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001 BAYASEN v.

CA (Saldua) FACTS:
Feb. 26, 1981 | Fernandez J. | Skidding of a vehicle is an Unforeseen Event 1. On the morning of Aug. 15, 1963, Saturnino Bayasen (the Rural Health
PETITIONER: Saturnino Bayasen Doctor in Sagada, Mountain Province) went to Barrio Ambasing to visit a
RESPONDENTS: Court of Appeals patient. Elena Awichen and Dolores Balcita, 2 nurses from St Theodore’s
Hospital in Sagada went with him. He was driving a jeep assigned to said
SUMMARY: Rural Health Unit.
Dr. Bayasen was convicted by the lower courts of the crime of Homicide Thru 2. At Barrio Ambasing, the 2 nurses asked Dr. Bayasen again if they could
Reckless Imprudence after the jeep he was driving skidded off the road and fell into a ride with him up to a certain place to Barrio Suyo which Dr. Bayasen
precipice of the mountain w/c led to the death of one of his companions, Elena intended to visit anyway because the 2 nurses wanted to gather flowers. Dr.
Awichen. Bayasen went up to the SC on a petition for certiorari alleging that the lower Bayasen agreed.
courts’s conclusion that the proximate cause of Awichen’s death was “his negligence in 3. Elena Awichen sat between Dr. Bayasen and Dolores Balicta. At Barrio
driving at an unreasonable speed” is openly contrary to the evidence that the Langtiw (on the way to their destination, Barrio Suyo), the jeep went over
prosecution presented during trial. Thus, Bayasen contended, he is entitled to acquittal. a precipice as it skidded. About 8 ft. below the road, it was blocked by a
Issue is WON Bayasen’s the proximate cause of Awichen’s death was “his negligence pine tree. All 3 of them were thrown out of the jeep. Elena was found
in driving at an unreasonable speed”. SC held NO. Bayasen’s negligence was not lying in a creek further below. Among other injuries, Elea suffered a
proved by the evidence on record and that the particular circumstances of this case i.e. skull fracture w/c caused her death.
skidding of the vehicle (particularly the rear wheels) is considered as a unforeseen 4. So a criminal information (People of the Philippines v. Saturnino Bayasen)
event. 1st, the testimony of the star witness of the prosecution (who was one of his for the crime of Homicide Thru Reckless Imprudence was filed against
passengers during that tragedy) proved that Bayasen was actually driving at a moderate him.
speed just before the accident; that there was nothing wrong with the jeep nor with the 5. CFI = Dr. Bayasen was guilty of the charge. Sentenced him to:
condition of the road; and that Bayasen was neither intoxicated nor distracted with the a. Indeterminate penalty of 4 mos. & 1 day of arrresto mayor as
passengers at the time of the accident. 2nd, SC gave credence to Bayasen’s testimony minimum – 1 yr, 7 mos. & 10 days of prision correccional as
that the rear wheel of the vehicle skidded while he was driving 8 – 10 km/h. So as a maximum.
precautionary measure, he directed the jeep towards the side of the mountain along its b. Indemnify the heirs of Elena Awichen: 1) P3,000 compensatory
side, but not touching it. Lastly, SC held that said skidding is a unforeseen event. It is a damages; 2) P1,000 atty’s fees; 3) P1,886 burial expenses; 4)pay
well known physical fact that cars may skid on greasy/slippery road, as in this case, the costs.
without fault on the manner of handling the car. Skidding means partial or complete CA = affirmed CFI decision w/ modifications:
loss of control of the car under circumstances not necessarily implying negligence. a. Max. prision term was raised to 1 yr, 7 mos & 17 days of prision
Skidding may occur without fault. The moment that Bayasen felt that the rear wheel of correccional.
the jeep skidded, he promptly drove it to the left side of the road, parallel to the b. Indemnity increased to P6,000; award of atty’s fees was set aside.
mountain, because as he said, he wanted to play safe and avoid the embankment. Thus, 6. Lower courts both concluded that due to Bayasen’s lack of sufficient skill &
no negligence as a matter of law can be charged on Bayasen. Under the particular confidence in diring, he lost his nerve when confronted by an emergency
circumstances of this case, Dr. Bayasen who skidded could not be regarded as due to his negligence in driving at an unreasonable speed on a narrow &
negligent, the skidding being an unforeseen event. Dr. Bayasen had a valid excuse for slippery road. He was at a loss as to what to do, and at no time did he step
his departure from his regular course. on the brakes, so he failed to control the jeep after it skidded. Thus, it was
Dr. Bayasen’s failure to exercise due diligence which caused the accident.
DOCTRINE: 7. BAYASEN’S DEFENSE: Bayasen went up to the SC on a petition for
It is a well known physical fact that cars may skid on greasy/slippery road, as in this certiorari alleging that the lower courts’s conclusion that the proximate
case, without fault on the manner of handling the car. Skidding means partial or cause of Awichen’s death was “his negligence in driving at an
complete loss of control of the car under circumstances not necessarily implying unreasonable” is openly contrary to the evidence that the prosecution
negligence. Skidding may occur without fault. presented during trial. Thus, Bayasen contended, he is entitled to acquittal.
Characters:
ISSUE/s:
Dr. Bayasen – accused-petitioner. He was the driver of the vehicle
1. WON Bayasen is entitled to acquittal on the ground that the finding that the
Elena Awichen – one of the passengers. She died.
proximate cause of Awichen’s death was Bayasen’s “negligence in dirivng
Dolores Balcita – one of the passengers. She lived.
at an unreasonable speed” is openly contrary to the evidence of the
prosecution = YES. SC gave credence to Bayasen’s testimony that the rear c. While doing so, Elena Awichen suddenly held the steering wheel
wheel of the vehicle skidded. Said skidding was considered as an and he felt that her foot stepped on his right foot which was then
unforeseen event. It is a well known physical fact that cars may skid on pressed on the accelerator.
greasy/slippery road, as in this case, without fault on the manner of d. Immediately after, the jeep suddenly swerved to thr right and went
handling the car. Skidding may occur without fault. off.
2. Dolores’ rebuttal testimony that she “did not see” what Elena suddenly did, and
RULING: WHEREFORE, the decision of the Court of Appeals sought to be that she “did not feel any movement from her side”, are all in the negative and
reviewed is hereby set aside and the petitioner is ACQUITTED of the crime charged equivocal. They do not deny or preclude the truth of Bayasen’s positive
in the information in Criminal Case No. 1056 of the Court of First Instance of testimony. So the positive and consistent testimony of Bayasen is more worthy
Mountain Province, with costs de oficio. SO ORDERED. of credence.
RATIO: III. Skidding is an Unforeseen Event, and Bayasen is not Negligent:
1. SC held that a careful examination of the evidence introduced by the Proximate Cause of the Tragedy was the Skidding of the Rear
prosecution shown that there is no “legally sufficient” proof that the Wheels and not the “Unreasonable Speed” of Bayasen
accused was negligent in driving his jeep: 1. Dolores’ earlier testimony that Bayasen was driving at moderate (and not
unreasonable) speed is supported by the testimony of Sagada Mayor Pablo
I. Testimony of the Star Witness of the Prosecution (testimony Lizardo who found the jeep at 2nd gear when he examined it not long after
reproduced at the end of the digest) the incident.
1. Dolores Balcita (star witness), who was one of the passengers in the 2. SC held that such fact shows that Dr. Bayasen could not have been driving
jeep testified that Dr. Bayasen was driving his jeep moderately just the jeep at a fast rate of speed. Thus, there is no evidence on record to
before the accident. Dolores also categorically stated that she did not prove/support the finding that Dr. Bayasen was driving at an “unreasonable
know what caused the jeep to fall into the precipice. speed”.
2. When asked whether the jeep hit anything before it fell into the precipice, 3. It is a well known physical fact that cars may skid on greasy/slippery
Dolores testified that she did not feel any bump. Furthermore, on the last road, as in this case, without fault on the manner of handling the car.
part of her testimony, it was clear that Dolores testified that there was no Skidding means partial or complete loss of control of the car under
conversation between the passengers in the jeep that could have distracted circumstances not necessarily implying negligence. Skidding may occur
Dr. Bayasen’s attention while he was driving. without fault.
3. As to the condition of the jeep itself, Dolores also testified that she “did 4. The moment that Bayasen felt that the rear wheel of the jeep skidded, he
not notice anything wrong” with it from the time they drove from Sagada to promptly drove it to the left side of the road, parallel to the mountain,
Ambasing, and then from Ambasing to the place where the jeep fell off the because as he said, he wanted to play safe and avoid the embankment.
road. 5. Thus, no negligence as a matter of law can be charged on Bayasen.
4. As to the condition of the road, Dolores testified that it was fair enough to Under the particular circumstances of this case, Dr. Bayasen who
drive on, but it was moist/wet, and the weather was fair. skidden could not be regarded as negligent, the skidding being an
5. As to whether Dr. Bayasen was under the influence of alcohol, Dolores unforeseen event. Dr. Bayasen had a valid excuse for his departure
testified that at the time of the accident, he was not. from his regular course.
6. Thus, SC held that there is no evidence on record to show that Dr.
Bayasen was negligent in driving the jeep. ____________________

II. Dr. Bayasen’s Positive & Consistent Testimony is more worthy of "ATTY. GOMEZ;
Credence VS. Dolores Balcita’s Negative & Equivocal Answers Q From Ambasing to the place where the jeep fell over the precipice, was the driver
1. Dr. Bayasen testified that: running fast or slow?
a. Before reaching the portion of the road where the jeep fell, he
noticed that the rear wheel skidded while he was driving 8 – 10 A He was with moderate speed, sir."
km/h.
b. So as a precautionary measure, he directed the jeep towards the In the course of the cross-examination, the Court asked the witness the following:
side of the mountain along its side, but not touching it. "COURT: (to the witness).
Q Could you inform this Court as to what caused the jeep to fall into the
embankment?
A I do not know, sir,"
____________________
"COURT: (to the witness).
xxx xxx xxx
Q Did the jeep hit anything before it fell into the embankment?
A I did not feel any bump, sir.
Q Going to Suyo you were passing by a mountain, is that right?
A Yes, sir.
Q On what side was that mountain?
A On the left side.
Q And while the jeep was going toward Suyo, how far was it from the mountain
along the left side?
A I do not know, sir.
Q Where was the jeep nearer to while it was on the way to Suyo - to the
embankment or the mountain?
A I do not know, sir. I was not aware of that.
Q During the time that the jeep was traversing toward Suyo, was there any
conversation transpiring?
A Just before the accident, I did not hear anything. sir."
____________________
"COURT
Witness may answer.
A When I said I was [not] looking at him, I did not see and with the space of time
that I was still conscious, I did not feel any movement from my side.
COURT
Your answer is not responsive. It is true what the accused said?
A I did not see, sir."
002 GATCHALIAN v. DELIM (EMAR) Passenger: Gatchalian
21 Oct. 1991 | Feliciano, J. | Waiver; Moral Damages; Force Majeure Common carrier (owner of minibus) – Delim
PETITIONER: REYNALDA GATCHALIAN FACTS:
RESPONDENTS: ARSENIO DELIM and CA 1. 11 July 1973, 12nn: Gatchalian boarded, as a paying passenger, Delim’s
SUMMARY: Gatchalian boarded Delim’s minibus (driven by someone else). They “Thames” minibus.
heard a snapping sound and the mini-bus bumped a cement flower pot on the side of 2. While the bus was running along a highway, “a snapping sound” was heard at
the road, went off the road, turned turtle and fell into a ditch causing injuries to its one part of the bus and, shortly, the vehicle bumped a cement flower pot on the
passengers. In the hospital, Delim’s wife made the injured passengers sign a waiver side of the road, went off the road, turned turtle and fell into a ditch.
stating, among others, “That [they] are no longer interested to file a complaint, 3. Passengers, including Gatchalian, were injured.
against the said driver and owner of the [minibus], because it was an accident and the 4. They were promptly taken to a Hospital for medical treatment.
[…] driver and owner [..] have gone to the extent of helping [them] to be treated [..].” 5. Gatchalian sustained physical injuries on the leg, arm and forehead, “lacerated
Gatchalian filed a case before the CFI collecting damages but the CFI said wound, forehead; abrasion, elbow, left; abrasion, knee, left; abrasion, lateral
Gatchalian validly waived her cause of action in signing the letter. CA denied the surface, leg, left.”
claim for damages. ISSUES: (1) WON there was a valid waiver. SC: No because the 6. 14 July 1973: while injured passengers were confined, wife of Delim, paid for
terms of the Joint Affidavit in the instant case cannot be regarded as a waiver their hospitalization and medical expenses and gave Gatchalian P12 to pay her
cast in “clear and unequivocal” terms. Gatchalian also said that while reading it, transportation going home from the hospital.
she experienced dizziness but seeing the other passengers who had also suffered 7. Mrs. Delim had the injured passengers sign a Joint Affidavit stating, “we are no
injuries sign the document, she too signed without bothering to read the Joint longer interested to file a complaint, criminal or civil against the driver and
Affidavit in its entirety. (Continue to doctrine on waiver) (2) WON what happened owner of Thames, because it was an accident and the driver and owner of the
may be considered force majeure – NO. (Doctrine on Force Majeure)The continued said Thames have gone to the extent of helping us to be treated upon our
failure of respondent to look after the roadworthiness and safety of the bus, coupled injuries.”
with the driver’s refusal or neglect to stop the mini-bus after he had heard once again 8. Gatchalian filed with the CFI an action extra contractu to recover compensatory
the “snapping sound” and the cry of alarm from one of the passengers, constituted and moral damages, alleging her injuries sustained from the vehicular mishap
wanton disregard of the physical safety of the passengers, and hence gross negligence had left on her forehead, a 1x.5”conspicuous white scar:
on the part of respondent and his driver. (3) WON moral damages may be awarded – a. generating mental suffering and inferiority complex;
YES. (Doctrine on Moral Damages) b. causing her to retire in seclusion and stay away from friends.
DOCTRINE: On waiver c. diminishing her facial beauty and
Waiver, to be valid and effective, must: d. depriving her of opportunities for employment.
• be couched in clear and unequivocal terms which leave no doubt as to the She prayed for:
intention of a person to give up a right a. P10k for loss of employment and other opportunities;
• not casually be attributed to a person when the terms thereof do not explicitly b. P10k for the cost of plastic surgery for removal the forehead scar;
and clearly evidence an intent to abandon a right vested in such person. c. P30k for moral damages; and
d. P1k as atty’s fees.
• not be contrary to law, morals, public policy or good customs.
COMMON CARRIER’S DEFENSE:
To uphold a supposed waiver of any right to claim damages by an injured passenger,
9. Delim contends that:
under circumstances like those exhibited in this case, would be to dilute and weaken
a. the vehicular mishap was due to force majeure,
the standard of extraordinary diligence exacted by the law from common
b. Gatchalian had already been paid and had waived any right to institute any
carriers and hence to render that standard unenforceable. Such a purported
action against Delim and his driver, when Gatchalian signed the Joint
waiver is offensive to public policy.
Affidavit on 14 July 1973.
On Force Majeure
10. TC dismissed the complaint upon the ground that when Gatchalian signed the
To be considered a force majeure, the carrier must clearly show not only that the
Joint Affidavit, she relinquished any right of action (criminal/civil) that she may
efficient cause of the casualty was entirely independent of the human will, but also
have had against respondent and the driver of the mini-bus.
that it was impossible to avoid.
11. CA: There was no valid waiver but Gatchalian’s claim for damages is denied.
On Moral Damages
12. Gatchalian argues that CA, having by majority vote held that there was no
Moral damages may be awarded where gross negligence on the part of the common
enforceable waiver of her right of action, should have awarded her actual or
carrier is shown
compensatory and moral damages as a matter of course.
5. Appellees did not actually waive their right to claim damages from appellant for
ISSUES: the appellant’s failure to comply with their contract of carriage.
1. WON there was a valid waiver – NO. Such waiver is (1) not couched in clear 6. All that the document proves is that they expressed a ‘desire’ to make the
and unequivocal terms (2) Gatchalian was dizzy when she signed it; and only waiver—which obviously is not the same as making an actual waiver of their
signed since she saw the other injured passengers sign the same (3) contrary to right. A waiver of the kind invoked by appellant must be clear and
public policy (for diluting the liability of common carriers who should exercise unequivocal (Decision of the Supreme Court of Spain of July 8, 1887)—which
extraordinary diligence) is not the case of the one relied upon in this appeal.”
2. WON what happened may be considered force majeure – NO. To be considered 7. The terms of the Joint Affidavit in the instant case cannot be regarded as a
a force majeure, the carrier must clearly show not only that the efficient cause of waiver cast in “clear and unequivocal” terms.
the casualty was entirely independent of the human will, but also that it was 8. Circumstances under which the Joint Affidavit was signed by Gatchalian need to
impossible to avoid. The continued failure of respondent to look after the be considered. Gatchalian was still reeling from the effects of the vehicular
roadworthiness and safety of the bus, coupled with the driver’s refusal or neglect accident, having been in the hospital for only 3d, when the purported waiver in
to stop the mini-bus after he had heard once again the “snapping sound” and the the form of the Joint Affidavit was presented to her for signing. While reading it,
cry of alarm from one of the passengers, constituted wanton disregard of the she experienced dizziness but that, seeing the other passengers who had also
physical safety of the passengers, and hence gross negligence on the part of suffered injuries sign the document, she too signed without bothering to read the
respondent and his driver. Joint Affidavit in its entirety.
3. WON moral damages may be awarded – YES. Moral damages may be awarded 9. There appears substantial doubt whether Gatchalian understood fully the import
where gross negligence on the part of the common carrier is shown as in this of the Joint Affidavit (prepared by or at the instance of Delim) she signed and
case. whether she actually intended thereby to waive any right of action against
Delim.
RULING: CA and CFI Decisions are REVERSED and SET ASIDE. Delim is 10. What is involved here is the liability of a common carrier for injuries sustained
ORDERED to pay Gatchalian: by passengers in respect of whose safety a common carrier must
1) P15k - actual/compensatory damages to cover the cost of plastic surgery for the exercise extraordinary diligence, we must construe any such purported waiver
removal of the scar on Gatchalian’s forehead; most strictly against the common carrier.
2) P30k moral damages; and 11. For a waiver to be valid and effective, it must not be contrary to law, morals,
3) P1k atty’s fees, public policy or good customs. To uphold a supposed waiver of any right to
+ 6%/annum from promulgation of decision to full payment. Costs against Delim. claim damages by an injured passenger, under circumstances like those
exhibited in this case, would be to dilute and weaken the standard of
RATIO: extraordinary diligence exacted by the law from common carriers and hence to
1. The relevant language of the Joint Affidavit: “That we are no longer interested render that standard unenforceable. Such a purported waiver is offensive to
to file a complaint, criminal or civil against the said driver and owner of the public policy.
said Thames, because it was an accident and the said driver and owner of the Common Carrier’s Liability
said Thames have gone to the extent of helping us to be treated upon our 12. A duty to exercise extraordinary diligence in protecting the safety of its
injuries.” passengers is imposed upon a common
2. A waiver, to be valid and effective, must in the first place be couched in clear carrier.http://www.central.com.ph/sfsreader/session/000001659394ac1bfa2c472
and unequivocal terms which leave no doubt as to the intention of a person to 6003600fb002c009e/p/APW798/?username=Guest - p203scra8960134001 In
give up a right or benefit which legally pertains to him. case of death/injuries to passengers, a statutory presumption arises that the
3. A waiver may not casually be attributed to a person when the terms thereof do common carrier was at fault or had acted negligently “unless it proves that it
not explicitly and clearly evidence an intent to abandon a right vested in such [had] observed extraordinary diligence as prescribed in Arts. 1733 & 1755.”
person. 13. A court need not even make an express finding of fault or negligence on the part
4. Yepes and Susaya v. Samar Express Transit : “x x x It appears that before their of the common carrier in order to hold a common carrier liable. To overcome
transfer to the Leyte Provincial Hospital, appellees were asked to sign as, in fact, this presumption, the common carrier must show to the court that it had
they signed the document Exhibit I wherein they stated that ‘in consideration of exercised extraordinary diligence to prevent the injuries.
the expenses which said operator has incurred in properly giving us the proper 14. The standard of extraordinary diligence imposed upon common carriers is
medical treatment, we hereby manifest our desire to waive any and all claims considerably more demanding than the standard of ordinary diligence, i.e., the
against the operator of the Samar Express Transit.’ diligence of a good paterfamilias established in respect of the ordinary relations
between members of society. A common carrier is bound to carry its passengers stop the mini-bus after he had heard once again the “snapping sound” and the cry of
safely “as far as human care and foresight can provide, using the utmost alarm from one of the passengers, constituted wanton disregard of the physical safety
diligence of a very cautious person, with due regard to all the circumstances”.11 of the passengers, and hence gross negligence on the part of respondent and his
15. Delim did not even attempt, during the trial before the court a quo, to prove that driver.
he exercised the requisite extraordinary diligence. Delim did try to exculpate Damages - Revenue
himself from liability by alleging that the mishap was the result of force 22. Gatchalian: On the day that the mini-bus went off the road, she was supposed to
majeure. But allegation is not proof and here again, Delim utterly failed to confer with the district supervisor of public schools for a substitute teacher’s
substantiate his defense of force majeure. job, a job which she had held off and on as a “casual employee.”
16. To exempt a common carrier from liability for death or physical injuries to 23. CA: At time of accident, Gatchalian was no longer employed in a public
passengers upon the ground of force majeure, the carrier must clearly show not school since, being a casual employee; not a Civil Service eligible, she was laid
only that the efficient cause of the casualty was entirely independent of the off.
human will, but also that it was impossible to avoid. Any participation by the 24. Gatchalian’s employment as a substitute teacher was occasional and episodic,
common carrier in the occurrence of the injury will defeat the defense of force contingent upon the availability of vacancies for substitute teachers.
majeure. 25. CA: She could not be said to have in fact lost any employment after and by
17. Servando v. Philippine Steam Navigation: essential characteristics of force reason of the accident. Such was the factual finding of the CA, a finding entitled to
majeure from Enciclopedia Juridica Española: due respect from this Court. Petitioner Gatchalian has not submitted any basis for
“Thus, where fortuitous event or force majeure is the immediate and proximate cause overturning this finding of fact, and she may not be awarded damages on the basis of
of the loss, the obligor is exempt from liability for non-performance. The Partidas, speculation or conjecture.
the antecedent of Art. 1174, CC, defines ‘caso fortuito’ as ‘an event that takes place Damages - Surgery
by accident and could not have been foreseen. Examples of this are destruction of 26. A person is entitled to the physical integrity of his or her body; if that integrity is
houses, unexpected fire, shipwreck, violence of robbers.’ violated or diminished, actual injury is suffered for which actual or compensatory
18. Enciclopedia Juridica Española says: ‘In legal sense and, consequently, also in damages are due and assessable.
relation to contracts, a ‘caso fortuito’ presents the following essential 27. Gatchalian is entitled to be placed as nearly as possible in the condition that she
characteristics: was before the mishap. A scar, especially one on the face of the woman, resulting
(1) the cause of the unforeseen and unexpected occurrence, or of the failure of from the infliction of injury upon her, is a violation of bodily integrity, giving raise
the debtor to comply with his obligation, must be independent of the human to a legitimate claim for restoration to her conditio ante. If the scar is relatively small
will; and does not grievously disfigure the victim, the cost of surgery may be expected to
(2) it must be impossible to foresee the event which constitutes the ‘caso be correspondingly modest.
fortuito’, or if it can be foreseen, it must be impossible to avoid; 28. Araneta, et al. vs. Areglado: SC awarded actual or compensatory damages for
(3) the occurrence must be such as to render it impossible for the debtor to fulfill surgical removal of the scar on the face of a young boy who had been injured in a
his obligation in a normal manner; and vehicular collision. The Court there held: “In allowing not more than P1k as
(4) the obligor must be free from any participation in the aggravation of the compensation for ‘permanent deformity and—inferiority complex’ as well as for the
injury resulting to the creditor.” ‘pathological condition on the left side of the jaw’ caused, the court overlooked the
19. There was fault or negligence on the part of Delim. In her direct examination, evidence that to arrest the degenerative process taking place in the mandible
Gatchalian narrated that shortly before the vehicle went off the road and into a and restore the injured boy to a nearly normal condition, surgical intervention was
ditch, a “snapping sound” was suddenly heard at one part of the bus. needed, for which the doctor’s charges would amount to P3k, exclusive of
20. An old woman passengers asked, “What happened?”. The driver replied, “That is hospitalization fees, expenses and medicines.”
only normal” and did not stop to check if anything had gone wrong with the bus. 29. Gatchalian estimated that the cost of having her scar surgically removed was
21. The driver’s reply indicated that the same “snapping sound” had been heard in somewhere between P10-15k.
the bus on previous occasions; meaning that the bus had not been checked 30. Dr. Fe Tayao Lasam, a witness presented as an expert by Gatchalian, testified
physically or mechanically to determine what was causing the “snapping sound” that the cost would probably be between P5-P10k. In view of this testimony, and the
which had occurred so frequently that the driver had gotten accustomed to it. Such a fact that a considerable amount of time has lapsed since the mishap in 1973 which
sound is obviously alien to a motor vehicle in good operating condition, and even a may be expected to increase not only the cost but also very probably the difficulty of
modicum of concern for life and limb of passengers dictated that the bus be checked removing the scar, we consider that the amount of P15k to cover the cost of such
and repaired. The obvious continued failure of respondent to look after the plastic surgery is not unreasonable.
roadworthiness and safety of the bus, coupled with the driver’s refusal or neglect to Moral Damages
31. Moral damages may be awarded where gross negligence on the part of the
common carrier is shown.
32. Delim – a common carrier and his driver had been grossly negligent in
connection with the bus mishap which had injured Gatchalian and other passengers,
and recalling the aggressive manuevers of respondent, through his wife, to get the
victims to waive their right to recover damages even as they were still hospitalized
for their injuries, Gatchalian must be held entitled to such moral damages.
Considering the extent of pain and anxiety which Gatchalian must have suffered as a
result of her physical injuries including the permanent scar on her forehead, P30k is a
reasonable award.
Gatchalian’s claim for P1k attorney’s fees is modest.
003 Fortune Express v. CA (Sarmiento) 2. A bus of petitioner figured in an accident with a jeepney in Kauswagan,
March 18, 1999 | Mendoza, J. | Fortuitous event Lanao del Norte, resulting in the death of several passengers of the jeepney,
including two Maranaos.
PETITIONER: Fortune Express a. Crisanto Generalao, a volunteer field agent of the Constabulary
Regional Security conducted an investigation of the accident. He
RESPONDENTS: Pauline Caorong et al. found that the owner of the jeepney was a Maranao residing in
Delabayan, Lanao del Norte and that certain Maranaos were
SUMMARY: planning to take revenge on the petitioner by burning some of its
buses.
A bus of Fortune Express figured in an accident with a jeepney resulting in the b. Thus, Generalao informed the police about this plot of revenge.
death of several passengers of the jeepney, owned by a Maranao. The
investigation found that certain Maranaos were planning to take revenge on the 3. Then three armed Maranaos who pretended to be passengers, seized a bus
Fortune Express by burning some of its buses. The police informed the of petitioner at Linamon, Lanao del Norte while on its way to Iligan City.
operations manager of Fortune. Later, three armed Maranaos who pretended to a. Among the passengers of the bus was Atty. Caorong. The leader of
be passengers, seized a bus of petitioner. Among the passengers of the bus was the Maranaos, identified as one Bashier Mananggolo, ordered the
Atty. Caorong. Atty. Caorong was shot when he tried to retrieve something from driver, Godofredo Cabatuan, to stop the bus on the side of the
the bus, after the passengers were instructed by the Maranaos to go out. The highway. Mananggolo then shot Cabatuan on the arm, which
private respondents brought this suit for breach of contract of carriage. Despite caused him to slump on the steering wheel. Then one of the
warning by the Philippine Constabulary at Cagayan de Oro that the Maranaos companions of Mananggolo started pouring gasoline inside the
were planning to take revenge on the petitioner by burning some of its buses and bus, as the other held the passengers at bay with a handgun.
the assurance of petitioner's operation manager, Diosdado Bravo, that the b. Mananggolo then ordered the passengers to get off the bus. The
necessary precautions would be taken, petitioner did nothing to protect the safety passengers, including Atty. Caorong, stepped out of the bus and
of its passengers. The seizure of the bus of the petitioner was foreseeable and, went behind the bushes in a field some distance from the highway
therefore, was not a fortuitous event which would exempt petitioner from c. However, Atty. Caorong returned to the bus to retrieve something
liabilty. Atty. Caorong was also not guilty of contributory negligence. from the overhead rack. At that time, one of the armed men was
pouring gasoline on the head of the driver.
d. Cabatuan, who had meantime regained consciousness, heard Atty.
DOCTRINE: Art. 1174 of the Civil Code defines a fortuitous even as an Caorong pleading with the armed men to spare the driver as he was
occurrence which could not be foreseen or which though foreseen, is inevitable. innocent of any wrong doing and was only trying to make a living.
It is necessary that: (1) the cause of the breach of the obligation must be The armed men were, however, adamant as they repeated their
independent of the human will; (2) the event must be either unforeseeable or warning that they were going to burn the bus along with its driver.
unavoidable; (3) the occurrence must be such as to render it impossible for the e. During this exchange between Atty. Caorong and the assailants,
debtor to fulfill the obligation in a normal manner; and (4) the obligor must be Cabatuan climbed out of the left window of the bus and crawled to
free of participation in, or aggravation of, the injury to the creditor. The absence the canal on the opposite side of the highway. He heard shots from
of any of the requisites mentioned above would prevent the obligor from being inside the bus. Larry de la Cruz, one of the passengers, saw that
excused from liability. Atty. Caorong was hit.
f. Then the bus was set on fire.
g. Some of the passengers were able to pull Atty. Caorong out of the
burning bus and rush him to the hospital but he died.
FACTS:
1. Petitioner Fortune Express is a bus company in northern Mindanao. Private
4. The private respondents Caorong brought this suit for breach of contract of
respondent Paulie Caorong is the widow of Atty. Caorong, while private
carriage in the Regional Trial Court, Branch VI, Iligan City.
respondents Yasser King, Rose Heinni, and Prince Alexander are their
a. Trial Court: no negligence on the part of the Fortune Express bus
minor children.
company because the failure to post guards in the bus cannot be
expected of buses.
b. CA: reversed the decision.
before allowing them on board could have been employed without violating
ISSUE: Whether or not Fortune Express is liable for the death of Atty. the passenger's constitutional rights.
Caorong—YES. The event was forseeable which takes it out of the ambit of a force a. As this Court intimated in Gacal v. Philippine Air Lines, Inc.,[6] a
majeure. common carrier can be held liable for failing to prevent a hijacking
by frisking passengers and inspecting their baggages
RULING: b. From the foregoing, it is evident that petitioner's employees failed
to prevent the attack on one of petitioner's buses because they did
WHEREFORE, the decision, dated July 29, 1994, of the Court of Appeals is not exercise the diligence of a good father of a family. Hence,
hereby AFFIRMED with the MODIFICATION that petitioner Fortune Express, Inc. petitioner should be held liable for the death of Atty. Caorong.
is ordered to pay the following amounts to private respondents Paulie, Yasser King,
Rose Heinni, and Prince Alexander Caorong: Second. Seizure of Petitioner's Bus not a Case of Force Majeure
1. death indemnity in the amount of fifty thousand pesos (P50,000.00); 1. The petitioner contends that the seizure of its bus by the armed assailants
2. actual damages in the amount of thirty thousand pesos (P30,000.00); was a fortuitous event for which it could not be held liable.
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 2. Art. 1174 of the Civil Code defines a fortuitous even as an occurrence
(P100,000.00); which could not be foreseen or which though foreseen, is inevitable.
5. attorney's fees in the amount of fifty thousand pesos (P50,000.00); In Yobido v. Court of Appeals, we held that to be considered as force
6. compensation for loss of earning capacity in the amount of two million one majeure, it is necessary that: (1) the cause of the breach of the obligation
hundred twenty-one thousand four hundred four pesos and ninety centavos must be independent of the human will; (2) the event must be either
(P2,121,404.90); and unforeseeable or unavoidable; (3) the occurrence must be such as to render
7. costs of suits. 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
RATIO: to the creditor. The absence of any of the requisites mentioned above would
prevent the obligor from being excused from liability.
First. Petitioner's Breach of the Contract of Carriage
3. Thus, in Vasquez v. Court of Appeals, it was held that the common carrier
1. Art. 1763 of the Civil Code provides that a common carrier is responsible was liable for its failure to take the necessary precautions against an
for injuries suffered by a passenger on account of the wilful acts of other approaching typhoon, of which it was warned, resulting in the loss of the
passengers, if the employees of the common carrier could have prevented lives of several passengers.
the act the exercise of the diligence of a good father of a family. a. The event was foreseeable, and, thus, the second requisite
a. In the present case, it is clear that because of the negligence of mentioned above was not fulfilled.
petitioner's employees, the seizure of the bus by Mananggolo and 4. This ruling applies by analogy to the present case.
his men was made possible. a. Despite the report of PC agent Generalao that the Maranaos were
b. Despite warning by the Philippine Constabulary that the Maranaos going to attack its buses, petitioner took no steps to safeguard the
were planning to take revenge on the petitioner by burning some of lives and properties of its passengers.
its buses and the assurance of petitioner's operation manager, b. The seizure of the bus of the petitioner was foreseeable and,
Diosdado Bravo, that the necessary precautions would be taken, therefore, was not a fortuitous event which would exempt
petitioner did nothing to protect the safety of its passengers. petitioner from liability.
c. Had petitioner and its employees been vigilant they would not have
failed to see that the malefactors had a large quantity of gasoline 5. Petitioner invokes the ruling in Pilapil v. Court of Appeals and De Guzman
with them. v. Court of Appeals in support of its contention that the seizure of its bus by
the assailants constitutes force majeure.
2. Under the circumstances, simple precautionary measures to protect the a. In Pilapil v. Court of Appeals, it was held that a common carrier is
safety of passengers, such as frisking passengers and inspecting their not liable for failing to install window grills on its buses to protect
baggages, preferably with non-intrusive gadgets such as metal detectors, passengers from injuries caused by rocks hurled at the bus by
lawless elements.
b. On the other hand, in De Guzman v. Court of Appeals, it was ruled P50,000.00. Private respondents are entitled to this amount.
that a common carrier is not responsible for goods lost as a result
of a robbery which is attended by grave or irresistible threat, Actual damages. Art. 2199 provides that "Except as provided by law or by
violence, or force. stipulation, one is entitled to an adequate compensation only for such pecuniary loss
c. It is clear that the cases of Pilapil and De Guzman do not apply to suffered by him as he has duly proved." The trial court found that the private
the present case. Art. 1755 of the Civil Code provides that "a respondents spent P30,000.00 for the wake and burial of Atty. Caorong. Since
common carrier is bound to carry the passengers as far as human petitioner does not question this finding of the trial court, it is liable to private
care and foresight can provide, using the utmost diligence of very respondents in the said amount as actual damages.
cautious person, with due regard for all the circumstances."
d. Thus, we held in Pilapil and De Guzman that the respondents Moral Damages. Under Art. 2206, the "spouse, legitimate and illegitimate
therein were not negligent in failing to take special precautions descendants and ascendants of the deceased may demand moral damages for mental
against threats to the safety of passengers which could not be anguish by reason of the death of the deceased." The trial court found that private
foreseen, such as tortious or criminal acts of third persons. 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,
6. In the present case, this factor of unforeseeablility (the second requisite for Rose Heinni, and Prince Alexander. The petitioner likewise does not question this
an event to be considered force majeure) is lacking. 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
Third. Deceased not Guilty of Contributory Negligence of P100,000.00 as moral damages for the death of Atty. Caorong.

1. The petitioner contends that Atty. Caorong was guilty of contributory Exemplary Damages. Art. 2232 provides that "in contracts and quasi-contracts, the
negligence in returning to the bus to retrieve something. But Atty. Caorong court may award exemplary damages if the defendant acted in a wanton, fraudulent,
did not act recklessly. It should be pointed out that the intended targets of reckless, oppressive, or malevolent manner." In the present case, the petitioner acted
the violence were petitioner and its employees, not its passengers. in a wanton and reckless manner. Despite warning that the Maranaos were planning
a. The assailant's motive was to retaliate for the loss of life of two to take revenge against the petitioner by burning some of its buses, and contrary to
Maranaos as a result of the collision between petitioner's bus and the assurance made by its operations manager that the necessary precautions would
the jeepney in which the two Maranaos were riding. Mananggolo, be taken, the petitioner and its employees did nothing to protect the safety of
the leader of the group which had hijacked the bus, ordered the passengers. Under the circumstances, we deem it reasonable to award private
passengers to get off the bus as they intended to burn it and its respondents exemplary damages in the amount of P100,000.00.
driver.
b. The armed men actually allowed Atty. Caorong to retrieve Attorney's Fees. Pursuant to Art. 2208, attorney's fees may be recovered when, as in
something from the bus. What apparently angered them was his the instant case, exemplary damages are awarded. In the recent case of Sulpicio
attempt to help the driver of the bus by pleading for his life. Lines, Inc. v. Court of Appeals,we held an award of P50,000.00 as attorney's fees to
c. He was playing the role of the good Samaritan. Certainly, this act be reasonable. Hence, the private respondents are entitled to attorney's fees in that
cannot be considered an act of negligence, let alone recklessness. amount.

Compensation for Loss of Earning Capacity. Art. 1764 of the Civil Code, in relation
Fourth. Petitioner Liable to Private Respondents for Damages to Art. 2206 thereof, provides that in addition to the indemnity for death arising from
the breach of contract of carriage by a common carrier, the "defendant shall be liable
We now consider the question of damages that the heirs of Atty. Caorong, private for the loss of the earning capacity of the deceased, and the indemnity shall be paid
respondents herein, are entitled to recover from the petitioner. to the heirs of the latter." The formula established in decided cases for computing net
earning capacity is as follows:
Indemnity for Death. Art. 1764 of the Civil Code, in relation to Art. 2206 thereof,
provides for the payment of indemnity for the death of passengers caused by the
breached of contract of carriage by a common carrier. Initially fixed in Art. 2206 at
P3,000.00, the amount of the said indemnity for death has through the years been
gradually increased in view of the declining value of the peso. It is presently fixed at
004 TAN v. NORTHWEST AIRLINES, INC. (SEE) 2. Upon their arrival, Priscilla and Connie found that their baggages were
March 3, 2000 | Pardo, J. | liability for left baggage missing. They returned to NAIA the evening of the following day and they
were informed that their bags might still be in another plane in Tokyo.
PETITIONER: Priscilla Tan 3. On June 3, they recovered their bags and discovered that some of its
RESPONDENTS: Northwest Airlines Inc. contents were destroyed and soiled.
4. Claiming that they “suffered mental anguish, sleepless nights and great
SUMMARY: Priscilla and Connue boarded a Northwest Airlines flight from damage” because of Northwest’s failure to inform them in advance that
Chicago to Manila with stopover at Detroit. Upon their arrival in Manila on June their baggages would not be loaded on the same flight they boarded and
1, their baggages were missing. The next evening, they went back to NAIA because of their delayed arrival, they demanded from Northwest Airlines
where they were informed that their bags might still be in a plane in Tokyo. compensation for the damages they suffered. On June 15, 1994 and June 22,
They were able to recover their bags on June 3 and discovered that some of its 1994, Priscilla sent demand letters to Northwest Airlines, but the latter did
contents were destroyed and soiled. They then claims for damages for breach of not respond. Hence, Priscilla filed an action for damages for breach of
contract of carriage for failure of the airline to deliver their bagges on the date of contract of carriage for failure of the airline to deliver their baggages on the
their arrival. Northwest, in its answer, did not deny that the baggages were not date of their arrival.
loaded on the Northwest Flight 29. They claim that it couldn't be loaded on the 5. Northwest, in its answer, did not deny that the baggages were not loaded on
same flight because of weight and balance restrictions. However, the baggages the Northwest Flight 29. They claim that it couldn't be loaded on the same
were loaded in another Northwest flight which arrived on the evening on June 2, flight because of weight and balance restrictions. However, the baggages
the night after Priscilla and Connie arrived. When Priscilla received the damaged were loaded in another Northwest flight which arrived on the evening on
baggages, Northwest offered either to: (1) reimburse the cost or repair of the June 2, the night after Priscilla and Connie arrived.
bags; or (2) reimburse the cost for the purchase of new bags, upon submission of 6. When Priscilla received the damaged baggages, Northwest offered either to:
receipts. The RTC ruled for Priscilla, the CA affirmed but deleted moral and (1) reimburse the cost or repair of the bags; or (2) reimburse the cost for the
exemplary damages and reduced attorney’s fees. purchase of new bags, upon submission of receipts.
7. The RTC ruled in favor of Priscilla and made Northwest liable for damages.
WoN Northwest is liable for moral and exemplary damages for willful a. 15k actual damages
misconduct and breach of the contract of air carriage.—NO because Northwest b. 100k moral damages
is not guilty of willful misconduct. They didn't load the baggages due to weight c. 50k exemplary damages
and balance restriction so there is no bad faith. Contrary to Priscilla’s contention, d. 30 attorney’s fees, and
there was nothing in the conduct of Northwest which showed that they were e. Costs
motivated by malice or bad faith in loading her baggages on another plane. Due 8. Northwest appealed contending that the RTC erred in finding it guilty of
to weight and balance restrictions, as a safety measure, Northwest had to breach of contract of carriage and willful misconduct and that the award of
transport the baggages on a different flight, but with the same expected date and damages had no basis or were otherwise excessive.
time of arrival in the Philippines. (Weird because the facts stated that the bags 9. The CA partially granted the appeal but only deleted the moral and
arrived 2 days after, on June 3.) exemplary damages and reduced the attorney’s fees to 10k.

DOCTRINE: Where in breaching the contract of carriage the defendant airline ISSUE/s:
is not shown to have acted fraudulently or in bad faith, liability for damages is 1. WoN Northwest is liable for moral and exemplary damages for willful
limited to the natural and probable consequences of the breach of obligation misconduct and breach of the contract of air carriage.—NO. Northwest is
which the parties had foreseen or could have reasonably foreseen. In that case, not guilty of willful misconduct. They didn't load the baggages due to
such liability does not include moral and exemplary damages. weight and balance restriction so there is no bad faith.

RULING: WHEREFORE, the Court DENIES the petition for lack of merit. The
FACTS:
Court AFFIRMS the decision of the Court of Appeals deleting, however, the award
1. On May 31, 1994, Priscilla L. Tan and Connie Tan boarded Northwest
of attorney’s fees. No costs. SO ORDERED.
Airlines Flight 29 in Chicago, U.S.A. bound for the Philippines, with a
stopover at Detroit, U.S.A. They arrived at NAIA on June 1, 1994 at about
RATIO:
10:40 in the evening.
1. The CA was correct in finding that Northwest is not guilty of willful
misconduct. “For willful misconduct to exist, there must be a showing that
the acts complained of were impelled by an intention to violate the law, or
were in persistent disregard of one’s rights. It must be evidenced by a
flagrantly or shamefully wrong or improper conduct.”
2. Contrary to Priscilla’s contention, there was nothing in the conduct of
Northwest which showed that they were motivated by malice or bad
faith in loading her baggages on another plane. Due to weight and
balance restrictions, as a safety measure, Northwest had to transport
the baggages on a different flight, but with the same expected date and
time of arrival in the Philippines. As aptly explained by respondent:
a. “To ensure the safety of each flight, Northwest’s personnel
determine every flight’s compliance with “weight and balance
restrictions.” They check the factors like weight of the aircraft used
for the flight gas input, passenger and crew load, baggage weight,
all in relation to the wind factor anticipated on the flight. If there is
an overload, i.e., a perceived safety risk, the aircraft’s load will be
reduced by offloading cargo, which will then be placed on the next
available flight.”
3. It is admitted that Northwest failed to deliver the luggages on time but there
was no showing of bad faith or malice. In fact, it was for safety that the
baggages had to be shipped in another flight with the same date of arrival.
(This is weird because the facts stated that the bags arrived 2 days after, on
June 3.)
4. Bad faith does not simply connote bad judgment or negligence, it imports a
dishonest purpose or some moral obliquity and conscious doing of a wrong,
a breach of known duty through some motive or interest or ill will that
partakes of the nature of fraud.
5. Where in breaching the contract of carriage the defendant airline is not
shown to have acted fraudulently or in bad faith, liability for damages
is limited to the natural and probable consequences of the breach of
obligation which the parties had foreseen or could have reasonably
foreseen. In that case, such liability does not include moral and
exemplary damages.
005 CHINA AIR v. CA (Siapno)
July 14, 2003 | Carpio, J. | FACTS:
1. Antonio Salvador and Rolando Lao (Salvador and Lao) planned to travel to Los
PETITIONER: China Airlines, LTD. Angeles, California to pursue a cable business deal involving the distribution of
RESPONDENT: Court of Appeals, Antonio Salvador and Rolando Lao Filipino films and programs in Los Angeles.
2. Morelia Travel Agency (Morelia) booked Salvador and Lao’s flight with
SUMMARY: Salvador and Lao planned to travel to LA to pursue a cable CAL. Morelia scheduled the flight for Manila-Taipei-Los Angeles.
business deal involving the distribution of Filipino films. Initially, Morelia 3. On discovering that Morelia charged higher rates than American Express
Travel Agency booked their flight with CAL. Upon discovering that Morelia Travel Service Philippines (Amexco), Salvador and Lao dropped the services of
charged higher rates than Amexco, they dropped the services of Morelia. Lao Morelia and engaged the services of Amexco.
called Amexco claiming that he and Salvador had a confirmed booking with 4. Lao called up Amexco claiming that he and Salvador had a confirmed booking
CAL. Lao then gave to Amexco the record locator number that CAL issued with CAL. Lao then gave to Amexco the record locator number or booking
previously to Morelia. CAL confirmed the booking. When the Salvador and Lao reference number that CAL had previously issued to Morelia.
were at the airport, CAL prevented them from boarding because their names 5. Amexco called up CAL to finalize the reservation. Amexco used the record
were not in the passenger's manifest. CAL cancelled the reservations when locator number given by Lao in confirming the reservation. CAL confirmed the
Morelia revoked the booking. But the respondents were able to get a flight with booking. Amexco then issued to Salvador and Lao the confirmed tickets.
Northwest Airlines. 6. CAL called up Morelia to reconfirm the reservations of private
Issue/s: respondents. Morelia cancelled the reservations of Salvador and Lao.
1. WON there was a breach in the contract of carriage - Yes. When an airline 7. Salvador and Lao were at the airport to board the flight but CAL personnel
issues a ticket to a passenger confirmed for a particular flight on a certain date, a prevented them from boarding the airplane because their names were not in the
contract of carriage arises. The passenger has every right to expect that he would passengers manifest. Salvador and Lao left for LA the following day on a
fly on that flight and on that date. When CAL did not allow respondents, who different airline, Northwest Airlines. Through counsel, they sent a demand
were in possession of the confirmed tickets, from boarding its airplane because letter to CAL for payment of moral damages totaling P500,000.
their names were not in the manifest, it consituted a breach of contract of 8. CAL explained that its records showed that Morelia and not Amexco made the
carriage. bookings. Morelia also sought the cancellation of the booking and CAL merely
2. WON there there was bad faith - No. Bad faith should always be established accepted the cancellation. CAL argued that Salvador and Lao’s cause of action
by clear and convincing evidence since the law always presumes good faith. In should not be against it, but against the travel agencies.
the case, there were three reasons why CAL cancelled the reservations. First was 9. Salvador and Lao also wrote a demand letter to Amexco. They filed with the
Amexco's unauthorized use of the record locator number. Second was CAL's RTC a complaint for damages against CAL and Amexco. They claimed that the
negligence in confirming the reservations of Amexco. Third was the absence of one-day delay in their flight to LA caused them to lose business opportunities
the correct contact numbers of private respondents. There was no concerted entitling them to actual, moral and exemplary damages and attorneys fees.
effort on the part of CAL to cancel respondent's reservations in favor of other 10. RTC: disregarded CALs argument that it had to cancel Salvador and Lao’s
passengers. reservations because of the advice of Morelia, the booking agent, and that
3. WON there was sufficient claims for damages – Only nominal damages. Not Amexco had no right to use the booking and record locator number of Morelia.
entitled to moral damages because not every case of mental anguish, fright or a. CAL already knew that Salvador and Lao had confirmed their flight, even
anxiety calls for the award of moral damages. Not entitled to exemplary damages though Amexco and not Morelia made the confirmation. CALs cancellation
because CAL was not in bad faith and its employees did not act in a wanton, of the reservations was unjustified and tainted with bad faith. In the
fraudulent, reckless, oppressive or malevolent manner. Not entitled to actual testimony of Lea, the booking agent of Amexco who called up CAL
damages because respondents did not shell out any money for their CAL tickets. identifying herself as Lea-Amexco said that she used the record locator
Respondents would have been entitled to the price difference between the tickets number that Lao gave Amexco.
of CAL and Northwest had the latter cost more than the former but this was not b. Even if Amexco wittingly or unwittingly missed the truth with respect to the
the case. record locator number, CAL should have known better as it was the
assignor of the record locator number. CAL should not have confirmed the
DOCTRINE: When an airline issues a ticket to a passenger confirmed for a booking made by Lea who was not a familiar caller from Morelia.
particular flight on a certain date, a contract of carriage arises. The passenger has c. The trial court wondered why CAL took the initiative of calling up Morelia
every right to expect that he would fly on that flight and on that date. on the same afternoon that Amexco finalized and confirmed the reservations
of private respondents. CAL took this as an excuse to cancel the 2. WON there there was bad faith - No. Bad faith should always be established by
reservations. CAL’s actions justified private respondent’s accusation that clear and convincing evidence since the law always presumes good faith
CAL bumped them off in favor of other passengers. 3. WON there was sufficient claims for damages – Yes but only nominal damages.
d. RTC did not believe that it could not contact Salvador and Lao’s given
number. If CAL was truly sincere in its attempt to save Salvador and Lao’s RULING: WHEREFORE, we AFFIRM the decision of the Court of Appeals with
booked flight, CAL should have contacted Lea-Amexco. MODIFICATION by deleting the award of moral and exemplary damages as well as
e. If indeed the industry policy prohibited a travel agency from using the attorneys fees. Petitioner China Airlines, Ltd. shall pay nominal damages of Five
bookings made by another travel agency, then CAL should not have Thousand Pesos (P5,000) each to private respondents Antonio S. Salvador and
entertained Lea’s call or should have checked with Morelia. Rolando C. Lao. No pronouncement as to costs.
f. In absolving Amexco of any liability, the trial court noted that Amexco did
not misrepresent itself to CAL. Amexco did not know that the record locator RATIO:
number it was using in confirming the reservations of private respondents Breach of its Contract of Carriage
belonged to Morelia. Amexco assumed that Salvador and Lao acquired the 1. The confusion with the confirmation and cancellation of the reservations began
record locator number from CAL itself. when Lao gave to Amexco record locator No. 4RJ2CJ that CAL had already
g. However, the trial court ruled that Salvador and Lao are not entitled to assigned to Morelia. (A record locator number is a combination of letters and
actual damages for the costs of their Northwest plane tickets and the car numbers issued by an airline to a travel agency when the airline confirms the
rental expenses they incurred in proceeding to San Francisco. These travel agency’s booking)
expenses were necessary in their pursuit of their cable business deal. 2. Based on the testimonies, industry practice prohibits a travel agency to use
h. The trial court also denied the claim of private respondents for payment of the record locator number of another travel agency, as this will usurp the
unrealized income. The trial court pointed out that private respondents booking of another travel agency.
planned to take the business trip to the US any day from 10 June to 17 June 3. Amexco was only able to book the flight with CAL when it used the record
1990. They were able to book the 13 June 1990 flight of CAL. When CAL locator number of Morelia because it was peak season. Thus, Amexco had no
prevented them from taking that flight, Amexco booked private respondents recourse but to use Morelias record locator number to book the flight.
with Northwest for its flight the next day which was still within the schedule 4. Lea, the booking agent of Amexco, testified that Lao did not inform her that the
they set. The delay of one day could not have resulted in the loss of business record locator number was from Morelia. On the other hand, Salvador and Lao
opportunity when they could have still pursued the business deal until June claimed in their answer to CALs written interrogatories that they informed
17. There was only a pure failure of business negotiations that they could Amexco that they made their original booking with Morelia and that Lea of
not blame CAL since there was nothing certain with their negotiations for Amexco checked this matter with CAL.
the television cable deal. 5. Lao should have made it known to Amexco that the record locator number
11. RTC issued its decision in favor of Salvador and Lao and ordered CAL to pay belonged to another travel agency, Morelia. On the other hand, Amexco should
each of the plaintiffs P100,000.00 as moral damages, P50,000.00 as exemplary not have hastily presumed that private respondents themselves obtained the
damages and P50,000.00 as and by way of attorneys fees. record locator number from CAL and that they engaged the services of Amexco
12. CAL appealed to the CA which affirmed the decision of the RTC. CA purely for ticketing purposes since Lao was an Amexco card member. Amexco
considered that Melo, a witness of CAL, testified that she was reluctant to should have inquired how Lao got hold of the record locator number.
cancel the bookings because they had already finalized the seating 6. Lao’s act in giving Morelia’s record locator number to Amexco, after deciding
arrangements with Lea. The appellate court was convinced that such reluctance to terminate Morelia’s services, amounted to accepting the benefit of Morelia’s
indicated CAL’s bad faith. CA held that CAL cancelled the reservations of services without paying for it. However, the greater blame falls on CAL.
Salvador and Lao without prior notice, in total disregard of private respondents’ 7. When CAL confirmed the reservations, a contract of carriage arose
rights. Such conscious disregard of a passengers right makes CAL answerable between CAL and Salvador and Lao, even if Amexco, not Morelia,
for moral and exemplary damages. confirmed the reservations. Because of CAL’s confirmation, Amexco issued
to Salvador and Lao the confirmed tickets.
ISSUES: 8. The nature of an airlines contract of carriage partakes of two types,
1. WON there was a breach in the contract of carriage - Yes. When an airline issues a namely: (1) a contract to deliver a cargo or merchandise to its destination, and
ticket to a passenger confirmed for a particular flight on a certain date, a contract of (2) a contract to transport passengers to their destination. In this case, when
carriage arises. The passenger has every right to expect that he would fly on that CAL confirmed the reservations, it bound itself to transport private respondents
flight and on that date. on its flight on 13 June 1990.
9. In an action based on a breach of contract of carriage, the aggrieved party does to secure first the endorsement of Morelia. CAL’s negligence is
not have to prove that the common carrier was at fault or was negligent. All that clear. Only simple negligence, not bad faith.
he has to prove is the existence of the contract and the fact of its non- c. Third, it is the standard practice of CAL to re-confirm reservations by
performance by the carrier. CAL does not deny its confirmation of the calling up the travel agency or passenger two days or even as close as
reservations made by Amexco. The confirmed tickets are undeniable proof of a day before the intended departure date. This is the pre-flight
the contract of carriage between CAL and private respondents. checking procedure of CAL. There is therefore nothing unusual or
10. Alitalia Airways v. CA, et al.: we held that when an airline issues a ticket to a suspicious in CALs initiative in calling up Morelia.
passenger, the passenger then has every right to expect that he would fly on that d. Fourth, Melo testified that she assumed that a certain telephone
flight and on that date. If he does not, then the carrier opens itself to a suit for number was the contact number of Salvador and Lao. Melo dialed the
breach of contract of carriage. number and a certain Gemma answered the phone. Gemma denied any
11. CAL did not allow Salvador and Lao, who were then in possession of the knowledge of the booking made by Salvador and Lao or by Lea. Melo
confirmed tickets, from boarding its airplane because their names were not in then decided to call up Morelia. Melo first tried to contact Salvador and
the passenger’s manifest. Clearly, CAL breached its contract of carriage with Lao, showing CALs lack of malice.
private respondents. We, however, rule out bad faith by CAL. e. Fifth, Melo did express to Joel her reluctance to cancel the reservations
because a certain Lea had already ended the seating arrangements. Despite
Absence of Bad Faith Melos hesitation, the cancellation still pushed through for three reasons:
12. Bad faith does not simply connote bad judgment or negligence. It imports a (1) Joel insisted on it; (2) Lea was not from Morelia; and (3) Melo failed
dishonest purpose or some moral obliquity and conscious doing of a wrong. A to contact Salvador and Lao and Lea. CA took Melos reluctance to cancel
finding of bad faith entitles the offended party to moral damages. the reservations as an indication of CAL’s bad faith when such fact is a
13. The settled rule is bad faith should be established by clear and convincing badge of good faith.
evidence since the law always presumes good faith. Thus, the person who seeks f. Lastly, CAL did not have the addresses of private respondents. Melo first
damages due to the acts of another has the burden of proving that the latter tried to notify private respondents through a telephone number
acted in bad faith or with ill motive. presumably given by Lea. However, the telephone number turned out to
14. Since bad faith is a question of intention, a clear understanding of the be a wrong number.
confirmation and pre-flight checking procedure of CAL is vital to determine 17. CAL still exerted its best efforts to notify Salvador and Lao. In reconfirming
if CAL indeed bumped off private respondents in favor of other passengers. the reservations, Melo called up Morelia twice. The first time was two days
15. Based on the testimonies of the reservations officers of CAL, not one but two before the scheduled flight of CAL. In that first telephone call, Joel told Melo
officers made the confirmation and pre-flight checking of the airline. Chang, a that he would first check if Salvador and Lao were definite in taking the 13
reservation officer of CAL, received Amexco’s call confirming the reservations June 1990 flight. Melo called up Morelia the next day or a day before the
of private respondents. Melo, another reservation officer of CAL, was in charge scheduled flight.
of the pre-flight checking of Salvador and Lao’s reservations. Melo called up 18. CAL did not deliberately bump off Salvador and Leo to accommodate other
Morelia to reconfirm the reservations. passengers. Amexcos unauthorized use of the record locator number of Morelia
16. Salvador and Lao claimed that CAL just wanted them bumped off to was not just a convenient excuse that CAL used to conceal a supposed
accommodate other passengers. However, they failed to substantiate this malicious intent. There were three reasons CAL cancelled the reservations and
particular allegation. Circumstances are inadequate to prove CALs bad faith in did not notify Salvador and Lao of the cancellation. First was Amexcos
cancelling the reservations. unauthorized use of the record locator number. Second was CALs
a. First, Lea, the booking agent of Amexco, identified herself as Lea- negligence in confirming the reservations of Amexco. Third was the
Amexco when she called CAL. However, the testimonies of Chang and absence of the correct contact numbers of private respondents and Lea.
Melo do not show that they heard/recorded that Lea-Amexco made the There was no concerted effort on the part of CALs employees to cancel
confirmation. Melo stated in open court that what the computer monitor Salvador and Lao’s reservations in favor of other passengers.
recorded was the name Lea, not Lea-Amexco which is why when Melo 19. Zalamea v. Court of Appeals: The petitioners in Zalamea were passengers of
called up Morelia to reconfirm the booking, she asked if there was a TWAirlines who held confirmed discounted tickets. Petitioners were, however,
person named Lea in Morelia. wait-listed and eventually prevented from boarding the airplane because TWA
b. CAL should not have accepted the confirmation of Lea who is not a had overbooked the flight and gave preference to other passengers who were
familiar caller from Morelia. CAL should have screened and verified the holders of full-fare tickets. TWA was in bad faith when, failing to inform
name of the person or travel agency. CAL should have informed Amexco petitioners when it could have easily done so, TWA kept them as passengers up
to the last minute. TWAs conscious disregard of petitioners rights made it liable vindicate a right of a plaintiff which defendant has violated and not to
not only for actual but moral damages as well. indemnify any loss the plaintiff has suffered. The court may award nominal
20. Unlike in Zalamea, bad faith is not evident in this case. It was CAL’s hasty damages in every obligation arising from any source enumerated in Article
confirmation of the reservations of Amexco that established the contract of 1157 of the Civil Code, or in any case where there is an invasion of any
carriage between CAL and private respondents as evidenced by the tickets property right. We find P5,000 as a reasonable award of nominal damages to
issued by Amexco to private respondents. CAL failed to honor its contract each of the private respondents.
of carriage. However, CAL was not wanton or reckless in cancelling 26. The fact that private respondents were compelled to litigate and incur expenses
private respondents reservations. CAL made the cancellation in conformity to protect and enforce their claim does not justify the award of attorneys fees.
with its usual procedure, which was neither unreasonable nor arbitrary The court may award attorneys fees only in the instances mentioned in Article
considering that CAL cancelled the reservations at the behest of Morelia. Thus, 2208 of the Civil Code, and this case is not one of them. Moreover, when there
when Morelia cancelled the reservations, CAL had to accede as if private is no basis to award moral and exemplary damages, there is also no basis to
respondents themselves had asked for the cancellation. Private respondents award attorneys fees.
names were consequently not included in the passengers manifest.
Damages Laches and Use of Objectionable Language in the Comment (NOT MAIN ISSUE)
21. CALs negligence caused it to breach its contract of carriage. CALs negligence 1. SC held that laches did not bar the present action. Salvador and Lao’s action
is, however, not so gross to amount to bad faith. Mere negligence, even if it is based on a written contract with the prescriptive period for an action on a
causes the plaintiff to suffer mental anguish or serious fright, is not a ground for written contract is 10 years from the time the right of action
awarding moral damages. accrues. Salvador and Lao’s right of action accrued on 13 June 1990 when
22. The law distinguishes a contractual breach effected in good faith from one CAL disallowed them from boarding its flight. Salvador and Lao filed this
attended by bad faith. Absent fraud or bad faith on defendant’s part in case on 11 June 1992. Moreover, private respondents vigorously pursued
breaching his contract, his liability for damages is limited to the natural their claim as shown by the demand letters that they sent CAL and Amexco
and probable consequences of the breach of the obligation, which the before filing this case.
parties had foreseen or could have reasonably foreseen. In such a case, the 2. The excessive language employed by counsel of private respondents
liability would not include moral damages. allegedly transgresses Canon 8 of the Code of Professional Responsibility.
23. As for exemplary damages, Article 2232 of the Civil Code provides that in a CAL thus urges us to expunge from the records the abusive language of
contractual or quasi-contractual relationship, exemplary damages may be private respondents counsel.
awarded only if the defendant had acted in a wanton, fraudulent, reckless, 3. Salvador and Lao were frustrated that CAL continued to raise questions of
oppressive or malevolent manner." CAL was not in bad faith and its fact in its petition. In expressing private respondents frustration, their
employees did not act in a wanton, fraudulent, reckless, oppressive or counsel used the clause (1) cleverly and adroitly to camouflage the issues of
malevolent manner. The award of exemplary damages is therefore unwarranted fact, the phrase (2) insidious ploy and the word (3) bleating.
in this case. 4. Indeed, counsel of Salvador and Lao used brash language but it is not
24. Salvador and Lao’s remaining claim is for actual damages. However, private highly excessive and abusive language.
respondents did not shell out any money for their CAL tickets. Amexco
eventually booked their flight with Northwest. The price difference between the
tickers would have been a damage reasonably attributed to CAL’s breach of its
contract of carriage because Salvador and Lao would not have flown via
Northwest were it not for CALs non-performance of its obligation. The
evidence, however, shows that the Northwest tickets at US$625 each cost less
than the CAL tickets priced at US$629 each.
25. Undeniably, however, Salvador and Lao suffered some form of injury. CAL
confirmed the reservations of private respondents carelessly. Salvador and
Lao relied on this confirmation. Salvador and Lao went through the trouble of
going to the airport at the appointed time expecting that they would be able to
board the CAL Flight. To their consternation, CAL personnel prevented them
from boarding because Morelia cancelled their reservations. The court may
award nominal damages. The court may award nominal damages purely to
005 CHINA AIR v. CA (Siapno)
July 14, 2003 | Carpio, J. | FACTS:
13. Antonio Salvador and Rolando Lao (Salvador and Lao) planned to travel to Los
PETITIONER: China Airlines, LTD. Angeles, California to pursue a cable business deal involving the distribution of
RESPONDENT: Court of Appeals, Antonio Salvador and Rolando Lao Filipino films and programs in Los Angeles.
14. Morelia Travel Agency (Morelia) booked Salvador and Lao’s flight with
SUMMARY: Salvador and Lao planned to travel to LA to pursue a cable CAL. Morelia scheduled the flight for Manila-Taipei-Los Angeles.
business deal involving the distribution of Filipino films. Initially, Morelia 15. On discovering that Morelia charged higher rates than American Express
Travel Agency booked their flight with CAL. Upon discovering that Morelia Travel Service Philippines (Amexco), Salvador and Lao dropped the services of
charged higher rates than Amexco, they dropped the services of Morelia. Lao Morelia and engaged the services of Amexco.
called Amexco claiming that he and Salvador had a confirmed booking with 16. Lao called up Amexco claiming that he and Salvador had a confirmed booking
CAL. Lao then gave to Amexco the record locator number that CAL issued with CAL. Lao then gave to Amexco the record locator number or booking
previously to Morelia. CAL confirmed the booking. When the Salvador and Lao reference number that CAL had previously issued to Morelia.
were at the airport, CAL prevented them from boarding because their names 17. Amexco called up CAL to finalize the reservation. Amexco used the record
were not in the passenger's manifest. CAL cancelled the reservations when locator number given by Lao in confirming the reservation. CAL confirmed the
Morelia revoked the booking. But the respondents were able to get a flight with booking. Amexco then issued to Salvador and Lao the confirmed tickets.
Northwest Airlines. 18. CAL called up Morelia to reconfirm the reservations of private
Issue/s: respondents. Morelia cancelled the reservations of Salvador and Lao.
1. WON there was a breach in the contract of carriage - Yes. When an airline 19. Salvador and Lao were at the airport to board the flight but CAL personnel
issues a ticket to a passenger confirmed for a particular flight on a certain date, a prevented them from boarding the airplane because their names were not in the
contract of carriage arises. The passenger has every right to expect that he would passengers manifest. Salvador and Lao left for LA the following day on a
fly on that flight and on that date. When CAL did not allow respondents, who different airline, Northwest Airlines. Through counsel, they sent a demand
were in possession of the confirmed tickets, from boarding its airplane because letter to CAL for payment of moral damages totaling P500,000.
their names were not in the manifest, it consituted a breach of contract of 20. CAL explained that its records showed that Morelia and not Amexco made the
carriage. bookings. Morelia also sought the cancellation of the booking and CAL merely
2. WON there there was bad faith - No. Bad faith should always be established accepted the cancellation. CAL argued that Salvador and Lao’s cause of action
by clear and convincing evidence since the law always presumes good faith. In should not be against it, but against the travel agencies.
the case, there were three reasons why CAL cancelled the reservations. First was 21. Salvador and Lao also wrote a demand letter to Amexco. They filed with the
Amexco's unauthorized use of the record locator number. Second was CAL's RTC a complaint for damages against CAL and Amexco. They claimed that the
negligence in confirming the reservations of Amexco. Third was the absence of one-day delay in their flight to LA caused them to lose business opportunities
the correct contact numbers of private respondents. There was no concerted entitling them to actual, moral and exemplary damages and attorneys fees.
effort on the part of CAL to cancel respondent's reservations in favor of other 22. RTC: disregarded CALs argument that it had to cancel Salvador and Lao’s
passengers. reservations because of the advice of Morelia, the booking agent, and that
3. WON there was sufficient claims for damages – Only nominal damages. Not Amexco had no right to use the booking and record locator number of Morelia.
entitled to moral damages because not every case of mental anguish, fright or a. CAL already knew that Salvador and Lao had confirmed their flight, even
anxiety calls for the award of moral damages. Not entitled to exemplary damages though Amexco and not Morelia made the confirmation. CALs cancellation
because CAL was not in bad faith and its employees did not act in a wanton, of the reservations was unjustified and tainted with bad faith. In the
fraudulent, reckless, oppressive or malevolent manner. Not entitled to actual testimony of Lea, the booking agent of Amexco who called up CAL
damages because respondents did not shell out any money for their CAL tickets. identifying herself as Lea-Amexco said that she used the record locator
Respondents would have been entitled to the price difference between the tickets number that Lao gave Amexco.
of CAL and Northwest had the latter cost more than the former but this was not b. Even if Amexco wittingly or unwittingly missed the truth with respect to the
the case. record locator number, CAL should have known better as it was the
assignor of the record locator number. CAL should not have confirmed the
DOCTRINE: When an airline issues a ticket to a passenger confirmed for a booking made by Lea who was not a familiar caller from Morelia.
particular flight on a certain date, a contract of carriage arises. The passenger has c. The trial court wondered why CAL took the initiative of calling up Morelia
every right to expect that he would fly on that flight and on that date. on the same afternoon that Amexco finalized and confirmed the reservations
of private respondents. CAL took this as an excuse to cancel the 2. WON there there was bad faith - No. Bad faith should always be established by
reservations. CAL’s actions justified private respondent’s accusation that clear and convincing evidence since the law always presumes good faith
CAL bumped them off in favor of other passengers. 3. WON there was sufficient claims for damages – Yes but only nominal damages.
d. RTC did not believe that it could not contact Salvador and Lao’s given
number. If CAL was truly sincere in its attempt to save Salvador and Lao’s RULING: WHEREFORE, we AFFIRM the decision of the Court of Appeals with
booked flight, CAL should have contacted Lea-Amexco. MODIFICATION by deleting the award of moral and exemplary damages as well as
e. If indeed the industry policy prohibited a travel agency from using the attorneys fees. Petitioner China Airlines, Ltd. shall pay nominal damages of Five
bookings made by another travel agency, then CAL should not have Thousand Pesos (P5,000) each to private respondents Antonio S. Salvador and
entertained Lea’s call or should have checked with Morelia. Rolando C. Lao. No pronouncement as to costs.
f. In absolving Amexco of any liability, the trial court noted that Amexco did
not misrepresent itself to CAL. Amexco did not know that the record locator RATIO:
number it was using in confirming the reservations of private respondents Breach of its Contract of Carriage
belonged to Morelia. Amexco assumed that Salvador and Lao acquired the 27. The confusion with the confirmation and cancellation of the reservations began
record locator number from CAL itself. when Lao gave to Amexco record locator No. 4RJ2CJ that CAL had already
g. However, the trial court ruled that Salvador and Lao are not entitled to assigned to Morelia. (A record locator number is a combination of letters and
actual damages for the costs of their Northwest plane tickets and the car numbers issued by an airline to a travel agency when the airline confirms the
rental expenses they incurred in proceeding to San Francisco. These travel agency’s booking)
expenses were necessary in their pursuit of their cable business deal. 28. Based on the testimonies, industry practice prohibits a travel agency to use
h. The trial court also denied the claim of private respondents for payment of the record locator number of another travel agency, as this will usurp the
unrealized income. The trial court pointed out that private respondents booking of another travel agency.
planned to take the business trip to the US any day from 10 June to 17 June 29. Amexco was only able to book the flight with CAL when it used the record
1990. They were able to book the 13 June 1990 flight of CAL. When CAL locator number of Morelia because it was peak season. Thus, Amexco had no
prevented them from taking that flight, Amexco booked private respondents recourse but to use Morelias record locator number to book the flight.
with Northwest for its flight the next day which was still within the schedule 30. Lea, the booking agent of Amexco, testified that Lao did not inform her that the
they set. The delay of one day could not have resulted in the loss of business record locator number was from Morelia. On the other hand, Salvador and Lao
opportunity when they could have still pursued the business deal until June claimed in their answer to CALs written interrogatories that they informed
17. There was only a pure failure of business negotiations that they could Amexco that they made their original booking with Morelia and that Lea of
not blame CAL since there was nothing certain with their negotiations for Amexco checked this matter with CAL.
the television cable deal. 31. Lao should have made it known to Amexco that the record locator number
23. RTC issued its decision in favor of Salvador and Lao and ordered CAL to pay belonged to another travel agency, Morelia. On the other hand, Amexco should
each of the plaintiffs P100,000.00 as moral damages, P50,000.00 as exemplary not have hastily presumed that private respondents themselves obtained the
damages and P50,000.00 as and by way of attorneys fees. record locator number from CAL and that they engaged the services of Amexco
24. CAL appealed to the CA which affirmed the decision of the RTC. CA purely for ticketing purposes since Lao was an Amexco card member. Amexco
considered that Melo, a witness of CAL, testified that she was reluctant to should have inquired how Lao got hold of the record locator number.
cancel the bookings because they had already finalized the seating 32. Lao’s act in giving Morelia’s record locator number to Amexco, after deciding
arrangements with Lea. The appellate court was convinced that such reluctance to terminate Morelia’s services, amounted to accepting the benefit of Morelia’s
indicated CAL’s bad faith. CA held that CAL cancelled the reservations of services without paying for it. However, the greater blame falls on CAL.
Salvador and Lao without prior notice, in total disregard of private respondents’ 33. When CAL confirmed the reservations, a contract of carriage arose
rights. Such conscious disregard of a passengers right makes CAL answerable between CAL and Salvador and Lao, even if Amexco, not Morelia,
for moral and exemplary damages. confirmed the reservations. Because of CAL’s confirmation, Amexco issued
to Salvador and Lao the confirmed tickets.
ISSUES: 34. The nature of an airlines contract of carriage partakes of two types,
1. WON there was a breach in the contract of carriage - Yes. When an airline issues a namely: (1) a contract to deliver a cargo or merchandise to its destination, and
ticket to a passenger confirmed for a particular flight on a certain date, a contract of (2) a contract to transport passengers to their destination. In this case, when
carriage arises. The passenger has every right to expect that he would fly on that CAL confirmed the reservations, it bound itself to transport private respondents
flight and on that date. on its flight on 13 June 1990.
35. In an action based on a breach of contract of carriage, the aggrieved party does to secure first the endorsement of Morelia. CAL’s negligence is
not have to prove that the common carrier was at fault or was negligent. All that clear. Only simple negligence, not bad faith.
he has to prove is the existence of the contract and the fact of its non- c. Third, it is the standard practice of CAL to re-confirm reservations by
performance by the carrier. CAL does not deny its confirmation of the calling up the travel agency or passenger two days or even as close as
reservations made by Amexco. The confirmed tickets are undeniable proof of a day before the intended departure date. This is the pre-flight
the contract of carriage between CAL and private respondents. checking procedure of CAL. There is therefore nothing unusual or
36. Alitalia Airways v. CA, et al.: we held that when an airline issues a ticket to a suspicious in CALs initiative in calling up Morelia.
passenger, the passenger then has every right to expect that he would fly on that d. Fourth, Melo testified that she assumed that a certain telephone
flight and on that date. If he does not, then the carrier opens itself to a suit for number was the contact number of Salvador and Lao. Melo dialed the
breach of contract of carriage. number and a certain Gemma answered the phone. Gemma denied any
37. CAL did not allow Salvador and Lao, who were then in possession of the knowledge of the booking made by Salvador and Lao or by Lea. Melo
confirmed tickets, from boarding its airplane because their names were not in then decided to call up Morelia. Melo first tried to contact Salvador and
the passenger’s manifest. Clearly, CAL breached its contract of carriage with Lao, showing CALs lack of malice.
private respondents. We, however, rule out bad faith by CAL. e. Fifth, Melo did express to Joel her reluctance to cancel the reservations
because a certain Lea had already ended the seating arrangements. Despite
Absence of Bad Faith Melos hesitation, the cancellation still pushed through for three reasons:
38. Bad faith does not simply connote bad judgment or negligence. It imports a (1) Joel insisted on it; (2) Lea was not from Morelia; and (3) Melo failed
dishonest purpose or some moral obliquity and conscious doing of a wrong. A to contact Salvador and Lao and Lea. CA took Melos reluctance to cancel
finding of bad faith entitles the offended party to moral damages. the reservations as an indication of CAL’s bad faith when such fact is a
39. The settled rule is bad faith should be established by clear and convincing badge of good faith.
evidence since the law always presumes good faith. Thus, the person who seeks f. Lastly, CAL did not have the addresses of private respondents. Melo first
damages due to the acts of another has the burden of proving that the latter tried to notify private respondents through a telephone number
acted in bad faith or with ill motive. presumably given by Lea. However, the telephone number turned out to
40. Since bad faith is a question of intention, a clear understanding of the be a wrong number.
confirmation and pre-flight checking procedure of CAL is vital to determine 43. CAL still exerted its best efforts to notify Salvador and Lao. In reconfirming
if CAL indeed bumped off private respondents in favor of other passengers. the reservations, Melo called up Morelia twice. The first time was two days
41. Based on the testimonies of the reservations officers of CAL, not one but two before the scheduled flight of CAL. In that first telephone call, Joel told Melo
officers made the confirmation and pre-flight checking of the airline. Chang, a that he would first check if Salvador and Lao were definite in taking the 13
reservation officer of CAL, received Amexco’s call confirming the reservations June 1990 flight. Melo called up Morelia the next day or a day before the
of private respondents. Melo, another reservation officer of CAL, was in charge scheduled flight.
of the pre-flight checking of Salvador and Lao’s reservations. Melo called up 44. CAL did not deliberately bump off Salvador and Leo to accommodate other
Morelia to reconfirm the reservations. passengers. Amexcos unauthorized use of the record locator number of Morelia
42. Salvador and Lao claimed that CAL just wanted them bumped off to was not just a convenient excuse that CAL used to conceal a supposed
accommodate other passengers. However, they failed to substantiate this malicious intent. There were three reasons CAL cancelled the reservations and
particular allegation. Circumstances are inadequate to prove CALs bad faith in did not notify Salvador and Lao of the cancellation. First was Amexcos
cancelling the reservations. unauthorized use of the record locator number. Second was CALs
a. First, Lea, the booking agent of Amexco, identified herself as Lea- negligence in confirming the reservations of Amexco. Third was the
Amexco when she called CAL. However, the testimonies of Chang and absence of the correct contact numbers of private respondents and Lea.
Melo do not show that they heard/recorded that Lea-Amexco made the There was no concerted effort on the part of CALs employees to cancel
confirmation. Melo stated in open court that what the computer monitor Salvador and Lao’s reservations in favor of other passengers.
recorded was the name Lea, not Lea-Amexco which is why when Melo 45. Zalamea v. Court of Appeals: The petitioners in Zalamea were passengers of
called up Morelia to reconfirm the booking, she asked if there was a TWAirlines who held confirmed discounted tickets. Petitioners were, however,
person named Lea in Morelia. wait-listed and eventually prevented from boarding the airplane because TWA
b. CAL should not have accepted the confirmation of Lea who is not a had overbooked the flight and gave preference to other passengers who were
familiar caller from Morelia. CAL should have screened and verified the holders of full-fare tickets. TWA was in bad faith when, failing to inform
name of the person or travel agency. CAL should have informed Amexco petitioners when it could have easily done so, TWA kept them as passengers up
to the last minute. TWAs conscious disregard of petitioners rights made it liable vindicate a right of a plaintiff which defendant has violated and not to
not only for actual but moral damages as well. indemnify any loss the plaintiff has suffered. The court may award nominal
46. Unlike in Zalamea, bad faith is not evident in this case. It was CAL’s hasty damages in every obligation arising from any source enumerated in Article
confirmation of the reservations of Amexco that established the contract of 1157 of the Civil Code, or in any case where there is an invasion of any
carriage between CAL and private respondents as evidenced by the tickets property right. We find P5,000 as a reasonable award of nominal damages to
issued by Amexco to private respondents. CAL failed to honor its contract each of the private respondents.
of carriage. However, CAL was not wanton or reckless in cancelling 52. The fact that private respondents were compelled to litigate and incur expenses
private respondents reservations. CAL made the cancellation in conformity to protect and enforce their claim does not justify the award of attorneys fees.
with its usual procedure, which was neither unreasonable nor arbitrary The court may award attorneys fees only in the instances mentioned in Article
considering that CAL cancelled the reservations at the behest of Morelia. Thus, 2208 of the Civil Code, and this case is not one of them. Moreover, when there
when Morelia cancelled the reservations, CAL had to accede as if private is no basis to award moral and exemplary damages, there is also no basis to
respondents themselves had asked for the cancellation. Private respondents award attorneys fees.
names were consequently not included in the passengers manifest.
Damages Laches and Use of Objectionable Language in the Comment (NOT MAIN ISSUE)
47. CALs negligence caused it to breach its contract of carriage. CALs negligence 5. SC held that laches did not bar the present action. Salvador and Lao’s action
is, however, not so gross to amount to bad faith. Mere negligence, even if it is based on a written contract with the prescriptive period for an action on a
causes the plaintiff to suffer mental anguish or serious fright, is not a ground for written contract is 10 years from the time the right of action
awarding moral damages. accrues. Salvador and Lao’s right of action accrued on 13 June 1990 when
48. The law distinguishes a contractual breach effected in good faith from one CAL disallowed them from boarding its flight. Salvador and Lao filed this
attended by bad faith. Absent fraud or bad faith on defendant’s part in case on 11 June 1992. Moreover, private respondents vigorously pursued
breaching his contract, his liability for damages is limited to the natural their claim as shown by the demand letters that they sent CAL and Amexco
and probable consequences of the breach of the obligation, which the before filing this case.
parties had foreseen or could have reasonably foreseen. In such a case, the 6. The excessive language employed by counsel of private respondents
liability would not include moral damages. allegedly transgresses Canon 8 of the Code of Professional Responsibility.
49. As for exemplary damages, Article 2232 of the Civil Code provides that in a CAL thus urges us to expunge from the records the abusive language of
contractual or quasi-contractual relationship, exemplary damages may be private respondents counsel.
awarded only if the defendant had acted in a wanton, fraudulent, reckless, 7. Salvador and Lao were frustrated that CAL continued to raise questions of
oppressive or malevolent manner." CAL was not in bad faith and its fact in its petition. In expressing private respondents frustration, their
employees did not act in a wanton, fraudulent, reckless, oppressive or counsel used the clause (1) cleverly and adroitly to camouflage the issues of
malevolent manner. The award of exemplary damages is therefore unwarranted fact, the phrase (2) insidious ploy and the word (3) bleating.
in this case. 8. Indeed, counsel of Salvador and Lao used brash language but it is not
50. Salvador and Lao’s remaining claim is for actual damages. However, private highly excessive and abusive language.
respondents did not shell out any money for their CAL tickets. Amexco
eventually booked their flight with Northwest. The price difference between the
tickers would have been a damage reasonably attributed to CAL’s breach of its
contract of carriage because Salvador and Lao would not have flown via
Northwest were it not for CALs non-performance of its obligation. The
evidence, however, shows that the Northwest tickets at US$625 each cost less
than the CAL tickets priced at US$629 each.
51. Undeniably, however, Salvador and Lao suffered some form of injury. CAL
confirmed the reservations of private respondents carelessly. Salvador and
Lao relied on this confirmation. Salvador and Lao went through the trouble of
going to the airport at the appointed time expecting that they would be able to
board the CAL Flight. To their consternation, CAL personnel prevented them
from boarding because Morelia cancelled their reservations. The court may
award nominal damages. The court may award nominal damages purely to
006 SINGSON vs COURT OF APPEALS (STA. MARIA) common carriers.Although the rule is that moral damages predicated upon a breach of
November 18, 1997 | Bellosillo, J. | Breach of Contract of Carriage contract of carriage may only be recoverable in instances where the mishap results in
the death of a passenger, or where the carrier is guilty of fraud or bad faith, there are
PLAINTIFFS: Carlos Singson situations where the negligence of the carrier is so gross and reckless as to virtually
DEFENDANT: Court of Appeals and Cathay Pacific Airways, Inc. amount to bad faith, in which case, the passenger likewise becomes entitled to
recover moral damages. The circumstances (please check Ratio II 2a-d) of this case
SUMMARRY: Carlos Singson and his cousin Crescentino Tiongson bought from reflect the carrier’s utter lack of care and sensitivity to the needs of its passengers,
Cathay Pacific Airways 2 open-dated, identically routed, round trip plane tickets. clearly constitutive of gross negligence, recklessness and wanton disregard of the
Each ticket consisted of 6 flight coupons, each would be detached at the start of each rights of the latter, acts evidently indistinguishable or no different from fraud, malice
leg of the trip. The procedure was that at the start of each leg of the trip a flight and bad faith. As the rule now stands, where in breaching the contract of carriage the
coupon corresponding to the particular sector of the travel would be removed from defendant airline is shown to have acted fraudulently, with malice or in bad faith, the
the ticket booklet so that at the end of the trip no more coupon would be left in the award of moral and exemplary damages, in addition to actual damages, is proper.
ticket booklet. Singson failed to obtain a booking in LA for their trip to Manila; However, the moral damages and exemplary damages awarded by the trial court have
apparently, the coupon corresponding to the 5th leg of the trip was missing and to be reduced. The well-entrenched principle is that the grant of moral damages
instead the 3rd was still attached. It was not until few days later that Cathay finally depends upon the discretion of the court based on the circumstances of each case.
was able to arrange for his return to Manila. Singson commenced an action for This discretion is limited by the principle that the "amount awarded should not be
damages based on breach of contract of carriage against Cathay. Cathay alleged that palpably and scandalously excessive" as to indicate that it was the result of prejudice
there was no contract of carriage yet existing such that Cathay’s refusal to or corruption on the part of the trial court. There is no hard-and-fast rule in the
immediately book him could not be construed as breach of contract of carriage. The determination of what would be a fair amount of moral damages since each case must
RTC ruled in favor of Singson herein holding that CATHAY was guilty of gross be governed by its own peculiar facts. In the instant case, the injury suffered by
negligence amounting to malice and bad faith for which it was adjudged to pay Singson is not so serious or extensive. The award of actual damages and attorney’s
damages. The CA reversed this. The issues and rulings are as follows: fees are also granted but the latter amount was reduced by the Court.

DOCTRINE: A contract of air carriage is a peculiar one. Imbued with public


1) WON a breach of contract was committed by Cathay when it failed to confirm the interest, common carriers are required by law to carry passengers safely as far as
booking of Singson? – YES. the round trip ticket issued by the carrier to the human care and foresight can provide, using the utmost diligence of a very cautious
passenger was in itself a complete written contract by and between the carrier and the person, with due regard for all the circumstances. Failure of the carrier to observe this
passenger. It had all the elements of a complete written contract, to wit: (a) the high degree of care and extraordinary diligence renders it liable for any damage that
consent of the contracting parties manifested by the fact that the passenger agreed to may be sustained by its passengers.
be transported by the carrier to and from Los Angeles via San Francisco and Hong
Kong back to the Philippines, and the carrier’s acceptance to bring him to his FACTS:
destination and then back home; (b) cause or consideration, which was the fare paid 1. A contract of air carriage is a peculiar one. Imbued with public interest,
by the passenger as stated in his ticket; and, (c) object, which was the transportation common carriers are required by law to carry passengers safely as far as
of the passenger from the place of departure to the place of destination and back, human care and foresight can provide, using the utmost diligence of a very
which are also stated in his ticket. In fact, the contract of carriage in the instant case cautious person, with due regard for all the circumstances.
was already partially executed as the carrier complied with its obligation to transport 2. A contract to transport passengers is quite different in kind and degree from
the passenger to his destination, i.e., Los Angeles. the loss of the coupon was any other contractual relation. And this is because its business is mainly
attributable to the negligence of CATHAY’s agents and was the proximate cause of with the traveling public. It invites people to avail of the comforts and
the non-confirmation of petitioner's return flight. advantages it offers.
3. The contract of carriage, therefore, generates a relation attended with a
2) WON Cathay was liable not only for actual damages but also for moral and public duty. Failure of the carrier to observe this high degree of care and
exemplary damages, and attorneys fees for failing to book petitioner on his return extraordinary diligence renders it liable for any damage that may be
flight to the Philippines? – YES. Cathay’s mistake in removing the wrong coupon sustained by its passengers. The instant case is an illustration of the exacting
was compounded by several other independent acts of negligence. Taken together, standard demanded by the law of common carriers.
they indubitably signify more than ordinary inadvertence or inattention and thus 4. Carlos Singson (Singson) and his cousin Crescentino Tiongson bought from
constitute a radical departure from the extraordinary standard of care required of Cathay Pacific Airways, Ltd. (CATHAY), at its Metro Manila ticket outlet
2 open-dated, identically routed, round trip plane tickets for the purpose of replacement ticket to Singson. For that purpose, it sent a request by telex on
spending their vacation in the United States. the same day, 1 July 1988, to its Hongkong Headquarters where such
5. Each ticket consisted of 6 flight coupons corresponding to this information could be retrieved. However, due to the time difference
itinerary: flight coupon no. 1 - Manila to Hongkong; flight coupon no. 2 - between LA and Hongkong, no response from the Hongkong office was
Hongkong to San Francisco; flight coupon no. 3 - San Francisco to LA; immediately received. Besides, since 2 and 3 July 1988 were a Saturday and
flight coupon no. 4 - LA back to San Francisco; flight coupon no. 5 - San a Sunday, respectively, and 4 July 1988 was an official holiday being U.S.
Francisco to Hongkong; and, finally, flight coupon no. 6 - Hongkong to Independence Day, the telex response of CATHAY Hongkong was not read
Manila. until 5 July 1988.
6. The procedure was that at the start of each leg of the trip a flight coupon 11. Lastly, CATHAY denied having required SINGSON to make a trip back to
corresponding to the particular sector of the travel would be removed from San Francisco; on the other hand, it was the latter who informed CATHAY
the ticket booklet so that at the end of the trip no more coupon would be left that he was making a side trip to San Francisco. Hence, CATHAY advised
in the ticket booklet. him that the response of Hongkong would be copied in San Francisco so
7. Singson and Crescentino left Manila on board Cathay’s Flight No. that he could conveniently verify thereat should he wish to.
902. They arrived safely in LA and after staying there for about 3 weeks 12. The trial court rendered a decision in favor of Singson herein holding that
they decided to return to the Philippines. They arranged for their return CATHAY was guilty of gross negligence amounting to malice and bad faith
flight at CATHAY’s LA Office and chose 1 July 1988, a Friday, for their for which it was adjudged to pay Singson damages.
departure. 13. The CA reversed the trial courts finding that there was gross negligence
8. While Tiongson easily got a booking for the flight, Singson was not as amounting to bad faith or fraud and, accordingly, modified its judgment by
lucky. It was discovered that his ticket booklet did not have flight coupon deleting the awards for moral and exemplary damages, and the attorneys
no. 5 corresponding to the San Francisco-Hongkong leg of the trip. Instead, fees as well.
what was in his ticket was flight coupon no. 3 - San Francisco to LA- which 14. Singson’s subsequent MR having been denied for lack of merit and for
was supposed to have been used and removed from the ticket booklet. It being pro forma he came to us for review. He claims that the trial court
was not until 6 July 1988 that CATHAY was finally able to arrange for his found CATHAY guilty of gross negligence amounting to malice and bad
return flight to Manila. faith in: (a) detaching the wrong coupon; (b) using that error to deny
9. Singson commenced an action for damages against Cathay before the RTC, confirmation of his return flight; and, (c) directing petitioner to prematurely
Ilocos Sur. He claimed that he insisted on CATHAYs confirmation of his return to San Francisco to verify his missing coupon. He also underscores
return flight reservation because of very important and urgent business the scornful and demeaning posture of CATHAYs employees toward
engagements in the Philippines. But CATHAY allegedly shrugged off his him. He argues that since findings of fact of the trial court are entitled to the
protestations and arrogantly directed him to go to San Francisco himself and highest degree of respect from the appellate courts, especially when they
do some investigations on the matter or purchase a new ticket subject to were supported by evidence, it was erroneous for the Court of Appeals to
refund if it turned out that the missing coupon was still unused or strike out the award of moral and exemplary damages as well as attorneys
subsisting. He remonstrated that it was the airlines agent/representative who fees allegedly for lack of basis.
must have committed the mistake of tearing off the wrong flight coupon; 15. In its Comment, CATHAY firmly maintains that it did not breach its
that he did not have enough money to buy new tickets; and, CATHAY contract of carriage with Singson. It argues that it is only when a passenger
could conclude the investigation in a matter of minutes because of its is confirmed on a particular flight and on a particular date specifically stated
facilities. CATHAY, allegedly in scornful insolence, simply dismissed him in his ticket that its refusal to board the passenger will result in a breach of
like an impertinent "brown pest." Thus he and his cousin Tiongson, who contract. And even assuming that there was breach of contract, there was no
deferred his own flight to accompany him, were forced to leave for San fraud or bad faith on the part of CATHAY as to justify the award of moral
Francisco on the night of 1 July 1988 to verify the missing ticket. and exemplary damages plus attorney’s fees in favor of Singson.
10. CATHAY denied these allegations and averred that since Singson was
holding an "open-dated" ticket, which meant that he was not booked on a ISSUE:
specific flight on a particular date, there was no contract of carriage yet 1. WON a breach of contract was committed by Cathay when it failed to
existing such that CATHAYs refusal to immediately book him could not be confirm the booking of Singson? – YES. There was already a complete
construed as breach of contract of carriage. Moreover, the coupon had been written contract by and between Cathay and Singson when the round trip
missing for almost a month hence CATHAY must first verify its status, i.e., ticket was issue. Had Cathay’s agents been diligent in double checking the
whether the ticket was still valid and outstanding, before it could issue a
coupons they were supposed to detach from the passenger’s tickets, there Francisco-Hongkong flight coupon thinking that it was the San Francisco-
would have been no reason for CATHAY not to confirm Singson’s booking Los Angeles portion; or, second, Singson’s booklet of tickets did not from
2. WON Catahy was liable not only for actual damages but also for moral and issuance include a San Francisco-Hongkong flight coupon.
exemplary damages, and attorneys fees for failing to book petitioner on his 5. In either case, the loss of the coupon was attributable to
return flight to the Philippines? – YES. Cathay’s mistake in removing the the negligence of CATHAYs agents and was the proximate cause of the
wrong coupon was compounded by several other independent acts of non-confirmation of petitioner's return flight. It virtually prevented
negligence. Taken together, they indubitably signify more than ordinary Singson from demanding the fulfillment of the carrier’s obligations under
inadvertence or inattention and thus constitute a radical departure from the the contract. Had CATHAYs agents been diligent in double checking the
extraordinary standard of care required of common carriers. coupons they were supposed to detach from the passenger’s tickets,
there would have been no reason for CATHAY not to confirm
RULING: WHEREFORE, the petition is GRANTED and the 14 July 1994 Singson’s booking as exemplified in the case of his cousin and flight
Decision of the Court of Appeals is REVERSED. Private respondent is ordered to companion Tiongson whose ticket booklet was found to be in order.
pay petitioner P20,000.00 for actual damages as fixed by the trial court, 6. Hence, to hold that no contractual breach was committed by CATHAY and
plus P200,000.00 for moral damages, P50,000.00 for exemplary damages totally absolve it from any liability would in effect put a premium on the
and P25,000.00 for attorney's fees. No costs. negligence of its agents, contrary to the policy of the law requiring
common carriers to exercise extraordinary diligence.
RATIO:
There was a breach of contract of carriage by Cathay. Cathay was liable for damages.
1. CATHAY undoubtedly committed a breach of contract when it refused 1. The CA seriously erred in disallowing moral and exemplary
to confirm petitioner's flight reservation back to the Philippines on damages. Although the rule is that moral damages predicated upon a breach
account of his missing flight coupon. Its contention that there was no of contract of carriage may only be recoverable in instances where the
contract of carriage that was breached because petitioners ticket was open- mishap results in the death of a passenger, or where the carrier is guilty of
dated is untenable. fraud or bad faith, there are situations where the negligence of the
2. To begin with, the round trip ticket issued by the carrier to the carrier is so gross and reckless as to virtually amount to bad faith, in
passenger was in itself a complete written contract by and between the which case, the passenger likewise becomes entitled to recover moral
carrier and the passenger. It had all the elements of a complete written damages.
contract, to wit: (a) the consent of the contracting parties manifested by the 2. The following circumstances attended the breach of contract by CATHAY,
fact that the passenger agreed to be transported by the carrier to and from to wit:
Los Angeles via San Francisco and Hongkong back to the Philippines, and a. the ticket coupon corresponding to the San Francisco-Hongkong flight was
the carriers acceptance to bring him to his destination and then back missing either due to the negligence of CATHAYs agents in improperly
home; (b) cause or consideration, which was the fare paid by the passenger detaching Singson’s flight coupons or failing to issue the flight coupon for
as stated in his ticket; and, (c) object, which was the transportation of the San Francisco-Hongkong in the ticket booklet;
passenger from the place of departure to the place of destination and back, b. Singson and his cousin presented their respective ticket booklets bearing
which are also stated in his ticket. identical itineraries to prove that there had been a mistake in removing the
3. In fact, the contract of carriage was already partially executed as the coupons of Singson. CATHAY's Timothy Remedios testified that he was
carrier complied with its obligation to transport the passenger to his able to ascertain from his flight reservations computer that Singson indeed
destination, i.e., Los Angeles. Only the performance of the other half of the had reservations booked for travel on their return flight, but CATHAY
contract - which was to transport the passenger back to the Philippines - was apparently ignored the clear evidential import of these facts and
left to be done. Moreover, Timothy Remedios, CATHAYs reservation and peremptorily refused to confirm Singson’s flight - while ready to confirm
ticketing agent, unequivocally testified that Singson indeed had reservations his traveling companions identically routed plane ticket - on the lame and
booked for travel flimsy excuse that the existence and validity of the missing ticket must first
4. Singson was not a mere "chance passenger with no superior right to be be verified;
boarded on a specific flight," as erroneously claimed by CATHAY and c. Singson was directed by CATHAY to go to its San Francisco office and
sustained by the CA. It appears that CATHAY was responsible for the loss make the necessary verification concerning the lost coupon himself. This,
of the ticket. One of 2 things may be surmised from the circumstances of notwithstanding the fact that CATHAY was responsible for the loss of the
this case: first, US Air (CATHAYs agent) had mistakenly detached the San ticket and had all the necessary equipment, e.g., computers, fax and telex
machines and telephones which could facilitate the verification right there at 3. Anent the accusation that Cathay’s personnel were rude and arrogant,
its LA Office.CATHAYs allegation that it never required Singson to go to Singson failed to adduce sufficient evidence to substantiate his
San Francisco is unpersuasive. Singson categorically testified that a lady claim. Nonetheless, such fact will not in any manner affect the disposition
employee of CATHAY in LA "insisted that we take the matter (up) with of this case. Cathay’s mistake in removing the wrong coupon was
their office in San Francisco." In fact, it even appeared from the evidence compounded by several other independent acts of negligence. Taken
that it was the San Francisco office which arranged for his return flight to together, they indubitably signify more than ordinary inadvertence or
the Philippines and not the LA office. Moreover, due deference must be inattention and thus constitute a radical departure from the
accorded the trial courts finding that Singson was indeed sent by CATHAY extraordinary standard of care required of common carriers.
to its San Francisco office to verify. 4. These circumstances reflect the carriers utter lack of care and sensitivity to
d. Cathay endeavored to show that it undertook the verification of the lost the needs of its passengers, clearly constitutive of gross negligence,
coupon by sending a telex to its Hongkong Office. It likewise tried to justify recklessness and wanton disregard of the rights of the latter, acts evidently
the 5 days delay in completing the verification process, claiming that it was indistinguishable or no different from fraud, malice and bad faith. As the
due to the time difference between Hongkong and LA and the coinciding rule now stands, where in breaching the contract of carriage the
non-working days in the United States. The following dialogue between defendant airline is shown to have acted fraudulently, with malice or in
Consul Cortez and Cathay's reservation and ticketing agent Timothy bad faith, the award of moral and exemplary damages, in addition to
Remedios can be enlightening - actual damages, is proper.
Q: What official action did you in turn take? 5. However, the P500,000.00 moral damages and P400,000.00 exemplary
A: While Mr. Singson was still in my office I sent a telex out at approximately 10:00 damages awarded by the trial court have to be reduced. The well-entrenched
a.m. on 30 June 1988 to Hongkong Accounting Office and copied San Francisco principle is that the grant of moral damages depends upon the discretion of
ticket office since Mr. Singson advised he might not be able to return to my office the court based on the circumstances of each case.This discretion is limited
but would be going to San Francisco. 10:00 a.m. on 30 June 1988 in LA is however by the principle that the "amount awarded should not be palpably and
2:00 a.m. on 1 July 1988 in Hongkong and since office hours start at 9:00 a.m. in scandalously excessive" as to indicate that it was the result of prejudice or
Hongkong, no reply was instantly sent back to me. The response was sent out from corruption on the part of the trial court.
Hongkong on 2 July 1988 at approximately 12:00 noon (Hongkong time) and was 6. Damages are not intended to enrich the complainant at the expense of the
received immediately by the LA telex machine. However, 12:00 noon 2 July 1988 defendant. They are awarded only to alleviate the moral suffering that the
Hongkong time was 8:00 p.m. 1 July 1988 in LA where office hours close at 5:00 injured party had undergone by reason of the defendant's culpable action.
p.m. The LA office was closed on 2 and 3 July 1988 being Saturday and Sunday and There is no hard-and-fast rule in the determination of what would be a
also closed 4 July 1988 for a public holiday (Independence day) so the reply from fair amount of moral damages since each case must be governed by its
Hongkong was not read until 5 July 1988, 8:30 LA time. own peculiar facts.
- But far from helping Cathay’s cause, this testimony only betrayed 7. The injury suffered by Singson is not so serious or extensive as to warrant
another act of negligence committed by its employees in Hongkong. It an award amounting to P900,000.00. The assessment of P200,000.00 as
will be observed that CATHAYs Hongkong Office received the telex moral damages and P50,000.00 as exemplary damages in his favor is, in our
from Los Angeles on 1 July 1988 at approximately 2:00 a.m. view, reasonable and realistic.
(Hongkong time) and sent out their response only on 2 July 1988 at 8. On the issue of actual damages, we agree with the CA that the amount
12:00 noon. In spite of the fact that they had access to all records and of P20,000.00 granted by the trial court to Singson should not be
facilities that would enable them to verify in a matter of minutes, it disturbed. Singson categorically testified that he incurred the amount during
strangely took them more than 24 hours to complete the verification the period of his delay in departing from the US.
process and to send their reply to Los Angeles. The inevitable 9. In the absence of any countervailing evidence from Cathay, and in view of
conclusion is that CATHAYs Hongkong personnel never acted the negligence attributable to it, Singson’s testimony suffices as basis for
promptly and timely on the request for verification. Besides, to be actual damages as determined by the court a quo.
stranded for 5 days in a foreign land because of an air carriers 10. As regards attorney's fees, they may be awarded when the defendant's act or
negligence is too exasperating an experience for a plane passenger. For omission has compelled the plaintiff to litigate with third persons or to incur
sure, Singson underwent profound distress and anxiety, not to mention expenses to protect his interest. It was therefore erroneous for the CA to
the worries brought about by the thought that he did not have enough delete the award made by the trial court; consequently, Singson should be
money to sustain himself, and the embarrassment of having been forced awarded attorney's fees and the amount of P25,000.00, instead
to seek the generosity of relatives and friends.
of P100,000.00 earlier awarded, may be considered rational, fair and
reasonable.
007 MANILA RAILROAD COMP. v. BALLESTEROS, ET AL. (TAN) so doing, the left front fender and left side of the freight truck smashed the
Apr. 29, ‘66 | Makalintal, J. | Liability as to acts of strangers left side of the bus resulting in extensive damages to the body of the bus and
injuries to seventeen of its passengers, the Ballesteros et al..
PETITIONER/S: Manila Railroad Company 5. The trial court said that Abello was reckless when he was driving the bus at
RESPONDENT/S: Macaria Ballesteros, Timoteo Camayo, Jose Reyes, and the rate of 40-50 kms on a bumpy road.
Julian Maimban, Jr. 6. MRC then arged that since Abello isn’t its employee, then it should not be
responsible for his acts.
SUMMARY: Ballesteros et al. were passengers on Manila Railroad
Company’s (MRC) bus, the driver of which was Jose Anastacio. In a stopover, ISSUE/S:
one Dionisio Abello, an auditor assigned to MRC by the General Auditing 1. W/N MRC should be held liable for the acts of Abello? Yes because
Office, took the wheel and told the driver to sit somewhere else. With Abello allowing Abello to drive showed negligence on the part of MRC’s
driving, the bus proceeded on its way, from time to time stopping to pick up employees.
passengers. While the bus was traversing Isabela, a freight truck driven by
Marcial Nocum bound for Manila, was also negotiating the same place. MRC RULING: The writ prayed for is denied, with costs against petitioner.
then arged that since Abello isn’t its employee, then it should not be
responsible for his acts. The issue is whether or not MRC should be liable for RATIO:
Abello’s acts even if he wasn’t an employee. After analyzing the facts and the 1. Art. 17631 of the Civil Code and Sec. 48(b)2 of the Motor Vehicle Law are
law applicable, he reached the conclusion that the acts of the bus personnel, clear about this matter.
particularly "in allowing Mr. Abello to drive despite two occasions when 2. After analyzing the facts and the law applicable, he reached the conclusion
the bus stopped and the regular driver could have taken over, constitute that the acts of the bus personnel, particularly "in allowing Mr. Abello to
reckless imprudence and wanton injurious conduct on the part of the drive despite two occasions when the bus stopped and the regular
MRR employees." driver could have taken over, constitute reckless imprudence and
wanton injurious conduct on the part of the MRR employees."
DOCTRINE: A common carrier is responsible for injuries suffered by a
passenger on account of the wilful acts or negligence of other passengers
or of strangers, if the common carrier’s employees through the exercise of the
diligence of a good father of a family could have prevented or stopped the act
or omission.

Note: This is a super short case.

FACTS:
1. Ballesteros et al. were passengers on Manila Railroad Company’s (MRC)
bus, the driver of which was Jose Anastacio. In Bayombong, Nueva
Vizcaya, Anastacio stopped the bus and got off to replace a defective spark
plug.
2. While he was thus engaged, one Dionisio Abello, an auditor assigned to
MRC by the General Auditing Office, took the wheel and told the driver to
sit somewhere else. With Abello driving, the bus proceeded on its way,
from time to time stopping to pick up passengers.
1
A common carrier is responsible for injuries suffered by a passenger on account of the wilful acts or
3. Anastacio tried twice to take the wheel back but Abello would not negligence of other passengers or of strangers, if the common carrier’s employees through the exercise
relinquish it. While the bus was traversing Isabela, a freight truck driven by of the diligence of a good father of a family could have prevented or stopped the act or omission.
Marcial Nocum bound for Manila, was also negotiating the same place. 2
No professional chauffeur shall permit any unlicensed person to drive the motor vehicle under his
4. When these two vehicles were about to meet at the bend of the road Marcial control, or permit a person, sitting beside him or in any other part of the car, to interfere with him in the
operation of the motor vehicle, by allowing said person to take hold of the steering wheel, or in any other
Nocum, in trying to evade several holes on the right lane, where his truck manner take part in the manipulation or control of the car.
was running, swerved his truck towards the middle part of the road and in
008 BACHELOR EXPRESS v. CA (TIMBOL) a. The bus came from Davao City on its way to Cagayan de Oro City
July 31, 1990 | Gutierrez, J. | Fortuitous Event passing Butuan City
b. While at Tabon-Tabon, Butuan City, the bus picked up a passenger
PETITIONER: Bachelor Express, Incorporated and Crescencio Rivera c. That about 15 minutes later, a passenger at the rear portion
RESPONDENTS: CA, Ricardo Beter, Sergia Beter, Teofilo Rautraut and Zoetera suddenly stabbed a PC soldier which caused commotion and panic
Rautraut among the passngers
d. That when the bus stopped, passengers Ornominui Beter and
SUMMARY: Bus No. 800 driven from Davao to CDO was the situs of the stampede Narcisa Rautraut were found lying down the road, the former
which resulted to the death of BETER and RAUTRAUT, its passengers. As shown, already dead as a result of head injuries and the latter also suffering
the bus picked up a passenger, and a few minutes later, a passenger from the rear from severe injuries which caused her death later
portion suddenly stabbed a PC officer, which caused the commotion of the e. The passenger assailant alighted from the bus and ran toward the
passengers. And as soon as the bus stopped, it was discovered that BETER and bushes but was killed by the polic
RATRAUT were found lying down the road. The HEIRS of both BETER and 9. The heirs of both BETER and RAUTRAUT filed a complaint for sum of
RAUTRAUT claimed damages from BACHELOR (Yasay the owner) and RIVERA money against Bachelor Express, Inc., (BACHELOR) it’s alleged owner
the driver. BACHELOR contends that it should not be liable because the proximate Samson Yasay and the driver Rivera
cause of the death was the act of the passenger who caused the stabbing incident, 10. In their answer, BACHELOR and RIVERA denied liability for the death of
which is beyond their control, and that they exercising extraordinary diligence as a BETER and RAUTRAUT, and alleged that:
Common Carrier. Hence this petition. a. The driver was able to transport his passnegers safely to their
respective places of destination except BETER and RAUTRAUT
W/N BACHELOR is liable for the damages – YES who jumped off the bus without the knowledge and consent, much
less, the fault of the driver and conductor and BACHELOR
The SC held that BACHELOR is liable. Although the suddent act of the stabbing is a b. BACHELOR had exercised due diligence in the choice of its
fortuitous event, BACHELOR must still prove that it was not negligent in causing employees to avoid as much as possible accidents
the injuries resulting from such accident. In this case, BACHELOR was not able to c. The incident was not a traffic accident or vehicular accident, it was
overcome the presumption of negligence of common carriers when damage or injury an incident or evernt very much beyond the control of
result to a passenger. It was proven in evidence and testimonies that BACHELOR BACHELOR and RIVERA
failed to exercise the extraordinary diligence required when it belatedly stopped d. Bachelor and Rivera were not parties to the incident
during the commotion, and opened the solitary door at an appreciably fast speed. complained of as it was an act of a third party who is not in
Further, it was in contravention of the Land Transportation and Traffic Code when it any way connected with them and of wchih the latter have no
was equipped with a solitary door for a bus its size and loading capacity. Hence, control and supervision
BACHELOR is liable for being the proximate cause of the death of BETER and 11. Trial Court dismissed the complaint
RATRAUT, and it was not due to the act of the passenger as a fortuitous event. As to 12. CA reversed and set aside the ruling
the legal standing of the HEIRS, it was shown that they are indeed the parents of the 13. Hence this petition (PETITONER’s ARGUMENTS)
victim when they identified the vicitms during trial. As for damages, the SC validly a. BACHELOR argues that the proximate cause of the death of
substantiated them (see last page) BETER and RAUTRAUT was the act of the passenger who ran
auck and stabbed another passenger of the bus
DOCTRINE: However, in order that a common carrier may be absolved from b. That the stabbing incident triggered off the commotion and panic
liability in case of force majeure, it is not enough that the accident was caused by among the passengers who pushed on another and that presumably
force majeurer. The common carrier must still prove that it was not negligent in out of fear and moved by that human instinct of self-preservation
causing the injuries resulting from such accident BETER and RAUTRAUT jumped off the bus while the bus was
still running resulting in their untimely death
c. Under these circumstances, BACHELOR asseverate that they wer
FACTS:
not negligent in the performance of their duties and that the
7. Bus No. 800 (BUS) owned by Bachelor Express, Inc. and driven by
incident was completely and absolutely attributable to a third
Crescencio Rivera was the situs of a stampede which resulted in the death
person, the passenger who ran amuck, for without his criminal act,
of passengers Ornominio Beter and Narcisa Rautraut
8. The evidence shows that:
BETER and RAUTRAUT could not have been subjected to fear extradordinary diligence in accordance with Articles 17334 and 17555 of the
and shock which compelled them to jump off the running bus New Civil Code
d. Thus, should not be liable for damages arising from acts of third 6. BACHELOR dnies liability for the death of BETER and RAUTRAUT on
persons over whom they have no control or supervision its posture that the death of the said passengers were caused by a third
e. That the driver of the bus, before, during and after the incident was person who was beyond its control and supervision
driving cautiously giving due regard to traffic rules, laws and 7. In effect, BACHELOR, in order to overcome the presumption of fault or
regulations negligence under the law, states that the vehicular incident resulting in the
f. BACHELOR also contends that the respondents (SPS. BETER and death of passengers BETER and RAUTRAUT was caused by force
SPS. RAUTRAUT) are not the parents of the deceased BETER majeure or caso fortuito over which the common carrier did not have any
and RAUTRAUT, and thus have no legal personality to sue them control
• Art. 1174. Except in cases expressly specified by law, or when it is
ISSUE/s: otherwise declared by stipulations, or when the nature of the
2. WoN there was a fortuitous event – Yes, the sudden act of passenger obligation requires the assumption of risk, no person shall be
stabbing another passenger is a fortuitous event, HOWEVER in order responsible for those event which could not be foreseen, or which
to absolve liability, the cause of the death or injury must be the result of though foreseen, were inevitable
such fortuitous event 8. “Events” as defined in the case of Lasam v. Smith:
3. WoN BACHELOR was negligent – Yes, the testimony and evidence • Escriche defins caso fortuito as an unexpected event or act of God
showed that BACHELOR was negligent when it belatedly stopped, and which could neither be foreseen nor resisted, such as floods,
opened the door at an appreciably fast speed, as well as being equipped torrents, shipwrecks, conflagrations, lightning, compulsion,
with a solitary door in contravention of the Land Transportion and insurrections, destruction of buildings by unforeseen accidents and
Traffic Code other occurrences of a similar nature
4. WoN Heirs have legal standing – Yes, they were able to prove and identify • In a legal sense and, consequently, also in relation to contracts, a
the victims caso fortuito presents the following characteristics
5. WoN there is legal basis for the damages – Yes, see damages portion 1. The casue of the unforeseen and unexpected occurrence, or of the failure
of the debtor to comply with his obligation, must be independent of the
RULING: WHEREFORE, the instant petition is DISMISSED. The questioned human will
decision dated May 19, 1988 and the resolution dated August 1, 1988 of the Court of 2. It must be impossible to foresee the event which constitutes the caso
Appeals are AFFIRMED. 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
RATIO: fulfill his obligation in a normal manner
3. There is no question that BACHELOR is a common carrier. Hence, from 4. The debtor must be free from any participation in the aggravation of the
the nature of its business and for reasons of public policy BACHELOR is injury resulting to the creditor
bound to cary its passengers safely as far as human care and foresignt can 9. The running amuck of the passenger was the proximate cause of the
provide using the utmost diligence of very cautious persons, with a due incident as it triggered off a commotion and panic among the passngers
regard for all the circumsntances such that the passnegers started running to the sole exit shoving each other
4. In the case at bar, BETER and RAUTRAUT were passnegers of a bus resulting in the falling off the bus by passengers BETER and RAUTRAUT
belonging to BACHELOR and while passengers of the bus, suffered causing them fatal injuries
injuries which caused their death
5. Consequently, pursuant to Article 17563 of the Civil Code, BACHELOR is
presumed to have acted negligently unless it can prove that it had observed
4
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
3 5
Art. 1756. In case of death of or injuries to passengers, common carriers are Art. 1755. A common carrier is bound to carry the passengers safely as far as
presumed to have been at fault or to have acted negligently, unless they prove that human care and foresight can provide, using the utmost diligence of very cautious
they observed extraordinary diligence as prescribed in Articles 1733 and 1755 persons, with a due regard for all the cicumstances
• The sudden act of the passenger who stabbed another large, while equipped with only a solitary door for a bus its size
passenger in the bus is within the context of force majeure and loading capacity, in contravention of rules and regulations
10. However, in order that a common carrier may be absolved from provided for under the Land Transportation and Traffic Code
liability in case of force majeure, it is not enough that the accident was 14. Considering the factual findings of the CA – the bus driver did not
caused by force majeurer. The common carrier must still prove that it immediately stop the bus at the height of the commotion; the bus was
was not negligent in causing the injuries resulting from such accident speeding from a full stop; the victims fell from the bus door when it was
11. For their defense of force majeure or act of God to prosper the accident opened or gae way while the bus was still running; the conductor panicked
must be due to natural causes and exclusively without human intervention and blew his whistle after people had already falled off the bus; and the bus
12. A thorough examination of the records, however, show that there are was not properly equipped with doors in accordance with law – it is clear
material facts ignored by the trial court which were discussed by the that BACHELOR has failed to overcome the presumption of fault and
appellate court to arrive a t a different conclusion negligence found in the law governing common carriers
13. These circumstnaces show that BACHELOR was negligent in the provision
of safety precautions so that its passengers may eb transported safel to their MINOR ISSUES:
destinations As to the legal standing
• There is nothing in the record to support the conclusion that the 1. We find this argument a belated attempt on the part of BACHELOR and
solitary door of the bus was locked as to prevent the passngers RIVERA to avoid liability for the deaths of BETER and RAUTRAUT
from passing through. Cullano, testifying for the defense, clearly 2. The HEIRS of BETER and RAUTRAUT were identified as the parents
stated that the conductor opened the door when the passgers were of the victims by witnesses during the trial and the trial court recognized
shouting that the bus stop while they were in a state of panic. them as such
Sergia Beter categorically state that she actually saw her son fall
from the bus as the door was forced open by the force of the As to damages awarded
onrushing passengers 1. BETER was 32 years of age at the time of his death, single, in good
• Collango, on the other hand, testified that he shut the door after the health and rendering support and service to his mother. As far as
last passenger had boarded the bus. But he had quite conveniently RAUTRAUT is concerned, the only evidence adduced is to the effect that
neglected to say that when the passnegers had panciked, he himself at her death, she was 23 years of age, in good health and without visible
panicke and had gone to open he door means of support
• Accordingly, there is no reason to believe that the deceased 2. With respect to Ornominio Beter, it is both just and reasonable,
passnegers jumped from the window when it was entirely possible considering his social standing and position, to fix the deductible, living
for them to have alighted through the door and incidental expenses at the sum of Four Hundred Pesos (P400.00) a
• The lower court’s reliance on the testimony of Collango, as the month, or Four Thousand Eight Hundred Pesos (P4,800.00) annually. As
conductor and employee of BACHELOR, is unjustified, in the to his income, considering the irregular nature of the work of a daily
light of the cler testimony of Cllano as the sole uninterested wage carpenter which is seasonal, it is safe to assume that he shall have
eyewitness of the entire episode work for twenty (20) days a month at Twenty Five Pesos (P150,000.00)
• Instead we find Pedro Colllango’s testimony to be infused by bias for twenty five years. Deducting therefrom his necessary expenses, his
and fraught with inconsistencies, if not notably unreliable for lack heirs would be entitled to Thirty Thousand Pesos (P30,000.00)
of veracity 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)
• In the light of the foregoing, the negligence of the common
as straight death indemnity pursuant to Article 2206 (People v. Daniel,
carrier, through its employees, consisted of the lack of
supra). For damages for their moral and mental anguish, his heirs are
extraordinary diligence required of common carriers, in
entitled to the reasonable sum of P10,000.00 as an exception to the
exercising vigilance and utmost care of the safety of its
passengers, exemplified by the driver’s belated stop and 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
reckless opening of the doors of the bus while the same was
are entitled to P5,000.00. All in all, the plaintiff-appellants Ricardo and
travelling at an appreciably fast speed
Sergia Beter as heirs of their son Ornominio are entitled to an
• At the same time, the common carrier itself acknowledged,
indemnity of Seventy Five Thousand Pesos (P75,000.00).
through its administrative officer, Granada, that the bus was
commissioned to travel and take on passngers and the public at
3. 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.
009 Nocum v. BLTB (CHIQUI) and when the explosion occurred, he was thrown out. PC investigation
October 31, 1969 | Barredo, J. | Responsibility of Passenger report states that 37 passengers were injured
17. The bus conductor, Sancho Mendoza, testified that the box belonged to a
PETITIONER: Herminio L. Nocum passenger whose name he does not know and who told him that it contained
RESPONDENTS: Laguna Tayabas Bus Company miscellaneous items and clothes. He helped the owner in loading the
baggage which weighed about 12 kilos and because of company regulation,
SUMMARY: Nocum was injured as a result of the explosion of firecrackers. This he charged him for P0.25. From its appearance there was no indication at all
happened while he was riding Bus No. 120 of BLTB. The bus conductor and the that the contents were explosives or firecrackers. Neither did he open the
dispatcher both testified that they helped a passenger load a box who declared that box because he just relied on the word of the owner.
only miscellaneous items and clothes were inside when in reality those were 18. Dispatcher Nicolas Cornista of the bus company corroborated the
explosives. Nocum then filed for damages against BLTB. CFI ruled in his favor testimony of Mendoza and he said, among other things, that he was present
saying that BLTB failed to exercise extraordinary diligence in the proper inspection when the box was loaded in the truck and the owner agreed to pay its fare.
of the passenger’s items and that fortuitous events cannot apply because the He added that they were not authorized to open the baggages of passengers
contents would have been discovered if BLTB did its job properly. W/N BLTB is because instruction from the management was to call the police if there
liable for the injury caused by the firecrackers to Nocum – NO, it is to be presumed were packages containing articles which were against regulations.
that a passenger will not take with him anything dangerous to the lives and limbs of 19. There is no question that Bus No. 120 was road worthy when it left its
his co-passengers. Fairness demands that in measuring a common carrier's duty Manila Terminal for Lucena that morning of December 5, 1960. The
towards its passengers, allowance must be given to the reliance that should be injuries suffered by the Nocum were not due to mechanical defects but to
reposed on the sense of responsibility of all the passengers in regard to their the explosion of firecrackers inside the bus which was loaded by a co-
common safety. Furthermore, the right to privacy of the passengers should also be passenger.
respected. He cannot be subjected to any unusual search when nothing appears to 20. The main basis of the trial court's decision is that BLTB did not observe the
out of the ordinary. In compelling the passenger to submit to a more rigid inspection extraordinary or utmost diligence of a very cautious person required by the
after the passenger had already declared that the box contained mere clothes and articles of the Civil Code.6
other miscellaneous, it would result to an invasion of a constitutionally protected a. It is quite clear that extraordinary or utmost diligence of a very
right. Only when there are sufficient indications that the representations of the cautious person was not observed by the bus company. The service
passenger regarding the nature of his baggage may not be true, in the interest of the manual, exhibits '3' and '3-A', prohibits the employees to allow
common safety of all, the assistance of the police authorities may be solicited. explosives, such as dynamite and firecrackers to be transported on
its buses. To implement this particular rule for 'the safety of
DOCTRINE: A carrier is ordinarily not liable for injuries to passengers from fires passengers, it was therefore incumbent upon the employees of the
or explosions caused by articles brought into its conveyances by other passengers,
in the absence of any evidence that the carrier, through its employees, was aware of
the nature of the article or had any reason to anticipate danger therefrom. 6
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.
FACTS:
"Such extraordinary diligence in the vigilance over the goods is further expressed in articles 1734, 1735,
14. This is an appeal of Laguna Tayabas Bus Co., defendant in the court below, and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for the safety of the passengers is further set
from a judgment of the CFI of Batangas. forth in articles 1755 and 1756.
15. Herminio L. Nocum, who was a passenger in Bus No. 120 of BLTB then
making a trip within the barrio of Dita, Municipality of Bay, Laguna, was "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
injured as a consequence of the explosion of firecrackers, contained in a circumstances.
box, loaded in said bus and declared to its conductor as containing clothes
and miscellaneous items by a co-passenger. "ART. 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at
16. Severino Andaya, a witness for Nocum, said that a man with a box went up fault or to have acted negligently, unless they prove that they observed extraordinary diligence as
the baggage compartment of the bus where he already was and said box was prescribed in articles 1733 and 1755.
placed under the seat. They left Azcarraga at about 11:30 in the morning

company to make the proper inspection of all the baggages which that should be reposed on the sense of responsibility of all the
are carried by the passengers. passengers in regard to their common safety. It is to be presumed that a
b. Fortuitous event (the cause of the unexpected event must be passenger will not take with him anything dangerous to the lives and
independent of the will of man, or something which cannot be limbs of his co-passengers, not to speak of his own.
avoided) cannot apply to the instant case. If proper and rigid 6. Not to be lightly considered be the right to privacy to which each
inspection were observed by BLTB, the contents of the box could passenger is entitled. He cannot be subjected to any unusual search,
have been discovered and the accident avoided. Refusal by the when he protests the innocuousness of his baggage and nothing appears
passenger to have the package opened was no excuse because, as to indicate the contrary, as in the case at bar. In other words, inquiry
stated by Dispatcher Cornista, employees should call the police if may be verbally made as to the nature of a passenger's baggage when such
there were packages containing articles against company is not outwardly perceptible, but beyond this, constitutional boundaries are
regulations. already in danger of being transgressed.
7. Calling a policeman to his aid, as suggested by the service manual invoked
ISSUE/s: by the trial judge, in compelling the passenger to submit to more rigid
1. W/N BLTB is liable for the injury caused by the firecrackers to Nocum – inspection, after the passenger had already declared that the box contained
NO, It is to be presumed that a passenger will not take with him anything mere clothes and other miscellaneous, could not have justified invasion of a
dangerous to the lives and limbs of his co-passengers. constitutionally protected domain. Police officers acting without judicial
authority secured in the manner provided by law are not beyond the pale of
constitutional inhibitions designed to protect individual human rights and
liberties.
RULING: ACCORDINGLY, the appealed judgment of the trial court is reversed
8. What must be importantly considered here is not so much the infringement
and the case is dismissed, without costs.
of the fundamental sacred rights of the particular passenger herein involved,
but the constant threat any contrary ruling would pose on the right of
RATIO: privacy of all passengers of all common carriers, considering how easily the
2. It is undisputed that before the box containing the firecrackers were allowed duty to inspect can be made an excuse for mischief and abuse. Of course,
to be loaded in the bus by the conductor, inquiry was made with the when there are sufficient indications that the representations of the
passenger carrying the same as to what was in it, since its "opening . . . was passenger regarding the nature of his baggage may not be true, in the
folded and tied with abaca." interest of the common safety of all, the assistance of the police authorities
3. According to His Honor (CFI Judge), "if proper and rigid inspection were may be solicited, not necessarily to force the passenger to open his baggage,
observed by the defendant, the contents of the box could have been but to conduct the needed investigation consistent with the rules of
discovered and the accident avoided. Refusal by the passenger to have the propriety and, above all, the constitutional rights of the passenger. It is in
package opened was no excuse because, as stated by Dispatcher Cornista, this sense that the mentioned service manual issued by BLTB to its
employees should call the police if there were packages containing articles conductors must be understood.
against company regulations." 9. Decisions in other jurisdictions cited by BLTB in its brief, evidently
4. That may be true, but it is Our considered opinion that the law does not because of the paucity of local precedents squarely in point, emphasize that
require as much. Article 1733 is not as unbending as His Honor has held, there is need, as We hold here, for evidence of circumstances indicating
for it reasonably qualifies the extraordinary diligence required of cause or causes for apprehension that the passenger's baggage is dangerous
common carriers for the safety of the passengers transported by them and that it is failure of the common carrier's employee to act in the face of
to be "according to all the circumstances of each case." "In fact, Article such evidence that constitutes the cornerstone of the common carrier's
1755 repeats this same qualification: "A common carrier is bound to liability in cases similar to the present one.
carry the passengers safely as far as human care and foresight can 10. A carrier is ordinarily not liable for injuries to passengers from fires or
provide, using the utmost diligence of very cautious persons, with due explosions caused by articles brought into its conveyances by other
regard for all the circumstances." passengers, in the absence of any evidence that the carrier, through its
5. In this particular case before Us, it must be considered, that while it is true employees, was aware of the nature of the article or had any reason to
the passengers of the bus should not be made to suffer for something over anticipate danger therefrom.
which they had no control, as enunciated in the decision of this Court cited 11. BLTB further invokes Article 1174 of the Civil Code which relieves all
by His Honor, fairness demands that in measuring a common carrier's obligors, including, of course, common carriers from the consequence of
duty towards its passengers, allowance must be given to the reliance
fortuitous events. The court a quo held that "the breach of contract (in this
case) was not due to fortuitous event and that, therefore, the defendant is
liable in damages." Since We hold that BLTB has succeeded in rebutting
the presumption of negligence by showing that it has exercised
extraordinary diligence for the safety of its passengers, "according to the
circumstances of the (each) case", We deem it unnecessary to rule whether
or not there was any fortuitous event in this case.
010 Smith Bell v. Borja (Valle) 2. M/T King Family contained 750 metric tons of alkyl benzene and methyl
10 June 2002 | Panganiban, J. | Transpo Law methacrylate monomer. Supervising Customs Inspector instructed Borja to
board said vessel and perform duties as inspector until the vessel’s
PETITIONER: Smith Bell Dodwell Shippinf Agency Corporation departure.
RESPONDENTS: Catalino Broja and International To Wage and Transport 3. At about 11am, while M/T King was unloading chemicals unto two barges
Corporation which were owned by International To Wage and Transport Corporation
(International), there was a sudden explosion that set the vessel on fire.
SUMMARY: 4. Borja was at that time in the cabin preparing reports. He ran outside to
Smith Bell’s M/T King Family was carrying 750 metric tons of alkyl benzene check what happened. Another explosion was heard. Seeing the fire and
and methyl methacrylate monomer. While it was unloading the cargo on the fearing for hislife, Borja hurriedly jumped over board. But the water was
barge of International Wage, Borja was in the vessel’s cabin preparing papers. also on fire because of the spilled chemicals. Borja swam his way for one
Borja was an inspector from the Bureau of Customs and was inspecting on the hour until he was rescued and was sent to San Juan De Dios Hospital.
vessel. Borja heard an explosion and immediately went out of the cabin to the 5. After intensive care in the hospitao, he was diagnosed to be permanently
deck. He heard another explosion and found that the vessel was on fire. To save disabled. Borja made demands against Smith Bell and International for
his life, he jumped over board. But the water was also on fire because of the damages. However, both denied liabilities and attributed to each other
spilled chemicals. Despite this, Borja swam for his life and was later taken to the negligence.
hospital where he suffered injuries. Borja brought this suit against both Smith
Bell and International Wage. ISSUE/s:
2. WoN Smith Bell is the one responsible to pay dmaages to Borja– YES,
The issue in this case is which between Smith Bell and International Wage are because it was the chemical cargo of its vessel and the fact that its crew
liable to pay Borja damages. failed to take the necessary precautions to prevent the accident.

The SC held that it is Smith Bell. Smith Bell’s vessel was carrying chemical RULING: WHEREFORE, the Petition is PARTLY GRANTED. The assailed
cargo -- alkyl benzene and methyl methacrylate monomer. While knowing that Decision is AFFIRMED with the following MODIFICATIONS: petitioner is ordered
their vessel was carrying dangerous inflammable chemicals, its officers and crew to pay the heirs of the victim damages in the amount of P320,240 as loss of earning
failed to take all the necessary precautions to prevent an accident. Smith Bell capacity, moral damages in the amount of P100,000, plus another P50,000 as
was, therefore, negligent. attorneys fees. Costs against petitioner.
Knowing fully well that it was carrying dangerous chemicals, Smith Bell was
negligent in not taking all the necessary precautions in transporting the cargo. RATIO:
Responsibility for injuries
DOCTRINE: 1. Smith Bell claims that the explosion that caused the fire originated from
International’s barge.
The owner or the person in possession and control of a vessel and the vessel are a. It showed a Survey report submitted by the Admiral Surveyor’s
liable for all natural and proximate damage caused to persons and property by and Adjuster Inc. which showed that no part of the vessel sustained
reason of negligent management or navigation. any sharp or violent damage if indeed an explosion had occurred
on it. On the other hand, the fact that the vessel sustained cracks
The three elements of quasi delict are: was noted.
a. damages suffered by the plaintiff, b. The fire damage on the hull of the vessel indicate dthat the fire had
b. fault or negligence of the defendant, and started from outsideof it. The port side of the vessel to which the
c. the connection of cause and effect between the fault or negligence of barge was tied was completely gutted by fire, while the starboard
the defendant and the damages inflicted on the plaintiff. side sustained only slight fire damage. Port side is left and
starboard side is right.
c. Testimonial evidence proved that the explosion came from the
FACTS:
barge and not from its vessel. Security Guard Vivencio Estrella
1. Smith Bell filed a written request with the Bureau of Customs (BOC) for
testified that he had seen the sudden explosion of monomer on the
the attendance of BOC’s inspection team on vessel M/T King Family which
barge with fire that went up to about 60 meters. Third Mate Choi
was due to arrive in Manila on 24 Sept 1987.
Seong Hwan and Second Mate Nam Bang Choun of M/T King c. Moral and mental sufferings
Family narrated that while they were discharging the chemicals, 4. Loss of earning capacity is based on the number of years remaining in the
they saw and heard an explosion from the barge. Chief Security person’s expected life span. This is the basus of the damages that shall be
Guard Reynaldo Patron, in turn, testified that he was 7 to 10 meters computed:
away from the barge when he heard the explosion from the port a. Net earning capacity = life expectancy x [Gross Annual income –
side of M/T King Family and saw the barge already on fire. living expenses(50% of grosss annual income)]
2. the court was not persuaded. Both the RTC and CA ruled that the fire and b. Where life expectancy = 2/3 (80 – age of deceased)
explosion had originated from the vessel.
3. The documents offered to prove that the explosion originated from the
barges were denied admission for being hearsay. There is nothing to support
Smith bell’s contention.
4. The SC did not overturn the factual findings of the lower court.
5. Negligence conduct that creates undue risk of harm to another. It is the
failure to observe that degree of care, precaution and vigilance that the
circumstances justly demand, whereby that other person suffers injury.
6. Smith Bell’s vessel was carrying chemical cargo -- alkyl benzene and
methyl methacrylate monomer. While knowing that their vessel was
carrying dangerous inflammable chemicals, its officers and crew failed to
take all the necessary precautions to prevent an accident. Smith Bell
was, therefore, negligent.
7. The three elements of quasi delict are:
a. damages suffered by the plaintiff,
b. fault or negligence of the defendant, and
c. the connection of cause and effect between the fault or negligence
of the defendant and the damages inflicted on the plaintiff.
8. All these elements were established in this case. Knowing fully well that it
was carrying dangerous chemicals, Smith Bell was negligent in not taking
all the necessary precautions in transporting the cargo.
9. As a result of the fire and explosion, Borja had suffered damages. Hence,
the owner or the person in possession and control of a vessel and the
vessel are liable for all natural and proximate damage caused to
persons and property by reason of negligent management or
navigation.

Amount of Liability
1. Smith bell insists that Borja isn’t entitled to dmaages. It also disputes the
use of his gross earning as basis for the computation of the award for loss of
earning capacity. Both courts, in computing the value of such loss, used the
remaining years of the victim as a government employee and the amount he
had been receiving per annum at the time of the incident.
2. Borja claims that Smith Bell had no casuse to complain because the
miscalculation had been in its favor.
3. In determining the reasonableness of the damages awarded under art 1764
in conjunction with Art 2206 of the CC, the factors to be considered are:
a. Life expenctancy and loss of earning capacity
b. Pecuniary loss, loss of support and service
001 PHILIPPINE FIRST INSURANCE v. WALLEM SHIPPING DOCTRINE: The duty of care of the cargo is non-delegable, and the
(Rosales edited by Escalona) carrier is accordingly responsible for the acts of the master, the crew, the
March 26, 2009 | Tinga, J. | Liability of a Common Carrier stevedore, and his other agents. It has also been held that it is ordinarily
the duty of the master of a vessel to unload the cargo and place it in
PETITIONER: Philippine First Insurance Co, Inc readiness for delivery to the consignee, and there is an implied obligation
RESPONDENTS: Wallem Phils Shipping Inc, unknown owner and/or that this shall be accomplished with sound machinery, competent hands,
unknown charterer of the vessel M/S “Offshore Master” and “Shanghai and in such manner that no unnecessary injury shall be done thereto. And
Fareast Ship Business Company” the fact that a consignee is required to furnish persons to assist in
unloading a shipment may not relieve the carrier of its duty as to such
SUMMARY: Anhui Chemicals Import & Export Corporation loaded on unloading.
board M/S Offshore Master a shipment consisting of 10,000 bags of
sodium sulphate anhydrous 99 PCT Min., complete and in good order for FACTS:
transportation to and delivery at the port of Manila for consignee, L.G. 1. Anhui Chemicals Import & Export Corporation loaded on board M/S
Atkimson Import-Export, Inc., covered by a Clean Bill of Lading. 2,426 Offshore Master a shipment consisting of 10,000 bags of sodium
poly bags were in bad order and condition, having sustained various sulphate anhydrous 99 PCT Min., complete and in good order for
degrees of spillages and losses. This is evidenced by the Turn Over
transportation to and delivery at the port of Manila for consignee,
Survey of Bad Order Cargoes of the arrastre operator, Asian Terminals,
L.G. Atkimson Import-Export, Inc., covered by a Clean Bill of
Inc. Asia Star Freight Services, Inc. undertook the delivery of the subject
shipment from the pier to L.G. Atkimson’s warehouse in Quezon City. Lading. The Bill of Lading reflects the gross weight of the total
During the unloading, it was found and noted that the bags had been cargo at 500,200 kilograms. The Owner and/or Charterer of M/V
discharged in damaged and bad order condition L. G. Atkimson filed a Offshore Master is unknown while the shipper of the shipment is
formal claim with Wallem for the value of the damaged shipment, to no Shanghai Fareast Ship Business Company. Both are foreign firms
avail. Since the shipment was insured with petitioner Philippines First doing business in the Philippines, thru its local ship agent,
Insurance Co., Inc. against all risks . G. Atkimson filed a formal claim respondent Wallem Philippines Shipping, Inc.
with Phil First Insurance for the damage and losses sustained by the
shipment. Phil First Insurance, in the exercise of its right of subrogation, 2. The shipment arrived at the port of Manila on board the vessel M/S
sent a demand letter to Wallem for the recovery of the amount paid to no Offshore Master from which it was subsequently discharged. 2,426
avail. Phil First Insurance instituted an action before the RTC for poly bags were in bad order and condition, having sustained various
damages against Wallem for its recovery. Issue is WoN Wallem degrees of spillages and losses. This is evidenced by the Turn Over
Shipping’s vessel as a common carrier should be held liable for the cost Survey of Bad Order Cargoes of the arrastre operator, Asian
of the damaged shipment? SC held that it is because the duty of care of Terminals, Inc. The bad state of the bags is also evinced by the
the cargo is non-delegable, and the carrier is accordingly responsible for arrastre operator’s Request for Bad Order Survey.
the acts of the master, the crew, the stevedore, and his other agents. The
records are replete with evidence which show that the damage to the bags 3. Asia Star Freight Services, Inc. undertook the delivery of the subject
happened before and after their discharge and it was caused by the shipment from the pier to L.G. Atkimson’s warehouse in Quezon
stevedores of the arrastre operator who were then under the supervision City, while the final inspection was conducted jointly by the L.G.
of Wallem. It is settled in maritime law jurisprudence that cargoes while Atkimson’s representative and the cargo surveyor. During the
being unloaded generally remain under the custody of the carrier. In the unloading, it was found and noted that the bags had been discharged
instant case, the damage or losses were incurred during the discharge of in damaged and bad order condition. Upon inspection, it was
the shipment while under the supervision of the carrier. Consequently, discovered that 63,065 kilograms of the shipment had sustained
the carrier is liable for the damage or losses caused to the shipment. unrecovered spillages, while 58,235 kilograms had been exposed and
contaminated, resulting in losses due to depreciation and
downgrading. other agents.

4. L. G. Atkimson filed a formal claim with Wallem for the value of the
damaged shipment, to no avail. Since the shipment was insured with RULING: WHEREFORE, the petition is GRANTED. The Decision of the
petitioner Philippines First Insurance Co., Inc. against all risks in the Court of Appeals dated 22 June 2004 and its Resolution dated 11 October
amount of ₱2,470,213.50, the L. G. Atkimson filed a formal claim 2004 are REVERSED and SET ASIDE. Wallem is ordered to pay petitioner
with Phil First Insurance for the damage and losses sustained by the the sum of ₱397,879.69, with interest thereon at 6% per annum from the
shipment. Phil First Insurance paid L. G. Atkimson the sum of filing of the complaint on 7 October 1996 until the judgment becomes final
₱397,879.69 and the latter signed a subrogation receipt. and executory. Thereafter, an interest rate of 12% per annum shall be
imposed. Respondents are also ordered to pay petitioner the amount of
5. Phil First Insurance, in the exercise of its right of subrogation, sent a ₱20,000.00 for and as attorney’s fees, together with the costs of the suit.
demand letter to Wallem for the recovery of the amount paid to no
avail. Phil First Insurance instituted an action before the RTC for RATIO:
damages against Wallem for its recovery. 1. It is beyond question that Wallem Shipping’s vessel is a common
carrier. Thus, the standards for determining the existence or absence
6. RTC Ruling: Citing Eastern Shipping Lines, Inc. v. Court of of Wallem’s liability will be gauged on the degree of diligence
Appeals, the RTC held the shipping company and the arrastre required of a common carrier. Moreover, as the shipment was an
operator solidarily liable since both the arrastre operator and the exercise of international trade, the provisions of the Carriage of
carrier are charged with and obligated to deliver the goods in good Goods by Sea Act (COGSA), together with the Civil Code and the
order condition to the consignee. It also ruled that the ship Code of Commerce, shall apply.
functioned as a common carrier and was obliged to observe the
degree of care required of a common carrier in handling cargoes. 2. It is undisputed that the shipment was damaged prior to its
Further, it held that a notice of loss or damage in writing is not receipt by the insured consignee. The damage to the shipment
required in this case because said goods already underwent a joint was documented by the turn-over survey and Request for Bad
inspection or survey at the time of receipt thereof by the consignee, Order Survey. The turn-over survey, in particular, expressly
which dispensed with the notice requirement. stipulates that 2,426 bags of the shipment were received by the
arrastre operator in damaged condition. With these documents,
7. CA Ruling: CA reversed and set aside the RTC’s decision. here is Phil First Insurance insists that the shipment incurred damage or
no solidary liability between the carrier and the arrastre operator losses while still in the care and responsibility of Wallem and before
because it was clearly established by the court a quo that the damage it was turned over and delivered to the arrastre operator.
and losses of the shipment were attributed to the mishandling by the
arrastre operator in the discharge of the shipment. The appellate 3. While it is established that damage or losses were incurred by the
court ruled that the instant case falls under an exception recognized shipment during the unloading, it is disputed who should be liable
in Eastern Shipping Lines. Hence, the arrastre operator was held for the damage incurred at that point of transport.
solely liable to the consignee. 4. Common carriers, from the nature of their business and for reasons
of public policy, are bound to observe extraordinary diligence in the
ISSUE/s: vigilance over the goods transported by them. Subject to certain
1. WoN Wallem Shipping’s vessel as a common carrier should be held exceptions enumerated under Article 1734 of the Civil Code,
liable for the cost of the damaged shipment – YES, because the duty common carriers are responsible for the loss, destruction, or
of care of the cargo is non-delegable, and the carrier is accordingly deterioration of the goods. The extraordinary responsibility of the
responsible for the acts of the master, the crew, the stevedore, and his common carrier lasts from the time the goods are unconditionally
placed in the possession of, and received by the carrier for a. The legal relationship between the consignee and the arrastre
transportation until the same are delivered, actually or constructively, operator is akin to that of a depositor and warehouseman.
by the carrier to the consignee, or to the person who has a right to The relationship between the consignee and the common
receive them. carrier is similar to that of the consignee and the arrastre
operator. Since it is the duty of the ARRASTRE to take good
5. For marine vessels, Article 619 of the Code of Commerce provides
care of the goods that are in its custody and to deliver them
that the ship captain is liable for the cargo from the time it is turned
in good condition to the consignee, such responsibility also
over to him at the dock or afloat alongside the vessel at the port of
devolves upon the CARRIER. Both the ARRASTRE and the
loading, until he delivers it on the shore or on the discharging wharf
CARRIER are therefore charged with and obligated to
at the port of unloading, unless agreed otherwise. In Standard Oil
deliver the goods in good condition to the consignee.
Co. of New York v. Lopez Castelo, the Court interpreted the ship
11. In this case the appellate court is correct insofar as it ruled that
captain’s liability as ultimately that of the shipowner by regarding an arrastre operator and a carrier may not be held solidarily
the captain as the representative of the ship owner.
liable at all times. But the precise question is which entity had
6. Lastly, Section 2 of the COGSA provides that under every contract custody of the shipment during its unloading from the vessel?
of carriage of goods by sea, the carrier in relation to the loading, 12. In a case decided by a U.S. Circuit Court, Nichimen Company v.
handling, stowage, carriage, custody, care, and discharge of such M./V. Farland, it was ruled that like the duty of seaworthiness, the
goods, shall be subject to the responsibilities and liabilities and duty of care of the cargo is non-delegable, and the carrier is
entitled to the rights and immunities set forth in the Act. Section 3 accordingly responsible for the acts of the master, the crew, the
(2) thereof then states that among the carriers’ responsibilities are to stevedore, and his other agents. It has also been held that it is
properly and carefully load, handle, stow, carry, keep, care for, and ordinarily the duty of the master of a vessel to unload the cargo
discharge the goods carried. and place it in readiness for delivery to the consignee, and there
is an implied obligation that this shall be accomplished with
7. The above doctrines are in fact expressly incorporated in the bill of sound machinery, competent hands, and in such manner that no
lading between the shipper Shanghai Fareast Business Co., and the unnecessary injury shall be done thereto. And the fact that a
consignee. consignee is required to furnish persons to assist in unloading a
8. On the other hand, the functions of an arrastre operator involve shipment may not relieve the carrier of its duty as to such
the handling of cargo deposited on the wharf or between the unloading.
establishment of the consignee or shipper and the ship's tackle. Being 13. The records are replete with evidence which show that the damage
the custodian of the goods discharged from a vessel, an arrastre to the bags happened before and after their discharge and it was
operator's duty is to take good care of the goods and to turn caused by the stevedores of the arrastre operator who were then
them over to the party entitled to their possession. under the supervision of Wallem.
9. Handling cargo is mainly the arrastre operator's principal work 14. It is settled in maritime law jurisprudence that cargoes while
so its drivers/operators or employees should observe the being unloaded generally remain under the custody of the
standards and measures necessary to prevent losses and damage carrier. In the instant case, the damage or losses were incurred
to shipments under its custody. during the discharge of the shipment while under the supervision
10. In Fireman’s Fund Insurance Co. v. Metro Port Service, Inc. the of the carrier. Consequently, the carrier is liable for the damage
Court explained the relationship and responsibility of an arrastre or losses caused to the shipment.
operator to a consignee of a cargo, to quote:
002 REGIONAL CONTAINER LINES V. THE NETHERLANDS
INSURANCE CO. G.R. No. 118126 | September 4, 2009 | Brion., J. • RCL is a foreign corporation based in Singapore. It does business in
Proof of extraordinary diligence necessary to overcome presumption of negligence the Philippines through its agent, EDSA Shipping, a domestic corporation
organized and existing under Philippine laws.
PETITIONERS: Regional Container Lines (RCL) of Singapore and EDSA • Netherlands Insurance Company (Philippines), Inc. is likewise a domestic
Shipping Agency corporation engaged in the marine underwriting business.
RESPONDENT: The Netherlands Insurance Co. (Philippines) Inc.
FACTS
SUMMARY: 405 cartons of Epoxy Molding Compound were to be shipped from 1. On October 20, 1995, 405 cartons of Epoxy Molding Compound were
Singapore to Manila for consignee Temic Telefunken. It was packed and sealed in consigned to be shipped from Singapore to Manila for Temic Telefunken
a refrigerated container, which had to be kept at a temperature of 0 Celsius, as the Microelectronics Philippines (Temic).
cargo was highly perishable. The shipment was loaded on board M/V Piya Bhum, 2. U-Freight Singapore PTE Ltd. (U-Freight Singapore), a forwarding agent
owned by RCL (with EDSA as its agent in the Philippines). It was insured by based in Singapore, contracted the services of Pacific Eagle Lines PTE. Ltd.
Netherlands Insurance. (Pacific Eagle) to transport the subject cargo.
When Temic received shipment, it found the cargo completely damaged. It 3. The cargo was packed, stored, and sealed by Pacific Eagle in its
was found out that when the cargo was unloaded from the ship, the temperature Refrigerated Container. As the cargo was highly perishable, the inside of
fluctuated at 33 Celsius, which was caused by the burnt condenser fan motor of the container had to be kept at a temperature of 0 Celsius. It was loaded on
the refrigerated container. board the M/V Piya Bhum, a vessel owned by RCL.
Temic filed a claim with Netherlands Insurance and in turn, Netherlands filed 4. To insure the cargo against loss and damage, Netherlands Insurance issued
a complaint for subrogation of insurance settlement against EDSA Shipping, a Marine Open Policy in favor of Temic.
RCL, Eagle Liner Shipping, U-Freight Singapore and U-Ocean (forwarder). 5. On October 25, 1995, the M/V Piya Bhum docked in Manila. After
RCL and EDSA filed a Motion to Dismiss on the ground that Netherlands unloading the refrigerated container, it was plugged to the power terminal
failed to establish any negligence on their part. Trial Court dismissed the of the pier to keep its temperature constant.
complaint on demurrer to evidence, but this was reversed by the Court of Appeals 6. Fidel Rocha, Vice-President for Operations of Marines Adjustment
which held RCL and EDSA Shipping liable under the presumption of negligence. Corporation, with two surveyors, conducted a protective survey of the
Hence, this case before the Supreme Court. cargo. They found that based on the temperature chart, the temperature
reading was constant from October 18 to October 25, 1995 at 0
The issue in this case is whether the CA correctly held RCL and EDSA Shipping Celsius. However, at midnight of October 25 when the cargo had already
liable as common carriers under the theory of presumption of negligence. been unloaded from the ship the temperature fluctuated at 33 Celsius.
Rocha believed the fluctuation was caused by the burnt condenser fan motor
The Supreme Court affirmed the CA Decision and held that a common carrier of the refrigerated container.
is presumed to have been negligent if it fails to prove that it exercised 7. On November 9, 1995, Temic received the shipment. It found the cargo
extraordinary vigilance over the goods it transported. RCL could have presented completely damaged.
proof to show that they exercised extraordinary care and diligence in the handling 8. Temic filed a claim for cargo loss against Netherlands Insurance. The
of the goods, but they opted to file a demurrer to evidence. As the order granting Netherlands Insurance paid Temic the sum of P1,036,497 under the terms of
their demurrer was reversed on appeal, they are deemed to have waived their right the Marine Open Policy. Temic then executed a loss and subrogation receipt
to present evidence, and the presumption of negligence must stand. in favor of Netherlands Insurance.
RCL and EDSA also invoked Article 1734, specifically the character of the 9. On June 4, 1996, Netherlands Insurance filed a complaint for subrogation of
goods or defects in the packing or in the containers, to exculpate themselves from insurance settlement with the RTC against EDSA Shipping, RCL, Eagle
liability. However, they failed to offer evidence on this point as it was barred Liner Shipping Agencies, U-Freight Singapore, and U-Ocean.
from presenting evidence, as stated, due to the reversal of the dismissal of trial 10. After Netherlands Insurance had made its formal offer of evidence, RCL
court based on demurrer to evidence. and EDSA Shipping sought leave of court to file their respective motions to
dismiss based on demurrer to evidence.
DOCTRINE: To overcome the presumption of negligence, the common carrier
must establish by adequate proof that it exercised extraordinary diligence over the RCL and EDSA’s ARGUMENTS:
goods. 1. They denied negligence in the transport of the cargo, but attributed
negligence to their co-defendants. They argued that the cause of the
damage to the cargo was the fluctuation of the temperature in the reefer van, goods they transport, according to all the circumstances of each case;
which fluctuation occurred after the cargo had already been discharged (2) In the event of loss, destruction, or deterioration of the insured goods,
from the vessel and that no fluctuation arose when the cargo was still on common carriers are responsible, unless they can prove that such loss,
board M/V Piya Bhum. destruction, or deterioration was brought about by, among others, flood,
2. As the cause of the damage to the cargo occurred after the same was already storm, earthquake, lightning, or other natural disaster or calamity; and
discharged from the vessel and was under the custody of the arrastre (3) In all other cases not specified under Article 1734 of the Civil Code,
operator (ICTSI), RCL and EDSA Shipping posit that the presumption of common carriers are presumed to have been at fault or to have acted
negligence provided in Article 1735 of the Civil Code should not apply. negligently, unless they observed extraordinary diligence.
3. What should apply in this case is Article 1734, particularly paragraphs 3
3. A common carrier is presumed to have been negligent if it fails to prove
and 4 thereof, which exempts the carrier from liability for loss or damage to
that it exercised extraordinary vigilance over the goods it transported. When
the cargo when it is caused either by an act or omission of the shipper or by
the goods shipped are either lost or arrived in damaged condition, a
the character of the goods or defects in the packing or in the containers.
presumption arises against the carrier of its failure to observe that diligence,
4. They likewise asserted that no valid subrogation exists, as the payment
and there need not be an express finding of negligence to hold it liable.
made by Netherlands Insurance to the consignee was invalid.
5. They averred that the Netherlands Insurance has no cause of action, and is 4. To overcome the presumption of negligence, the common carrier must
not the real party-in-interest establish by adequate proof that it exercised extraordinary diligence
6. They argued that the claim is barred by laches/prescription. over the goods. It must do more than merely show that some other
party could be responsible for the damage.
TRIAL COURT’s RULING: (in favor of RCL and EDSA)
1. Dismissed the case on demurrer to evidence. 5. RCL and EDSA Shipping failed to prove that they exercised extraordinary
diligence over the goods they transported. While there is sufficient evidence
2. While there was valid subrogation, the defendants could not be held liable
showing that the fluctuation of the temperature in the refrigerated container
for the loss or damage, as their respective liabilities ended at the time of the
van occurred after the cargo had been discharged from the vessel and was
discharge of the cargo from the ship at the Port of Manila.
already under the custody of the arrastre operator, this does not disprove
that the condenser fan which caused the fluctuation of the temperature in the
COURT OF APPEALS’ RULING: (Reversed trial court)
refrigerated container was not damaged while the cargo was being unloaded
1. Ordered RCL and EDSA to reimburse Netherlands in the sum
from the ship. It is settled in maritime law jurisprudence that cargoes while
of P1,036,497.00 with interest.
being unloaded generally remain under the custody of the carrier; RCL
2. Dismissed Netherland Insurance’s complaint against the other defendants
and EDSA Shipping failed to dispute this.
after finding that the claim had already been barred by prescription.
ISSUE: 6. RCL and EDSA Shipping could have offered evidence before the trial court
1. Whether the CA correctly held RCL and EDSA Shipping liable as to show that the damage to the condenser fan did not occur: (1) while the
cargo was in transit; (2) while they were in the act of discharging it from the
common carriers under the theory of presumption of negligence. Yes,
vessel; or (3) while they were delivering it actually or constructively to the
CA was correct. RCL and EDSA were not able to overcome the
consignee. They could have presented proof to show that they exercised
presumption.
extraordinary care and diligence in the handling of the goods, but they opted
RULING: WHEREFORE, we DENY the petition for review on certiorari filed by to file a demurrer to evidence. As the order granting their demurrer was
the Regional Container Lines of Singapore and EDSA Shipping Agency. The reversed on appeal, the CA correctly ruled that they are deemed to
decision of the Court of Appeals dated May 26, 2004 in CA-G.R. CV No. 76690 have waived their right to present evidence, and the presumption of
is AFFIRMED IN TOTO. negligence must stand.
RATIO: 7. Finally, to exculpate itself from liability for the loss/damage to the cargo,
1. The present case is governed by the following provisions of the Civil Code: the common carrier is burdened to prove any of the causes in Article 1734
Articles 1733, 1734, 1735, 1736, 1738 and 1742. of the Civil Code claimed by it by a preponderance of evidence. If the
carrier succeeds, the burden of evidence is shifted to the shipper to prove
2. In Central Shipping v. Insurance Company of North America, the rules for
that the carrier is negligent. RCL and EDSA Shipping, however, failed to
the liability of a common carrier for lost or damaged cargo are as follows:
satisfy this standard of evidence and in fact offered no evidence at all on
(1) Common carriers are bound to observe extraordinary diligence over the this point; a reversal of a dismissal based on a demurrer to evidence bars the
defendant from presenting evidence supporting its allegations.
003 SULPICIO LINES v. CURSO (Fordan) Civil Code. The omission from Art. 2206(3) of the brothers and sisters of the
March 17, 2010 | Bersamin, J. | Moral damages in breach of contract of deceased passenger reveals the legislative intent to exclude them from the
carriage recovery of moral damages for mental anguish by reason of the death of the
deceased. Inclusio unius est exclusio alterius. According to Villanueva v.
PETITIONER: Sulpicio Lines Salvador, the conditions for awarding moral damages are: 1) there must be
RESPONDENTS: Domingo E. Curso, Lucia E. Curso, Melecio E. Curso, an injury, whether physical, mental, or psychological, clearly substantiated
Segundo E. Curso, Virgilio E. Curso, Diosdada E. Curso, and Cecilia E. by the claimant; 2) there must be a culpable act or omission factually
Curso established; 3) the wrongful act or omission of the defendant must be the
proximate cause of the injury sustained by the claimant; and 4) the award of
SUMMARY: On Oct. 23, 1988, Dr. Curso boarded at the port of Manila the damages is predicated on any of the cases stated in Art. 2219 of the Civil
MV Doña Marilyn, an inter-island vessel owned and operated by Sulpicio Code. To be entitled to moral damages, Domingo et. al must have a right
Lines, bound for Tacloban City. Unfortunately, the MV Doña Marilyn sank based upon law. It is true that under Art. 1003 of the Civil Code they
in the afternoon of Oct. 24 while at sea due to the inclement sea and weather succeeded to the entire estate of the late Dr. Curso in the absence of the
conditions brought about by Typhoon Unsang. The body of Dr. Curso was latter’s descendants, ascendants, illegitimate children, and surviving spouse.
not recovered, along with hundreds of other passengers of the ill-fated vessel. However, they were not included among the persons entitled to recover
At the time of his death, Dr. Curso was 48 yrs. old, and employed as a moral damages, as enumerated in Art. 2219 of the Civil Code. *doctrine*
resident physician at the Naval District Hospital in Naval, Biliran. He had a
basic monthly salary of P3,940, and would have retired from government DOCTRINE: In fine, moral damages may be recovered in an action upon
service by Dec. 20, 2004 at the age of 65. Domingo, et. al, allegedly the breach of contract of carriage only when:
surviving brothers and sisters of Dr. Curso, sued Sulpicio Lines in the RTC a. where death of a passenger results, or
in Naval, Biliran to claim damages based on breach of contract of carriage by b. it is proved that the carrier was guilty of fraud and bad faith, even if
sea, averring that the latter had acted negligently in transporting Dr. Curso death does not result.
and the other passengers. Sulpicio Lines, on the other hand, denied liability, Art. 2206 of the Civil Code entitles the descendants, ascendants, illegitimate
insisting that the sinking of the vessel was due to force majeure (i.e., children, and surviving spouse of the deceased passenger to demand moral
Typhoon Unsang), which exempted a common carrier from liability. It damages for mental anguish by reason of the death of the deceased.
averred that the MV Doña Marilyn was seaworthy in all respects, and was in
fact cleared by the Philippine Coast Guard for the voyage; and that after the FACTS:
accident it conducted intensive search and rescue operations and extended 21. On Oct. 23, 1988, Dr. Cenon E. Curso (Dr. Curso) boarded at the
assistance and aid to the victims and their families. RTC dismissed the port of Manila the MV Doña Marilyn, an inter-island vessel owned
complaint upon its finding that the sinking of the vessel was due to force and operated by petitioner Sulpicio Lines, Inc. (Sulpicio Lines),
majeure. On appeal, the CA held that Sulpicio Lines had been negligent in bound for Tacloban City.
transporting Dr. Curso. It granted the following damages to Domingo et. al: 22. Unfortunately, the MV Doña Marilyn sank in the afternoon of Oct.
1) death indemnity of P50,000; 2) loss of earning capacity of P504,241.20; 3) 24 while at sea due to the inclement sea and weather conditions
moral damages of P100,000; and 4) costs of the suit. Hence, the current brought about by Typhoon Unsang.
petition. 23. The body of Dr. Curso was not recovered, along with hundreds of
other passengers of the ill-fated vessel.
The issue is whether or not Domingo, et. al are entitled to an award of moral 24. At the time of his death, Dr. Curso was 48 yrs. old, and employed as
damages against Sulpicio Lines. NO. As a general rule, moral damages are a resident physician at the Naval District Hospital in Naval, Biliran.
not recoverable in actions for damages predicated on a breach of contract, He had a basic monthly salary of P3,940, and would have retired
unless there is fraud or bad faith. As an exception, moral damages may be from government service by Dec. 20, 2004 at the age of 65.
awarded in case of breach of contract of carriage that results in the death of a 25. On Jan. 21, 1993, respondents Domingo, et. al, allegedly the
passenger, in accordance with Art. 1764 in relation to Art. 2206(3) of the surviving brothers and sisters of Dr. Curso, sued Sulpicio Lines in
the RTC in Naval, Biliran to claim damages based on breach of b. In the first place, it finds inadequate explanation why the officers
contract of carriage by sea, averring that the latter had acted of the MV Doña Marilyn had not apprised themselves of the
negligently in transporting Dr. Curso and the other passengers. weather reports on the approach of typhoon “Unsang” which had
26. Domingo, et. al stated that their parents had predeceased Dr. Curso, the power of a signal no. 3 cyclone, bearing upon the general
who died single and without issue; and that, as such, they were Dr. direction of the path of the MV Doña Marilyn. If the officers and
Curso’s surviving heirs and successors in interest entitled to recover crew of the Doña Marilyn had indeed been adequately monitoring
moral and other damages. They prayed for judgment, as follows: the strength and direction of the typhoon, and had acted promptly
a. compensatory damages of P1,924,809; and competently to avoid the same, then such a mishap would not
b. moral damages of P100,000; have occurred.
c. exemplary or corrective damages in the amount deemed proper c. Furthermore, there was no account of the acts and decision of the
and just; crew of the ill-fated ship from 8 PM on Oct. 23, 1988 when the
d. expenses of litigation of at least P50,000; Chief Mate left his post until 4 AM the next day when he resumed
e. attorney’s fees of P50,000; and duty. It does not appear what occurred during that time, or what
f. costs of suit. weather reports were received and acted upon by the ship captain.
27. Sulpicio Lines, on the other hand, denied liability, insisting that the What happened during such time is important in determining what
sinking of the vessel was due to force majeure (i.e., Typhoon information about the typhoon was gathered and how the ship
Unsang), which exempted a common carrier from liability. It averred officers reached their decision to just change course, and not take
that the MV Doña Marilyn was seaworthy in all respects, and was in shelter while a strong typhoon was approaching.
fact cleared by the Philippine Coast Guard for the voyage; and that d. There is doubt as to the fitness of the ship for the voyage, since at
after the accident it conducted intensive search and rescue operations the first sign of bad weather, the ship’s hydraulic system failed
and extended assistance and aid to the victims and their families. and had to be repaired mid-voyage, making the vessel a virtual
28. The RTC dismissed the complaint upon its finding that the sinking of derelict amidst a raging storm at sea. It is part of Sulpicio Lines’
the vessel was due to force majeure. The RTC concluded that: extraordinary diligence as a common carrier to make sure that its
a. the officers of the MV Doña Marilyn had acted with the diligence ships can withstand the forces that bear upon them during a
required of a common carrier; voyage, whether they be the ordinary stress of the sea during a
b. that the sinking of the vessel and the death of its passengers, calm voyage or the rage of a storm. The fact that the stud bolts in
including Dr. Curso, could not have been avoided; the ships hydraulic system gave way while the ship was at sea
c. there was no basis to consider the MV Doña Marilyn not discredits the theory that Sulpicio Lines exercised due diligence in
seaworthy at the time of the voyage; maintaining the seaworthy condition of the MV Doña Marilyn.
d. the findings of the Special Board of Marine Inquiry (SBMI) e. Aside from these, Sulpicio must compensate Doming et. al for
constituted to investigate the disaster absolved Sulpicio Lines, its moral damages that they suffered as a result of the negligence
officers, and crew of any negligence and administrative liability; attending the loss of the MV Doña Marilyn.
and f. Domingo, et. al have established that they took great pains to
e. Domingo, et. al failed to prove their claim for damages. recover, in vain, the body of their brother, at their own cost, while
29. On appeal, the CA held that Sulpicio Lines had been negligent in suffering great grief due to the loss of a loved one. Furthermore,
transporting Dr. Curso who was on board the ill-fated MV Doña they were unable to recover the body of their brother. Thus, the
Marilyn, resulting in his untimely death. It ruled that: following damages:
a. Based on the events described by the witness, it found inadequate 1. Death indemnity of P50,000;
proof to show that Sulpicio Lines, Inc., or its officers and crew, 2. Loss of Earning Capacity of P504,241.20;
had exercised the required degree of diligence to acquit them of 3. Moral Damages of P100,000
liability. 4. Costs of the suit.
30. Hence, the current appeal. Sulpicio Lines insist that:
a. the CA committed grievous errors in holding that Domingo, et. al what is not written therein. Thus, the CA erred in awarding moral
were entitled to moral damages as the brothers and sisters of the damages to Domingo, et. al.
late Dr. Curso; 19. Sulpicio Lines has correctly relied on the holding in Receiver for
b. the CA thereby disregarded Art. 1764 and Art. 2206 of the Civil North Negros Sugar Company, Inc. v. Ybañez to the effect that in
Code and the ruling in Receiver for North Negros Sugar Co., Inc. case of death caused by quasi-delict, the brother of the deceased was
v. Ybañez, whereby the SC disallowed the award of moral not entitled to the award of moral damages based on Art. 2206 of the
damages in favor of the brothers and sisters of a deceased Civil Code.
passenger in an action upon breach of a contract of carriage. 20. Essentially, the purpose of moral damages is indemnity or reparation,
that is, to enable the injured party to obtain the means, diversions, or
ISSUE: Whether or not Domingo, et. al are entitled to an award of amusements that will serve to alleviate the moral suffering he has
moral damages against Sulpicio Lines. – NO, since brothers and sisters of undergone by reason of the tragic event.
the deceased passenger were not included among the persons entitled to 21. According to Villanueva v. Salvador, the conditions for awarding
recover moral damages, as enumerated in Art. 2219 of the Civil Code. moral damages are:
a. there must be an injury, whether physical, mental, or
RULING: The petition for review on certiorari is granted and the award psychological, clearly substantiated by the claimant;
made to the Domingo, et. al in the decision of the CA of moral damages of b. there must be a culpable act or omission factually established;
P100,000 is deleted and set aside. c. the wrongful act or omission of the defendant must be the
proximate cause of the injury sustained by the claimant; and
RATIO: d. the award of damages is predicated on any of the cases stated in
15. As a general rule, moral damages are not recoverable in actions for Art. 22199 of the Civil Code.
damages predicated on a breach of contract, unless there is fraud or 22. To be entitled to moral damages, Domingo et. al must have a right
bad faith. based upon law. It is true that under Art. 100310 of the Civil Code
16. As an exception, moral damages may be awarded in case of breach they succeeded to the entire estate of the late Dr. Curso in the
of contract of carriage that results in the death of a passenger, in absence of the latter’s descendants, ascendants, illegitimate children,
accordance with Art. 17647 in relation to Art. 2206(3)8 of the Civil and surviving spouse. However, they were not included among the
Code.
17. The mentioned legal provisions set forth the persons entitled to
9
moral damages. The omission from Art. 2206(3) of the brothers and Article 2219. Moral damages may be recovered in the following and analogous cases:
sisters of the deceased passenger reveals the legislative intent to 1. A criminal offense resulting in physical injuries;
exclude them from the recovery of moral damages for mental 2. Quasi-delicts causing physical injuries;
3. Seduction, abduction, rape or other lascivious acts;
anguish by reason of the death of the deceased. Inclusio unius est 4. Adultery or concubinage;
exclusio alterius. 5. Illegal or arbitrary detention or arrest;
18. The solemn power and duty of the courts to interpret and apply the 6. Illegal search;
law do not include the power to correct the law by reading into it 7. Libel, slander or any other form of defamation;
8. Malicious prosecution;
9. Acts mentioned in Article 309;
7
Article 1764. Damages in cases comprised in this Section shall be awarded in accordance 10. Acts and actions referred to in articles 21, 26, 27, 28, 29, 30, 32, 34 and 35.
with Title XVIII of this Book, concerning Damages. Article 2206 shall also apply to the death of The parents of the female seduced, abducted, raped or abused referred to in No. 3 of
a passenger caused by the breach of contract by a common carrier. this article, may also recover moral damages.
8
Article 2206. The amount of damages for death caused by a crime or quasi-delict shall be at The spouse, descendants, ascendants and brothers and sisters may bring the action
least three thousand pesos, even though there may have been mitigating circumstances. In mentioned in No. 9 of this article, in the order named.
10
addition: x x x (3) The spouse, legitimate and illegitimate descendants and ascendants of the Article 1003. If there are no descendants, ascendants, illegitimate children, or a surviving
deceased may demand moral damages for mental anguish by reason of the death of the spouse, the collateral relatives shall succeed to the entire estate of the deceased in
deceased. accordance with the following articles. (946a)
persons entitled to recover moral damages, as enumerated in Art.
2219 of the Civil Code.
23. Art. 2219 circumscribes the instances in which moral damages may
be awarded. The provision does not include succession in the
collateral line as a source of the right to recover moral damages. The
usage of the phrase analogous cases in the provision means simply
that the situation must be held similar to those expressly enumerated
in the law in question following the ejusdem generis rule.
24. Hence, Art. 1003 of the Civil Code is not concerned with recovery of
moral damages.
25. In fine, moral damages may be recovered in an action upon breach of
contract of carriage only when:
a. where death of a passenger results, or
b. it is proved that the carrier was guilty of fraud and bad faith,
even if death does not result.
Art. 2206 of the Civil Code entitles the descendants, ascendants,
illegitimate children, and surviving spouse of the deceased passenger
to demand moral damages for mental anguish by reason of the death
of the deceased.
04 AIR FRANCE v. GILLEGO (GALINDEZ) DOCTRINE: Inattention to and lack of care for the interest of its passengers
December 15, 2010 | Villarama, Jr., J. | Moral and Exemplary Damages
who are entitled to its utmost consideration, particularly as to their convenience,
amount to bad faith which entitles the passenger to an award of moral damages.
PETITIONER: Air France
RESPONDENTS: Bonifacio H. Gillego (substituted by his surviving heirs
represented by Dolores P. Gillego)

SUMMARY: Gillego, a Congressman and chairman of the House of


Representatives Committee on Civil, Political and Human Rights, was invited to
participate as one of the keynote speakers at the 89th Inter-Parliamentary FACTS:
Conference Symposium on Parliament Guardian of Human Rights to be held in 1. In April 1993, respondent Bonifacio Gillego (Gillego), then incumbent
Budapest, Hungary and Tokyo, Japan. He travelled to Paris via Air France, and Congressman of the Second District of Sorsogon and Chairman of the
he made arrangements to change his flight to Budapest via the same carrier. House of Representatives Committee on Civil, Political and Human Rights,
was invited to participate as one of the keynote speakers at the 89th Inter-
Unfortunately, Gillego’s only check-in baggage did not arrive in Budapest after Parliamentary Conference Symposium on Parliament Guardian of Human
promises by Air France that they would search for it. Gillego had to make his Rights to be held in Budapest, Hungary and Tokyo, Japan from May 19 to
speech from scratch, and upon arrival in the PH his baggage still couldn’t be 22, 1993. The Philippines is a member of the Inter-Parliamentary Union
located. Hence he filed a case for damages against Air France. The trial court which organized the event.
awarded Gillego P1M in moral and P500k in exemplary damages to which Air 2. On May 16, 1993, Gillego left Manila on board petitioner Air France’s
France appealed. aircraft bound for Paris, France. He arrived in Paris early morning of May
17 (5am).
Issue: WoN Air France is liable for moral and exemplary damages – YES but 3. While waiting at the De Gaulle International Airport for his connecting
should be lowered. Where as in this case the air carrier failed to act timely on flight to Budapest scheduled at 3:15pm on the same day, Gallego learned
the passengers predicament caused by its employees mistake and more than that Air France had another aircraft bound for Budapest with an earlier
ordinary inadvertence or inattention, and the passenger failed to show any act of departure time (10am) than his scheduled flight.
arrogance, discourtesy or rudeness committed by the air carriers employees, the 4. This prompted Gillego to make arrangements to change his booking. He
amounts of P200,000.00, P50,000.00 and P30,000.00 as moral damages, went to Air France’s counter at the airport and was given a corresponding
exemplary damages and attorneys fees would be sufficient and justified. ticket and boarding pass for Flight No. 2024, and also a new baggage claim
stub for his checked-in luggage.
Gillego’s baggage was returned only after the trial (which is why Gillego 5. However, upon arriving in Budapest, Gillego was unable to locate his
luggage at the claiming section. He sought assistance from Air France’s
retracted his claim for actual damages) with no explanation from Air France as
counter at the airport where Air France’s representative verified from their
to why the baggage went missing. Air France even faulted Gillego for not computer that he had a checked-in luggage.
providing his Buddapest contact details (only his PH details). It is difficult to 6. He was then advised to just wait for his luggage at his hotel, and that Air
believe that Gillego, who had just lost his single luggage containing all his France’s representatives would take charge of delivering the same to him
necessities for his stay in a foreign land and his reference materials for a that same day. But said luggage was never delivered by Air France’s
speaking engagement, would not give an information so vital such as his hotel representatives despite follow-up inquiries by Gillego.
7. Upon Gillego’s return o the PH, his lawyer immediately wrote Air France’s
address and contact number to the airline counter where he had promptly and
Station Manager complaining about the lost luggage and the resulting
frantically filed his complaint.
damages he suffered while in Budapest.
8. Gillego claimed that his single luggage contained his personal effects like
Assuming arguendo that only his Philippine contact details were provided, still clothes, toiletries, medicines for his hypertension, and the speeches he had
there was no explanation why Air France never communicated with Gillego prepared, including the notes and reference materials he needed for the
concerning his lost baggage when he came back to the PH. The baggage was conference.
only returned after the trial of the case. 9. Hence, he was left with only his travel documents, pocket moneys and the
clothes he was wearing. Because Air France’s representatives in Budapest
failed to deliver his luggage despite their assurances and repeated follow dispatch.
ups, he was forced to shop for personal items including clothes and 20. Air France further asserted that it exercised due diligence in the selection
medicines. and supervision of its employees and acted in good faith in denying
10. Aside from these unnecessary expenses of around $1,000, Gillego had to respondents demand for damages. The claims for actual, moral and
prepare another speech, in which he had difficulty due to lack of data and exemplary damages and attorneys fees therefore have no basis in fact and in
information. law, and are, moreover speculative and unconscionable.
11. Gillego thus demanded the sum of P1,000,000.00 from the Air France as 21. Trial court’s decision: In favor of Gillego as follows:
compensation for his loss, inconvenience and moral damages. Air France a. Moral damages: 1M
however, continued to ignore Gillego’s repeated follow-ups regarding his b. Exemplary damages: 500,000
luggage. c. Attorney’s fees: 50,000
12. On July 1993, Gillego filed a complaint for damages against Air France d. Costs
alleging that due to Air France’s negligence and breach of obligation to 22. It found that there was gross negligence on Air France’s part which failed to
transport and deliver his luggage, Gillego suffered inconvenience, serious retrieve Gillego’s luggage up to the time of the filing of the complaint and
anxiety, physical suffering and sleepless nights. It was further alleged that in its answer, ignored Gallego’s repeated follow ups.
due to the physical, mental and emotional strain resulting from the loss of 23. It likewise found Air France guilty of willful misconduct as it persistently
his luggage, aggravated by the fact that he failed to take his regular disregarded the rights of Gillego who was no ordinary individual but a
medication, Gillego had to be taken to a medical clinic in Tokyo, Japan for high government official.
emergency treatment. 24. As to the Warsaw Convention: Trial court cited Alitalia v. IAC and rejected
13. Gillego alleged: that Air France as a common carrier was under obligation Air France’s argument.
to observe extraordinary diligence in the vigilance over checked-in luggage 25. CA’s decision: Affirmed TC’s decision. The CA noted that in Air France’s
and to see to it that his luggage entrusted to Air France’s custody would memorandum before the trial court it was mentioned that Gillego’s luggage
accompany him on his flight and/or could be claimed by him upon arrival at was eventually found and delivered, which was not denied by Gillego and
his point of destination or delivered to him without delay. resulted in the withdrawal of the claim for actual damages.
14. Air France should be held liable for actual damages ($2,000.00 or 26. The CA sustained the award of moral and exemplary damages, because Air
P40,000.00), moral damages (P1,000,000.00), exemplary damages France failed to satisfactorily explain the unreasonable delay in the delivery
(P500,000.00), attorneys fees (P50,000.00) and costs of suit. of Gillego’s luggage. Instead of justifying the delay, Air France took refuge
15. Air France’s defense: Admitted that Gillego was issued tickets for the under the provisions of the Warsaw Convention to escape liability.
flights mentioned, his subsequent request to be transferred to another flight 27. Furthermore, the unapologetic Air France even faulted Gillego for not
while at the Paris airport and the loss of his checked-in luggage upon arrival leaving a local address in Budapest in order for Air France to contact him in
at Budapest, which luggage has not been retrieved to date and the Gillego’s the event the luggage is found. This actuation of Air France is a clear
repeated follow-ups ignored. However, Air France said it has no knowledge showing of willful misconduct and a deliberate design to avoid liability. It
and information sufficient to form a belief as to their truth. amounts to bad faith.
16. As special and affirmative defense, Air France contended that its liability a. Bad faith does not simply connote bad judgment or negligence; it
for lost checked-in baggage is governed by the Warsaw Convention for the imports a dishonest purpose or some moral obliquity and conscious
Unification of Certain Rules Relating to International Carriage. doing of a wrong, a breach of a known duty through some motive
17. Under the said treaty, Air France’s liability for lost or delayed registered or interest or ill will that partakes of the nature of fraud.
baggage of respondent is limited to 250 francs per kilogram or US$20.00, 28. Air France’s MR was likewise denied hence it filed the present Rule 45
which constitutes liquidated damages and hence Gillego is not entitled to petition.
any further damage. 29. Air France assails both lower courts for awarding extravagant sums to
18. Air France averred that it has taken all necessary measures to avoid loss of Gillego which is tantamount to Gillego’s enrichment, not the function of
Gillego’s baggage, the contents of which he did not declare, and that it has moral damages.
no intent to cause such loss, much less knew that such loss could occur. 30. Air France points out that despite the incident, Gillego was able to
19. The loss of Gillego’s luggage is due to or occasioned by force majeure or reconstruct his speeches, notes and study guides for the conferences, and
fortuitous event or other causes beyond the carriers control. Diligent sincere attend, speak and participate as scheduled.
and timely efforts were exerted by Air France to locate Gillego’s missing 31. Air France believes that because of Gillego’s expertise in human rights, he
luggage and attended to his problem with utmost courtesy, concern and should have had no difficulty in delivering his speech even without his
notes. In addition, there is no evidence that members of the Inter- and justified.
Parliamentary Union made derogatory statements or even knew that he was
unprepared for the conference. RULING: WHEREFORE, the petition is DENIED. The Decision dated June 30,
32. Moreover, since the actual damages sought by Gillego was only $2,000, 2004 of the Court of Appeals in CA-G.R. CV No. 56587 is hereby AFFIRMED with
then the trial court clearly went way beyond that amount in determining the MODIFICATION in that the award of moral damages, exemplary damages and
appropriate damages, in spite of Gillego eventually getting back his
attorneys fees are hereby reduced to P200,000.00, P50,000.00 and P30,000.00,
luggage.
33. Comparing it to other similar cases of breach of contract by international respectively.
carriers, Air France argues that assuming Gillego was entitled to the
damages, the sums should be modified or reduced. It stressed that Air RATIO:
France nor its agents were rude or discourteous toward Gillego, he was not 2. Art. 1735 of the Civil Code provides that in case of lost or damaged goods,
subjected to humiliating treatment/comments like in Lopez v. American common carriers are presumed to have been at fault or to have acted
World Airways etc. negligently, unless they prove that they observed extraordinary diligence as
34. The mere fact that Gillego was a Congressman should not result in an required by Article 1733. Thus, in an action based on a breach of contract of
automatic increase in moral and exemplary damages recoverable. carriage, the aggrieved party does not have to prove that the common carrier
35. Kierulf v. CA: The social and financial standing of a claimant may be was at fault or was negligent. All that he has to prove is the existence of the
considered only if he or she was subjected to contemptuous conduct contract and the fact of its non-performance by the carrier.
despite the offenders knowledge of his or her social and financial 3. That Gillego’s luggage was not found upon arrival at his destination and
standing. was not returned to him until about two years later is not disputed. The
36. Air France raises a factual issue (invokes an exception to Rule 45) stating action of Gillego is founded on such breach of contract with Air France who
that the trial court incorrectly concluded that Air France didn’t prepare a offered no satisfactory explanation for the delay in the delivery of Gillego’s
Property Irregularity Report (PIR) but only fabricated one as an baggage.
afterthought. However, a PIR can only be initiated upon the instance of a 4. The presumption of negligence was not overcome by Air France and hence
passenger whose baggage had been lost, and in this case it was prepared by its liability for the delay was established. However, upon receipt of the
the station where the loss was reported. The PIR in this case was luggage, Gillego no longer press on his claim for actual or compensatory
automatically and chronologically recorded in Air France’s computerized damages and neither did he adduce evidence of the actual amount of loss
system. and damage incurred by such delayed delivery of his luggage.
37. Such fact was admitted by Gillego himself and in his testimony he stated Consequently, the trial court proceeded to determine only the propriety of
that he gave his Philippine contact details to the lady in charge of Air his claim for moral and exemplary damages, and attorneys fees.
France’s complaint desk in Budapest. It was unnecessary to furnish Gillego 5. In awarding moral damages for breach of contract of carriage, the
with a copy since its purpose is for the airline to trace a lost baggage. What breach must be wanton and deliberately injurious or the one responsible
Gillego should have done was to make a copy for himself. acted fraudulently or with malice or bad faith. Not every case of mental
38. But Air France’s main argument: There was no bad faith/negligence on its anguish, fright or serious anxiety calls for the award of moral damages.
part. Gillego failed to prove that bad faith, fraud or ill will motivated or Where in breaching the contract of carriage the airline is not shown to have
caused the delay of his baggage. Mere failure of a carrier to deliver a acted fraudulently or in bad faith, liability for damages is limited to the
passengers baggage at the agreed place and time did not ipso facto amount natural and probable consequences of the breach of the obligation which the
to willful misconduct as to make it liable for moral and exemplary damages. parties had foreseen or could have reasonably foreseen. In such a case the
liability does not include moral and exemplary damages.
ISSUE/s: 6. Bad faith should be established by clear and convincing evidence. The
1. WoN Air France is liable for moral and exemplary damages – YES but settled rule is that the law always presumes good faith such that any person
should be lowered. Where as in this case the air carrier failed to act timely who seeks to be awarded damages due to the acts of another has the burden
on the passengers predicament caused by its employees mistake and more of proving that the latter acted in bad faith or with ill motive.
than ordinary inadvertence or inattention, and the passenger failed to show 7. Tan v. Northwest Airlines: The Court sustained the CAs deletion of moral
any act of arrogance, discourtesy or rudeness committed by the air carriers and exemplary damages awarded to a passenger whose baggage were
employees, the amounts of P200,000.00, P50,000.00 and P30,000.00 as loaded to another plane with the same expected date and time of arrival but
moral damages, exemplary damages and attorneys fees would be sufficient nevertheless not delivered to her on time. The Court found that the carrier
was not motivated by malice/bad faith in doing so due to weight and
balance restrictions. transported and delivered to him at his travel destination and scheduled
8. In another case involving the off-loading of private respondents baggage to time.
another destination, taken together with airline’s neglect in providing the 16. Inattention to and lack of care for the interest of its passengers who are
necessary accommodations and assistance to its stranded passengers, entitled to its utmost consideration, particularly as to their convenience,
aggravated by the discourteous acts of its employees, the Court upheld the amount to bad faith which entitles the passenger to an award of moral
CA in sustaining the trial courts decision awarding moral and exemplary damages.
damages and attorneys fees. The Court pointed out that it is PALs duty to 17. While Gillego failed to cite any act of discourtesy, discrimination or
provide assistance to private respondents and to any other passenger rudeness by Air France’s employees, this did not make his loss and moral
similarly inconvenienced due to delay in the completion of the transport and suffering insignificant and less deserving of compensation. In repeatedly
the receipt of their baggage. ignoring Gillego’s inquiries, Air France’s employees exhibited an
indifferent attitude without due regard for the inconvenience and anxiety he
Air France is liable for moral and exemplary damages experienced after realizing that his luggage was missing. Air France was
9. Air France’s station manager, Reyes, testified that upon receiving the letter- thus guilty of bad faith in breaching its contract of carriage with the
complaint of Gillego’s counsel, she worked on the PIR from their respondent, which entitles the latter to the award of moral damages.
computerized data. Based on her testimony, a PIR is issued at the airline 18. But the Court believes the amount awarded should be lowered.
station upon complaint by a passenger concerning missing baggage. 19. Trans World v. CA: The Court considered the social standing of a passenger
10. A search telex for the missing luggage was sent out on the following dates: who is a lawyer and director of several companies, the amount of P500k
May 17, May 21 and May 23, 1993. As shown in the PIR printout, the was reduced to P300k.
information Gillego supposedly furnished to Air France was only his 20. The aim of awarding exemplary damages is to deter serious wrongdoings.
Philippine address and telephone number, and not the address and contact 21. Art. 2216 of the Civil Code provides that assessment of damages is left to
number of the hotel where he was billeted at Budapest. the discretion of the court according to the circumstances of each case. This
11. According to the witness, PIR usually is printed in two originals, one is kept discretion is limited by the principle that the amount awarded should not be
by the station manager and the other copy given to the passenger. The palpably excessive as to indicate that it was the result of prejudice or
witness further claimed that there was no record or entry in the PIR of any corruption on the part of the trial court. Simply put, the amount of damages
follow-up call made by the Gillego while in Budapest. Gillego, on the other must be fair, reasonable and proportionate to the injury suffered.
hand, claimed that he was not given a copy of this PIR and that his repeated 22. Where as in this case the air carrier failed to act timely on the passengers
telephone calls to inquire about his lost luggage were ignored. predicament caused by its employees mistake and more than ordinary
12. The alleged entries in the PIR deserve scant consideration, as these have not inadvertence or inattention, and the passenger failed to show any act of
been properly identified or authenticated by the airline station representative arrogance, discourtesy or rudeness committed by the air carriers employees,
in Budapest who initiated and inputed the said entries. Furthermore, this the amounts of P200,000.00, P50,000.00 and P30,000.00 as moral damages,
Court cannot accept the convenient excuse given by Air France that Gillego exemplary damages and attorneys fees would be sufficient and justified.
should be faulted in allegedly not giving his hotel address and telephone
number.
13. It is difficult to believe that Gillego, who had just lost his single luggage
containing all his necessities for his stay in a foreign land and his reference
materials for a speaking engagement, would not give an information so vital
such as his hotel address and contact number to the airline counter where he
had promptly and frantically filed his complaint.
14. Assuming arguendo that only his Philippine contact details were provided,
still there was no explanation why Air France never communicated with
Gillego concerning his lost baggage when he came back to the PH. The
baggage was only returned after the trial of the case.
15. The PIR confirmed that the only action taken by Air France to locate
Gillego’s luggage were telex searches made on May 17, 21 and 23. No
attempt to explain the reason for the loss was given. Clearly, Air France did
not give attention and care due to its passenger whose baggage was not
005 NORTHWEST AIRLINES v. CATAPANG FLIGHTS WITHIN THE UNITED STATES.
(Balisong edited by Gonzales) 3. FUT informed him that Northwest Airlines was willing to
30 July 2009 | Carpio-Morales, J. | Damages; Breach of contract of carriage accommodate his request provided he would pay an additional $50
for every rebooking. He agreed. He was thereafter issued a ticket
PETITIONER: Northwest Airlines covering the New York to Los Angeles via Detroit and the Los
RESPONDENT: Atty. Delfin S. Catapang Angeles to Manila segment of his travel. His itinerary was: Manila -
> Paris -> New York -> Detroit -> Los Angeles -> Manila.
SUMMARY: Atty. Catapang was a lawyer, and the Assistant Vice President 4. Under the restrictions portion of the ticket the following were
and Head of Special Projects Department, Corporate Services Division of indicated: (a) Non-endorsable; (b) $50
UCPB. He was to go on a business trip, visiting his family along the way. rebooking/rerouting/cancellation fee
His itinerary was: Manila -> Paris -> New York -> Detroit -> Los Angeles -> 5. Upon his arrival in New York, he was told by phone that the ticket
Manila. Upon his arrival in New York, he was told by phone that the ticket was not rebookable or reroutable. He was advised to go to
was not rebookable or reroutable. In the branch office, Atty. Catapang was Northwest’s branch office.
rudely and impolitely spoken to by Northwest’s representative, saying that 6. He thus proceeded to Northwest’s ticket office at the World Trade
HE DID NOT UNDERSTAND ENGLISH, that his ticket was of a restricted Center where he was treated in a rude manner by an employee who
type, and that he needed to pay $644 to rebook. All these the representative informed him that his ticket was not rebookable or reroutable since it
did in front of Atty. Catapang’s brother-in-law and other customers. Since he was of a "restricted type", and that unless he upgraded it by paying
was pressed for time, he paid under protest. He demanded damages from US$644.00, he could not rebook. Left with no choice, he paid that
Northwest. Northwest raises as defense the fact that Atty. Catapang’s ticket amount for rebooking.
was merely a discounted one. Northwest explained that the $50 rebooking 7. Upon his arrival in Manila, Atty. Catapang wrote a letter to
charge was subject to “rules of applicability,” which rules could not be Northwest.
reflected on the ticket. The RTC and CA found for Atty. Catapang. The issue a. Your representative rudely told me that my ticket is the
here is whether Northwest is guilty of breach of contract of carriage. The restrictive type and that my flight can not be rebooked or
Court held in the affirmative. He was not told by FUT and the ticket did not rerouted. Your representative rudely and impolitely
reflect it that the ticket being issued to him was a "restricted type" to call for retorted that I could not understand English and that unless
its upgrading before a rebooking/rerouting. Northwest’s breach in this case I pay the amount of US$644.00, I cannot get a rebooking
was aggravated by the undenied treatment received by Atty. Catapang when and rerouting.
he tried to rebook his ticket. b. Considering that my ticket was cleared with you prior to its
issuance and that FUT is your duly accredited agent, you are
DOCTRINE: Passengers have the right to be treated by a carrier's bound by the terms of the ticket issued by FUT in your
employees with kindness, respect, courtesy and due consideration. Any behalf. You have no right to unilaterally change the tenor of
discourteous conduct on the part of these employees toward a passenger your contract during its effectivity without my consent.
gives the latter an action for damages against the carrier. c. Your airline's willful breach of the terms and conditions of
my ticket and the shabby treatment that I received from your
FACTS: personnel hurt my feeling, humiliated and embarrassed me
1. Atty. Catapang was a lawyer, and the Assistant Vice President and in the presence of my brother-in-law and other people
Head of Special Projects Department, Corporate Services Division of nearby who witnessed the incident. The fact that your
UCPB. employee did that to a bank officer and a lawyer like me
2. He was asked to go on a business trip to Paris. After his trip to Paris only shows that your airline can also do the same to others,
he was to go to the US. He wanted to also visit his siblings while he not to mention the poor and hapless persons.
was in the US. He asked First United Travel (FUT) to issue him a d. To compensate me for the expenses that I incurred, and the
ticket that would ALLOW REBOOKING OR REROUTING OF wounded feeling, humiliation and embarrassment that were
caused by your airline's willful breach of contract with me, I rebooked, Northwest’s agent in New York exhibited rudeness in the
demand that you pay me damages in the amount of presence of Atty. Catapang’s brother-in-law and other customers,
P1,000,000.00 within a period of five (5) days from your insulting respondent by telling him that he could not understand
receipt hereof. English.
8. Since Catapang’s demand remained unanswered, he filed a 4. Passengers have the right to be treated by a carrier's employees with
complaint for damages against Northwest. kindness, respect, courtesy and due consideration. They are entitled
9. RTC ruled in favor of Catapang, ordering Northwest to pay the ff: to be protected against personal misconduct, injurious language,
a. US$823.00 or its Peso equivalent at the time of the payment indignities and abuses from such employees. So it is that any
with legal interest and Php7,372.50 for filing fees as actual discourteous conduct on the part of these employees toward a
damages; passenger gives the latter an action for damages against the
b. P800,000.00 as moral damages; carrier.
c. P100,000.00 as exemplary damages; 5. The award of moral and exemplary damages to Catapang is thus
d. P200,000.00 as and for attorney's fees; and justified.
e. Cost of suit. 6. Inclusion of filing fees is superfluous, it being part of the cost of suit.
10. CA affirmed RTC’s decision, except for the reduction of the award The award for attorney’s fees is deleted since the trial court did not
of moral damages from P800,000.00 to P400,000.00. state the factual and legal basis thereof. The transcript of
11. Hence, the present petition. stenographic notes of the lower court's proceedings do not show that
12. Northwest assails the award of damages to Catapang. It raises as Catapang adduced proof to sustain his general averment of a retainer
defense the fact that Atty. Catapang’s ticket was merely a discounted agreement in the amount of P200,000.00. The award must thus be
one. Northwest explained that the $50 rebooking charge was subject deleted.
to “rules of applicability,” which rules could not be reflected on the
ticket.

ISSUE:
1. Whether Northwest is guilty of breach of contract of carriage. YES
— The only restriction on the ticket pertained to the non-
endorsement and the $50 fee. Further, he was treated rudely.

RULING: WHEREFORE, the Court of Appeals Decision of June 30, 2006


is AFFIRMED with MODIFICATION in that the award of attorney's fees is
deleted for lack of basis. And the award of actual damages of P7,372.50
representing filing fees is deleted

RATIO:
1. He was not told by FUT and the ticket did not reflect it that the ticket
being issued to him was a "restricted type" to call for its upgrading
before a rebooking/rerouting.
2. Northwest’s reservation supervisor in fact admitted that the only
restriction on Catapang’s ticket pertains only to non-endorsement.
3. Northwest’s breach in this case was aggravated by the undenied
treatment received by Atty. Catapang when he tried to rebook his
ticket. Instead of civilly informing him that his ticket could not be
06 MAERSK LINE v. CA (GALINDEZ edited by GUECO) against the party who drafted the contract. The provision in the case at
May 17, 1993 | Bidin, J. | Bill of Lading, Contracts of Adhesion bar creates an absurd situation because it practically leaves the date of
arrival of the subject shipment on the sole determination and will of the
PETITIONER: Maersk Line carrier. While it is true that common carriers are not obligated by law to
RESPONDENTS: CA and Efren Castillo, doing business under the carry and to deliver merchandise, and persons are not vested with the
name and style of Ethegal Laboratories right to prompt delivery, unless such common carriers previously assume
the obligation to deliver at a given date or time, delivery of shipment or
SUMMARY: Maersk is engaged in the transportation of goods by sea. cargo should at least be made within a reasonable time. In this case, the
Efren is the proprietor of Ethegal Laboratories. Efren ordered from Eli delay in the delivery of the goods spanning a period of two months and
Lilly of Puerto Rico gelatin capsules for the manufacture of his seven days is unreasonable.
pharmaceutical products.
DOCTRINE: When a common carrier undertakes to convey goods, the
Through a Memorandum of Shipment (MOS), Eli Lilly advised Efren law implies a contract that they shall be delivered at destination within a
that the gelatin capsules were already shipped on board MV Anders reasonable time, in the absence, of any agreement as to the time of
Maerskline. The specified date of arrival in the MOS was April 3, 1977, delivery. But where a carrier has made an express contract to transport
and the shipment was to the Philippines via Oakland, California. and deliver properly within a specified time, it is bound to fulfill its
contract and is liable for any delay, no matter from what cause it may
For some unknown reason, the capsules were misipped and diverted to have arisen.
Richmond, Virginia and then transported back to Oakland. The goods
arrived only on June 10, 1977, 2 months from the date specified in the FACTS:
MOS. Efren alleged that there was gross negligence and undue delay in 1. Maersk Line (Maersk) is engaged in the transportation of goods by
the delivery of goods, and filed an action for damages against Maersk sea, doing business in the Philippines through its general agent
and Eli Lilly. Eli Lilly likewise filed a cross-claim against Maersk. The Compania General de Tabacos de Filipinas.
case against Eli Lilly was dismissed on its motion and it withdrew its 2. Private respondent Efren Castillo (Efren), is the proprietor of Ethegal
cross-claim against Maersk. Maersk argues that it cannot be held liable Laboratories, a firm engaged in the manufacture of pharmaceutical
for damages since it acted in good faith and because there was no special products.
contract under which it undertook to deliver the shipment on or before a 3. On November 12, 1976, Efren ordered from Eli Lilly of Puerto Rico
specific date. through its agent in the Philippines, Elanco Products, 600,000 empty
gelatin capsules for the manufacture of his pharmaceutical products.
ISSUE: WoN Maersk can be held liable despite the absence of a These were placed in six drums of 100,000 capsules each, valued at
stipulation in the bill of lading as to the period of delivery – YES $1,668.71.
4. Through a Memorandum of Shipment, the shipper Eli Lilly of Puerto
RULING: There was a provision in the bill of lading which states “The Rico advised Efren as consignee that the empty gelatin capsules were
Carrier does not undertake that the goods shall arrive at the port of already shipped on board MV “Anders Maerskline” for shipment to
discharge or the place of delivery at any particular time or to meet any the Philippines via Oakland, California. The specified date of arrival
particular market…” (See Ratio 9 for full provision). in the Memorandum was April 3, 1977.
5. For reasons unknown, the cargo of capsules were mishipped and
Said provision in the bill of lading is indisputably a contract of adhesion. diverted to Richmond, Virginia and then transported back to
As a rule, contracts of adhesion are valid since one who adheres to it is Oakland, California.
said to have given his consent to the contract. However, where the 6. The goods finally arrived in the Philippines on June 10, 1977, two
contract is ambiguous or creates an absurd situation, it shall be construed months from the date specified in the Memorandum.
7. Because of this, Efren as consignee refused to take delivery of the 2. Maersk submits that its liability is predicated on the cross-claim filed
goods on account of its failure to arrive on time. by its co-defendant Eli Lilly, which cross-claim has been dismissed.
8. EFREN’S ALLEGATION: There was gross negligence and undue The original complaint against it should likewise be dismissed.
delay in the delivery of the goods. He filed an action before the court 3. The Court disagrees. The complaint was filed originally against Eli
for rescission of contract with damages against Maersk and Eli Lilly Lilly as shipper-supplier and Maersk as carrier. Maersk being an
as defendants. original party defendant upon whom the delayed shipment is imputed
9. MAERSK’S DEFENSE: Maersk denied that it committed breach of cannot claim that the dismissal of the complaint against Eli Lilly
contract. It alleged in its answer that the subject shipment was inured to its benefit.
transported in accordance with the provisions of the covering bill of 4. The CA erred in declaring that the trial court based Maersk’s liability
lading, and that its liability under the law on transportation of goods on the cross-claim of Eli Lilly.
attaches only in case of loss, destruction or deterioration of the goods 5. The trial court anchored its decision on Maersk’s delay or negligence
under Art. 1734 of the Civil Code. to deliver the drums of gelatin capsules within a reasonable time on
10. ELLY LILY’S DEFENSE: It filed its answer alleging that the the basis of which Maersk was held liable under Art 1170 which
delay in the arrival of the subject merchandise was due solely on the provides:
gross negligence of Maersk. a. Those who in the performance of their obligations are guilty of fraud,
11. The trial court dismissed the complaint against Eli Lilly on its negligence, or delay and those who in any manner contravene the tenor
thereof, are liable for damages.
motion, and it withdrew its cross-claim against Maersk.
6. MAERSK’S DEFENSE: It maintains that it cannot be held for
12. The trial court rendered judgment in favor of Efren:
damages for damages for the alleged delay in the delivery in the
a. In view of the foregoing, the Court believes and olds that
capsules since it acted in good faith and there was no special contract
there was a breach in the performance of their obligation by
under which it undertook to deliver the shipment on or before a
the defendant Maersk Line consisting of their negligence to
specific date.
ship the 6 drums of empty Gelatin Capsules which under
7. EFREN’S CLAIM: Efren claims that during the period before the
their own memorandum shipment would arrive in the
specified date of arrival of the goods, he had made several
Philippines on April 3, 1977 which under Art. 1170 of the
commitments and contract of adhesion. Therefore, Maersk can be
New Civil Code, they stood liable for damages.
held liable for the damages suffered by Efren for the cancellation of
b. It awarded damages to Efren
the contracts he entered into.
13. On appeal, the CA affirmed the trial court’s decision with
8. Both of the decisions of the CA and trial court show that, in finding
modifications on the award for damages.
Maersk liable for damages for the delay in the delivery of goods,
reliance was made on the rule that contracts of adhesion are void.
ISSUE/s:
9. The bill of lading covering the shipment reads:
1. WoN Maersk can be held liable despite the absence of a stipulation a. The Carrier does not undertake that the goods shall arrive at the port of
in the bill of lading as to the period of delivery—YES. Generally discharge or the place of delivery at any particular time or to meet any
contracts of adhesion are valid. However, since the questioned particular market or use and save as is provided in clause 4 the Carrier
provision in the bill of lading has the effect of practically leaving the shall in no circumstances be liable for any direct, indirect or consequential
loss or damage caused by delay. If the Carrier should nevertheless be held
date of arrival of the subject shipment on the sole determination and legally liable for any such direct or indirect or consequential loss or
will of the carrier, it is void, thus making Maersk liable. damage caused by delay, such liability shall in no event exceed the freight
paid for the transport covered by this Bill of Lading.
RULING: WHEREFORE, with the modification regarding the deletion of 10. It is undisputed that such provision at the back of the bill of lading is
item 4 of respondent court`s decision, the appealed decision is is hereby a contract of adhesion. Generally, contracts of adhesion are
AFFIRMED in all respects. considered void since almost all the provisions of these types of
contracts are prepared and drafted only by one party, usually the
RATIO: carrier. The only participation left of the other party in such a
contract is the affixing of his signature thereto, hence the term estimated to arrive in Manila on April 3, 1977.
"Adhesion" 18. While there was no special contract entered into by the parties
11. However, settled is the rule that bills of lading are contracts not indicating the date of arrival of the subject shipment, Maersk
entirely prohibited. nevertheless, was very well aware of the specific date when the
12. One who adheres to the contract is in reality free to reject it in its goods were expected to arrive as indicated in the bill of lading itself.
entirety; if he adheres, he gives his consent. 19. In this regard, there arises no need to execute another contract for the
13. In the case of Magellan, the Court ruled: purpose as it would be a mere superfluity.
a. It is a long standing jurisprudential rule that a bill of lading operates both 20. A delay in the delivery of the goods spanning a period of two (2)
as a receipt and as contract to transport and deliver the same a therein months and seven (7) days falls was beyond the realm of
stipulated. As a contract, it names the parties, which includes the
consignee, fixes the route, destination, and freight rates or charges, and reasonableness.
stipulates the rights and obligations assumed by the parties. Being a 21. The shipment was delivered to, and left in, the possession and
contract, it is the law between the parties who are bound by its terms and custody of Maersk for transport to Manila via Oakland, California.
conditions provided that these are not contrary to law, morals, good But through petitioner's negligence was mishipped to Richmond,
customs, public order and public policy. A bill of lading usually becomes
effective upon its delivery to and acceptance by the shipper. It is presumed
Virginia. Maersk’s insistence that it cannot be held liable for the
that the stipulations of the bill were, in the absence of fraud, concealment delay finds no merit.
or improper conduct, known to the shipper, and he is generally bound by 22. MAERSK’S CONTENTION: It maintains that the award of actual,
his acceptance whether he reads the bill or not. moral and exemplary dames and attorney's fees are not valid since
14. The ruling applies only if such contracts will not create an absurd there are no factual findings or legal bases stated in the text of the
situation as in the case at bar. The questioned provision in the subject trial court's decision to support the award thereof.
bill of lading has the effect of practically leaving the date of arrival 23. It is settled that actual and compensatory damages requires
of the subject shipment on the sole determination and will of the substantial proof. In this case, Efren was able to sufficiently prove
carrier. through an invoice, certification from the issuer of the letter of credit
15. While it is true that common carriers are not obligated by law to and Memorandum the amount he paid as costs of the credit line for
carry and to deliver merchandise, and persons are not vested with the the goods.
right to prompt delivery, unless such common carriers previously 24. As to the propriety of the award of moral damages, Article 2220 of
assume the obligation to deliver at a given date or time, delivery of the Civil Code provides that moral damages may be awarded in
shipment or cargo should at least be made within a reasonable time. "breaches of contract where the defendant acted fraudulently or in
16. Saludo Jr. v. CA: bad faith"
a. The oft-repeated rule regarding a carrier's liability for delay is that in the 25. Only the testimony of Mr. Ramirez was presented by Maersk.
absence of a special contract, a carrier is not an insurer against delay in
transportation of goods. When a common carrier undertakes to convey Maersk did not even bother to explain the cause for the delay in the
goods, the law implies a contract that they shall be delivered at destination delivery of the shipment.
within a reasonable time, in the absence, of any agreement as to the time 26. Under the circumstances, the Court holds that Maersk is liable for
of delivery. But where a carrier has made an express contract to transport breach of contract of carriage through gross negligence amounting to
and deliver properly within a specified time, it is bound to fulfill its
contract and is liable for any delay, no matter from what cause it may have
bad faith. Thus, the award of moral damages if therefore proper in
arisen. This result logically follows from the well-settled rule that where this case.
the law creates a duty or charge, and the default in himself, and has no 27. Gross carelessness or negligence constitutes wanton misconduct,
remedy over, then his own contract creates a duty or charge upon himself, hence, exemplary damages may be awarded to the aggrieved party.
he is bound to make it good notwithstanding any accident or delay by
inevitable necessity because he might have provided against it by contract.
Whether or not there has been such an undertaking on the part of the
carrier is to be determined from the circumstances surrounding the case
and by application of the ordinary rules for the interpretation of contracts.
17. An examination of the bill of lading shows that the shipment was
007 Lorenzo Shipping Corp v BJ Marthel International date of delivery was indicated therein. If time was really of the essence as
November 19, 2004 | Chico-Nazario, J. | Delivery within reasonable time claimed by Lorenzo Shipping, they should have stated the same in the said
purchase orders, and not merely relied on the quotation issued BJ Marthel
PETITIONER: Lorenzo Shippinh Corp considering the lapse of time between the quotation issued by BJ Marthel and the
RESPONDENTS: BJ Marthel International Inc. purchase orders of Lorenzo Shipping. In the instant case, Lorenzo Shipping
SUMMARY: BJ Marthel had been supplying Lorenzo Shipping with spare parts should have provided for an allowance of time and made the purchase order
for Lorenzo Shipping’s marine engines. Sometime in 1989, Lorenzo Shipping earlier if indeed the said cylinder liner was necessary for the repair of the vessel
asked BJ Marthel for a quotation for various machine parts. Acceding to this scheduled on the first week of January, 1990. In fact, Lorenzo Shipping should
request, BJ Marthel furnished Lorenzo Shipping with a formal quotation. have cancelled the first purchase order when the cylinder liner was not delivered
Thereafter, Lorenzo Shipping issued the 1st Purchase Order (PO) for the 1st set of on the date it now says was necessary. Instead it issued another purchase order
cylinders. Subsequently, Lorenzo Shipping issued another PO, for yet another for the second set of cylinder liner. This fact negates Lorenzo Shipping’s claim
unit of cylinder liner. Like the first purchase order, the second purchase order did that time was indeed of the essence in the consummation of the contract of sale
not state the date of the cylinder liners delivery. BJ Marthel deposited Lorenzo between the parties.
Shipping’s check that was postdated however, the same was dishonored by the DOCTRINE:
drawee bank due to insufficiency of funds. The remaining 9 postdated checks When the time of delivery is not fixed or is stated in general and indefinite
were eventually returned by BJ Marthel to Lorenzo Shippinng. BJ Marthel terms, time is not of the essence of the contract. In such cases, the delivery must
thereafter placed the order for the two cylinder liners with its principal in Japan, be made within a reasonable time. The law implies, however, that if no time is
Daiei Sangyo Co. Ltd., by opening a letter of credit under its own name with the fixed, delivery shall be made within a reasonable time, in the absence of
First Interstate Bank of Tokyo. The cylinders were then delivered to Lorenzo anything to show that an immediate delivery intended
Shipping’s warehouse. Instead of heeding the demand of BJ Marthel for the full
payment of the value of the cylinder liners, Lorenzo Shipping sent BJ Marthel a
FACTS:
letter offering to pay only P150,000 for the cylinder liners. In said letter,
Parties- Lorenzo Shipping- Domestic Corporation engaged in coastwise shipping;
Lorenzo Shipping claimed that as the cylinder liners were delivered late and due
Owner of M/V Dadiangas Express; Buyer
to the scrapping of the M/V Dadiangas Express, it would have to sell the
BJ Marthel International- Importer & Distributor of Different Brands; Seller
cylinder liners in Singapore and pay the balance from the proceeds of said sale.
1. Lorenzo Shipping Corporation is a domestic corporation engaged in
Shortly thereafter, another demand letter was furnished Lorenzo Shipping by BJ
coastwise shipping. It used to own the cargo vessel M/V Dadiangas
Marthel’s counsel requiring Lorenzo Shipping to settle its obligation to BJ
Express. Upon the other hand, BJ Marthel International, Inc. is a business
Marthel together with accrued interest and attorneys fees. Due to the failure of
entity engaged in trading, marketing, and selling of various industrial
the parties to settle the matter, BJ Marthel filed an action for sum of money and
commodities. It is also an importer and distributor of different brands of
damages before the RTC of Makati City. In its complaint, BJ Marthel alleged
engines and spare parts.
that despite its repeated oral and written demands, Lorenzo Shipping obstinately
2. From 1987 up to the institution of this case, BJ Marthel supplied Lorenzo
refused to settle its obligations. BJ Marthel prayed that Lorenzo Shipping be
Shippping with spare parts for Lorenzo Shipping’s marine
ordered to pay for the value of the cylinder liners plus accrued interest and
engines. Sometime in 1989, Lorenzo Shipping asked BJ Marthel for a
additional interest of 14% per annum to be reckoned from June 1991 until the
quotation for various machine parts. Acceding to this request, BJ Marthel
full payment of the principal; attorneys fees; costs of suits; exemplary damages;
furnished Lorenzo Shipping with a formal quotation.
actual damages; and compensatory damages. The RTC held BJ Marthel bound to
3. Lorenzo Shipping thereafter issued to BJ Marthel a Purchase Order, for the
the quotation it submitted to Lorenzo Shipping particularly with respect to the
procurement of one set of cylinder liner, valued at P477,000, to be used for
terms of payment and delivery of the cylinder liners. It also declared that BJ
M/V Dadiangas Express. The purchase order was co-signed by Jose Go, Jr.,
Marthel had agreed to the cancellation of the contract of sale when it returned
Lorenzo Shipping’s vice-president, and Henry Pajarillo.
the postdated checks issued by Lorenzo Shipping.However, the CA overturned
4. Instead of paying the 25% down payment for the first cylinder liner,
such decision stating that BJ Marthel could not have incurred delay in the
Lorenzo Shipping issued in favor of BJ Marthel 10 postdated checks to be
delivery of cylinder liners as no demand, judicial or extrajudicial, was made by
drawn against Lorenzo Shipping’s account with Allied Banking
Lorenzo Shipping upon BJ Marthel. The issue is WoN BJ Marthel incurred delay
Corporation. The checks were supposed to represent the full payment of the
in performing its obligation under the contract of sale and whether or not said
aforementioned cylinder liner.
contract was validly rescinded by Lorenzo Shipping?- NO.
5. Subsequently, Lorenzo Shipping issued another Purchase Order, for yet
The SC held that in the purchase orders issued by Lorenzo Shipping, no specific
another unit of cylinder liner. This purchase order stated the term of
payment to be 25% upon delivery, balance payable in 5 bi-monthly equal of preliminary attachment, the amendments also pertained to the issuance
installments. Like the first purchase order, the second purchase order by Lorenzo Shipping of the postdated checks and the amounts of damages
did not state the date of the cylinder liners delivery. claimed. The court a quo granted BJ Marthel’s prayer for the issuance of a
6. BJ Marthel deposited Lorenzo Shipping’s check that was postdated preliminary attachment.
however, the same was dishonored by the drawee bank due to insufficiency 13. Lorenzo Shipping afterwards filed its Answer alleging therein that time was
of funds. The remaining 9 postdated checks were eventually returned by BJ of the essence in the delivery of the cylinder liners and that the delivery on
Marthel to Lorenzo Shippinng. The parties presented disparate accounts of 20 April 1990 of said items was late as BJ Marthel committed to deliver
what happened to the check which was previously dishonored. Lorenzo said items within 2 months after receipt of firm order from Lorenzo
Shipping claimed that it replaced said check with a good one, the proceeds Shipping. Lorenzo Shipping likewise sought counterclaims for moral
of which were applied to its other obligation to BJ Marthel. For its part, BJ damages, exemplary damages, attorneys fees plus appearance fees, and
Marthel insisted that it returned said postdated check to Lorenzo Shipping. expenses of litigation.
7. BJ Marthel thereafter placed the order for the two cylinder liners with its 14. Subsequently, BJ Marthel filed a Second Amended Complaint with
principal in Japan, Daiei Sangyo Co. Ltd., by opening a letter of credit Preliminary Attachment. The amendment introduced dealt solely with the
under its own name with the First Interstate Bank of Tokyo. number of postdated checks issued by Lorenzo Shipping as full payment for
8. Pajarillo delivered the two cylinder liners at Lorenzo Shipping’s warehouse the first cylinder liner it ordered from BJ Marthel. Whereas in the first
in North Harbor, Manila. The sales invoices evidencing the delivery of the amended complaint, only 9 postdated checks were involved, in its second
cylinder liners both contain the notation subject to verification under which amended complaint, BJ Marthel claimed that Lorenzo Shipping actually
the signature of Eric Go, Lorenzo Shipping’s warehouseman, appeared. issued 10 postdated checks.Despite the opposition by Lorenzo Shipping, the
9. BJ Marthel thereafter sent a Statement of Account to Lorenzo trial court admitted BJ Marthel’s Second Amended Complaint with
Shipping. While the other items listed in said statement of account were Preliminary Attachment.
fully paid by Lorenzo Shipping, the 2 cylinder liners delivered to Lorenzo 15. Prior to the commencement of trial, Lorenzo Shipping filed a Motion (For
Shipping remained unsettled. Consequently, BJ Marthel’s vice-president, Leave To Sell Cylinder Liners) alleging therein that with the passage of
sent a demand letter to Lorenzo Shipping requiring it to pay the value of the time and with no definite end in sight to the present litigation, the cylinder
cylinder liners subjects of this case. liners run the risk of obsolescence and deterioration to the prejudice of the
10. Instead of heeding the demand of BJ Marthel for the full payment of parties to this case. Thus, Lorenzo Shipping prayed that it be allowed to
the value of the cylinder liners, Lorenzo Shipping sent BJ Marthel a sell the cylinder liners at the best possible price and to place the proceeds of
letter offering to pay only P150,000 for the cylinder liners. In said said sale in escrow. This motion, unopposed by BJ Marthel, was granted by
letter, Lorenzo Shipping claimed that as the cylinder liners were the trial court.
delivered late and due to the scrapping of the M/V Dadiangas Express, 16. The RTC held BJ Marthel bound to the quotation it submitted to Lorenzo
it would have to sell the cylinder liners in Singapore and pay the Shipping particularly with respect to the terms of payment and delivery of
balance from the proceeds of said sale. Shortly thereafter, another the cylinder liners. It also declared that BJ Marthel had agreed to the
demand letter was furnished Lorenzo Shipping by BJ Marthel’s cancellation of the contract of sale when it returned the postdated checks
counsel requiring Lorenzo Shipping to settle its obligation to BJ issued by Lorenzo Shipping. BJ Marthel’s counterclaims for moral,
Marthel together with accrued interest and attorneys fees. exemplary, and compensatory damages were dismissed for insufficiency of
11. Due to the failure of the parties to settle the matter, BJ Marthel filed an evidence. The CA reversed the ruling of the RTC.
action for sum of money and damages before the RTC of Makati City. In 17. As for the CA, it brushed aside Lorenzo Shipping’s claim that time was
its complaint, BJ Marthel alleged that despite its repeated oral and written of the essence in the contract of sale between the parties herein
demands, Lorenzo Shipping obstinately refused to settle its obligations. BJ considering the fact that a significant period of time had lapsed
Marthel prayed that Lorenzo Shipping be ordered to pay for the value of the between BJ Marthel’s offer and the issuance by Lorenzo Shipping of its
cylinder liners plus accrued interest of P111,300 as of May 1991 and purchase orders. It also held that BJ Marthel could not have incurred
additional interest of 14% per annum to be reckoned from June 1991 until delay in the delivery of cylinder liners as no demand, judicial or
the full payment of the principal; attorneys fees; costs of suits; exemplary extrajudicial, was made by Lorenzo Shipping upon BJ Marthel in
damages; actual damages; and compensatory damages. contravention of the express provision of Article 1169 of the Civil Code
12. Prior to the filing of a responsive pleading, BJ Marthel filed an amended which provides: “Those obliged to deliver or to do something incur in
complaint with preliminary attachment pursuant to Sections 2 and 3, Rule delay from the time the obligee judicially or extrajudicially demands
57 of the then Rules of Court. Aside from the prayer for the issuance of writ from them the fulfillment of their obligation.” There was no evidence of
the alleged cancellation of orders by Lorenzo Shipping and that the terms as stated in the formal quotation and the first Purchase Order with
delivery of the cylinder liners on 20 April 1990 was reasonable under regard to the due date of the down payment for the first cylinder liner and
the circumstances. the date of its delivery as well as the second Purchase Order with respect to
ISSUE/s: the date of delivery of the second cylinder liner. While the quotation
2. WoN BJ Marthel incurred delay in performing its obligation under the provided by BJ Marthel evidently stated that the cylinder liners were
contract of sale and whether or not said contract was validly rescinded by supposed to be delivered within two months from receipt of the firm
Lorenzo Shipping?- NO because in the purchase orders prepared by order of Lorenzo Shipping and that the 25% down payment was due
Lorenzo Shipping, the delivery date was not indicated thus the contract was upon the cylinder liners delivery, the purchase orders prepared by
not validly rescinded. Lorenzo Shipping clearly omitted these significant items. Lorenzo
Shipping’s first Purchase Order made no mention at all of the due
RULING: Wherefore, premises considered, the instant Petition for Review dates of delivery of the first cylinder liner and of the payment of 25%
on Certiorari is DENIED. The Decision of the CA, and its Resolution, are hereby down payment. Its 2nd Purchase Order likewise did not indicate the
AFFIRMED. due date of delivery of the second cylinder liner.
5. In the instant case, the formal quotation provided by BJ Marthel represented
RATIO: the negotiation phase of the subject contract of sale between the parties. As
1. A contract of sale was entered into by the parties is not disputed. Lorenzo of that time, the parties had not yet reached an agreement as regards the
Shipping however, maintains that its obligation to pay fully the purchase terms and conditions of the contract of sale of the cylinder liners. Lorenzo
price was extinguished because the adverted contract was validly terminated Shipping could very well have ignored the offer or tendered a counter-offer
due to BJ Marthel’s failure to deliver the cylinder liners within the 2 month to BJ Marthel while BJ Marthel could have, under the pertinent provision of
period stated in the formal quotation. the Civil Code, withdrawn or modified the same. The parties were at liberty
2. In determining whether time is of the essence in a contract, the ultimate to discuss the provisions of the contract of sale prior to its perfection. In this
criterion is the actual or apparent intention of the parties and before time connection, the testimonies of Pajarillo and Kanaan, Jr., stated that the
may be so regarded by a court, there must be a sufficient manifestation, terms of the offer were, indeed, renegotiated prior to the issuance of the first
either in the contract itself or the surrounding circumstances of that Purchase Order.
intention. Lorenzo Shipping insists that although its purchase orders 6. Notably, Lorenzo Shipping was the one who caused the preparation of the
did not specify the dates when the cylinder liners were supposed to be 2 Purchase Orders yet it utterly failed to adduce any justification as to why
delivered, nevertheless, BJ Marthel should abide by the term of said documents contained terms which are at variance with those stated in
delivery appearing on the quotation it submitted to Lorenzo Shipping. the quotation provided by BJ Marthel. The only plausible reason for such
Lorenzo Shipping theorizes that the quotation embodied the offer from failure on the part of Lorenzo Shipping is that the parties had, in fact,
BJ Marthel while the purchase order represented its Lorenzo renegotiated the proposed terms of the contract of sale. Moreover, as
Shipping’s acceptance of the proposed terms of the contract of sale. the obscurity in the terms of the contract between BJ Marthel and
Thus, Lorenzo Shipping is of the view that these two documents cannot Lorenzo Shipping was caused by Lorenzo Shipping when it omitted the
be taken separately as if there were two distinct contracts. date of delivery of the cylinder liners in the purchase orders and varied
3. It is a cardinal rule in interpretation of contracts that if the terms thereof are the term with respect to the due date of the down payment, said
clear and leave no doubt as to the intention of the contracting parties, the obscurity must be resolved against it.
literal meaning shall control. However, in order to ascertain the intention of 7. In the case of Smith, Bell & Co v Matti: “When the time of delivery is not
the parties, their contemporaneous and subsequent acts should be fixed or is stated in general and indefinite terms, time is not of the
considered. While this Court recognizes the principle that contracts are essence of the contract. In such cases, the delivery must be made within
respected as the law between the contracting parties, this principle is a reasonable time. The law implies, however, that if no time is fixed,
tempered by the rule that the intention of the parties is primordial and once delivery shall be made within a reasonable time, in the absence of
the intention of the parties has been ascertained, that element is deemed as anything to show that an immediate delivery intended.” The Court finds
an integral part of the contract as though it has been originally expressed in significant the fact that while Lorenzo Shipping alleges that the cylinder
unequivocal terms. liners were to be used for dry dock repair and maintenance of its M/V
4. In the present case, the Court cannot subscribe to the position of Lorenzo Dadiangas Express between the later part of December 1989 to early
Shipping that the documents, by themselves, embody the terms of the sale January 1990, the record is bereft of any indication that BJ Marthel was
of the cylinder liners. One can easily glean the significant differences in the aware of such fact. The failure of Lorenzo Shipping to notify BJ Marthel of
said date is fatal to its claim that time was of the essence in the subject place the order for the cylinder liners with its principal in Japan and
contracts of sale. that the latter was, at that time, beset by heavy volume of work. There
8. Further, “It must be noted that in the purchase orders issued by having been no failure on the part of BJ Marthel to perform its obligation,
Lorenzo Shipping, no specific date of delivery was indicated therein. If the power to rescind the contract is unavailing to Lorenzo Shipping.
time was really of the essence as claimed by Lorenzo Shipping, they 12. There is no showing that Lorenzo Shipping notified BJ Marthel of its
should have stated the same in the said purchase orders, and not intention to rescind the contract of sale between them. Quite the contrary,
merely relied on the quotation issued BJ Marthel considering the lapse BJ Marthel’s act of proceeding with the opening of an irrevocable letter of
of time between the quotation issued by BJ Marthel and the purchase credit belies Lorenzo Shipping’s claim that it notified BJ Marthel of the
orders of Lorenzo Shipping. In the instant case, Lorenzo Shipping cancellation of the contract of sale. Truly, no prudent businessman would
should have provided for an allowance of time and made the purchase pursue such action knowing that the contract of sale, for which the letter of
order earlier if indeed the said cylinder liner was necessary for the credit was opened, was already rescinded by the other party.
repair of the vessel scheduled on the first week of January, 1990. In
fact, Lorenzo Shipping should have cancelled the first purchase order
when the cylinder liner was not delivered on the date it now says was
necessary. Instead it issued another purchase order for the second set
of cylinder liner. This fact negates Lorenzo Shipping’s claim that time
was indeed of the essence in the consummation of the contract of sale
between the parties.
9. Finally, the 10 postdated checks issued in November 1989 by Lorenzo
Shipping and received by Barthel as full payment of the purchase price of
the first cylinder liner supposed to be delivered on 02 January 1990 fail to
impress. It is not an indication of failure to honor a commitment on the part
of BJ Marthel. The earliest maturity date of the checks was 18 January
1990. As delivery of said checks could produce the effect of payment only
when they have been cashed, BJ Marthel’s obligation to deliver the first
cylinder liner could not have arisen as early as 02 January 1990 as
claimed by Lorenzo Shipping since by that time, Lorenzo Shipping had
yet to fulfill its undertaking to fully pay for the value of the first
cylinder liner. As explained by BJ Marthel, it proceeded with the
placement of the order for the cylinder liners with its principal in
Japan solely on the basis of its previously harmonious business
relationship with Lorenzo Shipping.
10. As an aside, let it be underscored that even where time is of the essence, a
breach of the contract in that respect by one of the parties may be waived by
the other partys subsequently treating the contract as still in force. Lorenzo
Shipping’s receipt of the cylinder liners when they were delivered to its
warehouse clearly indicates that it considered the contract of sale to be
still subsisting up to that time. Indeed, had the contract of sale been
cancelled already as claimed by Lorenzo Shipping, it no longer had any
business receiving the cylinder liners even if said receipt was subject to
verification. By accepting the cylinder liners when these were delivered
to its warehouse, Lorenzo Shipping indisputably waived the claimed
delay in the delivery of said items.
11. The Court holds hat in the subject contracts, time was not of the
essence. The delivery of the cylinder liners on 20 April 1990 was made
within a reasonable period of time considering that BJ Marthel had to
008 Trans-Asia v. CA (Esguerra edited by Cruz edited by Hilario) of the faint-hearted. More so in the light of the many tragedies at sea
March 4, 1996 | Davide, Jr, J. | Exemplary Damages resulting in the loss of lives of hopeless passengers and damage to
PETITIONER: Trans-Asia Shipping Lines, Inc. property simply because common carriers failed in their duty to exercise
RESPONDENTS: Court of Appeals and Atty. Renato T. Arroyo extraordinary diligence in the performance of their obligations.
SUMMARY: Arroyo boarded M/V Asia Thailand from Cebu port Actual damages was not proved by Arroyo while atty’s fees weren’t
(supposedly going to Cagayan de Oro City) which had only one (1) out prayed for.
of its two engines running. The vessel eventually stopped near Kawit
Island and returned to Cebu upon demand of some passengers. Arroyo DOCTRINE: Exemplary damages are imposed by way of example or
disembarked in Cebu while the vessel continued its way to Cagayan de correction for the public good, in addition to moral, temperate, liquidated
Oro. On account of its failure to transport him to his supposed or compensatory damages. In contracts and quasi-contracts, exemplary
destination, Arroyo filed a complaint for damages. damages may be awarded if the defendant acted in a wanton fraudulent,
reckless, oppressive or malevolent manner. It cannot, however, be
The issues in this case are (1) the applicable laws in contracts of carriage; considered as a matter of right; the court having to decide whether or not
and (2) the liability of Trans-ASia to Arroyo. they should be adjudicated. Before the court may consider an award for
The Supreme Court held that in a contract of common carriage, the laws exemplary damages, the plaintiff must first show that he is entitled to
of primary application are the provisions on common carriers under moral, temperate or compensatory damages; but it is not necessary
Section 4, Chapter 3, Title VIII, Book IV of the Civil Code, while for all that he prove the monetary value thereof.
other matters not regulated thereby, the Code of Commerce and special
laws. FACTS:
The SC also held that Trans-Asia was bound to observe extraordinary 18. Atty. Renato Arroyo (Atty. Arroyo), a public attorney, bought a
diligence as a common carrier. It failed to observe such diligence when it ticket from Trans-Asia Shipping Lines (Trans-Asia), a corporation
continued with the voyage despite only one engine running. Only moral engaged in inter-island shipping, for the voyage of M/V Asia
and exemplary damages were awarded by the SC. In allowing its Thailand vessel to Cagayan de Oro City from Cebu City on
November 12, 1991.
unseaworthy M/V Asia Thailand to leave the port of origin and undertake
19. At around 5:30 in the evening of November 12, 1991, Arroyo
the contracted voyage, with full awareness that it was exposed to perils of
boarded the M/V Asia Thailand. He noticed that some repair works
the sea, it deliberately disregarded its solemn duty to exercise
were being undertaken on the engine of the vessel. The vessel
extraordinary diligence and obviously acted with bad faith and in a departed around 11:00 in the evening with only one (1) engine
wanton and reckless manner. On this score, however, Trans-Asia asserts running.
that the safety of the vessel and passengers was never at stake because 20. After an hour of slow voyage, the vessel stopped near Kawit Island
the sea was calm in the vicinity where it stopped as faithfully recorded in and dropped its anchor thereat. After half an hour of stillness, some
the vessels log book. Hence, Atty. Arroyo was merely over-reacting to passengers demanded that they should be allowed to return to Cebu
the situation obtaining then. The SC said that this defense cannot City for they were no longer willing to continue their voyage to
exculpate nor mitigate its liability. On the contrary, such a claim Cagayan de Oro City. The captain acceded to their request and thus
demonstrates beyond cavil Trans-Asia’s lack of genuine concern for the the vessel headed back to Cebu.
safety of its passengers. It was, perhaps, only providential that the sea 21. At Cebu City, Arroyo together with other passengers who requested
happened to be calm. Even so, Trans-Asia should not expect its to be brought back to Cebu City, were allowed to disembark.
passengers to act in the manner it desired. The passengers were not Thereafter, the vessel proceeded to Cagayan de Oro City. Arroyo, the
stoics; becoming alarmed, anxious, or frightened at the stoppage of a next day, boarded the M/V Asia Japan, likewise a vessel of Trans-
vessel at sea in an unfamiliar zone at nighttime is not the sole prerogative Asia, for its voyage to Cagayan de Oro City.
22. On account of this failure of Trans-Asia to transport him to the place
of destination, Arroyo filed a complaint for damages. fraud. As early as 3:00 p.m. of November 12, 1991, Trans-Asia did
a. He asserted that his complaint was an action for damage not hide the fact that the cylinder head cracked. Arroyo even saw the
arising from bad faith, breach of contract and from tort, repair. If he had doubts as to the vessel’s capacity to sail, he had time
with the former arising from the petitioners failure to carry to take another boat and ask that his cash be returned to him.
him to his place of destination as contracted, while the latter 6. There was also an announcement at the Port of Cebu that passengers
from the conduct of the petitioner resulting in the infliction who would like to disembark were given ten (10) minutes only to do
of emotional distress to the private respondent. so. It could then be inferred that the boat would proceed to Cagayan
Atty. Arroyo’s ARGUMENTS: de Oro.
1. The engines of M/V Asia Thailand conked out in the open sea, and 7. If Arroyo was not able to make the trip that night, it was because of
for more than an hour it was stalled and at the mercy of the waves, his fault or negligence. But Arroyo admitted already that he was of
thus causing fear in the passengers. the impression only that the boat will not proceed to CDO that
2. It sailed back to Cebu City after it regained power, but for evening so he disembarked.
unexplained reasons, the passengers were arrogantly told to a. Had he been prudent, with the announcement that those who
disembark without the necessary precautions against possible injury will disembark were given 10 minutes only, he should have
to them. lingered a little by staying in his cot and inquired whether
3. They were unceremoniously dumped, which only exacerbated his the boat will proceed to CDO or not. Trans Asia cannot be
mental distress. expected to be explaining reasons to each passenger—
4. By reason of Trans-Asia’s wanton, reckless, and willful acts, he was announcement by microphone was enough.
unnecessarily exposed to danger, and having been stranded in Cebu 8. In short, Trans Asia did not maliciously excluded him from the
City for a day, incurred additional expenses and loss of income. trip—he was left because of his fault or negligence.
5. He prayed that he be awarded P1,100.00, P50,000.00, and COURT OF APPEALS’ RULING: (Reversed trial court)
P25,000.00 as compensatory, moral, and exemplary damages, 1. Applied Art. 1755 in relation to Articles 2201, 2008, 2217, and 2232
respectively. of the Civil Code.
Trans-Asia’s ARGUMENT: 2. Awarded compensatory, moral, and exemplary damages (also
1. The safety of the vessel or passengers was never at stake because the attorney’s fees), but did not allow the grant of damages for the delay
sea was ‘calm’ in the vicinity where it stopped. in the performance of Trans-Asia’s obligation as the requirement of
demand set forth in Art. 1169 of the Civil Code had not been met by
TRIAL COURT’s RULING: (Dismissed Arroyo’s complaint) Atty. Arroyo.
1. The action was only for breach of contract, with Articles 1170, 1172, a. Moral and exemplary damages for mental anguish, fright,
and 1173 of the Civil Code as applicable law- not Article 2180 of the and serious anxiety he suffered during the voyage when the
same Code. vessels engine broke down and when he disembarked from
2. Article 1170 makes a person liable for damages if, in the the vessel during the wee hours of the morning at Cebu City
performance of his obligation, he is guilty of fraud, negligence, or when it returned.
delay, or in any manner contravened the tenor thereof. b. Moral damages are recoverable in a damage suit predicated
3. Moreover, pursuant to Article 2201 of the same Code, to be entitled upon a breach of contract of carriage where it is proved that
to damages, the non-performance of the obligation must have been the carrier was guilty of fraud or bad faith even if death does
tainted only by fraud, negligence, or delay but also bad faith, malice, not result.
and wanton attitude. c. Exemplary damages are designed by our law to permit the
4. It does not appear from evidence that Arroyo was left in the Port of courts to reshape behavior that is socially deleterious in its
Cebu because of the fault, negligence, malice, or wanton attitude of consequence by creating negative incentives or deterrents
Trans-Asia’s employees. against such behavior.
5. The evidence of the parties show nothing that Trans Asia committed 3. No actual or compensatory damages for delay because no delay was
incurred since there was no demand. (this will be struck down later for all the circumstances. Trans-Asia failed to discharge this
by the SC, put it just in case sir asks!) obligation.
4. Trans-Asia knew from the very start of the voyage that the vessel 2. Plainly, the vessel was unseaworthy (For a vessel to be seaworthy, it
was not in sailing condition because the second engine was still must be adequately equipped for the voyage and manned with a
being repaired. Despite this, it still proceeded to sail with only one sufficient number of competent officers and crew.) even before the
engine running. At that instant, it failed to exercise the diligence voyage began, since only one engine was working. And even the
which all common carriers should exercise in transporting or lone functioning engine was not in perfect condition, as sometime
carrying passengers. after it had run its course it conked out. The failure of a common
5. The law does not merely require extraordinary diligence in the carrier to maintain in seaworthy condition its vessel involved in a
performance of the obligation. The law mandates that common contract of carriage is a clear breach of its duty prescribed in Art.
carriers should exercise utmost diligence [of very cautious persons] 1755 of the Civil Code.
in the transport of passengers. As to the award of compensatory damages
6. Hence, this petition under Rule 45. 3. CA was wrong in applying the rule that demand is necessary before
delay can set in, because there was in fact no delay in the
ISSUE/s: commencement of the contracted voyage. If any delay was incurred,
3. Is the case governed by the Civil Code provision on common it was after the commencement of such voyage, more specifically,
carriers, or by the Code of Commerce? when the voyage was subsequently interrupted when the vessel had
Primary application: provisions on common carriers in the Civil to stop near Kawit Island after the only functioning engine conked
Code; out.
All other matters not regulated: Code of Commerce and special 4. As to the rights and duties of the parties, Article 698 of the Code of
laws. Commerce11 applies suppletorily pursuant to Art. 1766 of the Civil
4. W/N Trans-Asia was liable? If so, what should be the proper award? Code12.
Yes, only moral and exemplary damages are proper—no 5. Art. 698 must be read together with Articles 2199, 2200, 2201, and
attorney’s fees, no actual damages. 2208 in relation to Art. 21 of the Civil Code. It means that Trans-
Asia is liable for any pecuniary loss or loss of profits which Arroyo
RULING: WHEREFORE, the instant petition is DENIED and the may have suffered by reason thereof.
challenged decision of the Court of Appeals is AFFIRMED subject to the a. This however assumes that he stayed on the vessel and was
modification as to the award for attorney’s fees which is hereby SET ASIDE. with it when it resumed its voyage after the Kawit Island
stop, but he did not. He voluntarily chose not to complete the
RATIO: voyage and return to Cebu. Any further delay then in
First Issue Arroyo’s arrival at the port of destination was caused by
13. Undoubtedly, there was, between the Trans-Asia and Arroyo, a his decision to disembark in Cebu. Had he remained in
contract of common carriage. The laws of primary application then the vessel, he would have reached CDO at noon of
are the provisions on common carriers under Section 4, Chapter 3, November 13, and he would have been able to report to
Title VIII, Book IV of the Civil Code, while for all other matters not his office in the afternoon.
regulated thereby, the Code of Commerce and special laws.

Second Issue 11
Art. 698. In case a voyage already begun should be interrupted, the passengers shall be obliged to pay
1. Under Article 1733 of the Civil Code, Trans-Asia was bound to the fare in proportion to the distance covered, without right to recover for losses and damages if the
observe extraordinary diligence in ensuring the safety of Arroyo. interruption is due to fortuitous event or force majeure, but with a right to indemnity if the interruption
should be caused by the disability of the vessel and a passenger should agree to await the repairs, he
That meant that Trans-Asia was bound, under Art. 1755 to carry may not be required to pay any increased price of passage, but his living expenses during the stay shall
Arroyo safely as far as human care and foresight could provide, be for his own account.
using the utmost diligence of very cautious persons, with due regard 12
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.
6. Actual or compensatory damages must be proved, which Arroyo and obviously acted with bad faith and in a wanton and reckless
failed to do. There was no convincing evidence that he did not manner.
receive his salary for November 13, 1991 or that his absence was a. Trans-Asia asserts that the safety of the vessel and
not excused. passengers was never at stake because the sea was calm in
As to the award of moral and exemplary damages: the vicinity where it stopped as faithfully recorded in the
7. Moral damages include moral suffering, mental anguish, fright, vessels log book. Hence, Atty. Arroyo was merely over-
serious anxiety, besmirched reputation, wounded feelings, moral reacting to the situation obtaining then.
shock, social humiliation, or similar injury. They may be recovered b. The SC said that this defense cannot exculpate nor mitigate
in the cases enumerated in Article 221913 of the Civil Code, likewise, its liability.
if they are the proximate result of, as in this case, the petitioners i. On the contrary, such a claim demonstrates beyond
breach of the contract of carriage. cavil Trans-Asia’s lack of genuine concern for the
a. Anent a breach of a contract of common carriage, moral safety of its passengers. It was, perhaps, only
damages may be awarded if the common carrier, like the providential that the sea happened to be calm. Even
petitioner, acted fraudulently or in bad faith so, Trans-Asia should not expect its passengers to
8. Exemplary damages are imposed by way of example or correction act in the manner it desired.
for the public good, in addition to moral, temperate, liquidated or ii. The passengers were not stoics; becoming alarmed,
compensatory damages. anxious, or frightened at the stoppage of a vessel at
a. In contracts and quasi-contracts, exemplary damages may be sea in an unfamiliar zone at nighttime is not the sole
awarded if the defendant acted in a wanton fraudulent, prerogative of the faint-hearted.
reckless, oppressive or malevolent manner. iii. More so in the light of the many tragedies at sea
b. It cannot, however, be considered as a matter of right; the resulting in the loss of lives of hopeless passengers
court having to decide whether or not they should be and damage to property simply because common
adjudicated. carriers failed in their duty to exercise extraordinary
c. Before the court may consider an award for exemplary diligence in the performance of their obligations.
damages, the plaintiff must first show that he is entitled to As to the award of attorney’s fees, SC DENIED:
moral, temperate or compensatory damages; but it is not 10. Under Art. 2208 of the Civil Code, the attorney’s fees are
necessary that he prove the monetary value thereof recoverable only in the concept of actual damages, not as moral
9. In allowing its unseaworthy vessel to leave the port of origin and damages or judicial costs. To merit such an award, the amount must
undertake the contracted voyage, Trans-Asia deliberately be proven and must be specifically prayed for, as was not done in
disregarded its solemn duty to exercise extraordinary diligence this case.

13
Article 2219. Moral damages may be recovered in the following and analogous cases: Provisions
(1) A criminal offense resulting in physical injuries; Article 1733. Common carriers, from the nature of their business and for
(2) Quasi-delicts causing physical injuries;
(3) Seduction, abduction, rape, or other lascivious acts;
reasons of public policy, are bound to observe extraordinary diligence in the
(4) Adultery or concubinage; vigilance over the goods and for the safety of the passengers transported by
(5) Illegal or arbitrary detention or arrest; them, according to all the circumstances of each case.
(6) Illegal search; Such extraordinary diligence in the vigilance over the goods is further
(7) Libel, slander or any other form of defamation;
(8) Malicious prosecution; expressed in articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while the
(9) Acts mentioned in article 309; extraordinary diligence for the safety of the passengers is further set forth in
(10) Acts and actions referred to in articles 21, 26, 27, 28, 29, 30, 32, 34, and 35. articles 1755 and 1756.
The parents of the female seduced, abducted, raped, or abused, referred to in No. 3 of this article, may
also recover moral damages.
The spouse, descendants, ascendants, and brothers and sisters may bring the action mentioned in No. 9
of this article, in the order named.
Article 1755. A common carrier is bound to carry the passengers safely as (7) In actions for the recovery of wages of household helpers,
far as human care and foresight can provide, using the utmost diligence of laborers and skilled workers;
very cautious persons, with a due regard for all the circumstances. (8) In actions for indemnity under workmen's compensation and
employer's liability laws;
Compensatory Damages (9) In a separate civil action to recover civil liability arising from a
Article 698 of the Code of Commerce crime;
Art. 698. In case a voyage already begun should be interrupted, the (10) When at least double judicial costs are awarded;
passengers shall be obliged to pay the fare in proportion to the distance (11) In any other case where the court deems it just and equitable
covered, without right to recover for losses and damages if the interruption is that attorney's fees and expenses of litigation should be recovered.
due to fortuitous event or force majeure, but with a right to indemnity if the In all cases, the attorney's fees and expenses of litigation must be reasonable.
interruption should be caused by the disability of the vessel and a passenger Article 21. Any person who wilfully causes loss or injury to another in
should agree to await the repairs, he may not be required to pay any manner that is contrary to morals, good customs or public policy shall
increased price of passage, but his living expenses during the stay shall be for compensate the latter for the damage.
his own account.
Article 2199. Except as provided by law or by stipulation, one is entitled to Exemplary Damages
an adequate compensation only for such pecuniary loss suffered by him as he Article 2229. Exemplary or corrective damages are imposed, by way of
has duly proved. Such compensation is referred to as actual or compensatory example or correction for the public good, in addition to the moral,
damages. temperate, liquidated or compensatory damages.
Article 2200. Indemnification for damages shall comprehend not only the Article 2234. While the amount of the exemplary damages need not be
value of the loss suffered, but also that of the profits which the obligee failed proved, the plaintiff must show that he is entitled to moral, temperate or
to obtain. (1106) compensatory damages before the court may consider the question of
Article 2201. In contracts and quasi-contracts, the damages for which the whether or not exemplary damages should be awarded. In case liquidated
obligor who acted in good faith is liable shall be those that are the natural and damages have been agreed upon, although no proof of loss is necessary in
probable consequences of the breach of the obligation, and which the parties order that such liquidated damages may be recovered, nevertheless, before
have foreseen or could have reasonably foreseen at the time the obligation the court may consider the question of granting exemplary in addition to the
was constituted. liquidated damages, the plaintiff must show that he would be entitled to
In case of fraud, bad faith, malice or wanton attitude, the obligor shall be moral, temperate or compensatory damages were it not for the stipulation for
responsible for all damages which may be reasonably attributed to the non- liquidated damages.
performance of the obligation. (1107a)
Article 2208. In the absence of stipulation, attorney's fees and expenses of Moral Damages
litigation, other than judicial costs, cannot be recovered, except: Article 2219. Moral damages may be recovered in the following and
(1) When exemplary damages are awarded; analogous cases:
(2) When the defendant's act or omission has compelled the plaintiff (1) A criminal offense resulting in physical injuries;
to litigate with third persons or to incur expenses to protect his (2) Quasi-delicts causing physical injuries;
interest; (3) Seduction, abduction, rape, or other lascivious acts;
(3) In criminal cases of malicious prosecution against the plaintiff; (4) Adultery or concubinage;
(4) In case of a clearly unfounded civil action or proceeding against (5) Illegal or arbitrary detention or arrest;
the plaintiff; (6) Illegal search;
(5) Where the defendant acted in gross and evident bad faith in (7) Libel, slander or any other form of defamation;
refusing to satisfy the plaintiff's plainly valid, just and demandable (8) Malicious prosecution;
claim; (9) Acts mentioned in article 309;
(6) In actions for legal support;
(10) Acts and actions referred to in articles 21, 26, 27, 28, 29, 30, 32,
34, and 35.
The parents of the female seduced, abducted, raped, or abused, referred to in
No. 3 of this article, may also recover moral damages.
The spouse, descendants, ascendants, and brothers and sisters may bring the
action mentioned in No. 9 of this article, in the order named.
009 LOADSTAR v. PIONEER (LAGUILLES) conclusion of the trial court and the CA that the loss of the entire
January 24, 2006| Quisumbing, J. | Voyage-charter shipment was due to the gross negligence of Loadstar. Records show that
the sea and weather conditions in the vicinity were calm. Also, records
PETITIONER: Loadstar Shipping Co., Inc reveal that Loadstar took a shortcut route, instead of the usual route,
RESPONDENTS: Pioneer Asia Insurance Corp. which exposed the voyage to unexpected hazard.

SUMMARY: Loadstar Shipping is the owner of M/V Weasel. It entered DOCTRINE: It is imperative that a public carrier shall remain as such,
into a voyage-charter with Northern Mindanao Transport for the carriage notwithstanding the charter of the whole or portion of a vessel by one or
of 65,000 bags of cement. The shipper was Iligan Cement, while the more persons, provided the charter is limited to the ship only, as in the
consignee was Market Developers. 67,500 bags of cement were loaded case of a time-charter or voyage-charter.
on board M/V Weasel for delivery to Market Developers, which the
latter insured with Pioneer Asia Insurance for P1,400,000. M/V Weasel
left Iligan for Manila in good weather. However, at 4:31 in the morning
the following day, the captain of M/V Weasel ordered the vessel to be
forced aground, so the entire shipment of cement was good as gone due
to exposure to sea water. Market Developers then demanded from FACTS:
Loadstar the full reimbursement of the cost of the lost shipment, but LOADSTAR – COMMON CARRIER
Loadstar refused. Pioneer Insurance then paid P1.4 million to Market ILIGAN CEMENT – SHIPPER
Developers, for which it was issued a subrogation receipt. Pioneer then MARKET DEVELOPERS – CONSIGNEE
filed a complaint against Loadstar, alleging that the vessel was not PIONEER INSURANCE – INSURANCE COMPANY
seaworthy, that the weather and sea conditions were usual and expected, 1. Petitioner Loadstar Shipping is the registered owner and operator of
and that it was negligent in the selection and supervision of its agents M/V Weasel, and holds office at Paco, Manila.
and employees. Loadstar alleged no fault on its part because it exercised 2. Loadstar entered into a voyage-charter with Northern Mindanao
due diligence to make the ship seaworthy. Loadstar also claimed that the Transport Company for the carriage of 65,000 bags of cement from
failure to deliver the cargo was due to a force majeure. The RTC then Iligan to Manila. The shipper was Iligan Cement Corporation, while
rendered a decision in favor of Pioneer and held that Loadstar, as a the consignee in Manila was Market Developers, Inc.
common carrier, bears the burden of proving that it exercised 3. On June 24, 1984, 67,500 bags of cement were loaded on board M/V
extraordinary diligence in its vigilance over the goods. The issue is WoN Weasel and stowed in the cargo holds for delivery to Market
Loadstar is liable as a common carrier, and whether or not there was a Developers. The shipment was covered by Loadstar’s bill of lading.
force majeur. 4. Prior to the voyage, Market Developers insured the shipment of
cement with Pioneer Asia Insurance Corporation for P1,400,000, for
The SC held that 1) Loadstar is a common carrier, and 2) There was no which Pioneer issued Marine Open Policy No. MOP-006 covering
force majeure. The voyage-charter did not convert Loadstar into a all shipments made on or after September 30, 1980.
private carrier, contrary to its position. The voyage-charter agreement 5. At 12:50 in the afternoon of June 24, 1984, M/V Weasel left Iligan
did not in any way convert the common carrier into a private carrier. It is for Manila in good weather. However, at 4:31 in the morning of June
only when the charter includes both the vessel and its crew, as in a 25, Captain Montera, master of M/V Weasel, ordered the vessel to be
bareboat or demise that a common carrier becomes private, at least forced aground. Consequently, the entire shipment of cement was
insofar as the particular voyage covering the charter-party is concerned. good as gone due to exposure to sea water. Loadstar thus failed to
Conformably, Loadstar remains a common carrier despite the existence deliver the goods to Market Developers.
of the charter agreement with Northern Mindanao Transport Company, 6. Market Developers then demanded from Loadstar full
since the said charter is limited to the shop only and does not involve reimbursement of the cost of the lost shipment. However, Loadstar
both the vessel and its crew. we find supported by evidence on record the refused.
7. Nonetheless, Pioneer Insurance paid Market Developers P1,400,000
plus an additional amount of P500,000, the value of the lost shipment RULING: WHEREFORE, the petition is DENIED. The assailed Decision
of cement. In return, Market Developers executed a Loss and dated October 15, 2002 and the Resolution dated February 27, 2003, of the
Subrogation Receipt in favor of Pioneer Insurance concerning the Court of Appeals in CA-G.R. CV No. 40999, are AFFIRMED.
latter’s subrogation rights against Loadstar.
8. Pioneer Insurance then filed a complaint against Loadstar, alleging RATIO:
that: 1. Loadstar contends that at the time of the voyage the carrier’s voyage-
a. M/V Weasel was not seaworthy at the time of the voyage; charter with the shipper converted it into a private carrier. Thus, the
b. The weather and sea conditions then prevailing were usual presumption of negligence against common carriers could not apply.
and expected for that time of the year and as such, was an 2. Loadstar further claims that the stipulation in the voyage-charter
ordinary peril of the voyage for which M/V Weasel should holding it free from liability is valid and binds Pioneer Insurance.
have been normally able to cope with; Loadstar insists that it had exercised extraordinary diligence and that
c. Loadstar was negligent in the selection and supervision of its the proximate cause of the loss of the cargo was a fortuitous event.
agents and employees. 3. The Supreme Court held that the voyage-charter agreement did not
9. Loadstar alleged that no fault nor negligence could be attributed to it in any way convert the common carrier into a private carrier. In
because it exercised due diligence to make the ship seaworthy, as Planters Products Inc vs. CA, the Court held that it is imperative that
well as properly manned and equipped. a public carrier shall remain as such, notwithstanding the charter of
10. Loadstar insisted that the failure to deliver the cargo to Market the whole or portion of a vessel by one or more persons, provided the
Developers was due to force majeure. Loadstar claimed that it could charter is limited to the ship only, as in the case of a time-charter or
not be held liable for an act or omission not directly attributable to it. voyage-charter.
11. The RTC rendered a decision in favor of Pioneer Insurance and held 4. It is only when the charter includes both the vessel and its crew, as in
that Loadstar, as a common carrier, bears the burden of proving that a bareboat or demise that a common carrier becomes private, at least
it exercised extraordinary diligence in its vigilance over the goods it insofar as the particular voyage covering the charter-party is
transported. The court explained that in case of loss or destruction of concerned.
the goods, a statutory presumption arises that the common carrier 5. Conformably, Loadstar remains a common carrier despite the
was negligent unless it could have proved that it had observed existence of the charter agreement with Northern Mindanao
extraordinary diligence. Transport Company, since the said charter is limited to the shop only
12. Loadstar’s defense of force majeure was found bereft of factual basis and does not involve both the vessel and its crew.
as the RTC called attention to the PAG-ASA report that at the time 6. As a common carrier, Loadstar is required to observe extraordinary
of the incident, tropical storm “Asiang” had moved away from the diligence in the vigilance over the goods it transports. When the
Philippines. Also, records show that the sea and weather conditions goods placed in its care are lost, Loadstar is presumed to have been
in the area were slight and smooth. at fault or to have acted negligently.
13. On appeal to the CA, the latter affirmed the RTC decision with 7. It is incumbent upon the common carrier to prove that the loss,
modification that Loadstar shall only pay the sum of 10% the total deterioration, or destruction was due to accident or some other
claim for attorney’s fees and litigation expenses. circumstances inconsistent with its liability.
8. The extraordinary diligence in the vigilance over the goods tendered
ISSUE: for shipment requires the common carrier to know and to follow the
1. WoN Loadstar is liable as a common carrier – Yes, because the required precaution for avoiding damage to, or destruction of the
voyage-charter did not convert it into a private carrier. goods entrusted to it for safe carriage and delivery.
2. WoN the proximate cause of the loss of the cargo was a 9. Loadstar claims that the loss was due to a fortuitous event under
fortuitous event – No, because records show that the sea and flood, storm, earthquake, lightning, or other natural disaster or
weather conditions at that time was stable. calamity under Art. 1734. Yet, its claim is unsubstantiated. On the
contrary, we find supported by evidence on record the conclusion of
the trial court and the CA that the loss of the entire shipment was due
to the gross negligence of Loadstar.
10. Records show that the sea and weather conditions in the vicinity
were calm. Also, records reveal that Loadstar took a shortcut route,
instead of the usual route, which exposed the voyage to unexpected
hazard.
11. As to the award of attorney’s fees, the Court affirmed the CA in that
only 10% of the total claim must be paid because the contract
between the parties contained a stipulation that in case of suit,
attorney’s fees and expenses of litigation shall be limited to only
10% of the total monetary award.

*Voyage Charter - The hiring of a vessel and crew for a voyage between a
load port and a discharge port.
010 MITSUI LINES v. CA (PELIÑO edited by MARCOS) international freight forwarder, with Lavine Loungewear Manufacturing
March 11, 1998 | Mendoza, J. | Loss or damage Corp. (Lavine) to transport goods of Lavine from Manila to Le Havre,
France.
PETITIONER: Mitsui O.S.K. Lines Ltd., represented by Magsaysay Agencies, Inc. a. Mitsui undertook to deliver the goods to France 28 days from initial
RESPONDENT: Court of Appeals and Lavine Loungewear Mfg. Corp. loading.
b. On July 24, 1991, Mitsui’s vessel loaded Lavine’s container van for
SUMMARY: Mitsui, through Meister, (A) entered into a contract of carriage with Lavine carriage at the said port of origin.
to transport goods of Lavine (B) from Manila to Le Havre, France. Mitsui undertook to 25. While in Kaoshiung, Taiwan, the goods were not transshipped immediately.
deliver the goods to France 28 days from initial loading. Mitsui’s vessel loaded Lavine’s 26. The goods arrived in Le Havre only on November 14, 1991.
container van for carriage on July 24, 1991. While in Taiwan, the goods were not a. Consignee allegedly paid only half the value of the goods since they
transshipped immediately, so the goods only arrived on November 14, 1991. The
didn’t arrive until the “off season” in that country, while the other half
consignee only paid half since the goods arrived during off season, while the other half
was charged to the account of Lavine. So Lavine demanded payment from Mitsui through
was charged to the account of Lavine, so Lavine demanded payment
Magsaysay. Mitsui denied Lavine’s claim, so Lavine filed a case in the RTC. Mitsui filed from Mitsui through Magsaysay.
a MTD, arguing that the claims of Lavine are already prescribed under the COGSA. RTC 27. As Mitsui denied Lavine’s claim, Lavine filed a case in the RTC.
denied the MTD as well as the MR. Mitsui filed a petition for certiorari in the CA, but the a. Original complaint: Lavine impleaded as defendants Meister and
CA sustained the RTC’s order. Hence, this petition. The issue in this case is whether or Magsaysay.
not Lavine’s action is for loss or damage to goods shipped within the meaning of Sec. b. Amended complaint: Mitsui as defendant in lieu of its agent.
3(6) of the COGSA. The SC held in the negative. This is because the kind of loss referred 28. Mitusi filed a motion to dismiss alleging that the claims against it had
to is a situation where no delivery at all was made by the shipper of the goods because the prescribed under the Carriage of Goods by Sea Act (COGSA).
same had perished, gone out of commerce, or disappeared in such a way that their
29. RTC denied Mitsui’s MTD as well as its MR.
existence is unknown or they cannot be recovered. In this case, there is neither
deterioration, disappearance, or destruction of goods caused by the carriers breach of
30. Mitsui filed a petition for certiorari in the CA, but the CA sustained the
contract. Whatever reduction there may have been in the value is not because they have RTC’s order.
been deteriorated or disappeared because they had been damaged in transit. The suit is not 31. Hence, this petition.
for loss or damage to goods contemplated. The question of prescription is governed NOT 32. PETITIONER’S ARGUMENT: Although we agree that there are places in
by the COGSA BUT by Art. 1144 of the Civil Code which provides for a prescriptive the section (Article III) in which the phrase need have no broader meaning
period of 10 years. In addition, the question involved in this case is Mitsui’s potential than loss or physical damage to the goods, we disagree with the conclusion
liability for the damages it has caused in the general sense, and as such, the matter is that it must be so limited wherever it is used. We take it that the phrase has
governed by the Civil Code, the Code of Commerce, and COGSA, for the breach of its a uniform meaning, not merely in Section 3, but throughout the Act; and
contract of carriage with Lavine.
there are a number of places in which the restricted interpretation suggested
DOCTRINE: Based on the Civil Code and in Sec. 3(6), par. 4 of COGSA, loss
would be inappropriate. For example, Section 4(2) Article IV(2) exempts
contemplates merely a situation where no delivery at all was made by the shipper of the the carrier, the ship, from liability loss or damage resulting from certain
goods because the same had perished, gone out of commerce, or disappeared in such a courses beyond their control. (My understanding is that they claim that what
way that their existence is unknown or they cannot be recovered. The question involved happened in their case constitutes as ‘loss or damage’ within the purview of
in this case is Mitsui’s potential liability for the damages it has caused in the general Sec. 3(6) of the COGSA, and that since it is, and Lavine didn’t file within
sense, and as such, the matter is governed by the Civil Code, the Code of Commerce, and the 1 year period, then their action is already barred.)
COGSA, for the breach of its contract of carriage with Lavine.
ISSUE/s:
FACTS: 5. WON Lavine’s action is for loss or damage to goods shipped, within the
23. Parties: meaning of 3(6) of the COGSA. – NO. The question involved in this case is
a. Mitsui or Meister – carrier (the facts said that Mitsui entered into a Mitsui’s potential liability for the damages it has caused in the general
contract of carriage through Meister) sense, and as such, the matter is governed by the Civil Code, the Code of
b. Lavine – Shipper/owner of the goods to be shipped Commerce, and COGSA, for the breach of its contract of carriage with
c. Consignee – Case did not mention who but it’s a company in France. Lavine.
24. Mitsui O.S.K. Lines Ltd. (Mitsui) is a foreign corporation represented in the
Philippines by its agent, Magsaysay Agencies (Magsaysay). It entered into a RULING: WHEREFORE, the decision of the Court of Appeals is AFFIRMED.
contract of carriage through Meister Transport, Inc. (Meister), an
RATIO: for a prescriptive period of 10 years.
On whether Lavine’s action is for loss or damage to goods shipped within the
meaning of Sec. 3(6) of the COGSA Provision Cited (this is important)
1. Ang v. American Steamship: The issue there was whether an action for the
value of goods which had been delivered to a party other than the consignee Section 3:
is for loss or damage within Sec. 3(6) of COGSA, and it was held that there
was no loss because the goods were simply misdelivered. Loss refers to the (6) Unless notice of loss or damage and the general nature of such loss or damage be
deterioration or disappearance of goods. given in writing to the carrier or his agent at the port of discharge or at the time of
2. Based on the Civil Code and in Sec. 3(6), par. 4 of COGSA, loss the removal of the goods into the custody of the person entitled to delivery thereof
contemplates merely a situation where no delivery at all was made by under the contract of carriage, such removal shall be prima facie evidence of the
the shipper of the goods because the same had perished, gone out of delivery by the carrier of the goods as described in the bill of lading. If the loss or
commerce, or disappeared in such a way that their existence is damage is not apparent, the notice must be given within three days of the delivery.
unknown or they cannot be recovered.
a. In another case, the SC has held that the deterioration of goods due to
delay in the transportation constitutes loss or damage within the
meaning of Sec. 3(6), so that as suit was not brought within 1 year, the
action was barred. Said notice of loss or damage may be endorsed upon the receipt for the goods given
b. But the Court allowed that there would be some merit in the insistence by the person taking delivery thereof.
that the damages suffered by him as a result of the delay in the
shipment of the cargo are not covered by the prescriptive provision of
the GOGSA, if the damages were due, not to the deteriorarion and
decay of the goods while in transit, but to other causes independent of The notice in writing need not be given if the state of the goods has at the time of
the condition of the condition of the cargo upon arrival. their receipt been the subject of joint survey or inspection.
3. Rationale behind limiting the definitions to such parameters is not hard to
find or fathom: 1 year period of limitation is designed to meet the
exigencies of maritime hazards. The case is different when the goods were
not lost or damaged in transit but were delivered to someone who claimed
In any event the carrier and the ship shall be discharged from all liability in
to be entitled, so the short period of limitation caused by maritime perils
respect of loss or damage unless suit is brought within one year after delivery of
does not obtain.
the goods or the date when the goods should have been delivered: Provided, that,
4. In this case, there is neither deterioration, disappearance, or destruction
if a notice of loss or damage, either apparent or concealed, is not given as provided
of goods caused by the carriers breach of contract.
for in this section, that fact shall not affect or prejudice the right of the shipper to
a. Whatever reduction there may have been in the value is not because
bring suit within one year after the delivery of the goods or the date when the goods
they have been deteriorated or disappeared because they had been
should have been delivered.
damaged in transit.
5. SC’s answer to petitioner’s argument: What is in issue is not the liability of
Mitsui for the handling of goods as provided by Sec. 3(6) of COGSA, but
its liability under the contract of carriage with Lavine as covered by laws of
more general application. In the case of any actual or apprehended loss or damage, the carrier and the receiver
i. The question before the RTC is not the particular sense of damages shall give all reasonable facilities to each other for inspecting and tallying the goods.
but Mitsui’s potential liability for the damages it has caused in
the general sense, and as such, the matter is governed by the
Civil Code, the Code of Commerce, and COGSA, for the
breach of its contract of carriage with Lavine.
ii. The suit is not for loss or damage to goods contemplated in
Sec. 3(6). The question of prescription is governed NOT by the
COGSA BUT by Art. 1144 of the Civil Code which provides
011 Southern Lines, Inc v. CA (Matsumura) 34. On August 24, 1948 NARIC shipped 1,726 sacks of rice with the City of
April 28, 1983 | Melencio-Herrera, J. | Shortage in weight of shipment Iloilo as consignee. The rice was boarded on SS “General Wright” owned
by Southern Lines, Inc.
PETITIONER: Sourthern Lines, Inc. 35. Each sack of rice weighed 75 kilos and the entire shipment as indicated in
RESPONDENTS: Court of Appeals, and City of Iloilo the bill of lading had a total weight of 129,450 kilos.
36. According to the bill of lading, the cost of the shipment was P63,115.50,
SUMMARY: The City of Iloilo ordered rice from the National Rice and Corn itemized and computed as follows:
Corporation (NARIC) who shipped 1,726 sacks of rice, with a total weight of
129,450 kilos, through a vessel owned by Southern Lines. According to the bill Unit price per bag P36.25 P62,567.50
of lading, the cost of the shipment was P63,115.50. Upon arrival to Iloilo, the
Handling at P0.13 per bag 224.38
City of Iloilo paid the full price, but it noted in the bill of lading that the goods
had a total shortage ascertained 13,319 kilos equivalent to P6,486.35 pesos. The Trucking at P2.50 per bag 323.62
City of Iloilo then filed a case against NARIC and Southern Lines for the ————
recovery of the P6,486.35 (price of shortage). The lower court absolved NARIC, Total P63,115.50
but ordered Southern Lines to pay P4,931.41 (the claim minus counterclaim).
The CA affirmed this. Hence, this case. 37. The City of Iloilo received the shipment on September 3, and paid
P63,115.50 (price in bill of lading).
The issue is W/N Southern Lines is liable for the shortage. The SC ruled YES. 38. At the foot of the bill of lading, it indicated that the City of Iloilo "Received
According to Art. 361 of the Code of Commerce, merchandise transported is by the above mentioned merchandise apparently in same condition as when
at the risk of the shipper if the loss is due to force majure, or by the inherent shipped, save as noted below: actually received 1685 sacks with a gross
nature of the goods. On the other hand, the common carrier is liable for damages weight of 116,131 kilos upon actual weighing. Total shortage
if it is proved that the damage is due to its negligence or failing to take the ascertained 13,319 kilos."
precautions which usage has established among careful persons. In the case at 39. The shortage of the weight was equivalent to 41 sacks of rice with a net
bar, Southern Lines itself admitted that the strings that tied the bags of rice weight of 13,319 kilos, the proportionate value of which was P6,486.35.
were broken; some bags were with holes and plenty of rice were spilled inside 40. The City of Iloilo filed a complaint with the CFI against NARIC and
the hull of the boat, and that the personnel of the boat collected no less than 26 Southern Lines for the recovery of the P6,486.35 representing the shortage
sacks of rice which they had distributed among themselves. It is thus obvious of the shipment.
that the shortage was due to Southern Lines’ own negligence. Hence, it should 41. The lower court absolved NARIC, but ordered Southern Lines to pay
be liable for the shortage. P4,931.41 which is the difference between the claim (P6,486.35) and
Southern Lines’ counterclaim for handling and freight (P1,554.94).
DOCTRINE: the carrier shall be liable for the losses and damages 42. The CA affirmed this judgment.
resulting from the causes mentioned in the preceding article if it is 43. Hence this petition for review on certiorari.
proved, as against him, that they arose through his negligence or by
reason of his having failed to take the precautions which usage has ISSUE/s:
established among careful persons, unless the shipper has committed 1. W/N Southern Lines is liable for the shortage of the rice shipped –
fraud in the bill of lading, representing the goods to be of a kind or Yes because the shortage of the rice was due to the negligence of
quality different from what they really were. Southern Lines, hence cannot be exempted from liability.

NARIC: Shipper/Seller RULING:


City of Iloilo: Consignee/Buyer
Souther Lines: Common Carrier RATIO:
1. Article 361 of the Code of Commerce provides:
FACTS:
33. In 1948, the City of Iloilo ordered rice from the National Rice and Corn
Corporation (NARIC) in Manila.
"ART. 361. — The merchandise shall be or spillage of the rice on account of the bad condition of the
transported at the risk and venture of the shipper, if sacks at the time it received the same and the negligence of the
the contrary has not been expressly stipulated. agents of City of Iloilo in receiving the shipment.
6. The SC ruled that this argument is untenable.
As a consequence, all the losses and deteriorations a. If the fact of improper packing is known to the carrier or
which the goods may suffer during the transportation by his servants, or apparent upon ordinary observation, but it
reason of fortuitous event, force majeure, or the accepts the goods notwithstanding such condition, it is not
inherent nature and defect of the goods, shall be for the relieved of liability for loss or injury resulting therefrom.
account and risk of the shipper. b. Further, according to the CA, Southern Lines itself frankly
Proof of these accidents is incumbent upon the admitted that the strings that tied the bags of rice were
carrier." broken; some bags were with holes and plenty of rice
were spilled inside the hull of the boat, and that the
2. Article 362 of the same Code provides: personnel of the boat collected no less than 26 sacks of
"ART. 362. — Nevertheless, the carrier shall be rice which they had distributed among themselves."
liable for the losses and damages resulting from the This finding, which is binding upon this Court, shows that
causes mentioned in the preceding article if it is proved, the shortage resulted from the negligence of Southern
as against him, that they arose through his negligence or Lines.
by reason of his having failed to take the precautions 7. ARGUMENT 2 OF SOUTHERN LINES: Invoking the provisions
which usage has established among careful persons, unless of Article 366 of the Code of Commerce and those of the bill of
the shipper has committed fraud in the bill of lading, lading, Southern Lines contends that The City of Iloilo is
representing the goods to be of a kind or quality different precluded from filing an action for damages on account of its
from what they really were. failure to present a claim within 24 hours from receipt of the
shipment.
If, notwithstanding the precautions referred to in a. Southern Lines cites Government vs. Ynchausti & Co, and
this article, the goods transported run the risk of being lost, Triton Insurance Co. vs. Jose which ruled that the
on account of their nature or by reason of unavoidable requirement that the claim for damages must be made
accident, there being no time for their owners to dispose of within 24 hours from delivery is a condition precedent to
them, the carrier may proceed to sell them, placing them the accrual of the right of action to recover damages.
for this purpose at the disposal of the judicial authority or 8. The SC also ruled against this argument.
of the officials designated by special provisions." a. These two cases above-cited are not applicable to the case
at bar. In the first cited case, the plaintiff never
3. Under the provisions of Article 361, in order a common carrier to
presented any claim at all before filing the action.
free itself from liability, it only has to prove that the damages
b. In the second case, there was payment of the
suffered by the goods were "by virtue of the nature or defect of
transportation charges which precludes the presentation
the articles."
of any claim against the carrier. (See Article 366, Code of
4. Meanwhile, under the provisions of Article 362, the consignee, in
Commerce.)
order to hold the common carrier liable, is obliged to prove that the
c. It is significant to note that in the American case of
damages to the goods by virtue of their nature, occurred on account
Hoye vs. Pennsylvania Railroad Co, the court ruled that:
of its negligence or because the defendant did not take the
precaution adopted by careful persons.
“A stipulation in the contract of shipment requiring the
5. ARGUMENT 1 OF SOUTHERN LINES (common carrier):
owner of the goods to present a notice of his claim to the
claims that it is exempted form liability because the shortage in the
carrier within a specified time after the goods have arrived
shipment of rice was due to factors such as the shrinkage, leakage
at their destination is in the nature of a condition precedent
to the owner's right to enforce a recovery, and that he must
show in the first instance that he 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 each 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 limitations was reasonable and in proper
form or within the time stated.'
d. In the case at bar, the record shows that Southern Lines
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.
e. Moreover, as the Court of Appeals has said:

". . . the records reveal that the City of Iloilo 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 City
of Iloilo 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."
012 ESSO STANDARD V MANILA RAILROAD CO. (ARMAND) FACTS:
September 28, 1979 | De Castro, J. | Prescriptive Period 1. Esso Standard filed in the City Court of Manila, Branch III, - a
PETITIONER: Esso Standard Eastern, Inc. complaint for the recovery of the sum of P2,691.18 for loss and
RESPONDENTS: Manila Railroad Co. and Manila Port Service damage caused to four shipments of goods consigned to it which
SUMMARY: On May 10, 1962, May 7, 1962, and May 30, 1962, four arrived from abroad on four different occasions in the year 1962 and
shipments owned by Esso Standard Eastern arrived onboard the following which were handled by Manila Port Service as arrastre operators for
vessels: "Genevieve Lykes," "Pioneer Moor" and "Pioneer Main" the port of Manila. Almost a year later, on January 7, 1966, the said
respectively. Because of loss and damage caused to the four shipments, Esso City Court rendered, on the basis of the stipulation of facts entered
filed a complaint in the City Court of Manila on February 1, 1964 for the sum into on November 20, 1964 by both parties and of the annexes
of P2,691.18 against Manila Railroad and Manila Port Service, the arrastre thereto, a decision dismissing the complaint. A motion for
operators for the port of Manila. On January 7, 1966, the City Court rendered, reconsideration of this decision was denied.
on the basis of the stipulation of facts (p. 32, Original CFI Records) entered 2. Thereafter, Esso Standard appealed to the Court of First Instance of
into on November 20, 1964 by both parties. Motion for reconsideration Manila, Branch V. On the basis of another stipulation of facts
denied. Esso appealed to the Court of First Instance of Manila, Branch V. On entered into on September 2, 1965 by both parties and of the annexes
the basis of another stipulation of facts (p. 69, Id) entered into on September of the stipulation of facts submitted before the City Court of Manila
2, 1965 by both parties and of the annexes of the stipulation of facts which were adopted by them as part of their respective evidence
submitted before the City Court of Manila which were adopted by them as before the Court of First Instance of Manila, said Court of First
part of their respective evidence before the Court of First Instance of Manila, Instance rendered on September 23, 1965 a decision reversing that of
said Court of First Instance rendered on September 23, 1965 a decision the City Court of Manila. Hence, this appeal.
reversing that of the City Court of Manila. The issue is WoN Esso’s right to 3. The basic issue in this appeal in whether Essto Standard’s right to
bring this action has already prescribed, the same having been brought bring this action has already prescribed, the same having been
beyond 1 month from the dates of the discharge of the shipments in brought beyond one (1) year from the dates of discharge of the
question – NO the right to bring the action has not yet prescribed. The shipments in question. Necessarily involved in this issue is the
Supreme Court ruled that in cases where the arrastre contractor does not act determination of whether the provisional claims herein involved
on the claim one way or the other within the period of one year from the date satisfy the condition set forth in Section 15 of the Management
of discharge of the last package, the claim should be deemed constructively Contract that the "claim for the value" should be filed within fifteen
denied or rejected upon the expiration of one year therefrom. In the facts of (15) days from the date of discharge of the last package of the said
the case, the dates of discharge from the vessels "Genevieve Lykes," "Pionee shipments.
Moor" and "Pioneer Main" are May 10, 1962, May 7, 1962, and May 30, ISSUE/s:
1962, respectively; that provisional claims therefor have all been seasonably 1. WoN Esso’s right to bring this action has already prescribed, the
filed but that the same have not been acted upon by MRR. Applying the same having been brought beyond 1 month from the dates of the
above-stated rule, said claims are then deemed constructively denied upon the discharge of the shipments in question – NO the right to bring the
expiration of one year from May 10, 1962, May 7, 1962, and May 30, 1962 or action has not yet prescribed. The Supreme Court ruled that in cases
more exactly on May 10, 1963, May 7,1963, and May 30, 1963, respectively. where the arrastre contractor does not act on the claim one way or
Counting from these dates the one-year period within which action may be the other within the period of one year from the date of discharge of
filed, the Supreme Court then found that this suit which has been filed on the last package, the claim should be deemed constructively denied
February 1, 1964 has not yet been barred by prescription. or rejected upon the expiration of one year therefrom.
RULING: WHEREFORE, the decision appealed from is hereby affirmed in
DOCTRINE: In cases where the arrastre contractor does not act on the claim toto.
one way or the other within the period of one year from the date of discharge SO ORDERED.
of the last package, the claim should be deemed constructively denied or RATIO:
rejected upon the expiration of one year therefrom
1. Manial Port Service contend that the said provisional claims are not specify the value of the loss still substantially fulfills the requirement
in compliance with Section 15 of the Management Contract because of the contract. ... and is not a defense against the claim of the
the latter requires the filing not merely of a "provisional claim' but of consignee for recovery after it shall have ascertained later its actual
a claim for the value. This argument lays much stress on the loss or damage" is clearly applicable to this case where Esso
terminological difference between a "provisional claim" and a Standard, at first, filed provisional claims advising defendants-
"claim for the value," which distinction is, in our opinion, of no appellants that the shipments stated therein have been damaged
consequential import. The test in determining whether the said and/or short-delivered, then followed the same with formal claims
section of the Management Contract has been complied with is specifying the value of the loss or damage suffered by the said
whether a claim, be it called a "Provisional claim" or a "claim for the shipments
value," has served the purpose of giving the arrastre operator(s) 5. Lastly, Manila Port Service, relying on the statement in the
reasonable opportunity to check the validity of the claim while the provisional claims that the shipments stated therein have been
facts are still fresh in the minds of the persons who took part in the damaged and/or short-delivered ex their respective carriers, argue
transaction and while the pertinent documents are still available that they cannot be held liable by the said provisional claims
2. Upon perusal of the said provisional claims, We find that they inasmuch as being arrastre operators, they are not responsible for
contain descriptions of the shipments in question sufficient to have loss or damage aboard, or under the control of the said carriers. This
allowed Manila Port Service to make a reasonable verification, argument is belied by the Stipulation of Facts submitted before the
consistent with our ruling in a long line of cases involving this same Court of First Instance of Manila. Stipulation Nos. 2, 3, and 4
argument. Accordingly, We hold that the filing of the said categorically state that the shipments therein stated have all been
provisional claim is a sufficient compliance with the requirement of discharged in good order unto the custody of defendant-appellant
said section of the Management Contract. Manila Port Service, implying thereby that the loss or damage to said
3. In furtherance of their stance that the provisional claims herein shipments occurred only when they were already within its safe-
involved fall short of the claims for the value contemplated and keeping.
required by the said section of the Management Contract, Manila 6. The foregoing discussion next brings up the question of whether the
Port Service contend that the said provisional do not claim for actual said provisional claims have been seasonably filed. Upon
and itemized goods lost or damaged but, instead, merely advise that examination of the aforementioned Stipulation of Facts, We find that
the entire shipments stated therein have been damaged and/or short- the dates of last discharge from the vessels "Genevieve Lykes......
delivered ex parte their respective. Stated otherwise, Manila Port Pioneer Moor", and "Pioneer Main" are May 10, 1962, May 7, 1962,
Service argue that inasmuch as the provisional claims do not state an and May 30, 1962, and that the provisional claims therefor have been
itemized specification of the value of the loss or damage suffered by filed on May 14, 1962, May 14, 1962, and May 30, 1962,
the shipments in question, said provisional claims cannot be respectively. It is obvious, then, that the said provisional claims to
categorized as "claims for the value," and, hence, cannot be said to have all been filed within the requisite 15-day period.
comply with the requirement of the aforesaid section of the 7. Manila Port Service claim that "it is illegal to shift to [them] the duty
Management Contract. of provising [plaintiff-appellees] case, i.e., to show that claims for
4. We cannot subscribe to this argument. In the first place, it is not the value were rejected or denied so as to extend further the running
necessary that the said provisional claimss should state a detailed fist of the prescriptive period." It is apparent from this argument that
of the loss or damage suffered by the said shipments; they only have Manila Port Service invoke prescription in their favor but would
to meet the test We have earlier mentioned. The reason behind this is rather have placed on Esso Standard the burden of proving that the
that the determination and preparation of the specific amount of suit has not yet prescribed. The claim that the suit has prescribed is
damages claimed should be done carefully and without haste, and an affirmative allegation. According to Rule 131, Section I of the
these can be done practically only in a formal claim which can be Revised Rules of Court, "Each party must prove his own affirmative
filed even long after a provisional claim has been filed. Secondly, allegation," and evidence need not be given in support of a negative
Our holding that the circumstance that the provisional claim did not
allegation. Hence, the Manila Port Service have the burden of
proving that the suit has prescribed.
8. Manila Port Service also contend that Section 15 of the Management
Contract should be interpreted to mean that "in cases where there is
no denial or rejection of the claim or when the denial or rejection is
made after the lapse of one year from the date of discharge of the
goods, the prescriptive period shall commence from the date of
discharge and not from the date of rejection." We have already had
occasion to rule on this point. In Delgado Brothers, Inc., et al. v.
Manila Port Service, et al., where herein Manila Port Service
insisted therein that "while there are two periods provided for in the
contract, in any event the suit must be filed within one year from the
date of arrival of the goods," We rejected the same, holding that "to
uphold this contention would [be] unfair to the consignee, for all that
the arrastre contractor would [do would] be to assure the [former]
that his claim is under consideration and that he would be informed
of its decision in due time; wait for one year; and then send notice
that the claim has prescribed." We have, thus, adopted the rule
that in cases where the arrastre contractor does not act on the
claim one way or the other within the period of one year from
the date of discharge of the last package, the claim should be
deemed constructively denied or rejected upon the expiration of
one year therefrom.
9. As earlier pointed out, the dates of discharge from the vessels
"Genevieve Lykes," "Pionee Moor" and "Pioneer Main" are May 10,
1962, May 7, 1962, and May 30, 1962, respectively; that provisional
claims therefor have all been seasonably filed but that the same have
not been acted upon by defendants- appellants. Applying the above-
stated rule, said claims are then deemed constructively denied upon
the expiration of one year from May 10, 1962, May 7, 1962, and
May 30, 1962 or more exactly on May 10, 1963, May 7,1963, and
May 30, 1963, respectively. Counting from these dates the one-
year period within which action may be filed, We find that this
suit which has been filed on February 1, 1964 has not yet been
barred by prescription.
013 SHELL CHEMICAL CO. v. MANILA PORT SERVICE a. The arrastre operator refused to pay the claim.
(MERILLES) 5. On August 8, 1963 Shell Chemical Company sued the Manila Port Service
July 7, 1976 | Aquino, J. | Period of filing action as stipulated in management and its principal, he Manila Railroad Company, in the municipal court of
contract Manila for the recovery of the said sum of P1,152.28.
6. MTC rendered judgement in favor of Shell.
7. On appeal, the CFI affirmed the MTC judgment.
PETITIONER: Shell Chemical Company (Philippines), Inc a. It ordered the Manila Port Service and the Manila Railroad
RESPONDENTS: Manila Port Service and/or Manila Railroad Company, later Company to pay solidarity to Shell Chemical Company the sum of
substituted by Philippine National Railways P1,152.28 with legal rate of interest from August 8, 1963 up to the
date of payment., plus P200 as attorney's fees
SUMMARY: Shell was the consignee of 15 drums of synthetic resin shipped by 8. Hence, this petition before the SC.
Asiatic. The vessel arrived at the port of Manila on August 7, 1962. The
following day, the cargo was unloaded in good order to Manila Port Services. ISSUE/s:
Manila Port then delivered the cargo to Shell on September 7, 1962. However, 1. WON Manila Port is liable for the lost cargo - NO, Shell failed to claim
one drum was missing. On January 25, 1963 (MONTHS AFTER) Shell filed a within the period agreed upon in their management contract
claim against Manila Port fo the value of the undelivered cargo. Manila Port
denied the claim. On August 1963, a suit was instituted in the MTC. The MTC RULING: WHEREFORE, the trial court's judgment is reversed and set aside and
and RTC, ruled in favor of Shell. plaintiff- appellee's claim is dismiss. No costs.
Manila Port brings the case to the SC alleging that under their management RATIO:
contract, Shell should have filed a claim within 15 days from discharge of the 1. Paragraph 15 of the management contract between the Manila Port Service
goods. and the Bureau of Customs provides that the Manila Port Service
a. "shall be relieved and released of any all responsibility or
The SC, in re-evaluating the facts, found that Shell filed a claim 15 days liability for loss, damage, misdelivery, and/or nondelivery of
BEFORE delivery— assuming that there would be defect in the delivery. The goods, unless suit in the court of proper jurisdiction is brought
SC held that this claim was premature. Failure to file the claim within the within a period of one (1) year from the date of the discharge
fifteen-day period prescribed in paragraph 15 relieves the arrastre contractor of of the goods, or from the date when the claim for the value of
any liability for nondelivery of the cargo and is a bar to the court action. such goods have been rejected or denied by the contractor,
provided that such claim shall have been filed with the
DOCTRINE: The filing of such a claim was a condition precedent to the contractor within fifteen (15) days from the date of the
institution of the suit for damages discharge of the last package from the carrying vessel”
2. It should be stressed that the management contract, including the conditions
in paragraph 15 thereof, was incorporated by reference in the gate passes
FACTS: and delivery permits which were used by the customs broker of Shell
1. Shell Chemical Company (Philippines), Inc, was the consignee of fifteen Chemical Company to obtain delivery of the cargo from the Manila Port
drums of synthetic resin shipped by Asiatic Petroleum Corporation of New Service.
York on board the SS Fernview That 3. ARGUMENT OF Manila Port Service and Manila Railroad Company:
a. The vessel arrived at port of Manila on August 7, 1962 they contend that Shell Chemical Company cannot recover the value of the
2. On the following day, August 8, the said cargo was unloaded and delivered missing cargo because it failed to comply with the condition precedent in
in good order to the Manila Port Service, the arrastre operator, a subsidiary paragraph 15 that the consignee should file a claim for loss or damage
of the Manila Railroad Company, now the Philippine National Railways. within fifteen days from the date of the discharge of the last package from
3. The Manila Port Service delivered to Shell Chemical Company on the carrying vessel.
September 7,1962 fourteen drums. One drum was missing. 4. Shell Chemical Company, instead of filing its claim within the fifteen-day
4. On January 25, 1963 Shell Chemical Company filed with the Manila Port period from August 8, 1962, anticipated the shortage or damage by filing
Service a formal claim for the value of the undelivered cargo in the sum of a provisional claim with the Manila Port Service on July 23, 1962 or
P1,152.28. fifteen (15) days before the arrival of the carrying vessel
5. The RTC ruling which stated that Shell is not bound but he management
contract because it was not a party or signatory is erroneous.
6. The management contract is enforceable against the consignee because, as
already noted, it was incorporated in the gate pass and delivery permit.
7. The consignee obtained delivery of the cargo by means of those documents.
8. The consignee availed itself of the arrastre operator's services.
9. Moreover, the consignee's action for damages is based on the provisions of
the management contract.
10. Paragraph 15 contains a stipulation for the liability of the arrastre service
contractor to the consignee. It is a sort of stipulation pour atrui within the
meaning of article 1311 of the Civil Code.
11. The consignee cannot be permitted to take advantage of the favorable
provisions of paragraph 15 and reject those that are disadvantageous to it
12. The instant action of Shell Chemical Company should be dismissed because
it did not file any claim within the fifteen day period.
a. The filing of such a claim was a condition precedent to the
institution of the suit for damages
13. The provisional claim which Shell Chemical Company filed on July 23,
1962, fifteen days before the vessel's arrival at the port of Manila in
anticipation of any possible shortage or damage, was premature and
speculative. It was not in compliance with paragraph 15.
14. Even the filing of a provisional claim on the day of the vessels arrival but
one day prior to the discharge of the cargo was held to be a noncompliance
with paragraph 15
15. Failure to file the claim within the fifteen-day period prescribed in
paragraph 15 relieves the arrastre contractor of any liability for nondelivery
of the cargo and is a bar to the court action
014 FILIPRO v. MANILA RAILROAD (PELIÑO)
May 17, 1980 | Makasiar, J. | Reckoning point of filing suit; reckoning point when FACTS:
arrastre makes no action on the claims **Filipro – consignee; Manila Railroad and Manila Port – arrastre operators**
44. Filipro, Inc. (Filipro) filed an action to recover the value of imported goods
PLAINTIFF-APPELLEE: Filipro, Inc. discharged at the port of Manila, into the custody of Manila Railroad
DEFENDANTS-APPELLANTS: Manila Railroad Company and Manila Port Service Company and Manila Port Service (Manila Railroad and Manila Port) as
operators of the arrastre service in that port, and not delivered or delivered
SUMMARY: On different dates, 7 shipments of goods consigned to Filipro were in bad condition to Filipro as consignee of the goods.
discharged at the port of Manila into Manila Port’s custody. The goods consigned either 45. On different dates, 7 shipments of goods consigned to Filipro were
arrived in bad condition or were not delivered. (Kindly see table for the dates) Because of discharged at the port of Manila into the Manila Port’s custody:
this, Filipro made provisional and formal claims on the goods, but no action was taken by
Manila Railroad and Manila Port. So Filipro filed a case in the CFI of Manila, but it was
SHIPMENT DISCHARGE PROVISIONAL FORMAL VALUE
first dismissed since the total demand was under the exclusive jurisdiction of an inferior
FROM CLAIM CLAIM
court. On September 14, 1963, Filipro brought an action in the CFI for the recovery of
VESSEL
Php 6,885.39 representing the total value of the losses and damages to the consigned
goods, Php 2,500 for unrealized profits, and Php 2k for atty’s fees. The CFI rendered Last package July 27, 1962 August 1, 1962 August 27, Php
judgment in favor of Filipro. Hence, this appeal by Manila Railroad and/or Manila Port. of 1st shipment 1962 1,527.32
The issues in this case are: (1) whether or not the complaint is barred on the ground that Last package August 9, 1962 August 16, 1962 September Php
Filipro failed to file suit in the court of proper jurisdiction within 1 year from date of of 2nd 4, 1962 1,747.45
discharge of the goods; (2) whether or not the complaint is barred on the ground that shipment
Filipro failed to file the claims for the value of the cargoes within 15 days from date of Last package September 2, September 12, October 18, Php
discharge of last packages; and (3) whether or not the amount of damages awarded was of 3rd shipment 196214 1962 1962 90.95
correct. With regard to the first issue, the SC ruled in the negative because in order to Last package September 5, September 12, January 3, Php
hold the arrastre liable for the goods lost or damaged, the claimant, based on par. 15, of 4th shipment 1962 1962 1963 1,181.26
takes 2 steps: (1) must file with the operator a claim for the value of the goods within 15 Last package September 9, September 17, October 26 Php
days from the date of discharge of the last package from the carrying vessel and (2) suit of 5th shipment 1962 1962 and 1,599.09
should be brought in the court of proper jurisdiction within 1 year from the date of December
discharge of the goods or from the date when the claim for the value of the goods has 18, 1962
been rejected or denied. Filipro has 2 periods within which to file its action: 1 year from Last package September 9, October 10, 1962 October 26, Php
the date of discharge of the goods and 1 year from the rejection or denial of its claim for of 6th shipment 1962 1962 212.04
the value. And even if there was no action, express or implied on the part of Manila Port Last package October 4, 1962 Php
and Manila Railroad, they will be deemed to have denied the importer’s claim upon the of 7th shipment 212.59
expiration of 1 year from the date when the last package was discharged from the carrying
vessel. As to the second issue, the SC ruled in the negative because provisional claim may 46. No action was taken by Manila Railroad and Manila Port on the provisional
be sufficient even if the value of the goods involved were not stated therein, provided it and formal claims made by Filipro.
describes the goods sufficiently to permit its identification by the operator and the a. So on July 27, 1963, Filipro brought an acation against Manila Railroad
determination by the latter of the facts relevant thereto. As to the thid issue, the SC ruled
and Manila Port in the CFI of Manila.
in the negative because when you compute everything, you’ll arrive at a different sum.
b. But the CFI dismissed based on lack of jurisdiction on the subject
DOCTRINE: In order to hold the arrastre liable for the goods lost or damaged, the matter since the total demand was only Php 7,885.79, a case within the
claimant, based on par. 15, takes 2 steps: (1) must file with the operator a claim for the exclusive jurisdiction of the lower courts.
value of the goods within 15 days from the date of discharge of the last package from the c. It was in this action that Manila Railroad and Manila Port denied the
carrying vessel and (2) suit should be brought in the court of proper jurisdiction within 1 claims of Filipro in their answer dated August 3, 1963.
year from the date of discharge of the goods or from the date when the claim for the value 47. On September 14, 1963, Filipro brought an action in the CFI of Manila for
of the goods has been rejected or denied. There are 2 periods within which to file: 1 year the recovery of Php 6,885.39: total value of losses and damages to several
from the date of discharge of the goods and 1 year from the rejection or denial of its claim
for the value. And even if there was no action, express or implied, on the part of the

arrastre as to the claims, jurisprudence provides that they will be deemed to have denied 14
In the latter part of the decision, SC said that based on the record on appeal, the date of the discharge
the importer’s claim upon the expiration of 1 year from the date when the last package rd
from vessel of the last package of the 3 shipment was September 4, 1962. I don’t know how to
was discharged from the carrying vessel. reconcile that with this fact given.

shipments consigned to it; Php 2,500 for unrealized profits; Php 2k for 7. WON the complaint is barred on the ground that Filipro failed to file the
atty’s fees and cost of suit. claims for the value of the cargoes within 15 days from date of discharge of
48. The parties submitted a stipulation of facts and the only issue for judicial last packages. – NO, a provisional claim may be sufficient even if the value
determination was whether Filipro complied with the provisions of par. 15 of the goods involved were not stated therein, provided it describes the
of the Management Contract in the filing of its claims.15 goods sufficiently to permit its identification by the operator and the
a. Court rendered judgment in Filipro’s favor. determination by the latter of the facts relevant thereto
49. Hence, this appeal by Manila Railroad and/or Manila Port. 8. WON the amount of damages awarded was correct. – NO, if you compute
50. MANILA RAILROAD AND MANILA PORT’S ASSIGNMENT OF the whole thing you’ll arrive at a different sum.
ERRORS: (Please read the footnote; will be referring to the assignment of
errors as first, etc.) RULING: WHEREFORE, Manila Port and Manila Railroad are hereby
a. First: Filipro’s 1st-5th causes of action on their complaint have already DIRECTED to pay JOINTLY AND SEVERALLY Filipro the sum of Php 6,570.70.
prescribed, so Manila Railroad and Manila Port have been released and Thus modified, the judgment appealed from is hereby AFFIRMED in all other
relieved from any and all responsibility for failure of Filipro to file suit respects.
in the court with proper jurisdiction within 1 yr from date of discharge
of the goods based on par. 15 of the Management Contract. RATIO:
b. Second: Complaint is barred for Filipro’s failure to file the claims for On whether the complaint is barred on the ground that Filipro failed to file suit in
the values of the cargoes within 15 days from date of discharge of last the court of proper jurisdiction within 1 year from date of discharge of the goods
packages from their respective carrying vessels and that they Manila 1. Manila Railroad and Manila Port: action of Filipro in the CFI was already
Railroad and Manila Port are relieved from liability based on par. 15 of time-barred since it was brought 1 year after the date of last discharge of the
the Management Contract. goods, contrary to par. 15 of the Management Contract.
c. Third: Total value of the losses and damages of the shipments in the 1st- a. Computation should be solely from the date of discharge of the goods
7th causes of action is only Php 6,530.70 and not Php 6,885.39. from the carrying vessel (see table, column 2) since the claims have not
d. Fourth: The lower court erred in rendering judgment in favor of Filipro been expressly rejected or denied by them.
ordering them to pay Php 6,885.39 with legal interest of 6% per annum b. Since the complaint was filed 1 year after the date of the last discharge
from September 14, 1963, date of filing of complaint until the principal of the goods, then they are time-barred.
shall have been paid with costs against Manila Railroad and Manila 2. SC: Wrong. In order to hold the arrastre liable for the goods lost or
Port. damaged, the claimant, based on par. 15, takes 2 steps: (1) must file with
the operator a claim for the value of the goods within 15 days from the
ISSUE/s: date of discharge of the last package from the carrying vessel and (2)
6. WON the complaint is barred on the ground that Filipro failed to file suit in suit should be brought in the court of proper jurisdiction within 1 year
the court of proper jurisdiction within 1 year from date of discharge of the from the date of discharge of the goods or from the date when the claim
goods. – NO, in order to hold the arrastre liable for the goods lost or for the value of the goods has been rejected or denied.
damaged, the claimant, based on par. 15, takes 2 steps: (1) must file with a. They overlooked the fact that Filipro has 2 periods within which to
the operator a claim for the value of the goods within 15 days from the date file its action: 1 year from the date of discharge of the goods and 1
of discharge of the last package from the carrying vessel and (2) suit should year from the rejection or denial of its claim for the value.
be brought in the court of proper jurisdiction within 1 year from the date of b. Manila Railroad and Manila Port can’t deny Filipro of these
discharge of the goods or from the date when the claim for the value of the alternatives.
goods has been rejected or denied. There are 2 periods within which to file: 3. Considering, however, that no action, implied or express, was taken by
1 year from the date of discharge of the goods and 1 year from the rejection Manila Railroad and Manila Port on the claims of Filipro, how should the 1
or denial of its claim for the value. year prescriptive period be computed?
a. Union Carbide v. Manila Railroad: This case provided that in case of
inaction on the part of the arrastre, he shall be deemed to have rejected
15
Par. 15 of the Management Contract provides: “… in any event the CONTRACTOR (arrastre operator) or denied the importer’s claim upon the expiration of 1 year from the
shall be relieved and released of any and all liability for loss, damage, misdelivery and/or non-delivery of
goods, unless suit in the court of proper jurisdiction is brought within… one (1) year from the date of
date when the last package was discharged and that the period
discharge of the goods or from the date when the value of such goods has been rejected or denied by within which to file the suit shall then begin to run.
the CONTRACTOR within fifteen (15) days from the date of discharge of the last package from the b. Since Manila Railroad and Manila Port did not act on the provisional
carrying vessel.
and formal claims of Filipro, based on the Union Carbide case, they to the agreement is to render judgment strictly based on the facts agreed
will be deemed to have denied the importer’s claim upon the upon.
expiration of 1 year from the date when the last package was
discharged from the carrying vessel. (see table, column 2 again). **There was a fourth assignment of error but the SC said that it’s merely a corollary
c. The dates should be the starting point in reckoning the 1 year of the first 3, so they didn’t discuss this anymore.**
prescriptive period wihin which they should file the court action. Since
the complaint was filed on September 14, 1963, it should be considered
seasonably filed.

On whether the complaint is barred on the ground that Filipro failed to file the
claims for the value of the cargoes within 15 days from the date of discharge of last
packages
1. Manila Port and Manila Railroad: Inasmuch as the 15-day period had
expired before the filing of the formal claims in connection with each one of
the 7 shipments, Filipro should be deemed barred from recovering the
indemnity.
a. Provisional claims which were filed within the 15-day period
requirement of the Management Contract are not claims “for the value”
of the goods lost, damaged, or not delivered to Filipro.
2. SC: The theory is manifestly untenable since (1) it assumes that the claim
must state the value of the goods which par. 15 doesn’t require and (2) a
provisional claim may be sufficient even if the value of the goods
involved were not stated therein, provided it describes the goods
sufficiently to permit its identification by the operator and the
determination by the latter of the facts relevant16 thereto, while the
facts are still fresh in the minds of the persons who took part in the
transaction and while the documents are still available.
a. Domestic Insurance v. Manila Railroad: The circumstance that
provisional claim did not specify the value of the loss doesn’t detract
from the fact that the claim still substantiall fulfills the requirements of
the contract mentioned and is not a defense against the claim of the
consignee for the recovery after it shall have ascertained later its actual
loss or damage.

On whether the amount of damages awarded was correct


1. The CFI awarded Php 6,885.39 representing the value of the lost and
damaged goods.
2. SC: Mathematical computation of the value of the goods (see table, last
column) which were not delivered or in bad condition, as agreed upon by
the parties, would show that total amount is Php 6,570.70.
a. If you add everything together, that’s what you get.
b. CFI awarded Php 6,885.39, which is erroneous since the parties
submitted the case upon stipulated facts, and there is no other evidence
introduced, so the duty of the court in a case where there is no objection

16
Name of carrying vessel, date of arrival, corresponding bill of lading, or other shipping documents in
which the value of the goods is set forth.
015 PCIC v. CHEMOIL (PLEYTO) it fails to do so, no right of action against the carrier can accrue in favor of
June 29, 2005 | Chico-Nazario, J. | Notice based on Article 366 of the Code the former. Also, based on the 2nd paragraph of Article 366 of the Code of
of Commerce Commerce: It is not only when the period to make a claim has elapsed that
no claim whatsoever shall be admitted, as no claim may similarly be
PETITIONER: Philippine Charter Insurance Corporation admitted after the transportation charges have been paid. PCIC is of the view
RESPONDENT: Chemoil Lighterage Corporation that the payment for services does not invalidate its claim. SC does not agree.
There is no evidence to confirm that the notice of claim was filed within the
SUMMARY: Samkyung shipped dioctyl phthalate on board MT Tachibana period provided for under Article 366 of the Code of Commerce. PCIC’s
to Plastic Group Phils., Inc (PGP) in Manila. PGP insured the cargo with contention proceeds from a false presupposition that the notice of claim was
PCIC against all risks. MT Tachibana unloaded the cargo to the tanker barge timely filed.
of Chemoil and transport it to Del Pan Bridge in Pasig River. The tanker
barge would then unload the cargo to tanker trucks also owned by Chemoil, DOCTRINE: The filing of a claim with the carrier within the time limitation
and haul it by land to PGP’s storage tanks in Calamba. When PGP inspected therefore actually constitutes a condition precedent to the accrual of a right of
it, the samples showed discoloration from yellowish to amber, demonstrating action against a carrier for loss of, or damage to, the goods. The shipper or
that it was damaged because DOP is colorless and water clear. After being consignee must allege and prove the fulfillment of the condition. If it fails to
adjusted, the final amount to be paid was P5M. PGP paid and issued a do so, no right of action against the carrier can accrue in favor of the former.
subrogation receipt to PCIC. PCIC filed an action for damages before the Also, based on the 2nd paragraph of Article 366 of the Code of Commerce: It
RTC against Chemoil. Chemoil filed an answer with compulsory is not only when the period to make a claim has elapsed that no claim
counterclaims, admitting that the shipment did occur but before the DOP was whatsoever shall be admitted, as no claim may similarly be admitted after the
loaded into its barge, GIT, the surveyor/representative of PGP, inspected it transportation charges have been paid.
and found it clean, dry and fit for loading. It also allegesd that the contract
states that it will be free from claims against contamination, loss of cargo or FACTS:
part, and that the consignee accepted it without protest. Also, that it exercised Philippine Charter Insurance Corporation (PCIC) - domestic corporation
extraordinary diligence. RTC ruled in favor of PCIC. Chemoil appealed to engaged in the business of non-life insurance
the CA, alleging that PGP failed to file any notice, claim, or protest within Chemoil Lighterage Corporation (Chemoil) - a domestic corporation engaged
the period required by the Article 366 of the Code of Commerce, which is a in the transport of goods
condition precedent to the accrual of a right against the carrier. A telephone Samkyung Chemical Company (Samkyung) – shipper
call, supposedly made by a certain Alfred Chan, an employee of PGP, to one Plastic Group Phils, Inc. (PGP) - consignee
of the the VPs of Chemoil, informing the latter of the discoloration, is not the 4. Jan. 24, 1991: Samkyung Chemical Company, Ltd., based in Ulsan,
notice required by Article 366. CA reversed the RTC’s decision. The issues South Korea, shipped the liquid chemical Dioctyl Phthalate (DOP)
in this case are WoN the notice of claim was filed on time; and if in the on board MT Tachibana to the Philippines:
affirmative, WoN the damage to the cargo was due to the fault or negligence a. 62.02 metric tons valued at $90,201.57 under Bill of Lading
of Chemoil. SC ruled in favor of Chemoil. The finding of the CA does not No. ULS/MNL-1
actually contradict the finding of the RTC with regard to the giving of notice b. 436.70 metric tons valued at $634,724.89 under Bill of
of claim. Both courts held that, indeed, a telephone call was made by Chan to Lading No. ULS/MNL-2
Abastillas, informing the latter of the contamination. However, nothing in the 5. The consignee of the shipment was PGP in Manila
trial courts decision stated that the notice of claim was relayed or filed with 6. PGP insured the cargo with PCIC against all risks
Chemoil immediately or within a period of 24 hours from the time the goods a. Marine Policy No. MRN-30721 dated Feb. 6, 1991 for
were received. The filing of a claim with the carrier within the time P31,757,969.19
limitation therefore actually constitutes a condition precedent to the accrual b. Marine Policy No. MRN-30722 (same date) for
of a right of action against a carrier for loss of, or damage to, the goods. The P4,514,881.00
shipper or consignee must allege and prove the fulfillment of the condition. If
7. Marine Endorsement No. 2786 dated May 11, 1991 was attached and c. The loading and unloading were also done under the control
formed part of the first marine policy, amending the latters insured and supervision of PGPs surveyor/rep
value to P24,667,422.03, and reduced the premium d. The contract between it and PGP expressly stipulated that it
8. The ocean tanker MT Tachibana unloaded the cargo to the tanker shall be free from any and all claims arising from
barge of Chemoil, which shall transport the same to Del Pan Bridge contamination, loss of cargo or part thereof; that PGP
in Pasig River accepted the cargo without any protest or notice; and that
9. The tanker barge would unload the cargo to tanker trucks also owned cargo shall be insured by its owner sans recourse against all
by Chemoil, and haul it by land to PGP’s storage tanks in Calamba, risks
Laguna e. As subrogee, PCIC was bound by this stipulation
10. Upon inspection by PGP, the samples taken from the shipment f. As carrier, no fault or negligence can be attributed against
showed discoloration from yellowish to amber, demonstrating that it Chemoil as it exercised extraordinary diligence
was damaged, as DOP is colorless and water clear 17. RTC: PCIC should be paid P5M with legal interest from the date of
11. PGP then sent a letter to PCIC where it fomally made an insurance filing
claim for the loss it sustained due to the contamination 18. Chemoil sought relief with the CA where it alleged that PGP failed
12. PCIC requested an independent insurance adjuster, the GIT to file any notice, claim, or protest within the period required by
Insurance Adjusters, Inc. (GIT) to conduct a quantity and condition Artcle 36617 of the Code of Commerce, which is a condition
survey of the shipment precedent to the accrual of a right of action against the carrier.
a. GIT’s report: Inspection of cargo tanks showed manhole 19. A telephone call, supposedly made by a certain Alfred Chan, an
covers of ballast tanks ceilings loosely secured. It was also employee of PGP, to one of the the VPs of Chemoil, informing the
noted that the rubber gaskets of the manhole covers of the latter of the discoloration, is not the notice required by Article 366.
ballast tanks reacted to the chemical causing shrinkage thus, 20. CA: reversed the RTC’s decision.
loosening the covers and cargo ingress to the rusty ballast
tanks ISSUE/s:
13. PGP paid the amount of P5M as full and final payment for the loss. 1. WoN the notice of claim was filed within the required period – NO.
PGP issued a subrogation receipt to PCIC This was not proven by Chemoil.
14. PGP paid Chemoil the amount of P301,909.5 as full payment for the 2. If in the affirmative, WoN the damage to the cargo was due to the
latters services, evidenced by an official receipt fault or negligence of Chemoil – no longer relevant
15. An action for damages was instituted by PCIC against Chemoil
before the RTC, praying for: RULING: SC affirmed the CA’s decision
a. Actual damages – P5M
b. Attorney’s fees – no less than P1M RATIO:
c. Costs of suit 10. As to the first issue, PCIC contends that the notice of contamination
16. CHEMOIL’S ARGUMENTS: was given by Alfredo Chan, an employee of PGP, via a telephone
a. Answer with Compulsory Counterclaim was filed by call to Ms. Encarnacion Abastillas, VP for Administration and
Chemoil. It admitted it undertook to transport the shiptment Operations of Chemoil, at the time of the delivery of the cargo, and
from MT Tachibana to the Del Pan Brige, Pasig River, therefore, within the required period
where it was transferred to its tanker trucks for hauling to
PGPs storage tanks in Calamba, Laguna 17
ARTICLE 366. Within the twenty-four hours following the receipt of the merchandise, the claim
b. It alleged that before the DOP was loaded into its barge, the against the carrier for damage or average 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
surveyor/representative of PGP, Adjustment Standard ascertained from the outside part of such packages, in which case the claim shall be admitted only at the
Corporation, inspected it and found it clean, dry, and fit for time of receipt. After the periods mentioned have elapsed, or the transportation charges have been
loading paid, no claim shall be admitted against the carrier with regard to the condition in which the goods
transported were delivered.
11. Chemoil, however, claims that the supposed notice was denied by •Chan’s testimony reveals that he does not have personal
Ms. Abastillas knowledge that the drivers of Chemoil were informed of the
12. Between the testimonies of Chan and Abastillas, the latters testimony contamination.18
is purportedly more credible because it would be quite unbelievable 19. The requirement that a notice of claim should be filed within the
and contrary to business practice for Chan to merely make a verbal period stated in Article 366 is not an empty proviso.
notice of claim that involves millions of pesos 20. Roldan v. Lim Ponzo and Co.: The object sought to be attained by
13. On this point, the CA said that a telephone call constitutes substantial the requirement of the submission of claims in pursuance of this
compliance with the requirement of notice considering that the notice article is to compel the consignee of goods entrusted to a carrier
was given to a responsible official, the Vice-President, who promptly to make prompt demand for settlement of alleged damages
replied that she will look into the matter. suffered by the goods while in transport, so that the carrier will
• However, it must be pointed out that compliance with the be enabled to verify all such claims at the time of delivery or
period for filing notice is an essential part of the within twenty-four hours thereafter, and if necessary fix
requirement, i.e.. immediately if the damage is apparent, or responsibility and secure evidence as to the nature and extent of
otherwise within twenty-four hours from receipt of the the alleged damages to the goods while the matter is still fresh in
goods, the clear import being that prompt examination of the the minds of the parties.
goods must be made to ascertain damage if this is not 21. Philippine American General Insurance Co., Inc. v. Sweet Lines,
immediately apparent. Inc.: More particularly, where the contract of shipment contains a
• They were unable to find any proof of compliance with the reasonable requirement of giving notice of loss of or injury to the
required period, which is fatal to the accrual of the right of goods, the giving of such notice is a condition precedent to the
action against the carrier. action for loss or injury or the right to enforce the carrier’s
14. PCIC’s argument: there was an incongruity in the findings of facts liability. Such requirement is not an empty formalism. The
of the trial court and the CA, the former allegedly holding that the fundamental reason or purpose of such a stipulation is not to relieve
period to file the notice had been complied with, while the latter held the carrier from just liability, but reasonably to inform it that the
otherwise shipment has been damaged and that it is charged with liability
15. SC disagrees with PCIC. The finding of the CA does not actually therefore, and to give it an opportunity to examine the nature
contradict the finding of the RTC with regard to the giving of notice and extent of the injury. This protects the carrier by affording it
of claim an opportunity to make an investigation of a claim while the
16. Both courts held that, indeed, a telephone call was made by Chan to matter is fresh and easily investigated so as to safeguard itself
Abastillas, informing the latter of the contamination. from false and fraudulent claims.
• However, nothing in the trial courts decision stated that the 22. The filing of a claim with the carrier within the time limitation
notice of claim was relayed or filed with Chemoil therefore actually constitutes a condition precedent to the accrual of
immediately or within a period of 24 hours from the time the a right of action against a carrier for loss of, or damage to, the goods.
goods were received.
17. CA made the same finding. Having examined the entire records of
the case, we cannot find a shred of evidence that will precisely and
ultimately point to the conclusion that the notice of claim was timely
18
Q:
Mr. Witness, were you in your plant site at the time these various cargoes were delivered?
relayed or filed.
A: No, sir.
18. PCIC’s argument: Not only the VP was informated but also its Q: So, do you have a first hand knowledge that your plant representative informed the driver of the
drivers, as testified by Chan, furing the time the delivery was made alleged contamination?
• Cannot be given great weight as no driver was presented to A: What do you mean by that?

Q: Personal knowledge [that] you yourself heard or saw them [notify] the driver?
the witness stand to prove this A: No, sir

23. 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.
24. The aforementioned requirement is a reasonable condition precedent;
it does not constitute a limitation of action.
25. The second paragraph of Article 366 of the Code of Commerce is
also edifying. It is not only when the period to make a claim has
elapsed that no claim whatsoever shall be admitted, as no claim
may similarly be admitted after the transportation charges have
been paid.
26. In this case, there is no question that the transportation charges have
been paid, as admitted by PCIC, and the corresponding official
receipt duly issued.
27. But PCIC is of the view that the payment for services does not
invalidate its claim. It contends that under the second paragraph of
Article 366 of the Code of Commerce, it is clear that if notice or
protest has been made prior to payment of services, claim against the
bad order condition of the cargo is allowed.
28. SC does not agree. There is no evidence to confirm that the notice of
claim was filed within the period provided for under Article 366 of
the Code of Commerce. PCIC’s contention proceeds from a false
presupposition that the notice of claim was timely filed.
29. Considering that we have resolved the first issue in the negative, it is
therefore unnecessary to make a resolution on the second issue.
016 LOADSTAR v. CA (Sabaupan) Three kinds of stipulations have often been made in a bill of lading. The first is
28 September 1999 | Davide, Jr., C.J. | Limited liability rule one exempting the carrier from any and all liability for loss or damage
occasioned by its own negligence. The second is one providing for an
PETITIONER: Loadstar Shipping Co. Inc. unqualified limitation of such liability to an agreed valuation. And the third is
RESPONDENTS: Court of Appeals and The Manila Insurance Co. Inc. one limiting the liability of the carrier to an agreed valuation unless the shipper
declares a higher value and pays a higher rate of freight. According to an almost
SUMMARY: Loadstar received on board its vessel wood products for shipment. uniform weight of authority, the first and second kinds of stipulations are invalid
The goods were insured by MIC. The vessel sank off Limasawa Island while on as being contrary to public policy, but the third is valid and enforceable.
its way to Manila from Agusan del Norte resulting to the loss of goods. Loadstar
refused to pay for the loss of goods, so MIC paid the insured. MIC filed a FACTS:
complaint against Loadstar and PGAI alleging that the sinking of the vessel was Parties
due to the fault or negligence of Loadstar and its employees. RTC ruled in favor Loadstar Shipping Co., Inc. (Loadstar) – carrier
of MIC which was affirmed by CA. Loadstar argues that it was a private carrier Manila Insurance Co. (MIC) – insurer of goods
because there was only “one shipper, one consignee for a special cargo” and 51. Loadstar received on board its M/V “Cherokee” (vessel) goods (lawanit
consequently, it cannot be presumed to have been negligent, and the burden of hardwood, crates of tilewood assemblies, mouldings R&W and apitong
proving otherwise is on MIC. Also, because it was a private carrier, the limited bolidenized) for shipment amounting to P6,067,178 and which was insured
liability rule applies and the provision in the bill of lading that the cargo was for the same amount with MIC. The vessel was insured by PGAI for P4
being shipped at “owner’s risk” is valid. Moreover, Loadstar argues that the million.
vessel was seaworthy, and the cause of the loss was due to force majeure. It also 52. In November 1984, the vessel along with its cargo sank off Limasawa
raised the defense of prescription. MIC counters that Loadstar was a common Island while on its way to Manila from Agusan Del Norte. Consignee made
carrier and that the loss was caused by its negligence. And since there was a claim with Loadstar which was refused. MIC, as insurer, paid the insured
negligence, the limited liability rule does not apply. The issues are whether in full settlement of its claim, and insured executed a subrogation receipt
Loadstar is a common carrier and whether Loadstar is liable for the loss. The therefor.
Supreme Court ruled in the affirmative on both issues. In this case, there are no 53. In February 1985, MIC filed a complaint against Loadstar and PGAI
records that the vessel undertook to carry a special cargo or was chartered to a alleging that the sinking of the vessel was due to the fault or negligence of
special person only. There was no charter party. The bills of lading failed to Loadstar and its employees. Loadstar denied any liability for the loss of the
show any special arrangement, but only a general provision to the effect that the goods and claimed that the sinking of the vessel was due to force majeure.
vessel was a “general cargo carrier.” (see doctrine). Loadstar is liable because of PGAI was later dropped as a party defendant after it paid the insurance
its negligence. It was found that when the vessel embarked on its voyage, the proceeds to Loadstar.
vessel was not sufficiently manned. Loadstar was at fault or negligent in not 54. RTC ruled in favor of MIC. CA affirmed. CA, in dismissing the appeal filed
maintaining a seaworthy vessel and in having allowed its vessel to sail despite by Loadstar ruled that:
knowledge of an approaching typhoon. As to the limited liability, the stipulation a. Loadstar cannot be considered a private carrier on the sole ground
in this case effectively reduces the common carrier’s liability for the loss or that there was a single shipper on the voyage. The charter of the
destruction of the goods to a degree less than extraordinary, that is, the carrier is vessel was limited to the ship, but Loadstar retained control over
not liable for any loss or damage to shipments made at “owner’s risk.” Such its crew.
stipulation is obviously null and void for being contrary to public policy. b. The vessel was not seaworthy because it was undermanned on the
day of the voyage. If it had been seaworthy, it could have
DOCTRINE: The bare fact that the vessel was carrying a particular type of withstood the “natural and inevitable action of the sea” in
cargo for one shipper, which appears to be purely coincidental, is not reason November 1984 when the condition of the sea was moderate. The
enough to convert the vessel from a common to a private carrier, especially vessel sank not because of force majeure but because it was not
where, as in this case, it was shown that the vessel was also carrying passengers. seaworthy. Loadstar’s allegation that the sinking was due to the
“convergence of winds” as stated by a PAGASA expert was not
For a vessel to be seaworthy, it must be adequately equipped for the voyage and proven during trial.
manned with a sufficient number of competent officers and crew. Moreover, the c. The “limited liability rule” does not apply because there was an
doctrine of limited liability does not apply where there was negligence on the actual finding of negligence on the part of the carrier.
part of the vessel owner or agent. d. There was a clear breach of contract of carriage when the goods
never reached their destination. The defense of “diligence of a was a “general cargo carrier.” Neither was there any “special
good father of a family” in the training and selection of its crew is arrangement” between Loadstar and the shipper regarding the
unavailing because this is not a proper or complete defense in shipment of the cargo. The singular fact that the vessel was
culpa contractual. carrying a particular type of cargo for one shipper is not sufficient
55. Loadstar’s Arguments: to convert the vessel into a private carrier.
a. Private carrier. The vessel was private carrier because it was not c. Loadstar liable because it was negligent. Loadstar was liable
issued a certificate of public convenience, it did not have a regular notwithstanding that the loss of cargo was due to force majeure
trip or schedule nor a fixed route, and there was only “one shipper, because the same concurred with Loadstar’s fault or negligence.
one consignee for a special cargo.” As a private carrier, it cannot d. Defense of prescription was waived. The issue of prescription
be presumed to have been negligent, and the burden of proving was not raised in the court below.
otherwise is on MIC. e. Limited liability not applicable. Limited liability is not
b. The vessel was seaworthy. Before the voyage, it was allegedly applicable because Loadstar was at fault or negligent, and because
drydocked at Keppel Philippine Shipyard and was duly inspected it failed to maintain a seaworthy vessel. Authorizing the voyage
by the maritime safety engineers of the Philippine Coast Guard notwithstanding its knowledge of a typhoon is tantamount to
who certified that the ship was fit to undertake a voyage. Its crew negligence.
at the time was experienced, licensed and unquestionably
competent. Hence, Loadstar exercised the diligence of a good ISSUE/s:
father of a family in ensuring the vessel’s seaworthiness. 9. Whether M/V “Cherokee” is a common carrier – YES, there was no charter
c. Force majeure. The loss was due to force majeure. When the party agreement and the bare fact that the vessel was carrying a particular
vessel left Agusan del Norte, the weather was fine until the next type of cargo for one shipper, which appears to be purely coincidental, is
day when the vessel sank due to strong waves. A witness fully not reason enough to convert the vessel from a common to a private carrier.
established the existence of two typhoons (Welfring and Yoling) 10. Whether Loadstar is liable for the loss – YES, because it was not seaworthy
inside the Philippine Area of Responsibility. In fact, signal no. 1 when it embarked on its voyage and because the “limited liability” theory is
was declared over Eastern Visayas, which includes Limasawa not applicable.
Island. The witness also testified that the convergence of winds 11. Whether the claim has prescribed.
brought about by these two typhoons strengthened wind velocity in
the area, naturally producing strong waves and winds causing the RULING: WHEREFORE, the instant petition is DENIED and the challenged
vessel to sink. decision of the Court of Appeals is AFFIRMED.
d. Limited liability rule applies. Being a private carrier, any
agreement limiting its liability is valid. Since the cargo was being
shipped at “owner’s risk”, Loadstar was not liable for any loss or RATIO:
damage to the same. Loadstar is a common carrier
e. Claim has prescribed. The claim having been instituted beyond 14. Loadstar is a common carrier. It is not necessary that the carrier be issued a
the period stated in the bills of lading – suits based upon claims certificate of public convenience, and this public character is not altered by
arising from the shortage, damage, or non-delivery of shipment the fact that the carriage of the goods in question was periodic, occasional,
shall be instituted within 60 days from the accrual of right of action episodic, or unscheduled.
– the claim has already prescribed. Case was filed on February 15. Loadstar relied on the case of Home Insurance Co. v. American Steamship
1985. where the SC held that a common carrier transporting special cargo or
56. MIC’s Arguments: chartering the vessel to a special person becomes a private carrier that is not
a. M/V is a common carrier. The issue as to the whether M/V subject to the provisions of the Civil Code. Any stipulation in the charter
Cherokee is a common carrier was not timely raised, hence barred party absolving the owner from liability for loss due to the negligence of its
by estoppel. While it is true that the vessel had on board only the agent is void only if the strict policy governing common carriers is upheld.
cargo of wood products for delivery to one consignee, it was also Such policy has no force where the public at large is not involved, as in the
carrying passengers as part of its regular business. case of a ship totally chartered for the use of a single party.
b. No charter party agreement. The bills of lading made no 16. The Home Insurance case is not applicable to the case at bar because the
mention of any charter party but only a statement that the vessel factual milieu is different. In this case, there are no records that the vessel
undertook to carry a special cargo or was chartered to a special person only.
There was no charter party. The bills of lading failed to show any special determined to be moderate. Since it was remiss in the performance of its
arrangement, but only a general provision to the effect that the vessel was a duties, Loadstar cannot hide behind the "limited liability" doctrine to escape
“general cargo carrier.” The bare fact that the vessel was carrying a responsibility for the loss of the vessel and its cargo.
particular type of cargo for one shipper, which appears to be purely
coincidental, is not reason enough to convert the vessel from a common Loadstar is liable for the loss of the goods
to a private carrier, especially where, as in this case, it was shown that 21. Loadstar argues that in St. Paul Fire & Marine Ins. Co. v. Macondray &
the vessel was also carrying passengers. Co. and National Union Fire Insurance v. Stolt-Nielsen Phils., Inc., the
17. Loadstar fits the definition of a common carrier under Article 173219 of the Court ruled that after paying the claim of the insured for damages under the
Civil Code. Citing De Guzman v. CA, SC held that the article does not make insurance policy, the insurer is subrogated merely to the rights of the
any distinction between one whose principal business activity is carrying assured, that is, it can recover only the amount that may be recovered by the
persons or goods or both, and one who does such carrying only as ancillary assured. Since the right of the assured in case of loss or damage to the
activity. Neither is there a distinction between a person or enterprise goods is limited or restricted by the provisions in the bills of lading, a suit
offering transportation service on a regular or scheduled basis and one by the insurer as subrogee is necessarily subject to the same limitations and
offering such service on an occasional, episodic, or unscheduled basis. restrictions. The Court does not agree.
Neither does it distinguish between a carrier offering its services to the 22. The cases relied on by Loadstar involved a limitation on the carrier’s
“general public” and one who offers services or solicits business only from liability to an amount fixed in the bill of lading which the parties may enter
a narrow segment of the general population. A certificate of public into, provided that the same was freely and fairly agreed upon (Articles
convenience is not a requisite for the incurring of liability under the Civil 1749-1750). On the other hand, the stipulation in this case effectively
Code provisions governing common carriers. That liability arises the reduces the common carrier’s liability for the loss or destruction of the
moment a person or firm acts as a common carrier, without regard to goods to a degree less than extraordinary, that is, the carrier is not liable for
whether or not such carrier has also complied with the requirements of the any loss or damage to shipments made at “owner’s risk.” Such stipulation is
applicable regulatory statute and implementing regulations and has been obviously null and void for being contrary to public policy.
granted a certificate of public convenience or other franchise. To exempt 23. Three kinds of stipulations have often been made in a bill of lading. The
private respondent from the liabilities of a common carrier because he has first is one exempting the carrier from any and all liability for loss or
not secured the necessary certificate of public convenience, would be damage occasioned by its own negligence. The second is one providing for
offensive to sound public policy; that would be to reward private respondent an unqualified limitation of such liability to an agreed valuation. And the
precisely for failing to comply with applicable statutory requirements. third is one limiting the liability of the carrier to an agreed valuation unless
the shipper declares a higher value and pays a higher rate of freight.
M/V “Cherokee” was not seaworthy According to an almost uniform weight of authority, the first and second
18. When the vessel embarked on its voyage, the vessel was not sufficiently kinds of stipulations are invalid as being contrary to public policy, but the
manned. For a vessel to be seaworthy, it must be adequately equipped for third is valid and enforceable.
the voyage and manned with a sufficient number of competent officers and 24. Since the stipulation in question is null and void, it follows that when MIC
crew. The failure of a common carrier to maintain in seaworthy condition paid the shipper, it was subrogated to all the rights which the latter has
its vessel involved in a contract of carriage is a clear breach of its duty against the common carrier.
prescribed in Article 1755 of the Civil Code."
The claim has not prescribed
Limited liability theory is not applicable 25. MIC's cause of action had not yet prescribed at the time it was concerned.
19. The doctrine of limited liability does not apply where there was negligence Inasmuch as neither the Civil Code nor the Code of Commerce states a
on the part of the vessel owner or agent. Loadstar was at fault or negligent specific prescriptive period on the matter, the Carriage of Goods by Sea Act
in not maintaining a seaworthy vessel and in having allowed its vessel to (COGSA) — which provides for a one-year period of limitation on claims
sail despite knowledge of an approaching typhoon. for loss of, or damage to, cargoes sustained during transit — may be applied
20. In any event, it did not sink because of any storm that may be deemed as suppletorily to the case at bar. This one-year prescriptive period also applies
force majeure, inasmuch as the wind condition in the area where it sank was to the insurer of the goods.
26. In this case, the period for filing the action for recovery has not yet elapsed.
19
ARTICLE 1732. Common carriers are persons, corporations, firms or associations engaged in the Moreover, a stipulation reducing the one-year period is null and void; it
business of carrying or transporting passengers or goods or both, by land, water, or air for must, accordingly, be struck down.
compensation, offering their services to the public."
017 Aboitiz Shipping v. Insurance Company of North America (Rosales)
August 6, 2008 | Reyes, J. | Extraordinary Diligence
*See ISSUE/s for all other issues but this is the most relevant:
WoN there was compliance with the notice requirement – YES,
PETITIONER: Aboitiz Shipping Corporation
RESPONDENTS: Insurance Company of North America because Bernhard Willig, the representative of consignee who
received the shipment, relayed the information that the delivered
SUMMARY: On June 20, 1993 MSAS procured an "all-risk" goods were discovered to have sustained water damage to no less
marine insurance policy from ICNA UK Limited of London for than the Claims Head of Aboitiz, Mayo B. Perez. Immediately,
wooden work tools and workbenches purchased by consignee Perez was able to investigate the claims himself and he confirmed
STIP, Ecotech Center, Sudlon Lahug, Cebu City. The cargo was that the goods were, indeed, already corroded. Circumstances
received by Aboitiz Shipping Corporation through its duly peculiar to this case lead Us to conclude that the notice requirement
authorized booking representative, Aboitiz Transport System. was complied with. The call to Aboitiz was made two days from
The container van was then loaded on board MV Super Concarrier delivery, a reasonable period considering that the goods could not
I owned by Aboitiz. The vessel left Manila en route to Cebu City. have corroded instantly overnight such that it could only have
On August 3, 1993 the shipment arrived in Cebu City. The sustained the damage during transit. Moreover, Aboitiz was able to
Stripping Report, checker noted that the crates were slightly broken immediately inspect the damage while the matter was still fresh. In
or cracked at the bottom. On August 11, 1993 the cargo was so doing, the main objective of the prescribed time period was
withdrawn by the representative of the consignee, STIP and fulfilled. Thus, there was substantial compliance with the notice
delivered to Don Bosco Technical High School, Punta Princesa, requirement in this case.
Cebu City. On August 13, 1993 Mayo B. Perez, Head of Aboitiz
DOCTRINE: The giving of notice of loss or injury is a condition precedent to
received a call from the receiver Mr. Bernhard Willig that the cargo the action for loss or injury or the right to enforce the carrier’s
sustained water damage so he checked the other cargo but they liability. Circumstances peculiar to this case lead Us to conclude that the notice
were dry. Willig informed Aboitiz that the damage was caused by requirement was complied with. Stipulations requiring notice of loss or claim
water entering through the broken bottom parts of the crate. for damage as a condition precedent to the right of recovery from a carrier must
Consignee STIP filed a claim against ICNA. CAC reported to be given a reasonable and practical construction, adapted to the circumstances of
the case under adjudication, and their application is limited to cases falling fairly
ICNA that the shipment was placed outside the warehouse when it
within their object and purpose.
was delivered on July 26, 1993 and it was only on July 31, 1993
when the shipment was stuffed inside another container van for FACTS:
shipment to Cebu. Weather report shows that the heavy rains on Shipper – MSAS
July 28 and 29, 1993 caused the damages. Aboitiz refused to settle Common Carrier – Aboitiz
the claim. ICNA paid the amount of P280,176.92 to consignee and Insurer – ICNA
a subrogation receipt was duly signed by Willig. ICNA then Consignee – STIP
advised Aboitiz of the receipt signed in its favor but received no
reply so it filed for collection at the RTC. RTC ruled against 1. On June 20, 1993, MSAS Cargo International Limited and/or
ICNA: subrogation form is self-serving and has no probative value Associated and/or Subsidiary Companies (MSAS) procured a
since Wellig was not presented to the witness stand. CA reversed marine insurance policy from ICNA UK Limited
RTC ruling: the right of subrogation accrues simply upon payment of London. The insurance was for a transshipment of certain
by the insurance company of the insurance claim even assuming wooden work tools and workbenches purchased for the
that it is an unlicensed foreign corporation. consignee Science Teaching Improvement Project
(STIP), Ecotech Center, Sudlon Lahug, Cebu Princesa, Cebu City. It was received by Mr. Bernhard
City, Philippines. ICNA issued an all-risk open marine Willig. On August 13, 1993, Mayo B. Perez, then Claims Head
policy, stating: of Aboitiz, received a telephone call from Willig informing
a. This Company, in consideration of a premium as agreed him that the cargo sustained water damage. Perez, upon
and subject to the terms and conditions printed hereon, receiving the call, immediately went to the bonded warehouse
does insure for MSAS Cargo International Limited and checked the condition of the container and other cargoes
&/or Associated &/or Subsidiary Companies on behalf stuffed in the same container. He found that the container van
of the title holder: Loss, if any, payable to the Assured and other cargoes stuffed there were completely dry and
or order. showed no sign of wetness.
2. The cargo, packed inside one container van, was shipped 7. Perez found that except for the bottom of the crate which was
freight prepaid from Hamburg, Germany on board M/S slightly broken, the crate itself appeared to be completely dry
Katsuragi. A clean bill of lading was issued by Hapag-Lloyd and had no water
which stated the consignee to be STIP, Ecotech Center, Sudlon marks. But he confirmed that the tools which were stored
Lahug, Cebu City. inside the crate were already corroded. He further explained
3. The container van was then off-loaded at Singapore and that the grounded outside warehouse notation in the bill of
transshipped on board M/S Vigour Singapore. On July 18, lading referred only to the container van bearing the cargo.
1993, the ship arrived and docked at the Manila International 8. Willig informed Aboitiz of the damage noticed upon opening
Container Port where the container van was again off- of the cargo. The letter stated that the crate was broken at its
loaded. On July 26, 1993, the cargo was received by Aboitiz bottom part such that the contents were exposed. The work
Shipping Corporation (Aboitiz) through its duly authorized tools and workbenches were found to have been completely
booking representative, Aboitiz Transport System. The bill of soaked in water with most of the packing cartons already
lading issued by Aboitiz contained the notation grounded disintegrating. The crate was properly sealed off from the
outside warehouse. inside with tarpaper sheets. On the outside, galvanized metal
4. The container van was stripped and transferred to another bands were nailed onto all the edges. The letter concluded that
crate/container van without any notation on the condition of the apparently, the damage was caused by water entering through
cargo on the Stuffing/Stripping Report. On August 1, 1993, the the broken parts of the crate.
container van was loaded on board Aboitiz’s vessel, MV Super 9. STIP contacted the Philippine office of ICNA for insurance
Concarrier I. The vessel left Manila en claims. On August 21, 1993, the Claimsmen Adjustment
route to Cebu City on August 2, 1993. Corporation (CAC) conducted an ocular inspection and survey
5. On August 3, 1993, the shipment arrived in Cebu City and of the damage. CAC reported to ICNA that the goods sustained
discharged onto a receiving apron of the Cebu International water damage, molds, and corrosion which were discovered
Port. It was then brought to the Cebu Bonded Warehousing upon delivery to consignee.
Corporation pending clearance from the Customs authorities. 10. STIP filed a formal claim with Aboitiz in the amount
In the Stripping Report dated August 5, 1993, Aboitiz’s of P276,540.00 for the damaged condition of the following
checker noted that the crates were slightly broken or cracked at goods: ten wooden workbenches, three carbide-tipped saw
the bottom. blades, one set of ball-bearing guides, one set of overarm router
6. On August 11, 1993, the cargo was withdrawn by the bits, twenty rolls of sandpaper for stroke sander
representative of the consignee STIP and delivered 11. In a Supplemental Report, CAC reported to ICNA that based
to Don BoscoTechnical High School, Punta on official weather report from the Philippine Atmospheric,
Geophysical and Astronomical Services Administration, it 16. ICNA failed to produce evidence that it was a foreign
would appear that heavy rains on July 28 and 29, 1993 caused corporation duly licensed to do business in
water damage to the shipment. CAC noted that the shipment the Philippines. Thus, it lacked the capacity to sue before
was placed outside the warehouse of Pier No. Philippine Courts, to wit:
4, North Harbor, Manila when it was delivered on July 26, 17. CA Decision: The right of subrogation accrues simply upon
1993. The shipment was placed outside the warehouse as can payment by the insurance company of the insurance claim. As
be gleaned from the bill of lading issued by Aboitiz which subrogee, ICNA is entitled to reimbursement from Aboitiz,
contained the notation grounded outside warehouse. It was even assuming that it is an unlicensed foreign corporation. The
only on July 31, 1993 when the shipment was stuffed inside CA ruled that the presumption that the carrier was at fault or
another container van for shipment to Cebu. that it acted negligently was not overcome by any
12. Aboitiz refused to settle the claim. ICNA paid the amount countervailing evidence. Hence, the trial court erred in
of P280,176.92 to STIP. A subrogation receipt was duly signed dismissing the complaint and in not finding that based on the
by Willig. ICNA formally advised Aboitiz of the claim and evidence on record and relevant provisions of law, Aboitiz is
subrogation receipt executed in its favor. Despite follow-ups, liable for the loss or damage sustained by the subject cargo.
however, no reply was received from Aboitiz.
13. RTC Decision: ICNA filed a civil complaint against Aboitiz ISSUE/s:
12. WoN Aboitiz is liable for the damages incurred during the shipment – YES,
for collection of actual damages in the sum of P280,176.92, because as common carrier having failed to discharge the burden of proving
plus interest and attorney’s fees. ICNA alleged that the damage that it exercised extraordinary diligence in the vigilance over such goods it
sustained by the shipment was exclusively and solely brought contracted for carriage, the presumption of fault or negligence on its part
about by the fault and negligence of Aboitiz when the shipment from the time the goods were unconditionally placed in its possession (July
was left grounded outside its warehouse prior to delivery. 26, 1993) up to the time the same were delivered to the consignee (August
11, 1993), therefore stands.
14. ICNA failed to prove that it is the real party-in-interest to 13. WoN there was compliance with the notice requirement – YES, because
pursue the claim against Aboitiz. The trial court noted that Bernhard Willig, the representative of consignee who received the
Marine Policy No. 87GB 4475 was issued by ICNA UK shipment, relayed the information that the delivered goods were discovered
Limited. However, complainant ICNA Phils. did not present to have sustained water damage to no less than the Claims Head of Aboitiz,
any evidence to show that ICNA UK is its predecessor-in- Mayo B. Perez. Immediately, Perez was able to investigate the claims
himself and he confirmed that the goods were, indeed, already corroded.
interest, or that ICNA UK assigned the insurance policy to 14. WoN ICNA is the real party-in-interest that possesses the right of
ICNA Phils. subrogation to claim reimbursement from Aboitiz – YES, because
15. ICNA Phils.’ claim that it had been subrogated to the rights of subrogation is not dependent upon, nor does it grow out of, any privity of
the consignee must fail because the subrogation receipt had no contract or upon written assignment of claim. It accrues simply upon
probative value for being hearsay evidence. The assured in the payment of the insurance claim by the insurer.
Marine Policy appears to be MSAS. ICNA’s witness, Francisco RULING: WHEREFORE, the petition is DENIED, and the appealed
B. Francisco, claims that the signature below the name MSAS Decision AFFIRMED.
Cargo International is an endorsement of the marine policy in
favor of STIP. ICNA’s witness, however, failed to identify RATIO:
whose signature it was and ICNA did not present on the 1. ISSUE 1: The rule as stated in Article 1735 of the Civil Code
witness stand or took the deposition of the person who made is that in cases where the goods are lost, destroyed or
that signature. deteriorated, common carriers are presumed to have been at
fault or to have acted negligently, unless they prove that they
observed extraordinary diligence required by law. Here, the the crate was properly stored indoors during the time when it
shipment delivered to the consignee sustained water exercised custody before shipment to Cebu. As held by the CA:
damage. We agree with the findings of the CA that Aboitiz a. Appellees witness, Mr. Mayo tried to disavow any
failed to overturn this presumption: responsibility for causing wettage to the subject goods
a. Appellee carrier having failed to discharge the burden by claiming that the notation “grounded outside
of proving that it exercised extraordinary diligence in warehouse” actually refers to the container and not the
the vigilance over such goods it contracted for carriage, contents thereof or the cargoes. And yet it presented no
the presumption of fault or negligence on its part from evidence to explain where did they place or store the
the time the goods were unconditionally placed in its subject goods from the time it accepted the same for
possession (July 26, 1993) up to the time the same were shipment on July 26, 1993 up to the time the goods
delivered to the consignee (August 11, 1993), therefore were stripped or transferred from the container van to
stands. another container and loaded into the vessel M/V
2. The shipment arrived in the port of Manila and was received by Supercon Carrier I on August 1, 1993 and left Manila
Aboitiz for carriage on July 26, 1993. On the same day, it was for Cebu City on August 2, 1993.
stripped from the container van. Five days later, on July 31, 6. Aboitiz is thus liable for the water damage sustained by the
1993, it was re-stuffed inside another container van. On August goods due to its failure to satisfactorily prove that it exercised
1, 1993, it was loaded onto another vessel bound the extraordinary diligence required of common carriers.
for Cebu. During the period between July 26 to 31, 1993, the 7. ISSUE 2: The giving of notice of loss or injury is a
shipment was outside a container van and kept in storage by condition precedent to the action for loss or injury or the
Aboitiz right to enforce the carrier’s liability. Circumstances
3. The bill of lading issued by Aboitiz on July 31, peculiar to this case lead Us to conclude that the notice
1993 contains the notation grounded outside warehouse, requirement was complied with.
suggesting that from July 26 to 31, the goods were kept 8. Under the Code of Commerce, the notice of claim must be
outside the warehouse. And since evidence showed that rain made within twenty-four hours from receipt of the cargo if the
fell over Manila during the same period, We can conclude damage is not apparent from the outside of the package. For
that this was when the shipment sustained water damage. damages that are visible from the outside of the package, the
4. To prove the exercise of extraordinary diligence, Aboitiz must claim must be made immediately. The law provides:
do more than merely show the possibility that some other party a. Article 366. Within twenty four hours following the
could be responsible for the damage. It must prove that it used receipt of the merchandise, the claim against the carrier
all reasonable means to ascertain the nature and characteristic for damages or average which may be found therein
of the goods tendered for transport and that it exercised due upon opening the packages, may be made, provided
care in handling them. Extraordinary diligence must include that the indications of the damage or average which
safeguarding the shipment from damage coming from natural give rise to the claim cannot be ascertained from the
elements such as rainfall. outside part of such packages, in which case the claim
5. Aside from denying that the grounded outside warehouse shall be admitted only at the time of receipt.
notation referred not to the crate for shipment but only to the After the periods mentioned have elapsed, or the
carrier van, Aboitiz failed to mention where exactly the goods transportation charges have been paid, no claim shall be
were stored during the period in question. It failed to show that admitted against the carrier with regard to the condition
in which the goods transported were damaged cargo was a school institution where authorities
delivered. (Emphasis supplied) are bound by rules and regulations governing their
9. The periods above, as well as the manner of giving notice may actions. When the goods were delivered, the necessary
be modified in the terms of the bill of lading, which is the clearance had to be made before the package was
contract between the parties. Notably, neither of the parties in opened. Upon opening and discovery of the damaged
this case presented the terms for giving notices of claim under condition of the goods, a report to this effect had to pass
the bill of lading issued by Aboitiz for the goods. through the proper channels before it could be finalized
10. The shipment was delivered on August 11, 1993. Although the and endorsed by the institution to the claims department of
letter informing the carrier of the damage was dated August 15, the shipping company.
1993, that letter, together with the notice of claim, was 15. The call to Aboitiz was made two days from delivery, a
received by Aboitiz only on September 21, 1993. But Aboitiz reasonable period considering that the goods could not have
admits that even before it received the written notice of claim, corroded instantly overnight such that it could only have
Mr. Mayo B. Perez, Claims Head of the company, was sustained the damage during transit. Moreover, Aboitiz was
informed by telephone sometime in August 13, 1993. Mr. able to immediately inspect the damage while the matter was
Perez then immediately went to the warehouse and to the still fresh. In so doing, the main objective of the prescribed
delivery site to inspect the goods in behalf of petitioner. time period was fulfilled. Thus, there was substantial
11. In the case of Philippine Charter Insurance Corporation compliance with the notice requirement in this case.
(PCIC) v. Chemoil Lighterage Corporation, the notice was 16. ISSUE 3: This Court has held that a foreign insurance
allegedly made by the consignee through telephone. The claim company may sue in Philippine courts upon the marine
for damages was denied. However, there are peculiar insurance policies issued by it abroad to cover international-
circumstances in the instant case that constrain Us to rule bound cargoes shipped by a Philippine carrier, even if it has no
differently from the PCIC case, albeit this ruling is being license to do business in this country. It is the act of engaging
made pro hac vice, not to be made a precedent for other cases. in business without the prescribed license, and not the lack of
12. Stipulations requiring notice of loss or claim for damage as license per se, which bars a foreign corporation from access to
a condition precedent to the right of recovery from a our courts. Only when that foreign corporation is transacting or
carrier must be given a reasonable and practical doing business in the country will a license be necessary before
construction, adapted to the circumstances of the case it can institute suits.
under adjudication, and their application is limited to cases 17. In any case, while it was the ICNA UK Limited which issued
falling fairly within their object and purpose. the subject marine policy, the present suit was filed by the said
13. Bernhard Willig, the representative of consignee who received company’s authorized agent in Manila. It was the domestic
the shipment, relayed the information that the delivered goods corporation that brought the suit and not the foreign
were discovered to have sustained water damage to no less than company. Its authority is expressly provided for in the open
the Claims Head of Aboitiz, Mayo B. Perez. Immediately, policy which includes the ICNA office in the Philippines as
Perez was able to investigate the claims himself and he one of the foreign companys agents.
confirmed that the goods were, indeed, already corroded. 18. The terms of the Open Policy authorize the filing of any claim
14. Provisions specifying a time to give notice of damage to on the insured goods, to be brought against ICNA UK, the
common carriers are ordinarily to be given a reasonable company who issued the insurance, or against any of its listed
and practical, rather than a strict construction. We give agents worldwide. MSAS accepted said provision when it
due consideration to the fact that the final destination of the signed and accepted the policy. The acceptance operated as
an acceptance of the authority of the agents. Hence, a the insurer, the insured releases the wrongdoer who caused the
formal indorsement of the policy to the agent in loss from liability, the insurer loses its claim against the latter.
the Philippines was unnecessary for the latter to exercise
the rights of the insurer.
19. Likewise, the Open Policy expressly provides that the policy
benefits any subsequent assignee, or holder, including the
consignee, who may file claims on behalf of the assured. This
is in keeping with Section 57 of the Insurance Code which
states:
a. A policy may be so framed that it will inure to the
benefit of whosoever, during the continuance of the
risk, may become the owner of the interest
insured. (Emphasis added)
20. ICNA’s cause of action is founded on it being subrogated to
the rights of the consignee of the damaged shipment. The right
of subrogation springs from Article 2207 of the Civil Code,
which states:
a. Article 2207. If the plaintiffs property has been insured,
and he has received indemnity from the insurance
company for the injury or loss arising out of the wrong
or breach of contract complained of, the insurance
company shall be subrogated to the rights of the
insured against the wrongdoer or the person who has
violated the contract. If the amount paid by the
insurance company does not fully cover the injury or
loss, the aggrieved party shall be entitled to recover the
deficiency from the person causing the loss or
injury. (Emphasis added)
21. Payment by the insurer to the assured operates as an equitable
assignment of all remedies the assured may have against the
third party who caused the damage. 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.
22. This right of subrogation, however, has its limitations. First,
both the insurer and the consignee are bound by the contractual
stipulations under the bill of lading. Second, the insurer can be
subrogated only to the rights as the insured may have against
the wrongdoer. If by its own acts after receiving payment from
001 ANG v. AMERICAN STEAMSHIP AGENCIES INC. (SEE)
January 27, 1967 |Bengzon, J. P., J. | “loss” under COGSA Carrier: SS Tensai Maru owned by Nissho Shipping Co. Ltd. Of Japan
Agent of Carrier: American Steamship Agencies Inc.
PLAINTIFF-APPELLANT: Domingo Ang Shipper: Tokyo Boeki Ltd. Of Tokyo
DEFENDANT-APPELLEE: American Steamship Agency Inc. Consignee: Herminio Teves

SUMMARY: Yan Yue agreed to sell 140 packages of galvanized durzinc sheets FACTS:
to Teves. The agreement was subject to certain conditions, one of which is that 57. Yan Yue Commercial Bank of Hong Kong (Yan Yue) agreed to sell 140
Teves would present the bill of lading to American Steamship, the agent of the packages of galvanized steel durzinc sheets to Herminio Teves (Teves) for
carrier, Nissho Shipping, which would then issue the “Permit to deliver imported US $32,458.26. The agreement was subject to the following conditions:
articles” to be presented to Customs to obtain release of the goods. A bill of a. The purchase price should be covered by a bank draft for the corresponding
amount which should be paid by Teves in exchange for the delivery to him of
lading was issued and indorsed to Yan Yue by Tokyo Boeki, the shipper. Yan
the corresponding bill of lading to be deposited with a local bank, the
Yue then drew a demand draft and a bill of lading against Teves, through Hong Hongkong & Shanghai Bank of Manila
Kong & Shanghai Bank (Bank). Upon arrival of the goods, Bank notified Teves b. Upon arrival of the articles in Manila, Teves would be notified and he would
but Teves did not pay the demand draft so the Bank made a protest. The Bank have to pay the amount called for in the corresponding demand draft, after
then returned the bill of lading and demand draft to Yan Yue who indorsed the which the bill of lading would be delivered to him; and
bill of lading to Domingo Ang. Despite non-payment, Teves was able to obtain a c. Teves would present said bill of lading to the carrier's agent, American
bank guaranty in favor of American Steamship which allowed the former to Steamship Agencies, Inc. which would then issue the corresponding "Permit To
secure the “Permit to deliver imported articles” so the goods were released to Deliver Imported Articles" to be presented to the Bureau of Customs to obtain
him. Ang then claimed for the goods from American Steamship, presenting the the release of the articles.
indorsed bill of lading, but he was informed that it delivered the goods to Teves. 58. Pursuant to the agreement, Yan Yue through Tokyo Boeki Ltd of Tokyo,
Ang then filed a complaint in the CFI of Manila against American Steamship for shipped the articles at Yawata, Japan, on April 30, 1961, on board the S.S.
having allegedly misdelivered and/or converted the goods. American Steamship TENSAI MARU, belonging to Nissho Shipping Co. Ltd of japan, of which
filed a Motion to Dismiss claiming that the cause of action has prescribed as per American Steamship Agencies is the agent in the Philippines, under a
the COGSA. The complaint was dimissed and the MR was also denied. shipping agreement, Bill of Lading No. WM-2 dated April 30, 1961,
consigned "to order of the shipper with Herminio G. Teves as the party to
WoN there was loss of the goods which is the subject of the complaint—NO, the be notified of the arrival of the 140 packages of galvanized steel durzinc
goods were not lost since, "... it is understood that a thing is lost when it sheets in Manila.
perishes, or goes out of commerce, or disappears in such a way that its existence 59. The Bill of Lading was indorsed to the order of and delivered to Yan Yue
unknown or it cannot be recovered." But in this case, the goods were merely by the shipper. Upon receipt, Yan Yue drew a demand draft together with
misdelivered. the bill of lading against Teves, through Hong Kong & Shanghai Bank.
60. When the articles arrived in Manila on or about May 9, 1961, Hongkong &
WoN Ang’s cause of action has prescribed under the COGSA—NO, there being Shanghai Bank notified Teves, the "notify party" under the bill of lading, of
no loss, the COGSA doesn't apply but the applicable rule on prescription is that the arrival of the goods and requested payment of the demand draft
found in the Civil Code, namely, either ten years for breach of a written contract representing the purchase price of the articles. Teves, however, did not pay
or four years for quasi-delict. In either case, Ang’s cause of action has not yet the demand draft, prompting the bank to make the corresponding protest.
prescribed, since his right of action would have accrued at the earliest on May 9, The bank likewise returned the bill of lading and demand draft to Yau Yue
1961 when the ship arrived in Manila and he filed suit on October 30, 1963. which indorsed the said bill of lading to Domingo Ang.
61. Meanwhile, despite his non-payment of the purchase price of the articles,
DOCTRINE: As defined in the Civil Code and as applied to Section 3 (6) Teves was able to obtain a bank guaranty in favor of the American
paragraph 4 of the Carriage of Goods by Sea Act, "loss" contemplates merely a Steamship Agencies, Inc., as carrier's agent, to the effect that he would
situation where no delivery at all was made by the shipper of the goods because surrender the original and negotiable bill of lading duly indorsed by Yau
the same had perished, gone out of commerce, or disappeared that their existence Yue. On the strength of this guaranty, Teves succeeded in securing a
is unknown or they cannot be recovered. It does not include a situation where "Permit To Deliver Imported Articles" from American Steamship, which he
there was indeed delivery — but delivery to the wrong person, or a misdelivery, presented to the Bureau of Customs which in turn released to him the
as alleged in the complaint in this case. articles covered by the bill of lading.
62. Domingo Ang then claimed for the articles from American Steamship by of an obligation to give. The contract of carriage under consideration
presenting the indorsed Bill of Lading, but he was informed that it had entered into by and between American Steamship and the Yau Yue (which
delivered the articles to Teves. later on endorsed the bill of lading covering the shipment to Ang), is one
63. Ang then filed a complaint in the CFI of Manila against American involving an obligation to give or to deliver the goods "to the order of
Steamship for having allegedly wrongfully delivered and/or converted shipper", that is, upon the presentation and surrender of the bill of lading.
the goods covered by the bill of lading belonging to Ang , to the his This being so, said article can be applied to the present controversy, more
damage. specifically paragraph 2 thereof which provides that, "... it is understood
64. American Steamship filed a Motion to Dismiss upon the ground that Ang’s that a thing is lost when it perishes, or goes out of commerce, or
cause of action has prescribed under Sec 3(6) par. 4 of the COGSA disappears in such a way that its existence unknown or it cannot be
(Commonwealth Act No. 65) which provides: recovered."
a. In any event, the carrier and the ship shall be discharged from all liability in 4. As defined in the Civil Code and as applied to Section 3 (6) paragraph 4 of
respect to loss or damage unless suit is brought within one year, after delivery the Carriage of Goods by Sea Act, "loss" contemplates merely a situation
of the goods or the date when the goods should have been delivered. where no delivery at all was made by the shipper of the goods because
the same had perished, gone out of commerce, or disappeared that their
It argued that the cargo should have been delivered to the person entitled to the
existence is unknown or they cannot be recovered. It does not include a
delivery thereof (meaning the plaintiff) on May 9, 1961, the date of the vessel's
arrival in Manila, and that even allowing a reasonable time (even one month) situation where there was indeed delivery — but delivery to the wrong
after such arrival within which to make delivery, still, the action commenced on person, or a misdelivery, as alleged in the complaint in this case.
October 30, 1963 was filed beyond the prescribed period of one year. 5. In Tan Pho vs. Hassamal Dalamal, the court made a distinction between
65. The CFI dismissed the complaint on the ground of prescription. The MR non-delivery and misdelivery.
was also denied. Hence this appeal. a. Hence, the defendant-petitioner Tan Pho having delivered the goods to
Enrique Aldeguer without the presentation by the latter of the bill of
ISSUE/s: lading duly endorsed to him by the shipper, the said defendant made a
misdelivery and violated the bill of lading, because his duty was not only
15. WoN there was loss of the goods which is the subject of the complaint—
to transport the goods entrusted to him safely, but to deliver them to the
NO, the goods were not lost since, "... it is understood that a thing is lost person indicated in the bill of lading.
when it perishes, or goes out of commerce, or disappears in such a way that 6. It is well settled that if a defendant files a motion to dismiss, he thereby
its existence unknown or it cannot be recovered." But in this case, the goods hypothetically admints the truth of the allegations of fact contained in the
were merely misdelivered. complaint. Since American Steamship filed a motion to dismiss, he is
16. WoN Ang’s cause of action has prescribed under the COGSA—NO, there deemed to have admitted the following facts:
being no loss, the COGSA doesn't apply but the applicable rule on a. 6. — That, when the said articles arrived in Manila, the defendant
prescription is that found in the Civil Code, namely, either ten years for authorized the delivery thereof to Herminio G. Teves, through the issuance
breach of a written contract or four years for quasi-delict. of the corresponding Permit To Deliver Imported Articles, without the
knowledge and consent of the plaintiff, who is the holder in due course of
RULING: Wherefore, the dismissal order appealed from is hereby reversed and set said bill of lading, notwithstanding the fact that the said Herminio G.
aside and this case is remanded to the court a quo for further proceedings. No costs. Teves could not surrender the corresponding bill of lading; .
So ordered. b. 7. — That, without any evidence of the fact that Herminio G. Teves is the
holder of the corresponding bill of lading in due course; without the
surrender of the bill of lading without the knowledge and consent of the
RATIO: plaintiff, as holder thereof in due course, and in violation of the provision
1. The provision of the COGSA involved talks about “loss or damage”. In this on the bill of lading which requires that the articles are only to be
case, both parties admit that there was no damage caused to the goods delivered to the person who is the holder in due course of the said bill of
which were delivered intact to Teves who did not file any notice of damage. lading, or his order, the defendant issued the corresponding 'Permit To
2. The COGSA does not define what “loss” is therefore recourse must be had Deliver Imported Articles' in favor of the defendant, without the
to the Civil Code since Art. 18 of the Civil Code provides, “In matters knowledge and consent of the plaintiff as holder in due course of said bill
which are governed by the Code of Commerce and special laws, their of lading, which, originally was Yau Yue subsequently, the plaintiff
deficiency shall be supplied by the provisions of this Code.” Domingo Ang;
c. 8. — That, as a result of the issuance by the defendant of said permit,
3. Article 1189 of the Civil Code defines the word "loss" in cases where
Herminio G. Teves was able to secure the release of the articles from the
conditions have been imposed with the intention of suspending the efficacy
Bureau of Customs, which is not legally possible without the presentation
of said permit to the said Bureau; ...
7. From the allegations of the complaint, therefore, the goods cannot be
deemed "lost". They were delivered to Teves, so that there can only be
either delivery, if Teves really was entitled to receive them, or
misdelivery, if he was not so entitled. It is not for the Court now to resolve
whether or not delivery of the goods to Teves was proper, that is, whether
or not there was rightful delivery or misdelivery.
8. The point that matters here is that the situation is either delivery or
misdelivery, but not nondelivery. Thus, the goods were either rightly
delivered or misdelivered, but they were not lost. There being no loss or
damage to the goods, the aforequoted provision of the Carriage of
Good by Sea Act stating that "In any event, the carrier and the ship
shall be discharged from all liability in respect of loss or damage unless
suit is brought within one year after delivery of the goods or the date
when the goods should have been delivered," does not apply.
9. The reason is not difficult to see. Said one-year period of limitation is
designed to meet the exigencies of maritime hazards. In a case where the
goods shipped were neither last nor damaged in transit but were, on the
contrary, delivered in port to someone who claimed to be entitled thereto,
the situation is different, and the special need for the short period of
limitation in cases of loss or damage caused by maritime perils does not
obtain.
10. It follows that for suits predicated not upon loss or damage but on alleged
misdelivery (or conversion) of the goods, the applicable rule on
prescription is that found in the Civil Code, namely, either ten years for
breach of a written contract or four years for quasi-delict. In either
case, Ang’s cause of action has not yet prescribed, since his right of
action would have accrued at the earliest on May 9, 1961 when the ship
arrived in Manila and he filed suit on October 30, 1963.
002 New Zealand Insurance Co. vs. Joy (Siapno)
Sept. 30, 1955 | Bautista Angelo, J. | Art 336 Application FACTS:
1. The ship "Jupiter", on her voyage, received on board at Carangian,
PETITIONER: NEW ZEALAND INSURANCE Co., LTD. Samar, in good order and condition, 107 bundles of first class loose
RESPONDENT: ADRIANO CHOA JOY ET. AL. weight hemp valued at P6,736.20, from Lee Teh & Co. (consignor), Inc.,
for transportation and delivery to Manila, under a bill of lading issued by
SUMMARY: The consignor is the branch office of Lee Teh & Co., Inc. at the carrier to the shipper.
Catarman, Samar, which placed first class loose weight hemp on board 2. The ship was owned by Adriano Choa Joy (carrier), doing business
the ship Jupiter, and the consignee, its main office at Manila. The cargo under the name of South Sea Shipping Line, while the cargo was
never reached Manila, its destination, nor was it ever delivered to the shipped by the branch office of Lee Teh & Co., Inc. at Carangian, Samar
consignee, the office of the shipper in Manila, because the ship ran (consignee), for transportation and delivery to its main office at Manila.
aground upon entering Laoang Bay, Samar on the same day of the 3. The cargo failed to arrive in Manila because the vessel ran aground
shipment. The cargo was insured by the New Zealand Insurance Co., while entering the Laoang Bay, Samar, on May 20, 1950, due to the
Ltd., and because of the damage caused to said cargo while in transit, the negligence of its captain, Jose Molina, who, in the investigation
losses were paid by said company to the shipper. Joy having refused to conducted by the Marine Board of Inquiry, was found negligent of his
reimburse so New Zealand filed for reimbursement. CFI ruled that duties and was suspended from office for a period of three months. Of
liability of the carrier did not attach because of the failure of the shipper the cargo, only 7,590 kilos, or 120 piculs of hemp, were saved and
or of the consignee to file its claim for damages within 24 hours from because of their damaged condition, they were sold for the sum of P2,040,
receipt of the cargo as required by law in accordance with Art. 366. the consignor having spent P500 for their salvage, thereby causing Lee
Teh & Co., Inc. losses in the sum of P5,196.20.
Issue: WoN Lee Teh & Co Manila (consignee) or Lee Teh & Co 4. The cargo was insured by the New Zealand Insurance Co., Ltd., the
Catarman, Samar (consignor) needed to comply with Art. 366 of the losses were paid by said company to the shipper. The carrier having
Code of Commerce? No Art. 366 does not have application because the refused to reimburse these damages despite demands made to that
cargo was never received by the consignee. (Doctrine) In the instant case effect, the insurance company, instituted the present action before the
the consignor placed the cargo on board the ship. The cargo never CFI.
reached Manila, its destination, nor was it ever delivered to the 5. After the parties had presented their evidence, the court found that, while
consignee. Such being the case, Article 366 does not have application the shipper has suffered damages because of the inability of the
because the cargo was never received by the consignee. Moreover, under carrier to transport the cargo as agreed upon, however, the liability of
the bill of lading issued by the carrier, it was the carrier’s undertaking the carrier did not attach because of the failure of the shipper or of the
to bring the cargo to its destination—Manila,—and deliver it to its consignee to file its claim for damages within 24 hours from receipt of
consignee, which undertaking was never complied with. The carrier the cargo as required by law.
(Joy), therefore, breached its contract, and, as such, it forefeited its 6. Consequently, the court dismissed the case, with costs against New
right to invoke in its favor the condition required by Article 366. Zealand. New Zealand brought this case on appeal directly to this Court.
Where the contract calls for reciprocal obligations, the carrier cannot
demand fulfillment of its part from the shipper or consignee unless it first ISSUE: WoN Lee Teh & Co., Inc. of Manila, as consignee, or Lee Teh &
complies with its own obligation. (Article 1100, old Civil Code). Co., Inc., of Catarman, Samar, as consignor, should have filed its claim for
damages to the cargo with the shipping company, Joy, within 24 hours from
DOCTRINE: In order that the condition provided in Article 366 of the the date the said cargo was salvaged by the consignor in accordance with
Code of Commerce may be demanded there should be a consignment of Article 366 of the Code of Commerce? No Art. 366 does not have
goods, through a common carrier, by a consignor in one place to a application because the cargo was never received by the consignee.
consignee in another place, and the delivery of the merchandise by the
carrier to the consignee at the place of destination.
RULING: Wherefore, the decision appealed from is hereby reversed, and through the negligence and lack of skill of the master of the lorcha. And
another one will be entered ordering the defendant to pay the plaintiff the of the total cargo of 2,244 packages of sugar, only 1,022 were saved in
sum of P5,196.20, with legal interest thereon from the filing of the damaged condition through the efforts made by the shipper. Court held
complaint, with costs against appellee. that said article "is limited to cases of claims for damages to goods
actually received by the consignee; it has no application in cases
1. Article 366 of the Code of Commerce, which was applied by the court, wherein the goods entrusted to the carrier are not delivered to the
provides: consignee by the carrier in pursuance of the terms of the carriage
"Within twenty-four hours following the receipt of the merchandise, contract," whether those damages be apparent from an examination of the
the claim against the carrier for damage or average which may be found packages in which the goods are delivered, or of such character that the
therein upon opening the packages, may be made, provided that the nature and extent of the damage is not apparent until the packages are
indications of the damage or average which gives rise to the claim opened and the contents examined. In such cases wherein the goods
cannot be ascertained from the outside part of such packages, in entrusted to the carrier are not delivered by the carrier to the consignee,
which case the claim shall be admitted only at the time of receipt. there can be no question of a claim for damages suffered by the goods
After the periods mentioned have elapsed, or the transportation while in transport, since the claim for damages arises exclusively out of
charges have been paid, no claim shall be admitted against the carrier the failure to make delivery. However, the necessity for making the
with regard to the condition in which the goods transported were claim in accordance with that article did not arise if, as it is alleged,
delivered." these 1,022 packages, of sugar were recovered from the wreck by the
2. In order that the condition therein provided may be demanded there plaintiff, himself, in an effort, by his own activities, to save his
should be a consignment of goods, through a common carrier, by a property from total loss. The measures to be taken under the terms of
consignor in one place to a consignee in another place. And said article Article 367 of the Code when the parties are unable to arrive at an
provides that the claim for damages must be made "within twenty-four amicable settlement of claims for damages set up in accordance with
hours following the receipt of the merchandise" by the consignee from the Article 366, quite clearly indicate that the necessity for the presentation of
carrier. claims under this article arises only in those cases wherein the carrier
3. In other words, there must be delivery of the merchandise by the makes delivery and the consignee receives the goods in pursuance of
carrier to the consignee at the place of destination. the terms of the contract."
4. In the instant case, the consignor which placed the cargo on board the 8. It is true that there is some disagreement as to whether the salvage of the
ship Jupiter. The lower court found that the cargo never reached portion of the cargo that was saved was due to the efforts of the carrier
Manila, its destination, nor was it ever delivered to the consignee, the itself or to the combined efforts of the latter and the shipper as a result of
office of the shipper in Manila, because the ship ran aground upon which the salvaged cargo was placed in possession of the shipper who
entering Laoang Bay, Samar on the same day of the shipment. sold it and deducted its proceeds from the liability of the carrier.
5. Such being the case, it follows that the aforesaid article 366 does not 9. But this discrepancy, in our opinion, would seem to be immaterial
have application because the cargo was never received by the consignee. because the law as well as the contract contemplates delivery of the
6. Moreover, under the bill of lading issued by the carrier (Exhibit C), it was cargo to the consignee at its port of destination in order that the benefit
the carrier’s undertaking to bring the cargo to its destination— of the law may be availed of. The liability of the carrier must be
Manila,—and deliver it to consignee, which undertaking was never determined in the light of the carriage contract (calls for reciprocal
complied with. The carrier, therefore, breached its contract, and, as obligations), the carrier cannot demand fulfillment of its part from
such, it forefeited its right to invoke in its favor the conditions the shipper or consignee unless it first complies with its own
required by article 366. obligation. (Article 1100, old Civil Code.)
7. Roldan vs. Lim Ponzo & Co: Plaintiff sought to recover damages for 10. The fact that the consignor is but the branch office of the company that
failure of defendant to transport 2,244 packages of sugar from shipped the goods, and the consignee is the main office at Manila, is of no
plaintiff's hacienda to Iloilo. It was proven that the cargo did not reach its moment, because the duties of each party under the law are different.
destination because the lorcha carrying it was wrecked in the river Jalaud Moreover, even if the consignor and the consignee be considered as one
and the same party, still the carrier cannot disclaim responsibility under commerce in international and domestic trade, and promote regional development through
its contract for the simple reason that it failed to comply with its improved port facilities. The Committee recommended the integration of arrastre and
obligation to bring the cargo to its destination. This breach alone stevedoring operations in each port so that ultimately only one contractor would be authorized
to service that port. The Bureau of Customs (BOC) issued Memorandum Order No. 28-75,
justifies its liability under the carriage contract. providing for the merger of all existing cargo-handling contractors in each port. To effect the
003 PERNITO ARRASTRE SERVICES INC vs MENDOZA (STA. MARIA) gradual integration of the several arrastre and stevedoring labor contractors then operating in
Different Dates | Guiterrez, Jr., J. | Take over of arrastre and stevedoring operations the Port of Tacloban, the BOC decided to require the merger of the 36 existing labor
contractors into 4 corporations, and then to just 1. PD No. 857 took effect as a result of which
G.R. No. L-53492 December 29, 1986 the powers, duties, and jurisdiction of the BOC with regard to arrastre and stevedoring
PETITIONER: PERNITO ARRASTRE SERVICES, INC., APOLONIO BACALLA, doing business operations were transferred to and vested in the PPA. PPA was authorized among others, to
under the style "Bacalla Arrastre Services," ARISTON AGUILAR, doing business under the style "Aguilar "regulate the rates or charges for port services or port related services so that, taking one year
Arrastre Services," ROMEO CABRAS, doing business under the style "Cabras Arrastre Services;" with another, such rates or charges furnish adequate working capital and produce an adequate
GUERRERO DAJAO, doing business under the style "Dajao Arrastre Services," NIÑ;O TAMARRA, return on the assets of the Authority" and "to levy dues, rates, or charges for the use of the
doing business under the style "Tamarra Arrastre Services," JESUS GARCIA, doing business under the
premises, works, appliances, facilities, or for services provided by or belonging to the authority
style "Garcia Arrastre Services," FRANCISCO AGUIRRE, doing business under the style "Sto. Rosario
Arrastre Services," TEOFILO ESTOCE, doing business under the style "E & C Arrastre Services," or any other organization concerned with port operations." Pursuant to said decree, PPA
RAMON P. TECSON, doing business under the style "Tecson Arrastre Services," MARCELO A. imposed a 10% charge on the monthly gross earnings of the operators of arrastre and
CANSANCIO, doing business under the style "Tabunec Arrastre Service," SIMEON M. PACA, SR., doing stevedoring services. Through its memorandum Order, PPA also adopted as its own, the BOC’s
business under the style "A. O. Paca Arrastre Service," ANDRES ROMARIZ, doing business under the policy of integrating the operation of arrastre and stevedoring services in each port. This policy
style "F. Figueroa Arrastre Service," NILO SERVILA, doing business under the style "Servila Arrastre was applied to the port of Tacloban where the 4 arrastre/stevedoring operators agreed to merge
Services," RHODA F. BANCOY, doing business under the style "Tan Arrastre Services," FILOMENO and form one of the petitioners herein, the Leyte Integrated Port Services, Inc. (LIPSI). PPA
PEPITO, doing business under the style "F. Pepito & Villacruses Arrastre Services," VICTORINO SY, issued a temporary permit to petitioner LIPSI, subject to several conditions. Later on, PPA
doing business under the style "E. V. Sy Arrastre Services," and ROMEO GADIANO doing business
issued Special Order No. 114-79 creating the Philippine Ports Authority- Tacloban Arrastre
under the style "Gadiano Arrastre Service,"
RESPONDENT: HON. RAFAEL T. MENDOZA, as Presiding Judge of the Court of First Instance of Ports Services (PPA-TAPS) within its worn Tacloban port unit and ordering a take-over by
Cebu, Branch II, PHILIPPINE PORTS AUTHORITY, and the UNITED SOUTH DOCKHANDLERS, PPA- TAPS of the entire arrastre and stevedoring services in the Port of Tacloban, effective not
INC later than June 1, 1979, LIPSI, as well all port users were duly informed of the take-over by
G.R. No. L-54265 December 29, 1986 PPA-TAPS. PPA-TAPS tooks over the actual management and operations of arrastre and
PETITIONER: THE EASTERN LEYTE ARRASTRE SERVICE, represented by its Manager stevedoring services in the port of Tacloban. For this purpose, PPA-TAPS utilized the same
ANACORITO AURELIA, dock labor force that existed at the time of the cancellation of the permit of LIPSI. According
RESPONDENT: HON. JUDGE AUXENCIO C. DACUYCUY, Presiding Judge of the Court of First to PPA, after such take-over, the dockworkers where placed on regular payrolls; their social
Instance of Leyte, Branch IV; THE PHILIPPINE PORT AUTHORITY (TACLOBAN PORT SERVICE),
security premiums were promptly paid and all illegal exactions from their pay were stopped;
represented by its Port Manager BENIGNO V. MAGPALE, JR.; and THE INTERNATIONAL COPRA
EXPORT CORPORATION (TACLOBAN BR.), represented by its Branch Manager CELEDONIO they were issued free uniforms and hard hats for safety and protection; and they organized a
MUTIA genuine labor organization, the Tacloban Port Service Labor Union (TAPSLU) for the
G.R. NO. L-54394 December 29, 1986 protection of their rights. These petitions which are now resolved in a consolidated decision
PETITIONER: FROILAN BASIO, BERNARDO SIPACO, BONIFACIO MARTINEZ, GLICERIO seek to permanently restrain the PPA from taking over the arrastre and stevedoring operations
VALLE, FORTUNATO BASIO, GENARO ROSALES, REMARICO MENDIOLA, CAMILO in the port of Tacloban, Leyte. The petitioners invoke the constitutional right to due process of
COBILLA, ALIPIO REPOLLO, MANUEL SOLAJES, ANTONIO ROSALES, VICENTE BASIO, law and to non-impairment of contract.
REYNALDO BETUIN, HERMINIO JACA, GERARDO DEMESA, CARLITO LACBAYO, GREGORIO
MARTIN and REGINO BALLAIS
RESPONDENT ARRO, Presiding Judge of the Court of First Instance of Leyte, Branch I; and BENIGNO The issues are the ff:
MAGPALE, JR., in his official capacity as both Manager of the Philippine Ports Authority, Tacloban Port, 1. WON PPA's take- over through PPA-TAPS of arrastre operations in the port of
and Manager, Philippine Ports Authority — Tacloban Arrastre Port Service, Inc., Tacloban, Leyte is a valid exercise of police power? – YES. The arrastre operations
No. L-54565 December 29, 1989 in the various ports in the Philippines are affected with public interest. The State in
PETITIONER: LEYTE INTEGRATED PORT SERVICES, INC., the exercise of its police power through its agency, the PPA, has the power to revoke
RESPONDENT: PHILIPPINE PORTS AUTHORITY, Metro Manila; PHILIPPINE PORTS the temporary permits of petitioners, assuming the existence of valid temporary
AUTHORITY, PMU Tacloban; and PHILIPPINE PORTS AUTHORITY, Tacloban Arrastre Ports permits, and take over the operations of the port of Tacloban whenever the need to
Services,
promote the public interest and welfare both of the stevedoring industry and the
workers therein justifies such take over
SUMMARRY: An Ad Hoc Committee on Waterfront Services was created by the
2. WON this take-over violates the constitutional right of the petitioners to non-
Government to study the problems of arrastre and stevedoring operations in various ports in the
impairment of contracts? – NO. The subvservience of the contract clause to the
Philippines. Among the problems pinpointed were the proliferation of the oppressive "cabo
police power enacting public regulations intended for the general welfare of the
system" and the increase in the incidence of violence and thefts in the ports. There was also
community has already been upheld by the court. The records will bear out the fact
recognized a need to streamline port operations, ensure the smooth flow of water borne
that only petitioner LIPSI has a temporary permit issued by PPA. The rest of the
petitioners where either merely allowed or tolerated to operate in the port of Ports Authority (PPA). Pursuant to said decree, PPA was authorized
Tacloban among others, to "regulate the rates or charges for port services or port
3. WON the 10% charge on the monthly gross earnings of the operators of arrastre and related services so that, taking one year with another, such rates or charges
stevedoring services is excessive? – NO. It is within the sound discretion of the PPA furnish adequate working capital and produce an adequate return on the
to impose a reasonable charge or rate on arrastre and stevedoring operators which it assets of the Authority" and "to levy dues, rates, or charges for the use of
deems to above most appropriate and advantageous to the government under the the premises, works, appliances, facilities, or for services provided by or
circumstances. belonging to the authority or any other organization concerned with port
4. WON the take over by the PPA violates the prohibition against monopolies in
operations."
restraint of trade? – NO. In industries affected with public interest, a regulated
monopoly is not necessarily proscribed, if such is deemed necessary in order to 6. Pursuant to said decree, PPA imposed a 10% charge on the monthly
protect and promote public interest. gross earnings of the operators of arrastre and stevedoring services.
Through its memorandum Order No. 21, series of 1977, PPA also adopted
DOCTRINE: as its own, the BOC’s policy of integrating the operation of arrastre and
• The arrastre operations in the various ports in the Philippines are affected with public stevedoring services in each port. This policy was applied to the port of
interest. Tacloban where the 4 arrastre/stevedoring operators, mentioned earlier,
• It is within the sound discretion of the PPA to impose a reasonable charge or rate on agreed to merge and form one of the petitioners herein, the Leyte Integrated
arrastre and stevedoring operators which it deems to above most appropriate and Port Services, Inc. (LIPSI). PPA issued a temporary permit to LIPSI,
advantageous to the government under the circumstances. subject to several conditions, one of which: That this temporary permit is
• that in industries affected with public interest, a regulated monopoly is not non-transferrable and shall remain valid until a special permit shall be
necessarily proscribed, if such is deemed necessary in order to protect and promote
issued by PPA Manila, provided, however, that the same may be revoked
public interest.
for violation of any of the conditions herein set or justifiable cause(s) at the
discretion of this Authority.
FACTS: (sorry ang daming facts kasi consolidated petitions siya) 7. Pernito Arrastre Services, Inc. and other arrastre operators filed with the
1. In November, 1972, an Ad Hoc Committee on Waterfront Services was then CFI of Cebu an action for declaratory relief and mandamus against the
created by the Government to study the problems of arrastre and PPA, assailing the validity of the integration policy which would, in effect,
stevedoring operations in various ports in the Philippines. Among the authorize only one arrastre operator in each port in the Philippines and the
problems pinpointed were the proliferation of the oppressive "cabo system" authority of PPA to collect 10% of the gross arrastre and stevedoring
and the increase in the incidence of violence and thefts in the ports. charges paid to operators.
2. There was also recognized a need to streamline port operations, ensure the 8. The trial court issued a writ of injunction, prohibiting the PPA, pendente
smooth flow of water borne commerce in international and domestic trade, lite, from enforcing its policy of integration in the Cebu City port and
and promote regional development through improved port facilities. directing it to allow the petitioners to operate individually and
3. The Committee recommended the integration of arrastre and stevedoring independently as arrastre and stevedoring contractors. However, with
operations in each port so that ultimately only one contractor would be respect to the collection of the 10% charge by PPA, the court ruled that it
authorized to service that port. The Bureau of Customs (BOC) issued was going to presume its reasonableness in the meantime since PPA was
Memorandum Order No. 28-75, providing for the merger of all existing merely following the rate fixed by the Bureau of Customs.
cargo-handling contractors in each port. 9. PPA filed a petition for certiorari before this Court as a result of which a
4. To effect the gradual integration of the several arrastre and stevedoring TRO was issued enjoining the trial court from enforcing its order. We,
labor contractors then operating in the Port of Tacloban, the BOC decided however, subsequently allowed the trial court to proceed with the case.
to require the merger of the 36 existing labor contractors into 4 Consequently, the petitioners filed a supplemental application for
corporations, and then to just 1. Accordingly, 4 organizations were formed, preliminary injunction seeking to stop PPA from collecting the 10% charge.
namely: (1) Tacloban Waterfront Labor and Arrastre Service Cooperative, The trial court denied this on the ground that the reason relied upon does
Inc., or TWALSCI which absorbed herein petitioner Eastern Leyte Arrastre not appear to be indubitable. Hence, petitioners filed the present petition for
Service; (2) San Juanico Pumpboats and Motor Launches Stevedoring and certiorari, G.R. No. 53492, with this Court.
Delivery Service, Inc., (3) Sealand, Inc., and (4) Tacloban Port Services, 10. On July 22, 1980, this Court issued a temporary restraining order enjoining
Inc. the PPA from collecting from petitioners the 10% of their gross income
5. PD No. 857 took effect as a result of which the powers, duties, and from arrastre operations.
jurisdiction of the BOC with regard to arrastre and stevedoring
operations were transferred to and vested in the respondent Philippine
11. The Nasipit Integrated Arrastre & Stevedoring, Inc. filed a motion for PPA has taken over the cargo-handling operations in the port of Tacloban
intervention asking that in view of the restraining order issued by this Court, and therefore, all transactions and payments relevant to said cargo-handling
it should not be required to pay 10% of its gross earnings to PPA. operations should be coursed through the management of the PPA at
12. In the meantime, according to PPA, in the course of the operation of arrastre Tacloban. Consequently, INTERCO, in turn, sent a formal letter to Eastern
services by the LIPSI, it noted a number of violations of the temporary Leyte demanding a refund of the payments it made for the services rendered
permit. The violations consisted of inefficiency in providing services due to by said petitioner.
failure to acquire the needed cargo-handling equipment; inability to render 17. Eastern Leyte filed an action with the then CFI of Leyte for injunction with
night work; permitting illegal operations by unlicenses individual labor preliminary injunction, prohibition and damages seeking to restrain
contractors or cabos whom petitioner was supposed to have absorbed by the respondent INTERCO from making any payment to respondent PPA-TAPS
process of merger; employment of child labor; and non-remittance of the and to prevent the latter from taking over the operations of petitioner,
government share of arrastre charges. As a result, PPA gave LIPSI several alleging that the same was illegal, against public policy and an impairment
written and verbal warnings to carry out the needed reforms in its of the contract executed by and between petitioner and INTERCO.
operations. 18. The judge issued a writ or preliminary injunction against respondent PPA.
13. Meanwhile, Jose M. Asturias, the Executive Vice-President and General A MR was filed by the latter alleging among others, that under PD No. 857,
Manager of petitioner wrote respondent PPA admitting petitioner's failure to it has the authority to take over the operations. The judge granted PPA's
comply with the conditions of its temporary permit. A portion of said letter motion, stating that since there is no showing that P.D. No. 857 is
reads: While there has been an integration on paper, the conditions existing unconstitutional and in view of the well known presumption of validity that
at the Tacloban pier before the supposed integration remain the same. every statute has in its favor, there is no reason for not yielding to the
Labor contractors still cling to their over-powering position as lords of the motion of PPA to dissolve the writ of preliminary injunction. Petitioner
lowly pier workers, getting a lion's share of the fees they collect and paying Eastern Leyte filed a motion for reconsideration but the same was denied.
their workers measly sums which provide the laborers a sub-human level of Hence, it filed this petition in G.R. No. 54265. On July 17, 1980, we issued
existence at most. Moreover, the amounts they turn over to the supposedly a TRO enjoining the trial court from further proceeding with the trial of the
integrated corporation are so miniscule and barely enough to pass the SSS, case and the respondent PPA from taking over the arrastre operations of
and ECC, the BIR and other governmental creditors, including the PPA petitioner in the port of Tacloban.
which gets 10% of the gross receipts. While they verbally agree to 19. A similar petition was filed by Froilan Basio and other labor contractors
integrate, they decline and refuse to relinquish control of their respective with the Court of First Instance of Leyte, questioning the PPA-TAPS' take-
contracts with the pertinent shipping companies. over of the port of Tacloban and alleging that the same constituted an
14. PPA issued Special Order No. 114-79 creating the Philippine Ports impairment of the contract between petitioners and the owners of motor
Authority- Tacloban Arrastre Ports Services (PPA-TAPS) within its launches and between petitioners and respondent PPA. As evidence of the
worn Tacloban port unit and ordering a take-over by PPA- TAPS of latter allegation, the petitioners attached to their petition a copy of the
the entire arrastre and stevedoring services in the Port of Tacloban, "Memorandum" of the Leyte-Samar Labor Union and Benigno Magpale,
effective not later than June 1, 1979, LIPSI, as well all port users were duly Inc., the manager of the PPA-PMU of Tacloban whereby the latter agreed to
informed of the take-over by PPA-TAPS. remit ten percent (10%) of the gross income derived from the port users
15. PPA-TAPS tooks over the actual management and operations of serviced by the Leyte-Samar Labor Union for the period July 1 to 31, 1979
arrastre and stevedoring services in the port of Tacloban. For this to the petitioners as labor contractors.
purpose, PPA-TAPS utilized the same dock labor force that existed at the 20. Initially, the trial court issued a TRO. However, instead of deciding the
time of the cancellation of the permit of LIPSI. According to PPA, after petition on the merits, it called the parties to a series of conferences to find
such take-over, the dockworkers where placed on regular payrolls; their means and ways whereby the petitioners as labor contractors and the
social security premiums were promptly paid and all illegal exactions from workers under them could be absorbed under the new set-up. The
their pay were stopped; they were issued free uniforms and hard hats for respondent PPA submitted its "Compliance," binding itself to absorb the
safety and protection; and they organized a genuine labor organization, the aforementioned labor contractors and workers. It assured them that whoever
Tacloban Port Service Labor Union (TAPSLU) for the protection of their would be the winning bidder of the arrastre service, he must utilize the
rights. services of the labor force who are all members of the waterfront union. In
16. As result of the take-over, PPA sent a notice to respondent International view of this "Compliance" submitted by PPA, the trial court dismissed the
Copra Export Corporation (INTER-CO), a corporation with a stevedoring petition and lifted the restraining order.
contract with Eastern Leyte reiterating the fact that effective June 1, 1979,
21. Petitioners filed a MR alleging that the decision of the trial court had no ISSUES:
evidence to support itself and that trial should have been conducted. They 5. WON PPA's takeover through PPA-TAPS of arrastre operations in the port
also sought the issuance of a restraining order against the PPA. The motion, of Tacloban, Leyte is a valid exercise of police power? – YES. The arrastre
however, was denied by said court. Thus, instead of waiting for the trial operations in the various ports in the Philippines are affected with public
court on the ground that the same violated the petitioners' right to due interest. The State in the exercise of its police power through its agency, the
process of law. LIPSI also filed a petition for certiorari with preliminary PPA, has the power to revoke the temporary permits of petitioners,
mandatory injunction. assuming the existence of valid temporary permits, and take over the
22. On August 26, 1980, we issued a resolution consolidating the four petitions. operations of the port of Tacloban whenever the need to promote the public
23. TAPSLU filed a motion to intervene in the case of LIPSI v. PPA, et al., interest and welfare both of the stevedoring industry and the workers therein
alleging that it has a legal interest in the matters in issue as it constitutes the justifies such take over
entire labor force of the stevedoring and arrastre services turned over by this 6. WON this takeover violates the constitutional right of the petitioners to non-
Court to petitioner LIPSI. impairment of contracts? – NO. The subvservience of the contract clause to
the police power enacting public regulations intended for the general
PETITIONERS’ CONTENTIONS. welfare of the community has already been upheld by the court. the records
1. Eastern Leyte contends that PPA's take over constitutes an impairment of will bear out the fact that only petitioner LIPSI has a temporary permit
the contract executed by and between itself and respondent INTERCO, issued by PPA. The rest of the petitioners where either merely allowed or
which cannot be justified because a valid impairment of contract is only tolerated to operate in the port of Tacloban
justified because a valid impairment of contract is only applicable to 7. WON the 10% charge on the monthly gross earnings of the operators of
franchises issued by the government to operators of public utilities which arrastre and stevedoring services is excessive? – NO. It is within the sound
involved public interest, public welfare, public health, and public safety. discretion of the PPA to impose a reasonable charge or rate on arrastre and
2. Froilan Basio, et al., while assailing the procedural aspect of the stevedoring operators which it deems to above most appropriate and
proceedings in the trial court, also content the PPA's take over constitutes an advantageous to the government under the circumstances.
impairment o f contract and a deprivation of property without due process 8. WON the take over by the PPA violates the prohibition against monopolies
of law. in restraint of trade? – NO. In industries affected with public interest, a
3. LIPSI goes further and challenges the constitutionality of the repealed regulated monopoly is not necessarily proscribed, if such is deemed
portion of P.D. 50520 and Section 6(a) (v) of P.D. 857 21 as being violative necessary in order to protect and promote public interest.
not only of the due process and non-impairment clauses of the Constitution
but also of the right to free enterprise by creating the dangerous blanket of a RULING: WHEREFORE, IN VIEW OF THE FOREGOING, the petitioner in G.R.
monopoly in restraint of trade, which creation is subject to the respondent Nos. 53492, 54265, 54394 and 54565 are hereby DISMISSED for lack of merit. The
PP's whims and caprices. temporary restraining orders dated July 17, 1980, July 22, 1980, August 5, 1980 and
4. Pernito Arrastre questions the validity of the ten percent (10%) charge August 21, 1980 are DISSOLVED.
imposed by PPA.
RATIO:
The take-over is a valid exercise of police power.
9. In the case of Anglo-Fil Trading Corporation v. Lazaro, we have already
20 underscored the fact that the arrastre operations in the various ports in
SEC. 5. Powers and Functions of the Council. — The Philippine Port Authority Council shall have the
following powers, functions and duties, among others: the Philippines are affected with public interest. We ruled: The
xxx xxx xxx streamlining of the stevedoring activities in the various ports of the
e. To recommend to the President, whenever the national interest demands it, that the State, through an Philippines was undertaken by PPA to implement LOI No. 1005-A. The
agency the Authority may designate, take over the administration and operation of a specific port district
or portion thereof; public interest, public welfare, and public policy sought to be subserved by
f. To approve specific application of any person, firm or entity to operate, administer and establish an said LOI are clearly set forth in its whereas clauses ... xxx xxx xxx Clearly,
individual Port/Industrial Zone Authority in a particular area there is reasonable relation between the undeniable existence of an
21
Sec. 6. Corporate Powers and Duties. —
a) The corporate duties of the Authority shall be: undesirable situation and the statutory attempt to avoid it. "Public welfare,
(v) To provide services (whether on its own, by contracts, or otherwise) within the Port Districts and the
approaches thereof, including but not limited to —
then, lies at the bottom of the enactment of said law, and the state in order
— berthing, towing, mooring, moving, slipping, or docking any vessel;
— loading or discharging any to promote the general welfare may interfere with personal liberty, with
vessel ;
— sorting, weighing, measuring, storing, warehousing, or otherwise handling goods. property, and with business and occupations." xxx xxx xxx The Manila
South Harbor is public property owned by the State. The operations of the 14. It is within the sound discretion of the PPA to impose a reasonable
premiere port of the country, including stavedoring work, are affected iwth charge or rate on arrastre and stevedoring operators which it deems to
public interest. Stevedoring services are subject to regulation and control above most appropriate and advantageous to the government under the
for the public good and in the interest of general welfare. circumstances. In the case of Anglo-Fil trading Corporation v. Lazaro, we
10. The State in the exercise of its police power through its agency, the held that the award of PPA to Ocean Terminal Services, Inc. (OTSI) of the
PPA, has the power to revoke the temporary permits of petitioners, stevedoring contract is not violate of the Anti-Graft Law since said contract,
assuming the existence of valid temporary permits, and take over the for one, embodied sufficient consideration which is the payment by OTSI to
operations of the port of Tacloban whenever the need to promote the the government of ten percent (10%) of its gross income. We ruled: Neither
public interest and welfare both of the stevedoring industry and the is the management contract violative of the Anti-Graft Law. It is a contract executed
workers therein justifies such take over. This Court has already ruled that in pursuance to law and the instructions of the President to carry out government
the statute which gives PPA the authority to implement the take over cannot objectives to promote public interest. The act did not cause "undue injury" to the
be assailed on the constitutional grounds raised by the petitioners may have petitioners who as explained earlier had no vested property rights entitled to
protection. There is no undue injury to the government nor any unwarranted benefit
acquired on the basis of the temporary permits earlier given them must
to OTSI considering that the contract carried sufficient consideration for PPA which
yield to the State's valid exercised of police power. is the payment by OTSI of ten percent (10%) of its gross income, something which
petitioner OTSI is loathe to pay. the rationalization and effective utilization of port
The take-over does not violate the constitutional right of the petitioners to non- facilities is to the advantage of the Government. Furthermore, the discretion in
impairment of contracts. choosing the stevedoring contractor for the South Harbor, Port of Manila, belongs
11. Neither can petitioners argue that their right to non-impairment of to the PPA. As long as standards are set in determining the contractor and such
contract had been violated. In the same case of Anglo-Fil Trading standards are reasonable and related to the purpose for which they are used, the
Corporation v. Lazaro, we held that the subvservience of the contract clause courts should not inquire into the wisdom of PPA's choice ...
to the police power enacting public regulations intended for the general 15. We have found the 10% share of the government in the earnings from
welfare of the community has been settled by this Court. stevedoring and arrastre service as reasonable consideration for the use
12. Furthermore, the records will bear out the fact that only petitioner of government premises, works, facilities, and services, not to mention
LIPSI has a temporary permit issued by PPA. The rest of the the supervision inherent in the upgrading and improvement of port
petitioners where either merely allowed or tolerated to operate in the operations, of which said services are an integral part.
port of Tacloban. However, even on the assumption that tall of them
were able to secure temporary permits from PPA, still, this does not The take-over by the PPA does not violate the prohibigition against monopolies in
vest any property right on them and hence, petitioners cannot allege a restraint of trade.
violation of their right to non-deprivation of property without due 16. We hold that in industries affected with public interest, a regulated
process of law. monopoly is not necessarily proscribed, if such is deemed necessary in
13. In the case of Anglo-Fil Trading Corporation v. Lazaro, we ruled:
The order to protect and promote public interest.
contention of petitioners Anglo-Fil, et al., that due process was violated resulting to 17. In the case of Philippine Ports Authority v. Mendoza, we ruled: Private
a confiscatory effect on private property is likewise without merit. In the first place, monopolies are not necessarily prohibited. The use of the word "regulate "
the petitioners were operating merely on "hold-over" permits ... Clearly, all hold- in the constitution indicates that some monopolies, properly regulated, are
over permits were by nature temporary and subject to subsequent policy guidelines allowed ... " Competition can best regulate a free economy. Like all basis
as may be implemented by PPA. Such should have served as sufficient notice to beliefs, however, that principle must accommodate hare practical
petitioners that, at any time, their authorities may be terminated. Whether or not the experience. There are areas where for special reasons the force of
petitioner would be issued a PTO depended on the sound discretion of PPA and on competition, when left wholly free, might operate too destructively to
the policies, rules and regulations that the latter may implement in accordance with safeguard the public interest. Public utilities are an instance of that
the statutory grant of power. Petitioners. therefore, cannot be said to have been
consideration." By their very nature, certain public services or public
deprived of property without due process of law because, it this respect, what they
should have taken cognizance of the fact that since they have no vested right to utilities such as those which supply water, electricity, transportation,
operate in the South Harbor, their permits can be withdrawn anytime the public telegraph, etc. must be given exclusive franchises if public interest is to be
welfare deems it best to do so. served. Such exclusive franchises are not violative of the law against
monopolies
18. In these present cases, as stated by respondent PPA, when PPA-TAPS took
10% share of government in earnings is a reasonable consideration.
over arrastre operations, it also absorbed the entire labor force that existed
at the time of the cancellation of LIPSI's permit. Hence, it can be safely said
that PPA-TAPS is also composed of all the labor contractors and the
workers under them which have been integrated t develop and improve
the planning, growth, financing, construction, maintenance and
operation of ports throughout the country and make them responsive
to the needs of their individual localities.
004 KLM v. CA (TAN) Sps. Mendoza of conditions prescribed in their tickets or, in the very least, to
Jul. 22, 1975 | Castro, J. | Liability of Main Common Carrier ascertain that they read them before they accepted their passage tickets.

PETITIONER: Koninklijke Luchtvaart Maatshappij N.V. DOCTRINE: Under the circumstances, it would be unfair and inequitable to
RESPONDENTS: The Honorable Court of Appeals, Consuelo T. Mendoza charge the Sps. Mendoza with automatic knowledge or notice of the said
and Rufino T. Mendoza condition so as to preclude any doubt that it was fairly and freely agreed upon
by the respondents when they accepted the passage tickets issued to them by
SUMMARY: Consuelo and Rufino Mendoza (Sps. Mendoza), approached the KLM.
Tirso Reyes, manager of a branch of the Philippine Travel Bureau, a travel
agency, for consultations about a world tour which they were intending to FACTS:
make with their daughter and a niece. Of the 3 segments of the trip, the 1. Consuelo and Rufino Mendoza (Sps. Mendoza), approached Tirso Reyes,
longest, would be via KLM. They also wanted to visit Lourdes, France, as manager of a branch of the Philippine Travel Bureau, a travel agency, for
discussed with Reyes, their travel agent. They decided on the Barcelona- consultations about a world tour which they were intending to make with
Lourdes route with knowledge that only one airline, Aer Lingus, serviced it. their daughter and a niece.
Sps. Mendoza were issued KLM tickets for their entire trip. However, their 2. Reyes gave them a tentative itinerary which prescribed a trip of thirty-five
coupon for the Aer Lingus flight was marked "RQ" which meant "on legs; the Mendoza’s would fly on different airlines.
request". At the Barcelona airport, the manager of Aer Lingus directed them 3. Three segments of the trip, the longest, would be via KLM.
to check in. They did so as instructed and were accepted for passage. 4. The Mendoza’s wanted to visit Lourdes, France, and discussed with Reyes
However, although their daughter and niece were allowed to take the plane, two alternate routes, namely, Paris to Lourdes and Barcelona to Lourdes.
Sps. Mendoza were off-loaded on orders of the Aer Lingus manager who They eventually decided on the Barcelona-Lourdes route with knowledge
brusquely shoved them aside with the aid of a policeman and who shouted at that only one airline, Aer Lingus, serviced it.
them, "Coños! Ignorantes Filipinos!" 5. The Philippine Travel Bureau to which Reyes was accredited was an agent
On March 17, 1966 the Sps. Mendoza, referring to KLM as the principal of for international air carriers which are members of the International Air
Aer Lingus, filed a complaint for damages with the Court of First Instance of Transport Association, popularly known as the "IATA," of which both the
Manila arising from breach of contract of carriage and for the humiliating KLM and the Aer Lingus are members.
treatment received by them at the hands of the Aer Lingus manager in 6. Reyes then made the plane reservations for the whole trip. KLM thereafter
Barcelona. KLM argued that Art. 30 of the Warsaw Convention provides that, secured seat reservations for the Sps. Mendoza and their two companions
“In the case of transportation of this nature, the passenger or his from the carriers which would ferry them throughout their trip, with the
representative can take action only against the carrier who performed the exception of Aer Lingus.
transportation during which the accident or the delay occured, save in the 7. They were issued KLM tickets for their entire trip. However, their coupon
case where, by express agreement, the first carrier has assumed liability for for the Aer Lingus flight was marked "RQ" which meant "on request".
the whole journey.” Moreover, the front cover of the ticket provides: Liability 8. After several legs, the Mendoza’s arrived in Frankfurt, Germany. They went
of carrier for damages shall be limited to occurrences on its own line, to a KLM office there and obtained a confirmation from Aer Lingus of seat
except in the case of checked baggage as to which the passenger also has a reservations on flight 861. After travelling to London, Paris and Lisbon,
right of action against the first or last carrier. A carrier issuing a ticket or they went to Barcelona for their trip to Lourdes, France.
checking baggage for carriage over the lines of others does so only as 9. At the airport, the manager of Aer Lingus directed them to check in. They
agent...” The SC held that KLM should be held liable. Art. 30 of the Warsaw did so as instructed and were accepted for passage. However, although their
Convention does not apply. That article presupposes the occurrence of either daughter and niece were allowed to take the plane, Sps. Mendoza were off-
an accident or a delay, neither of which took place at the Barcelona loaded on orders of the Aer Lingus manager who brusquely shoved them
airport; here, Aer Lingus, through its manager there, refused to transport aside with the aid of a policeman and who shouted at them, "Coños!
Sps. Mendoza to their planned and contracted destination. Second, that Ignorantes Filipinos!"
condition on the ticket was printed in letters so small that one would have to 10. Mrs. Mendoza later called up the manager of Aer Lingus and requested that
use a magnifying glass to read the words. As the airline which issued those they provide her and her husband means to get to Lourdes, but the request
tickets with the knowledge that the respondents would be flown on the was denied.
various legs of their journey by different air carriers, the KLM was
chargeable with the duty and responsibility of specifically informing the
11. A stranger, however, advised them to take a train, which the two did; a. On the inside front cover of each ticket the following appears
despite the third class accommodations and lack of food service, they under the heading "Conditions of Contract":
reached Lourdes the following morning. 1. Liability of carrier for damages shall be limited to
12. During the train trip, Sps. Mendoza had to suffer draft winds as they wore occurrences on its own line, except in the case of
only minimum clothing, their luggage having gone ahead with the Aer checked baggage as to which the passenger also has a
Lingus plane. They spent $50 for that train trip; their plane passage was right of action against the first or last carrier. A carrier
worth $43.35. issuing a ticket or checking baggage for carriage over the
13. On March 17, 1966 the Sps. Mendoza, referring to KLM as the principal lines of others does so only as agent...
of Aer Lingus, filed a complaint for damages with the Court of First b. All that the KLM did after Sps. Mendoza completed their
Instance of Manila arising from breach of contract of carriage and for the arrangements with the travel agency was to request for seat
humiliating treatment received by them at the hands of the Aer Lingus reservations among the airlines called for by the itinerary
manager in Barcelona. submitted to the KLM and to issue tickets for the entire flight as a
14. After due hearing, the trial court awarded damages to them as follows: ticket-issuing agent.
$43.35 or its peso equivalent as actual damages, P10,000 as moral damages, 18. On the other hand, Sps. Mendoza argued that:
P5,000 as exemplary damages, and P5,000 as attorney's fees, and expenses . Article 30 of the Warsaw Convention has no application in the
of litigation case at bar which involves, not an accident or delay, but a willful
15. Both parties appealed to the Court of Appeals. The KLM sought complete misconduct on the part of the KLM's agent, the Aer Lingus.
exoneration; the Sps. Mendoza prayed for an increase in the award of Under article 25 of the same Convention the following is
damages. prescribed:
16. The CA decreed as follows: "Appellant KLM is condemned to pay unto the 1. ART. 25. (1) The carrier shall not be entitled to avail
plaintiffs the sum of $43.35 as actual damages; P50,000 as moral damages; himself of the provisions of this convention which
and P6,000 as attorney's fees and costs." exclude or limit his liability, if the damage is caused by
17. (Take note of the arguments of the parties) KLM argued in the SC that his willful misconduct or by such default on his part as,
they should be exonerated because of the following grounds. in accordance with the law of the court to which the case
. The air tickets issued to Sps. Mendoza stipulate that carriage is submitted, is considered to be equivalent to willful
thereunder is subject to the "Convention for the Unification of misconduct.
Certain Rules Relating to International Transportation by Air," 2. (2) Similarly, the carrier shall not be entitled to avail
("Warsaw Convention") to which the Philippine Government is a himself of the said provisions, if the damage is caused
party by adherence, and which Art. 30 of which pertinently under the same circumstances by any agent of the carrier
provides: acting within the scope of his employment
1. ART. 30. (1) In the case of transportation to be performed a. The condition in their tickets which purportedly excuse the KLM
by various successive carriers and failing within the from liability appears in very small print, to read which, as found
definition set out in the third paragraph of Article I, each by the Court of Appeals, one has practically to use a magnifying
carrier who accepts passengers, baggage, or goods shall glass.
be subject to the rules set out in the convention, and shall b. The first paragraph of the "Conditions of Contract" appearing
be deemed to be one of the contracting parties to the identically on the KLM tickets issued to them idubitably shows
contract of transportation insofar as the contract deals that their contract was one of continuous air transportation
with that part of transportation which is performed under around the world:
his supervision. 1. "Carriage" includes the air carrier issuing this ticket and
2. (2) In the case of transportation of this nature, the all carriers that carry or undertake to carry the passenger
passenger or his representative can take action only or his baggage hereunder or perform any other service
against the carrier who performed the transportation incidental to such air carriage... Carriage to be
during which the accident or the delay occured, save in performed hereunder by several successive carrier is
the case where, by express agreement, the first carrier has regarded as a single operation.
assumed liability for the whole journey. c. The contract of air transportation was exclusively between the
Sps. Mendoza and the KLM, the latter merely endorsing its
performance to other carriers, like Aer Lingus, as its the theory of the KLM that Sps. Mendoza entered into a series of
subcontractors or agents, as evidenced by the passage tickets independent contracts with the carriers which took them on the various
themselves which on their face disclose that they are KLM tickets. segments of their trip.
Moreover, the Sps. Mendoza dealt only with KLM through the 38. Sps. Mendoza dealt exclusively with the KLM which issued them tickets
travel agency. for their entire trip and which in effect guaranteed to them that they would
have sure space in Aer Lingus flight 861.
ISSUE/s: 39. Sps. Mendoza, under that assurance of the internationally prestigious KLM,
3. WoN KLM should be held liable for the acts of Aer Lingus? Yes because naturally had the right to expect that their tickets would be honored by Aer
Aer Lingus was a mere agent, and the contract of carriage was still between Lingus to which KLM had indorsed and in effect guaranteed the
KLM and the Mendoza’s. performance of its principal engagement to carry out their scheduled
itinerary previously and mutually agreed upon between the parties.
RULING: ACCORDINGLY, the judgment of the Court of Appeals dated August 40. The breach of that guarantee was aggravated by the discourteous and highly
14, 1969 is affirmed, at KLM’s cost. arbitrary conduct of an official of the Aer Lingus which the KLM had
engaged to transport Sps. Mendoza on the Barcelona-Lourdes segment of
RATIO: their itinerary.
30. Art. 30 of the Warsaw Convention does not apply. That article presupposes 41. It is but just and in full accord with the policy expressly embodied in our
the occurrence of either an accident or a delay, neither of which took civil law which enjoins courts to be more vigilant for the protection of a
place at the Barcelona airport; here, Aer Lingus, through its manager contracting party who occupies an inferior position with respect to the other
there, refused to transport Sps. Mendoza to their planned and contracted contracting party, that the KLM should be held responsible for the abuse,
destination. injury and embarrassment suffered by the respondents at the hands of a
31. The argument that the KLM should not be held accountable for the tortious supercilious boor of the Aer Lingus.
conduct of Aer Lingus because of the provision printed on the respondents'
tickets expressly limiting the KLM's liability for damages only to
occurrences on its own lines is unacceptable.
32. As noted by the CA that condition was printed in letters so small that one
would have to use a magnifying glass to read the words.
33. Under the circumstances, it would be unfair and inequitable to charge the
Sps. Mendoza with automatic knowledge or notice of the said condition so
as to preclude any doubt that it was fairly and freely agreed upon by the
respondents when they accepted the passage tickets issued to them by the
KLM.
34. As the airline which issued those tickets with the knowledge that the
respondents would be flown on the various legs of their journey by different
air carriers, the KLM was chargeable with the duty and responsibility of
specifically informing the Sps. Mendoza of conditions prescribed in their
tickets or, in the very least, to ascertain that they read them before they
accepted their passage tickets.
35. The records fail to show that any effort was exerted by the KLM officials or
employees to discharge in a proper manner this responsibility to the them.
36. Consequently, the Sps. Mendoza cannot be bound by the provision in
question by which KLM unilaterally assumed the role of a mere ticket-
issuing agent for other airlines and limited its liability only to untoward
occurrences on its own lines.
37. Moreover, , the passage tickets of the respondents provide that the carriage
to be performed thereunder by several successive carriers "is to be
regarded as a single operation," which is diametrically incompatible with
005 LUFTHANSA v. CA (TIMBOL)
November 24, 1994 | Romero, J. | Damages FACTS:
19. Tirso V. Antirporda, Sr. (ANTIPORDA) was an associate director of the
PETITIONER: Lufthansa German Airlines Central Bank of the Philippine and a registered consultant of the Asian
RESPONDENTS: CA and Tirso V. Antiporda Sr. Development Bank, the World Bank and the UNDP
a. He was contracted by Sycip, Gorres, Velayo & Co (SGV) to be the
SUMMARY: ANTIPORDA was an associate director of the Central Bank and was institutional financial specialist for the agricultural credit
contracted by SGV to be the institutional financial specialist in the agricultural credit institution project of the Investment and Development Bank of
institution project of the Investment and Development Bank of Malawi in Africa. Malawi in Africa
LUFTHANSA issued tickets with confirmed flights (5-leg trip) from MNL – SG – b. He would render his services to the Malawi Bank as an
BOMBAY – NAIROBI – LILONGWE – BLANTYRE. ANTIPORDA took the independent contractor for which he would be paid US$ 9, 167 for
LUFTHANSA flight to SG then to BOMBAY. When he arrived at BOMBAY, a 50-day period commencing sometime in Sept. 1984
however, there was no representative to assist him in his connecting flight. Matias, c. ANTIPORDA would be provided one round-trip economy ticket
traffic officer, and Benent, a duty officer of LUFTHANSA in BOMBAY informed from MANILA to BLANTYRE and BACK with a maximum
ANTIPORDA that his seat in AIR KENYA to NAIROBI was given away to a very travel time of 3 days per round-trip and, in addition, a travel
important person of BOMBAY. AIR KENYA left before such was remedied. Four allowance of $50 per day, a travel insurance coverage of P100,000
months later, ANTIPORDA sent a letter to LUFTHANSA claiming for damages. and major hospitalization with AFIA and an accident insurance
When such demand was not heeded, he filed a civil action in the RTC. The RTC coverage of P150,000
ruled in his favor, holding that LUFTHANSA was liable for breach of contract of 20. Lufthansa, through SGV, issued ticket No. 3477712678 for ANTIPORDA’s
carriage, and that such contract is between LUFTHANSA and ANTIPORDA, and CONFIRMED flights to Malawi, Africa
not AIR KENYA. That a condition in the contract stated that it is continuous in a. MANILA TO SG
nature despite having different carriers. RTC also granted moral and exemplary b. SG TO BOMBAY
damages for the conduct of Matias (Fact 9). CA affirmed the decision, and adding c. BOMBAY TO NAIROBI
that Sec. 2 of Art. 30 of the Warsaw Convention is not applicable in this case. Thus, d. NAIROBI TO LILONGWE
this appeal. e. LILONGWE TO BLANTYRE
21. ANTIPORDA took the LUFTHANSA flight to SG from where he
Whether or not LUFTHANSA is liable for damages against ANTIPORDA proceeded to BOMBAY on board the same airline
a. He arrived in BOMBAY as scheduled and waited at the transit area
The SC held in the affirmative. First and foremost, the confirmed ticket issued by of the airport for his connecting flight to NAIROBI which was, per
LUFTHANSA is proof of the exclusive contract of air transport between schedule given by him by LUFTHANSA, to leave BOMBAY in
ANTIPORDA and LUFTHANSA. The 4th paragraph of the Conditions of Contracts the morning
indicated in the tickets also provide that carriage performed by several carriers is 22. Finding no representative of LUFTHANSA waiting for him at the gate,
considered a single operation. Thus, LUFTHANSA’s contract did not cease upon ANTIPORDA asked the duty officer of AIR INDIA how he could get in
performance of its obligation until BOMBAY, but is also liable for the performance touch with LUFTHANSA
by AIR KENYA despite being another carrier. In effect, LUFTHANSA guaranteed a. He was told to call up LUFTHANSA which informed him that
that the successive carriers would honor the ticket. Second, bumping-off is not somebody would attend to him shortly
considered as delay under Sec. 2 of Art. 30 of the Warsaw Convention, as to defeat b. Ten minutes later, Gerard Matias, LUFTHANSA’s traffic officer,
the liability of LUFTHANSA. Applying the meaning of delay in the ordinary sense is arrived, asked for ANTIPORDA’s ticket and told him to just sit
clearly inapplicable to the circumstances given. Lastly, based on the conduct of down and wait
LUFTHANSA and its officers, there is a ground for the court to grant moral and c. Matias returned with one Leslie Benent, duty officer of
exemplary damages. Clearly they were in bad faith (See either fact 9 or ratio 5) LUFTHANSA, who informed ANTIPORDA that his seat in AIR
KENYA flight 203 to NAIROBI had been given to a very
DOCTRINE: Art. 2220. Willful injury to property may be a legal ground for important person of BOMBAY who was attending a religious
awarding moral damages if the court should find that, under the circumstances, such function in NAIROBI
damages are justly due. The same rule applies to breaches of contract where the
defendant acted fraudulently or in bad faith.
d. ANTIPORDA protested, stressing that he had an important a.
Matias got angry and threw the ticket and passport on
professional engagement in BLANTYRE, Malawi in the afternoon ANTIPORDA’s lap and was ordered to go to the basement with
of Sept. 26, 1984 his heavy luggages for no reason at all
e. He requested tha the situation be remedied but AIR KENYA Flight b. It was a difficult task for ANTIPORDA to cary 3 luggages and yet
203 left for NAIROBI without him on board Matias did not even offer to help him
23. Stranded in BOMBAY, ANTIPORDA was booked for NAIROBI via Addis c. ANTIPORDA requested accommodation but Matias ignored it and
Ababa only on Sept. 27, 1984 just left
24. Consequently, 4 months later, ANTOPORDA’s counsel wrote the general d. Not even LUFTHANSA office in BOMBAY, after learning
manager of LUFTHANSA in Manila demanding P1,000,000 in dmages for ANTIPORDA’s being stranded in BOMBAY and his
the airlines “malicious, wanton, disregard of the contract of carriage” accommodation problem, provided any relief to ANTIPORDA’s
25. ANTIPORDA filed with the RTC a complaint against LUFTHANSA after sordid situation
no positive action from the latter e. ANTIPORDAD had to stay in the transit area and could not sleep
26. RTC ruled in favor of ANTIPORDA: for fear that his luggaes might be lost
a. ANTIPORDA dealt exclusively with LUFTHANSA which issued f. Everytime he went to the toilet, he had to drag with him his
to him the ticket for his ENTIRE tirp and which in effect luggages
guaranteed that ANTIPORDA would have sure space in AIR g. He tried to eat the high-seasoned food available at the airport but
KENYA flights to NAIROBI developed stomach trouble
b. LUFTHANSA admitted that the flight from MNL, SG, BOMBAY, h. It was indeed a pathetic sight that ANTIPORDA, an official of the
NAIROBI, LILONGWE, BLANTYRE, MALAWI, were all Central Bank, a multi-awarded institutional expert, tasked to
CONFIRMED with the stamped letters “OK” thereon perform consultancy work in a World Bank funded agricultural
c. The contract of air transportation was exclusively between bank project in Malawi instead found himself stranded in a foreign
ANTIPORDA and LUFTHANSA, the latter merely endorsing its land where nobody was expected to help him in his predicament
performance to AIR KENYA, as its subcontractor or agent except LUFTHANSA, who displayed utter lack of concern of its
d. The fourth paragraph of the “Conditions of Contracts” of the ticke obligation to ANTIPORDA and helft him alone in his misery at
issued by LUFTHANSA indubitably shows that the contract was BOMBAY airport
one of continuous air transportation from MANILA to BLANTYR, 28. Hence, the following were given to ANTIPORDA:
MALAWI a. Moral damages – P300,000
1. “4… Carriage to be performed hereunder by several successive b. Exemplary damages – P200,000
carriers is regarded as a single operation” c. Attorney’s fees – P50,000
e. RTC held that LUFTHANSA cannot limit its liability as a mere 29. The CA affirmed the trial courts ruling and added that:
ticket issuing agent for other airlines and only to untoward a. Although the contract of carriage was to be performed by several
occurrences on its own line air carriers, the same is to be treated as a single operation
f. RTC added that under the pool arrangement of the International conducted by LUFTHANSA because ANTIPORDA dealt
Air Transport Association (IATA), of which LUFTHANSA and exclusively with it which issued him a LUFTHANSA ticket for the
AIR KENYA are members, member airlines are agents of each entire trip
other in the issuance of tickets and, therefore, in accordance with b. LUFTHANSA also cannot rely on Secs. 122 and 223, Art. 30 of the
Ortigas v. Lufthansa, an airline company is considered bound by Warsaw Convention
the mistakes committed by another member of IATA which, in
behalf of the former, had confirmed a passenger’s reservation for 22
Art. 30 (1). In the case of transportation to be performed by various successive
accommodation
carriers and falling within the definition set out in the third paragraph of Article I,
27. In justifying its award of moral and exemplary damages, RTC emphasized
that the breach of contract was “aggravated by the discourteous and highly each carrier who accepts passengers, baggage, or goods shall be subject to the rules
arbitrary conduct of Gerard Matias, an official of LUFTHANSA in set out in the convention, and shall be deemed to be one of the contracting parties
BOMBAY” to the contract of transportation insofar as the contract deals with that part of the
transportation which is performed under his supervision.
23
(2) In the case of transportation of this nature, the passenger or his
representative can take action only against the carrier who performed the
c.
ANTIPORDA’s cause of action is not premised on the occurrence 43. In the very nature of their contract, LUFTHANSA is clearly the principal in
of an accident or delay as contemplated under Sec. 2 of said the contract of carriage with ANTIPORDA and remains to be so, regardless
Article but on AIR KENYA’s refusal to transport him in order to of those isntances when actual carriage was to be performed by various
accommodate another carriers
30. LUFTHANSA’s ARGUMENTS: 44. The issuance of a confirmed LUFTHANSA ticket in favor of ANTIPORDA
a. Liability is limited to occurrences in its own line, and thus, in this covering his entire 5-leg trip abroad successive carreirs concretely attests to
case, its liability to ANTIPORDA is limited to the extent that it this
had transported him from MNL to SG and from SG to BOMBAY 45. This also serves as proof that LUFTHANSA, in effect guaranteed that the
b. That therefrom, contract of carriage is assumed by the succeeding successive carriers, such as AIR KENYA would honor his ticket; assure
carriers, and LUFTHANSA acts as a ticket-issuing agent for the him of a space therein and transport him on a particular segment of his trip
other carriers 46. Sec. 2, Art. 30 of the Warsaw Convention is not applicable herein:
c. That “Bumping off” is similar to “Delay”, thus Sec. 2 of Art. 30 of • In its ordinary sense, “delay” means to prolong the time of or
the Warsaw Convention is applicable before; to stop, detain or inder for a time, or cause someone or
31. ANTIPORDA’s ARGUMENTS: something to be behind in schedule or usual rate of movement in
a. He entered into an exclusive contract of carriage with rogress
LUFTHANSA, which is continuous in nature, and not into a series • “Bumping-off,” which is the refusal to transport passengers with
of independent contracts; proof of which is the 4th paragraph of the confirmed reservation to their planned and contracted destinations,
confirmed tickets totally forecloses said passengers’ right to be transported, whereas
32. Hence this petition delay merely postpones for a long time being the efnrocement of
such right
ISSUE/s: 47. Consequently, Sec. 2, Art. 30 of the Warsaw Convention which does not
4. WoN LUFTHANSA which issued a confirmed LUFTHANSA ticket to contemplate the instance of “bumping-off” but merely of simple delay,
ANTIPORDA covering a 5-leg trip abroad different airlines should be held cannot provide a handy excused for LUFTHANSA as to exculpate it from
liable for damages occasioned by the “bumping-off” of said ANTIPORDA any liability to ANTIPORDA
by AIR KENYA, one of the airlines contracted to carry him to a particular
destination of the 5-leg trip - YES, Lufthansa being the principal in the DAMAGES
contract of carriage between the former and ANTIPORDA, in effect 1. Art. 2220. Willful injury to property may be a legal ground for
guaranteed that the successive carriers will honor the contract. Such failure awarding moral damages if the court should find that, under the
or refusal resulted to the breach of contract. Further, bumping off is not circumstances, such damages are justly due. The same rule applies to
similar to delay, thus, cannot invoke the Warsaw Convention. Also, breaches of contract where the defendant acted fraudulently or in bad
LUFTHANSA and its officers were clearly in bad faith in attending to faith.
ANTIPORDA, hence, they are liable even for Moral and Exemplary 2. Observed by the CA: [Just in case sir asks]
damages 1. If there was really no seat available because of overbooking, why
did Lufthansa confirm the ticket of the plaintiffappellee? It has to be
RULING: WHEREFORE, the petition for review is hereby DENIED and the pointed out that the confirmed ticket is up to Blantyre, Malawi, not
decision of the Court of Appeals AFFIRMED. only to Bombay.
2. If the plaintiffappellee was not in the list of passengers of Kenya
RATIO: Airways (the connecting flight) then Lufthansa must have deceived
42. We, therefore, reject LUFTHANSA’s theory that from the time another him in Manila because according to Gerard Matias, the passengers
carrier was engaged to transport ANTIPORDA on another segment of his booked by Kenya Airways for Boeing 707 were 190 passengers
trip, it merely acted as a ticket-issuing agent in behalf of said carrier when the plane could accommodate only 144 passengers
considering that the name of plaintiffappellee was not in the list. If
that was the situation, Lufthansa by the issuance of its ticket should
transportation during which the accident or the delay occurred, save in the case have not assured the plaintiffappellee that he could get the
where, by express agreement, the first carrier has assumed liability for the whole connecting flights as scheduled. Surely, Lufthansa before
journey. confirming the ticket of the plaintiffappellee must have confirmed

the flight with Kenya Airways. If it was impossible to get a seat stranded in the Bombay Airport for 32 hours, when plaintiff insisted
upon its own investigation in Bombay, then it should have not on taking his scheduled flight to Nairobi, Gerard Matias got angry
confirmed the ticket of the plaintiff appellee. It is the defendant- and threw the ticket and passport on plaintiff's lap and was ordered
appellant who was negligent in the performance of its duties, and to go to the basement with his heavy luggages for no reason at all. It
plaintiff appellee was just plainly deceived. was a difficult task for the plaintiff to carry three luggages and yet
3. Since the ticket was marked O.K., meaning confirmed, therefore Gerard Matias did not even offer to help him. Plaintiff requested
plaintiffappellee must have a definite seat with Kenya Airways but accommodation but Matias ignored it and just left. Not even
it was lost or given to another person. It is not true therefore, that Lufthansa office in Bombay, after learning plaintiff's being stranded
plaintiff appellee's name was not in the list of Kenya Airways. in Bombay and his accommodation problem, provided any relief to
Besides, why should Lufthansa allow a passenger to depart from the plaintiff's sordid situation. Plaintiff has to stay in the transit area and
Philippines with a confirmed ticket, without instructing its Bombay could not sleep for fear that his luggages might be lost. Everytime
office to reserve a seat with Kenya Airways for its connecting he went to the toilet, he had to drag with him his luggages. He tried
flight? In spite of the confirmation, Nelda Aquino testified that to eat the highseasoned food available at the airport but developed
plaintiffappellee was stranded in Bombay because he did not get a stomach trouble. It was indeed a pathetic sight that the plaintiff, an
seat with Kenya Airways, and his name did not appear in the list of official of the Central Bank, a multiawarded institutional expert,
passengers. Then contrary to the testimonies of Berndt Loewe and tasked to perform consultancy work in a World Bank funded
Gerard Matias that the obligation of the agricultural bank project in Malawi instead found himself stranded
4. defendantappellant is only up to Bombay and the reason why in a foreign land where nobody was expected to help him in his
plaintiffappellee was not in the list of passengers is because of predicament except the defendant, who displayed utter lack of
overbooking. Nelda Aquino contrary to the testimonies of the two, concern of its obligation to the plaintiff and left plaintiff alone in his
testified that the reason for the bumpingoff is that the seat was given misery at the Bombay airport.
to another passenger
3. Clearly, bad faith attended the performance of the contract of carriage, for
even while ANTIPORDA was in BOMBAY, representatives of
LUFTHANSA already tried to evade liability first, by claiming that the
contract of carriage between LUFTHANSA and ANTIPORDA ceased at
the BOMBAY airport, in disregard of the tact that ANTIPORDA was
holding a LUFTHANSA ticket for the entire 5-leg trip
1. Second, despite Loewe’s knowledge that ANTIPORDA’s seat was
allowed to be given to antoher passenger, the same suppressed the
finromation and feigned ignorance of the matter, presenting
altogether another reason why ANTIPORDA was not listed in the
manifest
4. ANTIPORDA is likewise entitled to the award of exemplary damages on
the basis of Art. 223224 fo the Civil Code
5. There is every indication that LUFTHANSA, thorugh its representatives in
BOMBAY, acted in reckless and malevolent manner in dealing with
ANTIPORDA
1. The breach of the guarantee was aggravated by the discourteous and
highly arbitrary conduct of Gerard Matias, an official of Lufthansa
in Bombay. Bumped off from his connecting flight to Nairobi and

24
Art. 2232. In contracts and quasicontracts, the court may award exemplary
damages if the defendant acted in a wanton, fraudulent, reckless, oppressive, or
malevolent manner.

006 CHINA AIR LINES v. CA (CHIQUI) 1. On June 4, 1968, Jose E. Pagsibigan, then vice-president and general
May 18, 1990 | Regalado, J. | Agent sued for negligence of own employee manager of Rentokil (Phils.) Inc., a local firm dealing in insecticides,
pesticides and related services appurtenant thereto, purchased a plane ticket
PETITIONER: China Air Line, Ltd. for a Manila-Taipei-Hongkong-Manila flight from the Transaire Travel
RESPONDENTS: Court of Appeals, Jose Pagsibigan, Philippine Air Lines, Inc., Agency. The said agency, through its Cecille Baron, contacted the Manila
and Roberto Espiritu Hotel branch of Philippine Air Lines (PAL) which at that time was a sales
and ticketing agent of China Air Lines (CAL).
PETITIONER: Philippine Air Lines, Inc., and Roberto Espiritu 2. On June 6, 1968, PAL, through its ticketing clerk Roberto Espiritu, cut and
RESPONDENTS: Court of Appeals, Jose Pagsibigan, and China Air Lines, Inc. issued CAL Ticket No. 017991 for a Manila-Taipei-Hongkong-Manila
flight. According to the plane ticket, Pagsibigan was booked on CAL CI
Flight No. 812 to depart from Manila for Taipei on June 10, 1968 at 1720
hours (5:20 p.m.).
SUMMARY: Pagsibigan bought a plane ticket for a Manila-Taipei-Hongkong-
3. On June 10, 1968, one hour before the scheduled time of the flight as stated
Manila from Transaire Travel Agency. This agency contacted PAL, a sales and
in his ticket, Pagsibigan arrived at the airport to check in for CI Flight No.
ticketing agent of CAL. Espiritu, the ticketing clerk, issued the ticket bound for
812. Upon arriving at the airport, Pagsibigan was informed that the plane
Taipei scheduled on June 10, 1968 at 5:20 pm. One hour before the scheduled
he was supposed to take for Taipei had left at 10:20 in the morning of that
flight, Pagsibigan was informed that the plane already left at 10:20 in the morning
day. The PAL employees at the airport made appropriate arrangements for
of that day. Nevertheless, PAL made arrangements and Pagsibigan arrived the
Pagsibigan to take PAL’s flight to Taipei the following day, June 11, 1968.
following day in Taipei. Because of this, Pagsibigan filed for damages. PAL argues
Pagsibigan took said flight and arrived in Taipei around noontime of the
that CAL should be the one to pay since the former is only an agent. CAL, on the
said date.
other hand, contends that the revised schedule of flights was properly
4. Pagsibigan, through counsel, made formal demand on PAL for moral
communicated to PAL. RTC ruled that CAL did not contribute to the erroneous
damages in not less than P125,000.00 for what he allegedly suffered as a
entry. However, CA finds that the evidence of CAL to be insufficient to overcome
result of his failure to take the flight as stated in his plane ticket.
the presumption of negligence on its part for the act done by Espiritu. W/N CAL is
5. After a series of negotiations among Pagsibigan, PAL and CAL failed to
liable as the principal of PAL – NO, PAL is being sued for the negligence of its
reach an amicable settlement, Pagsibigan instituted this action in the CFI of
employee. There is no question that the contractual relation between both airlines is
Rizal.
one of agency (doctrine). However, in an action premised on the employee’s
a. In his complaint, Pagsibigan prays for the recovery of P125,000.00
negligence, whereby Pagsibigan seeks recovery for the resulting damages from both
as moral damages and P25,000.00 for and as attorney’s fees. The
PAL and Espiritu without qualification, what is sought to be imposed is the direct
moral damages allegedly arose from the gross negligence of
and primary liability of PAL as an employer under Article 2180. To escape solidary
Espiritu in stating on the plane ticket that the time of departure was
liability for the quasi-delict committed by Espiritu, it is imperative that PAL must
1720 hours, instead of 1020 hours which was the correct time of
adduce sufficient proof that it exercised such degree of care. PAL failed to
departure in the revised summer schedule of CAL. He suffered
overcome the presumption. As found by the CA, CAL had revised its schedule of
besmirched reputation, embarrassment, mental anguish, wounded
flights since April 1, 1968; that after the Civil Aeronautics Board had approved the
feelings and sleepless nights, inasmuch as when he went to the
revised schedule of flights, PAL was duly informed thereof and, in fact, PAL’s
airport, he was accompanied by his business associates, close
Manila Hotel branch office had been issuing and selling tickets based on the revised
friends and relatives.
time schedule before June 10, 1968.
b. He further averred that his trip to Taipei was for the purpose of
conferring with a certain Peng Siong Lim, president of the Union
DOCTRINE: As a general proposition, an agent who duly acts as such is not Taiwan Chemical Corporation, scheduled at 9:00 a.m. on June 11,
personally liable to third persons. However, there are admitted exceptions, as in this 1968.
case where the agent is being sued for damages arising from a tort committed by his 6. PAL’s contention:
employee. a. The departure time indicated by Espiritu in the ticket was furnished
and confirmed by the reservation office of CAL.
FACTS: b. CAL had not informed PAL’s Manila Hotel Branch of the revised
schedule of its flight, nor provided it with revised timetable
c. Espiritu who was then the ticketing clerk on duty, checked with the whatever negligence was committed by him is attributable to PAL.
reservation office of CAL on the availability of space, the date and It is an admitted fact that PAL is an authorized agent of CAL. In
the time of said flight and CAL’s Dory Chan informed Espiritu this relationship, the responsibility of PAL for the tortious act of its
that the departure time of Flight No. 812 on June 10, 1968 was at agent or representative is inescapable.
5:20 in the afternoon of said date. d. A similar principle is recognized in our Civil Code in its Art. 2180
7. CAL’s argument: x x x. Unlike in the doctrine of respondeat superior, however, the
a. Disclaims liability for the negligence and incompetence of the Civil Code permits the employer to escape this liability upon proof
employees of PAL of having observed all the diligence of a good father of a family to
b. It had revised its schedule since April 1, 1968, the same to be prevent the damage. We find the evidence of CAL to be
effective on April 20, 1968, and the said revised schedule was insufficient to overcome the presumption of negligence on its part
adopted only after proper petition with and approval of the Civil for the act done by Roberto Espiritu.
Aeronautics Board of which all airlines, including defendant PAL, e. The liability for the damage sustained by the plaintiff should,
were notified therefore, be borne by all of the defendants in a joint and solidary
c. Both printed copies of the international timetable and of the capacity (Art. 2194).
mimeographed notices of the official schedule and flight departure 10. CAL, in a petition for certiorari, appealed:
schedules were distributed to all its sales agents, including PAL a. A principal cannot be held liable, much less solidarily, for the
d. After the effectivity of the new time schedules, PAL’s Manila negligence of the sub-agent, where the former never participated
Hotel office had been issuing and selling tickets based on the in, ratified or authorized the latter’s act or omission.
revised time schedule b. Dismissal of the cross-claim of PAL against PAL and Espiritu will
e. Assuming that Pagsibigan is entitled to recover damages, the not prevent the release of PAL from liability to Pagsibigan.
liability is on PAL and not on CAL. c. The award of damages was unwarranted both legally and factually.
8. RTC rendered judgment laying the blame for the erroneous entry in the 11. PAL and Espiritu also appealed:
ticket as to the time of departure to Espiritu, ticketing agent of PAL, and a. CA erred in not holding that CAL, being the principal, is solely
that no employee of CAL contributed to such erroneous entry. It was further liable to Pagsibigan.
ruled that Pagsibigan had no reason to claim moral damages but may be b. CA erred in awarding respondent Pagsibigan the sum of
entitled to recover exemplary damages. P20,000.00 as nominal damages.
9. CA sustained the ruling of the trial court denying Pagsibigan’s claim for
moral damages. It concluded that Roberto Espiritu did not act with malice ISSUE/s:
or in bad faith in making a wrong entry of the time of departure on the 5. W/N CAL is liable as the principal of PAL – NO, PAL is being sued for the
ticket, and that the mistake committed by Espiritu appears to be an honest negligence of its employee.
one done in good faith. It also ruled out the claim for exemplary damages
for lack of legal basis. Nonetheless, as earlier noted, it awarded Pagsibigan
RULING: WHEREFORE, the decision of respondent Court of Appeals is
P20,000.00 as nominal damages
MODIFIED accordingly. China Air Lines, Ltd. is hereby absolved from liability.
a. CAL had no share in the error committed by Espiritu in indicating
Philippine Air Lines, Inc. and Roberto Espiritu are declared jointly and severally
the time of departure
liable to pay the sum of P10,000.00 by way of nominal damages, without prejudice
b. PAL had shown through the testimony of Carmen Ibazeta Gallaga,
to the right of Philippine Air Lines, Inc. to recover from Roberto Espiritu
ticket representative of PAL at the Manila Hotel Office, that they
reimbursement of the damages that it may pay respondent Jose Pagsibigan. SO
received circulars and timetables of airlines in the PAL main
ORDERED.
office. It further appears that on two occasions, PAL cut and issued
tickets for CAL based on the new schedule even before June 10,
1968. As a matter of fact, the other entries of time departures in the RATIO:
ticket issued to the plaintiff are in accordance with the revised
schedule 1. To avoid inequitable effects under such confluence of remedies, the true
c. However, in proving that the fault lied with Espiritu, CAL derives nature of the action instituted by Pagsibigan must be determined. A careful
no solace nor gains an advantage. It may not claim exemption from perusal of the complaint of Pagsibigan will readily disclose that the
liability by reason thereof. Espiritu was an employee of PAL and allegations thereof clearly and unmistakably make out a case for a quasi-
delict.
a. Had the intention of respondent Pagsibigan been to maintain an sufficient proof that it exercised such degree of care. PAL
action based on breach of contract of carriage, he could have sued failed to overcome the presumption.
CAL alone considering that PAL is not a real party to the contract. c. As found by the CA, CAL had revised its schedule of flights since
b. Moreover, in cases of such nature, the aggrieved party does not April 1, 1968; that after the Civil Aeronautics Board had approved
have to prove that the common carrier was at fault or was the revised schedule of flights, PAL was duly informed thereof
negligent. All he has to prove is the existence of the contract and and, in fact, PAL’s Manila Hotel branch office had been issuing
the fact of its non-performance by the carrier. and selling tickets based on the revised time schedule before June
2. The records disclose that the RTC delved much into the issues of who was 10, 1968.
at fault, and its decision is primarily anchored on its factual findings 5. PAL’s main defense is that it is only an agent.
regarding the civil liability arising from culpa aquiliana of the erring party. a. As a general proposition, an agent who duly acts as such is not
a. It, therefore, becomes evident that Pagsibigan, having sensed that personally liable to third persons. However, there are admitted
he cannot hold CAL liable on a quasi-delict, decided on appeal to exceptions, as in this case where the agent is being sued for
instead make a sinistral detour, so to speak, by claiming that his damages arising from a tort committed by his employee.
action against CAL is based on a breach of contract of carriage. 6. CA found that the mistake committed by Espiritu was done in good faith.
b. We cannot permit Pagsibigan to change his theory at this stage; it While there is no evidence that he acted with malice, we cannot entirely
would be unfair to the adverse party who would have no more condone his actuations. As an employee of PAL, the nature of his functions
opportunity to present further evidence, material to the new theory, requires him to observe for the protection of the interests of another person
which it could have done had it been aware earlier of the new that degree of care, precaution and vigilance which the circumstances justly
theory at the time of the hearing before the trial court. demand. He committed a clear neglect of duty.
c. There is indeed no basis whatsoever to hold CAL liable on a quasi- 7. For his negligence, Espiritu is primarily liable to Pagsibigan under Article
delict or culpa aquiliana. As hereinbefore stated, RTC absolved 2176 of the Civil Code. For the failure of PAL to rebut the legal
CAL of any liability for fault or negligence. This finding was presumption of negligence in the selection and supervision of its employee,
shared by the CA when it concluded that CAL did not contribute to it is also primarily liable under Article 2180 of the same code which
the negligence committed by PAL and Espiritu. explicitly provides that employers shall be liable for the damages caused by
3. Pagsibigan insists that CAL was barred from proving that it observed due their employees and household helpers acting within the scope of their
diligence in the selection and supervision of its employees. This argument is assigned tasks, even though the former are not engaged in any business or
obviously misplaced. CAL is not the employer of PAL or Espiritu. industry.
a. We have stressed the need of first establishing the existence of an a. Under the aforesaid provision, all that is required is that the
employer-employee relationship before an employer may be employee, by his negligence, committed a quasi-delict which
vicariously liable under Article 2180 of the Civil Code. caused damage to another, and this suffices to hold the employer
4. There is no question that the contractual relation between both airlines is primarily and solidarily responsible for the tortious act of the
one of agency. Suffice it to say, however, that in an action premised on the employee. PAL, however, can demand from Espiritu
employee’s negligence, whereby Pagsibigan seeks recovery for the resulting reimbursement of the amount which it will have to pay the
damages from both PAL and Espiritu without qualification, what is sought offended party’s claim.
to be imposed is the direct and primary liability of PAL as an employer 8. On the issue of damages, we agree, except as to the amount, that nominal
under said Article 2180. damages may be awarded to Pagsibigan to vindicate the legal wrong
a. When an injury is caused by the negligence of an employee, there committed against him. It appearing that the wrong committed was
instantly arises a presumption of law that there was negligence on immediately rectified when PAL promptly booked him for the next
the part of the employer either in the selection of the employee or morning’s flight to Taipei where he arrived before noon of June 11, 1968
in the supervision over him after such selection. The presumption, and was able to attend his scheduled conference, and considering the
however, may be rebutted by a clear showing on the part of the concept and purpose of nominal damages, the award of P20,000.00 must
employer that it has exercised the care and diligence of a good accordingly be reduced to an amount equal or at least commensurate to the
father of a family in the selection and supervision of his employee. injury sustained.
b. Hence, to escape solidary liability for the quasi-delict
committed by Espiritu, it is imperative that PAL must adduce
007 Santiago Lighterage v. CA (Valle) 1. Pelaez is the sole proprietor of the firm M. A. P. Trading and offered to C-
21 June 2004 | Carpio, J. | Seaworthiness square the vessel MV Christine Gay for the use of C-square in shipping and
exporting its milled chromite ores in bulk to Pohang Port, South Korea
(SK). Pelaez assured Emilio G. Libatigue. (VP of C-square) that it was
PETITIONER: Santiago Lighterage Corporation
seaworthy.
RESPONDENTS: CA, C-Square Consolidated Mines and Manuela A. Pelaez
2. C-square accepted Pelaez’s offer and entered into a Voyage Charter
Agreement with Pelaez, it being speficially agreed upon that the agreement
SUMMARY:
shall automatically be considered rescinded and inoperative if the vessel is
C-square needed a vessel to transport its chromite ores to South Korea. It
found not seaworthy to undertake a safe voyage to Korea or if Pelaez fails
entered into a bareboat charter agreement with Pelaez, the owner of MAP
to get the necessary permits and/or shipping documents to allow voyage to
Trading, who offered the MV Christine Gay for use. This vessel disowned by
Korea.
Santiago Lighterage (Santiago) and the charterer is MAP Trading. When the
3. MV Christine Gay is the subject of a Bareboat charter agreement where
vessel was turned over to Pelaez, a new set of crew members boarded and took
Santiago is the owner of the vessel and MAP Trading is the charter and
possession of the vessel. After boarding, it went to Masinloc, Zambales from
pursuant to the understanding of C-Square and Pelaez, C-Square paid to
Manila and this was when the Chief Engineer Simeon observed that the engine
Santiago Lighterage for the account of MAP, the amount of 740K pesos.
was not in good condition because smoke was going out from the exhaust
4. MV Christine Gay was turned over by Santiago to Pelaez. The new set of
manifold. The vessel went on to Zambales because Simeon was assured that it
crew members boarded and took possession of the vessel to determine
will be repaired in Masinloc. While being boarded with ores, it was also being
her actual condition.
repaired. But because of the inadequacy of the repairs, Simeon recommended
5. After boarding, they immediately proceeded to Masinloc, Zambales from
that the vessel may not be able to continue to SK. It was decided that the vessel
Manila. At this time, Marine Chief Engineer Simeon Panaguiton (Simeon)
sail back to Manila instead. On its way, the engines stopped and the vessel was
observed that the engine was not in good condition because heavy smoke
floating in the middle of the sea. C-square is now claiming for damages against
was going out from the exhaust manifold. Simeon, however, allowed the
Pelaez and Pelaez filed a third-party complaint against Santiago.
vessel to make the voyage to Zambales because he was assured that it will
be repaired in Masinloc.
The issue here is whether to not the MV Christine Gay is seaworthy.
6. At Masinloc, the chromite ores were loaded on the vessel while repairs were
being made by the men of Santiago and Robert Tan. A report was made by
The SC held that it wasn’t seaworthy. Though Santiago presented documentary
Capt. Beltran Sorongon (Beltran) who was the master of the vessel, about
evidence showing that MV Christine Gay is seaworthy, these are only prima
the condition of the hull and superstructures. Because of the inadequacy of
facie evidence and may be overturned. The court gave credence to the
the repairs, Simeon recommended to Pelaez that the vessel may not be able
testimonies Simeon and Beltran, the Marine Chief Engineer and the master of
to continue to SK. He also informed Beltran that the vessel was not
the ship respectively. Both testified of the unseaworthiness of the vessel. (The
seaworthy.
testimonies are the end. There’s a lot of reasons listed from both testimonies.
7. It was decided that the vessel loaded with ores sail back to Manila instead
Please check it out.) that there were no new spare parts for the engine or the
of SK since it will be dangerous. At about 2pm to 3pm the engines suddenly
auxiliary engines, that the mechanical governors of the engines are defective, no
stopped, so the vessel stopped in the middle of the ocean. Simeon allowed
pyrometer gauges etc.
Maximo Alvarez, the ship purser, to board a passing fishing boat and to
inform Pelaez and Tan about what happened. Simeon also had a written
note for Atty. Paculdo of C-square informing him that the vessel was
DOCTRINE
drifting at sea because some of the pistons and piston rings of the engines of
the vessel were damaged.
In Maritime Law, to be seaworthy, a vessel must have that degree of fitness
8. C-Square served a notice of recision of the agreement upon Pelaez who
which an ordinary, careful, and prudent owner would require his vessel to
gave his conformity. C-Square then sent a demand letter informing Pelaez
have at the commencement of her voyage, having regarded to all the
that it suffered damages of at least 2M because of lack of documentation
probable circumstances of it. Thus, the degree of seaworthiness varies in
and that it was unseaworthy.
relation to the contemplated voyage.
9. Counsel of Pelaez wrote a letter addressed to Santiago and Tan informing
them about the demand letter. Pelaez also demanded that he be paid 2M and
further 1M for unrealized profit.
FACTS:
10. The vessel was towed by a tugboat to Manila. At this time Pelaez wrote a 1. Santiago asserts that delivery of the MV Christine Gay to Pelaez and
letter to the Maritime Industry Authority (MARINA) requesting for re- Pelaez’s subsequent takeover of the vessel is already a full performance of
investigation of the seaworthiness. It was conducted and a report stated that Santiago’s obligation. Santiago berthed the Christine Gay in the port of
the vessel was a dead ship at time of inspection. Manila and Pelaez had the opportunity to inspect when he took over the
11. C-square had to transport its ores to SK with other companies and entailed vessel. Thus, Santiago is not liable for defects of the vessel after delivery
additional expenses. Ores had to be unloaded from the vessel too. So C- and turn over.
square spent for salaries of officers and crew members, provisions, fuel, and 2. It quoted the bareboat charter agreement:
other things. Total sent was 3,133.031.15 pesos. a. Delivery – The VESSEL shall be delivered and taken over by the
12. C-Square filed a complaint for damages against Pelaez before the trial court. CHARTERERS at the port of the City of Manila, in such ready
C-square signed a single voyage charter agreement with Pelaez who berth as the CHARTERERS may direct. The OWNER shall before
represented himself as the disponent owner of MV Christine Gay. Pelaez and at the time of delivery exercise due diligence to make the
warranted that MV Christine Gay was seaworthy and can undertake voyage VESSEL seaworthy and in every respect ready in hull, machinery
to South Korea. and equipment for service hereunder. The VESSEL shall be
13. But MV Christine Gay failed to start the voyage so C-square asked the TC properly documented at time of delivery. The delivery to the
to hold Pelaez liable for actual, moral, exemplary damages, plus atty’s fees. CHARTERERS of the VESSEL and the taking over of the
14. Pelaez filed a third-party complaint against Santiago Lighterage (Santiago) VESSEL by the CHARTERERS shall constitute a full
for damages with prayer for a writ of preliminary attachment. Pelaez signed performance by the OWNER of all the OWNER’S obligations
the bareboat charter agreement with Santiago because fo Santiago’s hereunder, and thereafter the CHARTERERS shall not be entitled
representations that the MV Christine Gay was seaworthy and fit. Since it to make or assert any claim against the OWNER on account of the
failed to begin voyage, Pelaez sought to hold Santiago liable for whatever representations or warranties expressed or implied with respect to
damages the TC may award to C-square. the VESSEL but the OWNER shall be responsible for repairs or
15. Santiago filed its answer and argued that Pelaez has no cause of action renewals occasioned by latent defects in the VESSEL, her
against it because MV Christian Gay was seaworthy at time of delivery. machinery or appurtenances existing at the time of delivery under
16. TC this Agreement, provided such defects have manifested before
a. Not seaworthy when the parties signed the bareboat charter turnover.
agreement. 3. The SC that the mere physical transfer of the vessel to Pelaez does not
17. CA constitute full performance of its obligation under the bareboat agreement.
a. Affirmed the TC decision. Neither is it considered delivery. Under the agreement, physical transfer o a
ISSUE/s: seaworthy vessel is necessary to satisfy delivery. Par 3 (quoted above)
1. WoN MV Christine Gay was seaworthy to travel to South Korea– No. expressly requires Santiago to make the vessel seaworthy at the time of
Even though Santiago presented documents to prove its seaworthiness, the delivery. Since Santiago failed to do so, it failed to perform its obligation
Court gave credence to the findings of fact of the TC which was affirmed under the agreement.
by the CA from the testimonies of Simeon and Beltran that the vessel was 4. Seaworthiness is a relative term. Santiago claims that the mV later
not seaworthy. undertook voyages within the Philippines. However, such subsequent
voyages do not prove the vessel’s seaworthiness to withstand a voyage to
RULING: WHEREFORE, we DENY the instant petition for review. The Decision SK.
dated 15 October 1998 of the Court of Appeals in CAG.R. CV No. 52661, and its 5. In Maritime Law, to be seaworthy, a vessel must have that degree of
Resolution dated 5 August 1999 denying the motion for reconsideration, are fitness which an ordinary, careful, and prudent owner would require
AFFIRMED with the MODIFICATION that the amount due shall earn legal interest his vessel to have at the commencement of her voyage, having regarded
at 6% annually from 4 May 1992, the date of the trial court’s decision. On finality of to all the probable circumstances of it. Thus, the degree of
this decision, the amount due shall earn annual interest at 12%, in lieu of 6% annual seaworthiness varies in relation to the contemplated voyage.
interest, until full payment. a. Crossing he Atlantic calls for stronger equipment than sailing
across the Visayan Sea. It is essential to consider that once the
necessary degree of seaworthiness has been ascertained, this
RATIO: obligation is an absolute one, i.e. the undertaking is that the vessel
SANTIAGO’s argument actually is seaworthy. It is no excuse that the shipowner took every
possible precaution to make her so, if in fact he failed. SIMEON’s Testimony
b. In examining what is meant by seaworthiness we must bear in
mind the dual nature of the carrier’s obligations under a contract of Q As Chief Engineer of the "MV CHRISTINE GAY" from 1 September 1989 to 2 October 1989, were
affreightment. To satisfy these duties the vessel must (a) be you able to observe the condition of the said vessel at that time?
efficient as an instrument of transport and (b) as a storehouse for A Yes, sir.
Q Will you please tell us what your observations were as to the condition and fitness of the
her cargo. The latter part of the obligation is sometimes referred to
vessel to undertake a voyage at that time?
as cargoworthiness. A There were no new spare parts available on board for the auxiliary engines, and neither
c. A ship is efficient as an instrument of transport if its hull, tackle were there spare parts for the main engine except for a single worn out cylinder liner and
and machinery are in a state of good repair, if she is sufficiently piston. The mechanical governors of both the main and auxiliary engines were all defective.
provided with fuel and ballast, and is manned by an efficient crew. There were no pyrometer gauges installed on the main engine to determine the temperature of
d. And a vessel is cargoworthy if it is sufficiently strong and individual working cylinders. The main engine indicator docks were not mechanically
equipped to carry the particular kind of cargo which she has functioning, and they were blinded and not working. Expoxy [sic] was applied temporarily to
contracted to carry, and her cargo must be so loaded that it is safe some part connections to prevent leakages that cause substantial consumption of lubricating
for her to proceed on her voyage. A mere right given to the oil especially on engines. No special tools were available specifically for the repair of the main
engine in case of a major internal breakdown such as that which happened on 23 September
charterer to inspect the vessel before loading and to satisfy
1989 when we had to use fabricated and imported ones. The bilge pump connections to the
himself that she was fit for the contracted cargo does not free main engine were defective and condemned thereby requiring the use of portable gasoline
the shipowner from his obligation to provide a cargoworthy engine Robin pump instead – which is not advisable since fuel feed to operate is highly
ship. flammable in character. Per record found registered in the ship’s logbook, dated 6 August
1989, No. 1 and No. 6 pistons were pulled out due to mechanical trouble, and I discovered,
6. Santiago asserts that MV Christine Gay is sufficient in materials, when No. 1 piston was damaged again on 23 September 1989, that the said No. 6 piston had
construction, equipment, and outfit as shown by documents from the Coast not been replaced with a precision one when it was repaired prior to the time I took over as
Guard and the MARINA issued to it. Santiago presents the following Chief Engineer on 1 September 1989.
documents:
a. Certificateof Inspection No. 2361-89 Beltran’s
b. Cargo ship safety equipment certificate No. 561-89
After the vessel "MV CHRISTINE GAY," under my command arrived and/or berthed alongside Acoje
c. Cargo Ship Safety Construction Certificate No 539-89 Wharf at Sta. Cruz, Zambales on 3 September 1989, the Chief Mate and I (captain) conducted survey
d. Manning Certificate for Vessels on International Trade around the hull and superstructures. We found the following defects:
e. Special Permit No 0313-89 1. The hull on deck line around the accommodations found [to have] plenty [of] holes and
7. But Santiago overlooks that these are mere prima facie evidence of the heavily rusted. Seawater entered crew quarters with the possibility to the engine when sea
facts stated and contrary proof can overturn such. The TC relied on shipping on deck. Recommended for welding with doubler while loading chromite.
testimonies of Simeon and Beltran (inserted at the end of the digest for your 2. The starboard superstructure deeply dented/crippled.
3. Mooring winches forward and aft are defective, gave a lot of problems during berthing and
reference. I suggest you check it kasi it listed down the reasons why the
shifting. Pilots complained of power and delay.
vessel wasn’t seaworthy. Sir might ask.) that there were no new spare parts 4. Several pontoon covers are not in good condition.
for the engine or the auxiliary engines, that the mechanical governors of the 5. No hatch battens to secure hatch covers/tarpaulins, so seawater cannot enter into the hold.
engines are defective, no pyrometer gauges etc. 6. All bilges not suctioning and very dangerous for sea passage and not safe for crew and
cargo loaded on board.
8. The court gave respect to the findings of fact of the TC especially if affirmed by 7. No lifeboat on board. According to ship’s plan, davits are fitted on portside boatdeck where
the appellate court (which was done here). The Court did not disturb the trial lifeboat is secured but now not existing anymore, totally not complying [with] the SOLAS
court’s calibration of the testimonial evidence of the parties, its assessment of requirements.
the credibility and probative weight of the evidence of the parties, and its 8. Plenty of holes found on deck platings and hatch coamings. Recommended repair while
loading.
conclusion anchored on its findings. The exception to this rule is when the trial 9. Exhaust found not in proper position/location. Seawater will enter through and cause
court misconstrued facts and circumstances of substance which if considered damage to the engine and generators. Chief Engineer recommended to restore to its original
would alter the outcome of the case. The SC has assessed the evidence on position.
record and found no reason to deviate from the trial and appellate courts’ 10. Water tight doors with no rubbers to prevent seawater and butterflies/locks not moving.
findings of facts. Reconditioned/greased while loading but no available watertight door rubbers to use.
11. Anchor winch cannot heave up the anchor without the aid of the boom runner. Oil seals all
worn out[.] Pilots complained of delays.
12. Portside of the shell plating below the comfort room as reported by Chief Engineer, there negligence, the doctrine of limited liability cannot be applied.
is a heavily corroded portion that by a slight bump of any object will cause the seawater to
rush into the engine.
13. Atop the bridge, Captain’s and Chief Mates’ cabin are leaking when raining.
14. Found plenty [of] holes at the bow. Vessel not strong or capable to encounter big waves,
boisterous winds and other meteorological elements in high seas[,] not seaworthy.
15. Ladder steps going up to the bridge are missing and rotten. The Pilot nearly fell down.
008 Aboitiz Shipping Corp. v. New India Assurance Company (VARGAS)
2006 May 02 | Quisumbing, J. | Doctrine of Limited Liability

PETITIONER: Aboitiz Shipping Corporation


RESPONDENTS: New India Assurance Company, Ltd.
SUMMARY: A cargo of textiles and auxiliary materials from France were
loaded on board a vessel owned by Franco-Belgian. While in Hong Kong, the FACTS:
cargo was transferred to M/V P. Aboitiz for transshipment to Manila. The cargo 1. Characters:
was consigned to General Textile, Inc. and was covered by an insurance. Before Franco-Belgian Services, Inc. – owner of the vessel used from France to HK aka
departing, the vessel was advised that it was safe to travel. But while at sea, the the ship which did not sink haha
vessel received a report of typhoon moving within its general path. To avoid it, Aboitiz Shipping Corporation – owner of the vessel used from HK to PH aka the
the vessel changed its course. The vessel sank, but the captain and crew were ship that sank (M/V P. Aboitiz)
saved. The captain filed his marine protest and Aboitiz notified consignee of the General Textile, Inc. – consignee
total loss of the vessel and all of its cargoes. The consignee lodged a claim with New India Assurance Company – insurance company
the insurance company. The insurance company paid and was subrogated to the 2. A cargo of textiles and auxiliary chemicals from France were loaded on board a
rights of the consignee. The insurance company hired a surveyor to investigate vessel owned by Franco-Belgian Services, Inc. The cargo was consigned to
the cause of the sinking. The report stated that the cause was the flooding of the General Textile, Inc., in Manila and insured by respondent New India Assurance
holds brought about by the vessel’s questionable seaworthiness. Insurance Company. While in Hong Kong, the cargo was transferred to M/V P. Aboitiz for
company filed a complaint for damages against Aboitiz, among others. Both the transshipment to Manila.
trial court and the CA ruled in favor of the insurance company holding Aboitiz 3. Before departing, the vessel was advised by Japanese Meteorological Center that
liable for the total value of the lost cargo. So, Aboitiz brought this case before it was safe to travel. But while at sea, the vessel received a report of typhoon
the Supreme Court. Aboitiz contends that insurance company’s claim for moving within its general path. To avoid it, the vessel changed it course.
damages should only be against the insurance proceeds and limited to its pro-rata However, it was still at the fringe of the typhoon when its hull leaked. The vessel
share in view of the doctrine of limited liability. On the other hand, the insurance sank, but the captain and his crew were saved.
company argues that the doctrine of real and hypothecary nature of maritime law 4. The captain of the vessel then filed his Marine Protest stating that the wind force
is not applicable in this case because Aboitiz was found to have been was at 10-15 knots at the time the ship foundered and described the weather as
negligent.The issue is WON the limited liability doctrine, which limits moderate breeze, small waves, becoming longer, fairly frequent white horses.
insurance company’s award of damages to its pro-rata share in the 5. Thereafter, Aboitiz Shipping Corp. notified the consignee of the total loss of the
insurance proceeds, applies in this case – NO. As stated in Monarch, an vessel and all of its cargoes. The consignee lodged a claim with insurance
exception to the limited liability doctrine is when the damage is due to the fault company for the amount of its loss. The insurance company paid the consignee
of the shipowner or to the concurrent negligence of the shipowner and the and was subrogated to the rights of the latter.
captain. In which case, the shipowner shall be liable to the full-extent of the 6. The insurance company hired a surveyor to investigate the cause of the sinking.
damage. In this case, Aboitiz has the burden of showing that it exercised The surveyor concluded that the cause was the flooding of the holds brought
extraordinary diligence in the transport of the goods it had on board in order to about by the vessel’s questionable seaworthiness. Consequently, the insurance
invoke the limited liability doctrine. To limit its liability to the amount of the company filed a complaint for damages against Abotiz Shipping Corporation,
insurance proceeds, Aboitiz has the burden of proving that the unseaworthiness Franco-Belgian Services and its local agent.
of its vessel was not due to its fault or negligence. Considering the evidence 7. Insurance Company’s (New India) Argument: The proximate cause of the loss
presented and the circumstances obtaining in this case, Aboitiz failed to was
discharge this burden. a. the fault or negligence of the master and crew of the vessel,
DOCTRINE: Where the shipowner fails to overcome the presumption of b. the vessel’s unseaworthiness, and
c. failure of defendants (Aboitiz, Franco and its agent) to exercise extraordinary been negligent. Hence, Aboitiz should be held liable for the total value of the lost
diligence in the transport of the goods. Hence, the defendants breached their cargo.
contract of carriage. 3. It bears stressing that this Court has variedly applied the doctrine of limited
8. Franco-Belgian and its agent: They claimed that: liability to the same incident - the sinking of M/V P. Aboitiz. Monarch, the latest
a. They exercised extraordinary diligence in handling the shipment while in ruling, tried to settle the conflicting pronouncements relative to the sinking of
their possession; M/V P. Aboitiz.
b. Its vessel was seaworthy; 4. In Monarch, we said that the sinking of the vessel was not due to force majeure,
c. Proximate cause of the loss of cargo was a fortuitous event. but to its unseaworthy condition. Therein, we found Aboitiz concurrently
Moreover, Franco-Belgian filed a cross-claim against Aboitiz alleging that the negligent with the captain and crew. But the Court stressed that the circumstances
loss occurred during the transshipment with Aboitiz and so liability should rest therein still made the doctrine of limited liability applicable.
with it. 5. Our ruling in Monarch may appear inconsistent with the exception of the limited
9. Aboitiz Shipping Corp. raised the following defenses: liability doctrine, as explicitly stated in the earlier part of the Monarch decision.
a. The ship was seaworthy; An exception to the limited liability doctrine is when the damage is due to
b. The sinking of the vessel M/V P. Aboitiz was due to an unforeseen event and the fault of the shipowner or to the concurrent negligence of the shipowner
without fault or negligence on its part; and the captain. In which case, the shipowner shall be liable to the full-
c. In accordance with the real and hypothecary nature of maritime law, the extent of the damage. We thus find it necessary to clarify now the applicability
sinking of the vessel extinguished its liability on the loss of cargoes. here of the decision in Monarch.
10. Board of Marine Inquiry (BMI): BMI conducted its own investigation to 6. From the nature of their business and for reasons of public policy, common
determine whether the captain and crew were administratively liable. However, carriers are bound to observe extraordinary diligence over the goods they
Aboitiz Shipping Corp. neither informed the insurance company nor the trial transport according to all the circumstances of each case. In the event of loss,
court of the investigation. BMI exonerated the captain and crew of any destruction or deterioration of the insured goods, common carriers are
administrative liability and declared the vessel seaworthy and concluded that the responsible, unless they can prove that the loss, destruction or deterioration was
sinking was due to the vessel’s exposure to the approaching typhoon. brought about by the causes specified in Article 1734 of the Civil Code. In all
11. Trial Court: Ruled in favor of the insurance company. It held Aboitiz liable for other cases, common carriers are presumed to have been at fault or to have acted
the total value of the lost cargo plus legal interest. negligently, unless they prove that they observed extraordinary diligence.
12. CA: affirmed in toto trial court’s decision. BMI proceedings was only for the Moreover, where the vessel is found unseaworthy, the shipowner is also
administrative liability of the captain and crew and was unilateral in nature, presumed to be negligent since it is tasked with the maintenance of its vessel.
hence not binding on the courts. Though this duty can be delegated, still, the shipowner must exercise close
supervision over its men.
ISSUE: WON the limited liability doctrine, which limits insurance company’s 7. In this case, Aboitiz has the burden of showing that it exercised extraordinary
award of damages to its pro-rata share in the insurance proceeds, applies in this diligence in the transport of the goods it had on board in order to invoke the
case – NO. To limit its liability to the amount of the insurance proceeds, Aboitiz has limited liability doctrine. To limit its liability to the amount of the insurance
the burden of proving that the unseaworthiness of its vessel was not due to its fault or proceeds, Aboitiz has the burden of proving that the unseaworthiness of its vessel
negligence. Considering the evidence presented and the circumstances obtaining in was not due to its fault or negligence.
this case, we find that Aboitiz failed to discharge this burden. 8. Considering the evidence presented and the circumstances obtaining in this case,
Aboitiz failed to discharge this burden. It initially attributed the sinking to the
RULING: WHEREFORE, the petition is DENIED for lack of merit. The Decision typhoon and relied on the BMI findings that it was not at fault. However, both
dated August 29, 2002 and Resolution dated January 23, 2003 of the Court of the trial and the appellate courts, in this case, found that the sinking was not
Appeals in CA-G.R. CV No. 28770 are AFFIRMED. due to the typhoon but to its unseaworthiness. Evidence on record showed that
the weather was moderate when the vessel sank. These factual findings of the
RATIO: Court of Appeals, affirming those of the trial court are not to be disturbed on
1. Abotiz: Citing Monarch v. CA, Aboitiz contends that insurance company’s claim appeal, but must be accorded great weight. These findings are conclusive on this
for damages should only be against the insurance proceeds and limited to its pro- Court as well.
rata share in view of the doctrine of limited liability. 9. In contrast, the findings of the BMI are not deemed always binding on the courts.
2. Insurance Company (New India): The doctrine of real and hypothecary nature of Besides, exoneration of the vessels officers and crew by the BMI merely
maritime law is not applicable in this case because Aboitiz was found to have concerns their respective administrative liabilities. It does not in any way operate
to absolve the common carrier from its civil liabilities arising from its failure to
exercise extraordinary diligence, the determination of which properly belongs to
the courts.
10. Where the shipowner fails to overcome the presumption of negligence, the
doctrine of limited liability cannot be applied. Therefore, we agree with the
appellate court in sustaining the trial courts ruling that petitioner is liable for the
total value of the lost cargo.
009 WESTERN SHIPPING v. NLRC (VICENCIO)
Feb. 9, 1996 | Mendoza, J. | Illegal Dismissal; Loss of Confidence Bao also did inform the petitioners of the vessel's ETA in Manila. He just failed to
confirm its arrival because the vessel arrived on a Sunday when offices are closed. The
PETITIONER: Western Shipping Agency, Inc., Yeh Shipping Co. LTD. And Phil. vessel also only arrived an hour behind its ETA yet no agents of the petitioners (Western
British Assurance Co., Inc. et al.) were on hand to meet it when the vessel arrived. Western Shipping knew the vessel
RESPONDENTS: National Labor Relations Commission and Alexander S. Bao arrived since it issued a telex message welcoming the vessel's arrival.

SUMMARY: Yeh Shipping is the owner of the vessel M/V Sea Wealth, which was (Read the doctrine). Petitioners Western, Yeh, and Phil. British assurance failed to
carrying 17,000+ metric tons of urea from Indonesia, and then it discharged some in discharge the burden of proof. Bao was illegally dismissed.
Davao, until it finally made its voyage to Manila. Western Shipping is the manning agent
of Yeh Shipping. Phil. British in turn is the surety of Western Shipping. On Jan. 14, 1989, DOCTRINE: Loss of confidence is a valid ground for the dismissal of managerial
Western Shipping notified Alexandar Bao, the master of M/V Sea Wealth (hired by employees like Bao herein, who was the master of a vessel. But even managerial
Western Shipping) of his discharge. He was discharged for loss of trust and condfidence. employees enjoy security of tenure, fair standards of employment and protection of labor
The grounds for the discharge included Bao’s failure to notify the Western’s offices of laws and, as such, they can only be dismissed after cause is shown in an appropriate
the arrival of the vessel in Manila (from Davao) and his unauthorized accommodation proceeding. The loss of confidence must be substantiated by evidence. The burden of
and transport of 15 people, knowing of the limited safety equipment on board. Bao filed a proof is on the employer to show grounds justifying the loss of confidence.
complaint for illegal dismissal with the POEA. Bao did not deny that he had taken
passengers on board. He claimed however, that Noimi Zabala, president of Western PARTIES:
Shipping, did not object to the taking of additional passengers and on the contrary 33. Petitioner Yeh Shipping Co., Ltd. is the owner of the vessel M/V Sea
secured permit from the Collector of Customs for them. The Coast Guard also issued a Wealth.
clearance for the vessel to sail. POEA ruled that Bao was illegally dismissed and ordered 34. Petitioner Western Shipping Agency, Inc. is the manning agent of Yeh
Western and Yeh Shipping to pay salary differentials to Bao. The NLRC modified the Shipping Co., Ltd.
decision and lowered the monetary claims. Issue: WoN Bao was illegally dimissed and 35. Petitioner Philippine British Assurance Company is the surety of Western
entitled to his monetary claims? Yes.
Shipping Agency, Inc.
36. Private respondent Alexandar Bao was master of the M/V Sea
As both the LA ad the POEA found, Bao's taking of 15 passengers was with the
knowledge of the President of Western Shipping. The shipowner's agent, World Mariner
Wealth, having been hired by Western Shipping in 1988 at a monthly salary
Phils., also knew of the presence of the passengers. World Mariner even secured a permit of US$1,323.00 with a fixed monthly overtime pay of US$287.00. His
for them from he Collector of Customer and Coast Guard. The clearance issued by the contract was for one year, starting April 21, 1988.
Coast Guard establishes two points: first that the Coast Guard and the Collector of
Customss approved the application for boarding of additional passengers, and second that FACTS:
the safety of the vessel was not endangered by the presence of such passengers. 37. On January 14, 1989, Bao was notified of his discharge. In the
disembarkation order given to him on January 17, 1989, Western Shipping
The vessel also had two life boats and two inflatable life rafts on board which could justified the discharge of Bao on the following ground:
accommodate 50 persons and 25 persons, respectively. With only 36 persons on board 38. At this juncture, our Offices would like to let you feel and understand that
(21 are the vessels complement and 15 passengers), the vessel had adequate life-saving they Were unhappy about the way you conducted and executed your official
equipment. duties and responsibilities as Master of the vessel, particularly when it was
at the port of Davao and when it arrived at (the) Port of Manila.
Bao may also be presumed to be as much concerned with the safety of those on board as 39. As you have admitted thru the telephone, you failed to notify or gave advice
were petitioners (Western, Yeh, Phil. British). After all the additional passengers were to our offices about your actual arrival in Manila because you were busy
not ordinary passengers but the wives and children of the vessel's complement, including coordinating matters including your intention to take the Pilot
Bao's own wife. If the presence of these relatives endangered the safety of the vessel as a Examinations in Batangas. Had it not for our initiative when we tried to go
whole, Bao, who had 15 years of maritime experience behind him, would in all likelihood to South Harbor on Monday - January 9th - and verified, we would have not
have been the first one to disallow them.
known that you were already in Manila.
40. Indeed, we understand your failure to communicate with us upon your
The boarding of the complements family did not make the vessels load heavier than when
it left Indonesia. If the vessel was seaworthy then, with more reason it was seaworthy
arrival in Manila, when we went on board the ship and discovered that you
when it sailed from Davao with a lighter load. allowed the accommodation and transport of people who should not be on
board during the vessels navigation from Davao to Manila, without even
trying to secure the necessary approval from our offices, aware of the risks of P6,920.01 representing the underpayment of family allotment and the
and knowing the limited safety equipment and accommodation on board. difference in peso dollar conversion plus ten percent (10%) of the total
41. On March 1, 1989, Bao filed a complaint with the POEA alleging illegal judgment away by way of and as attorneys fees.
dismissal, underpayment of salary and fixed overtime pay and non-payment 50. The NLRC modified the decision:
of wages and other emoluments corresponding to the unexpired portion of a. The decision appealed from is hereby MODIFIED in that the award of
his employment contract. P6,920.01 representing the alleged salary differentials caused by the
42. Petitioners (Western, Yeh and Phil. British) denied Bao’s allegations. They erroneous conversion of complainant’s shipboard pay and allotments is
averred that the Bao was dismissed because of loss of trust and confidence hereby SET ASIDE.
b. The award of US$5,643.00 or its equivalent in Philippine currency at the
for having allowed fifteen (15) persons to sail with him
time of payment representing the salaries corresponding to the unexpired
from Davao to Manila without authority and without regard to the safety of portion of complainants contract plus ten percent (10%) thereof as
the passengers and the cargo. attorneys fees is hereby AFFIRMED with the qualification that: (1)
43. In their position paper petitioners (Western, Yeh and Phil. British) claimed Respondents Western Shipping Agency, Inc. and Yeh Shipping Co. Ltd.
that, in violation of company rules, Bao failed to notify them of the vessels are jointly and severally liable therefor, and (2) respondent British
arrival in Manila on January 8, 1989 and to provide life-saving equipment Assurance Co., Inc. is likewise liable therefor in its capacity as the
for the passengers he had allowed to board, as required by Sec. 1019 of the bonding company.
Philippine Merchant Marine Rules and Regulation. 51. Hence this petition. Petitioners (Western, Yeh and Phil. British) allege that
44. Petitioners (Western, Yeh and Phil. British) submitted the affidavit of NLRC gravely abused its discretion in affirming the decision of the POEA,
Noimi Zabala, president of Western Shipping, stating as further ground for finding Bao to have beel illegally dismissed and awarding US$5,643.00 to
the employers loss of trust and confidence in Bao, the fact that the latter him as salaries corresponding to the unexpired portion of Bao’s contract.
allegedly collected US$7,000.00 in foreign currency from Western
Shipping in violation of a Central Bank regulation prohibiting manning ISSUE/s:
agencies from withdrawing foreign remittances in dollars and falsely 6. WoN Bao was illegally dimissed and entitled to his monetary claims – YES,
accused Western Shipping of underpayment. Petitioners (Western, Yeh and Phil. British) had knowledge of the vessel’s
45. DEFENSE: Bao did not deny that he had taken passengers on board the arrival and additional passengers as proved by permits from the Coast
vessel on its trip from Davao to Manila. He claimed, however, that Mr. Guard and Collector of Customs, and they failed to discharge the burden of
Zabala had been notified of this fact in a telephone conversation but he did proof of loss of confidence of their managerial employee.
not object and that the additional passengers were wives and children of the
complement of the vessel. RULING: WHEREFORE, the petition is DISMISSED.
46. Bao alleged that the shipowners’ agent in Davao, the World Mariner
Philippines, Inc., did not object to the taking Qf additional passengers but RATIO:
on the contrary secured permit from the Collector of Customs for them to 48. The petition is without merit. To begin with, findings of facts of the NLRC,
board the vessel. Lastly, it was alleged, the Coast Guard, after inspecting affirming those of the Labor Arbiter, are entitled to great weight and will
the vessel with the additional passengers on board, issued a clearance for not be disturbed by this Court if they are supported by substantial evidence.
the vessel to sail. 49. In this case, both the Labor Arbiter and the POEA found that Bao had
47. Bao denied that he did not notify Western Shipping of the vessels arrival. taken on board the vessel the fifteen passengers with the knowledge of
He claimed he had sent a telex message on January 5, 1989, informing Noimi Zabala, the president of Western Shipping. Zabala had been told
Western Shipping of the expected time of arrival of the vessel on January 8, so by telephone by Bao but Zabala did not object and only said,
1989, at 0600 Hrs, and that Western Shipping sent a message, also by telex, “Mabuti ka pa pare, pinahihintulutan mo ang mga iyan na makasama
welcoming the arrival of the vessel. sa biyahe.”
48. He alleged that the vessel was equipped with two life boats and rafts which 50. As both the NLRC and the POEA also found, the shipowner’s agent,
could accommodate all persons aboard in case of emergency. World Mariner Phils. Inc., knew of the presence on board the vessel of
49. POEA rendered a decision finding Bao to have been illegally disissed and the passengers who were actually the crew’s relatives. World Mariner
ordered petitioners (Western and Yeh Shipping; Phil. British not included) in fact secured a permit for them from the Collector of Customs and
to pay Bao’s monetary claims in the sums of US$5,643.00 or its peso the Coast Guard as part of its duty to represent the vessel in that port.
equivalent at the time of payment representing complainants salary for the 51. Noimi Zabala denied in his affidavit that World Mariner was the ship agent
unexpired portion of the contract including his salary differential, the sum in Davao. His denial, however, cannot prevail over the positive assertion by
World Mariner that it was the shipowner’s (Yeh Shipping Co’s) agent for
the duration of the M/V Sea Wealths call at Davao from December 23, 1988 60. Petitioners (Wester, Yeh, Phil. British) further contend that Bao did not
to January 20, 1989. Indeed, the shipowner, Yeh Shipping Co., never denied notify Western Shipping of the actual arrival of the vessel in Manila despite
the claim of the World Mariner. Western Shipping’s authority, as manning the fact that the vessel was equipped with communication facilities which
agent, was only to hire seafarers for the ship. made it possible for Bao to contact any telephone on shore.
52. The clearance to sail issued by the Coast Guard, after the vessel had 61. It appears that Bao did inform petitioners of the vessels Expected Time
been inspected by it together with the Collector of Customs, establishes of Arrival (ETA) in Manila. If he failed to confirm its arrival later, it
two points: was because the vessel arrived in Manila on January 8, 1989, which was
53. First, that the Coast Guard and the Collector of Customs approved the a Sunday, when offices were closed.
application for the boarding of the additional passengers, and second 62. Petitioners (Wester, Yeh, Phil. British) claim that it is engaged in maritime
that the safety of the vessel was not endangered by the presence of the business and that it operates on a 24-hour a day basis. Petitioners might be
additional passengers. This clearance is entitled to much weight as it in operation 24 hours a day plying their vessels. But there is no evidence to
was issued by an agency of the government charged with the show that its offices were open 24 hours a day, seven days a week, so that
seaworthiness of vessels. even if the vessel arrived on a Sunday, there were employees of Western
54. Nor is there any basis for petitioners’ (Western, Yeh, Phil. British) Shipping who could have attended to the vessel upon its arrival.
allegation that the vessel did not have life-saving equipment for the 63. Furthermore, the vessel arrived only an hour behind its ETA as given to
additional passengers. It had two life boats and two inflatable life rafts petitioners (Wester, Yeh, Phil. British), but petitioners’ agents were not
on board which could accommodate 50 persons and 25 persons, on hand to meet it when the vessel arrived. Bao had reason to believe
respectively. With only 36 persons on board (21 are the vessels that the Western Shipping knew that vessel was arriving on January 8,
complement and 15 passengers), the vessel had adequate life-saving 1989 because the latter had in fact issued a telex message welcoming the
equipment. arrival of the vessel.
55. Petitioners (Western, Yeh, Phil. British) contend that the life boats and rafts 64. Indeed, had it been Bao’s intention to hide the presence of the 15
were for the crew and passengers under emergency, but there were none for passengers on board the vessel, as petitioners (Wester, Yeh, Phil. British)
the additional passengers. But there were no passengers under claim, Bao could have asked the passengers to disembark from the vessel
emergency during the vessels run from Davao to Manila, so that the immediately after its arrival on January 8, 1989 instead of allowing them to
lifebuoys intended for the passengers under emergency could have been stay until the next morning when officers of Western Shipping came.
used by the crews relatives on board if needed. 65. Loss of confidence is a valid ground for the dismissal of managerial
56. The clearance to sail issued by the Coast Guard is proof of compliance employees like Bao herein, who was the master of a vessel. But even
with the requirements of 1019 of the Philippine Merchant Marine managerial employees enjoy security of tenure, fair standards of
Rules and Regulation. employment and protection of labor laws and, as such, they can only be
57. Bao may be presumed to be as much concerned with the safety of those dismissed after cause is shown in an appropriate proceeding.
on board as were petitioners. After all the additional passengers were 66. The loss of confidence must be substantiated by evidence. The burden
not Ordinary passengers but the wives and children of the vessel’s of proof is on the employer to show grounds justifying the loss of
complement, including Bao’s own wife. If the presence of these relatives confidence. Petitioners (Wester, Yeh, Phil. British) failed to discharge
endangered the safety of the vessel as a whole, Bao, who had 15 years of this burden, as the POEA and the NLRC found.
maritime experience behind him, would in all likelihood have been the 67. As Bao was illegally dismissed, he is entitled to the payment of salary
first one to disallow them. corresponding to the unexpired portion of his contract of employment.
58. The fact is that when the M/V Sea Wealth was in Lhokseumawe, Indonesia,
it was loaded with 17,171.443 metric tons of urea. When it reached Davao,
it unloaded 8,021.713 metric tons of its cargo, so that on its voyage to
Manila, the vessels load was much lighter.
59. The boarding of the complements family did not make the vessels load
heavier than when it left Indonesia. If the vessel was seaworthy then,
with more reason it was seaworthy when it sailed from Davao with a
lighter load. It appears that of the fifteen additional passengers, 12
were adults, two were teenagers and one was an infant.
CALTEX v. SULPICIO (Villavicencio) negligence.
September 30, 1999 | Pardo, J. | Charter Party

PETITIONER: Caltex (Philippines), Inc. FACTS:


RESPONDENTS: SULPICIO LINES, INC., GO SIOC SO, ENRIQUE S. GO, 1. MT Vector is owned and operated by Vector Shipping Corporation, engaged in
EUSEBIO S. GO, CARLOS S. GO, VICTORIANO S. GO, DOMINADOR S. GO, the business of transporting fuel products such as gasoline, kerosene, diesel and
RICARDO S. GO, EDWARD S. GO, ARTURO S. GO, EDGAR S. GO, EDMUND crude oil.
S. GO, FRANCISCO SORIANO, VECTOR SHIPPING CORPORATION, 2. MT Vector carried on board gasoline and other oil products owned by Caltex by
TERESITA G. CAEZAL AND SOTERA E. CAEZAL virtue of a charter contract between them
3. passenger ship MV Doa Paz left the port of Tacloban headed for Manila with a
SUMMARY: Caltex and Vector Shipping entered into a voyage charter agreement complement of 59 crew members including the master and his officers, and
or a contract of affreightment for the shipping of fuel products of Caltex. The fuel passengers totaling 1,493 as indicated in the Coast Guard Clearance.
products were carried on board MT Vector owned and operated by Vector. A 4. The MV Doa Paz is a passenger and cargo vessel owned and operated by
collision happened between MT Vector and MV Doa Paz, a passenger and cargo Sulpicio Lines, Inc.
vessel owned and operated by Sulpicio lines within the vicinity of Dumali Point 5. two vessels collided in the open sea within the vicinity of Dumali Point between
between Marinduque and Oriental Mindoro. Board of Marine Inquiry held that MT Marinduque and Oriental Mindoro.
Vector were at fault. Wife and mother of deceased passengers of MV Doa Paz filed a 6. All the crewmembers of MV Doa Paz died, while the two survivors from MT
a complaint for Damages Arising from Breach of Contract of Carriage against Vector claimed that they were sleeping at the time of the incident.
Sulpicio Lines, Inc. Sulpicio, in turn, filed a third party complaint against Francisco 7. MV Doa Paz carried an estimated 4,000 passengers; many indeed, were not in
Soriano, Vector Shipping Corporation and Caltex (Philippines), Inc. Trial court the passenger manifest. Only 24 survived the tragedy after having been rescued
rendered decision dismissing the third party complaint against Caltex. Court of from the burning waters by vessels that responded to distress calls.
Appeal modified the trial courts ruling and included Caltex as one of those liable for 8. board of marine inquiry in BMI Case No. 653-87 after investigation found that
damages. WoN Caltex is liable for damages – NO, because in a contract of the MT Vector were at fault and responsible for its collision with MV Doa Paz.
affreigtment, the charterer, here Caltex, has no liability for damages as it is only 9. Teresita Caezal and Sotera E. Caezal, Sebastian Caezals wife and mother of
required to exercises ordinary diligence that the vessel is presumed to be seaworthy, deceased passengers respectively, filed a complaint for Damages Arising from
Caltex is not expected to inquire into the vessels seaworthiness, genuineness of its Breach of Contract of Carriage against Sulpicio Lines, Inc.
licenses and compliance with all maritime laws anymore. If the charter is a contract 10. Sulpicio, in turn, filed a third party complaint against Francisco Soriano, Vector
of affreightment, which leaves the general owner in possession of the ship as owner Shipping Corporation and Caltex (Philippines), Inc.
for the voyage, the rights and the responsibilities of ownership rest on the owner. 11. Sulpicio alleged that Caltex chartered MT Vector with gross and evident bad
The charterer is free from liability to third persons in respect of the ship. Sulpicio’s faith knowing fully well that MT Vector was improperly manned, ill-equipped,
arguments rest on the vessel’s seaworthiness. Caltex had the right to presume the unseaworthy and a hazard to safe navigation
vessel’s seaworthiness; even the Philippine Coast Guard did so. Caltex and Vector 12. the trial court rendered decision dismissing the third party complaint against
Shipping Corporation had been doing business since 1985, or for about two years Caltex
before the tragic incident occurred in 1987. Past services rendered showed no reason 13. Court of Appeal modified the trial courts ruling and included Caltex as one of
for Caltex to observe a higher degree of diligence. those liable for damages.

DOCTRINE: A charter party is a contract by which an entire ship, or some principal ISSUE/s:
part thereof, is let by the owner to another person for a specified time or use; a 1. WoN Caltex is liable for damages – NO, because in a contract of affreigtment,
contract of affreightment is one by which the owner of a ship or other vessel lets the the charterer, here Caltex, has no liability for damages as it is only required to
whole or part of her to a merchant or other person for the conveyance of goods, on a exercises ordinary diligence that the vessel is presumed to be seaworthy, Caltex
particular voyage, in consideration of the payment of freight is not expected to inquire into the vessels seaworthiness, genuineness of its
A contract of affreightment may be either time charter, wherein the leased vessel is licenses and compliance with all maritime laws anymore.
leased to the charterer for a fixed period of time, or voyage charter, wherein the ship
is leased for a single voyage. Under a demise or bareboat charter on the other RULING: WHEREFORE, the Court hereby GRANTS the petition and SETS
hand, the charterer mans the vessel with his own people and becomes, in effect, the ASIDE the decision of the Court of Appeals in CA-G. R. CV No. 39626,
owner for the voyage or service stipulated, subject to liability for damages caused by promulgated on April 15, 1997, insofar as it held Caltex liable under the third party
complaint to reimburse/indemnify defendant Sulpicio Lines, Inc. the damages the • For a vessel to be seaworthy, it must be adequately equipped for the voyage
latter is adjudged to pay plaintiffs-appellees.The Court AFFIRMS the decision of the and manned with a sufficient number of competent officers and crew. The
Court of Appeals insofar as it orders Sulpicio Lines, Inc. to pay the heirs of Sebastian failure of a common carrier to maintain in seaworthy condition the vessel
E. Caezal and Corazon Caezal damages as set forth therein. Third-party defendant- involved in its contract of carriage is a clear breach of its duty prescribed in
appellee Vector Shipping Corporation and Francisco Soriano are held liable to Article 1755 of the Civil Code.
reimburse/indemnify defendant Sulpicio Lines, Inc. whatever damages, attorneys
fees and costs the latter is adjudged to pay plaintiffs-appellees in the case. Caltex is not liable for damages under the Civil Code
Sulpicio argues that Caltex negligently shipped its highly combustible fuel
RATIO: cargo aboard an unseaworthy vessel such as the MT Vector when Caltex:
The charterer has no liability for damages under Philippine Maritime laws. 1.Did not take steps to have M/T Vectors certificate of inspection and
68. Caltex and Vector entered into a contract of affreightment, also known as a coastwise license renewed;
voyage charter.
69. A charter party is a contract by which an entire ship, or some principal part 2. Proceeded to ship its cargo despite defects found by Mr. Carlos Tan of
thereof, is let by the owner to another person for a specified time or use; a Bataan Refinery Corporation;
contract of affreightment is one by which the owner of a ship or other vessel lets
the whole or part of her to a merchant or other person for the conveyance of 3. Witnessed M/T Vector submitting fake documents and certificates to the
goods, on a particular voyage, in consideration of the payment of freight Philippine Coast Guard.
70. A contract of affreightment may be either time charter, wherein the leased
vessel is leased to the charterer for a fixed period of time, or voyage charter, Sulpicio further argues that Caltex chose MT Vector to transport its cargo
wherein the ship is leased for a single voyage. despite these deficiencies:
71. In both cases, the charter-party provides for the hire of the vessel only, either for
a determinate period of time or for a single or consecutive voyage, the ship 1. The master of M/T Vector did not posses the required Chief Mate license
owner to supply the ships store, pay for the wages of the master of the crew, and to command and navigate the vessel;
defray the expenses for the maintenance of the ship.
72. Under a demise or bareboat charter on the other hand, the charterer mans the 2. The second mate, Ronaldo Tarife, had the license of a Minor Patron,
vessel with his own people and becomes, in effect, the owner for the voyage or authorized to navigate only in bays and rivers when the subject collision
service stipulated, subject to liability for damages caused by negligence. occurred in the open sea;
73. If the charter is a contract of affreightment, which leaves the general owner in
possession of the ship as owner for the voyage, the rights and the responsibilities 3. The Chief Engineer, Filoteo Aguas, had no license to operate the engine
of ownership rest on the owner. The charterer is free from liability to third of the vessel;
persons in respect of the ship.
4. The vessel did not have a Third Mate, a radio operator and a lookout; and
MT Vector is a common carrier
• In this case, the charter party agreement did not convert the common carrier into 5. The vessel had a defective main engine.
a private carrier. The parties entered into a voyage charter, which retains the
character of the vessel as a common carrier. 2. As basis for the liability of Caltex, the Court of Appeals relied on Articles 20
• In Planters Products, Inc. vs. Court of Appeals, we said: and 2176 of the Civil Code
It is therefore imperative that a public carrier shall remain as such, 3. The charterer of a vessel has no obligation before transporting its cargo to
notwithstanding the charter of the whole or portion of a vessel by one or more ensure that the vessel it chartered complied with all legal requirements. The duty
persons, provided the charter is limited to the ship only, as in the case of a time- rests upon the common carrier simply for being engaged in public service.
charter or voyage charter. It is only when the charter includes both the vessel 4. The Civil Code demands diligence which is required by the nature of the
and its crew, as in a bareboat or demise that a common carrier becomes private, obligation and that which corresponds with the circumstances of the persons, the
at least insofar as the particular voyage covering the charter-party is concerned. time and the place. Hence, considering the nature of the obligation between
Indubitably, a ship-owner in a time or voyage charter retains possession and Caltex and MT Vector, the liability as found by the Court of Appeals is without
control of the ship, although her holds may, for the moment, be the property of basis.
the charterer. 5. The relationship between the parties in this case is governed by special laws.
Because of the implied warranty of seaworthiness, shippers of goods, when Certificate of Inspection No. 1290-85 during the hiring of MT Vector?
transacting with common carriers, are not expected to inquire into the vessels Apolinar Ng: At the time when I extended the Contract, I did nothing because the tanker has a
seaworthiness, genuineness of its licenses and compliance with all maritime valid C.I. which will expire on December 7, 1987 but on the last week of November, I called
laws. the attention of Mr. Abalos to ensure that the C.I. be renewed and Mr. Abalos, in turn, assured
me they will renew the same.
6. To demand more from shippers and hold them liable in case of failure exhibits
Q: What happened after that?
A: On the first week of December, I again made a follow-up
nothing but the futility of our maritime laws insofar as the protection of the
from Mr. Abalos, and said they were going to send me a copy as soon as possible, sir. xxx xxx
public in general is concerned. By the same token, we cannot expect passengers xxx
to inquire every time they board a common carrier, whether the carrier possesses Q: What did you do with the C.I.?
the necessary papers or that all the carriers employees are qualified A: We did not insist on getting a copy of the C.I. from Mr. Abalos on the first place, because
7. Thus, the nature of the obligation of Caltex demands ordinary diligence like any of our long business relation, we trust Mr. Abalos and the fact that the vessel was able to sail
other shipper in shipping his cargoes. indicates that the documents are in order. xxx
8. Caltex and Vector Shipping Corporation had been doing business since 1985, or On cross examination -
for about two years before the tragic incident occurred in 1987. Past services Atty. Sarenas: This being the case, and this being an admission by you, this Certificate of
rendered showed no reason for Caltex to observe a higher degree of diligence. Inspection has expired on December 7. Did it occur to you not to let the vessel sail on that day
because of the very approaching date of expiration?
9. Clearly, as a mere voyage charterer, Caltex had the right to presume that the ship
Apolinar Ng: No sir, because as I said before, the operation Manager assured us that they
was seaworthy as even the Philippine Coast Guard itself was convinced of its were able to secure a renewal of the Certificate of Inspection and that they will in time submit
seaworthiness. All things considered, we find no legal basis to hold petitioner us a copy.
liable for damages. Finally, on Mr. Ngs redirect examination:
9. As Vector Shipping Corporation did not appeal from the Court of Appeals Atty. Poblador: The certificate of Inspection?
decision, we limit our ruling to the liability of Caltex alone. However, we maintain A: As I said, firstly, we trusted Mr. Abalos as he is a long time business partner; secondly,
the Court of Appeals ruling insofar as Vector is concerned . those three years, they were allowed to sail by the Coast Guard. That are some that make me
believe that they in fact were able to secure the necessary renewal.
Laws cited:
Under the Carriage of Goods by Sea Act :
Sec. 3. (1) The carrier shall be bound before and at the beginning of the voyage to exercise due
diligence to -
(a) Make the ship seaworthy;
(b) Properly man, equip, and supply the ship
Article 20. - Every person who contrary to law, willfully or negligently causes damage to
another, shall indemnify the latter for the same.

Article 2176. - Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-
existing contractual relation between the parties, is called a quasi-delict and is governed by the
provisions of this Chapter.

Article 1173. The fault or negligence of the obligor consists in the omission of that diligence
which is required by the nature of the obligation and corresponds with the circumstances of
the persons, of the time and of the place. When negligence shows bad faith, the provisions of
Article 1171 and 2201 paragraph 2, shall apply.
If the law does not state the diligence which is to be observed in the performance, that which
is expected of a good father of a family shall be required.

A cursory reading of the records convinces us that Caltex had reasons to believe that MT
Vector could legally transport cargo that time of the year.

Atty. Poblador: Mr. Witness, I direct your attention to this portion here containing the entries
here under VESSELS DOCUMENTS
1. Certificate of Inspection No. 1290-85, issued December 21, 1986, and Expires December 7,
1987, Mr. Witness, what steps did you take regarding the impending expiry of the C.I. or the
011 MACONDRAY v. PROVIDENT INSURANCE (Yap) liable as ship agent ‘of the vessel’ under Arts. 586 and 587 of the Code of
December 9, 2004 | Panganiban, J. | Ship Agent Commerce.

PETITIONER: Macondray & Co., Inc.


RESPONDENTS: Provident Insurance Corporation

SUMMARY: Canpotex, charterer of M/V Trade Carrier, shipped 5,000 metric


tons of standard-grade muriate of potash in bulk were transported from
Vancouver, Canada to Cebu, to be delivered to Atlas. Upon arrival, Atlas found
that 476.140 metric tons were lost/spilled. Provident Insurance paid Atlas, and
then filed the complaint against Macondray, as the agent of and Trade and
Transport, the operator of the vessel. However, summons was not served on
Trade and Transport since the latter could not be located and is no longer
connected with Macondray. Macondray now claims that it is not a party to the
case and that it had no control over the acts of the captain and crew of the vessel,
which was operated by Trade and Transport. Macondray’s witness, its
supercargo (ie., employee who prepares a notice of readiness, statement of FACTS:
facts, sailing notice and custom’s clearance in order to attend to the 66. Parties to the case:
formalities and the ned of the vessel), stated that Macondray was not an agent a. Carrier/s:
of Trade and Transport, and that Macondray is performing functions in behalf of i. Macondray – local representative of Cantopex; ship agent
Canpotex and was appointed as local agent of the vessel, which duty includes of M/V/ Trade Carrier (hereinafter ‘vessel’)
arrangement of the entrance and clearance of the vessel. The trial court ruled ii. Trade and Transport – alleged operator of the vessel (ie.,
that Macondray was not an agent of Trade and Transport, hence not liable. The the actual carrier)
CA likewise ruled that Macondray was not such agent, but ruled that Macondray b. Shipper – Canpotex Shipping Services Ltd., Saskatoon,
may still be held liable as ship agent of the vessel. Saskatchewan; charterer of M/V Trade Carrier
c. Consignee – Atlas Fertilizer Corporation
The pertinent issue is whether Macondray is liable as ship agent. d. Insurer – Provident Insurance
67. Cantopex shipped 5,000 metric tons of standard-grade muriate of potash in
The SC ruled in the affirmative. First, Art. 586 and 587 of the Code of bulk were transported from Vancouver, Canada to Cebu, to be delivered to
Commerce provide that the ship-owner and ship agent shall be civilly liable for Atlas.
the acts of the captain and for the obligations contracted by the captain to repair, 68. When the shipment arrived, Atlas discovered that there were losses of
equip, and provision the vessel, provided the creditor proves that the amounts 476.140 metric tons (valued at PHP1,657,700.95).
claimed was invested for the benefit of the same, and that the ship agent shall 69. Provident, as insurer of the goods in an all risk policy for marine insurance,
also be civilly liable for the indemnities in favor of third persons which may paid Atlas and then filed this complaint against Macondray and Trade and
arise from the cocnduct of the captain in the care of the goods which he loaded Transport.
on the vessel. Second, the acts (those in bold above) of Macondray make it a. The case against Trade and Transport was dismissed without
evident that it is the ship agent of M/V Trade Carrier. Moreover, Macondray’s prejudice due to failure to serve summons since it could not be
employees were present in Sangi, Toeldo City (where the port was located in the located and was no longer connected with Macondray.
island of Cebu) a day before the arrival of the vessel, and also during the actual 70. MACONDRAY’S DEFENSES:
discharging of the cargo. a. It has no relation with Trade and Transport, which was the alleged
operator of the vessel who transported the goods.
I think Macondray is the “ship agent” of M/V Trade Carrier since it was proven b. It is the charterer of the vessel M/V Trade Carrier, and is thus not a
to be the agent of Canpotex, which is in turn the “charterer” of the vessel which party to the case.
is allegedly owned and operated by Trade and Transport. c. It has no control over the acts of the captain and crew of the carrier
(ie., allegedly Trade and Transport) and thus cannot be held liable
DOCTRINE: Although one is not an agent of the carrier, one may still be held for damage arising from the fault or negligence of the captain and
crew. b. The following acts of Macondray point out its being the ship agent
d. Ricardo de la Cruz, Macondray’s “supercargo,” testified that: of Canpotex:
i. Macondray was not an agent of Trade and Transport. i. Macondray prepared the Nnotice of readiness, the
ii. His functions as supercargo was to prepare a notice of statement of facts, the completion notice, the sailing
readiness, statement of facts, sailing notice and custom’s notice and custom’s clearance.
clearance in order to attend to the formalities and the ned ii. Macondray’s employees were present in Sangi, Toeldo
of the vessel. City (where the port was located in the island of Cebu) a
iii. Macondray is performing functions in behalf of Canpotex day before the arrival of the vessel, where they stayed
and was appointed as local agent of the vessel, which duty until it departed. They were also present during the actual
includes arrangement of the entrance and clearance of the discharging of the cargo.
vessel. iii. Its supercargo also prepared for the needs of the vessel,
e. The CA decision had not attained finality since Macondray’s like money, provision, water and fuel.
counsel was negligent in not informing the CA of its change of c. Macondray does not dispute the liability of a ship agent, hence no
address. Moreover, the decision given to the previous counsel further discussion is needed.
cannot be considered as notice to Macondray. 28. The CA decision has attained finality.
71. The trial court ruled in favor of Macondray and dismissed the petition. The a. Service was made to Macondray’s counsels of record. That copy
CA reversed by ruling that, although Macondray was not the agent of Trade was, however, returned to the sender for the reason that the
and Transport, it may still be held liable for the shortages of the shipment addressee had moved out.
because the latter was the ship agent of Canpotex – the shipper and i. If counsel moves to another address without informing the
charterer of the vessel. court of that change, such omission or neglect is
inexcusable and will not stay the finality of the decision.
ISSUE/s: ii. The court cannot be expected to take judicial notice of the
17. Whether liability attached to Macondray despite the unequivocal factual new address of a lawyer who has moved.
findings that it was not a ship agent – YES, because. b. The negligence of counsel binds the client (just in case sir asks, the
18. Whether the CA decision has attained finality – YES, because. exception is gross negligence resulting in the prejudice of the
19. Whether by filing the the instant petition for review on certiorari, client). Hence, service made upon the present counsel of record has
Macondray is guilty of forum shopping – unnecessary to discuss, said the at his given address is service to Macondray.
Court (but it’s an obvious now). c. Moreover, litigants represented by counsel should not expect that
all they need to do is sit back, relax and await the outcome of their
RULING: Petition DENIED. CA decision AFFIRMED. case – Maconday should have taken the initiative of periodically
keeping in touch with its counsel, checking with the court, and
RATIO: inquiring about the status of its case.
27. Macondray is liable as ship agent.
a. Relevant Code of Commerce provisions:
i. Art. 586. The ship-owner and the ship agent shall be
civilly liable for the acts of the captain and for the
obligations contracted by the latter to repair, equip, and
provision the vessel, provided the creditor proves that the
amount claimed was invested for the benefit of the same.
ii. Art. 587. The ship agent shall also be civilly liable for the
indemnities in favor of third persons which may arise
from the cocnduct of the captain in the care of the goods
which he loaded on the vessel; but he may exempt himself
therefrom by abandoning the vessel with all her
equipments and the freight it may have earned during the
voyage.
NEGROS NAVIGATION v. CA (TALION) owned by the Philippine National Oil Company (PNOC) and the PNOC
November, 7, 1997| Mendoza, J. | Ship owner’s liability Shipping and Transport Corporation (PNOC/STC). As a result, the M/V
Don Juan sank. Many passengers died and some were never found,
including Miranda’s family.
PETITIONER:Negros Navigation Co., Inc. 3. Miranda filed a complaint in the RTC against the PNOC and the
RESPONDENTS: The Court of Appeals, Ramon Miranda, Sps. Ricardo PNOC/STC for damages.
and Virginia De La Victoria 4. In 1986, the PNOC and Negros Navigation Co., Inc. entered into a
compromise agreement whereby petitioner assumed full responsibility for
SUMMARY: Miranda bought tickets for his family to take a voyage on the payment and satisfaction of all claims arising out of or in connection
board M/V Don Juan going to Bacolod. On its way, the vessel collided with with the collision and releasing the PNOC and the PNOC/STC from any
an oil tanker owned by PNOC and it sank killing many passengers, some liability to it.
were never found, including Miranda’s family. Miranda files a complaint 5. Negros’ Argument: Negros admitted that Miranda purchased the tickets and
against PNOC in the RTC. Negros Navigation executed a compromise that they were listed in the passenger manifest; and that the Don Juan left
agreement with PNOC and were subrogated all the rights and liabilities of the pier and sank that night after being rammed by the oil tanker M/T
PNOC. Negros contends that since the bodies couldn't be found, there is no Tacloban City, and that, as a result of the collision, some of the passengers
proof that they ever boarded the ship. RTC and CA ruled in favor of 6. of the M/V Don Juan died. However, they denied that the four relatives of
Miranda. Issue: WON Negros is liable for the death of Miranda’s family. private respondents actually boarded the vessel as shown by the fact that
Yes. The family were validated as paying and actual passengers regardless their bodies were never recovered. Further, they averred that the Don Juan
of whether their bodies were found or not. This was proved through was seaworthy and manned by a full and competent crew, and that the
testimonial evidence of Miranda and another passenger who spent time collision was entirely due to the fault of the crew of the M/T Tacloban City.
with the family before the ship collided and sank. Negros was also found to 7. RTC: Ruled in favor of Miranda
be guilty of negligence, the proximate cause of the collision was the oil 8. CA: Affirmed with modification:
tanker but the negligence of the crew given that they had all the opportunity 1. Ordering and sentencing defendants--appellants, jointly and
to avoid the collision was contributory. The Mecenas case was used and severally, to pay plaintiff -appellee Ramon Miranda the amount of
applied in this case. It involved a different victim from the same incident P23,075.00 as actual damages instead of P42,025.00;
and so the discussion on liability were reiterated here. 2. Ordering and sentencing defendants--appellants, jointly and
severally, to pay plaintiff- appellee Ramon Miranda the amount of
DOCTRINE: P150,000.00, instead of P90,000.00, as compensatory damages for
1. A shipowner may be held liable for injuries to passengers the death of his wife and two children;
notwithstanding the exclusively real and hypothecary nature of 3. Ordering and sentencing defendants--appellants, jointly and
maritime law if fault can be attributed to the shipowner. severally, to pay plaintiffs -appellees Dela Victoria spouses the
2. Stare decisis simply declares that, for the sake of certainty, a amount of P50,000.00, instead of P30,000.00, as compensatory
conclusion reached in one case should be applied to those which damages for the death of their daughter Elfreda Dela Victoria.
follow, if the facts are substantially the same, even though the parties 9. Negros is appealing the CA decision.
may be different.
ISSUE/s:
1. Whether the members of private respondents families were actually
passengers of the Don Juan. YES, the fact that they were passengers were
FACTS: sufficiently proven and corroborated by witness testimony.
1. In April 1980, Ramon Miranda purchased 4 special cabin tickets for his 2. Whether the ruling in Mecenas v. Court of Appeals, finding the crew
wife, daughter, son and niece (Ardita de la Victoria Miranda, 48, Rosario V. members of petitioner to be grossly negligent in the performance of their
Miranda, 19, Ramon V. Miranda, Jr., 16, and Elfreda de la Victoria, 26) duties, is binding in this case. YES, stare decisis from the Mecenas case
who were going to Bacolod City to attend a family reunion. The tickets (Case by a different victim regarding the same incident)
were for the M/V Don Juan, leaving Manila at 1:00 p.m. on April 22, 1980. 3. Whether the total loss of the M/V Don Juan extinguished petitioners
The ship sailed from the port of Manila on schedule. liability. NO, a shipowner may be held liable for injuries to passengers
2. At about 10:30 in the evening of April 22, 1980, the Don Juan collided off
the Tablas Strait in Mindoro, with the M/T Tacloban City, an oil tanker
notwithstanding the exclusively real and hypothecary nature of maritime the ship. The witnesses who affirmed that the victims were on the ship were
law if fault can be attributed to the shipowner biased and unreliable.
4. Whether the damages awarded by the appellate court are excessive, 2. The trial court held that the fact that the victims were passengers of the M/V
unreasonable and unwarranted. NO, the doctrine of stare decisis works as a Don Juan was sufficiently proven by Miranda, who testified that he
bar only against issues litigated in a previous case. Where the issue involved purchased tickets at P131.30 each from the Makati office. He personally
was not raised nor presented to the court and not passed upon by the court took his family and his niece to the vessel on the day of the voyage and
in the previous case, the decision in the previous case is not stare decisis of stayed with them on the ship until it was time for it to leave. There is no
the question presently presented. reason he should claim members of his family to have perished in the
accident just to maintain an action.
3. This was corroborated by the passenger manifest on which the numbers of
RULING: WHEREFORE, the decision of the Court of Appeals is AFFIRMED the tickets and the names of Ardita Miranda and her children and Elfreda de
with modification and petitioner is ORDERED to pay private respondents damages la Victoria appear
as follows: 4. Mirandas testimony was corroborated by Edgardo Ramirez. Ramirez was a
seminarian and one of the survivors of the collision. He testified that he saw
To private respondent Ramon Miranda: P23,075.00 for actual damages; Mrs. Miranda and Elfreda de la Victoria on the ship and that he talked with
P109,038.96 as compensatory damages for loss of earning capacity of his wife; them. He knew Mrs. Miranda who was his teacher in the grade school. He
P150,000.00 as compensatory damages for wrongful death of three (3) victims; also knew Elfreda who was his childhood friend and townmate. Ramirez
P300,000.00 as moral damages; said he was with Mrs. Miranda and her children and niece from 7:00 p.m.
P300,000.00 as exemplary damages, all in the total amount of P882,113.96; and until 10:00 p.m. when the collision happened and that he in fact had dinner
P40,000.00 as attorneys fees. with them.
5. Negros casts doubt on Ramirez testimony, claiming that Ramirez could not
To private respondents Spouses Ricardo and Virginia de la Victoria: have talked with the victims for about three hours and not run out of stories
P12,000.00 for actual damages; to tell, unless Ramirez had a storehouse of stories.
P111,456.00 as compensatory damages for loss of earning capacity; 6. People do not normally lie about so grave a matter as the loss of dear ones.
P50,000.00 as compensatory damages for wrongful death; P100,000.00 as moral Negros’ only proof is that the bodies of the supposed victims were not
damages; among those recovered from the site of the mishap. But so were the bodies
P100,000.00 as exemplary damages, all in the total amount of P373,456.00; and of the other passengers reported missing not recovered.
P15,000.00 as attorneys fees.
Petitioners are further ordered to pay costs of suit.
Second Issue: Negligence
In the event the Philippine National Oil Company and/or the PNOC Shipping and 1. Negros is guilty of negligence and in failing to exercise the extraordinary
Transport Corporation pay or are required to pay all or a portion of the amounts diligence required of it in the carriage of passengers, both the trial court and
adjudged, petitioner Negros Navigation Co., Inc. shall reimburse either of them such the appellate court relied on the findings of this Court in Mecenas v.
amount or amounts as either may have paid, and in the event of failure of Negros Intermediate Appellate Court which case was brought for the death of other
Navigation Co., Inc., to make the necessary reimbursement, PNOC and/or passengers.
PNOC/STC shall be entitled to a writ of execution without need of filing another 2. In that case it was found that although the proximate cause of the mishap
action. was the negligence of the crew of the M/T Tacloban City, the crew of the
Don Juan was equally negligent
RATIO: 3. The ship master, Capt. Rogelio Santisteban, was playing mahjong at the
time of collision, and the officer on watch, Senior Third Mate Rogelio De
First Issue: Vera, admitted that he failed to call the attention of Santisteban to the
1. Negros contends that the purchase of the tickets does not necessarily mean imminent danger facing them.
that the alleged victims actually took the trip. They assert that it is common 4. Capt. Santisteban and the crew of the M/V Don Juan failed to take steps to
knowledge that passengers purchase tickets in advance but do not actually prevent the collision or at least delay the sinking of the ship and supervise
use them. Hence, Miranda should also prove the presence of the victims on the abandoning of the ship.
5. Negros Navigation was found equally negligent in tolerating the playing of 14. Adherence to the Mecenas case is dictated by this Courts policy of
mahjong by the ship captain and other crew members while on board the maintaining stability in jurisprudence in accordance with the legal maxim
ship and failing to keep the M/V Don Juan seaworthy so much so that the stare decisis et non quieta movere (Follow past precedents and do not
ship sank within 10 to 15 minutes of its impact with the M/T Tacloban City. disturb what has been settled.) Where substantially similar cases to the
6. Don Juan was overloaded. The Certificate of Inspection, Philippine Coast pending case were presented and applicable principles declared in prior
Guard Commander stated that the total number of persons allowed on the decisions, the court is bound by the principle of stare decisis. Under the
ship was 864, of whom 810 are passengers, but there were actually 1,004 on doctrine of stare decisis a ruling is final even as to parties who are strangers
board the vessel when it sank, 140 persons more than the maximum number to the original proceeding and not bound by the judgment under the res
that could be safely carried. judicata doctrine. Stare decisis simply declares that, for the sake of
7. M/V Don Juan, as the faster and better-equipped vessel, could have avoided certainty, a conclusion reached in one case should be applied to those which
a collision with the PNOC tanker, the Don Juan was guilty of contributory follow, if the facts are substantially the same, even though the parties may
negligence. be different. Indeed, the evidence presented in this case was the same as
a. First Don Juan was more than twice as fast as the Tacloban City. those presented in the Mecenas case.
The Don Juans top speed was 17 knots; while that of the Tacloban 15. Nor is it true that the trial court merely based its decision on the Mecenas
City was 6.3. knots. case. The trial court made its own independent findings on the basis of the
b. Secondly, the Don Juan carried the full complement of officers and testimonies of witnesses, such as Senior Third Mate Rogelio de Vera, who
crew members specified for a passenger vessel of her class. incidentally gave substantially the same testimony on petitioners behalf
c. Thirdly, the Don Juan was equipped with radar which was before the Board of Marine Inquiry. The trial court agreed with the
functioning that night. conclusions of the then Minister of National Defense finding both vessels to
d. Fourthly, the Don Juans officer on-watch had sighted the Tacloban be negligent.
City on his radar screen while the latter was still four (4) nautical
miles away. Visual confirmation of radar contact was established Third Issue: Liability
by the Don Juan while the Tacloban City was still 2.7 miles away. 1. The rule is well-entrenched in our jurisprudence that a shipowner may be
8. The Don Juan might well have avoided the collision even if it had exercised held liable for injuries to passengers notwithstanding the exclusively real
ordinary diligence. and hypothecary nature of maritime law if fault can be attributed to the
9. Tacloban City failed to follow Rule 18 of the International Rules of the shipowner.
Road which requires two (2) power-driven vessels meeting end on or nearly 2. In Mecenas, this Court found petitioner guilty of negligence in (1) allowing
end on each to alter her course to starboard (right) so that each vessel may or tolerating the ship captain and crew members in playing mahjong during
pass on the port side (left) of the other. the voyage, (2) in failing to maintain the vessel seaworthy and (3) in
10. However, the Don Juan having sighted the Tacloban City when it was still a allowing the ship to carry more passengers than it was allowed to carry.
long way off was negligent in failing to take early preventive action. Therefore, clearly liable for damages to the full extent.
11. It is noteworthy that the Tacloban City, upon turning hard to port shortly
before the moment of collision, signalled its intention to do so by giving Fourth Issue: Damages (in case)
two (2) short blasts with its horn. The Don Juan gave no answering horn 1. Negros contends that, assuming that the Mecenas case applies, Miranda
blast to signal its own intention and proceeded to turn hard to starboard. should be allowed to claim only P43,857.14 each as moral damages because
in the Mecenas case, the amount of P307,500.00 was awarded to the seven
Stare Decisis children of the Mecenas couple. Under petitioners formula, Ramon Miranda
12. Negros argues, although this case arose out of the same incident as that should receive P43,857.14, while the De la Victoria spouses should receive
involved in Mecenas, the parties are different and trial was conducted P97,714.28.
separately and that the decision in this case should be based on the 2. Here is where the principle of stare decisis does not apply in view of
allegations and defenses pleaded and evidence adduced in it or, in short, on differences in the personal circumstances of the victims. For that matter,
the record of this case. differentiation would be justified even if private respondents had joined the
13. The contention is without merit. What petitioner contends may be true with private respondents in the Mecenas case.
respect to the merits of the individual claims against petitioner but not as to 3. The doctrine of stare decisis works as a bar only against issues litigated in a
the cause of the sinking of its ship and its liability for such accident, of previous case. Where the issue involved was not raised nor presented to the
which there can only be one truth.
court and not passed upon by the court in the previous case, the decision in 12. On the other hand, the award of actual damages in the amount of
the previous case is not stare decisis of the question presently presented. P23,075.00 was determined by the Court of Appeals on the basis of receipts
4. The decision in the Mecenas case relates to damages for which petitioner submitted by private respondents. This amount is reasonable considering
was liable to the claimants in that case. the expenses incurred by private respondent Miranda in organizing three
5. In the case at bar, the award of P300,000.00 for moral damages is search teams to look for his family, spending for transportation in going to
reasonable considering the grief petitioner Ramon Miranda suffered as a places such as Batangas City and Iloilo, where survivors and the bodies of
result of the loss of his entire family. As a matter of fact, three months after other victims were found, making long distance calls, erecting a monument
the collision, he developed a heart condition undoubtedly caused by the in honor of the four victims, spending for obituaries in the Bulletin Today
strain of the loss of his family. The P100,000.00 given to Mr. and Mrs. de la and for food, masses and novenas.
Victoria is likewise reasonable and should be affirmed. 13. As for the award of attorneys fees, we agree with the Court of Appeals that
6. As for the amount of civil indemnity awarded to private respondents, the the amount of P40,000.00 for private respondent Ramon Miranda and
appellate courts award of P50,000.00 per victim should be sustained. P15,000.00 for the de la Victoria spouses is justified. The appellate court
7. We now turn to the determination of the earning capacity of the victims. correctly held. The Mecenas case cannot be made the basis for determining
The life expectancy of Ardita Miranda was correctly determined to be 21.33 the award for attorneys fees. The award would naturally vary or differ in
years, or up to age 69. each case.
8. The accepted formula for determining life expectancy is 2/3 multiplied by 14. The award of exemplary damages should be increased to P300,000.00 for
(80 minus the age of the deceased). It may be that in the Philippines the age Ramon Miranda and P100,000.00 for the de la Victoria spouses in
of retirement generally is 65 but, in calculating the life expectancy of accordance with our ruling in the Mecenas case: The Court will take
individuals for the purpose of determining loss of earning capacity under judicial notice of the dreadful regularity with which grievous maritime
Art. 2206(1) of the Civil Code, it is assumed that the deceased would have disasters occur in our waters with massive loss of life. The bulk of our
earned income even after retirement from a particular job population is too poor to afford domestic air transportation. So it is that
9. In this case, the trial court took into account the fact that Mrs. Miranda had notwithstanding the frequent sinking of passenger vessels in our waters,
a masters degree and a good prospect of becoming principal of the school in crowds of people continue to travel by sea. This Court is prepared to use the
which she was teaching. There was reason to believe that her income would instruments given to it by the law for securing the ends of law and public
have increased through the years and she could still earn more after her policy. One of those instruments is the institution of exemplary damages;
retirement, e.g., by becoming a consultant, had she not died. The gross one of those ends, of special importance in an archipelagic state like the
earnings which Mrs. Miranda could reasonably be expected to earn were it Philippines, is the safe and reliable carriage of people and goods by sea.
not for her untimely death was, therefore, correctly computed by the trial
court to be P218,077.92 (given a gross annual income of P10,224.00 and
life expectancy of 21.33 years).
10. Negros contends that from the amount of gross earnings, 60% should be
deducted as necessary living expenses, not merely 30% as the trial court
allowed. Petitioner contends that 30% is unrealistic, considering that Mrs.
Mirandas earnings would have been subject to taxes, social security
deductions and inflation.SC agrees with this contention.
11. As for Elfreda de la Victoria, the trial court found that, at the time of her
death, she was 26 years old, a teacher in a private school in Malolos,
Bulacan, earning P6,192.00 per annum. Although a probationary employee,
she had already been working in the school for two years at the time of her
death and she had a general efficiency rating of 92.85% and it can be
presumed that, if not for her untimely death, she would have become a
regular teacher. Hence, her loss of earning capacity is P111,456.00,
computed as follows:
net earning capacity (x) = life expectancy x [ gross annual income less
reasonable & necessary living expenses (50%) ] x = [ 2 (80-26) ] x
[P6,192.00 - P3,096.00] 3 = 36 x 3,096.00 = P111,456.00
013 MONARCH INSURANCE v. CA (Adrias) nature of the case, the limited liability rule should be applied. By doing this, all those
June 8, 2000 | De Leon, Jr. J. | Doctine of Limited Liability who have claims can recover at least part of their loss from Aboitiz. The claimants
must be treated as "creditors in an insolvent corporation whose assets are not enough
G.R. No. 92735. June 8, 2000 to satisfy the totality of claims against it."
PETITIONER: MONARCH INSURANCE CO., INC., TABACALERA
INSURANCE CO., INC. and Hon. Judge AMANTE PURISIMA Here’s how the limited liability should be applied:
RESPONDENT: COURT OF APPEALS and ABOITIZ SHIPPING 1. Collate all claims against Aboitiz. Final and executory judgments should be
CORPORATION stayed while the other cases are still pending.
2. In fairness to the claimants, and as a matter of equity, the total proceeds of
G.R. No. 94867. June 8, 2000 the insurance and pending freightage should now be deposited in trust.
PETITIONER: ALLIED GUARANTEE INSURANCE COMPANY 3. Aboitiz should institute the necessary limitation and distribution action
RESPONDENT: COURT OF APPEALS, Presiding Judge, RTC Manila, Br. 24 and before the proper admiralty court within 15 days from finality of this
ABOITIZ SHIPPING CORPORATION decision, and thereafter deposit with it the proceeds from the insurance
company and pending freightage in order to safeguard the same pending
G.R. No. 95578. June 8, 2000 final resolution of all incidents, for final pro-rating and settlement thereof.
PETITIONER: EQUITABLE INSURANCE CORPORATION
RESPONDENT: COURT OF APPEALS, Former First Division Composed of Hon. DOCTRINE: The limited liability rule states that the shipowner’s or agent’s liability
Justices RODOLFO NOCON, PEDRO RAMIREZ, and JESUS ELBINIAS and is merely co-extensive with his interest in the vessel such that a total loss thereof
ABOITIZ SHIPPING CORPORATION results in its extinction. The total destruction of the vessel extinguishes maritime liens
because there is no longer any res to which it can attach. This doctrine is based on the
Characters: real and hypothecary nature of maritime law. However, there are exceptions to this
COMMON CARRIER: Aboitiz Shipping doctrine. The exceptions are (1) where the injury or death to a passenger is due either
CLAIMANTS: Monarch Insurance, Tabacalera Insurance, Allied Guarantee to the fault of the shipowner, or to the concurring negligence of the shipowner and the
Insurance, Equitable Insurance (Monarch et al) captain; (2) where the vessel is insured; and (3) in workmen’s compensation claims.

SUMMARY: The case before the Supreme Court consolidated three different cases
initiated against Aboitiz by different insurers—Monarch, Tabacalera, Allied
Guarantee and Equitable. What happened is that the ship M/V P. Aboitiz owned by FACTS:
Aboitiz sank in the South China Sea. The vessel was ultimately abandoned. The 1. On October 31, 1980, M/V P. Aboitiz, owned and operated by Aboitiz
insurers argued that the vessel sank because of Aboitiz’ negligence, as well as the Shipping, sank on her voyage from Hongkong to Manila. The vessel was
negligence of the captain and the crew. According to the witnesses presented during abandoned. This case involves three different cases which arose from the
the trial, the vessel sank when the wind speed was only 10-15 knots, which is just sinking of the cargo vessel.
moderate breeze. The fast flooding of the cargo hold also means that there are 2. 110 cases filed against Aboitiz for indemnity of P41M, which is thrice the
already breaches of the hull. All the insurers won in their respective cases and had value of the insurance proceeds of P14.5M.
final and executory decisions already. HOWEVER, Aboitiz got a preliminary 3. These are three consolidated petitions.
injunction, arguing that while it may be liable to the insurers, its liability is not the a. G.R. No. 92735 is a petition for review filed under Rule 45 of the
full amount awarded to the insurers, but only limited to the value of vessel. The Rules of Court assailing the decision of the Court of Appeals
insurers’ claims must also be prorated. This according to Aboitiz, is pursuant to the which set aside the writ of execution issued by the lower court for
Doctrine of the Limited Liability Rule arising out of the real and hypothecary nature the full indemnification of the claims of the petitioners, "Monarch"
of maritime law. and "Tabacalera" against private respondent, Aboitiz on the ground
that the latter is entitled to the benefit of the limited liability rule in
ISSUE: WoN the claims should be limited pursuant to the Limited Liability Rule maritime law;
b. G.R. No. 94867 is a petition for certiorari under Rule 65 of the
The SC held in the affirmative. (Read Doctrine) However, here, Aboitiz failed to Rules of Court to annul and set aside the decision of the Court of
show that it was not negligent or at fault when the vessel sank. Usually, this would Appeals which ordered the lower court to stay the execution of the
mean that the limited liability rule is not applicable. But because of the peculiar judgment in favor of the petitioner, Allied Guarantee Insurance
against Aboitiz insofar as it impairs the rights of the other 15 knots that the vessel encountered was normal at that time of the year in
claimants to their pro-rata share in the insurance proceeds from the the South China Sea and was considered as moderate winds. Further, the
sinking of the M/V P. Aboitiz, in accordance with the rule on vessel was probably not seaworthy as there were breaches of the hull and
limited liability; serious flooding of 2 cargo holds during seasonal weather.
c. and G.R. No. 95578 is a petition for review under Rule 45 of the 8. Only Aboitiz was found by the RTC to be liable for all the amounts
Rules of Court seeking a reversal of the decision of the Court of mentioned above, including attorney’s fees and legal interest. The RTC
Appeals which modified the judgment of the lower court by appeal was denied.
applying the hypothecary rule on limited liability to limit the lower 9. In the CA, the appeal was dismissed because of Aboitiz’ failure to file the
courts award of actual damages to petitioner Equitable Insurance to appellant’s brief. The CA denied the appeal of the dismissal for lack of
its pro-rata share in the insurance proceeds from the sinking of the merit.
M/V P. Aboitiz. 10. In the SC, the SC denied the appeal for being filed out of time; and the MR
was also denied. Judgment was entered in the case.
G.R. 917735 – FIRST CASE between Monarch and Tabacalera Insurance, and 11. Monarch and Tabacalera moved for the execution of judgment and the RTC
Aboitiz issued writs of execution. Aboitiz filed a motion to quash the writ invoking
4. Monarch and Tabacalera were insurers who were subrogated to the rights, the real and hypothecary nature of liability in maritime law.
interests and actions of the shippers (who they paid already) against a. According to Aboitiz, since its liability is limited to the value of
Aboitiz. the vessel, which was insufficient to satisfy the aggregate claims
a. Monarch instituted 2 civil cases. of all 110 claimants, to indemnify Monarch and Tabacalera
(1) Monarch sued Aboitiz, Malaysian International and Litonjua ahead of the other claimants would be prejudicial to the latter.
for the value of 3 pallets of glass tubing that sank (value: 12. The sheriff was able to levy 5 heavy equipment owned by Aboitiz for public
P29,719.88). and attorney's fees, litigation expenses, legal interest auction sale. Monarch got two equipment while Tabacalera got three
(2) Monarch sued Aboitiz, Compagnie Maritime des Chargeurs equipment. Certificates of sale were issued to both.
Reunis and F.E. Zuellig for the value of one case of motor vehicles 13. Judge Purisima denied the motion to quash, but froze the execution
parts (value: P39,579.66) and attorney’s fees. proceedings to give Aboitiz time to ask for injunction from a higher court.
b. Tabacalera instituted 2 civil cases. 14. Aboitiz then filed before the CA a Rule 65 petition with preliminary
(1) Tabacalera sued Aboitiz, F.E. Zuellig and Franco Beligna for injunction. The CA granted Aboitiz’ petition and ruled that the amount
the recovery of P284,218.00 corresponding to the value of nine (9) given to Monarch and Tabacalera exceeded their pro-rata shares in the
cases of Renault spare parts, P213,207.00 for the value of twenty- insurance procceds of Aboitiz in relation to the pro-rata shares of the
five (25) cases of door closers and P42,254.00 representing the 106 other claimants. Thus, the CA in effect ruled that Monarch and
value of eighteen (18) cases of plastic spangle, plus attorneys fees Tabacalera can only claim their pro-rata share, and not the actual value of
of not less than P50,000.00 and cost of suit the lost goods.
(2) Tabacalera sued Aboitiz, Citadel Lines and HK Island Shipping 15. Monarch and Tabacalera appeals now to the SC.
for the value of 4 motor vehicle parts (value: P75,058) and
attorney’s fees. G.R. 94867 & 95578 - SECOND CASE between Allied Guarantee and Aboitiz
5. Aboitiz argued that the sinking of the cargo vessel was due to force majeure and THIRD CASE between Equitable and Aboitiz
but since it failed to appear during the pre-trial, Aboitiz was declared in 16. Second case: Allied Guarantee was subrogated to the rights of Peak Plastic.
default. It moved to lift the order of the default but the judge who was Allied Guarantee sued Aboitiz for the value 676 bags of PVC compound
handling the case was elevated to the IAC. and 10 bags of ABS plastic (value: 278,536.50) and attorney’s fees and
6. The cases were re-raffled to Judge Purisima. Judge Purisima set the case for damages.
hearing without rendering judgment on the motion to lift order of default. 17. Third case: