Spouses Cruz vs. Sun Holidays, Inc.

GR No. 186312
29 June 2010

FACTS
Spouses Cruz files a complaint for damages against Sun Holidays arising from the death of their son who
perished with his wife on board the boat M/B Coco Beach III that capsized en route Batangas from Puerto
Galera where the couple had stayed at Coco Beach Island Resort owned and operated by respondent.
Their stay was by virtue of a tour package-contract with respondent that included transportation to and
from the Resort and the point of departure in Batangas. Eight of the passengers, including petitioners’ son
and his wife, died during the accident. Sun denied any responsibility for the incident which it considered
to be a fortuitous event. Petitioners allege that as a common carrier, Sun was negligent in allowing the
boat to sail despite the storm warning bulletins issued by PAGASA. Respondent denied being a common
carrier, alleging that its boats are not available to the public but are only used as ferry resort carrier. It also
claimed to have exercised the utmost diligence in ensuring the safety of its passengers, and that contrary
to petitioners’ allegation, there was no storm as the Coast Guard in fact cleared the voyage. M/B Coco
Beach III was not filled to capacity and had sufficient life jackets for its passengers.

RTC dismissed the complaint. CA denied the appeal holding that Sun is a private carrier which is only
required to observe ordinary diligence and that the proximate cause of the incident was a fortuitous event.

ISSUE
Whether M/B Coco Beach III breached a contract of carriage

HELD
Respondent is a common carrier. Its ferry services are so intertwined with its business as to be properly
considered ancillary thereto. The constancy of respondent’s ferry services in its resort operations is
underscored by its having its own Coco Beach boats. And the tour packages it offers, which include the
ferry services, may be availed of by anyone who can afford to pay the same. These services are thus
available to the public.

In the De Guzman case, Article 1732 of the Civil Code defining “common carriers” has deliberately
refrained from making distinctions on whether the carrying of persons or goods is the carrier’s principal
business, whether it is offered on a regular basis, or whether it is offered to the general public.

Under the Civil Code, common carriers, from the nature of their business and for reasons of public policy,
are bound to observe extraordinary diligence for the safety of the passengers transported by them,
according to all the circumstances of each case. They are bound to carry the passengers safely as far as
human care and foresight can provide, using the utmost diligence of very cautious persons, with due
regard for all the circumstances.

When a passenger dies or is injured in the discharge of a contract of carriage, it is presumed that the
common carrier is at fault or negligent. In fact, there is even no need for the court to make an express
finding of fault or negligence on the part of the common carrier. This statutory presumption may only be
overcome by evidence that the carrier exercised extraordinary diligence.
SPS. FERNANDO vs. NORTHWEST AIRLINES, INC.

SPS. FERNANDO vs. NORTHWEST AIRLINES, INC.

G.R. No. 212038

February 08, 2017

FACTS:

Spouses Jesus and Elizabeth S. Fernando are frequent flyers of Northwest Airlines, Inc. and are holders
of Elite Platinum World Perks Card, the highest category given to frequent flyers of the carrier.

The Fernandos initiated the filing of the instant case which arose from two separate incidents: first,
when Jesus Fernando arrived at Los Angeles Airport on December 20, 2001; second, when the
Fernandos were to depart from the LA Airport on January 29, 2002.

Jesus Fernando arrived at the LA Airport via Northwest Airlines Flight No. NW02 to join his family for
Christmas, however upon arrival at the airport it was found out that his documents reflect his return
ticket as August 2001. So he approached Northwest personnel who was later identified as Linda
Puntawongdaycha, but the latter merely glanced at his ticket without checking its status with the
computer and peremptorily said that the ticket has been used and could not be considered as valid.

The Immigration Officer brought Jesus Fernando to the interrogation room of the Immigration and
Naturalization Services where he was asked humiliating questions for more than two (2) hours. When he
was finally cleared by the Immigration Officer, he was granted only a twelve-day stay in the United
States, instead of the usual six months.

When the Fernandos reached the gate area where boarding passes need to be presented, Northwest
supervisor Linda Tang stopped them and demanded for the presentation of their paper tickets (coupon
type). They failed to present the same since, according to them, Northwest issued electronic tickets
(attached to the boarding passes) which they showed to the supervisor. In the presence of the other
passengers, Linda Tang rudely pulled them out of the queue. Elizabeth Fernando explained to Linda Tang
that the matter could be sorted out by simply verifying their electronic tickets in her computer and all
she had to do was click and punch in their Elite Platinum World Perks Card number. But when the
Fernandos reached the boarding gate, the plane had already departed. They were able to depart,
instead, the day after, or on January 30, 2002, and arrived in the Philippines on January 31, 2002.

Northwest airlines employees on the other hand claim that they were “courteous” and “was very kind
enough” to assist them. Northwest also offered them free hotel accommodations but they, again,
rejected the offer Northwest then made arrangements for the transportation of the Fernandos from the
airport to their house in LA, and booked the Fernandos on a Northwest flight that would leave the next
day, January 30, 2002. On January 30, 2002, the Fernandos flew to Manila on business class seats.
ISSUES:

(1) Whether or not there was breach of contract of carriage and whether it was done In a wanton,
malevolent or reckless manner amounting to bad faith.

(2) Whether or not Northwest is liable for the payment of moral damages and attorney’s fees and
whether it is liable to pay more than that awarded by the RTC.

HELD:

(1). Yes. The Fernandos’ cause of action against Northwest stemmed from a breach of contract of
carriage. A contract is a meeting of minds between two persons whereby one agrees to give something
or render some service to another for a consideration. There is no contract unless the following
requisites concur:

1. consent of the contracting parties; 

2. an object certain which is the subject of the contract; and 

3. the cause of the obligation which is established.

A contract of carriage is defined as one whereby a certain person or association of persons obligate
themselves to transport persons, things, or goods from one place to another for a fixed price.

Under Article 1732 of the Civil Code, this “persons, corporations, firms, or associations engaged in the
business of carrying or transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public” is called a common carrier. Undoubtedly, a contract
of carriage existed between Northwest and the Fernandos. They voluntarily and freely gave their
consent to an agreement whose object was the transportation of the Fernandos from LA to Manila, and
whose cause or consideration was the fare paid by the Fernandos to Northwest.

(2) Yes. Northwest is in bad faith. While We agree that the discrepancy between the date of actual travel
and the date appearing on the tickets of the Fernandos called for some verification, however, the
Northwest personnel failed to exercise the utmost diligence in assisting the Fernandos. The actuations
of Northwest personnel in both subject incidents are constitutive of bad faith.

On the first incident, Jesus Fernando even gave the Northwest personnel the number of his Elite
Platinum World Perks Card for the latter to access the ticket control record with the airline’s computer
for her to see that the ticket is still valid. But Linda Puntawongdaycha refused to check the validity of the
ticket in the computer. As a result, the Immigration Officer brought Jesus Fernando to the interrogation
room of the INS where he was interrogated for more than two (2) hours. When he was finally cleared by
the Immigration Officer, he was granted only a twelve (12)-day stay in the United States (US), instead of
the usual six (6) months.
EASTERN SHIPPING LINES, INC., vs.
BPI/MS INSURANCE CORP., & MITSUI SUMITOMO INSURANCE CO., LTD.
G.R. No. 182864, January 12, 2015

FACTS:

For two separate transactions in 2004, Sumitomo Corporation, a corporation based in Yokohama,
Japan shipped on board the vessels of petitioner Eastern Shipping Lines Inc. (ESLI) coils of various steel
sheet for transportation and delivery at the port of Manila in favor of consignee Calamba Steel Center
located in Saimsim, Calamba, Laguna. The Shipments were insured with the respondents BPI/MS
Insurance Corporation (BPI/MS) and Mitsui Sumitomo Insurance Company (Mitsui) against all risks.

The first shipment arrived at the port of Manila in an unknown condition and was turned over to
Asian Terminals Inc. (ATI) for safekeeping. Upon withdrawal of the shipment by Calamba Steel, it was
found out that part of the shipment was damaged and was in bad order condition such that there was a
Request for Bad Order Survey. It was found out that the damage amounted to US$4,598.85 prompting
Calamba Steel to reject the damaged shipment for being unfit for the intended purpose.
Sumitomo Corporation again shipped on board ESLI’s vessel coils of various Steel for
transportation to and delivery at the port of Manila in favor of Calamba Steel. Again, the shipment was
insured by respondents against all risk. The second shipment arrived at the port of Manila partly damaged
and in bad order. The coils sustained further damage during the discharge from vessel to shore until its
turnover to ATI’s custody for safekeeping. Upon withdrawal from ATI and delivery to Calamba Steel, As it
did before, Calamba Steel rejected the damaged shipment for being unfit for the intended purpose.
Calamba Steel attributed the damages on both shipments to ESLI as the carrier and ATI as the
arrastre operator in charge of the handling and discharge of the coils and filed a claim against them.
When ESLI and ATI refused to pay, Calamba Steel filed an insurance claim for the total amount of the
cargo against BPI/MS and Mitsui as cargo insurers. As a result, BPI/MS and Mitsui became subrogated in
place of and with all the rights and defenses accorded by law in favor of Calamba Steel.
Opposing the complaint, ATI denied the allegations and insisted that the coils in two shipments
were already damaged upon receipt from ESLI’s vessels. It likewise insisted that it exercised due
diligence in the handling of the shipments and invoked that in case of adverse decision, its liability should
not exceed P5,000.00 pursuant to Section 7.01, Article VII of the Contract for Cargo Handling Services
between Philippine Ports Authority (PPA) and ATI.
On its part, ESLI denied the allegations of the complainants and averred that the damage to both
shipments was incurred while the same were in the possession and custody of ATI and/or of the
consignee or its representatives.
The RTC Makati City rendered a decision finding both the ESLI and ATI liable for the damages
sustained by the two shipments. Upon appeal, Both ESLI and ATI invoked the limitation of liability of
US$500.00 per package as provided in Commonwealth Act No. 65 or the Carriage of Goods by Sea Act
(COGSA). The CA absolved ATI from liability in its decision.

ISSUE:
1. Whether or not ESLI is liable for the damaged shipment transported and delivered by its
vessels.
2. Whether or not ESLI can invoke the limitation of liability of US$500.00 per package as
provided in Commonwealth Act No. 65 or the Carriage of Goods by Sea Act (COGSA).

HELD:
Common carriers, from the nature of their business and on public policy considerations, are
bound to observe extra ordinary diligence in the vigilance over the goods transported by them. Subject to
certain exceptions enumerated under Article 1734 of the Civil Code, common carriers are responsible for
the loss, destruction, or deterioration of the goods. The extraordinary responsibility of the common carrier
lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier
for transportation until the same are delivered, actually or constructively, by the carrier to the consignee,
or to the person who has a right to receive them.
In maritime transportation, a bill of lading is issued by a common carrier as a contract, receipt and
symbol of the goods covered by it.  If it has no notation of any defect or damage in the goods, it is
considered as a "clean bill of lading." A clean bill of lading constitutes prima facie evidence of the receipt
by the carrier of the goods as therein described.

Based on the bills of lading issued, it is undisputed that ESLI received the two shipments of coils
from shipper Sumitomo Corporation in good condition at the ports of Yokohama and Kashima, Japan.
However, upon arrival at the port of Manila, some coils from the two shipments were partly dented and
crumpled as evidenced by the Turn Over Survey of Bad Order Cargoes prior to turnover to ATI. Mere
proof of delivery of the goods in good order to a common carrier and of their arrival in bad order at
their destination constitutes a prima facie case of fault or negligence against the carrier. If no
adequate explanation is given as to how the deterioration, loss, or destruction of the goods
happened, the transporter shall be held responsible. From the foregoing, the fault is attributable to
ESLI. While no longer an issue, it may be nonetheless state that ATI was correctly absolved of
liability for the damage.

In the issue of limitation of liability, the law of the country to which the goods are to be transported
shall govern the liability of the common carrier for their loss, destruction or deterioration. The Code takes
precedence as the primary law over the rights and obligations of common carriers with the Code of
Commerce and COGSA applying suppletorily. The New Civil Code provides that a stipulation limiting a
common carrier’s liability to the value of the goods appearing in the bill of lading is binding, unless the
shipper or owner declares a greater value. In addition, 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.
COGSA, on the other hand, provides under Section 4, Subsection 5 that an amount recoverable
in case of loss or damage shall not exceed US$500.00 per package or per customary freight unless the
nature and value of such goods have been declared by the shipper before shipment and inserted in the
bill of lading. Accordingly, the issue whether or not ESLI has limited liability as a carrier is determined by
either absence or presence of proof that the nature and value of the goods have been declared by
Sumitomo Corporation and inserted in the bills of lading.
There is no question about the declaration of the nature, weight and description of the goods on
the first bill of lading. The bills of lading represent the formal expression of the parties’ rights, duties and
obligations. It is the best evidence of the intention of the parties which is to be deciphered from the
language used in the contract, not from the unilateral post facto assertions of one of the parties, or of third
parties who are strangers to the contract. Thus, when the terms of an agreement have been reduced to
writing, it is deemed to contain all the terms agreed upon and there can be, between the parties and their
successors in interest, no evidence of such terms other than the contents of the written agreement.
As to the non-declaration of the value of the goods on the second bill of lading, we see no error
on the part of the appellate court when it ruled that there was a compliance of the requirement provided
by COGSA. The declaration requirement does not require that all the details must be written down on the
very bill of lading itself. It must be emphasized that all the needed details are in the invoice, which
"contains the itemized list of goods shipped to a buyer, stating quantities, prices, shipping charges," and
other details which may contain numerous sheets. Compliance can be attained by incorporating the
invoice, by way of reference, to the bill of lading provided that the former containing the description of the
nature, value and/or payment of freight charges is as in this case duly admitted as evidence.
Wherefore, the petition for review on certiorari of ESLI was denied and the decision of the CA
was affirmed.
GR 182208; OCT. 14, 2015

G.V. FLORIDA TRANSPORT, INC., Petitioner, v. HEIRS OF ROMEO L. BATTUNG, JR.,

REPRESENTED BY ROMEO BATTUNG, SR., Respondents.

Nature and Effects of Obligation: Negligence

Facts: Respondents alleged that in the evening of March 22, 2003, Battung boarded petitioner's bus
bound for Manila. Battung then got shot at his head. The bus conductor, Daraoay, notified Duplio, the
driver, of the incident and thereafter, brought Romeo to the hospital, but the latter was pronounced dead
on arrival. Hence, respondents filed a complaint on July 15, 2008 for damages based on a breach of
contract of carriage against petitioner, Duplio, and Baraoay, contending that as a common carrier,
petitioner and its employees are bound to observe extraordinary diligence in ensuring the safety of
passengers; and in case of injuries and/or death on the part of a passenger, they are presumed to be at
fault and, thus, responsible therefor. Petitioner however, maintained that they had exercised the
extraordinary diligence required by law from common carriers. In this relation, they claimed that a
common carrier is not an absolute insurer of its passengers and that Battung's death should be properly
deemed a fortuitous event.

The RTC ruled in respondents' favor, finding that petitioner, et al. were unable to rebut the presumed
liability of common carriers in case of injuries/death to its passengers due to their failure to show that they
implemented the proper security measures to prevent passengers from carrying deadly weapons inside
the bus which, in this case, resulted in the killing of Battung. Such was affirmed by the CA.

Issue: Whether or not the petitioner should be held liable for damages to respondent arising from culpa
contractual.

Held: No. The law exacts from common carriers the highest degree of diligence in ensuring the safety of
its passengers. In case of death of or injuries to passengers, common carriers are presumed to have
been at fault or to have acted negligently. Notwithstanding, however, the law does not make the common
carrier an insurer of the absolute safety of its passengers. Being a mere presumption, the aforementioned
is rebuttable by proof that the common carrier had exercised extraordinary diligence as required by law in
the performance of its contractual obligation, or that the injury suffered by the passenger was solely due
to a fortuitous event. Thus, it is imperative to show that the injury or death to the passenger/s arose from
the negligence of the common carrier and/or its employees in providing safe transport to its passengers.

In this case, Battung's death was neither caused by any defect in the means of transport or in the method
of transporting, or to the negligent or willful acts of petitioner's employees. Instead, the case involves the
death of Battung wholly caused by the surreptitious act of a co-passenger who, after consummating such
crime, hurriedly alighted from the vehicle.

Moreover, while Article 1763 of the Civil Code states that “a common carrier is responsible for injuries
suffered by a passenger on account of the willful acts or negligence of other passengers or of strangers, if
the common carrier's employees through the exercise of the diligence of a good father of a family could
have prevented or stopped the act or omission," no danger was shown to exist in this case so as to impel
petitioner or its employees to implement heightened security measures to ensure the safety of its
passengers. There was also no showing that during the course of the trip, Battung's killer made
suspicious actions which would have forewarned petitioner's employees of the need to conduct thorough
checks on him or any of the passengers. Common carriers should be given sufficient leeway in assuming
that the passengers they take in will not bring anything that would prove dangerous to himself, as well as
his co-passengers, unless there is something that will indicate that a more stringent inspection should be
made.

In this case, records reveal that both Duplio and Daraoay observed nothing which would rouse their
suspicion that the men were armed or were to carry out an unlawful activity. With no such indication, there
was no need for them to conduct a more stringent search (i.e., bodily search) on the aforesaid men. By all
accounts, therefore, it cannot be concluded that petitioner or any of its employees failed to employ the
diligence of a good father of a family.

GV Florida Transport, Inc. v Battung (2015)

GV Florida Transport, Inc., Petitioner v Heirs of Romeo L. Battung GR No. 208802, October
14, 2015  

FACTS: Battung boarded the bus of petitioner in Delfin Albano, Isabela, bound for Manila.
He was seated at the first row behind the driver and slept during the ride. Battung was
seated at the first row behind the driver and slept during the ride. When the bus reached
the Philippine Carabao Center in Muñoz, Nueva Ecija, the bus driver, Duplio, stopped the
bus and alighted to check the tires. At this point, a man who was seated at the fourth row of
the bus stood up, shot Battung at his head, and then left with a companion. The bus
conductor, Daraoay, notified Duplio of the incident and thereafter, brought Romeo to the
hospital, but the latter was pronounced dead on arrival. Hence, respondents filed a
complaint on July 15, 2008 for damages in the aggregate amount of P1,826,000.00 based
on a breach of contract of carriage against petitioner, Duplio, and Baraoay (petitioner, et
al.) before the RTC, docketed as Civil Case No. 22-1103.   

ISSUE: Whether petitioner is liable for damages arising from culpa contractual  

RULING: No.  

Where, as in the instant case, the injury sustained by the petitioner was in no way due to
any defect in the means of transport or in the method of transporting or to the negligent or
wilful acts of [the common carrier'sl employees, and therefore involving no issue of
negligence in its duty to provide safe and suitable [care] as well as competent employees,
with the injury arising wholly from causes created by strangers over which the carrier had
no control or even knowledge or could not have prevented, the presumption is rebutted and
the carrier is not and ought not to be held liable. To rule otherwise would make the common
carrier the insurer of the absolute safety of its passengers which is not the intention of the
lawmakers. (Emphasis and underscoring supplied)   

The case involves the death of Battung wholly caused by the surreptitious act of a co-
passenger who, after consummating such crime, hurriedly alighted from the vehicle.   

The law exacts from common carriers (i.e., those persons, corporations, firms, or
associations engaged in the business of carrying or transporting passengers or goods or
both, by land, water, or air, for compensation, offering their services to the public) the
highest degree of diligence (i.e., extraordinary diligence) in ensuring the safety of its
passengers.   

Articles 1733 and 1755 of the Civil Code state:   

Art. 1733. Common carriers, from the nature of their business and for reasons of public
policy, are bound to observe extraordinary diligence in the vigilance over the goods and for
the safety of the passengers transported by them, according to all the circumstances of
each case.   
Art. 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.   

In this relation, Article 1756 of the Civil Code provides that "[i]n case of death of or injuries
to passengers, common carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary diligence as prescribed in
Articles 1733 and 1755." This disputable presumption may also be overcome by a showing
that the accident was caused by a fortuitous event.   

The foregoing provisions notwithstanding, it should be pointed out that the law does not
make the common carrier an insurer of the absolute safety of its passengers.   

While the law requires the highest degree of diligence from common carriers in the safe
transport of their passengers and creates a presumption of negligence against them, it does
not, however, make the carrier an insurer of the absolute safety of its passengers.   

Article 1755 of the Civil Code qualifies the duty of extraordinary care, vigilance[,] and
precaution in the carriage of passengers by common carriers to only such as human care
and foresight can provide. What constitutes compliance with said duty is adjudged with due
regard to all the circumstances.   

Article 1756 of the Civil Code, in creating a presumption of fault or negligence on the part of
the common carrier when its passenger is injured, merely relieves the latter, for the time
being, from introducing evidence to fasten the negligence on the former, because the
presumption stands in the place of evidence. Being a mere presumption, however, the same
is rebuttable by proof that the common carrier had exercised extraordinary diligence as
required by law in the performance of its contractual obligation, or that the injury suffered
by the passenger was solely due to a fortuitous event.   

In fine, we can only infer from the law the intention of the Code Commission and Congress
to curb the recklessness of drivers and operators of common carriers in the conduct of their
business.   

Thus, it is clear that neither the law nor the nature of the business of a transportation
company makes it an insurer of the passenger's safety, but that its liability for personal
injuries sustained by its passenger rests upon its negligence, its failure to exercise the
degree of diligence that the law requires.   

Therefore, it is imperative for a party claiming against a common carrier under the above-
said provisions to show that the injury or death to the passenger/s arose from the
negligence of the common carrier and/or its employees in providing safe transport to its
passengers.    

In Pilapil v. CA, the Court clarified that where the injury sustained by the passenger was in
no way due   

(1) to any defect in the means of transport or in the method of transporting, or  (2) to the
negligent or willful acts of the common carrier's employees with respect to the foregoing –  

such as when the injury arises wholly from causes created by strangers which the carrier
had no control of or prior knowledge to prevent — there would be no issue regarding the
common carrier's negligence in its duty to provide safe and suitable care, as well as
competent employees in relation to its transport business; as such, the presumption of
fault/negligence foisted under Article 1756 of the Civil Code should not apply:   

First, as stated earlier, the presumption of fault or negligence against the carrier is only a
disputable presumption.[The presumption] gives in where contrary facts are established
proving either that the carrier had exercised the degree of diligence required by law or the
injury suffered by the passenger was due to a fortuitous event.   

Since Battung's death was caused by a co-passenger, the applicable provision is Article
1763 of the Civil Code, which states that:   

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

Notably, for this obligation, the law provides a lesser degree of diligence, i.e., diligence of a
good father of a family, in assessing the existence of any culpability on the common
carrier's part.   

Case law states that the concept of diligence of a good father of a family "connotes
reasonable care consistent with that which an ordinarily prudent person would have
observed when confronted with a similar situation.   

The test to determine whether negligence attended the performance of an obligation is:   

Did the defendant in doing the alleged negligent act use that reasonable care and caution
which an ordinarily prudent person would have used in the same situation? If not, then he is
guilty of negligence."    

At bar, no danger i.e. intelligent reports from law enforcement agents that certain lawless
elements were planning to hijack and burn some of its buses, as to impel petitioner or its
employees to implement heightened security measures to ensure the safety of its
passengers. There was also no showing that during the course of the trip, Battung's killer
made suspicious actions which would have forewarned petitioner's employees of the need to
conduct thorough checks on him or any of the passengers.    

Relevantly, the Court, in Nocum v. Laguna Tayabas Bus Company, has held that common
carriers should be given sufficient leeway in assuming that the passengers they take in will
not bring anything that would prove dangerous to himself, as well as his co-passengers,
unless there is something that will indicate that a more stringent inspection should be
made.  Not to be lightly considered must be the right to privacy to which each passenger is
entitled. He cannot be subjected to any unusual search, when he protests the
innocuousness of his baggage and nothing appears to indicate the contrary, as in the case
at bar.   

in compelling the passenger to submit to more rigid inspection, after the passenger had
already declared that the box contained mere clothes and other miscellaneous, could not
have justified invasion of a constitutionally protected domain.  
REGIONAL CONTAINER LINES (RCL) OF SINGAPORE vs. THE NETHERLANDS INSURANCE CO.
(PHILIPPINES), INC.

G.R. No. 168151; September 4, 2009

BRION, J.:

RCL is a foreign corporation based in Singapore. It does business in the Philippines through its agent,
EDSA Shipping, a domestic corporation organized and existing under Philippine laws.

Respondent Netherlands Insurance Company (Philippines), Inc. (Netherlands Insurance) is likewise a

domestic corporation engaged in the marine underwriting business.

FACTS: 405 cartons of Epoxy molding compound were consigned to be shipped from Singapore to
Manila for TEMIC. U-Freight Singapore contracted Pacific Eagle to transport cargo. It was stored in its
refrigerated container as cargo is highly presihable. The temperature was 0º Celsius. Pacific Eagle
loaded it to M/V Piya Bhum owned by RCL which the former had a slot charter agreement with. RCL
issued Bill of Lading in favor of Pacific Eagle. Netherlands Insurance issued a Marine Open Policy to
insure cargo in favor of Temic to cover loss/damages. Upon arrival at Manila, the cargoes were surveyed
and it was found to be at the constant required temperature for several ldays. But later on, it was found
out that the temperature changed when the cargo had already been unloaded, to 33º Celsius.
Surveyor believed the fluctuation was caused by the burnt condenser fan motor of the refrigerated
container. Temic received the shipment and found it to be damaged. Temic filed a claim for cargo loss
against Netherlands Insurance, with supporting claims documents. The Netherlands Insurance paid
Temic the sum ofP1,036,497.00 under the terms of the Marine Open Policy. Temic then executed a loss
and subrogation receipt in favor of Netherlands Insurance.

Seven months from delivery of the cargo - Netherlands Insurance filed a complaint for subrogation of
insurance settlement with the Regional Trial Court, RCL and TMS Ship Agencies (TMS) thought to be
the local agent of M/V Piya, EDSA Shipping, Eagle Liner Shipping Agencies, U-Freight Singapore, and U-
Ocean (Phils.), Inc. (U-Ocean). RCL and EDSA Shipping filed motion to dismiss based on demurer to
evidence. They attributed negligence to their co-defendants, that fluctuation of temperature occurred
after cargo has been discharged from vessel but in the reefer van and that Netherlands is not party in
interest hence has no cause of action. RTC found RCL and EDSA Shipping not liable but this was reversed
by CA and barred them from presenting evidence since they filed for demurer.

Defense of RCL and EDSA Shipping:

1. They attributed any negligence that may have caused the loss of the shipment to their co- defendants.

a. They contend that the cause of the damage to the cargo was the “fluctuation of the
temperature in the reefer van,” which fluctuation occurred after the cargo had already been discharged
from the vessel; no fluctuation, they point out, arose when the cargo was still on board M/V Piya Bhum.
 b. As the cause of the damage to the cargo occurred after the same was already discharged from
the vessel and was under the custody of the arrastre operator (International Container Terminal
Services, Inc. or ICTSI), RCL and EDSA Shipping posit that the presumption of negligence provided in
Article 1735 of the Civil Code should not apply. What applies in this case is Article 1734,
particularly paragraphs 3 and 4 thereof, which exempts the carrier from liability for loss or damage to
the cargo when it is caused either by an act or omission of the shipper or by the character of the goods
or defects in the packing or in the containers.

2. They likewise asserted that no valid subrogation exists, as the payment made by Netherlands
Insurance to the consignee was invalid.

3. That the Netherland Insurance has no cause of action, and is not the real party-in-interest,

4. The claim is barred by laches/prescription.

RCL and EDSA Shipping, in their motion to dismiss based on demurrer to evidence:

1. Netherlands Insurance had failed to prove any valid subrogation,

2. Netherlands Insurance had failed to establish that any negligence on their part or that the loss was
sustained while the cargo was in their custody.

RTC ruled:

1. There was valid subrogation.

2. The defendants could not be held liable for the loss or damage, as their respective liabilities ended at
the time of the discharge of the cargo from the ship at the Port of Manila.

Netherlands Insurance seasonably appealed the order of dismissal to the CA.

CA ruled:

1. Against EDSA Shipping Agency and RCL. They were held liable for the damages/ reimbursement.

2. The CA dismissed Netherland Insurances complaint against the other defendants after finding that the
claim had already been barred by prescription

3. They are deemed to have waived their right to present evidence, and the presumption of
negligence must stand.

ISSUE: Whether the CA correctly held RCL and EDSA Shipping liable as common carriers under the
theory of presumption of negligence.

RULING: Yes CA is correct. RCL and EDSA Shipping failed to satisfy this standard of evidence and in
fact offered no evidence at all on this point; a reversal of a dismissal based on a demurrer to evidence
bars the defendant from presenting evidence supporting its allegations. The CA correctly ruled that
they are deemed to have waived their right to present evidence, and the presumption of
negligence must stand. It is for this reason as well that the court finds RCL and EDSA Shipping’s claim
that the loss or damage to the cargo was caused by a defect in the packing or in the containers.

The present case is governed by the following provisions of the Civil Code:

ART. 1733. Common carriers, from the nature of their business and for reasons of public policy, are
bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the
passengers transported by them according to all the circumstances of each case.

Such extraordinary diligence in the vigilance over the goods is further expressed in articles 1734,
1735, and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for the safety of the passengers is
further set forth in articles1755 and 1756.

ART. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods,
unless the same is due to any of the following causes only:

1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

2) Act of the public enemy in war, whether international or civil;

3) Act of omission of the shipper or owner of the goods;

4) The character of the goods or defects in the packing or in the containers;

5) Order or act of competent public authority.

ART. 1735. In all cases other that those mentioned in Nos. 1, 2, 3, 4 and 5 of the preceding article, if
the goods are lost, destroyed, or deteriorated, common carriers are presumed to have been at
fault or to have acted negligently, unless they prove that they observed extraordinary diligence
as required by article 1733.

ART. 1736. The extraordinary responsibility of the common carrier lasts from the time the goods
are unconditionally placed in the possession of, and received by the carrier for transportation
until the sane are delivered, actually or constructively, by the carrier to the consignee, or to the
person who has a right to receive them, without prejudice to the provisions of articles 1738.

ART. 1738. The extraordinary liability of the common carrier continues to be operative even
during the time the goods are stored in a warehouse of the carrier at the place of destination, until
the consignee has been advised of the arrival of the goods and has had reasonable opportunity
thereafter to remove them or otherwise dispose of them.

ART. 1742. Even if the loss, destruction, or deterioration of the goods should be caused by the
character of the goods, or the faulty nature of the packing or of the containers, the common
carrier must exercise due diligence to forestall or lessen the loss .

Rules for the liability of a common carrier for lost or damaged cargo as follows: (Central Shipping
Company, Inc. v. Insurance Company of North America)

(1) Common carriers are bound to observe extraordinary diligence over the goods they transport,
according to all the circumstances of each case;

(2) In the event of loss, destruction, or deterioration of the insured goods, common carriers are
responsible, unless they can prove that such loss, destruction, or deterioration was brought about
by, among others, flood, storm, earthquake, lightning, or other natural disaster or calamity; and
 (3) In all other cases not specified under Article 1734 of the Civil Code, common carriers are
presumed to have been at fault or to have acted negligently, unless they observed extraordinary
diligence.

Arguments of RCL and EDSA Shipping are not meritorious.

A common carrier is presumed to have been negligent if it fails to prove that it exercised
extraordinary vigilance over the goods it transported. When the goods shipped are either lost or
arrived in damaged condition, a presumption arises against the carrier of its failure to observe that
diligence, and there need not be an express finding of negligence to hold it liable.

To overcome the presumption of negligence, the common carrier must establish by

adequate proof that it exercised extraordinary diligence over the goods. It must do more than
merely show that some other party could be responsible for the damage.

In the present case, RCL and EDSA Shipping failed to prove that they did exercise that degree
of diligence required by law over the goods they transported. Indeed, there is sufficient
evidence showing that the fluctuation of the temperature in the refrigerated container van, as recorded
in the temperature chart, occurred after the cargo had been discharged from the vessel and was already
under the custody of the arrastre operator, ICTSI. This evidence, however, does not disprove that the
condenser fan – which caused the fluctuation of the temperature in the refrigerated container – was not
damaged while the cargo was being unloaded from the ship. It is settled in maritime law jurisprudence
that cargoes while being unloaded generally remain under the custody of the carrier; RCL and EDSA

Shipping failed to dispute this.

RCL and EDSA Shipping could have offered evidence before the trial court to show that the damage to
the condenser fan did not occur: (1) while the cargo was in transit; (2) while they were in the act of
discharging it from the vessel; or (3) while they were delivering it actually or constructively to the
consignee. They could have presented proof to show that they exercised extraordinary care and
diligence in the handling of the goods, but they opted to file a demurrer to evidence. As the order
granting their demurrer was reversed on appeal, the CA correctly ruled that they are deemed to
have waived their right to present evidence, and the presumption of negligence must stand.

It is for this reason as well that we find RCL and EDSA Shipping’s claim that the loss or damage to
the cargo was caused by a defect in the packing or in the containers. To exculpate itself from
liability for the loss/damage to the cargo under any of the causes, the common carrier is burdened to
prove any of the causes in Article 1734 of the Civil Code claimed by it by a preponderance of evidence.
If the carrier succeeds, the burden of evidence is shifted to the shipper to prove that the carrier is
negligent. RCL and EDSA Shipping, however, failed to satisfy this standard of evidence and in fact
offered no evidence at all on this point; a reversal of a dismissal based on a demurrer to evidence bars
the defendant from presenting evidence supporting its allegations.
R Transport Corp. vs. Eduardo Pante 599 SCRA 747 (2009)

FACTS:
 R Transport operates a bus line which transports passengers from Cubao, Quezon City to
Gapan, Nueva Ecija.
 27 January 1995: Pante rode a bus from Cubao (P48 fare). Along a highway in Bulacan,
the bus hit a tree and a house due to the reckless driving of Johnny Mediquia.
 Pante sustained a “laceration frontal area, with fracture of the right humerous1”.
o His operation, confinement, and medications caused him P30K. He became
unemployed as Goldilocks refused to re-employ him due to his condition.
o He had to undergo a second operation after four years. He spent another P15k.
o The only assistance petitioner gave was the amount of P7K to reimburse him for
the stainless steel plate placed in his arm. Other than that, petitioner refused to
assist Pante.
 14 March 1995: Pante sued for damages.
 Petitioner in its answer denied fault claiming that it exercised the diligence of a good
father of the family in the selection and supervision of employees, and that the accident
was force majeure.
 The case went on for 7 years. The delays were due to the multiple postponements and
unexplained absence of petitioner’s counsel. Its rights to cross-examine and present
evidence were eventually forfeited as a consequence.
 RTC ruled in favour of Pante. CA affirmed RTC’s decision.

ISSUE:
W/N Petitioner is liable for damages despite Pante not presenting substantial evidence to support
his claim.

HELD:
YES. Petitioner is liable for damages.

 Petitioner, as a common carrier, is expected to exercise extraordinary diligence, and has

the duty to transport its passengers safely to their destination.
 ARTICLE 1756 OF THE CIVIL CODE: In case of death or injuries to passengers,
common carriers are presumed at fault or negligent unless they are able to prove their
exercise of extraordinary diligence.
 ARTICLE 1759: Common carriers are also liable for the negligence of their employees.
o The liability of common carriers does not cease upon proof that they exercised
extraordinary diligence of a good father of the family in the selection and
supervision of employees.
 Petitioner cannot claim that it was denied due process which prevented it from presenting
evidence in his defense. Due to the unexplained absences of his counsel, the hearings had
to be constantly postponed, which resulted in a 7-year delay of the case. It was given the
opportunity to present its evidence, but was considered to have waived its right.

1
  Petitioner also contends that the CA and TC erred in awarding damages in favour of
Pante in the amount of P22,000 based on a statement issued by the Baliuag Hospital and
not based on the receipt. The Court held that this was without merit since in another case,
the Court awarded damages for hospitalization expenses based on the statement of
account issued by the Makati Medical Center.
 The Court also affirmed the award of moral damages, citing Spouses Ong vs. CA where
moral damages were given to passengers who suffered physical injuries. It is the usual
practice to award moral damages for physical injuries sustained. Pante here suffered
physical pain, mental anguish and anxiety as a result of the accident. P50,000 is proper.
 An award of exemplary damages is also proper, as the driver was manning the bus in a
reckless, negligent, and imprudent manner. This will provide as an example or as a
correction for the public good.

PETITION IS DENIED.

ABOITIZ SHIPPING CORPORATION v. INSURANCE COMPANY OF NORTH AMERICA

FACTS:
On June 20, 1993 MSAS Cargo International Limited and/or Associated and/or Subsidiary
Companies (MSAS) procured an "all-risk" marine insurance policy from ICNA UK Limited of
London for wooden work tools and workbenches purchased by consignee Science Teaching Improvement
Project (STIP), Ecotech Center, Sudlon Lahug, Cebu City. On July 26, 1993, the cargo was received by
Aboitiz Shipping Corporation (Aboitiz) through its duly authorized booking representative, Aboitiz
Transport System. August 1, 1993 the container van was loaded on board MV Super Concarrier I. August
3, 1993 the shipment arrived in Cebu City, as per Stripping Report, the checker noted that the crates were
slightly broken or cracked at the bottom. On August 11, 1993 the cargo was withdrawn by the
representative of the consignee, Science Teaching Improvement Project (STIP) and delivered to Don
Bosco Technical High School, Punta Princesa, Cebu City. August 13, 199, Mayo B. Perez, Head of
Aboiti received a call from the receiver Mr. Bernhard Willig that the cargo sustained water damage so he
checked the other cargo but they were dry. In a letter dated August 15, 1993, Willig informed Aboitiz that
the damage was caused by water entering through the broken bottom parts of the crate. Consignee filed a
claim against ICNA. CAC reported to ICNA that the shipment was placed outside the warehouse when it
was delivered on July 26, 1993 and it was only on July 31, 1993 when the shipment was stuffed inside
another container van for shipment to Cebu.  Weather report shows that the heavy rains on July 28 and
29, 1993 caused the damages.  Aboitiz refused to settle the claim. ICNA paid the amount of
P280,176.92 to consignee and a subrogation receipt was duly signed by Willig. ICNA then advised
Aboitiz of the receipt signed in its favor but received no reply so it filed for collection at the RTC. 
RTC ruled against ICNA on the ground that the subrogation Form is self-serving and has no
probative value since Wellig was not presented to the witness stand. CA reversed the RTC ruling on the
ground that the right of subrogation accrues simply upon payment by the insurance company of the
insurance claim even assuming that it is an unlicensed foreign corporation

ISSUE: WON ICNA can claim under the right of subrogation

HELD: YES.
Only when that foreign corporation is "transacting" or "doing business" in the country will a license
be necessary before it can institute suits.  It may, however, bring suits on isolated business transactions,
which is not prohibited under Philippine law
The policy benefits any subsequent assignee, or holder, including the consignee, who may file claims
on behalf of the assured.
Insurance Code. Sec. 57. A policy may be so framed that it will inure to the benefit of whomsoever,
during the continuance of the risk, may become the owner of the interest insured.
Civil Code. Art. 2207. If the plaintiff's property has been insured, and he has received indemnity from
the insurance company for the injury or loss arising out of the wrong or breach of contract complained of,
the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the
person who has violated the contract. If the amount paid by the insurance company does not fully cover
the injury or loss, the aggrieved party shall be entitled to recover the deficiency from the person causing
the loss or injury.

This right of subrogation, however, has its limitations. 

First, both the insurer and the consignee are bound by the contractual stipulations under the bill of
lading.
Second, the insurer can be subrogated only to the rights as the insured may have against the
wrongdoer. If by its own acts after receiving payment from the insurer, the insured releases the
wrongdoer who caused the loss from liability, the insurer loses its claim against the latter.

Article 366. Within twenty-four hours following the receipt of the merchandise, the claim against the
carrier for damages or average which may be found therein upon opening the packages, may be made,
provided that the indications of the damage or average which give rise to the claim cannot be ascertained
from the outside part of such packages, in which case the claim shall be admitted only at the time of
receipt.
After the periods mentioned have elapsed, or the transportation charges have been paid, no claim
shall be admitted against the carrier with regard to the condition in which the goods transported were
delivered.
The call was made 2 days from delivery, a reasonable period considering that the goods could not
have corroded instantly overnight such that it could only have sustained the damage during transit.
Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the preceding article, if
the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to
have acted negligently, unless they prove that they observed extraordinary diligence as required in Article
1733.
The shipment delivered to the consignee sustained water damage. SC agree with the findings of the
CA that petitioner failed to overturn this presumption

PAL v. Court of Appeals 226 SCRA 423

Facts:

Zapatos purchased a ticket from Philippine Air Lines (PAL) wherein it was agreed that the
latter would transport him to Ozamiz City. The plane’s route was from Cebu-Ozamiz-
Cotabato. However, due to unfavoarable weather conditions and the fact that PAL did not
have an all-weather airport, PAL had bypassed Ozamiz City. PAL then informed Zapatos of
his options, to return to Cebu on the same day, or take the next flight to Cebu the following
day, or to take the next available flight to Ozamiz City. Zapatos chose to return to Ozamiz
City on the same day. However, there were only six (6) seats available and, the seats were
given to the passengers according to their check-in sequence at Cebu. Consequently,
Zapatos was stranded in Cotabato City, where a battle between the government and the
Muslims was ongoing.

During his stay in Cotabato City, PAL also failed to provide accomodations for Zapatos. It
also refused to have the latter hitch a ride with its employees on a ford truck bound for the
City. It also failed to return Zapatos’ luggage.

This prompted Zapatos to file a complaint for damages against Philippine Air Lines for
breach of contract.

PAL claimed that it should not be charged with the task of looking after the passengers'
comfort and convenience because the diversion of the flight was due to a fortuitous event,
and that if made liable, an added burden is given to PAL which is over and beyond its duties
under the contract of carriage. 

Issue:

w/n the occurrence of a fortuitous event extinguished PAL’s duty to observe extraordinary
diligence towards its passengers?

Ruling:

No. The SC ruled in favor of Zapatos.

The contract of air carriage is a peculiar one. Being imbued with public interest, the law
requires common carriers to carry the passengers safely as far as human care and foresight
can provide, using the utmost diligence of very cautious persons, with due regard for all the
circumstances.  20 In Air France v. Carrascoso,  21 we held that —
 A contract to transport passengers is quite different in kind and degree from
any other contractual relation. And this, because of the relation which an air
carrier sustains with the public. Its business is mainly with the travelling
public. It invites people to avail of the comforts and advantages it offers. The
contract of air carriage, therefore, generates a relation attended with a public
duty . . . . ( emphasis supplied).

The position taken by PAL in this case clearly illustrates its failure to grasp the exacting
standard required by law. Undisputably, PAL's diversion of its flight due to inclement
weather was a fortuitous event. Nonetheless, such occurrence did not terminate
PAL's contract with its passengers. Being in the business of air carriage and the
sole one to operate in the country, PAL is deemed equipped to deal with situations
as in the case at bar. What we said in one case once again must be stressed, i.e., the
relation of carrier and passenger continues until the latter has been landed at the
port of destination and has left the carrier's premises.   22  Hence, PAL necessarily
would still have to exercise extraordinary diligence in safeguarding the comfort,
convenience and safety of its stranded passengers until they have reached their
final destination. On this score, PAL grossly failed considering the then ongoing battle
between government forces and Muslim rebels in Cotabato City and the fact that the private
respondent was a stranger to the place.

JAPAN AIRLINES vs. SIMANGAN

GR No. 170141 April 22, 2008
Third Division Reyes

FACTS:
Respondent needed to go to the US to donate his kidney to his ailing cousin. Having obtained an
emergency US Visa, respondent purchased a round trip ticket from petitioner JAL. He was scheduled to a
flight bound for LA via Japan. On the date of his flight, respondent passed through rigid immigration and
security routines before being allowed to board a JAL plane.
While inside the plane, respondent was asked to show his travel documents. After which he was
ordered by the crew to leave the plane, imputing that respondent is carrying falsified travel documents.
Respondent pleaded but was ignored and under constraint he gets off the plane. The plane took off and
respondent was left behind.
Respondent was refunded with the cost of his ticket minus 500 USD, when JAL found out
eventually that his travel documents were not falsified and in order. Respondent filed an action for damages
against JAL.

RTC RULING:
JAL is liable for beach of contract of carriage, and should pay 1M as MD, 500K as ED, 250K as AF
+ cost of suit. JAL appealed contending it is not guilty of breach of contract of carriage and not liable for
damages.

CA RULING:
 Affirmed RTC decision with modification as to amount of damages for being scandalously
excessive. 500K MD, 250K ED and NO AT.

ISSUE:
WON JAL is guilty of breach of contract of carriage.
WON Simangan is entitled to moral and exemplary damages.

HELD:
JAL is guilty of breach of contract of carriage and is liable for damages. Petition of JAL was denied.
CA decision was affirmed with modification. 500K ED, 100K ED, 200K AF.

RATIO:
Breach of contract of carriage
In an action for breach of contract of carriage, all that is required of plaintiff is to prove the
existence of such contract and its non-performance by the carrier through the failure to carry the passenger
safely to his destination. Simangan complied with these requisites. Damage was accrued by JAL when
Simangan was bumped off despite his protestations and valid travel documents and notwithstanding his
contract of carriage with JAL.

Award of moral damages in breach of contract of carriage.

As a general rule, moral damages are not recoverable in actions for damages predicated on a
breach of contract for it is not enumerated under Art 2219 NCC. As an exception, such damages are
recoverable in:
1. Mishaps resulting to a death of a passenger (Art. 1764 NCC)
2. When carrier is guilty of fraud or bad faith (Art. 2220)
JAL breached its contract of carriage with respondent in bad faith, when its crew ordered
respondent to disembark while the latter is already settled in his assigned seat under the guise of verifying
the genuineness of his travel documents. Inattention to and lack of care for the interest of its passengers
who are entitled ot its utmost consideration, particularly as to their convenience, amount to bad faith which
entitles the passenger to award of moral damages.

Award of exemplary damages in breach of contract of carriage.

Exemplary damages maybe recovered in contractual obligations as a way of example or correction
for the public good.JAL is liable for exemplary damages as its acts constitute wanton, oppressive and
malevolent acts against respondent. Passengers have the right to be treated by the carrier’s employees
with kindness, respect, courtesy and due consideration and are entitled to be protected against personal
misconduct, injurious language, indignities and abuses from such employees.

LOADMASTERS CUSTOMS SERVICES, INC., vs. GLODEL BROKERAGE CORPORATION

and R&B INSURANCE CORPORATION, / G.R. No. 179446 / January 10, 2011

FACTS:

            The case is a petition for review on certiorari under Rule 45 of the Revised Rules of
Court assailing the August 24, 2007 Decision of the Court of Appeals (CA) in CA-G.R. CV No.
82822.
            On August 28, 2001, R&B Insurance issued Marine Policy No. MN-00105/2001 in favor
of Columbia to insure the shipment of 132 bundles of electric copper cathodes against All Risks.
On August 28, 2001, the cargoes were shipped on board the vessel "Richard Rey" from Isabela,
Leyte, to Pier 10, North Harbor, Manila. They arrived on the same date.
            Columbia engaged the services of Glodel for the release and withdrawal of the cargoes
from the pier and the subsequent delivery to its warehouses/plants. Glodel, in turn, engaged the
services of Loadmasters for the use of its delivery trucks to transport the cargoes to Columbia’s
warehouses/plants in Bulacan and Valenzuela City.
            The goods were loaded on board twelve (12) trucks owned by Loadmasters, driven by
its employed drivers and accompanied by its employed truck helpers. Of the six (6) trucks route
to Balagtas, Bulacan, only five (5) reached the destination. One (1) truck, loaded with 11
bundles or 232 pieces of copper cathodes, failed to deliver its cargo.
            Later on, the said truck, was recovered but without the copper cathodes. Because of this
incident, Columbia filed with R&B Insurance a claim for insurance indemnity in the amount
ofP1,903,335.39. After the investigation, R&B Insurance paid Columbia the amount
ofP1,896,789.62 as insurance indemnity.
            R&B Insurance, thereafter, filed a complaint for damages against both Loadmasters and
Glodel before the Regional Trial Court, Branch 14, Manila (RTC), It sought reimbursement of
the amount it had paid to Columbia for the loss of the subject cargo. It claimed that it had been
subrogated "to the right of the consignee to recover from the party/parties who may be held
legally liable for the loss."
            On November 19, 2003, the RTC rendered a decision holding Glodel liable for damages
for the loss of the subject cargo and dismissing Loadmasters’ counterclaim for damages and
attorney’s fees against R&B Insurance.
            Both R&B Insurance and Glodel appealed the RTC decision to the CA.
            On August 24, 2007, the CA rendered that the appellee is an agent of appellant Glodel,
whatever liability the latter owes to appellant R&B Insurance Corporation as insurance
indemnity must likewise be the amount it shall be paid by appellee Loadmasters. Hence,
Loadmasters filed the present petition for review on certiorari.

ISSUE:
Whether or not Loadmasters and Glodel are common carriers to determine their liability for the
loss of the subject cargo.
RULING:

The petition is PARTIALLY GRANTED. Judgment is rendered declaring petitioner Loadmasters

Customs Services, Inc. and respondent Glodel Brokerage Corporation jointly and severally
liable to respondent
Under Article 1732 of the Civil Code, common carriers are persons, corporations, firms, or
associations engaged in the business of carrying or transporting passenger or goods, or both by
land, water or air for compensation, offering their services to the public. Loadmasters is a
common carrier because it is engaged in the business of transporting goods by land, through its
trucking service. It is a common carrier as distinguished from a private carrier wherein the
carriage is generally undertaken by special agreement and it does not hold itself out to carry
goods for the general public. Glodel is also considered a common carrier within the context of
Article 1732.  For as stated and well provided in the case of Schmitz Transport & Brokerage
Corporation v. Transport Venture, Inc., a customs broker is also regarded as a common carrier,
the transportation of goods being an integral part of its business.
Loadmasters and Glodel, being both common carriers, are mandated from the nature of their
business and for reasons of public policy, to observe the extraordinary diligence in the vigilance
over the goods transported by them according to all the circumstances of such case, as
 required by Article 1733 of the Civil Code. When the Court speaks of extraordinary diligence, it
is that extreme measure of care and caution which persons of unusual prudence and
circumspection observe for securing and preserving their own property or rights. With respect to
the time frame of this extraordinary responsibility, the Civil Code provides that the exercise of
extraordinary diligence lasts from the time the goods are unconditionally placed in the
possession of, and received by, the carrier for transportation until the same are delivered,
actually or constructively, by the carrier to the consignee, or to the person who has a right to
receive them.
The Court is of the view that both Loadmasters and Glodel are jointly and severally liable to R &
B Insurance for the loss of the subject cargo. Loadmasters’ claim that it was never privy to the
contract entered into by Glodel with the consignee Columbia or R&B Insurance as subrogee, is
not a valid defense.
For under ART. 2180. The obligation imposed by Article 2176 is demandable not only for one’s
own acts or omissions, but also for those of persons for whom one is responsible.
xxxx
Employers shall be liable for the damages caused by their employees and household helpers
acting within the scope of their assigned tasks, even though the former are not engaged in any
business or industry.
It is not disputed that the subject cargo was lost while in the custody of Loadmasters whose
employees (truck driver and helper) were instrumental in the hijacking or robbery of the
shipment. As employer, Loadmasters should be made answerable for the damages caused by
its employees who acted within the scope of their assigned task of delivering the goods safely to
the warehouse.
Glodel is also liable because of its failure to exercise extraordinary diligence. It failed to ensure
that Loadmasters would fully comply with the undertaking to safely transport the subject cargo
to the designated destination. Glodel should, therefore, be held liable with Loadmasters. Its
defense of force majeure is unavailing.
For the consequence, Glodel has no one to blame but itself. The Court cannot come to its aid
on equitable grounds. "Equity, which has been aptly described as ‘a justice outside legality,’ is
applied only in the absence of, and never against, statutory law or judicial rules of
procedure." The Court cannot be a lawyer and take the cudgels for a party who has been at
fault or negligent.

PET: FGU Insurance Corporation

RES: CA; San Miguel Corporation (SMC); Estate of Ang Gui represented by Lucio, Julian, Jaime, all surnamed
Ang; Co To

These are two separate Petitions for review assailing the decision of the Court of Appeals which affirmed
the decision of RTC of Cebu City.

1. Evidence shows that Anco Enterprises Company (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.

2. Since the D/B Lucio had no engine of its own, it could not maneuver by itself and had to be towed
by a tugboat for it to move from one place to another.
 3. On September 23, 1979, SMC shipped from Mandaue City, on board the D/B Lucio for towage by
M/T ANCO:
a. Bill of Lading #1: 25,000 cases of Pale Pilsen + 350 cases of Cerveza Negra to Estancia,
Iloilo
b. Bill of Lading #2: 15,000 cases of Pale Pilsen + 200 cases of Cerveza Negra to San
Jose, Antique

4. When the barge and tugboat arrived at Antique in the afternoon, the clouds over the area were
dark and the waves were already big. SMCs Supervisor, Fernando Macabuag, requested ANCOs
representative to transfer the barge to a safer place because the vessel might not be able to
withstand the big waves. ANCO did not heed the request because he was confident.

5. On October 01, 1979, 10pm, the crew of D/B Lucio abandoned the vessel because the barges
rope attached to the wharf was cut off by the big waves.

6. Thus, ANCO failed to deliver to SMCs consignee 29,210 cases of Pale Pilsen and 550 cases of
Cerveza Negra. The value amounted to P1,346,197. SMC filed a complaint for Breach of
Contract of Carriage and Damages against ANCO for the amount aforesaid plus interest &
damages

7. Upon Ang Guis death, ANCO, as a partnership, was dissolved. Hence, SMC filed a second
amended complaint impleading the surviving partner, Co To and the Estate of Ang Gui
represented by Lucio, Julian and Jaime, all surnamed Ang.

8. ANCO admitted that the cases of beer were indeed loaded on the vessel belonging to them. It
claimed however that it had an agreement with SMC that ANCO would not be liable for any
losses or damages resulting to the cargoes by reason of fortuitous event. Since the cases of beer
Pale Pilsen and Cerveza Negra were lost by reason of a storm, a fortuitous event which battered
and sunk the vessel in which they were loaded, they should not be held liable. 

9. ANCO filed a Third-Party Complaint against FGU alleging that before the vessel of ANCO left for
San Jose, the cargoes were insured with FGU. ANCO alleged that the third-party defendant
corporation should be held liable to indemnify or reimburse ANCO whatever amounts, or
damages, it may be required to pay to SMC.

10. The trial court found that while the cargoes were indeed lost due to fortuitous event, there was
failure on ANCOs part to observe the degree of diligence required. The trial court thus held the
Estate of Ang Gui and Co To liable to SMC for the amount of the lost shipment.  FGU liable to
bear 53% of the amount of the lost cargoes.CA affirmed in toto.

I.
WON ANCO exercised due diligence?

II.
WON respondent Court of Appeals committed grave abuse of discretion in holding FGU liable under
the insurance contract considering the circumstances surrounding the loss of the cargoes?

I. NO.
ANCO claims that their crewmembers exercised due diligence to prevent or minimize the loss of the
cargoes but their efforts proved no match to the forces unleashed by the typhoon. The argument does not
persuade.

Caso fortuito or force majeure by definition, are extraordinary events not foreseeable or avoidable, events
that could not be foreseen, or which though foreseen, were inevitable. It is therefore not enough that the
event should not have been foreseen or anticipated, as is commonly believed but it must be one
impossible to foresee or to avoid. In this case, the calamity which caused the loss of the cargoes was not
unforeseen nor was it unavoidable. In fact, the other vessels in the port of San Jose, Antique, managed to
transfer to another place, a circumstance which prompted SMCs District Sales Supervisor to request that
the D/B Lucio be likewise transferred.

To be exempted from responsibility, the natural disaster should have been the proximate and only cause
of the loss. There must have been no contributory negligence on the part of the common carrier.

II. FGU not liable.

It is a basic rule in insurance that the carelessness and negligence of the insured or his agents constitute
no defense on the part of the insurer. This rule however presupposes that the loss has occurred due to
causes which could not have been prevented by the insured, despite the exercise of due diligence.

The question now is whether there is a certain degree of negligence on the part of the insured or his
agents that will deprive him the right to recover under the insurance contract. According to the Court,
while mistake and negligence of the master or crew are incident to navigation and constitute a part of the
perils that the insurer is obliged to incur, such negligence or recklessness must not be of such gross
character as to amount to misconduct or wrongful acts; otherwise, such negligence shall release the
insurer from liability under the insurance contract.

In the case at bar, both the trial court and the appellate court had concluded from the evidence that the
crewmembers of both the D/B Lucio and the M/T ANCO were blatantly negligent.

Taking into account the circumstances present in the instant case, concludes that the blatant negligence
of ANCOs employees is of such gross character that it amounts to a wrongful act which must exonerate
FGU from liability under the insurance contract.

GR No. 172682, July 27, 2016

Sulpicio Lines Inc. (Petitioner) v Napoleon Sisante (Respondents)
First Division
Ponente: Bersamin, J.

Nature of Action: Action for damages for breach of contract of carriage.

FACTS:

The M/V Princess of the Orient, a passenger vessel owned and operated by the petitioner, sank
near Fortune Island in Batangas. Of the 388 recorded passengers, 150 were lost. Napoleon Sesante, then a
member of the Philippine National Police (PNP) and a lawyer, was one of the passengers who survived
the sinking. He sued the petitioner for breach of contract and damages. In its defense, the petitioner
insisted on the seaworthiness of the M/V Princess of the Orient due to its having been cleared to sail from
the Port of Manila by the proper authorities; that the sinking had been due to force majeure; that it had not
been negligent; and that its officers and crew had also not been negligent because they had made
preparations to abandon the vessel because they had launched life rafts and had provided the passengers
assistance in that regard. The RTC rendered judgement in favor of plaintiff Napoleon Sesante and ordered
defendant to pay temperate and moral damages. The RTC observed that the petitioner, being negligent,
was liable to Sesante pursuant to Articles 1739 and 1759 of the Civil Code. The CA reduced the award of
the temperate damages to the approximate cost of Sesante's lost personal belongings and held that
petitioner remained civilly liable.

The petitioner has attributed the sinking of the vessel to the storm notwithstanding its position on
the seaworthiness of M/V Princess of the Orient. Yet, the findings of the BMI directly contradicted the
petitioner's attribution, as the BMI found that petitioner’s fault was the immediate and proximate cause of
the sinking due to the Captain's erroneous maneuvers of the M/V Princess of the Orient minutes before
she sunk.

ISSUE:

Whether or not the petitioner is liable for moral damages.

RULING:

Yes. The Court awarded moral damages due to the totality of the negligence by the officers and
crew of the Princess of the Orient coupled with the seeming indifference of the petitioner to render
assistance to Sesante.

The petitioner argues that moral damages could be meted against a common carrier only in the
following instances, to wit: (1) in the situations enumerated by Article 2201 of the Civil Code; (2) in
cases of the death of a passenger; or (3) where there was bad faith on the part of the common carrier. It
contends that none of these instances obtained herein; hence, the award should be deleted.

We agree with the petitioner that moral damages may be recovered in an action upon breach of
contract of carriage only when: (a) death of a passenger results, or (b) it is proved that the carrier was
guilty of fraud and bad faith, even if death does not result. However, moral damages may be awarded if
the contractual breach is found to be wanton and deliberately injurious, or if the one responsible acted
fraudulently or with malice or bad faith.

The negligent acts of the officers and crew of M/V Princess of the Orient could not be ignored in
view of the extraordinary duty of the common carrier to ensure the safety of the passengers. The totality
of the negligence by the officers and crew of M/V Princess of the Orient, coupled with the seeming
indifference of the petitioner to render assistance to Sesante, warranted the award of moral damages.

Nedlloyd Lijnen Bv Rotterdam & East Asiatic vs. Glow Laks

Enterprises (GR 156330)
The Facts
Petitioner Nedlloyd Lijnen B.V. Rotterdam (Nedlloyd) is a foreign corporation engaged in
the business of carrying goods by sea, whose vessels regularly call at the port of Manila. It is
doing business in the Philippines thru its local ship agent, co-petitioner East Asiatic Co., Ltd.
(East Asiatic).

Respondent Glow Laks Enterprises, Ltd., is likewise a foreign corporation organized and
existing under the laws of Hong Kong. It is not licensed to do, and it is not doing business in, the
Philippines.

On or about September 1987, respondent loaded on board of M/S Scandutch, garments

in complete and in good order for pre-carriage to the port of Hong Kong, and were transferred
to M/S Amethyst for final carriage to Colon, Free Zone, Panama.

Both vessels, M/S Scandutch and M/S Amethyst, are owned by Nedlloyd represented in
the Phlippines by its agent, East Asiatic. The goods which were valued at US$53,640.00 was
agreed to be released to the consignee, Pierre Kasem, International, S.A., upon presentation of
the original copies of the covering bills of lading.

Upon arrival of the vessel at the Port of Colon on 23 October 1987, petitioners
purportedly notified the consignee of the arrival of the shipments, and its custody was turned
over to the National Ports Authority in accordance with the laws, customs regulations and
practice of trade in Panama.

By an unfortunate turn of events, however, unauthorized persons managed to forge the

covering bills of lading and on the basis of the falsified documents, the ports authority released
the goods.

Petitioners filed a civil case before the RTC in Manila holding the respondents liable for
the misdelivery of the goods and seeking for the recovery of the amount of US$53,640.00,
including the legal interest from the date of the first demand.

DEFENSE:

 Petitioners asserted in their Answer that they were never remiss in their
obligation as a common carrier and the goods were discharged in good order
and condition into the custody of the National Ports Authority of Panama in
accordance with the Panamanian law.
  They averred that they cannot be faulted for the release of the goods to
unauthorized persons, their extraordinary responsibility as a common carrier
having ceased at the time the possession of the goods were turned over to the
possession of the port authorities.

The Issues

Dissatisfied with the foregoing disquisition, petitioners impugned the adverse Court of
Appeals Decision before the Court on the following grounds:

I.
Is there a need to prove Panamanian Laws just because they had been judicially admitted;
therefore since it was admitted by in the course of the proceeding, it does not require a proof?

II.

Were the laws of Panama proven by presenting the [GACETA] OFFICIAL OF REPUBLICA DE
PANAMA NO. 17.596 where the applicable Panamanian Laws were officially published and by
testimony of expert witnesses?

III.

Will the CA ruling be conceded even if there was failure of proof, the legal questions presented
should be resolved favorable because the carrier discharged its duty whether the Panamanian
Law or under the Philippine Law?

The Court’s Ruling

Petition is bereft of merit.

Rationale 1:

Foreign laws do not prove themselves in our jurisdiction and our courts are not
authorized to take judicial notice of them. Like any other fact, they must be alleged and proved.
To prove a foreign law, the party invoking it must present a copy thereof and comply
with Sections 24 and 25 of Rule 132 of the Revised Rules of Court which read:

SEC. 24. Proof of official record. — The record of public documents

referred to in paragraph (a) of Section 19, when admissible for any purpose, may
be evidenced by an official publication thereof or by a copy attested by the
 officer having the legal custody of the record, or by his deputy, and
accompanied, if the record is not kept in the Philippines, with a certificate that
such officer has the custody. If the office in which the record is kept is in a
foreign country, the certificate may be made by a secretary of the embassy or
legation, consul general, consul, vice-consul, or consular agent or by any officer
in the foreign service of the Philippines stationed in the foreign country in
which the record is kept, and authenticated by the seal of his office.

SEC. 25. What attestation of copy must state. — Whenever a copy of a

document or record is attested for the purpose of the evidence, the attestation
must state, in substance, that the copy is a correct copy of the original, or a
specific part thereof, as the case may be. The attestation must be under the
official seal of the attesting officer, if there be any, or if
he be the clerk of a court having a seal, under the seal of such court.

For a copy of a foreign public document to be admissible, the following requisites are
mandatory:
(1) it must be attested by the officer having legal custody of the records or by his
deputy; and
(2) it must be accompanied by a certificate by a secretary of the embassy or legation,
consul general, consul, vice -consular or consular agent or foreign service officer, and with the
seal of his office.
Such official publication or copy must be accompanied, if the record is not kept in the
Philippines, with a certificate that the attesting officer has the legal custody thereof. 16 The
certificate may be issued by any of the authorized Philippine embassy or consular officials
stationed in the foreign country in which the record is kept, and authenticated by the seal of his
office. The attestation must state, in substance, that the copy is a correct copy of the original, or
a specific part thereof, as the case may be, and must be under the official seal of the attesting
officer.

Rationale #2:

a) Contrary to the contention of the petitioners, the Panamanian laws, particularly Law 42
and its Implementing Order No. 7, were not duly proven in accordance with Rules of
Evidence and as such, it cannot govern the rights and obligations of the parties in the
case at bar.

While a photocopy of the Gaceta Official of the Republica de Panama No. 17.596, the
Spanish text of Law 42 which is the foreign statute relied upon by the court a quo to relieve
the common carrier from liability, was presented as evidence during the trial of the case
below, the same however was not accompanied by the required attestation and certification.

b) Deposition of Mr. Enrique Cajigas, a maritime law practitioner in the Republic of

Panama, before the Philippine Consulate in Panama, is not the certificate contemplated
by law. At best, the deposition can be considered as an opinion of an expert witness
 who possess the required special knowledge on the Panamanian laws but could not be
recognized as proof of a foreign law, the deponent not being the custodian of the
statute who can guarantee the genuineness of the document from a foreign country.
(Section 24, Rule 132 of the Revised Rules of Court)

Exceptions to the Rule:

Willamete Iron and Steel Works v. Muzzal for instance, we allowed the foreign law to be
established on the basis of the testimony in open court during the trial in the Philippines of an
attorney-at-law in San Francisco, California, who quoted the particular foreign law sought to be
established.
Private international law: A foreign law must be properly pleaded and proved as a fact.
In the absence of pleading and proof, the laws of the foreign country or state will be presumed
to be the same as our local or domestic law. This is known as processual presumption.
While the foreign law was properly pleaded in the case at bar, it was, however, proven
not in the manner provided by Section 24, Rule 132 of the Revised Rules of Court. The decision
of the RTC, which proceeds from a disregard of specific rules cannot be recognized.

Rationale #3:

Whether or not, petitioners are liable for the misdelivery of goods under Philippine laws.

 Under the New Civil Code, common carriers, from the nature of their business and for
reasons of public policy, are bound to observe extraordinary diligence in the vigilance
over goods, according to the circumstances of each case.

 Common carriers are responsible for loss, destruction or deterioration of the goods
unless the same is due to flood, storm, earthquake or other natural disaster or
calamity.24 Extraordinary diligence is that extreme care and caution which persons of
unusual prudence and circumspection use for securing or preserving their own
property or rights.

 This expecting standard imposed on common carriers in contract of carrier of goods is

intended to tilt the scales in favor of the shipper who is at the mercy of the common
carrier once the goods have been lodged for the shipment.

 Hence, in case of loss of goods in transit, the common carrier is presumed under the
law to have been in fault or negligent.
PETITIONER:
As a common carrier, they are bound to observe extraordinary diligence in the care and
custody of the goods in their possession, they insist that they cannot be held liable for the loss
of the shipments, their extraordinary responsibility having ceased at the time the goods were
discharged into the custody of the customs arrastre operator, who in turn took complete
responsibility over the care, storage and delivery of the cargoes.

RESPONDENT:
Submits that the fact that the shipments were not delivered to the consignee as stated
in the bill of lading or to the party designated or named by the consignee, constitutes
misdelivery thereof, and under the law it is presumed that the common carrier is at fault or
negligent if the goods they transported, as in this case, fell into the hands of persons who have
no right to receive them.

SC sustain the position of the respondent.

Article 1736 and Article 1738 are the provisions in the New Civil Code which define the
period when the common carrier is required to exercise diligence lasts, viz:
Article 1736. The extraordinary responsibility of the common carrier lasts
from the time the goods are unconditionally placed in the possession of, and
received by the carrier for transportation until the same are delivered, actually or
constructively, by the carrier to the consignee, or to the person who has a right to
receive them, without prejudice to the provisions of article 1738.

Article 1738. The extraordinary liability of the common carrier continues

to be operative even during the time the goods are stored in a warehouse of the
carrier at the place of destination, until the consignee has been advised of the
arrival of the goods and has had reasonable opportunity thereafter to remove
them or otherwise dispose of them.

Explicit is the rule under Article 1736 of the Civil Code that the extraordinary responsibility of
the common carrier begins from the time the goods are delivered to the carrier. 29 This
responsibility remains in full force and effect even when they are temporarily unloaded or
stored in transit, unless the shipper or owner exercises the right of stoppage in transitu, and
terminates only after the lapse of a reasonable time for the acceptance, of the goods by the
consignee or such other person entitled to receive them. 30

It was further provided in the same statute that the carrier may be relieved from the
responsibility for loss or damage to the goods upon actual or constructive delivery of the same
by the carrier to the consignee or to the person who has the right to receive them. 31 In sales,
actual delivery has been defined as the ceding of the corporeal possession by the seller, and the
actual apprehension of the corporeal possession by the buyer or by some person authorized by
him to receive the goods as his representative for the purpose of custody or disposal.
 By the same token, there is actual delivery in contracts for the transport of goods
when possession has been turned over to the consignee or to his duly authorized agent and a
reasonable time is given him to remove the goods.

In this case, there is no dispute that the custody of the goods was never turned over to
the consignee or his agents but was lost into the hands of unauthorized persons who secured
possession thereof on the strength of falsified documents. The loss or the misdelivery of the
goods in the instant case gave rise to the presumption that the common carrier is at fault or
negligent.

A common carrier is presumed to have been negligent if it fails to prove that it

exercised extraordinary vigilance over the goods it transported. When the goods shipped are
either lost or arrived in damaged condition, a presumption arises against the carrier of its
failure to observe that diligence, and there need not be an express finding of negligence to
hold it liable. To overcome the presumption of negligence, the common carrier must establish
by adequate proof that it exercised extraordinary diligence over the goods. It must do more
than merely show that some other party could be responsible for the damage.

The contract of carriage remains in full force and effect even after the delivery of the
goods to the port authorities; the only delivery that releases it from their obligation to observe
extraordinary care is the delivery to the consignee or his agents. Even more telling of
petitioners’ continuing liability for the goods transported to the fact that the original bills of
lading up to this time, remains in the possession of the notify party or consignee. Explicit on this
point is the provision of Article 353 of the Code of Commerce which provides:

Article 353. The legal evidence of the contract between the shipper and
the carrier shall be the bills of lading.

After the contract has been complied with, the bill of lading which the
carrier has issued shall be returned to him, and by virtue of the exchange of
this title with the thing transported, the respective obligations and actions
shall be considered cancelled, unless in the same act the claim which the
parties may wish to reserve be reduced to writing, with the exception of that
provided for in Article 366.

In case the consignee, upon receiving the goods, cannot return the bill of
lading subscribed by the carrier, because of its loss or of any other cause, he
must give the latter a receipt for the goods delivered, this receipt producing the
same effects as the return of the bill of lading.

Absence bill of lading, there must be, at the very least, an acknowledgement of the
delivery by signing the delivery receipt, if surrender of the original of the bill of lading is not
possible, otherwise the contract of carriage still subsists and petitioners could be held liable for
the breach thereof.
 Petitioners could have offered evidence before the trial court to show that they
exercised the highest degree of care and caution even after the goods was turned over to the
custom authorities, by promptly notifying the consignee of its arrival in order to afford them
ample opportunity to remove the cargoes from the port of discharge.
Petitioners are held liable for the misdelivery of the goods. Petitioners failed to rebut
the prima facie presumption of negligence.

The petition was denied. CA is AFFIRMED.

Spouses Teodoro and Nanette Perena, vs. Spouses Nicolas and Teresita Zarate
GR no. 157917 August 29, 2012

The facts of the case are as follows:

Spouses Perena were engaged in school bus service, transporting students from
Paranaque to Don Bosco Technical Institute in Makati. In June 1996, spouses Zarate contracted
spouses Perena to transport their son, Aaron Zarate, from their residence in Paranaque to Don
Bosco. As on the usual days of school in August 22, 1996, the van picked-up Aaron in their
house, he then took the left side seat near the rear door of the said vehicle. Considering that the
students were due by 7:15am at Don Bosco, and because of heavy traffic at the South
Superhighway, the driver, Clemente Alfaro, decided to take the narrow path underneath the
Magallanes interchange which then is being used by Makati bound vehicles as short cut. The said
narrow path has a railroad crossing, and while traversing the said narrow path, closely tailing a
huge passenger bus, the driver of the school service decided to overtake the said bus at about 50
meters away from the railroad crossing. Considering that the stereo is playing loudly and blinded
by the bus, he did not hear the blowing of horn of the oncoming train as a warning to the
vehicles. The bus successfully crossed the railroad crossing but the van did not. The train hit the
rear side of the van and the impact threw 9 of the 12 students including Aaron. His body landed
in the path of the train, which dragged him, severed his head, instantaneously killing him.
Devastated by the sudden death of their son, spouses Zarate commenced this action for damages.
The Regional Trial Court ruled in favor of the spouses Zarate. On appeal, The Court of Appeals
affirmed the decision of the lower court but lowered the moral damages to php 2,500,000.00.

ISSUE:
Whether or not there is a breach of contract of a common carrier and whether there is
negligence.

HELD:

The Supreme Court ruled in favor spouses Zarate, affirming the decision of the Court of
Appeals.

In this case, the Supreme Court, once and for all lay the matter to rest that the school
service is a common carrier and not a private carrier, and as such, they are required to observe
the extraordinary diligence as provided under Article 1733 of the Civil Code.
 According to the Supreme Court, the true test for a common carrier is not the quantity or
extent of the business actually transacted, or the number and character of the conveyances used
in the activity, but whether the undertaking is a part of the activity engaged in by the carrier that
he has held out to the general public as his business or occupation. Otherwise stated, making the
activity or holding himself or itself out to the public as a ready to act for all who may desire his
or its services to transport goods or persons for a fee.

Applying the considerations mentioned above, there is no question that Perenas as the
operators of a school service were: a) engaged in transporting passengers generally as a business
not just as a casual occupation; b) undertaking to carry passengers over established roads; c)
transporting students for a fee. Despite catering limited clientele, the Perenas operated as a
common carrier because they hold themselves out as a ready transportation indiscriminately to
the students of a particular school living within or near where they operated the service and for a
fee.

On the second issue, Article 1756 of the Civil code provides that, In case of death of or
injuries to passengers, common carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary diligence as prescribed in articles
1733 and 1755. In this case, Aaron Zarate died, and thus as provided under the above-mentioned
law, they are negligent.

Asia Lighterage and Shipping, Inc vs CA

FACTS:

Asia Lighterage and Shipping, Inc was contracted as carrier to deliver 3,150 metric tons of Better
Western White Wheat in bulk, (US$423,192.35) to the consignee‘s (General Milling
Corporation) warehouse at Bo. Ugong, Pasig City insured by Prudential Guarantee and
Assurance, Inc. against loss/damage for P14,621,771.75.

It appears that on August 17, 1990, the transport of said cargo was suspended due to a warning of
an incoming typhoon. PSTSI III was tied down to other barges which arrived ahead of it while
weathering out the storm that night. A few days after, the barge developed a list because of a
hole it sustained after hitting an unseen protuberance underneath the water. It filed a Marine
Protest on August 28, 1990 and also secured the services of Gaspar Salvaging Corporation to
refloat the barge.

The barge was then towed to ISLOFF terminal before it finally headed towards the consignee’s
wharf on September 5, 1990. Upon reaching the Sta. Mesa spillways, the barge again ran
aground due to strong current.

7 days later, a bidding was conducted to dispose of the damaged wheat retrieved & loaded on the
3 other barges. The total proceeds from the sale of the salvaged cargo was P201,379.75.

ISSUES:

1. Whether petitioner is a common carrier.

2. Assuming petitioner is a common carrier, whether it exercised extraordinary care and

diligence in its care and custody of the consignee’s cargo.

HELD:

1. Petitioner is a common carrier.

Article 1732 of the Civil Code defines common carriers as persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers or goods or both,
by land, water, or air, for compensation, offering their services to the public.

In De Guzman vs. CA it was held that the definition of common carriers in Article 1732 of the
Civil Code makes no distinction between one whose principal business activity is the carrying of
persons or goods or both, and one who does such carrying only as an ancillary activity. There is
also no distinction between a person or enterprise offering transportation service on a
regular/scheduled basis and one offering such service on an occasional, episodic or unscheduled
basis.]

The test to determine a common carrier is “whether the given undertaking is a part of the
business engaged in by the carrier which he has held out to the general public as his occupation
rather than the quantity or extent of the business transacted.” In the case at bar, the petitioner
admitted that it is engaged in the business of shipping, lighterage and drayage, offering its barges
to the public, despite its limited clientele for carrying/transporting goods by water for
compensation.

2. The findings of the lower courts should be upheld. Petitioner failed to exercise extraordinary
diligence in its care and custody of the consignee’s goods.

Common carriers are bound to observe extraordinary diligence in the vigilance over the goods
transported by them. They are presumed to have been at fault or to have acted negligently if the
goods are lost, destroyed or deteriorated. To overcome the presumption of negligence in the case
of loss, destruction or deterioration of the goods, the common carrier must prove that it exercised
extraordinary diligence.There are, however, exceptions

Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the
goods, unless the same is due to any of the following causes only:

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

In the case at bar, the barge completely sank after its towing bits broke, resulting in the total loss
of its cargo. Petitioner claims that this was caused by a typhoon, hence, it should not be held
liable for the loss of the cargo. However, petitioner failed to prove that the typhoon is the
proximate and only cause of the loss of the goods, and that it has exercised due diligence before,
during and after the occurrence of the typhoon to prevent/minimize the loss. The evidence show
that, even before the towing bits of the barge broke, it had already previously sustained damage
when it hit a sunken object while docked at the Engineering Island. It even suffered a hole.
Clearly, this could not be solely attributed to the typhoon. Thus, when petitioner persisted to
proceed with the voyage, it recklessly exposed the cargo to further damage.

Moreover, petitioner still headed to the consignee’s wharf despite knowledge of an incoming
typhoon. During the time that the barge was heading towards the consignee’s wharf on
September 5, 1990, typhoon “Loleng” has already entered the Philippine area of responsibility.

Philippine American General Insurance vs. PKS Shipping Company

G.R. No. 149038. April 9, 2003
By: Alba, Angela

Doctrine: The provisions of Article 1733, notwithstanding, common carriers are exempt from liability for
loss, destruction, or deterioration of the goods due to any of the following causes:

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers; and
(5) Order or act of competent public authority.

Parties:
Davao Union Marketing Corporation - Shipper
PKS Shipping Company – Carrier
Philippine American General Insurance Company - Insurer

FACTS:
Davao Union Marketing Corporation (DUMC) contracted the services of respondent PKS Shipping
Company
(PKS Shipping) for the shipment to Tacloban City of 75,000 bags of cement. DUMC insured the goods for
its full value with petitioner Philippine American General Insurance Company (Philamgen). The goods
were loaded aboard the dumb barge Limar I belonging to PKS Shipping. On 22 December 1993, about 9
o’clock, while Limar I was being towed by respondent’s tugboat, MT Iron Eagle, the barge sank a couple
of miles off the coast of Dumagasa Point, in Zamboanga del Sur, bringing down with it the entire cargo of
75,000 bags of cement.
Philamgen made payment to DUMC upon filing a formal claim; it then sought reimbursement from PKS
Shipping of the sum paid to DUMC but the shipping company refused to pay. This prompted Philamgen
to file suit against PKS Shipping with the Makati RTC.

RTC – dismissed complaint after finding that the total loss of the cargo could have been caused either by
a fortuitous event, in which case the ship owner was not liable, or through the negligence of the captain
and crew of the vessel and that, under Article 587 of the Code of Commerce adopting the “Limited
Liability Rule,” the ship owner could free itself of liability by abandoning, as it apparently so did, the
vessel with all her equipment and earned freightage.

CA – affirmed in toto.
-ruled that evidence to establish that PKS Shipping was a common carrier at the time it undertook to
transport the bags of cement was wanting because the peculiar method of the shipping company’s
carrying goods for others was not generally held out as a business but as a casual occupation.
- concluded that PKS Shipping, not being a common carrier, was not expected to observe the stringent
extraordinary diligence required of common carriers in the care of goods.
- found that the loss of the goods was sufficiently established as having been due to fortuitous event,
negating any liability on the part of PKS Shipping to the shipper.

Petitioner’s Arguments:
- The fact that respondent has a limited clientele does not militate against respondent’s being a
common carrier and that the only way by which such carrier can be held exempt for the loss of the cargo
would be if the loss were caused by natural disaster or calamity.
- Avers that typhoon “APIANG” has not entered the Philippine area of responsibility and that, even if it
did, respondent would not be exempt from liability because its employees, particularly the tugmaster,
have failed to exercise due diligence to prevent or minimize the loss.

Respondent’s Arguments:
- Respondent urges that the petition should be denied because what Philamgen seeks is not a review on
points or errors of law but a review of the undisputed factual findings of the RTC and the appellate
court.
In any event, the findings and conclusions of both courts find support from the evidence and applicable
jurisprudence.

ISSUES:
1. Whether PKS Shipping is a private carrier or a common carrier.
2. Whether PKS Shipping has observed the proper diligence (ordinary, if a private carrier, or
extraordinary, if a common carrier) required of it given the circumstances.

Held:
1. PKS Shipping is a common carrier. The factual findings indicate that PKS Shipping has engaged
 itself in the business of carrying goods for others, although for a limited clientele, undertaking to
carry such goods for a fee. The regularity of its activities in this area indicates more than just a
casual activity on its part. Neither can the concept of a common carrier change merely because
individual contracts are executed or entered into with patrons of the carrier. Such restrictive
interpretation would make it easy for a common carrier to escape liability by the simple expedient
of entering into those distinct agreements with clients.

2. Yes. Article 1733 of the Civil Code requires common carriers to observe extraordinary diligence in
the vigilance over the goods they carry. In case of loss, destruction or deterioration of goods,
common carriers are presumed to have been at fault or to have acted negligently, and the
burden of proving otherwise rests on them. The provisions of Article 1733, notwithstanding,
common carriers are exempt from liability for loss, destruction, or deterioration of the goods due
to any of the following causes:

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers; and
(5) Order or act of competent public authority.

The appellate court ruled, gathered from the testimonies and sworn marine protests of the
respective vessel masters of Limar I and MT Iron Eagle, that there was no way by which the
barge’s or the tugboat’s crew could have prevented the sinking of Limar I. The vessel was
suddenly tossed by waves of extraordinary height of six (6) to eight (8) feet and buffeted by
strong winds of 1.5 knots resulting in the entry of water into the barge’s hatches. The official
Certificate of Inspection of the barge issued by the Philippine Coastguard and the Coastwise Load
Line Certificate would attest to the seaworthiness of Limar I and should strengthen the factual
findings of the appellate court. The appellate court did not err in its judgment absolving PKS
Shipping from liability for the loss of the DUMC cargo.

Transportation Case Digest: Calvo V. UCPB

Gen Insurance Co. (2002)
G.R. No.148496     March 19, 2002

Lessons Applicable: Legal Effect (Transportation)

FACTS:

 At the time material to this case, Transorient Container Terminal Services, Inc.

(TCTSI) owned by Virgines Calvo entered into a contract with San Miguel
Corporation (SMC) for the transfer of 114 reels of semi-chemical fluting paper and
124 reels of kraft liner board from the Port Area in Manila to SMC's warehouse at
the Tabacalera Compound, Romualdez St., Ermita, Manila. 
 The cargo was insured by respondent UCPB General Insurance Co., Inc.
 July 14, 1990: arrived in Manila on board "M/V Hayakawa Maru" and later
on unloaded from the vessel to the custody of the arrastre operator, Manila Port
Services, Inc
 July 23 to July 25, 1990: Calvo withdrew the cargo from the arrastre
operator and delivered it to SMC's warehouse in Ermita, Manila
 July 25, 1990: goods were inspected by Marine Cargo Surveyors, who found
that 15 reels of the semi-chemical fluting paper were "wet/stained/torn" and 3
reels of kraft liner board were likewise torn
 SMC collected payment from UCPB the total damage of P93,112 under its
insurance contract 
 UCPB brought suit against Calvo as subrogee of SMC
 Calvo: Art. 1734(4) The character of the goods or defects in the
packing or in the containers
 spoilage or wettage" took place while the goods were in the
custody of either the carrying vessel "M/V Hayakawa Maru," which transported
the cargo to Manila, or the arrastre operator, to whom the goods were unloaded
and who allegedly kept them in open air for 9 days notwithstanding the fact that
some of the containers were deformed, cracked, or otherwise damaged
 Trial Court: Calvo liable
 CA: affirmed
ISSUE: W/N Calvo can be exempted from liability under Art. 1734(4)

HELD: NO. CA AFFIRMED.

 mere proof of delivery of goods in good order to a carrier, and of their arrival
at the place of destination in bad order, makes out a prima facie case against
the carrier, so that if no explanation is given as to how the injury occurred, the
carrier must be held responsible
 extraordinary responsibility lasts from the time the goods are unconditionally
placed in the possession of and received by the carrier for transportation until
the same are delivered actually or constructively by the carrier to the consignee
or to the person who has the right to receive the same
 Article 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers or
goods or both, by land, water, or air for compensation, offering their services to
the public."
The above article makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such
carrying only as an ancillary activity . . . Article 1732 also carefully avoids
making any distinction between a person or enterprise offering transportation
service on a regular or scheduled basis  and one offering such service on
an occasional, episodic or unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its services to the "general public," i.e.,
the general community or population, and one who offers services or solicits
business only from a narrow segment of the general population.

 concept of "common carrier" under Article 1732 may be seen to coincide

neatly with the notion of "public service," under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at least partially
supplements the law on common carriers set forth in the Civil Code
 Under Section 13, paragraph (b) of the Public Service Act, "public service"
includes:
" x x x every person that now or hereafter may own, operate, manage, or
control in the Philippines, for hire or compensation, with general or limited
clientele, whether permanent, occasional or accidental, and done for general
business purposes, any common carrier,  railroad, street railway, traction
railway, subway motor vehicle, either for freight or passenger, or both, with or
without fixed route and whatever may be its classification, freight or carrier
service of any class, express service, steamboat, or steamship line, pontines,
ferries and water craft, engaged in the transportation of passengers or freight or
both, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration
plant, canal, irrigation system, gas, electric light, heat and power, water supply
and power petroleum, sewerage system, wire or wireless communications
systems, wire or wireless broadcasting stations and other similar public services.
x x x" 
 when Calvo's employees withdrew the cargo from the arrastre operator, they
did so without exception or protest either with regard to the condition of
container vans or their contents
 Calvo must do more than merely show the possibility that some other party
could be responsible for the damage. It must prove that it used "all reasonable
means to ascertain the nature and characteristic of goods tendered for transport
and that it exercised due care in the handling 

Spouses Estrada vs. Philippine Rabbit Bus Lines

FACTS:

 A collision between passenger bus driven by respondent Saylan and owned by Philippine Rabbit
Bus (PRB) and an Isuzu truck driven by Urez and registered to Cuyton Jr. occurred which injured
petitioner Estrada’s arm and was later amputated.
 Petitioner filed a complaint for damages that pursuant to the contract of carriage between him
and PRB.
 Petitioner claims are as follows: P500k for moral damages, P60k for actual damages, and P25k
for attorney’s fees.
 RTC rules in favor of petitioner concluding PRB driver was negligent in driving the PRB bus as he
was tailgating, did not apply the breaks when necessary and instead swerved, and operated the
bus at a speed greater than what was reasonably necessary for a full stop. Also established by
Art. 2185 of the NCC “It is presumed that a person driving a motor vechilce has been negligent if
at the time of the mishap he was violating any traffic regulation, unless there is proof to the
contrary.” Which the driver failed to rebut. Last clear chance is inapplicable in this case as the
suit is between passenger and common carrier. RTC awarded the moral damages, actual
damages, and attorney’s fees.
 The CA partially granted the appeal and agreed with PRB’s contention that moral damages are
not recoverable in actions for damages predicated on a breach of contract, unless death or a
passenger results, or it is proven that the carrier was guilty of fraud or bad faith, even if death
does not result.
 The CA ruled that the RTC erred in ruling PRB bus company and respondent driver are jointly
and severally liable because a driver may not be held liable under the contract of carriage, not
being a party of the same. The carrier thus is exclusively responsible to the passenger, even if
such breach be due to the negligence of his driver.
 The basis of a cause of action of a passenger against the driver is either culpa criminal or culpa
aquiliana. A passenger may file a criminal case based on culpa criminal punishable by RPC or a
civil case based on culpa aquiliana under the Civil Code, both have separate and distinct causes
of action.
 ISSUE: W/N the CA erred in declaring that there was no evidence to indicate bad faith or fraud on
PRB bus company to make it liable for moral damages.

HELD: No, CA ruled correctly. There being no evidence of bad faith or fraud, moral damages cannot
be awarded in a contract of carriage.

RATIO:

 Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock, social humiliation, and similar injury. Though
incapable of pecuniary computation, moral damages may be recovered if they are the proximate
result of the defendant's wrongful act or omission.

 requisites for the award of moral damages: (1) there must be an injury clearly sustained by the
claimant, whether physical, mental or psychological; (2) there must be a culpable act or
omission factually established; (3) the wrongful act or omission of the defendant is the
proximate cause of the injury sustained by the claimant; and (4) the award for damages is
predicated on any of the cases stated in Article 2219 of the Civil Code

 It has been held, however, that "allegations of bad faith and fraud must be proved by clear and
convincing evidence."In this case, the fraud or bad faith that must be convincingly proved by
petitioners should be one which was committed by Philippine Rabbit in breaching its contract of
carriage with Dionisio. Unfortunately for petitioners, the Court finds no persuasive proof of such
fraud or bad faith.
 There is no showing here that Philippine Rabbit induced Dionisio to enter into a contract of
carriage with the former through insidious machination. Neither is there any indication or even
an allegation of deceit or concealment or omission of material facts by reason of which Dionisio
boarded the bus owned by Philippine Rabbit. Likewise, it was not shown that Philippine Rabbit's
breach of its known duty, which was to transport Dionisio from Urdaneta to La Union, 43 was
attended by some motive, interest, or ill will. From these, no fraud or bad faith can be attributed
to Philippine Rabbit.
 Wherefore, Petition for Review on Certiorari is denied. Petitioners are entitled to temperate
damages, actual damages, and legal interest of 6% per annum.

Darines v. Quiñones G.R. No. 206468; August 2, 2017

FACTS: Judith and Joyce are mother and daughter who boarded Amianan Bus Line, going from Carmen,
Rosales, Pangasinan, to Baguio City. The bus crashed into a parked truck on the shoulder of Kennon
Road. Both vehicles were damaged; petitioners were injured.

Petitioners argue that respondents breached their contract of carriage for failure to bring them safely to
their destination. Also Quitan’s reckless and negligent driving caused the collision.

Respondents say Quitan was driving at a moderate speed, and the proximate cause of the accident was
the negligence of the truck driver, Fernandez who was parked at roadside right after the curve without any
early warning device. Quiñones observed due diligence in selection and supervision of Quitan by
conducting seminars on road safety measures.

Judith failed to report for two months and presented receipts for medicine, expenses for the dao-is ritual,
a tribal ritual in their tribe when a member meets an accident and is released from the hospital, to prove
actual damages. She also claimed moral damages for sleepless nights.

Respondents testified that through Benitez, they bought petitioners’ medicines and paid for their hospital
expenses, shown by receipts.

RTC: ruled to pay petitioners Moral and exemplary damages, plus attorney’s fees and appearance fees.
No actual damages for lack of proof of such expenses. CA deleted moral damages for failure to prove
fraud and bad faith, as shown by the fact that respondents paid for petitioners’ hospitalization. Since no
moral damages are awarded, no exemplary damages too, and consequently, attorney’s fees must be
deleted.

ISSUE: WON petitioners are entitled to damages – NO

HELD: Going now to the main issue, the Court fully agrees with the CA ruling that in an action for breach
of contract, moral damages may be recovered only when a) death of a passenger results; or b) the carrier
was guilty of fraud and bad faith even if death does not result; and that neither of these circumstances
were present in the case at bar. The CA correctly held that, since no moral damages was awarded then,
there is no basis to grant exemplary damages and attorney’s fees to petitioners.

To stress, this case is one for breach of contract of carriage (culpa contractual) where it is necessary to
show the existence of the contract between the parties, and the failure of the common carrier to transport
its passenger safely to his or her destination. X x x

The principle that, in an action for breach of contract of carriage, moral damages may be awarded only in
case (1) an accident results in the death of a passenger; or (2) the carrier is guilty of fraud or bad faith, is
pursuant to Article 1764, in relation to Article 2206(3) of the Civil Code, and Article 2220 thereof, as
follows:

The aforesaid concepts of fraud or bad faith and negligence are basic as they are distinctly differentiated
by law. Specifically, fraud or bad faith connotes "deliberate or wanton wrong doing" or such deliberate
disregard of contractual obligations while negligence amounts to sheer carelessness.

More particularly, fraud includes "inducement through insidious machination." In turn, insidious
machination refers to such deceitful strategy or such plan with an evil purpose. On the other hand, bad
faith does not merely pertain to bad judgment or negligence but relates to a dishonest purpose, and a
deliberate doing of a wrongful act. Bad faith involves "breach of a known duty through some motive or
interest or ill will that partakes of the nature of fraud”

Clearly, unless it is fully established (and not just lightly inferred) that negligence in an action for breach of
contract is so gross as to amount to malice, then the claim of moral damages is without merit.

Here, petitioners impute negligence on the part of respondents when, as paying passengers, they
sustained injuries when the bus owned and operated by respondent Quifiones, and driven by respondent
Quitan, collided with another vehicle. Petitioners propounded on the negligence of respondents, but did
not discuss or impute fraud or bad faith, or such gross negligence which would amount to bad faith,
against respondents. There being neither allegation nor proof that respondents acted in fraud or in bad
faith in performing their duties arising from their contract of carriage, they are then not liable for moral
damages.

The Court also sustains the CA's finding that petitioners are not entitled to exemplary damages. Pursuant
to Articles 2229 and 2234 of the Civil Code, exemplary damages may be awarded only in addition to
moral, temperate, liquidated, or compensatory damages. Since petitioners are not entitled to either moral,
temperate, liquidated, or compensatory damages, then their claim for exemplary damages is bereft of
merit.

Finally, considering the absence of any of the circumstances under Article 2208 of the Civil Code where
attorney's fees may be awarded, the same cannot be granted to petitioners.

All told, the CA correctly ruled that petitioners are not entitled to moral and exemplary damages as well as
attorney's fees.