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CASE DIGESTS AND SYNTHESES ON TRANSPORTATION LAW

GROUP 6
LEADER:
FROILAN JAY C. SUAREZ

MEMBERS:
ALDRIN LIM
ANN COMENDADOR
MANNY KENT REGULACION
RIZYL YAPSANGCO
WILLIAM JEFFERSON BENAVIDES
DAISY NAVALES

SUBMITTED TO:
ATTY. GERALD YU

Monarch Insurance Co., Inc. vs. CA


MONARCH INSURANCE CO., INC vs. COURT OF APPEALS and ABOITIZ
SHIPPING CORPORATION
G.R. No. 92735. June 8, 2000

FACTS:
Monarch and Tabacalera are insurance carriers of lost cargoes. They indemnified the
shippers and were consequently subrogated to their rights, interests and actions
against Aboitiz, the cargo carrier. Because Aboitiz refused to compensate Monarch, it
filed two complaints against Aboitiz, which were consolidated and jointly tried.
Aboitiz rejected responsibility for the claims on the ground that the sinking of its
cargo vessel was due to force majeure or an act of God. Aboitiz was subsequently
declared as in default and allowed Monarch and Tabacalera to present evidence exparte.
ISSUE:
Whether or not the doctrine of limited liability applies in the instant case.
HELD:
Yes.
The failure of Aboitiz to present sufficient evidence to exculpate itself from fault
and/or negligence in the sinking of its vessel in the face of the foregoing expert
testimony constrains us to hold that Aboitiz was concurrently at fault and/or negligent
with the ship captain and crew of the M/V P. Aboitiz. [This is in accordance with the
rule that in cases involving the limited liability of shipowners, the initial burden of
proof of negligence or unseaworthiness rests on the claimants. However, once the
vessel owner or any party asserts the right to limit its liability, the burden of proof as
to lack of privity or knowledge on its part with respect to the matter of negligence or
unseaworthiness is shifted to it. This burden, Aboitiz had unfortunately failed to
discharge.] That Aboitiz failed to discharge the burden of proving that the
unseaworthiness of its vessel was not due to its fault and/or negligence should not
however mean that the limited liability rule will not be applied to the present cases.

The peculiar circumstances here demand that there should be no strict adherence to
procedural rules on evidence lest the just claims of shippers/insurers be frustrated.
The rule on limited liability should be applied in accordance with the latest ruling in
Aboitiz Shipping Corporation v. General Accident Fire and Life Assurance
Corporation, Ltd.,] promulgated on January 21, 1993, that claimants be treated as
"creditors in an insolvent corporation whose assets are not enough to satisfy the
totality of claims against it."

STANDARD OIL COMPANY OF NEW YORK, PLAINTIFF AND APPELLEE, VS.


MANUEL LOPEZ CASTELO, DEFENDANT AND APPELLANT.
G. R. No. 13695, October 18, 1921

FACTS:
By contract of charter dated February 8, 1915, Manuel Lopez Castelo, as owner, let
the small interisland steamer Batangueno for the term of one year to Jose Lim
Chumbuque for use in the conveying of cargo between certain ports of the Philippine
Islands.
While the boat was being thus used by the charterer in the interisland trade, the
Standard Oil Company delivered to the agent of the boat in Manila a quantity of
petroleum to be conveyed to the port of Casiguran, in the Province of Sorsogon.
While the boat was on her way to the port mentioned, and off the western coast of
Sorsogon, a violent typhoon passed over that region, and while the storm was at its
height the captain was compelled for the safety of all to jettison the entire
consignment of petroleum consisting of two hundred cases. When the storm abated
the ship made port, and thirteen cases of the petroleum were recovered, but the
remainder was wholly lost.
To recover the value of the petroleum thus jettisoned but not recovered, the present
action was instituted by the Standard Oil Company against the owner of the ship in
the Court of First Instance of Manila, where judgment was rendered in favor of' the
plaintiff. From this judgment the defendant appealed.

ISSUE:
1. Whether the loss of this petroleum was a general average loss or a particular
loss to be borne solely by the owner of the cargo.
2. Who is the person, or persons, who are liable to make good this loss, and
what are the conditions under which the action can be maintained?
HELD:
The loss of cargo carried on deck shall not be considered a general average loss.
The cargo was carried upon deck; and it is a general rule, both under the Spanish
Commercial Code and under the doctrines prevailing in the courts of admiralty of
England and America, as well as in other countries, that ordinarily the loss of cargo
carried on deck shall not be considered a general average loss.
This is clearly expressed in Rule I of the YorkAntwerp Rules, as follows: "No jettison
of deck cargo shall be made good as general average." The reason for this rule is
found in the fact that deck cargo is in an extra-hazardous position and, if on a sailing
vessel, its presence is likely to obstruct the free action of the crew in managing the
ship. Moreover, especially in the case of small vessels, it renders the boat top-heavy
and thus may have to be cast overboard sooner than would be necessary if it were in
the hold; and naturally it is always the first cargo to go over in case of emergency.
Indeed, in subsection 1 of article 815 of the Code of Commerce, it is expressly
declared that deck cargo shall be cast overboard before cargo stowed in the hold.
The Marine Regulations now in force in these Islands contain provisions recognizing
the right of vessels engaged in the interisland trade to carry deck cargo; and express
provision is made as to the manner in which it shall be bestowed and protected from
the elements (Phil. Mar. Reg. [1913], par. 23). Indeed, there is one commodity,
namely, gasoline, which from its inflammable nature is not permitted to be carried in
the hold of any passenger vessel, though it may be carried on the deck if certain
precautions are taken. There is no express provision declaring that petroleum shall
be carried on deck in any case; but having regard to its inflammable nature and the
known practices of the interisland boats, it cannot be denied that this commodity
also, as well as gasoline, may be lawfully carried on deck in our coastwise trade.

The reason for adopting a more liberal rule with respect to deck cargo on vessels
used in the coastwise trade than upon those used for ordinary ocean borne traffic is
to be found of course in the circumstance that in the coastwise trade the boats are
small and voyages are short, with the result that the coasting vessel can use more
circumspection about the condition of the weather at the time of departure; and if
threatening weather arises, she can often reach a port of safety before disaster
overtakes her. Another consideration is that the coastwise trade must as a matter of
public policy be encouraged, and domestic traffic must be permitted under such
conditions as are practically possible, even if not altogether ideal.
2. The owner of the ship is a person to whom the plaintiff in this case may
immediately look for reimbursement to the extent above stated is deducible not only
from the general doctrines of admiralty jurisprudence but from the provisions of the
Code of Commerce applicable to the case. It is universally recognized that the
captain is primarily the representative of the owner; and article 586 of the Code of
Commerce expressly declares that both the owner of the vessel and the naviero, or
charterer, shall be civily liable for the acts of the master. In this connection, it may be
noted that there is a discrepancy between the meaning ofnaviero, in article 586 of
the Code of Commerce, where the word is used in contradistinction to the term
"owner of the vessel" (propietario), and in article 587 where it is used alone, and
apparently in a sense broad enough to include the owner. Fundamentally the word
"naviero" must be understood to refer to the person undertaking the voyage, who in
one case may be the owner and in another the charterer. But this is not vital to the
present discussion. The real point to which we direct attention is that, by the express
provision of the Code, the owner of the vessel is civilly liable for the acts of the
captain; and he can only escape from this civil liability by abandoning his property in
the ship and any freight that he may have earned on the voyage (arts. 587, 588,
Code of Comm.).

Ernesto Canada vs. All Commodities Marketing Corporation, GR 146141,


October 17, 2008
Facts:

Petitioner Ernesto P. Canada (petitioner) is engaged in business of providing trucking


and hauling services under the name Hi-Ball Freight Services. Respondent All
Commodities Marketing Corporation (respondent) has been a valued client of
petitioner for several years. The respondent contracted petitioners services to haul
and

deliver

one

Tondo, Manila to

thousand
the

Pepsi

sacks
Cola

of sugar
Plant

at

from

Pier 18, North Harbor in

Muntinlupa,

Metro

Manila

(now Muntinlupa City). The transaction was covered by Way Bills/ Delivery Receipt
Nos. 5340 and 5341 of All Star Transport, Inc. , but duly signed by petitioners
driver. As agreed, petitioner loaded respondents 1,000 sacks of sugar into his two (2)
trucks; however, the same were never delivered to the Pepsi Cola Plant. The drivers
of the trucks, along with the helpers, had since vanished into thin air.
Respondent demanded payment of the value of the sugar, but the demand was not
heeded. The respondent filed a complaint against petitioner with the Regional Trial
Court (RTC) of Makati to recover the value of the lost sugar. In his answer,petitioner
denied that the cargo did not reach their destination. He averred that the cargo were
delivered to the Pepsi Cola Plant in Muntinlupa City and rejected responsibility for
the claim arguing that the loss of the goods was either due to respondents
negligence or due to fortuitous event.
The RTC rendered judgment against petitioner. Petitioner appealed to the CA and
raised an argument that was totally new and was never raised before the RTC, to wit
Hi Ball Freight Services was not the common carrier of respondent; hence, cannot
be held liable for the value of the lost sugar.
The CA affirmed the assailed decision of the RTC and rejected petitioners new
theory. Petitioner filed an MR but still denied by CA
Issue:
Whether or not Ernesto Canada is guilty for breach of contract of carriage.
Ruling:
Petitioner had admitted his contract of carriage with respondent in the court citing
paragraph 5 and 6 of the complaint, which referred to the contract. During the trial,
petitioner admitted that the truck drivers and helpers who loaded the goods were his
employees. He even tried to settle the case amicably, but negotiations for settlement

had failed. These were unmistakable admissions of petitioners contractual relation


with respondent.
The court adhered to the familiar doctrine, embodied under Sec.4, Rule 129 of the
Rules of Court, that an admission made in the course of the trial, either by verbal or
written manifestations, or stipulations, cannot be controverted by the party making
such admission; they become conclusive on him, and all proofs submitted by him
contrary thereto or inconsistent therewith should be ignored, whether an objection is
interposed by the adverse party or not. In the absence of a compelling reason to the
contrary, petitioners admission of his contract with respondent is definitely binding
on him.
The court likewise disagrees with the petitioners claim that the incident was a case
of fortuito. The exempting circumstance of caso fortuito may be availed of only when:
(a) the cause of the unforeseen and unexpected occurrence was independent of
the human will; (b) it was impossible to foresee the event which constituted the caso
fortuito or, if it could be foreseen, it was impossible to avoid; (c) the occurrence must
be such as to render it impossible to perform an obligation in a normal manner; and
(d) the person tasked to perform the obligation must not have participated in any
course of conduct that aggravated the accident.
None of these elements is present in this case. Other than petitioners barefaced
assertion that the cargos were lost due to fortuitous event, no evidence was offered
to substantiate it. On the contrary, the court find supported by evidence on record the
conclusions of the trial court and the CA that the loss of the sugar was due to the
negligence of petitioner. The CA, therefore, committed no reversible error in
sustaining the finding of liability against petitioner.
However, the court held that the RTC and CA erred in awarding actual damages of
P350, 000.00 for the value of the lost sugar, ad P50, 000.00 for actual losses due to
non-delivery of the cargo. There is no sufficient evidence to support respondents
plea for actual damages. Mere allegation is not proof. Thus, no actual damages can
be awarded to respondent. However, respondent may be awarded with temperate or
moderate damages when court finds that some pecuniary loss has been suffered. In
this case, the court find that the P250, 000.00 as damages is sufficient.
The Court ultimately denied the petition and affirmed the decision of the Court of

Appeals.

Japan Airlines vs. Jesus Simangan, GR 170141, April 22, 2008


Facts:
In 1991, respondent Jesus Simangan decided to donate a kidney to his ailing cousin,
Loreto Simangan, in UCLA School of Medicine in Los Angeles, California, U.S.A.
Upon request of UCLA, respondent undertook a series of laboratory tests at the
National Kidney Institute in Quezon City to verify whether his blood and tissue type
are compatible with Loretos. The said tests proved that respondents blood and
tissue type were well-matched with Loretos.
To facilitate respondents travel to the United States, UCLA wrote a letter to the
American Consulate in Manila to arrange for Jesuss visa. In due time, respondent
was issued an emergency U.S. visa by the American Embassy in Manila. Having
obtained an emergency U.S. visa, respondent purchased a round trip plane ticket
from petitioner JAL for US$1,485.00 and was issued the corresponding boarding
pass. He was scheduled to a particular flight bound for Los Angeles, California,
U.S.A. via Narita, Japan.
On the date of his flight, respondent went to Ninoy Aquino International Airport in the
company of several relatives and friends. He was allowed to check-in at JALs
counter. His plane ticket, boarding pass, travel authority and personal articles were
subjected to rigid immigration and security routines. After passing through said
immigration and security procedures, respondent was allowed by JAL to enter its
airplane.
While inside the airplane, JALs airline crew suspected respondent of carrying a
falsified travel document and imputed that he would only use the trip to the United
States as a pretext to stay and work in Japan. The stewardess asked respondent to
show his travel documents. Shortly after, the stewardess along with a Japanese and
a Filipino haughtily ordered him to stand up and leave the plane. Respondent

protested but ignored. He was then constrained to go out of the plane. In a nutshell,
respondent was bumped off the flight.
Respondent went to JALs ground office and waited there for three hours. The plane
took off and he was left behind. He was informed, afterwards, that his travel
documents were, indeed, in order. Respondent was refunded the cost of his plane
ticket less the sum of US$500.00, which was deducted by JAL. Subsequently,
respondents U.S. visa was cancelled.
Respondent filed an action for damages against JAL with the Regional Trial Court
(RTC) in Valenzuela City for not able to donate his kidney to Loreto and that he
suffered terrible embarrassment and mental anguish. Thus, he prayed that he be
awarded of damages.
The RTC rendered its decision in favor of respondent (plaintiff). It held that the
defendant JAL violated the contract of carriage. JAL appealed to the CA contending
that it is not guilty of breach of contract of carriage, hence, not liable for damages.
The CA affirmed the decision of the RTC with modification in that it lowered the
amount of moral and exemplary damages and deleted the award of attorneys fees.
JALs motion for reconsideration was denied, thus the instant petition.
Issue:
Whether or not the Japan Airlines is guilty of breach of contract of carriage
Ruling:
JAL, as a common carrier, ought to know the kind of valid travel documents
respondent carried. As provided in Article 1755 of the New Civil Code: A common
carrier is bound to carry the passengers safely as far as human care and foresight
can provide, using the utmost diligence of very cautious persons, with a due regard
for all the circumstances. Thus, the court find untenable JALs defense of verification
of respondents documents in its breach of contract of carriage.

When an airline issues a ticket to a passenger confirmed on a particular flight on a


certain date, a contract of carriage arises, and the passenger has every right to
expect that he would fly on that flight and on that date. If he does not, then the carrier
opens itself to a suit for breach of contract of carriage.
The power to admit or not an alien into the country is a sovereign act which cannot
be interfered with even by Japan Airlines (JAL).
In an action for breach of contract of carriage, all that is required of plaintiff is to
prove the existence of such contract and its non-performance by the carrier through
the latters failure to carry the passenger safely to his destination. Respondent has
complied with these twin requisites, thus he is entitled to damages for such breach.
The court denied the petition and affirmed the decision of the Court of Appeals. The
award of damages is modified.
Northwest Airlines, Inc. vs. Steven Choing, GR, no. 155550, January 31, 2008
Facts:
In 1989, Philimare Shipping and Seagull Maritime Corporation (Philimare), an
authorized Philippine agent of TransOcean Lines (TransOcean), hired respondent
Steven Chiong as Third Engineer of TransOceans vessel M/V Elbia at the San
Diego, California Port.

Philimare purchased for Chiong a Northwest plane ticket

for San Diego, California from Manila. Choing brought his family to Manila before
his scheduled departure for them to see him off at the airport.

On the departure date, Chiong arrived at the Manila International Airport (MIA), three
hours before the scheduled time of departure. A Philimare Liaison Officer, met
Chiong and accompanied him to the Philippine Coast Guard (PCG) Counter to
present his seaman service record book for clearance. Chiongs passport was duly
stamped, after complying with government requirements for departing seafarers.

Chiong proceeded to queue at the Northwest check-in counter. He was informed by


a Northwest personnel that his name did not appear in the computers list of
confirmed departing passengers. Anxious to board the plane, Chiong queued a
number of times at Northwests Check-in Counter and presented his ticket, but he
was told to wait and that he was a pest. Chiong went to the Philimare liason officer
which insisted that Chiongs plane ticket was confirmed and as such, he could checkin smoothly and board the plane. Chiong was not allowed to board Northwest Flight
No. 24 bound for San Diego that day and, consequently, was unable to work at
the M/V Elbia byApril 1, 1989. It appeared that Chiongs name was crossed out and
substituted with W. Costine in Northwests Air Passenger Manifest.
Chiongs counsel demanded as compensation for the amount equivalent to Chiongs
salary under the latters Crew Agreement with TransOcean, P15,000.00 for Chiongs
expenses in fetching and bringing his family to Manila, and P500,000.00 as moral
damages; and P500,000.00 as legal fees.
Northwest demurred. Thus, Chiong filed a Complaint for breach of contract of
carriage before the RTC. Northwest filed a Motion to Dismiss the complaint citing
the trial courts lack of jurisdiction over the subject matter of the case, but the trial
court denied the same. In its Answer, Northwest contradicted the claim that it
breached its contract of carriage with Chiong, and cited that Chiong was a no-show
passenger for Northwest Flight No. 24 on April 1, 1989.
After trial, the RTC rendered a Decision in favor of Chiong and holding Northwest
liable for breach of contract of carriage. The RTC ruled that the evidence adduced by
the parties supported the conclusion that Chiong was deliberately prevented from
checking-in and his boarding pass unjustifiably withheld to accommodate an
American passenger by the name of W. Costine. On appeal, the CA affirmed in
toto the ruling of the RTC. Hence, tNorthwest filed a petition with the supreme court.
Issue:
Whether or not Northwest is liable for breach of contract of carriage.
Ruling:

The petition must fail. The Supreme court sided with the ruling of the lower courts
that Northwest breached the contract of carriage with Chiong, and that Chiong is
entitled to compensatory, actual, moral and exemplary damages, attorneys fees and
costs of suit.
The court have declared that a contract of carriage is primarily intended to serve the
traveling public and thus, imbued with public interest. The law governing common
carriers consequently imposes an exacting standard of conduct. As the aggrieved
party, Chiong only had to prove the existence of the contract and the fact of its nonperformance by Northwest, as carrier, in order to be awarded compensatory and
actual damages.
Under Article 2220 of the Civil Code of the Philippines, an award of moral damages,
in breaches of contract, is in order upon a showing that the defendant acted
fraudulently or in bad faith. Bad faith does not simply connote bad judgment or
negligence. It imports a dishonest purpose or some moral obliquity and conscious
doing of a wrong. It means breach of a known duty through some motive, interest or
ill will that partakes of the nature of fraud.
In the case at bench, the courts carefully examined the evidence as to the conduct
and outward acts of Northwest indicative of its inward motive. It is borne out by the
records that Chiong was given the run-around at the Northwest check-in counter,
instructed to deal with a man in barong to obtain a boarding pass, and eventually
barred from boarding Northwest Flight No. 24 to accommodate an American, W.
Costine, whose name was merely inserted in the Flight Manifest, and did not even
personally check-in at the counter.
Under the foregoing circumstances, the award of exemplary damages is also correct
given the evidence that Northwest acted in an oppressive manner towards Chiong.
As for the award of attorneys fees, while we recognize that it is sound policy not to
set a premium on the right to litigate, we sustain the lower courts award thereof.
Petition is Denied. The decision of the Court of Appeals is affirmed.

Philippine Airlines, Inc. vs. Court of Appeals, et al., GR 123238, September 22,
2008
Facts:
Sometime before 2 May 1980, private respondents spouses Manuel S. Buncio and
Aurora R. Buncio purchased from petitioner Philippine Airlines, Incorporated, two
plane tickets for their two minor children, Deanna R. Buncio (Deanna), then 9 years
of age, and Nikolai R. Buncio (Nikolai), then 8 years old, who will travel as
unaccompanied minors. Petitioner required private respondents to accomplish, sign
and submit to it an indemnity bond. Private respondents complied with this
requirement. For the purchase of the said two plane tickets, petitioner agreed to
transport Deanna and Nikolai from Manila to San Francisco, California,USA, and
from San Francisco, California, USA to Los Angeles, California, USA, via another
airline, United Airways 996, where their grandmother will meet them. Deanna and
Nikolai boarded Flight 106 in Manila and arrived the next day at the San Francisco
Airport, however, the staff of United Airways 996 refused to take aboard Deanna and
Nikolai for their connecting flight to Los Angeles because petitioners personnel
in San Francisco could not produce the indemnity bond accomplished and submitted
by private respondents. The said indemnity bond was lost by petitioners personnel
during the previous stop-over of Flight 106 in Honolulu, Hawaii. Deanna and Nikolai
were

then

left

stranded

Edwin Strigl (Strigl),

then

at
the

the San
Lead

Francisco Airport. Subsequently,

Traffic

Agent

of

petitioner

Mr.

in San

Francisco, California, USA, took Deanna and Nikolai to his residence in San
Francisco where they stayed overnight.
Mrs. Regalado and several relatives waited for the arrival of Deanna and Nikolai at
the Los

Angeles Airport. When

United

Airways

996

landed

at

the Los

Angeles Airport and its passengers disembarked, Mrs. Regalado sought Deanna and
Nikolai but she failed to find them. Mrs. Regalado asked a stewardess of the United
Airways 996 if Deanna and Nikolai were on board but the stewardess told her that
they had no minor passengers. Mrs. Regalado called private respondents and
informed

them

that

Deanna

and

Nikolai

did

not

arrive

at

the Los

Angeles Airport. Private respondents inquired about the location of Deanna and
Nikolai from petitioners personnel, but the latter replied that they were still verifying
their whereabouts.
On the morning of

May 4, 1980, Strigl took Deanna and Nikolai to San

Francisco Airport where the two boarded a Western Airlines plane bound for Los
Angeles. Later that day, Deanna and Nikolai arrived at the Los Angeles Airport where
they were met by Mrs. Regalado. Petitioners personnel had previously informed
Mrs. Regalado of the late arrival of Deanna and Nikolai..
Private respondents, through their lawyer, sent a letter to petitioner demanding
payment of 1 million pesos as damages for the gross negligence and inefficiency of
its employees in transporting Deanna and Nikolai. Petitioner did not heed the
demand. Thus, private respondents filed a complaint for damages against petitioner
before the RTC. Private respondents prayed the RTC to render judgment ordering
petitioner: (1) to pay Deanna and NikolaiP100,000.00 each, or a total
of P200,000.00, as moral damages; (2) to pay private respondents P500,000.00
each,

or

total

of P1,000,000,00,

as

moral

damages;

(3)

to

pay

Mrs.Regalado P100,000.00 as moral damages; (4) to pay Deanna, Nikolai,


Mrs. Regalado and private respondents P50,000.00 each, or a total of P250,000.00
as exemplary damages; and (5) to pay attorneys fees equivalent to 25% of the total
amount of damages mentioned plus costs of suit.
In its answer, the petitioner denied that the loss of the indemnity bond was caused by
the gross negligence and malevolent conduct of its personnel and averred that they
always exercised the diligence of a good father of the family in the selection,
supervision and control of its employees. In addition, Deanna and Nikolai were
personally escorted by Strigl, and the latter exerted efforts to make the connecting
flight of Deanna and Nikolai to Los Angeles possible
RTC rendered a decision holding petitioner liable for damages for breach of contract
of carriage and that petitioner should pay moral damages for its inattention and lack
of care for the welfare of Deanna and Nikolai which, in effect, amounted to bad faith,
and for the agony brought by the incident to private respondents and Mrs. Regalado.

Petitioner appealed to the Court of Appeals. On 20 December 1995, the


appellate court promulgated its Decision affirming in toto the RTC Decision
Issue:
Whether or not the petitioner PAL is guilty of breach of contract.
Ruling:
Yes.
When an airline issues a ticket to a passenger, confirmed for a particular flight on a
certain date, a contract of carriage arises. The passenger has every right to expect
that he be transported on that flight and on that date, and it becomes the airlines
obligation to carry him and his luggage safely to the agreed destination without
delay. If the passenger is not so transported or if in the process of transporting, he
dies or is injured, the carrier may be held liable for a breach of contract of carriage.
In breach of contract of air carriage, moral damages may be recovered where (1) the
mishap results in the death of a passenger; or (2) where the carrier is guilty of fraud
or bad faith; or (3) where the negligence of the carrier is so gross and reckless as to
virtually amount to bad faith.
Gross negligence implies a want or absence of or failure to exercise even slight care
or diligence, or the entire absence of care. It evinces a thoughtless disregard of
consequences without exerting any effort to avoid them.
The petitioner , despite knowledge that the indemnity bond is required, it did not
exercise utmost care in handling the indemnity bond resulting in its loss
in Honolulu, Hawaii. This was the proximate cause why Deanna and Nikolai were not
allowed to take the connecting flight and were thus stranded overnight in San
Francisco. The petitioner's discovery that the indemnity bond was lost was only
when Flight 106 had already landed in San Francisco Airport and when the staff of
United Airways 996 demanded the indemnity bond.
It is worth emphasizing that petitioner, as a common carrier, is bound by law to
exercise extraordinary diligence and utmost care in ensuring for the safety and

welfare of its passengers with due regard for all the circumstances. The negligent
acts of petitioner signified more than inadvertence or inattention and thus constituted
a radical departure from the extraordinary standard of care required of common
carriers.
In the instant case, the award of attorneys fees was merely cited in the dispositive
portion of the RTC decision without the RTC stating any legal or factual basis for said
award. Hence, the Court of Appeals erred in sustaining the RTCs award of attorneys
fees.
The court partially granted the petition and affirmed the decision of the Court of
Appeals with modification as to the award of damages.
Synthesis
In the case of Northwest Airlines, Inc. v. Chiong, there was a contract of carriage
between Mr. Chiong and the Northwest Airlines, Inc. existed. Mr. Chiong was given a
Northwest ticket by an agent of his employer, the necessary clearances and
government requirements for departing seafarers had been complied with, and his
passport was duly stamped. The problem arose when a Northwest Airline personnel
disallowed him to check-in for the fact that his name is not in the list of passengers.
The question raised in the case filed by Mr. Choing is whether or not the Northwest
Airlines, Inc. is guilty of breach of contract of carriage that would support the
awarding of moral damages. The court held that, The law governing common
carriers consequently imposes an exacting standard of conduct. As the aggrieved
party, Chiong only had to prove the existence of the contract and the fact of its nonperformance by Northwest, as carrier, in order to be awarded compensatory and
actual damages. The award of moral damages to Mr. Chiong is also proper in this
case because of attendance of bad faith with an inward motive against Mr. Choing,
manifested in the act of Northwest Airline in inserting the name of an American in the
slot that was reserved for Mr. Choing.

In the case of Japan Airlines v. Jesus Simangan, a contract of carriage between


Simangan and the Japan Airlines was created upon purchase of a round trip ticket.
Simangan was allowed to board the plane after passing immigration and security
procedures, but was later ordered to leave the plane when his travel documents
were suspected to be falsified. After the plane left, he was told that his travel
documents were in order. The question raised in the case is whether Japan Airlines
is guilty of breach of contract of carriage. The court held in the affirmative. JAL, as a
common carrier, ought to know the kind of valid travel documents respondent
carried. Under the law, 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. Thus, the court find
untenable JALs defense of verification of respondents documents in its breach of
contract of carriage.
In the case of PAL v. CA, a contract of carriage was created between the PAL and
the respondents upon purchased of a connecting flight tickets. The first flight to San
Francisco, CA, however the second flight to Los Angeles, CA was never realized the
PAL personnel lost the indemnity bond thatwas executed by the private respondents.
The question raised in the case is whether the PAL is guilty of breach of contract.
The court ruled in the affirmative. It held that when an airline issues a ticket to a
passenger, confirmed for a particular flight on a certain date, a contract of carriage
arises. The passenger has every right to expect that he be transported on that flight
and on that date, and it becomes the airlines obligation to carry him and his luggage
safely to the agreed destination without delay. If the passenger is not so transported
or if in the process of transporting, he dies or is injured, the carrier may be held liable
for a breach of contract of carriage. Moral damages can likewise be recovered due to
said breach because the negligence of the PAL, as a carrier, is so gross and
reckless as to virtually amount to bad faith.
In the case of Ernesto Canada v. All Commodities Marketing Corp., a contract of
carriage was created between the parties upon execution of contract to haul and
deliver sacks of sugar to the Pepsi Coco Plant. The problem arose when the sugar
was not delivered and vanished in thin air. The question raised is whether Ernesto
Canada is guilty of breach of contract of carriage. The court ruled in the affirmative.
The court held that a contract of carriage existed between the parties. The petitioner

had admitted his contract of carriage with respondent in the court citing paragrapgh 5
and 6 of the complaint which referred to the contract. During the trial, petitioner also
admitted that the truck drivers and helpers who loaded the goods were his
employees. The court adhered to the familiar doctrine, embodied under Sec.4, Rule
129 of the Rules of Court, that an admission made in the course of the trial, either by
verbal or written manifestations, or stipulations, cannot be controverted by the party
making such admission; they become conclusive on him, and all proofs submitted by
him contrary thereto or inconsistent therewith should be ignored. The court also
denied the claim of petitioner that the sugar was lost due to fortuitous event for no
evidence was offered to substantiate it. The court affirmed the decisions of the
lowers courts that the sugar was lost due to negligence of the petitioner.

In the Northwest case, the Nortwest Airlines acted in bad faith with inward motive,
thus the award of moral damages was proper. In the Japan Airlines case, Japan
Airlines is guilty of breach of contract of carriage due to its negligence and lack of
foresight in requiring verification of Simangan's document, which a carriage is ought
to know. In the PAL case, PAL is guilty of said breach of contract due to gross
recklessness of its personnel that led to the loss of the indemnity bond, that warrants
award of moral damages. In the case of Canada, Canada was guilty of said breach
because of his negligence in making sure that the sugar be delivered to the desire
location agreed upon.
Aboitiz Shipping Corp. v. GAFLAC
M/V P. Aboitiz owned by Aboitiz Shipping sank on its way to Hong Kong on Oct. 31,
1980. The sinking prompted the shippers and suborgees (such as General Accident)
to file suits for recovery. To state the obvious, General Accident is a suborgee
because it already indemnified the insured. Board of Marine Inquiry (BMI)
investigated the matter and found that: the sinking was caused by force majeure the
vessel was seaworthy

Despite the findings by the BMI, the RTC nevertheless ruled that Aboitiz was liable.
Also, RTC granted the prayer of General Accident for execution for the full amount of
the judgment award. The primary contention of Aboitiz, which was grounded on the
real and hypothecary nature of its liability, was swept aside. This is elevated to the
CA however the CA dismissed the petition for certiorari filed by Aboitiz.
Hence this petition.
ISSUE:
Whether or not the Doctrine of Limited Liability arising out of the real and
hypothecary nature of maritime law is applicable to the case?
SC RULING:
Yes. The real and hypothecary nature of maritime law simply means that the liability
of the carrier in connection with losses related to maritime contracts is confined to
the vessel, which is hypothecated for such obligations or which stands as the
guaranty for their settlement. It has its origin by reason of the conditions and risks
attending maritime trade in its earliest years when such trade was replete with
innumerable and unknown hazards since vessels had to go through largely
uncharted waters to ply their trade. It was designed to offset such adverse conditions
and to encourage people and entities to venture into maritime commerce despite the
risks and the prohibitive cost of shipbuilding. Thus, the liability of the vessel owner
and agent arising from the operation of such vessel were confined to the vessel
itself, its equipment, freight, and insurance, if any, which limitation served to induce
capitalists into effectively wagering their resources against the consideration of the
large profits attainable in the trade.
The Limited Liability Rule in the Philippines is taken up in Book III of the Code of
Commerce, particularly in Articles 587, 590, and 837, hereunder quoted in toto:
Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third
persons which may arise from the conduct of the captain in the care of the goods
which he loaded on the vessel; but he may exempt himself therefrom by abandoning
the vessel with all her equipment and the freight it may have earned during the
voyage.

Art. 590. The co-owners of a vessel shall be civilly liable in the proportion of their
interests in the common fund for the results of the acts of the captain referred to in
Art. 587.
Each co-owner may exempt himself from this liability by the abandonment, before a
notary, of the part of the vessel belonging to him.
Art. 837. The civil liability incurred by ship owners in the case prescribed in this
section (on collisions), shall be understood as limited to the value of the vessel with
all its appurtenances and freightage served during the voyage.
In the few instances when the matter was considered by this Court, we have been
consistent in this jurisdiction in holding that the only time the Limited Liability Rule
does not apply is when there is an actual finding of negligence on the part of the
vessel owner or agent.
Unfortunately for General Accident. A careful reading of the decision rendered by
the trial court in Civil Case No. 144425 (pp. 27-33, Rollo) as well as the entirety of
the records in the instant case will show that there has been no actual finding of
negligence on the part of petitioner.

Aboitiz Shipping v, New India


G.R. No. 156978 May 2, 2006

Facts:
Textile cargo owned by General Textile was shipped to Manila using M/V P. Aboitiz.
Before departing, the vessel was advised that it was safe to travel to its destination,
but while at sea, the vessel received a report of a typhoon moving within its path. It
was at the edge of a typhoon when its hull leaker. The vessel sank, but the captain
and his crew were saved.
The captain filed his Marine Protest, stating that the weather was moderate
breeze, small waves, becoming longer, fairly frequent white horse. General Textile
lodged a claim with respondent for the amount of its loss. Respondent paid General

Textile and was subrogated to the rights of the latter. After investigation, the cause
was found to be the vessels unseaworthiness.
General filed a complaint with Aboitiz and the trial court consequently ruled in favor
of the former. Petitioner elevated the case to the Court of Appeals, which in turn,
affirmed the trial courts decision. It moved for reconsideration but the same was
denied. Hence, this petition for review

Issue:

WON the limited liability doctrine applies in this case

SC Ruling:
No. Where the ship owner fails to overcome the presumption of negligence, the
doctrine of limited liability cannot be applied.
From the nature of their business and for reasons of public policy, common carriers
are bound to observe extraordinary diligence over the goods they transport
according to all the circumstances of each case. In the event of loss, destruction or
deterioration of the insured goods, common carriers are responsible, unless they can
prove that the loss, destruction or deterioration was brought about by the causes
specified in Article 1734 of the Civil Code. In all other cases, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove that
they observed extraordinary diligence. Moreover, where the vessel is found
unseaworthy, the ship owner is also presumed to be negligent since it is tasked with
the maintenance of its vessel. Though this duty can be delegated, still, the ship
owner must exercise close supervision over its men.
In the present case, petitioner has the burden of showing that it exercised
extraordinary diligence in the transport of the goods it had on board in order to
invoke the limited liability doctrine. Differently put, to limit its liability to the amount of
the insurance proceeds, petitioner has the burden of proving that the seaworthiness
of its vessel was not due to its fault or negligence.

Considering the evidence presented and the circumstances obtaining in this case,
we find that petitioner failed to discharge this burden. Both the trial and the appellate
courts, in this case, found that the sinking was not due to the typhoon but to its
seaworthiness. Evidence on record showed that the weather was moderate when
the vessel sank. These factual findings of the Court of Appeals, affirming those of
the trial court are not to be disturbed on appeal, but must be accorded great weight.
These findings are conclusive not only on the parties but on this Court as well.
Aboitiz Shipping Corp v. CA, et al.
G.R. No. 121833 Oct 17, 2008
Facts:
Respondent Malayan Insurance Company, Inc. (Malayan) filed five separate actions
against several defendants for the collection of the amounts of the cargoes allegedly
paid by Malayan under various marine cargo policies issued to the insurance
claimants. The shipments were supported by their respective bills of lading and
insured separately by Malayan against the risk of loss or damage. Aboitiz raised the
defenses of lack of jurisdiction, lack of cause of action and prescription. It also
claimed that M/V P. Aboitiz was seaworthy, that it exercised extraordinary diligence
and that the loss was caused by a fortuitous event. RTC adjudged Aboitiz liable on
the money claims. CA affirmed the decision finding that the sinking of M/V P. Aboitiz
was caused by the negligence of its officers and crew. It is one of the numerous
collection suits against Aboitiz, which eventually reached this Court in connection
with the sinking of M/V P. Aboitiz.
On the other hand, Respondents Asia Traders Insurance Corporation (Asia Traders)
and Allied Guarantee Insurance Corporation (Allied) filed separate actions for
damages against Aboitiz to recover by way of subrogation the value of the cargoes
insured by them and lost in the sinking of the vessel M/V P. Aboitiz. Aboitiz reiterated
the defense of force majeure. RTC and CA ordered Aboitiz to pay damages.
Also, On 27 February 1981, Equitable Insurance Corporation (Equitable) filed an
action for damages against Aboitiz to recover by way of subrogation the value of the
cargoes insured by Equitable that were lost in the sinking of M/V P. Aboitiz. RTC and

CA found that Aboitiz was guilty of contributory negligence and, therefore, liable for
the loss.
ISSUE: Whether the real and hypothecary doctrine may be invoked by the shipowner in relation to the loss of cargoes occasioned by the sinking of M/V P. Aboitiz
on 31 October 1980.
SC RULING: No. The finding of actual fault on the part of Aboitiz is central to the
issue of its liability to the respondents. Aboitiz contention, that with the sinking of M/V
P. Aboitiz, its liability to the cargo shippers and shippers should be limited only to the
insurance proceeds of the vessel absent any finding of fault on the part of Aboitiz, is
not supported by the record. Thus, Aboitiz is not entitled to the limited liability rule
and is, therefore, liable for the value of the lost cargoes as so duly alleged and
proven during trial.
The instant petitions provide another occasion for the Court to reiterate the wellsettled doctrine of the real and hypothecary nature of maritime law. As a general rule,
a ship owners liability is merely co-extensive with his interest in the vessel, except
where actual fault is attributable to the ship-owner. Thus, as an exception to the
limited inability doctrine, a ship-owner or ship agent may be held liable for damages
when the sinking of the vessel is attributable to the actual fault or negligence of the
ship-owner or its failure to ensure the seaworthiness of the vessel. The instant
petitions cannot be spared from the application of the exception to the doctrine of
limited liability in view of the unanimous findings of the courts below that both Aboitiz
and the crew failed to ensure the seaworthiness of the M/V P. Aboitiz.

In Aboitiz Shipping Corp. v. GAFLAC, the liability of the vessel owner and agent
arising from the operation of such vessel were confined to the vessel itself, its
equipment, freight, and insurance, if any, which limitation served to induce capitalists
into effectively wagering their resources against the consideration of the large profits
attainable in the trade. The Limited Liability Rule in the Philippines is taken up in
Book III of the Code of Commerce, particularly in Articles 587, 590, and 837. The
real and hypothecary nature of maritime law simply means that the liability of the

carrier in connection with losses related to maritime contracts is confined to the


vessel, which is hypothecated for such obligations or which stands as the guaranty
for their settlement.
However, in Aboitiz Shipping v. New India, where the ship owner fails to overcome
the presumption of negligence, the doctrine of limited liability cannot be applied. . In
the event of loss, destruction or deterioration of the insured goods, common carriers
are responsible, unless they can prove that the loss, destruction or deterioration was
brought about by the causes specified in Article 1734 of the Civil Code. In all other
cases, common carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary diligence. Moreover,
where the vessel is found unseaworthy, the ship owner is also presumed to be
negligent since it is tasked with the maintenance of its vessel.
Also in Aboitiz Shipping Corp v. CA, et al., the general rule was applied, a ship
owners liability is merely co-extensive with his interest in the vessel, except where
actual fault is attributable to the shipowner. Thus, as an exception to the limited
iability doctrine, a shipowner or ship agent may be held liable for damages when the
sinking of the vessel is attributable to the actual fault or negligence of the shipowner
or its failure to ensure the seaworthiness of the vessel.

Aboitiz Shipping Corp. v. GAFLAC


M/V P. Aboitiz owned by Aboitiz Shipping sank on its way to Hong Kong on Oct. 31,
1980. The sinking prompted the shippers and subrigee such as General Accident) to
file suits for recovery. To state the obvious, General Accident is a subrigee because it
already indemnified the insured. Board of Marine Inquiry (BMI) investigated the
matter and found that: the sinking was caused by force majeure the vessel was
seaworthy
Despite the findings by the BMI, the RTC nevertheless ruled that Aboitiz was liable.
Also, RTC granted the prayer of General Accident for execution for the full amount of
the judgment award. The primary contention of Aboitiz, which was grounded on the

real and hypothecary nature of its liability, was swept aside. This is elevated to the
CA however the CA dismissed the petition for certiorari filed by Aboitiz.
Hence this petition.
ISSUE:
Whether or not the Doctrine of Limited Liability arising out of the real and
hypothecary nature of maritime law is applicable to the case?
SC RULING:
Yes. The real and hypothecary nature of maritime law simply means that the liability
of the carrier in connection with losses related to maritime contracts is confined to
the vessel, which is hypothecated for such obligations or which stands as the
guaranty for their settlement. It has its origin by reason of the conditions and risks
attending maritime trade in its earliest years when such trade was replete with
innumerable and unknown hazards since vessels had to go through largely
uncharted waters to ply their trade. It was designed to offset such adverse conditions
and to encourage people and entities to venture into maritime commerce despite the
risks and the prohibitive cost of ship building. Thus, the liability of the vessel owner
and agent arising from the operation of such vessel were confined to the vessel
itself, its equipment, freight, and insurance, if any, which limitation served to induce
capitalists into effectively wagering their resources against the consideration of the
large profits attainable in the trade.
The Limited Liability Rule in the Philippines is taken up in Book III of the Code of
Commerce, particularly in Articles 587, 590, and 837, hereunder quoted in toto:
Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third
persons which may arise from the conduct of the captain in the care of the goods
which he loaded on the vessel; but he may exempt himself therefrom by abandoning
the vessel with all her equipment and the freight it may have earned during the
voyage.
Art. 590. The co-owners of a vessel shall be civilly liable in the proportion of their
interests in the common fund for the results of the acts of the captain referred to in
Art. 587.
Each co-owner may exempt himself from this liability by the abandonment, before a
notary, of the part of the vessel belonging to him.

Art. 837. The civil liability incurred by ship owners in the case prescribed in this
section (on collisions), shall be understood as limited to the value of the vessel with
all its appurtenances and freightage served during the voyage.
In the few instances when the matter was considered by this Court, we have been
consistent in this jurisdiction in holding that the only time the Limited Liability Rule
does not apply is when there is an actual finding of negligence on the part of the
vessel owner or agent.
Unfortunately for General Accident. A careful reading of the decision rendered by
the trial court in Civil Case No. 144425 (pp. 27-33, Rollo) as well as the entirety of
the records in the instant case will show that there has been no actual finding of
negligence on the part of petitioner.
Aboitiz Shipping v. New India
G.R. No. 156978 May 2, 2006

Facts:
Textile cargo owned by General Textile was shipped to Manila using M/V P. Aboitiz.
Before departing, the vessel was advised that it was safe to travel to its destination,
but while at sea, the vessel received a report of a typhoon moving within its path. It
was at the edge of a typhoon when its hull leaker. The vessel sank, but the captain
and his crew were saved.
The captain filed his Marine Protest, stating that the weather was moderate
breeze, small waves, becoming longer, fairly frequent white horse. General Textile
lodged a claim with respondent for the amount of its loss. Respondent paid General
Textile and was subrogated to the rights of the latter. After investigation, the cause
was found to be the vessels unseaworthiness.
General filed a complaint with Aboitiz and the trial court consequently ruled in favor
of the former. Petitioner elevated the case to the Court of Appeals, which in turn,
affirmed the trial courts decision. It moved for reconsideration but the same was
denied. Hence, this petition for review

Issue: WON the limited liability doctrine applies in this case

SC Ruling: No. Where the ship owner fails to overcome the presumption of
negligence, the doctrine of limited liability cannot be applied.
From the nature of their business and for reasons of public policy, common carriers
are bound to observe extraordinary diligence over the goods they transport
according to all the circumstances of each case. In the event of loss, destruction or
deterioration of the insured goods, common carriers are responsible, unless they can
prove that the loss, destruction or deterioration was brought about by the causes
specified in Article 1734 of the Civil Code. In all other cases, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove that
they observed extraordinary diligence. Moreover, where the vessel is found
unseaworthy, the ship owner is also presumed to be negligent since it is tasked with
the maintenance of its vessel. Though this duty can be delegated, still, the ship
owner must exercise close supervision over its men.
In the present case, petitioner has the burden of showing that it exercised
extraordinary diligence in the transport of the goods it had on board in order to
invoke the limited liability doctrine. Differently put, to limit its liability to the amount of
the

insurance

proceeds,

petitioner

has

the

burden

of

proving

that

the

unseaworthiness of its vessel was not due to its fault or negligence.


Considering the evidence presented and the circumstances obtaining in this case,
we find that petitioner failed to discharge this burden. Both the trial and the appellate
courts, in this case, found that the sinking was not due to the typhoon but to its
unseaworthiness. Evidence on record showed that the weather was moderate when
the vessel sank. These factual findings of the Court of Appeals, affirming those of
the trial court are not to be disturbed on appeal, but must be accorded great weight.
These findings are conclusive not only on the parties but on this Court as well.

Aboitiz Shipping Corp v. CA, et al.


G.R. No. 121833 Oct 17, 2008

Facts: Respondent Malayan Insurance Company, Inc. (Malayan) filed five separate
actions against several defendants for the collection of the amounts of the cargoes
allegedly paid by Malayan under various marine cargo policies issued to the
insurance claimants. The shipments were supported by their respective bills of lading
and insured separately by Malayan against the risk of loss or damage. Aboitiz raised
the defenses of lack of jurisdiction, lack of cause of action and prescription. It also
claimed that M/V P. Aboitiz was seaworthy, that it exercised extraordinary diligence
and that the loss was caused by a fortuitous event. RTC adjudged Aboitiz liable on
the money claims. CA affirmed the decision finding that the sinking of M/V P. Aboitiz
was caused by the negligence of its officers and crew. It is one of the numerous
collection suits against Aboitiz, which eventually reached this Court in connection
with the sinking of M/V P. Aboitiz.
On the other hand, Respondents Asia Traders Insurance Corporation (Asia Traders)
and Allied Guarantee Insurance Corporation (Allied) filed separate actions for
damages against Aboitiz to recover by way of subrogation the value of the cargoes
insured by them and lost in the sinking of the vessel M/V P. Aboitiz. Aboitiz reiterated
the defense of force majeure. RTC and CA ordered Aboitiz to pay damages.
Also, On 27 February 1981, Equitable Insurance Corporation (Equitable) filed an
action for damages against Aboitiz to recover by way of subrogation the value of the
cargoes insured by Equitable that were lost in the sinking of M/V P. Aboitiz. RTC and
CA found that Aboitiz was guilty of contributory negligence and, therefore, liable for
the loss.
ISSUE: Whether the real and hypothecary doctrine may be invoked by the
shipowner in relation to the loss of cargoes occasioned by the sinking of M/V P.
Aboitiz on 31 October 1980.
SC RULING: No. The finding of actual fault on the part of Aboitiz is central to the
issue of its liability to the respondents. Aboitizs contention, that with the sinking of
M/V P. Aboitiz, its liability to the cargo shippers and shippers should be limited only to
the insurance proceeds of the vessel absent any finding of fault on the part of
Aboitiz, is not supported by the record. Thus, Aboitiz is not entitled to the limited

liability rule and is, therefore, liable for the value of the lost cargoes as so duly
alleged and proven during trial.
The instant petitions provide another occasion for the Court to reiterate the wellsettled doctrine of the real and hypothecary nature of maritime law. As a general rule,
a ship owners liability is merely co-extensive with his interest in the vessel, except
where actual fault is attributable to the shipowner. Thus, as an exception to the
limited iability doctrine, a shipowner or ship agent may be held liable for damages
when the sinking of the vessel is attributable to the actual fault or negligence of the
shipowner or its failure to ensure the seaworthiness of the vessel. The instant
petitions cannot be spared from the application of the exception to the doctrine of
limited liability in view of the unanimous findings of the courts below that both Aboitiz
and the crew failed to ensure the seaworthiness of the M/V P. Aboitiz.

AIR FRANCE vs. GILLEGO


FACTS: Sometime in April 1993, respondent Bonifacio H. Gillegowas invited to
participate as one of the keynote speakers at the 89th Inter-Parliamentary
Conference Symposium on Parliament Guardian of Human Rights to be held in
Budapest, Hungary and Tokyo, Japan from May 19 to 22, 1993.
On May 16, 1993, respondent left Manila on board petitioner Air Frances
aircraft bound for Paris, France. He arrived in Paris early morning of May 17,
1993 (5:00 a.m.). While waiting at the De Gaulle International Airport for his
connecting flight to Budapest scheduled at 3:15 p.m. that same day, respondent
learned that petitioner had another aircraft bound for Budapest with an earlier
departure time (10:00 a.m.) than his scheduled flight. He then went to petitioners
counter at the airport and made arrangements for the change in his booking. He was
given a corresponding ticket and boarding pass for Flight No. 2024 and also a new
baggage claim stub for his checked-in luggage.

However, upon arriving in Budapest, respondent was unable to locate his


luggage at the claiming section. He sought assistance from petitioners counter at the
airport where he was advised to just wait for his luggage at his hotel and that
petitioners representatives would take charge of delivering the same to him that
same day. But said luggage was never delivered by petitioners representatives
despite follow-up inquiries by respondent.
On July 13, 1993, respondent filed a complaint for damages against the
petitioner alleging that by reason of its negligence and breach of obligation to
transport and deliver his luggage, respondent suffered inconvenience, serious
anxiety, physical suffering and sleepless nights. It was further alleged that due to the
physical, mental and emotional strain resulting from the loss of his luggage,
aggravated by the fact that he failed to take his regular medication, respondent had
to be taken to a medical clinic inTokyo, Japan for emergency treatment. Respondent
asserted that as a common carrier which advertises and offers its services to the
public, petitioner is under obligation to observe extraordinary diligence in the
vigilance over checked-in luggage and to see to it that respondents luggage
entrusted to petitioners custody would accompany him on his flight and/or could be
claimed by him upon arrival at his point of destination or delivered to him without
delay.
Petitioner averred that it has taken all necessary measures to avoid loss of
respondents baggage, the contents of which respondent did not declare, and that it
has no intent to cause such loss, much less knew that such loss could occur. The
loss of respondents luggage is due to or occasioned by force majeure or fortuitous
event or other causes beyond the carriers control. Diligent, sincere and timely efforts
were exerted by petitioner to locate respondents missing luggage and attended to
his problem with utmost courtesy, concern and dispatch. Petitioner further asserted
that it exercised due diligence in the selection and supervision of its employees and
acted in good faith in denying respondents demand for damages. The claims for
actual, moral and exemplary damages and attorneys fees therefore have no basis in
fact and in law, and are, moreover speculative and unconscionable.
On January 3, 1996, the trial court rendered its decision in favor of respondent
and against the petitioner. The trial court found there was gross negligence on the
part of petitioner which failed to retrieve respondents checked-in luggage up to the
time of the filing of the complaint and as admitted in its answer, ignored respondents

repeated follow-ups. It likewise found petitioner guilty of willful misconduct as it


persistently disregarded the rights of respondent who was no ordinary individual but
a high government official. As to the applicability of the limited liability for lost
baggage under the Warsaw Convention, the trial court rejected the argument of
petitioner citing the case of Alitalia v. Intermediate Appellate Court.
Petitioner appealed to the CA, which affirmed the trial courts decision. The
CA noted that in the memorandum submitted by petitioner before the trial court it was
mentioned that respondents luggage was eventually found and delivered to him,
which was not denied by respondent and thus resulted in the withdrawal of the claim
for actual damages. CA also affirmed the trial courts findings that there was bad
faith, gross negligence, and willful misconduct on the part of the petitioner which
justifies the award of moral damages to the respondent.
ISSUE: Whether or not the trial court erred in its findings that there was bad faith,
gross negligence, and willful misconduct on the part of the petitioner.
HELD: No. In awarding moral damages for breach of contract of carriage, the breach
must be wanton and deliberately injurious or the one responsible acted fraudulently
or with malice or bad faith. Not every case of mental anguish, fright or serious
anxiety calls for the award of moral damages. Where in breaching the contract of
carriage the airline is not shown to have acted fraudulently or in bad faith, liability for
damages is limited to the natural and probable consequences of the breach of the
obligation which the parties had foreseen or could have reasonably foreseen. In such
a case the liability does not include moral and exemplary damages.
Bad faith should be established by clear and convincing evidence. The settled
rule is that the law always presumes good faith such that any person who seeks to
be awarded damages due to the acts of another has the burden of proving that the
latter acted in bad faith or with ill motive.
After a careful review, we find that petitioner is liable for moral damages.
We hold that the trial and appellate courts did not err in finding that petitioner
acted in bad faith in repeatedly ignoring respondents follow-up calls. The alleged
entries in the PIR deserve scant consideration, as these have not been properly
identified or authenticated by the airline station representative in Budapest who
initiated and inputed the said entries. Furthermore, this Court cannot accept the

convenient excuse given by petitioner that respondent should be faulted in allegedly


not giving his hotel address and telephone number. It is difficult to believe that
respondent, who had just lost his single luggage containing all his necessities for his
stay in a foreign land and his reference materials for a speaking engagement, would
not give an information so vital such as his hotel address and contact number to the
airline counter where he had promptly and frantically filed his complaint. And even
assuming arguendo that his Philippine address and contact number were the only
details respondent had provided for the PIR, still there was no explanation as to why
petitioner never communicated with respondents concerning his lost baggage long
after respondent had already returned to the Philippines. While the missing luggage
was eventually recovered, it was returned to respondent only after the trial of this
case.
Furthermore, the alleged copy of the PIR confirmed that the only action taken
by the petitioner to locate respondents luggage were telex searches allegedly made
on May 17, 21 and 23, 1993. There was not even any attempt to explain the reason
for the loss of respondents luggage. Clearly, petitioner did not give the attention and
care due to its passenger whose baggage was not transported and delivered to him
at his travel destination and scheduled time. Inattention to and lack of care for the
interest of its passengers who are entitled to its utmost consideration, particularly as
to their convenience, amount to bad faith which entitles the passenger to an award of
moral damages. What the law considers as bad faith which may furnish the ground
for an award of moral damages would be bad faith in securing the contract and in the
execution thereof, as well as in the enforcement of its terms, or any other kind of
deceit.
SYNTHESIS: The case discusses about invoking bad faith as an allegation to claim
damages against the carrier. The Court held that Bad faith should be established by
clear and convincing evidence. The settled rule is that the law always presumes
good faith such that any person who seeks to be awarded damages due to the acts
of another has the burden of proving that the latter acted in bad faith or with ill
motive. There is a presumption of regularity on the part of the common carrier in the
performance of its duties for the reason that they are required to observe
extraordinary diligence, thus, it is incumbent on their part to take measures to ensure
the safety of the passengers and their belongings. That is why the one who alleges

bad faith, i.e. the passenger, against the common carrier has the burden of proving
the same.

PHILIPPINE AIRLINES vs. MIANO

FACTS: On August 31, 1988, private respondent took petitioner's flight PR 722,
Mabuhay Class, bound for Frankfurt, Germany. He had an immediate onward
connecting flight via Lufthansa flight LH 1452 to Vienna, Austria. At the Ninoy Aquino
International Airport, he checked-in one brown suitcase weighing twenty (20)
kilograms but did not declare a higher valuation. He claimed that his suitcase
contained money, documents, one Nikkon camera with zoom lens, suits, sweaters,
shirts, pants, shoes, and other accessories.
Upon private respondent's arrival at Vienna via Lufthansa flight LH 1452, his
checked-in baggage was missing. He reported the matter to the Lufthansa
authorities. After three (3) hours of waiting in vain, he proceeded to Piestany,
Czechoslovakia. Eleven (11) days after or on September 11, 1988, his suitcase was
delivered to him in his hotel in Piestany, Czechoslovakia. He claimed that because of
the delay in the delivery of his suitcase, he was forced to borrow money to buy some
clothes, to pay $200.00 for the transportation of his baggage from Vienna to
Piestany, and lost his Nikkon camera.
He instituted an action for Damages docketed as Civil Case No. 89-3496
before the Regional Trial Court of Makati.
Petitioner contested the complaint. It disclaimed any liability on the ground
that there was neither a report of mishandled baggage on flight PR 722 nor a tracer
telex received from its Vienna Station. It, however, contended that if at all liable its
obligation is limited by the Warsaw Convention rate.
Petitioner filed a Third-Party Complaint against Lufthansa German Airlines
imputing the mishandling of private respondent's baggage, but was dismissed for its
failure to prosecute.
In its decision, the trial court observed that petitioner's actuation was not attended by
bad faith. Nevertheless, it awarded private respondent damages and attorney's fees.

ISSUE: WON the trial court erred in awarding damages to the respondent.

HELD: In breach of contract of carriage by air, moral damages are awarded only if
the defendant acted fraudulently or in bad faith. Bad faith means a breach of a
known duty through same motive of interest or ill will.
The trial court erred in awarding moral damages to private respondent. The
established facts evince that petitioner's late delivery of the baggage for eleven (11)
days was not motivated by ill will or bad faith. In fact, it immediately coordinated with
its Central Baggage Services to trace private respondent's suitcase and succeeded
in finding it. At the hearing, petitioner's Manager for Administration of Airport Services
Department Miguel Ebio testified that their records disclosed that Manila, the
originating station, did not receive any tracer telex. A tracer telex, an airline lingo, is
an action of any station that the airlines operate from whom a passenger may
complain or have not received his baggage upon his arrival. It was reasonable to
presume that the handling of the baggage was normal and regular. Upon inquiry
from their Frankfurt Station, it was however discovered that the interline tag of
private respondent's baggage was accidentally taken off. According to Mr. Ebio, it
was customary for destination stations to hold a tagless baggage until properly
identified. The tracer telex, which contained information on the baggage, is matched
with the tagless luggage for identification. Without the tracer telex, the color and the
type of baggage are used as basis for the matching. Thus, the delay.
Worthy to stress, the trial court made an unequivocal conclusion that
petitioner did not act in bad faith or with malice, viz.:
Bad faith must be substantiated by evidence. In LBC vs. Court of
Appeals, we ruled: Bad faith under the law cannot be presumed; it must be
established by clear and convincing evidence. Again, the unbroken jurisprudence is
that in breach of contract cases where the defendant is not shown to have acted
fraudulently or in bad faith, liability for damages is limited to the natural and probable

consequences of the breach of the obligation which the parties had foreseen or
could reasonably have foreseen. The damages, however, will not include liability far
moral damages.
We can neither sustain the award of exemplary damages. The prerequisite for
the award of exemplary damages in cases of contract or quasi-contract is that the
defendant acted in wanton, fraudulent, reckless, oppressive, or malevolent
manner. The undisputed facts do not so warrant the characterization of the action of
petitioner.
The award of attorney's fees must also be disallowed for lack of legal leg to
stand on. The fact that private respondent was compelled to litigate and incur
expenses to protect and enforce his claim did not justify the award of attorney's fees.
The general rule is that attorney's fees cannot be recovered as part of damages
because of the policy that no premium should be placed on the right to
litigate. Petitioner is willing to pay the just claim of $200.00 as a result of the delay in
the transportation of the luggage in accord with the Warsaw Convention. Needless to
say, the award of attorney's fees must be deleted where the award of moral and
exemplary damages are eliminated.

SYNTHESIS: The ruling in this case reinforced the ruling laid down in the case of Air
France vs. Gillego. In the said case, the court ruled that the one who alleges bad
faith has the burden of proving the same. Here, the court ruled that bad faith must be
established by clear and convincing evidence. The court ruled in favor of the
petitioner because the latter was able to prove that the loss suffered by the private
respondent was not due to gross negligence on the part of the petitioner. In fact, the
petitioner was able to prove that they were able to exhaust all means to find the
missing baggage.

LUFTHANSA GERMAN AIRLINES vs. INTERMEDIATE APPELLATE COURT and


SPOUSES HENRY H. ALCANTARA and TERESITA ALCANTARA

FACTS:On January 21, 1979, respondent Henry H. Alcantara shipped thirteen (13)
pieces of luggage through petitioner Lufthansa from Teheran to Manila. The Air
Waybill discloses that the actual gross weight of the thirteen (13) pieces of luggage is
180 kilograms. Respondent Henry H. Alcantara did not declare an inventory of the
contents or the value of the luggages when he delivered them to Lufthansa.
On March 3, 1979, the thirteen (13) pieces of luggage were boarded in one of
Lufthansa's flights which arrived in Manila on the same date. After the luggages
arrived in Manila, the consignee, respondent TeresitaAlcantara, was able to claim
from the cargo broker Philippine Skylanders, Inc. on March 6, 1979 only twelve (12)
out of the thirteen (13) pieces of luggage with a total weight of 174 kilograms.
Since efforts to trace the missing luggage yielded negative results, Lufthansa
informed Henry Alcantara accordingly and advised him to file a claim invoice.
On September 24, 1979, the private respondents wrote the petitioner
demanding the production of the missing luggage within then (10) days from receipt.
Since the petitioner did not comply with said demand, the private respondents filed a
complaint dated May 7, 1980, for breach of contract with damages against the
petitioner before the Court of First Instance of Manila, Sixth Judicial District, Branch
XXIV.
The petitioner filed its answer to the complaint alleging that the Warsaw
Convention limits the liability of the carrier, if any, with respect to cargo to a sum of
250 francs per kilo ($20.00 per kilo or $9.07 per pound), unless a higher value is
declared in advance and additional charges are paid by the passenger and the
conditions of the contract as set forth in the air waybill expressly subject the contract
of carriage of cargo to the Warsaw Convention. The petitioner also alleged that it
never acted fraudulently or in bad faith so as to entitle respondent spouses to moral

damages and attorney's fees, nor did it act in a wanton, fraudulent, reckless,
oppressive or malevolent manner as to entitle spouses to exemplary damages.
After trial, on November 18, 1981, the trial court in favor of the private
respondents.
On appeal, CA affirmed the trial courts decision with modification.

ISSUE: Whether or not the private respondents are entitled to an award of damages
beyond the liability set forth in the Warsaw Convention and in the Airwaybill of
Lading.

HELD:The petition is without merit.


The loss of one luggage belonging to the private respondents while the same
was in the custody of the petitioner is not disputed. The contract of air carriage
generates a relation attended with a public duty. Neglect or malfeasance of the
carrier's employees could given ground for an action for damages (Zulueta v. Pan
American World Airways, Inc., 43 SCRA 37 [1972]). Common carriers are liable for
the missing goods for failure to comply with its duty (American Insurance Co., Inc. v.
Macondray& Co., Inc., 39 SCRA 494 [171]).
In the case at bar, the trial court found that: (a) petitioners airline has not
successfully refuted the presumption established by Article 1735 of the Civil Code
that the loss of the luggage in question was due to the negligence or fault of its
employees; (b) the contents of the missing luggage of private respondents could not
be

replaced

and

were

assessed

at

P200,000.00

by

the

latter;

(c) respondent Henry Alcantara spent about $15,000.00 in trying to locate said
luggage in Frankfurt, Germany, London, United Kingdom and Hongkong;
(d) there being no evidence to the contrary, the foregoing assessments made by
private respondents were fair and reasonable; and (e) private respondents were

unable to present ample evidence to prove fraud and bad faith and are therefore not
entitled to moral damages under Article 2220 of the Civil Code.
On the other hand, the Court of Appeals found that the lower court's award of
P200,000.00 as actual compensatory damages is well based factually and legally
(Rollo, p. 37) except as to the deletion of attorney's fees due to the absence of
findings of gross and evident bad faith.
Under the circumstances, there appears to be no cogent reason to disturb the
factual findings of both the trial court and the Court of Appeals.

SYNTHESIS: The Court ruled in this case that Neglect or malfeasance of the
carrier's employees could give ground for an action for damages. This is because
the contract of carriage was entered between the passenger and the common carrier
in the first place. In the event that there was neglect on the part of the employee of
the common carrier, the latter will be the one who is held liable for damages.

BRITISH AIRWAYS vs. COURT OF APPEALS, GOP MAHTANI, and PHILIPPINE


AIRLINES
FACTS:On April 16, 1989, Mahtani decided to visit his relatives in Bombay, India. In
anticipation of his visit, he obtained the services of a certain Mr. Gumar to prepare
his travel plans.
Since BA had no direct flights from Manila to Bombay, Mahtani had to take a flight to
Hongkong via PAL, and upon arrival in Hongkong he had to take a connecting flight
to Bombay on board BA.

Prior to his departure, Mahtani checked in at the PAL counter in Manila his
two pieces of luggage containing his clothings and personal effects, confident that
upon reaching Hongkong, the same would be transferred to the BA flight bound for
Bombay.
Unfortunately, when Mahtani arrived in Bombay he discovered that his luggage was
missing and that upon inquiry from the BA representatives, he was told that the same
might have been diverted to London. After patiently waiting for his luggage for one
week, BA finally advised him to file a claim by accomplishing the "Property
Irregularity Report."
Back in the Philippines, specifically on June 11, 1990, Mahtani filed his complaint for
damages and attorney's fees against BA and Mr. Gumar before the trial court,
docketed as Civil Case No. CEB-9076.
On September 4, 1990, BA filed its answer with counter claim to the complaint
raising, as special and affirmative defenses, that Mahtani did not have a cause of
action against it. Likewise, on November 9, 1990, BA filed a third-party
complaint against PAL alleging that the reason for the non-transfer of the luggage
was due to the latter's late arrival in Hongkong, thus leaving hardly any time for the
proper transfer of Mahtani's luggage to the BA aircraft bound for Bombay.
On February 25, 1991, PAL filed its answer to the third-party complaint, wherein it
disclaimed any liability, arguing that there was, in fact, adequate time to transfer the
luggage to BA facilities in Hongkong. Furthermore, the transfer of the luggage to
Hongkong authorities should be considered as transfer to BA.
After appropriate proceedings and trial, on March 4, 1993, the trial court
rendered its decision in favor of Mahtani. The trial court gave award of compensatory
damages and attorney's fees, as well as the dismissal of its third-party complaint
against PAL.
Dissatisfied, BA appealed to the Court of Appeals, which however, affirmed
the trial court's findings.
ISSUE: WON the trial court in dismissing the the petitioners third-party complaint
against PAL.
HELD:We cannot agree with the dismissal of the third-complaint.

In Firestone Tire and Rubber Company of the Philippines v. Tempengko, we


expounded on the nature of a third-party complaint thus:
The third-party complaint is, therefore, a procedural device whereby a "third
party" who is neither a party nor privy to the act or deed complained of by the
plaintiff, may be brought into the case with leave of court, by the defendant,
who acts, as third-party plaintiff to enforce against such third-party defendant
a right for contribution, indemnity, subrogation or any other relief, in respect of
the plaintiff's claim. The third-party complaint is actually independent of and
separate and distinct from the plaintiff's complaint. Were it not for this
provision of the Rules of Court, it would have to be filed independently and
separately from the original complaint by the defendant against the third-party.
But the Rules permit defendant to bring in a third-party defendant or so to
speak, to litigate his separate cause of action in respect of plaintiff's claim
against a third-party in the original and principal case with the object of
avoiding circuitry of action and unnecessary proliferation of law suits and of
disposing expeditiously in one litigation the entire subject matter arising from
one particular set of facts.
Undeniably, for the loss of his luggage, Mahtani is entitled to damages from
BA, in view of their contract of carriage. Yet, BA adamantly disclaimed its liability and
instead imputed it to PAL which the latter naturally denies. In other words, BA and
PAL are blaming each other for the incident.
In resolving this issue, it is worth observing that the contract of air
transportation was exclusively between Mahtani and BA, the latter merely endorsing
the Manila to Hongkong leg of the former's journey to PAL, as its subcontractor or
agent. In fact, the fourth paragraph of the "Conditions of Contracts" of the
ticket 32 issued by BA to Mahtani confirms that the contract was one of continuous air
transportation from Manila to Bombay.
Prescinding from the above discussion, it is undisputed that PAL, in
transporting Mahtani from Manila to Hongkong acted as the agent of BA.
Parenthetically, the Court of Appeals should have been cognizant of the wellsettled rule that an agent is also responsible for any negligence in the performance
of its function. and is liable for damages which the principal may suffer by reason of
its negligent act. Hence, the Court of Appeals erred when it opined that BA, being
the principal, had no cause of action against PAL, its agent or sub-contractor.

Also, it is worth mentioning that both BA and PAL are members of the
International Air Transport Association (IATA), wherein member airlines are regarded
as agents of each other in the issuance of the tickets and other matters pertaining to
their relationship. Therefore, in the instant case, the contractual relationship between
BA and PAL is one of agency, the former being the principal, since it was the one
which issued the confirmed ticket, and the latter the agent.
Since the instant petition was based on breach of contract of carriage,
Mahtani can only sue BA alone, and not PAL, since the latter was not a party to the
contract. However, this is not to say that PAL is relieved from any liability due to any
of its negligent acts. In China Air Lines, Ltd. v. Court of Appeals, while not exactly in
point, the case, however, illustrates the principle which governs this particular
situation. In that case, we recognized that a carrier (PAL), acting as an agent of
another carrier, is also liable for its own negligent acts or omission in the
performance of its duties.
Accordingly, to deny BA the procedural remedy of filing a third-party complaint
against PAL for the purpose of ultimately determining who was primarily at fault as
between them, is without legal basis. After all, such proceeding is in accord with the
doctrine against multiplicity of cases which would entail receiving the same or similar
evidence for both cases and enforcing separate judgments therefor. It must be borne
in mind that the purpose of a third-party complaint is precisely to avoid delay and
circuitry of action and to enable the controversy to be disposed of in one suit. It is
but logical, fair and equitable to allow BA to sue PAL for indemnification, if it is proven
that the latter's negligence was the proximate cause of Mahtani's unfortunate
experience, instead of totally absolving PAL from any liability.

SYNTHESIS: This case discusses on the propriety of the dismissal of the


third-party complaint filed by the petitioner against PAL. The Court ruled in the
negative. Although the contract of carriage was between Mahtani and British
Airways, such fact does not absolve PAL from its liability. The Court recognized that
a carrier (PAL), acting as an agent of another carrier, is also liable for its own
negligent acts or omission in the performance of its duties.

FEDERAL EXPRESS CORPORATION vs. AMERICAN HOME ASSURANCE


COMPANY and PHILAM INSURANCE COMPANY, INC.

FACTS: On January 26, 1994, SMITHKLINE Beecham (SMITHKLINE for brevity) of


Nebraska, USA delivered to Burlington Air Express (BURLINGTON), an agent of
[Petitioner] Federal Express Corporation, a shipment of 109 cartons of veterinary
biologicals for delivery to consignee SMITHKLINE and French Overseas Company in
Makati City, Metro Manila. The shipment was covered by Burlington Airway Bill No.
11263825 with the words, 'REFRIGERATE WHEN NOT IN TRANSIT' and
'PERISHABLE' stamp marked on its face. That same day, Burlington insured the
cargoes in the amount of $39,339.00 with American Home Assurance Company
(AHAC). The following day, Burlington turned over the custody of said cargoes to
Federal Express which transported the same to Manila. The first shipment,
consisting of 92 cartons arrived in Manila on January 29, 1994 in Flight No. 007128NRT and was immediately stored at [Cargohaus Inc.'s] warehouse. While the
second, consisting of 17 cartons, came in two (2) days later, or on January 31, 1994,
in Flight No. 0071-30NRT which was likewise immediately stored at Cargohaus'
warehouse. Prior to the arrival of the cargoes, Federal Express informed GETC
Cargo International Corporation, the customs broker hired by the consignee to
facilitate the release of its cargoes from the Bureau of Customs, of the impending
arrival of its client's cargoes. "On February 10, 1994, DARIO C. DIONEDA
('DIONEDA'), twelve (12) days after the cargoes arrived in Manila, a non-licensed
custom's broker who was assigned by GETC to facilitate the release of the subject
cargoes, found out, while he was about to cause the release of the said cargoes, that
the same [were] stored only in a room with two (2) air conditioners running, to cool
the place instead of a refrigerator. When he asked an employee of Cargohaus why
the cargoes were stored in the 'cool room' only, the latter told him that the cartons
where the vaccines were contained specifically indicated therein that it should not be
subjected to hot or cold temperature. Thereafter, DIONEDA, upon instructions from
GETC, did not proceed with the withdrawal of the vaccines and instead, samples of
the same were taken and brought to the Bureau of Animal Industry of the
Department of Agriculture in the Philippines by SMITHKLINE for examination

wherein it was discovered that the 'ELISA reading of vaccinates sera are below the
positive reference serum.'
"As a consequence of the foregoing result of the veterinary biologics test,
SMITHKLINE abandoned the shipment and, declaring 'total loss' for the unusable
shipment, filed a claim with AHAC through its representative in the Philippines, the
Philam Insurance Co., Inc. ('PHILAM') which recompensed SMITHKLINE for the
whole insured amount of THIRTY NINE THOUSAND THREE HUNDRED THIRTY
NINE DOLLARS ($39,339.00). Thereafter, [respondents] filed an action for damages
against the [petitioner] imputing negligence on either or both of them in the handling
of the cargo.
Trial ensued and ultimately concluded on March 18, 1997 with the [petitioner]
being held solidarily liable for the loss.
On appeal, CA found that the petition was devoid of merit.
ISSUE: WON Federal Express is liable for damage to or loss of the insured goods?
HELD: Yes. In this jurisdiction, the filing of a claim with the carrier within the time
limitation therefor actually constitutes a condition precedent to the accrual of a right
of action against a carrier for loss of or damage to the goods. The shipper or
consignee must allege and prove the fulfillment of the condition. If it fails to do so, no
right of action against the carrier can accrue in favor of the former. The
aforementioned requirement is a reasonable condition precedent; it does not
constitute a limitation of action.
The requirement of giving notice of loss of or injury to the goods is not an
empty formalism. The fundamental reasons for such a stipulation are (1) to inform
the carrier that the cargo has been damaged, and that it is being charged with
liability therefor; and (2) to give it an opportunity to examine the nature and extent of
the injury. "This protects the carrier by affording it an opportunity to make an
investigation of a claim while the matter is fresh and easily investigated so as to
safeguard itself from false and fraudulent claims."
When an airway bill -- or any contract of carriage for that matter -- has a
stipulation that requires a notice of claim for loss of or damage to goods shipped and
the stipulation is not complied with, its enforcement can be prevented and the liability
cannot be imposed on the carrier. To stress, notice is a condition precedent, and the

carrier is not liable if notice is not given in accordance with the stipulation. Failure to
comply with such a stipulation bars recovery for the loss or damage suffered.
Being a condition precedent, the notice must precede a suit for
enforcement. In the present case, there is neither an allegation nor a showing of
respondents' compliance with this requirement within the prescribed period. While
respondents may have had a cause of action then, they cannot now enforce it for
their failure to comply with the aforesaid condition precedent.
SYNTHESIS: Basic is the requirement that before suing to recover loss of or
damage to transported goods, the plaintiff must give the carrier notice of the loss or
damage, within the period prescribed by the Warsaw Convention and/or the airway
bill. This case emphasized the importance of giving notice to the common carrier for
the basic reason of informing them that there was damage on the cargo, and to
enable both parties to determine the extent of the carriers liability. Failure of giving
such notice to the common carrier gives no right to the consignee to sue the former
for damages.

ABOITIZ SHIPPING CORP. vs. GAFLAC


FACTS: M/V P. Aboitiz owned by Aboitiz Shipping sank on its way to Hong Kong on
Oct. 31, 1980. The sinking prompted the shippers and suborgees (such as General
Accident) to file suits for recovery. To state the obvious, General Accident is a
suborgee because it already indemnified the insured. Board of Marine Inquiry (BMI)
investigated the matter and found that: the sinking was caused by force majeure the
vessel was seaworthy
Despite the findings by the BMI, the RTC nevertheless ruled that Aboitiz was liable.
Also, RTC granted the prayer of General Accident fFAor execution for the full amount
of the judgment award. The primary contention of Aboitiz, which was grounded on
the real and hypothecary nature of its liability, was swept aside. This is elevated to
the CA however the CA dismissed the petition for certiorari filed by Aboitiz.
Hence this petition.

ISSUE:Whether or not the Doctrine of Limited Liability arising out of the real and
hypothecary nature of maritime law is applicable to the case?
HELD: Yes. The real and hypothecary nature of maritime law simply means that the
liability of the carrier in connection with losses related to maritime contracts is
confined to the vessel, which is hypothecated for such obligations or which stands as
the guaranty for their settlement. It has its origin by reason of the conditions and
risks attending maritime trade in its earliest years when such trade was replete with
innumerable and unknown hazards since vessels had to go through largely
uncharted waters to ply their trade. It was designed to offset such adverse conditions
and to encourage people and entities to venture into maritime commerce despite the
risks and the prohibitive cost of ship building. Thus, the liability of the vessel owner
and agent arising from the operation of such vessel were confined to the vessel
itself, its equipment, freight, and insurance, if any, which limitation served to induce
capitalists into effectively wagering their resources against the consideration of the
large profits attainable in the trade.
The Limited Liability Rule in the Philippines is taken up in Book III of the Code
of Commerce, particularly in Articles 587, 590, and 837, hereunder quoted in toto:
Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third
persons which may arise from the conduct of the captain in the care of the goods
which he loaded on the vessel; but he may exempt himself therefrom by abandoning
the vessel with all her equipment and the freight it may have earned during the
voyage.
Art. 590. The co-owners of a vessel shall be civilly liable in the proportion of their
interests in the common fund for the results of the acts of the captain referred to in
Art. 587.
Each co-owner may exempt himself from this liability by the abandonment, before a
notary, of the part of the vessel belonging to him.
Art. 837. The civil liability incurred by ship owners in the case prescribed in
this section (on collisions), shall be understood as limited to the value of the vessel
with all its appurtenances and freightage served during the voyage.

In the few instances when the matter was considered by this Court, we have been
consistent in this jurisdiction in holding that the only time the Limited Liability Rule
does not apply is when there is an actual finding of negligence on the part of the
vessel owner or agent.
Unfortunately for General Accident. A careful reading of the decision rendered by
the trial court in Civil Case No. 144425 (pp. 27-33, Rollo) as well as the entirety of
the records in the instant case will show that there has been no actual finding of
negligence on the part of petitioner.
SYNTHESIS: InAboitiz Shipping Corp. v. GAFLAC, the liability of the vessel owner
and agent arising from the operation of such vessel were confined to the vessel
itself, its equipment, freight, and insurance, if any, which limitation served to induce
capitalists into effectively wagering their resources against the consideration of the
large profits attainable in the trade. The Limited Liability Rule in the Philippines is
taken up in Book III of the Code of Commerce, particularly in Articles 587, 590, and
837. The real and hypothecary nature of maritime law simply means that the liability
of the carrier in connection with losses related to maritime contracts is confined to
the vessel, which is hypothecated for such obligations or which stands as the
guaranty for their settlement.

ABOITIZ SHIPPING CORP. vs. NEW INDIA

FACTS: Textile cargo owned by General Textile was shipped to Manila using M/V P.
Aboitiz. Before departing, the vessel was advised that it was safe to travel to its
destination, but while at sea, the vessel received a report of a typhoon moving within
its path. It was at the edge of a typhoon when its hull leaker. The vessel sank, but
the captain and his crew were saved.

The captain filed his Marine Protest, stating that the weather was moderate
breeze, small waves, becoming longer, fairly frequent white horse. General Textile
lodged a claim with respondent for the amount of its loss. Respondent paid General
Textile and was subrogated to the rights of the latter. After investigation, the cause
was found to be the vessels unseaworthiness.
General filed a complaint with Aboitiz and the trial court consequently ruled in
favor of the former. Petitioner elevated the case to the Court of Appeals, which in
turn, affirmed the trial courts decision. It moved for reconsideration but the same
was denied. Hence, this petition for review.

ISSUE: WON the limited liability doctrine applies in this case

HELD: No. Where the ship owner fails to overcome the presumption of negligence,
the doctrine of limited liability cannot be applied.
From the nature of their business and for reasons of public policy, common
carriers are bound to observe extraordinary diligence over the goods they transport
according to all the circumstances of each case. In the event of loss, destruction or
deterioration of the insured goods, common carriers are responsible, unless they can
prove that the loss, destruction or deterioration was brought about by the causes
specified in Article 1734 of the Civil Code. In all other cases, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove that
they observed extraordinary diligence. Moreover, where the vessel is found
unseaworthy, the ship owner is also presumed to be negligent since it is tasked with
the maintenance of its vessel. Though this duty can be delegated, still, the ship
owner must exercise close supervision over its men.
In the present case, petitioner has the burden of showing that it exercised
extraordinary diligence in the transport of the goods it had on board in order to
invoke the limited liability doctrine. Differently put, to limit its liability to the amount of
the

insurance

proceeds,

petitioner

has

the

burden

of

proving

unseaworthiness of its vessel was not due to its fault or negligence.

that

the

Considering the evidence presented and the circumstances obtaining in this


case, we find that petitioner failed to discharge this burden. Both the trial and the
appellate courts, in this case, found that the sinking was not due to the typhoon but
to its unseaworthiness. Evidence on record showed that the weather was moderate
when the vessel sank. These factual findings of the Court of Appeals, affirming
those of the trial court are not to be disturbed on appeal, but must be accorded great
weight. These findings are conclusive not only on the parties but on this Court as
well.
SYNTHESIS: In Aboitiz Shipping v. New India, where the ship owner fails to
overcome the presumption of negligence, the doctrine of limited liability cannot be
applied. . In the event of loss, destruction or deterioration of the insured goods,
common carriers are responsible, unless they can prove that the loss, destruction or
deterioration was brought about by the causes specified in Article 1734 of the Civil
Code. In all other cases, common carriers are presumed to have been at fault or to
have acted negligently, unless they prove that they observed extraordinary diligence.
Moreover, where the vessel is found unseaworthy, the ship owner is also presumed
to be negligent since it is tasked with the maintenance of its vessel.

ABOITIZ SHIPPING CORP. vs. CA, et al.


FACTS: Respondent Malayan Insurance Company, Inc. (Malayan) filed five separate
actions against several defendants for the collection of the amounts of the cargoes
allegedly paid by Malayan under various marine cargo policies issued to the
insurance claimants. The shipments were supported by their respective bills of lading
and insured separately by Malayan against the risk of loss or damage. Aboitiz raised
the defenses of lack of jurisdiction, lack of cause of action and prescription. It also
claimed that M/V P. Aboitiz was seaworthy, that it exercised extraordinary diligence
and that the loss was caused by a fortuitous event. RTC adjudged Aboitiz liable on
the money claims. CA affirmed the decision finding that the sinking of M/V P. Aboitiz

was caused by the negligence of its officers and crew. It is one of the numerous
collection suits against Aboitiz, which eventually reached this Court in connection
with the sinking of M/V P. Aboitiz.
On the other hand, Respondents Asia Traders Insurance Corporation (Asia
Traders) and Allied Guarantee Insurance Corporation (Allied) filed separate actions
for damages against Aboitiz to recover by way of subrogation the value of the
cargoes insured by them and lost in the sinking of the vessel M/V P. Aboitiz. Aboitiz
reiterated the defense of force majeure. RTC and CA ordered Aboitiz to pay
damages.
Also, On 27 February 1981, Equitable Insurance Corporation (Equitable) filed an
action for damages against Aboitiz to recover by way of subrogation the value of the
cargoes insured by Equitable that were lost in the sinking of M/V P. Aboitiz. RTC and
CA found that Aboitiz was guilty of contributory negligence and, therefore, liable for
the loss.
ISSUE: Whether the real and hypothecary doctrine may be invoked by the
shipowner in relation to the loss of cargoes occasioned by the sinking of M/V P.
Aboitiz on 31 October 1980.
HELD: No. The finding of actual fault on the part of Aboitiz is central to the issue of
its liability to the respondents. Aboitizs contention, that with the sinking of M/V P.
Aboitiz, its liability to the cargo shippers and shippers should be limited only to the
insurance proceeds of the vessel absent any finding of fault on the part of Aboitiz, is
not supported by the record. Thus, Aboitiz is not entitled to the limited liability rule
and is, therefore, liable for the value of the lost cargoes as so duly alleged and
proven during trial.
The instant petitions provide another occasion for the Court to reiterate the
well-settled doctrine of the real and hypothecary nature of maritime law. As a general
rule, a ship owners liability is merely co-extensive with his interest in the vessel,
except where actual fault is attributable to the shipowner. Thus, as an exception to
the limited iability doctrine, a shipowner or ship agent may be held liable for

damages when the sinking of the vessel is attributable to the actual fault or
negligence of the shipowner or its failure to ensure the seaworthiness of the vessel.
The instant petitions cannot be spared from the application of the exception to the
doctrine of limited liability in view of the unanimous findings of the courts below that
both Aboitiz and the crew failed to ensure the seaworthiness of the M/V P. Aboitiz.
SYNTHESIS: In Aboitiz Shipping Corp v. CA, et al.,the general rule was applied, a
ship owners liability is merely co-extensive with his interest in the vessel, except
where actual fault is attributable to the shipowner. Thus, as an exception to the
limited iability doctrine, a shipowner or ship agent may be held liable for damages
when the sinking of the vessel is attributable to the actual fault or negligence of the
shipowner or its failure to ensure the seaworthiness of the vessel.

Spouses Cruz vs. Sun Holidays, Inc. G.R. No. 186312, June 29, 2010
Facts: the petitioners spouses filed a case against the respondent Sun Holidays
because their son together with his wife were boarded on the respondents boat, M/B
Coco Beach III, that was capsized during the squall. The said services were part of
their tour packages offered by the respondent to the deceased. The petitioner
asserted that the respondent, as a common carrier, must exercise extra-ordinary
diligence in transporting their passengers. The respondent denied the liability
contending that their boats are not common carriers because they are not available
to the general public as they only ferry resort and guest crew members.

Isssue: Whether or not the respondent is common carrier.


Held: The Supreme Court, by invoking the case of De Guzman vs. Court of Appeals,
held that: Article 1732 makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such carrying
only as an ancillary activity. Article 1732 also carefully avoids making any distinction
between a person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish between a carrier offering
its services to the "general public," i.e., the general community or population, and
one who offers services or solicits business only from a narrow segment of the
general population. In this case, the respondent is indeed a common carrier. Its ferry
services are so intertwined with its main business as to be properly considered as
ancillary thereto. The constancy of respondents ferry services in its resort operations
is underscored by its having its own Coco Beach boats. And the tour packages it
offers, which include the ferry services, may be availed of by anyone who can afford
to pay the same. These services are available to the public.

Sulpicio Lines, Inc vs. Curso, G.R. No. 157009, March 17, 2010. I
Facts: In this case, the surviving brothers and sisters of Dr. Curso, who boarded one
of the petitioners ships, MV Dona Marilyn, bound for Tacloban City that was
foundered while at sea because of the stormy weather brought by Typhoon Unsang,
filed a case of moral damages against the petitioners. The petitioner contended that
they were not liable to the respondents because under the Article 1764 and Article
2206 (3), and the ruling of Receiver for North Sugar Co., Inc. vs. Ybanez, which
stated that the brothers and sisters of the deceased passenger are not entitled to
moral damages in an action upon breach of contract of carriage.
Issue: Whether the brothers and sisters can recover.
Held: The Supreme Court sustained the argument of the petitioner because under
Article 2206 (3) of the Civil Code only the spouse, legitimate and illegitimate
descendants and ascendants of the deceased may demand moral damages for
mental anguish by reason of the death of the deceased. The Court expounded that

since the said provision omitted the brothers and sisters of the deceased passenger
reveals the legislative intent to exclude them from the recovery of moral damages for
mental anguish by reason of the death of the deceased.

Philtranco Services Enterprises, Inc. vs Paras, G.R. No. 161909, April 25, 2012,
Facts: The passenger of Inland Trailways named Felix Paras suffered an injury
because the bus that he boarded was hit by the petitioners bus in the rear causing
the former bus to push forward in the other lane and hit again by the truck. The
accident resulted the death of the driver of inland bus and injury of the passenger
Paras. Paras filed a complaint for moral damages resulting the breach of contract of
carriage against Inland and the latter filed third-party complaint against petitioner
Philtranco. Petitioner contended that Paras cannot recover moral damages arising
from the breach of contract of carriage because he can only recover the same if he
had died in that accident.
Issue: Wether or not Paras can recover damages
Held: The Supreme Court did not uphold the argument of the petitioner, even the
respondent had not died in that accident, the petitioner cannot escape its liability to
other damages.

Ochoa vs. G & S Transportation Corporation, G.R. No. 170071 and G.R. No.
170125, March 9, 2011,
Facts: The taxi driver was involved in an accident killing his passenger Jose Marcial
K. Ochoa. His spouse and minor children filed a complaint against the respondent for
damages. The respondent contended that it cannot be held liable for damages
because their driver was acquitted in a criminal case of reckless imprudence resulted
to homicide which would prove that they exercised extra-ordinary diligence.
Issue: Can the acquittal exonerate the operator from liability?

Held: The Supreme Court rejected the argument of the respondent because the
action filed by the heirs of Jose Marcial Ochoa for the recovery of damages arising
from breach of contract of carriage was quasi-delict and it is an independent civil
action which is separate and distinct from the criminal action for reckless imprudence
resulting to homicide.
Synthesis:
Common carrier has been defined under Article 1732 of the Civil Code which
states: Common carriers are persons, corporations, firms or associations engaged in
the business of carrying or transporting passengers or goods or both, by land, water,
or air, for compensation, offering their services to the public. By that definition, the
question is this: Does the boats are considered common carriers even they are not
available to the general public as they only ferry resort guest and crew members?
This question was answered in the case of Spouses Cruz vs. Sun Holidays,
Inc. G.R. No. 186312, June 29, 2010. Here, the petitioners spouses filed a case
against the respondent Sun Holidays because their son together with his wife were
boarded on the respondents boat, M/B Coco Beach III, that was capsized during the
squall. The said services were part of their tour packages offered by the respondent
to the deceased. The petitioner asserted that the respondent, as a common carrier,
must exercise extra-ordinary diligence in transporting their passengers. The
respondent denied the liability contending that their boats are not common carriers
because they are not available to the general public as they only ferry resort and
guest crew members. The Supreme Court, by invoking the case of De Guzman vs.
Court of Appeals, held that: Article 1732 makes no distinction between one whose
principal business activity is the carrying of persons or goods or both, and one who
does such carrying only as an ancillary activity. Article 1732 also carefully avoids
making any distinction between a person or enterprise offering transportation service
on a regular or scheduled basis and one offering such service on an occasional,
episodic or unscheduled basis. Neither does Article 1732 distinguish between a
carrier offering its services to the "general public," i.e., the general community or
population, and one who offers services or solicits business only from a narrow
segment of the general population. In this case, the respondent is indeed a common
carrier. Its ferry services are so intertwined with its main business as to be properly

considered as ancillary thereto. The constancy of respondents ferry services in its


resort operations is underscored by its having its own Coco Beach boats. And the
tour packages it offers, which include the ferry services, may be availed of by anyone
who can afford to pay the same. These services are available to the public.
It is the general rule that moral damages cannot be awarded arising from the
breach of contract unless there is fraud or bad faith. As an exception, moral
damages may be awarded in case of breach of contract of carriage that results in the
death of a passenger, in accordance with Article 1764, in relation to Article 2206 (3),
of the Civil Code, which provide: Article 1764. Damages in cases comprised in this
Section shall be awarded in accordance with Title XVIII of this Book, concerning
Damages. Article 2206 shall also apply to the death of a passenger caused by the
breach of contract by a common carrier. The question is this: Who can claim or
demand moral damages to the common carriers?
This question was answered and expounded in the case of Sulpicio Lines, Inc
vs. Curso, G.R. No. 157009, March 17, 2010. In this case, the surviving brothers and
sisters of Dr. Curso, who boarded one of the petitioners ships, MV Dona Marilyn,
bound for Tacloban City that was foundered while at sea because of the stormy
weather brought by Typhoon Unsang, filed a case of moral damages against the
petitioners. The petitioner contended that they were not liable to the respondents
because under the Article 1764 and Article 2206 (3), and the ruling of Receiver for
North Sugar Co., Inc. vs. Ybanez, which stated that the brothers and sisters of the
deceased passenger are not entitled to moral damages in an action upon breach of
contract of carriage. The Supreme Court sustained the argument of the petitioner
because under Article 2206 (3) of the Civil Code only the spouse, legitimate and
illegitimate descendants and ascendants of the deceased may demand moral
damages for mental anguish by reason of the death of the deceased. The Court
expounded that since the said provision omitted the brothers and sisters of the
deceased passenger reveals the legislative intent to exclude them from the recovery
of moral damages for mental anguish by reason of the death of the deceased. It is
also interesting in the case of Philtranco Services Enterprises, Inc. vs Paras, G.R.
No. 161909, April 25, 2012, wherein the passenger of Inland Trailways named Felix
Paras suffered an injury because the bus that he boarded was hit by the petitioners

bus in the rear causing the former bus to push forward in the other lane and hit again
by the truck. The accident resulted the death of the driver of inland bus and injury of
the passenger Paras. Paras filed a complaint for moral damages resulting the breach
of contract of carriage against Inland and the latter filed third-party complaint against
petitioner Philtranco. Petitioner contended that Paras cannot recover moral damages
arising from the breach of contract of carriage because he can only recover the
same if he had died in that accident. The Supreme Court did not uphold the
argument of the petitioner, even the respondent had not died in that accident, the
petitioner cannot escape its liability to other damages.
It must be noted that the acquittal of a negligent driver in the criminal case of
reckless imprudence does not exonerate the operator from civil liability. In fact, in the
case of Ochoa vs. G & S Transportation Corporation, G.R. No. 170071 and G.R. No.
170125, March 9, 2011, where the taxi driver was involved in an accident killing his
passenger Jose Marcial K. Ochoa. His spouse and minor children filed a complaint
against the respondent for damages. The respondent contended that it cannot be
held liable for damages because their driver was acquitted in a criminal case of
reckless imprudence resulted to homicide which would prove that they exercised
extra-ordinary diligence. The Supreme Court rejected the argument of the
respondent because the action filed by the heirs of Jose Marcial Ochoa for the
recovery of damages arising from breach of contract of carriage was quasi-delict and
it is an independent civil action which is separate and distinct from the criminal action
for reckless imprudence resulting to homicide.

Phil. Charter Insurance (PCI) vs. ChemoilLighterage, June 29, 2005


Facts

Samkyung Co. shipped 62 tons of Dioctyl Phthalate (DOP) under one bill of
lading on board MT Tahibana and another 436 tons of DOP under another bill to the
Philippines. The consignee was Plastic Group Phil. (PGP). PGP insured the cargo
with PCI against all risks. The ocean tanker unloaded the cargo to a Tanker Barge of
Chemoil, which shall transport the same to Del Pan Bridge in Pasig River. It would
be unloaded to tanker trucks, also owned by Chemoil, and deliver it to PGPs storage
tanks.
Upon delivery, PGP saw that the shipment showed discoloration, demonstrating
damage. PGP sent a letter to PCI for insurance claim for the loss it sustained due to
contamination. The inspection showed that the manhole covers of ballast tanks
ceilings were loosely secured and that the rubber gaskets of the covers re-acted to
the chemical causing shrinkage thus, loosening the covers and cargo ingress to the
rusty ballast tanks.
PCI paid PGP. PGP filed an action for damages against Chemoil. The latter
averred that PGPs representative inspected the barge before loading and found it to
be clean and dry and fit for loading. That said representative supervised the entire
loading and unloading of the shipment and that the contract expressly stipulated
waiver of liability from all claims arising from contamination, loss of cargo or part
thereof; that the consignee accepted the cargo without any protest or notice; and it
exercised extraordinary diligence in handling the cargo.
The trial court order Chemoil to pay PCI. On appeal, the CA gave credit to
Chemoils assertion that a phone call is not the required notice of claim by the Code
of Commerce, and reversed the trial court. Hence, the present petition.
Issue

Whether or not the notice of claim was filed within the required period

Ruling:

NO THE NOTICE OF CLAIM WAS NOT FILED ON THE REQUIRED PERIOD


Art. 366 of the Code of Commerce provides that Within twenty-four hours
following the receipt of the merchandise a claim may be made against the carrier on
account of damage or average found upon opening the packages, provided that the
indications of the damage or average giving rise to the claim cannot be ascertained
from the exterior of said packages, in which case said claim shall only be admitted at
the time of the receipt of the packages.
After the periods mentioned have elapsed, or after the transportation charges
have been paid, no claim whatsoever shall be admitted against the carrier with
regard to the condition in which the goods transported were delivered.Chan made a
telephone call to Abastillas, informing the latter of the contamination. However,
nothing in the trial courts decision stated that the notice of claim was relayed or filed
with the respondent-carrier immediately or within a period of twenty-four hours from
the time the goods were received. The Court of Appeals made the same finding.
Having examined the entire records of the case, we cannot find a shred of evidence
that will precisely and ultimately point to the conclusion that the notice of claim was
timely relayed or filed. Chan had no personal knowledge that the drivers of the
respondent were informed of the contamination.
This protects the carrier by affording it an opportunity to make an investigation of
a claim while the matter is fresh and easily investigated so as to safeguard itself from
false and fraudulent claims. The filing of a claim with the carrier within the time
limitation therefore actually constitutes a condition precedent to the accrual of a right
of action against a carrier for loss of, or damage to, the goods. The shipper or
consignee must allege and prove the fulfillment of the condition. If it fails to do so, no
right of action against the carrier can accrue in favor of the former.
It is not only when the period to make a claim has elapsed that no claim
whatsoever shall be admitted, as no claim may similarly be admitted after the
transportation charges have been paid. In this case, there is no question that the
transportation charges have been paid, as admitted by the petitioner, and the
corresponding official receipt duly issued.

Aboitiz Shipping Corporation vs Insurance Company of North America (ICNA),


August 6, 2008
Facts
MSAS Cargo International and/or associated and/or Subsidiary companies
procured an all risk marine insurance policy from ICNA for transshipment of certain
wooden work tools and workbenches purchased for consignee Science Teaching
Improvement Project (STIP). The cargo, packed inside a container van, was shipped
freight prepaid from Germany on board M/S Katsuragi. A clean bill of lading was
issued by Hapag-Lloyd which stated the consignee to be STIP, Cebu City.
The container van was off-loaded at Singapore and transshipped on board M/S
Vigour Singapore. When the ship arrived and docked at Manila, the container van
was again off-loaded. The cargo was received by Aboitiz, which issued a bill of lading
containing the notation grounded outside warehouse. The container van was
stripped and transferred to another crate/container van without any notation on the
condition of the cargo on the Stuffing/Stripping Report. The container van was
loaded on board Aboitizs vessel en route to Cebu.
The shipment arrived in Cebu City and discharged. It was brought to the Cebu
Bonded Warehousing Corporation pending clearance from the Customs. In the
Stripping Report, Aboitizs checker noted that the crates were slightly broken or
cracked at the bottom. The cargo was withdrawn by STIP and delivered to Don
Bosco High School, and received by Mr. Willig. Two days later, Willig, through a
telephone call, informed Perez, the Claims Head of Aboitiz, that the cargo sustained
water damage. Perez inspected the contrainer and found that the container van and
other cargoes were completely dry. Perez found that except for the bottom of the

crate which was slightly broken, the crate itself appeared to be completely dry and
had no water marks. But he confirmed that the tools which were stored inside the
crate were already corroded. He further explained that the "grounded outside
warehouse" notation in the bill of lading referred only to the container van bearing the
cargo.
STIP filed insurance claims with ICNA. The inspection showed the goods
sustained water damage, molds, and corrosion which were discovered upon delivery
to consignee. STIP filed a formal claim with Aboitiz. A supplemental report showed
that PAGASA reported heavy rains that caused water damage to the shipment,
which were placed outside the warehouse of the Pier in Manila as can be gleaned
from the bill of lading which contained the notation grounded outside warehouse. It
was only 4 days after that the shipment was stuffed inside another container van for
shipment to Cebu.
ICNA paid the amount, and formally advised Aboitiz of the claim, which the latter
did not settle. The RTC rendered judgment against ICNA ruling that it failed to prove
personality to sue because it was ICNA UK who issued the policy not ICNA Phils.
ICNA failed to produce evidence that it was a foreign corporation duly licensed to do
business in the Philippines. Thus, it lacked the capacity to sue before Philippine
Courts. On appeal, the CA reversed the RTC ruling holding that the right of
subrogation accrues simply upon payment by the insurance company of the
insurance claim. As subrogee, ICNA is entitled to reimbursement from Aboitiz, even
assuming that it is an unlicensed foreign corporation. The CA ruled that the
presumption that the carrier was at fault or that it acted negligently was not
overcome by any countervailing evidence. Hence, Aboitiz brought the present
petition.
Issue:

Was there a timely filing of the notice of claim as required under Article 366 of
the Code of Commerce

Ruling:
YES THERE WAS SUBSTANTIAL COMPLIANCE WITH THE REQUIRMENTS
The giving of notice of loss or injury is a condition precedent to the action for loss
or injury or the right to enforce the carrier's liability. Circumstances peculiar to this
case lead Us to conclude that the notice requirement was complied with. The
shipment was delivered on August 11, 1993. Although the letter informing the carrier
of the damage was dated August 15, 1993, that letter, together with the notice of
claim, was received by petitioner only on September 21, 1993. But petitioner admits
that even before it received the written notice of claim, Mr. Mayo B. Perez, Claims
Head of the company, was informed by telephone sometime in August 13, 1993. Mr.
Perez then immediately went to the warehouse and to the delivery site to inspect the
goods in behalf of petitioner.
There are peculiar circumstances in the instant case that constrain Us to rule
differently from the PCIC case, albeit this ruling is being made pro hac vice, not to be
made a precedent for other cases. Provisions specifying a time to give notice of
damage to common carriers are ordinarily to be given a reasonable and practical,
rather than a strict construction.37 We give due consideration to the fact that the final
destination of the damaged cargo was a school institution where authorities are
bound by rules and regulations governing their actions. Understandably, when the
goods were delivered, the necessary clearance had to be made before the package
was opened. Upon opening and discovery of the damaged condition of the goods, a
report to this effect had to pass through the proper channels before it could be
finalized and endorsed by the institution to the claims department of the shipping
company.
The call to petitioner was made two days from delivery, a reasonable period
considering that the goods could not have corroded instantly overnight such that it
could only have sustained the damage during transit. Moreover, petitioner was able
to immediately inspect the damage while the matter was still fresh. In so doing, the
main objective of the prescribed time period was fulfilled. Thus, there was substantial
compliance with the notice requirement in this case. Petitioner failed to overturn this

presumption of negligence when it failed to explain where the cargo was stored
during the time rain fell on Manila and the bill of lading contained the notation
grounded outside warehouse.

Topic: Damages
Victory Liner, Inc. vs. Rosalito Gammad, et al., November 25, 2004
Facts
Gammad showed that his wife Marie Grace was on board a Victory Liner bus
running at high speed when it fell on a ravine, which resulted to her death and
physical injuries to other passengers. The heirs of the deceased filed a complaint for
damages arising from culpa contractual. the petitioner claimed that the incident was
purely accidental and that it has always exercised extraordinary diligence.
The trial court ordered Victory Liner to pay actual damages, death indemnity,
exemplary and moral damages, compensatory damages, attorneys fees and cost of
the suit. The CA affirmed the trial courts decision but reduced the actual and
exemplary damages. The CA denied the MR. Hence, the present petition wherein VL
argues that the award of damages were without basis and should be deleted.
Issue

Whether the award of damages was proper

Ruling
YES THE PETITIONER SHOULD BE LIABLE FOR THE BREACH OF CONTRACT
OF CARRIAGE
Petitioner was correctly found liable for breach of contract of carriage. A common
carrier is bound to carry its passengers safely as far as human care and foresight

can provide, using the utmost diligence of very cautious persons, with due regard to
all the circumstances. In a contract of carriage, it is presumed that the common
carrier was at fault or was negligent when a passenger dies or is injured. Unless the
presumption is rebutted, the court need not even make an express finding of fault or
negligence on the part of the common carrier. This statutory presumption may only
be overcome by evidence that the carrier exercised extraordinary diligence. There is
no evidence to rebut the statutory presumption that the proximate cause of Marie
Graces death was the negligence of petitioner.
Nevertheless, the award of damages should be modified. Article 1764 in relation
to Article 2206 of the Civil Code, holds the common carrier in breach of its contract of
carriage that results in the death of a passenger liable to pay the following: (1)
indemnity for death, (2) indemnity for loss of earning capacity, and (3) moral
damages.In the present case, respondent heirs of the deceased are entitled to
indemnity for the death of Marie Grace which under current jurisprudence is fixed at
P50,000.The award of compensatory damages for the loss of the deceaseds
earning capacity should be deleted for lack of basis. As a rule, documentary
evidence should be presented to substantiate the claim for damages for loss of
earning capacity. By way of exception, damages for loss of earning capacity may be
awarded despite the absence of documentary evidence when (1) the deceased is
self-employed earning less than the minimum wage under current labor laws, and
judicial notice may be taken of the fact that in the deceaseds line of work no
documentary evidence is available; or (2) the deceased is employed as a daily wage
worker earning less than the minimum wage under current labor laws.

Rosalito

did not present evidence attesting to Marie Graces earning capacity as BIR Section
Chief.
However, the fact of loss having been established, temperate damages in the
amount of P500,000.00 should be awarded to respondents. Under Article 2224 of the
Civil Code, temperate or moderate damages, which are more than nominal but less
than compensatory damages, may be recovered when the court finds that some
pecuniary loss has been suffered but its amount cannot, from the nature of the case,
be proved with certainty.Anent the award of moral damages, the same cannot be
lumped with exemplary damages because they are based on different jural

foundations. These damages are different in nature and require separate


determination. In culpa contractual or breach of contract, moral damages may be
recovered when the defendant acted in bad faith or was guilty of gross negligence
(amounting to bad faith) or in wanton disregard of contractual obligations and, as in
this case, when the act of breach of contract itself constitutes the tort that results in
physical injuries. By special rule in Article 1764 in relation to Article 2206 of the Civil
Code, moral damages may also be awarded in case the death of a passenger
results from a breach of carriage. On the other hand, exemplary damages, which are
awarded by way of example or correction for the public good may be recovered in
contractual obligations if the defendant acted in wanton, fraudulent, reckless,
oppressive, or malevolent manner.
Respondents in the instant case should be awarded moral damages to
compensate for the grief caused by the death of the deceased resulting from the
petitioners breach of contract of carriage. Furthermore, the petitioner failed to prove
that it exercised the extraordinary diligence required for common carriers, it is
presumed to have acted recklessly. Thus, the award of exemplary damages is
proper. Under the circumstances, we find it reasonable to award respondents the
amount of P100,000.00 as moral damages and P100,000.00 as exemplary
damages. These amounts are not excessive.
Actual damages should be further reduced to P78,160.00, which was the amount
supported by official receipts.Pursuant to Article 2208 of the Civil Code, attorneys
fees may also be recovered in the case at bar where exemplary damages are
awarded. The Court finds the award of attorneys fees equivalent to 10% of the total
amount adjudged against petitioner reasonable.
In the instant case, petitioner should be held liable for payment of interest as
damages for breach of contract of carriage. Considering that the amounts payable by
petitioner has been determined with certainty only in the instant petition, the interest
due shall be computed upon the finality of this decision at the rate of 12% per annum
until satisfaction

Spouses Ong v CA, Inland Railways, Inc. and Philtranco, January 21, 1999
Facts
The Ongs boarded an Inland bus under a lease agreement with Philtranco, driven
by Coronel. When the bus slowed down to avoid a stalled cargo truck, it was
bumped from the rear by another bus, owned and operated by Philtranco and driven
by Miralles. The spouses suffered injuries and were brought to a hospital for
treatment and were confined for 9 days. Later, the Ongs filed an action against
Philtranco and Inland alleging that they suffered injuries, preventing Francia from
operating a sari-sari store and Renato from continuing his work as an OCW. The
also claimed moral, exemplary and corrective damages, compensatory damages,
medical and miscellaneous expenses, and attorneys fees. They presented various
documentary evidence.
Philtranco answered that the Inland bus was owned by the latter and that they
had an agreement that Inland would be solely liable for all claims and liabilities
arising from the operation of said bus. With respect to its own bus, it exercised the
diligence of a good father of a family in the selection and supervision of its drivers,
and that the proximate cause of the accident was the negligence of either the cargo
truck or the Inland bus which collided with said cargo truck.Inland answered that the
Police Report showed that Miralles was at fault and that Coronel exercised
extraordinary diligence as testified to by its passengers.
The trial court absolved Inland and found Philtranco liable for damages against
the spouses Ong. It ruled that the proximate cause of the accident was the bumping
form behind by the Philtranco bus. On appeal, the CA resolved that Philtranco should
be absolved from liability because the Police Report was not offered as evidence,
hence, had no probative value. Instead it was Inland who should be made liable on
the basis of culpa contractual. Further, it reduced Inlands liability based on the
records and disallowed the award for unearned income and the amount of moral
damages was likewise reduced. Hence, the present petition.

Issue

Whether the Police Report, which was not formally offered in evidence, could
be used to establish a claim against Philtranco based on culpa aquiliana

Whether the reduction in the amounts of damages awarded was proper

Ruling:
NO THE POLICE REPORT, WHICH WAS NOT OFFERED IN EVIDENCE, COULD
NOT BE USED TO ESTABLISH A CLAIM AGAINTS PHILTRANCO
A formal offer is necessary, since judges are required to base their findings of fact
and their judgment solely and strictly upon the evidence offered by the parties at the
trial. To allow parties to attach any document to their pleadings and then expect the
court to consider it as evidence, even without formal offer and admission, may draw
unwarranted consequences. Opposing parties will be deprived of their chance to
examine the document and to object to its admissibility. On the other hand, the
appellate court will have difficulty reviewing documents not previously scrutinized the
court below.Granting arguendo that there was an agreement to submit the case for
decision based on the pleadings, this does not necessarily imply that petitioners are
entitled to the award of damages. The fundamental principle of the law on damages
is that one injured by a breach of contract or by a wrongful or negligent act or
omission shall have a fair and just compensation, commensurate with the loss
sustained as a consequence of the defendant's acts. Hence, actual pecuniary
compensation is the general rule, except where the circumstances warrant the
allowance of other kinds of damages.
To be recoverable, actual damages must be pleaded and proven in Court. In no
instance may the trial judge award more than those so pleaded and proven.
Damages cannot be presumed. The award thereof must be based on the evidence
presented, not on the personal knowledge of the court. Damages, after all, are not
intended to enrich the complainant at the expense of the defendant.

In the case at bar, it was sufficiently shown during the trial that Francia's right arm
could not function in a normal manner and that, as a result, she suffered mental
anguish and anxiety. Thus, an increase in the amount of moral damages awarded,
from P30,000 to P50,000, appears to be reasonable and justified. Renato also
suffered mental anxiety and anguish from the accident. Thus, he should be
separately awarded P30,000 as moral damages.
THE REDUCTION OF AWARD WAS PROPER
In the case at bar, petitioner failed to present evidence regarding the feasibility or
practicability and the cost of a restorative medical operation on her arm. Thus, there
is no basis to grant her P48,000 for such expense.The appellate court was correct in
deleting the award for unrealized income, because of petitioner's utter failure to
substantiate her claim. The bare and unsubstantiated assertion of Francia that she
usually earned P200 a day from her market stall is not the best evidence to prove
her claim of unrealized income for the eight-month period that her arm was in plaster
cast.

UCPB General Insurance Co., Inc. v Aboitiz Shipping Corp., Eagle Express
Lines, Damco Intermodal Services, Inc., and Pimentel Customs Brokerage Co.,
February 10, 2009
Facts
San Miguel Corporation (SMC) purchased 3 units of waste water treatment plant
from Super Max. The goods came from USA and arrived at the port of Manila. The
same were then transported to Cebu on board MV Aboitiz Supercon II. After its
arrival at the port of Cebu, the goods were delivered to and received by SMC at its
plant site where it was then discovered that one electrical motor was damaged.
Pursuant to an insurance agreement UCPB paid SMC. UCPB filed a complaint as
subrogee against the defendants. The trial court ordered DAMCO, Eagle and Aboitiz
solidarily liable to plaintiff. The CA reversed the decision and ruled that UCPBs right

of action did not accrue for failure to file a formal notice of claim within 24 hours from
SMCs receipt. UCPB claims that under the Carriage of Goods by Sea Act (COGSA),
notice of loss need not be given if the condition of the cargo has been the subject of
joint inspection such as, in this case, the inspection in the presence of the Eagle
Express representative at the time the cargo was opened at the ICTSI. UCPB further
claims that the issue of the applicability of Art. 366 of the Code of Commerce was
never raised before the trial court and should, therefore, not have been considered
by the Court of Appeals.
Aboitiz argues that it obviously cannot be held liable for the damage to the cargo
which, by UCPBs admission, was incurred not during transshipment to Cebu on
board one of Aboitizs vessels, but was already existent at the time of unloading in
Manila. Aboitiz also argues that Art. 366 is applicable.
Issue

Who is liable for the damage

Ruling:
UCPB IS LIABLE
When the shipment was discharged and opened at the ICTSI in Manila in the
presence of an Eagle Express representative, the cargo had already been found
damaged. When the cargo was finally received by SMC at its Mandaue City
warehouse, it was found in bad order, thereby confirming the damage already
uncovered in Manila. Even by the exercise of extraordinary diligence, Aboitiz could
not have undone the damage to the cargo that had already been there when the
same was shipped on board its vessel.
The claims were dated more than three months from receipt of the shipment and,
at that, even after the extent of the loss had already been determined by SMCs
surveyor. The claim was, therefore, clearly filed beyond the 24-hour time frame

prescribed by Art. 366 of the Code of Commerce.The notice in writing need not be
given if the state of the goods has at the time of their receipt been the subject of joint
survey or inspection.
UCPB seizes upon the last paragraph, which dispenses with the written notice if
the state of the goods has been the subject of a joint survey which, in this case, was
the opening of the shipment in the presence of an Eagle Express representative. It
should be noted at this point that the applicability of the above-quoted provision of
the COGSA was not raised as an issue by UCPB before the trial court and was only
cited by UCPB in its Memorandum in this case.
But Eagle Express had acted as the agent of the freight consolidator, not that of
the carrier to whom the notice should have been made.UCPBs misrepresentation
that the applicability of the Code of Commerce was not raised as an issue before the
trial court warrants the assessment of double costs of suit against it.

Topic: Notice of Claim


Phil. Charter Insurance (PCI) vs. Chemoil Lighterage, June 29, 2005
Facts
Samkyung Co. shipped 62 tons of Dioctyl Phthalate (DOP) under one bill of
lading on board MT Tahibana and another 436 tons of DOP under another bill to the
Philippines. The consignee was Plastic Group Phil. (PGP). PGP insured the cargo
with PCI against all risks. The ocean tanker unloaded the cargo to a Tanker Barge of
Chemoil, which shall transport the same to Del Pan Bridge in Pasig River. It would
be unloaded to tanker trucks, also owned by Chemoil, and deliver it to PGPs storage
tanks.
Upon delivery, PGP saw that the shipment showed discoloration, demonstrating
damage. PGP sent a letter to PCI for insurance claim for the loss it sustained due to
contamination. The inspection showed that the manhole covers of ballast tanks

ceilings were loosely secured and that the rubber gaskets of the covers re-acted to
the chemical causing shrinkage thus, loosening the covers and cargo ingress to the
rusty ballast tanks.
PCI paid PGP. PGP filed an action for damages against Chemoil. The latter
averred that PGPs representative inspected the barge before loading and found it to
be clean and dry and fit for loading. That said representative supervised the entire
loading and unloading of the shipment and that the contract expressly stipulated
waiver of liability from all claims arising from contamination, loss of cargo or part
thereof; that the consignee accepted the cargo without any protest or notice; and it
exercised extraordinary diligence in handling the cargo.
The trial court order Chemoil to pay PCI. On appeal, the CA gave credit to
Chemoils assertion that a phone call is not the required notice of claim by the Code
of Commerse, and reversed the trial court. Hence, the present petition.
Issue

Whether or not the notice of claim was filed within the required period

Ruling:
Art. 366 of the Code of Commerce provides that Within twenty-four hours
following the receipt of the merchandise a claim may be made against the carrier on
account of damage or average found upon opening the packages, provided that the
indications of the damage or average giving rise to the claim cannot be ascertained
from the exterior of said packages, in which case said claim shall only be admitted at
the time of the receipt of the packages.
After the periods mentioned have elapsed, or after the transportation charges
have been paid, no claim whatsoever shall be admitted against the carrier with
regard to the condition in which the goods transported were delivered. Chan made a
telephone call to Abastillas, informing the latter of the contamination. However,

nothing in the trial courts decision stated that the notice of claim was relayed or filed
with the respondent-carrier immediately or within a period of twenty-four hours from
the time the goods were received. The Court of Appeals made the same finding.
Having examined the entire records of the case, we cannot find a shred of evidence
that will precisely and ultimately point to the conclusion that the notice of claim was
timely relayed or filed. Chan had no personal knowledge that the drivers of the
respondent were informed of the contamination.
This protects the carrier by affording it an opportunity to make an investigation of
a claim while the matter is fresh and easily investigated so as to safeguard itself from
false and fraudulent claims. The filing of a claim with the carrier within the time
limitation therefore actually constitutes a condition precedent to the accrual of a right
of action against a carrier for loss of, or damage to, the goods. The shipper or
consignee must allege and prove the fulfillment of the condition. If it fails to do so, no
right of action against the carrier can accrue in favor of the former.
It is not only when the period to make a claim has elapsed that no claim
whatsoever shall be admitted, as no claim may similarly be admitted after the
transportation charges have been paid. In this case, there is no question that the
transportation charges have been paid, as admitted by the petitioner, and the
corresponding official receipt duly issued.
Synthesis:
This case discusses that a phone call does not comply with the notice of claim
contemplated in Art 336 of the Code of Commerce. There must be notice if claim
filed with the carrier in order for the carrier to be made liable for the damage that the
packages delivered might have suffered provided it could not be ascertained in the
exterior of the said packages.

Aboitiz Shipping Corporation vs Insurance Company of North America (ICNA),


August 6, 2008
Facts
MSAS Cargo International and/or associated and/or Subsidiary companies
procured an all risk marine insurance policy from ICNA for transshipment of certain
wooden work tools and workbenches purchased for consignee Science Teaching
Improvement Project (STIP). The cargo, packed inside a container van, was shipped
freight prepaid from Germany on board M/S Katsuragi. A clean bill of lading was
issued by Hapag-Lloyd which stated the consignee to be STIP, Cebu City.
The container van was off-loaded at Singapore and transshipped on board M/S
Vigour Singapore. When the ship arrived and docked at Manila, the container van
was again off-loaded. The cargo was received by Aboitiz, which issued a bill of
lading containing the notation grounded outside warehouse. The container van was
stripped and transferred to another crate/container van without any notation on the
condition of the cargo on the Stuffing/Stripping Report. The container van was
loaded on board Aboitizs vessel en route to Cebu.
The shipment arrived in Cebu City and discharged. It was brought to the Cebu
Bonded Warehousing Corporation pending clearance from the Customs. In the
Stripping Report, Aboitizs checker noted that the crates were slightly broken or
cracked at the bottom. The cargo was withdrawn by STIP and delivered to Don
Bosco High School, and received by Mr. Willig. Two days later, Willig, through a
telephone call, informed Perez, the Claims Head of Aboitiz, that the cargo sustained
water damage. Perez inspected the contrainer and found that the container van and
other cargoes were completely dry. Perez found that except for the bottom of the
crate which was slightly broken, the crate itself appeared to be completely dry and
had no water marks. But he confirmed that the tools which were stored inside the
crate were already corroded. He further explained that the "grounded outside
warehouse" notation in the bill of lading referred only to the container van bearing the
cargo.

STIP filed insurance claims with ICNA. The inspection showed the goods
sustained water damage, molds, and corrosion which were discovered upon delivery
to consignee. STIP filed a formal claim with Aboitiz. A supplemental report showed
that PAGASA reported heavy rains that caused water damage to the shipment,
which were placed outside the warehouse of the Pier in Manila as can be gleaned
from the bill of lading which contained the notation grounded outside warehouse. It
was only 4 days after that the shipment was stuffed inside another container van for
shipment to Cebu.
ICNA paid the amount, and formally advised Aboitiz of the claim, which the
latter did not settle. The RTC rendered judgment against ICNA ruling that it failed to
prove personality to sue because it was ICNA UK who issued the policy not ICNA
Phils. ICNA failed to produce evidence that it was a foreign corporation duly licensed
to do business in the Philippines. Thus, it lacked the capacity to sue before
Philippine Courts. On appeal, the CA reversed the RTC ruling holding that the right
of subrogation accrues simply upon payment by the insurance company of the
insurance claim. As subrogee, ICNA is entitled to reimbursement from Aboitiz, even
assuming that it is an unlicensed foreign corporation. The CA ruled that the
presumption that the carrier was at fault or that it acted negligently was not
overcome by any countervailing evidence. Hence, Aboitiz brought the present
petition.
Issue:

Was there a timely filing of the notice of claim as required under Article 366 of
the Code of Commerce

Ruling:
YES THERE WAS SUBSTANTIAL COMPLIANCE WITH THE REQUIRMENTS
The giving of notice of loss or injury is a condition precedent to the action for loss
or injury or the right to enforce the carrier's liability. Circumstances peculiar to this

case lead Us to conclude that the notice requirement was complied with. The
shipment was delivered on August 11, 1993. Although the letter informing the carrier
of the damage was dated August 15, 1993, petitioner received that letter, together
with the notice of claim, only on September 21, 1993. But petitioner admits that even
before it received the written notice of claim, Mr. Mayo B. Perez, Claims Head of the
company, was informed by telephone sometime in August 13, 1993. Mr. Perez then
immediately went to the warehouse and to the delivery site to inspect the goods in
behalf of petitioner.
There are peculiar circumstances in the instant case that constrain Us to rule
differently from the PCIC case, albeit this ruling is being made pro hac vice, not to be
made a precedent for other cases. Provisions specifying a time to give notice of
damage to common carriers are ordinarily to be given a reasonable and practical,
rather than a strict construction. We give due consideration to the fact that the final
destination of the damaged cargo was a school institution where authorities are
bound by rules and regulations governing their actions. Understandably, when the
goods were delivered, the necessary clearance had to be made before the package
was opened. Upon opening and discovery of the damaged condition of the goods, a
report to this effect had to pass through the proper channels before it could be
finalized and endorsed by the institution to the claims department of the shipping
company.
The call to petitioner was made two days from delivery, a reasonable period
considering that the goods could not have corroded instantly overnight such that it
could only have sustained the damage during transit. Moreover, petitioner was able
to immediately inspect the damage while the matter was still fresh. In so doing, the
main objective of the prescribed time period was fulfilled. Thus, there was substantial
compliance with the notice requirement in this case. Petitioner failed to overturn this
presumption of negligence when it failed to explain where the cargo was stored
during the time rain fell on Manila and the bill of lading contained the notation
grounded outside warehouse.
Synthesis:

In this case the Supreme Court did construe the notice requirement under the
Article 336 of the code of commerce strictly. They took notice of the fact that the final
destination of the goods was at a School in Cebu and that the goods involve could
not have been damage overnight and thus it was understood that it was damage
during transit. Upon receiving even before a written claim was submitted the Aboitz
was already informed with the damage sustained by the goods thus the notice
requirement was meet.

Topic: Damages
Victory Liner, Inc. vs. Rosalito Gammad, et al., November 25, 2004
Facts
Gammad showed that his wife Marie Grace was on board a Victory Liner bus
running at high speed when it fell on a ravine, which resulted to her death and
physical injuries to other passengers. The heirs of the deceased filed a complaint for
damages arising from culpa contractual. The petitioner claimed that the incident was
purely accidental and that it has always exercised extraordinary diligence.
The trial court ordered Victory Liner to pay actual damages, death indemnity,
exemplary and moral damages, compensatory damages, attorneys fees and cost of
the suit. The CA affirmed the trial courts decision but reduced the actual and
exemplary damages. The CA denied the MR. Hence, the present petition wherein VL
argues that the award of damages were without basis and should be deleted.
Issue

Whether the award of damages was proper

Ruling

YES THE PETITIONER SHOULD BE LIABLE FOR THE BREACH OF CONTRACT


OF CARRIAGE
Petitioner was correctly found liable for breach of contract of carriage. A common
carrier is bound to carry its passengers safely as far as human care and foresight
can provide, using the utmost diligence of very cautious persons, with due regard to
all the circumstances. In a contract of carriage, it is presumed that the common
carrier was at fault or was negligent when a passenger dies or is injured. Unless the
presumption is rebutted, the court need not even make an express finding of fault or
negligence on the part of the common carrier. This statutory presumption may only
be overcome by evidence that the carrier exercised extraordinary diligence. There is
no evidence to rebut the statutory presumption that the proximate cause of Marie
Graces death was the negligence of petitioner.
Nevertheless, the award of damages should be modified. Article 1764 in relation
to Article 2206 of the Civil Code, holds the common carrier in breach of its contract of
carriage that results in the death of a passenger liable to pay the following: (1)
indemnity for death, (2) indemnity for loss of earning capacity, and (3) moral
damages. In the present case, respondent heirs of the deceased are entitled to
indemnity for the death of Marie Grace which under current jurisprudence is fixed at
P50,000. The award of compensatory damages for the loss of the deceaseds
earning capacity should be deleted for lack of basis. As a rule, documentary
evidence should be presented to substantiate the claim for damages for loss of
earning capacity. By way of exception, damages for loss of earning capacity may be
awarded despite the absence of documentary evidence when (1) the deceased is
self-employed earning less than the minimum wage under current labor laws, and
judicial notice may be taken of the fact that in the deceaseds line of work no
documentary evidence is available; or (2) the deceased is employed as a daily wage
worker earning less than the minimum wage under current labor laws.

Rosalito

did not present evidence attesting to Marie Graces earning capacity as BIR Section
Chief.

However, the fact of loss having been established, temperate damages in the
amount of P500,000.00 should be awarded to respondents. Under Article 2224 of the
Civil Code, temperate or moderate damages, which are more than nominal but less
than compensatory damages, may be recovered when the court finds that some
pecuniary loss has been suffered but its amount cannot, from the nature of the case,
be proved with certainty. Anent the award of moral damages, the same cannot be
lumped with exemplary damages because they are based on different jural
foundations. These damages are different in nature and require separate
determination. In culpa contractual or breach of contract, moral damages may be
recovered when the defendant acted in bad faith or was guilty of gross negligence
(amounting to bad faith) or in wanton disregard of contractual obligations and, as in
this case, when the act of breach of contract itself constitutes the tort that results in
physical injuries. By special rule in Article 1764 in relation to Article 2206 of the Civil
Code, moral damages may also be awarded in case the death of a passenger
results from a breach of carriage. On the other hand, exemplary damages, which are
awarded by way of example or correction for the public good may be recovered in
contractual obligations if the defendant acted in wanton, fraudulent, reckless,
oppressive, or malevolent manner.
Respondents in the instant case should be awarded moral damages to
compensate for the grief caused by the death of the deceased resulting from the
petitioners breach of contract of carriage. Furthermore, the petitioner failed to prove
that it exercised the extraordinary diligence required for common carriers, it is
presumed to have acted recklessly. Thus, the award of exemplary damages is
proper. Under the circumstances, we find it reasonable to award respondents the
amount of P100, 000.00 as moral damages and P100,000.00 as exemplary
damages. These amounts are not excessive.
Actual damages should be further reduced to P78,160.00, which was the amount
supported by official receipts. Pursuant to Article 2208 of the Civil Code, attorneys
fees may also be recovered in the case at bar where exemplary damages are
awarded. The Court finds the award of attorneys fees equivalent to 10% of the total
amount adjudged against petitioner reasonable.

In the instant case, petitioner should be held liable for payment of interest as
damages for breach of contract of carriage. Considering that the amounts payable by
petitioner has been determined with certainty only in the instant petition, the interest
due shall be computed upon the finality of this decision at the rate of 12% per annum
until satisfaction
Synthesis:
This case discusses the carriers liability in cases of accident. Carriers are liable to
their passengers under the New Civil Code if they incur an accident while in transit
under the principle of culpa contractual but such liability must not be excessive as to
prejudice also the carrier involved.

Spouses Ong v CA, Inland Railways, Inc. and Philtranco, January 21, 1999
Facts
The Ongs boarded an Inland bus under a lease agreement with Philtranco, driven
by Coronel. When the bus slowed down to avoid a stalled cargo truck, it was
bumped from the rear by another bus, owned and operated by Philtranco and driven
by Miralles. The spouses suffered injuries and were brought to a hospital for
treatment and were confined for 9 days. Later, the Ongs filed an action against
Philtranco and Inland alleging that they suffered injuries, preventing Francia from
operating a sari-sari store and Renato from continuing his work as an OCW. The
also claimed moral, exemplary and corrective damages, compensatory damages,
medical and miscellaneous expenses, and attorneys fees. They presented various
documentary evidence.
Philtranco answered that the Inland bus was owned by the latter and that they
had an agreement that Inland would be solely liable for all claims and liabilities
arising from the operation of said bus. With respect to its own bus, it exercised the
diligence of a good father of a family in the selection and supervision of its drivers,
and that the proximate cause of the accident was the negligence of either the cargo

truck or the Inland bus which collided with said cargo truck. Inland answered that the
Police Report showed that Miralles was at fault and that Coronel exercised
extraordinary diligence as testified to by its passengers.
The trial court absolved Inland and found Philtranco liable for damages against
the spouses Ong. It ruled that the proximate cause of the accident was the bumping
form behind by the Philtranco bus. On appeal, the CA resolved that Philtranco should
be absolved from liability because the Police Report was not offered as evidence,
hence, had no probative value. Instead it was Inland who should be made liable on
the basis of culpa contractual. Further, it reduced Inlands liability based on the
records and disallowed the award for unearned income and the amount of moral
damages was likewise reduced. Hence, the present petition.
Issue

Whether the Police Report, which was not formally offered in evidence, could
be used to establish a claim against Philtranco based on culpa aquiliana

Whether the reduction in the amounts of damages awarded was proper

Ruling:
NO THE POLICE REPORT, WHICH WAS NOT OFFERED IN EVIDENCE, COULD
NOT BE USED TO ESTABLISH A CLAIM AGAINTS PHILTRANCO
A formal offer is necessary, since judges are required to base their findings of fact
and their judgment solely and strictly upon the evidence offered by the parties at the
trial. To allow parties to attach any document to their pleadings and then expect the
court to consider it as evidence, even without formal offer and admission, may draw
unwarranted consequences. Opposing parties will be deprived of their chance to
examine the document and to object to its admissibility. On the other hand, the
appellate court will have difficulty reviewing documents not previously scrutinized the
court below. Granting arguendo that there was an agreement to submit the case for
decision based on the pleadings, this does not necessarily imply that petitioners are

entitled to the award of damages. The fundamental principle of the law on damages
is that one injured by a breach of contract or by a wrongful or negligent act or
omission shall have a fair and just compensation, commensurate with the loss
sustained as a consequence of the defendant's acts. Hence, actual pecuniary
compensation is the general rule, except where the circumstances warrant the
allowance of other kinds of damages.
To be recoverable, actual damages must be pleaded and proven in Court. In no
instance may the trial judge award more than those so pleaded and proven.
Damages cannot be presumed. The award thereof must be based on the evidence
presented, not on the personal knowledge of the court. Damages, after all, are not
intended to enrich the complainant at the expense of the defendant.
In the case at bar, it was sufficiently shown during the trial that Francia's right arm
could not function in a normal manner and that, as a result, she suffered mental
anguish and anxiety. Thus, an increase in the amount of moral damages awarded,
from P30,000 to P50,000, appears to be reasonable and justified. Renato also
suffered mental anxiety and anguish from the accident. Thus, he should be
separately awarded P30,000 as moral damages.
THE REDUCTION OF AWARD WAS PROPER
In the case at bar, petitioner failed to present evidence regarding the feasibility or
practicability and the cost of a restorative medical operation on her arm. Thus, there
is no basis to grant her P48,000 for such expense. The appellate court was correct in
deleting the award for unrealized income, because of petitioner's utter failure to
substantiate her claim. The bare and unsubstantiated assertion of Francia that she
usually earned P200 a day from her market stall is not the best evidence to prove
her claim of unrealized income for the eight-month period that her arm was in plaster
cast.
Synthesis:
Same as discussed in the case above a carrier is liable for the damages incurred to
its passenger while in transit for breach of the contract of common carrier under the

New Civil Code. For a victim to claim for a higher amount so excessive it must be still
be proven by the evidence presented and the practicability of such claim. If the court
finds that the claimants claim against the carrier is excessive it can adjudged a
lesser as much as it is practicable.

UCPB General Insurance Co., Inc. v Aboitiz Shipping Corp., Eagle Express
Lines, Damco Intermodal Services, Inc., and Pimentel Customs Brokerage Co.,
February 10, 2009
Facts
San Miguel Corporation (SMC) purchased 3 units of waste water treatment plant
from Super Max. The goods came from USA and arrived at the port of Manila. The
same were then transported to Cebu on board MV Aboitiz Supercon II. After its
arrival at the port of Cebu, the goods were delivered to and received by SMC at its
plant site where it was then discovered that one electrical motor was damaged.
Pursuant to an insurance agreement UCPB paid SMC. UCPB filed a complaint as
subrogee against the defendants. The trial court ordered DAMCO, Eagle and Aboitiz
solidarily liable to plaintiff. The CA reversed the decision and ruled that UCPBs right
of action did not accrue for failure to file a formal notice of claim within 24 hours from
SMCs receipt. UCPB claims that under the Carriage of Goods by Sea Act (COGSA),
notice of loss need not be given if the condition of the cargo has been the subject of
joint inspection such as, in this case, the inspection in the presence of the Eagle
Express representative at the time the cargo was opened at the ICTSI. UCPB further
claims that the issue of the applicability of Art. 366 of the Code of Commerce was
never raised before the trial court and should, therefore, not have been considered
by the Court of Appeals.
Aboitiz argues that it obviously cannot be held liable for the damage to the cargo
which, by UCPBs admission, was incurred not during transshipment to Cebu on
board one of Aboitizs vessels, but was already existent at the time of unloading in
Manila. Aboitiz also argues that Art. 366 is applicable.

Issue

Whether or not Aboitiz is liable for UCPBS claim

Ruling:
NO ABOITIZ IS NOT LIABLE
When the shipment was discharged and opened at the ICTSI in Manila in the
presence of an Eagle Express representative, the cargo had already been found
damaged. When the cargo was finally received by SMC at its Mandaue City
warehouse, it was found in bad order, thereby confirming the damage already
uncovered in Manila. Even by the exercise of extraordinary diligence, Aboitiz could
not have undone the damage to the cargo that had already been there when the
same was shipped on board its vessel.
The claims were dated more than three months from receipt of the shipment and,
at that, even after the extent of the loss had already been determined by SMCs
surveyor. The claim was, therefore, clearly filed beyond the 24-hour time frame
prescribed by Art. 366 of the Code of Commerce. The notice in writing need not be
given if the state of the goods has at the time of their receipt been the subject of joint
survey or inspection.
UCPB seizes upon the last paragraph, which dispenses with the written notice if
the state of the goods has been the subject of a joint survey which, in this case, was
the opening of the shipment in the presence of an Eagle Express representative. It
should be noted at this point that the applicability of the above-quoted provision of
the COGSA was not raised as an issue by UCPB before the trial court and was only
cited by UCPB in its Memorandum in this case.
But Eagle Express had acted as the agent of the freight consolidator, not that of
the carrier to whom the notice should have been made. UCPBs misrepresentation

that the applicability of the Code of Commerce was not raised as an issue before the
trial court warrants the assessment of double costs of suit against it.
Synthesis:
In this case Aboitiz was not held to be liable for the damage goods because it was
already damaged when they received it and transported it to Cebu. The existence of
the above-mentioned damage negates the presumption that the carrier is liable for
the damage goods while in transit. Thus Aboitiz cannot be made liable.

G.R. No. L-10195 December 29, 1916


YU CON, plaintiff-appellee,
vs.
GLICERIO IPIL, NARCISO LAURON, and JUSTO SOLAMO, defendantsappellants.
Facts:
Plaintiff Yu Con, a merchant engaged in the sale of cloth and domestic articles in

the town of Catmon, city of Cebu, had several times chartered from the defendant
Narciso Lauron, a banca named Maria belonging to the latter, of which Glicerio Ipil
was

master and Justo Solamo, supercargo, for the transportation of certain

merchandise and some money to and from the said town and the port of Cebu.
On or about the 17th of October 1911, the plaintiff chartered the said banca for the
transportation

of various merchandise from

the port of Cebu to

Catmon. The

following day, he delivered to the other two defendants, Ipil and Solamo, the sum
of P450, which was in a truck belonging to the plaintiff, for t he purpose of its
delivery to the latter's shop in Catmon for the purchase of corn in this town.
While the money was still in the said trunk aboard the vessel, on the night of the
said 18th of October, the time scheduled for the departure of Maria from the port of
Cebu, said master and said supercargo transferred the P450 from the plaintiff's
trunk, where it was to theirs, which was in a stateroom of the banca, from which
stateroom both the trunk and the money disappeared during that same night, and
that the investigations, made to ascertain their whereabouts, produced no result.
At the termination of the trial, the court, in view of the evidence adduced, held that
there was no room to doubt that the sole cause of the disappearance of the money
from the said banca was the negligence of the master and the supercargo, the
defendants Ipil and Solamo, respectively, and that the defendant Narciso Lauron was
responsible for that negligence, as owner of the banca, pursuant to articles 589, 587,
and 618 of the Code of Commerce, the plaintiff therefore being entitled to recover
the amount lost.
Issue:
Whether or not the petitioners liable for the loss?
Ruling:
The Supreme Court provided that, it is therefore beyond all doubt that the loss or
disappearance, on the night aforementioned, of the P450, the property of the
plaintiff, which, were in the possession of the defendants, the master and the
supercargo of the banca Maria, occurred through the manifest fault and negligence

of said defendants, for, not only did they fail to take the necessary precautions in
order that the stateroom containing the trunk in which they kept the money should be
properly guarded by members of the crew and put in such condition that it would be
impossible to steal the trunk from it or that persons not belonging to the vessel might
force an entrance into the stateroom from the outside, but also they did not expressly
station some person inside the stateroom for the guarding and safe-keeping of the
trunk, for it was not proven that the cabin boy Gabriel slept there, as the master of
the vessel, Ipil, stated, nor that the other Cabin-boy, Simeon Solamo, was on guard
that night, for the latter contradicted the statements made by the two defendants on
this point.
All of these circumstances, together with that of its having been impossible to know
who took the trunk and the money and the failure to recover the one or the other
make the conduct of the two defendants and of the other members of the crew of
banca, eminently supicious and prevent our holding that the disappearance or loss of
the money was due to a fortuitous event, to force majeure.
The said two defendants being the depositaries of the sum in question, and they
having failed to
exercise for its safe-keeping the diligence required by the nature of the obligation
assumed by them and by the circumstances of the time and the place, it is evident
that, in pursuance of the provisions of Articles 1601 and 1602, in their relation to
articles 1783 and 1784, and as prescribed in articles 1770, of the Civil Code, they
are liable for its loss or misplacement and must restore it to the plaintiff, together with
the corresponding interest thereon as an indemnity for the losses and damages
caused him through the loss of the said sum.
It is therefore evident that, in accordance with the provisions of the Code of
Commerce in force, which are applicable to the instance case, the defendant Narciso
Lauron, as the proprietor and owner of the craft of which Glicerio Ipil was the master
and in which, through the fault and negligence of the latter and of the supercago
Justo Solamo, there occurred the loss, theft, or robbery of the P450 that belonged to
the plaintiff and were delivered to said master and supercargo, a theft which, on the
other hand, as shown by the evidence, does not appear to have been committed by
a person not belonging to the craft, should, for said loss or theft, be held civilly liable

to the plaintiff, who executed with said defendant Lauron the contract for the
transportation of the merchandise and money aforementioned between the port of
Cebu and the town of Catmon, by means of the said craft.
Therefore, and for all the reasons above set forth, we affirm the judgment appealed
from, with the costs of this instance against the appellants. So ordered.

G.R. No. L-47447-47449 October 29, 1941


TEODORO R. YANGCO, ETC., petitioner,
vs.
MANUEL LASERNA, ET AL., respondent

Facts:
At about one o'clock in the afternoon of May 26, 1927, the steamer S.S. Negros,
belonging to petitioner here, Teodoro R. Yangco, left the port of Romblon on its retun
trip to Manila. Typhoon signal No. 2 was then up, of which fact the captain was duly
advised and his attention thereto called by the passengers themselves before the
vessel set sail. The boat was overloaded as indicated by the loadline which was 6 to
7 inches below the surface of the water. Baggage, trunks and other equipments were
heaped on the upper deck, the hold being packed to capacity. In addition, the vessel
carried thirty sacks of crushed marble and about one hundred sacks of copra and
some lumber. The passengers, numbering about 180, were overcrowded, the
vessel's capacity being limited to only 123 passengers. After two hours of sailing, the
boat encountered strong winds and rough seas between the islands of Banton and
Simara, and as the waves splashed the ladies' dresses, the awnings were lowered.

As the sea became increasingly violent, the captain ordered the vessel to turn left,
evidently to return to port, but in the manuever, the vessel was caught sidewise by a
big wave which caused it to capsize and
sink. Many of the passengers died in the mishap, among them being Antolin Aldaa
and his son Victorioso, husband and son, respectively, of Emilia Bienvenida who,
together with her other children and a brother-in-law, are respondents in G.R. No.
47447; Casiana Laserna, the daughter of respondents Manuel Laserna and P.A. de
Laserna in G.R. 47448; and Genaro Basaa, son of Filomeno Basaa, respondent in
G.R. No. 47449.
These respondents instituted in the Court of First Instance of Capiz separate civil
actions against petitioner here to recover damages for the death of the passengers
aforementioned. The court awarded the heirs of Antolin and Victorioso Aldana the
sum of P2,000; the heirs of Casiana Laserna, P590; and those of Genaro Basana,
also P590. After the rendition of the judgment to this effect, petitioner, by a verified
pleading, sought to abandon the vessel to the plainitffs in the three cases, together
with all its equipments, without prejudice to his right to appeal. The abandonment
having been denied, an appeal was taken to the Court of Appeals, wherein all the
judgments were affirmed except that which sums was increased to P4,000.
Petitioner, now deceased, appealed and is here represented by his legal
representative.
Issue:
May the shipowner or agent, notwithstanding the total loss of the vessel as a result
of the negligence of its captain, be properly held liable in damages for the
consequent death of its passengers?
Ruling:
We are of the opinion and so hold that this question is controlled by the provisions of
article 587 of the Code of Commerce. Said article reads:
The agent shall also be civilly liable for the indemnities in favor of third persons
which arise from the conduct of the captain in the care of the goods which the vessel
carried; but he may exempt himself therefrom by abandoning the vessel with all her

equipments and the freight he may have earned during the voyage.
"As evidence of this real nature of the maritime law we have (1) the limitation of the
liability of the agents to the actual value of the vessel and the freight money, and (2)
the right to retain the cargo and the embargo and detention of the vesseleven in
cases where the ordinary civil law would not allow more than a personal action
against the debtor or person liable. It will be observed that these rights are
correlative, and naturally so, because if the agent can exempt himself from liability by
abandoning the vessel and freight money, thus avoiding the possibilityof risking his
whole fortune in the business, it is also just that his maritime creditor may for any
reason attach the vessel itself to secure his claim without waiting for a settlement of
his rights by a final judgment, even to the prejudice of a third person.
In the light of all the foregoing, we therefore hold that if the shipowner or agent may
in any way be held civilly liable at all for injury to or death of passengers arising from
the negligence of the captain in cases of collisions or shipwrecks, his liability is
merely co-extensive with his interest in the vessel such that a total loss thereof
results in its extinction.
In arriving at this conclusion, we have not been unmindful of the fact that the ill-fated
steamship Negros, as a vessel engaged in interisland trade, is a common carrier (De
Villata v. Stanely, 32 Phil., 541), and that the as a vessel engaged in interisland
trade, is a common carrier (De Villata v. Stanely, 32 Phil., 541),and that the
relationship between the petitioner and the passengers who died in the mishap rests
on a contract of carriage.
But assuming that petitioner is liable for a breach of contract of carriage, the
exclusively "real and hypothecary nature" of maritime law operates to limit such
liability to the value of the vessel, or to the insurance thereon, if any. In the instant
case it does not appear that the vessel was insured.
Whether the abandonment of the vessel sought by the petitioner in the instant case
was in accordance with law of not, is immaterial. The vessel having totally perished,
any act of abandonment would be an idle ceremony.

G.R. No. L-74811 December 14, 1988


CHUA YEK HONG, petitioner,
vs.
INTERMEDIATE APPELLATE COURT, MARIANO GUNO and DOMINADOR OLIT,
respondents.
Facts:
Before us is a Motion for Reconsideration of our Decision dated 30 September 1988
affirming the judgment of the Court of Appeals dismissing the complaint against
private respondents and absolving them from any and all liability arising from the
loss of 1000 sacks of copra shipped by petitioner aboard private respondents'
vessel.
The basic facts are not disputed:
Petitioner is a duly licensed copra dealer based at Puerta Galera, Oriental Mindoro,
while private respondents are the owners of the vessel, "M/V Luzviminda I," a
common carrier engaged in coastwise trade from the different ports of Oriental
Mindoro to the Port of Manila. In October 1977, petitioner loaded 1,000 sacks of
copra, valued at P101,227.40, on board the vessel "M/V Luzviminda I" for shipment
from Puerta Galera, Oriental Mindoro, to Manila. Said cargo, however, did not reach
Manila because somewhere between Cape Santiago and Calatagan, Batangas, the
vessel capsized and sank with all its cargo. On 30 March 1979, petitioner instituted
before the then Court of First Instance of Oriental Mindoro, a Complaint for damages
based on breach of contract of carriage against private respondents (Civil Case No.
R-3205).
In their Answer, private respondents averred that even assuming that the alleged
cargo was truly loaded aboard their vessel, their liability had been extinguished by
reason of the total loss of said vessel.
The trial court rendered

its

decision in favoring the

plaintiff and ordering the

respondents, jointly and severally, to pay the plaintiff the sum of P101,227.40
representing the value of the cargo belonging to the plaintiff which was lost while in
the custody of the defendants; P65,550.00 representing miscellaneous expenses of
plaintiff on said lost cargo; attorneys fees in the amount of P5,000.00, and to pay the

costs of suit."
The appellate court also provides its decision, "IN VIEW OF THE FOREGOING
CONSIDERATIONS, the decision appealed from is hereby REVERSED, and another
one entered dismissing the complaint against defendants-appellants and absolving
them from any and all liabilities arising from the loss of 1,000 sacks of copra
belonging to plaintiff-appellee. Costs against appellee."
Petitioner argues that this Court failed to consider the Trial Court's finding that the
loss of the vessel with its cargo was due to the fault of the shipowner or to the
concurring negligence of the shipowner and the captain.
Thus, the Supreme court affirms((September 30 1988) the decision of the appellate
court since private respondents liability, as shipowners, for the loss of the cargo is
merely co-extensive with their interest in the vessel such that a total loss thereof
results in its extinction (Yangco v. Laserna, supra), and none of the exceptions to the
rule on limited liability being present, the liability of private respondents for the loss of
the cargo of copra must be deemed to have been extinguished. There is no showing
that the vessel was insured in this case.
Issue:
Does the Court erred in not applying Article 1733 and 1755 of the Civil Code in the
present case?
Ruling:
The Supreme Court provided that the invocation by petitioners of Articles 1733 and
1735 of the Civil Code is misplaced. As stated in the Decision sought to be
reconsidered, while the primary law governing the instant case is the Civil Code, in
all matters not regulated by said Code, the Code of Commerce and other special
laws shall govern. Since the Civil Code contains no provisions regulating liability of
shipowners or agents in the event of total loss or destruction of the vessel, it is the
provisions of the Code of Commerce, particularly Article 587, that governs.
Petitioner further contends that the ruling laid down in Eastern Shipping Lines vs.

IAC, et al. (150 SCRA 464 [1987]) should be made to apply in the instant case. That
case, however, involved foreign maritime trade while the present case involves local
inter-island shipping. The environmental set-up in the two cases, therefore, is not on
all fours. ACCORDINGLY, petitioner's Motion for Reconsideration is hereby DENIED
and this denial is FINAL.
SO ORDERED.
G.R. No. L-51165 June 21, 1990
HEIRS OF AMPARO DE LOS SANTOS, HEIRS OF ERNANIE DELOS SANTOS,
HEIRS OF
AMABELLA DELOS SANTOS, HEIRS OF LENNY DELOS SANTOS, HEIRS OF
MELANY
DELOS SANTOS, HEIRS OF TERESA PAMATIAN, HEIRS OF DIEGO SALEM,
AND RUBEN
REYES, petitioners,
vs.
HONORABLE COURT OF APPEALS AND COMPANIA MARITIMA, respondents.
Facts:
This petition for review on certiorari seeks to set aside the decision of the Court of
Appeals in CA-G.R. No. 58118-R affirming the decision in Civil Case No. 74593 of
the then Court of First Instance (now Regional Trial Court), Branch XI, Manila which
dismissed the petitioners' claim for damages against Compania Maritima for the
injury to and death of the victims as a result of the sinking of M/V Mindoro on
November 4, 1967.
The trial court found the antecedent facts to be as follows:
This is a complaint originally filed on October 21, 1968 (p. 1, rec.) and amended on
October 24, 1968 (p. 16 rec.) by the heirs of Delos Santos and others as pauper
litigants against the Compania Maritima, for damages due to the death of several
passengers as a result of the sinking of the vessel of defendant, the M/V'Mindoro',
on November 4, 1967.
There is no dispute in the record that the M/V 'Mindoro' sailed from pier 8 North
Harbor, Manila, on November 2,1967 at about 2:00 (should have been 6:00 p.m.) in

the afternoon bound for New Washington, Aklan, with many passengers aboard. It
appears that said vessel met typhoon 'Welming' on the Sibuyan Sea,Aklan, at about
5:00 in the morning of November 4, 1967 causing the death of many of its
passengers, although about 136 survived.
Mauricio delos Santos declared that on November 2, 1967 he accompanied his
common-law

wife, Amparo

delos

Santos,

and

children,

namely:

Romeo,

Josie,Hernani, who was 10 years old, Abella, 7 years old, Maria Lemia, 5 years old
and Melany, 5 months old, to pier 8, North Harbor, Manila, to board the M/V Mindoro'
bound for Aklan. It appears that Amparo delos Santos and the aforesaid children
brought all their belongings, including household utensils valued at P 1,000.00,with
the intention of living in Aklan permanently.
As already stated, the boat met typhoon 'Welming' and due to the strong waves it
sank causing the drowning of many passengers among whom were Amparo delos
Santos and all the aforesaid children. It appears also that Teresa Pamatian and
Diego Salim, who were also passengers also drowned. Plaintiff Ruben Reyes was
one of the survivors. 'The plaintiffs presented the birth and death certificates of
Amparo delos Santos and the children. They also presented copies of the manifest
of
passengers of the M/V 'Mindoro' on November 2,1967.
Ruben Reyes, the other survivor, declared that he paid for his ticket before boarding
the M/V Mindoro. At that time he had with him personal belongings and cash all in
the amount of P2,900.00. It appears that Felix Reyes Jakusalem, Teresa Pamatian
and Amparo delos Santos drowned during the sinking of the vessel. He was able to
swim on (sic) an island and was with the others, rescued later on and brought to the
hospital. The survivors were then taken ashore.
Dominador Salim declared that Teresa Pamatian, his aunt and Diego Salim,
hisfather, drowned along with the sinking of the M/V Mindoro. Tins witness declared
that he accompanied both his father and his aunt to the pier to board the boat and at
the time Teresa Pamatian was bringing cash and personal belongings of about
P250.00 worth. His father brought with him P200.00 in cash plus some belongings.

The plaintiffs further submitted in evidence a copy of a Radiogram stating among


other things that the MN Mindoro was loaded also with 3,000 cases of beer, one
dump truck and 292 various goods.
In alleging negligence on the part of the vessel, plaintiffs introduced in evidence a
letter sent to the Department of Social Welfare concerning the resurvey of the M/V
Mindoro victims and a telegram to the Social Welfare Administration, a resurvey of
the M/V 'Mindoro' victims a complete list of the, M/V 'Mindoro' victims, a certified
true copy of the Special Permit to the Compania Maritima issued by the Bureau of
Customs limiting the vessel to only 193 passengers .
The defendant alleges that no negligence was ever established and, in fact, the
shipowners and their officers took all the necessary precautions in operating the
vessel. Furthermore, the loss of lives as a result of the drowning of some
passengers, including the relatives of the herein plaintiff, was due to force majeure
because of the strong typhoon 'Welming.
A certification of the Weather Bureau indicated the place of typhoon 'Welming' on
November 2, 1967.A certification of the shipyard named El Varadero de Manila
stated among other things that the M/V 'Mindoro' was dry-docked from August 25 to
September 6,1967 and was found to be in a seaworthy condition, and that the
saidM/V 'Mindoro' was duly inspected by the Bureau of Customs. Another
certification was introduced stating among other things that the Bureau of Customs
gave a clearance to the M/V 'Mindoro' after inspection.
On the basis of these facts, the trial court sustained the position of private
respondent Compania Maritima (Maritima, for short) and issued a decision on March
27, 1974 favoring the respondents due to lack of sufficient evidence and the case
was dismissed.
The appellate court affirmed the decision on appeal. While it found that there was
concurring negligence on the part of the captain which must be imputable to
Maritima, the Court of Appeals ruled that Maritima cannot be held liable in damages
based on the principle of limited liability of the shipowner or ship agent under Article

587 of the Code of Commerce.


Issue's:
Was there a negligence of Compania Maritima of the said incident and the
application of Article 587 of the Code of Commerce?
Ruling:
We note that there is no dispute as to the finding of the captain's negligence in the
mishap. The present controversy centers on the questions of Maritima's negligence
and of the application of Article 587 of the Code of Commerce. The said article
provides:
Art. 587. The ship agent shall also be civilly liable for indemnities in favor of third
persons which may arise from the conduct of the captain in the care of the goods
which he loaded on the vessel, but he may exempt himself therefrom by abandoning
the vessel with all her equipments and the freight it may have earned during the
voyage.
Under this provision, a shipowner or agent has the right of abandonment; and by
necessary implication, his liability is confined to that which he is entitled as of right to
abandon-"the vessel with all her equipments and the freight it may have earned
during the voyage" (Yangco v. Laserna, et al., 73 Phil. 330, 332). The reason lies in
the peculiar nature of maritime law which is exclusively real and hypothecary that
operates to limit such liability to the value of the vessel, or to the insurance thereon,
if any (Yangco v. Laserna, Ibid). As correctly stated by the appellate court, "(t)his rule
is found necessary to offset against the innumerable hazards and perils of a sea
voyage and to encourage shipbuilding and marine commerce. (Decision, Rollo, p.
29). Contrary to the petitioners' supposition, the limited liability doctrine applies not
only to the goods but also in all cases like death or injury to passengers wherein the
shipowner or agent may properly be held liable for the negligent or illicit acts of the
captain (Yangco v. Laserna, Ibid). It must be stressed at this point that Article 587
speaks only of situations where the fault or negligence is committed solely by the
captain.
In cases where the shipowner is likewise to be blamed, Article 587 does not apply

(see Manila Steamship Co., Inc. v. Abdulhanan, et al., 100 Phil. 32, 38). Such a
situation will be covered by the provisions of the New Civil Code on Common
Carriers. Owing to the nature of their business and for reasons of public policy,
common carriers are tasked to observe extraordinary diligence in the vigilance over
the goods and for the safety of its passengers (Article 1733, New Civil Code).
Further, they are bound to carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious persons, with a
due regard for all the circumstances (Article 1755, New Civil Code). Whenever death
or injury to a passenger occurs, common carriers are presumed to have been at fault
or to have acted negligently unless they prove that they observed extraordinary
diligence as prescribed by Articles 1733 and 1755 (Article 1756, New Civil Code).
Maritima claims that it did not have any information about typhoon 'Welming' until
after the boat was already at sea. Modem technology belie such contention. The
Weather Bureau is now equipped with modern apparatus which enables it to detect
any incoming atmospheric disturbances. In his summary report on tropical cyclone
'Welming' which occurred within the Philippine Area of Responsibility, Dr. Roman L.
Kintanar, Weather Bureau Director, stated thatduring the periods of November 15,
1967, the Bureau issued a total of seventeen (17) warnings or advisories of typhoon
'Welming' to shipping companies. Considering the above report and the evidence on
record showing the late departure of the shipat 6:00 p.m. (instead of the scheduled
2:00 p.m. departure) on November 2, 1967, We find it
highly improbable that the Weather Bureau had not yet issued any typhoon bulletin
at any time during the day to the shipping companies. Maritima submitted no
convincing evidence to show this omission.Significantly, the appellate court found
that the ship's captain through his action showed prior knowledge of the typhoon.
The court said: For in his radiogram sent to defendant-appellee's office in Manila as
early as 8:07in the morning of November 3, 1967 he states in the concluding portion'
still observing weather condition.' thereby implicitly suggesting that he had known
even before departure of the unusual weather condition.
If the captain knew of the typhoon beforehand, it is inconceivable for Maritima to be
totally in the dark of 'Welming.' In allowing the ship to depart late from Manila despite
the typhoon advisories, Maritima displayed lack of foresight and minimum concern

for the safety of its passengers taking into account the surrounding circumstances of
the case.
While We agree with the appellate court that the captain was negligent for
overloading the ship, We, however, rule that Maritima shares equally in his
negligence. We find that while M/VMindoro was already cleared by the Bureau of
Customs and the Coast Guard for departure at 2:00 p.m. the ship's departure was,
however, delayed for four hours. Maritima could not account for the delay because it
neither checked from the captain the reasons behind the delay nor sent its
representative to inquire into the cause of such delay. It was due to this interim that
the appellate court noted that "(i)ndeed there is a great probability that unmanifested
cargo (such as dump truck, 3 toyota cars, steel bars, and 6,000 beer cases) and
passengers (about 241 more than the authorized 193 passengers) were loaded
during the four (4) hour interval".
Perchance, a closer supervision could have prevented the overloading of the ship.
Maritima could have directed the ship's captain to immediately depart in view of the
fact that as of 11:07 in the morning of November 2, 1967, the typhoon had already
attained surface winds of about 240 kilometers per hour. As the appellate court
stated, '(v)erily, if it were not for have reached (its) destination and this delay, the
vessel could thereby have avoided the effects of the storm" (Decision, Rollo p. 26).
This conclusion was buttressed by evidence that another ship, M/V Mangaren, an
interisland vessel, sailed for New Washington, Aklan on November 2,1967, ahead of
M/V Mindoro and took the same route as the latter but it arrived safely.
While indeed it is true that all these things were done on the vessel, Maritima,
however, could not present evidence that it specifically installed a radar which could
have allowed the vessel to
navigate safely for shelter during a storm. The foregoing clearly demonstrates that
Maritima's lack of extraordinary diligence coupled withthe negligence of the captain
as found by the appellate court were the proximate causes of the sinking of M/V
Mindoro.
Under Article 1764 in relation to Article 2206 of the New Civil Code, the amount of

damages for the death of a passenger caused by the breach of contract by a


common carrier is at least three thousand pesos (P3,000.00). The prevailing
jurisprudence has increased the amount of P3,000.00 to P30,000.00 (De Lima v.
Laguna Tayabas Co., L-35697-99, April 15, 1988, 160 SCRA 70). Consequently,
Maritima should pay the civil indemnity of P30,000.00 to the heirs of each of the
victims. For mental anguish suffered due to the deaths of their relatives, Maritima
should also pay to the heirs the sum of P10,000.00 each as moral damages.
In addition, it was proven at the trial that at the time of death, (1) Amparo delos
Santos had with her cash in the sum of P1,000.00 and personal belongings valued at
P500.00; (2) Teresa Pamatian, cash in the sum of P250.00 and personal belongings
worth P200.00; and (3) Diego Salem, cash in the sum of P200.00 and personal
belongings valued at P100.00. Likewise, it was established that the heirs of Amparo
delos Santos and her deceased children incurred transportation and incidental
expenses in connection with the trial of this case in the amount of P500.00 while
Dominador Salem, son of victim Diego Salem and nephew of victim Teresa
Pamatian spent about P100.00 for expenses at the trial. With respect to petitioner
Reyes, the evidence shows that at the time of the disaster, he had in his possession
cash in the sum of P2,900.00 and personal belongings worth P100.00. Further, due
to the disaster, Reyes was unable to work for three months due to shock and he was
earning P9.50 a day or in a total sum of P855.00. Also, he spent about P100.00 for
court expenses. For such losses and incidental expenses at the trial of this case,
Maritima should pay the aforestated amounts to the petitioners as actual damages.
Reyes' claim for moral damages cannot be granted inasmuch as the same is not
recoverable in damage action based on the breach of contract of transportation
under Articles 2219 and 2220of the New Civil Code except (1) where the mishap
resulted in the death of a passenger and (2)where it is proved that the carrier was
guilty of fraud or bad faith, even if death does not result(Rex Taxicab Co., Inc. v.
Bautista, 109 Phil. 712). The exceptions do not apply in this case since Reyes
survived the incident and no evidence was presented to show that Maritima was
guilty of bad faith. Mere carelessness of the carrier does not per se constitute or
justify an inference of malice or bad faith on its part (Rex Taxicab Co., Inc. v.
Bautista, supra).

Anent the claim for exemplary damages, We are not inclined to grant the same in the
absence of gross or reckless negligence in this case.
As regards the claim for attorney's fees, the records reveal that the petitioners
engaged the services of a lawyer and agreed to pay the sum of P 3,000.00 each on
a contingent basis (see TSN'S, July 21, 1971, p. 24; November 3, 1971, pp. 18 and
29). In view hereof, We find the sum of P 10,000.00 as a reasonable compensation
for the legal services rendered.
ACCORDINGLY, the appealed decision is hereby REVERSED and judgment is
hereby rendered sentencing the private respondent to pay the following: (1)
P30,000.00 as indemnity for death to the heirs of each of the victims; (2) P10,000.00
as moral damages to the heirs of each of the victims; (3) P6,805.00 as actual
damages divided among the petitioners as follows: heirs of Amparo Delos Santos
and her deceased children, P2,000.00; heirs of Teresa Pamatian, P450.00; heirs of
Diego Salem, P400.00; and Ruben Reyes, P2,955.00; (4) P10,000.00 as attorney's
fees; and (5) the costs.
SO ORDERED.
Synthesis for the maritime cases:
The cases that evolves maritime law tackles mainly to whose negligence or at fault
is it for the court to determine the liability that should be imposed in the finding of
the court.
In Yu con vs. Ipil case, that it is therefore beyond all doubt that the loss or
disappearance, on the night aforementioned, of the P450, the property of the
plaintiff, which, were in the possession of the defendants, the master and the
supercargo of the banca Maria, occurred through the manifest fault and negligence
of said defendants, for, not only did they fail to take the necessary precautions in
order that the stateroom containing the trunk in which they kept the money should be
properly guarded by members of the crew and put in such condition that it would be
impossible to steal the trunk from it or that persons not belonging to the vessel might
force an entrance into the stateroom from the outside. Thus, the said two defendants
being the depositaries of the sum in question, and they having failed to exercise for
its safe-keeping the diligence required by the nature of the obligation assumed by

them and by the circumstances of the time and the place, it is evident that, in
pursuance of the provisions of Articles 1601 and 1602, in their relation to articles
1783 and 1784, and as prescribed in articles 1770, of the Civil Code, they are liable
for its loss or misplacement and must restore it to the plaintiff, together with the
corresponding interest thereon as an indemnity for the losses and damages caused
him through the loss of the said sum.
And in Yangco vs. Laserna's case, it indicates the evidence of the real nature of the
maritime law we have (1) the limitation of the liability of the agents to the actual value
of the vessel and the freight money, and (2) the right to retain the cargo and the
embargo and detention of the vesseleven in cases where the ordinary civil law would
not allow more than a personal action against the debtor or person liable. It will be
observed that these rights are correlative, and naturally so, because if the agent can
exempt himself from liability by abandoning the vessel and freight money, thus
avoiding the possibilityof risking his whole fortune in the business, it is also just that
his maritime creditor may for any reason attach the vessel itself to secure his claim
without waiting for a settlement of his rights by a final judgment, even to the
prejudice of a third person.
While in, Chua Yek Hong vs. IAC,Guno and Olit, which specifically explains the
limited liability rule,however, is not without exceptions, namely: (1) where the injury
or death to a passenger is due either to the fault of the shipowner, or to the
concurring negligence of the shipowner and the captain (Manila Steamship Co., Inc.
v. Abdulhaman, supra); (2) wherethe vessel is insured; and (3) in workmens
compensation claims (Abueg v. San Diego, supra). In this case, there is nothing in
the records to show that the loss of the cargo was due to the fault of the private
respondents as shipowners, or to their concurrent negligence with the captain of the
vessel.
And lastly, for the De los Santos vs. CA and Compania Maritima, it gives us the
notion of about the Art. 587 of the Code of Commerce that a shipowner or agent
has the right of abandonment; and by necessary implication, his liability is confined
to that which he is entitled as of right to abandon-"the vessel with all her equipments
and the freight it may have earned during the voyage" (Yangco v. Laserna, et al., 73

Phil. 330, 332).


And considering the facts provided above, this denotes the intention of the law in
the interpretation of Art. 587 of the Code of Commerce or the limited liability
doctrine in the negligence committed solely by the captain of the ship. The reason
lies in the peculiar nature of maritime law which is exclusively real and hypothecary
that operates to limit such liability to the value of the vessel, or to the insurance
thereon, if any (Yangco v. Laserna, Ibid). As correctly stated by the appellate court,
"(t)his rule is found necessary to offset against the innumerable hazards and perils of
a sea voyage and to encourage shipbuilding and marine commerce. In cases where
the shipowner is likewise to be blamed, Article 587 does not apply (see Manila
Steamship Co.,Inc. v. Abdulhanan, et al., 100 Phil. 32, 38). Such a situation will be
covered by the provisions of the New Civil Code on Common Carriers.
Further, they are bound to carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious persons, with a
due regard for all the circumstances (Article 1755, New Civil Code). Whenever death
or injury to a passenger occurs, common carriers are presumed to have been at fault
or to have acted negligently unless they prove that they observed extraordinary
diligence as prescribed by Articles 1733 and 1755 (Article 1756, New Civil Code).