public of the Philippines SUPREME COURT Manila FIRST DIVISION

G.R. No. 114061 August 3, 1994 KOREAN AIRLINES CO., LTD., petitioner, vs. COURT OF APPEALS and JUANITO C. LAPUZ, respondents. G.R. No. 113842 August 3, 1994 JUANITO C. LAPUZ, petitioner, vs. COURT OF APPEALS and KOREAN AIRLINES CO., LTD., respondents. M.A. Aguinaldo and Associates for Korean Airlines Co., Ltd. Camacho and Associates for Juanito Lapuz.

CRUZ, J.: Sometime in 1980, Juanito C. Lapuz, an automotive electrician, was contracted for employment in Jeddah, Saudi Arabia, for a period of one year through Pan Pacific Overseas Recruiting Services, Inc. Lapuz was supposed to leave on November 8, 1980, via Korean Airlines. Initially, he was "waitlisted," which meant that he could only be accommodated if any of the confirmed passengers failed to show up at the airport before departure. When two of such passengers did not appear, Lapuz and another person by the name of Perico were given the two unclaimed seats. According to Lapuz, he was allowed to check in with one suitcase and one shoulder bag at the checkin counter of KAL. He passed through the customs and immigration sections for routine check-up and was cleared for departure as Passenger No. 157 of KAL Flight No. KE 903. Together with the other passengers, he rode in the shuttle bus and proceeded to the ramp of the KAL aircraft for boarding. However, when he was at the third or fourth rung of the stairs, a KAL officer pointed to him and shouted "Down! Down!" He was thus barred from taking the flight. When he later asked for another booking, his ticket was canceled by KAL. Consequently, he was unable to report for his work in Saudi Arabia within the stipulated 2-week period and so lost his employment. KAL, on the other hand, alleged that on November 8, 1980, Pan Pacific Recruiting Services Inc. coordinated with KAL for the departure of 30 contract workers, of whom only 21 were confirmed and 9 were wait-listed passengers. The agent of Pan Pacific, Jimmie Joseph, after being informed that there was a possibility of having one or two seats becoming available, gave priority to Perico, who was one of the supervisors of the hiring company in Saudi Arabia. The other seat was won

through lottery by Lapuz. However, only one seat became available and so, pursuant to the earlier agreement that Perico was to be given priority, he alone was allowed to board. After trial, the Regional Trial Court of Manila, Branch 30, 1 adjudged KAL liable for damages, disposing as follows: WHEREFORE, in view of the foregoing consideration, judgment is hereby rendered sentencing the defendant Korean Air Lines to pay plaintiff Juanito C. Lapuz the following: 1. The amount of TWO HUNDRED SEVENTY-TWO THOUSAND ONE HUNDRED SIXTY (P272,160.00) PESOS as actual/compensatory damages, with legal interest thereon from the date of the filing of the complaint until fully paid. 2. The sum of TWENTY-FIVE THOUSAND (P25,000.00) PESOS as and for attorney's fees; and 3. The costs of suit. The case is hereby dismissed with respect to defendant Pan Pacific Overseas Recruiting Services, Inc. The counterclaims and cross-claim of defendant Korean Air Lines Co., Ltd. are likewise dismissed. On appeal, this decision was modified by the Court of Appeals 2 as follows: WHEREFORE, in view of all the foregoing, the appealed judgment is hereby AFFIRMED with the following modifications: the amount of actual damages and compensatory damages is reduced to P60,000.00 and defendant-appellant is hereby ordered to pay plaintiff-appellant the sum of One Hundred Thousand Pesos (P100,000.00) by way of moral and exemplary damages, at 6% interest per annum from the date of the filing of the Complaint until fully paid. KAL and Lapuz filed their respective motions for reconsideration, which were both denied for lack of merit. Hence, the present petitions for review which have been consolidated because of the identity of the parties and the similarity of the issues. In G. R. No. 114061, KAL assails the decision of the appellate court on the following grounds: 1. That the Court of Appeals erred in concluding that petitioner committed a breach of contract of carriage notwithstanding lack of proper, competent and sufficient evidence of the existence of such contract. 2. That the Court of Appeals erred in not according the proper evidentiary weight to some evidence presented and the fact that private respondent did not have any boarding pass to prove that he was allowed to board and to prove that his airline ticket was confirmed. 3. That the Court of Appeals erred in concluding that the standby passenger status of private respondent Lapuz was changed to a confirmed status when his name was entered into the passenger manifest. 4. That the Court of Appeals abused its discretion in awarding moral and exemplary damages in the amount of P100,000.00 in favor of private respondent notwithstanding its lack of basis and private

respondent did not state such amount in his complaint nor had private respondent proven the said damages. 5. That the Court of Appeals erred in dismissing the counterclaims. 6. That the Court of Appeals erred in dismissing the counterclaim of petitioner against Pan Pacific. 7. That the Court of Appeals erred in ruling that the 6% per annum legal interest on the judgment shall be computed from the filing of the complaint. In G. R. No. 113842, Lapuz seeks: (a) the setting aside of the decision of the Court of Appeals insofar as it modifies the award of damages; b) actual and compensatory damages in the sum equivalent to 5 years' loss of earnings based on the petitioner's monthly salary of 1,600 Saudi rials at the current conversion rate plus the cost of baggage and personal belongings worth P2,000 and the service fee of P3,000 paid to the recruiting agency, all with legal interest from the filing of the complaint until fully paid; c) moral damages of not less than P1 million and exemplary damages of not less than P500,000.00, both with interest at 6% per annum from the filing of the complaint; and d) attorney's fees in the sum equivalent to 30% of the award of damages. It is evident that the issues raised in these petitions relate mainly to the correctness of the factual findings of the Court of Appeals and the award of damages. The Court has consistently affirmed that the findings of fact of the Court of Appeals and the other lower courts are as a rule binding upon it, subject to certain exceptions. As nothing in the record indicates any of such exceptions, the factual conclusions of the appellate court must be affirmed. The status of Lapuz as standby passenger was changed to that of a confirmed passenger when his name was entered in the passenger manifest of KAL for its Flight No. KE 903. His clearance through immigration and customs clearly shows that he had indeed been confirmed as a passenger of KAL in that flight. KAL thus committed a breach of the contract of carriage between them when it failed to bring Lapuz to his destination. This Court has held that a contract to transport passengers is different in kind and degree from any other contractual relation. 3 The business of the carrier is mainly with the traveling public. It invites people to avail themselves of the comforts and advantages it offers. The contract of air carriage generates a relation attended with a public duty. Passengers have the right to be treated by the carrier's employees with kindness, respect, courtesy and due consideration. They are entitled to be protected against personal misconduct, injurious language, indignities and abuses from such employees. 4 So it is that any discourteous conduct on the part of these employees toward a passenger gives the latter an action for damages against the carrier. The breach of contract was aggravated in this case when, instead of courteously informing Lapuz of his being a "wait-listed" passenger, a KAL officer rudely shouted "Down! Down!" while pointing at him, thus causing him embarrassment and public humiliation. KAL argues that "the evidence of confirmation of a chance passenger status is not through the entry of the name of a chance passenger in the passenger manifest nor the clearance from the Commission on Immigration and Deportation, because they are merely means of facilitating the boarding of a chance passenger in case his status is confirmed." We are not persuaded.

The evidence presented by Lapuz shows that he had indeed checked in at the departure counter, passed through customs and immigration, boarded the shuttle bus and proceeded to the ramp of KAL's aircraft. In fact, his baggage had already been loaded in KAL's aircraft, to be flown with him to Jeddah. The contract of carriage between him and KAL had already been perfected when he was summarily and insolently prevented from boarding the aircraft. KAL's allegation that the respondent court abused its discretion in awarding moral and exemplary damages is also not tenable. The Court of Appeals granted moral and exemplary damages because: The findings of the court a quo that the defendant-appellant has committed breach of contract of carriage in bad faith and in wanton, disregard of plaintiff-appellant's rights as passenger laid the basis and justification of an award for moral damages. xxxx In the instant case, we find that defendant-appellant Korean Air Lines acted in a wanton, fraudulent, reckless, oppressive or malevolent manner when it "bumped off" plaintiff-appellant on November 8, 1980, and in addition treated him rudely and arrogantly as a "patay gutom na contract worker fighting Korean Air Lines," which clearly shows malice and bad faith, thus entitling plaintiff-appellant to moral damages. xxxx Considering that the plaintiff-appellant's entitlement to moral damages has been fully established by oral and documentary evidence, exemplary damages may be awarded. In fact, exemplary damages may be awarded, even though not so expressly pleaded in the complaint (Kapoe vs. Masa, 134 SCRA 231). By the same token, to provide an example for the public good, an award of exemplary damages is also proper (Armovit vs. Court of Appeals, supra). On the other hand, Lapuz's claim that the award of P100,000.00 as moral and exemplary damages is inadequate is not acceptable either. His prayer for moral damages of not less than P1 million and exemplary damages of not less than P500,000.00 is overblown. The well-entrenched principle is that moral damages depend upon the discretion of the court based on the circumstances of each case. 5 This discretion is limited by the principle that the "amount awarded should not be palpably and scandalously excessive" as to indicate that it was the result of prejudice or corruption on the part of the trial court. 6 Damages are not intended to enrich the complainant at the expense of the defendant. They are awarded only to alleviate the moral suffering that the injured party had undergone by reason of the defendant's culpable action. 7 There is no hard-and-fast rule in the determination of what would be a fair amount of moral damages since each case must be governed by its own peculiar facts. A review of the record of this case shows that the injury suffered by Lapuz is not so serious or extensive as to warrant an award of P1.5 million. The assessment of P100,000 as moral and exemplary damages in his favor is, in our view, reasonable and realistic.

Lapuz likewise claims that the respondent court could not rule upon the propriety of the award of actual damages because it had not been assigned as an error by KAL. Not so. The rule is that only errors specifically assigned and properly argued in the brief will be considered except errors affecting jurisdiction over the subject matter and plain as well as clerical errors. 8 But this is not without qualification for, as the Court held in Vda. de Javellana vs. Court of Appeals: 9 . . . [T]he Court is clothed with ample authority to review matters, even if they are not assigned as errors in their appeal, if it finds that their consideration is necessary in arriving at a just decision of the case. A similar pronouncement was made in Baquiran vs. Court of Appeals 10 in this wise: Issues, though not specifically raised in the pleading in the appellate court, may, in the interest of justice, be properly considered by said court in deciding a case, if they are questions raised in the trial court and are matters of record having some bearing on the issue submitted which the parties failed to raise or the lower court ignored. The Court of Appeals was therefore justified in decreasing the award of actual damages even if the issue was not assigned as an error by KAL. Consideration of this question was necessary for the just and complete resolution of the present case. Furthermore, there was enough evidence to warrant the reduction of the original award, as the challenged decision correctly observed: A perusal of the plaintiff-appellant's contract of employment shows that the effectivity of the contract is for only one year, renewable every year for five years. Although plaintiff-appellant intends to renew his contract, such renewal will still be subject to his foreign employer. Plaintiffappellant had not yet started working with his foreign employer, hence, there can be no basis as to whether his contract will be renewed by his foreign employer or not. Thus, the damages representing the loss of earnings of plaintiff-appellant in the renewal of the contract of employment is at most speculative. Damages may not be awarded on the basis of speculation or conjecture (Gachalian vs. Delim, 203 SCRA 126). Hence, defendant-appellant's liability is limited to the one year contract only. Plaintiff-appellant is, therefore, entitled only to his lost earnings for one year, i.e., P60,000.00, which is 1/5 of P300,000.00, the total amount of actual damages, representing lost earnings for five years prayed for in the Complaint. Plaintiff-appellant's contention that in computing his lost earnings, the current rate of the Saudi Rial to the Philippine Peso at the time of payment should be used, is untenable, considering that in his Complaint, plaintiff-appellant has quantified in Philippine Peso his lost earnings for five years. We disagree with the respondent court, however, on the date when the legal interest should commence to run. The rule is that the legal interest of six percent (6%) on the amounts adjudged in favor of Lapuz should resume from the time of the rendition of the trial court's decision instead of November 28, 1980, the date of the filing of the complaint. On this matter, the Court has held: If suit were for payment of a definite sum of money, the contention might be tenable. However, if it is for damages, unliquidated and not known until definitely ascertained, assessed and determined by the courts after proof, interest should be from the date of the decision. 11

xxxx The obligation to pay interest on a sum filed in a judgment exists from the date of the sentence, when so declared; for until the net amount of the debtor's liability has been determined, he cannot he considered delinquent in the fulfillment of his obligation to pay the debt with interest thereon. 12 Finally, we find that the respondent court did not err in sustaining the trial court's dismissal of KAL's counterclaim against Pan Pacific Overseas Recruiting Services Inc., whose responsibility ended with the confirmation by KAL of Lapuz as its passenger in its Flight No. 903. This is still another case of the maltreatment of our overseas contract workers, this time by the airline supposed to bring the passenger to his foreign assignment. Our OCW's sacrifice much in seeking employment abroad, where they are deprived of the company of their loved ones, the direct protection of our laws, and the comfort of our own native culture and way of life. This Court shall exert every effort to vindicate their rights when they are abused and shall accord them the commensurate reparation of their injuries consistent with their dignity and worth as members of the working class. WHEREFORE, the appealed judgment is AFFIRMED, but with the modification that the legal interest on the damages awarded to private respondent should commence from the date of the decision of the trial court on November 14, 1990. The parties shall bear their own costs. SO ORDERED epublic of the Philippines SUPREME COURT Manila FIRST DIVISION

G.R. No. 106279 July 14, 1995 SULPICIO LINES, INC., petitioner, vs. THE HONORABLE COURT OF APPEALS (Twelfth Division) and JACINTA L. PAMALARAN, respondents.

QUIASON, J.: This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court to reverse the Decision dated April 8, 1992 of the Court of Appeals in CA-G.R. CV No. 21919, affirming the decision of the Regional Trial Court of Bohol, Branch 2, Tagbilaran City, which awarded the claim for damages filed by private respondent against CBL Timber Corporation (CBL), AGO Lumber Company (ALC), Sulpicio Lines, Inc. (SLI) and Ernie Santiago (Civil Case No. 2864). We deny the petition.

I A contract of carriage was entered into between petitioner and ALC for the transport of the latter's timber from Pugad, Lianga, Surigao del Sur. On March 17, 1976, petitioner sent its tugboat "MT Edmund" and barge "Solid VI" to Lianga to pick up ALC's timber. However, no loading could be made because of the heavy downpour. The next morning, several stevedores of CBL, who were hired by ALC, boarded the "Solid VI" and opened its storeroom. The stevedores were warned of the gas and heat generated by the copra stored in the holds of the ship. Not heeding the warning, a stevedore entered the storeroom and fell unconscious. Two other stevedores followed, one of whom was Leoncio L. Pamalaran. He also lost consciousness and eventually died of gas poisoning. Thus, Civil Case No. 2864 for damages was filed with the Regional Trial Court of Bohol, Branch 2, Tagbilaran by Pamalaran's heirs against petitioner CBL, ALC and its manager, Ernie Santiago. The trial court ruled in favor of plaintiffs, disposing as follows: WHEREFORE, finding a preponderance of evidence in favor of the plaintiffs, judgment is hereby rendered: Ordering defendants CBL Timber Corporation, AGO Lumber Company, Sulpicio Lines, Inc. and Ernie Santiago to pay plaintiffs jointly and severally: 1. Actual and compensatory damages of P40,000.00; 2. Moral damages of P50,000.00; 3. Attorney's fees of P20,000.00 and the costs of the suit (Rollo, p. 57). On appeal, the Court of Appeals in its Decision dated April 8, 1992 in CA-G.R. No. CV No. 21919, affirmed the lower court's decision, the dispositive portion of which reads: WHEREFORE, WE AFFIRM the appealed judgment there being no justifiable reason that warrants the reversal thereof. Costs against defendant-appellant (Rollo, p. 32). Not satisfied with the appellate court's decision, petitioner filed this petition. II Petitioner raises the following arguments: 1. Pamalaran was never a passenger of petitioner. Therefore, it is not liable as a common carrier; 2. Petitioner and its employees were not negligent in the series of events which led to the death of Pamalaran; 3. Petitioner is not liable under Article 2180 of the New Civil Code; 4. It is CBL and/or ALC which should be held liable for the death of the victim; and, 5. Petitioner should have been granted its just and valid counterclaims and cross claims.

We agree with the Court of Appeals that although Pamalaran was never a passenger of petitioner, still the latter is liable as a common carrier for his death. The Court of Appeals relied on Canas v. Dabatos, 8 Court of Appeals Report 918 (1965). In said case, 13 persons were on board the vessel of defendant not as passengers but as 'cargadores' of the shipper's goods. They were there with the consent and knowledge of the owner of the vessel. Despite the absence of a passenger-carrier relationship between them, the appellate court, just the same, held the patron thereof liable as a common carrier. The appellate court ruled: There is no debate as to the fact that not one of the thirteen passengers have paid an amount of money as fare for their conveyance from Hingotanan to Cebu. The undisputed fact, however, is that all of them were in the boat with the knowledge and consent of the patron. The eleven passengers, other than Encarnacion and Diosdado were in the boat because they have helped in loading cargoes in the boat, and "to serve as cargadores of the cargoes," presumably, in unloading them at the place of destination. For those services they were permitted to be in the boat and to proceed to their destination in Cebu. The services rendered were the valuable consideration in exchange for the transportation fare. "In onerous contracts the cause is understood to be, for each contracting party, the prestation or promise of a thing or service by the other; . . ." (at p. 925; emphasis supplied). ALC had a contract of carriage with petitioner. The presence of the stevedores sent by ALC on board the barge of petitioner was called for by the contract of carriage. For how else would its lumber be transported unless it is placed on board? And by whom? Of course, the stevedores. Definitely, petitioner could not expect the shipper itself to load the lumber without the aid of the stevedores. Furthermore, petitioner knew of the presence and role of the stevedores in its barge and thus consented to their presence. Hence, petitioner was responsible for their safety while on board the barge. Petitioner next claims that its employees even warned the stevedores and tried to prevent their entry into the storeroom. Such argument, again, is demolished by the findings of the Court of Appeals, thus: . . . . However, appellant failed to prove that its employees were actually trained or given specific instructions to see to it that the barge is fit and safe not only in transporting goods but also for people who would be loading the cargo into the bodega of the barge. It is not enough that appellant's employees have warned the laborers not to enter the barge after the hatch was opened. Appellant's employees should have been sufficiently instructed to see to it that the hatch of the barge is not opened by any unauthorized person and that the hatch is not easily opened by anyone. At the very least, precautionary measures should have been observed by appellant's employees to see to it that no one could enter the bodega of the barge until after they have made sure that it is safe for anyone to enter the same. Failing to exercise due diligence in the supervision of its employees, the lower court was correct in holding appellant liable for damages (Rollo, pp. 31-32; Emphasis supplied). Inasmuch as the findings of the Court of Appeals are merely an affirmance of the findings of the trial court, which findings are supported by the evidence, we do not find any reason to reverse the same. There is no quarrel that ALC and CBL are also liable as they were in fact held liable by both the trial and appellate courts.

Both the counterclaims and cross claims of petitioner are without legal basis. The counterclaims and cross claims were based on the assumption that the other defendants are the ones solely liable. However, inasmuch as its solidary liability with the other defendants has clearly been established by both the trial and the appellate courts, which we find to be in order, we cannot make a different conclusion contrary to that of the said courts. Finally, the indemnity for the death of Leoncio L. Pamalaran is increased from P40,000.00 to P50,000.00 in accordance with our ruling in People v. Flores, 237 SCRA 653 (1994). WHEREFORE, the Decision of the Court of Appeals is AFFIRMED with the MODIFICATION that the award of actual and compensatory damages is increased to P50,000.00. SO ORDERED Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 127897 November 15, 2001

DELSAN TRANSPORT LINES, INC., petitioner, vs. THE HON. COURT OF APPEALS and AMERICAN HOME ASSURANCE CORPORATION, respondents. DE LEON, JR., J.: Before us is a petition for review on certiorari of the Decision1 of the Court of Appeals in CA-G.R. CV No. 39836 promulgated on June 17, 1996, reversing the decision of the Regional Trial Court of Makati City, Branch 137, ordering petitioner to pay private respondent the sum of Five Million Ninety-Six Thousand Six Hundred Thirty-Five Pesos and Fifty-Seven Centavos (P5,096,635.57) and costs and the Resolution2 dated January 21, 1997 which denied the subsequent motion for reconsideration. The facts show that Caltex Philippines (Caltex for brevity) entered into a contract of affreightment with the petitioner, Delsan Transport Lines, Inc., for a period of one year whereby the said common carrier agreed to transport Caltex s industrial fuel oil from the Batangas-Bataan Refinery to different parts of the country. Under the contract, petitioner took on board its vessel, MT Maysun 2,277.314 kiloliters of industrial fuel oil of Caltex to be delivered to the Caltex Oil Terminal in Zamboanga City. The shipment was insured with the private respondent, American Home Assurance Corporation. On August 14, 1986, MT Maysum set sail from Batangas for Zamboanga City. Unfortunately, the vessel sank in the early morning of August 16, 1986 near Panay Gulf in the Visayas taking with it the entire cargo of fuel oil. Subsequently, private respondent paid Caltex the sum of Five Million Ninety-Six Thousand Six Hundred Thirty-Five Pesos and Fifty-Seven Centavos (P5,096,635.67) representing the insured value

of the lost cargo. Exercising its right of subrogation under Article 2207 of the New Civil Code, the private respondent demanded of the petitioner the same amount it paid to Caltex.1wphi1.nt Due to its failure to collect from the petitioner despite prior demand, private respondent filed a complaint with the Regional Trial Court of Makati City, Branch 137, for collection of a sum of money. After the trial and upon analyzing the evidence adduced, the trial court rendered a decision on November 29, 1990 dismissing the complaint against herein petitioner without pronouncement as to cost. The trial court found that the vessel, MT Maysum, was seaworthy to undertake the voyage as determined by the Philippine Coast Guard per Survey Certificate Report No. M5-016-MH upon inspection during its annual dry-docking and that the incident was caused by unexpected inclement weather condition or force majeure, thus exempting the common carrier (herein petitioner) from liability for the loss of its cargo. 3 The decision of the trial court, however, was reversed, on appeal, by the Court of Appeals. The appellate court gave credence to the weather report issued by the Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAGASA for brevity) which showed that from 2:00 o clock to 8:oo o clock in the morning on August 16, 1986, the wind speed remained at 10 to 20 knots per hour while the waves measured from .7 to two (2) meters in height only in the vicinity of the Panay Gulf where the subject vessel sank, in contrast to herein petitioner s allegation that the waves were twenty (20) feet high. In the absence of any explanation as to what may have caused the sinking of the vessel coupled with the finding that the same was improperly manned, the appellate court ruled that the petitioner is liable on its obligation as common carrier4 to herein private respondent insurance company as subrogee of Caltex. The subsequent motion for reconsideration of herein petitioner was denied by the appellate court. Petitioner raised the following assignments of error in support of the instant petition, 5 to wit: I THE COURT OF APPEALS ERRED IN REVERSING THE DECISION OF THE REGIONAL TRIAL COURT. II THE COURT OF APPEALS ERRED AND WAS NOT JUSTIFIED IN REBUTTING THE LEGAL PRESUMPTION THAT THE VESSEL MT "MAYSUN" WAS SEAWORTHY. III THE COURT OF APPEALS ERRED IN NOT APPLYING THE DOCTRINE OF THE SUPREME COURT IN THE CASE OF HOME INSURANCE CORPORATION V. COURT OF APPEALS. Petitioner Delsan Transport Lines, Inc. invokes the provision of Section 113 of the Insurance Code of the Philippines, which states that in every marine insurance upon a ship or freight, or freightage, or upon any thin which is the subject of marine insurance there is an implied warranty by the shipper that the ship is seaworthy. Consequently, the insurer will not be liable to the assured for any loss under the policy in case the vessel would later on be found as not seaworthy at the inception of the insurance. It theorized that when private respondent paid Caltex the value of its lost cargo, the act of the private respondent is equivalent to a tacit recognition that the ill-fated vessel was seaworthy;

otherwise, private respondent was not legally liable to Caltex due to the latter s breach of implied warranty under the marine insurance policy that the vessel was seaworthy. The petitioner also alleges that the Court of Appeals erred in ruling that MT Maysun was not seaworthy on the ground that the marine officer who served as the chief mate of the vessel, Francisco Berina, was allegedly not qualified. Under Section 116 of the Insurance Code of the Philippines, the implied warranty of seaworthiness of the vessel, which the private respondent admitted as having been fulfilled by its payment of the insurance proceeds to Caltex of its lost cargo, extends to the vessel s complement. Besides, petitioner avers that although Berina had merely a 2nd officer s license, he was qualified to act as the vessel s chief officer under Chapter IV(403), Category III(a)(3)(ii)(aa) of the Philippine Merchant Marine Rules and Regulations. In fact, all the crew and officers of MT Maysun were exonerated in the administrative investigation conducted by the Board of Marine Inquiry after the subject accident. 6 In any event, petitioner further avers that private respondent failed, for unknown reason, to present in evidence during the trial of the instant case the subject marine cargo insurance policy it entered into with Caltex. By virtue of the doctrine laid down in the case of Home Insurance Corporation vs. CA,7 the failure of the private respondent to present the insurance policy in evidence is allegedly fatal to its claim inasmuch as there is no way to determine the rights of the parties thereto. Hence, the legal issues posed before the Court are: I Whether or not the payment made by the private respondent to Caltex for the insured value of the lost cargo amounted to an admission that the vessel was seaworthy, thus precluding any action for recovery against the petitioner. II Whether or not the non-presentation of the marine insurance policy bars the complaint for recovery of sum of money for lack of cause of action. We rule in the negative on both issues. The payment made by the private respondent for the insured value of the lost cargo operates as waiver of its (private respondent) right to enforce the term of the implied warranty against Caltex under the marine insurance policy. However, the same cannot be validly interpreted as an automatic admission of the vessel s seaworthiness by the private respondent as to foreclose recourse against the petitioner for any liability under its contractual obligation as a common carrier. The fact of payment grants the private respondent subrogatory right which enables it to exercise legal remedies that would otherwise be available to Caltex as owner of the lost cargo against the petitioner common carrier.8 Article 2207 of the New civil Code provides that: Art. 2207. If the plaintiff s property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. If the amount paid by the insurance company does not

fully cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency from the person causing the loss or injury. The right of subrogation has its roots in equity. It is designed to promote and to accomplish justice and is the mode which equity adopts to compel the ultimate payment of a debt by one who in justice and good conscience ought to pay. 9 It is not dependent upon, nor does it grow out of, any privity of contract or upon written assignment of claim. It accrues simply upon payment by the insurance company of the insurance claim. 10 Consequently, the payment made by the private respondent (insurer) to Caltex (assured) operates as an equitable assignment to the former of all the remedies which the latter may have against the petitioner. From the nature of their business and for reasons of public policy, common carriers are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of passengers transported by them, according to all the circumstance of each case.11 In the event of loss, destruction or deterioration of the insured goods, common carriers shall be responsible unless the same is brought about, among others, by flood, storm, earthquake, lightning or other natural disaster or calamity.12 In all other cases, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence.13 In order to escape liability for the loss of its cargo of industrial fuel oil belonging to Caltex, petitioner attributes the sinking of MT Maysun to fortuitous even or force majeure. From the testimonies of Jaime Jarabe and Francisco Berina, captain and chief mate, respectively of the ill-fated vessel, it appears that a sudden and unexpected change of weather condition occurred in the early morning of August 16, 1986; that at around 3:15 o clock in the morning a squall ("unos") carrying strong winds with an approximate velocity of 30 knots per hour and big waves averaging eighteen (18) to twenty (20) feet high, repeatedly buffeted MT Maysun causing it to tilt, take in water and eventually sink with its cargo.14 This tale of strong winds and big waves by the said officers of the petitioner however, was effectively rebutted and belied by the weather report15 from the Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAGASA), the independent government agency charged with monitoring weather and sea conditions, showing that from 2:00 o clock to 8:00 o clock in the morning on August 16, 1986, the wind speed remained at ten (10) to twenty (20) knots per hour while the height of the waves ranged from .7 to two (2) meters in the vicinity of Cuyo East Pass and Panay Gulf where the subject vessel sank. Thus, as the appellate court correctly ruled, petitioner s vessel, MT Maysun, sank with its entire cargo for the reason that it was not seaworthy. There was no squall or bad weather or extremely poor sea condition in the vicinity when the said vessel sank. The appellate court also correctly opined that the petitioner s witnesses, Jaime Jarabe and Francisco Berina, ship captain and chief mate, respectively, of the said vessel, could not be expected to testify against the interest of their employer, the herein petitioner common carrier. Neither may petitioner escape liability by presenting in evidence certificates16 that tend to show that at the time of dry-docking and inspection by the Philippine Coast Guard, the vessel MT Maysun, was fit for voyage. These pieces of evidence do not necessarily take into account the actual condition of the vessel at the time of the commencement of the voyage. As correctly observed by the Court of appeals:

At the time of dry-docking and inspection, the ship may have appeared fit. The certificates issued, however, do not negate the presumption of unseaworthiness triggered by an unexplained sinking. Of certificates issued in this regard, authorities are likewise clear as to their probative value, (thus): Seaworthiness relates to a vessel s actual condition. Neither the granting of classification or the issuance of certificates established seaworthiness. (2-A Benedict on Admiralty, 7-3, Sec. 62). And also: Authorities are clear that diligence in securing certificates of seaworthiness does not satisfy the vessel owner s obligation. Also securing the approval of the shipper of the cargo, or his surveyor, of the condition of the vessel or her stowage does not establish due diligence if the vessel was in fact unseaworthy, for the cargo owner has no obligation in relation to seaworthiness. (Ibid.)17 Additionally, the exoneration of MT Maysun s officers and crew by the Board of Marine Inquiry merely concerns their respective administrative liabilities. It does not in any way operate to absolve the petitioner common carrier from its civil liabilities. It does not in any way operate to absolve the petitioner common carrier from its civil liability arising from its failure to observe extraordinary diligence in the vigilance over the goods it was transporting and for the negligent acts or omissions of its employees, the determination of which properly belongs to the courts.18 In the case at bar, petitioner is liable for the insured value of the lost cargo of industrial fuel oil belonging to Caltex for its failure to rebut the presumption of fault or negligence as common carrier19 occasioned by the unexplained sinking of its vessel, MT Maysun, while in transit. Anent the second issue, it is our view and so hold that the presentation in evidence of the marine insurance policy is not indispensable in this case before the insurer may recover from the common carrier the insured value of the lost cargo in the exercise of its subrogatory right. The subrogation receipt, by itself, is sufficient to establish not only the relationship of herein private respondent as insurer and Caltex, as the assured shipper of the lost cargo of industrial fuel oil, but also the amount paid to settle the insurance claim. The right of subrogation accrues simply upon payment by the insurance company of the insurance claim. 20 The presentation of the insurance policy was necessary in the case of Home Insurance Corporation v. CA21 (a case cited by petitioner) because the shipment therein (hydraulic engines) passed through several stages with different parties involved in each stage. First, from the shipper to the port of departure; second, from the port of departure to the M/S Oriental Statesman; third, from the M/S Oriental Statesman to the M/S Pacific Conveyor; fourth, from the M/S Pacific Conveyor to the port or arrival; fifth, from the port of arrival to the arrastre operator; sixth, from the arrastre operator to the hauler, Mabuhay Brokerage Co., Inc. (private respondent therein); and lastly, from the hauler to the consignee. We emphasized in that case that in the absence of proof of stipulations to the contrary, the hauler can be liable only for any damage that occurred from the time it received the cargo until it finally delivered it to the consignee. Ordinarily, it cannot be held responsible for the handling of the cargo before it actually received it. The insurance contract, which was not presented in evidence in that case would have indicated the scope of the insurer s liability, if any, since no evidence was adduced indicating at what stage in the handling process the damage to the cargo was sustained.

Hence, our ruling on the presentation of the insurance policy in the said case of Home Insurance Corporation is not applicable to the case at bar. In contrast, there is no doubt that the cargo of industrial fuel oil belonging to Caltex, in the case at bar, was lost while on board petitioner s vessel, MT Maysun, which sank while in transit in the vicinity of Panay Gulf and Cuyo East Pass in the early morning of August 16, 1986. WHEREFORE, the instant petition is DENIED. The Decision dated June 17, 1996 of the Court of Appeals in CA-G.R. CV No. 39836 is AFFIRMED. Costs against the petitioner. SO ORDERED.1w Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

G.R. No. 110398 November 7, 1997 NEGROS NAVIGATION CO., INC., petitioner, vs. THE COURT OF APPEALS, RAMON MIRANDA, SPS. RICARDO and VIRGINIA DE LA VICTORIA, respondents.

MENDOZA, J.: This is a petition for review on certiorari of the decision of the Court of Appeals affirming with modification the Regional Trial Court's award of damages to private respondents for the death of relatives as a result of the sinking of petitioner's vessel. In April of 1980, private respondent Ramon Miranda purchased from the Negros Navigation Co., Inc. four special cabin tickets (#74411, 74412, 74413 and 74414) for his wife, daughter, son and niece who were going to Bacolod City to attend a family reunion. The tickets were for Voyage No. 457-A of the M/V Don Juan, leaving Manila at 1:00 p.m. on April 22, 1980. The ship sailed from the port of Manila on schedule. At about 10:30 in the evening of April 22, 1980, the Don Juan collided off the Tablas Strait in Mindoro, with the M/T Tacloban City, an oil tanker owned by the Philippine National Oil Company (PNOC) and the PNOC Shipping and Transport Corporation (PNOC/STC). As a result, the M/V Don Juan sank. Several of her passengers perished in the sea tragedy. The bodies of some of the victims were found and brought to shore, but the four members of private respondents' families were never found. Private respondents filed a complaint on July 16, 1980 in the Regional Trial Court of Manila, Branch 34, against the Negros Navigation, the Philippine National Oil Company (PNOC), and the PNOC

Shipping and Transport Corporation (PNOC/STC), seeking damages for the death of Ardita de la Victoria Miranda, 48, Rosario V. Miranda, 19, Ramon V. Miranda, Jr., 16, and Elfreda de la Victoria, 26. In its answer, petitioner admitted that private respondents purchased ticket numbers 74411, 74412, 74413 and 74414; that the ticket numbers were listed in the passenger manifest; and that the Don Juan left Pier 2, North Harbor, Manila on April 22, 1980 and sank that night after being rammed by the oil tanker M/T Tacloban City, and that, as a result of the collision, some of the passengers of the M/V Don Juan died. Petitioner, however, denied that the four relatives of private respondents actually boarded the vessel as shown by the fact that their bodies were never recovered. Petitioner further averred that the Don Juan was seaworthy and manned by a full and competent crew, and that the collision was entirely due to the fault of the crew of the M/T Tacloban City. On January 20, 1986, the PNOC and petitioner Negros Navigation Co., Inc. entered into a compromise agreement whereby petitioner assumed full responsibility for the payment and satisfaction of all claims arising out of or in connection with the collision and releasing the PNOC and the PNOC/STC from any liability to it. The agreement was subsequently held by the trial court to be binding upon petitioner, PNOC and PNOC/STC. Private respondents did not join in the agreement. After trial, the court rendered judgment on February 21, 1991, the dispositive portion of which leads as follows: WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of the plaintiffs, ordering all the defendants to pay jointly and severally to the plaintiffs damages as follows: To Ramon Miranda: P42,025.00 for actual damages; P152,654.55 as compensatory damages for loss of earning capacity of his wife; P90,000.00 as compensatory damages for wrongful death of three (3) victims; P300,000.00 as moral damages; P50,000.00 as exemplary damages, all in the total amount of P634,679.55; and P40,000.00 as attorney's fees. To Spouses Ricardo and Virginia de la Victoria: P12,000.00 for actual damages; P158,899.00 as compensatory damages for loss of earning capacity;

P30,000.00 as compensatory damages for wrongful death; P100,000.00 as moral damages; P20,000.00 as exemplary damages, all in the total amount of P320,899.00; and P15,000.00 as attorney's fees. On appeal, the Court of Appeals 1 affirmed the decision of the Regional Trial Court with modification

1. Ordering and sentencing defendants-appellants, jointly and severally, to pay plaintiff-appellee Ramon Miranda the amount of P23,075.00 as actual damages instead of P42,025.00; 2. Ordering and sentencing defendants-appellants, jointly and severally, to pay plaintiff-appellee Ramon Miranda the amount of P150,000.00, instead of P90,000.00, as compensatory damages for the death of his wife and two children; 3. Ordering and sentencing defendants-appellants, jointly and severally, to pay plaintiffs-appellees Dela Victoria spouses the amount of P50,000.00, instead of P30,000.00, as compensatory damages for the death of their daughter Elfreda Dela Victoria; Hence this petition, raising the following issues: (1) whether the members of private respondents' families were actually passengers of the Don Juan; (2) whether the ruling in Mecenas v. Court of Appeals, 2 finding the crew members of petitioner to be grossly negligent in the performance of their duties, is binding in this case; (3) whether the total loss of the M/V Don Juan extinguished petitioner's liability; and (4) whether the damages awarded by the appellate court are excessive, unreasonable and unwarranted. First. The trial court held that the fact that the victims were passengers of the M/V Don Juan was sufficiently proven by private respondent Ramon Miranda, who testified that he purchased tickets numbered 74411, 74412, 74413, and 74414 at P131.30 each from the Makati office of petitioner for Voyage No. 47-A of the M/V Don Juan, which was leaving Manila on April 22, 1980. This was corroborated by the passenger manifest (Exh. E) on which the numbers of the tickets and the names of Ardita Miranda and her children and Elfreda de la Victoria appear. Petitioner contends that the purchase of the tickets does not necessarily mean that the alleged victims actually took the trip. Petitioner asserts that it is common knowledge that passengers purchase tickets in advance but do not actually use them. Hence, private respondent should also prove the presence of the victims on the ship. The witnesses who affirmed that the victims were on the ship were biased and unreliable.

This contention is without merit. Private respondent Ramon Miranda testified that he personally took his family and his niece to the vessel on the day of the voyage and stayed with them on the ship until it was time for it to leave. There is no reason he should claim members of his family to have perished in the accident just to maintain an action. People do not normally lie about so grave a matter as the loss of dear ones. It would be more difficult for private respondents to keep the existence of their relatives if indeed they are alive than it is for petitioner to show the contrary. Petitioner's only proof is that the bodies of the supposed victims were not among those recovered from the site of the mishap. But so were the bodies of the other passengers reported missing not recovered, as this Court noted in the Mecenas 3 case. Private respondent Miranda's testimony was corroborated by Edgardo Ramirez. Ramirez was a seminarian and one of the survivors of the collision. He testified that he saw Mrs. Miranda and Elfreda de la Victoria on the ship and that he talked with them. He knew Mrs. Miranda who was his teacher in the grade school. He also knew Elfreda who was his childhood friend and townmate. Ramirez said he was with Mrs. Miranda and her children and niece from 7:00 p.m. until 10:00 p.m. when the collision happened and that he in fact had dinner with them. Ramirez said he and Elfreda stayed on the deck after dinner and it was there where they were jolted by the collision of the two vessels. Recounting the moments after the collision, Ramirez testified that Elfreda ran to fetch Mrs. Miranda. He escorted her to the room and then tried to go back to the deck when the lights went out. He tried to return to the cabin but was not able to do so because it was dark and there was a stampede of passengers from the deck. Petitioner casts doubt on Ramirez' testimony, claiming that Ramirez could not have talked with the victims for about three hours and not run out of stories to tell, unless Ramirez had a "storehouse" of stories. But what is incredible about acquaintances thrown together on a long journey staying together for hours on end, in idle conversation precisely to while the hours away? Petitioner also points out that it took Ramirez three (3) days before he finally contacted private respondent Ramon Miranda to tell him about the fate of his family. But it is not improbable that it took Ramirez three days before calling on private respondent Miranda to tell him about the last hours of Mrs. Miranda and her children and niece, in view of the confusion in the days following the collision as rescue teams and relatives searched for survivors. Indeed, given the facts of this case, it is improper for petitioner to even suggest that private respondents' relatives did not board the ill-fated vessel and perish in the accident simply because their bodies were not recovered. Second. In finding petitioner guilty of negligence and in failing to exercise the extraordinary diligence required of it in the carriage of passengers, both the trial court and the appellate court relied on the findings of this Court inMecenas v. Intermediate Appellate Court, 4 which case was brought for the death of other passengers. In that case it was found that although the proximate cause of the mishap was the negligence of the crew of the M/TTacloban City, the crew of the Don Juan was equally negligent as it found that the latter's master, Capt. Rogelio Santisteban, was playing mahjong at the time of collision, and the officer on watch, Senior Third Mate Rogelio De Vera, admitted that he failed to call the attention of Santisteban to the imminent danger facing them. This Court found that Capt. Santisteban and the crew of the M/V Don Juan failed to take steps to prevent the collision or at least delay the sinking of the ship and supervise the abandoning of the ship.

Petitioner Negros Navigation was found equally negligent in tolerating the playing of mahjong by the ship captain and other crew members while on board the ship and failing to keep the M/V Don Juan seaworthy so much so that the ship sank within 10 to 15 minutes of its impact with the M/T Tacloban City. In addition, the Court found that the Don Juan was overloaded. The Certificate of Inspection, dated August 27, 1979, issued by the Philippine Coast Guard Commander at Iloilo City stated that the total number of persons allowed on the ship was 864, of whom 810 are passengers, but there were actually 1,004 on board the vessel when it sank, 140 persons more than the maximum number that could be safely carried by it. Taking these circumstances together, and the fact that the M/V Don Juan, as the faster and betterequipped vessel, could have avoided a collision with the PNOC tanker, this Court held that even if the Tacloban City had been at fault for failing to observe an internationally-recognized rule of navigation, the Don Juan was guilty of contributory negligence. Through Justice Feliciano, this Court held: The grossness of the negligence of the "Don Juan" is underscored when one considers the foregoing circumstances in the context of the following facts: Firstly, the "Don Juan" was more than twice as fast as the "Tacloban City." The "Don Juan's" top speed was 17 knots; while that of the "Tacloban City" was 6.3. knots. Secondly, the "Don Juan" carried the full complement of officers and crew members specified for a passenger vessel of her class. Thirdly, the "Don Juan" was equipped with radar which was functioning that night. Fourthly, the "Don Juan's officer on-watch had sighted the "Tacloban City" on his radar screen while the latter was still four (4) nautical miles away. Visual confirmation of radar contact was established by the "Don Juan" while the "Tacloban City" was still 2.7 miles away. In the total set of circumstances which existed in the instant case, the "Don Juan," had it taken seriously its duty of extraordinary diligence, could have easily avoided the collision with the "Tacloban City." Indeed, the "Don Juan" might well have avoided the collision even if it had exercised ordinary diligence merely. It is true that the "Tacloban City" failed to follow Rule 18 of the International Rules of the Road which requires two (2) power-driven vessels meeting end on or nearly end on each to alter her course to starboard (right) so that each vessel may pass on the port side (left) of the other. The "Tacloban City," when the two (2) vessels were only three-tenths (0.3) of a mile apart, turned (for the second time) 15 to port side while the "Don Juan" veered hard to starboard. . . . [But] "route observance" of the International Rules of the Road will not relieve a vessel from responsibility if the collision could have been avoided by proper care and skill on her part or even by a departure from the rules. In the petition at bar, the "Don Juan" having sighted the "Tacloban City" when it was still a long way off was negligent in failing to take early preventive action and in allowing the two (2) vessels to come to such close quarters as to render the collision inevitable when there was no necessity for passing so near to the "Tacloban City" as to create that hazard or inevitability, for the "Don Juan" could choose its own distance. It is noteworthy that the "Tacloban City," upon turning hard to port shortly before the moment of collision, signalled its intention to do so by giving two (2) short blasts with its horn. The "Don Juan" gave no answering horn blast to signal its own intention and proceeded to turn hard to starboard.

We conclude that Capt. Santisteban and Negros Navigation are properly held liable for gross negligence in connection with the collision of the "Don Juan" and "Tacloban City" and the sinking of the "Don Juan" leading to the death of hundreds of passengers. . . . 5 Petitioner criticizes the lower court's reliance on the Mecenas case, arguing that, although this case arose out of the same incident as that involved in Mecenas, the parties are different and trial was conducted separately. Petitioner contends that the decision in this case should be based on the allegations and defenses pleaded and evidence adduced in it or, in short, on the record of this case. The contention is without merit. What petitioner contends may be true with respect to the merits of the individual claims against petitioner but not as to the cause of the sinking of its ship on April 22, 1980 and its liability for such accident, of which there can only be one truth. Otherwise, one would be subscribing to the sophistry: truth on one side of the Pyrenees, falsehood on the other! Adherence to the Mecenas case is dictated by this Court's policy of maintaining stability in jurisprudence in accordance with the legal maxim "stare decisis et non quieta movere" (Follow past precedents and do not disturb what has been settled.) Where, as in this case, the same questions relating to the same event have been put forward by parties similarly situated as in a previous case litigated and decided by a competent court, the rule of stare decisis is a bar to any attempt to relitigate the same issue. 6 In Woulfe v. Associated Realties Corporation, 7 the Supreme Court of New Jersey held that where substantially similar cases to the pending case were presented and applicable principles declared in prior decisions, the court was bound by the principle of stare decisis. Similarly, in State ex rel. Tollinger v. Gill, 8 it was held that under the doctrine of stare decisis a ruling is final even as to parties who are strangers to the original proceeding and not bound by the judgment under the res judicata doctrine. The Philadelphia court expressed itself in this wise: "Stare decisis simply declares that, for the sake of certainty, a conclusion reached in one case should be applied to those which follow, if the facts are substantially the same, even though the parties may be different." 9 Thus, in J.M. Tuason v. Mariano, supra, this Court relied on its rulings in other cases involving different parties in sustaining the validity of a land title on the principle of"stare decisis et non quieta movere." Indeed, the evidence presented in this case was the same as those presented in the Mecenas case, to wit: Document Mecenas case This case Decision of Commandant, Exh. 10 10 Exh. 11-B-NN/X Phil. Coast Guard in BMI Case No. 415-80 dated 3/26/81 Decision of the Minister Exh. 11 11 Exh. ZZ of National Defense dated 3/12/82 Resolution on the Exh. 13 12 Exh. AAA motion for reconsideration (private of the decision of the respondents)

Minister of National defense dated 7/27/84 Certificate of Exh. 1-A 13 Exh. 19-NN inspection dated 8/27/79 Certificate of Stability Exh. 6-A 14 Exh. 19-D-NN dated 12/16/76 Nor is it true that the trial court merely based its decision on the Mecenas case. The trial court made its own independent findings on the basis of the testimonies of witnesses, such as Senior Third Mate Rogelio de Vera, who incidentally gave substantially the same testimony on petitioner's behalf before the Board of Marine Inquiry. The trial court agreed with the conclusions of the then Minister of National Defense finding both vessels to be negligent. Third. The next issue is whether petitioner is liable to pay damages notwithstanding the total loss of its ship. The issue is not one of first impression. The rule is well-entrenched in our jurisprudence that a shipowner may be held liable for injuries to passengers notwithstanding the exclusively real and hypothecary nature of maritime law if fault can be attributed to the shipowner. 15 In Mecenas, this Court found petitioner guilty of negligence in (1) allowing or tolerating the ship captain and crew members in playing mahjong during the voyage, (2) in failing to maintain the vessel seaworthy and (3) in allowing the ship to carry more passengers than it was allowed to carry. Petitioner is, therefore, clearly liable for damages to the full extent. Fourth. Petitioner contends that, assuming that the Mecenas case applies, private respondents should be allowed to claim only P43,857.14 each as moral damages because in the Mecenas case, the amount of P307,500.00 was awarded to the seven children of the Mecenas couple. Under petitioner's formula, Ramon Miranda should receive P43,857.14, while the De la Victoria spouses should receive P97,714.28. Here is where the principle of stare decisis does not apply in view of differences in the personal circumstances of the victims. For that matter, differentiation would be justified even if private respondents had joined the private respondents in the Mecenas case. The doctrine of stare decisis works as a bar only against issues litigated in a previous case. Where the issue involved was not raised nor presented to the court and not passed upon by the court in the previous case, the decision in the previous case is not stare decisis of the question presently presented. 16 The decision in the Mecenas case relates to damages for which petitioner was liable to the claimants in that case. In the case at bar, the award of P300,000.00 for moral damages is reasonable considering the grief petitioner Ramon Miranda suffered as a result of the loss of his entire family. As a matter of fact, three months after the collision, he developed a heart condition undoubtedly caused by the strain of the loss of his family. The P100,000.00 given to Mr. and Mrs. de la Victoria is likewise reasonable and should be affirmed. As for the amount of civil indemnity awarded to private respondents, the appellate court's award of P50,000.00 per victim should be sustained. The amount of P30,000.00 formerly set in De Lima

v. Laguna Tayabas Co., 17 Heirs of Amparo delos Santos v. Court of Appeals, 18 and Philippine Rabbit Bus Lines, Inc. v. Intermediate Appellate Court19 as benchmark was subsequently increased to P50,000.00 in the case of Sulpicio Lines, Inc. v. Court of Appeals, 20 which involved the sinking of another interisland ship on October 24, 1988. We now turn to the determination of the earning capacity of the victims. With respect to Ardita Miranda, the trial court awarded damages computed as follows: 21 In the case of victim Ardita V. Miranda whose age at the time of the accident was 48 years, her life expectancy was computed to be 21.33 years, and therefore, she could have lived up to almost 70 years old. Her gross earnings for 21.33 years based on P10,224.00 per annum, would be P218,077.92. Deducting therefrom 30% as her living expenses, her net earnings would be P152,654.55, to which plaintiff Ramon Miranda is entitled to compensatory damages for the loss of earning capacity of his wife. In considering 30% as the living expenses of Ardita Miranda, the Court takes into account the fact that plaintiff and his wife were supporting their daughter and son who were both college students taking Medicine and Law respectively. In accordance with the ruling in Villa-Rey Transit, Inc. v. Court of Appeals, 22 we think the life expectancy of Ardita Miranda was correctly determined to be 21.33 years, or up to age 69. Petitioner contends, however, that Mrs. Miranda would have retired from her job as a public school teacher at 65, hence her loss of earning capacity should be reckoned up to 17.33 years only. The accepted formula for determining life expectancy is 2/3 multiplied by (80 minus the age of the deceased). It may be that in the Philippines the age of retirement generally is 65 but, in calculating the life expectancy of individuals for the purpose of determining loss of earning capacity under Art. 2206(1) of the Civil Code, it is assumed that the deceased would have earned income even after retirement from a particular job. In this case, the trial court took into account the fact that Mrs. Miranda had a master's degree and a good prospect of becoming principal of the school in which she was teaching. There was reason to believe that her income would have increased through the years and she could still earn more after her retirement, e.g., by becoming a consultant, had she not died. The gross earnings which Mrs. Miranda could reasonably be expected to earn were it not for her untimely death was, therefore, correctly computed by the trial court to be P218,077.92 (given a gross annual income of P10,224.00 and life expectancy of 21.33 years). Petitioner contends that from the amount of gross earnings, 60% should be deducted as necessary living expenses, not merely 30% as the trial court allowed. Petitioner contends that 30% is unrealistic, considering that Mrs. Miranda's earnings would have been subject to taxes, social security deductions and inflation. We agree with this contention. In Villa-Rey Transit, Inc. v. Court of Appeals, 23 the Court allowed a deduction of P1,184.00 for living expenses from the P2,184.00 annual salary of the victim, which is roughly 54.2% thereof. The deceased was 29 years old and a training assistant in the Bacnotan Cement Industries. In People v. Quilation, 24the deceased was a 26-year old laborer earning a daily wage. The court allowed a deduction of P120,000.00 which was 51.3% of his annual gross earnings of P234,000.00. In People v. Teehankee, 25 the court allowed a deduction of P19,800.00, roughly 42.4% thereof from the deceased's annual salary of P46,659.21. The deceased, Maureen Hultman, was 17 years old and had just received her first paycheck as a secretary. In the case at bar, we hold

that a deduction of 50% from Mrs. Miranda's gross earnings (P218,077.92) would be reasonable, so that her net earning capacity should be P109,038.96. There is no basis for supposing that her living expenses constituted a smaller percentage of her gross income than the living expenses in the decided cases. To hold that she would have used only a small part of her income for herself, a larger part going to the support of her children would be conjectural and unreasonable. As for Elfreda de la Victoria, the trial court found that, at the time of her death, she was 26 years old, a teacher in a private school in Malolos, Bulacan, earning P6,192.00 per annum. Although a probationary employee, she had already been working in the school for two years at the time of her death and she had a general efficiency rating of 92.85% and it can be presumed that, if not for her untimely death, she would have become a regular teacher. Hence, her loss of earning capacity is P111,456.00, computed as follows: net earning = life x gross less reasonable capacity (x) expectancy annual & necessary income living expenses (50%) x = [2(80-26)] x [P6,192.00 - P3,096.00]

3 = 36 x 3,096.00 = P111,456.00 On the other hand, the award of actual damages in the amount of P23,075.00 was determined by the Court of Appeals on the basis receipts submitted by private respondents. This amount is reasonable considering the expenses incurred by private respondent Miranda in organizing three search teams to look for his family, spending for transportation in going to places such as Batangas City and Iloilo, where survivors and the bodies of other victims were found, making long distance calls, erecting a monument in honor of the four victims, spending for obituaries in the Bulletin Today and for food, masses and novenas. Petitioner's contention that the expenses for the erection of a monument and other expenses for memorial services for the victims should be considered included in the indemnity for death awarded to private respondents is without merit. Indemnity for death is given to compensate for violation of the rights of the deceased, i.e., his right to life and physical integrity. 26 On the other hand, damages incidental to or arising out of such death are for pecuniary losses of the beneficiaries of the deceased. As for the award of attorney's fees, we agree with the Court of Appeals that the amount of P40,000.00 for private respondent Ramon Miranda and P15,000.00 for the de la Victoria spouses is justified. The appellate court correctly held:

The Mecenas case cannot be made the basis for determining the award for attorney's fees. The award would naturally vary or differ in each case. While it is admitted that plaintiff-appellee Ramon Miranda who is himself a lawyer, represented also plaintiffs-appellees Dela Victoria spouses, we note that separate testimonial evidence were adduced by plaintiff-appellee Ramon Miranda (TSN, February 26, 1982, p. 6) and plaintiffs-appellees spouses Dela Victoria (TSN, August 13, 1981, p. 43). Considering the amount of work and effort put into the case as indicated by the voluminous transcripts of stenographic notes, we find no reason to disturb the award of P40,000.00 for plaintiffappellee Ramon Miranda and P15,000.00 for plaintiffs-appellees Dela Victoria spouses. 27 The award of exemplary damages should be increased to P300,000.00 for Ramon Miranda and P100,000.00 for the de la Victoria spouses in accordance with our ruling in the Mecenas case: Exemplary damages are designed by our civil law to permit the courts to reshape behaviour that is socially deleterious in its consequence by creating negative incentives or deterrents against such behaviour. In requiring compliance with the standard of extraordinary diligence, a standard which is in fact that of the highest possible degree of diligence, from common carriers and in creating a presumption of negligence against them, the law seeks to compel them to control their employees, to tame their reckless instincts and to force them to take adequate care of human beings and their property. The Court will take judicial notice of the dreadful regularity with which grievous maritime disasters occur in our waters with massive loss of life. The bulk of our population is too poor to afford domestic air transportation. So it is that notwithstanding the frequent sinking of passenger vessels in our waters, crowds of people continue to travel by sea. This Court is prepared to use the instruments given to it by the law for securing the ends of law and public policy. One of those instruments is the institution of exemplary damages; one of those ends, of special importance in an archipelagic state like the Philippines, is the safe and reliable carriage of people and goods by sea.28 WHEREFORE, the decision of the Court of Appeals is AFFIRMED with modification and petitioner is ORDERED to pay private respondents damages as follows: To private respondent Ramon Miranda: P23,075.00 for actual damages; P109,038.96 as compensatory damages for loss of earning capacity of his wife; P150,000.00 as compensatory damages for wrongful death of three (3) victims; P300,000.00 as moral damages; P300,000.00 as exemplary damages, all in the total amount of P882,113.96; and P40,000.00 as attorney's fees. To private respondents Spouses Ricardo and Virginia de la Victoria: P12,000.00 for actual damages;

P111,456.00 as compensatory damages for loss of earning capacity; P50,000.00 as compensatory damages for wrongful death; P100,000.00 as moral damages; P100,000.00 as exemplary damages, all in the total amount of P373,456.00; and P15,000.00 as attorney's fees. Petitioners are further ordered to pay costs of suit. In the event the Philippine National Oil Company and/or the PNOC Shipping and Transport Corporation pay or are required to pay all or a portion of the amounts adjudged, petitioner Negros Navigation Co., Inc. shall reimburse either of them such amount or amounts as either may have paid, and in the event of failure of NegrosNavigation Co., Inc., to make the necessary reimbursement, PNOC and/or PNOC/STC shall be entitled to a writ of execution without need of filing another action. SO ORDERE Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 143133 June 5, 2002

BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. and JARDINE DAVIES TRANSPORT SERVICES, INC.,petitioners, vs. PHILIPPINE FIRST INSURANCE CO., INC., respondents. PANGANIBAN, J.: Proof of the delivery of goods in good order to a common carrier and of their arrival in bad order at their destination constitutes prima facie fault or negligence on the part of the carrier. If no adequate explanation is given as to how the loss, the destruction or the deterioration of the goods happened, the carrier shall be held liable therefor. Statement of the Case Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the July 15, 1998 Decision1 and the May 2, 2000 Resolution2 of the Court of Appeals3 (CA) in CA-GR CV No. 53571. The decretal portion of the Decision reads as follows:

"WHEREFORE, in the light of the foregoing disquisition, the decision appealed from is hereby REVERSED and SET ASIDE. Defendants-appellees are ORDERED to jointly and severally pay plaintiffsappellants the following: '1) FOUR Hundred Fifty One Thousand Twenty-Seven Pesos and 32/100 (P451,027.32) as actual damages, representing the value of the damaged cargo, plus interest at the legal rate from the time of filing of the complaint on July 25, 1991, until fully paid; '2) Attorney's fees amounting to 20% of the claim; and '3) Costs of suit.'"4 The assailed Resolution denied petitioner's Motion for Reconsideration. The CA reversed the Decision of the Regional Trial Court (RTC) of Makati City (Branch 134), which had disposed as follows: "WHEREFORE, in view of the foregoing, judgment is hereby rendered, dismissing the complaint, as well as defendant's counterclaim."5 The Facts The factual antecedents of the case are summarized by the Court of Appeals in this wise: "On June 13, 1990, CMC Trading A.G. shipped on board the M/V 'Anangel Sky' at Hamburg, Germany 242 coils of various Prime Cold Rolled Steel sheets for transportation to Manila consigned to the Philippine Steel Trading Corporation. On July 28, 1990, M/V Anangel Sky arrived at the port of Manila and, within the subsequent days, discharged the subject cargo. Four (4) coils were found to be in bad order B.O. Tally sheet No. 154974. Finding the four (4) coils in their damaged state to be unfit for the intended purpose, the consignee Philippine Steel Trading Corporation declared the same as total loss.1wphi1.nt "Despite receipt of a formal demand, defendants-appellees refused to submit to the consignee's claim. Consequently, plaintiff-appellant paid the consignee five hundred six thousand eighty six & 50/100 pesos (P506,086.50), and was subrogated to the latter's rights and causes of action against defendants-appellees. Subsequently, plaintiff-appellant instituted this complaint for recovery of the amount paid by them, to the consignee as insured. "Impugning the propriety of the suit against them, defendants-appellees imputed that the damage and/or loss was due to pre-shipment damage, to the inherent nature, vice or defect of the goods, or to perils, danger and accidents of the sea, or to insufficiency of packing thereof, or to the act or omission of the shipper of the goods or their representatives. In addition thereto, defendantsappellees argued that their liability, if there be any, should not exceed the limitations of liability provided for in the bill of lading and other pertinent laws. Finally, defendants-appellees averred that, in any event, they exercised due diligence and foresight required by law to prevent any damage/loss to said shipment."6 Ruling of the Trial Court

The RTC dismissed the Complaint because respondent had failed to prove its claims with the quantum of proof required by law. 7 It likewise debunked petitioners' counterclaim, because respondent's suit was not manifestly frivolous or primarily intended to harass them.8 Ruling of the Court of Appeals In reversing the trial court, the CA ruled that petitioners were liable for the loss or the damage of the goods shipped, because they had failed to overcome the presumption of negligence imposed on common carriers. The CA further held as inadequately proven petitioners' claim that the loss or the deterioration of the goods was due to pre-shipment damage.9 It likewise opined that the notation "metal envelopes rust stained and slightly dented" placed on the Bill of Lading had not been the proximate cause of the damage to the four (4) coils.10 As to the extent of petitioners' liability, the CA held that the package limitation under COGSA was not applicable, because the words "L/C No. 90/02447" indicated that a higher valuation of the cargo had been declared by the shipper. The CA, however, affirmed the award of attorney's fees. Hence, this Petition.11 Issues In their Memorandum, petitioners raise the following issues for the Court's consideration: I "Whether or not plaintiff by presenting only one witness who has never seen the subject shipment and whose testimony is purely hearsay is sufficient to pave the way for the applicability of Article 1735 of the Civil Code; II "Whether or not the consignee/plaintiff filed the required notice of loss within the time required by law; III "Whether or not a notation in the bill of lading at the time of loading is sufficient to show preshipment damage and to exempt herein defendants from liability; IV "Whether or not the "PACKAGE LIMITATION" of liability under Section 4 (5) of COGSA is applicable to the case at bar."12 In sum, the issues boil down to three: 1. Whether petitioners have overcome the presumption of negligence of a common carrier

2. Whether the notice of loss was timely filed 3. Whether the package limitation of liability is applicable This Court's Ruling The Petition is partly meritorious. First Issue: Proof of Negligence Petitioners contend that the presumption of fault imposed on common carriers should not be applied on the basis of the lone testimony offered by private respondent. The contention is untenable. Well-settled is the rule that common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence and vigilance with respect to the safety of the goods and the passengers they transport.13 Thus, common carriers are required to render service with the greatest skill and foresight and "to use all reason[a]ble means to ascertain the nature and characteristics of the goods tendered for shipment, and to exercise due care in the handling and stowage, including such methods as their nature requires."14 The extraordinary responsibility lasts from the time the goods are unconditionally placed in the possession of and received for transportation by the carrier until they are delivered, actually or constructively, to the consignee or to the person who has a right to receive them.15 This strict requirement is justified by the fact that, without a hand or a voice in the preparation of such contract, the riding public enters into a contract of transportation with common carriers.16 Even if it wants to, it cannot submit its own stipulations for their approval.17 Hence, it merely adheres to the agreement prepared by them. Owing to this high degree of diligence required of them, common carriers, as a general rule, are presumed to have been at fault or negligent if the goods they transported deteriorated or got lost or destroyed.18 That is, unless they prove that they exercised extraordinary diligence in transporting the goods.19 In order to avoid responsibility for any loss or damage, therefore, they have the burden of proving that they observed such diligence.20 However, the presumption of fault or negligence will not arise21 if the loss is due to any of the following causes: (1) flood, storm, earthquake, lightning, or other natural disaster or calamity; (2) an act of the public enemy in war, whether international or civil; (3) an act or omission of the shipper or owner of the goods; (4) the character of the goods or defects in the packing or the container; or (5) an order or act of competent public authority. 22 This is a closed list. If the cause of destruction, loss or deterioration is other than the enumerated circumstances, then the carrier is liable therefor.23 Corollary to the foregoing, mere proof of delivery of the goods in good order to a common carrier and of their arrival in bad order at their destination constitutes a prima facie case of fault or negligence against the carrier. If no adequate explanation is given as to how the deterioration, the loss or the destruction of the goods happened, the transporter shall be held responsible. 24

That petitioners failed to rebut the prima facie presumption of negligence is revealed in the case at bar by a review of the records and more so by the evidence adduced by respondent.25 First, as stated in the Bill of Lading, petitioners received the subject shipment in good order and condition in Hamburg, Germany.26 Second, prior to the unloading of the cargo, an Inspection Report27 prepared and signed by representatives of both parties showed the steel bands broken, the metal envelopes rust-stained and heavily buckled, and the contents thereof exposed and rusty. Third, Bad Order Tally Sheet No. 15497928 issued by Jardine Davies Transport Services, Inc., stated that the four coils were in bad order and condition. Normally, a request for a bad order survey is made in case there is an apparent or a presumed loss or damage.29 Fourth, the Certificate of Analysis30 stated that, based on the sample submitted and tested, the steel sheets found in bad order were wet with fresh water. Fifth, petitioners -- in a letter31 addressed to the Philippine Steel Coating Corporation and dated October 12, 1990 -- admitted that they were aware of the condition of the four coils found in bad order and condition. These facts were confirmed by Ruperto Esmerio, head checker of BM Santos Checkers Agency. Pertinent portions of his testimony are reproduce hereunder: "Q. Mr. Esmerio, you mentioned that you are a Head Checker. Will you inform the Honorable Court with what company you are connected? A. BM Santos Checkers Agency, sir.

Q. How is BM Santos checkers Agency related or connected with defendant Jardine Davies Transport Services? A. It is the company who contracts the checkers, sir.

Q. You mentioned that you are a Head Checker, will you inform this Honorable Court your duties and responsibilities? A. I am the representative of BM Santos on board the vessel, sir, to supervise the discharge of cargoes. xxx xxx xxx

Q. On or about August 1, 1990, were you still connected or employed with BM Santos as a Head Checker? A. Yes, sir.

Q. And, on or about that date, do you recall having attended the discharging and inspection of cold steel sheets in coil on board the MV/AN ANGEL SKY? A. Yes, sir, I was there.

xxx

xxx

xxx

Q. Based on your inspection since you were also present at that time, will you inform this Honorable Court the condition or the appearance of the bad order cargoes that were unloaded from the MV/ANANGEL SKY? ATTY. MACAMAY: Objection, Your Honor, I think the document itself reflects the condition of the cold steel sheets and the best evidence is the document itself, Your Honor that shows the condition of the steel sheets. COURT: Let the witness answer. A. The scrap of the cargoes is broken already and the rope is loosen and the cargoes are dent on the sides."32 All these conclusively prove the fact of shipment in good order and condition and the consequent damage to the four coils while in the possession of petitioner,33 who notably failed to explain why. 34 Further, petitioners failed to prove that they observed the extraordinary diligence and precaution which the law requires a common carrier to know and to follow to avoid damage to or destruction of the goods entrusted to it for safe carriage and delivery.35 True, the words "metal envelopes rust stained and slightly dented" were noted on the Bill of Lading; however, there is no showing that petitioners exercised due diligence to forestall or lessen the loss.36 Having been in the service for several years, the master of the vessel should have known at the outset that metal envelopes in the said state would eventually deteriorate when not properly stored while in transit.37 Equipped with the proper knowledge of the nature of steel sheets in coils and of the proper way of transporting them, the master of the vessel and his crew should have undertaken precautionary measures to avoid possible deterioration of the cargo. But none of these measures was taken.38 Having failed to discharge the burden of proving that they have exercised the extraordinary diligence required by law, petitioners cannot escape liability for the damage to the four coils.39 In their attempt to escape liability, petitioners further contend that they are exempted from liability under Article 1734(4) of the Civil Code. They cite the notation "metal envelopes rust stained and slightly dented" printed on the Bill of Lading as evidence that the character of the goods or defect in the packing or the containers was the proximate cause of the damage. We are not convinced. From the evidence on record, it cannot be reasonably concluded that the damage to the four coils was due to the condition noted on the Bill of Lading.40 The aforecited exception refers to cases when goods are lost or damaged while in transit as a result of the natural decay of perishable goods or the fermentation or evaporation of substances liable therefor, the necessary and natural wear of goods in transport, defects in packages in which they are shipped, or the natural propensities of animals.41 None of these is present in the instant case.

Further, even if the fact of improper packing was known to the carrier or its crew or was apparent upon ordinary observation, it is not relieved of liability for loss or injury resulting therefrom, once it accepts the goods notwithstanding such condition. 42 Thus, petitioners have not successfully proven the application of any of the aforecited exceptions in the present case.43 Second Issue: Notice of Loss Petitioners claim that pursuant to Section 3, paragraph 6 of the Carriage of Goods by Sea Act44 (COGSA), respondent should have filed its Notice of Loss within three days from delivery. They assert that the cargo was discharged on July 31, 1990, but that respondent filed its Notice of Claim only on September 18, 1990.45 We are not persuaded. First, the above-cited provision of COGSA provides that the notice of claim need not be given if the state of the goods, at the time of their receipt, has been the subject of a joint inspection or survey. As stated earlier, prior to unloading the cargo, an Inspection Report46 as to the condition of the goods was prepared and signed by representatives of both parties.47 Second, as stated in the same provision, a failure to file a notice of claim within three days will not bar recovery if it is nonetheless filed within one year.48 This one-year prescriptive period also applies to the shipper, the consignee, the insurer of the goods or any legal holder of the bill of lading. 49 In Loadstar Shipping Co., Inc, v. Court of Appeals,50 we ruled that a claim is not barred by prescription as long as the one-year period has not lapsed. Thus, in the words of the ponente, Chief Justice Hilario G. Davide Jr.: "Inasmuch as the neither the Civil Code nor the Code of Commerce states a specific prescriptive period on the matter, the Carriage of Goods by Sea Act (COGSA)--which provides for a one-year period of limitation on claims for loss of, or damage to, cargoes sustained during transit--may be applied suppletorily to the case at bar." In the present case, the cargo was discharged on July 31, 1990, while the Complaint51 was filed by respondent on July 25, 1991, within the one-year prescriptive period. Third Issue: Package Limitation Assuming arguendo they are liable for respondent's claims, petitioners contend that their liability should be limited to US$500 per package as provided in the Bill of Lading and by Section 4(5)52 of COGSA.53 On the other hand, respondent argues that Section 4(5) of COGSA is inapplicable, because the value of the subject shipment was declared by petitioners beforehand, as evidenced by the reference to and the insertion of the Letter of Credit or "L/C No. 90/02447" in the said Bill of Lading. 54 A bill of lading serves two functions. First, it is a receipt for the goods shipped.53 Second, it is a contract by which three parties -- namely, the shipper, the carrier, and the consignee -- undertake

specific responsibilities and assume stipulated obligations.56 In a nutshell, the acceptance of the bill of lading by the shipper and the consignee, with full knowledge of its contents, gives rise to the presumption that it constituted a perfected and binding contract.57 Further, a stipulation in the bill of lading limiting to a certain sum the common carrier's liability for loss or destruction of a cargo -- unless the shipper or owner declares a greater value58 -- is sanctioned by law.59 There are, however, two conditions to be satisfied: (1) the contract is reasonable and just under the circumstances, and (2) it has been fairly and freely agreed upon by the parties.60 The rationale for this rule is to bind the shippers by their agreement to the value (maximum valuation) of their goods. 61 It is to be noted, however, that the Civil Code does not limit the liability of the common carrier to a fixed amount per package.62 In all matters not regulated by the Civil Code, the right and the obligations of common carriers shall be governed by the Code of Commerce and special laws.63 Thus, the COGSA, which is suppletory to the provisions of the Civil Code, supplements the latter by establishing a statutory provision limiting the carrier's liability in the absence of a shipper's declaration of a higher value in the bill of lading.64 The provisions on limited liability are as much a part of the bill of lading as though physically in it and as though placed there by agreement of the parties.65 In the case before us, there was no stipulation in the Bill of Lading66 limiting the carrier's liability. Neither did the shipper declare a higher valuation of the goods to be shipped. This fact notwithstanding, the insertion of the words "L/C No. 90/02447 cannot be the basis for petitioners' liability. First, a notation in the Bill of Lading which indicated the amount of the Letter of Credit obtained by the shipper for the importation of steel sheets did not effect a declaration of the value of the goods as required by the bill.67 That notation was made only for the convenience of the shipper and the bank processing the Letter of Credit.68 Second, in Keng Hua Paper Products v. Court of Appeals,69 we held that a bill of lading was separate from the Other Letter of Credit arrangements. We ruled thus: "(T)he contract of carriage, as stipulated in the bill of lading in the present case, must be treated independently of the contract of sale between the seller and the buyer, and the contract of issuance of a letter of credit between the amount of goods described in the commercial invoice in the contract of sale and the amount allowed in the letter of credit will not affect the validity and enforceability of the contract of carriage as embodied in the bill of lading. As the bank cannot be expected to look beyond the documents presented to it by the seller pursuant to the letter of credit, neither can the carrier be expected to go beyond the representations of the shipper in the bill of lading and to verify their accuracy vis--vis the commercial invoice and the letter of credit. Thus, the discrepancy between the amount of goods indicated in the invoice and the amount in the bill of lading cannot negate petitioner's obligation to private respondent arising from the contract of transportation."70

In the light of the foregoing, petitioners' liability should be computed based on US$500 per package and not on the per metric ton price declared in the Letter of Credit.71 In Eastern Shipping Lines, Inc. v. Intermediate Appellate Court,72 we explained the meaning of packages: "When what would ordinarily be considered packages are shipped in a container supplied by the carrier and the number of such units is disclosed in the shipping documents, each of those units and not the container constitutes the 'package' referred to in the liability limitation provision of Carriage of Goods by Sea Act." Considering, therefore, the ruling in Eastern Shipping Lines and the fact that the Bill of Lading clearly disclosed the contents of the containers, the number of units, as well as the nature of the steel sheets, the four damaged coils should be considered as the shipping unit subject to the US$500 limitation.1wphi1.nt WHEREFORE, the Petition is partly granted and the assailed Decision MODIFIED. Petitioners' liability is reduced to US$2,000 plus interest at the legal rate of six percent from the time of the filing of the Complaint on July 25, 1991 until the finality of this Decision, and 12 percent thereafter until fully paid. No pronouncement as to costs. SO ORDERE Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 128607 January 31, 2000 ALFREDO MALLARI, SR. and ALFREDO MALLARI, JR., petitioners, vs. COURT OF APPEALS and BULLETIN PUBLISHING CORPORATION, respondents. BELLOSILLO, J.: ALFREDO MALLARI SR. and ALFREDO MALLARI JR. in this petition for review on certiorari seek to set aside the Decision of the Court of Appeals 1 which reversed the court a quo and adjudged petitioners to be liable for damages due to negligence as a common carrier resulting in the death of a passenger. On 14 October 1987, at about 5:00 o'clock in the morning, the passenger jeepney driven by petitioner Alfredo Mallari Jr. and owned by his co-petitioner Alfredo Mallari Sr. collided with the delivery van of respondent Bulletin Publishing Corp. (BULLETIN, for brevity) along the National Highway in Barangay San Pablo, Dinalupihan, Bataan. Petitioner Mallari Jr. testified that he went to the left lane of the highway and overtook a Fiera which had stopped on the right lane. Before he passed by the Fiera, he saw the van of respondent BULLETIN coming from the opposite direction. It was driven by one Felix Angeles. The sketch of the accident showed that the collision occurred after Mallari Jr. overtook the Fiera while negotiating a curve in the highway. The points of collision were the and the left rear portion of the passenger jeepney and the left front side of the delivery van of

BULLETIN. The two (2) right wheels of the delivery van were on the right shoulder of the road and pieces of debris from the accident were found scattered along the shoulder of the road up to a certain portion of the lane travelled by the passenger jeepney. The impact caused the jeepney to turn around and fall on its left side resulting in injuries to its passengers one of whom was Israel Reyes who eventually died due to the gravity of his injuries.1wphi1.nt On 16 December 1987 Claudia G. Reyes, the widow of Israel M. Reyes, filed a complaint for damages with the Regional Trial Court of Olongapo City against Alfredo Mallari Sr. and Alfredo Mallari Jr., and also against BULLETIN, its driver Felix Angeles, and the N.V. Netherlands Insurance Company. The complaint alleged that the collision which resulted in the death of Israel Reyes was caused by the fault and negligence of both drivers of the passenger jeepney and the Bulletin Isuzu delivery van. The complaint also prayed that the defendants be ordered jointly and severally to pay plaintiff P1,006,777.40 in compensatory damages, P40,000.00 for hospital and medical expenses, P18,270.00 for burial expenses plus such amounts as may be fixed by the trial court for exemplary damages and attorney's fees. The trial court found that the proximate cause of the collision was the negligence of Felix Angeles, driver of the Bulletin delivery van, considering the fact that the left front portion of the delivery truck driven by Felix Angeles hit and bumped the left rear portion of the passenger jeepney driven by Alfredo Mallari Jr. Hence, the trial court ordered BULLETIN and Felix Angeles to pay jointly and severally Claudia G. Reyes, widow of the deceased victim, the sums of P42,106.93 for medical expenses; P8,600.00 for funeral and burial expenses; P1,006,777.40 for loss of earning capacity; P5,000.00 for moral damages and P10,000.00 for attorney's fees. The trial court also ordered N.V. Netherlands Insurance Company to indemnify Claudia G. Reyes P12,000.00 as death indemnity and P2,500.00 for funeral expenses which when paid should be deducted from the liabilities of respondent BULLETIN and its driver Felix Angeles to the plaintiff. It also dismissed the complaint against the other defendants Alfredo Mallari Sr. and Alfredo Mallari Jr. On appeal the Court of Appeals modified the decision of the trial court and found no negligence on the part of Angeles and consequently of his employer, respondent BULLETIN. Instead, the appellate court ruled that the collision was caused by the sole negligence of petitioner Alfredo Mallari Jr. who admitted that immediately before the collision and after he rounded a curve on the highway, he overtook a Fiera which had stopped on his lane and that he had seen the van driven by Angeles before overtaking the Fiera. The Court of Appeals ordered petitioners Mallari Jr. and Mallari Sr. to compensate Claudia G. Reyes P1,006,777.50 for loss of earning capacity, P50,000.00 as indemnity for death and P10,000.00 for attorney's fees. It absolved from any liability respondent BULLETIN, Felix Angeles and N.V. Netherlands Insurance Company. Hence this petition. Petitioners contend that there is no evidence to show that petitioner Mallari Jr. overtook a vehicle at a curve on the road at the time of the accident and that the testimony of Angeles on the overtaking made by Mallari Jr. was not credible and unreliable. Petitioner also submits that the trial court was in a better position than the Court of Appeals to assess the evidence and observe the witnesses as well as determine their credibility; hence, its finding that the proximate cause of the collision was the negligence of respondent Angeles, driver of the delivery van owned by respondent BULLETIN, should be given more weight and consideration.

We cannot sustain petitioners. Contrary to their allegation that there was no evidence whatsoever that petitioner Mallari Jr. overtook a vehicle at a curve on the road at the time of or before the accident, the same petitioner himself testified that such fact indeed did occur Q: And what was that accident all about? A: Well, what happened, sir, is that at about that time 5:00 o'clock in that morning of October 14 while I was negotiating on the highway at San Pablo, Dinalupihan, Bataan, I was then following a blue Ford Fierra and my distance behind was about twenty (20) feet and then I passed that blue Ford Fierra. I overtook and when I was almost on the right lane of the highway towards Olongapo City there was an oncoming delivery van of the Bulletin Publishing Corporation which bumped the left rear portion of the jeepney which I was driving and as a result of which the jeepney . . . turned around and fell on its left side and as a result of which some of my passengers including me were injured, sir . . . . Q: Before you overtook the Ford Fierra jeepney did you look . . . whether there was any vehicle coming towards you? A: Yes, sir. Q: Did you see the Bulletin van or the Press van coming towards you? A: Yes, sir. Q: At the moment the Ford Fierra . . . stop(ped) and in overtaking the Fierra, did you not have an option to stop and not to overtake the Ford Fierra? A: Well, at the time when the Ford Fierra stopped in front of me I slowed down with the intention of applying the brake, however, when I saw the oncoming vehicle which is the Press van is very far. . . which is 100 feet distance, . . . it is sufficient to overtake the Ford Fierra so I overt(ook) it . . . . Q: You said that you took into consideration the speed of the oncoming Press van but you also could not estimate the speed of the press van because it was dark at that time, which of these statements are true? A: What I wanted to say, I took into consideration the speed of the oncoming vehicle, the Press van, although at the moment I could not estimate the speed of the oncoming vehicle . . . . 2 The Court of Appeals correctly found, based on the sketch and spot report of the police authorities which were not disputed by petitioners, that the collision occurred immediately after petitioner Mallari Jr. overtook a vehicle in front of it while traversing a curve on the highway.3 This act of overtaking was in clear violation of Sec. 41, pars. (a) and (b), of RA 4136 as amended, otherwise known as The Land Transportation and Traffic Code which provides: Sec. 41. Restrictions on overtaking and passing. (a) The driver of a vehicle shall not drive to the left side of the center line of a highway in overtaking or passing another vehicle proceeding in the same direction, unless such left side is clearly visible and is free of oncoming traffic for a sufficient distance ahead to permit such overtaking or passing to be made in safety.

(b) The driver of a vehicle shall not overtake or pass another vehicle proceeding in the same direction when approaching the crest of a grade, nor upon a curve in the highway, where the driver's view along the highway is obstructed within a distance of five hundred feet ahead except on a highway having two or more lanes for movement of traffic in one direction where the driver of a vehicle may overtake or pass another vehicle: Provided That on a highway, within a business or residential district, having two or more lanes for movement of traffic in one direction, the driver of a vehicle may overtake or pass another vehicle on the right. The rule is settled that a driver abandoning his proper lane for the purpose of overtaking another vehicle in an ordinary situation has the duty to see to it that the road is clear and not to proceed if he cannot do so in safety.4When a motor vehicle is approaching or rounding a curve, there is special necessity for keeping to the right side of the road and the driver does not have the right to drive on the left hand side relying upon having time to turn to the right if a car approaching from the opposite direction comes into view. 5 In the instant case, by his own admission, petitioner Mallari Jr. already saw that the BULLETIN delivery van was coming from the opposite direction and failing to consider the speed thereof since it was still dark at 5:00 o'clock in the morning mindlessly occupied the left lane and overtook two (2) vehicles in front of it at a curve in the highway. Clearly, the proximate cause of the collision resulting in the death of Israel Reyes, a passenger of the jeepney, was the sole negligence of the driver of the passenger jeepney, petitioner Alfredo Mallari Jr., who recklessly operated and drove his jeepney in a lane where overtaking was not allowed by traffic rules. Under Art. 2185 of the Civil Code, unless there is proof to the contrary, it is presumed that a person driving a motor vehicle has been negligent if at the time of the mishap he was violating a traffic regulation. As found by the appellate court, petitioners failed to present satisfactory evidence to overcome this legal presumption. The negligence and recklessness of the driver of the passenger jeepney is binding against petitioner Mallari Sr., who admittedly was the owner of the passenger jeepney engaged as a common carrier, considering the fact that in an action based on contract of carriage, the court need not make an express finding of fault or negligence on the part of the carrier in order to hold it responsible for the payment of damages sought by the passenger. Under Art. 1755 of the Civil Code, 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. Moreover, under Art. 1756 of the Civil Code, in case of death or injuries to passengers, a common carrier is presumed to have been at fault or to have acted negligently, unless it proves that it observed extraordinary diligence. Further, pursuant to Art. 1759 of the same Code, it is liable for the death of or injuries to passengers through the negligence or willful acts of the former's employees. This liability of the common carrier does not cease upon proof that it exercised all the diligence of a good father of a family in the selection of its employees. Clearly, by the contract of carriage, the carrier jeepney owned by Mallari Sr. assumed the express obligation to transport the passengers to their destination safely and to observe extraordinary diligence with due regard for all the circumstances, and any injury or death that might be suffered by its passengers is right away attributable to the fault or negligence of the carrier. The monetary award ordered by the appellate court to be paid by petitioners to the widow of the deceased passenger Israel M. Reyes of P1,006,777.50 for loss of earning capacity, P50,000.00 as civil

indemnity for death, and P10,000.00 for attorney's fees, all of which were not disputed by petitioners, is a factual matter binding and conclusive upon this Court.1wphi1.nt WHEREFORE, the Petition is DENIED and the Decision of the Court of Appeals dated 20 September 1995 reversing the decision of the trial court being in accord with law and evidence is AFFIRMED. Consequently, petitioners are ordered jointly and severally to pay Claudia G. Reyes P1,006,777.50 for loss of earning capacity, P50,000.00 as civil indemnity for death, and P10,000.00 for attorney's fees. Costs against petitioners. SO ORDERED. Mendoza, Quis Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-28692 July 30, 1982 CONRADA VDA. DE ABETO, CARME0000LO ABETO, CECILIA ABETO, CONCEPCION ABETO, MARIA ABETO, ESTELA ABETO, PERLA ABETO, PATRIA ABETO and ALBERTO ABETO, plaintiffs-appellees, vs. PHILIPPINE AIR LINES, INCORPORATED, defendant-appellant. Quijano, Arroyo & Padilla Law Offices for plaintiffs-appellees. Siguion Reyna, Montecillo & Ongsiako, Belo and Associates for defendant-appellant.

RELOVA, J.. Appeal from the decision of the Court of First Instance of Iloilo finding that defendant-appellant "did not exercise extraordinary diligence or prudence as far as human foresight can provide ... but on the contrary showed negligence and indifference for the safety of the passengers that it was bound to transport, " and for the death of Judge Quirico Abeto, defendant- appellant was ordered to pay plaintiffs, the heirs of Judge Abeto, the following: 1st For the death of Judge Quirico Abeto, the amount of P6,000.00;

2nd For the loss of his earning capacity, for 4.75 (4 ) years at the rate of P7,200.00 per annum in the amount of P34,200.00; 3rd For moral damages in favor of the plaintiffs in the sum of P10,000.00;

4th For actual damages in the sum of P2,000.00 minus P400.00 received under Voucher Exhibit 'H' the amount of Pl,600.00;

5th For attorney's fees, the sum of P6,000.00 and/or the total sum of P57,800.00 and; To pay the costs of this proceedings. Plaintiff's evidence shows that about 5:30 in the afternoon of November 23, 1960, Judge Quirico Abeto, with the necessary tickets, boarded the Philippine Air Lines' PI-C133 plane at the Mandurriao Airport, Iloilo City for Manila. He was listed as the No. 18 passenger in its Load Manifest (Exhibit A). The plane which would then take two hours from Iloilo to Manila did not reach its destination and the next day there was news that the plane was missing. After three weeks, it was ascertained that the plane crashed at Mt. Baco, Province of Mindoro. All the passengers, including Judge Abeto, must have been killed instantly and their remains were scattered all over the area. Among the articles recovered on the site of the crash was a leather bag with the name "Judge Quirico Abeto. " (Exhibit C.) Judge Abeto, prior to the plane crash, was a Technical Assistant in the Office of the President receiving an annual compensation of P7,200.00; and before that, has held the various positions in the government, namely: Municipal President of Iloilo; Provincial Fiscal of Antique, Negros Occidental and Cebu; Judge of the Court of First Instance of Manila, and Secretary of Justice. He was in good health before the incident even if he was already 79 years old at that time. Plaintiff-appellee Conrada Vda. de Abeto was appointed administratrix of the estate of Judge Abeto. The other plaintiffs-appellees are the children of the deceased. When they received the news of the plane crash, Mrs. Abeto was shocked and until it was ascertained that the plane had crashed three weeks after, she could not sleep and eat. She felt sick and was miserable after that. The members of the family also suffered. Personal belongings which were lost amounted to P300.00. Burial expenses of the late judge was P1,700.00. When defendant-appellant would not hear demands for settlement of damages, plaintiffs-appellees were compelled to hire counsel for the institution and prosecution of this case. Defendant-appellant tried to prove that the plane crash at Mt. Baco was beyond the control of the pilot. The plane at the time of the crash was airworthy for the purpose of conveying passengers across the country as shown by the certificate of airworthiness issued by the Civil Aeronautics Administration (CAA). There was navigational error but no negligence or malfeasance on the part of the pilot. The plane had undergone 1,822 pre- flight checks, 364 thorough checks, 957 terminating checks and 501 after maintenance checks. These checks were part of the quality control operation of defendant airline Further, deviation from its prescribed route was due to the bad weather conditions between Mt. Baco and Romblon and strong winds which caused the plane to drift to Mt. Baco. Under the circumstances, appellant argues that the crash was a fortuitous event and, therefore, defendant-appellant cannot be held liable under the provisions of Article 1174 of the New Civil Code. Besides, appellant tried to prove that it had exercised all the cares, skill and diligence required by law on that particular flight in question. The trial court, finding for the plaintiffs, said: The Court after a thorough perusal of the evidences, testimonial and documentaries submitted by both parties has come into the conclusion that the evidence introduced by the plaintiffs have

established the following significant facts which proved the negligence of the defendant's pilot of the plane on that flight- in question. 1st That the Pilot of the plane disobeyed instruction given in not following the route of Amber 1 prescribed by the CAA in Violation of Standard Regulation. Second The defendant failed to perform the pre-flight test on plane PIC-133 before the same took off from Mandurriao Airport to Manila in order to find out a possible defect of the plane. Third When the defendant allowed during the flight in question, student Officer Rodriguez on training as proved when his body was found on the plane's cockpit with its microphone hanging still on his left leg. Fourth When the Pilot during the flight in question failed or did not report his position over or abeam Romblon which is a compulsory reporting point. These facts as established by the evidence of the plaintiff lead to the inevitable conclusion that the defendant did not exercise extraordinary diligence or prudence as far as human foresight can provide imposed upon by the Law, but on the contrary showed negligence and indifference for the safety of the passengers that it was bound to transport. By the very evidence of the defendant, as shown by the deposition of one Jose Abanilla, dated December 13, 1963, Section Chief of the Actuarial Department of the Insular Life Insurance Company regarding life expectancy through American experience, the late Judge Abeto at the age of 79 would still live or have a life expectancy of 4.75 years. Appealing to this Court, defendant claimed that the trial court erred: I ... in finding, contrary to the evidence, that the appellant was negligent; III ... in not finding that the appellant, in the conduct and operation of PI-C133, exercised its statutory obligation over the passengers of PI C133 of extraordinary diligence as far as human care and foresight can provide, using the utmost diligence of a very cautious person with due regard for all the circumstances and in not finding that the crash of PI-C133 was caused by fortuitous events; ... in awarding damages to the appellees; and IV ... in not finding that appellant acted in good faith and exerted efforts to minimize damages. The issue before Us in this appeal is whether or not the defendant is liable for violation of its contract of carriage. The provisions of the Civil Code on this question of liability are clear and explicit. Article 1733 binds common carriers, "from the nature of their business and by reasons of public policy, ... to observe extraordinary diligence in the vigilance ... for the safety of the passengers transported by them

according to all the circumstances of each case." Article 1755 establishes the standard of care required of a common carrier, which is, "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." Article 1756 fixes the burden of proof by providing that "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 extra-ordinary diligence as prescribed in Articles 1733 and 1755." Lastly, Article 1757 states that "the responsibility of a common carrier for the safety of passengers ... cannot be dispensed with or lessened by stipulation, by the posting of notices, by statements on tickets, or otherwise." The prescribed airway of plane PI-C133 that afternoon of November 23, 1960, with Capt. de Mesa, as the pilot, was Iloilo-Romblon-Manila, denominated as airway "Amber l," and the prescribed elevation of the flight was 6,000 ft. The fact is, the plane did not take the designated route because it was some 30 miles to the west when it crashed at Mt. Baco. According to defendant's witness, Ramon A. Pedroza, Administrative Assistant of the Philippine Air Lines, Inc., this tragic crash would have not happened had the pilot continued on the route indicated. Hereunder is Mr. Pedroza's testimony on this point: Q Had the pilot continued on the route indicated, Amber A-1 there would have been no crash, obviously? A Yes, Your Honor ATTY. HILADO: (To the witness) Q Because Mt. Baco is 30 miles from Amber I? A Yes,sir.(TSN,p.75,Oct.22,1963 hearing) xxx xxx xxx And, Assistant Director Cesar Mijares of the Civil Aeronautics Administration testified that the pilot of said plane was "off course." Q But the fact is that you found him out, that he was off course? A Yes, sir. Q And off course, you mean that he did not follow the route prescribed for him? A Yes, sir. Q And the route for him to follow was Amber A-l? A Yes, sir. Q And the route for Iloilo direct to Manila, is passing Romblon to Manila? A Yes, passing Romblon to Manila.

Q And you found that he was not at all following the route to Romblon to Manila? A Yes, sir. Q You know Mr. Witness that a disregard or, violation, or disregard of instruction is punishable by law? A Yes,sir. (TSN,pp.247-248,Dec. 20, 1963) xxx xxx xxx It is clear that the pilot did not follow the designated route for his flight between Romblon and Manila. The weather was clear and he was supposed to cross airway "Amber I" over Romblon; instead, he made a straight flight to Manila in violation of air traffic rules. At any rate, in the absence of a satisfactory explanation by appellant as to how the accident occurred, the presumption is, it is at fault. In an action based on a contract of carriage, the court need not make an express finding of fault or negligence on the part of the carrier in order to hold it responsible to pay the damages sought for by the passenger. By the contract of carriage, the carrier assumes the express obligation to transport the passenger to his destination safely and to observe extraordinary diligence with a due regard for all the circumstances, and any injury that might be suffered by the passenger is right away attributable to the fault or negligence of the carrier (Art. 1756, New Civil Code). This is an exception to the general rule that negligence must be proved. (Batangas Transportation Company vs. Caguimbal, 22 SCRA 171.) The total of the different items which the lower court adjudged herein appellant to pay the plaintiffs is P57,800.00. The judgment of the court a quo is modified in the sense that the defendant is hereby ordered to pay the said amount to the plaintiffs, with legal interest thereon from the finality of this judgment. With costs against defendant-appellant. Teehankee (Chairman), Makasiar, Melencio-Herrera, Plana and Vasquez, JJ., concur. Gutierrez, Jr., J., is on leave EN BANC G.R. No. L-23733 October 31, 1969

HERMINIO L. NOCUM, Plaintiff-Appellee, vs. LAGUNA TAYABAS BUS COMPANY, DefendantAppellant. BARREDO, J.: chanrobles virtual law library Appeal of the Laguna Tayabas Bus Co., defendant in the Court below, from a judgment of the said court (Court of First Instance of Batangas) in its Civil Case No. 834, wherein appellee Herminio L. Nocum was plaintiff, sentencing appellant to pay appellee the sum of P1,351.00 for actual damages and P500.00 as attorney's fees with legal interest from the filing of the complaint plus costs. Appellee, who was a passenger in appellant's Bus No. 120 then making a trip within the barrio of

Dita, Municipality of Bay, Laguna, was injured as a consequence of the explosion of firecrackers, contained in a box, loaded in said bus and declared to its conductor as containing clothes and miscellaneous items by a co-passenger. The findings of fact of the trial court are not assailed. The appeal is purely on legal questions.chanroblesvirtualawlibrary chanrobles virtual law library Appellee has not filed any brief. All that We have before Us is appellant's brief with the following assignment of errors: I BASED ON THE FACTS THE LOWER COURT FOUND AS ESTABLISHED, IT ERRED AS A MATTER OF LAW IN NOT ABSOLVING APPELLANT FROM LIABILITY RESULTING FROM THE EXPLOSION OF FIRECRACKERS CONTAINED IN A PACKAGE, THE CONTENTS OF WHICH WERE MISREPRESENTED BY A PASSENGER. II THE LOWER COURT ERRED, AS A MATTER OF LAW, IN AWARDING DAMAGES WITH LEGAL INTEREST IN FAVOR OF THE APPELLEE. III THE LOWER COURT ERRED IN NOT DISMISSING THE COMPLAINT, WITH COSTS AGAINST THE APPELLEE. Upon consideration of the points raised and discussed by appellant, We find the appeal to be well taken.chanroblesvirtualawlibrary chanrobles virtual law library The main basis of the trial court's decision is that appellant did not observe the extraordinary or utmost diligence of a very cautious person required by the following articles of the Civil Code: 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.chanroblesvirtualawlibrary chanrobles virtual law library Such extraordinary diligence in the vigilance over the goods is further expressed in articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for the safety of the passengers is further set forth in articles 1755 and 1756.chanroblesvirtualawlibrary chanrobles virtual law library 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.chanroblesvirtualawlibrary chanrobles virtual law library ART 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed in articles 1733 and 1755. Analyzing the evidence presented by the parties, His Honor found:

According to Severino Andaya, a witness for the plaintiff, a man with a box went up the baggage compartment of the bus where he already was and said box was placed under the seat. They left Azcarraga at about 11:30 in the morning and when the explosion occurred, he was thrown out. PC investigation report states that thirty seven (37) passengers were injured (Exhibits "O" and "2").chanroblesvirtualawlibrary chanrobles virtual law library The bus conductor, Sancho Mendoza, testified that the box belonged to a passenger whose name he does not know and who told him that it contained miscellaneous items and clothes. He helped the owner in loading the baggage which weighed about twelve (12) kilos and because of company regulation, he charged him for it twenty-five centavos (P0.25). From its appearance there was no indication at all that the contents were explosives or firecrackers. Neither did he open the box because he just relied on the word of the owner.chanroblesvirtualawlibrary chanrobles virtual law library Dispatcher Nicolas Cornista of defendant company corroborrated the testimony of Mendoza and he said, among other things, that he was present when the box was loaded in the truck and the owner agreed to pay its fare. He added that they were not authorized to open the baggages of passengers because instruction from the management was to call the police if there were packages containing articles which were against regulations. xxx xxx xxx chanrobles virtual law library

There is no question that Bus No. 120 was road worthy when it left its Manila Terminal for Lucena that morning of December 5, 1960. The injuries suffered by the plaintiff were not due to mechanical defects but to the explosion of firecrackers inside the bus which was loaded by a copassenger.chanroblesvirtualawlibrary chanrobles virtual law library ... Turning to the present case, it is quite clear that extraordinary or utmost diligence of a very cautious person was not observed by the defendant company. The service manual, exhibits "3" and "3-A," prohibits the employees to allow explosives, such as dynamite and firecrackers to be transported on its buses. To implement this particular rule for 'the safety of passengers, it was therefore incumbent upon the employees of the company to make the proper inspection of all the baggages which are carried by the passengers.chanroblesvirtualawlibrary chanrobles virtual law library But then, can it not be said that the breach of the contract was due to fortuitous event? The Supreme Court in the case of Lasam vs. Smith, 45 Phil. 657, quoted Escriche's definition of caso fortuito as "an unexpected event or act of God which could neither be foreseen nor resisted, such as floods, torrents, shipwrecks, conflagrations, lightning, compulsions, insurrections, destructions of buildings by unforeseen accidents and other occurrences of a similar nature." In other words, the cause of the unexpected event must be independent of the will of man or something which cannot be avoided. This cannot be said of the instant case. If proper and rigid inspection were observed by the defendant, the contents of the box could have been discovered and the accident avoided. Refusal by the passenger to have the package opened was no excuse because, as stated by Dispatcher Cornista, employees should call the police if there were packages containing articles against company regulations. Neither was failure by employees of defendant company to detect the contents of the packages of passengers because like the rationale in the Necesito vs. Paras case

(supra), a passenger has neither choice nor control in the exercise of their discretion in determining what are inside the package of co-passengers which may eventually prove fatal. We cannot agree. No doubt, the views of His Honor do seem to be in line with the reasons that the Code Commission had for incorporating the above-quoted provisions in its draft of the Civil Code. Indeed, in approving the said draft, Congress must have concurred with the Commission that by requiring the highest degree of diligence from common carriers in the safe transport of their passengers and by creating a presumption of negligence against them, the recklessness of their drivers which is a common sight even in crowded areas and, particularly, on the highways throughout the country may, somehow, if not in a large measure, be curbed. We are not convinced, however, that the exacting criterion of said provisions has not been met by appellant in the circumstances of this particular case.chanroblesvirtualawlibrary chanrobles virtual law library It is undisputed that before the box containing the firecrackers were allowed to be loaded in the bus by the conductor, inquiry was made with the passenger carrying the same as to what was in it, since its "opening ... was folded and tied with abaca." (Decision p. 16, Record on Appeal.) According to His Honor, "if proper and rigid inspection were observed by the defendant, the contents of the box could have been discovered and the accident avoided. Refusal by the passenger to have the package opened was no excuse because, as stated by Dispatcher Cornista, employees should call the police if there were packages containing articles against company regulations." That may be true, but it is Our considered opinion that the law does not require as much. Article 1733 is not as unbending as His Honor has held, for it reasonably qualifies the extraordinary diligence required of common carriers for the safety of the passengers transported by them to be "according to all the circumstances of each case." In fact, Article 1755 repeats this same qualification: "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." chanrobles virtual law library In this particular case before Us, it must be considered that while it is true the passengers of appellant's bus should not be made to suffer for something over which they had no control, as enunciated in the decision of this Court cited by His Honor, 1 fairness demands that in measuring a common carrier's duty towards its passengers, allowance must be given to the reliance that should be reposed on the sense of responsibility of all the passengers in regard to their common safety. It is to be presumed that a passenger will not take with him anything dangerous to the lives and limbs of his co-passengers, not to speak of his own. Not to be lightly considered must be the right to privacy to which each passenger is entitled. He cannot be subjected to any unusual search, when he protests the innocuousness of his baggage and nothing appears to indicate the contrary, as in the case at bar. In other words, inquiry may be verbally made as to the nature of a passenger's baggage when such is not outwardly perceptible, but beyond this, constitutional boundaries are already in danger of being transgressed. Calling a policeman to his aid, as suggested by the service manual invoked by the trial judge, in compelling the passenger to submit to more rigid inspection, after the passenger had already declared that the box contained mere clothes and other miscellaneous, could not have justified invasion of a constitutionally protected domain. Police officers acting without judicial authority secured in the manner provided by law are not beyond the pale of constitutional inhibitions designed to protect individual human rights and liberties. Withal, what must be importantly considered here is not so much the infringement of the fundamental sacred rights of the

particular passenger herein involved, but the constant threat any contrary ruling would pose on the right of privacy of all passengers of all common carriers, considering how easily the duty to inspect can be made an excuse for mischief and abuse. Of course, when there are sufficient indications that the representations of the passenger regarding the nature of his baggage may not be true, in the interest of the common safety of all, the assistance of the police authorities may be solicited, not necessarily to force the passenger to open his baggage, but to conduct the needed investigation consistent with the rules of propriety and, above all, the constitutional rights of the passenger. It is in this sense that the mentioned service manual issued by appellant to its conductors must be understood.chanroblesvirtualawlibrary chanrobles virtual law library Decisions in other jurisdictions cited by appellant in its brief, evidently because of the paucity of local precedents squarely in point, emphasize that there is need, as We hold here, for evidence of circumstances indicating cause or causes for apprehension that the passenger's baggage is dangerous and that it is failure of the common carrier's employee to act in the face of such evidence that constitutes the cornerstone of the common carrier's liability in cases similar to the present one. The principle that must control the servants of the carrier in a case like the one before us is correctly stated in the opinion in the case of Clarke v. Louisville & N.R. Co. 20 Ky L. Rep. 839, 49 S.W. 1120. In that case Clarke was a passenger on the defendant's train. Another passenger took a quantity of gasoline into the same coach in which Clarke was riding. It ignited and exploded, by reason of which he was severely injured. The trial court peremptorily instructed the jury to find for the defendant. In the opinion, affirming the judgment, it is said: "It may be stated briefly, in assuming the liability of a railroad to its passengers for injury done by another passenger, only where the conduct of this passenger had been such before the injury as to induce a reasonably prudent and vigilant conductor to believe that there was reasonable ground to apprehend violence and danger to the other passengers, and in that case asserting it to be the duty of the conductor of the railroad train to use all reasonable means to prevent such injury, and if he neglects this reasonable duty, and injury is done, that then the company is responsible; that otherwise the railroad is not responsible." chanrobles virtual law library The opinion quotes with approval from the case of Gulf, C. & S. F. R. Co. vs. Shields, 9 Tex. Civ. App. 652, 29 S. W. 652, in which case the plaintiff was injured by alcohol which had been carried upon the train by another passenger. In the opinion in that case it is said: "It was but a short period of time after the alcohol was spilt when it was set on fire and the accident occurred, and it was not shown that appellant's employees knew that the jug contained alcohol. In fact, it is not shown that the conductor or any other employee knew that Harris had a jug with him until it fell out of the sack, though the conductor had collected ... (his) fare, and doubtless knew that he had the sack on the seat with him. ... It cannot be successfully denied that Harris had the right as a passenger to carry baggage on the train, and that he had a right to carry it in a sack if he chose to do so. We think it is equally clear that, in the absence of some intimation or circumstance indicating that the sack contained something dangerous to other passengers, it was not the duty of appellant's conductor or any other employee to open the sack and examine its contents." Quinn v. Louisville & N. R. Co. 98 Ky. 231, 32 S. W. 742; Wood v. Louisville & N. R. Co. 101 Ky. 703, 42 S. W. 349; Louisville & N. R. Co. v. Vincent, 29 Ky. L. Rep. 1049, 96 S. W. 898; Louisville & N. R. Co. v. Renfro, 142 Ky. 590, 33 L. R. A. (N. S.) 133, 135 S. W. 266.2 (Emphasis supplied)chanrobles virtual law library

Explosive or Dangerous Contents. - A carrier is ordinarily not liable for injuries to passengers from fires or explosions caused by articles brought into its conveyances by other passengers, in the absence of any evidence that the carrier, through its employees, was aware of the nature of the article or had any reason to anticipate danger therefrom. (Bogard v. Illinois C. R Co. 144 Ky. 649, 139 S. W. 855, 36 L. R. A.[N. S.] 337; Clarke v. Louisville & N. R. Co. 101 Ky. 34, 39 S. W. 840, 36 L. R. A. 123 [explosion of can of gasoline]; East Indian R. Co. v. Mukerjee [1901] A. C. [Eng.] 396, 3 B. R. C. 420 - P. C. [explosion of fireworks]; Annotation: 37 L. R. A. [N. S.] 725.)3 Appellant further invokes Article 1174 of the Civil Code which relieves all obligors, including, of course, common carriers like appellant, from the consequence of fortuitous events. The court a quo held that "the breach of contract (in this case) was not due to fortuitous event and that, therefore, the defendant is liable in damages." Since We hold that appellant has succeeded in rebutting the presumption of negligence by showing that it has exercised extraordinary diligence for the safety of its passengers, "according to the circumstances of the (each) case", We deem it unnecessary to rule whether or not there was any fortuitous event in this case.chanroblesvirtualawlibrary chanrobles virtual law library ACCORDINGLY, the appealed judgment of the trial court is reversed and the case is dismissed, without costs.chanroblesvirtualawlibrary chanrobles virtual law library Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez and Fernando, JJ., concur. Castro, J., concurs in the result. Teehankee, J., reserves his vote.

Endnotes: FIRST DIVISION [G.R. No. 131166. September 30, 1999] CALTEX (PHILIPPINES), INC. Petitioner, vs. SULPICIO LINES, INC., GO SIOC SO, ENRIQUE S. GO, EUSEBIO S. GO, CARLOS S. GO, VICTORIANO S. GO, DOMINADOR S. GO, RICARDO S. GO, EDWARD S. GO, ARTURO S. GO, EDGAR S. GO, EDMUND S. GO, FRANCISCO SORIANO, VECTOR SHIPPING CORPORATION, TERESITA G. CAEZAL AND SOTERA E. CAEZAL, Respondents. DECISION PARDO, J.: Is the charterer of a sea vessel liable for damages resulting from a collision between the chartered vessel and a passenger ship? When MT Vector left the port of Limay, Bataan, on December 19, 1987 carrying petroleum products of Caltex (Philippines), Inc. (hereinafter Caltex) no one could have guessed that it would collide with

MV Doa Paz, killing almost all the passengers and crew members of both ships, and thus resulting in one of the countrys worst maritime disasters. The petition before us seeks to reverse the Court of Appeals decision[1holding petitioner jointly liable with the operator of MT Vector for damages when the latter collided with Sulpicio Lines, Inc.s passenger ship MV Doa Paz. The facts are as follows: On December 19, 1987, motor tanker MT Vector left Limay, Bataan, at about 8:00 p.m., enroute to Masbate, loaded with 8,800 barrels of petroleum products shipped by petitioner Caltex.[2 MT Vector is a tramping motor tanker owned and operated by Vector Shipping Corporation, engaged in the business of transporting fuel products such as gasoline, kerosene, diesel and crude oil. During that particular voyage, the MT Vector carried on board gasoline and other oil products owned by Caltex by virtue of a charter contract between them.[3 On December 20, 1987, at about 6:30 a.m., the passenger ship MV Doa Paz left the port of Tacloban headed for Manila with a complement of 59 crew members including the master and his officers, and passengers totaling 1,493 as indicated in the Coast Guard Clearance.[4 The MV Doa Paz is a passenger and cargo vessel owned and operated by Sulpicio Lines, Inc. plying the route of Manila/ Tacloban/ Catbalogan/ Manila/ Catbalogan/ Tacloban/ Manila, making trips twice a week. At about 10:30 p.m. of December 20, 1987, the two vessels collided in the open sea within the vicinity of Dumali Point between Marinduque and Oriental Mindoro. All the crewmembers of MV Doa Paz died, while the two survivors from MT Vector claimed that they were sleeping at the time of the incident. The MV Doa Paz carried an estimated 4,000 passengers; many indeed, were not in the passenger manifest. Only 24 survived the tragedy after having been rescued from the burning waters by vessels that responded to distress calls.[5 Among those who perished were public school teacher Sebastian Caezal (47 years old) and his daughter Corazon Caezal (11 years old), both unmanifested passengers but proved to be on board the vessel. On March 22, 1988, the board of marine inquiry in BMI Case No. 653-87 after investigation found that the MT Vector, its registered operator Francisco Soriano, and its owner and actual operator Vector Shipping Corporation, were at fault and responsible for its collision with MV Doa Paz.[6 On February 13, 1989, Teresita Caezal and Sotera E. Caezal, Sebastian Caezals wife and mother respectively, filed with the Regional Trial Court, Branch 8, Manila, a complaint for Damages Arising from Breach of Contract of Carriage against Sulpicio Lines, Inc. (hereafter Sulpicio). Sulpicio, in turn, filed a third party complaint against Francisco Soriano, Vector Shipping Corporation and Caltex (Philippines), Inc. Sulpicio alleged that Caltex chartered MT Vector with gross and evident bad faith knowing fully well that MT Vector was improperly manned, ill-equipped, unseaworthy and a hazard to safe navigation; as a result, it rammed against MV Doa Paz in the open sea setting MT Vectors highly flammable cargo ablaze. On September 15, 1992, the trial court rendered decision dismissing the third party complaint against petitioner. The dispositive portion reads:

WHEREFORE, judgement is hereby rendered in favor of plaintiffs and against defendant-3rd party plaintiff Sulpicio Lines, Inc., to wit: 1. For the death of Sebastian E. Caezal and his 11-year old daughter Corazon G. Caezal, including loss of future earnings of said Sebastian, moral and exemplary damages, attorneys fees, in the total amount of P 1,241,287.44 and finally; 2. The statutory costs of the proceedings. Likewise, the 3rd party complaint is hereby DISMISSED for want of substantiation and with costs against the 3rd party plaintiff. IT IS SO ORDERED. DONE IN MANILA, this 15th day of September 1992. ARSENIO M. GONONG Judge[7 On appeal to the Court of Appeals interposed by Sulpicio Lines, Inc., on April 15, 1997, the Court of Appeal modified the trial courts ruling and included petitioner Caltex as one of the those liable for damages. Thus: WHEREFORE, in view of all the foregoing, the judgment rendered by the Regional Trial Court is hereby MODIFIED as follows: WHEREFORE, defendant Sulpicio Lines, Inc., is ordered to pay the heirs of Sebastian E. Caezal and Corazon Caezal: 1. Compensatory damages for the death of Sebastian E.Caezal and Corazon Caezal the total amount of ONE HUNDRED THOUSAND PESOS (P100,000); 2. Compensatory damages representing the unearned income of Sebastian E. Caezal, in the total amount of THREE HUNDRED SIX THOUSAND FOUR HUNDRED EIGHTY (P306,480.00) PESOS; 3. Moral damages in the amount of THREE HUNDRED THOUSAND PESOS (P 300,000.00); 4. Attorneys fees in the concept of actual damages in the amount of FIFTY THOUSAND PESOS (P 50,000.00); 5. Costs of the suit. Third party defendants Vector Shipping Co. and Caltex (Phils.), Inc. are held equally liable under the third party complaint to reimburse/indemnify defendant Sulpicio Lines, Inc. of the above-mentioned damages, attorneys fees and costs which the latter is adjudged to pay plaintiffs, the same to be shared half by Vector Shipping Co. (being the vessel at fault for the collision) and the other half by Caltex (Phils.), Inc. (being the charterer that negligently caused the shipping of combustible cargo aboard an unseaworthy vessel). SO ORDERED.

JORGE S. IMPERIAL Associate Justice WE CONCUR: RAMON U. MABUTAS. JR. PORTIA ALIO HERMACHUELOS Associate Justice Associate Justice[8 Hence, this petition. We find the petition meritorious. First: The charterer has no liability for damages under Philippine Maritime laws. The respective rights and duties of a shipper and the carrier depends not on whether the carrier is public or private, but on whether the contract of carriage is a bill of lading or equivalent shipping documents on the one hand, or a charter party or similar contract on the other.[9 Petitioner and Vector entered into a contract of affreightment, also known as a voyage charter.[10 A charter party is a contract by which an entire ship, or some principal part thereof, is let by the owner to another person for a specified time or use; a contract of affreightment is one by which the owner of a ship or other vessel lets the whole or part of her to a merchant or other person for the conveyance of goods, on a particular voyage, in consideration of the payment of freight.[11 A contract of affreightment may be either time charter, wherein the leased vessel is leased to the charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single voyage. In both cases, the charter-party provides for the hire of the vessel only, either for a determinate period of time or for a single or consecutive voyage, the ship owner to supply the ships store, pay for the wages of the master of the crew, and defray the expenses for the maintenance of the ship.[12 Under a demise or bareboat charter on the other hand, the charterer mans the vessel with his own people and becomes, in effect, the owner for the voyage or service stipulated, subject to liability for damages caused by negligence. If the charter is a contract of affreightment, which leaves the general owner in possession of the ship as owner for the voyage, the rights and the responsibilities of ownership rest on the owner. The charterer is free from liability to third persons in respect of the ship.[13 Second : MT Vector is a common carrier Charter parties fall into three main categories: (1) Demise or bareboat, (2) time charter, (3) voyage charter. Does a charter party agreement turn the common carrier into a private one? We need to answer this question in order to shed light on the responsibilities of the parties.

In this case, the charter party agreement did not convert the common carrier into a private carrier. The parties entered into a voyage charter, which retains the character of the vessel as a common carrier. In Planters Products, Inc. vs. Court of Appeals,[14 we said: It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the whole or portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in the case of a time-charter or voyage charter. It is only when the charter includes both the vessel and its crew, as in a bareboat or demise that a common carrier becomes private, at least insofar as the particular voyage covering the charter-party is concerned. Indubitably, a shipowner in a time or voyage charter retains possession and control of the ship, although her holds may, for the moment, be the property of the charterer. Later, we ruled in Coastwise Lighterage Corporation vs. Court of Appeals:[15 Although a charter party may transform a common carrier into a private one, the same however is not true in a contract of affreightment xxx A common carrier is a person or corporation whose regular business is to carry passengers or property for all persons who may choose to employ and to remunerate him.[16 MT Vector fits the definition of a common carrier under Article 1732 of the Civil Code. In Guzman vs. Court of Appeals,[17 we ruled: The Civil Code defines common carriers in the following terms: Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers for passengers or goods or both, by land, water, or air for compensation, offering their services to the public. The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as a sideline). Article 1732 also carefully avoids making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such services on a an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the general public, i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population. We think that Article 1733 deliberately refrained from making such distinctions. It appears to the Court that private respondent is properly characterized as a common carrier even though he merely back-hauled goods for other merchants from Manila to Pangasinan, although such backhauling was done on a periodic, occasional rather than regular or scheduled manner, and even though respondents principaloccupation was not the carriage of goods for others. There is no dispute that private respondent charged his customers a fee for hauling their goods; that the fee frequently fell below commercial freight rates is not relevant here. Under the Carriage of Goods by Sea Act :

Sec. 3. (1) The carrier shall be bound before and at the beginning of the voyage to exercise due diligence to (a) Make the ship seaworthy; (b) Properly man, equip, and supply the ship; xxx xxx xxx Thus, the carriers are deemed to warrant impliedly the seaworthiness of the ship. For a vessel to be seaworthy, it must be adequately equipped for the voyage and manned with a sufficient number of competent officers and crew. The failure of a common carrier to maintain in seaworthy condition the vessel involved in its contract of carriage is a clear breach of its duty prescribed in Article 1755 of the Civil Code.[18 The provisions owed their conception to the nature of the business of common carriers. This business is impressed with a special public duty. The public must of necessity rely on the care and skill of common carriers in the vigilance over the goods and safety of the passengers, especially because with the modern development of science and invention, transportation has become more rapid, more complicated and somehow more hazardous.[19 For these reasons, a passenger or a shipper of goods is under no obligation to conduct an inspection of the ship and its crew, the carrier being obliged by law to impliedly warrant its seaworthiness. This aside, we now rule on whether Caltex is liable for damages under the Civil Code. Third: Is Caltex liable for damages under the Civil Code? We rule that it is not. Sulpicio argues that Caltex negligently shipped its highly combustible fuel cargo aboard an unseaworthy vessel such as the MT Vector when Caltex: 1. Did not take steps to have M/T Vectors certificate of inspection and coastwise license renewed; 2. Proceeded to ship its cargo despite defects found by Mr. Carlos Tan of Bataan Refinery Corporation; 3. Witnessed M/T Vector submitting fake documents and certificates to the Philippine Coast Guard. Sulpicio further argues that Caltex chose MT Vector to transport its cargo despite these deficiencies: 1. The master of M/T Vector did not posses the required Chief Mate license to command and navigate the vessel; 2. The second mate, Ronaldo Tarife, had the license of a Minor Patron, authorized to navigate only in bays and rivers when the subject collision occurred in the open sea; 3. The Chief Engineer, Filoteo Aguas, had no license to operate the engine of the vessel;

4. The vessel did not have a Third Mate, a radio operator and a lookout; and 5. The vessel had a defective main engine.[20 As basis for the liability of Caltex, the Court of Appeals relied on Articles 20 and 2176 of the Civil Code, which provide: Article 20. - Every person who contrary to law, willfully or negligently causes damage to another, shall indemnify the latter for the same. Article 2176. - Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no preexisting contractual relation between the parties, is called a quasi-delict and is governed by the provisions of this Chapter. And what is negligence? The Civil Code provides: Article 1173. The fault or negligence of the obligor consists in the omission of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the persons, of the time and of the place. When negligence shows bad faith, the provisions of Article 1171 and 2201 paragraph 2, shall apply. If the law does not state the diligence which is to be observed in the performance, that which is expected of a good father of a family shall be required. In Southeastern College, Inc. vs. Court of Appeals,[21 we said that negligence, as commonly understood, is conduct which naturally or reasonably creates undue risk or harm to others. It may be the failure to observe that degree of care, precaution, and vigilance, which the circumstances justly demand, or the omission to do something which ordinarily regulate the conduct of human affairs, would do. The charterer of a vessel has no obligation before transporting its cargo to ensure that the vessel it chartered complied with all legal requirements. The duty rests upon the common carrier simply for being engaged in public service.[22 The Civil Code demands diligence which is required by the nature of the obligation and that which corresponds with the circumstances of the persons, the time and the place. Hence, considering the nature of the obligation between Caltex and MT Vector, the liability as found by the Court of Appeals is without basis. The relationship between the parties in this case is governed by special laws. Because of the implied warranty of seaworthiness,[23 shippers of goods, when transacting with common carriers, are not expected to inquire into the vessels seaworthiness, genuineness of its licenses and compliance with all maritime laws. To demand more from shippers and hold them liable in case of failure exhibits nothing but the futility of our maritime laws insofar as the protection of the public in general is concerned. By the same token, we cannot expect passengers to inquire every time they board a common carrier, whether the carrier possesses the necessary papers or that all the carriers employees are qualified. Such a practice would be an absurdity in a business where time is

always of the essence. Considering the nature of transportation business, passengers and shippers alike customarily presume that common carriers possess all the legal requisites in its operation. Thus, the nature of the obligation of Caltex demands ordinary diligence like any other shipper in shipping his cargoes. A cursory reading of the records convinces us that Caltex had reasons to believe that MT Vector could legally transport cargo that time of the year. Atty. Poblador: Mr. Witness, I direct your attention to this portion here containing the entries here underVESSELS DOCUMENTS 1. Certificate of Inspection No. 1290-85, issued December 21, 1986, and Expires December 7, 1987, Mr. Witness, what steps did you take regarding the impending expiry of the C.I. or the Certificate of Inspection No. 1290-85 during the hiring of MT Vector? Apolinar Ng: At the time when I extended the Contract, I did nothing because the tanker has a valid C.I. which will expire on December 7, 1987 but on the last week of November, I called the attention of Mr. Abalos to ensure that the C.I. be renewed and Mr. Abalos, in turn, assured me they will renew the same. Q: What happened after that? A: On the first week of December, I again made a follow-up from Mr. Abalos, and said they were going to send me a copy as soon as possible, sir.[24 xxx xxx xxx Q: What did you do with the C.I.? A: We did not insist on getting a copy of the C.I. from Mr. Abalos on the first place, because of our long business relation, we trust Mr. Abalos and the fact that the vessel was able to sail indicates that the documents are in order. xxx[25 On cross examination Atty. Sarenas: This being the case, and this being an admission by you, this Certificate of Inspection has expired on December 7. Did it occur to you not to let the vessel sail on that day because of the very approaching date of expiration? Apolinar Ng: No sir, because as I said before, the operation Manager assured us that they were able to secure a renewal of the Certificate of Inspection and that they will in time submit us a copy.[26 Finally, on Mr. Ngs redirect examination: Atty. Poblador: Mr. Witness, were you aware of the pending expiry of the Certificate of Inspection in the coastwise license on December 7, 1987. What was your assurance for the record that this document was renewed by the MT Vector?

Atty. Sarenas: xxx Atty. Poblador: The certificate of Inspection? A: As I said, firstly, we trusted Mr. Abalos as he is a long time business partner; secondly, those three years, they were allowed to sail by the Coast Guard. That are some that make me believe that they in fact were able to secure the necessary renewal. Q: If the Coast Guard clears a vessel to sail, what would that mean? Atty. Sarenas: Objection. Court: He already answered that in the cross examination to the effect that if it was allowed, referring to MV Vector, to sail, where it is loaded and that it was scheduled for a destination by the Coast Guard, it means that it has Certificate of Inspection extended as assured to this witness by Restituto Abalos. That in no case MV Vector will be allowed to sail if the Certificate of Inspection is, indeed, not to be extended. That was his repeated explanation to the crossexamination. So, there is no need to clarify the same in the re-direct examination.[27 Caltex and Vector Shipping Corporation had been doing business since 1985, or for about two years before the tragic incident occurred in 1987. Past services rendered showed no reason for Caltex to observe a higher degree of diligence. Clearly, as a mere voyage charterer, Caltex had the right to presume that the ship was seaworthy as even the Philippine Coast Guard itself was convinced of its seaworthiness. All things considered, we find no legal basis to hold petitioner liable for damages. As Vector Shipping Corporation did not appeal from the Court of Appeals decision, we limit our ruling to the liability of Caltex alone. However, we maintain the Court of Appeals ruling insofar as Vector is concerned . WHEREFORE, the Court hereby GRANTS the petition and SETS ASIDEthe decision of the Court of Appeals in CA-G. R. CV No. 39626, promulgated on April 15, 1997, insofar as it held Caltex liable under the third party complaint to reimburse/indemnify defendant Sulpicio Lines, Inc. the damages the latter is adjudged to pay plaintiffs-appellees. The Court AFFIRMSthe decision of the Court of Appeals insofar as it orders Sulpicio Lines, Inc. to pay the heirs of Sebastian E. Caezal and Corazon Caezal damages as set forth therein. Third-party defendant-appellee Vector Shipping Corporation and Francisco Soriano are held liable to reimburse/indemnify defendant Sulpicio Lines, Inc. whatever damages, attorneys fees and costs the latter is adjudged to pay plaintiffsappellees in the case. No costs in this instance. SO ORDERED. Davide, Jr., C.J., (Chairman), Kapunan, and Ynares-Santiago, JJ., concur. Puno, J., took no part due to close relation with a party.

Endnotes IRST DIVISION [G.R. No. L-46558 : July 31, 1981.] PHILIPPINE AIR LINES, INC., Petitioner, vs. THE COURT OF APPEALS and JESUS V. SAMSON, Respondents.

DECISION

GUERRERO, J.:

This is a petition for review on Certiorari of the decision of the Court of Appeals 1 dated April 18, 1977, affirming with modification the decision of the Court of First Instance of Albay in Civil Case No. 1279, entitled Jesus V. Samson, plaintiff, vs. Philippine Air Lines, Inc., defendant, for damages. The dispositive portion of the trial court s decision reads: WHEREFORE, for all the foregoing considerations, judgment is hereby rendered in favor of the plaintiff and against the defendant ordering the defendant to pay the plaintiff, the following sums: P1988,000.00 as unearned income or damages; P50,000.00 for moral damages; P20,000.00 as attorney s fees and P5,000.00 as expenses of litigation, or a total of P273,000.00. Costs against the defendant. The appellate court modified the above decision, to wit: However, Plaintiff-Appellee, who has been deprived of his job since 1954, is entitled to the legal rate of interest on the P198,000.00 unearned income from the filing of the complaint cranad(Sec. 8, Rule 51, Rules of Court). WHEREFORE, with the modification indicated above, the judgment appealed from is affirmed, with costs against defendant-appellant. The complaint filed on July 1, 1954 by plaintiff Jesus V. Samson, private respondent herein, averred that on January 8, 1951, he flew as co-pilot on a regular flight from Manila to Legaspi with stops at Daet, Camarines Norte and Pili, Camarines Sur, with Captain Delfin Bustamante as commanding pilot of a C-47 plane belonging to defendant Philippine Air Lines, Inc., now the herein petitioner; that on attempting to land the plane at Daet airport, Captain Delfin Bustamante due to his very slow reaction and poor judgment overshot the airfield and as a result, notwithstanding the diligent efforts

of the plaintiff co-pilot to avert an accident, the airplane crashlanded beyond the runway; that the jolt caused the head of the plaintiff to hit and break through the thick front windshield of the airplane causing him severe brain concussion, wounds and abrasions on the forehead with intense pain and suffering cranad(par. 6, complaint).:onad The complaint further alleged that instead of giving plaintiff expert and proper medical treatment called for by the nature and severity of his injuries, defendant simply referred him to a company physician, a general medical practitioner, who limited the treatment to the exterior injuries without examining the severe brain concussion of plaintiff cranad(par. 7, complaint); that several days after the accident, defendant Philippine Air Lines called back the plaintiff to active duty as co-pilot, and inspite of the latter s repeated request for expert medical assistance, defendant had not given him any cranad(par. 8, complaint); that as a consequence of the brain injury sustained by plaintiff from the crash, he had been having periodic dizzy spells and had been suffering from general debility and nervousness cranad(par. 9, complaint); that defendant airline company instead of submitting the plaintiff to expert medical treatment, discharged the latter from its employ on December 21, 1953 on grounds of physical disability, thereby causing plaintiff not only to lose his job but to become physically unfit to continue as aviator due to defendant s negligence in not giving him the proper medical attention cranad(pars. 10-11, complaint). Plaintiff prayed for damages in the amount of P180,000.00 representing his unearned income, P50,000.00 as moral damages, P20,000.00 as attorney s fees and P5,000.00 as expenses, or a total of P255,000.00. In its answer filed on July 28, 1954, defendant PAL denied the substantial averments in the complaint, alleging among others, that the accident was due solely and exclusively to inevitable unforeseen circumstances whereby plaintiff sustained only superficial wounds and minor injuries which were promptly treated by defendant s medical personnel cranad(par. 5, answer); that plaintiff did not sustain brain injury or cerebral concussion from the accident since he passed the annual physical and medical examination given thereafter on April 24, 1951; that the headaches and dizziness experienced by plaintiff were due to emotional disturbance over his inability to pass the required up-grading or promotional course given by defendant companycranad(par. 6, answer), and that, as confirmed by an expert neuro-surgeon, plaintiff was suffering-from neurosis and in view of this unfitness and disqualification from continuing as a pilot, defendant had to terminate plaintiff s employment cranad(pars. 7, 9, answer). Further, defendant alleged that by the very nature of its business as a common carrier, it is bound to employ only pilots who are proficient and in good mental, emotional and physical condition; that the pilot, Captain Delfin Bustamante, was a competent and proficient pilot, and although he was already afflicted with a tumor of the nasopharynx even before the accident of January 8, 1951, the Civil Aeronautics Administration, in passing upon the fitness of pilots, gave Capt. Bustamante a waiver of physical standards to enable him to retain his first class airman certificate since the affliction had not in the least affected his proficiency cranad(pars. 16-17, answer). By way of counterclaim, defendant prayed for P10,000.00 as expenses for the litigation. On March 25, 1958, defendant filed a Motion to Dismiss on the ground that the complaint is essentially a Workmen s Compensation claim, stating a cause of action not cognizable within the general jurisdiction of the court. The Motion to Dismiss was denied in the order of April 14, 1958.

After the reception of evidence, the trial court rendered on January 15, 1973 the decision, the dispositive portion of which has been earlier cited. The defendant Philippine Air Lines, Inc. appealed the decision to the Court of Appeals as being contrary to law and unsupported by the evidence. It raised as errors of the trial court cranad(a) the holding that the damages allegedly suffered by plaintiff are attributable to the accident of January 8, 1951 which was due to the negligence of defendant in having allowed Capt. Delfin Bustamante to continue flying despite his alleged slow reaction and poor judgment; cranad(b) the finding that defendant was negligent in not having given plaintiff proper and adequate expert medical treatment and assistance for the injuries allegedly sustained in the accident of January 8, 1951; and cranad(c) in ordering defendant to pay actual or compensatory damages, moral damages and attorney s fees to the plaintiff. On April 18, 1977, the Court of Appeals rendered its decision affirming the judgment of the lower court but modified the award of damages by imposing legal rate of interest on the P198,000.00 unearned income from the filing of the complaint, citing Sec. 8, Rule 51 of the Rules of Court. Its motion for reconsideration of the above judgment having been denied, Philippine Air Lines, Inc. filed this instant petition for Certiorari on the ground that the decision is not in accord with law or with the applicable jurisprudence, aside from its being replete with findings in the nature of speculation, surmises and conjectures not borne out by the evidence on record thereby resulting to misapprehension of facts and amounting to a grave abuse of discretion cranad(p. 7, Petition). Petitioner raises the fundamental question in the case at bar as follows: Is there a causal connection between the injuries suffered by private respondent during the accident on 8 January 1951 and the subsequent periodic dizzy spells, headache and general debility of which private respondent complained every now and then, on the one hand, and such periodic dizzy spells, headache and general debility allegedly caused by the accident and private respondent s eventual discharge from employment, on the other? PAL submits that respondent court s award of damages to private respondent is anchored on findings in the nature of speculations, surmises and conjectures and not borne out by the evidence on record, thereby resulting in a misapprehension of facts and amounting to a grave abuse of discretion. Petitioner s submission is without merit. As found by the respondent court, the following are the essential facts of the case: It appears that plaintiff, a licensee aviator, was employed by defendant a few years prior to January 8, 1951 as a regular co-pilot on a guaranteed basic salary of P750.00 a month. He was assigned to and/or paired with pilot Delfin Bustamante. Sometime in December 1950, he complained to defendant through its authorized official about the slow reaction and poor judgment of pilot Delfin Bustamante. Notwithstanding said complaint, defendant allowed the pilot to continue flying. On January 8, 1951, the two manned the regular afternoon flight of defendant s plane from Manila to Legaspi, with stops at Daet, Camarines Norte, and Pili, Camarines Sur. Upon making a landing at Daet, the pilot, with his slow reaction and poor judgment, overshot the airfield and, as a result of

and notwithstanding diligent efforts of plaintiff to avert an accident, the airplane crash-landed beyond the runway into a mangrove. The jolt and impact caused plaintiff to hit his head upon the front windshield of the plane thereby causing his brain concussions and wounds on the forehead, with concomittant intense pain. Plaintiff was not given proper medical attention and treatment demanded by the nature and severity of his injuries. Defendant merely referred him to its clinic attended by general practitioners on his external injuries. His brain injury was never examined, much less treated. On top of that negligence, defendant recalled plaintiff to active duty as a co-pilot, completely ignoring his plea for expert medical assistance. Suffering periodic dizzy spells, headache and general debility, plaintiff every now and then complained to defendant. To make matters worst for plaintiff, defendant discharged him from his employment on December 21, 1953. In consequence, plaintiff has been beset with additional worries, basically financial. He is now a liability instead of a provider, of his family. On July 1, 1954, plaintiff filed a complaint for damages. Defendant vainly sought to dismiss the complaint after filing an answer. Then, the judgment and this appeal. Continuing, the respondent Court of Appeals further held: There is no question about the employment of plaintiff by defendant, his age and salary, the overshooting by pilot Bustamante of the airfield and crashlanding in a mangrove, his hitting his head on the front windshield of the plane, his intermittent dizzy spells, headache and general debility for which he was discharged from his employment on December 21, 1953. As the lower court aptly stated: From the evidence adduced by the parties, the Court finds the following facts to be uncontroverted: That the plaintiff Jesus V. Samson, on January 8, 1951 and a few years prior thereto, December 21, 1953, was a duly licensed pilot employed as a regular co-pilot of the defendant with assignment in its domestic air service in the Philippines; that on January 8, 1951, the defendant s airplane met an accident in crashlanding at the Daet Airport, Camarines Norte by overshooting the runway and reaching the mangroves at the edge of the landing strip; that the jolt caused plaintiff s head to hit the front windshield of the airplane causing him to suffer wounds and abrasion on the forehead; that the defendant, instead of giving the plaintiff expert and proper medical treatment called for by the nature and severity of the injuries of the plaintiff, simply referred him to the clinic of the defendant s physicians who are only general medical practitioners and not brain specialists; that the defendant s physicians limited their treatment to the exterior injuries on the forehead of the plaintiff and made no examination of the severe concussion of the brain of the plaintiff; that the Medical Director and Flight Surgeon of the defendant were not able to definitely determine the cause of the complaint of the plaintiff as to the periodic attack of dizziness, spells and headache; that due to this laxity of the defendant s physician and the continuous suffering of the ailment of the plaintiff complained of, he demanded for expert medical assistance for his brain injury and to send him to the United States, which demand was turned down and in effect denied by the defendant; that instead the defendant referred the plaintiff to a neurologist, Dr. Victor Reyes; that from the time that said accident occurred on January 21, 1953, he was ordered grounded on several occasions because of his complaint of dizzy spells and headache; that instead of submitting the plaintiff to

expert medical treatment as demanded by him and denied by the defendant, he was discharged from its employment on December 21, 1953 on the ground of physical disability, and that the plaintiff, at the time when the defendant s plane met the accident, up to the time he was discharged, was regularly employed as a co-pilot and receiving a basic salary of P750.00 a month plus extra pay for flying time, and bonuses amounting to P300.00 a month. Even defendant-appellant itself admits as not controverted the following facts which generally admit what have been stated above as not controverted. In the case at bar, the following facts are not the subject of controversy: (1) First, that from July 1950 to 21 December 1953, plaintiff was employed with defendant company as a first officer or co-pilot and served in that capacity in defendant s domestic services. (2) Second, that on January 1951, plaintiff did fly on defendant s PI-C 94, as first officer or co-pilot, with the late Capt. Delfin Bustamante in command as pilot; that while making a landing at the Daet airport on that date, PI-C 94 did meet an accident as stated above. (3) Third, that at or about the time of the discharge from defendant company, plaintiff had complained of spells of dizziness, headaches and nervousness , by reason of which he was grounded from flight duty. In short, that at that time, or approximately from November 1953 up to the date of his discharge on 21 December 1953, plaintiff was actually physically unfit to discharge his duties as pilot. (4) Fourth, that plaintiff s unfitness for flight duty was properly established after a thorough medical examination by competent medical experts. cralaw cranad(pp. 11-12, appellant s brief) hence, there can hardly be an issue, factual, legal or medical. Taking exception from the rest of the essential facts of the case as found by the respondent court PAL claims said facts are not fully borne out by the evidence on record and insists that the injuries suffered by private respondent during the accident on January 8, 1951 were superficial in nature; that the periodic spells, headache, and general debility complaint of every now and then by private respondent subsequent to the Jan. 8, 1951 incident were due to emotional disturbances and that no negligence can be attributed to Capt. Delfin Bustamante much less to PAL for the occurrence on January 8, 1951, hence PAL cannot be held liable for damages. Petitioner claims absence of any causal connection between private respondent s superficial injuries and his alleged subsequent periodic spells, headache and general debility, pointing out that these subsequent ailments were found by competent physician, including an expert neuro-surgeon, to be due to emotional disturbances insights the conclusions of Dr. Trajano V. Bernardo that respondent s complaints were psychosomatic symptoms on the basis of declarations made by respondent himself, which conclusions are supported by similar diagnosis made by Drs. Damaceno J. Ago and Villaraza stating that respondent Samson was suffering from neurosis as well as the report of Dr. Victor Reyes, a neurological specialist, indicating that the symptoms were probably, most probably due to psychogenic factors and have no organic basis.

In claiming that there is no factual basis for the finding of the respondent court that the crashlanding caused respondent s brain concussion . cra ., with concomittant intense pain, for on the contrary, testimonial evidence establish the superficiality of the injuries sustained by respondent during the accident of January 8, 1951, petitioner quotes portions of the testimony of Dr. Manuel S. Sayas, who declared that he removed the band-aid on the forehead of respondent and that he found out after removal that the latter had two contussed superficial wounds over the supra orbiter regions or just above the eyes measuring one centimeter long and one millimeter deep. He examined and found his blood pressure normal, no discharges from the nose and ears. Dr. Trajano V. Bernardo also testified that when he examined respondent Samson three days after the accident, the wound was already healed and found nothing wrong with his ears, nose and throat so that he was declared fit for duty after the sixth day. Petitioner goes further. It contends that there is no causal connection between respondent s superficial injuries sustained during the accident on January 8, 1951 and plaintiff s discharge from employment with PAL on December 21, 1953. According to PAL, it was the repeated recurrence of respondent s neurasthenic symptoms cranad(dizzy spells, headache, nervousness) which prompted PAL s Flight Surgeon, Dr. Bernardo, to recommend that plaintiff be grounded permanently as respondent was psychologically unfit to resume his duties as pilot. PAL concludes that respondent s eventual discharge from employment with PAL was effected for absolutely valid reasons, and only after he was thoroughly examined and found unfit to carry out his responsibilities and duties as a pilot.:onad We agree with the respondent court in finding that the dizzy spells, headache and general debility of private respondent Samson was an after-effect of the crash-landing and We find that such holding is supported by substantial evidence, which We quote from the court s decision, to wit: Defendant would imply that plaintiff suffered only superficial wounds which were treated and not brain injury. It would, by the opinion of its company doctors, Dr. Bernardo and Dr. Reyes, attribute the dizzy spells and headache to organic or as phychosomatic, neurasthenic or psychogenic, which we find outlandishly exaggerated. That plaintiff s condition as psychosomatic rather than organic in nature is allegedly confirmed by the fact that on six cranad(6) separate occasions after the accident he passed the required CAA physical examination for airman s certificate. cranad(Exhs. 78, 79, 80, 81, 83 and 92). We noticed, however, that there were other similar physical examinations conducted by the CAA on the person of plaintiff the report on which were not presented in evidence. Obviously, only those which suited defendants cause were hand-picked and offered in evidence. We hesitate to accept the opinion of the defendant s two physicians, considering that Dr. Bernardo admittedly referred to Dr. Reyes because he could not determine the cause of the dizzy spells and headache and the latter admitted that it is extremely hard to be certain of the cause of his dizzy spells, and suggested a possibility that it was due to postraumatic syndrome, evidently due to the injuries suffered by the plaintiff in hitting the forehead against the windshield of the plane during the accident. Judgment are not based on possibilities. The admitted difficulty of defendant s doctors in determining the cause of the dizzy spells and headache cannot be a sound basis for finding against the plaintiff and in favor of defendant.

Whatever it might be, the fact is that such dizzy spells, headache and general debility was an aftereffect of the crash-landing. Be it brain injury or psychosomatic, neurasthenic or psychogenic, there is no gainsaying the fact that it was caused by the crash-landing. As an effect of the cause, not fabricated or concocted, plaintiff has to be indemnified. The fact is that such effect caused his discharge. We are prone to believe the testimony of the plaintiff s doctors. Dr. Morales, a surgeon, found that blood was coming from plaintiff s ears and nose. He testified that plaintiff was suffering from cerebral concussion as a result of traumatic injury to the brain caused by his head hitting on the windshield of the plane during the crash-landing cranad(Exhibit G ). Dr. Conrado Aramil, a neurologist and psychiatrist with experience in two hospitals abroad, found abnormality reflected by the electroencephalogram examination in the frontal area on both sides of plaintiff s head cranad(Exhibits K , K-1 ). The opinion of these two specialist renders unnecessary that of plaintiff s wife who is a physician in her own right and because of her relation to the plaintiff, her testimony and opinion may not be discussed here, although her testimony is crystallized by the opinions of Dr. Ador Dionisio, Dr. Marquez, Dr. Jose O. Chan, Dr. Yambao and Dr. Sandico. Even the doctors presented by defendant admit vital facts about plaintiff s brain injury. Dr. Bernardo admits that due to the incident, the plaintiff continuously complained of his fainting spells, dizziness and headache everytime he flew as a co-pilot and everytime he went to defendant s clinic no less than 25 times cranad(Exhibits 15 to 36 ), that he complained of the same to Dr. Reyes; that he promised to help send plaintiff to the United States for expert medical assistance provided that whatever finding thereat should not be attributed to the crash-landing incident to which plaintiff did not agree and that plaintiff was completely ignored by the defendant in his plea for expert medical assistance. They admitted that they could not determine definitely the cause of the fainting spells, dizziness and headache, which justifies the demand for expert medical assistance. We also find the imputation of gross negligence by respondent court to PAL for having allowed Capt. Delfin Bustamante to fly on that fateful day of the accident on January 8, 1951 to be correct, and We affirm the same, duly supported as it is by substantial evidence, clearly established and cited in the decision of said court which states as follows: The pilot was sick. He admittedly had tumor of the nasopharynx cranad(nose). He is now in the Great Beyond. The spot is very near the brain and the eyes. Tumor on the spot will affect the sinus, the breathing, the eyes which are very near it. No one will certify the fitness to fly a plane of one suffering from the disease. . cra . The fact First Pilot Bustamante has a long standing tumor of the Nasopharynx for which reason he was grounded since November 1947 is admitted in the letter cranad(Exh. 69-A) of Dr. Bernardo to the Medical Director of the CAA requesting waiver of physical standards. The request for waiver of physical standards is itself a positive proof that the physical condition of Capt. Bustamante is short of the standard set by the CAA. The Deputy Administrator of the CAA granted the request relying on the representation and recommendation made by Dr. Bernardo cranad(See Exh. 69). We noted, however, that the request cranad(Exh. 69-A) says that it is believed that his

continuing to fly as a co-pilot does not involve any hazard. cralaw cranad(Italics supplied). Flying as a First Officer entails a very different responsibility than flying as a mere co-pilot. Defendant requested the CAA to allow Capt. Bustamante to fly merely as a co-pilot and it is safe to conclude that the CAA approved the request thus allowing Bustamante to fly only as a co-pilot. For having allowed Bustamante to fly as a First Officer on January 8, 1951, defendant is guilty of gross negligence and therefore should be made liable for the resulting accident. As established by the evidence, the pilot used to get treatments from Dr. Sycangco. He used to complain of pain in the face more particularly in the nose which caused him to have sleepless nights. Plaintiff s observation of the pilot was reported to the Chief Pilot who did nothing about it. Captain Carbonel of the defendant corroborated plaintiff of this matter. The complaint against the slow reaction of the pilot at least proved the observation. The observation could be disregarded. The fact that the complaint was not in writing does not detract anything from the seriousness thereof, considering that a miscalculation would not only cause the death of the crew but also of the passengers. One month prior to the crash-landing, when the pilot was preparing to land in Daet, plaintiff warned him that they were not in the vicinity of Daet but above the town of Ligao. The plane hit outside the airstrip. In another instance, the pilot would hit the Mayon Volcano had not plaintiff warned him. These more than prove what plaintiff had complained of. Disregard thereof by defendant is condemnable. To bolster the claim that Capt. Bustamante has not suffered from any kind of sickness which hampered his flying ability, appellant contends that for at least one or more years following the accident of January 8, 1951, Capt. Bustamante continued to fly for defendant company as a pilot, and did so with great skill and proficiency, and without any further accident or mishap, citing tsn. pp. 756-765, January 20, 1965. We have painstakingly perused the records, particularly the transcript of stenographic notes cited, but found nothing therein to substantiate appellant s contention. Instead, We discovered that the citation covers the testimony of Dr. Bernardo on the physical condition of Bustamante and nothing about his skills or proficiency to fly nor on the mishaps or accidents, matters which are beyond Dr. Bernardo s competence anyway. Assuming that the pilot was not sick or that the tumor did not affect the pilot in managing the plane, the evidence shows that the overshooting of the runway and crash-landing at the mangrove was caused by the pilot for which acts the defendant must answer for damages caused thereby. And for this negligence of defendant s employee, it is liable cranad(Joaquin vs. Aniceto, 12 SCRA 308). At least, the law presumes the employer negligent imposing upon it the burden of proving that it exercised the diligence of a good father of a family in the supervision of its employees. Defendant would want to tie plaintiff to the report he signed about the crash-landing. The report was prepared by his pilot and because the latter pleaded that he had a family too and would have nowhere to go if he lost his job, plaintiff s compassion would not upturn the truth about the crashlanding. We are for the truth not logic of any argumentation. At any rate, it is incorrect to say that the Accident Report cranad(Exh. 12 & 12-A), signed by plaintiff, exculpated Capt. Bustamante from any fault. We observed that the Report does not categorically state that Capt. Bustamante was not at fault. It merely relates in chronological sequence what Capt.

Bustamante and plaintiff did from the take-off from Manila to the landing in Daet which resulted in an accident. On the contrary, we may infer the negligence of Bustamante from the following portion of the Report, to wit: . cra . I felt his brakes strong but as we neared the intersection of the NE-SW runway, the brakes were not as strong and I glanced at the system pressure which indicated 900 lbs. per sq. m. It was during the above precise instance that Capt. Bustamante lost his bearing and disposition. Had he maintained the pressure on the brakes the plane would not have overshot the runway. Verily, Bustamante displayed slow reaction and poor judgment.cranad(CA decision, pp. 8-12). This Court is not impressed by, much less can We accept petitioner s invocation to calibrate once again the evidence testified to in detail and plucked from the voluminous transcript to support petitioner s own conclusion. It is not the task of this Court to discharge the functions of a trier of facts much less to enter into a calibration of the evidence, notwithstanding petitioner s wail that the judgment of the respondent court is based entirely on speculations, surmises and conjectures. We are convinced that respondent court s judgment is supported by strong, clear and substantial evidence.:onad Petitioner is a common carrier 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, as defined in Art. 1732, New Civil Code. The law is clear in requiring a common carrier to exercise the highest degree of care in the discharge of its duty and business of carriage and transportation under Arts. 1733, 1755 and 1756 of the New Civil Code. These Articles provide: 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, and 1745, 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 passenger safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances. Art. 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed in Articles 1733 and 1755. The duty to exercise the utmost diligence on the part of common carriers is for the safety of passengers as well as for the members of the crew or the complement operating the carrier, the airplane in the case at bar. And this must be so for any omission, lapse or neglect thereof will certainly result to the damage, prejudice, nay injuries and even death to all aboard the plane, passengers and crew members alike.

Now to the damages. The Court of Appeals affirmed the award of damages made by the trial court, stating that the damages awarded plaintiff by the lower court are in accordance with the facts, law and jurisprudence. The court further observed that defendant-appellant is still fortunate, considering that the unearned income was reckoned with only up to 1968 and not up to the present as plaintiff-appellee is still living. Whatever mathematical error defendant-appellant could show by abstract argumentation, the same must be compensated by such deficiency of the damages awarded to plaintiff-appellee. As awarded by the trial court, private respondent was entitled to P198,000.00 as unearned income or compensatory damages; P50,000.00 for moral damages, P20,000.00 as attorney s fees and P5,000.00 as expenses of litigation, or a total of P273,000.00. The trial court arrived at the sum of P198,000.00 as unearned income or damages by considering that respondent Samson could have continued to work as airline pilot for fifteen more years, he being only 38 years at the time the services were terminated by the defendant cranad(PAL) and he would have earned P120,000.00 from 1954 to 1963 or a period of ten cranad(10) years at the rate of one thousand per month cranad(P750.00 basic salary plus P300.00 extra pay for extra flying time and bonuses; and considering further that in 1964 the basic pay of defendant s pilot was increased to P12,000.00 annually, the plaintiff could have earned from 1964 to 1968 the sum of P60,000.00 in the form of salaries and another P18,000.00 as bonuses and extra pay for extra flying time at the same rate of P300 a month, or a grand total of P198,000.00 for the entire period. This claim of the plaintiff for loss or impairment of earning capacity is based on the provision of Article 2205 of the New Civil Code of the Philippines which provides that damages may be recovered for loss or impairment of earning capacity in cases of temporary or permanent personal injury. This provision of law has been construed and interpreted in the case of Aureliano Ropato, et al. vs. La Mallorca General Partnership, 56 O.G., 7812, which rules that law allows the recovery of damages for loss or impairment of earning capacity in cases of temporary or permanent personal injury. chanroblesvirtualawlibrary(Decision, CFI, pp. 98-99, Record on Appeal) The respondent appellate court modified the above award by ordering payment of legal interest on the P198,000.00 unearned income from the filing of the claim, citing Sec. 8, Rule 51 of the Rules of Court. Petitioner assails the award of the total sum of P198,000.00 as unearned income up to 1968 as being tenuous because firstly, the trial court s finding affirmed by the respondent court is allegedly based on pure speculation and conjecture and secondly, the award of P300.00 a month as extra pay for extra flying time from 1954 to 1968 is likewise speculative. PAL likewise rejects the award of moral damages in the amount of P50,000.00 on the ground that private respondent s action before the trial court does not fall under any of the cases enumerated in the law cranad(Art. 2219 of the New Civil Code) for which moral damages are recoverable and that although private respondent s action gives the appearance that it is covered under quasi-delict as provided in Art. 21 of the New Civil Code, the definition of quasi-delict in Art. 2176 of the New Civil Code expressly excludes cases where there is a pre-existing contractual relation between the parties, as in the case under consideration, where an employer-employee relationship existed between PAL and private respondent. It is further argued that private respondent s action cannot be deemed to be covered by Art. 21, inasmuch as there is no evidence on record to show that PAL wilfully cause(d) loss or injury to cranad(private

respondent) in a manner that is contrary to morals, good customs or public policy . cra . Nor can private respondent s action be considered analogous to either of the foregoing, for the reasons are obvious that it is not. chanroblesvirtualawlibrary(Memorandum of petitioner, pp. 418-421, Records) Having affirmed the gross negligence of PAL in allowing Capt. Delfin Bustamante to fly the plane to Daet on January 8, 1951 whose slow reaction and poor judgment was the cause of the crash-landing of the plane which resulted in private respondent Samson hitting his head against the windshield and causing him injuries for which reason PAL terminated his services and employment as pilot after refusing to provide him with the necessary medical treatment of respondent s periodic spells, headache and general debility produced from said injuries, We must necessarily affirm likewise the award of damages or compensation under the provisions of Art. 1711 and Art. 1712 of the New Civil Code which provide: Art. 1711. Owners of enterprises and other employers are obliged to pay compensation for the death or injuries to their laborers, workmen, mechanics or other employees, even though the event may have been purely accidental or entirely due to a fortuitous cause, if the death or personal injury arose out of and in the course of the employment. The employer is also liable for compensation if the employee contracts any illness or disease caused by such employment or as the result of the nature of the employment. If the mishap was due to the employee s own notorious negligence, or voluntary act, or drunkenness, the employer shall not be liable for compensation. When the employee s lack of due care contributed to his death or injury, the compensation shall be equitably reduced. Art. 1712. If the death or injury is due to the negligence of a fellow-worker, the latter and the employer shall be solidarily liable for compensation. If a fellow-worker s intentional or malicious act is the only cause of the death or injury, the employer shall not be answerable, unless it should be shown that the latter did not exercise due diligence in the selection or supervision of the plaintiffs fellow-worker. The grant of compensatory damages to the private respondent made by the trial court and affirmed by the appellate court by computing his basic salary per annum at P750.00 a month as basic salary and P300.00 a month for extra pay for extra flying time including bonus given in December every year is justified. The correct computation however should be P750 plus P300 x 12 months = P12,600 per annum x 10 years = P126,000.00 cranad(not P120,000.00 as computed by the court a quo). The further grant of increase in the basic pay of the pilots to P12,000 annually for 1964 to 1968 totalling P60,000.00 and another P18,000.00 as bonuses and extra pay for extra flying time at the same rate of P300.00 a month totals P78,000.00. Adding P126,000.00 cranad(1964 to 1968 compensation) makes a grand total of P204,000.00 cranad(not P198,000.00 as originally computed). As to the grant of moral damages in the sum of P50,000.00 We also approve the same. We have noted and considered the holding of the appellate court in the matter of bad faith on the part of PAL, stated hereunder, this wise: None of the essential facts material to the determination of the case have been seriously assailed: the overshooting of runway and crash-landing into the mangroves; the hitting of plaintiff s head to the front windshield of the plane; the oozing of blood out of his ears, nose and mouth; the

intermittent dizzy spells, headaches and general debility thereafter for which he was discharged from his employment; the condition of not to attribute the cause of the ailment to the crash-landing imposed in bad faith for a demanded special medical service abroad; and the resultant brain injury which defendant s doctors could not understand nor diagnose. xxx The act of defendant-appellant in unjustly refusing plaintiff-appellee s demand for special medical service abroad for the reason that plaintiff-appellee s deteriorating physical condition was not due to the accident violates the provisions of Article 19 of the Civil Code on human relations to act with justice, give everyone his due, and observe honesty and good faith. chanroblesvirtualawlibrary(CA Resolution, pp. 151-152, Records) We reject the theory of petitioner that private respondent is not entitled to moral damages. Under the facts found by the trial court and affirmed by the appellate court and under the law and jurisprudence cited and applied, the grant of moral damages in the amount of P50,000.00 is proper and justified. The fact that private respondent suffered physical injuries in the head when the plane crash-landed due to the negligence of Capt. Bustamante is undeniable. The negligence of the latter is clearly a quasi-delict and therefore Article 2219, cranad(2) New Civil Code is applicable, justifying the recovery of moral damages. Even from the standpoint of the petitioner that there is an employer-employee relationship between it and private respondent arising from the contract of employment, private respondent is still entitled to moral damages in view of the finding of bad faith or malice by the appellate court, which finding We hereby affirm, applying the provisions of Art. 2220, New Civil Code which provides that willful injury to property may be a legal ground for awarding moral damages if the court should find that, under the circumstances, such damages are justly due. The same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith. The justification in the award of moral damages under Art. 19 of the New Civil Code on Human Relations which requires that every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith, as applied by respondent court is also well-taken and We hereby give Our affirmance thereto. With respect to the award of attorney s fees in the sum of P20,000.00 the same is likewise correct. As pointed out in the decision of the Court of Appeals, the plaintiff is entitled to attorney s fees because he was forced to litigate in order to enforce his valid claim cranad(Ganaban vs. Bayle, 30 SCRA 365; De la Cruz vs. De la Cruz, 22 SCRA 33; and many others); defendant acted in bad faith in refusing plaintiff s valid claimcranad(Filipino Pipe Foundry Corporation vs. Central Bank, 23 SCRA 1044); and plaintiff was dismissed and was forced to go to court to vindicate his right cranad(Nadura vs. Benguet Consolidated, Inc., 5 SCRA 879). We also agree with the modification made by the appellate court in ordering payment of legal interest from the date judicial demand was made by Pilot Samson against PAL with the filing of the complaint in the lower court. We affirm the ruling of the respondent court which reads:

Lastly, the defendant-appellant claims that the legal rate of interest on the unearned compensation should be computed from the date of the judgment in the lower court, not from the filing of the complaint, citing a case where the issue raised in the Supreme Court was limited to when the judgment was rendered in the lower court or in the appellate court, which does not mean that it should not be computed from the filing of the complaint. Articles 1169, 2209 and 2212 of the Civil Code govern when interest shall be computed. Thereunder interest begins to accrue upon demand, extrajudicial or judicial. A complaint is a judicial demand cranad(Cabarroguis vs. Vicente, 107 Phil. 340). Under Article 2212 of the Civil Code, interest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent upon this point. chanroblesvirtualawlibrary(CA Resolution, pp. 153-154, Records). The correct amount of compensatory damages upon which legal interest shall accrue from the filing of the complaint is P204,000.00 as herein computed and not P198,000.00. WHEREFORE, in view of all the foregoing, the judgment of the appellate court is hereby affirmed with slight modification in that the correct amount of compensatory damages is P204,000.00. With costs against petitioner. SO ORDERED. Makasiar and De Castro, JJ., concur. Teehankee and Melencio-Herrera, JJ., concur in the result.

Endnotes