G.R. No.
157917 August 29, 2012 traversing the narrow path underneath the Magallanes Interchange that was then
SPOUSES TEODORO1 and NANETTE PERENA, Petitioners,
vs.
SPOUSES TERESITA PHILIPPINE NICOLAS and L. ZARATE, NATIONAL
RAILWAYS, and the COURT OF APPEALS Respondents.
DECISION
BERSAMIN, J.:
The operator of a. school bus service is a common carrier in the eyes of the law. He
is bound to observe extraordinary diligence in the conduct of his business. He is
presumed to be negligent when death occurs to a passenger. His liability may
include indemnity for loss of earning capacity even if the deceased passenger may
only be an unemployed high school student at the time of the accident.
The Case
By petition for review on certiorari, Spouses Teodoro and Nanette Perefia (Perefias)
appeal the adverse decision promulgated on November 13, 2002, by which the Court
of Appeals (CA) affirmed with modification the decision rendered on December 3,
1999 by the Regional Trial Court (RTC), Branch 260, in Parañaque City that had
decreed them jointly and severally liable with Philippine National Railways (PNR),
their co-defendant, to Spouses Nicolas and Teresita Zarate (Zarates) for the death of
their 15-year old son, Aaron John L. Zarate (Aaron), then a high school student of
Don Bosco Technical Institute (Don Bosco).
Antecedents
The Pereñas were engaged in the business of transporting students from their
respective residences in Parañaque City to Don Bosco in Pasong Tamo, Makati City,
and back. In their business, the Pereñas used a KIA Ceres Van (van) with Plate No.
PYA 896, which had the capacity to transport 14 students at a time, two of whom
would be seated in the front beside the driver, and the others in the rear, with six
students on either side. They employed Clemente Alfaro (Alfaro) as driver of the van.
In June 1996, the Zarates contracted the Pereñas to transport Aaron to and from
Don Bosco. On August 22, 1996, as on previous school days, the van picked Aaron
up around 6:00 a.m. from the Zarates’ residence. Aaron took his place on the left
side of the van near the rear door. The van, with its air-conditioning unit turned on
and the stereo playing loudly, ultimately carried all the 14 student riders on their way
to Don Bosco. Considering that the students were due at Don Bosco by 7:15 a.m.,
and that they were already running late because of the heavy vehicular traffic on the
South Superhighway, Alfaro took the van to an alternate route at about 6:45 a.m. by
commonly used by Makati-bound vehicles as a short cut into Makati. At the time, the
narrow path was marked by piles of construction materials and parked passenger
jeepneys, and the railroad crossing in the narrow path had no railroad warning signs,
or watchmen, or other responsible persons manning the crossing. In fact, the
bamboo barandilla was up, leaving the railroad crossing open to traversing motorists.
At about the time the van was to traverse the railroad crossing, PNR Commuter No.
302 (train), operated by Jhonny Alano (Alano), was in the vicinity of the Magallanes
Interchange travelling northbound. As the train neared the railroad crossing, Alfaro
drove the van eastward across the railroad tracks, closely tailing a large passenger
bus. His view of the oncoming train was blocked because he overtook the passenger
bus on its left side. The train blew its horn to warn motorists of its approach. When
the train was about 50 meters away from the passenger bus and the van, Alano
applied the ordinary brakes of the train. He applied the emergency brakes only when
he saw that a collision was imminent. The passenger bus successfully crossed the
railroad tracks, but the van driven by Alfaro did not. The train hit the rear end of the
van, and the impact threw nine of the 12 students in the rear, including Aaron, out of
the van. Aaron landed in the path of the train, which dragged his body and severed
his head, instantaneously killing him. Alano fled the scene on board the train, and did
not wait for the police investigator to arrive.
Devastated by the early and unexpected death of Aaron, the Zarates commenced
this action for damages against Alfaro, the Pereñas, PNR and Alano. The Pereñas
and PNR filed their respective answers, with cross-claims against each other, but
Alfaro could not be served with summons.
At the pre-trial, the parties stipulated on the facts and issues, viz:
A. FACTS:
(1)) That spouses Zarate were the legitimate parents of Aaron John L. Zarate;
(2)) Spouses Zarate engaged the services of spouses Pereña for the adequate and
safe transportation carriage of the former spouses' son from their residence in
Parañaque to his school at the Don Bosco Technical Institute in Makati City;
(3)) During the effectivity of the contract of carriage and in the implementation
thereof, Aaron, the minor son of spouses Zarate died in connection with a
vehicular/train collision which occurred while Aaron was riding the contracted carrier
Kia Ceres van of spouses Pereña, then driven and operated by the latter's
employee/authorized driver Clemente Alfaro, which van collided with the train of
PNR, at around 6:45 A.M. of August 22, 1996, within the vicinity of the Magallanes
Interchange in Makati City, Metro Manila, Philippines;
(4)) At the time of the vehicular/train collision, the subject site of the vehicular/train
collision was a railroad crossing used by motorists for crossing the railroad tracks;
(5)) During the said time of the vehicular/train collision, there were no appropriate
and safety warning signs and railings at the site commonly used for railroad crossing;
(6)) At the material time, countless number of Makati bound public utility and private
vehicles used on a daily basis the site of the collision as an alternative route and
short-cut to Makati;
(7)) The train driver or operator left the scene of the incident on board the commuter
train involved without waiting for the police investigator;
(8)) The site commonly used for railroad crossing by motorists was not in fact
intended by the railroad operator for railroad crossing at the time of the vehicular
collision;
(9)) PNR received the demand letter of the spouses Zarate;
(10)0) PNR refused to acknowledge any liability for the vehicular/train collision;
(11)) The eventual closure of the railroad crossing alleged by PNR was an internal
arrangement between the former and its project contractor; and
(12)) The site of the vehicular/train collision was within the vicinity or less than 100
meters from the Magallanes station of PNR.
B. ISSUES
(1) Whether or not defendant-driver of the van is, in the performance of his functions,
liable for negligence constituting the proximate cause of the vehicular collision, which
resulted in the death of plaintiff spouses' son;
(2) Whether or not the defendant spouses Pereña being the employer of defendant
Alfaro are liable for any negligence which may be attributed to defendant Alfaro;
(3) Whether or not defendant Philippine National Railways being the operator of the
railroad system is liable for negligence in failing to provide adequate safety warning
signs and railings in the area commonly used by motorists for railroad crossings,
constituting the proximate cause of the vehicular collision which resulted in the death
of the plaintiff spouses' son;
(4) Whether or not defendant spouses Pereña are liable for breach of the contract of
carriage with plaintiff-spouses in failing to provide adequate and safe transportation
for the latter's son;
(5) Whether or not defendants spouses are liable for actual, moral damages,
exemplary damages, and attorney's fees;
(6) Whether or not defendants spouses Teodorico and Nanette Pereña observed the
diligence of employers and school bus operators;
(7) Whether or not defendant-spouses are civilly liable for the accidental death of
Aaron John Zarate;
(8) Whether or not defendant PNR was grossly negligent in operating the commuter
train involved in the accident, in allowing or tolerating the motoring public to cross,
and its failure to install safety devices or equipment at the site of the accident for the
protection of the public;
(9) Whether or not defendant PNR should be made to reimburse defendant spouses
for any and whatever amount the latter may be held answerable or which they may
be ordered to pay in favor of plaintiffs by reason of the action;
(10) Whether or not defendant PNR should pay plaintiffs directly and fully on the
amounts claimed by the latter in their Complaint by reason of its gross negligence;
(11) Whether or not defendant PNR is liable to defendants spouses for actual, moral
and exemplary damages and attorney's fees.2
The Zarates’ claim against the Pereñas was upon breach of the contract of carriage
for the safe transport of Aaron; but that against PNR was based on quasi-delict
under Article 2176, Civil Code.
In their defense, the Pereñas adduced evidence to show that they had exercised the
diligence of a good father of the family in the selection and supervision of Alfaro, by
making sure that Alfaro had been issued a driver’s license and had not been
involved in any vehicular accident prior to the collision; that their own son had taken
the van daily; and that Teodoro Pereña had sometimes accompanied Alfaro in the
van’s trips transporting the students to school.
For its part, PNR tended to show that the proximate cause of the collision had been
the reckless crossing of the van whose driver had not first stopped, looked and
listened; and that the narrow path traversed by the van had not been intended to be
a railroad crossing for motorists.
Ruling of the RTC
On December 3, 1999, the RTC rendered its decision,3 disposing:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the
plaintiff and against the defendants ordering them to jointly and severally pay the
plaintiffs as follows:
(1) (for) the death of Aaron- Php50,000.00;
(2) Actual damages in the amount of Php100,000.00;
(3) For the loss of earning capacity- Php2,109,071.00;
(4) Moral damages in the amount of Php4,000,000.00;
(5) Exemplary damages in the amount of Php1,000,000.00;
(6) Attorney’s fees in the amount of Php200,000.00; and
(7) Cost of suit.
SO ORDERED.
On June 29, 2000, the RTC denied the Pereñas’ motion for reconsideration,4
reiterating that the cooperative gross negligence of the Pereñas and PNR had
caused the collision that led to the death of Aaron; and that the damages awarded to
the Zarates were not excessive, but based on the established circumstances.
The CA’s Ruling
Both the Pereñas and PNR appealed (C.A.-G.R. CV No. 68916).
PNR assigned the following errors, to wit:5
The Court a quo erred in:
1. In finding the defendant-appellant Philippine National Railways jointly and
severally liable together with defendant-appellants spouses Teodorico and Nanette
Pereña and defendant-appellant Clemente Alfaro to pay plaintiffs-appellees for the
death of Aaron Zarate and damages.
2. In giving full faith and merit to the oral testimonies of plaintiffs-appellees witnesses
despite overwhelming documentary evidence on record, supporting the case of
defendants-appellants Philippine National Railways.
The Pereñas ascribed the following errors to the RTC, namely:
The trial court erred in finding defendants-appellants jointly and severally liable for
actual, moral and exemplary damages and attorney’s fees with the other defendants.
The trial court erred in dismissing the cross-claim of the appellants Pereñas against
the Philippine National Railways and in not holding the latter and its train driver
primarily responsible for the incident.
The trial court erred in awarding excessive damages and attorney’s fees.
The trial court erred in awarding damages in the form of deceased’s loss of earning
capacity in the absence of sufficient basis for such an award.
On November 13, 2002, the CA promulgated its decision, affirming the findings of the
RTC, but limited the moral damages to ₱ 2,500,000.00; and deleted the attorney’s
fees because the RTC did not state the factual and legal bases, to wit:6
WHEREFORE, premises considered, the assailed Decision of the Regional Trial
Court, Branch 260 of Parañaque City is AFFIRMED with the modification that the
award of Actual Damages is reduced to ₱ 59,502.76; Moral Damages is reduced to
₱ 2,500,000.00; and the award for Attorney’s Fees is Deleted.
SO ORDERED.
The CA upheld the award for the loss of Aaron’s earning capacity, taking cognizance
of the ruling in Cariaga v. Laguna Tayabas Bus Company and Manila Railroad
Company,7 wherein the Court gave the heirs of Cariaga a sum representing the loss
of the deceased’s earning capacity despite Cariaga being only a medical student at
the time of the fatal incident. Applying the formula adopted in the American
Expectancy Table of Mortality:–
2/3 x (80 - age at the time of death) = life expectancy
the CA determined the life expectancy of Aaron to be 39.3 years upon reckoning his
life expectancy from age of 21 (the age when he would have graduated from college
and started working for his own livelihood) instead of 15 years (his age when he
died). Considering that the nature of his work and his salary at the time of Aaron’s
death were unknown, it used the prevailing minimum wage of ₱ 280.00/day to
compute Aaron’s gross annual salary to be ₱ 110,716.65, inclusive of the thirteenth
month pay. Multiplying this annual salary by Aaron’s life expectancy of 39.3 years,
his gross income would aggregate to ₱ 4,351,164.30, from which his estimated
expenses in the sum of ₱ 2,189,664.30 was deducted to finally arrive at P
2,161,500.00 as net income. Due to Aaron’s computed net income turning out to be
higher than the amount claimed by the Zarates, only ₱ 2,109,071.00, the amount
expressly prayed for by them, was granted.
On April 4, 2003, the CA denied the Pereñas’ motion for reconsideration.8
Issues
In this appeal, the Pereñas list the following as the errors committed by the CA, to
wit:
I. The lower court erred when it upheld the trial court’s decision holding the
petitioners jointly and severally liable to pay damages with Philippine National
Railways and dismissing their cross-claim against the latter.
II. The lower court erred in affirming the trial court’s decision awarding damages for
loss of earning capacity of a minor who was only a high school student at the time of
his death in the absence of sufficient basis for such an award.
III. The lower court erred in not reducing further the amount of damages awarded,
assuming petitioners are liable at all.
Ruling
The petition has no merit.
1. Were the Pereñas and PNR jointly and severally liable for damages?
The Zarates brought this action for recovery of damages against both the Pereñas
and the PNR, basing their claim against the Pereñas on breach of contract of
carriage and against the PNR on quasi-delict.
The RTC found the Pereñas and the PNR negligent. The CA affirmed the findings.
We concur with the CA.
To start with, the Pereñas’ defense was that they exercised the diligence of a good
father of the family in the selection and supervision of Alfaro, the van driver, by
seeing to it that Alfaro had a driver’s license and that he had not been involved in
any vehicular accident prior to the fatal collision with the train; that they even had
their own son travel to and from school on a daily basis; and that Teodoro Pereña
himself sometimes accompanied Alfaro in transporting the passengers to and from
school. The RTC gave scant consideration to such defense by regarding such
defense as inappropriate in an action for breach of contract of carriage.
We find no adequate cause to differ from the conclusions of the lower courts that the
Pereñas operated as a common carrier; and that their standard of care was
extraordinary diligence, not the ordinary diligence of a good father of a family.
Although in this jurisdiction the operator of a school bus service has been usually
regarded as a private carrier,9 primarily because he only caters to some specific or
privileged individuals, and his operation is neither open to the indefinite public nor for
public use, the exact nature of the operation of a school bus service has not been
finally settled. This is the occasion to lay the matter to rest.
A carrier is a person or corporation who undertakes to transport or convey goods or
persons from one place to another, gratuitously or for hire. The carrier is classified
either as a private/special carrier or as a common/public carrier.10 A private carrier is
one who, without making the activity a vocation, or without holding himself or itself
out to the public as ready to act for all who may desire his or its services, undertakes,
by special agreement in a particular instance only, to transport goods or persons
from one place to another either gratuitously or for hire.11 The provisions on ordinary
contracts of the Civil Code govern the contract of private carriage.The diligence
required of a private carrier is only ordinary, that is, the diligence of a good father of
the family. In contrast, a common carrier is a person, corporation, firm or association
engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air, for compensation, offering such services to the public.12 Contracts
of common carriage are governed by the provisions on common carriers of the Civil
Code, the Public Service Act,13 and other special laws relating to transportation. A
common carrier is required to observe extraordinary diligence, and is presumed to be
at fault or to have acted negligently in case of the loss of the effects of passengers,
or the death or injuries to passengers.14
In relation to common carriers, the Court defined public use in the following terms in
United States v. Tan Piaco,15 viz:
"Public use" is the same as "use by the public". The essential feature of the public
use is not confined to privileged individuals, but is open to the indefinite public. It is
this indefinite or unrestricted quality that gives it its public character. In determining
whether a use is public, we must look not only to the character of the business to be
done, but also to the proposed mode of doing it. If the use is merely optional with the
owners, or the public benefit is merely incidental, it is not a public use, authorizing
the exercise of the jurisdiction of the public utility commission. There must be, in
general, a right which the law compels the owner to give to the general public. It is
not enough that the general prosperity of the public is promoted. Public use is not
synonymous with public interest. The true criterion by which to judge the character of
the use is whether the public may enjoy it by right or only by permission.
In De Guzman v. Court of Appeals,16 the Court noted that Article 1732 of the Civil
Code avoided any distinction between a person or an enterprise offering
transportation on a regular or an isolated basis; and has not distinguished a carrier
offering his services to the general public, that is, the general community or
population, from one offering his services only to a narrow segment of the general
population.
Nonetheless, the concept of a common carrier embodied in Article 1732 of the Civil
Code coincides neatly with the notion of public service under the Public Service Act,
which supplements the law on common carriers found in the Civil Code. Public
service, according to Section 13, paragraph (b) of the Public Service Act, includes:
x x x every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited clientèle, whether
permanent or occasional, and done for the 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, 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. x x x.17
Given the breadth of the aforequoted characterization of a common carrier, the Court
has considered as common carriers pipeline operators,18 custom brokers and
warehousemen,19 and barge operators20 even if they had limited clientèle.
As all the foregoing indicate, 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 that he has held out to the general public as his business
or occupation. If the undertaking is a single transaction, not a part of the general
business or occupation engaged in, as advertised and held out to the general public,
the individual or the entity rendering such service is a private, not a common, carrier.
The question must be determined by the character of the business actually carried
on by the carrier, not by any secret intention or mental reservation it may entertain or
assert when charged with the duties and obligations that the law imposes.21
Applying these considerations to the case before us, there is no question that the
Pereñas as the operators of a school bus service were: (a) engaged in transporting
passengers generally as a business, not just as a casual occupation; (b) undertaking
to carry passengers over established roads by the method by which the business
was conducted; and (c) transporting students for a fee. Despite catering to a limited
clientèle, the Pereñas operated as a common carrier because they held themselves
out 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.
The common carrier’s standard of care and vigilance as to the safety of the
passengers is defined by law. Given the nature of the business and for reasons of
public policy, the common carrier is 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."22 Article 1755 of the Civil Code
specifies that the common carrier should "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." To successfully fend off liability
in an action upon the death or injury to a passenger, the common carrier must prove
his or its observance of that extraordinary diligence; otherwise, the legal presumption
that he or it was at fault or acted negligently would stand.23 No device, whether by
stipulation, posting of notices, statements on tickets, or otherwise, may dispense with
or lessen the responsibility of the common carrier as defined under Article 1755 of
the Civil Code. 24
And, secondly, the Pereñas have not presented any compelling defense or reason
by which the Court might now reverse the CA’s findings on their liability. On the
contrary, an examination of the records shows that the evidence fully supported the
findings of the CA.
As earlier stated, the Pereñas, acting as a common carrier, were already presumed
to be negligent at the time of the accident because death had occurred to their
passenger.25 The presumption of negligence, being a presumption of law, laid the
burden of evidence on their shoulders to establish that they had not been negligent.26
It was the law no less that required them to prove their observance of extraordinary
diligence in seeing to the safe and secure carriage of the passengers to their
destination. Until they did so in a credible manner, they stood to be held legally
responsible for the death of Aaron and thus to be held liable for all the natural
consequences of such death.
There is no question that the Pereñas did not overturn the presumption of their
negligence by credible evidence. Their defense of having observed the diligence of a
good father of a family in the selection and supervision of their driver was not legally
sufficient. According to Article 1759 of the Civil Code, their liability as a common
carrier did not cease upon proof that they exercised all the diligence of a good father
of a family in the selection and supervision of their employee. This was the reason
why the RTC treated this defense of the Pereñas as inappropriate in this action for
breach of contract of carriage.
The Pereñas were liable for the death of Aaron despite the fact that their driver might
have acted beyond the scope of his authority or even in violation of the orders of the
common carrier.27 In this connection, the records showed their driver’s actual
negligence. There was a showing, to begin with, that their driver traversed the
railroad tracks at a point at which the PNR did not permit motorists going into the
Makati area to cross the railroad tracks. Although that point had been used by
motorists as a shortcut into the Makati area, that fact alone did not excuse their
driver into taking that route. On the other hand, with his familiarity with that shortcut,
their driver was fully aware of the risks to his passengers but he still disregarded the
risks. Compounding his lack of care was that loud music was playing inside the air-
conditioned van at the time of the accident. The loudness most probably reduced his
ability to hear the warning horns of the oncoming train to allow him to correctly
appreciate the lurking dangers on the railroad tracks. Also, he sought to overtake a
passenger bus on the left side as both vehicles traversed the railroad tracks. In so
doing, he lost his view of the train that was then coming from the opposite side of the
passenger bus, leading him to miscalculate his chances of beating the bus in their
race, and of getting clear of the train. As a result, the bus avoided a collision with the
train but the van got slammed at its rear, causing the fatality. Lastly, he did not slow
down or go to a full stop before traversing the railroad tracks despite knowing that his
slackening of speed and going to a full stop were in observance of the right of way at
railroad tracks as defined by the traffic laws and regulations.28 He thereby violated a
specific traffic regulation on right of way, by virtue of which he was immediately
presumed to be negligent.29
The omissions of care on the part of the van driver constituted negligence,30 which,
according to Layugan v. Intermediate Appellate Court,31 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,32 or as Judge Cooley defines it, ‘(t)he
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.’"33
The test by which to determine the existence of negligence in a particular case has
been aptly stated in the leading case of Picart v. Smith,34 thuswise:
The test by which to determine the existence of negligence in a particular case may
be stated as follows: 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.
The question as to what would constitute the conduct of a prudent man in a given
situation must of course be always determined in the light of human experience and
in view of the facts involved in the particular case. Abstract speculation cannot here
be of much value but this much can be profitably said: Reasonable men govern their
conduct by the circumstances which are before them or known to them. They are
not, and are not supposed to be, omniscient of the future. Hence they can be
expected to take care only when there is something before them to suggest or warn
of danger. Could a prudent man, in the case under consideration, foresee harm as a
result of the course actually pursued? If so, it was the duty of the actor to take
precautions to guard against that harm. Reasonable foresight of harm, followed by
the ignoring of the suggestion born of this prevision, is always necessary before
negligence can be held to exist. Stated in these terms, the proper criterion for
determining the existence of negligence in a given case is this: Conduct is said to be
negligent when a prudent man in the position of the tortfeasor would have foreseen
that an effect harmful to another was sufficiently probable to warrant his foregoing
the conduct or guarding against its consequences. (Emphasis supplied)
Pursuant to the Picart v. Smith test of negligence, the Pereñas’ driver was entirely
negligent when he traversed the railroad tracks at a point not allowed for a motorist’s
crossing despite being fully aware of the grave harm to be thereby caused to his
passengers; and when he disregarded the foresight of harm to his passengers by
overtaking the bus on the left side as to leave himself blind to the approach of the
oncoming train that he knew was on the opposite side of the bus.
Unrelenting, the Pereñas cite Phil. National Railways v. Intermediate Appellate
Court,35 where the Court held the PNR solely liable for the damages caused to a
passenger bus and its passengers when its train hit the rear end of the bus that was
then traversing the railroad crossing. But the circumstances of that case and this one
share no similarities. In Philippine National Railways v. Intermediate Appellate Court,
no evidence of contributory negligence was adduced against the owner of the bus.
Instead, it was the owner of the bus who proved the exercise of extraordinary
diligence by preponderant evidence. Also, the records are replete with the showing
of negligence on the part of both the Pereñas and the PNR. Another distinction is
that the passenger bus in Philippine National Railways v. Intermediate Appellate
Court was traversing the dedicated railroad crossing when it was hit by the train, but
the Pereñas’ school van traversed the railroad tracks at a point not intended for that
purpose.
At any rate, the lower courts correctly held both the Pereñas and the PNR "jointly
and severally" liable for damages arising from the death of Aaron. They had been
impleaded in the same complaint as defendants against whom the Zarates had the
right to relief, whether jointly, severally, or in the alternative, in respect to or arising
out of the accident, and questions of fact and of law were common as to the
Zarates.36 Although the basis of the right to relief of the Zarates (i.e., breach of
contract of carriage) against the Pereñas was distinct from the basis of the Zarates’
right to relief against the PNR (i.e., quasi-delict under Article 2176, Civil Code), they
nonetheless could be held jointly and severally liable by virtue of their respective
negligence combining to cause the death of Aaron. As to the PNR, the RTC rightly
found the PNR also guilty of negligence despite the school van of the Pereñas
traversing the railroad tracks at a point not dedicated by the PNR as a railroad
crossing for pedestrians and motorists, because the PNR did not ensure the safety of
others through the placing of crossbars, signal lights, warning signs, and other
permanent safety barriers to prevent vehicles or pedestrians from crossing there.
The RTC observed that the fact that a crossing guard had been assigned to man that
point from 7 a.m. to 5 p.m. was a good indicium that the PNR was aware of the risks
to others as well as the need to control the vehicular and other traffic there. Verily,
the Pereñas and the PNR were joint tortfeasors.
2. Was the indemnity for loss of Aaron’s earning capacity proper?
The RTC awarded indemnity for loss of Aaron’s earning capacity. Although agreeing
with the RTC on the liability, the CA modified the amount. Both lower courts took into
consideration that Aaron, while only a high school student, had been enrolled in one
of the reputable schools in the Philippines and that he had been a normal and able-
bodied child prior to his death. The basis for the computation of Aaron’s earning
capacity was not what he would have become or what he would have wanted to be if
not for his untimely death, but the minimum wage in effect at the time of his death.
Moreover, the RTC’s computation of Aaron’s life expectancy rate was not reckoned
from his age of 15 years at the time of his death, but on 21 years, his age when he
would have graduated from college.
We find the considerations taken into account by the lower courts to be reasonable
and fully warranted.
Yet, the Pereñas submit that the indemnity for loss of earning capacity was
speculative and unfounded.1âwphi1 They cited People v. Teehankee, Jr.,37 where
the Court deleted the indemnity for victim Jussi Leino’s loss of earning capacity as a
pilot for being speculative due to his having graduated from high school at the
International School in Manila only two years before the shooting, and was at the
time of the shooting only enrolled in the first semester at the Manila Aero Club to
pursue his ambition to become a professional pilot. That meant, according to the
Court, that he was for all intents and purposes only a high school graduate.
We reject the Pereñas’ submission.
First of all, a careful perusal of the Teehankee, Jr. case shows that the situation
there of Jussi Leino was not akin to that of Aaron here. The CA and the RTC were
not speculating that Aaron would be some highly-paid professional, like a pilot (or, for
that matter, an engineer, a physician, or a lawyer). Instead, the computation of
Aaron’s earning capacity was premised on him being a lowly minimum wage earner
despite his being then enrolled at a prestigious high school like Don Bosco in Makati,
a fact that would have likely ensured his success in his later years in life and at work.
And, secondly, the fact that Aaron was then without a history of earnings should not
be taken against his parents and in favor of the defendants whose negligence not
only cost Aaron his life and his right to work and earn money, but also deprived his
parents of their right to his presence and his services as well. Our law itself states
that the loss of the earning capacity of the deceased shall be the liability of the guilty
party in favor of the heirs of the deceased, and shall in every case be assessed and
awarded by the court "unless the deceased on account of permanent physical
disability not caused by the defendant, had no earning capacity at the time of his
death."38 Accordingly, we emphatically hold in favor of the indemnification for Aaron’s
loss of earning capacity despite him having been unemployed, because
compensation of this nature is awarded not for loss of time or earnings but for loss of
the deceased’s power or ability to earn money.39
This favorable treatment of the Zarates’ claim is not unprecedented. In Cariaga v.
Laguna Tayabas Bus Company and Manila Railroad Company,40 fourth-year medical
student Edgardo Carriaga’s earning capacity, although he survived the accident but
his injuries rendered him permanently incapacitated, was computed to be that of the
physician that he dreamed to become. The Court considered his scholastic record
sufficient to justify the assumption that he could have finished the medical course
and would have passed the medical board examinations in due time, and that he
could have possibly earned a modest income as a medical practitioner. Also, in
People v. Sanchez,41 the Court opined that murder and rape victim Eileen Sarmienta
and murder victim Allan Gomez could have easily landed good-paying jobs had they
graduated in due time, and that their jobs would probably pay them high monthly
salaries from ₱ 10,000.00 to ₱ 15,000.00 upon their graduation. Their earning
capacities were computed at rates higher than the minimum wage at the time of their
deaths due to their being already senior agriculture students of the University of the
Philippines in Los Baños, the country’s leading educational institution in agriculture.
3. Were the amounts of damages excessive?
The Pereñas plead for the reduction of the moral and exemplary damages awarded
to the Zarates in the respective amounts of ₱ 2,500,000.00 and ₱ 1,000,000.00 on
the ground that such amounts were excessive.
The plea is unwarranted.
The moral damages of ₱ 2,500,000.00 were really just and reasonable under the
established circumstances of this case because they were intended by the law to
assuage the Zarates’ deep mental anguish over their son’s unexpected and violent
death, and their moral shock over the senseless accident. That amount would not be
too much, considering that it would help the Zarates obtain the means, diversions or
amusements that would alleviate their suffering for the loss of their child. At any rate,
reducing the amount as excessive might prove to be an injustice, given the passage
of a long time from when their mental anguish was inflicted on them on August 22,
1996.
Anent the ₱ 1,000,000.00 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 Pereñas 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.
WHEREFORE, we DENY the petition for review on certiorari; AFFIRM the decision
promulgated on November 13, 2002; and ORDER the petitioners to pay the costs of
suit.
SO ORDERED.
G.R. No. 170071 March 9, 2011
HEIRS OF JOSE MARCIAL K. OCHOA namely: RUBY B. OCHOA, MICAELA B.
OCHOA and JOMAR B. OCHOA, Petitioners,
vs.
G & S TRANSPORT CORPORATION, Respondent.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 170125
G & S TRANSPORT CORPORATION, Petitioner,
vs.
HEIRS OF JOSE MARCIAL K. OCHOA namely: RUBY B. OCHOA, MICAELA B.
OCHOA and JOMAR B. OCHOA, Respondents.
DECISION
DEL CASTILLO, J.:
An accident which claimed the life of a passenger is the root of these two petitions -
one brought before us by the common carrier and the other by the heirs of the
deceased.
These consolidated Petitions for Review on Certiorari assail the Court of Appeals’
(CA) Decision1 dated June 29, 2005 in CA-G.R. CV No. 75602 which affirmed with
modification the December 21, 2001 Decision and March 5, 2002 Order of the trial
court. Likewise assailed is the Resolution2 dated October 12, 2005 denying the
parties’ respective Motions for Reconsideration thereto.
Factual Antecedents
Jose Marcial K. Ochoa (Jose Marcial) died on the night of March 10, 1995 while on
board an Avis taxicab owned and operated by G & S Transport Corporation (G & S),
a common carrier. As narrated by the trial court, the circumstances attending Jose
Marcial’s death are as follows:
It appears that sometime in the evening of March 10, 1995, at the Manila Domestic
Airport, the late Jose Marcial K. Ochoa boarded and rode a taxicab with Plate No.
PKR-534, a passenger vehicle for hire owned and operated by defendant
corporation under the business name "Avis Coupon Taxi" (Avis) and driven by its
employee and authorized driver Bibiano Padilla, Jr. on his way home to Teacher’s
Village, Diliman, Quezon City.
At about 11:00 p.m., the taxicab was cruising along Epifanio delos Santos Avenue
[EDSA], in front of Camp Aguinaldo in Quezon City at high speed. While going up the
Boni Serrano (Santolan) fly-over, it overtook another cab driven by Pablo Clave and
tried to pass another vehicle, a ten-wheeler cargo truck. Because of the narrow
space between the left side railing of the fly-over and the ten-wheeler truck, the Avis
cab was unable to pass and because of its speed, its driver (Padilla) was unable to
control it. To avoid colliding with the truck, Padilla turned the wheel to the left causing
his taxicab to ram the railing throwing itself off the fly-over and fell on the middle
surface of EDSA below. The forceful drop of the vehicle on the floor of the road
broke and split it into two parts. Both driver Padilla and passenger Jose Marcial K.
Ochoa were injured and rushed to the hospital. At the East Avenue Medical Center,
Ochoa was not as lucky as Padilla who was alive. He was declared dead on arrival
from the accident. The death certificate issued by the Office of the Civil Registrar of
Quezon City cited the cause of his death as vehicular accident.3
On May 13, 1999, Jose Marcial’s wife, Ruby Bueno Ochoa, and his two minor
children, Micaela B. Ochoa and Jomar B. Ochoa (the heirs), through counsel, sent G
& S a letter4 demanding that the latter indemnify them for Jose Marcial’s death, his
loss of earning capacity, and funeral expenses in the total amount of
₱15,000,000.00. As G & S failed to heed the same, the heirs filed a Complaint5 for
Damages before the Regional Trial Court (RTC) of Pasig City which was raffled to
Branch 164 of said court.
The heirs alleged that G & S, as a common carrier, is under legal obligation to
observe and exercise extraordinary diligence in transporting its passengers to their
destination safely and securely. However, G & S failed to observe and exercise this
extraordinary diligence because its employee failed to transport Jose Marcial to his
destination safely. They averred that G & S is liable to them for having breached the
contract of common carriage. As an alternative cause of action, they asserted that G
& S is likewise liable for damages based on quasi-delict pursuant to Article 21806 in
relation to Article 21767 of the Civil Code. The heirs thus prayed for G & S to pay
them actual damages, moral damages, exemplary damages, and attorney’s fees and
expenses of litigation.
In its Answer With Compulsory Counterclaims,8 G & S claimed that Jose Marcial
boarded an Avis taxicab driven by its employee, Bibiano Padilla (Padilla), at the
Domestic Airport to bring him to Teacher’s Village in Quezon City. While passing the
Santolan fly-over, however, the Avis taxicab was bumped by an on-rushing delivery
van at the right portion causing the taxicab to veer to the left, ram through the left
side of the railings of the fly-over and fall to the center of the island below. The
taxicab was split into two and Jose Marcial was thrown 10 meters away. G & S
posited that the proximate cause of Jose Marcial’s death is a
fortuitous event and/or the fault or negligence of the driver of the delivery van that hit
the taxicab. It likewise claimed that it exercised the diligence required of a good
father of a family in the selection and supervision of its employees including Padilla.
By way of compulsory counterclaim, G & S sought to recover from the heirs the
amount of ₱300,000.00 as attorney’s fees and costs of suit.
Ruling of the Regional Trial Court
On December 27, 2001, the trial court rendered a Decision9 finding the vehicular
mishap not caused by a fortuitous event but by the negligence of Padilla. It likewise
found the evidence adduced by G & S to show that it exercised the diligence of a
good father of a family in the selection and supervision of its employees as
insufficient. Hence, the trial court declared G & S civilly liable to the heirs. However,
for lack of receipts or any proof of funeral expenses and other actual damages, the
trial court denied the heirs’ claim for actual damages. It also denied them moral and
exemplary damages for lack of legal basis. The dispositive portion of said Decision
reads:
WHEREFORE, defendant is hereby adjudged guilty of breach of contract of carriage
and is ordered to pay plaintiffs the following amounts:
1. ₱50,000.00 as civil indemnity for the death of deceased Jose Marcial K. Ochoa;
2. ₱6,537,244.96 for the loss of earning capacity of the deceased;
3. ₱100,00.00 for attorney’s fees;
4. And the cost of litigation.
SO ORDERED.10
G & S filed a Notice of Appeal11 while the heirs filed a Motion for Partial
Reconsideration.12 The heirs averred that they are entitled to moral damages
pursuant to Article 176413 in relation to Article 2206(3)14 of the Civil Code. They also
cited applicable jurisprudence providing that moral damages are recoverable in a
damage suit predicated upon a breach of contract of carriage where the mishap
results in the death of the passenger. With respect to their claim for exemplary
damages, the heirs relied upon Article 2232 of the Civil Code which provides that in
contracts and quasi-contracts, the court may award exemplary damages if the
defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent manner.
And, since Padilla was declared by the trial court to have been grossly negligent in
driving the taxicab, the heirs claimed that they are likewise entitled to exemplary
damages.
After G & S filed its Opposition (To Plaintiffs’ Motion for Partial Reconsideration),15
the trial court issued an Order16 on March 5, 2002. It found merit in the heirs’ Motion
for Partial Reconsideration and thus declared them entitled to moral and exemplary
damages, viz:
WHEREFORE, the decision dated December 27, 2001 is hereby modified so as to
order defendant Corporation to pay plaintiffs the amount of P300,000.00 as moral
damages and P50,000.00 as exemplary damages. The dispositive portion of said
decision is hereby amended to read as follows:
‘WHEREFORE, defendant is hereby adjudged guilty of breach of contract of carriage
and is ordered to pay plaintiffs the following amounts:
1. ₱50,000.00 as civil indemnity for the death of the deceased Jose Marcial K.
Ochoa;
2. ₱6,537,244.96 for the loss of earning capacity of the deceased.
3. ₱300,000.00 as moral damages;
4. ₱50,000.00 as exemplary damages;
5. ₱100,000.00 for attorney’s fees;
6. And the costs of litigation.’
SO ORDERED.17
Because of this, G & S filed another Notice of Appeal18 and same was given due
course by the trial court in an Order19 dated April 23, 2002.
Ruling of the Court of Appeals
Before the CA, G & S continued to insist that it exercised the diligence of a good
father of the family in the selection and supervision of its employees. It averred that it
has been carrying out not only seminars for its drivers even before they were made
to work, but also periodic evaluations for their performance. Aside from these, it has
also been conducting monthly check-up of its automobiles and has regularly issued
rules regarding the conduct of its drivers. G & S claimed that it was able to establish
a good name in the industry and maintain a clientele.
In an effort to build up Padilla’s character as an experienced and careful driver, G &
S averred that: (1) before G & S employed Padilla, he was a delivery truck driver of
Inter Island Gas Service for 11 years; (2) Padilla has been an employee of G & S
from 1989 to 1996 and during said period, there was no recorded incident of his
being a negligent driver; (3) despite his qualifications, G & S still required Padilla to
submit an NBI clearance, driver’s license and police clearance; (4) Padilla’s being a
good driver-employee was manifest in his years of service with G & S, as in fact, he
has received congratulatory messages from the latter as shown by the inter-office
memos dated August 23, 1990 and February 1, 1993; and that (5) Padilla attended a
seminar at the Pope Pius Center sometime in December 1999 as part of the NAIA
Taxi Operation Program.
G & S also argued that the proximate cause of Jose Marcial’s death is a fortuitous
event and/or the fault or negligence of another and not of its employee. According to
G & S, the collision was totally unforeseen since Padilla had every right to expect
that the delivery van would just overtake him and not hit the right side of the taxicab.
Therefore, what transpired was beyond Padilla’s control. There was no negligence
on his part but on the part of the driver of the delivery van. For this reason, G & S
opined that it was not liable to the heirs.
On the other hand, the heirs maintained that Padilla was grossly negligent in driving
the Avis taxicab on the night of March 10, 1995. They claimed that Padilla, while
running at a very high speed, acted negligently when he tried to overtake a ten-
wheeler truck at the foot of the fly-over. This forced him to swerve to the left and as a
consequence, the Avis taxicab hit the center of the railing and was split into two upon
hitting the ground. The manner by which Padilla drove the taxicab clearly showed
that he acted without regard to the safety of his passenger.
The heirs also averred that in order for a fortuitous event to exempt one from liability,
it is necessary that he has committed no negligence or conduct that may have
occasioned the loss. Thus, to be exempt from liability for the death of Jose Marcial
on this ground, G & S must clearly show that the proximate cause of the casualty
was entirely independent of human will and that it was impossible to avoid. And since
in the case at bar it was Padilla’s inexcusable poor judgment, utter lack of foresight
and extreme negligence which were the immediate and proximate causes of the
accident, same cannot be considered to be due to a fortuitous event. This is
bolstered by the fact that the court trying the case for criminal negligence arising
from the same incident convicted Padilla for said charge.20
At any rate, the heirs contended that regardless of whether G & S observed due
diligence in the selection of its employees, it should nonetheless be held liable for the
death of Jose Marcial pursuant to Article 1759 of the Civil Code which provides:
ART. 1759 – 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.
In sum, the heirs prayed that the appeal be dismissed for lack of merit and the
assailed Decision and Order of the trial court be affirmed in toto.
In a Decision21 dated June 29, 2005, the CA ruled in favor of the heirs. The appellate
court gave weight to their argument that in order for a fortuitous event to exempt one
from liability, it is necessary that he committed no negligence or misconduct that may
have occasioned the loss. In this case, the CA noted that Padilla failed to employ
reasonable foresight, diligence and care needed to exempt G & S from liability for
Jose Marcial’s death. Said court also quoted pertinent portions of the MTC decision
convicting Padilla of reckless imprudence resulting in homicide to negate G & S’
claim that the proximate cause of the accident was the fault of the driver of the
delivery van who allegedly hit the right side of the taxicab. And just like the trial court,
the CA found insufficient the evidence adduced by G & S to support its claim that it
exercised due diligence in the selection and supervision of its employees.
With respect to the award of ₱6,537,244.96 for Jose Marcial’s loss of earning
capacity, the CA declared the same unwarranted. It found the Certification22 issued
by Jose Marcial’s employer, the United States Agency for International Development
(USAID) through its Chief of Human Resources Division Jonas Cruz (Cruz), as self-
serving, unreliable, and biased. While said certification states that Jose Marcial was
earning an annual salary of ₱450,844.49 at the time of his untimely demise, the CA
noted that same is unsupported by competent evidence such as income tax returns
or receipts. This is in view of the ruling in People v. Ereño23 where it was held that
"there must be unbiased proof of the deceased’s average income." Anent moral
damages, the CA found the award of ₱300,000.00 excessive and thus reduced the
same to ₱200,000.00 as to make it proportionate to the award of exemplary
damages which is ₱50,000.00. The dispositive portion of said Decision reads:
WHEREFORE, the assailed Decision dated December 27, 2001 and Order dated
March 5, 2002 are AFFIRMED with the following MODIFICATION: appellant is
ordered to pay appellees the sum of ₱50,000.00 as civil indemnity for the death of
the deceased Jose Marcial K. Ochoa, ₱200,000.00 as moral damages, ₱50,000.00
as exemplary damages, ₱100,000.00 for attorney’s fees and the costs of litigation.
The trial court’s award of ₱6,537,244.96 for the loss of earning capacity of the
deceased is DELETED for lack of basis.
SO ORDERED.
Both parties moved for reconsideration24 but the CA denied their respective motions
for reconsideration in a Resolution25 dated October 12, 2005.
Hence, G & S and the heirs filed their respective Petitions for Review on Certiorari
before this Court. The heirs’ petition was docketed as G.R. No. 170071 and that of G
& S as G.R. No. 170125. These petitions were later consolidated pursuant to this
Court’s Resolution of November 21, 2005.26
G.R. No. 170125
G & S anchors its petition on the following grounds:
I. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT RULING
THAT THE PROXIMATE CAUSE OF DEATH OF MR. JOSE MARCIAL K. OCHOA
WAS A FORTUITOUS EVENT AND/OR WAS DUE TO THE FAULT OR
NEGLIGENCE OF ANOTHER AND SHOULD THUS EXEMPT THE PETITIONER
FROM LIABILITY.
II. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT TAKING
NOTE OF THE FACT THAT THE PETITIONER’S EMPLOYEE HAD BEEN
ACQUITTED OF THE CRIME OF RECKLESS IMPRUDENCE RESULTING (IN)
HOMICIDE.
III. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN UPHOLDING
THE TESTIMONY OF A WITNESS WHO SURFACED MONTHS AFTER THE
INCIDENT WHILE DISREGARDING THAT OF AN EYEWITNESS WHO WAS
PRESENT AT THE TIME AND PLACE OF THE ACCIDENT.
IV. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT RULING
THAT THE PETITIONER EXERCISED THE DILIGENCE OF A GOOD FATHER OF
A FAMILY IN THE SELECTION AND SUPERVISION OF ITS EMPLOYEES
PARTICULARLY MR. BIBIANO PADILLA.27
G & S reiterates its arguments that the proximate cause of the accident is a fortuitous
event and/or the negligence of the driver of the delivery van which bumped the right
portion of its taxicab and, that it exercised the diligence of a good father of a family in
the selection and supervision of its employees. It faults the CA when it overlooked
the fact that the MTC Decision convicting Padilla of reckless imprudence has already
been reversed on appeal by the RTC with Padilla having been accordingly acquitted
of the crime charged. Moreover, it claims that the appellate court erred in according
respect to the testimony of the lone prosecution witness, Pablo Clave (Clave), when
it concluded that Padilla was driving negligently at the time of the accident. It asserts
that Clave is not a credible witness and so is his testimony. Thus, G & S prays that
the assailed CA Decision and Resolution be reversed and set aside.
On the other hand, the heirs posit that the determination of the issues raised by G &
S necessarily entails a re-examination of the factual findings which this Court cannot
do in this petition for review on certiorari. At any rate, they maintain that the trial court
itself is convinced of Clave’s credibility. They stress the settled rule that the
evaluation of the credibility of witnesses is a matter that particularly falls within the
authority of the trial court because it had the opportunity to observe the demeanor of
the witnesses on the stand.
The heirs assert that fortuitous event was not the proximate cause of the mishap.
They point out that as correctly found by the trial court, Padilla was running at an
extremely high speed. This was why the impact was so strong when the taxicab
rammed the fly-over railings and was split into two when it hit the ground. Also, while
it is true that the MTC Decision in the criminal case for reckless imprudence has
been reversed by the RTC, this does not excuse G & S from its liability to the heirs
because its liability arises from its breach of contract of carriage and from its
negligence in the selection and supervision of its employees. Also, since the acquittal
of Padilla is based on reasonable doubt, same does not in any way rule out his
negligence as this may merely mean that the prosecution failed to meet the requisite
quantum of evidence to sustain his conviction. Therefore, G & S cannot bank on said
acquittal to disprove its liability.
G.R. No. 170071
The heirs, on the other hand, advance the following grounds in support of their
petition:
THE COURT OF APPEALS MANIFESTLY AND GRAVELY ERRED IN
COMPLETELY DELETING THE TRIAL COURT’S AWARD FOR THE LOSS OF
EARNING CAPACITY OF THE DECEASED.
THE COURT OF APPEALS MANIFESTLY AND GRAVELY ERRED IN REDUCING
THE TRIAL COURT’S AWARD FOR MORAL DAMAGES.28
The focal point of the heirs’ petition is the CA’s deletion of the award of
₱6,537,244.96 for Jose Marcial’s loss of earning capacity as well as the reduction of
the award of moral damages from ₱300,000.00 to ₱200,000.00.
The heirs aver that the appellate court gravely erred in relying upon Ereño as said
case is not on all fours with the present case. They contend that in Ereño, this Court
disallowed the award for loss of income because the only proof presented was a
handwritten statement of the victim’s spouse stating the daily income of the
deceased as a self-employed fish vendor. The heirs argue that the reason why this
Court declared said handwritten statement as self-serving is because the one who
prepared it, the deceased’s wife, was also the one who would directly and personally
benefit from such an award.29 This cannot be said in the case at bar since the same
bias and personal interest cannot be attributed to Jose Marcial’s employer, the
USAID. Unlike in Ereño, USAID here does not stand to be benefited by an award for
Jose Marcial’s loss of earning capacity. Clearly, the Certification issued by it is far
from being self-serving. At any rate, the heirs contend that Ereño has already been
superseded by Pleyto v. Lomboy30 where this Court held that in awarding damages
for loss of earning capacity, "mere testimonial evidence suffices to establish a basis
for which the court can make a fair and reasonable estimate of the loss of earning
capacity". In addition, the heirs point out that the authenticity and accuracy of said
Certification was neither questioned by G & S nor discredited by any controverting
evidence. In fact, its admission by the trial court was not even assigned by G & S as
an error in their appeal before the CA.
As to the reduction of moral damages, the heirs claim that since the CA agreed with
the factual circumstances of the case as found by the trial court, there is therefore no
reason for it to alter the award of damages arising from such factual circumstances.
They aver that the CA may only modify the damages awarded by the trial court when
it is excessive and scandalous as held in Meneses v. Court of Appeals.31 Here, they
claim that the award of moral damages in the amount of ₱300,000.00 cannot be
considered as excessive and unreasonable but only commensurate to the sufferings
caused by the incident to a wife who became a young widow at the age of 33 and to
two minor children who lost a father. Moreover, the heirs aver that the CA should not
have reduced the award of moral damages just to make said amount proportionate
to the exemplary damages awarded. This is because there is no such rule which
dictates that the amount of moral damages should be proportionate to that of the
exemplary damages. The heirs pray that the assailed CA Decision and Resolution be
reversed and set aside insofar as they deleted the award for loss of earning capacity
and reduced the award for moral damages.
For its part, G & S avers that the Certification issued by USAID is self-serving
because the USAID officer who issued it has not been put on the witness stand to
validate the contents thereof. Moreover, said Certification was not supported by
competent evidence such as income tax returns and receipts. G & S likewise finds
the reduction of the award of moral damages appropriate in view of the settled rule
that moral damages are not meant to enrich the complainant at the expense of the
defendant. Hence, it prays that the petition be dismissed for lack of merit.
Our Ruling
We shall first tackle the issues raised by G & S in its petition.
The first, third and fourth issues raised by G & S involve questions of fact
We have reviewed said issues and we find that the determination of the first, third
and fourth issues raised entails re-examination of the evidence presented because
they all involve questions of fact. In Microsoft Corporation v. Maxicorp, Inc.,32 we held
that:
Once it is clear that the issue invites a review of the evidence presented, the
question posed is one of fact. If the query requires a re-evaluation of the credibility of
witnesses, or the existence or relevance of surrounding circumstances and their
relation to each other, the issue in that query is factual. Our ruling in Paterno v.
Paterno is illustrative on this point:
Such questions as whether certain items of evidence should be accorded probative
value or weight, or rejected as feeble or spurious, or whether or not the proof on one
side or the other are clear and convincing and adequate to establish a proposition in
issue, are without doubt questions of fact. Whether or not the body of proofs
presented by a party, weighed and analyzed in relation to contrary evidence
submitted by adverse party, may be said to be strong, clear and convincing; whether
or not certain documents presented by one side should be accorded full faith and
credit in the face of protests as to their spurious character by the other side; whether
or not inconsistencies in the body of proofs of a party are of such a gravity as to
justify refusing to give said proofs weight – all these are issues of fact. (Citations
omitted)
In this case, the said three issues boil down to the determination of the following
questions: What is the proximate cause of the death of Jose Marcial? Is the
testimony of prosecution witness Clave credible? Did G & S exercise the diligence of
a good father of a family in the selection and supervision of its employees? Suffice it
to say that these are all questions of fact which require this Court to inquire into the
probative value of the evidence presented before the trial court. As we have
consistently held, "[t]his Court is not a trier of facts. It is not a function of this court to
analyze or weigh evidence. When we give due course to such situations, it is solely
by way of exception. Such exceptions apply only in the presence of extremely
meritorious circumstances."33 Here, we note that although G & S enumerated in its
Consolidated Memorandum34 the exceptions35 to the rule that a petition for review on
certiorari should only raise questions of law, it nevertheless did not point out under
what exception its case falls. And, upon review of the records of the case, we are
convinced that it does not fall under any. Hence, we cannot proceed to resolve said
issues and disturb the findings and conclusions of the CA with respect thereto. As we
declared in Diokno v. Cacdac:36
It is aphoristic that a re-examination of factual findings cannot be done through a
petition for review on certiorari under Rule 45 of the Rules of Court because as
earlier stated, this Court is not a trier of facts; it reviews only questions of law. The
Supreme Court is not duty-bound to analyze and weigh again the evidence
considered in the proceedings below. This is already outside the province of the
instant Petition for Certiorari. [Citations omitted.]
There is a contract of carriage between G & S and Jose Marcial
What is clear from the records is that there existed a contract of carriage between G
& S, as the owner and operator of the Avis taxicab, and Jose Marcial, as the
passenger of said vehicle. As a common carrier, G & S "is bound to carry [Jose
Marcial] 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."37
However, Jose Marcial was not able to reach his destination safely as he died during
the course of the travel. "In a contract of carriage, it is presumed that the common
carrier is at fault or is negligent when a passenger dies or is injured. 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."38 Unfortunately, G & S
miserably failed to overcome this presumption. Both the trial court and the CA found
that the accident which led to Jose Marcial’s death was due to the reckless driving
and gross negligence of G & S’ driver, Padilla, thereby holding G & S liable to the
heirs of Jose Marcial for breach of contract of carriage.
The acquittal of Padilla in the criminal case is immaterial to the instant case for
breach of contract
This thus now leaves us with the remaining issue raised by G & S, that is, whether
the CA gravely erred in not taking note of the fact that Padilla has already been
acquitted of the crime of reckless imprudence resulting in homicide, a charge which
arose from the same incident subject of this case.
Article 31 of the Civil Code provides, viz:
When the civil action is based on an obligation not arising from the act or omission
complained of as a felony, such civil action may proceed independently of the
criminal proceedings and regardless of the result of the latter.
Thus, in Cancio, Jr. v. Isip,39 we declared:
In the instant case, it must be stressed that the action filed by petitioner is an
independent civil action, which remains separate and distinct from any criminal
prosecution based on the same act. Not being deemed instituted in the criminal
action based on culpa criminal, a ruling on the culpability of the offender will
have no bearing on said independent civil action based on an entirely different
cause of action, i.e., culpa contractual." (Emphasis supplied; Citations omitted.)
In this case, the action filed by the heirs is primarily for the recovery of damages
arising from breach of contract of carriage allegedly committed by G & S. Clearly, it is
an independent civil action arising from contract which is separate and distinct from
the criminal action for reckless imprudence resulting in homicide filed by the heirs
against Padilla by reason of the same incident. Hence, regardless of Padilla’s
acquittal or conviction in said criminal case, same has no bearing in the resolution of
the present case. There was therefore no error on the part of the CA when it
resolved this case without regard to the fact that Padilla has already been acquitted
by the RTC in the criminal case. Moreover, while the CA quoted some portions of the
MTC Decision in said criminal case, we however find that those quoted portions were
only meant to belie G & S’ claim that the proximate cause of the accident was the
negligence of the driver of the delivery van which allegedly hit the Avis taxicab. Even
without those quoted portions, the appellate court’s ultimate finding that it was
Padilla’s negligence which was the proximate cause of the mishap would still be the
same. This is because the CA has, in fact, already made this declaration in the
earlier part of its assailed Decision. The fact that the MTC Decision from which the
subject quoted portions were lifted has already been reversed by the RTC is
therefore immaterial.
In view of the foregoing, we deny G & S’ petition for lack of merit.
The denial by the CA of the heirs’ claim for lost earnings is unwarranted
Going now to the petition filed by the heirs, we note at the outset that the issues of
whether the CA erred in deleting the award for loss of earning capacity and in
reducing the award for moral damages made by the trial court likewise raise
questions of fact as they "involve an examination of the probative value of the
evidence presented by the parties".40 However, we find that the heirs’ case falls
under one of the exceptions because the findings of the CA conflict with the findings
of the RTC.41 Since the heirs properly raised the conflicting findings of the lower
courts, it is proper for this Court to resolve such contradiction.42
In Ereño, we denied the claim for loss of income because the handwritten estimate of
the deceased’s daily income as a self-employed vendor was not supported by
competent evidence like income tax returns or receipts. This was in view of the rule
that compensation for lost income is in the nature of damages and as such requires
due proof of damages suffered. We reiterated this rule in People v. Yrat43 where we
likewise denied the same claim because the only evidence presented to show that
the deceased was earning ₱50,000.00 a month was the testimony of the wife. There
we stated that for lost income due to death, there must be unbiased proof of the
deceased’s average income. Self-serving, hence, unreliable statement is not
enough. In People v. Caraig,44 we declared that "documentary evidence should be
presented to substantiate the claim for damages for loss of earning capacity. By way
of exception, damages therefor may be awarded despite the absence of
documentary evidence, provided that there is testimony that the victim was either (1)
self-employed earning less than the minimum wage under current labor laws, and
judicial notice may be taken of the fact that in the victim’s line of work no
documentary evidence is available; or (2) employed as a daily-wage worker earning
less than the minimum wage under current labor laws". However, we subsequently
ruled in Pleyto v. Lomboy45 that "failure to present documentary evidence to support
a claim for loss of earning capacity of the deceased need not be fatal to its cause.
Testimonial evidence suffices to establish a basis for which the court can make a fair
and reasonable estimate of the loss of earning capacity". Hence, we held as
sufficient to establish a basis for an estimate of damages for loss of earning capacity
the testimony of the victim’s widow that her husband was earning a monthly income
of ₱8,000.00. Later, in Victory Liner, Inc. v. Gammad,46 after finding that the
deceased’s earnings does not fall within the exceptions laid down in Caraig, we
deleted the award for compensatory damages for loss of earning capacity as same
was awarded by the lower courts only on the basis of the husband’s testimony that
the deceased was 39 years of age and a Section Chief of the Bureau of Internal
Revenue with a salary of ₱83,088.00 per annum at the time of her death. This same
rule was also applied in the 2008 case of Licyayo v. People.47
In all of the cases mentioned except for Ereño, the sole basis for the claim for loss of
earning capacity were the testimonies of the claimants. This is not the case here.
Just like in Ereño where the testimony of the mother of the deceased was
accompanied by a handwritten estimate of her daughter’s alleged income as a fish
vendor, the testimony of Jose Marcial’s wife that he was earning around
₱450,000.00 a year was corroborated by a Certification issued by the USAID.
However in Ereño, we declared as self-serving the handwritten estimate submitted
by the mother hence we denied the claim for such award. Based on said ruling, the
CA in this case deleted the award for lost income after it found the USAID
Certification to be self-serving and unreliable.
We disagree. The CA sweepingly concluded that the USAID Certification is self-
serving and unreliable without elaborating on how it was able to arrive at such a
conclusion. A research on USAID reveals that it is the "principal [United States]
agency to extend assistance to countries recovering from disaster, trying to escape
poverty, and engaging in democratic reforms."48 It is an "independent federal
government agency that receives over-all foreign policy guidance from the Secretary
of the State [of the United States]."49 Given this background, it is highly improbable
that such an agency will issue a certification containing unreliable information
regarding an employee’s income. Besides, there exists a presumption that official
duty has been regularly performed.50 Absent any showing to the contrary, it is
presumed that Cruz, as Chief of Human Resources Division of USAID, has regularly
performed his duty relative to the issuance of said certification and therefore, the
correctness of its contents can be relied upon. This presumption remains especially
so where the authenticity, due execution and correctness of said certification have
not been put in issue either before the trial court or the CA. As to its being self-
serving, our discussion on "self-serving evidence" in Heirs of Pedro Clemeña y
Zurbano v. Heirs of Irene B. Bien51 is enlightening, viz:
‘Self-serving evidence,’ perhaps owing to its descriptive formulation, is a concept
much misunderstood. Not infrequently, the term is employed as a weapon to devalue
and discredit a party's testimony favorable to his cause. That, it seems, is the sense
in which petitioners are using it now. This is a grave error. "Self-serving evidence" is
not to be taken literally to mean any evidence that serves its proponent's interest.
The term, if used with any legal sense, refers only to acts or declarations made
by a party in his own interest at some place and time out of court x x x.
(Citations omitted; emphasis supplied.)
Verily, the USAID certification cannot be said to be self-serving because it does not
refer to an act or declaration made out of court by the heirs themselves as parties to
this case.1awphi1
Clearly, the CA erred in deleting the award for lost income on the ground that the
USAID Certification supporting such claim is self-serving and unreliable. On the
contrary, we find said certification sufficient basis for the court to make a fair and
reasonable estimate of Jose Marcial’s loss of earning capacity just like in Tamayo v.
Señora52 where we based the victim’s gross annual income on his pay slip from the
Philippine National Police. Hence, we uphold the trial court’s award for Jose
Marcial’s loss of earning capacity.
While the trial court applied the formula generally used by the courts to determine net
earning capacity which is, to wit:
Net Earning Capacity = life expectancy* x (gross annual income - reasonable living
expenses),53
*
Life expectancy = 2/3 (80 – age of the deceased)
we, however, find incorrect the amount of ₱6,537, 244.96 arrived at. The award
should be ₱6,611,634.59 as borne out by the following computation:
2 (80-3654)
Net earning capacity = x 450,844.4955-50%56
3
88
= x 225,422.25
3
= 29.33 x 225,422.25
= ₱6, 611,634.59
The award of moral damages should be modified
While we deemed it proper to modify the amount of moral damages awarded by the
trial court as discussed below, we nevertheless agree with the heirs that the CA
should not have pegged said award in proportion to the award of exemplary
damages. Moral and exemplary damages are based on different jural foundations.57
They are different in nature and require separate determination.58 The amount of one
cannot be made to depend on the other.
In Victory Liner Inc. v. Gammad59 we awarded ₱100,000.00 by way of moral
damages to the husband and three children of the deceased, a 39-year old Section
Chief of the Bureau of Internal Revenue, to compensate said heirs for the grief
caused by her death. This is pursuant to the provisions of Articles 1764 and 2206(3)
which provide:
Art. 1764. Damages in cases comprised in this Section shall be awarded in
accordance with Title XVIII of this Book, concerning Damages. Articles 2206 shall
also apply to the death of a passenger caused by the breach of contract by a
common carrier.
Art. 2206. x x x
(3) The spouse, legitimate and illegitimate descendants and the ascendants of the
deceased may demand moral damages for mental anguish by reason of the death of
the deceased.
Here, there is no question that the heirs are likewise entitled to moral damages
pursuant to the above provisions, considering the mental anguish suffered by them
by reason of Jose Marcial’s untimely death, as can be deduced from the following
testimony of his wife Ruby:
Atty. Suarez:
Q: How would you describe Jose Marcial Ochoa?
(Ruby) A: My husband was a very loving husband, faithful husband, a very [good] decided to move.
provider[.] I depended on him so much financially [and] emotionally[.] He was Q: If you would assign that pain and suffering that you suffered as a result of the
practically my life then. death of your husband, what will be the monetary consideration?
Q: How is he as a father? A: I struggled with that kasi….I can honestly say no amount of money can ever repay
A: A very good father, he is very committed to Micaela[. H]e has always time for her[. the [loss] that my children suffered, future nila yan eh, and my son was not given a
H]e is a family man, so it’s really a great [loss] to me and to Micaela. chance to get to know his father, so I cannot imagine kung ano yung sinasabi n’yong
Q: What was your reaction upon learning of your husband’s death? amount that will compensate the suffering that I have to go through and my children
A: Immediately after I learned of his death, I tried very hard to keep a clear mind for will go through, ‘yon and mahirap bayaran.60
my little girl, she was 3 ½ and she could not grasp what death is, so I found [it] so Under this circumstance, we thus find as sufficient and "somehow proportional to
hard to explain to her [at] that time what happened [e]specially [because] she just and in approximation of the suffering inflicted"61 an award of moral damages in an
talked to her father from the airport telling her that he is coming home, tapos hindi na amount similar to that awarded in Victory which is ₱100,000.00.
pala. From the above discussion, we, thus, partly grant the heirs’ petition.
Q: How did it affect you? WHEREFORE, the petition for review on certiorari in G.R. No. 170071 is PARTLY
A: It was a painful struggle everyday just to get up and move on when someone who GRANTED while the petition in G.R. No. 170125 is DENIED. The assailed Decision
[you] really really love and [who] is important to you … it is very hard to move on and and Resolution dated June 29, 2005 and October 12, 2005 of the Court of Appeals in
[it is even] harder to move on [when] I found out that I was pregnant with my second CA-G.R. CV No. 75602 are AFFIRMED with the MODIFICATIONS that G & S is
child, parang tinabunan ka [ng] lahat eh[. I]t’s [too] hard to find happiness, you’re ordered to pay the heirs of Jose Marcial K. Ochoa the sum of ₱6,611,634.59 for loss
pregnant, when you know wala naman talagang father yung bata later on x x x of earning capacity of the deceased and ₱100,000.00 as moral damages.
xxxx SO ORDERED.
Q: How did this affect your family?
A: Yung effect kay Micaela, she [used] to be a gregarious child, yung happy ganyan,
but nung wala na yong father niya that time, [during] graduation ng nursery that time
naging very very [quiet] siya, so a lot of emotional support from my own family was
given to her at the time para makacope-up siya sa loss kasi she is very close to the
father.
Q: Financially, how did it affect you?
A: I had to make do of what was left by my husband, I couldn’t also work so much at
the time because I was….and hirap eh, I cannot find enthusiasm in what I do, tapos
pregnant pa ako, and hirap talaga.
Q: How else did it affect you?
A: We had to move houses like we used to live in Quezon City at (the) time of his
death, tapos kinuha kami ni Gorjie my brother-in-law sa compound nila para hindi…
[to] support us emotionally (at that time) kasi nga I was pregnant and then I also
decided to move (to make it easy for me) to adjust yung lifestyle ng mga bata,
because I cannot cope [here] financially on my own[. N]ahihirapan na ako dito
because the living expenses here are quite high compared sa probinsiya so I
 !supportFootnotes][2][endif]
MOF COMPANY, INC., G.R. No. 172822 which was prepared by the carrier Hanjin Shipping Co., Ltd. (Hanjin),
Petitioner, named respondent Shin Yang Brokerage Corp. (Shin Yang) as the consignee and indicated
Present: that payment was on a Freight Collect basis, i.e., that the consignee/receiver of the goods
would be the one to pay for the freight and other charges in the total amount of P57,646.00.[if
!supportFootnotes][3][endif]
CARPIO, J., Chairperson, ∗

- versus - LEONARDO-DE CASTRO, ∗∗

BRION, The shipment arrived in Manila on October 29, 2001. Thereafter, petitioner MOF
DEL CASTILLO, and Company, Inc. (MOF), Hanjins exclusive general agent in the Philippines, repeatedly
ABAD, JJ. demanded the payment of ocean freight, documentation fee and terminal handling charges
SHIN YANG BROKERAGE from Shin Yang. The latter, however, failed and refused to pay contending that it did not
CORPORATION, Promulgated: cause the importation of the goods, that it is only the Consolidator of the said shipment, that
Respondent. December 18, 2009 the ultimate consignee did not endorse in its favor the original bill of lading and that the bill
x--------------------------------------------------------------- of lading was prepared without its consent.
----x
Thus, on March 19, 2003, MOF filed a case for sum of money before the Metropolitan Trial
Court of Pasay City (MeTC Pasay) which was docketed as Civil Case No. 206-03 and raffled
DECISION to Branch 48. MOF alleged that Shin Yang, a regular client, caused the importation and
shipment of the goods and assured it that ocean freight and other charges would be paid upon
arrival of the goods in Manila. Yet, after Hanjin's compliance, Shin Yang unjustly breached
DEL CASTILLO, J.: its obligation to pay. MOF argued that Shin Yang, as the named consignee in the bill of
lading, entered itself as a party to the contract and bound itself to the Freight Collect
The necessity of proving lies with the person who sues. arrangement. MOF thus prayed for the payment of P57,646.00 representing ocean freight,
documentation fee and terminal handling charges as well as damages and attorneys fees.
The refusal of the consignee named in the bill of lading to pay the freightage on
the claim that it is not privy to the contract of affreightment propelled the shipper to sue for Claiming that it is merely a consolidator/forwarder and that Bill of Lading No.
collection of money, stressing that its sole evidence, the bill of lading, suffices to prove that HJSCPUSI14168303 was not endorsed to it by the ultimate consignee, Shin Yang denied any
the consignee is bound to pay. Petitioner now comes to us by way of Petition for Review on involvement in shipping the goods or in promising to shoulder the freightage. It asserted that
Certiorari[if !supportFootnotes][1][endif] under Rule 45 praying for the reversal of the Court of Appeals' it never authorized Halla Trading Co. to ship the articles or to have its name included in the
(CA) judgment that dismissed its action for sum of money for insufficiency of evidence. bill of lading. Shin Yang also alleged that MOF failed to present supporting documents to
prove that it was Shin Yang that caused the importation or the one that assured payment of
the shipping charges upon arrival of the goods in Manila.
Factual Antecedents
Ruling of the Metropolitan Trial Court
On October 25, 2001, Halla Trading Co., a company based in Korea, shipped to
Manila secondhand cars and other articles on board the vessel Hanjin Busan 0238W. The bill On June 16, 2004, the MeTC of Pasay City, Branch 48 rendered its Decision[if
!supportFootnotes][4][endif]
of lading covering the shipment, i.e., Bill of Lading No. HJSCPUSI14168303,[if in favor of MOF. It ruled that Shin Yang cannot disclaim being a party to
the contract of affreightment because: 2. P10,000.00 as and for attorneys fees and

x x x it would appear that defendant has business transactions with plaintiff. This
is evident from defendants letters dated 09 May 2002 and 13 May 2002
(Exhibits 1 and 2, defendants Position Paper) where it requested for the 3. the cost of suit.
release of refund of container deposits x x x. [In] the mind of the Court,
by analogy, a written contract need not be necessary; a mutual
understanding [would suffice]. Further, plaintiff would have not
included the name of the defendant in the bill of lading, had there been
no prior agreement to that effect.

SO ORDERED.[if !supportFootnotes][6][endif]

In sum, plaintiff has sufficiently proved its cause of action

against the defendant and the latter is obliged to honor its agreement
Ruling of the Regional Trial Court
with plaintiff despite the absence of a written contract.[if
!supportFootnotes][5][endif]
The Regional Trial Court (RTC) of Pasay City, Branch 108 affirmed in toto the Decision of
the MeTC. It held that:

MOF and Shin Yang entered into a contract of affreightment which Blacks Law
Dictionary defined as a contract with the ship owner to hire his ship or
The dispositive portion of the MeTC Decision reads: part of it, for the carriage of goods and generally take the form either of
a charter party or a bill of lading.
WHEREFORE, premises considered, judgment is hereby rendered in favor of
plaintiff and against the defendant, ordering the latter to pay plaintiff as
follows:

1. P57,646.00 plus legal interest from the date of demand until fully paid,
The bill of lading contain[s] the information embodied in the contract. Defendant is liable to pay the sum of P57,646.00, with interest until fully paid,
attorneys fees of P10,000.00 [and] cost of suit.

Article 652 of the Code of Commerce provides that the charter party must be in
writing; however, Article 653 says: If the cargo should be received Considering all the foregoing, this Court affirms in toto the decision of the Court a
without charter party having been signed, the contract shall be quo.
understood as executed in accordance with what appears in the bill of
lading, the sole evidence of title with regard to the cargo for
determining the rights and obligations of the ship agent, of the captain
and of the charterer. Thus, the Supreme Court opined in the Market
Developers, Inc. (MADE) vs. Honorable Intermediate Appellate Court
and Gaudioso Uy, G.R. No. 74978, September 8, 1989, this kind of
contract may be oral. In another case, Compania Maritima vs. Insurance
Company of North America, 12 SCRA 213 the contract of
SO ORDERED.[if !supportFootnotes][7][endif]
affreightment by telephone was recognized where the oral agreement
was later confirmed by a formal booking.

Ruling of the Court of Appeals

Seeing the matter in a different light, the CA dismissed MOFs complaint and refused to
award any form of damages or attorneys fees. It opined that MOF failed to substantiate its
claim that Shin Yang had a hand in the importation of the articles to the Philippines or that it
xxxx gave its consent to be a consignee of the subject goods. In its March 22, 2006 Decision,[if
!supportFootnotes][8][endif]
the CA said:

This Court is persuaded [that except] for the Bill of Lading, respondent has not
presented any other evidence to bolster its claim that petitioner has
entered [into] an agreement of affreightment with respondent, be it
 verbal or written. It is noted that the Bill of Lading was prepared by A bill of lading delivered and accepted constitutes the contract of
Hanjin Shipping, not the petitioner. Hanjin is the principal while carriage[,] even though not signed, because the
respondent is the formers agent. (p. 43, rollo) acceptance of a paper containing the terms of a
proposed contract generally constitutes an
acceptance of the contract and of all its terms and
conditions of which the acceptor has actual or
constructive notice (Keng Hua Paper Products
The conclusion of the court a quo, which was upheld by the RTC Pasay City, Co., Inc. vs. CA, 286 SCRA 257).
Branch 108 xxx is purely speculative and conjectural. A court cannot
rely on speculations, conjectures or guesswork, but must depend upon
competent proof and on the basis of the best evidence obtainable under
the circumstances. Litigation cannot be properly resolved by
suppositions, deductions or even presumptions, with no basis in
evidence, for the truth must have to be determined by the hard rules of
admissibility and proof (Lagon vs. Hooven Comalco Industries, Inc.
349 SCRA 363).

In the present case, petitioner did not only [refuse to] accept the bill of lading, but
it likewise disown[ed] the shipment x x x. [Neither did it] authorize
While it is true that a bill of lading serves two (2) functions: first, it is a receipt for Halla Trading Company or anyone to ship or export the same on its
the goods shipped; second, it is a contract by which three parties, behalf.
namely, the shipper, the carrier and the consignee who undertake
specific responsibilities and assume stipulated obligations (Belgian
Overseas Chartering and Shipping N.V. vs. Phil. First Insurance Co.,
Inc., 383 SCRA 23), x x x if the same is not accepted, it is as if one
party does not accept the contract. Said the Supreme Court:

It is settled that a contract is upheld as long as there is proof of consent, subject

matter and cause (Sta. Clara Homeowners Association vs. Gaston, 374

SCRA 396). In the case at bar, there is not even any iota of evidence to
show that petitioner had given its consent.
He who alleges a fact has the burden of proving it and a mere allegation is not
evidence (Luxuria Homes Inc. vs. CA, 302 SCRA 315).
The 40-footer van contains goods of substantial value. It is highly improbable for
petitioner not to pay the charges, which is very minimal compared with
the value of the goods, in order that it could work on the release thereof.
For failure to substantiate its claim by preponderance of evidence, respondent has
not established its case against petitioner.[if !supportFootnotes][9][endif]
Petitioners filed a motion for reconsideration but it was denied in a Resolution[if
!supportFootnotes][10][endif]
dated May 25, 2006. Hence, this petition for review on certiorari.
Petitioners Arguments
In assailing the CAs Decision, MOF argues that the factual findings of both the MeTC and
RTC are entitled to great weight and respect and should have bound the CA. It stresses that
the appellate court has no justifiable reason to disturb the lower courts judgments because
their conclusions are well-supported by the evidence on record.
MOF further argues that the CA erred in labeling the findings of the lower courts as purely
speculative and conjectural. According to MOF, the bill of lading, which expressly stated
Shin Yang as the consignee, is the best evidence of the latters actual participation in the
transportation of the goods. Such document, validly entered, stands as the law among the
shipper, carrier and the consignee, who are all bound by the terms stated therein. Besides, a
carriers valid claim after it fulfilled its obligation cannot just be rejected by the named
consignee upon a simple denial that it ever consented to be a party in a contract of
affreightment, or that it ever participated in the preparation of the bill of lading. As against
Shin Yangs bare denials, the bill of lading is the sufficient preponderance of evidence
required to prove MOFs claim. MOF maintains that Shin Yang was the one that supplied all
the details in the bill of lading and acquiesced to be named consignee of the shipment on a
Freight Collect basis.
Lastly, MOF claims that even if Shin Yang never gave its consent, it cannot avoid
its obligation to pay, because it never objected to being named as the consignee in the bill of
lading and that it only protested when the shipment arrived in the Philippines, presumably
due to a botched transaction between it and Halla Trading Co. Furthermore, Shin Yangs
letters asking for the refund of container deposits highlight the fact that it was aware of the
shipment and that it undertook preparations for the intended release of the shipment.
Respondents Arguments
Echoing the CA decision, Shin Yang insists that MOF has no evidence to prove that it
consented to take part in the contract of affreightment. Shin Yang argues that MOF miserably
failed to present any evidence to prove that it was the one that made preparations for the
subject shipment, or that it is an actual shipping practice that forwarders/consolidators as
consignees are the ones that provide carriers details and information on the bills of lading.

Shin Yang contends that a bill of lading is essentially a contract between the
shipper and the carrier and ordinarily, the shipper is the one liable for the freight charges. A
consignee, on the other hand, is initially a stranger to the bill of lading and can be liable only
when the bill of lading specifies that the charges are to be paid by the consignee. This liability
arises from either a) the contract of agency between the shipper/consignor and the consignee;
or b) the consignees availment of the stipulation pour autrui drawn up by and between the
shipper/ consignor and carrier upon the consignees demand that the goods be delivered to it.
Shin Yang contends that the fact that its name was mentioned as the consignee of the cargoes
did not make it automatically liable for the freightage because it never benefited from the
shipment. It never claimed or accepted the goods, it was not the shippers agent, it was not
aware of its designation as consignee and the original bill of lading was never endorsed to it.
Issue
The issue for resolution is whether a consignee, who is not a signatory to the bill of lading, is
bound by the stipulations thereof. Corollarily, whether respondent who was not an agent of
the shipper and who did not make any demand for the fulfillment of the stipulations of the bill
of lading drawn in its favor is liable to pay the corresponding freight and handling charges.
Our Ruling
Since the CA and the trial courts arrived at different conclusions, we are constrained to depart
from the general rule that only errors of law may be raised in a Petition for Review on
Certiorari under Rule 45 of the Rules of Court and will review the evidence presented.[if
!supportFootnotes][11][endif]
The bill of lading is oftentimes drawn up by the shipper/consignor and the carrier without the
intervention of the consignee. However, the latter can be bound by the stipulations of the bill
of lading when a) there is a relation of agency between the shipper or consignor and the
consignee or b) when the consignee demands fulfillment of the stipulation of the bill of lading
which was drawn up in its favor.[if !supportFootnotes][12][endif]
In Keng Hua Paper Products Co., Inc. v. Court of Appeals,[if !supportFootnotes][13][endif]
we held that once the bill of lading is received by the consignee who does not object to any
terms or stipulations contained therein, it constitutes as an acceptance of the contract and of
all of its terms and conditions, of which the acceptor has actual or constructive notice.
In Mendoza v. Philippine Air Lines, Inc.,[if !supportFootnotes][14][endif] the consignee sued the carrier
for damages but nevertheless claimed that he was never a party to the contract of
transportation and was a complete stranger thereto. In debunking Mendozas contention, we
held that:
x x x First, he insists that the articles of the Code of Commerce should be applied;
that he invokes the provisions of said Code governing the obligations of a common carrier to
make prompt delivery of goods given to it under a contract of transportation. Later, as already
said, he says that he was never a party to the contract of transportation and was a complete
stranger to it, and that he is now suing on a tort or a violation of his rights as a stranger (culpa
aquiliana). If he does not invoke the contract of carriage entered into with the defendant
company, then he would hardly have any leg to stand on. His right to prompt delivery of the
can of film at the Pili Air Port stems and is derived from the contract of carriage under which
contract, the PAL undertook to carry the can of film safely and to deliver it to him promptly.
Take away or ignore that contract and the obligation to carry and to deliver and right to
prompt delivery disappear. Common carriers are not obligated by law to carry and to deliver
merchandise, and persons are not vested with the right to prompt delivery, unless such
common carriers previously assume the obligation. Said rights and obligations are created by
a specific contract entered into by the parties. In the present case, the findings of the trial
court which as already stated, are accepted by the parties and which we must accept are
to the effect that the LVN Pictures Inc. and Jose Mendoza on one side, and the
defendant company on the other, entered into a contract of transportation (p. 29, Rec.
on Appeal). One interpretation of said finding is that the LVN Pictures Inc. through
previous agreement with Mendoza acted as the latter's agent. When he negotiated with
the LVN Pictures Inc. to rent the film 'Himala ng Birhen' and show it during the Naga
town fiesta, he most probably authorized and enjoined the Picture Company to ship the
film for him on the PAL on September 17th. Another interpretation is that even if the
LVN Pictures Inc. as consignor of its own initiative, and acting independently of
Mendoza for the time being, made Mendoza a consignee. [Mendoza made himself a
party to the contract of transportaion when he appeared at the Pili Air Port armed with
the copy of the Air Way Bill (Exh. 1) demanding the delivery of the shipment to him.]
The very citation made by appellant in his memorandum supports this view. Speaking of the
possibility of a conflict between the order of the shipper on the one hand and the order of the
consignee on the other, as when the shipper orders the shipping company to return or retain
the goods shipped while the consignee demands their delivery, Malagarriga in his book
Codigo de Comercio Comentado, Vol. 1, p. 400, citing a decision of the Argentina Court of
Appeals on commercial matters, cited by Tolentino in Vol. II of his book entitled
'Commentaries and Jurisprudence on the Commercial Laws of the Philippines' p. 209, says
that the right of the shipper to countermand the shipment terminates when the
consignee or legitimate holder of the bill of lading appears with such bill of lading
before the carrier and makes himself a party to the contract. Prior to that time he is a
stranger to the contract.
Still another view of this phase of the case is that contemplated in Art. 1257, paragraph
2, of the old Civil Code (now Art. 1311, second paragraph) which reads thus:
Should the contract contain any stipulation in favor of a third person, he may demand
its fulfillment provided he has given notice of his acceptance to the person bound before
the stipulation has been revoked.'
Here, the contract of carriage between the LVN Pictures Inc. and the defendant carrier
contains the stipulations of delivery to Mendoza as consignee. His demand for the
delivery of the can of film to him at the Pili Air Port may be regarded as a notice of his
acceptance of the stipulation of the delivery in his favor contained in the contract of
carriage and delivery. In this case he also made himself a party to the contract, or at
least has come to court to enforce it. His cause of action must necessarily be founded on
its breach.[if !supportFootnotes][15][endif] (Emphasis Ours)
In sum, a consignee, although not a signatory to the contract of carriage between the shipper
and the carrier, becomes a party to the contract by reason of either a) the relationship of
agency between the consignee and the shipper/ consignor; b) the unequivocal acceptance of
the bill of lading delivered to the consignee, with full knowledge of its contents or c)
availment of the stipulation pour autrui, i.e., when the consignee, a third person, demands
before the carrier the fulfillment of the stipulation made by the consignor/shipper in the
consignees favor, specifically the delivery of the goods/cargoes shipped.[if !supportFootnotes][16][endif]
In the instant case, Shin Yang consistently denied in all of its pleadings that it authorized
Halla Trading, Co. to ship the goods on its behalf; or that it got hold of the bill of lading
covering the shipment or that it demanded the release of the cargo. Basic is the rule in
evidence that the burden of proof lies upon him who asserts it, not upon him who denies,
since, by the nature of things, he who denies a fact cannot produce any proof of it.[if
!supportFootnotes][17][endif]
Thus, MOF has the burden to controvert all these denials, it being
insistent that Shin Yang asserted itself as the consignee and the one that caused the shipment
of the goods to the Philippines.
In civil cases, the party having the burden of proof must establish his case by
preponderance of evidence,[if !supportFootnotes][18][endif] which means evidence which is of greater
weight, or more convincing than that which is offered in opposition to it.[if !supportFootnotes][19][endif]
Here, MOF failed to meet the required quantum of proof. Other than presenting the bill of
lading, which, at most, proves that the carrier acknowledged receipt of the subject cargo from
the shipper and that the consignee named is to shoulder the freightage, MOF has not adduced
any other credible evidence to strengthen its cause of action. It did not even present any
witness in support of its allegation that it was Shin Yang which furnished all the details
indicated in the bill of lading and that Shin Yang consented to shoulder the shipment costs.
There is also nothing in the records which would indicate that Shin Yang was an agent of
Halla Trading Co. or that it exercised any act that would bind it as a named consignee. Thus,
the CA correctly dismissed the suit for failure of petitioner to establish its cause against
respondent.
WHEREFORE, the petition is DENIED. The assailed Decision of the Court of Appeals
dated March 22, 2006 dismissing petitioners complaint and the Resolution dated May 25,
2006 denying the motion for reconsideration are AFFIRMED.
SO ORDERED.
SPOUSES DANTE CRUZ and G.R. No. 186312 survivors, gave his account of the incident that led to the filing of the complaint as follows:
LEONORA CRUZ,
Petitioners, Present: 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
CARPIO MORALES, J., night because of strong winds and heavy rains.
Chairperson,
BRION, On September 11, 2000, as it was still windy, Matute and 25 other Resort guests including
- versus - BERSAMIN, petitioners son and his wife trekked to the other side of the Coco Beach mountain that was
ABAD,* and sheltered from the wind where they boarded M/B Coco Beach III, which was to ferry them to
VILLARAMA, JR., JJ. Batangas.
SUN HOLIDAYS, INC.,
Respondent. Promulgated: 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
June 29, 2010 side and the captain to step forward to the front, leaving the wheel to one of the crew
members.
x-------------------------------------------------x
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.

DECISION 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
CARPIO MORALES, J.: Iligtas niyo na lang ang sarili niyo (Just save yourselves).

Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on January 25, 2001[if
!supportFootnotes][1][endif]
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),[if !supportFootnotes][2][endif] a scuba diving instructor and one of the
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.[if !supportFootnotes][3][endif]
Petitioners, by letter of October 26, 2000,[if !supportFootnotes][4][endif] 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,[if !supportFootnotes][5][endif] 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.[if !supportFootnotes][6][endif]
In its Answer,[if !supportFootnotes][7][endif] 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.[if !supportFootnotes][8][endif] He added that M/B Coco
Beach III met all four conditions on September 11, 2000,[if !supportFootnotes][9][endif] but a subasco
or squall, characterized by strong winds and big waves, suddenly occurred, causing the boat
to capsize.[if !supportFootnotes][10][endif]
By Decision of February 16, 2005,[if !supportFootnotes][11][endif] 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,[if !supportFootnotes][12][endif] they appealed to the Court of Appeals.
By Decision of August 19, 2008,[if !supportFootnotes][13][endif] 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,[if !supportFootnotes][14][endif] they filed the present Petition for Review.[if !supportFootnotes][15][endif]
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.[if !supportFootnotes][16][endif]
The petition is impressed with merit.
Petitioners correctly rely on De Guzman v. Court of Appeals[if !supportFootnotes][17][endif]
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 .
. .[if !supportFootnotes][18][endif] (emphasis and underscoring supplied.)
 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.[if !supportFootnotes][21][endif]

Indeed, respondent is a common carrier. Its ferry services are so intertwined with
Respondent nevertheless harps on its strict compliance with the earlier mentioned conditions
its main business as to be properly considered ancillary thereto. The constancy of respondents
of voyage before it allowed M/B Coco Beach III to sail on September 11, 2000. Respondents
ferry services in its resort operations is underscored by its having its own Coco Beach boats.
position does not impress.
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.
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
That respondent does not charge a separate fee or fare for its ferry services is of no
in Northern Luzon which would also affect the province of Mindoro.[if !supportFootnotes][22][endif] By
moment. It would be imprudent to suppose that it provides said services at a loss. The Court
the testimony of Dr. Frisco Nilo, supervising weather specialist of PAGASA, squalls are to be
is aware of the practice of beach resort operators offering tour packages to factor the
expected under such weather condition.[if !supportFootnotes][23][endif]
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
A very cautious person exercising the utmost diligence would thus not brave such stormy
may only be deemed to have overpaid.
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
As De Guzman instructs, Article 1732 of the Civil Code defining common carriers has
were their own. This respondent failed to do.
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
Respondents insistence that the incident was caused by a fortuitous event does not
obligations and liabilities of common carriers.
impress either.

Under the Civil Code, common carriers, from the nature of their business and for reasons of
The elements of a "fortuitous event" are: (a) the cause of the unforeseen and unexpected
public policy, are bound to observe extraordinary diligence for the safety of the passengers
occurrence, or the failure of the debtors to comply with their obligations, must have been
transported by them, according to all the circumstances of each case.[if !supportFootnotes][19][endif]
independent of human will; (b) the event that constituted the caso fortuito must have been
They are bound to carry the passengers safely as far as human care and foresight can provide,
impossible to foresee or, if foreseeable, impossible to avoid; (c) the occurrence must have
using the utmost diligence of very cautious persons, with due regard for all the
been such as to render it impossible for the debtors to fulfill their obligation in a normal
circumstances.[if !supportFootnotes][20][endif]
manner; and (d) the obligor must have been free from any participation in the aggravation of
the resulting injury to the creditor.[if !supportFootnotes][24][endif]
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.[if
!supportFootnotes][25][endif]
2 / 3 x [80 age of deceased at the time of death][if !supportFootnotes][30][endif]

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.[if !supportFootnotes][26][endif]
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[if !supportFootnotes][27][endif] vis--vis Article 2206[if !supportFootnotes][28][endif] 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
[if !supportFootnotes][29][endif]
P50,000.
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.[if !supportFootnotes][31][endif]
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.[if !supportFootnotes][32][endif]
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.[if
!supportFootnotes][33][endif]

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).
In computing the third factor necessary living expense, Smith Bell Dodwell
Shipping Agency Corp. v. Borja[if !supportFootnotes][34][endif] 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 is determined in accordance with the formula:
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
[if !supportFootnotes][35][endif]
$900 which, when converted to Philippine peso applying the annual
average exchange rate of $1 = P44 in 2000,[if !supportFootnotes][36][endif] 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.[if
!supportFootnotes][37][endif]
Under the circumstances, it is reasonable to award petitioners the amount of
P100,000 as moral damages and P100,000 as exemplary damages.[if !supportFootnotes][38][endif]
Pursuant to Article 2208[if !supportFootnotes][39][endif] 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[if !supportFootnotes][40][endif]
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.
NOSTRADAMUS VILLANUEVA petitioner, vs. PRISCILLA R. DOMINGO and
LEANDRO LUIS R. DOMINGO, respondents.
DECISION
CORONA, J.:
This is a petition to review the decision[1] of the Court of Appeals in CA-G.R. CV No.
52203 affirming in turn the decision of the trial court finding petitioner liable to
respondent for damages. The dispositive portion read:
WHEREFORE, the appealed decision is hereby AFFIRMED except the award of attorneys
fees including appearance fees which is DELETED.
SO ORDERED.[2]
The facts of the case, as summarized by the Court of Appeals, are as follows:
[Respondent] Priscilla R. Domingo is the registered owner of a silver Mitsubishi Lancer Car
model 1980 bearing plate No. NDW 781 91 with [co-respondent] Leandro Luis R. Domingo
as authorized driver. [Petitioner] Nostradamus Villanueva was then the registered owner of a
green Mitsubishi Lancer bearing Plate No. PHK 201 91.
On 22 October 1991 at about 9:45 in the evening, following a green traffic light, [respondent]
Priscilla Domingos silver Lancer car with Plate No. NDW 781 91 then driven by [co-
respondent] Leandro Luis R. Domingo was cruising along the middle lane of South
Superhighway at moderate speed from north to south. Suddenly, a green Mitsubishi Lancer
with plate No. PHK 201 91 driven by Renato Dela Cruz Ocfemia darted from Vito Cruz
Street towards the South Superhighway directly into the path of NDW 781 91 thereby hitting
and bumping its left front portion. As a result of the impact, NDW 781 91 hit two (2) parked
vehicles at the roadside, the second hitting another parked car in front of it.
Per Traffic Accident Report prepared by Traffic Investigator Pfc. Patrocinio N. Acido,
Renato dela Cruz Ocfemia was driving with expired license and positive for alcoholic breath.
Hence, Manila Assistant City Prosecutor Oscar A. Pascua recommended the filing of
information for reckless imprudence resulting to (sic) damage to property and physical
injuries.
The original complaint was amended twice: first, impleading Auto Palace Car Exchange as
commercial agent and/or buyer-seller and second, impleading Albert Jaucian as principal
defendant doing business under the name and style of Auto Palace Car Exchange.
Except for Ocfemia, all the defendants filed separate answers to the complaint. [Petitioner]
Nostradamus Villanueva claimed that he was no longer the owner of the car at the time of the
mishap because it was swapped with a Pajero owned by Albert Jaucian/Auto Palace Car
Exchange. For her part, Linda Gonzales declared that her presence at the scene of the
accident was upon the request of the actual owner of the Mitsubishi Lancer (PHK 201 91)
[Albert Jaucian] for whom she had been working as agent/seller. On the other hand, Auto
Palace Car Exchange represented by Albert Jaucian claimed that he was not the registered
owner of the car. Moreover, it could not be held subsidiary liable as employer of Ocfemia
because the latter was off-duty as utility employee at the time of the incident. Neither was
Ocfemia performing a duty related to his employment.[3]
After trial, the trial court found petitioner liable and ordered him to pay respondent
actual, moral and exemplary damages plus appearance and attorneys fees:
WHEREFORE, judgment is hereby rendered for the plaintiffs, ordering Nostradamus
Villanueva to pay the amount of P99,580 as actual damages, P25,000.00 as moral damages,
P25,000.00 as exemplary damages and attorneys fees in the amount of P10,000.00 plus
appearance fees of P500.00 per hearing with legal interest counted from the date of judgment.
In conformity with the law on equity and in accordance with the ruling in First Malayan
Lending and Finance Corporation vs. Court of Appeals (supra), Albert Jaucian is hereby
ordered to indemnify Nostradamus Villanueva for whatever amount the latter is hereby
ordered to pay under the judgment.
SO ORDERED.[4]
The CA upheld the trial courts decision but deleted the award for appearance and
attorneys fees because the justification for the grant was not stated in the body of the
decision. Thus, this petition for review which raises a singular issue:
MAY THE REGISTERED OWNER OF A MOTOR VEHICLE BE HELD LIABLE FOR
DAMAGES ARISING FROM A VEHICULAR ACCIDENT INVOLVING HIS MOTOR
VEHICLE WHILE BEING OPERATED BY THE EMPLOYEE OF ITS BUYER
WITHOUT THE LATTERS CONSENT AND KNOWLEDGE?[5]
Yes.
We have consistently ruled that the registered owner of any vehicle is directly and
primarily responsible to the public and third persons while it is being operated.[6] The
rationale behind such doctrine was explained way back in 1957 in Erezo vs. Jepte[7]:
The principle upon which this doctrine is based is that in dealing with vehicles registered
under the Public Service Law, the public has the right to assume or presume that the
registered owner is the actual owner thereof, for it would be difficult for the public to enforce
the actions that they may have for injuries caused to them by the vehicles being negligently
operated if the public should be required to prove who the actual owner is. How would the
public or third persons know against whom to enforce their rights in case of subsequent
transfers of the vehicles? We do not imply by his doctrine, however, that the registered owner
may not recover whatever amount he had paid by virtue of his liability to third persons from
the person to whom he had actually sold, assigned or conveyed the vehicle.
Under the same principle the registered owner of any vehicle, even if not used for a public
service, should primarily be responsible to the public or to third persons for injuries caused
the latter while the vehicle is being driven on the highways or streets. The members of the
Court are in agreement that the defendant-appellant should be held liable to plaintiff-
appellee for the injuries occasioned to the latter because of the negligence of the driver, even
if the defendant-appellant was no longer the owner of the vehicle at the time of the damage
because he had previously sold it to another. What is the legal basis for his (defendant-
appellants) liability?
There is a presumption that the owner of the guilty vehicle is the defendant-appellant as he is
the registered owner in the Motor Vehicles Office. Should he not be allowed to prove the
truth, that he had sold it to another and thus shift the responsibility for the injury to the real
and actual owner? The defendant holds the affirmative of this proposition; the trial court held
the negative.
The Revised Motor Vehicle Law (Act No. 3992, as amended) provides that no vehicle may
be used or operated upon any public highway unless the same is property registered. It has
been stated that the system of licensing and the requirement that each machine must carry a
registration number, conspicuously displayed, is one of the precautions taken to reduce the
danger of injury to pedestrians and other travelers from the careless management of
automobiles. And to furnish a means of ascertaining the identity of persons violating the laws
and ordinances, regulating the speed and operation of machines upon the highways (2 R.C.L.
1176). Not only are vehicles to be registered and that no motor vehicles are to be used or
operated without being properly registered for the current year, but that dealers in motor
vehicles shall furnish thee Motor Vehicles Office a report showing the name and address of
each purchaser of motor vehicle during the previous month and the manufacturers serial
number and motor number. (Section 5(c), Act No. 3992, as amended.)
Registration is required not to make said registration the operative act by which ownership in
vehicles is transferred, as in land registration cases, because the administrative proceeding of
registration does not bear any essential relation to the contract of sale between the parties
(Chinchilla vs. Rafael and Verdaguer, 39 Phil. 888), but to permit the use and operation of the
vehicle upon any public highway (section 5 [a], Act No. 3992, as amended). The main aim of
motor vehicle registration is to identify the owner so that if any accident happens, or that any
damage or injury is caused by the vehicle on the public highways, responsibility therefore can
be fixed on a definite individual, the registered owner. Instances are numerous where vehicles
running on public highways caused accidents or injuries to pedestrians or other vehicles
without positive identification of the owner or drivers, or with very scant means of
identification. It is to forestall these circumstances, so inconvenient or prejudicial to the
public, that the motor vehicle registration is primarily ordained, in the interest of the
determination of persons responsible for damages or injuries caused on public highways:
One of the principal purposes of motor vehicles legislation is identification of the vehicle and
of the operator, in case of accident; and another is that the knowledge that means of detection
are always available may act as a deterrent from lax observance of the law and of the rules of
conservative and safe operation. Whatever purpose there may be in these statutes, it is
subordinate at the last to the primary purpose of rendering it certain that the violator of the
law or of the rules of safety shall not escape because of lack of means to discover him. The
purpose of the statute is thwarted, and the displayed number becomes a share and delusion, if
courts would entertain such defenses as that put forward by appellee in this case. No
responsible person or corporation could be held liable for the most outrageous acts of
negligence, if they should be allowed to pace a middleman between them and the public, and
escape liability by the manner in which they recompense servants. (King vs. Brenham
Automobile Co., Inc. 145 S.W. 278, 279.)
With the above policy in mind, the question that defendant-appellant poses is: should not the
registered owner be allowed at the trial to prove who the actual and real owner is, and in
accordance with such proof escape or evade responsibility by and lay the same on the person
actually owning the vehicle? We hold with the trial court that the law does not allow him to
do so; the law, with its aim and policy in mind, does not relieve him directly of the
responsibility that the law fixes and places upon him as an incident or consequence of
registration. Were a registered owner allowed to evade responsibility by proving who the
supposed transferee or owner is, it would be easy for him, by collusion with others or
otherwise, to escape said responsibility and transfer the same to an indefinite person, or to
one who possesses no property with which to respond financially for the damage or injury
done. A victim of recklessness on the public highways is usually without means to discover
or identify the person actually causing the injury or damage. He has no means other than by a
recourse to the registration in the Motor Vehicles Office to determine who is the owner. The
protection that the law aims to extend to him would become illusory were the registered
owner given the opportunity to escape liability by disproving his ownership. If the policy of
the law is to be enforced and carried out, the registered owner should not be allowed to prove
the contrary to the prejudice of the person injured, that is, to prove that a third person or
another has become the owner, so that he may thereby be relieved of the responsibility to the
injured person.
The above policy and application of the law may appear quite harsh and would seem to
conflict with truth and justice. We do not think it is so. A registered owner who has already
sold or transferred a vehicle has the recourse to a third-party complaint, in the same action
brought against him to recover for the damage or injury done, against the vendee or transferee
of the vehicle. The inconvenience of the suit is no justification for relieving him of liability;
said inconvenience is the price he pays for failure to comply with the registration that the law
demands and requires.
In synthesis, we hold that the registered owner, the defendant-appellant herein, is primarily
responsible for the damage caused to the vehicle of the plaintiff-appellee, but he (defendant-
appellant) has a right to be indemnified by the real or actual owner of the amount that he may
be required to pay as damage for the injury caused to the plaintiff-appellant.[8]
Petitioner insists that he is not liable for damages since the driver of the vehicle at
the time of the accident was not an authorized driver of the new (actual) owner of the
vehicle. He claims that the ruling in First Malayan Leasing and Finance Corporation
vs. CA[9] implies that to hold the registered owner liable for damages, the driver of
the vehicle must have been authorized, allowed and permitted by its actual owner to
operate and drive it. Thus, if the vehicle is driven without the knowledge and consent
of the actual owner, then the registered owner cannot be held liable for damages.
He further argues that this was the underlying theory behind Duavit vs. CA[10]
wherein the court absolved the registered owner from liability after finding that the
vehicle was virtually stolen from the owners garage by a person who was neither
authorized nor employed by the owner. Petitioner concludes that the ruling in Duavit
and not the one in First Malayan should be applicable to him.
Petitioners argument lacks merit. Whether the driver is authorized or not by the
actual owner is irrelevant to determining the liability of the registered owner who the
law holds primarily and directly responsible for any accident, injury or death caused
by the operation of the vehicle in the streets and highways. To require the driver of
the vehicle to be authorized by the actual owner before the registered owner can be
held accountable is to defeat the very purpose why motor vehicle legislations are
enacted in the first place.
Furthermore, there is nothing in First Malayan which even remotely suggests that the
driver must be authorized before the registered owner can be held accountable. In
First Malayan, the registered owner, First Malayan Corporation, was held liable for
damages arising from the accident even if the vehicle involved was already owned
by another party:
This Court has consistently ruled that regardless of who the actual owner is of a motor
vehicle might be, the registered owner is the operator of the same with respect to the public
and third persons, and as such, directly and primarily responsible for the consequences of its
operation. In contemplation of law, the owner/operator of record is the employer of the
driver, the actual operator and employer being considered merely as his agent (MYC-Agro- registered owner-bank answered for damages for the accident even if the vehicle
Industrial Corporation vs. Vda. de Caldo, 132 SCRA 10, citing Vargas vs. Langcay, 6 SCRA was being driven by the Vice-President of the Bank in his private capacity and not as
174; Tamayo vs. Aquino, 105 Phil. 949). an officer of the Bank, as claimed by the Bank. We find no reason to deviate from
We believe that it is immaterial whether or not the driver was actually employed by the these decisions.
operator of record. It is even not necessary to prove who the actual owner of the vehicle and The main purpose of vehicle registration is the easy identification of the owner who
the employer of the driver is. Granting that, in this case, the father of the driver is the actual can be held responsible for any accident, damage or injury caused by the vehicle.
owner and that he is the actual employer, following the well-settled principle that the operator Easy identification prevents inconvenience and prejudice to a third party injured by
of record continues to be the operator of the vehicle in contemplation of law, as regards the one who is unknown or unidentified. To allow a registered owner to escape liability
public and third person, and as such is responsible for the consequences incident to its by claiming that the driver was not authorized by the new (actual) owner results in
operation, we must hold and consider such owner-operator of record as the employer, in the public detriment the law seeks to avoid.
contemplation of law, of the driver. And, to give effect to this policy of law as enunciated in Finally, the issue of whether or not the driver of the vehicle during the accident was
the above cited decisions of this Court, we must now extend the same and consider the actual authorized is not at all relevant to determining the liability of the registered owner.
operator and employer as the agent of the operator of record.[11] This must be so if we are to comply with the rationale and principle behind the
Contrary to petitioners position, the First Malayan ruling is applicable to him since the registration requirement under the motor vehicle law.
case involves the same set of facts ― the registered owner had previously sold the WHEREFORE, the petition is hereby DENIED. The January 26, 2000 decision
vehicle to someone else and was being driven by an employee of the new (actual) of the Court of Appeals is AFFIRMED.
owner. Duavit is inapplicable since the vehicle there was not transferred to another; SO ORDERED.
the registered and the actual owner was one and the same person. Besides, in
Duavit, the defense of the registered owner, Gilberto Duavit, was that the vehicle
was practically stolen from his garage by Oscar Sabiano, as affirmed by the latter:
Defendant Sabiano, in his testimony, categorically admitted that he took the jeep from the
garage of defendant Duavit without the consent and authority of the latter. He testified further
that Duavit even filed charges against him for the theft of the jeep but which Duavit did not
push through as his (Sabianos) parents apologized to Duavit on his behalf.[12]
As correctly pointed out by the CA, the Duavit ruling is not applicable to petitioners
case since the circumstance of unauthorized use was not present. He in fact
voluntarily delivered his car to Albert Jaucian as part of the downpayment for a
vehicle he purchased from Jaucian. Thus, he could not claim that the vehicle was
stolen from him since he voluntarily ceded possession thereof to Jaucian. It was the
latter, as the new (actual) owner, who could have raised the defense of theft to prove
that he was not liable for the acts of his employee Ocfemia. Thus, there is no reason
to apply the Duavit ruling to this case.
The ruling in First Malayan has been reiterated in BA Finance Corporation vs. CA[13]
and more recently in Aguilar, Sr. vs. Commercial Savings Bank.[14] In BA Finance,
we held the registered owner liable even if, at the time of the accident, the vehicle
was leased by another party and was driven by the lessees employee. In Aguilar, the
G.R. No. 168433 February 10, 2009
UCPB GENERAL INSURANCE CO., INC., Petitioner,
vs.
ABOITIZ SHIPPING CORP. EAGLE EXPRESS LINES, DAMCO INTERMODAL
SERVICES, INC., and PIMENTEL CUSTOMS BROKERAGE CO., Respondents.
DECISION
TINGA, J.:
UCPB General Insurance Co., Inc. (UCPB) assails the Decision1 of the Court of
Appeals dated October 29, 2004, which reversed the Decision2 dated November 29,
1999 of the Regional Trial Court of Makati City, Branch 146, and its Resolution3
dated June 14, 2005, which denied UCPB’s motion for reconsideration.
The undisputed facts, culled from the assailed Decision, are as follows:
On June 18, 1991, three (3) units of waste water treatment plant with accessories
were purchased by San Miguel Corporation (SMC for brevity) from Super Max
Engineering Enterprises, Co., Ltd. of Taipei, Taiwan. The goods came from
Charleston, U.S.A. and arrived at the port of Manila on board MV "SCANDUTCH
STAR". The same were then transported to Cebu on board MV "ABOITIZ
SUPERCON II". After its arrival at the port of Cebu and clearance from the Bureau of
Customs, the goods were delivered to and received by SMC at its plant site on
August 2, 1991. It was then discovered that one electrical motor of DBS Drive Unit
Model DE-30-7 was damaged.
Pursuant to an insurance agreement, plaintiff-appellee paid SMC the amount of
₱1,703,381.40 representing the value of the damaged unit. In turn, SMC executed a
Subrogation Form dated March 31, 1992 in favor of plaintiff-appellee.
Consequently, plaintiff-appellee filed a Complaint on July 21, 1992 as subrogee of
SMC seeking to recover from defendants the amount it had paid SMC.
On September 20, 1994, plaintiff-appellee moved to admit its Amended Complaint
whereby it impleaded East Asiatic Co. Ltd. (EAST for brevity) as among the
defendants for being the "general agent" of DAMCO. In its Order dated September
23, 1994, the lower court admitted the said amended complaint.
Upon plaintiff-appellee’s motion, defendant DAMCO was declared in default by the
lower court in its Order dated January 6, 1995.
In the meantime, on January 25, 1995, defendant EAST filed a Motion for
Preliminary Hearing on its affirmative defenses seeking the dismissal of the
complaint against it on the ground of prescription, which motion was however denied
by the court a quo in its Order dated September 1, 1995. Such denial was elevated
by defendant EAST to this Court through a Petition for Certiorari on October 30,
1995 in CA G.R. SP No. 38840. Eventually, this Court issued its Decision dated
February 14, 1996 setting aside the lower court’s assailed order of denial and further
ordering the dismissal of the complaint against defendant EAST. Plaintiff-appellee
moved for reconsideration thereof but the same was denied by this Court in its
Resolution dated November 8, 1996. As per Entry of Judgment, this Court’s decision
ordering the dismissal of the complaint against defendant EAST became final and
executory on December 5, 1996.
Accordingly, the court a quo noted the dismissal of the complaint against defendant
EAST in its Order dated December 5, 1997. Thus, trial ensued with respect to the
remaining defendants.
On November 29, 1999, the lower court rendered its assailed Decision, the
dispositive portion of which reads:
WHEREFORE, all the foregoing premises considered, judgment is hereby rendered
declaring DAMCO Intermodal Systems, Inc., Eagle Express Lines, Inc. and
defendant Aboitiz Shipping solidarily liable to plaintiff-subrogee for the damaged
shipment and orders them to pay plaintiff jointly and severally the sum of
₱1,703,381.40.
No costs.
SO ORDERED.
Not convinced, defendants-appellants EAGLE and ABOITIZ now come to this Court
through their respective appeals x x x4
The appellate court, as previously mentioned, reversed the decision of the trial court
and ruled that UCPB’s right of action against respondents did not accrue because
UCPB failed to file a formal notice of claim within 24 hours from (SMC’s) receipt of
the damaged merchandise as required under Art. 366 of the Code of Commerce.
According to the Court of Appeals, the filing of a claim within the time limitation in Art.
366 is a condition precedent to the accrual of a right of action against the carrier for
the damages caused to the merchandise.
In its Memorandum5 dated February 8, 2007, UCPB asserts that the claim
requirement under Art. 366 of the Code of Commerce does not apply to this case
because the damage to the merchandise had already been known to the carrier.
Interestingly, UCPB makes this revelation: "x x x damage to the cargo was found
upon discharge from the foreign carrier onto the International Container Terminal
Services, Inc. (ICTSI) in the presence of the carrier’s representative who signed the
Request for Bad Order Survey6 and the Turn Over of Bad Order Cargoes.7 On
transshipment, the cargo was already damaged when loaded on board the inter-
island carrier."8 This knowledge, UCPB argues, dispenses with the need to give the
carrier a formal notice of claim. Incidentally, the carrier’s representative mentioned by
UCPB as present at the time the merchandise was unloaded was in fact a
representative of respondent Eagle Express Lines (Eagle Express).
UCPB claims that under the Carriage of Goods by Sea Act (COGSA), notice of loss
need not be given if the condition of the cargo has been the subject of joint
inspection such as, in this case, the inspection in the presence of the Eagle Express
representative at the time the cargo was opened at the ICTSI.
UCPB further claims that the issue of the applicability of Art. 366 of the Code of
Commerce was never raised before the trial court and should, therefore, not have
been considered by the Court of Appeals.
Eagle Express, in its Memorandum9 dated February 7, 2007, asserts that it cannot
be held liable for the damage to the merchandise as it acted merely as a freight
forwarder’s agent in the transaction. It allegedly facilitated the transshipment of the
cargo from Manila to Cebu but represented the interest of the cargo owner, and not
the carrier’s. The only reason why the name of the Eagle Express representative
appeared on the Permit to Deliver Imported Goods was that the form did not have a
space for the freight forwarder’s agent, but only for the agent of the shipping line.
Moreover, UCPB had previously judicially admitted that upon verification from the
Bureau of Customs, it was East Asiatic Co., Ltd. (East Asiatic), regarding whom the
original complaint was dismissed on the ground of prescription, which was the real
agent of DAMCO Intermodal Services, Inc. (DAMCO), the ship owner.
Eagle Express argues that the applicability of Art. 366 of the Code of Commerce was
properly raised as an issue before the trial court as it mentioned this issue as a
defense in its Answer to UCPB’s Amended Complaint. Hence, UCPB’s contention
that the question was raised for the first time on appeal is incorrect.
Aboitiz Shipping Corporation (Aboitiz), on the other hand, points out, in its
Memorandum10 dated March 29, 2007, that it obviously cannot be held liable for the
damage to the cargo which, by UCPB’s admission, was incurred not during
transshipment to Cebu on
board one of Aboitiz’s vessels, but was already existent at the time of unloading in
Manila. Aboitiz also argues that Art. 366 of the Code of Commerce is applicable and
serves as a condition precedent to the accrual of UCPB’s cause of action against
it.lawphil.net
The Memorandum11 dated June 3, 2008, filed by Pimentel Customs Brokerage Co.
(Pimentel Customs), is also a reiteration of the applicability of Art. 366 of the Code of
Commerce.
It should be stated at the outset that the issue of whether a claim should have been
made by SMC, or UCPB as SMC’s subrogee, within the 24-hour period prescribed
by Art. 366 of the Code of Commerce was squarely raised before the trial court.
In its Answer to Amended Complaint12 dated May 10, 1993, Eagle Express averred,
thus:
The amended complaint states no cause of action under the provisions of the Code
of Commerce and the terms of the bill of lading; consignee made no claim against
herein defendant within twenty four (24) hours following the receipt of the alleged
cargo regarding the condition in which said cargo was delivered; however, assuming
arguendo that the damage or loss, if any, could not be ascertained from the outside
part of the shipment, consignee never made any claim against herein defendant at
the time of receipt of said cargo; herein defendant learned of the alleged claim only
upon receipt of the complaint.13
Likewise, in its Answer14 dated September 21, 1992, Aboitiz raised the defense that
UCPB did not file a claim with it and that the complaint states no cause of action.
UCPB obviously made a gross misrepresentation to the Court when it claimed that
the issue regarding the applicability of the Code of Commerce, particularly the 24-
hour formal claim rule, was not raised as an issue before the trial court. The
appellate court, therefore, correctly looked into the validity of the arguments raised
by Eagle Express, Aboitiz and Pimentel Customs on this point after the trial court had
so ill-advisedly centered its decision merely on the matter of extraordinary diligence.
Interestingly enough, UCPB itself has revealed that when the shipment was
discharged and opened at the ICTSI in Manila in the presence of an Eagle Express
representative, the cargo had already been found damaged. In fact, a request for
bad order survey was then made and a turnover survey of bad order cargoes was
issued, pursuant to the procedure in the discharge of bad order cargo. The shipment
was then repacked and transshipped from Manila to Cebu on board MV Aboitiz
Supercon II. When the cargo was finally received by SMC at its Mandaue City
warehouse, it was found in bad order, thereby confirming the damage already
uncovered in Manila.15
In charging Aboitiz with liability for the damaged cargo, the trial court condoned
UCPB’s wrongful suit against Aboitiz to whom the damage could not have been
attributable since there was no evidence presented that the cargo was further
damaged during its transshipment to Cebu. Even by the exercise of extraordinary
diligence, Aboitiz could not have undone the damage to the cargo that had already
been there when the same was shipped on board its vessel.
That said, it is nonetheless necessary to ascertain whether any of the remaining
parties may still be held liable by UCPB. The provisions of the Code of Commerce,
which apply to overland, river and maritime transportation, come into play.
Art. 366 of the Code of Commerce states:
Art. 366. Within twenty-four hours following the receipt of the merchandise, the claim
against the carrier for damage or average which may be found therein upon opening
the packages, may be made, provided that the indications of the damage or average
which gives rise to the claim cannot be ascertained from the outside part of such
packages, in which case the claim shall be admitted only at the time of receipt.
After the periods mentioned have elapsed, or the transportation charges have been
paid, no claim shall be admitted against the carrier with regard to the condition in
which the goods transported were delivered.1avvphi1
The law clearly requires that the claim for damage or average must be made within
24 hours from receipt of the merchandise if, as in this case, damage cannot be
ascertained merely from the outside packaging of the cargo.
In Philippine Charter Insurance Corporation v. Chemoil Lighterage Corporation,16
petitioner, as subrogee of Plastic Group Phil., Inc. (PGP), filed suit against
respondent therein for the damage found on a shipment of chemicals loaded on
board respondent’s barge. Respondent claimed that no timely notice in accordance
with Art. 366 of the Code of Commerce was made by petitioner because an
employee of PGP merely made a phone call to respondent’s Vice President,
informing the latter of the contamination of the cargo. The Court ruled that the notice
of claim was not timely made or relayed to respondent in accordance with Art. 366 of
the Code of Commerce.
The requirement to give notice of loss or damage to the goods is not an empty
formalism. The fundamental reason or purpose of such a stipulation is not to relieve
the carrier from just liability, but reasonably to inform it that the shipment has been
damaged and that it is charged with liability therefor, and to give it an opportunity to
examine the nature and extent of the injury. This protects the carrier by affording it
an opportunity to make an investigation of a claim while the matter is still fresh and
easily investigated so as to safeguard itself from false and fraudulent claims.17
We have construed the 24-hour claim requirement as a condition precedent to the
accrual of a right of action against a carrier for loss of, or damage to, the goods. The
shipper or consignee must allege and prove the fulfillment of the condition.
Otherwise, no right of action against the carrier can accrue in favor of the former.18
The shipment in this case was received by SMC on August 2, 1991. However, as
found by the Court of Appeals, the claims were dated October 30, 1991, more than
three (3) months from receipt of the shipment and, at that, even after the extent of
the loss had already been determined by SMC’s surveyor. The claim was, therefore,
clearly filed beyond the 24-hour time frame prescribed by Art. 366 of the Code of
Commerce.
But what of the damage already discovered in the presence of Eagle Express’s
representative at the time the shipment was discharged in Manila? The Request for
Bad Order Survey and Turn Over Survey of Bad Order Cargoes, respectively dated
June 17, 1999 and June 28, 1991, evince the fact that the damage to the cargo was
already made known to Eagle Express and, possibly, SMC, as of those dates.
Sec. 3(6) of the COGSA provides a similar claim mechanism as the Code of
Commerce but prescribes a period of three (3) days within which notice of claim
must be given if the loss or damage is not apparent. It states:
Sec. 3(6). Unless notice of loss or damage and the general nature of such loss or
damage be given in writing to the carrier or his agent at the port of discharge or at
the time of the removal of the goods into the custody of the person entitled to
delivery thereof under the contract of carriage, such removal shall be prima facie
evidence of the delivery by the carrier of the goods as descibed in the bill of lading. If
the loss or damage is not apparent, the notice must be given within three days of the
delivery.
Said notice of loss or damage may be endorsed upon the receipt of the goods given
by the person taking delivery thereof.
The notice in writing need not be given if the state of the goods has at the time of
their receipt been the subject of joint survey or inspection.
UCPB seizes upon the last paragraph which dispenses with the written notice if the
state of the goods has been the subject of a joint survey which, in this case, was the
opening of the shipment in the presence of an Eagle Express representative. It
should be noted at this point that the applicability of the above-quoted provision of
the COGSA was not raised as an issue by UCPB before the trial court and was only
cited by UCPB in its Memorandum in this case.
UCPB, however, is ambivalent as to which party Eagle Express represented in the
transaction. By its own manifestation, East Asiatic, and not Eagle Express, acted as
the agent through which summons
and court notices may be served on DAMCO. It would be unjust to hold that Eagle
Express’s knowledge of the damage to the cargo is such that it served to preclude or PCI LEASING AND FINANCE, INC., G.R. No. 162267
dispense with the 24-hour notice to the carrier required by Art. 366 of the Code of Petitioner, Present:
Commerce. Neither did the inspection of the cargo in which Eagle Express’s
representative had participated lead to the waiver of the written notice under the Sec. YNARES-SANTIAGO, J.,
3(6) of the COGSA. Eagle Express, after all, had acted as the agent of the freight Chairperson,
consolidator, not that of the carrier to whom the notice should have been made. - versus - AUSTRIA-MARTINEZ,
At any rate, the notion that the request for bad order survey and turn over survey of CHICO-NAZARIO,
bad cargoes signed by Eagle Express’s representative is construable as compliant NACHURA, and
with the notice requirement under Art. 366 of the Code of Commerce was foreclosed REYES, JJ.
by the dismissal of the complaint against DAMCO’s representative, East Asiatic. UCPB GENERAL INSURANCE CO., INC.,
As regards respondent Pimentel Customs, it is sufficient to acknowledge that it had Respondent. Promulgated:
no participation in the physical handling, loading and delivery of the damaged cargo July 4, 2008
and should, therefore, be absolved of liability.
Finally, UCPB’s misrepresentation that the applicability of the Code of Commerce x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- x
was not raised as an issue before the trial court warrants the assessment of double
costs of suit against it. DECISION
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-
G.R. CV No. 68168, dated October 29, 2004 and its Resolution dated June 14, 2005 AUSTRIA-MARTINEZ, J.:
are AFFIRMED. Double costs against petitioner.
SO ORDERED. Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court,
seeking a reversal of the Decision[if !supportFootnotes][1][endif] of the Court of Appeals (CA) dated
December 12, 2003 affirming with modification the Decision of the Regional Trial Court
(RTC) of Makati City which ordered petitioner and Renato Gonzaga (Gonzaga) to pay,
jointly and severally, respondent the amount of P244,500.00 plus interest; and the CA
Resolution[if !supportFootnotes][2][endif] dated February 18, 2004 denying petitioner's Motion for
Reconsideration.

The facts, as found by the CA, are undisputed:

On October 19, 1990 at about 10:30 p.m., a Mitsubishi Lancer car with Plate
Number PHD-206 owned by United Coconut Planters Bank was
traversing the Laurel Highway, Barangay Balintawak, Lipa City. The
car was insured with plantiff-appellee [UCPB General Insurance Inc.],
then driven by Flaviano Isaac with Conrado Geronimo, the Asst.
Manager of said bank, was hit and bumped by an 18-wheeler Fuso
Tanker Truck with Plate No. PJE-737 and Trailer Plate No. NVM-133,
 owned by defendants-appellants PCI Leasing & Finance, Inc. allegedly demands were made by plaintiff-appellee for the payment of the
leased to and operated by defendant-appellant Superior Gas & aforesaid amounts. However, no payment was made. Thus, plaintiff-
Equitable Co., Inc. (SUGECO) and driven by its employee, defendant appellee filed the instant case on March 13, 1991.[if !supportFootnotes][3][endif]
appellant Renato Gonzaga.

PCI Leasing and Finance, Inc., (petitioner) interposed the defense that it could not be held
liable for the collision, since the driver of the truck, Gonzaga, was not its employee, but that
of its co-defendant Superior Gas & Equitable Co., Inc. (SUGECO).[if !supportFootnotes][4][endif] In
fact, it was SUGECO, and not petitioner, that was the actual operator of the truck, pursuant to
a Contract of Lease signed by petitioner and SUGECO.[if !supportFootnotes][5][endif] Petitioner,
The impact caused heavy damage to the Mitsubishi Lancer car resulting in an
however, admitted that it was the owner of the truck in question.[if !supportFootnotes][6][endif]
explosion of the rear part of the car. The driver and passenger suffered
physical injuries. However, the driver defendant-appellant Gonzaga
After trial, the RTC rendered its Decision dated April 15, 1999,[if !supportFootnotes][7][endif]
the
continued on its [sic] way to its [sic] destination and did not bother to
dispositive portion of which reads:
bring his victims to the hospital.

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

plaintiff UCPB General Insurance [respondent], ordering the
defendants PCI Leasing and Finance, Inc., [petitioner] and Renato
Gonzaga, to pay jointly and severally the former the following
amounts: the principal amount of P244,500.00 with 12% interest as of
the filing of this complaint until the same is paid; P50,000.00 as
attorney's fees; and P20,000.00 as costs of suit.

Plaintiff-appellee paid the assured UCPB the amount of P244,500.00 representing

the insurance coverage of the damaged car.

SO ORDERED.[if !supportFootnotes][8][endif]

As the 18-wheeler truck is registered under the name of PCI Leasing, repeated

Aggrieved by the decision of the trial court, petitioner appealed to the CA.
In its Decision dated December 12, 2003, the CA affirmed the RTC's decision, with certain
modifications, as follows:
WHEREFORE, the appealed decision dated April 15, 1999 is hereby AFFIRMED
with modification that the award of attorney's fees is hereby deleted
and the rate of interest shall be six percent (6%) per annum computed
from the time of the filing of the complaint in the trial court until the
finality of the judgment. If the adjudged principal and the interest
remain unpaid thereafter, the interest rate shall be twelve percent
(12%) per annum computed from the time the judgment becomes final
and executory until it is fully satisfied.
SO ORDERED.[if !supportFootnotes][9][endif]
Petitioner filed a Motion for Reconsideration which the CA denied in its Resolution dated
February 18, 2004.
Hence, herein Petition for Review.
The issues raised by petitioner are purely legal:
Whether petitioner, as registered owner of a motor vehicle that figured in a quasi-delict may
be held liable, jointly and severally, with the driver thereof, for the damages caused to third
parties.
Whether petitioner, as a financing company, is absolved from liability by the enactment of
Republic Act (R.A.) No. 8556, or the Financing Company Act of 1998.
Anent the first issue, the CA found petitioner liable for the damage caused by the collision
since under the Public Service Act, if the property covered by a franchise is transferred or
leased to another without obtaining the requisite approval, the transfer is not binding on the
Public Service Commission and, in contemplation of law, the grantee continues to be
responsible under the franchise in relation to the operation of the vehicle, such as damage or
injury to third parties due to collisions.[if !supportFootnotes][10][endif]
Petitioner claims that the CA's reliance on the Public Service Act is misplaced, since the said
law applies only to cases involving common carriers, or those which have franchises to
operate as public utilities. In contrast, the case before this Court involves a private
commercial vehicle for business use, which is not offered for service to the general public.[if
!supportFootnotes][11][endif]
Petitioner's contention has partial merit, as indeed, the vehicles involved in the case at bar are
not common carriers, which makes the Public Service Act inapplicable.
However, the registered owner of the vehicle driven by a negligent driver may still
be held liable under applicable jurisprudence involving laws on compulsory motor vehicle
registration and the liabilities of employers for quasi-delicts under the Civil Code.
The principle of holding the registered owner of a vehicle liable for quasi-delicts resulting
from its use is well-established in jurisprudence. Erezo v. Jepte,[if !supportFootnotes][12][endif] with
Justice Labrador as ponente, wisely explained the reason behind this principle, thus:
Registration is required not to make said registration the
operative act by which ownership in vehicles is transferred, as in land
registration cases, because the administrative proceeding of registration
does not bear any essential relation to the contract of sale between the
parties (Chinchilla vs. Rafael and Verdaguer, 39 Phil. 888), but to
permit the use and operation of the vehicle upon any public highway
(section 5 [a], Act No. 3992, as amended.) The main aim of motor
vehicle registration is to identify the owner so that if any accident
happens, or that any damage or injury is caused by the vehicle on the
public highways, responsibility therefor can be fixed on a definite
individual, the registered owner. Instances are numerous where
vehicles running on public highways caused accidents or injuries to
pedestrians or other vehicles without positive identification of the
owner or drivers, or with very scant means of identification. It is to
forestall these circumstances, so inconvenient or prejudicial to the
public, that the motor vehicle registration is primarily ordained, in the
interest of the determination of persons responsible for damages or
injuries caused on public highways.
One of the principal purposes of motor vehicles legislation is
identification of the vehicle and of the operator, in case of accident; and
another is that the knowledge that means of detection are always
available may act as a deterrent from lax observance of the law and of
the rules of conservative and safe operation. Whatever purpose there
may be in these statutes, it is subordinate at the last to the primary
purpose of rendering it certain that the violator of the law or of the rules
of safety shall not escape because of lack of means to discover
him. The purpose of the statute is thwarted, and the displayed number
becomes a snare and delusion, if courts would entertain such defenses
as that put forward by appellee in this case. No responsible person or
corporation could be held liable for the most outrageous acts of
negligence, if they should be allowed to place a middleman between
them and the public, and escape liability by the manner in which they
recompense their servants. (King vs. Brenham Automobile Co., 145
S.W. 278, 279.)
With the above policy in mind, the question that defendant-
appellant poses is: should not the registered owner be allowed at the
trial to prove who the actual and real owner is, and in accordance with
such proof escape or evade responsibility and lay the same on the
person actually owning the vehicle? We hold with the trial court that
the law does not allow him to do so; the law, with its aim and policy in
mind, does not relieve him directly of the responsibility that the law
fixes and places upon him as an incident or consequence of
registration. Were a registered owner allowed to evade responsibility
by proving who the supposed transferee or owner is, it would be easy
for him, by collusion with others or otherwise, to escape said
responsibility and transfer the same to an indefinite person, or to one
who possesses no property with which to respond financially for the
damage or injury done. A victim of recklessness on the public
highways is usually without means to discover or identify the person
actually causing the injury or damage. He has no means other than by a
recourse to the registration in the Motor Vehicles Office to determine
who is the owner. The protection that the law aims to extend to him
would become illusory were the registered owner given the opportunity
to escape liability by disproving his ownership. If the policy of the law
is to be enforced and carried out, the registered owner should not be
allowed to prove the contrary to the prejudice of the person injured, that
is, to prove that a third person or another has become the owner, so that
he may thereby be relieved of the responsibility to the injured person.
The above policy and application of the law may appear
quite harsh and would seem to conflict with truth and justice. We do
not think it is so. A registered owner who has already sold or
transferred a vehicle has the recourse to a third-party complaint, in the
same action brought against him to recover for the damage or injury
done, against the vendee or transferee of the vehicle. The
inconvenience of the suit is no justification for relieving him of
liability; said inconvenience is the price he pays for failure to comply
with the registration that the law demands and requires.
 In synthesis, we hold that the registered owner, the
defendant-appellant herein, is primarily responsible for the damage
caused to the vehicle of the plaintiff-appellee, but he (defendant-
appellant) has a right to be indemnified by the real or actual owner of
the amount that he may be required to pay as damage for the injury
caused to the plaintiff-appellant.[if !supportFootnotes][13][endif]
The case is still good law and has been consistently cited in subsequent cases.[if
!supportFootnotes][14][endif]
Thus, there is no good reason to depart from its tenets.
For damage or injuries arising out of negligence in the operation of a motor vehicle, the
registered owner may be held civilly liable with the negligent driver either 1) subsidiarily, if
the aggrieved party seeks relief based on a delict or crime under Articles 100 and 103 of the
Revised Penal Code; or 2) solidarily, if the complainant seeks relief based on a quasi-delict
under Articles 2176 and 2180 of the Civil Code. It is the option of the plaintiff whether to
waive completely the filing of the civil action, or institute it with the criminal action, or file it
separately or independently of a criminal action;[if !supportFootnotes][15][endif] his only limitation is
that he cannot recover damages twice for the same act or omission of the defendant.[if
!supportFootnotes][16][endif]
In case a separate civil action is filed, the long-standing principle is that the registered owner
of a motor vehicle is primarily and directly responsible for the consequences of its operation,
including the negligence of the driver, with respect to the public and all third persons.[if
!supportFootnotes][17][endif]
In contemplation of law, the registered owner of a motor vehicle is the
employer of its driver, with the actual operator and employer, such as a lessee, being
considered as merely the owner's agent.[if !supportFootnotes][18][endif] This being the case, even if a
sale has been executed before a tortious incident, the sale, if unregistered, has no effect as to
the right of the public and third persons to recover from the registered owner.[if
!supportFootnotes][19][endif]
The public has the right to conclusively presume that the registered owner
is the real owner, and may sue accordingly.[if !supportFootnotes][20][endif]
In the case now before the Court, there is not even a sale of the vehicle involved, but a mere
lease, which remained unregistered up to the time of the occurrence of the quasi-delict that
gave rise to the case. Since a lease, unlike a sale, does not even involve a transfer of title or
ownership, but the mere use or enjoyment of property, there is more reason, therefore, in this
instance to uphold the policy behind the law, which is to protect the unwitting public and
provide it with a definite person to make accountable for losses or injuries suffered in
vehicular accidents.[if !supportFootnotes][21][endif] This is and has always been the rationale behind
compulsory motor vehicle registration under the Land Transportation and Traffic Code and
similar laws, which, as early as Erezo, has been guiding the courts in their disposition of
cases involving motor vehicular incidents. It is also important to emphasize that such
principles apply to all vehicles in general, not just those offered for public service or utility.[if
!supportFootnotes][22][endif]
The Court recognizes that the business of financing companies has a legitimate and
commendable purpose.[if !supportFootnotes][23][endif] In earlier cases, it considered a financial lease or
financing lease a legal contract,[if !supportFootnotes][24][endif] though subject to the restrictions of the
so-called Recto Law or Articles 1484 and 1485 of the Civil Code.[if !supportFootnotes][25][endif] In
previous cases, the Court adopted the statutory definition of a financial lease or financing
lease, as:
[A] mode of extending credit through a non-cancelable lease contract under which
the lessor purchases or acquires, at the instance of the lessee,
machinery, equipment, motor vehicles, appliances, business and office
machines, and other movable or immovable property in consideration
of the periodic payment by the lessee of a fixed amount of money
sufficient to amortize at least seventy (70%) of the purchase price or
acquisition cost, including any incidental expenses and a margin of
profit over an obligatory period of not less than two (2) years during
which the lessee has the right to hold and use the leased property, x x x
but with no obligation or option on his part to purchase the leased
property from the owner-lessor at the end of the lease contract. [if
!supportFootnotes][26][endif]
Petitioner presented a lengthy discussion of the purported trend in other jurisdictions, which
apparently tends to favor absolving financing companies from liability for the consequences
of quasi-delictual acts or omissions involving financially leased property.[if
!supportFootnotes][27][endif]
The petition adds that these developments have been legislated in our
jurisdiction in Republic Act (R.A.) No. 8556,[if !supportFootnotes][28][endif] which provides:
Section 12. Liability of lessors. Financing companies shall not be liable for loss, damage or
injury caused by a motor vehicle, aircraft, vessel, equipment, machinery or other property
leased to a third person or entity except when the motor vehicle, aircraft, vessel, equipment or
other property is operated by the financing company, its employees or agents at the time of
the loss, damage or injury.
(e) Encumbrances of motor vehicles. - Mortgages,
attachments, and other encumbrances of motor vehicles, in order to be
valid against third parties must be recorded in the Bureau (now the
Land Transportation Office). Voluntary transactions or voluntary
encumbrances shall likewise be properly recorded on the face of all
outstanding copies of the certificates of registration of the vehicle
concerned.

Petitioners argument that the enactment of R.A. No. 8556, especially its addition of the new
Sec. 12 to the old law, is deemed to have absolved petitioner from liability, fails to convince
the Court.

These developments, indeed, point to a seeming emancipation of financing

Cancellation or foreclosure of such mortgages, attachments,
companies from the obligation to compensate claimants for losses suffered from the operation
and other encumbrances shall likewise be recorded, and in the absence
of vehicles covered by their lease. Such, however, are not applicable to petitioner and do not
of such cancellation, no certificate of registration shall be issued
exonerate it from liability in the present case.
without the corresponding notation of mortgage, attachment and/or
other encumbrances.
The new law, R.A. No. 8556, notwithstanding developments in foreign jurisdictions, do not
supersede or repeal the law on compulsory motor vehicle registration. No part of the law
expressly repeals Section 5(a) and (e) of R.A. No. 4136, as amended, otherwise known as the
Land Transportation and Traffic Code, to wit:

Sec. 5. Compulsory registration of motor vehicles. - (a) All motor vehicles and trailer of any
type used or operated on or upon any highway of the Philippines must be registered with the
Bureau of Land Transportation (now the Land Transportation Office, per Executive Order
No. 125, January 30, 1987, and Executive Order No. 125-A, April 13, 1987) for the current x x x x (Emphasis supplied)
year in accordance with the provisions of this Act.

xxxx

Neither is there an implied repeal of R.A. No. 4136. As a rule, repeal by implication is
frowned upon, unless there is clear showing that the later statute is so irreconcilably
inconsistent and repugnant to the existing law that they cannot be reconciled and made to
stand together.[if !supportFootnotes][29][endif] There is nothing in R.A. No. 4136 that is inconsistent and
incapable of reconciliation.
Thus, the rule remains the same: a sale, lease, or financial lease, for that matter, that is not
registered with the Land Transportation Office, still does not bind third persons who are
aggrieved in tortious incidents, for the latter need only to rely on the public registration of a
motor vehicle as conclusive evidence of ownership.[if !supportFootnotes][30][endif] A lease such as the
one involved in the instant case is an encumbrance in contemplation of law, which needs to
be registered in order for it to bind third parties.[if !supportFootnotes][31][endif] Under this policy, the
evil sought to be avoided is the exacerbation of the suffering of victims of tragic vehicular
accidents in not being able to identify a guilty party. A contrary ruling will not serve the ends
of justice. The failure to register a lease, sale, transfer or encumbrance, should not benefit the
parties responsible, to the prejudice of innocent victims.
The non-registration of the lease contract between petitioner and its lessee precludes the
former from enjoying the benefits under Section 12 of R.A. No. 8556.
This ruling may appear too severe and unpalatable to leasing and financing companies, but
the Court believes that petitioner and other companies so situated are not entirely left without
recourse. They may resort to third-party complaints against their lessees or whoever are the
actual operators of their vehicles. In the case at bar, there is, in fact, a provision in the lease
contract between petitioner and SUGECO to the effect that the latter shall indemnify and hold
the former free and harmless from any liabilities, damages, suits, claims or judgments arising
from the latter's use of the motor vehicle.[if !supportFootnotes][32][endif] Whether petitioner would act
against SUGECO based on this provision is its own option.
The burden of registration of the lease contract is minuscule compared to the chaos that may
result if registered owners or operators of vehicles are freed from such responsibility.
Petitioner pays the price for its failure to obey the law on compulsory registration of motor
vehicles for registration is a pre-requisite for any person to even enjoy the privilege of putting
a vehicle on public roads.
WHEREFORE, the petition is DENIED. The Decision dated December 12, 2003 and
Resolution dated February 18, 2004 of the Court of Appeals are AFFIRMED.
Costs against petitioner.
SINGAPORE AIRLINES LIMITED, petitioner, vs. ANDION FERNANDEZ,
respondent.
DECISION
CALLEJO, SR., J.:
This is a petition for review on certiorari assailing the Decision[if !supportFootnotes][1][endif] of
the Court of Appeals which affirmed in toto the decision[if !supportFootnotes][2][endif] of the
Regional Trial Court of Pasig City, Branch 164 in Civil Case No. 60985 filed by the
respondent for damages.
The Case for the Respondent
Respondent Andion Fernandez is an acclaimed soprano here in the Philippines and
abroad. At the time of the incident, she was availing an educational grant from the
Federal Republic of Germany, pursuing a Masters Degree in Music majoring in
Voice.[if !supportFootnotes][3][endif]
She was invited to sing before the King and Queen of Malaysia on February 3 and 4,
1991. For this singing engagement, an airline passage ticket was purchased from
petitioner Singapore Airlines which would transport her to Manila from Frankfurt,
Germany on January 28, 1991. From Manila, she would proceed to Malaysia on the
next day.[if !supportFootnotes][4][endif] It was necessary for the respondent to pass by Manila
in order to gather her wardrobe; and to rehearse and coordinate with her pianist her
repertoire for the aforesaid performance.
The petitioner issued the respondent a Singapore Airlines ticket for Flight No. SQ 27,
leaving Frankfurt, Germany on January 27, 1991 bound for Singapore with onward
connections from Singapore to Manila. Flight No. SQ 27 was scheduled to leave
Frankfurt at 1:45 in the afternoon of January 27, 1991, arriving at Singapore at 8:50
in the morning of January 28, 1991. The connecting flight from Singapore to Manila,
Flight No. SQ 72, was leaving Singapore at 11:00 in the morning of January 28,
1991, arriving in Manila at 2:20 in the afternoon of the same day.[if !supportFootnotes][5][endif]
On January 27, 1991, Flight No. SQ 27 left Frankfurt but arrived in Singapore two
hours late or at about 11:00 in the morning of January 28, 1991. By then, the aircraft
bound for Manila had left as scheduled, leaving the respondent and about 25 other
passengers stranded in the Changi Airport in Singapore.[if !supportFootnotes][6][endif]
Upon disembarkation at Singapore, the respondent approached the transit counter
who referred her to the nightstop counter and told the lady employee thereat that it
was important for her to reach Manila on that day, January 28, 1991. The lady
employee told her that there were no more flights to Manila for that day and that
respondent had no choice but to stay in Singapore. Upon respondents persistence,
she was told that she can actually fly to Hong Kong going to Manila but since her
ticket was non-transferable, she would have to pay for the ticket. The respondent
could not accept the offer because she had no money to pay for it.[if
!supportFootnotes][7][endif]
Her pleas for the respondent to make arrangements to transport
her to Manila were unheeded.[if !supportFootnotes][8][endif]
The respondent then requested the lady employee to use their phone to make a call
to Manila. Over the employees reluctance, the respondent telephoned her mother to
inform the latter that she missed the connecting flight. The respondent was able to
contact a family friend who picked her up from the airport for her overnight stay in
Singapore.[if !supportFootnotes][9][endif]
The next day, after being brought back to the airport, the respondent proceeded to
petitioners counter which says: Immediate Attention To Passengers with Immediate
Booking. There were four or five passengers in line. The respondent approached
petitioners male employee at the counter to make arrangements for immediate
booking only to be told: Cant you see I am doing something. She explained her
predicament but the male employee uncaringly retorted: Its your problem, not ours.[if
!supportFootnotes][10][endif]
The respondent never made it to Manila and was forced to take a direct flight from
Singapore to Malaysia on January 29, 1991, through the efforts of her mother and
travel agency in Manila. Her mother also had to travel to Malaysia bringing with her
respondents wardrobe and personal things needed for the performance that caused
them to incur an expense of about P50,000.[if !supportFootnotes][11][endif]
As a result of this incident, the respondents performance before the Royal Family of
Malaysia was below par. Because of the rude and unkind treatment she received
from the petitioners personnel in Singapore, the respondent was engulfed with fear,
anxiety, humiliation and embarrassment causing her to suffer mental fatigue and skin
rashes. She was thereby compelled to seek immediate medical attention upon her
return to Manila for acute urticaria.[if !supportFootnotes][12][endif]
On June 15, 1993, the RTC rendered a decision with the following dispositive
portion:
ACCORDINGLY and as prayed for, defendant Singapore Airlines is ordered to pay herein
plaintiff Andion H. Fernandez the sum of:
1. FIFTY THOUSAND (P50,000.00) PESOS as compensatory or actual damages;
2. TWO HUNDRED and FIFTY THOUSAND (P250,000.00) PESOS as moral damages
considering plaintiffs professional standing in the field of culture at home and abroad;
3. ONE HUNDRED THOUSAND (P100,000.00) PESOS as exemplary damages;
4. SEVENTY-FIVE THOUSAND (P75,000.00) PESOS as attorneys fees; and
5. To pay the costs of suit.
SO ORDERED.[if !supportFootnotes][13][endif]
The petitioner appealed the decision to the Court of Appeals.
On June 10, 1998, the CA promulgated the assailed decision finding no reversible
error in the appealed decision of the trial court.[if !supportFootnotes][14][endif]
Forthwith, the petitioner filed the instant petition for review, raising the following
errors:
I
THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING IN TOTO THE
DECISION OF THE TRIAL COURT THAT AWARDED DAMAGES TO RESPONDENT
FOR THE ALLEGED FAILURE OF THE PETITIONER TO EXERCISE
EXTRAORDINARY DILIGENCE.
II
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE
PETITIONER ACTED IN BAD FAITH.
III
THE HONORABLE COURT OF APPEALS ERRED IN DISMISSING THE
PETITIONERS COUNTERCLAIMS.[if !supportFootnotes][15][endif]
The petitioner assails the award of damages contending that it exercised the
extraordinary diligence required by law under the given circumstances. The delay of
Flight No. SQ 27 from Frankfurt to Singapore on January 28, 1991 for more than two
hours was due to a fortuitous event and beyond petitioners control. Inclement
weather prevented the petitioners plane coming from Copenhagen, Denmark to
arrive in Frankfurt on time on January 27, 1991. The plane could not take off from the
airport as the place was shrouded with fog. This delay caused a snowball effect
whereby the other flights were consequently delayed. The plane carrying the
respondent arrived in Singapore two (2) hours behind schedule.[if !supportFootnotes][16][endif]
The delay was even compounded when the plane could not travel the normal route
which was through the Middle East due to the raging Gulf War at that time. It had to
pass through the restricted Russian airspace which was more congested.[if
!supportFootnotes][17][endif]
Under these circumstances, petitioner therefore alleged that it cannot be faulted for
the delay in arriving in Singapore on January 28, 1991 and causing the respondent
to miss her connecting flight to Manila.
The petitioner further contends that it could not also be held in bad faith because its
personnel did their best to look after the needs and interests of the passengers
including the respondent. Because the respondent and the other 25 passengers
missed their connecting flight to Manila, the petitioner automatically booked them to
the flight the next day and gave them free hotel accommodations for the night. It was
respondent who did not take petitioners offer and opted to stay with a family friend in
Singapore.
The petitioner also alleges that the action of the respondent was baseless and it
tarnished its good name and image earned through the years for which, it was
entitled to damages in the amount of P1,000,000; exemplary damages of P500,000;
and attorneys fees also in the amount of P500,000.[if !supportFootnotes][18][endif]
The petition is barren of merit.
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 be transported on that flight and on that date. If he does not, then the
carrier opens itself to a suit for a breach of contract of carriage.[if !supportFootnotes][19][endif]
The contract of air carriage is a peculiar one. Imbued with public interest, the law
requires common carriers to carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious persons with due
regard for all the circumstances.[if !supportFootnotes][20][endif] In an action for 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 is necessary to prove is the existence of
the contract and the fact of its non-performance by the carrier.[if !supportFootnotes][21][endif]
In the case at bar, it is undisputed that the respondent carried a confirmed ticket for
the two-legged trip from Frankfurt to Manila: 1) Frankfurt-Singapore; and 2)
Singapore-Manila. In her contract of carriage with the petitioner, the respondent
certainly expected that she would fly to Manila on Flight No. SQ 72 on January 28,
1991. Since the petitioner did not transport the respondent as covenanted by it on
said terms, the petitioner clearly breached its contract of carriage with the
respondent. The respondent had every right to sue the petitioner for this breach. The
defense that the delay was due to fortuitous events and beyond petitioners control is
unavailing. In PAL vs. CA,[if !supportFootnotes][22][endif] we held that:
.... Undisputably, PALs diversion of its flight due to inclement weather was a fortuitous
event. Nonetheless, such occurrence did not terminate PALs contract with its passengers.
Being in the business of air carriage and the sole one to operate in the country, PAL is
deemed to be equipped to deal with situations as in the case at bar. What we said in one case
once again must be stressed, i.e., the relation of carrier and passenger continues until the latter
has been landed at the port of destination and has left the carriers premises. Hence, PAL
necessarily would still have to exercise extraordinary diligence in safeguarding the comfort,
convenience and safety of its stranded passengers until they have reached their final
destination...
...
...If the cause of non-fulfillment of the contract is due to a fortuitous event, it has to be the
sole and only cause (Art. 1755 C.C., Art. 1733 C.C.). Since part of the failure to comply with
the obligation of common carrier to deliver its passengers safely to their destination lay in the
defendants failure to provide comfort and convenience to its stranded passengers using
extraordinary diligence, the cause of non-fulfillment is not solely and exclusively due to
fortuitous event, but due to something which defendant airline could have prevented,
defendant becomes liable to plaintiff.
Indeed, in the instant case, petitioner was not without recourse to enable it to fulfill its
obligation to transport the respondent safely as scheduled as far as human care and
foresight can provide to her destination. Tagged as a premiere airline as it claims to
be and with the complexities of air travel, it was certainly well-equipped to be able to
foresee and deal with such situation. The petitioners indifference and negligence by
its absence and insensitivity was exposed by the trial court, thus:
(a) Under Section 9.1 of its Traffic Manual (Exhibit 4) flights can be delayed to await
the uplift of connecting cargo and passengers arriving on a late in-bound flight As
adverted to by the trial court,Flight SQ-27/28 maybe delayed for about half an hour to
transfer plaintiff to her connecting flight. As pointed out above, delay is normal in
commercial air transportation (RTC Decision, p. 22); or
(b) Petitioner airlines could have carried her on one of its flights bound for Hongkong
and arranged for a connecting flight from Hongkong to Manila all on the same date.
But then the airline personnel who informed her of such possibility told her that she
has to pay for that flight. Regrettably, respondent did not have sufficient funds to pay
for it. (TSN, 30 March 1992, pp.8-9; RTC Decision, pp. 22-23) Knowing the
predicament of the respondent, petitioner did not offer to shoulder the cost of the
ticket for that flight; or
(c) As noted by the trial court from the account of petitioners witness, Bob
Khkimyong, that a passenger such as the plaintiff could have been accommodated in
another international airline such as Lufthansa to bring the plaintiff to Singapore early
enough from Frankfurt provided that there was prior communication from that station
to enable her to catch the connecting flight to Manila because of the urgency of her
business in Manila(RTC Decision, p. 23)
The petitioners diligence in communicating to its passengers the consequences of
the delay in their flights was wanting. As elucidated by the trial court:
It maybe that delay in the take off and arrival of commercial aircraft could not be avoided and
may be caused by diverse factors such as those testified to by defendants pilot. However,
knowing fully well that even before the plaintiff boarded defendants Jumbo aircraft in
Frankfurt bound for Singapore, it has already incurred a delay of two hours. Nevertheless,
defendant did not take the trouble of informing plaintiff, among its other passengers of such a
delay and that in such a case, the usual practice of defendant airline will be that they have to
stay overnight at their connecting airport; and much less did it inquire from the plaintiff and
the other 25 passengers bound for Manila whether they are amenable to stay overnight in
Singapore and to take the connecting flight to Manila the next day. Such information should
have been given and inquiries made in Frankfurt because even the defendant airlines manual
provides that in case of urgency to reach his or her destination on the same date, the head
office of defendant in Singapore must be informed by telephone or telefax so as the latter
may make certain arrangements with other airlines in Frankfurt to bring such a passenger
with urgent business to Singapore in such a manner that the latter can catch up with her
connecting flight such as S-27/28 without spending the night in Singapore[if
!supportFootnotes][23][endif]
The respondent was not remiss in conveying her apprehension about the delay of
the flight when she was still in Frankfurt. Upon the assurance of petitioners personnel
in Frankfurt that she will be transported to Manila on the same date, she had every
right to expect that obligation fulfilled. She testified, to wit:
Q: Now, since you were late, when the plane that arrived from Frankfurt was late, did
you not make arrangements so that your flight from Singapore to Manila would be
adjusted?
A: I asked the lady at the ticket counter, the one who gave the boarding pass in
Frankfurt and I asked her, Since my flight going to Singapore would be late, what
would happen to my Singapore-Manila flight? and then she said, Dont worry,
Singapore Airlines would be responsible to bring you to Manila on the same date.
And then they have informed the name of the officer, or whatever, that our flight is
going to be late.[if !supportFootnotes][24][endif]
When a passenger contracts for a specific flight, he has a purpose in making that
choice which must be respected. This choice, once exercised, must not be impaired
by a breach on the part of the airline without the latter incurring any liability.[if
!supportFootnotes][25][endif]
For petitioners failure to bring the respondent to her destination,
as scheduled, we find the petitioner clearly liable for the breach of its contract of
carriage with the respondent.
We are convinced that the petitioner acted in bad faith. Bad faith means a breach of
known duty through some motive of interest or ill will. Self-enrichment or fraternal
interest, and not personal ill will, may well have been the motive; but it is malice
nevertheless.[if !supportFootnotes][26][endif] Bad faith was imputed by the trial court when it
found that the petitioners employees at the Singapore airport did not accord the
respondent the attention and treatment allegedly warranted under the circumstances.
The lady employee at the counter was unkind and of no help to her. The respondent
further alleged that without her threats of suing the company, she was not allowed to
use the companys phone to make long distance calls to her mother in Manila. The
male employee at the counter where it says: Immediate Attention to Passengers with
Immediate Booking was rude to her when he curtly retorted that he was busy
attending to other passengers in line. The trial court concluded that this
inattentiveness and rudeness of petitioners personnel to respondents plight was
gross enough amounting to bad faith. This is a finding that is generally binding upon
the Court which we find no reason to disturb.
Article 2232 of the Civil Code provides that in a contractual or quasi-contractual
relationship, exemplary damages may be awarded only if the defendant had acted in
a wanton, fraudulent, reckless, oppressive or malevolent manner. In this case,
petitioners employees acted in a wanton, oppressive or malevolent manner. The
award of exemplary damages is, therefore, warranted in this case.
WHEREFORE, the Petition is DENIED. The Decision of the Court of Appeals is
AFFIRMED.
SO ORDERED.
JAPAN AIRLINES, petitioner, vs. MICHAEL ASUNCION and JEANETTE
ASUNCION, respondents.
DECISION
YNARES-SANTIAGO, J.:
This petition for review seeks to reverse and set aside the October 9, 2002 decision[1]
of the Court of Appeals and its January 12, 2004 resolution,[2] which affirmed in toto
the June 10, 1997 decision of the Regional Trial Court of Makati City, Branch 61 in
Civil Case No. 92-3635.[3]
On March 27, 1992, respondents Michael and Jeanette Asuncion left Manila on
board Japan Airlines (JAL) Flight 742 bound for Los Angeles. Their itinerary included
a stop-over in Narita and an overnight stay at Hotel Nikko Narita. Upon arrival at
Narita, Mrs. Noriko Etou-Higuchi of JAL endorsed their applications for shore pass
and directed them to the Japanese immigration official.[4] A shore pass is required of
a foreigner aboard a vessel or aircraft who desires to stay in the neighborhood of the
port of call for not more than 72 hours.
During their interview, the Japanese immigration official noted that Michael appeared
shorter than his height as indicated in his passport. Because of this inconsistency,
respondents were denied shore pass entries and were brought instead to the Narita
Airport Rest House where they were billeted overnight.
The immigration official also handed Mrs. Higuchi a Notice[5] where it was stated that
respondents were to be watched so as not to escape.
Mr. Atsushi Takemoto of the International Service Center (ISC), the agency tasked
by Japans Immigration Department to handle passengers who were denied shore
pass entries, brought respondents to the Narita Airport Rest House where they
stayed overnight until their departure the following day for Los Angeles. Respondents
were charged US$400.00 each for their accommodation, security service and meals.
On December 12, 1992, respondents filed a complaint for damages[6] claiming that
JAL did not fully apprise them of their travel requirements and that they were rudely
and forcibly detained at Narita Airport.
JAL denied the allegations of respondents. It maintained that the refusal of the
Japanese immigration authorities to issue shore passes to respondents is an act of
state which JAL cannot interfere with or prevail upon. Consequently, it cannot
impose upon the immigration authorities that respondents be billeted at Hotel Nikko
instead of the airport resthouse.[7]
On June 10, 1997, the trial court rendered its decision, the dispositive portion of
which reads:
WHEREFORE PREMISES CONSIDERED, judgment is hereby rendered in favor of
plaintiffs ordering defendant JAL to pay plaintiffs as follows:
1. the sum of US$800.00 representing the expenses incurred at the Narita Airport with
interest at 12% per annum from March 27, 1992 until the sum is fully paid;
2. the sum of P200,000.00 for each plaintiff as moral damages;
3. the amount of P100,000.00 for each plaintiff as exemplary damages;
4. the amount of P100,000.00 as attorneys fees; and
5. costs of suit.
SO ORDERED.[8]
The trial court dismissed JALs counterclaim for litigation expenses, exemplary
damages and attorneys fees.
On October 9, 2002, the Court of Appeals affirmed in toto the decision of the trial
court. Its motion for reconsideration having been denied,[9] JAL now files the instant
petition.
The basic issue for resolution is whether JAL is guilty of breach of contract.
Under Article 1755 of the Civil Code, a common carrier such as JAL 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 for all the circumstances.
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 has every right to expect
that he be transported on that flight and on that date and it becomes the carriers
obligation to carry him and his luggage safely to the agreed destination.[10] If the
passenger is not so transported or if in the process of transporting he dies or is
injured, the carrier may be held liable for a breach of contract of carriage.[11]
We find that JAL did not breach its contract of carriage with respondents. It may be
true that JAL has the duty to inspect whether its passengers have the necessary
travel documents, however, such duty does not extend to checking the veracity of
every entry in these documents. JAL could not vouch for the authenticity of a
passport and the correctness of the entries therein. The power to admit or not an
alien into the country is a sovereign act which cannot be interfered with even by JAL.
This is not within the ambit of the contract of carriage entered into by JAL and herein
respondents. As such, JAL should not be faulted for the denial of respondents shore
pass applications.
Prior to their departure, respondents were aware that upon arrival in Narita, they
must secure shore pass entries for their overnight stay. Respondents mother, Mrs.
Imelda Asuncion, insisted though that Ms. Linda Villavicencio of JAL assured her that
her children would be granted the passes.[12] This assertion was satisfactorily refuted
by Ms. Villavicencios testimony during the cross examination, to wit:
ATTY. GONZAGA:
Q I will show to you Exh. 9 which is the TIM and on page 184 hereof, particularly number
10, and I quote, Those holding tickets with confirmed seats and other documents for their
onward journey and continuing their journey to a third country provided that they obtain an
indorsement with an application of shore pass or transit pass from the airline ground
personnel before clearing the immigration formality?
WITNESS:
A Yes, Sir.
Q Did you tell this provision to Mrs. Asuncion?
A Yes, Sir. I did.
Q Are you sure?
A Yes, Sir.
Q Did you give a copy?
A No, Sir, I did not give a copy but verbally I explained to her the procedure they have to
undergo when they get to narita airport.
. cannot interfere with that decision.[15]
Q And you read the contents of this [TIM]?
A No, Sir, I did not read it to her but I explained to her the procedure that each passenger has
to go through before when they get to narita airport before they line up in the immigration
counter.
Q In other words, you told Mrs. Asuncion the responsibility of securing shore passes bears
solely on the passengers only?
A Yes, Sir.
Q That the airline has no responsibility whatsoever with regards (sic) to the application for
shore passes?
A Yes, Sir.[13]
Next, respondents claimed that petitioner breached its contract of carriage when it
failed to explain to the immigration authorities that they had overnight vouchers at the
Hotel Nikko Narita. They imputed that JAL did not exhaust all means to prevent the
denial of their shore pass entry applications.
To reiterate, JAL or any of its representatives have no authority to interfere with or
influence the immigration authorities. The most that could be expected of JAL is to
endorse respondents applications, which Mrs. Higuchi did immediately upon their
arrival in Narita.
As Mrs. Higuchi stated during her deposition:
ATTY. QUIMBO
Q: Madam Witness, what assistance did you give, if any, to the plaintiffs during this
interview?
A: No, I was not present during their interview. I cannot assist.
Q: Why not?
A: It is forbidden for a civilian personnel to interfere with the Immigration agents duties.[14]
.
Q: During the time that you were in that room and you were given this notice for you to sign,
did you tell the immigration agent that Michael and Jeanette Asuncion should be allowed to
stay at the Hotel Nikko Narita because, as passengers of JAL, and according to the plaintiff,
they had vouchers to stay in that hotel that night?
A: No, I couldnt do so.
Q: Why not?
A: This notice is evidence which shows the decision of immigration authorities. It shows
there that the immigration inspector also designated Room 304 of the Narita Airport
Resthouse as the place where the passengers were going to wait for their outbound flight. I
Mrs. Higuchi did all she could to assist the respondents. Upon being notified of the
denial of respondents applications, Mrs. Higuchi immediately made reservations for
respondents at the Narita Airport Rest House which is really more a hotel than a
detention house as claimed by respondents.[16]
More importantly, nowhere in respondent Michaels testimony did he state
categorically that Mrs. Higuchi or any other employee of JAL treated them rudely or
exhibited improper behavior throughout their stay. We therefore find JAL not remiss
in its obligations as a common carrier.
Moral damages may be recovered in cases where one willfully causes injury to
property, or in cases of breach of contract where the other party acts fraudulently or
in bad faith. Exemplary damages are imposed by way of example or correction for
the public good, when the party to a contract acts in wanton, fraudulent, oppressive
or malevolent manner. Attorneys fees are allowed when exemplary damages are
awarded and when the party to a suit is compelled to incur expenses to protect his
interest.[17] There being no breach of contract nor proof that JAL acted in wanton,
fraudulent or malevolent manner, there is no basis for the award of any form of
damages.
Neither should JAL be held liable to reimburse respondents the amount of
US$800.00. It has been sufficiently proven that the amount pertained to ISC, an
agency separate and distinct from JAL, in payment for the accommodations provided
to respondents. The payments did not in any manner accrue to the benefit of JAL.
However, we find that the Court of Appeals correctly dismissed JALs counterclaim
for litigation expenses, exemplary damages and attorneys fees. The action was filed
by respondents in utmost good faith and not manifestly frivolous. Respondents
honestly believed that JAL breached its contract. A persons right to litigate should
not be penalized by holding him liable for damages. This is especially true when the
filing of the case is to enforce what he believes to be his rightful claim against
another although found to be erroneous.[18]
WHEREFORE, in view of the foregoing, the instant petition is PARTLY
GRANTED. The October 9, 2002 decision of the Court of Appeals and its January
12, 2004 resolution in CA-G.R. CV No. 57440, are REVERSED and SET ASIDE
insofar as the finding of breach on the part of petitioner and the award of damages,
attorneys fees and costs of the suit in favor of respondents is concerned.
Accordingly, there being no breach of contract on the part of petitioner, the award of
actual, moral and exemplary damages, as well as attorneys fees and costs of the suit
in favor of respondents Michael and Jeanette Asuncion, is DELETED for lack of
basis. However, the dismissal for lack of merit of petitioners counterclaim for litigation
expenses, exemplary damages and attorneys fees, is SUSTAINED. No
pronouncement as to costs.
SO ORDERED.
G.R. No. L-22272 June 26, 1967
ANTONIA MARANAN, plaintiff-appellant,
vs.
PASCUAL PEREZ, ET AL., defendants.
PASCUAL PEREZ, defendant appellant.
Pedro Panganiban for plaintiff-appellant. Magno T. Bueser for defendant-appellant.
BENGZON, J.P., J.:
Rogelio Corachea, on October 18, 1960, was a passenger in a taxicab owned and
operated by Pascual Perez when he was stabbed and killed by the driver, Simeon
Valenzuela.
Valenzuela was prosecuted for homicide in the Court of First Instance of Batangas.
Found guilty, he was sentenced to suffer imprisonment and to indemnify the heirs of
the deceased in the sum of P6,000. Appeal from said conviction was taken to the
Court of Appeals.1äwphï1.ñët
On December 6 1961, while appeal was pending in the Court of Appeals, Antonia
Maranan, Rogelio's mother, filed an action in the Court of First Instance of Batangas
to recover damages from Perez and Valenzuela for the death of her son. Defendants
asserted that the deceased was killed in self-defense, since he first assaulted the
driver by stabbing him from behind. Defendant Perez further claimed that the death
was a caso fortuito for which the carrier was not liable.
The court a quo, after trial, found for the plaintiff and awarded her P3,000 as
damages against defendant Perez. The claim against defendant Valenzuela was
dismissed. From this ruling, both plaintiff and defendant Perez appealed to this
Court, the former asking for more damages and the latter insisting on non-liability.
Subsequently, the Court of Appeals affirmed the judgment of conviction earlier
mentioned, during the pendency of the herein appeal, and on May 19, 1964, final
judgment was entered therein. (Rollo, p. 33).
Defendant-appellant relies solely on the ruling enunciated in Gillaco v. Manila
Railroad Co., 97 Phil. 884, that the carrier is under no absolute liability for assaults of
its employees upon the passengers. The attendant facts and controlling law of that
case and the one at bar are very different however. In the Gillaco case, the
passenger was killed outside the scope and the course of duty of the guilty
employee. As this Court there found:
x x x when the crime took place, the guard Devesa had no duties to discharge in
connection with the transportation of the deceased from Calamba to Manila. The
stipulation of facts is clear that when Devesa shot and killed Gillaco, Devesa was
assigned to guard the Manila-San Fernando (La Union) trains, and he was at Paco
Station awaiting transportation to Tutuban, the starting point of the train that he was
engaged to guard. In fact, his tour of duty was to start at 9:00 two hours after the
commission of the crime. Devesa was therefore under no obligation to safeguard the
passengers of the Calamba-Manila train, where the deceased was riding; and the
killing of Gillaco was not done in line of duty. The position of Devesa at the time was
that of another would be passenger, a stranger also awaiting transportation, and not
that of an employee assigned to discharge any of the duties that the Railroad had
assumed by its contract with the deceased. As a result, Devesa's assault can not be
deemed in law a breach of Gillaco's contract of transportation by a servant or
employee of the carrier. . . . (Emphasis supplied)
Now here, the killing was perpetrated by the driver of the very cab transporting the
passenger, in whose hands the carrier had entrusted the duty of executing the
contract of carriage. In other words, unlike the Gillaco case, the killing of the
passenger here took place in the course of duty of the guilty employee and when the
employee was acting within the scope of his duties.
Moreover, the Gillaco case was decided under the provisions of the Civil Code of
1889 which, unlike the present Civil Code, did not impose upon common carriers
absolute liability for the safety of passengers against wilful assaults or negligent acts
committed by their employees. The death of the passenger in the Gillaco case was
truly a fortuitous event which exempted the carrier from liability. It is true that Art.
1105 of the old Civil Code on fortuitous events has been substantially reproduced in
Art. 1174 of the Civil Code of the Philippines but both articles clearly remove from
their exempting effect the case where the law expressly provides for liability in spite
of the occurrence of force majeure. And herein significantly lies the statutory
difference between the old and present Civil Codes, in the backdrop of the factual
situation before Us, which further accounts for a different result in the Gillaco case.
Unlike the old Civil Code, the new Civil Code of the Philippines expressly makes the
common carrier liable for intentional assaults committed by its employees upon its
passengers, by the wording of Art. 1759 which categorically states that
Common carriers are liable for the death of or injuries to passengers through the
negligence or willful acts of the former's employees, although such employees may
have acted beyond the scope of their authority or in violation of the orders of the
common carriers.
The Civil Code provisions on the subject of Common Carriers1 are new and were
taken from Anglo-American Law.2 There, the basis of the carrier's liability for assaults
on passengers committed by its drivers rests either on (1) the doctrine of respondeat
superior or (2) the principle that it is the carrier's implied duty to transport the
passenger safely.3
Under the first, which is the minority view, the carrier is liable only when the act of the
employee is within the scope of his authority and duty. It is not sufficient that the act
be within the course of employment only.4
Under the second view, upheld by the majority and also by the later cases, it is
enough that the assault happens within the course of the employee's duty. It is no
defense for the carrier that the act was done in excess of authority or in disobedience
of the carrier's orders.5 The carrier's liability here is absolute in the sense that it
practically secures the passengers from assaults committed by its own employees.6
As can be gleaned from Art. 1759, the Civil Code of the Philippines evidently follows
the rule based on the second view. At least three very cogent reasons underlie this
rule. As explained in Texas Midland R.R. v. Monroe, 110 Tex. 97, 216 S.W. 388,
389-390, and Haver v. Central Railroad Co., 43 LRA 84, 85: (1) the special
undertaking of the carrier requires that it furnish its passenger that full measure of
protection afforded by the exercise of the high degree of care prescribed by the law,
inter alia from violence and insults at the hands of strangers and other passengers,
but above all, from the acts of the carrier's own servants charged with the
passenger's safety; (2) said liability of the carrier for the servant's violation of duty to
passengers, is the result of the formers confiding in the servant's hands the
performance of his contract to safely transport the passenger, delegating therewith
the duty of protecting the passenger with the utmost care prescribed by law; and (3)
as between the carrier and the passenger, the former must bear the risk of wrongful
acts or negligence of the carrier's employees against passengers, since it, and not
the passengers, has power to select and remove them.
Accordingly, it is the carrier's strict obligation to select its drivers and similar
employees with due regard not only to their technical competence and physical
ability, but also, no less important, to their total personality, including their patterns of
behavior, moral fibers, and social attitude.
Applying this stringent norm to the facts in this case, therefore, the lower court rightly
adjudged the defendant carrier liable pursuant to Art. 1759 of the Civil Code. The
dismissal of the claim against the defendant driver was also correct. Plaintiff's action
was predicated on breach of contract of carriage7 and the cab driver was not a party
thereto. His civil liability is covered in the criminal case wherein he was convicted by
final judgment.
In connection with the award of damages, the court a quo granted only P3,000 to
plaintiff-appellant. This is the minimum compensatory damages amount recoverable
under Art. 1764 in connection with Art. 2206 of the Civil Code when a breach of
contract results in the passenger's death. As has been the policy followed by this
Court, this minimal award should be increased to P6,000. As to other alleged actual
damages, the lower court's finding that plaintiff's evidence thereon was not
convincing,8 should not be disturbed. Still, Arts. 2206 and 1764 award moral
damages in addition to compensatory damages, to the parents of the passenger
killed to compensate for the mental anguish they suffered. A claim therefor, having
been properly made, it becomes the court's duty to award moral damages.9 Plaintiff
demands P5,000 as moral damages; however, in the circumstances, We consider
P3,000 moral damages, in addition to the P6,000 damages afore-stated, as
sufficient. Interest upon such damages are also due to plaintiff-appellant. 10
Wherefore, with the modification increasing the award of actual damages in plaintiff's
favor to P6,000, plus P3,000.00 moral damages, with legal interest on both from the
filing of the complaint on December 6, 1961 until the whole amount is paid, the
judgment appealed from is affirmed in all other respects. No costs. So ordered.
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 Civil Code, more particularly Articles 2200 and 2208, private respondent further
to him, since the ordinary boom has a capacity of 5 tons while the payloader was seeks additional damages allegedly because the construction project was delayed
only 2.5 tons, he did not bother to use the "jumbo" anymore. 20 and that in spite of his demands, petitioner failed to take any steps to settle his valid,
In that sense, therefore, private respondent's act of furnishing petitioner with an just and demandable claim for damages.
inaccurate weight of the payloader upon being asked by petitioner's collector, cannot We find private respondent's submission erroneous. It is well- settled that an
be used by said petitioner as an excuse to avoid liability for the damage caused, as appellee, who is not an appellant, may assign errors in his brief where his purpose is
the same could have been avoided had petitioner utilized the "jumbo" lifting to maintain the judgment on other grounds, but he may not do so if his purpose is to
apparatus which has a capacity of lifting 20 to 25 tons of heavy cargoes. It is a fact have the judgment modified or reversed, for, in such case, he must appeal. 22 Since
known to the Chief Officer of MV Cebu that the payloader was loaded aboard the MV private respondent did not appeal from the judgment insofar as it limited the award of
Cebu at the Manila North Harbor on August 28, 1964 by means of a terminal crane. damages due him, the reduction of 20% or 1/5 of the value of the payloader stands.
21
Even if petitioner chose not to take the necessary precaution to avoid damage by WHEREFORE, in view of the foregoing, the petition is DENIED. The decision of the
checking the correct weight of the payloader, extraordinary care and diligence Court of Appeals is hereby AFFIRMED in all respects with costs against petitioner. In
compel the use of the "jumbo" lifting apparatus as the most prudent course for view of the length of time this case has been pending, this decision is immediately
petitioner. executory.
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
[ GR No. 213418, Sep 21, 2016 ]
ALFREDO S.RAMOS v. CHINA SOUTHERN AIRLINES CO. LTD. +
RESOLUTION
PEREZ, J.:
For resolution of the Court is this Petition for Review on Certiorari[1] filed by
petitioners Alfredo S. Ramos, Conchita S. Ramos, Benjamin B. Ramos, Nelson T.
Ramos and Robinson T. Ramos, seeking to reverse and set aside the Decision[2]
dated 19 March 2013 and Resolution[3] dated 9 July 2014 of the Court of Appeals
(CA) in CA-G.R. CV. No. 94561. The assailed decision and resolution affirmed with
modification the 23 March 2009 Decision[4] of the Regional Trial Court (RTC) of
Manila, Branch 36, which ordered respondent China Southern Airlines to pay
petitioners the amount of P692,000.00, representing the amount of damages and
attorney's fees. On appeal, the appellate court affirmed the award of actual damages
but deleted the order for payment of moral and exemplary damages in the amount of
P600,000.00.[5]
The Facts
On 7 August 2003, petitioners purchased five China Southern Airlines roundtrip
plane tickets from Active Travel Agency for $985.00.[6] It is provided in their
itineraries that petitioners will be leaving Manila on 8 August 2003 at 0900H and
will be leaving Xiamen on 12 August 2003 at 1920H.[7] Nothing eventful happened
during petitioners' flight going to Xiamen as they were able to successfully board the
plane which carried them to Xiamen International Airport. On their way back to the
Manila, however, petitioners were prevented from taking their designated flight
despite the fact that earlier that day an agent from Active Tours informed them that
their bookings for China Southern Airlines 1920H flight are confirmed.[8] The
refusal came after petitioners already checked in all their baggages and were given
the corresponding claim stubs and after they had paid the terminal fees. According to
the airlines' agent with whom they spoke at the airport, petitioners were merely
chance passengers but they may be allowed to join the flight if they are willing to pay
an additional 500 Renminbi (RMB) per person. When petitioners refused to defray
the additional cost, their baggages were offloaded from the plane and China Southern
Airlines 1920H flight then left Xiamen International Airport without them.[9]
Because they have business commitments waiting for them in Manila, petitioners
were constrained to rent a car that took them to Chuan Chio Station where they
boarded the train to Hongkong.[10] Upon reaching Hong Kong, petitioners
purchased new plane tickets from Philippine Airlines (PAL) that flew them back to
Manila.[11]
Upon arrival in Manila, petitioners went to Active Travel to inform them of their
unfortunate fate with China Southern Airlines. In their effort to avoid lawsuit, Active
Travel offered to refund the price of the plane tickets but petitioners refused to accept
the offer. Petitioners then went to China Southern Airlines to demand for the
reimbursement of their airfare and travel expenses in the amount of P87,375.00.
When the airline refused to accede to their demand, petitioners initiated an action for
damages before the RTC of Manila against China Southern Airlines and Active
Travel. In their Complaint docketed as Civil Case No. 04-109574, petitioners sought
for the payment of the amount of P87,375.00 as actual damages, P500,000.00 as
moral damages, P500,000.00 as exemplary damages and cost of the suit.[12]
In their Answer,[13] China Southern Airlines denied liability by alleging that
petitioners were not confirmed passengers of the airlines but were merely chance
passengers. According to the airlines, it was specifically provided in the issued tickets
that petitioners are required to re-confirm all their bookings at least 72 hours before
their scheduled time of departures but they failed to do so which resulted in the
automatic cancellation of their bookings.
The RTC then proceeded with the reception of evidence after the pre-trial conference.
On 23 March 2009, the RTC rendered a Decision[14] in favor of the petitioners and
ordered Chkia Southern Airlines to pay damages in the amount of P692,000.00,
broken down as follows:
"WHEREFORE, judgment is hereby rendered ordering the defendant [China
Southern Airlines] to pay [petitioners]:
1. The sum of [P]62,000.00 as actual damages;
2. The sum of [P]300,000.00 as moral damages;

3. The sum of [P]300,000.00 as exemplary damages; and
4. The sum of [P]30,000.00 for attorney's fees.
The defendants' counterclaim against plaintiffs are [hereby] dismissed for
insufficiency of evidence [enough] to sustain the damages claimed."[15]
On appeal, however, the CA modified the RTC Decision by deleting the award for
moral and exemplary damages. According to the appellate court, petitioners failed to
prove that China Southern Airlines' breach of contractual obligation was attended
with bad faith.[16] The disquisition of the CA reads:
"xxx. Where in breaching the contract, the defendant is not shown to have acted
fraudulently or in bad faith, liability for damages is limited to the natural and
probable consequences of the breach of the obligation and which the parties had
foreseen or could reasonably have foreseen; and in that case, such liability would not
include liability for moral and exemplary damages.
In this case, We are not persuaded that [China Southern Airlines] breach of
contractual obligation had been attended by bad faith or malice or gross negligence
amounting to bad faith. On the contrary, it appears that despite [petitioner's] failure
to "re-confirm" their bookings, [China Southern Airlines] exerted diligent efforts to
comply with its obligation to [petitioners]. If at the outset, [China Southern Airlines]
simply did not intend to comply with its promise to transport [petitioners] back to
Manila, it would not have taken the trouble of proposing that the latter could still
board the plane as "chance passengers" provided [that] they will pay the necessary
pay and penalties.
Thus, We believe and so hold that the damages recoverable by [petitioners] are
limited to the peso value of the PAL ticket they had purchased for their return flight
from Xiamen, plus attorney's fees, in the amount of [P]30,000.00, considering that
[petitioners] were ultimately compelled to litigate their claim[s] against [China
Southern Airlines]."[17]
Since China Southern, Airlines' refusal to let petitioners board the plane was not
attended by bad faith, the appellate court decided not to award petitioners moral and
exemplary damages. The CA disposed in this wise:
"WHEREFORE, premises considered, the instant appeal is hereby AFFIRMED
with MODIFICATION in that the award of moral and exemplary damages are
hereby DELETED."[18]
Dissatisfied, petitioners timely interposed a Motion for Partial Reconsideration
which was partially granted by the CA in a Resolution[19] dated 9 July 2014, to wit:
"ACCORDINGLY, the instant Motion is PARTIALLY GRANTED. The Decision
dated 19 March 2013 rendered by this Court in CA-G.R. CV No. 94561 is hereby
MODIFIED in that [China Southern Airlines] is ORDERED to pay [petitioners]
interest of 6% per annum on the P62,000.00 as actual damages from the finality of
this Court's Decision until the same is fully satisfied."[20]
Unflinching, petitioners elevated the matter before the Court by filing the instant
Petition for Review on Certiorari assailing the CA Decision and Resolution on the
following grounds:
The Issues
I.
THE COURT OF APPEALS COMMITTED GRAVE AND SERIOUS ERROR WHEN
IT DELETED THE AWARDS OF MORAL AND EXEMPLARY DAMAGES, A
DEPARTURE FROM ESTABLISHED DOCTRINES THAT PASSENGERS WHO ARE
BUMPED-OFF ARE ENTITLED TO MORAL AND EXEMPLARY DAMAGES;
I.
THE COURT OF APPEALS COMMITTED GRAVE AND SERIOUS ERROR WHEN
IT DECLARED THAT BUMPING OFF OF THE PETITIONERS WAS NOT
ATTENDED BY BAD FAITH AND MALICE CONTRARY TO THE FINDINGS OF
THE LOWER COURT;
III.
THE COURT OF APPEALS COMMITTED GRAVE AND SERIOUS ERROR WHEN
IT HELD THAT THE LEGAL INTEREST COMMENCE ONLY FROM THE
FINALITY OF THE DECISION INSTEAD OF FROM THE DATE OF EXTRA-
JUDICIAL DEMAND ON 18 AUGUST 2003.[21]
The Court's Ruling
We resolve to grant the petition.
A contract of carriage, in this case, air transport, is intended to serve the traveling
public and thus, imbued with public interest.[22] The law governing common
carriers consequently imposes an exacting standard of conduct,[23] viz:
"1755 of the New Civil Code. A common carrier is bound to carry 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."
When an airline issues a ticket to a passenger confirmed on a particular flight, on a
certain date, a contract of carriage arises, and the passenger has every right to expect
that he would fly on that flight and on that date. If that does not happen, then the
carrier opens itself to a suit for breach of contract of carriage.[24] 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.[25] All he has to prove is the
existence of the contract and the fact of its non-performance by the carrier, through
the latter's failure to carry the passenger to its destination.[26]
It is beyond question in the case at bar that petitioners had an existing contract of air
carriage with China Southern Airlines as evidenced by the airline tickets issued by
Active Travel. When they showed up at the airport and after they went through the
routine security check including the checking in of their luggage and the payment of
the corresponding terminal fees, petitioners were not allowed by China Southern
Airlines to board on the plane. The airlines' claim that petitioners do not have
confirmed reservations cannot be given credence by the Court. The petitioners were
issued two-way tickets with itineraries indicating the date and time of their return
flight to Manila. These are binding contracts of carriage.[27] China Southern Airlines
allowed petitioners to check in their luggage and issued the necessary claim stubs
showing that they were part of the flight. It was only after petitioners went through
all the required check-in procedures that they were informed by the airlines that they
were merely chance passengers. Airlines companies do not, as a practice, accept
pieces of luggage from passengers without confirmed reservations. Quite tellingly, all
the foregoing circumstances lead us to the inevitable conclusion that petitioners
indeed were bumped off from the flight. We cannot from the records of this case
deduce the true reason why the airlines refused to board petitioners back to Manila.
What we can be sure of is the unacceptability of the proffered reason that rightfully
gives rise to the claim for damages.
The prologue shapes the body of the petitioners' rights, that is, that they are entitled
to damages, actual, moral and exemplary.
There is no doubt that petitioners are entitled to actual or compensatory damages.
Both the RTC and the CA uniformly held that there was a breach of contract
committed by China Southern Airlines when it failed to deliver petitioners to their
intended destination, a factual finding that we do not intend to depart from in the
absence of showing that it is unsupported by evidence. As the aggrieved parties,
petitioners had satisfactorily proven the existence of the contract and the fact of its
non-performance by China Southern Airlines; the concurrence of these elements
called for the imposition of actual or compensatory damages.
With respect to moral damages, the following provision of the New Civil Code is
instructive:
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.
Bad faith does not simply connote bad judgment or negligence. It imports 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 the nature of
fraud. Bad faith is in essence a question of intention.[28]
In Japan Airlines v. Simangan,[29] the Court took the occasion to expound on the
meaning of bad faith in a breach of contract of carriage that merits the award of
moral damages:
"Clearly, JAL is liable for moral damages. It is firmly settled that moral damages are
recoverable in suits predicated on breach of a contract of carriage where it is proved
that the carrier was guilty of fraud or bad faith, as in this case. Inattention to and lack
of care for the interests of its passengers who are entitled to its utmost consideration,
particularly as to their convenience, amount to bad faith which entitles the passenger
to an award of moral damages. What the law considers as bad faith which may
furnish the ground for an award of moral damages would be bad faith in securing the
contract and in the execution thereof, as well as in the enforcement of its terms, or
any other kind of deceit."
Applying the foregoing yardstick in the case at bar, We find that the airline company judgment. The total amount shall thereafter earn interest at the rate of six percent
acted in bad faith in insolently bumping petitioners off the flight after they have (6%) per annum from such finality of judgment until its satisfaction.
completed all the pre-departure routine. Bad faith is evident when the ground
personnel of the airline company unjustly and unreasonably refused to board WHEREFORE, premises considered, the petition is GRANTED. The Court hereby
petitioners to the plane which compelled them to rent a car and take the train to the AWARDS petitioners the following amounts:
nearest airport where they bought new sets of plane tickets from another airline that P62,000.00 as actual damages, with 6% interest per annum from date of extrajudicial de
(a)
could fly them home. Petitioners have every reason to expect that they would be thereafter earn interest at 6% per annum from finality of judgment until full satisfaction;
transported to their intended destination after they had checked in their luggage and
had gone through all the security checks. Instead, China Southern Airlines offered to (b) P300,000.00 as moral damages; and
allow them to join the flight if they are willing to pay additional cost; this amount is
on top of the purchase price of the plane tickets. The requirement to pay an (c) P300,000.00 as exemplary damages.
additional fare was insult upon injury. It is an aggravation of the breach of contract. SO ORDERED.
Undoubtedly, petitioners are entitled to the 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 [that] he has undergone by
reason of defendant['s] culpable action.[30]

China Southern Airlines is also liable for exemplary damages as it acted in a wantonly
oppressive manner as succinctly discussed above against the petitioners. Exemplary
damages which are awarded by way of example or correction for the public good,
may be recovered in contractual obligations, as in this case, if defendant acted in
wanton, fraudulent, reckless, oppressive or malevolent manner.[31]

Article 2216 of the Civil Code provides that assessment of damages is left to the

discretion of the court according to the circumstances of each case. This discretion is

limited by the principle that the amount awarded should not be palpably excessive as

to indicate that it was the result of prejudice or corruption on the part of the trial

court. Simply put, the amount of damages must be fair, reasonable and proportionate

to the injury suffered.[32] With fairness as the benchmark, We find adequate the

amount of P300,000.00 each for moral and exemplary damages imposed by the trial

court.

The last issue is the reckoning point of the 6% interest on the money judgment.
Following this Court's ruling in Nacar v. Gallery Frames,[33] we agree with the
petitioners that the 6% rate of interest per annum shall be reckoned from the date of
their extrajudicial demand on 18 August 2003 until the date of finality of this

G.R. No. 172682
SULPICIO LINES, INC., Petitioner
vs.
NAPOLEON SESANTE, NOW SUBSTITUTED BY MARIBEL ATILANO, KRISTEN
MARIE, CHRISTIAN IONE, KENNETH KERRN AND KARISNA KATE, ALL
SURNAMED SESANTE, Respondents
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.2
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.4
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 Veney 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
₱500,000.00 and ₱l,000,000.00, respectively.7
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.8
Decision of the RTC
On October 12, 2001, the RTC rendered its judgment in favor of the respondent,9
holding as follows:
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 ₱400,000.00;
2. Moral damages in the amount of One Million Pesos (₱l ,000,000.00);
3. Costs of suit.
SO ORDERED.10
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 ₱500,000.00 to ₱300,000.00.11
Dissatisfied, the petitioner appealed.12 It was pending the appeal in the CA when
Sesante passed away. He was substituted by his heirs.13
Judgment of the CA
On June 27, 2005, the CA promulgated its assailed decision. It lowered the
temperate damages to ₱120,000.00, 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.14
Sttill aggrieved, Sulpicio Lines moved for reconsideration, but the CA denied the
motion.15
Hence, this appeal.
Issues
The petitioner attributes the following errors to the CA, to wit:
I The petitioner urges that Sesante's complaint for damages was purely personal and
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 estate.18
THE ASSAILED DECISION ERRED IN SUBSTITUTING THE HEIRS OF
RESPONDENT SESANTE IN THE INST ANT 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 INCIDENT16
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
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.:
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 of due
process.17 It protects the right of due process belonging to any 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
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:
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 earners.
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.20
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.:
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.24
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 117425 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:
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.1âwphi1 Yet, the
findings of the BMI directly contradicted the petitioner's attribution, as follows:
7. The Immediate and the Proximate Cause of the Sinking
The Captain's erroneous maneuvers of the MIV 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.30
Even assuming the seaworthiness of the M/VPrincess 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. I 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.32
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.34
The CA enumerated the negligent acts committed by the officers and crew of M/V
Princess of the Orient, viz.:
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:
The Chief Mate, when interviewed under oath, had attested that he was not able to
make stability calculation of the ship vis-à-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 x35
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.38
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.39
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 ₱l,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 A1iicle 1754, in relation to Articles 1998, 2000 to 2003 of the
Civil Code, which provide:
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.42
In YHT Realty Corporation v. Court of Appeals,43we 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 Code expressly authorizes the courts to award
temperate damages despite the lack of certain proof of actual damages.47
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 ₱120,000.00 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:
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 arc 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,52to wit:
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 arc 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:
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.53
Clearly, the petitioner and its agents on the scene acted wantonly and recklessly.
Wanton and reckless are virtually synonymous in meaning as respects liability for
conduct towards others.54 Wanton 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.56
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 ₱l ,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
Pereria v. Zarate:57
Anent the ₱1,000,000.00 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 Pereñas 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
₱l,000,000.00; (b) the amount of ₱l,000,000.00 is granted as exemplary damages;
and (c) the sum of ₱l20,000.00 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.

G.R. No. 194121
TORRES-MADRID BROKERAGE, INC., Petitioner
vs.
FEB MITSUI MARINE INSURANCE CO., INC. and BENJAMIN P. MANALAST AS,
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. 91829.1
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 Biñan, Laguna.2
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 Biñan warehouse.3 Incidentally, TMBI notified Sony
who had no objections to the arrangement.4
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 Biñan 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.8
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.10
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.12
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.13
On August 5, 2008, the RTC found TMBI and Benjamin Manalastas jointly and
solidarily 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.18
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.19
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.21
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.
BMT’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.25
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.27
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.30
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.31
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.33
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,37and Westwind Shipping
Corporation v. UCPB General Insurance Co., Inc.38
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.39
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.41
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.42
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.43
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.45
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.46 Jurisprudence, 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.48
That the cargo disappeared during transit while under the custody of BMT – TMBI’s
subcontractor – did not diminish nor terminate TMBI’s 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 solidarily liable
to Mitsui
We disagree with the lower courts’ ruling that TMBI and BMT are solidarily liable to
Mitsui for the loss as joint tortfeasors. The ruling was based on Article 2194 of the
Civil Code:
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 negligence
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.51
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.52
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.54
In the present case, Mitsui’s action is solely premised on TMBI’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 tum, 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 2181.55
WHEREFORE, the Court hereby ORDERS petitioner TorresMadrid Brokerage, Inc.
to pay the respondent FEB Mitsui Marine Insurance Co", Inc. the following:
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 foes in the amount of PHP 200,000.00; and
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.
G.R. No. 213088
LAND TRANSPORTATION FRANCHISING AND REGULATORY BOARD
(LTFRB), Petitioner
vs.
G.V. FLORIDA TRANSPORT, INC., Respondent
DECISION
PERALTA, J.:
Before the Court is a petition for review on certiorari seeking the reversal and setting
aside of the Decision 1 of the Court of Appeals (CA), dated June 26, 2014 in CA-G.R.
SP No. 134772.
The pertinent factual and procedural antecedents of the case are as follows:
Around 7:20 in the morning of February 7, 2014, a vehicular accident occurred at
Sitio Paggang, Barangay Talubin, Bontoc, Mountain Province involving a public utility
bus coming from Sampaloc, Manila, bound for Poblacion Bontoc and bearing a "G.V.
Florida" body mark with License Plate No. TXT-872. The mishap claimed the lives of
fifteen (15) passengers and injured thirty-two (32) others.
An initial investigation report, which came from the Department of Transportation and
Communications of the Cordillera Administrative Region (DOTC-CAR), showed that
based on the records of the Land Transportation Office (LTO) and herein petitioner,
License Plate No. TXT-872 actually belongs to a different bus owned by and
registered under the name of a certain Norberto Cue, Sr. (Cue) under Certificate of
Public Convenience (CPC) Case No. 2007-0407 and bears engine and chassis
numbers LX004564 and KN2EAM12PK004452, respectively; and that the bus
involved in the accident is not duly authorized to operate as a public transportation.
Thus, on the same day of the accident, herein petitioner, pursuant to its regulatory
powers, immediately issued an Order2 preventively suspending, for a period not
exceeding thirty (30) days, the operations of ten (10) buses of Cue under its CPC
Case No. 2007-0407, as well as respondent's entire fleet of buses, consisting of two
hundred and twenty-eight (228) units, under its twenty-eight (28) CPCs. In the same
Order, respondent and Cue were likewise directed to comply with the following:
1. Inspection and determination of road worthiness of the authorized PUB unit of
respondents-operators bringing the said buses to the Motor Vehicle Inspection
Service (MVIS) of the Land Transportation Office, together with the authorized
representatives of the Board;
2. Undergo Road Safety Seminar of respondents-operators' drivers and conductors
to be conducted or scheduled by the Board and/or its authorized seminar provider;
3. Compulsory Drug Testing of the respondents-operators' drivers and conductors to
be conducted by authorized/accredited agency of the Department of Health and the
Land Transportation Office;
4. Submit the Certificates of Registration and latest LTO Official Receipts of the
units, including the names of the respective drivers and conductors; and
5. Submit the video clippings of roadworthiness inspection, Road Safety Seminar
and Drug Testing. 3
Furthermore, respondent and Cue were ordered to show cause why their respective
CPCs should not be suspended, canceled or revoked due to the said accident.
Thereafter, in its Incident Report dated February 12, 2014, the DOTC-CAR stated,
among others: that the License Plate Number attached to the ill-fated bus was
indeed TXT-872, which belongs to a different unit owned by Cue; that the wrecked
bus had actual engine and chassis numbers DE12T-601104BD and KTP1011611C,4
respectively; that, per registration records, the subject bus was registered as
"private" on April 4, 2013 with issued License Plate No. UDO 762; and that the
registered owner is Dagupan Bus Co., Inc. (Dagupan Bus) while the previous owner
is herein respondent bus company.
As a result, Dagupan Bus was also ordered to submit an Answer on the DOTC-CAR
Incident Report, particularly, to explain why the bus involved in the above accident,
which is registered in its name, was sporting the name "G.V. Florida" at the time of
the accident.
Subsequently, Dagupan Bus filed its Answer claiming that: it is not the owner of the
bus which was involved in the accident; the owner is G.V. Florida; Dagupan Bus
entered into a Memorandum of Agreement with G.V. Florida, which, among others,
facilitated the exchange of its CPC covering the Cagayan route for the CPC of
Florida covering the Bataan route; and the subsequent registration of the subject bus
in the name of Dagupan Bus is a mere preparatory act on the part of G.V. Florida to
substitute the old authorized units of Dagupan Bus plying the Cagayan route which
are being operated under the abovementioned CPC which has been exchanged with
G. V. Florida.
On the other hand, Cue filed his Position Paper contending that: License Plate No.
TXT-872 was issued by the LTO to one among ten public utility buses under CPC
No. 2007-040i issued to him as operator of the Mountain Province Cable Tours; the
application for the extension of the validity of the said CPC is pending with petitioner;
the subject CPC, together with all authorized units, had been sold to G.V. Florida in
September 2013; and thereafter, Cue completely ceded the operation and
maintenance of the subject buses in favor of G.R. Florida.
In its Position Paper, herein respondent alleged that: it, indeed, bought Cue's CPC
and the ten public utility buses operating under the said CPC, including the one
which bears License Plate No. TXT-872; since Cue's buses were already old and
dilapidated, and not wanting to stop its operations to the detriment of the riding
public, it replaced these buses with new units using the License Plates attached to
the old buses, pending approval by petitioner of the sale and transfer of Cue's CPC
in its favor; and it exercised utmost good faith in deciding to dispatch the ill-fated bus
notwithstanding the absence of prior adequate compliance with the requirements that
will constitute its operation legal.
On March 14, 2014, herein petitioner rendered its Decision canceling Cue's CPC No.
2007-0407 and suspending the operation of respondent's 186 buses under 28 of its
CPCs for a period of six (6) months. Pertinent portions of the dispositive portion of
the said Decision read as follows:
WHEREFORE, premises considered and by virtue of Commonwealth Act 146
(otherwise known as "The Public Service Law"), as amended, and Executive Order
No. 202, the Board hereby ORDERS that:
a. The Certificate of Public Convenience of respondentoperator NORBERTO M.
CUE, SR. under Case No. 2007- 0407, now under the beneficial ownership of
respondentoperator G.V. FLORIDA TRANSPORT, INC., be CANCELLED and
REVERTED to the State. Therefore, upon receipt of this Decision, respondent-
operator G.V. FLORIDA TRANSPORT, INC. is hereby directed to CEASE and
DESIST from operating the Certificate of Public Convenience under Case No. 2007-
0407 involving ten (10) authorized units, to wit:
xxxx
b. Upon finality of this Decision, the above-mentioned for hire plates of respondent-
operator NORBERTO M. CUE, SR. are hereby ordered DESTRUCTED (sic) and
DESTROYED prior to their turn over to the Land Transportation Office (LTO).
xxxx
c. All existing Certificates of Public Convenience of respondent-operator G.V.
FLORIDA TRANSPORT, INC. under case numbers listed under case numbers listed
below are hereby SUSPENDED for a period of SIX (6) MONTHS commencing from
March 11, 2014, which is the lapse of the 30-day preventive suspension order issued
by this Board, to wit:
xxxx
[d.] During the period of suspension of its CPCs and as a condition for the lifting
thereof, respondent-operator G.V. FLORIDA TRANSPORT, INC. must comply with
the following:
1. All its authorized drivers must secure the National Competency III issued by the
Technical Education and Skills Development Authority (TESDA)
2. All its conductors must secure Conductor's License from the Land Transportation
Office (LTO);
3. Submit all its authorized units that have not undergone inspection and
determination of roadworthiness to the Motor Vehicle Inspection Service of the LTO,
together with the authorized representatives of the Board; and
4. Compulsory Drug Testing of all its authorized drivers and conductors to be
conducted by the authorized accredited agency of the Department of Health and the
Land Transportation Office at least thirty (30) days before the expiration of its
suspension.
[e.] The Show Cause Order issued against respondent-operator DAGUPAN BUS
CO., INC. is hereby SET ASIDE.
The Information Systems Management Division (ISMD) is also directed to make
proper recording of this Decision for future reference against subject vehicles and
respondents-operators. During the period of suspension of its CPCs, respondent-
operator G.V. FLORIDA TRANSPORT, INC. is allowed to confirm its authorized units
subject to submission of all requirements for confirmation.
The Law Enforcement Unit of this Board, the Land Transportation Office (LTO),
the Metro Manila Development Authority (MMDA), the Philippine National
Police-Highway Patrol Group (PNP-HPG), and other authorized traffic enforcement
agencies are hereby ordered to APPREHEND and IMPOUND the said vehicles, if
found operating.
SO ORDERED.6
Respondent then filed with the CA a petition for certiorari under Rule 65 of the Rules
of Court, with prayer for the issuance of a preliminary mandatory injunction, assailing
petitioner's above Decision.
On June 26, 2014, the CA promulgated its questioned Decision, disposing as
follows:
WHEREFORE, the instant petition is PARTIALLY GRANTED. The Decision dated
March 14, 2014 of the Land Transportation Franchising and Regulatory Board is
MODIFIED as follows:
1. The Order canceling and reverting to the State of the Certificate of Public
Convenience of operator Cue under Case No. 2007-0407, under the beneficial
ownership of petitioner G.V. Florida Transport, Inc. is AFFIRMED;
2. The penalty of suspension for a period of six (6) months against all existing 28
Certificates of Public Convenience of petitioner G.V. Florida, Transport, Inc., is
REVERSED and SET ASIDE;
3. The condition set forth in the Decision for the lifting of the penalty of suspension is
DELETED; and
4. The order to apprehend and impound petitioner G.V. Florida Transport, Inc.'s 186
authorized bus units under the 28 CPCs if found operating is RECALLED
Accordingly, petitioner G.V. Florida Transport, Inc. prayer for mandatory injunctive
relief is hereby GRANTED. The Land Transportation and Franchising Regulatory
Board is hereby ordered to immediately LIFT the order of suspension and RETURN
or CAUSE the RETURN of the confiscated license plates of petitioner G.V. Florida
Transport, Inc.'s 186 authorized bus units under its 28 Certificates of Public
Convenience without need of further order from this Court. Said Office is further
DIRECTED to submit its Compliance within five (5) days from receipt thereof.
SO ORDERED.7
Hence, the present petition grounded on a lone issue, to wit:
DOES THE LTFRB HAVE THE POWER TO SUSPEND THE FLEET OF A PUBLIC
UTILITY THAT VIOLATES THE LAW, TO THE DAMAGE OF THE PUBLIC?8
The main issue brought before this Court is whether or not petitioner is justified in
suspending respondent's 28 CPCs for a period of six (6) months. In other words, is
the suspension within the powers of the LTFRB to impose and is it reasonable?
Petitioner contends that it is vested by law with jurisdiction to regulate the operation
of public utilities; that under Section 5(b) of Executive Order No. 202 (E. 0. 202),9 it is
authorized "[t]o issue, amend, revise, suspend or cancel Certificates of Public
Convenience or permits authorizing the operation of public land transportation
services provided by motorized vehicles, and to prescribe the appropriate terms and
conditions therefor;" and that petitioner's authority to impose the penalty of
suspension of CPCs of bus companies found to have committed violations of the law
is broad and is consistent with its mandate and regulatory capability.
On the other hand, respondent, in its Comment to the present Petition, contends that
the suspension of its 28 CPCs is tantamount to an outright confiscation of private
property without due process of law; and that petitioner cannot simply ignore
respondent's property rights on the pretext of promoting public safety. Respondent
insists that the penalty imposed by petitioner is not commensurate to the infraction it
had committed.
The Court rules in favor of petitioner.
Section 16(n) of Commonwealth Act. No. 146, otherwise known as the Public
Service Act, provides:
Section 16. Proceedings of the Commission, upon notice and hearing. - The
Commission shall have power, upon proper notice and hearing in accordance with
the rules and provisions of this Act, subject to the limitations and exceptions
mentioned and saving provisions to the contrary:
xxxx
(n) To suspend or revoke any certificate issued under the provisions of this Act
whenever the holder thereof has violated or willfully and contumaciously refused to
comply with any order rule or regulation of the Commission or any provision of this
Act: Provided, That the Commission, for good cause, may prior to the hearing
suspend for a period not to exceed thirty days any certificate or the exercise of any
right or authority issued or granted under this Act by order of the Commission,
whenever such step shall in the judgment of the Commission be necessary to avoid
serious and irreparable damage or inconvenience to the public or to private interests.
xxxx
Also, Section 5(b) of E.O. 202 states:
Sec. 5. Powers and Functions of the Land Transportation Franchising and
Regulatory Board. The Board shall have the following powers and functions:
Also, Section 5(b) of E.O. 202 states:
Sec. 5. Powers and Functions of the Land Transportation Franchising and
Regulatory Board. The Board shall have the following powers and functions:
xxxx
b. To issue, amend, revise, suspend or cancel Certificates of Public Convenience or
permits authorizing the operation of public land transportation services provided by
motorized vehicles, and to prescribe the appropriate terms and conditions therefor;
xxxx
In the present case, respondent is guilty of several violations of the law, to wit: lack of
petitioner's approval of the sale and transfer of the CPC which respondent bought
from Cue; operating the ill-fated bus under its name when the same is registered
under the name of Dagupan Bus Co., Inc.; attaching a vehicle license plate to the ill-
fated bus when such plate belongs to a different bus owned by Cue; and operating
the subject bus under the authority of a different CPC. What makes matters worse is
that respondent knowingly and blatantly committed these violations. How then can
respondent claim good faith under these circumstances?
Respondent, nonetheless, insists that it is unreasonable for petitioner to suspend the
operation of 186 buses covered by its 28 CPCs, considering that only one bus unit,
covered by a single CPC, was involved in the subject accident.
The Court is not persuaded. It bears to note that the suspension of respondent's 28
CPCs is not only because of the findings of petitioner that the ill-fated bus was not
roadworthy. 10 Rather, and more importantly, the suspension of the 28 CPCs was
also brought about by respondent's wanton disregard and obstinate defiance of the
regulations issued by petitioner, which is tantamount to a willful and contumacious
refusal to comply with the requirements of law or of the orders, rules or regulations
issued by petitioner and which is punishable, under the law, by suspension or
revocation of any of its CPCs.
The Court agrees with petitioner that its power to suspend the CPCs issued to public
utility vehicles depends on its assessment of the gravity of the violation, the potential
and actual harm to the public, and the policy impact of its own actions. In this regard,
the Court gives due deference to petitioner's exercise of its sound administrative
discretion in applying its special knowledge, experience and expertise to resolve
respondent's case.
Indeed, the law gives to the LTFRB (previously known, among others, as Public
Service Commission or Board of Transportation) ample power and discretion to
decree or refuse the cancellation of a certificate of public convenience issued to an
operator as long as there is evidence to support its action. 11 As held by this Court in
a long line of cases, 12 it was even intimated that, in matters of this nature so long as
the action is justified, this Court will not substitute its discretion for that of the
regulatory agency which, in this case, is the LTFRB.
Moreover, the Court finds the ruling in Rizal Light & Ice Co., Inc. v. The Municipality
of Morang, Rizal and The Public Service Commission, 13 instructive, to wit:
xxxx
It should be observed that Section 16(n) of Commonwealth Act No. 146, as
amended, confers upon the Commission ample power and discretion to order the
cancellation and revocation of any certificate of public convenience issued to an
operator who has violated, or has willfully and contumaciously refused to comply
with, any order, rule or regulation of the Commission or any provision of law. What
matters is that there is evidence to support the action of the Commission. In the
instant case, as shown by the evidence, the contumacious refusal of the petitioner
since 1954 to comply with the directives, rules and regulations of the Commission, its
violation of the conditions of its certificate and its incapability to comply with its
commitment as shown by its inadequate service, were the circumstances that
warranted the action of the Commission in not merely imposing a fine but in revoking
altogether petitioner's certificate. To allow petitioner to continue its operation would
be to sacrifice public interest and convenience in favor of private interest.
A grant of a certificate of public convenience confers no property rights but is a mere
license or privilege, and such privilege is forfeited when the grantee fails to comply
with his commitments behind which lies the paramount interest of the public, for
public necessity cannot be made to wait, nor sacrificed for private convenience.
(Collector of Internal Revenue v. Estate of F. P. Buan, et al., L-11438 and Santiago
Sambrano, et al. v. PSC, et al., L-11439 & L- 11542-46, July 31, 1958)
(T)he Public Service Commission, . . . has the power to specify and define the terms
and conditions upon which the public utility shall be operated, and to make
reasonable rules and regulations for its operation and the compensation which the
utility shall receive for its services to the public, and for any failure to comply with
such rules and regulations or the violation of any of the terms and conditions for
which the license was granted, the Commission has ample power to enforce the
provisions of the license or even to revoke it, for any failure or neglect to comply with
any of its terms and provisions. x xx x x x14
Respondent likewise contends that, in suspending its 28 CPCs, the LTFRB acted in
reckless disregard of the property rights of respondent as a franchise holder,
considering that it has put in substantial investments amounting to hundreds of
millions in running its operations. In this regard, the Court's ruling in the case of
Luque v. Villegas 15 is apropos:
xxxx
Contending that they possess valid and subsisting certificates of public convenience,
the petitioning public services aver that they acquired a vested right to operate their
public utility vehicles to and from Manila as appearing in their said respective
certificates of public convenience.
Petitioner's argument pales on the face of the fact that the very nature of a certificate
of public convenience is at cross purposes with the concept of vested rights. To this
day, the accepted view, at least insofar as the State is concerned, is that "a
certificate of public convenience constitutes neither a franchise nor a contract,
confers no property right, and is a mere license or privilege." The holder of such
certificate does not acquire a property right in the route covered thereby. Nor does it
confer upon the holder any proprietary right or interest of franchise in the public
highways. Revocation of this certificate deprives him of no vested right. Little
reflection is necessary to show that the certificate of public convenience is granted
with so many strings attached. New and additional burdens, alteration of the
certificate, and even revocation or annulment thereof is reserved to the State.
We need but add that the Public Service Commission, a government agency vested
by law with "jurisdiction, supervision, and control over all public services and their
franchises, equipment, and other properties" is empowered, upon proper notice and
hearing, amongst others: (1) "[t]o amend, modify or revoke at any time a certificate
issued under the provisions of this Act [Commonwealth Act 146, as amended],
whenever the facts and circumstances on the strength of which said certificate was
issued have been misrepresented or materially changed"; and (2) "[t]o suspend or
revoke any certificate issued under the provisions of this Act whenever the holder
thereof has violated or wilfully and contumaciously refused to comply with any order,
rule or regulation of the Commission or any provision of this Act: Provided, That the
Commission, for good cause, may prior to the hearing suspend for a period not to
exceed thirty days any certificate or the exercise of any right or authority issued or
granted under this Act by order of the Commission, whenever such step shall in the
judgment of the Commission be necessary to avoid serious and irreparable damage
or inconvenience to the public or to private interests."
Jurisprudence echoes the rule that the Commission is authorized to make
reasonable rules and regulations for the operation of public services and to enforce
them. In reality, all certificates of public convenience issued are subject to the
condition that all public services "shall observe and comply [with] ... all the rules and
regulations of the Commission relative to" the service. To further emphasize the
control imposed on public services, before any public service can "adopt, maintain,
or apply practices or measures, rules, or regulations to which the public shall be
subject in its relation with the public service," the Commission's approval must first
be had.
And more. Public services must also reckon with provincial resolutions and municipal
ordinances relating to the operation of public utilities within the province or
municipality concerned. The Commission can require compliance with these
provincial resolutions or municipal ordinances.
Illustrative of the lack of "absolute, complete, and unconditional" right on the part of
public services to operate because of the delimitations and restrictions which
circumscribe the privilege afforded a certificate of public convenience is the following
from the early (March 31, 1915) decision of this Court in Fisher vs. Yangco
Steamship Company, 31 Phil. 1, 18-19:
Common carriers exercise a sort of public office, and have duties to perform in which
the public is interested. Their business is, therefore, affected with a public interest,
and is subject of public regulation. (New Jersey Steam Nav. Co. vs. Merchants
Banks, 6 How. 344, 382; Munn vs. Illinois, 94 U.S. 113, 130.) Indeed, this right of
regulation is so far beyond question that it is well settled that the power of the state
to exercise legislative control over railroad companies and other carriers 'in all
respects necessary to protect the public against danger, injustice and oppression'
may be exercised through boards of commissioners. (New York, etc. R. Co. vs.
Bristol, 151 U.S. 556, 571; Connecticut, etc. R. Co. vs. Woodruff, 153 U.S. 689.).
xxxx
.... The right to enter the public employment as a common carrier and to offer one's
services to the public for hire does not carry with it the right to conduct that business
as one pleases, without regard to the interests of the public and free from such
reasonable and just regulations as may be prescribed for the protection of the public
from the reckless or careless indifference of the carrier as to the public welfare and
for the prevention of unjust and unreasonable discrimination of any kind whatsoever
in the performance of the carrier's duties as a servant of the public.
Business of certain kinds, including the business of a common carrier, holds such a
peculiar relation to the public interest that there is superinduced upon it the right of
public regulation. (Budd vs. New York, 143 U.S. 517, 533.) When private property is
"affected with a public interest it ceases to be Juris privati only." Property becomes
clothed with a public interest when used in a manner to make it of public
consequence and affect the community at large. "When, therefore, one devotes his
property to a use in which the public has an interest, he, in effect, grants to the public
an interest in that use, and must submit to be controlled by the public for the
common good, to the extent of the interest he has thus created. He may withdraw his
grant by discontinuing the use, but so long as he maintains the use he must submit
to control." (Munn vs. Illinois, 94 U.S. 113; Georgia R. & Bkg. Co. vs. Smith, 128 U.S.
174; Budd vs. New York, 143 U.S. 517; Louisville, etc. Ry. Co. vs. Kentucky, 161
U.S. 677, 695.).
The foregoing, without more, rejects the vested rights theory espoused by petitioning
bus operators.
x x x16
Neither is the Court convinced by respondent's contention that the authority given to
petitioner, under the abovequoted Section 16(n) of the Public Service Act does not
mean that petitioner is given the power to suspend the entire operations of a
transport company. Respondent must be reminded that, as quoted above, the law Appeals, dated June 26, 2014 in CA-GR. SP No. 134772, is REVERSED and SET
clearly states that petitioner has the power "[t]o suspend or revoke any certificate ASIDE. The March 14, 2014 Decision of the Land Transportation Franchising and
issued under the provisions of [the Public Service Act] whenever the holder thereof Regulatory Board is REINSTATED.
has violated or willfully and contumaciously refused to comply with any order SO ORDERED.
rule or regulation of the Commission or any provision of this Act x x x" This
Court has held that when the context so indicates, the word "any" may be construed
to mean, and indeed it has been frequently used in its enlarged and Plural sense as
meaning "all " "all or every" "each " "each one of all " ' ' ' ' ' "every" without limitation;
indefinite number or quantity, an indeterminate unit or number of units out of many or
all, one or more as the case may be, several, some. 17 Thus, in the same vein, the
Merriam-Webster Dictionary defines the word "any" as "one, some, or all
indiscriminately of whatever quantity"; "used to indicate a maximum or whole";
"unmeasured or unlimited in amount, number, or extent." 18 Hence, under the above
definitions, petitioner undoubtedly wields authority, under the law, to suspend not
only one but all of respondent's CPCs if warranted, which is proven to be the case
here.
As to whether or not the penalty imposed by petitioner is reasonable, respondent
appears to trivialize the effects of its deliberate and shameless violations of the law.
Contrary to its contention, this is not simply a case of one erring bus unit. Instead,
the series or combination of violations it has committed with respect to the ill-fated
bus is indicative of its design and intent to blatantly and maliciously defy the law and
disregard, with impunity, the regulations imposed by petitioner upon all holders of
CPCs. Thus, the Court finds nothing irregular in petitioner's imposition of the penalty
of sixmonths suspension of the operations of respondent's 28 CPCs. In other words,
petitioner did not commit grave abuse of discretion in imposing the questioned
penalty.
Lastly, the suspension of respondent's CPCs finds relevance in light of the series of
accidents met by different bus units owned by different operators in recent events.
This serves as a reminder to all operators of public utility vehicles that their
franchises and CPCs are mere privileges granted by the government. As such, they
are sternly warned that they should always keep in mind that, as common carriers,
they bear the responsibility of exercising extraordinary diligence in the transportation
of their passengers. Moreover, they should conscientiously comply with the
requirements of the law in the conduct of their operations, failing which they shall
suffer the consequences of their own actions or inaction.
WHEREFORE, the instant petition is GRANTED. The Decision of the Court of