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Liability of carriers

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Eastern vs IAC 150 SCRA 464 (May 1987)
Ganzon vs CA 161 SCRA 646 (May 1988)
De Guzman case
Benedicto vs IAC 187 SCRA 547 (July 1990)
Eastern Shipping vs CA 196 SCRA 570 (April 1991)
Sarkies Tours vs CA 280 SCRA 58 (June 1997)
Valenzuela Hardwood vs CA 274 SCRA 642 (June 1997)
Yobido vs CA 281 SCRA 1

Commencement, Duration, and Termination of Carrier's
Responsibility:

Macam vs CA 313 SCRA 77 (August 1999)
Samar Mining 132 SCRA 529
Ganzon vs CA 161 SCRA 646 (1988)
Saludo vs CA 207 SCRA 490 (March 1992)








G.R. No. L-69044 May 29, 1987
EASTERN SHIPPING LINES, INC., petitioner,
vs.
INTERMEDIATE APPELLATE COURT and DEVELOPMENT INSURANCE &
SURETY CORPORATION,respondents.
No. 71478 May 29, 1987
EASTERN SHIPPING LINES, INC., petitioner,
vs.
THE NISSHIN FIRE AND MARINE INSURANCE CO., and DOWA FIRE &
MARINE INSURANCE CO., LTD.,respondents.

MELENCIO-HERRERA, J .:
These two cases, both for the recovery of the value of cargo insurance, arose
from the same incident, the sinking of the M/S ASIATICA when it caught fire,
resulting in the total loss of ship and cargo.
The basic facts are not in controversy:
In G.R. No. 69044, sometime in or prior to June, 1977, the M/S ASIATICA, a
vessel operated by petitioner Eastern Shipping Lines, Inc., (referred to
hereinafter as Petitioner Carrier) loaded at Kobe, Japan for transportation to
Manila, 5,000 pieces of calorized lance pipes in 28 packages valued at
P256,039.00 consigned to Philippine Blooming Mills Co., Inc., and 7 cases of
spare parts valued at P92,361.75, consigned to Central Textile Mills, Inc. Both
sets of goods were insured against marine risk for their stated value with
respondent Development Insurance and Surety Corporation.
In G.R. No. 71478, during the same period, the same vessel took on board
128 cartons of garment fabrics and accessories, in two (2) containers,
consigned to Mariveles Apparel Corporation, and two cases of surveying
instruments consigned to Aman Enterprises and General Merchandise. The
128 cartons were insured for their stated value by respondent Nisshin Fire &
Marine Insurance Co., for US $46,583.00, and the 2 cases by respondent
Dowa Fire & Marine Insurance Co., Ltd., for US $11,385.00.
Enroute for Kobe, Japan, to Manila, the vessel caught fire and sank, resulting
in the total loss of ship and cargo. The respective respondent Insurers paid the
corresponding marine insurance values to the consignees concerned and were
thus subrogated unto the rights of the latter as the insured.
G.R. NO. 69044
On May 11, 1978, respondent Development Insurance & Surety Corporation
(Development Insurance, for short), having been subrogated unto the rights of
the two insured companies, filed suit against petitioner Carrier for the recovery
of the amounts it had paid to the insured before the then Court of First instance
of Manila, Branch XXX (Civil Case No. 6087).
Petitioner-Carrier denied liability mainly on the ground that the loss was due to
an extraordinary fortuitous event, hence, it is not liable under the law.
On August 31, 1979, the Trial Court rendered judgment in favor of
Development Insurance in the amounts of P256,039.00 and P92,361.75,
respectively, with legal interest, plus P35,000.00 as attorney's fees and costs.
Petitioner Carrier took an appeal to the then Court of Appeals which, on
August 14, 1984, affirmed.
Petitioner Carrier is now before us on a Petition for Review on Certiorari.
G.R. NO. 71478
On June 16, 1978, respondents Nisshin Fire & Marine Insurance Co. NISSHIN
for short), and Dowa Fire & Marine Insurance Co., Ltd. (DOWA, for brevity), as
subrogees of the insured, filed suit against Petitioner Carrier for the recovery of
the insured value of the cargo lost with the then Court of First Instance of
Manila, Branch 11 (Civil Case No. 116151), imputing unseaworthiness of the
ship and non-observance of extraordinary diligence by petitioner Carrier.
Petitioner Carrier denied liability on the principal grounds that the fire which
caused the sinking of the ship is an exempting circumstance under Section
4(2) (b) of the Carriage of Goods by Sea Act (COGSA); and that when the loss
of fire is established, the burden of proving negligence of the vessel is shifted
to the cargo shipper.
On September 15, 1980, the Trial Court rendered judgment in favor of
NISSHIN and DOWA in the amounts of US $46,583.00 and US $11,385.00,
respectively, with legal interest, plus attorney's fees of P5,000.00 and costs.
On appeal by petitioner, the then Court of Appeals on September 10, 1984,
affirmed with modification the Trial Court's judgment by decreasing the amount
recoverable by DOWA to US $1,000.00 because of $500 per package
limitation of liability under the COGSA.
Hence, this Petition for Review on certiorari by Petitioner Carrier.
Both Petitions were initially denied for lack of merit. G.R. No. 69044 on
January 16, 1985 by the First Division, and G. R. No. 71478 on September 25,
1985 by the Second Division. Upon Petitioner Carrier's Motion for
Reconsideration, however, G.R. No. 69044 was given due course on March
25, 1985, and the parties were required to submit their respective Memoranda,
which they have done.
On the other hand, in G.R. No. 71478, Petitioner Carrier sought
reconsideration of the Resolution denying the Petition for Review and moved
for its consolidation with G.R. No. 69044, the lower-numbered case, which was
then pending resolution with the First Division. The same was granted; the
Resolution of the Second Division of September 25, 1985 was set aside and
the Petition was given due course.
At the outset, we reject Petitioner Carrier's claim that it is not the operator of
the M/S Asiatica but merely a charterer thereof. We note that in G.R. No.
69044, Petitioner Carrier stated in its Petition:
There are about 22 cases of the "ASIATICA" pending in various
courts where various plaintiffs are represented by various counsel
representing various consignees or insurance companies. The
common defendant in these cases is petitioner herein, being the
operator of said vessel. ... 1
Petitioner Carrier should be held bound to said admission. As a general rule,
the facts alleged in a party's pleading are deemed admissions of that party and
binding upon it.
2
And an admission in one pleading in one action may be
received in evidence against the pleader or his successor-in-interest on the
trial of another action to which he is a party, in favor of a party to the latter
action.
3

The threshold issues in both cases are: (1) which law should govern — the
Civil Code provisions on Common carriers or the Carriage of Goods by Sea
Act? and (2) who has the burden of proof to show negligence of the carrier?
On the Law Applicable
The law of the country to which the goods are to be transported governs the
liability of the common carrier in case of their loss, destruction or
deterioration.
4
As the cargoes in question were transported from Japan to the
Philippines, the liability of Petitioner Carrier is governed primarily by the Civil
Code.
5
However, in all matters not regulated by said Code, the rights and
obligations of common carrier shall be governed by the Code of Commerce
and by special laws.
6
Thus, the Carriage of Goods by Sea Act, a special law,
is suppletory to the provisions of the Civil Code.
7

On the Burden of Proof
Under the Civil Code, common carriers, from the nature of their business and
for reasons of public policy, are bound to observe extraordinary diligence in the
vigilance over goods, according to all the circumstances of each
case.
8
Common carriers are responsible for the loss, destruction, or
deterioration of the goods unless the same is due to any of the following
causes only:
(1) Flood, storm, earthquake, lightning or other natural disaster
or calamity;
xxx xxx xxx
9

Petitioner Carrier claims that the loss of the vessel by fire exempts it from
liability under the phrase "natural disaster or calamity. " However, we are of the
opinion that fire may not be considered a natural disaster or calamity. This
must be so as it arises almost invariably from some act of man or by human
means. 10 It does not fall within the category of an act of God unless caused by
lightning 11 or by other natural disaster or calamity. 12 It may even be caused
by the actual fault or privity of the carrier. 13
Article 1680 of the Civil Code, which considers fire as an extraordinary
fortuitous event refers to leases of rural lands where a reduction of the rent is
allowed when more than one-half of the fruits have been lost due to such
event, considering that the law adopts a protection policy towards
agriculture. 14
As the peril of the fire is not comprehended within the exception in Article
1734, supra, Article 1735 of the Civil Code provides that all cases than those
mention in Article 1734, the common carrier shall be presumed to have been
at fault or to have acted negligently, unless it proves that it has observed the
extraordinary deligence required by law.
In this case, the respective Insurers. as subrogees of the cargo shippers, have
proven that the transported goods have been lost. Petitioner Carrier has also
proved that the loss was caused by fire. The burden then is upon Petitioner
Carrier to proved that it has exercised the extraordinary diligence required by
law. In this regard, the Trial Court, concurred in by the Appellate Court, made
the following Finding of fact:
The cargoes in question were, according to the witnesses
defendant placed in hatches No, 2 and 3 cf the vessel,
Boatswain Ernesto Pastrana noticed that smoke was coming
out from hatch No. 2 and hatch No. 3; that where the smoke
was noticed, the fire was already big; that the fire must have
started twenty-four 24) our the same was noticed; that carbon
dioxide was ordered released and the crew was ordered to
open the hatch covers of No, 2 tor commencement of fire
fighting by sea water: that all of these effort were not enough to
control the fire.
Pursuant to Article 1733, common carriers are bound to
extraordinary diligence in the vigilance over the goods. The
evidence of the defendant did not show that extraordinary
vigilance was observed by the vessel to prevent the occurrence of
fire at hatches numbers 2 and 3. Defendant's evidence did not
likewise show he amount of diligence made by the crew, on
orders, in the care of the cargoes. What appears is that after the
cargoes were stored in the hatches, no regular inspection was
made as to their condition during the voyage. Consequently, the
crew could not have even explain what could have caused the fire.
The defendant, in the Court's mind, failed to satisfactorily show
that extraordinary vigilance and care had been made by the crew
to prevent the occurrence of the fire. The defendant, as a common
carrier, is liable to the consignees for said lack of deligence
required of it under Article 1733 of the Civil Code. 15
Having failed to discharge the burden of proving that it had exercised the
extraordinary diligence required by law, Petitioner Carrier cannot escape
liability for the loss of the cargo.
And even if fire were to be considered a "natural disaster" within the meaning
of Article 1734 of the Civil Code, it is required under Article 1739 of the same
Code that the "natural disaster" must have been the "proximate and only cause
of the loss," and that the carrier has "exercised due diligence to prevent or
minimize the loss before, during or after the occurrence of the disaster. " This
Petitioner Carrier has also failed to establish satisfactorily.
Nor may Petitioner Carrier seek refuge from liability under the Carriage of
Goods by Sea Act, It is provided therein that:
Sec. 4(2). Neither the carrier nor the ship shall be responsible
for loss or damage arising or resulting from
(b) Fire, unless caused by the actual fault or privity of the
carrier.
xxx xxx xxx
In this case, both the Trial Court and the Appellate Court, in effect, found, as a
fact, that there was "actual fault" of the carrier shown by "lack of diligence" in
that "when the smoke was noticed, the fire was already big; that the fire must
have started twenty-four (24) hours before the same was noticed; " and that
"after the cargoes were stored in the hatches, no regular inspection was made
as to their condition during the voyage." The foregoing suffices to show that
the circumstances under which the fire originated and spread are such as to
show that Petitioner Carrier or its servants were negligent in connection
therewith. Consequently, the complete defense afforded by the COGSA when
loss results from fire is unavailing to Petitioner Carrier.
On the US $500 Per Package Limitation:
Petitioner Carrier avers that its liability if any, should not exceed US $500 per
package as provided in section 4(5) of the COGSA, which reads:
(5) Neither the carrier nor the ship shall in any event be or
become liable for any loss or damage to or in connection with
the transportation of goods in an amount exceeding $500 per
package lawful money of the United States, or in case of goods
not shipped in packages, per customary freight unit, or the
equivalent of that sum in other currency, unless the nature and
value of such goods have been declared by the shipper before
shipment and inserted in bill of lading. This declaration if
embodied in the bill of lading shall be prima facie evidence, but
all be conclusive on the carrier.
By agreement between the carrier, master or agent of the
carrier, and the shipper another maximum amount than that
mentioned in this paragraph may be fixed: Provided, That such
maximum shall not be less than the figure above named. In no
event shall the carrier be Liable for more than the amount of
damage actually sustained.
xxx xxx xxx
Article 1749 of the New Civil Code also allows the limitations of liability in this
wise:
Art. 1749. A stipulation that the common carrier's liability as
limited to the value of the goods appearing in the bill of lading,
unless the shipper or owner declares a greater value, is
binding.
It is to be noted that the Civil Code does not of itself limit the liability of the
common carrier to a fixed amount per package although the Code expressly
permits a stipulation limiting such liability. Thus, the COGSA which is
suppletory to the provisions of the Civil Code, steps in and supplements the
Code by establishing a statutory provision limiting the carrier's liability in the
absence of a declaration of a higher value of the goods by the shipper in the
bill of lading. The provisions of the Carriage of Goods by.Sea Act on limited
liability are as much a part of a bill of lading as though physically in it and as
much a part thereof as though placed therein by agreement of the parties. 16
In G.R. No. 69044, there is no stipulation in the respective Bills of Lading
(Exhibits "C-2" and "I-3") 1 7 limiting the carrier's liability for the loss or
destruction of the goods. Nor is there a declaration of a higher value of the
goods. Hence, Petitioner Carrier's liability should not exceed US $500 per
package, or its peso equivalent, at the time of payment of the value of the
goods lost, but in no case "more than the amount of damage actually
sustained."
The actual total loss for the 5,000 pieces of calorized lance pipes was
P256,039 (Exhibit "C"), which was exactly the amount of the insurance
coverage by Development Insurance (Exhibit "A"), and the amount affirmed to
be paid by respondent Court. The goods were shipped in 28 packages (Exhibit
"C-2") Multiplying 28 packages by $500 would result in a product of $14,000
which, at the current exchange rate of P20.44 to US $1, would be P286,160, or
"more than the amount of damage actually sustained." Consequently, the
aforestated amount of P256,039 should be upheld.
With respect to the seven (7) cases of spare parts (Exhibit "I-3"), their actual
value was P92,361.75 (Exhibit "I"), which is likewise the insured value of the
cargo (Exhibit "H") and amount was affirmed to be paid by respondent Court.
however, multiplying seven (7) cases by $500 per package at the present
prevailing rate of P20.44 to US $1 (US $3,500 x P20.44) would yield P71,540
only, which is the amount that should be paid by Petitioner Carrier for those
spare parts, and not P92,361.75.
In G.R. No. 71478, in so far as the two (2) cases of surveying instruments are
concerned, the amount awarded to DOWA which was already reduced to
$1,000 by the Appellate Court following the statutory $500 liability per
package, is in order.
In respect of the shipment of 128 cartons of garment fabrics in two (2)
containers and insured with NISSHIN, the Appellate Court also limited
Petitioner Carrier's liability to $500 per package and affirmed the award of
$46,583 to NISSHIN. it multiplied 128 cartons (considered as COGSA
packages) by $500 to arrive at the figure of $64,000, and explained that "since
this amount is more than the insured value of the goods, that is $46,583, the
Trial Court was correct in awarding said amount only for the 128 cartons,
which amount is less than the maximum limitation of the carrier's liability."
We find no reversible error. The 128 cartons and not the two (2) containers
should be considered as the shipping unit.
In Mitsui & Co., Ltd. vs. American Export Lines, Inc. 636 F 2d 807 (1981), the
consignees of tin ingots and the shipper of floor covering brought action
against the vessel owner and operator to recover for loss of ingots and floor
covering, which had been shipped in vessel — supplied containers. The U.S.
District Court for the Southern District of New York rendered judgment for the
plaintiffs, and the defendant appealed. The United States Court of Appeals,
Second Division, modified and affirmed holding that:
When what would ordinarily be considered packages are
shipped in a container supplied by the carrier and the number
of such units is disclosed in the shipping documents, each of
those units and not the container constitutes the "package"
referred to in liability limitation provision of Carriage of Goods
by Sea Act. Carriage of Goods by Sea Act, 4(5), 46 U.S.C.A.&
1304(5).
Even if language and purposes of Carriage of Goods by Sea
Act left doubt as to whether carrier-furnished containers whose
contents are disclosed should be treated as packages, the
interest in securing international uniformity would suggest that
they should not be so treated. Carriage of Goods by Sea Act,
4(5), 46 U.S.C.A. 1304(5).
... After quoting the statement in Leather's Best, supra, 451 F
2d at 815, that treating a container as a package is inconsistent
with the congressional purpose of establishing a reasonable
minimum level of liability, Judge Beeks wrote, 414 F. Supp. at
907 (footnotes omitted):
Although this approach has not completely
escaped criticism, there is, nonetheless, much
to commend it. It gives needed recognition to
the responsibility of the courts to construe and
apply the statute as enacted, however great
might be the temptation to "modernize" or
reconstitute it by artful judicial gloss. If
COGSA's package limitation scheme suffers
from internal illness, Congress alone must
undertake the surgery. There is, in this regard,
obvious wisdom in the Ninth Circuit's
conclusion in Hartford that technological
advancements, whether or not forseeable by
the COGSA promulgators, do not warrant a
distortion or artificial construction of the
statutory term "package." A ruling that these
large reusable metal pieces of transport
equipment qualify as COGSA packages — at
least where, as here, they were carrier owned
and supplied — would amount to just such a
distortion.
Certainly, if the individual crates or cartons
prepared by the shipper and containing his
goods can rightly be considered "packages"
standing by themselves, they do not suddenly
lose that character upon being stowed in a
carrier's container. I would liken these
containers to detachable stowage
compartments of the ship. They simply serve to
divide the ship's overall cargo stowage space
into smaller, more serviceable loci. Shippers'
packages are quite literally "stowed" in the
containers utilizing stevedoring practices and
materials analogous to those employed in
traditional on board stowage.
In Yeramex International v. S.S. Tando,, 1977 A.M.C. 1807
(E.D. Va.) rev'd on other grounds, 595 F 2nd 943 (4 Cir. 1979),
another district with many maritime cases followed Judge
Beeks' reasoning in Matsushita and similarly rejected the
functional economics test. Judge Kellam held that when rolls of
polyester goods are packed into cardboard cartons which are
then placed in containers, the cartons and not the containers
are the packages.
xxx xxx xxx
The case of Smithgreyhound v. M/V Eurygenes, 18 followed the Mitsui test:
Eurygenes concerned a shipment of stereo equipment
packaged by the shipper into cartons which were then placed
by the shipper into a carrier- furnished container. The number
of cartons was disclosed to the carrier in the bill of lading.
Eurygenes followed the Mitsui test and treated the cartons, not
the container, as the COGSA packages. However, Eurygenes
indicated that a carrier could limit its liability to $500 per
container if the bill of lading failed to disclose the number of
cartons or units within the container, or if the parties indicated,
in clear and unambiguous language, an agreement to treat the
container as the package.
(Admiralty Litigation in Perpetuum: The
Continuing Saga of Package Limitations and
Third World Delivery Problems by Chester D.
Hooper & Keith L. Flicker, published in
Fordham International Law Journal, Vol. 6,
1982-83, Number 1) (Emphasis supplied)
In this case, the Bill of Lading (Exhibit "A") disclosed the following data:
2 Containers
(128) Cartons)
Men's Garments Fabrics and Accessories Freight Prepaid
Say: Two (2) Containers Only.
Considering, therefore, that the Bill of Lading clearly disclosed the contents of
the containers, the number of cartons or units, as well as the nature of the
goods, and applying the ruling in the Mitsui and Eurygenes cases it is clear
that the 128 cartons, not the two (2) containers should be considered as the
shipping unit subject to the $500 limitation of liability.
True, the evidence does not disclose whether the containers involved herein
were carrier-furnished or not. Usually, however, containers are provided by the
carrier. 19 In this case, the probability is that they were so furnished for
Petitioner Carrier was at liberty to pack and carry the goods in containers if
they were not so packed. Thus, at the dorsal side of the Bill of Lading (Exhibit
"A") appears the following stipulation in fine print:
11. (Use of Container) Where the goods receipt of which is
acknowledged on the face of this Bill of Lading are not already
packed into container(s) at the time of receipt, the Carrier shall
be at liberty to pack and carry them in any type of container(s).
The foregoing would explain the use of the estimate "Say: Two (2) Containers
Only" in the Bill of Lading, meaning that the goods could probably fit in two (2)
containers only. It cannot mean that the shipper had furnished the containers
for if so, "Two (2) Containers" appearing as the first entry would have sufficed.
and if there is any ambiguity in the Bill of Lading, it is a cardinal principle in the
construction of contracts that the interpretation of obscure words or stipulations
in a contract shall not favor the party who caused the obscurity.
20
This applies
with even greater force in a contract of adhesion where a contract is already
prepared and the other party merely adheres to it, like the Bill of Lading in this
case, which is draw. up by the carrier.
21

On Alleged Denial of Opportunity to Present Deposition of Its Witnesses: (in
G.R. No. 69044 only)
Petitioner Carrier claims that the Trial Court did not give it sufficient time to
take the depositions of its witnesses in Japan by written interrogatories.
We do not agree. petitioner Carrier was given- full opportunity to present its
evidence but it failed to do so. On this point, the Trial Court found:
xxx xxx xxx
Indeed, since after November 6, 1978, to August 27, 1979, not
to mention the time from June 27, 1978, when its answer was
prepared and filed in Court, until September 26, 1978, when
the pre-trial conference was conducted for the last time, the
defendant had more than nine months to prepare its evidence.
Its belated notice to take deposition on written interrogatories of
its witnesses in Japan, served upon the plaintiff on August
25th, just two days before the hearing set for August 27th,
knowing fully well that it was its undertaking on July 11 the that
the deposition of the witnesses would be dispensed with if by
next time it had not yet been obtained, only proves the lack of
merit of the defendant's motion for postponement, for which
reason it deserves no sympathy from the Court in that regard.
The defendant has told the Court since February 16, 1979, that
it was going to take the deposition of its witnesses in Japan.
Why did it take until August 25, 1979, or more than six months,
to prepare its written interrogatories. Only the defendant itself is
to blame for its failure to adduce evidence in support of its
defenses.
xxx xxx xxx
22

Petitioner Carrier was afforded ample time to present its side of the case.
23
It
cannot complain now that it was denied due process when the Trial Court
rendered its Decision on the basis of the evidence adduced. What due process
abhors is absolute lack of opportunity to be heard.
24

On the Award of Attorney's Fees:
Petitioner Carrier questions the award of attorney's fees. In both cases,
respondent Court affirmed the award by the Trial Court of attorney's fees of
P35,000.00 in favor of Development Insurance in G.R. No. 69044, and
P5,000.00 in favor of NISSHIN and DOWA in G.R. No. 71478.
Courts being vested with discretion in fixing the amount of attorney's fees, it is
believed that the amount of P5,000.00 would be more reasonable in G.R. No.
69044. The award of P5,000.00 in G.R. No. 71478 is affirmed.
WHEREFORE, 1) in G.R. No. 69044, the judgment is modified in that
petitioner Eastern Shipping Lines shall pay the Development Insurance and
Surety Corporation the amount of P256,039 for the twenty-eight (28) packages
of calorized lance pipes, and P71,540 for the seven (7) cases of spare parts,
with interest at the legal rate from the date of the filing of the complaint on
June 13, 1978, plus P5,000 as attorney's fees, and the costs.
2) In G.R.No.71478,the judgment is hereby affirmed.
SO ORDERED.
Narvasa, Cruz, Feliciano and Gancayco, JJ., concur.


Separate Opinions

YAP, J ., concurring and dissenting:
With respect to G.R. No. 71478, the majority opinion holds that the 128 cartons
of textile materials, and not the two (2) containers, should be considered as the
shipping unit for the purpose of applying the $500.00 limitation under the
Carriage of Goods by Sea Act (COGSA).
The majority opinion followed and applied the interpretation of the COGSA
"package" limitation adopted by the Second Circuit, United States Court of
Appeals, in Mitsui & Co., Ltd. vs. American Export Lines, Inc., 636 F. 2d 807
(1981) and the Smithgreyhound v. M/V Eurygenes, 666, F 2nd, 746. Both
cases adopted the rule that carrier-furnished containers whose contents are
fully disclosed are not "packages" within the meaning of Section 4 (5) of
COGSA.
I cannot go along with the majority in applying
the Mitsui and Eurygenes decisions to the present case, for the following
reasons: (1) The facts in those cases differ materially from those obtaining in
the present case; and (2) the rule laid down in those two cases is by no means
settled doctrine.
In Mitsui and Eurygenes, the containers were supplied by the carrier or
shipping company. In Mitsui the Court held: "Certainly, if the individual crates
or cartons prepared by the shipper and containing his goods can rightly be
considered "packages" standing by themselves, they do not suddenly lose that
character upon being stowed in a carrier's container. I would liken these
containers to detachable stowage compartments of the ship." Cartons or
crates placed inside carrier-furnished containers are deemed stowed in the
vessel itself, and do not lose their character as individual units simply by being
placed inside container provided by the carrier, which are merely "detachable
stowage compartments of the ship.
In the case at bar, there is no evidence showing that the two containers in
question were carrier-supplied. This fact cannot be presumed. The facts of the
case in fact show that this was the only shipment placed in containers. The
other shipment involved in the case, consisting of surveying instruments, was
packed in two "cases."
We cannot speculate on the meaning of the words "Say: Two (2) Containers
Only, " which appear in the bill of lading. Absent any positive evidence on this
point, we cannot say that those words constitute a mere estimate that the
shipment could fit in two containers, thereby showing that when the goods
were delivered by the shipper, they were not yet placed inside the containers
and that it was the petitioner carrier which packed the goods into its own
containers, as authorized under paragraph 11 on the dorsal side of the bill of
lading, Exhibit A. Such assumption cannot be made in view of the following
words clearly stamped in red ink on the face of the bill of lading: "Shipper's
Load, Count and Seal Said to Contain." This clearly indicates that it was the
shipper which loaded and counted the goods placed inside the container and
sealed the latter.
The two containers were delivered by the shipper to the carrier already sealed
for shipment, and the number of cartons said to be contained inside them was
indicated in the bill of lading, on the mere say-so of the shipper. The freight
paid to the carrier on the shipment was based on the measurement (by
volume) of the two containers at $34.50 per cubic meter. The shipper must
have saved on the freight charges by using containers for the shipment. Under
the circumstances, it would be unfair to the carrier to have the limitation of its
liability under COGSA fixed on the number of cartons inside the containers,
rather than on the containers themselves, since the freight revenue was based
on the latter.
The Mitsui and Eurygenes decisions are not the last word on the subject. The
interpretation of the COGSA package limitation is in a state of flux, 1 as the
courts continue to wrestle with the troublesome problem of applying the
statutory limitation under COGSA to containerized shipments. The law was
adopted before modern technological changes have revolutionized the
shipping industry. There is need for the law itself to be updated to meet the
changes brought about by the container revolution, but this is a task which
should be addressed by the legislative body. Until then, this Court, while
mindful of American jurisprudence on the subject, should make its own
interpretation of the COGSA provisions, consistent with what is equitable to the
parties concerned. There is need to balance the interests of the shipper and
those of the carrier.
In the case at bar, the shipper opted to ship the goods in two containers, and
paid freight charges based on the freight unit, i.e., cubic meters. The shipper
did not declare the value of the shipment, for that would have entailed higher
freight charges; instead of paying higher freight charges, the shipper protected
itself by insuring the shipment. As subrogee, the insurance company can
recover from the carrier only what the shipper itself is entitled to recover, not
the amount it actually paid the shipper under the insurance policy.
In our view, under the circumstances, the container should be regarded as the
shipping unit or "package" within the purview of COGSA. However, we realize
that this may not be equitable as far as the shipper is concerned. If the
container is not regarded as a "package" within the terms of COGSA, then, the
$500.00 liability limitation should be based on "the customary freight unit." Sec.
4 (5) of COGSA provides that in case of goods not shipped in packages, the
limit of the carrier's liability shall be $500.00 "per customary freight unit." In the
case at bar, the petitioner's liability for the shipment in question based on
"freight unit" would be $21,950.00 for the shipment of 43.9 cubic meters.
I concur with the rest of the decision.
Sarmiento, J., concur.




Separate Opinions

YAP, J ., concurring and dissenting:
With respect to G.R. No. 71478, the majority opinion holds that the 128 cartons
of textile materials, and not the two (2) containers, should be considered as the
shipping unit for the purpose of applying the $500.00 limitation under the
Carriage of Goods by Sea Act (COGSA).
The majority opinion followed and applied the interpretation of the COGSA
"package" limitation adopted by the Second Circuit, United States Court of
Appeals, in Mitsui & Co., Ltd. vs. American Export Lines, Inc., 636 F. 2d 807
(1981) and the Smithgreyhound v. M/V Eurygenes, 666, F 2nd, 746. Both
cases adopted the rule that carrier-furnished containers whose contents are
fully disclosed are not "packages" within the meaning of Section 4 (5) of
COGSA.
I cannot go along with the majority in applying
the Mitsui and Eurygenes decisions to the present case, for the following
reasons: (1) The facts in those cases differ materially from those obtaining in
the present case; and (2) the rule laid down in those two cases is by no means
settled doctrine.
In Mitsui and Eurygenes, the containers were supplied by the carrier or
shipping company. In Mitsui the Court held: "Certainly, if the individual crates
or cartons prepared by the shipper and containing his goods can rightly be
considered "packages" standing by themselves, they do not suddenly lose that
character upon being stowed in a carrier's container. I would liken these
containers to detachable stowage compartments of the ship." Cartons or
crates placed inside carrier-furnished containers are deemed stowed in the
vessel itself, and do not lose their character as individual units simply by being
placed inside container provided by the carrier, which are merely "detachable
stowage compartments of the ship.
In the case at bar, there is no evidence showing that the two containers in
question were carrier-supplied. This fact cannot be presumed. The facts of the
case in fact show that this was the only shipment placed in containers. The
other shipment involved in the case, consisting of surveying instruments, was
packed in two "cases."
We cannot speculate on the meaning of the words "Say: Two (2) Containers
Only, " which appear in the bill of lading. Absent any positive evidence on this
point, we cannot say that those words constitute a mere estimate that the
shipment could fit in two containers, thereby showing that when the goods
were delivered by the shipper, they were not yet placed inside the containers
and that it was the petitioner carrier which packed the goods into its own
containers, as authorized under paragraph 11 on the dorsal side of the bill of
lading, Exhibit A. Such assumption cannot be made in view of the following
words clearly stamped in red ink on the face of the bill of lading: "Shipper's
Load, Count and Seal Said to Contain." This clearly indicates that it was the
shipper which loaded and counted the goods placed inside the container and
sealed the latter.
The two containers were delivered by the shipper to the carrier already sealed
for shipment, and the number of cartons said to be contained inside them was
indicated in the bill of lading, on the mere say-so of the shipper. The freight
paid to the carrier on the shipment was based on the measurement (by
volume) of the two containers at $34.50 per cubic meter. The shipper must
have saved on the freight charges by using containers for the shipment. Under
the circumstances, it would be unfair to the carrier to have the limitation of its
liability under COGSA fixed on the number of cartons inside the containers,
rather than on the containers themselves, since the freight revenue was based
on the latter.
The Mitsui and Eurygenes decisions are not the last word on the subject. The
interpretation of the COGSA package limitation is in a state of flux, 1 as the
courts continue to wrestle with the troublesome problem of applying the
statutory limitation under COGSA to containerized shipments. The law was
adopted before modern technological changes have revolutionized the
shipping industry. There is need for the law itself to be updated to meet the
changes brought about by the container revolution, but this is a task which
should be addressed by the legislative body. Until then, this Court, while
mindful of American jurisprudence on the subject, should make its own
interpretation of the COGSA provisions, consistent with what is equitable to the
parties concerned. There is need to balance the interests of the shipper and
those of the carrier.
In the case at bar, the shipper opted to ship the goods in two containers, and
paid freight charges based on the freight unit, i.e., cubic meters. The shipper
did not declare the value of the shipment, for that would have entailed higher
freight charges; instead of paying higher freight charges, the shipper protected
itself by insuring the shipment. As subrogee, the insurance company can
recover from the carrier only what the shipper itself is entitled to recover, not
the amount it actually paid the shipper under the insurance policy.
In our view, under the circumstances, the container should be regarded as the
shipping unit or "package" within the purview of COGSA. However, we realize
that this may not be equitable as far as the shipper is concerned. If the
container is not regarded as a "package" within the terms of COGSA, then, the
$500.00 liability limitation should be based on "the customary freight unit." Sec.
4 (5) of COGSA provides that in case of goods not shipped in packages, the
limit of the carrier's liability shall be $500.00 "per customary freight unit." In the
case at bar, the petitioner's liability for the shipment in question based on
"freight unit" would be $21,950.00 for the shipment of 43.9 cubic meters.
I concur with the rest of the decision.
Sarmiento, J., concur.

Footnotes
1 Petition, p. 6, Rollo of G.R. No. 69044, p. 15.
2 Granada vs. PNB, 18 SCRA 1 (1966); Gardner vs. CA, 131
SCRA 85 (1984)
3 p.51, Vol. 5, Rules of Court by Ruperto G. Martin, citing 31
C.J.S. 1075.
4 Article 1753, Civil Code.
5 See Samar Mining Co., Inc. vs. Nordeutscher Lloyd, 132
SCRA 529 (1984).
6 Art. 1766, Civil Code; Samar Mining Co. Inc. vs. Lloyd, supra.
7 See American President Lines vs. Klepper, 110 Phil. 243,
248 (1960).
8 Article 1733, Civil Code.
9 Article 1734, Civil Code.
10 Africa vs. Caltex Phil. 16 SCRA 448, 455 (1966).
11 Lloyd vs. Haugh & K. Storage & Transport Co., 293 Pa. 148,
A 516; Forward v. Pittard, ITR 27, 99 Eng. Reprint, 953.
12 Article 1734, Civil Code.
13 Section 4, Carriage of Goods by Sea Act.
14 Manresa, cited in p. 147, V. Outline of the Civil Law, J.B.L.
Reyes and R.C. Puno.
15 Decision, Court of Appeals in CA-G.R. No. 67848-R,
appealed in G.R. No. 71478.
16 Shackman v. Cunard White Star, D.C. N. Y. 1940, 31 F.
Supp. 948. 46 USCA 866: cited in Phoenix Assurance
Company vs. Macondray 64 SCRA 15 (1975),
17 Folio of Exhibits, pp. 6 and 23.
18 666 F. 2d 746, 1982 A.M.C. 320 (2d Circuits 1981).
19 A container is a permanent reusable article of transport
equipment not packaging of goods durably made of metal, and
equipped with doors for easy access to the goods and for
repeated use. It is designed to facilitate the handling, loading,
stowage aboard ship, carriage, discharge from ship,
movement, and transfer of large numbers of packages
simultaneously by mechanical means to minimize the cost and
risks of manually processing each package individually, It
functions primarily as ship's gear for cargo handling, and is
usually provided by the carrier. (Simon, The Law of Shipping
Containers) (Emphasis supplied).
20 Article 1377, Civil Code.
21 See Qua Chee Gan vs. Law Union & Rock Ins. Co., Ltd., 98
Phil. 85 (1956).
22 Amended Record on Appeal, Annex "D," p. 62; Rollo in G.R.
No. 69044, p. 89.
23 Associated Citizens Bank vs. Ople, 103 SCRA 130 (1981).
24 Tajonera vs. Lamaroza, 110 SCRA 438 (1981).
Yap, J.:
1 See R.M. Sharpe, Jr. and Mark E. Steiner, "The Container as
Customary Freight Unit". Round Two of the Container
Debate?", South Texas Law Journal Vol. 24, No. 2 (1983).

G.R. No. L-48757 May 30, 1988
MAURO GANZON, petitioner,
vs.
COURT OF APPEALS and GELACIO E. TUMAMBING, respondents.
Antonio B. Abinoja for petitioner.
Quijano, Arroyo & Padilla Law Office for respondents.

SARMIENTO, J .:
The private respondent instituted in the Court of First Instance of Manila
1
an
action against the petitioner for damages based on culpa contractual. The
antecedent facts, as found by the respondent Court,
2
are undisputed:
On November 28, 1956, 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" (Exhibit 1, Stipulation of Facts,
Amended Record on Appeal, p. 38). Pursuant to that agreement, Mauro B.
Ganzon sent his lighter "Batman" to Mariveles where it docked in three feet of
water (t.s.n., September 28, 1972, p. 31). On December 1, 1956, Gelacio
Tumambing delivered the scrap iron to defendant Filomeno Niza, captain of
the lighter, for loading which was actually begun on the same date by the crew
of the lighter under the captain's supervision. When about half of the scrap iron
was already loaded (t.s.n., December 14, 1972, p. 20), Mayor Jose Advincula
of Mariveles, Bataan, arrived and demanded P5,000.00 from Gelacio
Tumambing. The latter resisted the shakedown and after a heated argument
between them, Mayor Jose Advincula drew his gun and fired at Gelacio
Tumambing (t.s.n., March 19, 1971, p. 9; September 28, 1972, pp. 6-7).<äre||anº• 1àw> The
gunshot was not fatal but Tumambing had to be taken to a hospital in Balanga,
Bataan, for treatment (t.s.n., March 19, 1971, p. 13; September 28, 1972, p.
15).
After sometime, the loading of the scrap iron was resumed. But on December
4, 1956, Acting Mayor Basilio Rub, accompanied by three policemen, ordered
captain Filomeno Niza and his crew to dump the scrap iron (t.s.n., June 16,
1972, pp. 8-9) where the lighter was docked (t.s.n., September 28, 1972, p.
31). The rest was brought to the compound of NASSCO (Record on Appeal,
pp. 20-22). Later on Acting Mayor Rub issued a receipt stating that the
Municipality of Mariveles had taken custody of the scrap iron (Stipulation of
Facts, Record on Appeal, p. 40; t.s.n., September 28, 1972, p. 10.)
On the basis of the above findings, the respondent Court rendered a decision,
the dispositive portion of which states:
WHEREFORE, the decision appealed from is hereby reversed
and set aside and a new one entered ordering defendant-appellee
Mauro Ganzon to pay plaintiff-appellant Gelacio E. Tumambimg
the sum of P5,895.00 as actual damages, the sum of P5,000.00
as exemplary damages, and the amount of P2,000.00 as
attorney's fees. Costs against defendant-appellee Ganzon.
3

In this petition for review on certiorari, the alleged errors in the decision of the
Court of Appeals are:
I
THE COURT OF APPEALS FINDING THE HEREIN PETITIONER GUILTY OF
BREACH OF THE CONTRACT OF TRANSPORTATION AND IN IMPOSING
A LIABILITY AGAINST HIM COMMENCING FROM THE TIME THE SCRAP
WAS PLACED IN HIS CUSTODY AND CONTROL HAVE NO BASIS IN FACT
AND IN LAW.
II
THE APPELLATE COURT ERRED IN CONDEMNING THE PETITIONER
FOR THE ACTS OF HIS EMPLOYEES IN DUMPING THE SCRAP INTO THE
SEA DESPITE THAT IT WAS ORDERED BY THE LOCAL GOVERNMENT
OFFICIAL WITHOUT HIS PARTICIPATION.
III
THE APPELLATE COURT FAILED TO CONSIDER THAT THE LOSS OF THE
SCRAP WAS DUE TO A FORTUITOUS EVENT AND THE PETITIONER IS
THEREFORE NOT LIABLE FOR LOSSES AS A CONSEQUENCE
THEREOF.
4

The petitioner, in his first assignment of error, 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 Court's finding that
on December 1, 1956, the private respondent delivered the scraps to Captain
Filomeno Niza for loading in the lighter "Batman," That the petitioner, thru his
employees, actually received the scraps is freely admitted. Significantly, there
is not the slightest allegation or showing of any condition, qualification, or
restriction accompanying the delivery by the private respondent-shipper of the
scraps, or the receipt of the same by the petitioner. On the contrary, soon after
the scraps were delivered to, and received by the petitioner-common carrier,
loading was commenced.
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-carrier's extraordinary responsibility for the loss,
destruction or deterioration of the goods commenced. Pursuant to Art. 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.
5
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 still unloaded.
The petitioner has failed to show that the loss of the scraps was due to any of
the following causes enumerated in Article 1734 of the Civil Code, namely:
(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;
(5) Order or act of competent public authority.
Hence, the petitioner is presumed to have been at fault or to have acted
negligently.
6
By reason of this presumption, the court is not even required to
make an express finding of fault or negligence before it could hold the
petitioner answerable for the breach of the contract of carriage. Still, the
petitioner could have been exempted from any liability had he been able to
prove that he observed extraordinary diligence in the vigilance over the goods
in his custody, according to all the circumstances of the case, or that the loss
was due to an unforeseen event or to force majeure. As it was, there was
hardly any attempt on the part of the petitioner to prove that he exercised such
extraordinary diligence.
It is in the second and third assignments of error where the petitioner
maintains that he is exempt from any liability because the loss of the scraps
was due mainly to the intervention of the municipal officials of Mariveles which
constitutes a caso fortuito as defined in Article 1174 of the Civil Code.
7

We cannot sustain the theory of caso fortuito. In the courts below, the
petitioner's defense was that the loss of the scraps was due to an "order or act
of competent public authority," and this contention was correctly passed upon
by the Court of Appeals which ruled that:
... In the second place, before the appellee Ganzon could be
absolved from responsibility on the ground that he was ordered
by competent public authority to unload the scrap iron, it must
be shown that Acting Mayor Basilio Rub had the power to issue
the disputed order, or that it was lawful, or that it was issued
under legal process of authority. The appellee failed to
establish this. Indeed, no authority or power of the acting
mayor to issue such an order was given in evidence. Neither
has it been shown that the cargo of scrap iron belonged to the
Municipality of Mariveles. What we have in the record is the
stipulation of the parties that the cargo of scrap iron was
accilmillated by the appellant through separate purchases here
and there from private individuals (Record on Appeal, pp. 38-
39). The fact remains that the order given by the acting mayor
to dump the scrap iron into the sea was part of the pressure
applied by Mayor Jose Advincula to shakedown the appellant
for P5,000.00. The order of the acting mayor did not constitute
valid authority for appellee Mauro Ganzon and his
representatives to carry out.
Now the petitioner is changing his theory to caso fortuito. Such a change of
theory on appeal we cannot, however, allow. In any case, the intervention of
the municipal officials was not In any case, of a character that would render
impossible the fulfillment by the carrier of its obligation. The petitioner was not
duty bound to obey the illegal order to dump into the sea the scrap 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 petitioner's employees. The mere difficulty in the fullfilment of the
obligation is not considered force majeure. We agree with the private
respondent that the scraps could have been properly unloaded at the shore or
at the NASSCO compound, so that after the dispute with the local officials
concerned was settled, the scraps could then be delivered in accordance with
the contract of carriage.
There is no incompatibility between the Civil Code provisions on common
carriers and Articles 361
8
and 362
9
of the Code of Commerce which were the
basis for this Court's ruling in Government of the Philippine Islands vs.
Ynchausti & Co.10 and which the petitioner invokes in tills petition. For Art.
1735 of the Civil Code, conversely stated, means that the shipper will suffer
the losses and deterioration arising from the causes enumerated in Art. 1734;
and in these instances, the burden of proving that damages were caused by
the fault or negligence of the carrier rests upon him. However, the carrier must
first establish that the loss or deterioration was occasioned by one of the
excepted causes or was due to an unforeseen event or to force majeure. Be
that as it may, insofar as Art. 362 appears to require of the carrier only ordinary
diligence, the same is .deemed to have been modified by Art. 1733 of the Civil
Code.
Finding the award of actual and exemplary damages to be proper, the same
will not be disturbed by us. Besides, these were not sufficiently controverted by
the petitioner.
WHEREFORE, the petition is DENIED; the assailed decision of the Court of
Appeals is hereby AFFIRMED. Costs against the petitioner.
This decision is IMMEDIATELY EXECUTORY.
Yap, C.J., Paras and Padilla, JJ., concur.


Separate Opinions

MELENCIO-HERRERA, J ., dissenting:
I am constrained to dissent.
It is my view that petitioner can not be held liable in damages for the loss and
destruction of the scrap iron. The loss of said cargo was due to an excepted
cause an 'order or act of competent public authority" (Article 1734[5], Civil
Code).
The loading of the scrap iron on the lighter had to be suspended because of
Municipal Mayor Jose Advincula's intervention, who was a "competent public
authority." Petitioner had no control over the situation as, in fact, Tumambing
himself, the owner of the cargo, was impotent to stop the "act' of said official
and even suffered a gunshot wound on the occasion.
When loading was resumed, this time it was Acting Mayor Basilio Rub,
accompanied by three policemen, who ordered the dumping of the scrap iron
into the sea right where the lighter was docked in three feet of water. Again,
could the captain of the lighter and his crew have defied said order?
Through the "order" or "act" of "competent public authority," therefore, the
performance of a contractual obligation was rendered impossible. The scrap
iron that was dumped into the sea was "destroyed" while the rest of the cargo
was "seized." The seizure is evidenced by the receipt issues by Acting Mayor
Rub stating that the Municipality of Mariveles had taken custody of the scrap
iron. Apparently, therefore, the seizure and destruction of the goods was done
under legal process or authority so that petitioner should be freed from
responsibility.
Art. 1743. If through order of public authority the goods are
seized or destroyed, the common carrier is not responsible,
provided said public authority had power to issue the order.


Separate Opinions
MELENCIO-HERRERA, J ., dissenting:
I am constrained to dissent.
It is my view that petitioner can not be held liable in damages for the loss and
destruction of the scrap iron. The loss of said cargo was due to an excepted
cause an 'order or act of competent public authority" (Article 1734[5], Civil
Code).
The loading of the scrap iron on the lighter had to be suspended because of
Municipal Mayor Jose Advincula's intervention, who was a "competent public
authority." Petitioner had no control over the situation as, in fact, Tumambing
himself, the owner of the cargo, was impotent to stop the "act' of said official
and even suffered a gunshot wound on the occasion.
When loading was resumed, this time it was Acting Mayor Basilio Rub,
accompanied by three policemen, who ordered the dumping of the scrap iron
into the sea right where the lighter was docked in three feet of water. Again,
could the captain of the lighter and his crew have defied said order?
Through the "order" or "act" of "competent public authority," therefore, the
performance of a contractual obligation was rendered impossible. The scrap
iron that was dumped into the sea was "destroyed" while the rest of the cargo
was "seized." The seizure is evidenced by the receipt issues by Acting Mayor
Rub stating that the Municipality of Mariveles had taken custody of the scrap
iron. Apparently, therefore, the seizure and destruction of the goods was done
under legal process or authority so that petitioner should be freed from
responsibility.
Art. 1743. If through order of public authority the goods are
seized or destroyed, the common carrier is not responsible,
provided said public authority had power to issue the order.
Footnotes
1 Presided by Judge Jesus P. Morfe
2 Pascual, Chairman, ponente; Agrava and Climaco, JJ.,
concurring.
3 Decision, 9; Rollo 19.
4 Petitioner's Brief, 3, 7, 9; Rollo, 41.
5 Article 1736, Civil Code of the Philippines:
Art. 1736. The extraordinary responsibility of the common
carriers lasts from the time the goods are unconditionally
placed in the possession of, and received by the carrier for
transportation until the same are delivered, actually or
constructively, by the carrier to the consignee, or to the person
who has a right to receive them, without prejudice to the
provisions of article 1738.
6 Article 1735, supra.
Art. 1735. In all cases other than those mentioned in Nos. 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.
7 Art. 11 74, supra:
Art. 1174. Except in cases expressly specified by the law, or
when it is otherwise declared by stipulation, or when the nature
of the obligation requires the assumption of risk, no person
shall be responsible for those events which could not be
foreseen, or which though for foreseen were inevitable.
8 Article 361, Code of Commerce:
Art. 361. The merchandise shall
be transported at the risk and
venture of the shipper, if the
contrary has not been expressly
stipulated.
As a consequence, all the
losses and deterioration which
the goods may suffer during the
transportation by reason of
fortuitous event, force majeure,
or the inherent nature and
defect of the goods, shall be for
the account and risk of the
shipper.
Proof of these accidents is
incumbent upon the carrier.
9 Article 362, Code of Commerce:
Art. 362. Nevertheless, the
carrier shall be liable for the
losses and damages resulting
from the causes mentioned in
the preceding article if it is
proved, as against him, that
they arose through his
negligence or by reason of his
having failed to take the
precautions which usage has
established among careful
persons, unless the shipper has
committed fraud in the bill of
lading, representing the goods
to be of a kind or quality
different from what they really
were.
If, notwithstanding the
precautions referred to in to
article, the goods transported
run the risk of being lost, on
account of their nature or by
reason of unavoidable accident,
there being no time for their
owners to dispose of them, the
carrier may proceed to sell
them, placing them for this
purpose at the disposal of the
judicial authority or of the
officials designated by special
provisions.
10 No. 14191, September 29, 1919, 40 Phil. 219

G.R. No. 70876 July 19, 1990
MA. LUISA BENEDICTO, petitioner,
vs.
HON. INTERMEDIATE APPELLATE COURT and GREENHILLS WOOD
INDUSTRIES COMPANY, INC.respondents.
Britanico, Panganiban, Benitez, Africa, Linsangan and Barinaga for petitioner.
Abelardo V. Viray for private respondent.

FELICIANO, J .:
This Petition for Review asks us to set aside the Decision of the then
Intermediate Appellate Court dated 30 January 1985 in A.C.-G.R. CV No.
01454, which affirmed in toto the decision of the Regional Trial Court ("RTC")
of Dagupan City in Civil Case No. 5206. There, the RTC held petitioner Ma.
Luisa Benedicto liable to pay private respondent Greenhills Wood Industries
Company, Inc. ("Greenhills") the amounts of P16,016.00 and P2,000.00
representing the cost of Greenhills' lost sawn lumber and attorney's fees,
respectively.
Private respondent Greenhills, a lumber manufacturing firm with business
address at Dagupan City, operates sawmill in Maddela, Quirino.
Sometime in May 1980, private respondent bound itself to sell and deliver to
Blue Star Mahogany, Inc., ("Blue Star") a company with business operations in
Valenzuela, Bulacan 100,000 board feet of sawn lumber with the
understanding that an initial delivery would be made on 15 May 1980.
1
To
effect its first delivery, private respondent's resident manager in Maddela,
Dominador Cruz, contracted Virgilio Licuden, the driver of a cargo truck
bearing Plate No. 225 GA TH to transport its sawn lumber to the consignee
Blue Star in Valenzuela, Bulacan. This cargo truck was registered in the name
of petitioner Ma. Luisa Benedicto, the proprietor of Macoven Trucking, a
business enterprise engaged in hauling freight, with main office in B.F. Homes,
Parañaque.
On 15 May 1980, Cruz in the presence and with the consent of driver Licuden,
supervised the loading of 7,690 board feet of sawn lumber with invoice value
of P16,918.00 aboard the cargo truck. Before the cargo truck left Maddela for
Valenzuela, Bulacan, Cruz issued to Licuden Charge Invoices Nos. 3259 and
3260 both of which were initialed by the latter at the bottom left corner.
2
The
first invoice was for the amount of P11,822.80 representing the value of 5,374
board feet of sawn lumber, while the other set out the amount of P5,095.20 as
the value of 2,316 board feet. Cruz instructed Licuden to give the original
copies of the two (2) invoices to the consignee upon arrival in Valenzuela,
Bulacan
3
and to retain the duplicate copies in order that he could afterwards
claim the freightage from private respondent's Manila office.
4

On 16 May 1980, the Manager of Blue Star called up by long distance
telephone Greenhills' president, Henry Lee Chuy, informing him that the sawn
lumber on board the subject cargo truck had not yet arrived in Valenzuela,
Bulacan. The latter in turn informed Greenhills' resident manager in its
Maddela saw-mill of what had happened. In a letter
5
dated 18 May 1980, Blue
Star's administrative and personnel manager, Manuel R. Bautista, formally
informed Greenhills' president and general manager that Blue Star still had not
received the sawn lumber which was supposed to arrive on 15 May 1980 and
because of this delay, "they were constrained to look for other suppliers."
On 25 June 1980, after confirming the above with Blue Star and after trying
vainly to persuade it to continue with their contract, private respondent
Greenhill's filed Criminal Case No. 668 against driver Licuden for estafa.
Greenhills also filed against petitioner Benedicto Civil Case No. D-5206 for
recovery of the value of the lost sawn lumber plus damages before the RTC of
Dagupan City.
In her answer,
6
petitioner Benedicto denied liability alleging that she was a
complete stranger to the contract of carriage, the subject truck having been
earlier sold by her to Benjamin Tee, on 28 February 1980 as evidenced by a
deed of sale.
7
She claimed that the truck had remained registered in her name
notwithstanding its earlier sale to Tee because the latter had paid her only
P50,000.00 out of the total agreed price of P68,000.00 However, she averred
that Tee had been operating the said truck in Central Luzon from that date (28
February 1980) onwards, and that, therefore, Licuden was Tee's employee
and not hers.
On 20 June 1983, based on the finding that petitioner Benedicto was still the
registered owner of the subject truck, and holding that Licuden was her
employee, the trial court adjudged as follows:
WHEREFORE, in the light of the foregoing considerations, this
Court hereby renders judgment against defendant Maria Luisa
Benedicto, ordering her to pay the Greenhills Wood Industries
Co. Inc., thru its President and General Manager, the amount
of P16,016 cost of the sawn lumber loaded on the cargo truck,
with legal rate of interest from the filing of the complaint to pay
attorney's fees in the amount of P2,000.00; and to pay the
costs of this suit.
SO ORDERED.
8

On 30 January 1985, upon appeal by petitioner, the Intermediate Appellate
Court affirmed
9
the decision of the trial court in toto. Like the trial court, the
appellate court held that since petitioner was the registered owner of the
subject vehicle, Licuden the driver of the truck, was her employee, and that
accordingly petitioner should be responsible for the negligence of said driver
and bear the loss of the sawn lumber plus damages. Petitioner moved for
reconsideration, without success.
10

In the present Petition for Review, the sole issue raised is whether or not under
the facts and applicable law, the appellate court was correct in finding that
petitioner, being the registered owner of the carrier, should be held liable for
the value of the undelivered or lost sawn lumber.
Petitioner urges that she could not be held answerable for the loss of the
cargo, because the doctrine which makes the registered owner of a common
carrier vehicle answerable to the public for the negligence of the driver despite
the sale of the vehicle to another person, applies only to cases involving death
of or injury to passengers. What applies in the present case, according to
petitioner, is the rule that a contract of carriage requires proper delivery of the
goods to and acceptance by the carrier. Thus, petitioner contends that the
delivery to a person falsely representing himself to be an agent of the carrier
prevents liability from attaching to the registered owner.
The Court considers that petitioner has failed to show that appellate court
committed reversible error in affirming the trial court's holding that petitioner
was liable for the cost of the sawn lumber plus damages.
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 carriers 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. Thus, contrary to petitioner's
claim, private respondent is not required to go beyond the vehicle's 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 also because of the
aforementioned 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.
In fact, private respondent had no reason at all to doubt the authority of
Licuden to enter into a contract of carriage on behalf of the registered owner. It
appears that, earlier, in the first week of May 1980, private respondent
Greenhills had contracted Licuden who was then driving the same cargo truck
to transport and carry a load of sawn lumber from the Maddela sawmill to
Dagupan City.
12
No one came forward to question that contract or the
authority of Licuden to represent the owner of the carrier truck.
Moreover, assuming the truth of her story, petitioner Benedicto retained
registered ownership of the freight truck for her own benefit and convenience,
that is, to secure the payment of the balance of the selling price of the truck.
She may have been unaware of the legal security device of chattel mortgage;
or she, or her buyer, may have been unwilling to absorb the expenses of
registering a chattel mortgage over the truck. In either case, considerations
both of public policy and of equity require that she bear the consequences
flowing from registered ownership of the subject vehicle.
Petitioner Benedicto, however, insists that the said principle should apply only
to cases involving negligence and resulting injury to or death of passengers,
and not to cases involving merely carriage of goods. We believe otherwise.
A common carrier, both from the nature of its business and for insistent
reasons of public policy, is burdened by the law with the duty of exercising
extraordinary diligence not only in ensuring the safety of passengers but also
in caring for goods transported by it.
13
The loss or destruction or deterioration
of goods turned over to the common carrier for conveyance to a designated
destination, raises instantly a presumption of fault or negligence on the part of
the carrier, save only where such loss, destruction or damage arises from
extreme circumstances such as a natural disaster or calamity or act of the
public enemy in time of war, or from an act or omission of the shipper himself
or from the character of the goods or their packaging or container.
14

This presumption may be overcome only by proof of extraordinary diligence on
the part of the carrier. Clearly, to permit a common carrier to escape its
responsibility for the passengers or goods transported by it by proving a prior
sale of the vehicle or means of transportation to an alleged vendee would be to
attenuate drastically the carrier's duty of extraordinary diligence. It would also
open wide the door to collusion between the carrier and the supposed vendee
and to shifting liability from the carrier to one without financial capability to
respond for the resulting damages. In other words, the thrust of the public
policy here involved is as sharp and real in the case of carriage of goods as it
is in the transporting of human beings. Thus, to sustain petitioner Benedicto's
contention, that is, to require the shipper to go behind a certificate of
registration of a public utility vehicle, would be utterly subversive of the
purpose of the law and doctrine.
Petitioner further insists that there was no perfected contract of carriage for the
reason that there was no proof that her consent or that of Tee had been
obtained; no proof that the driver, Licuden was authorized to bind the
registered owner; and no proof that the parties had agreed on the freightage to
be paid.
Once more, we are not persuaded by petitioner's arguments which appear to
be a transparent attempt to evade statutory responsibilities. Driver Licuden
was entrusted with possession and control of the freight truck by the registered
owner (and by the alleged secret owner, for that matter).i•t•c-aüsl Driver Licuden, under
the circumstances, was clothed with at least implied authority to contract to
carry goods and to accept delivery of such goods for carriage to a specified
destination. That the freight to be paid may-not have been fixed before loading
and carriage, did not prevent the contract of carriage from arising, since the
freight was at least determinable if not fixed by the tariff schedules in
petitioner's main business office. Put in somewhat different terms, driver
Licuden is in law regarded as the employee and agent of the petitioner, for
whose acts petitioner must respond. A contract of carriage of goods was
shown; the sawn lumber was loaded on board the freight truck; loss or non-
delivery of the lumber at Blue Star's premises in Valenzuela, Bulacan was also
proven; and petitioner has not proven either that she had exercised
extraordinary diligence to prevent such loss or non-delivery or that the loss or
non-delivery was due to some casualty or force majeure inconsistent with her
liability.
16
Petitioner's liability to private respondent Greenhills was thus fixed
and complete, without prejudice to petitioner's right to proceed against her
putative transferee Benjamin Tee and driver Licuden for reimbursement or
contribution.
17

WHEREFORE, the Petition for Review is DENIED for lack of merit and the
Decision of the former Intermediate Appellate Court dated 30 January 1985 is
hereby AFFIRMED. Costs against petitioner.
SO ORDERED.
Fernan (Chairman), Gutierrez, Jr., and Cortes, JJ., concur.
Bidin, J., took no part.

G.R. No. 94151 April 30, 1991
EASTERN SHIPPING LINES, INC., petitioner,
vs.
THE COURT OF APPEALS and THE FIRST NATIONWIDE ASSURANCE
CORPORATION, respondents.
Jimenez, Dala & Zaragoza for petitioner.
Reloy Law Office for private respondent.

GANCAYCO, J .:p
The extent of the liability of the common carrier and its insurer for damage to
the cargo upon its delivery to the arrastre operator is the center of this
controversy.
The findings of fact of the trial court which were adopted by the appellate court
and which are not disputed are as follows:
On September 4, 1978, thirteen coils of uncoated 7-wire stress
relieved wire strand for prestressed concrete were shipped on
board the vessel "Japri Venture," owned and operated by the
defendant Eastern Shipping Lines, Inc., at Kobe, Japan, for
delivery to Stresstek Post-Tensioning Phils., Inc. in Manila, as
evidenced by the bill of lading, commercial invoice, packing list
and commercial invoice marked Exhibits A, B, C, D; 3, 4, 5 and
6-Razon which were insured by the plaintiff First Nationwide
Assurance Corporation for P171,923 (Exhibit E).
On September 16, 1978, the carrying vessel arrived in Manila
and discharged the cargo to the custody of the defendant E.
Razon, Inc. (Exhibits 1, 2, 3, 4 and 5-ESL), from whom the
consignee's customs broker received it for delivery to the
consignee's warehouse.
On February 19, 1979, the plaintiff indemnified the consignee
in the amount of P171,923.00 for damage and loss to the
insured cargo, whereupon the former was subrogated for the
latter (Exhibit I).
The plaintiff now seeks to recover from the defendants what it
has indemnified the consignee, less P48,293.70, the salvage
value of the cargo, or the total amount of P123,629.30.
It appears that while enroute from Kobe to Manila, the carrying
vessel "encountered very rough seas and stormy weather" for
three days, more or less, which caused it to roll and pound
heavily, moving its master to execute a marine note of protest
upon arrival at the port of Manila on September 15, 1978 (Exhibit
1-Razon); that the coils wrapped in burlap cloth and cardboard
paper were stored in the lower hold of the hatch of the vessel
which was flooded with water about one foot deep; that the water
entered the hatch when the vessel encountered heavy weather
enroute to Manila (Exhibits G, 2, 2A, 2B-Razon); that upon
request, a survey of bad order cargo was conducted at the pier in
the presence of the representatives of the consignee and the
defendant E. Razon, Inc. and it was found that seven coils were
rusty on one side each (Exhibits F and 10-Razon); that upon
survey conducted at the consignee's warehouse it was found that
the "wetting (of the cargo) was caused by fresh water" that
entered the hatch when the vessel encountered heavy weather
enroute to Manila (p. 3, Exhibit G); and that all thirteen coils were
extremely rusty and totally unsuitable for the intended purpose (p.
3, Exhibit G), (pp. 217-218, orig. rec.)
1

The complaint that was filed by the First Nationwide Assurance Corporation
(insurer) against Eastern Shipping Lines, Inc. and E. Razon, Inc., in the
Regional Trial Court, Manila, was dismissed in a decision dated November 25,
1985. An appeal therefrom was interposed by the insurer to the Court of
Appeals wherein in due course a decision was rendered on April 27, 1990, the
dispositive part of which reads as follows:
WHEREFORE, the judgment appealed from is hereby SET
ASIDE. The appellees are ordered to pay the appellant the
sum of P123,629.30, with legal rate of interest from July 24,
1979 until fully paid, Eastern Shipping Lines, Inc. to assume
8/13 thereof, and E. Razon, Inc. to assume 5/13 thereof. No
pronouncement as to costs.
SO ORDERED.
2

Only Eastern Shipping Lines, Inc. filed this petition for review
by certiorari based on the following assigned errors:
I. IT REFUSED TO CONSIDER THE COUNTER-
ASSIGNMENT OF ERRORS OF PETITIONER AS
CONTAINED IN ITS BRIEF FOR THE DEFENDANT-
APPELLEE EASTERN SHIPPING LINES, INC. AND WHICH
ARE ONLY MEANT TO SUSTAIN THE DECISION OF
DISMISSAL OF THE TRIAL COURT;
II. AGAINST ITS OWN FINDINGS OF FACT THAT THE
CARGO WAS DISCHARGED AND DELIVERED COMPLETE
UNTO THE CUSTODY OF THE ARRASTRE OPERATOR
UNDER CLEAN TALLY SHEETS, IT NEVERTHELESS
ARBITRARILY CONCLUDED PETITIONER AS LIABLE FOR
THE CLAIMED DAMAGES;
III. IT FAILED TO HOLD PETITIONER RELIEVED OF ANY
LIABILITY OVER THE CARGO NOTWITHSTANDING IT
FOUND THAT THE SAME WAS DISCHARGED AND
DELIVERED UNTO THE CUSTODY OF THE ARRASTRE
OPERATOR UNDER CLEAN TALLY SHEETS AND ERGO TO
BE CONSIDERED GOOD ORDER CARGO WHEN
DELIVERED; and,
IV. IT ARBITRARILY AWARDED INTEREST AT THE LEGAL
RATE TO COMMENCE FROM THE DATE OF THE COMPLAINT
IN VIOLATION OF THE DOCTRINAL RULE THAT IN CASE OF
UNLIQUIDATED CLAIMS SUCH AS THE CLAIM IN QUESTION,
INTEREST SHOULD ONLY COMMENCE FROM THE DATE OF
THE DECISION OF THE TRIAL COURT.
3

Under the first assigned error, petitioner contends that the appellate court did
not consider its counter-assignment of errors which was only meant to sustain
the decision of dismissal of the trial court. An examination of the questioned
decision shows that the appellate court did not consider the counter-
assignment of errors of petitioner as it did not appeal the decision of the trial
court.
Nevertheless, when such counter-assignments are intended to sustain the
judgment appealed from on other grounds, but not to seek modification or
reversal thereof, the appellate court should consider the same in the
determination of the case but no affirmative relief can be granted thereby other
than what had been obtained from the lower court.
4
The contention of
petitioner on this aspect is, thus, well-taken.
Be that as it may, under the second and third assigned errors, petitioner claims
it should not be held liable as the shipment was discharged and delivered
complete into the custody of the arrastre operator under clean tally sheets.
While it is true the cargo was delivered to the arrastre operator in apparent
good order condition, it is also undisputed that while en route from Kobe to
Manila, the vessel encountered "very rough seas and stormy weather", the
coils wrapped in burlap cloth and cardboard paper were stored in the lower
hatch of the vessel which was flooded with water about one foot deep; that the
water entered the hatch; that a survey of bad order cargo which was
conducted in the pier in the presence of representatives of the consignee and
E. Razon, Inc., showed that seven coils were rusty on one side (Exhibits F and
10-Razon); that a survey conducted at the consignee's warehouse also
showed that the "wetting (of the cargo) was caused by fresh water" that
entered the hatch when the vessel encountered heavy rain en route to Manila
(Exhibit G); and that all thirteen coils were extremely rusty and totally
unsuitable for the intended purpose.
5

Consequently, based on these facts, the appellate court made the following
findings and conclusions:
Plainly, the heavy seas and rains referred to in the master's
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 theJupri 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.
Moreover, under Article 1733 of the Civil Code, common
carriers are bound to observe "extra-ordinary vigilance over
goods . . . .according to all circumstances of each case," and
Article 1735 of the same Code states, to wit:
Art. 1735. In all cases other than those
mentioned in Nos. 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.
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.
The Court agrees with and is bound by the foregoing findings of fact made by
the appellate court. The presumption, therefore, that the cargo was in apparent
good condition when it was delivered by the vessel to the arrastre operator by
the clean tally sheets has been overturned and traversed. The evidence is
clear to the effect that the damage to the cargo was suffered while aboard
petitioner's vessel.
The last assigned error is untenable. The interest due on the amount of the
judgment should commence from the date of judicial demand.
6

WHEREFORE, the petition is DISMISSED, with costs against petitioner.
SO ORDERED.
Narvasa, Cruz, Griño-Aquino and Medialdea, JJ., concur.

G.R. No. 108897 October 2, 1997
SARKIES TOURS PHILIPPINES, INC., petitioner,
vs.
HONORABLE COURT OF APPEALS (TENTH DIVISION), DR. ELINO G.
FORTADES, MARISOL A. FORTADES and FATIMA MINERVA A.
FORTADES, respondents.

ROMERO, J .:
This petition for review is seeking the reversal of the decision of the Court of
Appeals in CA-G.R. CV No. 18979 promulgated on January 13, 1993, as well
as its resolution of February 19, 1993, denying petitioner's motion for
reconsideration for being a mere rehash of the arguments raised in the
appellant's brief.
The case arose from a damage suit filed by private respondents Elino, Marisol,
and Fatima Minerva, all surnamed Fortades, against petitioner for breach of
contract of carriage allegedly attended by bad faith.
On August 31, 1984, Fatima boarded petitioner's De Luxe Bus No. 5 in Manila
on her way to Legazpi City. Her brother Raul helped her load three pieces of
luggage containing all of her optometry review books, materials and
equipment, trial lenses, trial contact lenses, passport and visa, as well as her
mother Marisol's U.S. immigration (green) card, among other important
documents and personal belongings. Her belongings were kept in the baggage
compartment of the bus, but during a stopover at Daet, it was discovered that
only one bag remained in the open compartment. The others, including
Fatima's things, were missing and might have dropped along the way. Some of
the passengers suggested retracing the route of the bus to try to recover the
lost items, but the driver ignored them and proceeded to Legazpi City.
Fatima immediately reported the loss to her mother who, in turn, went to
petitioner's office in Legazpi City and later at its head office in Manila.
Petitioner, however, merely offered her P1,000.00 for each piece of luggage
lost, which she turned down. After returning to Bicol, disappointed but not
defeated, mother and daughter asked assistance from the radio stations and
even from Philtranco bus drivers who plied the same route on August 31st.
The effort paid off when one of Fatima's bags was recovered. Marisol further
reported the incident to the National Bureau of Investigation's field office in
Legazpi City and to the local police.
On September 20, 1984, respondents, through counsel, formally demanded
satisfaction of their complaint from petitioner. In a letter dated October 1, 1984,
the latter apologized for the delay and said that "(a) team has been sent out to
Bicol for the purpose of recovering or at least getting the full detail"
1
of the
incident.
After more than nine months of fruitless waiting, respondents decided to file
the case below to recover the value of the remaining lost items, as well as
moral and exemplary damages, attorney's fees and expenses of litigation.
They claimed that the loss was due to petitioner's failure to observe
extraordinary diligence in the care of Fatima's luggage and that petitioner dealt
with them in bad faith from the start. Petitioner, on the other hand, disowned
any liability for the loss on the ground that Fatima allegedly did not declare any
excess baggage upon boarding its bus.
On June 15, 1988, after trial on the merits, the court a quo adjudged the case
in favor of respondents, viz.:
PREMISES CONSIDERED, judgment is hereby rendered in favor of
the plaintiffs (herein respondents) and against the herein defendant
Sarkies Tours Philippines, Inc., ordering the latter to pay to the former
the following sums of money, to wit:
1. The sum of P30,000.00 equivalent to the value of the personal
belongings of plaintiff Fatima Minerva Fortades, etc. less the value of
one luggage recovered;
2. The sum of P90,000.00 for the transportation expenses, as well as
moral damages;
3. The sum of P10,000.00 by way of exemplary damages;
4. The sum of P5,000.00 as attorney's fees; and
5. The sum of P5,000.00 as litigation expenses or a total of One
Hundred Forty Thousand (P140,000.00) Pesos.
to be paid by herein defendant Sarkies Tours Philippines, Inc. to the
herein plaintiffs within 30 days from receipt of this Decision.
SO ORDERED.
On appeal, the appellate court affirmed the trial court's judgment, but deleted
the award of moral and exemplary damages. Thus,
WHEREFORE, premises considered, except as above modified, fixing
the award for transportation expenses at P30,000.00 and the deletion
of the award for moral and exemplary damages, the decision appealed
from is AFFIRMED, with costs against defendant-appellant.
SO ORDERED.
Its motion for reconsideration was likewise rejected by the Court of Appeals, so
petitioner elevated its case to this Court for a review.
After a careful scrutiny of the records of this case, we are convinced that the
trial and appellate courts resolved the issues judiciously based on the
evidence at hand.
Petitioner claims that Fatima did not bring any piece of luggage with her, and
even if she did, none was declared at the start of the trip. The documentary
and testimonial evidence presented at the trial, however, established that
Fatima indeed boarded petitioner's De Luxe Bus No. 5 in the evening of
August 31, 1984, and she brought three pieces of luggage with her, as testified
by her brother Raul,
2
who helped her pack her things and load them on said
bus. One of the bags was even recovered by a Philtranco bus driver. In its
letter dated October 1, 1984, petitioner tacitly admitted its liability by
apologizing to respondents and assuring them that efforts were being made to
recover the lost items.
The records also reveal that respondents went to great lengths just to salvage
their loss. The incident was reported to the police, the NBI, and the regional
and head offices of petitioner. Marisol even sought the assistance of Philtranco
bus drivers and the radio stations. To expedite the replacement of her mother's
lost U.S. immigration documents, Fatima also had to execute an affidavit of
loss.
3
Clearly, they would not have gone through all that trouble in pursuit of a
fancied loss.
Fatima was not the only one who lost her luggage. Apparently, other
passengers had suffered a similar fate: Dr. Lita Samarista testified that
petitioner offered her P1,000.00 for her lost baggage and she accepted
it;
4
Carleen Carullo-Magno lost her chemical engineering review materials,
while her brother lost abaca products he was transporting to Bicol.
5

Petitioner's receipt of Fatima's personal luggage having been thus established,
it must now be determined if, as a common carrier, it is responsible for their
loss. Under the Civil Code, "(c)ommon carriers, from the nature of their
business and for reasons of public policy, are bound to observe extraordinary
diligence in the vigilance over the goods . . . transported by them,"
6
and this
liability "lasts from the time the goods are unconditionally placed in the
possession of, and received by the carrier for transportation until the same are
delivered, actually or constructively, by the carrier to . . . the person who has a
right to receive them,"
7
unless the loss is due to any of the excepted causes
under Article 1734 thereof.
8

The cause of the loss in the case at bar was petitioner's negligence in not
ensuring that the doors of the baggage compartment of its bus were securely
fastened. As a result of this lack of care, almost all of the luggage was lost, to
the prejudice of the paying passengers. As the Court of Appeals correctly
observed:
. . . . Where the common carrier accepted its passenger's baggage for
transportation and even had it placed in the vehicle by its own
employee, its failure to collect the freight charge is the common
carrier's own lookout. It is responsible for the consequent loss of the
baggage. In the instant case, defendant appellant's employee even
helped Fatima Minerva Fortades and her brother load the
luggages/baggages in the bus' baggage compartment, without asking
that they be weighed, declared, receipted or paid for (TSN, August 4,
1986, pp. 29, 34, 54, 57, 70; December 23, 1987, p. 35). Neither was
this required of the other passengers (TSN, August 4, 1986, p. 104;
February 5, 1988; p. 13).
Finally, petitioner questions the award of actual damages to respondents. On
this point, we likewise agree with the trial and appellate courts' conclusions.
There is no dispute that of the three pieces of luggage of Fatima, only one was
recovered. The other two contained optometry books, materials, equipment, as
well as vital documents and personal belongings. Respondents had to shuttle
between Bicol and Manila in their efforts to be compensated for the loss.
During the trial, Fatima and Marisol had to travel from the United States just to
be able to testify. Expenses were also incurred in reconstituting their lost
documents. Under these circumstances, the Court agrees with the Court of
Appeals in awarding P30,000.00 for the lost items and P30,000.00 for the
transportation expenses, but disagrees with the deletion of the award of moral
and exemplary damages which, in view of the foregoing proven facts, with
negligence and bad faith on the fault of petitioner having been duly
established, should be granted to respondents in the amount of P20,000.00
and P5,000.00, respectively.
WHEREFORE, the assailed decision of the Court of Appeals dated January
13, 1993, and its resolution dated February 19, 1993, are hereby AFFIRMED
with the MODIFICATION that petitioner is ordered to pay respondents an
additional P20,000.00 as moral damages and P5,000.00 as exemplary
damages. Costs against petitioner.
SO ORDERED.
Narvasa, C.J., Melo, Francisco and Panganiban, JJ., concur.

G.R. No. 102316 June 30, 1997
VALENZUELA HARDWOOD AND INDUSTRIAL SUPPLY INC., petitioner,
vs.
COURT OF APPEALS AND SEVEN BROTHERS SHIPPING
CORPORATION, respondents.

PANGANIBAN, J .:
Is a stipulation in a charter party that the "(o)wners shall not be responsible for
loss, split, short-landing, breakages and any kind of damages to the
cargo"
1
valid? This is the main question raised in this petition for review
assailing the Decision of Respondent Court of Appeals
2
in CA-G.R. No. CV-
20156 promulgated on October 15, 1991. The Court of Appeals modified the
judgment of the Regional Trial Court of Valenzuela, Metro Manila, Branch 171,
the dispositive portion of which reads:
WHEREFORE, Judgment is hereby rendered ordering South
Sea Surety and Insurance Co., Inc. to pay plaintiff the sum of
TWO MILLION PESOS (P2,000,000.00) representing the value
of the policy of the lost logs with legal interest thereon from the
date of demand on February 2, 1984 until the amount is fully
paid or in the alternative, defendant Seven Brothers Shipping
Corporation to pay plaintiff the amount of TWO MILLION
PESOS (2,000,000.00) representing the value of lost logs plus
legal interest from the date of demand on April 24, 1984 until
full payment thereof; the reasonable attorney's fees in the
amount equivalent to five (5) percent of the amount of the claim
and the costs of the suit.
Plaintiff is hereby ordered to pay defendant Seven Brothers
Shipping Corporation the sum of TWO HUNDRED THIRTY
THOUSAND PESOS (P230,000.00) representing the balance
of the stipulated freight charges.
Defendant South Sea Surety and Insurance Company's
counterclaim is hereby dismissed.
In its assailed Decision, Respondent Court of Appeals held:
WHEREFORE, the appealed judgment is hereby AFFIRMED
except in so far (sic) as the liability of the Seven Brothers Shipping
Corporation to the plaintiff is concerned which is hereby
REVERSED and SET ASIDE.
3

The Facts
The factual antecedents of this case as narrated in the Court of Appeals
Decision are as follows:
It appears that on 16 January 1984, plaintiff (Valenzuela
Hardwood and Industrial Supply, Inc.) entered into an
agreement with the defendant Seven Brothers (Shipping
Corporation) whereby the latter undertook to load on board its
vessel M/V Seven Ambassador the former's lauan round logs
numbering 940 at the port of Maconacon, Isabela for shipment
to Manila.
On 20 January 1984, plaintiff insured the logs against loss
and/or damage with defendant South Sea Surety and
Insurance Co., Inc. for P2,000,000.00 and the latter issued its
Marine Cargo Insurance Policy No. 84/24229 for
P2,000,000.00 on said date.
On 24 January 1984, the plaintiff gave the check in payment of
the premium on the insurance policy to Mr. Victorio Chua.
In the meantime, the said vessel M/V Seven Ambassador sank
on 25 January 1984 resulting in the loss of the plaintiff's
insured logs.
On 30 January 1984, a check for P5,625.00 (Exh. "E") to cover
payment of the premium and documentary stamps due on the
policy was tendered due to the insurer but was not accepted.
Instead, the South Sea Surety and Insurance Co., Inc.
cancelled the insurance policy it issued as of the date of the
inception for non-payment of the premium due in accordance
with Section 77 of the Insurance Code.
On 2 February 1984, plaintiff demanded from defendant South
Sea Surety and Insurance Co., Inc. the payment of the
proceeds of the policy but the latter denied liability under the
policy. Plaintiff likewise filed a formal claim with defendant
Seven Brothers Shipping Corporation for the value of the lost
logs but the latter denied the claim.
After due hearing and trial, the court a quo rendered judgment
in favor of plaintiff and against defendants. Both defendants
shipping corporation and the surety company appealed.
Defendant-appellant Seven Brothers Shipping Corporation
impute (sic) to the court a quo the following assignment of
errors, to wit:
A. The lower court erred in holding that the proximate cause of
the sinking of the vessel Seven Ambassadors, was not due to
fortuitous event but to the negligence of the captain in stowing
and securing the logs on board, causing the iron chains to snap
and the logs to roll to the portside.
B. The lower court erred in declaring that the non-liability
clause of the Seven Brothers Shipping Corporation from logs
(sic) of the cargo stipulated in the charter party is void for being
contrary to public policy invoking article 1745 of the New Civil
Code.
C. The lower court erred in holding defendant-appellant Seven
Brothers Shipping Corporation liable in the alternative and
ordering/directing it to pay plaintiff-appellee the amount of two
million (2,000,000.00) pesos representing the value of the logs
plus legal interest from date of demand until fully paid.
D. The lower court erred in ordering defendant-appellant Seven
Brothers Shipping Corporation to pay appellee reasonable
attorney's fees in the amount equivalent to 5% of the amount of
the claim and the costs of the suit.
E. The lower court erred in not awarding defendant-appellant
Seven Brothers Corporation its counter-claim for attorney's
fees.
F. The lower court erred in not dismissing the complaint against
Seven Brothers Shipping Corporation.
Defendant-appellant South Sea Surety and Insurance Co., Inc. assigns the
following errors:
A. The trial court erred in holding that Victorio Chua was an
agent of defendant-appellant South Sea Surety and Insurance
Company, Inc. and likewise erred in not holding that he was the
representative of the insurance broker Columbia Insurance
Brokers, Ltd.
B. The trial court erred in holding that Victorio Chua received
compensation/commission on the premiums paid on the
policies issued by the defendant-appellant South Sea Surety
and Insurance Company, Inc.
C. The trial court erred in not applying Section 77 of the
Insurance Code.
D. The trial court erred in disregarding the "receipt of payment
clause" attached to and forming part of the Marine Cargo
Insurance Policy No. 84/24229.
E. The trial court in disregarding the statement of account or bill
stating the amount of premium and documentary stamps to be
paid on the policy by the plaintiff-appellee.
F. The trial court erred in disregarding the endorsement of
cancellation of the policy due to non-payment of premium and
documentary stamps.
G. The trial court erred in ordering defendant-appellant South
Sea Surety and Insurance Company, Inc. to pay plaintiff-
appellee P2,000,000.00 representing value of the policy with
legal interest from 2 February 1984 until the amount is fully
paid,
H. The trial court erred in not awarding to the defendant-
appellant the attorney's fees alleged and proven in its
counterclaim.
The primary issue to be resolved before us is whether defendants
shipping corporation and the surety company are liable to the
plaintiff for the latter's lost logs.
4

The Court of Appeals affirmed in part the RTC judgment by sustaining the
liability of South Sea Surety and Insurance Company ("South Sea"), but
modified it by holding that Seven Brothers Shipping Corporation ("Seven
Brothers") was not liable for the lost cargo.
5
In modifying the RTC judgment,
the respondent appellate court ratiocinated thus:
It appears that there is a stipulation in the charter party that the
ship owner would be exempted from liability in case of loss.
The court a quo erred in applying the provisions of the Civil
Code on common carriers to establish the liability of the
shipping corporation. The provisions on common carriers
should not be applied where the 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 even for the negligence of its agent is valid (Home
Insurance Company, Inc. vs. American Steamship Agencies,
Inc., 23 SCRA 24).
The shipping corporation should not therefore be held liable for the
loss of the logs.
6

South Sea and herein Petitioner Valenzuela Hardwood and Industrial Supply,
Inc. ("Valenzuela") filed separate petitions for review before this Court. In a
Resolution dated June 2, 1995, this Court denied the petition of South
Sea.
7
There the Court found no reason to reverse the factual findings of the
trial court and the Court of Appeals that Chua was indeed an authorized agent
of South Sea when he received Valenzuela's premium payment for the marine
cargo insurance policy which was thus binding on the insurer.
8

The Court is now called upon to resolve the petition for review filed by
Valenzuela assailing the CA Decision which exempted Seven Brothers from
any liability for the lost cargo.
The Issue
Petitioner Valenzuela's arguments resolve around a single issue: "whether or
not respondent Court (of Appeals) committed a reversible error in upholding
the validity of the stipulation in the charter party executed between the
petitioner and the private respondent exempting the latter from liability for the
loss of petitioner's logs arising from the negligence of its (Seven Brothers')
captain."
9

The Court's Ruling
The petition is not meritorious.
Validity of Stipulation is Lis Mota
The charter party between the petitioner and private respondent stipulated that
the "(o)wners shall not be responsible for loss, split, short-landing, breakages
and any kind of damages to the cargo."
10
The validity of this stipulation is
the lis mota of this case.
It should be noted at the outset that there is no dispute between the parties
that the proximate cause of the sinking of M/V Seven Ambassadors resulting in
the loss of its cargo was the "snapping of the iron chains and the subsequent
rolling of the logs to the portside due to the negligence of the captain in
stowing and securing the logs on board the vessel and not due to fortuitous
event."
11
Likewise undisputed is the status of Private Respondent Seven
Brothers as a private carrier when it contracted to transport the cargo of
Petitioner Valenzuela. Even the latter admits this in its petition.
12

The trial court deemed the charter party stipulation void for being contrary to
public policy,
13
citing Article 1745 of the Civil Code which provides:
Art. 1745. Any of the following or similar stipulations shall be
considered unreasonable, unjust and contrary to public policy:
(1) That the goods are transported at the risk of the owner or
shipper;
(2) That the common carrier will not be liable for any loss,
destruction, or deterioration of the goods;
(3) That the common carrier need not observe any diligence in
the custody of the goods;
(4) That the common carrier shall exercise a degree of
diligence less than that of a good father of a family, or of a man
of ordinary prudence in the vigilance over the movables
transported;
(5) That the common carrier shall not be responsible for the
acts or omissions of his or its employees;
(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;
(7) That the common carrier is not responsible for the loss,
destruction, or deterioration of goods on account of the
defective condition of the car, vehicle, ship, airplane or other
equipment used in the contract of carriage.
Petitioner Valenzuela adds that the stipulation is void for being contrary to
Articles 586 and 587 of the Code of Commerce
14
and Articles 1170 and 1173
of the Civil Code. Citing Article 1306 and paragraph 1, Article 1409 of the Civil
Code,
15
petitioner further contends that said stipulation "gives no duty or
obligation to the private respondent to observe the diligence of a good father of
a family in the custody and transportation of the cargo."
The Court is not persuaded. As adverted to earlier, it is undisputed that private
respondent had acted as a private carrier in transporting petitioner's lauan
logs. Thus, Article 1745 and other Civil Code provisions on common carriers
which were cited by petitioner may not be applied unless expressly stipulated
by the parties in their charter party.
16

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.
The issue posed in this case and the arguments raised by petitioner are not
novel; they were resolved long ago by this Court in Home Insurance
Co. vs. American Steamship Agencies, Inc.
18
In that case, the trial court
similarly nullified a stipulation identical to that involved in the present case for
being contrary to public policy based on Article 1744 of the Civil Code and
Article 587 of the Code of Commerce. Consequently, the trial court held the
shipowner liable for damages resulting for the partial loss of the cargo. This
Court reversed the trial court and laid down, through Mr. Justice Jose P.
Bengzon, the following well-settled observation and doctrine:
The provisions of our Civil Code on common carriers were
taken from Anglo-American law. 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 not against public
policy, and is deemed valid.
Such doctrine We find reasonable. The Civil Code provisions on
common carriers should not be applied where the carrier is not
acting as such but as a private carrier. The stipulation in the
charter party absolving the owner from liability for loss due to the
negligence of its agent would be void if the strict public policy
governing common carriers is applied. Such policy has no force
where the public at large is not involved, as in this case of a ship
totally chartered for the used of a single party.
19
(Emphasis
supplied.)
Indeed, where the reason for the rule ceases, the rule itself does not apply.
The general public enters into a contract of transportation with common
carriers without a hand or a voice in the preparation thereof. The riding public
merely adheres to the contract; even if the public wants to, it cannot submit its
own stipulations for the approval of the common carrier. Thus, the law on
common carriers extends its protective mantle against one-sided stipulations
inserted in tickets, invoices or other documents over which the riding public
has no understanding or, worse, no choice. Compared to the general public, a
charterer in a contract of private carriage is not similarly situated. It can — and
in fact it usually does — enter into a free and voluntary agreement. In practice,
the parties in a contract of private carriage can stipulate the carrier's
obligations and liabilities over the shipment which, in turn, determine the price
or consideration of the charter. Thus, a charterer, in exchange for convenience
and economy, may opt to set aside the protection of the law on common
carriers. When the charterer decides to exercise this option, he takes a normal
business risk.
Petitioner contends that the rule in Home Insurance is not applicable to the
present case because it "covers only a stipulation exempting a private carrier
from liability for the negligence of his agent, but it does not apply to a
stipulation exempting a private carrier like private respondent from the
negligence of his employee or servant which is the situation in this
case."
20
This contention of petitioner is bereft of merit, for it raises a distinction
without any substantive difference. The case Home Insurance specifically dealt
with "the liability of the shipowner for acts or negligence of its captain and
crew"
21
and a charter party stipulation which "exempts the owner of the vessel
from any loss or damage or delay arising from any other source, even from the
neglect or fault of the captain or crew or some other person employed by the
owner on
board, for whose acts the owner would ordinarily be liable except for said
paragraph."
22
Undoubtedly, Home Insurance is applicable to the case at bar.
The naked assertion of petitioner that the American rule enunciated in Home
Insurance is not the rule in the Philippines
23
deserves scant consideration. The
Court there categorically held that said rule was "reasonable" and proceeded
to apply it in the resolution of that case. Petitioner miserably failed to show
such circumstances or arguments which would necessitate a departure from a
well-settled rule. Consequently, our ruling in said case remains a binding
judicial precedent based on the doctrine of stare decisis and Article 8 of the
Civil Code which provides that "(j)udicial decisions applying or interpreting the
laws or the Constitution shall form part of the legal system of the Philippines."
In fine, the respondent appellate court aptly stated that "[in the case of] a
private carrier, a stipulation exempting the owner from liability even for the
negligence of its agents is valid."
24

Other Arguments
On the basis of the foregoing alone, the present petition may already be
denied; the Court, however, will discuss the other arguments of petitioner for
the benefit and satisfaction of all concerned.
Articles 586 and 587, Code of Commerce
Petitioner Valenzuela insists that the charter party stipulation is contrary to
Articles 586 and 587 of the Code of Commerce which confer on petitioner the
right to recover damages from the shipowner and ship agent for the acts or
conduct of the captain.
25
We are not persuaded. Whatever rights petitioner
may have under the aforementioned statutory provisions were waived when it
entered into the charter party.
Article 6 of the Civil Code provides that "(r)ights may be waived, unless the
waiver is contrary to law, public order, public policy, morals, or good customs,
or prejudicial to a person with a right recognized by law." As a general rule,
patrimonial rights may be waived as opposed to rights to personality and family
rights which may not be made the subject of waiver.
26
Being patently and
undoubtedly patrimonial, petitioner's right conferred under said articles may be
waived. This, the petitioner did by acceding to the contractual stipulation that it
is solely responsible or any damage to the cargo, thereby exempting the
private carrier from any responsibility for loss or damage thereto. Furthermore,
as discussed above, the contract of private carriage binds petitioner and
private respondent alone; it is not imbued with public policy considerations for
the general public or third persons are not affected thereby.
Articles 1170 and 1173, Civil Code
Petitioner likewise argues that the stipulation subject of this controversy is void
for being contrary to Articles 1170 and 1173 of the Civil Code
27
which read:
Art. 1170. Those who in the performance of their obligations
are guilty of fraud, negligence, or delay, and those who in any
manner contravene the tenor thereof, are liable for damages
Art. 1173. The fault or negligence of the obligor consists in the
omission of that diligence which is required by the nature of the
obligation and corresponds with the circumstances of the
persons, of the time and of the place. When negligence shows
bad faith, the provisions of articles 1171 and 2201, shall apply.
If the law does not state the diligence which is to be observed
in the performance, that which is expected of a good father of a
family shall be required.
The Court notes that the foregoing articles are applicable only to the obligor or
the one with an obligation to perform. In the instant case, Private Respondent
Seven Brothers is not an obligor in respect of the cargo, for this obligation to
bear the loss was shifted to petitioner by virtue of the charter party. This
shifting of responsibility, as earlier observed, is not void. The provisions cited
by petitioner are, therefore, inapplicable to the present case.
Moreover, the factual milieu of this case does not justify the application of the
second paragraph of Article 1173 of the Civil Code which prescribes the
standard of diligence to be observed in the event the law or the contract is
silent. In the instant case, Article 362 of the Code of Commerce
28
provides the
standard of ordinary diligence for the carriage of goods by a carrier. The
standard of diligence under this statutory provision may, however, be modified
in a contract of private carriage as the petitioner and private respondent had
done in their charter party.
Cases Cited by Petitioner Inapplicable
Petitioner cites Shewaram vs. Philippine Airlines, Inc.
29
which, in turn,
quoted Juan Ysmael & Co. vs. Gabino Barreto & Co.
30
and argues that the
public policy considerations stated there vis-a-vis contractual stipulations
limiting the carrier's liability be applied "with equal force" to this case.
31
It also
cites Manila Railroad Co. vs.Compañia Transatlantica
32
and contends that
stipulations exempting a party from liability for damages due to negligence
"should not be countenanced" and should be "strictly construed" against the
party claiming its benefit.
33
We disagree.
The cases of Shewaram and Ysmael both involve a common carrier; thus, they
necessarily justify the application of such policy considerations and
concomitantly stricter rules. As already discussed above, the public policy
considerations behind the rigorous treatment of common carriers are absent in
the case of private carriers. Hence, the stringent laws applicable to common
carriers are not applied to private carries. The case of Manila Railroad is also
inapplicable because the action for damages there does not involve a contract
for transportation. Furthermore, the defendant therein made a "promise to use
due care in the lifting operations" and, consequently, it was "bound by its
undertaking"'; besides, the exemption was intended to cover accidents due to
hidden defects in the apparatus or other unforseeable occurrences" not
caused by its "personal negligence." This promise was thus constructed to
make sense together with the stipulation against liability for damages.
34
In the
present case, we stress that the private respondent made no such promise.
The agreement of the parties to exempt the shipowner from responsibility for
any damage to the cargo and place responsibility over the same to petitioner is
the lone stipulation considered now by this Court.
Finally, petitioner points to Standard Oil Co. of New York vs. Lopez
Costelo,
35
Walter A. Smith & Co. vs.Cadwallader Gibson Lumber
Co.,
36
N. T . Hashim and Co. vs. Rocha and Co.,
37
Ohta Development
Co. vs.Steamship "Pompey"
38
and Limpangco Sons vs. Yangco Steamship
Co.
39
in support of its contention that the shipowner be held liable for
damages.
40
These however are not on all fours with the present case because
they do not involve a similar factual milieu or an identical stipulation in the
charter party expressly exempting the shipowner form responsibility for any
damage to the cargo.
Effect of the South Sea Resolution
In its memorandum, Seven Brothers argues that petitioner has no cause of
action against it because this Court has earlier affirmed the liability of South
Sea for the loss suffered by petitioner. Private respondent submits that
petitioner is not legally entitled to collect twice for a single loss.
41
In view of the
above disquisition upholding the validity of the questioned charter party
stipulation and holding that petitioner may not recover from private respondent,
the present issue is moot and academic. It suffices to state that the Resolution
of this Court dated June 2, 1995
42
affirming the liability of South Sea does not,
by itself, necessarily preclude the petitioner from proceeding against private
respondent. An aggrieved party may still recover the deficiency for the person
causing the loss in the event the amount paid by the insurance company does
not fully cover the loss. Article 2207 of the Civil Code provides:
Art. 2207. If the plaintiff's property has been insured, and he
has received indemnity for the insurance company for the injury
or loss arising out of the wrong or breach of contract
complained of, the insurance company shall be subrogated to
the rights of the insured against the wrongdoer or the person
who has violated the contract. If the amount paid by the
insurance company does not fully cover the injury or loss, the
aggrieved party shall be entitled to recover the deficiency form
the person causing the loss or injury.
WHEREFORE, premises considered, the petition is hereby DENIED for its
utter failure to show any reversible error on the part of Respondent Court. The
assailed Decision is AFFIRMED.
SO ORDERED.
Narvasa, C.J., Davide, Jr., Melo and Francisco, JJ., concur.

G.R. No. 113003 October 17, 1997
ALBERTA YOBIDO and CRESENCIO YOBIDO, petitioners,
vs.
COURT OF APPEALS, LENY TUMBOY, ARDEE TUMBOY and JASMIN
TUMBOY, respondents.

ROMERO, J .:
In this petition for review on certiorari of the decision of the Court of Appeals,
the issue is whether or not the explosion of a newly installed tire of a
passenger vehicle is a fortuitous event that exempts the carrier from liability for
the death of a passenger.
On April 26, 1988, spouses Tito and Leny Tumboy and their minor children
named Ardee and Jasmin, bearded at Mangagoy, Surigao del Sur, a Yobido
Liner bus bound for Davao City. Along Picop Road in Km. 17, Sta. Maria,
Agusan del Sur, the left front tire of the bus exploded. The bus fell into a ravine
around three (3) feet from the road and struck a tree. The incident resulted in
the death of 28-year-old Tito Tumboy and physical injuries to other
passengers.
On November 21, 1988, a complaint for breach of contract of carriage,
damages and attorney's fees was filed by Leny and her children against
Alberta Yobido, the owner of the bus, and Cresencio Yobido, its driver, before
the Regional Trial Court of Davao City. When the defendants therein filed their
answer to the complaint, they raised the affirmative defense of caso fortuito.
They also filed a third-party complaint against Philippine Phoenix Surety and
Insurance, Inc. This third-party defendant filed an answer with compulsory
counterclaim. At the pre-trial conference, the parties agreed to a stipulation of
facts.
1

Upon a finding that the third party defendant was not liable under the
insurance contract, the lower court dismissed the third party complaint. No
amicable settlement having been arrived at by the parties, trial on the merits
ensued.
The plaintiffs asserted that violation of the contract of carriage between them
and the defendants was brought about by the driver's failure to exercise the
diligence required of the carrier in transporting passengers safely to their place
of destination. According to Leny Tumboy, the bus left Mangagoy at 3:00
o'clock in the afternoon. The winding road it traversed was not cemented and
was wet due to the rain; it was rough with crushed rocks. The bus which was
full of passengers had cargoes on top. Since it was "running fast," she
cautioned the driver to slow down but he merely stared at her through the
mirror. At around 3:30 p.m., in Trento, she heard something explode and
immediately, the bus fell into a ravine.
For their part, the defendants tried to establish that the accident was due to a
fortuitous event. Abundio Salce, who was the bus conductor when the incident
happened, testified that the 42-seater bus was not full as there were only 32
passengers, such that he himself managed to get a seat. He added that the
bus was running at a speed of "60 to 50" and that it was going slow because of
the zigzag road. He affirmed that the left front tire that exploded was a "brand
new tire" that he mounted on the bus on April 21, 1988 or only five (5) days
before the incident. The Yobido Liner secretary, Minerva Fernando, bought the
new Goodyear tire from Davao Toyo Parts on April 20, 1988 and she was
present when it was mounted on the bus by Salce. She stated that all driver
applicants in Yobido Liner underwent actual driving tests before they were
employed. Defendant Cresencio Yobido underwent such test and submitted
his professional driver's license and clearances from the barangay, the fiscal
and the police.
On August 29, 1991, the lower court rendered a decision
2
dismissing the
action for lack of merit. On the issue of whether or not the tire blowout was
a caso fortuito, it found that "the falling of the bus to the cliff was a result of no
other outside factor than the tire blow-out." It held that the ruling in the La
Mallorca and Pampanga Bus Co. v. De Jesus
3
that a tire blowout is "a
mechanical defect of the conveyance or a fault in its equipment which was
easily discoverable if the bus had been subjected to a more thorough or rigid
check-up before it took to the road that morning" is inapplicable to this case. It
reasoned out that in said case, it was found that the blowout was caused by
the established fact that the inner tube of the left front tire "was pressed
between the inner circle of the left wheel and the rim which had slipped out of
the wheel." In this case, however, "the cause of the explosion remains a
mystery until at present." As such, the court added, the tire blowout was
"a caso fortuito which is completely an extraordinary circumstance
independent of the will" of the defendants who should be relieved of "whatever
liability the plaintiffs may have suffered by reason of the explosion pursuant to
Article 1174
4
of the Civil Code."
Dissatisfied, the plaintiffs appealed to the Court of Appeals. They ascribed to
the lower court the following errors: (a) finding that the tire blowout was a caso
fortuito; (b) failing to hold that the defendants did not exercise utmost and/or
extraordinary diligence required of carriers under Article 1755 of the Civil
Code, and (c) deciding the case contrary to the ruling in Juntilla
v. Fontanar,
5
and Necesito v. Paras.
6

On August 23, 1993, the Court of Appeals rendered the Decision
7
reversing
that of the lower court. It held that:
To Our mind, the explosion of the tire is not in itself a fortuitous event.
The cause of the blow-out, if due to a factory defect, improper
mounting, excessive tire pressure, is not an unavoidable event. On the
other hand, there may have been adverse conditions on the road that
were unforeseeable and/or inevitable, which could make the blow-out
a caso fortuito. The fact that the cause of the blow-out was not known
does not relieve the carrier of liability. Owing to the statutory
presumption of negligence against the carrier and its obligation to
exercise the utmost diligence of very cautious persons to carry the
passenger safely as far as human care and foresight can provide, it is
the burden of the defendants to prove that the cause of the blow-out
was a fortuitous event. It is not incumbent upon the plaintiff to prove
that the cause of the blow-out is not caso-fortuito.
Proving that the tire that exploded is a new Goodyear tire is not
sufficient to discharge defendants' burden. As enunciated in Necesito
vs. Paras, the passenger has neither choice nor control over the carrier
in the selection and use of its equipment, and the good repute of the
manufacturer will not necessarily relieve the carrier from liability.
Moreover, there is evidence that the bus was moving fast, and the road
was wet and rough. The driver could have explained that the blow-out
that precipitated the accident that caused the death of Toto Tumboy
could not have been prevented even if he had exercised due care to
avoid the same, but he was not presented as witness.
The Court of Appeals thus disposed of the appeal as follows:
WHEREFORE, the judgment of the court a quo is set aside and
another one entered ordering defendants to pay plaintiffs the sum of
P50,000.00 for the death of Tito Tumboy, P30,000.00 in moral
damages, and P7,000.00 for funeral and burial expenses.
SO ORDERED.
The defendants filed a motion for reconsideration of said decision which was
denied on November 4, 1993 by the Court of Appeals. Hence, the instant
petition asserting the position that the tire blowout that caused the death of Tito
Tumboy was a caso fortuito. Petitioners claim further that the Court of Appeals,
in ruling contrary to that of the lower court, misapprehended facts and,
therefore, its findings of fact cannot be considered final which shall bind this
Court. Hence, they pray that this Court review the facts of the case.
The Court did re-examine the facts and evidence in this case because of the
inapplicability of the established principle that the factual findings of the Court
of Appeals are final and may not be reviewed on appeal by this Court. This
general principle is subject to exceptions such as the one present in this case,
namely, that the lower court and the Court of Appeals arrived at diverse factual
findings.
8
However, upon such re-examination, we found no reason to overturn
the findings and conclusions of the Court of Appeals.
As a rule, when a passenger boards a common carrier, he takes the risks
incidental to the mode of travel he has taken. After all, a carrier is not an
insurer of the safety of its passengers and is not bound absolutely and at all
events to carry them safely and without injury.
9
However, when a passenger is
injured or dies while travelling, the law presumes that the common carrier is
negligent. Thus, the Civil Code provides:
Art. 1756. In case of death or injuries to passengers, common carriers
are presumed to have been at fault or to have acted negligently, unless
they prove that they observed extraordinary diligence as prescribed in
articles 1733 and 1755.
Article 1755 provides that "(a) common carrier is bound to carry the
passengers safely as far as human care and foresight can provide, using the
utmost diligence of very cautious persons, with a due regard for all the
circumstances." Accordingly, in culpa contractual, once a passenger dies or is
injured, the carrier is presumed to have been at fault or to have acted
negligently. This disputable presumption may only be overcome by evidence
that the carrier had observed extraordinary diligence as prescribed by Articles
1733,
10
1755 and 1756 of the Civil Code or that the death or injury of the
passenger was due to a fortuitous event.
11
Consequently, the court need not
make an express finding of fault or negligence on the part of the carrier to hold
it responsible for damages sought by the passenger.
12

In view of the foregoing, petitioners' contention that they should be exempt
from liability because the tire blowout was no more than a fortuitous event that
could not have been foreseen, must fail. A fortuitous event is possessed of the
following characteristics: (a) the cause of the unforeseen and unexpected
occurrence, or the failure of the debtor to comply with his obligations, must be
independent of human will; (b) it must be impossible to foresee the event
which constitutes the caso fortuito, or if it can be foreseen, it must be
impossible to avoid; (c) the occurrence must be such as to render it impossible
for the debtor to fulfill his obligation in a normal manner; and (d) the obliger
must be free from any participation in the aggravation of the injury resulting to
the creditor.
13
As Article 1174 provides, no person shall be responsible for a
fortuitous event which could not be foreseen, or which, though foreseen, was
inevitable. In other words, there must be an entire exclusion of human agency
from the cause of injury or loss.
14

Under the circumstances of this case, the explosion of the new tire may not be
considered a fortuitous event. There are human factors involved in the
situation. The fact that the tire was new did not imply that it was entirely free
from manufacturing defects or that it was properly mounted on the vehicle.
Neither may the fact that the tire bought and used in the vehicle is of a brand
name noted for quality, resulting in the conclusion that it could not explode
within five days' use. Be that as it may, it is settled that an accident caused
either by defects in the automobile or through the negligence of its driver is not
a caso fortuito that would exempt the carrier from liability for damages.
15

Moreover, a common carrier may not be absolved from liability in case of force
majeure or fortuitous event alone. The common carrier must still prove that it
was not negligent in causing the death or injury resulting from an
accident.
16
This Court has had occasion to state:
While it may be true that the tire that blew-up was still good because the
grooves of the tire were still visible, this fact alone does not make the
explosion of the tire a fortuitous event. No evidence was presented to
show that the accident was due to adverse road conditions or that
precautions were taken by the jeepney driver to compensate for any
conditions liable to cause accidents. The sudden blowing-up, therefore,
could have been caused by too much air pressure injected into the tire
coupled by the fact that the jeepney was overloaded and speeding at the
time of the accident.
17

It is interesting to note that petitioners proved through the bus conductor,
Salce, that the bus was running at "60-50" kilometers per hour only or within
the prescribed lawful speed limit. However, they failed to rebut the testimony of
Leny Tumboy that the bus was running so fast that she cautioned the driver to
slow down. These contradictory facts must, therefore, be resolved in favor of
liability in view of the presumption of negligence of the carrier in the law.
Coupled with this is the established condition of the road — rough, winding
and wet due to the rain. It was incumbent upon the defense to establish that it
took precautionary measures considering partially dangerous condition of the
road. As stated above, proof that the tire was new and of good quality is not
sufficient proof that it was not negligent. Petitioners should have shown that it
undertook extraordinary diligence in the care of its carrier, such as conducting
daily routinary check-ups of the vehicle's parts. As the late Justice J.B.L.
Reyes said:
It may be impracticable, as appellee argues, to require of carriers to test
the strength of each and every part of its vehicles before each trip; but we
are of the opinion that a due regard for the carrier's obligations toward the
traveling public demands adequate periodical tests to determine the
condition and strength of those vehicle portions the failure of which may
endanger the safety of the passengers.
18

Having failed to discharge its duty to overthrow the presumption of negligence
with clear and convincing evidence, petitioners are hereby held liable for
damages. Article 1764
19
in relation to Article 2206
20
of the Civil Code
prescribes the amount of at least three thousand pesos as damages for the
death of a passenger. Under prevailing jurisprudence, the award of damages
under Article 2206 has been increased to fifty thousand pesos (P50,000.00).
21

Moral damages are generally not recoverable in culpa contractual except when
bad faith had been proven. However, the same damages may be recovered
when breach of contract of carriage results in the death of a passenger,
22
as in
this case. Exemplary damages, awarded by way of example or correction for
the public good when moral damages are awarded,
23
may likewise be
recovered in contractual obligations if the defendant acted in wanton,
fraudulent, reckless, oppressive, or malevolent manner.
24
Because petitioners
failed to exercise the extraordinary diligence required of a common carrier,
which resulted in the death of Tito Tumboy, it is deemed to have acted
recklessly.
25
As such, private respondents shall be entitled to exemplary
damages.
WHEREFORE, the Decision of the Court of Appeals is hereby AFFIRMED
subject to the modification that petitioners shall, in addition to the monetary
awards therein, be liable for the award of exemplary damages in the amount of
P20,000.00. Costs against petitioners.
SO ORDERED.
Narvasa, C.J., Melo, Francisco and Panganiban, JJ., concur.


G.R. No. 125524 August 25, 1999
BENITO MACAM doing business under the name and style BEN-MAC
ENTERPRISES, petitioner,
vs.
COURT OF APPEALS, CHINA OCEAN SHIPPING CO., and/or WALLEM
PHILIPPINES SHIPPING, INC.,respondents.
BELLOSILLO, J .:
On 4 April 1989 petitioner Benito Macam, doing business under the name and
style Ben-Mac Enterprises, shipped on board the vessel Nen Jiang, owned
and operated by respondent China Ocean Shipping Co., through local agent
respondent Wallem Philippines Shipping, Inc. (hereinafter WALLEM), 3,500
boxes of watermelons valued at US$5,950.00 covered by Bill of Lading No.
HKG 99012 and exported through Letter of Credit No. HK 1031/30 issued by
National Bank of Pakistan, Hongkong (hereinafter PAKISTAN BANK) and
1,611 boxes of fresh mangoes with a value of US$14,273.46 covered by Bill of
Lading No. HKG 99013 and exported through Letter of Credit No. HK 1032/30
also issued by PAKISTAN BANK. The Bills of Lading contained the following
pertinent provision: "One of the Bills of Lading must be surrendered duly
endorsed in exchange for the goods or delivery order.
1
The shipment was
bound for Hongkong with PAKISTAN BANK as consignee and Great Prospect
Company of Kowloon, Hongkong (hereinafter GPC) as notify party.
On 6 April 1989, per letter of credit requirement, copies of the bills of lading
and commercial invoices were submitted to petitioner's depository bank,
Consolidated Banking Corporation (hereinafter SOLIDBANK), which paid
petitioner in advance the total value of the shipment of US$20,223.46.1âwphi1. nêt
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 pre-paid petitioner the value of the shipment, it demanded payment
from respondent WALLEM through five (5) letters but was refused. Petitioner
was thus allegedly constrained to return the amount involved to SOLIDBANK,
then demanded payment from respondent WALLEM in writing but to no avail.
On 25 September 1991 petitioner sought collection of the value of the
shipment of US$20,223.46 or its equivalent of P546,033.42 from respondents
before the Regional Trial Court of Manila, based on delivery of the shipment to
GPC without presentation of the bills of lading and bank guarantee.
Respondents contended that the shipment was delivered to GPC without
presentation of the bills of lading and bank guarantee per request of petitioner
himself because the shipment consisted of perishable goods. The telex dated
5 April 1989 conveying such request read —
AS PER SHPR'S REQUEST KINDLY ARRANGE DELIVERY OF A/M
SHIPT TO RESPECTIVE CNEES WITHOUT PRESENTATION OF
OB/L
2
and bank guarantee since for prepaid shipt ofrt charges already
fully paid our end . . . .
3

Respondents explained that it is a standard maritime practice, when immediate
delivery is of the essence, for the shipper to request or instruct the carrier to
deliver the goods to the buyer upon arrival at the port of destination without
requiring presentation of the bill of lading as that usually takes time. As proof
thereof, respondents apprised the trial court that for the duration of their two-
year business relationship with petitioner concerning similar shipments to GPC
deliveries were effected without presentation of the bills of
lading.
4
Respondents advanced next that the refusal of PAKISTAN BANK to
pay the letters of credit to SOLIDBANK was due to the latter's failure to submit
a Certificate of Quantity and Quality. Respondents counterclaimed for
attorney's fees and costs of suit.
On 14 May 1993 the trial court ordered respondents to pay, jointly and
severally, the following amounts: (1) P546,033.42 plus legal interest from 6
April 1989 until full payment; (2) P10,000.00 as attorney's fees; and, (3) the
costs. The counterclaims were dismissed for lack of merit.
5
The trial court
opined that respondents breached the provision in the bill of lading requiring
that "one of the Bills of Lading must be surrendered duly endorsed in
exchange for the goods or delivery order," when they released the shipment to
GPC without presentation of the bills of lading and the bank guarantee that
should have been issued by PAKISTAN BANK in lieu of the bills of lading. The
trial court added that the shipment should not have been released to GPC at
all since the instruction contained in the telex was to arrange delivery to the
respective consignees and not to any party. The trial court observed that the
only role of GPC in the transaction as notify party was precisely to be notified
of the arrival of the cargoes in Hongkong so it could in turn duly advise the
consignee.
Respondent Court of Appeals appreciated the evidence in a different manner.
According to it, as established by previous similar transactions between the
parties, shipped cargoes were sometimes actually delivered not to the
consignee but to notify party GPC without need of the bills of lading or bank
guarantee.
6
Moreover, the bills of lading were viewed by respondent court to
have been properly superseded by the telex instruction and to implement the
instruction, the delivery of the shipment must be to GPC, the real
importer/buyer of the goods as shown by the export invoices,
7
and not to
PAKISTAN BANK since the latter could very well present the bills of lading in
its possession; likewise, if it were the PAKISTAN BANK to which the cargoes
were to be strictly delivered it would no longer be proper to require a bank
guarantee. Respondent court noted that besides, GPC was listed as a
consignee in the telex. It observed further that the demand letter of petitioner
to respondents never complained of misdelivery of goods. Lastly, respondent
court found that petitioner's claim of having reimbursed the amount involved to
SOLIDBANK was unsubstantiated. Thus, on 13 March 1996 respondent court
set aside the decision of the trial court and dismissed the complaint together
with the counterclaims.
8
On 5 July 1996 reconsideration was denied.
9

Petitioner submits that the fact that the shipment was not delivered to the
consignee as stated in the bill of lading or to a party designated or named by
the consignee constitutes a misdelivery thereof. Moreover, petitioner argues
that from the text of the telex, assuming there was such an instruction, the
delivery of the shipment without the required bill of lading or bank guarantee
should be made only to the designated consignee, referring to PAKISTAN
BANK.
We are not persuaded. The submission of petitioner that "the fact that the
shipment was not delivered to the consignee as stated in the Bill of Lading or
to a party designated or named by the consignee constitutes a misdelivery
thereof" is a deviation from his cause of action before the trial court. It is clear
from the allegation in his complaint that it does not deal with misdelivery of the
cargoes but of delivery to GPC without the required bills of lading and bank
guarantee —
6. The goods arrived in Hongkong and were released by the defendant
Wallem directly to the buyer/notify party, Great Prospect Company and
not to the consignee, the National Bank of Pakistan, Hongkong,
without the required bills of lading and bank guarantee for the release
of the shipment issued by the consignee of the goods . . . .
10

Even going back to an event that transpired prior to the filing of the present
case or when petitioner wrote respondent WALLEM demanding payment of
the value of the cargoes, misdelivery of the cargoes did not come into the
picture —
We are writing you on behalf of our client, Ben-Mac Enterprises who
informed us that Bills of Lading No. 99012 and 99013 with a total value
of US$20,223.46 were released to Great Prospect, Hongkong without
the necessary bank guarantee. We were further informed that the
consignee of the goods, National Bank of Pakistan, Hongkong, did not
release or endorse the original bills of lading. As a result thereof,
neither the consignee, National Bank of Pakistan, Hongkong, nor the
importer, Great Prospect Company, Hongkong, paid our client for the
goods . . . .
11

At any rate, we shall dwell on petitioner's submission only as a prelude to our
discussion on the imputed liability of respondents concerning the shipped
goods. Article 1736 of the Civil Code provides —
Art. 1736. The extraordinary responsibility of the common carriers lasts
from the time the goods are unconditionally placed in the possession
of, and received by the carrier for transportation until the same are
delivered, actually or constructively, by the carrier to the consignee, or
to the person who has a right to receive them, without prejudice to the
provisions of article 1738.
12

We emphasize that 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
14
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.
Respondents submitted in evidence a telex dated 5 April 1989 as basis for
delivering the cargoes to GPC without the bills of lading and bank guarantee.
The telex instructed delivery of various shipments to the respective consignees
without need of presenting the bill of lading and bank guarantee per the
respective shipper's request since "for prepaid shipt ofrt charges already fully
paid." Petitioner was named therein as shipper and GPC as consignee with
respect to Bill of Lading Nos. HKG 99012 and HKG 99013. Petitioner disputes
the existence of such instruction and claims that this evidence is self-serving.
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. He admitted the existence of the
telex of 3 July 1989 containing his request to deliver the shipment to the
consignee without presentation of the bill of lading
15
but not the telex of 5 April
1989 because he could not remember having made such request.
Consider pertinent portions of petitioner's testimony —
Q: Are you aware of any document which would indicate or show that
your request to the defendant Wallem for the immediate release of
your fresh fruits, perishable goods, to Great Prospect without the
presentation of the original Bill of Lading?
A: Yes, by telegraphic transfer, which means that it is fully paid. And I
requested immediate release of the cargo because there was
immediate payment.
Q: And you are referring, therefore, to this copy Telex release that you
mentioned where your Company's name appears Ben-Mac?
Atty. Hernandez: Just for the record, Your Honor, the witness is
showing a Bill of Lading referring to SKG (sic) 93023 and
93026 with Great Prospect Company.
Atty. Ventura:
Q: Is that the telegraphic transfer?
A: Yes, actually, all the shippers partially request for the immediate
release of the goods when they are perishable. I thought Wallem
Shipping Lines is not neophyte in the business. As far as LC is
concerned, Bank guarantee is needed for the immediate release of the
goods . . . .
15

Q: Mr. Witness, you testified that if is the practice of the shipper of the
perishable goods to ask the shipping lines to release immediately the
shipment. Is that correct?
A: Yes, sir.
Q: Now, it is also the practice of the shipper to allow the shipping lines
to release the perishable goods to the importer of goods without a Bill
of Lading or Bank guarantee?
A: No, it cannot be without the Bank Guarantee.
Atty. Hernandez:
Q: Can you tell us an instance when you will allow the release of the
perishable goods by the shipping lines to the importer without the Bank
guarantee and without the Bill of Lading?
A: As far as telegraphic transfer is concerned.
Q: Can you explain (to) this Honorable Court what telegraphic transfer
is?
A: Telegraphic transfer, it means advance payment that I am already
fully paid . . . .
Q: Mr. Macam, with regard to Wallem and to Great Prospect, would
you know and can you recall that any of your shipment was released to
Great Prospect by Wallem through telegraphic transfer?
A: I could not recall but there were so many instances sir.
Q: Mr. Witness, do you confirm before this Court that in previous
shipments of your goods through Wallem, you requested Wallem to
release immediately your perishable goods to the buyer?
A: Yes, that is the request of the shippers of the perishable goods . . .
.
16

Q: Now, Mr. Macam, if you request the Shipping Lines for the release
of your goods immediately even without the presentation of OBL, how
do you course it?
A: Usually, I call up the Shipping Lines, sir . . . .
17

Q: You also testified you made this request through phone calls. Who
of you talked whenever you made such phone call?
A: Mostly I let my people to call, sir. (sic)
Q: So everytime you made a shipment on perishable goods you let
your people to call? (sic)
A: Not everytime, sir.
Q: You did not make this request in writing?
A: No, sir. I think I have no written request with Wallem . . . .
18

Against petitioner's claim of "not remembering" having made a request for
delivery of subject cargoes to GPC without presentation of the bills of lading
and bank guarantee as reflected in the telex of 5 April 1989 are damaging
disclosures in his testimony. He declared that it was his practice to ask the
shipping lines to immediately release shipment of perishable goods through
telephone calls by himself or his "people." He no longer required presentation
of a bill of lading nor of a bank guarantee as a condition to releasing the goods
in case he was already fully paid. Thus, taking into account that subject
shipment consisted of perishable goods and SOLIDBANK pre-paid the full
amount of the value thereof, it is not hard to believe the claim of respondent
WALLEM that petitioner indeed requested the release of the goods to GPC
without presentation of the bills of lading and bank guarantee.
The instruction in the telex of 5 April 1989 was "to deliver the shipment to
respective consignees." And so petitioner argues that, assuming there was
such an instruction, the consignee referred to was PAKISTAN BANK. We find
the argument too simplistic. Respondent court analyzed the telex in its entirety
and correctly arrived at the conclusion that the consignee referred to was not
PAKISTAN BANK but GPC —
There is no mistake that the originals of the two (2) subject Bills of
Lading are still in the possession of the Pakistani Bank. The appealed
decision affirms this fact. Conformably, to implement the said telex
instruction, the delivery of the shipment must be to GPC, the notify
party or real importer/buyer of the goods and not the Pakistani Bank
since the latter can very well present the original Bills of Lading in its
possession. Likewise, if it were the Pakistani Bank to whom the
cargoes were to be strictly delivered, it will no longer be proper to
require a bank guarantee as a substitute for the Bill of Lading. To
construe otherwise will render meaningless the telex instruction. After
all, the cargoes consist of perishable fresh fruits and immediate
delivery thereof to the buyer/importer is essentially a factor to reckon
with. Besides, GPC is listed as one among the several consignees in
the telex (Exhibit 5-B) and the instruction in the telex was to arrange
delivery of A/M shipment (not any party) to respective consignees
without presentation of OB/L and bank guarantee . . . .
20

Apart from the foregoing obstacles to the success of petitioner's cause,
petitioner failed to substantiate his claim that he returned to SOLIDBANK the
full amount of the value of the cargoes. It is not far-fetched to entertain the
notion, as did respondent court, that he merely accommodated SOLIDBANK in
order to recover the cost of the shipped cargoes from respondents. We note
that it was SOLIDBANK which initially demanded payment from respondents
through five (5) letters. SOLIDBANK must have realized the absence of privity
of contract between itself and respondents. That is why petitioner conveniently
took the cudgels for the bank.
In view of petitioner's utter failure to establish the liability of respondents over
the cargoes, no reversible error was committed by respondent court in ruling
against him.
WHEREFORE, the petition is DENIED. The decision of respondent Court of
Appeals of 13 March 1996 dismissing the complaint of petitioner Benito
Macam and the counterclaims of respondents China Ocean Shipping Co.
and/or Wallem Philippines Shipping, Inc., as well as its resolution of 5 July
1996 denying reconsideration, is AFFIRMED.1âwphi 1. nêt
SO ORDERED.
Mendoza, Quisumbing and Buena, JJ., concur.


G.R. No. L-28673 October 23, 1984
SAMAR MINING COMPANY, INC., plaintiff-appellee,
vs.
NORDEUTSCHER LLOYD and C.F. SHARP & COMPANY, INC., defendants-
appellants.

CUEVAS, J .:ñé+.£ªwph!1
This is an appeal taken directly to Us on certiorari from the decision of the
defunct Court of First Instance of Manila, finding defendants carrier and agent,
liable for the value of goods never delivered to plaintiff consignee. The issue
raised is a pure question of law, which is, the liability of the defendants, now
appellants, under the bill of lading covering the subject shipment.
The case arose from an importation made by plaintiff, now appellee, SAMAR
MINING COMPANY, INC., of one (1) crate Optima welded wedge wire sieves
through the M/S SCHWABENSTEIN a vessel owned by defendant-appellant
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 aforementioned importation was
unloaded and delivered in good order and condition to the bonded warehouse
of AMCYL. 1 The goods were however never delivered to, nor received by, the
consignee at the port of destination — Davao.
When the letters of complaint sent to defendants failed to elicit the desired
response, consignee herein appellee, filed a formal claim for P1,691.93, the
equivalent of $424.00 at the prevailing rate of exchange at that time, against
the former, but neither paid. Hence, the filing of the instant suit to enforce
payment. Defendants-appellants brought in AMCYL as third party defendant.
The trial court rendered judgment in favor of plaintiff, ordering defendants to
pay the amount of P1,691.93 plus attorney's fees and costs. However, the
Court stated that defendants may recoup whatever they may pay plaintiff by
enforcing the judgment against third party defendant AMCYL which had earlier
been declared in default. Only the defendants appealed from said decision.
The issue at hand demands a close scrutiny of Bill of Lading No. 18 and its
various clauses and stipulations which should be examined in the light of
pertinent legal provisions and settled jurisprudence. This undertaking is not
only proper but necessary as well because of the nature of the bill of lading
which operates both as a receipt for the goods; and more importantly, as a
contract to transport and deliver the same as stipulated therein.
2
Being a
contract, it is the law between the parties thereto
3
who are bound by its terms
and conditions
4
provided that these are not contrary to law, morals, good
customs, public order and public policy.
5

Bill of Lading No. 18 sets forth in page 2 thereof
6
that one (1) crate of Optima
welded wedge wire sieves was received by the carrier NORDEUTSCHER
LLOYD at the "port of loading" which is Bremen, Germany, while the freight
had been prepaid up to the port of destination or the "port of discharge of
goods in this case, Davao, the carrier undertook to transport the goods in its
vessel, M/S SCHWABENSTEIN only up to the "port of discharge from ship-
Manila. Thereafter, the goods were to be transshipped by the carrier to the port
of destination or "port of discharge of goods The stipulation is plainly indicated
on the face of the bill which contains the following phrase printed below the
space provided for the port of discharge from ship", thus: têñ.£îhqwâ£
if goods are to be transshipped at port of discharge, show
destination under the column for "description of contents"
7

As instructed above, the following words appeared typewritten under the
column for "description of contents": têñ. £î hqwâ£
PORT OF DISCHARGE OF GOODS: DAVAO
FREIGHT PREPAID
8

It is clear, then, that in discharging the goods from the ship at the port of
Manila, and delivering the same into the custody of AMCYL, the bonded
warehouse, appellants were acting in full accord with the contractual
stipulations contained in Bill of Lading No. 18. The delivery of the goods to
AMCYL was part of appellants' duty to transship the goods from Manila to their
port of destination-Davao. The word "transship" means: têñ.£îhqwâ£
to transfer for further transportation from one ship or conveyance
to another
9

The extent of appellant carrier's responsibility and/or liability in the
transshipment of the goods in question are spelled out and delineated under
Section 1, paragraph 3 of Bill of Lading No. 18, to wit: t êñ.£îhqwâ£
The carrier shall not be liable in any capacity whatsoever for
any delay, loss or damage occurring before the goods enter
ship's tackle to be loaded or after the goods leave ship's tackle
to be discharged, transshipped or forwarded ... (Emphasis
supplied)
and in Section 11 of the same Bill, which provides: têñ. £î hqwâ£
Whenever the carrier or m aster may deem it advisable or in any
case where the goods are placed at carrier's disposal at
or consigned to a point where the ship does not expect to load or
discharge, the carrier or master may, without notice, forward the
whole or any part of the goods before or after loading at the
original port of shipment, ... This carrier, in making arrangements
for any transshipping or forwarding vessels or means of
transportation not operated by this carrier shall be considered
solely the forwarding agent of the shipper and without any other
responsibility whatsoever even though the freight for the whole
transport has been collected by him. ... Pending or during
forwarding or transshipping the carrier may store the goods
ashore or afloat solely as agent of the shipper and at risk and
expense of the goods and the carrier shall not be liable for
detention nor responsible for the acts, neglect, delay or failure to
act of anyone to whom the goods are entrusted or delivered for
storage, handling or any service incidental thereto (Emphasis
supplied) 10
Defendants-appellants now shirk liability for the loss of the subject goods by
claiming that they have discharged the same in full and good condition unto
the custody of AMCYL at the port of discharge from ship — Manila, and
therefore, pursuant to the aforequoted stipulation (Sec. 11) in the bill of lading,
their responsibility for the cargo had ceased. 11
We find merit in appellants' stand. 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 by Us in PHOENIX
ASSURANCE CO., LTD. vs. UNITED STATES LINES, 22 SCRA 674 (1968).
Said case matches the present controversy not only as to the material facts
but more importantly, as to the stipulations contained in the bill of lading
concerned. As if to underline their awesome likeness, the goods in question in
both cases were destined for Davao, but were discharged from ship in Manila,
in accordance with their respective bills of lading.
The stipulations in the bill of lading in the PHOENIX case which are
substantially the same as the subject stipulations before Us, provides: têñ. £î hqwâ£
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.)
xxx xxx xxx
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). 12
Finding the above stipulations not contrary to law, morals, good customs,
public order or public policy, We sustained their validity 13 Applying said
stipulations as the law between the parties in the aforecited case, the Court
concluded that: têñ.£îhqwâ£
... The short form Bill of Lading ( ) states in no uncertain terms that
the port of discharge of the cargo is Manila, but that the same was
to be transshipped beyond the port of discharge to Davao City.
Pursuant to the terms of the long form Bill of Lading ( ), appellee's
responsibility as a common carrier ceased the moment the goods
were unloaded in Manila and in the matter of
transshipment, appellee acted merely as an agent of the shipper
and consignee. ... (Emphasis supplied) 14
Coming now to the case before Us, We hold, that by the authority of the above
pronouncements, and in conformity with the pertinent provisions of the New
Civil Code, Section 11 of Bill of Lading No. 18 and the third paragraph of
Section 1 thereof are valid stipulations between the parties insofar as they
exempt the carrier from liability for loss or damage to the goods while the same
are not in the latter's actual custody.
The liability of the common carrier for the loss, destruction or deterioration of
goods transported from a foreign country to the Philippines is governed
primarily by the New Civil Code. 15 In all matters not regulated by said Code,
the rights and obligations of common carriers shall be governed by the Code of
Commerce and by special laws. 16A careful perusal of the provisions of the
New Civil Code on common carriers (Section 4, Title VIII, Book IV) directs our
attention to Article 1736 thereof, which reads: têñ.£î hqwâ£
Article 1736. The extraordinary responsibility of the common
carrier lasts from the time the goods are unconditionally placed
in the possession of, and received by the carrier for
transportation until the same are delivered, actually or
constructively, by the carrier to the consignee, or to the person
who has a right to receive them, without prejudice to the
provisions of article 1738.
Article 1738 referred to in the foregoing provision runs thus: têñ.£îhqwâ£
Article 1738. The extraordinary liability of the common carrier
continues to be operative even during the time the goods are
stored in a warehouse of the carrier at the place of destination,
until the consignee has been advised of the arrival of the goods
and has had reasonable opportunity thereafter to remove them
or otherwise dispose of them.
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.
However, 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. 17 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.
It becomes necessary at this point to dissect the complex relationship that had
developed between appellant and appellee in the course of the transactions
that gave birth to the present suit. Two undertakings appeared embodied
and/or provided for in the Bill of Lading 19 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.
20
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 before Us.
But even as agent of the consignee, the appellant cannot be made answerable
for the value of the missing goods, It is true that the transshipment of the
goods, which was the object of the agency, was not fully performed. However,
appellant had commenced said performance, the completion of which was
aborted by circumstances beyond its control. An agent who carries out the
orders and instructions of the principal without being guilty of negligence,
deceit or fraud, cannot be held responsible for the failure of the principal to
accomplish the object of the agency,
21
This can be gleaned from the following
provisions of the New Civil Code on the obligations of the agent: têñ.£îhqwâ£
Article 1884. The agent is bound by his acceptance to carry out
the agency, and is liable for the damages which, through his
non-performance, the principal may suffer.
xxx xxx xxx
Article 1889. The agent shall be liable for damages if, there
being a conflict between his interests and those of the principal,
he should prefer his own.
Article 1892. The agent may appoint a substitute if the principal
has not prohibited him from doing so; but he shall be
responsible for the acts of the substitute:
(1) When he was not given the power to appoint one;
(2) When he was given such power but without designating the
person and the person appointed was notoriously incompetent
or insolvent.
xxx xxx xxx
Article 1909. The agent is responsible not only for fraud, but
also for negligence which shall be judged with more or less
rigor by the courts, according to whether the agency was or
was not for a compensation.
The records fail to reveal proof of negligence, deceit or fraud committed by
appellant or by its representative in the Philippines. Neither is there any
showing of notorious incompetence or insolvency on the part of AMCYT, which
acted as appellant's substitute in storing the goods awaiting transshipment.
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.
WHEREFORE, the appealed decision is hereby REVERSED. Plaintiff-
appellee's complaint is hereby DISMISSED.
No costs.
SO ORDERED.1äwphï1. ñët
Makasiar (Chairman), Guerrero, Abad Santos and Escolin, concur.
Aquino, J., concurs in the result.
Concepcion Jr., J., took no part.


G.R. No. 95536 March 23, 1992
ANICETO G. SALUDO, JR., MARIA SALVACION SALUDO, LEOPOLDO G.
SALUDO and SATURNINO G. SALUDO, petitioners,
vs.
HON. COURT OF APPEALS, TRANS WORLD AIRLINES, INC., and
PHILIPPINE AIRLINES, INC., respondents.

REGALADO, J .:
Assailed in this petition for review on certiorari is the decision in CA-G.R. CV
No. 20951 of respondent Court of Appeals
1
which affirmed the decision of the
trial court
2
dismissing for lack of evidence herein petitioners' complaint in Civil
Case No R-2101 of the then Court of First Instance of Southern Leyte, Branch
I.
The facts, as recounted by the court a quo and adopted by respondent court
after "considering the evidence on record," are as follows:
After the death of plaintiffs' mother, Crispina Galdo Saludo, in
Chicago Illinois, (on) October 23, 1976 (Exh. A), Pomierski and
Son Funeral Home of Chicago, made the necessary
preparations and arrangements for the shipment, of the
remains from Chicago to the Philippines. The funeral home had
the remains embalmed (Exb. D) and secured a permit for the
disposition of dead human body on October 25, 1976 (Exh. C),
Philippine Vice Consul in Chicago, Illinois, Bienvenido M.
Llaneta, at 3:00 p.m. on October 26, 1976 at the Pomierski &
Son Funeral Home, sealed the shipping case containing a
hermetically sealed casket that is airtight and waterproof
wherein was contained the remains of Crispina Saludo Galdo
(sic) (Exb. B). On the same date, October 26, 1976, Pomierski
brought the remains to C.M.A.S. (Continental Mortuary Air
Services) at the airport (Chicago) which made the necessary
arrangements such as flights, transfers, etc.; C.M.A.S. is a
national service used by undertakers to throughout the nation
(U.S.A.), they furnish the air pouch which the casket is
enclosed in, and they see that the remains are taken to the
proper air freight terminal (Exh. 6-TWA). C.M.A.S. booked the
shipment with PAL thru the carrier's agent Air Care
International, with Pomierski F.H. as the shipper and Mario
(Maria) Saludo as the consignee. PAL Airway Bill No. 079-
01180454 Ordinary was issued wherein the requested routing
was from Chicago to San Francisco on board TWA Flight 131
of October 27, 1976 and from San Francisco to Manila on
board PAL Flight No. 107 of the same date, and from Manila to
Cebu on board PAL Flight 149 of October 29, 1976 (See Exh.
E., Also Exh. 1-PAL).
In the meantime, plaintiffs Maria Salvacion Saludo and
Saturnino Saludo, thru a travel agent, were booked with United
Airlines from Chicago to California, and with PAL from
California to Manila. She then went to the funeral director of
Pomierski Funeral Home who had her mother's remains and
she told the director that they were booked with United Airlines.
But the director told her that the remains were booked with
TWA flight to California. This upset her, and she and her
brother had to change reservations from UA to the TWA flight
after she confirmed by phone that her mother's remains should
be on that TWA flight. They went to the airport and watched
from the look-out area. She saw no body being brought. So,
she went to the TWA counter again, and she was told there
was no body on that flight. Reluctantly, they took the TWA flight
upon assurance of her cousin, Ani Bantug, that he would look
into the matter and inform her about it on the plane or have it
radioed to her. But no confirmation from her cousin reached
her that her mother was on the West Coast.
Upon arrival at San Francisco at about 5:00 p.m., she went to
the TWA counter there to inquire about her mother's remains.
She was told they did not know anything about it.
She then called Pomierski that her mother's remains were not
at the West Coast terminal, and Pomierski immediately called
C.M.A.S., which in a matter of 10 minutes informed him that the
remains were on a plane to Mexico City, that there were two
bodies at the terminal, and somehow they were switched; he
relayed this information to Miss Saludo in California; later
C.M.A.S. called and told him they were sending the remains
back to California via Texas (see Exh. 6-TWA).
It-turned out that TWA had carried a shipment under PAL
Airway Bill No. 079-ORD-01180454 on TWA Flight 603 of
October 27, 1976, a flight earlier than TWA Flight 131 of the
same date. TWA delivered or transferred the said shipment
said to contain human remains to PAL at 1400H or 2:00 p.m. of
the same date, October 27, 1976 (Bee Exh. 1- TWA). "Due to a
switch(ing) in Chicago", this shipment was withdrawn from PAL
by CMAS at 1805H (or 6:05 p.m.) of the same date, October 27
(Exh. 3-PAL, see Exh. 3-a-PAL).
What transpired at the Chicago (A)irport is explained in a
memo or incident report by Pomierski (Exh. 6-TWA) to
Pomierski's lawyers who in turn referred to said' memo and
enclosed it in their (Pomierski's lawyers) answer dated July 18,
1981 to herein plaintiff's counsel (See Exh. 5-TWA). In that
memo or incident report (Exh. 6-TWA), it is stated that the
remains (of Crispina Saludo) were taken to CMAS at the
airport; that there were two bodies at the (Chicago Airport)
terminal, and somehow they were switched, that the remains
(of Crispina Saludo) were on a plane to Mexico City; that
CMAS is a national service used by undertakers throughout the
nation (U.S.A.), makes all the necessary arrangements, such
as flights, transfers, etc., and see(s) to it that the remains are
taken to the proper air freight terminal.
The following day October 28, 1976, the shipment or remains of
Crispina Saludo arrived (in) San Francisco from Mexico on board
American Airlines. This shipment was transferred to or received by
PAL at 1945H or 7:45 p.m. (Exh. 2-PAL, Exh. 2-a-PAL). This
casket bearing the remains of Crispina Saludo, which was
mistakenly sent to Mexico and was opened (there), was resealed
by Crispin F. Patagas for shipment to the Philippines (See Exh. B-
1). The shipment was immediately loaded on PAL flight for Manila
that same evening and arrived (in) Manila on October 30, 1976, a
day after its expected arrival on October 29, 1976.
3

In a letter dated December 15, 1976,
4
petitioners' counsel informed private
respondent Trans World Airlines (TWA) of the misshipment and eventual delay
in the delivery of the cargo containing the remains of the late Crispin Saludo,
and of the discourtesy of its employees to petitioners Maria Salvacion Saludo
and Saturnino Saludo. In a separate letter on June 10, 1977 addressed to co-
respondent Philippine Airlines (PAL),
5
petitioners stated that they were holding
PAL liable for said delay in delivery and would commence judicial action
should no favorable explanation be given.
Both private respondents denied liability. Thus, a damage suit
6
was filed by
petitioners before the then Court of First Instance, Branch III, Leyte, praying for
the award of actual damages of P50,000.00, moral damages of
P1,000,000.00, exemplary damages, attorney's fees and costs of suit.
As earlier stated, the court below absolved the two respondent airlines
companies of liability. The Court of Appeals affirmed the decision of the lower
court in toto, and in a subsequent resolution,
7
denied herein petitioners' motion
for reconsideration for lack of merit.
In predictable disagreement and dissatisfaction with the conclusions reached
by respondent appellate court, petitioners now urge this Court to review the
appealed decision and to resolve whether or not (1) the delay in the delivery of
the casketed remains of petitioners' mother was due to the fault of respondent
airline companies, (2) the one-day delay in the delivery of the same constitutes
contractual breach as would entitle petitioners to damages, (3) damages are
recoverable by petitioners for the humiliating, arrogant and indifferent acts of
the employees of TWA and PAL, and (4) private respondents should be held
liable for actual, moral and exemplary damages, aside from attorney's fees and
litigation expenses.
8

At the outset and in view of the spirited exchanges of the parties on this
aspect, it is to be stressed that only questions of law may be raised in a
petition filed in this Court to review on certiorari the decision of the Court of
Appeals.
9
This being so, the factual findings of the Court of Appeals are final
and conclusive and cannot be reviewed by the Supreme Court. The rule,
however, admits of established exceptions, to wit: (a) where there is grave
abuse of discretion; (b) when the finding is grounded entirely on speculations,
surmises or conjectures;(c) when the inference made is manifestly-mistaken,
absurd or impossible; (d) when the judgment of the Court of Appeals was
based on a misapprehension of facts; (e) when the factual findings are
conflicting; (f) when the Court of Appeals, in making its findings, went beyond
the issues of the case and the same are contrary to the admissions of both
appellant and appellee;
10
(g) when the Court of Appeals manifestly overlooked
certain relevant facts not disputed by the parties and which, if properly
considered, would justify a different conclusion;
11
and (h) where the findings of
fact of the Court of Appeals are contrary to those of the trial court, or are mere
conclusions without citation of specific evidence, or where the facts of set forth
by the petitioner are not disputed by the respondent, or where the findings of
fact of the Court of Appeals are premised on the absence of evidence and are
contradicted by the evidence on record.
12

To distinguish, a question of law is one which involves a doubt or controversy
on what the law is on a certain state of facts; and, a question of fact, contrarily,
is one in which there is a doubt or difference as to the truth or falsehood of the
alleged facts.
13
One test, it has been held, is whether the appellate court can
determine the issue raised without reviewing or evaluating the evidence, in
which case it is a question of law, otherwise it will be a question of fact.
14

Respondent airline companies object to the present recourse of petitioners on
the ground that this petition raises only factual questions.
15
Petitioners
maintain otherwise or, alternatively, they are of the position that, assuming that
the petition raises factual questions, the same are within the recognized
exceptions to the general rule as would render the petition cognizable and
worthy of review by the Court.
16

Since it is precisely the soundness of the inferences or conclusions that may
be drawn from the factual issues which are here being assayed, we find that
the issues raised in the instant petition indeed warrant a second look if this
litigation is to come to a reasonable denouement. A discussion seriatim of said
issues will further reveal that the sequence of the events involved is in effect
disputed. Likewise to be settled is whether or not the conclusions of the Court
of Appeals subject of this review indeed find evidentiary and legal support.
I. Petitioners fault respondent court for "not finding that private respondents
failed to exercise extraordinary diligence required by law which resulted in the
switching and/or misdelivery of the remains of Crispina Saludo to Mexico
causing gross delay in its shipment to the Philippines, and consequently,
damages to petitioners."
17

Petitioner allege that private respondents received the casketed remains of
petitioners' mother on October 26, 1976, as evidenced by the issuance of PAL
Air Waybill No. 079-01180454
18
by Air Care International as carrier's agent;
and from said date, private respondents were charged with the responsibility to
exercise extraordinary diligence so much so that for the alleged switching of
the caskets on October 27, 1976, or one day after private respondents
received the cargo, the latter must necessarily be liable.
To support their assertion, petitioners rely on the jurisprudential dictum, both
under American and Philippine law, that "(t)he issuance of a bill of lading
carries the presumption that the goods were delivered to the carrier issuing the
bill, for immediate shipment, and it is nowhere questioned that a bill of lading
is prima facie evidence of the receipt of the goods by the carrier. . . . In the
absence of convincing testimony establishing mistake, recitals in the bill of
lading showing that the carrier received the goods for shipment on a specified
date control (13 C.J.S. 235)."
19

A bill of lading is a written acknowledgment of the receipt of the goods and an
agreement to transport and deliver them at a specified place to a person
named or on his order. Such instrument may be called a shipping receipt,
forwarder's receipt and receipt for transportation.
20
The designation, however,
is immaterial. It has been hold that freight tickets for bus companies as well as
receipts for cargo transported by all forms of transportation, whether by sea or
land, fall within the definition. Under the Tariff and Customs Code, a bill of
lading includes airway bills of lading.
21
The two-fold character of a bill of lading
is all too familiar; it is a receipt as to the quantity and description of the goods
shipped and a contract to transport the goods to the consignee or other person
therein designated, on the terms specified in such instrument.
22

Logically, since a bill of lading acknowledges receipt of goods to be
transported, delivery of the goods to the carrier normally precedes the
issuance of the bill; or, to some extent, delivery of the goods and issuance of
the bill are regarded in commercial practice as simultaneous acts.
23
However,
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.
Ordinarily, a receipt is not essential to a complete delivery of goods to the
carrier for transportation but, when issued, is competent and prima facie, but
not conclusive, evidence of delivery to the carrier. A bill of lading, when
properly executed and delivered to a shipper, is evidence that the carrier has
received the goods described therein for shipment. Except as modified by
statute, it is a general rule as to the parties to a contract of carriage of goods in
connection with which a bill of lading is issued reciting that goods have been
received for transportation, that the recital being in essence a receipt alone, is
not conclusive, but may be explained, varied or contradicted by parol or other
evidence.
24

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."
25
(Emphasis supplied)
For this reason, we must perforce allow explanation by private respondents
why, despite the issuance of the airway bill and the date thereof, they deny
having received the remains of Crispina Saludo on October 26, 1976 as
alleged by petitioners.
The findings of the trial court, as favorably adopted by the Court of Appeals
and which we have earner quoted, provide us with the explanation that
sufficiently over comes the presumption relied on by petitioners in insisting that
the remains of their mother were delivered to and received by private
respondents on October 26, 1976. Thus —
. . . Philippine Vice Consul in Chicago, Illinois, Bienvenido M.
Llaneta, at 3:00 p.m. on October 26, 1976 at the Pomierski & Son
Funeral Home, sealed the shipping case containing a hermetically
sealed casket that is airtight and waterproof wherein was
contained the remains of Crispina Saludo Galdo (sic) (Exh. B). On
the same date October 26, 1976, Pomierski brought the remains
to C.M.A.S. (Continental Mortuary Air Services) at the airport
(Chicago) which made the necessary arrangements such as
flights, transfers, etc; C.M.A.S. is a national service used by
undertakers throughout the nation (U.S.A.), they furnish the air
pouch which the casket is enclosed in, and they see that the
remains are taken to the proper air freight terminal (Exh. G-TWA).
C.M.A.S. booked the shipment with PAL thru the carrier's agent
Air Care International, with Pomierski F.H. as the shipper and
Mario (Maria) Saludo as the consignee. PAL Airway Bill No. 079-
01180454 Ordinary was issued wherein the requested routing was
from Chicago to San Francisco on board TWA Flight-131 of
October 27;1976, and from San Francisco to Manila on board PAL
Flight No. 107 of the same date, and from Manila to Cebu on
board PAL Flight 149 of October 29, 1976 (See Exh. E, also Exh.
1-PAL).
26
(Emphasis ours.)
Moreover, we are persuaded to believe private respondent PAL's account as
to what transpired October 26, 1976:
. . . Pursuant thereto, on 26 October 1976, CMAS acting upon
the instruction of Pomierski, F.H., the shipper requested
booking of the casketed remains of Mrs. Cristina (sic) Saludo
on board PAL's San Francisco-Manila Flight No. PR 107 on
October 27, 1976.
2. To signify acceptance and confirmation of said booking, PAL
issued to said Pomierski F.H., PAL Airway Bill No. 079-01180454
dated October 27, 1976 (sic, "10/26/76"). PAL confirmed the
booking and transporting of the shipment on board of its Flight PR
107 on October 27, 1976 on the basis of the representation of the
shipper and/or CMAS that the said cargo would arrive in San
Francisco from Chicago on board United Airlines Flight US 121 on
27 October 1976.
27

In other words, on October 26, 1976 the cargo containing the casketed
remains of Crispina Saludo was booked for PAL Flight Number PR-107 leaving
San Francisco for Manila on October 27, 1976, PAL Airway Bill No. 079-
01180454 was issued, not as evidence of receipt of delivery of the cargo on
October 26, 1976, but merely as a confirmation of the booking thus made for
the San Francisco-Manila flight scheduled on October 27, 1976. Actually, it
was not until October 28, 1976 that PAL received physical delivery of the body
at San Francisco, as duly evidenced by the Interline Freight Transfer Manifest
of the American Airline Freight System and signed for by Virgilio Rosales at
1945H, or 7:45 P.M. on said date.
28

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,
29
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.
30
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.
31
Where
such a delivery has thus been accepted by the carrier, the liability of the
common carrier commences eo instanti.
32

Hence, while we agree with petitioners that the extraordinary diligence
statutorily required to be observed by the carrier instantaneously commences
upon delivery of the goods thereto, for such duty to commence there must in
fact have been delivery of the cargo subject of the contract of carriage. 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.
As already demonstrated, the facts in the case at bar belie the averment that
there was delivery of the cargo to the carrier on October 26, 1976. Rather, as
earlier explained, the body intended to be shipped as agreed upon was really
placed in the possession and control of PAL on October 28, 1976 and it was
from that date that private respondents became responsible for the agreed
cargo under their undertakings in PAL Airway Bill No. 079-01180454.
Consequently, for the switching of caskets prior thereto which was not caused
by them, and subsequent events caused thereby, private respondents cannot
be held liable.
Petitioners, proceeding on the premise that there was delivery of the cargo to
private respondents on October 26,1976 and that the latter's extraordinary
responsibility had by then become operative, insist on foisting the blame on
private respondents for the switching of the two caskets which occurred on
October 27, 1976. It is argued that since there is no clear evidence
establishing the fault Continental Mortuary Air Services (CMAS) for the mix-up,
private respondents are presumably negligent pursuant to Article 1735 of the
Civil Code and, for failure to rebut such presumption, they must necessarily be
held liable; or, assuming that CMAS was at fault, the same does not absolve
private respondents of liability because whoever brought the cargo to the
airport or loaded it on the plane did so as agent of private respondents.
This contention is without merit. As pithily explained by the Court of Appeals:
The airway bill expressly provides that "Carrier certifies goods
described below were received for carriage", and said cargo
was "casketed human remains of Crispina Saludo," with "Maria
Saludo as Consignee; Pomierski F.H. as Shipper; Air Care
International as carrier's agent." On the face of the said airway
bill, the specific flight numbers, specific routes of shipment and
dates of departure and arrival were typewritten, to wit: Chicago
TWA Flight 131/27 to San Francisco and from San Francisco
by PAL 107 on, October 27, 1976 to Philippines and to Cebu
via PAL Flight 149 on October 29, 1976. The airway bill also
contains the following typewritten words, as follows: all
documents have been examined (sic). Human remains of
Crispina Saludo. Please return back (sic) first available flight to
SFO.
But, as it turned out and was discovered later the casketed
human remains which was issued PAL Airway Bill #079-
1180454 was not the remains of Crispina Saludo, the casket
containing her remains having been shipped to Mexico City.
However, it should be noted that, Pomierski F.H., the shipper of
Mrs. Saludo's remains, hired Continental Mortuary Services
(hereafter referred to as C.M.A.S.), which is engaged in the
business of transporting and forwarding human remains. Thus,
C.M.A.S. made all the necessary arrangements such as flights,
transfers, etc. — for shipment of the remains of Crispina
Saludo.
The remains were taken on October 26th,
1976, to C.M.A.S. at the airport. These people
made all the necessary arrangements, such as
flights, transfers, etc. This is a national service
used by undertakers throughout the nation.
They furnished the air pouch which the casket
is enclosed in, and they see that the remains
are taken to the proper air frieght terminal. I
was very surprised when Miss Saludo called
me to say that the remains were not at the west
coast terminal. I immediately called C.M.A.S.
They called me back in a matter of ten minutes
to inform me that the remains were on a plane
to Mexico City. The man said that there were
two bodies at the terminal, and somehow they
were switched. . . . (Exb. 6 — "TWA", which is
the memo or incident report enclosed in the
stationery of Walter Pomierski & Sons Ltd.)
Consequently, when the cargo was received from C.M.A.S. at
the Chicago airport terminal for shipment, which was supposed
to contain the remains of Crispina Saludo, Air Care
International and/or TWA, had no way of determining its actual
contents, since the casket was hermetically sealed by the
Philippine Vice-Consul in Chicago and in an air pouch of
C.M.A.S., to the effect that Air Care International and/or TWA
had to rely on the information furnished by the shipper
regarding the cargo's content. Neither could Air Care
International and/or TWA open the casket for further
verification, since they were not only without authority to do so,
but even prohibited.
Thus, under said circumstances, no fault and/or negligence can be
attributed to PAL (even if Air Care International should be
considered as an agent of PAL) and/or TWA, the entire fault or
negligence being exclusively with C.M.A.S.
33
(Emphasis supplied.)
It can correctly and logically be concluded, therefore, that the switching
occurred or, more accurately, was discovered on October 27, 1976; and based
on the above findings of the Court of appeals, it happened while the cargo was
still with CMAS, well before the same was place in the custody of private
respondents.
Thus, while the Air Cargo Transfer Manifest of TWA of October 27, 1976
34
was
signed by Garry Marcial of PAL at 1400H, or 2:00 P.M., on the same date,
thereby indicating acknowledgment by PAL of the transfer to them by TWA of
what was in truth the erroneous cargo, said misshipped cargo was in fact
withdrawn by CMAS from PAL as shown by the notation on another copy of
said manifest
35
stating "Received by CMAS — Due to switch in Chicago 10/27-
1805H," the authenticity of which was never challenged. This shows that said
misshipped cargo was in fact withdrawn by CMAS from PAL and the correct
shipment containing the body of Crispina Saludo was received by PAL only on
October 28, 1976, at 1945H, or 7:45 P.M., per American Airlines Interline
Freight Transfer Manifest No. AA204312.
36

Witness the deposition of TWA's ramp serviceman, Michael Giosso, on this
matter:
ATTY. JUAN COLLAS, JR.:
On that date, do (sic) you have occasion to
handle or deal with the transfer of cargo from
TWA Flight No. 603 to PAL San Francisco?
MICHAEL GIOSSO:
Yes, I did.
ATTY. JUAN COLLAS, JR.:
What was your participation with the transfer of
the cargo?
MICHAEL GIOSSO:
I manifested the freight on a transfer manifest
and physically moved it to PAL and concluded
the transfer by signing it off.
ATTY. JUAN COLLAS, JR.:
You brought it there yourself?
MICHAEL GIOSSO:
Yes sir.
ATTY. JUAN COLIAS, JR.:
Do you have anything to show that PAL
received the cargo from TWA on October 27,
1976?
MICHAEL GIOSSO:
Yes, I do.
(Witness presenting a document)
ATTY. JUAN COLLAS, JR.:
For purposes of clarity, Exhibit I is designated
as Exhibit I-TWA.
xxx xxx xxx
ATTY. JUAN COLLAS, JR.:
This Exhibit I-TWA, could you tell what it is,
what it shows?
MICHAEL GIOSSO:
It shows transfer of manifest on 10-27-76 to
PAL at 1400 and verified with two signatures as
it completed the transfer.
ATTY. JUAN COLLAS, JR.:
Very good,. Who was the PAL employee who
received the cargo?
MICHAEL GIOSSO:
The name is Garry Marcial."
37

The deposition of Alberto A. Lim, PAL's cargo supervisor at San Francisco, as
deponent-witness for PAL, makes this further clarification:
ATTY. CESAR P. MANALAYSAY:
You mentioned Airway Bill, Mr. Lim. I am
showing to you a PAL Airway Bill Number
01180454 which for purposes of evidence, I
would like to request that the same be marked
as evidence Exhibit I for PAL.
xxx xxx xxx
In what circumstances did you encounter
Exhibit I-PAL?
ALBERTO A. LIM:
If I recall correctly, I was queried by Manila, our
Manila office with regard to a certain complaint
that a consignee filed that this shipment did not
arrive on the day that the consignee expects
the shipment to arrive.
ATTY CESAR P. MANALAYSAY:
Okay. Now, upon receipt of that query from
your Manila office, did you conduct any
investigation to pinpoint the possible causes of
mishandling?
ALBERTO A. LIM:
Yes.
xxx xxx xxx
ATTY. CESAR P. MANALAYSAY:
What is the result of your investigation?
ALBERTO A. LIM:
In the course of my investigation, I found that
we received the body on October 28, 1976,
from American Airlines.
ATTY. CESAR P. MANALAYSAY:
What body are you referring to?
xxx xxx xxx
ALBERTO A. LIM:
The remains of Mrs. Cristina (sic) Saludo.
ATTY. CESAR P. MANALAYSAY:
Is that the same body mentioned in this Airway
Bill?
ALBERTO A. LIM:
Yes.
ATTY. CESAR P. MANALAYSAY:
What time did you receive said body on
October 28, 1976?
ALBERTO A. LIM:
If I recall correctly, approximately 7:45 of
October 28, 1976.
ATTY. CESAR P. MANALAYSAY:
Do you have any proof with you to back the
statement?
ALBERTO A. LIM:
Yes. We have on our records a Transfer
Manifest from American Airlines Number
204312 showing that we received a human
remains shipment belong to Mrs. Cristina (sic)
Saludo or the human remains of Mrs. Cristina
(sic) Saludo.
ATTY. CESAR P. MAIALAYSAY:
At this juncture, may I request that the Transfer
Manifest referred to by the witness be marked
as an evidence as Exhibit II-PAL.
xxx xxx xxx
Mr. Lim, yesterday your co-defendant TWA
presented as their Exhibit I evidence tending to
show that on October 27, 1976 at about 2:00 in
the, afternoon they delivered to you a cargo
bearing human remains. Could you go over this
Exhibit I and please give us your comments as
to that exhibit?
ATTY. ALBERTO C. MENDOZA:
That is a vague question. I would rather request
that counsel propound specific questions rather
than asking for comments on Exhibit I-TWA.
ATTY. CESAR P. MANALAYSAY:
In that case, I will reform my question. Could
you tell us whether TWA in fact delivered to you
the human remains as indicated in that Transfer
Manifest?
ALBERTO A. LIM:
Yes, they did.
ATTY. CESAR P. MANALAYSAY:
I noticed that the Transfer Manifest of TWA
marked as Exhibit I-TWA bears the same
numbers or the same entries as the Airway Bill
marked as Exhibit I-A PAL tending to show that
this is the human remains of Mrs Cristina (sic)
Saludo. Could you tell us whether this is true?
ALBERTO A. LIM:
It is true that we received human remains
shipment from TWA as indicated on this Transfer
Manifest. But in the course of investigation, it was
found out that the human remains transferred to
us is not the remains of Mrs. Cristina (sic) Saludo
this is the reason why we did not board it on our
flight.
38

Petitioners consider TWA's statement that "it had to rely on the information
furnished by the shipper" a lame excuse and that its failure to prove that its
personnel verified and identified the contents of the casket before loading the
same constituted negligence on the part of TWA.
39

We upbold the favorable consideration by the Court of Appeals of the following
findings of the trial court:
It was not (to) TWA, but to C.M.A.S. that the Pomierski & Son
Funeral Home delivered the casket containing the remains of
Crispina Saludo. TWA would have no knowledge therefore that
the remains of Crispina Saludo were not the ones inside the
casket that was being presented to it for shipment. TWA would
have to rely on there presentations of C.M.A.S. The casket was
hermetically sealed and also sealed by the Philippine Vice
Consul in Chicago. TWA or any airline for that matter would not
have opened such a sealed casket just for the purpose of
ascertaining whose body was inside and to make sure that the
remains inside were those of the particular person indicated to
be by C.M.A.S. TWA had to accept whatever information was
being furnished by the shipper or by the one presenting the
casket for shipment. And so as a matter of fact, TWA carried to
San Francisco and transferred to defendant PAL a shipment
covered by or under PAL Airway Bill No. 079-ORD-01180454,
the airway bill for the shipment of the casketed remains of
Crispina Saludo. Only, it turned out later, while the casket was
already with PAL, that what was inside the casket was not the
body of Crispina Saludo so much so that it had to be withdrawn
by C.M.A.S. from PAL. The body of Crispina Saludo had been
shipped to Mexico. The casket containing the remains of
Crispina Saludo was transshipped from Mexico and arrived in
San Francisco the following day on board American Airlines. It
was immediately loaded by PAL on its flight for Manila.
The foregoing points at C.M.A.S., not defendant TWA much less
defendant PAL, as the ONE responsible for the switching or mix-
up of the two bodies at the Chicago Airport terminal, and started a
chain reaction of the misshipment of the body of Crispina Saludo
and a one-day delay in the delivery thereof to its destination.
40

Verily, no amount of inspection by respondent airline companies could have
guarded against the switching that had already taken place. Or, granting that
they could have opened the casket to inspect its contents, private respondents
had no means of ascertaining whether the body therein contained was indeed
that of Crispina Saludo except, possibly, if the body was that of a male person
and such fact was visually apparent upon opening the casket. However, to
repeat, private respondents had no authority to unseal and open the same nor
did they have any reason or justification to resort thereto.
It is the right of the carrier to require good faith on the part of those persons
who deliver goods to be carried, or enter into contracts with it, and inasmuch
as the freight may depend on the value of the article to be carried, the carrier
ordinarily has the right to inquire as to its value. Ordinarily, too, it is the duty of
the carrier to make inquiry as to the general nature of the articles shipped and
of their value before it consents to carry them; and its failure to do so cannot
defeat the shipper's right to recovery of the full value of the package if lost, in
the absence of showing of fraud or deceit on the part of the shipper. In the
absence of more definite information, the carrier has a the right to accept
shipper's marks as to the contents of the package offered for transportation
and is not bound to inquire particularly about them in order to take advantage
of a false classification and where a shipper expressly represents the contents
of a package to be of a designated character, it is not the duty of the carrier to
ask for a repetition of the statement nor disbelieve it and open the box and see
for itself.
41
However, where a common carrier has reasonable ground to
suspect that the offered goods are of a dangerous or illegal character, the
carrier has the right to know the character of such goods and to insist on an
inspection, if reasonable and practical under the circumstances, as a condition
of receiving and transporting such goods.
42

It can safely be said then that a common carrier is entitled to fair
representation of the nature and value of the goods to be carried, with the
concomitant right to rely thereon, and further noting at this juncture that a
carrier has no obligation to inquire into the correctness or sufficiency of such
information.
43
The consequent duty to conduct an inspection thereof arises in
the event that there should be reason to doubt the veracity of such
representations. Therefore, to be subjected to unusual search, other than the
routinary inspection procedure customarily undertaken, there must exist proof
that would justify cause for apprehension that the baggage is dangerous as to
warrant exhaustive inspection, or even refusal to accept carriage of the same;
and it is the failure of the carrier to act accordingly in the face of such proof
that constitutes the basis of the common carrier's liability.
44

In the case at bar, private respondents had no reason whatsoever to doubt the
truth of the shipper's representations. The airway bill expressly providing that
"carrier certifies goods received below were received for carriage," and that the
cargo contained "casketed human remains of Crispina Saludo," was issued on
the basis of such representations. The reliance thereon by private respondents
was reasonable and, for so doing, they cannot be said to have acted
negligently. Likewise, no evidence was adduced to suggest even an iota of
suspicion that the cargo presented for transportation was anything other than
what it was declared to be, as would require more than routine inspection or
call for the carrier to insist that the same be opened for scrutiny of its contents
per declaration.
Neither can private respondents be held accountable on the basis of
petitioners' preposterous proposition that whoever brought the cargo to the
airport or loaded it on the airplane did so as agent of private respondents, so
that even if CMAS whose services were engaged for the transit arrangements
for the remains was indeed at fault, the liability therefor would supposedly still
be attributable to private respondents.
While we agree that the actual participation of CMAS has been sufficiently and
correctly established, to hold that it acted as agent for private respondents
would be both an inaccurate appraisal and an unwarranted categorization of
the legal position it held in the entire transaction.
It bears repeating that CMAS was hired to handle all the necessary shipping
arrangements for the transportation of the human remains of Crispina Saludo
to Manila. Hence, it was to CMAS that the Pomierski & Son Funeral Home, as
shipper, brought the remains of petitioners' mother for shipment, with Maria
Saludo as consignee. Thereafter, CMAS booked the shipment with PAL
through the carrier's agent, Air Care International.
45
With its aforestated
functions, CMAS may accordingly be classified as a forwarder which, by
accepted commercial practice, is regarded as an agent of the shipper and not
of the carrier. As such, it merely contracts for the transportation of goods by
carriers, and has no interest in the freight but receives compensation from the
shipper as his agent.
46

At this point, it can be categorically stated that, as culled from the findings of
both the trial court and appellate courts, the entire chain of events which
culminated in the present controversy was not due to the fault or negligence of
private respondents. Rather, the facts of the case would point to CMAS as the
culprit. Equally telling of the more likely possibility of CMAS' liability is
petitioners' letter to and demanding an explanation from CMAS regarding the
statement of private respondents laying the blame on CMAS for the incident,
portions of which, reading as follows:
. . . we were informed that the unfortunate a mix-up occurred
due to your negligence. . . .
Likewise, the two airlines pinpoint the responsibility upon your
agents. Evidence were presented to prove that allegation.
On the face of this overwhelming evidence we could and should
have filed a case against you. . . .
47

clearly allude to CMAS as the party at fault. This is tantamount to an admission
by petitioners that they consider private respondents without fault, or is at the
very least indicative of the fact that petitioners entertained serious doubts as to
whether herein private respondents were responsible for the unfortunate turn
of events.
Undeniably, petitioners' grief over the death of their mother was aggravated by
the unnecessary inconvenience and anxiety that attended their efforts to bring
her body home for a decent burial. This is unfortunate and calls for sincere
commiseration with petitioners. But, much as we would like to give them
consolation for their undeserved distress, we are barred by the inequity of
allowing recovery of the damages prayed for by them at the expense of private
respondents whose fault or negligence in the very acts imputed to them has
not been convincingly and legally demonstrated.
Neither are we prepared to delve into, much less definitively rule on, the
possible liability of CMAS as the evaluation and adjudication of the same is not
what is presently at issue here and is best deferred to another time and
addressed to another forum.
II. Petitioners further fault the Court of Appeals for ruling that there was no
contractual breach on the part of private respondents as would entitle
petitioners to damages.
Petitioners hold that respondent TWA, by agreeing to transport the remains of
petitioners' mother on its Flight 131 from Chicago to San Francisco on October
27, 1976, made itself a party to the contract of carriage and, therefore, was
bound by the terms of the issued airway bill. When TWA undertook to ship the
remains on its Flight 603, ten hours earlier than scheduled, it supposedly
violated the express agreement embodied in the airway bill. It was allegedly
this breach of obligation which compounded, if not directly caused, the
switching of the caskets.
In addition, petitioners maintain that since there is no evidence as to who
placed the body on board Flight 603, or that CMAS actually put the cargo on
that flight, or that the two caskets at the Chicago airport were to be transported
by the same airline, or that they came from the same funeral home, or that
both caskets were received by CMAS, then the employees or agents of TWA
presumably caused the mix-up by loading the wrong casket on the plane. For
said error, they contend, TWA must necessarily be presumed negligent and
this presumption of negligence stands undisturbed unless rebutting evidence is
presented to show that the switching or misdelivery was due to circumstances
that would exempt the carrier from liability.
Private respondent TWA professes otherwise. Having duly delivered or
transferred the cargo to its co-respondent PAL on October 27, 1976 at 2:00
P.M., as supported by the TWA Transfer Manifest, TWA faithfully complied
with its obligation under the airway bill. Said faithful compliance was not
affected by the fact that the remains were shipped on an earlier flight as there
was no fixed time for completion of carriage stipulated on. Moreover, the
carrier did not undertake to carry the cargo aboard any specified aircraft, in
view of the condition on the back of the airway bill which provides:
CONDITIONS OF CONTRACT
xxx xxx xxx
It is agreed that no time is fixed for the completion of carriage
hereunder and that Carrier may without notice substitute alternate
carriers or aircraft. Carrier assumes no obligation to carry the
goods by any specified aircraft or over any particular route or
routes or to make connection at any point according to any
particular schedule, and Carrier is hereby authorized to select, or
deviate from the route or routes of shipment, notwithstanding that
the same may be stated on the face hereof. The shipper
guarantees payment of all charges and advances.
48

Hence, when respondent TWA shipped the body on earlier flight and on a
different aircraft, it was acting well within its rights. We find this argument
tenable.
The contention that there was contractual breach on the part of private
respondents is founded on the postulation that there was ambiguity in the
terms of the airway bill, hence petitioners' insistence on the application of the
rules on interpretation of contracts and documents. We find no such ambiguity.
The terms are clear enough as to preclude the necessity to probe beyond the
apparent intendment of the contractual provisions.
The hornbook rule on interpretation of contracts consecrates the primacy of
the intention of the parties, the same having the force of law between them.
When the terms of the agreement are clear and explicit, that they do not justify
an attempt to read into any alleged intention of the parties, the terms are to be
understood literally just as they appear on the face of the contract.
49
The
various stipulations of a contract shall be interpreted together
50
and such a
construction is to be adopted as will give effect to all provisions thereof.
51
A
contract cannot be construed by parts, but its clauses should be interpreted in
relation to one another. The whole contract must be interpreted or read
together in order to arrive at its true meaning. Certain stipulations cannot be
segregated and then made to control; neither do particular words or phrases
necessarily determine the character of a contract. The legal effect of the
contract is not to be determined alone by any particular provision disconnected
from all others, but in the ruling intention of the parties as gathered from all the
language they have used and from their contemporaneous and subsequent
acts.
52

Turning to the terms of the contract at hand, as presented by PAL Air Waybill
No. 079-01180454, respondent court approvingly quoted the trial court's
disquisition on the aforequoted condition appearing on the reverse side of the
airway bill and its disposition of this particular assigned error:
The foregoing stipulation fully answers plaintiffs' objections to
the one-day delay and the shipping of the remains in TWA
Flight 603 instead of TWA Flight 131. Under the stipulation,
parties agreed that no time was fixed to complete the contract
of carriage and that the carrier may, without notice, substitute
alternate carriers or aircraft. The carrier did not assume the
obligation to carry the shipment on any specified aircraft.
xxx xxx xxx
Furthermore, contrary to the claim of plaintiffs-appellants, the
conditions of the Air Waybill are big enough to be read and
noticed. Also, the mere fact that the cargo in question was shipped
in TWA Flight 603, a flight earlier on the same day than TWA
Flight 131, did not in any way cause or add to the one-day delay
complained of and/or the switching or mix-up of the bodies.
53

Indubitably, that private respondent can use substitute aircraft even without
notice and without the assumption of any obligation whatsoever to carry the
goods on any specified aircraft is clearly sanctioned by the contract of carriage
as specifically provided for under the conditions thereof.
Petitioners' invocation of the interpretative rule in the Rules of Court that
written words control printed words in documents,
54
to bolster their assertion
that the typewritten provisions regarding the routing and flight schedule prevail
over the printed conditions, is tenuous. Said rule may be considered only when
there is inconsistency between the written and printed words of the contract.
As previously stated, we find no ambiguity in the contract subject of this case
that would call for the application of said rule. In any event, the contract
has provided for such a situation by explicitly stating that the above condition
remains effective "notwithstanding that the same (fixed time for completion of
carriage, specified aircraft, or any particular route or schedule) may be stated
on the face hereof." While petitioners hinge private respondents' culpability on
the fact that the carrier "certifies goods described below were received for
carriage," they may have overlooked that the statement on the face of the
airway bill properly and completely reads —
Carrier certifies goods described below were received for
carriage subject to the Conditions on the reverse hereof the goods
then being in apparent good order and condition except as noted
hereon.
55
(Emphasis ours.)
Private respondents further aptly observe that the carrier's certification
regarding receipt of the goods for carriage "was of a smaller print than the
condition of the Air Waybill, including Condition No. 5 — and thus if plaintiffs-
appellants had recognized the former, then with more reason they were aware
of the latter.
56

In the same vein, it would also be incorrect to accede to the suggestion of
petitioners that the typewritten specifications of the flight, routes and dates of
departures and arrivals on the face of the airway bill constitute a special
contract which modifies the printed conditions at the back thereof. We reiterate
that typewritten provisions of the contract are to be read and understood
subject to and in view of the printed conditions, fully reconciling and giving
effect to the manifest intention of the parties to the agreement.
The oft-repeated rule regarding a carrier's liability for delay is that in the
absence of a special contract, a carrier is not an insurer against delay in
transportation of goods. When a common carrier undertakes to convey goods,
the law implies a contract that they shall be delivered at destination within a
reasonable time, in the absence, of any agreement as to the time of
delivery.
57
But where a carrier has made an express contract to transport and
deliver property within a specified time, it is bound to fulfill its contract and is
liable for any delay, no matter from what cause it may have arisen.
58
This
result logically follows from the well-settled rule that where the law creates a
duty or charge, and the party is disabled from performing it without any default
in himself, and has no remedy over, then the law will excuse him, but where
the party by his own contract creates a duty or charge upon himself, he is
bound to make it good notwithstanding any accident or delay by inevitable
necessity because he might haveprovided against it by contract. Whether or
not there has been such an undertaking on the part of the carrier to be
determined from the circumstances surrounding the case and by application of
the ordinary rules for the interpretation of contracts.
59

Echoing the findings of the trial court, the respondent court correctly declared
that —
In a similar case of delayed delivery of air cargo under a very
similar stipulation contained in the airway bill which reads: "The
carrier does not obligate itself to carry the goods by any
specified aircraft or on a specified time. Said carrier being
hereby authorized to deviate from the route of the shipment
without any liability therefor", our Supreme Court ruled 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. Said rights and obligations are created
by a specific contract entered into by the parties (Mendoza vs.
PAL, 90 Phil. 836).
There is no showing by plaintiffs that such a special or specific
contract had been entered into between them and the
defendant airline companies.
And this special contract for prompt delivery should call the
attention of the carrier to the circumstances surrounding the case
and the approximate amount of damages to be suffered in case of
delay (See Mendoza vs. PAL, supra). There was no such contract
entered into in the instant case.
60

Also, the theory of petitioners that the specification of the flights and dates of
departure and arrivals constitute a special contract that could prevail over the
printed stipulations at the back of the airway bill is vacuous. To countenance
such a postulate would unduly burden the common carrier for that would have
the effect of unilaterally transforming every single bill of lading or trip ticket into
a special contract by the simple expedient of filling it up with the particulars of
the flight, trip or voyage, and thereby imposing upon the carrier duties and/or
obligations which it may not have been ready or willing to assume had it been
timely, advised thereof.
Neither does the fact that the challenged condition No. 5 was printed at the
back of the airway bill militate against its binding effect on petitioners as parties
to the contract, for there were sufficient indications on the face of said bill that
would alert them to the presence of such additional condition to put them on
their guard. Ordinary prudence on the part of any person entering or
contemplating to enter into a contract would prompt even a cursory
examination of any such conditions, terms and/or stipulations.
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.
61

Granting arguendo that Condition No. 5 partakes of the nature of a contract of
adhesion and as such must be construed strictly against the party who drafted
the same or gave rise to any ambiguity therein, it should be borne in mind that
a contract of adhesion may be struck down as void and unenforceable, for
being subversive of public policy, only when the weaker party is imposed upon
in dealing with the dominant bargaining party and is reduced to the alternative
of taking it or leaving it, completely deprived of the opportunity to bargain on
equal footing.
62
However, Ong Yiu vs. Court of Appeals, et al
63
instructs us that
contracts of adhesion are not entirely prohibited. The one who adheres to the
contract is in reality free to reject it entirely; if he adheres, be gives his consent.
Accordingly, petitioners, far from being the weaker party in this situation, duly
signified their presumed assent to all terms of the contract through their
acceptance of the airway bill and are consequently bound thereby. It cannot be
gainsaid that petitioners' were not without several choices as to carriers in
Chicago with its numerous airways and airliner servicing the same.
We wish to allay petitioners' apprehension that Condition No. 5 of the airway
bill is productive of mischief as it would validate delay in delivery, sanction
violations of contractual obligations with impunity or put a premium on
breaches of contract.
Just because we have said that condition No. 5 of the airway bill is binding
upon the parties to and fully operative in this transaction, it does not mean, and
let this serve as fair warning to respondent carriers, that they can at all times
whimsically seek refuge from liability in the exculpatory sanctuary of said
Condition No. 5 or arbitrarily vary routes, flights and schedules to the prejudice
of their customers. This condition only serves to insulate the carrier from
liability in those instances when changes in routes, flights and schedules are
clearly justified by the peculiar circumstances of a particular case, or by
general transportation practices, customs and usages, or by contingencies or
emergencies in aviation such as weather turbulence, mechanical failure,
requirements of national security and the like. And even as it is conceded that
specific routing and other navigational arrangements for a trip, flight or voyage,
or variations therein, generally lie within the discretion of the carrier in the
absence of specific routing instructions or directions by the shipper, it is plainly
incumbent upon the carrier to exercise its rights with due deference to the
rights, interests and convenience of its customers.
A common carrier undertaking to transport property has the implicit duty to
carry and deliver it within reasonable time, absent any particular stipulation
regarding time of delivery, and to guard against delay. In case of any
unreasonable delay, the carrier shall be liable for damages immediately and
proximately resulting from such neglect of duty.
64
As found by the trial court,
the delay in the delivery of the remains of Crispina Saludo, undeniable and
regrettable as it was, cannot be attributed to the fault, negligence or malice of
private respondents,
65
a conclusion concurred in by respondent court and
which we are not inclined to disturb.
We are further convinced that when TWA opted to ship the remains of Crispina
Saludo on an earlier flight, it did so in the exercise of sound discretion and with
reasonable prudence, as shown by the explanation of its counsel in his letter of
February 19, 1977 in response to petitioners' demand letter:
Investigation of TWA's handling of this matter reveals that
although the shipment was scheduled on TWA Flight 131 of
October 27, 1976, it was actually boarded on TWA Flight 603 of
the same day, approximately 10 hours earlier, in order to assure
that the shipment would be received in San Francisco in sufficient
time for transfer to PAL. This transfer was effected in San
Francisco at 2:00 P.M. on October 27, 1976.
66

Precisely, private respondent TWA knew of the urgency of the shipment by
reason of this notation on the lower portion of the airway bill: "All documents
have been certified. Human remains of Cristina (sic) Saludo. Please return bag
first available flight to SFO." Accordingly, TWA took it upon itself to carry the
remains of Crispina Saludo on an earlier flight, which we emphasize it could do
under the terms of the airway bill, to make sure that there would be enough
time for loading said remains on the transfer flight on board PAL.
III. Petitioners challenge the validity of respondent court's finding that private
respondents are not liable for tort on account of the humiliating, arrogant and
indifferent acts of their officers and personnel. They posit that since their
mother's remains were transported ten hours earlier than originally scheduled,
there was no reason for private respondents' personnel to disclaim knowledge
of the arrival or whereabouts of the same other than their sheer arrogance,
indifference and extreme insensitivity to the feelings of petitioners. Moreover,
being passengers and not merely consignors of goods, petitioners had the
right to be treated with courtesy, respect, kindness and due consideration.
In riposte, TWA claims that its employees have always dealt politely with all
clients, customers and the public in general. PAL, on the other hand, declares
that in the performance of its obligation to the riding public, other customers
and clients, it has always acted with justice, honesty, courtesy and good faith.
Respondent appellate court found merit in and reproduced the trial court's
refutation of this assigned error:
About the only evidence of plaintiffs that may have reference to
the manner with which the personnel of defendants treated the
two plaintiffs at the San Francisco Airport are the following
pertinent portions of Maria Saludo's testimony:
Q When you arrived there, what did you do, if
any?
A I immediately went to the TWA counter and I
inquired about whether my mother was there or
if' they knew anything about it.
Q What was the answer?
A They said they do not know. So, we waited.
Q About what time was that when you reached
San Francisco from Chicago?
A I think 5 o'clock. Somewhere around that in
the afternoon.
Q You made inquiry it was immediately
thereafter?
A Right after we got off the plane.
Q Up to what time did you stay in the airport to
wait until the TWA people could tell you the
whereabouts?
A Sorry, Sir, but the TWA did not tell us
anything. We stayed there until about 9 o'clock.
They have not heard anything about it. They did
not say anything.
Q Do you want to convey to the Court that from
5 up to 9 o'clock in the evening you yourself
went back to the TWA and they could not tell
you where the remains of your mother were?
A Yes sir.
Q And after nine o'clock, what did you do?
A I told my brother my Mom was supposed to
be on the Philippine Airlines flight. "Why don't"
we check with PAL instead to see if she was
there?" We tried to comfort each other. I told
him anyway that was a shortest flight from
Chicago to California. We will be with our
mother on this longer flight. So, we checked
with the PAL.
Q What did you find?
A We learned, Yes, my Mom would be on the
flight.
Q Who was that brother?
A Saturnino Saludo.
Q And did you find what was your flight from
San Francisco to the Philippines?
A I do not know the number. It was the evening
flight of the Philippine Airline(s) from San
Francisco to Manila.
Q You took that flight with your mother?
A We were scheduled to, Sir.
Q Now, you could not locate the remains of
your mother in San Francisco could you tell us
what did you feel?
A After we were told that my mother was not
there?
Q After you learned that your mother could not
fly with you from Chicago to California?
A Well, I was very upset. Of course, I wanted
the confirmation that my mother was in the
West Coast. The fliqht was about 5 hours from
Chicago to California. We waited anxiously all
that time on the plane. I wanted to be assured
about my mother's remains. But there was
nothing and we could not get any assurance
from anyone about it.
Q Your feeling when you reached San
Francisco and you could not find out from the
TWA the whereabouts of the remains, what did
you feel?
A Something nobody would be able to describe
unless he experiences it himself. It is a kind of
panic. I think it's a feeling you are about to go
crazy. It is something I do not want to live
through again. (Inting, t.s.n., Aug. 9, 1983, pp.
14-18).
The foregoing does not show any humiliating or arrogant manner
with which the personnel of both defendants treated the two
plaintiffs. Even their alleged indifference is not clearly established.
The initial answer of the TWA personnel at the counter that they
did not know anything about the remains, and later, their answer
that they have not heard anything about the remains, and the
inability of the TWA counter personnel to inform the two plaintiffs
of the whereabouts of the remains, cannot be said to be total or
complete indifference to the said plaintiffs. At any rate, it is any
rude or discourteous conduct, malfeasance or neglect, the use of
abusive or insulting language calculated to humiliate and shame
passenger or had faith by or on the part of the employees of the
carrier that gives the passenger an action for damages against the
carrier (Zulueta vs. Pan American World Airways, 43 SCRA 397;
Air France vs. Carrascoso, et al., 18 SCRA 155; Lopez, et al. vs.
Pan American World Airways, 16 SCRA 431; Northwest Airlines,
Inc. vs. Cuenca, 14 SCRA 1063), and none of the above is
obtaining in the instant case.
67

We stand by respondent court's findings on this point, but only to the extent
where it holds that the manner in which private respondent TWA's employees
dealt with petitioners was not grossly humiliating, arrogant or indifferent as
would assume the proportions of malice or bad faith and lay the basis for an
award of the damages claimed. It must however, be pointed out that the
lamentable actuations of respondent TWA's employees leave much to be
desired, particularly so in the face of petitioners' grief over the death of their
mother, exacerbated by the tension and anxiety wrought by the impasse and
confusion over the failure to ascertain over an appreciable period of time what
happened to her remains.
Airline companies are hereby sternly admonished that it is their duty not only to
cursorily instruct but to strictly require their personnel to be more
accommodating towards customers, passengers and the general public. After
all, common carriers such as airline companies are in the business of
rendering public service, which is the primary reason for their enfranchisement
and recognition in our law. Because the passengers in a contract of carriage
do not contract merely for transportation, they have a right to be treated with
kindness, respect, courtesy and consideration.
68
A contract to transport
passengers is quite different in kind and degree from any other contractual
relation, and generates a relation attended with public duty. The operation of a
common carrier is a business affected with public interest and must be
directed to serve the comfort and convenience of passengers.
69
Passengers
are human beings with human feelings and emotions; they should not be
treated as mere numbers or statistics for revenue.
The records reveal that petitioners, particularly Maria and Saturnino Saludo,
agonized for nearly five hours, over the possibility of losing their mother's
mortal remains, unattended to and without any assurance from the employees
of TWA that they were doing anything about the situation. This is not to say
that petitioners were to be regaled with extra special attention. They were,
however, entitled to the understanding and humane consideration called for by
and commensurate with the extraordinary diligence required of common
carriers, and not the cold insensitivity to their predicament. It is hard to believe
that the airline's counter personnel were totally helpless about the situation.
Common sense would and should have dictated that they exert a little extra
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, which could have easily
facilitated said inquiry and which are used as a matter of course by airline
companies in their daily operations, their apathetic stance while not legally
reprehensible is morally deplorable.
Losing a loved one, especially one's, parent, is a painful experience. Our
culture accords the tenderest 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 the airline's personnel, even for just that
fraction of time, was especially condemnable particularly in the hour of
bereavement of the family of Crispina Saludo, intensified by anguish due to the
uncertainty of the whereabouts of their mother's remains. Hence, it is quite
apparent that private respondents' 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 or
imputable to respondent PAL or its employees. 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 that they repaired after failing to
receive proper attention from TWA. It was from PAL that they received
confirmation that their mother's remains would be on the same flight to Manila
with them.
We find the following substantiation on this particular episode from the
deposition of Alberto A. Lim, PAL's cargo supervisor earlier adverted to,
regarding their investigation of and the action taken on learning of petitioner's
problem:
ATTY. ALBERTO C. MENDOZA:
Yes.
Mr. Lim, what exactly was your procedure
adopted in your so called investigation?
ALBERTO A. LIM:
I called the lead agent on duty at that time and
requested for a copy of airway bill, transfer
manifest and other documents concerning the
shipment.
ATTY ALBERTO C. MENDOZA:
Then, what?
ALBERTO A. LIM:
They proceeded to analyze exactly where PAL
failed, if any, in forwarding the human remains of
Mrs. Cristina (sic) Saludo. And I found out that
there was not (sic) delay in shipping the remains
of Mrs. Saludo to Manila. Since we received the
body from American Airlines on 28 October at
7:45 and we expedited the shipment so that it
could have been loaded on our flight leaving at
9:00 in the evening or just barely one hour and 15
minutes prior to the departure of the aircraft. That
is so (sic) being the case, I reported to Manila
these circumstances.
70

IV. Finally, petitioners insist, as a consequence of the delay in the shipment of
their mother's remains allegedly caused by wilful contractual breach, on their
entitlement to actual, moral and exemplary damages as well as attorney's fees,
litigation expenses, and legal interest.
The uniform decisional tenet in our jurisdiction bolds that moral damages may
be awarded for wilful or fraudulent breach of contract
71
or when such breach is
attended by malice or bad faith.
72
However, in the absence of strong and
positive evidence of fraud, malice or bad faith, said damages cannot be
awarded.
73
Neither can there be an award of exemplary damages
74
nor of
attorney's fees
75
as an item of damages in the absence of proof that defendant
acted with malice, fraud or bad faith.
The censurable conduct of TWA's employees cannot, however, be said to
have approximated the dimensions of fraud, malice or bad faith. It can be said
to be more of a lethargic reaction produced and engrained in some people by
the mechanically routine nature of their work and a racial or societal culture
which stultifies what would have been their accustomed human response to a
human need under a former and different ambience.
Nonetheless, the facts show that 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 TWA and this entitles
them, at least, 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 of 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.
76
In the exercise of our discretion, we find an award
of P40,000.00 as nominal damages in favor of, petitioners to be a reasonable
amount under the circumstances of this case.
WHEREFORE, with the modification that an award of P40,000.00 as and by
way of nominal damages is hereby granted in favor of petitioners to be paid by
respondent Trans World Airlines, the appealed decision is AFFIRMED in all
other respects.
SO ORDERED.
Melencio-Herrera, Paras, Padilla and Nocon, JJ., concur.