EVERETT STEAMSHIP CORPORATION, petitioner,
vs.
COURT OF APPEALS and HERNANDEZ TRADING CO. INC.,
respondents.
Petitioner Everett Steamship Corporation, through this petition for review,
seeks the reversal of the decision 1 of the Court of Appeals, dated June 14,
1995, in CA-G.R. No. 428093, which affirmed the decision of the Regional
Trial Court of Kalookan City, Branch 126, in Civil Case No. C-15532,
finding petitioner liable to private respondent Hernandez Trading Co., Inc.
for the value of the lost cargo.
Private respondent imported three crates of bus spare parts marked as
MARCO C/No. 12, MARCO C/No. 13 and MARCO C/No. 14, from its
supplier, Maruman Trading Company, Ltd. (Maruman Trading), a foreign
corporation based in Inazawa, Aichi, Japan. The crates were shipped from
Nagoya, Japan to Manila on board "ADELFAEVERETTE," a vessel owned
by petitioner's principal, Everett Orient Lines. The said crates were covered
by Bill of Lading No. NGO53MN.
Upon arrival at the port of Manila, it was discovered that the crate marked
MARCO C/No. 14 was missing. This was confirmed and admitted by
petitioner in its letter of January 13, 1992 addressed to private respondent,
which thereafter made a formal claim upon petitioner for the value of the lost
cargo amounting to One Million Five Hundred Fifty Two Thousand Five
Hundred (Y1,552,500.00) Yen, the amount shown in an Invoice No. MTM-
941, dated November 14, 1991. However, petitioner offered to pay only One
Hundred Thousand (Y100,000.00) Yen, the maximum amount stipulated
under Clause 18 of the covering bill of lading which limits the liability of
petitioner.
Private respondent rejected the offer and thereafter instituted a suit for
collection docketed as Civil Case No. C-15532, against petitioner before the
Regional Trial Court of Caloocan City, Branch 126.
At the pre-trial conference, both parties manifested that they have no
testimonial evidence to offer and agreed instead to file their respective
memoranda.
On July 16, 1993, the trial court rendered judgment 2 in favor of private
respondent, ordering petitioner to pay: (a) Y1,552,500.00; (b) Y20,000.00 or
its peso equivalent representing the actual value of the lost cargo and the
material and packaging cost; (c) 10% of the total amount as an award for and
as contingent attorney's fees; and (d) to pay the cost of the suit. The trial
court ruled:
Considering defendant's categorical admission of loss
and its failure to overcome the presumption of
negligence and fault, the Court conclusively finds
defendant liable to the plaintiff. The next point of
inquiry the Court wants to resolve is the extent of the
liability of the defendant. As stated earlier, plaintiff
contends that defendant should be held liable for the
whole value for the loss of the goods in the amount of
Y1,552,500.00 because the terms appearing at the
back of the bill of lading was so written in fine prints
and that the same was not signed by plaintiff or
shipper thus, they are not bound by clause stated in
paragraph 18 of the bill of lading. On the other hand,
defendant merely admitted that it lost the shipment but
shall be liable only up to the amount of Y100,000.00.
The Court subscribes to the provisions of Article 1750
of the New Civil Code —
Art. 1750. "A contract fixing the
sum that may be recovered by
the owner or shipper for the
loss, destruction or deterioration
of the goods is valid, if it is
reasonable and just under the
circumstances, and has been
fairly and freely agreed upon."
It is required, however, that the contract must be
reasonable and just under the circumstances and has
been fairly and freely agreed upon. The requirements
provided in Art. 1750 of the New Civil Code must be
complied with before a common carrier can claim a
limitation of its pecuniary liability in case of loss,
destruction or deterioration of the goods it has
undertaken to transport.
In the case at bar, the Court is of the view that the
requirements of said article have not been met. The
fact that those conditions are printed at the back of the
bill of lading in letters so small that they are hard to
read would not warrant the presumption that the
plaintiff or its supplier was aware of these conditions
such that he had "fairly and freely agreed" to these
conditions. It can not be said that the plaintiff had
actually entered into a contract with the defendant,
embodying the conditions as printed at the back of the
bill of lading that was issued by the defendant to
plaintiff.
On appeal, the Court of Appeals deleted the award of attorney's fees but
affirmed the trial court's findings with the additional observation that private
respondent can not be bound by the terms and conditions of the bill of lading
because it was not privy to the contract of carriage. It said:
As to the amount of liability, no evidence appears on
record to show that the appellee (Hernandez Trading
Co.) consented to the terms of the Bill of Lading. The
shipper named in the Bill of Lading is Maruman
Trading Co., Ltd. whom the appellant (Everett
Steamship Corp.) contracted with for the
transportation of the lost goods.
Even assuming arguendo that the shipper Maruman
Trading Co., Ltd. accepted the terms of the bill of
lading when it delivered the cargo to the appellant, still
it does not necessarily follow that appellee Hernandez
Trading, Company as consignee is bound thereby
considering that the latter was never privy to the
shipping contract.
xxx xxx xxx
Never having entered into a contract with the
appellant, appellee should therefore not be bound by
any of the terms and conditions in the bill of lading.
Hence, it follows that the appellee may recover the full
value of the shipment lost, the basis of which is not the
breach of contract as appellee was never a privy to the
any contract with the appellant, but is based on Article
1735 of the New Civil Code, there being no evidence
to prove satisfactorily that the appellant has overcome
the presumption of negligence provided for in the law.
Petitioner now comes to us arguing that the Court of Appeals erred (1) in
ruling that the consent of the consignee to the terms and conditions of the bill
of lading is necessary to make such stipulations binding upon it; (2) in
holding that the carrier's limited package liability as stipulated in the bill of
lading does not apply in the instant case; and (3) in allowing private
respondent to fully recover the full alleged value of its lost cargo.
We shall first resolve the validity of the limited liability clause in the bill of
lading.
A stipulation in the bill of lading limiting the common carrier's liability for
loss or destruction of a cargo to a certain sum, unless the shipper or owner
declares a greater value, is sanctioned by law, particularly Articles 1749 and
1750 of the Civil Code which provide:
Art. 1749. A stipulation that the common carrier's
liability is limited to the value of the goods appearing
in the bill of lading, unless the shipper or owner
declares a greater value, is binding.
Art. 1750. A contract fixing the sum that may be
recovered by the owner or shipper for the loss,
destruction, or deterioration of the goods is valid, if it
is reasonable and just under the circumstances, and has
been freely and fairly agreed upon.
Such limited-liability clause has also been consistently upheld by this Court
in a number of cases. 3 Thus, in Sea Land Service, Inc. vs. Intermediate
Appellate Court 4, we ruled:
It seems clear that even if said section 4 (5) of the
Carriage of Goods by Sea Act did not exist, the
validity and binding effect of the liability limitation
clause in the bill of lading here are nevertheless fully
sustainable on the basis alone of the cited Civil Code
Provisions. That said stipulation is just and reasonable
is arguable from the fact that it echoes Art. 1750 itself
in providing a limit to liability only if a greater value
is not declared for the shipment in the bill of lading.
To hold otherwise would amount to questioning the
justness and fairness of the law itself, and this the
private respondent does not pretend to do. But over
 and above that consideration, the just and reasonable
character of such stipulation is implicit in it giving the
shipper or owner the option of avoiding accrual of
liability limitation by the simple and surely far from
onerous expedient of declaring the nature and value of
the shipment in the bill of lading.
Pursuant to the afore-quoted provisions of law, it is required that the
stipulation limiting the common carrier's liability for loss must be
"reasonable and just under the circumstances, and has been freely and fairly
agreed upon."
The bill of lading subject of the present controversy specifically provides,
among others:
18. All claims for which the carrier may be liable shall
be adjusted and settled on the basis of the shipper's net
invoice cost plus freight and insurance premiums, if
paid, and in no event shall the carrier be liable for any
loss of possible profits or any consequential loss.
The carrier shall not be liable for any loss of or any
damage to or in any connection with, goods in an
amount exceeding One Hundred thousand Yen in
Japanese Currency (Y100,000.00) or its equivalent in
any other currency per package or customary freight
unit (whichever is least) unless the value of the goods
higher than this amount is declared in writing by the
shipper before receipt of the goods by the carrier and
inserted in the Bill of Lading and extra freight is paid
as required. (Emphasis supplied)
The above stipulations are, to our mind, reasonable and just. In the bill of
lading, the carrier made it clear that its liability would only be up to One
Hundred Thousand (Y100,000.00) Yen. However, the shipper, Maruman
Trading, had the option to declare a higher valuation if the value of its cargo
was higher than the limited liability of the carrier. Considering that the
shipper did not declare a higher valuation, it had itself to blame for not
complying with the stipulations.
The trial court's ratiocination that private respondent could not have "fairly
and freely" agreed to the limited liability clause in the bill of lading because
the said conditions were printed in small letters does not make the bill of
lading invalid.
We ruled in PAL, Inc. vs. Court of Appeals 5 that the "jurisprudence on the
matter reveals the consistent holding of the court that contracts of adhesion
are not invalid per se and that it has on numerous occasions upheld the
binding effect thereof." Also, in Philippine American General Insurance Co.,
Inc. vs. Sweet Lines, Inc. 6 this Court, speaking through the learned Justice
Florenz D. Regalado, held:
. . . Ong Yiu vs. Court of Appeals, et. al., instructs us
that "contracts of adhesion wherein one party imposes
a ready-made form of contract on the other . . . are
contracts not entirely prohibited. The one who adheres
to the contract is in reality free to reject it entirely; if
the adheres he gives his consent." In the present case,
not even an allegation of ignorance of a party excuses
non-compliance with the contractual stipulations since
the responsibility for ensuring full comprehension of
the provisions of a contract of carriage devolves not
on the carrier but on the owner, shipper, or consignee
as the case may be. (Emphasis supplied)
It was further explained in Ong Yiu vs. Court of Appeals 7 that stipulations in
contracts of adhesion are valid and binding.
While it may be true that petitioner had not signed the
plane
ticket . . ., he is nevertheless bound by the provisions
thereof. "Such provisions have been held to be a part
of the contract of carriage, and valid and binding upon
the passenger regardless of the latter's lack of
knowledge or assent to the regulation." It is what is
known as a contract of "adhesion," in regards which it
has been said that contracts of adhesion wherein one
party imposes a ready-made form of contract on the
other, as the plane ticket in the case at bar, are
contracts not entirely prohibited. The one who adheres
to the contract is in reality free to reject it entirely; if
he adheres, he gives his consent. . . ., a contract
limiting liability upon an agreed valuation does not
offend against the policy of the law forbidding one
from contracting against his own negligence.
(Emphasis supplied)
Greater vigilance, however, is required of the courts when dealing with
contracts of adhesion in that the said contracts must be carefully scrutinized
"in order to shield the unwary (or weaker party) from deceptive schemes
contained in ready-made covenants," 8 such as the bill of lading in question.
The stringent requirement which the courts are enjoined to observe is in
recognition of Article 24 of the Civil Code which mandates that "(i)n all
contractual, property or other relations, when one of the parties is at a
disadvantage on account of his moral dependence, ignorance, indigence,
mental weakness, tender age or other handicap, the courts must be vigilant
for his protection."
The shipper, Maruman Trading, we assume, has been extensively engaged in
the trading business. It can not be said to be ignorant of the business
transactions it entered into involving the shipment of its goods to its
customers. The shipper could not have known, or should know the
stipulations in the bill of lading and there it should have declared a higher
valuation of the goods shipped. Moreover, Maruman Trading has not been
heard to complain that it has been deceived or rushed into agreeing to ship
the cargo in petitioner's vessel. In fact, it was not even impleaded in this case.
The next issue to be resolved is whether or not private respondent, as
consignee, who is not a signatory to the bill of lading is bound by the
stipulations thereof.
Again, in Sea-Land Service, Inc. vs. Intermediate Appellate Court (supra),
we held that even if the consignee was not a signatory to the contract of
carriage between the shipper and the carrier, the consignee can still be bound
by the contract. Speaking through Mr. Chief Justice Narvasa, we ruled:
To begin with, there is no question of the right, in
principle, of a consignee in a bill of lading to recover
from the carrier or shipper for loss of, or damage to
goods being transported under said bill, although that
document may have been-as in practice it oftentimes
is-drawn up only by the consignor and the carrier
without the intervention of the
onsignee. . . . .
. . . the right of a party in the same situation as
respondent here, to recover for loss of a shipment
consigned to him under a bill of lading drawn up only
by and between the shipper and the carrier, springs
from either a relation of agency that may exist
between him and the shipper or consignor, or his
status as stranger in whose favor some stipulation is
made in said contract, and who becomes a party
thereto when he demands fulfillment of that
stipulation, in this case the delivery of the goods or
cargo shipped. In neither capacity can he assert
personally, in bar to any provision of the bill of lading,
the alleged circumstance that fair and free agreement
to such provision was vitiated by its being in such fine
print as to be hardly readable. Parenthetically, it may
be observed that in one comparatively recent case
(Phoenix Assurance Company vs. Macondray & Co.,
Inc., 64 SCRA 15) where this Court found that a
similar package limitation clause was "printed in the
smallest type on the back of the bill of lading," it
nonetheless ruled that the consignee was bound
thereby on the strength of authority holding that such
provisions on liability limitation are as much a part of
a bill of lading as through physically in it and as
though placed therein by agreement of the parties.
There can, therefore, be no doubt or equivocation
about the validity and enforceability of freely-agreed-
upon stipulations in a contract of carriage or bill of
lading limiting the liability of the carrier to an agreed
valuation unless the shipper declares a higher value
and inserts it into said contract or bill. This
proposition, moreover, rests upon an almost uniform
weight of authority. (Emphasis supplied).
When private respondent formally claimed reimbursement for the missing
goods from petitioner and subsequently filed a case against the latter based
on the very same bill of lading, it (private respondent) accepted the
provisions of the contract and thereby made itself a party thereto, or at least
has come to court to enforce it. 9 Thus, private respondent cannot now reject
or disregard the carrier's limited liability stipulation in the bill of lading. In
other words, private respondent is bound by the whole stipulations in the bill
of lading and must respect the same.
Private respondent, however, insists that the carrier should be liable for the
full value of the lost cargo in the amount of Y1,552,500.00, considering that
the shipper, Maruman Trading, had "fully declared the shipment . . ., the
contents of each crate, the dimensions, weight and value of the contents," 10
as shown in the commercial Invoice No. MTM-941.
This claim was denied by petitioner, contending that it did not know of the
contents, quantity and value of "the shipment which consisted of three pre-
packed crates described in Bill of Lading No. NGO-53MN merely as '3
CASES SPARE PARTS.'" 11
The bill of lading in question confirms petitioner's contention. To defeat the
carrier's limited liability, the aforecited Clause 18 of the bill of lading
requires that the shipper should have declared in writing a higher valuation of
its goods before receipt thereof by the carrier and insert the said declaration
in the bill of lading, with extra freight paid. These requirements in the bill of
lading were never complied with by the shipper, hence, the liability of the
carrier under the limited liability clause stands. The commercial Invoice No.
MTM-941 does not in itself sufficiently and convincingly show that
petitioner has knowledge of the value of the cargo as contended by private
respondent. No other evidence was proffered by private respondent to
support is contention. Thus, we are convinced that petitioner should be liable
for the full value of the lost cargo.
In fine, the liability of petitioner for the loss of the cargo is limited to One
Hundred Thousand (Y100,000.00) Yen, pursuant to Clause 18 of the bill of
lading.
WHEREFORE, the decision of the Court of Appeals dated June 14, 1995 in
C.A.-G.R. CV No. 42803 is hereby REVERSED and SET ASIDE.
SO ORDERED.
MOF COMPANY, INC., Petitioner,
vs.
SHIN YANG BROKERAGE CORPORATION Respondent.
The necessity of proving lies with the person who sues.
The refusal of the consignee named in the bill of lading to pay the freightage
on the claim that it is not privy to the contract of affreightment propelled the
shipper to sue for collection of money, stressing that its sole evidence, the
bill of lading, suffices to prove that the consignee is bound to pay. Petitioner
now comes to us by way of Petition for Review on Certiorari1 under Rule 45
praying for the reversal of the Court of Appeals' (CA) judgment that
dismissed its action for sum of money for insufficiency of evidence.
Factual Antecedents
On October 25, 2001, Halla Trading Co., a company based in Korea, shipped
to Manila secondhand cars and other articles on board the vessel Hanjin
Busan 0238W. The bill of lading covering the shipment, i.e., Bill of Lading
No. HJSCPUSI14168303,2 which was prepared by the carrier Hanjin
Shipping Co., Ltd. (Hanjin), named respondent Shin Yang Brokerage Corp.
(Shin Yang) as the consignee and indicated that payment was on a "Freight
Collect" basis, i.e., that the consignee/receiver of the goods would be the one
to pay for the freight and other charges in the total amount of P57,646.00.3
The shipment arrived in Manila on October 29, 2001. Thereafter, petitioner
MOF Company, Inc. (MOF), Hanjin’s exclusive general agent in the
Philippines, repeatedly demanded the payment of ocean freight,
documentation fee and terminal handling charges from Shin Yang. The latter,
however, failed and refused to pay contending that it did not cause the
importation of the goods, that it is only the Consolidator of the said
shipment, that the ultimate consignee did not endorse in its favor the original
bill of lading and that the bill of lading was prepared without its consent.
Thus, on March 19, 2003, MOF filed a case for sum of money before the
Metropolitan Trial Court of Pasay City (MeTC Pasay) which was docketed
as Civil Case No. 206-03 and raffled to Branch 48. MOF alleged that Shin
Yang, a regular client, caused the importation and shipment of the goods and
assured it that ocean freight and other charges would be paid upon arrival of
the goods in Manila. Yet, after Hanjin's compliance, Shin Yang unjustly
breached its obligation to pay. MOF argued that Shin Yang, as the named
consignee in the bill of lading, entered itself as a party to the contract and
bound itself to the "Freight Collect" arrangement. MOF thus prayed for the
payment of P57,646.00 representing ocean freight, documentation fee and
terminal handling charges as well as damages and attorney’s fees.
Claiming that it is merely a consolidator/forwarder and that Bill of Lading
No. HJSCPUSI14168303 was not endorsed to it by the ultimate consignee,
Shin Yang denied any involvement in shipping the goods or in promising to
shoulder the freightage. It asserted that it never authorized Halla Trading Co.
to ship the articles or to have its name included in the bill of lading. Shin
Yang also alleged that MOF failed to present supporting documents to prove
that it was Shin Yang that caused the importation or the one that assured
payment of the shipping charges upon arrival of the goods in Manila.
Ruling of the Metropolitan Trial Court
On June 16, 2004, the MeTC of Pasay City, Branch 48 rendered its Decision 4
in favor of MOF. It ruled that Shin Yang cannot disclaim being a party to the
contract of affreightment because:
x x x it would appear that defendant has business transactions with plaintiff.
This is evident from defendant’s letters dated 09 May 2002 and 13 May 2002
(Exhibits "1" and "2", defendant’s Position Paper) where it requested for the
release of refund of container deposits x x x. [In] the mind of the Court, by
analogy, a written contract need not be necessary; a mutual understanding
[would suffice]. Further, plaintiff would have not included the name of the
defendant in the bill of lading, had there been no prior agreement to that
effect.
In sum, plaintiff has sufficiently proved its cause of action against the
defendant and the latter is obliged to honor its agreement with plaintiff
despite the absence of a written contract.5
The dispositive portion of the MeTC Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor
of plaintiff and against the defendant, ordering the latter to pay plaintiff as
follows:
1. P57,646.00 plus legal interest from the date of demand until
fully paid,
2. P10,000.00 as and for attorney’s fees and
3. the cost of suit.
SO ORDERED.6
Ruling of the Regional Trial Court
The Regional Trial Court (RTC) of Pasay City, Branch 108 affirmed in toto
the Decision of the MeTC. It held that:
MOF and Shin Yang entered into a contract of affreightment which Black’s
Law Dictionary defined as a contract with the ship owner to hire his ship or
part of it, for the carriage of goods and generally take the form either of a
charter party or a bill of lading.
The bill of lading contain[s] the information embodied in the contract.
Article 652 of the Code of Commerce provides that the charter party must be
in writing; however, Article 653 says: "If the cargo should be received
without charter party having been signed, the contract shall be understood as
executed in accordance with what appears in the bill of lading, the sole
evidence of title with regard to the cargo for determining the rights and
obligations of the ship agent, of the captain and of the charterer". Thus, the
Supreme Court opined in the Market Developers, Inc. (MADE) vs.
Honorable Intermediate Appellate Court and Gaudioso Uy, G.R. No. 74978,
September 8, 1989, this kind of contract may be oral. In another case,
Compania Maritima vs. Insurance Company of North America, 12 SCRA
213 the contract of affreightment by telephone was recognized where the oral
agreement was later confirmed by a formal booking.
xxxx
Defendant is liable to pay the sum of P57,646.00, with interest until fully
paid, attorney’s fees of P10,000.00 [and] cost of suit.
Considering all the foregoing, this Court affirms in toto the decision of the
Court a quo.
SO ORDERED.7
Ruling of the Court of Appeals
Seeing the matter in a different light, the CA dismissed MOF’s complaint
and refused to award any form of damages or attorney’s fees. It opined that
MOF failed to substantiate its claim that Shin Yang had a hand in the
importation of the articles to the Philippines or that it gave its consent to be a
consignee of the subject goods. In its March 22, 2006 Decision,8 the CA said:
This Court is persuaded [that except] for the Bill of Lading, respondent has
not presented any other evidence to bolster its claim that petitioner has
entered [into] an agreement of affreightment with respondent, be it verbal or
written. It is noted that the Bill of Lading was prepared by Hanjin Shipping,
not the petitioner. Hanjin is the principal while respondent is the former’s
agent. (p. 43, rollo)
The conclusion of the court a quo, which was upheld by the RTC Pasay City,
Branch 108 xxx is purely speculative and conjectural. A court cannot rely on
speculations, conjectures or guesswork, but must depend upon competent
proof and on the basis of the best evidence obtainable under the
circumstances. Litigation cannot be properly resolved by suppositions,
deductions or even presumptions, with no basis in evidence, for the truth
must have to be determined by the hard rules of admissibility and proof
(Lagon vs. Hooven Comalco Industries, Inc. 349 SCRA 363).
While it is true that a bill of lading serves two (2) functions: first, it is a
receipt for the goods shipped; second, it is a contract by which three parties,
namely, the shipper, the carrier and the consignee who undertake specific
responsibilities and assume stipulated obligations (Belgian Overseas
Chartering and Shipping N.V. vs. Phil. First Insurance Co., Inc., 383 SCRA
23), x x x if the same is not accepted, it is as if one party does not accept the
contract. Said the Supreme Court:
"A bill of lading delivered and accepted constitutes the contract of carriage[,]
even though not signed, because the acceptance of a paper containing the
terms of a proposed contract generally constitutes an acceptance of the
contract and of all its terms and conditions of which the acceptor has actual
or constructive notice" (Keng Hua Paper Products Co., Inc. vs. CA, 286
SCRA 257).
In the present case, petitioner did not only [refuse to] accept the bill of
lading, but it likewise disown[ed] the shipment x x x. [Neither did it]
authorize Halla Trading Company or anyone to ship or export the same on its
behalf.
It is settled that a contract is upheld as long as there is proof of consent,
subject matter and cause (Sta. Clara Homeowner’s Association vs. Gaston,
374 SCRA 396). In the case at bar, there is not even any iota of evidence to
show that petitioner had given its consent.
"He who alleges a fact has the burden of proving it and a mere allegation is
not evidence" (Luxuria Homes Inc. vs. CA, 302 SCRA 315).
The 40-footer van contains goods of substantial value. It is highly
improbable for petitioner not to pay the charges, which is very minimal
compared with the value of the goods, in order that it could work on the
release thereof.
For failure to substantiate its claim by preponderance of evidence,
respondent has not established its case against petitioner.9
Petitioners filed a motion for reconsideration but it was denied in a
Resolution10 dated May 25, 2006. Hence, this petition for review on
certiorari.
Petitioner’s Arguments
In assailing the CA’s Decision, MOF argues that the factual findings of both
the MeTC and RTC are entitled to great weight and respect and should have
bound the CA. It stresses that the appellate court has no justifiable reason to
disturb the lower courts’ judgments because their conclusions are well-
supported by the evidence on record.
MOF further argues that the CA erred in labeling the findings of the lower
courts as purely ‘speculative and conjectural’. According to MOF, the bill of
lading, which expressly stated Shin Yang as the consignee, is the best
evidence of the latter’s actual participation in the transportation of the goods.
Such document, validly entered, stands as the law among the shipper, carrier
and the consignee, who are all bound by the terms stated therein. Besides, a
carrier’s valid claim after it fulfilled its obligation cannot just be rejected by
the named consignee upon a simple denial that it ever consented to be a party
in a contract of affreightment, or that it ever participated in the preparation of
the bill of lading. As against Shin Yang’s bare denials, the bill of lading is
the sufficient preponderance of evidence required to prove MOF’s claim.
MOF maintains that Shin Yang was the one that supplied all the details in the
bill of lading and acquiesced to be named consignee of the shipment on a
‘Freight Collect’ basis.
Lastly, MOF claims that even if Shin Yang never gave its consent, it cannot
avoid its obligation to pay, because it never objected to being named as the
consignee in the bill of lading and that it only protested when the shipment
arrived in the Philippines, presumably due to a botched transaction between
it and Halla Trading Co. Furthermore, Shin Yang’s letters asking for the
refund of container deposits highlight the fact that it was aware of the
shipment and that it undertook preparations for the intended release of the
shipment.
Respondent’s Arguments
Echoing the CA decision, Shin Yang insists that MOF has no evidence to
prove that it consented to take part in the contract of affreightment. Shin
Yang argues that MOF miserably failed to present any evidence to prove that
it was the one that made preparations for the subject shipment, or that it is an
‘actual shipping practice’ that forwarders/consolidators as consignees are the
ones that provide carriers details and information on the bills of lading.
Shin Yang contends that a bill of lading is essentially a contract between the
shipper and the carrier and ordinarily, the shipper is the one liable for the
freight charges. A consignee, on the other hand, is initially a stranger to the
bill of lading and can be liable only when the bill of lading specifies that the
charges are to be paid by the consignee. This liability arises from either a)
the contract of agency between the shipper/consignor and the consignee; or
b) the consignee’s availment of the stipulation pour autrui drawn up by and
between the shipper/ consignor and carrier upon the consignee’s demand that
the goods be delivered to it. Shin Yang contends that the fact that its name
was mentioned as the consignee of the cargoes did not make it automatically
liable for the freightage because it never benefited from the shipment. It
never claimed or accepted the goods, it was not the shipper’s agent, it was
not aware of its designation as consignee and the original bill of lading was
never endorsed to it.
Issue
The issue for resolution is whether a consignee, who is not a signatory to the
bill of lading, is bound by the stipulations thereof. Corollarily, whether
respondent who was not an agent of the shipper and who did not make any
demand for the fulfillment of the stipulations of the bill of lading drawn in its
favor is liable to pay the corresponding freight and handling charges.
Our Ruling
Since the CA and the trial courts arrived at different conclusions, we are
constrained to depart from the general rule that only errors of law may be
raised in a Petition for Review on Certiorari under Rule 45 of the Rules of
Court and will review the evidence presented.11
The bill of lading is oftentimes drawn up by the shipper/consignor and the
carrier without the intervention of the consignee. However, the latter can be
bound by the stipulations of the bill of lading when a) there is a relation of
agency between the shipper or consignor and the consignee or b) when the
consignee demands fulfillment of the stipulation of the bill of lading which
was drawn up in its favor.12
In Keng Hua Paper Products Co., Inc. v. Court of Appeals,13 we held that
once the bill of lading is received by the consignee who does not object to
any terms or stipulations contained therein, it constitutes as an acceptance of
the contract and of all of its terms and conditions, of which the acceptor has
actual or constructive notice.1avvphi1
In Mendoza v. Philippine Air Lines, Inc.,14 the consignee sued the carrier for
damages but nevertheless claimed that he was never a party to the contract of
transportation and was a complete stranger thereto. In debunking Mendoza’s
contention, we held that:
x x x First, he insists that the articles of the Code of Commerce should be
applied; that he invokes the provisions of said Code governing the
obligations of a common carrier to make prompt delivery of goods given to it
under a contract of transportation. Later, as already said, he says that he was
never a party to the contract of transportation and was a complete stranger to
it, and that he is now suing on a tort or a violation of his rights as a stranger
(culpa aquiliana). If he does not invoke the contract of carriage entered into
with the defendant company, then he would hardly have any leg to stand on.
His right to prompt delivery of the can of film at the Pili Air Port stems and
is derived from the contract of carriage under which contract, the PAL
undertook to carry the can of film safely and to deliver it to him promptly.
Take away or ignore that contract and the obligation to carry and to deliver
and right to prompt delivery disappear. Common carriers are not obligated by
law to carry and to deliver merchandise, and persons are not vested with the
right to prompt delivery, unless such common carriers previously assume the
obligation. Said rights and obligations are created by a specific contract
entered into by the parties. In the present case, the findings of the trial
court which as already stated, are accepted by the parties and which we
must accept are to the effect that the LVN Pictures Inc. and Jose
Mendoza on one side, and the defendant company on the other, entered
into a contract of transportation (p. 29, Rec. on Appeal). One
interpretation of said finding is that the LVN Pictures Inc. through
previous agreement with Mendoza acted as the latter's agent. When he
negotiated with the LVN Pictures Inc. to rent the film 'Himala ng
Birhen' and show it during the Naga town fiesta, he most probably
authorized and enjoined the Picture Company to ship the film for him
on the PAL on September 17th. Another interpretation is that even if the
LVN Pictures Inc. as consignor of its own initiative, and acting
independently of Mendoza for the time being, made Mendoza a
consignee. [Mendoza made himself a party to the contract of
transportaion when he appeared at the Pili Air Port armed with the
copy of the Air Way Bill (Exh. 1) demanding the delivery of the
shipment to him.] The very citation made by appellant in his memorandum
supports this view. Speaking of the possibility of a conflict between the order
of the shipper on the one hand and the order of the consignee on the other, as
when the shipper orders the shipping company to return or retain the goods and cargo to their respective destinations before banging said victim to the
shipped while the consignee demands their delivery, Malagarriga in his book Lepanto Hospital where he expired.
Codigo de Comercio Comentado, Vol. 1, p. 400, citing a decision of the
Argentina Court of Appeals on commercial matters, cited by Tolentino in
On the other hand, petitioners alleged that they had observed and continued
Vol. II of his book entitled 'Commentaries and Jurisprudence on the
to observe the extraordinary diligence required in the operation of the
Commercial Laws of the Philippines' p. 209, says that the right of the
transportation company and the supervision of the employees, even as they
shipper to countermand the shipment terminates when the consignee or
add that they are not absolute insurers of the safety of the public at large.
legitimate holder of the bill of lading appears with such bill of lading
Further, it was alleged that it was the victim's own carelessness and
before the carrier and makes himself a party to the contract. Prior to
negligence which gave rise to the subject incident, hence they prayed for the
that time he is a stranger to the contract.
dismissal of the complaint plus an award of damages in their favor by way of
a counterclaim.
Still another view of this phase of the case is that contemplated in Art.
1257, paragraph 2, of the old Civil Code (now Art. 1311, second
On July 29, 1988, the trial court rendered a decision, effectively in favor of
paragraph) which reads thus:
petitioners, with this decretal portion:

‘Should the contract contain any stipulation in favor of a third person,

IN VIEW OF ALL THE FOREGOING, judgment is hereby
he may demand its fulfillment provided he has given notice of his
pronounced that Pedrito Cudiamat was negligent, which negligence
acceptance to the person bound before the stipulation has been revoked.'
was the proximate cause of his death. Nonetheless, defendants in
equity, are hereby ordered to pay the heirs of Pedrito Cudiamat the
Here, the contract of carriage between the LVN Pictures Inc. and the sum of P10,000.00 which approximates the amount defendants
defendant carrier contains the stipulations of delivery to Mendoza as initially offered said heirs for the amicable settlement of the case. No
consignee. His demand for the delivery of the can of film to him at the costs.
Pili Air Port may be regarded as a notice of his acceptance of the
stipulation of the delivery in his favor contained in the contract of
Not satisfied therewith, private respondents appealed to the Court of Appeals
carriage and delivery. In this case he also made himself a party to the
which, in a decision 3 in CA-G.R. CV No. 19504 promulgated on August 14,
contract, or at least has come to court to enforce it. His cause of action
1990, set aside the decision of the lower court, and ordered petitioners to pay
must necessarily be founded on its breach.15 (Emphasis Ours)
private respondents:

In sum, a consignee, although not a signatory to the contract of carriage

1. The sum of Thirty Thousand (P30,000.00) Pesos by way of
between the shipper and the carrier, becomes a party to the contract by
indemnity for death of the victim Pedrito Cudiamat;
reason of either a) the relationship of agency between the consignee and the
2. The sum of Twenty Thousand (P20,000.00) by way of moral
shipper/ consignor; b) the unequivocal acceptance of the bill of lading
damages;
delivered to the consignee, with full knowledge of its contents or c)
3. The sum of Two Hundred Eighty Eight Thousand
availment of the stipulation pour autrui, i.e., when the consignee, a third
(P288,000.00) Pesos as actual and compensatory damages;
person, demands before the carrier the fulfillment of the stipulation made by
4. The costs of this suit. 4
the consignor/shipper in the consignee’s favor, specifically the delivery of
the goods/cargoes shipped.16
Petitioners' motion for reconsideration was denied by the Court of Appeals in
its resolution dated October 4, 1990, 5 hence this petition with the central
In the instant case, Shin Yang consistently denied in all of its pleadings that issue herein being whether respondent court erred in reversing the decision
it authorized Halla Trading, Co. to ship the goods on its behalf; or that it got of the trial court and in finding petitioners negligent and liable for the
hold of the bill of lading covering the shipment or that it demanded the damages claimed.
release of the cargo. Basic is the rule in evidence that the burden of proof lies
upon him who asserts it, not upon him who denies, since, by the nature of
It is an established principle that the factual findings of the Court of Appeals
things, he who denies a fact cannot produce any proof of it. 17 Thus, MOF has
as a rule are final and may not be reviewed by this Court on appeal.
the burden to controvert all these denials, it being insistent that Shin Yang
However, this is subject to settled exceptions, one of which is when the
asserted itself as the consignee and the one that caused the shipment of the
findings of the appellate court are contrary to those of the trial court, in
goods to the Philippines.
which case a reexamination of the facts and evidence may be undertaken. 6

In civil cases, the party having the burden of proof must establish his case by
preponderance of evidence,18 which means evidence which is of greater
weight, or more convincing than that which is offered in opposition to it. 19
Here, MOF failed to meet the required quantum of proof. Other than
presenting the bill of lading, which, at most, proves that the carrier
acknowledged receipt of the subject cargo from the shipper and that the
consignee named is to shoulder the freightage, MOF has not adduced any
other credible evidence to strengthen its cause of action. It did not even
present any witness in support of its allegation that it was Shin Yang which
furnished all the details indicated in the bill of lading and that Shin Yang
consented to shoulder the shipment costs. There is also nothing in the records
which would indicate that Shin Yang was an agent of Halla Trading Co. or
that it exercised any act that would bind it as a named consignee. Thus, the
CA correctly dismissed the suit for failure of petitioner to establish its cause
against respondent.
WHEREFORE, the petition is DENIED. The assailed Decision of the Court
of Appeals dated March 22, 2006 dismissing petitioner’s complaint and the
Resolution dated May 25, 2006 denying the motion for reconsideration are
AFFIRMED
DANGWA TRANSPORTATION CO., INC. and THEODORE
LARDIZABAL y MALECDAN, petitioners, vs.
COURT OF APPEALS, INOCENCIA CUDIAMAT, EMILIA
CUDIAMAT BANDOY, FERNANDO CUDLAMAT, MARRIETA
CUDIAMAT, NORMA CUDIAMAT, DANTE CUDIAMAT, SAMUEL
CUDIAMAT and LIGAYA CUDIAMAT, all Heirs of the late Pedrito
Cudiamat represented by Inocencia Cudiamat, respondents.
In the case at bar, the trial court and the Court of Appeal have discordant
positions as to who between the petitioners an the victim is guilty of
negligence. Perforce, we have had to conduct an evaluation of the evidence
in this case for the prope calibration of their conflicting factual findings and
legal conclusions.
The lower court, in declaring that the victim was negligent, made the
following findings:
This Court is satisfied that Pedrito Cudiamat was
negligent in trying to board a moving vehicle,
especially with one of his hands holding an umbrella.
And, without having given the driver or the conductor
any indication that he wishes to board the bus. But
defendants can also be found wanting of the necessary
diligence. In this connection, it is safe to assume that
when the deceased Cudiamat attempted to board
defendants' bus, the vehicle's door was open instead of
being closed. This should be so, for it is hard to
believe that one would even attempt to board a vehicle
(i)n motion if the door of said vehicle is closed. Here
lies the defendant's lack of diligence. Under such
circumstances, equity demands that there must be
something given to the heirs of the victim to assuage
their feelings. This, also considering that initially,
defendant common carrier had made overtures to
amicably settle the case. It did offer a certain monetary
consideration to the victim's heirs. 7

On May 13, 1985, private respondents filed a complaint 1 for damages

However, respondent court, in arriving at a different opinion, declares that:
against petitioners for the death of Pedrito Cudiamat as a result of a vehicular
accident which occurred on March 25, 1985 at Marivic, Sapid, Mankayan,
Benguet. Among others, it was alleged that on said date, while petitioner From the testimony of appellees'own witness in the
Theodore M. Lardizabal was driving a passenger bus belonging to petitioner person of Vitaliano Safarita, it is evident that the
corporation in a reckless and imprudent manner and without due regard to subject bus was at full stop when the victim Pedrito
traffic rules and regulations and safety to persons and property, it ran over its Cudiamat boarded the same as it was precisely on this
passenger, Pedrito Cudiamat. However, instead of bringing Pedrito instance where a certain Miss Abenoja alighted from
immediately to the nearest hospital, the said driver, in utter bad faith and the bus. Moreover, contrary to the assertion of the
without regard to the welfare of the victim, first brought his other passengers appellees, the victim did indicate his intention to board
the bus as can be seen from the testimony of the said
 witness when he declared that Pedrito Cudiamat was
no longer walking and made a sign to board the bus
when the latter was still at a distance from him. It was
at the instance when Pedrito Cudiamat was closing his
umbrella at the platform of the bus when the latter
made a sudden jerk movement (as) the driver
commenced to accelerate the bus.
Evidently, the incident took place due to the gross
negligence of the appellee-driver in prematurely
stepping on the accelerator and in not waiting for the
passenger to first secure his seat especially so when
we take into account that the platform of the bus was
at the time slippery and wet because of a drizzle. The
defendants-appellees utterly failed to observe their
duty and obligation as common carrier to the end that
they should observe extra-ordinary diligence in the
vigilance over the goods and for the safety of the
passengers transported by them according to the
circumstances of each case (Article 1733, New Civil
Code). 8
After a careful review of the evidence on record, we find no reason to disturb
the above holding of the Court of Appeals. Its aforesaid findings are
supported by the testimony of petitioners' own witnesses. One of them,
Virginia Abalos, testified on cross-examination as follows:
Q It is not a fact Madam witness, that at bunkhouse
54, that is before the place of the incident, there is a
crossing?
A The way going to the mines but it is not being pass(ed)
by the bus.
Q And the incident happened before bunkhouse 56, is that
not correct?
A It happened between 54 and 53 bunkhouses. 9
The bus conductor, Martin Anglog, also declared:
Q When you arrived at Lepanto on March 25, 1985, will
you please inform this Honorable Court if there was anv
unusual incident that occurred?
A When we delivered a baggage at Marivic because a
person alighted there between Bunkhouse 53 and 54.
Q What happened when you delivered this passenger at
this particular place in Lepanto?
A When we reached the place, a passenger alighted and I
signalled my driver. When we stopped we went out
because I saw an umbrella about a split second and I
signalled again the driver, so the driver stopped and we
went down and we saw Pedrito Cudiamat asking for help
because he was lying down.
Q How far away was this certain person, Pedrito
Cudiamat, when you saw him lying down — from the bus
how far was he?
A It is about two to three meters.
Q On what direction of the bus was he found about three
meters from the bus, was it at the front or at the back?
A At the back, sir. 10 (Emphasis supplied.)
The foregoing testimonies show that the place of the accident and the place
where one of the passengers alighted were both between Bunkhouses 53 and
54, hence the finding of the Court of Appeals that the bus was at full stop
when the victim boarded the same is correct. They further confirm the
conclusion that the victim fell from the platform of the bus when it suddenly
accelerated forward and was run over by the rear right tires of the vehicle, as
shown by the physical evidence on where he was thereafter found in relation
to the bus when it stopped. Under such circumstances, it cannot be said that
the deceased was guilty of negligence.
The contention of petitioners that the driver and the conductor had no
knowledge that the victim would ride on the bus, since the latter had
supposedly not manifested his intention to board the same, does not merit
consideration. When the bus is not in motion there is no necessity for a
person who wants to ride the same to signal his intention to board. A public
utility bus, once it stops, is in effect making a continuous offer to bus riders.
Hence, it becomes the duty of the driver and the conductor, every time the
bus stops, to do no act that would have the effect of increasing the peril to a
passenger while he was attempting to board the same. The premature
acceleration of the bus in this case was a breach of such duty. 11
It is the duty of common carriers of passengers, including common carriers
by railroad train, streetcar, or motorbus, to stop their conveyances a
reasonable length of time in order to afford passengers an opportunity to
board and enter, and they are liable for injuries suffered by boarding
passengers resulting from the sudden starting up or jerking of their
conveyances while they are doing so. 12
Further, even assuming that the bus was moving, the act of the victim in
boarding the same cannot be considered negligent under the circumstances.
As clearly explained in the testimony of the aforestated witness for
petitioners, Virginia Abalos, th bus had "just started" and "was still in slow
motion" at the point where the victim had boarded and was on its platform.
13
It is not negligence per se, or as a matter of law, for one attempt to board a
train or streetcar which is moving slowly. 14 An ordinarily prudent person
would have made the attempt board the moving conveyance under the same
or similar circumstances. The fact that passengers board and alight from
slowly moving vehicle is a matter of common experience both the driver and
conductor in this case could not have been unaware of such an ordinary
practice.
The victim herein, by stepping and standing on the platform of the bus, is
already considered a passenger and is entitled all the rights and protection
pertaining to such a contractual relation. Hence, it has been held that the duty
which the carrier passengers owes to its patrons extends to persons boarding
cars as well as to those alighting therefrom. 15
Common carriers, from the nature of their business and reasons of public
policy, are bound to observe extraordina diligence for the safety of the
passengers transported by the according to all the circumstances of each case.
16 A common carrier is bound to carry the passengers safely as far as human
care and foresight can provide, using the utmost diligence very cautious
persons, with a due regard for all the circumstances. 17
It has also been repeatedly held that in an action based on a contract of
carriage, the court need not make an express finding of fault or negligence on
the part of the carrier in order to hold it responsible to pay the damages
sought by the passenger. By contract of carriage, the carrier assumes the
express obligation to transport the passenger to his destination safely and
observe extraordinary diligence with a due regard for all the circumstances,
and any injury that might be suffered by the passenger is right away
attributable to the fault or negligence of the carrier. This is an exception to
the general rule that negligence must be proved, and it is therefore incumbent
upon the carrier to prove that it has exercised extraordinary diligence as
prescribed in Articles 1733 and 1755 of the Civil Code. 18
Moreover, the circumstances under which the driver and the conductor failed
to bring the gravely injured victim immediately to the hospital for medical
treatment is a patent and incontrovertible proof of their negligence. It defies
understanding and can even be stigmatized as callous indifference. The
evidence shows that after the accident the bus could have forthwith turned at
Bunk 56 and thence to the hospital, but its driver instead opted to first
proceed to Bunk 70 to allow a passenger to alight and to deliver a
refrigerator, despite the serious condition of the victim. The vacuous reason
given by petitioners that it was the wife of the deceased who caused the delay
was tersely and correctly confuted by respondent court:
... The pretension of the appellees that the delay was
due to the fact that they had to wait for about twenty
minutes for Inocencia Cudiamat to get dressed
deserves scant consideration. It is rather scandalous
and deplorable for a wife whose husband is at the
verge of dying to have the luxury of dressing herself
up for about twenty minutes before attending to help
her distressed and helpless husband. 19
Further, it cannot be said that the main intention of petitioner Lardizabal in
going to Bunk 70 was to inform the victim's family of the mishap, since it
was not said bus driver nor the conductor but the companion of the victim
who informed his family thereof. 20 In fact, it was only after the refrigerator
was unloaded that one of the passengers thought of sending somebody to the
house of the victim, as shown by the testimony of Virginia Abalos again, to
wit:
Q Why, what happened to your refrigerator at that
particular time?
A I asked them to bring it down because that is the
nearest place to our house and when I went down and
 asked somebody to bring down the refrigerator, I also After trial, the Regional Trial Court of Manila, Branch 30, 1 adjudged KAL
asked somebody to call the family of Mr. Cudiamat. liable for damages, disposing as follows:

COURT: WHEREFORE, in view of the foregoing

consideration, judgment is hereby rendered sentencing
the defendant Korean Air Lines to pay plaintiff Juanito
Q Why did you ask somebody to call the family of Mr.
C. Lapuz the following:
Cudiamat?

1. The amount of TWO HUNDRED SEVENTY-TWO

A Because Mr. Cudiamat met an accident, so I ask
THOUSAND ONE HUNDRED SIXTY
somebody to call for the family of Mr. Cudiamat.
(P272,160.00) PESOS as actual/compensatory
damages, with legal interest thereon from the date of
Q But nobody ask(ed) you to call for the family of Mr. the filing of the complaint until fully paid.
Cudiamat?
2. The sum of TWENTY-FIVE THOUSAND
A No sir. 21 (P25,000.00) PESOS as and for attorney's fees; and

With respect to the award of damages, an oversight was, however, committed 3. The costs of suit.
by respondent Court of Appeals in computing the actual damages based on
the gross income of the victim. The rule is that the amount recoverable by the
The case is hereby dismissed with respect to defendant
heirs of a victim of a tort is not the loss of the entire earnings, but rather the
Pan Pacific Overseas Recruiting Services, Inc.
loss of that portion of the earnings which the beneficiary would have
received. In other words, only net earnings, not gross earnings, are to be
considered, that is, the total of the earnings less expenses necessary in the The counterclaims and cross-claim of defendant
creation of such earnings or income and minus living and other incidental Korean Air Lines Co., Ltd. are likewise dismissed.
expenses. 22
On appeal, this decision was modified by the Court of Appeals 2 as follows:
We are of the opinion that the deductible living and other expense of the
deceased may fairly and reasonably be fixed at P500.00 a month or
WHEREFORE, in view of all the
P6,000.00 a year. In adjudicating the actual or compensatory damages,
foregoing, the appealed judgment is hereby
respondent court found that the deceased was 48 years old, in good health
AFFIRMED with the following
with a remaining productive life expectancy of 12 years, and then earning
modifications: the amount of actual
P24,000.00 a year. Using the gross annual income as the basis, and
damages and compensatory damages is
multiplying the same by 12 years, it accordingly awarded P288,000.
reduced to P60,000.00 and defendant-
Applying the aforestated rule on computation based on the net earnings, said
appellant is hereby ordered to pay plaintiff-
award must be, as it hereby is, rectified and reduced to P216,000.00.
appellant the sum of One Hundred
However, in accordance with prevailing jurisprudence, the death indemnity
Thousand Pesos (P100,000.00) by way of
is hereby increased to P50,000.00. 23
moral and exemplary damages, at 6%
interest per annum from the date of the
WHEREFORE, subject to the above modifications, the challenged judgment filing of the Complaint until fully paid.
and resolution of respondent Court of Appeals are hereby AFFIRMED in all
other respects.SO ORDERED.
KAL and Lapuz filed their respective motions for reconsideration, which
were both denied for lack of merit. Hence, the present petitions for review
KOREAN AIRLINES CO., LTD., petitioner, which have been consolidated because of the identity of the parties and the
vs. similarity of the issues.
COURT OF APPEALS and JUANITO C. LAPUZ, respondents.
In G. R. No. 114061, KAL assails the decision of the appellate court on the
G.R. No. 113842 August 3, 1994 following grounds:

JUANITO C. LAPUZ, petitioner, 1. That the Court of Appeals erred in

vs. concluding that petitioner committed a
COURT OF APPEALS and KOREAN AIRLINES CO., LTD., breach of contract of carriage
respondents. notwithstanding lack of proper, competent
and sufficient evidence of the existence of
such contract.
Sometime in 1980, Juanito C. Lapuz, an automotive electrician, was
contracted for employment in Jeddah, Saudi Arabia, for a period of one year
through Pan Pacific Overseas Recruiting Services, Inc. Lapuz was supposed 2. That the Court of Appeals erred in not
to leave on November 8, 1980, via Korean Airlines. Initially, he was "wait- according the proper evidentiary weight to
listed," which meant that he could only be accommodated if any of the some evidence presented and the fact that
confirmed passengers failed to show up at the airport before departure. When private respondent did not have any
two of such passengers did not appear, Lapuz and another person by the boarding pass to prove that he was allowed
name of Perico were given the two unclaimed seats. to board and to prove that his airline ticket
was confirmed.
According to Lapuz, he was allowed to check in with one suitcase and one
shoulder bag at the check-in counter of KAL. He passed through the customs 3. That the Court of Appeals erred in
and immigration sections for routine check-up and was cleared for departure concluding that the standby passenger
as Passenger No. 157 of KAL Flight No. KE 903. Together with the other status of private respondent Lapuz was
passengers, he rode in the shuttle bus and proceeded to the ramp of the KAL changed to a confirmed status when his
aircraft for boarding. However, when he was at the third or fourth rung of the name was entered into the passenger
stairs, a KAL officer pointed to him and shouted "Down! Down!" He was manifest.
thus barred from taking the flight. When he later asked for another booking,
his ticket was canceled by KAL. Consequently, he was unable to report for
4. That the Court of Appeals abused its
his work in Saudi Arabia within the stipulated 2-week period and so lost his
discretion in awarding moral and
employment.
exemplary damages in the amount of
P100,000.00 in favor of private respondent
KAL, on the other hand, alleged that on November 8, 1980, Pan Pacific notwithstanding its lack of basis and
Recruiting Services Inc. coordinated with KAL for the departure of 30 private respondent did not state such
contract workers, of whom only 21 were confirmed and 9 were wait-listed amount in his complaint nor had private
passengers. The agent of Pan Pacific, Jimmie Joseph, after being informed respondent proven the said damages.
that there was a possibility of having one or two seats becoming available,
gave priority to Perico, who was one of the supervisors of the hiring
5. That the Court of Appeals erred in
company in Saudi Arabia. The other seat was won through lottery by Lapuz.
dismissing the counterclaims.
However, only one seat became available and so, pursuant to the earlier
agreement that Perico was to be given priority, he alone was allowed to
board.
 6. That the Court of Appeals erred in
dismissing the counterclaim of petitioner
against Pan Pacific.
7. That the Court of Appeals erred in ruling
that the 6% per annum legal interest on the
judgment shall be computed from the filing
of the complaint.
In G. R. No. 113842, Lapuz seeks: (a) the setting aside of the decision of the
Court of Appeals insofar as it modifies the award of damages; b) actual and
compensatory damages in the sum equivalent to 5 years' loss of earnings
based on the petitioner's monthly salary of 1,600 Saudi rials at the current
conversion rate plus the cost of baggage and personal belongings worth
P2,000 and the service fee of P3,000 paid to the recruiting agency, all with
legal interest from the filing of the complaint until fully paid; c) moral
damages of not less than P1 million and exemplary damages of not less than
P500,000.00, both with interest at 6% per annum from the filing of the
complaint; and d) attorney's fees in the sum equivalent to 30% of the award
of damages.
It is evident that the issues raised in these petitions relate mainly to the
correctness of the factual findings of the Court of Appeals and the award of
damages. The Court has consistently affirmed that the findings of fact of the
Court of Appeals and the other lower courts are as a rule binding upon it,
subject to certain exceptions. As nothing in the record indicates any of such
exceptions, the factual conclusions of the appellate court must be affirmed.
The status of Lapuz as standby passenger was changed to that of a confirmed
passenger when his name was entered in the passenger manifest of KAL for
its Flight No. KE 903. His clearance through immigration and customs
clearly shows that he had indeed been confirmed as a passenger of KAL in
that flight. KAL thus committed a breach of the contract of carriage between
them when it failed to bring Lapuz to his destination.
This Court has held that a contract to transport passengers is different in kind
and degree from any other contractual relation. 3 The business of the carrier
is mainly with the traveling public. It invites people to avail themselves of
the comforts and advantages it offers. The contract of air carriage generates a
relation attended with a public duty. Passengers have the right to be treated
by the carrier's employees with kindness, respect, courtesy and due
consideration. They are entitled to be protected against personal misconduct,
injurious language, indignities and abuses from such employees. 4 So it is
that any discourteous conduct on the part of these employees toward a
passenger gives the latter an action for damages against the carrier.
The breach of contract was aggravated in this case when, instead of
courteously informing Lapuz of his being a "wait-listed" passenger, a KAL
officer rudely shouted "Down! Down!" while pointing at him, thus causing
him embarrassment and public humiliation.
KAL argues that "the evidence of confirmation of a chance passenger status
is not through the entry of the name of a chance passenger in the passenger
manifest nor the clearance from the Commission on Immigration and
Deportation, because they are merely means of facilitating the boarding of a
chance passenger in case his status is confirmed." We are not persuaded.
The evidence presented by Lapuz shows that he had indeed checked in at the
departure counter, passed through customs and immigration, boarded the
shuttle bus and proceeded to the ramp of KAL's aircraft. In fact, his baggage
had already been loaded in KAL's aircraft, to be flown with him to Jeddah.
The contract of carriage between him and KAL had already been perfected
when he was summarily and insolently prevented from boarding the aircraft.
KAL's allegation that the respondent court abused its discretion in awarding
moral and exemplary damages is also not tenable.
The Court of Appeals granted moral and exemplary damages because:
The findings of the court a quo that the
defendant-appellant has committed breach
of contract of carriage in bad faith and in
wanton, disregard of plaintiff-appellant's
rights as passenger laid the basis and
justification of an award for moral
damages.
xxxx
In the instant case, we find that defendant-
appellant Korean Air Lines acted in a
wanton, fraudulent, reckless, oppressive or
malevolent manner when it "bumped off"
plaintiff-appellant on November 8, 1980,
and in addition treated him rudely and
arrogantly as a "patay gutom na contract
worker fighting Korean Air Lines," which
clearly shows malice and bad faith, thus
entitling plaintiff-appellant to moral
damages.
xxxx
Considering that the plaintiff-appellant's
entitlement to moral damages has been
fully established by oral and documentary
evidence, exemplary damages may be
awarded. In fact, exemplary damages may
be awarded, even though not so expressly
pleaded in the complaint (Kapoe vs. Masa,
134 SCRA 231). By the same token, to
provide an example for the public good, an
award of exemplary damages is also proper
(Armovit vs. Court of Appeals, supra).
On the other hand, Lapuz's claim that the award of P100,000.00 as moral and
exemplary damages is inadequate is not acceptable either. His prayer for
moral damages of not less than P1 million and exemplary damages of not
less than P500,000.00 is overblown.
The well-entrenched principle is that moral damages depend upon the
discretion of the court based on the circumstances of each case. 5 This
discretion is limited by the principle that the "amount awarded should not be
palpably and scandalously excessive" as to indicate that it was the result of
prejudice or corruption on the part of the trial court. 6 Damages are not
intended to enrich the complainant at the expense of the defendant. They are
awarded only to alleviate the moral suffering that the injured party had
undergone by reason of the defendant's culpable action. 7 There is no hard-
and-fast rule in the determination of what would be a fair amount of moral
damages since each case must be governed by its own peculiar facts.
A review of the record of this case shows that the injury suffered by Lapuz is
not so serious or extensive as to warrant an award of P1.5 million. The
assessment of P100,000 as moral and exemplary damages in his favor is, in
our view, reasonable and realistic.
Lapuz likewise claims that the respondent court could not rule upon the
propriety of the award of actual damages because it had not been assigned as
an error by KAL. Not so. The rule is that only errors specifically assigned
and properly argued in the brief will be considered except errors affecting
jurisdiction over the subject matter and plain as well as clerical errors. 8 But
this is not without qualification for, as the Court held in Vda. de Javellana vs.
Court of Appeals: 9
. . . [T]he Court is clothed with ample
authority to review matters, even if they are
not assigned as errors in their appeal, if it
finds that their consideration is necessary
in arriving at a just decision of the case.
10
A similar pronouncement was made in Baquiran vs. Court of Appeals in
this wise:
Issues, though not specifically raised in the
pleading in the appellate court, may, in the
interest of justice, be properly considered
by said court in deciding a case, if they are
questions raised in the trial court and are
matters of record having some bearing on
the issue submitted which the parties failed
to raise or the lower court ignored.
The Court of Appeals was therefore justified in decreasing the award of
actual damages even if the issue was not assigned as an error by KAL.
Consideration of this question was necessary for the just and complete
resolution of the present case. Furthermore, there was enough evidence to
warrant the reduction of the original award, as the challenged decision
correctly observed:
A perusal of the plaintiff-appellant's
contract of employment shows that the
effectivity of the contract is for only one
year, renewable every year for five years.
Although plaintiff-appellant intends to
renew his contract, such renewal will still
be subject to his foreign employer.
Plaintiff-appellant had not yet started
working with his foreign employer, hence,
there can be no basis as to whether his
contract will be renewed by his foreign
employer or not. Thus, the damages
representing the loss of earnings of
plaintiff-appellant in the renewal of the
 contract of employment is at most
speculative. Damages may not be awarded
on the basis of speculation or conjecture
(Gachalian vs. Delim, 203 SCRA 126).
Hence, defendant-appellant's liability is
limited to the one year contract only.
Plaintiff-appellant is, therefore, entitled
only to his lost earnings for one year, i.e.,
P60,000.00, which is 1/5 of P300,000.00,
the total amount of actual damages,
representing lost earnings for five years
prayed for in the Complaint.
Plaintiff-appellant's contention that in
computing his lost earnings, the current
rate of the Saudi Rial to the Philippine Peso
at the time of payment should be used, is
untenable, considering that in his
Complaint, plaintiff-appellant has
quantified in Philippine Peso his lost
earnings for five years.
We disagree with the respondent court, however, on the date when the legal
interest should commence to run. The rule is that the legal interest of six
percent (6%) on the amounts adjudged in favor of Lapuz should resume from
the time of the rendition of the trial court's decision instead of November 28,
1980, the date of the filing of the complaint.
On this matter, the Court has held:
If suit were for payment of a definite sum
of money, the contention might be tenable.
However, if it is for damages, unliquidated
and not known until definitely ascertained,
assessed and determined by the courts after
proof, interest should be from the date of
the decision. 11
xxxx
The obligation to pay interest on a sum
filed in a judgment exists from the date of
the sentence, when so declared; for until
the net amount of the debtor's liability has
been determined, he cannot he considered
delinquent in the fulfillment of his
obligation to pay the debt with interest
thereon. 12
Finally, we find that the respondent court did not err in sustaining the trial
court's dismissal of KAL's counterclaim against Pan Pacific Overseas
Recruiting Services Inc., whose responsibility ended with the confirmation
by KAL of Lapuz as its passenger in its Flight No. 903.
This is still another case of the maltreatment of our overseas contract
workers, this time by the airline supposed to bring the passenger to his
foreign assignment. Our OCW's sacrifice much in seeking employment
abroad, where they are deprived of the company of their loved ones, the
direct protection of our laws, and the comfort of our own native culture and
way of life. This Court shall exert every effort to vindicate their rights when
they are abused and shall accord them the commensurate reparation of their
injuries consistent with their dignity and worth as members of the working
class.
WHEREFORE, the appealed judgment is AFFIRMED, but with the
modification that the legal interest on the damages awarded to private
respondent should commence from the date of the decision of the trial court
on November 14, 1990. The parties shall bear their own costs.SO
ORDERED.
LIGHT RAIL TRANSIT AUTHORITY & RODOLFO ROMAN,
petitioners,
vs.
MARJORIE NAVIDAD, Heirs of the Late NICANOR NAVIDAD &
PRUDENT SECURITY AGENCY, respondents.
The case before the Court is an appeal from the decision and resolution of the
Court of Appeals, promulgated on 27 April 2000 and 10 October 2000,
respectively, in CA-G.R. CV No. 60720, entitled "Marjorie Navidad and
Heirs of the Late Nicanor Navidad vs. Rodolfo Roman, et. al.," which has
modified the decision of 11 August 1998 of the Regional Trial Court, Branch
266, Pasig City, exonerating Prudent Security Agency (Prudent) from
liability and finding Light Rail Transit Authority (LRTA) and Rodolfo
Roman liable for damages on account of the death of Nicanor Navidad.
On 14 October 1993, about half an hour past seven o’clock in the evening,
Nicanor Navidad, then drunk, entered the EDSA LRT station after
purchasing a "token" (representing payment of the fare). While Navidad was
standing on the platform near the LRT tracks, Junelito Escartin, the security
guard assigned to the area approached Navidad. A misunderstanding or an
altercation between the two apparently ensued that led to a fist fight. No
evidence, however, was adduced to indicate how the fight started or who,
between the two, delivered the first blow or how Navidad later fell on the
LRT tracks. At the exact moment that Navidad fell, an LRT train, operated
by petitioner Rodolfo Roman, was coming in. Navidad was struck by the
moving train, and he was killed instantaneously.
On 08 December 1994, the widow of Nicanor, herein respondent Marjorie
Navidad, along with her children, filed a complaint for damages against
Junelito Escartin, Rodolfo Roman, the LRTA, the Metro Transit
Organization, Inc. (Metro Transit), and Prudent for the death of her husband.
LRTA and Roman filed a counterclaim against Navidad and a cross-claim
against Escartin and Prudent. Prudent, in its answer, denied liability and
averred that it had exercised due diligence in the selection and supervision of
its security guards.
The LRTA and Roman presented their evidence while Prudent and Escartin,
instead of presenting evidence, filed a demurrer contending that Navidad had
failed to prove that Escartin was negligent in his assigned task. On 11 August
1998, the trial court rendered its decision; it adjudged:
"WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and
against the defendants Prudent Security and Junelito Escartin ordering the
latter to pay jointly and severally the plaintiffs the following:
"a) 1) Actual damages of P44,830.00;
2) Compensatory damages of P443,520.00;
3) Indemnity for the death of Nicanor Navidad in the sum of
P50,000.00;
"b) Moral damages of P50,000.00;
"c) Attorney’s fees of P20,000;
"d) Costs of suit.
"The complaint against defendants LRTA and Rodolfo Roman are dismissed
for lack of merit.
"The compulsory counterclaim of LRTA and Roman are likewise
dismissed."1
Prudent appealed to the Court of Appeals. On 27 August 2000, the appellate
court promulgated its now assailed decision exonerating Prudent from any
liability for the death of Nicanor Navidad and, instead, holding the LRTA
and Roman jointly and severally liable thusly:
"WHEREFORE, the assailed judgment is hereby MODIFIED, by
exonerating the appellants from any liability for the death of Nicanor
Navidad, Jr. Instead, appellees Rodolfo Roman and the Light Rail Transit
Authority (LRTA) are held liable for his death and are hereby directed to pay
jointly and severally to the plaintiffs-appellees, the following amounts:
a) P44,830.00 as actual damages;
b) P50,000.00 as nominal damages;
c) P50,000.00 as moral damages;
d) P50,000.00 as indemnity for the death of the
deceased; and
e) P20,000.00 as and for attorney’s fees."2
The appellate court ratiocinated that while the deceased might not have then
as yet boarded the train, a contract of carriage theretofore had already existed
when the victim entered the place where passengers were supposed to be
after paying the fare and getting the corresponding token therefor. In
exempting Prudent from liability, the court stressed that there was nothing to
link the security agency to the death of Navidad. It said that Navidad failed
to show that Escartin inflicted fist blows upon the victim and the evidence
merely established the fact of death of Navidad by reason of his having been
hit by the train owned and managed by the LRTA and operated at the time by
Roman. The appellate court faulted petitioners for their failure to present
expert evidence to establish the fact that the application of emergency brakes
could not have stopped the train.
The appellate court denied petitioners’ motion for reconsideration in its
resolution of 10 October 2000.
In their present recourse, petitioners recite alleged errors on the part of the
appellate court; viz:
"I.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED BY
DISREGARDING THE FINDINGS OF FACTS BY THE TRIAL COURT
"II.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN
FINDING THAT PETITIONERS ARE LIABLE FOR THE DEATH OF
NICANOR NAVIDAD, JR.
"III.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN
FINDING THAT RODOLFO ROMAN IS AN EMPLOYEE OF LRTA."3
Petitioners would contend that the appellate court ignored the evidence and
the factual findings of the trial court by holding them liable on the basis of a
sweeping conclusion that the presumption of negligence on the part of a
common carrier was not overcome. Petitioners would insist that Escartin’s
assault upon Navidad, which caused the latter to fall on the tracks, was an act
of a stranger that could not have been foreseen or prevented. The LRTA
would add that the appellate court’s conclusion on the existence of an
employer-employee relationship between Roman and LRTA lacked basis
because Roman himself had testified being an employee of Metro Transit
and not of the LRTA.
Respondents, supporting the decision of the appellate court, contended that a
contract of carriage was deemed created from the moment Navidad paid the
fare at the LRT station and entered the premises of the latter, entitling
Navidad to all the rights and protection under a contractual relation, and that
the appellate court had correctly held LRTA and Roman liable for the death
of Navidad in failing to exercise extraordinary diligence imposed upon a
common carrier.
Law and jurisprudence dictate that a common carrier, both from the nature of
its business and for reasons of public policy, is burdened with the duty of
exercising utmost diligence in ensuring the safety of passengers. 4 The Civil
Code, governing the liability of a common carrier for death of or injury to its
passengers, provides:
"Article 1755. A common carrier is bound to carry the passengers safely as
far as human care and foresight can provide, using the utmost diligence of
very cautious persons, with a due regard for all the circumstances.
"Article 1756. In case of death of or injuries to passengers, common carriers
are presumed to have been at fault or to have acted negligently, unless they
prove that they observed extraordinary diligence as prescribed in articles
1733 and 1755."
"Article 1759. Common carriers are liable for the death of or injuries to
passengers through the negligence or willful acts of the former’s employees,
although such employees may have acted beyond the scope of their authority
or in violation of the orders of the common carriers.
common carrier is not relieved of its responsibilities under the contract of
carriage.
Should Prudent be made likewise liable? If at all, that liability could only be
for tort under the provisions of Article 217612 and related provisions, in
conjunction with Article 2180,13 of the Civil Code. The premise, however,
for the employer’s liability is negligence or fault on the part of the employee.
Once such fault is established, the employer can then be made liable on the
basis of the presumption juris tantum that the employer failed to exercise
diligentissimi patris families in the selection and supervision of its
employees. The liability is primary and can only be negated by showing due
diligence in the selection and supervision of the employee, a factual matter
that has not been shown. Absent such a showing, one might ask further, how
then must the liability of the common carrier, on the one hand, and an
independent contractor, on the other hand, be described? It would be
solidary. A contractual obligation can be breached by tort and when the same
act or omission causes the injury, one resulting in culpa contractual and the
other in culpa aquiliana, Article 219414 of the Civil Code can well apply.15 In
fine, a liability for tort may arise even under a contract, where tort is that
which breaches the contract.16 Stated differently, when an act which
constitutes a breach of contract would have itself constituted the source of a
quasi-delictual liability had no contract existed between the parties, the
contract can be said to have been breached by tort, thereby allowing the rules
on tort to apply.17
Regrettably for LRT, as well as perhaps the surviving spouse and heirs of the
late Nicanor Navidad, this Court is concluded by the factual finding of the
Court of Appeals that "there is nothing to link (Prudent) to the death of
Nicanor (Navidad), for the reason that the negligence of its employee,
Escartin, has not been duly proven x x x." This finding of the appellate court
is not without substantial justification in our own review of the records of the
case.
There being, similarly, no showing that petitioner Rodolfo Roman himself is
guilty of any culpable act or omission, he must also be absolved from
liability. Needless to say, the contractual tie between the LRT and Navidad is
not itself a juridical relation between the latter and Roman; thus, Roman can
be made liable only for his own fault or negligence.
The award of nominal damages in addition to actual damages is untenable.
Nominal damages are adjudicated in order that a right of the plaintiff, which
has been violated or invaded by the defendant, may be vindicated or
recognized, and not for the purpose of indemnifying the plaintiff for any loss
suffered by him.18 It is an established rule that nominal damages cannot co-
exist with compensatory damages.19
WHEREFORE, the assailed decision of the appellate court is AFFIRMED
with MODIFICATION but only in that (a) the award of nominal damages is
DELETED and (b) petitioner Rodolfo Roman is absolved from liability. No
costs.

"This liability of the common carriers does not cease upon proof that they
exercised all the diligence of a good father of a family in the selection and
supervision of their employees."

"Article 1763. A common carrier is responsible for injuries suffered by a

passenger on account of the willful acts or negligence of other passengers or
of strangers, if the common carrier’s employees through the exercise of the
diligence of a good father of a family could have prevented or stopped the act
or omission."

The law requires common carriers to carry passengers safely using the
utmost diligence of very cautious persons with due regard for all
circumstances.5 Such duty of a common carrier to provide safety to its
passengers so obligates it not only during the course of the trip but for so
long as the passengers are within its premises and where they ought to be in
pursuance to the contract of carriage.6 The statutory provisions render a
common carrier liable for death of or injury to passengers (a) through the
negligence or wilful acts of its employees or b) on account of wilful acts or
negligence of other passengers or of strangers if the common carrier’s
employees through the exercise of due diligence could have prevented or
stopped the act or omission.7 In case of such death or injury, a carrier is
presumed to have been at fault or been negligent, and 8 by simple proof of
injury, the passenger is relieved of the duty to still establish the fault or
negligence of the carrier or of its employees and the burden shifts upon the
carrier to prove that the injury is due to an unforeseen event or to force
majeure.9 In the absence of satisfactory explanation by the carrier on how the
accident occurred, which petitioners, according to the appellate court, have
failed to show, the presumption would be that it has been at fault,10 an
exception from the general rule that negligence must be proved. 11

The foundation of LRTA’s liability is the contract of carriage and its

obligation to indemnify the victim arises from the breach of that contract by
reason of its failure to exercise the high diligence required of the common
carrier. In the discharge of its commitment to ensure the safety of passengers,
a carrier may choose to hire its own employees or avail itself of the services
of an outsider or an independent firm to undertake the task. In either case, the