LAW ON TRANSPORTATION

I. CONCEPT OF COMMON CARRIER 1. Definition Article 1732 NCC, De Guzman vs. Court of Appeals Planters Products Inc vs. CA

168 SCRA 612 (1993) 226 SCRA 76 (1993)

2. Characteristics Fisher vs. Yangco Steamship Co. 31 Phil 1 (1915) US vs. Quinahon 31 Phil 189 Loadstar Shipping Co., Inc. vs. Court of Appeals 339 (1999) First Phil. Industrial vs. Court of Appeals 300 (1998)

315 SCRA

SCRA 661

3. Distinguished from Private Carrier Home Insurance Co. vs. American Steamship 23 SCRA 24 (1968) San Pablo vs. Pantranco 153 SCRA 199 (1987) National Steel Corp. vs. Court of Appeals 283 SCRA 45 (1997) 4. Government Regulation of Common Carriers Business KMU Labor Center vs. Garcia, Jr. 239 SCRA 386 (1994) Tatad vs. Garcia, Jr. 241 SCRA 334 (1997) 5. Governing Law Samar Mining Co., Inc. vs. Nordeutscher Llyod 132 SCRA 529 (1984) Eastern Shipping Lines vs. IAC 150 SCRA 464 (1984) National Development Co. vs. Court of Appeals 164 SCRA 593 (1988) II. CONTRACTUAL EFFECTS A. VIGILANCE OVER GOODS 1. Extra-ordinary Diligence Required of Common Carriers (Article 1733, NCC) a. Registered Owner Rule Gelisan vs. Alday 154 SCRA 388 (1987) Benedicto vs. IAC 187 SCRA 547 (1990) Philtranco Service Enterprises, Inc. vs. CA 273 SCRA 562 (1997)

b. Kabit System Santos vs. Sibug 104 SCRA 520 (1981) Lita Enterprises, Inc. vs. CA 148 SCRA (1987) Teja Marketing vs. IAC c. Boundary System Magboo vs. Bernardo 148 SCRA 347 (1987) 7 SCRA 952 (1963)

347

2. Liability of Carriers for Loss, Destruction and Deterioration of Goods; Exceptions; Presumption of Negligence Articles 1734-1735; Articles 1739-1743 Eastern Shipping Lines vs. IAC, supra Ganzon vs. CA 161 SCRA 646 (1985) Eastern Shipping Lines vs. Court of Appeals 196 SCRA 570 (1991) Sarkies Tours Phils., Inc. vs. Court of Appeals 280 SCRA 58 (1997) Valenzuela Hardwood & Industrial Supply vs. Court of Appeals 274 SCRA 642 (1997) Yobido vs. Court of Appeals 281 SCRA 1 (1997) 3. Commencement, Duration and Termination of carriers responsibility over the goods (Articles 1736-1738, NCC) Compania Maritima vs. Insurance Co. of North America 12 SCRA 213 (1964) Lu Do vs. Binamira 101 Phil. 120 (1957) American President Lines Ltd. vs. Klepper 110 PHIL 243 Servando vs. Phil. Steam 117 SCRA 832 (1982) Ganzon vs. Court of Appeals, supra Saludo, Jr. vs. Court of Appeals 207 SCRA 498 (1992) Macam vs. Court of Appeals 313 SCRA 77 (1999) 4. Stipulations Limiting Carriers Liability a. Articles 1744-1745, NCC; Degree of Diligence Reasonable time in the delivery Case: Maersk Line vs. Court of Appeals 222 SCRA (1993) b. Articles 1749-1750, NCC; Amount of Liability Ysmael vs. Barretto 51 PHIL 90 (1927)

108

Shewaram vs. Philippine Airlines 17 SCRA 606 (1966) Ong Yiu vs. Court of Appeals 91 SCRA 223 (1966) Sea Land Services, Inc. vs. Intermediate Appellate Court 153 SCRA 552 (1987) Citadel Lines, Inc. vs. Court of Appeals 184 SCRA 544 (1990) Everett Seamship Corp. vs. Court of Appeals 297 SCRA 496 (1998) British Airways vs. Court of Appeals 285 SCRA 450 (1998) H.E. Heacock Co. vs. Macondray & Co. 42 PHIL 205 (1921) c. Void Stipulation (Art. 1745, NCC) Case: Sweet Lines vs. Teves 83 SCRA 361 (1978) 5. Passengers Baggages (Article 1754, NCC) Quisumbing, Sr. vs. Court of Appeals (1990) Pan American Airlines vs. Rapadas (1992) British Airways vs. Court of Appeals, supra Alitalia vs. Intermediate Appellate Court (1990) 209 SCRA 67 189 SCRA 605

192 SCRA 9

B. SAFETY OF PASSENGERS 1. Utmost Diligence Required of Common Carriers (Article 1755, NCC) Nocum vs. Laguna Tayabas bus. Co. vs. CA 83 SCRA 386 (1978) Mecenas vs. CA 180 SCRA 83 (1989) Negros Navigation Co., Inc. vs. CA 281 SCRA 717 (1997) Korean Airlines Co. Ltd. vs. CA 234 SCRA 14 (1999) Fortune Express, Inc. vs. CA 305 SCRA 14 (1999) Gatchalian vs. Delim 203 SCRA 126 (1991) Del Castillo vs. Jaymalin 112 SCRA 629 (1982) A. Doctrine of Last Clear Chance Philippine Rabbit Bus Lines vs. IAC (1990) Bustamante vs. CA 193 SCRA 603 (1991) B. Accomodation Passenger Lara vs. Valencia 104 SCRA 65 (1958)

189

SCRA

158

C. Carrier not an insurer against all risks Necessito vs. Paras 104 Phil. 75 (1958) Japan Airlines vs. CA 294 SCRA 19 (1998) D. Res Ipsa Loquitur Layugan vs. IAC 167 SCRA 363 (1988) Termination of Carriers

2. Commencement, Duration and Responsibility

La Mallorca vs. De Jesus 17 SCRA 739 (1966) Aboitiz Shipping Co. vs. Court of Appeals 179 SCRA 95 (1989) Mallari Sr. vs. Court of Appeals 324 SCRA 147 (2000) 3. Presumption of Negligence: Liability of Carriers for death or injury to passengers; Exceptions (Articles 1756-1758, NCC) Bayasen vs. Court of Appeals Cervantes vs. Court of Appeals Calalas vs. Court of Appeals Pestao vs. Sumayang 103 SCRA 197 (1981) 304 SCRA 27 (1999) 332 SCRA 356 (2000) 346 SCRA 870 (2000)

4. Negligence or intentional assault by carriers employee Gillaco vs. Manila Railroad Co. 97 Phil. 884 (1955) Maranan vs. Perez 20 SCRA 412 (1967) 5. Passengers duty to observe diligence to avoid injury; contributory negligence PNR vs. Court of Appeals Isaac vs. Al Ammen Trans 139 SCRA 87 (1985) 101 Phil 1046 (1957)

6. Injury to passenger due to acts of co-passenger or stranger Bachelor Express, Inc vs. Court of Appeals 188 SCRA 216 (1990) Fortune Express Inc. vs. CA, supra III. DAMAGES (Article 1764, NCC) A. Actual/Compensatory Damages (Arts. 2199, 2201, 2203, NCC) Cariaga vs. LTB Co., & MRR 110 PHIL 346 (1960) Villa Rey Transit, Inc. vs. Court of Appeals 31 SCRA 511 (1970) Pan American World Airways vs. IAC 153 SCRA 521 (1987) Gatchalian vs. Delim 203 SCRA 126 (1991) 1. Recovery for Physical Injuries Soberano vs. MRR & Benguet Auto Line 18 SCRA 732 (1966)

Marchan vs. Mendoza

24 SCRA 888 (1968)

2. Damages in case of death De Caliston vs. CA 122 SCRA 958 (1983) PAL vs. CA 185 SCRA 110 (1990) B. Moral Damages (Arts. 2206, 2216-2217, 2219-2220, NCC) Cachero vs. Manila Yellow Taxi Cab 101 Phil. 523 (1957) Fores vs. Miranda 105 Phil. 266 (1959) Lopez vs. Pan American 16 SCRA 431 (1966) Ortigas Jr. vs. Lufthansa 64 SCRA 610 (1975) Phil. Rabbit Bus Lines vs. Esguerra 117 SCRA 741 (1982) Sweet Lines vs. Court of Appeals 121 SCRA 769 (1983) Pan American World Airways vs. IAC, supra TransWorld Airlines vs. CA 165 SCRA 143 (1988) Armovit vs. Court of Appeals 184 SCRA 476 (1990) PAL vs. CA 106 SCRA 391 C. Exemplary Damages (Arts. 2229, 2232-2233, NCC) Prudenciado vs. Alliance Transport 148 SCRA 440 (1987) Marchan vs. Mendoza, supra.

SUMMARY OF CASE DOCTRINES

De Guzman vs. Court of Appeals Article 1732 makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in local Idiom as "a sideline"). Article 1732 also carefully avoids making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the "general public," i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population. The Court of Appeals referred to the fact that private respondent held no certificate of public convenience. A certificate of public convenience is not a requisite for the incurring of liability. That liability arises the moment a person or firm acts as a common carrier, without regard to whether or not such carrier

has also complied with the requirements of the applicable regulatory statute and implementing regulations and has been granted a certificate of public convenience or other franchise. To exempt private respondent from the liabilities of a common carrier because he has not secured the necessary certificate of public convenience, would be offensive to sound public policy; that would be to reward private respondent precisely for failing to comply with applicable statutory requirements. Planters Products, Inc. vs. CA It is not disputed that respondent carrier, in the ordinary course of business, operates as a common carrier, transporting goods indiscriminately for all persons. When petitioner chartered the vessel M/V "Sun Plum", the ship captain, its officers and compliment were under the employ of the shipowner and therefore continued to be under its direct supervision and control. Hardly then can the charterer be charged, a stranger to the crew and to the ship, with the duty of caring for his cargo when the charterer did not have any control of the means in doing so. This is evident in the present case considering that the steering of the ship, the manning of the decks, the determination of the course of the voyage and other technical incidents of maritime navigation were all consigned to the officers and crew who were screened, chosen and hired by the shipowner. 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, 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. Fisher vs. Yangco In construing Act 98 for the alleged violation, the test is whether the refusal of YSC to carry the explosives without qualification or conditions may have the effect of subjecting any person or locality or the traffic is such explosives to an unduly unreasonable or unnecessary prejudice or discrimination. Common carriers in this jurisdiction cannot lawfully decline to accept a particular class of goods unless it appears that for some sufficient reason the discrimination for such is reasonable and necessary. YSC has not met those conditions. The nature of the business of a common carrier as a public employment is such that it is within the power of the State to impose such just regulations in the interest of the public as the legislator may deem proper. US vs. Quinahon

There is no pretense that it actually cost more to handle the rice for the province than it did for the merchants with whom the special contracts were made. There was a clear discrimination against the province which is prohibited by the law. It is however not believed that the law prohibits common carriers from making special rates for the handling and transporting of merchandise, when the same are made for the purpose of increasing their business and to manage their important interests upon the same principles which are regarded as sound and adopted in other trades and pursuits. Absolute equality is not required in all cases. It is only unjust, undue and unreasonable discrimination which the law forbids. The law of equality is in force only where the services performed in the different cases are substantially the same and the circumstances and conditions are similar. Loadstar Shipping Co., Inc. vs. CA Loadstar submits that the vessel was a private carrier because it was not issued a CPC; it did not have a regular trip or schedule nor a fixed route; and there was only one shipper, one consignee for a special cargo. The SC held that Loadstar is a common carrier. It is not necessary that the carrier be issued a CPC, and this character is not altered by the fact that the carriage of the goods in question was periodic, occasional, episodic or unscheduled. First Philippine Industrial Corporation vs. CA Based on Article 1732 NCC, there is no doubt that petitioner is a common carrier. It is engaged in the business of transporting or carrying goods, i.e. petroleum products, for hire as a public employment. It undertakes to carry for all persons indifferently, that is, to all persons who choose to employ its services, and transports the goods by land and for compensation. The fact that petitioner has a limited clientele does not exclude it from the definition of a common carrier. (De Guzman Ruling upheld) Respondents argument that the term common carrier as used in Section 133(j) of the Local Government Code refers only to common carriers transporting goods and passengers through moving vehicles or vessels either by land, sea or water is erroneous. The definition of common carriers in NCC makes no distinction as to the means of transporting as long as it is by land, water or air. It does not provide that the transporting of the passengers or goods should be by motor vehicle. Home Insurance Company vs. American Steamship Agencies, Inc. The NCC provisions on common carriers should not apply where the common carrier is not acting as such but as a private carrier. Under American Jurisprudence, a common carrier undertaking to carry a special cargo or

chartered to a special person only becomes a private carrier. As a private carrier, a stipulation exempting the owner from liability for the negligence of its agent is valid. The stipulation in the charter party absolving the owner from liability for loss due to the negligence of its agent would be void only if strict public policy governing common carrier is applied. Such policy has no force where the public at large is not involved, as in the case of a ship totally chartered for the use of a single party. The stipulation exempting the owner from liability for negligence of its agent is not against public policy and is deemed valid. Recovery cant be had, for loss or damage to the cargo against shipowners, unless the same is due to personal acts or negligence of said owner or its managers, as distinguished from agents or employees. San Pablo vs. PANTRANCO Considering the environmental circumstances of the case, the conveyance of passengers, trucks and cargo from Matnog to Allen is certainly not a ferry boat service but a coastwise or interisland shipping service. Under no circumstance can the sea between Matnog and Allen be considered a continuation of the highway. While a ferry boat service has been considered as a continuation of the highway when crossing rivers or even lakes, which are small body of waters - separating the land, however, when as in this case the two terminals, Matnog and Allen are separated by an open sea it can not be considered as a continuation of the highway. Respondent PANTRANCO should secure a separate CPC for the operation of an interisland or coastwise shipping service in accordance with the provisions of law. Its CPC as a bus transportation cannot be merely amended to include this water service under the guise that it is a mere private ferry service. The contention of private respondent PANTRANCO that its ferry service operation is as a private carrier, not as a common carrier for its exclusive use in the ferrying of its passenger buses and cargo trucks is absurd. PANTRANCO does not deny that it charges its passengers separately from the charges for the bus trips and issues separate tickets whenever they board the MV "Black Double" that crosses Matnog to Allen, PANTRANCO cannot pretend that in issuing tickets to its passengers it did so as a private carrier and not as a common carrier. The Court does not see any reason why inspite of its amended franchise to operate a private ferry boat service it cannot accept walk-in passengers just for the purpose of crossing the sea between Matnog and Allen. Indeed evidence to this effect has been submitted. National Steel Corporation vs. CA In the instant case, it is undisputed that VSI did not offer its services to the general public. It carried passengers or goods only for those it chose under a special contract of charter party. It is a private carrier that renders tramping service and as such, does not transport cargo or shipment for the general

public. Its services are available only to specific persons who enter into a special contract of charter party with its owner. Consequently, the rights and obligations of VSI and NSC, including their respective liability for damage to the cargo, are determined primarily by stipulations in their contracts of private carriage or charter party. Unlike in a contract involving a common carrier, private carriage does not involve the general public. Hence, the stringent provisions of the Civil Code on common carriers protecting the general public cannot justifiably be applied to a ship transporting commercial goods as a private carrier. KMU vs. Garcia The issuance of a Certificate of Public Convenience is determined by public need. The presumption of public need for a service shall be deemed in favor of the applicant, while the burden of proving that there is no need for the proposed service shall be the oppositor's. By its terms, public convenience or necessity generally means something fitting or suited to the public need. As one of the basic requirements for the grant of a CPC, public convenience and necessity exists when the proposed facility or service meets a reasonable want of the public and supply a need which the existing facilities do not adequately supply. The existence or non-existence of public convenience and necessity is therefore a question of fact that must be established by evidence, real and/or testimonial; empirical data; statistics and such other means necessary, in a public hearing conducted for that purpose. The object and purpose of such procedure, among other things, is to look out for, and protect, the interests of both the public and the existing transport operators. Tatad vs. Garcia In law, there is a clear distinction between the "operation" of a public utility and the ownership of the facilities and equipment used to serve the public. The right to operate a public utility may exist independently and separately from the ownership of the facilities thereof. One can own said facilities without operating them as a public utility, or conversely, one may operate a public utility without owning the facilities used to serve the public. The devotion of property to serve the public may be done by the owner or by the person in control thereof who may not necessarily be the owner thereof. Samar Mining Company, Inc. vs. Nordeutscher Lloyd The validity of stipulations in bills of lading exempting the carrier from liability for loss or damage to the goods when the same are not in its actual custody has been upheld. There is no doubt that Art. 1738 finds no applicability to the instant case. The said article contemplates a situation where the goods

had already reached their place of destination and are stored in the warehouse of the carrier. The subject goods were still awaiting transshipment to their port of destination, and were stored in the warehouse of a third party when last seen and/or heard of. Article 1736 is applicable to the instant suit. Under said article, the carrier may be relieved of the responsibility for loss or damage to the goods upon actual or constructive delivery of the same by the carrier to the consignee, or to the person who has a right to receive them. In sales, actual delivery has been defined as the ceding of corporeal possession by the seller, and the actual apprehension of corporeal possession by the buyer or by some person authorized by him to receive the goods as his representative for the purpose of custody or disposal. By the same token, there is actual delivery in contracts for the transport of goods when possession has been turned over to the consignee or to his duly authorized agent and a reasonable time is given him to remove the goods. The court a quo found that there was actual delivery to the consignee through its duly authorized agent, the carrier. Eastern Shipping Lines vs. Intermediate Appellate Court 1) The law of the country to which the goods are to be transported governs the liability of the common carrier in case of their loss, destruction or deterioration. As the cargoes in question were transported from Japan to the Philippines, the liability of Petitioner Carrier is governed primarily by the Civil Code. However, in all matters not regulated by said Code, the rights and obligations of common carrier shall be governed by the Code of Commerce and by special laws. Thus, the Carriage of Goods by Sea Act, a special law, is suppletory to the provisions of the Civil Code. (2) Under the Civil Code, common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over goods, according to all the circumstances of each case. Common carriers are responsible for the loss, destruction, or deterioration of the goods unless the same is due to any of the following causes only: (1) Flood, storm, earthquake, lightning or other natural disaster or calamity; Petitioner Carrier claims that the loss of the vessel by fire exempts it from liability under the phrase "natural disaster or calamity. However, the Court said that fire may not be considered a natural disaster or calamity. This must be so as it arises almost invariably from some act of man or by human means. It does not fall within the category of an act of God unless caused by lightning or by other natural disaster or calamity. It may even be caused by the actual fault or privity of the carrier. As the peril of the fire is not comprehended within the exception in Article 1734, supra, Article 1735 of the Civil Code provides that all cases than those mention in Article 1734, the common carrier shall be presumed to have been at fault or to have acted negligently, unless it proves that it has observed the extraordinary diligence required by law.

And even if fire were to be considered a "natural disaster" within the meaning of Article 1734 of the Civil Code, it is required under Article 1739 of the same Code that the "natural disaster" must have been the "proximate and only cause of the loss," and that the carrier has "exercised due diligence to prevent or minimize the loss before, during or after the occurrence of the disaster. This Petitioner Carrier has also failed to establish satisfactorily. National Development Company vs. CA Significantly, under the provisions of the Code of Commerce, particularly Articles 826 to 839, the shipowner or carrier, is not exempt from liability for damages arising from collision due to the fault or negligence of the captain. Primary liability is imposed on the shipowner or carrier in recognition of the universally accepted doctrine that the shipmaster or captain is merely the representative of the owner who has the actual or constructive control over the conduct of the voyage. The agreement between NDC and MCP shows that MCP is appointed as agent, a term broad enough to include the concept of ship agent in maritime law. In fact MCP was even conferred all the powers of the owner of the vessel, including the power to contract in the name of the NDC. Both owner and agent should be declared jointly and severally liable since the obligation which is the subject of the action had its origin in a fortuitous act and did not arise from contract. Gelisan vs. Alday The court has held in several decisions that the registered owner of a public service is responsible for damages that may arise from consequences incident to its operation or that may be caused to any of the passengers therein. The claim of the petitioners that he is not liable in view of the lease contract executed by and between him and Espiritu which exempts him from liability to 3rd persons, cannot be sustained because it appears that the lease contract had not been approved by the Public Service Commission. It is a settled rule in our jurisprudence that if the property covered by a Franchise is transferred or lease to another without obtaining the requisite approval, the transfer is not binding upon the public and 3rd persons. However, Gelisan is not without recourse because he has a right to be indemnified by Espiritu for the amount he may be required to pay. This is due to the fact that the lease contract in question, although not effective against the public is valid and binding between the contracting parties. Benedicto vs. Intermediate Appellate Court The prevailing doctrine in common carriers make the owner liable for consequences having from the operations of the carrier even though the specific vehicle involved may have been transferred to another person. This

doctrine rests upon the principle in dealing with vehicles registered under Public Service Law, the public has the right to assume that the registered owner is the actual or lawful owner thereof. It would be very difficult and often impossible as a practical matter, for members of the general public to enforce the rights of action that they may have for injuries inflicted by the vehicles being negligently operated if they should be required to prove who the actual owner is. The registered owner is not allowed to deny liability by proving the identity of the alleged transferee. Thus, contrary to petitioners claim, private respondents are not required to go beyond the vehicles certificate of registration to ascertain the owner of the carrier. PHILTRANCO Service Enterprise, Inc. vs. Court of Appeals We have consistently held that the liability of the registered owner of a public service vehicle, like petitioner Philtranco, for damages arising from the tortious acts of the driver is primary, direct, and joint and several or solidary with the driver. As to solidarity, Article 2194 expressly provides: Art. 2194. The responsibility of two or more persons who are liable for a quasi-delict is solidary. Since the employer's liability is primary, direct and solidary, its only recourse if the judgment for damages is satisfied by it is to recover what it has paid from its employee who committed the fault or negligence which gave rise to the action based on quasi-delict. Article 2181 of the Civil Code provides: Art. 2181. Whoever pays for the damage caused by his dependents or employees may recover from the latter what he has paid or delivered in satisfaction of the claim. Santos vs. Sibug Although SANTOS, as the kabit was the true owner as against VIDAD, the latter, as the registered owner/operator and grantee of the franchise, is directly and primarily responsible and liable for the damages caused to SIBUG, the injured party, as a consequence of the negligent or careless operation of the vehicle. This ruling is based on the principle that the operator of record is considered the operator of the vehicle in contemplation of law as regards the public and third persons even if the vehicle involved in the accident had been sold to another where such sale had not been approved by the then Public Service Commission. Lita Enterprises Inc. vs. Intermediate Appellate Court Unquestionably, the parties herein operated under an arrangement, comonly known as the "kabit system", whereby a person who has been

granted a certificate of convenience allows another person who owns motors vehicles to operate under such franchise for a fee. A certificate of public convenience is a special privilege conferred by the government . Abuse of this privilege by the grantees thereof cannot be countenanced. Although not outrightly penalized as a criminal offense, the "kabit system" is invariably recognized as being contrary to public policy and, therefore, void and inexistent under Article 1409 of the Civil Code, It is a fundamental principle that the court will not aid either party to enforce an illegal contract, but will leave them both where it finds them.

Teja Marketing vs. Intermediate Appellate Court The ruling in Lita Enterprises Inc. vs. IAC is upheld. The defect of in existence of a contract is permanent and cannot be cured by ratification or by prescription. The mere lapse of time cannot give efficacy to contracts that are null and void. Magboo vs. Bernardo The features which characterize the boundary system are not sufficient to withdraw the relationship between the parties from that of employer and employee. The owner continued to be the operator of the vehicle in legal contemplation and as such, he is responsible for the consequences incident to its operation. To exempt from liability the owner of a public vehicle who operates it under the boundary system on the ground that he is a mere lessor would be not only to abet flagrant violations of the Public Service Law but also to place the riding public at the mercy of reckless and irresponsible drivers. Ganzon vs. CA Petitioner Ganzon failed to show that the loss of the scrap iron due to any cause enumerated in Art. 1734. The order of the acting Mayor did not constitute valid authority for petitioner to carry out. In any case, the intervention of the municipal officials was not of a character that would render impossible the fulfillment by the carrier of its obligation. The petitioner was not duly bound to obey the illegal order to dump into the sea the scrap of iron. Moreover, there is absence of sufficient proof that the issuance of the same order was attended with such force or intimidation as to completely overpower the will of the petitioners employees. By the delivery made during Dec. 1, 1956, the scraps were unconditionally placed in the possession and control of the common carrier, and upon their receipt by the carrier of transportation, the contract of carriage was deemed perfected. Consequently, Ganzons extraordinary responsibility for the loss, destruction or deterioration of the goods commenced. According to Art 1738, such extraordinary responsibility would cease only upon the delivery by the carrier to the consignee or persons with right to receive them. The fact

that part of the shipment had not been loaded on board did not impair the contract of transportation as the goods remained in the custody & control of the carrier. Eastern Shipping Lines vs. Court of Appeals The heavy seas and rains referred to in the masters report were not caso fortuito but normal occurrences that an ocean-going vessel, particularly in the month of September which, in our area, is a month of rains and heavy seas would encounter as a matter of routine. They are not unforeseen nor unforeseeable. These are conditions that ocean-going vessels would encounter and provide for, in the ordinary course of a voyage. That rain water (not sea water) found its way into the holds of the Jupri Venture is a clear indication that care and foresight did not attend the closing of the ship's hatches so that rain water would not find its way into the cargo holds of the ship. Since the carrier has failed to establish any caso fortuito, the presumption by law of fault or negligence on the part of the carrier applies; and the carrier must present evidence that it has observed the extraordinary diligence required by Article 1733 of the Civil Code in order to escape liability for damage or destruction to the goods that it had admittedly carried in this case. No such evidence exists of record. Thus, the carrier cannot escape liability. Sarkies Tours Phils vs. Court of Appeals Under the Civil Code, common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods transported by them, and this liability lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the person who has a right to receive them, unless the loss is due to any of the excepted causes under Article 1734 thereof. Where the common carrier accepted its passenger's baggage for transportation and even had it placed in the vehicle by its own employee, its failure to collect the freight charge is the common carrier's own lookout. It is responsible for the consequent loss of the baggage. In the instant case, defendant appellant's employee even helped Fatima Minerva Fortades and her brother load the luggages/baggages in the bus' baggage compartment, without asking that they be weighed, declared, receipted or paid for. Neither was this required of the other passengers. Valenzuela Hardwood & Industrial Supply vs. Court of Appeals In a contract of private carriage, the parties may validly stipulate that responsibility for the cargo rests solely on the charterer, exempting the

shipowner from liability for loss of or damage to the cargo caused even by the negligence of the ship captain. Pursuant to Article 1306 17 of the Civil Code, such stipulation is valid because it is freely entered into by the parties and the same is not contrary to law, morals, good customs, public order, or public policy. Indeed, their contract of private carriage is not even a contract of adhesion. We stress that in a contract of private carriage, the parties may freely stipulate their duties and obligations which perforce would be binding on them. Unlike in a contract involving a common carrier, private carriage does not involve the general public. Hence, the stringent provisions of the Civil Code on common carriers protecting the general public cannot justifiably be applied to a ship transporting commercial goods as a private carrier. Consequently, the public policy embodied therein is not contravened by stipulations in a charter party that lessen or remove the protection given by law in contracts involving common carriers. Yobido vs. Court of Appeals The explosion of the new tire is not a fortuitous event. There are human factors involved in the situation. The fact that the tire was new did not imply that it was entirely free from manufacturing defects or that it was properly mounted on the vehicle. Neither may the fact that the tire bought and used is of a brand name noted for quality, resulting in the conclusion that it could not explode within five days use. It is settled that an accident caused either by defects in the automobile or through the negligence of its driver is not a caso fortuito. Moreover, a common carrier may not be absolved from liability in case of force majeure. A common carrier must still prove that it was not negligent in causing the death or injury resulting from the accident. Thus, having failed to overthrow the presumption of negligence with clear and convincing evidence, petitioners are hereby held liable for damages.

Compania Maritima vs. Insurance Co. of North America The receipt of goods by the carrier has been said to lie at the foundation of the contract to carry and deliver, and if actually no goods are received there can be no such contract. The liability and responsibility of the carrier under a contract for the carriage of goods commence on their actual delivery to, or receipt by, the carrier or an authorized agent and delivery to a lighter in charge of a vessel for shipment on the vessel, where it is the custom to deliver in that way, is a good delivery and binds the vessel receiving the freight, the liability commencing at the time of delivery to the lighter and, similarly, where there is a contract to carry goods from one port to another, and they cannot be loaded directly on the vessel and lighters are sent by the vessel to bring the goods to it, the lighters are for the time its substitutes, so that the bill of landing is applicable to the goods as soon as they are placed on the lighters.

Whenever the control and possession of goods passes to the carrier and nothing remains to be done by the shipper, then it can be said with certainty that the relation of shipper and carrier has been established. A bill of lading is not indispensable for the creation of a contract of carriage. The bill of lading is juridically a documentary proof of the stipulations and conditions agreed upon by both parties. The liability of the carrier as common carrier begins with the actual delivery of the goods for transportation, and not merely with the formal execution of a receipt or bill of lading; the issuance of a bill of lading is not necessary to complete delivery and acceptance. Even where it is provided by statute that liability commences with the issuance of the bill of lading, actual delivery and acceptance are sufficient to bind the carrier.

Lu Do vs. Binamira While delivery of the cargo to the consignee, or to the person who has a right to receive them, contemplated in Article 1736, because in such case the goods are still in the hands of the Government and the owner cannot exercise dominion over them, we believe however that the parties may agree to limit the liability of the carrier considering that the goods have still to through the inspection of the customs authorities before they are actually turned over to the consignee. This is a situation where we may say that the carrier losses control of the goods because of a custom regulation and it is unfair that it be made responsible for what may happen during the interregnum.

American President Lines, Ltd. vs. Klepper With regard to the contention of the carrier that COGSA should control in this case, the same is of as moment. Art. 1763 of the New Civil Code provides that the laws of the country to which the goods are transported shall govern the liability of the common carrier in case of loss, destruction and deterioration. This means that the law of the Philippines on the New Civil Code. Under 1766 of NCC, in all matter not regulated by this Code, the rights and obligations of common carriers shall be governed by the Code of Commerce and by Special Laws. Art. 1736-1738, NCC governs said rights and obligations. Therefore, although Sec 4(5) of COGSA states that the carrier shall not be liable in an amount exceeding $500 per package unless the value of the goods had been declared by the shipper and asserted in the bill of lading, said section is merely supplementary to the provisions of the New Civil Code. Servando vs. Phil. Steam The court a quo held that the delivery of the shipment in question to the warehouse of the Bureau of Customs is not the delivery contemplated by

Article 1736; and since the burning of the warehouse occurred before actual or constructive delivery of the goods to the appellees, the loss is chargeable against the appellant. It should be pointed out, however, that in the bills of lading issued for the cargoes in question, the parties agreed to limit the responsibility of the carrier for the loss or damage that may be caused to the shipment therein the following stipulation: Clause 14. Carrier shall not be responsible for loss or damage to shipments billed 'owner's risk' unless such loss or damage is due to negligence of carrier. Nor shall carrier be responsible for loss or damage caused by force majeure, dangers or accidents of the sea or other waters; war; public enemies; . . . fire . ... We sustain the validity of the above stipulation; there is nothing therein that is contrary to law, morals or public policy. Appellees would contend that the above stipulation does not bind them because it was printed in fine letters on the back-of the bills of lading; and that they did not sign the same. This argument overlooks the pronouncement of this Court in Ong Yiu vs. Court of Appeals, where the same issue was resolved in this wise: While it may be true that petitioner had not signed the plane ticket, he is nevertheless bound by the provisions thereof. 'Such provisions have been held to be a part of the contract of carriage, and valid and binding upon the passenger regardless of the latter's lack of knowledge or assent to the regulation'. It is what is known as a contract of 'adhesion', in regards which it has been said that contracts of adhesion wherein one party imposes a ready made form of contract on the other, as the plane ticket in the case at bar, are contracts not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent." Saludo, Jr. vs. Court of Appeals Except as may be prohibited by law, there is nothing to prevent an inverse order of events, that is, the execution of the bill of lading even prior to actual possession and control by the carrier of the cargo to be transported. There is no law which requires that the delivery of the goods for carriage and the issuance of the covering bill of lading must coincide in point of time or, for that matter, that the former should precede the latter. While we agree with petitioners' statement that "an airway bill estops the carrier from denying receipt of goods of the quantity and quality described in the bill," a further reading and a more faithful quotation of the authority cited would reveal that "(a) bill of lading may contain constituent elements of estoppel and thus become something more than a contract between the shipper and the carrier. . . . (However), as between the shipper and the carrier, when no goods have been delivered for shipment no recitals in the bill can estop the carrier from showing the true facts . . . Between the consignor of goods and receiving

carrier, recitals in a bill of lading as to the goods shipped raise only a rebuttable presumption that such goods were delivered for shipment. As between the consignor and a receiving carrier, the fact must outweigh the recital." There is a holding in most jurisdictions that the acceptance of a bill of lading without dissent raises a presumption that all terms therein were brought to the knowledge of the shipper and agreed to by him, and in the absence of fraud or mistake, he is estopped from thereafter denying that he assented to such terms. This rule applies with particular force where a shipper accepts a bill of lading with full knowledge of its contents, and acceptance under such circumstances makes it a binding contract. In order that any presumption of assent to a stipulation in a bill of lading limiting the liability of a carrier may arise, it must appear that the clause containing this exemption from liability plainly formed a part of the contract contained in the bill of lading. A stipulation printed on the back of a receipt or bill of lading or on papers attached to such receipt will be quite as effective as if printed on its face, if it is shown that the consignor knew of its terms. Thus, where a shipper accepts a receipt which states that its conditions are to be found on the back, such receipt comes within the general rule, and the shipper is held to have accepted and to be bound by the conditions there to be found. Explicit is the rule under Article 1736 of the Civil Code that the extraordinary responsibility of the common carrier begins from the time the goods are delivered to the carrier. This responsibility remains in full force and effect even when they are temporarily unloaded or stored in transit, unless the shipper or owner exercises the right of stoppage in transitu, and terminates only after the lapse of a reasonable time for the acceptance, of the goods by the consignee or such other person entitled to receive them. And, there is delivery to the carrier when the goods are ready for and have been placed in the exclusive possession, custody and control of the carrier for the purpose of their immediate transportation and the carrier has accepted them. Where such a delivery has thus been accepted by the carrier, the liability of the common carrier commences. Only when such fact of delivery has been unequivocally established can the liability for loss, destruction or deterioration of goods in the custody of the carrier, absent the excepting causes under Article 1734, attach and the presumption of fault of the carrier under Article 1735 be invoked.

Macam vs. CA The extraordinary responsibility of the common carriers lasts until actual or constructive delivery of the cargoes to the consignee or to the person who has a right to receive them. PAKISTAN BANK was indicated in the bills of lading as consignee whereas GPC was the notify party. However, in the export invoices GPC was clearly named as buyer/importer. Petitioner also referred to GPC as such in his demand letter to respondent WALLEM and in his complaint before the trial court. This premise draws us to conclude that the delivery of

the cargoes to GPC as buyer/importer which, conformably with Art. 1736 had, other than the consignee, the right to receive them was proper. The real issue is whether respondents are liable to petitioner for releasing the goods to GPC without the bills of lading or bank guarantee. From the testimony of petitioner, we gather that he has been transacting with GPC as buyer/importer for around two (2) or three (3) years already. When mangoes and watermelons are in season, his shipment to GPC using the facilities of respondents is twice or thrice a week. The goods are released to GPC. It has been the practice of petitioner to request the shipping lines to immediately release perishable cargoes such as watermelons and fresh mangoes through telephone calls by himself or his "people." In transactions covered by a letter of credit, bank guarantee is normally required by the shipping lines prior to releasing the goods. But for buyers using telegraphic transfers, petitioner dispenses with the bank guarantee because the goods are already fully paid. In his several years of business relationship with GPC and respondents, there was not a single instance when the bill of lading was first presented before the release of the cargoes.

Maersk Line vs. CA While it is true that common carriers are not obligated by law to carry and to deliver merchandise, and persons are not vested with the right to prompt delivery, unless such common carriers previously assume the obligation to deliver at a given date or time, delivery of shipment or cargo should at least be made within a reasonable time. While there was no special contract entered into by the parties indicating the date of arrival of the subject shipment, petitioner nevertheless, was very well aware of the specific date when the goods were expected to arrive as indicated in the bill of lading itself. In this regard, there arises no need to execute another contract for the purpose as it would be a mere superfluity. In the case before us, we find that a delay in the delivery of the goods spanning a period of two months and seven days falls was beyond the realm of reasonableness. Ysmael vs. Barretto Limiting the common carriers liability for loss or damage from any cause or for any reason for less than 1/8 the actual value of the goods is unconscionable and therefore against public policy. A common carrier cannot lawfully stipulate for exemption from liability, unless such exemption is just and reasonable and the contract is freely and fairly made. Shewaram vs. Philippine Airlines

It can not be said that a contract has been entered into between a passenger and the common carrier, embodying the conditions as printed at the back of the ticket. The fact that those conditions are printed at the back of the ticket stub in letters so small that they are hard to read would not warrant the presumption that the passenger was aware of those conditions such that he had "fairly and freely agreed" to those conditions. The passenger is considered not having agreed to the stipulation on the ticket, as manifested by the fact that he did not sign the ticket. Ong Yiu vs. Court of Appeals While it may be true that the passenger had not signed the plane ticket, he is nevertheless bound by the provisions thereof. "Such provisions have been held to be a part of the contract of carriage, and valid and binding upon the passenger regardless of the latter's lack of knowledge or assent to the regulation". It is what is known as a contract of "adhesion", in regards which it has been said that contracts of adhesion wherein one party imposes a ready made form of contract on the other, as the plane ticket in the case at bar, are contracts not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent. A contract limiting liability upon an agreed valuation does not offend against the policy of the law forbidding one from contracting against his own negligence. Sea Land Services, Inc. vs. IAC Since the liability of a common carrier for loss of or damage to goods transported by it under a contract of carriage so governed by the laws of the country of destination and the goods in question were shipped from the United States to the Philippines, the liability of common carrier to the consignee is governed primarily by the Civil Code. Applying the Civil Code provisions (Article 1749 and 1750) the stipulation in the bill of lading limiting the liability of the common carrier for loss or damages to the shipment covered by said rule unless the shipper declares the value of the shipment and pays additional charges is valid and binding on the consignee. Citadel Lines, Inc. vs. CA Basic is the rule that a stipulation limiting the liability of the carrier to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value, is binding. Furthermore, a contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been fairly and freely agreed upon. In this case, the award based on the alleged market value of the goods is erroneous. It is provided in a clause in the BOL that its liability is limited to

US$2.00/kilo. The consignee also admits in the memorandum that the value of the goods does not appear in the bill of lading. Hence, the stipulation on the carriers limited liability applies. Everett Seamship Corp. vs. CA In the bill of lading, the carrier made it clear that all claims for which it may be liable shall be adjusted and settled on the basis of the shipper's net invoice cost plus freight and insurance premiums, if paid, and in no event shall the carrier be liable for any loss of possible profits or any consequential loss. Its liability would only be up to One Hundred Thousand (Y100,000.00) Yen. However, the shipper, had the option to declare a higher valuation if the value of its cargo was higher than the limited liability of the carrier. Considering that the shipper did not declare a higher valuation, it had itself to blame for not complying with the stipulations. The commercial Invoice does not in itself sufficiently and convincingly show that the common carrier has knowledge of the value of the cargo as contended by the shipper. British Airways vs. CA The contract of transportation was exclusively between the passenger and common carrier BA. The latter merely endorsing the Manila to Hong Kong log of the formers journey to PAL, as its subcontractor or agent. Conditions of contracts were one of continuous air transportation. Well-settled rule that an agent is also responsible for any negligence in the performance of its function and is liable for damages which the principal may suffer by reason of its negligent act. When an action is based on breach of contract of carriage, the passenger can only sue BA and not PAL, since the latter was not a party in the contract. The contention of BA with respect to limited liability was overruled although it is recognized in the Philippines, stating that BA had waived the defense of limited liability when it allowed Mahtani(the passenger) to testify as to the actual damages he incurred due to the misplacement of his luggage, without any objection. H.E. Heacock Co. vs. Macondray Three kinds of stipulations have often been made in a bill of lading. The first is one exempting the carrier from any and all liability for loss or damage occasioned by its own negligence. The second is one providing for an unqualified limitation of such liability to an agreed valuation. And the third is one limiting the liability of the carrier to an agreed valuation unless the shipper declares a higher value and pays a higher rate of freight. According to an almost uniform weight of authority, the first and second kinds of stipulations

are invalid as being contrary to public policy, but the third is valid and enforceable. If a common carrier gives to a shipper the choice of two rates and if the shipper makes such a choice, understandingly and freely, and names his valuation, he cannot thereafter recover more than the value which he thus places upon his property. A limitation of liability based upon an agreed value does not conflict with any sound principle of public policy; and it is not conformable to plain principles of justice that a shipper may understate value in order to reduce the rate and then recover a larger value in case of loss. Sweet Lines Inc. vs. TEVES Considered in the light of circumstances prevailing in the inter-island shipping industry in the country today, We find and hold that Condition No. 14 printed at the back of the passage tickets should be held as void and unenforceable for the following reasons first, under circumstances obligation in the inter-island shipping industry, it is not just and fair to bind passengers to the terms of the conditions printed at the back of the passage tickets, on which Condition No. 14 is Printed in fine letters, and second, Condition No. 14 subverts the public policy on transfer of venue of proceedings of this nature, since the same will prejudice rights and interests of innumerable passengers located in different places of the country who, under Condition No. 14, will have to file suits against petitioner only in the City of Cebu. Considering the expense and trouble a passenger residing outside of Cebu City would incur to prosecute a claim in the City of Cebu, he would most probably decide not to file the action at all. The condition will thus defeat, instead of enhance, the ends of justice. Upon the other hand, petitioner has branches or offices in the respective ports of call of its vessels and can afford to litigate in any of these places. Hence, the filing of the suit in the CFI of Misamis Oriental, as was done in the instant case, will not cause inconvenience to, much less prejudice, petitioner. Under Art. 2220 of the Civil Code, moral damages are justly due in breaches of contract where the defendant acted fraudulently or in bad faith. Both the Trial Court and the Appellate Court found that there was bad faith on the part of petitioner in that: (1) Defendants- Appellants did not give notice to plaintiffs-appellates as to the change of scheduled of the vessel; (2) Knowing fully well that it would take no less than fifteen hours to effect the repairs of the damaged engine, defendants- appellants instead made announce ment of assurance that the vessel would leave within a short period of time, and when plaintiff-appellees wanted to leave the port and gave up the trip, defendants- appellants employees would come and say, we are leaving already. (3) Defendants- appellants did not offer to refund plaintiffs-appellees tickets nor provide them with transportation form Tacloban to Catbalogan.

Quisumbing Sr. vs. Court of Appeals The highjacking-robbery was force majeure. The hijackers do not board an airplane through a blatant display of firepower and violent fury. Firearms, hand-grenades, dynamite, and explosives are introduced into the airplane surreptitiously and with the utmost cunning and stealth, although there is an occasional use of innocent hostages who will be coldly murdered unless a plane is given to the hijackers' complete disposal. PAL was not negligent so as to overcome the force majeure nature of the hi-jacking. Hijackers do not board an airplane through a blatant display of firepower and violent fury. Firearms and grenades are brought to the plane surreptitiously. PAL could not have been faulted for want of diligence, particularly for failing to take positive measures to implement Civil Aeronautics Administration regulations prohibiting civilians from carrying firearms on board the plane. The use of the most sophisticated electronic detection devices may have minimized hijacking but still ineffective against truly determining hijackers. Pan American World Airways, Inc. vs. Rapadas The Warsaw Convention governs the availment of the liability limitations where the baggage check is combined with or incorporated in the passenger ticket. In the case at bar, the baggage check is combined with the passenger ticket in one document of carriage. The passenger ticket complies with Article 3, which provides: (c) a notice to the effect that, if the passenger's journey involves an ultimate destination or stop in a country other than the country of departure, the Warsaw Convention may be applicable and that the Convention governs and in most cases limits the liability of carriers for death or personal injury and in respect of loss of or damage to baggage. The provisions in the plane ticket are sufficient to govern the limitations of liabilities of the airline for loss of luggage. The passenger, upon contracting with the airline and receiving the plane ticket, was expected to be vigilant insofar as his luggage is concerned. If the passenger fails to adduce evidence to overcome the stipulations, he cannot avoid the application of the liability limitations. The facts show that the private respondent actually refused to register the attache case and chose to take it with him despite having been ordered by the PANAM agent to check it in. In attempting to avoid registering the luggage by going back to the line, private respondent manifested a disregard of airline rules on allowable handcarried baggages. Prudence of a reasonably careful person also dictates that cash and jewelry should be removed from checked-in-

luggage and placed in one's pockets or in a handcarried Manila-paper or plastic envelope. The alleged lack of enough time for him to make a declaration of a higher value and to pay the corresponding supplementary charges cannot justify his failure to comply with the requirement that will exclude the application of limited liability. Alitalia vs. Intermediate Appellate Court The Warsaw Convention's provisions, do not regulate or exclude liability for other breaches of contract by the carrier' or misconduct of its officers and employees, or for some particular or exceptional type of damage, Otherwise, an air carrier would be exempt from any liability for damages in the event of its absolute refusal, in bad faith, to comply with a contract of carriage, which is absurd. In the case at bar, no bad faith or otherwise improper conduct may be ascribed to the employees of petitioner airline; and Dr. Pablo's luggage was eventually returned to her, belatedly, it is true, but without appreciable damage. There can be no doubt that Dr. Pablo underwent profound distress and anxiety, which gradually turned to panic and finally despair, from the time she learned that her suitcases were missing up to the time when, having gone to Rome, she finally realized that she would no longer be able to take part in the conference. Certainly, the compensation for the injury suffered by Dr. Pablo cannot under the circumstances be restricted to that prescribed by the Warsaw Convention for delay in the transport of baggage. She is not, of course, entitled to be compensated for loss or damage to her luggage. As already mentioned, her baggage was ultimately delivered to her in Manila, tardily, but safely.

Nocum vs. Laguna Tayabas Bus Company 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. Mecenas vs. CA The behaviour of the captain of the "Don Juan" in tills instance-playing mahjong "before and up to the time of collision constitutes behaviour that is simply unacceptable on the part of the master of a vessel to whose hands the lives and welfare of at least seven hundred fifty (750) passengers had been entrusted. Whether or not Capt. Santisteban was "off-duty" or "on-duty" at or around the time of actual collision is quite immaterial; there is, both realistically speaking and in contemplation of law, no such thing as "off-duty" hours for the master of a vessel at sea that is a common carrier upon whom the law imposes the duty of extraordinary diligence. The record shows that the "Don Juan" sank within ten (10) to fifteen (15) minutes after initial contact with the "Tacloban City. While the failure of Capt. Santisteban to supervise his officers and crew in the process of abandoning the ship and his failure to avail of measures to prevent the too rapid sinking of his vessel after collision, did not cause the collision by themselves, such failures doubtless contributed materially to the consequent loss of life and, moreover, were indicative of the kind and level of diligence exercised by Capt. Santisteban in respect of his vessel and his officers and men prior to actual contact between the two (2) vessels. The officer-on-watch in the "Don Juan" admitted that he had failed to inform Capt. Santisteban not only of the "imminent danger of collision" but even of "the actual collision itself " There is also evidence that the "Don Juan" was carrying more passengers than she had been certified as allowed to carry. Under these circumstances, a presumption of gross negligence on the part of the vessel (her officers and crew) and of its ship-owner arises. Negros Navigation Co., Inc. vs. CA The Duty to exercise due diligence includes the duty to take passengers or cargoes that are within the carrying capacity of the vessel. (Same Ruling with Mecenas)

Korean Airlines Co., LTD. vs. CA

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. 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. 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. Fortune Express Inc. vs. CA Art. 1763 of the Civil Code provides that a common carrier is responsible for injuries suffered by a passenger on account of wilfull acts of other passengers, if the employees of the common carrier could have prevented the act through the exercise of the diligence of a good father of a family. In the present case, it is clear that because of the negligence of petitioner's employees, the seizure of the bus by Mananggolo and his men was made possible. Despite warning by the Philippine Constabulary at Cagayan de Oro that the Maranaos were planning to take revenge on the petitioner by burning some of its buses and the assurance of petitioner's operation manager, Diosdado Bravo, that the necessary precautions would be taken, petitioner did nothing to protect the safety of its passengers. Had petitioner and its employees been vigilant they would not have failed to see that the malefactors had a large quantity of gasoline with them. Under the circumstances, simple precautionary measures to protect the safety of passengers, such as frisking passengers and inspecting their baggages, preferably with non-intrusive gadgets such as metal detectors, before allowing them on board could have been employed without violating the passenger's constitutional rights. The acts of Maranaos could not be considered as caso fortuito because there was already a warning by the PC. No contributory negligence could be attributed to the deceased. The assailant's motive was to retaliate for the loss of life of two Maranaos as a result of the collision between petitioner's bus and the jeepney in which the two Maranaos were riding. The armed men actually allowed deceased to retrieve something from the bus. What apparently angered them was his attempt to help the driver of the bus by pleading for his life.

Gatchalian vs. Delim The record yields affirmative evidence of fault or negligence on the part of respondent common carrier. The driver did not stop to check if anything had gone wrong with the bus when the snapping sound was heard and made known to him by the passengers, instead told them that it was normal. The driver's reply necessarily indicated that the same "snapping sound" had been heard in the bus on previous occasions. This could only mean that the bus had not been checked physically or mechanically to determine what was causing the "snapping sound" which had occurred so frequently that the driver had gotten accustomed to it. Such a sound is obviously alien to a motor vehicle in good operating condition, and even a modicum of concern for life and limb of passengers dictated that the bus be checked and repaired. The obvious continued failure of respondent to look after the roadworthiness and safety of the bus, coupled with the driver's refusal or neglect to stop the mini-bus after he had heard once again the "snapping sound" and the cry of alarm from one of the passengers, constituted wanton disregard of the physical safety of the passengers, and hence gross negligence on the part of respondent and his driver. Because what is involved here is the liability of a common carrier for injuries sustained by passengers in respect of whose safety a common carrier must exercise extraordinary diligence, we must construe any such purported waiver most strictly against the common carrier. For a waiver to be valid and effective, it must not be contrary to law, morals, public policy or good customs. A cursory examination of the purported waiver will readily show that appellees did not actually waive their right to claim damages from appellant for the latter's failure to comply with their contract of carriage. All that said document proves is that they expressed a "desire" to make the waiver which obviously is not the same as making an actual waiver of their right. A waiver of the kind invoked by appellant must be clear and unequivocal. A person is entitled to the physical integrity of his or her body; if that integrity is violated or diminished, actual injury is suffered for which actual or compensatory damages are due and assessable. Petitioner Gatchalian is entitled to be placed as nearly as possible in the condition that she was before mishap. A scar, especially one on the face of the woman, resulting from the infliction of injury upon her, is a violation of bodily integrity, giving raise to a legitimate claim for restoration to her condition ante. Del Castillo vs. Jaymalin Common carriers are responsible for the death of their passengers (Articles 1764 and 2206 of the Civil Code). This liability includes the loss of the earning capacity of the deceased. It appears proven that the defendant corporations failed to exercise the diligence that was their duty to observe according to Articles 1733 and 1755. The conductor was apprised of the fact that Mario del Castillo was deaf and dumb. With this knowledge the conductor

should have taken extra-ordinary care for the safety of the said passenger. In this he failed. Phil. Rabbit Bus Lines vs. IAC The principle about "the last clear" chance, would call for application in a suit between the owners and drivers of the two colliding vehicles. It does not arise where a passenger demands responsibility from the carrier to enforce its contractual obligations. For it would be inequitable to exempt the negligent driver of the jeepney and its owners on the ground that the other driver was likewise guilty of negligence." It is the rule under the substantial factor test that if the actor's conduct is a substantial factor in bringing about harm to another, the fact that the actor neither foresaw nor should have foreseen the extent of the harm or the manner in which it occurred does not prevent him from being liable. The bus driver's conduct is not a substantial factor in bringing about harm to the passengers of the jeepney. It cannot be said that the bus was travelling at a fast speed when the accident occurred because the speed of 80 to 90 kilometers per hour, assuming such calculation to be correct, is yet within the speed limit allowed in highways.

Bustamante vs. CA The doctrine, stated broadly, is that the negligence of the plaintiff does not preclude a recovery for the negligence of the defendant where it appears that the defendant, by exercising reasonable care and prudence, might have avoided injurious consequences to the plaintiff notwithstanding the plaintiff's negligence. In other words, the doctrine of last clear chance means that even though a person's own acts may have placed him in a position of peril, and an injury results, the injured person is entitled to recovery. As the doctrine is usually stated, a person who has the last clear chance or opportunity of avoiding an accident, notwithstanding the negligent acts of his opponent or that of a third person imputed to the opponent is considered in law solely responsible for the consequences of the accident. All premises considered, the Court is convinced that the respondent Court committed an error of law in applying the doctrine of last clear chance as between the defendants, since the case at bar is not a suit between the owners and drivers of the colliding vehicles but a suit brought by the heirs of the deceased passengers against both owners and drivers of the colliding vehicles. Therefore, the respondent court erred in absolving the owner and driver of the cargo truck from liability. Lara vs. Valencia

The owner and driver of a vehicle owes to accommodation passengers or invited guests merely the duty to exercise reasonable care so that they may be transported safely to their destination. Thus, "The rule is established by weight of authority that the owner or operator of an automobile owes the duty to an invited guest to exercise reasonable care in its operation, and not unreasonably to expose him to danger and injury by increasing the hazard of travel. The owner of the vehicle in the case at bar is only required to observe ordinary care, and is not in duty bound to exercise extraordinary diligence as required by our law. A passenger must observe the diligence of a father of a family to avoid injury to himself which means that if the injury to the passenger has been proximately caused by his own negligence, the carrier cannot be held liable. Necessito vs. Paras While the carrier is not an insurer of the safety of the passengers, it should nevertheless be held to answer for the laws its equipment if such flaws were at all discoverable. In this connection, the manufacturer of the defective appliance is considered in law the agent of the carrier, and the good repute of the manufacturer will not relieve the carrier from liability. The rationale of the carrier's liability is the fact that the passenger has no privity with the manufacturer of the defective equipment; hence, he has no remedy against him, while the carrier usually has. Japan Airlines vs. CA Accordingly, there is no question that when a party is unable to fulfill his obligation because of "force majeure," the general rule is that he cannot be held liable for damages for non-performance. Corollarily, when JAL was prevented from resuming its flight to Manila due to the effects of Mt. Pinatubo eruption, whatever losses or damages in the form of hotel and meal expenses the stranded passengers incurred, cannot be charged to JAL. Yet it is undeniable that JAL assumed the hotel expenses of respondents for their unexpected overnight stay on June 15, 1991. It has been held that airline passengers must take such risks incident to the mode of travel. In this regard, adverse weather conditions or extreme climatic changes are some of the perils involved in air travel, the consequences of which the passenger must assume or expect. While JAL was no longer required to defray private respondents' living expenses during their stay in Narita on account of the fortuitous event, JAL had the duty to make the necessary arrangements to transport private respondents on the first available connecting flight to Manila. Petitioner JAL reneged on its obligation to look after the comfort and convenience of its passengers when it declassified private respondents from "transit passengers" to "new

passengers" as a result of which private respondents were obliged to make the necessary arrangements themselves for the next flight to Manila. Layugan vs. IAC Res ipsa loquitur is a doctrine which states thus: "Where the thing which causes injury is shown to be under the management of the defendant, and the accident is such as in the ordinary course of things does not happen if those who have the management use proper care, it affords reasonable evidence, in the absence of an explanation by the defendant, that the accident arose from want of care. The doctrine of Res ipsa loquitur as a rule of evidence is peculiar to the law of negligence which recognizes that prima facie negligence may be established without direct proof and furnishes a substitute for specific proof of negligence. The doctrine can be invoked when and only when, under the circumstances involved, direct evidence is absent and not readily available. Whether the cargo truck was parked along the road or on half the shoulder of the right side of the road would be of no moment taking into account the warning device consisting of the lighted kerosene lamp placed three or four meters from the back of the truck. But despite this warning which we rule as sufficient, the Isuzu truck driven by Daniel Serrano, an employee of the private respondent, still bumped the rear of the parked cargo truck. As a direct consequence of such accident the petitioner sustained injuries on his left forearm and left foot. It is clear therefore that the absence or want of care of Daniel Serrano has been established by clear and convincing evidence. It follows that the doctrine of Res ipsa loquitur is inapplicable, making the employer of the driver liable for the negligence of his employee. La Mallorca vs. CA The liability of the carrier for the child, who was already led by the father to a place about 5 meters away from the bus for her safety under the contract of carriage, persists. The relation of carrier and passenger does not necessarily cease where the latter, after alighting from the car, aids the carrier's servant or employee in removing his baggage from the car. It has been recognized as a rule that the relation of carrier and passenger does not cease at the moment the passenger alights from the carrier's vehicle at a place selected by the carrier at the point of destination, but continues until the passenger has had a reasonable time or a reasonable opportunity to leave the carrier's premises. And, what is a reasonable time or a reasonable delay within this rule is to be determined from all the circumstances. Aboitiz Shipping Co. vs. CA

The rule is that the relation of carrier and passenger continues until the passenger has been landed at the port of destination and has left the vessel owner's dock or premises. Once created, the relationship will not ordinarily terminate until the passenger has, after reaching his destination, safely alighted from the carrier's conveyance or had a reasonable opportunity to leave the carrier's premises. All persons who remain on the premises a reasonable time after leaving the conveyance are to be deemed passengers, and what is a reasonable time or a reasonable delay within this rule is to be determined from all the circumstances, and includes a reasonable time to see after his baggage and prepare for his departure. The carrier-passenger relationship is not terminated merely by the fact that the person transported has been carried to his destination if, for example, such person remains in the carrier's premises to claim his baggage. When the accident occurred, the victim was in the act of unloading his cargoes, which he had every right to do, from petitioner's vessel. Even if he had already disembarked an hour earlier, his presence in petitioner's premises was not without cause. The victim had to claim his baggage which was possible only one hour after the vessel arrived since it was admittedly standard procedure in the case of petitioner's vessels that the unloading operations shall start only after that time. Mallari Sr. vs. CA Clearly, the proximate cause of the collision resulting in the death of 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. 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.

Bayasen vs. CA It is a well known physical tact that cars may skid on greasy or slippery roads, as in the instant case, without fault on account of the manner of handling the

car. Skidding means partial or complete loss of control of the car under circumstances not necessarily implying negligence. It may occur without fault. Under the particular circumstances of the instant case, the petitioner- driver who skidded could not be regarded as negligent, the skidding being an unforeseen event, so that the petitioner had a valid excuse for his departure from his regular course. Cervantes vs. CA Since the PAL agents are not privy to the said Agreement and petitioner knew that a written request to the legal counsel of PAL was necessary, he cannot use what the PAL agents did to his advantage. The said agents, acted without authority when they confirmed the flights of the petitioner. Under Article 1989 of the New Civil Code, the acts of an agent beyond the scope of his authority do not bind the principal, unless the latter ratifies the same expressly or impliedly. Furthermore, when the third person (herein petitioner) knows that the agent was acting beyond his power or authority, the principal cannot be held liable for the acts of the agent. If the said third person is aware of such limits of authority, he is to blame, and is not entitled to recover damages from the agent, unless the latter undertook to secure the principal's ratification. Calalas vs. CA It is immaterial that the proximate cause of the collision between the jeepney and the truck was the negligence of the truck driver. The doctrine of proximate cause is applicable only in actions for quasi-delict, not in actions involving breach of contract. The doctrine is a device for imputing liability to a person where there is no relation between him and another party. In such a case, the obligation is created by law itself. But, where there is a pre-existing contractual relation between the parties, it is the parties themselves who create the obligation, and the function of the law is merely to regulate the relation thus created. Insofar as contracts of carriage are concerned, some aspects regulated by the Civil Code are those respecting the diligence required of common carriers with regard to the safety of passengers as well as the presumption of negligence in cases of death or injury to passengers. In case of death or injuries to passengers, Art. 1756 of the Civil Code provides that common carriers are presumed to have been at fault or to have acted negligently unless they prove that they observed extraordinary diligence as defined in Arts. 1733 and 1755 of the Code. This provision necessarily shifts to the common carrier the burden of proof. The driver of jeepney did not carry safely as far as human care and foresight could provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances" as required by Art. 1755. First, the jeepney was not properly parked, its rear portion being exposed about two meters from the broad shoulders of the highway, and facing the middle of the highway in a diagonal angle. The petitioner's driver took in more passengers

than the allowed seating capacity of the jeepney. These are violations of the Land Transportation and Traffic Code. Therefore, there is no assumption of risk by the passenger. Pestao vs. Sumayang In the case at bar, Pestao, as a professional driver operating a public transport bus, should have anticipated that overtaking at a junction was a perilous maneuver and should thus have exercised extreme caution. Under Articles 2180 and 2176 of the Civil Code, owners and managers are responsible for damages caused by their employees. When an injury is caused by the negligence of a servant or an employee, the master or employer is presumed to be negligent either in the selection or in the supervision of that employee. This presumption may be overcome only by satisfactorily showing that the employer exercised the care and the diligence of a good father of a family in the selection and the supervision of its employee. Gillaco vs. Manila Railroad While a passenger is entitled to protection from personal violence by the carrier or its agents or employees, since the contract of transportation obligates the carrier to transport a passenger safely to his destination, the responsibility of the carrier extends only to those acts that the carrier could foresee or avoid through the exercise of the degree of care and diligence required of it. In the present case, the act of the train guard of the Manila Railroad Company in shooting the passenger (because of a personal grudge nurtured against the latter since the Japanese occupation) was entirely unforseeable by the Manila Railroad Co. The latter had no means to ascertain or anticipate that the two would meet, nor could it reasonably forsee every personal rancor that might exist between each one of its many employees and any one of the thousands of eventual passengers riding in its trains. The shooting in question was therefore "caso fortuito" within the definition of Art. 1105 of the old Civil Code (which is the law applicable), being both unforeseeable and inevitable under the given circumstances; and pursuant to established doctrine, the resulting breach of the company's contract of safe carriage with the deceased was excused thereby. Maranan vs. Perez The basis of the common carrier's liability under NCC for assaults on passengers committed by its drivers rests either on (1) the doctrine of respondeat superior or (2) the principle that it is the carrier's implied duty to transport the passenger safely. Under the first, which is the minority view, the carrier is liable only when the act of the employee is within the scope of his authority and duty. It is not sufficient that the act be within the course of employment only. Under the

second view, upheld by the majority and also by the later cases, it is enough that the assault happens within the course of the employee's duty. It is no defense for the carrier that the act was done in excess of authority or in disobedience of the carrier's orders. The carrier's liability here is absolute in the sense that it practically secures the passengers from assaults committed by its own employees. Art. 1759, evidently follows the rule based on the second view. Accordingly, it is the carrier's strict obligation to select its drivers and similar employees with due regard not only to their technical competence and physical ability, but also, no less important, to their total personality, including their patterns of behavior, moral fibers, and social attitude. PNR vs. CA When a train boarded by the deceased passenger was so over-crowded that he and many other passengers had no choice but to sit on the open platforms between the coaches of the train, the common carrier is negligent. Likewise when the train did not even slow down when it approached the Iyam Bridge which was under repair at the time, neither did the train stop, despite the alarm raised by other passengers that a person had fallen off the train at lyam Bridge, there was negligence. The petitioner has the obligation to transport its passengers to their destinations and to observe extraordinary diligence in doing so. Death or any injury suffered by any of its passengers gives rise to the presumption that it was negligent in the performance of its obligation under the contract of carriage. But while petitioner failed to exercise extraordinary diligence as required by law, it appears that the deceased was chargeable with contributory negligence. Since he opted to sit on the open platform between the coaches of the train, he should have held tightly and tenaciously on the upright metal bar found at the side of said platform to avoid falling off from the speeding train. Isaac vs. A.L. Ammen Trans. Co. If the carriers employee is confronted with a sudden emergency, he is not held to the same degree of care he would otherwise, be required in the absence of such emergency. By placing his left arm on the window, petitioner is guilty of contributory negligence. It cannot however relieve the carrier but can only reduce its liability (ART. 1762). It is a prevailing rule that it is negligence per se for passengers on a railroad to protrude any part of his body and that no recovery can be had for an injury. Bachelor Express Inc vs. CA The running amuck of the passenger was the proximate cause of the incident as it triggered off a commotion and panic among the passengers such

that the passengers started running to the sole exit shoving each other resulting in the falling off the bus by passengers Beter and Rautraut causing them fatal injuries. The sudden act of the passenger who stabbed another passenger in the bus is within the context of force majeure. However, in order that a common carrier may be absolved from liability in case of force majeure, it is not enough that the accident was caused by force majeure. The common carrier must still prove that it was not negligent in causing the injuries resulting from such accident. In this case, Bachelor was negligent. Considering the factual findings of the Court of Appeals-the bus driver did not immediately stop the bus at the height of the commotion; the bus was speeding from a full stop; the victims fell from the bus door when it was opened or gave way while the bus was still running; the conductor panicked and blew his whistle after people had already fallen off the bus; and the bus was not properly equipped with doors in accordance with law. Cariaga vs. LTB Co The income which deceased could earn if he should finish the medical course and pass the corresponding board examinations must be deemed to be within the same category provided for by Art. 2201 of the Civil Code, which are those that are the natural and probable consequences of the breach and which the parties had foreseen or could have reasonably foreseen at the time the obligation was constituted. LTB could not be held liable to pay moral damages under Article 2220 of the Civil Code on account of breach of its contract of carriage because it did not act fraudulently or in bad faith. LTB had exercised due diligence in the selection and supervision of its employees like the drivers of its buses in connection with the discharge of their duties and so it must be considered an obligor in good faith. Villa Rey Transit, Inc. vs. CA Life expectancy is, not only relevant, but, also, an important element in fixing the amount recoverable by private respondents herein. Although it is not the sole element determinative of said amount, no cogent reason has been given to warrant its disregard and the adoption, in the case at bar, of a purely arbitrary standard, such as a four-year rule. When the liability of common carrier had been fixed at a minimal rate of only of P2,184.00 a year, which is the annual salary of deceased at the time of his death, as a young "training assistant" and when the deceaseds potentiality and capacity to increase his future income was not considered said liability may be enforced upon finality of the decision. Pan American World Airways vs. IAC

By refusing to accommodate plaintiff in said flight, defendant had willfully and knowingly violated the contract of carriage and failed to bring the plaintiff to her place of destination under its contract with plaintiff. Bad faith was also present. Self enrichment or fraternal interest and not personal ill will may have been the motive of defendant, but it is malice nevertheless. The fact that plaintiff was ordered out under some pretext in order to accommodate a white man in an airline owned by an American firm with a reputation for bumping off non- Caucasian to accommodate whites is very regrettable. Defendant having breached its contract with plaintiff in bad faith, it is not error to have awarded exemplary damages. The rationale behind exemplary or corrective damages is, as the name implies, to provide an example or correction for public good . In view of it nature, it should be imposed in such amount as to sufficiently and effectively deter similar breach of contract in the future by defendant and other airlines. An award of attorney's fees is also in order, having found bad faith on the part of defendant. Soberano vs. MRR In case of physical injuries, moral damages are recoverable only by the party injured and not by his next of kin, unless there is express statutory provision to the contrary. In this case it was Juana Soberano, not her husband Jose, who sustained the bodily injuries. Attorneys fees may only be awarded when the defendant's act or omission has compelled the plaintiff to litigate with third persons or incur expenses to protect his interest, or when the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly valid, just and demandable claim. It will be observed that the defendant companies offered to settle the case by offering to the Soberanos the additional sum of P5,000. The Soberanos, however, rejected the offer and proceeded to court to recover damages in the total sum of P76,757.76. Marchan vs. Mendoza It is argued that this Court is without jurisdiction to adjudicate the exemplary damages since there was no allegation nor prayer, nor proof, nor counterclaim of error for the same by the respondents. It is to be observed however, that in the complaint, plaintiffs "prayed for such other and further relief as this Court may deem just and equitable." Now, since the body of the complaint sought to recover damages against the defendant-carrier wherein plaintiffs prayed for indemnification for the damages they suffered as a result of the negligence of the driver who is appellant's employee and since exemplary damages is intimately connected with general damages, plaintiffs may not be expected to single out by express term the kind of damages they

are trying to recover against the defendant's carrier. Suffice it to state that when plaintiffs prayed in their complaint for such other relief and remedies that may be availed of under the premises, in effect, therefore, the court is called upon the exercise and use its discretion whether the imposition of punitive or exemplary damages even though not expressly prayed or pleaded in the plaintiffs' complaint. Exemplary damages may be imposed by way of example or correction only in addition, among others, to compensatory damages, but that they cannot be recovered as a matter of right, their determination depending upon the discretion of the court. If the amount of exemplary damages need not be proved, it need not also be alleged, and the reason is obvious because it is merely incidental or dependent upon what the court may award as compensatory damages. De Caliston vs. Court of Appeals The deletion of the P10,000.00 awarded for loss of pension is unjustified. Under Article 2206 of the Civil Code: The amount of damages for death caused by a crime or quasi-delict shall be at least three thousand pesos, even though there may have been mitigating circumstances. In addition: (1) The defendant shall be liable for the loss of the earning capacity of the deceased, and the indemnity shall be paid to the heirs of the latter. . The pension of the decedent being a sure income that was cut short by her death for which Dalmacio was responsible, the surviving heir of the former is entitled to the award of P 10,000.00 which is just equivalent to the pension the decedent would have received for one year if she did not die. On the other hand, the P5,000.00 paid to the herein petitioner by the insurer of the passenger bus which figured in the accident may be deemed to have come from the bus owner who procured the insurance. Since the civil liability (ex-delicto) of the latter for the death caused by his driver is subsidiary and, at bottom, arises from the same culpa, the insurance proceeds should be credited in favor of the errant driver. Philippine Airlines vs. CA 185 SCRA 110 Petitioner relies on "the principle of law generally recognized and applied by the courts in the United States" that "the controlling element in determining loss of earnings arising from death is, as established by authorities, the life expectancy of the deceased or of the beneficiary, whichever is shorter. However, resort to foreign jurisprudence would be proper only if no law or jurisprudence is available locally to settle a controversy. Even in the absence of local statute and case law, foreign jurisprudence is only persuasive. For the settlement of the issue at hand, there are enough applicable local laws and jurisprudence. Under Article 1764 and Article 2206(1) of the Civil Code, the award of damages for death is computed on the basis of the life expectancy of the deceased, not of his beneficiary.

Cachero vs. Manila Yellow Taxi Cab While under the law, employers are made responsible for the damages caused by their employees acting within the scope of their assigned task, plaintiff, in the present case, does not maintain his action against all the persons who might be liable for the damages caused but on an alleged breach of contract of carriage and against the defendant employer alone. However, the defendant taxicab company has not committed any criminal offense resulting in physical injuries against the plaintiff. The one that committed the offense against plaintiff is the driver of defendant's taxicab but he was not made party defendant to the case. Therefore, plaintiff is not entitled to compensation for moral damages as his case does not come within the exception of paragraph 1 of Article 2219 of the Civil Code. The present case does not come under any of the exceptions enumerated in Article 2208 of the Civil Code, specially of paragraph 2 thereof, because defendant's failure to meet its responsibility was not the cause that compelled the plaintiff to litigate or to incur expenses to protect his interests. The present action was instituted because plaintiff demanded an exorbitant amount for moral damages and naturally the defendant did not and could not yield to such demand. This is neither a case that comes under paragraph 11 of said Article because the Lower Court did not deem it just and equitable to award any amount for attorney's fees, on which point this Court agrees. Fores vs. Miranda The exception to the basic rule of damages now under consideration is a mishap resulting in the death of a passenger, in which case Article 1764 makes the common carrier expressly subject to the rule of Art. 2206, that entitles the spouse, descendants and ascendants of the deceased passenger to "demand moral damages for mental anguish by reason of the death of the deceased". But the exceptional rule of Art. 1764 makes it all the more evident that where the injured passenger does not die, moral damages are not recoverable unless it is proved that the carrier was guilty of malice or bad faith. We think it is clear that the mere carelessness of the carrier's driver does not per se constitute or justify an inference of malice or bad faith on the part of the carrier; and in the case at bar there is no other evidence of such malice to support the award of moral damages by the Court of Appeals. To award moral damages for breach of contract, therefore, without proof of bad faith or malice on the part of the defendant, as required by Art. 2220, would be to violate the clear provisions of the law, and constitute unwarranted judicial legislation. Lopez vs. Pan American As a proximate result of defendant's breach in bad faith of its contracts with plaintiffs, the latter suffered social humiliation, wounded feelings, serious anxiety and mental anguish. For plaintiffs were travelling with first class tickets

issued by defendant and yet they were given only the tourist class. At stopovers, they were expected to be among the first-class passengers by those awaiting to welcome them, only to be found among the tourist passengers. It may not be humiliating to travel as tourist passengers; it is humiliating to be compelled to travel as such, contrary to what is rightfully to be expected from the contractual undertaking. Senator Lopez was then Senate President Pro Tempore. International carriers like defendant know the prestige of such an office. And he was former Vice-President of the Philippines. Senator Lopez was going to the United States to attend a private business conference of the Binalbagan-Isabela Sugar Company; but his aforesaid rank and position were by no means left behind, and in fact he had a second engagement awaiting him in the United States: a banquet tendered by Filipino friends in his honor as Senate President Pro Tempore. For the moral damages sustained by him, therefore, an award of P100,000.00 is appropriate. A written contract for attorney's services shall control the amount to be paid therefor unless found by the court to be unconscionable or unreasonable. A consideration of the attorneys prominence as well as comparison of the defense counsels fees could well establish the reasonableness of the attorneys fees, such as in this case. Ortigas Jr. vs. Lufthansa It is Our considered view that when it comes to contracts of common carriage, inattention and lack of care on the part of the carrier resulting in the failure of the passenger to be accommodated in the class contracted for amounts to bad faith or fraud which entitles the passenger to the award of moral damages in accordance with Article 2220 of the Civil Code. But in the instant case, the breach appears to be of graver nature, since the preference given to the Belgian passenger over plaintiff was done willfully and in wanton disregard of plaintiff's rights and his dignity as a human being and as a Filipino, who may not be discriminated against with impunity. What worsened the situation of was that Lufthansa succeeded in keeping Ortigas as its passenger by assuring him that he would be given first class accommodation at the next stations, the proper arrangements therefor having been made already, when in truth such was not the case. A passenger contracts for first class accommodations for many reasons peculiar to himself and pays a higher price therefor, and it is certainly not for the airplane to say later, after it deprives him of his space in order to favor another passenger, that economy class is anyway just as good as first class. We have uniformly upheld the right of a passenger to damages in all cases wherein, after having contracted and paid for first class accommodations duly confirmed and validated, he is transferred over his objection to economy, class, which he has to take in order to be able to arrive at his destination on his scheduled time.

Philippine Rabbit Bus Lines vs. Esguerra

Moral damages are not recoverable in actions for damages predicated on a breach of the contract of transportation, as in the instant case, in view of the provisions of Articles 2219 and 2220 of the New Civil Code. The exceptions are (1) where the mishap results in the death of a passenger, and (2) where it is proved that the carrier was guilty of fraud or bad faith, even if death does not result. The Court of Appeals found that the two vehicles sideswiped each other at the middle of the road. In other words. both vehicles were in their respective lanes and that they did not invade the lane of the other. It cannot be said therefore that there was fraud or bad faith on the part of the carrier's driver. This being the case, no moral damages are recoverable.

Trans World Airlines vs. CA Petitioner sacrificed the comfort of its first class passengers including private respondent Vinluan for the sake of economy. Such inattention and lack of care for the interest of its passengers who are entitled to its utmost consideration, particularly as to their convenience, amount to bad faith which entitles the passenger to the award of moral damages. More so in this case where instead of courteously informing private respondent of his being downgraded under the circumstances, he was angrily rebuffed by an employee of petitioner. At the time of this unfortunate incident, the private respondent was a practicing lawyer, a senior partner of a big law firm in Manila. He was a director of several companies and was active in civic and social organizations in the Philippines. Considering the circumstances of this case and the social standing of private respondent in the community, he is entitled to the award of moral and exemplary damages. Armovit vs. CA The gross negligence committed by private respondent(Northwest Airlines) in the issuance of the tickets by the erroneous entry of the date of departure and without changing or correcting the error when the tickets were presented for re-confirmation and the manner by which petitioners were rudely informed that they were bumped off are clear indicia of such malice and bad faith and establish that private respondent committed a breach of contract which entitles petitioners to moral damages. The deletion of the nominal damages by the appellate court is welltaken since there is an award of actual damages. Nominal damages cannot coexist with actual or compensatory damages. Philippine Airlines vs. CA 106 SCRA 391 There was gross negligence by PAL for allowing Capt. Bustamante to fly on the that fateful day of the accident, even if he was sick, having tumor on his

nose. No one will certify the fitness to fly a plane of one suffering from the disease. One month prior to the crash-landing, when the pilot was preparing to land in Daet, private respondent warned him that they were not in the vicinity of Daet but above the town of Ligao. The dizziness, headaches and general debility of private respondent were after-effects of the crash-landing. And therefore there is causal connection between the accident and said aftereffects. The negligence of PAL is clearly a quasi-delict and therefore Art. 2219(2) is applicable, justifying the recovery of moral damages. Even from the standpoint of the petitioner that there is an employee-employer 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, applying the provisions of Article 2220. Prudenciado vs. Alliance Transport Dra. Prudenciado suffered a brain concussion which although mild can admittedly produce the effects complained of by her and that these symptoms can develop after several years and can lead to some, serious handicaps or predispose the patient to other sickness. Being a doctor by profession, her fears can be more real and intense than an ordinary person. Otherwise stated, she is undeniably a proper recipient of moral damages which are proportionate to her suffering. As to exemplary damages, Article 2231 of the Civil Code provides: In quasi-delicts, exemplary damages may be granted if the defendant acted with grave negligence. The rationale behind exemplary or corrective damages is, as the name implies, to provide an example or correction for the public good. Respondent driver was running at high speed after turning to the right along Taft Ave. coming from Ayala Boulevard, considering that the traffic was clear. Failing to notice petitioner's car, he failed to apply his brakes and did not even swerve to the right to avoid the collision. Much more, it was raining that time and the roads are slippery. The frequent incidence of accidents of this nature caused by taxi drivers indeed demands corrective measures.

I. CONCEPT OF COMMON CARRIER

DE GUZMAN vs. COURT OF APPEALS Facts: Respondent Ernesto Cendaa is a junk dealer who was engaged in buying up used bottles and scrap metal in Pangasinan. Upon gathering sufficient quantities of such scrap material, respondent would bring such material to Manila for resale. He utilized two six-wheeler trucks which he owned for hauling the material to Manila. On the return trip to Pangasinan, respondent would load his vehicles with cargo which various merchants wanted delivered to different establishments in Pangasinan. For that service, respondent charged freight rates which were commonly lower than regular commercial rates. Petitioner Pedro de Guzman a merchant and authorized dealer of General Milk Company (Philippines), Inc. in Urdaneta, Pangasinan, contracted with respondent for the hauling of 750 cartons of Liberty filled milk from its warehouse in Makati to petitioner's establishment in Urdaneta. 150 cartons were loaded on a truck driven by respondent, while 600 cartons were placed on board the other truck which was driven by Manuel Estrada, respondent's driver and employee. Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600 boxes never reached petitioner, since the truck which carried these boxes was hijacked somewhere along the MacArthur Highway in Paniqui, Tarlac, by armed men who took with them the truck, its driver, his helper and the cargo. Petitioner commenced action against private respondent demanding payment of P22,150.00, the claimed value of the lost merchandise, plus damages and attorney's fees. Petitioner argued that private respondent, being a common carrier, and having failed to exercise the extraordinary diligence required of him by the law, should be held liable for the value of the undelivered goods. Private respondent denied that he was a common carrier and argued that he could not be held responsible for the value of the lost goods, such loss having been due to force majeure.

The RTC ruled that private respondent was a common carrier. CA reversed the decision and held that respondent had been engaged in transporting return loads of freight "as a casual occupation, a sideline to his scrap iron business. Issue: 1. Whether or not respondent is a common carrier. 2. Whether or not respondent is liable. Held: 1. Yes. Article 1732 makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in local Idiom as "a sideline"). Article 1732 also carefully avoids making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the "general public," i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population. The Court of Appeals referred to the fact that private respondent held no certificate of public convenience. A certificate of public convenience is not a requisite for the incurring of liability. That liability arises the moment a person or firm acts as a common carrier, without regard to whether or not such carrier has also complied with the requirements of the applicable regulatory statute and implementing regulations and has been granted a certificate of public convenience or other franchise. To exempt private respondent from the liabilities of a common carrier because he has not secured the necessary certificate of public convenience, would be offensive to sound public policy; that would be to reward private respondent precisely for failing to comply with applicable statutory requirements. 2. No. Article 1734 establishes the general rule that common carriers are responsible for the loss, destruction or deterioration of the goods which they carry, "unless the same is due to any of the following causes only: (1) Flood, storm, earthquake, lightning or other natural disaster or calamity; (2) Act of the public enemy in war, whether international or civil; (3) Act or omission of the shipper or owner of the goods; (4) The character-of the goods or defects in the packing or-in the containers; and (5) Order or act of competent public authority. Article 1735 also provides as follows: In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the preceding article, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as required in Article 1733. The hijacking of the carrier's truck does not fall within any of the five categories of exempting causes listed in Article 1734. It would follow,

therefore, that the hijacking of the carrier's vehicle must be dealt with under the provisions of Article 1735, in other words, that the private respondent as common carrier is presumed to have been at fault or to have acted negligently. This presumption, however, may be overthrown by proof of extraordinary diligence on the part of private respondent. Petitioner argues that in the circumstances of this case, private respondent should have hired a security guard presumably to ride with the truck carrying the 600 cartons of Liberty filled milk. We do not believe, however, that in the instant case, the standard of extraordinary diligence required private respondent to retain a security guard to ride with the truck and to engage brigands in a firelight at the risk of his own life and the lives of the driver and his helper. Article 1745 provides in relevant part: Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public policy: (6) that the common carrier's liability for acts committed by thieves, or of robbers who do not act with grave or irresistible threat, violence or force, is dispensed with or diminished. In the instant case, armed men held up the second truck owned by private respondent which carried petitioner's cargo. Accused acted with grave, if not irresistible, threat, violence or force. In these circumstances, we hold that the occurrence of the loss must reasonably be regarded as quite beyond the control of the common carrier and properly regarded as a fortuitous event. It is necessary to recall that even common carriers are not made absolute insurers against all risks of travel and of transport of goods, and are not held liable for acts or events which cannot be foreseen or are inevitable, provided that they shall have complied with the rigorous standard of extraordinary diligence.

PLANTERS PRODUCTS, INC. vs. COURT OF APPEALS Facts: PPI purchased from Mitsubishi metric tons of Urea fertilizer which the latter shipped aboard the cargo vessel owned by KKKK from US to La Union. Prior to its voyage, a time charter-party on the vessel was entered into between Mitsubishi as shipper/charterer and KKKK as shipowner, in Tokyo, Japan. Before loading the fertilizer aboard the vessel, they were all presumably inspected by the charterer's representative and found fit to take a load of urea. After the Urea fertilizer was loaded in bulk by stevedores hired by and under the supervision of the shipper, the steel hatches were closed with heavy iron lids, covered with three layers of tarpaulin, then tied with steel bonds. The hatches remained closed and tightly sealed throughout the entire voyage. A private marine and cargo surveyor, Cargo Superintendents Company Inc. (CSCI), was hired by PPI to determine the "outturn" of the cargo shipped. The survey report submitted revealed a shortage in the cargo and that a portion of the Urea fertilizer approximating was contaminated with dirt. PPI sent a claim letter to Soriamont Steamship Agencies (SSA), the resident agent of the carrier, KKKK, for the cost of the shortage in the and the diminution in value of that portion contaminated with dirt. SSA explained that

they did not respond to the consignee's claim because it was not a formal claim, and that they had nothing to do with the discharge of the shipment. PPI filed an action for damages. The defendant carrier argued that the strict public policy governing common carriers does not apply to them because they have become private carriers by reason of the provisions of the charterparty. RTC ruled in favor of plaintiff, stating that common carriers are presumed negligent, all that a shipper has to do in a suit to recover for loss or damage is to show receipt by the carrier of the goods and to delivery by it of less than what it received. After that, the burden of proving that the loss or damage was due to any of the causes which exempt him from liability is shifted to the carrier, common or private he may be. Even if the provisions of the charter-party are deemed valid, and the defendants considered private carriers, it was still incumbent upon them to prove that the shortage or contamination sustained by the cargo is attributable to the fault or negligence on the part of the shipper or consignee in the loading, stowing, trimming and discharge of the cargo. This they failed to do. CA reversed the decision, relying on the 1968 case of Home Insurance Co. v. American Steamship Agencies, Inc., it ruled that the cargo vessel M/V "Sun Plum" owned by private respondent KKKK was a private carrier and not a common carrier by reason of the time charterer-party. Accordingly, the Civil Code provisions on common carriers which set forth a presumption of negligence do not find application in the case at bar. Issue: 1) Whether a common carrier becomes a private carrier by reason of a charter-party. 2) Whether the shipowner was able to prove that he had exercised that degree of diligence required of him under the law. Held: 1.) Not necessarily. It is not disputed that respondent carrier, in the ordinary course of business, operates as a common carrier, transporting goods indiscriminately for all persons. When petitioner chartered the vessel M/V "Sun Plum", the ship captain, its officers and compliment were under the employ of the shipowner and therefore continued to be under its direct supervision and control. Hardly then can the charterer be charged, a stranger to the crew and to the ship, with the duty of caring for his cargo when the charterer did not have any control of the means in doing so. This is evident in the present case considering that the steering of the ship, the manning of the decks, the determination of the course of the voyage and other technical incidents of maritime navigation were all consigned to the officers and crew who were screened, chosen and hired by the shipowner. 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, that a common carrier becomes private, at least insofar as the particular voyage covering the charterparty 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.

Respondent carrier's heavy reliance on the case of Home Insurance Co. v. American Steamship Agencies, is misplaced for the reason that the meat of the controversy therein was the validity of a stipulation in the charter-party exempting the shipowners from liability for loss due to the negligence of its agent, and not the effects of a special charter on common carriers. At any rate, the rule in the United States that a ship chartered by a single shipper to carry special cargo is not a common carrier, does not find application in our jurisdiction, for we have observed that the growing concern for safety in the transportation of passengers and /or carriage of goods by sea requires a more exacting interpretation of admiralty laws, more particularly, the rules governing common carriers. 2.) Yes. In an action for recovery of damages against a common carrier on the goods shipped, the RTCs statement on the requirements of the law was reiterated. SC held that respondent carrier has sufficiently overcome, by clear and convincing proof, the prima facie presumption of negligence. It was shown during the trial that after the loading of the cargo in bulk in the ships holds, the steel pontoon hatches were closed and sealed with iron lids, then covered with 3 layers of serviceable tarpaulins which were tied with steel bonds. The hatches remained close and tightly sealed while the ship was in transit as the weight of the steel covers made it impossible for a person to open without the use of the ships boom. Also shown, was that the hull of the vessel was in good condition, foreclosing the possibility of spillage of the cargo into the sea or seepage of water inside the hull of the vessel. SC agreed that the bulk shipment of highly soluble goods like fertilizer carries with it the risk of loss or damage. Moreso, with a variable weather condition prevalent during its unloading, as was the case at bar. This is a risk the shipper or the owner of the goods has to face. Clearly, respondent carrier has sufficiently proved the inherent character of the goods which makes it highly vulnerable to deterioration; as well as the inadequacy of its packaging which further contributed to the loss. F.C. FISHER vs.YANGCO STEAMSHIP COMPANY Facts: The board of Yangco Steamship Co. adopted a resolution which was ratified by the stockholders declaring classes of merchandise which are not to be carried by the vessels of the company and prohibiting the employees to carry dynamite, powder or other explosives. The Collector of Customs suspended the issuance of clearances for the vessels unless they carry the explosives. Fisher, a stockholder of YSC, filed a petition for prohibition. Issue: Whether or not the refusal of the board of YFC to accept for carriage "dynamite, powder or other explosives" from any and all shippers who may offer such explosives for carriage can be held to be a lawful act. Held: No. In construing Act 98 for the alleged violation, the test is whether the refusal of YSC to carry the explosives without qualification or conditions may have the effect of subjecting any person or locality or the traffic is such

explosives to an unduly unreasonable or unnecessary prejudice or discrimination. Common carriers in this jurisdiction cannot lawfully decline to accept a particular class of goods unless it appears that for some sufficient reason the discrimination for such is reasonable and necessary. YSC has not met those conditions. The nature of the business of a common carrier as a public employment is such that it is within the power of the State to impose such just regulations in the interest of the public as the legislator may deem proper. US vs. QUINAHON Facts: Defendants were charged for violation of Act 98, when they unloaded in the port of Currimao 5,986 sacks of rice belonging to Ilocos Norte Provincial Government from Manila, and charged the provincial treasurer 10 centavos for each sack instead of 6 centavos which they have been regularly charging for the unloading of the same kind of merchandise and under virtually the same circumstances and conditions. They were convicted, hence they appealed to the higher court. Issue: Whether or not the defendants as common carriers caused prejudice to the Ilocos Norte Government. Held: Yes. There is no pretense that it actually cost more to handle the rice for the province than it did for the merchants with whom the special contracts were made. There was a clear discrimination against the province which is prohibited by the law. It is however not believed that the law prohibits common carriers from making special rates for the handling and transporting of merchandise, when the same are made for the purpose of increasing their business and to manage their important interests upon the same principles which are regarded as sound and adopted in other trades and pursuits. Absolute equality is not required in all cases. It is only unjust, undue and unreasonable discrimination which the law forbids. The law of equality is in force only where the services performed in the different cases are substantially the same and the circumstances and conditions are similar. LOADSTAR SHIPPING CO., INC. vs.COURT OF APPEALS Facts: On November 19, 1984, LOADSTAR received on board its M/V Cherokee goods(certain types of wood) for shipment. The goods were insured with Manila Insurance Co.(MIC) against various risks including TOTAL LOSS BY TOTAL LOSS OF THE VESSEL. The vessel, in turn, was insured by Prudential Guarantee & Assurance, Inc.(PGAI) for P4 Million. On November 20, 1984, on its way to Manila from Nasipit, Agusan del Norte, the vessel sank off Limasawa Island. As a result of the total loss of its shipment, the consignee made a claim with LOADSTAR which, however ignored the same. As the insurer, MIC paid the insured in full settlement of its claim.

On February 4, 1985, MIC filed a complaint against Loadstar and PGAI, alleging that the sinking of the vessel was due to the fault and negligence of Loadstar and its employees. Loadstar claimed force majeur. PGAI averred that MIC has no cause of action against it, Loadstar being the party insured. PGAI was later dropped as a party defendant after it paid the insurance proceeds to Loadstar. The trial court rendered judgment for MIC, prompting Loadstar to go to the CA which affirmed the decision. Issue: Whether or not Loadstar is a private carrier. Held: No. Loadstar submits that the vessel was a private carrier because it was not issued a CPC; it did not have a regular trip or schedule nor a fixed route; and there was only one shipper, one consignee for a special cargo. The SC held that Loadstar is a common carrier. It is not necessary that the carrier be issued a CPC, and this character is not altered by the fact that the carriage of the goods in question was periodic, occasional, episodic or unscheduled. In support of its position Loadstar relied on the 1968 case of Home Insurance Co. v. American Steamship Agencies, where the Court held that a common carrier transporting special cargo or chartering the vessel to a special person becomes a private carrier that is not subject to the provisions of the Civil Code. This case however is not applicable in the case at bar for the simple reason that the actual settings are different. The records do not disclose that the M/V Cherokee, on the date in question, undertook to carry a special cargo or was chartered to a special person only. There was no charter party. The bills of lading failed to show any special arrangement, but only a general provision to the effect that the M/V Cherokee was a general cargo carrier. Further, the bare fact that the vessel was carrying a particular type of cargo for one shipper, which appears to be purely coincidental, is not reason enough to convert the vessel from a common carrier to a private carrier, especially where, as in this case, it was shown that the vessel was also carrying passengers. Under the facts and circumstances obtaining in this case, Loadstar fits the definition of a common carrier under Article 1732 of the NCC. The doctrine enunciated in the case of De Guzman v. CA was also mentioned. CA decision is hereby affirmed. FIRST PHILIPPINE INDUSTRIAL CORPORATION vs. COURT OF APPEALS Facts: Petitioner is a grantee of a pipeline concession under RA 387 to contract, install and operate oil pipelines. The first pipeline concession was granted in 1967 and was renewed by the ERB in 1992. In 1995, petitioner applied for a Mayors permit in Batangas City. Respondent treasurer required petitioner to pay a local tax based on its gross receipts for the fiscal year in 1993 pursuant to the Local Government Code. To avoid hampering its operations, petitioner paid the amount of tax for the first quarter under protest. Petitioner argued that as a pipeline operator with a government concession engaged in transporting petroleum products via

pipeline it is exempted from payment of tax based on gross receipts. Respondent refused to make reimbursement on the ground that petitioner is not a common carrier engaged in transportation business by land, water or air. Issue: Whether or not petitioner is liable to pay a local tax based on gross receipts since it is not a common carrier. Held: No. Based on Article 1732 NCC, there is no doubt that petitioner is a common carrier. It is engaged in the business of transporting or carrying goods, i.e. petroleum products, for hire as a public employment. It undertakes to carry for all persons indifferently, that is, to all persons who choose to employ its services, and transports the goods by land and for compensation. The fact that petitioner has a limited clientele does not exclude it from the definition of a common carrier. (De Guzman Ruling upheld) Respondents argument that the term common carrier as used in Section 133(j) of the Local Government Code refers only to common carriers transporting goods and passengers through moving vehicles or vessels either by land, sea or water is erroneous. The definition of common carriers in NCC makes no distinction as to the means of transporting as long as it is by land, water or air. It does not provide that the transporting of the passengers or goods should be by motor vehicle. It is clear that the legislative intent in excluding from the taxing power of the local government unit the imposition of business tax against common carriers is to prevent a duplication of the so-called "common carrier's tax." Petitioner is already paying 3% common carrier's tax on its gross sales/earnings under the National Internal Revenue Code. To tax petitioner again on its gross receipts in its transportation of petroleum business would defeat the purpose of the Local Government Code. HOME INSURANCE COMPANY vs. AMERICAN STEAMSHIP AGENCIES, INC. Facts: A Peruvian firm shipped fishmeal through the SS Chowborough consigned to the San Miguel Brewery and insured by the Home Insurance Co. The cargo arrived in Manila and was discharged into the lighters of Luzon Stevedoring Co. When the cargo was delivered to SMB there were shortages. Home Insurance Co. paid SMB P14,000 after its demand. Home Insurance filed for reimbursement from Luzon Stevedoring and American Steamship Agencies, owner and operator of the vessel. The lower court absolved Luzon after finding that it observed the required diligence but ordered ASA to reimburse Home Insurance, declaring that Art. 587 of the Code of Commerce makes the ship agent civilly liable for damages in favor of third persons due to the conduct of carriers captain and that the stipulation in the charter party exempting owner from liability is against public policy under Art. 1744, NCC. ASA appealed, alleging that under the provisions of the Charter Party referred to in the bills of lading, the charterer, not the shipowner is responsible for any loss or damage of the cargo.

Issue: Are the provisions of the NCC applicable? Held: No. The NCC provisions on common carriers should not apply where the common carrier is not acting as such but as a private carrier. Under American Jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a special person only becomes a private carrier. As a private carrier, a stipulation exempting the owner from liability for the negligence of its agent is valid. The stipulation in the charter party absolving the owner from liability for loss due to the negligence of its agent would be void only if strict public policy governing common carrier is applied. Such policy has no force where the public at large is not involved, as in the case of a ship totally chartered for the use of a single party. The stipulation exempting the owner from liability for negligence of its agent is not against public policy and is deemed valid. Recovery cant be had, for loss or damage to the cargo against shipowners, unless the same is due to personal acts or negligence of said owner or its managers, as distinguished from agents or employees. SAN PABLO vs. PANTRANCO Facts: PANTRANCO offers PUB service for passengers and freight. It operates passenger buses from Metro Manila to Bicol Region and Eastern Samar. On March 27,1980 it requested MARINA for authority to lease/purchase a vessel for its project to operate a ferryboat service from Matnog,Sorsogon and Allen,Samar that will provide service to company buses and freight trucks that have to cross San Bernardo Strait.This was not given due course because the Matnog-Allen run is adequately serviced by Cardinal Shipping Corp. and Epitacio San Pablo and market conditions in the proposed route cannot support the entry of additional tonnage. PANTRANCO nevertheless acquired the vessel. It wrote the Chairman of the Board of Transportation (BOT), that it proposes to operate a ferry service to carry its passenger buses and freight trucks between Allen and Matnog in connection with its trips to Tacloban City. PANTRANCO claims that it can operate a ferry service in connection with its franchise for bus operation in the highway from Pasay City to Tacloban City for the purpose of continuing the highway, which is interrupted by a small body of water, the said proposed ferry operation is merely a necessary and incidental service to its main service and obligation of transporting its passengers from Pasay City to Tacloban City. Such being the case there is no need to obtain a separate certificate for public convenience to operate a ferry service. The BOT granted authority to PANTRANCO to operate a private ferry boat service, to which the petitioners opposed. Issue: W/N a land transportation company can be authorized to operate a ferry service or coastwise or interisland shipping service along its authorized route as an incident to its franchise without the need of filing a separate application for the same.

Held: No. Considering the environmental circumstances of the case, the conveyance of passengers, trucks and cargo from Matnog to Allen is certainly not a ferry boat service but a coastwise or interisland shipping service. Under no circumstance can the sea between Matnog and Allen be considered a continuation of the highway. While a ferry boat service has been considered as a continuation of the highway when crossing rivers or even lakes, which are small body of waters - separating the land, however, when as in this case the two terminals, Matnog and Allen are separated by an open sea it can not be considered as a continuation of the highway. Respondent PANTRANCO should secure a separate CPC for the operation of an interisland or coastwise shipping service in accordance with the provisions of law. Its CPC as a bus transportation cannot be merely amended to include this water service under the guise that it is a mere private ferry service. The contention of private respondent PANTRANCO that its ferry service operation is as a private carrier, not as a common carrier for its exclusive use in the ferrying of its passenger buses and cargo trucks is absurd. PANTRANCO does not deny that it charges its passengers separately from the charges for the bus trips and issues separate tickets whenever they board the MV "Black Double" that crosses Matnog to Allen, PANTRANCO cannot pretend that in issuing tickets to its passengers it did so as a private carrier and not as a common carrier. The Court does not see any reason why inspite of its amended franchise to operate a private ferry boat service it cannot accept walk-in passengers just for the purpose of crossing the sea between Matnog and Allen. Indeed evidence to this effect has been submitted. NATIONAL STEEL CORPORATION vs. COURT OF APPEALS Facts: On July 17, 1974, plaintiff NSC as charterer and defendant VSI as owner, entered into a Contract of Voyage Charter Hire whereby NSC hired VSIs vessel, the MV VLASONS I to make one voyage to load steel products at Iligan City and discharge them at North Harbor Manila. When the vessels 3 hatches containing the shipment were opened by plaintiffs agents, nearly all the skids of tinplates and hot rolled sheets were allegedly found to be wet and rusty. The cargo was discharged and unloaded by stevedores hired by the plaintiff. Plaintiff filed with the defendant its claim for damages suffered due to the downgrading of the damaged tinplates in the amount of P941,145.18 but defendant refused and failed to pay. RTC ruled against the plaintiff, stating that the vessel was seaworthy and that there is no proof of willful negligence of the vessel's officers. This was affirmed by CA but modified the award of damages, hence the appeal. Issue: W/N VSI contracted with NSC as a common carrier or as a private carrier. Held: It is a private carrier. In the instant case, it is undisputed that VSI did not offer its services to the general public. It carried passengers or goods only for

those it chose under a special contract of charter party. It is a private carrier that renders tramping service and as such, does not transport cargo or shipment for the general public. Its services are available only to specific persons who enter into a special contract of charter party with its owner. Consequently, the rights and obligations of VSI and NSC, including their respective liability for damage to the cargo, are determined primarily by stipulations in their contracts of private carriage or charter party. Unlike in a contract involving a common carrier, private carriage does not involve the general public. Hence, the stringent provisions of the Civil Code on common carriers protecting the general public cannot justifiably be applied to a ship transporting commercial goods as a private carrier. It is clear from the parties Contract of Voyage Charter Hire, that VSI shall not be responsible for losses except on proven wilful negligence of the officers of the vessel. The NANYOZAI Charter Party(an internationally recognized Charter Party Agreement), which was incorporated in the parties contract of transportation, further provided that the shipowner shall not be liable for loss of or damage to the cargo arising or resulting from unseaworthiness, unless the same was caused by its lack of due diligence to make the vessel seaworthy or to ensure that the same was properly manned, equipped and supplied. In view of the above, NSC must prove that the damage to its shipment was caused by VSIs wilful negligence or failure to exercise due diligence in making MV Vlasons I seaworthy and fit for holding, carrying and safekeeping the cargo. Ineluctably, the burden of proof was placed on NSC by the parties agreement. The CA decision, affirming the RTC decision in favor of defendant and dismissing the complaint is Affirmed. KMU vs. GARCIA Facts: The following memoranda, circulars and/or orders are sought to be nullified by the instant petition, viz: (a) DOTC Memorandum Order 90-395, dated June 26, 1990 relative to the implementation of a fare range scheme for provincial bus services in the country, allowing provincial bus operators to charge passengers rates within a range of 15% above and 15% below the LTFRB official rate for a period of one year. LTFRB Chairman, Fernando, finding the MO not legally feasible submitted a memorandum to DOTC Secretary Orbos as it contravenes the Public Service Act for the following reasons: i. the rates to be approved should be proposed by public service operators ii. there should be a publication and notice to concerned or affected parties in the territory affected iii. a public hearing should be held for the fixing of the rates The chairman added that to allow bus operators to charge fares 15% above the present LTFRB fares in the wake of the devastation, death and suffering caused by the July 16 earthquake will not be socially warranted and will be politically unsound.

Provincial Bus Operators Association of the Philippines, Inc. (PBOAP) filed an application for an across-the-board fare increase of P0.085 per kilometer. It was opposed by Philippine Consumers Foundation, Inc. and Perla C. Bautista alleging that the proposed rates were exorbitant and unreasonable. The said increase was granted by LTFRB. (b) DOTC Department Order No.92-587, dated March 30, 1992, defining the policy framework on the regulation of transport services; Among the salient provisions of which include: In determining public need, the presumption of need for a service shall be deemed in favor of the applicant. The burden of proving that there is no need for a proposed service shall be with the oppositor(s). (c) DOTC Memorandum dated October 8, 1992, laying down rules and procedures to implement Department Order No. 92-587; (d) LTFRB Memorandum Circular No. 92-009, providing guidelines on the DOTC Department Order No. 92-587; and (e) LTFRB Order dated March 24, 1994 in Case No. 94-3112. Sometime in March, 1994, private respondent PBOAP, availing itself of the deregulation policy of the DOTC allowing provincial bus operators to collect plus 20% and minus 25% of the prescribed fare without first having filed a petition for the purpose and without the benefit of a public hearing, announced a fare increase of 20% percent of the existing fares. Petitioner KMU filed a petition before the LTFRB opposing the upward adjustment of bus fares. LTFRB dismissed the petition hence the present one. Issue: Whether or not the assailed orders/circulars are valid. Held: While the authority of the DOTC and the LTFRB to issue administrative orders to regulate the transport sector is recognized, the Court found that they committed grave abuse of discretion in issuing DOTC Department Order No. 92-587 and LTFRB Memorandum Circular No. 92-009 promulgating the implementing guidelines on DOTC Department Order No. 92-587, the said administrative issuances being amendatory and violative of the Public Service Act and the Rules of Court. Fare Range Scheme: The 20% fare increase imposed by PBOAP without the benefit of a petition and a public hearing is null and void and of no force and effect. Presumed Public Need: A CPC is an authorization granted by the LTFRB for the operation of land transportation services for public use as required by law. Pursuant to Section 16(a) of the Public Service Act, as amended, the following requirements must be met before a CPC may be granted, to wit: (i) the applicant must be a citizen of the Philippines, or a corporation or copartnership, association or joint-stock company constituted and organized implementing

under the laws of the Philippines, at least 60 % of its stock or paid-up capital must belong entirely to citizens of the Philippines; (ii) the applicant must be financially capable of undertaking the proposed service and meeting the responsibilities incident to its operation; and (iii) the applicant must prove that the operation of the public service proposed and the authorization to do business will promote the public interest in a proper and suitable manner. It is understood that there must be proper notice and hearing before the PSC can exercise its power to issue a CPC. While adopting the foregoing requisites for the issuance of a CPC, LTFRB Memorandum Circular No. 92-009, Part IV, provides for yet incongruous and contradictory policy guideline on the issuance of a CPC. The guidelines states: The issuance of a Certificate of Public Convenience is determined by public need. The presumption of public need for a service shall be deemed in favor of the applicant, while the burden of proving that there is no need for the proposed service shall be the oppositor's. By its terms, public convenience or necessity generally means something fitting or suited to the public need. As one of the basic requirements for the grant of a CPC, public convenience and necessity exists when the proposed facility or service meets a reasonable want of the public and supply a need which the existing facilities do not adequately supply. The existence or non-existence of public convenience and necessity is therefore a question of fact that must be established by evidence, real and/or testimonial; empirical data; statistics and such other means necessary, in a public hearing conducted for that purpose. The object and purpose of such procedure, among other things, is to look out for, and protect, the interests of both the public and the existing transport operators. No grave abuse of discretion however was committed in the issuance of DOTC Memorandum Order No. 90-395 and DOTC Memorandum dated October 8, 1992, the same being merely internal communications between administrative officers. TATAD vs. GARCIA Facts: DOTC planned to construct a light railway transit line along EDSA referred to as EDSA Light Rail Transit III (EDSA LRT III). Then President Aquino, signed into law the Build-Operate-Transfer (BOT) Law. After prequalifying the bidders for the construction of the said transit, it was found that out of all the applicants, only the EDSA LRT Consortium met the requirements. DOTC and respondent EDSA LRT Corporation, Ltd. (a private corporation organized under the laws of HongKong) in substitution of the EDSA LRT Consortium, entered into an "Agreement to Build, Lease and Transfer a Light Rail Transit System for EDSA" under the terms of the BOT Law. DOTC sought the approval of the President but the same was denied. Thus, DOTC, represented by Secretary Garcia, and private respondent entered into a supplemental agreementRevised and Restated Agreement to Build,

Lease and Transfer a Light Rail Transit System for EDSA" so as to clarify their respective rights and responsibilities and to submit Supplemental Agreement to the President. Petitioners, in their capacity as Senators and taxpayers, question the constitutionality of the two agreements between DOTC and private respondent. They contend that it grants EDSA LRT Corp., Ltd., a foreign corporation, the ownership of EDSA LRT III which is a public utility. Secretary Garcia and private respondent on the other hand, contend that the nationality requirement for public utilities mandated by the Constitution does not apply to private respondent. Issue: Does the fact that EDSA LRT Corporation, Ltd., a foreign corporation, own the facilities and equipment of the LRT III mean it also own the LRT III as a public utility? Held: No. What private respondent owns are the rail tracks, rolling stocks like the coaches, rail stations, terminals and the power plant, not a public utility. While a franchise is needed to operate these facilities to serve the public, they do not by themselves constitute a public utility. As ruled in Iloilo Ice & Cold Storage Co. v. Public Service Board, what constitutes a public utility is not their ownership but their use to serve the public. In law, there is a clear distinction between the "operation" of a public utility and the ownership of the facilities and equipment used to serve the public. The right to operate a public utility may exist independently and separately from the ownership of the facilities thereof. One can own said facilities without operating them as a public utility, or conversely, one may operate a public utility without owning the facilities used to serve the public. The devotion of property to serve the public may be done by the owner or by the person in control thereof who may not necessarily be the owner thereof. In the case at bar, private respondent and DOTC agreed that on completion date, private respondent will immediately deliver possession of the LRT system by way of lease for 25 years, during which period DOTC shall operate the same as a common carrier and private respondent shall provide technical maintenance and repair services to DOTC. Clearly, private respondent will not run the light rail vehicles and collect fees from the riding public. It will have no dealings with the public and the public will have no right to demand any services from it. It is DOTC which shall operate the EDSA LRT III. Therefore, private respondent, EDSA LRT Corp., Ltd. does not own EDSA LRT III as a public utility. SAMAR MINING COMPANY, INC. vs. NORDEUTSCHER LLOYD Facts: The case arose from an importation made by plaintiff, SAMAR of one crate Optima welded wedge wire sieves through the M/S SCHWABENSTEIN a vessel owned by defendant NORDEUTSCHER LLOYD, (represented in the Philippines by its agent, C.F. SHARP & CO., INC.), which shipment is covered by Bill of Lading No. 18 duly issued to consignee SAMAR MINING COMPANY, INC.

Upon arrival of the aforesaid vessel at the port of Manila, the importation was unloaded and delivered in good order and condition to the bonded warehouse of AMCYL. The goods were however never delivered to, nor received by, the consignee at the port of destinationDavao. Bill of lading, No. 18 sets forth in the page 2 thereof that the goods were received by NORDEUTSCHER LLOYD at the port of loading at Bremen, Germany, while the freight had been prepaid up to the port of destination or the port of discharge of goodsDavao. The carrier undertook to transport the goods in its vessel, M/S SHWABENSTEIN, only up to the port of discharge from shipManila. Thereafter, the goods were to be transhipped by the carrier to the port of destination or port of discharge of goods. Section 1, paragraph 3 of Bill of Lading No. 18, states: The carrier shall not be liable in any capacity whatsoever for any delay, loss or damage occurring before the goods enter ships tackle to be loaded or after the goods leave ships tackle to be discharged, transhipped or forwarded. xxx The trial court rendered judgment in favor of plaintiff, hence the appeal. Issue: Whether or not the various clauses and stipulations in the Bill of lading is valid. Held: Yes. The validity of stipulations in bills of lading exempting the carrier from liability for loss or damage to the goods when the same are not in its actual custody has been upheld in PHOENIX ASSURANCE CO., LTD. vs. UNITED STATES LINES, 22 SCRA 674 (1968). The stipulations in the bill of lading in the PHOENIX case which are substantially the same as the subject stipulations provides: The carrier shall not be liable in any capacity whatsoever for any loss or damage to the goods while the goods are not in its actual custody. (Par. 2, last subpar.) The carrier or master, in making arrangements with any person for or in connection with all transshipping or forwarding of the goods or the use of any means of transportation or forwarding of goods not used or operated by the carrier, shall be considered solely the agent of the shipper and consignee and without any other responsibility whatsoever or for the cost thereof. (Par. 16) Finding the above stipulations not contrary to law, morals, good customs, public order or public policy their validity was sustained. A careful perusal of the provisions of the New Civil Code on common carriers was looked into by the Court particularly, Article 1736 and 1738. There is no doubt that Art. 1738 finds no applicability to the instant case. The said article contemplates a situation where the goods had already reached their place of destination and are stored in the warehouse of the carrier. The subject goods were still awaiting transshipment to their port of destination, and were stored in the warehouse of a third party when last seen and/or heard of.

Article 1736 is applicable to the instant suit. Under said article, the carrier may be relieved of the responsibility for loss or damage to the goods upon actual or constructive delivery of the same by the carrier to the consignee, or to the person who has a right to receive them. In sales, actual delivery has been defined as the ceding of corporeal possession by the seller, and the actual apprehension of corporeal possession by the buyer or by some person authorized by him to receive the goods as his representative for the purpose of custody or disposal. By the same token, there is actual delivery in contracts for the transport of goods when possession has been turned over to the consignee or to his duly authorized agent and a reasonable time is given him to remove the goods. The court a quo found that there was actual delivery to the consignee through its duly authorized agent, the carrier. Two undertakings appeared embodied and/or provided for in the Bill of Lading in question. The first is FOR THE TRANSPORT OF GOODS from Bremen, Germany to Manila. The second, THE TRANSSHIPMENT OF THE SAME GOODS from Manila to Davao, with appellant acting as agent of the consignee. At the hiatus between these two undertakings of appellant which is the moment when the subject goods are discharged in Manila, its personality changes from that of carrier to that of agent of the consignee. Thus, the character of appellant's possession also changes, from possession in its own name as carrier, into possession in the name of consignee as the latter's agent. Such being the case, there was, in effect, actual delivery of the goods from appellant as carrier to the same appellant as agent of the consignee. Upon such delivery, the appellant, as erstwhile carrier, ceases to be responsible for any loss or damage that may befall the goods from that point onwards. This is the full import of Article 1736, as applied to the case. The actions of appellant carrier and of its representative in the Philippines being in full faith with the lawful stipulations of Bill of Lading No. 18 and in conformity with the provisions of the New Civil Code on common carriers, agency and contracts, they incur no liability for the loss of the goods in question. Appealed decision is REVERSED. Plaintiff-appellee's complaint is DISMISSED. EASTERN SHIPPING LINES, INC. vs. INTERMEDIATE APPELLATE COURT Facts: In G.R. No. 69044, sometime in or prior to June, 1977, the M/S ASIATICA, a vessel operated by petitioner loaded at Kobe, Japan for transportation to Manila, 5,000 pieces of calorized lance pipes consigned to Philippine Blooming Mills Co., Inc., and 7 cases of spare parts valued consigned to Central Textile Mills, Inc. Both sets of goods were insured against marine risk for with respondent. In G.R. No. 71478, during the same period, the same vessel took on board 128 cartons of garment fabrics and accessories consigned to Mariveles Apparel Corporation, and two cases of surveying instruments consigned to Aman Enterprises and General Merchandise. The 128 cartons were insured for their stated value by respondent Nisshin and the 2 cases by respondent Dowa.

Enroute for Kobe, Japan, to Manila, the vessel caught fire and sank, resulting in the total loss of ship and cargo. The respective respondent Insurers paid the corresponding marine insurance values to the consignees concerned and were thus subrogated unto the rights of the latter as the insured. Respondents filed a claim for reimbursement from petitioner. The RTC ruled in their favor to which the petitioner appealed. Issue: (1) Which law should govern the Civil Code provisions on Common carriers or the Carriage of Goods by Sea Act? and (2) who has the burden of proof to show negligence of the carrier? Held: (1) The law of the country to which the goods are to be transported governs the liability of the common carrier in case of their loss, destruction or deterioration. As the cargoes in question were transported from Japan to the Philippines, the liability of Petitioner Carrier is governed primarily by the Civil Code. However, in all matters not regulated by said Code, the rights and obligations of common carrier shall be governed by the Code of Commerce and by special laws. Thus, the Carriage of Goods by Sea Act, a special law, is suppletory to the provisions of the Civil Code. (2) Under the Civil Code, common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over goods, according to all the circumstances of each case. Common carriers are responsible for the loss, destruction, or deterioration of the goods unless the same is due to any of the following causes only: (1) Flood, storm, earthquake, lightning or other natural disaster or calamity; Petitioner Carrier claims that the loss of the vessel by fire exempts it from liability under the phrase "natural disaster or calamity. However, the Court said that fire may not be considered a natural disaster or calamity. This must be so as it arises almost invariably from some act of man or by human means. It does not fall within the category of an act of God unless caused by lightning or by other natural disaster or calamity. It may even be caused by the actual fault or privity of the carrier. As the peril of the fire is not comprehended within the exception in Article 1734, supra, Article 1735 of the Civil Code provides that all cases than those mention in Article 1734, the common carrier shall be presumed to have been at fault or to have acted negligently, unless it proves that it has observed the extraordinary diligence required by law. In this case, the respective Insurers. as subrogees of the cargo shippers, have proven that the transported goods have been lost. Petitioner Carrier has also proved that the loss was caused by fire. The burden then is upon Petitioner Carrier to proved that it has exercised the extraordinary diligence required by law, which it failed to do. And even if fire were to be considered a "natural disaster" within the meaning of Article 1734 of the Civil Code, it is required under Article 1739 of the same Code that the "natural disaster" must have been the "proximate and only cause of the loss," and that the carrier has "exercised due diligence to

prevent or minimize the loss before, during or after the occurrence of the disaster. This Petitioner Carrier has also failed to establish satisfactorily. Nor may Petitioner Carrier seek refuge from liability under the Carriage of Goods by Sea Act, It is provided therein that: Sec. 4(2). Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from (b) Fire, unless caused by the actual fault or privity of the carrier. Both the Trial Court and the Appellate Court, in effect, found, as a fact, that there was "actual fault" of the carrier shown by "lack of diligence" in that when the smoke was noticed, the fire was already big; that the fire must have started 24 hours before the same was noticed; and that after the cargoes were stored in the hatches, no regular inspection was made as to their condition during the voyage. The foregoing suffices to show that the circumstances under which the fire originated and spread are such as to show that Petitioner Carrier or its servants were negligent in connection therewith. Consequently, the complete defense afforded by the COGSA when loss results from fire is unavailing to Petitioner Carrier. NATIONAL DEVELOPMENT COMPANY vs. COURT OF APPEALS Facts: An agreement was entered onto between defendants National Development Company (NDC) and Maritime Company of the Philippines (MCP) in accordance of which, NDC as the first preferred mortgagee of three oceangiving vessels including one with the name Dona Nati appointed MCP as its agents to manage and operate said vessel in its behalf. The E. Philipp Corporation of the New York loaded on board the vessel Dona Nati at San Francisco, California, a total of 1,200 bales of American raw cotton consigned to Manila Banking Corporation, Manila and the Peoples Bank and Trust Company, acting for and in behalf of Pan Asiatic Commercial Company, Inc. who represents Riverside Mills Corporation. The vessel figured in a collision at Ise Bay, Japan with a Japanese vessel as a result of which 50 bales of aforesaid cargo were lost and/or destroyed. Plaintiff (DISC) as insurer, paid the respective claims of holders of the negotiable bills of lading duly endorsed to them. Plaintiff filed complaint for reimbursement from the defendants-NDC and MCP as owner and ship agent respectively. The RTC rendered a decision ordering the defendants MCP and NDC to pay jointly and solidarity to DISC. MCP and NDC interposed their appeals. CA affirmed the RTCs decision. Issue: Which law shall govern loss or destruction of goods due to collision of vessels outside Philippine waters, and the extent of liability? Held: This issue has already been laid to rest by this Court of Eastern Shipping Lines Inc. v. IAC (150 SCRA 469-470 [1987]) In the case at bar, it has been established that the goods in question are transported from San Francisco, California and Tokyo, Japan to the Philippines and that they were lost or due to a collision which was found to have been

caused by the negligence or fault of both captains of the colliding vessels. Under the above ruling, it is evident that the laws of the Philippines will apply, and it is immaterial that the collision actually occurred in foreign waters, such as Ise Bay, Japan. It appears, however, that collision falls among matters not specifically regulated by the Civil Code, so that no reversible error can be found in respondent courses application to the case at bar of Articles 826 to 839, Book Three of the Code of Commerce, which deal exclusively with collision of vessels. More specifically, Article 826 of the Code of Commerce provides that where collision is imputable to the personnel of a vessel, the owner of the vessel at fault, shall indemnify the losses and damages incurred after an expert appraisal. But more in point to the instant case is Article 827 of the same Code, which provides that if the collision is imputable to both vessels, each one shall suffer its own damages and both shall be solidarily responsible for the losses and damages suffered by their cargoes. Significantly, under the provisions of the Code of Commerce, particularly Articles 826 to 839, the shipowner or carrier, is not exempt from liability for damages arising from collision due to the fault or negligence of the captain. Primary liability is imposed on the shipowner or carrier in recognition of the universally accepted doctrine that the shipmaster or captain is merely the representative of the owner who has the actual or constructive control over the conduct of the voyage. The agreement between NDC and MCP shows that MCP is appointed as agent, a term broad enough to include the concept of ship agent in maritime law. In fact MCP was even conferred all the powers of the owner of the vessel, including the power to contract in the name of the NDC. Both owner and agent should be declared jointly and severally liable since the obligation which is the subject of the action had its origin in a fortuitous act and did not arise from contract. CA decision is affirmed.

II. CONTRACTUAL EFFECTS A. Vigilance over Goods

GELISAN vs. ALDAY Facts: Bienvenido Gelisan is the owner of a freight truck. Defendant Bienveido Gelisan and Roberto Roberto entered into a contact underwhich Espiritu hired the same freight truck of Gelisan for the purpose of hauling rice, sugar, flour and fertilizer. It also agreed that Espiritu shall bear and pay all losses and damages attending the carriage of the goods to be hauled by him.

Benito Alday, a trucking operator had known Roberto Espiritu. Alday had a contact to haul the fertilizer of the Atlas Fertilizer Corporation from Pier 4, North Harbor, to its Warehouse in Mandaluyong. Alday met Espiritu at the gate of Pier 4 and the latter offered the use of his truck with the driver and helper. The offer was accepted by Alday and he instructed his checker to let Roberto Espiritu haul the fertilizer. Espiritu made two hauls of zoobags of fertilizer per trip. The fertilizer was delivered to the driver and helper of Espiritu with the necessary waybill receipts. Espiritu, however, did not deliver the fertilizer to the Atlas Fertilizer bodega at Mandaluyong. Thus, Benito Alday was compelled to pay the value of the 400 bags of fertilizers to Atlas Fertilizer Corporation and filed a compliant against Roberto Espiritu and Bienvenido Gelisan with the CFI of Manila. The CFI of Manila ruled that Roberto Espiritu was the only one liable. On appeal, CA ruled that Bienvenido Gelisan is likewise liable for being the registered owner of the truck. Issue: Whether or not Gelisan should be held solidarily liable with Espiritu, being the registered owner of the truck. Held: Yes, Gelisan should be held solidarily liable with Espiritu, being the registered owner of the truck. The Court has invariably held in several decisions that the registered owner of a public service vehicle is responsible for damages that may arise from consequences incident to its operation or that may be caused to any of the passengers therein. The claim of the petitioner that he is not liable in view of the lease contract executed by and between him and Roberto Espiritu which exempts him from liability to third persons, cannot be sustained because it appears that the lease contract, adverted to, had not been approved by the Public service Commission. It is settled in our jurisprudence that if the property covered by a franchise is transferred or leased to another without obtaining the requisite approval, the transfer is not binding upon the public or third persons. However, Gelisan is not without recourse because he has a right to be indemnified by Roberto Espiritu for the amount that he may be required to pay as damages for the injury caused to Benito Alday, since the lease contract in question, although not effective against the public for not having been approved by the Public Service Commission, is valid and binding between the contracting parties. The Court ruled that the petitioner is DENIED. With costs against the petitioner. BENEDICTO vs. IAC Facts: Private respondent Greenhills Wood Industries Company, Inc., a lumber manufacturing firm, operates a sawmill in Quirino. Sometime in May 1980, private respondent bound itself to sell and deliver to Blue Star Mahogany, Inc. (Blue Star), a company in Bulacan 100,000 board feet of sawn lumber with the understanding that an initial

delivery would be made on May 15, 1980. To effect its first delivery, private respondents resident manager Dominador Cruz, contracted Virgilio Licuden, the driver of a cargo truck to transport its sawn lumber to the consignee Blue Star in Valenzuela, Bulacan. The cargo truck was registered in the name of petitioner Ma. Luisa Benedicto, the proprietor of Macoren Trucking, a business enterprise engaged in hauling freight. On May 15, 1980, cruz in the presence and with the consent of driver Licuden, supervised the loading of sawn lumber with invoice aboard the cargo truck. Thereafter, the Manager of Blue Star called up Greenhills president, informing him that the sawn lumber on board the subject cargo truck had not yet arrived in Bulacan. The latter then informed Greenhills resident manager. Still, Blue Star had not received the sawn lumber and were constrained to look for other suppliers. Thus, private respondent Greenhills filed criminal case against driver Luciden for estafa and also against petitioner Benedicto for recovery of the value of the lost sawn lumber plus damages before the RTC of Dagupan City. The trial court ruled against Benedicto and Luciden. On appeal, the IAC affirmed the decision of the trial court in toto. Issue: Whether or not petitioner Benedicto, being the registered owner of the carrier, should be held liable for the value of the undelivered or lost sawn lumber. Held: Yes, Benedicto is liable for the undelivered or lost sawn lumber as registered owner. There is no dispute that petitioner Benedicto has been holding herself out to the public as engaged in the business of hauling or transporting goods for hire or compensation. Petitioner Benedicto is, in brief, a common carrier. The prevailing doctrine on common carrier makes the registered owner liable for consequences flowing from the operations of the carrier, even though the specific vehicle involved may already have been transferred to another person. This doctrine rests upon the principle that in dealing with vehicles registered under the Public Service Law, the public has the right to assume that the registered owner is the actual or lawful owner thereof. It would be very difficult and often impossible as a practical matter, for members of the general public to enforce the rights of action that they may have for injuries inflicted by the vehicles being negligently operated if they should be required to prove who the actual owner is. The registered owner is not allowed to deny liability by proving the identity of the alleged transferee. In the case at bar, private respondent is not required to go beyond the vehicles certificate of registration to ascertain the owner of the carrier. In this regard, the letter presented by petitioner allegedly written by Benjamin Tee admitting that Licuden was his driver, had no evidentiary value not only because Benjamin Tee was not presented in court to testify on this matter but because of the afore mentioned doctrine. To permit the ostensible or registered owner to prove who the actual owner is, would be to set at naught the purpose or public policy which infuses that doctrine. The Court ruled that the Petition fro Review is Denied.

PHILTRANCO SERVICE ENTERPRISES, INC. vs. CA Facts: The victim Ramon Acuesta was riding in his easy rider bicycle along Calbayog City. Also in Calbayog City, defendant Philtranco driven by defendant Rogasiones Dolina Manilhig was being pushed by some persons in order to start its engine. As the bus was pushed, its engine started thereby the bus continued its running motion and it occurred at the time when Ramon A. Acuesta who was still riding on his bicycle was directly in front of the said bus. As the engine of Philtranco started abruptly and suddenly, its running motion was also enhanced by the said functioning engine, thereby bumped on the victim Ramon. As a result, fell and was ran over by the bus. Still, the bus did not stop although it had already bumped and ran over the victim; instead, it proceeded running. Thereafter, P/sgt. Yabao who was then jogging approached the bus driver defendant Manilhig and signaled him to stop, but the latter did not listen. So, the police officer introduced himself and ordered the latter to stop. The said defendant drivers stopped the Philtranco bus. The trial court rendered a decision ordering the petitioners to jointly and severally pay the private respondent. On appeal, the CA affirmed the decision of the trial court. Issue: Whether or not petitioner Philtranco as the registered owner of a public service is liable for damages arising from the tortuous acts of the driver. Held: Yes, petitioner Philtranco as the registered owner is still liable. Article 2176 of the Civil Code provides that, Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi- delict and is governed by the provision of this Chapter. Further, Article 2180 of the Civil Code states that, the obligation imposed by Art. 2176 is demandable not only for ones own acts or omissions, but for those of persons for whom one is responsible. In the case at bar, the liability of the registered owner of a public service vehicle, like petitioner Philtranco, for damages arising from the tortuous acts of the driver is primary, direct, and joint and severally or solidary with the driver. Since the employers liability is primary, direct and solidary, its only recourse if the judgment for damages is satisfied by it is to recover what it has paid from its employee who committed the fault or negligence which gave rise to the action based on quasi- delict. The court ruled that the petition is partly granted. SANTOS vs. SIBUG Facts: Prior to April 26, 1963, Vidad was duly authorized passenger jeepney operator. Also, prior to said date, petitioner Santos was the owner of a

passenger jeep, but he had no certificate of public convenience for the operation of the vehicle as a public passenger jeep. Santos then transferred his jeep to the name of Vidad so that it could be operated under the latters certificate of public convenience. Thus, Santos became what is known as a kabit operator. For the protection of Santos, Vidad executed a re-transfer document to the former, which was to be a private document presumably to be registered if and when it was decided that the passenger jeep of Santos was to be withdrawn from the kabit agreement. On April 26, 1963, private respondent Sibug was bumped by a passenger jeepney operated by vidad and driven by Severo Gragas. Thus, filed a complaint for damages. Judgment was rendered in favor of Sibug. On April 10, 1964, the Sheriff of Manila levied on a motor vehicle, registered in the name of Vidad, and scheduled the public auction sale. The next day, Santos presented a third-party claim with the Sheriff, as a result, Santos, instituted an Action for Damages and Injunction with a prayer for Preliminary Mandatory Injunction. On October 14, 1965, branch X affirmed Santos ownership of the jeepney in question. Sibug sought relief from respondent Appellate Court. Respondent Court held that Santos may not be permitted to prove his ownership over a particular vehicle being levied upon but registered in anothers name in a separate action. Issue: Whether or not a jeepney registered in the name of Vidad, an authorized public utility operator but is actually owned by Santos (the kabit operator), which bumped Sibug be sold at a public auction to satisfy the courts award. Held: Yes, the jeepney under the kabit system which bumped Sibu can be sold at public auction to satisfy the courts award. Sec. 20 (g) of the Public Service Act provides: it shall be unlawful for any public service or for the owner, lessee or operator thereof, without the approval or authorization of the Commission previously had- (g) to sell, alienate, mortgage, encumber or lease its property, franchise certificates, privileges, or rights, or any part thereof. In the case at bar, Santos had fictitiously sold the jeepney to Vidad, who had become the registered owner and operator of record at the time of the accident. It is true that Vidad had executed a re-sale to Santos, but the document was not registered. Although Santos, as the kabit, was the true owner as against Vidad, the latter, as the registered owner/ operator and grantee of the franchise, is directly and primarily responsible and liable for damages caused to Sibug, the injured party, as a consequence of the negligent or careless operation of the vehicle. This ruling is based on the principle that the operator of record is considered the operator of the vehicle in contemplation of law as regards the public and third persons even if the vehicle involved in the accident had been sold to another where such sale had not been approved by the then Public Service commission. The court ruled that the petition for review filed by Santos is dismissed.

LITA ENTERPRISES, INC. vs. CA Facts: Sometime in 1966, the spouses Nicasio Ocampo and Francisca Garcia, herein private respondent purchased in installment from the Delta Motor Sales Corp. five Toyota Corona Standard cars to be used as taxicabs. Since they had no franchise to operate taxicabs, they contracted with petitioner, for the use of the latters certificate of public convenience in consideration of an initial payment of P1,000 and a monthly rental of P200 per taxi cab unit. About a year later, one of said taxicabs driven by their employee, Emeterio Martin, collided with a motorcycle whose driver, Florante Galvez, died from the head injuries sustained. A criminal case was filed against the driver while a civil case was filed against Lita enterprises seeking for damages. In the CFI of Manila, petitioner Lita Enterprises was adjudged liable for damages as the registered owner of the taxicab. Thus, a writ of execution was issued and one of the vehicles of respondent spouses was levied upon and sold at public auction. Thereafter, respondent Nicasio Ocampo decided to register his taxicab in his name, but Lita Enterprises allegedly refused. Hence, the spouses filed a complaint. The CFI of Manila ordered Lita Enterprises to transfer the registration certificate. On Appeal, the IAC modified the decision. Issue: Whether or not the parties entered into a kabit system Held: Yes, the parties entered into a kabit system. The parties herein operated under an arrangement, commonly known as the kabit system, whereby a person who has been granted a certificate of convenience allows another person who owns motor vehicles to operate under such franchise for a fee. A certificate of public convenience is a special privilege conferred by the government. Abuse of this privilege by the grantees thereof cannot be countenanced. The kabit system has been identified as one of the root causes of the prevalence of graft and corruption in the government transportation services. Thus, the concept of Kabit system being contrary to public policy and void and existent, the court cannot allow either of the parties to enforce an illegal contract bu leaves them both where it finds them. The Court ruled that the decisions rendered by the CFI of Manila and IAC are hereby annulled and set aside. TEJA MARKETING vs. IAC Facts: On May 9, 1975, the defendant bought from the plaintiff a motorcycle with complete accessories and a sidecar in the total consideration of P8,000.00. Out of the total purchase price the defendant gave a down payment of P1,700.00 with a promise that he would pay plaintiff the balance within sixty days. The defendant, however, failed to comply with his promise and so upon his own request, the period of paying the balance was extended to one year in monthly installments until January 1976 when he stopped paying anymore. The

plaintiff made demands but just the same the defendant failed to comply thus forcing plaintiff to consult a lawyer and file this action for his damage. It also appears and the court so finds that the defendant purchased the motorcycle in question and the Court so finds that defendant purchased the motorcycle in question, particularly for the purpose of engaging and using the same in transportation business and for this purpose said trimobile unit was attached to the plaintiffs transportation line who had the franchise, so much so that in the registration certificate, the plaintiff appears to be the owner of the unit. Furthermore, it appears to have been agreed further between, the plaintiff and the defendant, that plaintiff would undertake the yearly registration of the unit in question with the LTC. Thus, for the registration of the unit for the year 1976, per agreement, the defendant gave to the plaintiff the amount of P82.00 of rits registration, as well as the insurance coverage of the unit. Petitioner Teja Marketing and/or Angel Jaucian filed an action for the sum of money with damages. The city court rendered judgment in favor of petitioner. On appeal, the decision was affirmed in toto. Issue: Whether or not kabit system applies in the instant case. Held: Yes, the parties operated under an agreement called kabit system. This is a system whereby a person who has been granted a certificate of public convenience allows another person who owns motor vehicles to operate under such franchise for a fee. A certificate of public convenience is a special privilege conferred by the government. Although not outrightly penalized as a criminal offense, the kabit system is invariably recognized as being contrary to public policy and therefore, void and inexistent under Article 1404 of the Civil Code. Thus, court will not aid either party to enforce an illegal contract, but will leave both where it finds them. The court ruled that the petition is hereby dismissed for lack of merit. The assailed decision of the IAC now the CA is AFFIRMED. MAGBOO vs. BERNARDO Facts: The spouses Magboo are the parents of the 8-year old child killed in a motor vehicle accident, the vehicle owned by the defendant Bernardo. At the time of the accident, said passenger jeepney was driven by Corado Roque. The contract between Conrado Roque and defendant Delfin Bernardo was that Roque was to pay to defendant the sum of P8.00, which he paid to said defendant, for privilege of driving the jeepney, it being their agreement that whatever earnings Roque could make out of the use of the jeepney in transporting passengers from one point to another would belong entirely to Conrado Roque. As a result of the accident, Conrado Roque was prosecuted for homicide thru reckless imprudence before the CFI of Manila, and that upon arraignment, Conrado Roque pleaded guilty to the information and was sentenced to a jail term, to indemnify the heirs of the deceased in the sum of P3, 000.00 with

subsidiary imprisonment in case of insolvency. Conrado Roque served his sentence but he was not able to pay the indemnity because he was insolvent. Issue: Whether or not an employer-employee relationship exists between a jeepney- owner and a driver under a boundary system agreement. Held: Yes, there exist an employer-employee relationship under a boundary system arrangement. The features which characterize the boundary systemnamely, the fact that the driver does not receive a fixed wage but gets only the excess of the amount of fares collected by him over the amount he pays to the jeep- owner, and that the gasoline consumed by the jeepney is for the account of the driver- are not sufficient to withdraw the relationship between them from that of employer- employee. Consequently, the jeepney- owner is subsidiarily liable as employer in accordance with article 103 of the Revised Penal Code. The Court ruled that the judgment appealed from is hereby affirmed. GANZON vs. CA Facts: In 1965, private respondent Tumambing contracted the services of petitioner Ganzon to haul 305 tons of scrap iron from Mariveles, Bataan on board the latters lighter. Pursuant to their agreement, private respondent delivered the scrap iron to the captain for loading. When half of the scrap iron was loaded, Mayor Advincula demanded P5,000.00 from private respondents, which the latter refused to give, prompting the Mayor to draw his gun and shoot at him. The gunshot was not fatal but he had to be taken to a hospital. Thereafter, the loading of the scrap iron was resumed. The Acting Mayor, accompanied by three policemen, ordered the captain and his crew to dump the scrap iron, with the rest brought to Nassco Compound. A receipt was issued stating that the Municipality of Mariveles had taken custody of the scrap iron. Issue: Whether or not petitioner is guilty of breach of contract of transportation and in imposing a liability against him commencing from the time the scrap iron was placed in his custody and control have no basis in fact and in law. Held: Yes, petitioner is guilty of breach of the contract of transportation. By the said act of delivery, the scraps were unconditionally placed in the possession and control of the common carrier, and upon their receipt by the carrier for transportation, the contract of carriage was deemed perfected. Consequently, the petitioner- carriers extraordinary responsibility for the loss, destruction or deterioration of the goods commenced. Pursuant to Article 1736, such extraordinary responsibility would cease only upon the delivery, actual or constructive, by the carrier to the consignee, or to the person who has a right to receive them. The fact that part of the shipment had not been headed the lighter did not impair the said contract of transportation as the goods remained in the custody and control of the carrier, albeit still unloaded.

The Court ruled that the petition is DENIED.

EASTERN SHIPPING LINES, INC. vs. CA Facts: On September 4, 1978, thirteen coils of uncoated 7- wire stress relieved for pre- stressed concrete were shipped on board the vessel Jupri Venture owned and operated by petitioner, for delivery to stresstek Post- Tensioning Philippines in Manila. The said cargo was insured by respondent operator E. Razon, from whom the consignees broker received for delivery to consignees warehouse. It appears that while en route, the vessel encountered very rough seas and stormy weather, for the days, which caused it to pound and roll heavily. The coils which were wrapped in burlap cloth and cardboard paper were stored in the lower hold of the hatch of the vessel which were rusty on one side each and it was found that the wetting was caused by fresh water that entered the hatch. The complaint that was filed by the first Nationwide Assurance Corporation (insurer) against Eastern Shipping Lines and F. Razon in RTC, Manila was dismissed. On appeal, the judgment appealed from is hereby SET ASIDE. Only Eastern Shipping Lines, Inc. filed this petition. Issue: Whether or not rains and rough is considered as caso fortuito which would exempt petitioner from liability for the deterioration of the cargo. Held: No, such is not considered caso fortuito which would exempt from liability for the deterioration of the cargo. Art. 1737 of the Civil Code provides that, common carrier are bound to observe extraordinary vigilance over goods according to all circumstances of each case. Further Article 1735 of the Civil Code provides that, if the goods are lost, destroyed, or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as required in Article 1733. In the case at bar, heavy rains and rough seas were not caso fortuito, but normal occurrences that an ocean- going vessel, particularly in the month of September, is a month of rains and heavy seas would encounter as a matter of routine. They are not unforeseen nor unforeseeable. These are conditions that ocean- going vessels would encounter and provide for, in the ordinary course of voyage. That rain water (not sea water) found its way into the holds of the Jupri Venture is a clear indication that care and foresight did not attend the closing of ships hatches so that rain water would not find its way into the cargo holds of the ship. Since, the carrier has failed to establish any caso fortuito, the presumption by law of fault or negligence on the part of the carrier applies. The Court ruled that the petition is DISMISSED. SARKIES TOURS PHILIPPINES vs. COURT OF APPEALS

Facts: On August 31, 1984, Fatima boarded petitioners De luxe bus in Manila on her way to Legaspi City. Her brother helped her load three pieces of luggage containing all of her optometry review books, materials and equipment, trial contact lenses, passport and visa. Her belongings were kept in the baggage compartment and during the stopover at Daet, it was discovered that only one bag had remained in the baggage compartment. Some of the passengers suggested retracing the route to try to recover the items, but the driver ignored them and proceeded to Legaspi City. Fatima reported the loss to her mother, who went to petitioners office. Petitioner merely offered her one thousand pesos for each piece of luggage lost, which she turned down. Fatima asked the help of radio stations and even from Philtranco bus drivers who plied the same route. Thus, one of Fatimas bags was recovered. Respondents, through counsel, demanded satisfaction of their complaint from petitioner. Petitioner apologized through a letter. After more than nine months of fruitless waiting, respondents decided to file the case. The trial court ruled in favor of respondents. On appeal, the appellate court affirmed the trial courts judgment. Issue: Fatima. Whether or not petitioner is liable for the lost baggages of

Held: The petitioner is liable for the lost baggages. Under the Civil Code, common carriers from the nature of their business and for reasons of public policy are bound to observe extraordinary diligence and vigilance over goods transported by the, and this liability last from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the person who has a right to receive them, unless the loss is due to any of the excepted causes under Article 1734 thereof. In the case at bar, the cause of the loss was petitioners negligence in not ensuring that the doors of the baggage compartment of its bus were securely fastened. As a result of this lack of care, almost all the baggage was lost to the prejudice of the paying passengers. Thus, petitioner is held liable. The Court affirmed the decision of the Court of Appeals with modification.

VALENZUELA HARDWOOD AND INDUSTRIAL SUPPLY INC. vs. CA Facts: Valenzuela hardwood entered into an agreement with Seven Brother Shipping Corporation whereby the latter undertook to load on board its vessel M/V Seven Ambassador the formers lauan round logs numbering 940 at the port of Isabela for shipment to Manila.

Petitioner insured the logs against loss and/or damage with South Sea Surety and Insurance Company. The said vessel sank resulting on the loss of plaintiffs insured bags. Both respondent and insurer denied liability. After trial, the court held that the proximate cause of the los is the negligence of the captain and the stipulation in the charter party limiting respondents liability is void being against public policy citing Article 1745 of the Civil Code. The Court of Appeals affirmed in part the RTC judgment by sustaining the liability of South Surety and Insurance Company, but modified it by holding that Seven Brothers was not liable for the lost of the cargo. Issue: Whether or not the stipulation in the charter party exempting the ship-owner from liability for the loss of the cargo arising from the negligence of its captain valid. Held :The stipulation in the instant case is valid. In a contract of private carriage, the parties may validly stipulate that responsibility for the cargo rests solely on the charterer, exempting the ship-owner from liability for the loss of or damage to the cargo caused even by the negligence of the ship captain. Pursuant to Article 1306 of the Civil Code, such stipulation is valid because it is freely entered into by the parties and the same is not contrary to law, morals, good customs, public order or public policy. In the case at bar, the charter party between the petitioner and private respondent stipulated that the owners shall not be responsible for loss, split, short landing, breakages and any kind of damages to the cargo. This stipulation is deemed valid as it is undisputed that private respondent acted as a private carrier in transporting petitioners lauan logs. Thus, Article 1745 and other Civil Code provisions on common carriers which were cited by the petitioner may not be applied unless expressly stipulated by the parties in their charter party. The petition is denied by the Court.

YOBIDO vs. COURT OF APPEALS Facts: Spouses Tito and Leny Tumboy and their minor children boarded a Yobido Liner bus at Surigaodel Sur. along Picop Road, Agusan del Sur, the left front tire of the bus exploded. The bus fell into a ravine around the three feet from the road and struck a tree. The incident resulted in the death if Tito Tumboy and physical injuries to other passengers. Leny filed a case of breach of contract of carriage against petitioners. The owners of Yobido Liner Bus. Alberto and Cresencio Yobido raised the affirmative defense of caso fortuito. They claimed that the bus was not full as there were only 32 passengers out of the 42 seating capacity. They also claimed that the bus was running as speed pr 60 to 50 and that the tire was brand-new. Respondents on the other hand, asserted the violation of the contract of carriage was brought about by the drivers failure to exercise the diligence required of the

carrier. Leny claimed that the was running fast in a winding road which was not cemented and was wet because of the rain. Issue: Whether or not the tire blow out is considered a fortuitous event which would exempt petitioners from liability. Held: The tire blow out is not considered as a fortuitous event which would exempt petitioners from liability. Article 1756 of the Civil Code provides that, in case of death or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently unless they prove that they observed extraordinary diligence as prescribed in Articles 1733 and 1755. Further, Article 1755 provides that a common carrier is bound to carry the passengers safely as far as human care and foresight can provide using the utmost diligence of very cautious persons with due regard for all circumstances.. In the case at bar, the explosion of the new tire may not be considered a fortuitous event. There are human factors involved in the situation. The fact that the tire was new did not imply that it was entirely free from manufacturing defects or that it was properly mounted on the vehicle. Neither may the fact that the tire bought and used in the vehicle is of a brand name noted for quality, resulting in the conclusion that it could not explode within five days use. Be that as it may, it is settled that an accident caused either by defects in the automobile or through the negligence of its driver is not a case fortuity that would exempt the carrier from liability for damages. Moreover, a common carrier may not be absolved from liability in case of force majeure or fortuitous event alone. The common carrier must still prove that it was not negligent in causing the death or injury resulting from an accident. Thus, having failed to discharge its duty to overthrow the presumption of negligence with clear and convincing evidence, petitioners are hereby held liable for damages. The Court ruled that the Decision of the Court of Appeals is hereby affirmed. COMPANIA MARITIMA vs. INSURANCE CO. OF NORTH AMERICA Facts: Macleod and Co. contracted, first by telephone and later confirmed by a formal written booking issued by Macleod and Co. the services of the petitioner Campania Maritime for the shipment of bales of hemp from Davao to Manila. Two lighters of the petitioner loaded said cargo from Macleods wharf at Davao awaiting the arrival of another vessel of the petitioner for loading. One of the lighters sunk which Macleod suffered damage P54, 018.55. Petitioner denied the liability on the grounds that there was no bill of lading issued thereby resulting to the non-existence of carriage contract, that the sinking was due to a fortuitous event and that the respondent has no personality. Issue: Whether or not there is a perfected contract of carriage.

Held: There was a complete contract of carriage the consummation of which has already begun when the shipper delivered the cargo to the carrier and the latter took possession of the same by placing it on a lighter manned by its authorized employees, under which Macleod became entitled to the privilege secured to him by law. The responsibility of the carrier commenced on the actual delivery to, or receipt by, the carrier or its authorized agent, of the goods. The barges or lighters were merely employed as the first step of the voyage. As to the issuance of a bill of lading, although Art. 350 of the Code of Commerce provides that the shipper as well as the carrier may mutually demand that a bill of lading be issued, it is not indispensable. As regards to the form of the contract of carriage, it can be said that provided there is a meeting of the minds and from such meeting arise rights and obligations, there should be no limitations as to form. A bill of lading is not essential to the contract, although it may become obligatory by reason of the regulations or as a condition imposed in the contract by the agreement of the parties themselves. The Code of Commerce does not demand as a necessary requisite in the contract of transportation, the delivery of a bill of lading to the shipper, but gives the right to both the shipper and carrier to mutually demand of each other the delivery of the said bill. Judgment against petitioner is affirmed. LU DO vs. BINAMIRA Facts: Delta Company of New York shipped six cases of films and photographic supplies to Binamira. The ship arrived in Cebu and discharged her cargo, placing it in the custody of the arrastre operator appointed by the Bureau of Customs. The cargo was checked both by the stevedoring company and the arrastre operator and was found in good order. On the contract of carriage, however, it was stipulated that the carrier in no longer liable for the cargo upon its delivery to the hands of the customs authorities. The cargo was later delivered to Binamira and a marine surveyor found that some were missing valued at P324.63. Lower Court held that the carrier liable. Issue: is valid. Whether or not the stipulations limiting the liability of the carrier

Held: While delivery of the cargo to the customs authorities is not delivery to the consignee of the person who has the right to receive them as contemplated in Article 1736 of the Civil Code because in such case the goods are still in the hands of the government and the owner cannot be exercise dominion over them, however, the parties may agree to limit the liability of the carrier considering that the goods have still to go through the inspection of the customs authorities before they are actully turned over to the consignee. These stipulations limiting liability is not contrary to morals or public policy. This is a situation where the carrier loses control of the goods because of a custom regulation and it is unfair that it be made responsible for any loss or damage that may be caused to the goods during the interregnum.

Judgment reversed. AMERICAN PRESIDENT LINES, LTD. vs. CA Facts: American President Lines (APL) vessel President Washington(Carrier for short) receive and loaded on board at Los Angeles, California, the subject of the shipment of one (1) unit of Submersible Jocky Pump, contained in (3) boxes, complete and in good order condition, covered by Commercial Invoice No. 602956, and Packing List. It was for transport to Manila in favor or Lindale Development Corporation, the consignee. The CARRIER, thru Forwarders Direct Container Lines, Inc., issued its clean Bill of Lading No. CHI-MNL-120. The shipment was insured by FGU Ins. Corp. for P481, 842.24 The defendant CARRIER transshipped the shipment in Hongkong on board the vessel MS Partas, which arrived at the Port of Manila, on September 6, 1987. On the same date, the shipment was discharged and turned over to Marina Port Services, Inc.(Arrastre0, with one box in bad order condition, showing signs of having been previously tampered; hence, covered by a Turn over Survey Cargoes No. A-08851. The cargo remained with the ARRASTRE for ten days until it was withdrawn on April 16, 1987 by the defendant broker which delivered the same to the consignee, aforementioned, at its warehouse, where the said shipment was examined and inventoried, and the one box discharged from the CARRIERs vessel in bad order condition, was found short of one piece waster cone and one piece Main Relief valued, per invoice, at P28, 248.58. Private respondent FGU Ins. Corp. filed a complaint for recovery of a sum of money against APL, Marina Port Services, Inc., and LCM Brokerage Co., Inc. The trial court found in favor of private respondent and ordered APL to pay private respondent the amount of P28, 248.58. In actual damages, Issue: What law is applicable the Civil Code provisions or COGSA? Held: The Civil Code. With regard to the contention of the carrier that COGSA should control in this case, the same is of no moment. Art. 1763 of the New Civil Code provides that the laws of the country to which the goods are transported shall govern the liability of the common carrier in case of loss, destruction and deterioration. This means that the law of the Philippines on the New Civil Code. Under 1766 of NCC, in all matter not regulated by this Code, the rights and obligations of common carriers shall be governed by the Code of Commerce and by Special Laws. Art. 1736-1738, NCC governs said rights and obligations. Therefore, although Sec 4(5) of COGSA states that the carrier shall not be liable in an amount exceeding $500 per package unless the value of the goods had been declared by the shipper and asserted in the bill of lading, said section is merely supplementary to the provisions of the New Civil Code.

SERVANDO vs. PHILIPPINE STEAM NAVIGATION CO. Facts: Clara UY Bico and Amparo Servando loaded on board the Philippine Steam Navigation vessel, FS-176, for carriage from Manila to Pulupundan, Negros Occidental, cargoes of rice and colored paper as evidenced by the corresponding bills of lading issued by the carrier. Upon arrival of the vessel at Pulupandan in the morning of November 18, 1963, the cargoes were discharged, complete and in good order, unto the warehouse of the Bureau of Customs. About 2:00 p.m. of the same day, said warehouse was razed by a fire of unknown origin, destroying Servandos cargoes. Issue: Whether or not the stipulations in the bill of lading limiting the liability of carrier is valid. Held: The court a quo held that the delivery of the shipment on question to the warehouse of the Bureau of Customs is not the delivery contemplated by Article 1736; and since the burning of the warehouse occurred before actual or constructive delivery of the goods to the appellees, the loss is chargeable against the appellant. However, that in the bills of lading issued for the cargoes in question, parties agreed to limit the responsibility of the carrier for the loss or damage that may be caused to the shipment by inserting therein the following stipulation. Clause 14. Carrier shall not be responsible for loss or damage to shipments billed owners risk unless such damage is due to negligence of carrier. Nor shall carrier be responsible for loss or damage cause by force majeure, dangers or accidents of the sea or other waters; war; public enemies, xxx fire xxx. We sustain the validity of the above stipulation; there is nothing therein that is contrary to law, morals or public policy. Appellees would contend that the above stipulation does not bind them because it was printed in fine letters on the back of the bills of lading; and that they did not sign the same. This argument overlooks the pronouncement of this Court in Ong Yiu vs. Court of Appeals. While it may be true that petitioner had not signed the plane ticket, he is nevertheless bound by the provisions thereof. Such provisions have been held to be part of the contract of carriage and valid and binding upon the passenger regardless of the latters lack of knowledge or assent to the regulation. There is nothing in the record to show that appellant carrier in delay in the performance of its obligation nor that was the cause of the fire that broke out in the Customs warehouse in anyway attributable to the negligence of the appellant or its employees.

GANZON vs. COURT OF APPEALS

Facts: Gelacio Tumambing contracted the services of Mauro B. Ganzon to haul 305 tons of scrap iron from Mariveles, Bataan, to the port of Manila on board the lighter LCT Batman. Ganzon then sent his lighter Batman to Mariveles where it docked. On December 1, 1956, Gelacio Tumambing delivered the scrap iron to defendant Filomeno Niza; captain of the lighter, for loading which was actually began on the same date by the crew of the lighter. When about of the scrap of the scrap iron was already loaded, Mayor Advincula of Mariveles, Bataan, arrived and demanded P5, 000.00 from Tumambing. The latter resisted the shakedown and after a heated argument, Mayor Advincula drew his gun and fired at Tumambing. The gunshot was not fatal but Tumambing had to be taken to a hospital in Balanga, Bataan, for treatment. After some time, the loading of the scrap iron was resumed. But on December 4, 1956, Acting Mayor Basillo Rub, accompanied by the three policemen, ordered Captain Filomeno Niza and his crew to dump the scrap iron where the lighter was docked. The rest was brougth to the compound of NASSCO. Acting Mayor Rub issued a receipt stating that the Municipality of Mariveles had taken custody of the scrap iron. Issue: Whether or not the scrap iron were already delivered.

Held: Petitioner Ganzon insists that the scrap iron had not been unconditionally placed under his custody and control to make him liable. However, he completely agrees with the respondent Courts finding that on December 1, 1956, the private respondent delivered the scraps to Captain Niza for loading in the lighter Batman. That the petitioner, thru his employees, actually received the scraps is freely admitted. By the said act of delivery, the scraps were unconditionally placed in the possession and control of the common carrier and upon their receipt by the carrier for transportation, the contract of carriage was deemed perfected. Consequently, the petitioner-carriers extraordinay responsibility for the loss, destruction, or deterioration of the goods commenced. Pursuant to Art. 1738, such extraordinary responsibility would cease only upon the delivery, actual or constructive, by the carrier to the consignee, or to the person who has a right to receive them. The fact that part of the shipment had not been loaded on board the lighter did not impair the said contract of transportation as the goods remained in the custody and control of the carrier, albeit unloaded.

SALUDO, JR. vs. COURT OF APPEALS Facts: After the death of plaintiffs mother, Crispina Saludo, Pomierski and Son Funeral Home of Chicago brought the remains to Continental Mortuary Air Services which booked the shipment of the remains from Chicago to San Francisco by TWA and from San Francisco to Manila with PAL. The remains

were taken to the Chicago Airport, but it turned out that there were two bodies in the said airport. Somehow the two bodies were switched; the casket bearing the remains of plaintiffs mother was mistakenly sent to Mexico and was opened there. The shipment was immediately loaded on PAL flight and arrived on Manila a day after it expected arrival on October 29, 1976. Plaintiff filed a damage suit with CFI of Leyte, contending that Trans World Airlines and PAL were liable for misshipment, the eventual delay on the delivery of the cargo containing the remains, and of the discourtesy of its employees to them. The court absolve the two airline companies of any liability. The CA affirmed such decision. Issue: Whether or not the carrier is liable for damages.

Held: The records reveal that petitioners, particularly Maria and Saturnino Saludo, agonised for nearly five hours, over the possibility of losing their mothers mortal remains, unattended to and without any assurance from the employees of TWA that they were doing anything about the situation. They were entitled to the understanding and humane consideration called of by and commensurate with the extraordinary diligence required for common carriers, and not the cold insensitivity to their predicament. Common sense could and should have dictated that they exert a little effort in making a more extensive inquiry by themselves or through their superiors, rather than just shrug off the problem with a callous and uncaring remark that they had no knowledge about it. With all the modern communications equipment readily available to them, it could have easily facilitated said inquiry. TWAs apathetic stance while not legally reprehensible is morally deplorable. Losing a loved one, especially ones parent, is a painful experience. Our culture accords utmost tenderness human feelings toward and in reverence to the dead. That the remains of the deceased were subsequently delivered, albeit, belatedly and eventually laid in her final resting place is of little consolation. The imperviousness displayed by TWAs personnel, even for just that fraction of time, was especially condemnable particularly in the hours of bereavement of the family of Crispina Saludo, intensified by anguish due to the uncertainty of the whereabouts of their mothers remains. TWAs personnel were remiss in the observance of that genuine human concern and professional attentiveness required and expected of them. The foregoing observations, however, do not appear to be applicable to respondent PAL. No attribution of discourtesy or indifference has been made against PAL by petitioners and, in fact, petitioner Maria Saludo testified that it was to PAL they repaired after failing to receive proper attention from TWA. It was from PAL that they received confirmation that their mothers remains would be on the same flight with them. Petitioners right to be treated with due courtesy in accordance with the degree of diligence required by law to be exercised by every common carrier was violated by the TWA and this entitles them, atleast to nominal damages from TWA alone. Articles 2221 and 2222 of the Civil Code make it clear that nominal damages are not intended for indemnification of loss suffered but for the vindication or recognition of a right violated or invaded. They are

recoverable where some injury has been done but the amount of which the evidence fails to show, the assessment of damages being left to the discretion of the court according to the circumstances of the case.

MACAM vs. COURT OF APPEALS Facts: Petitioner Benito Macam shipped on board the vessel Nen Jiang, through local agent respondent Wallem Philippines Shipping, Inc. watermelons valued at US$5,950.00 and fresh mangoes valued at US$14,273.46. The shipment was bound for Hongkong with Pakistan Bank as consignee and Great Prospect Company of Kowloon, Hongkong as notify party. Petitioners depository bank. Consolidated Banking Corporation(SOLIDBANK) paid petitioner in advance the total value of the shipment of US$20,223.46. Upon arrival in Hongkong, the shipment was delivered by respondent WALLEM directly to GPC, not to Pakistan Bank, and without the required bill of lading having been surrendered. Subsequently, GPC failed to pay Pakistan Bank such that the latter, still in possession of the original bills of lading, refused to pay petitioner through SOLIDBANK. Since SOLIDBANK already prepaid petitioner the value of the shipment, it demanded payment from respondent WALLEM but was refused. Petitioner returned the amount involved to SOLIDBANK, and then demanded payment from respondent WALLEM in writing but to no avail. Hence petitioner sought collection of the value of the shipment if US$20,223.46 from respondents before the RTC of Manila, bases on delivery of the shipment to GPC without presentation of the bills of lading and bank guarantee. Issue: Whether or not respondents are liable to petitioner for releasing the goods to GPC without the bills of lading or bank guarantee? Held: Under Art. 1736 of the Civil Code, the extraordinary responsibility of the common carrier lasts until actual or constructive delivery of the cargoes to the consignee or to the person who has a right to receive them. PAKISTAN BANK was indicated in the bills of lading as consignee whereas GPC was notifying party. However, in the export invoices GPC was clearly named as buyer/importer. Petitioner also referred to GPC as such in his demand letter to respondent WALLEM and in his complaint before the trial court. This premise draws us to conclude that the delivery of the cargoes to GPC as buyer/importer which, conformably with Art. 1736 had, other than the consignee, the right to receive them was proper. The real issue is whether respondents are liable to petitioner for releasing the goods to GPC without the bills of lading or bank guarantee. From the testimony of petitioner, we gather that he has been transacting with GPC as buyer/importer for around 2 to 3 years already. When mangoes and watermelons are in season, his shipment to GPC using the facilities of respondents is twice or thrice a week. The goods are released to GPC. It has been the practice of petitioner to request the shipping lines to

immediately release perishable cargoes such as watermelons and fresh mangoes through telephone calls by himself or his people. In transactions covered by a letter of credit, bank guarantee is normally required by the shipping lines prior to releasing the goods. But for buyers using telegraphic transfers, petitioner dispenses with the bank guarantee because the goods are already fully paid. In his several years of business relationship with GPC and respondents, there was not a single instance when the bill of lading was first presented before the release of the cargoes. MAERSK LINE vs. COURT OF APPEALS Facts: Private respondent(consignee) ordered from Eli Lilly. Inc.(shipper) 600,000 empty gelatin capsules for the manufacture of his pharmaceutical products. The Memorandum of Shipment provides that the shipper advised the consignee that the goods were already shipped on board the vessel of petitioner for shipment to the Philippines via Oakland, California. The specified date of arrival was April 3, 1977. For reasons unknown, said cargo of capsules were mishipped and diverted to Richmond, Virginia, USA and then transported back to Oakland, California. The goods finally arrived in the Philippines on June 10, 1977 or after two months from the date specified. The consignee refused to take delivery of the goods. Private respondent alleging gross negligence and undue delay in the delivery of the goods, filed an action for rescission of contract with damages against petitioner and shipper. Petitioner alleged that the goods were transported in accordance with the bill of lading(..the Carrier does not undertake that the goods shall arrive at the port of discharge or the place of delivery at any particular time..) and that its liability under the law attaches only in case of loss, destruction or deterioration of the goods as provided for in Article 1734 NCC. The shipper alleged that the mis-shipment was due solely to the gross negligence of petitioner. The RTC dismissed the complaint against the shipper and ruled in favor of the consignee. RTC ruled that the stipulation in the BOL is in the nature of contract of adhesion and therefore void. CA affirmed said decision, hence the present petition. Issue: Whether or not respondent is entitled to damages resulting from delay in the delivery of the shipment in the absence in the bill of lading of a stipulation on the period of delivery. Held: Yes. While it is true that common carriers are not obligated by law to carry and to deliver merchandise, and persons are not vested with the right to prompt delivery, unless such common carriers previously assume the obligation to deliver at a given date or time, delivery of shipment or cargo should at least be made within a reasonable time. An examination of the subject bill of lading shows that the subject shipment was estimated to arrive in Manila on April 3, 1977. While there was no special contract entered into by the parties indicating the date of arrival of the subject shipment, petitioner nevertheless, was very well aware of the specific date when the goods were expected to arrive as indicated in the bill of lading itself. In this regard, there arises no need to execute another contract for the purpose as it would be a

mere superfluity. In the case before us, we find that a delay in the delivery of the goods spanning a period of two months and seven days falls was beyond the realm of reasonableness. With respect to the ruling that contracts of adhesion are void, SC said that it was necessarily so and that it is a settled rule that bills of lading are contracts not entirely prohibited. YSMAEL vs. BARRETTO Facts:Ysmael, a domestic corporation seeks to recover from Barretto P9,940, which is the alleged value of four cases of merchandise which it delivered to the steamship Andres, at Manila to be shipped to Surigao. The said merchandise was never delivered to the consignee Solomon Sharuff. Barretto denied all the allegations against him stating that the said merchandise was never delivered to him. He also stated that under the provision of paragraph 7 of the printed condition at the back of the bill of lading, plaintiffs right of action is barred for the reason that it was not brought within 60 days from the time the cause of action accrued. Barretto also alleged that in provision 12 of the bill of lading, he is not liable for the excess of P300.00 for any package of silk unless the value and contents of such package are correctly declared in the bill of lading at the time of shipment. The lower court rendered its judgment in favor of Ysmael & co. Issue: Whether or not the stipulation in the bill of lading limiting the liability of defendant of not more than P300 is valid. Held: No, the stipulation is not valid. A common carrier cannot lawfully stipulate for exemption from liability, unless such exemption is just andreasonable and the contract is freely and fairly made. A common carrier cannot lawfully stipulate for the exemption from liability, unless such exemption is just and reasonable. The carrier cannot limit its liability for injury to or loss of goods shipped if such was caused by its own negligence. Based upon the findings of fact of the trial court which are sustained by the evidence, the plaintiff delivered to the defendants 164 cases of silk consigned and to be delivered by the defendants to Salomon Sharuff in Surigao. Four of such cases were never delivered to the consignee, and the evidence shows that their value is the alleged in the complaint. Also, the goods in question were shipped from Manila on October 25, 1922, to be delivered to Salomon Sharuff in Surigao, Plaintiff's original complaint was filed on April 17, 1923, or a little less than six months after the shipment was made. The lower court also points out that the conditions in question "are not printed on the triplicate copies which were delivered to the plaintiff," and that by reason thereof they "are not binding upon the plaintiff." The clause in question provides that the carrier shall not be liable for loss or damage from any cause or for any reason to an amount in excess of P300 "for any single package of silk or other valuable cargo."

The evidence shows that 164 "cases" were shipped, and that the value of each case was very near P2,500. In this situation, the limit of defendants' liability for each case of silk "for loss or damage from any cause or for any reason" would put it in the power of the defendants to have taken the whole cargo of 164 cases of silk at a valuation of P300 for each case, or less than one-eight of its actual value. If that rule of law should be sustained, no silk would ever be shipped from one island to another in the Philippines. Such a limitation of value is unconscionable and void as against public policy. There is no merit in the appeal. The judgment of the lower court is affirmed. SHEWARAM vs. PHILIPPINE AIR LINES, INC. Facts: Shewaram, a paying passenger on defendant's aircraft flight from Zamboanga City bound for Manila. He checked in three pieces of baggages, a suitcase and two other pieces. When plaintiff Parmanand Shewaram arrived in Manila, his suitcase did not arrive with his flight because it was sent to Iligan. It was found out that it was mistagged by defendants personnel. The station agent of the PAL in Iligan caused the baggage to be sent to Manila for delivery to plaintiff. Defendant admitted that the two items (Transistor Radio and the Rollflex Camera) could not be found inside the suitcase. An action for damages was instituted against PAL. RTC ruled that the loss of the articles was due to the negligence of the employees of PAL. PAL however was ordered to pay damages of P100.00 only, as this was its limited liability as stated in the ticket. (The liability, if any, for loss or damage to checked baggage or for delay in the delivery thereof is limited to its value and, unless the passenger declares in advance a higher valuation and pay an additional charge therefor, the value shall be conclusively deemed not to exceed P100.00 for each ticket.). An appeal was then brought up by plaintiff. Issue: Whether or not the limited liability rule applies. Held: No. The limited liability rule shall not apply. The requirements provided in Article 1750 of the New Civil Code must be complied with before a common carrier can claim a limitation of its pecuniary liability in case of loss, destruction or deterioration of the goods it has undertaken to transport. In the case before us We believe that the requirements of said article have not been met. It can not be said that the appellee had actually entered into a contract with the appellant, embodying the conditions as printed at the back of the ticket. The fact that those conditions are printed at the back of the ticket stub in letters so small that they are hard to read would not warrant the presumption that the appellee was aware of those conditions such that he had "fairly and freely agreed" to those conditions. Shewaram did not agree to the stipulation on the ticket, as manifested by the fact that Shewaram did not sign the ticket.

ONG YIU vs. COURT OF APPEALS Facts: Petitioner was paying passenger of respondent Philippine Airlines on board flight No. 946-R from Mactan Cebu bound for Butuan City. He was scheduled to attend the trial in the Court of First instance , Br. II thereat. As a passenger, he checked in one piece of luggage, a bull maleta. The plane left Mactan Airport, Cebu City at about 1pm and arrived at Bacasi Airport, Butuan City at past 2pm of the same day. Upon arrival, petitioner claimed his luggage but it could not be found. According to petitioner, it was only after reacting indignantly to the loss that the matter was attended by the porter clerk which however, the later denied. When the luggage was delivered to the petitioner with the information that the lock was open, he found out that the folder containing documents and transcripts were missing, aside from the two gift items for his parents-in-law. Petitioner refused to accept the luggage. Petitioner filed a Complaint against PAL for damages for breach of contract of transportation. The lower Court found PAL to have acted in bad faith and with malice and declared petitioner entitled to moral damages. CA held that PAL was guilty only of simple negligence, reversed the judgment of the trial Court granting petitioner moral and exemplary damages, but ordered PAL to pay plaintiff the sum of P100.00, the baggage liability assumed by it under the condition of carriage printed at the back of the ticket. Hence the present petition. Issue: Whether or not PAL acted with gross negligence. Held: No. PAL did not act in bad faith. It was the duty of PAL to look for petitioners luggage which had been miscarried. PAL exerted diligent efforts to locate the plaintiffs baggage. Petitioner is neither entitled to exemplary damages. Exemplary damages can only be granted if the defendant asked in a wanton, fraudulent, reckless, oppressive or malevolent manner, which loss, in accordance with the stipulation written at the back of the ticket is limited to P100 per luggage plaintiff not having declared a greater value and not having called the attention of the defendant on its value ad paid the tariff thereon. While it may be true that petitioner had not signed the plane ticket, he is nevertheless bound by the provisions thereof. "Such provisions have been held to be a part of the contract of carriage, and valid and binding upon the passenger regardless of the latter's lack of knowledge or assent to the regulation". It is what is known as a contract of "adhesion", in regards which it has been said that contracts of adhesion wherein one party imposes a ready made form of contract on the other, as the plane ticket in the case at bar, are contracts not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent. A contract limiting liability upon an agreed valuation does not offend against the policy of the law forbidding one from contracting against his own negligence.

SEA-LAND SERVICE, INC. vs. IAC Facts: Sea-land, a foreign shipping and forwarding company licensed to do business in the Philippines, received from Seaborne Trading Company in California a shipment consigned to Sen Hiap Hing. The shipper not having declared the value of the shipment, no value was indicated in the BOL. The shipment was discharged in Manila, and while awaiting transshipment to Cebu the cargo was stolen and never recovered. The lower court sentences Sea-land to pay Cue the value of the lost cargo, the unrealized profit and attorneys fees. The CA affirmed the decision, hence the petition. Issue: Whether or not the consignee of seaborne freight is bound by stipulations in the covering bill of lading limiting to a fixed amount the liability of the carrier for loss or damage to the cargo where its value is not declared in the bill. Held: Yes. There is no question of the right of a consignee in a bill of lading to recover from the carrier or shipper for loss of, or damage to, goods being transported under said bill, although that document may have been drawn up only by the consignor and the carrier without the intervention of the consignee. Since the liability of a common carrier for loss of or damage to goods transported by it under a contract of carriage so governed by the laws of the country of destination and the goods in question were shipped from the United States to the Philippines, the liability of Sea-Land has Cue is governed primarily by the Civil Code, and as ordained by the said Code, supplementary, in all matters not cluttered thereby, by the Code of Commerce and special laws. One of these supplementary special laws is the Carriage of goods by Sea Act (COGSA), made applicable to all contracts for the carriage by sea to and from the Philippines Ports in Foreign Trade by Comm. Act. 65. Even if Section 4(5) of COGSA did not list the validity and binding effect of the liability limitation clause in the bill of lading here are fully substantial on the basis alone of Article 1749 and 1750 of the Civil Code. The justices of such stipulation is implicit in its giving the owner or shipper the option of avoiding accrual of liability limitation by the simple expedient of declaring the value of the shipment in the bill of lading. The stipulation in the bill of lading limiting the liability of Sea-Land for loss or damages to the shipment covered by said rule to US$500 per package unless the shipper declares the value of the shipment and pays additional charges is valid and binding on Cue. CITADEL LINES, INC. vs. COURT OF APPEALS Facts: Petitioner is the general agent of the vessel Cardigan Bay/ Straight Enterprises, while private respondent Manila Wine Merchants, Inc. as the consignee is the importer of the subject shipment of Dunhill cigarettes from England. On or about March 17,1979, the vessel Cardigan loaded on board at England for carriage to Manila, 180 Filbrate cartons of mixed British

manufactured cigarettes called Dunhill International Filter & Dunhill International Menthol, as evidenced by a Bill of Lading. Clause 6 of the bills of lading issued by the carrier states to limit the latters liability to US$2.00 per kilo.The shipment arrived at the port of Manila Pier 13 and the container van was received by E. Razon an arrastre. Thereafter, the container van containing two shipments was stripped. One shipment was delivered and the other, containing the cigarettes were placed in two containers due to the lack of space, both of them duly padlocked and sealed by the representative of the carrier. On May 1, 1979, the carriers headchecker discovered that one of the container van had a different padlock and the sealed was tampered with. It was found out that 90 cases of the cigarettes were missing. Based on the investigation conducted by the arrastre, the cargo was not formally turned over by the carrier. The consignee filed a complaint against the carrier demanding P315,000 which is the market value of the goods. The carrier admitted the loss in its reply letter but alleged that the said matter is under the control of the arrastre therefore, the consignee filed a complaint against the arrastre. The lower court decided to absolve the arrastre form any liability. CA affirmed the decision of the lower court. Issue: Whether or not the stipulation limiting the liability of the carrier contained in the bill of lading is binding on the consignee. Held: Yes, the stipulation is valid. Basic is the rule that a stipulation limiting the liability of the carrier to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value, is binding. Furthermore, a contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been fairly and freely agreed upon. In this case, the award of P315,000 based on the alleged market value of the goods is erroneous. It is provided in Clause 6 that its liability is limited to US$2.00/kilo. The consignee also admits in the memorandum that the value of the goods does not appear in the bill of lading. Hence, the stipulation on the carriers limited liability applies. The bill of lading shows that 120 cartons weight 2,978 kilos or 24.82kilos/carton. Since 90 cartons were lost and the weight of said cartons is 2,233.80, the carriers liability amounts only to US$4,467.60. The judgment of CA is hereby modified. EVERETT STEAMSHIP CORPORATION vs. COURT OF APPEALS Facts: Private respondent Hernandez Trading Co. imported three crates of bus spare parts from Japan from its supplier Maruman Trading based there. The crates were shipped from Japan to Manila on board a vessel owned by petitioners principal, Everett Orient Lines.

Upon arrival at the port of Manila, it was discovered that one of the crater was missing. Respondent made a formal claim for the recovery of the actual value of the lost spare parts contained in the missing crates. The trial court rendered judgment in favor of private respondent, ordering petitioner to pay Y1,552,500.00. An appeal was brought by petitioner only 100,000 yen was offered by petitioner, the maximum amount stipulated in clause 18 of the BOL. The Court of Appeals deleted the award of attorney's fees but affirmed the trial court's findings with the additional observation that private respondent can not be bound by the terms and conditions of the bill of lading because it was not privy to the contract of carriage. Petitioner now comes to SC arguing that the Court of Appeals erred (1) in ruling that the consent of the consignee to the terms and conditions of the bill of lading is necessary to make such stipulations binding upon it; (2) in holding that the carrier's limited package liability as stipulated in the bill of lading does not apply in the instant case; and (3) in allowing private respondent to fully recover the full alleged value of its lost cargo. Issue: Whether or not the petitioner is liable for the actual value and not the maximum value recoverable under the bill of lading. Held: No. A stipulation in the bill of lading limiting the liability of the common carrier for the loss, damages of cargo to a certain sum, unless the shipper declares or a higher value is sanctioned by law, particularly Articles 1749 and 1750 of the Civil Code. Pursuant to the afore-quoted provisions of law, it is required that the stipulation limiting the common carrier's liability for loss must be "reasonable and just under the circumstances, and has been freely and fairly agreed upon." The bill of lading subject of the present controversy specifically provides, among others: 18. All claims for which the carrier may be liable shall be adjusted and settled on the basis of the shipper's net invoice cost plus freight and insurance premiums, if paid, and in no event shall the carrier be liable for any loss of possible profits or any consequential loss. The carrier shall not be liable for any loss of or any damage to or in any connection with, goods in an amount exceeding One Hundred thousand Yen in Japanese Currency (Y100,000.00) or its equivalent in any other currency per package or customary freight unit (whichever is least) unless the value of the goods higher than this amount is declared in writing by the shipper before receipt of the goods by the carrier and inserted in the Bill of Lading and extra freight is paid as required. The above stipulations are, to our mind, reasonable and just. In the bill of lading, the carrier made it clear that its liability would only be up to One Hundred Thousand (Y100,000.00) Yen. However, the shipper, Maruman Trading, had the option to declare a higher valuation if the value of its cargo was higher than the limited liability of the carrier. Considering that the shipper did not declare a higher valuation, it had itself to blame for not complying with the stipulations.

To defeat the carrier's limited liability, the aforecited Clause 18 of the bill of lading requires that the shipper should have declared in writing a higher valuation of its goods before receipt thereof by the carrier and insert the said declaration in the bill of lading, with extra freight paid. These requirements in the bill of lading were never complied with by the shipper, hence, the liability of the carrier under the limited liability clause stands. The commercial Invoice does not in itself sufficiently and convincingly show that petitioner has knowledge of the value of the cargo as contended by private respondent. BRITISH AIRWAYS vs. COURT OF APPEALS Facts: Mahtani obtained the services of a certain Mr. Gemar to prepare his travel plan to Bombay, India. Mr. Gemar purchased a ticket from British Airways, however since it had no ticket flights from Manila to Bombay, Mahtani had to take a connecting flight to Bombay. Prior to his departure, Mahtani checked in the PAL counter in Manila his two pieces of luggage containing his clothing and personal effects, confident that upon reaching Hong Kong, the same would be transferred to the BA flight bound for Bombay. Unfortunately, when Mahtani arrived in Bombay, he discovered that his luggage was missing and that upon inquiry from the BA representatives, he was told that the same might have been diverted to London. After plaintiff waited for his luggage for one week, BA finally advised him to file a claim. Mahtani filed his complaint for damages. BA filed a third-party complaint against PAL alleging that the reason for the non-transfer of the luggage was due to the latter's late arrival in Hongkong, thus leaving hardly any time for the proper transfer of Mahtani's luggage to the BA aircraft bound for Bombay. RTC rendered its decision in favor of Mahtani, which CA affirmed, hence the instant petition. BA alleged that there should have been no separate award for the luggage and the contents thereof since Mahtani failed to declare a separate higher valuation for the luggage and therefore, its liability is limited, at most, only to the amount stated in the ticket. Issue: Whether or not BA is liable for the compensatory damages. Held: Yes. The contract of transportation was exclusively between Mahtani and BA. The latter merely endorsing the Manila to Hong Kong log of the formers journey to PAL, as its subcontractor or agent. Conditions of contacts was one of continuous air transportation from Manila to Bombay. The Court of Appeals should have been cognizant of the well-settled rule that an agent is also responsible for any negligence in the performance of its function and is liable for damages which the principal may suffer by reason of its negligent act. The third-party complaint was therefore reinstated. Since the instant petition was based on breach of contract of carriage, Mahtani can only sue BA and not PAL, since the latter was not a party in the contract. The contention of BA with respect to limited liability was overruled although it is recognized in the Philippines, stating that BA had waived the defense of limited liability when it allowed Mahtani to testify as to the actual

damages he incurred due to the misplacement of his luggage, without any objection. H. E. HEACOCK COMPANY vs. MACONDRAY & COMPANY, INC. Facts: The plaintiff shipped Edmonton clocks from New York to Manila on board a vessel of the defendant. The BOL has the following stipulations: 1. It is mutually agreed that the value of the goods receipted for above does not exceed $500 per freight ton, or, in proportion for any part of a ton, unless the value be expressly stated herein and ad valorem freight paid thereon. 9. Also, that in the event of claims for short delivery of, or damage to, cargo being made, the carrier shall not be liable for more than the net invoice price plus freight and insurance less all charges saved, and any loss or damage for which the carrier may be liable shall be adjusted pro rata on the said basis. The clocks were not delivered despite demands. Plaintiff claimed P420.00, the market value of the clocks, while defendant tendered only P76.36, the proportionate freight ton value. The trial court decided for the plaintiff for P226.02, the invoice value plus freight and insurance. Both appealed. The claim of the plaintiff is based upon the argument that the clause in the bill of lading, limiting the liability of the carrier, are contrary to public order and, therefore, null and void. The defendant, on the other hand, contends that clause 1 is valid, and clause 9 should have not been applied by the lower court. Issue: May a common carrier, by stipulations inserted in the bill of lading, limit its liability for the loss of or damage to the cargo to an agreed valuation of the latter? Held: Yes. Three kinds of stipulations have often been made in a bill of lading. The first is one exempting the carrier from any and all liability for loss or damage occasioned by its own negligence. The second is one providing for an unqualified limitation of such liability to an agreed valuation. And the third is one limiting the liability of the carrier to an agreed valuation unless the shipper declares a higher value and pays a higher rate of freight. According to an almost uniform weight of authority, the first and second kinds of stipulations are invalid as being contrary to public policy, but the third is valid and enforceable. A reading of clauses 1 and 9 of the bill of lading here in question, however, clearly shows that the present case falls within the third stipulation, to wit: That a clause in a bill of lading limiting the liability of the carrier to a certain amount unless the shipper declares a higher value and pays a higher rate of freight, is valid and enforceable. Thus, if a common carrier gives to a shipper the choice of two rates, the lower of the conditioned upon his agreeing to a stipulated valuation of his property in case of loss, even by the carrier's negligence, if the shipper makes such a choice, understandingly and freely, and names his valuation, he cannot thereafter recover more than the value which he thus places upon his property. A limitation of liability based upon an

agreed value to obtain a lower rate does not conflict with any sound principle of public policy; and it is not conformable to plain principles of justice that a shipper may understate value in order to reduce the rate and then recover a larger value in case of loss. SWEET LINES, INC. vs. TEVES Facts: Private respondents Atty. Tandog and Tiro, a contractors bought tickets for Voyage at the branch office of petitioner, a shipping company transporting inter-island passengers and cargoes, at Cagayan de Oro City. Respondents were to board petitioner's vessel bound for Tagbilaran City via the port of Cebu. Upon learning that the vessel was not proceeding to Bohol, since many passengers were bound for Surigao, private respondents per advice, went to the branch office for proper relocation to another vessel. Because the said vessel was already filled to capacity, they were forced to agree "to hide at the cargo section to avoid inspection of the officers of the Philippine Coastguard." Private respondents alleged that they were, during the trip," "exposed to the scorching heat of the sun and the dust coming from the ship's cargo of corn grits," and that the tickets they bought at Cagayan de Oro City for Tagbilaran were not honored and they were constrained to pay for other tickets. In view thereof, private respondents sued petitioner for damages and for breach of contract of carriage before Court of First Instance of Misamis Oriental. Petitioner moved to dismiss the complaint on the ground of improper venue. This motion was premised on the condition printed at the back of the tickets, Condition No. 14, which reads: It is hereby agreed and understood that any and all actions arising out of the conditions and provisions of this ticket, irrespective of where it is issued, shall be filed in the competent courts in the City of Cebu. The motion was denied hence the instant petition. Issue: Is Condition No. 14 printed at the back of the petitioner's passage tickets purchased by private respondents, which limits the venue of actions arising from the contract of carriage to theCourt of First Instance of Cebu, valid and enforceable? Held: No. Considered in the light of circumstances prevailing in the inter-island shipping industry in the country today, We find and hold that Condition No. 14 printed at the back of the passage tickets should be held as void and unenforceable for the following reasons first, under circumstances obligation in the inter-island shipping industry, it is not just and fair to bind passengers to the terms of the conditions printed at the back of the passage tickets, on which Condition No. 14 is Printed in fine letters, and second, Condition No. 14 subverts the public policy on transfer of venue of proceedings of this nature, since the same will prejudice rights and interests of innumerable passengers located in different places of the country who, under Condition No. 14, will have to file suits against petitioner only in the City of Cebu. Considering the expense and trouble a passenger residing outside of Cebu City would incur to prosecute a claim in the City of Cebu, he would most probably decide not to file the action at all. The condition will thus defeat, instead of enhance, the ends of

justice. Upon the other hand, petitioner has branches or offices in the respective ports of call of its vessels and can afford to litigate in any of these places. Hence, the filing of the suit in the CFI of Misamis Oriental, as was done in the instant case, will not cause inconvenience to, much less prejudice, petitioner. QUISUMBING, SR. vs. COURT OF APPEALS Facts: Norberto Quisumbing Sr. and Gunther Leoffler were among the passengers of PALs plane from Mactan City Cebu to Manila. There was an exchange of gunshot between a Senior NBI agent Villarin and the four armed hijackers one of which was Zaldy who is a suspect in the killing of Judge Valdez. Zaldy then announced to the passengers and the pilots that it was a hijacked and ordered the pilot not to send any SOS. The robbers divested the passengers of their belongings including Quisumbing who was divested with his jewelries and cash amounting to P18,650.00 and Leoffler with his watch, wallet and cash amounting to P1,700. Quisumbing suffered a shock for a gun had been pointed at him by one of the hold uppers. The four hijackers succeeded in their escape upon arrival at Manila. Contending that the "aforesaid loss is a result of breach of PAL's contractual obligation to carry them and their belongings and effects to their Manila destination without loss or damage, and constitutes a serious dereliction of PAL's legal duty to exercise extraordinary diligence in the vigilance over the same, Quisumbing and Loeffler brought suit against PAL to recover the value of the property lost by them to the robbers as well as moral and exemplary damages.The CFI dismissed the complaint and the CA affirmed the CFIs decision. Hence the instant petition. The plaintiffs declared that their suit was instituted "... pursuant to Civil Code articles 1754, 998, 2000 and 2001 and on the ground that in relation to said Civil Code article 2001 the complained-of act of the armed robbers is not a force majeure, as the 'use of arms' or 'irresistible force' was not taken advantage of by said armed robbers in gaining entrance to defendant's ill-fated plane in questions. And, with respect to said Civil Code article 1998, it is not essential that the lost effects and belongings of plaintiffs were actually delivered to defendant's plane personnel or that the latter were notified thereof. Issue: 1) Whether or not hijacking-robbery was force majeure. 2) Whether or not PAL was negligent to overcome the hi-jacking-robbery. Held: 1) Yes. The Court ruled that under the facts, "the highjacking-robbery was force majeure," observing that: hijackers do not board an airplane through a blatant display of firepower and violent fury. Firearms, hand-grenades, dynamite, and explosives are introduced into the airplane surreptitiously and with the utmost cunning and stealth, although there is an occasional use of innocent hostages who will be coldly murdered unless a plane is given to the hijackers' complete disposal. 2) No, PAL was not negligent so as to overcome the force majeure nature of the hi-jacking. Hijackers do not board an airplane through a blatant display of

firepower and violent fury. Firearms and grenades are brought to the plane surreptitiously. PAL could not have been faulted for want of diligence, particularly for failing to take positive measures to implement Civil Aeronautics Administration regulations prohibiting civilians from carrying firearms on board the plane. The use of the most sophisticated electronic detection devices may have minimized hijacking but still ineffective against truly determining hijackers. The petition is denied and appealed decision of CA is affirmed. PAN AMERICAN WORLD AIRWAYS, INC. vs. RAPADAS Facts: Private respondent held Passenger Ticket and Baggage Claim Check for petitioner's Flight with the route from Guam to Manila. While standing in line to board the flight at the Guam airport, Rapadas was ordered by petitioner's handcarry control agent to check-in his Samsonite attache case. Rapadas protested pointing to the fact that other co-passengers were permitted to handcarry bulkier baggages. He stepped out of the line only to go back again at the end of it to try if he can get through without having to register his attache case. However, the same man in charge of handcarry control did not fail to notice him and ordered him again to register his baggage. For fear that he would miss the plane if he insisted and argued on personally taking the valise with him, he acceded to checking it in. He then gave his attache case to his brother who happened to be around and who checked it in for him, but without declaring its contents or the value of its contents. Upon arriving in Manila Rapadas claimed and was given all his checked-in baggages except the attache case. He sent his son, Jorge Rapadas to request for the search of the missing luggage. The petitioner exerted efforts to locate the luggage through the Pan American World Airways-Manila International Airport (PAN AM-MIA) Baggage Service. Rapadas received a letter from the petitioner's counsel offering to settle the claim for the sum of $160.00 representing the petitioner's alleged limit of liability for loss or damage to a passenger's personal property under the contract of carriage between Rapadas and PAN AM. Refusing to accept this kind of settlement, Rapadas filed the instant action for damages. The lower court ruled in favor of Rapadas after finding no stipulation giving notice to the baggage liability limitation. On appeal, the Court of Appeals affirmed the trial court decision. Hence, this petition. Issue: Whether or not a passenger is bound by the terms of a passenger ticket declaring the limitations of carriers liability Held: Yes. The Warsaw Convention, as amended, specifically provides that it is applicable to international carriage which it defines in Article 1, par. 2 as follows: (2) For the purposes of this Convention, the expression "international carriage" means any carriage in which, according to the agreement between the parties, the place of departure and the place of destination, whether or not there be a breach in the carriage or a transhipment, are situated either within the

territories of two High Contracting Parties or within the territory of a single High Contracting Party if there is an agreed stopping place within the territory of another State, even if that State is not a High Contracting Party. Carriage between two points within the territory of a single High Contracting Party without an agreed stopping place within the territory of another State is not international carriage for the purposes of this Convention. ("High Contracting Party" refers to a state which has ratified or adhered to the Convention, or which has not effectively denounced the Convention [Article 40A(l)]). Nowhere in the Warsaw Convention, as amended, is such a detailed notice of baggage liability limitations required. Nevertheless, it should become a common, safe and practical custom among air carriers to indicate beforehand the precise sums equivalent to those fixed by the Convention. The Convention governs the availment of the liability limitations where the baggage check is combined with or incorporated in the passenger ticket. In the case at bar, the baggage check is combined with the passenger ticket in one document of carriage. The passenger ticket complies with Article 3, which provides: (c) a notice to the effect that, if the passenger's journey involves an ultimate destination or stop in a country other than the country of departure, the Warsaw Convention may be applicable and that the Convention governs and in most cases limits the liability of carriers for death or personal injury and in respect of loss of or damage to baggage. What the petitioner is concerned about is whether or not the notice, which it did not fail to state in the plane ticket and which it deemed to have been read and accepted by the private respondent will be considered by this Court as adequate under the circumstances of this case. As earlier stated, the Court finds the provisions in the plane ticket sufficient to govern the limitations of liabilities of the airline for loss of luggage. The passenger, upon contracting with the airline and receiving the plane ticket, was expected to be vigilant insofar as his luggage is concerned. If the passenger fails to adduce evidence to overcome the stipulations, he cannot avoid the application of the liability limitations. The facts show that the private respondent actually refused to register the attache case and chose to take it with him despite having been ordered by the PANAM agent to check it in. In attempting to avoid registering the luggage by going back to the line, private respondent manifested a disregard of airline rules on allowable handcarried baggages. Prudence of a reasonably careful person also dictates that cash and jewelry should be removed from checked-inluggage and placed in one's pockets or in a handcarried Manila-paper or plastic envelope. The alleged lack of enough time for him to make a declaration of a higher value and to pay the corresponding supplementary charges cannot justify his failure to comply with the requirement that will exclude the application of limited liability. ALITALIA vs. IAC

Facts: Dr. Felipa Pablo, an associate professor in UP, was invited to a meeting of the Department of Research and Isotopes of the Joint FAO-IAEA Division of Atomic Energy in Food and Agriculture of UN in Ispra, Italy. To fulfill this engagement, Dr. Pablo booked passage on petitioner airline, ALITALIA. She arrived in Milan on the day before the meeting in accordance with the itinerary and time table set for her by ALITALIA. She was however told by the petitioners personnel there at Milan that her luggage was delayed inasmuch as the same was in one of the succeeding flights from Rome to Milan. Her luggage consisted of two suitcases. But the other flights arriving from Rome did not have her baggage on board. The suitcases were not actually restored to Prof. Pablo by petitioner until eleven months and four months after the institution of her action. Issue: Did petitioner acted in bad faith so as to entitle private respondent to damages? Held: No. The Warsaw Convention does not exclude liability for other breaches of contract by the carrier. Thus: "The Convention does not thus operate as an exclusive enumeration of the instances of an airline's liability, or as an absolute limit of the extent of that liability. Moreover, slight reflection readily leads to the conclusion that it should be deemed a limit of liability only in those cases where the cause of the death or injury to person, or destruction, loss or damage to property or delay in its transport is not attributable to or attended by any wilful misconduct, bad faith, recklessness, or otherwise improper conduct on the part of any official or employee for which the carrier is responsible, and there is otherwise no special or extraordinary form of resulting injury. The Convention's provisions, in short, do not regulate or exclude liability for other breaches of contract by the carrier' or misconduct of its officers and employees, or for some particular or exceptional type of damage, Otherwise, 'an air carrier would be exempt from any liability for damages in the event of its absolute refusal, in bad faith, to comply with a contract of carriage, which is absurd.' Nor may it for a moment be supposed that if a member of the aircraft complement should inflict some physical injury on a passenger, or maliciously destroy or damage the latter's property, the Convention might successfully be pleaded as the sole gauge to determine the carrier's liability to the passenger. Neither may the Convention be invoked to justify the disregard of some extraordinary sort of damage resulting to a passenger and preclude recovery therefor beyond the limits set by said Convention. It is in this sense that the Convention has been applied, or ignored, depending on the peculiar facts presented by each case. In the case at bar, no bad faith or otherwise improper conduct may be ascribed to the employees of petitioner airline; and Dr. Pablo's luggage was eventually returned to her, belatedly, it is true, but without appreciable damage. The fact is, nevertheless, that some species of injury was caused to Dr. Pablo because petitioner ALITALIA misplaced her baggage and failed to deliver it to her at the time appointed-a breach of its contract of carriage, to be sure-with the result that she was unable to read the paper and make the scientific presentation (consisting of slides, autoradiograms or films, tables and tabulations) that she

had painstakingly labored over, at the prestigious international conference, to attend which she had traveled hundreds of miles, to her embarrassment and the disappointment and annoyance of the organizers. There can be no doubt that Dr. Pablo underwent profound distress and anxiety, which gradually turned to panic and finally despair, from the time she learned that her suitcases were missing up to the time when, having gone to Rome, she finally realized that she would no longer be able to take part in the conference. Certainly, the compensation for the injury suffered by Dr. Pablo cannot under the circumstances be restricted to that prescribed by the Warsaw Convention for delay in the transport of baggage. She is not, of course, entitled to be compensated for loss or damage to her luggage. As already mentioned, her baggage was ultimately delivered to her in Manila, tardily, but safely. She is however entitled to nominal damageswhich, as the law says, is adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated and recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered-and this Court agrees that the respondent Court of Appeals correctly set the amount thereof at P40,000.00."

B. Safety of Passengers
NOCUM vs. LAGUNA TAYABAS BUS CO. Facts: A passenger boarded the respondents bus carrying a box which such person attested to the conductor as containing clothes and miscellaneous items. 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 the box brought by the co-passenger. Issue: Did LTB Co. exercise the extraordinary diligence required? Held: Yes, 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. MECENAS vs. CA Facts: M/T "Tacloban City," a barge-type oil tanker owned by the Philippine National Oil Company (PNOC) and operated by the PNOC Shipping and Transport Corporation (PNOC Shipping), having unloaded its cargo, left for Negros Occidental when it collided with a carrier ship named Don Juan. When the collision occurred, the sea was calm, the weather fair and visibility good. As a result of this collision, the M/V "Don Juan" sank and hundreds of its passengers perished. Among the ill-fated passengers were the parents of petitioners, the spouses Perfecto Mecenas and Sofia Mecenas, whose bodies were never found despite intensive search by petitioners. Issue: Whether or not the respondents were negligent?

Held: Yes, the behaviour of the captain of the "Don Juan" in tills instanceplaying mahjong "before and up to the time of collision constitutes behaviour that is simply unacceptable on the part of the master of a vessel to whose hands the lives and welfare of at least seven hundred fifty (750) passengers had been entrusted. Whether or not Capt. Santisteban was "off-duty" or "onduty" at or around the time of actual collision is quite immaterial; there is, both realistically speaking and in contemplation of law, no such thing as "off-duty" hours for the master of a vessel at sea that is a common carrier upon whom the law imposes the duty of extraordinary diligence. The record shows that the "Don Juan" sank within ten (10) to fifteen (15) minutes after initial contact with the "Tacloban City. While the failure of Capt. Santisteban to supervise his officers and crew in the process of abandoning the ship and his failure to avail of measures to prevent the too rapid sinking of his vessel after collision, did not cause the collision by themselves, such failures doubtless contributed materially to the consequent loss of life and, moreover, were indicative of the kind and level of diligence exercised by Capt. Santisteban in respect of his vessel and his officers and men prior to actual contact between the two (2) vessels. The officer-on-watch in the "Don Juan" admitted that he had failed to inform Capt. Santisteban not only of the "imminent danger of collision" but even of "the actual collision itself " There is also evidence that the "Don Juan" was carrying more passengers than she had been certified as allowed to carry. Under these circumstances, a presumption of gross negligence on the part of the vessel (her officers and crew) and of its ship-owner arises. NEGROS NAVIGATION CO. vs. CA

Facts: Private respondent Ramon Miranda purchased from the Negros Navigation Co., Inc. four special cabin tickets for his wife, daughter, son and niece who were going to Bacolod City to attend a family reunion boarding the Don Juan. 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. Issue: Whether or not the petitioners exercised the extraordinary diligence required? Held: No. As with the Mecenas case, 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. Also, the duty to exercise due diligence includes the duty to take passengers or cargoes that are within the carrying capacity of the vessel. KOREAN AIRLINES CO. vs. CA Facts: Juanito C. Lapuz, an automotive electrician, was contracted for employment in Jeddah, Saudi Arabia. Lapuz was supposed to leave via Korean Airlines. Initially, he was "wait-listed," 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. As he was about to board the said airline 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 2week period and so lost his employment. Issue: Carriage? Whether or not KAL committed a breach of the Contract of

Held: Yes. 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. 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. 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. FORTUNE EXPRESS vs. CA Facts: Petitioner is a bus company in northern Mindanao. A bus of petitioner figured in an accident with a jeepney in Kauswagan, Lanao del Norte, resulting in the death of several passengers of the jeepney, including two Maranaos. The Constabulary officer found out that certain Maranaos were planning to take revenge on the petitioner by burning some of its buses. On November 22, 1989, three armed Maranaos who pretended to be passengers, seized a bus of petitioner at Linamon, Lanao del Norte while on its way to Iligan City. They started pouring gasoline inside the bus, as the other held the passenger at bay with a handgun then ordered the passenger to get off the bus. A passenger Atty. Caorong pleaded with the Maranaos to spare the bus driver but the Maranaos shot him. Issue: Whether or not the petitioners were guilty of a breach of the contract of carriage? Held: Yes, Art. 1763 of the Civil Code provides that a common carrier is responsible for injuries suffered by a passenger on account of wilfull acts of other passengers, if the employees of the common carrier could have prevented the act through the exercise of the diligence of a good father of a family. In the present case, it is clear that because of the negligence of petitioner's employees, the seizure of the bus by Mananggolo and his men was made possible. Despite warning by the Philippine Constabulary at Cagayan de Oro that the Maranaos were planning to take revenge on the petitioner by burning some of its buses and the assurance of petitioner's operation manager, Diosdado Bravo, that the necessary precautions would be taken, petitioner did nothing to protect the safety of its passengers. Had petitioner and its employees been vigilant they would not have failed to see that the malefactors had a large quantity of gasoline with them. Under the circumstances, simple precautionary measures to protect the safety of passengers, such as frisking passengers and inspecting their baggages, preferably with non-intrusive gadgets such as metal detectors, before allowing them on board could have been employed without violating the passenger's constitutional rights. The acts of Maranaos could not be considered as caso fortuito because there was already a warning by the PC.

No contributory negligence could be attributed to the deceased. The assailant's motive was to retaliate for the loss of life of two Maranaos as a result of the collision between petitioner's bus and the jeepney in which the two Maranaos were riding. The armed men actually allowed deceased to retrieve something from the bus. What apparently angered them was his attempt to help the driver of the bus by pleading for his life. GATCHALIAN vs. DELIM Facts: Petitioner Reynalda Gatchalian boarded respondent's mini bus. While the bus was running along the highway in Barrio Payocpoc, Bauang, Union, "a snapping sound" was suddenly heard at one part of the bus and, shortly thereafter, the vehicle bumped a cement flower pot on the side of the road, went off the road, turned turtle and fell into a ditch as a result petitioner sustained injuries. As she and several others were confined in a hospital, respondent Delim paid for the hospitalization expenses and had the passengers sign a waiver stating that they were no longer interested to file a complaint. Notwithstanding this document, petitioner Gathalian filed a complaint. Issue: Whether or not the private respondent were negligent.

Held: The record yields affirmative evidence of fault or negligence on the part of respondent common carrier. The driver did not stop to check if anything had gone wrong with the bus when the snapping sound was heard and made known to him by the passengers, instead told them that it was normal. The driver's reply necessarily indicated that the same "snapping sound" had been heard in the bus on previous occasions. This could only mean that the bus had not been checked physically or mechanically to determine what was causing the "snapping sound" which had occurred so frequently that the driver had gotten accustomed to it. Such a sound is obviously alien to a motor vehicle in good operating condition, and even a modicum of concern for life and limb of passengers dictated that the bus be checked and repaired. The obvious continued failure of respondent to look after the roadworthiness and safety of the bus, coupled with the driver's refusal or neglect to stop the mini-bus after he had heard once again the "snapping sound" and the cry of alarm from one of the passengers, constituted wanton disregard of the physical safety of the passengers, and hence gross negligence on the part of respondent and his driver. Because what is involved here is the liability of a common carrier for injuries sustained by passengers in respect of whose safety a common carrier must exercise extraordinary diligence, we must construe any such purported waiver most strictly against the common carrier. For a waiver to be valid and effective, it must not be contrary to law, morals, public policy or good customs. A cursory examination of the purported waiver will readily show that appellees did not actually waive their right to claim damages from appellant for the latter's failure to comply with their contract of carriage. All that said document proves

is that they expressed a "desire" to make the waiver which obviously is not the same as making an actual waiver of their right. A waiver of the kind invoked by appellant must be clear and unequivocal. A person is entitled to the physical integrity of his or her body; if that integrity is violated or diminished, actual injury is suffered for which actual or compensatory damages are due and assessable. Petitioner Gatchalian is entitled to be placed as nearly as possible in the condition that she was before mishap. A scar, especially one on the face of the woman, resulting from the infliction of injury upon her, is a violation of bodily integrity, giving raise to a legitimate claim for restoration to her condition ante. DEL CASTILLO vs. JAYMALIN Facts: Mario del Castillo, a deaf-mute, son of plaintiff Severo del Castillo boarded a bus of private respondent bus line. Upon alighting from the bus, he fell and died as a result. Respondents contend that the proximate cause of Mario's death was his recklessness and gross negligence in jumping out of the bus while in motion. Issue: Whether or not respondents exercised extraordinary diligence.

Held: No, common carriers are responsible for the death of their passengers (Articles 1764 and 2206 of the Civil Code). This liability includes the loss of the earning capacity of the deceased. It appears proven that the defendant corporations failed to exercise the diligence that was their duty to observe according to Articles 1733 and 1755. The conductor was apprised of the fact that Mario del Castillo was deaf and dumb. With this knowledge the conductor should have taken extra-ordinary care for the safety of the said passenger. In this he failed. PHILIPPINE RABBIT BUS LINES vs. IAC Facts: Catalina Pascua with several others boarded the jeep owned by spouses Isidro Mangune and Guillerma Carreon and driven by Tranquilino Manalo bound for Carmen, Rosales, Pangasinan. Upon reaching Tarlac the right rear wheel of the jeepney was detached, so it was running in an unbalanced position. Manalo stepped on the brake, as a result of which, the jeepney which was then running on the eastern lane (its right of way) made a U-turn, invading and eventually stopping on the western lane and was hit by the petitioner companys bus causing the death of Catalina Pascua and two other passengers. Issue: Wether or not the Doctrine of Last Clear Chance applies in the case at bar?

Held: No, The principle about "the last clear" chance, would call for application in a suit between the owners and drivers of the two colliding vehicles. It does not arise where a passenger demands responsibility from the carrier to enforce its contractual obligations. For it would be inequitable to exempt the negligent driver of the jeepney and its owners on the ground that the other driver was likewise guilty of negligence." It is the rule under the substantial factor test that if the actor's conduct is a substantial factor in bringing about harm to another, the fact that the actor neither foresaw nor should have foreseen the extent of the harm or the manner in which it occurred does not prevent him from being liable. The bus driver's conduct is not a substantial factor in bringing about harm to the passengers of the jeepney. It cannot be said that the bus was travelling at a fast speed when the accident occurred because the speed of 80 to 90 kilometers per hour, assuming such calculation to be correct, is yet within the speed limit allowed in highways. The driver cannot be held jointly and severally liable with the carrier in case of breach of the contract of carriage. The rationale behind this is readily discernible. Firstly, the contract of carriage is between the carrier and the passenger, and in the event of contractual liability, the carrier is exclusively responsible therefore to the passenger, even if such breach be due to the negligence of his driver. In other words, the carrier can neither shift his liability on the contract to his driver nor share it with him, for his driver's negligence is his. Secondly, if We make the driver jointly and severally liable with the carrier, that would make the carrier's liability personal instead of merely vicarious and consequently, entitled to recover only the share which corresponds to the driver, contradictory to the explicit provision of Article 2181 of the New Civil Code. BUSTAMANTE vs. CA Facts: A collision occurred between a gravel and sand truck, and a Mazda passenger bus along the national road at Calibuyo, Tanza, Cavite. The front left side portion (barandilla) of the body of the truck sideswiped the left side wall of the passenger bus, ripping off the said wall from the driver's seat to the last rear seat. Due to the impact, several passengers of the bus were thrown out and died as a result of the injuries they sustained, Among those killed were Rogelio Bustamante and his spouse and children, and several others. During the incident, the cargo truck was driven by defendant Montesiano and owned by defendant Del Pilar; while the passenger bus was driven by defendant Susulin. The vehicle was registered in the name of defendant Novelo but was owned and/or operated as a passenger bus jointly by defendants Magtibay and Serrado, under a franchise, with a line from Naic, Cavite, to Baclaran, Paranaque, Metro Manila, and vice versa, which Novelo sold to Magtibay on November 8, 1981, and which the latter transferred to Serrado (Cerrado) on January 18, 1983.

After a careful perusal of the circumstances of the case, the trial court reached the conclusion "that the negligent acts of both drivers contributed to or combined with each other in directly causing the accident which led to the death of the aforementioned persons. It could not be determined from the evidence that it was only the negligent act of one of them which was the proximate cause of the collision. In view of this, the liability of the two drivers for their negligence must be solidary. From said decision, only defendants Federico del Pilar and Edilberto Montesiano, owner and driver, respectively, of the sand and gravel truck have interposed an appeal before the respondent Court of Appeals, which set aside the trial courts decision. Hence the present petition. Issue: Whether the respondent court has properly and legally applied the doctrine of "last clear chance" in the present case despite its own finding that appellant cargo truck driver Edilberto Montesiano was admittedly negligent in driving his cargo truck very fast on a descending road and in the presence of the bus driver coming from the opposite direction. Held: The respondent court adopted the doctrine of "last clear chance." The doctrine, stated broadly, is that the negligence of the plaintiff does not preclude a recovery for the negligence of the defendant where it appears that the defendant, by exercising reasonable care and prudence, might have avoided injurious consequences to the plaintiff notwithstanding the plaintiff's negligence. In other words, the doctrine of last clear chance means that even though a person's own acts may have placed him in a position of peril, and an injury results, the injured person is entitled to recovery. As the doctrine is usually stated, a person who has the last clear chance or opportunity of avoiding an accident, notwithstanding the negligent acts of his opponent or that of a third person imputed to the opponent is considered in law solely responsible for the consequences of the accident. (Sangco, Torts and Damages, 4th Ed., 1986, p. 165). The practical import of the doctrine is that a negligent defendant is held liable to a negligent plaintiff, or even to a plaintiff who has been grossly negligent in placing himself in peril, if he, aware of the plaintiffs peril, or according to some authorities, should have been aware of it in the reasonable exercise of due case, had in fact an opportunity later than that of the plaintiff to avoid an accident (57 Am. Jur., 2d, pp. 798-799). All premises considered, the Court is convinced that the respondent Court committed an error of law in applying the doctrine of last clear chance as between the defendants, since the case at bar is not a suit between the owners and drivers of the colliding vehicles but a suit brought by the heirs of the deceased passengers against both owners and drivers of the colliding vehicles. Therefore, the respondent court erred in absolving the owner and driver of the cargo truck from liability. LARA vs. VALENCIA

Facts: The deceased was an inspector of the Bureau of Forestry stationed in Davao. The defendant is engaged in the business of exporting logs from his lumber concession in Cotabato. Lara went to said concession upon instructions of his chief to classify the logs of defendant which were about to be loaded on a ship anchored in the port of Parang. Lara boarded with several others a pick-up bound for Davao and were seated at the back on an improvised bench. Lara accidentally fell from the pick-up and as a result he suffered serious injuries which lead to his death. Issue: Whether or not the respondent failed to exercise the ordinary diligence required? Held: Yes. The owner and driver of a vehicle owes to accommodation passengers or invited guests merely the duty to exercise reasonable care so that they may be transported safely to their destination. Thus, "The rule is established by weight of authority that the owner or operator of an automobile owes the duty to an invited guest to exercise reasonable care in its operation, and not unreasonably to expose him to danger and injury by increasing the hazard of travel. The owner of the vehicle in the case at bar is only required to observe ordinary care, and is not in duty bound to exercise extraordinary diligence as required by our law. A passenger must observe the diligence of a father of a family to avoid injury to himself which means that if the injury to the passenger has been proximately caused by his own negligence, the carrier cannot be held liable.

NECESSITO vs. PARAS Facts: Severina Garces and her one-year old son boarded passenger auto truck of the Philippine Rabbit Bus Lines. The truck entered a wooden bridge, but the front wheels swerved to the right; the driver lost control, and after wrecking the bridge's wooden rails, the truck fell on its right side into a creek where water was breast deep. The mother, Severina Garces, was drowned; the son,the truck fell on its right side into a creek where water was breast deep. The mother, Severina Garces, was drowned; the son sustained injuries. Issue: Whether or not the carrier is liable Held: While the carrier is not an insurer of the safety of the passengers, it should nevertheless be held to answer for the laws its equipment if such flaws were at all discoverable. In this connection, the manufacturer of the defective appliance is considered in law the agent of the carrier, and the good repute of the manufacturer will not relieve the carrier from liability. The rationale of the

carrier's liability is the fact that the passenger has no privity with the manufacturer of the defective equipment; hence, he has no remedy against him, while the carrier usually has. JAPAN AIRLINES vs. CA Facts: Private respondents boarded the JAL flights to Manila with a stop over at Narita Japan at the airlines' expense. Upon arrival at Narita private respondents were billeted at Hotel Nikko Narita for the night. The next day, private respondents went to the airport to take their flight to Manila. However, due to the Mt. Pinatubo eruption rendered NAIA inaccessible to airline traffic. Hence, private respondents' trip to Manila was cancelled indefinitely. JAL then booked another flight fort the passengers and again answered for the hotel accommodations but still the succeeding flights were cancelled. Issue: Whether or not JAL was obligated accommodation expenses due to the force majeure. to answer for the

Held: No, there is no question that when a party is unable to fulfill his obligation because of "force majeure," the general rule is that he cannot be held liable for damages for non-performance. Corollarily, when JAL was prevented from resuming its flight to Manila due to the effects of Mt. Pinatubo eruption, whatever losses or damages in the form of hotel and meal expenses the stranded passengers incurred, cannot be charged to JAL. Yet it is undeniable that JAL assumed the hotel expenses of respondents for their unexpected overnight stay on June 15, 1991. It has been held that airline passengers must take such risks incident to the mode of travel. In this regard, adverse weather conditions or extreme climatic changes are some of the perils involved in air travel, the consequences of which the passenger must assume or expect. While JAL was no longer required to defray private respondents' living expenses during their stay in Narita on account of the fortuitous event, JAL had the duty to make the necessary arrangements to transport private respondents on the first available connecting flight to Manila. Petitioner JAL reneged on its obligation to look after the comfort and convenience of its passengers when it declassified private respondents from "transit passengers" to "new passengers" as a result of which private respondents were obliged to make the necessary arrangements themselves for the next flight to Manila.

LAYUGAN vs. IAC Facts: Pedro T. Layugan filed an action for damages against Godofredo Isidro, alleging that while at Baretbet, Bagabag, Nueva Vizcaya, the Plaintiff and a companion were repairing the tire of their cargo truck which was parked along the right side of the National Highway; that defendant's truck, driven recklessly

by Daniel Serrano bumped the plaintiff, that as a result, plaintiff was injured and hospitalized. Defendant countered that the plaintiff was merely a bystander, not a truck helper being a brother-in-law of the driver of said truck and hence must suffer the damages. The trial court decided in favor of the plaintiff, which was reversed by the CA, hence the present petition. Issue: W/N defendant is absolved by virtue of the doctrine of res ipsa loquitur. Held: No. Res ipsa loquitur is a doctrine which states thus: "Where the thing which causes injury is shown to be under the management of the defendant, and the accident is such as in the ordinary course of things does not happen if those who have the management use proper care, it affords reasonable evidence, in the absence of an explanation by the defendant, that the accident arose from want of care. It is clear that the driver did not know his responsibilities because he apparently did not check his vehicle before he took it on the road. If he did he could have discovered earlier that the brake fluid pipe on the right was cut, and could have repaired it and thus the accident could have been avoided. Moreover, to our mind, the fact that the private respondent used to instruct his driver to be careful in his driving, that the driver was licensed, and the fact that he had no record of any accident, as found by the respondent court, are not sufficient to destroy the finding of negligence of the Regional Trial Court given the facts established at the trial The private respondent or his mechanic, who must be competent, should have conducted a thorough inspection of his vehicle before allowing his driver to drive it. In the light of the circumstances obtaining in the case, we hold that Isidro failed to prove that the diligence of a good father of a family in the supervision of his employees which would exculpate him from solidary liability with his driver to the petitioner. Respondent Isidro posits that any immobile object along the highway, like a parked truck, poses serious danger to a moving vehicle which has the right to be on the highway. He argues that since the parked cargo truck in this case was a threat to life and limb and property, it was incumbent upon the driver as well as the petitioner, who claims to be a helper of the truck driver, to exercise extreme care so that the motorist negotiating the road would be properly forewarned of the peril of a parked vehicle. Isidro submits that the burden of proving that care and diligence were observed is shifted to the petitioner, for, as previously claimed, his (Isidro's) Isuzu truck had a right to be on the road, while the immobile cargo truck had no business, so to speak, to be there. Likewise, Isidro proffers that the petitioner must show to the satisfaction of a reasonable mind that the driver and he (petitioner) himself, provided an early warning device, like that required by law, or, by some other adequate means that would properly forewarn vehicles of the impending danger that the parked vehicle posed considering the time, place, and other peculiar circumstances of the occasion. Absent such proof of care, as in the case at bar, Isidro concludes, would, under the doctrine of Res ipsa loquitur, evoke the presumption of negligence on the part of the driver of the parked cargo truck as well as his helper, the petitioner herein, who was fixing the flat tire of the said truck.

Respondent Isidro's contention is untenable. LA MALLORCA vs. DE JESUS Facts: Plaintiffs husband and wife, together with their minor children, boarded a La Mallorca bus. Upon arrival at their destination, plaintiffs and their children alighted from the bus and the father led them to a shaded spot about 5 meters away from the vehicle. The father returned to the bus to get a piece of baggage which was not unloaded. He was followed by her daughter Raquel. While the father was still on the running board awaiting for the conductor to give his baggage, the bus started to run so that the father had to jump. Raquel, who was near the bus, was run over and killed. The Lower Court rendered judgment for the plaintiff which was affirmed by CA, holding La Mallorca liable for quasi-delict. La Mallorca contended that when the child was killed, she was no longer a passenger and therefore the contract of carriage had terminated. Issue: Whether or not the deceased is considered to be still a passenger of the bus to which the petitioner could be held liable. Held: Yes. It is a recognized rule that the relation between carrier and passengers does not cease at the moment the passenger alights from the carriers premises, to be determined from the circumstances. In this case, there was no utmost diligence. Firstly, the driver, although stopping the bus, did not put off the engine. Secondly, he started to run the bus even before the bus conductor gave him the signal and while the latter was unloading cargo. Here the presence of said passengers near the bus was not unreasonable and the duration of responsibility still exists. ABOITIZ SHIPPING CORPORATION vs. CA Facts: Anacleto Viana boarded the vessel owned by defendant ABOITIZ, at the port at San Jose, Occidental Mindoro, bound for Manila. Said vessel arrived at Pier 4, North Harbor, Manila, and the passengers therein disembarked, a gangplank having been provided connecting the side of the vessel to the pier. Instead of using said gangplank Anacleto Viana disembarked on the third deck which was on the level with the pier. After said vessel had landed, the Pioneer Stevedoring Corporation took over the exclusive control of the cargoes loaded on said vessel pursuant to the Memorandum of Agreement between the third party defendant Pioneer Stevedoring Corporation and defendant Aboitiz. The crane owned by the third party defendant and operated by its crane operator Alejo Figueroa was placed alongside the vessel and one hour after the passengers of said vessel had disembarked, it started operation by unloading the cargoes from said vessel. While the crane was being operated, Anacleto Viana who had already disembarked from said vessel obviously remembering that some of his cargoes were still loaded in the vessel, went back to the vessel, and it was while he was pointing to the crew of the said vessel to the

place where his cargoes were loaded that the crane hit him, pinning him between the side of the vessel and the crane. He was thereafter brought to the hospital where he later died. Private respondents Vianas filed a complaint for damages against Aboitiz for breach of contract of carriage. Aboitiz denied responsibility contending that at the time of the accident, the vessel was completely under the control of Pioneer as the which handled the unloading of cargoes from the vessel of Aboitiz. It is also averred that since the crane operator was not an employee of Aboitiz, the latter cannot be held liable under the fellow-servant rule. Judgment is rendered in favor of the plantiffs. The trial court absolved Pioneer from liability for failure of the Vianas and Aboitiz to preponderantly established a case of negligence against the crane operator which the court ruled is never presumed. Aboitiz appealed the same to respondent Court of Appeals which affirmed the findings of of the trial court except as to the amount of damages awarded to the Vianas. Hence the instant petition. Issue: Whether or not the responsibility of Aboitiz to the victim ceased when it disembarked from the vessel. Held: No. The rule is that the relation of carrier and passenger continues until the passenger has been landed at the port of destination and has left the vessel owner's dock or premises. Once created, the relationship will not ordinarily terminate until the passenger has, after reaching his destination, safely alighted from the carrier's conveyance or had a reasonable opportunity to leave the carrier's premises. All persons who remain on the premises a reasonable time after leaving the conveyance are to be deemed passengers, and what is a reasonable time or a reasonable delay within this rule is to be determined from all the circumstances, and includes a reasonable time to see after his baggage and prepare for his departure. The carrier-passenger relationship is not terminated merely by the fact that the person transported has been carried to his destination if, for example, such person remains in the carrier's premises to claim his baggage. When the accident occurred, the victim was in the act of unloading his cargoes, which he had every right to do, from petitioner's vessel. Even if he had already disembarked an hour earlier, his presence in petitioner's premises was not without cause. The victim had to claim his baggage which was possible only one hour after the vessel arrived since it was admittedly standard procedure in the case of petitioner's vessels that the unloading operations shall start only after that time. Consequently, under the foregoing circumstances, the victim Anacleto Viana is still deemed a passenger of said carrier at the time of his tragic death. As found by the Court of Appeals, the evidence does not show that there was a cordon of drums around the perimeter of the crane, as claimed by petitioner. It also adverted to the fact that the alleged presence of visible warning signs in the vicinity was disputable and not indubitably established. Thus, we are not inclined to accept petitioner's explanation that the victim and other passengers were sufficiently warned that merely venturing into the area in question was fraught with serious peril. Hence, Aboitiz is negligent. Pioneer had taken the necessary safeguards insofar as its unloading operations were

concerned, a fact which appears to have been accepted by the plaintiff therein by not impleading Pioneer as a defendant, and likewise inceptively by Aboitiz by filing its third-party complaint only after ten months from the institution of the suit against it. Parenthetically, Pioneer is not within the ambit of the rule on extraordinary diligence required of, and the corresponding presumption of negligence foisted on, common carriers like Aboitiz. MALLARI SR. vs. CA Facts: 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 along the National Highway in Barangay San Pablo, Dinalupihan, Bataan. 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. The widow of the victim, filed a complaint for damages against petitioners and also against BULLETIN, its driver Felix Angeles, and the N.V. Netherlands Insurance Company. 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 held that BULLETIN and Felix Angeles are jointly and severally liable. 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. Hence this petition. Issue: Whether or not petitioners are negligent. Held: Yes. The Court of Appeals correctly found, that the collision occurred immediately after petitioner Mallari Jr. overtook a vehicle in front of it while traversing a curve on the highway. 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.
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. When 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. 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 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. 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. BAYASEN vs. CA Facts: Petitioner was charged of Homicide Thru Reckless Imprudence, being then the driver and person in-charge of Rural health Unit Jeep, drove along Suyo Municipal Road, Sagada, Mountain Province in a negligent, careless and imprudent manner. Said jeep fell over a precipice in the abovementioned place causing thereby the death of Elena Awichen. After trial, the petitioner was

found guilty of the charge. The decision was affirmed in CA, hence the instant petition. Issue: Whether or not petitioner is entitled to acquittal on the ground that the finding of the Court of Appeals that the proximate cause of the death of Awichen was the petitioner's "negligence in driving at an unreasonable speed" is openly contrary to the evidence of the prosecution. Held: Yes. It is obvious that the proximate cause of the tragedy was the skidding of the rear wheels of the jeep and not the "unreasonable speed" of the petitioner because there is no evidence on record to prove or support the finding that the petitioner was driving at "an unreasonable speed". It is a well known physical tact that cars may skid on greasy or slippery roads, as in the instant case, without fault on account of the manner of handling the car. Skidding means partial or complete loss of control of the car under circumstances not necessarily implying negligence. It may occur without fault. No negligence as a matter of law can, therefore, be charged to the petitioner. In fact, the moment he felt that the rear wheels of the jeep skidded, he promptly drove it to the left hand side of the road, parallel to the slope of the mountain, because as he said, he wanted to play safe and avoid the embankment. Under the particular circumstances of the instant case, the petitionerdriver who skidded could not be regarded as negligent, the skidding being an unforeseen event, so that the petitioner had a valid excuse for his departure from his regular course. The negligence of the petitioner not having been sufficiently established, his guilt of the crime charged has not been proven beyond reasonable doubt. He is, therefore, entitled to acquittal. CERVANTES vs. CA Facts: PAL issued to the petitioner a round trip plane ticket for ManilaHonolulu-Los Angeles-Honolulu-Manila, which ticket expressly provided an expiry of date of one year from issuance, i.e., until March 27, 1990. On March 23, 1990, four days before the expiry date of subject ticket, the petitioner used it. Upon his arrival in Los Angeles on the same day, he immediately booked his Los Angeles-Manila return ticket with the PAL office, and it was confirmed for the April 2, 1990 flight. Upon learning that the same PAL plane would make a stop-over in San Francisco, and considering that he would be there on April 2, 1990, petitioner made arrangements with PAL for him to board the flight In San Francisco instead of boarding in Los Angeles. On April 2, 1990, when the petitioner checked in at the PAL counter in San Francisco, he was not allowed to board. The PAL personnel concerned marked the following notation on his ticket: "TICKET NOT ACCEPTED DUE EXPIRATION OF VALIDITY." Petitioner Cervantes filed a Complaint for Damages, for breach of contract of carriage. But the said complaint was dismissed for lack of merit. On appeal, the lower courts decision was upheld, hence the instant petition.

Issue: Whether or not the act of the PAL agents in confirming subject ticket extended the period of validity of petitioner's ticket. Held: No. Since the PAL agents are not privy to the said Agreement and petitioner knew that a written request to the legal counsel of PAL was necessary, he cannot use what the PAL agents did to his advantage. The said agents, according to the Court of Appeals, acted without authority when they confirmed the flights of the petitioner. Under Article 1989 of the New Civil Code, the acts an agent beyond the scope of his authority do not bind the principal, unless the latter ratifies the same expressly or impliedly. Furthermore, when the third person (herein petitioner) knows that the agent was acting beyond his power or authority, the principal cannot be held liable for the acts of the agent. If the said third person is aware of such limits of authority, he is to blame, and is not entitled to recover damages from the agent, unless the latter undertook to secure the principal's ratification. In awarding moral damages for breach of contract of carriage, the breach must be wanton and deliberately injurious or the one responsible acted fraudulently or with malice or bad faith. Petitioner knew there was a strong possibility that he could not use the subject ticket, so much so that he bought a back-up ticket to ensure his departure. Should there be a finding of bad faith, we are of the opinion that it should be on the petitioner. What the employees of PAL did was one of simple negligence. No injury resulted on the part of petitioner because he had a back-up ticket should PAL refuse to accommodate him with the use of subject ticket. Neither can the claim for exemplary damages be upheld. Such kind of damages is imposed by way of example or correction for the public good, and the existence of bad faith is established. CALALAS vs. CA Facts: Private respondent Eliza Sunga, then a college freshman majoring in Physical Education at the Siliman University, took a passenger jeepney owned and operated by petitioner Vicente Calalas. As the jeepney was filled to capacity of about 24 passengers, Sunga was given by the conductor an "extension seat," a wooden stool at the back of the door at the rear end of the vehicle. On the way to Poblacion Sibulan, Negros Occidental, the jeepney stopped to let a passenger off. As she was seated at the rear of the vehicle, Sunga gave way to the outgoing passenger. Just as she was doing so, an Isuzu truck driven by Iglecerio Verena and owned by Francisco Salva bumped the left rear portion of the jeepney. As a result, Sunga was injured. Sunga filed a complaint for damages against Calalas, alleging violation of the contract of carriage by the former in failing to exercise the diligence required of him as a common carrier. Calalas, on the other hand, filed a third-party complaint against Francisco Salva, the owner of the Isuzu truck. The lower court rendered judgment against Salva as third-party defendant and absolved Calalas of liability, holding that it was the driver of the Isuzu truck who was responsible for the accident. It took cognizance of another case (Civil Case No. 3490), filed by Calalas against Salva and Verena, for quasidelict, in which the same court held Salva and his driver Verena jointly liable to

Calalas for the damage to his jeepney. On appeal to the Court of Appeals, the ruling of the lower court was reversed on the ground that Sunga's cause of action was based on a contract of carriage, not quasi-delict, and that the common carrier failed to exercise the diligence required under the Civil Code. The appellate court dismissed the third-party complaint against Salva and adjudged Calalas liable for damages to Sunga. Hence, this petition. Petitioner contends that the ruling in Civil Case No. 3490 that the negligence of Verena was the proximate cause of the accident negates his liability and that to rule otherwise would be to make the common carrier an insurer of the safety of its passengers. He contends that the bumping of the jeepney by the truck owned by Salva was a caso fortuito. Petitioner further assails the award of moral damages to Sunga on the ground that it is not supported by evidence. Issue: Should be petitioner be absolved if his contentions are considered? Held: No. There is no basis for the contention that the ruling in Civil Case No. 3490, finding Salva and his driver Verena liable for the damage to petitioner's jeepney, should be binding on Sunga. It is immaterial that the proximate cause of the collision between the jeepney and the truck was the negligence of the truck driver. The doctrine of proximate cause is applicable only in actions for quasi-delict, not in actions involving breach of contract. The doctrine is a device for imputing liability to a person where there is no relation between him and another party. In such a case, the obligation is created by law itself. But, where there is a pre-existing contractual relation between the parties, it is the parties themselves who create the obligation, and the function of the law is merely to regulate the relation thus created. Insofar as contracts of carriage are concerned, some aspects regulated by the Civil Code are those respecting the diligence required of common carriers with regard to the safety of passengers as well as the presumption of negligence in cases of death or injury to passengers. In quasi-delict, the negligence or fault should be clearly established because it is the basis of the action, whereas in breach of contract, the action can be prosecuted merely by proving the existence of the contract and the fact that the obligor, in this case the common carrier, failed to transport his passenger safely to his destination. In case of death or injuries to passengers, Art. 1756 of the Civil Code provides that common carriers are presumed to have been at fault or to have acted negligently unless they prove that they observed extraordinary diligence as defined in Arts. 1733 and 1755 of the Code. This provision necessarily shifts to the common carrier the burden of proof. Now, did the driver of jeepney carry Sunga "safely as far as human care and foresight could provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances" as required by Art. 1755? We do not think so. First, the jeepney was not properly parked, its rear portion being exposed about two meters from the broad shoulders of the highway, and facing the middle of the highway in a diagonal angle. The petitioner's driver took in more passengers than the allowed seating capacity of the jeepney. These are violations of the Land Transportation and Traffic Code. Petitioner

should have foreseen the danger of parking his jeepney with its body protruding two meters into the highway. As a general rule, moral damages are not recoverable in actions for damages predicated on a breach of contract for it is not one of the items enumerated under Art. 2219 of the Civil Code. As an exception, such damages are recoverable: (1) in cases in which the mishap results in the death of a passenger, as provided in Art. 1764, in relation to Art. 2206(3) of the Civil Code; and (2) in the cases in which the carrier is guilty of fraud or bad faith, as provided in Art. 2220.In this case, there is no legal basis for awarding moral damages since there was no factual finding by the appellate court that petitioner acted in bad faith in the performance of the contract of carriage. PESTAO vs. SUMAYANG Facts: Ananias Sumayang was riding a motorcycle along the national highway in Ilihan, Tabagon, Cebu. Riding with him was his friend Manuel Romagos. As they came upon a junction where the highway connected with the road leading to Tabagon, they were hit by a passenger bus driven by Pestao and owned by Metro Cebu which had tried to overtake them, sending the motorcycle and its passengers hurtling upon the pavement. Apart from the institution of criminal charges against Pestao, Respondent-heirs, filed this civil action for damages against petitioners. The cases were consolidated. The lower court found petitioners liable. Said decision was affirmed by CA, hence this petition. Issue: Whether or not petitioner Pestao was negligent Held: Yes. Petitioners contend that Pestao was not under any obligation to slow down when he overtook the motorcycle, because the deceased had given way to him upon hearing the bus horn. Seeing that the left side of the road was clearly visible and free of oncoming traffic, Pestao accelerated his speed to pass the motorcycle. Having given way to the bus, the motorcycle driver should have slowed down until he had been overtaken. They further contend that the motorcycle was not in the middle of the road nearest to the junction but was on the inner lane. This explains why the damages on the bus were all on the right side - the right end of the bumper and the right portion of the radiator grill were bent and dented. SC disagreed with this contention and considered the findings of CA, based on the testimony of the witnesses, wherein, it was found out that as the two vehicles approached the junction, the victim raised his left arm to signal that he was turning left to Tabagon, but that the latter and his companion were thrown off the motorcycle after it was bumped by the overspeeding bus. As a professional driver operating a public transport bus, Pestao should have anticipated that overtaking at a junction was a perilous maneuver and should thus have exercised extreme caution. Petitioners also aver that the CA was wrong in attributing the accident to a faulty speedometer and in implying that the accident could have been avoided had this instrument been properly functioning. This contention has no factual basis. Under Articles 2180 and 2176 of the Civil Code, owners and managers are responsible for damages caused by their employees. When an

injury is caused by the negligence of a servant or an employee, the master or employer is presumed to be negligent either in the selection or in the supervision of that employee. This presumption may be overcome only by satisfactorily showing that the employer exercised the care and the diligence of a good father of a family in the selection and the supervision of its employee. GILLACO vs. MANILA RAILROAD COMPANY Facts: Lieut. Tomas Gillaco, husband of the plaintiff, was a passenger in the early morning train of the Manila Railroad Company from Calamba, Laguna to Manila. When the train reached the Paco Railroad station, Emilio Devesa, a train guard of the Manila Railroad Company happened to be in said station waiting for the same train which would take him to Tutuban Station, where he was going to report for duty. Emilio Devesa had a long standing personal grudge against Tomas Gillaco, because of this, Devesa shot Gillaco with the carbine furnished to him by the Manila Railroad Company for his use as such train guard, upon seeing him inside the train coach. Tomas died. Devesa was convicted of homicide. A complaint for damages was filed by the victims widow. Damages were awarded to the plaintiff, hence the instant petition. Appellant's contention is that, no liability attaches to it as employer of the Emilio Devesa because the crime was not committed while the slayer was in the actual performance of his ordinary duties and service and that no negligence on appellant's part was shown. Issue: Whether or not appellant could be held liable for the acts of its employee. Held: No. While a passenger is entitled to protection from personal violence by the carrier or its agents or employees, since the contract of transportation obligates the carrier to transport a passenger safely to his destination, the responsibility of the carrier extends only to those acts that the carrier could foresee or avoid through the exercise of the degree of care and diligence required of it. In the present case, the act of the train guard of the Manila Railroad Company in shooting the passenger (because of a personal grudge nurtured against the latter since the Japanese occupation) was entirely unforseeable by the Manila Railroad Co. The latter had no means to ascertain or anticipate that the two would meet, nor could it reasonably forsee every personal rancor that might exist between each one of its many employees and any one of the thousands of eventual passengers riding in its trains. The shooting in question was therefore "caso fortuito" within the definition of Art. 1105 of the old Civil Code (which is the law applicable), being both unforeseeable and inevitable under the given circumstances; and pursuant to established doctrine, the resulting breach of the company's contract of safe carriage with the deceased was excused thereby. MARANAN vs. PEREZ

Facts: Rogelio Corachea, on October 18, 1960, was a passenger in a taxicab owned and operated by Pascual Perez when he was stabbed and killed by the driver, Simeon Valenzuela. Valenzuela was prosecuted for homicide in the Court of First Instance of Batangas and was found guilty. While appeal was pending in the Court of Appeals, Antonia Maranan, Rogelio's mother, filed an action to recover damages. The court decided in plaintiffs favor. Hence the instant petition. Issue: Whether or not defendant- operators could be held liable for damages Held: Yes. Defendant-appellant relies solely on the ruling enunciated in Gillaco v. Manila Railroad Co., 97 Phil. 884, that the carrier is under no absolute liability for assaults of its employees upon the passengers. The attendant facts and controlling law of that case and the one at bar are very different however. In the Gillaco case, the passenger was killed outside the scope and the course of duty of the guilty employee. Now here, the killing was perpetrated by the driver of the very cab transporting the passenger, in whose hands the carrier had entrusted the duty of executing the contract of carriage. In other words, unlike the Gillaco case, the killing of the passenger here took place in the course of duty of the guilty employee and when the employee was acting within the scope of his duties. Moreover, the Gillaco case was decided under the provisions of the Civil Code of 1889 which, unlike the present Civil Code, did not impose upon common carriers absolute liability for the safety of passengers against wilful assaults or negligent acts committed by their employees. The death of the passenger in the Gillaco case was truly a fortuitous event which exempted the carrier from liability. The Civil Code provisions on the subject of Common Carriers are new and were taken from Anglo-American Law. There, the basis of the carrier's liability for assaults on passengers committed by its drivers rests either on (1) the doctrine of respondeat superior or (2) the principle that it is the carrier's implied duty to transport the passenger safely. Under the first, which is the minority view, the carrier is liable only when the act of the employee is within the scope of his authority and duty. It is not sufficient that the act be within the course of employment only. Under the second view, upheld by the majority and also by the later cases, it is enough that the assault happens within the course of the employee's duty. It is no defense for the carrier that the act was done in excess of authority or in disobedience of the carrier's orders. The carrier's liability here is absolute in the sense that it practically secures the passengers from assaults committed by its own employees. As can be gleaned from Art. 1759, the Civil Code of the Philippines evidently follows the rule based on the second view. At least three very cogent reasons underlie this rule. (1) the special undertaking of the carrier requires that it furnish its passenger that full measure of protection afforded by the exercise of the high degree of care prescribed by the law, inter alia from violence and insults at the hands of strangers and other passengers, but above all, from the acts of the carrier's own servants charged with the passenger's safety; (2) said liability of the carrier for the servant's violation of duty to passengers, is the result of the formers confiding in the servant's hands the

performance of his contract to safely transport the passenger, delegating therewith the duty of protecting the passenger with the utmost care prescribed by law; and (3) as between the carrier and the passenger, the former must bear the risk of wrongful acts or negligence of the carrier's employees against passengers, since it, and not the passengers, has power to select and remove them. Accordingly, it is the carrier's strict obligation to select its drivers and similar employees with due regard not only to their technical competence and physical ability, but also, no less important, to their total personality, including their patterns of behavior, moral fibers, and social attitude. Applying this stringent norm to the facts in this case, therefore, the lower court rightly adjudged the defendant carrier liable pursuant to Art. 1759 of the Civil Code. The dismissal of the claim against the defendant driver was also correct. Plaintiff's action was predicated on breach of contract of carriage7 and the cab driver was not a party thereto. His civil liability is covered in the criminal case wherein he was convicted by final judgment. PHILIPPINE NATIONAL RAILWAYS vs. CA Facts: Winifredo Tupang, husband of plaintiff, boarded a train of appellant at Libmanan, Camarines Sur, as a paying passenger bound for Manila. Due to some mechanical defect, the train stopped at Sipocot, Camarines Sur, for repairs. Unfortunately, upon passing Iyam Bridge at Lucena, Quezon, Winifredo Tupang fell off the train resulting in his death.The train did not stop despite the alarm raised by the other passengers that somebody fell from the train. Upon complaint filed by Rosario the lower court after trial, held PNR liable for damages for breach of contract of carriage. The decision was sustained by the appellate court hence the present petition, wherein PNR raised for the first time, as a defense, the doctrine of state immunity from suit. It alleged that it is a mere agency of the Philippine government without distinct or separate personality of its own, and that its funds are governmental in character and, therefore, not subject to garnishment or execution. Issue: Whether or not PNR can raise the defense of doctrine of state immunity from suit. Held: No. The PNR was created under Rep. Act 4156, as amended. Section 4 of the said Act provides: The Philippine national Railways shall have the following powers: a. To do all such other things and to transact all such business directly or indirectly necessary, incidental or conducive to the attainment of the purpose of the corporation; and b. Generally, to exercise all powers of a corporation under the Corporation Law. Under the foregoing section, the PNR has all the powers, the characteristics and attributes of a corporation under the Corporation Law. There can be no question then that the PNR may sue and be sued and may be subjected to court processes just like any other corporation.

Now, is PNR negligent? Yes. The appellate court found, the petitioner does not deny, that the train boarded by the deceased Winifredo Tupang was so over-crowded that he and many other passengers had no choice but to sit on the open platforms between the coaches of the train. It is likewise undisputed that the train did not even slow down when it approached the Iyam Bridge which was under repair at the time, Neither did the train stop, despite the alarm raised by other passengers that a person had fallen off the train at lyam Bridge. The petitioner has the obligation to transport its passengers to their destinations and to observe extraordinary diligence in doing so. Death or any injury suffered by any of its passengers gives rise to the presumption that it was negligent in the performance of its obligation under the contract of carriage. Thus, as correctly ruled by the respondent court, the petitioner failed to overthrow such presumption of negligence with clear and convincing evidence. But while petitioner failed to exercise extraordinary diligence as required by law, it appears that the deceased was chargeable with contributory negligence. Since he opted to sit on the open platform between the coaches of the train, he should have held tightly and tenaciously on the upright metal bar found at the side of said platform to avoid falling off from the speeding train. Such contributory negligence, while not exempting the PNR from liability, nevertheless justified the deletion of the amount adjudicated as moral damages and exemplary damages. Exemplary damages may be allowed only in cases where the defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. ISAAC vs. A.L. AMMEN TRANS. CO. Facts: Plaintiff boarded defendants bus as paying passenger from Albay. The bus collided with a pick-up truck which was coming from opposite direction trying to swerve from a pile of gravel. As a result, his left arm was completely severed. Plaintiff chose to hold defendant liable on its contractual obligation. Plaintiff brought an action for damages which the lower court dismissed holding the driver of the pick-up car negligent and not that of the bus. Issue: Whether or not the common carrier is liable. Held: The bus was running at a moderate speed. The driver of the bus upon the speeding pick-up truck swerved the bus to the very extreme right of the road. Said driver would not move the bus further without endangering the safety of his passengers. Notwithstanding all these efforts, the rear left side was hit. This finding of the lower court was sustained. Also, of the carriers employee is confronted with a sudden emergency, he is not held to the same degree of care he would otherwise, he required in the absence of such emergency. By placing his left arm on the window, he is guilty of contributory negligence cannot relieve the carrier but can only reduce its liability (ART. 1762), this is a circumstance which further militates against plaintiffs position. It is a prevailing rule that it is negligence per se for passengers on a railroad to protrude any part of his body and that no recovery can be had for an injury.

BACHELOR EXPRESS, vs.CA Facts: The bus owned by Petitioners came from Davao City on its way to Cagayan de Oro City passing Butuan City. While at Tabon-Tabon, Butuan City, the bus picked up a passenger, that about fifteen minutes later, a passenger at the rear portion suddenly stabbed a PC soldier which caused commotion and panic among the passengers. When the bus stopped, passengers Ornominio Beter and Narcisa Rautraut were found lying down the road, the former already dead as a result of head injuries and the latter also suffering from severe injuries which caused her death later. The passenger assailant alighted from the bus and ran toward the bushes but was killed by the police. Thereafter, the heirs of Ornominio Beter and Narcisa Rautraut, private respondents herein filed a complaint for "sum of money" against Bachelor Express, Inc., its alleged owner and the driver Rivera. The lower court dismissed the complaint. CA reversed the decision, hence the instant petition. Issue: Whether or not petitioner is negligent. Held: Yes. The liability, if any, of the petitioners is anchored on culpa contractual or breach of contract of carriage. Art. 1732, 1733, 1755 and 1756 are applicable. There is no question that Bachelor is a common carrier. Hence, Bachelor is bound to carry its passengers safely as far as human care and foresight can provide using the utmost diligence of very cautious persons, with a due regard for all the circumstances. In the case at bar, Ornominio Beter and Narcisa Rautraut were passengers of a bus belonging to Bachelor and, while passengers of the bus, suffered injuries which caused their death. Consequently, pursuant to Article 1756 of the Civil Code, Bachelor is presumed to have acted negligently unless it can prove that it had observed extraordinary diligence in accordance with Articles 1733 and 1755 of the New Civil Code. Bachelor denies liability for the death of Beter and Rautraut in that their death was caused by a third person who was beyond its control and supervision. In effect, the petitioner, in order to overcome the presumption of fault or negligence under the law, states that the vehicular incident resulting in the death of passengers Beter and Rautraut was caused by force majeure or caso fortuito over which the common carrier did not have any control. The running amuck of the passenger was the proximate cause of the incident as it triggered off a commotion and panic among the passengers such that the passengers started running to the sole exit shoving each other resulting in the falling off the bus by passengers Beter and Rautraut causing them fatal injuries. The sudden act of the passenger who stabbed another passenger in the bus is within the context of force majeure. However, in order that a common carrier may be absolved from liability in case of force majeure, it is not enough that the accident was caused by force majeure. The common carrier must still prove that it was not negligent in causing the injuries resulting from such accident. In this case, Bachelor was negligent.

Considering the factual findings of the Court of Appeals-the bus driver did not immediately stop the bus at the height of the commotion; the bus was speeding from a full stop; the victims fell from the bus door when it was opened or gave way while the bus was still running; the conductor panicked and blew his whistle after people had already fallen off the bus; and the bus was not properly equipped with doors in accordance with law-it is clear that the petitioners have failed to overcome the presumption of fault and negligence found in the law governing common carriers. The petitioners' argument that the petitioners "are not insurers of their passengers" deserves no merit in view of the failure of the petitioners to prove that the deaths of the two passengers were exclusively due to force majeure and not to the failure of the petitioners to observe extraordinary diligence in transporting safely the passengers to their destinations as warranted by law. FORTUNE EXPRESS, INC., vs.CA Facts: A bus of petitioner figured in an accident with a jeepney in Kauswagan, Lanao del Norter, resulting in the death of several passengers of the jeepney, including two Maranaos. A constabulary agent investigated and found out that the owner of the jeepney was a Maranao and that certain Maranaos were planning to take revenge on the petitioner by burning some of its buses. The operations manager of petitioner was advised to take precautionary measures. Four days after the accident, three armed Maranaos who pretended to be passengers seized a bus petitioner bound for Iligan City and set it on fire. Atty. Talib Caorong, whose heirs are private respondents herein was a passenger of the bus and was shot and killed during the incident. The private respondents brought this suit for breach of contract of carriage. Complaint was dismissed in the lower court but its decision was reversed in CA, hence the instant petition, with petitioners contention that the acts of the Maranaos is caso fortuito. Issue: Was there breach of contract of carriage? Held: Yes. Art. 1763 of the Civil Code provides that a common carrier is responsible for injuries suffered by a passenger on account of wilfull acts of other passengers, if the employees of the common carrier could have prevented the act through the exercise of the diligence of a good father of a family. In the present case, it is clear that because of the negligence of petitioner's employees, the seizure of the bus by Mananggolo and his men was made possible. Despite warning by the Philippine Constabulary at Cagayan de Oro that the Maranaos were planning to take revenge on the petitioner by burning some of its buses and the assurance of petitioner's operation manager, Diosdado Bravo, that the necessary precautions would be taken, petitioner did nothing to protect the safety of its passengers. Had petitioner and its employees been vigilant they would not have failed to see that the malefactors had a large quantity of gasoline with them. Under the circumstances, simple precautionary measures to protect the safety of passengers, such as frisking passengers and inspecting their baggages, preferably with non-intrusive gadgets such as metal

detectors, before allowing them on board could have been employed without violating the passenger's constitutional rights. Petitioner invokes the ruling in Pilapil v. Court of Appeals, and De Guzman v. Court of Appeals, in support of its contention that the seizure of its bus by the assailants constitutes force majeure. In Pilapil v. Court of Appeals, it was held that a common carrier is not liable for failing to install window grills on its buses to protect the passengers from injuries cause by rocks hurled at the bus by lawless elements. On the other hand, in De Guzman v. Court of Appeals, it was ruled that a common carriers is not responsible for goods lost as a result of a robbery which is attended by grave or irresistable threat, violence, or force. It is clear that the cases of Pilapil and De Guzman do not apply to the prensent case. Art. 1755 of the Civil Code provides that "a common carrier is bound to carry the passengers as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances." Thus, we held in Pilapil and De Guzman that the respondents therein were not negligent in failing to take special precautions against threats to the safety of passengers which could not be foreseen, such as tortious or criminal acts of third persons. In the present case, this factor of unforeseeability (the second requisite for an event to be considered force majeure) is lacking. As already stated, despite the report of PC agent Generalao that the Maranaos were planning to burn some of petitioner's buses and the assurance of petitioner's operation manager (Diosdado Bravo) that the necessary precautions would be taken, nothing was really done by petitioner to protect the safety of passengers. The petitioner contends that Atty. Caorong was guilty of contributory negligence in returning to the bus to retrieve something. But Atty. Caorong did not act recklessly. It should be pointed out that the intended targets of the violence were petitioners and its employees, not its passengers. The assailant's motive was to retaliate for the loss of life of two Maranaos as a result of the collision between petitioner's bus and the jeepney in which the two Maranaos were riding. Mananggolo, the leader of the group which had hijacked the bus, ordered the passengers to get off the bus as they intended to burn it and its driver. The armed men actually allowed Atty. Caorong to retrieve something from the bus. What apparently angered them was his attempt to help the driver of the bus by pleading for his life. He was playing the role of the good Samaritan. Certainly, this act cannot be considered an act of negligence, let alone recklessness.

III. DAMAGES A. Actual/Compensatory Damages

CARIAGA vs. LAGUNA TAYABAS BUS COMPANY

Facts: Edgardo Cariaga, a fourth-year medical student of the University of Santos Tomas was a passenger in one of the buses of LTB, when it bumped against the engine of a train passing by, when it reached that part of the Poblacion of Bay, Laguna, where the national highway crossed a railroad track. The front part of the body of the bus was wrecked, the driver of the bus died, and many passengers including Edgardo were injured. The LTB paid the sum of P16,964.45 for all the hospital, medical and miscellaneous expenses incurred from June 18, 1952 to April 1953. From January 15, 1953 up to April of the same year Edgardo stayed in a private house in Quezon City, the LTB having agreed to give him a subsistence allowance of P10.00 daily during his convalescence. The present action was filed to recover from the LTB and the MRR Co., the total sum of P312,000.00 as actual, compensatory, moral and exemplary damages, and for Edgardos parents, the sum of P18,000.00 in the same concepts. The LTB disclaimed liability claiming that the accident was due to the negligence of its co-defendant, the Manila Railroad Company, for not providing a crossing bar at the point where the national highway crossed the railway track, and for this reason filed the corresponding cross-claim against the latter company to recover the total sum of P18,194.75 representing the expenses paid to Edgardo. The Manila Railroad Company, in turn, denied liability upon the complaint and cross-claim, alleging that it was the reckless negligence of the bus driver that caused the accident. The lower court held that it was the negligence of the bus driver that caused the accident and, as a result, rendered judgment sentencing the LTB to pay Edgardo the sum of P10,490.00 as compensatory damages, with interest at the legal rate from the filing of the coinplaint, and dismissing the cross-claim against the Manila Railroad Company. From this decision the Cariagas and the LTB appealed.The Cariagas claim that the trial court erred: in awarding only P10,490.00 as compensatory damages to Edgardo; in not awarding them actual and moral damages, and in not sentencing appellant LTB to pay attorney's fees. Issue: WON petitioners are entitled to an increase in compensatory damages, and for actual and moral damages, as well as attorneys fees. Held: The findings of the trial court was sustained. Firstly, the train whistle had been sounded several times before it reached the crossing; secondly, that another LTB bus which arrived at the crossing ahead of the one where Edgardo was a passenger, paid heed to the warning and stopped before the "crossing". Upon the whole evidence on the matter, the lower court found that the removal of the right frontal lobe of the brain of Edgardo reduced his intelligence by about 50%; that due to the replacement of the right frontal bone of his head with a tantalum plate Edgardo has to lead a quite and retired life because "if the tantalum plate is pressed in or dented it would cause his death." The impression one gathers from this evidence is that, as a result of the physical injuries suffered by Edgardo Cariaga, he is now in a helpless condition, virtually an invalid, both physically and mentally. Appellant LTB admits that under Art. 2201 of the Civil Code the damages for which the obligor, guilty of a breach of contract but who acted in good faith,

is liable shall be those that are the natural and probable consequences of the breach and which the parties had foreseen or could have reasonably foreseen at the time the obligation was constituted, provided such damages, according to Art. 2199 of the same Code, have been duly proved. Upon this premise it claims that only the actual damages suffered by Edgardo consisting of medical, hospital and other expenses in the total sum of P17,719.75 are within this category. We are of the opinion however, that the income which Edgardo could earn if he should finish the medical course and pass the corresponding board examinations must be deemed to be within the same category because they could have reasonably been foreseen by the parties at the time he boarded the bus. Upon consideration of all the facts this Court is of the opinion, and so holds, that the compensatory damages awarded to petitioner should be increased to P25,000.00.The claim for moral damages and attorney's fees is denied. Article 2219 of the Civil Code enumerates the instances when moral damages may be covered and the case under consideration does not fall under any one of them. The present action cannot come under Paragraph 2 of said article because it is not one of quasi-delict and cannot be considered as such because of the pre-existing contractual relation between the Laguna LTB and Edgardo. Neither could LTB be held liable to pay moral damages under Article 2220 of the Civil Code on account of breach of its contract of carriage because it did not act fraudulently or in bad faith. LTB had exercised due diligence in the selection and supervision of its employees like the drivers of its buses in connection with the discharge of their duties and so it must be considered an obligor in good faith. Petitioner is not entitled to recover attorney's fees, because this case does not fall under any of the instances enumerated in Article 2208 of the Civil Code. VILLA REY TRANSIT, INC. vs. CA Facts: An Izuzu First Class passenger bus owned and operated by the petitioner left Lingayen, Pangasinan, for Manila. Among its paying passengers was the deceased, Policronio Quintos, Jr. When the vehicle was nearing the Sadsaran Bridge on the national highway in barrio Sto. Domingo, municipality of Minalin, Pampanga, it frontally hit the rear side of a bullcart filled with hay. As a result the end of a bamboo pole placed on top of the hayload and tied to the cart to hold it in place, hit the right side of the windshield of the bus. The protruding end of the bamboo pole, about 8 feet long from the rear of the bullcart, penetrated through the glass windshield and landed on the face of deceased, which caused several wounds. Notwithstanding the medical assistance, the Quintos died. The private respondents, brought this action against petitioner for breach of the contract of carriage to recover the aggregate sum of P63,750.00 as damages, including attorney's fees. Said petitioner contended that the mishap was due to a fortuitous event, but this pretense was rejected by the trial court and the Court of Appeals, both of which found that the accident and the death of Policronio had been due to the negligence of the bus driver. Hence the instant petition.

Issue: Did CA erred in its award of the damages to the heirs of Quintos? Held: No. Petitioner maintains that the lower courts had erred in placing the life expectancy of Quintos at 33-1/3, he being over 29 years of age at the time of his demise and in not acting in accordance with Alcantara v. Surro in which the damages were computed on a four year basis, despite the fact that the victim therein was 39 years old, at the time of his death, and had a life expectancy of 28.90 years. The case cited is not, however, controlling in the one at bar. In the Alcantara case, none of the parties had questioned the propriety of the four-year basis adopted by the trial court in making its award of damages. Both parties appealed, but only as regards the amount thereof. In addition, the case had not thereby laid down any rule on the length of time to be used in the computation of damages. It even declared that the determination of the indemnity to be awarded to the heirs of a deceased person has therefore no fixed basis. Much is left to the discretion of the court considering the moral and material damages involved, and so it has been said that there can be no exact or uniform rule for measuring the value of a human life and the measure of damages cannot be arrived at by precise mathematical calculation, but the amount recoverable depends on the particular facts and circumstances of each case. The life expectancy of the deceased or of the beneficiary, whichever is shorter, is an important factor. Thus, life expectancy is, not only relevant, but, also, an important element in fixing the amount recoverable by private respondents herein. Although it is not the sole element determinative of said amount, no cogent reason has been given to warrant its disregard and the adoption, in the case at bar, of a purely arbitrary standard, such as a four-year rule. In short, the Court of Appeals has not erred in basing the computation of petitioner's liability upon the life expectancy of Policronio Quintos, Jr. With respect to the rate at which the damages shall be computed, petitioner impugns the decision appealed from upon the ground that the damages awarded therein will have to be paid now, whereas most of those sought to be indemnified will be suffered years later. This argument is basically true, and this is, perhaps, one of the reasons why the Alcantara case points out the absence of a "fixed basis" for the ascertainment of the damages recoverable in litigations like the one at bar. Just the same, the force of the said argument of petitioner herein is offset by the fact that, although payment of the award in the case at bar will have to take place upon the finality of the decision therein, the liability of petitioner herein had been fixed at the rate only of P2,184.00 a year, which is the annual salary of Policronio Quintos, Jr. at the time of his death, as a young "training assistant" in the Bacnotan Cement Industries, Inc. In other words, unlike the Alcantara case, on which petitioner relies, the lower courts did not consider, in the present case, Policronio's potentiality and capacity to increase his future income. Indeed, upon the conclusion of his training period, he was supposed to have a better job and be promoted from time to time, and, hence, to earn more, if not considering the growing importance of trade, commerce and industry and the concomitant rise in the income level of officers and employees therein much more.

PAN AMERICAN WORLD AIRWAYS, INC. vs. IAC Facts: Private respondent Teofista P. Tinitigan, filed a complaint against petitioner for damages arising from defendant's alleged refusal to accommodate her on Pan Am Flight No. 431 from Sto. Domingo, Republica Dominica to San Juan, Puerto Rico notwithstanding the fact that she possessed a confirmed plane ticket purchased from Pan Ams Office at Sto. Domingo and thus causing her to suffer mental anguish, serious anxiety, besmirched reputation, wounded feelings and social humiliation She prayed that she be awarded moral damages of P500,000.00, exemplary damages of P200,000.00, attorney's fees of P100,000.00 and actual damages sustained by her in the amount of US$1,546.15. Defendant denied that plaintiff was a confirmed passenger since the ticket issued to her was on an open space basis which meant that she could only be accommodated if any of the confirmed passengers failed to show up at the airport before departure. The lower court rendered judgment in favor of plaintiff and awarded the amount of damages as prayed for. Said decision was affirmed hence the instant petition. Issue: Whether or not the award of damages was proper. Held: Yes, but subject to modifications. Findings of fact show that plaintiff, a businesswoman and a multimillionaire in her own right as evidenced (proprietor of Sampaguita Restaurant, New York City USA; Treasurer of the Molave Development Corp., Phil., proprietor of Cavite Household Appliances and Rowena's Handicraft, Phil.), was on a business trip with a Pan-Am ticket. While in Sto. Domingo, after talking thru the telephone with a certain Mrs. Lilibeth Warner, the former said that she (plaintiff) must be in San Juan that same day, to sign her contract or lose it. Plaintiff expected to make a profit of $1,000 in said contract but since she wasnt able to board the flight, said profit was lost. Other instances which caused moral damage to the plaintiff are the following: 1. While plaintiff was standing in line preparatory to boarding the aircraft, Rene Nolasco, a Pan Am employee ordered her in a loud voice to step out of line because her ticket was not confirmed to her consternation and embarrassment in the presence of several people who heard and order. Despite her Pleas she was not allowed to board the aircraft. And as if to add insult to injury, she saw that her seat was given to a white man. 2. When the plane took off without her but with her luggage on board. She was forced to return to her hotel without any luggage much less an extra dress. It was a good thing that the Hotel people remembered her because they do not usually accommodate female guests, without any luggage to stay in the hotel. While normally, hotel accommodation was paid before departure, plaintiff was made to pay the room accommodation petition in advance. It is clear from the evidence that defendant issued a Passenger Ticket and Baggage Check with assigned seat and the corresponding pass and baggage claim symbol. Plaintiff was made to pay the fare and terminal fee. At the immigration section, plaintiff's passport was stamped accordingly. Plaintiff's

name was included in the passenger manifest. And these show that plaintiff was indeed a confirmed passenger of defendant's Flight 431 for San Juan. There was, therefore, a contract or carriage perfected between plaintiff and defendant for the latter to take plaintiff to her place of destination. By refusing to accommodate plaintiff in said flight, defendant had willfully and knowingly violated the contract of carriage and failed to bring the plaintiff to her place of destination under its contract with plaintiff. Bad faith was also present. Self enrichment or fraternal interest and not personal ill will may have been the motive of defendant, but it is malice nevertheless. The fact that plaintiff was ordered out under some pretext in order to accommodate a white man in an airline owned by an American firm with a reputation for bumping off nonCaucasian to accommodate whites is very regrettable. Defendant having breached its contract with plaintiff in bad faith, it is not error to have awarded exemplary damages. The rational behind exemplary or corrective damages is, as the name implies, to provide an example or correction for public good . In view of it nature, it should be imposed in such amount as to sufficiently and effectively deter similar breach of contract in the future by defendant and other airlines. An award of attorney's fees is also in order, having found bad faith on the part of defendant. We believe, however the amount of some damages awarded to be exorbitant: We therefore reduce the moral and exemplary damages to the combined total sum of Two Hundred Thousand (P200,000.00) Pesos and the attorney's fees to Twenty Thousand (P20,000.00) Pesos. The award of actual damages in the amount of One Thousand Five Hundred Forty Six American dollars and fifteen cents (US$1,546.15) computed at the exchange rate prevailing at the time of payment is hereby retained and granted. GATCHALIAN vs. DELIM Facts: Reynalda Gatchalian boarded respondents minibus at a point in Aringay, La Union bound for Bauang. While the bus was running along the highway, a snapping sound was suddenly heard at one part of the bus and shortly thereafter, the vehicle bumped a cement flower pot on the side of the road, turned turtle and fell into the ditch. Upon medical examination, petitioner was found to have sustained physical injuries on the leg, arm and forehead. Issue: Is petitioner entitled to actual and compensatory damages? Held: Yes. A person is entitled to the physical integrity of his or her body; if that integrity is violated or diminished, actual injury is suffered for which actual or compensatory damages are due and assessable. Petitioner Gatchalian is entitled to be placed as nearly as possible in the condition that she was before mishap. A scar, especially one on the face of the woman, resulting from the

infliction of injury upon her, is a violation of bodily integrity, giving raise to a legitimate claim for restoration to her condition ante. In Araneta v. Areglado, 104 Phil. 529, this Court awarded actual or compensatory damages, for among other things, the surgical removal of the scar on the face of a young boy who had been injured in a vehicular collision. We consider that the amount of P15,000.00 to recover the cost of such plastic surgery is not unreasonable. SOBERANO vs. MANILA RAILROAD COMPANY Facts: Juana Soberano boarded a bus of the Benguet Auto Line (BAL), a subsidiary of the Manila Railroad Co. (MRR), driven by Santiago Caccam, bound for Baguio City. In that trip, Juana brought with her 3,024 chicken eggs to be sold in Baguio City, and some personal belongings which she needed in that trip. About three kilometers away from Baguio City, along the Naguilian road, the bus hit a stone embankment, causing it to fall into a 65-foot deep precipice, resulting in death to two of its passengers and serious physical injuries to Juana and loss and destruction of all her belongings. Juana Soberano did not intervene in the criminal case because she filed a formal reservation to institute a separate civil action for damages and indemnity against the MRR and the BAL. Because of the loss of the eggs and the destruction of the personal effects that Juana brought with her in that trip, Jose Soberano, her husband, demanded from the defendant companies the value thereof amounting to P370.66, of which sum the MRR paid P300. The MRR also paid the daily expenses, allowances, subsistence, hospitalization, medical fees and medicines of Juana Soberano, as well as the service fees of her caretaker. The MRR has paid a total sum of P4,219. Later the MRR offered to settle the case extrajudicially, tendering to the Soberanos the additional sum of P5,000. The offer was rejected, and the Soberanos filed the present action against the defendant companies and Caccam, to recover from them damages in the total sum of P76,757.76. After due trial, the lower court rendered the decision appealed from, dismissing at the same time the complaint against Caccam. The Soberanos moved to have the decision reconsidered. The motion for reconsideration was denied; hence the present recourse. Issue: Whether or not the amount of damages awarded is adequate. Held: The Soberanos initially contend that the lower court erred in disallowing their claim of P200, representing the expenses of Juana Soberano in attending as a witness in the criminal case and attorney's fees incurred in connection therewith. This claim was correctly denied by the lower court, because these expenses were properly taxable in the criminal case. It may be argued that the Soberanos could not have recovered this sum in the criminal case because Juana Soberano expressly filed a formal reservation to institute a separate civil action for damages, but such reservation did not preserve whatever rights they had against Caccam on the basis of the latter's imprudence. The reservation is

ineffective as to Caccam as it did not include him among those against whom their rights had been reserved. And the Soberanos not having intervened in the criminal case, this claim must be considered as having been impliedly adjudicated in the criminal case, and cannot therefore be ventilated in the present action. The Soberanos next contend that the lower court erred in denying their claim for moral damages in the sum of P15,000, for the physical suffering, mental anguish, serious anxiety and fright they suffered as a consequence of the mishap. The lower court denied this claim on the strength of the oftreiterated ruling of this Court that moral damages cannot be recovered against the employer in actions based on a breach of contract of carriage in the absence of malice, fraud, or bad faith. The lower court rightly denied the claim for moral damages as far as Jose Soberano is concerned. In case of physical injuries, moral damages are recoverable only by the party injured and not by his next of kin, unless there is express statutory provision to the contrary. In this case it was Juana Soberano, not her husband Jose, who sustained the bodily injuries. The claim for attorney's fees was also properly denied by the lower court. The Soberanos aver that they were obliged to file a separate civil action for damages against the defendant companies. This claim is predicated upon paragraphs (2) and (5) of article 2208 of the New Civil Code, which provide that attorney's fees and expenses of litigation may be recovered when the defendant's act or omission has compelled the plaintiff to litigate with third persons or incur expenses to protect his interest, or when the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly valid, just and demandable claim. It will be observed that the defendant companies offered to settle the case by offering to the Soberanos the additional sum of P5,000. The Soberanos, however, rejected the offer and proceeded to court to recover damages in the total sum of P76,757.76. It was not, therefore, the defendant companies that compelled the Soberanos to litigate, or to incur expenses in connection with the litigation instituted by them. Lastly, the nature and extent of the physical injuries suffered by Juana Soberano has the effect of making her live an abnormal life. Considering all the facts this Court is of the opinion that the sum of P5,000 in compensatory damages awarded to her for loss of earning capacity is inadequate; the amount should be increased to P15,000. She should also be awarded the sum of P45.35, representing unrealized profits from the 3,024 chicken eggs which she brought with her in the trip and which were destroyed. MARCHAN vs. MENDOZA Facts: A passenger bus of the Philippine Rabbit Bus Lines which was then driven by Silverio Marchan fell into a ditch somewhere in Barrio Malanday, Polo, Bulacan, while travelling on its way to Manila. As a result of which Arsenio Mendoza, his wife and child, who were then inside the bus as passengers were thrown out to the ground resulting in their multiple injuries. Arsenio Mendoza suffered the most serious injuries which damaged his vertebrae causing the paralysis of his lower extremities. An action was brought to recover damages

against petitioners predicated not only on a breach of contract of carriage for failure to safely convey the plaintiffs to their destination, but also on account of a criminal negligence on the part of defendant driver. The lower court ruled in favor of plaintiffs. The award of P40,000.00 as compensatory damages was affirmed by CA. It however added the amount of P30,000.00 as exemplary damages and sustained the award of attorney's fees in the amount of P5,000.00. Issue: Whether or not the award of moral damages was proper. Held: Yes. The amount of P40,000.00 awarded by the court as compensatory damages is quite reasonable and fair, considering that plaintiff Arsenio Mendoza had suffered paralysis on the lower extremities, which will incapacitate him to engage in his customary occupation throughout the remaining years of his life, especially so if we take into account that plaintiff was only 26 years old when he met an accident and taking the average span of life of a Filipino, he may be expected to live for 30 years more and bearing in mind the earning capacity of Arsenio Mendoza who before the happening of this accident derived an income of almost P100.00 a month from the business of his father-in-law as Assistant Supervisor of the small fairs and his income of P100.00 a month which he derived as a professional boxer. DE CALISTON vs. CA Facts: While driving a passenger bus in Bacolod City, private respondent Geronimo Dalmacio ran over Juana Sonza Vda. de Darrocha (a USVA pensioner) who died instantly, survived by her only child, Gloria Darrocha de Caliston, the herein petitioner. Prosecuted for homicide thru reckless imprudence, Dalmacio was convicted by the Court of First Instance of Negros Occidental, sentenced to imprisonment and ordered to pay the herein petitioner P15,000.00 for the death of the victim, P5,000.00 as moral damages, P5,000.00 for burial expenses and P10,000.00 for loss of pension which the deceased had failed to receive. On appeal, the former Court of Appeals modified the CFI decision by absolving Dalmacio from the payment of the P10,000.00 for loss of pension and credited him for the amount of P5,000.00 previously paid to the herein petitioner under a vehicular insurance policy obtained by the bus owner. Issue: Whether or not the deletion of the P10,000.00 awarded for loss of pension is justified? Held: The deletion of the P10,000.00 awarded for loss of pension is unjustified. Under Article 2206 of the Civil Code: The amount of damages for death caused by a crime or quasi-delict shall be at least three thousand pesos, even though there may have been mitigating circumstances. In addition: (1) The defendant shall be liable for the loss of the earning capacity of the deceased, and the indemnity shall be paid to the heirs of the latter.

The pension of the decedent being a sure income that was cut short by her death for which Dalmacio was responsible, the surviving heir of the former is entitled to the award of P 10,000.00 which is just equivalent to the pension the decedent would have received for one year if she did not die. On the other hand, the P5,000.00 paid to the herein petitioner by the insurer of the passenger bus which figured in the accident may be deemed to have come from the bus owner who procured the insurance. Since the civil liability (exdelicto) of the latter for the death caused by his driver is subsidiary and, at bottom, arises from the same culpa, the insurance proceeds should be credited in favor of the errant driver. PHILIPPINE AIRLINES, INC. vs. CA 185 SCRA 110 Facts: On November 23, 1960, Starlight Flight No. 26 of the Philippine Air Lines took off from Iloilo, on its way to Manila, with 33 persons on board, including the plane's complement. The plane did not reach its destination but crashed on Mt. Baco, Mindoro, one hour and fifteen minutes after takeoff .The plane was Identified as PI-C133, a DC-3 type aircraft manufactured in 1942 and acquired by PAL in 1948. It had flown almost 18,000 hours at the time of its illfated flight. It had been certified as airworthy by the Civil Aeronautics Administration. Among the fatalities was Nicanor Padilla. He was 29 years old, single. His mother, Natividad A. Vda. de Padilla, was his only legal heir. As a result of her son's death, Mrs. Padilla filed a complaint (which was amended twice) against PAL, demanding payment of P600,000 as actual and compensatory damages, plus exemplary damages and P60,000 as attorney's fees. In its answer, PAL denied that the accident was caused by its negligence or that of any of the plane's flight crew, and that, moreover, the damages sought were excessive and speculative. On August 31, 1973, the trial court promulgated a decision, ordering the defendant Philippine Air Lines, Inc. to pay the plaintiff Natividad A. Vda. de Padilla the sum of P477,000.00 as award for the expected income of the deceased Nicanor; P10,000.00 as moral damages; P10,000.00 as attorney's fees; and to pay the costs. On Appeal to the Court of Appeals the decision of the trial court was affirmed in toto. Issue: Whether or not the respondent court erred in computing the awarded indemnity on the basis of the life expectancy of the late Nicanor A. Padilla rather than on the life expectancy of private respondent, and thus erred in awarding what appears to the petitioner as the excessive sum of P477,000 as indemnity for loss of earnings.

Held: Petitioner relies on "the principle of law generally recognized and applied by the courts in the United States" that "the controlling element in determining loss of earnings arising from death is, as established by authorities, the life expectancy of the deceased or of the beneficiary, whichever is shorter. However, resort to foreign jurisprudence would be proper only if no law or jurisprudence is available locally to settle a controversy. Even in the absence of local statute and case law, foreign jurisprudence is only persuasive. For the settlement of the issue at hand, there are enough applicable local laws and jurisprudence. Under Article 1764 and Article 2206(1) of the Civil Code, the award of damages for death is computed on the basis of the life expectancy of the deceased, not of his beneficiary. The articles provide: Art. 1764. Damages in cases comprised in this Section shall be awarded in accordance with Title XVIII of this Book, concerning Damages. Article 2206 shall also apply to the death of a passenger caused by the breach of contract by a common carrier. Art. 2206. The amount of damages for death caused by a crime or quasi- delict shall be at least three thousand pesos, even though there may have been mitigating circumstances. In addition: (1) The defendant shall be liable for the loss of the earning capacity of the deceased, and the indemnity shall be paid to the heirs of the latter; such indemnity shall in every case be assessed and awarded by the court, unless the deceased on account of permanent physical disability not caused by the defendant, had no earning capacity at the time of his death. In the case of Davila vs. PAL, 49 SCRA 497 which involved the same tragic plane crash, this Court determined not only PALs liability for negligence or breach of contract, but also the manner of computing the damages due the plaintiff therein which it based on the life expectancy of the deceased, Pedro Davila, Jr. WHEREFORE, the petition is dismissed. The decision of the trial court is affirmed with modification. The petitioner is ordered to pay the private respondent or her heirs death indemnity in the sum of P417,000 (not P477,000), with legal rate of interest of 6% per annum from the date of the judgment on August 31, 1973, until it is fully paid. Costs against the petitioner.

B. MORAL DAMAGES
CACHERO vs. MANILA YELLOW TAXICAB CO., INC.,

Facts: Atty. Cachero boarded a Yellow Taxicab driven by Gregorio Mira Abinion and owned by the Manila Yellow Taxicab Co., Inc. On passing Oroquieta between Doroteo Jos and Lope de Vega streets, Gregorio Mira Abinion bumped said taxicab against a Meralco post, with the result that the cab was badly smashed and the plaintiff fell out of the vehicle to the ground, suffering thereby physical injuries, slight in nature. The chauffeur was subsequently prosecuted by the City Fiscal and on February 26, 1953, upon his plea of guilty the Municipal Court of Manila sentenced him to suffer 1 month and 1 day of arresto mayor, and to pay the costs. On December 17, 1952, Tranquilino F. Cachero addressed a letter to the Manila Yellow Taxicab Co., Inc., which was followed by another of January 6, 1953, which he asks for damages. The Taxicab Co. to avoid expenses and time of litigation offered to settle the case amicably with plaintiff but the latter only agreed to reduce his demand to the sum of P72,050.20 as his only basis for settlement which, of course, was not accepted by said company. So plaintiff instituted an action in the Court of First Instance of Manila. Issue: Whether or not the defendant demanded an exorbitant moral damages? Held: In all cases, the attorney's fees and expenses of litigation must be reasonable.The present action was instituted because plaintiff demanded an exorbitant amount for moral damages (P60,000) and naturally the defendant did not and could not yield to such demand. This is neither a case that comes under paragraph 11 of Article 2208 because the Lower Court did not deem it just and equitable to award any amount for attorney's fees. As We agree with the trial Judge on this point, We cannot declare that he erred for not awarding to plaintiff any such fees in this case. "Realizing its obligation under its contract of carriage with the plaintiff, and because the facts of the case, as have been shown, mark it as more proper for the Municipal Court only, the defendant, to avoid the expense and time of litigation, offered to settle the case amicably with plaintiff, but the latter refused and insisted on his demand for P72,050.20 as the only basis for settlement, thus adding a clearly petty case to the already overflowing desk of the Honorable Members of this Court. We admire and respect at all times a man for standing up and fighting for his rights, and when said right consists in injuries sustained due to a breach of a contract of carriage with us, sympathy and understanding are added thereto. But when a person starts demanding P2,050.20 for a solitary bruise and sprain, injuries for which the trial court, even at its generous although erroneous best, could only grant P5,900, then respect and sympathy give way to something else. It is time to fight, for, in our humble opinion, there is nothing more loathsome nor truly worthy of condemnation than one who uses his injuries for other purposes than just rectification. If plaintiff's claim is granted, it would be a blessing, not a misfortune, to be injured." This case was instituted by a lawyer who, as an officer of the courts, should be the first in helping Us in the administration of justice, and after going over the record of this case, we do not hesitate to say that the demand of this

case, we do not hesitate to say that the demand of P72,050.20 for a subluxation of the right humerus bone and an insignificant contusion in 'he chest, has not even the semblance of reasonableness. The plaintiff himself must have felt embarrassed by his own attitude when after receiving defendant's brief as appellant, he makes in his brief as appellee the categorical statement that he "DOES NOT NOW INSIST NOR PRETEND IN THE LEAST to collect from the defendant all the damages he had claimed in his complaint, but instead he is submitting his case to the sound discretion of the Honorable Court for the award of a reasonable and equitable damages allowable by law, to compensate the plaintiff of the suffering and losses he had undergone and incurred because of the accident oftentimes mentioned in this brief in which plaintiff was injured". This acknowledgment comes too late, for plaintiff has already deprived the Court of Appeals of the occasion to exercise its appellate jurisdiction over this case which he recklessly dumped to this Court. We certainly cannot look with favor at this attitude of plaintiff. Wherefore, the decision appealed from is hereby modified by reducing the amount awarded as unearned professioral fees from P3,000 to P2,000 and by eliminating, the moral damages of P2,000 awarded by the Lower Court to the plaintiff. Said decision is in all other respects affirmed, without pronouncement as to costs. It is so ordered. FORES vs. MIRANDA Facts: Respondent was one of the passengers on a jeepney driven by Eugenio Luga. While the vehicle was descending the Sta. Mesa bridge at an excessive rate of speed, the driver lost control thereof, causing it to swerve and to hit the bridge wall. The accident occurred on the morning of March 22, 1953. Five of the passengers were injured, including the respondent who suffered a fracture of the upper right humerus. He was taken to the National Orthopedic Hospital for treatment, and later was subjected to a series of operations; the first on May 23, 1953, when wire loops were wound around the broken bones and screwed into place; a second, effected to insert a metal splint, and a third one to remove such splint. At the time of the trial, it appears that respondent had not yet recovered the use of his right arm. The driver was charged with serious physical injuries through reckless imprudence, and upon interposing a plea of guilty was sentenced accordingly. The contention that the evidence did not sufficiently establish the identity of the vehicle as that belonging to the petitioner was rejected by the appellate court which found, among other things, that it carried plate No. TPU-1163, series of 1952, Quezon City, registered in the name of Paz Fores, (appellant herein) and that the vehicle even had the name of "Doa Paz" painted below its windshield. No evidence to the contrary was introduced by the petitioner, who relied on an attack upon the credibility of the two policemen who went to the scene of the incident. A point to be further remarked is petitioner's contention that on March 21, 1953, or one day before the accident happened, she allegedly sold the passenger jeep that was involved therein to a certain Carmen Sackerman. The CA awarded moral damages to respondent hence this petition.

Issue: Whether or not the award of moral damages given by the CA was valid? Held: No. Petitioners contention of loss of income and payment of attorneys fees cannot be the basis for the award of the damages on the ground that a review of the records failed to disclose a sufficient basis for the trial court's appraisal, since the only evidence presented on this point consisted of respondent's bare statement of his expenses and the said loss of income. Petitioner fails to note that attorney's fees are included in the concept of actual damages under the Civil Code and may be awarded whenever the court deems it just and equitable. Moral damages are not recoverable in damage actions predicated on a breach of the contract of transportation, in view of Articles 2219 and 2220 of the new Civil Code, which provide as follows: "ART. 2219. Moral damages may be recovered in the following and analogous cases: (1) A criminal offense resulting in physical injuries; (2) Quasi-delicts causing physical injuries; ART. 2220. 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." By contrasting the provisions of these two articles it immediately becomes apparent that: (a) In case of breach of contract (including one of transportation) proof of bad faith or fraud (dolus), i.e., wanton or deliberately injurious conduct, is essential to Justify an award of moral damages; and (b) That a breach of contract can not be considered included in the descriptive term "analogous cases" used in Art. 2219; not only because Art. 2220 specifically provides for the damages that are caused by contractual breach, but because the definition of quasi-delict in Art. 2176 of the Code expressly excludes the cases where there is a "preexisting contractual relation between the parties." "ART. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict and is governed by the provisions of this Chapter." The exception to the basic rule of damages now under consideration is a mishap resulting in the death of a passenger, in which case Article 1764 makes the common carrier expressly subject to the rule of Art. 2206, that entitles the spouse, descendants and ascendants of the deceased passenger to "demand moral damages for mental anguish by reason of the death of the deceased". But the exceptional rule of Art. 1764 makes it all the more evident that where the injured passenger does not die, moral damages are not recoverable unless it is proved that the carrier was guilty of malice or bad faith. We think it is clear that the mere carelessness of the carrier's driver does not per se constitute or justify an inference of malice or bad faith on the part of the carrier; and in the case at bar there is no other evidence of such malice to support the award of moral damages by the Court of Appeals. To award moral damages for breach of contract, therefore, without proof of bad faith or malice on the part of the

defendant, as required by Art. 2220, would be to violate the clear provisions of the law, and constitute unwarranted judicial legislation. The suggestion that a carrier's violation of its engagement to safely transport the passenger involves a breach of the passenger's confidence, and therefore should be regarded as a breach of contract in bad faith, justifying recovery of moral damages under Art. 2220 is untenable, for under it the carrier would always be deemed in bad faith, in every case its obligation to the passenger is infringed, and it would be never accountable for simple negligence; while under the law (Art. 1756) "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." "ART. 1762. The contributory negligence of the passenger does not bar recovery of damages for his death or injuries, if the proximate cause thereof is the negligence of the common carrier, but the amount of damages shall be equitably reduced." The distinction between fraud, bad faith or malice in the sense of deliberate or wanton wrong doing and negligence (as mere carelessness) is too fundamental in our law to be ignored; their consequences being clearly differentiated by the Code. "ART. 2201. In contracts and quasi-contracts, the damages forwhich the obligor who acted in good faith is liable shall be those that arc the, natural and probable consequences of the breach of the obligation, and which the parties have foreseen or could have reasonably foreseen at the time the obligation was constituted. In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all damages which may be reasonably attributed to the nonperformance of the obligation." It is to be presumed, in the absence of statutory provision to the contrary, that this difference was in the mind of the lawmakers when in Art. 2220 they limited recovery of moral damages to breaches of contract in bad faith. It is true that negligence may be occasionally so gross as to amount to malice; but that fact must be shown in evidence, and a carrier's bad faith is not to be lightly inferred from a mere finding that the contract was breached through negligence of the carrier's employees. In view of the foregoing considerations, the decision of the Court of Appeals is modified by eliminating the award of P5.000.00 by way of moral damages the presumption is that common carriers acted negligently (and not maliciously), and Art. 1762 speaks of negligence of the common carrier.

LOPEZ vs.PAN AMERICAN WORLD AIRWAYS Facts: Reservations for first class accommodations in Flight No. 2 of Pan American World Airways from Tokyo to San Francisco were made, by "Your Travel Guide" agency, for then Senator Fernando Lopez, his wife Maria J. Lopez, his son-in-law Alfredo Montelibano, Jr., and his daughter, Mrs. Alfredo Montelibano, Jr. PAN-AM's San Francisco head office confirmed the

reservations. First class tickets for the abovementioned flight were subsequently issued. As scheduled Senator Lopez and party left Manila by Northwest Airlines. As soon as they arrived Senator Lopez requested Minister Busuego of the Philippine Embassy to contact PAN-AM's Tokyo office regarding their first class accommodations for that evening's flight. For the given reason that the first class seats therein were all booked up, however, PAN-AM's Tokyo office informed Minister Busuego that PAN-AM could not accommodate Senator Lopez and party in that trip as first class passengers. Senator Lopez thereupon gave their first class tickets to Minister Busuego for him to show the same to PAN-AM's Tokyo office, but the latter firmly reiterated that there was no accommodation for them in the first class, stating that they could not go in that flight unless they took the tourist class therein. They were constrained to take PAN-AM's flight from Tokyo to San Francisco as tourist passengers. Suit for damages was thereafter filed by Senator Lopez and party against PAN-AM. Alleging breach of contracts in bad faith by defendant, plaintiffs asked for P500,000 actual and moral damages, P100,000 exemplary damages, P25,000 attorney's fees plus costs. PAN-AM filed its answer, asserting that its failure to provide first class accommodations to plaintiffs was due to honest error of its employees. Court of First Instance rendered its decision in favor of plaintiffs. Both however appealed the decision. Plaintiff prayed for an increase in the award. Issue: Whether or not plaintiff is entitled to damages. Held: Yes. According to plaintiffs, defendant acted in bad faith because it deliberately refused to comply with its contract to provide first class accommodations to plaintiffs, out of racial prejudice against Orientals. Against the foregoing, however, defendant's evidence would seek to establish its theory of honest mistake. It said that the first class reservations of Senator Lopez and party were made together with those of four members of the Rufino family. The reservations employee mistakenly cancelled all the seats that had been reserved, that is, including those of Senator Lopez and party. Since the flight involved was still more than a month away and confident that reinstatement would be made, Herranz forgot the matter and told no one about it except his co-employee. From the foregoing evidence of defendant, it is in effect admitted that defendant through its agents first cancelled plaintiffs, reservations by mistake and thereafter deliberately and intentionally withheld from plaintiffs or their travel agent the fact of said cancellation, letting them go on believing that their first class reservations stood valid and confirmed. In so misleading plaintiffs into purchasing first class tickets in the conviction that they had confirmed reservations for the same, when in fact they had none, defendant willfully and knowingly placed itself into the position of having to breach its contracts with plaintiffs. All the time, in legal contemplation such conduct already amounts to action in bad faith. For bad faith means a breach of a known duty through some motive of interest or ill-will. Now on the issue of amount of damages. First, then, as to moral damages. As a proximate result of defendant's breach in bad faith of its contracts with plaintiffs, the latter suffered social humiliation, wounded feelings, serious anxiety and mental anguish. For plaintiffs were travelling with

first class tickets issued by defendant and yet they were given only the tourist class. At stop-overs, they were expected to be among the first-class passengers by those awaiting to welcome them, only to be found among the tourist passengers. It may not be humiliating to travel as tourist passengers; it is humiliating to be compelled to travel as such, contrary to what is rightfully to be expected from the contractual undertaking. Senator Lopez was then Senate President Pro Tempore. International carriers like defendant know the prestige of such an office. And he was former Vice-President of the Philippines. Senator Lopez was going to the United States to attend a private business conference of the Binalbagan-Isabela Sugar Company; but his aforesaid rank and position were by no means left behind, and in fact he had a second engagement awaiting him in the United States: a banquet tendered by Filipino friends in his honor as Senate President Pro Tempore. For the moral damages sustained by him, therefore, an award of P100,000.00 is appropriate. Considering also the physical discomfort of the wife of Senator Lopez as well as the members of his family, it should be imposed in such an amount as to sufficiently and effectively deter similar breach of contracts in the future by defendant or other airlines. In this light, we find it just to award P75,000.00 as exemplary or corrective damages. A written contract for attorney's services shall control the amount to be paid therefor unless found by the court to be unconscionable or unreasonable. The amount of P25, 000 is reasonable, considering the attorneys prominence in the legal profession, and that the defense counsels fees is more than half the said amount. In concluding, let it be stressed that the amount of damages awarded in this appeal has been determined by adequately considering the official, political, social, and financial standing of the offended parties on one hand, and the business and financial position of the offender on the other.

ORTIGAS, JR. vs. LUFTHANSA GERMAN AIRLINES Facts: The Sharp Travel Service, the travel department of C. F. Sharp, Inc., the majority interest-in-which is held by Rocha y Cia., Inc., General Agents of the defendant, Lufthansa German Airlines issued to the plaintiff First Class Pan American Ticket which would take him from Manila, the place of departure, to Hongkong, various cities in the United States, Europe, Asia, the Far East, and then back to Manila, the place of destination. Ortigas' ticket for all these different legs of his journey was first class. He left Manila as scheduled. In New York, he decided to leave out some cities, included in his original itinerary, to be in Hongkong, for several appointments he had there. Ortigas arrived in due course in Rome. To be sure he could fly first class to Hongkong, for his appointments there the next day, Ortigas went to the office of the Alitalia to book passage. The man at the counter of the Alitalia office told him it had no flight on Monday but the Lufthansa had. The man thereupon called up the office of the Lufthansa and, after talking to an employee thereof, told Ortigas that the Lufthansa had no first class, but only economy seats available. Ortigas

was not willing to take an economy seat and requested the employee to call up other airlines. The employee afterwards informed Ortigas that the Lufthansa had a first class seat available. Ortigas immediately asked him to get the seat and to see to it that his ticket be confirmed and validated for the flight and a first class seat. The man thereafter asked for Ortigas' passport and other travel papers and attached a validating sticker on flight coupon No. 4 which corresponded to the Rome-Hongkong leg of his TWA Ticket. The following Monday, Ortigas checked out of his hotel and took a taxi to the terminal. He unloaded his baggage and proceeded to the counter in charge of the Lufthansa passengers. The lady at the counter told him that Lufthansa had no space for him that day. Ortigas requested her to check with her main office, which she did by calling it up. After calling, she apologized and said the plaintiff's ticket was in order and would be confirmed and validated. On her request, Ortigas had his luggage weighed and was given the free luggage allowance of a first class passenger. He was furthermore asked to pay 800 liras for bus fare and 700 liras as embarkation tax. An employee in the airport asked for his passport and other papers and, after examining his passport, where his Filipino nationality appears, said he could not board the plane that day because his seat would be given to a Belgian. After an argument with the employee, Ortigas made another request, that the employee call other airlines to inquire if they had flights to Hongkong that day but he once more turned down the plea and insisted that Ortigas travel economy, with the promise that he will be transferred to first class in Cairo and onward to Hongkong. He was constrained to agree with the arrangement. Upon arrival in Cairo, the plaintiff requested the Lufthansa agent to transfer him to first class but the agent said he could not and that he did not receive any communication from Rome to that effect. At Dharham, the plaintiff once more requested a transfer to first class but was also told by the Lufthansa agent that he had not received any communication about the change and the request could not be granted. In Calcutta, Ortigas once again requested a transfer or that he be assisted in booking passage on other planes but was also refused. It was only in Bangkok when the chief steward asked him if he wanted to move over to first class but having been already embarrassed and humiliated and the trip to Hongkong being only three hours, he said he would not as a sign of protest. The foregoing facts resulted in the filing of the case by the plaintiff against defendant, in which an award of moral and exemplary damages was ordered and now subject of an appeal. Issue: Whether or not plaintiff is entitled to damages. Held: Yes. Manuel Otayza, general manager of Filital, Inc., which is the general agent of the Alitalia in the Philippines, testified that space reservation through telephone calls between airlines is permitted by IATA's, "Manual of Traffic Conference Resolutions" and that telephone calls for reservation by one airline to another is in fact accepted procedure in accordance with the official airline guide of the Air Traffic Conference and International Air Transport Association. There was, therefore, a valid and binding contract between Lufthansa and the plaintiff to transport him as a first class passenger from Rome to Hongkong, and this agreement the defendant violated by compelling the plaintiff to travel

as an economy passenger. It cannot be said the breach was the result of an honest mistake or excusable negligence. There is evidence that the defendant acted with bad faith and in willful disregard of the plaintiffs rights. It is Our considered view that when it comes to contracts of common carriage, inattention and lack of care on the part of the carrier resulting in the failure of the passenger to be accommodated in the class contracted for amounts to bad faith or fraud which entitles the passenger to the award of moral damages in accordance with Article 2220 of the Civil Code. But in the instant case, the breach appears to be of graver nature, since the preference given to the Belgian passenger over plaintiff was done willfully and in wanton disregard of plaintiff's rights and his dignity as a human being and as a Filipino, who may not be discriminated against with impunity. Lufthansa contends, however, that there could not have been any possible discrimination by reason of race against Ortigas because from his appearance, said plaintiff can easily be taken for a European or white more than his own witness Amado Castro and besides, there were other Orientals in the same flight on that occasion. It is argued that any such policy would be self-defeating, since it would certainly be damaging to its own business. Again, this ratiocination is untenable, for what appears from the evidence is not really a case of a general policy of discriminating against Orientals or non-whites, but a specific act of Lufthansa employee at the airport of giving preference to a Belgian after examining Ortigas passport wherein his Filipino nationality is noted. As found by the lower court what worsened the situation of Ortigas was that Lufthansa succeeded in keeping him as its passenger by assuring him that he would be given first class accommodation at Cairo, the next station, the proper arrangements therefor having been made already, when in truth such was not the case. Thus, instead of complying with the request of Ortigas that other airlines be contacted to find out it they had first class space for him, the Lufthansa employee who had indifferently told him about his downgrading paid very little attention if ever to said request. Although molested and embarrassed to the point that he had to take nitroglycerine pills to ward off a possible heart attack, Ortigas hardly had any choice, since his luggage was already in the plane. To his disappointment, when the plane reached Cairo, he was told by the Lufthansa office there that no word at all had been received from Rome and they had no space for him in first class. Worse, similar false representations were made to him at Dharham and Calcutta. It was only at Bangkok where for the first time, Ortigas was at last informed that he could have a first class seat in that leg of the flight, from Bangkok to Hongkong. This Ortigas rejected, if only to make patent his displeasure and indignation at being so inconsiderately treated in the earlier part of his journey. Moreover, it is argued, the economy class accommodations are not much different from first class and Ortigas was not delayed in his trip. We cannot see the point. A passenger contracts for first class accommodations for many reasons peculiar to himself and pays a higher price therefor, and it is certainly not for the airplane to say later, after it deprives him of his space in order to favor another passenger, that economy class is anyway just as good as first class.

In the light of all the foregoing, there can be no doubt as to the right of Ortigas to damages, both moral and exemplary. We have uniformly upheld the right of a passenger to damages in all cases wherein, after having contracted and paid for first class accommodations duly confirmed and validated, he is transferred over his objection to economy, class, which he has to take in order to be able to arrive at his destination on his scheduled time. DISPOSITIVE: WHEREFORE, the judgment appealed from is modified by raising the award of moral and exemplary damages to plaintiff Ortigas to P150,000.00 and P100,000.00, respectively. In all other respects, including as to the payment of interests on the said amounts, the same is affirmed.

PHILIPPINE RABBIT BUS LINES, INC. vs.ESGUERRA Facts: Patrocinio Esguerra was a paying passenger of Bus No. 223 of Philippine Rabbit Bus Lines, Inc. He boarded the said bus at the Manila terminal about four o'clock in the afternoon of November 6, 1961, bound for San Fernando, Pampanga. He sat at the left-end of the fourth row behind the driver, close to the window. As the bus approached barrio San Marcos, Calumpit, Bulacan, a freight truck owned and operated by the Transport Contractors, Inc. was coming from the opposite direction. The vehicles sideswiped each other. The window glass near the driver's seat of the Rabbit Bus was detached and the left side of its body was damaged. The left forearm of Patrocinio Esguerra was hit by a hard blunt object, breaking the bones into small fragments while the soft tissues of the muscles and the skin were mascerated. He was immediately brought to the Bulacan Provincial Hospital in Malolos, Bulacan for treatment. The left arm was amputated. Plaintiff filed a case against the Philippine Rabbit Bus Lines, Inc. and the Transport Contractors, Inc., together with their respective drivers, praying that judgment be rendered in favor of the plaintiff and against the defendants requiring them to pay, jointly and severally damages, actual and compensatory, moral and exemplary, litigation expenses and costs. The Court of Appeals affirmed CFIs decision. Issue: Whether or not the award of moral damages is proper Held: No. The contention of petitioners with respect to the award of moral damages is meritorious. This Court has repeatedly held that moral damages are not recoverable in actions for damages predicated on a breach of the contract of transportation, as in the instant case, in view of the provisions of Articles 2219 and 2220 of the New Civil Code. The exceptions are (1) where the mishap results in the death of a passenger, and (2) where it is proved that the carrier was guilty of fraud or bad faith, even if death does not result. The Court

of Appeals found that the two vehicles sideswiped each other at the middle of the road. In other words both vehicles were in their respective lanes and that they did not invade the lane of the other. It cannot be said therefore that there was fraud or bad faith on the part of the carrier's driver. This being the case, no moral damages are recoverable. SWEET LINES vs. CA Facts: Private respondents purchased first-class tickets from petitioner at the latters office in Cebu City. They were to board petitioners vessel. M/V Sweet Grace, bound for Catbalogan, Western Samar. Instead of departing at the scheduled hour of about midnight on July 8, 1972, the vessel set sail at 3:00am of July 9, 1972, only to be towed back to cebu due to engine trouble, arrving at about 4:00pm n the same day. Repairs having been accomplished, the vessel lifted anchor again on July 10, 1972 at around 8:00am. Instead of docking to Catbalogan, which was the first port of call, the vessel proceeded direct to Tacloban at around 9:00pm of July 10, 1972. Private respondents had no recourse but to disembark and board a ferryboat to Catbalogan. Hence, this suit for damages for breach of contract of carriage which the Trial court, affirmed by the CA, decided in favor of plaintiffs. Issue: Whether or not moral damages may be rightfully demanded. Held: Yes. Under Art. 2220 of the Civil Code, moral damages are justly due in breaches of contract where the defendant acted fraudulently or in bad faith. Both the Trial Court and the Appellate Court found that there was bad faith on the part of petitioner in that: (1) Defendants- Appellants did not give notice to plaintiffs-appellates as to the change of scheduled of the vessel; (2) Knowing fully well that it would take no less than fifteen hours to effect the repairs of the damaged engine, defendants- appellants instead made announce ment of assurance that the vessel would leave within a short period of time, and when plaintiff-appellees wanted to leave the port and gave up the trip, defendantsappellants employees would come and say, we are leaving already. (3) Defendants- appellants did not offer to refund plaintiffs-appellees tickets nor provide them with transportation form Tacloban to Catbalogan. That the finding of bad faith is binding on us, since it is not the function of the court to analyze and review evidence on this point all over again, aside from the fact that we find it faithful to the meaning of bad faith enunciated thus:

Bad faith means a breach of a known duty through some motive or interest or ill will. Self enrichment or fraternal interest, and not personal ill will, may have been the motive, but it is malice nevertheless. Under the circumstances, however, we find the award of moral damages excessive and accordingly reduce them from P75,000.00 to P3,000.00 respectively for each of the private respondents. Judgment MODIFIED . TRANS WORLD AIRLINES vs. CA Facts: Rogelio A. Vinluan is a practicing lawyer who entered into a contract for air carriage for valuable consideration with Japan Airlines first class from Manila to Tokyo, Moscow, Paris, Hamburg, Zurich, New York, Los Angeles, Honolulu and back to Manila thru the same airline and other airlines it represents for which he was issued the corresponding first class tickets for the entire trip. On April 18, 1979, while in Paris, he went to the office of Trans World Airlines (TWA) and secured therefrom confirmed reservation for first class accommodation on board its Flight No. 41 from New York to San Francisco. A validated stub was attached to the New York-Los Angeles portion of his ticket evidencing his confirmed reservation for said flight with the mark "OK " On April 20, 1979, at about 8:00 o'clock A.M., Vinluan reconfirmed his reservation for first class accommodation on board TWA Flight No. 41 with its New York office. He was advised that his reservation was confirmed. Vinluan presented his ticket for check-in at the counter of TWA at JFK International Airport at about 9:45 o'clock A.M., the scheduled time of the departure being 11:00 o'clock A.M. He was informed that there was no first class seat available for him on the flight. He asked for an explanation but TWA employees on duty declined to give any reason. When he began to protest, one of the TWA employees, a certain Mr. Braam, rudely threatened him with the words "Don't argue with me, I have a very bad temper." To be able to keep his schedule, Vinluan was compelled to take the economy seat offered to him and he was issued a refund application" as he was downgraded from first class to economy class. While waiting for the departure of Flight No. 41. Vinluan noticed that other passengers who were white Caucasians and who had checked-in later than him were given preference in some first class seats which became available due to "no show" passengers. On February 15, 1980, Vinluan filed an action for damages against the TWA in the Court of First Instance of Rizal alleging breach of contract and bad faith. The CFI ruled in favor of Vinluan which was affirmed by the Court of appeals with some modifications. Issue: Whether or not Trans World should be liable for damages. Held: Respondent had a first class ticket for Flight No. 41 of petitioner from New York to San Francisco on April 20, 1979. It was twice confirmed and yet respondent unceremoniously told him that there was no first class seat available for him and that he had to be downgraded to the economy class. As

he protested, he was arrogantly threatened by one Mr. Braam. Worst still, while he was waiting for the flight, he saw that several Caucasians who arrived much later were accommodated in first class seats when the other passengers did not show up. The discrimination is obvious and the humiliation to which private respondent was subjected is undeniable. Consequently, the award of moral and exemplary damages by the respondent court is in order. Indeed, private respondent had shown that the alleged switch of planes from a Lockheed 1011 to a smaller Boeing 707 was because there were only 138 confirmed economy class passengers who could very well be accommodated in the smaller plane and not because of maintenance problems. Petitioner sacrificed the comfort of its first class passengers including private respondent Vinluan for the sake of economy. Such inattention and lack of care for the interest of its passengers who are entitled to its utmost consideration, particularly as to their convenience, amount to bad faith which entitles the passenger to the award of moral damages. 5 More so in this case where instead of courteously informing private respondent of his being downgraded under the circumstances, he was angrily rebuffed by an employee of petitioner. At the time of this unfortunate incident, the private respondent was a practicing lawyer, a senior partner of a big law firm in Manila. He was a director of several companies and was active in civic and social organizations in the Philippines. Considering the circumstances of this case and the social standing of private respondent in the community, he is entitled to the award of moral and exemplary damages. However, the moral damages should be reduced to P300,000.00, and the exemplary damages should be reduced to P200,000.00. This award should be reasonably sufficient to indemnify private respondent for the humiliation and embarrassment that he suffered and to serve as an example to discourage the repetition of similar oppressive and discriminatory acts. ARMOVIT vs.COURT OF APPEALS Facts: In October 1981, the petitioners decided to spend their Christmas holidays with relatives and friends in the Philippines, so they purchased from private respondent, (Northwest Airlines, Inc.) three (3) round trip airline tickets from the U.S. to Manila and back, plus three (3) tickets for the rest of the children, though not involved in the suit. Each ticket of the petitioners which was in the handwriting of private respondent's tickets sales agent contains the following entry on the Manila to Tokyo portion of the return flight: from Manila to Tokyo, NW flight 002, date 17 January, time 10:30 A.M. Status, OK. On their return trip from Manila to the U.S. scheduled on January 17, 1982, petitioner arrived at the check-in counter of private respondent at the Manila International Airport at 9:15 in the morning, which is a good one (1) hour and fifteen (15) minutes ahead of the 10:30 A.M. scheduled flight time recited in their tickets. Petitioners were rudely informed that they cannot be accommodated inasmuch as Flight 002 scheduled at 9:15 a.m. was already

taking off and the 10:30 A.M. flight time entered in their plane tickets was erroneous. Previous to the said date of departure petitioners re-confirmed their reservations through their representative Ernesto Madriaga who personally presented the three (3) tickets at the private respondent's Roxas Boulevard office. The departure time in the three (3) tickets of petitioners was not changed when re-confirmed. The names of petitioners appeared in the passenger manifest and confirmed as Passenger Nos. 306, 307, and 308, Flight 002. Herein petitioner Dr. Armovit protested in extreme agitation that because of the bump-off he will not be able to keep his appointments with his patients in the U.S. Petitioners suffered anguish, wounded feelings, and serious anxiety day and night of January 17th until the morning of January 18th when they were finally informed that seats will be available for them on the flight that day. Because of the refusal of the private respondent to heed the repeated demands of the petitioners for compensatory damages arising from the aforesaid breach of their air-transport contracts, petitioners were compelled to file an action for damages in the Regional Trial Court of Manila. The RTC awarded actual damages, moral damages, exemplary damages and nominal damages to the plaintiffs but the CA eliminated the award for moral and nominal damages. Issue: Whether or not the elimination of the CA of the award for moral damages. Held: Yes. The contention of the CA that the appellees did not take the witness stand to testify on their "social humiliation, wounded feelings and anxiety" and the breach of contract was not malicious or fraudulent was without merit. The CA overlooked the fact that a year after the incident there was a turmoil in the country because of the assassination of Benigno Aquino and that violent demonstrations in the country were sensationalized in the U.S. media so petitioners were advised to refrain from returning to the Philippines at the time when they were scheduled to testify. Nevertheless, Atty. Armovit, brother of Dr. Armovit, took the witness stand for he was there from the time they checked in until the time they were rudely informed that their flight had already taken off. Angered and frustrated Dr. Armovit told the said check-in-officer that he had to be accommodated that morning so that he could attend to all his appointments in the U.S.; that petitioner Jacqueline Armovit also complained about not being able to report for work at the expiration of her leave of absence; that while petitioner had to accept private respondent's offer for hotel accommodations at the Philippine Village Hotel so that they could follow up

and wait for their flight out of Manila the following day, petitioners did not use their meal coupons supplied because of the limitations thereon so they had to spend for lunch, dinner, and breakfast in the sum of P1,300.00 while waiting to be flown out of Manila; that Dr. Armovit had to forego the professional fees for the medical appointments he missed due to his inability to take the January 17 flight; that the petitioners were finally able to fly out of Manila on January 18, 1982, but were assured of this flight only on the very morning of that day, so that they experienced anxiety until they were assured seats for that flight. No doubt Atty. Raymund Armovit's testimony adequately and sufficiently established the serious anxiety, wounded feelings and social humiliation that petitioners suffered upon having been bumped off. However, considering the circumstances of this case whereby the private respondent attended to the plight of the petitioners, taking care of their accommodations while waiting and boarding them in the flight back to the U.S. the following day, the Court finds that the petitioners are entitled to moral damages in the amount of P100,000.00 each. Also, the gross negligence committed by private respondent in the issuance of the tickets with entries as to the time of the flight, the failure to correct such erroneous entries and the manner by which petitioners were rudely informed that they were bumped off are clear indicia of such malice and bad faith and establish that private respondent committed a breach of contract which entitles petitioners to moral damages. The deletion of the nominal damages by the appellate court is welltaken since there is an award of actual damages. Nominal damages cannot coexist with actual or compensatory damages. Wherefore the decision of the CA is modified providing the award for moral damages. PHILIPPINE AIRLINES vs. COURT OF APPEALS 106 SCRA 391 Facts: Private respondent Jesus Samson flew as co-pilot on a regular flight from Manila to Legaspi with Captain Delfin Bustamante in a plane belonging to petitioner PAL. The airplane crash-landed beyond the runway due to the slow reaction and poor judgment of said captain, when it did not maintain the required pressure on the brakes and notwithstanding the diligent efforts of Samson. The jolt caused injuries to Samson. And instead of PAL giving Samson expert and proper medical treatment it referred him to a general medical practitioner. Now, on grounds of physical disability Samson was discharged from PALs employ, which caused him to file a complaint for damages. PAL denied liability on the ground of fortuitous event, and that the physical headaches and dizziness experience by Samson were due to emotional disturbance over his inability to pass the required upgrading course given by

PAL. Judgement was rendered in favor of Samson in the lower court which was affirmed by CA with some modification, by imposing legal rate of interest on the unearned income of Samson. Hence the instant petition. Issue: Is there a causal connection between the injuries suffered by private respondent during the accident and the subsequent periodic dizziness, headache and general debility allegedly caused by the accident and private respondents discharge from employment, which further warrants the award of damages? Held: Yes. The dizziness, headaches and general debility of private respondent were after-effects of the crash-landing. Doctors presented by PAL even admit the vital facts about Samsons brain injury. There was also gross negligence by PAL for allowing Capt. Bustamante to fly on the that fateful day of the accident, even if he was sick, having tumor on his nose. No one will certify the fitness to fly a plane of one suffering from the disease. One month prior to the crash-landing, when the pilot was preparing to land in Daet, private respondent 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 the plaintiff warned him. These more than prove what private respondent had complained of. Disregard thereof by PAL is condemnable. Having affirmed the gross negligence and casual connection of the aftereffects of the accident, the award of damages was likewise affirmed. The grant of compensatory damages[P204,000] by computing the basic salary per annum at P750.00 a month and P300.00 a month for extra pay for extra flying time including bonus every year is justified. The grant of moral damages[P50,000] was also justified, having considered the bad faith of PAL. The negligence of PAL is clearly a quasi-delict and therefore Art. 2219(2) is applicable, justifying the recovery of moral damages. Even from the standpoint of the petitioner that there is an employee-employer 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, applying the provisions of Article 2220.

C. Exemplary Damages
PRUDENCIADO vs. ALLIANCE TRANSPORT SYSTEM, INC. Facts: Petitioner was driving her own Chevrolet Bel Air car along Arroceros Street with the intention of crossing Taft Avenue in order to turn left, to go to the Philippine Normal College Compound where she would hold classes. She claimed that she was driving her car at the rate of 10 kmph, that before crossing Taft Ave. she stopped her car and looked to the right and to the left and not noticing any on-coming vehicle on either side she slowly proceeded on

first gear to cross the same, but when she was almost at the center, near the island thereof, Jose Leyson who was driving People's Taxicab owned and operated by Alliance Transport System, Inc., suddenly bumped and struck petitioners car, thereby causing physical injuries in different parts of her body, suffering more particularly brain concussion while her car was damaged to the extent of P2,451.27. The damage to the taxicab amounted to P190.00. Petitioner filed a complaint for damages against respondents. The lower court found Jose Leyson guilty of negligence. Alliance Transport System, Inc. failed to prove to the satisfaction of the court that it had exercised the required diligence of a good father of the family in the selection, supervision and control of its employees. Both defendants were held jointly and severally liable for the physical injuries suffered by the plaintiff as well as for the damage to her car, in addition to the other consequential damages prayed for. The award was P2,451.27 for actual damages representing the cost for the repair of the car of plaintiff; P25,000.00 as moral damages; P5,000.00 as exemplary damages; and the further sum of P3,000.00 as attorney's fees, with costs against the defendants. CA modified the award, reducing the amount of moral damages from P25,000 to P2,000 and eliminating the award of exemplary damages and attorney's fees. Hence the instant petition. Issue: Whether or not the Court of Appeals is justified in modifying or changing the grant of damages by the trial court. Held: No. A careful review of the records makes it readily apparent that the injuries sustained by petitioner are not as serious or extensive as they were claimed to be, to warrant the damages awarded by the trial court. In fact, a closer scrutiny of the exhibits showing a moderate damage to the car can by no stretch of the imagination produce a logical conclusion that such disastrous effects of the accident sought to be established, actually took place, not to mention the fact that such were not supported by the medical findings presented. Unquestionably, therefore, the damages imposed by the lower court should be reduced to more reasonable levels. On the other hand, it will be observed that the reduction of the damages made by the Court of Appeals is both too drastic and unrealistic, to pass the test of reasonableness, which appears to be the underlying basis to justify such reduction. While the damages sought to be recovered were not satisfactorily established to the extent desired by the petitioner, it was nonetheless not disputed that an accident occurred due to the fault and negligence of the respondents that Dra. Prudenciado suffered a brain concussion which although mild can admittedly produce the effects complained of by her and that these symptoms can develop after several years and can lead to some, serious handicaps or predispose the patient to other sickness. Being a doctor by profession, her fears can be more real and intense than an ordinary person. Otherwise stated, she is undeniably a proper recipient of moral damages which are proportionate to her suffering. As to exemplary damages, Article 2231 of the Civil Code provides: In quasi-delicts, exemplary damages may be granted if the defendant acted with grave negligence. The rationale behind exemplary or corrective damages is, as the name implies, to provide an example or correction for the public good.

The findings of the trial court is apparent, which became the basis of the award of exemplary damages that respondent driver was running at high speed after turning to the right along Taft Ave. coming from Ayala Boulevard, considering that the traffic was clear. Failing to notice petitioner's car, he failed to apply his brakes and did not even swerve to the right to avoid the collision. Much more, it was raining that time and the roads are slippery. The frequent incidence of accidents of this nature caused by taxi drivers indeed demands corrective measures. This however was overruled by CA and did not subscribed to the fact that the driver was grossly negligent, in which this Court finds that it has erred. DISPOSITIVE: PREMISES CONSIDERED, the assailed decision of the Court of Appeals is hereby MODIFIED insofar as the award of damages is concerned; and respondents are ordered to jointly and severally pay the petitioner; (1) the sum of P2,451.27 for actual damages representing the cost of the repair of her car; (2) the sum of P15,000.00 as moral damages; (3) the sum of P5,000.00 as exemplary damages; and (4) the sum of P3,000.00 as attorney's fees. No pronouncement as to costs. MARCHAN vs. MENDOZA Facts: A passenger bus of the Philippine Rabbit Bus Lines which was then driven by Silverio Marchan fell into a ditch somewhere in Barrio Malanday, Polo, Bulacan, while travelling on its way to Manila. As a result of which Arsenio Mendoza, his wife and child, who were then inside the bus as passengers were thrown out to the ground resulting in their multiple injuries. Arsenio Mendoza suffered the most serious injuries which damaged his vertebrae causing the paralysis of his lower extremities. An action was brought to recover damages against petitioners predicated not only on a breach of contract of carriage for failure to safely convey the plaintiffs to their destination, but also on account of a criminal negligence on the part of defendant driver. The lower court ruled in favor of plaintiffs. The award of P40,000.00 as compensatory damages was affirmed by CA. It however added the amount of P30,000.00 as exemplary damages and sustained the award of attorney's fees in the amount of P5,000.00. Issue: Whether or not there should be an award of exemplary damages. Held: Yes. It is argued that this Court is without jurisdiction to adjudicate the exemplary damages since there was no allegation nor prayer, nor proof, nor counterclaim of error for the same by the respondents. It is to be observed however, that in the complaint, plaintiffs "prayed for such other and further relief as this Court may deem just and equitable." Now, since the body of the complaint sought to recover damages against the defendant-carrier wherein plaintiffs prayed for indemnification for the damages they suffered as a result of the negligence of the driver who is appellant's employee and since exemplary damages is intimately connected with general damages, plaintiffs may not be expected to single out by express term the kind of damages they

are trying to recover against the defendant's carrier. Suffice it to state that when plaintiffs prayed in their complaint for such other relief and remedies that may be availed of under the premises, in effect, therefore, the court is called upon the exercise and use its discretion whether the imposition of punitive or exemplary damages even though not expressly prayed or pleaded in the plaintiffs' complaint. Exemplary damages may be imposed by way of example or correction only in addition, among others, to compensatory damages, but that they cannot be recovered as a matter of right, their determination depending upon the discretion of the court. If the amount of exemplary damages need not be proved, it need not also be alleged, and the reason is obvious because it is merely incidental or dependent upon what the court may award as compensatory damages. There is no reason to consider that the lower court erred in awarding the P5,000 attorneys fees. A modification of the decision however is proper. Respondents are entitled to interest for the amount of compensatory damages from the date of the decision of the lower court and legal interest on the exemplary damages from the date of the decision of the Court of Appeals.