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CHARTER PARTIES Cargo Superintendents Company Inc.

Cargo Superintendents Company Inc. (CSCI), private marine and This is a risk the shipper or the owner of the goods has to face.
cargo surveyor, was hired by PPI to determine the "outturn" of the Clearly, KKKK has sufficiently proved the inherent character of the
Planters Products Inc V. CA (1993) cargo shipped, by taking draft readings of the vessel prior to and goods which makes it highly vulnerable to deterioration; as well as
after discharge the inadequacy of its packaging which further contributed to the
G.R. No. 101503 September 15, 1993 loss.
shortage in the cargo of 106.726 M/T and that a portion of the
Lessons Applicable: Charter Party (Transportation) Urea fertilizer approximating 18 M/T was contaminated with dirt On the other hand, no proof was adduced by the petitioner
showing that the carrier was remise in the exercise of due
FACTS: Certificate of Shortage/Damaged Cargo prepared by PPI diligence in order to minimize the loss or damage to the goods it
June 16 1974: Mitsubishi International Corporation (Mitsubishi) of short of 94.839 M/T and about 23 M/T were rendered unfit for
New York, U.S.A., 9,329.7069 M/T of Urea 46% fertilizer bought commerce, having been polluted with sand, rust and dirt Coastwise Lighterage Corporation v. CA
by Planters Products, Inc. (PPI) on aboard the cargo vessel M/V
"Sun Plum" owned by private Kyosei Kisen Kabushiki Kaisha PPI sent a claim letter 1974 to Soriamont Steamship Agencies FACTS:
(KKKK) from Kenai, Alaska, U.S.A., to Poro Point, San Fernando, (SSA), the resident agent of the carrier, KKKK, for P245,969.31
La Union, Philippines, as evidenced by Bill of Lading representing the cost of the alleged shortage in the goods shipped Pag-asa Sales Inc. entered into a contract to transport molasses
and the diminution in value of that portion said to have been from the province of Negros to Manila with Coastwise Lighterage
May 17 1974: a time charter-party on the vessel M/V "Sun Plum" contaminated with dirt Corporation (Coastwise for brevity), using the latter's dumb
pursuant to the Uniform General Charter was entered into barges. The barges were towed in tandem by the tugboat MT
between Mitsubishi as shipper/charterer and KKKK as shipowner, SSA: what they received was just a request for shortlanded Marica, which is likewise owned by Coastwise. Upon reaching
in Tokyo, Japan certificate and not a formal claim, and that they "had nothing to do Manila Bay, one of the barges, "Coastwise 9", struck an unknown
with the discharge of the shipment sunken object. The forward buoyancy compartment was
Before loading the fertilizer aboard the vessel, 4 of her holds were damaged, and water gushed in through a hole "two inches wide
all presumably inspected by the charterer's representative and RTC: failure to destroy the presumption of negligence against and twenty-two inches long". As a consequence, the molasses at
found fit them, SSA are liable the cargo tanks were contaminated. Pag-asa filed a claim against
Philippine General Insurance Company, the insurer of its cargo.
The hatches remained closed and tightly sealed throughout the CA: REVERSED - failed to prove the basis of its cause of action Philgen paid P700,000 for the value of the molasses lost.
entire voyage
ISSUE: W/N a time charter between a shipowner and a charterer
July 3, 1974: PPI unloaded the cargo from the holds into its transforms a common carrier into a private one as to negate the
steelbodied dump trucks which were parked alongside the berth, civil law presumption of negligence in case of loss or damage to Philgen then filed an action against Coastwise to recover the
using metal scoops attached to the ship, pursuant to the terms its cargo money it paid, claiming to be subrogated to the claims which the
and conditions of the charter-partly consignee may have against the carrier. Both the trial court and
the Court of Appeals ruled against Coastwise.
hatches remained open throughout the duration of the discharge
HELD: NO. petition is DISMISSED
Each time a dump truck was filled up, its load of Urea was
covered with tarpaulin before it was transported to the consignee's When PPI chartered the vessel M/V "Sun Plum", the ship captain, ISSUE: Whether Coastwise was transformed into a private carrier
warehouse located some 50 meters from the wharf its officers and compliment were under the employ of the by virtue of the contract it entered into with Pag-asa, and whether
shipowner and therefore continued to be under its direct it exercised the required degree of diligence? NO
Midway to the warehouse, the trucks were made to pass through supervision and control. Hardly then can we charge the charterer,
a weighing scale where they were individually weighed for the a stranger to the crew and to the ship, with the duty of caring for
purpose of ascertaining the net weight of the cargo. his cargo when the charterer did not have any control of the
means in doing so HELD:
The port area was windy, certain portions of the route to the
warehouse were sandy and the weather was variable, raining carrier has sufficiently overcome, by clear and convincing proof, Pag-asa Sales, Inc. only leased three of petitioner's vessels, in
occasionally while the discharge was in progress. the prima facie presumption of negligence. The hatches remained order to carry cargo from one point to another, but the possession,
close and tightly sealed while the ship was in transit as the weight command mid navigation of the vessels remained with petitioner
Tarpaulins and GI sheets were placed in-between and alongside of the steel covers made it impossible for a person to open without Coastwise Lighterage. Coastwise Lighterage, by the contract of
the trucks to contain spillages of the ferilizer the use of the ship's boom. affreightment, was not converted into a private carrier, but
remained a common carrier and was still liable as such. The law
It took 11 days for PPI to unload the cargo bulk shipment of highly soluble goods like fertilizer carries with it and jurisprudence on common carriers both hold that the mere
the risk of loss or damage. More so, with a variable weather proof of delivery of goods in good order to a carrier and the
condition prevalent during its unloading subsequent arrival of the same goods at the place of destination
in bad order makes for a prima facie case against the carrier. It An owner who retains possession of the ship though the hold is Private respondent had acted as a private carrier in transporting
follows then that the presumption of negligence that attaches to the property of the charterer, remains liable as carrier and must petitioner’s lauan logs. Thus, Article 1745 and other Civil Code
common carriers, once the goods it is sports are lost, destroyed or answer for any breach of duty as to the care, loading and provisions on common carriers which were cited by petitioner may
deteriorated, applies to the petitioner. This presumption, which is unloading of the cargo. Although a charter party may transform a not be applied unless expressly stipulated by the parties in their
overcome only by proof of the exercise of extraordinary diligence, common carrier into a private one, the same however is not true in charter party.
remained unrebutted in this case. Jesus R. Constantino, the a contract of affreightment on account of the aforementioned
patron of the vessel "Coastwise 9" admitted that he was not distinctions between the two. PETITION DENIED. In a contract of private carriage, the parties may validly stipulate
licensed. Coastwise Lighterage cannot safely claim to have that responsibility for the cargo rests solely on the charterer,
exercised extraordinary diligence, by placing a person whose Valenzuela Hardwood and Industrial Supply vs. Court exempting the shipowner from liability for loss of or damage to the
navigational skills are questionable, at the helm of the vessel of Appeals cargo caused even by the negligence of the ship captain.
which eventually met the fateful accident. It may also logically, Pursuant to Article 1306 of the Civil Code, such stipulation is valid
follow that a person without license to navigate, lacks not just the FACTS: because it is freely entered into by the parties and the same is not
skill to do so, but also the utmost familiarity with the usual and contrary to law, morals, good customs, public order, or public
safe routes taken by seasoned and legally authorized ones. Had Plaintiff shipped at Maconcon Port, Isabela 940 round logs on policy. Indeed, their contract of private carriage is not even a
the patron been licensed he could be presumed to have both the board M/V Seven Ambassador, a vessel owned by defendant contract of adhesion. We stress that in a contract of private
skill and the knowledge that would have prevented the vessel's Seven Brothers Shipping Corporation. Plaintiff insured the logs carriage, the parties may freely stipulate their duties and
hitting the sunken derelict ship that lay on their way to Pier 18. As against loss and/or damage with defendant South Sea Surety and obligations which perforce would be binding on them. Unlike in
a common carrier, petitioner is liable for breach of the contract of Insurance Co., Inc. for P2M and the latter issued its Marine Cargo contract involving a common carrier, private carriage does not
carriage, having failed to overcome the presumption of negligence Insurance Policy on said date. In the meantime, the M/V Seven involve the general public. Hence, the stringent provisions of the
with the loss and destruction of goods it transported, by proof of Ambassador sank resulting in the loss of the plaintiff’s insured Civil Code on common carriers protecting the general public
its exercise of extraordinary diligence. logs. cannot justifiably be applied to a ship transporting commercial
goods as a private carrier. Consequently, the public policy
Plaintiff demanded from defendant South Sea Surety and embodied therein is not contravened by stipulations in a charter
Insurance Co., Inc. the payment of the proceeds of the policy but party that lessen or remove the protection given by law in
The distinction between the two kinds of charter parties (i.e. the latter denied liability under the policy. Plaintiff likewise filed a contracts involving common carriers.
bareboat or demise and contract of affreightment) is more clearly formal claim with defendant Seven Brothers Shipping Corporation
set out in the case of Puromines, Inc. vs. Court of Appeals: for the value of the lost logs but the latter denied the claim. The provisions of our Civil Code on common carriers were taken
from Anglo-American law. Under American jurisprudence, a
Court of Appeals affirmed in part the RTC judgment by sustaining common carrier undertaking to carry a special cargo or chartered
the liability of South Sea Surety and Insurance Company (“South to a special person only, becomes a private carrier. As a private
Under the demise or bareboat charter of the vessel, the charterer Sea”), but modified it by holding that Seven Brothers Shipping carrier a stipulation exempting the owner from liability for the
will generally be regarded as the owner for the voyage or service Corporation (“Seven Brothers”) was not liable for the lost cargo. negligence of its agent is not against public policy and is deemed
stipulated. The charterer mans the vessel with his own people and valid. Such doctrine We find reasonable. The Civil Code
becomes the owner pro hac vice, subject to liability to others for ISSUE: provisions on common carriers should not be applied where the
damages caused by negligence. To create a demise, the owner of carrier is not acting as such but as a private carrier. The
a vessel must completely and exclusively relinquish possession, Whether defendants shipping corporation and the surety company stipulation in the charter party absolving the owner from liability for
command and navigation thereof to the charterer, anything short are liable to the plaintiff for the latter’s lost logs. loss due to the negligence of its agent would be void only if the
of such a complete transfer is a contract of affreightment (time or strict public policy governing common carriers is applied. Such
voyage charter party) or not a charter party at all. In this case, HELD: policy has no force where the public at large is not involved as in
there was no demise, and only a contract of affreightment. Hence, this case of a ship totally chartered for the use of a single party.
the carrier was not transformed into a private carrier. (Home Insurance Co. vs. American Steamship Agencies Inc., 23
The charter party between the petitioner and private respondent
stipulated that the “(o)wners shall not be responsible for loss, split, SCRA 24, April 4, 1968)
short-landing, breakages and any kind of damages to the cargo” –
On the other hand a contract of affreightment is one in which the
owner of the vessel leases part or all of its space to haul goods for There is no dispute between the parties that the proximate cause
others. It is a contract for special service to be rendered by the of the sinking of M/V Seven Ambassadors resulting in the loss of
owner of the vessel and under such contract the general owner its cargo was the “snapping of the iron chains and the subsequent
retains the possession, command and navigation of the ship, the rolling of the logs to the portside due to the negligence of the
charterer or freighter merely having use of the space in the vessel captain in stowing and securing the logs on board the vessel and
in return for his payment of the charter hire. not due to fortuitous event.” Likewise undisputed is the status of
Private Respondent Seven Brothers as a private carrier when it
contracted to transport the cargo of Petitioner Valenzuela. Even
the latter admits this in its petition.
Caltex V. Sulpicio Lines (1999) does not convert the common carrier into a private carrier

G.R.No. 131166 September 30, 1999 HELD: NO. Grants Petition. CA set aside. Carriage of Goods by Sea Act :

Lessons Applicable: Charter Party (Transportation)

FACTS: respective rights and duties of a shipper and the carrier depends Sec. 3. (1) The carrier shall be bound before and at the beginning
not on whether the carrier is public or private, but on whether the of the voyage to exercise due diligence to -
December 19, 1987 8 pm: motor tanker MT Vector owned and contract of carriage:
operated by Vector Shipping Corporation carried 8,800 barrels of
petroleum products of Caltex by virtue of a charter contract bill of lading or equivalent shipping documents; or
(a) Make the ship seaworthy;
December 20, 1987 6:30 am: MV Doña Paz passenger and cargo charter party or similar contract on the other
vessel owned and operated by Sulpicio Lines, Inc. left the port of
Tacloban headed for Manila with 1,493 passengers indicated in Caltex and Vector entered into a contract of affreightment, also
the Coast Guard Clear known as a voyage charter (b) Properly man, equip, and supply the ship;

December 20, 1987: MT Vector collided with MV Doña Paz in the charter party
open sea within the vicinity of Dumali Point between Marinduque
and Oriental Mindoro, killing almost all the passengers and crew contract by which an entire ship, or some principal part thereof, is xxx xxx xxx
members of both ships except for 24 survivors let by the owner to another person for a specified time or use
Thus, the carriers are deemed to warrant impliedly the
MV Doña Paz carried an estimated 4,000 passengers most were Charter parties fall into three main categories: seaworthiness of the ship. For a vessel to be seaworthy, it must
not in the passenger manifest be adequately equipped for the voyage and manned with a
(1) Demise or bareboat sufficient number of competent officers and crew. The failure of a
board of marine inquiry in BMI Case No. 653-87 after investigation common carrier to maintain in seaworthy condition the vessel
found that the MT Vector, its registered operator Francisco charterer mans the vessel with his own people and becomes, in involved in its contract of carriage is a clear breach of its duty
Soriano, and its owner and actual operator Vector Shipping effect, the owner for the voyage or service stipulated, subject to prescribed in Article 1755 of the Civil Code
Corporation, were at fault and responsible for its collision with MV liability for damages caused by negligence
Doña Paz a passenger or a shipper of goods is under no obligation to
common carrier becomes private conduct an inspection of the ship and its crew, the carrier being
February 13, 1989: Teresita Cañezal and Sotera E. Cañezal, obliged by law to impliedly warrant its seaworthiness
Sebastian Cañezal’s wife and mother respectively, filed a contract of affreightment
complaint for “Damages Arising from Breach of Contract of nature of the obligation of Caltex demands ordinary diligence like
Carriage” against Sulpicio Lines, Inc. for the death of Sebastian E. one by which the owner of a ship or other vessel lets the whole or any other shipper in shipping his cargoes
Cañezal (public school teacher 47 years old) and his 11-year old part of her to a merchant or other person for the conveyance of
daughter Corazon G. Cañezal goods, on a particular voyage, in consideration of the payment of Caltex and Vector Shipping Corporation had been doing business
freight since 1985, or for about two years before the tragic incident
Sulpicio, in turn, filed a 3rd party complaint against Francisco occurred in 1987. Past services rendered showed no reason for
Soriano, Vector Shipping Corporation and Caltex may be either: Caltex to observe a higher degree of diligence.

Sulpicio alleged that Caltex chartered MT Vector with gross and (2)time charter - wherein the leased vessel is leased to the Caltex had the right to presume that the ship was seaworthy as
evident bad faith knowing fully well that MT Vector was improperly charterer for a fixed period of time even the Philippine Coast Guard itself was convinced of its
manned, ill-equipped, unseaworthy and a hazard to safe seaworthiness
navigation (3) voyage charter - wherein the ship is leased for a single voyage
RTC: dismissed the third party complaint and favored the charter-party provides for the hire of the vessel only, either for a
Cañezal's against Sulpicio Lines determinate period of time or for a single or consecutive voyage, First: The charterer has no liability for damages under
the ship owner to supply the ship’s store, pay for the wages of the Philippine Maritime laws.
CA: included Caltex as liable party master of the crew, and defray the expenses for the maintenance
of the ship Petitioner and Vector entered into a contract of affreightment, also
ISSUE: W/N Caltex as a voyage charterer of a sea vessel liable known as a voyage charter.
for damages resulting from a collision between the chartered charterer is free from liability to third persons in respect of the ship
vessel and a passenger ship
A charter party is a contract by which an entire ship, or some parties in this case is governed by special laws. Because of the words "L/C No. 90/02447" indicated that a higher valuation of the
principal part thereof, is let by the owner to another person for a implied warranty of seaworthiness, shippers of goods, when cargo had been declared by the shipper.
specified time or use; a contract of affreightment is one by which transacting with common carriers, are not expected to inquire into
the owner of a ship or other vessel lets the whole or part of her to the vessel’s seaworthiness, genuineness of its licenses and
a merchant or other person for the conveyance of goods, on a compliance with all maritime laws. To demand more from shippers Issues:
particular voyage, in consideration of the payment of freight. A and hold them liable in case of failure exhibits nothing but the
contract of affreightment may be either time charter, wherein the futility of our maritime laws insofar as the protection of the public
leased vessel is leased to the charterer for a fixed period of time, in general is concerned. Such a practice would be an absurdity in - Whether the notice of loss was timely filed. (Belgian claims that
or voyage charter, wherein the ship is leased for a single voyage. a business where time is always of the essence. Considering the pursuant to Section 3, paragraph 6 of COGSA, respondent should
In both cases, the charter-party provides for the hire of the vessel nature of transportation business, passengers and shippers alike have filed its Notice of Loss within three days from delivery. They
only, either for a determinate period of time or for a single or customarily presume that common carriers possess all the legal assert that the cargo was discharged on July 31, 1990, but that
consecutive voyage, the ship owner to supply the ship’s store, pay requisites in its operation. respondent filed its Notice of Claim only on September 18, 1990.)
for the wages of the master of the crew, and defray the expenses
for the maintenance of the ship. If the charter is a contract of Whether the package limitation of liability under COGSA is
affreightment, which leaves the general owner in possession of applicable. (Belgian contends that assuming that they are liable
the ship as owner for the voyage, the rights and the their liability should be limited to US$500 per package as provided
responsibilities of ownership rest on the owner. The charterer is in the Bill of Lading and by Section 4(5)of COGS
free from liability to third persons in respect of the ship. CARRIAGE:VIGILANCE OVER GOODS

Second: MT Vector is a common carrier BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. V. Held:
The charter party agreement did not convert the common carrier
into a private carrier. The parties entered into a voyage charter, Facts: - NO. Mere proof of delivery of the goods in good order to a
which retains the character of the vessel as a common carrier. It is common carrier and of their arrival in bad order at their destination
imperative that a public carrier shall remain as such, constitutes a prima facie case of fault or negligence against the
notwithstanding the charter of the whole or portion of a vessel by - CMC Trading A.G. shipped on board the M/V Anangel Sky at carrier.
one or more persons, provided the charter is limited to the ship Hamburg, Germany 242 coils of various Prime Cold Rolled Steel - In this case, Belgian failed to rebut the prima facie presumption
only, as in the case of a time-charter or voyage charter. It is only sheets for transportation to Manila consigned to the Philippine of negligence. First, as stated in the Bill of Lading, Belgian
when the charter includes both the vessel and its crew, as in a Steel Trading Corporation. received the subject shipment in good order and condition in
bareboat or demise that a common carrier becomes private, at - On July 28, 1990, M/V Anangel Sky arrived at the port of Germany. Second, prior to the unloading of the cargo, an
least insofar as the particular voyage covering the charter-party is Manila and, within the subsequent days, discharged the subject Inspection Report prepared and signed by representatives of both
concerned. Indubitably, a ship-owner in a time or voyage charter cargo. Four (4) coils were found to be in bad order. parties showed the steel bands broken, the metal envelopes rust-
retains possession and control of the ship, although her holds - Finding the four (4) coils in their damaged state to be unfit for stained and heavily buckled, and the contents thereof exposed
may, for the moment, be the property of the charterer. A common the intended purpose, the consignee Philippine Steel Trading and rusty. Third, Bad Order Tally Sheet issued by Jardine Davies
carrier is a person or corporation whose regular business is to Corporation declared the same as total loss. Transport Services stated that the four coils were in bad order and
carry passengers or property for all persons who may choose to - Philippine First Insurance paid the claim of Philippine Steel and condition. Normally, a request for a bad order survey is made in
employ and to remunerate him. 16 MT Vector fits the definition of was thus subrogated. case there is an apparent or a presumed loss or damage.Fourth,
a common carrier under Article 1732 of the Civil Code. - Philippine First then instituted a complaint for recovery of the the Certificate of Analysis stated that, based on the sample
amount paid to the consignee as insured. submitted and tested, the steel sheets found in bad order were
The public must of necessity rely on the care and skill of common - Belgian claims that the damage and/or loss was due to pre- wet with fresh water. Fifth, Belgian -- in a letteraddressed to the
carriers in the vigilance over the goods and safety of the shipment damage, to the inherent nature, vice or defect of the Philippine Steel --admitted that they were aware of the condition
passengers, especially because with the modern development of goods, or to perils, danger and accidents of the sea, or to of the four coils found in bad order and condition.
science and invention, transportation has become more rapid, insufficiency of packing thereof, or to the act or omission of the
more complicated and somehow more hazardous. For these shipper of the goods or their representatives. Belgian further - YES. First, the provision of COGSA provides that the notice of
reasons, a passenger or a shipper of goods is under no obligation argued that their liability, if there be any, should not exceed the claim need not be given if the state of the goods, at the time of
to conduct an inspection of the ship and its crew, the carrier being limitations of liability provided for in the bill of lading and other their receipt, has been the subject of a joint inspection or survey.
obliged by law to impliedly warrant its seaworthiness. pertinent laws. Finally, Belgian averred that, in any event, they Here, prior to unloading the cargo, an Inspection Report as to the
exercised due diligence and foresight required by law to prevent condition of the goods was prepared and signed by
Third: Is Caltex liable for damages under the Civil Code? any damage/loss to said shipment. representatives of both parties. Second, as stated in the same
- The RTC dismissed the complaint. provision, a failure to file a notice of claim within three days will
The charterer of a vessel has no obligation before transporting its - The CA reversed and ruled that Belgian were liable for the loss not bar recovery if it is nonetheless filed within one year. This one-
cargo to ensure that the vessel it chartered complied with all legal or the damage of the goods shipped, because they had failed to year prescriptive period also applies to the shipper, the consignee,
requirements. The duty rests upon the common carrier simply for overcome the presumption of negligence imposed on common the insurer of the goods or any legal holder of the bill of lading.
being engaged in "public service." The relationship between the carriers. As to the extent of Belgian’s liability, the CA held that the - A claim is not barred by prescription as long as the one-year
package limitation under COGSA was not applicable, because the
period has not lapsed. In the present case, the cargo was September 30, 1979: D/B Lucio was towed by the M/T ANCO Art. 1739. In order that the common carrier may be exempted
discharged on July 31, 1990, while the Complaint51 was filed by arrived and M/T ANCO left the barge immediately from responsibility, the natural disaster must have been the
respondent on July 25, 1991, within the one-year prescriptive proximate and only cause of the loss. However, the common
period. The clouds were dark and the waves were big so SMC’s District carrier must exercise due diligence to prevent or minimize loss
Sales Supervisor, Fernando Macabuag, requested ANCO’s before, during and after the occurrence of flood, storm, or other
- YES. In this case, there was no stipulation in the Bill of Lading representative to transfer the barge to a safer place but it refused natural disaster in order that the common carrier may be
limiting the carrier's liability. Neither did the shipper declare a so around the midnight, the barge sunk along with 29,210 cases exempted from liability for the loss, destruction, or deterioration of
higher valuation of the goods to be shipped. This fact of Pale Pilsen and 500 cases of Cerveza Negra totalling to the goods . . .
notwithstanding, the insertion of the words "L/C No. 90/02447 P1,346,197
cannot be the basis for Belgian’s liability. Caso fortuito or force majeure
- First, a notation in the Bill of Lading which indicated the When SMC claimed against ANCO it stated that they agreed that
amount of the Letter of Credit obtained by the shipper for the it would not be liable for any losses or damages resulting to the extraordinary events not foreseeable or avoidable, events that
importation of steel sheets did not effect a declaration of the value cargoes by reason of fortuitous event and it was agreed to be could not be foreseen, or which though foreseen, were inevitable
of the goods as required by the bill. That notation was made only insured with FGU for 20,000 cases or P858,500
for the convenience of the shipper and the bank processing the not enough that the event should not have been foreseen or
Letter of Credit. ANCO filed against FGU anticipated, as is commonly believed but it must be one
- Second, a bill of lading is separate from the Other Letter of impossible to foresee or to avoid - not in this case
Credit arrangements. Thus, Belgian’s liability should be computed FGU alleged that ANCO and SMC failed to exercise ordinary
based on US$500 per package and not on the per metric ton price diligence or the diligence of a good father of the family in the care other vessels in the port of San Jose, Antique, managed to
declared in the Letter of Credit. and supervision of the cargoes transfer to another place

RTC: ANCO liable to SMC and FGU liable for 53% of the lost To be exempted from responsibility, the natural disaster should
FGU Insurance Corporation V. CA (2005) cargoes have been the proximate and only cause of the loss. There must
have been no contributory negligence on the part of the common
G.R.No. 137775 March 31, 2005 CA affirmed carrier.

Lessons Applicable: Loss caused by negligence of the ISSUE: W/N FGU should be exempted from liability to ANCO for there was blatant negligence on the part of M/T ANCO’s
insured (Insurance) the lost cargoes because of a fortuitous event and negligence of crewmembers, first in leaving the engine-less barge D/B Lucio at
ANCO the mercy of the storm without the assistance of the tugboat, and
FACTS: again in failing to heed the request of SMC’s representatives to
have the barge transferred to a safer place
Anco Enterprises Company (ANCO), a partnership between Ang
Gui and Co To, was engaged in the shipping business operating HELD: YES. Affirmed with modification. Third-party complainant When evidence show that the insured’s negligence or
two common carriers is dismissed. recklessness is so gross as to be sufficient to constitute a willful
act, the insurer must be exonerated.
M/T ANCO tugboat Art. 1733. Common carriers, from the nature of their business
and for reasons of public policy are bound to observe ANCO’s employees is of such gross character that it amounts to a
D/B Lucio barge - no engine of its own, it could not maneuver by extraordinary diligence in the vigilance over the goods and for the wrongful act which must exonerate FGU from liability under the
itself and had to be towed by a tugboat for it to move from one safety of the passengers transported by them, according to all the insurance contract
place to another. circumstances of each case.
both the D/B Lucio and the M/T ANCO were blatantly negligent
September 23 1979: San Miguel Corporation (SMC) shipped from Such extraordinary diligence in vigilance over the goods is further
expressed in Articles 1734, 1735, and 1745 Nos. 5, 6, and 7 . . .
Mandaue City, Cebu, on board the D/B Lucio, for towage by M/T -PET: FGU Insurance Corporation
ANCO: RES: CA; San Miguel Corporation (SMC); Estate of Ang Gui represented
by Lucio, Julian, Jaime, all surnamed Ang; Co To
25,000 cases Pale Pilsen and 350 cases Cerveza Negra -
consignee SMC’s Beer Marketing Division (BMD)-Estancia Beer Art. 1734. Common carriers are responsible for the loss, These are two separate Petitions for review assailing the
Sales Office, Estancia, Iloilo destruction, or deterioration of the goods, unless the same is due decision of the Court of Appeals which affirmed the decision of
to any of the following causes only: RTC of Cebu City.
15,000 cases Pale Pilsen and 200 cases Cerveza Negra -
consignee SMC’s BMD-San Jose Beer Sales Office, San Jose, (1) Flood, storm, earthquake, lightning, or other natural disaster 1. Evidence shows that Anco Enterprises Company
or calamity; (ANCO), a partnership between Ang Gui and Co To,
was engaged in the shipping business. It owned the
M/T ANCO tugboat and the D/B Lucio barge which
were operated as common carriers.
ANCOs part to observe the degree of diligence Taking into account the circumstances present in the instant case,
2. Since the D/B Lucio had no engine of its own, it could required. The trial court thus held the Estate of Ang Gui concludes that the blatant negligence of ANCOs employees is of
not maneuver by itself and had to be towed by a and Co To liable to SMC for the amount of the lost such gross character that it amounts to a wrongful act which must
tugboat for it to move from one place to another. shipment. FGU liable to bear 53% of the amount of the exonerate FGU from liability under the insurance contract.
lost cargoes.CA affirmed in toto.
3. On September 23, 1979, SMC shipped from Mandaue Sulpicio Lines, Inc. vs. First Lepanto-Taisho Insurance
City, on board the D/B Lucio for towage by M/T ANCO: I.
a. Bill of Lading #1: 25,000 cases of Pale WON ANCO exercised due diligence? GR No. 140349, June 29, 2005
Pilsen + 350 cases of Cerveza Negra to
Estancia, Iloilo II.
b. Bill of Lading #2: 15,000 cases of Pale WON respondent Court of Appeals committed grave abuse
Pilsen + 200 cases of Cerveza Negra to San of discretion in holding FGU liable under the insurance
Jose, Antique contract considering the circumstances surrounding the loss Taiyo Yuden Philippines, Inc. (owner of the goods) and Delbros,
of the cargoes? Inc. (shipper) entered into a contract, evidenced by Bill of Lading
4. When the barge and tugboat arrived at Antique in the issued by the latter in favor of the owner of the goods, for Delbros,
afternoon, the clouds over the area were dark and the Inc. to transport a shipment of goods consisting of 3 wooden
waves were already big. SMCs Supervisor, Fernando I. NO. crates containing 136 cartons of inductors and LC compound on
Macabuag, requested ANCOs representative to ANCO claims that their crewmembers exercised due diligence to board the V Singapore V20 from Cebu City to Singapore in favor
transfer the barge to a safer place because the vessel prevent or minimize the loss of the cargoes but their efforts proved of the consignee, Taiyo Yuden Singapore Pte, Ltd. For the
might not be able to withstand the big waves. ANCO no match to the forces unleashed by the typhoon. The argument carriage of said shipment from Cebu City to Manila, Delbros, Inc.
did not heed the request because he was confident. does not persuade.
engaged the services of the vessel M/V Philippine Princess,
Caso fortuito or force majeure by definition, are extraordinary owned and operated by petitioner Sulpicio Lines, Inc. (carrier).
5. On October 01, 1979, 10pm, the crew of D/B Lucio
events not foreseeable or avoidable, events that could not be During the unloading of the shipment, one crate containing 42
abandoned the vessel because the barges rope
foreseen, or which though foreseen, were inevitable. It is therefore cartons dropped from the cargo hatch to the pier apron. The
attached to the wharf was cut off by the big waves.
not enough that the event should not have been foreseen or owner of the goods examined the dropped cargo, and upon an
anticipated, as is commonly believed but it must be one alleged finding that the contents of the crate were no longer
6. Thus, ANCO failed to deliver to SMCs consignee
impossible to foresee or to avoid. In this case, the calamity which usable for their intended purpose, they were rejected as a total
29,210 cases of Pale Pilsen and 550 cases of Cerveza caused the loss of the cargoes was not unforeseen nor was it
Negra. The value amounted to P1,346,197. SMC filed loss and returned to Cebu City. The owner of the goods filed a
unavoidable. In fact, the other vessels in the port of San Jose,
a complaint for Breach of Contract of Carriage and Antique, managed to transfer to another place, a circumstance claim with herein petitioner-carrier for the recovery of the value of
Damages against ANCO for the amount aforesaid plus which prompted SMCs District Sales Supervisor to request that the rejected cargo which was refused by the latter. Thereafter, the
interest & damages the D/B Lucio be likewise transferred. owner of the goods sought payment from respondent First
Lepanto-Taisho Insurance Corporation (insurer) under a marine
7. Upon Ang Guis death, ANCO, as a partnership, was To be exempted from responsibility, the natural disaster should insurance policy issued to the former. Respondent-insurer paid
dissolved. Hence, SMC filed a second amended have been the proximate and only cause of the loss. There must
the claim less thirty-five percent (35%) salvage value or P194,
complaint impleading the surviving partner, Co To and have been no contributory negligence on the part of the common
carrier. 220.31. The payment of the insurance claim of the owner of the
the Estate of Ang Gui represented by Lucio, Julian and
goods by the respondent-insurer subrogated the latter to whatever
Jaime, all surnamed Ang.
II. FGU not liable. right or legal action the owner of the goods may have against
8. ANCO admitted that the cases of beer were indeed It is a basic rule in insurance that the carelessness and Delbros, Inc. and petitioner-carrier, Sulpicio Lines, Inc. Thus,
negligence of the insured or his agents constitute no defense on respondent-insurer then filed claims for reimbursement from
loaded on the vessel belonging to them. It claimed
the part of the insurer. This rule however presupposes that the Delbros, Inc. and petitioner-carrier Sulpicio Lines, Inc. which were
however that it had an agreement with SMC that ANCO
loss has occurred due to causes which could not have been
would not be liable for any losses or damages resulting subsequently denied. In 1992, respondent-insurer filed a suit for
prevented by the insured, despite the exercise of due diligence.
to the cargoes by reason of fortuitous event. Since the damages with the trial court against Delbros, Inc. and herein
cases of beer Pale Pilsen and Cerveza Negra were lost The question now is whether there is a certain degree of petitioner-carrier. Delbros, Inc. filed on 15 April 1993 its Answer
by reason of a storm, a fortuitous event which battered negligence on the part of the insured or his agents that will with Counterclaim and Cross-claim, alleging that assuming the
and sunk the vessel in which they were loaded, they deprive him the right to recover under the insurance contract. contents of the crate in question were trulyin bad order, fault is
should not be held liable. According to the Court, while mistake and negligence of the with herein petitioner-carrier which was responsible forthe
master or crew are incident to navigation and constitute a part of unloading of the crates. Petitioner-carrier filed its Answer to
9. ANCO filed a Third-Party Complaint against FGU the perils that the insurer is obliged to incur, such negligence or
Delbros, Inc.’s cross-claim asserting that it observed extraordinary
alleging that before the vessel of ANCO left for San recklessness must not be of such gross character as to amount to
misconduct or wrongful acts; otherwise, such negligence shall diligence in the handling, storage and general care of the goods
Jose, the cargoes were insured with FGU. ANCO
alleged that the third-party defendant corporation release the insurer from liability under the insurance contract.
should be held liable to indemnify or reimburse ANCO ISSUE:
whatever amounts, or damages, it may be required to In the case at bar, both the trial court and the appellate court had
concluded from the evidence that the crewmembers of both the Whether or not petitioner is liable for the breach of
pay to SMC.
D/B Lucio and the M/T ANCO were blatantly negligent.
contract of carriage (vigilance over goods)?
10. The trial court found that while the cargoes were
indeed lost due to fortuitous event, there was failure on
RULING: RULING: by the unexplained sinking of its vessel, MT Maysun, while in
YES. There was damage suffered by the goods which consisted NO. The payment made by American Home for the
in the destruction of one wooden crate and the tearing of two (2) insured value of the lost cargo operates as waiver of its right to
cardboard boxes therein which rendered them unfit to be sent to enforce the term of the implied warranty against Caltex under the
Singapore. The falling of the crate was negligence on the part of marine insurance policy. However, the same cannot be validly
[ GR No. 213418, Sep 21, 2016 ]
Sulpicio Lines, Inc. for which it cannot exculpate itself from liability interpreted as an automatic admission of the vessel’s
because it failed to prove that it exercised extraordinary diligence. seaworthiness by American Home as to foreclose recourse
against Delsan for any liability under its contractual obligation as a
LTD. +
Delsan Transport Lines vs. American Home Assurance common carrier. The fact of payment grants American Home
subrogatory right which enables it to exercise legal remedies that
For resolution of the Court is this Petition for Review
GR No. 149019, August 15, 2006 would otherwise be available to Caltex as owner of the lost cargo
on Certiorari[1] filed by petitioners Alfredo S. Ramos, Conchita S.
against Delsan, the common carrier.
Ramos, Benjamin B. Ramos, Nelson T. Ramos and Robinson T.
FACTS: Ramos, seeking to reverse and set aside the Decision[2] dated 19
March 2013 and Resolution[3] dated 9 July 2014 of the Court of
Caltex engaged into a contract of freight with the Appeals (CA) in CA-G.R. CV. No. 94561. The assailed decision
petitioner, Delsan Transport Lines, Inc., (Delsan), for a period of From the nature of their business and for reasons of public policy,
and resolution affirmed with modification the 23 March 2009
one year whereby the said common carrier agreed to transport common carriers are bound to observe extraordinary diligence in
Decision[4] of the Regional Trial Court (RTC) of Manila, Branch 36,
Caltex’s industrial fuel oil from the Batangas-Bataan Refinery to the vigilance over the goods and for the safety of passengers
which ordered respondent China Southern Airlines to pay
different parts of the country. Under the contract, petitioner took transported by them, according to all the circumstances of each
petitioners the amount of P692,000.00, representing the amount
on board its vessel, MT Maysun, 2,277.314 kiloliters of industrial case. In the event of loss, destruction or deterioration of the
of damages and attorney's fees. On appeal, the appellate court
fuel oil of Caltex to be delivered to the Caltex Oil Terminal in insured goods, common carriers shall be responsible unless the
affirmed the award of actual damages but deleted the order for
Zamboanga City. The shipment was insured with private same is brought about, among others, by flood, storm,
payment of moral and exemplary damages in the amount of
respondent, American Home Assurance Corporation (American earthquake, lightning or other natural disaster or calamity. In all
Home). The vessel sank in the early morning of August 15, 1986 other cases, if the goods are lost, destroyed or deteriorated.
near Panay Gulf in the Visayas taking with it the entire cargo of Common carriers are presumed to have been at fault or to have
fuel oil. Subsequently, American Home paid Caltex the sum of acted negligently, unless they prove they observed extraordinary
Php 5,096,635.57 representing the insured value of the cargo. diligence.
The Facts
Exercising its right to subrogation under Article 2207 of the New
Civil Code, the American Home demanded the Delsan the same
amount it paid to Caltex. Due to its failure to collect from Delsan On 7 August 2003, petitioners purchased five China Southern
despite prior demand, American Home filed a complaint with the In order to escape liability for the loss of its cargo of industrial fuel
Airlines roundtrip plane tickets from Active Travel Agency for
RTC of Makati for collection of a sum of money. The trial court oil belonging to Caltex, Delsan attributes the sinking of MT
$985.00.[6]It is provided in their itineraries that petitioners will be
dismissed the complaint against Delsan. It ruled that the vessel, Maysun to fortuitous event or force majeure. Although the
leaving Manila on 8 August 2003 at 0900H and will be leaving
MT Maysun, was seaworthy and that the incident was caused by testimony of the captain and chief mate that there were strong
Xiamen on 12 August 2003 at 1920H.[7] Nothing eventful
unexpected inclement weather condition or force majeure, thus winds and waves 20 feet high was effectively rebutted and belied
happened during petitioners' flight going to Xiamen as they were
exempting the common carrier from liability for the loss of its by the weather report of PAGASA. Thus, as the CA correctly
able to successfully board the plane which carried them to Xiamen
cargo. The CA reversed. It gave credence to the weather report ruled, Delsan’s vessel, MT Maysun, sank with its entire cargo for
International Airport. On their way back to the Manila, however,
issued by PAGASA which stated that the waves were only .7 to 2 the reason that it was not seaworthy. There was no squall or bad
petitioners were prevented from taking their designated flight
meters in height in the vicinity of the Panay Gulf at the day the weather or extremely poor sea condition in the vicinity where the
despite the fact that earlier that day an agent from Active Tours
ship sank, in contrast to the claim of the crew of the ship that the said vessel sank.
informed them that their bookings for China Southern Airlines
waves were 20 feet high. 1920H flight are confirmed.[8] The refusal came after petitioners
already checked in all their baggages and were given the
corresponding claim stubs and after they had paid the terminal
Additionally, the exoneration of MT Maysun’s officers and crew
fees. According to the airlines' agent with whom they spoke at the
ISSUE: merely concern their respective administrative liabilities. It does
airport, petitioners were merely chance passengers but they may
not in any way operate to absolve Delsan the common carrier
be allowed to join the flight if they are willing to pay an additional
Whether or not the payment made by American Home from its civil liability arising from its failure to observe extraordinary
500 Renminbi (RMB) per person. When petitioners refused to
to Caltex for the insured value of the lost cargo amounted to an diligence in the vigilance over the goods it was transporting and
defray the additional cost, their baggages were offloaded from the
admission that the vessel was seaworthy, thus precluding any for the negligent acts or omissions of its employees, the
plane and China Southern Airlines 1920H flight then left Xiamen
action for recovery against the petitioner. determination of which properly belongs to the courts. In the case
International Airport without them.[9] Because they have business
at bar, Delsan is liable for the insured value of the lost cargo of
commitments waiting for them in Manila, petitioners were
industrial fuel oil belonging to Caltex for its failure to rebut the
constrained to rent a car that took them to Chuan Chio Station
presumption of fault or negligence as common carrier occasioned
where they boarded the train to Hongkong.[10] Upon reaching
Hong Kong, petitioners purchased new plane tickets from "xxx. Where in breaching the contract, the defendant is not shown I.THE COURT OF APPEALS COMMITTED GRAVE AND
Philippine Airlines (PAL) that flew them back to Manila.[11] to have acted fraudulently or in bad faith, liability for damages is SERIOUS ERROR WHEN IT DELETED THE AWARDS OF
limited to the natural and probable consequences of the breach of MORAL AND EXEMPLARY DAMAGES, A DEPARTURE FROM
Upon arrival in Manila, petitioners went to Active Travel to inform the obligation and which the parties had foreseen or could ESTABLISHED DOCTRINES THAT PASSENGERS WHO ARE
them of their unfortunate fate with China Southern Airlines. In their reasonably have foreseen; and in that case, such liability would BUMPED-OFF ARE ENTITLED TO MORAL AND EXEMPLARY
effort to avoid lawsuit, Active Travel offered to refund the price of not include liability for moral and exemplary damages. DAMAGES;
the plane tickets but petitioners refused to accept the offer.
Petitioners then went to China Southern Airlines to demand for the In this case, We are not persuaded that [China Southern Airlines]
reimbursement of their airfare and travel expenses in the amount breach of contractual obligation had been attended by bad faith or
of P87,375.00. When the airline refused to accede to their malice or gross negligence amounting to bad faith. On the I.THE COURT OF APPEALS COMMITTED GRAVE AND
demand, petitioners initiated an action for damages before the contrary, it appears that despite [petitioner's] failure to "re-confirm" SERIOUS ERROR WHEN IT DECLARED THAT BUMPING OFF
RTC of Manila against China Southern Airlines and Active Travel. their bookings, [China Southern Airlines] exerted diligent efforts to OF THE PETITIONERS WAS NOT ATTENDED BY BAD FAITH
In their Complaint docketed as Civil Case No. 04-109574, comply with its obligation to [petitioners]. If at the outset, [China AND MALICE CONTRARY TO THE FINDINGS OF THE LOWER
petitioners sought for the payment of the amount of P87,375.00 as Southern Airlines] simply did not intend to comply with its promise COURT;
actual damages, P500,000.00 as moral damages, P500,000.00 as to transport [petitioners] back to Manila, it would not have taken
exemplary damages and cost of the suit.[12] the trouble of proposing that the latter could still board the plane
as "chance passengers" provided [that] they will pay the
In their Answer,[13] China Southern Airlines denied liability by necessary pay and penalties. III.THE COURT OF APPEALS COMMITTED GRAVE AND
alleging that petitioners were not confirmed passengers of the SERIOUS ERROR WHEN IT HELD THAT THE LEGAL
airlines but were merely chance passengers. According to the Thus, We believe and so hold that the damages recoverable by INTEREST COMMENCE ONLY FROM THE FINALITY OF THE
airlines, it was specifically provided in the issued tickets that [petitioners] are limited to the peso value of the PAL ticket they DECISION INSTEAD OF FROM THE DATE OF EXTRA-
petitioners are required to re-confirm all their bookings at least 72 had purchased for their return flight from Xiamen, plus attorney's JUDICIAL DEMAND ON 18 AUGUST 2003.[21]
hours before their scheduled time of departures but they failed to fees, in the amount of [P]30,000.00, considering that [petitioners]
do so which resulted in the automatic cancellation of their were ultimately compelled to litigate their claim[s] against [China The Court's Ruling
bookings. Southern Airlines]."[17]

The RTC then proceeded with the reception of evidence after the Since China Southern, Airlines' refusal to let petitioners board the We resolve to grant the petition.
pre-trial conference. plane was not attended by bad faith, the appellate court decided
not to award petitioners moral and exemplary damages. The CA A contract of carriage, in this case, air transport, is intended to
On 23 March 2009, the RTC rendered a Decision[14] in favor of the disposed in this wise: serve the traveling public and thus, imbued with public
petitioners and ordered Chkia Southern Airlines to pay damages interest.[22] The law governing common carriers consequently
in the amount of P692,000.00, broken down as follows: imposes an exacting standard of conduct,[23] viz:
"WHEREFORE, premises considered, the instant appeal is
hereby AFFIRMED with MODIFICATION in that the award of
"WHEREFORE, judgment is hereby rendered ordering the moral and exemplary damages are hereby DELETED."[18] "1755 of the New Civil Code. A common carrier is bound to carry
defendant [China Southern Airlines] to pay [petitioners]: passengers safely as far as human care and foresight can
Dissatisfied, petitioners timely interposed a Motion for Partial provide, using the utmost diligence of very cautious persons, with
1. The sum of [P]62,000.00 as actual damages; Reconsideration which was partially granted by the CA in a due regard for all the circumstances."
Resolution[19]dated 9 July 2014, to wit:
2. The sum of [P]300,000.00 as moral damages; When an airline issues a ticket to a passenger confirmed on a
particular flight, on a certain date, a contract of carriage arises,
3. The sum of [P]300,000.00 as exemplary damages; and "ACCORDINGLY, the instant Motion is PARTIALLY GRANTED. and the passenger has every right to expect that he would fly on
The Decision dated 19 March 2013 rendered by this Court in CA- that flight and on that date. If that does not happen, then the
4. The sum of [P]30,000.00 for attorney's fees. G.R. CV No. 94561 is hereby MODIFIED in that [China Southern carrier opens itself to a suit for breach of contract of carriage.[24] In
Airlines] is ORDERED to pay [petitioners] interest of 6% per an action based on a breach of contract of carriage, the aggrieved
The defendants' counterclaim against plaintiffs are [hereby] annum on the P62,000.00 as actual damages from the finality of party does not have to prove that the common carrier was at fault
dismissed for insufficiency of evidence [enough] to sustain the this Court's Decision until the same is fully satisfied."[20] or was negligent.[25] All he has to prove is the existence of the
damages claimed."[15] contract and the fact of its non-performance by the carrier,
Unflinching, petitioners elevated the matter before the Court by through the latter's failure to carry the passenger to its
On appeal, however, the CA modified the RTC Decision by filing the instant Petition for Review on Certiorari assailing the CA destination.[26]
deleting the award for moral and exemplary damages. According Decision and Resolution on the following grounds:
to the appellate court, petitioners failed to prove that China It is beyond question in the case at bar that petitioners had an
Southern Airlines' breach of contractual obligation was attended existing contract of air carriage with China Southern Airlines as
with bad faith.[16]The disquisition of the CA reads: The Issues evidenced by the airline tickets issued by Active Travel. When
they showed up at the airport and after they went through the carriage that merits the award of moral damages: The last issue is the reckoning point of the 6% interest on the
routine security check including the checking in of their luggage money judgment. Following this Court's ruling in Nacar v. Gallery
and the payment of the corresponding terminal fees, petitioners Frames,[33] we agree with the petitioners that the 6% rate of
were not allowed by China Southern Airlines to board on the "Clearly, JAL is liable for moral damages. It is firmly settled that interest per annum shall be reckoned from the date of their
plane. The airlines' claim that petitioners do not have confirmed moral damages are recoverable in suits predicated on breach of a extrajudicial demand on 18 August 2003 until the date of finality of
reservations cannot be given credence by the Court. The contract of carriage where it is proved that the carrier was guilty of this judgment. The total amount shall thereafter earn interest at
petitioners were issued two-way tickets with itineraries indicating fraud or bad faith, as in this case. Inattention to and lack of care the rate of six percent (6%) per annum from such finality of
the date and time of their return flight to Manila. These are binding for the interests of its passengers who are entitled to its utmost judgment until its satisfaction.
contracts of carriage.[27] China Southern Airlines allowed consideration, particularly as to their convenience, amount to bad
petitioners to check in their luggage and issued the necessary faith which entitles the passenger to an award of moral damages. WHEREFORE, premises considered, the petition is GRANTED.
claim stubs showing that they were part of the flight. It was only What the law considers as bad faith which may furnish the ground The Court hereby AWARDS petitioners the following amounts:
after petitioners went through all the required check-in procedures for an award of moral damages would be bad faith in securing the
that they were informed by the airlines that they were merely contract and in the execution thereof, as well as in the
chance passengers. Airlines companies do not, as a practice, enforcement of its terms, or any other kind of deceit." P62,000.00 as actual damages, with 6% interest per annum
accept pieces of luggage from passengers without confirmed from date of extrajudicial demand on 18 August 2003 until
reservations. Quite tellingly, all the foregoing circumstances lead Applying the foregoing yardstick in the case at bar, We find that (a) finality of this judgment, and the total amount to thereafter earn
us to the inevitable conclusion that petitioners indeed were the airline company acted in bad faith in insolently bumping interest at 6% per annum from finality of judgment until full
bumped off from the flight. We cannot from the records of this petitioners off the flight after they have completed all the pre- satisfaction;
case deduce the true reason why the airlines refused to board departure routine. Bad faith is evident when the ground personnel
petitioners back to Manila. What we can be sure of is the of the airline company unjustly and unreasonably refused to board (b) P300,000.00 as moral damages; and
unacceptability of the proffered reason that rightfully gives rise to petitioners to the plane which compelled them to rent a car and
the claim for damages. take the train to the nearest airport where they bought new sets of (c) P300,000.00 as exemplary damages.
plane tickets from another airline that could fly them home.
The prologue shapes the body of the petitioners' rights, that is, Petitioners have every reason to expect that they would be
that they are entitled to damages, actual, moral and exemplary. transported to their intended destination after they had checked in
their luggage and had gone through all the security checks.
Calalas vs. CA, et. al.
There is no doubt that petitioners are entitled to actual or Instead, China Southern Airlines offered to allow them to join the
compensatory damages. Both the RTC and the CA uniformly held flight if they are willing to pay additional cost; this amount is on top
GR No. 122039, May 31, 2000
that there was a breach of contract committed by China Southern of the purchase price of the plane tickets. The requirement to pay
Airlines when it failed to deliver petitioners to their intended an additional fare was insult upon injury. It is an aggravation of the
destination, a factual finding that we do not intend to depart from breach of contract. Undoubtedly, petitioners are entitled to the
in the absence of showing that it is unsupported by evidence. As award of moral damages. The purpose of awarding moral
Private respondent Eliza Jujeurche G. Sunga took a
the aggrieved parties, petitioners had satisfactorily proven the damages is to enable the injured party to obtain means, diversion
passenger jeepney owned and operated by petitioner Vicente
existence of the contract and the fact of its non-performance by or amusement that will serve to alleviate the moral suffering [that]
Calalas. As the jeepney was already full, Calalas gave Sunga an
China Southern Airlines; the concurrence of these elements called he has undergone by reason of defendant['s] culpable action.[30]
stool at the back of the door at the rear end of the vehicle. Along
for the imposition of actual or compensatory damages.
the way, the jeepney stopped to let a passenger off. Sunga
China Southern Airlines is also liable for exemplary damages as it
stepped down to give way when an Isuzu truck owned by
With respect to moral damages, the following provision of the New acted in a wantonly oppressive manner as succinctly discussed
Francisco Salva and driven by Iglecerio Verena bumped the
Civil Code is instructive: above against the petitioners. Exemplary damages which are
jeepney. As a result, Sunga was injured. Sunga filed a complaint
awarded by way of example or correction for the public good, may
against Calalas for violation of contract of carriage. Calalas filed a
be recovered in contractual obligations, as in this case, if
third party complaint against Salva. The trial court held Salva
Article 2220. Willful injury to property may be a legal ground for defendant acted in wanton, fraudulent, reckless, oppressive or
liable and absolved Calalas, taking cognizance of another civil
awarding moral damages if the court should find that, under the malevolent manner.[31]
case for quasi-delict wherein Salva and Verena were held liable to
circumstances, such damages are justly due. The same rule
Calalas. The Court of Appeals reversed the decision and found
applies to breaches of contract where the defendant acted Article 2216 of the Civil Code provides that assessment of
Calalas liable to Sunga for violation of contract of carriage.
fraudulently or in bad faith. damages is left to the discretion of the court according to the
circumstances of each case. This discretion is limited by the
Bad faith does not simply connote bad judgment or negligence. It principle that the amount awarded should not be palpably
imports dishonest purpose or some moral obliquity and conscious excessive as to indicate that it was the result of prejudice or
Whether or not Calalas exercised the extraordinary
doing of a wrong. It means breach of a known duty through some corruption on the part of the trial court. Simply put, the amount of
diligence required in the contract of carriage.
motive, interest or ill will that partakes the nature of fraud. Bad damages must be fair, reasonable and proportionate to the injury
faith is in essence a question of intention.[28] suffered.[32] With fairness as the benchmark, We find adequate the
amount of P300,000.00 each for moral and exemplary damages
In Japan Airlines v. Simangan,[29] the Court took the occasion to imposed by the trial court.
expound on the meaning of bad faith in a breach of contract of
RULING: Airways. Deanna and Nikolai then will be met by their Civil Code, plus attorney’s fees and costs of suit.
grandmother, Mrs. Regalado, at the Los Angeles Airport on their
NO. First, the jeepney was not properly parked, its rear portion scheduled arrival on 3 May 1980. Petitioner filed the instant petition. Petitioner maintains that moral
being exposed about two meters from the broad shoulders of the damages may be awarded in a breach of contract of air carriage
highway, and facing the middle of the highway in a diagonal On 2 May 1980, Deanna and Nikolai boarded Flight 106 in Manila. only if the mishap results in death of a passenger or if the carrier
angle. Second, it is undisputed that petitioner's driver took in more acted fraudulently or in bad faith, that is, by breach of a known
passengers than the allowed seating capacity of the jeepney. The On 3 May 1980, Deanna and Nikolai arrived at the San Francisco duty through some motive of interest or ill will, some dishonest
fact that Sunga was seated in an "extension seat" placed her in a Airport. However, the staff of United Airways refused to take purpose or conscious doing of wrong; if there was no finding of
peril greater than that to which the other passengers were aboard Deanna and Nikolai for their connecting flight to Los fraud or bad faith on its part; if, although it lost the indemnity bond,
exposed. Therefore, not only was petitioner unable to overcome Angeles because petitioner’s personnel in San Francisco could there was no finding that such loss was attended by ill will, or
the presumption of negligence imposed on him for the injury not produce the indemnity bond accomplished and submitted by some motive of interest, or any dishonest purpose; and if there
sustained by Sunga, but also, the evidence shows he was actually private respondents. The said indemnity bond was lost by was no finding that the loss was deliberate, intentional or
negligent in transporting passengers. We find it hard to give petitioner’s personnel during the previous stop-over in Honolulu, consciously done.
serious thought to petitioner's contention that Sunga's taking an Hawaii. Deanna and Nikolai were then left stranded at the San
"extension seat" amounted to an implied assumption of risk. It is Francisco Airport. Subsequently, Mr. Strigl, then the Lead Traffic
akin to arguing that the injuries to the many victims of the Agent of petitioner in San Francisco took Deanna and Nikolai to
tragedies in our seas should not be compensated merely because his residence where they stayed overnight. ISSUE:
those passengers assumed a greater risk of drowning by boarding
an overloaded ferry. This is also true of petitioner's contention that Meanwhile, Mrs. Regalado and several relatives waited for the Whether or not petitioner is correct that it should not pay moral
the jeepney being bumped while it was improperly parked arrival of Deanna and Nikolai at the Los Angeles Airport (LAX). damages.
constitutes caso fortuito. A caso fortuito is an event which could When United Airways landed at the LAX and its passengers
not be foreseen, or which, though foreseen, was inevitable. This disembarked, Mrs. Regalado sought Deanna and Nikolai but she
requires that the following requirements be present: (a) the cause failed to find them. Mrs. Regalado called private respondents and
of the breach is independent of the debtor's will; (b) the event is informed them that Deanna and Nikolai did not arrive at LAX. RULING:
unforeseeable or unavoidable; (c) the event is such as to render it Private respondents inquired about the location of Deanna and
impossible for the debtor to fulfill his obligation in a normal Nikolai from petitioner’s personnel, but the latter replied that they No. When an airline issues a ticket to a passenger, confirmed for
manner, and (d) the debtor did not take part in causing the injury were still verifying their whereabouts.On the morning of 4 May a particular flight on a certain date, a contract of carriage arises.
to the creditor. Petitioner should have foreseen the danger of 1980, Strigl took the kids to San Francisco Airport where the two The passenger has every right to expect that he be transported on
parking his jeepney with its body protruding two meters into the boarded a Western Airlines plane bound for Los Angeles. Later that flight and on that date, and it becomes the airline’s obligation
highway. that day, Deanna and Nikolai arrived at the Los Angeles Airport to carry him and his luggage safely to the agreed destination
where they were met by Mrs. Regalado. without delay. If the passenger is not so transported or if in the
PHILIPPINE AIRLINES, INC., Petitioner, vs. G.R. No. 123238 process of transporting, he dies or is injured, the carrier may be
On July 1980, private respondents, through their lawyer, sent a held liable for a breach of contract of carriage.
letter to petitioner demanding payment of 1 million pesos as
COURT OF APPEALS Respondents. September 22, 2008
damages for the gross negligence and inefficiency of its In breach of contract of air carriage, moral damages may be
employees in transporting Deanna and Nikolai. Petitioner did not recovered where (1) the mishap results in the death of a
heed the demand. passenger; or (2) where the carrier is guilty of fraud or bad faith;
or (3) where the negligence of the carrier is so gross and reckless
On November 1981, private respondents filed a complaint for as to virtually amount to bad faith.
damages against petitioner before the RTC. Private respondents
Sometime before 2 May 1980, private respondents spouses
alleged that Deanna and Nikolai were not able to take their It was established in the instant case that since Deanna and
Buncio purchased from petitioner Philippine Airlines, Incorporated,
connecting flight from San Francisco to Los Angeles as scheduled Nikolai would travel as unaccompanied minors, petitioner required
two plane tickets for their two minor children, (Deanna), then 9
because the required indemnity bond was lost on account of the private respondents to accomplish, sign and submit to it an
years of age, and (Nikolai), then 8 years old. Since Deanna and
gross negligence and malevolent conduct of petitioner’s indemnity bond. Evidently, petitioner was fully aware that Deanna
Nikolai will travel as unaccompanied minors, petitioner required
personnel. As a consequence thereof, Deanna and Nikolai were and Nikolai would travel as unaccompanied minors and, therefore,
private respondents to accomplish, sign and submit to it an
stranded in San Francisco overnight, thereby exposing them to should be specially taken care of considering their tender age and
indemnity bond. Private respondents complied with this
grave danger. This dilemma caused Deanna, Nikolai, Mrs. delicate situation.
requirement. For the purchase of the said two plane tickets,
Regalado and private respondents to suffer serious anxiety,
petitioner agreed to transport Deanna and Nikolai on 2 May 1980
mental anguish, wounded feelings, and sleepless nights. The foregoing circumstances reflect petitioner’s utter lack of care
from Manila to San Francisco, California, through one of its
for and inattention to the welfare of Deanna and Nikolai as
planes. Petitioner also agreed that upon the arrival of Deanna and
After trial, the RTC rendered a decision holding petitioner liable for unaccompanied minor passengers. They also indicate petitioner’s
Nikolai in San Francisco Airport on 3 May 1980, it would again
damages for breach of contract of carriage. It also held that failure to exercise even slight care and diligence in handling the
transport the two on that same day through a connecting flight
petitioner should pay exemplary damages by way of example or indemnity bond. Clearly, the negligence of petitioner was so gross
from San Francisco to Los Angeles, via another airline, United
correction for the public good under Article 2229 and 2232 of the
and reckless that it amounted to bad faith. PGP’s storage tanks in Calamba, Laguna. Upon inspection by CONTRIBUTORY NEGLIGENCE
PGP, the samples taken from the shipment showed discoloration
It is worth emphasizing that petitioner, as a common carrier, is demonstrating that it was damaged. PGP then sent a letter where Estacion vs. Bernardo, et. al
bound by law to exercise extraordinary diligence and utmost care it formally made an insurance claim for the loss it sustained.
in ensuring for the safety and welfare of its passengers with due Petitioner requested the GIT Insurance Adjusters, Inc. (GIT), to GR No. 144723, February 27, 2006
regard for all the circumstances. The negligent acts of petitioner conduct a Quantity and Condition Survey of the shipment which
signified more than inadvertence or inattention and thus issued a report stating that DOP samples taken were discolored. FACTS:
constituted a radical departure from the extraordinary standard of Inspection of cargo tanks showed manhole covers of ballast tanks’
care required of common carriers. ceilings loosely secured and that the rubber gaskets of the In the afternoon of October 16, 1982, respondent Noe was going
manhole covers of the ballast tanks re-acted to the chemical home to Dumaguete from Cebu, via Bato and Tampi. At Tampi,
As we have earlier found, petitioner breached its contract of causing shrinkage thus, loosening the covers and cargo ingress. he boarded a Ford Fiera passenger jeepney with plate no. NLD
carriage with private respondents, and it acted recklessly and Petitioner paid PGP the full and final payment for the loss and 720 driven by respondent Geminiano Quinquillera (Quinquillera),
malevolently in transporting Deanna and Nikolai as issued a Subrogation Receipt. Meanwhile, PGP paid the owned by respondent Cecilia Bandoquillo (Bandoquillo), and was
unaccompanied minors and in handling their indemnity bond. We respondent the as full payment for the latter’s services. On 15 July seated on the extension seat placed at the center of the Fiera.
have also ascertained that private respondents are entitled to 1991, an action for damages was instituted by the petitioner- From San Jose, an old woman wanted to ride, so respondent Noe
moral damages because they have sufficiently established insurer against respondent-carrier before the RTC, Br.16, City of offered his seat. Since the Fiera was already full, respondent Noe
petitioner’s gross negligence which amounted to bad faith. This Manila. Respondent filed an answer which admitted that it hung or stood on the left rear carrier of the vehicle. Somewhere
being the case, the award of exemplary damages is warranted. undertook to transport the shipment, but alleged that before the along Barangay Sto. Niño, San Jose, Negros Oriental, between
The records show that Mrs. Regalado died in 1995 at the age of DOP was loaded into its barge, the representative of PGP, kilometers 13 and 14, the Fiera began to slow down and then
74, while Deanna passed away in 2003 at the age of 32. This Adjustment Standard Corporation, inspected it and found the stopped by the right shoulder of the road to pick up passengers.
being the case, the foregoing award of damages plus interests in same clean, dry, and fit for loading, thus accepted the cargo Suddenly, an Isuzu cargo truck, owned by petitioner and driven by
their favor should be given to their respective heirs. without any protest or notice. As carrier, no fault and negligence Gerosano, which was traveling in the same direction, hit the rear
can be attributed against respondent as it exercised extraordinary end portion of the Fiera where respondent Noe was standing. Due
diligence in handling the cargo. After due hearing, the trial court to the tremendous force, the cargo truck smashed respondent
rendered a Decision in favor of plaintiff. On appeal, the Court of Noe against the Fiera crushing his legs and feet which made him
Appeals promulgated its Decision reversing the trial court. A fall to the ground. A passing vehicle brought him to the Silliman
petition for review on certiorari was filed by the petitioner with this University Medical Center where his lower left leg was amputated.
Court. Police investigation reports showed that respondent Noe was one
NOTICE OF CLAIM of the 11 passengers of the Fiera who suffered injuries; that when
ISSUE: the Fiera stopped to pick up a passenger, the cargo truck bumped
Philippine Charter Insurance vs. Chemoil the rear left portion of the Fiera; that only one tire mark from the
Whether or not the notice of claim was filed within the required front right wheel of the cargo truck was seen on the road. A sketch
GR No. 136888, June 29, 2005 period? of the accident was drawn by investigator Mateo Rubia showing
the relative positions of the two vehicles, their distances from the
FACTS: RULING: shoulder of the road and the skid marks of the right front wheel of
the truck measuring about 48 feet.
Philippine Charter Insurance Corporation is a domestic YES. The petitioner contends that the notice of contamination was
corporation engaged in the business of non-life insurance. given by PGP employee, to Ms. Abastillas, at the time of the ISSUE:
Respondent Chemoil Lighterage Corporation is also a domestic delivery of the cargo, and therefore, within the required period.
corporation engaged in the transport of goods. On 24 January The respondent, however, claims that the supposed notice given Whether or not the petitioner’s liability be equitably
1991, Samkyung Chemical Company, Ltd., based in South Korea, by PGP over the telephone was denied by Ms. Abastillas. The reduced due to contributory negligence?
shipped 62.06 metric tons of the liquid chemical DIOCTYL Court of Appeals declared that a telephone call made to
PHTHALATE (DOP) on board MT “TACHIBANA” which was defendant-company could constitute substantial compliance with RULING:
valued at US$90,201.57 and another 436.70 metric tons of DOP the requirement of notice. However, it must be pointed out that
valued at US$634,724.89 to the Philippines. The consignee was compliance with the period for filing notice is an essential part of NO. As the employer of Gerosano, petitioner is primarily and
Plastic Group Phils., Inc. in Manila. PGP insured the cargo with the requirement. solidarily liable for the quasi-delict committed by the former.
Philippine Charter Insurance Corporation against all risks. The Petitioner is presumed to be negligent in the selection and
insurance was under Marine Policies No. MRN-30721 dated 06 supervision of his employee by operation of law and may be
February 1991. Marine Endorsement No. 2786 dated 11 May relieved of responsibility for the negligent acts of his driver, who at
1991 was attached and formed part of MRN-30721, amending the the time was acting within the scope of his assigned task, only if
latter’s insured value to P24,667,422.03, and reduced the he can show that he observed all the diligence of a good father of
premium accordingly. The ocean tanker MT “TACHIBANA” a family to prevent damage
unloaded the cargo to the tanker barge, which shall transport the
same to Del Pan Bridge in Pasig River and haul it by land to