You are on page 1of 43


[G.R. No. 122494. October 8, 1998]





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 petitioners 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

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 attorneys fees; and (d) to pay the cost of the suit. The trial court ruled:

Considering defendants 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 the 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 attorneys fees but affirmed
the trial courts 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.


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 carriers 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

A stipulation in the bill of lading limiting the common carriers 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 carriers 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 carriers 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

18. All claims for which the carrier may be liable shall be adjusted and settled on
the basis of the shippers 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 courts 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,

x x x Ong Yiu vs. Court of Appeals,, instructs us that contracts of

adhesion wherein one party imposes a ready-made form of contract on the other
x x x 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. 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 x x, 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 latters 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. x x x , 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 petitioners 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 consignee. x x x.

x x x 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 though
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.
(Underscoring 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 carriers
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 x x x, 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

The bill of lading in question confirms petitioners contention. To defeat the

carriers 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 the 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.


Regalado, (Acting Chief Justice), Melo, Puno, and Mendoza, JJ., concur.


MOF COMPANY, G.R. No. 172822




CARPIO,* J., Chai


- versus - LEONARDO-DE




CORPORATION, Promulgated:

Respondent. December 18,





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 Certiorari[1] 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), Hanjins 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 attorneys 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 defendants letters dated 09 May 2002 and 13 May
2002 (Exhibits 1 and 2, defendants 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 attorneys fees and

3. the cost of suit.


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 Blacks 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.


Defendant is liable to pay the sum of P57,646.00, with interest until fully paid,
attorneys 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.


Ruling of the Court of Appeals

Seeing the matter in a different light, the CA dismissed MOFs complaint and
refused to award any form of damages or attorneys 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 formers agent. (p. 43,

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

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 Homeowners 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
Resolution[10] dated May 25, 2006. Hence, this petition for review on certiorari.

Petitioners Arguments

In assailing the CAs 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 latters
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 carriers 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
Yangs bare denials, the bill of lading is the sufficient preponderance of evidence
required to prove MOFs 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 Yangs 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.

Respondents 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 consignees
availment of the stipulation pour autrui drawn up by and between the shipper/
consignor and carrier upon the consignees 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 shippers agent, it was not aware of its designation as
consignee and the original bill of lading was never endorsed to it.


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.

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 Mendozas 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 shipped while the consignee demands their delivery,
Malagarriga in his book Codigo de Comercio Comentado, Vol. 1, p. 400, citing a
decision of the Argentina Court of Appeals on commercial matters, cited by
Tolentino in Vol. II of his book entitled 'Commentaries and Jurisprudence on the
Commercial Laws of the Philippines' p. 209, says that the right of the shipper to
countermand the shipment terminates when the consignee or legitimate holder
of the bill of lading appears with such bill of lading before the carrier and makes
himself a party to the contract. Prior to that time he is a stranger to the contract.

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 paragraph) which reads

Should the contract contain any stipulation in favor of a third person, he may
demand its fulfillment provided he has given notice of his acceptance to the
person bound before the stipulation has been revoked.'

Here, the contract of carriage between the LVN Pictures Inc. and the defendant
carrier contains the stipulations of delivery to Mendoza as consignee. His
demand for the delivery of the can of film to him at the 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 carriage and delivery. In this case he also made
himself a party to the contract, or at least has come to court to enforce it. His
cause of action must necessarily be founded on its breach.[15] (Emphasis Ours)

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

the shipper and the carrier, becomes a party to the contract by reason of either a)
the relationship of agency between the consignee and the shipper/ consignor; b)
the unequivocal acceptance of the bill of lading delivered to the consignee, with
full knowledge of its contents or c) availment of the stipulation pour autrui, i.e.,
when the consignee, a third person, demands before the carrier the fulfillment of
the stipulation made by the consignor/shipper in the consignees favor,
specifically the delivery of the goods/cargoes shipped.[16]

In the instant case, Shin Yang consistently denied in all of its pleadings that it
authorized Halla Trading, Co. to ship the goods on its behalf; or that it got hold
of the bill of lading covering the shipment or that it demanded the 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 things, he who denies
a fact cannot produce any proof of it.[17] Thus, MOF has the burden to controvert
all these denials, it being insistent that Shin Yang asserted itself as the
consignee and the one that caused the shipment of the goods to the Philippines.

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 petitioners complaint and the
Resolution dated May 25, 2006 denying the motion for reconsideration

Republic of the Philippines


G.R. No. 95582 October 7, 1991


MALECDAN, petitioners,
Pedrito Cudiamat represented by Inocencia Cudiamat, respondents.

Francisco S. Reyes Law Office for petitioners.

Antonio C. de Guzman for private respondents.


On May 13, 1985, private respondents filed a complaint 1 for damages 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 Theodore M. Lardizabal
was driving a passenger bus belonging to petitioner corporation in a reckless and
imprudent manner and without due regard to traffic rules and regulations and
safety to persons and property, it ran over its passenger, Pedrito Cudiamat.
However, instead of bringing Pedrito immediately to the nearest hospital, the
said driver, in utter bad faith and without regard to the welfare of the victim, first
brought his other passengers and cargo to their respective destinations before
banging said victim to the Lepanto Hospital where he expired.

On the other hand, petitioners alleged that they had observed and continued to
observe the extraordinary diligence required in the operation of the
transportation company and the supervision of the employees, even as they add
that they are not absolute insurers of the safety of the public at large. Further, it
was alleged that it was the victim's own carelessness and negligence which gave
rise to the subject incident, hence they prayed for the dismissal of the complaint
plus an award of damages in their favor by way of a counterclaim.
On July 29, 1988, the trial court rendered a decision, effectively in favor of
petitioners, with this decretal portion:

IN VIEW OF ALL THE FOREGOING, judgment is hereby pronounced that Pedrito

Cudiamat was negligent, which negligence was the proximate cause of his death.
Nonetheless, defendants in equity, are hereby ordered to pay the heirs of Pedrito
Cudiamat the sum of P10,000.00 which approximates the amount defendants
initially offered said heirs for the amicable settlement of the case. No costs.


Not satisfied therewith, private respondents appealed to the Court of Appeals

which, in a decision 3 in CA-G.R. CV No. 19504 promulgated on August 14, 1990,
set aside the decision of the lower court, and ordered petitioners to pay private

1. The sum of Thirty Thousand (P30,000.00) Pesos by way of indemnity for death
of the victim Pedrito Cudiamat;

2. The sum of Twenty Thousand (P20,000.00) by way of moral damages;

3. The sum of Two Hundred Eighty Eight Thousand (P288,000.00) Pesos as actual
and compensatory damages;

4. The costs of this suit. 4

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 issue
herein being whether respondent court erred in reversing the decision of the trial
court and in finding petitioners negligent and liable for the damages claimed.

It is an established principle that the factual findings of the Court of Appeals as a

rule are final and may not be reviewed by this Court on appeal. However, this is
subject to settled exceptions, one of which is when the findings of the appellate
court are contrary to those of the trial court, in which case a reexamination of the
facts and evidence may be undertaken. 6
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

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

However, respondent court, in arriving at a different opinion, declares that:

From the testimony of appellees'own witness in the person of Vitaliano Safarita,

it is evident that the subject bus was at full stop when the victim Pedrito
Cudiamat boarded the same as it was precisely on this instance where a certain
Miss Abenoja alighted from the bus. Moreover, contrary to the assertion of the
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).

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

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.

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
asked somebody to call the family of Mr. Cudiamat.


Q Why did you ask somebody to call the family of Mr. Cudiamat?

A Because Mr. Cudiamat met an accident, so I ask somebody to call for the family
of Mr. Cudiamat.

Q But nobody ask(ed) you to call for the family of Mr. Cudiamat?

A No sir. 21

With respect to the award of damages, an oversight was, however, committed 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 heirs
of a victim of a tort is not the loss of the entire earnings, but rather the 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 creation of such earnings or
income and minus living and other incidental expenses. 22
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 P6,000.00 a
year. In adjudicating the actual or compensatory damages, respondent court
found that the deceased was 48 years old, in good health with a remaining
productive life expectancy of 12 years, and then earning P24,000.00 a year.
Using the gross annual income as the basis, and multiplying the same by 12
years, it accordingly awarded P288,000. Applying the aforestated rule on
computation based on the net earnings, said award must be, as it hereby is,
rectified and reduced to P216,000.00. However, in accordance with prevailing
jurisprudence, the death indemnity is hereby increased to P50,000.00. 23

WHEREFORE, subject to the above modifications, the challenged judgment and

resolution of respondent Court of Appeals are hereby AFFIRMED in all other


Melencio-Herrera (Chairperson), Paras, Padilla and Sarmiento, JJ., concur.

Republic of the Philippines


G.R. No. 114061 August 3, 1994

KOREAN AIRLINES CO., LTD., petitioner,


G.R. No. 113842 August 3, 1994

JUANITO C. LAPUZ, petitioner,


M.A. Aguinaldo and Associates for Korean Airlines Co., Ltd.

Camacho and Associates for Juanito Lapuz.


Sometime in 1980, Juanito C. Lapuz, an automotive electrician, was contracted

for employment in Jeddah, Saudi Arabia, for a period of one year through Pan
Pacific Overseas Recruiting Services, Inc. Lapuz was supposed to leave on
November 8, 1980, via Korean Airlines. Initially, he was "wait-listed," which
meant that he could only be accommodated if any of the confirmed passengers
failed to show up at the airport before departure. When two of such passengers
did not appear, Lapuz and another person by the name of Perico were given the
two unclaimed seats.

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 and
immigration sections for routine check-up and was cleared for departure as
Passenger No. 157 of KAL Flight No. KE 903. Together with the other passengers,
he rode in the shuttle bus and proceeded to the ramp of the KAL aircraft for
boarding. However, when he was at the third or fourth rung of the stairs, a KAL
officer pointed to him and shouted "Down! Down!" He was thus barred from
taking the flight. When he later asked for another booking, his ticket was
canceled by KAL. Consequently, he was unable to report for his work in Saudi
Arabia within the stipulated 2-week period and so lost his employment.

KAL, on the other hand, alleged that on November 8, 1980, Pan Pacific Recruiting
Services Inc. coordinated with KAL for the departure of 30 contract workers, of
whom only 21 were confirmed and 9 were wait-listed passengers. The agent of
Pan Pacific, Jimmie Joseph, after being informed that there was a possibility of
having one or two seats becoming available, gave priority to Perico, who was one
of the supervisors of the hiring company in Saudi Arabia. The other seat was won
through lottery by Lapuz. However, only one seat became available and so,
pursuant to the earlier agreement that Perico was to be given priority, he alone
was allowed to board.

After trial, the Regional Trial Court of Manila, Branch 30, 1 adjudged KAL liable
for damages, disposing as follows:

WHEREFORE, in view of the foregoing consideration, judgment is hereby

rendered sentencing the defendant Korean Air Lines to pay plaintiff Juanito C.
Lapuz the following:


SIXTY (P272,160.00) PESOS as actual/compensatory damages, with legal interest
thereon from the date of the filing of the complaint until fully paid.

2. The sum of TWENTY-FIVE THOUSAND (P25,000.00) PESOS as and for

attorney's fees; and

3. The costs of suit.

The case is hereby dismissed with respect to defendant Pan Pacific Overseas
Recruiting Services, Inc.

The counterclaims and cross-claim of defendant Korean Air Lines Co., Ltd. are
likewise dismissed.

On appeal, this decision was modified by the Court of Appeals 2 as follows:

WHEREFORE, in view of all the foregoing, the appealed judgment is hereby

AFFIRMED with the following modifications: the amount of actual damages and
compensatory damages is reduced to P60,000.00 and defendant-appellant is
hereby ordered to pay plaintiff-appellant the sum of One Hundred Thousand
Pesos (P100,000.00) by way of moral and exemplary damages, at 6% interest per
annum from the date of the filing of the Complaint until fully paid.
KAL and Lapuz filed their respective motions for reconsideration, which were
both denied for lack of merit. Hence, the present petitions for review which have
been consolidated because of the identity of the parties and the similarity of the

In G. R. No. 114061, KAL assails the decision of the appellate court on the
following grounds:

1. That the Court of Appeals erred in concluding that petitioner committed a

breach of contract of carriage notwithstanding lack of proper, competent and
sufficient evidence of the existence of such contract.

2. That the Court of Appeals erred in not according the proper evidentiary weight
to some evidence presented and the fact that private respondent did not have
any boarding pass to prove that he was allowed to board and to prove that his
airline ticket was confirmed.

3. That the Court of Appeals erred in concluding that the standby passenger
status of private respondent Lapuz was changed to a confirmed status when his
name was entered into the passenger manifest.

4. That the Court of Appeals abused its discretion in awarding moral and
exemplary damages in the amount of P100,000.00 in favor of private respondent
notwithstanding its lack of basis and private respondent did not state such
amount in his complaint nor had private respondent proven the said damages.

5. That the Court of Appeals erred in dismissing the counterclaims.

6. That the Court of Appeals erred in dismissing the counterclaim of petitioner

against Pan Pacific.

7. That the Court of Appeals erred in ruling that the 6% per annum legal interest
on the judgment shall be computed from the filing of the complaint.

In G. R. No. 113842, Lapuz seeks: (a) the setting aside of the decision of the Court
of Appeals insofar as it modifies the award of damages; b) actual and
compensatory damages in the sum equivalent to 5 years' loss of earnings based
on the petitioner's monthly salary of 1,600 Saudi rials at the current conversion
rate plus the cost of baggage and personal belongings worth P2,000 and the
service fee of P3,000 paid to the recruiting agency, all with legal interest from
the filing of the complaint until fully paid; c) moral damages of not less than P1
million and exemplary damages of not less than P500,000.00, both with interest
at 6% per annum from the filing of the complaint; and d) attorney's fees in the
sum equivalent to 30% of the award of damages.
It is evident that the issues raised in these petitions relate mainly to the
correctness of the factual findings of the Court of Appeals and the award of
damages. The Court has consistently affirmed that the findings of fact of the
Court of Appeals and the other lower courts are as a rule binding upon it, subject
to certain exceptions. As nothing in the record indicates any of such exceptions,
the factual conclusions of the appellate court must be affirmed.

The status of Lapuz as standby passenger was changed to that of a confirmed

passenger when his name was entered in the passenger manifest of KAL for its
Flight No. KE 903. His clearance through immigration and customs clearly shows
that he had indeed been confirmed as a passenger of KAL in that flight. KAL thus
committed a breach of the contract of carriage between them when it failed to
bring Lapuz to his destination.

This Court has held that a contract to transport passengers is different in kind
and degree from any other contractual relation. 3 The business of the carrier is
mainly with the traveling public. It invites people to avail themselves of the
comforts and advantages it offers. The contract of air carriage generates a
relation attended with a public duty. Passengers have the right to be treated by
the carrier's employees with kindness, respect, courtesy and due consideration.
They are entitled to be protected against personal misconduct, injurious
language, indignities and abuses from such employees. 4 So it is that any
discourteous conduct on the part of these employees toward a passenger gives
the latter an action for damages against the carrier.

The breach of contract was aggravated in this case when, instead of courteously
informing Lapuz of his being a "wait-listed" passenger, a KAL officer rudely
shouted "Down! Down!" while pointing at him, thus causing him embarrassment
and public humiliation.

KAL argues that "the evidence of confirmation of a chance passenger status is

not through the entry of the name of a chance passenger in the passenger
manifest nor the clearance from the Commission on Immigration and
Deportation, because they are merely means of facilitating the boarding of a
chance passenger in case his status is confirmed." We are not persuaded.

The evidence presented by Lapuz shows that he had indeed checked in at the
departure counter, passed through customs and immigration, boarded the shuttle
bus and proceeded to the ramp of KAL's aircraft. In fact, his baggage had already
been loaded in KAL's aircraft, to be flown with him to Jeddah. The contract of
carriage between him and KAL had already been perfected when he was
summarily and insolently prevented from boarding the aircraft.
KAL's allegation that the respondent court abused its discretion in awarding
moral and exemplary damages is also not tenable.

The Court of Appeals granted moral and exemplary damages because:

The findings of the court a quo that the defendant-appellant has committed
breach of contract of carriage in bad faith and in wanton, disregard of
plaintiff-appellant's rights as passenger laid the basis and justification of an
award for moral damages.


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.


Considering that the plaintiff-appellant's entitlement to moral damages has

been fully established by oral and documentary evidence, exemplary damages
may be awarded. In fact, exemplary damages may be awarded, even though not
so expressly pleaded in the complaint (Kapoe vs. Masa, 134 SCRA 231). By the
same token, to provide an example for the public good, an award of exemplary
damages is also proper (Armovit vs. Court of Appeals, supra).

On the other hand, Lapuz's claim that the award of P100,000.00 as moral and
exemplary damages is inadequate is not acceptable either. His prayer for moral
damages of not less than P1 million and exemplary damages of not less than
P500,000.00 is overblown.

The well-entrenched principle is that moral damages depend upon the discretion
of the court based on the circumstances of each case. 5 This discretion is limited
by the principle that the "amount awarded should not be palpably and
scandalously excessive" as to indicate that it was the result of prejudice or
corruption on the part of the trial court. 6 Damages are not intended to enrich
the complainant at the expense of the defendant. They are awarded only to
alleviate the moral suffering that the injured party had undergone by reason of
the defendant's culpable action. 7 There is no hard-and-fast rule in the
determination of what would be a fair amount of moral damages since each case
must be governed by its own peculiar facts.
A review of the record of this case shows that the injury suffered by Lapuz is not
so serious or extensive as to warrant an award of P1.5 million. The assessment of
P100,000 as moral and exemplary damages in his favor is, in our view,
reasonable and realistic.

Lapuz likewise claims that the respondent court could not rule upon the
propriety of the award of actual damages because it had not been assigned as an
error by KAL. Not so. The rule is that only errors specifically assigned and
properly argued in the brief will be considered except errors affecting
jurisdiction over the subject matter and plain as well as clerical errors. 8 But this
is not without qualification for, as the Court held in Vda. de Javellana vs. Court of
Appeals: 9

. . . [T]he Court is clothed with ample authority to review matters, even if they are
not assigned as errors in their appeal, if it finds that their consideration is
necessary in arriving at a just decision of the case.

A similar pronouncement was made in Baquiran vs. Court of Appeals 10 in this


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


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.


Davide, Jr., Quiason and Kapunan, JJ., concur.

Bellosillo, J., is on official leave.


[G.R. No. 145804. February 6, 2003]


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 oclock 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) Attorneys 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 attorneys 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

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:










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 Escartins 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 courts 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

Article 1759. Common carriers are liable for the death of or injuries to
passengers through the negligence or willful acts of the formers employees,
although such employees may have acted beyond the scope of their authority or
in violation of the orders of the common carriers.

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 carriers 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 carriers 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

The foundation of LRTAs 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 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 2176[12] and related provisions, in
conjunction with Article 2180,[13] of the Civil Code. The premise, however, for
the employers 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
2194[14] 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.


Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio and Azcuna, JJ., concur.