1.) G.R. No.
149038            April 9, 2003 employees, particularly the tugmaster, have failed to exercise due diligence to
PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, petitioner,
vs. PKS SHIPPING COMPANY, respondent.
Davao Union Marketing Corporation (DUMC) contracted the services of respondent
PKS Shipping Company (PKS Shipping) for the shipment to Tacloban City of seventy-
five thousand (75,000) bags of cement worth Three Million Three Hundred Seventy-
Five Thousand Pesos (P3,375,000.00). DUMC insured the goods for its full value with
petitioner Philippine American General Insurance Company (Philamgen). The goods
were loaded aboard the dumb barge Limar I belonging to PKS Shipping. On the
evening of 22 December 1988, about nine o’clock, while Limar I was being towed by
respondent’s tugboat, MT Iron Eagle, the barge sank a couple of miles off the coast of
Dumagasa Point, in Zamboanga del Sur, bringing down with it the entire cargo of
75,000 bags of cement.
DUMC filed a formal claim with Philamgen for the full amount of the insurance.
Philamgen promptly made payment; it then sought reimbursement from PKS Shipping
of the sum paid to DUMC but the shipping company refused to pay, prompting
Philamgen to file suit against PKS Shipping with the Makati RTC.
The RTC dismissed the complaint after finding that the total loss of the cargo could
have been caused either by a fortuitous event, in which case the ship owner was not
liable, or through the negligence of the captain and crew of the vessel and that, under
Article 587 of the Code of Commerce adopting the "Limited Liability Rule," the ship
owner could free itself of liability by abandoning, as it apparently so did, the vessel
with all her equipment and earned freightage.
Philamgen interposed an appeal to the Court of Appeals which affirmed in toto the
decision of the trial court. The appellate court ruled that evidence to establish that
PKS Shipping was a common carrier at the time it undertook to transport the bags of
cement was wanting because the peculiar method of the shipping company’s carrying
goods for others was not generally held out as a business but as a casual occupation.
It then concluded that PKS Shipping, not being a common carrier, was not expected
to observe the stringent extraordinary diligence required of common carriers in the
care of goods. The appellate court, moreover, found that the loss of the goods was
sufficiently established as having been due to fortuitous event, negating any liability
on the part of PKS Shipping to the shipper.
In the instant appeal, Philamgen contends that the appellate court has committed a
patent error in ruling that PKS Shipping is not a common carrier and that it is not
liable for the loss of the subject cargo. The fact that respondent has a limited
clientele, petitioner argues, does not militate against respondent’s being a common
carrier and that the only way by which such carrier can be held exempt for the loss of
the cargo would be if the loss were caused by natural disaster or calamity. Petitioner
avers that typhoon "APIANG" has not entered the Philippine area of responsibility and
that, even if it did, respondent would not be exempt from liability because its
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prevent or minimize the loss.
PKS Shipping, in its comment, urges that the petition should be denied because what
Philamgen seeks is not a review on points or errors of law but a review of the
undisputed factual findings of the RTC and the appellate court. In any event, PKS
Shipping points out, the findings and conclusions of both courts find support from the
evidence and applicable jurisprudence.
The determination of possible liability on the part of PKS Shipping boils down to the
question of whether it is a private carrier or a common carrier and, in either case, to
the other question of whether or not it has observed the proper diligence (ordinary, if
a private carrier, or extraordinary, if a common carrier) required of it given the
circumstances.
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."
Complementary to the codal definition is Section 13, paragraph (b), of the Public
Service Act; it defines "public service" to be –
"x x x every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for general business purposes, any
common carrier, railroad, street 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, 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
communication systems, wire or wireless broadcasting stations and other similar
public services. x x x. (Underscoring supplied)."
The prevailing doctrine on the question is that enunciated in the leading case of De
Guzman vs. Court of Appeals.2 Applying Article 1732 of the Code, in conjunction with
Section 13(b) of the Public Service Act, this Court has held:
"The above article makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such carrying
only as an ancillary activity (in local idiom, as `a sideline’). Article 1732 also carefully
avoids making any distinction between a person or enterprise offering transportation
service on a regular or scheduled basis and one offering such service on
an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish
between a carrier offering its services to the `general public,’ i.e., the general
community or population, and one who offers services or solicits business only from
a narrow segment of the general population. We think that Article 1732 deliberately
refrained from making such distinctions.
"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."
Much of the distinction between a "common or public carrier" and a "private or special
carrier" lies in the character of the business, such that if the undertaking is an isolated
transaction, not a part of the business or occupation, and the carrier does not hold
itself out to carry the goods for the general public or to a limited clientele, although
involving the carriage of goods for a fee,3 the person or corporation providing such
service could very well be just a private carrier. A typical case is that of a charter party
which includes both the vessel and its crew, such as in a bareboat or demise, where
the charterer obtains the use and service of all or some part of a ship for a period of
time or a voyage or voyages4 and gets the control of the vessel and its
crew.5 Contrary to the conclusion made by the appellate court, its factual findings
indicate that PKS Shipping has engaged itself in the business of carrying goods for
others, although for a limited clientele, undertaking to carry such goods for a fee. The
regularity of its activities in this area indicates more than just a casual activity on its
part.6 Neither can the concept of a common carrier change merely because individual
contracts are executed or entered into with patrons of the carrier. Such restrictive
interpretation would make it easy for a common carrier to escape liability by the
simple expedient of entering into those distinct agreements with clients. (PKS is a
CC)
Addressing now the issue of whether or not PKS Shipping has exercised the proper
diligence demanded of common carriers, Article 1733 of the Civil Code requires
common carriers to observe extraordinary diligence in the vigilance over the goods
they carry. In case of loss, destruction or deterioration of goods, common carriers are
presumed to have been at fault or to have acted negligently, and the burden of
proving otherwise rests on them.7 The provisions of Article 1733, notwithstanding,
common carriers are exempt from liability for loss, destruction, or deterioration of the
goods due to any of the following causes:
(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.8
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The appellate court ruled, gathered from the testimonies and sworn marine protests
of the respective vessel masters of Limar I and MT Iron Eagle, that there was no way
by which the barge’s or the tugboat’s crew could have prevented the sinking of Limar
I. The vessel was suddenly tossed by waves of extraordinary height of six (6) to eight
(8) feet and buffeted by strong winds of 1.5 knots resulting in the entry of water into
the barge’s hatches. The official Certificate of Inspection of the barge issued by the
Philippine Coastguard and the Coastwise Load Line Certificate would attest to the
seaworthiness of Limar I and should strengthen the factual findings of the appellate
court.
Findings of fact of the Court of Appeals generally conclude this Court; none of the
recognized exceptions from the rule - (1) when the factual findings of the Court of
Appeals and the trial court are contradictory; (2) when the conclusion is a finding
grounded entirely on speculation, surmises, or conjectures; (3) when the inference
made by the Court of Appeals from its findings of fact is manifestly mistaken, absurd,
or impossible; (4) when there is a grave abuse of discretion in the appreciation of
facts; (5) when the appellate court, in making its findings, went beyond the issues of
the case and such findings are contrary to the admissions of both appellant and
appellee; (6) when the judgment of the Court of Appeals is premised on a
misapprehension of facts; (7) when the Court of Appeals failed to notice certain
relevant facts which, if properly considered, would justify a different conclusion; (8)
when the findings of fact are themselves conflicting; (9) when the findings of fact are
conclusions without citation of the specific evidence on which they are based; and
(10) when the findings of fact of the Court of Appeals are premised on the absence of
evidence but such findings are contradicted by the evidence on record – would
appear to be clearly extant in this instance.
All given then, the appellate court did not err in its judgment absolving PKS Shipping
from liability for the loss of the DUMC cargo.
WHEREFORE, the petition is DENIED. No costs.
2.) G.R. No. 147246            August 19, 2003
ASIA LIGHTERAGE AND SHIPPING, INC., petitioner,
vs. COURT OF APPEALS and PRUDENTIAL GUARANTEE AND ASSURANCE,
INC., respondents.
On June 13, 1990, 3,150 metric tons of Better Western White Wheat in bulk, valued
at US$423,192.354 was shipped by Marubeni American Corporation of Portland,
Oregon on board the vessel M/V NEO CYMBIDIUM V-26 for delivery to the
consignee, General Milling Corporation in Manila, evidenced by Bill of Lading No.
PTD/Man-4.5 The shipment was insured by the private respondent Prudential
Guarantee and Assurance, Inc. against loss or damage for P14,621,771.75 under
Marine Cargo Risk Note RN 11859/90.6
On July 25, 1990, the carrying vessel arrived in Manila and the cargo was transferred
to the custody of the petitioner Asia Lighterage and Shipping, Inc. The petitioner was
contracted by the consignee as carrier to deliver the cargo to consignee's warehouse
at Bo. Ugong, Pasig City.
On August 15, 1990, 900 metric tons of the shipment was loaded on barge PSTSI III,
evidenced by Lighterage Receipt No. 03647 for delivery to consignee. The cargo did
not reach its destination.
It appears that on August 17, 1990, the transport of said cargo was suspended due to
a warning of an incoming typhoon. On August 22, 1990, the petitioner proceeded to
pull the barge to Engineering Island off Baseco to seek shelter from the approaching
typhoon. PSTSI III was tied down to other barges which arrived ahead of it while
weathering out the storm that night. A few days after, the barge developed a list
because of a hole it sustained after hitting an unseen protuberance underneath the
water. The petitioner filed a Marine Protest on August 28, 1990.8 It likewise secured
the services of Gaspar Salvaging Corporation which refloated the barge.9 The hole
was then patched with clay and cement.
The barge was then towed to ISLOFF terminal before it finally headed towards the
consignee's wharf on September 5, 1990. Upon reaching the Sta. Mesa spillways, the
barge again ran aground due to strong current. To avoid the complete sinking of the
barge, a portion of the goods was transferred to three other barges.10
The next day, September 6, 1990, the towing bits of the barge broke. It sank
completely, resulting in the total loss of the remaining cargo.11 A second Marine
Protest was filed on September 7, 1990.12
On September 14, 1990, a bidding was conducted to dispose of the damaged wheat
retrieved and loaded on the three other barges.13 The total proceeds from the sale of
the salvaged cargo was P201,379.75.14
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On the same date, September 14, 1990, consignee sent a claim letter to the
petitioner, and another letter dated September 18, 1990 to the private respondent for
the value of the lost cargo.
On January 30, 1991, the private respondent indemnified the consignee in the
amount of P4,104,654.22.15 Thereafter, as subrogee, it sought recovery of said
amount from the petitioner, but to no avail.
On July 3, 1991, the private respondent filed a complaint against the petitioner for
recovery of the amount of indemnity, attorney's fees and cost of suit.16 Petitioner filed
its answer with counterclaim.17
The Regional Trial Court ruled in favor of the private respondent. The dispositive
portion of its Decision states:
WHEREFORE, premises considered, judgment is hereby rendered ordering
defendant Asia Lighterage & Shipping, Inc. liable to pay plaintiff Prudential Guarantee
& Assurance Co., Inc. the sum of P4,104,654.22 with interest from the date complaint
was filed on July 3, 1991 until fully satisfied plus 10% of the amount awarded as and
for attorney's fees. Defendant's counterclaim is hereby DISMISSED. With costs
against defendant.18
Petitioner appealed to the Court of Appeals insisting that it is not a common carrier.
The appellate court affirmed the decision of the trial court with modification. The
dispositive portion of its decision reads:
WHEREFORE, the decision appealed from is hereby AFFIRMED with modification in
the sense that the salvage value of P201,379.75 shall be deducted from the amount
of P4,104,654.22. Costs against appellant.
Hence, this petition. Petitioner submits the following errors allegedly committed by the
appellate court, viz:19
The issues to be resolved are:
(1) Whether the petitioner is a common carrier; and,
(2) Assuming the petitioner is a common carrier, whether it exercised extraordinary
diligence in its care and custody of the consignee's cargo.
On the first issue, we rule that petitioner is a common carrier.
Article 1732 of the Civil Code defines common carriers as persons, corporations,
firms or associations engaged in the business of carrying or transporting passengers
or goods or both, by land, water, or air, for compensation, offering their services to the
public.
Petitioner contends that it is not a common carrier but a private carrier. Allegedly, it
has no fixed and publicly known route, maintains no terminals, and issues no tickets.
It points out that it is not obliged to carry indiscriminately for any person. It is not
bound to carry goods unless it consents. In short, it does not hold out its services to
the general public.20
We disagree.
In De Guzman vs. Court of Appeals,21 we held that the definition of common
carriers in Article 1732 of the Civil Code makes no distinction between one whose
principal business activity is the carrying of persons or goods or both, and one who
does such carrying only as an ancillary activity. We also did not distinguish between a
person or enterprise offering transportation service on a regular or scheduled basis
and one offering such service on an occasional, episodic or unscheduled basis.
Further, we ruled that Article 1732 does not distinguish between a carrier offering its
services to the general public, and one who offers services or solicits business only
from a narrow segment of the general population.
In the case at bar, the principal business of the petitioner is that of lighterage and
drayage22 and it offers its barges to the public for carrying or transporting goods by
water for compensation. Petitioner is clearly a common carrier. In De
Guzman, supra,23 we considered private respondent Ernesto Cendaña to be a
common carrier even if his principal occupation was not the carriage of goods for
others, but that of buying used bottles and scrap metal in Pangasinan and selling
these items in Manila.
We therefore hold that petitioner is a common carrier whether its carrying of goods is
done on an irregular rather than scheduled manner, and with an only limited clientele.
A common carrier need not have fixed and publicly known routes. Neither does it
have to maintain terminals or issue tickets.
To be sure, petitioner fits the test of a common carrier as laid down in Bascos vs.
Court of Appeals.24 The test to determine a common carrier is "whether the given
undertaking is a part of the business engaged in by the carrier which he has held out
to the general public as his occupation rather than the quantity or extent of the
business transacted."25 In the case at bar, the petitioner admitted that it is engaged in
the business of shipping and lighterage,26 offering its barges to the public, despite its
limited clientele for carrying or transporting goods by water for compensation.27
On the second issue, we uphold the findings of the lower courts that petitioner failed
to exercise extraordinary diligence in its care and custody of the consignee's goods.
Common carriers are bound to observe extraordinary diligence in the vigilance over
the goods transported by them.28 They are presumed to have been at fault or to have
acted negligently if the goods are lost, destroyed or deteriorated.29 To overcome the
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presumption of negligence in the case of loss, destruction or deterioration of the
goods, the common carrier must prove that it exercised extraordinary diligence. There
are, however, exceptions to this rule. Article 1734 of the Civil Code enumerates the
instances when the presumption of negligence does not attach:
Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration
of the goods, unless the same is due to any of the following causes only:
…
In the case at bar, the barge completely sank after its towing bits broke, resulting in
the total loss of its cargo. Petitioner claims that this was caused by a typhoon, hence,
it should not be held liable for the loss of the cargo. However, petitioner failed to
prove that the typhoon is the proximate and only cause of the loss of the goods, and
that it has exercised due diligence before, during and after the occurrence of the
typhoon to prevent or minimize the loss.30 The evidence show that, even before the
towing bits of the barge broke, it had already previously sustained damage when it hit
a sunken object while docked at the Engineering Island. It even suffered a hole.
Clearly, this could not be solely attributed to the typhoon. The partly-submerged
vessel was refloated but its hole was patched with only clay and cement. The patch
work was merely a provisional remedy, not enough for the barge to sail safely. Thus,
when petitioner persisted to proceed with the voyage, it recklessly exposed the cargo
to further damage. A portion of the cross-examination of Alfredo Cunanan, cargo-
surveyor of Tan-Gatue Adjustment Co., Inc., states:
…
This is not all. Petitioner still headed to the consignee's wharf despite knowledge of
an incoming typhoon. During the time that the barge was heading towards the
consignee's wharf on September 5, 1990, typhoon "Loleng" has already entered the
Philippine area of responsibility.32 A part of the testimony of Robert Boyd, Cargo
Operations Supervisor of the petitioner, reveals:
…
Accordingly, the petitioner cannot invoke the occurrence of the typhoon as force
majeure to escape liability for the loss sustained by the private respondent. Surely,
meeting a typhoon head-on falls short of due diligence required from a common
carrier. More importantly, the officers/employees themselves of petitioner admitted
that when the towing bits of the vessel broke that caused its sinking and the total loss
of the cargo upon reaching the Pasig River, it was no longer affected by the typhoon.
The typhoon then is not the proximate cause of the loss of the cargo; a human
factor, i.e., negligence had intervened.
IN VIEW THEREOF, the petition is DENIED. The Decision of the Court of Appeals in
CA-G.R. CV No. 49195 dated May 11, 2000 and its Resolution dated February 21,
2001 are hereby AFFIRMED. Costs against petitioner.
TRANSPORTATION LAW – Chapter 4
3.) G.R. No. L-69044 May 29, 1987
EASTERN SHIPPING LINES, INC., petitioner,
vs.
INTERMEDIATE APPELLATE COURT and DEVELOPMENT INSURANCE &
SURETY CORPORATION, respondents.
No. 71478 May 29, 1987
EASTERN SHIPPING LINES, INC., petitioner,
vs.
THE NISSHIN FIRE AND MARINE INSURANCE CO., and DOWA FIRE & MARINE
INSURANCE CO., LTD., respondents.
In G.R. No. 69044, sometime in or prior to June, 1977, the M/S ASIATICA, a vessel
operated by petitioner Eastern Shipping Lines, Inc., (referred to hereinafter as
Petitioner Carrier) loaded at Kobe, Japan for transportation to Manila, 5,000 pieces of
calorized lance pipes in 28 packages valued at P256,039.00 consigned to Philippine
Blooming Mills Co., Inc., and 7 cases of spare parts valued at P92,361.75, consigned
to Central Textile Mills, Inc. Both sets of goods were insured against marine risk for
their stated value with respondent Development Insurance and Surety Corporation.
In G.R. No. 71478, during the same period, the same vessel took on board 128
cartons of garment fabrics and accessories, in two (2) containers, consigned to
Mariveles Apparel Corporation, and two cases of surveying instruments consigned to
Aman Enterprises and General Merchandise. The 128 cartons were insured for their
stated value by respondent Nisshin Fire & Marine Insurance Co., for US $46,583.00,
and the 2 cases by respondent Dowa Fire & Marine Insurance Co., Ltd., for US
$11,385.00.
Enroute for Kobe, Japan, to Manila, the vessel caught fire and sank, resulting in the
total loss of ship and cargo. The respective respondent Insurers paid the
corresponding marine insurance values to the consignees concerned and were thus
subrogated unto the rights of the latter as the insured.
G.R. NO. 69044
On May 11, 1978, respondent Development Insurance & Surety Corporation
(Development Insurance, for short), having been subrogated unto the rights of the two
insured companies, filed suit against petitioner Carrier for the recovery of the amounts
it had paid to the insured before the then Court of First instance of Manila, Branch
XXX (Civil Case No. 6087).
Petitioner-Carrier denied liability mainly on the ground that the loss was due to an
extraordinary fortuitous event, hence, it is not liable under the law.
TRANSPORTATION LAW – Chapter 4
On August 31, 1979, the Trial Court rendered judgment in favor of Development
Insurance in the amounts of P256,039.00 and P92,361.75, respectively, with legal
interest, plus P35,000.00 as attorney's fees and costs. Petitioner Carrier took an
appeal to the then Court of Appeals which, on August 14, 1984, affirmed.
Petitioner Carrier is now before us on a Petition for Review on Certiorari.
G.R. NO. 71478
On June 16, 1978, respondents Nisshin Fire & Marine Insurance Co. NISSHIN for
short), and Dowa Fire & Marine Insurance Co., Ltd. (DOWA, for brevity), as
subrogees of the insured, filed suit against Petitioner Carrier for the recovery of the
insured value of the cargo lost with the then Court of First Instance of Manila, Branch
11 (Civil Case No. 116151), imputing unseaworthiness of the ship and non-
observance of extraordinary diligence by petitioner Carrier.
Petitioner Carrier denied liability on the principal grounds that the fire which caused
the sinking of the ship is an exempting circumstance under Section 4(2) (b) of the
Carriage of Goods by Sea Act (COGSA); and that when the loss of fire is established,
the burden of proving negligence of the vessel is shifted to the cargo shipper.
On September 15, 1980, the Trial Court rendered judgment in favor of NISSHIN and
DOWA in the amounts of US $46,583.00 and US $11,385.00, respectively, with legal
interest, plus attorney's fees of P5,000.00 and costs. On appeal by petitioner, the
then Court of Appeals on September 10, 1984, affirmed with modification the Trial
Court's judgment by decreasing the amount recoverable by DOWA to US $1,000.00
because of $500 per package limitation of liability under the COGSA.
Hence, this Petition for Review on certiorari by Petitioner Carrier.
Both Petitions were initially denied for lack of merit. G.R. No. 69044 on January 16,
1985 by the First Division, and G. R. No. 71478 on September 25, 1985 by the
Second Division. Upon Petitioner Carrier's Motion for Reconsideration, however, G.R.
No. 69044 was given due course on March 25, 1985, and the parties were required to
submit their respective Memoranda, which they have done.
On the other hand, in G.R. No. 71478, Petitioner Carrier sought reconsideration of the
Resolution denying the Petition for Review and moved for its consolidation with G.R.
No. 69044, the lower-numbered case, which was then pending resolution with the
First Division. The same was granted; the Resolution of the Second Division of
September 25, 1985 was set aside and the Petition was given due course.
At the outset, we reject Petitioner Carrier's claim that it is not the operator of the M/S
Asiatica but merely a charterer thereof. We note that in G.R. No. 69044, Petitioner
Carrier stated in its Petition:
There are about 22 cases of the "ASIATICA" pending in various courts where various
plaintiffs are represented by various counsel representing various consignees or
insurance companies. The common defendant in these cases is petitioner herein,
being the operator of said vessel. ... 1
Petitioner Carrier should be held bound to said admission. As a general rule, the facts
alleged in a party's pleading are deemed admissions of that party and binding upon
it. 2 And an admission in one pleading in one action may be received in evidence
against the pleader or his successor-in-interest on the trial of another action to which
he is a party, in favor of a party to the latter action. 3
The threshold issues in both cases are: (1) which law should govern — the Civil Code
provisions on Common carriers or the Carriage of Goods by Sea Act? and (2) who
has the burden of proof to show negligence of the carrier?
On the Law Applicable
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. 4 As the cargoes
in question were transported from Japan to the Philippines, the liability of Petitioner
Carrier is governed primarily by the Civil Code. 5 However, 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 special laws. 6 Thus, the Carriage of Goods by Sea Act, a
special law, is suppletory to the provisions of the Civil Code. 7
On the Burden of Proof
Under 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 goods, according to all the circumstances of each case. 8 Common carriers are
responsible for the loss, destruction, or deterioration of the goods unless the same is
due to any of the following causes only:
(1) Flood, storm, earthquake, lightning or other natural disaster or calamity;
xxx xxx xxx 9
Petitioner Carrier claims that the loss of the vessel by fire exempts it from liability
under the phrase "natural disaster or calamity. " However, we are of the opinion that
fire may not be considered a natural disaster or calamity. This must be so as it arises
almost invariably from some act of man or by human means. 10 It does not fall within
the category of an act of God unless caused by lightning 11 or by other natural
disaster or calamity. 12 It may even be caused by the actual fault or privity of the
carrier. 13
Article 1680 of the Civil Code, which considers fire as an extraordinary fortuitous
event refers to leases of rural lands where a reduction of the rent is allowed when
TRANSPORTATION LAW – Chapter 4
more than one-half of the fruits have been lost due to such event, considering that the
law adopts a protection policy towards agriculture. 14
As the peril of the fire is not comprehended within the exception in Article
1734, supra, Article 1735 of the Civil Code provides that all cases than those mention
in Article 1734, the common carrier shall be presumed to have been at fault or to
have acted negligently, unless it proves that it has observed the extraordinary
deligence required by law.
In this case, the respective Insurers. as subrogees of the cargo shippers, have proven
that the transported goods have been lost. Petitioner Carrier has also proved that the
loss was caused by fire. The burden then is upon Petitioner Carrier to proved that it
has exercised the extraordinary diligence required by law. In this regard, the Trial
Court, concurred in by the Appellate Court, made the following Finding of fact:
The cargoes in question were, according to the witnesses defendant placed in
hatches No, 2 and 3 cf the vessel, Boatswain Ernesto Pastrana noticed that smoke
was coming out from hatch No. 2 and hatch No. 3; that where the smoke was noticed,
the fire was already big; that the fire must have started twenty-four 24) our the same
was noticed; that carbon dioxide was ordered released and the crew was ordered to
open the hatch covers of No, 2 tor commencement of fire fighting by sea water: that
all of these effort were not enough to control the fire.
Pursuant to Article 1733, common carriers are bound to extraordinary diligence in the
vigilance over the goods. The evidence of the defendant did not show that
extraordinary vigilance was observed by the vessel to prevent the occurrence of fire
at hatches numbers 2 and 3. Defendant's evidence did not likewise show he amount
of diligence made by the crew, on orders, in the care of the cargoes. What appears is
that after the cargoes were stored in the hatches, no regular inspection was made as
to their condition during the voyage. Consequently, the crew could not have even
explain what could have caused the fire. The defendant, in the Court's mind, failed to
satisfactorily show that extraordinary vigilance and care had been made by the crew
to prevent the occurrence of the fire. The defendant, as a common carrier, is liable to
the consignees for said lack of deligence required of it under Article 1733 of the Civil
Code. 15
Having failed to discharge the burden of proving that it had exercised the
extraordinary diligence required by law, Petitioner Carrier cannot escape liability for
the loss of the cargo.
And even if fire were to be considered a "natural disaster" within the meaning of
Article 1734 of the Civil Code, it is required under Article 1739 of the same Code that
the "natural disaster" must have been the "proximate and only cause of the loss," and
that the carrier has "exercised due diligence to prevent or minimize the loss before,
during or after the occurrence of the disaster. " This Petitioner Carrier has also failed
to establish satisfactorily.
Nor may Petitioner Carrier seek refuge from liability under the Carriage of Goods by
Sea Act, It is provided therein that:
Sec. 4(2). Neither the carrier nor the ship shall be responsible for loss or damage
arising or resulting from
(b) Fire, unless caused by the actual fault or privity of the carrier.
xxx xxx xxx
In this case, both the Trial Court and the Appellate Court, in effect, found, as a fact,
that there was "actual fault" of the carrier shown by "lack of diligence" in that "when
the smoke was noticed, the fire was already big; that the fire must have started
twenty-four (24) hours before the same was noticed; " and that "after the cargoes
were stored in the hatches, no regular inspection was made as to their condition
during the voyage." The foregoing suffices to show that the circumstances under
which the fire originated and spread are such as to show that Petitioner Carrier or its
servants were negligent in connection therewith. Consequently, the complete defense
afforded by the COGSA when loss results from fire is unavailing to Petitioner Carrier.
On the US $500 Per Package Limitation:
Petitioner Carrier avers that its liability if any, should not exceed US $500 per
package as provided in section 4(5) of the COGSA, which reads:
(5) Neither the carrier nor the ship shall in any event be or become liable for any loss
or damage to or in connection with the transportation of goods in an amount
exceeding $500 per package lawful money of the United States, or in case of goods
not shipped in packages, per customary freight unit, or the equivalent of that sum in
other currency, unless the nature and value of such goods have been declared by the
shipper before shipment and inserted in bill of lading. This declaration if embodied in
the bill of lading shall be prima facie evidence, but all be conclusive on the carrier.
By agreement between the carrier, master or agent of the carrier, and the shipper
another maximum amount than that mentioned in this paragraph may be fixed:
Provided, That such maximum shall not be less than the figure above named. In no
event shall the carrier be Liable for more than the amount of damage actually
sustained.
xxx xxx xxx
Article 1749 of the New Civil Code also allows the limitations of liability in this wise:
Art. 1749. A stipulation that the common carrier's liability as limited to the value of the
goods appearing in the bill of lading, unless the shipper or owner declares a greater
value, is binding.
TRANSPORTATION LAW – Chapter 4
It is to be noted that the Civil Code does not of itself limit the liability of the common
carrier to a fixed amount per package although the Code expressly permits a
stipulation limiting such liability. Thus, the COGSA which is suppletory to the
provisions of the Civil Code, steps in and supplements the Code by establishing a
statutory provision limiting the carrier's liability in the absence of a declaration of a
higher value of the goods by the shipper in the bill of lading. The provisions of the
Carriage of Goods by.Sea Act on limited liability are as much a part of a bill of lading
as though physically in it and as much a part thereof as though placed therein by
agreement of the parties. 16
In G.R. No. 69044, there is no stipulation in the respective Bills of Lading (Exhibits "C-
2" and "I-3") 1 7 limiting the carrier's liability for the loss or destruction of the goods.
Nor is there a declaration of a higher value of the goods. Hence, Petitioner Carrier's
liability should not exceed US $500 per package, or its peso equivalent, at the time of
payment of the value of the goods lost, but in no case "more than the amount of
damage actually sustained."
The actual total loss for the 5,000 pieces of calorized lance pipes was P256,039
(Exhibit "C"), which was exactly the amount of the insurance coverage by
Development Insurance (Exhibit "A"), and the amount affirmed to be paid by
respondent Court. The goods were shipped in 28 packages (Exhibit "C-2") Multiplying
28 packages by $500 would result in a product of $14,000 which, at the current
exchange rate of P20.44 to US $1, would be P286,160, or "more than the amount of
damage actually sustained." Consequently, the aforestated amount of P256,039
should be upheld.
With respect to the seven (7) cases of spare parts (Exhibit "I-3"), their actual value
was P92,361.75 (Exhibit "I"), which is likewise the insured value of the cargo (Exhibit
"H") and amount was affirmed to be paid by respondent Court. however, multiplying
seven (7) cases by $500 per package at the present prevailing rate of P20.44 to US
$1 (US $3,500 x P20.44) would yield P71,540 only, which is the amount that should
be paid by Petitioner Carrier for those spare parts, and not P92,361.75.
In G.R. No. 71478, in so far as the two (2) cases of surveying instruments are
concerned, the amount awarded to DOWA which was already reduced to $1,000 by
the Appellate Court following the statutory $500 liability per package, is in order.
In respect of the shipment of 128 cartons of garment fabrics in two (2) containers and
insured with NISSHIN, the Appellate Court also limited Petitioner Carrier's liability to
$500 per package and affirmed the award of $46,583 to NISSHIN. it multiplied 128
cartons (considered as COGSA packages) by $500 to arrive at the figure of $64,000,
and explained that "since this amount is more than the insured value of the goods,
that is $46,583, the Trial Court was correct in awarding said amount only for the 128
cartons, which amount is less than the maximum limitation of the carrier's liability."
We find no reversible error. The 128 cartons and not the two (2) containers should be
considered as the shipping unit.
In Mitsui & Co., Ltd. vs. American Export Lines, Inc. 636 F 2d 807 (1981), the
consignees of tin ingots and the shipper of floor covering brought action against the
vessel owner and operator to recover for loss of ingots and floor covering, which had
been shipped in vessel — supplied containers. The U.S. District Court for the
Southern District of New York rendered judgment for the plaintiffs, and the defendant
appealed. The United States Court of Appeals, Second Division, modified and
affirmed holding that:
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 liability limitation provision of Carriage of Goods by Sea Act. Carriage of
Goods by Sea Act, 4(5), 46 U.S.C.A.& 1304(5).
Even if language and purposes of Carriage of Goods by Sea Act left doubt as to
whether carrier-furnished containers whose contents are disclosed should be treated
as packages, the interest in securing international uniformity would suggest that they
should not be so treated. Carriage of Goods by Sea Act, 4(5), 46 U.S.C.A. 1304(5).
... After quoting the statement in Leather's Best, supra, 451 F 2d at 815, that treating
a container as a package is inconsistent with the congressional purpose of
establishing a reasonable minimum level of liability, Judge Beeks wrote, 414 F. Supp.
at 907 (footnotes omitted):
Although this approach has not completely escaped criticism, there is, nonetheless,
much to commend it. It gives needed recognition to the responsibility of the courts to
construe and apply the statute as enacted, however great might be the temptation to
"modernize" or reconstitute it by artful judicial gloss. If COGSA's package limitation
scheme suffers from internal illness, Congress alone must undertake the surgery.
There is, in this regard, obvious wisdom in the Ninth Circuit's conclusion in Hartford
that technological advancements, whether or not forseeable by the COGSA
promulgators, do not warrant a distortion or artificial construction of the statutory term
"package." A ruling that these large reusable metal pieces of transport equipment
qualify as COGSA packages — at least where, as here, they were carrier owned and
supplied — would amount to just such a distortion.
Certainly, if the individual crates or cartons prepared by the shipper and containing
his goods can rightly be considered "packages" standing by themselves, they do not
suddenly lose that character upon being stowed in a carrier's container. I would liken
these containers to detachable stowage compartments of the ship. They simply serve
to divide the ship's overall cargo stowage space into smaller, more serviceable loci.
Shippers' packages are quite literally "stowed" in the containers utilizing stevedoring
practices and materials analogous to those employed in traditional on board stowage.
In Yeramex International v. S.S. Tando,, 1977 A.M.C. 1807 (E.D. Va.) rev'd on other
grounds, 595 F 2nd 943 (4 Cir. 1979), another district with many maritime cases
followed Judge Beeks' reasoning in Matsushita and similarly rejected the functional
economics test. Judge Kellam held that when rolls of polyester goods are packed into
TRANSPORTATION LAW – Chapter 4
cardboard cartons which are then placed in containers, the cartons and not the
containers are the packages.
…
Considering, therefore, that the Bill of Lading clearly disclosed the contents of the
containers, the number of cartons or units, as well as the nature of the goods, and
applying the ruling in the Mitsui  and Eurygenes cases it is clear that the 128 cartons,
not the two (2) containers should be considered as the shipping unit subject to the
$500 limitation of liability.
True, the evidence does not disclose whether the containers involved herein were
carrier-furnished or not. Usually, however, containers are provided by the
carrier. 19 In this case, the probability is that they were so furnished for Petitioner
Carrier was at liberty to pack and carry the goods in containers if they were not so
packed. Thus, at the dorsal side of the Bill of Lading (Exhibit "A") appears the
following stipulation in fine print:
11. (Use of Container) Where the goods receipt of which is acknowledged on the face
of this Bill of Lading are not already packed into container(s) at the time of receipt, the
Carrier shall be at liberty to pack and carry them in any type of container(s).
Petitioner Carrier was afforded ample time to present its side of the case. 23 It cannot
complain now that it was denied due process when the Trial Court rendered its
Decision on the basis of the evidence adduced. What due process abhors is absolute
lack of opportunity to be heard. 24
On the Award of Attorney's Fees:
Petitioner Carrier questions the award of attorney's fees. In both cases, respondent
Court affirmed the award by the Trial Court of attorney's fees of P35,000.00 in favor
of Development Insurance in G.R. No. 69044, and P5,000.00 in favor of NISSHIN and
DOWA in G.R. No. 71478.
Courts being vested with discretion in fixing the amount of attorney's fees, it is
believed that the amount of P5,000.00 would be more reasonable in G.R. No. 69044.
The award of P5,000.00 in G.R. No. 71478 is affirmed.
WHEREFORE, 1) in G.R. No. 69044, the judgment is modified in that petitioner
Eastern Shipping Lines shall pay the Development Insurance and Surety Corporation
the amount of P256,039 for the twenty-eight (28) packages of calorized lance pipes,
and P71,540 for the seven (7) cases of spare parts, with interest at the legal rate from
the date of the filing of the complaint on June 13, 1978, plus P5,000 as attorney's
fees, and the costs.
2) In G.R.No.71478,the judgment is hereby affirmed.
4.) G.R. No. 119756 March 18, 1999
FORTUNE EXPRESS, INC., petitioner,
vs. COURT OF APPEALS, PAULIE U.CAORONG, and minor childrenYASSER
KING CAORONG, ROSE HEINNI and PRINCE ALEXANDER, all surnamed
CAORONG, and represented by their mother PAULIE U.
CAORONG, respondents.
This is an appeal by petition for review on certiorari  of the decision, dated July 29,
1994, of the Court of Appeals, which reversed the decision of the Regional Trial
Court, Branch VI, Iligan City. The aforesaid decision of the trial court dismissed the
complaint of public respondents against petitioner for damages for breach of contract
of carriage filed on the ground that petitioner had not exercised the required degree of
diligence in the operation of one of its buses. Atty. Talib Caorong, whose heirs are
private respondents herein, was a passenger of the bus and was killed in the ambush
involving said bus.
The facts of the instant case are as follows:
Petitioner is a bus company in northern Mindanao. Private respondent Paulie
Caorong is the widow of Atty. Caorong, while private respondents Yasser King, Rose
Heinni, and Prince Alexander are their minor children.
On November 18, 1989, a bus of petitioner figured in an accident with a jeepney in
Kauswagan, Lanao del Norte, resulting in the death of several passengers of the
jeepney, including two Maranaos. Crisanto Generalao, a volunteer field agent of the
Constabulary Regional Security Unit No. X, conducted an investigation of the
accident. He found that the owner of the jeepney was a Maranao residing in
Delabayan, Lanao del Norte and that certain Maranaos were planning to take
revenge on the petitioner by burning some of its buses. Generalao rendered a report
on his findings to Sgt. Reynaldo Bastasa of the Philippine Constabulary Regional
Headquarters at Cagayan de Oro. Upon the instruction of Sgt. Bastasa, he went to
see Diosdado Bravo, operations manager of petitioner, its main office in Cagayan de
Oro City. Bravo assured him that the necessary precautions to insure the safety of
lives and property would be taken.1
At about 6:45 P.M. on November 22, 1989, three armed Maranaos who pretended to
be passengers, seized a bus of petitioner at Linamon, Lanao del Norte while on its
way to Iligan City. Among the passengers of the bus was Atty. Caorong. The leader of
the Maranaos, identified as one Bashier Mananggolo, ordered the driver, Godofredo
Cabatuan, to stop the bus on the side of the highway. Mananggolo then shot
Cabatuan on the arm, which caused him to slump on the steering wheel. The one of
the companions of Mananggolo started pouring gasoline inside the bus, as the other
held the passenger at bay with a handgun. Mananggolo then ordered the passenger
to get off the bus. The passengers, including Atty. Caorong, stepped out of the bus
and went behind the bushes in a field some distance from the highway.2
TRANSPORTATION LAW – Chapter 4
However, Atty. Caorong returned to the bus to retrieve something from the overhead
rack. at that time, one of the armed men was pouring gasoline on the head of the
driver. Cabatuan, who had meantime regained consciousness, heard Atty. Caorong
pleading with the armed men to spare the driver as he was innocent of any wrong
doing and was only trying to make a living. The armed men were, however, adamant
as they repeated the warning that they were going to burn the bus along with its
driver. During this exchange between Atty. Caorong and the assailants, Cabatuan
climbed out of the left window of the bus and crawled to the canal on the opposite
side of the highway. He heard shots from inside the bus. Larry de la Cruz, one of the
passengers, saw that Atty. Caorong was hit. Then the bus was set on fire. Some of
the passengers were able to pull Atty. Caorong out of the burning bus and rush him to
the Mercy Community Hospital in Iligan City, but he died while undergoing operation.3
The private respondents brought this suit for breach of contract of carriage in the
Regional Trial Court, Branch VI, Iligan City. In its decision, dated December 28, 1990,
the trial court dismissed the complaint, holding as follows:
The fact that defendant, through Operations Manager Diosdado Bravo, was informed
of the "rumors" that the Moslems intended to take revenge by burning five buses of
defendant is established since the latter also utilized Crisanto Generalao as a
witness. Yet despite this information, the plaintiffs charge, defendant did not take
proper precautions. . . . Consequently, plaintiffs now fault the defendant for ignoring
the report. Their position is that the defendant should have provided its buses with
security guards. Does the law require common carriers to install security guards in its
buses for the protection and safety of its passengers? Is the failure to post guards on
omission of the duty to "exercise the diligence of a good father of the family" which
could have prevented the killing of Atty. Caorong? To our mind, the diligence
demanded by law does not include the posting of security guard in buses. It is an
obligation that properly belongs to the State. Besides, will the presence of one or two
security guards suffice to deter a determined assault of the lawless and thus prevent
the injury complained of? Maybe so, but again, perhaps not. In other words, the
presence of a security guard is not a guarantee that the killing of Atty. Caorong would
have been definitely avoided.
xxx xxx xxx
Accordingly, the failure of defendant to accord faith and credit to the report of Mr.
Generalao and the fact that it did not provide security to its buses cannot, in the light
of the circumstances, be characterized as negligence.
Finally, the evidence clearly shows that the assalants did not have the least intention
of the harming any of the passengers. They ordered all the passengers to alight and
set fire on the bus only after all the passengers were out of danger. The death of Atty.
Caorong was an unexpected and unforseen occurrense over which defendant had no
control. Atty. Caorong performed an act of charity and heroism in coming to the
succor of the driver even in the face of danger. He deserves the undying gratitude of
the driver whose life he saved. No one should blame him for an act of extraordinary
charity and altruism which cost his life. But neither should any blame be laid on the
doorstep of defendant. His death was solely due to the willfull acts of the lawless
which defendant could neither prevent nor to stop.
WHEREFORE, in view of the foregoing, the complaint is hereby dismissed. For lack
of merit, the counter-claim is likewise dismissed. No costs.4
On appeal, however, the Court of Appeals reversed. It held:
In the case at bench, how did defendant-appellee react to the tip or information that
certain Maranao hotheads were planning to burn five of its buses out of revenge for
the deaths of two Maranaos in an earlier collision involving appellee's bus? Except for
the remarks of appellee's operations manager that "we will have our action . . . . and
I'll be the one to settle it personally," nothing concrete whatsoever was taken by
appellee or its employees to prevent the execution of the threat. Defendant-appellee
never adopted even a single safety measure for the protection of its paying
passengers. Were there available safeguards? Of course, there were: one was
frisking passengers particularly those en route to the area where the threats were
likely to be carried out such as where the earlier accident occurred or the place of
influence of the victims or their locality. If frisking was resorted to, even temporarily, . .
. . appellee might be legally excused from liabilty. Frisking of passengers picked up
along the route could have been implemented by the bus conductor; for those
boarding at the bus terminal, frisking could have been conducted by him and perhaps
by additional personnel of defendant-appellee. On hindsight, the handguns and
especially the gallon of gasoline used by the felons all of which were brought inside
the bus would have been discovered, thus preventing the burning of the bus and the
fatal shooting of the victim.
Appellee's argument that there is no law requiring it to provide guards on its buses
and that the safety of citizens is the duty of the government, is not well taken. To be
sure, appellee is not expected to assign security guards on all its buses; if at all, it has
the duty to post guards only on its buses plying predominantly Maranaos areas. As
discussed in the next preceding paragraph, least appellee could have done in
response to the report was to adopt a system of verification such as the frisking of
passengers boarding at its buses. Nothing, and no repeat, nothing at all, was done by
defendant-appellee to protect its innocent passengers from the danger arising from
the "Maranao threats." It must be observed that frisking is not a novelty as a safety
measure in our society. Sensitive places — in fact, nearly all important places — have
applied this method of security enhancement. Gadgets and devices are avilable in the
market for this purpose. It would not have weighed much against the budget of the
bus company if such items were made available to its personnel to cope up with
situations such as the "Maranaos threats."
In view of the constitutional right to personal privacy, our pronouncement in this
decision should not be construed as an advocacy of mandatory frisking in all public
conveyances. What we are saying is that given the circumstances obtaining in the
case at bench that: (a) two Maranaos died because of a vehicular collision involving
one of appellee's vehicles; (b) appellee received a written report from a member of
the Regional Security Unit, Constabulary Security Group, that the tribal/ethnic group
TRANSPORTATION LAW – Chapter 4
of the two deceased were planning to burn five buses of appellee out of revenge; and
(c) appelle did nothing — absolutely nothing — for the safety of its passengers
travelling in the area of influence of the victims, appellee has failed to exercise the
degree of dilegence required of common carriers. Hence, appellee must be adjudge
liable.
xxx xxx xxx
WHEREFORE the decision appealed from is hereby REVERSED and another
rendered ordering defendant-appellee to pay plaintiffs-appellants the following:
1) P3,399,649.20 as death indemnity;
2) P50,000.00 and P500.00 per appearance as attorney's fee and
Costs against defendant-appellee.5
Hence, this appeal. Petitioner contends:
(A) THAT PUBLIC RESPONDENT ERRED IN REVERSING THE DECISION OF THE
REGIONAL TRIAL COURT DATED DECEMBER 28, 1990 DISMISSING THE
COMPLAINT AS WELL AS THE COUNTERCLAIM, AND FINDING FOR PRIVATE
RESPONDENTS BY ORDERING PETITIONER TO PAY THE GARGANTUAN SUM
OF P3,449,649.20 PLUS P500.00 PER APPEARANCE AS ATTORNEY'S FEES, AS
WELL AS DENYING PETITIONERS MOTION FRO RECONSIDERATION AND THE
SUPPLEMENT TO SAID MOTION, WHILE HOLDING, AMONG OTHERS, THAT
THE PETITIONER BREACHED THE CONTRACT OF THE CARRIAGE BY ITS
FAILURE TO EXCERCISE THE REQUIRED DEGREE OF DILIGENCE;
(B) THAT THE ACTS OF THE MARANAO OUTLAWS WERE SO GRAVE,
IRRESISTABLE, VIOLENT, AND FORCEFULL, AS TO BE REGARDED AS CASO
FORTUITO; AND
(C) THAT PUBLIC RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN
HOLDING THAT PETITIONER COULD HAVE PROVIDED ADEQUATE SECURITY
IN PREDOMINANTLY MUSLIM AREAS AS PART OF ITS DUTY TO OBSERVE
EXTRA-ORDINARY DILIGENCE AS A COMMON CARRIER.
The instant has no merit.
First. Petitioner's Breach of the Contract of Carriage.
Art. 1763 of the Civil Code provides that a common carrier is responsible for injuries
suffered by a passenger on account of wilfull acts of other passengers, if the
employees of the common carrier could have prevented the act through the exercise
of the diligence of a good father of a family. In the present case, it is clear that
because of the negligence of petitioner's employees, the seizure of the bus by
Mananggolo and his men was made possible.
Despite warning by the Philippine Constabulary at Cagayan de Oro that the
Maranaos were planning to take revenge on the petitioner by burning some of its
buses and the assurance of petitioner's operation manager, Diosdado Bravo, that the
necessary precautions would be taken, petitioner did nothing to protect the safety of
its passengers.
Had petitioner and its employees been vigilant they would not have failed to see that
the malefactors had a large quantity of gasoline with them. Under the circumstances,
simple precautionary measures to protect the safety of passengers, such as frisking
passengers and inspecting their baggages, preferably with non-intrusive gadgets
such as metal detectors, before allowing them on board could have been employed
without violating the passenger's constitutional rights. As this Court amended
in Gacal v. Philippine Air Lines, Inc., 6 a common carrier can be held liable for failing
to prevent a hijacking by frisking passengers and inspecting their baggages.
From the foregoing, it is evident that petitioner's employees failed to prevent the
attack on one of petitioner's buses because they did not exercise the diligence of a
good father of a family. Hence, petitioner should be held liable for the death of Atty.
Caorong.
Second. Seizure of Petitioner's Bus not a Case of Force Majeure
The petitioner contends that the seizure of its bus by the armed assailants was a
fortuitous event for which it could not be held liable.
Art. 1174 of the Civil Code defines a fortuitous event as an occurence which could not
be foreseen, is inevitable. In Yobido v. Court of Appeals, 7 we held that to considered
as force majeure, it is necessary that (1) the cause of the breach of the obligation
must be independent of the human will; (2) the event must be either unforeseeable or
unavoidable; (3) the occurence must be render it impossible for the debtor to fulfill the
obligation in a normal manner; and (4) the obligor must be free of participation in, or
aggravation of, the injury to the creditor. The absence of any of the requisites
mentioned above would prevent the obligor from being excused from liability.
Thus, in Vasquez v. Court of Appeals, 8 it was held that the common carrier was liable
for its failure to take the necessary precautions against an approaching typhoon, of
which it was warned, resulting in the loss of the lives of several passengers. The
event was forseeable, and, thus, the second requisite mentioned above was not
fulfilled. This ruling applies by analogy to the present case. Despite the report of PC
agent Generalao that the Maranaos were going to attack its buses, petitioner took no
steps to safeguard the lives and properties of its passengers. The seizure of the bus
of the petitioner was foreseeable and, therefore, was not a fortuitous event which
would exempt petitioner from liabilty.
TRANSPORTATION LAW – Chapter 4
Petitioner invokes the ruling in Pilapil v. Court of Appeals, 9 and De Guzman v. Court
of Appeals, 10 in support of its contention that the seizure of its bus by the assailants
constitutes force majeure. In  Pilapil v. Court of Appeals, 11 it was held that a common
carrier is not liable for failing to install window grills on its buses to protect the
passengers from injuries cause by rocks hurled at the bus by lawless elements. On
the other hand, in De Guzman v. Court of Appeals, 12 it was ruled that a common
carriers is not responsible for goods lost as a result of a robbery which is attended by
grave or irresistable threat, violence, or force.
It is clear that the cases of Pilapil and De Guzman do not apply to the prensent case.
Art. 1755 of the Civil Code provides that "a common carrier is bound to carry the
passengers as far as human care and foresight can provide, using the utmost
diligence of very cautious persons, with due regard for all the circumstances." Thus,
we held in Pilapil and De Guzman that the respondents therein were not negligent in
failing to take special precautions against threats to the safety of passengers which
could not be foreseen, such as tortious or criminal acts of third persons. In the
present case, this factor of unforeseeability (the second requisite for an event to be
considered force majeure) is lacking. As already stated, despite the report of PC
agent Generalao that the Maranaos were planning to burn some of petitioner's buses
and the assurance of petitioner's operation manager (Diosdado Bravo) that the
necessary precautions would be taken, nothing was really done by petitioner to
protect the safety of passengers.
Third. Deceased not Guilty of Contributory Negligence
The petitioner contends that Atty. Caorong was guilty of contributory negligence in
returning to the bus to retrieve something. But Atty. Caorong did not act recklessly. It
should be pointed out that the intended targets of the violence were petitioners and its
employees, not its passengers. The assailant's motive was to retaliate for the loss of
life of two Maranaos as a result of the collision between petitioner's bus and the
jeepney in which the two Maranaos were riding. Mananggolo, the leader of the group
which had hijacked the bus, ordered the passengers to get off the bus as they
intended to burn it and its driver. The armed men actually allowed Atty. Caorong to
retrieve something from the bus. What apparently angered them was his attempt to
help the driver of the bus by pleading for his life. He was playing the role of the good
Samaritan. Certainly, this act cannot considered an act of negligence, let alone
recklessness.
Fourth. Petitioner Liable to Private Respaondents for Damages
We now consider the question of damages that the heirs of Atty. Caorong, private
respondents herein, are entitled to recover from the petitioner.
Indemnity for Death. Art. 1764 of the Civil Code, in relation to Art. 2206 thereof,
provides for the payment of indemnity for the death of passengers caused by the
breach of contract of carriage by a common carrier. Initially fixed in Art. 2206 at
P3,000.00, the amount of the said indemnity for death has through the years been
gradually increased in view of the declining value of the peso. It is presently fixed at
P50,000.00. 13 Private respondents are entitled to this amount.
Actual Damages. Art. 2199 provides that "except as provided by law or by stipulation,
one is entitled to an adequate compensation only for such pecuniary loss suffered by
him as has duly proved." The trial court found that the private respondents spent
P30,000.00 for the wake and burial of Atty. Caorong. 14 Since petitioner does not
question this finding of the trial court, it is liable to private respondent in the said
amount as actual damages.
Life expectancy is equivalent to two thirds (2/3) multiplied by the difference of eighty
(80) and the age of the deceased. 20 Since Atty. Caorong was 37 years old at that
time of his death, 21 he had a life expectancy of 28 2/3 more years.22 His projected
gross annual income, computed based on his monthly salary of P11,385.00. 23 as a
lawyer in the Department of Agrarian Reform at the time of his death, was
P148,005.00. 24 Allowing for necessary living expenses of fifty percent (50%) 25 of his
projected gross annual income, his total earning capacity amounts to
P2,121,404.90. 26 Hence, the petitioner is liable to the private respondents in the said
amount as a compensation for loss of earning capacity.

Moral Damages. Under Art. 2206, the "spouse, legitimate and illegitimate
descendants and ascendants of the deceased may demand moral damages for
mental anguish by reason of the death of the deceased." The trial court found that
private respondent Paulie Caorong suffered pain from the death of her husband and
worry on how to provide support for their minor children, private respondents Yasser
King, Rose Heinni, and Prince Alexander. 15 The petitioner likewise does not question
this finding of the trial court. Thus, in accordance with recent decisions of this
Court, 16 we hold that the petitioner is liable to the private respondents in the amount
of P100,000.00 as moral damages for the death of Atty. Caorong.
Exemplary Damages. Art. 2232 provides that "in contracts and quasi-contracts, the
court may award exemplary damages if the defendant acted in a wanton, fraudulent,
reckless, oppressive, or malevolent reckless manner." In the present case, the
petitioner acted in a wanton and reckless manner. Despite warning that the Maranaos
were planning to take revenge against the petitioner by burning some of its buses,
and contary to the assurance made by its operations manager that the necessary
precautions would be take, the petitioner and its employees did nothing to protect the
safety of passengers. Under the circumtances, we deem it reasonable to award
private respondents exemplary damages in the amount of P100,000.00.17
WHEREFORE, the decision, dated July 29, 1994, of the Court of Appeals is hereby
AFFIRMED with the MODIFICATION that petitioner Fortune Express, Inc. is ordered
to pay the following amounts to private respondents Paulie, Yasser King, Rose
Heinni, and Prince Alexander Caorong:
1. death indemnity in the amount of fifty thousand pesos (P50,000.00);
2. actual damages in the amount of thirty thousand pesos (P30,000.00);
3. moral damages in the amount of one hundred thousand pesos (P100,000.00);
4. exemplary damages in the amount of one hundred thousand pesos (P100,000.00);
5. attorney's fees in the amount of fifty thousand pesos (P50,000.00);
6. compensation for loss of earning capacity in the amount of two million one hundred
twenty-one thousand four hundred four pesos and ninety centavos (P2,121,404.90);
and

Attorney's Fees. Pursuant to Art. 2208, attorney's fees may be recovered when, as in 7. cost of suits.
the instant case, exemplary damages are awarded. In the recent case of Sulpicio
Lines, Inc. v. Court of Appeals, 18 we held an award of P50,000.00 as attorney's fees
to be reasonable. Hence, the private respondents are entitled to attorney's fees in
that amount.

Compensation for Loss of Earning Capacity. Art. 1764 of the Civil Code, in relation to
Art. 2206 thereof, provides that in addition to the indemnity for death arising from the
breach of contrtact of carriage by a common carrier, the "defendant shall be liable for
the loss of the earning capacity of the deceased, and the indemnity shall be paid to
the heirs of the latter." The formula established in decided cases for computing net
earning capacity is as follows:19

Gross Necessary

Net Earning = Life x Annual — Living

Capacity Expectancy Income Expenses

TRANSPORTATION LAW – Chapter 4
5.) G.R. No. L-6155             April 30, 1954
JOSE SON, plaintiff-appellee, vs. CEBU AUTOBUS COMPANY, defendant-
appellant.
The plaintiff, Jose Son, instituted in the Court of First Instituted of Cebu Autobus
Company, damages in the total sum of P2,660, alleged to have been suffered by the
plaintiff as a result of the fact that the defendant's TPU truck No. 312 fell into a canal
in the barrio of Macaas, municipality of Catmon, Cebu, on September 18, 1948, due
to a defect of its engine or to the negligence of its driver, the plaintiff (then a
passenger of the vehicle) having received serious injuries and two of his hogs (loaded
therein) having been killed. The defense set up by the defendant is that the accident
was caused by events which were unforeseen or, even if foreseen or, even if
foreseen, were inevitable. After trial the court rendered a decision, sentencing the
defendant to pay to the plaintiff the sum of P2,000 as moral damages, and the sum of
P286.80 as plaintiff's actual expenses, together with his loss and unrealized profit in
connection with the seven hogs loaded by the plaintiff in defendant's truck. From this
decision the defendant has appealed.
As the defendant has elevated the case directly to this Court on questions of law, we
are bound by the findings of fact contained in the appealed decision. We quote
hereunder the conclusions pertinent to and decisive of the present appeal:
The evidence adduced conclusively shows that TPU-Truck No. 312 of the defendant
Cebu Autobus Company left Cebu City on September 17, 1948, at about 10:00 a.m.
bound for Maya, municipality of Daan Bantayan, Cebu Province, arriving in the latter
place at about 5:00 p.m. of the same day. it passed the night in Maya. It left Maya,
Daan Bantayan, Cebu, on its return trip to Cebu City at about 4:00 a.m. September
18, 1948, without having been inspected or examined by the mechanic. The plaintiff
boarded defendant's truck in barrio Maya. Daan Bantayan, Cebu, and loaded seven
hogs for his home at Yati Liloan, Cebu, paying the usual fare and freight. The plaintiff
did not reach his destination safely, because the truck of the defendant fell into a
canal at kilometer. No. 56, barrio of Macaas, municipality of Catmon, Cebu. He was
pinned down or pressed by the truck on September 18, 1948, and, as a
consequence, he suffered complete fractures on his pelvic bone. Because of the
shock and pain he lost his consciousness for sometime. He was brought to his house
at Yati, municipality of Liloan, Cebu, unconscious on board another truck. Later, on
the same day, he was brought in a special wagon to the City of Cebu, and was
confined in the Velez Clinic for fourteen days, from September 18, 1948, to October
2, 1948. On October 2, 1948, the plaintiff went out of the Velez Clinic, but according
to Dr. Jacinto Velez, physician and proprietor of the Velez Clinic, the plaintiff needed
60 days more of treatment and rest before he could resume his former habitual work,
inasmuch as he suffered complete fractures on his pelvic bone.
The evidence further shows that two hogs of the plaintiff loaded on TPU truck No. 312
of the defendant on September 18, 1948 died when the said truck fell into a canal at
Macaas, Catmon, Cebu.
TRANSPORTATION LAW – Chapter 4
xxx     xxx     xxx
The theory of the defendant is that the accident was unforeseen, or even if foreseen,
was inevitable. This theory cannot be sustained. Whether the accident was caused by
the defect of the engine of the truck of the defendant, or by the negligence of the
driver, or by the breakage of the drag-link spring, the defendant is civilly liable to the
plaintiff for the damages suffered by him. The evidence shows the drag-link spring of
the truck in question was not inspected or examined when it left Maya, Daan
Bantayan, Cebu, on September 1, 1948, for Cebu City. If it were inspected or
examined, the accident might have been avoided. The plaintiff had no means of
avoiding the danger or escaping the injury. When he boarded at dawn of September
18, 1948, in Maya, Daan Bantayan. Cebu, defendant's TPU Truck No. 312, bound for
his home at Yati Liloan, Cebu, and loaded on said truck seven hogs, he had every
right to presume the truck perfectly in good condition which could transport him safely
and securely to his destination. He paid the regular fare and the freight of the seven
hogs.
The plaintiff is suing the defendant upon its contract of carriage which the latter had
failed to perform by virtue of its failure to safely carry the plaintiff to his destination at
the barrio of Yati, Liloan, Cebu, as distinguished from an action based on  culpa
acquiliana under which it is necessary, in order to recover damages, to prove fault or
negligence on the part of the carrier. The distinction is clearly set out in the case
of Castro vs. Acro Taxicab Co.,* 46 Off. Gaz., 2023, as follows: "La culpa aquiliana
determina y engendra la responsabilidad y por eso es sustantiva, independiente;
mientras que la culpa contractual presupone la preexistencia de una obligacion, por
tanto es solo incidental — es decir, la infraccion o incumplimiento de esa obligacion
es lo que genera la culpa contractual. Una implicacion o consecuencia caracteristica
de la diferencia entre ambos conceptos juridicos es que, tratandose de la culpa
extracontractual o aquiliana, el demandante que reclame indemnizacion de daños y
perjuicios tiene que probar, como requisito indispensable para que prospere su
accion, la culpa o negligencia del demandado, mientras que, tratandose de la culpa
contractual, es bastante que se prueba la existencia del contrato y que la obligacion
resultante del mismo se ha infringido o no se ha cumplido, siguiendose daños de esta
infraccion e incumplimiento."
The trial court based its decision in favor of the plaintiff upon the finding that the
defendant had defaulted in its contract of carriage due to the accident, regardless of
whether it was caused by a defect of the engine of the defendant's truck, by the
negligence of its driver, or by the breakage of the drag-link spring; the evidence
showing that the said drag-link spring was not inspected or examined when the
vehicle left Maya, Daan Bantayan, Cebu, for Cebu City. In other words, the trial court
overruled the defense interposed by the defendant that the accident was due to an
event (unexpected breakage of the drag-link spring) which could not be foreseen or
which, even if foreseen, was inevitable. In our opinion, the trial court was correct. Its
express finding as to the cause of the accident in effect blames the defendant for it
and logically rejects the defendant's theory that the cause emanated from an
unforeseen or inevitable event. In essence, the trial court held that the drag-link
spring of the truck in question was defective. In the case of Lazam vs. Smith, 45 Phil.,
660, it was already held that an accident cause either by defects in the automobile or
through the negligence of its driver is not a caso fortuito.

The conclusion of the trial court with respect to the amount of damages sustained by
and award in favor of the plaintiff, is being factual, conclusive herein, since, as
hereinbefore noted, the defendant has appealed directly to this court solely on
questions of law.

Upon the other hand, plaintiff's claim that the amount of moral damages awarded to
him by the trial court should be raised to P300, cannot be sustained, because no
appeal was taken by him from the decision a quo.

TRANSPORTATION LAW – Chapter 4

6.) G.R. No. 177116               February 27, 2013
ASIAN TERMINALS, INC., Petitioner,
vs. SIMON ENTERPRISES, INC., Respondent.
On October 25, 1995, Contiquincybunge Export Company loaded 6,843.700 metric
tons of U.S. Soybean Meal in Bulk on board the vessel MN  "Sea Dream" at the Port
of Darrow, Louisiana, U.S.A., for delivery to the Port of Manila to respondent Simon
Enterprises, Inc., as consignee. When the vessel arrived at the South Harbor in
Manila, the shipment was discharged to the receiving barges of petitioner Asian
Terminals, Inc. (ATI), the arrastre operator. Respondent later received the shipment
but claimed having received only 6,825.144 metric tons of U.S. Soybean Meal, or
short by 18.556 metric tons, which is estimated to be worth US$7,100.16 or
₱186,743.20.3
On November 25, 1995, Contiquincybunge Export Company made another shipment
to respondent and allegedly loaded on board the vessel M/V "Tern" at the Port of
Darrow, Louisiana, U.S.A. 3,300.000 metric tons of U.S. Soybean Meal in Bulk for
delivery to respondent at the Port of Manila. The carrier issued its clean Berth Term
Grain Bill of Lading.4
On January 25, 1996, the carrier docked at the inner Anchorage, South Harbor,
Manila. The subject shipment was discharged to the receiving barges of petitioner ATI
and received by respondent which, however, reported receiving only 3,100.137 metric
tons instead of the manifested 3,300.000 metric tons of shipment. Respondent filed
against petitioner ATI and the carrier a claim for the shortage of 199.863 metric tons,
estimated to be worth US$79,848.86 or ₱2,100,025.00, but its claim was denied.
Thus, on December 3, 1996, respondent filed with the Regional Trial Court (RTC) of
Manila an action for damages5 against the unknown owner of the vessels M/V "Sea
Dream" and M/V "Tern," its local agent Inter-Asia Marine Transport, Inc., and
petitioner ATI alleging that it suffered the losses through the fault or negligence of the
said defendants. Respondent sought to claim damages plus attorney’s fees and costs
of suit. Its claim against the unknown owner of the vessel M/V "Sea Dream," however,
was later settled in a Release and Quitclaim6 dated June 9, 1998, and only the claims
against the unknown owner of the M/V "Tern," Inter-Asia Marine Transport, Inc., and
petitioner ATI remained.
In their Answer,7 the unknown owner of the vessel M/V "Tern" and its local agent
Inter-Asia Marine Transport, Inc., prayed for the dismissal of the complaint essentially
alleging lack of cause of action and prescription. They alleged as affirmative defenses
the following: that the complaint does not state a cause of action; that plaintiff and/or
defendants are not the real parties-in-interest; that the cause of action had already
prescribed or laches had set in; that the claim should have been filed within three
days from receipt of the cargo pursuant to the provisions of the Code of Commerce;
that the defendant could no longer check the veracity of plaintiff’s claim considering
that the claim was filed eight months after the cargo was discharged from the vessel;
TRANSPORTATION LAW – Chapter 4
that plaintiff hired its own barges to receive the cargo and hence, any damages or
losses during the discharging operations were for plaintiff’s account and
responsibility; that the statement of facts bears no remarks on any short-landed
cargo; that the draft survey report indicates that the cargo discharged was more than
the figures appearing in the bill of lading; that because the bill of lading states that the
goods are carried on a "shipper’s weight, quantity and quality unknown" terms and on
"all terms, conditions and exceptions as per charter party dated October 15, 1995,"
the vessel had no way of knowing the actual weight, quantity, and quality of the bulk
cargo when loaded at the port of origin and the vessel had to rely on the shipper for
such information; that the subject shipment was discharged in Manila in the same
condition and quantity as when loaded at the port of loading; that defendants’
responsibility ceased upon discharge from the ship’s tackle; that the damage or loss
was due to the inherent vice or defect of the goods or to the insufficiency of packing
thereof or perils or dangers or accidents of the sea, pre-shipment damage or to
improper handling of the goods by plaintiff or its representatives after discharge from
the vessel, for which defendants cannot be made liable; that damage/loss occurred
while the cargo was in the possession, custody or control of plaintiff or its
representative, or due to plaintiff’s own negligence and careless actuations in the
handling of the cargo; that the loss is less than 0.75% of the entire cargo and
assuming arguendo that the shortage exists, the figure is well within the accepted
parameters when loading this type of bulk cargo; that defendants exercised the
required diligence under the law in the performance of their duties; that the vessel
was seaworthy in all respects; that the vessel went straight from the port of loading to
Manila, without passing through any intermediate ports so there was no chance for
any loss of the cargo; the plaintiff’s claim is excessive, grossly overstated,
unreasonable and a mere paper loss and is certainly unsubstantiated and without any
basis; the terms and conditions of the relevant bill of lading and the charter party, as
well as the provisions of the Carriage of Goods by Sea Act and existing laws, absolve
the defendants from any liability; that the subject shipment was received in bulk and
thus defendant carrier has no knowledge of the condition, quality and quantity of the
cargo at the time of loading; that the complaint was not referred to the arbitrators
pursuant to the bill of lading; that liability, if any, should not exceed the CIF value of
the lost cargo, or the limits of liability set forth in the bill of lading and the charter
party. As counterclaim, defendants prayed for the payment of attorney’s fees in the
amount of ₱220,000. By way of cross-claim, they ask for reimbursement from their
co-defendant, petitioner ATI, in the event that they are held liable to plaintiff.
Petitioner ATI meanwhile alleged in its Answer8 that it exercised the required
diligence in handling the subject shipment. It moved for the dismissal of the
complaint, and alleged by way of special and affirmative defense that plaintiff has no
valid cause of action against petitioner ATI; that the cargo was completely discharged
from the vessel M/V "Tern" to the receiving barges owned or hired by the plaintiff; and
that petitioner ATI exercised the required diligence in handling the shipment. By way
of counterclaim, petitioner ATI argued that plaintiff should shoulder its expenses for
attorney’s fees in the amount of ₱20,000 as petitioner ATI was constrained to engage
the services of counsel to protect its interest.
On May 10, 2001, the RTC of Manila rendered a Decision9 holding petitioner ATI and
its co-defendants solidarily liable to respondent for damages arising from the
shortage. The RTC held:
…
The trial court found that respondent has established that the losses/shortages were
incurred prior to its receipt of the goods. As such, the burden shifted to the carrier to
prove that it exercised extraordinary diligence as required by law to prevent the loss,
destruction or deterioration.
However, the trial court held that the defendants failed to prove that they did so. The
trial court gave credence to the testimony of Eduardo Ragudo, a super cargo of
defendant Inter-Asia Marine Transport, Inc., who admitted that there were spillages or
overflow down to the spillage saver. The trial court also noted that said witness also
declared that respondent’s representative was not allowed to sign the Master’s
Certificate. Such declaration, said the trial court, placed petitioner ATI in a bad light
and weakened its stand.
…
On November 27, 2006, the CA promulgated the assailed Decision, the decretal
portion of which reads:
WHEREFORE, the appealed Decision dated May 10, 2001 is affirmed, except the
award of attorney’s fees which is hereby deleted.
SO ORDERED.13
In affirming the RTC Decision, the CA held that there is no justification to disturb the
factual findings of the trial court which are entitled to respect on appeal as they were
supported by substantial evidence. It agreed with the findings of the trial court that the
unknown owner of the vessel M/V "Tern" and Inter-Asia Marine Transport, Inc. failed
to establish that they exercised extraordinary diligence in transporting the goods or
exercised due diligence to forestall or lessen the loss as provided in Article 174214 of
the Civil Code. The CA also ruled that petitioner ATI, as the arrastre operator, should
be held jointly and severally liable with the carrier considering that petitioner ATI’s
stevedores were under the direct supervision of the unknown owner of M/V "Tern"
and that the spillages occurred when the cargoes were being unloaded by petitioner
ATI’s stevedores.
Petitioner ATI filed a motion for reconsideration,15 but the CA denied its motion in a
Resolution16dated March 23, 2007. The unknown owner of the vessel M/V "Tern" and
Inter-Asia Marine Transport, Inc. for their part, appealed to this Court via a petition for
review on certiorari, which was docketed as G.R. No. 177170. Its appeal, however,
was denied by this Court on July 16, 2007 for failure to sufficiently show any
reversible error committed by the CA in the challenged Decision and Resolution as to
TRANSPORTATION LAW – Chapter 4
warrant the exercise of this Court’s discretionary appellate jurisdiction. The unknown
owner of M/V "Tern" and Inter-Asia Marine Transport, Inc. sought reconsideration of
the denial but their motion was denied by the Court in a Resolution dated October 17,
2007.17
Meanwhile, on April 20, 2007, petitioner ATI filed the present petition raising the sole
issue of whether the appellate court erred in affirming the decision of the trial court
holding petitioner ATI solidarily liable with its codefendants for the shortage incurred
in the shipment of the goods to respondent.
Petitioner ATI argues that:
1. Respondent failed to prove that the subject shipment suffered actual loss/shortage
as there was no competent evidence to prove that it actually weighed 3,300 metric
tons at the port of origin.
2. Stipulations in the bill of lading that the cargo was carried on a "shipper’s weight,
quantity and quality unknown" is not contrary to public policy. Thus, herein petitioner
cannot be bound by the quantity or weight of the cargo stated in the bill of lading.
3. Shortage/loss, if any, may have been due to the inherent nature of the shipment
and its insufficient packing considering that the subject cargo was shipped in bulk and
had a moisture content of 12.5%.
…
We grant the petition.
The CA erred in affirming the decision of the trial court holding petitioner ATI solidarily
liable with its co-defendants for the shortage incurred in the shipment of the goods to
respondent.
We note that the matters raised by petitioner ATI involve questions of fact which are
generally not reviewable in a petition for review on certiorari under Rule 45 of the
1997 Rules of Civil Procedure, as amended, as the Court is not a trier of facts.
Section 1 thereof provides that "the petition x x x shall raise only questions of law,
which must be distinctly set forth."
…
First,  petitioner ATI is correct in arguing that the respondent failed to prove that the
subject shipment suffered actual shortage, as there was no competent evidence to
prove that it actually weighed 3,300 metric tons at the port of origin.
Though it is true that common carriers are presumed to have been at fault or to have
acted negligently if the goods transported by them are lost, destroyed, or deteriorated,
and that the common carrier must prove that it exercised extraordinary diligence in
order to overcome the presumption,21 the plaintiff must still, before the burden is
shifted to the defendant, prove that the subject shipment suffered actual shortage.
This can only be done if the weight of the shipment at the port of origin and its
subsequent weight at the port of arrival have been proven by a preponderance of
evidence, and it can be seen that the former weight is considerably greater than the
latter weight, taking into consideration the exceptions provided in Article 173422 of the
Civil Code.
In this case, respondent failed to prove that the subject shipment suffered shortage,
for it was not able to establish that the subject shipment was weighed at the port of
origin at Darrow, Louisiana, U.S.A. and that the actual weight of the said shipment
was 3,300 metric tons.
The Berth Term Grain Bill of Lading23 (Exhibit "A"), the Proforma Invoice24 (Exhibit
"B"), and the Packing List25 (Exhibit "C"), being used by respondent to prove that the
subject shipment weighed 3,300 metric tons, do not, in fact, help its cause. The Berth
Term Grain Bill of Lading states that the subject shipment was carried with the
qualification "Shipper’s weight, quantity and quality unknown," meaning that it was
transported with the carrier having been oblivious of the weight, quantity, and quality
of the cargo. This interpretation of the quoted qualification is supported by Wallem
Philippines Shipping, Inc. v. Prudential Guarantee & Assurance, Inc.,26 a case
involving an analogous stipulation in a bill of lading, wherein the Supreme Court held
that:
Indeed, as the bill of lading indicated that the contract of carriage was under a "said to
weigh" clause, the shipper is solely responsible for the loading while the carrier
is oblivious of the contents of the shipment. (Emphasis supplied)
Similarly, International Container Terminal Services, Inc. v. Prudential Guarantee &
Assurance Co., Inc.,27 explains the meaning of clauses analogous to "Shipper’s
weight, quantity and quality unknown" in this manner:
This means that the shipper was solely responsible for the loading of the
container, while the carrier was oblivious to the contents of the shipment x x x.
The arrastre operator was, like any ordinary depositary, duty-bound to take good care
of the goods received from the vessel and to turn the same over to the party entitled
to their possession, subject to such qualifications as may have validly been
imposed in the contract between the parties.  The arrastre operator was not
required to verify the contents of the container received and to compare them
with those declared by the shipper because, as earlier stated, the cargo was at
the shipper’s load and count x x x. (Italics in the original; emphasis supplied)
Also, Bankers & Manufacturers Assurance Corporation v. Court of
Appeals28 elucidates thus:
The recital of the bill of lading for goods thus transported [i.e., transported in sealed
containers or "containerized"] ordinarily would declare "Said to Contain", "Shipper’s
TRANSPORTATION LAW – Chapter 4
Load and Count", "Full Container Load", and the amount or quantity of goods in the
container in a particular package is only prima facie  evidence of the amount or
quantity x x x.
A shipment under this arrangement is not inspected or inventoried by the
carrier whose duty is only to transport and deliver the containers in the same
condition as when the carrier received and accepted the containers for
transport x x x. (Emphasis supplied)
Hence, as can be culled from the above-mentioned cases, the weight of the shipment
as indicated in the bill of lading is not conclusive as to the actual weight of the goods.
Consequently, the respondent must still prove the actual weight of the subject
shipment at the time it was loaded at the port of origin so that a conclusion may be
made as to whether there was indeed a shortage for which petitioner must be liable.
This, the respondent failed to do.
The Proforma Invoice militates against respondent’s claim that the subject shipment
weighed 3,300 metric tons. The pertinent portion of the testimony of Mr. Jose
Sarmiento, respondent’s Claims Manager, is narrated below:
Atty. Rebano: You also identified a while ago, Mr. Witness Exhibit B, the invoice. Why
does it state as description of the cargo three thousand metric tons and not
three thousand three hundred?
A: Usually there is a contract between the supplier and our company that embodied
[sic] in the letter credit [sic] that they have the option to ship the cargo plus or
minus ten percent of the quantity.
xxxx
Q: So, it is possible for the shipper to ship less than ten percent in [sic] the
quantity stated in the invoice and it will still be a valid shipment. Is it [sic]
correct?
A: It [sic] is correct but we must be properly advised and the commercial invoice
should indicate how much they sent to us.29 (Emphasis supplied)
The quoted part of Mr. Sarmiento’s testimony not only shows uncertainty as to the
actual weight of the shipment, it also shows that assuming respondent did order
3,300 metric tons of U.S. Soybean Meal from Contiquincybunge Export Company,
and also assuming that it only received 3,100.137 metric tons, such volume would still
be a valid shipment because it is well within the 10% allowable shortage. Note that
Mr. Sarmiento himself mentioned that the supplier has the option to "ship the cargo
plus or minus ten percent of the quantity."30
Notably also, the genuineness and the due execution of the Packing List, the Berth
Term Grain Bill of Lading, and the Proforma Invoice, were not established.
Wallem Philippines Shipping, Inc.,31 is instructive on this matter:
We find that the Court of Appeals erred in finding that a shortage had taken place.
Josephine Suarez, Prudential’s claims processor, merely identified the papers
submitted to her in connection with GMC’s claim (Bill of Lading BEDI/1 (Exh. "B"),
Commercial Invoice No. 1401 issued by Toepfer International Asia Pte, Ltd. (Exh.
"C"), SGS Certificate of Quality (Exh. "F-1"), and SGS Certificate of Weight (Exh. "F-
3")). Ms. Suarez had no personal knowledge of the contents of the said
documents and could only surmise as to the actual weight of the cargo
loaded on M/V Gao Yang x x x.
xxxx
Ms. Suarez’s testimony regarding the contents of the documents is thus
hearsay, based as it is on the knowledge of another person not presented on
the witness stand.
Nor has the genuineness and due execution of these documents been
established. In the absence of clear, convincing, and competent evidence to
prove that the shipment indeed weighed 4,415.35 metric tons at the port of
origin when it was loaded on the M/V Gao Yang, it cannot be determined
whether there was a shortage of the shipment upon its arrival in Batangas.
(Emphasis supplied)
As in the present case, Mr. Sarmiento merely identified the three above-mentioned
exhibits, but he had no personal knowledge of the weight of the subject shipment
when it was loaded onto the M/V "Tern" at the port of origin. His testimony as regards
the weight of the subject shipment as described in Exhibits "A," "B," and "C" must
then be considered as hearsay,32 for it was based on the knowledge of a person who
was not presented during the trial in the RTC.
The presumption that the Berth Term Grain Bill of Lading serves as prima
facie  evidence of the weight of the cargo has been rebutted, there being doubt as to
the weight of the cargo at the time it was loaded at the port of origin. Further, the fact
that the cargo was shipped with the arrangement "Shipper’s weight, quantity and
quality unknown," indeed means that the weight of the cargo could not be determined
using as basis the figures written on the Berth Term Grain Bill of Lading. This is in line
with Malayan Insurance Co., Inc. v. Jardine Davies Transport Services, Inc.,33 where
we said:
The presumption that the bill of lading, which petitioner relies upon to support its
claim for restitution, constitutes prima facie evidence of the goods therein
described was correctly deemed by the appellate court to have been rebutted in
light of abundant evidence casting doubts on its veracity.
That MV Hoegh undertook, under the bill of lading, to transport 6,599.23 MT of yellow
crude sulphur on a "said to weigh" basis is not disputed. Under such clause, the
shipper is solely responsible for the loading of the cargo while the carrier is oblivious
TRANSPORTATION LAW – Chapter 4
of the contents of the shipment. Nobody really knows the actual weight of the cargo
inasmuch as what is written on the bill of lading, as well as on the manifest, is based
solely on the shipper’s declaration.
The bill of lading carried an added clause – the shipment’s weight, measure,
quantity, quality, condition, contents and value unknown. Evidently, the weight
of the cargo could not be gauged from the bill of lading. (Italics in the original;
emphasis supplied)
The respondent having failed to present evidence to prove the actual weight of the
subject shipment when it was loaded onto the M/V "Tern," its cause of action must
then fail because it cannot prove the shortage that it was alleging. Indeed, if the
claimant cannot definitively establish the weight of the subject shipment at the point of
origin, the fact of shortage or loss cannot be ascertained. The claimant then has no
basis for claiming damages resulting from an alleged shortage. Again, Malayan
Insurance Co., Inc.,34 provides jurisprudential basis:
In the absence of clear, convincing and competent evidence to prove that the
cargo indeed weighed, albeit the Bill of Lading qualified it by the phrase "said to
weigh," 6,599.23 MT at the port of origin when it was loaded onto the MV
Hoegh, the fact of loss or shortage in the cargo upon its arrival in Manila cannot be
definitively established. The legal basis for attributing liability to either of the
respondents is thus sorely wanting. (Emphasis supplied)
Second, as correctly asserted by petitioner ATI, the shortage, if any, may have been
due to the inherent nature of the subject shipment or its packaging since the subject
cargo was shipped in bulk and had a moisture content of 12.5%.
It should be noted that the shortage being claimed by the respondent is minimal, and
is an indication that it could be due to consolidation or settlement of the subject
shipment, as accurately observed by the petitioner. A Kansas State University study
on the handling and storage of soybeans and soybean meal35 is instructive on this
matter. Pertinent portions of the study reads:
Soybean meal is difficult to handle because of poor flow ability and bridging
characteristics. Soybean meal tends to settle or consolidate over time. This
phenomenon occurs in most granular materials and becomes more severe with
increased moisture, time and small particle size x x x.
xxxx
Moisture is perhaps the most important single factor affecting storage of soybeans
and soybean meal. Soybeans contain moisture ranging from 12% to 15% (wet
basis) at harvest time x x x.
xxxx
Soybeans and soybean meal are hygroscopic materials and will either lose
(desorb) or gain (adsorb) moisture from the surrounding air. The moisture level
reached by a product at a given constant temperature and equilibrium relative
humidity (ERH) is its equilibrium moisture content (EMC) x x x. (Emphasis supplied)
As indicated in the Proforma Invoice mentioned above, the moisture content of the
subject shipment was 12.5%. Taking into consideration the phenomena of desorption,
the change in temperature surrounding the Soybean Meal from the time it left
wintertime Darrow, Louisiana, U.S.A. and the time it arrived in Manila, and the fact
that the voyage of the subject cargo from the point of loading to the point of unloading
was 36 days, the shipment could have definitely lost weight, corresponding to the
amount of moisture it lost during transit.
The conclusion that the subject shipment lost weight in transit is bolstered by the
testimony of Mr. Fernando Perez, a Cargo Surveyor of L.J. Del Pan. The services of
Mr. Perez were requested by respondent.36 Mr. Perez testified that it was possible for
the subject shipment to have lost weight during the 36-day voyage, as it was
wintertime when M/V "Tern" left the United States and the climate was warmer when
it reached the Philippines; hence the moisture level of the Soybean Meal could have
changed.37 Moreover, Mr. Perez himself confirmed, by answering a question
propounded by the RTC, that loss of weight of the subject cargo cannot be avoided
because of the shift in temperature from the colder United States weather to the
warmer Philippine climate.38
More importantly, the 199.863 metric-ton shortage that respondent alleges is a
minimal 6.05% of the weight of the entire Soy Bean Meal shipment. Taking into
consideration the previously mentioned option of the shipper to ship 10% more or less
than the contracted shipment, and the fact that the alleged shortage is only 6.05% of
the total quantity of 3,300 metric tons, the alleged percentage loss clearly does not
exceed the allowable 10% allowance for loss, as correctly argued by petitioner. The
alleged loss, if any, not having exceeded the allowable percentage of shortage, the
respondent then has no cause of action to claim for shortages.
Third,  we agree with the petitioner ATI that respondent has not proven any
negligence on the part of the former.
As petitioner ATI pointed out, a reading of the Survey Report of Del Pan
Surveyors39 (Exhibits "D" to "D-4" of respondent) would not show any untoward
incident or negligence on the part of petitioner ATI during the discharging operations.
Also, a reading of Exhibits "D", "D-1", and "D-2" would show that the methods used in
determining whether there was a shortage are not accurate.
Respondent relied on the Survey Reports of Del Pan Surveyors to prove that the
subject shipment suffered loss. The conclusion that there was a shortage arose from
an evaluation of the weight of the cargo using the barge displacement method. This is
a type of draught survey, which is a method of cargo weight determination by ship’s
displacement calculations.40 The basic principle upon which the draught survey
TRANSPORTATION LAW – Chapter 4
methodology is based is the Principle of Archimedes, i.e.,  a vessel when floating in
water, will displace a weight of water equal to its own weight.41 It then follows that if a
weight of cargo is loaded on (or unloaded from) a vessel freely floating in water, then
the vessel will sink (or float) into the water until the total weight of water displaced is
equal to the original weight of the vessel, plus (or minus) the cargo which has been
loaded (or unloaded) and plus (or minus) density variation of the water between the
starting survey (first measurement) and the finishing survey (second
measurement).42 It can be seen that this method does not entail the weighing of the
cargo itself, but as correctly stated by the petitioner, the weight of the shipment is
being measured by mere estimation of the water displaced by the barges before and
after the cargo is unloaded from the said barges.
In addition, the fact that the measurements were done by Del Pan Surveyors in
prevailing slight to slightly rough sea condition43 supports the conclusion that the
resulting measurement may not be accurate. A United Nations study on draught
surveys44 in fact states that the accuracy of draught surveys will be dependent upon
several factors, one of which is the weather and seas condition in the harbor.
Also, it can be seen in respondent’s own Exhibit "D-1" that the actual weight of the
cargo was established by weighing 20% of the cargo. Though we recognize the
practicality of establishing cargo weight through random sampling, we note the
discrepancy in the weights used in the determination of the alleged shortage.
Exhibit "D-1" of respondent states that the average weight of each bag is 52 kilos. A
total of 63,391 bags45 were discharged from the barges, and the tare weight46 was
established at 0.0950 kilos.47 Therefore, if one were to multiply 52 kilos per bag by
63,391 bags and deduct the tare weight of 0.0950 kilos multiplied by 63,391 bags, the
result would be 3,290,309.65 kilos, or 3,290.310 metric tons. This would mean that
the shortage was only 9.69 metric tons, if we suppose that respondent was able to
establish that the shipment actually weighed 3,300 metric tons at the port of loading.
Considering that respondent was not able to establish conclusively that the subject
shipment weighed 3,300 metric tons at the port of loading, and that it cannot therefore
be concluded that there was a shortage for which petitioner should be responsible;
bearing in mind that the subject shipment most likely lost weight in transit due to the
inherent nature of Soya Bean Meal; assuming that the shipment lost weight in transit
due to desorption, the shortage of 199.863 metric tons that respondent alleges is a
minimal 6.05% of the weight of the entire shipment, which is within the allowable 10%
allowance for loss; and noting that the respondent was not able to show negligence
on the part of the petitioner and that the weighing methods which respondent relied
upon to establish the shortage it alleges is inaccurate, respondent cannot fairly claim
damages against petitioner for the subject shipment's alleged shortage.
WHEREFORE, the petition for review on certiorari is GRANTED. The Decision dated
November 27, 2006 and Resolution dated March 23, 2007 of the Court of Appeals in
CA-G.R. CV No. 71210 are REVERSED AND SET ASIDE insofar as petitioner Asian
Terminals, Inc. is concerned. Needless to add, the complaint against petitioner
docketed as RTC Manila Civil Case No. 96-81101 is ordered DISMISSED.

TRANSPORTATION LAW – Chapter 4

7.) G.R. No. 161833. July 8, 2005
PHILIPPINE CHARTER INSURANCE CORPORATION, Petitioners,
vs. UNKNOWN OWNER OF THE VESSEL M/V "NATIONAL HONOR," NATIONAL
SHIPPING CORPORATION OF THE PHILIPPINES and INTERNATIONAL
CONTAINER SERVICES, INC., Respondents.
On November 5, 1995, J. Trading Co. Ltd. of Seoul, Korea, loaded a shipment of four
units of parts and accessories in the port of Pusan, Korea, on board the vessel
M/V "National Honor," represented in the Philippines by its agent, National Shipping
Corporation of the Philippines (NSCP). The shipment was for delivery to Manila,
Philippines. Freight forwarder, Samhwa Inter-Trans Co., Ltd., issued Bill of Lading No.
SH94103062 in the name of the shipper consigned to the order of Metropolitan Bank
and Trust Company with arrival notice in Manila to ultimate consignee Blue Mono
International Company, Incorporated (BMICI), Binondo, Manila.
NSCP, for its part, issued Bill of Lading No. NSGPBSML5125653 in the name of the
freight forwarder, as shipper, consigned to the order of Stamm International Inc.,
Makati, Philippines. It is provided therein that:
12. This Bill of Lading shall be prima facie evidence of the receipt of the Carrier in
apparent good order and condition except as, otherwise, noted of the total number of
Containers or other packages or units enumerated overleaf. Proof to the contrary
shall be admissible when this Bill of Lading has been transferred to a third party
acting in good faith. No representation is made by the Carrier as to the weight,
contents, measure, quantity, quality, description, condition, marks, numbers, or value
of the Goods and the Carrier shall be under no responsibility whatsoever in respect of
such description or particulars.
13. The shipper, whether principal or agent, represents and warrants that the goods
are properly described, marked, secured, and packed and may be handled in ordinary
course without damage to the goods, ship, or property or persons and guarantees the
correctness of the particulars, weight or each piece or package and description of the
goods and agrees to ascertain and to disclose in writing on shipment, any condition,
nature, quality, ingredient or characteristic that may cause damage, injury or
detriment to the goods, other property, the ship or to persons, and for the failure to do
so the shipper agrees to be liable for and fully indemnify the carrier and hold it
harmless in respect of any injury or death of any person and loss or damage to cargo
or property. The carrier shall be responsible as to the correctness of any such mark,
descriptions or representations.4
The shipment was contained in two wooden crates, namely, Crate No. 1 and Crate
No. 2, complete and in good order condition, covered by Commercial Invoice No. YJ-
73564 DTD5 and a Packing List.6 There were no markings on the outer portion of the
crates except the name of the consignee.7 Crate No. 1 measured 24 cubic meters
and weighed 3,620 kgs. It contained the following articles: one (1) unit Lathe Machine
complete with parts and accessories; one (1) unit Surface Grinder complete with parts
TRANSPORTATION LAW – Chapter 4
and accessories; and one (1) unit Milling Machine complete with parts and
accessories. On the flooring of the wooden crates were three wooden battens placed
side by side to support the weight of the cargo. Crate No. 2, on the other hand,
measured 10 cubic meters and weighed 2,060 kgs. The Lathe Machine was stuffed in
the crate. The shipment had a total invoice value of US$90,000.00 C&F Manila.8 It
was insured for ₱2,547,270.00 with the Philippine Charter Insurance Corporation
(PCIC) thru its general agent, Family Insurance and Investment Corporation,9 under
Marine Risk Note No. 68043 dated October 24, 1994.10
The M/V "National Honor" arrived at the Manila International Container Terminal
(MICT) on November 14, 1995. The International Container Terminal Services,
Incorporated (ICTSI) was furnished with a copy of the crate cargo list and bill of
lading, and it knew the contents of the crate.11 The following day, the vessel started
discharging its cargoes using its winch crane. The crane was operated by Olegario
Balsa, a winchman from the ICTSI,12 the exclusive arrastre operator of MICT.
Denasto Dauz, Jr., the checker-inspector of the NSCP, along with the crew and the
surveyor of the ICTSI, conducted an inspection of the cargo.13 They inspected the
hatches, checked the cargo and found it in apparent good condition.14 Claudio
Cansino, the stevedore of the ICTSI, placed two sling cables on each end of Crate
No. 1.15 No sling cable was fastened on the mid-portion of the crate. In Dauz’s
experience, this was a normal procedure.16 As the crate was being hoisted from the
vessel’s hatch, the mid-portion of the wooden flooring suddenly snapped in the air,
about five feet high from the vessel’s twin deck, sending all its contents crashing
down hard,17 resulting in extensive damage to the shipment.
BMICI’s customs broker, JRM Incorporated, took delivery of the cargo in such
damaged condition.18 Upon receipt of the damaged shipment, BMICI found that the
same could no longer be used for the intended purpose. The Mariners’ Adjustment
Corporation hired by PCIC conducted a survey and declared that the packing of the
shipment was considered insufficient. It ruled out the possibility of taxes due to
insufficiency of packing. It opined that three to four pieces of cable or wire rope slings,
held in all equal setting, never by-passing the center of the crate, should have been
used, considering that the crate contained heavy machinery.19
BMICI subsequently filed separate claims against the NSCP,20 the ICTSI,21 and its
insurer, the PCIC,22 for US$61,500.00. When the other companies denied liability,
PCIC paid the claim and was issued a Subrogation Receipt23 for ₱1,740,634.50.
On March 22, 1995, PCIC, as subrogee, filed with the RTC of Manila, Branch 35, a
Complaint for Damages24 against the "Unknown owner of the vessel M/V National
Honor," NSCP and ICTSI, as defendants.
PCIC alleged that the loss was due to the fault and negligence of the defendants. It
prayed, among others –
…
ICTSI, for its part, filed its Answer with Counterclaim and Cross-claim against its co-
defendant NSCP, claiming that the loss/damage of the shipment was caused
exclusively by the defective material of the wooden battens of the shipment,
insufficient packing or acts of the shipper.
At the trial, Anthony Abarquez, the safety inspector of ICTSI, testified that the wooden
battens placed on the wooden flooring of the crate was of good material but was not
strong enough to support the weight of the machines inside the crate. He averred that
most stevedores did not know how to read and write; hence, he placed the sling
cables only on those portions of the crate where the arrow signs were placed, as in
the case of fragile cargo. He said that unless otherwise indicated by arrow signs, the
ICTSI used only two cable slings on each side of the crate and would not place a
sling cable in the mid-section.26 He declared that the crate fell from the cranes
because the wooden batten in the mid-portion was broken as it was being lifted.27 He
concluded that the loss/damage was caused by the failure of the shipper or its packer
to place wooden battens of strong materials under the flooring of the crate, and to
place a sign in its mid-term section where the sling cables would be placed.
The ICTSI adduced in evidence the report of the R.J. Del Pan & Co., Inc. that the
damage to the cargo could be attributed to insufficient packing and unbalanced
weight distribution of the cargo inside the crate as evidenced by the types and shapes
of items found.28
The trial court rendered judgment for PCIC and ordered the complaint dismissed,
thus:
According to the trial court, the loss of the shipment contained in Crate No. 1 was due
to the internal defect and weakness of the materials used in the fabrication of the
crates. The middle wooden batten had a hole (bukong-bukong). The trial court
rejected the certification30 of the shipper, stating that the shipment was properly
packed and secured, as mere hearsay and devoid of any evidentiary weight, the
affiant not having testified.
Not satisfied, PCIC appealed31 to the CA which rendered judgment on January 19,
2004 affirming in toto the appealed decision, with this fallo –
The appellate court held, inter alia, that it was bound by the finding of facts of the
RTC, especially so where the evidence in support thereof is more than substantial. It
ratiocinated that the loss of the shipment was due to an excepted cause – "[t]he
character of the goods or defects in the packing or in the containers" and the failure of
the shipper to indicate signs to notify the stevedores that extra care should be
employed in handling the shipment.33 It blamed the shipper for its failure to use
materials of stronger quality to support the heavy machines and to indicate an arrow
in the middle portion of the cargo where additional slings should be attached.34 The
CA concluded that common carriers are not absolute insurers against all risks in the
transport of the goods.35
Hence, this petition by the PCIC, where it alleges that:
TRANSPORTATION LAW – Chapter 4
…
The petitioner asserts that the mere proof of receipt of the shipment by the common
carrier (to the carrier) in good order, and their arrival at the place of destination in bad
order makes out a prima facie case against it; in such case, it is liable for the loss or
damage to the cargo absent satisfactory explanation given by the carrier as to the
exercise of extraordinary diligence. The petitioner avers that the shipment was
sufficiently packed in wooden boxes, as shown by the fact that it was accepted on
board the vessel and arrived in Manila safely. It emphasizes that the respondents did
not contest the contents of the bill of lading, and that the respondents knew that the
manner and condition of the packing of the cargo was normal and barren of defects. It
maintains that it behooved the respondent ICTSI to place three to four cables or wire
slings in equal settings, including the center portion of the crate to prevent damage to
the cargo:
… [A] simple look at the manifesto of the cargo and the bill of lading would have
alerted respondents of the nature of the cargo consisting of thick and heavy
machinery. Extra-care should have been made and extended in the discharge of the
subject shipment. Had the respondent only bothered to check the list of its contents,
they would have been nervous enough to place additional slings and cables to
support those massive machines, which were composed almost entirely of thick steel,
clearly intended for heavy industries. As indicated in the list, the boxes contained one
lat[h]e machine, one milling machine and one grinding machine-all coming with
complete parts and accessories. Yet, not one among the respondents were cautious
enough. Here lies the utter failure of the respondents to observed extraordinary
diligence in the handling of the cargo in their custody and possession, which the
Court of Appeals should have readily observed in its appreciation of the pertinent
facts.37
The petitioner posits that the loss/damage was caused by the mishandling of the
shipment by therein respondent ICTSI, the arrastre operator, and not by its
negligence.
Respondent ICTSI avers that the issues raised are factual, hence, improper under
Rule 45 of the Rules of Court. It claims that it is merely a depository and not a
common carrier; hence, it is not obliged to exercise extraordinary diligence. It
reiterates that the loss/damage was caused by the failure of the shipper or his packer
to place a sign on the sides and middle portion of the crate that extra care should be
employed in handling the shipment, and that the middle wooden batten on the flooring
of the crate had a hole. The respondent asserts that the testimony of Anthony
Abarquez, who conducted his investigation at the site of the incident, should prevail
over that of Rolando Balatbat. As an alternative, it argues that if ever adjudged liable,
its liability is limited only to ₱3,500.00 as expressed in the liability clause of Gate Pass
CFS-BR-GP No. 319773.
The petition has no merit.
The extraordinary diligence in the vigilance over the goods tendered for shipment
requires the common carrier to know and to follow the required precaution for
avoiding damage to, or destruction of the goods entrusted to it for sale, carriage and
delivery. It requires common carriers to render service with the greatest skill and
foresight and "to use all reasonable means to ascertain the nature and characteristic
of goods tendered for shipment, and to exercise due care in the handling and
stowage, including such methods as their nature requires."42
The common carrier’s duty to observe the requisite diligence in the shipment of goods
lasts from the time the articles are surrendered to or unconditionally placed in the
possession of, and received by, the carrier for transportation until delivered to, or until
the lapse of a reasonable time for their acceptance, by the person entitled to receive
them.43 When the goods shipped are either lost or arrive in damaged condition, a
presumption arises against the carrier of its failure to observe that diligence, and
there need not be an express finding of negligence to hold it liable.44 To overcome the
presumption of negligence in the case of loss, destruction or deterioration of the
goods, the common carrier must prove that it exercised extraordinary diligence.45
However, under Article 1734 of the New Civil Code, the presumption of negligence
does not apply to any of the following causes:
… weakness of the materials used in the fabrication of the said crate.
It bears stressing that the enumeration in Article 1734 of the New Civil Code which
exempts the common carrier for the loss or damage to the cargo is a closed list.46 To
exculpate itself from liability for the loss/damage to the cargo under any of the
causes, the common carrier is burdened to prove any of the aforecited causes
claimed by it by a preponderance of evidence. If the carrier succeeds, the burden of
evidence is shifted to the shipper to prove that the carrier is negligent.47
"Defect" is the want or absence of something necessary for completeness or
perfection; a lack or absence of something essential to completeness; a deficiency in
something essential to the proper use for the purpose for which a thing is to be
used.48 On the other hand, inferior means of poor quality, mediocre, or second
rate.49 A thing may be of inferior quality but not necessarily defective. In other words,
"defectiveness" is not synonymous with "inferiority."
In the present case, the trial court declared that based on the record, the loss of the
shipment was caused by the negligence of the petitioner as the shipper:
The same may be said with respect to defendant ICTSI. The breakage and collapse
of Crate No. 1 and the total destruction of its contents were not imputable to any fault
or negligence on the part of said defendant in handling the unloading of the cargoes
from the carrying vessel, but was due solely to the inherent defect and weakness of
the materials used in the fabrication of said crate.
The crate should have three solid and strong wooden batten placed side by side
underneath or on the flooring of the crate to support the weight of its contents.
TRANSPORTATION LAW – Chapter 4
However, in the case of the crate in dispute, although there were three wooden
battens placed side by side on its flooring, the middle wooden batten, which carried
substantial volume of the weight of the crate’s contents, had a knot hole or "bukong-
bukong," which considerably affected, reduced and weakened its strength. Because
of the enormous weight of the machineries inside this crate, the middle wooden
batten gave way and collapsed. As the combined strength of the other two wooden
battens were not sufficient to hold and carry the load, they too simultaneously with the
middle wooden battens gave way and collapsed (TSN, Sept. 26, 1996, pp. 20-24).
Crate No. 1 was provided by the shipper of the machineries in Seoul, Korea. There is
nothing in the record which would indicate that defendant ICTSI had any role in the
choice of the materials used in fabricating this crate. Said defendant, therefore,
cannot be held as blame worthy for the loss of the machineries contained in Crate No.
1.50
The CA affirmed the ruling of the RTC, thus:
The case at bar falls under one of the exceptions mentioned in Article 1734 of the
Civil Code, particularly number (4) thereof, i.e., the character of the goods or defects
in the packing or in the containers. The trial court found that the breakage of the crate
was not due to the fault or negligence of ICTSI, but to the inherent defect and
Upon examination of the records, We find no compelling reason to depart from the
factual findings of the trial court.
It appears that the wooden batten used as support for the flooring was not made of
good materials, which caused the middle portion thereof to give way when it was
lifted. The shipper also failed to indicate signs to notify the stevedores that extra care
should be employed in handling the shipment.
Claudio Cansino, a stevedore of ICTSI, testified before the court their duties and
responsibilities:
"Q: With regard to crates, what do you do with the crates?
A: Everyday with the crates, there is an arrow drawn where the sling is placed,
Ma’am.
Q: When the crates have arrows drawn and where you placed the slings, what do you
do with these crates?
A: A sling is placed on it, Ma’am.
Q: After you placed the slings, what do you do with the crates?
A: After I have placed a sling properly, I ask the crane (sic) to haul it, Ma’am. We agree with the trial and appellate courts.

… The petitioner failed to adduce any evidence to counter that of respondent ICTSI. The
petitioner failed to rebut the testimony of Dauz, that the crates were sealed and that
Q: Now, what, if any, were written or were marked on the crate? the contents thereof could not be seen from the outside.52 While it is true that the
crate contained machineries and spare parts, it cannot thereby be concluded that the
respondents knew or should have known that the middle wooden batten had a hole,
A: The thing that was marked on the cargo is an arrow just like of a chain, Ma’am. or that it was not strong enough to bear the weight of the shipment.

Q: And where did you see or what parts of the crate did you see those arrows? There is no showing in the Bill of Lading that the shipment was in good order or
condition when the carrier received the cargo, or that the three wooden battens under
A: At the corner of the crate, Ma’am. the flooring of the cargo were not defective or insufficient or inadequate. On the other
hand, under Bill of Lading No. NSGPBSML512565 issued by the respondent NSCP
Q: How many arrows did you see? and accepted by the petitioner, the latter represented and warranted that the goods
were properly packed, and disclosed in writing the "condition, nature, quality or
characteristic that may cause damage, injury or detriment to the goods." Absent any
A: Four (4) on both sides, Ma’am. signs on the shipment requiring the placement of a sling cable in the mid-portion of
the crate, the respondent ICTSI was not obliged to do so.
…
The statement in the Bill of Lading, that the shipment was in apparent good condition,
Q: What did you do with the arrows? is sufficient to sustain a finding of absence of defects in the merchandise. Case law
has it that such statement will create a prima facie presumption only as to the external
condition and not to that not open to inspection.53
A: When I saw the arrows, that’s where I placed the slings, Ma’am.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit.
…

Q: Now, did you find any other marks on the crate?

A: Nothing more, Ma’am.

Q: Now, Mr. Witness, if there are no arrows, would you place slings on the parts
where there are no arrows?

A: You can not place slings if there are no arrows, Ma’am."

Appellant’s allegation that since the cargo arrived safely from the port of [P]usan,
Korea without defect, the fault should be attributed to the arrastre operator who
mishandled the cargo, is without merit. The cargo fell while it was being carried only
at about five (5) feet high above the ground. It would not have so easily collapsed had
the cargo been properly packed. The shipper should have used materials of stronger
quality to support the heavy machines. Not only did the shipper fail to properly pack
the cargo, it also failed to indicate an arrow in the middle portion of the cargo where
additional slings should be attached. At any rate, the issue of negligence is factual in
nature and in this regard, it is settled that factual findings of the lower courts are
entitled to great weight and respect on appeal, and, in fact, accorded finality when
supported by substantial evidence.51

TRANSPORTATION LAW – Chapter 4

8.) G.R. No. L-16629             January 31, 1962
SOUTHERN LINES, INC., petitioner, vs. COURT OF APPEALS and CITY OF
ILOILO, respondents.
This is a petition to review on certiorari the decision of the Court of Appeals in CA-
G.R. No. 15579-R affirming that of the Court of First Instance of Iloilo which
sentenced petitioner Southern Lines, Inc. to pay respondent City of Iloilo the amount
of P4,931.41.
Sometime in 1948, the City of Iloilo requisitioned for rice from the National Rice and
Corn Corporation (hereafter referred to as NARIC) in Manila. On August 24 of the
same year, NARIC, pursuant to the order, shipped 1,726 sacks of rice consigned to
the City of Iloilo on board the SS "General Wright" belonging to the Southern Lines,
Inc. Each sack of rice weighed 75 kilos and the entire shipment as indicated in the bill
of lading had a total weight of 129,450 kilos. According to the bill of lading, the cost of
the shipment was P63,115.50 itemized and computed as follows:
Unit Price per bag P36.25 P62,567.50
Handling at P0.13 per bag 224.38
Trucking at P2.50 per bag 323.62
T o t a l . . . . . .. . . . . 63,115.50
On September 3, 1948, the City of Iloilo received the shipment and paid the amount
of P63,115.50. However, it was noted that the foot of the bill of lading that the City of
Iloilo 'Received the above mentioned merchandise apparently in same condition as
when shipped, save as noted below: actually received 1685 sacks with a gross weight
of 116,131 kilos upon actual weighing. Total shortage ascertained 13,319 kilos." The
shortage was equivalent to 41 sacks of rice with a net weight of 13,319 kilos, the
proportionate value of which was P6,486.35.
On February 14, 1951 the City of Iloilo filed a complaint in the Court of First Instance
of Iloilo against NARIC and the Southern Lines, Inc. for the recovery of the amount of
P6,486.35 representing the value of the shortage of the shipment of rice. After trial,
the lower court absolved NARIC from the complaint, but sentenced the Southern
Lines, Inc. to pay the amount of P4,931.41 which is the difference between the sum of
P6,486.35 and P1,554.94 representing the latter's counterclaim for handling and
freight.
TRANSPORTATION LAW – Chapter 4
The Southern Lines, Inc. appealed to the Court of Appeals which affirmed the
judgment of the trial court. Hence, this petition for review.
The only question to be determined in this petition is whether or not the defendant-
carrier, the herein petitioner, is liable for the loss or shortage of the rice shipped.
Article 361 of the Code of Commerce provides: .
ART. 361. — The merchandise shall be transported at the risk and venture of the
shipper, if the contrary has not been expressly stipulated.
As a consequence, all the losses and deteriorations which the goods may suffer
during the transportation by reason of fortuitous event, force majeure, or the inherent
nature and defect of the goods, shall be for the account and risk of the shipper.
Proof of these accidents is incumbent upon the carrier.
Article 362 of the same Code provides:
ART. 362. — Nevertheless, the carrier shall be liable for the losses and damages
resulting from the causes mentioned in the preceding article if it is proved, as against
him, that they arose through his negligence or by reason of his having failed to take
the precautions which usage his establisbed among careful persons, unless the
shipper has committed fraud in the bill of lading, representing the goods to be of a
kind or quality different from what they really were.
If, notwithstanding the precautions referred to in this article, the goods transported run
the risk of being lost, on account of their nature or by reason of unavoidable accident,
there being no time for their owners to dispose of them, the carrier may proceed to
sell them, placing them for this purpose at the disposal of the judicial authority or of
the officials designated by special provisions.
Under the provisions of Article 361, the defendant-carrier in order to free itself from
liability, was only obliged to prove that the damages suffered by the goods were "by
virtue of the nature or defect of the articles." Under the provisions of Article 362, the
plaintiff, in order to hold the defendant liable, was obliged to prove that the damages
to the goods by virtue of their nature, occurred on account of its negligence or
because the defendant did not take the precaution adopted by careful persons.
(Government v. Ynchausti & Co., 40 Phil. 219, 223).
Petitioner claims exemption from liability by contending that the shortage in the
shipment of rice was due to such factors as the shrinkage, leakage or spillage of the
rice on account of the bad condition of the sacks at the time it received the same and
the negligence of the agents of respondent City of Iloilo in receiving the shipment.
The contention is untenable, for, if the fact of improper packing is known to the carrier
or his servants, or apparent upon ordinary observation, but it accepts the goods WHEREFORE, the decision of the Court of Appeals is hereby affirmed in all respects
notwithstanding such condition, it is not relieved of liability for loss or injury resulting and the petition for certiorari denied.
thereform. (9 Am Jur. 869.) Furthermore, according to the Court of Appeals,
"appellant (petitioner) itself frankly admitted that the strings that tied the bags of rice
were broken; some bags were with holes and plenty of rice were spilled inside the hull
of the boat, and that the personnel of the boat collected no less than 26 sacks of rice
which they had distributed among themselves." This finding, which is binding upon
this Court, shows that the shortage resulted from the negligence of petitioner.

Invoking the provisions of Article 366 of the Code of Commerce and those of the bill
of lading, petitioner further contends that respondent is precluded from filing an action
for damages on account of its failure to present a claim within 24 hours from receipt of
the shipment. It also cites the cases of Government v. Ynchausti & Co., 24 Phil. 315
and Triton Insurance Co. v. Jose, 33 Phil. 194, ruling to the effect that the
requirement that the claim for damages must be made within 24 hours from delivery
is a condition precedent to the accrual of the right of action to recover damages.
These two cases above-cited are not applicable to the case at bar. In the first cited
case, the plaintiff never presented any claim at all before filing the action. In the
second case, there was payment of the transportation charges which precludes the
presentation of any claim against the carrier. (See Article 366, Code of Commerce.) It
is significant to note that in the American case of Hoye v. Pennsylvania Railroad
Co., 13 Ann. Case. 414, it has been said: .

... "It has been held that a stipulation in the contract of shipment requiring the owner
of the goods to present a notice of his claim to the carrier within a specified time after
the goods have arrived at their destination is in the nature of a condition precedent to
the owner's right to enforce a recovery, that he must show in the first instance that be
has complied with the condition, or that the circumstances were such that to have
complied with it would have required him to do an unreasonable thing. The weight of
authority, however, sustains the view that such a stipulation is more in the nature of a
limitation upon the owner's right to recovery, and that the burden of proof is
accordingly on the carrier to show that the limitation was reasonable and in proper
form or within the time stated." (Hutchinson on Carrier, 3d ed., par. 44) Emphasis
supplied.

In the case at bar, the record shows that petitioner failed to plead this defense in its
answer to respondent's complaint and, therefore, the same is deemed waived
(Section 10, Rule 9, Rules of Court), and cannot be raised for the first time at the trial
or on appeal. (Maxilom v. Tabotabo, 9 Phil. 390.) Moreover, as the Court of Appeals
has said: .

... the records reveal that the appellee (respondent) filed the present action, within a
reasonable time after the short delivery in the shipment of the rice was made. It
should be recalled that the present action is one for the refund of the amount paid in
excess, and not for damages or the recovery of the shortage; for admittedly the
appellee (respondent) had paid the entire value of the 1726 sacks of rice, subject to
subsequent adjustment, as to shortages or losses. The bill of lading does not at all
limit the time for filing an action for the refund of money paid in excess.

TRANSPORTATION LAW – Chapter 4

9.) G.R. No. L-24471           August 30, 1968
SILVERIO MARCHAN and PHILIPPINE RABBIT BUS CO., INC., petitioners,
vs. ARSENIO MENDOZA, LEONARDA ILAYA, and ZENAIDA
MENDOZA, respondents.
The facts as found by the Court of Appeals follow: "In the evening of February 22,
1954, between 9:00 and 9:30 o'clock, a passenger bus No. 141 of the Philippine
Rabbit Bus Lines, bearing Plate No. TPU-708 which was then driven by Silverio
Marchan fell into a ditch somewhere in Barrio Malanday, Polo, Bulacan, while
travelling on its way to Manila; as a result of which plaintiffs-appellees Arsenio
Mendoza, his wife and child, [respondents in this proceeding], who were then inside
the bus as passengers were thrown out to the ground resulting in their multiple
injuries. Plaintiff Arsenio Mendoza suffered the most serious injuries which damaged
his vertebrae causing the paralysis of his lower extremities which up to the time when
this case was tried he continued to suffer. The physician who attended and treated
plaintiff Arsenio Mendoza opined that he may never walk again. Consequently the
driver of said bus Silverio Marchan [now petitioner] was prosecuted for serious, less
serious and slight physical injuries through reckless imprudence before the Justice of
the Peace Court of Polo Bulacan, and thereafter convicted as charged on June 29,
1956 ..., which judgment of conviction was subsequently affirmed by the Court of First
Instance of same province ... In this present action before us, plaintiffs-appellees
Arsenio Mendoza, his wife and child sought to recover damages against defendant-
appellant Arsenio Marchan, then the driver of bus No. 141 of the Philippine Rabbit
Bus Lines, and from defendants-appellants Bienvenido P. Buan and Natividad Paras
in their capacity as administrator and administratix, respectively of the estate of the
late Florencio P. Buan, doing business under the style name of the Philippine Rabbit
Bus Lines, predicated not only on a breach of contract of carriage for failure of
defendants operator as well as the defendant driver to safely convey them to their
destination, but also on account of a criminal negligence on the part of defendant
Silverio Marchan resulting to plaintiff-appellee's multiple physical damages."1
The Court of Appeals in the decision under review found that there was a
preponderance of evidence to the effect that while respondents Arsenio Mendoza, his
wife, Leonarda Ilaya, and child, Zenaida Mendoza "were waiting for a passenger bus
on January 22, 1954 at about 9:00 in the evening at Malanday, they boarded
defendants-appellants' bus bearing No. 141 of the Philippine Rabbit Bus Lines with
Plate No. TPU-708 bound for Manila. And they were treated as passengers thereto,
for they paid their corresponding fares. As they travelled along the highway bound for
Manila, said bus was traveling at a high rate of speed without due regard to the safety
of the passengers. So much so that one of the passengers had to call the attention of
Silverio Marchan who was then at the steering wheel of said bus to lessen the speed
or to slow down, but then defendant Silverio Marchan did not heed the request of said
passenger; neither did he slacken his speed. On the contrary, defendant Silverio
Marchan even increased his speed while approaching a six-by-six truck which was
then parked ahead, apparently for the purpose of passing the said parked truck and
to avoid collision with the incoming vehicle from the opposite direction. But, when
appellant Silverio Marchan veered his truck to resume position over the right lane, the
TRANSPORTATION LAW – Chapter 4
rear tires of said truck skidded because of his high rate of speed, thereby causing
said truck to fall into a ditch. Substantially, the happening of the accident' resulting to
the multiple injuries of plaintiffs-appellees, was explained by defendant Silverio
Marchan who declared that while he was driving his bus from Barrio Malanday bound
towards Manila on a road test, he suddenly noticed an oncoming vehicle. He thus
shifted his light from dim to bright. Just then, he noticed a six-by-six truck parked on
the right lane of the road where he was driving. Confronted with such situation that if
he would apply his brake he would bump his bus against the parked truck he then
increased his speed with the view of passing the said parked truck, and thereafter he
veered to negotiate for the proper position on the right lane, but in so doing he
swerved to the right in order to avoid collision from the oncoming vehicle the rear
portion of the bus skidded and fell into the ditch."2
Hence the finding of negligence in the decision under review. Thus: "From the facts
as established preponderantly by the plaintiff and substantially corroborated by the
defendant Silverio Marchan, it is clear that the cause of the accident was the gross
negligence of the defendant Silverio Marchan who when driving his vehicle on the
night in question was expected to have employed the highest degree of care; and
should have been assiduously prudent in handling his vehicle to insure the safety of
his passengers. There is no reason why he could not have stopped his vehicle when
noticing a parked truck ahead of him if he was not driving at a high speed. His
admission to the effect that if he would apply his brake he would bump or hit the
parked truck ahead of him, since there was no time for him to stop the bus he was
driving, is a patent indication that he was travelling at a high rate of speed without
taking the necessary precaution under the circumstance, considering that it was then
nighttime. It is our considered view that under the situation as pictured before us by
the driver of said bus, he should not have increased his speed and by-passed the
parked truck obviously with the view of preventing a collision with the incoming
vehicle. Any prudent person placed under the situation of the appellant would not
have assumed the risk as what appellant did. The most natural reaction that could be
expected from one under the circumstance was for him to have slackened and
reduced his speed. But this was not done simply because defendant-appellant could
not possibly do so under the circumstance because he was then travelling at a high
rate of speed. In fact, he had increased his speed in order to avoid ramming the
parked truck without, however, taking the necessary precaution to insure the safety of
his passengers."3
On the above facts, the Court of Appeals, in its decision of December 14, 1964,
affirmed the amount of P40,000.00 awarded by the court below as compensatory
damages modifying the appealed lower court decision by holding petitioners to pay
the amount of P30,000.00 as exemplary damages and sustaining the award of
attorney's fees in the amount of P5,000.00.
In their brief as petitioners, the first error assigned is the alleged absence of an
implied contract of carriage by the petitioner bus firm and respondent. On this point, it
was the holding of the Court of Appeals: "Since it is undisputed by the evidence on
record that appellant Silverio Marchan was then at the steering wheel of the vehicle of
the defendant transportation company at that moment, the riding public is not
expected to inquire from time to time before they board the passenger bus whether or
not the driver who is at the steering wheel of said bus was authorized to drive said
vehicle or that said driver is acting within the scope of his authority and observing the
existing rules and regulations required of him by the management. To hold otherwise
would in effect render the aforequoted provision of law (Article 1759) ineffective."4 It is
clear from the above Civil Code provision that common carriers cannot escape liability
"for the death of or injuries to passengers through the negligence and willful acts of
the former's employees, although such employees may have acted beyond the scope
of their authority or in violation of the orders..." 5 From Vda. de Medina v.
Cresencia,6 where this Court, through Justice J.B.L. Reyes, stressed the "direct and
immediate" liability of the carrier under the above legal provision, "not merely
subsidiary or secondary,…
The next two errors assigned would dispute the holding of the Court of Appeals in
imposing liability in the respective amounts of P40,000.00 for compensatory damages
and P30,000.00 for exemplary damages. Again, such assignments of error cannot be
looked upon with favor. What the Court of Appeals did deserves not reprobation but
approval by this Court.
As to why the amount in compensatory damages should be fixed in the sum of
P40,000.00 is explained in the appealed decision thus: "Likewise, it is our considered
view that the amount of P40,000.00 awarded by the court below as compensatory
damages is quite reasonable and fair, considering that plaintiff Arsenio Mendoza had
suffered paralysis on the lower extremities, which will incapacitate him to engage in
his customary occupation throughout the remaining years of his life, especially so if
we take into account that plaintiff Arsenio Mendoza was only 26 years old when he
met an accident on January 22, 1954; and taking the average span of life of a Filipino,
he may be expected to live for 30 years more; and bearing in mind the earning
capacity of Arsenio Mendoza who before the happening of this accident derived an
income of almost P100.00 a month from the business of his father-in-law as Assistant
Supervisor of the small [fairs] and his income of P100.00 a month which he derived
as a professional boxer."8 Considering that respondent Arsenio Mendoza was only in
his middle twenties when, thru the negligence of petitioners, he lost the use of his
limbs, being condemned for the remainder of his life to be a paralytic, in effect leading
a maimed, well-nigh useless existence, the fixing of such liability in the amount of
P40,000.00 as compensatory damages was well within the discretion of the Court of
Appeals. 1äwphï1.ñët
As to the finding of liability for exemplary damages, the Court of Appeals, in its
resolution of March 31, 1965, stated the following: "We now come to the imposition of
exemplary damages upon defendants-appellants' carrier. It is argued that this Court is
without jurisdiction to adjudicate this exemplary damages since there was no
allegation nor prayer, nor proof, nor counterclaim of error for the same by the
appellees. It is to be observed however, that in the complaint, plaintiffs "prayed for
such other and further relief as this Court may deem just and equitable." Now, since
the body of the complaint sought to recover damages against the defendant-carrier
wherein plaintiffs prayed for indemnification for the damages they suffered as a result
of the negligence of said Silverio Marchan who is appellant's employee; and since
exemplary damages is intimately connected with general damages, plaintiffs may not
TRANSPORTATION LAW – Chapter 4
be expected to single out by express term the kind of damages they are trying to
recover against the defendant's carrier. Suffice it to state that when plaintiffs prayed in
their complaint for such other relief and remedies that may be availed of under the
premises, in effect, therefore, the court is called upon the exercise and use its
discretion whether the imposition of punitive or exemplary damages even though not
expressly prayed or pleaded in the plaintiffs' complaint."9
In support of the above view, Singson v. Aragon was cited by the Court of
Appeals. 10 As was there held by this Court: "From the above legal provisions it
appears that exemplary damages may be imposed by way of example or correction
only in addition, among others, to compensatory damages, but that they cannot be
recovered as a matter of right, their determination depending upon the discretion of
the court. It further appears that the amount of exemplary damages need not be
proved, because its determination depends upon the amount of compensatory
damages that may be awarded to the claimant. If the amount of exemplary damages
need not be proved, it need not also be alleged, and the reason is obvious because it
is merely incidental or dependent upon what the court may award as compensatory
damages. Unless and until this premise is determined and established, what may be
claimed as exemplary damages would amount to a mere surmise or speculation. It
follows as a necessary consequence that the amount of exemplary damages need
not be pleaded in the complaint because the same cannot be predetermined. One
can merely ask that it be determined by the court if in the use of its discretion the
same is warranted by the evidence, and this is just what appellee has done.".
Such a principle has been repeatedly upheld. 11 In Corpuz v. Cuaderno, 12 this Court,
again through Justice J.B.L. Reyes, made clear that the amount "lies within the
province of the court a quo, ..." It must be admitted, of course, that where it could be
shown that a tribunal acted "with vindictiveness or wantonness and not in the exercise
of honest judgment," then there is room for the interposition of the corrective power of
this Tribunal.
No such reproach can be hurled at the decision and resolution now under review. No
such indictment would be justified. As noted earlier, both the second and the third
assignments of error are devoid of merit. Nor is there any occasion to consider further
the fourth assigned error, petitioner being dissatisfied with the award of P5,000.00 as
attorney's fees to respondents. On its face, such an assignment of an alleged error is
conspicuously futile.
The judgment, however, must be modified in accordance with the ruling of this Court
in Soberano v. Manila Railroad Co. 13 Respondents are entitled to interest for the
amount of compensatory damages from the date of the decision of the lower court
and legal interest on the exemplary damages from the date of the decision of the
Court of Appeals.
WHEREFORE, as thus modified, the decision is affirmed, petitioners being liable for
the sum of P40,000.00 in the concept of compensatory damages with interest at the
legal rate from and after January 26, 1960, and the sum of P30,000.00 as exemplary
damages with interest at the legal rate from and after December 14, 1964, as well as
for the sum of P5,000.00 as attorney's fees, likewise earning a legal rate of interest
from and after January 26, 1960. Costs against petitioners

TRANSPORTATION LAW – Chapter 4

10.) G.R. No. L-22272             June 26, 1967
ANTONIA MARANAN, plaintiff-appellant,
vs.
PASCUAL PEREZ, ET AL., defendants.
PASCUAL PEREZ, defendant appellant.
Rogelio Corachea, on October 18, 1960, was a passenger in a taxicab owned and
operated by Pascual Perez when he was stabbed and killed by the driver, Simeon
Valenzuela.
Valenzuela was prosecuted for homicide in the Court of First Instance of Batangas.
Found guilty, he was sentenced to suffer imprisonment and to indemnify the heirs of
the deceased in the sum of P6,000. Appeal from said conviction was taken to the
Court of Appeals.
On December 6 1961, while appeal was pending in the Court of Appeals, Antonia
Maranan, Rogelio's mother, filed an action in the Court of First Instance of Batangas
to recover damages from Perez and Valenzuela for the death of her son. Defendants
asserted that the deceased was killed in self-defense, since he first assaulted the
driver by stabbing him from behind. Defendant Perez further claimed that the death
was a caso fortuito for which the carrier was not liable.
The court a quo, after trial, found for the plaintiff and awarded her P3,000 as
damages against defendant Perez. The claim against defendant Valenzuela was
dismissed. From this ruling, both plaintiff and defendant Perez appealed to this Court,
the former asking for more damages and the latter insisting on non-liability.
Subsequently, the Court of Appeals affirmed the judgment of conviction earlier
mentioned, during the pendency of the herein appeal, and on May 19, 1964, final
judgment was entered therein. (Rollo, p. 33).
Defendant-appellant relies solely on the ruling enunciated in Gillaco v. Manila
Railroad Co., 97 Phil. 884, that the carrier is under no absolute liability for assaults of
its employees upon the passengers. The attendant facts and controlling law of that
case and the one at bar are very different however. In the Gillaco case, the
passenger was killed outside the scope and the course of duty of the guilty employee.
As this Court there found:
x x x when the crime took place, the guard Devesa had no duties to discharge in
connection with the transportation of the deceased from Calamba to Manila. The
stipulation of facts is clear that when Devesa shot and killed Gillaco, Devesa was
assigned to guard the Manila-San Fernando (La Union) trains, and he was at Paco
Station awaiting transportation to Tutuban, the starting point of the train that he was
engaged to guard. In fact, his tour of duty was to start at 9:00 two hours after the
commission of the crime. Devesa was therefore under no obligation to safeguard the
passengers of the Calamba-Manila train, where the deceased was riding; and the
killing of Gillaco was not done in line of duty. The position of Devesa at the time was
TRANSPORTATION LAW – Chapter 4
that of another would be passenger, a stranger also awaiting transportation, and not
that of an employee assigned to discharge any of the duties that the Railroad had
assumed by its contract with the deceased. As a result, Devesa's assault can not be
deemed in law a breach of Gillaco's contract of transportation by a servant or
employee of the carrier. . . . (Emphasis supplied)
Now here, the killing was perpetrated by the driver of the very cab transporting the
passenger, in whose hands the carrier had entrusted the duty of executing the
contract of carriage. In other words, unlike the Gillaco case, the killing of the
passenger here took place in the course of duty of the guilty employee and when the
employee was acting within the scope of his duties.
Moreover, the Gillaco case was decided under the provisions of the Civil Code of
1889 which, unlike the present Civil Code, did not impose upon common carriers
absolute liability for the safety of passengers against wilful assaults or negligent acts
committed by their employees. The death of the passenger in the Gillaco case was
truly a fortuitous event which exempted the carrier from liability. It is true that Art.
1105 of the old Civil Code on fortuitous events has been substantially reproduced in
Art. 1174 of the Civil Code of the Philippines but both articles clearly remove from
their exempting effect the case where the law expressly provides for liability in spite of
the occurrence of force majeure. And herein significantly lies the statutory difference
between the old and present Civil Codes, in the backdrop of the factual situation
before Us, which further accounts for a different result in the Gillaco  case. Unlike the
old Civil Code, the new Civil Code of the Philippines expressly makes the common
carrier liable for intentional assaults committed by its employees upon its passengers,
by the wording of Art. 1759 which categorically states that
Common carriers are liable for the death of or injuries to passengers through the
negligence or willful acts of the former's employees, although such employees may
have acted beyond the scope of their authority or in violation of the orders of the
common carriers.
The Civil Code provisions on the subject of Common Carriers1 are new and were
taken from Anglo-American Law.2 There, the basis of the carrier's liability for assaults
on passengers committed by its drivers rests either on (1) the doctrine of respondeat
superior or (2) the principle that it is the carrier's implied duty  to transport the
passenger safely.3
Under the first, which is the minority view, the carrier is liable only when the act of the
employee is within the scope of his authority and duty. It is not sufficient that the act
be within the course of employment only.4
Under the second view, upheld by the majority and also by the later cases, it is
enough that the assault happens within the course of the employee's duty. It is no
defense for the carrier that the act was done in excess of authority or in disobedience
of the carrier's orders.5 The carrier's liability here is absolute in the sense that it
practically secures the passengers from assaults committed by its own employees.6
As can be gleaned from Art. 1759, the Civil Code of the Philippines evidently follows
the rule based on the second view. At least three very cogent reasons underlie this
rule. As explained in Texas Midland R.R. v. Monroe, 110 Tex. 97, 216 S.W. 388, 389-
390, and Haver v. Central Railroad Co., 43 LRA 84, 85: (1) the special undertaking of
the carrier requires that it furnish its passenger that full measure of protection
afforded by the exercise of the high degree of care prescribed by the law, inter
alia  from violence and insults at the hands of strangers and other passengers, but
above all, from the acts of the carrier's own servants charged with the passenger's
safety; (2) said liability of the carrier for the servant's violation of duty to passengers,
is the result of the formers confiding in the servant's hands the performance of his
contract to safely transport the passenger, delegating therewith the duty of protecting
the passenger with the utmost care prescribed by law; and (3) as between the carrier
and the passenger, the former must bear the risk of wrongful acts or negligence of the
carrier's employees against passengers, since it, and not the passengers, has power
to select and remove them.

Accordingly, it is the carrier's strict obligation to select its drivers and similar
employees with due regard not only to their technical competence and physical
ability, but also, no less important, to their total personality, including their patterns of
behavior, moral fibers, and social attitude.

Applying this stringent norm to the facts in this case, therefore, the lower court rightly
adjudged the defendant carrier liable pursuant to Art. 1759 of the Civil Code. The
dismissal of the claim against the defendant driver was also correct. Plaintiff's action
was predicated on breach of contract of carriage7 and the cab driver was not a party
thereto. His civil liability is covered in the criminal case wherein he was convicted by
final judgment.

In connection with the award of damages, the court a quo granted only P3,000 to
plaintiff-appellant. This is the minimum compensatory damages amount recoverable
under Art. 1764 in connection with Art. 2206 of the Civil Code when a breach of
contract results in the passenger's death. As has been the policy followed by this
Court, this minimal award should be increased to P6,000. As to other alleged actual
damages, the lower court's finding that plaintiff's evidence thereon was not
convincing,8 should not be disturbed. Still, Arts. 2206 and 1764
award moral damages in addition to compensatory damages, to the parents of the
passenger killed to compensate for the mental anguish they suffered. A claim
therefor, having been properly made, it becomes the court's duty to award moral
damages.9 Plaintiff demands P5,000 as moral damages; however, in the
circumstances, We consider P3,000 moral damages, in addition to the P6,000
damages afore-stated, as sufficient. Interest upon such damages are also due to
plaintiff-appellant. 10

Wherefore, with the modification increasing the award of actual damages in plaintiff's
favor to P6,000, plus P3,000.00 moral damages, with legal interest on both from the
filing of the complaint on December 6, 1961 until the whole amount is paid, the
judgment appealed from is affirmed in all other respects. No costs. So ordered.

TRANSPORTATION LAW – Chapter 4

11.) G.R. No. L-10195 December 29, 1916
YU CON, plaintiff-appellee,
vs. GLICERIO IPIL, NARCISO LAURON, and JUSTO SOLAMO, defendants-
appellants.
The purpose of the action brought in these proceedings is to enable the plaintiff to
recover from the defendants jointly and severally the sum of P450, which had been
delivered by the plaintiff to the first and third of the above-named defendants, master
and supercargo, respectively, of a banca  named Maria  belonging to the second
defendant, to be carried, together with various merchandise belonging to the plaintiff,
from the port of Cebu to the town of Catmon of the Province of Cebu. By virtue of the
contract executed between the said second defendant and the plaintiff, the money
and merchandise were to be transported by the said craft between the points above-
named in consideration of the payment of a certain sum for each voyage. The money
disappeared from said craft during the night of October 18, 1911, while it was
anchored in the port of Cebu and ready to sail for its destination, Catmon, and was
not afterwards found. The plaintiff based his action on the charge that the
disappearance of said sum was due to the abandonment, negligence, or voluntary
breach, on the part of the defendants, of the duty they had in respect to the safe-
keeping of the aforementioned sum.
The defendants, besides denying the allegations of the complaint, pleaded in special
defense that the plaintiff, at his own expense and under his exclusive responsibility,
chartered the said banca, the property of the defendant Lauron, for the fixed period of
three days, at the price of P10 per diem, and that, through the misfortune, negligence,
or abandonment of the plaintiff himself, the loss complained of occurred, while
said banca was at anchor in the port of Cebu, and was caused by theft committed by
unknown thieves. They further alleged that said defendant Lauron, the owner of
the banca merely placed this craft at the disposal of the plaintiff for the price and
period agreed upon, and did not go with the banca on its voyage from Catmon to
Cebu. As a counterclaim, the defendants also asked that the plaintiff be ordered to
pay the freight agreed upon, which had not yet been paid, amounting to P80, plus the
sum of P70, as an indemnity for the losses and damages caused them by the
attachment of the banca, issued at the instance of the plaintiff upon filing his
complaint. They also prayed for the additional sum of P100, for the deterioration of
the said banca, and also that of P200 for other deterioration suffered by the same
since November, 1911, and which had not bee paid for. Finally, the defendants asked
to be absolved from the complaint.
At the termination of the trial, the court, in view of the evidence adduced, held that
there was no room to doubt that the sole cause of the disappearance of the money
from the said banca  was the negligence of the master and the supercargo, the
defendants Ipil and Solamo, respectively, and that the defendant Narciso Lauron was
responsible for that negligence, as owner of the banca, pursuant to articles 589, 587,
and 618 of the Code of Commerce, the plaintiff therefore being entitled to recover the
amount lost. Judgment was rendered on April 20, 1914, in favor of the plaintiff and
against the defendants jointly and severally for the sum of P450, with interest thereon
TRANSPORTATION LAW – Chapter 4
at the rage of 6 per cent per annum from the date of filing of the complaint, October
24, 1911, with costs. The plaintiff was absolved from the defendant's counterclaim.
From this judgment the defendants excepted and at the same time moved for a new
trial. Their motion was denied, to which ruling they also excepted, and, through the
proper bill of exceptions, entered and appeal to this Supreme Court. In their brief they
allege that the trial court erred:
…
The evidence shows that the plaintiff Yu Con, a merchant and a resident of the town
of San Nicolas, of the city of Cebu, engaged in the sale of cloth and domestic articles
and having a share in a shop, or small store, situated in the town of Catmon, of said
province, had several times chartered from the defendant Narciso Lauron,
a banca named Maria belonging to the latter, of which Glicerio Ipil was master and
Justo Solamo, supercargo, for the transportation of certain merchandise and some
money to and from the said town and the port of Cebu, that, on or about the 17th of
October, 1911, the plaintiff chartered the said banca from the defendant Lauron for
the transportation of various merchandise from the port of Cebu to Catmon, at the
price of P45 for the round trip, which merchandise was loaded on board the said craft
which was then at anchor in front of one of the graded fills of the wharf of said port;
that in the afternoon of the following day, he delivered to the other two defendants,
Ipil, and Solamo, master and supercargo, respectively, of the afore-named banca, the
sum of P450, which was in a trunk belonging to the plaintiff and was taken charge of
by said two defendants, who received this money from the plaintiff, for the purpose of
its delivery to the latter's shop in Catmon for the purchase of corn in this town; that
while the money was still in said truck abroad the vessel, on the night of the said 18th
of October, the time scheduled for the departure of the Maria  from the port of Cebu,
said master and said supercargo transferred the P450 from the plaintiff's trunk, where
it was, to theirs, which was in a stateroom of the banca, from which stateroom both
the trunk and the money disappeared during that same night, and that the
investigations, made to ascertain their whereabouts, produced no result.
The facts are also admitted by the aforementioned master and supercargo, two of the
defendants, that they received from the plaintiff said P450, which sum was in the
latter's own trunk which was placed outside the stateroom of the banca, for the
reason, as they said, that there was no room for it inside the stateroom; that these
defendants therefore transferred said money to their trunk, which was inside the
stateroom, and that this trunk and the P450 therein contained disappeared from the
boat during the night of that same day; that said sum had not been found or returned
to the plaintiff; that the plaintiff, being on the banca in the afternoon of that day, when
his trunk containing the P450 was carried aboard, and seeing that said two
defendants, who had the key of the trunk, has removed said sum to their trunk inside
the stateroom, charged them to take special care of the money; that the master Ipil
assured the plaintiff that there was no danger of the money being lost; and that, final,
during the night in question, both the master and the supercargo and four cabin-boys
were aboard the banca.
It was likewise proven by the affidavits made by the master Ipil, the supercargo
Solamo, and the cabin-boys of said vessel, Juan Quiamco and Gabriel Basang,
before the provincial fiscal of Cebu on the day following the commission of the theft,
which affidavits were presented at the trial as Exhibits A, 3, 4, and 5, and by the
testimony given at the trial by the defendants Ipil and Solamo, that both said cabin-
boys and the other two, Simeon Solamo, and said cabin-boys ad the other two,
Simeon Solamo, and Eulalio Quiamco, knew of the existence of the money in the
trunk inside the stateroom and witnessed its removal to said trunk from the plaintiff's;
that the last two cabin- boys above-named, in company with the master and the
supercargo, conveyed the plaintiff's trunk, in which the money was previously
contained, from the plaintiff's shop to the banca; and that no person not belonging to
the vessel knew that the money was in the trunk inside said stateroom.
According to the testimony of the master Ipil himself he slept outside the stateroom
that night, but a cabin-boy named Gabriel slept inside. The latter, however, was not
presented by the defendants to be examined in regard to this point, nor does it
appear that he testified in respect thereto in his affidavit, Exhibit 5, before referred to,
presented by the defendant's own counsel. The master Ipil and the supercargo
Solamo also testified that they left the cabin-boy Simeon Solamo on guard that night;
but this affirmation was not corroborated by Solamo at the trial, for he was not
introduced as a witness, and only his affidavit, Exhibit 2, taken before the fiscal of
Cebu on the day following the commission of the crime, was presented by the
defendants. This affidavit, which should have been admitted and not rejected, as was
done by the court and excepted to by the defendants, shows that Simeon Solamo
stated that he was not designated to do guard duty that night, but that on the morning
of the said 19th of October, that is, the next day, all agreed that affiant should say that
he was on guard, though it was not true that he was.
Finally, said two defendants, the master and the supercargo, gave no satisfactory
explanation in regard to the disappearance of the trunk and the money therein
contained, from the stateroom in which the trunk was, nor as to who stole or might
have stolen it. The master of the banca merely testified that they, he and the
supercargo, did to know who the robbers were, for, when the robbery was committed,
they were sound asleep, as they were tired, and that he believed that the guard
Simeon also fell asleep because he, too, was tired. The second defendant gave the
same testimony. Both of them testified that the small window of the stateroom had
been broken, and the first of them,  i.e., the master, stated that all the window-blinds
had been removed from the windows, as well as part of the partition in which they
were, and that the trunk in which the money was contained could have been passed
through said small window, because, as this witness himself had verified, the
Chinaman's trunk, which differed but a little from the one stolen, could be passed
through the same opening. The chief pilot of the harbor of Cebu, Placido Sepeda,
who officially visited the said banca, also stated that the small wooden window of the
stateroom was broken, and that he believed that in breaking it much noise must have
been produced. However, no evidence whatever was offered by counsel for the
defendants to prove that it might have been possible to remove the trunk from the
stateroom through the opening made by the breaking of the small window, neither
was the size of the trunk proven, in relation to the Chinaman's to which the defendant
master referred in his testimony, so that it might be verified whether the statement
made by the latter was true, viz., that it might have been possible to remove from the
TRANSPORTATION LAW – Chapter 4
stateroom through said opening the trunk in which the P450 were contained, which
sum, the same as the trunk, its container, had not been found, in spite of the
investigation made for the purpose. Furthermore, it was not proven, nor is there any
circumstantial evidence to show, that the robbery in question was committed by
persons not belonging to the craft.
It is therefore beyond all doubt that the loss or disappearance, on the night
aforementioned, of the P450, the property of the plaintiff, which, were in the
possession of the defendants, the master and the supercargo of the banca Maria,
occurred through the manifest fault and negligence of said defendants, for, not only
did they fail to take the necessary precautions in order that the stateroom containing
the trunk in which they kept the money should be properly guarded by members of
the crew and put in such condition that it would be impossible to steal the trunk from it
or that persons not belonging to the vessel might force an entrance into the stateroom
from the outside, but also they did not expressly station some person inside the
stateroom for the guarding and safe-keeping of the trunk, for it was not proven that
the cabin-boy Gabriel slept there, as the master of the vessel, Ipil, stated, nor that the
other Cabin-boy, Simeon Solamo, was on guard that night, for the latter contradicted
the statements made by the two defendants on this point. On the contrary, it was
proven by the master's own statement that all the people of the vessel, including
himself and the supercargo Solamo, slept soundly that night; which fact cannot, in
any manner, serve them as an excuse, nor can it be accepted as an explanation of
the statement that they were not aware of what was then occuring on board, if the
trunk was actually stolen by outsiders and removed through the small window of the
stateroom, a detail which also was not proven, but, on the contrary, increases their
liability, because it is very strange that none of them, who were six and were around
or near the stateroom, should have heard the noise which the robbers must have
made in breaking its window. All of these circumstances, together with that of its
having been impossible to know who took the trunk and the money and the failure to
recover the one or the other make the conduct of the two defendants and of the other
members of the crew of banca, eminently supicious and prevent our holding that the
disappearance or loss of the money was due to a fortuitous event, to force majeure,
or that it was an occurrence which could not have been foreseen, or which, if
foreseen, was inevitable.
It is unquestionable that the defendants Glicerio Ipil and Justo Solamo were the
carriers of the said P450 belonging to the plaintiff, and that they received this sum
from the latter for the purpose of delivering it to the store of the town of Catmon, to
which it had been consigned. Under such circumstances, said defendants were the
depositaries of the money.
Manresa, in his Commentaries on the Civil Code (Vol. 10, p. 773), in treating of the
provisions of the said code concerning transportation by sea and by land of both
persons and things, says:
Liability of carriers. — In order that a thing may be transported, it must be delivered to
the carrier, as the Code says. From the time it is delivered to the carrier or shipper
until it is received by the consignee, the carrier has it in his possession, as a
necessary condition for its transportation, and is obliged to preserve and guard it;
wherefore it is but natural and logical that he should be responsible for it.
The Code discovers in the relation of all these elements the factors which go to make
up the conception of a trust, and, taking into account that the delivery of the thing on
the part of the shipper is unavoidable, if the transportation is to take place, esteem
that, at least in certain respects, such trusts are necessary.
The said two defendants being the depositaries of the sum in question, and they
having failed to exercise for its safe-keeping the diligence required by the nature of
the obligation assumed by them and by the circumstances of the time and the place,
it is evident that, in pursuance of the provisions of articles 1601 and 1602, in their
relation to articles 1783 and 1784, and as prescribed in articles 1770, of the Civil
Code, they are liable for its loss or misplacement and must restore it to the plaintiff,
together with the corresponding interest thereon as an indemnity for the losses and
damages caused him through the loss of the said sum.
With respect to the other defendant, Narciso Lauron, as he was the owner of the
vessel in which the loss or misplacement of the P450 occurred, of which vessel, as
aforestated, Glicerio Ipil was master and Justo Solamo, supercargo, both of whom
were appointed to, or chosen for, the positions they held, by the defendant himself,
and, as the aforementioned sum was delivered to the said master, Ipil, and the
merchandise to be transported by means of said vessel from the port of Cebu to the
town of Catmon was laden by virtue of a contract executed by and between the
plaintiff and the owner of the vessel, Narciso Lauron, it behooves us to examine
whether the latter, also, should be held to be liable, as requested by the plaintiff in his
complaint.
Said vessel was engaged in the transportation of merchandise by sea and made
voyages to and from the port of Cebu to Catmon, and had been equipped and
victualed for this purpose by its owner, Narciso Lauron, with whom, as aforesaid, the
plaintiff contracted for the transportation of the merchandise which was to be carried,
on the date hereinabove mentioned, from the port of Cebu to the town of Catmon.
For legal purposes, that is, for the determination of the nature and effect of the
relations created between the plaintiff, as owner of the merchandise laden on said
craft and of the money that was delivered to the master, Ipil, and the defendant
Lauron, as owner of the craft, the latter was a vessel, according to the meaning and
construction given to the word vessel in the Mercantile Code, in treating of maritime
commerce, under Title 1, Book 3.
The word vessel serves to designate every kind of craft by whatever particular or
technical name it may now be known or which nautical advancements may give it in
the future. (Commentaries on the Code of Commerce, in the General Review of
Legislation and Jurisprudence, founded by D. Jose Reus y Garcia, Vol., 2 p. 136.)
According to the Dictionary of Legislation and Jurisprudence by Escriche, a vessel is
any kind of craft, considering solely the hull.
TRANSPORTATION LAW – Chapter 4
Blanco, the commentator on mercantile law, in referring to the grammatical meaning
of the word "ship" and "vessels," says, in his work aforecited, that these terms
designate every kind of craft, large or small, whether belonging to the merchant
marine or to the navy. And referring to their juridical meaning, he adds: "This does not
differ essentially from the grammatical meaning; the words "ship" and "vessel" also
designate every craft, large or small, so long as it be not an accessory of another,
such as the small boat of a vessel, of greater or less tonnage. This definition
comprises both the craft intended for ocean or for coastwise navigation, as well as the
floating docks, mud lighters, dredges, dumpscows or any other floating apparatus
used in the service of an industry or in that of maritime commerce. . . ." (Vol. 1, p.
389.)
According to the foregoing definitions, then, we should that the banca  called Maria,
chartered by the plaintiff Yu Con from the defendant Narciso Lauron, was a "vessel",
pursuant to the meaning this word has in mercantile law, that is, in accordance with
the provisions of the Code of Commerce in force.
Glicerio Ipil, the master of the said banca Maria, must also be considered as its
captain, in the legal acceptation of this word.
The same Code of Commerce in force in these Islands compares, in its article 609,
masters with captains. It is to be noted that in the Code of Commerce of Spain the
denomination of arraeces is not included in said article as equivalent to that of
masters, as it is in the Code of these Islands.
Commenting on said article, the aforementioned General Review of Legislation and
Jurisprudence says:
The name of captain or master is given, according to the kind of vessel, to the person
in charge of it.
The first denomination is applied to those who govern vessels that navigate the high
seas or ships of large dimensions and importance, although they be engaged in the
coastwise trade.
Masters are those who command smaller ships engaged exclusively in the coastwise
trade.
For the purposes of maritime commerce, the words "captain" and "master" have the
same meaning; both being the chiefs or commanders of ships. (Vol. 2, p. 168.)
Article 587 of the Code of Commerce in force provides:
The agent shall be civilly liable for the indemnities in favor of third persons which arise
from the conduct of the captain in the care of the goods which the vessel carried; but
he may exempt himself therefrom by abandoning the vessel with all her equipments
and the freight he may have earned during the trip.
Article 618 of the same Code also prescribes:
The captain shall be civilly liable to the agent and the latter to the third persons who
may have made contracts with the former —
1. For all the damages suffered by the vessel and its cargo by reason of want of skill
or negligence on his part, If a misdemeanor or crime has been committed he shall be
liable in accordance with the Penal Code.
2. For all the thefts committed by the crew, reserving his right of action against the
guilty parties.
The Code of Commerce previous to the one now in force, to wit, that of 1829, in its
article 624, provided that the agent or shipowner should not be liable for any
excesses which, during the navigation, might be committed by the captain and crew,
and that, for the reason of such excesses, it was only proper to bring action against
the persons and property of those found guilty.
Estasen, in his work on the Institutes of Mercantile Law (Vol. 4, p. 280), makes the
following remarks, in referring to the exposition of reasons presented by the Code
Commission which prepared and presented for approval the Code of Commerce now
in force, in which exposition of reasons were set forth the fundamental differences
between the provisions contained in both codes, with respect to the subject-matter
now under discussion. He says:
Another very important innovation introduced by the Code is that relative to the
liability for misdemeanors and crimes committed by the captain or by members of the
crew. This is a matter of the greatest importance on which a variety of opinions has
been expressed by different juris-consults.
The old code declares the captain civilly liable for all damage sustained by the vessel
or its cargo through lack of skill or care on his part, through violations of the law, or
through unlawful acts committed by the crew. As regards the agent or shipowners, it
declares in unmistakeable terms that he shall in no wise be liable for any excesses
which, during the navigation, may be committed by the captain and the crew.
Upon an examination, in the light of the principles of modern law, of the standing legal
doctrine on the non-liability of the shipowner for the unlawful acts, that is, the crimes
or quasi crimes, committed by the captain and the crew, it is observed that it cannot
be maintained in the absolute and categorical terms in which it is formulated.
It is well and good that the shipowner be not held criminally liable for such crimes or
quasi crimes; but the cannot be excused from liability for the damage and harm
which, in consequence of those acts, may be suffered by the third parties who
contracted with the captain, in his double capacity of agent and subordinate of the
shipowner himself. In maritime commerce, the shippers and passengers in making
contracts with the captain do so through the confidence they have in the shipowner
TRANSPORTATION LAW – Chapter 4
who appointed him; they presume that the owner made a most careful investigation
before appointing him, and, above all, they themselves are unable to make such an
investigation, and even though they should do so, they could not obtain complete
security, inasmuch as the shipowner can, whenever he sees fir, appoint another
captain instead.
The shipowner is in the same case with respect to the members of the crew, for,
though he does not appoint directly, yet, expressly or tacitly, he contributes to their
appointment.
On the other hand, if the shipowner derives profits from the results of the choice of
the captain and the crew, when the choice turns out successful, it is also just that he
should suffer the consequences of an unsuccessful appointment, by application of the
rule of natural law contained in the Partidas, viz., that he who enjoys the benefits
derived from a thing must likewise suffer the losses that ensue therefrom.
Moreover, the Penal Code contains a general principle that resolves the question
under consideration, for it declares that such persons as undertake and carry on any
industry shall be civilly liable, in default of those who may be criminally liable, for the
misdemeanors and crimes committed by their subordinates in the discharge of their
duties.
The Code of Commerce in force omits the declaration of non-liability contained in the
old code, and clearly makes the shipowner liable civilly for the loss suffered by those
who contracted with the captain, in consequence of the misdemeanors and crimes
committed by the latter or by the members of the crew.
It is therefore evident that, in accordance with the provisions of the Code of
Commerce in force, which are applicable to the instance case, the defendant Narciso
Lauron, as the proprietor and owner of the craft of which Glicerio Ipil was the master
and in which, through the fault and negligence of the latter and of the supercago
Justo Solamo, there occurred the loss, theft, or robbery of the P450 that belonged to
the plaintiff and were delivered to said master and supercargo, a theft which, on the
other hand, as shown by the evidence, does not appear to have been committed by a
person not belonging to the craft, should, for said loss or theft, be held civilly liable to
the plaintiff, who executed with said defendant Lauron the contract for the
transportation of the merchandise and money aforementioned between the port of
Cebu and the town of Catmon, by means of the said craft.
Therefore, the trial court did not err in so holding in the judgement appealed from.
Therefore, and for all the reasons above set forth, we affirm the judgment appealed
from, with the costs of this instance against the appellants. So ordered.
12.) G.R. No. L-34597 November 5, 1982
ROSITO Z. BACARRO, WILLIAM SEVILLA, and FELARIO MONTEFALCON,
petitioners, vs. GERUNDIO B. CASTAÑO, and the COURT OF
APPEALS, respondents.
... In the afternoon of April 1, 1960, he (appellee) boarded the said jeep as a paying
passenger at Oroquieta bound for Jimenez, Misamis Occidental. It was then fined to
capacity, with twelve (12) passengers in all. 'The jeep was running quite fast and the
jeep while approaching the (Sumasap) bridge there was a cargo truck which blew its
horn for a right of way. The jeep gave way but did not change speed. ... When the
jeep gave way it turned to the right and continued running with the same speed. In so
doing ...the driver was not able to return the jeep to the proper place ... instead, it ran
obliquely towards the canal; that is why, we fell to the ditch. ... When the jeep was
running in the side of the road for few meters, naturally, the jeep was already inclined
and two passengers beside me were the ones who pushed me. I was pushed by the
two passengers beside me; that is why, when I was clinging, my leg and half of my
body were outside the jeep when it reached the canal. ... My right leg was
sandwiched by the body of the jeep and the right side of the ditch. ... My right leg was
broken.' He was rushed to the Saint Mary's Hospital where he stayed for about two
(2) months. 'My right leg is now shorter by one and one-half inches causing me to use
specially made shoes. ... I could not squat for a long time; I could not kneel for a long
time; and I could not even sit for a long time because I will suffer cramp. ... With my
three fingers I am still uneasy with my three fingers in my right hand. There is a
feeling of numbness with my three fingers even right now.
From appellee's version just set out, it appears that after he boarded the jeep in
question at Oroquieta, it was driven by defendant Montefalcon at around forty (40)
kilometers per hour bound for Jimenez; that while approaching Sumasap Bridge at
the said speed, a cargo truck coming from behind blew its horn to signal its intention
to overtake the jeep; that the latter, without changing its speed, gave way by swerving
to the right, such that both vehicles ran side by side for a distance of around twenty
(20) meters, and that thereafter as the jeep was left behind, its driver was unable to
return it to its former lane and instead it obliquely or diagonally ran down an inclined
terrain towards the right until it fell into a ditch pinning down and crushing appellee's
right leg in the process.
Throwing the blame for this accident on the driver of the cargo truck, appellants, in
turn, state the facts to be as follows:
In the afternoon of April 1, 1960, plaintiff Gerundio Castaño boarded the said jeepney
at Oroquieta bound for Jimenez, Misamis occidental. While said jeepney was
negotiating the upgrade approach of the Sumasap Bridge at Jimenez, Misamis
Occidental and at a distance of about 44 meters therefrom, a cargo truck, owned and
operated by a certain Te Tiong alias Chinggim, then driven by Nicostrato Digal, a
person not duly licensed to drive motor vehicles, overtook the jeepney so closely that
in the process of overtaking sideswiped the jeepney, hitting the reserve tire placed at
the left side of the jeepney with the hinge or bolt of the siding of the cargo truck,
causing the jeepney to swerve from its course and after running 14 meters from the
TRANSPORTATION LAW – Chapter 4
road it finally fell into the canal. The right side of the jeep fell on the right leg of the
plaintiff-appellee, crushing said leg against the ditch resulting in the injury to plaintiff-
appellee consisting of a broken right thigh.
and take the following stand: 'The main defense of defendants appellants is anchored
on the fact that the jeepney was sideswiped by the overtaking cargo truck'
(Appellants' Brief, pp. 3-4, 7).
It must be admitted, out of candor, that there is evidence of the sideswiping relied
upon by appellants. ....
This appeal by certiorari to review the decision of respondent Court of Appeals
asserts that the latter decided questions of substance which are contrary to law and
the approved decisions of this Court. Petitioners alleged that respondent Court of
Appeals erred (1) in finding contributory negligence on the part of jeepney driver
appellant Montefalcon for having raced with the overtaking cargo truck to the bridge
instead of slackening its speed, when the person solely responsible for the
sideswiping is the unlicensed driver of the overtaking cargo truck; (2) in finding the
jeepney driver not to have exercised extraordinary diligence, human care, foresight
and utmost. diligence of very cautious persons, when the diligence required pursuant
to Article 1763 of the New Civil Code is only that of a good father of a family since the
injuries were caused by the negligence of a stranger; and (3) in not considering that
appellants were freed from any liability since the accident was due to fortuitous event
- the sideswiping of the jeepney by the overtaking cargo truck.
We are not persuaded. The fact is, petitioner-driver Montefalcon did not slacken his
speed but instead continued to run the jeep at about forty (40) kilometers per hour
even at the time the overtaking cargo truck was running side by side for about twenty
(20) meters and at which time he even shouted to the driver of the truck. Hereunder is
the testimony of private respondent Gerundio B. Castaño on this point:
…
Thus, had Montefalcon slackened the speed of the jeep at the time the truck was
overtaking it, instead of running side by side with the cargo truck, there would have
been no contact and accident. He should have foreseen that at the speed he was
running, the vehicles were getting nearer the bridge and as the road was getting
narrower the truck would be to close to the jeep and would eventually sideswiped it.
Otherwise stated, he should have slackened his jeep when he swerved it to the right
to give way to the truck because the two vehicles could not cross the bridge at the
same time.
The second assigned error is centered on the alleged failure on the part of the
jeepney driver to exercise extraordinary diligence, human care, foresight and utmost
diligence of a very cautious person, when the diligence required pursuant to Article
1763 of the Civil Code is only that of a good father of a family. Petitioners contend
that the proximate cause of the accident was the negligence of the driver of the truck.
However, the fact is, there was a contract of carriage between the private respondent
and the herein petitioners in which case the Court of Appeals correctly applied
Articles 1733, 1755 and 1766 of the Civil Code which require the exercise of
extraordinary diligence on the part of petitioner Montefalcon.

Art. 1733. Common carriers, from the nature of their business and for reasons of
public policy, are bound to observe extraordinary diligence in the vigilance over the
goods and for the safety of the passengers transported by them, according to all the
circumstances of each case.

Art. 1755. A common carrier is bound to carry the Passengers safely as far as human
care and foresight can provide, using the utmost diligence of very cautious persons,
with a due regard for all the circumstances.

Art. 1766. In all matters not regulated by this Code, the rights and obligations of
common carriers shall be governed by the Code of Commerce and by special laws.

Indeed, the hazards of modern transportation demand extraordinary diligence. A

common carrier is vested with public interest. Under the new Civil Code, instead of
being required to exercise mere ordinary diligence a common carrier is exhorted to
carry the passengers safely as far as human care and foresight can provide "using
the utmost diligence of very cautious persons." (Article 1755). Once a passenger in
the course of travel is injured, or does not reach his destination safely, the carrier and
driver are presumed to be at fault.

The third assigned error of the petitioners would find fault upon respondent court in
not freeing petitioners from any liability, since the accident was due to a fortuitous
event. But, We repeat that the alleged fortuitous event in this case - the sideswiping
of the jeepney by the cargo truck, was something which could have been avoided
considering the narrowness of the Sumasap Bridge which was not wide enough to
admit two vehicles. As found by the Court of Appeals, Montefalcon contributed to the
occurrence of the mishap.

WHEREFORE, the decision of the respondent Court of Appeals, dated September

30,1971, is hereby AFFIRMED. With costs.

TRANSPORTATION LAW – Chapter 4

13.) 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.
Before us is an appeal by certiorari filed by petitioner Japan Airlines, Inc. (JAL)
seeking the reversal of the decision of the Court of Appeals, 1 which affirmed with
modification the award of damages made by the trial court in favor of herein private
respondents Enrique Agana, Maria Angela Nina Agana, Adelia Francisco and Jose
Miranda.
On June 13, 1991, private respondent Jose Miranda boarded JAL flight No. JL 001 in
San Francisco, California bound for Manila. Likewise, on the same day private
respondents Enrique Agana, Maria Angela Nina Agana and Adelia Francisco left Los
Angeles, California for Manila via JAL flight No. JL 061. As an incentive for travelling
on the said airline, both flights were to make an overnight stopover at Narita, Japan,
at the airlines' expense, thereafter proceeding to Manila the following day.
Upon arrival at Narita, Japan on June 14, 1991, private respondents were billeted at
Hotel Nikko Narita for the night. The next day, private respondents, on the final leg of
their journey, went to the airport to take their flight to Manila. However, due to the Mt.
Pinatubo eruption, unrelenting ashfall blanketed Ninoy Aquino International Airport
(NAIA), rendering it inaccessible to airline traffic. Hence, private respondents' trip to
Manila was cancelled indefinitely.
To accommodate the needs of its stranded passengers, JAL rebooked all the Manila-
bound passengers on flight No. 741 due to depart on June 16, 1991 and also paid for
the hotel expenses for their unexpected overnight stay. On June 16, 1991, much to
the dismay of the private respondents, their long-anticipated flight to Manila was
again cancelled due to NAIA's indefinite closure. At this point, JAL informed the
private respondents that it would no longer defray their hotel and accommodation
expense during their stay in Narita.
Since NAIA was only reopened to airline traffic on June 22, 1991, private respondents
were forced to pay for their accommodations and meal expenses from their personal
funds from June 16 to June 21, 1991. Their unexpected stay in Narita ended on June
22, 1991 when they arrived in Manila on board JL flight No. 741.
Obviously, still reeling from the experience, private respondents, on July 25, 1991,
commenced an action for damages against JAL before the Regional Trial Court of
Quezon City, Branch 104. 2 To support their claim, private respondents asserted that
JAL failed to live up to its duty to provide care and comfort to its stranded passengers
when it refused to pay for their hotel and accommodation expenses from June 16 to
21, 1991 at Narita, Japan. In other words, they insisted that JAL was obligated to
shoulder their expenses as long as they were still stranded in Narita. On the other
TRANSPORTATION LAW – Chapter 4
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.
Failing in its bid to reconsider the decision, JAL has now filed this instant petition.
The issue to be resolved is whether JAL, as a common carrier has the obligation to
shoulder the hotel and meal expenses of its stranded passengers until they have
reached their final destination, even if the delay were caused by "force majeure."
To begin with, there is no dispute that the Mt. Pinatubo eruption prevented JAL from
proceeding to Manila on schedule. Likewise, private respondents concede that such
event can be considered as "force majeure" since their delayed arrival in Manila was
not imputable to JAL. 5
However, private respondents contend that while JAL cannot be held responsible for
the delayed arrival in Manila, it was nevertheless liable for their living expenses during
their unexpected stay in Narita since airlines have the obligation to ensure the comfort
and convenience of its passengers. While we sympathize with the private
respondents' plight, we are unable to accept this contention.
We are not unmindful of the fact that in a plethora of cases we have consistently ruled
that a contract to transport passengers is quite different in kind, and degree from any
other contractual relation. It is safe to conclude that it is a relationship imbued with
public interest. Failure on the part of the common carrier to live up to the exacting
standards of care and diligence renders it liable for any damages that may be
sustained by its passengers. However, this is not to say that common carriers are
absolutely responsible for all injuries or damages even if the same were caused by a
fortuitous event. To rule otherwise would render the defense of "force majeure," as an
exception from any liability, illusory and ineffective.
Accordingly, there is no question that when a party is unable to fulfill his obligation
because of "force majeure," the general rule is that he cannot be held liable for
damages for non-performance.6 Corollarily, when JAL was prevented from resuming
its flight to Manila due to the effects of Mt. Pinatubo eruption, whatever losses or
damages in the form of hotel and meal expenses the stranded passengers incurred,
cannot be charged to JAL. Yet it is undeniable that JAL assumed the hotel expenses
of respondents for their unexpected overnight stay on June 15, 1991.
Admittedly, to be stranded for almost a week in a foreign land was an exasperating
experience for the private respondents. To be sure, they underwent distress and
anxiety during their unanticipated stay in Narita, but their predicament was not due to
the fault or negligence of JAL but the closure of NAIA to international flights. Indeed,
to hold JAL, in the absence of bad faith or negligence, liable for the amenities of its
stranded passengers by reason of a fortuitous event is too much of a burden to
assume.
Furthermore, it has been held that airline passengers must take such risks incident to
the mode of travel. 7 In this regard, adverse weather conditions or extreme climatic
changes are some of the perils involved in air travel, the consequences of which the
passenger must assume or expect. After all, common carriers are not the insurer of
all risks. 8
Paradoxically, the Court of Appeals, despite the presence of "force majeure," still
ruled against JAL relying in our decision in PAL v. Court of Appeals, 9 thus:
The position taken by PAL in this case clearly illustrates its failure to grasp the
exacting standard required by law. Undisputably, PAL's diversion of its flight due to
inclement weather was a fortuitous event. Nonetheless, such occurrence did not
terminate PAL's contract with its passengers. Being in the business of air carriage
and the sole one to operate in the country, PAL is deemed equipped to deal with
situations as in the case at bar. What we said in one case once again must be
stressed, i.e., the relation of carrier and passenger continues until the latter has been
landed at the port of destination and has left the carrier's premises. Hence, PAL
necessarily would still have to exercise extraordinary diligence in safeguarding the
comfort, convenience and safety of its stranded passengers until they have reached
their final destination. On this score, PAL grossly failed considering the then ongoing
battle between government forces and Muslim rebels in Cotabato City and the fact
that the private respondent was a stranger to the place.
The reliance is misplaced. The factual background of the PAL case is different from
the instant petition. In that case there was indeed a fortuitous event resulting in the
diversion of the PAL flight. However, the unforeseen diversion was worsened when
"private respondents (passenger) was left at the airport and could not even hitch a
ride in a Ford Fiera loaded with PAL personnel," 10 not to mention the apparent apathy
of the PAL station manager as to the predicament of the stranded passengers. 11 In
TRANSPORTATION LAW – Chapter 4
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.
14.) G.R. No. 122039 May 31, 2000
VICENTE CALALAS, petitioner, vs. COURT OF APPEALS, ELIZA JUJEURCHE
SUNGA and FRANCISCO SALVA, respondents.
At 10 o'clock in the morning of August 23, 1989, private respondent Eliza Jujeurche
G. Sunga, then a college freshman majoring in Physical Education at the Siliman
University, took a passenger jeepney owned and operated by petitioner Vicente
Calalas. As the jeepney was filled to capacity of about 24 passengers, Sunga was
given by the conductor an "extension seat," a wooden stool at the back of the door at
the rear end of the vehicle.
On the way to Poblacion Sibulan, Negros Occidental, the jeepney stopped to let a
passenger off. As she was seated at the rear of the vehicle, Sunga gave way to the
outgoing passenger. Just as she was doing so, an Isuzu truck driven by Iglecerio
Verena and owned by Francisco Salva bumped the left rear portion of the jeepney. As
a result, Sunga was injured. She sustained a fracture of the "distal third of the left
tibia-fibula with severe necrosis of the underlying skin." Closed reduction of the
fracture, long leg circular casting, and case wedging were done under sedation. Her
confinement in the hospital lasted from August 23 to September 7, 1989. Her
attending physician, Dr. Danilo V. Oligario, an orthopedic surgeon, certified she would
remain on a cast for a period of three months and would have to ambulate in crutches
during said period.
On October 9, 1989, Sunga filed a complaint for damages against Calalas, alleging
violation of the contract of carriage by the former in failing to exercise the diligence
required of him as a common carrier. Calalas, on the other hand, filed a third-party
complaint against Francisco Salva, the owner of the Isuzu truck.
The lower court rendered judgment against Salva as third-party defendant and
absolved Calalas of liability, holding that it was the driver of the Isuzu truck who was
responsible for the accident. It took cognizance of another case (Civil Case No.
3490), filed by Calalas against Salva and Verena, for quasi-delict, in which Branch 37
of the same court held Salva and his driver Verena jointly liable to Calalas for the
damage to his jeepney.
On appeal to the Court of Appeals, the ruling of the lower court was reversed on the
ground that Sunga's cause of action was based on a contract of carriage, not quasi-
delict, and that the common carrier failed to exercise the diligence required under the
Civil Code. The appellate court dismissed the third-party complaint against Salva and
adjudged Calalas liable for damages to Sunga. The dispositive portion of its decision
reads:
WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE,
and another one is entered ordering defendant-appellee Vicente Calalas to pay
plaintiff-appellant:
TRANSPORTATION LAW – Chapter 4
…
Hence, this petition. Petitioner contends that the ruling in Civil Case No. 3490 that the
negligence of Verena was the proximate cause of the accident negates his liability
and that to rule otherwise would be to make the common carrier an insurer of the
safety of its passengers. He contends that the bumping of the jeepney by the truck
owned by Salva was a caso fortuito. Petitioner further assails the award of moral
damages to Sunga on the ground that it is not supported by evidence.
The petition has no merit.
The argument that Sunga is bound by the ruling in Civil Case No. 3490 finding the
driver and the owner of the truck liable for quasi-delict ignores the fact that she was
never a party to that case and, therefore, the principle of res judicata does not apply.
Nor are the issues in Civil Case No. 3490 and in the present case the same. The
issue in Civil Case No. 3490 was whether Salva and his driver Verena were liable for
quasi-delict for the damage caused to petitioner's jeepney. On the other hand, the
issue in this case is whether petitioner is liable on his contract of carriage. The first,
quasi-delict, also known as culpa aquiliana or culpa extra contractual, has as its
source the negligence of the tortfeasor. The second, breach of contract or culpa
contractual, is premised upon the negligence in the performance of a contractual
obligation.
Consequently, in quasi-delict, the negligence or fault should be clearly established
because it is the basis of the action, whereas in breach of contract, the action can be
prosecuted merely by proving the existence of the contract and the fact that the
obligor, in this case the common carrier, failed to transport his passenger safely to his
destination.2 In case of death or injuries to passengers, Art. 1756 of the Civil Code
provides that common carriers are presumed to have been at fault or to have acted
negligently unless they prove that they observed extraordinary diligence as defined in
Arts. 1733 and 1755 of the Code. This provision necessarily shifts to the common
carrier the burden of proof.
There is, thus, no basis for the contention that the ruling in Civil Case No. 3490,
finding Salva and his driver Verena liable for the damage to petitioner's jeepney,
should be binding on Sunga. It is immaterial that the proximate cause of the collision
between the jeepney and the truck was the negligence of the truck driver. The
doctrine of proximate cause is applicable only in actions for quasi-delict, not in actions
involving breach of contract. The doctrine is a device for imputing liability to a person
where there is no relation between him and another party. In such a case, the
obligation is created by law itself. But, where there is a pre-existing contractual
relation between the parties, it is the parties themselves who create the obligation,
and the function of the law is merely to regulate the relation thus created. Insofar as
contracts of carriage are concerned, some aspects regulated by the Civil Code are
those respecting the diligence required of common carriers with regard to the safety
of passengers as well as the presumption of negligence in cases of death or injury to
passengers. It provides:
Art. 1733. Common carriers, from the nature of their business and for reasons of
public policy, are bound to observe extraordinary diligence in the vigilance over the
goods and for the safety of the passengers transported by them, according to all the
circumstances of each case.
Such extraordinary diligence in the vigilance over the goods is further expressed in
articles 1734, 1735, and 1746, Nos. 5, 6, and 7, while the extraordinary diligence for
the safety of the passengers is further set forth in articles 1755 and 1756.
Art. 1755. A common carrier is bound to carry the passengers safely as far as human
care and foresight can provide, using the utmost diligence of very cautious persons,
with due regard for all the circumstances.
Art. 1756. In case of death of or injuries to passengers, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove that
they observed extraordinary diligence as prescribed by articles 1733 and 1755.
In the case at bar, upon the happening of the accident, the presumption of negligence
at once arose, and it became the duty of petitioner to prove that he had to observe
extraordinary diligence in the care of his passengers.
Now, did the driver of jeepney carry Sunga "safely as far as human care and foresight
could provide, using the utmost diligence of very cautious persons, with due regard
for all the circumstances" as required by Art. 1755? We do not think so. Several
factors militate against petitioner's contention.
First, as found by the Court of Appeals, the jeepney was not properly parked, its rear
portion being exposed about two meters from the broad shoulders of the highway,
and facing the middle of the highway in a diagonal angle. This is a violation of the
R.A. No. 4136, as amended, or the Land Transportation and Traffic Code, which
provides:
Sec. 54. Obstruction of Traffic. — No person shall drive his motor vehicle in such a
manner as to obstruct or impede the passage of any vehicle, nor, while discharging or
taking on passengers or loading or unloading freight, obstruct the free passage of
other vehicles on the highway.
Second, it is undisputed that petitioner's driver took in more passengers than the
allowed seating capacity of the jeepney, a violation of §32(a) of the same law. It
provides:
Exceeding registered capacity. — No person operating any motor vehicle shall allow
more passengers or more freight or cargo in his vehicle than its registered capacity.
TRANSPORTATION LAW – Chapter 4
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.

TRANSPORTATION LAW – Chapter 4

15.) G.R. No. 89880             February 6, 1991
EMMA ADRIANO BUSTAMANTE, in her own behalf as Guardian-Ad-Litem of
minors: ROSSEL, GLORIA, YOLANDA, ERIC SON and EDERIC, all surnamed
BUSTAMANTE, Spouses SALVADOR JOCSON and PATRIA BONE-JOCSON,
Spouses JOSE RAMOS and ENRIQUETA CEBU-RAMOS, Spouses NARCISO-
HIMAYA and ADORACION MARQUEZ-HIMAYA, and Spouses JOSE
BERSAMINA and MA. COMMEMORACION PEREA-BUSTAMANTE, petitioners,
vs. THE HONORABLE COURT OF APPEALS, FEDERICO DEL PILAR AND
EDILBERTO MONTESIANO, respondents.
At about 6:30 in the morning of April 20, 1983, a collision occurred between a gravel
and sand truck, with Plate No. DAP 717, and a Mazda passenger bus with Motor No.
Y2231 and Plate No. DVT 259 along the national road at Calibuyo, Tanza, Cavite.
The front left side portion (barandilla) of the body of the truck sideswiped the left side
wall of the passenger bus, ripping off the said wall from the driver's seat to the last
rear seat.
Due to the impact, several passengers of the bus were thrown out and died as a
result of the injuries they sustained, Among those killed were the following:
1. Rogelio Bustamante, 40, husband of plaintiff Emma Adriano Bustamante and
father of plaintiffs Rossel, Gloria, Yolanda, Ericson, and Ederic, all surnamed
Bustamante;
2. Maria Corazon Jocson, 16, daughter of plaintiffs spouses Salvador and Patria
Jocson;
… Edilberto Montesiano are concerned. No costs in this instance.
During the incident, the cargo truck was driven by defendant Montesiano and owned
by defendant Del Pilar; while the passenger bus was driven by defendant Susulin.
The vehicle was registered in the name of defendant Novelo but was owned and/or
operated as a passenger bus jointly by defendants Magtibay and Serrado, under a
franchise, with a line from Naic, Cavite, to Baclaran, Paranaque, Metro Manila, and
vice versa, which Novelo sold to Magtibay on November 8, 1981, and which the latter
transferred to Serrado (Cerrado) on January 18, 1983.
Immediately before the collision, the cargo truck and the passenger bus were
approaching each other, coming from the opposite directions of the highway. While
the truck was still about 30 meters away, Susulin, the bus driver, saw the front wheels
of the vehicle wiggling. He also observed that the truck was heading towards his lane.
Not minding this circumstance due to his belief that the driver of the truck was merely
joking, Susulin shifted from fourth to third gear in order to give more power and speed
to the bus, which was ascending the inclined part of the road, in order to overtake or
pass a Kubota hand tractor being pushed by a person along the shoulder of the
TRANSPORTATION LAW – Chapter 4
highway. While the bus was in the process of overtaking or passing the hand tractor
and the truck was approaching the bus, the two vehicles sideswiped each other at
each other's left side. After the impact, the truck skidded towards the other side of the
road and landed on a nearby residential lot, hitting a coconut tree and felling it."
(Rollo, pp. 48-50)
After a careful perusal of the circumstances of the case, the trial court reached the
conclusion "that the negligent acts of both drivers contributed to or combined with
each other in directly causing the accident which led to the death of the
aforementioned persons. It could not be determined from the evidence that it was
only the negligent act of one of them which was the proximate cause of the collision.
In view of this, the liability of the two drivers for their negligence must be solidary.
(Rollo, pp. 50-51) Accordingly, the trial court rendered a decision on March 7, 1986,
the dispositive portion is hereunder quoted as follows:
WHEREFORE, defendants Valeriano Magtibay, Simplicio Serrado, Ricardo Susulin,
Efren Novelo, Federico del Pilar and Edilberto Montesiano are hereby ordered to pay
jointly and severally to the plaintiffs, as follows:
…
From said decision, only defendants Federico del Pilar and Edilberto Montesiano,
owner and driver, respectively, of the sand and gravel truck have interposed an
appeal before the respondent Court of Appeals. The Court of Appeals decided the
appeal on a different light. It rendered judgment on February 15, 1989, to wit:
WHEREFORE, the appealed judgment is hereby REVERSED and SET ASIDE and
the complaint dismissed insofar as defendants-appellants Federico del Pilar and
Hence, this petition.
Petitioners raised the following questions of law, namely:
First. Whether the respondent Court can legally and validly absolve defendants-
appellants from liability despite its own finding, as well as that of the trial court that
defendant-appellant Edilberto Montesiano, the cargo truck driver, was driving an old
vehicle very fast, with its wheels already wiggling, such that he had no more control of
his truck.
…
Third. Whether the respondent court has properly and legally applied the doctrine of
"last clear chance" in the present case despite its own finding that appellant cargo
truck driver Edilberto Montesiano was admittedly negligent in driving his cargo truck
very fast on a descending road and in the presence of the bus driver coming from the
opposite direction.
The trial court, in declaring that the negligent acts of both drivers directly caused the
accident which led to the death of the aforementioned persons, considered the
following:
It was negligent on the part of driver Montesiano to have driven his truck fast,
considering that it was an old vehicle, being a 1947 model as admitted by its owner,
defendant Del Pilar; that its front wheels were wiggling; that the road was descending;
and that there was a passenger bus approaching it. Likewise, driver Susulin was also
guilty of negligence in not taking the necessary precaution to avoid the collision, in the
light of his admission that, at a distance of 30 meters, he already saw the front wheels
of the truck wiggling and that the vehicle was usurping his lane coming towards his
direction. Had he exercised ordinary prudence, he could have stopped his bus or
swerved it to the side of the road even down to its shoulder. And yet, Susulin shifted
to third gear so as to, as claimed by him, give more power and speed to his bus in
overtaking or passing a hand tractor which was being pushed along the shoulder of
the road. (Rollo, p. 50)
The respondent Court of Appeals ruling on the contrary, opined that "the bus driver
had the last clear chance to avoid the collision and his reckless negligence in
proceeding to overtake the hand tractor was the proximate cause of the collision."
(Rollo, p. 95). Said court also noted that "the record also discloses that the bus driver
was not a competent and responsible driver. His driver's license was confiscated for a
traffic violation on April 17, 1983 and he was using a ticket for said traffic violation on
the day of the accident in question (pp. 16-18, TSN, July 23, 1984). He also admitted
that he was not a regular driver of the bus that figured in the mishap and was not
given any practical examination. (pp. 11, 96, TSN, supra)." (Rollo, p96)
The respondent Court quoting People v. Vender, CA-G.R. 11114-41-CR, August 28,
1975 held that "We are not prepared to uphold the trial court's finding that the truck
was running fast before the impact. The national road, from its direction, was
descending. Courts can take judicial notice of the fact that a motor vehicle going
down or descending is more liable to get out of control than one that is going up or
ascending for the simple reason that the one which is going down gains added
momentum while that which is going up loses its initial speeding in so doing."
On the other hand, the trial court found and We are convinced that the cargo truck
was running fast. It did not overlook the fact that the road was descending as in fact it
mentioned this circumstance as one of the factors disregarded by the cargo truck
driver along with the fact that he was driving an old 1947 cargo truck whose front
wheels are already wiggling and the fact that there is a passenger bus approaching it.
In holding that the driver of the cargo truck was negligent, the trial court certainly took
into account all these factors so it was incorrect for the respondent court to disturb the
factual findings of the trial court, which is in a better position to decide the question,
having heard the witness themselves and observed their deportment.
TRANSPORTATION LAW – Chapter 4
The respondent court adopted the doctrine of "last clear chance." The doctrine, stated
broadly, is that the negligence of the plaintiff does not preclude a recovery for the
negligence of the defendant where it appears that the defendant, by exercising
reasonable care and prudence, might have avoided injurious consequences to the
plaintiff notwithstanding the plaintiff's negligence. In other words, the doctrine of last
clear chance means that even though a person's own acts may have placed him in a
position of peril, and an injury results, the injured person is entitled to recovery. As the
doctrine is usually stated, a person who has the last clear chance or opportunity of
avoiding an accident, notwithstanding the negligent acts of his opponent or that of a
third person imputed to the opponent is considered in law solely responsible for the
consequences of the accident. (Sangco, Torts and Damages, 4th Ed., 1986, p. 165).
The practical import of the doctrine is that a negligent defendant is held liable to a
negligent plaintiff, or even to a plaintiff who has been grossly negligent in placing
himself in peril, if he, aware of the plaintiffs peril, or according to some authorities,
should have been aware of it in the reasonable exercise of due case, had in fact an
opportunity later than that of the plaintiff to avoid an accident (57 Am. Jur., 2d, pp.
798-799).
In the recent case of Philippine Rabbit Bus Lines, Inc. v. Intermediate Appellate
Court, et al. (G.R. Nos. 66102-04, August 30, 1990), the Court citing the landmark
decision held in the case of Anuran, et al. v. Buno, et al. (123 Phil. 1073) ruled that
the principle of "last clear chance" applies "in a suit between the owners and drivers
of colliding vehicles. It does not arise where a passenger demands responsibility from
the carrier to enforce its contractual obligations. For it would be inequitable to exempt
the negligent driver of the jeepney and its owners on the ground that the other driver
was likewise guilty of negligence."
Furthermore, "as between defendants: The doctrine cannot be extended into the field
of joint tortfeasors as a test of whether only one of them should be held liable to the
injured person by reason of his discovery of the latter's peril, and it cannot be invoked
as between defendants concurrently negligent. As against third persons, a negligent
actor cannot defend by pleading that another had negligently failed to take action
which could have avoided the injury." (57 Am. Jur. 2d, pp. 806-807).
All premises considered, the Court is convinced that the respondent Court committed
an error of law in applying the doctrine of last clear chance as between the
defendants, since the case at bar is not a suit between the owners and drivers of the
colliding vehicles but a suit brought by the heirs of the deceased passengers against
both owners and drivers of the colliding vehicles. Therefore, the respondent court
erred in absolving the owner and driver of the cargo truck from liability.
Pursuant to the new policy of this Court to grant an increased death indemnity to the
heirs of the deceased, their respective awards of P30,000.00 are hereby increased to
P50,000.00.
ACCORDINGLY, the petition is GRANTED; the appealed judgment and resolution of
the Court of Appeals are hereby REVERSED and SET ASIDE and the judgment of
the lower court is REINSTATED with the modification on the indemnity for death of
each of the victims which is hereby increased to P50,000.00 each. No
pronouncement as to costs.

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16.) G.R. No. 205090, October 17, 2016
GREENSTAR EXPRESS, INC. AND FRUTO L. SAYSON,
JR., Petitioners, v. UNIVERSAL ROBINA CORPORATION AND NISSIN
UNIVERSAL ROBINA CORPORATION, Respondent.
Petitioner Greenstar Express, Inc. (Grepistar) is a domestic corporation engaged in
the business of public transportation, while petitioner Fruto L. Sayson, Jr. (Sayson) is
one of its bus drivers,
Respondents Universal Robina Corporation (URC) and Nissin Universal Robina
Corporation (NURC) are domestic corporations engaged in the food business. NURC
is a subsidiary of URC. URC is the registered owner of a Mitsubishi L-300 van with
plate number WRN 403 (URC van).
At about 6:50 a.m. on February 25, 2003, which was then a declared national
holiday,7 petitioner's bus, which was then being driven toward the direction of Manila
by Sayson, collided head-on with the URC van, which was then being driven Quezon
province-bound by NURC's Operations Manager, Renante Bicomong (Bicomong).
The incident occurred along Km. 76, Maharlika Highway, Brgy. San Agustin,
Alaminos, Laguna. Bicomong died on the spot, while the colliding vehicles sustained
considerable damage.
On September 23, 2003, petitioners filed a Complaint8 against NURC to recover
damages sustained during the collision, premised on negligence. The case was
docketed as Civil Case No. SPL-0969 and assigned to Branch 31 of the RTC of San
Pedro, Laguna, An Amended Complaint9 was later filed, wherein URC was impleaded
as additional defendant.
URC and NURC filed their respective Answers,10 where they particularly alleged and
claimed lack of negligence on their part and on the part of Bicomong.
Riding of the Regional Trial Court
On April 4, 2011, the RTC issued its Decision, which decreed thus:
Plaintiff Fruto Sayson testified that on that fateful day, he was driving the plaintiff
passenger bus from Lucena City going to Manila at a speed of more or less 60
kilometers per hour when he met a vehicular accident at Barangay San Agustin,
Alaminos, Laguna. He saw from afar an L-300 UV coming from the shoulder going on
the opposite direction to Lucena City. Said vehicle was already near his bus when it
(UV) managed to return to ifs proper lane, then hit and swerved his vehicle.- "He tried
to prevent the collision by swerving to the right but it was too late. As a result, the left
front portion of the bus was damaged while the front portion of the L-300 UV was
totally wrecked- He and his conductor, one.Mendoza, managed to get but of the bug
by forcibly opening the automatic door which was also damaged due to the impact
After getting out of the bus, he looked for the driver of the L300 UV but he was
informed by a bystander that he was thrown in a canal arid already dead. For fear of
TRANSPORTATION LAW – Chapter 4
possible reprisals from bystanders as experienced by most drivers involved in an
accident, he boarded smother bug owned by bis employer. Before he left, he indorsed
the matter to hip conductor and line inspector. Thereafter, he reported to their office at
San Pedro, Laguna. He executed a statement on the same day x x x and submitted
the same to their operations department. He likewise testified that before the incident,
he was earning P700.00 to P900,00 a day on commission basis and he drives 25
days in a month. However, after the incident, he was not able to drive for almost two
months.
On cross-examination, it was established that the incident happened along the
Maharlika Highway along Kilometer 72. There were no structures near the site of the
incident, The highway has two lanes which can accommodate the size of the bus
about 3 meters wide and a. light vehicle. He was bound for Manila and had about ten
passengers. He saw the L-300 UV on the shoulder of the opposite lane about 250
meters away from, his bus while he was driving [at] a speed of 60 kilometers per
hour. He did not sense any danger when he saw the vehicle from afar. He cannot
drive fast as there were five vehicles ahead of his bus. When the L-300 UV managed
to return to it? proper lane coming from the shoulder, it was heading directly towards
his direction, at a distance of more or less five, meters away from his bus, He noticed
that the L-300 UV was running at full speed as he saw dust clouds. "The point of
impact happened on his lane. He tried to swerve his bus to prevent the impact but lie
admitted that at his speed, it was difficult for him to maneuver his vehicle
Investigator SPO3 Ernesto Marfori of the Alaminos Police Station testified that at
about 7:00 in the morning, he received a report from the Barangay Chairman of a
vehicular accident that occurred at Brgy. §an Agustin, Alaminos, Laguna. Thereafter,
he photographed the damaged vehicles (Exhibits "F" and sub-markings) and
interviewed some witnesses. He made a sketch depicting the damages suffered by
both vehicles (Exhibit "D-2"), the L-300 IV at the front portion (Exhibit "D-4") while the
bus at the left side of its front portion (Exhibit "D-3"). Based on the sketch he
prepared, the impact happened almost at the right lane which was the bus lane
(Exhibit "D-6"). He likewise noticed some debris also found at the bus lane. He was
able to interview the bus conductor and a fruit store owner in [sic] the names of
Apolinar Devilla and Virgilio Adao, He did not see the driver of the bus at the scene of
the accident and he was told that he had left the place. Based on, his investigation,
the possible cause of the accident was the swerving to the left lane [by] the driver of
the L-300 UV which resulted in me encroaching of the bus' lane.
On cross-examination, the witness admitted that he was not present when the
vehicles collided. The entries he made in the blotter report were mainly based on the
accounts of the witnesses he was able to interview who however did not give their
written statements. When he arrived at the scene of the accident, the L-300 UV was
already on the shoulder of the road and it was totally wrecked. According to reports,
the van spun around when it was bit causing the metal scar found on the road.
On the other hand, the defendants12 presented three witnesses: its employees
Alexander Caoleng and John Legaspi and deceased Renante Bicomong's widow,
Gloria Bicomgng, These witnesses were presented to prove that deceased Bicomong
was acting in his personal capacity when the mishap happened on February 25, 2003
as that day had been declared an official holiday and the L-300 UV he was driving
had not been issued to him, among others.
… Defendants were not able to present any witness as to how the mishap occurred
After an evaluation of the foregoing testimonies and documentary evidence of the
parties, the court had [sic] arrived at the following findings and conclusions:
Plaintiff has no cause of action and cannot recover from the defendants even
assuming that the direct and proximate cause of the accident was the negligence of
the defendant's employee Renato Bicomong.
Pursuant to Article 2184 of the New Civil Code, the owner of a motor vehicle is
solidarily liable with his driver if at the time of the mishap, the owner was in the
vehicle and by the use of due diligence could have presented (sic) the misfortune; if
the owner is not in the motor vehicle, the provision of Article 2180 is applicable. The
defendants being juridical persons, the first paragraph of Article 2184 is obviously not
applicable.
Under Article 2180, "employers shall be liable tor the damages caused by their
employees and household helpers acting within the scope of their assigned tasks,
even though the former are not engaged in any business or industry. "In other words,
for the employer to be liable for the damages caused by his employee, the latter must
have caused the damage in the course of doing his assigned tasks or in the-
performance of his duties" (Yambao vs. Zuñiga, G.R. No: 146173, December 11,
2003)
In this case, it is beyond cavil that the deceased Renante Bicong [sic] was not in the
performance of his duty on that fateful day of February 25, 2003. In the first place that
day was a holiday; there was no work and it was not shown that he was working as
indeed his work assignment is operations manager of the company's plant m, Cavite
while the accident happened while he was in Alaminos, Laguna on his way home to
Candelaria, Quezon. Secondly, as an operations manager, he was issued an
executive car for. Ms own use, a Toyota Corolla vehicle and he merely preferred to
use the L-300 UV when going home to his family in Quezon. Even assuming that the
company allowed or tolerated this, by itself, the tolerance did not make, the employer
liable in the absence of showing that he was using the vehicle in the performance of a
duty or within the scope of his assigned tasks. But as clearly relayed by defendant's
witnesses, defendants have no business or plant in Quezen. The L-300 vehicle was
for the hauling of items between their Pasig and Cavite offices and was merely
borrowed by Bicomong in going to Candelaria, Quezon on that day.
The accident having occurred outside Remnte Bicomong's assigned tasks, defendant
employers cannot be held liable to the plaintiffs, even assuming that it is the fault of
defendants' employee that was the direct and proximate cause of their damages.
However, the question of whose fault or negligence was the direct and proximate
cause of the mishap is material to the resolution of defendants' counterclaim.
The rule is that the burden of proof lies on him who claims a fact (Federico Ledesina
vs. NLRC, G.R. No. 175585, October 19,2007). Therefore, to be able to recover in
TRANSPORTATION LAW – Chapter 4
their counterclaim, the defendants must prove by preponderance of evidence that the
direct and proximate cause of their losses was the fault of the plaintiff-driver.
Their witnesses were limited to proving that Renante Bicomong was not in the
performance of his assigned task when the incident happened.
A reading of their answer would reveal, that their attribution of fault to the plaintiff-
driver is based only on the point of impact of the two vehicles. Thus:
'4.3 Based on the damage sustained by the passenger bus, plaintiffs' claim that
Renante Bicomong swerved on the left lane and encroached on the path of the said
bus moments before the accident could not have been true. Such claim would have
resulted to a head-on collision between the vehicle driven by Mr. Bicomong and the
bus; the latter would have sustained damage on its front side. However, based on
Annexes "B" and "C" of the Complaint, the said bus sustained damage on its left side.
Clearly, it was the passenger bus that swerved on the left lane, which was being
traversed by Renante Bicomong, and while returning to the right lane, said bus hit the
vehicle being driven by Mr. Bicomong. Thus, explaining the damage sustained by the
said bus on its left side just below the driver's seat.'
The foregoing however is a mere interpretation or speculation and not supported by
any account, either by an eyewitness [or by] a explanation tracing the relative
positions of the two vehicles in relation to the road at the time of impact and the
movements of the two vehicles after the impact. For this reason, it will be unfair to
make an interpretation of the events based alone on the point of impact [on] the
vehicles. The points of impact by themselves cannot explain the positions of the
vehicles on the road.
Defendants Memorandum attributed the cause of the mishap to the excessive speed
of the bus. In their Memorandum, the defendants content [sic] that if the driver had
seen the L-3G0 UV meters away in front of him running along the shoulder and
negotiating back to its lane, the bus driver would have watched out and slackened his
speed. Considering the damage to both the vehicles and the fact that the L-300,UV
span [sic] and was thrown 40 feet away from the point of impact and its driver was
thrown 14 feet away from his vehicle, defendant argued that the bus could not be
running at 60 kilometers only. But assuming the bus indeed was running at high
speed that alone does not mean that the negligence of the driver was the direct and
proximate cause, If it is true that the L-300 UV ran from the right shoulder, climbed up
to the right lane but overshoot [sic] it and occupied the bus' lane, the speed of the bus
cannot be considered the proximate and direct cause of the collision; But as stated
earlier, this were [sic] merely conjectures and surmises of the defendants and not
proven by competent evidence.
All told, defendants were not able to prove by their own evidence that the direct and
proximate cause of the collision was the fault of plaintiffs driver. Hence, they cannot
hold plaintiffs liable for the logs of their L-300 UV. As both parties failed to prove by
their respective evidence where the fault that occasioned their losses lie, they must
bear their respective losses.
Anent defendants' counterclaim for attorney's fees and exemplary damages, there is
no evidence to show that the filing, of this suit was motivated [by] malice. It cannot be
denied that plaintiffs suffered damages. The court mainly, dismissed the complaint for
lack of cause of action as Renante Bicomong was not performing his assigned tasks
at the time of the incident. Besides, to hold them liable to defendants for attorney's
fees and exemplary damages simply because they failed to come up with sufficient
evidence will be tantamount to putting a price on one's right to sue.
WHEREFORE, judgment is hereby rendered dismissing the complaint as well as the
counterclaim.
Ruling of the Court of Appeals
Petitioners filed an appeal before the CA, docketed as CA-G.R. CV No. 96961. They
argued that Bicomong's negligence was the proximate cause of the collision, as the
van he was 4rjvmg swerved to the opposite lane and hit the bus which was then
traveling along its proper lane; that Bicomong's act of occupying the bus's lane was
illegal and thus constituted a traffic violation; that respondents are liable for damages
as the registered owner of the van and failing to exercise due diligence in the
selection and supervision of its employee, Bicomong, Respondents, countered that
the bus driven by Sayson was running at high speed when the, collision occurred,
thus indicating that Sayson was in violation of traffic rules; and that Say-son had the
last clear chance to avert collision but he failed to take the necessary precaution
under the circumstances, by reducing his speed and applying the brakes on time to
avoid collision.
On September 26, 2012, the CA rendered the assailed Decision containing the
following pronouncement:
The present case involving an action for damages based on quasi-delict is governed
by Articles 2176 and 2180 of the New Civil Code, pertinent provisions of which read:
Records bear that the vehicular collision occurred on February 25, 2003 which was
declared by former Executive Secretary Alberto G. Romulo, by order of former
President Gloria Macapagal-Arroyo, as a special national holiday, per Proclamation
No. 331 dated February 19, 2003. Renante Bicomong had no work on that day and at
the time the accident occurred, he was on his way home to Candelaria, Quezon.
There was no showing that on that day, Renante Bicomong was given by defendants-
appellees14 an assigned task, much less instructed to go to Quezon. As testified to by
Renante Bicomong's widow Gloria Bicomong, Renante Bicomong was on the road
that day because he was going home to Candelaria, Quezon. Thus, he was then
carrying out a personal purpose and not performing work for defendants-appellees.
Apropos is Castilex Industrial Corp. vs. Vicente Vasquez, Jr.,15 wherein the Supreme
Court held that the mere fact that an employee was using a service vehicle at the time
of the injurious incident is not of itself sufficient to charge his employer with liability for
the operation of said vehicle unless it appeared that he was operating the vehicle
within the course or scope of bis employment. Thus:
TRANSPORTATION LAW – Chapter 4
… We do not agree. The mere fact that ABAD was using a service vehicle at the time
of the injurious incident is not of itself sufficient to charge petitioner with liability for the
negligent operation of said vehicle unless it appears mat he was operating the vehicle
within the course or scope of his employment.
III. Use of Employer's Vehicle Outside Regular Working Hours
An employer who loans his motor vehicle to an employee for the latter's personal use
outside of regular working hours is generally not liable for the employees negligent
operation of the vehicle during the period of permissive use, even where the employer
contemplates that a regularly assigned motor vehicle will be used by the employee for
personal as well as business purposes and there is some incidental benefit to the
employer. Even where the employee's personal purpose in using the vehicle has
been accomplished and he has started the return trip to his house where the vehicle
is normally kept, it has been held that he has not resumed his employment, and the
employer is not liable for the employees negligent operation of the vehicle during the
return trip.
The foregoing principles and jurisprudence are applicable in our jurisdiction albeit
based on the doctrine of respondent superior, not on the principle of bonus pater
familias as in ours. Whether the fault or negligence of the employee is conclusive on
his employer as in American law or jurisprudence, or merely gives rise to the
presumption juris tantum of negligence on the part of the employer as in ours, it is
indispensable that the employee was acting in his employer's business or within the
scope of his assigned task.
In the case at bar, it is undisputed that ABAD did some overtime work at Hie
petitioner's office, which was located in Cabangcalan, Mandaue City. Thereafter, he
went to Goldie's Restaurant in Fuente Osmefia, Cebu City, which is about seven
kilometers away from petitioner's place of business. A witness for the private
respondents, a sidewalk vendor, testified that Fuente Osmeña is a lively place even
at dawn because Goldie's Restaurant and Back Street were still open and people
were drinking thereat Moreover, prostitutes, pimps, and drug addicts littered the
place.
To the mind of this Court, ABAD was engaged in affairs of his own or was carrying
out a personal purpose not in line with his duties at the time he figured in a vehicular
accident. It was then about 2:00 a.m. of 28 August 1988, way beyond the normal
working hours. ABAD's working day had ended; his overtime work had already been
completed. His being at a place which, as petitioner put it, was known as a haven for
prostitutes, pimps, and drug pushers and addicts, had no connection to petitioner's
business; neither had it any relation to his duties as a manager. Rather, using his
service vehicle even for personal purposes was a form of a fringe benefit or one of
the perks attached to his position.
Since there is paucity of evidence that ABAD was acting within the scope of the
functions entrusted to him, petitioner CASTILEX had no duty to show that it exercised
the diligence of a good father of a family in providing ABAD with a service
vehicle. Thus, justice and equity require that petitioner be relieved of vicarious liability
for the consequences of the negligence of ABAD in driving its vehicle.
Accordingly, in the absence of showing that Renante Bicomong was acting within the
scope of his assigned task at the time of the vehicular collision, defendants-appellees
had no duty to show that they exercised the diligence of a good father of a family in
providing Renante Bicomong with a service vehicle. Thus, the trial court did not err in
holding that:
In this case, it is.beyond cavil that the deceased Renante Bicong [sic] was not in the
performance of his duty on that fateful day
The accident having occurred outside Renante Bicomong's assigned tasks,
defendant employers cannot be held liable to the plaintiffs, even assuming that it is
the fault of defendants' employee that was the direct and proximate cause of their
damages.'
In sum, squarely applicable in this case is the well-entrenched doctrine that the
assessment of the trial judge as to the issue of credibility binds the appellate court
because he is in a better position to decide the issue, having heard the witnesses and
observed their deportment and manner of testifying during the trial, except when the
trial court has plainly overlooked certain facts of substance and value, that, if
considered, might affect the result of the case, or where the assessment is clearly
shown to be arbitrary. Plaintiffs-appellants have not shown this case to fall under the
exception.
WHEREFORE, the trial court's Decision dated April 4, 2011 is affirmed.
Petitioners filed a Motion for Reconsideration, which the CA denied in is subsequent
December 28, 2012 Resolution. Hence, the present Petition.
Issues/Petitioners' Arguments
Petitioners insist that respondents should be held liable for Bicomong's negligence
under Articles 2176, 2180, and 2185 of the Civil Code;19 that Bicomong's negligence
was the direct and proximate eause of the accident, in that he unduly occupied the
opposite lane which the bus was lawfully traversing, thus resulting in the collision with
Greenstar's bus; that Bicomong's driving on the opposite lane constituted a traffic
violation, therefore giving rise to the presumption of negligence on his part; that in
view of this presumption, it became incumbent upon respondents to rebut the same
by proving that they exercised care and diligence in the selection and supervision of
their employees; that in their respective answers and motion to dismiss, respondents
did not allege the defense, which they tackled only during trial, that since February
25, 2003 was a declared national holiday, then Bicomong was not acting within the
scope of his assigned tasks at the time of the collision; that for failure to plead this
defense or allegation in their respective answers and pleadings, it is deemed waived
pursuant to Section 1, Rule 9 of the 1997 Rules of Civil Procedure20 (1997 Rules);
that just the same, respondents failed to prove that Bicomong was not in the official
performance of his duties or that the URC van was not officially issued to him at the
time of the accident - and for this reason, the presumption of negligence was not
overturned; and that URC should be held liable as the registered owner of the van.
TRANSPORTATION LAW – Chapter 4
In their Reply,21 petitioners add that while some of the issues raised in the Petition are
factual in nature, this Court must review the case as the CA gravely erred in its
appreciation of the evidence and in concluding that respondents are not liable.
Finally, they argue that URC should be held liable for allowing "a non-employee to
use for his personal use the vehicle owned" by it.
Respondents' Arguments
Pleading affirmance, respondents argue in their Comment22 that the issues raised in
the Petition are factual in nature; that the collision occurred on a holiday and while
Bicomong was. using the URC van for a purely personal purpose, it should be.
sufficient to absolve respondents of liability as evidently, Bicomong was not
performing his official duties on that day; that the totality of the evidence indicates that
it was Sayson who was negligent in the operation of Greenstar's bus when the
collision occurred; that Bicomong was not negligent in driving the URC van; that
petitioners' objection - pertaining to their defense that the collision occurred on a
holiday, when Bicomong was not considered to be at work - was belatedly raised; and
that in any case, under Section 5, Rule 10 of the 1997 Rules,23 their pleadings should
be deemed amended to conform to the evidence presented at the trial, which includes
proof that the accident occurred on a holiday and while Bicomong was not in the
performance of his official tasks and instead going home to his family in Quezon
province.
Our Ruling
The Court denies the Petition.
In Caravan Travel and Tours International, Inc. v. Abejar,24 the Court made the
following relevant pronouncement:
The resolution of this case must consider two (2) rules. First, Article 2180's
specification that '[e]mployers shall be liable for the damages caused by their
employees ... acting within the scope of their assigned tasks [.]' Second, the
operation of the registered-owner rule that registered owners are liable for
death or injuries caused by the operation of their Vehicles.
These rules appear to be in conflict when it comes to cases in which the employer is
also the registered owner of a vehicle. Article 2180 requires proof of two things: first,
an employment relationship between the driver and the owner; and second, that the
driver acted within the scope of his or her assigned tasks. On the other hand,
applying the registered-owner rule only requires the plaintiff to prove that the
defendant-employer is the registered owner of the vehicle.
The registered-owner rule was articulated as early as 1957 in Erezo, et al. v.
Jepte,25cralawred where this court explained that the registration of motor vehicles, as
required by Section 5(a) of Republic Act No. 41365 the  and Transportation and
Traffic Code, was necessary 'not to make said registration the operative act by which
ownership in vehicles is transferred, ... but to permit the use and operation of the
vehicle upon any public highway[.]' Its 'main aim ... is to identify the owner so that if
any accident happens, or that any damage or injury is caused by the vehicle on the
public highways, responsibility therefor can be fixed on a definite individual, the
registered owner.'
Mendoza v. Spouses Gomez29 reiterated this doctrine.
However, Aguilar, Sr., Del Carmen, Filcar, and Mendoza should not be taken to
mean that Article 2180 of the Civil Code should be completely discarded in cases
where the registered-owner rule finds application.
As acknowledged in Filcar, there is no categorical statutory pronouncement in the
Land Transportation and Traffic Code stipulating the liability of a registered owner.
The source of a registered owner's liability is not a distinct statutory provision, but
remains to be Articles 2176 and 2180 of the Civil Code:
While Republic Act No. 4136 or the Land Transportation and Traffic Code does not
contain any provision on the liability of registered owners in case of motor vehicle
mishaps, Article 2176, in relation with Article 2180, of the Civil Code imposes an
obligation upon Filcar, as registered owner, to answer for the damages caused to
Espinas' car.
Thus, it is imperative to apply the registered-owner rule in a manner that harmonizes
it with Articles 2176 and 2180 of the Civil Code. Rules must be construed in a manner
that will harmonize them with other rules so as to form a uniform and consistent
system of jurisprudence. In light of this, the words used in Del Carmen are particularly
notable. There, this court stated that Article 2180 'should defer to' the registered-
owner rule. It never stated that Article 2180 should be totally abandoned.
Therefore, the appropriate approach is that in cases where both the registered-
owner rule and Article 2180 apply, the plaintiff must first establish that the
employer is the registered owner of the vehicle in question. Once the plaintiff
successfully proves ownership, there arises a disputable presumption that the
requirements of Article 2180 have been proven. As a consequence, the burden
of proof shifts to the defendant to show that no liability under Article 2180 has
arisen.
This disputable presumption, insofar as the registered owner of the vehicle in relation
to the actual driver is concerned, recognizes that between the owner and the victim, it
is the former that should carry the costs of moving forward with the evidence. The
victim is, in many cases, a hapless pedestrian or motorist with hardly any means to
uncover the employment relationship of the owner and the driver, or any act that the
owner may have done in relation to that employment.
The registration of the vehicle, on the other hand, is accessible to the public.
Here, respondent presented a copy of the Certificate of Registration of the van that hit
Reyes. The Certificate attests to petitioner's ownership of the van. Petitioner itself did
not dispute its ownership of the van. Consistent with the rule we have just stated, a
presumption that the requirements of Article 2180 have been satisfied arises. It is now
up to petitioner to establish that it incurred no liability under Article 2180. This it can
TRANSPORTATION LAW – Chapter 4
do by presenting proof of any of the following: first, that it had no employment
relationship with Bautista; second, that Bautista acted outside the scope of his
assigned tasks; or third, that it exercised the diligence of a good father of a
family in the selection and supervision of Bautista. (Emphasis supplied)
In the present case, it has been established that on the day of the collision -or on
February 25, 2003 - URC was the registered owner of the URC van, although it
appears that it was designated for use by NURC, as it was officially assigned to the
latter's Logistics Manager, Florante Soro-Soro (Soro-Soro); that Bicomong was the
Operations Manager of NURC and assigned to the First Cavite Industrial Estate; that
there was no work as the day was declared a national holiday; that Bicomong was on
his way home to his family in Quezon province; that the URC van was not assigned to
Bicompng as well, but solely for Soro-Soro's official use; that the company service
vehicle officially assigned to Bicomong was a Toyota Corolla, which he left at the
Cavite plant and instead, he used the URC van; and that other than the Cavite plant,
there is no other NURC plant in the provinces of Quezon, Laguna or Bicol.
Applying the above pronouncement in the Caravan Travel and Tours case, it must be
said that when by evidence the ownership of the van and Bicomong's employment
were proved, the presumption of negligence on respondents' part attached, as the
registered owner of the van. and as Bicomong's employer. Hie burden of proof then
shifted to respondents to show that no liability under Article 2180 arose. This may be
done by proof of any of the following:
1. That they had no employment relationship with Bicomong; or
2. That Bicomong acted outside the scope of his assigned tasks; or
3. That they exercised the diligence of a good father of a family in the selection and
supervision of Bicomong.
Respondents succeeded in overcoming the presumption of negligence, having shown
that when the collision took place, Bicomong was not in the performance of his work;
that he was in possession of a service vehicle that did not belong to his employer
NURC, but to URC, and which vehicle was not officially assigned to him, but to
another employee; that his use of the URC van was unauthorized - even if he had
used the same vehicle in furtherance of a personal undertaking in the past,31 this
does not amount to implied permission; that the accident occurred on a holiday and
while Bicomong was on his way home to his family in Quezon province; and that
Bicomong had no official business whatsoever in his hometown in Quezon, or in
Laguna where the collision occurred, his area of operations being limited to the Cavite
area.
On the other hand, the evidence suggests that the collision could have been avoided
if Sayson exercised care and prudence, given the circumstances and information that
he had immediately prior to the accident. From the trial court's findings and evidence
on record, it would appear that immediately prior to the collision, which took place
very early in the morning - or at around 6:50 a.m., Sayson saw that the URC van was
traveling fast Quezon-bound on the shoulder of the opposite lane about 250 meters
away from him; that at this point, Sayson was driving the Greenstar bus Manila-bound
at 60 kilometers per hour; that Sayson knew that the URC van was traveling fast as it
was creating dust clouds from traversing the shoulder of the opposite lane; that
Sayson saw the URC van get back into its proper lane but directly toward him; that
despite being apprised of the foregoing information, Sayson, instead of slowing down,
maintained his speed and tried to swerve the Greenstar bus, but found it difficult to do
so at his speed; that the collision or point of impact occurred right in the middle of the
road; and that Sayson absconded from the scene immediately after the collision.
From the foregoing facts, one might think that from the way he was driving
immediately before the collision took place, Bicomong could have fallen asleep or ill
at the wheel, which led him to gradually steer the URC van toward the shoulder of the
highway; and to get back to the road after realizing his mistake, Bicomong must have
overreacted, thus overcompensating or oversteering to the left, or toward the opposite
lane and right into Sayson's bus. Given the premise of dozing off or falling ill, this
explanation is not far-fetched. The collis ion occurred very early in the morning in
Alaminos, Laguna. Sayson himself testified that he found Bicomong driving on the
service road or shoulder of the highway 250 meters away, which must have been
unpaved, as it caused dust clouds to rise on the heels of the URC van. And these
dust clouds stole Sayson's attention, leading him to conclude that the van was
running at high speed. At any rate, the evidence places the point of impact very near
the middle of the road or just within Sayson's lane. In other words, the collision took
place with Bicomong barely encroaching on Sayson's lane. This means that prior to
and at the time of collision, Sayson did not take any defensive maneuver to prevent
the accident and minimize the impending damage to life and property, which resulted
in the collision in the middle of the highway, where a vehicle would normally be
traversing. If Sayson took defensive measures, the point of impact should have
occurred further inside his lane or not at the front of the bus - but at its side, which
should have shown that Sayson either slowed down or swerved to the right to avoid a
collision.
Despite having seen Bicomong drive the URC van in a precarious manner while the
same was still a good 250 meters away from his bus, Sayson did not take the
necessary precautions, as by reducing speed and adopting a defensive stance to
avert any untoward incident that may occur from Bicomong's manner of driving. This
is precisely his testimony during trial. When the van began to swerve toward his bus,
he did not reduce speed nor swerve his bus to avoid collision. Instead, he maintained
his current speed and course, and for this reason., the inevitable took place: An
experienced driver who is. presented with the same facts would have adopted an
attitude consistent with a desire to preserve life and property; for common carriers,
the diligence demanded is of the highest degree.
The law exacts from common carriers (i.e., those persons, corporations, firms, or
associations engaged in the business of carrying or transporting passengers or goods
or both, by land, water, or air, for compensation, offering their services to the public)
the highest degree of diligence (i.e., extraordinary diligence) in ensuring the safety of
its passengers. Articles 1733 and 1755 of the Civil Code state:
Art. 1733. Common carriers, from the nature of their business and for reasons of
public policy, are bound to observe extraordinary, diligence in the vigilance over the
TRANSPORTATION LAW – Chapter 4
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 arid foresight can provide, using the utmost diligence of very cautious persons,
with a due regard for all the circumstances.
In this relation, Article 1756 of the Civil Code provides that '[i]n case of death of or
injuries to passengers, common carriers are presumed to have been at fault or to
have acted negligently, unless they prove that they observed extraordinary diligence
as prescribed in Articles 1733 and 1755. xxx
However, Sayson took no defensive maneuver whatsoever in spite of the fact that he
saw Bicomong drive his van in a precarious manner, as far as 250 meters away - or
at a point in time and space where Sayson had all the opportunity to prepare and
avert a possible collision. The collision was certainly foreseen and avoidable but
Sayson took no measures to avoid it. Rather than exhibit concern for the welfare of
his passengers and the driver of the oncoming vehicle, who might have fallen asleep
or suddenly fallen ill at the wheel, Sayson coldly and uncaringly stood his ground^
closed his eyes, and left everything to fate, without due regard for the consequences.
Such a suicidal mindset cannot be tolerated, for the grave danger it poses to the
public and passengers availing of petitioners' services. To add insult to injury, Sayson
hastily fled the scene of the collision instead of rendering assistance to the victims -
thus exhibiting a selfish, cold-blooded attitude and utter lack of concern motivated by
the self-centered desire to escape liability, inconvenience, and possible detention by
the authorities, rather than secure the well-being of the victims of his own negligent
act.
x x x The doctrine of last clear chance provides that where both parties are negligent
but the negligent act of one is appreciably later in point of time than that of the other,
or where it is impossible to determine whose fault or negligence brought about the
occurrence of the incident, the one who had the last clear opportunity to avoid the
impending harm but failed to do so, is chargeable with the consequences arising
therefrom. Stated differently, the rule is that the antecedent negligence of a person
does not preclude recovery of damages caused by the supervening negligence of the
latter, who had the last fair chance to prevent the impending harm by the exercise of
due diligence, x x x34
Petitioners might object to the treatment of their case in the foregoing manner, what
with the additional finding that Sayson was negligent under the circumstances. But
their Petition,  "once accepted by this Court, throws the entire case open to review,
and xxx this Court has the authority to review matters not specifically raised or
assigned as error by the parties, if their consideration is necessary in arriving at a just
resolution of the case."35chanrobleslaw
WHEREFORE, the Petition is DENIED. The September 26, 2012 Decision and
December 28, 2012 Resolution of the Court of Appeals in CA-G.R. CV No. 96961
are AFFIRMED in toto.
TRANSPORTATION LAW – Chapter 4
17.) G.R. No. 87434 August 5, 1992
PHILIPPINE AMERICAN GENERAL INSURANCE CO., INC. and TAGUM
PLASTICS, INC., petitioners,
vs. SWEET LINES, INC., DAVAO VETERANS ARRASTRE AND PORT SERVICES,
INC. and HON. COURT OF APPEALS, respondents.
A maritime suit 1 was commenced on May 12, 1978 by herein Petitioner Philippine
American General Insurance Co., Inc. (Philamgen) and Tagum Plastics, Inc. (TPI)
against private respondents Sweet Lines, Inc. (SLI) and Davao Veterans Arrastre and
Port Services, Inc. (DVAPSI), along with S.C.I. Line (The Shipping Corporation of
India Limited) and F.E. Zuellig, Inc., as co-defendants in the court a quo, seeking
recovery of the cost of lost or damaged shipment plus exemplary damages, attorney's
fees and costs allegedly due to defendants' negligence, with the following factual
backdrop yielded by the findings of the court below and adopted by respondent court:
It would appear that in or about March 1977, the vessel SS "VISHVA YASH"
belonging to or operated by the foreign common carrier, took on board at Baton
Rouge, LA, two (2) consignments of cargoes for shipment to Manila and later for
transhipment to Davao City, consisting of 600 bags Low Density Polyethylene 631
and another 6,400 bags Low Density Polyethylene 647, both consigned to the order
of Far East Bank and Trust Company of Manila, with arrival notice to Tagum Plastics,
Inc., Madaum, Tagum, Davao City. Said cargoes were covered, respectively, by Bills
of Lading Nos. 6 and 7 issued by the foreign common carrier (Exhs. E and F). The
necessary packing or Weight List (Exhs. A and B), as well as the Commercial
Invoices (Exhs. C and D) accompanied the shipment. The cargoes were likewise
insured by the Tagum Plastics Inc. with plaintiff Philippine American General
Insurance Co., Inc., (Exh. G).
In the course of time, the said vessel arrived at Manila and discharged its cargoes in
the Port of Manila for transhipment to Davao City. For this purpose, the foreign carrier
awaited and made use of the services of the vessel called M/V "Sweet Love" owned
and operated by defendant interisland carrier.
Subject cargoes were loaded in Holds Nos. 2 and 3 of the interisland carrier. These
were commingled with similar cargoes belonging to Evergreen Plantation and also
Standfilco.
On May 15, 1977, the shipment(s) were discharged from the interisland carrier into
the custody of the consignee. A later survey conducted on July 8, 1977, upon the
instance of the plaintiff, shows the following:
Of the cargo covered by Bill of Lading No. 25 or (2)6, supposed to contain 6,400 bags
of Low Density Polyethylene 647 originally inside 160 pallets, there were delivered to
the consignee 5,413 bags in good order condition. The survey shows shortages,
damages and losses to be as follows:
TRANSPORTATION LAW – Chapter 4
Undelivered/Damaged bags as tallied during discharge from vessel-173 bags;
undelivered and damaged as noted and observed whilst stored at the pier-699 bags;
and shortlanded-110 bags (Exhs. P and P-1).
Of the 600 bags of Low Density Polyethylene 631, the survey conducted on the same
day shows an actual delivery to the consignee of only 507 bags in good order
condition. Likewise noted were the following losses, damages and shortages, to wit:
Undelivered/damaged bags and tally sheets during discharge from vessel-17 bags.
Undelivered and damaged as noted and observed whilst stored at the pier-66 bags;
Shortlanded-10 bags.
Therefore, of said shipment totalling 7,000 bags, originally contained in 175 pallets,
only a total of 5,820 bags were delivered to the consignee in good order condition,
leaving a balance of 1,080 bags. Such loss from this particular shipment is what any
or all defendants may be answerable to (sic).
As already stated, some bags were either shortlanded or were missing, and some of
the 1,080 bags were torn, the contents thereof partly spilled or were fully/partially
emptied, but, worse, the contents thereof contaminated with foreign matters and
therefore could no longer serve their intended purpose. The position taken by the
consignee was that even those bags which still had some contents were considered
as total losses as the remaining contents were contaminated with foreign matters and
therefore did not (sic) longer serve the intended purpose of the material. Each bag
was valued, taking into account the customs duties and other taxes paid as well as
charges and the conversion value then of a dollar to the peso, at P110.28 per bag
(see Exhs. L and L-1 M and O). 2
Before trial, a compromise agreement was entered into between petitioners, as
plaintiffs, and defendants S.C.I. Line and F.E. Zuellig, upon the latter's payment of
P532.65 in settlement of the claim against them. Whereupon, the trial court in its
order of August 12, 1981 3 granted plaintiffs' motion to dismiss grounded on said
amicable settlement and the case as to S.C.I. Line and F.E. Zuellig was consequently
"dismissed with prejudice and without pronouncement as to costs."
The trial court thereafter rendered judgment in favor of herein petitioners on this
dispositive portion:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff Philippine
General American Insurance Company Inc. and against the remaining defendants,
Sweet Lines Inc. and Davao Veterans Arrastre Inc. as follows:
Defendant Sweet Lines, Inc. is ordered to pay said plaintiff the sum of P34,902.00,
with legal interest thereon from date of extrajudicial demand on April 28, 1978 (Exh.
M) until fully paid;
Defendant Sweet Lines Inc. and Davao Veterans Arrastre and (Port) Services Inc. are
directed to pay jointly and severally, the plaintiff the sum of P49,747.55, with legal
interest thereon from April 28, 1978 until fully paid;
Each of said defendants are ordered to pay the plaintiffs the additional sum of P5,000
is reimbursable attorney's fees and other litigation expenses;
Each of said defendants shall pay one-fourth (1/4) costs.  4
Due to the reversal on appeal by respondent court of the trial court's decision on the
ground of prescription, 5 in effect dismissing the complaint of herein petitioners, and
the denial of their motion for reconsideration, 6 petitioners filed the instant petition for
review on certiorari, faulting respondent appellate court with the following errors: (1) in
upholding, without proof, the existence of the so-called prescriptive period; (2)
granting arguendo that the said prescriptive period does exist, in not finding the same
to be null and void; and (3) assuming arguendo that the said prescriptive period is
valid and legal, in failing to conclude that petitioners substantially complied
therewith. 7
Parenthetically, we observe that herein petitioners are jointly pursuing this case,
considering their common interest in the shipment subject of the present controversy,
to obviate any question as to who the real party in interest is and to protect their
respective rights as insurer and insured. In any case, there is no impediment to the
legal standing of Petitioner Philamgen, even if it alone were to sue herein private
respondents in its own capacity as insurer, it having been subrogated to all rights of
recovery for loss of or damage to the shipment insured under its Marine Risk Note
No. 438734 dated March 31, 1977 8 in view of the full settlement of the claim
thereunder as evidenced by the subrogation receipt 9 issued in its favor by Far East
Bank and Trust Co., Davao Branch, for the account of petitioner TPI.
Upon payment of the loss covered by the policy, the insurer's entitlement to
subrogation pro tanto, being of the highest equity, equips it with a cause of action
against a third party in case of contractual breach. 10 Further, the insurer's
subrogatory right to sue for recovery under the bill of lading in case of loss of or
damage to the cargo is jurisprudentially upheld. 11 However, if an insurer, in the
exercise of its subrogatory right, may proceed against the erring carrier and for all
intents and purposes stands in the place and in substitution of the consignee, a
fortiori such insurer is presumed to know and is just as bound by the contractual
terms under the bill of lading as the insured.
On the first issue, petitioners contend that it was error for the Court of Appeals to
reverse the appealed decision on the supposed ground of prescription when SLI
failed to adduce any evidence in support thereof and that the bills of lading said to
contain the shortened periods for filing a claim and for instituting a court action
against the carrier were never offered in evidence. Considering that the existence and
tenor of this stipulation on the aforesaid periods have allegedly not been established,
petitioners maintain that it is inconceivable how they can possibly comply
therewith. 12 In refutation, SLI avers that it is standard practice in its operations to
TRANSPORTATION LAW – Chapter 4
issue bills of lading for shipments entrusted to it for carriage and that it in fact issued
bills of lading numbered MD-25 and MD-26 therefor with proof of their existence
manifest in the records of the case. 13 For its part, DVAPSI insists on the propriety of
the dismissal of the complaint as to it due to petitioners' failure to prove its direct
responsibility for the loss of and/or damage to the cargo. 14
On this point, in denying petitioner's motion for reconsideration, the Court of Appeals
resolved that although the bills of lading were not offered in evidence, the litigation
obviously revolves on such bills of lading which are practically the documents or
contracts sued upon, hence, they are inevitably involved and their provisions cannot
be disregarded in the determination of the relative rights of the parties thereto. 15
Respondent court correctly passed upon the matter of prescription, since that defense
was so considered and controverted by the parties. This issue may accordingly be
taken cognizance of by the court even if not inceptively raised as a defense so long
as its existence is plainly apparent on the face of relevant pleadings. 16 In the case at
bar, prescription as an affirmative defense was seasonably raised by SLI in its
answer, 17 except that the bills of lading embodying the same were not formally
offered in evidence, thus reducing the bone of contention to whether or not
prescription can be maintained as such defense and, as in this case, consequently
upheld on the strength of mere references thereto.
As petitioners are suing upon SLI's contractual obligation under the contract of
carriage as contained in the bills of lading, such bills of lading can be categorized as
actionable documents which under the Rules must be properly pleaded either as
causes of action or defenses, 18 and the genuineness and due execution of which are
deemed admitted unless specifically denied under oath by the adverse party. 19 The
rules on actionable documents cover and apply to both a cause of action or defense
based on said documents. 20
In the present case and under the aforestated assumption that the time limit involved
is a prescriptive period, respondent carrier duly raised prescription as an affirmative
defense in its answer setting forth paragraph 5 of the pertinent bills of lading which
comprised the stipulation thereon by parties, to wit:
5. Claims for shortage, damage, must be made at the time of delivery to consignee or
agent, if container shows exterior signs of damage or shortage. Claims for non-
delivery, misdelivery, loss or damage must be filed within 30 days from accrual. Suits
arising from shortage, damage or loss, non-delivery or misdelivery shall be instituted
within 60 days from date of accrual of right of action. Failure to file claims or institute
judicial proceedings as herein provided constitutes waiver of claim or right of action.
In no case shall carrier be liable for any delay, non-delivery, misdelivery, loss of
damage to cargo while cargo is not in actual custody of carrier. 21
In their reply thereto, herein petitioners, by their own assertions that —
2. In connection with Pars. 14 and 15 of defendant Sweet Lines, Inc.'s Answer,
plaintiffs state that such agreements are what the Supreme Court considers as
contracts of adhesion (see Sweet Lines, Inc. vs. Hon. Bernardo Teves, et al., G.R.
No. L-37750, May 19, 1978) and, consequently, the provisions therein which are
contrary to law and public policy cannot be availed of by answering defendant as valid
defenses. 22
thereby failed to controvert the existence of the bills of lading and the aforequoted
provisions therein, hence they impliedly admitted the same when they merely
assailed the validity of subject stipulations.
Petitioners' failure to specifically deny the existence, much less the genuineness and
due execution, of the instruments in question amounts to an admission. Judicial
admissions, verbal or written, made by the parties in the pleadings or in the course of
the trial or other proceedings in the same case are conclusive, no evidence being
required to prove the same, and cannot be contradicted unless shown to have been
made through palpable mistake or that no such admission was made. 23 Moreover,
when the due execution and genuineness of an instrument are deemed admitted
because of the adverse party's failure to make a specific verified denial thereof, the
instrument need not be presented formally in evidence for it may be considered an
admitted fact. 24
Even granting that petitioners' averment in their reply amounts to a denial, it has the
procedural earmarks of what in the law on pleadings is called a negative pregnant,
that is, a denial pregnant with the admission of the substantial facts in the pleading
responded to which are not squarely denied. It is in effect an admission of the
averment it is directed to. 25 Thus, while petitioners objected to the validity of such
agreement for being contrary to public policy, the existence of the bills of lading and
said stipulations were nevertheless impliedly admitted by them.
We find merit in respondent court's comments that petitioners failed to touch on the
matter of the non-presentation of the bills of lading in their brief and earlier on in the
appellate proceedings in this case, hence it is too late in the day to now allow the
litigation to be overturned on that score, for to do so would mean an over-indulgence
in technicalities. Hence, for the reasons already advanced, the non-inclusion of the
controverted bills of lading in the formal offer of evidence cannot, under the facts of
this particular case, be considered a fatal procedural lapse as would bar respondent
carrier from raising the defense of prescription. Petitioners' feigned ignorance of the
provisions of the bills of lading, particularly on the time limitations for filing a claim and
for commencing a suit in court, as their excuse for non-compliance therewith does not
deserve serious attention.
It is to be noted that the carriage of the cargo involved was effected pursuant to an
"Application for Delivery of Cargoes without Original Bill of Lading" issued on May 20,
1977 in Davao City 26 with the notation therein that said application corresponds to
and is subject to the terms of bills of lading MD-25 and MD-26. It would be a safe
assessment to interpret this to mean that, sight unseen, petitioners acknowledged the
existence of said bills of lading. By having the cargo shipped on respondent carrier's
vessel and later making a claim for loss on the basis of the bills of lading, petitioners
for all intents and purposes accepted said bills. Having done so they are bound by all
stipulations contained therein. 27 Verily, as petitioners are suing for recovery on the
TRANSPORTATION LAW – Chapter 4
contract, and in fact even went as far as assailing its validity by categorizing it as a
contract of adhesion, then they necessarily admit that there is such a contract, their
knowledge of the existence of which with its attendant stipulations they cannot now
be allowed to deny.
On the issue of the validity of the controverted paragraph 5 of the bills of lading above
quoted which unequivocally prescribes a time frame of thirty (30) days for filing a
claim with the carrier in case of loss of or damage to the cargo and sixty (60) days
from accrual of the right of action for instituting an action in court, which periods must
concur, petitioners posit that the alleged shorter prescriptive period which is in the
nature of a limitation on petitioners' right of recovery is unreasonable and that SLI has
the burden of proving otherwise, citing the earlier case of Southern Lines, Inc. vs.
Court of Appeals, et al. 28 They postulate this on the theory that the bills of lading
containing the same constitute contracts of adhesion and are, therefore, void for
being contrary to public policy, supposedly pursuant to the dictum in Sweet Lines,
Inc. vs. Teves, et al. 29
Furthermore, they contend, since the liability of private respondents has been clearly
established, to bar petitioners' right of recovery on a mere technicality will pave the
way for unjust enrichment. 30 Contrarily, SLI asserts and defends the reasonableness
of the time limitation within which claims should be filed with the carrier; the necessity
for the same, as this condition for the carrier's liability is uniformly adopted by nearly
all shipping companies if they are to survive the concomitant rigors and risks of the
shipping industry; and the countervailing balance afforded by such stipulation to the
legal presumption of negligence under which the carrier labors in the event of loss of
or damage to the cargo. 31
It has long been held that Article 366 of the Code of Commerce applies not only to
overland and river transportation but also to maritime transportation. 32 Moreover, we
agree that in this jurisdiction, as viewed from another angle, it is more accurate to
state that the filing of a claim with the carrier within the time limitation therefor under
Article 366 actually constitutes a condition precedent to the accrual of a right of action
against a carrier for damages caused to the merchandise. The shipper or the
consignee must allege and prove the fulfillment of the condition and if he omits such
allegations and proof, no right of action against the carrier can accrue in his favor. As
the requirements in Article 366, restated with a slight modification in the assailed
paragraph 5 of the bills of lading, are reasonable conditions precedent, they are not
limitations of action. 33 Being conditions precedent, their performance must precede a
suit for enforcement 34 and the vesting of the right to file spit does not take place until
the happening of these conditions. 35
Now, before an action can properly be commenced all the essential elements of the
cause of action must be in existence, that is, the cause of action must be complete.
All valid conditions precedent to the institution of the particular action, whether
prescribed by statute, fixed by agreement of the parties or implied by law must be
performed or complied with before commencing the action, unless the conduct of the
adverse party has been such as to prevent or waive performance or excuse non-
performance of the condition. 36
It bears restating that a right of action is the right to presently enforce a cause of
action, while a cause of action consists of the operative facts which give rise to such
right of action. The right of action does not arise until the performance of all conditions
precedent to the action and may be taken away by the running of the statute of
limitations, through estoppel, or by other circumstances which do not affect the cause
of action. 37 Performance or fulfillment of all conditions precedent upon which a right
of action depends must be sufficiently alleged, 38 considering that the burden of proof
to show that a party has a right of action is upon the person initiating the suit. 39
More particularly, where the contract of shipment contains a reasonable requirement
of giving notice of loss of or injury to the goods, the giving of such notice is a condition
precedent to the action for loss or injury or the right to enforce the carrier's liability.
Such requirement is not an empty formalism. The fundamental reason or purpose of
such a stipulation is not to relieve the carrier from just liability, but reasonably to
inform it that the shipment has been damaged and that it is charged with liability
therefor, and to give it an opportunity to examine the nature and extent of the injury.
This protects the carrier by affording it an opportunity to make an investigation of a
claim while the matter is fresh and easily investigated so as to safeguard itself from
false and fraudulent claims. 40
Stipulations in bills of lading or other contracts of shipment which require notice of
claim for loss of or damage to goods shipped in order to impose liability on the carrier
operate to prevent the enforcement of the contract when not complied with, that is,
notice is a condition precedent and the carrier is not liable if notice is not given in
accordance with the stipulation, 41 as the failure to comply with such a stipulation in a
contract of carriage with respect to notice of loss or claim for damage bars recovery
for the loss or damage suffered. 42
On the other hand, the validity of a contractual limitation of time for filing the suit itself
against a carrier shorter than the statutory period therefor has generally been upheld
as such stipulation merely affects the shipper's remedy and does not affect the
liability of the carrier. In the absence of any statutory limitation and subject only to the
requirement on the reasonableness of the stipulated limitation period, the parties to a
contract of carriage may fix by agreement a shorter time for the bringing of suit on a
claim for the loss of or damage to the shipment than that provided by the statute of
limitations. Such limitation is not contrary to public policy for it does not in any way
defeat the complete vestiture of the right to recover, but merely requires the assertion
of that right by action at an earlier period than would be necessary to defeat it through
the operation of the ordinary statute of limitations. 43
In the case at bar, there is neither any showing of compliance by petitioners with the
requirement for the filing of a notice of claim within the prescribed period nor any
allegation to that effect. It may then be said that while petitioners may possibly have a
cause of action, for failure to comply with the above condition precedent they lost
whatever right of action they may have in their favor or, token in another sense, that
remedial right or right to relief had prescribed.44
The shipment in question was discharged into the custody of the consignee on May
15, 1977, and it was from this date that petitioners' cause of action accrued, with thirty
TRANSPORTATION LAW – Chapter 4
(30) days therefrom within which to file a claim with the carrier for any loss or damage
which may have been suffered by the cargo and thereby perfect their right of action.
The findings of respondent court as supported by petitioners' formal offer of evidence
in the court below show that the claim was filed with SLI only on April 28, 1978, way
beyond the period provided in the bills of lading 45 and violative of the contractual
provision, the inevitable consequence of which is the loss of petitioners' remedy or
right to sue. Even the filing of the complaint on May 12, 1978 is of no remedial or
practical consequence, since the time limits for the filing thereof, whether viewed as a
condition precedent or as a prescriptive period, would in this case be productive of
the same result, that is, that petitioners had no right of action to begin with or, at any
rate, their claim was time-barred.
What the court finds rather odd is the fact that petitioner TPI filed a provisional claim
with DVAPSI as early as June 14, 1977 46 and, as found by the trial court, a survey
fixing the extent of loss of and/or damage to the cargo was conducted on July 8, 1977
at the instance of petitioners. 47 If petitioners had the opportunity and awareness to
file such provisional claim and to cause a survey to be conducted soon after the
discharge of the cargo, then they could very easily have filed the necessary formal, or
even a provisional, claim with SLI itself 48 within the stipulated period therefor, instead
of doing so only on April 28, 1978 despite the vessel's arrival at the port of destination
on May 15, 1977. Their failure to timely act brings us to no inference other than the
fact that petitioners slept on their rights and they must now face the consequences of
such inaction.
The ratiocination of the Court of Appeals on this aspect is worth reproducing:
xxx xxx xxx
It must be noted, at this juncture, that the aforestated time limitation in the
presentation of claim for loss or damage, is but a restatement of the rule prescribed
under Art. 366 of the Code of Commerce which reads as follows:
Art. 366. Within the twenty-four hours following the receipt of the merchandise, the
claim against the carrier for damage or average which may be found therein upon
opening the packages, may be made, provided that the indications of the damage or
average which gives rise to the claim cannot be ascertained from the outside part of
the packages, in which case the claims shall be admitted only at the time of the
receipt.
After the periods mentioned have elapsed, or the transportation charges have been
paid, no claim shall be admitted against the carrier with regard to the condition in
which the goods transported were delivered.
Gleanable therefrom is the fact that subject stipulation even lengthened the period for
presentation of claims thereunder. Such modification has been sanctioned by the
Supreme Court. In the case of Ong Yet (M)ua Hardware Co., Inc. vs. Mitsui
Steamship Co., Ltd., et al., 59 O.G. No. 17, p. 2764, it ruled that Art. 366 of the Code
of Commerce can be modified by a bill of lading prescribing the period of 90 days
after arrival of the ship, for filing of written claim with the carrier or agent, instead of
the 24-hour time limit after delivery provided in the aforecited legal provision.
Tested, too, under paragraph 5 of said Bill of Lading, it is crystal clear that the
commencement of the instant suit on May 12, 1978 was indeed fatally late. In view of
the express provision that "suits arising from
. . . damage or loss shall be instituted within 60 days from date of accrual of right of
action," the present action necessarily fails on ground of prescription.
In the absence of constitutional or statutory prohibition, it is usually held or recognized
that it is competent for the parties to a contract of shipment to agree on a limitation of
time shorter than the statutory period, within which action for breach of the contract
shall be brought, and such limitation will be enforced if reasonable . . . (13 C.J.S. 496-
497)
A perusal of the pertinent provisions of law on the matter would disclose that there is
no constitutional or statutory prohibition infirming paragraph 5 of subject Bill of Lading.
The stipulated period of 60 days is reasonable enough for appellees to ascertain the
facts and thereafter to sue, if need be, and the 60-day period agreed upon by the
parties which shortened the statutory period within which to bring action for breach of
contract is valid and binding. . . . (Emphasis in the original text.) 49
As explained above, the shortened period for filing suit is not unreasonable and has in
fact been generally recognized to be a valid business practice in the shipping
industry. Petitioners' advertence to the Court's holding in the Southern
Lines case, supra, is futile as what was involved was a claim for refund of excess
payment. We ruled therein that non-compliance with the requirement of filing a notice
of claim under Article 366 of the Code of Commerce does not affect the consignee's
right of action against the carrier because said requirement applies only to cases for
recovery of damages on account of loss of or damage to cargo, not to an action for
refund of overpayment, and on the further consideration that neither the Code of
Commerce nor the bills of lading therein provided any time limitation for suing for
refund of money paid in excess, except only that it be filed within a reasonable time.
The ruling in Sweet Lines categorizing the stipulated limitation on venue of action
provided in the subject bill of lading as a contract of adhesion and, under the
circumstances therein, void for being contrary to public policy is evidently likewise
unavailing in view of the discrete environmental facts involved and the fact that the
restriction therein was unreasonable. In any case, Ong Yiu vs. Court of Appeals, et
al., 50 instructs us that "contracts of adhesion wherein one party imposes a ready-
made form of contract on the other . . . are contracts not entirely prohibited. The one
who adheres to the contract is in reality free to reject it entirely; if he adheres he gives
his consent." In the present case, not even an allegation of ignorance of a party
excuses non-compliance with the contractual stipulations since the responsibility for
ensuring full comprehension of the provisions of a contract of carriage devolves not
on the carrier but on the owner, shipper, or consignee as the case may be.
TRANSPORTATION LAW – Chapter 4
While it is true that substantial compliance with provisions on filing of claim for loss of
or damage to cargo may sometimes suffice, the invocation of such an assumption
must be viewed vis-a-vis the object or purpose which such a provision seeks to attain
and that is to afford the carrier a reasonable opportunity to determine the merits and
validity of the claim and to protect itself against unfounded impositions. 51 Petitioners'
would nevertheless adopt an adamant posture hinged on the issuance by SLI of a
"Report on Losses and Damages," dated May 15, 1977, 52 from which petitioners
theorize that this charges private respondents with actual knowledge of the loss and
damage involved in the present case as would obviate the need for or render
superfluous the filing of a claim within the stipulated period.
Withal, it has merely to be pointed out that the aforementioned report bears this
notation at the lower part thereof: "Damaged by Mla. labor upon unloading; B/L noted
at port of origin," as an explanation for the cause of loss of and/or damage to the
cargo, together with an iterative note stating that "(t)his Copy should be submitted
together with your claim invoice or receipt within 30 days from date of issue otherwise
your claim will not be honored."
Moreover, knowledge on the part of the carrier of the loss of or damage to the goods
deducible from the issuance of said report is not equivalent to nor does it approximate
the legal purpose served by the filing of the requisite claim, that is, to promptly
apprise the carrier about a consignee's intention to file a claim and thus cause the
prompt investigation of the veracity and merit thereof for its protection. It would be an
unfair imposition to require the carrier, upon discovery in the process of preparing the
report on losses or damages of any and all such loss or damage, to presume the
existence of a claim against it when at that time the carrier is expectedly concerned
merely with accounting for each and every shipment and assessing its condition.
Unless and until a notice of claim is therewith timely filed, the carrier cannot be
expected to presume that for every loss or damage tallied, a corresponding claim
therefor has been filed or is already in existence as would alert it to the urgency for an
immediate investigation of the soundness of the claim. The report on losses and
damages is not the claim referred to and required by the bills of lading for it does not
fix responsibility for the loss or damage, but merely states the condition of the goods
shipped. The claim contemplated herein, in whatever form, must be something more
than a notice that the goods have been lost or damaged; it must contain a claim for
compensation or indicate an intent to claim. 53
Thus, to put the legal effect of respondent carrier's report on losses or damages, the
preparation of which is standard procedure upon unloading of cargo at the port of
destination, on the same level as that of a notice of claim by imploring substantial
compliance is definitely farfetched. Besides, the cited notation on the carrier's report
itself makes it clear that the filing of a notice of claim in any case is imperative if
carrier is to be held liable at all for the loss of or damage to cargo.
Turning now to respondent DVAPSI and considering that whatever right of action
petitioners may have against respondent carrier was lost due to their failure to
seasonably file the requisite claim, it would be awkward, to say the least, that by
some convenient process of elimination DVAPSI should proverbially be left holding
the bag, and it would be pure speculation to assume that DVAPSI is probably
responsible for the loss of or damage to cargo. Unlike a common carrier, an arrastre
operator does not labor under a presumption of negligence in case of loss,
destruction or deterioration of goods discharged into its custody. In other words, to
hold an arrastre operator liable for loss of and/or damage to goods entrusted to it
there must be preponderant evidence that it did not exercise due diligence in the
handling and care of the goods.
Petitioners failed to pinpoint liability on any of the original defendants and in this
seemingly wild goose-chase, they cannot quite put their finger down on when, where,
how and under whose responsibility the loss or damage probably occurred, or as
stated in paragraph 8 of their basic complaint filed in the court below, whether "(u)pon
discharge of the cargoes from the original carrying vessel, the SS VISHVA YASH,"
and/or upon discharge of the cargoes from the interisland vessel the MV "SWEET
LOVE," in Davao City and later while in the custody of defendant arrastre operator. 54
The testimony of petitioners' own witness, Roberto Cabato, Jr., Marine and Aviation
Claims Manager of petitioner Philamgen, was definitely inconclusive and the
responsibility for the loss or damage could still not be ascertained therefrom:
Q In other words, Mr. Cabato, you only computed the loss on the basis of the figures
submitted to you and based on the documents like the survey certificate and the
certificate of the arrastre?
A Yes, sir.
definitely at that point and time we cannot determine the extent of each liability. We
are only interested at that point and time in the liability as regards the underwriter in
accordance with the policy that we issued.
x x x           x x x          x x x
Q Mr. Witness, from the documents, namely, the survey of Manila Adjusters and
Surveyors Company, the survey of Davao Arrastre contractor and the bills of lading
issued by the defendant Sweet Lines, will you be able to tell the respective liabilities
of the bailees and/or carriers concerned?
A No, sir. (Emphasis ours.) 55
Neither did nor could the trial court, much less the Court of Appeals, precisely
establish the stage in the course of the shipment when the goods were lost,
destroyed or damaged. What can only be inferred from the factual findings of the trial
court is that by the time the cargo was discharged to DVAPSI, loss or damage had
already occurred and that the same could not have possibly occurred while the same
was in the custody of DVAPSI, as demonstrated by the observations of the trial court
quoted at the start of this opinion.
ACCORDINGLY, on the foregoing premises, the instant petition is DENIED and the
dismissal of the complaint in the court a quo as decreed by respondent Court of
Appeals in its challenged judgment is hereby AFFIRMED.

Q Therefore, Mr. Cabato, you have no idea how or where these losses were
incurred?

A No, sir.

x x x           x x x          x x x

Q Mr. Witness, you said that you processed and investigated the claim involving the
shipment in question. Is it not a fact that in your processing and investigation you
considered how the shipment was transported? Where the losses could have
occurred and what is the extent of the respective responsibilities of the bailees and/or
carriers involved?

x x x           x x x          x x x

A With respect to the shipment being transported, we have of course to get into it in
order to check whether the shipment coming in to this port is in accordance with the
policy condition, like in this particular case, the shipment was transported to Manila
and transhipped through an interisland vessel in accordance with the policy. With
respect to the losses, we have a general view where losses could have occurred. Of
course we will have to consider the different bailees wherein the shipment must have
passed through, like the ocean vessel, the interisland vessel and the arrastre, but
TRANSPORTATION LAW – Chapter 4
18.) G.R. No. 168433               February 10, 2009
UCPB GENERAL INSURANCE CO., INC., Petitioner,
vs. ABOITIZ SHIPPING CORP. EAGLE EXPRESS LINES, DAMCO INTERMODAL
SERVICES, INC., and PIMENTEL CUSTOMS BROKERAGE CO., Respondents.
The undisputed facts, culled from the assailed Decision, are as follows:
On June 18, 1991, three (3) units of waste water treatment plant with accessories
were purchased by San Miguel Corporation (SMC for brevity) from Super Max
Engineering Enterprises, Co., Ltd. of Taipei, Taiwan. The goods came from
Charleston, U.S.A. and arrived at the port of Manila on board MV "SCANDUTCH
STAR". The same were then transported to Cebu on board MV "ABOITIZ
SUPERCON II". After its arrival at the port of Cebu and clearance from the Bureau of
Customs, the goods were delivered to and received by SMC at its plant site on
August 2, 1991. It was then discovered that one electrical motor of DBS Drive Unit
Model DE-30-7 was damaged.
Pursuant to an insurance agreement, plaintiff-appellee paid SMC the amount of
₱1,703,381.40 representing the value of the damaged unit. In turn, SMC executed a
Subrogation Form dated March 31, 1992 in favor of plaintiff-appellee.
Consequently, plaintiff-appellee filed a Complaint on July 21, 1992 as subrogee of
SMC seeking to recover from defendants the amount it had paid SMC.
On September 20, 1994, plaintiff-appellee moved to admit its Amended Complaint
whereby it impleaded East Asiatic Co. Ltd. (EAST for brevity) as among the
defendants for being the "general agent" of DAMCO. In its Order dated September
23, 1994, the lower court admitted the said amended complaint.
Upon plaintiff-appellee’s motion, defendant DAMCO was declared in default by the
lower court in its Order dated January 6, 1995.
In the meantime, on January 25, 1995, defendant EAST filed a Motion for Preliminary
Hearing on its affirmative defenses seeking the dismissal of the complaint against it
on the ground of prescription, which motion was however denied by the court a quo in
its Order dated September 1, 1995. Such denial was elevated by defendant EAST to
this Court through a Petition for Certiorari on October 30, 1995 in CA G.R. SP No.
38840. Eventually, this Court issued its Decision dated February 14, 1996 setting
aside the lower court’s assailed order of denial and further ordering the dismissal of
the complaint against defendant EAST. Plaintiff-appellee moved for reconsideration
thereof but the same was denied by this Court in its Resolution dated November 8,
1996. As per Entry of Judgment, this Court’s decision ordering the dismissal of the
complaint against defendant EAST became final and executory on December 5,
1996.
TRANSPORTATION LAW – Chapter 4
Accordingly, the court a quo noted the dismissal of the complaint against defendant
EAST in its Order dated December 5, 1997. Thus, trial ensued with respect to the
remaining defendants.
On November 29, 1999, the lower court rendered its assailed Decision, the
dispositive portion of which reads:
WHEREFORE, all the foregoing premises considered, judgment is hereby rendered
declaring DAMCO Intermodal Systems, Inc., Eagle Express Lines, Inc. and defendant
Aboitiz Shipping solidarily liable to plaintiff-subrogee for the damaged shipment and
orders them to pay plaintiff jointly and severally the sum of ₱1,703,381.40.
Not convinced, defendants-appellants EAGLE and ABOITIZ now come to this Court
through their respective appeals x x x4
The appellate court, as previously mentioned, reversed the decision of the trial court
and ruled that UCPB’s right of action against respondents did not accrue because
UCPB failed to file a formal notice of claim within 24 hours from (SMC’s) receipt of the
damaged merchandise as required under Art. 366 of the Code of Commerce.
According to the Court of Appeals, the filing of a claim within the time limitation in Art.
366 is a condition precedent to the accrual of a right of action against the carrier for
the damages caused to the merchandise.
In its Memorandum5 dated February 8, 2007, UCPB asserts that the claim
requirement under Art. 366 of the Code of Commerce does not apply to this case
because the damage to the merchandise had already been known to the carrier.
Interestingly, UCPB makes this revelation: "x x x damage to the cargo was found
upon discharge from the foreign carrier onto the International Container Terminal
Services, Inc. (ICTSI) in the presence of the carrier’s representative who signed the
Request for Bad Order Survey6 and the Turn Over of Bad Order Cargoes.7 On
transshipment, the cargo was already damaged when loaded on board the inter-
island carrier."8 This knowledge, UCPB argues, dispenses with the need to give the
carrier a formal notice of claim. Incidentally, the carrier’s representative mentioned by
UCPB as present at the time the merchandise was unloaded was in fact a
representative of respondent Eagle Express Lines (Eagle Express).
UCPB claims that under the Carriage of Goods by Sea Act (COGSA), notice of loss
need not be given if the condition of the cargo has been the subject of joint inspection
such as, in this case, the inspection in the presence of the Eagle Express
representative at the time the cargo was opened at the ICTSI.
UCPB further claims that the issue of the applicability of Art. 366 of the Code of
Commerce was never raised before the trial court and should, therefore, not have
been considered by the Court of Appeals.
Eagle Express, in its Memorandum9 dated February 7, 2007, asserts that it cannot be
held liable for the damage to the merchandise as it acted merely as a freight
forwarder’s agent in the transaction. It allegedly facilitated the transshipment of the
cargo from Manila to Cebu but represented the interest of the cargo owner, and not
the carrier’s. The only reason why the name of the Eagle Express representative
appeared on the Permit to Deliver Imported Goods was that the form did not have a
space for the freight forwarder’s agent, but only for the agent of the shipping line.
Moreover, UCPB had previously judicially admitted that upon verification from the
Bureau of Customs, it was East Asiatic Co., Ltd. (East Asiatic), regarding whom the
original complaint was dismissed on the ground of prescription, which was the real
agent of DAMCO Intermodal Services, Inc. (DAMCO), the ship owner.
Eagle Express argues that the applicability of Art. 366 of the Code of Commerce was
properly raised as an issue before the trial court as it mentioned this issue as a
defense in its Answer to UCPB’s Amended Complaint. Hence, UCPB’s contention
that the question was raised for the first time on appeal is incorrect.
Aboitiz Shipping Corporation (Aboitiz), on the other hand, points out, in its
Memorandum10 dated March 29, 2007, that it obviously cannot be held liable for the
damage to the cargo which, by UCPB’s admission, was incurred not during
transshipment to Cebu on board one of Aboitiz’s vessels, but was already existent at
the time of unloading in Manila. Aboitiz also argues that Art. 366 of the Code of
Commerce is applicable and serves as a condition precedent to the accrual of
UCPB’s cause of action against it.
The Memorandum11 dated June 3, 2008, filed by Pimentel Customs Brokerage Co.
(Pimentel Customs), is also a reiteration of the applicability of Art. 366 of the Code of
Commerce.
It should be stated at the outset that the issue of whether a claim should have been
made by SMC, or UCPB as SMC’s subrogee, within the 24-hour period prescribed by
Art. 366 of the Code of Commerce was squarely raised before the trial court.
In its Answer to Amended Complaint12 dated May 10, 1993, Eagle Express averred,
thus:
The amended complaint states no cause of action under the provisions of the Code of
Commerce and the terms of the bill of lading; consignee made no claim against
herein defendant within twenty four (24) hours following the receipt of the alleged
cargo regarding the condition in which said cargo was delivered; however, assuming
arguendo that the damage or loss, if any, could not be ascertained from the outside
part of the shipment, consignee never made any claim against herein defendant at
the time of receipt of said cargo; herein defendant learned of the alleged claim only
upon receipt of the complaint.13
Likewise, in its Answer14 dated September 21, 1992, Aboitiz raised the defense that
UCPB did not file a claim with it and that the complaint states no cause of action.
TRANSPORTATION LAW – Chapter 4
UCPB obviously made a gross misrepresentation to the Court when it claimed that
the issue regarding the applicability of the Code of Commerce, particularly the 24-
hour formal claim rule, was not raised as an issue before the trial court. The appellate
court, therefore, correctly looked into the validity of the arguments raised by Eagle
Express, Aboitiz and Pimentel Customs on this point after the trial court had so ill-
advisedly centered its decision merely on the matter of extraordinary diligence.
Interestingly enough, UCPB itself has revealed that when the shipment was
discharged and opened at the ICTSI in Manila in the presence of an Eagle Express
representative, the cargo had already been found damaged. In fact, a request for bad
order survey was then made and a turnover survey of bad order cargoes was issued,
pursuant to the procedure in the discharge of bad order cargo. The shipment was
then repacked and transshipped from Manila to Cebu on board MV Aboitiz Supercon
II. When the cargo was finally received by SMC at its Mandaue City warehouse, it
was found in bad order, thereby confirming the damage already uncovered in
Manila.15
In charging Aboitiz with liability for the damaged cargo, the trial court condoned
UCPB’s wrongful suit against Aboitiz to whom the damage could not have been
attributable since there was no evidence presented that the cargo was further
damaged during its transshipment to Cebu. Even by the exercise of extraordinary
diligence, Aboitiz could not have undone the damage to the cargo that had already
been there when the same was shipped on board its vessel.
That said, it is nonetheless necessary to ascertain whether any of the remaining
parties may still be held liable by UCPB. The provisions of the Code of Commerce,
which apply to overland, river and maritime transportation, come into play.
Art. 366 of the Code of Commerce states:
Art. 366. Within twenty-four hours following the receipt of the merchandise, the claim
against the carrier for damage or average which may be found therein upon opening
the packages, may be made, provided that the indications of the damage or average
which gives rise to the claim cannot be ascertained from the outside part of such
packages, in which case the claim shall be admitted only at the time of receipt.
After the periods mentioned have elapsed, or the transportation charges have been
paid, no claim shall be admitted against the carrier with regard to the condition in
which the goods transported were delivered.1avvphi1
The law clearly requires that the claim for damage or average must be made within
24 hours from receipt of the merchandise if, as in this case, damage cannot be
ascertained merely from the outside packaging of the cargo.
In Philippine Charter Insurance Corporation v. Chemoil Lighterage
Corporation,16 petitioner, as subrogee of Plastic Group Phil., Inc. (PGP), filed suit
against respondent therein for the damage found on a shipment of chemicals loaded
on board respondent’s barge. Respondent claimed that no timely notice in
accordance with Art. 366 of the Code of Commerce was made by petitioner because
an employee of PGP merely made a phone call to respondent’s Vice President,
informing the latter of the contamination of the cargo. The Court ruled that the notice
of claim was not timely made or relayed to respondent in accordance with Art. 366 of
the Code of Commerce.
The requirement to give notice of loss or damage to the goods is not an empty
formalism. The fundamental reason or purpose of such a stipulation is not to relieve
the carrier from just liability, but reasonably to inform it that the shipment has been
damaged and that it is charged with liability therefor, and to give it an opportunity to
examine the nature and extent of the injury. This protects the carrier by affording it an
opportunity to make an investigation of a claim while the matter is still fresh and easily
investigated so as to safeguard itself from false and fraudulent claims.17
We have construed the 24-hour claim requirement as a condition precedent to the
accrual of a right of action against a carrier for loss of, or damage to, the goods. The
shipper or consignee must allege and prove the fulfillment of the condition. Otherwise,
no right of action against the carrier can accrue in favor of the former.18
The shipment in this case was received by SMC on August 2, 1991. However, as
found by the Court of Appeals, the claims were dated October 30, 1991, more than
three (3) months from receipt of the shipment and, at that, even after the extent of the
loss had already been determined by SMC’s surveyor. The claim was, therefore,
clearly filed beyond the 24-hour time frame prescribed by Art. 366 of the Code of
Commerce.
But what of the damage already discovered in the presence of Eagle Express’s
representative at the time the shipment was discharged in Manila? The Request for
Bad Order Survey and Turn Over Survey of Bad Order Cargoes, respectively dated
June 17, 1999 and June 28, 1991, evince the fact that the damage to the cargo was
already made known to Eagle Express and, possibly, SMC, as of those dates.
Sec. 3(6) of the COGSA provides a similar claim mechanism as the Code of
Commerce but prescribes a period of three (3) days within which notice of claim must
be given if the loss or damage is not apparent. It states:
Sec. 3(6). Unless notice of loss or damage and the general nature of such loss or
damage be given in writing to the carrier or his agent at the port of discharge or at the
time of the removal of the goods into the custody of the person entitled to delivery
thereof under the contract of carriage, such removal shall be prima facie evidence of
the delivery by the carrier of the goods as descibed in the bill of lading. If the loss or
damage is not apparent, the notice must be given within three days of the delivery.
Said notice of loss or damage may be endorsed upon the receipt of the goods given
by the person taking delivery thereof.
The notice in writing need not be given if the state of the goods has at the time of their
receipt been the subject of joint survey or inspection.
TRANSPORTATION LAW – Chapter 4
UCPB seizes upon the last paragraph which dispenses with the written notice if the
state of the goods has been the subject of a joint survey which, in this case, was the
opening of the shipment in the presence of an Eagle Express representative. It should
be noted at this point that the applicability of the above-quoted provision of the
COGSA was not raised as an issue by UCPB before the trial court and was only cited
by UCPB in its Memorandum in this case.
UCPB, however, is ambivalent as to which party Eagle Express represented in the
transaction. By its own manifestation, East Asiatic, and not Eagle Express, acted as
the agent through which summons and court notices may be served on DAMCO. It
would be unjust to hold that Eagle Express’s knowledge of the damage to the cargo is
such that it served to preclude or dispense with the 24-hour notice to the carrier
required by Art. 366 of the Code of Commerce. Neither did the inspection of the cargo
in which Eagle Express’s representative had participated lead to the waiver of the
written notice under the Sec. 3(6) of the COGSA. Eagle Express, after all, had acted
as the agent of the freight consolidator, not that of the carrier to whom the notice
should have been made.
At any rate, the notion that the request for bad order survey and turn over survey of
bad cargoes signed by Eagle Express’s representative is construable as compliant
with the notice requirement under Art. 366 of the Code of Commerce was foreclosed
by the dismissal of the complaint against DAMCO’s representative, East Asiatic.
As regards respondent Pimentel Customs, it is sufficient to acknowledge that it had
no participation in the physical handling, loading and delivery of the damaged cargo
and should, therefore, be absolved of liability.
Finally, UCPB’s misrepresentation that the applicability of the Code of Commerce
was not raised as an issue before the trial court warrants the assessment of double
costs of suit against it.
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-
G.R. CV No. 68168, dated October 29, 2004 and its Resolution dated June 14, 2005
are AFFIRMED. Double costs against petitioner.
19.) G.R. No. L-6957            February 14, 1913
THE GOVERNMENT OF THE PHILIPPINE ISLANDS, plaintiff-appellant,
vs. INCHAUSTI & CO., defendant-appellee.
An appeal by the plaintiff from an order which both parties treat as final, sustaining
the defendant's demurrer.
The appellant insists (1) that articles 366 and 952 of the Code of Commerce have
been repealed by section 43 of the Code of Civil Procedure; and (2) that if articles
366 and 952 of the Code of Commerce have not been so repealed, they have been
repealed by section 67 of Act No. 1792.
According to the complaint, the plaintiff, on June 3, 1909, placed aboard the
defendant's steamer Venus 500 barrels of cement consigned to the district engineer
of the Province of Albay, to be shipped to Tabaco, Albay. The cement, when placed
aboard the steamer in Manila Bay, was in good order and condition. On arrival of the
steamer at the port of Tabaco, the defendant, through its agents, unloaded the 500
barrels of cement and received a receipt therefor from the consignee stating that the
property had been received in good condition. Subsequently thereto (the exact time
not alleged in the complaint) the consignee discovered that 42 barrels had been
broken open and about half of the cement in each barrel lost, and it is alleged that this
loss was due to the careless handling on the part of the defendant's agents. There is
no allegation in the complaint showing that either the plaintiff of the consignee or
anyone else representing them made any complaint or demand on the defendant
company at any time prior to the presentation of this complaint, which was filed on
February 18, 1911, to be reimbursed for the loss of the cement.
Articles 366 and 952 of the Code of Commerce read:
ART. 366. Within the twenty-four hours following the receipt of the merchandise a
claim may be brought against the carrier on account of damage or average found
therein on opening the packages, provided that the indications of the damage or
average giving rise to the claim cannot be ascertained from the exterior of said
packages, in which case said claim would only be admitted on the receipt of the
packages.
After the periods mentioned have elapsed, or after the transportation charges have
been paid, no claim whatsoever shall be admitted against the carrier with regard to
the condition in which the goods transported were delivered.
ART. 952. The following (actions) shall prescribe after one year:
xxx           xxx           xxx
TRANSPORTATION LAW – Chapter 4
2. The actions relating to the delivery of the cargo in maritime or land transportation or
to the indemnity for delays and damages suffered by the goods transported, the
period of the prescription to be counted from the day of the delivery of the cargo at
the place of its destination, or from the day on which it should have been delivered
according to the conditions of its transportation.
The actions for damages or defaults cannot be brought if at the time of the delivery of
the respective shipments or within the twenty-four hours following, when damages
which do not appear on the exterior of the packages received are in question, the
proper protests or reservations should not have been made.
Section 67 of Act No. 1792 reads:
When public funds or property are shipped from one place to another and the
consignee whether an agent of the Government or otherwise shall accomplish the bill
of lading or receipt therefor without notation thereon of a shortage in or damage to the
public property covered by such bill of lading, such consignee shall be held for the full
amount and value of such public property in default of competent evidence to the
contrary satisfactory to the Auditor, a district auditor, or other committee appointed
under the provisions of this Act:  Provided, That evidence of the opening or tampering
with any package of public property shall bind the carrier for any shortage or damage
that may appear therein, and when notation is made upon the bill of lading or receipt
of such evidence the burden of proof that the shortage or damage occurred after the
shipment left the carrier's possession shall be upon such carrier.
Section 43 of the Code of Civil Procedure relates to the limitation or prescription of
civil actions other than for the recovery of real property. Such actions must be brought
within the periods therein set forth after the right of action accrues.
The first paragraph of clause No. 2 of article 952 of the Code of Commerce relates to
the same matter as that covered by sections 43 of Act No. 190, and may properly be
said to have been repealed by said section 43. Article 366 and the last paragraph of
clause No. 2 of article 952 of the Code of Commerce do not relate to the prescription
or limitation of actions. They create conditions precedent to the accruing of the right of
action against carriers for damages caused to merchandise, and have not been
repealed by section 43.
If the plaintiff's right of action depends upon a condition precedent, he must allege
and prove the fulfillment of the condition or a legal excuse for its non-fulfillment. And if
he omits such allegation his declaration, complaint, or petition will be bad on
demurrer. (9 Cyc., 699, and cases cited.)
It is urged that section 67, supra, changes the rules of law applicable to the liability of
carriers of merchandise belonging to the Government. A careful examination of this
section will show that it has made no change whatever in the existing law except with
respect to the liability of the consignee as an officer or agent of the Government. The
section first appeared as section 23 of Act No. 215 under the heading of
"Transportation of Property," the title of that Act being "An Act establishing and With reference to the question insisted upon by the plaintiff that article 366 of the
regulating accountability for public property in the Philippine Archipelago." The act as Code of Commerce is not applicable to maritime transportation, it is sufficient to say
a whole relates solely to the liability of officers of the Government by reason of the that this court has decided this point in the case of Cordoba vs. Warner, Barnes & Co.
possession of Government funds and other property. This Act, including the section in (1 Phil. Rep., 7) adversely to the contention of the plaintiff. We now see no reason for
question, went through a series of amendments until the section was finally inserted changing the doctrine announced in that case.
in its present form in the Accounting Act as section 67, supra.
For the foregoing reasons the order appealed from is affirmed, with costs against the
It is quite clear from a reading of this section (section 67 of Act No. 1792) that the only appellant. So ordered.
part which can be by any possibility be construed as affecting the liability of common
carriers is that which follows the word "Provided." All the rest of the section in terms
relates to the liability of the consignee. The latter part of this section makes the carrier
liable for any shortage in any package of public property or any damage thereto upon
proof of the opening or tampering with such package, and when a notation is made
upon the bill of lading or receipt of such evidence, the burden of proof that the
shortage or damage occurred after the shipment left the carrier's possession is upon
the carrier.

Before the passage of Act No. 1792, evidence of the "opening" of a package or
"tampering" with the goods delivered to him for transportation made the carrier liable
for the loss, provided the required notice was given in time. And when the fact that the
packages in which goods have been received showed evidence of having been
opened or tampered with at the time of delivery, and this fact was noted upon the bill
of lading, the burden rested upon the carrier to show that, although the package may
have been broken at the time of delivery, the contents were intact. This being so, the
mere repetition in the Act or section of a part of the existing law on the subject of the
liability of common carriers cannot be construed so as to have the effect of repealing
by implication the unrepealed parts of that law in the absence of a clear intention on
the part of the Legislature to effect such repeal. In other words, the statement that an
annotation of the receipt of goods in bad condition on the bill of lading throws the
burden of proof on the carrier to show that they were in fact intact and in good
condition at the time of delivery does involve as a necessary corollary the proposition
that when the goods are received and receipted for as being in good condition, that
the shipper can bring an action against the carrier at any time within the ten years
allowed by section 43 of Act No. 190, within which to sue on an obligation arising from
a contract in writing and recover upon proof that the goods, although receipted for as
being in good condition, were really received in bad condition. The whole purpose of
the law according to the Code of Commerce is to give the carrier an opportunity to
ascertain whether the claim is a well-founded one before the goods leave his hands
with respect to damages which are observable upon the exterior of the goods or of
the packages in which they are contained, and before the goods have been
consumed or their identity destroyed in cases in which it is alleged that the damage
has been discovered after the goods were received by the consignee. To impose
upon the carrier the liability which plaintiff seeks to impose by this action would be to
make the business of a common carrier a most hazardous one  — so hazardous,
indeed, that carriers would be obliged to charge much higher rates for carrying goods
belonging to the Government than for carrying goods belonging to other persons not
entitled to any such exemption from the general provisions of law relating to rights
and liabilities of shippers and carriers as is here claimed on behalf of this plaintiff.

TRANSPORTATION LAW – Chapter 4

20.) G.R. No. 136888               June 29, 2005
PHILIPPINE CHARTER INSURANCE CORPORATION, petitioner,
vs. CHEMOIL LIGHTERAGE CORPORATION, respondent.
THE FACTS
Petitioner Philippine Charter Insurance Corporation is a domestic corporation
engaged in the business of non-life insurance. Respondent Chemoil Lighterage
Corporation is also a domestic corporation engaged in the transport of goods.
On 24 January 1991, Samkyung Chemical Company, Ltd., based in Ulsan, South
Korea, shipped 62.06 metric tons of the liquid chemical DIOCTYL PHTHALATE
(DOP) on board MT "TACHIBANA" which was valued at US$90,201.57 under Bill of
Lading No. ULS/MNL-13 and another 436.70 metric tons of DOP valued at
US$634,724.89 under Bill of Lading No. ULS/MNL-24 to the Philippines. The
consignee was Plastic Group Phils., Inc. (PGP) in Manila.
PGP insured the cargo with herein petitioner Philippine Charter Insurance
Corporation against all risks. The insurance was under Marine Policies No. MRN-
307215 dated 06 February 1991 for ₱31,757,969.19 and No. MRN-307226 for
₱4,514,881.00. Marine Endorsement No. 27867 dated 11 May 1991 was attached and
formed part of MRN-30721, amending the latter’s insured value to ₱24,667,422.03,
and reduced the premium accordingly.
The ocean tanker MT "TACHIBANA" unloaded the cargo to Tanker Barge LB-1011 of
respondent Chemoil Lighterage Corporation, which shall transport the same to Del
Pan Bridge in Pasig River. Tanker Barge LB-1011 would unload the cargo to tanker
trucks, also owned by the respondent, and haul it by land to PGP’s storage tanks in
Calamba, Laguna.
Upon inspection by PGP, the samples taken from the shipment showed discoloration
from yellowish to amber, demonstrating that it was damaged, as DOP is colorless and
water clear. PGP then sent a letter to the petitioner dated 18 February 19918 where it
formally made an insurance claim for the loss it sustained due to the contamination.
The petitioner requested an independent insurance adjuster, the GIT Insurance
Adjusters, Inc. (GIT), to conduct a Quantity and Condition Survey of the shipment. On
22 February 1991, GIT issued a Report,9 part of which states:
As unloading progressed, it was observed on February 14, 1991 that DOP samples
taken were discolored from yellowish to amber. Inspection of cargo tanks showed
manhole covers of ballast tanks’ ceilings loosely secured. Furthermore, it was noted
that the rubber gaskets of the manhole covers of the ballast tanks re-acted to the
chemical causing shrinkage thus, loosening the covers and cargo ingress to the rusty
ballast tanks…10
TRANSPORTATION LAW – Chapter 4
On 13 May 1991, the petitioner paid PGP the amount of ₱5,000,000.0011 as full and
final payment for the loss. PGP issued a Subrogation Receipt to the petitioner.
Meanwhile, on 03 April 1991, PGP paid the respondent the amount of ₱301,909.50
as full payment for the latter’s services, as evidenced by Official Receipt No. 1274.12
On 15 July 1991, an action for damages was instituted by the petitioner-insurer
against respondent-carrier before the RTC, Branch 16, City of Manila, docketed as
Civil Case No. 91-57923.13 The petitioner prayed for actual damages in the amount of
₱5,000,000.00, attorney’s fees in the amount of no less than ₱1,000,000.00, and
costs of suit.
An Answer with Compulsory Counterclaim14 was filed by the respondent on 05
September 1991. The respondent admitted it undertook to transport the consignee’s
shipment from MT "TACHIBANA" to the Del Pan Bridge, Pasig River, where it was
transferred to its tanker trucks for hauling to PGP’s storage tanks in Calamba,
Laguna. The respondent alleged that before the DOP was loaded into its barge (LB-
1011), the surveyor/representative of PGP, Adjustment Standard Corporation,
inspected it and found the same clean, dry, and fit for loading. The entire loading and
unloading of the shipment were also done under the control and supervision of PGP’s
surveyor/representative. It was also mentioned by the respondent that the contract
between it and PGP expressly stipulated that it shall be free from any and all claims
arising from contamination, loss of cargo or part thereof; that the consignee accepted
the cargo without any protest or notice; and that the cargo shall be insured by its
owner sans recourse against all risks. As subrogee, the petitioner was bound by this
stipulation. As carrier, no fault and negligence can be attributed against respondent
as it exercised extraordinary diligence in handling the cargo.15
After due hearing, the trial court rendered a Decision on 06 January 1997, the
dispositive portion of which reads:
WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered in favor of
plaintiff ordering defendant to pay plaintiff’s claim of P5,000,000.00 with legal interest
from the date of the filing of the complaint. The counterclaims are DISMISSED.16
Aggrieved by the trial court’s decision, the respondent sought relief with the Court of
Appeals where it alleged in the main that PGP failed to file any notice, claim or protest
within the period required by Article 366 of the Code of Commerce, which is a
condition precedent to the accrual of a right of action against the carrier.17 A
telephone call which was supposedly made by a certain Alfred Chan, an employee of
PGP, to one of the Vice Presidents of the respondent, informing the latter of the
discoloration, is not the notice required by Article 366 of the Code of Commerce.18
On 18 December 1998, the Court of Appeals promulgated its Decision reversing the
trial court, the dispositive portion of which reads:
WHEREFORE, the decision appealed from is hereby REVERSED AND SET
ASIDE and a new one is entered dismissing the complaint.19
A petition for review on certiorari20 was filed by the petitioner with this Court, praying
that the decision of the trial court be affirmed.
After the respondent filed its Comment21 and the petitioner filed its Reply22 thereto,
this Court issued a Resolution23 on 18 August 1999, giving due course to the petition.
ASSIGNMENT OF ERRORS
The petitioner assigns as errors the following:
I given by Alfredo Chan, an employee of PGP, to Ms. Encarnacion Abastillas, Vice
THE APPELLATE COURT GRAVELY ERRED IN FINDING THAT THE NOTICE OF
CLAIM WAS NOT FILED WITHIN THE REQUIRED PERIOD.
II
THE APPELLATE COURT GRAVELY ERRED IN NOT HOLDING THAT DAMAGE
TO THE CARGO WAS DUE TO THE FAULT OR NEGLIGENCE OF RESPONDENT
CHEMOIL.
III
THE APPELLATE COURT GRAVELY ERRED IN SETTING ASIDE THE TRIAL
COURT’S DECISION AND IN DISMISSING THE COMPLAINT.24
ISSUES
Synthesized, the issues that must be addressed by this Court are:
I
WHETHER OR NOT THE NOTICE OF CLAIM WAS FILED WITHIN THE REQUIRED
PERIOD. If the answer is in the affirmative,
II
WHETHER OR NOT THE DAMAGE TO THE CARGO WAS DUE TO THE FAULT
OR NEGLIGENCE OF THE RESPONDENT.
THE COURT’S RULINGS
TRANSPORTATION LAW – Chapter 4
Article 366 of the Code of Commerce has profound application in the case at bar.
This provision of law imparts:
Art. 366. Within twenty-four hours following the receipt of the merchandise a claim
may be made against the carrier on account of damage or average found upon
opening the packages, provided that the indications of the damage or average giving
rise to the claim cannot be ascertained from the exterior of said packages, in which
case said claim shall only be admitted at the time of the receipt of the packages.
After the periods mentioned have elapsed, or after the transportation charges have
been paid, no claim whatsoever shall be admitted against the carrier with regard to
the condition in which the goods transported were delivered.
As to the first issue, the petitioner contends that the notice of contamination was
President for Administration and Operations of the respondent, at the time of the
delivery of the cargo, and therefore, within the required period.25 This was done by
telephone.
The respondent, however, claims that the supposed notice given by PGP over the
telephone was denied by Ms. Abastillas. Between the testimonies of Alfredo Chan
and Encarnacion Abastillas, the latter’s testimony is purportedly more credible
because it would be quite unbelievable and contrary to business practice for Alfredo
Chan to merely make a verbal notice of claim that involves millions of pesos.26
On this point, the Court of Appeals declared:
. . . We are inclined to sustain the view that a telephone call made to defendant-
company could constitute substantial compliance with the requirement of notice
considering that the notice was given to a responsible official, the Vice-President, who
promptly replied that she will look into the matter. However, it must be pointed out that
compliance with the period for filing notice is an essential part of the
requirement, i.e.. immediately if the damage is apparent, or otherwise within twenty-
four hours from receipt of the goods, the clear import being that prompt examination
of the goods must be made to ascertain damage if this is not immediately apparent.
We have examined the evidence, and We are unable to find any proof of compliance
with the required period, which is fatal to the accrual of the right of action against the
carrier.27
The petitioner is of the view that there was an incongruity in the findings of facts of the
trial court and the Court of Appeals, the former allegedly holding that the period to file
the notice had been complied with, while the latter held otherwise.
We do not agree. On the matter concerning the giving of the notice of claim as
required by Article 366 of the Code of Commerce, the finding of fact of the Court of
Appeals does not actually contradict the finding of fact of the trial court. Both courts
held that, indeed, a telephone call was made by Alfredo Chan to Encarnacion
Abastillas, informing the latter of the contamination. However, nothing in the trial
court’s decision stated that the notice of claim was relayed or filed with the
respondent-carrier immediately or within a period of twenty-four hours from the time
the goods were received. The Court of Appeals made the same finding. Having
examined the entire records of the case, we cannot find a shred of evidence that will
precisely and ultimately point to the conclusion that the notice of claim was timely
relayed or filed.
The allegation of the petitioner that not only the Vice President of the respondent was
informed, but also its drivers, as testified by Alfredo Chan, during the time that the
delivery was actually being made, cannot be given great weight as no driver was
presented to the witness stand to prove this. Part of the testimony of Alfredo Chan is
revealing:
Q: …
Mr. Witness, were you in your plant site at the time these various cargoes were
delivered?
A: No, sir.
… not only when the period to make a claim has elapsed that no claim whatsoever shall
Q: So, do you have a first hand knowledge that your plant representative informed the
driver of the alleged contamination?
A: What do you mean by that?
Q: Personal knowledge [that] you yourself heard or saw them [notify] the driver?
A: No, sir.28
From the preceding testimony, it is quite palpable that the witness Alfredo Chan had
no personal knowledge that the drivers of the respondent were informed of the
contamination.
The requirement that a notice of claim should be filed within the period stated by
Article 366 of the Code of Commerce is not an empty or worthless proviso. In a case,
we held:
The object sought to be attained by the requirement of the submission of claims in
pursuance of this article is to compel the consignee of goods entrusted to a carrier to
make prompt demand for settlement of alleged damages suffered by the goods while
in transport, so that the carrier will be enabled to verify all such claims at the time of
delivery or within twenty-four hours thereafter, and if necessary fix responsibility and
secure evidence as to the nature and extent of the alleged damages to the goods
while the matter is still fresh in the minds of the parties.29
TRANSPORTATION LAW – Chapter 4
In another case, we ruled, thus:
More particularly, where the contract of shipment contains a reasonable requirement
of giving notice of loss of or injury to the goods, the giving of such notice is a condition
precedent to the action for loss or injury or the right to enforce the carrier’s liability.
Such requirement is not an empty formalism. The fundamental reason or purpose of
such a stipulation is not to relieve the carrier from just liability, but reasonably to
inform it that the shipment has been damaged and that it is charged with liability
therefore, and to give it an opportunity to examine the nature and extent of the injury.
This protects the carrier by affording it an opportunity to make an investigation of a
claim while the matter is fresh and easily investigated so as to safeguard itself from
false and fraudulent claims.30
The filing of a claim with the carrier within the time limitation therefore actually
constitutes a condition precedent to the accrual of a right of action against a carrier
for loss of, or damage to, the goods. The shipper or consignee must allege and prove
the fulfillment of the condition. If it fails to do so, no right of action against the carrier
can accrue in favor of the former. The aforementioned requirement is a reasonable
condition precedent; it does not constitute a limitation of action.31
The second paragraph of Article 366 of the Code of Commerce is also edifying. It is
be admitted, as no claim may similarly be admitted after the transportation charges
have been paid.
In this case, there is no question that the transportation charges have been paid, as
admitted by the petitioner, and the corresponding official receipt32 duly issued. But the
petitioner is of the view that the payment for services does not invalidate its claim. It
contends that under the second paragraph of Article 366 of the Code of Commerce, it
is clear that if notice or protest has been made prior to payment of services, claim
against the bad order condition of the cargo is allowed.
We do not believe so. As discussed at length above, there is no evidence to confirm
that the notice of claim was filed within the period provided for under Article 366 of the
Code of Commerce. Petitioner’s contention proceeds from a false presupposition that
the notice of claim was timely filed.
Considering that we have resolved the first issue in the negative, it is therefore
unnecessary to make a resolution on the second issue.
WHEREFORE, in view of all the foregoing, the Decision of the Court of Appeals dated
18 December 1998, which reversed and set aside the decision of the trial court, is
hereby AFFIRMED in toto. No pronouncement as to costs.
21.) G.R. No. 147724             June 8, 2004
LORENZO SHIPPING CORP., petitioner,
vs. CHUBB and SONS, Inc., GEARBULK, Ltd. and PHILIPPINE TRANSMARINE
CARRIERS, INC., respondents.
Petitioner Lorenzo Shipping Corporation (Lorenzo Shipping, for short), a domestic
corporation engaged in coastwise shipping, was the carrier of 581 bundles of black
steel pipes, the subject shipment, from Manila to Davao City. From Davao City,
respondent Gearbulk, Ltd., a foreign corporation licensed as a common carrier under
the laws of Norway and doing business in the Philippines through its agent,
respondent Philippine Transmarine Carriers, Inc. (Transmarine Carriers, for short), a
domestic corporation, carried the goods on board its vessel M/V San Mateo Victory to
the United States, for the account of Sumitomo Corporation. The latter, the
consignee, is a foreign corporation organized under the laws of the United States of
America. It insured the shipment with respondent Chubb and Sons, Inc., a foreign
corporation organized and licensed to engage in insurance business under the laws
of the United States of America.
The facts are as follows:
On November 21, 1987, Mayer Steel Pipe Corporation of Binondo, Manila, loaded
581 bundles of ERW black steel pipes worth US$137,912.844 on board the vessel
M/V Lorcon IV, owned by petitioner Lorenzo Shipping, for shipment to Davao City.
Petitioner Lorenzo Shipping issued a clean bill of lading designated as Bill of Lading
No. T-35 for the account of the consignee, Sumitomo Corporation of San Francisco,
California, USA, which in turn, insured the goods with respondent Chubb and Sons,
Inc.6
The M/V Lorcon IV arrived at the Sasa Wharf in Davao City on December 2, 1987.
Respondent Transmarine Carriers received the subject shipment which was
discharged on December 4, 1987, evidenced by Delivery Cargo Receipt No.
115090.7 It discovered seawater in the hatch of M/V Lorcon IV, and found the steel
pipes submerged in it. The consignee Sumitomo then hired the services of R.J. Del
Pan Surveyors to inspect the shipment prior to and subsequent to discharge. Del
Pan’s Survey Report8 dated December 4, 1987 showed that the subject shipment was
no longer in good condition, as in fact, the pipes were found with rust formation on top
and/or at the sides. Moreover, the surveyor noted that the cargo hold of the M/V
Lorcon IV was flooded with seawater, and the tank top was "rusty, thinning, and with
several holes at different places." The rusty condition of the cargo was noted on the
mate’s receipts and the checker of M/V Lorcon IV signed his conforme thereon.9
After the survey, respondent Gearbulk loaded the shipment on board its vessel M/V
San Mateo Victory, for carriage to the United States. It issued Bills of Lading Nos.
DAV/OAK 1 to 7,10 covering 364 bundles of steel pipes to be discharged at Oakland,
U.S.A., and Bills of Lading Nos. DAV/SEA 1 to 6,11 covering 217 bundles of steel
TRANSPORTATION LAW – Chapter 4
pipes to be discharged at Vancouver, Washington, U.S.A. All bills of lading were
marked "ALL UNITS HEAVILY RUSTED."
While the cargo was in transit from Davao City to the U.S.A., consignee Sumitomo
sent a letter12 of intent dated December 7, 1987, to petitioner Lorenzo Shipping, which
the latter received on December 9, 1987. Sumitomo informed petitioner Lorenzo
Shipping that it will be filing a claim based on the damaged cargo once such damage
had been ascertained. The letter reads:
Please be advised that the merchandise herein below noted has been landed in bad
order ex-Manila voyage No. 87-19 under B/L No. T-3 which arrived at the port of
Davao City on December 2, 1987.
The extent of the loss and/or damage has not yet been determined but apparently all
bundles are corroded. We reserve the right to claim as soon as the amount of claim is
determined and the necessary supporting documents are available.
Please find herewith a copy of the survey report which we had arranged for after
unloading of our cargo from your vessel in Davao.
We trust that you shall make everything in order.
On January 17, 1988, M/V San Mateo Victory arrived at Oakland, California, U.S.A.,
where it unloaded 364 bundles of the subject steel pipes. It then sailed to Vancouver,
Washington on January 23, 1988 where it unloaded the remaining 217 bundles.
Toplis and Harding, Inc. of San Franciso, California, surveyed the steel pipes, and
also discovered the latter heavily rusted. When the steel pipes were tested with a
silver nitrate solution, Toplis and Harding found that they had come in contact with
salt water. The survey report,13 dated January 28, 1988 states:
xxx
We entered the hold for a close examination of the pipe, which revealed moderate to
heavy amounts of patchy and streaked dark red/orange rust on all lifts which were
visible. Samples of the shipment were tested with a solution of silver nitrate revealing
both positive and occasional negative chloride reactions, indicating pipe had come in
contact with salt water. In addition, all tension applied metal straps were very heavily
rusted, and also exhibited chloride reactions on testing with silver nitrate.
xxx
It should be noted that subject bills of lading bore the following remarks as to
conditions of goods: "ALL UNITS HEAVILY RUSTED." Attached herein is a copy of a
survey report issued by Del Pan Surveyors of Davao City, Philippines dated,
December 4, 1987 at Davao City, Philippines, which describes conditions of the cargo
as sighted aboard the vessel "LORCON IV," prior to and subsequent to discharge at
Davao City. Evidently, the aforementioned rust damages were apparently sustained
while the shipment was in the custody of the vessel "LORCON IV," prior to being
laden on board the vessel "SAN MATEO VICTORY" in Davao.
Due to its heavily rusted condition, the consignee Sumitomo rejected the damaged
steel pipes and declared them unfit for the purpose they were intended.14 It then filed
a marine insurance claim with respondent Chubb and Sons, Inc. which the latter
settled in the amount of US$104,151.00.15
On December 2, 1988, respondent Chubb and Sons, Inc. filed a complaint16 for
collection of a sum of money, docketed as Civil Case No. 88-47096, against
respondents Lorenzo Shipping, Gearbulk, and Transmarine. Respondent Chubb and
Sons, Inc. alleged that it is not doing business in the Philippines, and that it is suing
under an isolated transaction.
On February 21, 1989, respondents Gearbulk and Transmarine filed their
answer17 with counterclaim and cross-claim against petitioner Lorenzo Shipping
denying liability on the following grounds: (a) respondent Chubb and Sons, Inc. has
no capacity to sue before Philippine courts; (b) the action should be dismissed on the
ground of forum non conveniens; (c) damage to the steel pipes was due to the
inherent nature of the goods or to the insufficiency of packing thereof; (d) damage to
the steel pipes was not due to their fault or negligence; and, (e) the law of the country
of destination, U.S.A., governs the contract of carriage.
Petitioner Lorenzo Shipping filed its answer with counterclaim on February 28, 1989,
and amended it on May 24, 1989. It denied liability, alleging, among others: (a) that
rust easily forms on steel by mere exposure to air, moisture and other marine
elements; (b) that it made a disclaimer in the bill of lading; (c) that the goods were
improperly packed; and, (d) prescription, laches, and extinguishment of obligations
and actions had set in.
The Regional Trial Court ruled in favor of the respondent Chubb and Sons, Inc.,
finding that: (1) respondent Chubb and Sons, Inc. has the right to institute this action;
and, (2) petitioner Lorenzo Shipping was negligent in the performance of its
obligations as a carrier. The dispositive portion of its Decision states:
WHEREFORE, the judgment is hereby rendered ordering Defendant Lorenzo
Shipping Corporation to pay the plaintiff the sum of US$104,151.00 or its equivalent
in Philippine peso at the current rate of exchange with interest thereon at the legal
rate from the date of the institution of this case until fully paid, the attorney’s fees in
the sum of ₱50,000.00, plus the costs of the suit, and dismissing the plaintiff’s
complaint against defendants Gearbulk, Ltd. and Philippine Transmarine Carriers,
Inc., for lack of merit, and the two defendants’ counterclaim, there being no showing
that the plaintiff had filed this case against said defendants in bad faith, as well as the
two defendants’ cross-claim against Defendant Lorenzo Shipping Corporation, for
lack of factual basis.18
TRANSPORTATION LAW – Chapter 4
Petitioner Lorenzo Shipping appealed to the Court of Appeals insisting that: (a)
respondent Chubb and Sons does not have capacity to sue before Philippine courts;
and, (b) petitioner Lorenzo Shipping was not negligent in the performance of its
obligations as carrier of the goods. The appellate court denied the petition and
affirmed the decision of the trial court.
The Court of Appeals likewise denied petitioner Lorenzo Shipping’s Motion for
Reconsideration19 dated September 3, 2000, in a Resolution20 promulgated on March
28, 2001.
Hence, this petition. Petitioner Lorenzo Shipping submits the following issues for
resolution:
(1) Whether or not the prohibition provided under Art. 133 of the Corporation Code
applies to respondent Chubb, it being a mere subrogee or assignee of the rights of
Sumitomo Corporation, likewise a foreign corporation admittedly doing business in
the Philippines without a license;
(2) Whether or not Sumitomo, Chubb’s predecessor-in-interest, validly made a claim
for damages against Lorenzo Shipping within the period prescribed by the Code of
Commerce;
(3) Whether or not a delivery cargo receipt without a notation on it of damages or
defects in the shipment, which created a prima facie presumption that the carrier
received the shipment in good condition, has been overcome by convincing evidence;
(4) Assuming that Lorenzo Shipping was guilty of some lapses in transporting the
steel pipes, whether or not Gearbulk and Transmarine, as common carriers, are to
share liability for their separate negligence in handling the cargo.21
In brief, we resolve the following issues:
(1) whether respondent Chubb and Sons has capacity to sue before the Philippine
courts; and,
(2) whether petitioner Lorenzo Shipping is negligent in carrying the subject cargo.
Petitioner argues that respondent Chubb and Sons is a foreign corporation not
licensed to do business in the Philippines, and is not suing on an isolated transaction.
It contends that because the respondent Chubb and Sons is an insurance company, it
was merely subrogated to the rights of its insured, the consignee Sumitomo, after
paying the latter’s policy claim. Sumitomo, however, is a foreign corporation doing
business in the Philippines without a license and does not have capacity to sue
before Philippine courts. Since Sumitomo does not have capacity to sue, petitioner
then concludes that, neither the subrogee-respondent Chubb and Sons could sue
before Philippine courts.
We disagree with petitioner.
In the first place, petitioner failed to raise the defense that Sumitomo is a foreign
corporation doing business in the Philippines without a license. It is therefore
estopped from litigating the issue on appeal especially because it involves a question
of fact which this Court cannot resolve. Secondly, assuming arguendo that Sumitomo
cannot sue in the Philippines, it does not follow that respondent, as subrogee, has
also no capacity to sue in our jurisdiction.
Subrogation is the substitution of one person in the place of another with reference to
a lawful claim or right, so that he who is substituted succeeds to the rights of the other
in relation to a debt or claim, including its remedies or securities.22 The principle
covers the situation under which an insurer that has paid a loss under an insurance
policy is entitled to all the rights and remedies belonging to the insured against a third
party with respect to any loss covered by the policy.23 It contemplates full substitution
such that it places the party subrogated in the shoes of the creditor, and he may use
all means which the creditor could employ to enforce payment.24
The rights to which the subrogee succeeds are the same as, but not greater than,
those of the person for whom he is substituted – he cannot acquire any claim,
security, or remedy the subrogor did not have.25 In other words, a subrogee cannot
succeed to a right not possessed by the subrogor.26 A subrogee in effect steps into
the shoes of the insured and can recover only if insured likewise could have
recovered.
However, when the insurer succeeds to the rights of the insured, he does so only in
relation to the debt. The person substituted (the insurer) will succeed to all the rights
of the creditor (the insured), having reference to the debt due the latter.27 In the
instant case, the rights inherited by the insurer, respondent Chubb and Sons, pertain
only to the payment it made to the insured Sumitomo as stipulated in the insurance
contract between them, and which amount it now seeks to recover from petitioner
Lorenzo Shipping which caused the loss sustained by the insured Sumitomo. The
capacity to sue of respondent Chubb and Sons could not perchance belong to the
group of rights, remedies or securities pertaining to the payment respondent insurer
made for the loss which was sustained by the insured Sumitomo and covered by the
contract of insurance. Capacity to sue is a right personal to its holder. It is conferred
by law and not by the parties. Lack of legal capacity to sue means that the plaintiff is
not in the exercise of his civil rights, or does not have the necessary qualification to
appear in the case, or does not have the character or representation he claims. It
refers to a plaintiff’s general disability to sue, such as on account of minority, insanity,
incompetence, lack of juridical personality, or any other disqualifications of a
party.28 Respondent Chubb and Sons who was plaintiff in the trial court does not
possess any of these disabilities. On the contrary, respondent Chubb and Sons has
satisfactorily proven its capacity to sue, after having shown that it is not doing
business in the Philippines, but is suing only under an isolated transaction, i.e., under
the one (1) marine insurance policy issued in favor of the consignee Sumitomo
covering the damaged steel pipes.
TRANSPORTATION LAW – Chapter 4
The law on corporations is clear in depriving foreign corporations which are doing
business in the Philippines without a license from bringing or maintaining actions
before, or intervening in Philippine courts. Art. 133 of the Corporation Code states:
Doing business without a license. – No foreign corporation transacting business in
the Philippines without a license, or its successors or assigns, shall be permitted to
maintain or intervene in any action, suit or proceeding in any court or administrative
agency of the Philippines; but such corporation may be sued or proceeded against
before Philippine courts or administrative tribunals on any valid cause of action
recognized under Philippine laws.
The law does not prohibit foreign corporations from performing single acts of
business. A foreign corporation needs no license to sue before Philippine courts on
an isolated transaction.29 As held by this Court in the case of Marshall-Wells
Company vs. Elser & Company:30
The object of the statute (Secs. 68 and 69, Corporation Law) was not to prevent the
foreign corporation from performing single acts, but to prevent it from acquiring a
domicile for the purpose of business without taking the steps necessary to render it
amenable to suit in the local courts . . . the implication of the law (being) that it was
never the purpose of the legislature to exclude a foreign corporation which happens
to obtain an isolated order for business for the Philippines, from seeking redress in
the Philippine courts.
Likewise, this Court ruled in Universal Shipping Lines, Inc. vs. Intermediate
Appellate Court31 that:
. . . The private respondent may sue in the Philippine courts upon the marine
insurance policies issued by it abroad to cover international-bound cargoes shipped
by a Philippine carrier, even if it has no license to do business in this country, for it is
not the lack of the prescribed license (to do business in the Philippines) but doing
business without such license, which bars a foreign corporation from access to our
courts.
We reject the claim of petitioner Lorenzo Shipping that respondent Chubb and Sons
is not suing under an isolated transaction because the steel pipes, subject of this
case, are covered by two (2) bills of lading; hence, two transactions. The stubborn
fact remains that these two (2) bills of lading spawned from the single marine
insurance policy that respondent Chubb and Sons issued in favor of the consignee
Sumitomo, covering the damaged steel pipes. The execution of the policy is a single
act, an isolated transaction. This Court has not construed the term "isolated
transaction" to literally mean "one" or a mere single act. In Eriks Pte. Ltd. vs. Court
of Appeals, this Court held that:32
. . . What is determinative of "doing business" is not really the number or the quantity
of the transactions, but more importantly, the intention of an entity to continue the
body of its business in the country. The number and quantity are merely evidence of
such intention. The phrase "isolated transaction" has a definite and fixed meaning,
i.e. a transaction or series of transactions set apart from the common business of a
foreign enterprise in the sense that there is no intention to engage in a progressive
pursuit of the purpose and object of the business organization. Whether a foreign
corporation is "doing business" does not necessarily depend upon the frequency of its
transactions, but more upon the nature and character of the transactions. [Emphasis
supplied.]
In the case of Gonzales vs. Raquiza, et al.,33 three contracts, hence three
transactions were challenged as void on the ground that the three American
corporations which are parties to the contracts are not licensed to do business in the
Philippines. This Court held that "one single or isolated business transaction does not
constitute doing business within the meaning of the law. Transactions which are
occasional, incidental, and casual — not of a character to indicate a purpose to
engage in business — do not constitute the doing or engaging in business as
contemplated by law. Where the three transactions indicate no intent by the foreign
corporation to engage in a continuity of transactions, they do not constitute doing
business in the Philippines."
Furthermore, respondent insurer Chubb and Sons, by virtue of the right of
subrogation provided for in the policy of insurance,34 is the real party in interest in the
action for damages before the court a quo against the carrier Lorenzo Shipping to
recover for the loss sustained by its insured. Rule 3, Section 2 of the 1997 Rules of
Civil Procedure defines a real party in interest as one who is entitled to the avails of
any judgment rendered in a suit, or who stands to be benefited or injured by it. Where
an insurance company as subrogee pays the insured of the entire loss it suffered, the
insurer-subrogee is the only real party in interest and must sue in its own name35 to
enforce its right of subrogation against the third party which caused the loss. This is
because the insurer in such case having fully compensated its insured, which
payment covers the loss in full, is subrogated to the insured’s claims arising from
such loss. The subrogated insurer becomes the owner of the claim and, thus entitled
to the entire fruits of the action.36 It then, thus possesses the right to enforce the claim
and the significant interest in the litigation.37 In the case at bar, it is clear that
respondent insurer was suing on its own behalf in order to enforce its right of
subrogation.
On the second issue, we affirm the findings of the lower courts that petitioner Lorenzo
Shipping was negligent in its care and custody of the consignee’s goods.
The steel pipes, subject of this case, were in good condition when they were loaded
at the port of origin (Manila) on board petitioner Lorenzo Shipping’s M/V Lorcon IV en
route to Davao City. Petitioner Lorenzo Shipping issued clean bills of lading covering
the subject shipment. A bill of lading, aside from being a contract38 and a receipt,39 is
also a symbol40 of the goods covered by it. A bill of lading which has no notation of
any defect or damage in the goods is called a "clean bill of lading."41 A clean bill of
lading constitutes prima facie evidence of the receipt by the carrier of the goods as
therein described.42
The case law teaches us that mere proof of delivery of goods in good order to a
carrier and the subsequent arrival in damaged condition at the place of destination
TRANSPORTATION LAW – Chapter 4
raises a prima facie case against the carrier.43 In the case at bar, M/V Lorcon IV of
petitioner Lorenzo Shipping received the steel pipes in good order and condition,
evidenced by the clean bills of lading it issued. When the cargo was unloaded from
petitioner Lorenzo Shipping’s vessel at the Sasa Wharf in Davao City, the steel pipes
were rusted all over. M/V San Mateo Victory of respondent Gearbulk, Ltd, which
received the cargo, issued Bills of Lading Nos. DAV/OAK 1 to 7 and Nos. DAV/SEA 1
to 6 covering the entire shipment, all of which were marked "ALL UNITS HEAVILY
RUSTED." R.J. Del Pan Surveyors found that the cargo hold of the M/V Lorcon IV
was flooded with seawater, and the tank top was rusty, thinning and perforated,
thereby exposing the cargo to sea water. There can be no other conclusion than that
the cargo was damaged while on board the vessel of petitioner Lorenzo Shipping,
and that the damage was due to the latter’s negligence. In the case at bar, not only
did the legal presumption of negligence attach to petitioner Lorenzo Shipping upon
the occurrence of damage to the cargo.44 More so, the negligence of petitioner was
sufficiently established. Petitioner Lorenzo Shipping failed to keep its vessel in
seaworthy condition. R.J. Del Pan Surveyors found the tank top of M/V Lorcon IV to
be "rusty, thinning, and with several holes at different places." Witness Captain Pablo
Fernan, Operations Manager of respondent Transmarine Carriers, likewise observed
the presence of holes at the deck of M/V Lorcon IV.45 The unpatched holes allowed
seawater, reaching up to three (3) inches deep, to enter the flooring of the hatch of
the vessel where the steel pipes were stowed, submerging the latter in sea
water.46 The contact with sea water caused the steel pipes to rust. The silver nitrate
test, which Toplis and Harding employed, further verified this
conclusion.47 Significantly, petitioner Lorenzo Shipping did not even attempt to
present any contrary evidence. Neither did it offer any proof to establish any of the
causes that would exempt it from liability for such damage.48 It merely alleged that
the: (1) packaging of the goods was defective; and (2) claim for damages has
prescribed.
To be sure, there is evidence that the goods were packed in a superior condition.
John M. Graff, marine surveyor of Toplis and Harding, examined the condition of the
cargo on board the vessel San Mateo Victory. He testified that the shipment had
superior packing "because the ends were covered with plastic, woven plastic.
Whereas typically they would not go to that bother ... Typically, they come in with no
plastic on the ends. They might just be banded, no plastic on the ends ..."49
On the issue of prescription of respondent Chubb and Sons’ claim for damages, we
rule that it has not yet prescribed at the time it was made.
Art. 366 of the Code of Commerce states:
Within the twenty-four hours following the receipt of the merchandise, the claim
against the carrier for damage or average, which may be found therein upon the
opening of the packages, may be made, provided that the indications of the damage
or average which gives rise to the claim cannot be ascertained from the outside part
of such package, in which case the claim shall be admitted only at the time of the
receipt.
After the periods mentioned have elapsed, or transportation charges have been paid,
no claim shall be admitted against the carrier with regard to the condition in which the
goods transported were delivered.

A somewhat similar provision is embodied in the Bill of Lading No. T-3 which reads:50

NOTE: No claim for damage or loss shall be honored twenty-four (24) hours after
delivery.

(Ref. Art. 366 C Com.)

The twenty-four-hour period prescribed by Art. 366 of the Code of Commerce within
which claims must be presented does not begin to run until the consignee has
received such possession of the merchandise that he may exercise over it the
ordinary control pertinent to ownership.51 In other words, there must be delivery of the
cargo by the carrier to the consignee at the place of destination.52 In the case at bar,
consignee Sumitomo has not received possession of the cargo, and has not
physically inspected the same at the time the shipment was discharged from M/V
Lorcon IV in Davao City. Petitioner Lorenzo Shipping failed to establish that an
authorized agent of the consignee Sumitomo received the cargo at Sasa Wharf in
Davao City. Respondent Transmarine Carriers as agent of respondent Gearbulk, Ltd.,
which carried the goods from Davao City to the United States, and the principal,
respondent Gearbulk, Ltd. itself, are not the authorized agents as contemplated by
law. What is clear from the evidence is that the consignee received and took
possession of the entire shipment only when the latter reached the United States’
shore. Only then was delivery made and completed. And only then did the 24-hour
prescriptive period start to run.

Finally, we find no merit to the contention of respondents Gearbulk and Transmarine

that American law governs the contract of carriage because the U.S.A. is the country
of destination. Petitioner Lorenzo Shipping, through its M/V Lorcon IV, carried the
goods from Manila to Davao City. Thus, as against petitioner Lorenzo Shipping, the
place of destination is Davao City. Hence, Philippine law applies.

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

CA-G.R. CV No. 61334 dated August 14, 2000 and its Resolution dated March 28,
2001 are hereby AFFIRMED. Costs against petitioner.

TRANSPORTATION LAW – Chapter 4

22.) G.R. No. L-11325       December 7, 1917
MONICO G. ROLDAN, plaintiff-appellant,
vs.
LIM PONZO & CO., defendant-appellee.
Plaintiff in this action seeks to recover damages in the sum of P3,780.12 for the
alleged failure of the defendant company to live up to its contract for the
transportation of 2,244 packages of sugar from the plaintiff's hacienda to Iloilo.
Defendants admits the execution of the contract, the receipt from the plaintiff of 2,244
packages of sugar for transportation, and the loss of a part of this sugar. Counsel for
defendant insists, however, that it should not be held responsible for its failure to
carry out the contract, because, as it alleges, the sugar was lost in a wreck in the river
of Jalaud, without fault on the part of the owner, the patron, or the crew of the vessel.
There would not appear to be much question as to the fact that the defendant
company's lorcha was wrecked in the river Jalaud, and that of the 2,244 packages of
plaintiff's sugar aboard the vessel, only 1,022 packages were saved in a more or less
damaged condition.
At the trial in the court below, the plaintiff undertook to establish the facts upon which
he based his claim for damages and introduced evidence tending to disclose that
the lorcha had been wrecked and the sugar lost through the negligence and lack of
skill of the master of the lorcha in the management of his vessel. After the plaintiff had
submitted all his evidence and before the defendant company had called any of its
witnesses, the trial judge peremptorily dismissed the complaint on the ground that it
was neither alleged or proved that the plaintiff had complied with the provisions of
section 366 of the Commercial Code. That section is as follows:
Within the twenty-four hours following the receipt of the merchandise a claim may be
brought against the carrier on account of damage or average found therein on
opening the packages, provided that the indication of the damage of average giving
rise to the claim cannot be case said claim would only admitted on the receipt of the
packages.
After the periods mentioned have elapsed, or after the transportation charges have
been paid, no claim whatsoever shall be admitted against the carrier with regards to
the condition in which the goods transported were delivered.
We agree with plaintiff's counsel that the dismissal of the complaint on this ground
was error which necessitates the return of the record to the court below. Article 366 of
the Commercial Code is limited to cases of claims for damage goods actually turned
over by the carrier and received by the consignee, whether those damages be
apparent from the examination of the packages in which the goods are delivered, or
of such a character that the nature and extent of the damage is not apparent until the
packages are opened and the contents examined. Clearly it has no application in
such cases wherein the goods entrusted to the carrier are not delivered by the carrier
TRANSPORTATION LAW – Chapter 4
to the consignee. In such cases there can be no question of a claim for damages
suffered by the goods while in transport, since the claim for damages arises
exclusively out of the failure to make delivery.
The object sought to be attained by the requirement of the submission of claims in
pursuance of this article is to compel the consignee of goods entrusted to a carrier to
make prompt demand for settlement of alleged damages suffered by the goods while
in transport, so that the carrier will be enabled to verify all such claims at the time of
delivery or within twenty-four hours thereafter, and if necessary fix responsibility and
secure evidence as to the nature and extent of the alleged damages to the goods
while the matter is still fresh in the minds of the parties. To this end of provision is
made in article 367 of the Code for the prompt settlement of disputes as to the nature
and extent of the alleged damages, and for the final disposition of the damaged
goods, which is wholly inconsistent with the contention that these articles are
applicable in cases wherein the claim against the carrier is founded upon his failure to
make delivery of the goods entrusted to him.
Article 367 of the Commercial Code is as follows:
If there should occur doubts and disputes between the consignee and the carrier with
regard to the condition of goods transported at the time of their delivery to the former,
the said goods shall be examined by the experts appointed by the parties, and a third
one, in case of disagreement, appointed by the judicial authority, the result of the
examination always being reduced to writing; and if the persons interested should not
agree to the report of the experts and could not reach an agreement, said judicial
authority shall have the merchandise deposited in a safe warehouse, and the parties
interested shall make use of their rights in the proper manner.
It is very clear, then, that in so far as this action seeks to recover damages for
defendant's failure to deliver 1,222 packages or bayones of sugar, the failure to make
claim for such damages under the provisions of article 366 of the Commercial Code in
no wise affects the respective rights of the parties.
In so far as this action is founded on a claim for damages resulting from the wetting of
the 1,022 packages of sugar which were saved from the wreck, it seems clear that if
these 1,022 packages of sugar were delivered by the carrier and received by the
consignee under and in pursuance of the terms of the contract, this claim for
damages would be defeated by the plaintiff's failure to make claim therefor in
accordance with the terms of article 366 of the Code.
We are of opinion, however, that the necessity for making the claim in accordance
with that article did not arise if, as it is alleged, these 1,022 packages of sugar were
recovered from the wreck by the plaintiff, himself, in an effort, by his own activities, to
save his property from total loss. The measures to be taken under the terms of article
367 of the Code when the parties are unable to arrive at an amicable settlement of
claims for damages set up in accordance with article 366, quite clearly indicate that
the necessity for the presentation of claims under this article arises only in those
cases wherein the carrier makes delivery and the consignee receives the goods in
pursuance of the terms of the contract.

Until the defendant has had an opportunity to submit his evidence it is impossible to
determine under what conditions these 1,022 packages of sugar came into the
possession of the plaintiff, or to determine whether his claim for damages by the
wetting of this sugar, if well founded in every other respect, is or should be defeated
by his failure to make claim for such damages in the manner and form indicated in
article 366 of the Commercial Code.

We conclude that the judgment entered in the court below should be reversed and the
record remanded to the court below for new trial upon all the issues raised by the
pleadings, it being expressly understood, however, that the evidence already in the
record may be considered as submitted at the new trial, without prejudice to the right
of either party to offer such additional evidence as he may deem proper in support of
the allegations set forth in the pleadings. No costs will be taxed in this instance. So
ordered.

TRANSPORTATION LAW – Chapter 4

23.) G.R. No. 181163               July 24, 2013
ASIAN TERMINALS, INC., Petitioner,
vs.
PHILAM INSURANCE CO., INC. (now Chartis Philippines Insurance,
Inc.), Respondent.
On April 15, 1995, Nichimen Corporation shipped to Universal Motors Corporation
(Universal Motors) 219 packages containing 120 units of brand new Nissan Pickup
Truck Double Cab 4x2 model, without engine, tires and batteries, on board the vessel
S/S "Calayan Iris" from Japan to Manila. The shipment, which had a declared value of
US$81,368 or ₱29,400,000, was insured with Philam against all risks under Marine
Policy No. 708-8006717-4.4
The carrying vessel arrived at the port of Manila on April 20, 1995, and when the
shipment was unloaded by the staff of ATI, it was found that the package marked as
03-245-42K/1 was in bad order.5 The Turn Over Survey of Bad Order Cargoes6 dated
April 21, 1995 identified two packages, labeled 03-245-42K/1 and 03/237/7CK/2, as
being dented and broken. Thereafter, the cargoes were stored for temporary
safekeeping inside CFS Warehouse in Pier No. 5.
On May 11, 1995, the shipment was withdrawn by R.F. Revilla Customs Brokerage,
Inc., the authorized broker of Universal Motors, and delivered to the latter’s
warehouse in Mandaluyong City. Upon the request7 of Universal Motors, a bad order
survey was conducted on the cargoes and it was found that one Frame Axle Sub
without LWR was deeply dented on the buffle plate while six Frame Assembly with
Bush were deformed and misaligned.8 Owing to the extent of the damage to said
cargoes, Universal Motors declared them a total loss.
On August 4, 1995, Universal Motors filed a formal claim for damages in the amount
of ₱643,963.84 against Westwind,9 ATI10 and R.F. Revilla Customs Brokerage,
Inc.11 When Universal Motors’ demands remained unheeded, it sought reparation
from and was compensated in the sum of ₱633,957.15 by Philam. Accordingly,
Universal Motors issued a Subrogation Receipt12 dated November 15, 1995 in favor
of Philam.
On January 18, 1996, Philam, as subrogee of Universal Motors, filed a
Complaint13 for damages against Westwind, ATI and R.F. Revilla Customs
Brokerage, Inc. before the RTC of Makati City, Branch 148.
On September 24, 1999, the RTC rendered judgment in favor of Philam and ordered
Westwind and ATI to pay Philam, jointly and severally, the sum of ₱633,957.15 with
interest at the rate of 12% per annum, ₱158,989.28 by way of attorney’s fees and
expenses of litigation.
TRANSPORTATION LAW – Chapter 4
The court a quo ruled that there was sufficient evidence to establish the respective
participation of Westwind and ATI in the discharge of and consequent damage to the
shipment. It found that the subject cargoes were compressed while being hoisted
using a cable that was too short and taut.
The trial court observed that while the staff of ATI undertook the physical unloading of
the cargoes from the carrying vessel, Westwind’s duty officer exercised full
supervision and control throughout the process. It held Westwind vicariously liable for
failing to prove that it exercised extraordinary diligence in the supervision of the ATI
stevedores who unloaded the cargoes from the vessel. However, the court absolved
R.F. Revilla Customs Brokerage, Inc. from liability in light of its finding that the
cargoes had been damaged before delivery to the consignee.
The trial court acknowledged the subrogation between Philam and Universal Motors
on the strength of the Subrogation Receipt dated November 15, 1995. It likewise
upheld Philam’s claim for the value of the alleged damaged vehicle parts contained in
Case Nos. 03-245-42K/1 and 03-245-51K or specifically for "7 pieces of Frame Axle
Sub Without Lower and Frame Assembly with Bush."14
Westwind filed a Motion for Reconsideration15 which was, however, denied in an
Order16 dated October 26, 2000.
On appeal, the CA affirmed with modification the ruling of the RTC. In a Decision
dated October 15, 2007, the appellate court directed Westwind and ATI to pay
Philam, jointly and severally, the amount of ₱190,684.48 with interest at the rate of
12% per annum until fully paid, attorney’s fees of ₱47,671 and litigation expenses.
The CA stressed that Philam may not modify its allegations by claiming in its
Appellee’s Brief17 that the six pieces of Frame Assembly with Bush, which were
purportedly damaged, were also inside Case No. 03-245-42K/1. The CA noted that in
its Complaint, Philam alleged that "one (1) pc. FRAME AXLE SUB W/O LWR from
Case No. 03-245-42K/1 was completely deformed and misaligned, and six (6) other
pcs. of FRAME ASSEMBLY WITH BUSH from Case No. 03-245-51K were likewise
completely deformed and misaligned."18
The appellate court accordingly affirmed Westwind and ATI’s joint and solidary liability
for the damage to only one (1) unit of Frame Axle Sub without Lower inside Case No.
03-245-42K/1. It also noted that when said cargo sustained damage, it was not yet in
the custody of the consignee or the person who had the right to receive it. The CA
pointed out that Westwind’s duty to observe extraordinary diligence in the care of the
cargoes subsisted during unloading thereof by ATI’s personnel since the former
exercised full control and supervision over the discharging operation.
Similarly, the appellate court held ATI liable for the negligence of its employees who
carried out the offloading of cargoes from the ship to the pier. As regards the extent of
ATI’s liability, the CA ruled that ATI cannot limit its liability to ₱5,000 per damaged
package. It explained that Section 7.0119 of the Contract for Cargo Handling
Services20 does not apply in this case since ATI was not yet in custody and control of
the cargoes when the Frame Axle Sub without Lower suffered damage.
Citing Belgian Overseas Chartering and Shipping N.V. v. Philippine First Insurance
Co., Inc.,21 the appellate court also held that Philam’s action for damages had not
prescribed notwithstanding the absence of a notice of claim.
All the parties moved for reconsideration, but their motions were denied in a
Resolution dated January 11, 2008. Thus, they each filed a petition for review on
certiorari which were consolidated together by this Court considering that all three
petitions assail the same CA decision and resolution and involve the same parties.
Essentially, the issues posed by petitioner ATI in G.R. No. 181163, petitioner Philam
in G.R. No. 181262 and petitioner Westwind in G.R. No. 181319 can be summed up
into and resolved by addressing three questions: (1) Has Philam’s action for damages
prescribed? (2) Who between Westwind and ATI should be held liable for the
damaged cargoes? and (3) What is the extent of their liability?
Petitioners’ Arguments
G.R. No. 181163
Petitioner ATI disowns liability for the damage to the Frame Axle Sub without Lower
inside Case No. 03-245-42K/1. It shifts the blame to Westwind, whom it charges with
negligence in the supervision of the stevedores who unloaded the cargoes. ATI
admits that the damage could have been averted had Westwind observed
extraordinary diligence in handling the goods. Even so, ATI suspects that Case No.
03-245-42K/1 is "weak and defective"22 considering that it alone sustained damage
out of the 219 packages.
Notwithstanding, petitioner ATI submits that, at most, it can be held liable to pay only
₱5,000 per package pursuant to its Contract for Cargo Handling Services. ATI
maintains that it was not properly notified of the actual value of the cargoes prior to
their discharge from the vessel.
G.R. No. 181262
Petitioner Philam supports the CA in holding both Westwind and ATI liable for the
deformed and misaligned Frame Axle Sub without Lower inside Case No. 03-245-
42K/1. It, however, faults the appellate court for disallowing its claim for the value of
six Chassis Frame Assembly which were likewise supposedly inside Case Nos. 03-
245-51K and 03-245-42K/1. As to the latter container, Philam anchors its claim on the
results of the Inspection/Survey Report23 of Chartered Adjusters, Inc., which the court
received without objection from Westwind and ATI. Petitioner believes that with the
offer and consequent admission of evidence to the effect that Case No. 03-245-42K/1
contains six pieces of dented Chassis Frame Assembly, Philam’s claim thereon
should be treated, in all respects, as if it has been raised in the pleadings. Thus,
TRANSPORTATION LAW – Chapter 4
Philam insists on the reinstatement of the trial court’s award in its favor for the
payment of ₱633,957.15 plus legal interest, ₱158,989.28 as attorney’s fees and
costs.
G.R. No. 181319
Petitioner Westwind denies joint liability with ATI for the value of the deformed Frame
Axle Sub without Lower in Case No. 03-245-42K/1. Westwind argues that the
evidence shows that ATI was already in actual custody of said case when the Frame
Axle Sub without Lower inside it was misaligned from being compressed by the tight
cable used to unload it. Accordingly, Westwind ceased to have responsibility over the
cargoes as provided in paragraph 4 of the Bill of Lading which provides that the
responsibility of the carrier shall cease when the goods are taken into the custody of
the arrastre.
Westwind contends that sole liability for the damage rests on ATI since it was the
latter’s stevedores who operated the ship’s gear to unload the cargoes. Westwind
reasons that ATI is an independent company, over whose employees and operations
it does not exercise control. Moreover, it was ATI’s employees who selected and used
the wrong cable to lift the box containing the cargo which was damaged.
Westwind likewise believes that ATI is bound by its acceptance of the goods in good
order despite a finding that Case No. 03-245-42K/1 was partly torn and crumpled on
one side. Westwind also notes that the discovery that a piece of Frame Axle Sub
without Lower was completely deformed and misaligned came only on May 12, 1995
or 22 days after the cargoes were turned over to ATI and after the same had been
hauled by R.F. Revilla Customs Brokerage, Inc.
Westwind further argues that the CA erred in holding it liable considering that
Philam’s cause of action has prescribed since the latter filed a formal claim with it only
on August 17, 1995 or four months after the cargoes arrived on April 20, 1995.
Westwind stresses that according to the provisions of clause 20, paragraph 224 of the
Bill of Lading as well as Article 36625 of the Code of Commerce, the consignee had
until April 20, 1995 within which to make a claim considering the readily apparent
nature of the damage, or until April 27, 1995 at the latest, if it is assumed that the
damage is not readily apparent.
Lastly, petitioner Westwind contests the imposition of 12% interest on the award of
damages to Philam reckoned from the time of extrajudicial demand. Westwind
asserts that, at most, it can only be charged with 6% interest since the damages
claimed by Philam does not constitute a loan or forbearance of money.
The Court’s Ruling
The three consolidated petitions before us call for a determination of who between
ATI and Westwind is liable for the damage suffered by the subject cargo and to what
extent. However, the resolution of the issues raised by the present petitions is
predicated on the appreciation of factual issues which is beyond the scope of a
petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as
amended. It is settled that in petitions for review on certiorari, only questions of law
may be put in issue. Questions of fact cannot be entertained.26
There is a question of law if the issue raised is capable of being resolved without
need of reviewing the probative value of the evidence. The resolution of the issue
must rest solely on what the law provides on the given set of circumstances. Once it
is clear that the issue invites a review of the evidence presented, the question posed
is one of fact. If the query requires a re-evaluation of the credibility of witnesses, or
the existence or relevance of surrounding circumstances and their relation to each
other, the issue in that query is factual.27
In the present petitions, the resolution of the question as to who between Westwind
and ATI should be liable for the damages to the cargo and to what extent would have
this Court pass upon the evidence on record. But while it is not our duty to review,
examine and evaluate or weigh all over again the probative value of the evidence
presented,28 the Court may nonetheless resolve questions of fact when the case falls
under any of the following exceptions:
(1) when the findings are grounded entirely on speculation, surmises, or conjectures;
(2) when the inference made is manifestly mistaken, absurd, or impossible; (3) when
there is grave abuse of discretion; (4) when the judgment is based on a
misapprehension of facts; (5) when the findings of fact are conflicting; (6) when in
making its findings the Court of Appeals went beyond the issues of the case, or its
findings are contrary to the admissions of both the appellant and the appellee; (7)
when the findings are contrary to those of the trial court; (8) when the findings are
conclusions without citation of specific evidence on which they are based; (9) when
the facts set forth in the petition as well as in the petitioner’s main and reply briefs are
not disputed by the respondent; and (10) when the findings of fact are premised on
the supposed absence of evidence and contradicted by the evidence on record.29
In the cases at bar, the fifth and seventh exceptions apply. While the CA affirmed the
joint liability of ATI and Westwind, it held them liable only for the value of one unit of
Frame Axle Sub without Lower inside Case No. 03-245-42K/1. The appellate court
disallowed the award of damages for the six pieces of Frame Assembly with Bush,
which petitioner Philam alleged, for the first time in its Appellee’s Brief, to be likewise
inside Case No. 03-245-42K/1. Lastly, the CA reduced the award of attorney’s fees to
₱47,671.
Foremost, the Court holds that petitioner Philam has adequately established the basis
of its claim against petitioners ATI and Westwind. Philam, as insurer, was subrogated
to the rights of the consignee, Universal Motors Corporation, pursuant to the
Subrogation Receipt executed by the latter in favor of the former. The right of
subrogation accrues simply upon payment by the insurance company of the
insurance claim.30 Petitioner Philam’s action finds support in Article 2207 of the Civil
Code, which provides as follows:
TRANSPORTATION LAW – Chapter 4
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. x x x.
In their respective comments31 to Philam’s Formal Offer of Evidence,32 petitioners ATI
and Westwind objected to the admission of Marine Certificate No. 708-8006717-4 and
the Subrogation Receipt as documentary exhibits "B" and "P," respectively. Petitioner
Westwind objects to the admission of both documents for being hearsay as they were
not authenticated by the persons who executed them. For the same reason, petitioner
ATI assails the admissibility of the Subrogation Receipt. As regards Marine Certificate
No. 708-8006717-4, ATI makes issue of the fact that the same was issued only on
April 27, 1995 or 12 days after the shipment was loaded on and transported via S/S
"Calayan Iris."
The nature of documents as either public or private determines how the documents
may be presented as evidence in court. Public documents, as enumerated under
Section 19,33 Rule 132 of the Rules of Court, are self-authenticating and require no
further authentication in order to be presented as evidence in court.34
In contrast, a private document is any other writing, deed or instrument executed by a
private person without the intervention of a notary or other person legally authorized
by which some disposition or agreement is proved or set forth. Lacking the official or
sovereign character of a public document, or the solemnities prescribed by law, a
private document requires authentication35 in the manner prescribed under Section
20, Rule 132 of the Rules:
SEC. 20. Proof of private document. – Before any private document offered as
authentic is received in evidence, its due execution and authenticity must be proved
either:
(a) By anyone who saw the document executed or written; or
(b) By evidence of the genuineness of the signature or handwriting of the maker.
Any other private document need only be identified as that which it is claimed to be.
The requirement of authentication of a private document is excused only in four
instances, specifically: (a) when the document is an ancient one within the context of
Section 21,36 Rule 132 of the Rules; (b) when the genuineness and authenticity of the
actionable document have not been specifically denied under oath by the adverse
party; (c) when the genuineness and authenticity of the document have been
admitted; or (d) when the document is not being offered as genuine.37
Indubitably, Marine Certificate No. 708-8006717-4 and the Subrogation Receipt are
private documents which Philam and the consignee, respectively, issue in the pursuit
of their business. Since none of the exceptions to the requirement of authentication of
a private document obtains in these cases, said documents may not be admitted in
evidence for Philam without being properly authenticated.
Contrary to the contention of petitioners ATI and Westwind, however, Philam
presented its claims officer, Ricardo Ongchangco, Jr. to testify on the execution of the
Subrogation Receipt, as follows:
ATTY. PALACIOS
Q How were you able to get hold of this subrogation receipt?
A Because I personally delivered the claim check to consignee and have them
receive the said check.
Q I see. Therefore, what you are saying is that you personally delivered the claim
check of Universal Motors Corporation to that company and you have the subrogation
receipt signed by them personally?
A Yes, sir.
Q And it was signed in your presence?
A Yes, sir.38
Indeed, all that the Rules require to establish the authenticity of a document is the
testimony of a person who saw the document executed or written. Thus, the trial court
did not err in admitting the Subrogation Receipt in evidence despite petitioners ATI
and Westwind’s objections that it was not authenticated by the person who signed it.
However, the same cannot be said about Marine Certificate No. 708-8006717-4
which Ongchangcho, Jr. merely identified in court. There is nothing in Ongchangco,
Jr.’s testimony which indicates that he saw Philam’s authorized representative sign
said document, thus:
ATTY. PALACIOS
Q Now, I am presenting to you a copy of this marine certificate 708-8006717-4 issued
by Philam Insurance Company, Inc. to Universal Motors Corporation on April 15,
1995. Will you tell us what relation does it have to that policy risk claim mentioned in
that letter?
A This is a photocopy of the said policy issued by the consignee Universal Motors
Corporation.
ATTY. PALACIOS
TRANSPORTATION LAW – Chapter 4
I see. May I request, if Your Honor please, that this marine risk policy of the plaintiff
as submitted by claimant Universal Motors Corporation be marked as Exhibit B.
COURT
Mark it.39
As regards the issuance of Marine Certificate No. 708-8006717-4 after the fact of loss
occurred, suffice it to say that said document simply certifies the existence of an open
insurance policy in favor of the consignee. Hence, the reference to an "Open Policy
Number 9595093" in said certificate. The Court finds it completely absurd to suppose
that any insurance company, of sound business practice, would assume a loss that
has already been realized, when the profitability of its business rests precisely on the
non-happening of the risk insured against.
Yet, even with the exclusion of Marine Certificate No. 708-8006717-4, the
Subrogation Receipt, on its own, is adequate proof that petitioner Philam paid the
consignee’s claim on the damaged goods. Petitioners ATI and Westwind failed to
offer any evidence to controvert the same. In Malayan Insurance Co., Inc. v.
Alberto,40 the Court explained the effect of payment by the insurer of the insurance
claim in this wise:
We have held that payment by the insurer to the insured operates as an equitable
assignment to the insurer of all the remedies that the insured may have against the
third party whose negligence or wrongful act caused the loss. The right of subrogation
is not dependent upon, nor does it grow out of, any privity of contract. It accrues
simply upon payment by the insurance company of the insurance claim. The doctrine
of subrogation has its roots in equity. It is designed to promote and accomplish
justice; and is the mode that equity adopts to compel the ultimate payment of a debt
by one who, in justice, equity, and good conscience, ought to pay.41
Neither do we find support in petitioner Westwind’s contention that Philam’s right of
action has prescribed.
The Carriage of Goods by Sea Act (COGSA) or Public Act No. 521 of the 74th US
Congress, was accepted to be made applicable to all contracts for the carriage of
goods by sea to and from Philippine ports in foreign trade by virtue of Commonwealth
Act (C.A.) No. 65.42 Section 1 of C.A. No. 65 states:
Section 1. That the provisions of Public Act Numbered Five hundred and twenty-one
of the Seventy-fourth Congress of the United States, approved on April sixteenth,
nineteen hundred and thirty-six, be accepted, as it is hereby accepted to be made
applicable to all contracts for the carriage of goods by sea to and from Philippine
ports in foreign trade: Provided, That nothing in the Act shall be construed as
repealing any existing provision of the Code of Commerce which is now in force, or as
limiting its application.
The prescriptive period for filing an action for the loss or damage of the goods under
the COGSA is found in paragraph (6), Section 3, thus:
(6) Unless notice of loss or damage and the general nature of such loss or damage
be given in writing to the carrier or his agent at the port of discharge before or at the
time of the removal of the goods into the custody of the person entitled to delivery
thereof under the contract of carriage, such removal shall be prima facie evidence of
the delivery by the carrier of the goods as described in the bill of lading. If the loss or
damage is not apparent, the notice must be given within three days of the delivery.
Said notice of loss or damage maybe endorsed upon the receipt for the goods given
by the person taking delivery thereof.
The notice in writing need not be given if the state of the goods has at the time of their
receipt been the subject of joint survey or inspection.
In any event the carrier and the ship shall be discharged from all liability in respect of
loss or damage unless suit is brought within one year after delivery of the goods or
the date when the goods should have been delivered: Provided, That if a notice of
loss or damage, either apparent or concealed, is not given as provided for in this
section, that fact shall not affect or prejudice the right of the shipper to bring suit
within one year after the delivery of the goods or the date when the goods should
have been delivered.
In the Bill of Lading43 dated April 15, 1995, Rizal Commercial Banking Corporation
(RCBC) is indicated as the consignee while Universal Motors is listed as the notify
party. These designations are in line with the subject shipment being covered by
Letter of Credit No. I501054, which RCBC issued upon the request of Universal
Motors.
A letter of credit is a financial device developed by merchants as a convenient and
relatively safe mode of dealing with sales of goods to satisfy the seemingly
irreconcilable interests of a seller, who refuses to part with his goods before he is
paid, and a buyer, who wants to have control of his goods before paying.44 However,
letters of credit are employed by the parties desiring to enter into commercial
transactions, not for the benefit of the issuing bank but mainly for the benefit of the
parties to the original transaction,45 in these cases, Nichimen Corporation as the seller
and Universal Motors as the buyer. Hence, the latter, as the buyer of the Nissan CKD
parts, should be regarded as the person entitled to delivery of the goods. Accordingly,
for purposes of reckoning when notice of loss or damage should be given to the
carrier or its agent, the date of delivery to Universal Motors is controlling.
S/S "Calayan Iris" arrived at the port of Manila on April 20, 1995, and the subject
cargoes were discharged to the custody of ATI the next day. The goods were then
withdrawn from the CFS Warehouse on May 11, 1995 and the last of the packages
delivered to Universal Motors on May 17, 1995. Prior to this, the latter filed a Request
for Bad Order Survey46 on May 12,1995 following a joint inspection where it was
discovered that six pieces of Chassis Frame Assembly from two bundles were
TRANSPORTATION LAW – Chapter 4
deformed and one Front Axle Sub without Lower from a steel case was dented. Yet, it
was not until August 4, 1995 that Universal Motors filed a formal claim for damages
against petitioner Westwind.
Even so, we have held in Insurance Company of North America v. Asian Terminals,
Inc. that a request for, and the result of a bad order examination, done within the
reglementary period for furnishing notice of loss or damage to the carrier or its agent,
serves the purpose of a claim. A claim is required to be filed within the reglementary
period to afford the carrier or depositary reasonable opportunity and facilities to check
the validity of the claims while facts are still fresh in the minds of the persons who
took part in the transaction and documents are still available.47 Here, Universal
Motors filed a request for bad order survey on May 12, 1995, even before all the
packages could be unloaded to its warehouse.
Moreover, paragraph (6), Section 3 of the COGSA clearly states that failure to comply
with the notice requirement shall not affect or prejudice the right of the shipper to
bring suit within one year after delivery of the goods. Petitioner Philam, as subrogee
of Universal Motors, filed the Complaint for damages on January 18, 1996, just eight
months after all the packages were delivered to its possession on May 17, 1995.
Evidently, petitioner Philam’s action against petitioners Westwind and ATI was
seasonably filed.
This brings us to the question that must be resolved in these consolidated petitions.
Who between Westwind and ATI should be liable for the damage to the cargo?
It is undisputed that Steel Case No. 03-245-42K/1 was partly torn and crumpled on
one side while it was being unloaded from the carrying vessel. The damage to said
container was noted in the Bad Order Cargo Receipt48 dated April 20, 1995 and Turn
Over Survey of Bad Order Cargoes dated April 21, 1995. The Turn Over Survey of
Bad Order Cargoes indicates that said steel case was not opened at the time of
survey and was accepted by the arrastre in good order. Meanwhile, the Bad Order
Cargo Receipt bore a notation "B.O. not yet t/over to ATI." On the basis of these
documents, petitioner ATI claims that the contents of Steel Case No. 03-245-42K/1
were damaged while in the custody of petitioner Westwind.
We agree.
Common carriers, from the nature of their business and for reasons of public policy,
are bound to observe extraordinary diligence in the vigilance over the goods
transported by them. Subject to certain exceptions enumerated under Article
173449 of the Civil Code, common carriers are responsible for the loss, destruction, or
deterioration of the goods. The extraordinary responsibility of the common carrier
lasts from the time the goods are unconditionally placed in the possession of, and
received by the carrier for transportation until the same are delivered, actually or
constructively, by the carrier to the consignee, or to the person who has a right to
receive them.50
The court a quo, however, found both petitioners Westwind and ATI, jointly and
severally, liable for the damage to the cargo. It observed that while the staff of ATI
undertook the physical unloading of the cargoes from the carrying vessel, Westwind’s
duty officer exercised full supervision and control over the entire process. The
appellate court affirmed the solidary liability of Westwind and ATI, but only for the
damage to one Frame Axle Sub without Lower.
Upon a careful review of the records, the Court finds no reason to deviate from the
finding that petitioners Westwind and ATI are concurrently accountable for the
damage to the content of Steel Case No. 03-245-42K/1.
Section 251 of the COGSA provides that under every contract of carriage of goods by
the sea, the carrier in relation to the loading, handling, stowage, carriage, custody,
care and discharge of such goods, shall be subject to the responsibilities and
liabilities and entitled to the rights and immunities set forth in the Act. Section 3
(2)52 thereof then states that among the carrier’s responsibilities are to properly load,
handle, stow, carry, keep, care for and discharge the goods carried.53
At the trial, Westwind’s Operation Assistant, Menandro G. Ramirez, testified on the
presence of a ship officer to supervise the unloading of the subject cargoes.
ATTY. LLAMAS
Q Having been present during the entire discharging operation, do you remember
who else were present at that time?
A Our surveyor and our checker the foreman of ATI.
Q Were there officials of the ship present also?
A Yes, sir there was an officer of the vessel on duty at that time. 54
xxxx
Q Who selected the cable slink to be used?
A ATI Operation.
Q Are you aware of how they made that selection?
A Before the vessel arrived we issued a manifesto of the storage plan informing the
ATI of what type of cargo and equipment will be utilitized in discharging the cargo.55
xxxx
TRANSPORTATION LAW – Chapter 4
Q You testified that it was the ATI foremen who select the cable slink to be used in
discharging, is that correct?
A Yes sir, because they are the one who select the slink and they know the kind of
cargoes because they inspected it before the discharge of said cargo.
Q Are you aware that the ship captain is consulted in the selection of the cable sling?
A Because the ship captain knows for a fact the equipment being utilized in the
discharge of the cargoes because before the ship leave the port of Japan the crew
already utilized the proper equipment fitted to the cargo.56 (Emphasis supplied.)
It is settled in maritime law jurisprudence that cargoes while being unloaded generally
remain under the custody of the carrier.57 The Damage Survey Report58 of the survey
conducted by Phil. Navtech Services, Inc. from April 20-21, 1995 reveals that Case
No. 03-245-42K/1 was damaged by ATI stevedores due to overtightening of a cable
sling hold during discharge from the vessel’s hatch to the pier. Since the damage to
the cargo was incurred during the discharge of the shipment and while under the
supervision of the carrier, the latter is liable for the damage caused to the cargo.
This is not to say, however, that petitioner ATI is without liability for the damaged
cargo.
The functions of an arrastre operator involve the handling of cargo deposited on the
wharf or between the establishment of the consignee or shipper and the ship’s tackle.
Being the custodian of the goods discharged from a vessel, an arrastre operator’s
duty is to take good care of the goods and to turn them over to the party entitled to
their possession.59
Handling cargo is mainly the arrastre operator’s principal work so its drivers/operators
or employees should observe the standards and measures necessary to prevent
losses and damage to shipments under its custody.60
While it is true that an arrastre operator and a carrier may not be held solidarily liable
at all times,61 the facts of these cases show that apart from ATI’s stevedores being
directly in charge of the physical unloading of the cargo, its foreman picked the cable
sling that was used to hoist the packages for transfer to the dock. Moreover, the fact
that 218 of the 219 packages were unloaded with the same sling unharmed is telling
of the inadequate care with which ATI’s stevedore handled and discharged Case No.
03-245-42K/1.
With respect to petitioners ATI and Westwind’s liability, we agree with the CA that the
same should be confined to the value of the one piece Frame Axle Sub without
Lower.
In the Bad Order Inspection Report62 prepared by Universal Motors, the latter referred
to Case No. 03-245-42K/1 as the source of said Frame Axle Sub without Lower which
suffered a deep dent on its buffle plate. Yet, it identified Case No. 03-245-51K as the
container which bore the six pieces Frame Assembly with Bush. Thus, in Philam’s
Complaint, it alleged that "the entire shipment showed one (1) pc. FRAME AXLE SUB
W/O LWR from Case No. 03-245-42K/1 was completely deformed and misaligned,
and six (6) other pcs. of FRAME ASSEMBLY WITH BUSH from Case No. 03-245-
51K were likewise completely deformed and misaligned."63 Philam later claimed in its
Appellee’s Brief that the six pieces of Frame Assembly with Bush were also inside the
damaged Case No. 03-245-42K/1.

However, there is nothing in the records to show conclusively that the six Frame
Assembly with Bush were likewise contained in and damaged inside Case No. 03-
245-42K/1. In the Inspection Survey Report of Chartered Adjusters, Inc., it mentioned
six pieces of chassis frame assembly with deformed body mounting bracket.
However, it merely noted the same as coming from two bundles with no identifying
marks.

Lastly, we agree with petitioner Westwind that the CA erred in imposing an interest
rate of 12% on the award of damages. Under Article 2209 of the Civil Code, 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.64 In the similar case of Belgian Overseas Chartering and
Shipping NV v. Philippine First Insurance Co., lnc.,65 the Court reduced the rate of
interest on the damages awarded to the carrier therein to 6% from the time of the
filing of the complaint until the finality of the decision.

WHEREFORE, the Court AFFIRMS with MODIFICATION the Decision dated October
15,2007 and the Resolution dated January 11, 2008 of the Court of Appeals in CA-
G.R. CV No. 69284 in that the interest rate on the award of ₱190,684.48 is reduced to
6% per annum from the date of extrajudicial demand, until fully paid

TRANSPORTATION LAW – Chapter 4

24.) G.R. No. 180784               February 15, 2012
INSURANCE COMPANY OF NORTH AMERICA, Petitioner,
vs. ASIAN TERMINALs, INC., Respondent.
On November 9, 2002, Macro-Lite Korea Corporation shipped to San Miguel
Corporation, through M/V "DIMI P" vessel, one hundred eighty-five (185) packages
(231,000 sheets) of electrolytic tin free steel, complete and in good order condition
and covered by Bill of Lading No. POBUPOHMAN20638.2 The shipment had a
declared value of US$169,850.353 and was insured with petitioner Insurance
Company of North America against all risks under Marine Policy No. MOPA-06310.4
The carrying vessel arrived at the port of Manila on November 19, 2002, and when
the shipment was discharged therefrom, it was noted that seven (7) packages thereof
were damaged and in bad order.5 The shipment was then turned over to the custody
of respondent Asian Terminals, Inc. (ATI) on November 21, 2002 for storage and
safekeeping pending its withdrawal by the consignee's authorized customs broker,
R.V. Marzan Brokerage Corp. (Marzan).
On November 22, 23 and 29, 2002, the subject shipment was withdrawn by Marzan
from the custody of respondent. On November 29, 2002, prior to the last withdrawal
of the shipment, a joint inspection of the said cargo was conducted per the Request
for Bad Order Survey6 dated November 29, 2002, and the examination report, which
was written on the same request, showed that an additional five (5) packages were
found to be damaged and in bad order.
On January 6, 2003, the consignee, San Miguel Corporation, filed separate
claims7 against respondent and petitioner for the damage to 11,200 sheets of
electrolytic tin free steel.
Petitioner engaged the services of an independent adjuster/surveyor, BA McLarens
Phils., Inc., to conduct an investigation and evaluation on the claim and to prepare the
necessary report.8 BA McLarens Phils., Inc. submitted to petitioner an Survey
Report9 dated January 22, 2003 and another report10 dated May 5, 2003 regarding the
damaged shipment. It noted that out of the reported twelve (12) damaged skids, nine
(9) of them were rejected and three (3) skids were accepted by the consignee’s
representative as good order. BA McLarens Phils., Inc. evaluated the total cost of
damage to the nine (9) rejected skids (11,200 sheets of electrolytic tin free steel) to
be ₱431,592.14.
The petitioner, as insurer of the said cargo, paid the consignee the amount of
₱431,592.14 for the damage caused to the shipment, as evidenced by the
Subrogation Receipt dated January 8, 2004. Thereafter, petitioner, formally
demanded reparation against respondent. As respondent failed to satisfy its demand,
petitioner filed an action for damages with the RTC of Makati City.
TRANSPORTATION LAW – Chapter 4
The trial court found, thus:
The Court finds that the subject shipment indeed suffered additional damages. The
Request for Bad Order Survey No. 56422 shows that prior to the turn over of the
shipment from the custody of ATI to the consignee, aside from the seven (7)
packages which were already damaged upon arrival at the port of Manila, five (5)
more packages were found with "dent, cut and crumple" while in the custody of ATI.
This document was issued by ATI and was jointly executed by the representatives of
ATI, consignee and customs, and the Shed Supervisor. Thus, ATI is now estopped
from claiming that there was no additional damage suffered by the shipment. It is,
therefore, only logical to conclude that the damage was caused solely by the
negligence of defendant ATI. This evidence of the plaintiff was refuted by the
defendant by merely alleging that "the damage to the 5 Tin Plates is only in its
external packaging." However, the fact remains that the consignee has rejected the
same as total loss for not being suitable for their intended purpose. In addition, the
photographs presented by the plaintiff show that the shipment also suffered severe
dents and some packages were even critically crumpled.11
As to the extent of liability, ATI invoked the Contract for Cargo Handling Services
executed between the Philippine Ports Authority and Marina Ports Services, Inc. (now
Asian Terminals, Inc.). Under the said contract, ATI's liability for damage to cargoes in
its custody is limited to ₱5,000.00 for each package, unless the value of the cargo
shipment is otherwise specified or manifested or communicated in writing, together
with the declared Bill of Lading value and supported by a certified packing list to the
contractor by the interested party or parties before the discharge or lading unto vessel
of the goods.
The trial court found that there was compliance by the shipper and consignee with the
above requirement. The Bill of Lading, together with the corresponding invoice and
packing list, was shown to ATI prior to the discharge of the goods from the vessel.
Since the shipment was released from the custody of ATI, the trial court found that
the same was declared for tax purposes as well as for the assessment of arrastre
charges and other fees. For the purpose, the presentation of the invoice, packing list
and other shipping documents to ATI for the proper assessment of the arrastre
charges and other fees satisfied the condition of declaration of the actual invoices of
the value of the goods to overcome the limitation of liability of the arrastre operator.12
Further, the trial court found that there was a valid subrogation between the petitioner
and the assured/consignee San Miguel Corporation. The respondent admitted the
existence of Global Marine Policy No. MOPA-06310 with San Miguel Corporation and
Marine Risk Note No. 3445,13 which showed that the cargo was indeed insured with
petitioner. The trial court held that petitioner’s claim is compensable because the
Subrogation Receipt,16 which was admitted as to its existence by respondent, was
sufficient to establish not only the relationship of the insurer and the assured, but also
the amount paid to settle the insurance claim.14
However, the trial court dismissed the complaint on the ground that the petitioner’s
claim was already barred by the statute of limitations. It held that COGSA, embodied
in Commonwealth Act (CA) No. 65, applies to this case, since the goods were
shipped from a foreign port to the Philippines. The trial court stated that under the
said law, particularly paragraph 4, Section 3 (6)15 thereof, the shipper has the right to
bring a suit within one year after the delivery of the goods or the date when the goods
should have been delivered, in respect of loss or damage thereto.
The trial court held:
In the case at bar, the records show that the shipment was delivered to the consignee
on 22, 23 and 29 of November 2002. The plaintiff took almost a year to approve and
pay the claim of its assured, San Miguel, despite the fact that it had initially received
the latter's claim as well as the inspection report and survey report of McLarens as
early as January 2003. The assured/consignee had only until November of 2003
within which to file a suit against the defendant. However, the instant case was filed
only on September 7, 2005 or almost three (3) years from the date the subject
shipment was delivered to the consignee. The plaintiff, as insurer of the shipment
which has paid the claim of the insured, is subrogated to all the rights of the said
insured in relation to the reimbursement of such claim. As such, the plaintiff cannot
acquire better rights than that of the insured. Thus, the plaintiff has no one but itself to
blame for having acted lackadaisically on San Miguel's claim.
WHEREFORE, the complaint and counterclaim are hereby DISMISSED.16
Petitioner’s motion for reconsideration was denied by the trial court in the
Order17 dated December 4, 2007.
Petitioner filed this petition under Rule 45 of the Rules of Court directly before this
Court, alleging that it is raising a pure question of law:
THE TRIAL COURT COMMITTED A PURE AND SERIOUS ERROR OF LAW IN
APPLYING THE ONE-YEAR PRESCRIPTIVE PERIOD FOR FILING A SUIT UNDER
THE CARRIAGE OF GOODS BY SEA ACT (COGSA) TO AN ARRASTRE
OPERATOR.18
Petitioner states that while it is in full accord with the trial court in finding respondent
liable for the damaged shipment, it submits that the trial court’s dismissal of the
complaint on the ground of prescription under the COGSA is legally erroneous. It
contends that the one-year limitation period for bringing a suit in court under the
COGSA is not applicable to this case, because the prescriptive period applies only to
the carrier and the ship. It argues that respondent, which is engaged in warehousing,
arrastre and stevedoring business, is not a carrier as defined by the COGSA,
because it is not engaged in the business of transportation of goods by sea in
international trade as a common carrier. Petitioner asserts that since the complaint
was filed against respondent arrastre operator only, without impleading the carrier,
the prescriptive period under the COGSA is not applicable to this case.
TRANSPORTATION LAW – Chapter 4
Moreover, petitioner contends that the term "carriage of goods" in the COGSA covers
the period from the time the goods are loaded to the vessel to the time they are
discharged therefrom. It points out that it sued respondent only for the additional five
(5) packages of the subject shipment that were found damaged while in respondent’s
custody, long after the shipment was discharged from the vessel. The said damage
was confirmed by the trial court and proved by the Request for Bad Order Survey No.
56422.19
Petitioner prays that the decision of the trial court be reversed and set aside and a
new judgment be promulgated granting its prayer for actual damages.
The main issues are: (1) whether or not the one-year prescriptive period for filing a
suit under the COGSA applies to this action for damages against respondent arrastre
operator; and (2) whether or not petitioner is entitled to recover actual damages in the
amount of ₱431,592.14 from respondent.
To reiterate, petitioner came straight to this Court to appeal from the decision of the
trial court under Rule 45 of the Rules of Court on the ground that it is raising only a
question of law.
Microsoft Corporation v. Maxicorp, Inc.20 explains the difference between questions of
law and questions of fact, thus:
The distinction between questions of law and questions of fact is settled. A question
of law exists when the doubt or difference centers on what the law is on a certain
state of facts. A question of fact exists if the doubt centers on the truth or falsity of the
alleged facts. Though this delineation seems simple, determining the true nature and
extent of the distinction is sometimes problematic. For example, it is incorrect to
presume that all cases where the facts are not in dispute automatically involve purely
questions of law.
There is a question of law if the issue raised is capable of being resolved without
need of reviewing the probative value of the evidence. The resolution of the issue
must rest solely on what the law provides on the given set of circumstances. Once it
is clear that the issue invites a review of the evidence presented, the question posed
is one of fact. If the query requires a re-evaluation of the credibility of witnesses, or
the existence or relevance of surrounding circumstances and their relation to each
other, the issue in that query is factual. x x x21
In this case, although petitioner alleged that it is merely raising a question of law, that
is, whether or not the prescriptive period under the COGSA applies to an action for
damages against respondent arrastre operator, yet petitioner prays for the reversal of
the decision of the trial court and that it be granted the relief sought, which is the
award of actual damages in the amount of ₱431,592.14. For a question to be one of
law, it must not involve an examination of the probative value of the evidence
presented by the litigants or any of them.22 However, to resolve the issue of whether
or not petitioner is entitled to recover actual damages from respondent requires the
Court to evaluate the evidence on record; hence, petitioner is also raising a question
of fact.
Under Section 1, Rule 45, providing for appeals by certiorari before the Supreme
Court, it is clearly enunciated that only questions of law may be set forth.23 The Court
may resolve questions of fact only when the case falls under the following exceptions:
(1) when the findings are grounded entirely on speculation, surmises, or conjectures;
(2) when the inference made is manifestly mistaken, absurd, or impossible; (3) when
there is grave abuse of discretion; (4) when the judgment is based on a
misapprehension of facts; (5) when the findings of fact are conflicting; (6) when in
making its findings the Court of Appeals went beyond the issues of the case, or its
findings are contrary to the admissions of both the appellant and the appellee; (7)
when the findings are contrary to those of the trial court; (8) when the findings are
conclusions without citation of specific evidence on which they are based; (9) when
the facts set forth in the petition as well as in the petitioner's main and reply briefs are
not disputed by the respondent; and (10) when the findings of fact are premised on
the supposed absence of evidence and contradicted by the evidence on record.24
In this case, the fourth exception cited above applies, as the trial court rendered
judgment based on a misapprehension of facts.
We first resolve the issue on whether or not the one-year prescriptive period for filing
a suit under the COGSA applies to respondent arrastre operator.
The Carriage of Goods by Sea Act (COGSA), Public Act No. 521 of the 74th US
Congress, was accepted to be made applicable to all contracts for the carriage of
goods by sea to and from Philippine ports in foreign trade by virtue of CA No. 65.
Section 1 of CA No. 65 states:
Section 1. That the provisions of Public Act Numbered Five hundred and twenty-one
of the Seventy-fourth Congress of the United States, approved on April sixteenth,
nineteen hundred and thirty-six, be accepted, as it is hereby accepted to be made
applicable to all contracts for the carriage of goods by sea to and from Philippine
ports in foreign trade: Provided, That nothing in the Act shall be construed as
repealing any existing provision of the Code of Commerce which is now in force, or as
limiting its application.
Section 1, Title I of CA No. 65 defines the relevant terms in Carriage of Goods by
Sea, thus:
Section 1. When used in this Act -
(a) The term "carrier" includes the owner or the charterer who enters into a contract of
carriage with a shipper.
TRANSPORTATION LAW – Chapter 4
(b) The term "contract of carriage" applies only to contracts of carriage covered by a
bill of lading or any similar document of title, insofar as such document relates to the
carriage of goods by sea, including any bill of lading or any similar document as
aforesaid issued under or pursuant to a charter party from the moment at which such
bill of lading or similar document of title regulates the relations between a carrier and
a holder of the same.
(c) The term "goods" includes goods, wares, merchandise, and articles of every kind
whatsoever, except live animals and cargo which by the contract of carriage is stated
as being carried on deck and is so carried.
(d) The term "ship" means any vessel used for the carriage of goods by sea.
(e) The term "carriage of goods" covers the period from the time when the goods are
loaded to the time when they are discharged from the ship.25
It is noted that the term "carriage of goods" covers the period from the time when the
goods are loaded to the time when they are discharged from the ship; thus, it can be
inferred that the period of time when the goods have been discharged from the ship
and given to the custody of the arrastre operator is not covered by the COGSA.
The prescriptive period for filing an action for the loss or damage of the goods under
the COGSA is found in paragraph (6), Section 3, thus:
6) Unless notice of loss or damage and the general nature of such loss or damage be
given in writing to the carrier or his agent at the port of discharge before or at the time
of the removal of the goods into the custody of the person entitled to delivery thereof
under the contract of carriage, such removal shall be prima facie evidence of the
delivery by the carrier of the goods as described in the bill of lading. If the loss or
damage is not apparent, the notice must be given within three days of the delivery.
Said notice of loss or damage maybe endorsed upon the receipt for the goods given
by the person taking delivery thereof.
The notice in writing need not be given if the state of the goods has at the time of their
receipt been the subject of joint survey or inspection.
In any event the carrier and the ship shall be discharged from all liability in respect of
loss or damage unless suit is brought within one year after delivery of the goods or
the date when the goods should have been delivered: Provided, That if a notice of
loss or damage, either apparent or concealed, is not given as provided for in this
section, that fact shall not affect or prejudice the right of the shipper to bring suit
within one year after the delivery of the goods or the date when the goods should
have been delivered.26
From the provision above, the carrier and the ship may put up the defense of
prescription if the action for damages is not brought within one year after the delivery
of the goods or the date when the goods should have been delivered. It has been
held that not only the shipper, but also the consignee or legal holder of the bill may
invoke the prescriptive period.27 However, the COGSA does not mention that an
arrastre operator may invoke the prescriptive period of one year; hence, it does not
cover the arrastre operator.
Respondent arrastre operator’s responsibility and liability for losses and damages are
set forth in Section 7.01 of the Contract for Cargo Handling Services executed
between the Philippine Ports Authority and Marina Ports Services, Inc. (now Asian
Terminals, Inc.), thus:
Section 7.01 Responsibility and Liability for Losses and Damages; Exceptions - The
CONTRACTOR shall, at its own expense, handle all merchandise in all work
undertaken by it hereunder, diligently and in a skillful, workman-like and efficient
manner. The CONTRACTOR shall be solely responsible as an independent
contractor, and hereby agrees to accept liability and to pay to the shipping company,
consignees, consignors or other interested party or parties for the loss, damage or
non-delivery of cargoes in its custody and control to the extent of the actual invoice
value of each package which in no case shall be more than FIVE THOUSAND
PESOS (₱5,000.00) each, unless the value of the cargo shipment is otherwise
specified or manifested or communicated in writing together with the declared Bill of
Lading value and supported by a certified packing list to the CONTRACTOR by the
interested party or parties before the discharge or loading unto vessel of the goods.
This amount of Five Thousand Pesos (₱5,000.00) per package may be reviewed and
adjusted by the AUTHORITY from time to time. The CONTRACTOR shall not be
responsible for the condition or the contents of any package received, nor for the
weight nor for any loss, injury or damage to the said cargo before or while the goods
are being received or remains in the piers, sheds, warehouses or facility, if the loss,
injury or damage is caused by force majeure or other causes beyond the
CONTRACTOR's control or capacity to prevent or remedy; PROVIDED, that a formal
claim together with the necessary copies of Bill of Lading, Invoice, Certified Packing
List and Computation arrived at covering the loss, injury or damage or non-delivery of
such goods shall have been filed with the CONTRACTOR within fifteen (15) days
from day of issuance by the CONTRACTOR of a certificate of non-delivery;
PROVIDED, however, that if said CONTRACTOR fails to issue such certification
within fifteen (15) days from receipt of a written request by the shipper/consignee or
his duly authorized representative or any interested party, said certification shall be
deemed to have been issued, and thereafter, the fifteen (15) day period within which
to file the claim commences; PROVIDED, finally, that the request for certification of
loss shall be made within thirty (30) days from the date of delivery of the package to
the consignee.28
Based on the Contract above, the consignee has a period of thirty (30) days from the
date of delivery of the package to the consignee within which to request a certificate
of loss from the arrastre operator. From the date of the request for a certificate of
loss, the arrastre operator has a period of fifteen (15) days within which to issue a
certificate of non-delivery/loss either actually or constructively. Moreover, from the
date of issuance of a certificate of non-delivery/loss, the consignee has fifteen (15)
days within which to file a formal claim covering the loss, injury, damage or non-
TRANSPORTATION LAW – Chapter 4
delivery of such goods with all accompanying documentation against the arrastre
operator.
Petitioner clarified that it sued respondent only for the additional five (5) packages of
the subject shipment that were found damaged while in respondent’s custody, which
fact of damage was sustained by the trial court and proved by the Request for Bad
Order Survey No. 56422.29
Petitioner pointed out the importance of the Request for Bad Order Survey by citing
New Zealand Insurance Company Limited v. Navarro.30 In the said case, the Court
ruled that the request for, and the result of, the bad order examination, which were
filed and done within fifteen days from the haulage of the goods from the vessel,
served the purpose of a claim, which is to afford the carrier or depositary reasonable
opportunity and facilities to check the validity of the claims while facts are still fresh in
the minds of the persons who took part in the transaction and documents are still
available. Hence, even if the consignee therein filed a formal claim beyond the
stipulated period of 15 days, the arrastre operator was not relieved of liability as the
purpose of a formal claim had already been satisfied by the consignee’s timely
request for the bad order examination of the goods shipped and the result of the said
bad order examination.
To elaborate, New Zealand Insurance Company, Ltd. v. Navarro held:
We took special note of the above pronouncement six (6) years later in Fireman’s
Fund Insurance Co. v. Manila Port Service Co., et al. There, fifteen (15) cases of
nylon merchandise had been discharged from the carrying vessel and received by
defendant Manila Port Service Co., the arrastre operator, on 7 July 1961. Out of those
fifteen (15) cases, however, only twelve (12) had been delivered to the consignee in
good condition. Consequently, on 20 July 1961, the consignee's broker requested a
bad order examination of the shipment, which was later certified by defendant's own
inspector to be short of three (3) cases. On 15 August 1961, a formal claim for
indemnity was then filed by the consignee, who was later replaced in the action by
plaintiff Fireman's Fund Insurance Co., the insurer of the goods. Defendant, however,
refused to honor the claim, arguing that the same had not been filed within fifteen (15)
days from the date of discharge of the shipment from the carrying vessel, as required
under the arrastre Management Contract then in force between itself and the Bureau
of Customs. The trial court upheld this argument and hence dismissed the complaint.
On appeal by the consignee, this Court, speaking through Mr. Justice J.B.L. Reyes,
reversed the trial court and found the defendant arrastre operator liable for the value
of the lost cargo, explaining as follows:
"However, the trial court has overlooked the significance of the request for, and the
result of, the bad order examination, which were filed and done within fifteen days
from the haulage of the goods from the vessel. Said request and result, in effect,
served the purpose of a claim, which is –
‘to afford the carrier or depositary reasonable opportunity and facilities to check the
validity of the claims while facts are still fresh in the minds of the persons who took
part in the transaction and documents are still available.’ (Consunji vs. Manila Port
Service, L-15551, 29 November 1960)
Indeed, the examination undertaken by the defendant's own inspector not only gave
the defendant an opportunity to check the goods but is itself a verification of its own
liability x x x.
In other words, what the Court considered as the crucial factor in declaring the
defendant arrastre operator liable for the loss occasioned, in the Fireman's Fund
case, was the fact that defendant, by virtue of the consignee's request for a bad order
examination, had been able formally to verify the existence and extent of its liability
within fifteen (15) days from the date of discharge of the shipment from the carrying
vessel -- i.e., within the same period stipulated under the Management Contract for
the consignee to file a formal claim. That a formal claim had been filed by the
consignee beyond the stipulated period of fifteen (15) days neither relieved defendant
of liability nor excused payment thereof, the purpose of a formal claim, as
contemplated in Consunji, having already been fully served and satisfied by the
consignee's timely request for, and the eventual result of, the bad order examination
of the nylon merchandise shipped.
Relating the doctrine of Fireman's Fund to the case at bar, the record shows that
delivery to the warehouse of consignee Monterey Farms Corporation of the 5,974
bags of soybean meal, had been completed by respondent Razon (arrastre operator)
on 9 July 1974. On that same day, a bad order examination of the goods delivered
was requested by the consignee and was, in fact, conducted by respondent Razon's
own inspector, in the presence of representatives of both the Bureau of Customs and
the consignee. The ensuing bad order examination report — what the trial court
considered a "certificate of loss" — confirmed that out of the 5,974 bags of soybean
meal loaded on board the M/S "Zamboanga" and shipped to Manila, 173 bags had
been damaged in transitu while an additional 111 bags had been damaged after the
entire shipment had been discharged from the vessel and placed in the custody of
respondent Razon. Hence, as early as 9 July 1974 (the date of last delivery to the
consignee's warehouse), respondent Razon had been able to verify and ascertain for
itself not only the existence of its liability to the consignee but, more significantly, the
exact amount thereof - i.e., ₱5,746.61, representing the value of 111 bags of soybean
meal. We note further that such verification and ascertainment of liability on the part
of respondent Razon, had been accomplished "within thirty (30) days from the date of
delivery of last package to the consignee, broker or importer" as well as "within fifteen
(15) days from the date of issuance by the Contractor [respondent Razon] of a
certificate of loss, damage or injury or certificate of non-delivery" — the periods
prescribed under Article VI, Section 1 of the Management Contract here involved,
within which a request for certificate of loss and a formal claim, respectively, must be
filed by the consignee or his agent. Evidently, therefore, the rule laid down by the
Court in Fireman's Fund finds appropriate application in the case at bar.31
In this case, the records show that the goods were deposited with the arrastre
operator on November 21, 2002. The goods were withdrawn from the arrastre
operator on November 22, 23 and 29, 2002. Prior to the withdrawal on November 29,
2002, the broker of the importer, Marzan, requested for a bad order survey in the
TRANSPORTATION LAW – Chapter 4
presence of a Customs representative and other parties concerned. The joint
inspection of cargo was conducted and it was found that an additional five (5)
packages were found in bad order as evidenced by the document entitled Request for
Bad Order Survey32 dated November 29, 2002, which document also contained the
examination report, signed by the Custom’s representative,
Supervisor/Superintendent, consignee’s representative, and the ATI Inspector.
Thus, as early as November 29, 2002, the date of the last withdrawal of the goods
from the arrastre operator, respondent ATI was able to verify that five (5) packages of
the shipment were in bad order while in its custody. The certificate of non-delivery
referred to in the Contract is similar to or identical with the examination report on the
request for bad order survey.33 Like in the case of New Zealand Insurance Company
Ltd. v. Navarro, the verification and ascertainment of liability by respondent ATI had
been accomplished within thirty (30) days from the date of delivery of the package to
the consignee and within fifteen (15) days from the date of issuance by the Contractor
(respondent ATI) of the examination report on the request for bad order survey.
Although the formal claim was filed beyond the 15-day period from the issuance of
the examination report on the request for bad order survey, the purpose of the time
limitations for the filing of claims had already been fully satisfied by the request of the
consignee’s broker for a bad order survey and by the examination report of the
arrastre operator on the result thereof, as the arrastre operator had become aware of
and had verified the facts giving rise to its liability.34 Hence, the arrastre operator
suffered no prejudice by the lack of strict compliance with the 15-day limitation to file
the formal complaint.35
The next factual issue is whether or not petitioner is entitled to actual damages in the
amount of ₱431,592.14. The payment of the said amount by petitioner to the
assured/consignee was based on the Evaluation Report36 of BA McLarens Phils., Inc.,
thus:
xxxx
CIRCUMSTANCES OF LOSS
As reported, the shipment consisting of 185 packages (344.982 MT) Electrolytic Tin
Free Steel, JISG 3315SPTFS, MRT-4CA, Matte Finish arrived Manila via Ocean
Vessel, M/V "DIMI P" V-075 on November 9, 2002 and subsequently docked
alongside Pier No. 9, South Harbor, Manila. The cargo of Electrolyic Tin Free Steel
was discharged ex-vessel complete with seven (7) skids noted in bad order condition
by the vessel’[s] representative. These skids were identified as nos. 2HD804211,
2HD804460, SHD804251, SHD803784, 2HD803763, 2HD803765 and 2HD803783
and covered with Bad Order Tally Receipts No. 3709, 3707, 3703 and 3704.
Thereafter, the same were stored inside the warehouse of Pier No. 9, South Harbor,
Manila, pending delivery to the consignee’s warehouse.
On November 22, 23 and 29, 2002, the subject cargo was withdrawn from the Pier by
the consignee authorized broker, R. V. Marzan Brokerage Corp. and the same was
delivered to the consignee’s final warehouse located at Silangan, Canlubang, Laguna
-------------------
complete with twelve (12) skids in bad order condition.
231,000

VISUAL INSPECTION Less: Deductible 0.50% based on sum insured 49,392.74

We conducted an ocular inspection on the reported damaged Electrolytic Tin Free Total ₱429,567.14
Steel, Matte Finish at the consignee’s warehouse located at Brgy. Silangan,
Canlubang, Laguna and noted that out of the reported twelve (12) damaged skids, Add: Surveyor’s Fee 2,025.00
nine (9) of them were rejected and three (3) skids were accepted by the consignee’s
representative as complete and without exceptions. Sub-Total ₱431,592.14

xxxx Note: Above evaluation is Assured’s tentative liability as the salvage proceeds on the
damaged stocks has yet to be determined.
EVALUATION OF INDEMNITY
RECOVERY ASPECT
We evaluated the loss/damage sustained by the subject shipments and arrived as
follows: Prospect of recovery would be feasible against the shipping company and
the Arrastre operator considering the copies of Bad Order Tally Receipts and Bad
Order Certificate issued by the subject parties.37
NET WT. PER
PRODUCT PRODUCTS NO. OF
PACKING
NOS. NAMED SHEETS To clarify, based on the Evaluation Report, seven (7) skids were damaged upon
LIST
arrival of the vessel per the Bad Order Cargo Receipts38 issued by the shipping
Electrolytic Tin company, and an additional five (5) skids were damaged in the custody of the arrastre
2HD803763 Free 1,200 1,908 operator per the Bad Order Certificate/Examination Report39 issued by the arrastre
Steel JISG3315 contractor. The Evaluation Report states that out of the reported twelve damaged
skids, only nine were rejected, and three were accepted as good order by the
2HD803783 -do- 1,200 1,908 consignee’s representative. Out of the nine skids that were rejected, five skids were
damaged upon arrival of the vessel as shown by the product numbers in the
2HD803784 -do- 1,200 1,908 Evaluation Report, which product numbers matched those in the Bad Order Cargo
Receipts40 issued by the shipping company. It can then be safely inferred that the four
2HD804460 -do- 1,400 1,698 remaining rejected skids were damaged in the custody of the arrastre operator, as the
Bad Order Certificate/Examination Report did not indicate the product numbers
2HD803765 -do- 1,200 1,908 thereof.

2HD804522 -do- 1,200 1,987 Hence, it should be pointed out that the Evaluation Report shows that the claim for
actual damages in the amount of ₱431,592.14 covers five (5)41 out of the seven (7)
2HD804461 -do- 1,400 1,698 skids that were found to be damaged upon arrival of the vessel and covered by Bad
Order Cargo Receipt Nos. 3704, 3706, 3707 and 3709,42 which claim should have
2HD804540 -do- 1,200 1,987 been filed with the shipping company. Petitioner must have realized that the claim for
the said five (5) skids was already barred under COGSA; hence, petitioner filed the
2HD804549 -do- 1,200 1,987 claim for actual damages only against respondent arrastre operator.

As regards the four (4) skids that were damaged in the custody of the arrastre
operator, petitioner is still entitled to recover from respondent.1awp++i1 The Court
9 SKIDS TOTAL 11,200 16,989 kgs. has ruled that the Request for Bad Order Survey and the examination report on the
said request satisfied the purpose of a formal claim, as respondent was made aware
₱9,878,547.58 = 42.7643 x 11,200 ₱478,959.88 of and was able to verify that five (5) skids were damaged or in bad order while in its

TRANSPORTATION LAW – Chapter 4

custody before the last withdrawal of the shipment on November 29, 2002. Hence,
even if the formal claim was filed beyond the 15-day period stipulated in the Contract,
respondent was not prejudiced thereby, since it already knew of the number of skids
damaged in its possession per the examination report on the request for bad order
survey.
Remand of the case to the trial court for the determination of the liability of
respondent to petitioner is not necessary as the Court can resolve the same based on
the records before it.43 The Court notes that petitioner, who filed this action for
damages for the five (5) skids that were damaged while in the custody of respondent,
was not forthright in its claim, as it knew that the damages it sought in the amount of
₱431,592.14, which was based on the Evaluation Report of its adjuster/surveyor, BA
McLarens Phils., Inc., covered nine (9) skids. Based on the same Evaluation Report,
only four of the nine skids were damaged in the custody of respondent. Petitioner
should have been straightforward about its exact claim, which is borne out by the
evidence on record, as petitioner can be granted only the amount of damages that is
due to it.
In view of the foregoing, petitioner is entitled to actual damages in the amount of
P164,428.76 for the four (4) skids damaged while in the custody of
respondent.1âwphi1
WHEREFORE, the petition is GRANTED. The Decision of the Regional Trial Court of
Makati City, Branch 138, dated October 17, 2006, in Civil Case No. 05-809, and its
Order dated December 4, 2007, are hereby REVERSED and SET ASIDE.
Respondent Asian Terminals, Inc. is ORDERED to pay petitioner Insurance Company
of North America actual damages in the amount of One Hundred Sixty-Four
Thousand Four Hundred Twenty-Eight Pesos and Seventy-Six Centavos
(₱164,428.76). Twelve percent (12%) interest per annum shall be imposed on the
amount of actual damages from the date the award becomes final and executory until
its full satisfaction.

Based on the Evaluation Report44 of BA McLarens Phils., Inc., dated May 5, 2003, the
four (4) skids damaged while in the custody of the arrastre operator and the amount
of actual damages therefore are as follows:

NET WT. PER

PRODUCT NOS. PRODUCTS NAMED NO. OF SHEETS
PACKING LIST

Electrolytic Tin Free

2HD804522 1,200 1,987
Steel JISG3315

2HD804461 -do- 1,400 1,698

2HD804540 -do- 1,200 1,987

2HD804549 -do- 1,200 1,987

4 SKIDS TOTAL 5,000

₱9,878,547.58 (Insured value)45

---------------------------------------------- = 42.7643 x 5,000 ₱213,821.50
231,000 (Total number of sheets)

Less: Deductible 0.50% based on sum insured46 49,392.74

Total ₱164,428.76

TRANSPORTATION LAW – Chapter 4

25.) G.R. No. L-30805 December 26, 1984
DOMINGO ANG, plaintiff-appellant,
vs.
COMPANIA MARITIMA, MARITIME COMPANY OF THE PHILIPPINES and C.L.
DIOKNO, defendants-appellees.
AQUINO, J.:
This case involves the recovery of damages by the consignee from the carrier in case
of misdelivery of the cargo which action was dismissed by the trial court on the
grounds of lack of cause of action and prescription.
It should be noted that that legal point is already res judicata. In 1967 it was decided
in favor of plaintiff-appellant Domingo Ang in Ang vs. American Steamship Agencies,
Inc.,  125 Phil. 543 and 125 Phil. 1040, three cases. As observed by Ang's counsel,
the facts of those cases and the instant case are the same mutatis mutandis. It was
held that Ang has a cause of action against the carrier which has not prescribed
1964 dismissed the complaint on the grounds of lack of cause of action and
prescription since the action was filed beyond the one-year period provided in the
Carriage of Goods by Sea Act.
In the American Steamship Agencies  cases, it was held that the action of Ang is
based on misdelivery  of the cargo which should be distinguished from loss thereof.
The one-year period provided for in section 3 (6) of the Carriage of Goods by Sea Act
refers to loss of the cargo.  What is applicable is the four-year period of prescription
for quasi-delicts prescribed in article 1146 (2) of the Civil Code or ten years for
violation of a written contract as provided for in article 1144 (1) of the same Code.
As Ang filed the action less than three years from the date of the alleged misdelivery
of the cargo, it has not yet prescribed. Ang, as indorsee of the bill of lading, is a real
party in interest with a cause of action for damages.
WHEREFORE, the order of dismissal is reversed and set aside. The case is
remanded to the trial court for further proceedings. Costs against the defendants.

In the instant case, Ang on September 26, 1963, as the assignee of a bill of lading
held by Yau Yue Commercial Bank, Ltd. of Hongkong, sued Compania Maritima,
Maritime Company of the Philippines and C.L. Diokno. He prayed that the defendants
be ordered to pay him solidarily the sum of US$130,539.68 with interest from
February 9, 1963 plus attorney's fees and damages.

Ang alleged that Yau Yue Commercial Bank agreed to sell to Herminio G. Teves
under certain conditions 559 packages of galvanized steel, Durzinc sheets. The
merchandise was loaded on May 25, 1961 at Yawata, Japan in the M/S Luzon a
vessel owned and operated by the defendants, to be transported to Manila and
consigned "to order" of the shipper, Tokyo Boeki, Ltd., which indorsed the bill of
lading issued by Compania Maritima to the order of Yau Yue Commercial Bank.

Ang further alleged that the defendants, by means of a permit to deliver imported
articles, authorized the delivery of the cargo to Teves who obtained delivery from the
Bureau of Customs without the surrender of the bill of lading and in violation of the
terms thereof. Teves dishonored the draft drawn by Yau Yue against him.

The Hongkong and Shanghai Banking Corporation made the corresponding protest
for the draft's dishonor and returned the bill of lading to Yau Yue. The bill of lading
was indorsed to Ang.

The defendants filed a motion to dismiss Ang's complaint on the ground of lack of
cause of action. Ang opposed the motion. As already stated, the trial court on May 22,

TRANSPORTATION LAW – Chapter 4

26.) G.R. No. 119571 March 11, 1998
MITSUI O.S.K. LINES LTD., represented by MAGSAYSAY AGENCIES,
INC., petitioner,
vs.
COURT OF APPEALS and LAVINE LOUNGEWEAR MFG. CORP., respondents.
Petitioner Mitsui O.S.K. Lines Ltd. is a foreign corporation represented in the
Philippines by its agent, Magsaysay Agencies. It entered into a contract of carriage
through Meister Transport, Inc., an international freight forwarder, with private
respondent Lavine Loungewear Manufacturing Corporation to transport goods of the
latter from Manila to Le Havre, France. Petitioner undertook to deliver the goods to
France 28 days from initial loading. On July 24, 1991, petitioner's vessel loaded
private respondent's container van for carriage at the said port of origin.
However, in Kaoshiung, Taiwan the goods were not transshipped immediately, with
the result that the shipment arrived in Le Havre only on November 14, 1991. The
consignee allegedly paid only half the value of the said goods on the ground that they
did not arrive in France until the "off season" in that country. The remaining half was
allegedly charged to the account of private respondent which in turn demanded
payment from petitioner through its agent.
As petitioner denied private respondent's claim, the latter filed a case in the Regional
Trial Court on April 14, 1992. In the original complaint, private respondent impleaded
as defendants Meister Transport, Inc. and Magsaysay Agencies, Inc., the latter as
agent of petitioner Mitsui O.S.K. Lines Ltd. On May 20, 1993, it amended its
complaint by impleading petitioner as defendant in lieu of its agent. The parties to the
case thus became private respondent as plaintiff, on one side, and Meister Transport
Inc. and petitioner Mitsui O.S.K. Lines Ltd. as represented by Magsaysay Agencies,
Inc., as defendants on the other.
Petitioner filed a motion to dismiss alleging that the claim against it had prescribed
under the Carriage of Goods by Sea Act.
The Regional Trial Court, as aforesaid, denied petitioner's motion as well as its
subsequent motion for reconsideration. On petition for certiorari, the Court of Appeals
sustained the trial court's orders. Hence this petition containing one assignment of
error:
THE RESPONDENT COURT OF APPEALS COMMITTED A SERIOUS ERROR OF
LAW IN RULING THAT PRIVATE RESPONDENT'S AMENDED COMPLAINT IS (sic)
NOT PRESCRIBED PURSUANT TO SECTION 3(6) OF THE CARRIAGE OF
GOODS BY SEA ACT.
TRANSPORTATION LAW – Chapter 4
The issue raised by the instant petition is whether private respondent's action is for
"loss or damage" to goods shipped, within the meaning of §3(6) of the Carriage of
Goods by Sea Act (COGSA).
Section 3 provides:
(6) Unless notice of loss or damage and the general nature of such loss or damage
be given in writing to the carrier or his agent at the port of discharge or at the time of
the removal of the goods into the custody of the person entitled to delivery thereof
under the contract of carriage, such removal shall be  prima facie  evidence of the
delivery by the carrier of the goods as described in the bill of lading. If the loss or
damage is not apparent, the notice must be given within three days of the delivery.
Said notice of loss or damage may be endorsed upon the receipt for the goods given
by the person taking delivery thereof.
The notice in writing need not be given if the state of the goods has at the time of their
receipt been the subject of joint survey or inspection.
In any event the carrier and the ship shall be discharged from all liability in respect of
loss or damage unless suit is brought within one year after delivery of the goods or
the date when the goods should have been delivered: Provided, that, if a notice of
loss or damage, either apparent or concealed, is not given as provided for in this
section, that fact shall not affect or prejudice the right of the shipper to bring suit
within one year after the delivery of the goods or the date when the goods should
have been delivered.
In the case of any actual or apprehended loss or damage, the carrier and the receiver
shall give all reasonable facilities to each other for inspecting and tallying the goods.
In Ang v. American Steamship Agencies, Inc., the question was whether an action for
the value of goods which had been delivered to a party other than the consignee is for
"loss or damage" within the meaning of §3(6) of the COGSA. It was held that there
was no loss because the goods had simply been misdelivered. "Loss" refers to the
deterioration or disappearance of goods.3
As defined in the Civil Code and as applied to Section 3(6), paragraph 4 of the
Carriage of Goods by Sea Act, "loss" contemplates merely a situation where no
delivery at all was made by the shipper of the goods because the same had perished,
gone out of commerce, or disappeared in such a way that their existence is unknown
or they cannot be recovered.4
Conformably with this concept of what constitutes "loss" or "damage," this Court held
in another case5 that the deterioration of goods due to delay in their transportation
constitutes "loss" or "damage" within the meaning of §3(6), so that as suit was not
brought within one year the action was barred:
Whatever damage or injury is suffered by the goods while in transit would result in
loss or damage to either the shipper or the consignee. As long as it is claimed,
therefore, as it is done here, that the losses or damages suffered by the shipper or
consignee were due to the arrival of the goods in damaged or deteriorated condition,
the action is still basically one for damage to the goods, and must be filed within the
period of one year from delivery or receipt, under the above-quoted provision of the
Carriage of Goods by Sea Act.6
But the Court allowed that —
There would be some merit in appellant's insistence that the damages suffered by
him as a result of the delay in the shipment of his cargo are not covered by the
prescriptive provision of the Carriage of Goods by Sea Act above referred to, if such
damages were due, not to the deterioration and decay of the goods while in transit,
but to other causes independent of the condition of the cargo upon arrival, like a drop
in their market value. . . .7
Precisely, the question before the trial court is not the particular sense of "damages"
as it refers to the physical loss or damage of a shipper's goods as specifically covered
by §3(6) of COGSA but petitioner's potential liability for the damages it has caused in
the general sense and, as such, the matter is governed by the Civil Code, the Code of
Commerce and COGSA, for the breach of its contract of carriage with private
respondent.
We conclude by holding that as the suit below is not for "loss or damage" to goods
contemplated in §3(6), the question of prescription of action is governed not by the
COGSA but by Art. 1144 of the Civil Code which provides for a prescriptive period of
ten years.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED.

The rationale behind limiting the said definitions to such parameters is not hard to find
or fathom. As this Court held in Ang:

Said one-year period of limitation is designed to meet the exigencies of maritime

hazards. In a case where the goods shipped were neither lost nor damaged in transit
but were, on the contrary, delivered in port to someone who claimed to be entitled
thereto, the situation is different, and the special need for the short period of limitation
in cases of loss or damage caused by maritime perils does not obtain.8

In the case at bar, there is neither deterioration nor disappearance nor destruction of
goods caused by the carrier's breach of contract. Whatever reduction there may have
been in the value of the goods is not due to their deterioration or disappearance
because they had been damaged in transit.

Petitioner contends:

Although we agree that there are places in the section (Article III) in which the phrase
need have no broader meaning than loss or physical damage to the goods, we
disagree with the conclusion that it must so be limited wherever it is used. We take it
that the phrase has a uniform meaning, not merely in Section 3, but throughout the
Act; and there are a number of places in which the restricted interpretation suggested
would be inappropriate. For example Section 4(2) [Article IV(2) (sic) exempts exempts
(sic) the carrier, the ship (sic), from liability "loss or damage" (sic) resulting from
certain courses beyond their control.9

Indeed, what is in issue in this petition is not the liability of petitioner for its handling of
goods as provided by §3(6) of the COGSA, but its liability under its contract of
carriage with private respondent as covered by laws of more general application.

TRANSPORTATION LAW – Chapter 4

27.) G.R. No. 171337               July 11, 2012
BENJAMIN CUA (CUA UlAN TEK), Petitioner,
vs.
WALLEM PHILIPPINES SHIPPING, INC. and ADVANCE SHIPPING
CORPORATION, Respondents.
On November 12, 1990, Cua filed a civil action for damages against Wallem and
Advance Shipping before the RTC of Manila.5 Cua sought the payment of
P2,030,303.52 for damage to 218 tons and for a shortage of 50 tons of shipment of
Brazilian Soyabean consigned to him, as evidenced by Bill of Lading No. 10. He
claimed that the loss was due to the respondents’ failure to observe extraordinary
diligence in carrying the cargo. Advance Shipping (a foreign corporation) was the
owner and manager of M/V Argo Trader that carried the cargo, while Wallem was its
local agent.
Advance Shipping filed a motion to dismiss the complaint,6 assailing the RTC’s
jurisdiction over Cua’s claim; it argued that Cua’s claim should have first been brought
to arbitration. Cua opposed Advance Shipping’s argument; he contended that he, as
a consignee, was not bound by the Charter Party Agreement, which was a contract
between the ship owner (Advance Shipping) and the charterers.7 The RTC initially
deferred resolving the question of jurisdiction until after trial on the merits,8 but upon
motion by Advance Shipping,9 the RTC ruled that Cua was not bound by the
arbitration clause in the Charter Party Agreement.10
In the meantime, Wallem filed its own motion to dismiss,11 raising the sole ground of
prescription. Section 3(6) of the Carriage of Goods by Sea Act (COGSA) provides
that "the carrier and the ship shall be discharged from all liability in respect of loss or
damage unless suit is brought within one year after delivery of the goods." Wallem
alleged that the goods were delivered to Cua on August 16, 1989, but the damages
suit was instituted only on November 12, 1990 – more than one year than the period
allotted under the COGSA. Since the action was filed beyond the one year
prescriptive period, Wallem argued that Cua’s action has been barred.
Cua filed an opposition to Wallem’s motion to dismiss, denying the latter’s claim of
prescription.12 Cua referred to the August 10, 1990 telex message sent by Mr. A.R.
Filder of Thomas Miller,13 manager of the UK P&I Club,14 which stated that Advance
Shipping agreed to extend the commencement of suit for 90 days, from August 14,
1990 to November 12, 1990; the extension was made with the concurrence of the
insurer of the vessel, the UK P&I Club. A copy of the August 10, 1990 telex was
supposedly attached to Cua’s opposition.
On February 11, 1992, Wallem filed an omnibus motion,15 withdrawing its motion to
dismiss and adopting instead the arguments in Advance Shipping’s motion to dismiss.
It made an express reservation, however, that it was not waiving "the defense of
prescription and will allege as one of its defenses, such defense of prescription and/or
laches in its Answer should this be required by the circumstances."16 Accordingly, in
TRANSPORTATION LAW – Chapter 4
an order dated June 5, 1992,17 the RTC resolved that "the Court need not act on the
Motion to Dismiss filed by the defendant Wallem Philippines Shipping, Inc.,"18 and
required the defendants therein to file their Answer.
After trial on the merits, the RTC issued its decision on December 28, 1995,19 ordering
the respondents jointly and severally liable to pay as damages to Cua:
1. the amount of P2,030,000.00, plus interests until the same is fully paid;
2. the sum of P100,00.00 as attorney’s fees; and
3. the costs of [the] suit, and dismissing the counterclaims of the respondents.
The respondents filed an appeal with the CA, insisting that Cua’s claim is arbitrable
and has been barred by prescription and/or laches.20 The CA found the respondents’
claim of prescription meritorious after finding that the August 10, 1990 telex message,
extending the period to file an action, was neither attached to Cua’s opposition to
Wallem’s motion to dismiss, nor presented during trial. The CA ruled that there was
no basis for the RTC to conclude that the prescriptive period was extended by the
parties’ agreement. Hence, it set aside the RTC decision and dismissed Cua’s
complaint.21
Cua filed a motion for reconsideration22 of the CA decision, which was denied by the
CA in a resolution dated January 31, 2006.23 Cua thus filed the present petition to
assail the CA rulings.
THE PARTIES’ ARGUMENTS
Cua contends that the extension of the period to file a complaint for damages was a
fact that was already admitted by the respondents who may no longer assert the
contrary, unless they sufficiently show that it was made through palpable mistake or
that no admission was made. Cua points out that Wallem’s motion to dismiss raised
solely the issue of prescription, which he refuted by referring to the August 10, 1990
telex message extending the prescriptive period. Immediately after, Wallem withdrew
its motion to dismiss. Cua thus attributes the withdrawal to an admission by Wallem of
the existence of the August 10, 1990 telex message. Cua adds that Wallem’s
withdrawal of its motion to dismiss dispensed with the need for him to present as
evidence the telex message, since the RTC ruled that there is no more need to act on
the motion to dismiss. Cua, therefore, prays for the setting aside of the CA rulings and
the reinstatement of the RTC decision.
The respondents, on the other hand, deny that an admission was made with respect
to the existence of the August 10, 1990 telex message. The telex message was never
attached to Cua’s opposition to Wallem’s motion to dismiss, hence, there was no
need for the respondents to deny its existence. They contend that Wallem’s
withdrawal of its motion to dismiss does not amount to an admission of the existence
of the telex message, nor does it amount to a waiver of the defense for prescription.
As stated in the June 5, 1992 Order of the RTC, the "defendant [referring to Wallem]
moved for the withdrawal of the Motion to Dismiss without waiving the defense of
prescription."24 They thus pray for the denial of the petition.
THE COURT’S RULING
The basic issue presented by the case is whether Cua’s claim for payment of
damages against the respondents has prescribed.1âwphi1 After considering the facts
and the applicable law, the Court finds that Cua timely filed his claim before the trial
court.
Prescription may be considered by the courts motu proprio if the facts supporting the
ground are apparent from the pleadings or the evidence on record
Section 1, Rule 16 of the Rules of Court25 enumerates the grounds on which a motion
to dismiss a complaint may be based, and the prescription of an action is included as
one of the grounds under paragraph (f). The defendant may either raise the grounds
in a motion to dismiss or plead them as an affirmative defense in his answer.26 The
failure to raise or plead the grounds generally amounts to a waiver, except if the
ground pertains to (1) lack of jurisdiction over the subject matter, (2) litis pendentia,
(3) res judicata, or (4) prescription.27 If the facts supporting any of these four listed
grounds are apparent from the pleadings or the evidence on record, the courts may
consider these grounds motu proprio and accordingly dismiss the complaint.
Accordingly, no reversible error may be attributed to the CA in considering
prescription as a ground to dismiss Cua’s action despite Wallem’s supposed waiver of
the defense. The Court, therefore, need not resolve the question of whether Wallem
actually waived the defense of prescription; an inquiry into this question is useless, as
courts are empowered to dismiss actions on the basis of prescription even if it is not
raised by the defendant so long as the facts supporting this ground are evident from
the records. In the present case, what is decisive is whether the pleadings and the
evidence support a finding that Cua’s claim has prescribed, and it is on this point that
we disagree with the CA’s findings. We find that the CA failed to appreciate the
admissions made by the respondents in their pleadings that negate a finding of
prescription of Cua’s claim.
Respondents admitted the agreement extending the period to file the claim
The COGSA is the applicable law for all contracts for carriage of goods by sea to and
from Philippine ports in foreign trade;28 it is thus the law that the Court shall consider
in the present case since the cargo was transported from Brazil to the
Philippines.Under Section 3(6) of the COGSA, the carrier is discharged from liability
for loss or damage to the cargo "unless the suit is brought within one year after
delivery of the goods or the date when the goods should have been
delivered."29 Jurisprudence, however, recognized the validity of an agreement
between the carrier and the shipper/consignee extending the one-year period to file a
claim.30
TRANSPORTATION LAW – Chapter 4
The vessel MV Argo Trader arrived in Manila on July 8, 1989; Cua’s complaint for
damages was filed before the RTC of Manila on November 12, 1990. Although the
complaint was clearly filed beyond the one-year period, Cua additionally alleged in his
complaint (under paragraph 11) that
"the defendants x x x agreed to extend the time for filing of the action up to
November 12, 1990."31
The allegation of an agreement extending the period to file an action in Cua’s
complaint is a material averment that, under Section 11, Rule 8 of the Rules of Court,
must be specifically denied by the respondents; otherwise, the allegation is deemed
admitted.32
A specific denial is made by specifying each material allegation of fact, the truth of
which the defendant does not admit and, whenever practicable, setting forth the
substance of the matters upon which he relies to support his denial.33 The purpose of
requiring the defendant to make a specific denial is to make him disclose the matters
alleged in the complaint which he succinctly intends to disprove at the trial, together
with the matter which he relied upon to support the denial.34
A review of the pleadings submitted by the respondents discloses that they
failed to specifically deny Cua’s allegation of an agreement extending the
period to file an action to November 12, 1990. Wallem’s motion to dismiss simply
referred to the fact that Cua’s complaint was filed more than one year from the arrival
of the vessel, but it did not contain a denial of the extension.35 Advance Shipping’s
motion to dismiss, on the other hand, focused solely on its contention that the action
was premature for failure to first undergo arbitration.36 While the joint answer
submitted by the respondents denied Cua’s allegation of an extension,37 they made
no further statement other than a bare and unsupported contention that Cua’s
"complaint is barred by prescription and/or laches[.]"38 The respondents did not
provide in their joint answer any factual basis for their belief that the complaint had
prescribed.
We cannot consider the respondents’ discussion on prescription in their
Memorandum filed with the RTC,39 since their arguments were based on Cua’s
supposed failure to comply with Article 366 of the Code of Commerce, not Section
3(6) of the COGSA – the relevant and material provision in this case. Article 366 of
the Code of Commerce requires that a claim be made with the carrier within 24 hours
from the delivery of the cargo; the respondents alleged that they were informed of the
damage and shortage only on September 13, 1989, months after the vessel’s arrival
in Manila.
Since the COGSA is the applicable law, the respondents’ discussion to support their
claim of prescription under Article 366 of the Code of Commerce would, therefore, not
constitute a refutation of Cua’s allegation of extension. Given the respondents’ failure
to specifically deny the agreement on the extension of the period to file an action, the
Court considers the extension of the period as an admitted fact.
This presumed admission is further bolstered by the express admission made by the
respondents themselves in their Memorandum:

STATEMENT OF THE CASE

1. This case was filed by [the] plaintiff on 11 November 1990 within the extended
period agreed upon by the parties to file suit. 40 (emphasis ours)

The above statement is a clear admission by the respondents that there was indeed
an agreement to extend the period to file the claim. In light of this admission, it would
be unnecessary for Cua to present a copy of the August 10, 1990 telex message to
prove the existence of the agreement. Thus, Cua timely filed a claim for the damage
to and shortage of the cargo.

WHEREFORE, the decision dated May 16, 2005 and the resolution dated January
31, 2006 of the Court of Appeals in CA-G.R. CV No. 53538 are SET ASIDE. The
decision dated December 28, 1995 of the Regional Trial Court of Manila, Branch 31,
in Civil Case No. 90-55098 is REINSTATED. Costs against the respondents.

TRANSPORTATION LAW – Chapter 4

28.) G.R. No. L-54140 October 14, 1986
FILIPINO MERCHANTS INSURANCE COMPANY, INC., petitioner,
vs.
HONORABLE JOSE ALEJANDRO, Presiding Judge of Branch XXVI of the Court
of First Instance of Manila and FROTA OCEANICA BRASILIERA, respondents.
These consolidated petitions raise the issue of whether or not the one-year period
within which to file a suit against the carrier and theship, in case of damage or loss as
provided for in the Carriage of Goods by Sea Act applies to the insurer of the goods.
On August 3, 1977, plaintiff Choa Tiek Seng filed a complaint, docketed as Civil Case
No. 109911, against the petitioner before the then Court of First Instance of Manila for
recovery of a sum of money under the marine insurance policy on cargo. Mr. Choa
alleged that the goods he insured with the petitioner sustained loss and damage in
the amount of P35,987.26. The vessel SS Frotario which was owned and operated by
private respondent Frota Oceanica Brasiliera, (Frota) discharged the goods at the
port of Manila on December 13, 1976. The said goods were delivered to the arrastre
operator E. Razon, Inc., on December 17, 1976 and on the same date were received
by the consignee-plaintiff.
On December 19, 1977, the petitioner filed its amended answer disclaiming liability,
imputing against the plaintiff the commission of fraud and counterclaiming for
damages.
On January 9, 1978, the petitioner filed a third-party complaint against the carrier,
private respondent Frota and the arrastre contractor, E. Razon, Inc. for indemnity,
subrogation, or reimbursement in the event that it is held liable to the plaintiff.
Meanwhile, on August 10, 1977, Joseph Benzon Chua filed a similar complaint
against the petitioner which was docketed as Civil Case No. 110061, for recovery
under the marine insurance policy for cargo alleging that the goods insured with the
petitioner sustained loss and damage in the sum of P55,996.49.
The goods were delivered to the plaintiff-consignee on or about January 25-28, 1977.
On May 31, 1978, the petitioner filed its answer. On September 28, 1978, it filed an
amended third-party complaint against respondent carrier, the Australia-West Pacific
Line (Australia-West).
In both cases, the private respondents filed their respective answers and
subsequently filed a motion for preliminary hearing on their affirmative defense of
prescription. The private respondents alleged in their separate answers that the
petitioner is already barred from filing a claim because under the Carriage of Goods
by Sea Act, the suit against the carrier must be filed within one year after delivery of
the goods or the date when the goods should have been delivered...
TRANSPORTATION LAW – Chapter 4
The petitioner contended that the provision relied upon by the respondents applies
only to the shipper and not to the insurer of the goods.
On April 30, 1980, the respondent judge in Civil Case No. 109911, upheld respondent
Frota and dismissed the petitioner's third-party complaint. Likewise, on August 31,
1982, the respondent judge in Civil Case No. 110061 dismissed the petitioner's third-
party complaint against respondent Australia-West on the ground that the same was
filed beyond the prescriptive period provide in Section 3 (6) of the Carriage of Goods
by Sea Act of 1936. These both cases, the petitioner appealed to us on a pure
question of law, raising the issue of whether or not the prescriptive period of one year
under the said Act also applies to an insurer such as herein petitioner.
The petitioner maintains that the one-year prescriptive period cannot cover an insurer
which has not settled the claim of its insured because it cannot be considered as the
person referred to in the applicable provision of the said Act that has the duty or right
to give notice of loss or damage to the carrier or to sue such carrier within the period
of one year and that where an insurer does not settle the claim of its insured it cannot
be considered as subrogated to the rights of said insured that would then authorize it
to sue the carrier within the time-bar of one year. The petitioner further contends that
the period for the filing of a third-party complaint must be reckoned from the date
when the principal action was filed, that is, from the time the insured filed a suit
against the petitioner, because the third-party complaint is merely an incident of the
main action.
On the other hand, the respondents argue that the one-year prescriptive period within
which to file a case against the carrier also applies to a claim filed by an insurer who
stands as a subrogee to the insured and that the third-party complaint filed by the
petitioner cannot be reckoned from the firing of the main action because such
complaint is independent of, and separate and distinct from the insured's action
against the petitioner.
The lower courts did not err.
Section 3(b) of the Carriage of Goods by Sea Act provides:
(6) Unless notice of loss or damage and the general nature of such loss or damage
be given in writing to the carrier or his agent at the port of discharge before or at the
time of the removal of the goods into the custody of the person entitled to delivery
thereof under the contract of carriage, such removal shall be prima facie evidence of
the delivery by the carrier of the goods as described in the bill of lading. If the loss or
damage is not apparent, the notice must be given within three days of the delivery.
Said notice of loss or damage may be endorsed upon the receipt for the goods given
by the person taking delivery thereof.
The notice in writing need not be given if the state of the goods has at the time of their
receipt been the subject of joint survey or inspection.
In any event the carrier and the ship shall be discharged from all liability in respect of
loss or damage unless suit is brought within one year after delivery of the goods or
the date when the goods should have been delivered: Provided, that if a notice of
loss or damage, either apparent or concealed, is not given as provided for in this
section, that fact shall not affect or prejudice the right of the shipper to bring the suit
within one year after the delivery of the goods or the date when the goods should
have been delivered.
In the case of any actual or apprehended loss or damage, the carrier and the receiver
shall give all reasonable facilities to each other for inspecting and tallying the goods.
(Emphasis supplied) Philippine Permanent and General Statutes (Revised Edition,
Vol. 1, pp. 663-666).
Chua Kuy v. Everett Steamship Corporation (93 Phil 207, 213-214), expounds on the
extent of the applicability of the aforequoted provision. We ruled:
Neither do we find tenable the claim that the prescriptive period contained in said act
can only be invoked by the shipper, excluding all other parties to the transaction.
While apparently the proviso contained in the portion of section 3(6) of the act we
have quoted gives the impression that the right to file suit within one year after
delivery of the goods applies to the shipper alone, however, reading the proviso in
conjunction with the rest of section 3(6), it at once becomes apparent that the
conclusion drawn by petitioner is unwarranted. In the first place, said section provides
that the notice of loss or damage for which a claim for indemnity may be made should
be given in writing to the carrier at the port of discharge before or at the time of the
removal of the goods, and if the loss or damage is not apparent said notice should be
given 'within three days on delivery.' From the language of this section, it seems clear
that the notice of loss or damage is required to be filed not necessarily by the shipper
but also by the consignee or any legal holder of the bill of lading. In fact, said section
requires that the notice be given at the port of discharge and the most logical party to
file the notice is either the consignee or the endorsee of the bill of lading. In the
second place, a study of the historical background of this particular provision will
show that although the word shipper is used in the proviso referred to by the
petitioner, the intention of the law was not to exclude the consignee or endorsee of
the bill of lading from bringing the action but merely to limit the filing of the same
within one year after the delivery of the goods at the port of discharge. [The Southern
Cross, 1940, A. M. C. 59 (SDNY); Lindgren v. Farley, 1938 A. M. C. 805 (SDNY)].
Arnold W. Knauth, an eminent authority on admiralty, commenting on this proviso,
says:
xxx xxx xxx
It seems evident that this language does not alter the sense of the text of the Hague
Rules; it merely reiterates in another form the rule already laid down. Curiously, the
TRANSPORTATION LAW – Chapter 4
proviso seems limited to the rights of shippers, and might strictly be construed not to
give any rights to consignees, representatives, or subrogated parties; whereas the
Hague Rules phraseology is broader. As the Act contains both phrases, it would
seem to be as broad as the broader of the two forms of words. (Ocean Bills of Lading,
by Knauth, p. 229).
Clearly, the coverage of the Act includes the insurer of the goods. Otherwise, what
the Act intends to prohibit after the lapse of the one-year prescriptive period can be
done indirectly by the shipper or owner of the goods by simply filing a claim against
the insurer even after the lapse of one year. This would be the result if we follow the
petitioner's argument that the insurer can, at any time, proceed against the carrier
and the ship since it is not bound by the time-bar provision. In this situation, the one-
year limitation will be practically useless. This could not have been the intention of the
law which has also for its purpose the protection of the carrier and the ship from
fraudulent claims by having "matters affecting transportation of goods by sea be
decided in as short a time as possible" and by avoiding incidents which would
"unnecessarily extend the period and permit delays in the settlement of questions
affecting the transportation." (See The Yek Tong Fire and Marine Insurance Co., Ltd.,
v. American President Lines, Inc., 103 Phil. 1125-1126).
In the case of Aetna Insurance Co. v. Luzon Stevedoring Corporation (62 SCRA 11,
15), we denied the appeal of an insurance company which filed a suit against the
carrier after the lapse of one year. We ruled:
There is no merit in the appeal. The trial court correctly held that the one-year
statutory and contractual prescriptive period had already expired when appellant
company filed on April 7, 1965 its action against Barber Line Far East Service. The
one-year period commenced on February 25, 1964 when the damaged cargo was
delivered to the consignee. (See Chua Kuy v. Everrett Steamship Corporation, 93
Phil. 207; Yek Tong Fire & Marine Insurance Co., Ltd. v. American President Lines,
Inc., 103 Phil. 1125).
We likewise agree with the respondents that the third-party complaint of the petitioner
cannot be considered to have been filed upon the filing of the main action because
although it can be said that a third-party complaint is but ancilliary to the main action
(Eastern Assurance and Surety Corporation v. Cui 105 SCRA 622), it cannot abridge,
enlarge, nor modify the substantive rights of any litigant. It creates no substantive
rights. Thus, unless there is some substantive basis for the third-party Plaintiff's claim,
he cannot utilized the filing of such action to acquire any right of action against the
third-party defendant. (See also Francisco, The Revised Rules of Court in the
Philippines, Vol. 1, 1973 Ed., p. 507). The petitioner can only rightfully file a third-
party complaint against the respondents if, in the first place, it can still validly maintain
an action against the latter.
In the case at bar, the petitioner's action has prescribed under the provisions of the
Carriage of Goods by Sea Act. Hence, whether it files a third-party complaint or
chooses to maintain an independent action against herein respondents is of no
moment. Had the plaintiffs in the civil cases below filed an action against the
petitioner after the one-year prescriptive period, then the latter could have
successfully denied liability on the ground that by their own doing, the plaintiffs had
prevented the petitioner from being subrogated to their respective rights against the
herein respondents by filing a suit after the one-year prescriptive period. The
situation, however, does not obtain in the present case. The plaintiffs in the civil cases
below gave extra-judicial notice to their respective carriers and filed suit against the
petitioner well within one year from their receipt of the goods. The petitioner had
plenty of time within which to act. In Civil Case No. 109911, the petitioner had more
than four months to file a third-party complaint while in Civil Case No. 110061, it had
more than five months to do so. In both instances, however, the petitioner failed to file
the appropriate action.

WHEREFORE, IN VIEW OF THE FOREGOING, the petitions in G. R. No. 54140 and

G. R. No. 62001 are hereby DISMISSED for lack of merit. Costs against the
petitioner.

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29.) G.R. No. 150094             August 18, 2004
FEDERAL EXPRESS CORPORATION, petitioner,
vs.
AMERICAN HOME ASSURANCE COMPANY and PHILAM INSURANCE
COMPANY, INC., respondents.
The antecedent facts are summarized by the appellate court as follows:
"On January 26, 1994, SMITHKLINE Beecham (SMITHKLINE for brevity) of
Nebraska, USA delivered to Burlington Air Express (BURLINGTON), an agent of
[Petitioner] Federal Express Corporation, a shipment of 109 cartons of veterinary
biologicals for delivery to consignee SMITHKLINE and French Overseas Company in
Makati City, Metro Manila. The shipment was covered by Burlington Airway Bill No.
11263825 with the words, 'REFRIGERATE WHEN NOT IN TRANSIT' and
'PERISHABLE' stamp marked on its face. That same day, Burlington insured the
cargoes in the amount of $39,339.00 with American Home Assurance Company
(AHAC). The following day, Burlington turned over the custody of said cargoes to
Federal Express which transported the same to Manila. The first shipment, consisting
of 92 cartons arrived in Manila on January 29, 1994 in Flight No. 0071-28NRT and
was immediately stored at [Cargohaus Inc.'s] warehouse. While the second,
consisting of 17 cartons, came in two (2) days later, or on January 31, 1994, in Flight
No. 0071-30NRT which was likewise immediately stored at Cargohaus' warehouse.
Prior to the arrival of the cargoes, Federal Express informed GETC Cargo
International Corporation, the customs broker hired by the consignee to facilitate the
release of its cargoes from the Bureau of Customs, of the impending arrival of its
client's cargoes.
"On February 10, 1994, DARIO C. DIONEDA ('DIONEDA'), twelve (12) days after the
cargoes arrived in Manila, a non-licensed custom's broker who was assigned by
GETC to facilitate the release of the subject cargoes, found out, while he was about
to cause the release of the said cargoes, that the same [were] stored only in a room
with two (2) air conditioners running, to cool the place instead of a refrigerator. When
he asked an employee of Cargohaus why the cargoes were stored in the 'cool room'
only, the latter told him that the cartons where the vaccines were contained
specifically indicated therein that it should not be subjected to hot or cold
temperature. Thereafter, DIONEDA, upon instructions from GETC, did not proceed
with the withdrawal of the vaccines and instead, samples of the same were taken and
brought to the Bureau of Animal Industry of the Department of Agriculture in the
Philippines by SMITHKLINE for examination wherein it was discovered that the
'ELISA reading of vaccinates sera are below the positive reference serum.'
"As a consequence of the foregoing result of the veterinary biologics test,
SMITHKLINE abandoned the shipment and, declaring 'total loss' for the unusable
shipment, filed a claim with AHAC through its representative in the Philippines, the
Philam Insurance Co., Inc. ('PHILAM') which recompensed SMITHKLINE for the
whole insured amount of THIRTY NINE THOUSAND THREE HUNDRED THIRTY
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NINE DOLLARS ($39,339.00). Thereafter, [respondents] filed an action for damages
against the [petitioner] imputing negligence on either or both of them in the handling
of the cargo.
"Trial ensued and ultimately concluded on March 18, 1997 with the [petitioner] being
held solidarily liable for the loss as follows:
'WHEREFORE, judgment is hereby rendered in favor of [respondents] and [petitioner
and its Co-Defendant Cargohaus] are directed to pay [respondents], jointly and
severally, the following:
1. Actual damages in the amount of the peso equivalent of US$39,339.00 with
interest from the time of the filing of the complaint to the time the same is fully paid.
2. Attorney's fees in the amount of P50,000.00 and
3. Costs of suit.
'SO ORDERED.'
"Aggrieved, [petitioner] appealed to [the CA]."5
Ruling of the Court of Appeals
The Test Report issued by the United States Department of Agriculture (Animal and
Plant Health Inspection Service) was found by the CA to be inadmissible in evidence.
Despite this ruling, the appellate court held that the shipping Receipts were a prima
facie proof that the goods had indeed been delivered to the carrier in good condition.
We quote from the ruling as follows:
"Where the plaintiff introduces evidence which shows prima facie  that the goods were
delivered to the carrier in good condition [i.e., the shipping receipts], and that the
carrier delivered the goods in a damaged condition, a presumption is raised that the
damage occurred through the fault or negligence of the carrier, and this casts upon
the carrier the burden of showing that the goods were not in good condition when
delivered to the carrier, or that the damage was occasioned by some cause excepting
the carrier from absolute liability. This the [petitioner] failed to discharge. x x x."6
Found devoid of merit was petitioner's claim that respondents had no personality to
sue. This argument was supposedly not raised in the Answer or during trial.
Hence, this Petition.7
The Issues
In its Memorandum, petitioner raises the following issues for our consideration:
"I.
Are the decision and resolution of the Honorable Court of Appeals proper subject for
review by the Honorable Court under Rule 45 of the 1997 Rules of Civil Procedure?
The correctness of legal conclusions drawn by the Court of Appeals from undisputed
facts is a question of law cognizable by the Supreme Court.9
In the present case, the facts are undisputed. As will be shown shortly, petitioner is
questioning the conclusions drawn from such facts. Hence, this case is a proper
subject for review by this Court.

"II. Main Issue:

Is the conclusion of the Honorable Court of Appeals – petitioner's claim that
respondents have no personality to sue because the payment was made by the
respondents to Smithkline when the insured under the policy is Burlington Air Express
is devoid of merit – correct or not?
"III.
Is the conclusion of the Honorable Court of Appeals that the goods were received in
good condition, correct or not?
"IV.
Are Exhibits 'F' and 'G' hearsay evidence, and therefore, not admissible?
Liability for Damages
Petitioner contends that respondents have no personality to sue -- thus, no cause of
action against it -- because the payment made to Smithkline was erroneous.
Pertinent to this issue is the Certificate of Insurance10 ("Certificate") that both opposing
parties cite in support of their respective positions. They differ only in their
interpretation of what their rights are under its terms. The determination of those
rights involves a question of law, not a question of fact. "As distinguished from a
question of law which exists 'when the doubt or difference arises as to what the law is
on a certain state of facts' -- 'there is a question of fact when the doubt or difference
arises as to the truth or the falsehood of alleged facts'; or when the 'query necessarily
invites calibration of the whole evidence considering mainly the credibility of
witnesses, existence and relevancy of specific surrounding circumstance, their
relation to each other and to the whole and the probabilities of the situation.'"11

"V. Proper Payee

Is the Honorable Court of Appeals correct in ignoring and disregarding respondents' The Certificate specifies that loss of or damage to the insured cargo is "payable to
own admission that petitioner is not liable? and order x x x upon surrender of this Certificate." Such wording conveys the right of
collecting on any such damage or loss, as fully as if the property were covered by a
special policy in the name of the holder itself. At the back of the Certificate appears
"VI. the signature of the representative of Burlington. This document has thus been duly
indorsed in blank and is deemed a bearer instrument.
Is the Honorable Court of Appeals correct in ignoring the Warsaw Convention?"8
Since the Certificate was in the possession of Smithkline, the latter had the right of
Simply stated, the issues are as follows: (1) Is the Petition proper for review by the collecting or of being indemnified for loss of or damage to the insured shipment, as
Supreme Court? (2) Is Federal Express liable for damage to or loss of the insured fully as if the property were covered by a special policy in the name of the holder.
goods? Hence, being the holder of the Certificate and having an insurable interest in the
goods, Smithkline was the proper payee of the insurance proceeds.
This Court's Ruling
Subrogation
The Petition has merit.
Upon receipt of the insurance proceeds, the consignee (Smithkline) executed a
subrogation Receipt12 in favor of respondents. The latter were thus authorized "to file
Preliminary Issue:
claims and begin suit against any such carrier, vessel, person, corporation or
Propriety of Review
government." Undeniably, the consignee had a legal right to receive the goods in the
same condition it was delivered for transport to petitioner. If that right was violated,
the consignee would have a cause of action against the person responsible therefor.

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Upon payment to the consignee of an indemnity for the loss of or damage to the
insured goods, the insurer's entitlement to subrogation pro tanto -- being of the
highest equity -- equips it with a cause of action in case of a contractual breach or
negligence.13 "Further, the insurer's subrogatory right to sue for recovery under the bill
of lading in case of loss of or damage to the cargo is jurisprudentially upheld."14
In the exercise of its subrogatory right, an insurer may proceed against an erring
carrier. To all intents and purposes, it stands in the place and in substitution of the
consignee. A fortiori, both the insurer and the consignee are bound by the contractual
stipulations under the bill of lading.15
Prescription of Claim
From the initial proceedings in the trial court up to the present, petitioner has tirelessly
pointed out that respondents' claim and right of action are already barred. The latter,
and even the consignee, never filed with the carrier any written notice or complaint
regarding its claim for damage of or loss to the subject cargo within the period
required by the Warsaw Convention and/or in the airway bill. Indeed, this fact has
never been denied by respondents and is plainly evident from the records.
Airway Bill No. 11263825, issued by Burlington as agent of petitioner, states:
"6. No action shall be maintained in the case of damage to or partial loss of the
shipment unless a written notice, sufficiently describing the goods concerned, the
approximate date of the damage or loss, and the details of the claim, is presented by
shipper or consignee to an office of Burlington within (14) days from the date the
goods are placed at the disposal of the person entitled to delivery, or in the case of
total loss (including non-delivery) unless presented within (120) days from the date of
issue of the [Airway Bill]."16
Relevantly, petitioner's airway bill states:
"12./12.1 The person entitled to delivery must make a complaint to the carrier in
writing in the case:
12.1.1 of visible damage to the goods, immediately after discovery of the damage and
at the latest within fourteen (14) days from receipt of the goods;
12.1.2 of other damage to the goods, within fourteen (14) days from the date of
receipt of the goods;
12.1.3 delay, within twenty-one (21) days of the date the goods are placed at his
disposal; and
12.1.4 of non-delivery of the goods, within one hundred and twenty (120) days from
the date of the issue of the air waybill.
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12.2 For the purpose of 12.1 complaint in writing may be made to the carrier whose
air waybill was used, or to the first carrier or to the last carrier or to the carrier who
performed the transportation during which the loss, damage or delay took place."17
Article 26 of the Warsaw Convention, on the other hand, provides:
"ART. 26. (1) Receipt by the person entitled to the delivery of baggage or goods
without complaint shall be prima facie evidence that the same have been delivered in
good condition and in accordance with the document of transportation.
(2) In case of damage, the person entitled to delivery must complain to the carrier
forthwith after the discovery of the damage, and, at the latest, within 3 days from the
date of receipt in the case of baggage and 7 days from the date of receipt in the case
of goods. In case of delay the complaint must be made at the latest within 14 days
from the date on which the baggage or goods have been placed at his disposal.
(3) Every complaint must be made in writing upon the document of transportation or
by separate notice in writing dispatched within the times aforesaid.
(4) Failing complaint within the times aforesaid, no action shall lie against the carrier,
save in the case of fraud on his part."18
Condition Precedent
In this jurisdiction, the filing of a claim with the carrier within the time limitation therefor
actually constitutes a condition precedent to the accrual of a right of action against a
carrier for loss of or damage to the goods.19 The shipper or consignee must allege
and prove the fulfillment of the condition. If it fails to do so, no right of action against
the carrier can accrue in favor of the former. The aforementioned requirement is a
reasonable condition precedent; it does not constitute a limitation of action.20
The requirement of giving notice of loss of or injury to the goods is not an empty
formalism. The fundamental reasons for such a stipulation are (1) to inform the carrier
that the cargo has been damaged, and that it is being charged with liability therefor;
and (2) to give it an opportunity to examine the nature and extent of the injury. "This
protects the carrier by affording it an opportunity to make an investigation of a claim
while the matter is fresh and easily investigated so as to safeguard itself from false
and fraudulent claims."21
When an airway bill -- or any contract of carriage for that matter -- has a stipulation
that requires a notice of claim for loss of or damage to goods shipped and the
stipulation is not complied with, its enforcement can be prevented and the liability
cannot be imposed on the carrier. To stress, notice is a condition precedent, and the
carrier is not liable if notice is not given in accordance with the stipulation.22 Failure to
comply with such a stipulation bars recovery for the loss or damage suffered.23
Being a condition precedent, the notice must precede a suit for enforcement.24 In the
present case, there is neither an allegation nor a showing of respondents' compliance
with this requirement within the prescribed period. While respondents may have had a
cause of action then, they cannot now enforce it for their failure to comply with the
aforesaid condition precedent.

In view of the foregoing, we find no more necessity to pass upon the other issues
raised by petitioner.

We note that respondents are not without recourse. Cargohaus, Inc. -- petitioner's co-
defendant in respondents' Complaint below -- has been adjudged by the trial court as
liable for, inter alia, "actual damages in the amount of the peso equivalent of US
$39,339."25 This judgment was affirmed by the Court of Appeals and is already final
and executory.26

WHEREFORE, the Petition is GRANTED, and the assailed

Decision REVERSED insofar as it pertains to Petitioner Federal Express Corporation.
No pronouncement as to costs.

TRANSPORTATION LAW – Chapter 4

30.) G.R. No. 149547             July 4, 2008
PHILIPPINE AIRLINES, INC., petitioner,
vs. HON. ADRIANO SAVILLO, Presiding Judge of RTC Branch 30 , Iloilo City,
and SIMPLICIO GRIÑO, respondents.
Private respondent was invited to participate in the 1993 ASEAN Seniors Annual Golf
Tournament held in Jakarta, Indonesia. He and several companions decided to
purchase their respective passenger tickets from PAL with the following points of
passage: MANILA-SINGAPORE-JAKARTA-SINGAPORE-MANILA. Private
respondent and his companions were made to understand by PAL that its plane
would take them from Manila to Singapore, while Singapore Airlines would take them
from Singapore to Jakarta.4
On 3 October 1993, private respondent and his companions took the PAL flight to
Singapore and arrived at about 6:00 o’clock in the evening. Upon their arrival, they
proceeded to the Singapore Airlines office to check-in for their flight to Jakarta
scheduled at 8:00 o’clock in the same evening. Singapore Airlines rejected the tickets
of private respondent and his group because they were not endorsed by PAL. It was
explained to private respondent and his group that if Singapore Airlines honored the
tickets without PAL’s endorsement, PAL would not pay Singapore Airlines for their
passage. Private respondent tried to contact PAL’s office at the airport, only to find
out that it was closed.5
Stranded at the airport in Singapore and left with no recourse, private respondent was
in panic and at a loss where to go; and was subjected to humiliation, embarrassment,
mental anguish, serious anxiety, fear and distress. Eventually, private respondent and
his companions were forced to purchase tickets from Garuda Airlines and board its
last flight bound for Jakarta. When they arrived in Jakarta at about 12:00 o’clock
midnight, the party who was supposed to fetch them from the airport had already left
and they had to arrange for their transportation to the hotel at a very late hour. After
the series of nerve-wracking experiences, private respondent became ill and was
unable to participate in the tournament. 6
Upon his return to the Philippines, private respondent brought the matter to the
attention of PAL. He sent a demand letter to PAL on 20 December 1993 and another
to Singapore Airlines on 21 March 1994. However, both airlines disowned liability and
blamed each other for the fiasco. On 15 August 1997, private respondent filed a
Complaint for Damages before the RTC docketed as Civil Case No. 23773, seeking
compensation for moral damages in the amount of P1,000,000.00 and attorney’s
fees.7
Instead of filing an answer to private respondent’s Complaint, PAL filed a Motion to
Dismiss8 dated 18 September 1998 on the ground that the said complaint was barred
on the ground of prescription under Section 1(f) of Rule 16 of the Rules of
Court.9 PAL argued that the Warsaw Convention,10 particularly Article 29
thereof,11 governed this case, as it provides that any claim for damages in connection
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with the international transportation of persons is subject to the prescription period of
two years. Since the Complaint was filed on 15 August 1997, more than three years
after PAL received the demand letter on 25 January 1994, it was already barred by
prescription.
On 9 June 1998, the RTC issued an Order12 denying the Motion to Dismiss. It
maintained that the provisions of the Civil Code and other pertinent laws of the
Philippines, not the Warsaw Convention, were applicable to the present case.
The Court of Appeals, in its assailed Decision dated 17 August 2001, likewise
dismissed the Petition for Certiorari filed by PAL and affirmed the 9 June 1998 Order
of the RTC. It pronounced that the application of the Warsaw Convention must not be
construed to preclude the application of the Civil Code and other pertinent laws. By
applying Article 1144 of the Civil Code,13 which allowed for a ten-year prescription
period, the appellate court declared that the Complaint filed by private respondent
should not be dismissed.14
Hence, the present Petition, in which petitioner raises the following issues:
I
THE COURT OF APPEALS ERRED IN NOT GIVING DUE COURSE TO THE
PETITION AS RESPONDENT JUDGE COMMITED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OF JURSIDICTION IN DENYING PAL’S
MOTION TO DISMISS.
II
THE COURT OF APPEALS ERRED IN NOT APPLYING THE PROVISIONS OF THE
WARSAW CONVENTION DESPITE THE FACT THAT GRIÑO’S CAUSE OF
ACTION AROSE FROM A BREACH OF CONTRACT FOR INTERNATIONAL AIR
TRANSPORT.
III
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE COMPLAINT
FILED BY GRIÑO BEYOND THE TWO (2)-YEAR PERIOD PROVIDED UNDER THE
WARSAW CONVENTION IS ALREADY BARRED BY PRESCRIPTION. 15
The petition is without merit.
In determining whether PAL’s Motion to Dismiss should have been granted by the trial
court, it must be ascertained if all the claims made by the private respondent in his
Complaint are covered by the Warsaw Convention, which effectively bars all claims
made outside the two-year prescription period provided under Article 29 thereof. If the
Warsaw Convention covers all of private respondent’s claims, then Civil Case No.
23773 has already prescribed and should therefore be dismissed. On the other hand,
if some, if not all, of respondent’s claims are outside the coverage of the Warsaw
Convention, the RTC may still proceed to hear the case.
The Warsaw Convention applies to "all international transportation of persons,
baggage or goods performed by any aircraft for hire." It seeks to accommodate or
balance the interests of passengers seeking recovery for personal injuries and the
interests of air carriers seeking to limit potential liability. It employs a scheme of strict
liability favoring passengers and imposing damage caps to benefit air carriers.16 The
cardinal purpose of the Warsaw Convention is to provide uniformity of rules governing
claims arising from international air travel; thus, it precludes a passenger from
maintaining an action for personal injury damages under local law when his or her
claim does not satisfy the conditions of liability under the Convention.17
Article 19 of the Warsaw Convention provides for liability on the part of a carrier for
"damages occasioned by delay in the transportation by air of passengers, baggage or
goods." Article 24 excludes other remedies by further providing that "(1) in the cases
covered by articles 18 and 19, any action for damages, however founded, can only be
brought subject to the conditions and limits set out in this convention." Therefore, a
claim covered by the Warsaw Convention can no longer be recovered under local
law, if the statute of limitations of two years has already lapsed.
Nevertheless, this Court notes that jurisprudence in the Philippines and the United
States also recognizes that the Warsaw Convention does not "exclusively regulate"
the relationship between passenger and carrier on an international flight. This Court
finds that the present case is substantially similar to cases in which the damages
sought were considered to be outside the coverage of the Warsaw Convention.
In United Airlines v. Uy,18 this Court distinguished between the (1) damage to the
passenger’s baggage and (2) humiliation he suffered at the hands of the airline’s
employees. The first cause of action was covered by the Warsaw Convention which
prescribes in two years, while the second was covered by the provisions of the Civil
Code on torts, which prescribes in four years.
Similar distinctions were made in American jurisprudence. In Mahaney v. Air
France,19 a passenger was denied access to an airline flight between New York and
Mexico, despite the fact that she held a confirmed reservation. The court therein ruled
that if the plaintiff were to claim damages based solely on the delay she experienced
– for instance, the costs of renting a van, which she had to arrange on her own as a
consequence of the delay – the complaint would be barred by the two-year statute of
limitations. However, where the plaintiff alleged that the airlines subjected her to
unjust discrimination or undue or unreasonable preference or disadvantage, an act
punishable under the United States laws, then the plaintiff may claim purely nominal
compensatory damages for humiliation and hurt feelings, which are not provided for
by the Warsaw Convention. In another case, Wolgel v. Mexicana Airlines,20 the court
pronounced that actions for damages for the "bumping off" itself, rather than the
incidental damages due to the delay, fall outside the Warsaw Convention and do not
prescribe in two years.
TRANSPORTATION LAW – Chapter 4
In the Petition at bar, private respondent’s Complaint alleged that both PAL and
Singapore Airlines were guilty of gross negligence, which resulted in his being
subjected to "humiliation, embarrassment, mental anguish, serious anxiety, fear and
distress."21 The emotional harm suffered by the private respondent as a result of
having been unreasonably and unjustly prevented from boarding the plane should be
distinguished from the actual damages which resulted from the same incident. Under
the Civil Code provisions on tort,22 such emotional harm gives rise to compensation
where gross negligence or malice is proven.
The instant case is comparable to the case of Lathigra v. British Airways.23
In Lathigra, it was held that the airlines’ negligent act of reconfirming the passenger’s
reservation days before departure and failing to inform the latter that the flight had
already been discontinued is not among the acts covered by the Warsaw Convention,
since the alleged negligence did not occur during the performance of the contract of
carriage but, rather, days before the scheduled flight.
In the case at hand, Singapore Airlines barred private respondent from boarding the
Singapore Airlines flight because PAL allegedly failed to endorse the tickets of private
respondent and his companions, despite PAL’s assurances to respondent that
Singapore Airlines had already confirmed their passage. While this fact still needs to
be heard and established by adequate proof before the RTC, an action based on
these allegations will not fall under the Warsaw Convention, since the purported
negligence on the part of PAL did not occur during the performance of the contract of
carriage but days before the scheduled flight. Thus, the present action cannot be
dismissed based on the statute of limitations provided under Article 29 of the Warsaw
Convention.
Had the present case merely consisted of claims incidental to the airlines’ delay in
transporting their passengers, the private respondent’s Complaint would have been
time-barred under Article 29 of the Warsaw Convention. However, the present case
involves a special species of injury resulting from the failure of PAL and/or Singapore
Airlines to transport private respondent from Singapore to Jakarta – the profound
distress, fear, anxiety and humiliation that private respondent experienced when,
despite PAL’s earlier assurance that Singapore Airlines confirmed his passage, he
was prevented from boarding the plane and he faced the daunting possibility that he
would be stranded in Singapore Airport because the PAL office was already closed.
These claims are covered by the Civil Code provisions on tort, and not within the
purview of the Warsaw Convention. Hence, the applicable prescription period is that
provided under Article 1146 of the Civil Code:
Art. 1146. The following actions must be instituted within four years:
(1) Upon an injury to the rights of the plaintiff;
(2) Upon a quasi-delict.
Private respondent’s Complaint was filed with the RTC on 15 August 1997, which was
less than four years since PAL received his extrajudicial demand on 25 January 1994.
Thus, private respondent’s claims have not yet prescribed and PAL’s Motion to
Dismiss must be denied.

Moreover, should there be any doubt as to the prescription of private respondent’s

Complaint, the more prudent action is for the RTC to continue hearing the same and
deny the Motion to Dismiss. Where it cannot be determined with certainty whether the
action has already prescribed or not, the defense of prescription cannot be sustained
on a mere motion to dismiss based on what appears to be on the face of the
complaint.24 And where the ground on which prescription is based does not appear to
be indubitable, the court may do well to defer action on the motion to dismiss until
after trial on the merits.25

IN VIEW OF THE FOREGOING, the instant Petition is DENIED. The assailed

Decision of the Court of Appeals in CA-G.R. SP No. 48664, promulgated on 17
August 2001 is AFFIRMED. Costs against the petitioner.

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