EDGAR COKALIONG SHIPPING LINES, INC.
, Petitioner, "When the vessel left port, it had thirty-four (34) passengers and assorted cargo on board, including the goods of Legaspi.
vs.
UCPB GENERAL INSURANCE COMPANY, INC., Respondent.
The liability of a common carrier for the loss of goods may, by stipulation in the bill of lading, be limited to the value declared
by the shipper. On the other hand, the liability of the insurer is determined by the actual value covered by the insurance policy
and the insurance premiums paid therefor, and not necessarily by the value declared in the bill of lading.
The Case
Before the Court is a Petition for Review1 under Rule 45 of the Rules of Court, seeking to set aside the August 31, 2000
Decision2 and the November 17, 2000 Resolution3 of the Court of Appeals4 (CA) in CA-GR SP No. 62751. The dispositive
part of the Decision reads:
"IN THE LIGHT OF THE FOREGOING, the appeal is GRANTED. The Decision appealed from is REVERSED.
[Petitioner] is hereby condemned to pay to [respondent] the total amount of ₱148,500.00, with interest thereon, at the rate of
6% per annum, from date of this Decision of the Court. [Respondent’s] claim for attorney’s fees [is] DISMISSED.
[Petitioner’s] counterclaims are DISMISSED."5
The assailed Resolution denied petitioner’s Motion for Reconsideration.
On the other hand, the disposition of the Regional Trial Court’s Decision which was later reversed by the CA, states:
"WHEREFORE, premises considered, the case is hereby DISMISSED for lack of merit.
"No cost."
The Facts
The facts of the case are summarized by the appellate court in this wise:
"Sometime on December 11, 1991, Nestor Angelia delivered to the Edgar Cokaliong Shipping Lines, Inc. (now Cokaliong
Shipping Lines), [petitioner] for brevity, cargo consisting of one (1) carton of Christmas décor and two (2) sacks of plastic
toys, to be transported on board the M/V Tandag on its Voyage No. T-189 scheduled to depart from Cebu City, on December
12, 1991, for Tandag, Surigao del Sur. [Petitioner] issued Bill of Lading No. 58, freight prepaid, covering the cargo. Nestor
Angelia was both the shipper and consignee of the cargo valued, on the face thereof, in the amount of ₱6,500.00. Zosimo
Mercado likewise delivered cargo to [petitioner], consisting of two (2) cartons of plastic toys and Christmas decor, one (1)
roll of floor mat and one (1) bundle of various or assorted goods for transportation thereof from Cebu City to Tandag, Surigao
del Sur, on board the said vessel, and said voyage. [Petitioner] issued Bill of Lading No. 59 covering the cargo which, on
the face thereof, was valued in the amount of ₱14,000.00. Under the Bill of Lading, Zosimo Mercado was both the shipper
and consignee of the cargo.
"On December 12, 1991, Feliciana Legaspi insured the cargo, covered by Bill of Lading No. 59, with the UCPB General
Insurance Co., Inc., [respondent] for brevity, for the amount of ₱100,000.00 ‘against all risks’ under Open Policy No.
002/9 1/254 for which she was issued, by [respondent], Marine Risk Note No. 18409 on said date. She also insured the
cargo covered by Bill of Lading No. 58, with [respondent], for the amount of ₱50,000.00, under Open Policy No. 002/9
1/254 on the basis of which [respondent] issued Marine Risk Note No. 18410 on said date.
After the vessel had passed by the Mandaue-Mactan Bridge, fire ensued in the engine room, and, despite earnest efforts of
the officers and crew of the vessel, the fire engulfed and destroyed the entire vessel resulting in the loss of the vessel and the
cargoes therein. The Captain filed the required Marine Protest.
"Shortly thereafter, Feliciana Legaspi filed a claim, with [respondent], for the value of the cargo insured under Marine Risk
Note No. 18409 and covered by Bill of Lading No. 59. She submitted, in support of her claim, a Receipt, dated December
11, 1991, purportedly signed by Zosimo Mercado, and Order Slips purportedly signed by him for the goods he received
from Feliciana Legaspi valued in the amount of ₱110,056.00. [Respondent] approved the claim of Feliciana Legaspi and
drew and issued UCPB Check No. 612939, dated March 9, 1992, in the net amount of ₱99,000.00, in settlement of her claim
after which she executed a Subrogation Receipt/Deed, for said amount, in favor of [respondent]. She also filed a claim for
the value of the cargo covered by Bill of Lading No. 58. She submitted to [respondent] a Receipt, dated December 11, 1991
and Order Slips, purportedly signed by Nestor Angelia for the goods he received from Feliciana Legaspi valued at
₱60,338.00. [Respondent] approved her claim and remitted to Feliciana Legaspi the net amount of ₱49,500.00, after which
she signed a Subrogation Receipt/Deed, dated March 9, 1992, in favor of [respondent].
"On July 14, 1992, [respondent], as subrogee of Feliciana Legaspi, filed a complaint anchored on torts against [petitioner],
with the Regional Trial Court of Makati City, for the collection of the total principal amount of ₱148,500.00, which it paid
to Feliciana Legaspi for the loss of the cargo, praying that judgment be rendered in its favor and against the [petitioner] as
follows:
‘WHEREFORE, it is respectfully prayed of this Honorable Court that after due hearing, judgment be rendered ordering
[petitioner] to pay [respondent] the following.
1. Actual damages in the amount of ₱148,500.00 plus interest thereon at the legal rate from the time of filing of this complaint
until fully paid;
2. Attorney’s fees in the amount of ₱10,000.00; and
3. Cost of suit.
‘[Respondent] further prays for such other reliefs and remedies as this Honorable Court may deem just and equitable under
the premises.’
"[Respondent] alleged, inter alia, in its complaint, that the cargo subject of its complaint was delivered to, and received by,
[petitioner] for transportation to Tandag, Surigao del Sur under ‘Bill of Ladings,’ Annexes ‘A’ and ‘B’ of the complaint;
that the loss of the cargo was due to the negligence of the [petitioner]; and that Feliciana Legaspi had executed Subrogation
Receipts/Deeds in favor of [respondent] after paying to her the value of the cargo on account of the Marine Risk Notes it
issued in her favor covering the cargo.
"In its Answer to the complaint, [petitioner] alleged that: (a) [petitioner] was cleared by the Board of Marine Inquiry of any
negligence in the burning of the vessel; (b) the complaint stated no cause of action against [petitioner]; and (c) the
shippers/consignee had already been paid the value of the goods as stated in the Bill of Lading and, hence, [petitioner] cannot
be held liable for the loss of the cargo beyond the value thereof declared in the Bill of Lading.
"After [respondent] rested its case, [petitioner] prayed for and was allowed, by the Court a quo, to take the depositions of
Chester Cokaliong, the Vice-President and Chief Operating Officer of [petitioner], and a resident of Cebu City, and of Noel
Tanyu, an officer of the Equitable Banking Corporation, in Cebu City, and a resident of Cebu City, to be given before the
Presiding Judge of Branch 106 of the Regional Trial Court of Cebu City. Chester Cokaliong and Noel Tanyu did testify, by
way of deposition, before the Court and declared inter alia, that: [petitioner] is a family corporation like the Chester
Marketing, Inc.; Nestor Angelia had been doing business with [petitioner] and Chester Marketing, Inc., for years, and
incurred an account with Chester Marketing, Inc. for his purchases from said corporation; [petitioner] did issue Bills of
Lading Nos. 58 and 59 for the cargo described therein with Zosimo Mercado and Nestor Angelia as shippers/consignees,
respectively; the engine room of the M/V Tandag caught fire after it passed the Mandaue/Mactan Bridge resulting in the
total loss of the vessel and its cargo; an investigation was conducted by the Board of Marine Inquiry of the Philippine Coast
Guard which rendered a Report, dated February 13, 1992 absolving [petitioner] of any responsibility on account of the fire,
which Report of the Board was approved by the District Commander of the Philippine Coast Guard; a few days after the
sinking of the vessel, a representative of the Legaspi Marketing filed claims for the values of the goods under Bills of Lading
Nos. 58 and 59 in behalf of the shippers/consignees, Nestor Angelia and Zosimo Mercado; [petitioner] was able to ascertain,
from the shippers/consignees and the representative of the Legaspi Marketing that the cargo covered by Bill of Lading No.
59 was owned by Legaspi Marketing and consigned to Zosimo Mercado while that covered by Bill of Lading No. 58 was
purchased by Nestor Angelia from the Legaspi Marketing; that [petitioner] approved the claim of Legaspi Marketing for the
value of the cargo under Bill of Lading No. 59 and remitted to Legaspi Marketing the said amount under Equitable Banking
Corporation Check No. 20230486 dated August 12, 1992, in the amount of ₱14,000.00 for which the representative of the
Legaspi Marketing signed Voucher No. 4379, dated August 12, 1992, for the said amount of ₱14,000.00 in full payment of
claims under Bill of Lading No. 59; that [petitioner] approved the claim of Nestor Angelia in the amount of ₱6,500.00 but
that since the latter owed Chester Marketing, Inc., for some purchases, [petitioner] merely set off the amount due to Nestor
Angelia under Bill of Lading No. 58 against his account with Chester Marketing, Inc.; [petitioner] lost/[misplaced] the
original of the check after it was received by Legaspi Marketing, hence, the production of the microfilm copy by Noel Tanyu
of the Equitable Banking Corporation; [petitioner] never knew, before settling with Legaspi Marketing and Nestor Angelia
that the cargo under both Bills of Lading were insured with [respondent], or that Feliciana Legaspi filed claims for the value
of the cargo with [respondent] and that the latter approved the claims of Feliciana Legaspi and paid the total amount of
₱148,500.00 to her; [petitioner] came to know, for the first time, of the payments by [respondent] of the claims of Feliciana
Legaspi when it was served with the summons and complaint, on October 8, 1992; after settling his claim, Nestor Angelia x
x x executed the Release and Quitclaim, dated July 2, 1993, and Affidavit, dated July 2, 1993 in favor of [respondent];
hence, [petitioner] was absolved of any liability for the loss of the cargo covered by Bills of Lading Nos. 58 and 59; and
even if it was, its liability should not exceed the value of the cargo as stated in the Bills of Lading.
"[Petitioner] did not anymore present any other witnesses on its evidence-in-chief. x x x"9 (Citations omitted)
Ruling of the Court of Appeals
The CA held that petitioner had failed "to prove that the fire which consumed the vessel and its cargo was caused by
something other than its negligence in the upkeep, maintenance and operation of the vessel."10
Petitioner had paid ₱14,000 to Legaspi Marketing for the cargo covered by Bill of Lading No. 59. The CA, however, held
that the payment did not extinguish petitioner’s obligation to respondent, because there was no evidence that Feliciana
Legaspi (the insured) was the owner/proprietor of Legaspi Marketing. The CA also pointed out the impropriety of treating
the claim under Bill of Lading No. 58 -- covering cargo valued therein at ₱6,500 -- as a setoff against Nestor Angelia’s
account with Chester Enterprises, Inc.
Finally, it ruled that respondent "is not bound by the valuation of the cargo under the Bills of Lading, x x x nor is the value
of the cargo under said Bills of Lading conclusive on the [respondent]. This is so because, in the first place, the goods were
insured with the [respondent] for the total amount of ₱150,000.00, which amount may be considered as the face value of the
goods."11
Hence this Petition.12
Issues
Petitioner raises for our consideration the following alleged errors of the CA:
"I
"The Honorable Court of Appeals erred, granting arguendo that petitioner is liable, in holding that petitioner’s liability should
be based on the ‘actual insured value’ of the goods and not from actual valuation declared by the shipper/consignee in the
bill of lading.
"II
"The Court of Appeals erred in not affirming the findings of the Philippine Coast Guard, as sustained by the trial court a quo,
holding that the cause of loss of the aforesaid cargoes under Bill of Lading Nos. 58 and 59 was due to force majeure and due
diligence was [exercised] by petitioner prior to, during and immediately after the fire on [petitioner’s] vessel.
"III
"The Court of Appeals erred in not holding that respondent UCPB General Insurance has no cause of action against the
petitioner."13
In sum, the issues are: (1) Is petitioner liable for the loss of the goods? (2) If it is liable, what is the extent of its liability?
This Court’s Ruling
The Petition is partly meritorious.
First Issue:
Liability for Loss
Petitioner argues that the cause of the loss of the goods, subject of this case, was force majeure. It adds that its exercise of
due diligence was adequately proven by the findings of the Philippine Coast Guard.
We are not convinced. The uncontroverted findings of the Philippine Coast Guard show that the M/V Tandag sank due to a
fire, which resulted from a crack in the auxiliary engine fuel oil service tank. Fuel spurted out of the crack and dripped to the
heating exhaust manifold, causing the ship to burst into flames. The crack was located on the side of the fuel oil tank, which
had a mere two-inch gap from the engine room walling, thus precluding constant inspection and care by the crew.
Having originated from an unchecked crack in the fuel oil service tank, the fire could not have been caused by force majeure.
Broadly speaking, force majeure generally applies to a natural accident, such as that caused by a lightning, an earthquake, a
tempest or a public enemy.14 Hence, fire is not considered a natural disaster or calamity. In Eastern Shipping Lines, Inc. v.
Intermediate Appellate Court,15 we explained:
"x x x. This must be so as it arises almost invariably from some act of man or by human means. It does not fall within the
category of an act of God unless caused by lighting or by other natural disaster or calamity. It may even be caused by the
actual fault or privity of the carrier.
"Article 1680 of the Civil Code, which considers fire as an extraordinary fortuitous event refers to leases or rural lands where
a reduction of the rent is allowed when more than one-half of the fruits have been lost due to such event, considering that the
law adopts a protective policy towards agriculture.
"As the peril of fire is not comprehended within the exceptions in Article 1734, supra, Article 1735 of the Civil Code provides
that in all cases other than those mentioned in Article 1734, the common carrier shall be presumed to have been at fault or to
have acted negligently, unless it proves that it has observed the extraordinary diligence required by law."
Where loss of cargo results from the failure of the officers of a vessel to inspect their ship frequently so as to discover the
existence of cracked parts, that loss cannot be attributed to force majeure, but to the negligence of those officials.16
The law provides that a common carrier is presumed to have been negligent if it fails to prove that it exercised extraordinary
vigilance over the goods it transported. Ensuring the seaworthiness of the vessel is the first step in exercising the required
vigilance. Petitioner did not present sufficient evidence showing what measures or acts it had undertaken to ensure the
seaworthiness of the vessel. It failed to show when the last inspection and care of the auxiliary engine fuel oil service tank
was made, what the normal practice was for its maintenance, or some other evidence to establish that it had exercised
extraordinary diligence. It merely stated that constant inspection and care were not possible, and that the last time the vessel
was dry-docked was in November 1990. Necessarily, in accordance with Article 173517 of the Civil Code, we hold petitioner
responsible for the loss of the goods covered by Bills of Lading Nos. 58 and 59.
Second Issue:
Extent of Liability
Respondent contends that petitioner’s liability should be based on the actual insured value of the goods, subject of this case.
On the other hand, petitioner claims that its liability should be limited to the value declared by the shipper/consignee in the
Bill of Lading.
The records18 show that the Bills of Lading covering the lost goods contain the stipulation that in case of claim for loss or
for damage to the shipped merchandise or property, "[t]he liability of the common carrier x x x shall not exceed the value of
the goods as appearing in the bill of lading."19 The attempt by respondent to make light of this stipulation is unconvincing.
As it had the consignees’ copies of the Bills of Lading,20 it could have easily produced those copies, instead of relying on
mere allegations and suppositions. However, it presented mere photocopies thereof to disprove petitioner’s evidence showing
the existence of the above stipulation.
A stipulation that limits liability is valid21 as long as it is not against public policy. In Everett Steamship Corporation v.
Court of Appeals,22 the Court stated:
"A stipulation in the bill of lading limiting the common carrier’s liability for loss or destruction of a cargo to a certain sum,
unless the shipper or owner declares a greater value, is sanctioned by law, particularly Articles 1749 and 1750 of the Civil
Code which provides:
‘Art. 1749. A stipulation that the common carrier’s liability is limited to the value of the goods appearing in the bill of lading,
unless the shipper or owner declares a greater value, is binding.’
‘Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or deterioration
of the goods is valid, if it is reasonable and just under the circumstances, and has been freely and fairly agreed upon.’
"Such limited-liability clause has also been consistently upheld by this Court in a number of cases. Thus, in Sea-Land Service,
Inc. vs. Intermediate Appellate Court, we ruled:
‘It seems clear that even if said section 4 (5) of the Carriage of Goods by Sea Act did not exist, the validity and binding effect
of the liability limitation clause in the bill of lading here are nevertheless fully sustainable on the basis alone of the cited
Civil Code Provisions. That said stipulation is just and reasonable is arguable from the fact that it echoes Art. 1750 itself in
providing a limit to liability only if a greater value is not declared for the shipment in the bill of lading. To hold otherwise
would amount to questioning the justness and fairness of the law itself, and this the private respondent does not pretend to
do. But over and above that consideration, the just and reasonable character of such stipulation is implicit in it giving the
shipper or owner the option of avoiding accrual of liability limitation by the simple and surely far from onerous expedient of
declaring the nature and value of the shipment in the bill of lading.’
"Pursuant to the afore-quoted provisions of law, it is required that the stipulation limiting the common carrier’s liability for
loss must be ‘reasonable and just under the circumstances, and has been freely and fairly agreed upon.
"The bill of lading subject of the present controversy specifically provides, among others:
’18. All claims for which the carrier may be liable shall be adjusted and settled on the basis of the shipper’s net invoice cost
plus freight and insurance premiums, if paid, and in no event shall the carrier be liable for any loss of possible profits or any
consequential loss.
‘The carrier shall not be liable for any loss of or any damage to or in any connection with, goods in an amount exceeding
One Hundred Thousand Yen in Japanese Currency (¥100,000.00) or its equivalent in any other currency per package or
customary freight unit (whichever is least) unless the value of the goods higher than this amount is declared in writing by
the shipper before receipt of the goods by the carrier and inserted in the Bill of Lading and extra freight is paid as required.’
"The above stipulations are, to our mind, reasonable and just.1avvphi1 In the bill of lading, the carrier made it clear that its
liability would only be up to One Hundred Thousand (Y100,000.00) Yen. However, the shipper, Maruman Trading, had the
option to declare a higher valuation if the value of its cargo was higher than the limited liability of the carrier. Considering
that the shipper did not declare a higher valuation, it had itself to blame for not complying with the stipulations." (Italics
supplied)
In the present case, the stipulation limiting petitioner’s liability is not contrary to public policy. In fact, its just and reasonable
character is evident. The shippers/consignees may recover the full value of the goods by the simple expedient of declaring
the true value of the shipment in the Bill of Lading. Other than the payment of a higher freight, there was nothing to stop
them from placing the actual value of the goods therein. In fact, they committed fraud against the common carrier by
deliberately undervaluing the goods in their Bill of Lading, thus depriving the carrier of its proper and just transport fare.
Concededly, the purpose of the limiting stipulation in the Bill of Lading is to protect the common carrier. Such stipulation
obliges the shipper/consignee to notify the common carrier of the amount that the latter may be liable for in case of loss of
the goods. The common carrier can then take appropriate measures -- getting insurance, if needed, to cover or protect itself.
This precaution on the part of the carrier is reasonable and prudent. Hence, a shipper/consignee that undervalues the real
worth of the goods it seeks to transport does not only violate a valid contractual stipulation, but commits a fraudulent act
when it seeks to make the common carrier liable for more than the amount it declared in the bill of lading.
Indeed, Zosimo Mercado and Nestor Angelia misled petitioner by undervaluing the goods in their respective Bills of Lading.
Hence, petitioner was exposed to a risk that was deliberately hidden from it, and from which it could not protect itself.
It is well to point out that, for assuming a higher risk (the alleged actual value of the goods) the insurance company was paid
the correct higher premium by Feliciana Legaspi; while petitioner was paid a fee lower than what it was entitled to for
transporting the goods that had been deliberately undervalued by the shippers in the Bill of Lading. Between the two of them,
the insurer should bear the loss in excess of the value declared in the Bills of Lading. This is the just and equitable solution.
In Aboitiz Shipping Corporation v. Court of Appeals,23 the description of the nature and the value of the goods shipped were
declared and reflected in the bill of lading, like in the present case. The Court therein considered this declaration as the basis
of the carrier’s liability and ordered payment based on such amount. Following this ruling, petitioner should not be held
liable for more than what was declared by the shippers/consignees as the value of the goods in the bills of lading.
We find no cogent reason to disturb the CA’s finding that Feliciana Legaspi was the owner of the goods covered by Bills of
Lading Nos. 58 and 59. Undoubtedly, the goods were merely consigned to Nestor Angelia and Zosimo Mercado, respectively;
thus, Feliciana Legaspi or her subrogee (respondent) was entitled to the goods or, in case of loss, to compensation therefor.
There is no evidence showing that petitioner paid her for the loss of those goods. It does not even claim to have paid her.
On the other hand, Legaspi Marketing filed with petitioner a claim for the lost goods under Bill of Lading No. 59, for which
the latter subsequently paid ₱14,000. But nothing in the records convincingly shows that the former was the owner of the
goods. Respondent was, however, able to prove that it was Feliciana Legaspi who owned those goods, and who was thus
entitled to payment for their loss. Hence, the claim for the goods under Bill of Lading No. 59 cannot be deemed to have been
extinguished, because payment was made to a person who was not entitled thereto.
With regard to the claim for the goods that were covered by Bill of Lading No. 58 and valued at ₱6,500, the parties have not
convinced us to disturb the findings of the CA that compensation could not validly take place. Thus, we uphold the appellate
court’s ruling on this point.
WHEREFORE, the Petition is hereby PARTIALLY GRANTED. The assailed Decision is MODIFIED in the sense that
petitioner is ORDERED to pay respondent the sums of ₱14,000 and ₱6,500, which represent the value of the goods stated in
Bills of Lading Nos. 59 and 58, respectively. No costs.
SO ORDERED.
ESTRELLITA M. BASCOS, petitioners,
vs.
COURT OF APPEALS and RODOLFO A. CIPRIANO, respondents.
This is a petition for review on certiorari of the decision ** of the Court of Appeals in "RODOLFO A. CIPRIANO, doing
business under the name CIPRIANO TRADING ENTERPRISES plaintiff-appellee, vs. ESTRELLITA M. BASCOS, doing
business under the name of BASCOS TRUCKING, defendant-appellant," C.A.-G.R. CV No. 25216, the dispositive portion
of which is quoted hereunder:
"PREMISES considered, We find no reversible error in the decision appealed from, which is hereby affirmed in toto. Costs
against appellant."
The facts, as gathered by this Court, are as follows:
Rodolfo A. Cipriano representing Cipriano Trading Enterprise (CIPTRADE for short) entered into a hauling contract 2 with
Jibfair Shipping Agency Corporation whereby the former bound itself to haul the latter's 2,000 m/tons of soya bean meal
from Magallanes Drive, Del Pan, Manila to the warehouse of Purefoods Corporation in Calamba, Laguna. To carry out its
obligation, CIPTRADE, through Rodolfo Cipriano, subcontracted with Estrellita Bascos (petitioner) to transport and to
deliver 400 sacks of soya bean meal worth P156,404.00 from the Manila Port Area to Calamba, Laguna at the rate of P50.00
per metric ton. Petitioner failed to deliver the said cargo. As a consequence of that failure, Cipriano paid Jibfair Shipping
Agency the amount of the lost goods in accordance with the contract which stated that:
"1. CIPTRADE shall be held liable and answerable for any loss in bags due to theft, hijacking and non-delivery or damages
to the cargo during transport at market value, . . ."
Cipriano demanded reimbursement from petitioner but the latter refused to pay. Eventually, Cipriano filed a complaint for a
sum of money and damages with writ of preliminary attachment 4 for breach of a contract of carriage. The prayer for a Writ
of Preliminary Attachment was supported by an affidavit 5 which contained the following allegations:
"4. That this action is one of those specifically mentioned in Sec. 1, Rule 57 the Rules of Court, whereby a writ of preliminary
attachment may lawfully issue, namely:
"(e) in an action against a party who has removed or disposed of his property, or is about to do so, with intent to defraud his
creditors;"
5. That there is no sufficient security for the claim sought to be enforced by the present action;
6. That the amount due to the plaintiff in the above-entitled case is above all legal counterclaims;"
The trial court granted the writ of preliminary attachment on February 17, 1987.
In her answer, petitioner interposed the following defenses: that there was no contract of carriage since CIPTRADE leased
her cargo truck to load the cargo from Manila Port Area to Laguna; that CIPTRADE was liable to petitioner in the amount
of P11,000.00 for loading the cargo; that the truck carrying the cargo was hijacked along Canonigo St., Paco, Manila on the
night of October 21, 1988; that the hijacking was immediately reported to CIPTRADE and that petitioner and the police
exerted all efforts to locate the hijacked properties; that after preliminary investigation, an information for robbery and car
napping were filed against Jose Opriano, et al.; and that hijacking, being a force majeure, exculpated petitioner from any
liability to CIPTRADE.
After trial, the trial court rendered a decision *** the dispositive portion of which reads as follows:
"WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendant ordering the latter to pay the former:
1. The amount of ONE HUNDRED FIFTY-SIX THOUSAND FOUR HUNDRED FOUR PESOS (P156,404.00) as an (sic)
for actual damages with legal interest of 12% per cent per annum to be counted from December 4, 1986 until fully paid;
2. The amount of FIVE THOUSAND PESOS (P5,000.00) as and for attorney's fees; and
3. The costs of the suit.
The "Urgent Motion To Dissolve/Lift preliminary Attachment" dated March 10, 1987 filed by defendant is DENIED for
being moot and academic.
SO ORDERED."
Petitioner appealed to the Court of Appeals but respondent Court affirmed the trial court's judgment.
Consequently, petitioner filed this petition where she makes the following assignment of errors; to wit:
"I. THE RESPONDENT COURT ERRED IN HOLDING THAT THE CONTRACTUAL RELATIONSHIP BETWEEN
PETITIONER AND PRIVATE RESPONDENT WAS CARRIAGE OF GOODS AND NOT LEASE OF CARGO TRUCK.
II. GRANTING, EX GRATIA ARGUMENTI, THAT THE FINDING OF THE RESPONDENT COURT THAT THE
CONTRACTUAL RELATIONSHIP BETWEEN PETITIONER AND PRIVATE RESPONDENT WAS CARRIAGE OF
GOODS IS CORRECT, NEVERTHELESS, IT ERRED IN FINDING PETITIONER LIABLE THEREUNDER BECAUSE
THE LOSS OF THE CARGO WAS DUE TO FORCE MAJEURE, NAMELY, HIJACKING.
III. THE RESPONDENT COURT ERRED IN AFFIRMING THE FINDING OF THE TRIAL COURT THAT
PETITIONER'S MOTION TO DISSOLVE/LIFT THE WRIT OF PRELIMINARY ATTACHMENT HAS BEEN
RENDERED MOOT AND ACADEMIC BY THE DECISION OF THE MERITS OF THE CASE." 7
The petition presents the following issues for resolution: (1) was petitioner a common carrier?; and (2) was the hijacking
referred to a force majeure?
The Court of Appeals, in holding that petitioner was a common carrier, found that she admitted in her answer that she did
business under the name A.M. Bascos Trucking and that said admission dispensed with the presentation by private
respondent, Rodolfo Cipriano, of proofs that petitioner was a common carrier. The respondent Court also adopted in toto the
trial court's decision that petitioner was a common carrier, Moreover, both courts appreciated the following pieces of evidence
as indicators that petitioner was a common carrier: the fact that the truck driver of petitioner, Maximo Sanglay, received the
cargo consisting of 400 bags of soya bean meal as evidenced by a cargo receipt signed by Maximo Sanglay; the fact that the
truck helper, Juanito Morden, was also an employee of petitioner; and the fact that control of the cargo was placed in
petitioner's care.
In disputing the conclusion of the trial and appellate courts that petitioner was a common carrier, she alleged in this petition
that the contract between her and Rodolfo A. Cipriano, representing CIPTRADE, was lease of the truck. She cited as evidence
certain affidavits which referred to the contract as "lease". These affidavits were made by Jesus Bascos 8 and by petitioner
herself. 9 She further averred that Jesus Bascos confirmed in his testimony his statement that the contract was a lease contract.
10 She also stated that: she was not catering to the general public. Thus, in her answer to the amended complaint, she said
that she does business under the same style of A.M. Bascos Trucking, offering her trucks for lease to those who have cargo
to move, not to the general public but to a few customers only in view of the fact that it is only a small business. 11
We agree with the respondent Court in its finding that petitioner is a common carrier.
Article 1732 of the Civil Code defines a common carrier as "(a) person, corporation or firm, or association 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 test to determine a common carrier is "whether the given undertaking is a part of the business
engaged in by the carrier which he has held out to the general public as his occupation rather than the quantity or extent of
the business transacted." 12 In this case, petitioner herself has made the admission that she was in the trucking business,
offering her trucks to those with cargo to move. Judicial admissions are conclusive and no evidence is required to prove the
same. 13
But petitioner argues that there was only a contract of lease because they offer their services only to a select group of people
and because the private respondents, plaintiffs in the lower court, did not object to the presentation of affidavits by petitioner
where the transaction was referred to as a lease contract.
Regarding the first contention, the holding of the Court in De Guzman vs. Court of Appeals 14 is instructive. In referring to
Article 1732 of the Civil Code, it held thus:
"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 1732 deliberately refrained
from making such distinctions."
Regarding the affidavits presented by petitioner to the court, both the trial and appellate courts have dismissed them as self-
serving and petitioner contests the conclusion. We are bound by the appellate court's factual conclusions. Yet, granting that
the said evidence were not self-serving, the same were not sufficient to prove that the contract was one of lease. It must be
understood that a contract is what the law defines it to be and not what it is called by the contracting parties. 15 Furthermore,
petitioner presented no other proof of the existence of the contract of lease. He who alleges a fact has the burden of proving
it. 16
Likewise, we affirm the holding of the respondent court that the loss of the goods was not due to force majeure.
Common carriers are obliged to observe extraordinary diligence in the vigilance over the goods transported by them. 17
Accordingly, they are presumed to have been at fault or to have acted negligently if the goods are lost, destroyed or
deteriorated. 18 There are very few instances when the presumption of negligence does not attach and these instances are
enumerated in Article 1734. 19 In those cases where the presumption is applied, the common carrier must prove that it
exercised extraordinary diligence in order to overcome the presumption.
In this case, petitioner alleged that hijacking constituted force majeure which exculpated her from liability for the loss of the
cargo. In De Guzman vs. Court of Appeals, 20 the Court held that hijacking, not being included in the provisions of Article
1734, must be dealt with under the provisions of Article 1735 and thus, the common carrier is presumed to have been at fault
or negligent. To exculpate the carrier from liability arising from hijacking, he must prove that the robbers or the hijackers
acted with grave or irresistible threat, violence, or force. This is in accordance with Article 1745 of the Civil Code which
provides:
"Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public
policy;
xxx xxx xxx
(6) That the common carrier's liability for acts committed by thieves, or of robbers who do not act with grave or irresistible
threat, violences or force, is dispensed with or diminished;"
In the same case, 21 the Supreme Court also held that:
"Under Article 1745 (6) above, a common carrier is held responsible — and will not be allowed to divest or to diminish such
responsibility — even for acts of strangers like thieves or robbers except where such thieves or robbers in fact acted with
grave or irresistible threat, violence or force. We believe and so hold that the limits of the duty of extraordinary diligence in
the vigilance over the goods carried are reached where the goods are lost as a result of a robbery which is attended by "grave
or irresistible threat, violence or force."
To establish grave and irresistible force, petitioner presented her accusatory affidavit, 22 Jesus Bascos' affidavit, 23 and
Juanito Morden's 24 "Salaysay". However, both the trial court and the Court of Appeals have concluded that these affidavits
were not enough to overcome the presumption. Petitioner's affidavit about the hijacking was based on what had been told
her by Juanito Morden. It was not a first-hand account. While it had been admitted in court for lack of objection on the part
of private respondent, the respondent Court had discretion in assigning weight to such evidence. We are bound by the
conclusion of the appellate court. In a petition for review on certiorari, we are not to determine the probative value of evidence
but to resolve questions of law. Secondly, the affidavit of Jesus Bascos did not dwell on how the hijacking took place. Thirdly,
while the affidavit of Juanito Morden, the truck helper in the hijacked truck, was presented as evidence in court, he himself
was a witness as could be gleaned from the contents of the petition. Affidavits are not considered the best evidence if the
affiants are available as witnesses. 25 The subsequent filing of the information for carnapping and robbery against the accused
named in said affidavits did not necessarily mean that the contents of the affidavits were true because they were yet to be
determined in the trial of the criminal cases.
The presumption of negligence was raised against petitioner. It was petitioner's burden to overcome it. Thus, contrary to her
assertion, private respondent need not introduce any evidence to prove her negligence. Her own failure to adduce sufficient
proof of extraordinary diligence made the presumption conclusive against her.
Having affirmed the findings of the respondent Court on the substantial issues involved, We find no reason to disturb the
conclusion that the motion to lift/dissolve the writ of preliminary attachment has been rendered moot and academic by the
decision on the merits.
In the light of the foregoing analysis, it is our opinion that the petitioner's claim cannot be sustained. The petition is
DISMISSED and the decision of the Court of Appeals is hereby AFFIRMED.
SO ORDERED.
JOSE SON, plaintiff-appellee,
vs.
CEBU AUTOBUS COMPANY, defendant-appellant.
The plaintiff, Jose Son, instituted in the Court of First Instituted of Cebu Autobus Company, damages in the total sum of
P2,660, alleged to have been suffered by the plaintiff as a result of the fact that the defendant's TPU truck No. 312 fell into
a canal in the barrio of Macaas, municipality of Catmon, Cebu, on September 18, 1948, due to a defect of its engine or to the
negligence of its driver, the plaintiff (then a passenger of the vehicle) having received serious injuries and two of his hogs
(loaded therein) having been killed. The defense set up by the defendant is that the accident was caused by events which
were unforeseen or, even if foreseen or, even if foreseen, were inevitable. After trial the court rendered a decision, sentencing
the defendant to pay to the plaintiff the sum of P2,000 as moral damages, and the sum of P286.80 as plaintiff's actual
expenses, together with his loss and unrealized profit in connection with the seven hogs loaded by the plaintiff in defendant's
truck. From this decision the defendant has appealed.
As the defendant has elevated the case directly to this Court on questions of law, we are bound by the findings of fact
contained in the appealed decision. We quote hereunder the conclusions pertinent to and decisive of the present appeal:
The evidence adduced conclusively shows that TPU-Truck No. 312 of the defendant Cebu Autobus Company left Cebu City
on September 17, 1948, at about 10:00 a.m. bound for Maya, municipality of Daan Bantayan, Cebu Province, arriving in the
latter place at about 5:00 p.m. of the same day. it passed the night in Maya. It left Maya, Daan Bantayan, Cebu, on its return
trip to Cebu City at about 4:00 a.m. September 18, 1948, without having been inspected or examined by the mechanic. The
plaintiff boarded defendant's truck in barrio Maya. Daan Bantayan, Cebu, and loaded seven hogs for his home at Yati Liloan,
Cebu, paying the usual fare and freight. The plaintiff did not reach his destination safely, because the truck of the defendant
fell into a canal at kilometer. No. 56, barrio of Macaas, municipality of Catmon, Cebu. He was pinned down or pressed by
the truck on September 18, 1948, and, as a consequence, he suffered complete fractures on his pelvic bone. Because of the
shock and pain he lost his consciousness for sometime. He was brought to his house at Yati, municipality of Liloan, Cebu,
unconscious on board another truck. Later, on the same day, he was brought in a special wagon to the City of Cebu, and was
confined in the Velez Clinic for fourteen days, from September 18, 1948, to October 2, 1948. On October 2, 1948, the
plaintiff went out of the Velez Clinic, but according to Dr. Jacinto Velez, physician and proprietor of the Velez Clinic, the
plaintiff needed 60 days more of treatment and rest before he could resume his former habitual work, inasmuch as he suffered
complete fractures on his pelvic bone.
The evidence further shows that two hogs of the plaintiff loaded on TPU truck No. 312 of the defendant on September 18,
1948 died when the said truck fell into a canal at Macaas, Catmon, Cebu.
xxx xxx xxx
The theory of the defendant is that the accident was unforeseen, or even if foreseen, was inevitable. This theory cannot be
sustained. Whether the accident was caused by the defect of the engine of the truck of the defendant, or by the negligence of
the driver, or by the breakage of the drag-link spring, the defendant is civilly liable to the plaintiff for the damages suffered
by him. The evidence shows the drag-link spring of the truck in question was not inspected or examined when it left Maya,
Daan Bantayan, Cebu, on September 1, 1948, for Cebu City. If it were inspected or examined, the accident might have been
avoided. The plaintiff had no means of avoiding the danger or escaping the injury. When he boarded at dawn of September
18, 1948, in Maya, Daan Bantayan. Cebu, defendant's TPU Truck No. 312, bound for his home at Yati Liloan, Cebu, and
loaded on said truck seven hogs, he had every right to presume the truck perfectly in good condition which could transport
him safely and securely to his destination. He paid the regular fare and the freight of the seven hogs.
The plaintiff is suing the defendant upon its contract of carriage which the latter had failed to perform by virtue of its failure
to safely carry the plaintiff to his destination at the barrio of Yati, Liloan, Cebu, as distinguished from an action based on
culpa acquiliana under which it is necessary, in order to recover damages, to prove fault or negligence on the part of the
carrier. The distinction is clearly set out in the case of Castro vs. Acro Taxicab Co.,* 46 Off. Gaz., 2023, as follows: "La
culpa aquiliana determina y engendra la responsabilidad y por eso es sustantiva, independiente; mientras que la culpa
contractual presupone la preexistencia de una obligacion, por tanto es solo incidental — es decir, la infraccion o
incumplimiento de esa obligacion es lo que genera la culpa contractual. Una implicacion o consecuencia caracteristica de la
diferencia entre ambos conceptos juridicos es que, tratandose de la culpa extracontractual o aquiliana, el demandante que
reclame indemnizacion de daños y perjuicios tiene que probar, como requisito indispensable para que prospere su accion, la
culpa o negligencia del demandado, mientras que, tratandose de la culpa contractual, es bastante que se prueba la existencia
del contrato y que la obligacion resultante del mismo se ha infringido o no se ha cumplido, siguiendose daños de esta
infraccion e incumplimiento."
The trial court based its decision in favor of the plaintiff upon the finding that the defendant had defaulted in its contract of
carriage due to the accident, regardless of whether it was caused by a defect of the engine of the defendant's truck, by the
negligence of its driver, or by the breakage of the drag-link spring; the evidence showing that the said drag-link spring was
not inspected or examined when the vehicle left Maya, Daan Bantayan, Cebu, for Cebu City. In other words, the trial court
overruled the defense interposed by the defendant that the accident was due to an event (unexpected breakage of the drag-
link spring) which could not be foreseen or which, even if foreseen, was inevitable. In our opinion, the trial court was correct.
Its express finding as to the cause of the accident in effect blames the defendant for it and logically rejects the defendant's
theory that the cause emanated from an unforeseen or inevitable event. In essence, the trial court held that the drag-link spring
of the truck in question was defective. In the case of Lazam vs. Smith, 45 Phil., 660, it was already held that an accident
cause either by defects in the automobile or through the negligence of its driver is not a caso fortuito.
The conclusion of the trial court with respect to the amount of damages sustained by and award in favor of the plaintiff, is
being factual, conclusive herein, since, as hereinbefore noted, the defendant has appealed directly to this court solely on
questions of law.
Upon the other hand, plaintiff's claim that the amount of moral damages awarded to him by the trial court should be raised
to P300, cannot be sustained, because no appeal was taken by him from the decision a quo.
Wherefore, the appealed decision is affirmed and it is so ordered with costs against the defendant-appellant.
ROBERTO JUNTILLA, petitioner,
vs.
CLEMENTE FONTANAR, FERNANDO BANZON and BERFOL CAMORO, respondents.
This is a petition for review, on questions of law, of the decision of the Court of First Instance of Cebu which reversed the
decision of the City Court of Cebu and exonerated the respondents from any liability arising from a vehicular accident.
The background facts which led to the filing of a complaint for breach of contract and damages against the respondents are
summarized by the Court of First Instance of Cebu as follows:
The facts established after trial show that the plaintiff was a passenger of the public utility jeepney bearing plate No. PUJ-
71-7 on the course of the trip from Danao City to Cebu City. The jeepney was driven by defendant Berfol Camoro. It was
registered under the franchise of defendant Clemente Fontanar but was actually owned by defendant Fernando Banzon. When
the jeepney reached Mandaue City, the right rear tire exploded causing the vehicle to turn turtle. In the process, the plaintiff
who was sitting at the front seat was thrown out of the vehicle. Upon landing on the ground, the plaintiff momentarily lost
consciousness. When he came to his senses, he found that he had a lacerated wound on his right palm. Aside from this, he
suffered injuries on his left arm, right thigh and on his back. (Exh. "D"). Because of his shock and injuries, he went back to
Danao City but on the way, he discovered that his "Omega" wrist watch was lost. Upon his arrival in Danao City, he
immediately entered the Danao City Hospital to attend to his injuries, and also requested his father-in-law to proceed
immediately to the place of the accident and look for the watch. In spite of the efforts of his father-in-law, the wrist watch,
which he bought for P 852.70 (Exh. "B") could no longer be found.
xxx xxx xxx
Petitioner Roberto Juntilla filed Civil Case No. R-17378 for breach of contract with damages before the City Court of Cebu
City, Branch I against Clemente Fontanar, Fernando Banzon and Berfol Camoro.
The respondents filed their answer, alleging inter alia that the accident that caused losses to the petitioner was beyond the
control of the respondents taking into account that the tire that exploded was newly bought and was only slightly used at the
time it blew up.
After trial, Judge Romulo R. Senining of the Civil Court of Cebu rendered judgment in favor of the petitioner and against
the respondents. The dispositive portion of the decision reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendants and the latter are hereby
ordered, jointly and severally, to pay the plaintiff the sum of P750.00 as reimbursement for the lost Omega wrist watch, the
sum of P246.64 as unrealized salary of the plaintiff from his employer, the further sum of P100.00 for the doctor's fees and
medicine, an additional sum of P300.00 for attorney's fees and the costs.
The respondents appealed to the Court of First Instance of Cebu, Branch XIV.
Judge Leonardo B. Canares reversed the judgment of the City Court of Cebu upon a finding that the accident in question was
due to a fortuitous event. The dispositive portion of the decision reads:
WHEREFORE, judgment is hereby rendered exonerating the defendants from any liability to the plaintiff without
pronouncement as to costs.
A motion for reconsideration was denied by the Court of First Instance.
The petitioner raises the following alleged errors committed by the Court of First Instance of Cebu on appeal—
a. The Honorable Court below committed grave abuse of discretion in failing to take cognizance of the fact that defendants
and/or their employee failed to exercise "utmost and/or extraordinary diligence" required of common carriers contemplated
under Art. 1755 of the Civil Code of the Philippines.
b. The Honorable Court below committed grave abuse of discretion by deciding the case contrary to the doctrine laid down
by the Honorable Supreme Court in the case of Necesito et al. v. Paras, et al.
We find the petition impressed with merit.
The City Court and the Court of First Instance of Cebu found that the right rear tire of the passenger jeepney in which the
petitioner was riding blew up causing the vehicle to fall on its side. The petitioner questions the conclusion of the respondent
court drawn from this finding of fact.
The Court of First Instance of Cebu erred when it absolved the carrier from any liability upon a finding that the tire blow out
is a fortuitous event. The Court of First Instance of Cebu ruled that:
After reviewing the records of the case, this Court finds that the accident in question was due to a fortuitous event. A tire
blow-out, such as what happened in the case at bar, is an inevitable accident that exempts the carrier from liability, there
being absence of a showing that there was misconduct or negligence on the part of the operator in the operation and
maintenance of the vehicle involved. The fact that the right rear tire exploded, despite being brand new, constitutes a clear
case of caso fortuito which can be a proper basis for exonerating the defendants from liability. ...
The Court of First Instance relied on the ruling of the Court of Appeals in Rodriguez v. Red Line Transportation Co., CA
G.R. No. 8136, December 29, 1954, where the Court of Appeals ruled that:
A tire blow-out does not constitute negligence unless the tire was already old and should not have been used at all. Indeed,
this would be a clear case of fortuitous event.
The foregoing conclusions of the Court of First Instance of Cebu are based on a misapprehension of overall facts from which
a conclusion should be drawn. The reliance of the Court of First Instance on the Rodriguez case is not in order. In La Mallorca
and Pampanga Bus Co. v. De Jesus, et al. (17 SCRA 23), we held that:
Petitioner maintains that a tire blow-out is a fortuitous event and gives rise to no liability for negligence, citing the rulings of
the Court of Appeals in Rodriguez v. Red Line Transportation Co., CA G.R. No. 8136, December 29, 1954, and People v.
Palapad, CA-G.R. No. 18480, June 27, 1958. These rulings, however, not only are not binding on this Court but were based
on considerations quite different from those that obtain in the case at bar. The appellate court there made no findings of any
specific acts of negligence on the part of the defendants and confined itself to the question of whether or not a tire blow-out,
by itself alone and without a showing as to the causative factors, would generate liability. ...
In the case at bar, there are specific acts of negligence on the part of the respondents. The records show that the passenger
jeepney turned turtle and jumped into a ditch immediately after its right rear tire exploded. The evidence shows that the
passenger jeepney was running at a very fast speed before the accident. We agree with the observation of the petitioner that
a public utility jeep running at a regular and safe speed will not jump into a ditch when its right rear tire blows up. There is
also evidence to show that the passenger jeepney was overloaded at the time of the accident. The petitioner stated that there
were three (3) passengers in the front seat and fourteen (14) passengers in the rear.
While it may be true that the tire that blew-up was still good because the grooves of the tire were still visible, this fact alone
does not make the explosion of the tire a fortuitous event. No evidence was presented to show that the accident was due to
adverse road conditions or that precautions were taken by the jeepney driver to compensate for any conditions liable to cause
accidents. The sudden blowing-up, therefore, could have been caused by too much air pressure injected into the tire coupled
by the fact that the jeepney was overloaded and speeding at the time of the accident.
In Lasam v. Smith (45 Phil. 657), we laid down the following essential characteristics of caso fortuito:
xxx xxx xxx
... In a legal sense and, consequently, also in relation to contracts, a caso fortuito presents the following essential
characteristics: (1) The cause of the unforeseen and unexpected occurrence, or of the failure of the debtor to comply with his
obligation, must be independent of the human will. (2) It must be impossible to foresee the event which constitutes the caso
fortuito, or if it can be foreseen, it must be impossible to avoid. (3) The occurrence must be such as to render it impossible
for the debtor to fulfill his obligation in a normal manner. And (4) the obligor (debtor) must be free from any participation
in the aggravation of the injury resulting to the creditor. (5 Encyclopedia Juridica Espanola, 309.)
In the case at bar, the cause of the unforeseen and unexpected occurrence was not independent of the human will. The accident
was caused either through the negligence of the driver or because of mechanical defects in the tire. Common carriers should
teach their drivers not to overload their vehicles, not to exceed safe and legal speed limits, and to know the correct measures
to take when a tire blows up thus insuring the safety of passengers at all times. Relative to the contingency of mechanical
defects, we held in Necesito, et al. v. Paras, et al. (104 Phil. 75), that:
... The preponderance of authority is in favor of the doctrine that a passenger is entitled to recover damages from a carrier
for an injury resulting from a defect in an appliance purchased from a manufacturer, whenever it appears that the defect
would have been discovered by the carrier if it had exercised the degree of care which under the circumstances was incumbent
upon it, with regard to inspection and application of the necessary tests. For the purposes of this doctrine, the manufacturer
is considered as being in law the agent or servant of the carrier, as far as regards the work of constructing the appliance.
According to this theory, the good repute of the manufacturer will not relieve the carrier from liability' (10 Am. Jur. 205, s,
1324; see also Pennsylvania R. Co. v. Roy, 102 U.S. 451; 20 L. Ed. 141; Southern R. Co. v. Hussey, 74 ALR 1172; 42 Fed.
2d 70; and Ed Note, 29 ALR 788.: Ann. Cas. 1916E 929).
The rationale of the carrier's liability is the fact that the passenger has neither choice nor control over the carrier in the
selection and use of the equipment and appliances in use by the carrier. Having no privity whatever with the manufacturer
or vendor of the defective equipment, the passenger has no remedy against him, while the carrier usually has. It is but logical,
therefore, that the carrier, while not an insurer of the safety of his passengers, should nevertheless be held to answer for the
flaws of his equipment if such flaws were at all discoverable. ...
It is sufficient to reiterate that the source of a common carrier's legal liability is the contract of carriage, and by entering into
the said contract, it binds itself to carry the passengers safely as far as human care and foresight can provide, using the utmost
diligence of a very cautious person, with a due regard for all the circumstances. The records show that this obligation was
not met by the respondents.
The respondents likewise argue that the petitioner cannot recover any amount for failure to prove such damages during the
trial. The respondents submit that if the petitioner was really injured, why was he treated in Danao City and not in Mandaue
City where the accident took place. The respondents argue that the doctor who issued the medical certificate was not
presented during the trial, and hence not cross-examined. The respondents also claim that the petitioner was not wearing any
wrist watch during the accident.
It should be noted that the City Court of Cebu found that the petitioner had a lacerated wound on his right palm aside from
injuries on his left arm, right thigh and on his back, and that on his way back to Danao City, he discovered that his "Omega"
wrist watch was lost. These are findings of facts of the City Court of Cebu which we find no reason to disturb. More so when
we consider the fact that the Court of First Instance of Cebu impliedly concurred in these matters when it confined itself to
the question of whether or not the tire blow out was a fortuitous event.
WHEREFORE, the decision of the Court of First Instance of Cebu, Branch IV appealed from is hereby REVERSED and
SET ASIDE, and the decision of the City Court of Cebu, Branch I is REINSTATED, with the modification that the damages
shall earn interest at 12% per annum and the attorney's fees are increased to SIX HUNDRED PESOS (P600.00). Damages
shall earn interests from January 27, 1975.
SO ORDERED.
FORTUNE EXPRESS, INC., petitioner,
vs.
COURT OF APPEALS, PAULIE U.CAORONG, and minor children YASSER KING CAORONG, ROSE HEINNI
and PRINCE ALEXANDER, all surnamed CAORONG, and represented by their mother PAULIE U. CAORONG,
respondents.
This is an appeal by petition for review on certiorari of the decision, dated July 29, 1994, of the Court of Appeals, which
reversed the decision of the Regional Trial Court, Branch VI, Iligan City. The aforesaid decision of the trial court dismissed
the complaint of public respondents against petitioner for damages for breach of contract of carriage filed on the ground that
petitioner had not exercised the required degree of diligence in the operation of one of its buses. Atty. Talib Caorong, whose
heirs are private respondents herein, was a passenger of the bus and was killed in the ambush involving said bus.
The facts of the instant case are as follows:
Petitioner is a bus company in northern Mindanao. Private respondent Paulie Caorong is the widow of Atty. Caorong, while
private respondents Yasser King, Rose Heinni, and Prince Alexander are their minor children.
On November 18, 1989, a bus of petitioner figured in an accident with a jeepney in Kauswagan, Lanao del Norte, resulting
in the death of several passengers of the jeepney, including two Maranaos. Crisanto Generalao, a volunteer field agent of the
Constabulary Regional Security Unit No. X, conducted an investigation of the accident. He found that the owner of the
jeepney was a Maranao residing in Delabayan, Lanao del Norte and that certain Maranaos were planning to take revenge on
the petitioner by burning some of its buses. Generalao rendered a report on his findings to Sgt. Reynaldo Bastasa of the
Philippine Constabulary Regional Headquarters at Cagayan de Oro. Upon the instruction of Sgt. Bastasa, he went to see
Diosdado Bravo, operations manager of petitioner, its main office in Cagayan de Oro City. Bravo assured him that the
necessary precautions to insure the safety of lives and property would be taken.1
At about 6:45 P.M. on November 22, 1989, three armed Maranaos who pretended to be passengers, seized a bus of petitioner
at Linamon, Lanao del Norte while on its way to Iligan City. Among the passengers of the bus was Atty. Caorong. The leader
of the Maranaos, identified as one Bashier Mananggolo, ordered the driver, Godofredo Cabatuan, to stop the bus on the side
of the highway. Mananggolo then shot Cabatuan on the arm, which caused him to slump on the steering wheel. The one of
the companions of Mananggolo started pouring gasoline inside the bus, as the other held the passenger at bay with a handgun.
Mananggolo then ordered the passenger to get off the bus. The passengers, including Atty. Caorong, stepped out of the bus
and went behind the bushes in a field some distance from the highway.2
However, Atty. Caorong returned to the bus to retrieve something from the overhead rack. at that time, one of the armed men
was pouring gasoline on the head of the driver. Cabatuan, who had meantime regained consciousness, heard Atty. Caorong
pleading with the armed men to spare the driver as he was innocent of any wrong doing and was only trying to make a living.
The armed men were, however, adamant as they repeated the warning that they were going to burn the bus along with its
driver. During this exchange between Atty. Caorong and the assailants, Cabatuan climbed out of the left window of the bus
and crawled to the canal on the opposite side of the highway. He heard shots from inside the bus. Larry de la Cruz, one of
the passengers, saw that Atty. Caorong was hit. Then the bus was set on fire. Some of the passengers were able to pull Atty.
Caorong out of the burning bus and rush him to the Mercy Community Hospital in Iligan City, but he died while undergoing
operation.3
The private respondents brought this suit for breach of contract of carriage in the Regional Trial Court, Branch VI, Iligan
City. In its decision, dated December 28, 1990, the trial court dismissed the complaint, holding as follows:
The fact that defendant, through Operations Manager Diosdado Bravo, was informed of the "rumors" that the Moslems
intended to take revenge by burning five buses of defendant is established since the latter also utilized Crisanto Generalao as
a witness. Yet despite this information, the plaintiffs charge, defendant did not take proper precautions. . . . Consequently,
plaintiffs now fault the defendant for ignoring the report. Their position is that the defendant should have provided its buses
with security guards. Does the law require common carriers to install security guards in its buses for the protection and safety
of its passengers? Is the failure to post guards on omission of the duty to "exercise the diligence of a good father of the
family" which could have prevented the killing of Atty. Caorong? To our mind, the diligence demanded by law does not
include the posting of security guard in buses. It is an obligation that properly belongs to the State. Besides, will the presence
of one or two security guards suffice to deter a determined assault of the lawless and thus prevent the injury complained of?
Maybe so, but again, perhaps not. In other words, the presence of a security guard is not a guarantee that the killing of Atty.
Caorong would have been definitely avoided.
xxx xxx xxx
Accordingly, the failure of defendant to accord faith and credit to the report of Mr. Generalao and the fact that it did not
provide security to its buses cannot, in the light of the circumstances, be characterized as negligence.
Finally, the evidence clearly shows that the assalants did not have the least intention of the harming any of the passengers.
They ordered all the passengers to alight and set fire on the bus only after all the passengers were out of danger. The death
of Atty. Caorong was an unexpected and unforseen occurrense over which defendant had no control. Atty. Caorong
performed an act of charity and heroism in coming to the succor of the driver even in the face of danger. He deserves the
undying gratitude of the driver whose life he saved. No one should blame him for an act of extraordinary charity and altruism
which cost his life. But neither should any blame be laid on the doorstep of defendant. His death was solely due to the willfull
acts of the lawless which defendant could neither prevent nor to stop.
WHEREFORE, in view of the foregoing, the complaint is hereby dismissed. For lack of merit, the counter-claim is likewise
dismissed. No costs.4
On appeal, however, the Court of Appeals reversed. It held:
In the case at bench, how did defendant-appellee react to the tip or information that certain Maranao hotheads were planning
to burn five of its buses out of revenge for the deaths of two Maranaos in an earlier collision involving appellee's bus? Except
for the remarks of appellee's operations manager that "we will have our action . . . . and I'll be the one to settle it personally,"
nothing concrete whatsoever was taken by appellee or its employees to prevent the execution of the threat. Defendant-
appellee never adopted even a single safety measure for the protection of its paying passengers. Were there available
safeguards? Of course, there were: one was frisking passengers particularly those en route to the area where the threats were
likely to be carried out such as where the earlier accident occurred or the place of influence of the victims or their locality. If
frisking was resorted to, even temporarily, . . . . appellee might be legally excused from liabilty. Frisking of passengers picked
up along the route could have been implemented by the bus conductor; for those boarding at the bus terminal, frisking could
have been conducted by him and perhaps by additional personnel of defendant-appellee. On hindsight, the handguns and
especially the gallon of gasoline used by the felons all of which were brought inside the bus would have been discovered,
thus preventing the burning of the bus and the fatal shooting of the victim.
Appellee's argument that there is no law requiring it to provide guards on its buses and that the safety of citizens is the duty
of the government, is not well taken. To be sure, appellee is not expected to assign security guards on all its buses; if at all,
it has the duty to post guards only on its buses plying predominantly Maranaos areas. As discussed in the next preceding
paragraph, least appellee could have done in response to the report was to adopt a system of verification such as the frisking
of passengers boarding at its buses. Nothing, and no repeat, nothing at all, was done by defendant-appellee to protect its
innocent passengers from the danger arising from the "Maranao threats." It must be observed that frisking is not a novelty as
a safety measure in our society. Sensitive places — in fact, nearly all important places — have applied this method of security
enhancement. Gadgets and devices are avilable in the market for this purpose. It would not have weighed much against the
budget of the bus company if such items were made available to its personnel to cope up with situations such as the "Maranaos
threats."
In view of the constitutional right to personal privacy, our pronouncement in this decision should not be construed as an
advocacy of mandatory frisking in all public conveyances. What we are saying is that given the circumstances obtaining in
the case at bench that: (a) two Maranaos died because of a vehicular collision involving one of appellee's vehicles; (b)
appellee received a written report from a member of the Regional Security Unit, Constabulary Security Group, that the
tribal/ethnic group of the two deceased were planning to burn five buses of appellee out of revenge; and (c) appelle did
nothing — absolutely nothing — for the safety of its passengers travelling in the area of influence of the victims, appellee
has failed to exercise the degree of dilegence required of common carriers. Hence, appellee must be adjudge liable.
xxx xxx xxx
WHEREFORE the decision appealed from is hereby REVERSED and another rendered ordering defendant-appellee to pay
plaintiffs-appellants the following:
1) P3,399,649.20 as death indemnity;
2) P50,000.00 and P500.00 per appearance as attorney's fee and
Costs against defendant-appellee.5
Hence, this appeal. Petitioner contends:
(A) THAT PUBLIC RESPONDENT ERRED IN REVERSING THE DECISION OF THE REGIONAL TRIAL COURT
DATED DECEMBER 28, 1990 DISMISSING THE COMPLAINT AS WELL AS THE COUNTERCLAIM, AND
FINDING FOR PRIVATE RESPONDENTS BY ORDERING PETITIONER TO PAY THE GARGANTUAN SUM OF
P3,449,649.20 PLUS P500.00 PER APPEARANCE AS ATTORNEY'S FEES, AS WELL AS DENYING PETITIONERS
MOTION FRO RECONSIDERATION AND THE SUPPLEMENT TO SAID MOTION, WHILE HOLDING, AMONG
OTHERS, THAT THE PETITIONER BREACHED THE CONTRACT OF THE CARRIAGE BY ITS FAILURE TO
EXCERCISE THE REQUIRED DEGREE OF DILIGENCE;
(B) THAT THE ACTS OF THE MARANAO OUTLAWS WERE SO GRAVE, IRRESISTABLE, VIOLENT, AND
FORCEFULL, AS TO BE REGARDED AS CASO FORTUITO; AND
(C) THAT PUBLIC RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN HOLDING THAT PETITIONER
COULD HAVE PROVIDED ADEQUATE SECURITY IN PREDOMINANTLY MUSLIM AREAS AS PART OF ITS
DUTY TO OBSERVE EXTRA-ORDINARY DILIGENCE AS A COMMON CARRIER.
The instant has no merit.
First. Petitioner's Breach of the Contract of Carriage.
Art. 1763 of the Civil Code provides that a common carrier is responsible for injuries suffered by a passenger on account of
wilfull acts of other passengers, if the employees of the common carrier could have prevented the act through the exercise of
the diligence of a good father of a family. In the present case, it is clear that because of the negligence of petitioner's
employees, the seizure of the bus by Mananggolo and his men was made possible.
Despite warning by the Philippine Constabulary at Cagayan de Oro that the Maranaos were planning to take revenge on the
petitioner by burning some of its buses and the assurance of petitioner's operation manager, Diosdado Bravo, that the
necessary precautions would be taken, petitioner did nothing to protect the safety of its passengers.
Had petitioner and its employees been vigilant they would not have failed to see that the malefactors had a large quantity of
gasoline with them. Under the circumstances, simple precautionary measures to protect the safety of passengers, such as
frisking passengers and inspecting their baggages, preferably with non-intrusive gadgets such as metal detectors, before
allowing them on board could have been employed without violating the passenger's constitutional rights. As this Court
amended in Gacal v. Philippine Air Lines, Inc., 6 a common carrier can be held liable for failing to prevent a hijacking by
frisking passengers and inspecting their baggages.
From the foregoing, it is evident that petitioner's employees failed to prevent the attack on one of petitioner's buses because
they did not exercise the diligence of a good father of a family. Hence, petitioner should be held liable for the death of Atty.
Caorong.
Second. Seizure of Petitioner's Bus not a Case of Force Majeure
The petitioner contends that the seizure of its bus by the armed assailants was a fortuitous event for which it could not be
held liable.
Art. 1174 of the Civil Code defines a fortuitous event as an occurence which could not be foreseen, is inevitable. In Yobido
v. Court of Appeals, 7 we held that to considered as force majeure, it is necessary that (1) the cause of the breach of the
obligation must be independent of the human will; (2) the event must be either unforeseeable or unavoidable; (3) the
occurence must be render it impossible for the debtor to fulfill the obligation in a normal manner; and (4) the obligor must
be free of participation in, or aggravation of, the injury to the creditor. The absence of any of the requisites mentioned above
would prevent the obligor from being excused from liability.
Thus, in Vasquez v. Court of Appeals, 8 it was held that the common carrier was liable for its failure to take the necessary
precautions against an approaching typhoon, of which it was warned, resulting in the loss of the lives of several passengers.
The event was forseeable, and, thus, the second requisite mentioned above was not fulfilled. This ruling applies by analogy
to the present case. Despite the report of PC agent Generalao that the Maranaos were going to attack its buses, petitioner took
no steps to safeguard the lives and properties of its passengers. The seizure of the bus of the petitioner was foreseeable and,
therefore, was not a fortuitous event which would exempt petitioner from liabilty.
Petitioner invokes the ruling in Pilapil v. Court of Appeals, 9 and De Guzman v. Court of Appeals, 10 in support of its
contention that the seizure of its bus by the assailants constitutes force majeure. In Pilapil v. Court of Appeals, 11 it was held
that a common carrier is not liable for failing to install window grills on its buses to protect the passengers from injuries
cause by rocks hurled at the bus by lawless elements. On the other hand, in De Guzman v. Court of Appeals, 12 it was ruled
that a common carriers is not responsible for goods lost as a result of a robbery which is attended by grave or irresistable
threat, violence, or force.
It is clear that the cases of Pilapil and De Guzman do not apply to the prensent case. Art. 1755 of the Civil Code provides
that "a common carrier is bound to carry the passengers as far as human care and foresight can provide, using the utmost
diligence of very cautious persons, with due regard for all the circumstances." Thus, we held in Pilapil and De Guzman that
the respondents therein were not negligent in failing to take special precautions against threats to the safety of passengers
which could not be foreseen, such as tortious or criminal acts of third persons. In the present case, this factor of
unforeseeability (the second requisite for an event to be considered force majeure) is lacking. As already stated, despite the
report of PC agent Generalao that the Maranaos were planning to burn some of petitioner's buses and the assurance of
petitioner's operation manager (Diosdado Bravo) that the necessary precautions would be taken, nothing was really done by
petitioner to protect the safety of passengers.
Third. Deceased not Guilty of Contributory Negligence
The petitioner contends that Atty. Caorong was guilty of contributory negligence in returning to the bus to retrieve something.
But Atty. Caorong did not act recklessly. It should be pointed out that the intended targets of the violence were petitioners
and its employees, not its passengers. The assailant's motive was to retaliate for the loss of life of two Maranaos as a result
of the collision between petitioner's bus and the jeepney in which the two Maranaos were riding. Mananggolo, the leader of
the group which had hijacked the bus, ordered the passengers to get off the bus as they intended to burn it and its driver. The
armed men actually allowed Atty. Caorong to retrieve something from the bus. What apparently angered them was his attempt
to help the driver of the bus by pleading for his life. He was playing the role of the good Samaritan. Certainly, this act cannot
considered an act of negligence, let alone recklessness.
Fourth. Petitioner Liable to Private Respaondents for Damages
We now consider the question of damages that the heirs of Atty. Caorong, private respondents herein, are entitled to recover
from the petitioner.
Indemnity for Death. Art. 1764 of the Civil Code, in relation to Art. 2206 thereof, provides for the payment of indemnity for
the death of passengers caused by the breach of contract of carriage by a common carrier. Initially fixed in Art. 2206 at
P3,000.00, the amount of the said indemnity for death has through the years been gradually increased in view of the declining
value of the peso. It is presently fixed at P50,000.00. 13 Private respondents are entitled to this amount.
Actual Damages. Art. 2199 provides that "except as provided by law or by stipulation, one is entitled to an adequate
compensation only for such pecuniary loss suffered by him as has duly proved." The trial court found that the private
respondents spent P30,000.00 for the wake and burial of Atty. Caorong. 14 Since petitioner does not question this finding of
the trial court, it is liable to private respondent in the said amount as actual damages.
Moral Damages. Under Art. 2206, the "spouse, legitimate and illegitimate descendants and ascendants of the deceased may
demand moral damages for mental anguish by reason of the death of the deceased." The trial court found that private
respondent Paulie Caorong suffered pain from the death of her husband and worry on how to provide support for their minor
children, private respondents Yasser King, Rose Heinni, and Prince Alexander. 15 The petitioner likewise does not question
this finding of the trial court. Thus, in accordance with recent decisions of this Court, 16 we hold that the petitioner is liable
to the private respondents in the amount of P100,000.00 as moral damages for the death of Atty. Caorong.
Exemplary Damages. Art. 2232 provides that "in contracts and quasi-contracts, the court may award exemplary damages if
the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent reckless manner." In the present case, the
petitioner acted in a wanton and reckless manner. Despite warning that the Maranaos were planning to take revenge against
the petitioner by burning some of its buses, and contary to the assurance made by its operations manager that the necessary
precautions would be take, the petitioner and its employees did nothing to protect the safety of passengers. Under the
circumtances, we deem it reasonable to award private respondents exemplary damages in the amount of P100,000.00.17
Attorney's Fees. Pursuant to Art. 2208, attorney's fees may be recovered when, as in the instant case, exemplary damages are
awarded. In the recent case of Sulpicio Lines, Inc. v. Court of Appeals, 18 we held an award of P50,000.00 as attorney's fees
to be reasonable. Hence, the private respondents are entitled to attorney's fees in that amount.
Compensation for Loss of Earning Capacity. Art. 1764 of the Civil Code, in relation to Art. 2206 thereof, provides that in
addition to the indemnity for death arising from the breach of contrtact of carriage by a common carrier, the "defendant shall
be liable for the loss of the earning capacity of the deceased, and the indemnity shall be paid to the heirs of the latter." The
formula established in decided cases for computing net earning capacity is as follows:19
Gross Necessary
Net Earning = Life x Annual — Living
Capacity Expectancy Income Expenses
Life expectancy is equivalent to two thirds (2/3) multiplied by the difference of eighty (80) and the age of the deceased. 20
Since Atty. Caorong was 37 years old at that time of his death, 21 he had a life expectancy of 28 2/3 more years.22 His
projected gross annual income, computed based on his monthly salary of P11,385.00. 23 as a lawyer in the Department of
Agrarian Reform at the time of his death, was P148,005.00. 24 Allowing for necessary living expenses of fifty percent (50%)
25 of his projected gross annual income, his total earning capacity amounts to P2,121,404.90. 26 Hence, the petitioner is
liable to the private respondents in the said amount as a compensation for loss of earning capacity.
WHEREFORE, the decision, dated July 29, 1994, of the Court of Appeals is hereby AFFIRMED with the MODIFICATION
that petitioner Fortune Express, Inc. is ordered to pay the following amounts to private respondents Paulie, Yasser King,
Rose Heinni, and Prince Alexander Caorong:
1. death indemnity in the amount of fifty thousand pesos (P50,000.00);
2. actual damages in the amount of thirty thousand pesos (P30,000.00);
3. moral damages in the amount of one hundred thousand pesos (P100,000.00);
4. exemplary damages in the amount of one hundred thousand pesos (P100,000.00);
5. attorney's fees in the amount of fifty thousand pesos (P50,000.00);
6. compensation for loss of earning capacity in the amount of two million one hundred twenty-one thousand four hundred
four pesos and ninety centavos (P2,121,404.90); and
7. cost of suits.
SO ORDERED.
FRANKLIN G. GACAL and CORAZON M. GACAL, the latter assisted by her husband, FRANKLIN G. GACAL,
petitioners,
vs.
PHILIPPINE AIR LINES, INC., and THE HONORABLE PEDRO SAMSON C. ANIMAS, in his capacity as
PRESIDING JUDGE of the COURT OF FIRST INSTANCE OF SOUTH COTABATO, BRANCH I, respondents.
This is a, petition for review on certiorari of the decision of the Court of First Instance of South Cotabato, Branch 1, *
promulgated on August 26, 1980 dismissing three (3) consolidated cases for damages: Civil Case No. 1701, Civil Case No.
1773 and Civil Case No. 1797 (Rollo, p. 35).
The facts, as found by respondent court, are as follows:
Plaintiffs Franklin G. Gacal and his wife, Corazon M. Gacal, Bonifacio S. Anislag and his wife, Mansueta L. Anislag, and
the late Elma de Guzman, were then passengers boarding defendant's BAC 1-11 at Davao Airport for a flight to Manila, not
knowing that on the same flight, Macalinog, Taurac Pendatum known as Commander Zapata, Nasser Omar, Liling Pusuan
Radia, Dimantong Dimarosing and Mike Randa, all of Marawi City and members of the Moro National Liberation Front
(MNLF), were their co-passengers, three (3) armed with grenades, two (2) with .45 caliber pistols, and one with a .22 caliber
pistol. Ten (10) minutes after take off at about 2:30 in the afternoon, the hijackers brandishing their respective firearms
announced the hijacking of the aircraft and directed its pilot to fly to Libya. With the pilot explaining to them especially to
its leader, Commander Zapata, of the inherent fuel limitations of the plane and that they are not rated for international flights,
the hijackers directed the pilot to fly to Sabah. With the same explanation, they relented and directed the aircraft to land at
Zamboanga Airport, Zamboanga City for refueling. The aircraft landed at 3:00 o'clock in the afternoon of May 21, 1976 at
Zamboanga Airport. When the plane began to taxi at the runway, it was met by two armored cars of the military with machine
guns pointed at the plane, and it stopped there. The rebels thru its commander demanded that a DC-aircraft take them to
Libya with the President of the defendant company as hostage and that they be given $375,000 and six (6) armalites,
otherwise they will blow up the plane if their demands will not be met by the government and Philippine Air Lines.
Meanwhile, the passengers were not served any food nor water and it was only on May 23, a Sunday, at about 1:00 o'clock
in the afternoon that they were served 1/4 slice of a sandwich and 1/10 cup of PAL water. After that, relatives of the hijackers
were allowed to board the plane but immediately after they alighted therefrom, an armored car bumped the stairs. That
commenced the battle between the military and the hijackers which led ultimately to the liberation of the surviving crew and
the passengers, with the final score of ten (10) passengers and three (3) hijackers dead on the spot and three (3) hijackers
captured.
City Fiscal Franklin G. Gacal was unhurt. Mrs. Corazon M. Gacal suffered injuries in the course of her jumping out of the
plane when it was peppered with bullets by the army and after two (2) hand grenades exploded inside the plane. She was
hospitalized at General Santos Doctors Hospital, General Santos City, for two (2) days, spending P245.60 for hospital and
medical expenses, Assistant City Fiscal Bonifacio S. Anislag also escaped unhurt but Mrs. Anislag suffered a fracture at the
radial bone of her left elbow for which she was hospitalized and operated on at the San Pedro Hospital, Davao City, and
therefore, at Davao Regional Hospital, Davao City, spending P4,500.00. Elma de Guzman died because of that battle. Hence,
the action of damages instituted by the plaintiffs demanding the following damages, to wit:
Civil Case No. 1701 —
City Fiscal Franklin G. Gacal and Mrs. Corazon M. Gacal — actual damages: P245.60 for hospital and medical expenses of
Mrs Gacal; P8,995.00 for their personal belongings which were lost and not recovered; P50,000.00 each for moral damages;
and P5,000.00 for attorney's fees, apart from the prayer for an award of exemplary damages (Record, pp. 4-6, Civil Case No.
1701).
Civil Case No. 1773 —
xxx xxx xxx
Civil Case No. 1797 —
xxx xxx xxx
The trial court, on August 26, 1980, dismissed the complaints finding that all the damages sustained in the premises were
attributed to force majeure.
On September 12, 1980 the spouses Franklin G. Gacal and Corazon M. Gacal, plaintiffs in Civil Case No. 1701, filed a notice
of appeal with the lower court on pure questions of law (Rollo, p. 55) and the petition for review on certiorari was filed with
this Court on October 20, 1980 (Rollo, p. 30).
The Court gave due course to the petition (Rollo, p. 147) and both parties filed their respective briefs but petitioner failed to
file reply brief which was noted by the Court in the resolution dated May 3, 1982 (Rollo, p. 183).
Petitioners alleged that the main cause of the unfortunate incident is the gross, wanton and inexcusable negligence of
respondent Airline personnel in their failure to frisk the passengers adequately in order to discover hidden weapons in the
bodies of the six (6) hijackers. They claimed that despite the prevalence of skyjacking, PAL did not use a metal detector
which is the most effective means of discovering potential skyjackers among the passengers (Rollo, pp. 6-7).
Respondent Airline averred that in the performance of its obligation to safely transport passengers as far as human care and
foresight can provide, it has exercised the utmost diligence of a very cautious person with due regard to all circumstances,
but the security checks and measures and surveillance precautions in all flights, including the inspection of baggages and
cargo and frisking of passengers at the Davao Airport were performed and rendered solely by military personnel who under
appropriate authority had assumed exclusive jurisdiction over the same in all airports in the Philippines.
Similarly, the negotiations with the hijackers were a purely government matter and a military operation, handled by and
subject to the absolute and exclusive jurisdiction of the military authorities. Hence, it concluded that the accident that befell
RP-C1161 was caused by fortuitous event, force majeure and other causes beyond the control of the respondent Airline.
The determinative issue in this case is whether or not hijacking or air piracy during martial law and under the circumstances
obtaining herein, is a caso fortuito or force majeure which would exempt an aircraft from payment of damages to its
passengers whose lives were put in jeopardy and whose personal belongings were lost during the incident.
Under the Civil Code, common carriers are required to exercise extraordinary diligence in their vigilance over the goods and
for the safety of passengers transported by them, according to all the circumstances of each case (Article 1733). They are
presumed at fault or to have acted negligently whenever a passenger dies or is injured (Philippine Airlines, Inc. v. National
Labor Relations Commission, 124 SCRA 583 [1983]) or for the loss, destruction or deterioration of goods in cases other than
those enumerated in Article 1734 of the Civil Code (Eastern Shipping Lines, Inc. v. Intermediate Appellate Court, 150 SCRA
463 [1987]).
The source of a common carrier's legal liability is the contract of carriage, and by entering into said contract, it binds itself
to carry the passengers safely as far as human care and foresight can provide. There is breach of this obligation if it fails to
exert extraordinary diligence according to all the circumstances of the case in exercise of the utmost diligence of a very
cautious person (Isaac v. Ammen Transportation Co., 101 Phil. 1046 [1957]; Juntilla v. Fontanar, 136 SCRA 624 [1985]).
It is the duty of a common carrier to overcome the presumption of negligence (Philippine National Railways v. Court of
Appeals, 139 SCRA 87 [1985]) and it must be shown that the carrier had observed the required extraordinary diligence of a
very cautious person as far as human care and foresight can provide or that the accident was caused by a fortuitous event
(Estrada v. Consolacion, 71 SCRA 523 [1976]). Thus, as ruled by this Court, no person shall be responsible for those "events
which could not be foreseen or which though foreseen were inevitable. (Article 1174, Civil Code). The term is synonymous
with caso fortuito (Lasam v. Smith, 45 Phil. 657 [1924]) which is of the same sense as "force majeure" (Words and Phrases
Permanent Edition, Vol. 17, p. 362).
In order to constitute a caso fortuito or force majeure that would exempt a person from liability under Article 1174 of the
Civil Code, it is necessary that the following elements must concur: (a) the cause of the breach of the obligation must be
independent of the human will (the will of the debtor or the obligor); (b) the event must be either unforeseeable or
unavoidable; (c) the event must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner;
and (d) the debtor must be free from any participation in, or aggravation of the injury to the creditor (Lasam v. Smith, 45
Phil. 657 [1924]; Austria v. Court of Appeals, 39 SCRA 527 [1971]; Estrada v. Consolacion, supra; Vasquez v. Court of
Appeals, 138 SCRA 553 [1985]; Juan F. Nakpil & Sons v. Court of Appeals, 144 SCRA 596 [1986]). Caso fortuito or force
majeure, by definition, are extraordinary events not foreseeable or avoidable, events that could not be foreseen, or which,
though foreseen, are inevitable. It is, therefore, not enough that the event should not have been foreseen or anticipated, as is
commonly believed, but it must be one impossible to foresee or to avoid. The mere difficulty to foresee the happening is not
impossibility to foresee the same (Republic v. Luzon Stevedoring Corporation, 21 SCRA 279 [1967]).
Applying the above guidelines to the case at bar, the failure to transport petitioners safely from Davao to Manila was due to
the skyjacking incident staged by six (6) passengers of the same plane, all members of the Moro National Liberation Front
(MNLF), without any connection with private respondent, hence, independent of the will of either the PAL or of its
passengers.
Under normal circumstances, PAL might have foreseen the skyjacking incident which could have been avoided had there
been a more thorough frisking of passengers and inspection of baggages as authorized by R.A. No. 6235. But the incident in
question occurred during Martial Law where there was a military take-over of airport security including the frisking of
passengers and the inspection of their luggage preparatory to boarding domestic and international flights. In fact military
take-over was specifically announced on October 20, 1973 by General Jose L. Rancudo, Commanding General of the
Philippine Air Force in a letter to Brig. Gen. Jesus Singson, then Director of the Civil Aeronautics Administration (Rollo,
pp. 71-72) later confirmed shortly before the hijacking incident of May 21, 1976 by Letter of Instruction No. 399 issued on
April 28, 1976 (Rollo, p. 72).
Otherwise stated, these events rendered it impossible for PAL to perform its obligations in a nominal manner and obviously
it cannot be faulted with negligence in the performance of duty taken over by the Armed Forces of the Philippines to the
exclusion of the former.
Finally, there is no dispute that the fourth element has also been satisfied. Consequently the existence of force majeure has
been established exempting respondent PAL from the payment of damages to its passengers who suffered death or injuries
in their persons and for loss of their baggages.
PREMISES CONSIDERED, the petition is hereby DISMISSED for lack of merit and the decision of the Court of First
Instance of South Cotabato, Branch I is hereby AFFIRMED.
SO ORDERED.
ASIAN TERMINALS, INC., Petitioner,
vs.
SIMON ENTERPRISES, INC., Respondent.
Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, assailing the
Decision1 dated November 27, 2006 and Resolution2 dated March 23, 2007 of the Court of Appeals (CA) in CA-G.R. CV
No. 71210.
The facts are as follows:
On October 25, 1995, Contiquincy bunge Export Company loaded 6,843.700 metric tons of U.S. Soybean Meal in Bulk on
board the vessel MN "Sea Dream" at the Port of Darrow, Louisiana, U.S.A., for delivery to the Port of Manila to respondent
Simon Enterprises, Inc., as consignee. When the vessel arrived at the South Harbor in Manila, the shipment was discharged
to the receiving barges of petitioner Asian Terminals, Inc. (ATI), the arrastre operator. Respondent later received the
shipment but claimed having received only 6,825.144 metric tons of U.S. Soybean Meal, or short by 18.556 metric tons,
which is estimated to be worth US$7,100.16 or ₱186,743.20.3
On November 25, 1995, Contiquincy bunge Export Company made another shipment to respondent and allegedly loaded on
board the vessel M/V "Tern" at the Port of Darrow, Louisiana, U.S.A. 3,300.000 metric tons of U.S. Soybean Meal in Bulk
for delivery to respondent at the Port of Manila. The carrier issued its clean Berth Term Grain Bill of Lading. 4
On January 25, 1996, the carrier docked at the inner Anchorage, South Harbor, Manila. The subject shipment was discharged
to the receiving barges of petitioner ATI and received by respondent which, however, reported receiving only 3,100.137
metric tons instead of the manifested 3,300.000 metric tons of shipment. Respondent filed against petitioner ATI and the
carrier a claim for the shortage of 199.863 metric tons, estimated to be worth US$79,848.86 or ₱2,100,025.00, but its claim
was denied.
Thus, on December 3, 1996, respondent filed with the Regional Trial Court (RTC) of Manila an action for damages5 against
the unknown owner of the vessels M/V "Sea Dream" and M/V "Tern," its local agent Inter-Asia Marine Transport, Inc., and
petitioner ATI alleging that it suffered the losses through the fault or negligence of the said defendants. Respondent sought
to claim damages plus attorney’s fees and costs of suit. Its claim against the unknown owner of the vessel M/V "Sea Dream,"
however, was later settled in a Release and Quitclaim6 dated June 9, 1998, and only the claims against the unknown owner
of the M/V "Tern," Inter-Asia Marine Transport, Inc., and petitioner ATI remained.
In their Answer,7 the unknown owner of the vessel M/V "Tern" and its local agent Inter-Asia Marine Transport, Inc., prayed
for the dismissal of the complaint essentially alleging lack of cause of action and prescription. They alleged as affirmative
defenses the following: that the complaint does not state a cause of action; that plaintiff and/or defendants are not the real
parties-in-interest; that the cause of action had already prescribed or laches had set in; that the claim should have been filed
within three days from receipt of the cargo pursuant to the provisions of the Code of Commerce; that the defendant could no
longer check the veracity of plaintiff’s claim considering that the claim was filed eight months after the cargo was discharged
from the vessel; that plaintiff hired its own barges to receive the cargo and hence, any damages or losses during the
discharging operations were for plaintiff’s account and responsibility; that the statement of facts bears no remarks on any
short-landed cargo; that the draft survey report indicates that the cargo discharged was more than the figures appearing in
the bill of lading; that because the bill of lading states that the goods are carried on a "shipper’s weight, quantity and quality
unknown" terms and on "all terms, conditions and exceptions as per charter party dated October 15, 1995," the vessel had no
way of knowing the actual weight, quantity, and quality of the bulk cargo when loaded at the port of origin and the vessel
had to rely on the shipper for such information; that the subject shipment was discharged in Manila in the same condition
and quantity as when loaded at the port of loading; that defendants’ responsibility ceased upon discharge from the ship’s
tackle; that the damage or loss was due to the inherent vice or defect of the goods or to the insufficiency of packing thereof
or perils or dangers or accidents of the sea, pre-shipment damage or to improper handling of the goods by plaintiff or its
representatives after discharge from the vessel, for which defendants cannot be made liable; that damage/loss occurred while
the cargo was in the possession, custody or control of plaintiff or its representative, or due to plaintiff’s own negligence and
careless actuations in the handling of the cargo; that the loss is less than 0.75% of the entire cargo and assuming arguendo
that the shortage exists, the figure is well within the accepted parameters when loading this type of bulk cargo; that defendants
exercised the required diligence under the law in the performance of their duties; that the vessel was seaworthy in all respects;
that the vessel went straight from the port of loading to Manila, without passing through any intermediate ports so there was
no chance for any loss of the cargo; the plaintiff’s claim is excessive, grossly overstated, unreasonable and a mere paper loss
and is certainly unsubstantiated and without any basis; the terms and conditions of the relevant bill of lading and the charter
party, as well as the provisions of the Carriage of Goods by Sea Act and existing laws, absolve the defendants from any
liability; that the subject shipment was received in bulk and thus defendant carrier has no knowledge of the condition, quality
and quantity of the cargo at the time of loading; that the complaint was not referred to the arbitrators pursuant to the bill of
lading; that liability, if any, should not exceed the CIF value of the lost cargo, or the limits of liability set forth in the bill of
lading and the charter party. As counterclaim, defendants prayed for the payment of attorney’s fees in the amount of
₱220,000. By way of cross-claim, they ask for reimbursement from their co-defendant, petitioner ATI, in the event that they
are held liable to plaintiff.
Petitioner ATI meanwhile alleged in its Answer8 that it exercised the required diligence in handling the subject shipment. It
moved for the dismissal of the complaint, and alleged by way of special and affirmative defense that plaintiff has no valid
cause of action against petitioner ATI; that the cargo was completely discharged from the vessel M/V "Tern" to the receiving
barges owned or hired by the plaintiff; and that petitioner ATI exercised the required diligence in handling the shipment. By
way of counterclaim, petitioner ATI argued that plaintiff should shoulder its expenses for attorney’s fees in the amount of
₱20,000 as petitioner ATI was constrained to engage the services of counsel to protect its interest.
On May 10, 2001, the RTC of Manila rendered a Decision9 holding petitioner ATI and its co-defendants solidarily liable to
respondent for damages arising from the shortage. The RTC held:
WHEREFORE, premises considered, judgment is hereby rendered ordering defendants M/V "Tern" Inter-Asia Marine
Transport, Inc. and Asian Terminal Inc. jointly and severally liable to pay plaintiff Simon Enterprises the sum of
₱2,286,259.20 with legal interest from the date the complaint was filed until fully satisfied, 10% of the amount due plaintiff
as and for attorney’s fees plus the costs of suit.
Defendants’ counterclaim and cross claim are hereby DISMISSED for lack of merit.
SO ORDERED.10
The trial court found that respondent has established that the losses/shortages were incurred prior to its receipt of the goods.
As such, the burden shifted to the carrier to prove that it exercised extraordinary diligence as required by law to prevent the
loss, destruction or deterioration.
However, the trial court held that the defendants failed to prove that they did so. The trial court gave credence to the testimony
of Eduardo Ragudo, a super cargo of defendant Inter-Asia Marine Transport, Inc., who admitted that there were spillages or
overflow down to the spillage saver. The trial court also noted that said witness also declared that respondent’s representative
was not allowed to sign the Master’s Certificate. Such declaration, said the trial court, placed petitioner ATI in a bad light
and weakened its stand.
Not satisfied, the unknown owner of the vessel M/V "Tern," Inter-Asia Marine Transport, Inc. and petitioner ATI respectively
filed appeals to the CA. In their petition, the unknown owner of the vessel M/V "Tern" and Inter-Asia Marine Transport, Inc.
raised the question of whether the trial court erred in finding that they did not exercise extraordinary diligence in the handling
of the goods.11
On the other hand, petitioner ATI alleged that:
THE COURT-A-QUO COMMITTED SERIOUS AND REVERSIBLE ERROR IN HOLDING DEFENDANT[-
]APPELLANT ATI SOLIDARILY LIABLE WITH CO-DEFENDANT APPELLANT INTERASIA MARINE
TRANSPORT, INC. CONTRARY TO THE EVIDENCE PRESENTED.12
On November 27, 2006, the CA promulgated the assailed Decision, the decretal portion of which reads:
WHEREFORE, the appealed Decision dated May 10, 2001 is affirmed, except the award of attorney’s fees which is hereby
deleted.
SO ORDERED.13
In affirming the RTC Decision, the CA held that there is no justification to disturb the factual findings of the trial court which
are entitled to respect on appeal as they were supported by substantial evidence. It agreed with the findings of the trial court
that the unknown owner of the vessel M/V "Tern" and Inter-Asia Marine Transport, Inc. failed to establish that they exercised
extraordinary diligence in transporting the goods or exercised due diligence to forestall or lessen the loss as provided in
Article 174214 of the Civil Code. The CA also ruled that petitioner ATI, as the arrastre operator, should be held jointly and
severally liable with the carrier considering that petitioner ATI’s stevedores were under the direct supervision of the unknown
owner of M/V "Tern" and that the spillages occurred when the cargoes were being unloaded by petitioner ATI’s stevedores.
Petitioner ATI filed a motion for reconsideration,15 but the CA denied its motion in a Resolution16dated March 23, 2007. The
unknown owner of the vessel M/V "Tern" and Inter-Asia Marine Transport, Inc. for their part, appealed to this Court via a
petition for review on certiorari, which was docketed as G.R. No. 177170. Its appeal, however, was denied by this Court on
July 16, 2007 for failure to sufficiently show any reversible error committed by the CA in the challenged Decision and
Resolution as to warrant the exercise of this Court’s discretionary appellate jurisdiction. The unknown owner of M/V "Tern"
and Inter-Asia Marine Transport, Inc. sought reconsideration of the denial but their motion was denied by the Court in a
Resolution dated October 17, 2007.17
Meanwhile, on April 20, 2007, petitioner ATI filed the present petition raising the sole issue of whether the appellate court
erred in affirming the decision of the trial court holding petitioner ATI solidarily liable with its codefendants for the shortage
incurred in the shipment of the goods to respondent.
Petitioner ATI argues that:
1. Respondent failed to prove that the subject shipment suffered actual loss/shortage as there was no competent evidence to
prove that it actually weighed 3,300 metric tons at the port of origin.
2. Stipulations in the bill of lading that the cargo was carried on a "shipper’s weight, quantity and quality unknown" is not
contrary to public policy. Thus, herein petitioner cannot be bound by the quantity or weight of the cargo stated in the bill of
lading.
3. Shortage/loss, if any, may have been due to the inherent nature of the shipment and its insufficient packing considering
that the subject cargo was shipped in bulk and had a moisture content of 12.5%.
4. Respondent failed to substantiate its claim for damages as no competent evidence was presented to prove the same.1âwphi1
5. Respondent has not presented any scintilla of evidence showing any fault/negligence on the part of herein petitioner.
6. Petitioner ATI should be entitled to its counterclaim.18
Respondent, on the other hand, quotes extensively the CA decision and maintains its correctness.
We grant the petition.
The CA erred in affirming the decision of the trial court holding petitioner ATI solidarily liable with its co-defendants for
the shortage incurred in the shipment of the goods to respondent.
We note that the matters raised by petitioner ATI involve questions of fact which are generally not reviewable in a petition
for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, as the Court is not a trier of facts.
Section 1 thereof provides that "the petition x x x shall raise only questions of law, which must be distinctly set forth."
A question of law exists when the doubt or controversy concerns the correct application of law or jurisprudence to a certain
set of facts; or when the issue does not call for an examination of the probative value of the evidence presented, the truth or
falsehood of facts being admitted. A question of fact exists when the doubt or difference arises as to the truth or falsehood
of facts or when the query invites calibration of the whole evidence considering mainly the credibility of the witnesses, the
existence and relevancy of specific surrounding circumstances as well as their relation to each other and to the whole, and
the probability of the situation.19
The well-entrenched rule in our jurisdiction is that only questions of law may be entertained by this Court in a petition for
review on certiorari. This rule, however, is not ironclad and admits certain exceptions, such as when (1) the conclusion is
grounded on speculations, surmises or conjectures; (2) the inference is manifestly mistaken, absurd or impossible; (3) there
is grave abuse of discretion; (4) the judgment is based on a misapprehension of facts; (5) the findings of fact are conflicting;
(6) there is no citation of specific evidence on which the factual findings are based; (7) the findings of absence of facts are
contradicted by the presence of evidence on record; (8) the findings of the Court of Appeals are contrary to those of the trial
court; (9) the Court of Appeals manifestly overlooked certain relevant and undisputed facts that, if properly considered,
would justify a different conclusion; (10) the findings of the Court of Appeals are beyond the issues of the case; and (11)
such findings are contrary to the admissions of both parties.20
After a careful review of the records, we find justification to warrant the application of the fourth exception. The CA
misapprehended the following facts.
First, petitioner ATI is correct in arguing that the respondent failed to prove that the subject shipment suffered actual
shortage, as there was no competent evidence to prove that it actually weighed 3,300 metric tons at the port of origin.
Though it is true that common carriers are presumed to have been at fault or to have acted negligently if the goods transported
by them are lost, destroyed, or deteriorated, and that the common carrier must prove that it exercised extraordinary diligence
in order to overcome the presumption,21 the plaintiff must still, before the burden is shifted to the defendant, prove that the
subject shipment suffered actual shortage. This can only be done if the weight of the shipment at the port of origin and its
subsequent weight at the port of arrival have been proven by a preponderance of evidence, and it can be seen that the former
weight is considerably greater than the latter weight, taking into consideration the exceptions provided in Article 1734 22 of
the Civil Code.
In this case, respondent failed to prove that the subject shipment suffered shortage, for it was not able to establish that the
subject shipment was weighed at the port of origin at Darrow, Louisiana, U.S.A. and that the actual weight of the said
shipment was 3,300 metric tons.
The Berth Term Grain Bill of Lading23 (Exhibit "A"), the Proforma Invoice24 (Exhibit "B"), and the Packing List25 (Exhibit
"C"), being used by respondent to prove that the subject shipment weighed 3,300 metric tons, do not, in fact, help its cause.
The Berth Term Grain Bill of Lading states that the subject shipment was carried with the qualification "Shipper’s weight,
quantity and quality unknown," meaning that it was transported with the carrier having been oblivious of the weight, quantity,
and quality of the cargo. This interpretation of the quoted qualification is supported by Wallem Philippines Shipping, Inc. v.
Prudential Guarantee & Assurance, Inc.,26 a case involving an analogous stipulation in a bill of lading, wherein the Supreme
Court held that:
Indeed, as the bill of lading indicated that the contract of carriage was under a "said to weigh" clause, the shipper is solely
responsible for the loading while the carrier is oblivious of the contents of the shipment. (Emphasis supplied)
Similarly, International Container Terminal Services, Inc. v. Prudential Guarantee & Assurance Co., Inc.,27 explains the
meaning of clauses analogous to "Shipper’s weight, quantity and quality unknown" in this manner:
This means that the shipper was solely responsible for the loading of the container, while the carrier was oblivious to
the contents of the shipment x x x. The arrastre operator was, like any ordinary depositary, duty-bound to take good care
of the goods received from the vessel and to turn the same over to the party entitled to their possession, subject to such
qualifications as may have validly been imposed in the contract between the parties. The arrastre operator was not
required to verify the contents of the container received and to compare them with those declared by the shipper
because, as earlier stated, the cargo was at the shipper’s load and count x x x. (Italics in the original; emphasis supplied)
Also, Bankers & Manufacturers Assurance Corporation v. Court of Appeals28 elucidates thus:
The recital of the bill of lading for goods thus transported [i.e., transported in sealed containers or "containerized"]
ordinarily would declare "Said to Contain", "Shipper’s Load and Count", "Full Container Load", and the amount or
quantity of goods in the container in a particular package is only prima facie evidence of the amount or quantity x x x.
A shipment under this arrangement is not inspected or inventoried by the carrier whose duty is only to transport and
deliver the containers in the same condition as when the carrier received and accepted the containers for transport x
x x. (Emphasis supplied)
Hence, as can be culled from the above-mentioned cases, the weight of the shipment as indicated in the bill of lading is not
conclusive as to the actual weight of the goods. Consequently, the respondent must still prove the actual weight of the subject
shipment at the time it was loaded at the port of origin so that a conclusion may be made as to whether there was indeed a
shortage for which petitioner must be liable. This, the respondent failed to do.
The Proforma Invoice militates against respondent’s claim that the subject shipment weighed 3,300 metric tons. The pertinent
portion of the testimony of Mr. Jose Sarmiento, respondent’s Claims Manager, is narrated below:
Atty. Rebano: You also identified a while ago, Mr. Witness Exhibit B, the invoice. Why does it state as description of the
cargo three thousand metric tons and not three thousand three hundred?
A: Usually there is a contract between the supplier and our company that embodied [sic] in the letter credit [sic] that they
have the option to ship the cargo plus or minus ten percent of the quantity.
xxxx
Q: So, it is possible for the shipper to ship less than ten percent in [sic] the quantity stated in the invoice and it will
still be a valid shipment. Is it [sic] correct?
A: It [sic] is correct but we must be properly advised and the commercial invoice should indicate how much they sent to
us.29 (Emphasis supplied)
The quoted part of Mr. Sarmiento’s testimony not only shows uncertainty as to the actual weight of the shipment, it also
shows that assuming respondent did order 3,300 metric tons of U.S. Soybean Meal from Contiquincybunge Export Company,
and also assuming that it only received 3,100.137 metric tons, such volume would still be a valid shipment because it is well
within the 10% allowable shortage. Note that Mr. Sarmiento himself mentioned that the supplier has the option to "ship the
cargo plus or minus ten percent of the quantity."30
Notably also, the genuineness and the due execution of the Packing List, the Berth Term Grain Bill of Lading, and the
Proforma Invoice, were not established.
Wallem Philippines Shipping, Inc.,31 is instructive on this matter:
We find that the Court of Appeals erred in finding that a shortage had taken place. Josephine Suarez, Prudential’s claims
processor, merely identified the papers submitted to her in connection with GMC’s claim (Bill of Lading BEDI/1 (Exh.
"B"), Commercial Invoice No. 1401 issued by Toepfer International Asia Pte, Ltd. (Exh. "C"), SGS Certificate of Quality
(Exh. "F-1"), and SGS Certificate of Weight (Exh. "F-3")). Ms. Suarez had no personal knowledge of the contents of the
said documents and could only surmise as to the actual weight of the cargo loaded on M/V Gao Yang x x x.
xxxx
Ms. Suarez’s testimony regarding the contents of the documents is thus hearsay, based as it is on the knowledge of
another person not presented on the witness stand.
Nor has the genuineness and due execution of these documents been established. In the absence of clear, convincing,
and competent evidence to prove that the shipment indeed weighed 4,415.35 metric tons at the port of origin when it
was loaded on the M/V Gao Yang, it cannot be determined whether there was a shortage of the shipment upon its arrival
in Batangas. (Emphasis supplied)
As in the present case, Mr. Sarmiento merely identified the three above-mentioned exhibits, but he had no personal
knowledge of the weight of the subject shipment when it was loaded onto the M/V "Tern" at the port of origin. His testimony
as regards the weight of the subject shipment as described in Exhibits "A," "B," and "C" must then be considered as hearsay, 32
for it was based on the knowledge of a person who was not presented during the trial in the RTC.
The presumption that the Berth Term Grain Bill of Lading serves as prima facie evidence of the weight of the cargo has been
rebutted, there being doubt as to the weight of the cargo at the time it was loaded at the port of origin. Further, the fact that
the cargo was shipped with the arrangement "Shipper’s weight, quantity and quality unknown," indeed means that the weight
of the cargo could not be determined using as basis the figures written on the Berth Term Grain Bill of Lading. This is in line
with Malayan Insurance Co., Inc. v. Jardine Davies Transport Services, Inc., 33 where we said:
The presumption that the bill of lading, which petitioner relies upon to support its claim for restitution, constitutes prima
facie evidence of the goods therein described was correctly deemed by the appellate court to have been rebutted in light
of abundant evidence casting doubts on its veracity.
That MV Hoegh undertook, under the bill of lading, to transport 6,599.23 MT of yellow crude sulphur on a "said to weigh"
basis is not disputed. Under such clause, the shipper is solely responsible for the loading of the cargo while the carrier is
oblivious of the contents of the shipment. Nobody really knows the actual weight of the cargo inasmuch as what is written
on the bill of lading, as well as on the manifest, is based solely on the shipper’s declaration.
The bill of lading carried an added clause – the shipment’s weight, measure, quantity, quality, condition, contents
and value unknown. Evidently, the weight of the cargo could not be gauged from the bill of lading. (Italics in the
original; emphasis supplied)
The respondent having failed to present evidence to prove the actual weight of the subject shipment when it was loaded onto
the M/V "Tern," its cause of action must then fail because it cannot prove the shortage that it was alleging. Indeed, if the
claimant cannot definitively establish the weight of the subject shipment at the point of origin, the fact of shortage or loss
cannot be ascertained. The claimant then has no basis for claiming damages resulting from an alleged shortage. Again,
Malayan Insurance Co., Inc.,34 provides jurisprudential basis:
In the absence of clear, convincing and competent evidence to prove that the cargo indeed weighed, albeit the Bill of
Lading qualified it by the phrase "said to weigh," 6,599.23 MT at the port of origin when it was loaded onto the MV
Hoegh, the fact of loss or shortage in the cargo upon its arrival in Manila cannot be definitively established. The legal
basis for attributing liability to either of the respondents is thus sorely wanting. (Emphasis supplied)
Second, as correctly asserted by petitioner ATI, the shortage, if any, may have been due to the inherent nature of the subject
shipment or its packaging since the subject cargo was shipped in bulk and had a moisture content of 12.5%.
It should be noted that the shortage being claimed by the respondent is minimal, and is an indication that it could be due to
consolidation or settlement of the subject shipment, as accurately observed by the petitioner. A Kansas State University study
on the handling and storage of soybeans and soybean meal35 is instructive on this matter. Pertinent portions of the study
reads:
Soybean meal is difficult to handle because of poor flow ability and bridging characteristics. Soybean meal tends to settle
or consolidate over time. This phenomenon occurs in most granular materials and becomes more severe with increased
moisture, time and small particle size x x x.
xxxx
Moisture is perhaps the most important single factor affecting storage of soybeans and soybean meal. Soybeans contain
moisture ranging from 12% to 15% (wet basis) at harvest time x x x.
xxxx
Soybeans and soybean meal are hygroscopic materials and will either lose (desorb) or gain (adsorb) moisture from
the surrounding air. The moisture level reached by a product at a given constant temperature and equilibrium relative
humidity (ERH) is its equilibrium moisture content (EMC) x x x. (Emphasis supplied)
As indicated in the Proforma Invoice mentioned above, the moisture content of the subject shipment was 12.5%. Taking into
consideration the phenomena of desorption, the change in temperature surrounding the Soybean Meal from the time it left
wintertime Darrow, Louisiana, U.S.A. and the time it arrived in Manila, and the fact that the voyage of the subject cargo
from the point of loading to the point of unloading was 36 days, the shipment could have definitely lost weight, corresponding
to the amount of moisture it lost during transit.
The conclusion that the subject shipment lost weight in transit is bolstered by the testimony of Mr. Fernando Perez, a Cargo
Surveyor of L.J. Del Pan. The services of Mr. Perez were requested by respondent.36 Mr. Perez testified that it was possible
for the subject shipment to have lost weight during the 36-day voyage, as it was wintertime when M/V "Tern" left the United
States and the climate was warmer when it reached the Philippines; hence the moisture level of the Soybean Meal could have
changed.37 Moreover, Mr. Perez himself confirmed, by answering a question propounded by the RTC, that loss of weight of
the subject cargo cannot be avoided because of the shift in temperature from the colder United States weather to the warmer
Philippine climate.38
More importantly, the 199.863 metric-ton shortage that respondent alleges is a minimal 6.05% of the weight of the entire
Soy Bean Meal shipment. Taking into consideration the previously mentioned option of the shipper to ship 10% more or less
than the contracted shipment, and the fact that the alleged shortage is only 6.05% of the total quantity of 3,300 metric tons,
the alleged percentage loss clearly does not exceed the allowable 10% allowance for loss, as correctly argued by petitioner.
The alleged loss, if any, not having exceeded the allowable percentage of shortage, the respondent then has no cause of action
to claim for shortages.
Third, we agree with the petitioner ATI that respondent has not proven any negligence on the part of the former.
As petitioner ATI pointed out, a reading of the Survey Report of Del Pan Surveyors 39 (Exhibits "D" to "D-4" of respondent)
would not show any untoward incident or negligence on the part of petitioner ATI during the discharging operations.
Also, a reading of Exhibits "D", "D-1", and "D-2" would show that the methods used in determining whether there was a
shortage are not accurate.
Respondent relied on the Survey Reports of Del Pan Surveyors to prove that the subject shipment suffered loss. The
conclusion that there was a shortage arose from an evaluation of the weight of the cargo using the barge displacement method.
This is a type of draught survey, which is a method of cargo weight determination by ship’s displacement calculations. 40 The
basic principle upon which the draught survey methodology is based is the Principle of Archimedes, i.e., a vessel when
floating in water, will displace a weight of water equal to its own weight. 41 It then follows that if a weight of cargo is loaded
on (or unloaded from) a vessel freely floating in water, then the vessel will sink (or float) into the water until the total weight
of water displaced is equal to the original weight of the vessel, plus (or minus) the cargo which has been loaded (or unloaded)
and plus (or minus) density variation of the water between the starting survey (first measurement) and the finishing survey
(second measurement).42 It can be seen that this method does not entail the weighing of the cargo itself, but as correctly stated
by the petitioner, the weight of the shipment is being measured by mere estimation of the water displaced by the barges
before and after the cargo is unloaded from the said barges.
In addition, the fact that the measurements were done by Del Pan Surveyors in prevailing slight to slightly rough sea
condition43 supports the conclusion that the resulting measurement may not be accurate. A United Nations study on draught
surveys44 in fact states that the accuracy of draught surveys will be dependent upon several factors, one of which is the
Unit Price per bag P36.25 P62,567.50
weather and seas condition in the harbor.

Also, it can be seen in respondent’s own Exhibit "D-1" that the actual weight of the cargo was established by weighing 20%
Handling at P0.13 per bag 224.38
of the cargo. Though we recognize the practicality of establishing cargo weight through random sampling, we note the
discrepancy in the weights used in the determination of the alleged shortage.
Trucking at P2.50 per bag 323.62
Exhibit "D-1" of respondent states that the average weight of each bag is 52 kilos. A total of 63,391 bags 45 were discharged
from the barges, and the tare weight46 was established at 0.0950 kilos.47 Therefore, if one were to multiply 52 kilos per bag
by 63,391 bags and deduct the tare weight of 0.0950 kilos multiplied by 63,391 bags, the result would be 3,290,309.65 kilos,
or 3,290.310 metric tons. This would mean that the shortage was only 9.69 metric tons, if we suppose that respondent was
able to establish that the shipment actually weighed 3,300 metric tons at the port of loading. T o t a l . . . . . .. . . . . 63,115.50

However, the computation in Exhibit "D-2" would show that Del Pan Surveyors inexplicably used 49 kilos as the weight per
bag, instead of 52 kilos, therefore resulting in the total net weight of 3,100,137 kilos or 3,100.137 metric tons. This was the
figure used as basis for respondent's conclusion that there is a shortage of 199.863 metric tons.48
These discrepancies only lend credence to petitioner ATI's assertion that the weighing methods respondent used as bases are
unreliable and should not be completely relied upon.
Considering that respondent was not able to establish conclusively that the subject shipment weighed 3,300 metric tons at
the port of loading, and that it cannot therefore be concluded that there was a shortage for which petitioner should be
responsible; bearing in mind that the subject shipment most likely lost weight in transit due to the inherent nature of Soya
Bean Meal; assuming that the shipment lost weight in transit due to desorption, the shortage of 199.863 metric tons that
respondent alleges is a minimal 6.05% of the weight of the entire shipment, which is within the allowable 10% allowance
for loss; and noting that the respondent was not able to show negligence on the part of the petitioner and that the weighing
methods which respondent relied upon to establish the shortage it alleges is inaccurate, respondent cannot fairly claim
damages against petitioner for the subject shipment's alleged shortage.
WHEREFORE, the petition for review on certiorari is GRANTED. The Decision dated November 27, 2006 and Resolution
dated March 23, 2007 of the Court of Appeals in CA-G.R. CV No. 71210 are REVERSED AND SET ASIDE insofar as
petitioner Asian Terminals, Inc. is concerned. Needless to add, the complaint against petitioner docketed as RTC Manila
Civil Case No. 96-81101 is ordered DISMISSED.
No pronouncement as to costs.
On September 3, 1948, the City of Iloilo received the shipment and paid the amount of P63,115.50. However, it was noted
that the foot of the bill of lading that the City of Iloilo 'Received the above mentioned merchandise apparently in same
condition as when shipped, save as noted below: actually received 1685 sacks with a gross weight of 116,131 kilos upon
actual weighing. Total shortage ascertained 13,319 kilos." The shortage was equivalent to 41 sacks of rice with a net weight
of 13,319 kilos, the proportionate value of which was P6,486.35.
On February 14, 1951 the City of Iloilo filed a complaint in the Court of First Instance of Iloilo against NARIC and the
Southern Lines, Inc. for the recovery of the amount of P6,486.35 representing the value of the shortage of the shipment of
rice. After trial, the lower court absolved NARIC from the complaint, but sentenced the Southern Lines, Inc. to pay the
amount of P4,931.41 which is the difference between the sum of P6,486.35 and P1,554.94 representing the latter's
counterclaim for handling and freight.
The Southern Lines, Inc. appealed to the Court of Appeals which affirmed the judgment of the trial court. Hence, this petition
for review.
The only question to be determined in this petition is whether or not the defendant-carrier, the herein petitioner, is liable for
the loss or shortage of the rice shipped.
Article 361 of the Code of Commerce provides:
ART. 361. — The merchandise shall be transported at the risk and venture of the shipper, if the contrary has not been
expressly stipulated.

SOUTHERN LINES, INC., petitioner, As a consequence, all the losses and deteriorations which the goods may suffer during the transportation by reason of
vs. fortuitous event, force majeure, or the inherent nature and defect of the goods, shall be for the account and risk of the
COURT OF APPEALS and CITY OF ILOILO, respondents. shipper.1äwphï1.ñët

This is a petition to review on certiorari the decision of the Court of Appeals in CA-G.R. No. 15579-R affirming that of Proof of these accidents is incumbent upon the carrier.
the Court of First Instance of Iloilo which sentenced petitioner Southern Lines, Inc. to pay respondent City of Iloilo the
amount of P4,931.41. Article 362 of the same Code provides: .

Sometime in 1948, the City of Iloilo requisitioned for rice from the National Rice and Corn Corporation (hereafter referred
to as NARIC) in Manila. On August 24 of the same year, NARIC, pursuant to the order, shipped 1,726 sacks of rice consigned
to the City of Iloilo on board the SS "General Wright" belonging to the Southern Lines, Inc. Each sack of rice weighed 75
kilos and the entire shipment as indicated in the bill of lading had a total weight of 129,450 kilos. According to the bill of
lading, the cost of the shipment was P63,115.50 itemized and computed as follows: .
ART. 362. — Nevertheless, the carrier shall be liable for the losses and damages resulting from the causes mentioned in the
preceding article if it is proved, as against him, that they arose through his negligence or by reason of his having failed to
take the precautions which usage his establisbed among careful persons, unless the shipper has committed fraud in the bill
of lading, representing the goods to be of a kind or quality different from what they really were.
If, notwithstanding the precautions referred to in this article, the goods transported run the risk of being lost, on account of
their nature or by reason of unavoidable accident, there being no time for their owners to dispose of them, the carrier may
proceed to sell them, placing them for this purpose at the disposal of the judicial authority or of the officials designated by
special provisions.
Under the provisions of Article 361, the defendant-carrier in order to free itself from liability, was only obliged to prove that
the damages suffered by the goods were "by virtue of the nature or defect of the articles." Under the provisions of Article
362, the plaintiff, in order to hold the defendant liable, was obliged to prove that the damages to the goods by virtue of their
nature, occurred on account of its negligence or because the defendant did not take the precaution adopted by careful persons.
(Government v. Ynchausti & Co., 40 Phil. 219, 223).
Petitioner claims exemption from liability by contending that the shortage in the shipment of rice was due to such factors as
the shrinkage, leakage or spillage of the rice on account of the bad condition of the sacks at the time it received the same and
the negligence of the agents of respondent City of Iloilo in receiving the shipment. The contention is untenable, for, if the
fact of improper packing is known to the carrier or his servants, or apparent upon ordinary observation, but it accepts the
goods notwithstanding such condition, it is not relieved of liability for loss or injury resulting thereform. (9 Am Jur. 869.)
Furthermore, according to the Court of Appeals, "appellant (petitioner) itself frankly admitted that the strings that tied the
bags of rice were broken; some bags were with holes and plenty of rice were spilled inside the hull of the boat, and that the
personnel of the boat collected no less than 26 sacks of rice which they had distributed among themselves." This finding,
which is binding upon this Court, shows that the shortage resulted from the negligence of petitioner.
Invoking the provisions of Article 366 of the Code of Commerce and those of the bill of lading, petitioner further contends
that respondent is precluded from filing an action for damages on account of its failure to present a claim within 24 hours
from receipt of the shipment. It also cites the cases of Government v. Ynchausti & Co., 24 Phil. 315 and Triton Insurance
Co. v. Jose, 33 Phil. 194, ruling to the effect that the requirement that the claim for damages must be made within 24 hours
from delivery is a condition precedent to the accrual of the right of action to recover damages. These two cases above-cited
are not applicable to the case at bar. In the first cited case, the plaintiff never presented any claim at all before filing the
action. In the second case, there was payment of the transportation charges which precludes the presentation of any claim
against the carrier. (See Article 366, Code of Commerce.) It is significant to note that in the American case of Hoye v.
Pennsylvania Railroad Co., 13 Ann. Case. 414, it has been said: .
... "It has been held that a stipulation in the contract of shipment requiring the owner of the goods to present a notice of his
claim to the carrier within a specified time after the goods have arrived at their destination is in the nature of a condition
precedent to the owner's right to enforce a recovery, that he must show in the first instance that be has complied with the
condition, or that the circumstances were such that to have complied with it would have required him to do an unreasonable
thing. The weight of authority, however, sustains the view that such a stipulation is more in the nature of a limitation upon
the owner's right to recovery, and that the burden of proof is accordingly on the carrier to show that the limitation was
reasonable and in proper form or within the time stated." (Hutchinson on Carrier, 3d ed., par. 44) Emphasis supplied.
In the case at bar, the record shows that petitioner failed to plead this defense in its answer to respondent's complaint and,
therefore, the same is deemed waived (Section 10, Rule 9, Rules of Court), and cannot be raised for the first time at the trial
or on appeal. (Maxilom v. Tabotabo, 9 Phil. 390.) Moreover, as the Court of Appeals has said: .
... the records reveal that the appellee (respondent) filed the present action, within a reasonable time after the short delivery
in the shipment of the rice was made. It should be recalled that the present action is one for the refund of the amount paid in
excess, and not for damages or the recovery of the shortage; for admittedly the appellee (respondent) had paid the entire
value of the 1726 sacks of rice, subject to subsequent adjustment, as to shortages or losses. The bill of lading does not at all
limit the time for filing an action for the refund of money paid in excess.
WHEREFORE, the decision of the Court of Appeals is hereby affirmed in all respects and the petition for certiorari denied.
With costs against the petitioner.
MAURO GANZON, petitioner,
vs.
COURT OF APPEALS and GELACIO E. TUMAMBING, respondents.
The private respondent instituted in the Court of First Instance of Manila 1 an action against the petitioner for damages based
on culpa contractual. The antecedent facts, as found by the respondent Court, 2 are undisputed:
On November 28, 1956, Gelacio Tumambing contracted the services of Mauro B. Ganzon to haul 305 tons of scrap iron from
Mariveles, Bataan, to the port of Manila on board the lighter LCT "Batman" (Exhibit 1, Stipulation of Facts, Amended
Record on Appeal, p. 38). Pursuant to that agreement, Mauro B. Ganzon sent his lighter "Batman" to Mariveles where it
docked in three feet of water (t.s.n., September 28, 1972, p. 31). On December 1, 1956, Gelacio Tumambing delivered the
scrap iron to defendant Filomeno Niza, captain of the lighter, for loading which was actually begun on the same date by the
crew of the lighter under the captain's supervision. When about half of the scrap iron was already loaded (t.s.n., December
14, 1972, p. 20), Mayor Jose Advincula of Mariveles, Bataan, arrived and demanded P5,000.00 from Gelacio Tumambing.
The latter resisted the shakedown and after a heated argument between them, Mayor Jose Advincula drew his gun and fired
at Gelacio Tumambing (t.s.n., March 19, 1971, p. 9; September 28, 1972, pp. 6-7).<äre||anº•1àw> The gunshot was not fatal
but Tumambing had to be taken to a hospital in Balanga, Bataan, for treatment (t.s.n., March 19, 1971, p. 13; September 28,
1972, p. 15).
After sometime, the loading of the scrap iron was resumed. But on December 4, 1956, Acting Mayor Basilio Rub,
accompanied by three policemen, ordered captain Filomeno Niza and his crew to dump the scrap iron (t.s.n., June 16, 1972,
pp. 8-9) where the lighter was docked (t.s.n., September 28, 1972, p. 31). The rest was brought to the compound of NASSCO
(Record on Appeal, pp. 20-22). Later on Acting Mayor Rub issued a receipt stating that the Municipality of Mariveles had
taken custody of the scrap iron (Stipulation of Facts, Record on Appeal, p. 40; t.s.n., September 28, 1972, p. 10.)
On the basis of the above findings, the respondent Court rendered a decision, the dispositive portion of which states:
WHEREFORE, the decision appealed from is hereby reversed and set aside and a new one entered ordering defendant-
appellee Mauro Ganzon to pay plaintiff-appellant Gelacio E. Tumambimg the sum of P5,895.00 as actual damages, the sum
of P5,000.00 as exemplary damages, and the amount of P2,000.00 as attorney's fees. Costs against defendant-appellee
Ganzon. 3
In this petition for review on certiorari, the alleged errors in the decision of the Court of Appeals are:
I
THE COURT OF APPEALS FINDING THE HEREIN PETITIONER GUILTY OF BREACH OF THE CONTRACT OF
TRANSPORTATION AND IN IMPOSING A LIABILITY AGAINST HIM COMMENCING FROM THE TIME THE
SCRAP WAS PLACED IN HIS CUSTODY AND CONTROL HAVE NO BASIS IN FACT AND IN LAW.
II
THE APPELLATE COURT ERRED IN CONDEMNING THE PETITIONER FOR THE ACTS OF HIS EMPLOYEES IN
DUMPING THE SCRAP INTO THE SEA DESPITE THAT IT WAS ORDERED BY THE LOCAL GOVERNMENT
OFFICIAL WITHOUT HIS PARTICIPATION.
III
THE APPELLATE COURT FAILED TO CONSIDER THAT THE LOSS OF THE SCRAP WAS DUE TO A
FORTUITOUS EVENT AND THE PETITIONER IS THEREFORE NOT LIABLE FOR LOSSES AS A CONSEQUENCE
THEREOF. 4
The petitioner, in his first assignment of error, insists that the scrap iron had not been unconditionally placed under his
custody and control to make him liable. However, he completely agrees with the respondent Court's finding that on December
1, 1956, the private respondent delivered the scraps to Captain Filomeno Niza for loading in the lighter "Batman," That the
petitioner, thru his employees, actually received the scraps is freely admitted. Significantly, there is not the slightest allegation
or showing of any condition, qualification, or restriction accompanying the delivery by the private respondent-shipper of the
scraps, or the receipt of the same by the petitioner. On the contrary, soon after the scraps were delivered to, and received by
the petitioner-common carrier, loading was commenced.
By the said act of delivery, the scraps were unconditionally placed in the possession and control of the common carrier, and
upon their receipt by the carrier for transportation, the contract of carriage was deemed perfected. Consequently, the
petitioner-carrier's extraordinary responsibility for the loss, destruction or deterioration of the goods commenced. Pursuant
to Art. 1736, such extraordinary responsibility would cease only upon the delivery, actual or constructive, by the carrier to
the consignee, or to the person who has a right to receive them. 5 The fact that part of the shipment had not been loaded on
board the lighter did not impair the said contract of transportation as the goods remained in the custody and control of the
carrier, albeit still unloaded.
The petitioner has failed to show that the loss of the scraps was due to any of the following causes enumerated in Article
1734 of the Civil Code, namely:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act of competent public authority.
Hence, the petitioner is presumed to have been at fault or to have acted negligently. 6 By reason of this presumption, the
court is not even required to make an express finding of fault or negligence before it could hold the petitioner answerable for
the breach of the contract of carriage. Still, the petitioner could have been exempted from any liability had he been able to
prove that he observed extraordinary diligence in the vigilance over the goods in his custody, according to all the
circumstances of the case, or that the loss was due to an unforeseen event or to force majeure. As it was, there was hardly
any attempt on the part of the petitioner to prove that he exercised such extraordinary diligence.
It is in the second and third assignments of error where the petitioner maintains that he is exempt from any liability because
the loss of the scraps was due mainly to the intervention of the municipal officials of Mariveles which constitutes a caso
fortuito as defined in Article 1174 of the Civil Code. 7
We cannot sustain the theory of caso fortuito. In the courts below, the petitioner's defense was that the loss of the scraps was
due to an "order or act of competent public authority," and this contention was correctly passed upon by the Court of Appeals
which ruled that:
... In the second place, before the appellee Ganzon could be absolved from responsibility on the ground that he was ordered
by competent public authority to unload the scrap iron, it must be shown that Acting Mayor Basilio Rub had the power to
issue the disputed order, or that it was lawful, or that it was issued under legal process of authority. The appellee failed to
establish this. Indeed, no authority or power of the acting mayor to issue such an order was given in evidence. Neither has it
been shown that the cargo of scrap iron belonged to the Municipality of Mariveles. What we have in the record is the
stipulation of the parties that the cargo of scrap iron was accilmillated by the appellant through separate purchases here and
there from private individuals (Record on Appeal, pp. 38-39). The fact remains that the order given by the acting mayor to
dump the scrap iron into the sea was part of the pressure applied by Mayor Jose Advincula to shakedown the appellant for
P5,000.00. The order of the acting mayor did not constitute valid authority for appellee Mauro Ganzon and his representatives
to carry out.
Now the petitioner is changing his theory to caso fortuito. Such a change of theory on appeal we cannot, however, allow. In
any case, the intervention of the municipal officials was not In any case, of a character that would render impossible the
fulfillment by the carrier of its obligation. The petitioner was not duty bound to obey the illegal order to dump into the sea
the scrap iron. Moreover, there is absence of sufficient proof that the issuance of the same order was attended with such force
or intimidation as to completely overpower the will of the petitioner's employees. The mere difficulty in the fullfilment of
the obligation is not considered force majeure. We agree with the private respondent that the scraps could have been properly
unloaded at the shore or at the NASSCO compound, so that after the dispute with the local officials concerned was settled,
the scraps could then be delivered in accordance with the contract of carriage.
There is no incompatibility between the Civil Code provisions on common carriers and Articles 361 8 and 362 9 of the Code
of Commerce which were the basis for this Court's ruling in Government of the Philippine Islands vs. Ynchausti & Co.10
and which the petitioner invokes in tills petition. For Art. 1735 of the Civil Code, conversely stated, means that the shipper
will suffer the losses and deterioration arising from the causes enumerated in Art. 1734; and in these instances, the burden
of proving that damages were caused by the fault or negligence of the carrier rests upon him. However, the carrier must first
establish that the loss or deterioration was occasioned by one of the excepted causes or was due to an unforeseen event or to
force majeure. Be that as it may, insofar as Art. 362 appears to require of the carrier only ordinary diligence, the same is
.deemed to have been modified by Art. 1733 of the Civil Code.
Finding the award of actual and exemplary damages to be proper, the same will not be disturbed by us. Besides, these were
not sufficiently controverted by the petitioner.
WHEREFORE, the petition is DENIED; the assailed decision of the Court of Appeals is hereby AFFIRMED. Costs against
the petitioner.
This decision is IMMEDIATELY EXECUTORY.
ROSITO Z. BACARRO, WILLIAM SEVILLA, and FELARIO MONTEFALCON, petitioners,
vs.
GERUNDIO B. CASTAÑO, and the COURT OF APPEALS, respondents.
Appeal taken by petitioners from a decision of the Court of Appeals, affirming that of the Court of First Instance of Misamis
Occidental, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered, ordering the defendants to jointly and severally pay to the plaintiff the sum of
(1) P973.10 for medical treatment and hospitalization; (2) P840.20 for loss of salary during treatment; and (3) P2,000.00 for
partial permanent deformity, with costs against the defendants.
The facts are set forth in the decision of the Court of Appeals, from which We quote:
... In the afternoon of April 1, 1960, he (appellee) boarded the said jeep as a paying passenger at Oroquieta bound for Jimenez,
Misamis Occidental. It was then fined to capacity, with twelve (12) passengers in all. 'The jeep was running quite fast and
the jeep while approaching the (Sumasap) bridge there was a cargo truck which blew its horn for a right of way. The jeep
gave way but did not change speed. ... When the jeep gave way it turned to the right and continued running with the same
speed. In so doing ...the driver was not able to return the jeep to the proper place ... instead, it ran obliquely towards the canal;
that is why, we fell to the ditch. ... When the jeep was running in the side of the road for few meters, naturally, the jeep was
already inclined and two passengers beside me were the ones who pushed me. I was pushed by the two passengers beside
me; that is why, when I was clinging, my leg and half of my body were outside the jeep when it reached the canal. ... My
right leg was sandwiched by the body of the jeep and the right side of the ditch. ... My right leg was broken.' He was rushed
to the Saint Mary's Hospital where he stayed for about two (2) months. 'My right leg is now shorter by one and one-half
inches causing me to use specially made shoes. ... I could not squat for a long time; I could not kneel for a long time; and I
could not even sit for a long time because I will suffer cramp. ... With my three fingers I am still uneasy with my three fingers
in my right hand. There is a feeling of numbness with my three fingers even right now.
xxx xxx xxx
From appellee's version just set out, it appears that after he boarded the jeep in question at Oroquieta, it was driven by
defendant Montefalcon at around forty (40) kilometers per hour bound for Jimenez; that while approaching Sumasap Bridge
at the said speed, a cargo truck coming from behind blew its horn to signal its intention to overtake the jeep; that the latter,
without changing its speed, gave way by swerving to the right, such that both vehicles ran side by side for a distance of
around twenty (20) meters, and that thereafter as the jeep was left behind, its driver was unable to return it to its former lane
and instead it obliquely or diagonally ran down an inclined terrain towards the right until it fell into a ditch pinning down
and crushing appellee's right leg in the process.
Throwing the blame for this accident on the driver of the cargo truck, appellants, in turn, state the facts to be as follows:
In the afternoon of April 1, 1960, plaintiff Gerundio Castaño boarded the said jeepney at Oroquieta bound for Jimenez,
Misamis occidental. While said jeepney was negotiating the upgrade approach of the Sumasap Bridge at Jimenez, Misamis
Occidental and at a distance of about 44 meters therefrom, a cargo truck, owned and operated by a certain Te Tiong alias
Chinggim, then driven by Nicostrato Digal, a person not duly licensed to drive motor vehicles, overtook the jeepney so
closely that in the process of overtaking sideswiped the jeepney, hitting the reserve tire placed at the left side of the jeepney
with the hinge or bolt of the siding of the cargo truck, causing the jeepney to swerve from its course and after running 14
meters from the road it finally fell into the canal. The right side of the jeep fell on the right leg of the plaintiff-appellee,
crushing said leg against the ditch resulting in the injury to plaintiff-appellee consisting of a broken right thigh.
And take the following stand: 'The main defense of defendants appellants is anchored on the fact that the jeepney was
sideswiped by the overtaking cargo truck' (Appellants' Brief, pp. 3-4, 7).
It must be admitted, out of candor, that there is evidence of the sideswiping relied upon by appellants. ....
This appeal by certiorari to review the decision of respondent Court of Appeals asserts that the latter decided questions of
substance which are contrary to law and the approved decisions of this Court. Petitioners alleged that respondent Court of
Appeals erred (1) in finding contributory negligence on the part of jeepney driver appellant Montefalcon for having raced
with the overtaking cargo truck to the bridge instead of slackening its speed, when the person solely responsible for the
sideswiping is the unlicensed driver of the overtaking cargo truck; (2) in finding the jeepney driver not to have exercised
extraordinary diligence, human care, foresight and utmost. diligence of very cautious persons, when the diligence required
pursuant to Article 1763 of the New Civil Code is only that of a good father of a family since the injuries were caused by the
negligence of a stranger; and (3) in not considering that appellants were freed from any liability since the accident was due
to fortuitous event - the sideswiping of the jeepney by the overtaking cargo truck.
We are not persuaded. The fact is, petitioner-driver Montefalcon did not slacken his speed but instead continued to run the
jeep at about forty (40) kilometers per hour even at the time the overtaking cargo truck was running side by side for about
twenty (20) meters and at which time he even shouted to the driver of the truck. Hereunder is the testimony of private
respondent Gerundio B. Castaño on this point:
Q At that time when you rode that jeep on your way to Jimenez, you said that the jeep was running quite fast for a jeep, is
that correct?
A Yes, sir.
xxx xxx xxx
Q When you said that it is quite fast for a jeep, do you mean to tell this Court that the speed of that jeep could not be made
by that particular jeepney?
A It can be made but it will not be very safe for that kind of transportation to run that kind of speed.
Q What was the speed of that jeep in terms of miles or kilometers per hour?
A About 40 kilometers or about that time during that trip per hour.
Q And you said also that there was a cargo truck that was behind the jeep, is that correct, while you were already approaching
the Sumasap bridge?
A Yes.
xxx xxx xxx
Q How about the speed of that truck as the jeep you were riding was approaching the Sumasap bridge? What was the speed
of that truck, fast or not fast?
A Naturally, the truck when it asks for a clearance that he will overtake it will run fast.
xxx xxx xxx
Q Now comparing the speed that you mentioned that the jeep was negotiating in that place and the cargo truck, which ran
faster-the jeep or the cargo truck?
xxx xxx xxx
A Naturally, the truck was a little bit faster because he was able to overtake.
xxx xxx xxx
Q Now, how far more or less was the jeep from the bridge when the truck was about to or in the process of overtaking the
jeep you were riding?
A When the truck was asking for a clearance it was yet about less than 100 meters from the bridge when he was asking for a A I do not know why but I know it slowly got to the canal but I do not know why it goes there.
clearance to overtake.
xxx xxx xxx
xxx xxx xxx
Q You said when the jeep was about to be lodged in the canal, you stated that the jeep was running upright, is that a fact?
Q Do you remember the distance when the truck and the jeep were already side by side as they approach the bridge in relation
to the bridge? A Yes.

xxx xxx xxx Q So that the terrain was more or less level because the jeep was already running upright, is that not correct?

A They were about fifty meters ... from fifty to thirty meters when they were side by side from the bridge. A The jeep was running on its wheels but it is running on the side, the side was inclining until it reached the ditch.

xxx xxx xxx Q You mean to tell the Court that from the entire of the fifteen meters distance from the side of the road up to the place where
the jeep was finally lodged that place is inclining towards the right?
Q .... You said before that the jeep and the truck were running side by side for a few meters, is that correct?
A When the jeep left the road it was already inclining because it was running part side of the road which is inclining.
A Yes, sir. (Transcript of March 25 and 26, 1963).

Q I am asking you now, how long were they running side by side-the jeep and the cargo truck?
A About 20 meters, they were running side by side.
Q And after running side by side for 20 meters, the jeep and its passengers went to the canal?
A Yes.
Q You said on direct examination that when the jeep (should be truck) was blowing its horn and asking for a way, you said
that the jeep gave way and turned to the right and did not recover its position and the jeep fell into the ditch, is that what you
said before?
A The jeep did not recover. It was not able to return to the center of the road. It was running outside until it reached the canal,
running diagonally.
Q When the jeep gave way to the cargo truck, the jeep was at the right side of the road?
A Already on the right side of the road.
Q And this jeep was running steadily at the right side of the road.
Thus, had Montefalcon slackened the speed of the jeep at the time the truck was overtaking it, instead of running side by side
with the cargo truck, there would have been no contact and accident. He should have foreseen that at the speed he was
running, the vehicles were getting nearer the bridge and as the road was getting narrower the truck would be to close to the
jeep and would eventually sideswiped it. Otherwise stated, he should have slackened his jeep when he swerved it to the right
to give way to the truck because the two vehicles could not cross the bridge at the same time.
The second assigned error is centered on the alleged failure on the part of the jeepney driver to exercise extraordinary
diligence, human care, foresight and utmost diligence of a very cautious person, when the diligence required pursuant to
Article 1763 of the Civil Code is only that of a good father of a family. Petitioners contend that the proximate cause of the
accident was the negligence of the driver of the truck. However, the fact is, there was a contract of carriage between the
private respondent and the herein petitioners in which case the Court of Appeals correctly applied Articles 1733, 1755 and
1766 of the Civil Code which require the exercise of extraordinary diligence on the part of petitioner Montefalcon.
Art. 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound to observe
extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according
to all the circumstances of each case.
Art. 1755. A common carrier is bound to carry the Passengers safely as far as human care and foresight can provide, using
the utmost diligence of very cautious persons, with a due regard for all the circumstances.

A Yes, sir. Art. 1766. In all matters not regulated by this Code, the rights and obligations of common carriers shall be governed by the
Code of Commerce and by special laws.
xxx xxx xxx
Indeed, the hazards of modern transportation demand extraordinary diligence. A common carrier is vested with public
Q When the jeep gave way to the cargo truck and it kept its path to the right, it was still able to maintain that path to the right interest. Under the new Civil Code, instead of being required to exercise mere ordinary diligence a common carrier is
for about twenty meters and while the jeep and the cargo truck were running side by side? exhorted to carry the passengers safely as far as human care and foresight can provide "using the utmost diligence of very
cautious persons." (Article 1755). Once a passenger in the course of travel is injured, or does not reach his destination safely,
A Yes. the carrier and driver are presumed to be at fault.
Q When the truck and the jeep were already running side by side and after having run twenty meters side by side, do you The third assigned error of the petitioners would find fault upon respondent court in not freeing petitioners from any liability,
know why the jeep careened to the ditch or to the canal? since the accident was due to a fortuitous event. But, We repeat that the alleged fortuitous event in this case - the sideswiping
of the jeepney by the cargo truck, was something which could have been avoided considering the narrowness of the Sumasap
Bridge which was not wide enough to admit two vehicles. As found by the Court of Appeals, Montefalcon contributed to the
occurrence of the mishap.
WHEREFORE, the decision of the respondent Court of Appeals, dated September 30,1971, is hereby AFFIRMED. With
costs.
SO ORDERED.
BACHELOR EXPRESS, INCORPORATED, and CRESENCIO RIVERA, petitioners,
vs.
THE HONORABLE COURT OF APPEALS (Sixth Division), RICARDO BETER, SERGIA BETER, TEOFILO
RAUTRAUT and ZOETERA RAUTRAUT, respondents.
This is a petition for review of the decision of the Court of Appeals which reversed and set aside the order of the Regional
Trial Court, Branch I, Butuan City dismissing the private respondents' complaint for collection of "a sum of money" and
finding the petitioners solidarily liable for damages in the total amount of One Hundred Twenty Thousand Pesos
(P120,000.00). The petitioners also question the appellate court's resolution denying a motion for reconsideration.
On August 1, 1980, Bus No. 800 owned by Bachelor Express, Inc. and driven by Cresencio Rivera was the situs of a stampede
which resulted in the death of passengers Ornominio Beter and Narcisa Rautraut.
The evidence shows that the bus came from Davao City on its way to Cagayan de Oro City passing Butuan City; that while
at Tabon-Tabon, Butuan City, the bus picked up a passenger; that about fifteen (15) minutes later, a passenger at the rear
portion suddenly stabbed a PC soldier which caused commotion and panic among the passengers; that when the bus stopped,
passengers Ornominio Beter and Narcisa Rautraut were found lying down the road, the former already dead as a result of
head injuries and the latter also suffering from severe injuries which caused her death later. The passenger assailant alighted
from the bus and ran toward the bushes but was killed by the police. Thereafter, the heirs of Ornominio Beter and Narcisa
Rautraut, private respondents herein (Ricardo Beter and Sergia Beter are the parents of Ornominio while Teofilo Rautraut
and Zoetera [should be Zotera] Rautraut are the parents of Narcisa) filed a complaint for "sum of money" against Bachelor
Express, Inc. its alleged owner Samson Yasay and the driver Rivera.
In their answer, the petitioners denied liability for the death of Ornominio Beter and Narcisa Rautraut. They alleged that ...
the driver was able to transport his passengers safely to their respective places of destination except Ornominio Beter and
Narcisa Rautraut who jumped off the bus without the knowledge and consent, much less, the fault of the driver and conductor
and the defendants in this case; the defendant corporation had exercised due diligence in the choice of its employees to avoid
as much as possible accidents; the incident on August 1, 1980 was not a traffic accident or vehicular accident; it was an
incident or event very much beyond the control of the defendants; defendants were not parties to the incident complained of
as it was an act of a third party who is not in any way connected with the defendants and of which the latter have no control
and supervision; ..." (Rollo, pp. 112-113).i•t•c-aüsl
After due trial, the trial court issued an order dated August 8, 1985 dismissing the complaint.
Upon appeal however, the trial court's decision was reversed and set aside. The dispositive portion of the decision of the
Court of Appeals states:
WHEREFORE, the Decision appealed from is REVERSED and SET ASIDE and a new one entered finding the appellees
jointly and solidarily liable to pay the plaintiffs-appellants the following amounts:
1) To the heirs of Ornominio Beter, the amount of Seventy Five Thousand Pesos (P75,000.00) in loss of earnings and support,
moral damages, straight death indemnity and attorney's fees; and,
2) To the heirs of Narcisa Rautraut, the amount of Forty Five Thousand Pesos (P45,000.00) for straight death indemnity,
moral damages and attorney's fees. Costs against appellees. (Rollo, pp. 71-72)
The petitioners now pose the following questions
What was the proximate cause of the whole incident? Why were the passengers on board the bus panicked (sic) and why
were they shoving one another? Why did Narcisa Rautraut and Ornominio Beter jump off from the running bus?
The petitioners opine that answers to these questions are material to arrive at "a fair, just and equitable judgment." (Rollo, p.
5) They claim that the assailed decision is based on a misapprehension of facts and its conclusion is grounded on speculation,
surmises or conjectures.
As regards the proximate cause of the death of Ornominio Beter and Narcisa Rautraut, the petitioners maintain that it was
the act of the passenger who ran amuck and stabbed another passenger of the bus. They contend that the stabbing incident
triggered off the commotion and panic among the passengers who pushed one another and that presumably out of fear and
moved by that human instinct of self-preservation Beter and Rautraut jumped off the bus while the bus was still running
resulting in their untimely death." (Rollo, p. 6) Under these circumstances, the petitioners asseverate that they were not
negligent in the performance of their duties and that the incident was completely and absolutely attributable to a third person,
the passenger who ran amuck, for without his criminal act, Beter and Rautraut could not have been subjected to fear and
shock which compelled them to jump off the running bus. They argue that they should not be made liable for damages arising
from acts of third persons over whom they have no control or supervision.
Furthermore, the petitioners maintain that the driver of the bus, before, during and after the incident was driving cautiously
giving due regard to traffic rules, laws and regulations. The petitioners also argue that they are not insurers of their passengers
as ruled by the trial court.
The liability, if any, of the petitioners is anchored on culpa contractual or breach of contract of carriage. The applicable
provisions of law under the New Civil Code are as follows:
ART. 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods or both by land, water, or air, for compensation, offering their services to the public.
ART. 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound to observe
extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according
to all the circumstances of each case.
xxx xxx xxx
ART. 1755. A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using
the utmost diligence of very cautious persons, with a due regard for all the circumstances.
ART. 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.
There is no question that Bachelor Express, Inc. is a common carrier. Hence, from the nature of its business and for reasons
of public policy Bachelor Express, Inc. 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 a due regard for all the circumstances.
In the case at bar, Ornominio Beter and Narcisa Rautraut were passengers of a bus belonging to petitioner Bachelor Express,
Inc. and, while passengers of the bus, suffered injuries which caused their death. Consequently, pursuant to Article 1756 of
the Civil Code, petitioner Bachelor Express, Inc. is presumed to have acted negligently unless it can prove that it had observed
extraordinary diligence in accordance with Articles 1733 and 1755 of the New Civil Code.
Bachelor Express, Inc. denies liability for the death of Beter and Rautraut on its posture that the death of the said passengers
was caused by a third person who was beyond its control and supervision. In effect, the petitioner, in order to overcome the
presumption of fault or negligence under the law, states that the vehicular incident resulting in the death of passengers Beter
and Rautraut was caused by force majeure or caso fortuito over which the common carrier did not have any control.
Article 1174 of the present Civil Code states:
Except in cases expressly specified by law, or when it is otherwise declared by stipulations, or when the nature of the
obligation requires the assumption of risk, no person shall be responsible for those events which could not be foreseen, or
which though foreseen, were inevitable.
The above-mentioned provision was substantially copied from Article 1105 of the old Civil Code which states"
No one shall be liable for events which could not be foreseen or which, even if foreseen, were inevitable, with the exception
of the cases in which the law expressly provides otherwise and those in which the obligation itself imposes liability.
In the case of Lasam v. Smith (45 Phil. 657 [1924]), we defined "events" which cannot be foreseen and which, having been
foreseen, are inevitable in the following manner:
... The Spanish authorities regard the language employed as an effort to define the term 'caso fortuito' and hold that the two
expressions are synonymous. (Manresa Comentarios al Codigo Civil Español, vol. 8, pp. 88 et seq.; Scaevola, Codigo Civil,
vol. 19, pp. 526 et seq.)
The antecedent to Article 1105 is found in Law II, Title 33, Partida 7, which defines caso fortuito as 'occasion que acaese
por aventura de que non se puede ante ver. E son estos, derrivamientos de casas e fuego que enciende a so ora, e
quebrantamiento de navio, fuerca de ladrones' (An event that takes place by incident and could not have been foreseen.
Examples of this are destruction of houses, unexpected fire, shipwreck, violence of robbers ...)
Escriche defines caso fortuito as an unexpected event or act of God which could neither be foreseen nor resisted, such as
floods, torrents, shipwrecks, conflagrations, lightning, compulsion, insurrections, destruction of buildings by unforeseen
accidents and other occurrences of a similar nature.
In discussing and analyzing the term caso fortuito the Enciclopedia Juridica Española says: 'In a legal sense and,
consequently, also in relation to contracts, a caso fortuito presents the following essential characteristics: (1) The cause of
the unforeseen and unexpected occurrence, or of the failure of the debtor to comply with his obligation, must be independent
of the human will. (2) It must be impossible to foresee the event which constitutes the caso fortuito, or if it can be foreseen,
it must be impossible to avoid. (3) The occurrence must be such as to render it impossible for the debtor to fulfill his obligation
in a normal manner. And (4) the obligor (debtor) must be free from any participation in the aggravation of the injury resulting
to the creditor. (5) Enciclopedia Juridica Española, 309)
As will be seen, these authorities agree that some extraordinary circumstance independent of the will of the obligor or of his
employees, is an essential element of a caso fortuito. ...
The running amuck of the passenger was the proximate cause of the incident as it triggered off a commotion and panic among
the passengers such that the passengers started running to the sole exit shoving each other resulting in the falling off the bus
by passengers Beter and Rautraut causing them fatal injuries. The sudden act of the passenger who stabbed another passenger
in the bus is within the context of force majeure.
However, in order that a common carrier may be absolved from liability in case of force majeure, it is not enough that the
accident was caused by force majeure. The common carrier must still prove that it was not negligent in causing the injuries
resulting from such accident. Thus, as early as 1912, we ruled:
From all the foregoing, it is concluded that the defendant is not liable for the loss and damage of the goods shipped on the
lorcha Pilar by the Chinaman, Ong Bien Sip, inasmuch as such loss and damage were the result of a fortuitous event or force
majeure, and there was no negligence or lack of care and diligence on the part of the defendant company or its agents. (Tan
Chiong Sian v. Inchausti & Co., 22 Phil. 152 [1912]; Emphasis supplied).
This principle was reiterated in a more recent case, Batangas Laguna Tayabas Co. v. Intermediate Appellate Court (167
SCRA 379 [1988]), wherein we ruled:
... [F]or their defense of force majeure or act of God to prosper the accident must be due to natural causes and exclusively
without human intervention. (Emphasis supplied)
Therefore, the next question to be determined is whether or not the petitioner's common carrier observed extraordinary
diligence to safeguard the lives of its passengers.
In this regard the trial court and the appellate court arrived at conflicting factual findings.
The trial court found the following facts:
The parties presented conflicting evidence as to how the two deceased Narcisa Rautruat and Ornominio Beter met their
deaths.
However, from the evidence adduced by the plaintiffs, the Court could not see why the two deceased could have fallen off
the bus when their own witnesses testified that when the commotion ensued inside the bus, the passengers pushed and shoved
each other towards the door apparently in order to get off from the bus through the door. But the passengers also could not
pass through the door because according to the evidence the door was locked.
On the other hand, the Court is inclined to give credence to the evidence adduced by the defendants that when the commotion
ensued inside the bus, the two deceased panicked and, in state of shock and fear, they jumped off from the bus by passing
through the window.
It is the prevailing rule and settled jurisprudence that transportation companies are not insurers of their passengers. The
evidence on record does not show that defendants' personnel were negligent in their duties. The defendants' personnel have
every right to accept passengers absent any manifestation of violence or drunkenness. If and when such passengers harm
other passengers without the knowledge of the transportation company's personnel, the latter should not be faulted. (Rollo,
pp. 46-47)
A thorough examination of the records, however, show that there are material facts ignored by the trial court which were Q So what happened to the passengers inside your bus?
discussed by the appellate court to arrive at a different conclusion. These circumstances show that the petitioner common
carrier was negligent in the provision of safety precautions so that its passengers may be transported safely to their A Some of the passengers jumped out of the window.
destinations. The appellate court states:
COURT:
A critical eye must be accorded the lower court's conclusions of fact in its tersely written ratio decidendi. The lower court
concluded that the door of the bus was closed; secondly, the passengers, specifically the two deceased, jumped out of the Q While the bus was in motion?
window. The lower court therefore concluded that the defendant common carrier is not liable for the death of the said
A Yes, your Honor, but the speed was slow because we have just picked up a passenger.
passengers which it implicitly attributed to the unforeseen acts of the unidentified passenger who went amuck.
Atty. Gambe:
There is nothing in the record to support the conclusion that the solitary door of the bus was locked as to prevent the
passengers from passing through. Leonila Cullano, testifying for the defense, clearly stated that the conductor opened the Q You said that at the time of the incident the bus was running slow because you have just picked up a passenger. Can you
door when the passengers were shouting that the bus stop while they were in a state of panic. Sergia Beter categorically stated estimate what was your speed at that time?
that she actually saw her son fall from the bus as the door was forced open by the force of the onrushing passengers.
Atty. Calo:
Pedro Collango, on the other hand, testified that he shut the door after the last passenger had boarded the bus. But he had
quite conveniently neglected to say that when the passengers had panicked, he himself panicked and had gone to open the No basis, your Honor, he is neither a driver nor a conductor.
door. Portions of the testimony of Leonila Cullano, quoted below, are illuminating:
COURT:
xxx xxx xxx
Let the witness answer. Estimate only, the conductor experienced.
Q When you said the conductor opened the door, the door at the front or rear portion of the bus?
Witness:
A Front door.
Not less than 30 to 40 miles.
Q And these two persons whom you said alighted, where did they pass, the fron(t) door or rear door?
COURT:
A Front door.
Kilometers or miles?
xxx xxx xxx
A Miles.
(Tsn., p. 4, Aug. 8, 1984)
Atty. Gambe:
xxx xxx xxx
Q That is only your estimate by your experience?
Q What happened after there was a commotion at the rear portion of the bus?
A Yes, sir, estimate.
A When the commotion occurred, I stood up and I noticed that there was a passenger who was sounded (sic). The conductor
panicked because the passengers were shouting 'stop, stop'. The conductor opened the bus.' (Tsn., pp. 4-5, Oct. 17, 1983).

(Tsn. p. 3, August 8, 1984).
Accordingly, there is no reason to believe that the deceased passengers jumped from the window when it was entirely possible
for them to have alighted through the door. The lower court's reliance on the testimony of Pedro Collango, as the conductor
and employee of the common carrier, is unjustified, in the light of the clear testimony of Leonila Cullano as the sole
uninterested eyewitness of the entire episode. Instead we find Pedro Collango's testimony to be infused by bias and fraught
with inconsistencies, if not notably unreliable for lack of veracity. On direct examination, he testified:
xxx xxx xxx
At such speed of not less than 30 to 40 miles ..., or about 48 to 65 kilometers per hour, the speed of the bus could scarcely
be considered slow considering that according to Collango himself, the bus had just come from a full stop after picking a
passenger (Tsn, p. 4, Id.) and that the bus was still on its second or third gear (Tsn., p. 12, Id.).
In the light of the foregoing, the negligence of the common carrier, through its employees, consisted of the lack of
extraordinary diligence required of common carriers, in exercising vigilance and utmost care of the safety of its passengers,
exemplified by the driver's belated stop and the reckless opening of the doors of the bus while the same was travelling at an
appreciably fast speed. At the same time, the common carrier itself acknowledged, through its administrative officer,
Benjamin Granada, that the bus was commissioned to travel and take on passengers and the public at large, while equipped
with only a solitary door for a bus its size and loading capacity, in contravention of rules and regulations provided for under
the Land Transportation and Traffic Code (RA 4136 as amended.) (Rollo, pp. 23-26)
Considering the factual findings of the Court of Appeals-the bus driver did not immediately stop the bus at the height of the
commotion; the bus was speeding from a full stop; the victims fell from the bus door when it was opened or gave way while
the bus was still running; the conductor panicked and blew his whistle after people had already fallen off the bus; and the
bus was not properly equipped with doors in accordance with law-it is clear that the petitioners have failed to overcome the
presumption of fault and negligence found in the law governing common carriers.
The petitioners' argument that the petitioners "are not insurers of their passengers" deserves no merit in view of the failure
of the petitioners to prove that the deaths of the two passengers were exclusively due to force majeure and not to the failure
of the petitioners to observe extraordinary diligence in transporting safely the passengers to their destinations as warranted
by law. (See Batangas Laguna Tayabas Co. v. Intermediate Appellate Court, supra).
The petitioners also contend that the private respondents failed to show to the court that they are the parents of Ornominio
Beter and Narcisa Rautraut respectively and therefore have no legal personality to sue the petitioners. This argument deserves
scant consideration. We find this argument a belated attempt on the part of the petitioners to avoid liability for the deaths of
Beter and Rautraut. The private respondents were Identified as the parents of the victims by witnesses during the trial and
the trial court recognized them as such. The trial court dismissed the complaint solely on the ground that the petitioners were
not negligent.
Finally, the amount of damages awarded to the heirs of Beter and Rautraut by the appellate court is supported by the evidence.
The appellate court stated:
Ornominio Beter was 32 years of age at the time of his death, single, in good health and rendering support and service to his
mother. As far as Narcisa Rautraut is concerned, the only evidence adduced is to the effect that at her death, she was 23 years
of age, in good health and without visible means of support.
In accordance with Art. 1764 in conjunction with Art. 2206 of the Civil Code, and established jurisprudence, several factors
may be considered in determining the award of damages, namely: 1) life expectancy (considering the state of health of the
deceased and the mortality tables are deemed conclusive) and loss of earning capacity; (2) pecuniary loss, loss of support
and service; and (3) moral and mental suffering (Alcantara, et al. v. Surro, et al., 93 Phil. 470).
In the case of People v. Daniel (No. L-66551, April 25, 1985, 136 SCRA 92, at page 104), the High Tribunal, reiterating the
rule in Villa Rey Transit, Inc. v. Court of Appeals (31 SCRA 511), stated that the amount of loss of earring capacity is based
mainly on two factors, namely, (1) the number of years on the basis of which the damages shall be computed; and (2) the
rate at which the losses sustained by the heirs should be fixed.
As the formula adopted in the case of Davila v. Philippine Air Lines, 49 SCRA 497, at the age of 30 one's normal life
expectancy is 33-1/3 years based on the American Expectancy Table of Mortality (2/3 x 80-32).i•t•c-aüsl By taking into
account the pace and nature of the life of a carpenter, it is reasonable to make allowances for these circumstances and reduce
the life expectancy of the deceased Ornominio Beter to 25 years (People v. Daniel, supra). To fix the rate of losses it must
be noted that Art. 2206 refers to gross earnings less necessary living expenses of the deceased, in other words, only net
earnings are to be considered (People v. Daniel, supra; Villa Rey Transit, Inc. v. Court of Appeals, supra).
Applying the foregoing rules with respect to Ornominio Beter, it is both just and reasonable, considering his social standing
and position, to fix the deductible, living and incidental expenses at the sum of Four Hundred Pesos (P400.00) a month, or
Four Thousand Eight Hundred Pesos (P4,800.00) annually. As to his income, considering the irregular nature of the work of
a daily wage carpenter which is seasonal, it is safe to assume that he shall have work for twenty (20) days a month at Twenty
Five Pesos (P150,000.00) for twenty five years. Deducting therefrom his necessary expenses, his heirs would be entitled to
Thirty Thousand Pesos (P30,000.00) representing loss of support and service (P150,000.00 less P120,000.00). In addition,
his heirs are entitled to Thirty Thousand Pesos (P30,000.00) as straight death indemnity pursuant to Article 2206 (People v.
Daniel, supra). For damages for their moral and mental anguish, his heirs are entitled to the reasonable sum of P10,000.00
as an exception to the general rule against moral damages in case of breach of contract rule Art. 2200 (Necesito v. Paras, 104
Phil. 75). As attorney's fees, Beter's heirs are entitled to P5,000.00. All in all, the plaintiff-appellants Ricardo and Sergia
Beter as heirs of their son Ornominio are entitled to an indemnity of Seventy Five Thousand Pesos (P75,000.00).
In the case of Narcisa Rautraut, her heirs are entitled to a straight death indemnity of Thirty Thousand Pesos (P30,000.00),
to moral damages in the amount of Ten Thousand Pesos (P10,000.00) and Five Thousand Pesos (P5,000.00) as attorney's
fees, or a total of Forty Five Thousand Pesos (P45,000.00) as total indemnity for her death in the absence of any evidence
that she had visible means of support. (Rollo, pp. 30-31)
WHEREFORE, the instant petition is DISMISSED. The questioned decision dated May 19, 1988 and the resolution dated
August 1, 1988 of the Court of Appeals are AFFIRMED.
SO ORDERED.
SILVERIO MARCHAN and PHILIPPINE RABBIT BUS CO., INC., petitioners,
vs.
ARSENIO MENDOZA, LEONARDA ILAYA, and ZENAIDA MENDOZA, respondents.
Petitioners, the driver of the passenger bus responsible for the injuries sustained by respondent for which he was duly
prosecuted and thereafter convicted for serious, less serious, and slight physical injuries, and the bus firm, the Philippine
Rabbit Bus Lines, seek the reversal of a Court of Appeals decision of December 14, 1964 and a resolution of March 31,
1965, holding them liable both for compensatory and exemplary damages as well as attorney's fees. It is the contention of
petitioners that errors of law were committed when, in the aforesaid decision, it was held that there was an implied contract
of carriage between the petitioner bus firm and respondents, the breach of which was the occasion for their liability for
compensatory and exemplary damages as well as attorneys fees.
The facts as found by the Court of Appeals follow: "In the evening of February 22, 1954, between 9:00 and 9:30 o'clock, a
passenger bus No. 141 of the Philippine Rabbit Bus Lines, bearing Plate No. TPU-708 which was then driven by Silverio
Marchan fell into a ditch somewhere in Barrio Malanday, Polo, Bulacan, while travelling on its way to Manila; as a result of
which plaintiffs-appellees Arsenio Mendoza, his wife and child, [respondents in this proceeding], who were then inside the
bus as passengers were thrown out to the ground resulting in their multiple injuries. Plaintiff Arsenio Mendoza suffered the
most serious injuries which damaged his vertebrae causing the paralysis of his lower extremities which up to the time when
this case was tried he continued to suffer. The physician who attended and treated plaintiff Arsenio Mendoza opined that he
may never walk again. Consequently the driver of said bus Silverio Marchan [now petitioner] was prosecuted for serious,
less serious and slight physical injuries through reckless imprudence before the Justice of the Peace Court of Polo Bulacan,
and thereafter convicted as charged on June 29, 1956 ..., which judgment of conviction was subsequently affirmed by the
Court of First Instance of same province ... In this present action before us, plaintiffs-appellees Arsenio Mendoza, his wife
and child sought to recover damages against defendant-appellant Arsenio Marchan, then the driver of bus No. 141 of the
Philippine Rabbit Bus Lines, and from defendants-appellants Bienvenido P. Buan and Natividad Paras in their capacity as
administrator and administratix, respectively of the estate of the late Florencio P. Buan, doing business under the style name
of the Philippine Rabbit Bus Lines, predicated not only on a breach of contract of carriage for failure of defendants operator
as well as the defendant driver to safely convey them to their destination, but also on account of a criminal negligence on the
part of defendant Silverio Marchan resulting to plaintiff-appellee's multiple physical damages."1
The Court of Appeals in the decision under review found that there was a preponderance of evidence to the effect that while
respondents Arsenio Mendoza, his wife, Leonarda Ilaya, and child, Zenaida Mendoza "were waiting for a passenger bus on
January 22, 1954 at about 9:00 in the evening at Malanday, they boarded defendants-appellants' bus bearing No. 141 of the
Philippine Rabbit Bus Lines with Plate No. TPU-708 bound for Manila. And they were treated as passengers thereto, for
they paid their corresponding fares. As they travelled along the highway bound for Manila, said bus was traveling at a high
rate of speed without due regard to the safety of the passengers. So much so that one of the passengers had to call the attention
of Silverio Marchan who was then at the steering wheel of said bus to lessen the speed or to slow down, but then defendant
Silverio Marchan did not heed the request of said passenger; neither did he slacken his speed. On the contrary, defendant
Silverio Marchan even increased his speed while approaching a six-by-six truck which was then parked ahead, apparently
for the purpose of passing the said parked truck and to avoid collision with the incoming vehicle from the opposite direction.
But, when appellant Silverio Marchan veered his truck to resume position over the right lane, the rear tires of said truck
skidded because of his high rate of speed, thereby causing said truck to fall into a ditch. Substantially, the happening of the
accident' resulting to the multiple injuries of plaintiffs-appellees, was explained by defendant Silverio Marchan who declared
that while he was driving his bus from Barrio Malanday bound towards Manila on a road test, he suddenly noticed an
oncoming vehicle. He thus shifted his light from dim to bright. Just then, he noticed a six-by-six truck parked on the right
lane of the road where he was driving. Confronted with such situation that if he would apply his brake he would bump his
bus against the parked truck he then increased his speed with the view of passing the said parked truck, and thereafter he
veered to negotiate for the proper position on the right lane, but in so doing he swerved to the right in order to avoid collision
from the oncoming vehicle the rear portion of the bus skidded and fell into the ditch."2
Hence the finding of negligence in the decision under review. Thus: "From the facts as established preponderantly by the
plaintiff and substantially corroborated by the defendant Silverio Marchan, it is clear that the cause of the accident was the
gross negligence of the defendant Silverio Marchan who when driving his vehicle on the night in question was expected to
have employed the highest degree of care; and should have been assiduously prudent in handling his vehicle to insure the
safety of his passengers. There is no reason why he could not have stopped his vehicle when noticing a parked truck ahead
of him if he was not driving at a high speed. His admission to the effect that if he would apply his brake he would bump or
hit the parked truck ahead of him, since there was no time for him to stop the bus he was driving, is a patent indication that
he was travelling at a high rate of speed without taking the necessary precaution under the circumstance, considering that it
was then nighttime. It is our considered view that under the situation as pictured before us by the driver of said bus, he should
not have increased his speed and by-passed the parked truck obviously with the view of preventing a collision with the
incoming vehicle. Any prudent person placed under the situation of the appellant would not have assumed the risk as what
appellant did. The most natural reaction that could be expected from one under the circumstance was for him to have
slackened and reduced his speed. But this was not done simply because defendant-appellant could not possibly do so under
the circumstance because he was then travelling at a high rate of speed. In fact, he had increased his speed in order to avoid
ramming the parked truck without, however, taking the necessary precaution to insure the safety of his passengers." 3
On the above facts, the Court of Appeals, in its decision of December 14, 1964, affirmed the amount of P40,000.00 awarded
by the court below as compensatory damages modifying the appealed lower court decision by holding petitioners to pay the
amount of P30,000.00 as exemplary damages and sustaining the award of attorney's fees in the amount of P5,000.00. Then
came the resolution of March 31, 1965 by the Court of Appeals, where the motion for reconsideration of petitioners was
denied for lack of merit.
In their brief as petitioners, the first error assigned is the alleged absence of an implied contract of carriage by the petitioner
bus firm and respondent. On this point, it was the holding of the Court of Appeals: "Since it is undisputed by the evidence
on record that appellant Silverio Marchan was then at the steering wheel of the vehicle of the defendant transportation
company at that moment, the riding public is not expected to inquire from time to time before they board the passenger bus
whether or not the driver who is at the steering wheel of said bus was authorized to drive said vehicle or that said driver is
acting within the scope of his authority and observing the existing rules and regulations required of him by the management.
To hold otherwise would in effect render the aforequoted provision of law (Article 1759) ineffective." 4 It is clear from the
above Civil Code provision that common carriers cannot escape liability "for the death of or injuries to passengers through
the negligence and 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..." 5 From Vda. de Medina v. Cresencia,6 where this Court, through Justice J.B.L.
Reyes, stressed the "direct and immediate" liability of the carrier under the above legal provision, "not merely subsidiary or
secondary," to Maranan v. Perez,7 a 1967 decision, the invariable holding has been the responsibility for breach of the
contract of carriage on the part of the carrier. According to the facts as above disclosed, which this Court cannot disturb, the
applicability of Article 1759 is indisputable. Hence, the total absence of merit of the first assignment of error.
The next two errors assigned would dispute the holding of the Court of Appeals in imposing liability in the respective amounts
of P40,000.00 for compensatory damages and P30,000.00 for exemplary damages. Again, such assignments of error cannot
be looked upon with favor. What the Court of Appeals did deserves not reprobation but approval by this Court.
As to why the amount in compensatory damages should be fixed in the sum of P40,000.00 is explained in the appealed
decision thus: "Likewise, it is our considered view that the amount of P40,000.00 awarded by the court below as
compensatory damages is quite reasonable and fair, considering that plaintiff Arsenio Mendoza had suffered paralysis on the
lower extremities, which will incapacitate him to engage in his customary occupation throughout the remaining years of his
life, especially so if we take into account that plaintiff Arsenio Mendoza was only 26 years old when he met an accident on
January 22, 1954; and taking the average span of life of a Filipino, he may be expected to live for 30 years more; and bearing
in mind the earning capacity of Arsenio Mendoza who before the happening of this accident derived an income of almost
P100.00 a month from the business of his father-in-law as Assistant Supervisor of the small [fairs] and his income of P100.00
a month which he derived as a professional boxer."8 Considering that respondent Arsenio Mendoza was only in his middle
twenties when, thru the negligence of petitioners, he lost the use of his limbs, being condemned for the remainder of his life
to be a paralytic, in effect leading a maimed, well-nigh useless existence, the fixing of such liability in the amount of
P40,000.00 as compensatory damages was well within the discretion of the Court of Appeals. 1äwphï1.ñët
As to the finding of liability for exemplary damages, the Court of Appeals, in its resolution of March 31, 1965, stated the
following: "We now come to the imposition of exemplary damages upon defendants-appellants' carrier. It is argued that this
Court is without jurisdiction to adjudicate this exemplary damages since there was no allegation nor prayer, nor proof, nor
counterclaim of error for the same by the appellees. It is to be observed however, that in the complaint, plaintiffs "prayed for
such other and further relief as this Court may deem just and equitable." Now, since the body of the complaint sought to
recover damages against the defendant-carrier wherein plaintiffs prayed for indemnification for the damages they suffered
as a result of the negligence of said Silverio Marchan who is appellant's employee; and since exemplary damages is intimately
connected with general damages, plaintiffs may not be expected to single out by express term the kind of damages they are
trying to recover against the defendant's carrier. Suffice it to state that when plaintiffs prayed in their complaint for such
other relief and remedies that may be availed of under the premises, in effect, therefore, the court is called upon the exercise
and use its discretion whether the imposition of punitive or exemplary damages even though not expressly prayed or pleaded
in the plaintiffs' complaint."9
In support of the above view, Singson v. Aragon was cited by the Court of Appeals. 10 As was there held by this Court: "From
the above legal provisions it appears that exemplary damages may be imposed by way of example or correction only in
addition, among others, to compensatory damages, but that they cannot be recovered as a matter of right, their determination
depending upon the discretion of the court. 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.".
Such a principle has been repeatedly upheld. 11 In Corpuz v. Cuaderno, 12 this Court, again through Justice J.B.L. Reyes,
made clear that the amount "lies within the province of the court a quo, ..." It must be admitted, of course, that where it could
be shown that a tribunal acted "with vindictiveness or wantonness and not in the exercise of honest judgment," then there is
room for the interposition of the corrective power of this Tribunal.
No such reproach can be hurled at the decision and resolution now under review. No such indictment would be justified. As
noted earlier, both the second and the third assignments of error are devoid of merit.
Nor is there any occasion to consider further the fourth assigned error, petitioner being dissatisfied with the award of
P5,000.00 as attorney's fees to respondents. On its face, such an assignment of an alleged error is conspicuously futile.
1äwphï1.ñët
The judgment, however, must be modified in accordance with the ruling of this Court in Soberano v. Manila Railroad Co.
13
Respondents are entitled to interest for the amount of compensatory damages from the date of the decision of the lower
court and legal interest on the exemplary damages from the date of the decision of the Court of Appeals.
WHEREFORE, as thus modified, the decision is affirmed, petitioners being liable for the sum of P40,000.00 in the concept
of compensatory damages with interest at the legal rate from and after January 26, 1960, and the sum of P30,000.00 as
exemplary damages with interest at the legal rate from and after December 14, 1964, as well as for the sum of P5,000.00 as
attorney's fees, likewise earning a legal rate of interest from and after January 26, 1960. Costs against petitioners.
ANTONIA MARANAN, plaintiff-appellant,
vs.
PASCUAL PEREZ, ET AL., defendants.
PASCUAL PEREZ, defendant appellant.
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
cannot 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.
JAPAN AIRLINES, petitioner,
vs.
THE COURT OF APPEALS, ENRIQUE AGANA., MARIA ANGELA NINA AGANA, ADALIA B. FRANCISCO
and JOSE MIRANDA, respondents.
Before us is an appeal by certiorari filed by petitioner Japan Airlines, Inc. (JAL) seeking the reversal of the decision of the
Court of Appeals, 1 which affirmed with modification the award of damages made by the trial court in favor of herein private
respondents Enrique Agana, Maria Angela Nina Agana, Adelia Francisco and Jose Miranda.
On June 13, 1991, private respondent Jose Miranda boarded JAL flight No. JL 001 in San Francisco, California bound for
Manila. Likewise, on the same day private respondents Enrique Agana, Maria Angela Nina Agana and Adelia Francisco left
Los Angeles, California for Manila via JAL flight No. JL 061. As an incentive for travelling on the said airline, both flights
were to make an overnight stopover at Narita, Japan, at the airlines' expense, thereafter proceeding to Manila the following
day.
Upon arrival at Narita, Japan on June 14, 1991, private respondents were billeted at Hotel Nikko Narita for the night. The
next day, private respondents, on the final leg of their journey, went to the airport to take their flight to Manila. However,
due to the Mt. Pinatubo eruption, unrelenting ashfall blanketed Ninoy Aquino International Airport (NAIA), rendering it
inaccessible to airline traffic. Hence, private respondents' trip to Manila was cancelled indefinitely.
To accommodate the needs of its stranded passengers, JAL rebooked all the Manila-bound passengers on flight No. 741 due
to depart on June 16, 1991 and also paid for the hotel expenses for their unexpected overnight stay. On June 16, 1991, much
to the dismay of the private respondents, their long anticipated flight to Manila was again cancelled due to NAIA's indefinite
closure. At this point, JAL informed the private respondents that it would no longer defray their hotel and accommodation
expense during their stay in Narita.
Since NAIA was only reopened to airline traffic on June 22, 1991, private respondents were forced to pay for their
accommodations and meal expenses from their personal funds from June 16 to June 21, 1991. Their unexpected stay in Narita
ended on June 22, 1991 when they arrived in Manila on board JL flight No. 741.
Obviously, still reeling from the experience, private respondents, on July 25, 1991, commenced an action for damages against
JAL before the Regional Trial Court of Quezon City, Branch 104. 2 To support their claim, private respondents asserted that
JAL failed to live up to its duty to provide care and comfort to its stranded passengers when it refused to pay for their hotel
and accommodation expenses from June 16 to 21, 1991 at Narita, Japan. In other words, they insisted that JAL was obligated
to shoulder their expenses as long as they were still stranded in Narita. On the other hand, JAL denied this allegation and
averred that airline passengers have no vested right to these amenities in case a flight is cancelled due to "force majeure."
On June 18, 1992, the trial court rendered its judgment in favor of private respondents holding JAL liable for damages, viz.:
WHEREFORE, judgment is rendered in favor of plaintiffs ordering the defendant Japan Airlines to pay the plaintiffs Enrique
Agana, Adalia B. Francisco and Maria Angela Nina Agana the sum of One million Two Hundred forty-six Thousand Nine
Hundred Thirty-Six Pesos (P1,246,936.00) and Jose Miranda the sum of Three Hundred Twenty Thousand Six Hundred
sixteen and 31/100 (P320,616.31) as actual, moral and exemplary damages and pay attorney's fees in the amount of Two
Hundred Thousand Pesos (P200,000.00), and to pay the costs of suit.
Undaunted, JAL appealed the decision before the Court of Appeals, which, however, with the exception of lowering the
damages awarded affirmed the trial court's finding, 3 thus:
Thus, the award of moral damages should be as it is hereby reduced to P200,000.00 for each of the plaintiffs, the exemplary
damages to P300,000.00 and the attorney's fees to P100,000.00 plus the costs.
WHEREFORE, with the foregoing Modification, the judgment appealed from is hereby AFFIRMED in all other respects.
JAL filed a motion for reconsideration which proved futile and unavailing. 4
Failing in its bid to reconsider the decision, JAL has now filed this instant petition.
The issue to be resolved is whether JAL, as a common carrier has the obligation to shoulder the hotel and meal expenses of
its stranded passengers until they have reached their final destination, even if the delay were caused by "force majeure."
To begin with, there is no dispute that the Mt. Pinatubo eruption prevented JAL from proceeding to Manila on schedule.
Likewise, private respondents concede that such event can be considered as "force majeure" since their delayed arrival in
Manila was not imputable to JAL. 5
However, private respondents contend that while JAL cannot be held responsible for the delayed arrival in Manila, it was
nevertheless liable for their living expenses during their unexpected stay in Narita since airlines have the obligation to ensure
the comfort and convenience of its passengers. While we sympathize with the private respondents' plight, we are unable to
accept this contention.
We are not unmindful of the fact that in a plethora of cases we have consistently ruled that a contract to transport passengers
is quite different in kind, and degree from any other contractual relation. It is safe to conclude that it is a relationship imbued
with public interest. Failure on the part of the common carrier to live up to the exacting standards of care and diligence
renders it liable for any damages that may be sustained by its passengers. However, this is not to say that common carriers
are absolutely responsible for all injuries or damages even if the same were caused by a fortuitous event. To rule otherwise
would render the defense of "force majeure," as an exception from any liability, illusory and ineffective.
Accordingly, there is no question that when a party is unable to fulfill his obligation because of "force majeure," the general
rule is that he cannot be held liable for damages for non-performance.6 Corollarily, when JAL was prevented from resuming
its flight to Manila due to the effects of Mt. Pinatubo eruption, whatever losses or damages in the form of hotel and meal
expenses the stranded passengers incurred, cannot be charged to JAL. Yet it is undeniable that JAL assumed the hotel
expenses of respondents for their unexpected overnight stay on June 15, 1991.
Admittedly, to be stranded for almost a week in a foreign land was an exasperating experience for the private respondents.
To be sure, they underwent distress and anxiety during their unanticipated stay in Narita, but their predicament was not due
to the fault or negligence of JAL but the closure of NAIA to international flights. Indeed, to hold JAL, in the absence of bad
faith or negligence, liable for the amenities of its stranded passengers by reason of a fortuitous event is too much of a burden
to assume.
Furthermore, it has been held that airline passengers must take such risks incident to the mode of travel. 7 In this regard,
adverse weather conditions or extreme climatic changes are some of the perils involved in air travel, the consequences of
which the passenger must assume or expect. After all, common carriers are not the insurer of all risks. 8
Paradoxically, the Court of Appeals, despite the presence of "force majeure," still ruled against JAL relying in our decision
in PAL v. Court of Appeals, 9 thus:
The position taken by PAL in this case clearly illustrates its failure to grasp the exacting standard required by law.
Undisputably, PAL's diversion of its flight due to inclement weather was a fortuitous event. Nonetheless, such occurrence
did not terminate PAL's contract with its passengers. Being in the business of air carriage and the sole one to operate in the
country, PAL is deemed 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 carrier's 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. On this score, PAL
grossly failed considering the then ongoing battle between government forces and Muslim rebels in Cotabato City and the
fact that the private respondent was a stranger to the place.
The reliance is misplaced. The factual background of the PAL case is different from the instant petition. In that case there
was indeed a fortuitous event resulting in the diversion of the PAL flight. However, the unforeseen diversion was worsened
when "private respondents (passenger) was left at the airport and could not even hitch a ride in a Ford Fiera loaded with PAL
personnel," 10 not to mention the apparent apathy of the PAL station manager as to the predicament of the stranded
passengers. 11 In light of these circumstances, we held that if the fortuitous event was accompanied by neglect and
malfeasance by the carrier's employees, an action for damages against the carrier is permissible. Unfortunately, for private
respondents, none of these conditions are present in the instant petition.
We are not prepared, however, to completely absolve petitioner JAL from any liability. It must be noted that private
respondents bought tickets from the United States with Manila as their final destination. While JAL was no longer required
to defray private respondents' living expenses during their stay in Narita on account of the fortuitous event, JAL had the duty
to make the necessary arrangements to transport private respondents on the first available connecting flight to Manila.
Petitioner JAL reneged on its obligation to look after the comfort and convenience of its passengers when it declassified
private respondents from "transit passengers" to "new passengers" as a result of which private respondents were obliged to
make the necessary arrangements themselves for the next flight to Manila. Private respondents were placed on the waiting
list from June 20 to June 24. To assure themselves of a seat on an available flight, they were compelled to stay in the airport
the whole day of June 22, 1991 and it was only at 8:00 p.m. of the aforesaid date that they were advised that they could be
accommodated in said flight which flew at about 9:00 a.m. the next day.
We are not oblivious to the fact that the cancellation of JAL flights to Manila from June 15 to June 21, 1991 caused
considerable disruption in passenger booking and reservation. In fact, it would be unreasonable to expect, considering NAIA's
closure, that JAL flight operations would be normal on the days affected. Nevertheless, this does not excuse JAL from its
obligation to make the necessary arrangements to transport private respondents on its first available flight to Manila. After
all, it had a contract to transport private respondents from the United States to Manila as their final destination.
Consequently, the award of nominal damages is in order. Nominal damages are adjudicated in order that a right of a plaintiff,
which has been violated or invaded by the defendant, may be vindicated or recognized and not for the purpose of
indemnifying any loss suffered by him. 12 The court may award nominal damages in every obligation arising from any
source enumerated in article 1157, or in every case where any property right has been invaded. 13
WHEREFORE, in view of the foregoing, the decision of the Court of Appeals dated December 22, 1993 is hereby
MODIFIED. The award of actual, moral and exemplary damages is hereby DELETED. Petitioner JAL is ordered to pay each
of the private respondents nominal damages in the sum of P100,000.00 each including attorney' s fees of P50,000.00 plus
costs.
SO ORDERED.
VICENTE CALALAS, petitioner,
vs.
COURT OF APPEALS, ELIZA JUJEURCHE SUNGA and FRANCISCO SALVA, respondents.
This is a petition for review on certiorari of the decision1 of the Court of Appeals, dated March 31, 1991, reversing the
contrary decision of the Regional Trial Court, Branch 36, Dumaguete City, and awarding damages instead to private
respondent Eliza Jujeurche Sunga as plaintiff in an action for breach of contract of carriage.
The facts, as found by the Court of Appeals, are as follows:
At 10 o'clock in the morning of August 23, 1989, private respondent Eliza Jujeurche G. Sunga, then a college freshman
majoring in Physical Education at the Siliman University, took a passenger jeepney owned and operated by petitioner Vicente
Calalas. As the jeepney was filled to capacity of about 24 passengers, Sunga was given by the conductor an "extension seat,"
a wooden stool at the back of the door at the rear end of the vehicle.
On the way to Poblacion Sibulan, Negros Occidental, the jeepney stopped to let a passenger off. As she was seated at the
rear of the vehicle, Sunga gave way to the outgoing passenger. Just as she was doing so, an Isuzu truck driven by Iglecerio
Verena and owned by Francisco Salva bumped the left rear portion of the jeepney. As a result, Sunga was injured. She
sustained a fracture of the "distal third of the left tibia-fibula with severe necrosis of the underlying skin." Closed reduction
of the fracture, long leg circular casting, and case wedging were done under sedation. Her confinement in the hospital lasted
from August 23 to September 7, 1989. Her attending physician, Dr. Danilo V. Oligario, an orthopedic surgeon, certified she
would remain on a cast for a period of three months and would have to ambulate in crutches during said period.
On October 9, 1989, Sunga filed a complaint for damages against Calalas, alleging violation of the contract of carriage by
the former in failing to exercise the diligence required of him as a common carrier. Calalas, on the other hand, filed a third-
party complaint against Francisco Salva, the owner of the Isuzu truck.
The lower court rendered judgment against Salva as third-party defendant and absolved Calalas of liability, holding that it
was the driver of the Isuzu truck who was responsible for the accident. It took cognizance of another case (Civil Case No.
3490), filed by Calalas against Salva and Verena, for quasi-delict, in which Branch 37 of the same court held Salva and his
driver Verena jointly liable to Calalas for the damage to his jeepney.
On appeal to the Court of Appeals, the ruling of the lower court was reversed on the ground that Sunga's cause of action was
based on a contract of carriage, not quasi-delict, and that the common carrier failed to exercise the diligence required under
the Civil Code. The appellate court dismissed the third-party complaint against Salva and adjudged Calalas liable for damages
to Sunga. The dispositive portion of its decision reads:
WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE, and another one is entered ordering
defendant-appellee Vicente Calalas to pay plaintiff-appellant:
(1) P50,000.00 as actual and compensatory damages;
(2) P50,000.00 as moral damages;
(3) P10,000.00 as attorney's fees; and
(4) P1,000.00 as expenses of litigation; and
(5) to pay the costs.
SO ORDERED.
Hence, this petition. Petitioner contends that the ruling in Civil Case No. 3490 that the negligence of Verena was the
proximate cause of the accident negates his liability and that to rule otherwise would be to make the common carrier an
insurer of the safety of its passengers. He contends that the bumping of the jeepney by the truck owned by Salva was a caso
fortuito. Petitioner further assails the award of moral damages to Sunga on the ground that it is not supported by evidence.
The petition has no merit.
The argument that Sunga is bound by the ruling in Civil Case No. 3490 finding the driver and the owner of the truck liable
for quasi-delict ignores the fact that she was never a party to that case and, therefore, the principle of res judicata does not
apply.
Nor are the issues in Civil Case No. 3490 and in the present case the same. The issue in Civil Case No. 3490 was whether
Salva and his driver Verena were liable for quasi-delict for the damage caused to petitioner's jeepney. On the other hand, the
issue in this case is whether petitioner is liable on his contract of carriage. The first, quasi-delict, also known as culpa
aquiliana or culpa extra contractual, has as its source the negligence of the tortfeasor. The second, breach of contract or
culpa contractual, is premised upon the negligence in the performance of a contractual obligation.
Consequently, in quasi-delict, the negligence or fault should be clearly established because it is the basis of the action,
whereas in breach of contract, the action can be prosecuted merely by proving the existence of the contract and the fact that
the obligor, in this case the common carrier, failed to transport his passenger safely to his destination.2 In case of death or
injuries to passengers, Art. 1756 of the Civil Code provides that common carriers are presumed to have been at fault or to
have acted negligently unless they prove that they observed extraordinary diligence as defined in Arts. 1733 and 1755 of the
Code. This provision necessarily shifts to the common carrier the burden of proof.
There is, thus, no basis for the contention that the ruling in Civil Case No. 3490, finding Salva and his driver Verena liable
for the damage to petitioner's jeepney, should be binding on Sunga. It is immaterial that the proximate cause of the collision
between the jeepney and the truck was the negligence of the truck driver. The doctrine of proximate cause is applicable only
in actions for quasi-delict, not in actions involving breach of contract. The doctrine is a device for imputing liability to a
person where there is no relation between him and another party. In such a case, the obligation is created by law itself. But,
where there is a pre-existing contractual relation between the parties, it is the parties themselves who create the obligation,
and the function of the law is merely to regulate the relation thus created. Insofar as contracts of carriage are concerned, some
aspects regulated by the Civil Code are those respecting the diligence required of common carriers with regard to the safety
of passengers as well as the presumption of negligence in cases of death or injury to passengers. It provides:
Art. 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound to observe
extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according
to all the circumstances of each case.
Such extraordinary diligence in the vigilance over the goods is further expressed in articles 1734, 1735, and 1746, Nos. 5, 6,
and 7, while the extraordinary diligence for the safety of the passengers is further set forth in articles 1755 and 1756.
Art. 1755. A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using
the utmost diligence of very cautious persons, with due regard for all the circumstances.
Art. 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 by articles 1733 and 1755.
In the case at bar, upon the happening of the accident, the presumption of negligence at once arose, and it became the duty
of petitioner to prove that he had to observe extraordinary diligence in the care of his passengers.
Now, did the driver of jeepney carry Sunga "safely as far as human care and foresight could provide, using the utmost
diligence of very cautious persons, with due regard for all the circumstances" as required by Art. 1755? We do not think so.
Several factors militate against petitioner's contention.
First, as found by the Court of Appeals, the jeepney was not properly parked, its rear portion being exposed about two meters
from the broad shoulders of the highway, and facing the middle of the highway in a diagonal angle. This is a violation of the
R.A. No. 4136, as amended, or the Land Transportation and Traffic Code, which provides:
Sec. 54. Obstruction of Traffic. — No person shall drive his motor vehicle in such a manner as to obstruct or impede the
passage of any vehicle, nor, while discharging or taking on passengers or loading or unloading freight, obstruct the free
passage of other vehicles on the highway.
Second, it is undisputed that petitioner's driver took in more passengers than the allowed seating capacity of the jeepney, a
violation of §32(a) of the same law. It provides:
Exceeding registered capacity. — No person operating any motor vehicle shall allow more passengers or more freight or
cargo in his vehicle than its registered capacity.
The fact that Sunga was seated in an "extension seat" placed her in a peril greater than that to which the other passengers
were exposed. Therefore, not only was petitioner unable to overcome the presumption of negligence imposed on him for the
injury sustained by Sunga, but also, the evidence shows he was actually negligent in transporting passengers.
We find it hard to give serious thought to petitioner's contention that Sunga's taking an "extension seat" amounted to an
implied assumption of risk. It is akin to arguing that the injuries to the many victims of the tragedies in our seas should not
be compensated merely because those passengers assumed a greater risk of drowning by boarding an overloaded ferry. This
is also true of petitioner's contention that the jeepney being bumped while it was improperly parked constitutes caso fortuito.
A caso fortuito is an event which could not be foreseen, or which, though foreseen, was inevitable.3 This requires that the
following requirements be present: (a) the cause of the breach is independent of the debtor's will; (b) the event is
unforeseeable or unavoidable; (c) the event is such as to render it impossible for the debtor to fulfill his obligation in a normal
manner, and (d) the debtor did not take part in causing the injury to the
creditor.4 Petitioner should have foreseen the danger of parking his jeepney with its body protruding two meters into the
highway.
Finally, petitioner challenges the award of moral damages alleging that it is excessive and without basis in law. We find this
contention well taken.
In awarding moral damages, the Court of Appeals stated:
Plaintiff-appellant at the time of the accident was a first-year college student in that school year 1989-1990 at the Silliman
University, majoring in Physical Education. Because of the injury, she was not able to enroll in the second semester of that
school year. She testified that she had no more intention of continuing with her schooling, because she could not walk and
decided not to pursue her degree, major in Physical Education "because of my leg which has a defect already."
Plaintiff-appellant likewise testified that even while she was under confinement, she cried in pain because of her injured left
foot. As a result of her injury, the Orthopedic Surgeon also certified that she has "residual bowing of the fracture side." She
likewise decided not to further pursue Physical Education as her major subject, because "my left leg . . . has a defect already."
Those are her physical pains and moral sufferings, the inevitable bedfellows of the injuries that she suffered. Under Article
2219 of the Civil Code, she is entitled to recover moral damages in the sum of P50,000.00, which is fair, just and reasonable.
As a general rule, moral damages are not recoverable in actions for damages predicated on a breach of contract for it is not
one of the items enumerated under Art. 2219 of the Civil Code.5 As an exception, such damages are recoverable: (1) in cases
in which the mishap results in the death of a passenger, as provided in Art. 1764, in relation to Art. 2206(3) of the Civil Code;
and (2) in the cases in which the carrier is guilty of fraud or bad faith, as provided in Art. 2220.6
In this case, there is no legal basis for awarding moral damages since there was no factual finding by the appellate court that
petitioner acted in bad faith in the performance of the contract of carriage. Sunga's contention that petitioner's admission in
open court that the driver of the jeepney failed to assist her in going to a nearby hospital cannot be construed as an admission
of bad faith. The fact that it was the driver of the Isuzu truck who took her to the hospital does not imply that petitioner was
utterly indifferent to the plight of his injured passenger. If at all, it is merely implied recognition by Verena that he was the
one at fault for the accident.
WHEREFORE, the decision of the Court of Appeals, dated March 31, 1995, and its resolution, dated September 11, 1995,
are AFFIRMED, with the MODIFICATION that the award of moral damages is DELETED.
SO ORDERED.
PHILIPPINE RABBIT BUS LINES, INC., petitioner,
vs.
THE HONORABLE INTERMEDIATE APPELLATE COURT AND CASIANO PASCUA, ET AL., respondents.
This is a petition for review on certiorari of the decision of the Intermediate Appellate Court (now Court of Appeals) dated
July 29, 1983 in AC-G.R. Nos. CV-65885, CV-65886 and CV-65887 which reversed the decision of the Court of First
Instance (now Regional Trial Court) of Pangasinan dated December 27, 1978; and its resolution dated November 28, 1983
denying the motion for reconsideration.
It is an established principle that the factual findings of the Court of Appeals are final and may not be reviewed by this Court
on appeal. However, this principle is subject to certain exceptions. One of these is when the findings of the appellate court
are contrary to those of the trial court (see Sabinosa v. The Honorable Court of Appeals, et al., G.R. No. L-47981, July 24,
1989) in which case, a re-examination of the facts and evidence may be undertaken. This is our task now.
The antecedent facts are as follows:
About 11:00 o'clock in the morning on December 24, 1966, Catalina Pascua, Caridad Pascua, Adelaida Estomo, Erlinda
Meriales, Mercedes Lorenzo, Alejandro Morales and Zenaida Parejas boarded the jeepney owned by spouses Isidro Mangune
and Guillerma Carreon and driven by Tranquilino Manalo at Dau, Mabalacat, Pampanga bound for Carmen, Rosales,
Pangasinan to spend Christmas at their respective homes. Although they usually ride in buses, they had to ride in a jeepney
that day because the buses were full. Their contract with Manalo was for them to pay P24.00 for the trip. The private
respondents' testimonial evidence on this contractual relationship was not controverted by Mangune, Carreon and Manalo,
nor by Filriters Guaranty Assurance Corporation, Inc., the insurer of the jeepney, with contrary evidence. Purportedly riding
on the front seat with Manalo was Mercedes Lorenzo. On the left rear passenger seat were Caridad Pascua, Alejandro Morales
and Zenaida Parejas. On the right rear passenger seat were Catalina Pascua, Adelaida Estomo, and Erlinda Meriales. After a
brief stopover at Moncada, Tarlac for refreshment, the jeepney proceeded towards Carmen, Rosales, Pangasinan.
Upon reaching barrio Sinayoan, San Manuel, Tarlac, the right rear wheel of the jeepney was detached, so it was running in
an unbalanced position. Manalo stepped on the brake, as a result of which, the jeepney which was then running on the eastern
lane (its right of way) made a U-turn, invading and eventually stopping on the western lane of the road in such a manner that
the jeepney's front faced the south (from where it came) and its rear faced the north (towards where it was going). The jeepney
practically occupied and blocked the greater portion of the western lane, which is the right of way of vehicles coming from
the north, among which was Bus No. 753 of petitioner Philippine Rabbit Bus Lines, Inc. (Rabbit) driven by Tomas delos
Reyes. Almost at the time when the jeepney made a sudden U-turn and encroached on the western lane of the highway as
claimed by Rabbit and delos Reyes, or after stopping for a couple of minutes as claimed by Mangune, Carreon and Manalo,
the bus bumped from behind the right rear portion of the jeepney. As a result of the collision, three passengers of the jeepney
(Catalina Pascua, Erlinda Meriales and Adelaida Estomo) died while the other jeepney passengers sustained physical injuries.
What could have been a festive Christmas turned out to be tragic?
The causes of the death of the three jeepney passengers were as follows (p. 101, Record on Appeal):
The deceased Catalina Pascua suffered the following injuries, to wit: fracture of the left parietal and temporal regions of the
skull; fracture of the left mandible; fracture of the right humenous; compound fracture of the left radious and ullma middle
third and lower third; fracture of the upper third of the right tibia and fillnea; avulsion of the head, left internal; and multiple
abrasions. The cause of her death was shock, secondary to fracture and multiple hemorrhage. The fractures were produced
as a result of the hitting of the victim by a strong force. The abrasions could be produced when a person falls from a moving
vehicles (sic) and rubs parts of her body against a cement road pavement. . . .
Erlinda Mariles (sic) sustained external lesions such as contusion on the left parietal region of the skull; hematoma on the
right upper lid; and abrasions (sic) on the left knee. Her internal lesions were: hematoma on the left thorax; multiple
lacerations of the left lower lobe of the lungs; contusions on the left lower lobe of the lungs; and simple fractures of the 2nd,
3rd, 4th, 5th, 6th, 7th, and 8th ribs, left. The forcible impact of the jeep caused the above injuries which resulted in her death.
...
The cause of death of Erlinda or Florida Estomo (also called as per autopsy of Dr. Panlasiqui was due to shock due to internal
hemorrhage, ruptured spleen and trauma. . . .
Caridad Pascua suffered physical injuries as follows (p. 101, Record on Appeal):
. . . Lacerated wound on the forehead and occipital region, hematoma on the forehead, multiple abrasions on the forearm,
right upper arm, back and right leg. . . .
The police investigators of Tacpal and policemen of San Manuel, Tarlac, Tarlac, upon arrival at the scene of the mishap,
prepared a sketch (common exhibit "K" for private respondents "19" for Rabbit) showing the relative positions of the two
vehicles as well as the alleged point of impact (p. 100, Record on Appeal):
. . . The point of collision was a cement pave-portion of the Highway, about six (6) meters wide, with narrow shoulders with
grasses beyond which are canals on both sides. The road was straight and points 200 meters north and south of the point of
collision are visible and unobstructed. Purportedly, the point of impact or collision (Exh. "K-4", Pascua on the sketch Exh.
"K"-Pascua) was on the western lane of the highway about 3 feet (or one yard) from the center line as shown by the bedris
(sic), dirt and soil (obviously from the undercarriage of both vehicles) as well as paint, marron (sic) from the Rabbit bus and
greenish from the jeepney. The point of impact encircled and marked with the letter "X" in Exh. "K"-4 Pascua, had a diameter
of two meters, the center of which was about two meters from the western edge of cement pavement of the roadway. Pictures
taken by witness Bisquera in the course of the investigation showed the relative positions of the point of impact and center
line (Exh. "P"-Pascua) the back of the Rabbit bus (Exh. "P"-1-Pascua"), the lifeless body of Catalina Pascua (Exh. "P-2
Pascua"), and the damaged front part of the Rabbit bus (Exh. "P-3 Pascua"). No skid marks of the Rabbit bus was found in
the vicinity of the collision, before or after the point of impact. On the other hand, there was a skid mark about 45 meters
long purportedly of the jeepney from the eastern shoulder of the road south of, and extending up to the point of impact.
At the time and in the vicinity of the accident, there were no vehicles following the jeepney, neither were there oncoming
vehicles except the bus. The weather condition of that day was fair.
After conducting the investigation, the police filed with the Municipal Court of San Manuel, Tarlac, a criminal complaint
against the two drivers for Multiple Homicide. At the preliminary investigation, a probable cause was found with respect to
the case of Manalo, thus, his case was elevated to the Court of First Instance. However, finding no sufficiency of evidence
as regards the case of delos Reyes, the Court dismissed it. Manalo was convicted and sentenced to suffer imprisonment. Not
having appealed, he served his sentence.
Complaints for recovery of damages were then filed before the Court of First Instance of Pangasinan. In Civil Case No. 1136,
spouses Casiano Pascua and Juana Valdez sued as heirs of Catalina Pascua while Caridad Pascua sued in her behalf. In Civil
Case No. 1139, spouses Manuel Millares and Fidencia Arcica sued as heirs of Erlinda Meriales. In Civil Case No. 1140,
spouses Mariano Estomo and Dionisia Sarmiento also sued as heirs of Adelaida Estomo.
In all three cases, spouses Mangune and Carreon, Manalo, Rabbit and delos Reyes were all impleaded as defendants.
Plaintiffs anchored their suits against spouses Mangune and Carreon and Manalo on their contractual liability. As against
Rabbit and delos Reyes, plaintiffs based their suits on their culpability for a quasi-delict. Filriters Guaranty Assurance
Corporation, Inc. was also impleaded as additional defendant in Civil Case No. 1136 only.
For the death of Catalina Pascua, plaintiffs in Civil Case No. 1136 sought to collect the aggregate amount of P70,060.00 in
damages, itemized as follows: P500.00 for burial expenses; P12,000.00 for loss of wages for 24 years; P10,000.00 for
exemplary damages; P10,000.00 for moral damages; and P3,000.00 for attorney's fees. In the same case, plaintiff Caridad
Pascua claimed P550.00 for medical expenses; P240.00 for loss of wages for two months; P2,000.00 for disfigurement of
her face; P3,000.00 for physical pain and suffering; P2,500.00 as exemplary damages and P2,000.00 for attorney's fees and
expenses of litigation.
In Civil Case No. 1139, plaintiffs demanded P500.00 for burial expenses; P6,000.00 for the death of Erlinda, P63,000.00 for
loss of income; P10,000.00 for moral damages and P3,000.00 for attorney's fees or total of P80,000.00.
In Civil Case No. 1140, plaintiffs claimed P500.00 for burial expenses; P6,000.00 for the death of Adelaide, P56,160.00 for
loss of her income or earning capacity; P10,000.00 for moral damages; and P3,000.00 for attorney's fees.
Rabbit filed a cross-claim in the amount of P15,000.00 for attorney's fees and expenses of litigation. On the other hand,
spouses Mangune and Carreon filed a cross-claim in the amount of P6,168.00 for the repair of the jeepney and P3,000.00 for
its non-use during the period of repairs.
On December 27, 1978, the trial court rendered its decision finding Manalo negligent, the dispositive portion of which reads
(pp. 113-114, Record on Appeal):
PREMISES CONSIDERED, this Court is of the opinion and so holds:
1) That defendants Isidro Mangune, Guillerma Carreon and Tranquilino Manalo thru their negligence, breached contract of
carriage with their passengers the plaintiffs' and/or their heirs, and this Court renders judgment ordering said defendants,
jointly and severally, to pay the plaintiffs —
a) In Civil Case No. 1136, for the death of Catalina Pascua, to pay her heirs the amounts of P12,000.00 for indemnity for
loss of her life; P41,760.00 for loss of earnings; P324.40 for actual expenses and P2,000.00 for moral damages;
b) In the same Civil Case No.1136 for the injuries of Caridad Pascua, to pay her the amounts of P240.00 for loss of wages,
P328.20 for actual expenses and P500.00 for moral damages;
c) In Civil Case No.1139 for the death of Erlinda Meriales, to pay her heirs (the plaintiffs) the amount of P12,000.00 — for
indemnity for loss of her life; P622.00 for actual expenses, P60,480.00 for loss of wages or income and P2,000.00 for moral
damages;
d) In Civil Case No. 1140, for the death of Erlinda (also called Florida or Adelaida Estomo), to pay her heirs (the plaintiff
the amount of P12,000.00 for indemnity for the loss of her life; P580.00 for actual expenses; P53,160.00 for loss of wages
or income and P2,000.00 for moral damages.
2) The defendant Filriters Guaranty Insurance Co., having contracted to ensure and answer for the obligations of defendants
Mangune and Carreon for damages due their passengers, this Court renders judgment against the said defendants Filriters
Guaranty Insurance Co., jointly and severally with said defendants (Mangune and Carreon) to pay the plaintiffs the amount
herein above adjudicated in their favor in Civil Case No. 1136 only. All the amounts awarded said plaintiff, as set forth in
paragraph one (1) hereinabove;
3) On the cross claim of Phil. Rabbit Bus Lines, Inc. ordering the defendant, Isidro Mangune, Guillerma Carreon and
Tranquilino Manalo, to pay jointly and severally, cross-claimant Phil. Rabbit Bus Lines, Inc., the amounts of P216.27 as
actual damages to its Bus No. 753 and P2,173.60 for loss of its earning.
All of the above amount, shall bear legal interest from the filing of the complaints.
Costs are adjudged against defendants Mangune, Carreon and Manalo and Filriters Guaranty.
SO ORDERED
On appeal, the Intermediate Appellate Court reversed the above-quoted decision by finding delos Reyes negligent, the
dispositive portion of which reads (pp. 55-57, Rollo):
WHEREFORE, PREMISES CONSIDERED, the lower court's decision is hereby REVERSED as to item No. 3 of the
decision which reads:
3) On the cross claim of Philippine Rabbit Bus Lines, Inc. ordering the defendants Isidro Mangune, Guillerma Carreon and
Tranquilino Manalo, to pay jointly and severally, the amounts of P216.27 as actual damages to its Bus No. 753 and P2,173.60
for loss of its earnings.
And another judgment is hereby rendered in favor of plaintiffs-appellants Casiana Pascua, Juan Valdez and Caridad Pascua,
ordering the Philippine Rabbit Bus Lines, Inc. and its driver Tomas delos Reyes to pay the former jointly and severally
damages in amounts awarded as follows:
With costs against the Philippine Rabbit Bus Lines, Inc.
SO ORDERED.
The motion for reconsideration was denied. Hence, the present petition.
The issue is who is liable for the death and physical injuries suffered by the passengers of the jeepney?
The trial court, in declaring that Manalo was negligent, considered the following (p. 106, Record on Appeal):
(1) That the unrebutted testimony of his passenger plaintiff Caridad Pascua that a long ways (sic) before reaching the point
of collision, the Mangune jeepney was "running fast" that his passengers cautioned driver Manalo to slow down but did not
heed the warning: that the right rear wheel was detached causing the jeepney to run to the eastern shoulder of the road then
back to the concrete pavement; that driver Manalo applied the brakes after which the jeepney made a U-turn (half-turn) in
such a manner that it inverted its direction making it face South instead of north; that the jeepney stopped on the western lane
of the road on the right of way of the oncoming Phil. Rabbit Bus where it was bumped by the latter;
(2) The likewise unrebutted testimony of Police Investigator Tacpal of the San Manuel (Tarlac) Police who, upon responding
to the reported collission, found the real evidence thereat indicate in his sketch (Exh. K, Pascua ), the tracks of the jeepney
of defendant Mangune and Carreon running on the Eastern shoulder (outside the concrete paved road) until it returned to the
concrete road at a sharp angle, crossing the Eastern lane and the (imaginary) center line and encroaching fully into the western
lane where the collision took place as evidenced by the point of impact;
(3) The observation of witness Police Corporal Cacalda also of the San Manuel Police that the path of the jeepney they found
on the road and indicated in the sketch (Exh. K-Pascua) was shown by skid marks which he described as "scratches on the
road caused by the iron of the jeep, after its wheel was removed;"
(4) His conviction for the crime of Multiple Homicide and Multiple Serious Physical Injuries with Damage to Property thru
Reckless Imprudence by the Court of First Instance of Tarlac (Exh. 24-Rabbit) upon the criminal Information by the
Provincial Fiscal of Tarlac (Exh. 23-Rabbit), as a result of the collision, and his commitment to prison and service of his
sentence (Exh. 25-Rabbit) upon the finality of the decision and his failure to appeal therefrom; and
(5) The application of the doctrine of res-ipsa loquitar (sic) attesting to the circumstance that the collision occured (sic) on
the right of way of the Phil. Rabbit Bus.
The respondent court had a contrary opinion. Applying primarily (1) the doctrine of last clear chance, (2) the presumption
that drivers who bump the rear of another vehicle guilty and the cause of the accident unless contradicted by other evidence,
and (3) the substantial factor test. Concluded that delos Reyes was negligent.
The misappreciation of the facts and evidence and the misapplication of the laws by the respondent court warrant a reversal
of its questioned decision and resolution.
We reiterate that "[t]he principle about "the last clear" chance, would call for application in a suit between the owners and
drivers of the two colliding vehicles. It does not arise where a passenger demands responsibility from the carrier to enforce
its contractual obligations. For it would be inequitable to exempt the negligent driver of the jeepney and its owners on the
ground that the other driver was likewise guilty of negligence." This was Our ruling in Anuran, et al. v. Buño et al., G.R.
Nos. L-21353 and L-21354, May 20, 1966, 17 SCRA 224. 1 Thus, the respondent court erred in applying said doctrine.
On the presumption that drivers who bump the rear of another vehicle guilty and the cause of the accident, unless contradicted
by other evidence, the respondent court said (p. 49, Rollo):
. . . the jeepney had already executed a complete turnabout and at the time of impact was already facing the western side of
the road. Thus the jeepney assumed a new frontal position vis a vis, the bus, and the bus assumed a new role of defensive
driving. The spirit behind the presumption of guilt on one who bumps the rear end of another vehicle is for the driver
following a vehicle to be at all times prepared of a pending accident should the driver in front suddenly come to a full stop,
or change its course either through change of mind of the front driver, mechanical trouble, or to avoid an accident. The rear
vehicle is given the responsibility of avoiding a collision with the front vehicle for it is the rear vehicle who has full control
of the situation as it is in a position to observe the vehicle in front of it.
The above discussion would have been correct were it not for the undisputed fact that the U-turn made by the jeepney was
abrupt (Exhibit "K," Pascua). The jeepney, which was then traveling on the eastern shoulder, making a straight, skid mark
of approximately 35 meters, crossed the eastern lane at a sharp angle, making a skid mark of approximately 15 meters from
the eastern shoulder to the point of impact (Exhibit "K" Pascua). Hence, delos Reyes could not have anticipated the sudden
U-turn executed by Manalo. The respondent court did not realize that the presumption was rebutted by this piece of evidence.
With regard to the substantial factor test, it was the opinion of the respondent court that (p. 52, Rollo):
. . . It is the rule under the substantial factor test that if the actor's conduct is a substantial factor in bringing about harm to
another, the fact that the actor neither foresaw nor should have foreseen the extent of the harm or the manner in which it
occurred does not prevent him from being liable (Restatement, Torts, 2d). Here, We find defendant bus running at a fast
speed when the accident occurred and did not even make the slightest effort to avoid the accident . . . The bus driver's conduct
is thus a substantial factor in bringing about harm to the passengers of the jeepney, not only because he was driving fast and
did not even attempt to avoid the mishap but also because it was the bus which was the physical force which brought about
the injury and death to the passengers of the jeepney.
The speed of the bus was calculated by respondent court as follows (pp. 54-55, Rollo):
According to the record of the case, the bus departed from Laoag, Ilocos Norte, at 4:00 o'clock A.M. and the accident took
place at approximately around 12:30 P.M., after travelling roughly for 8 hours and 30 minutes. Deduct from this the actual
stopover time of two Hours (computed from the testimony of the driver that he made three 40-minute stop-overs), We will
have an actual travelling time of 6 hours and 30 minutes.
Under the circumstances, We calculate that the Laoag-Tarlac route (365 kms.) driving at an average of 56 km. per hour
would take 6 hours and 30 minutes. Therefore, the average speed of the bus, give and take 10 minutes, from the point of
impact on the highway with excellent visibility factor would be 80 to 90 kms. per hour, as this is the place where buses would
make up for lost time in traversing busy city streets.
Still, We are not convinced. It cannot be said that the bus was travelling at a fast speed when the accident occurred because
the speed of 80 to 90 kilometers per hour, assuming such calculation to be correct, is yet within the speed limit allowed in
highways. We cannot even fault delos Reyes for not having avoided the collision. As aforestated, the jeepney left a skid mark
of about 45 meters, measured from the time its right rear wheel was detached up to the point of collision. Delos Reyes must
have noticed the perilous condition of the jeepney from the time its right rear wheel was detached or some 90 meters away,
considering that the road was straight and points 200 meters north and south of the point of collision, visible and unobstructed.
Delos Reyes admitted that he was running more or less 50 kilometers per hour at the time of the accident. Using this speed,
delos Reyes covered the distance of 45 meters in 3.24 seconds. If We adopt the speed of 80 kilometers per hour, delos Reyes
would have covered that distance in only 2.025 seconds. Verily, he had little time to react to the situation. To require delos
Reyes to avoid the collision is to ask too much from him. Aside from the time element involved, there were no options
available to him. As the trial court remarked (pp. 107-108, Record on Appeal):
. . . They (plaintiffs) tried to impress this Court that defendant de los Reyes, could have taken either of two options: (1) to
swerve to its right (western shoulder) or (2) to swerve to its left (eastern lane), and thus steer clear of the Mangune jeepney.
This Court does not so believe, considering the existing exigencies of space and time.
As to the first option, Phil. Rabbit's evidence is convincing and unrebutted that the Western shoulder of the road was narrow
and had tall grasses which would indicate that it was not passable. Even plaintiffs own evidence, the pictures (Exhs. P and
P-2, Pascua) are mute confirmation of such fact. Indeed, it can be noticed in the picture (Exh. P-2, Pascua) after the Rabbit
bus came to a full stop, it was tilted to right front side, its front wheels resting most probably on a canal on a much lower
elevation that of the shoulder or paved road. It too shows that all of the wheels of the Rabbit bus were clear of the roadway
except the outer left rear wheel. These observation appearing in said picture (Exh P-2, Pascua) clearly shows coupled with
the finding the Rabbit bus came to a full stop only five meters from the point of impact (see sketch, Exh. K-Pascua) clearly
show that driver de los Reyes veered his Rabbit bus to the right attempt to avoid hitting the Mangune's jeepney. That it was
not successful in fully clearing the Mangune jeepney as its (Rabbit's) left front hit said jeepney (see picture Exh. 10-A-Rabbit)
must have been due to limitations of space and time.
Plaintiffs alternatively claim that defendant delos Reyes of the Rabbit bus could also have swerved to its left (eastern lane)
to avoid bumping the Mangune jeepney which was then on the western lane. Such a claim is premised on the hypothesis (sic)
that the eastern lane was then empty. This claim would appear to be good copy of it were based alone on the sketch made
after the collision. Nonetheless, it loses force it one were to consider the time element involved, for moments before that, the
Mangune jeepney was crossing that very eastern lane at a sharp angle. Under such a situation then, for driver delos Reyes to
swerve to the eastern lane, he would run the greater risk of running smack in the Mangune jeepney either head on or broadside.
After a minute scrutiny of the factual matters and duly proven evidence, We find that the proximate cause of the accident
was the negligence of Manalo and spouses Mangune and Carreon. They all failed to exercise the precautions that are needed
precisely pro hac vice.
In culpa contractual, the moment a passenger dies or is injured, the carrier is presumed to have been at fault or to have acted
negligently, and this disputable presumption may only be overcome by evidence that he had observed extra-ordinary
diligence as prescribed in Articles 1733, 1755 and 1756 of the New Civil Code 2 or that the death or injury of the passenger
was due to a fortuitous event 3 (Lasam v. Smith, Jr., 45 Phil. 657).
The negligence of Manalo was proven during the trial by the unrebutted testimonies of Caridad Pascua, Police Investigator
Tacpal, Police Corporal Cacalda, his (Manalo's) conviction for the crime of Multiple Homicide and Multiple Serious Injuries
with Damage to Property thru Reckless Imprudence, and the application of the doctrine of res ipsa loquitur supra. The
negligence of spouses Mangune and Carreon was likewise proven during the trial (p. 110, Record on Appeal):
To escape liability, defendants Mangune and Carreon offered to show thru their witness Natalio Navarro, an alleged
mechanic, that he periodically checks and maintains the jeepney of said defendants, the last on Dec. 23, the day before the
collision, which included the tightening of the bolts. This notwithstanding the right rear wheel of the vehicle was detached
while in transit. As to the cause thereof no evidence was offered. Said defendant did not even attempt to explain, much less
establish, it to be one caused by a caso fortuito.
In any event, "[i]n an action for damages against the carrier for his failure to safely carry his passenger to his destination, an
accident caused either by defects in the automobile or through the negligence of its driver, is not a caso fortuito which would
avoid the carriers liability for damages (Son v. Cebu Autobus Company, 94 Phil. 892 citing Lasam, et al. v. Smith, Jr., 45
Phil. 657; Necesito, etc. v. Paras, et al., 104 Phil. 75).
The trial court was therefore right in finding that Manalo and spouses Mangune and Carreon were negligent. However, its
ruling that spouses Mangune and Carreon are jointly and severally liable with Manalo is erroneous the driver cannot be held
jointly and severally liable with the carrier in case of breach of the contract of carriage. The rationale behind this is readily
discernible. Firstly, the contract of carriage is between the carrier and the passenger, and in the event of contractual liability,
the carrier is exclusively responsible therefore to the passenger, even if such breach be due to the negligence of his driver
(see Viluan v. The Court of Appeals, et al., G.R. Nos. L-21477-81, April 29, 1966, 16 SCRA 742). In other words, the carrier
can neither shift his liability on the contract to his driver nor share it with him, for his driver's negligence is his. 4 Secondly,
if We make the driver jointly and severally liable with the carrier, that would make the carrier's liability personal instead of
merely vicarious and consequently, entitled to recover only the share which corresponds to the driver, 5 contradictory to the
explicit provision of Article 2181 of the New Civil Code. 6
We affirm the amount of damages adjudged by the trial court, except with respect to the indemnity for loss of life. Under
Article 1764 in relation to Article 2206 of the New Civil Code, the amount of damages for the death of a passenger is at least
three thousand pesos (P3,000.00). The prevailing jurisprudence has increased the amount of P3,000.00 to P30,000.00 (see
Heirs of Amparo delos Santos, et al. v. Honorable Court of Appeals, et al., G.R. No. 51165, June 21, 1990 citing De Lima v.
Laguna Tayabas Co., G.R. Nos. L-35697-99, April 15, 1988, 160 SCRA 70).
ACCORDINGLY, the petition is hereby GRANTED. The decision of the Intermediate Appellate Court dated July 29, 1983
and its resolution dated November 28, 1983 are SET ASIDE. The decision of the Court of First Instance dated December 27,
1978 is REINSTATED MODIFICATION that only Isidro Mangune, Guillerma Carreon and Filriters Guaranty Assurance
Corporation, Inc. are liable to the victims or their heirs and that the amount of indemnity for loss of life is increased to thirty
thousand pesos (P30,000.00).
SO ORDERED.
WILLIAM TIU, doing business under the name and style of "D’ Rough Riders," and VIRGILIO TE LAS PIÑAS
petitioners,
vs.
PEDRO A. ARRIESGADO, BENJAMIN CONDOR, SERGIO PEDRANO and PHILIPPINE PHOENIX SURETY
AND INSURANCE, INC., respondents.
This is a petition for review on certiorari under Rule 45 of the Rules of Court from the Decision 1 of the Court of Appeals in
CA-G.R. CV No. 54354 affirming with modification the Decision 2 of the Regional Trial Court, 7th Judicial Region, Cebu
City, Branch 20, in Civil Case No. CEB-5963 for breach of contract of carriage, damages and attorney’s fees, and the
Resolution dated February 26, 1999 denying the motion for reconsideration thereof.
The following facts are undisputed:
At about 10:00 p.m. of March 15, 1987, the cargo truck marked "Condor Hollow Blocks and General Merchandise" bearing
plate number GBP-675 was loaded with firewood in Bogo, Cebu and left for Cebu City. Upon reaching Sitio Aggies,
Poblacion, Compostela, Cebu, just as the truck passed over a bridge, one of its rear tires exploded. The driver, Sergio Pedrano,
then parked along the right side of the national highway and removed the damaged tire to have it vulcanized at a nearby shop,
about 700 meters away.3 Pedrano left his helper, Jose Mitante, Jr. to keep watch over the stalled vehicle, and instructed the
latter to place a spare tire six fathoms away4 behind the stalled truck to serve as a warning for oncoming vehicles. The truck’s
tail lights were also left on. It was about 12:00 a.m., March 16, 1987.
At about 4:45 a.m., D’ Rough Riders passenger bus with plate number PBP-724 driven by Virgilio Te Laspiñas was cruising
along the national highway of Sitio Aggies, Poblacion, Compostela, Cebu. The passenger bus was also bound for Cebu City,
and had come from Maya, Daanbantayan, Cebu. Among its passengers were the Spouses Pedro A. Arriesgado and Felisa
Pepito Arriesgado, who were seated at the right side of the bus, about three (3) or four (4) places from the front seat.
As the bus was approaching the bridge, Laspiñas saw the stalled truck, which was then about 25 meters away. 5 He applied
the breaks and tried to swerve to the left to avoid hitting the truck. But it was too late; the bus rammed into the truck’s left
rear. The impact damaged the right side of the bus and left several passengers injured. Pedro Arriesgado lost consciousness
and suffered a fracture in his right colles.6 His wife, Felisa, was brought to the Danao City Hospital. She was later transferred
to the Southern Island Medical Center where she died shortly thereafter.7
Respondent Pedro A. Arriesgado then filed a complaint for breach of contract of carriage, damages and attorney’s fees before
the Regional Trial Court of Cebu City, Branch 20, against the petitioners, D’ Rough Riders bus operator William Tiu and his
driver, Virgilio Te Laspiñas on May 27, 1987. The respondent alleged that the passenger bus in question was cruising at a
fast and high speed along the national road, and that petitioner Laspiñas did not take precautionary measures to avoid the
accident.8 Thus:
6. That the accident resulted to the death of the plaintiff’s wife, Felisa Pepito Arriesgado, as evidenced by a Certificate of
Death, a xerox copy of which is hereto attached as integral part hereof and marked as ANNEX – "A", and physical injuries
to several of its passengers, including plaintiff himself who suffered a "COLLES FRACTURE RIGHT," per Medical
Certificate, a xerox copy of which is hereto attached as integral part hereof and marked as ANNEX – "B" hereof.
7. That due to the reckless and imprudent driving by defendant Virgilio Te Laspiñas of the said Rough Riders passenger bus,
plaintiff and his wife, Felisa Pepito Arriesgado, failed to safely reach their destination which was Cebu City, the proximate
cause of which was defendant-driver’s failure to observe utmost diligence required of a very cautious person under all
circumstances.
8. That defendant William Tiu, being the owner and operator of the said Rough Riders passenger bus which figured in the
said accident, wherein plaintiff and his wife were riding at the time of the accident, is therefore directly liable for the breach
of contract of carriage for his failure to transport plaintiff and his wife safely to their place of destination which was Cebu
City, and which failure in his obligation to transport safely his passengers was due to and in consequence of his failure to
exercise the diligence of a good father of the family in the selection and supervision of his employees, particularly defendant-
driver Virgilio Te Laspiñas.9
The respondent prayed that judgment be rendered in his favor and that the petitioners be condemned to pay the following
damages:
1). To pay to plaintiff, jointly and severally, the amount of ₱30,000.00 for the death and untimely demise of plaintiff’s wife,
Felisa Pepito Arriesgado;
2). To pay to plaintiff, jointly and severally, the amount of ₱38,441.50, representing actual expenses incurred by the plaintiff
in connection with the death/burial of plaintiff’s wife;
3). To pay to plaintiff, jointly and severally, the amount of ₱1,113.80, representing medical/hospitalization expenses incurred
by plaintiff for the injuries sustained by him;
4). To pay to plaintiff, jointly and severally, the amount of ₱50,000.00 for moral damages;
5). To pay to plaintiff, jointly and severally, the amount of ₱50,000.00 by way of exemplary damages;
6). To pay to plaintiff, jointly and severally, the amount of ₱20,000.00 for attorney’s fees;
7). To pay to plaintiff, jointly and severally, the amount of ₱5,000.00 for litigation expenses.
PLAINTIFF FURTHER PRAYS FOR SUCH OTHER RELIEFS AND REMEDIES IN LAW AND EQUITY. 10
The petitioners, for their part, filed a Third-Party Complaint11 on August 21, 1987 against the following: respondent
Philippine Phoenix Surety and Insurance, Inc. (PPSII), petitioner Tiu’s insurer; respondent Benjamin Condor, the registered
owner of the cargo truck; and respondent Sergio Pedrano, the driver of the truck. They alleged that petitioner Laspiñas was
negotiating the uphill climb along the national highway of Sitio Aggies, Poblacion, Compostela, in a moderate and normal
speed. It was further alleged that the truck was parked in a slanted manner, its rear portion almost in the middle of the
highway, and that no early warning device was displayed. Petitioner Laspiñas promptly applied the brakes and swerved to
the left to avoid hitting the truck head-on, but despite his efforts to avoid damage to property and physical injuries on the
passengers, the right side portion of the bus hit the cargo truck’s left rear. The petitioners further alleged, thus:
5. That the cargo truck mentioned in the aforequoted paragraph is owned and registered in the name of the third-party
defendant Benjamin Condor and was left unattended by its driver Sergio Pedrano, one of the third-party defendants, at the
time of the incident;
6. That third-party defendant Sergio Pedrano, as driver of the cargo truck with marked (sic) "Condor Hollow Blocks &
General Merchandise," with Plate No. GBP-675 which was recklessly and imprudently parked along the national highway
of Compostela, Cebu during the vehicular accident in question, and third-party defendant Benjamin Condor, as the registered
owner of the cargo truck who failed to exercise due diligence in the selection and supervision of third-party defendant Sergio
Pedrano, are jointly and severally liable to the third-party plaintiffs for whatever liability that may be adjudged against said
third-party plaintiffs or are directly liable of (sic) the alleged death of plaintiff’s wife;
7. That in addition to all that are stated above and in the answer which are intended to show reckless imprudence on the part
of the third-party defendants, the third-party plaintiffs hereby declare that during the vehicular accident in question, third-
party defendant was clearly violating Section 34, par. (g) of the Land Transportation and Traffic Code…
… the past six years of his employment, was insufficient to prove that he observed the diligence of a good father of a family in
10. That the aforesaid passenger bus, owned and operated by third-party plaintiff William Tiu, is covered by a common
carrier liability insurance with Certificate of Cover No. 054940 issued by Philippine Phoenix Surety and Insurance, Inc.,
Cebu City Branch, in favor of third-party plaintiff William Tiu which covers the period from July 22, 1986 to July 22, 1987
and that the said insurance coverage was valid, binding and subsisting during the time of the aforementioned incident (Annex
"A" as part hereof);
11. That after the aforesaid alleged incident, third-party plaintiff notified third-party defendant Philippine Phoenix Surety
and Insurance, Inc., of the alleged incident hereto mentioned, but to no avail;
12. That granting, et arguendo et arguendi, if herein third-party plaintiffs will be adversely adjudged, they stand to pay
damages sought by the plaintiff and therefore could also look up to the Philippine Phoenix Surety and Insurance, Inc., for
contribution, indemnification and/or reimbursement of any liability or obligation that they might [be] adjudged per insurance
coverage duly entered into by and between third-party plaintiff William Tiu and third-party defendant Philippine Phoenix
Surety and Insurance, Inc.;…12
The respondent PPSII, for its part, admitted that it had an existing contract with petitioner Tiu, but averred that it had already
attended to and settled the claims of those who were injured during the incident. 13 It could not accede to the claim of
respondent Arriesgado, as such claim was way beyond the scheduled indemnity as contained in the contract of insurance. 14
After the parties presented their respective evidence, the trial court ruled in favor of respondent Arriesgado. The dispositive
portion of the decision reads:
WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of plaintiff as against defendant William Tiu
ordering the latter to pay the plaintiff the following amounts:
1 - The sum of FIFTY THOUSAND PESOS (₱50,000.00) as moral damages;
2 - The sum of FIFTY THOUSAND PESOS (₱50,000.00) as exemplary damages;
3 - The sum of THIRTY-EIGHT THOUSAND FOUR HUNDRED FORTY-ONE PESOS (₱38,441.00) as actual damages;
4 - The sum of TWENTY THOUSAND PESOS (₱20,000.00) as attorney’s fees;
5 - The sum of FIVE THOUSAND PESOS (₱5,000.00) as costs of suit;
15
SO ORDERED.
According to the trial court, there was no dispute that petitioner William Tiu was engaged in business as a common carrier,
in view of his admission that D’ Rough Rider passenger bus which figured in the accident was owned by him; that he had
been engaged in the transportation business for 25 years with a sole proprietorship; and that he owned 34 buses. The trial
court ruled that if petitioner Laspiñas had not been driving at a fast pace, he could have easily swerved to the left to avoid
hitting the truck, thus, averting the unfortunate incident. It then concluded that petitioner Laspiñas was negligent.
The trial court also ruled that the absence of an early warning device near the place where the truck was parked was not
sufficient to impute negligence on the part of respondent Pedrano, since the tail lights of the truck were fully on, and the
vicinity was well lighted by street lamps.16 It also found that the testimony of petitioner Tiu, that he based the selection of
his driver Laspiñas on efficiency and in-service training, and that the latter had been so far an efficient and good driver for
the selection and supervision of his employees.
After the petitioner’s motion for reconsideration of the said decision was denied, the petitioners elevated the case to the Court
of Appeals on the following issues:
I WHETHER THIRD PARTY DEFENDANT SERGIO PEDRANO WAS RECKLESS AND IMPRUDENT WHEN HE
PARKED THE CARGO TRUCK IN AN OBLIQUE MANNER;
II WHETHER THE THIRD PARTY DEFENDANTS ARE JOINTLY AND SEVERALLY LIABLE DIRECTLY TO
PLAINTIFF-APPELLEE OR TO DEFENDANTS-APPELLANTS FOR WHATEVER LIABILITY THAT MAY BE
ADJUDGED TO THE SAID DEFENDANTS-APPELLANTS;
III WHETHER DEFENDANT-APPELLANT VIRGILIO TE LASPIÑAS WAS GUILTY OF GROSS NEGLIGENCE;
IV WHETHER DEFENDANT-APPELLANT WILLIAM TIU HAD EXERCISED THE DUE DILIGENCE OF A GOOD
FATHER OF A FAMILY IN THE SELECTION AND SUPERVISION OF HIS DRIVERS;
V GRANTING FOR THE SAKE OF ARGUMENT THAT DEFENDANT-APPELLANT WILLIAM TIU IS LIABLE TO
PLAINTIFF-APPELLEE, WHETHER THERE IS LEGAL AND FACTUAL BASIS IN AWARDING EXCESSIVE
MORAL DAMAGES, EX[E]MPLARY DAMAGES, ATTORNEY’S FEES AND LITIGATION EXPENSES TO
PLAINTIFF-APPELLEE;
VI WHETHER THIRD PARTY DEFENDANT PHILIPPINE PHOENIX SURETY AND INSURANCE, INC. IS LIABLE
TO DEFENDANT- APPELLANT WILLIAM TIU.17
The appellate court rendered judgment affirming the trial court’s decision with the modification that the awards for moral
and exemplary damages were reduced to ₱25,000. The dispositive portion reads:
WHEREFORE, the appealed Decision dated November 6, 1995 is hereby MODIFIED such that the awards for moral and
exemplary damages are each reduced to ₱25,000.00 or a total of ₱50,000.00 for both. The judgment is AFFIRMED in all
other respects.
SO ORDERED.18
According to the appellate court, the action of respondent Arriesgado was based not on quasi-delict but on breach of contract
of carriage. As a common carrier, it was incumbent upon petitioner Tiu to prove that extraordinary diligence was observed
in ensuring the safety of passengers during transportation. Since the latter failed to do so, he should be held liable for
respondent Arriesgado’s claim. The CA also ruled that no evidence was presented against the respondent PPSII, and as such,
it could not be held liable for respondent Arriesgado’s claim, nor for contribution, indemnification and/or reimbursement in
case the petitioners were adjudged liable.
The petitioners now come to this Court and ascribe the following errors committed by the appellate court:
I. THE HONORABLE COURT OF APPEALS ERRED IN NOT DECLARING RESPONDENTS BENJAMIN CONDOR
AND SERGIO PEDRANO GUILTY OF NEGLIGENCE AND HENCE, LIABLE TO RESPONDENT PEDRO A.
ARRIESGADO OR TO PETITIONERS FOR WHATEVER LIABILITY THAT MAY BE ADJUDGED AGAINST THEM.
II. THE HONORABLE COURT OF APPEALS ERRED IN FINDING PETITIONERS GUILTY OF NEGLIGENCE AND
HENCE, LIABLE TO RESPONDENT PEDRO A. ARRIESGADO.
III. THE HONORABLE COURT OF APPEALS ERRED IN FINDING PETITIONER WILLIAM TIU LIABLE FOR
EXEMPLARY DAMAGES, ATTORNEY’S FEES AND LITIGATION EXPENSES.
IV. THE HONORABLE COURT OF APPEALS ERRED IN NOT FINDING RESPONDENT PHILIPPINE PHOENIX
SURETY AND INSURANCE, INC. LIABLE TO RESPONDENT PEDRO A. ARRIESGADO OR TO PETITIONER
WILLIAM TIU.19
According to the petitioners, the appellate court erred in failing to appreciate the absence of an early warning device and/or
built-in reflectors at the front and back of the cargo truck, in clear violation of Section 34, par. (g) of the Land Transportation
and Traffic Code. They aver that such violation is only a proof of respondent Pedrano’s negligence, as provided under Article
2185 of the New Civil Code. They also question the appellate court’s failure to take into account that the truck was parked
in an oblique manner, its rear portion almost at the center of the road. As such, the proximate cause of the incident was the
gross recklessness and imprudence of respondent Pedrano, creating the presumption of negligence on the part of respondent
Condor in supervising his employees, which presumption was not rebutted. The petitioners then contend that respondents
Condor and Pedrano should be held jointly and severally liable to respondent Arriesgado for the payment of the latter’s claim.
The petitioners, likewise, aver that expert evidence should have been presented to prove that petitioner Laspiñas was driving
at a very fast speed, and that the CA could not reach such conclusion by merely considering the damages on the cargo truck.
It was also pointed out that petitioner Tiu presented evidence that he had exercised the diligence of a good father of a family
in the selection and supervision of his drivers.
The petitioners further allege that there is no legal and factual basis to require petitioner Tiu to pay exemplary damages as
no evidence was presented to show that the latter acted in a fraudulent, reckless and oppressive manner, or that he had an
active participation in the negligent act of petitioner Laspiñas.
Finally, the petitioners contend that respondent PPSII admitted in its answer that while it had attended to and settled the
claims of the other injured passengers, respondent Arriesgado’s claim remained unsettled as it was beyond the scheduled
indemnity under the insurance contract. The petitioners argue that said respondent PPSII should have settled the said claim
in accordance with the scheduled indemnity instead of just denying the same.
On the other hand, respondent Arriesgado argues that two of the issues raised by the petitioners involved questions of fact,
not reviewable by the Supreme Court: the finding of negligence on the part of the petitioners and their liability to him; and
the award of exemplary damages, attorney’s fees and litigation expenses in his favor. Invoking the principle of equity and
justice, respondent Arriesgado pointed out that if there was an error to be reviewed in the CA decision, it should be geared
towards the restoration of the moral and exemplary damages to ₱50,000 each, or a total of ₱100,000 which was reduced by
the Court of Appeals to ₱25,000 each, or a total of only ₱50,000.
Respondent Arriesgado also alleged that respondents Condor and Pedrano, and respondent Phoenix Surety, are parties with
whom he had no contract of carriage, and had no cause of action against. It was pointed out that only the petitioners needed
to be sued, as driver and operator of the ill-fated bus, on account of their failure to bring the Arriesgado Spouses to their
place of destination as agreed upon in the contract of carriage, using the utmost diligence of very cautious persons with due
regard for all circumstances.
Respondents Condor and Pedrano point out that, as correctly ruled by the Court of Appeals, the proximate cause of the
unfortunate incident was the fast speed at which petitioner Laspiñas was driving the bus owned by petitioner Tiu. According
to the respondents, the allegation that the truck was not equipped with an early warning device could not in any way have
prevented the incident from happening. It was also pointed out that respondent Condor had always exercised the due diligence
required in the selection and supervision of his employees, and that he was not a party to the contract of carriage between
the petitioners and respondent Arriesgado.
Respondent PPSII, for its part, alleges that contrary to the allegation of petitioner Tiu, it settled all the claims of those injured
in accordance with the insurance contract. It further avers that it did not deny respondent Arriesgado’s claim, and emphasizes
that its liability should be within the scheduled limits of indemnity under the said contract. The respondent concludes that
while it is true that insurance contracts are contracts of indemnity, the measure of the insurer’s liability is determined by the
insured’s compliance with the terms thereof.
The Court’s Ruling
At the outset, it must be stressed that this Court is not a trier of facts.20 Factual findings of the Court of Appeals are final and
may not be reviewed on appeal by this Court, except when the lower court and the CA arrived at diverse factual findings. 21
The petitioners in this case assail the finding of both the trial and the appellate courts that petitioner Laspiñas was driving at
a very fast speed before the bus owned by petitioner Tiu collided with respondent Condor’s stalled truck. This is clearly one
of fact, not reviewable by the Court in a petition for review under Rule 45.22
On this ground alone, the petition is destined to fail.
However, considering that novel questions of law are likewise involved, the Court resolves to examine and rule on the merits
of the case.
Petitioner Laspiñas
Was negligent in driving
The Ill-fated bus
In his testimony before the trial court, petitioner Laspiñas claimed that he was traversing the two-lane road at Compostela,
Cebu at a speed of only forty (40) to fifty (50) kilometers per hour before the incident occurred. 23 He also admitted that he
saw the truck which was parked in an "oblique position" at about 25 meters before impact, 24 and tried to avoid hitting it by
swerving to the left. However, even in the absence of expert evidence, the damage sustained by the truck 25 itself supports the
finding of both the trial court and the appellate court, that the D’ Rough Rider bus driven by petitioner Laspiñas was traveling
at a fast pace. Since he saw the stalled truck at a distance of 25 meters, petitioner Laspiñas had more than enough time to
swerve to his left to avoid hitting it; that is, if the speed of the bus was only 40 to 50 kilometers per hour as he claimed. As
found by the Court of Appeals, it is easier to believe that petitioner Laspiñas was driving at a very fast speed, since at 4:45
a.m., the hour of the accident, there were no oncoming vehicles at the opposite direction. Petitioner Laspiñas could have
swerved to the left lane with proper clearance, and, thus, could have avoided the truck. 26 Instinct, at the very least, would
have prompted him to apply the breaks to avert the impending disaster which he must have foreseen when he caught sight of
the stalled truck. As we had occasion to reiterate:
A man must use common sense, and exercise due reflection in all his acts; it is his duty to be cautious, careful and prudent,
if not from instinct, then through fear of recurring punishment. He is responsible for such results as anyone might foresee
and for acts which no one would have performed except through culpable abandon. Otherwise, his own person, rights and
property, and those of his fellow beings, would ever be exposed to all manner of danger and injury. 27
We agree with the following findings of the trial court, which were affirmed by the CA on appeal:
A close study and evaluation of the testimonies and the documentary proofs submitted by the parties which have direct
bearing on the issue of negligence, this Court as shown by preponderance of evidence that defendant Virgilio Te Laspiñas
failed to observe extraordinary diligence as a driver of the common carrier in this case. It is quite hard to accept his version
of the incident that he did not see at a reasonable distance ahead the cargo truck that was parked when the Rough Rider [Bus]
just came out of the bridge which is on an (sic) [more] elevated position than the place where the cargo truck was parked.
With its headlights fully on, defendant driver of the Rough Rider was in a vantage position to see the cargo truck ahead which
was parked and he could just easily have avoided hitting and bumping the same by maneuvering to the left without hitting
the said cargo truck. Besides, it is (sic) shown that there was still much room or space for the Rough Rider to pass at the left
lane of the said national highway even if the cargo truck had occupied the entire right lane thereof. It is not true that if the
Rough Rider would proceed to pass through the left lane it would fall into a canal considering that there was much space for
it to pass without hitting and bumping the cargo truck at the left lane of said national highway. The records, further, showed
that there was no incoming vehicle at the opposite lane of the national highway which would have prevented the Rough Rider
from not swerving to its left in order to avoid hitting and bumping the parked cargo truck. But the evidence showed that the
Rough Rider instead of swerving to the still spacious left lane of the national highway plowed directly into the parked cargo
truck hitting the latter at its rear portion; and thus, the (sic) causing damages not only to herein plaintiff but to the cargo truck
as well.28
Indeed, petitioner Laspiñas’ negligence in driving the bus is apparent in the records. By his own admission, he had just passed
a bridge and was traversing the highway of Compostela, Cebu at a speed of 40 to 50 kilometers per hour before the collision
occurred. The maximum speed allowed by law on a bridge is only 30 kilometers per hour. 29 And, as correctly pointed out by
the trial court, petitioner Laspiñas also violated Section 35 of the Land Transportation and Traffic Code, Republic Act No.
4136, as amended:1avvphil.net
Sec. 35. Restriction as to speed. – (a) Any person driving a motor vehicle on a highway shall drive the same at a careful and
prudent speed, not greater nor less than is reasonable and proper, having due regard for the traffic, the width of the highway,
and or any other condition then and there existing; and no person shall drive any motor vehicle upon a highway at such speed
as to endanger the life, limb and property of any person, nor at a speed greater than will permit him to bring the vehicle to a
stop within the assured clear distance ahead.30
Under Article 2185 of the Civil Code, a person driving a vehicle is presumed negligent if at the time of the mishap, he was
violating any traffic regulation.31
Petitioner Tiu failed to
Overcome the presumption
Of negligence against him as
One engaged in the business
Of common carriage
The rules which common carriers should observe as to the safety of their passengers are set forth in the Civil Code, Articles
1733,32 175533 and 1756.34 In this case, respondent Arriesgado and his deceased wife contracted with petitioner Tiu, as owner
and operator of D’ Rough Riders bus service, for transportation from Maya, Daanbantayan, Cebu, to Cebu City for the price
of ₱18.00.35 It is undisputed that the respondent and his wife were not safely transported to the destination agreed upon. In
actions for breach of contract, only the existence of such contract, and the fact that the obligor, in this case the common
carrier, failed to transport his passenger safely to his destination are the matters that need to be proved. 36 This is because
under the said contract of carriage, the petitioners assumed the express obligation to transport the respondent and his wife to
their destination safely and to observe extraordinary diligence with due regard for all circumstances. 37 Any injury suffered
by the passengers in the course thereof is immediately attributable to the negligence of the carrier.38 Upon the happening of
the accident, the presumption of negligence at once arises, and it becomes the duty of a common carrier to prove that he
observed extraordinary diligence in the care of his passengers. 39 It must be stressed that in requiring the highest possible
degree of diligence from common carriers and in creating a presumption of negligence against them, the law compels them
to curb the recklessness of their drivers.40
While evidence may be submitted to overcome such presumption of negligence, it must be shown that the carrier observed
the required extraordinary diligence, which means that the carrier must show the utmost diligence of very cautious persons
as far as human care and foresight can provide, or that the accident was caused by fortuitous event.41 As correctly found by
the trial court, petitioner Tiu failed to conclusively rebut such presumption. The negligence of petitioner Laspiñas as driver
of the passenger bus is, thus, binding against petitioner Tiu, as the owner of the passenger bus engaged as a common carrier.42
The Doctrine of
Last Clear Chance
Is Inapplicable in the
Case at Bar
Contrary to the petitioner’s contention, the principle of last clear chance is inapplicable in the instant case, as it only applies
in a suit between the owners and drivers of two colliding vehicles. It does not arise where a passenger demands responsibility
from the carrier to enforce its contractual obligations, for it would be inequitable to exempt the negligent driver and its owner
on the ground that the other driver was likewise guilty of negligence.43 The common law notion of last clear chance permitted
courts to grant recovery to a plaintiff who has also been negligent provided that the defendant had the last clear chance to
avoid the casualty and failed to do so. Accordingly, it is difficult to see what role, if any, the common law of last clear chance
doctrine has to play in a jurisdiction where the common law concept of contributory negligence as an absolute bar to recovery
by the plaintiff, has itself been rejected, as it has been in Article 2179 of the Civil Code. 44
Thus, petitioner Tiu cannot escape liability for the death of respondent Arriesgado’s wife due to the negligence of petitioner
Laspiñas, his employee, on this score.
Respondents Pedrano and
Condor were likewise
Negligent
In Phoenix Construction, Inc. v. Intermediate Appellate Court where therein respondent Dionisio sustained injuries when his
vehicle rammed against a dump truck parked askew, the Court ruled that the improper parking of a dump truck without any
warning lights or reflector devices created an unreasonable risk for anyone driving within the vicinity, and for having created
such risk, the truck driver must be held responsible. In ruling against the petitioner therein, the Court elucidated, thus:
… In our view, Dionisio’s negligence, although later in point of time than the truck driver’s negligence, and therefore closer
to the accident, was not an efficient intervening or independent cause. What the petitioners describe as an "intervening cause"
was no more than a foreseeable consequence of the risk created by the negligent manner in which the truck driver had parked
the dump truck. In other words, the petitioner truck driver owed a duty to private respondent Dionisio and others similarly
situated not to impose upon them the very risk the truck driver had created. Dionisio’s negligence was not that of an
independent and overpowering nature as to cut, as it were, the chain of causation in fact between the improper parking of the
dump truck and the accident, nor to sever the juris vinculum of liability. …
…
SCHEDULED VEHICLE
We hold that private respondent Dionisio’s negligence was "only contributory," that the "immediate and proximate cause"
of the injury remained the truck driver’s "lack of due care."…46
MODEL MAKE TYPE OF COLOR BLT FILE NO.
In this case, both the trial and the appellate courts failed to consider that respondent Pedrano was also negligent in leaving Isuzu Forward BODY blue mixed
the truck parked askew without any warning lights or reflector devices to alert oncoming vehicles, and that such failure Bus
created the presumption of negligence on the part of his employer, respondent Condor, in supervising his employees properly
and adequately. As we ruled in Poblete v. Fabros:47
PLATE SERIAL/CHASSIS MOTOR NO. AUTHORIZED UNLADEN
It is such a firmly established principle, as to have virtually formed part of the law itself, that the negligence of the employee NO. NO. 677836 CAPACITY WEIGHT
gives rise to the presumption of negligence on the part of the employer. This is the presumed negligence in the selection and PBP-724 SER450-1584124 50 6 Cyls. Kgs.
supervision of employee. The theory of presumed negligence, in contrast with the American doctrine of respondeat superior,
where the negligence of the employee is conclusively presumed to be the negligence of the employer, is clearly deducible
from the last paragraph of Article 2180 of the Civil Code which provides that the responsibility therein mentioned shall cease SECTION 1/11 *LIMITS OF LIABILITY PREMIUMS
if the employers prove that they observed all the diligence of a good father of a family to prevent damages. …48 ₱50,000.00 PAID
₱540.0052
The petitioners were correct in invoking respondent Pedrano’s failure to observe Article IV, Section 34(g) of the Rep. Act A. THIRD PARTY LIABILITY
No. 4136, which provides:

(g) Lights when parked or disabled. – Appropriate parking lights or flares visible one hundred meters away shall be displayed B. PASSENGER LIABILITY Per Person Per Accident
at a corner of the vehicle whenever such vehicle is parked on highways or in places that are not well-lighted or is placed in ₱12,000.00 ₱50,000
such manner as to endanger passing traffic.

The manner in which the truck was parked clearly endangered oncoming traffic on both sides, considering that the tire In its Answer53 to the Third-Party Complaint, the respondent PPSII admitted the existence of the contract of insurance, in
blowout which stalled the truck in the first place occurred in the wee hours of the morning. The Court can only now surmise view of its failure to specifically deny the same as required under then Section 8(a), Rule 8 of the Rules of Court, which
that the unfortunate incident could have been averted had respondent Condor, the owner of the truck, equipped the said reads:
vehicle with lights, flares, or, at the very least, an early warning device.49 Hence, we cannot subscribe to respondents Condor
Sec. 8. How to contest genuineness of such documents. When an action or defense is founded upon a written instrument
and Pedrano’s claim that they should be absolved from liability because, as found by the trial and appellate courts, the
copied in or attached to the corresponding pleading as provided in the preceding section, the genuineness and due execution
proximate cause of the collision was the fast speed at which petitioner Laspiñas drove the bus. To accept this proposition
of the instrument shall be deemed admitted unless the adverse party, under oath, specifically denies them, and sets forth what
would be to come too close to wiping out the fundamental principle of law that a man must respond for the foreseeable
he claims to be the facts; but the requirement of an oath does not apply when the adverse party does not appear to be a party
consequences of his own negligent act or omission. Indeed, our law on quasi-delicts seeks to reduce the risks and burdens of
to the instrument or when compliance with an order for inspection of the original instrument is refused.
living in society and to allocate them among its members. To accept this proposition would be to weaken the very bonds of
society.50 In fact, respondent PPSII did not dispute the existence of such contract, and admitted that it was liable thereon. It claimed,
however, that it had attended to and settled the claims of those injured during the incident, and set up the following as special
The Liability of Respondent PPSII as Insurer
affirmative defenses:
The trial court in this case did not rule on the liability of respondent PPSII, while the appellate court ruled that, as no evidence
Third party defendant Philippine Phoenix Surety and Insurance, Inc. hereby reiterates and incorporates by way of reference
was presented against it, the insurance company is not liable.
the preceding paragraphs and further states THAT:-
A perusal of the records will show that when the petitioners filed the Third-Party Complaint against respondent PPSII, they
8. It has attended to the claims of Vincent Canales, Asuncion Batiancila and Neptali Palces who sustained injuries during the
failed to attach a copy of the terms of the insurance contract itself. Only Certificate of Cover No. 054940 51 issued in favor of
incident in question. In fact, it settled financially their claims per vouchers duly signed by them and they duly executed
"Mr. William Tiu, Lahug, Cebu City" signed by Cosme H. Boniel was appended to the third-party complaint. The date of
Affidavit[s] of Desistance to that effect, xerox copies of which are hereto attached as Annexes 1, 2, 3, 4, 5, and 6 respectively;
issuance, July 22, 1986, the period of insurance, from July 22, 1986 to July 22, 1987, as well as the following items, were
also indicated therein: 9. With respect to the claim of plaintiff, herein answering third party defendant through its authorized insurance adjuster
attended to said claim. In fact, there were negotiations to that effect. Only that it cannot accede to the demand of said claimant
considering that the claim was way beyond the scheduled indemnity as per contract entered into with third party plaintiff
William Tiu and third party defendant (Philippine Phoenix Surety and Insurance, Inc.). Third party Plaintiff William Tiu
knew all along the limitation as earlier stated, he being an old hand in the transportation business;55…
Considering the admissions made by respondent PPSII, the existence of the insurance contract and the salient terms thereof
cannot be dispatched. It must be noted that after filing its answer, respondent PPSII no longer objected to the presentation of
evidence by respondent Arriesgado and the insured petitioner Tiu. Even in its Memorandum56 before the Court, respondent
PPSII admitted the existence of the contract, but averred as follows:
Petitioner Tiu is insisting that PPSII is liable to him for contribution, indemnification and/or reimbursement. This has no
basis under the contract. Under the contract, PPSII will pay all sums necessary to discharge liability of the insured subject to
the limits of liability but not to exceed the limits of liability as so stated in the contract. Also, it is stated in the contract that
in the event of accident involving indemnity to more than one person, the limits of liability shall not exceed the aggregate
amount so specified by law to all persons to be indemnified.57
As can be gleaned from the Certificate of Cover, such insurance contract was issued pursuant to the Compulsory Motor
Vehicle Liability Insurance Law. It was expressly provided therein that the limit of the insurer’s liability for each person was
₱12,000, while the limit per accident was pegged at ₱50,000. An insurer in an indemnity contract for third party liability is
directly liable to the injured party up to the extent specified in the agreement but it cannot be held solidarily liable beyond
that amount.58 The respondent PPSII could not then just deny petitioner Tiu’s claim; it should have paid ₱12,000 for the
death of Felisa Arriesgado,59 and respondent Arriesgado’s hospitalization expenses of ₱1,113.80, which the trial court found
to have been duly supported by receipts. The total amount of the claims, even when added to that of the other injured
passengers which the respondent PPSII claimed to have settled, 60 would not exceed the ₱50,000 limit under the insurance
agreement.
Indeed, the nature of Compulsory Motor Vehicle Liability Insurance is such that it is primarily intended to provide
compensation for the death or bodily injuries suffered by innocent third parties or passengers as a result of the negligent
operation and use of motor vehicles. The victims and/or their dependents are assured of immediate financial assistance,
regardless of the financial capacity of motor vehicle owners.61 As the Court, speaking through Associate Justice Leonardo
A. Quisumbing, explained in Government Service Insurance System v. Court of Appeals:62
However, although the victim may proceed directly against the insurer for indemnity, the third party liability is only up to
the extent of the insurance policy and those required by law. While it is true that where the insurance contract provides for
indemnity against liability to third persons, and such persons can directly sue the insurer, the direct liability of the insurer
under indemnity contracts against third party liability does not mean that the insurer can be held liable in solidum with the
insured and/or the other parties found at fault. For the liability of the insurer is based on contract; that of the insured carrier
or vehicle owner is based on tort. …
Obviously, the insurer could be held liable only up to the extent of what was provided for by the contract of insurance, in
accordance with the CMVLI law. At the time of the incident, the schedule of indemnities for death and bodily injuries,
professional fees and other charges payable under a CMVLI coverage was provided for under the Insurance Memorandum
Circular (IMC) No. 5-78 which was approved on November 10, 1978. As therein provided, the maximum indemnity for
death was twelve thousand (₱12,000.00) pesos per victim. The schedules for medical expenses were also provided by said
IMC, specifically in paragraphs (C) to (G).63
Damages to be awarded
The trial court correctly awarded moral damages in the amount of ₱50,000 in favor of respondent Arriesgado. The award of
exemplary damages by way of example or correction of the public good,64 is likewise in order. As the Court ratiocinated in
Kapalaran Bus Line v. Coronado:65
…While the immediate beneficiaries of the standard of extraordinary diligence are, of course, the passengers and owners of
cargo carried by a common carrier, they are not the only persons that the law seeks to benefit. For if common carriers carefully
observed the statutory standard of extraordinary diligence in respect of their own passengers, they cannot help but
simultaneously benefit pedestrians and the passengers of other vehicles who are equally entitled to the safe and convenient
use of our roads and highways. The law seeks to stop and prevent the slaughter and maiming of people (whether passengers
or not) on our highways and buses, the very size and power of which seem to inflame the minds of their drivers. Article 2231
of the Civil Code explicitly authorizes the imposition of exemplary damages in cases of quasi-delicts "if the defendant acted
with gross negligence."…66
The respondent Pedro A. Arriesgado, as the surviving spouse and heir of Felisa Arriesgado, is entitled to indemnity in the
amount of ₱50,000.00.67
The petitioners, as well as the respondents Benjamin Condor and Sergio Pedrano are jointly and severally liable for said
amount, conformably with the following pronouncement of the Court in Fabre, Jr. vs. Court of Appeals: 68
The same rule of liability was applied in situations where the negligence of the driver of the bus on which plaintiff was riding
concurred with the negligence of a third party who was the driver of another vehicle, thus causing an accident. In Anuran v.
Buño, Batangas Laguna Tayabas Bus Co. v. Intermediate Appellate Court, and Metro Manila Transit Corporation v. Court
of Appeals, the bus company, its driver, the operator of the other vehicle and the driver of the vehicle were jointly and
severally held liable to the injured passenger or the latter’s heirs. The basis of this allocation of liability was explained in
Viluan v. Court of Appeals, thus:
"Nor should it make difference that the liability of petitioner [bus owner] springs from contract while that of respondents
[owner and driver of other vehicle] arises from quasi-delict. As early as 1913, we already ruled in Gutierrez vs. Gutierrez,
56 Phil. 177, that in case of injury to a passenger due to the negligence of the driver of the bus on which he was riding and
of the driver of another vehicle, the drivers as well as the owners of the two vehicles are jointly and severally liable for
damages. Some members of the Court, though, are of the view that under the circumstances they are liable on quasi-delict."69
IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY GRANTED. The Decision of the Court of Appeals
is AFFIRMED with MODIFICATIONS:
(1) Respondent Philippine Phoenix Surety and Insurance, Inc. and petitioner William Tiu are ORDERED to pay, jointly and
severally, respondent Pedro A. Arriesgado the total amount of ₱13,113.80;
(2) The petitioners and the respondents Benjamin Condor and Sergio Pedrano are ORDERED to pay, jointly and severally,
respondent Pedro A. Arriesgado ₱50,000.00 as indemnity; ₱26,441.50 as actual damages; ₱50,000.00 as moral damages;
₱50,000.00 as exemplary damages; and ₱20,000.00 as attorney’s fees.
SO ORDERED.
UCPB GENERAL INSURANCE CO., INC., Petitioner,
vs.
ABOITIZ SHIPPING CORP. EAGLE EXPRESS LINES, DAMCO INTERMODAL SERVICES, INC., and
PIMENTEL CUSTOMS BROKERAGE CO., Respondents.
UCPB General Insurance Co., Inc. (UCPB) assails the Decision 1 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 Resolution 3
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 dispense with the 24-hour notice to the carrier required by Art. 366 of the Code
of 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. 3(6) of the COGSA. Eagle Express, after all, had acted as the agent of the freight
consolidator, not that of the carrier to whom the notice should have been made.
At any rate, the notion that the request for bad order survey and turn over survey of bad cargoes signed by Eagle Express’s
representative is construable as compliant with the notice requirement under Art. 366 of the Code of Commerce was
foreclosed by the dismissal of the complaint against DAMCO’s representative, East Asiatic.
As regards respondent Pimentel Customs, it is sufficient to acknowledge that it had no participation in the physical handling,
loading and delivery of the damaged cargo and should, therefore, be absolved of liability.
Finally, UCPB’s misrepresentation that the applicability of the Code of Commerce was not raised as an issue before the trial
court warrants the assessment of double costs of suit against it.
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 are AFFIRMED. Double costs against petitioner.
SO ORDERED.
LORENZO SHIPPING CORP., petitioner,
vs.
CHUBB and SONS, Inc., GEARBULK, Ltd. and PHILIPPINE TRANSMARINE CARRIERS, INC., respondents.
On appeal is the Court of Appeals’ August 14, 2000 Decision in CA-G.R. CV No. 61334 and March 28, 2001 Resolution
1 2
affirming the March 19, 1998 Decision3 of the Regional Trial Court of Manila which found petitioner liable to pay respondent
Chubb and Sons, Inc. attorney's fees and costs of suit.
Petitioner Lorenzo Shipping Corporation (Lorenzo Shipping, for short), a domestic corporation engaged in coastwise
shipping, was the carrier of 581 bundles of black steel pipes, the subject shipment, from Manila to Davao City. From Davao
City, respondent Gearbulk, Ltd., a foreign corporation licensed as a common carrier under the laws of Norway and doing
business in the Philippines through its agent, respondent Philippine Transmarine Carriers, Inc. (Transmarine Carriers, for
short), a domestic corporation, carried the goods on board its vessel M/V San Mateo Victory to the United States, for the
account of Sumitomo Corporation. The latter, the consignee, is a foreign corporation organized under the laws of the United
States of America. It insured the shipment with respondent Chubb and Sons, Inc., a foreign corporation organized and
licensed to engage in insurance business under the laws of the United States of America.
The facts are as follows:
On November 21, 1987, Mayer Steel Pipe Corporation of Binondo, Manila, loaded 581 bundles of ERW black steel pipes
worth US$137,912.844 on board the vessel M/V Lorcon IV, owned by petitioner Lorenzo Shipping, for shipment to Davao
City. Petitioner Lorenzo Shipping issued a clean bill of lading designated as Bill of Lading No. T-35 for the account of the
consignee, Sumitomo Corporation of San Francisco, California, USA, which in turn, insured the goods with respondent
Chubb and Sons, Inc.6
The M/V Lorcon IV arrived at the Sasa Wharf in Davao City on December 2, 1987. Respondent Transmarine Carriers
received the subject shipment which was discharged on December 4, 1987, evidenced by Delivery Cargo Receipt No.
115090.7 It discovered seawater in the hatch of M/V Lorcon IV, and found the steel pipes submerged in it. The consignee
Sumitomo then hired the services of R.J. Del Pan Surveyors to inspect the shipment prior to and subsequent to discharge.
Del Pan’s Survey Report8 dated December 4, 1987 showed that the subject shipment was no longer in good condition, as in
fact, the pipes were found with rust formation on top and/or at the sides. Moreover, the surveyor noted that the cargo hold of
the M/V Lorcon IV was flooded with seawater, and the tank top was "rusty, thinning, and with several holes at different
places." The rusty condition of the cargo was noted on the mate’s receipts and the checker of M/V Lorcon IV signed his
conforme thereon.9
After the survey, respondent Gearbulk loaded the shipment on board its vessel M/V San Mateo Victory, for carriage to the
United States. It issued Bills of Lading Nos. DAV/OAK 1 to 7,10 covering 364 bundles of steel pipes to be discharged at
Oakland, U.S.A., and Bills of Lading Nos. DAV/SEA 1 to 6, 11 covering 217 bundles of steel pipes to be discharged at
Vancouver, Washington, U.S.A. All bills of lading were marked "ALL UNITS HEAVILY RUSTED."
While the cargo was in transit from Davao City to the U.S.A., consignee Sumitomo sent a letter 12 of intent dated December
7, 1987, to petitioner Lorenzo Shipping, which the latter received on December 9, 1987. Sumitomo informed petitioner
Lorenzo Shipping that it will be filing a claim based on the damaged cargo once such damage had been ascertained. The
letter reads:
Please be advised that the merchandise herein below noted has been landed in bad order ex-Manila voyage No. 87-19 under
B/L No. T-3 which arrived at the port of Davao City on December 2, 1987.
The extent of the loss and/or damage has not yet been determined but apparently all bundles are corroded. We reserve the
right to claim as soon as the amount of claim is determined and the necessary supporting documents are available.
Please find herewith a copy of the survey report which we had arranged for after unloading of our cargo from your vessel in
Davao.
We trust that you shall make everything in order.
On January 17, 1988, M/V San Mateo Victory arrived at Oakland, California, U.S.A., where it unloaded 364 bundles of the
subject steel pipes. It then sailed to Vancouver, Washington on January 23, 1988 where it unloaded the remaining 217
bundles. Toplis and Harding, Inc. of San Franciso, California, surveyed the steel pipes, and also discovered the latter heavily
rusted. When the steel pipes were tested with a silver nitrate solution, Toplis and Harding found that they had come in contact
with salt water. The survey report,13 dated January 28, 1988 states:
xxx
We entered the hold for a close examination of the pipe, which revealed moderate to heavy amounts of patchy and streaked
dark red/orange rust on all lifts which were visible. Samples of the shipment were tested with a solution of silver nitrate
revealing both positive and occasional negative chloride reactions, indicating pipe had come in contact with salt water. In
addition, all tension applied metal straps were very heavily rusted, and also exhibited chloride reactions on testing with silver
nitrate.
xxx
It should be noted that subject bills of lading bore the following remarks as to conditions of goods: "ALL UNITS HEAVILY
RUSTED." Attached herein is a copy of a survey report issued by Del Pan Surveyors of Davao City, Philippines dated,
December 4, 1987 at Davao City, Philippines, which describes conditions of the cargo as sighted aboard the vessel
"LORCON IV," prior to and subsequent to discharge at Davao City. Evidently, the aforementioned rust damages were
apparently sustained while the shipment was in the custody of the vessel "LORCON IV," prior to being laden on board the
vessel "SAN MATEO VICTORY" in Davao.
Due to its heavily rusted condition, the consignee Sumitomo rejected the damaged steel pipes and declared them unfit for the
purpose they were intended.14 It then filed a marine insurance claim with respondent Chubb and Sons, Inc. which the latter
settled in the amount of US$104,151.00.15
On December 2, 1988, respondent Chubb and Sons, Inc. filed a complaint16 for collection of a sum of money, docketed as
Civil Case No. 88-47096, against respondents Lorenzo Shipping, Gearbulk, and Transmarine. Respondent Chubb and Sons,
Inc. alleged that it is not doing business in the Philippines, and that it is suing under an isolated transaction.
On February 21, 1989, respondents Gearbulk and Transmarine filed their answer 17 with counterclaim and cross-claim against
petitioner Lorenzo Shipping denying liability on the following grounds: (a) respondent Chubb and Sons, Inc. has no capacity
to sue before Philippine courts; (b) the action should be dismissed on the ground of forum non conveniens; (c) damage to the
steel pipes was due to the inherent nature of the goods or to the insufficiency of packing thereof; (d) damage to the steel pipes
was not due to their fault or negligence; and, (e) the law of the country of destination, U.S.A., governs the contract of carriage.
Petitioner Lorenzo Shipping filed its answer with counterclaim on February 28, 1989, and amended it on May 24, 1989. It
denied liability, alleging, among others: (a) that rust easily forms on steel by mere exposure to air, moisture and other marine
elements; (b) that it made a disclaimer in the bill of lading; (c) that the goods were improperly packed; and, (d) prescription,
laches, and extinguishment of obligations and actions had set in.
The Regional Trial Court ruled in favor of the respondent Chubb and Sons, Inc., finding that: (1) respondent Chubb and
Sons, Inc. has the right to institute this action; and, (2) petitioner Lorenzo Shipping was negligent in the performance of its
obligations as a carrier. The dispositive portion of its Decision states:
WHEREFORE, the judgment is hereby rendered ordering Defendant Lorenzo Shipping Corporation to pay the plaintiff the
sum of US$104,151.00 or its equivalent in Philippine peso at the current rate of exchange with interest thereon at the legal
rate from the date of the institution of this case until fully paid, the attorney’s fees in the sum of ₱50,000.00, plus the costs
of the suit, and dismissing the plaintiff’s complaint against defendants Gearbulk, Ltd. and Philippine Transmarine Carriers,
Inc., for lack of merit, and the two defendants’ counterclaim, there being no showing that the plaintiff had filed this case
against said defendants in bad faith, as well as the two defendants’ cross-claim against Defendant Lorenzo Shipping
Corporation, for lack of factual basis.18
Petitioner Lorenzo Shipping appealed to the Court of Appeals insisting that: (a) respondent Chubb and Sons does not have
capacity to sue before Philippine courts; and, (b) petitioner Lorenzo Shipping was not negligent in the performance of its
obligations as carrier of the goods. The appellate court denied the petition and affirmed the decision of the trial court.
The Court of Appeals likewise denied petitioner Lorenzo Shipping’s Motion for Reconsideration 19 dated September 3, 2000,
in a Resolution20 promulgated on March 28, 2001.
Hence, this petition. Petitioner Lorenzo Shipping submits the following issues for resolution:
(1) Whether or not the prohibition provided under Art. 133 of the Corporation Code applies to respondent Chubb, it being a
mere subrogee or assignee of the rights of Sumitomo Corporation, likewise a foreign corporation admittedly doing business
in the Philippines without a license;
(2) Whether or not Sumitomo, Chubb’s predecessor-in-interest, validly made a claim for damages against Lorenzo Shipping
within the period prescribed by the Code of Commerce;
(3) Whether or not a delivery cargo receipt without a notation on it of damages or defects in the shipment, which created a
prima facie presumption that the carrier received the shipment in good condition, has been overcome by convincing evidence;
(4) Assuming that Lorenzo Shipping was guilty of some lapses in transporting the steel pipes, whether or not Gearbulk and
Transmarine, as common carriers, are to share liability for their separate negligence in handling the cargo. 21
In brief, we resolve the following issues:
(1) whether respondent Chubb and Sons has capacity to sue before the Philippine courts; and,
(2) whether petitioner Lorenzo Shipping is negligent in carrying the subject cargo.
Petitioner argues that respondent Chubb and Sons is a foreign corporation not licensed to do business in the Philippines, and
is not suing on an isolated transaction. It contends that because the respondent Chubb and Sons is an insurance company, it
was merely subrogated to the rights of its insured, the consignee Sumitomo, after paying the latter’s policy claim. Sumitomo,
however, is a foreign corporation doing business in the Philippines without a license and does not have capacity to sue before
Philippine courts. Since Sumitomo does not have capacity to sue, petitioner then concludes that, neither the subrogee-
respondent Chubb nor Sons could sue before Philippine courts.
We disagree with petitioner.
In the first place, petitioner failed to raise the defense that Sumitomo is a foreign corporation doing business in the Philippines
without a license. It is therefore estopped from litigating the issue on appeal especially because it involves a question of fact
which this Court cannot resolve. Secondly, assuming arguendo that Sumitomo cannot sue in the Philippines, it does not
follow that respondent, as subrogee, has also no capacity to sue in our jurisdiction.
Subrogation is the substitution of one person in the place of another with reference to a lawful claim or right, so that he who
is substituted succeeds to the rights of the other in relation to a debt or claim, including its remedies or securities. 22 The
principle covers the situation under which an insurer that has paid a loss under an insurance policy is entitled to all the rights
and remedies belonging to the insured against a third party with respect to any loss covered by the policy.23 It contemplates
full substitution such that it places the party subrogated in the shoes of the creditor, and he may use all means which the
creditor could employ to enforce payment.24
The rights to which the subrogee succeeds are the same as, but not greater than, those of the person for whom he is substituted
– he cannot acquire any claim, security, or remedy the subrogor did not have.25 In other words, a subrogee cannot succeed to
a right not possessed by the subrogor.26 A subrogee in effect steps into the shoes of the insured and can recover only if insured
likewise could have recovered.
However, when the insurer succeeds to the rights of the insured, he does so only in relation to the debt. The person substituted
(the insurer) will succeed to all the rights of the creditor (the insured), having reference to the debt due the latter. 27 In the
instant case, the rights inherited by the insurer, respondent Chubb and Sons, pertain only to the payment it made to the insured
Sumitomo as stipulated in the insurance contract between them, and which amount it now seeks to recover from petitioner
Lorenzo Shipping which caused the loss sustained by the insured Sumitomo. The capacity to sue of respondent Chubb and
Sons could not perchance belong to the group of rights, remedies or securities pertaining to the payment respondent insurer
made for the loss which was sustained by the insured Sumitomo and covered by the contract of insurance. Capacity to sue is
a right personal to its holder. It is conferred by law and not by the parties. Lack of legal capacity to sue means that the plaintiff
is not in the exercise of his civil rights, or does not have the necessary qualification to appear in the case, or does not have
the character or representation he claims. It refers to a plaintiff’s general disability to sue, such as on account of minority,
insanity, incompetence, lack of juridical personality, or any other disqualifications of a party. 28 Respondent Chubb and Sons
who was plaintiff in the trial court does not possess any of these disabilities. On the contrary, respondent Chubb and Sons
has satisfactorily proven its capacity to sue, after having shown that it is not doing business in the Philippines, but is suing
only under an isolated transaction, i.e., under the one (1) marine insurance policy issued in favor of the consignee Sumitomo
covering the damaged steel pipes.
The law on corporations is clear in depriving foreign corporations which are doing business in the Philippines without a
license from bringing or maintaining actions before, or intervening in Philippine courts. Art. 133 of the Corporation Code
states:
Doing business without a license. – No foreign corporation transacting business in the Philippines without a license, or its
successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or
administrative agency of the Philippines; but such corporation may be sued or proceeded against before Philippine courts or
administrative tribunals on any valid cause of action recognized under Philippine laws.
The law does not prohibit foreign corporations from performing single acts of business. A foreign corporation needs no
license to sue before Philippine courts on an isolated transaction.29 As held by this Court in the case of Marshall-Wells
Company vs. Elser & Company:30
The object of the statute (Secs. 68 and 69, Corporation Law) was not to prevent the foreign corporation from performing
single acts, but to prevent it from acquiring a domicile for the purpose of business without taking the steps necessary to
render it amenable to suit in the local courts . . . the implication of the law (being) that it was never the purpose of the
legislature to exclude a foreign corporation which happens to obtain an isolated order for business for the Philippines, from
seeking redress in the Philippine courts.
Likewise, this Court ruled in Universal Shipping Lines, Inc. vs. Intermediate Appellate Court31 that:
. . . The private respondent may sue in the Philippine courts upon the marine insurance policies issued by it abroad to cover
international-bound cargoes shipped by a Philippine carrier, even if it has no license to do business in this country, for it is
not the lack of the prescribed license (to do business in the Philippines) but doing business without such license, which bars
a foreign corporation from access to our courts.
We reject the claim of petitioner Lorenzo Shipping that respondent Chubb and Sons is not suing under an isolated transaction
because the steel pipes, subject of this case, are covered by two (2) bills of lading; hence, two transactions. The stubborn fact
remains that these two (2) bills of lading spawned from the single marine insurance policy that respondent Chubb and Sons
issued in favor of the consignee Sumitomo, covering the damaged steel pipes. The execution of the policy is a single act, an
isolated transaction. This Court has not construed the term "isolated transaction" to literally mean "one" or a mere single act.
In Eriks Pte. Ltd. vs. Court of Appeals, this Court held that:32
. . . What is determinative of "doing business" is not really the number or the quantity of the transactions, but more
importantly, the intention of an entity to continue the body of its business in the country. The number and quantity are merely
evidence of such intention. The phrase "isolated transaction" has a definite and fixed meaning, i.e. a transaction or series of
transactions set apart from the common business of a foreign enterprise in the sense that there is no intention to engage in a
progressive pursuit of the purpose and object of the business organization. Whether a foreign corporation is "doing business"
does not necessarily depend upon the frequency of its transactions, but more upon the nature and character of the transactions.
[Emphasis supplied.]
In the case of Gonzales vs. Raquiza, et al.,33 three contracts, hence three transactions were challenged as void on the ground
that the three American corporations which are parties to the contracts are not licensed to do business in the Philippines. This
Court held that "one single or isolated business transaction does not constitute doing business within the meaning of the law.
Transactions which are occasional, incidental, and casual — not of a character to indicate a purpose to engage in business —
do not constitute the doing or engaging in business as contemplated by law. Where the three transactions indicate no intent
by the foreign corporation to engage in a continuity of transactions, they do not constitute doing business in the Philippines."
Furthermore, respondent insurer Chubb and Sons, by virtue of the right of subrogation provided for in the policy of
insurance,34 is the real party in interest in the action for damages before the court a quo against the carrier Lorenzo Shipping
to recover for the loss sustained by its insured. Rule 3, Section 2 of the 1997 Rules of Civil Procedure defines a real party in
interest as one who is entitled to the avails of any judgment rendered in a suit, or who stands to be benefited or injured by it.
Where an insurance company as subrogee pays the insured of the entire loss it suffered, the insurer-subrogee is the only real
party in interest and must sue in its own name35 to enforce its right of subrogation against the third party which caused the
loss. This is because the insurer in such case having fully compensated its insured, which payment covers the loss in full, is
subrogated to the insured’s claims arising from such loss. The subrogated insurer becomes the owner of the claim and, thus
entitled to the entire fruits of the action.36 It then, thus possesses the right to enforce the claim and the significant interest in
the litigation.37 In the case at bar, it is clear that respondent insurer was suing on its own behalf in order to enforce its right
of subrogation.
On the second issue, we affirm the findings of the lower courts that petitioner Lorenzo Shipping was negligent in its care and
custody of the consignee’s goods.
The steel pipes, subject of this case, were in good condition when they were loaded at the port of origin (Manila) on board
petitioner Lorenzo Shipping’s M/V Lorcon IV en route to Davao City. Petitioner Lorenzo Shipping issued clean bills of
lading covering the subject shipment. A bill of lading, aside from being a contract 38 and a receipt,39 is also a symbol40 of the
goods covered by it. A bill of lading which has no notation of any defect or damage in the goods is called a "clean bill of
lading."41 A clean bill of lading constitutes prima facie evidence of the receipt by the carrier of the goods as therein
described.42
The case law teaches us that mere proof of delivery of goods in good order to a carrier and the subsequent arrival in damaged
condition at the place of destination raises a prima facie case against the carrier. 43 In the case at bar, M/V Lorcon IV of
petitioner Lorenzo Shipping received the steel pipes in good order and condition, evidenced by the clean bills of lading it
issued. When the cargo was unloaded from petitioner Lorenzo Shipping’s vessel at the Sasa Wharf in Davao City, the steel
pipes were rusted all over. M/V San Mateo Victory of respondent Gearbulk, Ltd, which received the cargo, issued Bills of
Lading Nos. DAV/OAK 1 to 7 and Nos. DAV/SEA 1 to 6 covering the entire shipment, all of which were marked "ALL
UNITS HEAVILY RUSTED." R.J. Del Pan Surveyors found that the cargo hold of the M/V Lorcon IV was flooded with
seawater, and the tank top was rusty, thinning and perforated, thereby exposing the cargo to sea water. There can be no other
conclusion than that the cargo was damaged while on board the vessel of petitioner Lorenzo Shipping, and that the damage
was due to the latter’s negligence. In the case at bar, not only did the legal presumption of negligence attach to petitioner
Lorenzo Shipping upon the occurrence of damage to the cargo. 44 More so, the negligence of petitioner was sufficiently
established. Petitioner Lorenzo Shipping failed to keep its vessel in seaworthy condition. R.J. Del Pan Surveyors found the
tank top of M/V Lorcon IV to be "rusty, thinning, and with several holes at different places." Witness Captain Pablo Fernan,
Operations Manager of respondent Transmarine Carriers, likewise observed the presence of holes at the deck of M/V Lorcon
IV.45 The unpatched holes allowed seawater, reaching up to three (3) inches deep, to enter the flooring of the hatch of the
vessel where the steel pipes were stowed, submerging the latter in sea water.46 The contact with sea water caused the steel
pipes to rust. The silver nitrate test, which Toplis and Harding employed, further verified this conclusion. 47 significantly,
petitioner Lorenzo Shipping did not even attempt to present any contrary evidence. Neither did it offer any proof to establish
any of the causes that would exempt it from liability for such damage.48 It merely alleged that the: (1) packaging of the goods
was defective; and (2) claim for damages has prescribed.
To be sure, there is evidence that the goods were packed in a superior condition. John M. Graff, marine surveyor of Toplis
and Harding, examined the condition of the cargo on board the vessel San Mateo Victory. He testified that the shipment had
superior packing "because the ends were covered with plastic, woven plastic. Whereas typically they would not go to that
bother ... Typically, they come in with no plastic on the ends. They might just be banded, no plastic on the ends ..." 49
On the issue of prescription of respondent Chubb and Sons’ claim for damages, we rule that it has not yet prescribed at the
time it was made.
Art. 366 of the Code of Commerce states:
Within the twenty-four hours following the receipt of the merchandise, the claim against the carrier for damage or average,
which may be found therein upon the opening of 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 package, in which case the claim
shall be admitted only at the time of the receipt.
After the periods mentioned have elapsed, or 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.
A somewhat similar provision is embodied in the Bill of Lading No. T-3 which reads:50
NOTE: No claim for damage or loss shall be honored twenty-four (24) hours after delivery.
(Ref. Art. 366 C Com.)
The twenty-four-hour period prescribed by Art. 366 of the Code of Commerce within which claims must be presented does
not begin to run until the consignee has received such possession of the merchandise that he may exercise over it the ordinary
control pertinent to ownership.51 In other words, there must be delivery of the cargo by the carrier to the consignee at the
place of destination.52 In the case at bar, consignee Sumitomo has not received possession of the cargo, and has not physically
inspected the same at the time the shipment was discharged from M/V Lorcon IV in Davao City. Petitioner Lorenzo Shipping
failed to establish that an authorized agent of the consignee Sumitomo received the cargo at Sasa Wharf in Davao City.
Respondent Transmarine Carriers as agent of respondent Gearbulk, Ltd., which carried the goods from Davao City to the
United States, and the principal, respondent Gearbulk, Ltd. itself, are not the authorized agents as contemplated by law. What
is clear from the evidence is that the consignee received and took possession of the entire shipment only when the latter
reached the United States’ shore. Only then was delivery made and completed. And only then did the 24-hour prescriptive
period start to run.
Finally, we find no merit to the contention of respondents Gearbulk and Transmarine that American law governs the contract
of carriage because the U.S.A. is the country of destination. Petitioner Lorenzo Shipping, through its M/V Lorcon IV, carried
the goods from Manila to Davao City. Thus, as against petitioner Lorenzo Shipping, the place of destination is Davao City.
Hence, Philippine law applies.
IN VIEW THEREOF, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No. 61334 dated
August 14, 2000 and its Resolution dated March 28, 2001 are hereby AFFIRMED. Costs against petitioner.
SO ORDERED.
BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. and JARDINE DAVIES TRANSPORT
SERVICES, INC., petitioners,
vs.
PHILIPPINE FIRST INSURANCE CO., INC., respondents.
Proof of the delivery of goods in good order to a common carrier and of their arrival in bad order at their destination
constitutes prima facie fault or negligence on the part of the carrier. If no adequate explanation is given as to how the loss,
the destruction or the deterioration of the goods happened, the carrier shall be held liable therefor.
Statement of the Case
Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the July 15, 1998 Decision 1 and the May 2,
2000 Resolution2 of the Court of Appeals3 (CA) in CA-GR CV No. 53571. The decretal portion of the Decision reads as
follows:
"WHEREFORE, in the light of the foregoing disquisition, the decision appealed from is hereby REVERSED and SET
ASIDE. Defendants-appellees are ORDERED to jointly and severally pay plaintiffs-appellants the following:
'1) FOUR Hundred Fifty One Thousand Twenty-Seven Pesos and 32/100 (P451,027.32) as actual damages, representing the
value of the damaged cargo, plus interest at the legal rate from the time of filing of the complaint on July 25, 1991, until fully
paid;
'2) Attorney's fees amounting to 20% of the claim; and
'3) Costs of suit.'"4
The assailed Resolution denied petitioner's Motion for Reconsideration.
The CA reversed the Decision of the Regional Trial Court (RTC) of Makati City (Branch 134), which had disposed as
follows:
"WHEREFORE, in view of the foregoing, judgment is hereby rendered, dismissing the complaint, as well as defendant's
counterclaim."5
The Facts
The factual antecedents of the case are summarized by the Court of Appeals in this wise:
"On June 13, 1990, CMC Trading A.G. shipped on board the M/V 'Anangel Sky' at Hamburg, Germany 242 coils of various
Prime Cold Rolled Steel sheets for transportation to Manila consigned to the Philippine Steel Trading Corporation. On July
28, 1990, M/V Anangel Sky arrived at the port of Manila and, within the subsequent days, discharged the subject cargo. Four
(4) coils were found to be in bad order B.O. Tally sheet No. 154974. Finding the four (4) coils in their damaged state to be
unfit for the intended purpose, the consignee Philippine Steel Trading Corporation declared the same as total loss.1âwphi1.nêt
"Despite receipt of a formal demand, defendants-appellees refused to submit to the consignee's claim. Consequently,
plaintiff-appellant paid the consignee five hundred six thousand eighty six & 50/100 pesos (P506,086.50), and was
subrogated to the latter's rights and causes of action against defendants-appellees. Subsequently, plaintiff-appellant instituted
this complaint for recovery of the amount paid by them, to the consignee as insured.
"Impugning the propriety of the suit against them, defendants-appellees imputed that the damage and/or loss was due to pre-
shipment damage, to the inherent nature, vice or defect of the goods, or to perils, danger and accidents of the sea, or to
insufficiency of packing thereof, or to the act or omission of the shipper of the goods or their representatives. In addition
thereto, defendants-appellees argued that their liability, if there be any, should not exceed the limitations of liability provided
for in the bill of lading and other pertinent laws. Finally, defendants-appellees averred that, in any event, they exercised due
diligence and foresight required by law to prevent any damage/loss to said shipment."6
Ruling of the Trial Court
The RTC dismissed the Complaint because respondent had failed to prove its claims with the quantum of proof required by
law.7
It likewise debunked petitioners' counterclaim, because respondent's suit was not manifestly frivolous or primarily intended
to harass them.8
Ruling of the Court of Appeals
In reversing the trial court, the CA ruled that petitioners were liable for the loss or the damage of the goods shipped, because
they had failed to overcome the presumption of negligence imposed on common carriers.
The CA further held as inadequately proven petitioners' claim that the loss or the deterioration of the goods was due to pre-
shipment damage.9 It likewise opined that the notation "metal envelopes rust stained and slightly dented" placed on the Bill
of Lading had not been the proximate cause of the damage to the four (4) coils. 10
As to the extent of petitioners' liability, the CA held that the package limitation under COGSA was not applicable, because
the words "L/C No. 90/02447" indicated that a higher valuation of the cargo had been declared by the shipper. The CA,
however, affirmed the award of attorney's fees.
Hence, this Petition.11
Issues
In their Memorandum, petitioners raise the following issues for the Court's consideration:
I Owing to this high degree of diligence required of them, common carriers, as a general rule, are presumed to have been at
"Whether or not plaintiff by presenting only one witness who has never seen the subject shipment and whose testimony
is purely hearsay is sufficient to pave the way for the applicability of Article 1735 of the Civil Code;
II
"Whether or not the consignee/plaintiff filed the required notice of loss within the time required by law;
III
"Whether or not a notation in the bill of lading at the time of loading is sufficient to show pre-shipment damage and to exempt
herein defendants from liability;
IV
"Whether or not the "PACKAGE LIMITATION" of liability under Section 4 (5) of COGSA is applicable to the case at
bar."12
In sum, the issues boil down to three:
1. Whether petitioners have overcome the presumption of negligence of a common carrier
2. Whether the notice of loss was timely filed
3. Whether the package limitation of liability is applicable
This Court's Ruling
The Petition is partly meritorious.
First Issue:
Proof of Negligence
Petitioners contend that the presumption of fault imposed on common carriers should not be applied on the basis of the lone
testimony offered by private respondent. The contention is untenable.
Well-settled is the rule that common carriers, from the nature of their business and for reasons of public policy, are bound to
observe extraordinary diligence and vigilance with respect to the safety of the goods and the passengers they transport. 13
Thus, common carriers are required to render service with the greatest skill and foresight and "to use all reason[a]ble means
to ascertain the nature and characteristics of the goods tendered for shipment, and to exercise due care in the handling and
stowage, including such methods as their nature requires."14 The extraordinary responsibility lasts from the time the goods
are unconditionally placed in the possession of and received for transportation by the carrier until they are delivered, actually
or constructively, to the consignee or to the person who has a right to receive them. 15
This strict requirement is justified by the fact that, without a hand or a voice in the preparation of such contract, the riding
public enters into a contract of transportation with common carriers.16 Even if it wants to, it cannot submit its own stipulations
for their approval.17 Hence, it merely adheres to the agreement prepared by them.
fault or negligent if the goods they transported deteriorated or got lost or destroyed. 18 That is, unless they prove that they
exercised extraordinary diligence in transporting the goods.19 In order to avoid responsibility for any loss or damage,
therefore, they have the burden of proving that they observed such diligence. 20
However, the presumption of fault or negligence will not arise21 if the loss is due to any of the following causes: (1) flood,
storm, earthquake, lightning, or other natural disaster or calamity; (2) an act of the public enemy in war, whether international
or civil; (3) an act or omission of the shipper or owner of the goods; (4) the character of the goods or defects in the packing
or the container; or (5) an order or act of competent public authority.22 This is a closed list. If the cause of destruction, loss
or deterioration is other than the enumerated circumstances, then the carrier is liable therefor. 23
Corollary to the foregoing, mere proof of delivery of the goods in good order to a common carrier and of their arrival in bad
order at their destination constitutes a prima facie case of fault or negligence against the carrier. If no adequate explanation
is given as to how the deterioration, the loss or the destruction of the goods happened, the transporter shall be held
responsible.24
That petitioners failed to rebut the prima facie presumption of negligence is revealed in the case at bar by a review of the Q. Based on your inspection since you were also present at that time, will you inform this Honorable Court the condition
records and more so by the evidence adduced by respondent.25 or the appearance of the bad order cargoes that were unloaded from the MV/ANANGEL SKY?

First, as stated in the Bill of Lading, petitioners received the subject shipment in good order and condition in Hamburg, ATTY. MACAMAY:
Germany.26
Objection, Your Honor, I think the document itself reflects the condition of the cold steel sheets and the best evidence is the
Second, prior to the unloading of the cargo, an Inspection Report 27 prepared and signed by representatives of both parties document itself, Your Honor that shows the condition of the steel sheets.
showed the steel bands broken, the metal envelopes rust-stained and heavily buckled, and the contents thereof exposed and
rusty. COURT:

Third, Bad Order Tally Sheet No. 15497928 issued by Jardine Davies Transport Services, Inc., stated that the four coils were Let the witness answer.
in bad order and condition. Normally, a request for a bad order survey is made in case there is an apparent or a presumed
loss or damage.29 A. The scrap of the cargoes is broken already and the rope is loosen and the cargoes are dent on the sides." 32

Fourth, the Certificate of Analysis30 stated that, based on the sample submitted and tested, the steel sheets found in bad order All these conclusively prove the fact of shipment in good order and condition and the consequent damage to the four coils
were wet with fresh water. while in the possession of petitioner,33 who notably failed to explain why.34

Fifth, petitioners -- in a letter31 addressed to the Philippine Steel Coating Corporation and dated October 12, 1990 -- admitted Further, petitioners failed to prove that they observed the extraordinary diligence and precaution which the law requires a
that they were aware of the condition of the four coils found in bad order and condition. common carrier to know and to follow to avoid damage to or destruction of the goods entrusted to it for safe carriage and
delivery.35
These facts were confirmed by Ruperto Esmerio, head checker of BM Santos Checkers Agency. Pertinent portions of his
testimony are reproduce hereunder: True, the words "metal envelopes rust stained and slightly dented" were noted on the Bill of Lading; however, there is no
showing that petitioners exercised due diligence to forestall or lessen the loss.36 Having been in the service for several years,
"Q. Mr. Esmerio, you mentioned that you are a Head Checker. Will you inform the Honorable Court with what company the master of the vessel should have known at the outset that metal envelopes in the said state would eventually deteriorate
you are connected? when not properly stored while in transit.37 Equipped with the proper knowledge of the nature of steel sheets in coils and of
the proper way of transporting them, the master of the vessel and his crew should have undertaken precautionary measures
A. BM Santos Checkers Agency, sir. to avoid possible deterioration of the cargo. But none of these measures was taken. 38 Having failed to discharge the burden
of proving that they have exercised the extraordinary diligence required by law, petitioners cannot escape liability for the
Q. How is BM Santos checkers Agency related or connected with defendant Jardine Davies Transport Services? damage to the four coils.39
A. It is the company who contracts the checkers, sir. In their attempt to escape liability, petitioners further contend that they are exempted from liability under Article 1734(4) of
the Civil Code. They cite the notation "metal envelopes rust stained and slightly dented" printed on the Bill of Lading as
Q. You mentioned that you are a Head Checker, will you inform this Honorable Court your duties and responsibilities? evidence that the character of the goods or defect in the packing or the containers was the proximate cause of the damage.
We are not convinced.
A. I am the representative of BM Santos on board the vessel, sir, to supervise the discharge of cargoes.
From the evidence on record, it cannot be reasonably concluded that the damage to the four coils was due to the condition
xxx xxx xxx
noted on the Bill of Lading.40 The aforecited exception refers to cases when goods are lost or damaged while in transit as a
Q. On or about August 1, 1990, were you still connected or employed with BM Santos as a Head Checker? result of the natural decay of perishable goods or the fermentation or evaporation of substances liable therefor, the necessary
and natural wear of goods in transport, defects in packages in which they are shipped, or the natural propensities of animals.41
A. Yes, sir. None of these is present in the instant case.

Q. And, on or about that date, do you recall having attended the discharging and inspection of cold steel sheets in coil on Further, even if the fact of improper packing was known to the carrier or its crew or was apparent upon ordinary observation,
board the MV/AN ANGEL SKY? it is not relieved of liability for loss or injury resulting therefrom, once it accepts the goods notwithstanding such condition.42
Thus, petitioners have not successfully proven the application of any of the aforecited exceptions in the present case.43
A. Yes, sir, I was there.

xxx xxx xxx

Second Issue:
Notice of Loss
Petitioners claim that pursuant to Section 3, paragraph 6 of the Carriage of Goods by Sea Act 44 (COGSA), respondent should
have filed its Notice of Loss within three days from delivery. They assert that the cargo was discharged on July 31, 1990, but
that respondent filed its Notice of Claim only on September 18, 1990. 45
We are not persuaded. First, the above-cited provision of COGSA provides that the notice of claim need not be given if the
state of the goods, at the time of their receipt, has been the subject of a joint inspection or survey. As stated earlier, prior to
unloading the cargo, an Inspection Report46 as to the condition of the goods was prepared and signed by representatives of
both parties.47
Second, as stated in the same provision, a failure to file a notice of claim within three days will not bar recovery if it is
nonetheless filed within one year.48 This one-year prescriptive period also applies to the shipper, the consignee, the insurer
of the goods or any legal holder of the bill of lading.49
In Loadstar Shipping Co., Inc, v. Court of Appeals,50 we ruled that a claim is not barred by prescription as long as the one-
year period has not lapsed. Thus, in the words of the ponente, Chief Justice Hilario G. Davide Jr.:
"Inasmuch as the neither the Civil Code nor the Code of Commerce states a specific prescriptive period on the matter, the
Carriage of Goods by Sea Act (COGSA)--which provides for a one-year period of limitation on claims for loss of, or damage
to, cargoes sustained during transit--may be applied suppletorily to the case at bar."
In the present case, the cargo was discharged on July 31, 1990, while the Complaint51 was filed by respondent on July 25,
1991, within the one-year prescriptive period.
Third Issue:
Package Limitation
Assuming arguendo they are liable for respondent's claims, petitioners contend that their liability should be limited to
US$500 per package as provided in the Bill of Lading and by Section 4(5)52 of COGSA.53
On the other hand, respondent argues that Section 4(5) of COGSA is inapplicable, because the value of the subject shipment
was declared by petitioners beforehand, as evidenced by the reference to and the insertion of the Letter of Credit or "L/C No.
90/02447" in the said Bill of Lading.54
A bill of lading serves two functions. First, it is a receipt for the goods shipped.53 Second, it is a contract by which three
parties -- namely, the shipper, the carrier, and the consignee -- undertake specific responsibilities and assume stipulated
obligations.56 In a nutshell, the acceptance of the bill of lading by the shipper and the consignee, with full knowledge of its
contents, gives rise to the presumption that it constituted a perfected and binding contract. 57
Further, a stipulation in the bill of lading limiting to a certain sum the common carrier's liability for loss or destruction of a
cargo -- unless the shipper or owner declares a greater value58 -- is sanctioned by law.59 There are, however, two conditions
to be satisfied: (1) the contract is reasonable and just under the circumstances, and (2) it has been fairly and freely agreed
upon by the parties.60 The rationale for this rule is to bind the shippers by their agreement to the value (maximum valuation)
of their goods.61
It is to be noted, however, that the Civil Code does not limit the liability of the common carrier to a fixed amount per
package.62 In all matters not regulated by the Civil Code, the right and the obligations of common carriers shall be governed
by the Code of Commerce and special laws.63 Thus, the COGSA, which is suppletory to the provisions of the Civil Code,
supplements the latter by establishing a statutory provision limiting the carrier's liability in the absence of a shipper's
declaration of a higher value in the bill of lading.64 The provisions on limited liability are as much a part of the bill of lading
as though physically in it and as though placed there by agreement of the parties. 65
In the case before us, there was no stipulation in the Bill of Lading66 limiting the carrier's liability. Neither did the shipper
declare a higher valuation of the goods to be shipped. This fact notwithstanding, the insertion of the words "L/C No. 90/02447
cannot be the basis for petitioners' liability.
First, a notation in the Bill of Lading which indicated the amount of the Letter of Credit obtained by the shipper for the
importation of steel sheets did not effect a declaration of the value of the goods as required by the bill.67 That notation was
made only for the convenience of the shipper and the bank processing the Letter of Credit.68
Second, in Keng Hua Paper Products v. Court of Appeals,69 we held that a bill of lading was separate from the Other Letter
of Credit arrangements. We ruled thus:
"(T)he contract of carriage, as stipulated in the bill of lading in the present case, must be treated independently of the contract
of sale between the seller and the buyer, and the contract of issuance of a letter of credit between the amount of goods
described in the commercial invoice in the contract of sale and the amount allowed in the letter of credit will not affect the
validity and enforceability of the contract of carriage as embodied in the bill of lading. As the bank cannot be expected to
look beyond the documents presented to it by the seller pursuant to the letter of credit, neither can the carrier be expected to
go beyond the representations of the shipper in the bill of lading and to verify their accuracy vis-à-vis the commercial invoice
and the letter of credit. Thus, the discrepancy between the amount of goods indicated in the invoice and the amount in the
bill of lading cannot negate petitioner's obligation to private respondent arising from the contract of transportation."70
In the light of the foregoing, petitioners' liability should be computed based on US$500 per package and not on the per metric
ton price declared in the Letter of Credit. 71 In Eastern Shipping Lines, Inc. v. Intermediate Appellate Court,72 we explained
the meaning of packages:
"When what would ordinarily be considered packages are shipped in a container supplied by the carrier and the number of
such units is disclosed in the shipping documents, each of those units and not the container constitutes the 'package' referred
to in the liability limitation provision of Carriage of Goods by Sea Act."
Considering, therefore, the ruling in Eastern Shipping Lines and the fact that the Bill of Lading clearly disclosed the contents
of the containers, the number of units, as well as the nature of the steel sheets, the four damaged coils should be considered
as the shipping unit subject to the US$500 limitation.1âwphi1.nêt
WHEREFORE, the Petition is partly granted and the assailed Decision MODIFIED. Petitioners' liability is reduced to
US$2,000 plus interest at the legal rate of six percent from the time of the filing of the Complaint on July 25, 1991 until the
finality of this Decision, and 12 percent thereafter until fully paid. No pronouncement as to costs.
SO ORDERED.
VECTOR SHIPPING CORPORATION and FRANCISCO SORIANO, Petitioners,
vs.
AMERICAN HOME ASSURANCE COMPANY and SULPICIO LINES, INC., Respondents.
Subrogation under Article 2207 of the Civil Code gives rise to a cause of action created by law. For purposes of the law on
the prescription of actions, the period of limitation is ten years.
The Case
Vector Shipping Corporation (Vector) and Francisco Soriano appeal the decision promulgated on July 22, 2003, 1 whereby
the Court of Appeals (CA) held them jointly and severally liable to pay ₱7 ,455,421.08 to American Home Assurance
Company (respondent) as and by way of actual damages on the basis of respondent being the subrogee of its insured Caltex
Philippines, Inc. (Caltex).
Antecedents
Vector was the operator of the motor tanker M/T Vector, while Soriano was the registered owner of the M/T Vector.
Respondent is a domestic insurance corporation.2
On September 30, 1987, Caltex entered into a contract of Affreightment 3 with Vector for the transport of Caltex’s petroleum
cargo through the M/T Vector. Caltex insured the petroleum cargo with respondent for ₱7,455,421.08 under Marine Open
Policy No. 34-5093-6.4 In the evening of December 20, 1987, the M/T Vector and the M/V Doña Paz, the latter a vessel
owned and operated by Sulpicio Lines, Inc., collided in the open sea near Dumali Point in Tablas Strait, located between the
Provinces of Marinduque and Oriental Mindoro. The collision led to the sinking of both vessels. The entire petroleum cargo
of Caltex on board the M/T Vector perished.5 On July 12, 1988, respondent indemnified Caltex for the loss of the petroleum
cargo in the full amount of ₱7,455,421.08.6
On March 5, 1992, respondent filed a complaint against Vector, Soriano, and Sulpicio Lines, Inc. to recover the full amount
of ₱7,455,421.08 it paid to Caltex (Civil Case No. 92-620).7 The case was raffled to Branch 145 of the Regional Trial Court
(RTC) in Makati City.
On December 10, 1997, the RTC issued a resolution dismissing Civil Case No. 92-620 on the following grounds:
This action is upon a quasi-delict and as such must be commenced within four 4 years from the day they may be brought.
[Art. 1145 in relation to Art. 1150, Civil Code] "From the day [the action] may be brought" means from the day the quasi-
delict occurred. [Capuno v. Pepsi Cola, 13 SCRA 663]
The tort complained of in this case occurred on 20 December 1987. The action arising therefrom would under the law
prescribe, unless interrupted, on 20 December 1991.
When the case was filed against defendants Vector Shipping and Francisco Soriano on 5 March 1992, the action not having
been interrupted, had already prescribed.
Under the same situation, the cross-claim of Sulpicio Lines against Vector Shipping and Francisco Soriano filed on 25 June
1992 had likewise prescribed.
The letter of demand upon defendant Sulpicio Lines allegedly on 6 November 1991 did not interrupt the tolling of the
prescriptive period since there is no evidence that it was actually received by the addressee. Under such circumstances, the
action against Sulpicio Lines had likewise prescribed.
Even assuming that such written extra-judicial demand was received and the prescriptive period interrupted in accordance
with Art. 1155, Civil Code, it was only for the 10-day period within which Sulpicio Lines was required to settle its obligation.
After that period lapsed, the prescriptive period started again. A new 4-year period to file action was not created by the extra-
judicial demand; it merely suspended and extended the period for 10 days, which in this case meant that the action should be
commenced by 30 December 1991, rather than 20 December 1991.
Thus, when the complaint against Sulpicio Lines was filed on 5 March 1992, the action had prescribed.
PREMISES CONSIDERED, the complaint of American Home Assurance Company and the cross-claim of Sulpicio Lines
against Vector Shipping Corporation and Francisco Soriano are DISMISSED.
Without costs.
SO ORDERED.8
Respondent appealed to the CA, which promulgated its assailed decision on July 22, 2003 reversing the RTC.9 Although
thereby absolving Sulpicio Lines, Inc. of any liability to respondent, the CA held Vector and Soriano jointly and severally
liable to respondent for the reimbursement of the amount of ₱7,455,421.08 paid to Caltex, explaining:
xxxx
The resolution of this case is primarily anchored on the determination of what kind of relationship existed between Caltex
and M/V Dona Paz and between Caltex and M/T Vector for purposes of applying the laws on prescription. The Civil Code
expressly provides for the number of years before the extinctive prescription sets in depending on the relationship that
governs the parties.
xxxx
After a careful perusal of the factual milieu and the evidence adduced by the parties, We are constrained to rule that the
relationship that existed between Caltex and M/V Dona Paz is that of a quasi-delict while that between Caltex and M/T
Vector is culpa contractual based on a Contract of Affreightment or a charter party.
xxxx
On the other hand, the claim of appellant against M/T Vector is anchored on a breach of contract of affreightment. The
appellant averred that M/T Vector committed such act for having misrepresented to the appellant that said vessel is seaworthy
when in fact it is not. The contract was executed between Caltex and M/T Vector on September 30, 1987 for the latter to
transport thousands of barrels of different petroleum products. Under Article 1144 of the New Civil Code, actions based on
written contract must be brought within 10 years from the time the right of action accrued. A passenger of a ship, or his heirs,
can bring an action based on culpa contractual within a period of 10 years because the ticket issued for the transportation is
by itself a complete written contract (Peralta de Guerrero vs. Madrigal Shipping Co., L 12951, November 17, 1959).
Viewed with reference to the statute of limitations, an action against a carrier, whether of goods or of passengers, for injury
resulting from a breach of contract for safe carriage is one on contract, and not in tort, and is therefore, in the absence of a
specific statute relating to such actions governed by the statute fixing the period within which actions for breach of contract
must be brought (53 C.J.S. 1002 citing Southern Pac. R. Co. of Mexico vs. Gonzales 61 P. 2d 377, 48 Ariz. 260, 106 A.L.R.
1012).
Considering that We have already concluded that the prescriptive periods for filing action against M/V Doña Paz based on
quasi delict and M/T Vector based on breach of contract have not yet expired, are We in a position to decide the appeal on
its merit.
We say yes.
xxxx
Article 2207 of the Civil Code on subrogation is explicit that if the plaintiff’s property has been insured, and he has received
indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of,
the insurance company should be subrogated to the rights of the insured against the wrongdoer or the person who has violated
the contract. Undoubtedly, the herein appellant has the rights of a subrogee to recover from M/T Vector what it has paid by
way of indemnity to Caltex.
WHEREFORE, foregoing premises considered, the decision dated December 10, 1997 of the RTC of Makati City, Branch
145 is hereby REVERSED. Accordingly, the defendant-appellees Vector Shipping Corporation and Francisco Soriano are
held jointly and severally liable to the plaintiff-appellant American Home Assurance Company for the payment of
₱7,455,421.08 as and by way of actual damages.
SO ORDERED.10
Respondent sought the partial reconsideration of the decision of the CA, contending that Sulpicio Lines, Inc. should also be
held jointly liable with Vector and Soriano for the actual damages awarded. 11 On their part, however, Vector and Soriano
immediately appealed to the Court on September 12, 2003.12 Thus, on October 1, 2003, the CA held in abeyance its action
on respondent’s partial motion for reconsideration pursuant to its internal rules until the Court has resolved this appeal. 13
Issues
The main issue is whether this action of respondent was already barred by prescription for bringing it only on March 5, 1992.
A related issue concerns the proper determination of the nature of the cause of action as arising either from a quasi-delict or
a breach of contract.
The Court will not pass upon whether or not Sulpicio Lines, Inc. should also be held jointly liable with Vector and Soriano
for the actual damages claimed.
Ruling
The petition lacks merit.
Vector and Soriano posit that the RTC correctly dismissed respondent’s complaint on the ground of prescription. They insist
that this action was premised on a quasi-delict or upon an injury to the rights of the plaintiff, which, pursuant to Article 1146
of the Civil Code, must be instituted within four years from the time the cause of action accrued; that because respondent’s
cause of action accrued on December 20, 1987, the date of the collision, respondent had only four years, or until December
20, 1991, within which to bring its action, but its complaint was filed only on March 5, 1992, thereby rendering its action
already barred for being commenced beyond the four-year prescriptive period;14 and that there was no showing that
respondent had made extrajudicial written demands upon them for the reimbursement of the insurance proceeds as to interrupt
the running of the prescriptive period.15
We concur with the CA’s ruling that respondent’s action did not yet prescribe. The legal provision governing this case was
not Article 1146 of the Civil Code,16 but Article 1144 of the Civil Code, which states:
Article 1144. The following actions must be brought within ten years from the time the cause of action accrues:
(1)Upon a written contract;
(2)Upon an obligation created by law;
(3)Upon a judgment.
We need to clarify, however, that we cannot adopt the CA’s characterization of the cause of action as based on the contract
of affreightment between Caltex and Vector, with the breach of contract being the failure of Vector to make the M/T Vector
seaworthy, as to make this action come under Article 1144 (1), supra. Instead, we find and hold that that the present action
was not upon a written contract, but upon an obligation created by law. Hence, it came under Article 1144 (2) of the Civil
Code. This is because the subrogation of respondent to the rights of Caltex as the insured was by virtue of the express
provision of law embodied in Article 2207 of the Civil Code, to wit:
Article 2207. If the plaintiff’s property has been insured, and he has received indemnity from the insurance company for the
injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the
rights of the insured against the wrongdoer or the person who has violated the contract. If the amount paid by the insurance
company does not fully cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency from the person
causing the loss or injury. (Emphasis supplied)
The juridical situation arising under Article 2207 of the Civil Code is well explained in Pan Malayan Insurance Corporation
v. Court of Appeals,17 as follows:
Article 2207 of the Civil Code is founded on the well-settled principle of subrogation.1âwphi1 If the insured property is
destroyed or damaged through the fault or negligence of a party other than the assured, then the insurer, upon payment to the
assured, will be subrogated to the rights of the assured to recover from the wrongdoer to the extent that the insurer has been
obligated to pay. Payment by the insurer to the assured operates as an equitable assignment to the former of all remedies
which the latter may have against the third party whose negligence or wrongful act caused the loss.1âwphi1 The right of
subrogation is not dependent upon, nor does it grow out of, any privity of contract or upon written assignment of claim. It
accrues simply upon payment of the insurance claim by the insurer [Compania Maritima v. Insurance Company of North
America, G.R. No. L-18965, October 30, 1964, 12 SCRA 213; Fireman’s Fund Insurance Company v. Jamilla & Company,
Inc., G.R. No. L-27427, April 7, 1976, 70 SCRA 323].18
Verily, the contract of affreightment that Caltex and Vector entered into did not give rise to the legal obligation of Vector
and Soriano to pay the demand for reimbursement by respondent because it concerned only the agreement for the transport
of Caltex’s petroleum cargo. As the Court has aptly put it in Pan Malayan Insurance Corporation v. Court of Appeals, supra,
respondent’s right of subrogation pursuant to Article 2207, supra, was "not dependent upon, nor did it grow out of, any
privity of contract or upon written assignment of claim but accrued simply upon payment of the insurance claim by the
insurer."
Considering that the cause of action accrued as of the time respondent actually indemnified Caltex in the amount of
₱7,455,421.08 on July 12, 1988,19 the action was not yet barred by the time of the filing of its complaint on March 5, 1992,20
which was well within the 10-year period prescribed by Article 1144 of the Civil Code.
The insistence by Vector and Soriano that the running of the prescriptive period was not interrupted because of the failure of WHEREFORE, the Court DENIES the petition for review on certiorari; AFFIRMS the decision promulgated on July 22,
respondent to serve any extrajudicial demand was rendered inconsequential by our foregoing finding that respondent’s cause 2003; and ORDERS petitioners to pay the costs of suit.
of action was not based on a quasi-delict that prescribed in four years from the date of the collision on December 20, 1987,
as the RTC misappreciated, but on an obligation created by law, for which the law fixed a longer prescriptive period of ten SO ORDERED
years from the accrual of the action.
FEDERAL EXPRESS CORPORATION, petitioner,
Still, Vector and Soriano assert that respondent had no right of subrogation to begin with, because the complaint did not vs.
allege that respondent had actually paid Caltex for the loss of the cargo. They further assert that the subrogation receipt AMERICAN HOME ASSURANCE COMPANY and PHILAM INSURANCE COMPANY, INC., respondents.
submitted by respondent was inadmissible for not being properly identified by Ricardo C. Ongpauco, respondent’s witness,
who, although supposed to identify the subrogation receipt based on his affidavit, was not called to testify in court; and that The Facts
respondent presented only one witness in the person of Teresita Espiritu, who identified Marine Open Policy No. 34-5093-6
The antecedent facts are summarized by the appellate court as follows:
issued by respondent to Caltex.21
"On January 26, 1994, SMITHKLINE Beecham (SMITHKLINE for brevity) of Nebraska, USA delivered to Burlington Air
We disagree with petitioners’ assertions. It is undeniable that respondent preponderantly established its right of subrogation.
Express (BURLINGTON), an agent of [Petitioner] Federal Express Corporation, a shipment of 109 cartons of veterinary
Its Exhibit C was Marine Open Policy No. 34-5093-6 that it had issued to Caltex to insure the petroleum cargo against marine
biologicals for delivery to consignee SMITHKLINE and French Overseas Company in Makati City, Metro Manila. The
peril.22 Its Exhibit D was the formal written claim of Caltex for the payment of the insurance coverage of ₱7,455,421.08
shipment was covered by Burlington Airway Bill No. 11263825 with the words, 'REFRIGERATE WHEN NOT IN
coursed through respondent’s adjuster.23 Its Exhibits E to H were marine documents relating to the perished cargo on board
TRANSIT' and 'PERISHABLE' stamp marked on its face. That same day, Burlington insured the cargoes in the amount of
the M/V Vector that were processed for the purpose of verifying the insurance claim of Caltex.24 Its Exhibit I was the
$39,339.00 with American Home Assurance Company (AHAC). The following day, Burlington turned over the custody of
subrogation receipt dated July 12, 1988 showing that respondent paid Caltex ₱7,455,421.00 as the full settlement of Caltex’s
said cargoes to Federal Express which transported the same to Manila. The first shipment, consisting of 92 cartons arrived
claim under Marine Open Policy No. 34-5093-6.25 All these exhibits were unquestionably duly presented, marked, and
in Manila on January 29, 1994 in Flight No. 0071-28NRT and was immediately stored at [Cargohaus Inc.'s] warehouse.
admitted during the trial.26 Specifically, Exhibit C was admitted as an authentic copy of Marine Open Policy No. 34-5093-6,
While the second, consisting of 17 cartons, came in two (2) days later, or on January 31, 1994, in Flight No. 0071-30NRT
while Exhibits D, E, F, G, H and I, inclusive, were admitted as parts of the testimony of respondent’s witness Efren
which was likewise immediately stored at Cargohaus' warehouse. Prior to the arrival of the cargoes, Federal Express informed
Villanueva, the manager for the adjustment service of the Manila Adjusters and Surveyors Company.27
GETC Cargo International Corporation, the customs broker hired by the consignee to facilitate the release of its cargoes from
Consistent with the pertinent law and jurisprudence, therefore, Exhibit I was already enough by itself to prove the payment the Bureau of Customs, of the impending arrival of its client's cargoes.
of ₱7,455,421.00 as the full settlement of Caltex’s claim.28 The payment made to Caltex as the insured being thereby duly
"On February 10, 1994, DARIO C. DIONEDA ('DIONEDA'), twelve (12) days after the cargoes arrived in Manila, a non-
documented, respondent became subrogated as a matter of course pursuant to Article 2207 of the Civil Code. In legal
licensed custom's broker who was assigned by GETC to facilitate the release of the subject cargoes, found out, while he was
contemplation, subrogation is the "substitution of another person in the place of the creditor, to whose rights he succeeds in
about to cause the release of the said cargoes, that the same [were] stored only in a room with two (2) air conditioners running,
relation to the debt;" and is "independent of any mere contractual relations between the parties to be affected by it, and is
to cool the place instead of a refrigerator. When he asked an employee of Cargohaus why the cargoes were stored in the 'cool
broad enough to cover every instance in which one party is required to pay a debt for which another is primarily answerable,
room' only, the latter told him that the cartons where the vaccines were contained specifically indicated therein that it should
and which in equity and conscience ought to be discharged by the latter."29
not be subjected to hot or cold temperature. Thereafter, DIONEDA, upon instructions from GETC, did not proceed with the
Lastly, Vector and Soriano argue that Caltex waived and abandoned its claim by not setting up a cross-claim against them in withdrawal of the vaccines and instead, samples of the same were taken and brought to the Bureau of Animal Industry of the
Civil Case No. 18735, the suit that Sulpicio Lines, Inc. had brought to claim damages for the loss of the M/V Doña Paz from Department of Agriculture in the Philippines by SMITHKLINE for examination wherein it was discovered that the 'ELISA
them, Oriental Assurance Company (as insurer of the M/T Vector), and Caltex; that such failure to set up its cross- claim on reading of vaccinates sera are below the positive reference serum.'
the part of Caltex, the real party in interest who had suffered the loss, left respondent without any better right than Caltex, its
"As a consequence of the foregoing result of the veterinary biologics test, SMITHKLINE abandoned the shipment and,
insured, to recover anything from them, and forever barred Caltex from asserting any claim against them for the loss of the
declaring 'total loss' for the unusable shipment, filed a claim with AHAC through its representative in the Philippines, the
cargo; and that respondent was similarly barred from asserting its present claim due to its being merely the successor-in-
Philam Insurance Co., Inc. ('PHILAM') which recompensed SMITHKLINE for the whole insured amount of THIRTY NINE
interest of Caltex.
THOUSAND THREE HUNDRED THIRTY NINE DOLLARS ($39,339.00). Thereafter, [respondents] filed an action for
The argument of Vector and Soriano would have substance and merit had Civil Case No. 18735 and this case involved the damages against the [petitioner] imputing negligence on either or both of them in the handling of the cargo.
same parties and litigated the same rights and obligations. But the two actions were separate from and independent of each
"Trial ensued and ultimately concluded on March 18, 1997 with the [petitioner] being held solidarily liable for the loss as
other. Civil Case No. 18735 was instituted by Sulpicio Lines, Inc. to recover damages for the loss of its M/V Doña Paz. In
follows:
contrast, this action was brought by respondent to recover from Vector and Soriano whatever it had paid to Caltex under its
marine insurance policy on the basis of its right of subrogation. With the clear variance between the two actions, the failure 'WHEREFORE, judgment is hereby rendered in favor of [respondents] and [petitioner and its Co-Defendant Cargohaus] are
to set up the cross-claim against them in Civil Case No. 18735 is no reason to bar this action. directed to pay [respondents], jointly and severally, the following:
1. Actual damages in the amount of the peso equivalent of US$39,339.00 with interest from the time of the filing of the Are Exhibits 'F' and 'G' hearsay evidence, and therefore, not admissible?
complaint to the time the same is fully paid.
"V.
2. Attorney's fees in the amount of P50,000.00 and
Is the Honorable Court of Appeals correct in ignoring and disregarding respondents' own admission that petitioner is not
3. Costs of suit. liable? and

'SO ORDERED.' "VI.

"Aggrieved, [petitioner] appealed to [the CA]."5 Is the Honorable Court of Appeals correct in ignoring the Warsaw Convention?"8

Ruling of the Court of Appeals Simply stated, the issues are as follows: (1) Is the Petition proper for review by the Supreme Court? (2) Is Federal Express
liable for damage to or loss of the insured goods?
The Test Report issued by the United States Department of Agriculture (Animal and Plant Health Inspection Service) was
found by the CA to be inadmissible in evidence. Despite this ruling, the appellate court held that the shipping Receipts were This Court's Ruling
a prima facie proof that the goods had indeed been delivered to the carrier in good condition. We quote from the ruling as
follows: The Petition has merit.

"Where the plaintiff introduces evidence which shows prima facie that the goods were delivered to the carrier in good Preliminary Issue:
condition [i.e., the shipping receipts], and that the carrier delivered the goods in a damaged condition, a presumption is raised Propriety of Review
that the damage occurred through the fault or negligence of the carrier, and this casts upon the carrier the burden of showing
that the goods were not in good condition when delivered to the carrier, or that the damage was occasioned by some cause The correctness of legal conclusions drawn by the Court of Appeals from undisputed facts is a question of law cognizable
excepting the carrier from absolute liability. This the [petitioner] failed to discharge. x x x."6 by the Supreme Court.9

Found devoid of merit was petitioner's claim that respondents had no personality to sue. This argument was supposedly not In the present case, the facts are undisputed. As will be shown shortly, petitioner is questioning the conclusions drawn from
raised in the Answer or during trial. such facts. Hence, this case is a proper subject for review by this Court.

Hence, this Petition.7 Main Issue:

Liability for Damages
The Issues
Petitioner contends that respondents have no personality to sue -- thus, no cause of action against it -- because the payment
In its Memorandum, petitioner raises the following issues for our consideration: made to Smithkline was erroneous.

"I. Pertinent to this issue is the Certificate of Insurance10 ("Certificate") that both opposing parties cite in support of their
respective positions. They differ only in their interpretation of what their rights are under its terms. The determination of
Are the decision and resolution of the Honorable Court of Appeals proper subject for review by the Honorable Court under those rights involves a question of law, not a question of fact. "As distinguished from a question of law which exists 'when
Rule 45 of the 1997 Rules of Civil Procedure? the doubt or difference arises as to what the law is on a certain state of facts' -- 'there is a question of fact when the doubt or
difference arises as to the truth or the falsehood of alleged facts'; or when the 'query necessarily invites calibration of the
"II. whole evidence considering mainly the credibility of witnesses, existence and relevancy of specific surrounding
circumstance, their relation to each other and to the whole and the probabilities of the situation.'"11
Is the conclusion of the Honorable Court of Appeals – petitioner's claim that respondents have no personality to sue because
the payment was made by the respondents to Smithkline when the insured under the policy is Burlington Air Express is Proper Payee
devoid of merit – correct or not?
The Certificate specifies that loss of or damage to the insured cargo is "payable to order x x x upon surrender of this
"III. Certificate." Such wording conveys the right of collecting on any such damage or loss, as fully as if the property were covered
by a special policy in the name of the holder itself. At the back of the Certificate appears the signature of the representative
Is the conclusion of the Honorable Court of Appeals that the goods were received in good condition, correct or not? of Burlington. This document has thus been duly indorsed in blank and is deemed a bearer instrument.
"IV. Since the Certificate was in the possession of Smithkline, the latter had the right of collecting or of being indemnified for
loss of or damage to the insured shipment, as fully as if the property were covered by a special policy in the name of the
holder. Hence, being the holder of the Certificate and having an insurable interest in the goods, Smithkline was the proper
payee of the insurance proceeds.
Subrogation
Upon receipt of the insurance proceeds, the consignee (Smithkline) executed a subrogation Receipt12 in favor of respondents.
The latter were thus authorized "to file claims and begin suit against any such carrier, vessel, person, corporation or
government." Undeniably, the consignee had a legal right to receive the goods in the same condition it was delivered for
transport to petitioner. If that right was violated, the consignee would have a cause of action against the person responsible
therefor.
Upon payment to the consignee of an indemnity for the loss of or damage to the insured goods, the insurer's entitlement to
subrogation pro tanto -- being of the highest equity -- equips it with a cause of action in case of a contractual breach or
negligence.13 "Further, the insurer's subrogatory right to sue for recovery under the bill of lading in case of loss of or damage
to the cargo is jurisprudentially upheld."14
In the exercise of its subrogatory right, an insurer may proceed against an erring carrier. To all intents and purposes, it stands
in the place and in substitution of the consignee. A fortiori, both the insurer and the consignee are bound by the contractual
stipulations under the bill of lading.15
Prescription of Claim
From the initial proceedings in the trial court up to the present, petitioner has tirelessly pointed out that respondents' claim
and right of action are already barred. The latter, and even the consignee, never filed with the carrier any written notice or
complaint regarding its claim for damage of or loss to the subject cargo within the period required by the Warsaw Convention
and/or in the airway bill. Indeed, this fact has never been denied by respondents and is plainly evident from the records.
Airway Bill No. 11263825, issued by Burlington as agent of petitioner, states:
"6. No action shall be maintained in the case of damage to or partial loss of the shipment unless a written notice, sufficiently
describing the goods concerned, the approximate date of the damage or loss, and the details of the claim, is presented by
shipper or consignee to an office of Burlington within (14) days from the date the goods are placed at the disposal of the
person entitled to delivery, or in the case of total loss (including non-delivery) unless presented within (120) days from the
date of issue of the [Airway Bill]."16
Relevantly, petitioner's airway bill states:
"12./12.1 The person entitled to delivery must make a complaint to the carrier in writing in the case:
12.1.1 of visible damage to the goods, immediately after discovery of the damage and at the latest within fourteen (14) days
from receipt of the goods;
12.1.2 of other damage to the goods, within fourteen (14) days from the date of receipt of the goods;
12.1.3 delay, within twenty-one (21) days of the date the goods are placed at his disposal; and
12.1.4 of non-delivery of the goods, within one hundred and twenty (120) days from the date of the issue of the air waybill.
12.2 For the purpose of 12.1 complaint in writing may be made to the carrier whose air waybill was used, or to the first
carrier or to the last carrier or to the carrier who performed the transportation during which the loss, damage or delay took
place."17
Article 26 of the Warsaw Convention, on the other hand, provides:
"ART. 26. (1) Receipt by the person entitled to the delivery of baggage or goods without complaint shall be prima facie
evidence that the same have been delivered in good condition and in accordance with the document of transportation.
(2) In case of damage, the person entitled to delivery must complain to the carrier forthwith after the discovery of the damage,
and, at the latest, within 3 days from the date of receipt in the case of baggage and 7 days from the date of receipt in the case
of goods. In case of delay the complaint must be made at the latest within 14 days from the date on which the baggage or
goods have been placed at his disposal.
(3) Every complaint must be made in writing upon the document of transportation or by separate notice in writing dispatched
within the times aforesaid.
(4) Failing complaint within the times aforesaid, no action shall lie against the carrier, save in the case of fraud on his part."18
Condition Precedent
In this jurisdiction, the filing of a claim with the carrier within the time limitation therefor actually constitutes a condition
precedent to the accrual of a right of action against a carrier for loss of or damage to the goods.19 The shipper or consignee
must allege and prove the fulfillment of the condition. If it fails to do so, no right of action against the carrier can accrue in
favor of the former. The aforementioned requirement is a reasonable condition precedent; it does not constitute a limitation
of action.20
The requirement of giving notice of loss of or injury to the goods is not an empty formalism. The fundamental reasons for
such a stipulation are (1) to inform the carrier that the cargo has been damaged, and that it is being charged with liability
therefor; and (2) 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 fresh and easily investigated so as to safeguard itself
from false and fraudulent claims."21
When an airway bill -- or any contract of carriage for that matter -- has a stipulation that requires a notice of claim for loss
of or damage to goods shipped and the stipulation is not complied with, its enforcement can be prevented and the liability
cannot be imposed on the carrier. To stress, notice is a condition precedent, and the carrier is not liable if notice is not given
in accordance with the stipulation.22 Failure to comply with such a stipulation bars recovery for the loss or damage
suffered.23
Being a condition precedent, the notice must precede a suit for enforcement.24 In the present case, there is neither an
allegation nor a showing of respondents' compliance with this requirement within the prescribed period. While respondents
may have had a cause of action then, they cannot now enforce it for their failure to comply with the aforesaid condition
precedent.
In view of the foregoing, we find no more necessity to pass upon the other issues raised by petitioner.
We note that respondents are not without recourse. Cargohaus, Inc. -- petitioner's co-defendant in respondents' Complaint
below -- has been adjudged by the trial court as liable for, inter alia, "actual damages in the amount of the peso equivalent
of US $39,339."25 This judgment was affirmed by the Court of Appeals and is already final and executory.26
WHEREFORE, the Petition is GRANTED, and the assailed Decision REVERSED insofar as it pertains to Petitioner Federal
Express Corporation. No pronouncement as to costs.
SO ORDERED.
PHILIPPINE AIRLINES, INC., petitioner,
vs.
HON. ADRIANO SAVILLO, Presiding Judge of RTC Branch 30 , Iloilo City, and SIMPLICIO GRIÑO,
respondents.
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the Decision 1 dated 17 August
2001, rendered by the Court of Appeals in CA-G.R. SP No. 48664, affirming in toto the Order2 dated 9 June 1998, of Branch
30 of the Regional Trial Court (RTC) of Iloilo City, dismissing the Motion to Dismiss filed by petitioner Philippine Airlines
Inc. (PAL) in the case entitled, Simplicio Griño v. Philippine Airlines, Inc. and Singapore Airlines, docketed as Civil Case
No. 23773.
PAL is a corporation duly organized under Philippine law, engaged in the business of providing air carriage for passengers,
baggage and cargo.3
Public respondent Hon. Adriano Savillo is the presiding judge of Branch 30 of the Iloilo RTC, where Civil Case No. 23773
was filed; while private respondent Simplicio Griño is the plaintiff in the aforementioned case.
The facts are undisputed.
Private respondent was invited to participate in the 1993 ASEAN Seniors Annual Golf Tournament held in Jakarta, Indonesia.
He and several companions decided to purchase their respective passenger tickets from PAL with the following points of
passage: MANILA-SINGAPORE-JAKARTA-SINGAPORE-MANILA. Private respondent and his companions were made
to understand by PAL that its plane would take them from Manila to Singapore, while Singapore Airlines would take them
from Singapore to Jakarta.4
On 3 October 1993, private respondent and his companions took the PAL flight to Singapore and arrived at about 6:00
o’clock in the evening. Upon their arrival, they proceeded to the Singapore Airlines office to check-in for their flight to
Jakarta scheduled at 8:00 o’clock in the same evening. Singapore Airlines rejected the tickets of private respondent and his
group because they were not endorsed by PAL. It was explained to private respondent and his group that if Singapore Airlines
honored the tickets without PAL’s endorsement, PAL would not pay Singapore Airlines for their passage. Private respondent
tried to contact PAL’s office at the airport, only to find out that it was closed.5
Stranded at the airport in Singapore and left with no recourse, private respondent was in panic and at a loss where to go; and
was subjected to humiliation, embarrassment, mental anguish, serious anxiety, fear and distress. Eventually, private
respondent and his companions were forced to purchase tickets from Garuda Airlines and board its last flight bound for
Jakarta. When they arrived in Jakarta at about 12:00 o’clock midnight, the party who was supposed to fetch them from the
airport had already left and they had to arrange for their transportation to the hotel at a very late hour. After the series of
nerve-wracking experiences, private respondent became ill and was unable to participate in the tournament. 6
Upon his return to the Philippines, private respondent brought the matter to the attention of PAL. He sent a demand letter to
PAL on 20 December 1993 and another to Singapore Airlines on 21 March 1994. However, both airlines disowned liability
and blamed each other for the fiasco. On 15 August 1997, private respondent filed a Complaint for Damages before the RTC
docketed as Civil Case No. 23773, seeking compensation for moral damages in the amount of P1,000,000.00 and attorney’s
fees.7
Instead of filing an answer to private respondent’s Complaint, PAL filed a Motion to Dismiss 8 dated 18 September 1998 on
the ground that the said complaint was barred on the ground of prescription under Section 1(f) of Rule 16 of the Rules of
Court.9 PAL argued that the Warsaw Convention,10 particularly Article 29 thereof,11 governed this case, as it provides that
any claim for damages in connection with the international transportation of persons is subject to the prescription period of
two years. Since the Complaint was filed on 15 August 1997, more than three years after PAL received the demand letter on
25 January 1994, it was already barred by prescription.
On 9 June 1998, the RTC issued an Order12 denying the Motion to Dismiss. It maintained that the provisions of the Civil
Code and other pertinent laws of the Philippines, not the Warsaw Convention, were applicable to the present case.
The Court of Appeals, in its assailed Decision dated 17 August 2001, likewise dismissed the Petition for Certiorari filed by
PAL and affirmed the 9 June 1998 Order of the RTC. It pronounced that the application of the Warsaw Convention must not
be construed to preclude the application of the Civil Code and other pertinent laws. By applying Article 1144 of the Civil
Code,13 which allowed for a ten-year prescription period, the appellate court declared that the Complaint filed by private
respondent should not be dismissed.14
Hence, the present Petition, in which petitioner raises the following issues:
I
THE COURT OF APPEALS ERRED IN NOT GIVING DUE COURSE TO THE PETITION AS RESPONDENT JUDGE
COMMITED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURSIDICTION IN DENYING PAL’S
MOTION TO DISMISS.
II
THE COURT OF APPEALS ERRED IN NOT APPLYING THE PROVISIONS OF THE WARSAW CONVENTION
DESPITE THE FACT THAT GRIÑO’S CAUSE OF ACTION AROSE FROM A BREACH OF CONTRACT FOR
INTERNATIONAL AIR TRANSPORT.
III
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE COMPLAINT FILED BY GRIÑO BEYOND THE
TWO (2)-YEAR PERIOD PROVIDED UNDER THE WARSAW CONVENTION IS ALREADY BARRED BY
PRESCRIPTION.15
The petition is without merit.
In determining whether PAL’s Motion to Dismiss should have been granted by the trial court, it must be ascertained if all
the claims made by the private respondent in his Complaint are covered by the Warsaw Convention, which effectively bars
all claims made outside the two-year prescription period provided under Article 29 thereof. If the Warsaw Convention covers
all of private respondent’s claims, then Civil Case No. 23773 has already prescribed and should therefore be dismissed. On
the other hand, if some, if not all, of respondent’s claims are outside the coverage of the Warsaw Convention, the RTC may
still proceed to hear the case.
The Warsaw Convention applies to "all international transportation of persons, baggage or goods performed by any aircraft
for hire." It seeks to accommodate or balance the interests of passengers seeking recovery for personal injuries and the
interests of air carriers seeking to limit potential liability. It employs a scheme of strict liability favoring passengers and
imposing damage caps to benefit air carriers.16 The cardinal purpose of the Warsaw Convention is to provide uniformity of
rules governing claims arising from international air travel; thus, it precludes a passenger from maintaining an action for
personal injury damages under local law when his or her claim does not satisfy the conditions of liability under the
Convention.17
Article 19 of the Warsaw Convention provides for liability on the part of a carrier for "damages occasioned by delay in the
transportation by air of passengers, baggage or goods." Article 24 excludes other remedies by further providing that "(1) in
the cases covered by articles 18 and 19, any action for damages, however founded, can only be brought subject to the
conditions and limits set out in this convention." Therefore, a claim covered by the Warsaw Convention can no longer be
recovered under local law, if the statute of limitations of two years has already lapsed.
Nevertheless, this Court notes that jurisprudence in the Philippines and the United States also recognizes that the Warsaw
Convention does not "exclusively regulate" the relationship between passenger and carrier on an international flight. This
Court finds that the present case is substantially similar to cases in which the damages sought were considered to be outside
the coverage of the Warsaw Convention.
In United Airlines v. Uy, this Court distinguished between the (1) damage to the passenger’s baggage and (2) humiliation
18
proof before the RTC, an action based on these allegations will not fall under the Warsaw Convention, since the purported
negligence on the part of PAL did not occur during the performance of the contract of carriage but days before the scheduled
flight. Thus, the present action cannot be dismissed based on the statute of limitations provided under Article 29 of the
Warsaw Convention.
Had the present case merely consisted of claims incidental to the airlines’ delay in transporting their passengers, the private
respondent’s Complaint would have been time-barred under Article 29 of the Warsaw Convention. However, the present
case involves a special species of injury resulting from the failure of PAL and/or Singapore Airlines to transport private
respondent from Singapore to Jakarta – the profound distress, fear, anxiety and humiliation that private respondent
experienced when, despite PAL’s earlier assurance that Singapore Airlines confirmed his passage, he was prevented from
boarding the plane and he faced the daunting possibility that he would be stranded in Singapore Airport because the PAL
office was already closed.
These claims are covered by the Civil Code provisions on tort, and not within the purview of the Warsaw Convention. Hence,
the applicable prescription period is that provided under Article 1146 of the Civil Code:

he suffered at the hands of the airline’s employees. The first cause of action was covered by the Warsaw Convention which Art. 1146. The following actions must be instituted within four years:
prescribes in two years, while the second was covered by the provisions of the Civil Code on torts, which prescribes in four
years. (1) Upon an injury to the rights of the plaintiff;

Similar distinctions were made in American jurisprudence. In Mahaney v. Air France,19 a passenger was denied access to an (2) Upon a quasi-delict.
airline flight between New York and Mexico, despite the fact that she held a confirmed reservation. The court therein ruled
that if the plaintiff were to claim damages based solely on the delay she experienced – for instance, the costs of renting a Private respondent’s Complaint was filed with the RTC on 15 August 1997, which was less than four years since PAL
van, which she had to arrange on her own as a consequence of the delay – the complaint would be barred by the two-year received his extrajudicial demand on 25 January 1994. Thus, private respondent’s claims have not yet prescribed and PAL’s
statute of limitations. However, where the plaintiff alleged that the airlines subjected her to unjust discrimination or undue Motion to Dismiss must be denied.
or unreasonable preference or disadvantage, an act punishable under the United States laws, then the plaintiff may claim
Moreover, should there be any doubt as to the prescription of private respondent’s Complaint, the more prudent action is for
purely nominal compensatory damages for humiliation and hurt feelings, which are not provided for by the Warsaw
the RTC to continue hearing the same and deny the Motion to Dismiss. Where it cannot be determined with certainty whether
Convention. In another case, Wolgel v. Mexicana Airlines,20 the court pronounced that actions for damages for the "bumping
the action has already prescribed or not, the defense of prescription cannot be sustained on a mere motion to dismiss based
off" itself, rather than the incidental damages due to the delay, fall outside the Warsaw Convention and do not prescribe in
on what appears to be on the face of the complaint.24 And where the ground on which prescription is based does not appear
two years.
to be indubitable, the court may do well to defer action on the motion to dismiss until after trial on the merits. 25
In the Petition at bar, private respondent’s Complaint alleged that both PAL and Singapore Airlines were guilty of gross
IN VIEW OF THE FOREGOING, the instant Petition is DENIED. The assailed Decision of the Court of Appeals in CA-
negligence, which resulted in his being subjected to "humiliation, embarrassment, mental anguish, serious anxiety, fear and
G.R. SP No. 48664, promulgated on 17 August 2001 is AFFIRMED. Costs against the petitioner.
distress."21 The emotional harm suffered by the private respondent as a result of having been unreasonably and unjustly
prevented from boarding the plane should be distinguished from the actual damages which resulted from the same incident.
Under the Civil Code provisions on tort,22 such emotional harm gives rise to compensation where gross negligence or malice
is proven.

The instant case is comparable to the case of Lathigra v. British Airways.23

In Lathigra, it was held that the airlines’ negligent act of reconfirming the passenger’s reservation days before departure and
failing to inform the latter that the flight had already been discontinued is not among the acts covered by the Warsaw
Convention, since the alleged negligence did not occur during the performance of the contract of carriage but, rather, days
before the scheduled flight.

In the case at hand, Singapore Airlines barred private respondent from boarding the Singapore Airlines flight because PAL
allegedly failed to endorse the tickets of private respondent and his companions, despite PAL’s assurances to respondent that
Singapore Airlines had already confirmed their passage. While this fact still needs to be heard and established by adequate