G.R. No.
186312 June 29, 2010 Petitioners, by letter of October 26, 2000,4 demanded indemnification from respondent for the death
SPOUSES DANTE CRUZ and LEONORA CRUZ, Petitioners,
vs.
SUN HOLIDAYS, INC., Respondent.
DECISION
CARPIO MORALES, J.:
Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on January 25, 2001 1 against
Sun Holidays, Inc. (respondent) with the Regional Trial Court (RTC) of Pasig City for damages
arising from the death of their son Ruelito C. Cruz (Ruelito) who perished with his wife on
September 11, 2000 on board the boat M/B Coco Beach III that capsized en route to Batangas from
Puerto Galera, Oriental Mindoro where the couple had stayed at Coco Beach Island Resort (Resort)
owned and operated by respondent.
The stay of the newly wed Ruelito and his wife at the Resort from September 9 to 11, 2000 was by
virtue of a tour package-contract with respondent that included transportation to and from the Resort
and the point of departure in Batangas.
Miguel C. Matute (Matute),2 a scuba diving instructor and one of the survivors, gave his account of
the incident that led to the filing of the complaint as follows:
Matute stayed at the Resort from September 8 to 11, 2000. He was originally scheduled to leave the
Resort in the afternoon of September 10, 2000, but was advised to stay for another night because of
strong winds and heavy rains.
On September 11, 2000, as it was still windy, Matute and 25 other Resort guests including
petitioners’ son and his wife trekked to the other side of the Coco Beach mountain that was
sheltered from the wind where they boarded M/B Coco Beach III, which was to ferry them to
Batangas.
Shortly after the boat sailed, it started to rain. As it moved farther away from Puerto Galera and into
the open seas, the rain and wind got stronger, causing the boat to tilt from side to side and the
captain to step forward to the front, leaving the wheel to one of the crew members.
The waves got more unwieldy. After getting hit by two big waves which came one after the other,
M/B Coco Beach III capsized putting all passengers underwater.
The passengers, who had put on their life jackets, struggled to get out of the boat. Upon seeing the
captain, Matute and the other passengers who reached the surface asked him what they could do to
save the people who were still trapped under the boat. The captain replied "Iligtas niyo na lang ang
sarili niyo" (Just save yourselves).
Help came after about 45 minutes when two boats owned by Asia Divers in Sabang, Puerto Galera
passed by the capsized M/B Coco Beach III. Boarded on those two boats were 22 persons,
consisting of 18 passengers and four crew members, who were brought to Pisa Island. Eight
passengers, including petitioners’ son and his wife, died during the incident.
At the time of Ruelito’s death, he was 28 years old and employed as a contractual worker for Mitsui
Engineering & Shipbuilding Arabia, Ltd. in Saudi Arabia, with a basic monthly salary of $900.3
of their son in the amount of at least ₱4,000,000.
Replying, respondent, by letter dated November 7, 2000,5 denied any responsibility for the incident
which it considered to be a fortuitous event. It nevertheless offered, as an act of commiseration, the
amount of ₱10,000 to petitioners upon their signing of a waiver.
As petitioners declined respondent’s offer, they filed the Complaint, as earlier reflected, alleging that
respondent, as a common carrier, was guilty of negligence in allowing M/B Coco Beach III to sail
notwithstanding storm warning bulletins issued by the Philippine Atmospheric, Geophysical and
Astronomical Services Administration (PAGASA) as early as 5:00 a.m. of September 11, 2000. 6
In its Answer,7 respondent denied being a common carrier, alleging that its boats are not available to
the general public as they only ferry Resort guests and crew members. Nonetheless, it claimed that
it exercised the utmost diligence in ensuring the safety of its passengers; contrary to petitioners’
allegation, there was no storm on September 11, 2000 as the Coast Guard in fact cleared the
voyage; and M/B Coco Beach III was not filled to capacity and had sufficient life jackets for its
passengers. By way of Counterclaim, respondent alleged that it is entitled to an award for attorney’s
fees and litigation expenses amounting to not less than ₱300,000.
Carlos Bonquin, captain of M/B Coco Beach III, averred that the Resort customarily requires four
conditions to be met before a boat is allowed to sail, to wit: (1) the sea is calm, (2) there is clearance
from the Coast Guard, (3) there is clearance from the captain and (4) there is clearance from the
Resort’s assistant manager.8 He added that M/B Coco Beach III met all four conditions on
September 11, 2000,9 but a subasco or squall, characterized by strong winds and big waves,
suddenly occurred, causing the boat to capsize.10
By Decision of February 16, 2005,11 Branch 267 of the Pasig RTC dismissed petitioners’ Complaint
and respondent’s Counterclaim.
Petitioners’ Motion for Reconsideration having been denied by Order dated September 2,
2005,12 they appealed to the Court of Appeals.
By Decision of August 19, 2008,13 the appellate court denied petitioners’ appeal, holding, among
other things, that the trial court correctly ruled that respondent is a private carrier which is only
required to observe ordinary diligence; that respondent in fact observed extraordinary diligence in
transporting its guests on board M/B Coco Beach III; and that the proximate cause of the incident
was a squall, a fortuitous event.
Petitioners’ Motion for Reconsideration having been denied by Resolution dated January 16,
2009,14 they filed the present Petition for Review.15
Petitioners maintain the position they took before the trial court, adding that respondent is a common
carrier since by its tour package, the transporting of its guests is an integral part of its resort
business. They inform that another division of the appellate court in fact held respondent liable for
damages to the other survivors of the incident.
Upon the other hand, respondent contends that petitioners failed to present evidence to prove that it
is a common carrier; that the Resort’s ferry services for guests cannot be considered as ancillary to
its business as no income is derived therefrom; that it exercised extraordinary diligence as shown by
the conditions it had imposed before allowing M/B Coco Beach III to sail; that the incident was
caused by a fortuitous event without any contributory negligence on its part; and that the other case
wherein the appellate court held it liable for damages involved different plaintiffs, issues and
evidence.16
1
The petition is impressed with merit.
Petitioners correctly rely on De Guzman v. Court of Appeals17 in characterizing respondent as a
common carrier.
The Civil Code defines "common carriers" in the following terms:
Article 1732. Common carriers are persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or both, by land, water, or air for
compensation, offering their services to the public.
The above article makes no distinction between one whose principal business activity is the carrying
of persons or goods or both, and one who does such carrying only as an ancillary activity (in local
idiom, as "a sideline"). Article 1732 also carefully avoids making any distinction between a person or
enterprise offering transportation service on a regular or scheduled basis and one offering such
service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish
between a carrier offering its services to the "general public," i.e., the general community or
population, and one who offers services or solicits business only from a narrow segment of the
general population. We think that Article 1733 deliberately refrained from making such distinctions.
So understood, the concept of "common carrier" under Article 1732 may be seen to coincide neatly
with the notion of "public service," under the Public Service Act (Commonwealth Act No. 1416, as
amended) which at least partially supplements the law on common carriers set forth in the Civil
Code. Under Section 13, paragraph (b) of the Public Service Act, "public service" includes:
. . . every person that now or hereafter may own, operate, manage, or control in the Philippines, for
hire or compensation, with general or limited clientele, whether permanent, occasional or accidental,
and done for general business purposes, any common carrier, railroad, street railway, traction
railway, subway motor vehicle, either for freight or passenger, or both, with or without fixed route
and whatever may be its classification, freight or carrier service of any class, express service,
steamboat, or steamship line, pontines, ferries and water craft, engaged in the transportation of
passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration
plant, canal, irrigation system, gas, electric light, heat and power, water supply and power
petroleum, sewerage system, wire or wireless communications systems, wire or wireless
broadcasting stations and other similar public services . . .18 (emphasis and underscoring supplied.)
Indeed, respondent is a common carrier. Its ferry services are so intertwined with its main business
as to be properly considered ancillary thereto. The constancy of respondent’s ferry services in its
resort operations is underscored by its having its own Coco Beach boats. And the tour packages it
offers, which include the ferry services, may be availed of by anyone who can afford to pay the
same. These services are thus available to the public.
That respondent does not charge a separate fee or fare for its ferry services is of no moment. It
would be imprudent to suppose that it provides said services at a loss. The Court is aware of the
practice of beach resort operators offering tour packages to factor the transportation fee in arriving
at the tour package price. That guests who opt not to avail of respondent’s ferry services pay the
same amount is likewise inconsequential. These guests may only be deemed to have overpaid.
As De Guzman instructs, Article 1732 of the Civil Code defining "common carriers" has deliberately
refrained from making distinctions on whether the carrying of persons or goods is the carrier’s
principal business, whether it is offered on a regular basis, or whether it is offered to the general
public. The intent of the law is thus to not consider such distinctions. Otherwise, there is no telling
how many other distinctions may be concocted by unscrupulous businessmen engaged in the
carrying of persons or goods in order to avoid the legal obligations and liabilities of common carriers.
Under the Civil Code, common carriers, from the nature of their business and for reasons of public
policy, are bound to observe extraordinary diligence for the safety of the passengers transported by
them, according to all the circumstances of each case. 19 They are bound to carry the passengers
safely as far as human care and foresight can provide, using the utmost diligence of very cautious
persons, with due regard for all the circumstances. 20
When a passenger dies or is injured in the discharge of a contract of carriage, it is presumed that
the common carrier is at fault or negligent. In fact, there is even no need for the court to make an
express finding of fault or negligence on the part of the common carrier. This statutory presumption
may only be overcome by evidence that the carrier exercised extraordinary diligence.21
Respondent nevertheless harps on its strict compliance with the earlier mentioned conditions of
voyage before it allowed M/B Coco Beach III to sail on September 11, 2000. Respondent’s position
does not impress.
The evidence shows that PAGASA issued 24-hour public weather forecasts and tropical cyclone
warnings for shipping on September 10 and 11, 2000 advising of tropical depressions in Northern
Luzon which would also affect the province of Mindoro.22 By the testimony of Dr. Frisco Nilo,
supervising weather specialist of PAGASA, squalls are to be expected under such weather
condition.23
A very cautious person exercising the utmost diligence would thus not brave such stormy weather
and put other people’s lives at risk. The extraordinary diligence required of common carriers
demands that they take care of the goods or lives entrusted to their hands as if they were their own.
This respondent failed to do.
Respondent’s insistence that the incident was caused by a fortuitous event does not impress either.
The elements of a "fortuitous event" are: (a) the cause of the unforeseen and unexpected
occurrence, or the failure of the debtors to comply with their obligations, must have been
independent of human will; (b) the event that constituted the caso fortuito must have been
impossible to foresee or, if foreseeable, impossible to avoid; (c) the occurrence must have been
such as to render it impossible for the debtors to fulfill their obligation in a normal manner; and (d)
the obligor must have been free from any participation in the aggravation of the resulting injury to the
creditor.24
To fully free a common carrier from any liability, the fortuitous event must have been the proximate
and only cause of the loss. And it should have exercised due diligence to prevent or minimize the
loss before, during and after the occurrence of the fortuitous event.25
Respondent cites the squall that occurred during the voyage as the fortuitous event that overturned
M/B Coco Beach III. As reflected above, however, the occurrence of squalls was expected under the
weather condition of September 11, 2000. Moreover, evidence shows that M/B Coco Beach III
suffered engine trouble before it capsized and sank.26 The incident was, therefore, not completely
free from human intervention.
The Court need not belabor how respondent’s evidence likewise fails to demonstrate that it
exercised due diligence to prevent or minimize the loss before, during and after the occurrence of
the squall.
Article 176427 vis-à-vis Article 220628 of the Civil Code holds the common carrier in breach of its
contract of carriage that results in the death of a passenger liable to pay the following: (1) indemnity
for death, (2) indemnity for loss of earning capacity and (3) moral damages.
Petitioners are entitled to indemnity for the death of Ruelito which is fixed at ₱50,000. 29
2
As for damages representing unearned income, the formula for its computation is:
Net Earning Capacity = life expectancy x (gross annual income - reasonable and necessary living
expenses).
Life expectancy is determined in accordance with the formula:
2 / 3 x [80 — age of deceased at the time of death]30
The first factor, i.e., life expectancy, is computed by applying the formula (2/3 x [80 — age at death])
adopted in the American Expectancy Table of Mortality or the Actuarial of Combined Experience
Table of Mortality.31
The second factor is computed by multiplying the life expectancy by the net earnings of the
deceased, i.e., the total earnings less expenses necessary in the creation of such earnings or
income and less living and other incidental expenses.32 The loss is not equivalent to the entire
earnings of the deceased, but only such portion as he would have used to support his dependents
or heirs. Hence, to be deducted from his gross earnings are the necessary expenses supposed to
be used by the deceased for his own needs.33
In computing the third factor – necessary living expense, Smith Bell Dodwell Shipping Agency Corp.
v. Borja34 teaches that when, as in this case, there is no showing that the living expenses constituted
the smaller percentage of the gross income, the living expenses are fixed at half of the gross
income.
Applying the above guidelines, the Court determines Ruelito's life expectancy as follows:
Life expectancy = 2/3 x [80 - age of deceased at the time of death]
2/3 x [80 - 28]
2/3 x [52]
Life expectancy = 35
Documentary evidence shows that Ruelito was earning a basic monthly salary of $900 35 which,
when converted to Philippine peso applying the annual average exchange rate of $1 = ₱44 in
2000,36 amounts to ₱39,600. Ruelito’s net earning capacity is thus computed as follows:
Net Earning = life expectancy x (gross annual income - reasonable and
Capacity necessary living expenses).
= 35 x (₱475,200 - ₱237,600)
= 35 x (₱237,600)
Net Earning
= ₱8,316,000
Capacity
Respecting the award of moral damages, since respondent common carrier’s breach of contract of
carriage resulted in the death of petitioners’ son, following Article 1764 vis-à-vis Article 2206 of the
Civil Code, petitioners are entitled to moral damages.
Since respondent failed to prove that it exercised the extraordinary diligence required of common
carriers, it is presumed to have acted recklessly, thus warranting the award too of exemplary
damages, which are granted in contractual obligations if the defendant acted in a wanton,
fraudulent, reckless, oppressive or malevolent manner.37
Under the circumstances, it is reasonable to award petitioners the amount of ₱100,000 as moral
damages and ₱100,000 as exemplary damages.381avvphi1
Pursuant to Article 220839 of the Civil Code, attorney's fees may also be awarded where exemplary
damages are awarded. The Court finds that 10% of the total amount adjudged against respondent is
reasonable for the purpose.
Finally, Eastern Shipping Lines, Inc. v. Court of Appeals40 teaches that when an obligation,
regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the
contravenor can be held liable for payment of interest in the concept of actual and compensatory
damages, subject to the following rules, to wit —
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e.,
a loan or forbearance of money, the interest due should be that which may have been
stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the
time it is judicially demanded. In the absence of stipulation, the rate of interest shall be
12% per annum to be computed from default, i.e., from judicial or extrajudicial demand
under and subject to the provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an
interest on the amount of damages awarded may be imposed at the discretion of the court
at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated
claims or damages except when or until the demand can be established with reasonable
certainty. Accordingly, where the demand is established with reasonable certainty, the
interest shall begin to run from the time the claim is made judicially or extrajudicially (Art.
1169, Civil Code) but when such certainty cannot be so reasonably established at the time
the demand is made, the interest shall begin to run only from the date the judgment of the
court is made (at which time the quantification of damages may be deemed to have been
reasonably ascertained). The actual base for the computation of legal interest shall, in any
case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this
interim period being deemed to be by then an equivalent to a forbearance of credit.
(emphasis supplied).
Since the amounts payable by respondent have been determined with certainty only in the present
petition, the interest due shall be computed upon the finality of this decision at the rate of 12% per
annum until satisfaction, in accordance with paragraph number 3 of the immediately cited guideline
in Easter Shipping Lines, Inc.
WHEREFORE, the Court of Appeals Decision of August 19, 2008 is REVERSED and SET ASIDE.
Judgment is rendered in favor of petitioners ordering respondent to pay petitioners the following: (1)
₱50,000 as indemnity for the death of Ruelito Cruz; (2) ₱8,316,000 as indemnity for Ruelito’s loss of
earning capacity; (3) ₱100,000 as moral damages; (4) ₱100,000 as exemplary damages; (5) 10% of
the total amount adjudged against respondent as attorneys fees; and (6) the costs of suit.
The total amount adjudged against respondent shall earn interest at the rate of 12% per annum
computed from the finality of this decision until full payment.
SO ORDERED.
3
G.R. No. 131166 September 30, 1999
CALTEX (PHILIPPINES), INC., petitioner,
vs.
SULPICIO LINES, INC., GO SIOC SO, ENRIQUE S. GO, EUSEBIO S. GO, CARLOS S. GO,
VICTORIANO S. GO, DOMINADOR S. GO, RICARDO S. GO, EDWARD S. GO, ARTURO S. GO,
EDGAR S. GO, EDMUND S. GO, FRANCISCO SORIANO, VECTOR SHIPPING CORPORATION,
TERESITA G. CAÑEZAL, AND SOTERA E. CAÑEZAL, respondents.
PARDO, J.:
Is the charterer of a sea vessel liable for damages resulting from a collision between the chartered
vessel and a passenger ship?
When MT Vector left the port of Limay, Bataan, on December 19, 1987 carrying petroleum products
of Caltex (Philippines), Inc. (hereinafter Caltex) no one could have guessed that it would collide with
MV Doña Paz, killing almost all the passengers and crew members of both ships, and thus resulting
in one of the country's worst maritime disasters.
The petition before us seeks to reverse the Court of Appeals decision 1 holding petitioner jointly
liable with the operator of MT Vector for damages when the latter collided with Sulpicio Lines, Inc.'s
passenger ship MV Doña Paz.
The facts are as follows:
On December 19, 1987, motor tanker MT Vector left Limay, Bataan, at about 8:00 p.m., enroute to
Masbate, loaded with 8,800 barrels of petroleum products shipped by petitioner Caltex. 2 MT Vector
is a tramping motor tanker owned and operated by Vector Shipping Corporation, engaged in the
business of transporting fuel products such as gasoline, kerosene, diesel and crude oil. During that
particular voyage, the MT Vector carried on board gasoline and other oil products owned by Caltex
by virtue of a charter contract between
them. 3
On December 20, 1987, at about 6:30 a.m., the passenger ship MV Doña Paz left the port of
Tacloban headed for Manila with a complement of 59 crew members including the master and his
officers, and passengers totaling 1,493 as indicated in the Coast Guard Clearance. 4 The MV Doña
Paz is a passenger and cargo vessel owned and operated by Sulpicio Lines, Inc. plying the route of
Manila/ Tacloban/ Catbalogan/ Manila/ Catbalogan/ Tacloban/ Manila, making trips twice a week.
At about 10:30 p.m. of December 20, 1987, the two vessels collided in the open sea within the
vicinity of Dumali Point between Marinduque and Oriental Mindoro. All the crewmembers of MV
Doña Paz died, while the two survivors from MT Vector claimed that they were sleeping at the time
of the incident.1âwphi1.nêt
The MV Doña Paz carried an estimated 4,000 passengers; many indeed, were not in the passenger
manifest. Only 24 survived the tragedy after having been rescued from the burning waters by
vessels that responded to distress calls. 5 Among those who perished were public school teacher
Sebastian Cañezal (47 years old) and his daughter Corazon Cañezal (11 years old), both
unmanifested passengers but proved to be on board the vessel.
On March 22, 1988, the board of marine inquiry in BMI Case No. 659-87 after investigation found
that the MT Vector, its registered operator Francisco Soriano, and its owner and actual operator
Vector Shipping Corporation, were at fault and responsible for its collision with MV Doña Paz. 6
On February 13, 1989, Teresita Cañezal and Sotera E. Cañezal, Sebastian Cañezal's wife and
mother respectively, filed with the Regional Trial Court, Branch 8, Manila, a complaint for "Damages
Arising from Breach of Contract of Carriage" against Sulpicio Lines, Inc. (hereafter Sulpicio).
Sulpicio, in turn, filed a third party complaint against Francisco Soriano, Vector Shipping Corporation
and Caltex (Philippines), Inc. Sulpicio alleged that Caltex chartered MT Vector with gross and
evident bad faith knowing fully well that MT Vector was improperly manned, ill-equipped,
unseaworthy and a hazard to safe navigation; as a result, it rammed against MV Doña Paz in the
open sea setting MT Vector's highly flammable cargo ablaze.
On September 15, 1992, the trial court rendered decision dismissing, the third party complaint
against petitioner. The dispositive portion reads:
WHEREFORE, judgment is hereby rendered in favor of plaintiffs and against
defendant-3rd party plaintiff Sulpicio Lines, Inc., to wit:
1. For the death of Sebastian E. Cañezal and his 11-year old daughter Corazon
G. Cañezal, including loss of future earnings of said Sebastian, moral and
exemplary damages, attorney's fees, in the total amount of P 1,241,287.44 and
finally;
2. The statutory costs of the proceedings.
Likewise, the 3rd party complaint is hereby DISMISSED for want of
substantiation and with costs against the 3rd party plaintiff.
IT IS SO ORDERED.
DONE IN MANILA, this 15th day of September 1992.
On appeal to the Court of Appeals interposed by Sulpicio Lines, Inc., on April 15, 1997, the Court of
Appeal modified the trial court's ruling and included petitioner Caltex as one of the those liable for
damages. Thus:
WHEREFORE, in view of all the foregoing, the judgment rendered by the
Regional Trial Court is hereby MODIFIED as follows:
WHEREFORE, defendant Sulpicio Lines, Inc., is ordered to pay the heirs of
Sebastian E. Cañezal and Corazon Cañezal:
1. Compensatory damages for the death of Sebastian E. Cañezal and Corazon
Cañezal the total amount of ONE HUNDRED THOUSAND PESOS (P100,000);
2. Compensatory damages representing the unearned income of Sebastian E.
Cañezal, in the total amount of THREE HUNDRED SIX THOUSAND FOUR
HUNDRED EIGHTY (P306,480.00) PESOS;
3. Moral damages in the amount of THREE HUNDRED THOUSAND PESOS
(P300,000.00);
4
 4. Attorney's fees in the concept of actual damages in the amount of FIFTY
THOUSAND PESOS (P50,000.00);
5. Costs of the suit.
Third party defendants Vector Shipping Co. and Caltex (Phils.), Inc. are held
equally liable under the third party complaint to reimburse/indemnify defendant
Sulpicio Lines, Inc. of the above-mentioned damages, attorney's fees and costs
which the latter is adjudged to pay plaintiffs, the same to be shared half by
Vector Shipping Co. (being the vessel at fault for the collision) and the other half
by Caltex (Phils.), Inc. (being the charterer that negligently caused the shipping
of combustible cargo aboard an unseaworthy vessel).
SO ORDERED.
Hence, this petition.
We find the petition meritorious.
First: The charterer has no liability for damages under Philippine Maritime laws.
The respective rights and duties of a shipper and the carrier depends not on whether the carrier is
public or private, but on whether the contract of carriage is a bill of lading or equivalent shipping
documents on the one hand, or a charter party or similar contract on the other. 9
10
Petitioner and Vector entered into a contract of affreightment, also known as a voyage charter.
A charter party is a contract by which an entire ship, or some principal part thereof, is let by the
owner to another person for a specified time or use; a 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 goods, on a particular voyage, in consideration of the payment of freight. 11
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, wherein the ship is leased for a single voyage.
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 owner to supply the ship's store, pay
for the wages of the master of the crew, and defray the expenses for the maintenance of the ship. 12
Under a demise or bareboat charter on the other hand, the charterer mans the vessel with his own
people and becomes, in effect, the owner for the voyage or service stipulated, subject to liability for
damages caused by negligence.
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 of ownership rest on the owner. The
charterer is free from liability to third persons in respect of the ship. 13
Second: MT Vector is a common carrier
Charter parties fall into three main categories: (1) Demise or bareboat, (2) time charter, (3) voyage
charter. Does a charter party agreement turn the common carrier into a private one? We need to
answer this question in order to shed light on the responsibilities of the parties.
In this case, the charter party agreement did not convert the common carrier into a private carrier.
The parties entered into a voyage charter, which retains the character of the vessel as a common
carrier.
In Planters Products, Inc. vs. Court of Appeals, 14 we said:
It is therefore imperative that a public carrier shall remain as such,
notwithstanding the charter of the whole portion of a vessel of one or more
persons, provided the charter is limited to the ship only, as in the case of a time-
charter or the voyage charter. It is only when the charter includes both the
vessel and its crew, as in a bareboat or demise that a common carrier becomes
private, at least insofar as the particular voyage covering the charter-party is
concerned. Indubitably, a ship-owner in a time or voyage charter retains
possession and control of the ship, although her holds may, for the moment, be
the property of the charterer.
Later, we ruled in Coastwise Lighterage Corporation vs. Court of Appeals: 15
Although a charter party may transform a common carrier into a private one, the
same however is not true in a contract of affreightment . . .
A common carrier is a person or corporation whose regular business is to carry passengers or
property for all persons who may choose to employ and to remunerate him. 16 MT Vector fits the
definition of a common carrier under Article 1732 of the Civil Code. In Guzman vs. Court of
Appeals, 17 we ruled:
The Civil Code defines "common carriers" in the following terms:
Art. 1732. Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers for passengers
or goods or both, by land, water, or air for compensation, offering their services
to the public.
The above article makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such
carrying only as an ancillary activity (in local idiom, as "a sideline"). Article 1732
also carefully avoids making any distinction between a person or enterprise
offering transportation service on a regular or scheduled basis and one offering
such services on an occasional, episodic or unscheduled basis. Neither does
Article 1732 distinguish between a carrier offering its services to the "general
public," i.e., the general community or population, and one who offers services
or solicits business only from a narrow segment of the general population. We
think that Article 1733 deliberately refrained from making such distinctions.
It appears to the Court that private respondent is properly characterized as a
common carrier even though he merely "back-hauled" goods for other
merchants from Manila to Pangasinan, although such backhauling was done on
a periodic, occasional rather than regular or scheduled manner, and even
though respondent's principal occupation was not the carriage of goods for
others. There is no dispute that private respondent charged his customers a fee
for hauling their goods; that the fee frequently fell below commercial freight
rates is not relevant here.
5
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;
xxx xxx xxx
Thus, the carriers are deemed to warrant impliedly the seaworthiness of the ship. For a vessel to be
seaworthy, it must be adequately equipped for the voyage and manned with a sufficient number of
competent officers and crew. The failure of a common carrier to maintain in seaworthy condition the
vessel involved in its contract of carriage is a clear breach of its duty prescribed in Article 1755 of
the Civil Code. 18
The provisions owed their conception to the nature of the business of common carriers. This
business is impressed with a special public duty. The public must of necessity rely on the care and
skill of common carriers in the vigilance over the goods and safety of the passengers, especially
because with the modern development of science and invention, transportation has become more
rapid, more complicated and somehow more hazardous. 19 For these reasons, a passenger or a
shipper of goods is under no obligation to conduct an inspection of the ship and its crew, the carrier
being obliged by law to impliedly warrant its seaworthiness.
This aside, we now rule on whether Caltex is liable for damages under the Civil Code.
Third: Is Caltex liable for damages under the Civil Code?
We rule that it is not.
Sulpicio argues that Caltex negligently shipped its highly combustible fuel cargo aboard an
unseaworthy vessel such as the MT Vector when Caltex:
1. Did not take steps to have M/T Vector's certificate of inspection and coastwise license renewed;
2. Proceeded to ship its cargo despite defects found by Mr. Carlos Tan of Bataan Refinery
Corporation;
3. Witnessed M/T Vector submitting fake documents and certificates to the Philippine Coast Guard.
Sulpicio further argues that Caltex chose MT Vector transport its cargo despite these deficiencies.
1. The master of M/T Vector did not posses the required Chief Mate license to command and
navigate the vessel;
2. The second mate, Ronaldo Tarife, had the license of a Minor Patron, authorized to navigate only
in bays and rivers when the subject collision occurred in the open sea;
3. The Chief Engineer, Filoteo Aguas, had no license to operate the engine of the vessel;
4. The vessel did not have a Third Mate, a radio operator and lookout; and
20
5. The vessel had a defective main engine.
As basis for the liability of Caltex, the Court of Appeals relied on Articles 20 and 2176 of the Civil
Code, which provide:
Art. 20. — Every person who contrary to law, willfully or negligently causes
damage to another, shall indemnify the latter for the same.
Art. 2176. — Whoever by act or omission causes damage to another, there
being fault or negligence, is obliged to pay for the damage done. Such fault or
negligence, if there is no pre-existing contractual relation between the parties, is
called a quasi-delict and is governed by the provisions of this Chapter.
And what is negligence?
The Civil Code provides:
Art. 1173. The fault or negligence of the obligor consists in the omission of that
diligence which is required by the nature of the obligation and corresponds with
the circumstances of the persons, of the time and of the place. When
negligence shows bad faith, the provisions of 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.
In Southeastern College, Inc. vs. Court of Appeals, 21 we said that negligence, as commonly
understood, is conduct which naturally or reasonably creates undue risk or harm to others. It may be
the failure to observe that degree of care, precaution, and vigilance, which the circumstances justly
demand, or the omission to do something which ordinarily regulate the conduct of human affairs,
would do.
The charterer of a vessel has no obligation before transporting its cargo to ensure that the vessel it
chartered complied with all legal requirements. The duty rests upon the common carrier simply for
being engaged in "public service." 22 The Civil Code demands diligence which is required by the
nature of the obligation and that which corresponds with the circumstances of the persons, the time
and the place. Hence, considering the nature of the obligation between Caltex and MT Vector,
liability as found by the Court of Appeals is without basis.1âwphi1.nêt
The relationship between the parties in this case is governed by special laws. Because of the
implied warranty of seaworthiness, 23 shippers of goods, when transacting with common carriers, are
not expected to inquire into the vessel's seaworthiness, genuineness of its licenses and compliance
with all maritime laws. To demand more from shippers and hold them liable in case of failure exhibits
nothing but the futility of our maritime laws insofar as the protection of the public in general is
concerned. By the same token, we cannot expect passengers to inquire every time they board a
common carrier, whether the carrier possesses the necessary papers or that all the carrier's
employees are qualified. Such a practice would be an absurdity in a business where time is always
of the essence. Considering the nature of transportation business, passengers and shippers alike
customarily presume that common carriers possess all the legal requisites in its operation.
6
Thus, the nature of the obligation of Caltex demands ordinary diligence like any other shipper in
shipping his cargoes.
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 "VESSEL'S 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
Certificate of Inspection No. 1290-85 during the hiring of MT Vector?
Apolinario Ng: At the time when I extended the Contract, I did nothing because the tanker has a
valid C.I. which will expire on December 7, 1987 but on the last week of November, I called 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.
Q: What happened after that?
A: On the first week of December, I again made a follow-up from Mr. Abalos, and said they were
going to send me a copy as soon as possible, sir. 24
xxx xxx xxx
Q: What did you do with the C.I.?
A: We did not insist on getting a copy of the C.I. from Mr. Abalos on the first place, because of our
long business relation, we trust Mr. Abalos and the fact that the vessel was able to sail indicates that
the documents are in order. . . . 25
On cross examination —
Atty. Sarenas: This being the case, and this being an admission by you, this Certificate of 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?
Apolinar Ng: No sir, because as I said before, the operation Manager assured us that they were able
to secure a renewal of the Certificate of Inspection and that they will in time submit us a
copy. 26
Finally, on Mr. Ng's redirect examination:
Atty. Poblador: Mr. Witness, were you aware of the pending expiry of the Certificate of Inspection in
the coastwise license on December 7, 1987. What was your assurance for the record that this
document was renewed by the MT Vector?
Atty. Sarenas: . . .
Atty. Poblador: The certificate of Inspection?
A: As I said, firstly, we trusted Mr. Abalos as he is a long time business partner; secondly, 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.
Q: If the Coast Guard clears a vessel to sail, what would that mean?
Atty. Sarenas: Objection.
Court: He already answered that in the cross examination to the effect that if it was allowed,
referring to MV Vector, to sail, where it is loaded and that it was scheduled for a destination by the
Coast Guard, it means that it has Certificate of Inspection extended as assured to this witness by
Restituto Abalos. That in no case MV Vector will be allowed to sail if the Certificate of inspection is,
indeed, not to be extended. That was his repeated explanation to the cross-examination. So, there is
no need to clarify the same in the re-direct examination. 27
Caltex and Vector Shipping Corporation had been doing business since 1985, or for about two years
before the tragic incident occurred in 1987. Past services rendered showed no reason for Caltex to
observe a higher degree of diligence.
Clearly, as a mere voyage charterer, Caltex had the right to presume that the ship was seaworthy as
even the Philippine Coast Guard itself was convinced of its seaworthiness. All things considered, we
find no legal basis to hold petitioner liable for damages.
As Vector Shipping Corporation did not appeal from the Court of Appeals' decision, we limit our
ruling to the liability of Caltex alone. However, we maintain the Court of Appeals' ruling insofar as
Vector is concerned.
WHEREFORE, the Court hereby GRANTS the petition and SETS ASIDE the decision of the Court
of Appeals in CA-G.R. CV No. 39626, 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 latter is adjudged to pay plaintiffs-appellees. The Court AFFIRMS the decision of the Court of
Appeals insofar as it orders Sulpicio Lines, Inc. to pay the heirs of Sebastian E. Cañezal and
Corazon Cañezal damages as set forth therein. Third-party defendant-appellee Vector Shipping
Corporation and Francisco Soriano are held liable to reimburse/indemnify defendant Sulpicio Lines,
Inc. whatever damages, attorneys' fees and costs the latter is adjudged to pay plaintiffs-appellees in
the case.1âwphi1.nêt
No costs in this instance.
SO ORDERED.
7
G.R. No. 125948 December 29, 1998
FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner,
vs.
COURT OF APPEALS, HONORABLE PATERNO V. TAC-AN, BATANGAS CITY and ADORACION
C. ARELLANO, in her official capacity as City Treasurer of Batangas, respondents.
MARTINEZ, J.:
This petition for review on certiorari assails the Decision of the Court of Appeals dated November
29, 1995, in CA-G.R. SP No. 36801, affirming the decision of the Regional Trial Court of Batangas
City, Branch 84, in Civil Case No. 4293, which dismissed petitioners' complaint for a business tax
refund imposed by the City of Batangas.
Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as amended, to
contract, install and operate oil pipelines. The original pipeline concession was granted in 1967 1 and
renewed by the Energy Regulatory Board in 1992. 2
Sometime in January 1995, petitioner applied for a mayor's permit with the Office of the Mayor of
Batangas City. However, before the mayor's permit could be issued, the respondent City Treasurer
required petitioner to pay a local tax based on its gross receipts for the fiscal year 1993 pursuant to
the Local Government Code3. The respondent City Treasurer assessed a business tax on the
petitioner amounting to P956,076.04 payable in four installments based on the gross receipts for
products pumped at GPS-1 for the fiscal year 1993 which amounted to P181,681,151.00. In order
not to hamper its operations, petitioner paid the tax under protest in the amount of P239,019.01 for
the first quarter of 1993.
On January 20, 1994, petitioner filed a letter-protest addressed to the respondent City Treasurer, the
pertinent portion of which reads:
Please note that our Company (FPIC) is a pipeline operator with a government
concession granted under the Petroleum Act. It is engaged in the business of
transporting petroleum products from the Batangas refineries, via pipeline, to
Sucat and JTF Pandacan Terminals. As such, our Company is exempt from
paying tax on gross receipts under Section 133 of the Local Government Code
of 1991 . . . .
Moreover, Transportation contractors are not included in the enumeration of
contractors under Section 131, Paragraph (h) of the Local Government Code.
Therefore, the authority to impose tax "on contractors and other independent
contractors" under Section 143, Paragraph (e) of the Local Government Code
does not include the power to levy on transportation contractors.
The imposition and assessment cannot be categorized as a mere fee
authorized under Section 147 of the Local Government Code. The said section
limits the imposition of fees and charges on business to such amounts as may
be commensurate to the cost of regulation, inspection, and licensing. Hence,
assuming arguendo that FPIC is liable for the license fee, the imposition thereof
based on gross receipts is violative of the aforecited provision. The amount of
P956,076.04 (P239,019.01 per quarter) is not commensurate to the cost of
regulation, inspection and licensing. The fee is already a revenue raising
measure, and not a mere regulatory imposition.4
On March 8, 1994, the respondent City Treasurer denied the protest contending that petitioner
cannot be considered engaged in transportation business, thus it cannot claim exemption under
Section 133 (j) of the Local Government Code.5
On June 15, 1994, petitioner filed with the Regional Trial Court of Batangas City a complaint 6 for tax
refund with prayer for writ of preliminary injunction against respondents City of Batangas and
Adoracion Arellano in her capacity as City Treasurer. In its complaint, petitioner alleged, inter alia,
that: (1) the imposition and collection of the business tax on its gross receipts violates Section 133 of
the Local Government Code; (2) the authority of cities to impose and collect a tax on the gross
receipts of "contractors and independent contractors" under Sec. 141 (e) and 151 does not include
the authority to collect such taxes on transportation contractors for, as defined under Sec. 131 (h),
the term "contractors" excludes transportation contractors; and, (3) the City Treasurer illegally and
erroneously imposed and collected the said tax, thus meriting the immediate refund of the tax paid. 7
Traversing the complaint, the respondents argued that petitioner cannot be exempt from taxes under
Section 133 (j) of the Local Government Code as said exemption applies only to "transportation
contractors and persons engaged in the transportation by hire and common carriers by air, land and
water." Respondents assert that pipelines are not included in the term "common carrier" which refers
solely to ordinary carriers such as trucks, trains, ships and the like. Respondents further posit that
the term "common carrier" under the said code pertains to the mode or manner by which a product
is delivered to its destination.8
On October 3, 1994, the trial court rendered a decision dismissing the complaint, ruling in this wise:
. . . Plaintiff is either a contractor or other independent contractor.
. . . the exemption to tax claimed by the plaintiff has become unclear. It is a rule
that tax exemptions are to be strictly construed against the taxpayer, taxes
being the lifeblood of the government. Exemption may therefore be granted only
by clear and unequivocal provisions of law.
Plaintiff claims that it is a grantee of a pipeline concession under Republic Act
387. (Exhibit A) whose concession was lately renewed by the Energy
Regulatory Board (Exhibit B). Yet neither said law nor the deed of concession
grant any tax exemption upon the plaintiff.
Even the Local Government Code imposes a tax on franchise holders under
Sec. 137 of the Local Tax Code. Such being the situation obtained in this case
(exemption being unclear and equivocal) resort to distinctions or other
considerations may be of help:
1. That the exemption granted under Sec. 133 (j) encompasses only common carriers so as not to
overburden the riding public or commuters with taxes. Plaintiff is not a common carrier, but a special
carrier extending its services and facilities to a single specific or "special customer" under a "special
contract."
2. The Local Tax Code of 1992 was basically enacted to give more and effective local autonomy to
local governments than the previous enactments, to make them economically and financially viable
to serve the people and discharge their functions with a concomitant obligation to accept certain
devolution of powers, . . . So, consistent with this policy even franchise grantees are taxed (Sec.
137) and contractors are also taxed under Sec. 143 (e) and 151 of the Code. 9
Petitioner assailed the aforesaid decision before this Court via a petition for review. On February 27,
1995, we referred the case to the respondent Court of Appeals for consideration and
adjudication. 10 On November 29, 1995, the respondent court rendered a decision 11 affirming the
8
trial court's dismissal of petitioner's complaint. Petitioner's motion for reconsideration was denied on
July 18, 1996. 12
Hence, this petition. At first, the petition was denied due course in a Resolution dated November 11,
1996. 13 Petitioner moved for a reconsideration which was granted by this Court in a Resolution 14 of
January 22, 1997. Thus, the petition was reinstated.
Petitioner claims that the respondent Court of Appeals erred in holding that (1) the petitioner is not a
common carrier or a transportation contractor, and (2) the exemption sought for by petitioner is not
clear under the law.
There is merit in the petition.
A "common carrier" may be defined, broadly, as one who holds himself out to the public as engaged
in the business of transporting persons or property from place to place, for compensation, offering
his services to the public generally.
Art. 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm or
association engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air, for compensation, offering their services to the public."
The test for determining whether a party is a common carrier of goods is:
1. He must be engaged in the business of carrying goods for others as a public employment, and
must hold himself out as ready to engage in the transportation of goods for person generally as a
business and not as a casual occupation;
2. He must undertake to carry goods of the kind to which his business is confined;
3. He must undertake to carry by the method by which his business is conducted and over his
established roads; and
15
4. The transportation must be for hire.
Based on the above definitions and requirements, there is no doubt that petitioner is a common
carrier. It is engaged in the business of transporting or carrying goods, i.e. petroleum products, for
hire as a public employment. It undertakes to carry for all persons indifferently, that is, to all persons
who choose to employ its services, and transports the goods by land and for compensation. The fact
that petitioner has a limited clientele does not exclude it from the definition of a common carrier.
In De Guzman vs. Court of Appeals 16 we ruled that:
The above article (Art. 1732, Civil Code) makes no distinction between one whose principal
business activity is the carrying of persons or goods or both, and one who does such carrying only
as an ancillary activity (in local idiom, as a "sideline"). Article 1732 . . . avoids making any distinction
between a person or enterprise offering transportation service on a regular or scheduled basis and
one offering such service on an occasional, episodic or unscheduled basis. Neither does Article
1732 distinguish between a carrier offering its services to the "general public," i.e., the general
community or population, and one who offers services or solicits business only from a narrow
segment of the general population. We think that Article 1877 deliberately refrained from making
such distinctions.
So understood, the concept of "common carrier" under Article 1732 may be seen to coincide neatly
with the notion of "public service," under the Public Service Act (Commonwealth Act No. 1416, as
amended) which at least partially supplements the law on common carriers set forth in the Civil
Code. Under Section 13, paragraph (b) of the Public Service Act, "public service" includes:
every person that now or hereafter may own, operate. manage, or control in the Philippines, for hire
or compensation, with general or limited clientele, whether permanent, occasional or accidental, and
done for general business purposes, any common carrier, railroad, street railway, traction railway,
subway motor vehicle, either for freight or passenger, or both, with or without fixed route and
whatever may be its classification, freight or carrier service of any class, express service,
steamboat, or steamship line, pontines, ferries and water craft, engaged in the transportation
of passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice-
refrigeration plant, canal, irrigation system gas, electric light heat and power, water supply
and power petroleum, sewerage system, wire or wireless communications systems, wire or wireless
broadcasting stations and other similar public services. (Emphasis Supplied)
Also, respondent's argument that the term "common carrier" as used in Section 133 (j) of the Local
Government Code refers only to common carriers transporting goods and passengers through
moving vehicles or vessels either by land, sea or water, is erroneous.
As correctly pointed out by petitioner, the definition of "common carriers" in the Civil Code makes no
distinction as to the means of transporting, as long as it is by land, water or air. It does not provide
that the transportation of the passengers or goods should be by motor vehicle. In fact, in the United
States, oil pipe line operators are considered common carriers. 17
Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a "common
carrier." Thus, Article 86 thereof provides that:
Art. 86. Pipe line concessionaire as common carrier. — A pipe line shall have the preferential right to
utilize installations for the transportation of petroleum owned by him, but is obligated to utilize the
remaining transportation capacity pro rata for the transportation of such other petroleum as may be
offered by others for transport, and to charge without discrimination such rates as may have been
approved by the Secretary of Agriculture and Natural Resources.
Republic Act 387 also regards petroleum operation as a public utility. Pertinent portion of Article 7
thereof provides:
that everything relating to the exploration for and exploitation of petroleum . . . and everything
relating to the manufacture, refining, storage, or transportation by special methods of petroleum, is
hereby declared to be a public utility. (Emphasis Supplied)
The Bureau of Internal Revenue likewise considers the petitioner a "common carrier." In BIR Ruling
No. 069-83, it declared:
. . . since [petitioner] is a pipeline concessionaire that is engaged only in transporting petroleum
products, it is considered a common carrier under Republic Act No. 387 . . . . Such being the case, it
is not subject to withholding tax prescribed by Revenue Regulations No. 13-78, as amended.
From the foregoing disquisition, there is no doubt that petitioner is a "common carrier" and,
therefore, exempt from the business tax as provided for in Section 133 (j), of the Local Government
Code, to wit:
Sec. 133. Common Limitations on the Taxing Powers of Local Government Units. — Unless
otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and
barangays shall not extend to the levy of the following:
9
 xxx xxx xxx
(j) Taxes on the gross receipts of transportation contractors and persons engaged in the
transportation of passengers or freight by hire and common carriers by air, land or water, except as
provided in this Code.
The deliberations conducted in the House of Representatives on the Local Government Code of
1991 are illuminating:
MR. AQUINO (A). Thank you, Mr. Speaker.
Mr. Speaker, we would like to proceed to page 95, line 1. It states: "SEC. 121 [now Sec. 131].
Common Limitations on the Taxing Powers of Local Government Units." . . .
MR. AQUINO (A.). Thank you Mr. Speaker.
Still on page 95, subparagraph 5, on taxes on the business of transportation. This appears to be one
of those being deemed to be exempted from the taxing powers of the local government units. May
we know the reason why the transportation business is being excluded from the taxing powers of the
local government units?
MR. JAVIER (E.). Mr. Speaker, there is an exception contained in Section 121 (now Sec. 131), line
16, paragraph 5. It states that local government units may not impose taxes on the business of
transportation, except as otherwise provided in this code.
Now, Mr. Speaker, if the Gentleman would care to go to page 98 of Book II, one can see there that
provinces have the power to impose a tax on business enjoying a franchise at the rate of not more
than one-half of 1 percent of the gross annual receipts. So, transportation contractors who are
enjoying a franchise would be subject to tax by the province. That is the exception, Mr. Speaker.
What we want to guard against here, Mr. Speaker, is the imposition of taxes by local government
units on the carrier business. Local government units may impose taxes on top of what is already
being imposed by the National Internal Revenue Code which is the so-called "common carriers tax."
We do not want a duplication of this tax, so we just provided for an exception under Section 125
[now Sec. 137] that a province may impose this tax at a specific rate.
18
MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker. . . .
It is clear that the legislative intent in excluding from the taxing power of the local government unit
the imposition of business tax against common carriers is to prevent a duplication of the so-called
"common carrier's tax."
Petitioner is already paying three (3%) percent common carrier's tax on its gross sales/earnings
under the National Internal Revenue Code. 19 To tax petitioner again on its gross receipts in its
transportation of petroleum business would defeat the purpose of the Local Government Code.
WHEREFORE, the petition is hereby GRANTED. The decision of the respondent Court of Appeals
dated November 29, 1995 in CA-G.R. SP No. 36801 is REVERSED and SET ASIDE.
SO ORDERED.
G.R. No. L-47822 December 22, 1988
PEDRO DE GUZMAN, petitioner,
vs.
COURT OF APPEALS and ERNESTO CENDANA, respondents.
FELICIANO, J.:
Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used bottles and scrap
metal in Pangasinan. Upon gathering sufficient quantities of such scrap material, respondent would
bring such material to Manila for resale. He utilized two (2) six-wheeler trucks which he owned for
hauling the material to Manila. On the return trip to Pangasinan, respondent would load his vehicles
with cargo which various merchants wanted delivered to differing establishments in Pangasinan. For
that service, respondent charged freight rates which were commonly lower than regular commercial
rates.
Sometime in November 1970, petitioner Pedro de Guzman a merchant and authorized dealer of
General Milk Company (Philippines), Inc. in Urdaneta, Pangasinan, contracted with respondent for
the hauling of 750 cartons of Liberty filled milk from a warehouse of General Milk in Makati, Rizal, to
petitioner's establishment in Urdaneta on or before 4 December 1970. Accordingly, on 1 December
1970, respondent loaded in Makati the merchandise on to his trucks: 150 cartons were loaded on a
truck driven by respondent himself, while 600 cartons were placed on board the other truck which
was driven by Manuel Estrada, respondent's driver and employee.
Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600 boxes never reached
petitioner, since the truck which carried these boxes was hijacked somewhere along the MacArthur
Highway in Paniqui, Tarlac, by armed men who took with them the truck, its driver, his helper and
the cargo.
On 6 January 1971, petitioner commenced action against private respondent in the Court of First
Instance of Pangasinan, demanding payment of P 22,150.00, the claimed value of the lost
merchandise, plus damages and attorney's fees. Petitioner argued that private respondent, being a
common carrier, and having failed to exercise the extraordinary diligence required of him by the law,
should be held liable for the value of the undelivered goods.
In his Answer, private respondent denied that he was a common carrier and argued that he could
not be held responsible for the value of the lost goods, such loss having been due to force majeure.
On 10 December 1975, the trial court rendered a Decision 1 finding private respondent to be a
common carrier and holding him liable for the value of the undelivered goods (P 22,150.00) as well
as for P 4,000.00 as damages and P 2,000.00 as attorney's fees.
On appeal before the Court of Appeals, respondent urged that the trial court had erred in
considering him a common carrier; in finding that he had habitually offered trucking services to the
public; in not exempting him from liability on the ground of force majeure; and in ordering him to pay
damages and attorney's fees.
The Court of Appeals reversed the judgment of the trial court and held that respondent had been
engaged in transporting return loads of freight "as a casual
occupation — a sideline to his scrap iron business" and not as a common carrier. Petitioner came to
this Court by way of a Petition for Review assigning as errors the following conclusions of the Court
of Appeals:
1. that private respondent was not a common carrier;
10
 2. that the hijacking of respondent's truck was force majeure; and
3. that respondent was not liable for the value of the undelivered cargo. (Rollo,
p. 111)
We consider first the issue of whether or not private respondent Ernesto Cendana may, under the
facts earlier set forth, be properly characterized as a common carrier.
The Civil Code defines "common carriers" in the following terms:
Article 1732. Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or
both, by land, water, or air for compensation, offering their services to the
public.
The above article makes no distinction between one whose principal business activity is the carrying
of persons or goods or both, and one who does such carrying only as an ancillary activity (in local
Idiom as "a sideline"). Article 1732 also carefully avoids making any distinction between a person or
enterprise offering transportation service on a regular or scheduled basis and one offering such
service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish
between a carrier offering its services to the "general public," i.e., the general community or
population, and one who offers services or solicits business only from a narrow segment of the
general population. We think that Article 1733 deliberaom making such distinctions.
So understood, the concept of "common carrier" under Article 1732 may be seen to coincide neatly
with the notion of "public service," under the Public Service Act (Commonwealth Act No. 1416, as
amended) which at least partially supplements the law on common carriers set forth in the Civil
Code. Under Section 13, paragraph (b) of the Public Service Act, "public service" includes:
... every person that now or hereafter may own, operate, manage, or control in
the Philippines, for hire or compensation, with general or limited clientele,
whether permanent, occasional or accidental, and done for general business
purposes, any common carrier, railroad, street railway, traction railway, subway
motor vehicle, either for freight or passenger, or both, with or without fixed route
and whatever may be its classification, freight or carrier service of any class,
express service, steamboat, or steamship line, pontines, ferries and water craft,
engaged in the transportation of passengers or freight or both, shipyard, marine
repair shop, wharf or dock, ice plant,
ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and
power, water supply and power petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting stations and other
similar public services. ... (Emphasis supplied)
It appears to the Court that private respondent is properly characterized as a common carrier even
though he merely "back-hauled" goods for other merchants from Manila to Pangasinan, although
such back-hauling was done on a periodic or occasional rather than regular or scheduled manner,
and even though private respondent's principal occupation was not the carriage of goods for others.
There is no dispute that private respondent charged his customers a fee for hauling their goods; that
fee frequently fell below commercial freight rates is not relevant here.
The Court of Appeals referred to the fact that private respondent held no certificate of public
convenience, and concluded he was not a common carrier. This is palpable error. A certificate of
public convenience is not a requisite for the incurring of liability under the Civil Code provisions
governing common carriers. That liability arises the moment a person or firm acts as a common
carrier, without regard to whether or not such carrier has also complied with the requirements of the
applicable regulatory statute and implementing regulations and has been granted a certificate of
public convenience or other franchise. To exempt private respondent from the liabilities of a
common carrier because he has not secured the necessary certificate of public convenience, would
be offensive to sound public policy; that would be to reward private respondent precisely for failing to
comply with applicable statutory requirements. The business of a common carrier impinges directly
and intimately upon the safety and well being and property of those members of the general
community who happen to deal with such carrier. The law imposes duties and liabilities upon
common carriers for the safety and protection of those who utilize their services and the law cannot
allow a common carrier to render such duties and liabilities merely facultative by simply failing to
obtain the necessary permits and authorizations.
We turn then to the liability of private respondent as a common carrier.
Common carriers, "by the nature of their business and for reasons of public policy" 2 are held to a
very high degree of care and diligence ("extraordinary diligence") in the carriage of goods as well as
of passengers. The specific import of extraordinary diligence in the care of goods transported by a
common carrier is, according to Article 1733, "further expressed in Articles 1734,1735 and 1745,
numbers 5, 6 and 7" of the Civil Code.
Article 1734 establishes the general rule that common carriers are responsible for the loss,
destruction or deterioration of the goods which they carry, "unless the same is due to any of the
following causes only:
(1) Flood, storm, earthquake, lightning or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character-of the goods or defects in the packing or-in the containers; and
(5) Order or act of competent public authority.
It is important to point out that the above list of causes of loss, destruction or deterioration which
exempt the common carrier for responsibility therefor, is a closed list. Causes falling outside the
foregoing list, even if they appear to constitute a species of force majeure fall within the scope of
Article 1735, which provides as follows:
In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the
preceding article, if the goods are lost, destroyed or deteriorated, common
carriers are presumed to have been at fault or to have acted negligently, unless
they prove that they observed extraordinary diligence as required in Article
1733. (Emphasis supplied)
Applying the above-quoted Articles 1734 and 1735, we note firstly that the specific cause alleged in
the instant case — the hijacking of the carrier's truck — does not fall within any of the five (5)
categories of exempting causes listed in Article 1734. It would follow, therefore, that the hijacking of
the carrier's vehicle must be dealt with under the provisions of Article 1735, in other words, that the
private respondent as common carrier is presumed to have been at fault or to have acted
negligently. This presumption, however, may be overthrown by proof of extraordinary diligence on
the part of private respondent.
Petitioner insists that private respondent had not observed extraordinary diligence in the care of
petitioner's goods. Petitioner argues that in the circumstances of this case, private respondent
should have hired a security guard presumably to ride with the truck carrying the 600 cartons of
Liberty filled milk. We do not believe, however, that in the instant case, the standard of extraordinary
diligence required private respondent to retain a security guard to ride with the truck and to engage
brigands in a firelight at the risk of his own life and the lives of the driver and his helper.
11
The precise issue that we address here relates to the specific requirements of the duty of ACCORDINGLY, the Petition for Review on certiorari is hereby DENIED and the Decision of the
extraordinary diligence in the vigilance over the goods carried in the specific context of hijacking or Court of Appeals dated 3 August 1977 is AFFIRMED. No pronouncement as to costs.
armed robbery.
SO ORDERED.
As noted earlier, the duty of extraordinary diligence in the vigilance over goods is, under Article
1733, given additional specification not only by Articles 1734 and 1735 but also by Article 1745,
numbers 4, 5 and 6, Article 1745 provides in relevant part:

Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to
public policy:
G.R. No. 131621 September 28, 1999
xxx xxx xxx
LOADSTAR SHIPPING CO., INC., petitioner,
vs.
(5) that the common carrier shall not be responsible for the acts or omissions of his or its
COURT OF APPEALS and THE MANILA INSURANCE CO., INC., respondents.
employees;

DAVIDE, JR., C.J.:

(6) that the common carrier's liability for acts committed by thieves, or of robbers who do not act
with grave or irresistible threat, violence or force, is dispensed with or diminished; and
Petitioner Loadstar Shipping Co., Inc. (hereafter LOADSTAR), in this petition for review
on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, seeks to reverse and set aside the
(7) that the common carrier shall not responsible for the loss, destruction or deterioration of goods
following: (a) the 30 January 1997 decision 1 of the Court of Appeals in CA-G.R. CV No. 36401,
on account of the defective condition of the car vehicle, ship, airplane or other equipment used in the
which affirmed the decision of 4 October 1991 2 of the Regional Trial Court of Manila, Branch 16, in
contract of carriage. (Emphasis supplied)
Civil Case No. 85-29110, ordering LOADSTAR to pay private respondent Manila Insurance Co.
(hereafter MIC) the amount of P6,067,178, with legal interest from the filing of the compliant until
Under Article 1745 (6) above, a common carrier is held responsible — and will not be allowed to fully paid, P8,000 as attorney's fees, and the costs of the suit; and (b) its resolution of 19 November
divest or to diminish such responsibility — even for acts of strangers like thieves or 1997, 3 denying LOADSTAR's motion for reconsideration of said decision.
robbers, except where such thieves or robbers in fact acted "with grave or irresistible threat, violence
or force." We believe and so hold that the limits of the duty of extraordinary diligence in the vigilance
The facts are undisputed.1âwphi1.nêt
over the goods carried are reached where the goods are lost as a result of a robbery which is
attended by "grave or irresistible threat, violence or force."
On 19 November 1984, LOADSTAR received on board its M/V "Cherokee" (hereafter, the vessel)
the following goods for shipment:
In the instant case, armed men held up the second truck owned by private respondent which carried
petitioner's cargo. The record shows that an information for robbery in band was filed in the Court of
First Instance of Tarlac, Branch 2, in Criminal Case No. 198 entitled "People of the Philippines v. a) 705 bales of lawanit hardwood;
Felipe Boncorno, Napoleon Presno, Armando Mesina, Oscar Oria and one John Doe." There, the
accused were charged with willfully and unlawfully taking and carrying away with them the second
truck, driven by Manuel Estrada and loaded with the 600 cartons of Liberty filled milk destined for b) 27 boxes and crates of tilewood assemblies and the others ;and
delivery at petitioner's store in Urdaneta, Pangasinan. The decision of the trial court shows that the
accused acted with grave, if not irresistible, threat, violence or force.3 Three (3) of the five (5) hold- c) 49 bundles of mouldings R & W (3) Apitong Bolidenized.
uppers were armed with firearms. The robbers not only took away the truck and its cargo but also
kidnapped the driver and his helper, detaining them for several days and later releasing them in
another province (in Zambales). The hijacked truck was subsequently found by the police in Quezon The goods, amounting to P6,067,178, were insured for the same amount with MIC against various
City. The Court of First Instance convicted all the accused of robbery, though not of robbery in risks including "TOTAL LOSS BY TOTAL OF THE LOSS THE VESSEL." The vessel, in turn, was
band. 4 insured by Prudential Guarantee & Assurance, Inc. (hereafter PGAI) for P4 million. On 20 November
1984, on its way to Manila from the port of Nasipit, Agusan del Norte, the vessel, along with its
cargo, sank off Limasawa Island. As a result of the total loss of its shipment, the consignee made a
In these circumstances, we hold that the occurrence of the loss must reasonably be regarded as claim with LOADSTAR which, however, ignored the same. As the insurer, MIC paid P6,075,000 to
quite beyond the control of the common carrier and properly regarded as a fortuitous event. It is the insured in full settlement of its claim, and the latter executed a subrogation receipt therefor.
necessary to recall that even common carriers are not made absolute insurers against all risks of
travel and of transport of goods, and are not held liable for acts or events which cannot be foreseen
or are inevitable, provided that they shall have complied with the rigorous standard of extraordinary On 4 February 1985, MIC filed a complaint against LOADSTAR and PGAI, alleging that the sinking
diligence. of the vessel was due to the fault and negligence of LOADSTAR and its employees. It also prayed
that PGAI be ordered to pay the insurance proceeds from the loss the vessel directly to MIC, said
amount to be deducted from MIC's claim from LOADSTAR.
We, therefore, agree with the result reached by the Court of Appeals that private respondent
Cendana is not liable for the value of the undelivered merchandise which was lost because of an
event entirely beyond private respondent's control. In its answer, LOADSTAR denied any liability for the loss of the shipper's goods and claimed that
sinking of its vessel was due to force majeure. PGAI, on the other hand, averred that MIC had no

12
cause of action against it, LOADSTAR being the party insured. In any event, PGAI was later
dropped as a party defendant after it paid the insurance proceeds to LOADSTAR.
As stated at the outset, the court a quo rendered judgment in favor of MIC, prompting LOADSTAR to
elevate the matter to the court of Appeals, which, however, agreed with the trial court and affirmed
its decision in toto.
In dismissing LOADSTAR's appeal, the appellate court made the following observations:
1) LOADSTAR cannot be considered a private carrier on the sole ground that there was a single
shipper on that fateful voyage. The court noted that the charter of the vessel was limited to the ship,
but LOADSTAR retained control over its crew. 4
2) As a common carrier, it is the Code of Commerce, not the Civil Code, which should be applied in
determining the rights and liabilities of the parties.
3) The vessel was not seaworthy because it was undermanned on the day of the voyage. If it had
been seaworthy, it could have withstood the "natural and inevitable action of the sea" on 20
November 1984, when the condition of the sea was moderate. The vessel sank, not because
of force majeure, but because it was not seaworthy. LOADSTAR'S allegation that the sinking was
probably due to the "convergence of the winds," as stated by a PAGASA expert, was not duly
proven at the trial. The "limited liability" rule, therefore, is not applicable considering that, in this
case, there was an actual finding of negligence on the part of the carrier. 5
4) Between MIC and LOADSTAR, the provisions of the Bill of Lading do not apply because said
provisions bind only the shipper/consignee and the carrier. When MIC paid the shipper for the goods
insured, it was subrogated to the latter's rights as against the carrier, LOADSTAR. 6
5) There was a clear breach of the contract of carriage when the shipper's goods never reached
their destination. LOADSTAR's defense of "diligence of a good father of a family" in the training and
selection of its crew is unavailing because this is not a proper or complete defense in culpa
contractual.
6) "Art. 361 (of the Code of Commerce) has been judicially construed to mean that when goods are
delivered on board a ship in good order and condition, and the shipowner delivers them to the
shipper in bad order and condition, it then devolves upon the shipowner to both allege and prove
that the goods were damaged by reason of some fact which legally exempts him from liability."
Transportation of the merchandise at the risk and venture of the shipper means that the latter bears
the risk of loss or deterioration of his goods arising from fortuitous events, force majeure, or the
inherent nature and defects of the goods, but not those caused by the presumed negligence or fault
of the carrier, unless otherwise proved. 7
The errors assigned by LOADSTAR boil down to a determination of the following issues:
(1) Is the M/V "Cherokee" a private or a common carrier?
(2) Did LOADSTAR observe due and/or ordinary diligence in these premises.
Regarding the first issue, LOADSTAR submits that the vessel was a private carrier because it was
not issued certificate of public convenience, it did not have a regular trip or schedule nor a fixed
route, and there was only "one shipper, one consignee for a special cargo."
In refutation, MIC argues that the issue as to the classification of the M/V "Cherokee" was not timely
raised below; hence, it is barred by estoppel. While it is true that the vessel had on board only the
cargo of wood products for delivery to one consignee, it was also carrying passengers as part of its
regular business. Moreover, the bills of lading in this case made no mention of any charter party but
only a statement that the vessel was a "general cargo carrier." Neither was there any "special
arrangement" between LOADSTAR and the shipper regarding the shipment of the cargo. The
singular fact that the vessel was carrying a particular type of cargo for one shipper is not sufficient to
convert the vessel into a private carrier.
As regards the second error, LOADSTAR argues that as a private carrier, it cannot be presumed to
have been negligent, and the burden of proving otherwise devolved upon MIC. 8
LOADSTAR also maintains that the vessel was seaworthy. Before the fateful voyage on 19
November 1984, the vessel was allegedly dry docked at Keppel Philippines Shipyard and was duly
inspected by the maritime safety engineers of the Philippine Coast Guard, who certified that the ship
was fit to undertake a voyage. Its crew at the time was experienced, licensed and unquestionably
competent. With all these precautions, there could be no other conclusion except that LOADSTAR
exercised the diligence of a good father of a family in ensuring the vessel's seaworthiness.
LOADSTAR further claims that it was not responsible for the loss of the cargo, such loss being due
to force majeure. It points out that when the vessel left Nasipit, Agusan del Norte, on 19 November
1984, the weather was fine until the next day when the vessel sank due to strong waves. MCI's
witness, Gracelia Tapel, fully established the existence of two typhoons, "WELFRING" and
"YOLING," inside the Philippine area of responsibility. In fact, on 20 November 1984, signal no. 1
was declared over Eastern Visayas, which includes Limasawa Island. Tapel also testified that the
convergence of winds brought about by these two typhoons strengthened wind velocity in the area,
naturally producing strong waves and winds, in turn, causing the vessel to list and eventually sink.
LOADSTAR goes on to argue that, being a private carrier, any agreement limiting its liability, such
as what transpired in this case, is valid. Since the cargo was being shipped at "owner's risk,"
LOADSTAR was not liable for any loss or damage to the same. Therefore, the Court of Appeals
erred in holding that the provisions of the bills of lading apply only to the shipper and the carrier, and
not to the insurer of the goods, which conclusion runs counter to the Supreme Court's ruling in the
case of St. Paul Fire & Marine Co. v. Macondray & Co., Inc., 9 and National Union Fire Insurance
Company of Pittsburgh v. Stolt-Nielsen Phils., Inc. 10
Finally, LOADSTAR avers that MIC's claim had already prescribed, the case having been instituted
beyond the period stated in the bills of lading for instituting the same — suits based upon claims
arising from shortage, damage, or non-delivery of shipment shall be instituted within sixty days from
the accrual of the right of action. The vessel sank on 20 November 1984; yet, the case for recovery
was filed only on 4 February 1985.
MIC, on the other hand, claims that LOADSTAR was liable, notwithstanding that the loss of the
cargo was due to force majeure, because the same concurred with LOADSTAR's fault or
negligence.
Secondly, LOADSTAR did not raise the issue of prescription in the court below; hence, the same
must be deemed waived.
Thirdly, the " limited liability " theory is not applicable in the case at bar because LOADSTAR was at
fault or negligent, and because it failed to maintain a seaworthy vessel. Authorizing the voyage
notwithstanding its knowledge of a typhoon is tantamount to negligence.
We find no merit in this petition.
13
Anent the first assigned error, we hold that LOADSTAR is a common carrier. It is not necessary that
the carrier be issued a certificate of public convenience, and this public character is not altered by
the fact that the carriage of the goods in question was periodic, occasional, episodic or unscheduled.
In support of its position, LOADSTAR relied on the 1968 case of Home Insurance Co. v. American
Steamship Agencies, Inc., 11 where this Court held that a common carrier transporting special cargo
or chartering the vessel to a special person becomes a private carrier that is not subject to the
provisions of the Civil Code. Any stipulation in the charter party absolving the owner from liability for
loss due to the negligence of its agent is void only if the strict policy governing common carriers is
upheld. Such policy has no force where the public at is not involved, as in the case of a ship totally
chartered for the use of a single party. LOADSTAR also cited Valenzuela Hardwood and Industrial
Supply, Inc. v. Court of Appeals 12 and National Steel Corp. v. Court of Appeals, 13 both of which
upheld the Home Insurance doctrine.
These cases invoked by LOADSTAR are not applicable in the case at bar for the simple reason that
the factual settings are different. The records do not disclose that the M/V "Cherokee," on the date in
question, 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 arrangement, but only a general
provision to the effect that the M/V"Cherokee" was a "general cargo carrier." 14 Further, the bare fact
that the vessel was carrying a particular type of cargo for one shipper, which appears to be purely
coincidental, is not reason enough to convert the vessel from a common to a private carrier,
especially where, as in this case, it was shown that the vessel was also carrying passengers.
Under the facts and circumstances obtaining in this case, LOADSTAR fits the definition of a
common carrier under Article 1732 of the Civil Code. In the case of De Guzman v. Court of
Appeals,15 the Court juxtaposed the statutory definition of "common carriers" with the peculiar
circumstances of that case, viz.:
The Civil Code defines "common carriers" in the following terms:
Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or both, by land, water, or air for
compensation, offering their services to the public.
The above article makes no distinction between one whose principal business activity is the carrying
of persons or goods or both, and one who does such carrying only as ancillary activity (in local
idiom, as "a sideline". Article 1732 also carefully avoids making any distinction between a person or
enterprise offering transportation service on a regular or scheduled basis and one offering such
service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish
between a carrier offering its services to the "general public," i.e., the general community or
population, and one who offers services or solicits business only from a narrow segment of the
general population. We think that Article 1733 deliberately refrained from making such distinctions.
xxx xxx xxx
It appears to the Court that private respondent is properly characterized as a
common carrier even though he merely "back-hauled" goods for other
merchants from Manila to Pangasinan, although such backhauling was done on
a periodic or occasional rather than regular or scheduled manner, and
eventhough private respondent's principal occupation was not the carriage of
goods for others. There is no dispute that private respondent charged his
customers a fee for hauling their goods; that fee frequently fell below
commercial freight rates is not relevant here.
The Court of Appeals referred to the fact that private respondent held no
certificate of public convenience, and concluded he was not a common carrier.
This is palpable error. A certificate of public convenience is not a requisite for
the incurring of liability under the Civil Code provisions governing common
carriers. That liability arises the moment a person or firm acts as a common
carrier, without regard to whether or not such carrier has also complied with the
requirements of the applicable regulatory statute and implementing regulations
and has been granted a certificate of public convenience or other franchise. To
exempt private respondent from the liabilities of a common carrier because he
has not secured the necessary certificate of public convenience, would be
offensive to sound public policy; that would be to reward private respondent
precisely for failing to comply with applicable statutory requirements The
business of a common carrier impinges directly and intimately upon the safety
and well being and property of those members of the general community who
happen to deal with such carrier. The law imposes duties and liabilities upon
common carriers for the safety and protection of those who utilize their services
and the law cannot allow a common carrier to render such duties and liabilities
merely facultative by simply failing to obtain the necessary permits and
authorizations.
Moving on to the second assigned error, we find that the M/V "Cherokee" was not seaworthy when it
embarked on its voyage on 19 November 1984. The vessel was not even sufficiently manned at the
time. "For a vessel to be seaworthy, it must be adequately equipped for the voyage and manned
with a sufficient number of competent officers and crew. The failure of a common carrier to maintain
in seaworthy condition its vessel involved in a contract of carriage is a clear breach of its duty
prescribed in Article 1755 of the Civil Code." 16
Neither do we agree with LOADSTAR's argument that the "limited liability" theory should be applied
in this case. The doctrine of limited liability does not apply where there was negligence on the part of
the vessel owner or agent. 17 LOADSTAR was at fault or negligent in not maintaining a seaworthy
vessel and in having allowed its vessel to sail despite knowledge of an approaching typhoon. In any
event, it did not sink because of any storm that may be deemed as force majeure, inasmuch as the
wind condition in the performance of its duties, LOADSTAR cannot hide behind the "limited liability"
doctrine to escape responsibility for the loss of the vessel and its cargo.
LOADSTAR also claims that the Court of Appeals erred in holding it liable for the loss of the goods,
in utter disregard of this Court's pronouncements in St. Paul Fire & Marine Ins. Co. v. Macondray &
Co., Inc., 18 and National Union Fire Insurance v. Stolt-Nielsen Phils., Inc. 19 It was ruled in these two
cases that after paying the claim of the insured for damages under the insurance policy, the insurer
is subrogated merely to the rights of the assured, that is, it can recover only the amount that may, in
turn, be recovered by the latter. Since the right of the assured in case of loss or damage to the
goods is limited or restricted by the provisions in the bills of lading, a suit by the insurer as subrogee
is necessarily subject to the same limitations and restrictions. We do not agree. In the first place, the
cases relied on by LOADSTAR involved a limitation on the carrier's liability to an amount fixed in the
bill of lading which the parties may enter into, provided that the same was freely and fairly agreed
upon (Articles 1749-1750). On the other hand, the stipulation in the case at bar effectively reduces
the common carrier's liability for the loss or destruction of the goods to a degree less than
extraordinary (Articles 1744 and 1745), that is, the carrier is not liable for any loss or damage to
shipments made at "owner's risk." Such stipulation is obviously null and void for being contrary to
public policy." 20 It has been said:
Three kinds of stipulations have often been made in a bill of lading. The first 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 unqualified limitation of
such liability to an agreed valuation. And the 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. According to an almost uniform weight of
authority, the first and second kinds of stipulations are invalid as being contrary
to public policy, but the third is valid and enforceable. 21
14
 Since the stipulation in question is null and void, it follows that when MIC paid the shipper,
it was subrogated to all the rights which the latter has against the common carrier,
LOADSTAR.
Neither is there merit to the contention that the claim in this case was barred by prescription. MIC's
cause of action had not yet prescribed at the time it was concerned. Inasmuch as neither the Civil
Code nor the Code of Commerce states a specific prescriptive period on the matter, the Carriage of
Goods by Sea Act (COGSA) — which provides for a one-year period of limitation on claims for loss
of, or damage to, cargoes sustained during transit — may be applied suppletorily to the case at bar.
This one-year prescriptive period also applies to the insurer of the goods. 22 In this case, the period
for filing the action for recovery has not yet elapsed. Moreover, a stipulation reducing the one-year
period is null and void; 23 it must, accordingly, be struck down.
WHEREFORE, the instant petition is DENIED and the challenged decision of 30 January 1997 of
the Court of Appeals in CA-G.R. CV No. 36401 is AFFIRMED. Costs against petitioner.1âwphi1.nêt
SO ORDERED.
G.R. No. 101503 September 15, 1993
PLANTERS PRODUCTS, INC., petitioner,
vs.
COURT OF APPEALS, SORIAMONT STEAMSHIP AGENCIES AND KYOSEI KISEN KABUSHIKI
KAISHA, respondents.
BELLOSILLO, J.:
Does a charter-party1 between a shipowner and a charterer transform a common carrier into a
private one as to negate the civil law presumption of negligence in case of loss or damage to its
cargo?
Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation (MITSUBISHI) of
New York, U.S.A., 9,329.7069 metric tons (M/T) of Urea 46% fertilizer which the latter shipped in
bulk on 16 June 1974 aboard the cargo vessel M/V "Sun Plum" owned by private respondent Kyosei
Kisen Kabushiki Kaisha (KKKK) from Kenai, Alaska, U.S.A., to Poro Point, San Fernando, La Union,
Philippines, as evidenced by Bill of Lading No. KP-1 signed by the master of the vessel and issued
on the date of departure.
On 17 May 1974, or prior to its voyage, a time charter-party on the vessel M/V "Sun Plum" pursuant
to the Uniform General Charter2 was entered into between Mitsubishi as shipper/charterer and
KKKK as shipowner, in Tokyo, Japan.3 Riders to the aforesaid charter-party starting from par. 16 to
40 were attached to the pre-printed agreement. Addenda Nos. 1, 2, 3 and 4 to the charter-party
were also subsequently entered into on the 18th, 20th, 21st and 27th of May 1974, respectively.
Before loading the fertilizer aboard the vessel, four (4) of her holds 4 were all presumably inspected
by the charterer's representative and found fit to take a load of urea in bulk pursuant to par. 16 of the
charter-party which reads:
16. . . . At loading port, notice of readiness to be accomplished by certificate
from National Cargo Bureau inspector or substitute appointed by charterers for
his account certifying the vessel's readiness to receive cargo spaces. The
vessel's hold to be properly swept, cleaned and dried at the vessel's expense
and the vessel to be presented clean for use in bulk to the satisfaction of the
inspector before daytime commences. (emphasis supplied)
After the Urea fertilizer was loaded in bulk by stevedores hired by and under the supervision of the
shipper, the steel hatches were closed with heavy iron lids, covered with three (3) layers of tarpaulin,
then tied with steel bonds. The hatches remained closed and tightly sealed throughout the entire
voyage.5
Upon arrival of the vessel at her port of call on 3 July 1974, the steel pontoon hatches were opened
with the use of the vessel's boom. Petitioner unloaded the cargo from the holds into its steelbodied
dump trucks which were parked alongside the berth, using metal scoops attached to the ship,
pursuant to the terms and conditions of the charter-partly (which provided for an F.I.O.S.
clause).6 The hatches remained open throughout the duration of the discharge. 7
Each time a dump truck was filled up, its load of Urea was covered with tarpaulin before it was
transported to the consignee's warehouse located some fifty (50) meters from the wharf. Midway to
the warehouse, the trucks were made to pass through a weighing scale where they were individually
weighed for the purpose of ascertaining the net weight of the cargo. The port area was windy,
certain portions of the route to the warehouse were sandy and the weather was variable, raining
occasionally while the discharge was in progress.8 The petitioner's warehouse was made of
corrugated galvanized iron (GI) sheets, with an opening at the front where the dump trucks entered
and unloaded the fertilizer on the warehouse floor. Tarpaulins and GI sheets were placed in-
between and alongside the trucks to contain spillages of the ferilizer.9
It took eleven (11) days for PPI to unload the cargo, from 5 July to 18 July 1974 (except July 12th,
14th and 18th).10 A private marine and cargo surveyor, Cargo Superintendents Company Inc.
(CSCI), was hired by PPI to determine the "outturn" of the cargo shipped, by taking draft readings of
the vessel prior to and after discharge. 11 The survey report submitted by CSCI to the consignee
(PPI) dated 19 July 1974 revealed a shortage in the cargo of 106.726 M/T and that a portion of the
Urea fertilizer approximating 18 M/T was contaminated with dirt. The same results were contained in
a Certificate of Shortage/Damaged Cargo dated 18 July 1974 prepared by PPI which showed that
the cargo delivered was indeed short of 94.839 M/T and about 23 M/T were rendered unfit for
commerce, having been polluted with sand, rust and
dirt. 12
Consequently, PPI sent a claim letter dated 18 December 1974 to Soriamont Steamship Agencies
(SSA), the resident agent of the carrier, KKKK, for P245,969.31 representing the cost of the alleged
shortage in the goods shipped and the diminution in value of that portion said to have been
contaminated with dirt. 13
Respondent SSA explained that they were not able to respond to the consignee's claim for payment
because, according to them, what they received was just a request for shortlanded certificate and
not a formal claim, and that this "request" was denied by them because they "had nothing to do with
the discharge of the shipment." 14 Hence, on 18 July 1975, PPI filed an action for damages with the
Court of First Instance of Manila. The defendant carrier argued that the strict public policy governing
common carriers does not apply to them because they have become private carriers by reason of
the provisions of the charter-party. The court a quo however sustained the claim of the plaintiff
against the defendant carrier for the value of the goods lost or damaged when it ruled thus: 15
. . . Prescinding from the provision of the law that a common carrier is presumed
negligent in case of loss or damage of the goods it contracts to transport, all
that a shipper has to do in a suit to recover for loss or damage is to show
receipt by the carrier of the goods and to delivery by it of less than what it
received. After that, the burden of proving that the loss or damage was due to
any of the causes which exempt him from liability is shipted to the carrier,
common or private he may be. Even if the provisions of the charter-party
aforequoted are deemed valid, and the defendants considered private
15
 carriers, it was still incumbent upon them to prove that the shortage or
contamination sustained by the cargo is attributable to the fault or negligence on
the part of the shipper or consignee in the loading, stowing, trimming and
discharge of the cargo. This they failed to do. By this omission, coupled with
their failure to destroy the presumption of negligence against them, the
defendants are liable (emphasis supplied).
On appeal, respondent Court of Appeals reversed the lower court and absolved the carrier from
liability for the value of the cargo that was lost or damaged. 16 Relying on the 1968 case of Home
Insurance Co. v. American Steamship Agencies, Inc.,17 the appellate court ruled that the cargo
vessel M/V "Sun Plum" owned by private respondent KKKK was a private carrier and not a common
carrier by reason of the time charterer-party. Accordingly, the Civil Code provisions on common
carriers which set forth a presumption of negligence do not find application in the case at bar. Thus
— employment and not as a casual occupation. The distinction between a "common or public carrier"
. . . In the absence of such presumption, it was incumbent upon the plaintiff-
appellee to adduce sufficient evidence to prove the negligence of the defendant
carrier as alleged in its complaint. It is an old and well settled rule that if the
plaintiff, upon whom rests the burden of proving his cause of action, fails to
show in a satisfactory manner the facts upon which he bases his claim, the
defendant is under no obligation to prove his exception or defense
(Moran, Commentaries on the Rules of Court, Volume 6, p. 2, citing Belen v.
Belen, 13 Phil. 202).
But, the record shows that the plaintiff-appellee dismally failed to prove the
basis of its cause of action, i.e. the alleged negligence of defendant carrier. It
appears that the plaintiff was under the impression that it did not have to
establish defendant's negligence. Be that as it may, contrary to the trial court's
finding, the record of the instant case discloses ample evidence showing that
defendant carrier was not negligent in performing its obligation . . . 18 (emphasis
supplied).
Petitioner PPI appeals to us by way of a petition for review assailing the decision of the Court of
Appeals. Petitioner theorizes that the Home Insurance case has no bearing on the present
controversy because the issue raised therein is the validity of a stipulation in the charter-party
delimiting the liability of the shipowner for loss or damage to goods cause by want of due deligence
on its part or that of its manager to make the vessel seaworthy in all respects, and not whether the
presumption of negligence provided under the Civil Code applies only to common carriers and not to
private carriers. 19 Petitioner further argues that since the possession and control of the vessel
remain with the shipowner, absent any stipulation to the contrary, such shipowner should made
liable for the negligence of the captain and crew. In fine, PPI faults the appellate court in not
applying the presumption of negligence against respondent carrier, and instead shifting the onus
probandi on the shipper to show want of due deligence on the part of the carrier, when he was not
even at hand to witness what transpired during the entire voyage.
As earlier stated, the primordial issue here is whether a common carrier becomes a private carrier
by reason of a charter-party; in the negative, whether the shipowner in the instant case was able to
prove that he had exercised that degree of diligence required of him under the law.
It is said that etymology is the basis of reliable judicial decisions in commercial cases. This being so,
we find it fitting to first define important terms which are relevant to our discussion.
A "charter-party" is defined as a contract by which an entire ship, or some principal part thereof, is
let by the owner to another person for a specified time or use; 20 a contract of affreightment by which
the owner of a ship or other vessel lets the whole or a part of her to a merchant or other person for
the conveyance of goods, on a particular voyage, in consideration of the payment of
freight; 21 Charter parties are of two types: (a) contract of affreightment which involves the use of
shipping space on vessels leased by the owner in part or as a whole, to carry goods for others; and,
(b) charter by demise or bareboat charter, by the terms of which the whole vessel is let to the
charterer with a transfer to him of its entire command and possession and consequent control over
its navigation, including the master and the crew, who are his servants. Contract of affreightment
may either be time charter, wherein the vessel is leased to the charterer for a fixed period of time, or
voyage charter, wherein the ship is leased for a single voyage. 22 In both cases, the charter-party
provides for the hire of vessel only, either for a determinate period of time or for a single or
consecutive voyage, the shipowner to supply the ship's stores, pay for the wages of the master and
the crew, and defray the expenses for the maintenance of the ship.
Upon the other hand, the term "common or public carrier" is defined in Art. 1732 of the Civil
Code. 23 The definition extends to carriers either by land, air or water which hold themselves out as
ready to engage in carrying goods or transporting passengers or both for compensation as a public
and a "private or special carrier" lies in the character of the business, such that if the undertaking is
a single transaction, not a part of the general business or occupation, although involving the carriage
of goods for a fee, the person or corporation offering such service is a private carrier. 24
Article 1733 of the New Civil Code mandates that common carriers, by reason of the nature of their
business, should observe extraordinary diligence in the vigilance over the goods they carry. 25 In the
case of private carriers, however, the exercise of ordinary diligence in the carriage of goods will
suffice. Moreover, in the case of loss, destruction or deterioration of the goods, common carriers are
presumed to have been at fault or to have acted negligently, and the burden of proving otherwise
rests on them.26 On the contrary, no such presumption applies to private carriers, for whosoever
alleges damage to or deterioration of the goods carried has the onus of proving that the cause was
the negligence of the carrier.
It is not disputed that respondent carrier, in the ordinary course of business, operates as a common
carrier, transporting goods indiscriminately for all persons. When petitioner chartered the vessel M/V
"Sun Plum", the ship captain, its officers and compliment were under the employ of the shipowner
and therefore continued to be under its direct supervision and control. Hardly then can we charge
the charterer, a stranger to the crew and to the ship, with the duty of caring for his cargo when the
charterer did not have any control of the means in doing so. This is evident in the present case
considering that the steering of the ship, the manning of the decks, the determination of the course
of the voyage and other technical incidents of maritime navigation were all consigned to the officers
and crew who were screened, chosen and hired by the shipowner. 27
It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the
whole or portion of a vessel by one or more persons, provided the charter is limited to the ship only,
as in the case of a time-charter or voyage-charter. It is only when the charter includes both the
vessel and its crew, as in a bareboat or demise that a common carrier becomes private, at least
insofar as the particular voyage covering the charter-party is concerned. Indubitably, a shipowner in
a time or voyage charter retains possession and control of the ship, although her holds may, for the
moment, be the property of the charterer. 28
Respondent carrier's heavy reliance on the case of Home Insurance Co. v. American Steamship
Agencies, supra, is misplaced for the reason that the meat of the controversy therein was the validity
of a stipulation in the charter-party exempting the shipowners from liability for loss due to the
negligence of its agent, and not the effects of a special charter on common carriers. At any rate, the
rule in the United States that a ship chartered by a single shipper to carry special cargo is not a
common carrier, 29 does not find application in our jurisdiction, for we have observed that the
growing concern for safety in the transportation of passengers and /or carriage of goods by sea
requires a more exacting interpretation of admiralty laws, more particularly, the rules governing
common carriers.
We quote with approval the observations of Raoul Colinvaux, the learned barrister-at-law 30 —
16
 As a matter of principle, it is difficult to find a valid distinction between cases in
which a ship is used to convey the goods of one and of several persons. Where
the ship herself is let to a charterer, so that he takes over the charge and control
of her, the case is different; the shipowner is not then a carrier. But where her
services only are let, the same grounds for imposing a strict responsibility exist,
whether he is employed by one or many. The master and the crew are in each
case his servants, the freighter in each case is usually without any
representative on board the ship; the same opportunities for fraud or collusion
occur; and the same difficulty in discovering the truth as to what has taken place
arises . . .
In an action for recovery of damages against a common carrier on the goods shipped, the shipper or
consignee should first prove the fact of shipment and its consequent loss or damage while the same
was in the possession, actual or constructive, of the carrier. Thereafter, the burden of proof shifts to
respondent to prove that he has exercised extraordinary diligence required by law or that the loss,
damage or deterioration of the cargo was due to fortuitous event, or some other circumstances
inconsistent with its liability. 31
To our mind, respondent carrier has sufficiently overcome, by clear and convincing proof, the prima
facie presumption of negligence.
The master of the carrying vessel, Captain Lee Tae Bo, in his deposition taken on 19 April 1977
before the Philippine Consul and Legal Attache in the Philippine Embassy in Tokyo, Japan, testified
that before the fertilizer was loaded, the four (4) hatches of the vessel were cleaned, dried and
fumigated. After completing the loading of the cargo in bulk in the ship's holds, the steel pontoon
hatches were closed and sealed with iron lids, then covered with three (3) layers of serviceable
tarpaulins which were tied with steel bonds. The hatches remained close and tightly sealed while the
ship was in transit as the weight of the steel covers made it impossible for a person to open without
the use of the ship's boom. 32
It was also shown during the trial that the hull of the vessel was in good condition, foreclosing the
possibility of spillage of the cargo into the sea or seepage of water inside the hull of the
vessel. 33 When M/V "Sun Plum" docked at its berthing place, representatives of the consignee
boarded, and in the presence of a representative of the shipowner, the foreman, the stevedores, and
a cargo surveyor representing CSCI, opened the hatches and inspected the condition of the hull of
the vessel. The stevedores unloaded the cargo under the watchful eyes of the shipmates who were
overseeing the whole operation on rotation basis. 34
Verily, the presumption of negligence on the part of the respondent carrier has been efficaciously
overcome by the showing of extraordinary zeal and assiduity exercised by the carrier in the care of
the cargo. This was confirmed by respondent appellate court thus —
. . . Be that as it may, contrary to the trial court's finding, the record of the instant
case discloses ample evidence showing that defendant carrier was not
negligent in performing its obligations. Particularly, the following testimonies of
plaintiff-appellee's own witnesses clearly show absence of negligence by the
defendant carrier; that the hull of the vessel at the time of the discharge of the
cargo was sealed and nobody could open the same except in the presence of
the owner of the cargo and the representatives of the vessel (TSN, 20 July
1977, p. 14); that the cover of the hatches was made of steel and it was overlaid
with tarpaulins, three layers of tarpaulins and therefore their contents were
protected from the weather (TSN, 5 April 1978, p. 24); and, that to open these
hatches, the seals would have to be broken, all the seals were found to be
intact (TSN, 20 July 1977, pp. 15-16) (emphasis supplied).
The period during which private respondent was to observe the degree of diligence required of it as
a public carrier began from the time the cargo was unconditionally placed in its charge after the
vessel's holds were duly inspected and passed scrutiny by the shipper, up to and until the vessel
reached its destination and its hull was reexamined by the consignee, but prior to unloading. This is
clear from the limitation clause agreed upon by the parties in the Addendum to the standard
"GENCON" time charter-party which provided for an F.I.O.S., meaning, that the loading, stowing,
trimming and discharge of the cargo was to be done by the charterer, free from all risk and expense
to the carrier. 35 Moreover, a shipowner is liable for damage to the cargo resulting from improper
stowage only when the stowing is done by stevedores employed by him, and therefore under his
control and supervision, not when the same is done by the consignee or stevedores under the
employ of the latter. 36
Article 1734 of the New Civil Code provides that common carriers are not responsible for the loss,
destruction or deterioration of the goods if caused by the charterer of the goods or defects in the
packaging or in the containers. The Code of Commerce also provides that all losses and
deterioration which the goods may suffer during the transportation by reason of fortuitous
event, force majeure, or the inherent defect of the goods, shall be for the account and risk of the
shipper, and that proof of these accidents is incumbent upon the carrier. 37 The carrier, nonetheless,
shall be liable for the loss and damage resulting from the preceding causes if it is proved, as against
him, that they arose through his negligence or by reason of his having failed to take the precautions
which usage has established among careful persons. 38
Respondent carrier presented a witness who testified on the characteristics of the fertilizer shipped
and the expected risks of bulk shipping. Mr. Estanislao Chupungco, a chemical engineer working
with Atlas Fertilizer, described Urea as a chemical compound consisting mostly of ammonia and
carbon monoxide compounds which are used as fertilizer. Urea also contains 46% nitrogen and is
highly soluble in water. However, during storage, nitrogen and ammonia do not normally evaporate
even on a long voyage, provided that the temperature inside the hull does not exceed eighty (80)
degrees centigrade. Mr. Chupungco further added that in unloading fertilizer in bulk with the use of a
clamped shell, losses due to spillage during such operation amounting to one percent (1%) against
the bill of lading is deemed "normal" or "tolerable." The primary cause of these spillages is the
clamped shell which does not seal very tightly. Also, the wind tends to blow away some of the
materials during the unloading process.
The dissipation of quantities of fertilizer, or its daterioration in value, is caused either by an
extremely high temperature in its place of storage, or when it comes in contact with water. When
Urea is drenched in water, either fresh or saline, some of its particles dissolve. But the salvaged
portion which is in liquid form still remains potent and usable although no longer saleable in its
original market value.
The probability of the cargo being damaged or getting mixed or contaminated with foreign particles
was made greater by the fact that the fertilizer was transported in "bulk," thereby exposing it to the
inimical effects of the elements and the grimy condition of the various pieces of equipment used in
transporting and hauling it.
The evidence of respondent carrier also showed that it was highly improbable for sea water to seep
into the vessel's holds during the voyage since the hull of the vessel was in good condition and her
hatches were tightly closed and firmly sealed, making the M/V "Sun Plum" in all respects seaworthy
to carry the cargo she was chartered for. If there was loss or contamination of the cargo, it was more
likely to have occurred while the same was being transported from the ship to the dump trucks and
finally to the consignee's warehouse. This may be gleaned from the testimony of the marine and
cargo surveyor of CSCI who supervised the unloading. He explained that the 18 M/T of alleged "bar
order cargo" as contained in their report to PPI was just an approximation or estimate made by
them after the fertilizer was discharged from the vessel and segregated from the rest of the cargo.
The Court notes that it was in the month of July when the vessel arrived port and unloaded her
cargo. It rained from time to time at the harbor area while the cargo was being discharged according
to the supply officer of PPI, who also testified that it was windy at the waterfront and along the
shoreline where the dump trucks passed enroute to the consignee's warehouse.
17
Indeed, we agree with respondent carrier that bulk shipment of highly soluble goods like fertilizer
carries with it the risk of loss or damage. More so, with a variable weather condition prevalent during
its unloading, as was the case at bar. This is a risk the shipper or the owner of the goods has to
face. Clearly, respondent carrier has sufficiently proved the inherent character of the goods which
makes it highly vulnerable to deterioration; as well as the inadequacy of its packaging which further
contributed to the loss. On the other hand, no proof was adduced by the petitioner showing that the
carrier was remise in the exercise of due diligence in order to minimize the loss or damage to the
goods it carried.
WHEREFORE, the petition is DISMISSED. The assailed decision of the Court of Appeals, which
reversed the trial court, is AFFIRMED. Consequently, Civil Case No. 98623 of the then Court of the
First Instance, now Regional Trial Court, of Manila should be, as it is hereby DISMISSED.
Costs against petitioner.
SO ORDERED.
G.R. No. 112287 December 12, 1997
NATIONAL STEEL CORPORATION, petitioner,
vs.
COURT OF APPEALS AND VLASONS SHIPPING, INC., respondents.
G.R. No. 112350 December 12, 1997
VLASONS SHIPPING, INC., petitioner,
vs.
COURT OF APPEALS AND NATIONAL STEEL CORPORATION, respondents.
PANGANIBAN, J.:
The Court finds occasion to apply the rules on the seaworthiness of private carrier, its owner's
responsibility for damage to the cargo and its liability for demurrage and attorney's fees. The Court
also reiterates the well-known rule that findings of facts of trial courts, when affirmed by the Court of
Appeals, are binding on this Court.
The Case
Before us are two separate petitions for review filed by National Steel Corporation (NSC) and
Vlasons Shipping, Inc. (VSI), both of which assail the August 12, 1993 Decision of the Court of
Appeals.1 The Court of Appeals modified the decision of the Regional Trial Court of Pasig, Metro
Manila, Branch 163 in Civil Case No. 23317. The RTC disposed as follows:
WHEREFORE, judgment is hereby rendered in favor of defendant and against the plaintiff
dismissing the complaint with cost against plaintiff, and ordering plaintiff to pay the
defendant on the counterclaim as follows:
1. The sum of P75,000.00 as unpaid freight and P88,000.00 as demurrage with interest at
the legal rate on both amounts from April 7, 1976 until the same shall have been fully
paid;
2. Attorney's fees and expenses of litigation in the sum of P100,000.00; and
3. Costs of suit.
SO ORDERED.2
On the other hand, the Court of Appeals ruled:
WHEREFORE, premises considered, the decision appealed from is modified by reducing
the award for demurrage to P44,000.00 and deleting the award for attorney's fees and
expenses of litigation. Except as thus modified, the decision is AFFIRMED. There is no
pronouncement as to costs.
SO ORDERED.3
The Facts
The MV Vlasons I is a vessel which renders tramping service and, as such, does not transport cargo
or shipment for the general public. Its services are available only to specific persons who enter into a
special contract of charter party with its owner. It is undisputed that the ship is a private carrier. And
it is in the capacity that its owner, Vlasons Shipping, Inc., entered into a contract of affreightment or
contract of voyage charter hire with National Steel Corporation.
The facts as found by Respondent Court of Appeals are as follows:
(1) On July 17, 1974, plaintiff National Steel Corporation (NSC) as Charterer and
defendant Vlasons Shipping, Inc. (VSI) as Owner, entered into a Contract of Voyage
Charter Hire (Exhibit "B"; also Exhibit "1") whereby NSC hired VSI's vessel, the MV
"VLASONS I" to make one (1) voyage to load steel products at Iligan City and discharge
them at North Harbor, Manila, under the following terms and conditions, viz:
1. . . .
2. Cargo: Full cargo of steel products of not less than 2,500 MT, 10% more or less at
Master's option.
3. . . .
4. Freight/Payment: P30.00/metric ton, FIOST basis. Payment upon presentation of Bill of
Lading within fifteen (15) days.
5. Laydays/Cancelling: July 26, 1974/Aug. 5, 1974.
6. Loading/Discharging Rate: 750 tons per WWDSHINC. (Weather Working Day of 24
consecutive hours, Sundays and Holidays Included).
7. Demurrage/Dispatch: P8,000.00/P4,000.00 per day.
8. . . .
9. Cargo Insurance: Charterer's and/or Shipper's must insure the cargoes. Shipowners not
responsible for losses/damages except on proven willful negligence of the officers of the
vessel.
10. Other terms: (a) All terms/conditions of NONYAZAI C/P [sic] or other internationally
recognized Charter Party Agreement shall form part of this Contract.
18
 xxx xxx xxx
The terms "F.I.O.S.T." which is used in the shipping business is a standard provision in
the NANYOZAI Charter Party which stands for "Freight In and Out including Stevedoring
and Trading", which means that the handling, loading and unloading of the cargoes are
the responsibility of the Charterer. Under Paragraph 5 of the NANYOZAI Charter Party, it
states, "Charterers to load, stow and discharge the cargo free of risk and expenses to
owners. . . . (Emphasis supplied).
Under paragraph 10 thereof, it is provided that "(o)wners shall, before and at the
beginning of the voyage, exercise due diligence to make the vessel seaworthy and
properly manned, equipped and supplied and to make the holds and all other parts of the
vessel in which cargo is carried, fit and safe for its reception, carriage and preservation.
Owners shall not be liable for loss of or damage of the cargo arising or resulting from:
unseaworthiness unless caused by want of due diligence on the part of the owners to
make the vessel seaworthy, and to secure that the vessel is properly manned, equipped
and supplied and to make the holds and all other parts of the vessel in which cargo is
carried, fit and safe for its reception, carriage and preservation; . . . ; perils, dangers and
accidents of the sea or other navigable waters; . . . ; wastage in bulk or weight or any
other loss or damage arising from inherent defect, quality or vice of the cargo;
insufficiency of packing; . . . ; latent defects not discoverable by due diligence; any other
cause arising without the actual fault or privity of Owners or without the fault of the agents
or servants of owners."
Paragraph 12 of said NANYOZAI Charter Party also provides that "(o)wners shall not be
responsible for split, chafing and/or any damage unless caused by the negligence or
default of the master and crew."
(2) On August 6, 7 and 8, 1974, in accordance with the Contract of Voyage Charter Hire,
the MV "VLASONS I" loaded at plaintiffs pier at Iligan City, the NSC's shipment of 1,677
skids of tinplates and 92 packages of hot rolled sheets or a total of 1,769 packages with a
total weight of about 2,481.19 metric tons for carriage to Manila. The shipment was placed
in the three (3) hatches of the ship. Chief Mate Gonzalo Sabando, acting as agent of the
vessel[,] acknowledged receipt of the cargo on board and signed the corresponding bill of
lading, B.L.P.P. No. 0233 (Exhibit "D") on August 8, 1974.
(3) The vessel arrived with the cargo at Pier 12, North Harbor, Manila, on August 12,
1974. The following day, August 13, 1974, when the vessel's three (3) hatches containing
the shipment were opened by plaintiff's agents, nearly all the skids of tinplates and hot
rolled sheets were allegedly found to be wet and rusty. The cargo was discharged and
unloaded by stevedores hired by the Charterer. Unloading was completed only on August
24, 1974 after incurring a delay of eleven (11) days due to the heavy rain which
interrupted the unloading operations. (Exhibit "E")
(4) To determine the nature and extent of the wetting and rusting, NSC called for a survey
of the shipment by the Manila Adjusters and Surveyors Company (MASCO). In a letter to
the NSC dated March 17, 1975 (Exhibit "G"), MASCO made a report of its ocular
inspection conducted on the cargo, both while it was still on board the vessel and later at
the NDC warehouse in Pureza St., Sta. Mesa, Manila where the cargo was taken and
stored. MASCO reported that it found wetting and rusting of the packages of hot rolled
sheets and metal covers of the tinplates; that tarpaulin hatch covers were noted torn at
various extents; that container/metal casings of the skids were rusting all over. MASCO
ventured the opinion that "rusting of the tinplates was caused by contact with SEA
WATER sustained while still on board the vessel as a consequence of the heavy weather
and rough seas encountered while en route to destination (Exhibit "F"). It was also
reported that MASCO's surveyors drew at random samples of bad order packing materials
of the tinplates and delivered the same to the M.I.T. Testing Laboratories for analysis. On
August 31, 1974, the M.I.T. Testing Laboratories issued Report No. 1770 (Exhibit "I")
which in part, states, "The analysis of bad order samples of packing materials . . . shows
that wetting was caused by contact with SEA WATER".
(5) On September 6, 1974, on the basis of the aforesaid Report No. 1770, plaintiff filed
with the defendant its claim for damages suffered due to the downgrading of the damaged
tinplates in the amount of P941,145.18. Then on October 3, 1974, plaintiff formally
demanded payment of said claim but defendant VSI refused and failed to pay. Plaintiff
filed its complaint against defendant on April 21, 1976 which was docketed as Civil Case
No. 23317, CFI, Rizal.
(6) In its complaint, plaintiff claimed that it sustained losses in the aforesaid amount of
P941,145.18 as a result of the act, neglect and default of the master and crew in the
management of the vessel as well as the want of due diligence on the part of the
defendant to make the vessel seaworthy and to make the holds and all other parts of the
vessel in which the cargo was carried, fit and safe for its reception, carriage and
preservation — all in violation of defendant's undertaking under their Contract of Voyage
Charter Hire.
(7) In its answer, defendant denied liability for the alleged damage claiming that the MV
"VLASONS I" was seaworthy in all respects for the carriage of plaintiff's cargo; that said
vessel was not a "common carrier" inasmuch as she was under voyage charter contract
with the plaintiff as charterer under the charter party; that in the course of the voyage from
Iligan City to Manila, the MV "VLASONS I" encountered very rough seas, strong winds
and adverse weather condition, causing strong winds and big waves to continuously
pound against the vessel and seawater to overflow on its deck and hatch covers, that
under the Contract of Voyage Charter Hire, defendant shall not be responsible for
losses/damages except on proven willful negligence of the officers of the vessel, that the
officers of said MV "VLASONS I" exercised due diligence and proper seamanship and
were not willfully negligent; that furthermore the Voyage Charter Party provides that
loading and discharging of the cargo was on FIOST terms which means that the vessel
was free of risk and expense in connection with the loading and discharging of the cargo;
that the damage, if any, was due to the inherent defect, quality or vice of the cargo or to
the insufficient packing thereof or to latent defect of the cargo not discoverable by due
diligence or to any other cause arising without the actual fault or privity of defendant and
without the fault of the agents or servants of defendant; consequently, defendant is not
liable; that the stevedores of plaintiff who discharged the cargo in Manila were negligent
and did not exercise due care in the discharge of the cargo; land that the cargo was
exposed to rain and seawater spray while on the pier or in transit from the pier to plaintiff's
warehouse after discharge from the vessel; and that plaintiff's claim was highly
speculative and grossly exaggerated and that the small stain marks or sweat marks on the
edges of the tinplates were magnified and considered total loss of the cargo. Finally,
defendant claimed that it had complied with all its duties and obligations under the Voyage
Charter Hire Contract and had no responsibility whatsoever to plaintiff. In turn, it alleged
the following counterclaim:
(a) That despite the full and proper performance by defendant of its
obligations under the Voyage Charter Hire Contract, plaintiff failed
and refused to pay the agreed charter hire of P75,000.00 despite
demands made by defendant;
(b) That under their Voyage Charter Hire Contract, plaintiff had
agreed to pay defendant the sum of P8,000.00 per day for
demurrage. The vessel was on demurrage for eleven (11) days in
Manila waiting for plaintiff to discharge its cargo from the vessel.
Thus, plaintiff was liable to pay defendant demurrage in the total
amount of P88,000.00.
19
 (c) For filing a clearly unfounded civil action against defendant,
plaintiff should be ordered to pay defendant attorney's fees and all
expenses of litigation in the amount of not less than P100,000.00.
(8) From the evidence presented by both parties, the trial court came out with the
following findings which were set forth in its decision:
(a) The MV "VLASONS I" is a vessel of Philippine registry engaged in
the tramping service and is available for hire only under special
contracts of charter party as in this particular case.
(b) That for purposes of the voyage covered by the Contract of
Voyage Charter Hire (Exh. "1"), the MV VLASONS I" was covered by
the required seaworthiness certificates including the Certification of
Classification issued by an international classification society, the
NIPPON KAIJI KYOKAI (Exh. "4"); Coastwise License from the Board
of Transportation (Exh. "5"); International Loadline Certificate from the
Philippine Coast Guard (Exh. "6"); Cargo Ship Safety Equipment
Certificate also from the Philippine Coast Guard (Exh. "7"); Ship
Radio Station License (Exh. "8"); Certificate of Inspection by the
Philippine Coast Guard (Exh. "12"); and Certificate of Approval for
Conversion issued by the Bureau of Customs (Exh. "9"). That being a
vessel engaged in both overseas and coastwise trade, the MV
"VLASONS I" has a higher degree of seaworthiness and safety.
(c) Before it proceeded to Iligan City to perform the voyage called for
by the Contract of Voyage Charter Hire, the MV "VLASONS I"
underwent drydocking in Cebu and was thoroughly inspected by the
Philippine Coast Guard. In fact, subject voyage was the vessel's first
voyage after the drydocking. The evidence shows that the MV
"VLASONS I" was seaworthy and properly manned, equipped and
supplied when it undertook the voyage. It has all the required
certificates of seaworthiness.
(d) The cargo/shipment was securely stowed in three (3) hatches of
the ship. The hatch openings were covered by hatchboards which
were in turn covered by two or double tarpaulins. The hatch covers
were water tight. Furthermore, under the hatchboards were steel
beams to give support.
(e) The claim of the plaintiff that defendant violated the contract of
carriage is not supported by evidence. The provisions of the Civil
Code on common carriers pursuant to which there exists a
presumption of negligence in case of loss or damage to the cargo are
not applicable. As to the damage to the tinplates which was allegedly
due to the wetting and rusting thereof, there is unrebutted testimony
of witness Vicente Angliongto that tinplates "sweat" by themselves
when packed even without being in contract (sic) with water from
outside especially when the weather is bad or raining. The trust
caused by sweat or moisture on the tinplates may be considered as a
loss or damage but then, defendant cannot be held liable for it
pursuant to Article 1734 of the Civil Case which exempts the carrier
from responsibility for loss or damage arising from the "character of
the goods . . ." All the 1,769 skids of the tinplates could not have been
damaged by water as claimed by plaintiff. It was shown as claimed by
plaintiff that the tinplates themselves were wrapped in kraft paper
lining and corrugated cardboards could not be affected by water from
outside.
(f) The stevedores hired by the plaintiff to discharge the cargo of
tinplates were negligent in not closing the hatch openings of the MV
"VLASONS I" when rains occurred during the discharging of the cargo
thus allowing rainwater to enter the hatches. It was proven that the
stevedores merely set up temporary tents to cover the hatch
openings in case of rain so that it would be easy for them to resume
work when the rains stopped by just removing the tent or canvas.
Because of this improper covering of the hatches by the stevedores
during the discharging and unloading operations which were
interrupted by rains, rainwater drifted into the cargo through the hatch
openings. Pursuant to paragraph 5 of the NANYOSAI [sic] Charter
Party which was expressly made part of the Contract of Voyage
Charter Hire, the loading, stowing and discharging of the cargo is the
sole responsibility of the plaintiff charterer and defendant carrier has
no liability for whatever damage may occur or maybe [sic] caused to
the cargo in the process.
(g) It was also established that the vessel encountered rough seas
and bad weather while en route from Iligan City to Manila causing sea
water to splash on the ship's deck on account of which the master of
the vessel (Mr. Antonio C. Dumlao) filed a "Marine Protest" on August
13, 1974 (Exh. "15"); which can be invoked by defendant as a force
majeure that would exempt the defendant from liability.
(h) Plaintiff did not comply with the requirement prescribed in
paragraph 9 of the Voyage Charter Hire contract that it was to insure
the cargo because it did not. Had plaintiff complied with the
requirement, then it could have recovered its loss or damage from the
insurer. Plaintiff also violated the charter party contract when it loaded
not only "steel products", i.e. steel bars, angular bars and the like but
also tinplates and hot rolled sheets which are high grade cargo
commanding a higher freight. Thus plaintiff was able to ship grade
cargo at a lower freight rate.
(i) As regards defendant's counterclaim, the contract of voyage
charter hire under Paragraph 4 thereof, fixed the freight at P30.00 per
metric ton payable to defendant carrier upon presentation of the bill of
lading within fifteen (15) days. Plaintiff has not paid the total freight
due of P75,000.00 despite demands. The evidence also showed that
the plaintiff was required and bound under paragraph 7 of the same
Voyage Charter Hire contract to pay demurrage of P8,000.00 per day
of delay in the unloading of the cargoes. The delay amounted to
eleven (11) days thereby making plaintiff liable to pay defendant for
demurrage in the amount of P88,000.00.
Appealing the RTC decision to the Court of Appeals, NSC alleged six errors:
I
The trial court erred in finding that the MV "VLASONS I" was seaworthy, properly manned,
equipped and supplied, and that there is no proof of willful negligence of the vessel's
officers.
II
20
 The trial court erred in finding that the rusting of NSC's tinplates was due to the inherent 3. Whether or not NSC's cargo of tinplates did sweat during the voyage and, hence,
nature or character of the goods and not due to contact with seawater. rusted on their own; and

III 4. Whether or not NSC's stevedores were negligent and caused the wetting[/]rusting of
NSC's tinplates.
The trial court erred in finding that the stevedores hired by NSC were negligent in the
unloading of NSC's shipment. In its separate petition,9 VSI submits for the consideration of this Court the following alleged errors of
the CA:
IV
A. The respondent Court of Appeals committed an error of law in reducing the award of
demurrage from P88,000.00 to P44,000.00.
The trial court erred in exempting VSI from liability on the ground of force majeure.

B. The respondent Court of Appeals committed an error of law in deleting the award of
V
P100,000 for attorney's fees and expenses of litigation.

The trial court erred in finding that NSC violated the contract of voyage charter hire.
Amplifying the foregoing, VSI raises the following issues in its memorandum: 10

VI
I. Whether or not the provisions of the Civil Code of the Philippines on common carriers
pursuant to which there exist[s] a presumption of negligence against the common carrier
The trial court erred in ordering NSC to pay freight, demurrage and attorney's fees, to in case of loss or damage to the cargo are applicable to a private carrier.
VSI.4
II. Whether or not the terms and conditions of the Contract of Voyage Charter Hire,
As earlier stated, the Court of Appeals modified the decision of the trial court by reducing the including the Nanyozai Charter, are valid and binding on both contracting parties.
demurrage from P88,000.00 to P44,000.00 and deleting the award of attorneys fees and expenses
of litigation. NSC and VSI filed separate motions for reconsideration. In a Resolution5 dated October
The foregoing issues raised by the parties will be discussed under the following headings:
20, 1993, the appellate court denied both motions. Undaunted, NSC and VSI filed their respective
petitions for review before this Court. On motion of VSI, the Court ordered on February 14, 1994 the
consolidation of these petitions.6 1. Questions of Fact

The Issues 2. Effect of NSC's Failure to Insure the Cargo

In its petition7 and memorandum,8 NSC raises the following questions of law and fact: 3. Admissibility of Certificates Proving Seaworthiness

Questions of Law 4. Demurrage and Attorney's Fees.

1. Whether or not a charterer of a vessel is liable for demurrage due to cargo unloading The Court's Ruling
delays caused by weather interruption;
The Court affirms the assailed Decision of the Court of Appeals, except in respect of the demurrage.
2. Whether or not the alleged "seaworthiness certificates" (Exhibits "3", "4", "5", "6", "7",
"8", "9", "11" and "12") were admissible in evidence and constituted evidence of the
Preliminary Matter: Common Carrier or Private Carrier?
vessel's seaworthiness at the beginning of the voyages; and

At the outset, it is essential to establish whether VSI contracted with NSC as a common carrier or as
3. Whether or not a charterer's failure to insure its cargo exempts the shipowner from
a private carrier. The resolution of this preliminary question determines the law, standard of
liability for cargo damage.
diligence and burden of proof applicable to the present case.

Questions of Fact
Article 1732 of the Civil Code defines a common carrier as "persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers or goods or both, by
1. Whether or not the vessel was seaworthy and cargo-worthy; land, water, or air, for compensation, offering their services to the public." It has been held that the
true test of a common carrier is the carriage of passengers or goods, provided it has space,
for all who opt to avail themselves of its transportation service for a fee. 11 A carrier which does not
2. Whether or not vessel's officers and crew were negligent in handling and caring for
qualify under the above test is deemed a private carrier. "Generally, private carriage is undertaken
NSC's cargo;
by special agreement and the carrier does not hold himself out to carry goods for the general public.
The most typical, although not the only form of private carriage, is the charter party, a maritime
21
contract by which the charterer, a party other than the shipowner, obtains the use and service of all
or some part of a ship for a period of time or a voyage or voyages."12
In the instant case, it is undisputed that VSI did not offer its services to the general public. As found
by the Regional Trial Court, it carried passengers or goods only for those it chose under a "special
contract of charter party." 13 As correctly concluded by the Court of Appeals, the MV Vlasons I "was
not a common but a private carrier."14 Consequently, the rights and obligations of VSI and NSC,
including their respective liability for damage to the cargo, are determined primarily by stipulations in
their contract of private carriage or charter party.15 Recently, in Valenzuela Hardwood and Industrial
Supply, Inc., vs. Court of Appeals and Seven Brothers Shipping Corporation,16 the Court ruled:
. . . in a contract of private carriage, the parties may freely stipulate their duties and
obligations which perforce would be binding on them. Unlike in a contract involving a
common carrier, private carriage does not involve the general public. Hence, the stringent
provisions of the Civil Code on common carriers protecting the general public cannot
justifiably be applied to a ship transporting commercial goods as a private carrier.
Consequently, the public policy embodied therein is not contravened by stipulations in a
charter party that lessen or remove the protection given by law in contracts involving
common carriers.17
Extent of VSI's Responsibility and
Liability Over NSC's Cargo
It is clear from the parties' Contract of Voyage Charter Hire, dated July 17, 1974, that VSI "shall not
be responsible for losses except on proven willful negligence of the officers of the vessel." The
NANYOZAI Charter Party, which was incorporated in the parties' contract of transportation further
provided that the shipowner shall not be liable for loss of or a damage to the cargo arising or
resulting from unseaworthiness, unless the same was caused by its lack of due diligence to make
the vessel seaworthy or to ensure that the same was "properly manned, equipped and supplied,"
and to "make the holds and all other parts of the vessel in which cargo [was] carried, fit and safe for
its reception, carriage and preservation."18 The NANYOZAI Charter Party also provided that
"[o]wners shall not be responsible for split, chafing and/or any damage unless caused by the
negligence or default of the master or crew."19
Burden of Proof
In view of the aforementioned contractual stipulations, NSC must prove that the damage to its
shipment was caused by VSI's willful negligence or failure to exercise due diligence in making MV
Vlasons I seaworthy and fit for holding, carrying and safekeeping the cargo. Ineluctably, the burden
of proof was placed on NSC by the parties' agreement.
This view finds further support in the Code of Commerce which pertinently provides:
Art. 361. Merchandise shall be transported at the risk and venture of the shipper, if the
contrary has not been expressly stipulated.
Therefore, the damage and impairment suffered by the goods during the transportation,
due to fortuitous event, force majeure, or the nature and inherent defect of the things,
shall be for the account and risk of the shipper.
The burden of proof of these accidents is on the carrier.
Art. 362. The carrier, however, shall be liable for damages arising from the cause
mentioned in the preceding article if proofs against him show that they occurred on
account of his negligence or his omission to take the precautions usually adopted by
careful persons, unless the shipper committed fraud in the bill of lading, making him to
believe that the goods were of a class or quality different from what they really were.
Because the MV Vlasons I was a private carrier, the shipowner's obligations are governed by the
foregoing provisions of the Code of Commerce and not by the Civil Code which, as a general rule,
places the prima facie presumption of negligence on a common carrier. It is a hornbook doctrine
that:
In an action against a private carrier for loss of, or injury to, cargo, the burden is on the
plaintiff to prove that the carrier was negligent or unseaworthy, and the fact that the goods
were lost or damaged while in the carrier's custody does not put the burden of proof on
the carrier.
Since . . . a private carrier is not an insurer but undertakes only to exercise due care in the
protection of the goods committed to its care, the burden of proving negligence or a
breach of that duty rests on plaintiff and proof of loss of, or damage to, cargo while in the
carrier's possession does not cast on it the burden of proving proper care and diligence on
its part or that the loss occurred from an excepted cause in the contract or bill of lading.
However, in discharging the burden of proof, plaintiff is entitled to the benefit of the
presumptions and inferences by which the law aids the bailor in an action against a bailee,
and since the carrier is in a better position to know the cause of the loss and that it was
not one involving its liability, the law requires that it come forward with the information
available to it, and its failure to do so warrants an inference or presumption of its liability.
However, such inferences and presumptions, while they may affect the burden of coming
forward with evidence, do not alter the burden of proof which remains on plaintiff, and,
where the carrier comes forward with evidence explaining the loss or damage, the burden
of going forward with the evidence is again on plaintiff.
Where the action is based on the shipowner's warranty of seaworthiness, the burden of
proving a breach thereof and that such breach was the proximate cause of the damage
rests on plaintiff, and proof that the goods were lost or damaged while in the carrier's
possession does not cast on it the burden of proving seaworthiness. . . . Where the
contract of carriage exempts the carrier from liability for unseaworthiness not discoverable
by due diligence, the carrier has the preliminary burden of proving the exercise of due
diligence to make the vessel seaworthy.20
In the instant case, the Court of Appeals correctly found the NSC "has not taken the correct position
in relation to the question of who has the burden of proof. Thus, in its brief (pp. 10-11), after citing
Clause 10 and Clause 12 of the NANYOZAI Charter Party (incidentally plaintiff-appellant's [NSC's]
interpretation of Clause 12 is not even correct), it argues that 'a careful examination of the evidence
will show that VSI miserably failed to comply with any of these obligation's as if defendant-appellee
[VSI] had the burden of
proof."21
First Issue: Questions of Fact
Based on the foregoing, the determination of the following factual questions is manifestly relevant:
(1) whether VSI exercised due diligence in making MV Vlasons I seaworthy for the intended purpose
under the charter party; (2) whether the damage to the cargo should be attributed to the willful
negligence of the officers and crew of the vessel or of the stevedores hired by NSC; and (3) whether
the rusting of the tinplates was caused by its own "sweat" or by contact with seawater.
These questions of fact were threshed out and decided by the trial court, which had the firsthand
opportunity to hear the parties' conflicting claims and to carefully weigh their respective evidence.
The findings of the trial court were subsequently affirmed by the Court of Appeals. Where the factual
findings of both the trial court and the Court of Appeals coincide, the same are binding on this
22
Court.22 We stress that, subject to some exceptional instances,23 only questions of law — not And the relevant portions of Jose Pascua's deposition are as follows:
questions of fact — may be raised before this Court in a petition for review under Rule 45 of the
Rules of Court. After a thorough review of the case at bar, we find no reason to disturb the lower
q What is the purpose of the canvas cover?
court's factual findings, as indeed NSC has not successfully proven the application of any of the
aforecited exceptions.
a So that the cargo would not be soaked with water.
Was MV Vlasons I Seaworthy?
q And will you describe how the canvas cover was secured on the hatch opening?
In any event, the records reveal that VSI exercised due diligence to make the ship seaworthy and fit
for the carriage of NSC's cargo of steel and tinplates. This is shown by the fact that it was drylocked WITNESS
and inspected by the Philippine Coast Guard before it proceeded to Iligan City for its voyage to
Manila under the contract of voyage charter hire.24 The vessel's voyage from Iligan to Manila was
the vessel's first voyage after drydocking. The Philippine Coast Guard Station in Cebu cleared it a It was placed flat on top of the hatch cover, with a little canvas flowing over the sides and we
place[d] a flat bar over the canvas on the side of the hatches and then we place[d] a stopper so that
as seaworthy, fitted and equipped; it met all requirements for trading as cargo vessel.25 The Court of
Appeals itself sustained the conclusion of the trial court that MV Vlasons I was seaworthy. We find the canvas could not be removed.
no reason to modify or reverse this finding of both the trial and the appellate courts.
ATTY DEL ROSARIO
Who Were Negligent:
Seamen or Stevedores? q And will you tell us the size of the hatch opening? The length and the width of the hatch opening.

As noted earlier, the NSC had the burden of proving that the damage to the cargo was caused by a Forty-five feet by thirty-five feet, sir.
the negligence of the officers and the crew of MV Vlasons I in making their vessel seaworthy and fit
for the carriage of tinplates. NSC failed to discharge this burden.
xxx xxx xxx

Before us, NSC relies heavily on its claim that MV Vlasons I had used an old and torn tarpaulin or
canvas to cover the hatches through which the cargo was loaded into the cargo hold of the ship. It q How was the canvas supported in the middle of the hatch opening?
faults the Court of Appeals for failing to consider such claim as an "uncontroverted fact" 26 and denies
that MV Vlasons I "was equipped with new canvas covers in tandem with the old ones as indicated a There is a hatch board.
in the Marine Protest . . ."27 We disagree.
ATTY DEL ROSARIO
The records sufficiently support VSI's contention that the ship used the old tarpaulin, only in addition
to the new one used primarily to make the ship's hatches watertight. The foregoing are clear from
the marine protest of the master of the MV Vlasons I, Antonio C. Dumlao, and the deposition of the q What is the hatch board made of?
ship's boatswain, Jose Pascua. The salient portions of said marine protest read:
a It is made of wood, with a handle.
. . . That the M/V "VLASONS I" departed Iligan City or about 0730 hours of August 8,
1974, loaded with approximately 2,487.9 tons of steel plates and tin plates consigned to q And aside from the hatch board, is there any other material there to cover the hatch?
National Steel Corporation; that before departure, the vessel was rigged, fully equipped
and cleared by the authorities; that on or about August 9, 1974, while in the vicinity of the
western part of Negros and Panay, we encountered very rough seas and strong winds a There is a beam supporting the hatch board.
and Manila office was advised by telegram of the adverse weather conditions
encountered; that in the morning of August 10, 1974, the weather condition changed to q What is this beam made of?
worse and strong winds and big waves continued pounding the vessel at her port side
causing sea water to overflow on deck andhatch (sic) covers and which caused the first
layer of the canvass covering to give way while the new canvass covering still holding on; a It is made of steel, sir.

That the weather condition improved when we reached Dumali Point protected by q Is the beam that was placed in the hatch opening covering the whole hatch opening?
Mindoro; that we re-secured the canvass covering back to position; that in the afternoon of
August 10, 1974, while entering Maricaban Passage, we were again exposed to moderate a No, sir.
seas and heavy rains; that while approaching Fortune Island, we encountered again rough
seas, strong winds and big waves which caused the same canvass to give way and
leaving the new canvass holding on; q How many hatch beams were there placed across the opening?

xxx xxx xxx 28 a There are five beams in one hatch opening.

ATTY DEL ROSARIO

23
q And on top of the beams you said there is a hatch board. How many pieces of wood are put on
top?
a Plenty, sir, because there are several pieces on top of the hatch beam.
q And is there a space between the hatch boards?
a There is none, sir.
q They are tight together?
a Yes, sir.
q How tight?
a Very tight, sir.
q Now, on top of the hatch boards, according to you, is the canvass cover. How many canvas
covers?
a Two, sir.29
That due diligence was exercised by the officers and the crew of the MV Vlasons I was further
demonstrated by the fact that, despite encountering rough weather twice, the new tarpaulin did not
give way and the ship's hatches and cargo holds remained waterproof. As aptly stated by the Court
of Appeals, ". . . we find no reason not to sustain the conclusion of the lower court based on
overwhelming evidence, that the MV 'VLASONS I' was seaworthy when it undertook the voyage on
August 8, 1974 carrying on board thereof plaintiff-appellant's shipment of 1,677 skids of tinplates
and 92 packages of hot rolled sheets or a total of 1,769 packages from NSC's pier in Iligan City
arriving safely at North Harbor, Port Area, Manila, on August 12, 1974; . . . 30
Indeed, NSC failed to discharge its burden to show negligence on the part of the officers and the
crew of MV Vlasons I. On the contrary, the records reveal that it was the stevedores of NSC who
were negligent in unloading the cargo from the ship.
The stevedores employed only a tent-like material to cover the hatches when strong rains
occasioned by a passing typhoon disrupted the unloading of the cargo. This tent-like covering,
however, was clearly inadequate for keeping rain and seawater away from the hatches of the ship.
Vicente Angliongto, an officer of VSI, testified thus:
ATTY ZAMORA:
Q Now, during your testimony on November 5, 1979, you stated on August 14 you went on board
the vessel upon notice from the National Steel Corporation in order to conduct the inspection of the
cargo. During the course of the investigation, did you chance to see the discharging operation?
WITNESS:
A Yes, sir, upon my arrival at the vessel, I saw some of the tinplates already discharged on the pier
but majority of the tinplates were inside the hall, all the hatches were opened.
Q In connection with these cargoes which were unloaded, where is the place.
A At the Pier.
Q What was used to protect the same from weather?
ATTY LOPEZ:
We object, your Honor, this question was already asked. This particular matter . . . the transcript of
stenographic notes shows the same was covered in the direct examination.
ATTY ZAMORA:
Precisely, your Honor, we would like to go on detail, this is the serious part of the testimony.
COURT:
All right, witness may answer.
ATTY LOPEZ:
Q What was used in order to protect the cargo from the weather?
A A base of canvas was used as cover on top of the tin plates, and tents were built at the opening of
the hatches.
Q You also stated that the hatches were already opened and that there were tents constructed at
the opening of the hatches to protect the cargo from the rain. Now, will you describe [to] the Court
the tents constructed.
A The tents are just a base of canvas which look like a tent of an Indian camp raise[d] high at the
middle with the whole side separated down to the hatch, the size of the hatch and it is soaks [sic] at
the middle because of those weather and this can be used only to temporarily protect the cargo from
getting wet by rains.
Q Now, is this procedure adopted by the stevedores of covering tents proper?
A No, sir, at the time they were discharging the cargo, there was a typhoon passing by and the
hatch tent was not good enough to hold all of it to prevent the water soaking through the canvass
and enter the cargo.
Q In the course of your inspection, Mr. Anglingto [sic], did you see in fact the water enter and soak
into the canvass and tinplates.
A Yes, sir, the second time I went there, I saw it.
Q As owner of the vessel, did you not advise the National Steel Corporation [of] the procedure
adopted by its stevedores in discharging the cargo particularly in this tent covering of the hatches?
A Yes, sir, I did the first time I saw it, I called the attention of the stevedores but the stevedores did
not mind at all, so, called the attention of the representative of the National Steel but nothing was
done, just the same. Finally, I wrote a letter to them.31
24
NSC attempts to discredit the testimony of Angliongto by questioning his failure to complain
immediately about the stevedores' negligence on the first day of unloading, pointing out that he
wrote his letter to petitioner only seven days later.32 The Court is not persuaded. Angliongto's candid
answer in his aforequoted testimony satisfactorily explained the delay. Seven days lapsed because
he first called the attention of the stevedores, then the NSC's representative, about the negligent
and defective procedure adopted in unloading the cargo. This series of actions constitutes a
reasonable response in accord with common sense and ordinary human experience. Vicente
Angliongto could not be blamed for calling the stevedores' attention first and then the NSC's
representative on location before formally informing NSC of the negligence he had observed,
because he was not responsible for the stevedores or the unloading operations. In fact, he was
merely expressing concern for NSC which was ultimately responsible for the stevedores it had hired
and the performance of their task to unload the cargo.
We see no reason to reverse the trial and the appellate courts' findings and conclusions on this
point, viz:
In the THIRD assigned error, [NSC] claims that the trial court erred in finding that the
stevedores hired by NSC were negligent in the unloading of NSC's shipment. We do not
think so. Such negligence according to the trial court is evident in the stevedores hired by
[NSC], not closing the hatch of MV 'VLASONS I' when rains occurred during the
discharging of the cargo thus allowing rain water and seawater spray to enter the hatches
and to drift to and fall on the cargo. It was proven that the stevedores merely set up
temporary tents or canvas to cover the hatch openings when it rained during the
unloading operations so that it would be easier for them to resume work after the rains
stopped by just removing said tents or canvass. It has also been shown that on August
20, 1974, VSI President Vicente Angliongto wrote [NSC] calling attention to the manner
the stevedores hired by [NSC] were discharging the cargo on rainy days and the improper
closing of the hatches which allowed continuous heavy rain water to leak through and drip
to the tinplates' covers and [Vicente Angliongto] also suggesting that due to four (4) days
continuos rains with strong winds that the hatches be totally closed down and covered
with canvas and the hatch tents lowered. (Exh. "13"). This letter was received by [NSC] on
22 August 1974 while discharging operations were still going on (Exhibit "13-A").33
The fact that NSC actually accepted and proceeded to remove the cargo from the ship during
unfavorable weather will not make VSI liable for any damage caused thereby. In passing, it may be
noted that the NSC may seek indemnification, subject to the laws on prescription, from the
stevedoring company at fault in the discharge operations. "A stevedore company engaged in
discharging cargo . . . has the duty to load the cargo . . . in a prudent manner, and it is liable for
injury to, or loss of, cargo caused by its negligence . . . and where the officers and members and
crew of the vessel do nothing and have no responsibility in the discharge of cargo by stevedores . . .
the vessel is not liable for loss of, or damage to, the cargo caused by the negligence of the
stevedores . . ."34 as in the instant case.
Do Tinplates "Sweat"?
The trial court relied on the testimony of Vicente Angliongto in finding that ". . . tinplates 'sweat' by
themselves when packed even without being in contact with water from outside especially when the
weather is bad or
raining . . ."35 The Court of Appeals affirmed the trial court's finding.
A discussion of this issue appears inconsequential and unnecessary. As previously discussed, the
damage to the tinplates was occasioned not by airborne moisture but by contact with rain and
seawater which the stevedores negligently allowed to seep in during the unloading.
Second Issue: Effect of NSC's Failure to
Insure the Cargo
The obligation of NSC to insure the cargo stipulated in the Contract of Voyage Charter Hire is totally
separate and distinct from the contractual or statutory responsibility that may be incurred by VSI for
damage to the cargo caused by the willful negligence of the officers and the crew of MV Vlasons I.
Clearly, therefore, NSC's failure to insure the cargo will not affect its right, as owner and real party in
interest, to file an action against VSI for damages caused by the latter's willful negligence. We do not
find anything in the charter party that would make the liability of VSI for damage to the cargo
contingent on or affected in any manner by NSC's obtaining an insurance over the cargo.
Third Issue: Admissibility of Certificates
Proving Seaworthiness
NSC's contention that MV Vlasons I was not seaworthy is anchored on the alleged inadmissibility of
the certificates of seaworthiness offered in evidence by VSI. The said certificates include the
following:
1. Certificate of Inspection of the Philippines Coast Guard at Cebu
2. Certificate of Inspection from the Philippine Coast Guard
3. International Load Line Certificate from the Philippine Coast Guard
4. Coastwise License from the Board of Transportation
5. Certificate of Approval for Conversion issued by the Bureau of Customs36
NSC argues that the certificates are hearsay for not having been presented in accordance with the
Rules of Court. It points out that Exhibits 3, 4 and 11 allegedly are "not written records or acts of
public officers"; while Exhibits 5, 6, 7, 8, 9, 11 and 12 are not "evidenced by official publications or
certified true copies" as required by Sections 25 and 26, Rule 132, of the Rules of Court.37
After a careful examination of these exhibits, the Court rules that Exhibits 3, 4, 5, 6, 7, 8, 9 and 12
are inadmissible, for they have not been properly offered as evidence. Exhibits 3 and 4 are
certificates issued by private parties, but they have not been proven by one who saw the writing
executed, or by evidence of the genuineness of the handwriting of the maker, or by a subscribing
witness. Exhibits, 5, 6, 7, 8, 9, and 12 are photocopies, but their admission under the best evidence
rule have not been demonstrated.
We find, however, that Exhibit 11 is admissible under a well-settled exception to the hearsay rule per
Section 44 of Rule 130 of the Rules of Court, which provides that "(e)ntries in official records made
in the performance of a duty by a public officer of the Philippines, or by a person in the performance
of a duty specially enjoined by law, are prima facie evidence of the facts therein stated."38 Exhibit 11
is an original certificate of the Philippine Coast Guard in Cebu issued by Lieutenant Junior Grade
Noli C. Flores to the effect that "the vessel 'VLASONS I' was drydocked . . . and PCG Inspectors
were sent on board for inspection . . . After completion of drydocking and duly inspected by PCG
Inspectors, the vessel 'VLASONS I', a cargo vessel, is in seaworthy condition, meets all
requirements, fitted and equipped for trading as a cargo vessel was cleared by the Philippine Coast
Guard and sailed for Cebu Port on July 10, 1974." (sic) NSC's claim, therefore, is obviously
misleading and erroneous.
At any rate, it should be stressed that NSC has the burden of proving that MV Vlasons I was not
seaworthy. As observed earlier, the vessel was a private carrier and, as such, it did not have the
obligation of a common carrier to show that it was seaworthy. Indeed, NSC glaringly failed to
discharge its duty of proving the willful negligence of VSI in making the ship seaworthy resulting in
damage to its cargo. Assailing the genuineness of the certificate of seaworthiness is not sufficient
proof that the vessel was not seaworthy.
25
 Fourth Issue: Demurrage and Attorney's Fees
The contract of voyage charter hire provides inter alia:
xxx xxx xxx
2. Cargo: Full cargo of steel products of not less than 2,500 MT, 10% more or less at
Master's option.
xxx xxx xxx
6. Loading/Discharging Rate: 750 tons per WWDSHINC.
7. Demurrage/Dispatch: P8,000.00/P4,000.00 per day.39
The Court defined demurrage in its strict sense as the compensation provided for in the contract of
affreightment for the detention of the vessel beyond the laytime or that period of time agreed on for
loading and unloading of cargo.40 It is given to compensate the shipowner for the nonuse of the
vessel. On the other hand, the following is well-settled:
Laytime runs according to the particular clause of the charter party. . . . If laytime is
expressed in "running days," this means days when the ship would be run continuously,
and holidays are not excepted. A qualification of "weather permitting" excepts only those
days when bad weather reasonably prevents the work contemplated.41
In this case, the contract of voyage charter hire provided for a four-day laytime; it also qualified
laytime as WWDSHINC or weather working days Sundays and holidays included. 42 The running of
laytime was thus made subject to the weather, and would cease to run in the event unfavorable
weather interfered with the unloading of cargo.43 Consequently, NSC may not be held liable for
demurrage as the four-day laytime allowed it did not lapse, having been tolled by unfavorable
weather condition in view of the WWDSHINC qualification agreed upon by the parties. Clearly, it
was error for the trial court and the Court of Appeals to have found and affirmed respectively that
NSC incurred eleven days of delay in unloading the cargo. The trial court arrived at this erroneous
finding by subtracting from the twelve days, specifically August 13, 1974 to August 24, 1974, the
only day of unloading unhampered by unfavorable weather or rain, which was August 22, 1974.
Based on our previous discussion, such finding is a reversible error. As mentioned, the respondent
appellate court also erred in ruling that NSC was liable to VSI for demurrage, even if it reduced the
amount by half.
Attorney's Fees
VSI assigns as error of law the Court of Appeals' deletion of the award of attorney's fees. We
disagree. While VSI was compelled to litigate to protect its rights, such fact by itself will not justify an
award of attorney's fees under Article 2208 of the Civil Code when ". . . no sufficient showing of bad
faith would be reflected in a party's persistence in a case other than an erroneous conviction of the
righteousness of his cause . . ."44 Moreover, attorney's fees may not be awarded to a party for the
reason alone that the judgment rendered was favorable to the latter, as this is tantamount to
imposing a premium on one's right to litigate or seek judicial redress of legitimate grievances. 45
Epilogue
At bottom, this appeal really hinges on a factual issue: when, how and who caused the damage to
the cargo? Ranged against NSC are two formidable truths. First, both lower courts found that such
damage was brought about during the unloading process when rain and seawater seeped through
the cargo due to the fault or negligence of the stevedores employed by it. Basic is the rule that
factual findings of the trial court, when affirmed by the Court of Appeals, are binding on the Supreme
Court. Although there are settled exceptions, NSC has not satisfactorily shown that this case is one
of them. Second, the agreement between the parties — the Contract of Voyage Charter Hire —
placed the burden of proof for such loss or damage upon the shipper, not upon the shipowner. Such
stipulation, while disadvantageous to NSC, is valid because the parties entered into a contract of
private charter, not one of common carriage. Basic too is the doctrine that courts cannot relieve a
parry from the effects of a private contract freely entered into, on the ground that it is allegedly one-
sided or unfair to the plaintiff. The charter party is a normal commercial contract and its stipulations
are agreed upon in consideration of many factors, not the least of which is the transport price which
is determined not only by the actual costs but also by the risks and burdens assumed by the shipper
in regard to possible loss or damage to the cargo. In recognition of such factors, the parties even
stipulated that the shipper should insure the cargo to protect itself from the risks it undertook under
the charter party. That NSC failed or neglected to protect itself with such insurance should not
adversely affect VSI, which had nothing to do with such failure or neglect.
WHEREFORE, premises considered, the instant consolidated petitions are hereby DENIED. The
questioned Decision of the Court of Appeals is AFFIRMED with the MODIFICATION that the
demurrage awarded to VSI is deleted. No pronouncement as to costs.
SO ORDERED.
G.R. No. 111127 July 26, 1996
MR. & MRS. ENGRACIO FABRE, JR. and PORFIRIO CABIL, petitioners,
vs.
COURT OF APPEALS, THE WORD FOR THE WORLD CHRISTIAN FELLOWSHIP, INC.,
AMYLINE ANTONIO, JOHN RICHARDS, GONZALO GONZALES, VICENTE V. QUE, JR., ICLI
CORDOVA, ARLENE GOJOCCO, ALBERTO ROXAS CORDERO, RICHARD BAUTISTA,
JOCELYN GARCIA, YOLANDA CORDOVA, NOEL ROQUE, EDWARD TAN, ERNESTO
NARCISO, ENRIQUETA LOCSIN, FRANCIS NORMAN O. LOPES, JULIUS CAESAR, GARCIA,
ROSARIO MA. V. ORTIZ, MARIETTA C. CLAVO, ELVIE SENIEL, ROSARIO MARA-MARA,
TERESITA REGALA, MELINDA TORRES, MARELLA MIJARES, JOSEFA CABATINGAN, MARA
NADOC, DIANE MAYO, TESS PLATA, MAYETTE JOCSON, ARLENE Y. MORTIZ, LIZA MAYO,
CARLOS RANARIO, ROSAMARIA T. RADOC and BERNADETTE FERRER, respondents.
MENDOZA, J.:p
This is a petition for review on certiorari of the decision of the Court of Appeals1 in CA-GR No.
28245, dated September 30, 1992, which affirmed with modification the decision of the Regional
Trial Court of Makati, Branch 58, ordering petitioners jointly and severally to pay damages to private
respondent Amyline Antonio, and its resolution which denied petitioners' motion for reconsideration
for lack of merit.
Petitioners Engracio Fabre, Jr. and his wife were owners of a 1982 model Mazda minibus. They
used the bus principally in connection with a bus service for school children which they operated in
Manila. The couple had a driver, Porfirio J. Cabil, whom they hired in 1981, after trying him out for
two weeks, His job was to take school children to and from the St. Scholastica's College in Malate,
Manila.
On November 2, 1984 private respondent Word for the World Christian Fellowship Inc. (WWCF)
arranged with petitioners for the transportation of 33 members of its Young Adults Ministry from
Manila to La Union and back in consideration of which private respondent paid petitioners the
amount of P3,000.00.
26
The group was scheduled to leave on November 2, 1984, at 5:00 o'clock in the afternoon. However, WHEREFORE, premises considered, the Court hereby renders judgment against defendants Mr. &
as several members of the party were late, the bus did not leave the Tropical Hut at the corner of Mrs. Engracio Fabre, Jr. and Porfirio Cabil y Jamil pursuant to articles 2176 and 2180 of the Civil
Ortigas Avenue and EDSA until 8:00 o'clock in the evening. Petitioner Porfirio Cabil drove the Code of the Philippines and said defendants are ordered to pay jointly and severally to the plaintiffs
minibus. the following amount:

The usual route to Caba, La Union was through Carmen, Pangasinan. However, the bridge at 1) P93,657.11 as compensatory and actual damages;
Carmen was under repair, sot hat petitioner Cabil, who was unfamiliar with the area (it being his first
trip to La Union), was forced to take a detour through the town of Baay in Lingayen, Pangasinan. At
2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff
11:30 that night, petitioner Cabil came upon a sharp curve on the highway, running on a south to
Amyline Antonio;
east direction, which he described as "siete." The road was slippery because it was raining, causing
the bus, which was running at the speed of 50 kilometers per hour, to skid to the left road shoulder.
The bus hit the left traffic steel brace and sign along the road and rammed the fence of one Jesus 3) P20,000.00 as moral damages;
Escano, then turned over and landed on its left side, coming to a full stop only after a series of
impacts. The bus came to rest off the road. A coconut tree which it had hit fell on it and smashed its
front portion. 4) P20,000.00 as exemplary damages; and

5) 25% of the recoverable amount as attorney's fees;

Several passengers were injured. Private respondent Amyline Antonio was thrown on the floor of the
bus and pinned down by a wooden seat which came down by a wooden seat which came off after
being unscrewed. It took three persons to safely remove her from this portion. She was in great pain 6) Costs of suit.
and could not move.
SO ORDERED.
The driver, petitioner Cabil, claimed he did not see the curve until it was too late. He said he was not
familiar with the area and he could not have seen the curve despite the care he took in driving the
bus, because it was dark and there was no sign on the road. He said that he saw the curve when he The Court of Appeals affirmed the decision of the trial court with respect to Amyline Antonio but
was already within 15 to 30 meters of it. He allegedly slowed down to 30 kilometers per hour, but it dismissed it with respect to the other plaintiffs on the ground that they failed to prove their respective
was too late. claims. The Court of Appeals modified the award of damages as follows:

The Lingayen police investigated the incident the next day, November 3, 1984. On the basis of their 1) P93,657.11 as actual damages;
finding they filed a criminal complaint against the driver, Porfirio Cabil. The case was later filed with
the Lingayen Regional Trial Court. Petitioners Fabre paid Jesus Escano P1,500.00 for the damage 2) P600,000.00 as compensatory damages;
to the latter's fence. On the basis of Escano's affidavit of desistance the case against petitioners
Fabre was dismissed.
3) P50,000.00 as moral damages;

Amyline Antonio, who was seriously injured, brought this case in the RTC of Makati, Metro Manila.
As a result of the accident, she is now suffering from paraplegia and is permanently paralyzed from 4) P20,000.00 as exemplary damages;
the waist down. During the trial she described the operations she underwent and adduced evidence
regarding the cost of her treatment and therapy. Immediately after the accident, she was taken to 5) P10,000.00 as attorney's fees; and
the Nazareth Hospital in Baay, Lingayen. As this hospital was not adequately equipped, she was
transferred to the Sto. Niño Hospital, also in the town of Ba-ay, where she was given sedatives. An
x-ray was taken and the damage to her spine was determined to be too severe to be treated there. 6) Costs of suit.
She was therefore brought to Manila, first to the Philippine General Hospital and later to the Makati
Medical Center where she underwent an operation to correct the dislocation of her spine. The Court of Appeals sustained the trial court's finding that petitioner Cabil failed to exercise due
care and precaution in the operation of his vehicle considering the time and the place of the
In its decision dated April 17, 1989, the trial court found that: accident. The Court of Appeals held that the Fabres were themselves presumptively negligent.
Hence, this petition. Petitioners raise the following issues:

No convincing evidence was shown that the minibus was properly checked for travel to a long
distance trip and that the driver was properly screened and tested before being admitted for
employment. Indeed, all the evidence presented have shown the negligent act of the defendants
which ultimately resulted to the accident subject of this case.
Accordingly, it gave judgment for private respondents holding:
Considering that plaintiffs Word for the World Christian Fellowship, Inc. and Ms. Amyline Antonio
were the only ones who adduced evidence in support of their claim for damages, the Court is
therefore not in a position to award damages to the other plaintiffs.
I. WHETHER OR NOT PETITIONERS WERE NEGLIGENT.
II. WHETHER OF NOT PETITIONERS WERE LIABLE FOR THE INJURIES SUFFERED BY
PRIVATE RESPONDENTS.
III WHETHER OR NOT DAMAGES CAN BE AWARDED AND IN THE POSITIVE, UP TO WHAT
EXTENT.
Petitioners challenge the propriety of the award of compensatory damages in the amount of
P600,000.00. It is insisted that, on the assumption that petitioners are liable an award of
27
P600,000.00 is unconscionable and highly speculative. Amyline Antonio testified that she was a
casual employee of a company called "Suaco," earning P1,650.00 a month, and a dealer of Avon
products, earning an average of P1,000.00 monthly. Petitioners contend that as casual employees
do not have security of tenure, the award of P600,000.00, considering Amyline Antonio's earnings, is
without factual basis as there is no assurance that she would be regularly earning these amounts.
With the exception of the award of damages, the petition is devoid of merit.
The hour of departure had not been fixed. Even if it had been, the delay did not bear directly on the
cause of the accident. With respect to the second contention, it was held in an early case that:
[A] person who hires a public automobile and gives the driver directions as to the place to which he
wishes to be conveyed, but exercises no other control over the conduct of the driver, is not
responsible for acts of negligence of the latter or prevented from recovering for injuries suffered from
a collision between the automobile and a train, caused by the negligence or the automobile driver. 9

First, it is unnecessary for our purpose to determine whether to decide this case on the theory that As already stated, this case actually involves a contract of carriage. Petitioners, the Fabres, did not
petitioners are liable for breach of contract of carriage or culpa contractual or on the theory of quasi have to be engaged in the business of public transportation for the provisions of the Civil Code on
delict or culpa aquiliana as both the Regional Trial Court and the Court of Appeals held, for although common carriers to apply to them. As this Court has held: 10
the relation of passenger and carrier is "contractual both in origin and nature," nevertheless "the act
that breaks the contract may be also a tort." 2 In either case, the question is whether the bus driver,
Art. 1732. Common carriers are persons, corporations, firms or associations
petitioner Porfirio Cabil, was negligent.
engaged in the business of carrying or transporting passengers or goods or
both, by land, water, or air for compensation, offering their services to the
The finding that Cabil drove his bus negligently, while his employer, the Fabres, who owned the bus, public.
failed to exercise the diligence of a good father of the family in the selection and supervision of their
employee is fully supported by the evidence on record. These factual findings of the two courts we
The above article makes no distinction between one whose principal business
regard as final and conclusive, supported as they are by the evidence. Indeed, it was admitted by
activity is the carrying of persons or goods or both, and one who does such
Cabil that on the night in question, it was raining, and as a consequence, the road was slippery, and
carrying only as an ancillary activity (in local idiom, as "a sideline"). Article 1732
it was dark. He averred these facts to justify his failure to see that there lay a sharp curve ahead.
also carefully avoids making any distinction between a person or enterprise
However, it is undisputed that Cabil drove his bus at the speed of 50 kilometers per hour and only
offering transportation service on a regular or scheduled basis and one offering
slowed down when he noticed the curve some 15 to 30 meters ahead. 3 By then it was too late for
such service on an occasional, episodic or unscheduled basis. Neither does
him to avoid falling off the road. Given the conditions of the road and considering that the trip was
Article 1732 distinguish between a carrier offering its services to the "general
Cabil's first one outside of Manila, Cabil should have driven his vehicle at a moderate speed. There
public," i.e., the general community or population, and one who offers services
is testimony 4 that the vehicles passing on that portion of the road should only be running 20
or solicits business only from a narrow segment of the general population. We
kilometers per hour, so that at 50 kilometers per hour, Cabil was running at a very high speed.
think that Article 1732 deliberately refrained from making such distinctions.

Considering the foregoing — the fact that it was raining and the road was slippery, that it was dark,
As common carriers, the Fabres were found to exercise "extraordinary
that he drove his bus at 50 kilometers an hour when even on a good day the normal speed was only
diligence" for the safe transportation of the passengers to their destination. This
20 kilometers an hour, and that he was unfamiliar with the terrain, Cabil was grossly negligent and
duty of care is not excused by proof that they exercise the diligence of a good
should be held liable for the injuries suffered by private respondent Amyline Antonio.
father of the family in the selection and supervision of their employee. As Art.
1759 of the Code provides:
Pursuant to Arts. 2176 and 2180 of the Civil Code his negligence gave rise to the presumption that
his employers, the Fabres, were themselves negligent in the selection and supervisions of their
Common carriers are liable for the death of or injuries to passengers through
employee.
the negligence or willful acts of the former's employees although such
employees may have acted beyond the scope of their authority or in violation of
Due diligence in selection of employees is not satisfied by finding that the applicant possessed a the orders of the common carriers.
professional driver's license. The employer should also examine the applicant for his qualifications,
experience and record of service. 5 Due diligence in supervision, on the other hand, requires the
This liability of the common carriers does not cease upon proof that they
formulation of rules and regulations for the guidance of employees and issuance of proper
exercised all the diligence of a good father of a family in the selection and
instructions as well as actual implementation and monitoring of consistent compliance with the
supervision of their employees.
rules.6

In the case at bar, the Fabres, in allowing Cabil to drive the bus to La Union, apparently did not
consider the fact that Cabil had been driving for school children only, from their homes to the St.
Scholastica's College in Metro Manila. 7 They had hired him only after a two-week apprenticeship.
They had hired him only after a two-week apprenticeship. They had tested him for certain matters,
such as whether he could remember the names of the children he would be taking to school, which
were irrelevant to his qualification to drive on a long distance travel, especially considering that the
trip to La Union was his first. The existence of hiring procedures and supervisory policies cannot be
casually invoked to overturn the presumption of negligence on the part of an employer. 8
Petitioners argue that they are not liable because (1) an earlier departure (made impossible by the
congregation's delayed meeting) could have a averted the mishap and (2) under the contract, the
WWCF was directly responsible for the conduct of the trip. Neither of these contentions hold water.
The same circumstances detailed above, supporting the finding of the trial court and of the appellate
court that petitioners are liable under Arts. 2176 and 2180 for quasi delict, fully justify findings them
guilty of breach of contract of carriage under Arts. 1733, 1755 and 1759 of the Civil Code.
Secondly, we sustain the award of damages in favor of Amyline Antonio. However, we think the
Court of Appeals erred in increasing the amount of compensatory damages because private
respondents did not question this award as inadequate. 11 To the contrary, the award of
P500,000.00 for compensatory damages which the Regional Trial Court made is reasonable
considering the contingent nature of her income as a casual employee of a company and as
distributor of beauty products and the fact that the possibility that she might be able to work again
has not been foreclosed. In fact she testified that one of her previous employers had expressed
willingness to employ her again.

28
With respect to the other awards, while the decisions of the trial court and the Court of Appeals do
not sufficiently indicate the factual and legal basis for them, we find that they are nevertheless
supported by evidence in the records of this case. Viewed as an action for quasi delict, this case
falls squarely within the purview of Art. 2219(2) providing for the payment of moral damages in
cases of quasi delict. On the theory that petitioners are liable for breach of contract of carriage, the
award of moral damages is authorized by Art. 1764, in relation to Art. 2220, since Cabil's gross
negligence amounted to bad faith.12 Amyline Antonio's testimony, as well as the testimonies of her
father and copassengers, fully establish the physical suffering and mental anguish she endured as a
result of the injuries caused by petitioners' negligence.
The award of exemplary damages and attorney's fees was also properly made. However, for the
same reason that it was error for the appellate court to increase the award of compensatory
damages, we hold that it was also error for it to increase the award of moral damages and reduce
the award of attorney's fees, inasmuch as private respondents, in whose favor the awards were
made, have not appealed. 13
As in the case of BLTB, private respondents in this case and her coplaintiffs did not stake out their
claim against the carrier and the driver exclusively on one theory, much less on that of breach of
contract alone. After all, it was permitted for them to allege alternative causes of action and join as
many parties as may be liable on such causes of action 23 so long as private respondent and her
coplaintiffs do not recover twice for the same injury. What is clear from the cases is the intent of the
plaintiff there to recover from both the carrier and the driver, thus, justifying the holding that the
carrier and the driver were jointly and severally liable because their separate and distinct acts
concurred to produce the same injury.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED with MODIFICATION as to award
of damages. Petitioners are ORDERED to PAY jointly and severally the private respondent Amyline
Antonio the following amounts:
1) P93,657.11 as actual damages;

2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff Amyline Antonio;
As above stated, the decision of the Court of Appeals can be sustained either on the theory of quasi
delict or on that of breach of contract. The question is whether, as the two courts below held,
petitioners, who are the owners and driver of the bus, may be made to respond jointly and severally 3) P20,000.00 as moral damages;
to private respondent. We hold that they may be. In Dangwa Trans. Co. Inc. v. Court of
Appeals, 14 on facts similar to those in this case, this Court held the bus company and the driver
jointly and severally liable for damages for injuries suffered by a passenger. Again, in Bachelor 4) P20,000.00 as exemplary damages;
Express, Inc. v. Court of
Appeals 15 a driver found negligent in failing to stop the bus in order to let off passengers when a 5) 25% of the recoverable amount as attorney's fees; and
fellow passenger ran amuck, as a result of which the passengers jumped out of the speeding bus
and suffered injuries, was held also jointly and severally liable with the bus company to the injured
passengers. 6) costs of suit.

The same rule of liability was applied in situations where the negligence of the driver of the bus on SO ORDERED.
which plaintiff was riding concurred with the negligence of a third party who was the driver of another
vehicle, thus causing an accident. In Anuran v. Buño, 16 Batangas Laguna Tayabas Bus
Co. v. Intermediate Appellate Court, 17 and Metro Manila Transit Corporation v. Court of
Appeals, 18 the bus company, its driver, the operator of the other vehicle and the driver of the vehicle
were jointly and severally held liable to the injured passenger or the latters' heirs. The basis of this
allocation of liability was explained in Viluan v. Court of Appeals, 19 thus:

Nor should it make any difference that the liability of petitioner [bus owner]
springs from contract while that of respondents [owner and driver of other
vehicle] arises from quasi-delict. As early as 1913, we already ruled in Gutierrez
vs. Gutierrez, 56 Phil. 177, that in case of injury to a passenger due to the
negligence of the driver of the bus on which he was riding and of the driver of
another vehicle, the drivers as well as the owners of the two vehicles are jointly
and severally liable for damages. Some members of the Court, though, are of
the view that under the circumstances they are liable on quasi-delict. 20

It is true that in Philippine Rabbit Bus Lines, Inc. v. Court of Appeals 21 this Court exonerated the
jeepney driver from liability to the injured passengers and their families while holding the owners of
the jeepney jointly and severally liable, but that is because that case was expressly tried and
decided exclusively on the theory of culpa contractual. As this Court there explained:
G.R. No. 127897 November 15, 2001
The trial court was therefore right in finding that Manalo (the driver) and spouses Mangune and
Carreon (the jeepney owners) were negligent. However, its ruling that spouses Mangune and DELSAN TRANSPORT LINES, INC., petitioner,
Carreon are jointly and severally liable with Manalo is erroneous. The driver cannot be held jointly vs.
and severally liable with carrier in case of breach of the contract of carriage. The rationale behind THE HON. COURT OF APPEALS and AMERICAN HOME ASSURANCE
this is readily discernible. Firstly, the contract of carriage is between the carrier is exclusively CORPORATION, respondents.
responsible therefore to the passenger, even if such breach be due to the negligence of his driver
(see Viluan v. The Court of Appeals, et al., G.R. Nos. L-21477-81, April 29, 1966, 16 SCRA 742). 22
DE LEON, JR., J.:
29
Before us is a petition for review on certiorari of the Decision1 of the Court of Appeals in CA-G.R. CV THE COURT OF APPEALS ERRED AND WAS NOT JUSTIFIED IN REBUTTING THE
No. 39836 promulgated on June 17, 1996, reversing the decision of the Regional Trial Court of LEGAL PRESUMPTION THAT THE VESSEL MT "MAYSUN" WAS SEAWORTHY.
Makati City, Branch 137, ordering petitioner to pay private respondent the sum of Five Million
Ninety-Six Thousand Six Hundred Thirty-Five Pesos and Fifty-Seven Centavos (P5,096,635.57) and
III
costs and the Resolution2 dated January 21, 1997 which denied the subsequent motion for
reconsideration.
THE COURT OF APPEALS ERRED IN NOT APPLYING THE DOCTRINE OF THE
SUPREME COURT IN THE CASE OF HOME INSURANCE CORPORATION V. COURT
The facts show that Caltex Philippines (Caltex for brevity) entered into a contract of affreightment
OF APPEALS.
with the petitioner, Delsan Transport Lines, Inc., for a period of one year whereby the said common
carrier agreed to transport Caltex’s industrial fuel oil from the Batangas-Bataan Refinery to different
parts of the country. Under the contract, petitioner took on board its vessel, MT Maysun 2,277.314 Petitioner Delsan Transport Lines, Inc. invokes the provision of Section 113 of the Insurance Code
kiloliters of industrial fuel oil of Caltex to be delivered to the Caltex Oil Terminal in Zamboanga City. of the Philippines, which states that in every marine insurance upon a ship or freight, or freightage,
The shipment was insured with the private respondent, American Home Assurance Corporation. or upon any thin which is the subject of marine insurance there is an implied warranty by the shipper
that the ship is seaworthy. Consequently, the insurer will not be liable to the assured for any loss
under the policy in case the vessel would later on be found as not seaworthy at the inception of the
On August 14, 1986, MT Maysum set sail from Batangas for Zamboanga City. Unfortunately, the
insurance. It theorized that when private respondent paid Caltex the value of its lost cargo, the act of
vessel sank in the early morning of August 16, 1986 near Panay Gulf in the Visayas taking with it the
the private respondent is equivalent to a tacit recognition that the ill-fated vessel was seaworthy;
entire cargo of fuel oil.
otherwise, private respondent was not legally liable to Caltex due to the latter’s breach of implied
warranty under the marine insurance policy that the vessel was seaworthy.
Subsequently, private respondent paid Caltex the sum of Five Million Ninety-Six Thousand Six
Hundred Thirty-Five Pesos and Fifty-Seven Centavos (P5,096,635.67) representing the insured
The petitioner also alleges that the Court of Appeals erred in ruling that MT Maysun was not
value of the lost cargo. Exercising its right of subrogation under Article 2207 of the New Civil Code,
seaworthy on the ground that the marine officer who served as the chief mate of the vessel,
the private respondent demanded of the petitioner the same amount it paid to Caltex.1âwphi1.nêt
Francisco Berina, was allegedly not qualified. Under Section 116 of the Insurance Code of the
Philippines, the implied warranty of seaworthiness of the vessel, which the private respondent
Due to its failure to collect from the petitioner despite prior demand, private respondent filed a admitted as having been fulfilled by its payment of the insurance proceeds to Caltex of its lost cargo,
complaint with the Regional Trial Court of Makati City, Branch 137, for collection of a sum of money. extends to the vessel’s complement. Besides, petitioner avers that although Berina had merely a
After the trial and upon analyzing the evidence adduced, the trial court rendered a decision on 2nd officer’s license, he was qualified to act as the vessel’s chief officer under Chapter IV(403),
November 29, 1990 dismissing the complaint against herein petitioner without pronouncement as to Category III(a)(3)(ii)(aa) of the Philippine Merchant Marine Rules and Regulations. In fact, all the
cost. The trial court found that the vessel, MT Maysum, was seaworthy to undertake the voyage as crew and officers of MT Maysun were exonerated in the administrative investigation conducted by
determined by the Philippine Coast Guard per Survey Certificate Report No. M5-016-MH upon the Board of Marine Inquiry after the subject accident.6
inspection during its annual dry-docking and that the incident was caused by unexpected inclement
weather condition or force majeure, thus exempting the common carrier (herein petitioner) from
In any event, petitioner further avers that private respondent failed, for unknown reason, to present
liability for the loss of its cargo.3
in evidence during the trial of the instant case the subject marine cargo insurance policy it entered
into with Caltex. By virtue of the doctrine laid down in the case of Home Insurance Corporation vs.
The decision of the trial court, however, was reversed, on appeal, by the Court of Appeals. The CA,7 the failure of the private respondent to present the insurance policy in evidence is allegedly
appellate court gave credence to the weather report issued by the Philippine Atmospheric, fatal to its claim inasmuch as there is no way to determine the rights of the parties thereto.
Geophysical and Astronomical Services Administration (PAGASA for brevity) which showed that
from 2:00 o’clock to 8:oo o’clock in the morning on August 16, 1986, the wind speed remained at 10
Hence, the legal issues posed before the Court are:
to 20 knots per hour while the waves measured from .7 to two (2) meters in height only in the vicinity
of the Panay Gulf where the subject vessel sank, in contrast to herein petitioner’s allegation that the
waves were twenty (20) feet high. In the absence of any explanation as to what may have caused I
the sinking of the vessel coupled with the finding that the same was improperly manned, the
appellate court ruled that the petitioner is liable on its obligation as common carrier4 to herein private
respondent insurance company as subrogee of Caltex. The subsequent motion for reconsideration Whether or not the payment made by the private respondent to Caltex for the insured
value of the lost cargo amounted to an admission that the vessel was seaworthy, thus
of herein petitioner was denied by the appellate court.
precluding any action for recovery against the petitioner.

Petitioner raised the following assignments of error in support of the instant petition, 5 to wit:
II

I
Whether or not the non-presentation of the marine insurance policy bars the complaint for
recovery of sum of money for lack of cause of action.
THE COURT OF APPEALS ERRED IN REVERSING THE DECISION OF THE
REGIONAL TRIAL COURT.
We rule in the negative on both issues.

II
The payment made by the private respondent for the insured value of the lost cargo operates as
waiver of its (private respondent) right to enforce the term of the implied warranty against Caltex
under the marine insurance policy. However, the same cannot be validly interpreted as an automatic

30
admission of the vessel’s seaworthiness by the private respondent as to foreclose recourse against
the petitioner for any liability under its contractual obligation as a common carrier. The fact of
payment grants the private respondent subrogatory right which enables it to exercise legal remedies
that would otherwise be available to Caltex as owner of the lost cargo against the petitioner common
carrier.8 Article 2207 of the New civil Code provides that:
Art. 2207. If the plaintiff’s property has been insured, and he has received indemnity from
the insurance company for the injury or loss arising out of the wrong or breach of contract
complained of, the insurance company shall be subrogated to the rights of the insured
against the wrongdoer or the person who has violated the contract. If the amount paid by
the insurance company does not fully cover the injury or loss, the aggrieved party shall be
entitled to recover the deficiency from the person causing the loss or injury.
The right of subrogation has its roots in equity. It is designed to promote and to accomplish justice
and is the mode which equity adopts to compel the ultimate payment of a debt by one who in justice
and good conscience ought to pay.9 It is not dependent upon, nor does it grow out of, any privity of
contract or upon written assignment of claim. It accrues simply upon payment by the insurance
company of the insurance claim.10 Consequently, the payment made by the private respondent
(insurer) to Caltex (assured) operates as an equitable assignment to the former of all the remedies
which the latter may have against the petitioner.
From the nature of their business and for reasons of public policy, common carriers are bound to
observe extraordinary diligence in the vigilance over the goods and for the safety of passengers
transported by them, according to all the circumstance of each case.11 In the event of loss,
destruction or deterioration of the insured goods, common carriers shall be responsible unless the
same is brought about, among others, by flood, storm, earthquake, lightning or other natural disaster
or calamity.12 In all other cases, if the goods are lost, destroyed or deteriorated, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove that they observed
extraordinary diligence.13
In order to escape liability for the loss of its cargo of industrial fuel oil belonging to Caltex, petitioner
attributes the sinking of MT Maysun to fortuitous even or force majeure. From the testimonies of
Jaime Jarabe and Francisco Berina, captain and chief mate, respectively of the ill-fated vessel, it
appears that a sudden and unexpected change of weather condition occurred in the early morning
of August 16, 1986; that at around 3:15 o’clock in the morning a squall ("unos") carrying strong
winds with an approximate velocity of 30 knots per hour and big waves averaging eighteen (18) to
twenty (20) feet high, repeatedly buffeted MT Maysun causing it to tilt, take in water and eventually
sink with its cargo.14 This tale of strong winds and big waves by the said officers of the petitioner
however, was effectively rebutted and belied by the weather report 15 from the Philippine
Atmospheric, Geophysical and Astronomical Services Administration (PAGASA), the independent
government agency charged with monitoring weather and sea conditions, showing that from 2:00
o’clock to 8:00 o’clock in the morning on August 16, 1986, the wind speed remained at ten (10) to
twenty (20) knots per hour while the height of the waves ranged from .7 to two (2) meters in the
vicinity of Cuyo East Pass and Panay Gulf where the subject vessel sank. Thus, as the appellate
court correctly ruled, petitioner’s vessel, MT Maysun, sank with its entire cargo for the reason that it
was not seaworthy. There was no squall or bad weather or extremely poor sea condition in the
vicinity when the said vessel sank.
The appellate court also correctly opined that the petitioner’s witnesses, Jaime Jarabe and
Francisco Berina, ship captain and chief mate, respectively, of the said vessel, could not be
expected to testify against the interest of their employer, the herein petitioner common carrier.
Neither may petitioner escape liability by presenting in evidence certificates16 that tend to show that
at the time of dry-docking and inspection by the Philippine Coast Guard, the vessel MT Maysun, was
fit for voyage. These pieces of evidence do not necessarily take into account the actual condition of
the vessel at the time of the commencement of the voyage. As correctly observed by the Court of
appeals:
At the time of dry-docking and inspection, the ship may have appeared fit. The certificates
issued, however, do not negate the presumption of unseaworthiness triggered by an
unexplained sinking. Of certificates issued in this regard, authorities are likewise clear as
to their probative value, (thus):
Seaworthiness relates to a vessel’s actual condition. Neither the granting of
classification or the issuance of certificates established seaworthiness. (2-A
Benedict on Admiralty, 7-3, Sec. 62).
And also:
Authorities are clear that diligence in securing certificates of seaworthiness
does not satisfy the vessel owner’s obligation. Also securing the approval of the
shipper of the cargo, or his surveyor, of the condition of the vessel or her
stowage does not establish due diligence if the vessel was in fact unseaworthy,
for the cargo owner has no obligation in relation to seaworthiness. (Ibid.)17
Additionally, the exoneration of MT Maysun’s officers and crew by the Board of Marine Inquiry
merely concerns their respective administrative liabilities. It does not in any way operate to absolve
the petitioner common carrier from its civil liabilities. It does not in any way operate to absolve the
petitioner common carrier from its civil liability arising from its failure to observe extraordinary
diligence in the vigilance over the goods it was transporting and for the negligent acts or omissions
of its employees, the determination of which properly belongs to the courts. 18 In the case at bar,
petitioner is liable for the insured value of the lost cargo of industrial fuel oil belonging to Caltex for
its failure to rebut the presumption of fault or negligence as common carrier19 occasioned by the
unexplained sinking of its vessel, MT Maysun, while in transit.
Anent the second issue, it is our view and so hold that the presentation in evidence of the marine
insurance policy is not indispensable in this case before the insurer may recover from the common
carrier the insured value of the lost cargo in the exercise of its subrogatory right. The subrogation
receipt, by itself, is sufficient to establish not only the relationship of herein private respondent as
insurer and Caltex, as the assured shipper of the lost cargo of industrial fuel oil, but also the amount
paid to settle the insurance claim. The right of subrogation accrues simply upon payment by the
insurance company of the insurance claim.20
The presentation of the insurance policy was necessary in the case of Home Insurance Corporation
v. CA21 (a case cited by petitioner) because the shipment therein (hydraulic engines) passed through
several stages with different parties involved in each stage. First, from the shipper to the port of
departure; second, from the port of departure to the M/S Oriental Statesman; third, from the M/S
Oriental Statesman to the M/S Pacific Conveyor; fourth, from the M/S Pacific Conveyor to the port or
arrival; fifth, from the port of arrival to the arrastre operator; sixth, from the arrastre operator to the
hauler, Mabuhay Brokerage Co., Inc. (private respondent therein); and lastly, from the hauler to the
consignee. We emphasized in that case that in the absence of proof of stipulations to the contrary,
the hauler can be liable only for any damage that occurred from the time it received the cargo until it
finally delivered it to the consignee. Ordinarily, it cannot be held responsible for the handling of the
cargo before it actually received it. The insurance contract, which was not presented in evidence in
that case would have indicated the scope of the insurer’s liability, if any, since no evidence was
adduced indicating at what stage in the handling process the damage to the cargo was sustained.
Hence, our ruling on the presentation of the insurance policy in the said case of Home Insurance
Corporation is not applicable to the case at bar. In contrast, there is no doubt that the cargo of
industrial fuel oil belonging to Caltex, in the case at bar, was lost while on board petitioner’s vessel,
MT Maysun, which sank while in transit in the vicinity of Panay Gulf and Cuyo East Pass in the early
morning of August 16, 1986.
31
WHEREFORE, the instant petition is DENIED. The Decision dated June 17, 1996 of the Court of
Appeals in CA-G.R. CV No. 39836 is AFFIRMED. Costs against the petitioner.
SO ORDERED.
G.R. No. L-49407 August 19, 1988
NATIONAL DEVELOPMENT COMPANY, petitioner-appellant,
vs.
THE COURT OF APPEALS and DEVELOPMENT INSURANCE & SURETY
CORPORATION, respondents-appellees.
No. L-49469 August 19, 1988
MARITIME COMPANY OF THE PHILIPPINES, petitioner-appellant,
vs.
THE COURT OF APPEALS and DEVELOPMENT INSURANCE & SURETY
CORPORATION, respondents- appellees.
PARAS, J.:
These are appeals by certiorari from the decision * of the Court of Appeals in CA G.R. No: L- 46513-
R entitled "Development Insurance and Surety Corporation plaintiff-appellee vs. Maritime Company
of the Philippines and National Development Company defendant-appellants," affirming in toto the
decision ** in Civil Case No. 60641 of the then Court of First Instance of Manila, Sixth Judicial
District, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered ordering the defendants National
Development Company and Maritime Company of the Philippines, to pay jointly
and severally, to the plaintiff Development Insurance and Surety Corp., the sum
of THREE HUNDRED SIXTY FOUR THOUSAND AND NINE HUNDRED
FIFTEEN PESOS AND EIGHTY SIX CENTAVOS (364,915.86) with the legal
interest thereon from the filing of plaintiffs complaint on April 22, 1965 until fully
paid, plus TEN THOUSAND PESOS (Pl0,000.00) by way of damages as and
for attorney's fee.
On defendant Maritime Company of the Philippines' cross-claim against the
defendant National Development Company, judgment is hereby rendered,
ordering the National Development Company to pay the cross-claimant
Maritime Company of the Philippines the total amount that the Maritime
Company of the Philippines may voluntarily or by compliance to a writ of
execution pay to the plaintiff pursuant to the judgment rendered in this case.
With costs against the defendant Maritime Company of the Philippines.
(pp. 34-35, Rollo, GR No. L-49469)
The facts of these cases as found by the Court of Appeals, are as follows:
The evidence before us shows that in accordance with a memorandum
agreement entered into between defendants NDC and MCP on September 13,
1962, defendant NDC as the first preferred mortgagee of three ocean going
vessels including one with the name 'Dona Nati' appointed defendant MCP as
its agent to manage and operate said vessel for and in its behalf and account
(Exh. A). Thus, on February 28, 1964 the E. Philipp Corporation of New York
loaded on board the vessel "Dona Nati" at San Francisco, California, a total of
1,200 bales of American raw cotton consigned to the order of Manila Banking
Corporation, Manila and the People's Bank and Trust Company acting for and in
behalf of the Pan Asiatic Commercial Company, Inc., who represents Riverside
Mills Corporation (Exhs. K-2 to K7-A & L-2 to L-7-A). Also loaded on the same
vessel at Tokyo, Japan, were the cargo of Kyokuto Boekui, Kaisa, Ltd.,
consigned to the order of Manila Banking Corporation consisting of 200 cartons
of sodium lauryl sulfate and 10 cases of aluminum foil (Exhs. M & M-1). En
route to Manila the vessel Dofia Nati figured in a collision at 6:04 a.m. on April
15, 1964 at Ise Bay, Japan with a Japanese vessel 'SS Yasushima Maru' as a
result of which 550 bales of aforesaid cargo of American raw cotton were lost
and/or destroyed, of which 535 bales as damaged were landed and sold on the
authority of the General Average Surveyor for Yen 6,045,-500 and 15 bales
were not landed and deemed lost (Exh. G). The damaged and lost cargoes was
worth P344,977.86 which amount, the plaintiff as insurer, paid to the Riverside
Mills Corporation as holder of the negotiable bills of lading duly endorsed (Exhs.
L-7-A, K-8-A, K-2-A, K-3-A, K-4-A, K-5-A, A- 2, N-3 and R-3}. Also considered
totally lost were the aforesaid shipment of Kyokuto, Boekui Kaisa Ltd.,
consigned to the order of Manila Banking Corporation, Manila, acting for
Guilcon, Manila, The total loss was P19,938.00 which the plaintiff as insurer
paid to Guilcon as holder of the duly endorsed bill of lading (Exhibits M-1 and S-
3). Thus, the plaintiff had paid as insurer the total amount of P364,915.86 to the
consignees or their successors-in-interest, for the said lost or damaged
cargoes. Hence, plaintiff filed this complaint to recover said amount from the
defendants-NDC and MCP as owner and ship agent respectively, of the said
'Dofia Nati' vessel. (Rollo, L-49469, p.38)
On April 22, 1965, the Development Insurance and Surety Corporation filed before the then Court of
First Instance of Manila an action for the recovery of the sum of P364,915.86 plus attorney's fees of
P10,000.00 against NDC and MCP (Record on Appeal), pp. 1-6).
Interposing the defense that the complaint states no cause of action and even if it does, the action
has prescribed, MCP filed on May 12, 1965 a motion to dismiss (Record on Appeal, pp. 7-14). DISC
filed an Opposition on May 21, 1965 to which MCP filed a reply on May 27, 1965 (Record on
Appeal, pp. 14-24). On June 29, 1965, the trial court deferred the resolution of the motion to dismiss
till after the trial on the merits (Record on Appeal, p. 32). On June 8, 1965, MCP filed its answer with
counterclaim and cross-claim against NDC.
NDC, for its part, filed its answer to DISC's complaint on May 27, 1965 (Record on Appeal, pp. 22-
24). It also filed an answer to MCP's cross-claim on July 16, 1965 (Record on Appeal, pp. 39-40).
However, on October 16, 1965, NDC's answer to DISC's complaint was stricken off from the record
for its failure to answer DISC's written interrogatories and to comply with the trial court's order dated
August 14, 1965 allowing the inspection or photographing of the memorandum of agreement it
executed with MCP. Said order of October 16, 1965 likewise declared NDC in default (Record on
Appeal, p. 44). On August 31, 1966, NDC filed a motion to set aside the order of October 16, 1965,
but the trial court denied it in its order dated September 21, 1966.
On November 12, 1969, after DISC and MCP presented their respective evidence, the trial court
rendered a decision ordering the defendants MCP and NDC to pay jointly and solidarity to DISC the
sum of P364,915.86 plus the legal rate of interest to be computed from the filing of the complaint on
April 22, 1965, until fully paid and attorney's fees of P10,000.00. Likewise, in said decision, the trial
court granted MCP's crossclaim against NDC.
32
MCP interposed its appeal on December 20, 1969, while NDC filed its appeal on February 17, 1970
after its motion to set aside the decision was denied by the trial court in its order dated February
13,1970.
On November 17,1978, the Court of Appeals promulgated its decision affirming in toto the decision
of the trial court.
Hence these appeals by certiorari.
NDC's appeal was docketed as G.R. No. 49407, while that of MCP was docketed as G.R. No.
49469. On July 25,1979, this Court ordered the consolidation of the above cases (Rollo, p. 103). On
August 27,1979, these consolidated cases were given due course (Rollo, p. 108) and submitted for
decision on February 29, 1980 (Rollo, p. 136).
In its brief, NDC cited the following assignments of error:
I
THE COURT OF APPEALS ERRED IN APPLYING ARTICLE 827 OF THE CODE OF COMMERCE
AND NOT SECTION 4(2a) OF COMMONWEALTH ACT NO. 65, OTHERWISE KNOWN AS THE
CARRIAGE OF GOODS BY SEA ACT IN DETERMINING THE LIABILITY FOR LOSS OF
CARGOES RESULTING FROM THE COLLISION OF ITS VESSEL "DONA NATI" WITH THE
YASUSHIMA MARU"OCCURRED AT ISE BAY, JAPAN OR OUTSIDE THE TERRITORIAL
JURISDICTION OF THE PHILIPPINES.
II
THE COURT OF APPEALS ERRED IN NOT DISMISSING THE C0MPLAINT FOR
REIMBURSEMENT FILED BY THE INSURER, HEREIN PRIVATE RESPONDENT-APPELLEE,
AGAINST THE CARRIER, HEREIN PETITIONER-APPELLANT. (pp. 1-2, Brief for Petitioner-
Appellant National Development Company; p. 96, Rollo).
On its part, MCP assigned the following alleged errors:
I as well as the rules of prescription provided thereunder.
THE RESPONDENT COURT OF APPEALS ERRED IN NOT HOLDING THAT RESPONDENT
DEVELOPMENT INSURANCE AND SURETY CORPORATION HAS NO CAUSE OF ACTION AS
AGAINST PETITIONER MARITIME COMPANY OF THE PHILIPPINES AND IN NOT DISMISSING
THE COMPLAINT.
II
THE RESPONDENT COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CAUSE OF
ACTION OF RESPONDENT DEVELOPMENT INSURANCE AND SURETY CORPORATION IF
ANY EXISTS AS AGAINST HEREIN PETITIONER MARITIME COMPANY OF THE PHILIPPINES
IS BARRED BY THE STATUTE OF LIMITATION AND HAS ALREADY PRESCRIBED.
III
THE RESPONDENT COURT OF APPEALS ERRED IN ADMITTING IN EVIDENCE PRIVATE
RESPONDENTS EXHIBIT "H" AND IN FINDING ON THE BASIS THEREOF THAT THE
COLLISION OF THE SS DONA NATI AND THE YASUSHIMA MARU WAS DUE TO THE FAULT
OF BOTH VESSELS INSTEAD OF FINDING THAT THE COLLISION WAS CAUSED BY THE
FAULT, NEGLIGENCE AND LACK OF SKILL OF THE COMPLEMENTS OF THE YASUSHIMA
MARU WITHOUT THE FAULT OR NEGLIGENCE OF THE COMPLEMENT OF THE SS DONA
NATI
IV
THE RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT UNDER THE CODE OF
COMMERCE PETITIONER APPELLANT MARITIME COMPANY OF THE PHILIPPINES IS A SHIP
AGENT OR NAVIERO OF SS DONA NATI OWNED BY CO-PETITIONER APPELLANT NATIONAL
DEVELOPMENT COMPANY AND THAT SAID PETITIONER-APPELLANT IS SOLIDARILY LIABLE
WITH SAID CO-PETITIONER FOR LOSS OF OR DAMAGES TO CARGO RESULTING IN THE
COLLISION OF SAID VESSEL, WITH THE JAPANESE YASUSHIMA MARU.
V
THE RESPONDENT COURT OF APPEALS ERRED IN FINDING THAT THE LOSS OF OR
DAMAGES TO THE CARGO OF 550 BALES OF AMERICAN RAW COTTON, DAMAGES WERE
CAUSED IN THE AMOUNT OF P344,977.86 INSTEAD OF ONLY P110,000 AT P200.00 PER
BALE AS ESTABLISHED IN THE BILLS OF LADING AND ALSO IN HOLDING THAT
PARAGRAPH 1O OF THE BILLS OF LADING HAS NO APPLICATION IN THE INSTANT CASE
THERE BEING NO GENERAL AVERAGE TO SPEAK OF.
VI
THE RESPONDENT COURT OF APPEALS ERRED IN HOLDING THE PETITIONERS NATIONAL
DEVELOPMENT COMPANY AND COMPANY OF THE PHILIPPINES TO PAY JOINTLY AND
SEVERALLY TO HEREIN RESPONDENT DEVELOPMENT INSURANCE AND SURETY
CORPORATION THE SUM OF P364,915.86 WITH LEGAL INTEREST FROM THE FILING OF THE
COMPLAINT UNTIL FULLY PAID PLUS P10,000.00 AS AND FOR ATTORNEYS FEES INSTEAD
OF SENTENCING SAID PRIVATE RESPONDENT TO PAY HEREIN PETITIONERS ITS
COUNTERCLAIM IN THE AMOUNT OF P10,000.00 BY WAY OF ATTORNEY'S FEES AND THE
COSTS. (pp. 1-4, Brief for the Maritime Company of the Philippines; p. 121, Rollo)
The pivotal issue in these consolidated cases is the determination of which laws govern loss or
destruction of goods due to collision of vessels outside Philippine waters, and the extent of liability
The main thrust of NDC's argument is to the effect that the Carriage of Goods by Sea Act should
apply to the case at bar and not the Civil Code or the Code of Commerce. Under Section 4 (2) of
said Act, the carrier is not responsible for the loss or damage resulting from the "act, neglect or
default of the master, mariner, pilot or the servants of the carrier in the navigation or in the
management of the ship." Thus, NDC insists that based on the findings of the trial court which were
adopted by the Court of Appeals, both pilots of the colliding vessels were at fault and negligent,
NDC would have been relieved of liability under the Carriage of Goods by Sea Act. Instead, Article
287 of the Code of Commerce was applied and both NDC and MCP were ordered to reimburse the
insurance company for the amount the latter paid to the consignee as earlier stated.
This issue has already been laid to rest by this Court of Eastern Shipping Lines Inc. v. IAC (1 50
SCRA 469-470 [1987]) where it was held under similar circumstance "that the law of the country to
which the goods are to be transported governs the liability of the common carrier in case of their
loss, destruction or deterioration" (Article 1753, Civil Code). Thus, the rule was specifically laid down
that for cargoes transported from Japan to the Philippines, the liability of the carrier is governed
primarily by the Civil Code and in all matters not regulated by said Code, the rights and obligations
of common carrier shall be governed by the Code of commerce and by laws (Article 1766, Civil
33
Code). Hence, the Carriage of Goods by Sea Act, a special law, is merely suppletory to the
provision of the Civil Code.
In the case at bar, it has been established that the goods in question are transported from San
Francisco, California and Tokyo, Japan to the Philippines and that they were lost or due to a
collision which was found to have been caused by the negligence or fault of both captains of the
colliding vessels. Under the above ruling, it is evident that the laws of the Philippines will apply, and
it is immaterial that the collision actually occurred in foreign waters, such as Ise Bay, Japan.
Under Article 1733 of the Civil Code, 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 circumstances of each
case. Accordingly, under Article 1735 of the same Code, in all other than those mentioned is Article
1734 thereof, the common carrier shall be presumed to have been at fault or to have acted
negigently, unless it proves that it has observed the extraordinary diligence required by law.
It appears, however, that collision falls among matters not specifically regulated by the Civil Code,
so that no reversible error can be found in respondent courses application to the case at bar of
Articles 826 to 839, Book Three of the Code of Commerce, which deal exclusively with collision of
vessels.
More specifically, Article 826 of the Code of Commerce provides that where collision is imputable to
the personnel of a vessel, the owner of the vessel at fault, shall indemnify the losses and damages
incurred after an expert appraisal. But more in point to the instant case is Article 827 of the same
Code, which provides that if the collision is imputable to both vessels, each one shall suffer its own
damages and both shall be solidarily responsible for the losses and damages suffered by their
cargoes.
Significantly, under the provisions of the Code of Commerce, particularly Articles 826 to 839, the
shipowner or carrier, is not exempt from liability for damages arising from collision due to the fault or
negligence of the captain. Primary liability is imposed on the shipowner or carrier in recognition of
the universally accepted doctrine that the shipmaster or captain is merely the representative of the
owner who has the actual or constructive control over the conduct of the voyage (Y'eung Sheng
Exchange and Trading Co. v. Urrutia & Co., 12 Phil. 751 [1909]).
There is, therefore, no room for NDC's interpretation that the Code of Commerce should apply only
to domestic trade and not to foreign trade. Aside from the fact that the Carriage of Goods by Sea Act
(Com. Act No. 65) does not specifically provide for the subject of collision, said Act in no uncertain
terms, restricts its application "to all contracts for the carriage of goods by sea to and from Philippine
ports in foreign trade." Under Section I thereof, it is explicitly provided that "nothing in this Act shall
be construed as repealing any existing provision of the Code of Commerce which is now in force, or
as limiting its application." By such incorporation, it is obvious that said law not only recognizes the
existence of the Code of Commerce, but more importantly does not repeal nor limit its application.
On the other hand, Maritime Company of the Philippines claims that Development Insurance and
Surety Corporation, has no cause of action against it because the latter did not prove that its alleged
subrogers have either the ownership or special property right or beneficial interest in the cargo in
question; neither was it proved that the bills of lading were transferred or assigned to the alleged
subrogers; thus, they could not possibly have transferred any right of action to said plaintiff- appellee
in this case. (Brief for the Maritime Company of the Philippines, p. 16).
The records show that the Riverside Mills Corporation and Guilcon, Manila are the holders of the
duly endorsed bills of lading covering the shipments in question and an examination of the invoices
in particular, shows that the actual consignees of the said goods are the aforementioned companies.
Moreover, no less than MCP itself issued a certification attesting to this fact. Accordingly, as it is
undisputed that the insurer, plaintiff appellee paid the total amount of P364,915.86 to said
consignees for the loss or damage of the insured cargo, it is evident that said plaintiff-appellee has a
cause of action to recover (what it has paid) from defendant-appellant MCP (Decision, CA-G.R. No.
46513-R, p. 10; Rollo, p. 43).
MCP next contends that it can not be liable solidarity with NDC because it is merely the manager
and operator of the vessel Dona Nati not a ship agent. As the general managing agent, according to
MCP, it can only be liable if it acted in excess of its authority.
As found by the trial court and by the Court of Appeals, the Memorandum Agreement of September
13, 1962 (Exhibit 6, Maritime) shows that NDC appointed MCP as Agent, a term broad enough to
include the concept of Ship-agent in Maritime Law. In fact, MCP was even conferred all the powers
of the owner of the vessel, including the power to contract in the name of the NDC (Decision, CA
G.R. No. 46513, p. 12; Rollo, p. 40). Consequently, under the circumstances, MCP cannot escape
liability.
It is well settled that both the owner and agent of the offending vessel are liable for the damage
done where both are impleaded (Philippine Shipping Co. v. Garcia Vergara, 96 Phil. 281 [1906]);
that in case of collision, both the owner and the agent are civilly responsible for the acts of the
captain (Yueng Sheng Exchange and Trading Co. v. Urrutia & Co., supra citing Article 586 of the
Code of Commerce; Standard Oil Co. of New York v. Lopez Castelo, 42 Phil. 256, 262 [1921]); that
while it is true that the liability of the naviero in the sense of charterer or agent, is not expressly
provided in Article 826 of the Code of Commerce, it is clearly deducible from the general doctrine of
jurisprudence under the Civil Code but more specially as regards contractual obligations in Article
586 of the Code of Commerce. Moreover, the Court held that both the owner and agent (Naviero)
should be declared jointly and severally liable, since the obligation which is the subject of the action
had its origin in a tortious act and did not arise from contract (Verzosa and Ruiz, Rementeria y Cia v.
Lim, 45 Phil. 423 [1923]). Consequently, the agent, even though he may not be the owner of the
vessel, is liable to the shippers and owners of the cargo transported by it, for losses and damages
occasioned to such cargo, without prejudice, however, to his rights against the owner of the ship, to
the extent of the value of the vessel, its equipment, and the freight (Behn Meyer Y Co. v. McMicking
et al. 11 Phil. 276 [1908]).
As to the extent of their liability, MCP insists that their liability should be limited to P200.00 per
package or per bale of raw cotton as stated in paragraph 17 of the bills of lading. Also the MCP
argues that the law on averages should be applied in determining their liability.
MCP's contention is devoid of merit. The declared value of the goods was stated in the bills of lading
and corroborated no less by invoices offered as evidence ' during the trial. Besides, common
carriers, in the language of the court in Juan Ysmael & Co., Inc. v. Barrette et al., (51 Phil. 90 [1927])
"cannot limit its liability for injury to a loss of goods where such injury or loss was caused by its own
negligence." Negligence of the captains of the colliding vessel being the cause of the collision, and
the cargoes not being jettisoned to save some of the cargoes and the vessel, the trial court and the
Court of Appeals acted correctly in not applying the law on averages (Articles 806 to 818, Code of
Commerce).
MCP's claim that the fault or negligence can only be attributed to the pilot of the vessel SS
Yasushima Maru and not to the Japanese Coast pilot navigating the vessel Dona Nati need not be
discussed lengthily as said claim is not only at variance with NDC's posture, but also contrary to the
factual findings of the trial court affirmed no less by the Court of Appeals, that both pilots were at
fault for not changing their excessive speed despite the thick fog obstructing their visibility.
Finally on the issue of prescription, the trial court correctly found that the bills of lading issued allow
trans-shipment of the cargo, which simply means that the date of arrival of the ship Dona Nati on
April 18,1964 was merely tentative to give allowances for such contingencies that said vessel might
not arrive on schedule at Manila and therefore, would necessitate the trans-shipment of cargo,
resulting in consequent delay of their arrival. In fact, because of the collision, the cargo which was
supposed to arrive in Manila on April 18, 1964 arrived only on June 12, 13, 18, 20 and July 10, 13
34
and 15, 1964. Hence, had the cargoes in question been saved, they could have arrived in Manila on
the above-mentioned dates. Accordingly, the complaint in the instant case was filed on April 22,
1965, that is, long before the lapse of one (1) year from the date the lost or damaged cargo "should
have been delivered" in the light of Section 3, sub-paragraph (6) of the Carriage of Goods by Sea
Act.
PREMISES CONSIDERED, the subject petitions are DENIED for lack of merit and the assailed
decision of the respondent Appellate Court is AFFIRMED.
SO ORDERED.
[G.R. No. 71929 : December 4, 1990.]
192 SCRA 9
ALITALIA, Petitioner, vs. INTERMEDIATE APPELLATE COURT and FELIPA E. PABLO,
Respondents.
DECISION
NARVASA, J.:
Dr. Felipa Pablo — an associate professor in the University of the Philippines, 1 and a research
grantee of the Philippine Atomic Energy Agency — was invited to take part at a meeting of the
Department of Research and Isotopes of the Joint FAO-IAEA Division of Atomic Energy in Food and
Agriculture of the United Nations in Ispra, Italy. 2 She was invited in view of her specialized
knowledge in "foreign substances in food and the agriculture environment." She accepted the
invitation, and was then scheduled by the organizers, to read a paper on "The Fate of Radioactive
Fusion Products Contaminating Vegetable Crops." 3 The program announced that she would be the
second speaker on the first day of the meeting. 4 To fulfill this engagement, Dr. Pablo booked
passage on petitioner airline, ALITALIA.
She arrived in Milan on the day before the meeting in accordance with the itinerary and time table
set for her by ALITALIA. She was however told by the ALITALIA personnel there at Milan that her
luggage was "delayed inasmuch as the same . . . (was) in one of the succeeding flights from Rome
to Milan." 5 Her luggage consisted of two (2) suitcases: one contained her clothing and other
personal items; the other, her scientific papers, slides and other research material. But the other
flights arriving from Rome did not have her baggage on board.
By then feeling desperate, she went to Rome to try to locate her bags herself. There, she inquired
about her suitcases in the domestic and international airports, and filled out the forms prescribed by
ALITALIA for people in her predicament. However, her baggage could not be found. Completely
distraught and discouraged, she returned to Manila without attending the meeting in Ispra, Italy. :
nad
Once back in Manila she demanded that ALITALIA make reparation for the damages thus suffered
by her. ALITALIA offered her "free airline tickets to compensate her for any alleged damages. . . ."
She rejected the offer, and forthwith commenced the action 6 which has given rise to the present
appellate proceedings.
As it turned out, Prof. Pablo's suitcases were in fact located and forwarded to Ispra, 7 Italy, but only
on the day after her scheduled appearance and participation at the U.N. meeting there. 8 Of course
Dr. Pablo was no longer there to accept delivery; she was already on her way home to Manila. And
for some reason or other, the suitcases were not actually restored to Prof. Pablo by ALITALIA until
eleven (11) months later, and four (4) months after institution of her action. 9
After appropriate proceedings and trial, the Court of First Instance rendered judgment in Dr. Pablo's
favor: 10
"(1) Ordering the defendant (ALITALIA) to pay . . . (her) the sum of TWENTY THOUSAND
PESOS (P20,000.00), Philippine Currency, by way of nominal damages;
(2) Ordering the defendant to pay . . . (her) the sum of FIVE THOUSAND PESOS
(P5,000.00), Philippine Currency, as and for attorney's fees; (and)
(3) Ordering the defendant to pay the costs of the suit."
ALITALIA appealed to the Intermediate Appellate Court but failed to obtain a reversal of the
judgment. 11 Indeed, the Appellate Court not only affirmed the Trial Court's decision but also
increased the award of nominal damages payable by ALITALIA to P40,000.00. 12 That increase it
justified as follows: 13
"Considering the circumstances, as found by the Trial Court and the negligence
committed by defendant, the amount of P20,000.00 under present inflationary conditions
as awarded . . . to the plaintiff as nominal damages, is too little to make up for the
plaintiff's frustration and disappointment in not being able to appear at said conference;
and for the embarrassment and humiliation she suffered from the academic community for
failure to carry out an official mission for which she was singled out by the faculty to
represent her institution and the country. After weighing carefully all the considerations,
the amount awarded to the plaintiff for nominal damages and attorney's fees should be
increased to the cost of her round trip air fare or at the present rate of peso to the dollar at
P40,000,00."
ALITALIA has appealed to this Court on Certiorari. Here, it seeks to make basically the same points
it tried to make before the Trial Court and the Intermediate Appellate Court, i.e.:
1) that the Warsaw Convention should have been applied to limit ALITALIA'S liability; and
2) that there is no warrant in fact or in law for the award to Dr. Pablo of nominal damages
and attorney's fees. 14
In addition, ALITALIA postulates that it was error for the Intermediate Appellate Court to have
refused to pass on all the assigned errors and in not stating the facts and the law on which its
decision is based. 15
Under the Warsaw Convention, 16 an air carrier is made liable for damages for:
1) the death, wounding or other bodily injury of a passenger if the accident causing it took
place on board the aircraft or in the course of its operations of embarking or disembarking;
17
2) the destruction or loss of, or damage to, any registered luggage or goods, if the
occurrence causing it took place during the carriage by air;" 18 and
3) delay in the transportation by air of passengers, luggage or goods. 19
In these cases, it is provided in the Convention that the "action for damages, however, founded, can
only be brought subject to conditions and limits set out" therein. 20
The Convention also purports to limit the liability of the carriers in the following manner: 21
1. In the carriage of passengers the liability of the carrier for each passenger is limited to
the sum of 250,000 francs . . . Nevertheless, by special contract, the carrier and the
passenger may agree to a higher limit of liability.: nad
2. a) In the carriage of registered baggage and of cargo, the liability of the carrier is limited
to a sum of 250 francs per kilogramme, unless the passenger or consignor has made, at
the time when the package was handed over to the carrier, a special declaration of
interest in delivery at destination and has paid a supplementary sum if the case so
requires. In that case the carrier will be liable to pay a sum not exceeding the declared
sum, unless he proves that sum is greater than the actual value to the consignor at
delivery.
35
 b) In the case of loss, damage or delay of part of registered baggage or cargo, or of any
object contained therein, the weight to be taken into consideration in determining the
amount to which the carrier's liability is limited shall be only the total weight of the package
or packages concerned. Nevertheless, when the loss, damage or delay of a part of the
registered baggage or cargo, or of an object contained therein, affects the value of other
packages covered by the same baggage check or the same air way bill, the total weight of
such package or packages shall also be taken into consideration in determining the limit
of liability.
3. As regards objects of which the passenger takes charge himself the liability of the
carrier is limited to 5000 francs per passenger.
4. The limits prescribed . . shall not prevent the court from awarding, in accordance with
its own law, in addition, the whole or part of the court costs and of the other expenses of
litigation incurred by the plaintiff. The foregoing provision shall not apply if the amount of
the damages awarded, excluding court costs and other expenses of the litigation, does
not exceed the sum which the carrier has offered in writing to the plaintiff within a period of
six months from the date of the occurrence causing the damage, or before the
commencement of the action, if that is later.
The Warsaw Convention however denies to the carrier availment "of the provisions which exclude or
limit his liability, if the damage is caused by his wilful misconduct or by such default on his part as, in
accordance with the law of the court seized of the case, is considered to be equivalent to wilful
misconduct," or "if the damage is (similarly) caused . . by any agent of the carrier acting within the
scope of his employment." 22 The Hague Protocol amended the Warsaw Convention by removing
the provision that if the airline took all necessary steps to avoid the damage, it could exculpate itself
completely, 23 and declaring the stated limits of liability not applicable "if it is proved that the
damage resulted from an act or omission of the carrier, its servants or agents, done with intent to
cause damage or recklessly and with knowledge that damage would probably result." The same
deletion was effected by the Montreal Agreement of 1966, with the result that a passenger could
recover unlimited damages upon proof of wilful misconduct. 24
The Convention does not thus operate as an exclusive enumeration of the instances of an airline's
liability, or as an absolute limit of the extent of that liability. Such a proposition is not borne out by the
language of the Convention, as this Court has now, and at an earlier time, pointed out. 25
Moreover, slight reflection readily leads to the conclusion that it should be deemed a limit of liability
only in those cases where the cause of the death or injury to person, or destruction, loss or damage
to property or delay in its transport is not attributable to or attended by any wilful misconduct, bad
faith, recklessness, or otherwise improper conduct on the part of any official or employee for which
the carrier is responsible, and there is otherwise no special or extraordinary form of resulting injury.
The Convention's provisions, in short, do not "regulate or exclude liability for other breaches of
contract by the carrier" 26 or misconduct of its officers and employees, or for some particular or
exceptional type of damage. Otherwise, "an air carrier would be exempt from any liability for
damages in the event of its absolute refusal, in bad faith, to comply with a contract of carriage, which
is absurd." 27 Nor may it for a moment be supposed that if a member of the aircraft complement
should inflict some physical injury on a passenger, or maliciously destroy or damage the latter's
property, the Convention might successfully be pleaded as the sole gauge to determine the carrier's
liability to the passenger. Neither may the Convention be invoked to justify the disregard of some
extraordinary sort of damage resulting to a passenger and preclude recovery therefor beyond the
limits set by said Convention. It is in this sense that the Convention has been applied, or ignored,
depending on the peculiar facts presented by each case.:-cralaw
In Pan American World Airways, Inc. v. I.A.C., 28 for example, the Warsaw Convention was applied
as regards the limitation on the carrier's liability, there being a simple loss of baggage without any
otherwise improper conduct on the part of the officials or employees of the airline or other special
injury sustained by the passenger.
On the other hand, the Warsaw Convention has invariably been held inapplicable, or as not
restrictive of the carrier's liability, where there was satisfactory evidence of malice or bad faith
attributable to its officers and employees. 29 Thus, an air carrier was sentenced to pay not only
compensatory but also moral and exemplary damages, and attorney's fees, for instance, where its
employees rudely put a passenger holding a first-class ticket in the tourist or economy section, 30
or ousted a brown Asiatic from the plane to give his seat to a white man, 31 or gave the seat of a
passenger with a confirmed reservation to another, 32 or subjected a passenger to extremely rude,
even barbaric treatment, as by calling him a "monkey." 33
In the case at bar, no bad faith or otherwise improper conduct may be ascribed to the employees of
petitioner airline; and Dr. Pablo's luggage was eventually returned to her, belatedly, it is true, but
without appreciable damage. The fact is, nevertheless, that some special species of injury was
caused to Dr. Pablo because petitioner ALITALIA misplaced her baggage and failed to deliver it to
her at the time appointed — a breach of its contract of carriage, to be sure — with the result that she
was unable to read the paper and make the scientific presentation (consisting of slides,
autoradiograms or films, tables and tabulations) that she had painstakingly labored over, at the
prestigious international conference, to attend which she had traveled hundreds of miles, to her
chagrin and embarrassment and the disappointment and annoyance of the organizers. She felt, not
unreasonably, that the invitation for her to participate at the conference, extended by the Joint
FAO/IAEA Division of Atomic Energy in Food and Agriculture of the United Nations, was a singular
honor not only to herself, but to the University of the Philippines and the country as well, an
opportunity to make some sort of impression among her colleagues in that field of scientific activity.
The opportunity to claim this honor or distinction was irretrievably lost to her because of Alitalia's
breach of its contract.
Apart from this, there can be no doubt that Dr. Pablo underwent profound distress and anxiety,
which gradually turned to panic and finally despair, from the time she learned that her suitcases
were missing up to the time when, having gone to Rome, she finally realized that she would no
longer be able to take part in the conference. As she herself put it, she "was really shocked and
distraught and confused."
Certainly, the compensation for the injury suffered by Dr. Pablo cannot under the circumstances be
restricted to that prescribed by the Warsaw Convention for delay in the transport of baggage.
She is not, of course, entitled to be compensated for loss or damage to her luggage. As already
mentioned, her baggage was ultimately delivered to her in Manila, tardily but safely. She is however
entitled to nominal damages — which, as the law says, is adjudicated in order that a right of the
plaintiff, which has been violated or invaded by the defendant, may be vindicated and recognized,
and not for the purpose of indemnifying the plaintiff for any loss suffered — and this Court agrees
that the respondent Court of Appeals correctly set the amount thereof at P40,000.00. As to the
purely technical argument that the award to her of such nominal damages is precluded by her
omission to include a specific claim therefor in her complaint, it suffices to draw attention to her
general prayer, following her plea for moral and exemplary damages and attorney's fees, "for such
other and further just and equitable relief in the premises," which certainly is broad enough to
comprehend an application as well for nominal damages. Besides, petitioner should have realized
that the explicit assertion, and proof, that Dr. Pablo's right had been violated or invaded by it —
absent any claim for actual or compensatory damages, the prayer thereof having been voluntarily
deleted by Dr. Pablo upon the return to her of her baggage — necessarily raised the issue of
nominal damages.: rd
This Court also agrees that respondent Court of Appeals correctly awarded attorney's fees to Dr.
Pablo, and the amount of P5,000.00 set by it is reasonable in the premises. The law authorizes
recovery of attorney's fees inter alia where, as here, "the defendant's act or omission has compelled
the plaintiff to litigate with third persons or to incur expenses to protect his interest," 34 or "where
the court deems it just and equitable." 35
WHEREFORE, no error being perceived in the challenged decision of the Court of Appeals, it
appearing on the contrary to be entirely in accord with the facts and the law, said decision is hereby
AFFIRMED, with costs against the petitioner.
SO ORDERED.
G.R. No. 122308 July 8, 1997
36
PURITA S. MAPA, CARMINA S. MAPA and CORNELIO P. MAPA, petitioners,
vs.
COURT OF APPEALS and TRANS-WORLD AIRLINES INC., respondents.
DAVIDE, JR., J.:
The main issue in this petition for review under Rule 45 of the Rules of Court is the applicability of
Article 28(1) of the Warsaw Convention,1 which provides as follows:
Art. 28. (1) An action for damages must be brought, at the option of the plaintiff, in the
territory of one of the High Contracting Parties, either before the court of the domicile of
the carrier or of his principal place of business, or where he has a place of business
through which the contract has been made, or before the court at the place of destination.
We are urged by the petitioners to reverse the 31 May 1995 Decision of the Court of Appeals in CA-
G.R. CV No. 398962 affirming the 24 July 1992 Order of the Regional Trial Court of Quezon City,
Branch 102, which dismissed Civil Case No. Q-91-96203 on the ground of lack of jurisdiction in view
of the aforementioned Article 28(1) of the Warsaw Convention.
The antecedent facts, as summarized by the Court of Appeals, are as follows:
Plaintiffs Cornelio P. Mapa and Purita S. Mapa are respectable members of the society.
Mr. Mapa is an established businessman and currently the Regional General Manager of
Akerlund and Rausing, a multinational packaging material manufacturer based in Manila.
He was previously the Senior Vice President of Phimco Industries, an affiliate company of
Swedish Match Company. Mrs. Mapa is a successful businesswoman engaged in the
commercial transactions of high value antique and oriental arts decor items originating
from Asian countries. Carmina S. Mapa is the daughter of plaintiffs Purita and Cornelio
and is a graduate of the International School in Bangkok, Thailand, now presently enrolled
at the Boston University where she is majoring in communication.
Plaintiffs Mapa entered into contract of air transportation with defendant TWA as evidence
by TWA ticket Nos. 015:9475:153:304 and 015:9475:153:305, purchased in Bangkok,
Thailand. Said TWA tickets are for Los Angeles-New York-Boston-St. Louis-Chicago. . . .
Domicile of carrier TWA is Kansas City, Missouri, USA. Its principal place of business is
Kansas City, Missouri, USA. TWA's place of business through which the contracts were
made is Bangkok, Thailand. The place of destination is Chicago, USA.
On August 10, 1990, plaintiffs Carmina and Purita left Manila on board PAL flight No. 104
for Los Angeles. Carmina was to commence schooling and thus was accompanied by
Purita to assist her in settling down at the University.
They arrived Los Angeles on the same date and stayed there until August 14, 1990 when
they left for New York City.
On August 14, 1990, plaintiffs Purita and Carmina S. Mapa arrived at the John F.
Kennedy (JFK) Airport, New York, on TWA Flight No. 904.
On August 27, 1990, plaintiffs Purita and Carmina S. Mapa departed for Boston, taking a
connecting flight on TWA's carrier, TW 0901, from JFK Airport, New York, to Boston's
Logan Airport, checking in seven (7) pieces of luggage at the TWA counter in the JFK
Airport. The seven baggages were received by a porter who issued seven TWA baggage
receipts numbered 17-8270, 71, 72, 73, 74, 75, and 76 therefor.
From the entrance gate of the terminal building, plaintiffs Purita and Carmina proceeded
to TWA's ticket counter and presented their confirmed TWA tickets numbered
015:9475:153:304 and 015:9475:153:305 with a 3:00 p.m. departure time. They were
issued their boarding passes and were instructed to proceed to gate 35 for boarding. At
about 2:40 p.m., plaintiffs noticed that there was still no instruction to board the aircraft so
they made inquiries. The TWA ground stewardess informed plaintiffs that they were at the
wrong gate because their flight was boarding at gate 1. Upon hearing this, plaintiffs
rushed to gate 1 which was in another building terminal. At gate 1, they were told by a
TWA ground stewardess that flight 901 had just departed. However, they were consoled
that another TWA flight was leaving for Boston after 30 minutes and plaintiffs could use
the same boarding pass for the next flight. At around 3:15 p.m., plaintiffs Purita and
Carmina were able to board the next flight. However, the plane was not immediately
cleared for take off on account of a thunderstorm. The passengers were instructed to stay
inside the aircraft until 6:00 p.m. when the plane finally left for Boston.
Upon arriving in Boston, plaintiffs Purita and Carmina proceeded to the carousel to claim
their baggages and found only three out of the seven they checked in, to wit: one
Samsonite on the carousel, another Samsonite lying on the floor near the carousel and a
third baggage, an American Tourister, inside the unclaimed baggage office. Plaintiffs
immediately reported the loss of their four baggages to the TWA Baggage Office at Logan
Airport. TWA's representative confidently assured them that their baggages would be
located within 24 hours and not more than 48 hours.
On September 2, 1990, plaintiffs received a letter from TWA, signed by Mr. J.A. Butler,
Customer Relations-Baggage Service, apologizing for TWA's failure to locate the missing
luggage and requesting plaintiffs to accomplish a passenger property questionnaire to
facilitate a further intensive and computerized search for the lost luggage. Plaintiffs duly
accomplished the passenger property questionnaire, taking pains to write down in detail
the contents of each missing baggage. The total value of the lost items amounted to
$11,283.79.
On September 20, 1990, plaintiff's counsel wrote TWA thru its General Sales Manager in
the Philippines, Daniel Tuason, with office address at Ground Floor, Saville Building, Sen.
Gil. J. Puyat Avenue corner Paseo de Roxas, Makati, Metro Manila demanding
indemnification for the grave damage and injury suffered by the plaintiffs.
TWA again assured plaintiffs that intensive search was being conducted.
On October 8, 1990, TWA offered to amicably settle the case by giving plaintiffs-
appellants two options: (a) transportation credit for future TWA travel or (b) cash
settlement. Five months lapsed without any result on TWA's intensive search.
On January 3, 1991, plaintiffs-appellant opted for transportation credit for future TWA
travel.
On January 11, 1991, TWA disregarded plaintiffs' option and unilaterally declared the
payment of $2,560.00 as constituting full satisfaction of the plaintiffs' claim.
On July 19, 1991, plaintiffs accepted the check for $2,560.00, as partial payment for the
actual cost of their lost baggages and their contents.
37
 Despite demands by plaintiffs, TWA failed and refused without just cause to indemnify and
redress plaintiffs for the grave injury and damages they have suffered. 4
Purita S. Mapa, Carmina S. Mapa, and Cornelio P. Mapa (herein petitioners) then filed with the trial
court on 1 August 1991 a complaint5 for damages,6 which was docketed as Civil Case No. Q-91-
9620. Before a responsive pleading was filed, the petitioners filed an Amended Complaint.7 They
prayed that after due trial private respondent Trans-World Airlines, Inc. (hereafter, TWA), be ordered
to pay them the following amounts: (1) US$8,723.79, or its equivalent in Philippine currency,
representing the cost of the lost luggage and its contents; (2) US$2,949.50, or its equivalent in
Philippine currency, representing the cost of hotel, board and lodging, and communication
expenses; (3) P1 million, by way of moral damages; (4) P1 million, by way of exemplary damages,
with legal interest on said amounts from the date of extrajudicial demand thereof; and (5)
P500,000.00 as attorney's fees, costs of the suit, and other expenses of litigation.8
On 26 February 1992, TWA filed its Answer to the Amended Complaint raising, as special and
affirmative defense, lack of jurisdiction of Philippine courts over the action for damages in the
pursuant to Article 28(1) of the Warsaw Convention, the action could only be brought either in
Bangkok where the contract was entered into, or in Boston which was the place of destination, or in
Kansas City which is the carrier's domicile and principal place of business.
TWA further alleged that pursuant to the Warsaw Convention and the Notice of Baggage Limitations
at the back of the tickets, its liability to the petitioners is limited to US$9.07 per pound, or US$20.00
per kilo, which is in lieu of actual and compensatory damages. Even assuming that petitioners' bag
weighed the maximum acceptable weight of 70 pounds, TWA's maximum liability is $640.00 per bag
or $2,560.00 for the four pieces of baggage, which the petitioners have been offered and have
accepted. TWA also submitted that it could not be liable for moral and exemplary damages and
attorney's fees because it did not act in a wanton, fraudulent, reckless, oppressive, or malevolent
manner.9
On 7 February 1992, the petitioners filed their second Amended Complaint 10 to include a claim of
US$2,500, or its equivalent in Philippine Currency, representing the additional replacement cost of
the items and personal effects contained in their lost luggage; and US$4,500 representing the travel
expenses, hotel, lodging, food and other expenses of petitioner Cornelio Mapa, who was
constrained to join his family in Boston to extend the necessary assistance in connection with the
lost luggage.
After the filing of TWA's Answer to the second Amended Complaint, 11 and petitioners' Reply thereto,
the trial court gave TWA ten days within which to submit a memorandum in support of its affirmative
defenses; after which the incident would be deemed submitted for resolution. 12 However, after TWA
filed its Memorandum,13 the trial court gave the petitioners five days within which to file a reply
memorandum; and TWA, two days from receipt of the latter to file its comment thereon.14 The
petitioners then filed their Opposition (by way of Reply Memorandum)15 to which TWA filed a
Reply.16 Thereafter, the petitioners submitted a Rejoinder17; TWA, a Surrejoinder.18
On 24 July 1992, the trial court issued an Order19 dismissing the case for lack of jurisdiction in light
of Article 28(1) of the Warsaw Convention. Thus:
It is plaintiffs' theory that the Warsaw Convention does not apply to the instant case
because plaintiffs' contract of transportation does not constitute "international
transportation" as defined in said convention. This however is belied by the Passenger
Property Questionnaire which is Annex C of plaintiffs' amended complaint. Page two of
said questionnaire accomplished by plaintiffs under the heading "Your Complete Itinerary"
shows that the TWA tickets issued to the plaintiffs form part of the contract of
transportation to be performed from Manila to the United States. Since the Philippines and
the United States are parties to the convention, plaintiffs' contracts of transportation come
within the meaning of International Transportation.
xxx xxx xxx
On the basis of the foregoing, the Court holds that the Warsaw Convention is applicable to
the case at bar, even if the basis of plaintiffs' present action is breach of contract of
carriage under the New Civil Code.
The next question to be resolved is whether or not the Court has jurisdiction to try the
present case in the light of the provision of Art. 28(1) above-quoted.
Under Art. 28(1) supra, a complaint for damages against an air carrier can be instituted
only in any of the following places/courts:
(1) The court of the domicile of the carrier;
(2) The court of its principal place of business;
(3) The court where it has a place of business through which the contract had been made;
(4) The court of the place of destination.
In interpreting the provision of Art. 28(1) of the Warsaw Convention, the Supreme Court in
the same case of Augusto Benedicto Santos vs. Northwest Airlines held:
Whether Article 28(1) refers to jurisdiction or only to venue is a question over which
authorities are sharply divided. While the petitioner cites several cases holding that Article
28(1) refers to venue rather that jurisdiction, there are later cases cited by the private
respondent supporting the conclusion that the provision is jurisdictional.
Venue and jurisdiction are entirely distinct matters. Jurisdiction may not be conferred by
consent or waiver upon a court which otherwise would have no jurisdiction over the
subject-matter of an action; but the venue of an action as fixed by statute may be changed
by the consent of the parties and an objection that the plaintiff brought his suit in the
wrong country may be waived by the failure of the defendant to make a timely objection.
In either case, the court may render a valid judgment. Rules as to jurisdiction can never
be left to the consent or agreement of the parties, whether or not prohibition exists against
their alteration.
A number of reasons tends to support the characterization of Article 28(1) as a jurisdiction
and not a venue provision. First, the wording of Article 32, which indicates the places
where the action for damages "must" be brought, underscores the mandatory nature of
Article 28(1). Second, this characterization is consistent with one of the objectives of the
Convention, which is to "regulate in a uniform manner the conditions of international
transportation by air." Third, the Convention does not contain any provision prescribing
rules of jurisdiction other than Article 28(1), which means that the phrase "rules as to
jurisdiction" used in Article 32 must refer only to Article 28(1). In fact, the last sentence of
Article 32 specifically deals with the exclusive enumeration in Article 28(1) as
"jurisdictions," which, as such, cannot be left to the will of the parties regardless of the
time when the damage occurred.
xxx xxx xxx
It has been shown by the defendant that the domicile of the defendant Trans World
Airlines, Inc. is Kansas City, Missouri, its principal place of business is also in Kansas
City, Missouri, the carrier's place of business through which the contracts were made is
38
 Bangkok (Annexes A and A-1, Amended Complaint), and the place of destination was
Boston.
The Philippines not being one of the places specified in Art. 28(1) abovequoted where the
complaint may be instituted, this Court therefore, does not have jurisdiction over the
present case.
Evidently discontented with the trial court's order, the petitioners appealed to the Court of Appeals,
contending that the lower court erred in not holding that (1) it has jurisdiction over the instant case
and (2) the Warsaw Convention is inapplicable in the instant case because the subject matter of the
case is not included within the coverage of the said convention. 20 They claimed that their cause of
action could be based on breach of contract of air carriage founded on Articles 1733, 1734, 1735,
1755, and 1756 of the New Civil Code governing common carriers or Article 2176 of the same Code
governing tort or quasi-delict.
The appellate court disagreed with the petitioners and affirmed the order of the trial court. It held that
the Warsaw Convention is the law which governs the dispute between the petitioners and TWA
because what is involved is international transportation defined by said Convention in Article I(2).
This holding is founded on its determination that the two TWA tickets for Los Angeles-New York-
Boston-St. Louis-Chicago purchased in Bangkok, Thailand, were issued in conjunction with, and
therefore formed part of, the contract of transportation performed from Manila, Philippines, to the
United States.
The respondent court further held that the cause of action of the petitioners arose from the loss of
the four checked pieces of baggage, which then falls under Article 18(1), Chapter III (Liability of the
Carrier) of the Warsaw Conventions.21 Pursuant to Article 24(1) of the Convention, all actions for
damages, whether based on tort, code law or common law, arising from loss of baggage under
Article 18 of the Warsaw Convention, can only be brought subject to the conditions and limits set
forth in the Warsaw Convention. Article 28(1) thereof sets forth conditions and limits in that the
action for damages may be instituted only in the territory of one of the High Contracting Parties,
before the court of (1) the domicile of the carrier, (2) the carrier's principal place of business, (3) the
place of business through which the contract has been made, or (4) the place of destination. Since
the Philippines is not one of these places, a Philippine Court, like the RTC, has no jurisdiction over
the complaint for damages.
Respondent Court of Appeals likewise held that the petitioners could not claim application of Articles
1733, 1734, 1735, 1755, and 1756 of the New Civil Code on common carriers without taking into
consideration Article 1753 of the same Code, which provides that the law of the country to which the
goods are to be transported shall govern the liability of the common carrier for their loss, destruction,
or deterioration. Since the country of ultimate destination is Chicago, the law of Chicago shall govern
the liability of TWA for the loss of the four pieces of baggage. Neither is Article 2176 of the New Civil
Code on torts or quasi-delicts applicable in view of the private international law principle of lex loci
delicti commissi.22 In addition, comformably with Santos III v. Northwest Orient Airlines,23 mere
allegation of willful misconduct resulting in a tort is insufficient to exclude the case from the
comprehension of the Warsaw Convention.
Failing in their bid to reconsider the decision, the petitioners filed this petition. They aver that
respondent Court of Appeals gravely erred (1) in holding that the Warsaw Convention is applicable
to this case and (2) in applying Article 1753 of the Civil Code and the principle of lex loci
delicti commissi.24
We resolved to give due course to the petitioner after the filing by TWA of its Comment on the
petition and noted without action for the reasons stated in the resolution of 25 September 1996
petitioners' Reply and Rejoinder. We then required the parties to submit their respective
memoranda. They did in due time.
The petitioners insist that the Warsaw Convention is not applicable to their case because the
contracts they had with TWA did not involve an international transportation. Whether the contracts
were of international transportation is to be solely determined from the TWA tickets issued to them in
Bangkok, Thailand, which showed that their itinerary was Los Angeles-New York-Boston-St. Louis-
Chicago. Accordingly, since the place of departure (Los Angeles) and the place of destination
(Chicago) are both within the territory of one High Contracting Party, with no agreed stopping place
in a territory subject to the sovereignty, mandate, suzerainty or authority of another Power, the
contracts did not constitute 'international transportation' as defined by the convention. They also
claim to be without legal basis the contention of TWA that their transportation contracts were of
international character because of the handwritten notations in the tickets re "INT'S TKT #079-
4402956821-2" and "INT'L TKT #079-4402956819." Notwithstanding such notations, the TWA
tickets, viz., (a) No. 015.9475:153:304 and (b) No. 015:9475:153:305 did not cease to be for the
itinerary therein designated. Besides, it is a fact that petitioners Purita and Carmina Mapa traveled
from Manila to Los Angeles via Philippine Airlines (PAL) by virtue of PAL tickets issued
independently of the TWA tickets.
The pitch issue to be resolved under the petitioner's first assigned error is whether the contracts of
transportation between Purita and Carmina Mapa, on the one hand, and TWA, on the other, were
contracts of "international transportation" under the Warsaw Convention. If they were, then we
should sustain the trial court and the Court of Appeals in light of our ruling in Santos v. Northwest
Orient Airlines.25 It appears clear to us that TWA itself, the trial court, and the Court of Appeals
impliedly admit that if the sole basis were the two TWA tickets for Los Angeles-New York-Boston-
St. Louis-Chicago, the contracts cannot be brought within the term "international transportation," as
defined in Article I(2) of the Warsaw Convention. As provided therein, a contract is one
of international transportation only if
according to the contract made by the parties, the place of departure and the place of
destination, whether or not there be a break in the transportation or a transshipment, are
situated either within the territories of two High Contracting Parties, or within the territory
of a single High Contracting Party, if there is an agreed stopping place within a territory
subject to the sovereignty, mandate or authority of another power, even though that power
is not a party to this convention.
There are then two categories of international transportation, viz., (1) that where the place of
departure and the place of destination are situated within the territories of two High Contracting
Parties regardless of whether or not there be a break in the transportation or a transshipment; and
(2) that where the place of departure and the place of destination are within the territory of a single
High Contracting Party if there is an agreed stopping place within a territory subject to the
sovereignty, mandate, or authority of another power, even though the power is not a party of the
Convention.
The High Contracting Parties referred to in the Convention are the signatories thereto and those
which subsequently adhered to it. In the case of the Philippines, the Convention was concurred in by
the Senate, through Resolution No. 19, on 16 May 1950. The Philippine instrument of accession
was signed by President Elpidio Quirino on 13 October 1950 and was deposited with the Polish
Government on 9 November 1950. The Convention became applicable to the Philippines on 9
February 1951. Then, on 23 September 1955, President Ramon Magsaysay issued Proclamation
No. 201, declaring the Philippines' formal adherence thereto, "to the end that the same and every
article and clause thereof may be observed and fulfilled in good faith by the Republic of the
Philippines and the citizens thereof.26
The contracts of transportation in this case are evidenced by the two TWA tickets, No.
015:9475:153:304 and No. 015:9475:153:305, both purchased and issued in Bangkok, Thailand. On
the basis alone of the provisions therein, it is obvious that the place of departure and the place of
destination are all in the territory of the United States, or of a single High Contracting Party. The
contracts, therefore, cannot come within the purview of the first category of international
transportation. Neither can it be under the second category since there was NO agreed stopping
place within a territory subject to the sovereignty, mandate, or authority of another power.
39
The only way to bring the contracts between Purita and Carmina Mapa, on the one hand, and TWA,
on the other, within the first category of "international transportation" is to link them with, or to make
them an integral part of, the Manila-Los Angeles travel of Purita and Carmina through PAL aircraft.
The "linkages" which have been pointed out by the TWA, the trial court, and the Court of Appeals
are (1) the handwritten notations, viz., INT'L TKT # 079-4402956821-2 and INT'L TKT # 079-
4402956819, on the two TWA tickets; and (2) the entries made by petitioners Purita and Carmina
Mapa in column YOUR COMPLETE ITINERARY in TWA's Passenger Property Questionnaire,
wherein they mentioned their travel from Manila to Los Angeles in flight PR 102.
The alleged "international tickets" mentioned in the notations in conjunction with which the two TWA
tickets were issued were not presented. Clearly then, there is at all no factual basis of the finding
that the TWA tickets were issued in conjunction with the international tickets, which are even, at
least as of now, non-existent.
As regards the petitioner's entry in YOUR COMPLETE ITINERARY column of the Passenger
Property Questionnaire wherein they included the Manila-Los Angeles travel, it must be pointed out
that this was made on 4 September 199027 by petitioners Purita and Carmina Mapa, and only in
connection with their claim for their lost pieces of baggage. The loss occurred much earlier, or on 27
August 1990. The entry can by no means be considered as a part of, or supplement to, their
contracts of transportation evidenced by the TWA tickets which covered transportation within the
United States only.
It must be underscored that the first category of international transportation under the Warsaw
Convention is based on "the contract made by the parties." TWA does not claim that the Manila-Los
Angeles contracts of transportation which brought Purita and Carmina to Los Angeles were also its
contracts. It does not deny the assertion of the petitioners that those contracts were independent of
the TWA tickets issued in Bangkok, Thailand. No evidence was offered that TWA and PAL had an
agreement concerning transportation of passengers from points of departures not served with
aircrafts of one or the other. There could have been no difficulty for such agreement, since TWA
admitted without qualification in paragraph 1 of its Answer28 to the second Amended Complaint the
allegation in paragraph 1.1 of the latter29 that TWA "is a foreign corporation licensed to do business
in the Philippines with office address at Ground Floor, Saville Building, Sen. Gil. J. Puyat Avenue,
corner Paseo de Roxas, Makati, Metro Manila."
TWA relies on Article I(3) of the Convention, which provides as follows:
3. A carriage to be performed by several successive air carriers is
deemed, for the purposes of this Convention, to be one undivided
carriage, if it has been regarded by the parties as a single operation,
whether it had been agreed upon under the form of a single contract
or of a series of contracts, and it shall not lose its international
character merely because one contract or a series of contracts is to
be performed entirely within a territory subject to the sovereignty,
suzerainty, mandate, or authority of the same High Contracting Party.
It also points to Article 15 of the IATA Recommend Practice 1724, which provides: Carriage to be
performed by a several successive carriers under one ticket, or under a ticket and any conjunction
ticket issued in connection therewith, is regarded as a single operation." 30
The flaw of respondent's position is the presumption that the parties have "regarded" as an
"undivided carriage" or as a "single operation" the carriage from Manila to Los Angeles through PAL
then to New York-Boston-St. Louis-Chicago through TWA. The dismissal then of the second
Amended Complaint by the trial court and the Court of Appeals' affirmance of the dismissal were not
based on indubitable facts or grounds, but no inferences without established factual basis.
TWA should have offered evidence for its affirmative defenses at the preliminary hearing therefor.
Section 5 of Rule 16 of the Rules of Court expressly provides:
Sec. 5. Pleading grounds as affirmative defenses. — Any of the grounds for dismissal
provided for in this rule, except improper venue, may be pleaded as an affirmative
defense, and a preliminary hearing may be had thereon as if a motion to dismiss had
been filed.
Without any further evidence as earlier discussed, the trial court should have denied the affirmative
defense of lack of jurisdiction because it did not appear to be indubitable. Section 3 of Rule 16 of the
Rules of Court provides:
Sec. 3. Hearing and order. — After hearing the court may deny or grant the motion or
allow amendment of pleading, or may defer the hearing and determination of the motion
until the trial if the ground alleged therein does not appear to be indubitable.
WHEREFORE, the instant petition is GRANTED and the challenged decision of 31 May 1995 of
respondent Court of Appeals in CA-G.R. CV No. 39896, as well as the Order of 24 July 1992 of the
Regional Trial Court of Quezon City, Branch 102, in Civil Case No. Q-91-9620, is REVERSED and
SET ASIDE.
The Regional Trial Court of Quezon City, Branch 102, is hereby DIRECTED to proceed with the pre-
trial, if it has not been terminated, and with the trial on the merits of the case and then to render
judgment thereon, taking into account the foregoing observations on the issue of jurisdiction.
SO ORDERED.
G.R. No. 118664 August 7, 1998
JAPAN AIRLINES, petitioner,
vs.
THE COURT OF APPEALS, ENRIQUE AGANA., MARIA ANGELA NINA AGANA, ADALIA B.
FRANCISCO and JOSE MIRANDA, respondents.
ROMERO, J.:
Before us is an appeal by certiorari filed by petitioner Japan Airlines, Inc. (JAL) seeking the reversal
of the decision of the Court of Appeals, 1 which affirmed with modification the award of damages
made by the trial court in favor of herein private respondents Enrique Agana, Maria Angela Nina
Agana, Adelia Francisco and Jose Miranda.
On June 13, 1991, private respondent Jose Miranda boarded JAL flight No. JL 001 in San
Francisco, California bound for Manila. Likewise, on the same day private respondents Enrique
Agana, Maria Angela Nina Agana and Adelia Francisco left Los Angeles, California for Manila via
JAL flight No. JL 061. As an incentive for travelling on the said airline, both flights were to make an
overnight stopover at Narita, Japan, at the airlines' expense, thereafter proceeding to Manila the
following day.
Upon arrival at Narita, Japan on June 14, 1991, private respondents were billeted at Hotel Nikko
Narita for the night. The next day, private respondents, on the final leg of their journey, went to the
airport to take their flight to Manila. However, due to the Mt. Pinatubo eruption, unrelenting ashfall
40
blanketed Ninoy Aquino International Airport (NAIA), rendering it inaccessible to airline traffic.
Hence, private respondents' trip to Manila was cancelled indefinitely.
To accommodate the needs of its stranded passengers, JAL rebooked all the Manila-bound
passengers on flight No. 741 due to depart on June 16, 1991 and also paid for the hotel expenses
for their unexpected overnight stay. On June 16, 1991, much to the dismay of the private
respondents, their long anticipated flight to Manila was again cancelled due to NAIA's indefinite
closure. At this point, JAL informed the private respondents that it would no longer defray their hotel
and accommodation expense during their stay in Narita.
Since NAIA was only reopened to airline traffic on June 22, 1991, private respondents were forced
to pay for their accommodations and meal expenses from their personal funds from June 16 to June
21, 1991. Their unexpected stay in Narita ended on June 22, 1991 when they arrived in Manila on
board JL flight No. 741.
Obviously, still reeling from the experience, private respondents, on July 25, 1991, commenced an
action for damages against JAL before the Regional Trial Court of Quezon City, Branch 104. 2 To
support their claim, private respondents asserted that JAL failed to live up to its duty to provide care
and comfort to its stranded passengers when it refused to pay for their hotel and accommodation
expenses from June 16 to 21, 1991 at Narita, Japan. In other words, they insisted that JAL was
obligated to shoulder their expenses as long as they were still stranded in Narita. On the other hand,
JAL denied this allegation and averred that airline passengers have no vested right to these
amenities in case a flight is cancelled due to "force majeure."
On June 18, 1992, the trial court rendered its judgment in favor of private respondents holding JAL
liable for damages, viz.:
WHEREFORE, judgment is rendered in favor of plaintiffs ordering the defendant
Japan Airlines to pay the plaintiffs Enrique Agana, Adalia B. Francisco and
Maria Angela Nina Agana the sum of One million Two Hundred forty-six
Thousand Nine Hundred Thirty-Six Pesos (P1,246,936.00) and Jose Miranda
the sum of Three Hundred Twenty Thousand Six Hundred sixteen and 31/100
(P320,616.31) as actual, moral and exemplary damages and pay attorney's
fees in the amount of Two Hundred Thousand Pesos (P200,000.00), and to pay
the costs of suit.
Undaunted, JAL appealed the decision before the Court of Appeals, which, however, with the
exception of lowering the damages awarded affirmed the trial court's finding, 3 thus:
Thus, the award of moral damages should be as it is hereby reduced to
P200,000.00 for each of the plaintiffs, the exemplary damages to P300,000.00
and the attorney's fees to P100,000.00 plus the costs.
WHEREFORE, with the foregoing Modification, the judgment appealed from is
hereby AFFIRMED in all other respects.
JAL filed a motion for reconsideration which proved futile and
unavailing. 4
Failing in its bid to reconsider the decision, JAL has now filed this instant petition.
The issue to be resolved is whether JAL, as a common carrier has the obligation to shoulder the
hotel and meal expenses of its stranded passengers until they have reached their final destination,
even if the delay were caused by "force majeure."
To begin with, there is no dispute that the Mt. Pinatubo eruption prevented JAL from proceeding to
Manila on schedule. Likewise, private respondents concede that such event can be considered as
"force majeure" since their delayed arrival in Manila was not imputable to JAL. 5
However, private respondents contend that while JAL cannot be held responsible for the delayed
arrival in Manila, it was nevertheless liable for their living expenses during their unexpected stay in
Narita since airlines have the obligation to ensure the comfort and convenience of its passengers.
While we sympathize with the private respondents' plight, we are unable to accept this contention.
We are not unmindful of the fact that in a plethora of cases we have consistently ruled that a
contract to transport passengers is quite different in kind, and degree from any other contractual
relation. It is safe to conclude that it is a relationship imbued with public interest. Failure on the part
of the common carrier to live up to the exacting standards of care and diligence renders it liable for
any damages that may be sustained by its passengers. However, this is not to say that common
carriers are absolutely responsible for all injuries or damages even if the same were caused by a
fortuitous event. To rule otherwise would render the defense of "force majeure," as an exception
from any liability, illusory and ineffective.
Accordingly, there is no question that when a party is unable to fulfill his obligation because of "force
majeure," the general rule is that he cannot be held liable for damages for non-
performance.6 Corollarily, when JAL was prevented from resuming its flight to Manila due to the
effects of Mt. Pinatubo eruption, whatever losses or damages in the form of hotel and meal
expenses the stranded passengers incurred, cannot be charged to JAL. Yet it is undeniable that JAL
assumed the hotel expenses of respondents for their unexpected overnight stay on June 15, 1991.
Admittedly, to be stranded for almost a week in a foreign land was an exasperating experience for
the private respondents. To be sure, they underwent distress and anxiety during their unanticipated
stay in Narita, but their predicament was not due to the fault or negligence of JAL but the closure of
NAIA to international flights. Indeed, to hold JAL, in the absence of bad faith or negligence, liable for
the amenities of its stranded passengers by reason of a fortuitous event is too much of a burden to
assume.
Furthermore, it has been held that airline passengers must take such risks incident to the mode of
travel. 7 In this regard, adverse weather conditions or extreme climatic changes are some of the
perils involved in air travel, the consequences of which the passenger must assume or expect. After
all, common carriers are not the insurer of all risks. 8
Paradoxically, the Court of Appeals, despite the presence of "force majeure," still ruled against JAL
relying in our decision in PAL v. Court of Appeals, 9 thus:
The position taken by PAL in this case clearly illustrates its failure to grasp the
exacting standard required by law. Undisputably, PAL's diversion of its flight due
to inclement weather was a fortuitous event. Nonetheless, such occurrence did
not terminate PAL's contract with its passengers. Being in the business of air
carriage and the sole one to operate in the country, PAL is deemed equipped to
deal with situations as in the case at bar. What we said in one case once again
must be stressed, i.e., the relation of carrier and passenger continues until the
latter has been landed at the port of destination and has left the carrier's
premises. Hence, PAL necessarily would still have to exercise extraordinary
diligence in safeguarding the comfort, convenience and safety of its stranded
passengers until they have reached their final destination. On this score, PAL
grossly failed considering the then ongoing battle between government forces
and Muslim rebels in Cotabato City and the fact that the private respondent was
a stranger to the place.
41
The reliance is misplaced. The factual background of the PAL case is different from the instant
petition. In that case there was indeed a fortuitous event resulting in the diversion of the PAL flight.
However, the unforeseen diversion was worsened when "private respondents (passenger) was left
at the airport and could not even hitch a ride in a Ford Fiera loaded with PAL personnel," 10 not to
mention the apparent apathy of the PAL station manager as to the predicament of the stranded
passengers. 11 In light of these circumstances, we held that if the fortuitous event was accompanied
by neglect and malfeasance by the carrier's employees, an action for damages against the carrier is
permissible. Unfortunately, for private respondents, none of these conditions are present in the
instant petition.
We are not prepared, however, to completely absolve petitioner JAL from any liability. It must be
noted that private respondents bought tickets from the United States with Manila as their final
destination. While JAL was no longer required to defray private respondents' living expenses during
their stay in Narita on account of the fortuitous event, JAL had the duty to make the necessary
arrangements to transport private respondents on the first available connecting flight to Manila.
Petitioner JAL reneged on its obligation to look after the comfort and convenience of its passengers
when it declassified private respondents from "transit passengers" to "new passengers" as a result
of which private respondents were obliged to make the necessary arrangements themselves for the
next flight to Manila. Private respondents were placed on the waiting list from June 20 to June 24.
To assure themselves of a seat on an available flight, they were compelled to stay in the airport the
whole day of June 22, 1991 and it was only at 8:00 p.m. of the aforesaid date that they were advised
that they could be accommodated in said flight which flew at about 9:00 a.m. the next day.
We are not oblivious to the fact that the cancellation of JAL flights to Manila from June 15 to June
21, 1991 caused considerable disruption in passenger booking and reservation. In fact, it would be
unreasonable to expect, considering NAIA's closure, that JAL flight operations would be normal on
the days affected. Nevertheless, this does not excuse JAL from its obligation to make the necessary
arrangements to transport private respondents on its first available flight to Manila. After all, it had a
contract to transport private respondents from the United States to Manila as their final destination.
Consequently, the award of nominal damages is in order. Nominal damages are adjudicated in order
that a right of a plaintiff, which has been violated or invaded by the defendant, may be vindicated or
recognized and not for the purpose of indemnifying any loss suffered by him. 12 The court may
award nominal damages in every obligation arising from any source enumerated in article 1157, or
in every case where any property right has been invaded. 13
WHEREFORE, in view of the foregoing, the decision of the Court of Appeals dated December 22,
1993 is hereby MODIFIED. The award of actual, moral and exemplary damages is hereby
DELETED. Petitioner JAL is ordered to pay each of the private respondents nominal damages in the
sum of P100,000.00 each including attorney' s fees of P50,000.00 plus costs.
SO ORDERED.
G.R. No. 166640 July 31, 2009
HERMINIO MARIANO, JR., Petitioner,
vs.
ILDEFONSO C. CALLEJAS and EDGAR DE BORJA, Respondents.
DECISION
PUNO, C.J.:
On appeal are the Decision1 and Resolution2 of the Court of Appeals in CA-G.R. CV No. 66891,
dated May 21, 2004 and January 7, 2005 respectively, which reversed the Decision3 of the Regional
Trial Court (RTC) of Quezon City, dated September 13, 1999, which found respondents jointly and
severally liable to pay petitioner damages for the death of his wife.
First, the facts:
Petitioner Herminio Mariano, Jr. is the surviving spouse of Dr. Frelinda Mariano who was a
passenger of a Celyrosa Express bus bound for Tagaytay when she met her death. Respondent
Ildefonso C. Callejas is the registered owner of Celyrosa Express, while respondent Edgar de Borja
was the driver of the bus on which the deceased was a passenger.
At around 6:30 p.m. on November 12, 1991, along Aguinaldo Highway, San Agustin, Dasmariñas,
Cavite, the Celyrosa Express bus, carrying Dr. Mariano as its passenger, collided with an Isuzu
truck with trailer bearing plate numbers PJH 906 and TRH 531. The passenger bus was bound for
Tagaytay while the trailer truck came from the opposite direction, bound for Manila. The trailer truck
bumped the passenger bus on its left middle portion. Due to the impact, the passenger bus fell on its
right side on the right shoulder of the highway and caused the death of Dr. Mariano and physical
injuries to four other passengers. Dr. Mariano was 36 years old at the time of her death. She left
behind three minor children, aged four, three and two years.
Petitioner filed a complaint for breach of contract of carriage and damages against respondents for
their failure to transport his wife and mother of his three minor children safely to her destination.
Respondents denied liability for the death of Dr. Mariano. They claimed that the proximate cause of
the accident was the recklessness of the driver of the trailer truck which bumped their bus while
allegedly at a halt on the shoulder of the road in its rightful lane. Thus, respondent Callejas filed a
third-party complaint against Liong Chio Chang, doing business under the name and style of La
Perla Sugar Supply, the owner of the trailer truck, for indemnity in the event that he would be held
liable for damages to petitioner.lavvph!l
Other cases were filed. Callejas filed a complaint,4 docketed as Civil Case No. NC-397 before the
RTC of Naic, Cavite, against La Perla Sugar Supply and Arcadio Arcilla, the truck driver, for
damages he incurred due to the vehicular accident. On September 24, 1992, the said court
dismissed the complaint against La Perla Sugar Supply for lack of evidence. It, however, found
Arcilla liable to pay Callejas the cost of the repairs of his passenger bus, his lost earnings,
exemplary damages and attorney’s fees.5
A criminal case, Criminal Case No. 2223-92, was also filed against truck driver Arcilla in the RTC of
Imus, Cavite. On May 3, 1994, the said court convicted truck driver Arcadio Arcilla of the crime of
reckless imprudence resulting to homicide, multiple slight physical injuries and damage to property. 6
In the case at bar, the trial court, in its Decision dated September 13, 1999, found respondents
Ildefonso Callejas and Edgar de Borja, together with Liong Chio Chang, jointly and severally liable to
pay petitioner damages and costs of suit. The dispositive portion of the Decision reads:
42
ACCORDINGLY, the defendants are ordered to pay as follows:
1. The sum of ₱50,000.00 as civil indemnity for the loss of life;
2. The sum of ₱40,000.00 as actual and compensatory damages;
3. The sum of ₱1,829,200.00 as foregone income;
4. The sum of ₱30,000.00 as moral damages;
5. The sum of ₱20,000.00 as exemplary damages;
6. The costs of suit.
SO ORDERED.7
Respondents Callejas and De Borja appealed to the Court of Appeals, contending that the trial court
erred in holding them guilty of breach of contract of carriage.
On May 21, 2004, the Court of Appeals reversed the decision of the trial court. It reasoned:
. . . the presumption of fault or negligence against the carrier is only a disputable presumption. It
gives in where contrary facts are established proving either that the carrier had exercised the degree
of diligence required by law or the injury suffered by the passenger was due to a fortuitous event.
Where, as in the instant case, the injury sustained by the petitioner was in no way due to any defect
in the means of transport or in the method of transporting or to the negligent or wilful acts of private
respondent's employees, and therefore involving no issue of negligence in its duty to provide safe
and suitable cars as well as competent employees, with the injury arising wholly from causes
created by strangers over which the carrier had no control or even knowledge or could not have
prevented, the presumption is rebutted and the carrier is not and ought not to be held liable. To rule
otherwise would make the common carrier the insurer of the absolute safety of its passengers which
is not the intention of the lawmakers.8
The dispositive portion of the Decision reads:
WHEREFORE, the decision appealed from, insofar as it found defendants-appellants Ildefonso
Callejas and Edgar de Borja liable for damages to plaintiff-appellee Herminio E. Mariano, Jr., is
REVERSED and SET ASIDE and another one entered absolving them from any liability for the
death of Dr. Frelinda Cargo Mariano.9
The appellate court also denied the motion for reconsideration filed by petitioner.
Hence, this appeal, relying on the following ground:
THE DECISION OF THE HONORABLE COURT OF APPEALS, SPECIAL FOURTEENTH
DIVISION IS NOT IN ACCORD WITH THE FACTUAL BASIS OF THE CASE.10
The following are the provisions of the Civil Code pertinent to the case at bar:
ART. 1733. Common carriers, from the nature of their business and for reasons of public policy, are
bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the
passengers transported by them, according to all the circumstances of each case.
ART. 1755. A common carrier is bound to carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all
the circumstances.
ART. 1756. In case of death of or injuries to passengers, common carriers are presumed to have
been at fault or to have acted negligently, unless they prove that they observed extraordinary
diligence as prescribed in articles 1733 and 1755.
In accord with the above provisions, Celyrosa Express, a common carrier, through its driver,
respondent De Borja, and its registered owner, respondent Callejas, has the express obligation "to
carry the passengers safely as far as human care and foresight can provide, using the utmost
diligence of very cautious persons, with a due regard for all the circumstances,"11 and to observe
extraordinary diligence in the discharge of its duty. The death of the wife of the petitioner in the
course of transporting her to her destination gave rise to the presumption of negligence of the
carrier. To overcome the presumption, respondents have to show that they observed extraordinary
diligence in the discharge of their duty, or that the accident was caused by a fortuitous event.
This Court interpreted the above quoted provisions in Pilapil v. Court of Appeals. 12 We elucidated:
While the law requires the highest degree of diligence from common carriers in the safe transport of
their passengers and creates a presumption of negligence against them, it does not, however, make
the carrier an insurer of the absolute safety of its passengers.
Article 1755 of the Civil Code qualifies the duty of extraordinary care, vigilance and precaution in the
carriage of passengers by common carriers to only such as human care and foresight can provide.
What constitutes compliance with said duty is adjudged with due regard to all the circumstances.
Article 1756 of the Civil Code, in creating a presumption of fault or negligence on the part of the
common carrier when its passenger is injured, merely relieves the latter, for the time being, from
introducing evidence to fasten the negligence on the former, because the presumption stands in the
place of evidence. Being a mere presumption, however, the same is rebuttable by proof that the
common carrier had exercised extraordinary diligence as required by law in the performance of its
contractual obligation, or that the injury suffered by the passenger was solely due to a fortuitous
event.
In fine, we can only infer from the law the intention of the Code Commission and Congress to curb
the recklessness of drivers and operators of common carriers in the conduct of their business.
Thus, it is clear that neither the law nor the nature of the business of a transportation company
makes it an insurer of the passenger's safety, but that its liability for personal injuries sustained by its
passenger rests upon its negligence, its failure to exercise the degree of diligence that the law
requires.
In the case at bar, petitioner cannot succeed in his contention that respondents failed to overcome
the presumption of negligence against them. The totality of evidence shows that the death of
petitioner’s spouse was caused by the reckless negligence of the driver of the Isuzu trailer truck
which lost its brakes and bumped the Celyrosa Express bus, owned and operated by respondents.
First, we advert to the sketch prepared by PO3 Magno S. de Villa, who investigated the accident.
The sketch13 shows the passenger bus facing the direction of Tagaytay City and lying on its right
side on the shoulder of the road, about five meters away from the point of impact. On the other
hand, the trailer truck was on the opposite direction, about 500 meters away from the point of
impact. PO3 De Villa stated that he interviewed De Borja, respondent driver of the passenger bus,
who said that he was about to unload some passengers when his bus was bumped by the driver of
43
the trailer truck that lost its brakes. PO3 De Villa checked out the trailer truck and found that its
brakes really failed. He testified before the trial court, as follows:
ATTY. ESTELYDIZ:
q You pointed to the Isuzu truck beyond the point of impact. Did you investigate why did
(sic) the Isuzu truck is beyond the point of impact?
His police report bolsters his testimony and states:
Said vehicle 1 [passenger bus] was running from Manila toward south direction when, in the course
of its travel, it was hit and bumped by vehicle 2 [truck with trailer] then running fast from opposite
direction, causing said vehicle 1 to fall on its side on the road shoulder, causing the death of one
and injuries of some passengers thereof, and its damage, after collission (sic), vehicle 2
continiously (sic) ran and stopped at approximately 500 meters away from the piont (sic) of impact.15

In fine, the evidence shows that before the collision, the passenger bus was cruising on its rightful
a Because the truck has no brakes.
lane along the Aguinaldo Highway when the trailer truck coming from the opposite direction, on full
speed, suddenly swerved and encroached on its lane, and bumped the passenger bus on its left
COURT: middle portion. Respondent driver De Borja had every right to expect that the trailer truck coming
from the opposite direction would stay on its proper lane. He was not expected to know that the
trailer truck had lost its brakes. The swerving of the trailer truck was abrupt and it was running on a
q What is the distance between that circle which is marked as Exh. 1-c to the place where fast speed as it was found 500 meters away from the point of collision. Secondly, any doubt as to
you found the same? the culpability of the driver of the trailer truck ought to vanish when he pleaded guilty to the charge of
reckless imprudence resulting to multiple slight physical injuries and damage to property in Criminal
a More or less 500 meters. Case No. 2223-92, involving the same incident.1avvph!1

q Why did you say that the truck has no brakes? IN VIEW WHEREOF, the petition is DENIED. The Decision dated May 21, 2004 and the Resolution
dated January 7, 2005 of the Court of Appeals in CA-G.R. CV No. 66891 are AFFIRMED.
a I tested it.
SO ORDERED.
q And you found no brakes?

a Yes, sir.
G.R. No. L-46179 January 31, 1978
xxx
CANDIDA VIRATA, TOMAS VIRATA, MANOLITO VIRATA, EDERLINDA VIRATA, NAPOLEON
VIRATA, ARACELY VIRATA, ZENAIDA VIRATA, LUZMINDA VIRATA, PACITA VIRATA, and
q When you went to the scene of accident, what was the position of Celyrosa bus? EVANGELINA VIRATA, petitioners,
vs.
a It was lying on its side. VICTORIO OCHOA, MAXIMO BORILLA and THE COURT OF FIRST INSTANCE OF CAVITE, 7th
JUDICIAL DISTRICT, BRANCH V, stationed at BACOOR, CAVITE, respondents.
COURT:
FERNANDEZ, J.:
q Right side or left side?
This is an appeal by certiorari, from the order of the Court of First Instance of Cavite, Branch V, in
Civil Case No. B-134 granting the motion of the defendants to dismiss the complaint on the ground
a Right side. that there is another action pending between the same parties for the same cause. 1

ATTY. ESTELYDIZ: The record shows that on September 24, 1975 one Arsenio Virata died as a result of having been
bumped while walking along Taft Avenue, Pasay City by a passenger jeepney driven by Maximo
q On what part of the road was it lying? Borilla and registered in the name Of Victoria Ochoa; that Borilla is the employer of Ochoa; that for
the death of Arsenio Virata, a action for homicide through reckless imprudence was instituted on
September 25, 1975 against Maximo Borilla in the Court of First Instance of Rizal at Pasay City,
a On the shoulder of the road. docketed as C Case No. 3162-P of said court; that at the hearing of the said criminal case on
December 12, 1975, Atty. Julio Francisco, the private prosecutor, made a reservation to file a
COURT: separate civil action for damages against the driver on his criminal liability; that on February 19,
1976 Atty. Julio Francisco filed a motion in said c case to withdraw the reservation to file a separate
civil action; that thereafter, the private prosecutor actively participated in the trial and presented
q How many meters from the point of impact? evidence on the damages; that on June 29, 1976 the heirs of Arsenio Virata again reserved their
right to institute a separate civil action; that on July 19, 1977 the heirs of Arsenio Virata, petitioners
a Near, about 5 meters.14 herein, commenced Civil No. B-134 in the Court of First Instance of Cavite at Bacoor, Branch V, for
damages based on quasi-delict against the driver Maximo Borilla and the registered owner of the

44
jeepney, Victorio Ochoa; that on August 13, 1976 the defendants, private respondents filed a motion
to dismiss on the ground that there is another action, Criminal Case No. 3162-P, pending between
the same parties for the same cause; that on September 8, 1976 the Court of First Instance of Rizal
at Pasay City a decision in Criminal Case No. 3612-P acquitting the accused Maximo Borilla on the
ground that he caused an injury by name accident; and that on January 31, 1977, the Court of First
Instance of Cavite at Bacoor granted the motion to Civil Case No. B-134 for damages. 2
The principal issue is weather or not the of the Arsenio Virata, can prosecute an action for the
damages based on quasi-delict against Maximo Borilla and Victoria Ochoa, driver and owner,
respectively on the passenger jeepney that bumped Arsenio Virata.
It is settled that in negligence cases the aggrieved parties may choose between an action under the
Revised Penal Code or of quasi-delict under Article 2176 of the Civil Code of the Philippines. What
is prohibited by Article 2177 of the Civil Code of the Philippines is to recover twice for the same
negligent act.
The Supreme Court has held that:
According to the Code Commission: 'The foregoing provision (Article 2177)
though at first sight startling, is not so novel or extraordinary when we consider
the exact nature of criminal and civil negligence. The former is a violation of the
criminal law, while the latter is a 'culpa aquiliana' or quasi-delict, of ancient
origin, having always had its own foundation and individuality, separate from
criminal negligence. Such distinction between criminal negligence and 'culpa
extra-contractual' or quasi-delito has been sustained by decision of the
Supreme Court of Spain and maintained as clear, sound and perfectly tenable
by Maura, an outstanding Spanish jurist. Therefore, under the proposed Article
2177, acquittal from an accusation of criminal negligence, whether on
reasonable doubt or not, shall not be a bar to a subsequent civil action, not for
civil liability arising from criminal negligence, but for damages due to a quasi-
delict or 'culpa aquiliana'. But said article forestalls a double recovery. (Report
of the Code Commission, p. 162.)
Although, again, this Article 2177 does seem to literally refer to only acts of
negligence, the same argument of Justice Bocobo about construction that
upholds 'the spirit that given life' rather than that which is literal that killeth the
intent of the lawmaker should be observed in applying the same. And
considering that the preliminary chapter on human relations of the new Civil
Code definitely establishes the separability and independence of liability in a
civil action for acts criminal in character (under Articles 29 to 32) from the civil
responsibility arising from crime fixed by Article 100 of the Penal Code, and, in a
sense, the Rules of Court, under Sections 2 and 3(c), Rule 111, contemplate
also the same separability, it is 'more congruent' with the spirit of law, equity
and justice, and more in harmony with modern progress', to borrow the felicitous
language in Rakes vs. Atlantic Gulf and Pacific Co., 7 Phil. to 359, to hod as We
do hold, that Article 2176, where it refers to 'fault covers not only acts 'not
punishable by law' but also criminal in character, whether intentional and
voluntary or consequently, a separate civil action lies against the in a criminal
act, whether or not he is criminally prosecuted and found guilty and acquitted,
provided that the offended party is not allowed, if he is actually charged also
criminally, to recover damages on both scores, and would be entitled in such
eventuality only to the bigger award of the, two assuming the awards made in
the two cases vary. In other words the extinction of civil liability refereed to in
Par. (c) of Section 13, Rule 111, refers exclusively to civil liability founded on
Article 100 of the Revised Penal Code, whereas the civil liability for the same
act considered as a quasi-delict only and not as a crime is not extinguished
even by a declaration in the criminal case that the criminal act charged has not
happened or has not been committed by the accused. Brief stated, We hold, in
reitration of Garcia, that culpa aquilina includes voluntary and negligent acts
which may be punishable by law. 3
The petitioners are not seeking to recover twice for the same negligent act. Before Criminal Case
No. 3162-P was decided, they manifested in said criminal case that they were filing a separate civil
action for damages against the owner and driver of the passenger jeepney based on quasi-
delict. The acquittal of the driver, Maximo Borilla, of the crime charged in Criminal Case No. 3162-P
is not a bar to the prosecution of Civil Case No. B-134 for damages based on quasi-delict The
source of the obligation sought to be enforced in Civil Case No. B-134 is quasi-delict, not an act or
omission punishable by law. Under Article 1157 of the Civil Code of the Philippines, quasi-delict and
an act or omission punishable by law are two different sources of obligation.
Moreover, for the petitioners to prevail in the action for damages, Civil Case No. B-134, they have
only to establish their cause of action by preponderance of the evidence.
WHEREFORE, the order of dismissal appealed from is hereby set aside and Civil Case No. B-134 is
reinstated and remanded to the lower court for further proceedings, with costs against the private
respondents.
SO ORDERED.
G.R. No. 91856 October 5, 1990
YAKULT PHILIPPINES AND LARRY SALVADO, petitioner,
vs.
COURT OF APPEALS, WENCESLAO M. POLO, in his capacity as Presiding Judge of Br. 19 of
the RTC of Manila, and ROY CAMASO, respondents.
GANCAYCO, J.:
Can a civil action instituted after the criminal action was filed prosper even if there was no
reservation to file a separate civil action? This is the issue in this petition.
On December 24, 1982, a five-year old boy, Roy Camaso, while standing on the sidewalk of M. de
la Fuente Street, Sampaloc, Manila, was sideswiped by a Yamaha motorcycle owned by Yakult
Philippines and driven by its employee, Larry Salvado.
Salvado was charged with the crime of reckless imprudence resulting to slight physical injuries in an
information that was filed on January 6, 1983 with the then City Court of Manila, docketed as
Criminal Case No. 027184. On October 19, 1984 a complaint for damages was filed by Roy Camaso
represented by his father, David Camaso, against Yakult Philippines and Larry Salvado in the
Regional Trial Court of Manila docketed as Civil Case No. 84-27317.
In due course a decision was rendered in the civil case on May 26, 1989 ordering defendants to pay
jointly and severally the plaintiff the sum of P13,006.30 for actual expenses for medical services and
hospital bills; P3,000.00 attorney's fees and the costs of the suit. Although said defendants appealed
the judgment, they nevertheless filed a petition for certiorari in the Court of Appeals challenging the
jurisdiction of the trial court over said civil case.
Petitioners' thesis is that the civil action for damages for injuries arising from alleged criminal
negligence of Salvado, being without malice, cannot be filed independently of the criminal action
under Article 33 of the Civil Code. Further, it is contended that under Section 1, Rule 111 of the
45
1985 Rules on Criminal Procedure such a separate civil action may not be filed unless reservation
thereof is expressly made.
In a decision dated November 3, 1989, the Court of Appeals dismissed the petition. 1 A motion for
reconsideration thereof filed by petitioners was denied on January 30, 1990. Hence this petition.
The petition is devoid of merit.
Section 1, Rule 111 of the 1985 Rules of Criminal Procedure provides as follows:
SEC. 1. Institution of criminal and civil actions. — When a criminal action is
instituted, the civil action for the recovery of civil liability is impliedly instituted
with the criminal action, unless the offended party waives the civil action,
reserves his right to institute it separately, or institutes the civil action prior to the
criminal action.
Such civil action includes recovery of indemnity under the Revised Penal Code,
and damages under Articles 32, 33, 34 and 2176 of the Civil Code of the
Philippines arising from the same act or omission of the accused.
It is also provided that the reservation of the right to institute the separate civil action shall be made
before the prosecution starts to present its evidence and under circumstances affording the offended
party a reasonable opportunity to make such reservation.
In this case, the offended party has not waived the civil action, nor reserved the right to institute it
separately. Neither has the offended party instituted the civil action prior to the criminal action.
However, the civil action in this case was filed in court before the presentation of the evidence for
the prosecution in the criminal action of which the judge presiding on the criminal case was duly
informed, so that in the disposition of the criminal action no damages was awarded.
The civil liability sought arising from the act or omission of the accused in this case is a quasi
delict as defined under Article 2176 of the Civil Code as follows:
ART. 2176. Whoever by act or omission causes damage to another, there being
fault or negligence, is obliged to pay for the damage done. Such fault or
negligence, if there is no pre-existing contractual relation between the parties, is
called a quasi-delict and is governed by the provisions of this Chapter.
The aforecited revised rule requiring such previous reservation also covers quasi-delict as defined
under Article 2176 of the Civil Code arising from the same act or omission of the accused.

A waiver of any of the civil actions extinguishes the others. The institution of, or
Although the separate civil action filed in this case was without previous reservation in the criminal
the reservation of the right to file, any of said civil actions separately waives the
case, nevertheless since it was instituted before the prosecution presented evidence in the criminal
others.
action, and the judge handling the criminal case was informed thereof, then the actual filing of the
civil action is even far better than a compliance with the requirement of an express reservation that
The reservation of the right to institute the separate civil actions shall be made should be made by the offended party before the prosecution presents its evidence.
before the prosecution starts to present its evidence and under circumstances
affording the offended party a reasonable opportunity to make such reservation.
The purpose of this rule requiring reservation is to prevent the offended party from recovering
damages twice for the same act or omission.
In no case may the offended party recover damages twice for the same act or
omission of the accused.
Thus, the Court finds and so holds that the trial court had jurisdiction over the separate civil action
brought before it.
When the offended party seeks to enforce civil liability against the accused by
way of moral, nominal, temperate or exemplary damages, the filing fees for
WHEREFORE, the petition is DENIED. The questioned decision of the Court of Appeals dated
such civil action as provided in these Rules shall constitute a first lien on the
November 3, 1989 and its resolution dated January 30, 1990 are hereby AFFIRMED.
judgment except in an award for actual damages.

SO ORDERED.
In cases wherein the amount of damages, other than actual, is alleged in the
complaint or information, the corresponding filing fees shall be paid by the
offended party upon the filing thereof in court for trial. (1a)

Although the incident in question and the actions arising therefrom were instituted before the
promulgation of the 1985 Rules of Criminal Procedure, its provisions which are procedural may
apply retrospectively to the present case. 2

Under the aforecited provisions of the rule, the civil action for the recovery of civil liability is impliedly
instituted with the criminal action unless the offended party waives the civil action, reserves his right
to institute it separately or institutes the civil action prior to the criminal action.

Such civil action includes recovery of indemnity under the Revised Penal Code, and damages under
Articles 32, 33, 34 and 2176 of the Civil Code of the Philippines arising from the same act or
omission of the accused.

46
G.R. No. L-37750 May 19, 1978
SWEET LINES, INC., petitioner,
vs.
HON. BERNARDO TEVES, Presiding Judge, CFI of Misamis Oriental Branch VII, LEOVIGILDO
TANDOG, JR., and ROGELIO TIRO, respondents.
SANTOS, J.:
This is an original action for Prohibition with Pre Injunction filed October 3, 1973 to restrain
respondent Judge from proceeding further with Civil Case No. 4091, entitled Leovigildo D. Tandog,
Jr. and Rogelio Tiro v. Sweet Lines, Inc." after he denied petitioner's Motion to Dismiss the
complaint, and the Motion for Reconsideration of said order. 1
Briefly, the facts of record follow. Private respondents Atty. Leovigildo Tandog and Rogelio Tiro, a
contractor by professions, bought tickets Nos. 0011736 and 011737 for Voyage 90 on December 31,
1971 at the branch office of petitioner, a shipping company transporting inter-island passengers and
cargoes, at Cagayan de Oro City. Respondents were to board petitioner's vessel, M/S "Sweet Hope"
bound for Tagbilaran City via the port of Cebu. Upon learning that the vessel was not proceeding to
Bohol, since many passengers were bound for Surigao, private respondents per advice, went to the
branch office for proper relocation to M/S "Sweet Town". Because the said vessel was already filled
to capacity, they were forced to agree "to hide at the cargo section to avoid inspection of the officers
of the Philippine Coastguard." Private respondents alleged that they were, during the trip," "exposed
to the scorching heat of the sun and the dust coming from the ship's cargo of corn grits," and that
the tickets they bought at Cagayan de Oro City for Tagbilaran were not honored and they were
constrained to pay for other tickets. In view thereof, private respondents sued petitioner for damages
and for breach of contract of carriage in the alleged sum of P10,000.00 before respondents Court of
First Instance of Misamis Oriental. 2
Petitioner moved to dismiss the complaint on the ground of improper venue. This motion was
premised on the condition printed at the back of the tickets, i.e., Condition No. 14, which reads:
14. It is hereby agreed and understood that any and all actions arising out of the
conditions and provisions of this ticket, irrespective of where it is issued, shall
be filed in the competent courts in the City of Cebu. 3
The motion was denied by the trial court. 4 Petitioner moved to reconnsider the order of denial, but
no avail. 5 Hence, this instant petition for prohibition for preliminary injunction, 'alleging that the
respondent judge has departed from the accepted and usual course of judicial preoceeding" and
"had acted without or in excess or in error of his jurisdicton or in gross abuse of discretion. 6
In Our resolution of November 20, 1973, We restrained respondent Judge from proceeding further
with the case and required respondent to comment. 7 On January 18, 1974, We gave due course to
the petition and required respondent to answer. 8 Thereafter, the parties submitted their respesctive
memoranda in support of their respective contentions. 9
Presented thus for Our resolution is a question is aquestion which, to all appearances, is one of first
impression, to wit — Is Condition No. 14 printed at the back of the petitioner's passage tickets
purchased by private respondents, which limits the venue of actions arising from the contract of
carriage to theCourt of First Instance of Cebu, valid and enforceable? Otherwise stated, may a
common carrier engaged in inter-island shipping stipulate thru condition printed at the back of
passage tickets to its vessels that any and all actions arising out of the ocntract of carriage should
be filed only in a particular province or city, in this case the City of Cebu, to the exclusion of all
others?
Petitioner contends thaty Condition No. 14 is valid and enforceable, since private respndents
acceded to tit when they purchased passage tickets at its Cagayan de Oro branch office and took its
vessel M/S "Sweet Town" for passage to Tagbilaran, Bohol — that the condition of the venue of
actions in the City of Cebu is proper since venue may be validly waived, citing cases; 10 that is an
effective waiver of venue, valid and binding as such, since it is printed in bold and capital letters and
not in fine print and merely assigns the place where the action sing from the contract is institution
likewise citing cases; 11 and that condition No. 14 is unequivocal and mandatory, the words and
phrases "any and all", "irrespective of where it is issued," and "shag" leave no doubt that the
intention of Condition No. 14 is to fix the venue in the City of Cebu, to the exclusion of other places;
that the orders of the respondent Judge are an unwarranted departure from established
jurisprudence governing the case; and that he acted without or in excess of his jurisdiction in is the
orders complained of. 12
On the other hand, private respondents claim that Condition No. 14 is not valid, that the same is not
an essential element of the contract of carriage, being in itself a different agreement which requires
the mutual consent of the parties to it; that they had no say in its preparation, the existence of which
they could not refuse, hence, they had no choice but to pay for the tickets and to avail of petitioner's
shipping facilities out of necessity; that the carrier "has been exacting too much from the public by
inserting impositions in the passage tickets too burdensome to bear," that the condition which was
printed in fine letters is an imposition on the riding public and does not bind respondents, citing
cases; 13 that while venue 6f actions may be transferred from one province to another, such
arrangement requires the "written agreement of the parties", not to be imposed unilaterally; and that
assuming that the condition is valid, it is not exclusive and does not, therefore, exclude the filing of
the action in Misamis Oriental, 14
There is no question that there was a valid contract of carriage entered into by petitioner and private
respondents and that the passage tickets, upon which the latter based their complaint, are the best
evidence thereof. All the essential elements of a valid contract, i.e., consent, cause or consideration
and object, are present. As held in Peralta de Guerrero, et al. v. Madrigal Shipping Co., Inc., 15
It is a matter of common knowledge that whenever a passenger boards a ship
for transportation from one place to another he is issued a ticket by the shipper
which has all the elements of a written contract, Namely: (1) the consent of the
contracting parties manifested by the fact that the passenger boards the ship
and the shipper consents or accepts him in the ship for transportation; (2) cause
or consideration which is the fare paid by the passenger as stated in the ticket;
(3) object, which is the transportation of the passenger from the place of
departure to the place of destination which are stated in the ticket.
It should be borne in mind, however, that with respect to the fourteen (14) conditions — one of which
is "Condition No. 14" which is in issue in this case — printed at the back of the passage tickets,
these are commonly known as "contracts of adhesion," the validity and/or enforceability of which will
have to be determined by the peculiar circumstances obtaining in each case and the nature of the
conditions or terms sought to be enforced. For, "(W)hile generally, stipulations in a contract come
about after deliberate drafting by the parties thereto, ... there are certain contracts almost all the
provisions of which have been drafted only by one party, usually a corporation. Such contracts are
called contracts of adhesion, because the only participation of the party is the signing of his
signature or his 'adhesion' thereto. Insurance contracts, bills of lading, contracts of make of lots on
the installment plan fall into this category" 16
By the peculiar circumstances under which contracts of adhesion are entered into — namely, that it
is drafted only by one party, usually the corporation, and is sought to be accepted or adhered to by
the other party, in this instance the passengers, private respondents, who cannot change the same
and who are thus made to adhere thereto on the "take it or leave it" basis — certain guidelines in the
determination of their validity and/or enforceability have been formulated in order to that justice and
fan play characterize the relationship of the contracting parties. Thus, this Court speaking through
Justice J.B.L. Reyes in Qua Chee Gan v. Law Union and Rock Insurance Co., 17 and later through
Justice Fernando in Fieldman Insurance v. Vargas, 18 held —
47
 The courts cannot ignore that nowadays, monopolies, cartels and concentration
of capital endowed with overwhelm economic power, manage to impose upon
parties d with them y prepared 'agreements' that the weaker party may not
change one whit his participation in the 'agreement' being reduced to the
alternative 'to take it or leave it,' labelled since Raymond Saleilles 'contracts by
adherence' (contracts d' adhesion) in contrast to those entered into by parties
bargaining on an equal footing. Such contracts (of which policies of insurance
and international bill of lading are prime examples) obviously cap for greater
strictness and vigilance on the part of the courts of justice with a view to
protecting the weaker party from abuses and imposition, and prevent their
becoming traps for the unwary.
To the same effect and import, and, in recognition of the character of contracts of this kind, the
protection of the disadvantaged is expressly enjoined by the New Civil Code —
In all contractual property or other relations, when one of the parties is at a
disadvantage on account of his moral dependence, ignorance indigence, mental
weakness, tender age and other handicap, the courts must be vigilant for his
protection. 19
between the ports covered by their franchise. This being so, shipping companies, like petitioner,
engaged in inter-island shipping, have a virtual monopoly of the business of transporting passengers
and may thus dictate their terms of passage, leaving passengers with no choice but to buy their
tickets and avail of their vessels and facilities. Finally, judicial notice may be taken of the fact that the
bulk of those who board these inter-island vested come from the low-income groups and are less
literate, and who have little or no choice but to avail of petitioner's vessels.
2. Condition No. 14 is subversive of public policy on transfers of venue of actions. For, although
venue may be changed or transferred from one province to another by agreement of the parties in
writing t to Rule 4, Section 3, of the Rules of Court, such an agreement will not be held valid where it
practically negates the action of the claimants, such as the private respondents herein. The
philosophy underlying the provisions on transfer of venue of actions is the convenience of the
plaintiffs as well as his witnesses and to promote 21 the ends of justice. Considering the expense and
trouble a passenger residing outside of Cebu City would incur to prosecute a claim in the City of
Cebu, he would most probably decide not to file the action at all. The condition will thus defeat,
instead of enhance, the ends of justice. Upon the other hand, petitioner has branches or offices in
the respective ports of call of its vessels and can afford to litigate in any of these places. Hence, the
filing of the suit in the CFI of Misamis Oriental, as was done in the instant case, will not cause
inconvenience to, much less prejudice, petitioner.

Public policy is ". . . that principle of the law which holds that no subject or citizen can lawfully do that
Considered in the light Of the foregoing norms and in the context Of circumstances Prevailing in the
which has a tendency to be injurious to the public or against the public good ... 22 Under this
inter-island ship. ping industry in the country today, We find and hold that Condition No. 14 printed at
principle" ... freedom of contract or private dealing is restricted by law for the good of the
the back of the passage tickets should be held as void and unenforceable for the following reasons
public. 23 Clearly, Condition No. 14, if enforced, will be subversive of the public good or interest,
first, under circumstances obligation in the inter-island ship. ping industry, it is not just and fair to
since it will frustrate in meritorious cases, actions of passenger cants outside of Cebu City, thus
bind passengers to the terms of the conditions printed at the back of the passage tickets, on which
placing petitioner company at a decided advantage over said persons, who may have perfectly
Condition No. 14 is Printed in fine letters, and second, Condition No. 14 subverts the public policy on
legitimate claims against it. The said condition should, therefore, be declared void and
transfer of venue of proceedings of this nature, since the same will prejudice rights and interests of
unenforceable, as contrary to public policy — to make the courts accessible to all who may have
innumerable passengers in different s of the country who, under Condition No. 14, will have to file
need of their services.
suits against petitioner only in the City of Cebu.

WHEREFORE, the petition for prohibition is DISMISS. ED. The restraining order issued on
1. It is a matter of public knowledge, of which We can take judicial notice, that there is a dearth of
November 20, 1973, is hereby LIFTED and SET ASIDE. Costs against petitioner.
and acute shortage in inter- island vessels plying between the country's several islands, and the
facilities they offer leave much to be desired. Thus, even under ordinary circumstances, the piers
are congested with passengers and their cargo waiting to be transported. The conditions are even
worse at peak and/or the rainy seasons, when Passengers literally scramble to whatever
accommodations may be availed of, even through circuitous routes, and/or at the risk of their safety
Tamayo vs. Pascua
— their immediate concern, for the moment, being to be able to board vessels with the hope of
reaching their destinations. The schedules are — as often as not if not more so — delayed or
altered. This was precisely the experience of private respondents when they were relocated to M/S Doctrine: Common Carriers; Relationship of Carrier and Passenger; Creation
"Sweet Town" from M/S "Sweet Hope" and then any to the scorching heat of the sun and the dust
coming from the ship's cargo of corn grits, " because even the latter was filed to capacity.
There is concurrence of offer on the part of a commuter and acceptance on the part of a common
carrier to take the former as a passenger, where the commuter flags down the bus to stop and the
Under these circumstances, it is hardly just and proper to expect the passengers to examine their bus, and the bus slows down to a turtle pace along a loading and unloading island, apparently in the
tickets received from crowded/congested counters, more often than not during rush hours, for act of allowing and enabling the commuter to board it.
conditions that may be printed much charge them with having consented to the conditions, so
printed, especially if there are a number of such conditions m fine print, as in this case. 20
Common knowledge and experience; slowing down to allow passenger to board bus; driver’s duty.

Again, it should be noted that Condition No. 14 was prepared solely at the ms of the petitioner,
respondents had no say in its preparation. Neither did the latter have the opportunity to take the into A bus need not come to a dead stop to allow passengers to board it. It is enough that it slows down
to a negligible speed, allowing people to board it without danger to their lives and limbs. This is a
account prior to the purpose chase of their tickets. For, unlike the small print provisions of contracts
— the common example of contracts of adherence — which are entered into by the insured in his matter of common knowledge and experience in the city of manila and suburbs. Under such
awareness of said conditions, since the insured is afforded the op to and co the same, passengers circumstances it is a driver’s duty to see to it that every person who wants to board the bus is safe
inside before picking up speed and moving forward.
of inter-island v do not have the same chance, since their alleged adhesion is presumed only from
the fact that they purpose chased the tickets.
Use of diligence of a good father of a family, not a defense
It should also be stressed that slapping companies are franchise holders of certificates of public
convenience and therefore, posses a virtual monopoly over the business of transporting passengers

48
The liability of a common carrier under article 1759 of the Civil Code does not cease upon proof it
had exercised all the diligence of a good father of a family in the selection and supervision of its
employees, which is a defense available only in quasi-delict where no contractual relation between
the injured and the one causing the Injury exists.
Facts:
A bus of Royal Bus Co. passing the rotonda in Baclaran slowed down upon approaching an island.
There were several persons who were waiting for transportation, among whom was Benito Tamayo.
In view of the slow pace of the bus which was a sign that bus was going to pick up passengers from
the island, Benito Tamayo succeeded in holding the handle at the entrance and placing his 2 feet on
the first step of the running board, but all of a sudden the bus suddenly increased its speed causing
Tamayo to lose his balance and fall to the ground.
TC: Dismissed complaint on the ground that there was no contract of carriage. There having been
no offer from plaintiff communicated to the driver of the bus. Plaintiff boarded the bus without
signaling to the driver.
Issue: Whether there was a contract of carriage between the Royal Bus and Tamayo.
Held: Yes
The testimony of a traffic officer who was near the place where the incident occurred convinced the
court that there was indeed a contract of carriage between the parties since there was concurrence
of offer on the part of a commuter and acceptance on the part of a common carrier to take the
former as a passenger, where the commuter flags down the bus to stop and the bus, and the bus
slows down to a turtle pace along a loading and unloading island, apparently in the act of allowing
and enabling the commuter to board it. A bus need not come to a dead stop to allow passengers to
board it. It is enough that it slows down to a negligible speed, allowing people to board it without
danger to their lives and limbs. (See doctrine)
GR No. 31731 January 30, 1968
JESUSA VDA. DE NUEVA
V.
THE MANILA RAILROAD COMPANY
Facts:
- At 3 p.m. on Dec. 22, 1958, Fermin Nueca brought 7 sacks of palay to Manila Railroad
Co. (MRC) at its station in Barrio del Rosario, Camarines Sur, to be shipped to the municipality of
Libmanan of the same province.
- He paid P 0.70 as freight charge and was issued Way Bill No. 56515.
- The cargo was loaded on the freight wagon of Train 537. Passengers boarded the train
and shunting operations started to hook a wagon thereto.
- Before the train reached the turnoff switch, its passenger coach fell on its side some 40 m
from the station. The wagon pinned Nueca, killing him instantly.
- Nueca’s widow and children bring this claim for damages, alleging that the Nueca was a
passenger and his death was caused by MRC’s negligence.
- MRC disclaimed liability stating: (1) it exercised due care in safeguarding the passengers
during the shunting operation, (2) Nueca was not a passenger but a trespasser, (3) even if Nueca
were a passenger, he illegally boarded the train without permission by not paying the fare, (4) the
mishap was not attributable to any defect in MRC equipment, (5) that the accident happened due to
force majeur.
- MRC presented evidence showing there was no mechanical defect, but it did not explain
why the accident occurred or show that force majeur caused the mishap.
- The lower court absolved MRC of liability and held that Nueca was a trespasser since he
did not buy any ticket, and in any case, was not in a proper place for passengers.
Issue:
1. W/N Nueca was a passenger?
2. W/N MRC is liable?
3. Was the accident due to MRC’s negligence or force majeur?
4. Is Nueca liable for contributory negligence?
Held:
1. No, Nueca was not a passenger thus, MRC did not owe him extraordinary diligence.
A passenger is one who travels in a public conveyance by virtue of a contract, express or implied,
with the carrier as to the payment of the fare, or that which is accepted as an equivalent.
The relation of passenger and carrier commences when one puts himself in the care of the carrier,
or directly under its control, with the bona fide intention of becoming a passenger, and is accepted
as such by the carrier – as where he makes a contract for trasportation and presents himself at the
proper place and in a proper manner to be transported.
Even disregarding the matter of tickets, and assuming Nueca intended to be a passenger, he was
never accepted as such by MRC as he did not present himself at the proper place and in a proper
manner to be transported.
2. Yes, the liability of railroad companies to persons upon the premises is determined by the
general rules of negligence relating to duties of owners/occupiers of property.
While railroad companies are not bound to the same degree of care in regard to strangers who are
unlawfully upon the premises of its passengers, it may still be liable to such strangers for negligent
or tortious acts.
Here, Nueca was not on the track, but either unlawfully inside the baggage car or beside the track.
49
It is normal for people to walk on the track or roadbed when there is no oncoming train and to walk
beside the track when a train passes. This practice is tolerated by MRC. Generally, MRC’s stations
are not enclosed, and is easily accessible to the public.
3. MRC is negligent; doctrine of res ipsa loquitur applied.
The train was under the complete control of the railroad company at the time of the accident. The
baggage car would not have been derailed if the train had been properly operated.
Res ipsa loquitur is a rule of evidence peculiar to the law of negligence which recognizes that prima
facie negligence may be established without direct proof and furnishes a substitute for specific proof
of negligence.
4. No.
An invitation to stay in the premises is implied from the lack of prohibition to outsiders to keep off the
premises, hence, a stranger who is injured by a derailed train while staying beside a railroad track is
not guilty of contributory negligence.
Note: Our law on common carriers is lifted from Anglo-American statutes.
G.R. No. 95582 October 7, 1991
DANGWA TRANSPORTATION CO., INC. and THEODORE LARDIZABAL y MALECDAN,
petitioners,
vs.
COURT OF APPEALS, INOCENCIA CUDIAMAT, EMILIA CUDIAMAT BANDOY, FERNANDO
CUDLAMAT, MARRIETA CUDIAMAT, NORMA CUDIAMAT, DANTE CUDIAMAT, SAMUEL
CUDIAMAT and LIGAYA CUDIAMAT, all Heirs of the late Pedrito Cudiamat represented by
Inocencia Cudiamat, respondents.
REGALADO, J.:
On May 13, 1985, private respondents filed a complaint for damages against petitioners for the
death of Pedrito Cudiamat as a result of a vehicular accident which occurred on March 25, 1985 at
Marivic, Sapid, Mankayan, Benguet. Among others, it was alleged that on said date, while petitioner
Theodore M. Lardizabal was driving a passenger bus belonging to petitioner corporation in a
reckless and imprudent manner and without due regard to traffic rules and regulations and safety to
persons and property, it ran over its passenger, Pedrito Cudiamat. However, instead of bringing
Pedrito immediately to the nearest hospital, the said driver, in utter bad faith and without regard to
the welfare of the victim, first brought his other passengers and cargo to their respective destinations
before banging said victim to the Lepanto Hospital where he expired.
On the other hand, petitioners alleged that they had observed and continued to observe the
extraordinary diligence required in the operation of the transportation company and the supervision
of the employees, even as they add that they are not absolute insurers of the safety of the public at
large. Further, it was alleged that it was the victim's own carelessness and negligence which gave
rise to the subject incident, hence they prayed for the dismissal of the complaint plus an award of
damages in their favor by way of a counterclaim.
On July 29, 1988, the trial court rendered a decision, effectively in favor of petitioners, with this
decretal portion:
IN VIEW OF ALL THE FOREGOING, judgment is hereby pronounced that Pedrito Cudiamat was
negligent, which negligence was the proximate cause of his death. Nonetheless, defendants in
equity, are hereby ordered to pay the heirs of Pedrito Cudiamat the sum of P10,000.00 which
approximates the amount defendants initially offered said heirs for the amicable settlement of the
case. No costs.
SO ORDERED.
Not satisfied therewith, private respondents appealed to the Court of Appeals which, in a decision in
CA-G.R. CV No. 19504 promulgated on August 14, 1990, set aside the decision of the lower court,
and ordered petitioners to pay private respondents:
1. The sum of Thirty Thousand (P30,000.00) Pesos by way of indemnity for death of the victim
Pedrito Cudiamat;
2. The sum of Twenty Thousand (P20,000.00) by way of moral damages;
3. The sum of Two Hundred Eighty Eight Thousand (P288,000.00) Pesos as actual and
compensatory damages;
4. The costs of this suit.
Petitioners' motion for reconsideration was denied by the Court of Appeals in its resolution dated
October 4, 1990, hence this petition with the central issue herein being whether respondent court
erred in reversing the decision of the trial court and in finding petitioners negligent and liable for the
damages claimed.
It is an established principle that the factual findings of the Court of Appeals as a rule are final and
may not be reviewed by this Court on appeal. However, this is subject to settled exceptions, one of
which is when the findings of the appellate court are contrary to those of the trial court, in which case
a reexamination of the facts and evidence may be undertaken.
In the case at bar, the trial court and the Court of Appeal have discordant positions as to who
between the petitioners and the victim is guilty of negligence. Perforce, we have had to conduct an
evaluation of the evidence in this case for the prope calibration of their conflicting factual findings
and legal conclusions.
The lower court, in declaring that the victim was negligent, made the following findings:
This Court is satisfied that Pedrito Cudiamat was negligent in trying to board a moving vehicle,
especially with one of his hands holding an umbrella. And, without having given the driver or the
conductor any indication that he wishes to board the bus. But defendants can also be found wanting
of the necessary diligence. In this connection, it is safe to assume that when the deceased
Cudiamat attempted to board defendants' bus, the vehicle's door was open instead of being closed.
This should be so, for it is hard to believe that one would even attempt to board a vehicle (i)n motion
if the door of said vehicle is closed. Here lies the defendant's lack of diligence. Under such
circumstances, equity demands that there must be something given to the heirs of the victim to
assuage their feelings. This, also considering that initially, defendant common carrier had made
overtures to amicably settle the case. It did offer a certain monetary consideration to the victim's
heirs.
However, respondent court, in arriving at a different opinion, declares that:
50
From the testimony of appellees'own witness in the person of Vitaliano Safarita, it is evident that the
subject bus was at full stop when the victim Pedrito Cudiamat boarded the same as it was precisely
on this instance where a certain Miss Abenoja alighted from the bus. Moreover, contrary to the
assertion of the appellees, the victim did indicate his intention to board the bus as can be seen from
the testimony of the said witness when he declared that Pedrito Cudiamat was no longer walking
and made a sign to board the bus when the latter was still at a distance from him. It was at the
instance when Pedrito Cudiamat was closing his umbrella at the platform of the bus when the latter
made a sudden jerk movement (as) the driver commenced to accelerate the bus.
Evidently, the incident took place due to the gross negligence of the appellee-driver in prematurely
stepping on the accelerator and in not waiting for the passenger to first secure his seat especially so
when we take into account that the platform of the bus was at the time slippery and wet because of
a drizzle. The defendants-appellees utterly failed to observe their duty and obligation as common
carrier to the end that they should observe extra-ordinary diligence in the vigilance over the goods
and for the safety of the passengers transported by them according to the circumstances of each
case (Article 1733, New Civil Code).
After a careful review of the evidence on record, we find no reason to disturb the above holding of
the Court of Appeals. Its aforesaid findings are supported by the testimony of petitioners' own
witnesses. One of them, Virginia Abalos, testified on cross-examination as follows:
Q It is not a fact Madam witness, that at bunkhouse 54, that is before the place of the incident, there
is a crossing?
A The way going to the mines but it is not being pass(ed) by the bus.
Q And the incident happened before bunkhouse 56, is that not correct?
A It happened between 54 and 53 bunkhouses.
The bus conductor, Martin Anglog, also declared:
Q When you arrived at Lepanto on March 25, 1985, will you please inform this Honorable Court if
there was anv unusual incident that occurred?
A When we delivered a baggage at Marivic because a person alighted there between Bunkhouse 53
and 54.
Q What happened when you delivered this passenger at this particular place in Lepanto?
A When we reached the place, a passenger alighted and I signalled my driver. When we stopped we
went out because I saw an umbrella about a split second and I signalled again the driver, so the
driver stopped and we went down and we saw Pedrito Cudiamat asking for help because he was
lying down.
Q How far away was this certain person, Pedrito Cudiamat, when you saw him lying down — from
the bus how far was he?
A It is about two to three meters.
Q On what direction of the bus was he found about three meters from the bus, was it at the front or
at the back?
A At the back, sir. (Emphasis supplied.)
The foregoing testimonies show that the place of the accident and the place where one of the
passengers alighted were both between Bunkhouses 53 and 54, hence the finding of the Court of
Appeals that the bus was at full stop when the victim boarded the same is correct. They further
confirm the conclusion that the victim fell from the platform of the bus when it suddenly accelerated
forward and was run over by the rear right tires of the vehicle, as shown by the physical evidence on
where he was thereafter found in relation to the bus when it stopped. Under such circumstances, it
cannot be said that the deceased was guilty of negligence.
The contention of petitioners that the driver and the conductor had no knowledge that the victim
would ride on the bus, since the latter had supposedly not manifested his intention to board the
same, does not merit consideration. When the bus is not in motion there is no necessity for a person
who wants to ride the same to signal his intention to board. A public utility bus, once it stops, is in
effect making a continuous offer to bus riders. Hence, it becomes the duty of the driver and the
conductor, every time the bus stops, to do no act that would have the effect of increasing the peril to
a passenger while he was attempting to board the same. The premature acceleration of the bus in
this case was a breach of such duty.
It is the duty of common carriers of passengers, including common carriers by railroad train,
streetcar, or motorbus, to stop their conveyances a reasonable length of time in order to afford
passengers an opportunity to board and enter, and they are liable for injuries suffered by boarding
passengers resulting from the sudden starting up or jerking of their conveyances while they are
doing so.
Further, even assuming that the bus was moving, the act of the victim in boarding the same cannot
be considered negligent under the circumstances. As clearly explained in the testimony of the
aforestated witness for petitioners, Virginia Abalos, th bus had "just started" and "was still in slow
motion" at the point where the victim had boarded and was on its platform.
It is not negligence per se, or as a matter of law, for one attempt to board a train or streetcar which
is moving slowly. An ordinarily prudent person would have made the attempt board the moving
conveyance under the same or similar circumstances. The fact that passengers board and alight
from slowly moving vehicle is a matter of common experience both the driver and conductor in this
case could not have been unaware of such an ordinary practice.
The victim herein, by stepping and standing on the platform of the bus, is already considered a
passenger and is entitled all the rights and protection pertaining to such a contractual relation.
Hence, it has been held that the duty which the carrier passengers owes to its patrons extends to
persons boarding cars as well as to those alighting therefrom.
Common carriers, from the nature of their business and reasons of public policy, are bound to
observe extraordina diligence for the safety of the passengers transported by the according to all the
circumstances of each case. A common carrier is bound to carry the passengers safely as far as
human care and foresight can provide, using the utmost diligence very cautious persons, with a due
regard for all the circumstances.
It has also been repeatedly held that in an action based on a contract of carriage, the court need not
make an express finding of fault or negligence on the part of the carrier in order to hold it
responsible to pay the damages sought by the passenger. By contract of carriage, the carrier
assumes the express obligation to transport the passenger to his destination safely and observe
extraordinary diligence with a due regard for all the circumstances, and any injury that might be
suffered by the passenger is right away attributable to the fault or negligence of the carrier. This is
an exception to the general rule that negligence must be proved, and it is therefore incumbent upon
the carrier to prove that it has exercised extraordinary diligence as prescribed in Articles 1733 and
1755 of the Civil Code.
51
Moreover, the circumstances under which the driver and the conductor failed to bring the gravely
injured victim immediately to the hospital for medical treatment is a patent and incontrovertible proof
of their negligence. It defies understanding and can even be stigmatized as callous indifference. The
evidence shows that after the accident the bus could have forthwith turned at Bunk 56 and thence to
the hospital, but its driver instead opted to first proceed to Bunk 70 to allow a passenger to alight
and to deliver a refrigerator, despite the serious condition of the victim. The vacuous reason given
by petitioners that it was the wife of the deceased who caused the delay was tersely and correctly
confuted by respondent court:
... The pretension of the appellees that the delay was due to the fact that they had to wait for about
twenty minutes for Inocencia Cudiamat to get dressed deserves scant consideration. It is rather
scandalous and deplorable for a wife whose husband is at the verge of dying to have the luxury of
dressing herself up for about twenty minutes before attending to help her distressed and helpless
husband.
Further, it cannot be said that the main intention of petitioner Lardizabal in going to Bunk 70 was to
inform the victim's family of the mishap, since it was not said bus driver nor the conductor but the
companion of the victim who informed his family thereof. In fact, it was only after the refrigerator
was unloaded that one of the passengers thought of sending somebody to the house of the victim,
as shown by the testimony of Virginia Abalos again, to wit:
Q Why, what happened to your refrigerator at that particular time?
A I asked them to bring it down because that is the nearest place to our house and when I went
down and asked somebody to bring down the refrigerator, I also asked somebody to call the family
of Mr. Cudiamat.
COURT:
Q Why did you ask somebody to call the family of Mr. Cudiamat?
A Because Mr. Cudiamat met an accident, so I ask somebody to call for the family of Mr. Cudiamat.
Q But nobody ask(ed) you to call for the family of Mr. Cudiamat?
A No sir.
With respect to the award of damages, an oversight was, however, committed by respondent Court
of Appeals in computing the actual damages based on the gross income of the victim. The rule is
that the amount recoverable by the heirs of a victim of a tort is not the loss of the entire earnings, but
rather the loss of that portion of the earnings which the beneficiary would have received. In other
words, only net earnings, not gross earnings, are to be considered, that is, the total of the earnings
less expenses necessary in the creation of such earnings or income and minus living and other
incidental expenses.
We are of the opinion that the deductible living and other expense of the deceased may fairly and
reasonably be fixed at P500.00 a month or P6,000.00 a year. In adjudicating the actual or
compensatory damages, respondent court found that the deceased was 48 years old, in good health
with a remaining productive life expectancy of 12 years, and then earning P24,000.00 a year. Using
the gross annual income as the basis, and multiplying the same by 12 years, it accordingly awarded
P288,000. Applying the aforestated rule on computation based on the net earnings, said award must
be, as it hereby is, rectified and reduced to P216,000.00. However, in accordance with prevailing
jurisprudence, the death indemnity is hereby increased to P50,000.00. 23
WHEREFORE, subject to the above modifications, the challenged judgment and resolution of
respondent Court of Appeals are hereby AFFIRMED in all other respects.
SO ORDERED.
G.R. No. 145804 February 6, 2003
LIGHT RAIL TRANSIT AUTHORITY & RODOLFO ROMAN, petitioners,
vs.
MARJORIE NAVIDAD, Heirs of the Late NICANOR NAVIDAD & PRUDENT SECURITY
AGENCY, respondents.
DECISION
VITUG, J.:
The case before the Court is an appeal from the decision and resolution of the Court of Appeals,
promulgated on 27 April 2000 and 10 October 2000, respectively, in CA-G.R. CV No. 60720, entitled
"Marjorie Navidad and Heirs of the Late Nicanor Navidad vs. Rodolfo Roman, et. al.," which has
modified the decision of 11 August 1998 of the Regional Trial Court, Branch 266, Pasig City,
exonerating Prudent Security Agency (Prudent) from liability and finding Light Rail Transit Authority
(LRTA) and Rodolfo Roman liable for damages on account of the death of Nicanor Navidad.
On 14 October 1993, about half an hour past seven o’clock in the evening, Nicanor Navidad, then
drunk, entered the EDSA LRT station after purchasing a "token" (representing payment of the fare).
While Navidad was standing on the platform near the LRT tracks, Junelito Escartin, the security
guard assigned to the area approached Navidad. A misunderstanding or an altercation between the
two apparently ensued that led to a fist fight. No evidence, however, was adduced to indicate how
the fight started or who, between the two, delivered the first blow or how Navidad later fell on the
LRT tracks. At the exact moment that Navidad fell, an LRT train, operated by petitioner Rodolfo
Roman, was coming in. Navidad was struck by the moving train, and he was killed instantaneously.
On 08 December 1994, the widow of Nicanor, herein respondent Marjorie Navidad, along with her
children, filed a complaint for damages against Junelito Escartin, Rodolfo Roman, the LRTA, the
Metro Transit Organization, Inc. (Metro Transit), and Prudent for the death of her husband. LRTA
and Roman filed a counterclaim against Navidad and a cross-claim against Escartin and Prudent.
Prudent, in its answer, denied liability and averred that it had exercised due diligence in the selection
and supervision of its security guards.
The LRTA and Roman presented their evidence while Prudent and Escartin, instead of presenting
evidence, filed a demurrer contending that Navidad had failed to prove that Escartin was negligent in
his assigned task. On 11 August 1998, the trial court rendered its decision; it adjudged:
"WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants
Prudent Security and Junelito Escartin ordering the latter to pay jointly and severally the plaintiffs the
following:
"a) 1) Actual damages of P44,830.00;
2) Compensatory damages of P443,520.00;
52
 3) Indemnity for the death of Nicanor Navidad in the sum of P50,000.00;
"b) Moral damages of P50,000.00;
"c) Attorney’s fees of P20,000;
"d) Costs of suit.
"The complaint against defendants LRTA and Rodolfo Roman are dismissed for lack of merit.
"The compulsory counterclaim of LRTA and Roman are likewise dismissed." 1
Prudent appealed to the Court of Appeals. On 27 August 2000, the appellate court promulgated its
now assailed decision exonerating Prudent from any liability for the death of Nicanor Navidad and,
instead, holding the LRTA and Roman jointly and severally liable thusly:
"WHEREFORE, the assailed judgment is hereby MODIFIED, by exonerating the appellants from any
liability for the death of Nicanor Navidad, Jr. Instead, appellees Rodolfo Roman and the Light Rail
Transit Authority (LRTA) are held liable for his death and are hereby directed to pay jointly and
severally to the plaintiffs-appellees, the following amounts:
a) P44,830.00 as actual damages;
b) P50,000.00 as nominal damages;
c) P50,000.00 as moral damages;
d) P50,000.00 as indemnity for the death of the deceased; and
e) P20,000.00 as and for attorney’s fees." 2
The appellate court ratiocinated that while the deceased might not have then as yet boarded the
train, a contract of carriage theretofore had already existed when the victim entered the place where
passengers were supposed to be after paying the fare and getting the corresponding token therefor.
In exempting Prudent from liability, the court stressed that there was nothing to link the security
agency to the death of Navidad. It said that Navidad failed to show that Escartin inflicted fist blows
upon the victim and the evidence merely established the fact of death of Navidad by reason of his
having been hit by the train owned and managed by the LRTA and operated at the time by Roman.
The appellate court faulted petitioners for their failure to present expert evidence to establish the fact
that the application of emergency brakes could not have stopped the train.
The appellate court denied petitioners’ motion for reconsideration in its resolution of 10 October
2000.
In their present recourse, petitioners recite alleged errors on the part of the appellate court; viz:
"I.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED BY DISREGARDING THE
FINDINGS OF FACTS BY THE TRIAL COURT
"II.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT PETITIONERS
ARE LIABLE FOR THE DEATH OF NICANOR NAVIDAD, JR.
"III.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT RODOLFO
ROMAN IS AN EMPLOYEE OF LRTA."3
Petitioners would contend that the appellate court ignored the evidence and the factual findings of
the trial court by holding them liable on the basis of a sweeping conclusion that the presumption of
negligence on the part of a common carrier was not overcome. Petitioners would insist that
Escartin’s assault upon Navidad, which caused the latter to fall on the tracks, was an act of a
stranger that could not have been foreseen or prevented. The LRTA would add that the appellate
court’s conclusion on the existence of an employer-employee relationship between Roman and
LRTA lacked basis because Roman himself had testified being an employee of Metro Transit and
not of the LRTA.
Respondents, supporting the decision of the appellate court, contended that a contract of carriage
was deemed created from the moment Navidad paid the fare at the LRT station and entered the
premises of the latter, entitling Navidad to all the rights and protection under a contractual relation,
and that the appellate court had correctly held LRTA and Roman liable for the death of Navidad in
failing to exercise extraordinary diligence imposed upon a common carrier.
Law and jurisprudence dictate that a common carrier, both from the nature of its business and for
reasons of public policy, is burdened with the duty of exercising utmost diligence in ensuring the
safety of passengers.4 The Civil Code, governing the liability of a common carrier for death of or
injury to its passengers, provides:
"Article 1755. A common carrier is bound to carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all
the circumstances.
"Article 1756. In case of death of or injuries to passengers, common carriers are presumed to have
been at fault or to have acted negligently, unless they prove that they observed extraordinary
diligence as prescribed in articles 1733 and 1755."
"Article 1759. Common carriers are liable for the death of or injuries to passengers through the
negligence or willful acts of the former’s employees, although such employees may have acted
beyond the scope of their authority or in violation of the orders of the common carriers.
"This liability of the common carriers does not cease upon proof that they exercised all the diligence
of a good father of a family in the selection and supervision of their employees."
"Article 1763. A common carrier is responsible for injuries suffered by a passenger on account of the
willful acts or negligence of other passengers or of strangers, if the common 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."
The law requires common carriers to carry passengers safely using the utmost diligence of very
cautious persons with due regard for all circumstances. 5 Such duty of a common carrier to provide
safety to its passengers so obligates it not only during the course of the trip but for so long as the
passengers are within its premises and where they ought to be in pursuance to the contract of
53
carriage.6 The statutory provisions render a common carrier liable for death of or injury to
passengers (a) through the negligence or wilful acts of its employees or b) on account of wilful acts
or negligence of other passengers or of strangers if the common carrier’s employees through the
exercise of due diligence could have prevented or stopped the act or omission. 7 In case of such
death or injury, a carrier is presumed to have been at fault or been negligent, and8 by simple proof of
injury, the passenger is relieved of the duty to still establish the fault or negligence of the carrier or of
its employees and the burden shifts upon the carrier to prove that the injury is due to an unforeseen
event or to force majeure.9 In the absence of satisfactory explanation by the carrier on how the
accident occurred, which petitioners, according to the appellate court, have failed to show, the
presumption would be that it has been at fault,10 an exception from the general rule that negligence
must be proved.11
The foundation of LRTA’s liability is the contract of carriage and its obligation to indemnify the victim
arises from the breach of that contract by reason of its failure to exercise the high diligence required
of the common carrier. In the discharge of its commitment to ensure the safety of passengers, a
carrier may choose to hire its own employees or avail itself of the services of an outsider or an
independent firm to undertake the task. In either case, the common carrier is not relieved of its
responsibilities under the contract of carriage.
Should Prudent be made likewise liable? If at all, that liability could only be for tort under the
provisions of Article 217612 and related provisions, in conjunction with Article 2180,13 of the Civil
Code. The premise, however, for the employer’s liability is negligence or fault on the part of the
employee. Once such fault is established, the employer can then be made liable on the basis of the
presumption juris tantum that the employer failed to exercise diligentissimi patris families in the
selection and supervision of its employees. The liability is primary and can only be negated by
showing due diligence in the selection and supervision of the employee, a factual matter that has not
been shown. Absent such a showing, one might ask further, how then must the liability of the
common carrier, on the one hand, and an independent contractor, on the other hand, be described?
It would be solidary. A contractual obligation can be breached by tort and when the same act or
omission causes the injury, one resulting in culpa contractual and the other in culpa aquiliana, Article
219414 of the Civil Code can well apply.15 In fine, a liability for tort may arise even under a contract,
where tort is that which breaches the contract.16 Stated differently, when an act which constitutes a
breach of contract would have itself constituted the source of a quasi-delictual liability had no
contract existed between the parties, the contract can be said to have been breached by tort,
thereby allowing the rules on tort to apply.17
Regrettably for LRT, as well as perhaps the surviving spouse and heirs of the late Nicanor Navidad,
this Court is concluded by the factual finding of the Court of Appeals that "there is nothing to link
(Prudent) to the death of Nicanor (Navidad), for the reason that the negligence of its employee,
Escartin, has not been duly proven x x x." This finding of the appellate court is not without
substantial justification in our own review of the records of the case.
There being, similarly, no showing that petitioner Rodolfo Roman himself is guilty of any culpable act
or omission, he must also be absolved from liability. Needless to say, the contractual tie between the
LRT and Navidad is not itself a juridical relation between the latter and Roman; thus, Roman can be
made liable only for his own fault or negligence.
The award of nominal damages in addition to actual damages is untenable. Nominal damages are
adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant,
may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss
suffered by him.18 It is an established rule that nominal damages cannot co-exist with compensatory
damages.19
WHEREFORE, the assailed decision of the appellate court is AFFIRMED with MODIFICATION but
only in that (a) the award of nominal damages is DELETED and (b) petitioner Rodolfo Roman is
absolved from liability. No costs. SO ORDERED.
G.R. No. L-20761 July 27, 1966
LA MALLORCA, petitioner,
vs.
HONORABLE COURT OF APPEALS, MARIANO BELTRAN, ET AL., respondents.
BARRERA, J.:
La Mallorca seeks the review of the decision of the Court of Appeals in CA-G.R. No. 23267-R,
holding it liable for quasi-delict and ordering it to pay to respondents Mariano Beltran, et al.,
P6,000.00 for the death of his minor daughter Raquel Beltran, plus P400.00 as actual damages.
The facts of the case as found by the Court of Appeals, briefly are:
On December 20, 1953, at about noontime, plaintiffs, husband and wife, together with
their minor daughters, namely, Milagros, 13 years old, Raquel, about 4½ years old, and
Fe, over 2 years old, boarded the Pambusco Bus No. 352, bearing plate TPU No. 757
(1953 Pampanga), owned and operated by the defendant, at San Fernando, Pampanga,
bound for Anao, Mexico, Pampanga. At the time, they were carrying with them four pieces
of baggages containing their personal belonging. The conductor of the bus, who
happened to be a half-brother of plaintiff Mariano Beltran, issued three tickets (Exhs. A, B,
& C) covering the full fares of the plaintiff and their eldest child, Milagros. No fare was
charged on Raquel and Fe, since both were below the height at which fare is charged in
accordance with the appellant's rules and regulations.
After about an hour's trip, the bus reached Anao whereat it stopped to allow the
passengers bound therefor, among whom were the plaintiffs and their children to get off.
With respect to the group of the plaintiffs, Mariano Beltran, then carrying some of their
baggages, was the first to get down the bus, followed by his wife and his children. Mariano
led his companions to a shaded spot on the left pedestrians side of the road about four or
five meters away from the vehicle. Afterwards, he returned to the bus in controversy to get
his other bayong, which he had left behind, but in so doing, his daughter Raquel followed
him, unnoticed by her father. While said Mariano Beltran was on the running board of the
bus waiting for the conductor to hand him his bayong which he left under one of its seats
near the door, the bus, whose motor was not shut off while unloading, suddenly started
moving forward, evidently to resume its trip, notwithstanding the fact that the conductor
has not given the driver the customary signal to start, since said conductor was still
attending to the baggage left behind by Mariano Beltran. Incidentally, when the bus was
again placed into a complete stop, it had travelled about ten meters from the point where
the plaintiffs had gotten off.
Sensing that the bus was again in motion, Mariano Beltran immediately jumped from the
running board without getting his bayong from the conductor. He landed on the side of the
road almost in front of the shaded place where he left his wife and children. At that precise
time, he saw people beginning to gather around the body of a child lying prostrate on the
ground, her skull crushed, and without life. The child was none other than his daughter
Raquel, who was run over by the bus in which she rode earlier together with her parents.
For the death of their said child, the plaintiffs commenced the present suit against the
defendant seeking to recover from the latter an aggregate amount of P16,000 to cover
moral damages and actual damages sustained as a result thereof and attorney's fees.
After trial on the merits, the court below rendered the judgment in question.
On the basis of these facts, the trial court found defendant liable for breach of contract of carriage
and sentenced it to pay P3,000.00 for the death of the child and P400.00 as compensatory damages
representing burial expenses and costs.
54
On appeal to the Court of Appeals, La Mallorca claimed that there could not be a breach of contract
in the case, for the reason that when the child met her death, she was no longer a passenger of the
bus involved in the incident and, therefore, the contract of carriage had already terminated. Although
the Court of Appeals sustained this theory, it nevertheless found the defendant-appellant guilty
of quasi-delict and held the latter liable for damages, for the negligence of its driver, in accordance
with Article 2180 of the Civil Code. And, the Court of Appeals did not only find the petitioner liable,
but increased the damages awarded the plaintiffs-appellees to P6,000.00, instead of P3,000.00
granted by the trial court.
In its brief before us, La Mallorca contends that the Court of Appeals erred (1) in holding it liable
for quasi-delict, considering that respondents complaint was one for breach of contract, and (2) in
raising the award of damages from P3,000.00 to P6,000.00 although respondents did not appeal
from the decision of the lower court.
Under the facts as found by the Court of Appeals, we have to sustain the judgement holding
petitioner liable for damages for the death of the child, Raquel Beltran. It may be pointed out that
although it is true that respondent Mariano Beltran, his wife, and their children (including the
deceased child) had alighted from the bus at a place designated for disembarking or unloading of
passengers, it was also established that the father had to return to the vehicle (which was still at a
stop) to get one of his bags or bayong that was left under one of the seats of the bus. There can be
no controversy that as far as the father is concerned, when he returned to the bus for
his bayong which was not unloaded, the relation of passenger and carrier between him and the
petitioner remained subsisting. For, the relation of carrier and passenger does not necessarily cease
where the latter, after alighting from the car, aids the carrier's servant or employee in removing his
baggage from the car.1 The issue to be determined here is whether as to the child, who was already
led by the father to a place about 5 meters away from the bus, the liability of the carrier for her safety
under the contract of carriage also persisted.
It has been recognized as a rule that the relation of carrier and passenger does not cease at the
moment the passenger alights from the carrier's vehicle at a place selected by the carrier at the
point of destination, but continues until the passenger has had a reasonable time or a reasonable
opportunity to leave the carrier's premises. And, what is a reasonable time or a reasonable delay
within this rule is to be determined from all the circumstances. Thus, a person who, after alighting
from a train, walks along the station platform is considered still a passenger. 2 So also, where a
passenger has alighted at his destination and is proceeding by the usual way to leave the
company's premises, but before actually doing so is halted by the report that his brother, a fellow
passenger, has been shot, and he in good faith and without intent of engaging in the difficulty,
returns to relieve his brother, he is deemed reasonably and necessarily delayed and thus continues
to be a passenger entitled as such to the protection of the railroad and company and its agents. 3
That aside from the aforesaid breach of contract, the death of Raquel Beltran, plaintiffs'
daughter, was caused by the negligence and want of exercise of the utmost diligence of a
very cautious person on the part of the defendants and their agent, necessary to transport
plaintiffs and their daughter safely as far as human care and foresight can provide in the
operation of their vehicle.
is clearly an allegation for quasi-delict. The inclusion of this averment for quasi-delict, while
incompatible with the other claim under the contract of carriage, is permissible under Section 2 of
Rule 8 of the New Rules of Court, which allows a plaintiff to allege causes of action in the
alternative, be they compatible with each other or not, to the end that the real matter in controversy
may be resolved and determined.4
The plaintiffs sufficiently pleaded the culpa or negligence upon which the claim was predicated when
it was alleged in the complaint that "the death of Raquel Beltran, plaintiffs' daughter, was caused by
the negligence and want of exercise of the utmost diligence of a very cautious person on the part of
the defendants and their agent." This allegation was also proved when it was established during the
trial that the driver, even before receiving the proper signal from the conductor, and while there were
still persons on the running board of the bus and near it, started to run off the vehicle. The
presentation of proof of the negligence of its employee gave rise to the presumption that the
defendant employer did not exercise the diligence of a good father of the family in the selection and
supervision of its employees. And this presumption, as the Court of Appeals found, petitioner had
failed to overcome. Consequently, petitioner must be adjudged peculiarily liable for the death of the
child Raquel Beltran.
The increase of the award of damages from P3,000.00 to P6,000.00 by the Court of Appeals,
however, cannot be sustained. Generally, the appellate court can only pass upon and consider
questions or issues raised and argued in appellant's brief. Plaintiffs did not appeal from that portion
of the judgment of the trial court awarding them on P3,000.00 damages for the death of their
daughter. Neither does it appear that, as appellees in the Court of Appeals, plaintiffs have pointed
out in their brief the inadequacy of the award, or that the inclusion of the figure P3,000.00 was
merely a clerical error, in order that the matter may be treated as an exception to the general
rule.5 Herein petitioner's contention, therefore, that the Court of Appeals committed error in raising
the amount of the award for damages is, evidently, meritorious.1äwphï1.ñët
Wherefore, the decision of the Court of Appeals is hereby modified by sentencing, the petitioner to
pay to the respondents Mariano Beltran, et al., the sum of P3,000.00 for the death of the child,
Raquel Beltran, and the amount of P400.00 as actual damages. No costs in this instance. So
ordered.

In the present case, the father returned to the bus to get one of his baggages which was not
unloaded when they alighted from the bus. Raquel, the child that she was, must have followed the
father. However, although the father was still on the running board of the bus awaiting for the
conductor to hand him the bag or bayong, the bus started to run, so that even he (the father) had to
jump down from the moving vehicle. It was at this instance that the child, who must be near the bus,
was run over and killed. In the circumstances, it cannot be claimed that the carrier's agent had
exercised the "utmost diligence" of a "very cautions person" required by Article 1755 of the Civil
Code to be observed by a common carrier in the discharge of its obligation to transport safely its
passengers. In the first place, the driver, although stopping the bus, nevertheless did not put off the
engine. Secondly, he started to run the bus even before the bus conductor gave him the signal to go
and while the latter was still unloading part of the baggages of the passengers Mariano Beltran and
family. The presence of said passengers near the bus was not unreasonable and they are,
therefore, to be considered still as passengers of the carrier, entitled to the protection under their
contract of carriage.

But even assuming arguendo that the contract of carriage has already terminated, herein petitioner
can be held liable for the negligence of its driver, as ruled by the Court of Appeals, pursuant to
Article 2180 of the Civil Code. Paragraph 7 of the complaint, which reads —

55
G.R. No. 84458 November 6, 1989
ABOITIZ SHIPPING CORPORATION, petitioner,
vs.
HON. COURT OF APPEALS, ELEVENTH DIVISION, LUCILA C. VIANA, SPS. ANTONIO VIANA
and GORGONIA VIANA, and PIONEER STEVEDORING CORPORATION, respondents.
REGALADO, J.:
In this appeal by certiorari, petitioner Aboitiz Shipping Corporation seeks a review of the decision 1 of
respondent Court of Appeals, dated July 29, 1988, the decretal portion of which reads:
WHEREFORE, the judgment appealed from as modified by the order of
October 27, 1982, is hereby affirmed with the modification that appellant Aboitiz
Shipping is hereby ordered to pay plaintiff-appellees the amount of P30,000.00
for the death of Anacleto Viana; actual damages of P9,800.00; P150,000.00 for
unearned income; P7,200.00 as support for deceased's parents; P20,000.00 as
moral damages; P10,000.00 as attorney's fees; and to pay the costs.
The undisputed facts of the case, as found by the court a quo and adopted by respondent court, are
as follows: .
The evidence disclosed that on May 11, 1975, Anacleto Viana boarded the
vessel M/V Antonia, owned by defendant, at the port at San Jose, Occidental
Mindoro, bound for Manila, having purchased a ticket (No. 117392) in the sum
of P23.10 (Exh. 'B'). On May 12, 1975, said vessel arrived at Pier 4, North
Harbor, Manila, and the passengers therein disembarked, a gangplank having
been provided connecting the side of the vessel to the pier. Instead of using
said gangplank Anacleto Viana disembarked on the third deck which was on the
level with the pier. After said vessel had landed, the Pioneer Stevedoring
Corporation took over the exclusive control of the cargoes loaded on said
vessel pursuant to the Memorandum of Agreement dated July 26, 1975 (Exh.
'2') between the third party defendant Pioneer Stevedoring Corporation and
defendant Aboitiz Shipping Corporation.
The crane owned by the third party defendant and operated by its crane
operator Alejo Figueroa was placed alongside the vessel and one (1) hour after
the passengers of said vessel had disembarked, it started operation by
unloading the cargoes from said vessel. While the crane was being operated,
Anacleto Viana who had already disembarked from said vessel obviously
remembering that some of his cargoes were still loaded in the vessel, went back
to the vessel, and it was while he was pointing to the crew of the said vessel to
the place where his cargoes were loaded that the crane hit him, pinning him
between the side of the vessel and the crane. He was thereafter brought to the
hospital where he later expired three (3) days thereafter, on May 15, 1975, the
cause of his death according to the Death Certificate (Exh. "C") being
"hypostatic pneumonia secondary to traumatic fracture of the pubic bone
lacerating the urinary bladder" (See also Exh. "B"). For his hospitalization,
medical, burial and other miscellaneous expenses, Anacleto's wife, herein
plaintiff, spent a total of P9,800.00 (Exhibits "E", "E-1", to "E-5"). Anacleto Viana
who was only forty (40) years old when he met said fateful accident (Exh. 'E')
was in good health. His average annual income as a farmer or a farm
supervisor was 400 cavans of palay annually. His parents, herein plaintiffs
Antonio and Gorgonia Viana, prior to his death had been recipient of twenty (20)
cavans of palay as support or P120.00 monthly. Because of Anacleto's death,
plaintiffs suffered mental anguish and extreme worry or moral damages. For the
filing of the instant case, they had to hire a lawyer for an agreed fee of ten
thousand (P10,000.00) pesos. 2
Private respondents Vianas filed a complaint 3 for damages against petitioner corporation (Aboitiz,
for brevity) for breach of contract of carriage.
In its answer. 4 Aboitiz denied responsibility contending that at the time of the accident, the vessel
was completely under the control of respondent Pioneer Stevedoring Corporation (Pioneer, for
short) as the exclusive stevedoring contractor of Aboitiz, which handled the unloading of cargoes
from the vessel of Aboitiz. It is also averred that since the crane operator was not an employee of
Aboitiz, the latter cannot be held liable under the fellow-servant rule.
Thereafter, Aboitiz, as third-party plaintiff, filed a third-party complaint 5 against Pioneer imputing
liability thereto for Anacleto Viana's death as having been allegedly caused by the negligence of the
crane operator who was an employee of Pioneer under its exclusive control and supervision.
Pioneer, in its answer to the third-party complaint, 6 raised the defenses that Aboitiz had no cause of
action against Pioneer considering that Aboitiz is being sued by the Vianas for breach of contract of
carriage to which Pioneer is not a party; that Pioneer had observed the diligence of a good father of
a family both in the selection and supervision of its employees as well as in the prevention of
damage or injury to anyone including the victim Anacleto Viana; that Anacleto Viana's gross
negligence was the direct and proximate cause of his death; and that the filing of the third-party
complaint was premature by reason of the pendency of the criminal case for homicide through
reckless imprudence filed against the crane operator, Alejo Figueroa.
In a decision rendered on April 17, 1980 by the trial court, 7 Aboitiz was ordered to pay the Vianas
for damages incurred, and Pioneer was ordered to reimburse Aboitiz for whatever amount the latter
paid the Vianas. The dispositive portion of said decision provides:
WHEREFORE, judgment is hereby rendered in favor of the plantiffs:
(1) ordering defendant Aboitiz Shipping Corporation to pay to plaintiffs the sum
of P12,000.00 for the death of Anacleto Viana P9,800.00 as actual damages;
P533,200.00 value of the 10,664 cavans of palay computed at P50.00 per
cavan; P10,000.00 as attorney's fees; F 5,000.00, value of the 100 cavans of
palay as support for five (5) years for deceased (sic) parents, herein plaintiffs
Antonio and Gorgonia Viana computed at P50.00 per cavan; P7,200.00 as
support for deceased's parents computed at P120.00 a month for five years
pursuant to Art. 2206, Par. 2, of the Civil Code; P20,000.00 as moral damages,
and costs; and
(2) ordering the third party defendant Pioneer Stevedoring Corporation to
reimburse defendant and third party plaintiff Aboitiz Shipping Corporation the
said amounts that it is ordered to pay to herein plaintiffs.
Both Aboitiz and Pioneer filed separate motions for reconsideration wherein they similarly raised the
trial court's failure to declare that Anacleto Viana acted with gross negligence despite the
overwhelming evidence presented in support thereof. In addition, Aboitiz alleged, in opposition to
Pioneer's motion, that under the memorandum of agreement the liability of Pioneer as contractor is
automatic for any damages or losses whatsoever occasioned by and arising from the operation of its
arrastre and stevedoring service.
In an order dated October 27, 1982, 8 the trial court absolved Pioneer from liability for failure of the
Vianas and Aboitiz to preponderantly establish a case of negligence against the crane operator
which the court a quo ruled is never presumed, aside from the fact that the memorandum of
56
agreement supposedly refers only to Pioneer's liability in case of loss or damage to goods handled
by it but not in the case of personal injuries, and, finally that Aboitiz cannot properly invoke the
fellow-servant rule simply because its liability stems from a breach of contract of carriage. The
dispositive portion of said order reads:
WHEREFORE, judgment is hereby modified insofar as third party defendant
Pioneer Stevedoring Corporation is concerned rendered in favor of the plaintiffs-
,:
(1) Ordering defendant Aboitiz Shipping Corporation to pay the plaintiffs the
sum of P12,000.00 for the death of Anacleto Viana; P9,000.00 (sic) as actual
damages; P533,200.00 value of the 10,664 cavans of palay computed at
P50.00 per cavan; P10,000.00 as attorney's fees; P5,000.00 value of the 100
cavans of palay as support for five (5) years for deceased's parents, herein
plaintiffs Antonio and Gorgonia Viana,computed at P50.00 per cavan;
P7,200.00 as support for deceased's parents computed at P120.00 a month for
five years pursuant to Art. 2206, Par. 2, of the Civil Code; P20,000.00 as moral
damages, and costs; and
(2) Absolving third-party defendant Pioneer Stevedoring Corporation for (sic)
any liability for the death of Anacleto Viana the passenger of M/V Antonia
owned by defendant third party plaintiff Aboitiz Shipping Corporation it
appearing that the negligence of its crane operator has not been established
therein.
Not satisfied with the modified judgment of the trial court, Aboitiz appealed the same to respondent
Court of Appeals which affirmed the findings of of the trial court except as to the amount of damages
awarded to the Vianas.
Hence, this petition wherein petitioner Aboitiz postulates that respondent court erred:
(A) In holding that the doctrine laid down by this honorable Court in La Mallorca
vs. Court of Appeals, et al. (17 SCRA 739, July 27, 1966) is applicable to the
case in the face of the undisputable fact that the factual situation under the La
Mallorca case is radically different from the facts obtaining in this case;
(B) In holding petitioner liable for damages in the face of the finding of the court
a quo and confirmed by the Honorable respondent court of Appeals that the
deceased, Anacleto Viana was guilty of contributory negligence, which, We
respectfully submit contributory negligence was the proximate cause of his
death; specifically the honorable respondent Court of Appeals failed to apply
Art. 1762 of the New Civil Code;
(C) In the alternative assuming the holding of the Honorable respondent Court
of Appears that petitioner may be legally condemned to pay damages to the
private respondents we respectfully submit that it committed a reversible error
when it dismissed petitioner's third party complaint against private respondent
Pioneer Stevedoring Corporation instead of compelling the latter to reimburse
the petitioner for whatever damages it may be compelled to pay to the private
respondents Vianas. 9
At threshold, it is to be observed that both the trial court and respondent Court of Appeals found the
victim Anacleto Viana guilty of contributory negligence, but holding that it was the negligence of
Aboitiz in prematurely turning over the vessel to the arrastre operator for the unloading of cargoes
which was the direct, immediate and proximate cause of the victim's death.
I. Petitioner contends that since one (1) hour had already elapsed from the time Anacleto Viana
disembarked from the vessel and that he was given more than ample opportunity to unload his
cargoes prior to the operation of the crane, his presence on the vessel was no longer reasonable e
and he consequently ceased to be a passenger. Corollarily, it insists that the doctrine in La Mallorca
vs. Court of Appeals, et al. 10 is not applicable to the case at bar.
The rule is that the relation of carrier and passenger continues until the passenger has been landed
at the port of destination and has left the vessel owner's dock or premises. 11 Once created, the
relationship will not ordinarily terminate until the passenger has, after reaching his destination, safely
alighted from the carrier's conveyance or had a reasonable opportunity to leave the carrier's
premises. All persons who remain on the premises a reasonable time after leaving the conveyance
are to be deemed passengers, and what is a reasonable time or a reasonable delay within this rule
is to be determined from all the circumstances, and includes a reasonable time to see after his
baggage and prepare for his departure.12 The carrier-passenger relationship is not terminated
merely by the fact that the person transported has been carried to his destination if, for example,
such person remains in the carrier's premises to claim his baggage. 13
It was in accordance with this rationale that the doctrine in the aforesaid case of La Mallorca was
enunciated, to wit:
It has been recognized as a rule that the relation of carrier and passenger does
not cease at the moment the passenger alights from the carrier's vehicle at a
place selected by the carrier at the point of destination, but continues until the
passenger has had a reasonable time or a reasonable opportunity to leave the
carrier's premises. And, what is a reasonable time or a reasonable delay within
this rule is to be determined from all the circumstances. Thus, a person who,
after alighting from a train, walks along the station platform is considered still a
passenger. So also, where a passenger has alighted at his destination and is
proceeding by the usual way to leave the company's premises, but before
actually doing so is halted by the report that his brother, a fellow passenger, has
been shot, and he in good faith and without intent of engaging in the difficulty,
returns to relieve his brother, he is deemed reasonably and necessarily delayed
and thus continues to be a passenger entitled as such to the protection of the
railroad company and its agents.
In the present case, the father returned to the bus to get one of his baggages
which was not unloaded when they alighted from the bus. Racquel, the child
that she was, must have followed the father. However, although the father was
still on the running board of the bus waiting for the conductor to hand him the
bag or bayong, the bus started to run, so that even he (the father) had to jump
down from the moving vehicle. It was at this instance that the child, who must
be near the bus, was run over and killed. In the circumstances, it cannot be
claimed that the carrier's agent had exercised the 'utmost diligence' of a 'very
cautious person' required by Article 1755 of the Civil Code to be observed by a
common carrier in the discharge of its obligation to transport safely its
passengers. ... The presence of said passengers near the bus was not
unreasonable and they are, therefore, to be considered still as passengers of
the carrier, entitled to the protection under their contract of carriage. 14
It is apparent from the foregoing that what prompted the Court to rule as it did in said case is the fact
of the passenger's reasonable presence within the carrier's premises. That reasonableness of time
should be made to depend on the attending circumstances of the case, such as the kind of common
carrier, the nature of its business, the customs of the place, and so forth, and therefore precludes a
consideration of the time element per se without taking into account such other factors. It is thus of
no moment whether in the cited case of La Mallorca there was no appreciable interregnum for the
passenger therein to leave the carrier's premises whereas in the case at bar, an interval of one (1)
hour had elapsed before the victim met the accident. The primary factor to be considered is the
57
existence of a reasonable cause as will justify the presence of the victim on or near the petitioner's
vessel. We believe there exists such a justifiable cause.
It is of common knowledge that, by the very nature of petitioner's business as a shipper, the
passengers of vessels are allotted a longer period of time to disembark from the ship than other
common carriers such as a passenger bus. With respect to the bulk of cargoes and the number of
passengers it can load, such vessels are capable of accommodating a bigger volume of both as
compared to the capacity of a regular commuter bus. Consequently, a ship passenger will need at
least an hour as is the usual practice, to disembark from the vessel and claim his baggage whereas
a bus passenger can easily get off the bus and retrieve his luggage in a very short period of time.
Verily, petitioner cannot categorically claim, through the bare expedient of comparing the period of
time entailed in getting the passenger's cargoes, that the ruling in La Mallorca is inapplicable to the
case at bar. On the contrary, if we are to apply the doctrine enunciated therein to the instant petition,
we cannot in reason doubt that the victim Anacleto Viana was still a passenger at the time of the
incident. When the accident occurred, the victim was in the act of unloading his cargoes, which he
had every right to do, from petitioner's vessel. As earlier stated, a carrier is duty bound not only to
bring its passengers safely to their destination but also to afford them a reasonable time to claim
their baggage.
established. Thus, we are not inclined to accept petitioner's explanation that the victim and other
passengers were sufficiently warned that merely venturing into the area in question was fraught with
serious peril. Definitely, even assuming the existence of the supposed cordon of drums loosely
placed around the unloading area and the guard's admonitions against entry therein, these were at
most insufficient precautions which pale into insignificance if considered vis-a-vis the gravity of the
danger to which the deceased was exposed. There is no showing that petitioner was extraordinarily
diligent in requiring or seeing to it that said precautionary measures were strictly and actually
enforced to subserve their purpose of preventing entry into the forbidden area. By no stretch of
liberal evaluation can such perfunctory acts approximate the "utmost diligence of very cautious
persons" to be exercised "as far as human care and foresight can provide" which is required by law
of common carriers with respect to their passengers.
While the victim was admittedly contributorily negligent, still petitioner's aforesaid failure to exercise
extraordinary diligence was the proximate and direct cause of, because it could definitely have
prevented, the former's death. Moreover, in paragraph 5.6 of its petition, at bar, 19 petitioner has
expressly conceded the factual finding of respondent Court of Appeals that petitioner did not present
sufficient evidence in support of its submission that the deceased Anacleto Viana was guilty of gross
negligence. Petitioner cannot now be heard to claim otherwise.

It is not definitely shown that one (1) hour prior to the incident, the victim had already disembarked No excepting circumstance being present, we are likewise bound by respondent court's declaration
from the vessel. Petitioner failed to prove this. What is clear to us is that at the time the victim was that there was no negligence on the part of Pioneer Stevedoring Corporation, a confirmation of the
taking his cargoes, the vessel had already docked an hour earlier. In consonance with common trial court's finding to that effect, hence our conformity to Pioneer's being absolved of any liability.
shipping procedure as to the minimum time of one (1) hour allowed for the passengers to
disembark, it may be presumed that the victim had just gotten off the vessel when he went to
As correctly observed by both courts, Aboitiz joined Pioneer in proving the alleged gross negligence
retrieve his baggage. Yet, even if he had already disembarked an hour earlier, his presence in
of the victim, hence its present contention that the death of the passenger was due to the negligence
petitioner's premises was not without cause. The victim had to claim his baggage which was
of the crane operator cannot be sustained both on grounds, of estoppel and for lack of evidence on
possible only one (1) hour after the vessel arrived since it was admittedly standard procedure in the
its present theory. Even in its answer filed in the court below it readily alleged that Pioneer had taken
case of petitioner's vessels that the unloading operations shall start only after that time.
the necessary safeguards insofar as its unloading operations were concerned, a fact which appears
Consequently, under the foregoing circumstances, the victim Anacleto Viana is still deemed a
to have been accepted by the plaintiff therein by not impleading Pioneer as a defendant, and
passenger of said carrier at the time of his tragic death.
likewise inceptively by Aboitiz by filing its third-party complaint only after ten (10) months from the
institution of the suit against it. Parenthetically, Pioneer is not within the ambit of the rule on
II. Under the law, common carriers are, from the nature of their business and for reasons of public extraordinary diligence required of, and the corresponding presumption of negligence foisted on,
policy, bound to observe extraordinary diligence in the vigilance over the goods and for the safety of common carriers like Aboitiz. This, of course, does not detract from what we have said that no
the passengers transported by them, according to all the circumstances of each case. 15 More negligence can be imputed to Pioneer but, that on the contrary, the failure of Aboitiz to exercise
particularly, a common carrier is bound to carry the passengers safely as far as human care and extraordinary diligence for the safety of its passenger is the rationale for our finding on its liability.
foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all
the circumstances. 16 Thus, where a passenger dies or is injured, the common carrier is presumed to
WHEREFORE, the petition is DENIED and the judgment appealed from is hereby AFFIRMED in
have been at fault or to have acted negligently. 17 This gives rise to an action for breach of contract
toto.
of carriage where all that is required of plaintiff is to prove the existence of the contract of carriage
and its non-performance by the carrier, that is, the failure of the carrier to carry the passenger safely
to his destination, 18 which, in the instant case, necessarily includes its failure to safeguard its SO ORDERED.
passenger with extraordinary diligence while such relation subsists.

The presumption is, therefore, established by law that in case of a passenger's death or injury the
operator of the vessel was at fault or negligent, having failed to exercise extraordinary diligence, and
it is incumbent upon it to rebut the same. This is in consonance with the avowed policy of the State
to afford full protection to the passengers of common carriers which can be carried out only by
imposing a stringent statutory obligation upon the latter. Concomitantly, this Court has likewise
adopted a rigid posture in the application of the law by exacting the highest degree of care and
diligence from common carriers, bearing utmost in mind the welfare of the passengers who often
become hapless victims of indifferent and profit-oriented carriers. We cannot in reason deny that
petitioner failed to rebut the presumption against it. Under the facts obtaining in the present case, it
cannot be gainsaid that petitioner had inadequately complied with the required degree of diligence to
prevent the accident from happening.

As found by the Court of Appeals, the evidence does not show that there was a cordon of drums
around the perimeter of the crane, as claimed by petitioner. It also adverted to the fact that the
alleged presence of visible warning signs in the vicinity was disputable and not indubitably

58
G.R. No. L-22985 January 24, 1968
BATANGAS TRANSPORTATION COMPANY, petitioner,
vs.
GREGORIO CAGUIMBAL, PANCRACIO CAGUIMBAL, MARIA MARANAN DE CAGUIMBAL,
BIÑAN TRANSPORTATION COMPANY and MARCIANO ILAGAN, respondents.
CONCEPCION, C.J.:
Appeal by certiorari from a decision of the Court of Appeals.
The main facts are set forth in said decision from which we quote:
There is no dispute at all that the deceased Pedro Caguimbal, Barrio Lieutenant of Barrio
Calansayan, San Jose, Batangas, was a paying passenger of BTCO bus, with plate TPU-
507, going south on its regular route from Calamba, Laguna, to Batangas, Batangas,
driven by Tomas Perez, its regular driver, at about 5:30 o'clock on the early morning of
April 25, 1954. The deceased's destination was his residence at Calansayan, San Jose,
Batangas. The bus of the Biñan Transportation Company, bearing plate TPU-820, driven
by Marciano Ilagan, was coming from the opposite direction (north-bound). Along the
national highway at Barrio Daraza, Tanauan, Batangas, on the date and hour above
indicated, a horse-driven rig (calesa) managed by Benito Makahiya, which was then
ahead of the Biñan bus, was also coming from the opposite direction, meaning proceeding
towards the north. As to what transpired thereafter, the lower court chose to give more
credence to defendant Batangas Transportation Company's version which, in the words of
the Court a quo, is as follows: "As the BTCO bus was nearing a house, a passenger
requested the conductor to stop as he was going to alight, and when he heard the signal
of the conductor, the driver Tomas Perez slowed down his bus swerving it farther to the
right in order to stop; at this juncture, a calesa, then driven by Benito Makahiya was at a
distance of several meters facing the BTCO bus coming from the opposite direction; that
at the same time the Biñan bus was about 100 meters away likewise going northward and
following the direction of the calesa; that upon seeing the Biñan bus the driver of the
BTCO bus dimmed his light as established by Magno Ilaw, the very conductor of the
Biñan bus at the time of the accident; that as the calesa and the BTCO bus were passing
each other from the opposite directions, the Biñan bus following the calesa swerved to its
left in an attempt to pass between the BTCO bus and the calesa; that without diminishing
its speed of about seventy (70) kilometers an hour, the Biñan bus passed through the
space between the BTCO bus and the calesa hitting first the left side of the BTCO bus
with the left front corner of its body and then bumped and struck the calesa which was
completely wrecked; that the driver was seriously injured and the horse was killed; that the
second and all other posts supporting the top of the left side of the BTCO bus were
completely smashed and half of the back wall to the left was ripped open. (Exhibits 1 and
2). The BTCO bus suffered damages for the repair of its damaged portion.
As a consequence of this occurrence, two (2) passengers of BTCO died, namely, Pedro Caguimbal
and Guillermo Tolentino, apart from others who were injured. The widow and children of Caguimbal
instituted the present action, which was tried jointly with a similar action of the Tolentinos, to recover
damages from the Batangas Transportation Company, hereinafter referred to as BTCO. The latter,
in turn, filed a third-party complaint against the Biñan Transportation Company — hereinafter
referred to as Biñan — and its driver, Marciano Ilagan. Subsequently, the Caguimbals amended
their complaint, to include therein, as defendants, said Biñan and Ilagan.
After appropriate proceedings, the Court of First Instance of Batangas rendered a decision
dismissing the complaint insofar as the BTCO is concerned, without prejudice to plaintiff's right to
sue Biñan — which had stopped participating in the proceedings herein, owing apparently, to a case
in the Court of First Instance of Laguna for the insolvency of said enterprise — and Ilagan, and
without pronouncement as to costs.
On appeal taken by the Caguimbals, the Court of Appeals reversed said decision and rendered
judgment for them, sentencing the BTCO, Biñan and Ilagan to, jointly and severally, pay to the
plaintiffs the aggregate sum of P10,500.00 1 and the costs in both instances. Hence, this appeal by
BTCO, upon the ground that the Court of Appeals erred: 1) in finding said appellant liable for
damages; and 2) in awarding attorney's fees.
In connection with the first assignment of error, we note that the recklessness of defendant was,
manifestly, a major factor in the occurrence of the accident which resulted, inter alia, in the death of
Pedro Caguimbal. Indeed, as driver of the Biñan bus, he overtook Benito Makahiya's horse-driven
rig or calesa and passed between the same and the BTCO bus despite the fact that the space
available was not big enough therefor, in view of which the Biñan bus hit the left side of the BTCO
bus and then the calesa. This notwithstanding, the Court of Appeals rendered judgment against the
BTCO upon the ground that its driver, Tomas Perez, had failed to exercise the "extraordinary
diligence," required in Article 1733 of the new Civil Code, "in the vigilance for the safety" of his
passengers. 2
The record shows that, in order to permit one of them to disembark, Perez drove his BTCO bus
partly to the right shoulder of the road and partly on the asphalted portion thereof. Yet, he could
have and should have seen to it — had he exercised "extraordinary diligence" — that his bus was
completely outside the asphalted portion of the road, and fully within the shoulder thereof, the width
of which being more than sufficient to accommodate the bus. He could have and should have done
this, because, when the aforementioned passenger expressed his wish to alight from the bus, Ilagan
had seen the aforementioned "calesa", driven by Makahiya, a few meters away, coming from the
opposite direction, with the Biñan bus about 100 meters behind the rig cruising at a good
speed. 3 When Perez slowed down his BTCO bus to permit said passenger to disembark, he must
have known, therefore, that the Biñan bus would overtake the calesa at about the time when the
latter and BTCO bus would probably be on the same line, on opposite sides of the asphalted
portions of the road, and that the space between the BTCO bus and the "calesa" would not be
enough to allow the Biñan bus to go through. It is true that the driver of the Biñan bus should have
slowed down or stopped, and, hence, was reckless in not doing so; but, he had no especial
obligations toward the passengers of the BTCO unlike Perez whose duty was to exercise "utmost"
or "extraordinary" diligence for their safety. Perez was thus under obligation to avoid a situation
which would be hazardous for his passengers, and, make their safety dependent upon the diligence
of the Biñan driver. Such obligation becomes more patent when we considered the fact — of which
the Court may take judicial cognizance — that our motor vehicle drivers, particularly those of public
service utilities, have not distinguished themselves for their concern over the safety, the comfort or
the convenience of others. Besides, as correctly stated in the syllabus to Brito Sy vs. Malate Taxicab
& Garage, Inc., 4
In an action based on a contract of carriage, the court need not make an express finding
of fault or negligence on the part of the carrier in order to hold it responsible to pay the
damages sought for by the passenger. By the contract of carriage, the carrier assumes
the express obligation to transport the passenger to his destination safely and to observe
extraordinary diligence with a due regard for all the circumstances, and any injury that
might be suffered by the passenger is right away attributable to the fault or negligence of
the carrier (Article 1756, new Civil Code). This is an exception to the general rule that
negligence must be proved, and it is therefore incumbent upon the carrier to prove that it
has exercised extraordinary diligence as prescribed in Articles 1733 and 1755 of the new
Civil Code.
In the case at bar, BTCO has not proven the exercise of extraordinary diligence on its part. For this
reason, the case of Isaac vs. A. L. Ammen Trans. Co., Inc. 5 relied upon by BTCO, is not in point, for,
in said case, the public utility driver had done everything he could to avoid the accident, and could
not have possibly avoided it, for he "swerved the bus to the very extreme right of the road," which
the driver, in the present case, had failed to do.
As regards the second assignment of error, appellant argues that the award of attorney's fees is not
authorized by law, because, of the eleven (11) cases specified in Article 1208 of the new Civil Code,
59
only the fifth and the last are relevant to the one under consideration; but the fifth case requires bad
faith, which does not exist in the case at bar. As regards the last case, which permits the award,
"where the court deems it just and equitable that attorney's fees . . . should be recovered," it is urged
that the evidence on record does not show the existence of such just and equitable grounds.
We, however, believe otherwise, for: (1) the accident in question took place on April 25, 1954, and
the Caguimbals have been constrained to litigate for over thirteen (13) years to vindicate their rights;
and (2) it is high time to impress effectively upon public utility operators the nature and extent of their
responsibility in respect of the safety of their passengers and their duty to exercise greater care in
the selection of drivers and conductor and in supervising the performance of their duties, in
accordance, not only with Article 1733 of the Civil Code of the Philippines, but, also, with Articles
1755 and 1756 thereof 6 and the spirit of these provisions, as disclosed by the letter thereof, and
elucidated by the Commission that drafted the same. 7
WHEREFORE, the decision appealed from, should be, as it is hereby, affirmed, with the costs of this
instance against appellant Batangas Transportation Company.
G.R. No. 120262 July 17, 1997
PHILIPPINE AIRLINES, INC., petitioner,
vs.
COURT OF APPEALS and LEOVIGILDO A. PANTEJO, respondents.
REGALADO, J.:
In this appeal by certiorari, petitioner Philippine Airlines, Inc. (PAL) seeks to set aside the decision of
respondent Court of Appeals, 1 promulgated on December 29, 1994, which affirmed the award for
damages made by the trial court in favor of herein private respondent Leovegildo A. Pantejo.
On October 23, 1988, private respondent Pantejo, then City Fiscal of Surigao City, boarded a PAL
plane in Manila and disembarked in Cebu City where he was supposed to take his connecting flight
to Surigao City However, due to typhoon Osang, the connecting flight to Surigao City was cancelled.
To accommodate the needs of its stranded passengers, PAL initially gave out cash assistance of
P100.00 and, the next day, P200.00, for their expected stay of two days in Cebu. Respondent
Pantejo requested instead that he be billeted in a hotel at PAL's expense because he did not have
cash with him at that time, but PAL refused. Thus, respondent Pantejo was forced to seek and
accept the generosity of a co-passenger, an engineer named Andoni Dumlao, and he shared a room
with the latter at Sky View Hotel with the promise to pay his share of the expenses upon reaching
Surigao.
On October 25, 1988 when the flight for Surigao was resumed, respondent Pantejo came to know
that the hotel expenses of his co-passengers, one Superintendent Ernesto Gonzales and a certain
Mrs. Gloria Rocha, an auditor of the Philippine National Bank, were reimbursed by PAL. At this
point, respondent Pantejo informed Oscar Jereza, PAL's Manager for Departure Services at Mactan
Airport and who was in charge of cancelled flights, that he was going to sue the airline for
discriminating against him. It was only then that Jereza offered to pay respondent Pantejo P300.00
which, due to the ordeal and anguish he had undergone, the latter decline.
On March 18, 1991, the Regional Trial Court of Surigao City, Branch 30, rendered judgment in the
action for damages filed by respondent Pantejo against herein petitioner, Philippine Airlines, Inc.,
ordering the latter to pay Pantejo P300.00 for actual damages, P150,000.00 as moral damages,
P100,000.00 as exemplary damages, P15,000.00 as attorney's fees, and 6% interest from the time
of the filing of the complaint until said amounts shall have been fully paid, plus costs of suit. 2 On
appeal, respondent court affirmed the decision of the court a quo, but with the exclusion of the
award of attorney's fees and litigation expenses.
The main issue posed for resolution is whether petitioner airlines acted in bad faith when it failed
and refused to provide hotel accommodations for respondent Pantejo or to reimburse him for hotel
expenses incurred by reason of the cancellation of its connecting flight to Surigao City due to force
majeure.
To begin with, it must be emphasized that a contract to transport passengers is quite different in kind
and degree from any other contractual relation, and this is because of the relation which an air
carrier sustain with the public. Its business is mainly with the travelling public. It invites people to
avail of the comforts and advantages it offers. The contract of air carriage, therefore, generates a
relation attended with a public duty. Neglect or malfeasance of the carrier's employees naturally
could give ground for an action for damages.3
In ruling for respondent Pantejo, both the trial court and the Court of Appeals found that herein
petitioner acted in bad faith in refusing to provide hotel accommodations for respondent Pantejo or
to reimburse him for hotel expenses incurred despite and in contrast to the fact that other
passengers were so favored.
In declaring that bad faith existed, respondent court took into consideration the following factual
circumstances:
1. Contrary to petitioner's claim that cash assistance was given instead because of non-availability
of rooms in hotels where petitioner had existing tie-ups, the evidence shows that Sky View Hotel,
where respondent Pantejo was billeted, had plenty of rooms available.
2. It is not true that the P300.00 Paid to Ernesto Gonzales, a co-passenger of respondent, was a
refund for his plane ticket, the truth being that it was a reimbursement for hotel and meal expenses.
3. It is likewise not denied that said Gonzales and herein respondent came to know about the
reimbursements only because another passenger, Mrs. Rocha, informed them that she was able to
obtain the refund for her own hotel expenses.
4. Petitioner offered to pay P300.00 to private respondent only after he had confronted the airline's
manager about the discrimination committed against him, which the latter realized was an actionable
wrong.
5. Service Voucher No. 199351, presented by petitioner to prove that it gave cash assistance to its
passengers, was based merely on the list of passengers already given cash assistance and was
purportedly prepared at around 10:00 A.M. of October 23, 1988. This was two
hours before respondent came to know of the cancellation of his flight to Surigao, hence private
respondent could not have possibly refused the same.4
It must be stressed that these factual findings, which are supported by substantial evidence, are
binding, final and conclusive upon this Court absent any reason, and we find none, why this settled
evidential rule should not apply.
Petitioner theorizes that the hotel accommodations or cash assistance given in case a flight is
cancelled is in the nature of an amenity and is merely a privilege that may be extended at its own
discretion, but never a right that may be demanded by its passengers. Thus, when respondent
Pantejo was offered cash assistance and he refused it, petitioner cannot be held liable for whatever
befell respondent Pantejo on that fateful day, because it was merely exercising its discretion when it
opted to just give cash assistance to its passengers.
60
Assuming arguendo that the airline passengers have no vested right to these amenities in case a
flight is cancelled due to force majeure, what makes petitioner liable for damages in this particular
case and under the facts obtaining herein is its blatant refusal to accord the so-called amenities
equally to all its stranded passengers who were bound for Surigao City. No compelling or justifying
reason was advanced for such discriminatory and prejudicial conduct.
More importantly, it has been sufficiently established that it is petitioner's standard company policy,
whenever a flight has been cancelled, to extend to its hapless passengers cash assistance or to
provide them accommodations in hotels with which it has existing tie-ups. In fact, petitioner's Mactan
Airport Manager for departure services, Oscar Jereza, admitted that PAL has an existing
arrangement with hotels to accommodate stranded passengers, 5 and that the hotel bills of Ernesto
Gonzales were reimbursed 6 obviously pursuant to that policy.
Also, two witnesses presented by respondent, Teresita Azarcon and Nerie Bol, testified that
sometime in November, 1988, when their flight from Cebu to Surigao was cancelled, they were
billeted at Rajah Hotel for two nights and three days at the expense of PAL. 7 This was never denied
by PAL.
Further, Ernesto Gonzales, the aforementioned co-passenger of respondent on that fateful flight,
testified that based on his previous experience hotel accommodations were extended by PAL to its
stranded passengers either in Magellan or Rajah Hotels, or even in Cebu Plaza. Thus, we view as
impressed with dubiety PAL's present attempt to represent such emergency assistance as being
merely ex gratia and not ex debito.
While petitioner now insists that the passengers were duly informed that they would be reimbursed
for their hotel expenses, it miserably and significantly failed to explain why the other passengers
were given reimbursement while private respondent was not. Although Gonzales was subsequently
given a refund, this was only so because he came to know about it by accident through Mrs. Rocha,
as earlier explained.
Petitioner could only offer the strained and flimsy pretext that possibly the passengers were not
listening when the announcement was made. This is absurd because when respondent Pantejo
came to know that his flight had been cancelled, he immediately proceeded to petitioner's office and
requested for hotel accommodations. He was not only refused accommodations, but he was not
even informed that he may later on be reimbursed for his hotel expenses. This explains why his co-
passenger, Andoni Dumlao, offered to answer for respondent's hotel bill and the latter promised to
pay him when they arrive in Surigao. Had both know that they would be reimbursed by the airline,
such arrangement would not have been necessary.
Respondent Court of Appeals thus correctly concluded that the refund of hotel expenses was
surreptitiously and discriminatorily made by herein petitioner since the same was not made known to
everyone, except through word of mouth to a handful of passengers. This is a sad commentary on
the quality of service and professionalism of an airline company, which is the country's flag carrier at
that.
On the bases of all the foregoing, the inescapable conclusion is that petitioner acted in bad faith in
disregarding its duties as a common carrier to its passengers and in discriminating against herein
respondent Pantejo. It was even oblivious to the fact that this respondent was exposed to
humiliation and embarrassment especially because of his government position and social
prominence, which altogether necessarily subjected him to ridicule, shame and anguish. It remains
uncontroverted that at the time of the incident, herein respondent was then the City Prosecutor of
Surigao City, and that he is a member of the Philippine Jaycee Senate, past Lt. Governor of the
Kiwanis Club of Surigao, a past Master of the Mount Diwata Lodge of Free Masons of the
Philippines, member of the Philippine National Red Cross, Surigao Chapter,
and past Chairman of the Boy Scouts of the Philippines, Surigao del Norte Chapter. 8
It is likewise claimed that the moral and exemplary damages awarded to respondent Pantejo are
excessive and unwarranted on the ground that respondent is not totally blameless because of his
refusal to accept the P100.00 cash assistance which was inceptively offered to him. It bears
emphasis that respondent Pantejo had every right to make such refusal since it evidently could not
meet his needs and that was all that PAL claimed it could offer.
His refusal to accept the P300.00 proffered as an afterthought when he threatened suit was justified
by his resentment when he belatedly found out that his co-passengers were reimbursed for hotel
expenses and he was not. Worse, he would not even have known about it were it not for a co-
passenger who verbally told him that she was reimbursed by the airline for hotel and meal
expenses. It may even be said that the amounts, the time and the circumstances under which those
amounts were offered could not salve the moral wounds inflicted by PAL on private respondent but
even approximated insult added to injury.
The discriminatory act of petitioner against respondent ineludibly makes the former liable for moral
damages under Article 21 in relation to Article 2219 (10) of the Civil Code. 9 As held in Alitalia
Airways vs. CA, et al., 10 such inattention to and lack of care by petitioner airline for the interest of its
passengers who are entitled to its utmost consideration, particularly as to their convenience, amount
to bad faith which entitles the passenger to the award of moral damages.
Moral damages are emphatically not intended to enrich a plaintiff at the expense of the defendant.
They are awarded only to allow the former to obtain means, diversion, or amusements that will serve
to alleviate the moral suffering he has undergone due to the defendant's culpable action and must,
perforce, be proportional to the suffering inflicted. 11 However, substantial damages do not translate
into excessive damages. 12 Except for attorney's fees and costs of suit, it will be noted that the Court
of Appeals affirmed point by point the factual findings of the lower court upon which the award of
damages had been based.13 We, therefore, see no reason to modify the award of damages made by
the trial court.
Under the peculiar circumstances of this case, we are convinced that the awards for actual, moral
and exemplary damages granted in the judgment of respondent court, for the reasons meticulously
analyzed and thoroughly explained in its decision, are just and equitable. It is high time that the
travelling public is afforded protection and that the duties of common carriers, long detailed in our
previous laws and jurisprudence and thereafter collated and specifically catalogued in our Civil Code
in 1950, be enforced through appropriate sanctions.
We agree, however, with the contention that the interest of 6% imposed by respondent court should
be computed from the date of rendition of judgment and not from the filing of the complaint. The rule
has been laid down in Eastern Shipping Lines, Inc. vs. Court of Appeals, et al. 14 that:
When an obligation, not constituting a loan or forbearance of money, is breached, an
interest on the amount of damages awarded may be imposed at the discretion of the court
at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated
claims or damages except when or until the demand can be established with reasonable
certainty. Accordingly, where the demand is established with reasonable certainty, the
interest shall begin to run from the time the claim is made judicially or extrajudicially (Art.
1169, Civil Code) but when such certainty cannot be so reasonably established at the time
the demand is made, the interest shall begin to run only from the date the judgment of the
court is made (at which time the quantification of damages may be deemed to have been
reasonably ascertained). The actual base for the computation of legal interest shall, in any
case, be on the amount finally adjudged.
This is because at the time of the filing of the complaint, the amount of damages to which plaintiff
may be entitled remains unliquidated and not known, until it is definitely ascertained, assessed and
determined by the court, and only after the presentation of proof thereon. 15
61
WHEREFORE, the challenged judgment of respondent Court of Appeals is hereby AFFIRMED,
subject to the MODIFICATION regarding the computation of the 6% legal rate of interest on the
monetary awards granted therein to private respondent
SO ORDERED.
G.R. No. 136048 January 23, 2001
JOSE BARITUA and JB LINE, petitioners,
vs.
NIMFA DIVINA MERCADER in her capacity and as guardian of DARWIN, GIOVANNI, RODEL
and DENNIS, all surnamed MERCADER; LEONIDA Vda. de MERCADER on her behalf and on
behalf of her minor child MARY JOY MERCADER; SHIRLEY MERCADER DELA CRUZ; MARIA
THERESA MERCADER-GARCIA; DANILO MERCADER; JOSE DANTE MERCADER; JOSEFINA
MERCADER, respondents.
PANGANIBAN, J.:
The Manchester ruling requiring the payment of docket and other fees as a condition for the
acquisition of jurisdiction has no retroactive effect and applies only to cases filed after its finality.
The Case
Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the April 17, 1998
Decision1 and the October 28, 1998 Resolution2 of the Court of Appeals (CA) in CA-GR CY No.
40772. The decretal portion of said Decision reads as follows:
"WHEREFORE, upon all the foregoing premises considered, the DECISION appealed
from is AFFIRMED with the MODIFICATION that the loss of earnings of the late
Dominador Mercader is reduced to P798,000.00."3
The assailed Resolution denied petitioners' Motion for Reconsideration.
The Court of Appeals sustained the Decision of the Regional Trial Court (RTC) of Laoang, Northern
Samar (Branch 21). Except for the modification of the loss of earnings, it affirmed all the monetary
damages granted by the trial court to respondents. The decretal portion of the assailed RTC
Decision reads as follows:4
"WHEREFORE, on preponderance of evidence, judgment is for [herein respondents] and
against [herein petitioners], ordering the latter to pay the former:
(a) As compensatory damages for the death of Dominador Mercader -- P50,000.00;
(b) For the loss of earnings of the late Dominador Mercader -- P1,660,000.00, more or
less, based on the average life span of 75 years from the time of his death who earned a
net income of P5,000.00 monthly out of his business;
(c) Actual damages of P30,000.00 receipted purchases of goods in Manila; P5,750.00 for
the first class coffin and a 15-day wake services evidenced by a receipt marked Exh. 'D';
[P.]850.00 for the 50 x 60 headstone, receipt marked Exh. 'E' and P1,590.00 -- Deed of
Absolute Sale of a burial lot, marked Exh. 'F';
(d) 25% of whatever amount is collected by [respondents] from [petitioners] but no less
than P50,000.00 plus P1 ,000.00 per hearing by way of attorney's fees;
(e) As moral damages -- P50,000.00;
(f) As exemplary damages -- P30,000.00; and
(g) To pay the costs."
The Facts
The antecedents of the case are succinctly summarized by the Court of Appeals in this wise:
"The original complaint was filed against JB Lines, Inc. [Petitioner JB Lines, Inc.] filed a
motion to dismiss complaint, to strike out false-impertinent matters therefrom, and/or for
bill of particulars on the primary grounds that [respondents] failed to implead Jose Baritua
as an indispensable party and that the cause of action is a suit against a wrong and non-
existent party. [Respondents] filed an opposition to the said motion and an amended
complaint.
"In an Order dated December 11, 1984 the trial court denied the aforesaid motion and
admitted the amended complaint of [respondents] impleading Jose Baritua and alleged
the following:
'(10) The late Dominador Mercader is a [b]usinessman mainly engaged in the
buy and sell of dry goods in Laoang, N. Samar. He buys his goods from Manila
and bring[s] them to Laoang, Northern Samar for sale at his store located in the
said locality;
(11) Sometime on March 16, 1983, the late Dominador Mercader boarded
[petitioners'] bus No. 142 with Plate No. 484 EU at [petitioners'] Manila
Station/terminal, bound for Brgy. Rawis, Laoang Northern Samar as a paying
passenger;
(12) At that time, Dominador Mercader had with him as his baggage, assorted
goods (i.e. long pants, short pants, dusters, etc.) which he likewise loaded in
[petitioners'] bus;
(13) The late Dominador Mercader was not able to reach his destination
considering that on March 17, 1983 at Beily (Bugco) Bridge, Barangay Roxas,
Mondragon, Northern Samar, while he was on board [petitioners'] bus no. 142
with Plate No. 484 EU, the said bus fell into the river as a result of which the
late Dominador Mercader died. x x x.
(14) The accident happened because [petitioners'] driver negligently and
recklessly operated the bus at a fast speed in wanton disregard of traffic rules
and regulations and the prevailing conditions then existing that caused [the] bus
to fall into the river.'
62
"[Respondents] then filed a motion to declare [petitioners] in default which motion was
opposed by [petitioners]. [Respondents] withdrew the said motion prompting the trial court
to cancel the scheduled hearing of the said motion to declare [petitioners] in default in an
Order dated January 23, 1985.
"In its answer, [petitioners] denied specifically all the material allegations in the complaint
and alleged the following:
'2. The alleged person of Dominador Mercader did not board bus 142 at
[petitioners'] Manila station/terminal x x x as a (supposed paying passenger).
There is even no statement in the complaint that Dominador Mercader (if it were
true that he was a passenger of bus 142 'at the [petitioners'] Manila
station/terminal') was issued any passenger-freight ticket conformably with law
and practice. It is a fact of public knowledge that, in compliance with existing
rules and laws, [Petitioner] Baritua, as a public utility operator, issues, thru his
conductors, in appropriate situations, to a true passenger, the familiar and
known passenger and freight ticket which reads in part:
'NOTICE
Baggage carried at owner's risk x x x liability on prepaid
freight otherwise declared.
xxx xxx xxx
Whole Fare Paid P ___________________________
Declared value x x x.
Description of Freight ________________________
Signature of Owner .'
3. It is also a fact of public knowledge that [Petitioner] Baritua does not have
any 'Manila station/terminal,' because what he has is a Pasay city station.
4. [Petitioner] Baritua had no prior knowledge that, on or about March 17, 1983,
and/or previous thereto, the Bugko Bailey Bridge (across Catarman-Laoang
road) in Barangay Roxas, Mondragon, Northern Samar, was in virtual'
dilapida[ted] and dangerous condition, in a state of decay and disrepair, thus
calling for the concerned government and public officials' performance of their
coordinative and joint duties and responsibilities, to repair, improve and
maintain that bridge, in good and reasonably safe condition, but, far from
performing or complying with said subject duties and responsibilities, the
adverted officials concerned, without just cause, not only failed and neglected to
cause such needed repair, improvement and maintenance of the Bugko Bailey
Bridge, on or prior to March 17, 1983, but also failed, and neglected to either
close the Bugko Bridge to public use and travel, and/or to put appropriate
warning and cautionary signs, for repair, improvement, maintenance, and safety
purposes. So that, as a proximate and direct consequence of the aggregate
officials' nonfeasance, bad faith, negligence, serious inefficiency, and callous
indifference to public safety, that Bugko Bridge collapsed inward and caved in
ruin, on that March 17, 1983, while Baritua's bus 142 was cautiously and
prudently passing and travelling across the said bridge, as a result of which the
bus fell into the river and sea waters, despite the exercise and compliance by
Baritua and his driver of their duties in the matter of their requisite degree of
diligence, caution and prudence, Baritua also exercised and complied with the
requisite duty of diligence, care, and prudence in the selection and supervision
over his driver, contrary to the baseless imputation in paragraphs 14 and 20 of
the original and amended complaints. Moreover, Baritua and his driver did not
violate any traffic rule and regulation, contrary to plaintiffs' insinuation.
5. Furthermore, [Petitioner] Baritua and his driver have no causative connection
with the alleged death of Dominador Mercader who, according to a reliable
source, was already seriously suffering from a lingering illness even prior to his
alleged demise. Baritua also learned lately, and so it is herein alleged that
Dominador Mercader contributed considerably, to, and/or provided the
proximate and direct cause of his own death, hence, he himself is to be blamed
for whatever may have happened to him or for whatever may have been
sustained by his supposed heirs, vis-à-vis the suit against the wrong party.
6. Baritua and his driver, as earlier stated, did not commit any actionable breach
of contract with the alleged Dominador Mercader or the latter's supposed heirs.
7. There is no factual nor any legal basis for plaintiffs' proffered claims for
damages.
II. AFFIRMATIVE DEFENSES
8. Based on the preceding averments, plaintiffs have neither a cause nor a right
of action against [Petitioner] Baritua and his driver.
8.1. The allegation that supposedly the 'x x x [p]laintiffs are the compulsory heirs
of the late DOMINADOR MERCADER x x x' (par. 8, complaint) is too vague and
too broad, as the subject allegation is a bare and pure conclusionary averment
unaccompanied by the requisite statement of ultimate facts constitutive of a
cause or right of action.
8.2. Even assuming arguendo, without however conceding, plaintiffs statement
of a cause of action, the complaint is nonetheless replete with false and
impertinent matters which fit the rule on striking out pleadings or parts thereof.
To mention only a glaring few:
8.2.a. The allegation on exemplary damages x x x is impertinent and immaterial
in the complaint against a supposed employer. For, even theoretically
assuming, without however admitting a negligent act-omission on the part of a
driver, nevertheless, in such a hypothetical situation, the causative negligence,
if any there was, is personal to the wrongdoer, i.e., the employee-driver, to the
exclusion of the employer.
8.2.b. The allegation on supposed 'minimum life of 75 years' and on 'he expects
to earn no less than P1,680,000.00 x x x is false, a pure hyperbole, and bereft
of factual and legal basis. Besides, what jurisprudential rule refers to is
only net earning. The law abhors a claim, akin to plaintiffs' allegation, which is
manifestly speculative, as it may not exist at all. Furthermore, the questioned
allegation in the plaintiff's original and amended complaints is not preceded by
the requisite statement of definitive facts, nor of any specific fact, which could
possibly afford a rational basis for a reasonable expectation of supposed
earning that could be lost, or impaired.
63
 8.2.c. Likewise, the allegations that allegedly 'x x x the late Dominador
Mercader boarded x x x Bus No. 142 x x x and that supposedly the latter had a
baggage x x x containing drygoods x x x in which case [petitioners have] to
pay the value thereof in such amount as may be proven by [respondents] in
court during the trial x x x, apart from being false, are offensive to the rule on
concise statement of ultimate facts. The assailed allegations also contravene
Interim Rule 11, '(i)f any demand is for damages in a civil action the amount
thereof must be specifically alleged.' In consequence of this averment,
[respondents] have not yet paid the correct docket fee, for which reason,
[respondents'] case may be dismissed on that ground alone.1âwphi1.nêt
8.3. In violation also of the same Interim Rule 11, regarding the requisite
definitive amount of claim, the allegation on the supposed funeral expense x x x
does not also indicate any specific amount. So with the averment on supposed
moral damage which may not be warranted because of absence of allegation of
fraud or bad faith, if any, there was, apart from want of causative connection
with the defendant.
8.4. The allegation in paragraph 15 of the original and amended complaint is
also a pure conclusionary averment, without a factual premise.
9. [Petitioner] JB LINE, impleaded in the amended, complaint, is merely a
business name and sole proprietorship of defendant Baritua. As such, JB Line
is not a juridical person, nor an entity authorized by law to sue and be sued,
hence, it cannot legally be a party to any action. With this averment, correlated
with that in paragraphs 4-5 hereof, [respondents'] amended complaint is
essentially a suit against a wrong party."5
The RTC, after due trial, rendered the aforesaid assailed Decision.
Ruling of the Court of Appeals
As earlier stated, the Court of Appeals affirmed the trial court's award of monetary damages in favor
of respondents, except the amount of Dominador Mercader's lost earnings, which it reduced to
P798,000. It held that petitioners failed to rebut the presumption that in the event a passenger died
or was injured, the carrier had acted negligently. Petitioners, it added, presented no sufficient proof
that they had exercised extraordinary diligence.
Hence, this Petition.6
The Issues
In their Memorandum, petitioners submit the following issues for our consideration:
"I
Did the honorable Court of Appeals (CA) gravely abuse its discretion when it allowed to
pass sub silencio the trial court's failure to rule frontally on petitioners' plea for a bill of
particulars, and ignored the nature of respondents' prayer in the complaint pleading for an
award of --
'a) P12,000.00 -- representing the death compensation;
b) An amount to be proven in court. representing actual damages;
c) P1,660,000.00 or more as may be proven during the trial, by way of loss of
earnings;
d) An amount to be proven in court as and by way of funeral expenses;
e) An amount to be proven during the trial representing moral damages;
f) An amount to be determined by this Honorable Court, representing exemplary
damages;
g) An amount equivalent to 25% of whatever amount the plaintiffs would be able
to collect from the defendant but in no case less than P50,000.00 plus an
additional amount of P1,000.00 per hearing as and by way of Attorney's fees;'
"II
Did the CA also ignore the fact that the trial court was not paid the correct amount of the
docket and other lawful fees; hence, without jurisdiction over the original and amended
complaints or over the subject matter of the case;
"III
Did the CA likewise arbitrarily disregard petitioners' constitutional right to procedural due
process and fairness when it ignored and thrust aside their right to present evidence and
to expect that their evidence will be duly considered and appreciated; and
"IV.
In awarding excessive and extravagant damages, did the CA and the trial court adhere to
the rule that their assailed decision must state clearly and distinctly the facts and the laws
on which they are based?"7
Distilling the alleged errors cited above, petitioners raise two main issues for our consideration: (1)
whether the CA erred in holding that the RTC had jurisdiction over the subject matter of the case,
and (2) whether the CA disregarded petitioners' procedural rights.
The Court's Ruling
The Petition is devoid of merit.
First Issue:
Jurisdiction
Petitioners contend that since the correct amounts of docket and other lawful fees were not paid by
respondents, then the trial court did not acquire jurisdiction over the subject matter of the case.
The Court, in Manchester Development Corporation v. CA,8 held that "[t]he court acquires
jurisdiction over any case only upon the payment of the prescribed docket fee. An amendment of the
complaint or similar pleading will not thereby vest jurisdiction in the court, much less the payment of
the docket fee based on the amounts sought in the amended pleading. x x x."
64
Generally, the jurisdiction of a court is determined by the statute in force at the commencement of
the action,9 unless such statute provides for its retroactive application. 10 Once the jurisdiction of a
court attaches, it continues until the case is finally terminated.11 The trial court cannot be ousted
therefrom by subsequent happenings or events, although of a character that would have prevented
jurisdiction from attaching in the first instance.12
The Manchester ruling, which became final in 1987, has no retroactive application and cannot be
invoked in the subject Complaint filed in 1984. The Court explicitly declared:
"To put a stop to this irregularity, henceforth all complaints, petitions, answers and other
similar pleadings should specify the amount of damages being prayed for not only in the
body of the pleading but also in the prayer, and said damages shall be considered in the
assessment of the filing fees in any case. Any pleading that fails to comply with this
requirement shall not be accepted nor admitted, or shall otherwise be expunged from the
record."13 (emphasis supplied)
Second Issue:
Petitioners' Procedural Rights
Motion for a Bill of Particulars
Petitioners argue that the Court of Appeals erred when it passed sub silencio on the trial court's
failure to rule frontally on their plea for a bill of particulars.
We are not impressed. It must be noted that petitioners' counsel manifested in open court his desire
to file a motion for a bill of particulars. The RTC gave him ten days from March 12, 1985 within
which to do so.14 He, however, filed the aforesaid motion only on April 2, 1985 or eleven days past
the deadline set by the trial court.15 Moreover, such motion was already moot and academic
because, prior to its filing, petitioners had already filed their answer and several other pleadings to
the amended Complaint. Section 1, Rule 12 of the Rules of Court, provides:
"Section 1. When applied for; purpose. -- Before responding to a pleading, a party may
move for a more definite statement or for a bill of particulars of any matter which is not
averred with sufficient definiteness or particularity to enable him properly to prepare his
responsive pleading. If the pleading is a reply, the motion must be filed within ten (10)
days from service thereof. Such motion shall point out the defects complained of, the
paragraphs wherein they are contained, and the details desired." 16 (emphasis supplied)
Petitioners' Right to Adduce Evidence
Petitioners also argue that their right to present evidence was violated by the CA, because it did not
consider their contention that the trial judges who heard the case were biased and impartial.
Petitioners contend, as they did before the CA, that Judge Tomas B. Noynay based his Decision" on
certain chosen partial testimonies of [respondents'] witnesses x x x." They further maintain that
Judge Fortunato Operario, who initially handled the case, questioned some witnesses in an
overzealous manner and "assum[ed] the dual role of magistrate and advocate."17
These arguments are not meritorious. First, judges cannot be expected to rely on the testimonies of
every witness. In ascertaining the facts, they determine who are credible and who are not. In doing
so, they consider all the evidence before them. In other words, the mere fact that Judge Noynay
based his decision on the testimonies of respondents' witnesses does not necessarily mean that he
did not consider those of petitioners. Second, we find no sufficient showing that Judge Operario was
overzealous in questioning the witnesses. His questions merely sought to clarify their testimonies. In
all, we reject petitioners' contention that their right to adduce evidence was violated.
Alleged Failure to State Clearly the Facts and the Law
We are not convinced by petitioners' contention, either, that both the trial and the appellate courts
failed to state clearly and distinctly the facts and the law involved in the case. As can be gleaned
from their Decisions, both courts clearly laid down their bases for awarding monetary damages to
respondents.
Both the RTC and the CA found that a contract of carriage existed between petitioners and
Dominador Mercader when he boarded Bus No. 142 in Pasay City on March 16, 1983. Petitioners
failed to transport him to his destination, because the bus fell into a river while traversing the Bugko
Bailey Bridge. Although he survived the fall, he later died of asphyxia secondary to drowning.
We agree with the findings of both courts that petitioners failed to observe extraordinary
diligence18 that fateful morning. It must be noted that a common carrier, by the nature of its business
and for reasons of public policy, is bound to carry passengers safely as far as human care and
foresight can provide. It is supposed to do so by using the utmost diligence of very cautious persons,
with due regard for all the circunistances.19 In case of death or injuries to passengers, it is presumed
to have been at fault or to have acted negligently, unless it proves that it observed extraordinary
diligence as prescribed in Articles 1733 and 175520 of the Civil Code.1âwphi1.nêt
We sustain the ruling of the CA that petitioners failed to prove that they had observed extraordinary
diligence.
First, petitioners did not present evidence on the skill or expertise of the driver of Bus No. 142 or the
condition of that vehicle at the time of the incident.
Second, the bus was overloaded at the time. In fact, several individuals were standing when the
incident occurred.21
Third, the bus was overspeeding. Its conductor testified that it had overtaken several buses before it
reached the Bugko Bailey Bridge.22 Moreover, prior to crossing the bridge, it had accelerated and
maintained its speed towards the bridge.23
We therefore believe that there is no reason to overturn the assailed CA Decision, which affirmed
that of the RTC. It is a well-settled rule that the trial court's factual findings, when affirmed by the
appellate court, are conclusive and binding, if they are not tainted with arbitrariness or oversight of
some fact or circumstance of significance and influence. 24 As clearly discussed above, petitioners
have not presented sufficient ground to warrant a deviation from this rule.
Finally, we cannot fault the appellate court in its computation of the damages and lost earnings,
since it effectively computed only net earnings in accordance with existing jurisprudence. 25
WHEREFORE, the Petition is hereby DENIED, and the assailed Decision AFFIRMED. Costs
against petitioners.
SO ORDERED.
G.R. No. 116110 May 15, 1996
BALIWAG TRANSIT, INC., petitioner,
vs.
COURT OF APPEALS, SPOUSES ANTONIO GARCIA & LETICIA GARCIA, A & J TRADING,
AND JULIO RECONTIQUE, respondents.
65
PUNO, J.:p
This is a petition for certiorari to review the Decision1 of the Court of Appeals in CA-G.R. CV-31246
awarding damages in favor of the spouses Antonio and Leticia Garcia for breach of contract of
carriage.2
The records show that on July 31, 1980, Leticia Garcia, and her five-year old son, Allan Garcia,
boarded Baliwag Transit Bus No. 2036 bound for Cabanatuan City driven by Jaime Santiago. They
took the seat behind the driver.
At about 7:30 in the evening, in Malimba, Gapan, Nueva Ecija, the bus passengers saw a cargo
truck parked at the shoulder of the national highway. Its left rear portion jutted to the outer lane, as
the shoulder of the road was too narrow to accommodate the whole truck. A kerosene lamp
appeared at the edge of the road obviously to serve as a warning device. The truck driver, Julio
Recontique, and his helper, Arturo Escala, were then replacing a flat tire. The truck is owned by
respondent A & J Trading.
Bus driver Santiago was driving at an in ordinately fast speed and failed to notice the truck and the
kerosene lamp at the edge of the road. Santiago's passengers urged him to slow down but he paid
them no heed. Santiago even carried animated conversations with his co-employees while driving.
When the danger of collision became imminent, the bus passengers shouted "Babangga tayo!".
Santiago stepped on the brake, but it was too late. His bus rammed into the stalled cargo truck. It
caused the instant death of Santiago and Escala, and injury to several others. Leticia and Allan
Garcia were among the injured passengers.
Leticia suffered a fracture in her pelvis and right leg. They rushed her to the provincial hospital in
Cabanatuan City where she treatment. After three days, she was transferred to the National
Orthopedic Hospital where she was confined for more than a month. 3 She underwent an operation
for partial hip prosthesis.4
Allan, on the other hand, broke a leg. He was also given emergency treatment at the provincial
hospital.
Spouses Antonio and Leticia Garcia sued Baliwag Transit, Inc., A & J Trading and Julio Recontique
for damages in the Regional Trial Court of Bulacan.5 Leticia sued as an injured passenger of
Baliwag and as mother of Allan. At the time of the complaint, Allan was a minor, hence, the suit
initiated by his parents in his favor.
Baliwag, A & J Trading and Recontique disclaimed responsibility for the mishap. Baliwag alleged
that the accident was caused solely by the fault and negligence of A & J Trading and its driver,
Recontique. Baliwag charged that Recontique failed to place an early warning device at the corner
of the disabled cargo truck to warn on coming vehicles.6 On the other hand, A & J Trading and
Recontique alleged that the accident was the result of the negligence and reckless driving of
Santiago, bus driver of Baliwag.7
After hearing, the trial court found all the defendants liable, thus:
xxx xxx xxx
In view thereof, the Court holds that both defendants should be held liable; the
defendant Baliwag Transit, Inc. for having failed to deliver the plaintiff and her
son to their point of destination safely in violation of plaintiff's and defendant
Baliwag Transit's contractual relation.
The defendant A & J and Julio Recontique for failure to provide its cargo truck
with an early warning device in violation of the Motor Vehicle Law.8
The trial court ordered Baliwag, A & J Trading and Recontique to pay jointly and severally the Garcia
spouses the following: (1) P25,000,00 hospitalization and medication fee, (2) P450,000.00 loss of
earnings in eight (8) years, (3) P2,000.00 for the hospitalization of their son Allan Garcia, (4)
P50,000.00 moral damages, and (5) P30,000.00 attorney's fee.9
On appeal, the Court of Appeals modified the trial court's Decision by absolving A & J Trading from
liability and by reducing the award of attorney's fees to P10,000.00 and loss of earnings to
P300,000.00, respectively. 10
Baliwag filed the present petition for review raising the following issues:
1. Did the Court of Appeals err in absolving A & J Trading from liability and
holding Baliwag solely liable for the injuries suffered by Leticia and Allan Garcia
in the accident?
2. Is the amount of damages awarded by the Court of Appeals to the Garcia
spouses correct?
We affirm the factual findings of the Court of Appeals.
I
As a common carrier, Baliwag breached its contract of carriage when it failed to deliver its
passengers, Leticia and Allan Garcia to their destination safe and sound. A common carrier is bound
to carry its passengers safely as far as human care and foresight can provide, using the utmost
diligence of a very cautious person, with due regard for all the circumstances. 11 In a contract of
carriage, it is presumed that the common carrier was at fault or was negligent when a passenger
dies or is injured. Unless the presumption is rebutted, the court need not even make an express
finding of fault or negligence on the part of the common carrier. This statutory presumption may only
be overcome by evidence that the carrier exercised extraordinary diligence as prescribed in Articles
1733 and 1755 of the Civil Code. 12
The records are bereft of any proof to show that Baliwag exercised extra ordinary diligence. On the
contrary, the evidence demonstrates its driver's recklessness. Leticia Garcia testified that the bus
was running at a very high speed despite the drizzle and the darkness of the highway. The
passengers pleaded for its driver to slow down, but their plea was ignored. 13 Leticia also revealed
that the driver was smelling of liquor. 14 She could smell him as she was seated right behind the
driver. Another passenger, Felix Cruz testified that immediately before the collision, the bus driver
was conversing with a co-employee. 15 All these prove the bus driver's wanton disregard for the
physical safety of his passengers, which makes Baliwag as a common carrier liable for damages
under Article 1759 of the Civil Code:
Art. 1759. Common carriers are liable for the death of or injuries to passengers
through the negligence or willfull acts of the former's employees, although such
employees may have acted beyond the scope of their authority or in violation of
the orders of the common carriers.
This liability of the common carriers do not cease upon proof that they exercised
all the diligence of a good father of a family in the selection or supervision of
their employees.
66
Baliwag cannot evade its liability by insisting that the accident was caused solely by the negligence
of A & J Trading and Julio Recontique. It harps on their alleged non use of an early warning device
as testified to by Col. Demetrio dela Cruz, the station commander of Gapan, Nueva Ecija who
investigated the incident, and Francisco Romano, the bus conductor.
The records do not bear out Baliwag's contention. Col. dela Cruz and Romano testified that they did
not see any early warning device at the scene of the accident. 16 They were referring to the
triangular reflectorized plates in red and yellow issued by the Land Transportation Office. However,
the evidence shows that Recontique and Ecala placed a kerosene lamp or torch at the edge of the
road, near the rear portion of the truck to serve as an early warning
device. 17 This substantially complies with Section 34 (g) of the Land Transportation and Traffic
Code, to wit:
(g) Lights and reflector when parked or disabled. — Appropriate parking
lights or flares visible one hundred meters away shall be displayed at the corner
of the vehicle whenever such vehicle is parked on highways or in places that
are not well-lighted or, is placed in such manner as to endanger passing traffic.
Furthermore, every motor vehicle shall be provided at all times with built-in
reflectors or other similar warning devices either pasted, painted or attached at
its front and back which shall likewise be visible at night at least one hundred
meters away. No vehicle not provided with any of the requirements mentioned
in this subsection shall be registered. (emphasis supplied)
Baliwag's argument that the kerosene lamp or torch does not substantially comply with the law is
untenable. The aforequoted law clearly allows the use not only of an early warning device of the
triangular reflectorized plates variety but also parking lights or flares visible one hundred meters
away. Indeed, Col. dela Cruz himself admitted that a kerosene lamp is an acceptable substitute for
the reflectorized plates. 18 No negligence, therefore, may be imputed to A & J Trading and its driver,
Recontique.
Anent this factual issue, the analysis of evidence made by the Court of Appeals deserves our
concurrence, viz:
xxx xxx xxx
In the case at bar, both the injured passengers of the Baliwag involved in the
accident testified that they saw some sort of kerosene or a torch on the rear
portion of the truck before the accident. Baliwag Transit's conductor attempted
to defeat such testimony by declaring that he noticed no early warning device in
front of the truck.
Among the testimonies offered by the witnesses who were present at the scene
of the accident, we rule to uphold the affirmative testimonies given by the two
injured passengers and give less credence to the testimony of the bus
conductor who solely testified that no such early warning device exists.
The testimonies of injured passengers who may well be considered as
disinterested witness appear to be natural and more probable than the
testimony given by; Francisco Romano who is undoubtedly interested in the
outcome of the case, being the conductor of the defendant-appellant Baliwag
Transit Inc.
It must be borne in mind that the situation then prevailing at the time of the
accident was admittedly drizzly and all dark. This being so, it would be
improbable and perhaps impossible on the part of the truck helper without the
torch nor the kerosene to remove the flat tires of the truck . Moreover, witness
including the bus conductor himself admitted that the passengers shouted, that
they are going to bump before the collision which consequently caused the bus
driver to apply the brake 3 to 4 meters away from the truck. Again, without the
kerosene nor the torch in front of the truck, it would be improbable for the driver,
more so the passengers to notice the truck to be bumped by the bus
considering the darkness of the place at the time of the accident.
xxx xxx xxx
While it is true that the investigating officer testified that he found no early
warning device at the time of his investigation, We rule to give less credence to
such testimony insofar as he himself admitted on cross examination that he did
not notice the presence of any kerosene lamp at the back of the truck because
when he arrived at the scene of the accident, there were already many people
surrounding the place (TSN, Aug. 22, 1989, p. 13). He further admitted that
there exists a probability that the lights of the truck may have been smashed by
the bus at the time of the accident considering the location of the truck where its
rear portion was connected with the front portion of the bus (TSN, March 29,
1985, pp. Investigator's testimony therefore did not confirm nor deny the
existence of such warning device, making his testimony of little probative
value. 19
We now review the amount of damages awarded to the Garcia spouses.
First, the propriety of the amount awarded as hospitalization and medical fees. The award of
P25,000.00 is not supported by the evidence on record. The Garcias presented receipts marked as
Exhibits "B-1" to "B-42" but their total amounted only to P5,017.74. To be sure, Leticia testified as to
the extra amount spent for her medical needs but without more reliable evidence, her lone testimony
cannot justify the award of P25,000.00. To prove actual damages, the best evidence available to the
injured party must be presented. The court cannot rely on uncorroborated testimony whose truth is
suspect, but must depend upon competent proof that damages have been actually suffered. 20 Thus,
we reduce the actual damages for medical and hospitalization expenses to P5,017.74.
Second, we find as reasonable the award of P300,000.00 representing Leticia's lost earnings.
Before the accident, Leticia was engaged in embroidery, earning P5,000.00 per month. 21 Her
injuries forced her to stop working. Considering the nature and extent of her injuries and the length
of time it would take her to recover, 22 we find it proper that Baliwag should compensate her lost
income for five (5) years. 23
Third, the award of moral damages is in accord with law. In a breach of contract of carriage, moral
damages are recoverable if the carrier, through its agent, acted fraudulently or in bad faith. 24 The
evidence show the gross negligence of the driver of Baliwag bus which amounted to bad faith.
Without doubt, Leticia and Allan experienced physical suffering, mental anguish and serious anxiety
by reason of the accident. Leticia underwent an operation to replace her broken hip bone with a
metal plate. She was confined at the National Orthopedic Hospital for 45 days. The young Allan was
also confined in the hospital for his foot injury. Contrary to the contention of Baliwag, the decision of
the trial court as affirmed by, the Court of Appeals awarded moral damages to Antonio and Leticia
Garcia not in their capacity as parents of Allan. Leticia was given moral damages as an injured
party. Allan was also granted moral damages as an injured party but because of his minority, the
award in his favor has to be given to his father who represented him in the suit.
Finally, we find the award of attorney's fees justified. The complaint for damages was instituted by
the Garcia spouses on December 15, 1982, following the unjustified refusal of Baliwag to settle their
claim. The Decision was promulgated by the trial court only on January 29, 1991 or about nine years
later. Numerous pleadings were filed before the trial court, the appellate court and to this Court.
Given the complexity of the case and the amount of damages involved, 25 the award of attorney's fee
for P10,000.00 is just and reasonable.
67
IN VIEW WHEREOF, the Decision of the respondent Court of Appeals in CA-G.R. CV-31246 is
AFFIRMED with the MODIFICATION reducing the actual damages for hospitalization and medical
fees to P5,017.74. No costs.
SO ORDERED.
G.R. No. 113003 October 17, 1997
ALBERTA YOBIDO and CRESENCIO YOBIDO, petitioners,
vs.
COURT OF APPEALS, LENY TUMBOY, ARDEE TUMBOY and JASMIN TUMBOY, respondents.
ROMERO, J.:
In this petition for review on certiorari of the decision of the Court of Appeals, the issue is whether or
not the explosion of a newly installed tire of a passenger vehicle is a fortuitous event that exempts
the carrier from liability for the death of a passenger.
On April 26, 1988, spouses Tito and Leny Tumboy and their minor children named Ardee and
Jasmin, bearded at Mangagoy, Surigao del Sur, a Yobido Liner bus bound for Davao City. Along
Picop Road in Km. 17, Sta. Maria, Agusan del Sur, the left front tire of the bus exploded. The bus fell
into a ravine around three (3) feet from the road and struck a tree. The incident resulted in the death
of 28-year-old Tito Tumboy and physical injuries to other passengers.
On November 21, 1988, a complaint for breach of contract of carriage, damages and attorney's fees
was filed by Leny and her children against Alberta Yobido, the owner of the bus, and Cresencio
Yobido, its driver, before the Regional Trial Court of Davao City. When the defendants therein filed
their answer to the complaint, they raised the affirmative defense of caso fortuito. They also filed a
third-party complaint against Philippine Phoenix Surety and Insurance, Inc. This third-party
defendant filed an answer with compulsory counterclaim. At the pre-trial conference, the parties
agreed to a stipulation of facts.1
Upon a finding that the third party defendant was not liable under the insurance contract, the lower
court dismissed the third party complaint. No amicable settlement having been arrived at by the
parties, trial on the merits ensued.
The plaintiffs asserted that violation of the contract of carriage between them and the defendants
was brought about by the driver's failure to exercise the diligence required of the carrier in
transporting passengers safely to their place of destination. According to Leny Tumboy, the bus left
Mangagoy at 3:00 o'clock in the afternoon. The winding road it traversed was not cemented and was
wet due to the rain; it was rough with crushed rocks. The bus which was full of passengers had
cargoes on top. Since it was "running fast," she cautioned the driver to slow down but he merely
stared at her through the mirror. At around 3:30 p.m., in Trento, she heard something explode and
immediately, the bus fell into a ravine.
For their part, the defendants tried to establish that the accident was due to a fortuitous event.
Abundio Salce, who was the bus conductor when the incident happened, testified that the 42-seater
bus was not full as there were only 32 passengers, such that he himself managed to get a seat. He
added that the bus was running at a speed of "60 to 50" and that it was going slow because of the
zigzag road. He affirmed that the left front tire that exploded was a "brand new tire" that he mounted
on the bus on April 21, 1988 or only five (5) days before the incident. The Yobido Liner secretary,
Minerva Fernando, bought the new Goodyear tire from Davao Toyo Parts on April 20, 1988 and she
was present when it was mounted on the bus by Salce. She stated that all driver applicants in
Yobido Liner underwent actual driving tests before they were employed. Defendant Cresencio
Yobido underwent such test and submitted his professional driver's license and clearances from the
barangay, the fiscal and the police.
On August 29, 1991, the lower court rendered a decision2 dismissing the action for lack of merit. On
the issue of whether or not the tire blowout was a caso fortuito, it found that "the falling of the bus to
the cliff was a result of no other outside factor than the tire blow-out." It held that the ruling in the La
Mallorca and Pampanga Bus Co. v. De Jesus3 that a tire blowout is "a mechanical defect of the
conveyance or a fault in its equipment which was easily discoverable if the bus had been subjected
to a more thorough or rigid check-up before it took to the road that morning" is inapplicable to this
case. It reasoned out that in said case, it was found that the blowout was caused by the established
fact that the inner tube of the left front tire "was pressed between the inner circle of the left wheel
and the rim which had slipped out of the wheel." In this case, however, "the cause of the explosion
remains a mystery until at present." As such, the court added, the tire blowout was "a caso
fortuito which is completely an extraordinary circumstance independent of the will" of the defendants
who should be relieved of "whatever liability the plaintiffs may have suffered by reason of the
explosion pursuant to Article 11744 of the Civil Code."
Dissatisfied, the plaintiffs appealed to the Court of Appeals. They ascribed to the lower court the
following errors: (a) finding that the tire blowout was a caso fortuito; (b) failing to hold that the
defendants did not exercise utmost and/or extraordinary diligence required of carriers under Article
1755 of the Civil Code, and (c) deciding the case contrary to the ruling in Juntilla v. Fontanar,5 and
Necesito v. Paras.6
On August 23, 1993, the Court of Appeals rendered the Decision7 reversing that of the lower court. It
held that:
To Our mind, the explosion of the tire is not in itself a fortuitous event. The cause of the
blow-out, if due to a factory defect, improper mounting, excessive tire pressure, is not an
unavoidable event. On the other hand, there may have been adverse conditions on the
road that were unforeseeable and/or inevitable, which could make the blow-out a caso
fortuito. The fact that the cause of the blow-out was not known does not relieve the carrier
of liability. Owing to the statutory presumption of negligence against the carrier and its
obligation to exercise the utmost diligence of very cautious persons to carry the passenger
safely as far as human care and foresight can provide, it is the burden of the defendants
to prove that the cause of the blow-out was a fortuitous event. It is not incumbent upon the
plaintiff to prove that the cause of the blow-out is not caso-fortuito.
Proving that the tire that exploded is a new Goodyear tire is not sufficient to discharge
defendants' burden. As enunciated in Necesito vs. Paras, the passenger has neither
choice nor control over the carrier in the selection and use of its equipment, and the good
repute of the manufacturer will not necessarily relieve the carrier from liability.
Moreover, there is evidence that the bus was moving fast, and the road was wet and
rough. The driver could have explained that the blow-out that precipitated the accident
that caused the death of Toto Tumboy could not have been prevented even if he had
exercised due care to avoid the same, but he was not presented as witness.
The Court of Appeals thus disposed of the appeal as follows:
WHEREFORE, the judgment of the court a quo is set aside and another one entered
ordering defendants to pay plaintiffs the sum of P50,000.00 for the death of Tito Tumboy,
P30,000.00 in moral damages, and P7,000.00 for funeral and burial expenses. SO
ORDERED.
68
The defendants filed a motion for reconsideration of said decision which was denied on November
4, 1993 by the Court of Appeals. Hence, the instant petition asserting the position that the tire
blowout that caused the death of Tito Tumboy was a caso fortuito. Petitioners claim further that the
Court of Appeals, in ruling contrary to that of the lower court, misapprehended facts and, therefore,
its findings of fact cannot be considered final which shall bind this Court. Hence, they pray that this
Court review the facts of the case.
The Court did re-examine the facts and evidence in this case because of the inapplicability of the
established principle that the factual findings of the Court of Appeals are final and may not be
reviewed on appeal by this Court. This general principle is subject to exceptions such as the one
present in this case, namely, that the lower court and the Court of Appeals arrived at diverse factual
findings.8 However, upon such re-examination, we found no reason to overturn the findings and
conclusions of the Court of Appeals.
As a rule, when a passenger boards a common carrier, he takes the risks incidental to the mode of
travel he has taken. After all, a carrier is not an insurer of the safety of its passengers and is not
bound absolutely and at all events to carry them safely and without injury. 9 However, when a
passenger is injured or dies while travelling, the law presumes that the common carrier is negligent.
Thus, the Civil Code provides:
Art. 1756. In case of death or injuries to passengers, common carriers are presumed to
have been at fault or to have acted negligently, unless they prove that they observed
extraordinary diligence as prescribed in articles 1733 and 1755.
Article 1755 provides that "(a) common carrier is bound to carry the passengers safely as far as
human care and foresight can provide, using the utmost diligence of very cautious persons, with a
due regard for all the circumstances." Accordingly, in culpa contractual, once a passenger dies or is
injured, the carrier is presumed to have been at fault or to have acted negligently. This disputable
presumption may only be overcome by evidence that the carrier had observed extraordinary
diligence as prescribed by Articles 1733,10 1755 and 1756 of the Civil Code or that the death or
injury of the passenger was due to a fortuitous event.11 Consequently, the court need not make an
express finding of fault or negligence on the part of the carrier to hold it responsible for damages
sought by the passenger.12
In view of the foregoing, petitioners' contention that they should be exempt from liability because the
tire blowout was no more than a fortuitous event that could not have been foreseen, must fail. A
fortuitous event is possessed of the following characteristics: (a) the cause of the unforeseen and
unexpected occurrence, or the failure of the debtor to comply with his obligations, must be
independent of human will; (b) it must be impossible to foresee the event which constitutes the caso
fortuito, or if it can be foreseen, it must be impossible to avoid; (c) the occurrence must be such as
to render it impossible for the debtor to fulfill his obligation in a normal manner; and (d) the obliger
must be free from any participation in the aggravation of the injury resulting to the creditor. 13 As
Article 1174 provides, no person shall be responsible for a fortuitous event which could not be
foreseen, or which, though foreseen, was inevitable. In other words, there must be an entire
exclusion of human agency from the cause of injury or loss.14
Under the circumstances of this case, the explosion of the new tire may not be considered a
fortuitous event. There are human factors involved in the situation. The fact that the tire was new did
not imply that it was entirely free from manufacturing defects or that it was properly mounted on the
vehicle. Neither may the fact that the tire bought and used in the vehicle is of a brand name noted
for quality, resulting in the conclusion that it could not explode within five days' use. Be that as it
may, it is settled that an accident caused either by defects in the automobile or through the
negligence of its driver is not a caso fortuito that would exempt the carrier from liability for
damages.15
Moreover, a common carrier may not be absolved from liability in case of force majeure or fortuitous
event alone. The common carrier must still prove that it was not negligent in causing the death or
injury resulting from an accident.16 This Court has had occasion to state:
While it may be true that the tire that blew-up was still good because the grooves of the
tire were still visible, this fact alone does not make the explosion of the tire a fortuitous
event. No evidence was presented to show that the accident was due to adverse road
conditions or that precautions were taken by the jeepney driver to compensate for any
conditions liable to cause accidents. The sudden blowing-up, therefore, could have been
caused by too much air pressure injected into the tire coupled by the fact that the jeepney
was overloaded and speeding at the time of the accident.17
It is interesting to note that petitioners proved through the bus conductor, Salce, that the bus was
running at "60-50" kilometers per hour only or within the prescribed lawful speed limit. However, they
failed to rebut the testimony of Leny Tumboy that the bus was running so fast that she cautioned the
driver to slow down. These contradictory facts must, therefore, be resolved in favor of liability in view
of the presumption of negligence of the carrier in the law. Coupled with this is the established
condition of the road — rough, winding and wet due to the rain. It was incumbent upon the defense
to establish that it took precautionary measures considering partially dangerous condition of the
road. As stated above, proof that the tire was new and of good quality is not sufficient proof that it
was not negligent. Petitioners should have shown that it undertook extraordinary diligence in the
care of its carrier, such as conducting daily routinary check-ups of the vehicle's parts. As the late
Justice J.B.L. Reyes said:
It may be impracticable, as appellee argues, to require of carriers to test the strength of
each and every part of its vehicles before each trip; but we are of the opinion that a due
regard for the carrier's obligations toward the traveling public demands adequate
periodical tests to determine the condition and strength of those vehicle portions the
failure of which may endanger the safety of the passengers. 18
Having failed to discharge its duty to overthrow the presumption of negligence with clear and
convincing evidence, petitioners are hereby held liable for damages. Article 176419 in relation to
Article 220620 of the Civil Code prescribes the amount of at least three thousand pesos as damages
for the death of a passenger. Under prevailing jurisprudence, the award of damages under Article
2206 has been increased to fifty thousand pesos (P50,000.00). 21
Moral damages are generally not recoverable in culpa contractual except when bad faith had been
proven. However, the same damages may be recovered when breach of contract of carriage results
in the death of a passenger,22 as in this case. Exemplary damages, awarded by way of example or
correction for the public good when moral damages are awarded, 23 may likewise be recovered in
contractual obligations if the defendant acted in wanton, fraudulent, reckless, oppressive, or
malevolent manner.24 Because petitioners failed to exercise the extraordinary diligence required of a
common carrier, which resulted in the death of Tito Tumboy, it is deemed to have acted
recklessly.25 As such, private respondents shall be entitled to exemplary damages.
WHEREFORE, the Decision of the Court of Appeals is hereby AFFIRMED subject to the
modification that petitioners shall, in addition to the monetary awards therein, be liable for the award
of exemplary damages in the amount of P20,000.00. Costs against petitioners. SO ORDERED.
G.R. No. 118126 March 4, 1996
TRANS-ASIA SHIPPING LINES, INC., petitioner,
vs.
COURT OF APPEALS and ATTY. RENATO T. ARROYO, respondents.
DAVIDE, JR., J.:p
69
As formulated by the petitioner, the issue in this petition for review on certiorari under Rule 45 of the
Rules of Court is as follows:
In case of interruption of a vessel's voyage and the consequent delay in that
vessel's arrival at its port of destination, is the right of a passenger affected
thereby to be determined and governed by the vague Civil Code provision on
common carriers, or shall it be, in the absence of a specific provision
thereon governed by Art. 698 of the Code of Commerce?1
The petitioner considers it a "novel question of law."
Upon a closer evaluation, however, of the challenged decision of the Court of Appeals of 23
November 1994,2 vis-a-vis, the decision of 29 June 1992 in Civil Case No. 91-491 of the Regional
Trial Court (RTC) of Cagayan de Oro City, Branch 24,3 as well as the allegations and arguments
adduced by the parties, we find the petitioner's formulation of the issue imprecise. As this Court sees
it, what stands for resolution is a common carrier's liability for damages to a passenger who
disembarked from the vessel upon its return to the port of origin, after it suffered engine trouble and
had to stop at sea, having commenced the contracted voyage on one engine.
The antecedents are summarized by the Court of Appeals as follows:
Plaintiff [herein private respondent Atty. Renato Arroyo], a public attorney,
bought a ticket [from] defendant [herein petitioner], a corporation engaged in . . .
inter-island shipping, for the voyage of M/V Asia Thailand vessel to Cagayan de
Oro City from Cebu City on November 12, 1991.
At around 5:30 in the evening of November 12, 1991, plaintiff boarded the M/V
Asia Thailand vessel. At that instance, plaintiff noticed that some repair works
[sic] were being undertaken on the engine of the vessel. The vessel departed at
around 11:00 in the evening with only one (1) engine running.
After an hour of slow voyage, the vessel stopped near Kawit Island and dropped
its anchor thereat. After half an hour of stillness, some passengers demanded
that they should be allowed to return to Cebu City for they were no longer willing
to continue their voyage to, Cagayan de Oro City. The captain acceeded [sic] to
their request and thus the vessel headed back to Cebu City.
At Cebu City, plaintiff together with the other passengers who requested to be
brought back to Cebu City, were allowed to disembark. Thereafter, the vessel
proceeded to Cagayan de Oro City. Plaintiff, the next day, boarded the M/V
Asia Japan for its voyage to Cagayan de Oro City, likewise a vessel of
defendant.
On account of this failure of defendant to transport him to the place of
destination on November 12, 1991, plaintiff filed before the trial court a
complaint for damages against defendant.4
In his complaint, docketed as Civil Case No. 91-491, plaintiff (hereinafter private respondent) alleged
that the engines of the M/V Asia Thailand conked out in the open sea, and for more than an hour it
was stalled and at the mercy of the waves, thus causing fear in the passengers. It sailed back to
Cebu City after it regained power, but for unexplained reasons, the passengers, including the private
respondent, were arrogantly told to disembark without the necessary precautions against possible
injury to them. They were thus unceremoniously dumped, which only exacerbated the private
respondent's mental distress. He further alleged that by reason of the petitioner's wanton, reckless,
and willful acts, he was unnecessarily exposed to danger and, having been stranded in Cebu City
for a day, incurred additional expenses and loss of income. He then prayed that he be awarded
P1,100.00, P50,000.00, and P25,000.00 as compensatory, moral; and exemplary damages,
respectively.5
In his pre-trial brief, the private respondent asserted that his complaint was "an action for damages
arising from bad faith, breach of contract and from tort," with the former arising from the petitioner's
"failure to carry [him] to his place of destination as contracted," while the latter from the "conduct of
the [petitioner] resulting [in] the infliction of emotional distress" to the private respondent. 6
After due trial, the trial court rendered its decision7 and ruled that the action was only for breach of
contract, with Articles 1170, 1172, and 1173 of the Civil Code as applicable law — not Article 2180
of the same Code. It was of the opinion that Article 1170 made a person liable for damages if, in the
performance of his obligation, he was guilty of fraud, negligence, or delay, or in any manner
contravened the tenor thereof; moreover, pursuant to Article 2201 of the same Code, to be entitled
to damages, the non-performance of the obligation must have been tainted not only by fraud,
negligence, or delay, but also bad faith, malice, and wanton attitude. It then disposed of the case as
follows:
WHEREFORE, it not appearing from the evidence that plaintiff was left in the
Port of Cebu because of the fault, negligence, malice or wanton attitude of
defendant's employees, the complaint is DISMISSED. Defendant's counterclaim
is likewise dismissed it not appearing also that filing of the case by plaintiff was
motivated by malice or bad faith.8
The trial court made the following findings to support its disposition:
In the light of the evidence adduced by the parties and of the above provisions
of the New Civil Code, the issue to be resolved, in the resolution of this case is
whether or not, defendant thru its employees in [sic] the night of November 12,
1991, committed fraud, negligence, bad faith or malice when it left plaintiff in the
Port of Cebu when it sailed back to Cagayan de Oro City after it has [sic]
returned from Kawit Island.
Evaluation of the evidence of the parties tended to show nothing that defendant
committed fraud. As early as 3:00 p.m. of November 12, 1991, defendant did
not hide the fact that the cylinder head cracked. Plaintiff even saw during its
repair. If he had doubts as to the vessel's capacity to sail, he had time yet to
take another boat. The ticket could be returned to defendant and corresponding
cash [would] be returned to him.
Neither could negligence, bad faith or malice on the part of defendant be
inferred from the evidence of the parties. When the boat arrived at [the] Port of
Cebu after it returned from Kawit Island, there was an announcement that
passengers who would like to disembark were given ten (10) minutes only to do
so. By this announcement, it could be inferred that the boat will [sic] proceed to
Cagayan de Oro City. If plaintiff entertained doubts, he should have asked a
member of the crew of the boat or better still, the captain of the boat. But as
admitted by him, he was of the impression only that the boat will not proceed to
Cagayan de Oro that evening so he disembarked. He was instead, the ones
[sic] negligent. Had he been prudent, with the announcement that those who will
disembark were given ten minutes only, he should have lingered a little by
staying in his cot and inquired whether the boat will proceed to Cagayan de Oro
City or not. Defendant cannot be expected to be telling [sic] the reasons to each
passenger. Announcement by microphone was enough.
70
 The court is inclined to believe that the story of defendant that the boat returned
to the Port of Cebu because of the request of the passengers in view of the
waves. That it did not return because of the defective engines as shown by the
fact that fifteen (15) minutes after the boat docked [at] the Port of Cebu and
those who wanted to proceed to Cagayan de Oro disembarked, it left for
Cagayan de Oro City.
The defendant got nothing when the boat returned to Cebu to let those who did
not want to proceed to Cagayan de Oro City including plaintiff disembarked. On
the contrary, this would mean its loss instead because it will have to refund their
tickets or they will use it the next trip without paying anymore. It is hard
therefore, to imagine how defendant by leaving plaintiff in Cebu could have
acted in bad faith, negligently, wantonly and with malice.
If plaintiff, therefore, was not able to [m]ake the trip that night of November 12,
1991, it was not because defendant maliciously did it to exclude him [from] the
trip. If he was left, it was because of his fault or negligence.9
Unsatisfied, the private respondent appealed to the Court of Appeals (CA-G.R. CV No. 39901) and
submitted for its determination the following assignment of errors: (1) the trial court erred in not
finding that the defendant-appellee was guilty of fraud, delay, negligence, and bad faith; and (2) the
trial court. erred in not awarding moral and exemplary damages.10
In its decision of 23 November 1994,11 the Court of Appeals reversed the trial court's decision by
applying Article 1755 in relation to Articles 2201, 2208, 2217, and 2232 of the Civil Code and,
accordingly, awarded compensatory, moral, and exemplary damages as follows:
WHEREFORE, premises considered, the appealed decision is hereby
REVERSED and SET ASIDE and another one is rendered ordering defendant-
appellee to pay plaintiff-appellant:
1. P20,000.00 as moral damages;
2. P10,000.00 as exemplary damages;
3. P5,000.00 as attorney's fees;
4. Cost of suit.
SO ORDERED.12
It did not, however, allow the grant of damages for the delay in the performance of the petitioner's
obligation as the requirement of demand set forth in Article 1169 of the Civil Code had not been met
by the private respondent. Besides, it found that the private respondent offered no evidence to prove
that his contract of carriage with the petitioner provided for liability in case of delay in departure, nor
that a designation of the time of departure was the controlling motive for the establishment of the
contract. On the latter, the court a quo observed that the private respondent even admitted he was
unaware of the vessel's departure time, and it was only when he boarded the vessel that he became
aware of such. Finally, the respondent Court found no reasonable basis for the private respondent's
belief that demand was useless because the petitioner had rendered it beyond its power to perform
its obligation; on the contrary, he even admitted that the petitioner had been assuring the
passengers that the vessel would leave on time, and that it could still perform its obligation to
transport them as scheduled.
To justify its award of damages, the Court of Appeals ratiocinated as follows:
It is an established and admitted fact that the vessel before the voyage had
undergone some repair work on the cylinder head of the engine. It is likewise
admitted by defendant-appellee that it left the port of Cebu City with only one
engine running. Defendant-appellee averred:
. . . The dropping of the vessel's anchor after running slowly
on only one engine when it departed earlier must have
alarmed some nervous passengers . . .
The entries in the logbook which defendant-appellee itself offered as evidence
categorically stated therein that the vessel stopped at Kawit Island because of
engine trouble. It reads:
2330 HRS STBD ENGINE' EMERGENCY STOP
2350 HRS DROP ANCHOR DUE TO ENGINE TROUBLE, 2 ENGINE STOP.
The stoppage was not to start and synchronized [sic] the engines of the vessel
as claimed by defendant-appellee. It was because one of the engines of the
vessel broke down; it was because of the disability of the vessel which from the
very beginning of the voyage was known to defendant-appellee.
Defendant-appellee from the very start of the voyage knew for a fact that the
vessel was not yet in its sailing condition because the second engine was still
being repaired. Inspite of this knowledge, defendant-appellee still proceeded to
sail with only one engine running.
Defendant-appellee at that instant failed to exercise the diligence which all
common carriers should exercise in transporting or carrying passengers. The
law does not merely require extraordinary diligence in the performance of the
obligation. The law mandates that common carrier[s] should exercise utmost
diligence the transport of passengers.
Article 1755 of the New Civil Code provides:
Art. 1755. A common carrier is bound to carry the
passengers safely as far as human care and foresight can
provide, using the utmost diligence of very cautious
persons, with a due regard for all the circumstances.
Utmost diligence of a VERY CAUTIOUS person dictates that defendant-
appellee should have pursued the voyage only when its vessel was already fit
to sail. Defendant-appellee should have made certain that the vessel [could]
complete the voyage before starting [to] sail. Anything less than this, the vessel
[could not] sail . . . with so many passengers on board it.
However, defendant-appellant [sic] in complete disregard of the safety of the
passengers, chose to proceed with its voyage even if only one engine was
running as the second engine was still being repaired during the voyage.
Defendant-appellee disregarded the not very remote possibility that because of
the disability of the vessel, other problems might occur which would endanger
the lives of the passengers sailing with a disabled vessel.
71
As expected, . . . engine trouble occurred. Fortunate[ly] for defendant-appellee,
such trouble only necessitated the stoppage of the vessel and did not cause the
vessel to capsize. No wonder why some passengers requested to be brought
back to Cebu City. Common carriers which are mandated to exercise utmost
diligence should not be taking these risks.
On this premise, plaintiff-appellant should not be faulted why he chose to
disembark from the vessel with the other passengers when it returned back to
Cebu City. Defendant-appellee may call him a very "panicky passenger" or a
"nervous person", but this will not relieve defendant-appellee from the liability it
incurred for its failure to exercise utmost diligence.13
xxx xxx xxx
As to the second assigned error, we find that plaintiff-appellant is entitled to the
award of moral and exemplary damages for the breach committed by
defendant-appellee.
As discussed, defendant-appellee in sailing to Cagayan de Oro City with only
one engine and with full knowledge of the true condition of the vessel, acted. in
bad faith with malice, in complete disregard for the safety of the passengers and
only for its own personal advancement/interest.
The Civil Code provides:
Art. 2201.
xxx xxx xxx
In case of fraud, bad faith, malice or wanton attitude, the
obligor shall be responsible for all damages which may be
reasonably attributed to the non-performance of the
obligation.
Plaintiff-appellant is entitled to moral damages for the mental anguish, fright and
serious anxiety he suffered during the voyage when the vessel's engine broke
down and when he disembarked from the vessel during the wee hours of the
morning at Cebu City when it returned.14
Moral damages are recoverable in a damage suit predicated upon a breach of
contract of carriage where it is proved that the carrier was guilty of fraud or bad
faith even if death does not result. 15
Fraud and bad faith by defendant-appellee having been established, the award
of moral damages is in order.16
To serve as a deterrent to the commission of similar acts in the future,
exemplary damages should be imposed upon defendant-appellee. 17
Exemplary damages are designed by our civil law to permit the courts to
reshape behavior that is socially deleterious in its consequence by creating . . .
negative incentives or deterrents against such behavior.18
Moral damages having been awarded, exemplary damages maybe properly
awarded. When entitlement to moral damages has been established, the award
of exemplary damages is proper.19
The petitioner then instituted this petition and submitted the question of law earlier adverted to.
Undoubtedly, there was, between the petitioner and the private respondent, a contract of common
carriage. The laws of primary application then are the provisions on common carriers under Section
4, Chapter 3, Title VIII, Book IV of the Civil Code, while for all other matters not regulated thereby,
the Code of Commerce and special laws.20
Under Article 1733 of the Civil Code, the petitioner was bound to observe extraordinary diligence in
ensuring the safety of the private respondent. That meant that the petitioner was, pursuant to Article
1755 of the said Code, bound to carry the private respondent safely as far as human care and
foresight could provide, using the utmost diligence of very cautious persons, with due regard for all
the circumstances. In this case, we are in full accord with the Court of Appeals that the petitioner
failed to discharge this obligation.
Before commencing the contracted voyage, the petitioner undertook some repairs on the cylinder
head of one of the vessel's engines. But even before it could finish these repairs, it allowed the
vessel to leave the port of origin on only one functioning engine, instead of two. Moreover, even the
lone functioning engine was not in perfect condition as sometime after it had run its course, it
conked out. This caused the vessel to stop and remain a drift at sea, thus in order to prevent the
ship from capsizing, it had to drop anchor. Plainly, the vessel was unseaworthy even before the
voyage began. For a vessel to be seaworthy, it must be adequately equipped for the voyage and
manned with a sufficient number of competent officers and crew. 21 The failure of a common carrier
to maintain in seaworthy condition its vessel involved in a contract of carriage is a clear breach of its
duty prescribed in Article 1755 of the Civil Code.
As to its liability for damages to the private respondent, Article 1764 of the Civil Code expressly
provides:
Art. 1764. Damages in cases comprised in this Section shall be awarded in
accordance with Title XVIII of this Book, concerning Damages. Article 2206
shall also apply to the death of a passenger caused by the breach of contract by
common carrier.
The damages comprised in Title XVIII of the Civil Code are actual or compensatory,
moral, nominal, temperate or moderate, liquidated, and exemplary.
In his complaint, the private respondent claims actual or compensatory, moral, and exemplary
damages.
Actual or compensatory damages represent the adequate compensation for pecuniary loss suffered
and for profits the obligee failed to obtain.22
In contracts or quasi-contracts, the obligor is liable for all the damages which may be reasonably
attributed to the non-performance of the obligation if he is guilty of fraud, bad faith, malice, or wanton
attitude.23
Moral damages include moral suffering, mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock, social humiliation, or similar injury. They may be
recovered in the cases enumerated in Article 2219 of the Civil Code, likewise, if they are the
proximate result of, as in this case, the petitioner's breach of the contract of carriage.24 Anent a
72
breach of a contract of common carriage, moral damages may be awarded if the common carrier,
like the petitioner, acted fraudulently or in bad faith.25
Exemplary damages are imposed by way of example or correction for the public good, in addition to
moral, temperate, liquidated or compensatory damages.26 In contracts and quasi-contracts,
exemplary damages may be awarded if the defendant acted in a wanton, fraudulent, reckless,
oppressive or malevolent manner.27 It cannot, however, be considered as a matter of right; the court
having to decide whether or not they should be adjudicated.28 Before the court may consider an
award for exemplary damages, the plaintiff must first show that he is entitled to moral, temperate or
compensatory damages; but it is not necessary that he prove the monetary value thereof.29
The Court of Appeals did not grant the private respondent actual or compensatory damages,
reasoning that no delay was incurred since there was no demand, as required by Article 1169 of the
Civil Code. This article, however, finds no application in this case because, as found by the
respondent Court, there was in fact no delay in the commencement of the contracted voyage. If any
delay was incurred, it was after the commencement of such voyage, more specifically, when the
voyage was subsequently interrupted when the vessel had to stop near Kawit Island after the only
functioning engine conked out.
As to the rights and duties of the parties strictly arising out of such delay, the Civil Code is silent.
However, as correctly pointed out by the petitioner, Article 698 of the Code of Commerce specifically
provides for such a situation. It reads:
disregarded its solemn duty to exercise extraordinary diligence and obviously acted with bad faith
and in a wanton and reckless manner. On this score, however, the petitioner asserts that the safety
or the vessel and passengers was never at stake because the sea was "calm" in the vicinity where it
stopped as faithfully recorded in the vessel's log book (Exhibit "4"). Hence, the petitioner concludes,
the private respondent was merely "over-reacting" to the situation obtaining then.31
We hold that the petitioner's defense cannot exculpate it nor mitigate its liability. On the contrary,
such a claim demonstrates beyond cavil the petitioner's lack of genuine concern for the safety of its
passengers. It was, perhaps, only providential then the sea happened to be calm. Even so, the
petitioner should not expect its passengers to act in the manner it desired. The passengers were not
stoics; becoming alarmed, anxious, or frightened at the stoppage of a vessel at sea in an unfamiliar
zone as nighttime is not the sole prerogative of the faint-hearted. More so in the light of the many
tragedies at sea resulting in the loss of lives of hopeless passengers and damage to property simply
because common carriers failed in their duty to exercise extraordinary diligence in the performance
of their obligations.
We cannot, however, give our affirmance to the award of attorney's fees. Under Article 2208 of the
Civil Code, these are recoverable only in the concept of actual damages, 32 not as moral
damages33 nor judicial costs. 34 Hence, to merit such an award, it is settled that the amount thereof
must be proven. 35 Moreover, such must be specifically prayed for — as was not done in this case—
and may not be deemed incorporated within a general prayer for "such other relief and remedy as
this court may deem just and equitable."36 Finally, it must be noted that aside from the following, the
body of the respondent Court's decision was devoid of any statement regarding attorney's fees:

In case a voyage already begun should be interrupted, the passengers shall be

Plaintiff-appellant was forced to litigate in order that he can claim moral and
obliged to pay the fare in proportion to the distance covered, without right to
exemplary damages for the suffering he encurred [sic]. He is entitled to
recover for losses and damages if the interruption is due to fortuitous event
attorney's fees pursuant to Article 2208 of the Civil Code. It states:
or force majeure, but with a right to indemnity if the interruption should have
been caused by the captain exclusively. If the interruption should be caused by
the disability of the vessel and a passenger should agree to await the repairs, Art. 2208. In the absence of stipulation, attorney's fees and expenses of
he may not be required to pay any increased price of passage, but his living litigation, other than judicial costs cannot be recovered except:
expenses during the stay shall be for his own account.
1. When exemplary damages are awarded;
This article applies suppletorily pursuant to Article 1766 of the Civil Code.
2. When the defendant's act or omission has compelled the
Of course, this does not suffice for a resolution of the case at bench for, as earlier stated, the cause plaintiff to litigate with third persons or to incur expenses to
of the delay or interruption was the petitioner's failure to observe extraordinary diligence. Article 698 protect his interest.
must then be read together with Articles 2199, 2200, 2201, and 2208 in relation to Article 21 of the
Civil Code. So read, it means that the petitioner is liable for any pecuniary loss or loss of profits
This Court holds that the above does not satisfy the benchmark of "factual, legal and
which the private respondent may have suffered by reason thereof. For the private respondent, such
equitable justification" needed as basis for an award of attorney's fees. 3 7 In sum, for lack
would be the loss of income if unable to report to his office on the day he was supposed to arrive
of factual and legal basis, the award of attorney's fees must be deleted.
were it not for the delay. This, however, assumes that he stayed on the vessel and was with it when
it thereafter resumed its voyage; but he did not. As he and some passengers resolved not to
complete the voyage, the vessel had to return to its port of origin and allow them to disembark. The WHEREFORE, the instant petition is DENIED and the challenged decision of the Court of Appeals
private respondent then took the petitioner's other vessel the following day, using the ticket he had in CA-G.R. CV No. 39901 is AFFIRMED subject to the modification as to the award for attorney's
purchased for the previous day's voyage. fees which is hereby SET ASIDE.

Any further delay then in the private respondent's arrival at the port of destination was caused by his Costs against the petitioner.
decision to disembark. Had he remained on the first vessel, he would have reached his destination
at noon of 13 November 1991, thus been able to report to his office in the afternoon. He, therefore,
SO ORDERED.
would have lost only the salary for half of a day. But actual or compensatory damages must be
proved,30 which the private respondent failed to do. There is no convincing evidence that he did not
receive his salary for 13 November 1991 nor that his absence was not excused.

We likewise fully agree with the Court of Appeals that the petitioner is liable for moral and exemplary G.R. No. 139875 December 4, 2000
damages. In allowing its unseaworthy M/V Asia Thailand to leave the port of origin and undertake
the contracted voyage, with full awareness that it was exposed to perils of the sea, it deliberately

73
GREGORIO PESTAÑO and METRO CEBU AUTOBUS CORPORATION, petitioners,
vs.
Spouses TEOTIMO SUMAYANG and PAZ C. SUMAYANG, respondents.
PANGANIBAN, J.:
Factual findings of the Court of Appeals, affirming those of the trial judge, are binding on this Court.
In quasi-delicts, such findings are crucial because negligence is largely a matter of evidence. In
computing an award for lost earning capacity, the life expectancy of the deceased, not that of the
heir, is used as basis.
The Case
Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the
April 21, 1999 Decision and the August 6, 1999 Resolution of the Court of Appeals1 (CA) in CA-GR
CV No. 30289. The questioned Decision disposed as follows:
"WHEREFORE, premises considered, the instant appeal is hereby DENIED. The assailed
Decision of the lower court is hereby AFFIRMED with the aforesaid modification regarding
the award of death penalty."
The Resolution of August 6, 1999 denied reconsideration.2
The Facts
The events leading to this Petition were summarized by the Court of Appeals as follows:
"It appears from the records that at around 2:00 o'clock [o]n the afternoon of August 9,
1986, Ananias Sumayang was riding a motorcycle along the national highway in Ilihan,
Tabagon, Cebu. Riding with him was his friend Manuel Romagos. As they came upon a
junction where the highway connected with the road leading to Tabagon, they were hit by
a passenger bus driven by [Petitioner] Gregorio Pestaño and owned by [Petitioner] Metro
Cebu Autobus Corporation (Metro Cebu, for brevity), which had tried to overtake them,
sending the motorcycle and its passengers hurtling upon the pavement. Both Ananias
Sumayang and Manuel Romagos were rushed to the hospital in Sogod, where Sumayang
was pronounced dead on arrival. Romagos was transferred to the Cebu Doctors' Hospital,
but he succumbed to his injuries the day after.
"Apart from the institution of criminal charges against Gregorio Pestaño, [Respondents]
Teotimo and Paz Sumayang, as heirs of Ananias Sumayang, filed this civil action for
damages against Gregorio Pestaño, as driver of the passenger bus that rammed the
deceased's motorcycle, Metro Cebu, as owner and operator of the said bus, and Perla
Compania de Seguros, as insurer of Metro Cebu. The case was docketed as Civil Case
No. CEB-6108.
"On November 9, 1987, upon motion of [Petitioner] Pestaño, Judge Pedro C. Son ordered
the consolidation of the said case with Criminal Case No. 10624, pending in Branch 16 of
the same Court, involving the criminal prosecution of Gregorio Pestaño for [d]ouble
[h]omicide thru [r]eckless [i]mprudence. Joint trial of the two cases thereafter ensued,
where the following assertions were made:
'[Respondents] rely mainly on the testimonies of Ignacio Neis, Pat. Aquilino
Dinoy and Teotimo Sumayang, father of the deceased. Neis declared that he
saw the incident while he was sitting on a bench beside the highway; that both
vehicles c[a]me from the North; that as the motorcycle approached the junction
to Tab[a]gon, the driver Ananias Sumayang signalled with his left arm to
indicate that he was taking the Tab[a]gon Road; that the motorcycle did turn left
but as it did so, it was bumped by an overspeeding bus; that the force of the
impact threw Ananias Sumayang and his companion Manuel Romagos about
14 meters away. The motorcycle, Neis continued, was badly damaged as it was
dragged by the bus.
'On the other hand, Pat. Dinoy testified that he was in the nearby house of
Ruben Tiu [when] he heard the sound or noise caused by the collision; that he
immediately went to the scene where he found Ananias Sumayang and Manuel
Romagos lying on the road bleeding and badly injured; that he requested the
driver of a PU vehicle to take them to a hospital; that he took note of the various
distances which he included in his sketch (Exh. J) that the probable point of
impact was at the left lane of the highway and right at the junction to Tab[a]gon
(Exh J-11); that he based his conclusion on the 'scratches' caused by the
motorcycle's footrest on the asphalt pavement; that he described the damage
caused to the motorcycle in his sketch (Exh J); that on the part of the bus, the
right end of its front bumper was bent and the right portion of the radiator grill
was dented. Pat. Dinoy acknowledged that he met at the scene Ignacio Neis
who informed him that he saw the incident.
'On the contrary, Pestaño blamed Sumayang for the accident. He testified that
when he first blew the horn the motorcycle which was about 15 or 20 meters
ahead went to the right side of the highway that he again blew the horn and
accelerated in order to overtake the motorcycle; that when he was just one
meter behind, the motorcycle suddenly turned left towards the Tab[a]gon [R]oad
and was bumped by his bus; that he was able to apply his break only after the
impact. Pestaño's testimony was corroborated by Ireneo Casilia who declared
that he was one of the passengers of the bus; that the motorcycle suddenly
turned left towards Tab[a]gon [R]oad without giving any signal to indicate its
maneuver; that the bus was going at 40 kph when the accident occurred.
'To substantiate its defense of bonos pater familias [petitioner] [c]orporation
recalled to the witness box Gregorio Pestaño who explained how his driving
experience and ability were tested by the company before he was hired. He
further declared that the management gave regular lectures to drivers and
conductors touching on various topics like speeding, parking, loading and
treatment of passengers, and that before he took to the road at 2:30 AM of that
day he checked together with the mechanic the tires, brake, signal lights as well
as the tools to be brought along. He did the same thing before commencing his
return trip from Hagnaya, San Remegio later in the day.
'The corporation also presented its maintenance supervisor, Agustin Pugeda,
Jr., and its manager, Alfonso Corominas, Jr. who corroborated Pestaño's
testimony that his driving ability was thoroughly tested, and that all drivers
underwent periodic lecture on various aspects of safety driving including
pertinent traffic regulations. They also confirmed the thorough checkup of every
vehicle before it would depart and that the performance of the drivers was being
monitored by several inspectors posted at random places along the route.'
"In judgment, the lower court found [petitioners] liable to the [respondents], in the amounts
of P30,000.00 for death indemnity, P829,079 for loss of earning capacity of the deceased
Ananias Sumayang, and P36,000.00 for necessary interment expenses. The liability of
defendant Perla Compania de Seguros, Inc., however, was limited only to the amount
stipulated in the insurance policy, which [was] P12,000 for death indemnity and P4,500.00
for burial expenses.
74
 "In so ruling, the lower court found [Petitioner] Pestaño to have been negligent in driving
the passenger bus that hit the deceased. It was shown that Pestaño negligently attempted
to overtake the motorcycle at a dangerous speed as they were coming upon a junction in
the road, and as the motorcycle was about to turn left towards Tabagon. The court
likewise found Metro Cebu directly and primarily liable, along with Pestaño, the latter's
employer under Article 2180 of the Civil Code, as [Petitioner] Metro Cebu failed to present
evidence to prove that it had observed . . . [the] diligence of a good father of a family to
prevent damage. Nor has Metro Cebu proven that it had exercised due diligence in the
supervision of its employees and in the maintenance of vehicles."3
Ruling of the Court of Appeals
The CA affirmed respondent's liability for the accident and for Sumayang's death. Pestaño was
negligent when he tried to overtake the victim's motorcycle at the Tabagon junction. As a
professional driver operating a public transport vehicle, he should have taken extra precaution to
avoid accidents, knowing that it was perilous to overtake at a junction, where adjoining roads had
brought about merging and diverging traffic.
The appellate court opined that Metro Cebu had shown laxity in the conduct of its operations and in
the supervision of its employees. By allowing the bus to ply its route despite the defective
speedometer, said petitioner showed its indifference towards the proper maintenance of its vehicles.
Having failed to observe the extraordinary diligence required of public transportation companies, it
was held vicariously liable to the victims of the vehicular accident.
In accordance with prevailing jurisprudence, the CA raised to P50,000 the granted indemnity for the
death of the victim. It also affirmed the award of loss of earning capacity based on his life
expectancy. Such liability was assessed, not as a pension for the claiming heirs, but as a penalty
and an indemnity for the driver's negligent act.
Hence, this Petition.4
Issues
Petitioners submit the following issues5 for our consideration:
1) The Court of Appeals misapplied facts of weight and substance affecting the result of
the case.
2) The Court of Appeals misapplied R.A. 4136 as regards the behavior of the deceased at
the time of the accident.
3) The Court of Appeals erred in ruling that the award of damages representing income
that deceased could have earned be considered a penalty.
4) The Court of Appeals, contrary to Article 2204, Civil Code, raised the award of
P30,000.00 damages representing indemnity for death to P50,000.00.
5) The Court of Appeals used as basis for the loss of earning capacity, the life expectancy
of the [d]eceased instead of that of the respondents which was shorter." 6
In short, they raise these questions: whether the CA erred (1) in applying Section 45 of RA 4136
when it ruled that negligence in driving was the proximate cause of the accident; (2) in increasing
the civil indemnity from P30,000 to P50,000; and (3) in using the life expectancy of the deceased
instead of the life expectancies of respondents.
The Court's Ruling
The Petition has no merit.
First Issue: Negligence
Petitioners contend that Pestaño was not under any obligation to slow down when he overtook the
motorcycle, because the deceased had given way to him upon hearing the bus horn. Seeing that the
left side of the road was clearly visible and free of oncoming traffic, Pestaño accelerated his speed
to pass the motorcycle. Having given way to the bus, the motorcycle driver should have slowed
down until he had been overtaken.
They further contend that the motorcycle was not in the middle of the road nearest to the junction as
found by the trial and the appellate courts, but was on the inner lane. This explains why the damage
on the bus were all on the right side - the right end of the bumper and the right portion of the radiator
grill were bent and dented. Hence, they insist that it was the victim who was negligent.
We disagree. Petitioners are raising a question of fact based on Pestaño's testimony contradicting
that of Eyewitness Ignacio Neis and on the location of the dents on the bumper and the grill. Neis
testified that as the two vehicles approached the junction, the victim raised his left arm to signal that
he was turning left to Tabagon, but that the latter and his companion were thrown off the motorcycle
after it was bumped by the overspeeding bus.
These contentions have already been passed upon by the trial and the appellate courts. We find no
cogent reason to reverse or modify their factual findings. The CA agreed with the trial court that the
vehicular collision was caused by Pestaño's negligence when he attempted to overtake the
motorcycle. As a professional driver operating a public transport bus, he should have anticipated
that overtaking at a junction was a perilous maneuver and should thus have exercised extreme
caution.
Factual findings of the CA affirming those of the trial court are conclusive and binding on this Court.
Petitioners failed to demonstrate that this case falls under any of the recognized exceptions to this
rule.7 Indeed, the issue of negligence is basically factual and, in quasi-delicts, crucial in the award of
damages.
Petitioners aver that the CA was wrong in attributing the accident to a faulty speedometer and in
implying that the accident could have been avoided had this instrument been properly functioning.
This contention has no factual basis. Under Articles 2180 and 2176 of the Civil Code, owners and
managers are responsible for damages caused by their employees. When an injury is caused by the
negligence of a servant or an employee, the master or employer is presumed to be negligent either
in the selection or in the supervision of that employee. This presumption may be overcome only by
satisfactorily showing that the employer exercised the care and the diligence of a good father of a
family in the selection and the supervision of its employee.8
The CA said that allowing Pestaño to ply his route with a defective speedometer showed laxity on
the part of Metro Cebu in the operation of its business and in the supervision of its employees. The
negligence alluded to here is in its supervision over its driver, not in that which directly caused the
accident. The fact that Pestaño was able to use a bus with a faulty speedometer shows that Metro
Cebu was remiss in the supervision of its employees and in the proper care of its vehicles. It had
thus failed to conduct its business with the diligence required by law.
Second Issue: Life Indemnity
75
Petitioners aver that the CA erred in increasing the award for life indemnity from P30,000 to
P50,000, without specifying any aggravating circumstance to justify the increment as provided in the
Civil Code.9
This contention is untenable. The indemnity for death caused by a quasi-delict used to be pegged at
P3,000, based on Article 2206 of the Civil Code. However, the amount has been gradually increased
through the years because of the declining value of our currency. At present, prevailing
jurisprudence fixes the amount at P50,000.10
Third Issue: Loss of Earning Capacity
Petitioners cite Villa Rey Transit, Inc. v. Court of Appeals,11 which held:
"The determination of the indemnity to be awarded to the heirs of a deceased person has therefore
no fixed basis. . . . The life expectancy of the deceased or of the beneficiary, whichever is shorter, is
an important factor . . . "
They contend that the CA used the wrong basis for its computation of earning capacity.
We disagree. The Court has consistently computed the loss of earning capacity based on the life
expectancy of the deceased,12 and not on that of the heir.13 Even Villa Rey Transit did likewise.
The award for loss of earning capacity is based on two factors: (1) the number of years on which the
computation of damages is based and (2) the rate at which the loss sustained by the heirs is
fixed.14 The first factor refers to the life expectancy, which takes into consideration the nature of the
victim's work, lifestyle, age and state of health prior to the accident. The second refers to the victim's
earning capacity minus the necessary living expenses. Stated otherwise, the amount recoverable is
that portion of the earnings of the deceased which the beneficiary would have received — the net
earnings of the deceased.15
WHEREFORE, the Petition is DENIED and the assailed Decision and Resolution AFFIRMED. Cost
against petitioners.
SO ORDERED.
G.R. No. L-28014-15 May 29, 1970
SPOUSES MARCELO LANDINGIN and RACQUEL BOCASAS, plaintiffs-appellees,
vs.
PANGASINAN TRANSPORTATION CO. and MARCELO OLIGAN, defendants-appellants.
SPOUSES PEDRO GARCIA and EUFRACIA LANDINGIN, plaintiffs-appellees,
vs.
PANGASINAN TRANSPORTATION CO. and MARCELO OLIGAN, defendants-appellants.
VILLAMOR, J.:
Direct appeal on a question of law from the portion of the judgment of the Court of First Instance of
Manila ordering the defendants Pangasinan Transportation Co. (PANTRANCO) and Marcelo Oligan
to pay the plaintiffs in Civil Case No. D-1468
(L-28014) the sum of P6,500.00, and the plaintiffs in Civil Case No. 1470 (L-28015) the sum of
P3,500.00.
The complaints in said Civil Cases Nos. D-1468 and D-1470 were filed by the spouses Marcelo
Landingin and Racquel Bocasas, and the spouses Pedro Garcia and Eufracia Landingin,
respectively, for damages allegedly suffered by them in connection with the death of their respective
daughter, Leonila Landingin and Estrella Garcia, due to the alleged negligence of the defendants
and/or breach of contract of carriage. In their complaints, plaintiffs averred, among others, that in the
morning of April 20, 1963, their above-mentioned daughters were among the passengers in the bus
driven by defendant Marcelo Oligan and owned and operated by defendant PANTRANCO on an
excursion trip from Dagupan City to Baguio City and back, that the bus was open on one side and
enclosed on the other, in gross violation of the rules of the Public Service Commission; that
defendant PANTRANCO acted with negligence, fraud and bad faith in pretending to have previously
secured a special permit for the trip when in truth it had not done so; that upon reaching an uphill
point at Camp 8, Kennon Road, Baguio City, on the onward trip, defendant driver, through utter lack
of foresight, experience and driving knowledge, caused the bus to stall and stop for a few moments;
that through the said defendant's fault and mishandling, the motor ceased to function, causing the
bus to slide back unchecked; that when the said defendant suddenly swerved and steered the bus
toward the mountainside, Leonila and Estrella, together with several other passengers, were thrown
out of the bus through its open side unto the road, suffering serious injuries as a result of which
Leonila and Estrella died at the hospital and the same day; and that in connection with the incident,
defendant driver had been charged with and convicted of multiple homicide and multiple slight
physical injuries on account of the death of Leonila and Estrella and of the injuries suffered by four
others, although it may be said, by way of parenthesis, that this case is now pending appeal in a
higher court. The plaintiffs prayed for awards of moral, actual and exemplary damages in the total
sum of P40,000.00 in Civil Case No. D-1468, and in the total sum of P25,000.00 in Civil Case No. D-
1470 as well as attorney's fees in the amounts of P5,000.00 and P4,000.00, respectively.
Defendants filed a joint answer to each of the two complaints alleging, among others, that at the
time of the accident, defendant driver was driving the bus at, the slow speed of about 10 kilometers
per hour; that while the said defendant was steering his bus toward the mountainside after hearing a
sound coming from under the rear end of the bus, Leonila and Estrella recklessly, and in
disobedience to his shouted warnings and advice, jumped out of the bus causing their heads to hit
the road or pavement; that the bus was then being driven with extraordinary care, prudence and
diligence; that defendant PANTRANCO observed the care and diligence of a good father of a family
to prevent the accident as well as in the selection and supervision of its employees, particularly of
defendant driver; and that the decision convicting the said defendant was not yet final, the same
having been appealed to the Court of Appeals where it was still pending.
By agreement of the parties, the two cases were tried jointly. On October 17, 1966, the court a quo
rendered its decision therein in which it made the following findings; that upon reaching the fatal spot
at Camp 8, a sudden snapping or breaking of metal below the floor of the bus was heard, and the
bus abruptly stopped, rolling back a few moments later; that as a result, some of the passengers
jumped out of the bus, while others stepped down; that defendant driver maneuvered the bus safely
to and against the side of the mountain where its rear end was made to rest, ensuring the safety of
the many passengers still inside the bus; that while defendant driver as steering the bus towards the
mountainside, he advised the passengers not to jump, but to remain seated; that Leonila and
Estrella were not thrown out of the bus, but that they panicked and jumped out; that the
malfunctioning of the motor resulted from the breakage of the cross-joint; that there was no
76
negligence on the part of either of the defendants; that only the day before, the said cross-joint was circumstances? We think not. The court below found that the cross-joint of the bus in which the
duly inspected and found to be in order; and that defendant PANTRANCO had exercised the deceased were riding broke, which caused the malfunctioning of the motor, which in turn resulted in
requisite care in the selection and supervision of its employees, including the defendant driver. The panic among some of the passengers. This is a finding of fact which this Court may not disturb. We
court concluded that "the accident was caused by a fortuitous event or an act of God brought about are of the opinion, however, that the lower court's conclusion drawn from that fact, i.e., that "the
by some extra-ordinary circumstances independent of the will of the Pantranco or its employees." accident was caused by a fortuitous event or an act of God brought about by some extraordinary
circumstances independent of the will of the Pantranco or its employees," is in large measure
conjectural and speculative, and was arrived at without due regard to all the circumstances, as
One would wonder why in the face of such factual findings and conclusion of the trial court, the
required by Article 1755. In Lasam vs. Smith (45 Phil. 660), this Court held that an accident caused
defendants, instead of the plaintiffs, should come to this Court on appeal. The answer lies in the
by defects in the automobile is not a caso fortuito. The rationale of the carrier's liability is the fact that
dispositive portion of the decision, to wit:
"the passenger has neither the choice nor control over the carrier in the selection and use of the
equipment and appliances in use by the carrier." (Necesito, et al. vs. Paras, et al., 104 Phil. 75.)
IN VIEW OF THE FOREGOING CONSIDERATIONS, the Court hereby renders
judgment: (a) Absolving the defendants from any liability on account of
When a passenger dies or is injured, the presumption is that the common carrier is at fault or that it
negligence on their part and therefore dismissing the complaints in these two
acted negligently (Article 1756). This presumption is only rebutted by proof on the carrier's part that
cases; (b) However, as stated above, the Court hereby orders the defendant
it observed the "extraordinary diligence" required in Article 1733 and the "utmost diligence of very
Pantranco to pay to the plaintiffs spouses Marcelo Tandingin and Racquel
cautious persons" required in Article 1755 (Article 1756). In the instant case it appears that the court
Bocasas in Civil Case No. D-1468 the amount of P6,500.00; and the amount of
below considered the presumption rebutted on the strength of defendants-appellants' evidence that
P3,500.00 to the spouses Pedro Garcia and Eufracia Landingin in Civil Case
only the day before the incident, the crossjoint in question was duly inspected and found to be in
No. D-1470, not in payment of liability because of any negligence on the part of
order. It does not appear, however, that the carrier gave due regard for all the circumstances in
the defendants but as an expression of sympathy and goodwill. (Emphasis
connection with the said inspection. The bus in which the deceased were riding was heavily laden
supplied.)
with passengers, and it would be traversing mountainous, circuitous and ascending roads. Thus the
entire bus, including its mechanical parts, would naturally be taxed more heavily than it would be
As to what impelled the court below to include item (b) in the dispositive portion of its decision, can under ordinary circumstances. The mere fact that the bus was inspected only recently and found to
be gathered from the penultimate paragraph of the decision, which reads: be in order would not exempt the carrier from liability unless it is shown that the particular
circumstances under which the bus would travel were also considered.
However, there is evidence to the effect that an offer of P8,500.00 in the instant
cases without any admission of fault or negligence had been made by the In the premises, it was error for the trial court to dismiss the complaints. The awards made by the
defendant Pantranco and that actually in Civil Case No. D-1469 for the death of court should be considered in the concept of damages for breach of contracts of carriage.
Pacita Descalso, the other deceased passenger of the bus in question, the heirs
of the decease received P3,000.00 in addition to hospital and medical bills and
IN VIEW OF THE FOREGOING CONSIDERATIONS, the judgment appealed from is modified as
the coffin of the deceased for the dismissal of the said case without Pantranco
indicated above, and defendant-appellant PANTRANCO is ordered to pay to plaintiffs-appellees the
accepting liability. There was as a matter of fact during the pre-trial of these two
amounts stated in the judgment appealed from, as damages for breach of contracts, with interest
cases a continuing offer of settlement on the part of the defendant Pantranco
thereon at the legal rate from the date of the filing of the complaints. Costs against defendant-
without accepting any liability for such damages, and the Court understood that
appellant PANTRANCO.
the Pantranco would be willing still to pay said amounts even if these cases
were to be tried on the merits. It is well-known that the defendant Pantranco is
zealous in the preservation of its public relations. In the spirit therefore of the
offer of the defendant Pantranco aforesaid, to assuage the feelings of the herein
plaintiffs an award of P6,500.00 for the spouses Marcelo Landingin and
Racquel Bocasas in Civil Case No. D-1468 whose daughter Leonila was, when
she died, a third-year Commerce student at the Far Eastern University, and
P3,500.00 for the spouses Pedro Garcia and Eufracia Landingin in Civil Case
No. D-1470 whose daughter Estrella was in the fourth year High at the Dagupan
Colleges when she died, is hereby made in their favor. This award is in addition
to what Pantranco might have spent to help the parents of both deceased after
the accident.

Defendants-appellants complain that having found them to be absolutely free from fault or
negligence, and having in fact dismissed the complaints against them, the court should not have
ordered them to assume any pecuniary liability. There would be merit in his argument but for the fact
that defendant-appellant PANTRANCO was guilty of breach of contract of carriage. It will be noted
that in each of the two complaints it is averred that two buses including the one in which the two
deceased girls were riding, were hired to transport the excursionist passengers from Dagupan City
to Baguio City, and return, and that the said two passengers did not reach destination safely. G.R. No. L-10605 June 30, 1958

As a common carrier, defendant-appellant PANTRANCO was duty bound to carry its passengers PRECILLANO NECESITO, ETC., plaintiff-appellant,
"safely as far as human care and foresight can provide, using the utmost diligence of very cautious vs.
persons, with a due regard for all the circumstances." (Article 1755, Civil Code.) Did defendant- NATIVIDAD PARAS, ET AL., defendants-appellees.
appellant PANTRANCO measure up to the degree of care and foresight required it under the
77
x---------------------------------------------------------x
G.R. No. L-10606 June 30, 1958
GERMAN NECESITO, ET AL., plaintiffs-appellants,
vs.
NATIVIDAD PARAS, ET AL., defendants-appellees.
REYES, J. B. L., J.:
These cases involve ex contractu against the owners and operators of the common carrier known as
Philippine Rabbit Bus Lines, filed by one passenger, and the heirs of another, who injured as a
result of the fall into a river of the vehicle in which they were riding.
In the morning of January 28, 1964, Severina Garces and her one-year old son, Precillano Necesito,
carrying vegetables, boarded passenger auto truck or bus No. 199 of the Philippine Rabbit Bus
Lines at Agno, Pangasinan. The passenger truck, driven by Francisco Bandonell, then proceeded
on its regular run from Agno to Manila. After passing Mangatarem, Pangasinan truck No. 199
entered a wooden bridge, but the front wheels swerved to the right; the driver lost control, and after
wrecking the bridge's wooden rails, the truck fell on its right side into a creek where water was
breast deep. The mother, Severina Garces, was drowned; the son, Precillano Necesito, was injured,
suffering abrasions and fracture of the left femur. He was brought to the Provincial Hospital at
Dagupan, where the fracture was set but with fragments one centimeter out of line. The money,
wrist watch and cargo of vegetables were lost.
Two actions for damages and attorney's fees totalling over P85,000 having been filed in the Court of
First Instance of Tarlac (Cases Nos. 908 and 909) against the carrier, the latter pleaded that the
accident was due to "engine or mechanical trouble" independent or beyond the control of the
defendants or of the driver Bandonell.
After joint trial, the Court of First Instance found that the bus was proceeding slowly due to the bad
condition of the road; that the accident was caused by the fracture of the right steering knuckle,
which was defective in that its center or core was not compact but "bubbled and cellulous", a
condition that could not be known or ascertained by the carrier despite the fact that regular thirty-day
inspections were made of the steering knuckle, since the steel exterior was smooth and shiny to the
depth of 3/16 of an inch all around; that the knuckles are designed and manufactured for heavy duty
and may last up to ten years; that the knuckle of bus No. 199 that broke on January 28, 1954, was
last inspected on January 5, 1954, and was due to be inspected again on February 5th. Hence, the
trial court, holding that the accident was exclusively due to fortuitous event, dismissed both actions.
Plaintiffs appealed directly to this Court in view of the amount in controversy.
We are inclined to agree with the trial court that it is not likely that bus No. 199 of the Philippine
Rabbit Lines was driven over the deeply rutted road leading to the bridge at a speed of 50 miles per
hour, as testified for the plaintiffs. Such conduct on the part of the driver would have provoked
instant and vehement protest on the part of the passengers because of the attendant discomfort,
and there is no trace of any such complaint in the records. We are thus forced to assume that the
proximate cause of the accident was the reduced strength of the steering knuckle of the vehicle
caused by defects in casting it. While appellants hint that the broken knuckle exhibited in court was
not the real fitting attached to the truck at the time of the accident, the records they registered no
objection on that ground at the trial below. The issue is thus reduced to the question whether or not
the carrier is liable for the manufacturing defect of the steering knuckle, and whether the evidence
discloses that in regard thereto the carrier exercised the diligence required by law (Art. 1755, new
Civil Code).
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 the all the circumstances.
It is clear that the carrier is not an insurer of the passengers' safety. His liability rests upon
negligence, his failure to exercise the "utmost" degree of diligence that the law requires, and by Art.
1756, in case of a passenger's death or injury the carrier bears the burden of satisfying the court that
he has duly discharged the duty of prudence required. In the American law, where the carrier is held
to the same degree of diligence as under the new Civil Code, the rule on the liability of carriers for
defects of equipment is thus expressed: "The preponderance of authority is in favor of the doctrine
that a passenger is entitled to recover damages from a carrier for an injury resulting from a defect in
an appliance purchased from a manufacturer, whenever it appears that the defect would have been
discovered by the carrier if it had exercised the degree of care which under the circumstances was
incumbent upon it, with regard to inspection and application of the necessary tests. For the purposes
of this doctrine, the manufacturer is considered as being in law the agent or servant of the carrier, as
far as regards the work of constructing the appliance. According to this theory, the good repute of
the manufacturer will not relieve the carrier from liability" (10 Am. Jur. 205, s, 1324; see also
Pennsylvania R. Co. vs. Roy, 102 U. S. 451; 20 L. Ed. 141; Southern R. Co. vs. Hussey, 74 ALR
1172; 42 Fed. 2d 70; and Ed Note, 29 ALR 788; Ann. Cas. 1916E 929).
The rationale of the carrier's liability is the fact that the passenger has neither choice nor control over
the carrier in the selection and use of the equipment and appliances in use by the carrier. Having no
privity whatever with the manufacturer or vendor of the defective equipment, the passenger has no
remedy against him, while the carrier usually has. It is but logical, therefore, that the carrier, while
not in insurer of the safety of his passengers, should nevertheless be held to answer for the flaws of
his equipment if such flaws were at all discoverable. Thus Hannen, J., in Francis vs. Cockrell, LR 5
Q. B. 184, said:
In the ordinary course of things, the passenger does not know whether the carrier has
himself manufactured the means of carriage, or contracted with someone else for its
manufacture. If the carrier has contracted with someone else the passenger does not
usually know who that person is, and in no case has he any share in the selection. The
liability of the manufacturer must depend on the terms of the contract between him and
the carrier, of which the passenger has no knowledge, and over which he can have no
control, while the carrier can introduce what stipulations and take what securities he may
think proper. For injury resulting to the carrier himself by the manufacturer's want of care,
the carrier has a remedy against the manufacturer; but the passenger has no remedy
against the manufacturer for damage arising from a mere breach of contract with the
carrier . . . . Unless, therefore, the presumed intention of the parties be that the passenger
should, in the event of his being injured by the breach of the manufacturer's contract, of
which he has no knowledge, be without remedy, the only way in which effect can be given
to a different intention is by supposing that the carrier is to be responsible to the
passenger, and to look for his indemnity to the person whom he selected and whose
breach of contract has caused the mischief. (29 ALR 789)
And in the leading case of Morgan vs. Chesapeake & O. R. Co. 15 LRA (NS) 790, 16 Ann. Cas.
608, the Court, in holding the carrier responsible for damages caused by the fracture of a car axle,
due to a "sand hole" in the course of moulding the axle, made the following observations.
The carrier, in consideration of certain well-known and highly valuable rights granted to it
by the public, undertakes certain duties toward the public, among them being to provide
itself with suitable and safe cars and vehicles in which carry the traveling public. There is
no such duty on the manufacturer of the cars. There is no reciprocal legal relation
between him and the public in this respect. When the carrier elects to have another build
its cars, it ought not to be absolved by that facts from its duty to the public to furnish safe
cars. The carrier cannot lessen its responsibility by shifting its undertaking to another's
shoulders. Its duty to furnish safe cars is side by side with its duty to furnish safe track,
and to operate them in a safe manner. None of its duties in these respects can be sublet
78
 so as to relieve it from the full measure primarily exacted of it by law. The carrier selects we believe that for the minor Precillano Necesito (G. R. No. L-10605), an indemnity of P5,000 would
the manufacturer of its cars, if it does not itself construct them, precisely as it does those be adequate for the abrasions and fracture of the femur, including medical and hospitalization
who grade its road, and lay its tracks, and operate its trains. That it does not exercise expenses, there being no evidence that there would be any permanent impairment of his faculties or
control over the former is because it elects to place that matter in the hands of the bodily functions, beyond the lack of anatomical symmetry. As for the death of Severina Garces (G.
manufacturer, instead of retaining the supervising control itself. The manufacturer should R. No. L-10606) who was 33 years old, with seven minor children when she died, her heirs are
be deemed the agent of the carrier as respects its duty to select the material out of which obviously entitled to indemnity not only for the incidental loses of property (cash, wrist watch and
its cars and locomotive are built, as well as in inspecting each step of their construction. If merchandise) worth P394 that she carried at the time of the accident and for the burial expenses of
there be tests known to the crafts of car builders, or iron moulders, by which such defects P490, but also for the loss of her earnings (shown to average P120 a month) and for the deprivation
might be discovered before the part was incorporated into the car, then the failure of the of her protection, guidance and company. In our judgment, an award of P15,000 would be adequate
manufacturer to make the test will be deemed a failure by the carrier to make it. This is not (cf Alcantara vs. Surro, 49 Off. Gaz. 2769; 93 Phil., 472).
a vicarious responsibility. It extends, as the necessity of this business demands, the rule
of respondeat superior to a situation which falls clearly within its scope and spirit. Where
The low income of the plaintiffs-appellants makes an award for attorney's fees just and equitable
an injury is inflicted upon a passenger by the breaking or wrecking of a part of the train on
(Civil Code, Art. 2208, par. 11). Considering that he two cases filed were tried jointly, a fee of P3,500
which he is riding, it is presumably the result of negligence at some point by the carrier. As
would be reasonable.
stated by Judge Story, in Story on Bailments, sec. 601a: "When the injury or damage
happens to the passenger by the breaking down or overturning of the coach, or by any
other accident occurring on the ground, the presumption prima facie is that it occurred by In view of the foregoing, the decision appealed from is reversed, and the defendants-appellees are
the negligence of the coachmen, and onus probandi is on the proprietors of the coach to sentenced to indemnify the plaintiffs-appellants in the following amounts: P5,000 to Precillano
establish that there has been no negligence whatever, and that the damage or injury has Necesito, and P15,000 to the heirs of the deceased Severina Garces, plus P3,500 by way of
been occasioned by inevitable casualty, or by some cause which human care and attorney's fees and litigation expenses. Costs against defendants-appellees. So ordered.
foresight could not prevent; for the law will, in tenderness to human life and limb, hold the
proprietors liable for the slightest negligence, and will compel them to repel by satisfactory
Paras, C. J., Bengzon, Reyes, A., Bautista Angelo, Concepcion, and Endencia, JJ., concur.
proofs every imputation thereof." When the passenger has proved his injury as the result
of a breakage in the car or the wrecking of the train on which he was being carried,
whether the defect was in the particular car in which he was riding or not, the burden is Felix, J., concurs in the result.
then cast upon the carrier to show that it was due to a cause or causes which the exercise
of the utmost human skill and foresight could not prevent. And the carrier in this
connection must show, if the accident was due to a latent defect in the material or
construction of the car, that not only could it not have discovered the defect by the
exercise of such care, but that the builders could not by the exercise of the same care RESOLUTION
have discovered the defect or foreseen the result. This rule applies the same whether the
defective car belonged to the carrier or not.
September 11, 1958

In the case now before us, the record is to the effect that the only test applied to the steering knuckle
in question was a purely visual inspection every thirty days, to see if any cracks developed. It
nowhere appears that either the manufacturer or the carrier at any time tested the steering knuckle REYES, J. B. L., J.:
to ascertain whether its strength was up to standard, or that it had no hidden flaws would impair that
strength. And yet the carrier must have been aware of the critical importance of the knuckle's
Defendants-appellees have Submitted a motion asking this Court to reconsider its decision of June
resistance; that its failure or breakage would result in loss of balance and steering control of the bus,
30, 1958, and that the same be modified with respect to (1) its holding the carrier liable for the
with disastrous effects upon the passengers. No argument is required to establish that a visual
breakage of the steering knuckle that caused the autobus No. 199 to overturn, whereby the
inspection could not directly determine whether the resistance of this critically important part was not
passengers riding in it were injured; (2) the damages awarded, that appellees argue to be
impaired. Nor has it been shown that the weakening of the knuckle was impossible to detect by any
excessive; and (3) the award of attorneys' fees.
known test; on the contrary, there is testimony that it could be detected. We are satisfied that the
periodical visual inspection of the steering knuckle as practiced by the carrier's agents did not
measure up to the required legal standard of "utmost diligence of very cautious persons" — "as far (1) The rule prevailing in this jurisdiction as established in previous decisions of this Court, cited in
as human care and foresight can provide", and therefore that the knuckle's failure can not be our main opinion, is that a carrier is liable to its passengers for damages caused by mechanical
considered a fortuitous event that exempts the carrier from responsibility (Lasam vs. Smith, 45 Phil. defects of the conveyance. As early as 1924, in Lasam vs. Smith, 45 Phil. 659 this Court ruled:
657; Son vs. Cebu Autobus Co., 94 Phil., 892.)
As far as the record shows, the accident was caused either by defects in the
It may be impracticable, as appellee argues, to require of carriers to test the strength of each and automobile or else through the negligence of its driver. That is not caso fortuito.
every part of its vehicles before each trip; but we are of the opinion that a due regard for the carrier's
obligations toward the traveling public demands adequate periodical tests to determine the condition
And in Son vs. Cebu Autobus Company, 94 Phil., 892, this Court held a common carrier liable in
and strength of those vehicle portions the failure of which may endanger the safe of the passengers.
damages to passenger for injuries cause by an accident due to the breakage of a faulty drag-link
spring.
As to the damages suffered by the plaintiffs, we agree with appellee that no allowance may be made
for moral damages, since under Article 2220 of the new Civil Code, in case of suits for breach of
It can be seen that while the courts of the United States are at variance on the question of a carrier's
contract, moral damages are recoverable only where the defendant acted fraudulently or in bad
liability for latent mechanical defects, the rule in this jurisdiction has been consistent in holding the
faith, and there is none in the case before us. As to exemplary damages, the carrier has not acted in
carrier responsible. This Court has quoted from American and English decisions, not because it felt
a "wanton, fraudulent, reckless, oppressive or malevolent manner" to warrant their award. Hence,
bound to follow the same, but merely in approval of the rationale of the rule as expressed therein,
79
since the previous Philippine cases did not enlarge on the ideas underlying the doctrine established
thereby.
The new evidence sought to be introduced do not warrant the grant of a new trial, since the
proposed proof available when the original trial was held. Said evidence is not newly discovered.
Neither does the fact that the contract between the passengers and their counsel was on a
contingent basis affect the former's right to counsel fees. As pointed out for appellants, the Court's
award is an party and not to counsel. A litigant who improvidently stipulate higher counsel fees than
those to which he is lawfully entitled, does not for that reason earn the right to a larger indemnity;
but, by parity of reasoning, he should not be deprived of counsel fees if by law he is entitled to
recover them.

(2) With regard to the indemnity awarded to the child Precilliano Necesito, the injuries suffered by
We find no reason to alter the main decision heretofore rendered. Ultimately, the position taken by
him are incapable of accurate pecuniary estimation, particularly because the full effect of the injury is
this Court is that a common carrier's contract is not to be regarded as a game of chance wherein the
not ascertainable immediately. This uncertainty, however, does not preclude the right to an
passenger stakes his limb and life against the carrier's property and profits.
indemnity, since the injury is patent and not denied (Civil Code, Art. 2224). The reasons behind this
award are expounded by the Code Commission in its report:
Wherefore, the motion for reconsideration is hereby denied. So ordered.
There are cases where from the nature of the case, definite proof of pecuniary loss cannot
be offered, although the court is convinced that there has been such loss. For instance,
injury to one's commercial credit or to the goodwill of a business firm is often hard to show
with certainty in terms of money. Should damages be denied for that reason? The judge
G.R. No. 120027 April 21, 1999
should be empowered to calculate moderate damages in such cases, rather than that the
plaintiff should suffer, without redress, from the defendant's wrongful act." (Report of the
Code Commission, p. 75) EDNA A. RAYNERA, for herself and on behalf of the minors RIANNA and REIANNE
RAYNERA, petitioners,
vs.
In awarding to the heirs of the deceased Severina Garces an indemnity for the loss of her "guidance,
FREDDIE HICETA and JIMMY ORPILLA, respondents.
protection and company," although it is but moral damage, the Court took into account that the case
of a passenger who dies in the course of an accident, due to the carrier's negligence constitutes an
exception to the general rule. While, as pointed out in the main decision, under Article 2220 of the PARDO, J.:
new Civil Code there can be no recovery of moral damages for a breach of contract in the absence
of fraud malice or bad faith, the case of a violation of the contract of carriage leading to a
passenger's death escapes this general rule, in view of Article 1764 in connection with Article 2206, The case is a petition for review certiorari of the decision of the Court of Appeals, 1 reversing that of
the Regional Trial Court, Branch 45, Manila. 2
No. 3 of the new Civil Code.

ART. 1764. Damages in cases comprised in this Section shall be awarded in accordance
with Title XVIII of this Book, concerning Damages. Article 2206 shall also apply to the
death of a passenger caused by the breach of contract by a comman carrier. ART. 2206. .
..
The rule is well-settled that factual findings of the Court of Appeals are generally considered final
and may not be reviewed on appeal. However, this principle admits of certain exceptions, among
which is when the findings of the appellate court are contrary to those of the trial court, a re-
examination of the facts and evidence may be undertaken. 3 This case falls under the cited
exception.

(3) The spouse, legitimate and eligimate descendants and ascendants of the deceased
may demand moral damages for mental anguish by reason of the death of the deceased. The antecedent facts are as follows:

Being a special rule limited to cases of fatal injuries, these articles prevail over the general rule of
Art. 2220. Special provisions control general ones (Lichauco & Co. vs. Apostol, 44 Phil. 138; Sancio
vs. Lizarraga, 55 Phil. 601).
Petitioner Edna A. Raynera was the widow of Reynaldo Raynera and the mother and legal guardian
of the minors Rianna and Reianne, both surnamed Raynera. Respondents Freddie Hiceta and
Jimmy Orpilla were the owner and driver, respectively, of an Isuzu truck-trailer with plate No. NXC
848, involved in the accident.1âwphi1.nêt

It thus appears that under the new Civil Code, in case of accident due to a carrier's negligence, the
heirs of a deceased passenger may recover moral damages, even though a passenger who is
injured, but manages to survive, is not entitled to them. There is, therefore, no conflict between our
main decision in the instant case and that of Cachero vs. Manila Yellow Taxi Cab Co., 101 Phil.,
523, where the passenger suffered injuries, but did not lose his life.
(3) In the Cachero case this Court disallowed attorneys' fees to the injured plaintiff because the
litigation arose out of his exaggerated and unreasonable deeds for an indemnity that was out of
proportion with the compensatory damages to which he was solely entitled. But in the present case,
plaintiffs' original claims can not be deemed a priori wholly unreasonable, since they had a right to
indemnity for moral damages besides compensatory ones, and moral damages are not determined
by set and invariable bounds.
On March 23, 1989, at about 2:00 in the morning, Reynaldo Raynera was on his way home. He was
riding a motorcycle traveling on the southbound lane of East Service Road, Cupang, Muntinlupa.
The Isuzu truck was travelling ahead of him at 20 to 30 kilometers per hour. 4 The truck was loaded
with two (2) metal sheets extended on both sides, two (2) feet on the left and three (3) feet on the
right. There were two (2) pairs of red lights, about 35 watts each, on both sides of the metal
plates. 5 The asphalt road was not well lighted.
At some point on the road, Reynaldo Raynera crashed his motorcycle into the left rear portion of the
truck trailer, which was without tail lights. Due to the collision, Reynaldo sustained head injuries and
truck helper Geraldino D.
Lutelo 6 rushed him to the Parañaque Medical Center. Upon arrival at the hospital, the attending
physician, Dr. Marivic Aguirre, 7 pronounced Reynaldo Raynera dead on arrival.

80
At the time of his death, Reynaldo was manager of the Engineering Department, Kawasaki Motors
(Phils.) Corporation. He was 32 years old, had a life expectancy of sixty five (65) years, and an
annual net earnings of not less than seventy three thousand five hundred (P73,500.00) pesos, 8 with
a potential increase in annual net earnings of not less than ten percent (10%) of his salary. 9
On May 12, 1989, the heirs of the deceased demanded 10 from respondents payment of damages
arising from the death of Reynaldo
Raynera as a result of the vehicular accident. The respondents refused to pay the claims.
On September 13, 1989, petitioners filed with the Regional Trial Court, Manila 11 a complaint12 for
damages against respondents owner and driver of the Isuzu truck.
In their complaint against respondents, petitioners sought recovery of damages for the death of
Reynaldo Raynera caused by the negligent operation of the truck-trailer at nighttime on the highway,
without tail lights.
In their answer filed on April 4, 1990, respondents alleged that the truck was travelling slowly on the
service road, not parked improperly at a dark portion of the road, with no tail lights, license plate and
early warning device.
At the trial, petitioners presented Virgilio Santos. He testified that at about 1.00 and 2:00 in the
morning of March 23, 1989, he and his wife went to Alabang, market, on board a tricycle. They
passed by the service road going south, and saw a parked truck trailer, with its hood open and
without tail lights. They would have bumped the truck but the tricycle driver was quick in avoiding a
collision. The place was dark, and the truck had no early warning device to alert passing
motorists. 13
On the other hand, respondents presented truck helper Geraldino
Lucelo. 14 He testified that at the time the incident happened, the truck was slowly traveling at
approximately 20 to 30 kilometers per hour. Another employee of respondents, auto-mechanic
Rogoberto Reyes, 15 testified that at about 3:00 in the afternoon of March 22, 1989, with the help of
Lucelo, he installed two (2) pairs of red lights, about 30 to 40 watts each, on both sides of the steel
plates. 16 On his part, traffic investigation officer Cpl. Virgilio del Monte 17 admitted that these lights
were visible at a distance of 100 meters.
On December 19, 1991, the trial court rendered decision in favor of petitioners. It found respondents
Freddie Hiceta and Jimmy Orpilla negligent in view of these circumstances: (1) the truck trailer had
no license plate and tail lights; (2) there were only two pairs of red lights, 50 watts 18 each, on both
sides of the steel plates; and (3) the truck trailer was improperly parked in a dark area.
The trial court held that respondents' negligence was the immediate and proximate cause of
Reynaldo Raynera's death, for which they are jointly and severally liable to pay damages to
petitioners. The trial court also held that the victim was himself negligent, although this was
insufficient to overcome respondents' negligence. The trial court applied the doctrine of contributory
negligence 19 and reduced the responsibility of respondents by 20% on account of the victim's own
negligence.
The dispositive portion of the lower court's decision reads as follows:
All things considered, the Court is of the opinion that it is fair and reasonable to
fix the living and other expenses of the deceased the sum of P54,000.00 a year
or about P4,500.00 a month (P150.00 p/d) and that, consequently, the loss or
damage sustained by the plaintiffs may be estimated at P1,674,000.00 for the
31 years of Reynaldo Raynera's life expectancy.
Taking into account the cooperative negligence of the deceased Reynaldo
Raynera, the Court believes that the demand of substantial justice are satisfied
by allocating the damages on 80-20 ratio. Thus, P1,337,200.00 shall be paid by
the defendants with interest thereon, at the legal rate, from date of decision, as
damages for the loss of earnings. To this sum, the following shall be added:
(a) P33,412.00, actually spent for
funeral services, interment and
memorial lot;
(b) P20,000.00 as attorney's fees;
(c) cost of suit.
SO ORDERED. 20
21
On January 10, 1992, respondents Hiceta and Orpilla appealed to the Court of Appeals.
After due proceedings, on April 28, 1995, the Court of Appeals rendered decision setting aside the
appealed decision. The appellate court held that Reynaldo Raynera's bumping into the left rear
portion of the truck was the proximate cause or his death, 22 and consequently, absolved
respondents from liability.
Hence, this petitition for review on certiorari.
In this petition, the heirs of Reynaldo Raynera contend that the appellate court erred in: (1)
overturning the trial court's finding that respondents' negligent operation of the Isuzu truck was the
proximate cause of the victim's death; (2) applying the doctrine of last clear chance; (3) setting aside
the trial court's award of actual and compensatory damages.
The issues presented are (a) whether respondents were negligent, and if so, (b) whether such
negligence was the proximate cause of the death of Reynaldo Raynera.
Petitioners maintain that the proximate cause of Reynaldo Raynera's death was respondents'
negligence in operating the truck trailer on the highway without tail lights and license plate.
The Court finds no reason to disturb the factual findings of the Court of Appeals.
"Negligence is the omission to do something which a reasonable man, guided by those
considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of
something, which a prudent and reasonable man would not do." 23
Proximate cause is "that cause, which, in natural and continous sequence, unbroken by any efficient
intervening cause, produces the injury, and without which the result would not have occured." 24
During the trial, it was established that the truck had no tail lights. The photographs taken of the
scene of the accident showed that there were no tail lights of license plates installed on the Isuzu
truck. Instead, what were installed were two (2) pairs of lights on top of the steel plates, and one (1)
pair of lights in front of the truck. With regard to the rear of the truck, the photos taken and the
sketch in the spot report proved that there were no tail lights.
Despite the absence of tail lights and license plate, respondents truck was visible in the highway. It
was traveling at a moderate speed, approximately 20 to 30 kilometers per hour. It used the service
81
road, instead of the highway, because the cargo they were hauling posed a danger to passing SARKIES TOURS PHILIPPINES, INC., petitioner,
motorists. In compliance with the Land Transportation Traffic Code (Republic Act No. vs.
4136)" 25 respondents installed 2 pairs of lights on top of the steel plates, as the vehicle's cargo load HONORABLE COURT OF APPEALS (TENTH DIVISION), DR. ELINO G. FORTADES, MARISOL
extended beyond the bed or body thereof. A. FORTADES and FATIMA MINERVA A. FORTADES, respondents.

We find that the direct cause of the accident was the negligence of the victim. Traveling behind the ROMERO, J.:
truck, he had the responsibility of avoiding bumping the vehicle in front of him. He was in control of
the situation. His motorcycle was equipped with headlights to enable him to see what was in front of
This petition for review is seeking the reversal of the decision of the Court of Appeals in CA-G.R. CV
him. He was traversing the service road where the prescribed speed limit was less than that in the
No. 18979 promulgated on January 13, 1993, as well as its resolution of February 19, 1993, denying
highway.
petitioner's motion for reconsideration for being a mere rehash of the arguments raised in the
appellant's brief.
Traffic investigator Cpl. Virgilio del Monte testified that two pairs of 50-watts bulbs were on top of the
steel plates, 26 which were visible from a distance of 100 meters . 27 Virgilio Santos admitted that from
The case arose from a damage suit filed by private respondents Elino, Marisol, and Fatima Minerva,
the tricycle where he was on board, he saw the truck and its cargo of iron plates from a distance of
all surnamed Fortades, against petitioner for breach of contract of carriage allegedly attended by
ten (10) meters. 28 In light of these circumstances, an accident could have been easily avoided,
bad faith.
unless the victim had been driving too fast and did not exercise dues care and prudence demanded
of him under the circumstances.
On August 31, 1984, Fatima boarded petitioner's De Luxe Bus No. 5 in Manila on her way to
Legazpi City. Her brother Raul helped her load three pieces of luggage containing all of her
Virgilio Santos' testimony strengthened respondents' defense that it was the victim who was
optometry review books, materials and equipment, trial lenses, trial contact lenses, passport and
reckless and negligent in driving his motorcycle at high speed. The tricycle where Santos was on
visa, as well as her mother Marisol's U.S. immigration (green) card, among other important
board was not much different from the victim's motorcycle that figured in the accident. Although
documents and personal belongings. Her belongings were kept in the baggage compartment of the
Santos claimed the tricycle almost bumped into the improperly parked truck, the tricycle driver was
bus, but during a stopover at Daet, it was discovered that only one bag remained in the open
able to void hitting the truck.
compartment. The others, including Fatima's things, were missing and might have dropped along
the way. Some of the passengers suggested retracing the route of the bus to try to recover the lost
It has been said that drivers of vehicles "who bump the rear of another vehicle" are presumed to be items, but the driver ignored them and proceeded to Legazpi City.
"the cause of the accident, unless contradicted by other evidence". 29 The rationale behind the
presumption is that the driver of the rear vehicle has full control of the situation as he is in a position
Fatima immediately reported the loss to her mother who, in turn, went to petitioner's office in Legazpi
to observe the vehicle in front of him.
City and later at its head office in Manila. Petitioner, however, merely offered her P1,000.00 for each
piece of luggage lost, which she turned down. After returning to Bicol, disappointed but not defeated,
We agree with the Court of Appeals that the responsibility to avoid the collision with the front vehicle mother and daughter asked assistance from the radio stations and even from Philtranco bus drivers
lies with the driver of the rear vehicle. who plied the same route on August 31st. The effort paid off when one of Fatima's bags was
recovered. Marisol further reported the incident to the National Bureau of Investigation's field office
in Legazpi City and to the local police.
Consequently, no other person was to blame but the victim himself since he was the one who
bumped his motorcycle into the rear of the Isuzu truck. He had the last clear chance of avoiding the
accident. On September 20, 1984, respondents, through counsel, formally demanded satisfaction of their
complaint from petitioner. In a letter dated October 1, 1984, the latter apologized for the delay and
said that "(a) team has been sent out to Bicol for the purpose of recovering or at least getting the full
WHEREFORE, we DENY the petition for review on certiorari and AFFIRM the decision of the Court
detail"1 of the incident.
of Appeals in CA-G.R. CV No. 35895, dismissing the amended complaint in Civil Case No. 89-
50355, Regional Trial Court, Branch 45, Manila.1âwphi1.nêt
After more than nine months of fruitless waiting, respondents decided to file the case below to
recover the value of the remaining lost items, as well as moral and exemplary damages, attorney's
No costs.
fees and expenses of litigation. They claimed that the loss was due to petitioner's failure to observe
extraordinary diligence in the care of Fatima's luggage and that petitioner dealt with them in bad faith
SO ORDERED. from the start. Petitioner, on the other hand, disowned any liability for the loss on the ground that
Fatima allegedly did not declare any excess baggage upon boarding its bus.

On June 15, 1988, after trial on the merits, the court a quo adjudged the case in favor of
respondents, viz.:

PREMISES CONSIDERED, judgment is hereby rendered in favor of the plaintiffs (herein

respondents) and against the herein defendant Sarkies Tours Philippines, Inc., ordering
the latter to pay to the former the following sums of money, to wit:

1. The sum of P30,000.00 equivalent to the value of the personal belongings of plaintiff
G.R. No. 108897 October 2, 1997 Fatima Minerva Fortades, etc. less the value of one luggage recovered;

82
 2. The sum of P90,000.00 for the transportation expenses, as well as moral damages;
3. The sum of P10,000.00 by way of exemplary damages;
4. The sum of P5,000.00 as attorney's fees; and
5. The sum of P5,000.00 as litigation expenses or a total of One Hundred Forty Thousand
(P140,000.00) Pesos.
to be paid by herein defendant Sarkies Tours Philippines, Inc. to the herein plaintiffs within
30 days from receipt of this Decision.
SO ORDERED.
On appeal, the appellate court affirmed the trial court's judgment, but deleted the award of moral and
exemplary damages. Thus,
WHEREFORE, premises considered, except as above modified, fixing the award for
transportation expenses at P30,000.00 and the deletion of the award for moral and
exemplary damages, the decision appealed from is AFFIRMED, with costs against
defendant-appellant.
SO ORDERED.
Its motion for reconsideration was likewise rejected by the Court of Appeals, so petitioner elevated
its case to this Court for a review.
After a careful scrutiny of the records of this case, we are convinced that the trial and appellate
courts resolved the issues judiciously based on the evidence at hand.
Petitioner claims that Fatima did not bring any piece of luggage with her, and even if she did, none
was declared at the start of the trip. The documentary and testimonial evidence presented at the
trial, however, established that Fatima indeed boarded petitioner's De Luxe Bus No. 5 in the evening
of August 31, 1984, and she brought three pieces of luggage with her, as testified by her brother
Raul,2 who helped her pack her things and load them on said bus. One of the bags was even
recovered by a Philtranco bus driver. In its letter dated October 1, 1984, petitioner tacitly admitted its
liability by apologizing to respondents and assuring them that efforts were being made to recover the
lost items.
The records also reveal that respondents went to great lengths just to salvage their loss. The
incident was reported to the police, the NBI, and the regional and head offices of petitioner. Marisol
even sought the assistance of Philtranco bus drivers and the radio stations. To expedite the
replacement of her mother's lost U.S. immigration documents, Fatima also had to execute an
affidavit of loss.3 Clearly, they would not have gone through all that trouble in pursuit of a fancied
loss.
Fatima was not the only one who lost her luggage. Apparently, other passengers had suffered a
similar fate: Dr. Lita Samarista testified that petitioner offered her P1,000.00 for her lost baggage
and she accepted it;4 Carleen Carullo-Magno lost her chemical engineering review materials, while
her brother lost abaca products he was transporting to Bicol. 5
Petitioner's receipt of Fatima's personal luggage having been thus established, it must now be
determined if, as a common carrier, it is responsible for their loss. Under the Civil Code, "(c)ommon
carriers, from the nature of their business and for reasons of public policy, are bound to observe
extraordinary diligence in the vigilance over the goods . . . transported by them,"6 and this liability
"lasts from the time the goods are unconditionally placed in the possession of, and received by the
carrier for transportation until the same are delivered, actually or constructively, by the carrier to . . .
the person who has a right to receive them,"7 unless the loss is due to any of the excepted causes
under Article 1734 thereof.8
The cause of the loss in the case at bar was petitioner's negligence in not ensuring that the doors of
the baggage compartment of its bus were securely fastened. As a result of this lack of care, almost
all of the luggage was lost, to the prejudice of the paying passengers. As the Court of Appeals
correctly observed:
. . . . Where the common carrier accepted its passenger's baggage for transportation and
even had it placed in the vehicle by its own employee, its failure to collect the freight
charge is the common carrier's own lookout. It is responsible for the consequent loss of
the baggage. In the instant case, defendant appellant's employee even helped Fatima
Minerva Fortades and her brother load the luggages/baggages in the bus' baggage
compartment, without asking that they be weighed, declared, receipted or paid for (TSN,
August 4, 1986, pp. 29, 34, 54, 57, 70; December 23, 1987, p. 35). Neither was this
required of the other passengers (TSN, August 4, 1986, p. 104; February 5, 1988; p. 13).
Finally, petitioner questions the award of actual damages to respondents. On this point, we likewise
agree with the trial and appellate courts' conclusions. There is no dispute that of the three pieces of
luggage of Fatima, only one was recovered. The other two contained optometry books, materials,
equipment, as well as vital documents and personal belongings. Respondents had to shuttle
between Bicol and Manila in their efforts to be compensated for the loss. During the trial, Fatima and
Marisol had to travel from the United States just to be able to testify. Expenses were also incurred in
reconstituting their lost documents. Under these circumstances, the Court agrees with the Court of
Appeals in awarding P30,000.00 for the lost items and P30,000.00 for the transportation expenses,
but disagrees with the deletion of the award of moral and exemplary damages which, in view of the
foregoing proven facts, with negligence and bad faith on the fault of petitioner having been duly
established, should be granted to respondents in the amount of P20,000.00 and P5,000.00,
respectively.
WHEREFORE, the assailed decision of the Court of Appeals dated January 13, 1993, and its
resolution dated February 19, 1993, are hereby AFFIRMED with the MODIFICATION that petitioner
is ordered to pay respondents an additional P20,000.00 as moral damages and P5,000.00 as
exemplary damages. Costs against petitioner.
SO ORDERED.
G.R. No. 143133 June 5, 2002
83
BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. and JARDINE DAVIES TRANSPORT
SERVICES, INC., petitioners,
vs.
PHILIPPINE FIRST INSURANCE CO., INC., respondents.
PANGANIBAN, J.:
Proof of the delivery of goods in good order to a common carrier and of their arrival in bad order at
their destination constitutes prima facie fault or negligence on the part of the carrier. If no adequate
explanation is given as to how the loss, the destruction or the deterioration of the goods happened,
the carrier shall be held liable therefor.
Statement of the Case
Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the July 15, 1998
Decision1 and the May 2, 2000 Resolution2 of the Court of Appeals3 (CA) in CA-GR CV No. 53571.
The decretal portion of the Decision reads as follows:
"WHEREFORE, in the light of the foregoing disquisition, the decision appealed from is
hereby REVERSED and SET ASIDE. Defendants-appellees are ORDERED to jointly and
severally pay plaintiffs-appellants the following:
'1) FOUR Hundred Fifty One Thousand Twenty-Seven Pesos and 32/100
(P451,027.32) as actual damages, representing the value of the damaged
cargo, plus interest at the legal rate from the time of filing of the complaint on
July 25, 1991, until fully paid;
'2) Attorney's fees amounting to 20% of the claim; and
'3) Costs of suit.'"4
The assailed Resolution denied petitioner's Motion for Reconsideration.
The CA reversed the Decision of the Regional Trial Court (RTC) of Makati City (Branch 134), which
had disposed as follows:
"WHEREFORE, in view of the foregoing, judgment is hereby rendered, dismissing the
complaint, as well as defendant's counterclaim."5
The Facts
The factual antecedents of the case are summarized by the Court of Appeals in this wise:
"On June 13, 1990, CMC Trading A.G. shipped on board the M/V 'Anangel Sky' at
Hamburg, Germany 242 coils of various Prime Cold Rolled Steel sheets for transportation
to Manila consigned to the Philippine Steel Trading Corporation. On July 28, 1990, M/V
Anangel Sky arrived at the port of Manila and, within the subsequent days, discharged the
subject cargo. Four (4) coils were found to be in bad order B.O. Tally sheet No. 154974.
Finding the four (4) coils in their damaged state to be unfit for the intended purpose, the
consignee Philippine Steel Trading Corporation declared the same as total
loss.1âwphi1.nêt
"Despite receipt of a formal demand, defendants-appellees refused to submit to the
consignee's claim. Consequently, plaintiff-appellant paid the consignee five hundred six
thousand eighty six & 50/100 pesos (P506,086.50), and was subrogated to the latter's
rights and causes of action against defendants-appellees. Subsequently, plaintiff-
appellant instituted this complaint for recovery of the amount paid by them, to the
consignee as insured.
"Impugning the propriety of the suit against them, defendants-appellees imputed that the
damage and/or loss was due to pre-shipment damage, to the inherent nature, vice or
defect of the goods, or to perils, danger and accidents of the sea, or to insufficiency of
packing thereof, or to the act or omission of the shipper of the goods or their
representatives. In addition thereto, defendants-appellees argued that their liability, if
there be any, should not exceed the limitations of liability provided for in the bill of lading
and other pertinent laws. Finally, defendants-appellees averred that, in any event, they
exercised due diligence and foresight required by law to prevent any damage/loss to said
shipment."6
Ruling of the Trial Court
The RTC dismissed the Complaint because respondent had failed to prove its claims with the
quantum of proof required by law.7
It likewise debunked petitioners' counterclaim, because respondent's suit was not manifestly
frivolous or primarily intended to harass them.8
Ruling of the Court of Appeals
In reversing the trial court, the CA ruled that petitioners were liable for the loss or the damage of the
goods shipped, because they had failed to overcome the presumption of negligence imposed on
common carriers.
The CA further held as inadequately proven petitioners' claim that the loss or the deterioration of the
goods was due to pre-shipment damage.9 It likewise opined that the notation "metal envelopes rust
stained and slightly dented" placed on the Bill of Lading had not been the proximate cause of the
damage to the four (4) coils.10
As to the extent of petitioners' liability, the CA held that the package limitation under COGSA was
not applicable, because the words "L/C No. 90/02447" indicated that a higher valuation of the cargo
had been declared by the shipper. The CA, however, affirmed the award of attorney's fees.
Hence, this Petition.11
Issues
In their Memorandum, petitioners raise the following issues for the Court's consideration:
I
"Whether or not plaintiff by presenting only one witness who has never seen the subject
shipment and whose testimony is purely hearsay is sufficient to pave the way for the
applicability of Article 1735 of the Civil Code;
II
84
 "Whether or not the consignee/plaintiff filed the required notice of loss within the time
required by law;
III
"Whether or not a notation in the bill of lading at the time of loading is sufficient to show
pre-shipment damage and to exempt herein defendants from liability;
IV
"Whether or not the "PACKAGE LIMITATION" of liability under Section 4 (5) of COGSA is
applicable to the case at bar."12
In sum, the issues boil down to three:
1. Whether petitioners have overcome the presumption of negligence of a common carrier
2. Whether the notice of loss was timely filed
3. Whether the package limitation of liability is applicable
This Court's Ruling
The Petition is partly meritorious.
First Issue:
Proof of Negligence
Petitioners contend that the presumption of fault imposed on common carriers should not be applied
on the basis of the lone testimony offered by private respondent. The contention is untenable.
Well-settled is the rule that common carriers, from the nature of their business and for reasons of
public policy, are bound to observe extraordinary diligence and vigilance with respect to the safety of
the goods and the passengers they transport.13 Thus, common carriers are required to render
service with the greatest skill and foresight and "to use all reason[a]ble means to ascertain the
nature and characteristics of the goods tendered for shipment, and to exercise due care in the
handling and stowage, including such methods as their nature requires." 14 The extraordinary
responsibility lasts from the time the goods are unconditionally placed in the possession of and
received for transportation by the carrier until they are delivered, actually or constructively, to the
consignee or to the person who has a right to receive them. 15
This strict requirement is justified by the fact that, without a hand or a voice in the preparation of
such contract, the riding public enters into a contract of transportation with common carriers.16 Even
if it wants to, it cannot submit its own stipulations for their approval. 17 Hence, it merely adheres to the
agreement prepared by them.
Owing to this high degree of diligence required of them, common carriers, as a general rule, are
presumed to have been at fault or negligent if the goods they transported deteriorated or got lost or
destroyed.18 That is, unless they prove that they exercised extraordinary diligence in transporting the
goods.19 In order to avoid responsibility for any loss or damage, therefore, they have the burden of
proving that they observed such diligence.20
However, the presumption of fault or negligence will not arise21 if the loss is due to any of the
following causes: (1) flood, storm, earthquake, lightning, or other natural disaster or calamity; (2) an
act of the public enemy in war, whether international or civil; (3) an act or omission of the shipper or
owner of the goods; (4) the character of the goods or defects in the packing or the container; or (5)
an order or act of competent public authority.22 This is a closed list. If the cause of destruction, loss
or deterioration is other than the enumerated circumstances, then the carrier is liable therefor. 23
Corollary to the foregoing, mere proof of delivery of the goods in good order to a common carrier
and of their arrival in bad order at their destination constitutes a prima facie case of fault or
negligence against the carrier. If no adequate explanation is given as to how the deterioration, the
loss or the destruction of the goods happened, the transporter shall be held responsible. 24
That petitioners failed to rebut the prima facie presumption of negligence is revealed in the case at
bar by a review of the records and more so by the evidence adduced by respondent.25
First, as stated in the Bill of Lading, petitioners received the subject shipment in good order and
condition in Hamburg, Germany.26
Second, prior to the unloading of the cargo, an Inspection Report27 prepared and signed by
representatives of both parties showed the steel bands broken, the metal envelopes rust-stained
and heavily buckled, and the contents thereof exposed and rusty.
Third, Bad Order Tally Sheet No. 15497928 issued by Jardine Davies Transport Services, Inc., stated
that the four coils were in bad order and condition. Normally, a request for a bad order survey is
made in case there is an apparent or a presumed loss or damage. 29
Fourth, the Certificate of Analysis30 stated that, based on the sample submitted and tested, the steel
sheets found in bad order were wet with fresh water.
Fifth, petitioners -- in a letter31 addressed to the Philippine Steel Coating Corporation and dated
October 12, 1990 -- admitted that they were aware of the condition of the four coils found in bad
order and condition.
These facts were confirmed by Ruperto Esmerio, head checker of BM Santos Checkers Agency.
Pertinent portions of his testimony are reproduce hereunder:
"Q. Mr. Esmerio, you mentioned that you are a Head Checker. Will you inform the
Honorable Court with what company you are connected?
A. BM Santos Checkers Agency, sir.
Q. How is BM Santos checkers Agency related or connected with defendant Jardine
Davies Transport Services?
A. It is the company who contracts the checkers, sir.
Q. You mentioned that you are a Head Checker, will you inform this Honorable Court
your duties and responsibilities?
A. I am the representative of BM Santos on board the vessel, sir, to supervise the
discharge of cargoes.
xxx xxx xxx
85
 Q. On or about August 1, 1990, were you still connected or employed with BM Santos
as a Head Checker?
A. Yes, sir.
Q. And, on or about that date, do you recall having attended the discharging and
inspection of cold steel sheets in coil on board the MV/AN ANGEL SKY?
A. Yes, sir, I was there.
xxx xxx xxx
Q. Based on your inspection since you were also present at that time, will you inform
this Honorable Court the condition or the appearance of the bad order cargoes that were
unloaded from the MV/ANANGEL SKY?
ATTY. MACAMAY:
Objection, Your Honor, I think the document itself reflects the condition of the
cold steel sheets and the best evidence is the document itself, Your Honor that
shows the condition of the steel sheets.
COURT:
Let the witness answer.
A. The scrap of the cargoes is broken already and the rope is loosen and the cargoes
are dent on the sides."32
All these conclusively prove the fact of shipment in good order and condition and the consequent
damage to the four coils while in the possession of petitioner,33 who notably failed to explain why.34
Further, petitioners failed to prove that they observed the extraordinary diligence and precaution
which the law requires a common carrier to know and to follow to avoid damage to or destruction of
the goods entrusted to it for safe carriage and delivery.35
True, the words "metal envelopes rust stained and slightly dented" were noted on the Bill of Lading;
however, there is no showing that petitioners exercised due diligence to forestall or lessen the
loss.36 Having been in the service for several years, the master of the vessel should have known at
the outset that metal envelopes in the said state would eventually deteriorate when not properly
stored while in transit.37 Equipped with the proper knowledge of the nature of steel sheets in coils
and of the proper way of transporting them, the master of the vessel and his crew should have
undertaken precautionary measures to avoid possible deterioration of the cargo. But none of these
measures was taken.38 Having failed to discharge the burden of proving that they have exercised the
extraordinary diligence required by law, petitioners cannot escape liability for the damage to the four
coils.39
In their attempt to escape liability, petitioners further contend that they are exempted from liability
under Article 1734(4) of the Civil Code. They cite the notation "metal envelopes rust stained and
slightly dented" printed on the Bill of Lading as evidence that the character of the goods or defect in
the packing or the containers was the proximate cause of the damage. We are not convinced.
From the evidence on record, it cannot be reasonably concluded that the damage to the four coils
was due to the condition noted on the Bill of Lading.40 The aforecited exception refers to cases when
goods are lost or damaged while in transit as a result of the natural decay of perishable goods or the
fermentation or evaporation of substances liable therefor, the necessary and natural wear of goods
in transport, defects in packages in which they are shipped, or the natural propensities of
animals.41 None of these is present in the instant case.
Further, even if the fact of improper packing was known to the carrier or its crew or was apparent
upon ordinary observation, it is not relieved of liability for loss or injury resulting therefrom, once it
accepts the goods notwithstanding such condition. 42 Thus, petitioners have not successfully proven
the application of any of the aforecited exceptions in the present case. 43
Second Issue:
Notice of Loss
Petitioners claim that pursuant to Section 3, paragraph 6 of the Carriage of Goods by Sea
Act44 (COGSA), respondent should have filed its Notice of Loss within three days from delivery.
They assert that the cargo was discharged on July 31, 1990, but that respondent filed its Notice of
Claim only on September 18, 1990.45
We are not persuaded. First, the above-cited provision of COGSA provides that the notice of claim
need not be given if the state of the goods, at the time of their receipt, has been the subject of a joint
inspection or survey. As stated earlier, prior to unloading the cargo, an Inspection Report 46 as to the
condition of the goods was prepared and signed by representatives of both parties. 47
Second, as stated in the same provision, a failure to file a notice of claim within three days will not
bar recovery if it is nonetheless filed within one year.48 This one-year prescriptive period also applies
to the shipper, the consignee, the insurer of the goods or any legal holder of the bill of lading. 49
In Loadstar Shipping Co., Inc, v. Court of Appeals,50 we ruled that a claim is not barred by
prescription as long as the one-year period has not lapsed. Thus, in the words of the ponente, Chief
Justice Hilario G. Davide Jr.:
"Inasmuch as the neither the Civil Code nor the Code of Commerce states a specific
prescriptive period on the matter, the Carriage of Goods by Sea Act (COGSA)--which
provides for a one-year period of limitation on claims for loss of, or damage to, cargoes
sustained during transit--may be applied suppletorily to the case at bar."
In the present case, the cargo was discharged on July 31, 1990, while the Complaint 51 was filed by
respondent on July 25, 1991, within the one-year prescriptive period.
Third Issue:
Package Limitation
Assuming arguendo they are liable for respondent's claims, petitioners contend that their liability
should be limited to US$500 per package as provided in the Bill of Lading and by Section 4(5)52 of
COGSA.53
On the other hand, respondent argues that Section 4(5) of COGSA is inapplicable, because the
value of the subject shipment was declared by petitioners beforehand, as evidenced by the
reference to and the insertion of the Letter of Credit or "L/C No. 90/02447" in the said Bill of
Lading.54
86
A bill of lading serves two functions. First, it is a receipt for the goods shipped.53 Second, it is a
contract by which three parties -- namely, the shipper, the carrier, and the consignee -- undertake
specific responsibilities and assume stipulated obligations. 56 In a nutshell, the acceptance of the bill
of lading by the shipper and the consignee, with full knowledge of its contents, gives rise to the
presumption that it constituted a perfected and binding contract. 57
Further, a stipulation in the bill of lading limiting to a certain sum the common carrier's liability for
loss or destruction of a cargo -- unless the shipper or owner declares a greater value58 -- is
sanctioned by law.59 There are, however, two conditions to be satisfied: (1) the contract is
reasonable and just under the circumstances, and (2) it has been fairly and freely agreed upon by
the parties.60 The rationale for this rule is to bind the shippers by their agreement to the value
(maximum valuation) of their goods.61
It is to be noted, however, that the Civil Code does not limit the liability of the common carrier to a
fixed amount per package.62 In all matters not regulated by the Civil Code, the right and the
obligations of common carriers shall be governed by the Code of Commerce and special
laws.63 Thus, the COGSA, which is suppletory to the provisions of the Civil Code, supplements the
latter by establishing a statutory provision limiting the carrier's liability in the absence of a shipper's
declaration of a higher value in the bill of lading.64 The provisions on limited liability are as much a
part of the bill of lading as though physically in it and as though placed there by agreement of the
parties.65
In the case before us, there was no stipulation in the Bill of Lading66 limiting the carrier's liability.
Neither did the shipper declare a higher valuation of the goods to be shipped. This fact
notwithstanding, the insertion of the words "L/C No. 90/02447 cannot be the basis for petitioners'
liability.
First, a notation in the Bill of Lading which indicated the amount of the Letter of Credit obtained by
the shipper for the importation of steel sheets did not effect a declaration of the value of the goods
as required by the bill.67 That notation was made only for the convenience of the shipper and the
bank processing the Letter of Credit.68
Second, in Keng Hua Paper Products v. Court of Appeals,69 we held that a bill of lading was
separate from the Other Letter of Credit arrangements. We ruled thus:
"(T)he contract of carriage, as stipulated in the bill of lading in the present case, must be
treated independently of the contract of sale between the seller and the buyer, and the
contract of issuance of a letter of credit between the amount of goods described in the
commercial invoice in the contract of sale and the amount allowed in the letter of credit will
not affect the validity and enforceability of the contract of carriage as embodied in the bill
of lading. As the bank cannot be expected to look beyond the documents presented to it
by the seller pursuant to the letter of credit, neither can the carrier be expected to go
beyond the representations of the shipper in the bill of lading and to verify their
accuracy vis-à-vis the commercial invoice and the letter of credit. Thus, the discrepancy
between the amount of goods indicated in the invoice and the amount in the bill of lading
cannot negate petitioner's obligation to private respondent arising from the contract of
transportation."70
In the light of the foregoing, petitioners' liability should be computed based on US$500 per package
and not on the per metric ton price declared in the Letter of Credit. 71 In Eastern Shipping Lines, Inc.
v. Intermediate Appellate Court,72 we explained the meaning of packages:
"When what would ordinarily be considered packages are shipped in a container supplied
by the carrier and the number of such units is disclosed in the shipping documents, each
of those units and not the container constitutes the 'package' referred to in the liability
limitation provision of Carriage of Goods by Sea Act."
Considering, therefore, the ruling in Eastern Shipping Lines and the fact that the Bill of Lading
clearly disclosed the contents of the containers, the number of units, as well as the nature of the
steel sheets, the four damaged coils should be considered as the shipping unit subject to the
US$500 limitation.1âwphi1.nêt
WHEREFORE, the Petition is partly granted and the assailed Decision MODIFIED. Petitioners'
liability is reduced to US$2,000 plus interest at the legal rate of six percent from the time of the filing
of the Complaint on July 25, 1991 until the finality of this Decision, and 12 percent thereafter until
fully paid. No pronouncement as to costs.
SO ORDERED.
G.R. No. 122039 May 31, 2000
VICENTE CALALAS, petitioner,
vs.
COURT OF APPEALS, ELIZA JUJEURCHE SUNGA and FRANCISCO SALVA, respondents.
MENDOZA, J.:
This is a petition for review on certiorari of the decision1 of the Court of Appeals, dated March 31,
1991, reversing the contrary decision of the Regional Trial Court, Branch 36, Dumaguete City, and
awarding damages instead to private respondent Eliza Jujeurche Sunga as plaintiff in an action for
breach of contract of carriage.
The facts, as found by the Court of Appeals, are as follows:
At 10 o'clock in the morning of August 23, 1989, private respondent Eliza Jujeurche G. Sunga, then
a college freshman majoring in Physical Education at the Siliman University, took a passenger
jeepney owned and operated by petitioner Vicente Calalas. As the jeepney was filled to capacity of
about 24 passengers, Sunga was given by the conductor an "extension seat," a wooden stool at the
back of the door at the rear end of the vehicle.
On the way to Poblacion Sibulan, Negros Occidental, the jeepney stopped to let a passenger off. As
she was seated at the rear of the vehicle, Sunga gave way to the outgoing passenger. Just as she
was doing so, an Isuzu truck driven by Iglecerio Verena and owned by Francisco Salva bumped the
left rear portion of the jeepney. As a result, Sunga was injured. She sustained a fracture of the
"distal third of the left tibia-fibula with severe necrosis of the underlying skin." Closed reduction of the
fracture, long leg circular casting, and case wedging were done under sedation. Her confinement in
the hospital lasted from August 23 to September 7, 1989. Her attending physician, Dr. Danilo V.
Oligario, an orthopedic surgeon, certified she would remain on a cast for a period of three months
and would have to ambulate in crutches during said period.
On October 9, 1989, Sunga filed a complaint for damages against Calalas, alleging violation of the
contract of carriage by the former in failing to exercise the diligence required of him as a common
carrier. Calalas, on the other hand, filed a third-party complaint against Francisco Salva, the owner
of the Isuzu truck.
The lower court rendered judgment against Salva as third-party defendant and absolved Calalas of
liability, holding that it was the driver of the Isuzu truck who was responsible for the accident. It took
cognizance of another case (Civil Case No. 3490), filed by Calalas against Salva and Verena, for
87
quasi-delict, in which Branch 37 of the same court held Salva and his driver Verena jointly liable to
Calalas for the damage to his jeepney.
On appeal to the Court of Appeals, the ruling of the lower court was reversed on the ground that
Sunga's cause of action was based on a contract of carriage, not quasi-delict, and that the common
carrier failed to exercise the diligence required under the Civil Code. The appellate court dismissed
the third-party complaint against Salva and adjudged Calalas liable for damages to Sunga. The
dispositive portion of its decision reads:
WHEREFORE, the decision appealed from is hereby REVERSED and SET
ASIDE, and another one is entered ordering defendant-appellee Vicente
Calalas to pay plaintiff-appellant:
(1) P50,000.00 as actual and compensatory damages;
(2) P50,000.00 as moral damages;
(3) P10,000.00 as attorney's fees; and
(4) P1,000.00 as expenses of litigation; and
(5) to pay the costs.
SO ORDERED.
Hence, this petition. Petitioner contends that the ruling in Civil Case No. 3490 that the negligence of
Verena was the proximate cause of the accident negates his liability and that to rule otherwise would
be to make the common carrier an insurer of the safety of its passengers. He contends that the
bumping of the jeepney by the truck owned by Salva was a caso fortuito. Petitioner further assails
the award of moral damages to Sunga on the ground that it is not supported by evidence.
The petition has no merit.
The argument that Sunga is bound by the ruling in Civil Case No. 3490 finding the driver and the
owner of the truck liable for quasi-delict ignores the fact that she was never a party to that case and,
therefore, the principle of res judicata does not apply.
Nor are the issues in Civil Case No. 3490 and in the present case the same. The issue in Civil Case
No. 3490 was whether Salva and his driver Verena were liable for quasi-delict for the damage
caused to petitioner's jeepney. On the other hand, the issue in this case is whether petitioner is
liable on his contract of carriage. The first, quasi-delict, also known as culpa aquiliana or culpa extra
contractual, has as its source the negligence of the tortfeasor. The second, breach of contract
or culpa contractual, is premised upon the negligence in the performance of a contractual obligation.
Consequently, in quasi-delict, the negligence or fault should be clearly established because it is the
basis of the action, whereas in breach of contract, the action can be prosecuted merely by proving
the existence of the contract and the fact that the obligor, in this case the common carrier, failed to
transport his passenger safely to his destination.2 In case of death or injuries to passengers, Art.
1756 of the Civil Code provides that common carriers are presumed to have been at fault or to have
acted negligently unless they prove that they observed extraordinary diligence as defined in Arts.
1733 and 1755 of the Code. This provision necessarily shifts to the common carrier the burden of
proof.
There is, thus, no basis for the contention that the ruling in Civil Case No. 3490, finding Salva and
his driver Verena liable for the damage to petitioner's jeepney, should be binding on Sunga. It is
immaterial that the proximate cause of the collision between the jeepney and the truck was the
negligence of the truck driver. The doctrine of proximate cause is applicable only in actions for
quasi-delict, not in actions involving breach of contract. The doctrine is a device for imputing liability
to a person where there is no relation between him and another party. In such a case, the obligation
is created by law itself. But, where there is a pre-existing contractual relation between the parties, it
is the parties themselves who create the obligation, and the function of the law is merely to regulate
the relation thus created. Insofar as contracts of carriage are concerned, some aspects regulated by
the Civil Code are those respecting the diligence required of common carriers with regard to the
safety of passengers as well as the presumption of negligence in cases of death or injury to
passengers. It provides:
Art. 1733. Common carriers, from the nature of their business and for reasons
of public policy, are bound to observe extraordinary diligence in the vigilance
over the goods and for the safety of the passengers transported by them,
according to all the circumstances of each case.
Such extraordinary diligence in the vigilance over the goods is further
expressed in articles 1734, 1735, and 1746, Nos. 5, 6, and 7, while the
extraordinary diligence for the safety of the passengers is further set forth in
articles 1755 and 1756.
Art. 1755. A common carrier is bound to carry the passengers safely as far as
human care and foresight can provide, using the utmost diligence of very
cautious persons, with due regard for all the circumstances.
Art. 1756. In case of death of or injuries to passengers, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove
that they observed extraordinary diligence as prescribed by articles 1733 and
1755.
In the case at bar, upon the happening of the accident, the presumption of negligence at once
arose, and it became the duty of petitioner to prove that he had to observe extraordinary diligence in
the care of his passengers.
Now, did the driver of jeepney carry Sunga "safely as far as human care and foresight could provide,
using the utmost diligence of very cautious persons, with due regard for all the circumstances" as
required by Art. 1755? We do not think so. Several factors militate against petitioner's contention.
First, as found by the Court of Appeals, the jeepney was not properly parked, its rear portion being
exposed about two meters from the broad shoulders of the highway, and facing the middle of the
highway in a diagonal angle. This is a violation of the R.A. No. 4136, as amended, or the Land
Transportation and Traffic Code, which provides:
Sec. 54. Obstruction of Traffic. — No person shall drive his motor vehicle in
such a manner as to obstruct or impede the passage of any vehicle, nor, while
discharging or taking on passengers or loading or unloading freight, obstruct the
free passage of other vehicles on the highway.
Second, it is undisputed that petitioner's driver took in more passengers than the allowed seating
capacity of the jeepney, a violation of §32(a) of the same law. It provides:
88
 Exceeding registered capacity. — No person operating any motor vehicle shall
allow more passengers or more freight or cargo in his vehicle than its registered
capacity.
The fact that Sunga was seated in an "extension seat" placed her in a peril greater than that to
which the other passengers were exposed. Therefore, not only was petitioner unable to overcome
the presumption of negligence imposed on him for the injury sustained by Sunga, but also, the
evidence shows he was actually negligent in transporting passengers.
We find it hard to give serious thought to petitioner's contention that Sunga's taking an "extension
seat" amounted to an implied assumption of risk. It is akin to arguing that the injuries to the many
victims of the tragedies in our seas should not be compensated merely because those passengers
assumed a greater risk of drowning by boarding an overloaded ferry. This is also true of petitioner's
contention that the jeepney being bumped while it was improperly parked constitutes caso fortuito.
A caso fortuito is an event which could not be foreseen, or which, though foreseen, was
inevitable.3 This requires that the following requirements be present: (a) the cause of the breach is
independent of the debtor's will; (b) the event is unforeseeable or unavoidable; (c) the event is such
as to render it impossible for the debtor to fulfill his obligation in a normal manner, and (d) the debtor
did not take part in causing the injury to the
creditor.4 Petitioner should have foreseen the danger of parking his jeepney with its body protruding
two meters into the highway.
Finally, petitioner challenges the award of moral damages alleging that it is excessive and without
basis in law. We find this contention well taken.
In awarding moral damages, the Court of Appeals stated:
Plaintiff-appellant at the time of the accident was a first-year college student in
that school year 1989-1990 at the Silliman University, majoring in Physical
Education. Because of the injury, she was not able to enroll in the second
semester of that school year. She testified that she had no more intention of
continuing with her schooling, because she could not walk and decided not to
pursue her degree, major in Physical Education "because of my leg which has a
defect already."
Plaintiff-appellant likewise testified that even while she was under confinement,
she cried in pain because of her injured left foot. As a result of her injury, the
Orthopedic Surgeon also certified that she has "residual bowing of the fracture
side." She likewise decided not to further pursue Physical Education as her
major subject, because "my left leg . . . has a defect already."
Those are her physical pains and moral sufferings, the inevitable bedfellows of
the injuries that she suffered. Under Article 2219 of the Civil Code, she is
entitled to recover moral damages in the sum of P50,000.00, which is fair, just
and reasonable.
As a general rule, moral damages are not recoverable in actions for damages predicated on a
breach of contract for it is not one of the items enumerated under Art. 2219 of the Civil Code.5 As an
exception, such damages are recoverable: (1) in cases in which the mishap results in the death of a
passenger, as provided in Art. 1764, in relation to Art. 2206(3) of the Civil Code; and (2) in the cases
in which the carrier is guilty of fraud or bad faith, as provided in Art. 2220. 6
In this case, there is no legal basis for awarding moral damages since there was no factual finding
by the appellate court that petitioner acted in bad faith in the performance of the contract of carriage.
Sunga's contention that petitioner's admission in open court that the driver of the jeepney failed to
assist her in going to a nearby hospital cannot be construed as an admission of bad faith. The fact
that it was the driver of the Isuzu truck who took her to the hospital does not imply that petitioner
was utterly indifferent to the plight of his injured passenger. If at all, it is merely implied recognition
by Verena that he was the one at fault for the accident.
WHEREFORE, the decision of the Court of Appeals, dated March 31, 1995, and its resolution, dated
September 11, 1995, are AFFIRMED, with the MODIFICATION that the award of moral damages is
DELETED.
SO ORDERED.
G.R. No. 150403 January 25, 2007
CEBU SALVAGE CORPORATION, Petitioner,
vs.
PHILIPPINE HOME ASSURANCE CORPORATION, Respondent.
DECISION
CORONA, J.:
May a carrier be held liable for the loss of cargo resulting from the sinking of a ship it does not own?
This is the issue presented for the Court’s resolution in this petition for review on certiorari 1 assailing
the March 16, 2001 decision2 and September 17, 2001 resolution3 of the Court of Appeals (CA) in
CA-G.R. CV No. 40473 which in turn affirmed the December 27, 1989 decision4 of the Regional Trial
Court (RTC), Branch 145, Makati, Metro Manila.5
The pertinent facts follow.
On November 12, 1984, petitioner Cebu Salvage Corporation (as carrier) and Maria Cristina
Chemicals Industries, Inc. [MCCII] (as charterer) entered into a voyage charter6 wherein petitioner
was to load 800 to 1,100 metric tons of silica quartz on board the M/T Espiritu Santo7 at Ayungon,
Negros Occidental for transport to and discharge at Tagoloan, Misamis Oriental to consignee
Ferrochrome Phils., Inc.8
Pursuant to the contract, on December 23, 1984, petitioner received and loaded 1,100 metric tons of
silica quartz on board the M/T Espiritu Santo which left Ayungon for Tagoloan the next day. 9 The
shipment never reached its destination, however, because the M/T Espiritu Santo sank in the
afternoon of December 24, 1984 off the beach of Opol, Misamis Oriental, resulting in the total loss of
the cargo.10
MCCII filed a claim for the loss of the shipment with its insurer, respondent Philippine Home
Assurance Corporation.11 Respondent paid the claim in the amount of P211,500 and was
subrogated to the rights of MCCII.12 Thereafter, it filed a case in the RTC13 against petitioner for
reimbursement of the amount it paid MCCII.
After trial, the RTC rendered judgment in favor of respondent. It ordered petitioner to pay
respondent P211,500 plus legal interest, attorney’s fees equivalent to 25% of the award and costs of
suit.
On appeal, the CA affirmed the decision of the RTC. Hence, this petition.
89
Petitioner and MCCII entered into a "voyage charter," also known as a contract of affreightment
wherein the ship was leased for a single voyage for the conveyance of goods, in consideration of the
payment of freight.14 Under a voyage charter, the shipowner retains the possession, command and
navigation of the ship, the charterer or freighter merely having use of the space in the vessel in
return for his payment of freight.15 An owner who retains possession of the ship remains liable as
carrier and must answer for loss or non-delivery of the goods received for transportation.16
Petitioner argues that the CA erred when it affirmed the RTC finding that the voyage charter it
entered into with MCCII was a contract of carriage.17 It insists that the agreement was merely a
contract of hire wherein MCCII hired the vessel from its owner, ALS Timber Enterprises (ALS). 18 Not
being the owner of the M/T Espiritu Santo, petitioner did not have control and supervision over the
vessel, its master and crew.19 Thus, it could not be held liable for the loss of the shipment caused by
the sinking of a ship it did not own.
We disagree.
Based on the agreement signed by the parties and the testimony of petitioner’s operations manager,
it is clear that it was a contract of carriage petitioner signed with MCCII. It actively negotiated and
solicited MCCII’s account, offered its services to ship the silica quartz and proposed to utilize the
M/T Espiritu Santo in lieu of the M/T Seebees or the M/T Shirley (as previously agreed upon in the
voyage charter) since these vessels had broken down. 20
There is no dispute that petitioner was a common carrier. At the time of the loss of the cargo, it was
engaged in the business of carrying and transporting goods by water, for compensation, and offered
its services to the public.21
From the nature of their business and for reasons of public policy, common carriers are bound to
observe extraordinary diligence over the goods they transport according to the circumstances of
each case.22 In the event of loss of the goods, common carriers are responsible, unless they can
prove that this was brought about by the causes specified in Article 1734 of the Civil Code. 23 In all
other cases, common carriers are presumed to be at fault or to have acted negligently, unless they
prove that they observed extraordinary diligence.24
[I]n cases where a Bill of Lading has been issued by a carrier covering goods shipped aboard a
vessel under a charter party, and the charterer is also the holder of the bill of lading, "the bill of
lading operates as the receipt for the goods, and as document of title passing the property of the
goods, but not as varying the contract between the charterer and the shipowner." The Bill of Lading
becomes, therefore, only a receipt and not the contract of carriage in a charter of the entire vessel,
for the contract is the Charter Party, and is the law between the parties who are bound by its terms
and condition provided that these are not contrary to law, morals, good customs, public order and
public policy. 30
Finally, petitioner asserts that MCCII should be held liable for its own loss since the voyage charter
stipulated that cargo insurance was for the charterer’s account. 31 This deserves scant consideration.
This simply meant that the charterer would take care of having the goods insured. It could not
exculpate the carrier from liability for the breach of its contract of carriage. The law, in fact, prohibits
it and condemns it as unjust and contrary to public policy.32
To summarize, a contract of carriage of goods was shown to exist; the cargo was loaded on board
the vessel; loss or non-delivery of the cargo was proven; and petitioner failed to prove that it
exercised extraordinary diligence to prevent such loss or that it was due to some casualty or force
majeure. The voyage charter here being a contract of affreightment, the carrier was answerable for
the loss of the goods received for transportation.33
The idea proposed by petitioner is not only preposterous, it is also dangerous. It says that a carrier
that enters into a contract of carriage is not liable to the charterer or shipper if it does not own the
vessel it chooses to use. MCCII never dealt with ALS and yet petitioner insists that MCCII should
sue ALS for reimbursement for its loss. Certainly, to permit a common carrier to escape its
responsibility for the goods it agreed to transport (by the expedient of alleging non-ownership of the
vessel it employed) would radically derogate from the carrier's duty of extraordinary diligence. It
would also open the door to collusion between the carrier and the supposed owner and to the
possible shifting of liability from the carrier to one without any financial capability to answer for the
resulting damages.34
WHEREFORE, the petition is hereby DENIED.

Costs against petitioner.

Petitioner was the one which contracted with MCCII for the transport of the cargo. It had control over
what vessel it would use. All throughout its dealings with MCCII, it represented itself as a common
carrier. The fact that it did not own the vessel it decided to use to consummate the contract of SO ORDERED.
carriage did not negate its character and duties as a common carrier. The MCCII (respondent’s
subrogor) could not be reasonably expected to inquire about the ownership of the vessels which
petitioner carrier offered to utilize. As a practical matter, it is very difficult and often impossible for the
general public to enforce its rights of action under a contract of carriage if it should be required to
know who the actual owner of the vessel is.25 In fact, in this case, the voyage charter itself
denominated petitioner as the "owner/operator" of the vessel. 26

Petitioner next contends that if there was a contract of carriage, then it was between MCCII and ALS
as evidenced by the bill of lading ALS issued.27

Again, we disagree.

The bill of lading was merely a receipt issued by ALS to evidence the fact that the goods had been
received for transportation. It was not signed by MCCII, as in fact it was simply signed by the
supercargo of ALS.28 This is consistent with the fact that MCCII did not contract directly with ALS.
While it is true that a bill of lading may serve as the contract of carriage between the parties, 29 it
cannot prevail over the express provision of the voyage charter that MCCII and petitioner executed:

90
G.R. No. 155056-57 October 19, 2007
THE HEIRS OF THE LATE PANFILO V. PAJARILLO, Petitioners,
vs.
THE HON. COURT OF APPEALS, NATIONAL LABOR RELATIONS COMMISSION and
SAMAHAN NG MGA MANGGAGAWA NG PANFILO V. PAJARILLO, ALFREDO HOYOHOY,
HERMINIO CASTILLO, BERNARDO ROCO, RODOLFO TORRES, JULIAN JORVINA, LOURDES
ROCO, FLORITA YAPOC, MARLON ALDANA, PARALUMAN ULANG, TOLENTINO SANHI,
JOHNNY SORIANO, ANDRES CALAQUE, ROBERTO LAVAREZ, FRANCISCO MORALES,
SALVACION PERINA, ANTONIO ABALA, ROMEO SALONGA, AUGUR M. MANIPOL,
BIENVENIDA TEQUIL, MARIO ELEP, ALADINO LATIGO, BERNARDINE BANSAL, PEDRO DE
BAGUIO, RICARDO CALICA, LAURA CO, VICENTE RECANA, ELENA TOLLEDO, ALFREDO
PLAZA, SR., HERMINIO BALDONO, FELIPE YAPOC, ARISTON NIPA, and ALFONSO C.
BALDOMAR, Respondents.
DECISION
CHICO-NAZARIO, J.:
In this Petition for Review on Certiorari under Rule 45 of the Rules of Court, 1 petitioners, heirs of
Panfilo V. Pajarillo, seek to set aside the Decision,2 and Resolution,3 dated 12 March 2002 and 28
August 2002, respectively, of the Court of Appeals in CA-G.R. SP No. 54330 and CA-G.R. SP No.
54331, reversing the two Per Curiam Orders dated 28 October 1996 and 10 January 1997,4 of the
National Labor Relations Commission (NLRC) in NLRC NCR Cases No. 08-03013-87 and 01-
00331-88.
Stripped of the non-essentials, the facts are as follows:
Panfilo V. Pajarillo (Panfilo) was the owner and operator of several buses plying certain routes in
Metro Manila. He used the name "PVP Liner" in his buses. Private respondents were employed as
drivers, conductors and conductresses by Panfilo.
During their employment with Panfilo, private respondents worked at least four times a week or for
an average of fifteen working days per month. They were required to observe a work schedule
starting from 4:00 in the morning up to 10:00 in the evening on a straight time basis. Private
respondent drivers were paid a daily commission of 10%, while private respondent conductors and
conductresses received a daily commission of 7%. In sum, each of the private respondents earned
an average daily commission of about ₱150.00 a day. They were not given emergency cost of living
allowance (ECOLA), 13th month pay, legal holiday pay and service incentive leave pay. 5
The following were deducted from the private respondents’ daily commissions: (a) costs of washing
the assigned buses; (b) terminal fees; (c) fees for sweeping the assigned buses; (d) fees paid to the
barangay tanod at bus terminals; and (e) rental fees for the use of stereo in the assigned buses. Any
employee who refused such deductions were either barred from working or dismissed from work. 6
Thereafter, private respondents and several co-employees formed a union called "SAMAHAN NG
MGA MANGGAGAWA NG PANFILO V. PAJARILLO" (respondent union). The Department of Labor
and Employment (DOLE) issued a Certificate of Registration in favor of the respondent union.7
Upon learning of the formation of respondent union, Panfilo and his children ordered some of the
private respondents to sign a document affirming their trust and confidence in Panfilo and denying
any irregularities on his part. Other private respondents were directed to sign a blank document
which turned out to be a resignation letter. Private respondents refused to sign the said documents,
hence, they were barred from working or were dismissed without hearing and notice. Panfilo and his
children and relatives also formed a company union where they acted as its directors and officers. 8
On 25 August 1987, respondent union and several employees filed a Complaint for unfair labor
practice and illegal deduction before the Labor Arbiter with "Panfilo V. Pajarillo Liner" as party-
respondent. This was docketed as NLRC/NCR Case No. 00-08-03013-87.9 On 28 September 1987,
the respondent union filed an Amended Complaint alleging this time not only unfair labor practice
and illegal deduction but also illegal dismissal.10
On 20 January 1988, respondent union and several employees filed another Complaint for violation
of labor standard laws claiming non-payment of (1) ECOLA, (2) 13th month pay, (3) overtime pay,
(4) legal holiday pay, (5) premium pay, and (6) service incentive leave. The party-respondents in this
complaint were "PVP LINER INC. and PANFILO V. PAJARILLO, as its General Manager/Operator."
This was docketed as NLRC Case No. 00-01-00331-88.11
Notifications and summons with respect to NLRC/NCR Case No. 00-08-03013-87 were addressed
and sent to "PANFILO V. PAJARILLO, President/Manager, Panfilo V. Pajarillo Liner, Pasig Line St.,
Sta. Ana, Manila" on 31 August 1987. The Registry Return Receipt dated 4 September 1987 was
addressed to Panfilo V. Pajarillo, and a signature therein appears on top of the signature of the
name of the addressee.12 With regard to NLRC Case No. 00-01-00331-88, notifications and
summonses were addressed and sent to "THE PRESIDENT/MANAGER, PVP Liner Inc. and Panfilo
V. Pajarillo, 2175 Zamora Street, Sta. Ana, Manila" on 25 January 1988. The Registry Return
Receipt dated 4 February 1988 was addressed to "PVP Liner Inc." and was signed by a certain
"Irene G. Pajarillo" as the addressee’s agent.13
Panfilo denied the charges in the complaints. He maintained that private respondents were not
dismissed from work on account of their union activities; that private respondents and several of
their co-employees either resigned or were separated from work, or simply abandoned their
employment long before the respondent union was organized and registered with the DOLE; that the
private respondents are not entitled to ECOLA and 13th month pay because they received wages
above the minimum provided by law; that the private respondents are not entitled to overtime and
legal holiday pay because these are already included in their daily commissions; that the private
respondents are not entitled to five days incentive leave pay because they work only four days a
week; that no deductions were made in the daily commissions of the private respondents; that the
private respondents voluntarily and directly paid certain individuals for barangay protection and for
the cleaning of the assigned buses; that he had no participation in these activities/arrangements;
that the private respondents were not dismissed from work; and that the private respondents either
abandoned their jobs or voluntarily resigned from work. 14
Upon motion of Panfilo, the complaints in NLRC/NCR Case No. 00-08-03013-87 and NLRC Case
No. 00-01-00331-88 were consolidated.15 On 29 January 1991, Panfilo died.16
After hearing and submission by both parties of their respective position papers and memoranda,
Labor Arbiter Manuel P. Asuncion (Arbiter Asuncion) rendered a Decision17 dated 28 December
1992, dismissing the consolidated complaints for lack of merit. Thus:
IN THE LIGHT OF ALL THE FOREGOING CONSIDERATIONS, the complaint should be as it is
hereby dismissed for lack of merit.
Respondent union appealed to the NLRC. On 18 June 1996, the NLRC reversed the decision of
Arbiter Asuncion and ordered the reinstatement of, and payment of backwages, ECOLA, 13th month
pay, legal holiday pay and service incentive leave pay to, private respondents.18 The dispositive
portion of the NLRC decision reads:
Wherefore, the appealed decision is hereby set aside. Accordingly, judgment is hereby rendered
directing:
(1) The respondent, PVP Liner, Inc. to reinstate to their former positions, without loss of
seniority rights and other benefits, the following complainants: Alfredo [Hoyohoy],
91
 Bernardo Roco, Rodolfo Torres, Julian Jorvina, Florita Yapoc, Marlon Aldana, Paraluman WHEREFORE, premises considered, the PETITION FOR CERTIORARI is hereby GRANTED.
Ulang, Tolentino Sanhi, Johnny Soriano, Andres Calaque, Roberto Lavarez, Francisco Accordingly, the Order dated October 28 1996 and January 10, 1997 of the NLRC are hereby
Morales, Salvacion Perina, Antonio Abala, Alfonso Baldomar, Jr., Romeo Salonga, Augur NULLIFIED and its Decision dated 18 June 1986 be REINSTATED.
Manipol, Bienvenida Tequil, Mario Elep, Aladino Latigo, Bernardine Bansal, Pedro de
Baguio, Ricardo Calica, Laura Co, Vicente Recana, Elena Tolledo, Alfredo Plaza, Sr.,
Panfilo’s counsel filed a motion for reconsideration of the said decision but this was denied by the
Herminio Baldono, Felioe Yapoc, Ariston Nipa and Herminia Castillo and to pay them their
appellate court in its Resolution dated 28 August 2002.23
backwages corresponding to a period of three (3) years without qualifications and
deductions;
Herein petitioners, as heirs of Panfilo, filed the instant petition before this Court assigning the
following errors:
(2) The same respondent PVP Liner, Inc. to pay amounts to be computed in a hearing
called for said purpose by the Arbitration Branch of Origin, the aforesaid complainants
their claims for emergency cost of living allowance (ECOLA), 13th month pay, legal I.
holiday pay and service incentive leave benefits subject to the three-year prescriptive
period provided under Article 291 of the Labor Code, as amended;
THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN ARRIVING AT THE
CONCLUSION THAT PVP LINER INC. WAS PROPERLY MISPLEADED, WHICH IS A
(3) The dismissal of the claims on alleged illegal deductions of the respondents for lack of NON-EXISTING CORPORATION.
merits; and
II.
(4) The dismissal of the case of Lourdes Roco due to prescription.
THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN NOT CONSIDERING
All other claims of the complainants and the respondents are likewise DISMISSED, for being without THAT THERE WAS NO PROPER AND EFFECTIVE SERVICE OF SUMMONS.
merit.
III.
The Arbitration Branch of Origin is hereby directed to enforce this decision.
THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN PIERCING THE VEIL
Panfilo’s counsel filed a motion for reconsideration which was partially granted by the NLRC in its OF CORPORATE ENTITY OF PVP PAJARILLO LINER INC.
Order dated 28 October 1996, to wit:
IV.
Dictated, however, by the imperatives of due process, we find it more judicious to just remand this
case for further hearing on key questions of:
THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN REINSTATING THE
ORDER OF THE NLRC DATED JUNE 18, 1996, WHICH DECLARED THAT PRIVATE
1) whether or not PVP Liner Inc. was properly impleaded as party respondent in the RESPONDENTS WERE ILLEGALLY DISMISSED.24
consolidated cases below;
Anent the first issue, petitioners alleged that the Decision dated 18 June 1996 of the NLRC, ordered
2) whether or not summons was properly served on said corporation below; and PVP Liner Inc. to reinstate private respondents and pay their backwages, ECOLA, 13th month pay,
legal holiday pay and service incentive leave pay; that there was no such entity as PVP Liner Inc.
organized and existing in the Philippines; that it was not possible for Arbiter Asuncion and the NLRC
3) whether or not the subject cases can be considered as principally money claims which
to acquire jurisdiction over a non-existing company; that there can never be a service of summons
have to be litigated in intestate/testate proceedings involving the estate of the late Panfilo
or notice to a non-existent entity; that the true employer of private respondents was Panfilo as the
V. Pajarillo.
sole proprietor/operator of passenger buses doing business under the tradename, PVP Liner, and
not PVP Liner Inc. which was non-existent; that Panfilo never used PVP Liner Inc. as his tradename;
WHEREFORE, our decision dated June 18, 1996 is hereby set aside. Let this case be remanded to that the present operator of PVP Liner buses is P.V. PAJARILLO LINER, a corporation duly
the NCR Arbitration Branch for further hearing on the questions above-mentioned.19 registered with the Securities and Exchange Commission; that at the time the instant case was filed
before Arbiter Asuncion in 1987, the latter did not have jurisdiction over P.V. PAJARILLO LINER
because it was organized and duly registered only on 22 January 1990; that P.V. PAJARILLO
Respondent union filed a motion for reconsideration of the above-stated Order, but this was denied
LINER has a separate and distinct personality from Panfilo as the sole operator of PVP Liner buses;
by the NLRC in its Order dated 10 January 1997.20 Thus, respondent union filed a Petition for
that, therefore, P.V. PAJARILLO LINER cannot be made a party or impleaded in the present case;
Certiorari under Rule 65 before this Court. Pursuant, however, to our ruling in St. Martin Funeral
that the amended complaint in NLRC/NCR Case No. 00-08-03013-87 impleaded as party-
Home v. National Labor Relations Commission,21 we remanded the petition to the Court of Appeals
respondent "PANFILO V. PAJARILLO LINER and PANFILO V. PAJARILLO, as operator and
for proper disposition.
responsible officer"; that PVP Liner Inc. was not impleaded in the instant case; and that no
summons was ever served on PVP Liner Inc. in NLRC/NCR Case No. 00-08-03013-87.25
On 12 March 2002, the Court of Appeals rendered a Decision granting the respondent union’s
petition and nullifying the Orders dated 28 October 1996 and 10 January 1997 of the NLRC. It also
The contentions are bereft of merit.
reinstated the Decision dated 18 June 1986 of the NLRC.22 The appellate court decreed:

92
In the Complaint dated 20 January 1988, PVP Liner Inc. and Panfilo were impleaded as party-
respondents, thus:
That respondent PVP Liner, Inc., is a private business entity, engaged in transportation of
passengers, duly organized and existing pursuant to law and for this purpose maintains its principal
office at 2175, Zamora Street, Sta. Ana, Manila; while individual respondent [Panfilo] is the General
Manager/Operator and may be served with summons, notices and other processes at the
aforementioned principal office.26
Records show that Irene received the summons for NLRC Case No. 00-01-00331-88 on 4 February
1988 in behalf of PVP Liner Inc. These summonses were addressed and sent to "THE
PRESIDENT/MANAGER, PVP Liner Inc. and Panfilo V. Pajarillo, 2175 Zamora Street, Sta. Ana,
Manila" on 25 January 1988. The Registry Return Receipt dated 4 February 1988 was addressed to
"PVP Liner Inc." and was signed by Irene as the addressee’s agent. 32 Abel, one of the heirs of
Panfilo and the Operations Manager of PVP Liner Inc., testified during the hearing before Arbiter
Asuncion that Irene was one of the secretaries of PVP Liner Inc.33 Hence, there was a valid service
of summons.

Regarding the third issue, petitioners posited that P.V. Pajarillo Liner Inc. is an independent
Panfilo did not question in his position paper or in his motion for consolidation of the complaints the
corporation and cannot be considered as an adjunct or extension of Panfilo as the sole operator of
foregoing allegations. Neither did he assail the inclusion of PVP Liner Inc. as party-respondent in
PVP Liner buses; and that at the time P.V. Pajarillo Liner Inc. was established, it had no liability or
respondent union’s position paper dated 6 June 1988.
obligation which it tried to shield or circumvent.34

In Panfilo’s position paper as well as in the records of the proceedings before Arbiter Asuncion,
It is a fundamental principle of corporation law that a corporation is an entity separate and distinct
there is nothing that shows that Panfilo challenged the jurisdiction of Arbiter Asuncion over PVP
from its stockholders and from other corporations to which it may be connected. However, this
Liner Inc. When Arbiter Asuncion decided in favor of Panfilo, the latter said nothing about the
separate and distinct personality of a corporation is merely a fiction created by law for convenience
inclusion of PVP Liner Inc. as party respondent and the lack of jurisdiction of Arbiter Asuncion over
and to promote justice. Hence, when the notion of separate juridical personality is used to defeat
the same. It was only when the NLRC rendered a Decision adverse to Panfilo that the latter alleged
public convenience, justify wrong, protect fraud or defend crime, or is used as a device to defeat
the non-existence of PVP Liner Inc. and the fact that Arbiter Asuncion and the NLRC had no
labor laws, this separate personality of the corporation may be disregarded or the veil of the
jurisdiction over it.
corporate fiction pierced. This is true likewise when the corporation is merely an adjunct, a business
conduit or an alter ego of another corporation. The corporate mask may be lifted and the corporate
Petitioners are now precluded from questioning the inclusion of PVP Liner Inc. as party-respondent veil may be pierced when a corporation is but the alter ego of a person or another corporation. 35
as well as the jurisdiction of Arbiter Asuncion and the NLRC over them under the principle of
estoppel. It is settled that the active participation of a party against whom the action was brought,
It is apparent that Panfilo started his transportation business as the sole owner and operator of
coupled with his failure to object to the jurisdiction of the court or quasi-judicial body where the
passenger buses utilizing the name PVP Liner for his buses. After being charged by respondent
action is pending, is tantamount to an invocation of that jurisdiction and a willingness to abide by the
union of unfair labor practice, illegal deductions, illegal dismissal and violation of labor standard
resolution of the case and will bar said party from later on impugning the court or body’s
laws, Panfilo transformed his transportation business into a family corporation, namely, P.V. Pajarillo
jurisdiction.27 This Court has time and again frowned upon the undesirable practice of a party
Liner Inc. He and petitioners were the incorporators, stockholders and officers therein. P.V. Pajarillo
submitting his case for decision and then accepting the judgment only if favorable, and attacking it
Inc. and the sole proprietorship of Panfilo have the same business address. P.V. Pajarillo Inc. also
for lack of jurisdiction when adverse.28
uses the name "PVP Liner" in its buses. Further, the license to operate or franchise of the sole
proprietorship was merely transferred to P.V. Pajarillo Liner Inc. The testimony of Abel during the
It is apparent that Panfilo V. Pajarillo Liner and PVP Liner Inc. are one and the same entity hearing before Arbiter Asuncion is revealing, thus:
belonging to one and the same person, Panfilo. When PVP Liner Inc. and Panfilo V. Pajarillo Liner
were impleaded as party-respondents, it was Panfilo, through counsel, who answered the
Q: Mr. Pajarillo, when did you start assuming the functions of operations manager of PVP
complaints and filed the position papers, motions for reconsideration and appeals. It was also
Liner?
Panfilo, through counsel, who participated in the hearings and proceedings. In fact, Abel Pajarillo
(Abel), son of Panfilo, testified before Arbiter Asuncion that he was the operations manager of PVP
Liner Inc.29 Further, both Panfilo and PVP Liner Inc. were charged jointly and severally in the A: Seven years from now, sometime in the year 1984 or 1985, sir.
aforesaid complaints.
Q: Do you have any written appointment as Operations Manager?
Apropos the second issue, petitioners alleged that the notices and summons were received by a
certain Irene G. Pajarillo (Irene) for and in behalf of the PVP Liner Inc.; that Irene was neither and
A: No, sir.
could not have been the President/Manager of PVP Liner Inc., the latter being non-existent; and that
Irene was not an officer of P.V. Pajarillo Liner.30
Q: I noticed that your surname is Pajarillo you are one way or another related to Mr.
Panfilo V. Pajarillo, is that correct?
Sections 4 and 5 of Rule IV of the Revised Rules of Procedure of the NLRC provides the rule for the
service of summonses and notices in NLRC cases, viz:
Witness:
Sec. 4. Service of notices and resolutions. – a) Notices or summons and copies of orders,
resolutions or decisions shall be served personally by the bailiff or the duly authorized public officer A: I am the son of Panfilo Pajarillo, sir.
or by registered mail on the parties to the case within five (5) days from receipt thereof by the
serving officer.
Q: In so far as PVP Liner is concerned and being the operations manager, are you aware
if it is a single proprietor or a corporation?
Sec. 5. Proof and completeness of service. – The return is prima facie proof of the facts indicated
therein. Service by registered mail is complete upon receipt by the addressee or his agent. 31
A: At the start it was a single proprietorship, lately, it has become a family corporation.

93
 Atty. Flores, Jr. (to witness)
Q: When you became the Operations Manager of PVP Liner, is it a single proprietor or a
family Corporation?
A: It was a single proprietorship.
Q: Mr. Witness, since PVP Liner is a transportation business it has a license to operate
these buses?
A: Yes, there is, sir.
Atty. Flores, Jr. (to witness)
Q: In whose name was it registered?
A: Before it was with my father Panfilo V. Pajarillo, sir.
Q: Do I understand that the licensing of this transportation company was transferred to
another person?
A: It was never transferred to another person, except now, that it has been transferred to a
corporation.36
It is clear from the foregoing that P.V. Pajarillo Liner Inc. was a mere continuation and successor of
the sole proprietorship of Panfilo. It is also quite obvious that Panfilo transformed his sole
proprietorship into a family corporation in a surreptitious attempt to evade the charges of respondent
union. Given these considerations, Panfilo and P.V. Pajarillo Liner Inc. should be treated as one and
the same person for purposes of liability.37
Finally, petitioners averred that no unfair labor practice was committed, and that private respondents
were not illegally dismissed from work.
In its Decision dated 18 June 1996, the NLRC made an exhaustive discussion of the allegations and
evidence of both parties as regards unfair labor practice and illegal dismissal. It concluded that
private respondents, officers and members of respondent union were dismissed by reason of their
union activities and that there was no compliance with substantial and procedural due process in
terminating their services. It also held that the private respondents who were not members of the
respondent union were also dismissed without just or valid cause, and that they were denied due
process. These factual findings and conclusions were supported by substantial evidence comprised
of affidavits, sworn statements, testimonies of witnesses during hearings before Arbiter Asuncion,
and other documentary evidence. These findings were sustained by the Court of Appeals.
The rule is that findings of fact of quasi-judicial agencies like the NLRC are accorded by this Court
not only respect but even finality if they are supported by substantial evidence, or that amount of
relevant evidence which a reasonable mind might accept as adequate to justify a conclusion.38 We
find no compelling reason to deviate from such findings of the NLRC as affirmed by the Court of
Appeals.
Consequently, the private respondents are entitled to reinstatement, backwages and other privileges
and benefits under Article 279 of the Labor Code. Separation pay may be given in lieu of
reinstatement if the employee concerned occupies a position of trust and confidence. In the case at
bar, however, the private respondents, as former bus drivers, conductors and conductresses of
petitioners, do not hold the position of trust and confidence. 39
Nonetheless, it appears from the records that some of the private respondents, namely, Augur
Manipol, Rodolfo Torres, Ricardo Calica, Paraluman Ulang, Edith Chua, Alfredo Hoyohoy, Johnny
Soriano, Bernardo Roco, Tolentino Sanhi, Salvacion Perina, Pedro L. de Baguio, Ariston Nipa,
Felipe Yapoc, Laura Co, Bienvenida Tequil, Roberto Lavarez, Francisco Morales and Herminio
Castillo, had executed a Quitclaim/Release discharging petitioners "from any and all claims by way
of unpaid wages, separation pay, overtime pay, differential pay, ECOLA, 13th month pay, holiday
pay, service incentive leave pay or otherwise."40
Generally, deeds of release, waivers, or quitclaims cannot bar employees from demanding benefits
to which they are legally entitled or from contesting the legality of their dismissal, since quitclaims
are looked upon with disfavor and are frowned upon as contrary to public policy. Where, however,
the person making the waiver has done so voluntarily, with a full understanding thereof, and the
consideration for the quitclaim is credible and reasonable, the transaction must be recognized as
being a valid and binding undertaking.41
There is no showing that the executions of these quitclaims were tainted with deceit or coercion. On
the contrary, each of the private respondents’ Sinumpaang Salaysay, which accompanied the
quitclaims, evinces voluntariness and full understanding of the execution and consequence of the
quitclaim. In their said Sinumpaang Salaysay, the private respondents stated that their lawyer had
extensively explained to them the computation and the actual amount of consideration they would
receive; that they were not forced or tricked by their lawyer in accepting the same; and that they
already received the amount of consideration.42
Further, the considerations received by the private respondents were credible and reasonable
because they were not grossly disproportionate to the computation by the NLRC of the amount of
backwages and other money claims.43
Given these circumstances, the quitclaims should be considered as binding on the private
respondents who executed them. It is settled that a legitimate waiver which represents a voluntary
and reasonable settlement of a worker’s claim should be respected as the law between the
parties.44 Accordingly, the private respondents who made such quitclaims are already precluded
from claiming reinstatement, backwages, ECOLA, 13TH month pay, legal holiday pay, service
incentive leave pay, and other monetary claims.
With regard to the other private respondents who did not execute such quitclaims, they are entitled
to reinstatement, backwages, ECOLA, 13TH month pay, legal holiday pay and service incentive leave
pay in accordance with the computation of the NLRC.
WHEREFORE, the petition is hereby DENIED. The Decision and Resolution dated 12 March 2002
and 28 August 2002, respectively, of the Court of Appeals in CA-G.R. SP No. 54330 and CA-G.R.
SP No. 54331, are hereby AFFIRMED with the following MODIFICATIONS: (1) Private respondents
Augur Manipol, Rodolfo M. Torres, Ricardo Calica, Paraluman Ulang, Edith Chua, Alfredo Hoyohoy,
Johnny Soriano, Bernardo Roco, Tolentino Sanhi, Salvacion Perina, Pedro L. de Baguio, Ariston
Nipa, Felipe Yapoc, Laura Co, Bienvenida Tequil, Roberto Lavarez, Francisco Morales and
Herminio Castillo are hereby precluded from claiming reinstatement, backwages, ECOLA,
13TH month pay, legal holiday pay and service incentive leave pay by reason of their respective
quitclaims; (2) Petitioners are hereby ordered to reinstate private respondents Julian Jorvina, Florita
Yapoc, Marlon Aldana, Andres Calaque, Antonio Abala, Alfonso Baldomar, Romeo Salonga, Mario
Elep, Aladino Latigo, Bernardine Bansal, Vicente Recana, Elena Tolledo and Alfredo Plaza, Sr., and
to pay these respondents backwages from the time of their dismissal up to the finality of this
Decision. Petitioners are also ordered to pay the foregoing private respondents ECOLA, 13TH month
pay, legal holiday pay and service incentive leave pay in accordance with the computation of the
NLRC. Costs against petitioners. SO ORDERED.
94
G.R. No. L-55347 October 4, 1985
PHILIPPINE NATIONAL RAILWAYS, petitioner,
vs.
THE HONORABLE COURT OF APPEALS and ROSARIO TUPANG, respondents.
ESCOLIN, J.:
Invoking the principle of state immunity from suit, the Philippine National Railways, PNR for short,
instituted this petition for review on certiorari to set aside the decision of the respondent Appellate
Court which held petitioner PNR liable for damages for the death of Winifredo Tupang, a paying
passenger who fell off a train operated by the petitioner.
The pertinent facts are summarized by the respondent court as follows:
The facts show that on September 10, 1972, at about 9:00 o'clock in the
evening, Winifredo Tupang, husband of plaintiff Rosario Tupang, boarded 'Train
No. 516 of appellant at Libmanan, Camarines Sur, as a paying passenger
bound for Manila. Due to some mechanical defect, the train stopped at Sipocot,
Camarines Sur, for repairs, taking some two hours before the train could
resume its trip to Manila. Unfortunately, upon passing Iyam Bridge at Lucena,
Quezon, Winifredo Tupang fell off the train resulting in his death.The train did
not stop despite the alarm raised by the other passengers that somebody fell
from the train. Instead, the train conductor Perfecto Abrazado, called the station
agent at Candelaria, Quezon, and requested for verification of the information.
Police authorities of Lucena City were dispatched to the Iyam Bridge where they
found the lifeless body of Winifredo Tupang.
As shown by the autopsy report, Winifredo Tupang died of cardio-respiratory
failure due to massive cerebral hemorrhage due to traumatic injury [Exhibits B
and C, Folder of Exhibits],Tupang was later buried in the public cemetery of
Lucena City by the local police authorities. [Rollo, pp. 91-92]
Upon complaint filed by the deceased's widow, Rosario Tupang, the then Court of First Instance of
Rizal, after trial, held the petitioner PNR liable for damages for breach of contract of carriage and
ordered "to pay the plaintiff the sum of P12,000,00 for the death of Winifredo Tupang, plus
P20,000.00 for loss of his earning capacity and the further sum of P10,000.00 as moral damages,
and P2,000.00 as attorney's fees, and costs. 1
On appeal, the Appellate Court sustained the holding of the trial court that the PNR did not exercise
the utmost diligence required by law of a common carrier. It further increased the amount
adjudicated by the trial court by ordering PNR to pay the plaintiff an additional sum of P5,000.00 as
exemplary damages.
Moving for reconsideration of the above decision, the PNR raised for the first time, as a defense, the
doctrine of state immunity from suit. It alleged that it is a mere agency of the Philippine government
without distinct or separate personality of its own, and that its funds are governmental in character
and, therefore, not subject to garnishment or execution. The motion was denied; the respondent
court ruled that the ground advanced could not be raised for the first time on appeal.
Hence, this petition for review.
The petition is devoid of merit. The PNR was created under Rep. Act 4156, as amended. Section 4
of the said Act provides:
The Philippine national Railways shall have the following powers:
a. To do all such other things and to transact all such business directly or
indirectly necessary, incidental or conducive to the attainment of the purpose of
the corporation; and
b. Generally, to exercise all powers of a corporation under the Corporation Law.
Under the foregoing section, the PNR has all the powers, the characteristics and attributes of a
corporation under the Corporation Law. There can be no question then that the PNR may sue and
be sued and may be subjected to court processes just like any other corporation. 2
The petitioner's contention that the funds of the PNR are not subject to garnishment or execution
hardly raises a question of first impression. In Philippine National Railways v. Union de Maquinistas,
et al., 3 then Justice Fernando, later Chief Justice, said. "The main issue posed in this certiorari
proceeding, whether or not the funds of the Philippine National Railways, could be garnished or
levied upon on execution was resolved in two recent decisions, the Philippine National Bank v. Court
of Industrial Relations [81 SCRA 314] and Philippine National Bank v. Hon. Judge Pabalan [83
SCRA 595]. This Court in both cases answered the question in the affirmative. There was no legal
bar to garnishment or execution. The argument based on non-suability of a state allegedly because
the funds are governmental in character was unavailing.So it must be again."
In support of the above conclusion, Justice Fernando cited the Court's holding in Philippine National
Bank v. Court of Industrial Relations, to wit: "The premise that the funds could be spoken of as
public in character may be accepted in the sense that the People's Homesite and Housing
Corporation was a government-owned entity. It does not follow though that they were exempt from
garnishment. National Shipyard and Steel Corporation v. Court of Industrial Relations is squarely in
point. As was explicitly stated in the opinion of then Justice, later Chief Justice, Concepcion: "The
allegation to the effect that the funds of the NASSCO are public funds of the government, and that,
as such, the same may not be garnished, attached or levied upon, is untenable for, as a
government- owned and controlled corporation, the NASSCO has a personality of its own, distinct
and separate from that of the Government. It has-pursuant to Section 2 of Executive Order No. 356,
dated October 23, 1950 * * *, pursuant to which the NASSCO has been established- 'all the powers
of a corporation under the Corporation Law * * *. 4
As far back as 1941, this Court in the case of Manila Hotel Employees Association v. Manila Hotel
Co., 5 laid down the rule that "when the government enters into commercial business, it abandons its
sovereign capacity and is to be treated like any other corporation. [Bank of the U.S. v. Planters'
Bank, 9 Waitch 904, 6 L. ed. 244]. By engaging in a particular business through the instrumentality
of a corporation the government divests itself pro hac vice of its sovereign character, so as to render
the corporation subject to the rules of law governing private corporations. 6 Of Similar import is the
pronouncement in Prisco v. CIR,' that "when the government engages in business, it abdicates part
of its sovereign prerogatives and descends to the level of a citizen, ... . " In fine, the petitioner PNR
cannot legally set up the doctrine of non-suability as a bar to the plaintiff's suit for damages.
The appellate court found, the petitioner does not deny, that the train boarded by the deceased
Winifredo Tupang was so over-crowded that he and many other passengers had no choice but to sit
on the open platforms between the coaches of the train. It is likewise undisputed that the train did
not even slow down when it approached the Iyam Bridge which was under repair at the time, Neither
did the train stop, despite the alarm raised by other passengers that a person had fallen off the train
at lyam Bridge. 7
The petitioner has the obligation to transport its passengers to their destinations and to observe
extraordinary diligence in doing so. Death or any injury suffered by any of its passengers gives rise
to the presumption that it was negligent in the performance of its obligation under the contract of
95
carriage. Thus, as correctly ruled by the respondent court, the petitioner failed to overthrow such
presumption of negligence with clear and convincing evidence.

But while petitioner failed to exercise extraordinary diligence as required by law, 8 it appears that the
deceased was chargeable with contributory negligence. Since he opted to sit on the open platform
between the coaches of the train, he should have held tightly and tenaciously on the upright metal
bar found at the side of said platform to avoid falling off from the speeding train. Such contributory
negligence, while not exempting the PNR from liability, nevertheless justified the deletion of the
amount adjudicated as moral damages. By the same token, the award of exemplary damages must
be set aside. Exemplary damages may be allowed only in cases where the defendant acted in a
wanton, fraudulent, reckless, oppressive or malevolent manner. 9 There being no evidence of fraud,
malice or bad faith on the part of petitioner, the grant of exemplary damages should be discarded.

WHEREFORE, the decision of the respondent appellate court is hereby modified by eliminating
therefrom the amounts of P10,000.00 and P5,000.00 adjudicated as moral and exemplary damages,
respectively. No costs.

SO ORDERED.

96