TRANSPORTATION

LAW
Full Text Cases

UNIVERSITY OF SANTO TOMAS – LEGAZPI

COLLEGE OF LAW
PEÑARANDA CAMPUS, LEGAZPI CITY
231
 Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 186312               June 29, 2010
SPOUSES DANTE CRUZ and LEONORA
CRUZ, Petitioners,  members.
vs.
SUN HOLIDAYS, INC., Respondent.
DECISION
CARPIO MORALES, J.:
Spouses Dante and Leonora Cruz (petitioners)
lodged a Complaint on January 25,
20011 against Sun Holidays, Inc. (respondent)
with the Regional Trial Court (RTC) of Pasig
City for damages arising from the death of
their son Ruelito C. Cruz (Ruelito) who
perished with his wife on September 11, 2000
on board the boat M/B Coco Beach III that
capsized en route to Batangas from Puerto
Galera, Oriental Mindoro where the couple
had stayed at Coco Beach Island Resort
(Resort) owned and operated by respondent.
The stay of the newly wed Ruelito and his wife
at the Resort from September 9 to 11, 2000
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.
Miguel C. Matute (Matute), 2 a scuba diving
instructor and one of the survivors, gave his
account of the incident that led to the filing of
the complaint as follows:
Matute stayed at the Resort from September 8
to 11, 2000. He was originally scheduled to
leave the Resort in the afternoon of
September 10, 2000, but was advised to stay
for another night because of strong winds and
heavy rains.
On September 11, 2000, as it was still windy,
Matute and 25 other Resort guests including
petitioners’ son and his wife trekked to the
other side of the Coco Beach mountain that
was sheltered from the wind where they
boarded M/B Coco Beach III, which was to
ferry them to Batangas.
Shortly after the boat sailed, it started to rain.
As it moved farther away from Puerto Galera
and into the open seas, the rain and wind got
stronger, causing the boat to tilt from side to
side and the captain to step forward to the
front, leaving the wheel to one of the crew
The waves got more unwieldy. After getting hit
by two big waves which came one after the
other, M/B Coco Beach III capsized putting all
passengers underwater.
The passengers, who had put on their life
jackets, struggled to get out of the boat. Upon
seeing the captain, Matute and the other
passengers who reached the surface asked
him what they could do to save the people
who were still trapped under the boat. The
captain replied "Iligtas niyo na lang ang sarili
niyo" (Just save yourselves).
Help came after about 45 minutes when two
boats owned by Asia Divers in Sabang, Puerto
Galera passed by the capsized M/B Coco
Beach III. Boarded on those two boats were
22 persons, consisting of 18 passengers and
four crew members, who were brought to Pisa
Island. Eight passengers, including petitioners’
son and his wife, died during the incident.
At the time of Ruelito’s death, he was 28 years
old and employed as a contractual worker for
Mitsui Engineering & Shipbuilding Arabia, Ltd.
in Saudi Arabia, with a basic monthly salary of
$900.3
Petitioners, by letter of October 26,
2000,4 demanded indemnification from
respondent for the death of their son in the
amount of at least ₱4,000,000.
Replying, respondent, by letter dated
November 7, 2000,5 denied any responsibility
for the incident which it considered to be a
fortuitous event. It nevertheless offered, as an
act of commiseration, the amount of ₱10,000
to petitioners upon their signing of a waiver.
As petitioners declined respondent’s offer,
they filed the Complaint, as earlier reflected,
alleging that respondent, as a common carrier,
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was guilty of negligence in allowing M/B Coco
Beach III to sail notwithstanding storm warning
bulletins issued by the Philippine Atmospheric,
Geophysical and Astronomical Services
Administration (PAGASA) as early as 5:00
a.m. of September 11, 2000.6
In its Answer,7 respondent denied being a
common carrier, alleging that its boats are not
available to the general public as they only
ferry Resort guests and crew members.
Nonetheless, it claimed that it exercised the
utmost diligence in ensuring the safety of its
passengers; contrary to petitioners’ allegation,
there was no storm on September 11, 2000 as
the Coast Guard in fact cleared the voyage;
and M/B Coco Beach III was not filled to
capacity and had sufficient life jackets for its
passengers. By way of Counterclaim,
respondent alleged that it is entitled to an
award for attorney’s fees and litigation
expenses amounting to not less than
₱300,000.
Carlos Bonquin, captain of M/B Coco Beach
III, averred that the Resort customarily
requires four conditions to be met before a
boat is allowed to sail, to wit: (1) the sea is
calm, (2) there is clearance from the Coast
Guard, (3) there is clearance from the captain
and (4) there is clearance from the Resort’s
assistant manager.8 He added that M/B Coco
Beach III met all four conditions on September
11, 2000,9 but a subasco or squall,
characterized by strong winds and big waves,
suddenly occurred, causing the boat to
capsize.10
By Decision of February 16, 2005,11 Branch
267 of the Pasig RTC dismissed petitioners’
Complaint and respondent’s Counterclaim.
Petitioners’ Motion for Reconsideration having
been denied by Order dated September 2,
2005,12 they appealed to the Court of Appeals.
By Decision of August 19, 2008, 13 the
appellate court denied petitioners’ appeal,
holding, among other things, that the trial court
correctly ruled that respondent is a private
carrier which is only required to observe
ordinary diligence; that respondent in fact
observed extraordinary diligence in
transporting its guests on board M/B Coco
Beach III; and that the proximate cause of the
incident was a squall, a fortuitous event.
Petitioners’ Motion for Reconsideration having
been denied by Resolution dated January 16,
2009,14 they filed the present Petition for
Review.15
Petitioners maintain the position they took
before the trial court, adding that respondent is
a common carrier since by its tour package,
the transporting of its guests is an integral part
of its resort business. They inform that another
division of the appellate court in fact held
respondent liable for damages to the other
survivors of the incident.
Upon the other hand, respondent contends
that petitioners failed to present evidence to
prove that it is a common carrier; that the
Resort’s ferry services for guests cannot be
considered as ancillary to its business as no
income is derived therefrom; that it exercised
extraordinary diligence as shown by the
conditions it had imposed before allowing M/B
Coco Beach III to sail; that the incident was
caused by a fortuitous event without any
contributory negligence on its part; and that
the other case wherein the appellate court
held it liable for damages involved different
plaintiffs, issues and evidence.16
The petition is impressed with merit.
Petitioners correctly rely on De Guzman v.
Court of Appeals 17 in characterizing
respondent as a common carrier.
The Civil Code defines "common carriers" in
the following terms:
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 (in local
idiom, as "a sideline"). 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
231
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.
We think that Article 1733 deliberately
refrained from making such distinctions.
So understood, the 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:
. . . 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 . . .18 (emphasis and underscoring
supplied.)
Indeed, respondent is a common carrier. Its
ferry services are so intertwined with its main
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.
That respondent does not charge a separate
fee or fare for its ferry services is of no
moment. It would be imprudent to suppose
that it provides said services at a loss. The
Court is aware of the practice of beach resort
operators offering tour packages to factor the
transportation fee in arriving at the tour
package price. That guests who opt not to
avail of respondent’s ferry services pay the
same amount is likewise inconsequential.
These guests may only be deemed to have
overpaid.
As De Guzman instructs, 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. The intent of the
law is thus to not consider such distinctions.
Otherwise, there is no telling how many other
distinctions may be concocted by
unscrupulous businessmen engaged in the
carrying of persons or goods in order to avoid
the legal obligations and liabilities of common
carriers.
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. 19 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.20
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.21
Respondent nevertheless harps on its strict
compliance with the earlier mentioned
conditions of voyage before it allowed M/B
Coco Beach III to sail on September 11, 2000.
Respondent’s position does not impress.
The evidence shows that PAGASA issued 24-
hour public weather forecasts and tropical
cyclone warnings for shipping on September
10 and 11, 2000 advising of tropical
depressions in Northern Luzon which would
231
also affect the province of Mindoro. 22 By the
testimony of Dr. Frisco Nilo, supervising
weather specialist of PAGASA, squalls are to
be expected under such weather condition. 23
A very cautious person exercising the utmost
diligence would thus not brave such stormy
weather and put other people’s lives at risk.
The extraordinary diligence required of
common carriers demands that they take care
of the goods or lives entrusted to their hands
as if they were their own. This respondent
failed to do.
Respondent’s insistence that the incident was
caused by a fortuitous event does not impress
either.
The elements of a "fortuitous event" are: (a)
the cause of the unforeseen and unexpected
occurrence, or the failure of the debtors to
comply with their obligations, must have been
independent of human will; (b) the event that
constituted the caso fortuito must have been
impossible to foresee or, if foreseeable,
impossible to avoid; (c) the occurrence must
have been such as to render it impossible for
the debtors to fulfill their obligation in a normal
manner; and (d) the obligor must have been
free from any participation in the aggravation
of the resulting injury to the creditor. 24
To fully free a common carrier from any
liability, the fortuitous event must have been
the proximate and only causeof the loss. And it
should have exercised due diligence to
prevent or minimize the loss before, during
and after the occurrence of the fortuitous
event.25
Respondent cites the squall that occurred
during the voyage as the fortuitous event that
overturned M/B Coco Beach III. As reflected
above, however, the occurrence of squalls
was expected under the weather condition of
September 11, 2000. Moreover, evidence
shows that M/B Coco Beach III suffered
engine trouble before it capsized and
sank.26 The incident was, therefore, not
completely free from human intervention.
The Court need not belabor how respondent’s
evidence likewise fails to demonstrate that it
exercised due diligence to prevent or minimize
the loss before, during and after the
occurrence of the squall.
Article 176427 vis-à-vis Article 220628 of the
Civil Code holds the common carrier in breach
of its contract of carriage that results in the
death of a passenger liable to pay the
following: (1) indemnity for death, (2)
indemnity for loss of earning capacity and (3)
moral damages.
Petitioners are entitled to indemnity for the
death of Ruelito which is fixed at ₱50,000.29
As for damages representing unearned
income, the formula for its computation is:
Net Earning Capacity = life expectancy x
(gross annual income - reasonable and
necessary living expenses).
Life expectancy is determined in accordance
with the formula:
2 / 3 x [80 — age of deceased at the time of
death]30
The first factor, i.e., life expectancy, is
computed by applying the formula (2/3 x [80 —
age at death]) adopted in the American
Expectancy Table of Mortality or the Actuarial
of Combined Experience Table of Mortality.31
The second factor is computed by multiplying
the life expectancy by the net earnings of the
deceased, i.e., the total earnings less
expenses necessary in the creation of such
earnings or income and less living and other
incidental expenses.32 The loss is not
equivalent to the entire earnings of the
deceased, but only such portion as he would
have used to support his dependents or heirs.
Hence, to be deducted from his gross earnings
are the necessary expenses supposed to be
used by the deceased for his own needs.33
In computing the third factor – necessary living
expense, Smith Bell Dodwell Shipping Agency
Corp. v. Borja34teaches that when, as in this
case, there is no showing that the living
expenses constituted the smaller percentage
of the gross income, the living expenses are
fixed at half of the gross income.
Applying the above guidelines, the Court
determines Ruelito's life expectancy as
follows:
Life 2/3 x [80 - age of
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 against respondent is reasonable for the
purpose.
expectancy = deceased at the time of
death]
2/3 x [80 - 28] Finally, Eastern Shipping Lines, Inc. v. Court
2/3 x [52] of Appeals40 teaches that when an obligation,
regardless of its source, i.e., law, contracts,
quasi-contracts, delicts or quasi-delicts is
Life breached, the contravenor can be held liable
35 for payment of interest in the concept of actual
expectancy =
and compensatory damages, subject to the
following rules, to wit —
Documentary evidence shows that Ruelito was
earning a basic monthly salary of
$90035 which, when converted to Philippine 1. When the obligation is breached,
peso applying the annual average exchange and it consists in the payment of a sum
rate of $1 = ₱44 in 2000,36 amounts to of money, i.e., a loan or forbearance of
₱39,600. Ruelito’s net earning capacity is thus money, the interest due should be that
computed as follows: which may have been stipulated in
writing. Furthermore, the interest due
shall itself earn legal interest from the
Net = life expectancy x (gross time it is judicially demanded. In the
Earning annual income - absence of stipulation, the rate of
Capacity reasonable and necessary interest shall be 12% per annum to be
living expenses). computed from default, i.e., from
= 35 x (₱475,200 - judicial or extrajudicial demand under
₱237,600) and subject to the provisions of Article
= 35 x (₱237,600) 1169 of the Civil Code.

2. When an obligation, not constituting

Net
Earning = ₱8,316,000
Capacity
Respecting the award of moral damages,
since respondent common carrier’s breach of
contract of carriage resulted in the death of
petitioners’ son, following Article 1764 vis-à-vis
Article 2206 of the Civil Code, petitioners are
entitled to moral damages.
Since respondent failed to prove that it
exercised the extraordinary diligence required
of common carriers, it is presumed to have
acted recklessly, thus warranting the award
too of exemplary damages, which are granted
in contractual obligations if the defendant
acted in a wanton, fraudulent, reckless,
oppressive or malevolent manner.37
Under the circumstances, it is reasonable to
award petitioners the amount of ₱100,000 as
moral damages and ₱100,000 as exemplary
damages.38 1avvphi1
Pursuant to Article 220839 of the Civil Code,
attorney's fees may also be awarded where
exemplary damages are awarded. The Court
finds that 10% of the total amount adjudged
a loan or forbearance of money, is
breached, an interest on the amount of
damages awarded may be imposed at
the discretion of the court at the rate of
6% per annum. No interest, however,
shall be adjudged on unliquidated
claims or damages except when or
until the demand can be established
with reasonable certainty. Accordingly,
where the demand is established with
reasonable certainty, the interest shall
begin to run from the time the claim is
made judicially or extrajudicially (Art.
1169, Civil Code) but when such
certainty cannot be so reasonably
established at the time the demand is
made, the interest shall begin to run
only from the date the judgment of the
court is made (at which time the
quantification of damages may be
deemed to have been reasonably
ascertained). The actual base for the
computation of legal interest shall, in
any case, be on the amount finally
adjudged.
3. When the judgment of the court
awarding a sum of money becomes
final and executory, the rate of legal

231
 interest, whether the case falls under
paragraph 1 or paragraph 2, above,
shall be 12% per annum from such
finality until its satisfaction, this interim
period being deemed to be by then an
equivalent to a forbearance of credit.
(emphasis supplied).
Since the amounts payable by respondent
have been determined with certainty only in
the present petition, the interest due shall be
computed upon the finality of this decision at
the rate of 12% per annum until satisfaction, in
accordance with paragraph number 3 of the
immediately cited guideline in Easter Shipping
Lines, Inc.
WHEREFORE, the Court of Appeals Decision
of August 19, 2008 is REVERSED and SET
ASIDE. Judgment is rendered in favor of
petitioners ordering respondent to pay
petitioners the following: (1) ₱50,000 as
indemnity for the death of Ruelito Cruz; (2)
₱8,316,000 as indemnity for Ruelito’s loss of
earning capacity; (3) ₱100,000 as moral
damages; (4) ₱100,000 as exemplary
damages; (5) 10% of the total amount
adjudged against respondent as attorneys
fees; and (6) the costs of suit.
The total amount adjudged against respondent
shall earn interest at the rate of 12% per
annum computed from the finality of this
decision until full payment.
SO ORDERED.
CONCHITA CARPIO MORALES
Associate Justice
Chairperson
WE CONCUR:
ARTURO D. LUCAS P.
BRION BERSAMIN
Associate Justice Associate Justice
MARTIN S.
ROBERTO A.
VILLARAMA,
ABAD
JR.
Associate Justice
Associate Justice
CERTIFICATION
Pursuant to Section 13, Article VIII of the
Constitution, I certify that the conclusions in
the above decision had been reached in
consultation before the case was assigned to
the writer of the opinion of the Court’s Division.
RENATO C. CORONA
Chief Justice
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 131166 September 30, 1999
CALTEX (PHILIPPINES), INC., petitioner, 
vs.
SULPICIO LINES, INC., GO SIOC SO,
ENRIQUE S. GO, EUSEBIO S. GO, CARLOS
S. GO, VICTORIANO S. GO, DOMINADOR S.
GO, RICARDO S. GO, EDWARD S. GO,
ARTURO S. GO, EDGAR S. GO, EDMUND S.
GO, FRANCISCO SORIANO, VECTOR
SHIPPING CORPORATION, TERESITA G.
CAÑEZAL, AND SOTERA E.
CAÑEZAL, respondents.
PARDO, J.:
Is the charterer of a sea vessel liable for
damages resulting from a collision between
the chartered vessel and a passenger ship?
When MT Vector left the port of Limay,
Bataan, on December 19, 1987 carrying
petroleum products of Caltex (Philippines), Inc.
(hereinafter Caltex) no one could have
guessed that it would collide with MV Doña
Paz, killing almost all the passengers and crew
members of both ships, and thus resulting in
one of the country's worst maritime disasters.
The petition before us seeks to reverse the
Court of Appeals decision 1 holding petitioner
jointly liable with the operator of MT Vector for
damages when the latter collided with Sulpicio
Lines, Inc.'s passenger ship MV Doña Paz.
The facts are as follows:
On December 19, 1987, motor tanker MT
Vector left Limay, Bataan, at about 8:00 p.m.,
231
enroute to Masbate, loaded with 8,800 barrels
of petroleum products shipped by petitioner
Caltex. 2 MT Vector is a tramping motor tanker
owned and operated by Vector Shipping
Corporation, engaged in the business of
transporting fuel products such as gasoline,
kerosene, diesel and crude oil. During that
particular voyage, the MT Vector carried on
board gasoline and other oil products owned by
Caltex by virtue of a charter contract between
them. 3
On December 20, 1987, at about 6:30 a.m., the
passenger ship MV Doña Paz left the port of
Tacloban headed for Manila with a complement
of 59 crew members including the master and his
officers, and passengers totaling 1,493 as
indicated in the Coast Guard Clearance. 4 The
MV Doña Paz is a passenger and cargo vessel
owned and operated by Sulpicio Lines, Inc.
plying the route of Manila/ Tacloban/ Catbalogan/
Manila/ Catbalogan/ Tacloban/ Manila, making
trips twice a week.
At about 10:30 p.m. of December 20, 1987,
the two vessels collided in the open sea within
the vicinity of Dumali Point between
Marinduque and Oriental Mindoro. All the
crewmembers of MV Doña Paz died, while the
two survivors from MT Vector claimed that
they were sleeping at the time of the incident. 1âwphi1.nêt
The MV Doña Paz carried an estimated 4,000
passengers; many indeed, were not in the
passenger manifest. Only 24 survived the
tragedy after having been rescued from the
burning waters by vessels that responded to
distress calls. 5 Among those who perished were
public school teacher Sebastian Cañezal (47
years old) and his daughter Corazon Cañezal
(11 years old), both unmanifested passengers
but proved to be on board the vessel.
On March 22, 1988, the board of marine
inquiry in BMI Case No. 659-87 after
investigation found that the MT Vector, its
registered operator Francisco Soriano, and its
owner and actual operator Vector Shipping
Corporation, were at fault and responsible for
its collision with MV Doña Paz. 6
On February 13, 1989, Teresita Cañezal and
Sotera E. Cañezal, Sebastian Cañezal's wife and
mother respectively, filed with the Regional Trial
Court, Branch 8, Manila, a complaint for
"Damages Arising from Breach of Contract of
Carriage" against Sulpicio Lines, Inc. (hereafter
Sulpicio). Sulpicio, in turn, filed a third party
complaint against Francisco Soriano, Vector
Shipping Corporation and Caltex (Philippines),
Inc. Sulpicio alleged that Caltex chartered MT
Vector with gross and evident bad faith knowing
fully well that MT Vector was improperly manned,
ill-equipped, unseaworthy and a hazard to safe
navigation; as a result, it rammed against MV
Doña Paz in the open sea setting MT Vector's
highly flammable cargo ablaze.
On September 15, 1992, the trial court
rendered decision dismissing, the third party
complaint against petitioner. The dispositive
portion reads:
WHEREFORE, judgment is hereby
rendered in favor of plaintiffs and
against defendant-3rd party plaintiff
Sulpicio Lines, Inc., to wit:
1. For the death of Sebastian E.
Cañezal and his 11-year old daughter
Corazon G. Cañezal, including loss of
future earnings of said Sebastian,
moral and exemplary damages,
attorney's fees, in the total amount of P
1,241,287.44 and finally;
2. The statutory costs of the
proceedings.
Likewise, the 3rd party complaint is
hereby DISMISSED for want of
substantiation and with costs against
the 3rd party plaintiff.
IT IS SO ORDERED.
DONE IN MANILA, this 15th day of
September 1992.
ARSENIO M. GONONG
Judge 7
On appeal to the Court of Appeals interposed by
Sulpicio Lines, Inc., on April 15, 1997, the Court
of Appeal modified the trial court's ruling and
included petitioner Caltex as one of the those
liable for damages. Thus:
WHEREFORE, in view of all the
foregoing, the judgment rendered by
the Regional Trial Court is hereby
MODIFIED as follows:
WHEREFORE, defendant Sulpicio
Lines, Inc., is ordered to pay the heirs
231
 of Sebastian E. Cañezal and Corazon Hence, this petition.
Cañezal:
We find the petition meritorious.
1. Compensatory damages for the
death of Sebastian E. Cañezal and First: The charterer has no liability for
Corazon Cañezal the total amount of damages under Philippine Maritime laws.
ONE HUNDRED THOUSAND PESOS
(P100,000); The respective rights and duties of a shipper
and the carrier depends not on whether the
2. Compensatory damages carrier is public or private, but on whether the
representing the unearned income of contract of carriage is a bill of lading or
Sebastian E. Cañezal, in the total equivalent shipping documents on the one
amount of THREE HUNDRED SIX hand, or a charter party or similar contract on
THOUSAND FOUR HUNDRED the other. 9
EIGHTY (P306,480.00) PESOS;
Petitioner and Vector entered into a contract of
3. Moral damages in the amount of affreightment, also known as a voyage charter. 10
THREE HUNDRED THOUSAND
PESOS (P300,000.00); A charter party is a contract by which an entire
ship, or some principal part thereof, is let by the
4. Attorney's fees in the concept of owner to another person for a specified time or
actual damages in the amount of use; a contract of affreightment is one by which
FIFTY THOUSAND PESOS the owner of a ship or other vessel lets the whole
(P50,000.00); or part of her to a merchant or other person for
the conveyance of goods, on a particular voyage,
in consideration of the payment of freight. 11
5. Costs of the suit.
A contract of affreightment may be either time
Third party defendants Vector Shipping charter, wherein the leased vessel is leased to
Co. and Caltex (Phils.), Inc. are held the charterer for a fixed period of time,
equally liable under the third party or voyage charter, wherein the ship is leased for
complaint to reimburse/indemnify a single voyage. In both cases, the charter-party
defendant Sulpicio Lines, Inc. of the provides for the hire of the vessel only, either for
above-mentioned damages, attorney's a determinate period of time or for a single or
fees and costs which the latter is consecutive voyage, the ship owner to supply the
adjudged to pay plaintiffs, the same to ship's store, pay for the wages of the master of
be shared half by Vector Shipping Co. the crew, and defray the expenses for the
(being the vessel at fault for the maintenance of the ship. 12
collision) and the other half by Caltex
(Phils.), Inc. (being the charterer that Under a demise or bareboat charter on the other
negligently caused the shipping of hand, the charterer mans the vessel with his own
combustible cargo aboard an people and becomes, in effect, the owner for the
unseaworthy vessel). voyage or service stipulated, subject to liability
for damages caused by negligence.
SO ORDERED.
If the charter is a contract of affreightment,
JORGE S. IMPERIAL which leaves the general owner in possession
Associate Justice of the ship as owner for the voyage, the rights
and the responsibilities of ownership rest on
the owner. The charterer is free from liability to
WE CONCUR:
third persons in respect of the ship. 13
RAMON U. MABUTAS, JR.
Second: MT Vector is a common carrier
Associate Justice
Charter parties fall into three main categories:
PORTIA ALIÑO HERMACHUELOS
(1) Demise or bareboat, (2) time charter, (3)
Associate Justice. 8
voyage charter. Does a charter party
agreement turn the common carrier into a
231
private one? We need to answer this question
in order to shed light on the responsibilities of
the parties.
In this case, the charter party agreement did
not convert the common carrier into a private
carrier. The parties entered into a voyage
charter, which retains the character of the
vessel as a common carrier.
In Planters Products, Inc. vs. Court of
Appeals, 14 we said:
It is therefore imperative that a public
carrier shall remain as such,
notwithstanding the charter of the
whole portion of a vessel of one or
more persons, provided the charter is
limited to the ship only, as in the case
of a time-charter or the voyage charter.
It is only when the charter includes
both the vessel and its crew, as in a
bareboat or demise that a common
carrier becomes private, at least
insofar as the particular voyage
covering the charter-party is
concerned. Indubitably, a ship-owner
in a time or voyage charter retains
possession and control of the ship,
although her holds may, for the
moment, be the property of the
charterer.
Later, we ruled in Coastwise Lighterage
Corporation vs. Court of Appeals: 15
Although a charter party may transform
a common carrier into a private one,
the same however is not true in a
contract of affreightment . . .
A common carrier is a person or corporation
whose regular business is to carry passengers
Under the Carriage of Goods by Sea Act :
or property for all persons who may choose to
employ and to remunerate him. 16 MT Vector
fits the definition of a common carrier under
Article 1732 of the Civil Code. In Guzman
vs. Court of Appeals, 17 we ruled:
The Civil Code defines "common
carriers" in the following terms:
Art. 1732. Common carriers are
persons, corporations, firms or
associations engaged in the business
of carrying or transporting passengers
for 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 (in
local idiom, as "a sideline"). 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 services
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. We think that Article 1733
deliberately refrained from making
such distinctions.
It appears to the Court that private
respondent is properly characterized
as a common carrier even though he
merely "back-hauled" goods for other
merchants from Manila to Pangasinan,
although such backhauling was done
on a periodic, occasional rather than
regular or scheduled manner, and
even though
respondent's principal occupation was
not the carriage of goods for others.
There is no dispute that private
respondent charged his customers a
fee for hauling their goods; that the fee
frequently fell below commercial freight
rates is not relevant here.
Sec. 3. (1) The carrier shall be bound
before and at the beginning of the
voyage to exercise due diligence to —
(a) Make the ship seaworthy;
(b) Properly man, equip, and supply
the ship;
x x x           x x x          x x x
231
Thus, the carriers are deemed to warrant
impliedly the seaworthiness of the ship. For a
vessel to be seaworthy, it must be adequately
equipped for the voyage and manned with a
sufficient number of competent officers and
crew. The failure of a common carrier to
maintain in seaworthy condition the vessel
involved in its contract of carriage is a clear
breach of its duty prescribed in Article 1755 of
the Civil Code. 18
The provisions owed their conception to the
nature of the business of common carriers. This
business is impressed with a special public duty.
The public must of necessity rely on the care and
skill of common carriers in the vigilance over the
goods and safety of the passengers, especially
because with the modern development of
science and invention, transportation has
become more rapid, more complicated and
somehow more hazardous. 19 For these reasons,
a passenger or a shipper of goods is under no
obligation to conduct an inspection of the ship
and its crew, the carrier being obliged by law to
impliedly warrant its seaworthiness.
This aside, we now rule on whether Caltex is
liable for damages under the Civil Code.
Third: Is Caltex liable for damages under the
Civil Code?
We rule that it is not.
Sulpicio argues that Caltex negligently shipped
its highly combustible fuel cargo aboard an
unseaworthy vessel such as the MT Vector
when Caltex:
1. Did not take steps to have M/T Vector's
certificate of inspection and coastwise license
renewed;
2. Proceeded to ship its cargo despite defects
found by Mr. Carlos Tan of Bataan Refinery
Corporation;
3. Witnessed M/T Vector submitting fake
documents and certificates to the Philippine
Coast Guard.
Sulpicio further argues that Caltex chose MT
Vector transport its cargo despite these
deficiencies.
1. The master of M/T Vector did not posses
the required Chief Mate license to command
and navigate the vessel;
2. The second mate, Ronaldo Tarife, had the
license of a Minor Patron, authorized to
navigate only in bays and rivers when the
subject collision occurred in the open sea;
3. The Chief Engineer, Filoteo Aguas, had no
license to operate the engine of the vessel;
4. The vessel did not have a Third Mate, a
radio operator and lookout; and
5. The vessel had a defective main engine. 20
As basis for the liability of Caltex, the Court of
Appeals relied on Articles 20 and 2176 of the
Civil Code, which provide:
Art. 20. — Every person who contrary
to law, willfully or negligently causes
damage to another, shall indemnify the
latter for the same.
Art. 2176. — Whoever by act or
omission causes damage to another,
there being fault or negligence, is
obliged to pay for the damage done.
Such fault or negligence, if there is no
pre-existing contractual relation
between the parties, is called a quasi-
delict and is governed by the
provisions of this Chapter.
And what is negligence?
The Civil Code provides:
Art. 1173. The fault or negligence of
the obligor consists in the omission of
that diligence which is required by the
nature of the obligation and
corresponds with the circumstances of
the persons, of the time and of the
place. When negligence shows bad
faith, the provisions of Article 1171 and
2201 paragraph 2, shall apply.
If the law does not state the diligence
which is to be observed in the
performance, that which is expected of
a good father of a family shall be
required.
231
In Southeastern College, Inc. vs. Court of
Appeals, 21 we said that negligence, as
commonly understood, is conduct which naturally
or reasonably creates undue risk or harm to
others. It may be the failure to observe that
degree of care, precaution, and vigilance, which
the circumstances justly demand, or the
omission to do something which ordinarily
regulate the conduct of human affairs, would do.
The charterer of a vessel has no obligation
before transporting its cargo to ensure that the
vessel it chartered complied with all legal
requirements. The duty rests upon the
common carrier simply for being engaged in
"public service." 22 The Civil Code demands
diligence which is required by the nature of the
obligation and that which corresponds with the
circumstances of the persons, the time and the
place. Hence, considering the nature of the
obligation between Caltex and MT Vector,
liability as found by the Court of Appeals is
without basis.1âwphi1.nêt
The relationship between the parties in this
case is governed by special laws. Because of
the implied warranty
seaworthiness,   shippers of goods, when
23
transacting with common carriers, are not
expected to inquire into the vessel's
seaworthiness, genuineness of its licenses and
compliance with all maritime laws. To demand
more from shippers and hold them liable in case
of failure exhibits nothing but the futility of our
maritime laws insofar as the protection of the
public in general is concerned. By the same
token, we cannot expect passengers to inquire
every time they board a common carrier, whether
the carrier possesses the necessary papers or
that all the carrier's employees are qualified.
Such a practice would be an absurdity in a
business where time is always of the essence.
Considering the nature of transportation
business, passengers and shippers alike
customarily presume that common carriers
possess all the legal requisites in its operation.
Thus, the nature of the obligation of Caltex
demands ordinary diligence like any other
shipper in shipping his cargoes.
A cursory reading of the records convinces us
that Caltex had reasons to believe that MT
Vector could legally transport cargo that time
of the year.
Atty. Poblador: Mr. Witness, I direct
your attention to this portion here
containing the entries here under
"VESSEL'S DOCUMENTS
1. Certificate of Inspection No.
1290-85, issued December 21,
1986, and Expires December
7, 1987", Mr. Witness, what
steps did you take regarding
the impending expiry of the C.I.
or the Certificate of Inspection
No. 1290-85 during the hiring
of MT Vector?
Apolinario Ng: At the time
when I extended the Contract, I
did nothing because the tanker
has a valid C.I. which will
expire on December 7, 1987
but on the last week of
November, I called the
attention of Mr. Abalos to
ensure that the C.I. be
renewed and Mr. Abalos, in
turn, assured me they will
renew the same.
of
Q: What happened after that?
A: On the first week of
December, I again made a
follow-up from Mr. Abalos, and
said they were going to send
me a copy as soon as
possible, sir.  24
x x x           x x x          x x x
Q: What did you do with the
C.I.?
A: We did not insist on getting
a copy of the C.I. from Mr.
Abalos on the first place,
because of our long business
relation, we trust Mr. Abalos
and the fact that the vessel
was able to sail indicates that
the documents are in
order. . . . 25
On cross examination —
Atty. Sarenas: This being the
case, and this being an
admission by you, this
Certificate of Inspection has
expired on December 7. Did it
occur to you not to let the
231
 vessel sail on that day because
of the very approaching date of
expiration?
Apolinar Ng: No sir, because
as I said before, the operation
Manager assured us that they
were able to secure a renewal
of the Certificate of Inspection
and that they will in time submit
us a re-direct examination. 27
copy. 26
Finally, on Mr. Ng's redirect examination:
Atty. Poblador: Mr. Witness,
were you aware of the
pending expiry of the
Certificate of Inspection in the
coastwise license on
December 7, 1987. What was
your assurance for the record
that this document was
renewed by the MT Vector?
Atty. Sarenas: . . .
Atty. Poblador: The certificate
of Inspection?
A: As I said, firstly, we trusted
Mr. Abalos as he is a long
time business partner;
secondly, those three years;
they were allowed to sail by
the Coast Guard. That are
some that make me believe
that they in fact were able to
secure the necessary
renewal.
Q: If the Coast Guard clears a
vessel to sail, what would that
mean?
Atty. Sarenas: Objection.
Court: He already answered
that in the cross examination
to the effect that if it was
allowed, referring to MV
Vector, to sail, where it is
loaded and that it was
scheduled for a destination by
the Coast Guard, it means
that it has Certificate of
Inspection extended as
assured to this witness by
Restituto Abalos. That in no
case MV Vector will be
allowed to sail if the
Certificate of inspection is,
indeed, not to be extended.
That was his repeated
explanation to the cross-
examination. So, there is no
need to clarify the same in the
Caltex and Vector Shipping Corporation had
been doing business since 1985, or for about two
years before the tragic incident occurred in 1987.
Past services rendered showed no reason for
Caltex to observe a higher degree of diligence.
Clearly, as a mere voyage charterer, Caltex
had the right to presume that the ship was
seaworthy as even the Philippine Coast Guard
itself was convinced of its seaworthiness. All
things considered, we find no legal basis to
hold petitioner liable for damages.
As Vector Shipping Corporation did not appeal
from the Court of Appeals' decision, we limit
our ruling to the liability of Caltex alone.
However, we maintain the Court of Appeals'
ruling insofar as Vector is concerned.
WHEREFORE, the Court hereby GRANTS the
petition and SETS ASIDE the decision of the
Court of Appeals in CA-G.R. CV No. 39626,
promulgated on April 15, 1997, insofar as it
held Caltex liable under the third party
complaint to reimburse/indemnify defendant
Sulpicio Lines, Inc. the damages the latter is
adjudged to pay plaintiffs-appellees. The Court
AFFIRMS the decision of the Court of Appeals
insofar as it orders Sulpicio Lines, Inc. to pay
the heirs of Sebastian E. Cañezal and
Corazon Cañezal damages as set forth
therein. Third-party defendant-appellee Vector
Shipping Corporation and Francisco Soriano
are held liable to reimburse/indemnify
defendant Sulpicio Lines, Inc. whatever
damages, attorneys' fees and costs the latter
is adjudged to pay plaintiffs-appellees in the
case.1âwphi1.nêt
No costs in this instance.
SO ORDERED.
Davide, Jr., C.J., Kapunan and Ynares-
Santiago, JJ., concur.
231
Puno, J., no part due to close relation with a
party.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 125948 December 29, 1998
FIRST PHILIPPINE INDUSTRIAL
CORPORATION, petitioner,  gross receipts under Section 133 of
vs.
COURT OF APPEALS, HONORABLE
PATERNO V. TAC-AN, BATANGAS CITY
and ADORACION C. ARELLANO, in her
official capacity as City Treasurer of
Batangas, respondents.
MARTINEZ, J.:
This petition for review on certiorari assails the
Decision of the Court of Appeals dated
November 29, 1995, in CA-G.R. SP No.
36801, affirming the decision of the Regional
Trial Court of Batangas City, Branch 84, in
Civil Case No. 4293, which dismissed
petitioners' complaint for a business tax refund
imposed by the City of Batangas.
Petitioner is a grantee of a pipeline concession
under Republic Act No. 387, as amended, to
contract, install and operate oil pipelines. The
original pipeline concession was granted in
1967  and renewed by the Energy Regulatory
1
Board in 1992.  2
Sometime in January 1995, petitioner applied
for a mayor's permit with the Office of the
Mayor of Batangas City. However, before the
mayor's permit could be issued, the
respondent City Treasurer required petitioner
to pay a local tax based on its gross receipts
for the fiscal year 1993 pursuant to the Local
Government Code . The respondent City
3
Treasurer assessed a business tax on the
petitioner amounting to P956,076.04 payable
in four installments based on the gross
receipts for products pumped at GPS-1 for the
fiscal year 1993 which amounted to
P181,681,151.00. In order not to hamper its
operations, petitioner paid the tax under
protest in the amount of P239,019.01 for the
first quarter of 1993.
On January 20, 1994, petitioner filed a letter-
protest addressed to the respondent City
Treasurer, the pertinent portion of which
reads:
Please note that our Company (FPIC)
is a pipeline operator with a
government concession granted under
the Petroleum Act. It is engaged in the
business of transporting petroleum
products from the Batangas refineries,
via pipeline, to Sucat and JTF
Pandacan Terminals. As such, our
Company is exempt from paying tax on
the Local Government Code of 1991 . .
..
Moreover, Transportation contractors
are not included in the enumeration of
contractors under Section 131,
Paragraph (h) of the Local
Government Code. Therefore, the
authority to impose tax "on contractors
and other independent contractors"
under Section 143, Paragraph (e) of
the Local Government Code does not
include the power to levy on
transportation contractors.
The imposition and assessment cannot
be categorized as a mere fee
authorized under Section 147 of the
Local Government Code. The said
section limits the imposition of fees
and charges on business to such
amounts as may be commensurate to
the cost of regulation, inspection, and
licensing. Hence, assuming arguendo
that FPIC is liable for the license fee,
the imposition thereof based on gross
receipts is violative of the aforecited
provision. The amount of P956,076.04
(P239,019.01 per quarter) is not
commensurate to the cost of
regulation, inspection and licensing.
The fee is already a revenue raising
measure, and not a mere regulatory
imposition.4
On March 8, 1994, the respondent City
Treasurer denied the protest contending that
petitioner cannot be considered engaged in
transportation business, thus it cannot claim
exemption under Section 133 (j) of the Local
Government Code. 5
231
On June 15, 1994, petitioner filed with the
Regional Trial Court of Batangas City a
complaint  for tax refund with prayer for writ of
6
preliminary injunction against respondents City
of Batangas and Adoracion Arellano in her
capacity as City Treasurer. In its complaint,
petitioner alleged, inter alia, that: (1) the
imposition and collection of the business tax
on its gross receipts violates Section 133 of
the Local Government Code; (2) the authority
of cities to impose and collect a tax on the
gross receipts of "contractors and independent
contractors" under Sec. 141 (e) and 151 does
not include the authority to collect such taxes
on transportation contractors for, as defined
under Sec. 131 (h), the term "contractors"
excludes transportation contractors; and, (3)
the City Treasurer illegally and erroneously
imposed and collected the said tax, thus
meriting the immediate refund of the tax paid. 7
Traversing the complaint, the respondents
argued that petitioner cannot be exempt from
taxes under Section 133 (j) of the Local
Government Code as said exemption applies
only to "transportation contractors and persons
engaged in the transportation by hire and
common carriers by air, land and water."
Respondents assert that pipelines are not
included in the term "common carrier" which
refers solely to ordinary carriers such as
trucks, trains, ships and the like. Respondents
further posit that the term "common carrier"
under the said code pertains to the mode or
manner by which a product is delivered to its
destination. 8
On October 3, 1994, the trial court rendered a
decision dismissing the complaint, ruling in this
wise:
. . . Plaintiff is either a contractor or
other independent contractor.
. . . the exemption to tax claimed by
the plaintiff has become unclear. It is a
rule that tax exemptions are to be
strictly construed against the taxpayer,
taxes being the lifeblood of the
government. Exemption may therefore
be granted only by clear and
unequivocal provisions of law.
Plaintiff claims that it is a grantee of a
pipeline concession under Republic
Act 387. (Exhibit A) whose concession
was lately renewed by the Energy
Regulatory Board (Exhibit B). Yet
neither said law nor the deed of
concession grant any tax exemption
upon the plaintiff.
Even the Local Government Code
imposes a tax on franchise holders
under Sec. 137 of the Local Tax Code.
Such being the situation obtained in
this case (exemption being unclear
and equivocal) resort to distinctions or
other considerations may be of help:
1. That the exemption granted
under Sec. 133 (j)
encompasses only common
carriers so as not to
overburden the riding public or
commuters with
taxes. Plaintiff is not a
common carrier, but a special
carrier extending its services
and facilities to a single
specific or "special customer"
under a "special contract."
2. The Local Tax Code of 1992
was basically enacted to give
more and effective local
autonomy to local governments
than the previous enactments,
to make them economically
and financially viable to serve
the people and discharge their
functions with a concomitant
obligation to accept certain
devolution of powers, . . . So,
consistent with this policy even
franchise grantees are taxed
(Sec. 137) and contractors are
also taxed under Sec. 143 (e)
and 151 of the Code. 9
Petitioner assailed the aforesaid decision
before this Court via a petition for review. On
February 27, 1995, we referred the case to the
respondent Court of Appeals for consideration
and adjudication.   On November 29, 1995,
10
the respondent court rendered a
decision   affirming the trial court's dismissal of
11
petitioner's complaint. Petitioner's motion for
reconsideration was denied on July 18, 1996.  12
Hence, this petition. At first, the petition was
denied due course in a Resolution dated
November 11, 1996.  Petitioner moved for a
13
reconsideration which was granted by this
231
Court in a Resolution   of January 22, 1997.
14
Thus, the petition was reinstated.
Petitioner claims that the respondent Court of
Appeals erred in holding that (1) the petitioner
is not a common carrier or a transportation
contractor, and (2) the exemption sought for
by petitioner is not clear under the law.
There is merit in the petition.
A "common carrier" may be defined, broadly,
as one who holds himself out to the public as
engaged in the business of transporting
persons or property from place to place, for
compensation, offering his services to the
public generally.
Art. 1732 of the Civil Code defines a "common
carrier" as "any person, corporation, firm or
association 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 test for determining whether a party is a
common carrier of goods is:
1. He must be engaged in the business
of carrying goods for others as a public
employment, and must hold himself
out as ready to engage in the
transportation of goods for person
generally as a business and not as a
casual occupation;
2. He must undertake to carry goods of
the kind to which his business is
confined;
3. He must undertake to carry by the
method by which his business is
conducted and over his established
roads; and
4. The transportation must be for
hire. 
15
Based on the above definitions and
requirements, there is no doubt that petitioner
is a common carrier. It is engaged in the
business of transporting or carrying goods, i.e.
petroleum products, for hire as a public
employment. It undertakes to carry for all
persons indifferently, that is, to all persons
who choose to employ its services, and
transports the goods by land and for
compensation. The fact that petitioner has a
limited clientele does not exclude it from the
definition of a common carrier. In De Guzman
vs. Court of Appeals  we ruled that:
16
The above article (Art. 1732, 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 (in local
idiom, as a "sideline"). Article 1732 . . .
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. We think that Article 1877
deliberately refrained from making
such distinctions.
So understood, the 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:
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
231
 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 andpower
petroleum, sewerage system,
wire or wireless
communications systems, wire
or wireless broadcasting
stations and other similar
public services. (Emphasis
Supplied)
Also, respondent's argument that the term
"common carrier" as used in Section 133 (j) of
the Local Government Code refers only to
common carriers transporting goods and
passengers through moving vehicles or
vessels either by land, sea or water, is
erroneous.
As correctly pointed out by petitioner, the
definition of "common carriers" in the Civil
Code makes no distinction as to the means of
transporting, as long as it is by land, water or
air. It does not provide that the transportation
of the passengers or goods should be by
motor vehicle. In fact, in the United States, oil
pipe line operators are considered common
carriers. 
17
Under the Petroleum Act of the Philippines
(Republic Act 387), petitioner is considered a
"common carrier." Thus, Article 86 thereof
provides that:
Art. 86. Pipe line concessionaire as
common carrier. — A pipe line shall
have the preferential right to utilize
installations for the transportation of
petroleum owned by him, but is
obligated to utilize the remaining
transportation capacity pro rata for the
transportation of such other petroleum
as may be offered by others for
transport, and to charge without
discrimination such rates as may have
been approved by the Secretary of
Agriculture and Natural Resources.
Republic Act 387 also regards petroleum
operation as a public utility. Pertinent portion
of Article 7 thereof provides:
that everything relating to the
exploration for and exploitation of
petroleum . . . and everything relating
to the manufacture, refining, storage,
or transportation by special methods of
petroleum, is hereby declared to be
a public utility. (Emphasis Supplied)
The Bureau of Internal Revenue likewise
considers the petitioner a "common carrier." In
BIR Ruling No. 069-83, it declared:
. . . since [petitioner] is a pipeline
concessionaire that is engaged only in
transporting petroleum products, it is
considered a common carrier under
Republic Act No. 387 . . . . Such being
the case, it is not subject to withholding
tax prescribed by Revenue
Regulations No. 13-78, as amended.
From the foregoing disquisition, there is no
doubt that petitioner is a "common carrier"
and, therefore, exempt from the business tax
as provided for in Section 133 (j), of the Local
Government Code, to wit:
Sec. 133. Common Limitations on the
Taxing Powers of Local Government
Units. — Unless otherwise provided
herein, the exercise of the taxing
powers of provinces, cities,
municipalities, and barangays shall not
extend to the levy of the following:
x x x           x x x          x x x
(j) Taxes on the gross receipts of
transportation contractors and persons
engaged in the transportation of
passengers or freight by hire and
common carriers by air, land or water,
except as provided in this Code.
The deliberations conducted in the House of
Representatives on the Local Government
Code of 1991 are illuminating:
231
MR. AQUINO (A). Thank you, Mr. 137] that a province may impose this
Speaker. tax at a specific rate.

Mr. Speaker, we would like to proceed MR. AQUINO (A.). Thank you for that
to page 95, line clarification, Mr. Speaker. . . . 
18

1. It states: "SEC. 121 [now Sec. 131]. It is clear that the legislative intent in excluding
Common Limitations on the Taxing from the taxing power of the local government
Powers of Local Government Units." . . unit the imposition of business tax against
. common carriers is to prevent a duplication of
the so-called "common carrier's tax."
MR. AQUINO (A.). Thank you Mr.
Speaker. Petitioner is already paying three (3%) percent
common carrier's tax on its gross
Still on page 95, subparagraph 5, on sales/earnings under the National Internal
taxes on the business of Revenue Code.   To tax petitioner again on its
19

transportation. This appears to be one gross receipts in its transportation of

of those being deemed to be exempted petroleum business would defeat the purpose
from the taxing powers of the local of the Local Government Code.
government units. May we know the
reason why the transportation WHEREFORE, the petition is hereby
business is being excluded from the GRANTED. The decision of the respondent
taxing powers of the local government Court of Appeals dated November 29, 1995 in
units? CA-G.R. SP No. 36801 is REVERSED and
SET ASIDE.
MR. JAVIER (E.). Mr. Speaker, there is
an exception contained in Section 121 SO ORDERED.
(now Sec. 131), line 16, paragraph 5. It
states that local government units may Bellosillo, Puno and Mendoza, JJ., concur.
not impose taxes on the business of
transportation, except as otherwise
provided in this code.
Republic of the Philippines
Now, Mr. Speaker, if the Gentleman
SUPREME COURT
would care to go to page 98 of Book II,
Manila
one can see there that provinces have
the power to impose a tax on business
enjoying a franchise at the rate of not SECOND DIVISION
more than one-half of 1 percent of the
gross annual receipts. So, G.R. No. 101089. April 7, 1993.
transportation contractors who are
enjoying a franchise would be subject ESTRELLITA M. BASCOS, petitioners, 
to tax by the province. That is the vs.
exception, Mr. Speaker. COURT OF APPEALS and RODOLFO A.
CIPRIANO, respondents.
What we want to guard against here,
Mr. Speaker, is the imposition of taxes
by local government units on the
carrier business. Local government Modesto S. Bascos for petitioner.
units may impose taxes on top of what
is already being imposed by the Pelaez, Adriano & Gregorio for private
National Internal Revenue Code which respondent.
is the so-called "common carriers tax."
We do not want a duplication of this
SYLLABUS
tax, so we just provided for an
exception under Section 125 [now Sec.

231
1. CIVIL LAW; COMMON CARRIERS;
DEFINED; TEST TO DETERMINE COMMON
CARRIER. — Article 1732 of the Civil Code
defines a common carrier as "(a) person,
corporation or firm, or association 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 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." . . . The
holding of the Court in De Guzman vs. Court
of Appeals is instructive. In referring to Article
1732 of the Civil Code, it held thus: "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 (in local idiom, as a "sideline"). 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 distinguished
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. We think that Article
1732 deliberately refrained from making such
distinctions."
2. ID.; ID.; DILIGENCE REQUIRED IN
VIGILANCE OVER GOODS TRANSPORTED;
WHEN PRESUMPTION OF NEGLIGENCE
ARISES; HOW PRESUMPTION OVERCAME;
WHEN PRESUMPTION MADE ABSOLUTE.
— Common carriers are obliged to observe
extraordinary diligence in the vigilance over
the goods transported by them. Accordingly,
they are presumed to have been at fault or to
have acted negligently if the goods are lost,
destroyed or deteriorated. There are very few
instances when the presumption of negligence
does not attach and these instances are
enumerated in Article 1734. In those cases
where the presumption is applied, the common
carrier must prove that it exercised
extraordinary diligence in order to overcome
the presumption . . . The presumption of
negligence was raised against petitioner. It
was petitioner's burden to overcome it. Thus,
contrary to her assertion, private respondent
need not introduce any evidence to prove her
negligence. Her own failure to adduce
sufficient proof of extraordinary diligence made
the presumption conclusive against her.
3. ID.; ID.; HIJACKING OF GOODS;
CARRIER PRESUMED NEGLIGENT; HOW
CARRIER ABSOLVED FROM LIABILITY. —
In De Guzman vs. Court of Appeals, the Court
held that hijacking, not being included in the
provisions of Article 1734, must be dealt with
under the provisions of Article 1735 and thus,
the common carrier is presumed to have been
at fault or negligent. To exculpate the carrier
from liability arising from hijacking, he must
prove that the robbers or the hijackers acted
with grave or irresistible threat, violence, or
force. This is in accordance with Article 1745
of the Civil Code which provides: "Art. 1745.
Any of the following or similar stipulations shall
be considered unreasonable, unjust and
contrary to public policy . . . (6) That the
common carrier's liability for acts committed by
thieves, or of robbers who do not act with
grave or irresistible threat, violences or force,
is dispensed with or diminished"; In the same
case, the Supreme Court also held that:
"Under Article 1745 (6) above, a common
carrier is held responsible — and will not be
allowed to divest or to diminish such
responsibility — even for acts of strangers like
thieves or robbers, except where such thieves
or robbers in fact acted "with grave of
irresistible threat, violence of force," We
believe and so hold that the limits of the duty
of extraordinary diligence in the vigilance over
the goods carried are reached where the
goods are lost as a result of a robbery which is
attended by "grave or irresistible threat,
violence or force."
4. REMEDIAL LAW; EVIDENCE; JUDICIAL
ADMISSIONS CONCLUSIVE. — In this case,
petitioner herself has made the admission that
she was in the trucking business, offering her
trucks to those with cargo to move. Judicial
admissions are conclusive and no evidence is
required to prove the same.
5. ID.; ID.; BURDEN OF PROOF RESTS
WITH PARTY WHO ALLEGES A FACT. —
Petitioner presented no other proof of the
existence of the contract of lease. He who
alleges a fact has the burden of proving it.
6. ID.; ID.; AFFIDAVITS NOT CONSIDERED
BEST EVIDENCE IF AFFIANTS AVAILABLE
AS WITNESSES. — While the affidavit of
231
Juanito Morden, the truck helper in the
hijacked truck, was presented as evidence in
court, he himself was a witness as could be
gleaned from the contents of the petition.
Affidavits are not considered the best evidence
if the affiants are available as witnesses.
7. CIVIL LAW; OBLIGATIONS AND
CONTRACTS; CONTRACT IS WHAT LAW
DEFINES IT TO BE. — Granting that the said
evidence were not self-serving, the same were
not sufficient to prove that the contract was
one of lease. It must be understood that a
contract is what the law defines it to be and
not what it is called by the contracting parties.
DECISION
CAMPOS, JR., J p:
This is a petition for review on certiorari of the
decision ** of the Court of Appeals in
"RODOLFO A. CIPRIANO, doing business
under the name CIPRIANO TRADING
ENTERPRISES plaintiff-appellee, vs.
ESTRELLITA M. BASCOS, doing business
under the name of BASCOS TRUCKING,
defendant-appellant," C.A.-G.R. CV No.
25216, the dispositive portion of which is
quoted hereunder:
"PREMISES considered, We find no reversible
error in the decision appealed from, which is
hereby affirmed in toto. Costs against
appellant."
The facts, as gathered by this Court, are as
follows:
Rodolfo A. Cipriano representing Cipriano
Trading Enterprise (CIPTRADE for short)
entered into a hauling contract 2 with Jibfair
Shipping Agency Corporation whereby the
former bound itself to haul the latter's 2,000
m/tons of soya bean meal from Magallanes
Drive, Del Pan, Manila to the warehouse of
Purefoods Corporation in Calamba, Laguna.
To carry out its obligation, CIPTRADE, through
Rodolfo Cipriano, subcontracted with Estrellita
Bascos (petitioner) to transport and to deliver
400 sacks of soya bean meal worth
P156,404.00 from the Manila Port Area to
Calamba, Laguna at the rate of P50.00 per
metric ton. Petitioner failed to deliver the said
cargo. As a consequence of that failure,
Cipriano paid Jibfair Shipping Agency the
amount of the lost goods in accordance with
the contract which stated that:
"1. CIPTRADE shall be held liable and
answerable for any loss in bags due to theft,
hijacking and non-delivery or damages to the
cargo during transport at market value, . . ." 3
Cipriano demanded reimbursement from
petitioner but the latter refused to pay.
Eventually, Cipriano filed a complaint for a
sum of money and damages with writ of
preliminary attachment 4 for breach of a
contract of carriage. The prayer for a Writ of
Preliminary Attachment was supported by an
affidavit 5 which contained the following
allegations:
"4. That this action is one of those
specifically mentioned in Sec. 1, Rule
57 the Rules of Court, whereby a writ
of preliminary attachment may lawfully
issue, namely:
"(e) in an action against a party who
has removed or disposed of his
property, or is about to do so, with
intent to defraud his creditors;"
5. That there is no sufficient security
for the claim sought to be enforced by
the present action;
6. That the amount due to the plaintiff
in the above-entitled case is above all
legal counterclaims;"
The trial court granted the writ of preliminary
attachment on February 17, 1987.
In her answer, petitioner interposed the
following defenses: that there was no contract
of carriage since CIPTRADE leased her cargo
truck to load the cargo from Manila Port Area
to Laguna; that CIPTRADE was liable to
petitioner in the amount of P11,000.00 for
loading the cargo; that the truck carrying the
cargo was hijacked along Canonigo St., Paco,
Manila on the night of October 21, 1988; that
the hijacking was immediately reported to
CIPTRADE and that petitioner and the police
exerted all efforts to locate the hijacked
properties; that after preliminary investigation,
an information for robbery and carnapping
were filed against Jose Opriano, et al.; and
that hijacking, being a force majeure,
231
exculpated petitioner from any liability to NEVERTHELESS, IT ERRED IN
CIPTRADE. FINDING PETITIONER LIABLE
THEREUNDER BECAUSE THE LOSS
After trial, the trial court rendered a decision OF THE CARGO WAS DUE TO
*** the dispositive portion of which reads as FORCE MAJEURE, NAMELY,
follows: HIJACKING.

"WHEREFORE, judgment is hereby rendered III. THE RESPONDENT COURT

in favor of plaintiff and against defendant ERRED IN AFFIRMING THE FINDING
ordering the latter to pay the former: OF THE TRIAL COURT THAT
PETITIONER'S MOTION TO
1. The amount of ONE HUNDRED DISSOLVE/LIFT THE WRIT OF
FIFTY-SIX THOUSAND FOUR PRELIMINARY ATTACHMENT HAS
HUNDRED FOUR PESOS BEEN RENDERED MOOT AND
(P156,404.00) as an (sic) for actual ACADEMIC BY THE DECISION OF
damages with legal interest of 12% per THE MERITS OF THE CASE." 7
cent per annum to be counted from
December 4, 1986 until fully paid; The petition presents the following issues for
resolution: (1) was petitioner a common
2. The amount of FIVE THOUSAND carrier?; and (2) was the hijacking referred to a
PESOS (P5,000.00) as and for force majeure?
attorney's fees; and
The Court of Appeals, in holding that petitioner
3. The costs of the suit. was a common carrier, found that she
admitted in her answer that she did business
under the name A.M. Bascos Trucking and
The "Urgent Motion To Dissolve/Lift
that said admission dispensed with the
preliminary Attachment" dated March 10, 1987
presentation by private respondent, Rodolfo
filed by defendant is DENIED for being moot
Cipriano, of proofs that petitioner was a
and academic.
common carrier. The respondent Court also
adopted in toto the trial court's decision that
SO ORDERED." 6 petitioner was a common carrier, Moreover,
both courts appreciated the following pieces of
Petitioner appealed to the Court of Appeals evidence as indicators that petitioner was a
but respondent Court affirmed the trial court's common carrier: the fact that the truck driver of
judgment. petitioner, Maximo Sanglay, received the
cargo consisting of 400 bags of soya bean
Consequently, petitioner filed this petition meal as evidenced by a cargo receipt signed
where she makes the following assignment of by Maximo Sanglay; the fact that the truck
errors; to wit: helper, Juanito Morden, was also an employee
of petitioner; and the fact that control of the
"I. THE RESPONDENT COURT cargo was placed in petitioner's care.
ERRED IN HOLDING THAT THE
CONTRACTUAL RELATIONSHIP In disputing the conclusion of the trial and
BETWEEN PETITIONER AND appellate courts that petitioner was a common
PRIVATE RESPONDENT WAS carrier, she alleged in this petition that the
CARRIAGE OF GOODS AND NOT contract between her and Rodolfo A. Cipriano,
LEASE OF CARGO TRUCK. representing CIPTRADE, was lease of the
truck. She cited as evidence certain affidavits
II. GRANTING, EX GRATIA which referred to the contract as "lease".
ARGUMENTI, THAT THE FINDING These affidavits were made by Jesus Bascos
OF THE RESPONDENT COURT 8 and by petitioner herself. 9 She further
THAT THE CONTRACTUAL averred that Jesus Bascos confirmed in his
RELATIONSHIP BETWEEN testimony his statement that the contract was
PETITIONER AND PRIVATE a lease contract. 10 She also stated that: she
RESPONDENT WAS CARRIAGE OF was not catering to the general public. Thus, in
GOODS IS CORRECT, her answer to the amended complaint, she

231
said that she does business under the same
style of A.M. Bascos Trucking, offering her
trucks for lease to those who have cargo to
move, not to the general public but to a few
customers only in view of the fact that it is only
a small business. 11
We agree with the respondent Court in its
finding that petitioner is a common carrier.
Article 1732 of the Civil Code defines a
common carrier as "(a) person, corporation or
firm, or association 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 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." 12 In this
case, petitioner herself has made the
admission that she was in the trucking
business, offering her trucks to those with
cargo to move. Judicial admissions are
conclusive and no evidence is required to
prove the same. 13
But petitioner argues that there was only a
contract of lease because they offer their
services only to a select group of people and
because the private respondents, plaintiffs in
the lower court, did not object to the
presentation of affidavits by petitioner where
the transaction was referred to as a lease
contract.
Regarding the first contention, the holding of
the Court in De Guzman vs. Court of Appeals
14 is instructive. In referring to Article 1732 of
the Civil Code, it held thus:
"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 (in local idiom, as a
"sideline"). 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. We think that Article 1732
deliberately refrained from making such
distinctions."
Regarding the affidavits presented by
petitioner to the court, both the trial and
appellate courts have dismissed them as self-
serving and petitioner contests the conclusion.
We are bound by the appellate court's factual
conclusions. Yet, granting that the said
evidence were not self-serving, the same were
not sufficient to prove that the contract was
one of lease. It must be understood that a
contract is what the law defines it to be and
not what it is called by the contracting parties.
15 Furthermore, petitioner presented no other
proof of the existence of the contract of lease.
He who alleges a fact has the burden of
proving it. 16
Likewise, We affirm the holding of the
respondent court that the loss of the goods
was not due to force majeure.
Common carriers are obliged to observe
extraordinary diligence in the vigilance over
the goods transported by them. 17
Accordingly, they are presumed to have been
at fault or to have acted negligently if the
goods are lost, destroyed or deteriorated. 18
There are very few instances when the
presumption of negligence does not attach
and these instances are enumerated in Article
1734. 19 In those cases where the
presumption is applied, the common carrier
must prove that it exercised extraordinary
diligence in order to overcome the
presumption.
In this case, petitioner alleged that hijacking
constituted force majeure which exculpated
her from liability for the loss of the cargo. In De
Guzman vs. Court of Appeals, 20 the Court
held that hijacking, not being included in the
provisions of Article 1734, must be dealt with
under the provisions of Article 1735 and thus,
the common carrier is presumed to have been
at fault or negligent. To exculpate the carrier
from liability arising from hijacking, he must
prove that the robbers or the hijackers acted
with grave or irresistible threat, violence, or
force. This is in accordance with Article 1745
of the Civil Code which provides:
231
"Art. 1745. Any of the following or similar
stipulations shall be considered unreasonable,
unjust and contrary to public policy;
xxx xxx xxx
(6) That the common carrier's liability for acts
committed by thieves, or of robbers who do
not act with grave or irresistible threat,
violences or force, is dispensed with or
diminished;"
In the same case, 21 the Supreme Court also
held that:
"Under Article 1745 (6) above, a common
carrier is held responsible — and will not be
allowed to divest or to diminish such
responsibility — even for acts of strangers like
thieves or robbers except where such thieves
or robbers in fact acted with grave or
irresistible threat, violence or force. We believe
and so hold that the limits of the duty of
extraordinary diligence in the vigilance over
the goods carried are reached where the
goods are lost as a result of a robbery which is
attended by "grave or irresistible threat,
violence or force."
To establish grave and irresistible force,
petitioner presented her accusatory affidavit,
22 Jesus Bascos' affidavit, 23 and Juanito
Morden's 24 "Salaysay". However, both the
trial court and the Court of Appeals have
concluded that these affidavits were not
enough to overcome the presumption.
Petitioner's affidavit about the hijacking was
based on what had been told her by Juanito
Morden. It was not a first-hand account. While
it had been admitted in court for lack of
objection on the part of private respondent, the
respondent Court had discretion in assigning
weight to such evidence. We are bound by the
conclusion of the appellate court. In a petition
for review on certiorari, We are not to
determine the probative value of evidence but
to resolve questions of law. Secondly, the
affidavit of Jesus Bascos did not dwell on how
the hijacking took place. Thirdly, while the
affidavit of Juanito Morden, the truck helper in
the hijacked truck, was presented as evidence
in court, he himself was a witness as could be
gleaned from the contents of the petition.
Affidavits are not considered the best evidence
if the affiants are available as witnesses. 25
The subsequent filing of the information for
carnapping and robbery against the accused
named in said affidavits did not necessarily
mean that the contents of the affidavits were
true because they were yet to be determined
in the trial of the criminal cases.
The presumption of negligence was raised
against petitioner. It was petitioner's burden to
overcome it. Thus, contrary to her assertion,
private respondent need not introduce any
evidence to prove her negligence. Her own
failure to adduce sufficient proof of
extraordinary diligence made the presumption
conclusive against her.
Having affirmed the findings of the respondent
Court on the substantial issues involved, We
find no reason to disturb the conclusion that
the motion to lift/dissolve the writ of preliminary
attachment has been rendered moot and
academic by the decision on the merits.
In the light of the foregoing analysis, it is Our
opinion that the petitioner's claim cannot be
sustained. The petition is DISMISSED and the
decision of the Court of Appeals is hereby
AFFIRMED.
SO ORDERED.
Narvasa, C .J ., Padilla, Regalado and Nocon,
JJ ., concur.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 131621 September 28, 1999
LOADSTAR SHIPPING CO., INC., petitioner, 
vs.
COURT OF APPEALS and THE MANILA
INSURANCE CO., INC., respondents.
DAVIDE, JR., C.J.:
Petitioner Loadstar Shipping Co., Inc.
(hereafter LOADSTAR), in this petition for
review on certiorari under Rule 45 of the 1997
Rules of Civil Procedure, seeks to reverse and
set aside the following: (a) the 30 January
1997 decision 1 of the Court of Appeals in CA-
G.R. CV No. 36401, which affirmed the decision
231
of 4 October 1991 2 of the Regional Trial Court of
Manila, Branch 16, in Civil Case No. 85-29110,
ordering LOADSTAR to pay private respondent
Manila Insurance Co. (hereafter MIC) the amount
of P6,067,178, with legal interest from the filing
of the compliant until fully paid, P8,000 as
attorney's fees, and the costs of the suit; and (b)
its resolution of 19 November 1997, 3 denying
LOADSTAR's motion for reconsideration of said
decision.
The facts are undisputed. 1âwphi1.nêt
LOADSTAR being the party insured. In any
event, PGAI was later dropped as a party
defendant after it paid the insurance proceeds
to LOADSTAR.
As stated at the outset, the court a
quo rendered judgment in favor of MIC,
prompting LOADSTAR to elevate the matter to
the court of Appeals, which, however, agreed
with the trial court and affirmed its decision in
toto.

In dismissing LOADSTAR's appeal, the

On 19 November 1984, LOADSTAR received
appellate
on board its M/V "Cherokee" (hereafter, the
observations:
vessel) the following goods for shipment:
a) 705 bales of lawanit hardwood;
b) 27 boxes and crates of tilewood
assemblies and the others; and
c) 49 bundles of mouldings R & W (3)
Apitong Bolidenized.
The goods, amounting to P6,067,178, were
insured for the same amount with MIC against
various risks including "TOTAL LOSS BY
TOTAL OF THE LOSS THE VESSEL." The
vessel, in turn, was insured by Prudential
Guarantee & Assurance, Inc. (hereafter PGAI)
for P4 million. On 20 November 1984, on its
way to Manila from the port of Nasipit, Agusan
del Norte, the vessel, along with its cargo,
sank off Limasawa Island. As a result of the
total loss of its shipment, the consignee made
a claim with LOADSTAR which, however,
ignored the same. As the insurer, MIC paid
P6,075,000 to the insured in full settlement of
its claim, and the latter executed a subrogation
receipt therefor.
On 4 February 1985, MIC filed a complaint
against LOADSTAR and PGAI, alleging that
the sinking of the vessel was due to the fault
and negligence of LOADSTAR and its
employees. It also prayed that PGAI be
court made the following
1) LOADSTAR cannot be considered a
private carrier on the sole ground that
there was a single shipper on that
fateful voyage. The court noted that
the charter of the vessel was limited to
the ship, but LOADSTAR retained
control over its crew. 4
2) As a common carrier, it is the Code of
Commerce, not the Civil Code, which
should be applied in determining the
rights and liabilities of the parties.
3) The vessel was not seaworthy
because it was undermanned on the
day of the voyage. If it had been
seaworthy, it could have withstood the
"natural and inevitable action of the
sea" on 20 November 1984, when the
condition of the sea was moderate.
The vessel sank, not because of force
majeure, but because it was not
seaworthy. LOADSTAR'S allegation
that the sinking was probably due to
the "convergence of the winds," as
stated by a PAGASA expert, was not
duly proven at the trial. The "limited
liability" rule, therefore, is not
applicable considering that, in this
case, there was an actual finding of
negligence on the part of the carrier.5

ordered to pay the insurance proceeds from

the loss the vessel directly to MIC, said
amount to be deducted from MIC's claim from
LOADSTAR.
In its answer, LOADSTAR denied any liability
for the loss of the shipper's goods and claimed
that sinking of its vessel was due to force
majeure. PGAI, on the other hand, averred
that MIC had no cause of action against it,
4) Between MIC and LOADSTAR, the
provisions of the Bill of Lading do not
apply because said provisions bind
only the shipper/consignee and the
carrier. When MIC paid the shipper for
the goods insured, it was subrogated
to the latter's rights as against the
carrier, LOADSTAR. 6
231
 5) There was a clear breach of the
contract of carriage when the shipper's
goods never reached their destination.
LOADSTAR's defense of "diligence of a
good father of a family" in the training
and selection of its crew is unavailing
because this is not a proper or complete
defense in culpa contractual.
6) "Art. 361 (of the Code of
Commerce) has been judicially
construed to mean that when goods
are delivered on board a ship in good
order and condition, and the shipowner
delivers them to the shipper in bad
order and condition, it then devolves
upon the shipowner to both allege and
prove that the goods were damaged by
reason of some fact which legally
exempts him from liability."
Transportation of the merchandise at
the risk and venture of the shipper
means that the latter bears the risk of
loss or deterioration of his goods
arising from fortuitous events, force
majeure, or the inherent nature and
defects of the goods, but not those
caused by the presumed negligence or
fault of the carrier, unless otherwise
proved. 7
The errors assigned by LOADSTAR boil down to
a determination of the following issues:
(1) Is the M/V "Cherokee" a private or
a common carrier?
(2) Did LOADSTAR observe due
and/or ordinary diligence in these
premises.
Regarding the first issue, LOADSTAR submits
that the vessel was a private carrier because it
was not issued certificate of public
convenience, it did not have a regular trip or
schedule nor a fixed route, and there was only
"one shipper, one consignee for a special
cargo."
In refutation, MIC argues that the issue as to
the classification of the M/V "Cherokee" was
not timely raised below; hence, it is barred by
estoppel. While it is true that the vessel had on
board only the cargo of wood products for
delivery to one consignee, it was also carrying
passengers as part of its regular business.
Moreover, the bills of lading in this case made
no mention of any charter party but only a
statement that the vessel was a "general cargo
carrier." Neither was there any "special
arrangement" between LOADSTAR and the
shipper regarding the shipment of the cargo.
The singular fact that the vessel was carrying
a particular type of cargo for one shipper is not
sufficient to convert the vessel into a private
carrier.
As regards the second error, LOADSTAR
argues that as a private carrier, it cannot be
presumed to have been negligent, and the
burden of proving otherwise devolved upon
MIC. 8
LOADSTAR also maintains that the vessel was
seaworthy. Before the fateful voyage on 19
November 1984, the vessel was allegedly dry
docked at Keppel Philippines Shipyard and was
duly inspected by the maritime safety engineers
of the Philippine Coast Guard, who certified that
the ship was fit to undertake a voyage. Its crew
at the time was experienced, licensed and
unquestionably competent. With all these
precautions, there could be no other conclusion
except that LOADSTAR exercised the diligence
of a good father of a family in ensuring the
vessel's seaworthiness.
LOADSTAR further claims that it was not
responsible for the loss of the cargo, such loss
being due to force majeure. It points out that
when the vessel left Nasipit, Agusan del Norte,
on 19 November 1984, the weather was fine
until the next day when the vessel sank due to
strong waves. MCI's witness, Gracelia Tapel,
fully established the existence of two
typhoons, "WELFRING" and "YOLING," inside
the Philippine area of responsibility. In fact, on
20 November 1984, signal no. 1 was declared
over Eastern Visayas, which includes
Limasawa Island. Tapel also testified that the
convergence of winds brought about by these
two typhoons strengthened wind velocity in the
area, naturally producing strong waves and
winds, in turn, causing the vessel to list and
eventually sink.
LOADSTAR goes on to argue that, being a
private carrier, any agreement limiting its
liability, such as what transpired in this case, is
valid. Since the cargo was being shipped at
"owner's risk," LOADSTAR was not liable for
any loss or damage to the same. Therefore,
the Court of Appeals erred in holding that the
provisions of the bills of lading apply only to
the shipper and the carrier, and not to the
231
insurer of the goods, which conclusion runs
counter to the Supreme Court's ruling in the
case of St. Paul Fire & Marine Co. v.
Macondray & Co., Inc., 9 and National Union
Fire Insurance Company of Pittsburgh v. Stolt-
Nielsen Phils., Inc. 10
Finally, LOADSTAR avers that MIC's claim had
already prescribed, the case having been
instituted beyond the period stated in the bills of
lading for instituting the same — suits based
upon claims arising from shortage, damage, or
non-delivery of shipment shall be instituted within
sixty days from the accrual of the right of action.
The vessel sank on 20 November 1984; yet, the
case for recovery was filed only on 4 February
1985.
MIC, on the other hand, claims that
LOADSTAR was liable, notwithstanding that
the loss of the cargo was due toforce majeure,
because the same concurred with
LOADSTAR's fault or negligence.
Secondly, LOADSTAR did not raise the issue
of prescription in the court below; hence, the
same must be deemed waived.
Thirdly, the "limited liability" theory is not
applicable in the case at bar because
LOADSTAR was at fault or negligent, and
because it failed to maintain a seaworthy
vessel. Authorizing the voyage
notwithstanding its knowledge of a typhoon is
tantamount to negligence.
We find no merit in this petition.
Anent the first assigned error, we hold that
LOADSTAR is a common carrier. It is not
necessary that the carrier be issued a
certificate of public convenience, and this
public character is not altered by the fact that
the carriage of the goods in question was
periodic, occasional, episodic or unscheduled.
In support of its position, LOADSTAR relied on
the 1968 case of Home Insurance Co. v.
American Steamship Agencies, Inc., 11 where
this Court held that a common carrier
transporting special cargo or chartering the
vessel to a special person becomes a private
carrier that is not subject to the provisions of the
Civil Code. Any stipulation in the charter party
absolving the owner from liability for loss due to
the negligence of its agent is void only if the strict
policy governing common carriers is upheld.
Such policy has no force where the public at is
not involved, as in the case of a ship totally
chartered for the use of a single party.
LOADSTAR also cited Valenzuela
Hardwood and Industrial Supply, Inc. v. Court of
Appeals  12 and National Steel Corp. v. Court of
Appeals, 13 both of which upheld the Home
Insurance doctrine.
These cases invoked by LOADSTAR are not
applicable in the case at bar for the simple
reason that the factual settings are different.
The records do not disclose that the M/V
"Cherokee," on the date in question, undertook
to carry a special cargo or was chartered to a
special person only. There was no charter
party. The bills of lading failed to show any
special arrangement, but only a general
provision to the effect that the M/V"Cherokee"
was a "general cargo carrier." 14 Further, the
bare fact that the vessel was carrying a particular
type of cargo for one shipper, which appears to
be purely coincidental, is not reason enough to
convert the vessel from a common to a private
carrier, especially where, as in this case, it was
shown that the vessel was also carrying
passengers.
Under the facts and circumstances obtaining
in this case, LOADSTAR fits the definition of a
common carrier under Article 1732 of the Civil
Code. In the case of De Guzman v. Court of
Appeals,  the Court juxtaposed the statutory
15
definition of "common carriers" with the
peculiar circumstances of that case, viz.:
The Civil Code defines "common carriers" in
the following terms:
Art. 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 ancillary activity (in
local idiom, as "a sideline". Article
1732 also carefully avoids making any
distinction between a person or
enterprise offering transportation
service on a regular or scheduled
231
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. We think that Article 1733
deliberately refrained from making
such distinctions.
xxx xxx xxx
It appears to the Court that private
respondent is properly characterized
as a common carrier even though he
merely "back-hauled" goods for other
merchants from Manila to Pangasinan,
although such backhauling was done
on a periodic or occasional rather than
regular or scheduled manner, and
eventhough private
respondent's principal occupation was
not the carriage of goods for others.
There is no dispute that private
respondent charged his customers a
fee for hauling their goods; that fee
frequently fell below commercial freight
rates is not relevant here.
The Court of Appeals referred to the
fact that private respondent held no
certificate of public convenience, and
concluded he was not a common
carrier. This is palpable error. A
certificate of public convenience is not
a requisite for the incurring of liability
under the Civil Code provisions
governing common carriers. That
liability arises the moment a person or
firm acts as a common carrier, without
regard to whether or not such carrier
has also complied with the
requirements of the applicable
regulatory statute and implementing
regulations and has been granted a
certificate of public convenience or
other franchise. To exempt private
respondent from the liabilities of a
common carrier because he has not
secured the necessary certificate of
public convenience, would be offensive
to sound public policy; that would be to
reward private respondent precisely for
failing to comply with applicable
statutory requirements The business of
a common carrier impinges directly
and intimately upon the safety and well
being and property of those members
of the general community who happen
to deal with such carrier. The law
imposes duties and liabilities upon
common carriers for the safety and
protection of those who utilize their
services and the law cannot allow a
common carrier to render such duties
and liabilities merely facultative by
simply failing to obtain the necessary
permits and authorizations.
Moving on to the second assigned error, we
find that the M/V "Cherokee" was not
seaworthy when it embarked on its voyage on
19 November 1984. The vessel was not even
sufficiently manned at the time. "For a vessel
to be seaworthy, it must be adequately
equipped for the voyage and manned with a
sufficient number of competent officers and
crew. The failure of a common carrier to
maintain in seaworthy condition its vessel
involved in a contract of carriage is a clear
breach of its duty prescribed in Article 1755 of
the Civil Code." 16
Neither do we agree with LOADSTAR's
argument that the "limited liability" theory should
be applied in this case. The doctrine of limited
liability does not apply where there was
negligence on the part of the vessel owner or
agent. 17 LOADSTAR was at fault or negligent in
not maintaining a seaworthy vessel and in having
allowed its vessel to sail despite knowledge of an
approaching typhoon. In any event, it did not sink
because of any storm that may be deemed
as  force majeure, inasmuch as the wind
condition in the performance of its duties,
LOADSTAR cannot hide behind the "limited
liability" doctrine to escape responsibility for the
loss of the vessel and its cargo.
LOADSTAR also claims that the Court of
Appeals erred in holding it liable for the loss of
the goods, in utter disregard of this Court's
pronouncements in St. Paul Fire & Marine Ins.
Co. v. Macondray & Co., Inc., 18 and National
Union Fire Insurance v. Stolt-Nielsen Phils.,
Inc. 19 It was ruled in these two cases that after
paying the claim of the insured for damages
under the insurance policy, the insurer is
subrogated merely to the rights of the assured,
that is, it can recover only the amount that may,
in turn, be recovered by the latter. Since the right
of the assured in case of loss or damage to the
goods is limited or restricted by the provisions in
231
the bills of lading, a suit by the insurer as
subrogee is necessarily subject to the same
limitations and restrictions. We do not agree. In
the first place, the cases relied on by
LOADSTAR involved a limitation on the carrier's
WHEREFORE, the instant petition is DENIED
and the challenged decision of 30 January
1997 of the Court of Appeals in CA-G.R. CV
No. 36401 is AFFIRMED. Costs against
petitioner.
1âwphi1.nêt

liability to an amount fixed in the bill of lading

which the parties may enter into, provided that
SO ORDERED.
the same was freely and fairly agreed upon
(Articles 1749-1750). On the other hand, the
stipulation in the case at bar effectively reduces Puno, Kapunan, Pardo and Ynares-Santiago,
the common carrier's liability for the loss or JJ., concur.
destruction of the goods to a degree less than
extraordinary (Articles 1744 and 1745), that is,
the carrier is not liable for any loss or damage to
shipments made at "owner's risk." Such
stipulation is obviously null and void for being
contrary to public policy." 20 It has been said:

Three kinds of stipulations have often

been made in a bill of lading.
The first one exempting the carrier
from any and all liability for loss or
damage occasioned by its own
negligence. The second is one
providing for an unqualified limitation of
such liability to an agreed valuation.
And the third is one limiting the liability
of the carrier to an agreed valuation
unless the shipper declares a higher
value and pays a higher rate of. freight.
According to an almost uniform weight
of authority, the first and second kinds
of stipulations are invalid as being
contrary to public policy, but the third is
valid and enforceable. 21
Since the stipulation in question is null
and void, it follows that when MIC paid
the shipper, it was subrogated to all the
rights which the latter has against the
common carrier, LOADSTAR.
Neither is there merit to the contention that the
claim in this case was barred by prescription.
MIC's cause of action had not yet prescribed
at the time it was concerned. Inasmuch as
neither the Civil Code nor the Code of
Commerce states a specific prescriptive period
on the matter, the Carriage of Goods by Sea
Act (COGSA) — which provides for a one-year
period of limitation on claims for loss of, or
damage to, cargoes sustained during transit —
may be applied suppletorily to the case at bar.
This one-year prescriptive period also applies
to the insurer of the goods. 22In this case, the
period for filing the action for recovery has not
yet elapsed. Moreover, a stipulation reducing the
one-year period is null and void; 23 it must,
accordingly, be struck down.
SECOND DIVISION
G.R. No. 127897      November 15, 2001
DELSAN TRANSPORT LINES,
INC., petitioner, 
vs.
THE HON. COURT OF APPEALS and
AMERICAN HOME ASSURANCE
CORPORATION, respondents.
DE LEON, JR., J.:
Before us is a petition for review on certiorari
of the Decision1 of the Court of Appeals in CA-
G.R. CV No. 39836 promulgated on June 17,
1996, reversing the decision of the Regional
Trial Court of Makati City, Branch 137,
ordering petitioner to pay private respondent
the sum of Five Million Ninety-Six Thousand
Six Hundred Thirty-Five Pesos and Fifty-
Seven Centavos (P5,096,635.57) and costs
and the Resolution2 dated January 21, 1997
which denied the subsequent motion for
reconsideration.
The facts show that Caltex Philippines (Caltex
for brevity) entered into a contract of
affreightment with the petitioner, Delsan
Transport Lines, Inc., for a period of one year
whereby the said common carrier agreed to
transport Caltex’s industrial fuel oil from the
Batangas-Bataan Refinery to different parts of
the country. Under the contract, petitioner took
on board its vessel, MT Maysun 2,277.314
kiloliters of industrial fuel oil of Caltex to be
delivered to the Caltex Oil Terminal in
Zamboanga City. The shipment was insured
231
with the private respondent, American Home
Assurance Corporation.
On August 14, 1986, MT Maysum set sail from
Batangas for Zamboanga City. Unfortunately,
the vessel sank in the early morning of August
16, 1986 near Panay Gulf in the Visayas
taking with it the entire cargo of fuel oil.
Subsequently, private respondent paid Caltex
the sum of Five Million Ninety-Six Thousand
Six Hundred Thirty-Five Pesos and Fifty-
Seven Centavos (P5,096,635.67) representing
the insured value of the lost cargo. Exercising
its right of subrogation under Article 2207 of
the New Civil Code, the private respondent
demanded of the petitioner the same amount it
paid to Caltex.1âwphi1.nêt
Due to its failure to collect from the petitioner
despite prior demand, private respondent filed
a complaint with the Regional Trial Court of
Makati City, Branch 137, for collection of a
sum of money. After the trial and upon
analyzing the evidence adduced, the trial court
rendered a decision on November 29, 1990
dismissing the complaint against herein
petitioner without pronouncement as to cost.
The trial court found that the vessel, MT
Maysum, was seaworthy to undertake the
voyage as determined by the Philippine Coast
Guard per Survey Certificate Report No. M5-
016-MH upon inspection during its annual dry-
docking and that the incident was caused by
unexpected inclement weather condition
or force majeure, thus exempting the common
carrier (herein petitioner) from liability for the
loss of its cargo.3
The decision of the trial court, however, was
reversed, on appeal, by the Court of Appeals.
The appellate court gave credence to the
weather report issued by the Philippine
Atmospheric, Geophysical and Astronomical
Services Administration (PAGASA for brevity)
which showed that from 2:00 o’clock to 8:oo
o’clock in the morning on August 16, 1986, the
wind speed remained at 10 to 20 knots per
hour while the waves measured from .7 to two
(2) meters in height only in the vicinity of the
Panay Gulf where the subject vessel sank, in
contrast to herein petitioner’s allegation that
the waves were twenty (20) feet high. In the
absence of any explanation as to what may
have caused the sinking of the vessel coupled
with the finding that the same was improperly
manned, the appellate court ruled that the
petitioner is liable on its obligation as common
carrier4 to herein private respondent insurance
company as subrogee of Caltex. The
subsequent motion for reconsideration of
herein petitioner was denied by the appellate
court.
Petitioner raised the following assignments of
error in support of the instant petition, 5 to wit:
I
THE COURT OF APPEALS ERRED
IN REVERSING THE DECISION OF
THE REGIONAL TRIAL COURT.
II
THE COURT OF APPEALS ERRED
AND WAS NOT JUSTIFIED IN
REBUTTING THE LEGAL
PRESUMPTION THAT THE VESSEL
MT "MAYSUN" WAS SEAWORTHY.
III
THE COURT OF APPEALS ERRED
IN NOT APPLYING THE DOCTRINE
OF THE SUPREME COURT IN THE
CASE OF HOME INSURANCE
CORPORATION V. COURT OF
APPEALS.
Petitioner Delsan Transport Lines, Inc. invokes
the provision of Section 113 of the Insurance
Code of the Philippines, which states that in
every marine insurance upon a ship or freight,
or freightage, or upon any thin which is the
subject of marine insurance there is an implied
warranty by the shipper that the ship is
seaworthy. Consequently, the insurer will not
be liable to the assured for any loss under the
policy in case the vessel would later on be
found as not seaworthy at the inception of the
insurance. It theorized that when private
respondent paid Caltex the value of its lost
cargo, the act of the private respondent is
equivalent to a tacit recognition that the ill-
fated vessel was seaworthy; otherwise, private
respondent was not legally liable to Caltex due
to the latter’s breach of implied warranty under
the marine insurance policy that the vessel
was seaworthy.
The petitioner also alleges that the Court of
Appeals erred in ruling that MT Maysun was
231
not seaworthy on the ground that the marine
officer who served as the chief mate of the
vessel, Francisco Berina, was allegedly not
qualified. Under Section 116 of the Insurance
Code of the Philippines, the implied warranty
of seaworthiness of the vessel, which the
private respondent admitted as having been
fulfilled by its payment of the insurance
proceeds to Caltex of its lost cargo, extends to
the vessel’s complement. Besides, petitioner
avers that although Berina had merely a
2nd officer’s license, he was qualified to act as
the vessel’s chief officer under Chapter
IV(403), Category III(a)(3)(ii)(aa) of the
Philippine Merchant Marine Rules and
Regulations. In fact, all the crew and officers of
MT Maysun were exonerated in the
administrative investigation conducted by the
Board of Marine Inquiry after the subject
accident.6
In any event, petitioner further avers that
private respondent failed, for unknown reason,
to present in evidence during the trial of the
instant case the subject marine cargo
insurance policy it entered into with Caltex. By
virtue of the doctrine laid down in the case
of Home Insurance Corporation vs. CA,7 the
failure of the private respondent to present the
insurance policy in evidence is allegedly fatal
to its claim inasmuch as there is no way to
determine the rights of the parties thereto.
Hence, the legal issues posed before the
Court are:
I who in justice and good conscience ought to
Whether or not the payment made by
the private respondent to Caltex for the
insured value of the lost cargo
amounted to an admission that the
vessel was seaworthy, thus precluding
any action for recovery against the
petitioner.
II
Whether or not the non-presentation of
the marine insurance policy bars the
complaint for recovery of sum of
money for lack of cause of action.
We rule in the negative on both issues.
The payment made by the private respondent
for the insured value of the lost cargo operates
as waiver of its (private respondent) right to
enforce the term of the implied warranty
against Caltex under the marine insurance
policy. However, the same cannot be validly
interpreted as an automatic admission of the
vessel’s seaworthiness by the private
respondent as to foreclose recourse against
the petitioner for any liability under its
contractual obligation as a common carrier.
The fact of payment grants the private
respondent subrogatory right which enables it
to exercise legal remedies that would
otherwise be available to Caltex as owner of
the lost cargo against the petitioner common
carrier.8 Article 2207 of the New civil Code
provides that:
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.
The right of subrogation has its roots in equity.
It is designed to promote and to accomplish
justice and is the mode which equity adopts to
compel the ultimate payment of a debt by one
pay.9 It is not dependent upon, nor does it
grow out of, any privity of contract or upon
written assignment of claim. It accrues simply
upon payment by the insurance company of
the insurance claim.10 Consequently, the
payment made by the private respondent
(insurer) to Caltex (assured) operates as an
equitable assignment to the former of all the
remedies which the latter may have against
the petitioner.
From the nature of their business and for
reasons of public policy, common carriers are
bound to observe extraordinary diligence in
the vigilance over the goods and for the safety
of passengers transported by them, according
to all the circumstance of each case. 11 In the
event of loss, destruction or deterioration of
the insured goods, common carriers shall be
responsible unless the same is brought about,
231
among others, by flood, storm, earthquake,
lightning or other natural disaster or
calamity.12 In all other cases, 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.13
In order to escape liability for the loss of its
cargo of industrial fuel oil belonging to Caltex,
petitioner attributes the sinking of MT Maysun
to fortuitous even or force majeure. From the
testimonies of Jaime Jarabe and Francisco
Berina, captain and chief mate, respectively of
the ill-fated vessel, it appears that a sudden
and unexpected change of weather condition
occurred in the early morning of August 16,
1986; that at around 3:15 o’clock in the
morning a squall ("unos") carrying strong
winds with an approximate velocity of 30 knots
per hour and big waves averaging eighteen
(18) to twenty (20) feet high, repeatedly
buffeted MT Maysun causing it to tilt, take in
water and eventually sink with its cargo. 14 This
tale of strong winds and big waves by the said
officers of the petitioner however, was
effectively rebutted and belied by the weather
report15 from the Philippine Atmospheric,
Geophysical and Astronomical Services
Administration (PAGASA), the independent
government agency charged with monitoring
weather and sea conditions, showing that from
2:00 o’clock to 8:00 o’clock in the morning on
August 16, 1986, the wind speed remained at
ten (10) to twenty (20) knots per hour while the
height of the waves ranged from .7 to two (2)
meters in the vicinity of Cuyo East Pass and
Panay Gulf where the subject vessel sank.
Thus, as the appellate court correctly ruled,
petitioner’s vessel, MT Maysun, sank with its
entire cargo for the reason that it was not
seaworthy. There was no squall or bad
weather or extremely poor sea condition in the
vicinity when the said vessel sank.
The appellate court also correctly opined that
the petitioner’s witnesses, Jaime Jarabe and
Francisco Berina, ship captain and chief mate,
respectively, of the said vessel, could not be
expected to testify against the interest of their
employer, the herein petitioner common
carrier.
Neither may petitioner escape liability by
presenting in evidence certificates 16 that tend
to show that at the time of dry-docking and
inspection by the Philippine Coast Guard, the
vessel MT Maysun, was fit for voyage. These
pieces of evidence do not necessarily take into
account the actual condition of the vessel at
the time of the commencement of the voyage.
As correctly observed by the Court of appeals:
At the time of dry-docking and
inspection, the ship may have
appeared fit. The certificates issued,
however, do not negate the
presumption of unseaworthiness
triggered by an unexplained sinking. Of
certificates issued in this regard,
authorities are likewise clear as to their
probative value, (thus):
Seaworthiness relates to a
vessel’s actual condition.
Neither the granting of
classification or the issuance of
certificates established
seaworthiness. (2-A Benedict
on Admiralty, 7-3, Sec. 62).
And also:
Authorities are clear that
diligence in securing
certificates of seaworthiness
does not satisfy the vessel
owner’s obligation. Also
securing the approval of the
shipper of the cargo, or his
surveyor, of the condition of
the vessel or her stowage does
not establish due diligence if
the vessel was in fact
unseaworthy, for the cargo
owner has no obligation in
relation to seaworthiness.
(Ibid.)17
Additionally, the exoneration of MT Maysun’s
officers and crew by the Board of Marine
Inquiry merely concerns their respective
administrative liabilities. It does not in any way
operate to absolve the petitioner common
carrier from its civil liabilities. It does not in any
way operate to absolve the petitioner common
carrier from its civil liability arising from its
failure to observe extraordinary diligence in the
vigilance over the goods it was transporting
and for the negligent acts or omissions of its
employees, the determination of which
properly belongs to the courts.18 In the case at
bar, petitioner is liable for the insured value of
the lost cargo of industrial fuel oil belonging to
231
Caltex for its failure to rebut the presumption
of fault or negligence as common
carrier19 occasioned by the unexplained
sinking of its vessel, MT Maysun, while in
transit.
Anent the second issue, it is our view and so
hold that the presentation in evidence of the
marine insurance policy is not indispensable in
this case before the insurer may recover from
the common carrier the insured value of the
lost cargo in the exercise of its subrogatory
right. The subrogation receipt, by itself, is
sufficient to establish not only the relationship
of herein private respondent as insurer and
Caltex, as the assured shipper of the lost
cargo of industrial fuel oil, but also the amount
paid to settle the insurance claim. The right of
subrogation accrues simply upon payment by
the insurance company of the insurance
claim.20
The presentation of the insurance policy was
necessary in the case of Home Insurance
Corporation v. CA21 (a case cited by petitioner)
because the shipment therein (hydraulic
engines) passed through several stages with
different parties involved in each stage. First,
from the shipper to the port of departure;
second, from the port of departure to the M/S
Oriental Statesman; third, from the M/S
Oriental Statesman to the M/S Pacific
Conveyor; fourth, from the M/S Pacific
Conveyor to the port or arrival; fifth, from the
port of arrival to the arrastre operator; sixth,
from the arrastre operator to the hauler,
Mabuhay Brokerage Co., Inc. (private
respondent therein); and lastly, from the hauler
to the consignee. We emphasized in that case
that in the absence of proof of stipulations to
the contrary, the hauler can be liable only for
any damage that occurred from the time it
received the cargo until it finally delivered it to
the consignee. Ordinarily, it cannot be held
responsible for the handling of the cargo
before it actually received it. The insurance
contract, which was not presented in evidence
in that case would have indicated the scope of
the insurer’s liability, if any, since no evidence
was adduced indicating at what stage in the
handling process the damage to the cargo was
sustained.
Hence, our ruling on the presentation of the
insurance policy in the said case of Home
Insurance Corporation is not applicable to the
case at bar. In contrast, there is no doubt that
the cargo of industrial fuel oil belonging to
Caltex, in the case at bar, was lost while on
board petitioner’s vessel, MT Maysun, which
sank while in transit in the vicinity of Panay
Gulf and Cuyo East Pass in the early morning
of August 16, 1986.
WHEREFORE, the instant petition is DENIED.
The Decision dated June 17, 1996 of the Court
of Appeals in CA-G.R. CV No. 39836
is AFFIRMED. Costs against the petitioner.
SO ORDERED. 1âwphi1.nêt
Bellosillo, Mendoza, Quisumbing, and Buena,
JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION 
G.R. No. 112287 December 12, 1997
NATIONAL STEEL
CORPORATION, petitioner, 
vs.
COURT OF APPEALS AND VLASONS
SHIPPING, INC., respondents.
G.R. No. 112350 December 12, 1997
VLASONS SHIPPING, INC., petitioner, 
vs.
COURT OF APPEALS AND NATIONAL
STEEL CORPORATION, respondents.
PANGANIBAN, J.:
The Court finds occasion to apply the rules on
the seaworthiness of private carrier, its
owner's responsibility for damage to the cargo
and its liability for demurrage and attorney's
fees. The Court also reiterates the well-known
rule that findings of facts of trial courts, when
affirmed by the Court of Appeals, are binding
on this Court.
The Case
Before us are two separate petitions for review
filed by National Steel Corporation (NSC) and
Vlasons Shipping, Inc. (VSI), both of which
assail the August 12, 1993 Decision of the
231
Court of Appeals.  The Court of Appeals
1
modified the decision of the Regional Trial
Court of Pasig, Metro Manila, Branch 163 in
Civil Case No. 23317. The RTC disposed as
follows:
WHEREFORE, judgment is hereby
rendered in favor of defendant and
against the plaintiff dismissing the
complaint with cost against plaintiff,
and ordering plaintiff to pay the
defendant on the counterclaim as
follows:
1. The sum of P75,000.00 as unpaid
freight and P88,000.00 as demurrage
with interest at the legal rate on both
amounts from April 7, 1976 until the
same shall have been fully paid;
2. Attorney's fees and expenses of
litigation in the sum of P100,000.00;
and
3. Costs of suit.
SO ORDERED. 2
On the other hand, the Court of Appeals ruled:
WHEREFORE, premises considered,
the decision appealed from is modified
by reducing the award for demurrage
to P44,000.00 and deleting the award
for attorney's fees and expenses of
litigation. Except as thus modified, the
decision is AFFIRMED. There is no
pronouncement as to costs.
SO ORDERED. 3
The Facts
The MV Vlasons I is a vessel which renders
tramping service and, as such, does not
transport cargo or shipment for the general
public. Its services are available only to
specific persons who enter into a special
contract of charter party with its owner. It is
undisputed that the ship is a private carrier.
And it is in the capacity that its owner, Vlasons
Shipping, Inc., entered into a contract of
affreightment or contract of voyage charter
hire with National Steel Corporation.
The facts as found by Respondent Court of
Appeals are as follows:
(1) On July 17, 1974, plaintiff National
Steel Corporation (NSC) as Charterer
and defendant Vlasons Shipping, Inc.
(VSI) as Owner, entered into a
Contract of Voyage Charter Hire
(Exhibit "B"; also Exhibit "1") whereby
NSC hired VSI's vessel, the MV
"VLASONS I" to make one (1) voyage
to load steel products at Iligan City and
discharge them at North Harbor,
Manila, under the following terms and
conditions, viz:
1. . . .
2. Cargo: Full cargo of steel products
of not less than 2,500 MT, 10% more
or less at Master's option.
3. . . .
4. Freight/Payment: P30.00/metric ton,
FIOST basis. Payment upon
presentation of Bill of Lading within
fifteen (15) days.
5. Laydays/Cancelling: July 26,
1974/Aug. 5, 1974.
6. Loading/Discharging Rate: 750 tons
per WWDSHINC. (Weather Working
Day of 24 consecutive hours, Sundays
and Holidays Included).
7. Demurrage/Dispatch:
P8,000.00/P4,000.00 per day.
8. . . .
9. Cargo Insurance: Charterer's and/or
Shipper's must insure the cargoes.
Shipowners not responsible for
losses/damages except on proven
willful negligence of the officers of the
vessel.
10. Other terms: (a) All
terms/conditions of NONYAZAI
C/P [sic] or other internationally
recognized Charter Party Agreement
shall form part of this Contract.
xxx xxx xxx
231
The terms "F.I.O.S.T." which is used in
the shipping business is a standard
provision in the NANYOZAI Charter
Party which stands for "Freight In and
Out including Stevedoring and
Trading", which means that the
handling, loading and unloading of the
cargoes are the responsibility of the
Charterer. Under Paragraph 5 of the
NANYOZAI Charter Party, it states,
"Charterers to load, stow and
discharge the cargo free of risk and
expenses to owners. . . . (Emphasis
supplied).
Under paragraph 10 thereof, it is
provided that "(o)wners shall, before
and at the beginning of the voyage,
exercise due diligence to make the
vessel seaworthy and properly
manned, equipped and supplied and to
make the holds and all other parts of
the vessel in which cargo is carried, fit
and safe for its reception, carriage and
preservation. Owners shall not be
liable for loss of or damage of the
cargo arising or resulting from:
unseaworthiness unless caused by
want of due diligence on the part of the
owners to make the vessel seaworthy,
and to secure that the vessel is
properly manned, equipped and
supplied and to make the holds and all
other parts of the vessel in which cargo
is carried, fit and safe for its reception,
carriage and preservation; . . . ; perils,
dangers and accidents of the sea or
other navigable waters; . . . ; wastage
in bulk or weight or any other loss or
damage arising from inherent defect,
quality or vice of the cargo;
insufficiency of packing; . . . ; latent
defects not discoverable by due
diligence; any other cause arising
without the actual fault or privity of
Owners or without the fault of the
agents or servants of owners."
Paragraph 12 of said NANYOZAI
Charter Party also provides that
"(o)wners shall not be responsible for
split, chafing and/or any damage
unless caused by the negligence or
default of the master and crew."
(2) On August 6, 7 and 8, 1974, in
accordance with the Contract of
Voyage Charter Hire, the MV
"VLASONS I" loaded at plaintiffs pier
at Iligan City, the NSC's shipment of
1,677 skids of tinplates and 92
packages of hot rolled sheets or a total
of 1,769 packages with a total weight
of about 2,481.19 metric tons for
carriage to Manila. The shipment was
placed in the three (3) hatches of the
ship. Chief Mate Gonzalo Sabando,
acting as agent of the vessel[,]
acknowledged receipt of the cargo on
board and signed the corresponding
bill of lading, B.L.P.P. No. 0233
(Exhibit "D") on August 8, 1974.
(3) The vessel arrived with the cargo at
Pier 12, North Harbor, Manila, on
August 12, 1974. The following day,
August 13, 1974, when the vessel's
three (3) hatches containing the
shipment were opened by plaintiff's
agents, nearly all the skids of tinplates
and hot rolled sheets were allegedly
found to be wet and rusty. The cargo
was discharged and unloaded by
stevedores hired by the Charterer.
Unloading was completed only on
August 24, 1974 after incurring a delay
of eleven (11) days due to the heavy
rain which interrupted the unloading
operations. (Exhibit "E")
(4) To determine the nature and extent
of the wetting and rusting, NSC called
for a survey of the shipment by the
Manila Adjusters and Surveyors
Company (MASCO). In a letter to the
NSC dated March 17, 1975 (Exhibit
"G"), MASCO made a report of its
ocular inspection conducted on the
cargo, both while it was still on board
the vessel and later at the NDC
warehouse in Pureza St., Sta. Mesa,
Manila where the cargo was taken and
stored. MASCO reported that it found
wetting and rusting of the packages of
hot rolled sheets and metal covers of
the tinplates; that tarpaulin hatch
covers were noted torn at various
extents; that container/metal casings of
the skids were rusting all over.
MASCO ventured the opinion that
"rusting of the tinplates was caused by
contact with SEA WATER sustained
while still on board the vessel as a
consequence of the heavy weather
and rough seas encountered while en
231
route to destination (Exhibit "F"). It was
also reported that MASCO's surveyors
drew at random samples of bad order
packing materials of the tinplates and
delivered the same to the M.I.T.
Testing Laboratories for analysis. On
August 31, 1974, the M.I.T. Testing
Laboratories issued Report No. 1770
(Exhibit "I") which in part, states, "The
analysis of bad order samples of
packing materials . . . shows that
wetting was caused by contact with
SEA WATER".
(5) On September 6, 1974, on the
basis of the aforesaid Report No.
1770, plaintiff filed with the defendant
its claim for damages suffered due to
the downgrading of the damaged
tinplates in the amount of
P941,145.18. Then on October 3,
1974, plaintiff formally demanded
payment of said claim but defendant
VSI refused and failed to pay. Plaintiff
filed its complaint against defendant on
April 21, 1976 which was docketed as
Civil Case No. 23317, CFI, Rizal.
(6) In its complaint, plaintiff claimed
that it sustained losses in the aforesaid
amount of P941,145.18 as a result of
the act, neglect and default of the
master and crew in the management of
the vessel as well as the want of due
diligence on the part of the defendant
to make the vessel seaworthy and to
make the holds and all other parts of
the vessel in which the cargo was
carried, fit and safe for its reception,
carriage and preservation — all in
violation of defendant's undertaking
under their Contract of Voyage Charter
Hire.
(7) In its answer, defendant denied
liability for the alleged damage
claiming that the MV "VLASONS I"
was seaworthy in all respects for the
carriage of plaintiff's cargo; that said
vessel was not a "common carrier"
inasmuch as she was under voyage
charter contract with the plaintiff as
charterer under the charter party; that
in the course of the voyage from Iligan
City to Manila, the MV "VLASONS I"
encountered very rough seas, strong
winds and adverse weather condition,
causing strong winds and big waves to
continuously pound against the vessel
and seawater to overflow on its deck
and hatch covers, that under the
Contract of Voyage Charter Hire,
defendant shall not be responsible for
losses/damages except on proven
willful negligence of the officers of the
vessel, that the officers of said MV
"VLASONS I" exercised due diligence
and proper seamanship and were not
willfully negligent; that furthermore the
Voyage Charter Party provides that
loading and discharging of the cargo
was on FIOST terms which means that
the vessel was free of risk and
expense in connection with the loading
and discharging of the cargo; that the
damage, if any, was due to the
inherent defect, quality or vice of the
cargo or to the insufficient packing
thereof or to latent defect of the cargo
not discoverable by due diligence or to
any other cause arising without the
actual fault or privity of defendant and
without the fault of the agents or
servants of defendant; consequently,
defendant is not liable; that the
stevedores of plaintiff who discharged
the cargo in Manila were negligent and
did not exercise due care in the
discharge of the cargo; land that the
cargo was exposed to rain and
seawater spray while on the pier or in
transit from the pier to plaintiff's
warehouse after discharge from the
vessel; and that plaintiff's claim was
highly speculative and grossly
exaggerated and that the small stain
marks or sweat marks on the edges of
the tinplates were magnified and
considered total loss of the cargo.
Finally, defendant claimed that it had
complied with all its duties and
obligations under the Voyage Charter
Hire Contract and had no responsibility
whatsoever to plaintiff. In turn, it
alleged the following counterclaim:
(a) That despite the full and proper
performance by defendant of its
obligations under the Voyage Charter
Hire Contract, plaintiff failed and
refused to pay the agreed charter hire
of P75,000.00 despite demands made
by defendant;
231
(b) That under their Voyage Charter
Hire Contract, plaintiff had agreed to
pay defendant the sum of P8,000.00
per day for demurrage. The vessel was
on demurrage for eleven (11) days in
Manila waiting for plaintiff to discharge
its cargo from the vessel. Thus, plaintiff
was liable to pay defendant demurrage
in the total amount of P88,000.00.
(c) For filing a clearly unfounded civil
action against defendant, plaintiff
should be ordered to pay defendant
attorney's fees and all expenses of
litigation in the amount of not less than
P100,000.00.
(8) From the evidence presented by
both parties, the trial court came out
with the following findings which were
set forth in its decision:
(a) The MV "VLASONS I" is a vessel of
Philippine registry engaged in the
tramping service and is available for
hire only under special contracts of
charter party as in this particular case.
(b) That for purposes of the voyage
covered by the Contract of Voyage
Charter Hire (Exh. "1"), the MV
VLASONS I" was covered by the
required seaworthiness certificates
including the Certification of
Classification issued by an
international classification society, the
NIPPON KAIJI KYOKAI (Exh. "4");
Coastwise License from the Board of
Transportation (Exh. "5"); International
Loadline Certificate from the Philippine
Coast Guard (Exh. "6"); Cargo Ship
Safety Equipment Certificate also from
the Philippine Coast Guard (Exh. "7");
Ship Radio Station License (Exh. "8");
Certificate of Inspection by the
Philippine Coast Guard (Exh. "12");
and Certificate of Approval for
Conversion issued by the Bureau of
Customs (Exh. "9"). That being a
vessel engaged in both overseas and
coastwise trade, the MV "VLASONS I"
has a higher degree of seaworthiness
and safety.
(c) Before it proceeded to Iligan City to
perform the voyage called for by the
Contract of Voyage Charter Hire, the
MV "VLASONS I" underwent
drydocking in Cebu and was
thoroughly inspected by the Philippine
Coast Guard. In fact, subject voyage
was the vessel's first voyage after the
drydocking. The evidence shows that
the MV "VLASONS I" was seaworthy
and properly manned, equipped and
supplied when it undertook the voyage.
It has all the required certificates of
seaworthiness.
(d) The cargo/shipment was securely
stowed in three (3) hatches of the ship.
The hatch openings were covered by
hatchboards which were in turn
covered by two or double tarpaulins.
The hatch covers were water tight.
Furthermore, under the hatchboards
were steel beams to give support.
(e) The claim of the plaintiff that
defendant violated the contract of
carriage is not supported by evidence.
The provisions of the Civil Code on
common carriers pursuant to which
there exists a presumption of
negligence in case of loss or damage
to the cargo are not applicable. As to
the damage to the tinplates which was
allegedly due to the wetting and rusting
thereof, there is unrebutted testimony
of witness Vicente Angliongto that
tinplates "sweat" by themselves when
packed even without being in contract
(sic) with water from outside especially
when the weather is bad or raining.
The trust caused by sweat or moisture
on the tinplates may be considered as
a loss or damage but then, defendant
cannot be held liable for it pursuant to
Article 1734 of the Civil Case which
exempts the carrier from responsibility
for loss or damage arising from the
"character of the goods . . ." All the
1,769 skids of the tinplates could not
have been damaged by water as
claimed by plaintiff. It was shown as
claimed by plaintiff that the tinplates
themselves were wrapped in kraft
paper lining and corrugated
cardboards could not be affected by
water from outside.
(f) The stevedores hired by the plaintiff
to discharge the cargo of tinplates
were negligent in not closing the hatch
231
openings of the MV "VLASONS I"
when rains occurred during the
discharging of the cargo thus allowing
rainwater to enter the hatches. It was
proven that the stevedores merely set
up temporary tents to cover the hatch
openings in case of rain so that it
would be easy for them to resume
work when the rains stopped by just
removing the tent or canvas. Because
of this improper covering of the
hatches by the stevedores during the
discharging and unloading operations
which were interrupted by rains,
rainwater drifted into the cargo through
the hatch openings. Pursuant to
paragraph 5 of the NANYOSAI [sic]
Charter Party which was expressly
made part of the Contract of Voyage
Charter Hire, the loading, stowing and
discharging of the cargo is the sole
responsibility of the plaintiff charterer
and defendant carrier has no liability
for whatever damage may occur or
maybe [sic] caused to the cargo in the
process.
(g) It was also established that the
vessel encountered rough seas and
bad weather while en route from Iligan
City to Manila causing sea water to
splash on the ship's deck on account
of which the master of the vessel (Mr.
Antonio C. Dumlao) filed a "Marine
Protest" on August 13, 1974 (Exh.
"15"); which can be invoked by
defendant as a force majeure that
would exempt the defendant from
liability.
(h) Plaintiff did not comply with the
requirement prescribed in paragraph 9
of the Voyage Charter Hire contract
that it was to insure the cargo because
it did not. Had plaintiff complied with
the requirement, then it could have
recovered its loss or damage from the
insurer. Plaintiff also violated the
charter party contract when it loaded
not only "steel products", i.e. steel
bars, angular bars and the like but also
tinplates and hot rolled sheets which
are high grade cargo commanding a
higher freight. Thus plaintiff was able
to ship grade cargo at a lower freight
rate.
(i) As regards defendant's
counterclaim, the contract of voyage
charter hire under Paragraph 4 thereof,
fixed the freight at P30.00 per metric
ton payable to defendant carrier upon
presentation of the bill of lading within
fifteen (15) days. Plaintiff has not paid
the total freight due of P75,000.00
despite demands. The evidence also
showed that the plaintiff was required
and bound under paragraph 7 of the
same Voyage Charter Hire contract to
pay demurrage of P8,000.00 per day
of delay in the unloading of the
cargoes. The delay amounted to
eleven (11) days thereby making
plaintiff liable to pay defendant for
demurrage in the amount of
P88,000.00.
Appealing the RTC decision to the Court of
Appeals, NSC alleged six errors:
I
The trial court erred in finding that the
MV "VLASONS I" was seaworthy,
properly manned, equipped and
supplied, and that there is no proof of
willful negligence of the vessel's
officers.
II
The trial court erred in finding that the
rusting of NSC's tinplates was due to
the inherent nature or character of the
goods and not due to contact with
seawater.
III
The trial court erred in finding that the
stevedores hired by NSC were
negligent in the unloading of NSC's
shipment.
IV
The trial court erred in exempting VSI
from liability on the ground of force
majeure.
V
231
 The trial court erred in finding that NSC
violated the contract of voyage charter
hire.
VI
The trial court erred in ordering NSC to
pay freight, demurrage and attorney's
fees, to VSI. 4
As earlier stated, the Court of Appeals
modified the decision of the trial court by
reducing the demurrage from P88,000.00 to
P44,000.00 and deleting the award of
attorneys fees and expenses of litigation. NSC
and VSI filed separate motions for
reconsideration. In a Resolution  dated
5
October 20, 1993, the appellate court denied
both motions. Undaunted, NSC and VSI filed
their respective petitions for review before this
Court. On motion of VSI, the Court ordered on
February 14, 1994 the consolidation of these
petitions.
6
The Issues
In its petition  and memorandum,  NSC raises
7 8
the following questions of law and fact:
Questions of Law
1. Whether or not a charterer of a
vessel is liable for demurrage due to
cargo unloading delays caused by
weather interruption;
2. Whether or not the alleged
"seaworthiness certificates" (Exhibits
"3", "4", "5", "6", "7", "8", "9", "11" and
"12") were admissible in evidence and
constituted evidence of the vessel's
seaworthiness at the beginning of the
voyages; and
3. Whether or not a charterer's failure
to insure its cargo exempts the
shipowner from liability for cargo
damage.
Questions of Fact
1. Whether or not the vessel was
seaworthy and cargo-worthy;
2. Whether or not vessel's officers and
crew were negligent in handling and
caring for NSC's cargo;
3. Whether or not NSC's cargo of
tinplates did sweat during the voyage
and, hence, rusted on their own; and
4. Whether or not NSC's stevedores
were negligent and caused the
wetting[/]rusting of NSC's tinplates.
In its separate petition,  VSI submits for the
9
consideration of this Court the following
alleged errors of the CA:
A. The respondent Court of Appeals
committed an error of law in reducing
the award of demurrage from
P88,000.00 to P44,000.00.
B. The respondent Court of Appeals
committed an error of law in deleting
the award of P100,000 for attorney's
fees and expenses of litigation.
Amplifying the foregoing, VSI raises the
following issues in its memorandum: 10
I. Whether or not the provisions of the
Civil Code of the Philippines on
common carriers pursuant to which
there exist[s] a presumption of
negligence against the common carrier
in case of loss or damage to the cargo
are applicable to a private carrier.
II. Whether or not the terms and
conditions of the Contract of Voyage
Charter Hire, including the Nanyozai
Charter, are valid and binding on both
contracting parties.
The foregoing issues raised by the parties will
be discussed under the following headings:
1. Questions of Fact
2. Effect of NSC's Failure to Insure the Cargo
3. Admissibility of Certificates Proving
Seaworthiness
4. Demurrage and Attorney's Fees.
The Court's Ruling
231
The Court affirms the assailed Decision of the
Court of Appeals, except in respect of the
demurrage.
Preliminary Matter: Common Carrier or Private
Carrier?
At the outset, it is essential to establish
whether VSI contracted with NSC as a
common carrier or as a private carrier. The
resolution of this preliminary question
determines the law, standard of diligence and
burden of proof applicable to the present case.
Article 1732 of the Civil Code defines a
common carrier 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." It has been held that the true test of a
common carrier is the carriage of passengers
or goods, provided it has space, for all who opt
to avail themselves of its transportation service
for a fee.  A carrier which does not qualify
11
under the above test is deemed a private
carrier. "Generally, private carriage is
undertaken by special agreement and the
carrier does not hold himself out to carry
goods for the general public. The most typical,
although not the only form of private carriage,
is the charter party, a maritime contract by
which the charterer, a party other than the
shipowner, obtains the use and service of all
or some part of a ship for a period of time or a
voyage or voyages." 12
In the instant case, it is undisputed that VSI
did not offer its services to the general public.
As found by the Regional Trial Court, it carried
passengers or goods only for those it chose
under a "special contract of charter party."   As13
correctly concluded by the Court of Appeals,
the MV Vlasons I "was not a common but a
private carrier." Consequently, the rights and
14
obligations of VSI and NSC, including their
respective liability for damage to the cargo, are
determined primarily by stipulations in their
contract of private carriage or charter
party.  Recently, in Valenzuela Hardwood and
15
Industrial Supply, Inc., vs. Court of Appeals
and Seven Brothers Shipping
Corporation,  the Court ruled:
16
. . . in a contract of private carriage, the
parties may freely stipulate their duties
and obligations which perforce would
be binding on them. Unlike in a
contract involving a common carrier,
private carriage does not involve the
general public. Hence, the stringent
provisions of the Civil Code on
common carriers protecting the
general public cannot justifiably be
applied to a ship transporting
commercial goods as a private carrier.
Consequently, the public policy
embodied therein is not contravened
by stipulations in a charter party that
lessen or remove the protection given
by law in contracts involving common
carriers.
17
Extent of VSI's Responsibility and
Liability Over NSC's Cargo
It is clear from the parties' Contract of Voyage
Charter Hire, dated July 17, 1974, that VSI
"shall not be responsible for losses except on
proven willful negligence of the officers of the
vessel." The NANYOZAI Charter Party, which
was incorporated in the parties' contract of
transportation further provided that the
shipowner shall not be liable for loss of or a
damage to the cargo arising or resulting from
unseaworthiness, unless the same was
caused by its lack of due diligence to make the
vessel seaworthy or to ensure that the same
was "properly manned, equipped and
supplied," and to "make the holds and all other
parts of the vessel in which cargo [was]
carried, fit and safe for its reception, carriage
and preservation."  The NANYOZAI Charter
18
Party also provided that "[o]wners shall not be
responsible for split, chafing and/or any
damage unless caused by the negligence or
default of the master or crew."19
Burden of Proof
In view of the aforementioned contractual
stipulations, NSC must prove that the damage
to its shipment was caused by VSI's willful
negligence or failure to exercise due diligence
in making MV Vlasons I seaworthy and fit for
holding, carrying and safekeeping the cargo.
Ineluctably, the burden of proof was placed on
NSC by the parties' agreement.
This view finds further support in the Code of
Commerce which pertinently provides:
Art. 361. Merchandise shall be
transported at the risk and venture of
231
 the shipper, if the contrary has not
been expressly stipulated.
Therefore, the damage and impairment
suffered by the goods during the
transportation, due to fortuitous
event, force majeure, or the nature
and inherent defect of the things, shall
be for the account and risk of the
shipper.
The burden of proof of these accidents
is on the carrier.
Art. 362. The carrier, however, shall be
liable for damages arising from the
cause mentioned in the preceding
article if proofs against him show that
they occurred on account of his
negligence or his omission to take the
precautions usually adopted by careful
persons, unless the shipper committed
fraud in the bill of lading, making him to
believe that the goods were of a class
or quality different from what they
really were.
Because the MV Vlasons I was a private
carrier, the shipowner's obligations are
governed by the foregoing provisions of the
Code of Commerce and not by the Civil Code
which, as a general rule, places the prima
faciepresumption of negligence on a common
carrier. It is a hornbook doctrine that:
In an action against a private carrier for
loss of, or injury to, cargo, the burden
is on the plaintiff to prove that the
carrier was negligent or unseaworthy,
and the fact that the goods were lost or
damaged while in the carrier's custody
does not put the burden of proof on the
carrier.
Since . . . a private carrier is not an
insurer but undertakes only to exercise
due care in the protection of the goods
committed to its care, the burden of
proving negligence or a breach of that
duty rests on plaintiff and proof of loss
of, or damage to, cargo while in the
carrier's possession does not cast on it
the burden of proving proper care and
diligence on its part or that the loss
occurred from an excepted cause in
the contract or bill of lading. However,
in discharging the burden of proof,
plaintiff is entitled to the benefit of the
presumptions and inferences by which
the law aids the bailor in an action
against a bailee, and since the carrier
is in a better position to know the
cause of the loss and that it was not
one involving its liability, the law
requires that it come forward with the
information available to it, and its
failure to do so warrants an inference
or presumption of its liability. However,
such inferences and presumptions,
while they may affect the burden of
coming forward with evidence, do not
alter the burden of proof which remains
on plaintiff, and, where the carrier
comes forward with evidence
explaining the loss or damage, the
burden of going forward with the
evidence is again on plaintiff.
Where the action is based on the
shipowner's warranty of
seaworthiness, the burden of proving a
breach thereof and that such breach
was the proximate cause of the
damage rests on plaintiff, and proof
that the goods were lost or damaged
while in the carrier's possession does
not cast on it the burden of proving
seaworthiness. . . . Where the contract
of carriage exempts the carrier from
liability for unseaworthiness not
discoverable by due diligence, the
carrier has the preliminary burden of
proving the exercise of due diligence to
make the vessel seaworthy. 20
In the instant case, the Court of Appeals
correctly found the NSC "has not taken the
correct position in relation to the question of
who has the burden of proof. Thus, in its brief
(pp. 10-11), after citing Clause 10 and Clause
12 of the NANYOZAI Charter Party
(incidentally plaintiff-appellant's [NSC's]
interpretation of Clause 12 is not even
correct), it argues that 'a careful examination
of the evidence will show that VSI miserably
failed to comply with any of these obligation's
as if defendant-appellee [VSI] had the burden
of  proof."
21
First Issue: Questions of Fact
Based on the foregoing, the determination of
the following factual questions is manifestly
relevant: (1) whether VSI exercised due
231
diligence in making MV Vlasons I seaworthy
for the intended purpose under the charter
party; (2) whether the damage to the cargo
should be attributed to the willful negligence of
the officers and crew of the vessel or of the
stevedores hired by NSC; and (3) whether the
rusting of the tinplates was caused by its own
"sweat" or by contact with seawater.
These questions of fact were threshed out and
decided by the trial court, which had the
firsthand opportunity to hear the parties'
conflicting claims and to carefully weigh their
respective evidence. The findings of the trial
court were subsequently affirmed by the Court
of Appeals. Where the factual findings of both
the trial court and the Court of Appeals
coincide, the same are binding on this
Court.  We stress that, subject to some
22
exceptional instances, only questions of law
23
— not questions of fact — may be raised
before this Court in a petition for review under
Rule 45 of the Rules of Court. After a thorough
review of the case at bar, we find no reason to
disturb the lower court's factual findings, as
indeed NSC has not successfully proven the
application of any of the aforecited exceptions.
Was MV Vlasons I Seaworthy?
In any event, the records reveal that VSI
exercised due diligence to make the ship
seaworthy and fit for the carriage of NSC's
cargo of steel and tinplates. This is shown by
the fact that it was drylocked and inspected by
the Philippine Coast Guard before it
proceeded to Iligan City for its voyage to
Manila under the contract of voyage charter
hire. The vessel's voyage from Iligan to Manila
24
was the vessel's first voyage after drydocking.
The Philippine Coast Guard Station in Cebu
cleared it as seaworthy, fitted and equipped; it
met all requirements for trading as cargo
vessel.  The Court of Appeals itself sustained
25
the conclusion of the trial court that MV
Vlasons I was seaworthy. We find no reason
to modify or reverse this finding of both the
trial and the appellate courts.
Who Were Negligent:
Seamen or Stevedores?
As noted earlier, the NSC had the burden of
proving that the damage to the cargo was
caused by the negligence of the officers and
the crew of MV Vlasons I in making their
vessel seaworthy and fit for the carriage of
tinplates. NSC failed to discharge this burden.
Before us, NSC relies heavily on its claim
that MV Vlasons I had used an old and torn
tarpaulin or canvas to cover the hatches
through which the cargo was loaded into the
cargo hold of the ship. It faults the Court of
Appeals for failing to consider such claim as
an "uncontroverted fact"  and denies that MV
26
Vlasons I "was equipped with new canvas
covers in tandem with the old ones as
indicated in the Marine Protest . . ."  We27
disagree.
The records sufficiently support VSI's
contention that the ship used the old tarpaulin,
only in addition to the new one used primarily
to make the ship's hatches watertight. The
foregoing are clear from the marine protest of
the master of the MV Vlasons I, Antonio C.
Dumlao, and the deposition of the ship's
boatswain, Jose Pascua. The salient portions
of said marine protest read:
. . . That the M/V "VLASONS I"
departed Iligan City or about 0730
hours of August 8, 1974, loaded with
approximately 2,487.9 tons of steel
plates and tin plates consigned to
National Steel Corporation; that before
departure, the vessel was rigged, fully
equipped and cleared by the
authorities; that on or about August 9,
1974, while in the vicinity of the
western part of Negros and Panay, we
encountered very rough seas and
strong winds and Manila office was
advised by telegram of the adverse
weather conditions encountered; that
in the morning of August 10, 1974, the
weather condition changed to worse
and strong winds and big waves
continued pounding the vessel at her
port side causing sea water to overflow
on deck andhatch (sic) covers and
which caused the first layer of the
canvass covering to give way while the
new canvass covering still holding on;
That the weather condition improved
when we reached Dumali Point
protected by Mindoro; that we re-
secured the canvass covering back to
position; that in the afternoon of
August 10, 1974, while entering
Maricaban Passage, we were again
231
 exposed to moderate seas and heavy
rains; that while approaching Fortune
Island, we encountered again rough
seas, strong winds and big waves
which caused the same canvass to
give way and leaving the new canvass
holding on;
xxx xxx xxx  28
q And aside from the hatch board, is
there any other material there to cover
the hatch?
a There is a beam supporting the
hatch board.
q What is this beam made of?

a It is made of steel, sir.

And the relevant portions of Jose Pascua's
deposition are as follows:
q What is the purpose of the canvas
cover?
a So that the cargo would not be
soaked with water.
q And will you describe how the
canvas cover was secured on the
hatch opening?
q Is the beam that was placed in the
hatch opening covering the whole
hatch opening?
a No, sir.
q How many hatch beams were there
placed across the opening?
a There are five beams in one hatch
opening.

WITNESS ATTY DEL ROSARIO

a It was placed flat on top of the hatch q And on top of the beams you said
cover, with a little canvas flowing over there is a hatch board. How many
the sides and we place[d] a flat bar pieces of wood are put on top?
over the canvas on the side of the
hatches and then we place[d] a
a Plenty, sir, because there are several
stopper so that the canvas could not
pieces on top of the hatch beam.
be removed.
q And is there a space between the
ATTY DEL ROSARIO
hatch boards?
q And will you tell us the size of the
a There is none, sir.
hatch opening? The length and the
width of the hatch opening.
q They are tight together?
a Forty-five feet by thirty-five feet, sir.
a Yes, sir.
x x x           x x x          x x x
q How tight?
q How was the canvas supported in
the middle of the hatch opening? a Very tight, sir.

a There is a hatch board. q Now, on top of the hatch boards,

according to you, is the canvass cover.
How many canvas covers?
ATTY DEL ROSARIO
a Two, sir. 29

q What is the hatch board made of?

That due diligence was exercised by the
a It is made of wood, with a handle.
officers and the crew of the MV Vlasons I was
further demonstrated by the fact that, despite
encountering rough weather twice, the new
231
tarpaulin did not give way and the ship's
hatches and cargo holds remained waterproof.
As aptly stated by the Court of Appeals, ". . .
we find no reason not to sustain the
conclusion of the lower court based on
overwhelming evidence, that the MV
'VLASONS I' was seaworthy when it undertook
the voyage on August 8, 1974 carrying on
board thereof plaintiff-appellant's shipment of
1,677 skids of tinplates and 92 packages of
hot rolled sheets or a total of 1,769 packages
from NSC's pier in Iligan City arriving safely at
North Harbor, Port Area, Manila, on August
12, 1974; . . .
30
Indeed, NSC failed to discharge its burden to
show negligence on the part of the officers and
the crew of MV Vlasons I. On the contrary, the
records reveal that it was the stevedores of
NSC who were negligent in unloading the
cargo from the ship.
The stevedores employed only a tent-like
material to cover the hatches when strong
rains occasioned by a passing typhoon
disrupted the unloading of the cargo. This tent-
like covering, however, was clearly inadequate
for keeping rain and seawater away from the
hatches of the ship. Vicente Angliongto, an
officer of VSI, testified thus:
ATTY ZAMORA:
Q Now, during your testimony on
November 5, 1979, you stated on
August 14 you went on board the
vessel upon notice from the National
Steel Corporation in order to conduct
the inspection of the cargo. During the
course of the investigation, did you
chance to see the discharging
operation?
WITNESS:
A Yes, sir, upon my arrival at the
vessel, I saw some of the tinplates
already discharged on the pier but
majority of the tinplates were inside the
hall, all the hatches were opened.
Q In connection with these cargoes
which were unloaded, where is the
place.
A At the Pier.
Q What was used to protect the same
from weather?
ATTY LOPEZ:
We object, your Honor, this question
was already asked. This particular
matter . . . the transcript of
stenographic notes shows the same
was covered in the direct examination.
ATTY ZAMORA:
Precisely, your Honor, we would like to
go on detail, this is the serious part of
the testimony.
COURT:
All right, witness may answer.
ATTY LOPEZ:
Q What was used in order to protect
the cargo from the weather?
A A base of canvas was used as cover
on top of the tin plates, and tents were
built at the opening of the hatches.
Q You also stated that the hatches
were already opened and that there
were tents constructed at the opening
of the hatches to protect the cargo
from the rain. Now, will you describe
[to] the Court the tents constructed.
A The tents are just a base of canvas
which look like a tent of an Indian
camp raise[d] high at the middle with
the whole side separated down to the
hatch, the size of the hatch and it is
soaks [sic] at the middle because of
those weather and this can be used
only to temporarily protect the cargo
from getting wet by rains.
Q Now, is this procedure adopted by
the stevedores of covering tents
proper?
A No, sir, at the time they were
discharging the cargo, there was a
typhoon passing by and the hatch tent
was not good enough to hold all of it to
231
 prevent the water soaking through the
canvass and enter the cargo.
Q In the course of your inspection,
Mr. Anglingto [sic], did you see in fact
the water enter and soak into the
canvass and tinplates.
A Yes, sir, the second time I went
there, I saw it.
Q As owner of the vessel, did you not
advise the National Steel Corporation
[of] the procedure adopted by its
stevedores in discharging the cargo
particularly in this tent covering of the
hatches?
A Yes, sir, I did the first time I saw it, I
called the attention of the stevedores
but the stevedores did not mind at all,
so, called the attention of the
representative of the National Steel but
nothing was done, just the same.
Finally, I wrote a letter to them.31
NSC attempts to discredit the testimony of
Angliongto by questioning his failure to
complain immediately about the stevedores'
negligence on the first day of unloading,
pointing out that he wrote his letter to
petitioner only seven days later.  The Court is
32
not persuaded. Angliongto's candid answer in
his aforequoted testimony satisfactorily
explained the delay. Seven days lapsed
because he first called the attention of the
stevedores, then the NSC's representative,
about the negligent and defective procedure
adopted in unloading the cargo. This series of
actions constitutes a reasonable response in
accord with common sense and ordinary
human experience. Vicente Angliongto could
not be blamed for calling the stevedores'
attention first and then the NSC's
representative on location before formally
informing NSC of the negligence he had
observed, because he was not responsible for
the stevedores or the unloading operations. In
fact, he was merely expressing concern for
NSC which was ultimately responsible for the
stevedores it had hired and the performance of
their task to unload the cargo.
We see no reason to reverse the trial and the
appellate courts' findings and conclusions on
this point, viz:
In the THIRD assigned error, [NSC]
claims that the trial court erred in
finding that the stevedores hired by
NSC were negligent in the unloading of
NSC's shipment. We do not think so.
Such negligence according to the trial
court is evident in the stevedores hired
by [NSC], not closing the hatch of MV
'VLASONS I' when rains occurred
during the discharging of the cargo
thus allowing rain water and seawater
spray to enter the hatches and to drift
to and fall on the cargo. It was proven
that the stevedores merely set up
temporary tents or canvas to cover the
hatch openings when it rained during
the unloading operations so that it
would be easier for them to resume
work after the rains stopped by just
removing said tents or canvass. It has
also been shown that on August 20,
1974, VSI President Vicente
Angliongto wrote [NSC] calling
attention to the manner the stevedores
hired by [NSC] were discharging the
cargo on rainy days and the improper
closing of the hatches which allowed
continuous heavy rain water to leak
through and drip to the tinplates'
covers and [Vicente Angliongto] also
suggesting that due to four (4) days
continuos rains with strong winds that
the hatches be totally closed down and
covered with canvas and the hatch
tents lowered. (Exh. "13"). This letter
was received by [NSC] on 22 August
1974 while discharging operations
were still going on (Exhibit "13-A"). 33
The fact that NSC actually accepted and
proceeded to remove the cargo from the ship
during unfavorable weather will not make VSI
liable for any damage caused thereby. In
passing, it may be noted that the NSC may
seek indemnification, subject to the laws on
prescription, from the stevedoring company at
fault in the discharge operations. "A stevedore
company engaged in discharging cargo . . .
has the duty to load the cargo . . . in a prudent
manner, and it is liable for injury to, or loss of,
cargo caused by its negligence . . . and where
the officers and members and crew of the
vessel do nothing and have no responsibility in
the discharge of cargo by stevedores . . . the
vessel is not liable for loss of, or damage to,
the cargo caused by the negligence of
the stevedores . . ."  as in the instant case.
34
231
 Do Tinplates "Sweat"?
The trial court relied on the testimony of
Vicente Angliongto in finding that ". . . tinplates
'sweat' by themselves when packed even
without being in contact with water from
outside especially when the weather is bad
or raining . . ."  The Court of Appeals affirmed
35
the trial court's finding.
A discussion of this issue appears
inconsequential and unnecessary. As
previously discussed, the damage to the
tinplates was occasioned not by airborne
moisture but by contact with rain and seawater
which the stevedores negligently allowed to
seep in during the unloading.
Second Issue: Effect of NSC's Failure to
Insure the Cargo
The obligation of NSC to insure the cargo
stipulated in the Contract of Voyage Charter
Hire is totally separate and distinct from the
contractual or statutory responsibility that may
be incurred by VSI for damage to the cargo
caused by the willful negligence of the officers
and the crew of MV Vlasons I. Clearly,
therefore, NSC's failure to insure the cargo will
not affect its right, as owner and real party in
interest, to file an action against VSI for
damages caused by the latter's willful
negligence. We do not find anything in the
charter party that would make the liability of
VSI for damage to the cargo contingent on or
affected in any manner by NSC's obtaining an
insurance over the cargo.
Third Issue: Admissibility of Certificates
Proving Seaworthiness
NSC's contention that MV Vlasons I was not
seaworthy is anchored on the alleged
inadmissibility of the certificates of
seaworthiness offered in evidence by VSI. The
said certificates include the following:
1. Certificate of Inspection of the Philippines
Coast Guard at Cebu
2. Certificate of Inspection from the Philippine
Coast Guard
3. International Load Line Certificate from the
Philippine Coast Guard
4. Coastwise License from the Board of
Transportation
5. Certificate of Approval for Conversion
issued by the Bureau of Customs 36
NSC argues that the certificates are hearsay
for not having been presented in accordance
with the Rules of Court. It points out that
Exhibits 3, 4 and 11 allegedly are "not written
records or acts of public officers"; while
Exhibits 5, 6, 7, 8, 9, 11 and 12 are not
"evidenced by official publications or certified
true copies" as required by Sections 25 and
26, Rule 132, of the Rules of Court. 37
After a careful examination of these exhibits,
the Court rules that Exhibits 3, 4, 5, 6, 7, 8, 9
and 12 are inadmissible, for they have not
been properly offered as evidence. Exhibits 3
and 4 are certificates issued by private parties,
but they have not been proven by one who
saw the writing executed, or by evidence of
the genuineness of the handwriting of the
maker, or by a subscribing witness. Exhibits,
5, 6, 7, 8, 9, and 12 are photocopies, but their
admission under the best evidence rule have
not been demonstrated.
We find, however, that Exhibit 11 is admissible
under a well-settled exception to the hearsay
rule per Section 44 of Rule 130 of the Rules of
Court, which provides that "(e)ntries in official
records made in the performance of a duty by
a public officer of the Philippines, or by a
person in the performance of a duty specially
enjoined by law, are prima facie evidence of
the facts therein stated."  Exhibit 11 is an
38
original certificate of the Philippine Coast
Guard in Cebu issued by Lieutenant Junior
Grade Noli C. Flores to the effect that "the
vessel 'VLASONS I' was drydocked . . . and
PCG Inspectors were sent on board for
inspection . . . After completion of drydocking
and duly inspected by PCG Inspectors, the
vessel 'VLASONS I', a cargo vessel, is in
seaworthy condition, meets all requirements,
fitted and equipped for trading as a cargo
vessel was cleared by the Philippine Coast
Guard and sailed for Cebu Port on July 10,
1974." (sic) NSC's claim, therefore, is
obviously misleading and erroneous.
At any rate, it should be stressed that NSC
has the burden of proving that MV Vlasons
I was not seaworthy. As observed earlier, the
vessel was a private carrier and, as such, it did
231
not have the obligation of a common carrier to
show that it was seaworthy. Indeed, NSC
glaringly failed to discharge its duty of proving
the willful negligence of VSI in making the ship
seaworthy resulting in damage to its cargo.
Assailing the genuineness of the certificate of
seaworthiness is not sufficient proof that the
vessel was not seaworthy.
Fourth Issue: Demurrage and Attorney's Fees
The contract of voyage charter hire
provides inter alia:
xxx xxx xxx
2. Cargo: Full cargo of steel products
of not less than 2,500 MT, 10% more
or less at Master's option.
xxx xxx xxx
6. Loading/Discharging Rate: 750 tons
per WWDSHINC.
7. Demurrage/Dispatch:
P8,000.00/P4,000.00 per day. 39
The Court defined demurrage in its strict
sense as the compensation provided for in the
contract of affreightment for the detention of
the vessel beyond the laytime or that period of
time agreed on for loading and unloading of
cargo. It is given to compensate the shipowner
40
for the nonuse of the vessel. On the other
hand, the following is well-settled:
Laytime runs according to the
particular clause of the charter party. . .
. If laytime is expressed in "running
days," this means days when the ship
would be run continuously, and
holidays are not excepted. A
qualification of "weather permitting"
excepts only those days when bad
weather reasonably prevents the work
contemplated. 41
In this case, the contract of voyage charter
hire provided for a four-day laytime; it also
qualified laytime as WWDSHINC or weather
working days Sundays and holidays
included.  The running of laytime was thus
42
made subject to the weather, and would cease
to run in the event unfavorable weather
interfered with the unloading of
cargo.  Consequently, NSC may not be held
43
liable for demurrage as the four-day laytime
allowed it did not lapse, having been tolled by
unfavorable weather condition in view of the
WWDSHINC qualification agreed upon by the
parties. Clearly, it was error for the trial court
and the Court of Appeals to have found and
affirmed respectively that NSC incurred eleven
days of delay in unloading the cargo. The trial
court arrived at this erroneous finding by
subtracting from the twelve days, specifically
August 13, 1974 to August 24, 1974, the only
day of unloading unhampered by unfavorable
weather or rain, which was August 22, 1974.
Based on our previous discussion, such
finding is a reversible error. As mentioned, the
respondent appellate court also erred in ruling
that NSC was liable to VSI for demurrage,
even if it reduced the amount by half.
Attorney's Fees
VSI assigns as error of law the Court of
Appeals' deletion of the award of attorney's
fees. We disagree. While VSI was compelled
to litigate to protect its rights, such fact by itself
will not justify an award of attorney's fees
under Article 2208 of the Civil Code when ". . .
no sufficient showing of bad faith would be
reflected in a party's persistence in a case
other than an erroneous conviction of the
righteousness of his cause . . ."  Moreover,
44
attorney's fees may not be awarded to a party
for the reason alone that the judgment
rendered was favorable to the latter, as this is
tantamount to imposing a premium on one's
right to litigate or seek judicial redress of
legitimate grievances. 45
Epilogue
At bottom, this appeal really hinges on a
factual issue: when, how and who caused the
damage to the cargo? Ranged against NSC
are two formidable truths. First, both lower
courts found that such damage was brought
about during the unloading process when rain
and seawater seeped through the cargo due to
the fault or negligence of the stevedores
employed by it. Basic is the rule that factual
findings of the trial court, when affirmed by the
Court of Appeals, are binding on the Supreme
Court. Although there are settled exceptions,
NSC has not satisfactorily shown that this
case is one of them. Second, the agreement
between the parties — the Contract of Voyage
Charter Hire — placed the burden of proof for
231
such loss or damage upon the shipper, not
upon the shipowner. Such stipulation, while
disadvantageous to NSC, is valid because the
parties entered into a contract of private
charter, not one of common carriage. Basic
too is the doctrine that courts cannot relieve a
parry from the effects of a private contract
freely entered into, on the ground that it is
allegedly one-sided or unfair to the plaintiff.
The charter party is a normal commercial
contract and its stipulations are agreed upon in
consideration of many factors, not the least of
which is the transport price which is
determined not only by the actual costs but
also by the risks and burdens assumed by the
shipper in regard to possible loss or damage
to the cargo. In recognition of such factors, the
parties even stipulated that the shipper should
insure the cargo to protect itself from the risks
it undertook under the charter party. That NSC
failed or neglected to protect itself with such
insurance should not adversely affect VSI,
which had nothing to do with such failure or
neglect.
WHEREFORE, premises considered, the
instant consolidated petitions are hereby
DENIED. The questioned Decision of the
Court of Appeals is AFFIRMED with the
MODIFICATION that the demurrage awarded
to VSI is deleted. No pronouncement as to
costs.
SO ORDERED.
Narvasa, C.J., Romero, Melo and Francisco,
JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 101503 September 15, 1993
PLANTERS PRODUCTS, INC., petitioner, 
vs.
COURT OF APPEALS, SORIAMONT
STEAMSHIP AGENCIES AND KYOSEI
KISEN KABUSHIKI KAISHA, respondents.
Gonzales, Sinense, Jimenez & Associates for
petitioner.
Siguion Reyna, Montecillo & Ongsiako Law
Office for private respondents.
BELLOSILLO, J.:
Does a charter-party  between a shipowner
1
and a charterer transform a common carrier
into a private one as to negate the civil law
presumption of negligence in case of loss or
damage to its cargo?
Planters Products, Inc. (PPI), purchased from
Mitsubishi International Corporation
(MITSUBISHI) of New York, U.S.A.,
9,329.7069 metric tons (M/T) of Urea 46%
fertilizer which the latter shipped in bulk on 16
June 1974 aboard the cargo vessel M/V "Sun
Plum" owned by private respondent Kyosei
Kisen Kabushiki Kaisha (KKKK) from Kenai,
Alaska, U.S.A., to Poro Point, San Fernando,
La Union, Philippines, as evidenced by Bill of
Lading No. KP-1 signed by the master of the
vessel and issued on the date of departure.
On 17 May 1974, or prior to its voyage, a time
charter-party on the vessel M/V "Sun Plum"
pursuant to the Uniform General Charter  was2
entered into between Mitsubishi as
shipper/charterer and KKKK as shipowner, in
Tokyo, Japan.  Riders to the aforesaid charter-
3
party starting from par. 16 to 40 were attached
to the pre-printed agreement. Addenda Nos. 1,
2, 3 and 4 to the charter-party were also
subsequently entered into on the 18th, 20th,
21st and 27th of May 1974, respectively.
Before loading the fertilizer aboard the vessel,
four (4) of her holds  were all presumably
4
inspected by the charterer's representative
and found fit to take a load of urea in bulk
pursuant to par. 16 of the charter-party which
reads:
16. . . . At loading port, notice of
readiness to be accomplished by
certificate from National Cargo Bureau
inspector or substitute appointed by
charterers for his account certifying the
vessel's readiness to receive cargo
spaces. The vessel's hold to be
properly swept, cleaned and dried at
the vessel's expense and the vessel to
be presented clean for use in bulk to
the satisfaction of the inspector before
231
 daytime commences. (emphasis
supplied)
After the Urea fertilizer was loaded in bulk by
stevedores hired by and under the supervision
of the shipper, the steel hatches were closed
with heavy iron lids, covered with three (3)
layers of tarpaulin, then tied with steel bonds.
The hatches remained closed and tightly
sealed throughout the entire voyage. 5
Upon arrival of the vessel at her port of call on
3 July 1974, the steel pontoon hatches were
opened with the use of the vessel's boom.
Petitioner unloaded the cargo from the holds
into its steelbodied dump trucks which were
parked alongside the berth, using metal
scoops attached to the ship, pursuant to the
terms and conditions of the charter-partly
(which provided for an F.I.O.S. clause).  The 6
hatches remained open throughout the
duration of the discharge. 7
Each time a dump truck was filled up, its load
of Urea was covered with tarpaulin before it
was transported to the consignee's warehouse
located some fifty (50) meters from the wharf.
Midway to the warehouse, the trucks were
made to pass through a weighing scale where
they were individually weighed for the purpose
of ascertaining the net weight of the cargo.
The port area was windy, certain portions of
the route to the warehouse were sandy and
the weather was variable, raining occasionally
while the discharge was in progress.  The 8
petitioner's warehouse was made of
corrugated galvanized iron (GI) sheets, with an
opening at the front where the dump trucks
entered and unloaded the fertilizer on the
warehouse floor. Tarpaulins and GI sheets
were placed in-between and alongside the
trucks to contain spillages of the ferilizer.
9
It took eleven (11) days for PPI to unload the
cargo, from 5 July to 18 July 1974 (except July
12th, 14th and 18th). A private marine and
10
cargo surveyor, Cargo Superintendents
Company Inc. (CSCI), was hired by PPI to
determine the "outturn" of the cargo shipped,
by taking draft readings of the vessel prior to
and after discharge.   The survey report
11
submitted by CSCI to the consignee (PPI)
dated 19 July 1974 revealed a shortage in the
cargo of 106.726 M/T and that a portion of the
Urea fertilizer approximating 18 M/T was
contaminated with dirt. The same results were
contained in a Certificate of
Shortage/Damaged Cargo dated 18 July 1974
prepared by PPI which showed that the cargo
delivered was indeed short of 94.839 M/T and
about 23 M/T were rendered unfit for
commerce, having been polluted with sand,
rust and dirt. 
12
Consequently, PPI sent a claim letter dated 18
December 1974 to Soriamont Steamship
Agencies (SSA), the resident agent of the
carrier, KKKK, for P245,969.31 representing
the cost of the alleged shortage in the goods
shipped and the diminution in value of that
portion said to have been contaminated with
dirt. 
13
Respondent SSA explained that they were not
able to respond to the consignee's claim for
payment because, according to them, what
they received was just a request for
shortlanded certificate and not a formal claim,
and that this "request" was denied by them
because they "had nothing to do with the
discharge of the shipment."   Hence, on 18
14
July 1975, PPI filed an action for damages
with the Court of First Instance of Manila. The
defendant carrier argued that the strict public
policy governing common carriers does not
apply to them because they have become
private carriers by reason of the provisions of
the charter-party. The court a quo however
sustained the claim of the plaintiff against the
defendant carrier for the value of the goods
lost or damaged when it ruled thus:  15
. . . Prescinding from the provision of
the law that a common carrier is
presumed negligent in case of loss or
damage of the goods it contracts to
transport, all that a shipper has to do
in a suit to recover for loss or damage
is to show receipt by the carrier of the
goods and to delivery by it of less than
what it received. After that, the burden
of proving that the loss or damage was
due to any of the causes which
exempt him from liability is shipted to
the carrier, common or private he may
be. Even if the provisions of the
charter-party aforequoted are deemed
valid, and the defendants considered
private carriers, it was still incumbent
upon them to prove that the shortage
or contamination sustained by the
cargo is attributable to the fault or
negligence on the part of the shipper
or consignee in the loading, stowing,
231
 trimming and discharge of the cargo.
This they failed to do. By this omission,
coupled with their failure to destroy the
presumption of negligence against
them, the defendants are liable
(emphasis supplied).
On appeal, respondent Court of Appeals
reversed the lower court and absolved the
carrier from liability for the value of the cargo
that was lost or damaged.   Relying on the
16
1968 case of Home Insurance
Co. v. American Steamship Agencies,
Inc.,  the appellate court ruled that the cargo
17
vessel M/V "Sun Plum" owned by private
respondent KKKK was a private carrier and
not a common carrier by reason of the time
charterer-party. Accordingly, the Civil Code
provisions on common carriers which set forth
a presumption of negligence do not find
application in the case at bar. Thus —
. . . In the absence of such
presumption, it was incumbent upon
the plaintiff-appellee to adduce
sufficient evidence to prove the
negligence of the defendant carrier as
alleged in its complaint. It is an old and
well settled rule that if the plaintiff,
upon whom rests the burden of proving
his cause of action, fails to show in a
satisfactory manner the facts upon
which he bases his claim, the
defendant is under no obligation to
prove his exception or defense
(Moran, Commentaries on the Rules of
Court, Volume 6, p. 2, citing Belen v.
Belen, 13 Phil. 202).
But, the record shows that the plaintiff-
appellee dismally failed to prove the
basis of its cause of action, i.e. the
alleged negligence of defendant
carrier. It appears that the plaintiff was
under the impression that it did not
have to establish defendant's
negligence. Be that as it may, contrary
to the trial court's finding, the record of
the instant case discloses ample
evidence showing that defendant
carrier was not negligent in performing
its obligation . . .   (emphasis
18
supplied).
Petitioner PPI appeals to us by way of a
petition for review assailing the decision of the
Court of Appeals. Petitioner theorizes that
the Home Insurance case has no bearing on
the present controversy because the issue
raised therein is the validity of a stipulation in
the charter-party delimiting the liability of the
shipowner for loss or damage to goods cause
by want of due deligence on its part or that of
its manager to make the vessel seaworthy in
all respects, and not whether the presumption
of negligence provided under the Civil Code
applies only to common carriers and not to
private carriers.   Petitioner further argues that
19
since the possession and control of the vessel
remain with the shipowner, absent any
stipulation to the contrary, such shipowner
should made liable for the negligence of the
captain and crew. In fine, PPI faults the
appellate court in not applying the presumption
of negligence against respondent carrier, and
instead shifting the onus probandi on the
shipper to show want of due deligence on the
part of the carrier, when he was not even at
hand to witness what transpired during the
entire voyage.
As earlier stated, the primordial issue here is
whether a common carrier becomes a private
carrier by reason of a charter-party; in the
negative, whether the shipowner in the instant
case was able to prove that he had exercised
that degree of diligence required of him under
the law.
It is said that etymology is the basis of reliable
judicial decisions in commercial cases. This
being so, we find it fitting to first define
important terms which are relevant to our
discussion.
A "charter-party" is defined as a contract by
which an entire ship, or some principal part
thereof, is let by the owner to another person
for a specified time or use;   a contract of
20
affreightment by which the owner of a ship or
other vessel lets the whole or a part of her to a
merchant or other person for the conveyance
of goods, on a particular voyage, in
consideration of the payment of
freight;   Charter parties are of two types: (a)
21
contract of affreightment which involves the
use of shipping space on vessels leased by
the owner in part or as a whole, to carry goods
for others; and, (b) charter by demise or
bareboat charter, by the terms of which the
whole vessel is let to the charterer with a
transfer to him of its entire command and
possession and consequent control over its
navigation, including the master and the crew,
231
who are his servants. Contract of affreightment
may either be time charter, wherein the vessel
is leased to the charterer for a fixed period of
time, or voyage charter, wherein the ship is
leased for a single voyage.   In both cases, the
22
charter-party provides for the hire of vessel
only, either for a determinate period of time or
for a single or consecutive voyage, the
shipowner to supply the ship's stores, pay for
the wages of the master and the crew, and
defray the expenses for the maintenance of
the ship.
Upon the other hand, the term "common or
public carrier" is defined in Art. 1732 of the
Civil Code.   The definition extends to carriers
23
either by land, air or water which hold
themselves out as ready to engage in carrying
goods or transporting passengers or both for
compensation as a public employment and not
as a casual occupation. The distinction
between a "common or public carrier" and a
"private or special carrier" lies in the character
of the business, such that if the undertaking is
a single transaction, not a part of the general
business or occupation, although involving the
carriage of goods for a fee, the person or
corporation offering such service is a private
carrier.  24
Article 1733 of the New Civil Code mandates
that common carriers, by reason of the nature
of their business, should observe extraordinary
diligence in the vigilance over the goods they
carry.  In the case of private carriers, however,
25
the exercise of ordinary diligence in the
carriage of goods will suffice. Moreover, in the
case of loss, destruction or deterioration of the
goods, common carriers are presumed to have
been at fault or to have acted negligently, and
the burden of proving otherwise rests on
them.  On the contrary, no such presumption
26
applies to private carriers, for whosoever
alleges damage to or deterioration of the
goods carried has the onus of proving that the
cause was the negligence of the carrier.
It is not disputed that respondent carrier, in the
ordinary course of business, operates as a
common carrier, transporting goods
indiscriminately for all persons. When
petitioner chartered the vessel M/V "Sun
Plum", the ship captain, its officers and
compliment were under the employ of the
shipowner and therefore continued to be under
its direct supervision and control. Hardly then
can we charge the charterer, a stranger to the
crew and to the ship, with the duty of caring for
his cargo when the charterer did not have any
control of the means in doing so. This is
evident in the present case considering that
the steering of the ship, the manning of the
decks, the determination of the course of the
voyage and other technical incidents of
maritime navigation were all consigned to the
officers and crew who were screened, chosen
and hired by the shipowner.  27
It is therefore imperative that a public carrier
shall remain as such, notwithstanding the
charter of the whole or portion of a vessel by
one or more persons, provided the charter is
limited to the ship only, as in the case of a
time-charter or voyage-charter. It is only when
the charter includes both the vessel and its
crew, as in a bareboat or demise that a
common carrier becomes private, at least
insofar as the particular voyage covering the
charter-party is concerned. Indubitably, a
shipowner in a time or voyage charter retains
possession and control of the ship, although
her holds may, for the moment, be the
property of the charterer.  28
Respondent carrier's heavy reliance on the
case of Home Insurance Co. v. American
Steamship Agencies, supra, is misplaced for
the reason that the meat of the controversy
therein was the validity of a stipulation in the
charter-party exempting the shipowners from
liability for loss due to the negligence of its
agent, and not the effects of a special charter
on common carriers. At any rate, the rule in
the United States that a ship chartered by a
single shipper to carry special cargo is not a
common carrier,   does not find application in
29
our jurisdiction, for we have observed that the
growing concern for safety in the
transportation of passengers and /or carriage
of goods by sea requires a more exacting
interpretation of admiralty laws, more
particularly, the rules governing common
carriers.
We quote with approval the observations of
Raoul Colinvaux, the learned barrister-at-
law   —
30
As a matter of principle, it is difficult to
find a valid distinction between cases
in which a ship is used to convey the
goods of one and of several persons.
Where the ship herself is let to a
charterer, so that he takes over the
231
 charge and control of her, the case is
different; the shipowner is not then a
carrier. But where her services only
are let, the same grounds for imposing
a strict responsibility exist, whether he
is employed by one or many. The
master and the crew are in each case
his servants, the freighter in each case
is usually without any representative
on board the ship; the same
opportunities for fraud or collusion
occur; and the same difficulty in
discovering the truth as to what has
taken place arises . . .
In an action for recovery of damages against a
common carrier on the goods shipped, the
shipper or consignee should first prove the fact
of shipment and its consequent loss or
damage while the same was in the
possession, actual or constructive, of the
carrier. Thereafter, the burden of proof shifts to
respondent to prove that he has exercised
extraordinary diligence required by law or that
the loss, damage or deterioration of the cargo
was due to fortuitous event, or some other
circumstances inconsistent with its liability. 
31
To our mind, respondent carrier has
sufficiently overcome, by clear and convincing
proof, the prima faciepresumption of
negligence.
The master of the carrying vessel, Captain Lee
Tae Bo, in his deposition taken on 19 April
1977 before the Philippine Consul and Legal
Attache in the Philippine Embassy in Tokyo,
Japan, testified that before the fertilizer was
loaded, the four (4) hatches of the vessel were
cleaned, dried and fumigated. After completing
the loading of the cargo in bulk in the ship's
holds, the steel pontoon hatches were closed
and sealed with iron lids, then covered with
three (3) layers of serviceable tarpaulins which
were tied with steel bonds. The hatches
remained close and tightly sealed while the
ship was in transit as the weight of the steel
covers made it impossible for a person to open
without the use of the ship's boom.  32
It was also shown during the trial that the hull
of the vessel was in good condition,
foreclosing the possibility of spillage of the
cargo into the sea or seepage of water inside
the hull of the vessel.   When M/V "Sun Plum"
33
docked at its berthing place, representatives of
the consignee boarded, and in the presence of
a representative of the shipowner, the
foreman, the stevedores, and a cargo surveyor
representing CSCI, opened the hatches and
inspected the condition of the hull of the
vessel. The stevedores unloaded the cargo
under the watchful eyes of the shipmates who
were overseeing the whole operation on
rotation basis. 
34
Verily, the presumption of negligence on the
part of the respondent carrier has been
efficaciously overcome by the showing of
extraordinary zeal and assiduity exercised by
the carrier in the care of the cargo. This was
confirmed by respondent appellate court thus
—
. . . Be that as it may, contrary to the
trial court's finding, the record of the
instant case discloses ample evidence
showing that defendant carrier was not
negligent in performing its obligations.
Particularly, the following testimonies
of plaintiff-appellee's own witnesses
clearly show absence of negligence by
the defendant carrier; that the hull of
the vessel at the time of the discharge
of the cargo was sealed and nobody
could open the same except in the
presence of the owner of the cargo
and the representatives of the vessel
(TSN, 20 July 1977, p. 14); that the
cover of the hatches was made of steel
and it was overlaid with tarpaulins,
three layers of tarpaulins and therefore
their contents were protected from the
weather (TSN, 5 April 1978, p. 24);
and, that to open these hatches, the
seals would have to be broken, all the
seals were found to be intact (TSN, 20
July 1977, pp. 15-16) (emphasis
supplied).
The period during which private respondent
was to observe the degree of diligence
required of it as a public carrier began from the
time the cargo was unconditionally placed in
its charge after the vessel's holds were duly
inspected and passed scrutiny by the shipper,
up to and until the vessel reached its
destination and its hull was reexamined by the
consignee, but prior to unloading. This is clear
from the limitation clause agreed upon by the
parties in the Addendum to the standard
"GENCON" time charter-party which provided
for an F.I.O.S., meaning, that the loading,
stowing, trimming and discharge of the cargo
231
was to be done by the charterer, free from all
risk and expense to the carrier.   Moreover, a
35
shipowner is liable for damage to the cargo
resulting from improper stowage only when the
stowing is done by stevedores employed by
him, and therefore under his control and
supervision, not when the same is done by the
consignee or stevedores under the employ of
the latter.  36
Article 1734 of the New Civil Code provides
that common carriers are not responsible for
the loss, destruction or deterioration of the
goods if caused by the charterer of the goods
or defects in the packaging or in the
containers. The Code of Commerce also
provides that all losses and deterioration which
the goods may suffer during the transportation
by reason of fortuitous event, force majeure,
or the inherent defect of the goods, shall be for
the account and risk of the shipper, and that
proof of these accidents is incumbent upon the
carrier.   The carrier, nonetheless, shall be
37
liable for the loss and damage resulting from
the preceding causes if it is proved, as against
him, that they arose through his negligence or
by reason of his having failed to take the
precautions which usage has established
among careful persons.  38
Respondent carrier presented a witness who
testified on the characteristics of the fertilizer
shipped and the expected risks of bulk
shipping. Mr. Estanislao Chupungco, a
chemical engineer working with Atlas
Fertilizer, described Urea as a chemical
compound consisting mostly of ammonia and
carbon monoxide compounds which are used
as fertilizer. Urea also contains 46% nitrogen
and is highly soluble in water. However, during
storage, nitrogen and ammonia do not
normally evaporate even on a long voyage,
provided that the temperature inside the hull
does not exceed eighty (80) degrees
centigrade. Mr. Chupungco further added that
in unloading fertilizer in bulk with the use of a
clamped shell, losses due to spillage during
such operation amounting to one percent (1%)
against the bill of lading is deemed "normal" or
"tolerable." The primary cause of these
spillages is the clamped shell which does not
seal very tightly. Also, the wind tends to blow
away some of the materials during the
unloading process.
The dissipation of quantities of fertilizer, or its
daterioration in value, is caused either by an
extremely high temperature in its place of
storage, or when it comes in contact with
water. When Urea is drenched in water, either
fresh or saline, some of its particles dissolve.
But the salvaged portion which is in liquid form
still remains potent and usable although no
longer saleable in its original market value.
The probability of the cargo being damaged or
getting mixed or contaminated with foreign
particles was made greater by the fact that the
fertilizer was transported in "bulk," thereby
exposing it to the inimical effects of the
elements and the grimy condition of the
various pieces of equipment used in
transporting and hauling it.
The evidence of respondent carrier also
showed that it was highly improbable for sea
water to seep into the vessel's holds during the
voyage since the hull of the vessel was in
good condition and her hatches were tightly
closed and firmly sealed, making the M/V "Sun
Plum" in all respects seaworthy to carry the
cargo she was chartered for. If there was loss
or contamination of the cargo, it was more
likely to have occurred while the same was
being transported from the ship to the dump
trucks and finally to the consignee's
warehouse. This may be gleaned from the
testimony of the marine and cargo surveyor of
CSCI who supervised the unloading. He
explained that the 18 M/T of alleged "bar order
cargo" as contained in their report to PPI was
just an approximation or estimate made by
them after the fertilizer was discharged from
the vessel and segregated from the rest of the
cargo.
The Court notes that it was in the month of
July when the vessel arrived port and
unloaded her cargo. It rained from time to time
at the harbor area while the cargo was being
discharged according to the supply officer of
PPI, who also testified that it was windy at the
waterfront and along the shoreline where the
dump trucks passed enroute to the
consignee's warehouse.
Indeed, we agree with respondent carrier that
bulk shipment of highly soluble goods like
fertilizer carries with it the risk of loss or
damage. More so, with a variable weather
condition prevalent during its unloading, as
was the case at bar. This is a risk the shipper
or the owner of the goods has to face. Clearly,
respondent carrier has sufficiently proved the
231
inherent character of the goods which makes it
highly vulnerable to deterioration; as well as
the inadequacy of its packaging which further
contributed to the loss. On the other hand, no
proof was adduced by the petitioner showing
that the carrier was remise in the exercise of
due diligence in order to minimize the loss or
damage to the goods it carried.
WHEREFORE, the petition is DISMISSED.
The assailed decision of the Court of Appeals,
which reversed the trial court, is AFFIRMED.
Consequently, Civil Case No. 98623 of the
then Court of the First Instance, now Regional
Trial Court, of Manila should be, as it is
hereby DISMISSED.
Costs against petitioner.
SO ORDERED.
Davide, Jr. and Quiason, JJ., concur.
Cruz, J., took no part.
Griño-Aquino, J., is on leave.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION  P3,000.00.
G.R. No. 111127 July 26, 1996
MR. & MRS. ENGRACIO FABRE, JR. and
PORFIRIO CABIL, petitioners,  the party were late, the bus did not leave the
vs.
COURT OF APPEALS, THE WORD FOR
THE WORLD CHRISTIAN FELLOWSHIP,
INC., AMYLINE ANTONIO, JOHN
RICHARDS, GONZALO GONZALES,
VICENTE V. QUE, JR., ICLI CORDOVA,
ARLENE GOJOCCO, ALBERTO ROXAS
CORDERO, RICHARD BAUTISTA,
JOCELYN GARCIA, YOLANDA CORDOVA,
NOEL ROQUE, EDWARD TAN, ERNESTO
NARCISO, ENRIQUETA LOCSIN, FRANCIS
NORMAN O. LOPES, JULIUS CAESAR,
GARCIA, ROSARIO MA. V. ORTIZ,
MARIETTA C. CLAVO, ELVIE SENIEL,
ROSARIO MARA-MARA, TERESITA
REGALA, MELINDA TORRES, MARELLA
MIJARES, JOSEFA CABATINGAN, MARA
NADOC, DIANE MAYO, TESS PLATA,
MAYETTE JOCSON, ARLENE Y. MORTIZ,
LIZA MAYO, CARLOS RANARIO,
ROSAMARIA T. RADOC and BERNADETTE
FERRER, respondents.
MENDOZA, J.:p
This is a petition for review on certiorari of the
decision of the Court of Appeals1 in CA-GR No.
28245, dated September 30, 1992, which
affirmed with modification the decision of the
Regional Trial Court of Makati, Branch 58,
ordering petitioners jointly and severally to pay
damages to private respondent Amyline Antonio,
and its resolution which denied petitioners'
motion for reconsideration for lack of merit.
Petitioners Engracio Fabre, Jr. and his wife
were owners of a 1982 model Mazda minibus.
They used the bus principally in connection
with a bus service for school children which
they operated in Manila. The couple had a
driver, Porfirio J. Cabil, whom they hired in
1981, after trying him out for two weeks, His
job was to take school children to and from the
St. Scholastica's College in Malate, Manila.
On November 2, 1984 private respondent
Word for the World Christian Fellowship Inc.
(WWCF) arranged with petitioners for the
transportation of 33 members of its Young
Adults Ministry from Manila to La Union and
back in consideration of which private
respondent paid petitioners the amount of
The group was scheduled to leave on
November 2, 1984, at 5:00 o'clock in the
afternoon. However, as several members of
Tropical Hut at the corner of Ortigas Avenue
and EDSA until 8:00 o'clock in the evening.
Petitioner Porfirio Cabil drove the minibus.
The usual route to Caba, La Union was
through Carmen, Pangasinan. However, the
bridge at Carmen was under repair, sot hat
petitioner Cabil, who was unfamiliar with the
area (it being his first trip to La Union), was
forced to take a detour through the town of
Baay in Lingayen, Pangasinan. At 11:30 that
night, petitioner Cabil came upon a sharp
231
curve on the highway, running on a south to
east direction, which he described as "siete."
The road was slippery because it was raining,
causing the bus, which was running at the
speed of 50 kilometers per hour, to skid to the
left road shoulder. The bus hit the left traffic
steel brace and sign along the road and
rammed the fence of one Jesus Escano, then
turned over and landed on its left side, coming
to a full stop only after a series of impacts. The
bus came to rest off the road. A coconut tree
which it had hit fell on it and smashed its front
portion.
Several passengers were injured. Private
respondent Amyline Antonio was thrown on
the floor of the bus and pinned down by a
wooden seat which came down by a wooden
seat which came off after being unscrewed. It
took three persons to safely remove her from
this portion. She was in great pain and could
not move.
The driver, petitioner Cabil, claimed he did not
see the curve until it was too late. He said he
was not familiar with the area and he could not
have seen the curve despite the care he took
in driving the bus, because it was dark and
there was no sign on the road. He said that he
saw the curve when he was already within 15
to 30 meters of it. He allegedly slowed down to
30 kilometers per hour, but it was too late.
The Lingayen police investigated the incident
the next day, November 3, 1984. On the basis
of their finding they filed a criminal complaint
against the driver, Porfirio Cabil. The case was
later filed with the Lingayen Regional Trial
Court. Petitioners Fabre paid Jesus Escano
P1,500.00 for the damage to the latter's fence.
On the basis of Escano's affidavit of
desistance the case against petitioners Fabre
was dismissed.
Amyline Antonio, who was seriously injured,
brought this case in the RTC of Makati, Metro
Manila. As a result of the accident, she is now
suffering from paraplegia and is permanently
paralyzed from the waist down. During the trial
she described the operations she underwent
and adduced evidence regarding the cost of
her treatment and therapy. Immediately after
the accident, she was taken to the Nazareth
Hospital in Baay, Lingayen. As this hospital
was not adequately equipped, she was
transferred to the Sto. Niño Hospital, also in
the town of Ba-ay, where she was given
sedatives. An x-ray was taken and the
damage to her spine was determined to be too
severe to be treated there. She was therefore
brought to Manila, first to the Philippine
General Hospital and later to the Makati
Medical Center where she underwent an
operation to correct the dislocation of her
spine.
In its decision dated April 17, 1989, the trial
court found that:
No convincing evidence was shown that the
minibus was properly checked for travel to a
long distance trip and that the driver was
properly screened and tested before being
admitted for employment. Indeed, all the
evidence presented have shown the negligent
act of the defendants which ultimately resulted
to the accident subject of this case.
Accordingly, it gave judgment for private
respondents holding:
Considering that plaintiffs Word for the World
Christian Fellowship, Inc. and Ms. Amyline
Antonio were the only ones who adduced
evidence in support of their claim for damages,
the Court is therefore not in a position to
award damages to the other plaintiffs.
WHEREFORE, premises considered, the
Court hereby renders judgment against
defendants Mr. & Mrs. Engracio Fabre, Jr. and
Porfirio Cabil y Jamil pursuant to articles 2176
and 2180 of the Civil Code of the Philippines
and said defendants are ordered to pay jointly
and severally to the plaintiffs the following
amount:
1) P93,657.11 as compensatory and
actual damages;
2) P500,000.00 as the reasonable
amount of loss of earning capacity of
plaintiff Amyline Antonio;
3) P20,000.00 as moral damages;
4) P20,000.00 as exemplary damages;
and
5) 25% of the recoverable amount as
attorney's fees;
6) Costs of suit.
231
 SO ORDERED.
The Court of Appeals affirmed the decision of
the trial court with respect to Amyline Antonio
but dismissed it with respect to the other
plaintiffs on the ground that they failed to
prove their respective claims. The Court of
Appeals modified the award of damages as
follows:
1) P93,657.11 as actual damages;
2) P600,000.00 as compensatory
damages;
3) P50,000.00 as moral damages;
4) P20,000.00 as exemplary damages;
5) P10,000.00 as attorney's fees; and
6) Costs of suit.
The Court of Appeals sustained the trial court's
finding that petitioner Cabil failed to exercise
due care and precaution in the operation of his
vehicle considering the time and the place of
the accident. The Court of Appeals held that
the Fabres were themselves presumptively
negligent. Hence, this petition. Petitioners
raise the following issues:
I. WHETHER OR NOT PETITIONERS
WERE NEGLIGENT.
II. WHETHER OF NOT PETITIONERS
WERE LIABLE FOR THE INJURIES
SUFFERED BY PRIVATE
RESPONDENTS.
III WHETHER OR NOT DAMAGES
CAN BE AWARDED AND IN THE
POSITIVE, UP TO WHAT EXTENT.
Petitioners challenge the propriety of the
award of compensatory damages in the
amount of P600,000.00. It is insisted that, on
the assumption that petitioners are liable an
award of P600,000.00 is unconscionable and
highly speculative. Amyline Antonio testified
that she was a casual employee of a company
called "Suaco," earning P1,650.00 a month,
and a dealer of Avon products, earning an
average of P1,000.00 monthly. Petitioners
contend that as casual employees do not have
security of tenure, the award of P600,000.00,
considering Amyline Antonio's earnings, is
without factual basis as there is no assurance
that she would be regularly earning these
amounts.
With the exception of the award of damages,
the petition is devoid of merit.
First, it is unnecessary for our purpose to
determine whether to decide this case on the
theory that petitioners are liable for breach of
contract of carriage or culpa contractual or on
the theory of quasi delict or culpa aquiliana as
both the Regional Trial Court and the Court of
Appeals held, for although the relation of
passenger and carrier is "contractual both in
origin and nature," nevertheless "the act that
breaks the contract may be also a tort."   In2
either case, the question is whether the bus
driver, petitioner Porfirio Cabil, was negligent.
The finding that Cabil drove his bus
negligently, while his employer, the Fabres,
who owned the bus, failed to exercise the
diligence of a good father of the family in the
selection and supervision of their employee is
fully supported by the evidence on record.
These factual findings of the two courts we
regard as final and conclusive, supported as
they are by the evidence. Indeed, it was
admitted by Cabil that on the night in question,
it was raining, and as a consequence, the road
was slippery, and it was dark. He averred
these facts to justify his failure to see that
there lay a sharp curve ahead. However, it is
undisputed that Cabil drove his bus at the
speed of 50 kilometers per hour and only
slowed down when he noticed the curve some
15 to 30 meters ahead.   By then it was too
3
late for him to avoid falling off the road. Given
the conditions of the road and considering that
the trip was Cabil's first one outside of Manila,
Cabil should have driven his vehicle at a
moderate speed. There is testimony   that the
4
vehicles passing on that portion of the road
should only be running 20 kilometers per hour,
so that at 50 kilometers per hour, Cabil was
running at a very high speed.
Considering the foregoing — the fact that it
was raining and the road was slippery, that it
was dark, that he drove his bus at 50
kilometers an hour when even on a good day
the normal speed was only 20 kilometers an
hour, and that he was unfamiliar with the
terrain, Cabil was grossly negligent and should
231
be held liable for the injuries suffered by
private respondent Amyline Antonio.
Pursuant to Arts. 2176 and 2180 of the Civil
Code his negligence gave rise to the
presumption that his employers, the Fabres,
were themselves negligent in the selection and
supervisions of their employee.
Due diligence in selection of employees is not
satisfied by finding that the applicant
possessed a professional driver's license. The
employer should also examine the applicant
for his qualifications, experience and record of
service.   Due diligence in supervision, on the
5
other hand, requires the formulation of rules
and regulations for the guidance of employees
and issuance of proper instructions as well as
actual implementation and monitoring of
consistent compliance with the rules. 6
In the case at bar, the Fabres, in allowing
Cabil to drive the bus to La Union, apparently
did not consider the fact that Cabil had been
driving for school children only, from their
homes to the St. Scholastica's College in
Metro Manila.  They had hired him only after a
7
two-week apprenticeship. They had hired him
only after a two-week apprenticeship. They
had tested him for certain matters, such as
whether he could remember the names of the
children he would be taking to school, which
were irrelevant to his qualification to drive on a
long distance travel, especially considering
that the trip to La Union was his first. The
existence of hiring procedures and supervisory
policies cannot be casually invoked to overturn
the presumption of negligence on the part of
an employer.  8
Petitioners argue that they are not liable
because (1) an earlier departure (made
impossible by the congregation's delayed
meeting) could have a averted the mishap and
(2) under the contract, the WWCF was directly
responsible for the conduct of the trip. Neither
of these contentions hold water. The hour of
departure had not been fixed. Even if it had
been, the delay did not bear directly on the
cause of the accident. With respect to the
second contention, it was held in an early case
that:
[A] person who hires a public automobile and
gives the driver directions as to the place to
which he wishes to be conveyed, but
exercises no other control over the conduct of
the driver, is not responsible for acts of
negligence of the latter or prevented from
recovering for injuries suffered from a collision
between the automobile and a train, caused by
the negligence or the automobile driver.  9
As already stated, this case actually involves a
contract of carriage. Petitioners, the Fabres,
did not have to be engaged in the business of
public transportation for the provisions of the
Civil Code on common carriers to apply to
them. As this Court has held:  10
Art. 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 (in
local idiom, as "a sideline"). 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. We think that Article 1732
deliberately refrained from making
such distinctions.
As common carriers, the Fabres were
found to exercise "extraordinary
diligence" for the safe transportation of
the passengers to their destination.
This duty of care is not excused by
proof that they exercise the diligence
of a good father of the family in the
selection and supervision of their
employee. As Art. 1759 of the Code
provides:
Common carriers are liable for the
death of or injuries to passengers
231
 through the negligence or willful acts of
the former's employees although such
employees may have acted beyond
the scope of their authority or in
violation of the orders of the common
carriers.
This liability of the common carriers
does not cease upon proof that they
exercised all the diligence of a good
father of a family in the selection and
supervision of their employees.
The same circumstances detailed above,
supporting the finding of the trial court and of
the appellate court that petitioners are liable
under Arts. 2176 and 2180 for quasi delict,
fully justify findings them guilty of breach of
contract of carriage under Arts. 1733, 1755
and 1759 of the Civil Code.
Secondly, we sustain the award of damages in
favor of Amyline Antonio. However, we think
the Court of Appeals erred in increasing the
amount of compensatory damages because
private respondents did not question this
award as inadequate.   To the contrary, the
11
award of P500,000.00 for compensatory
damages which the Regional Trial Court made
is reasonable considering the contingent
nature of her income as a casual employee of
a company and as distributor of beauty
products and the fact that the possibility that
she might be able to work again has not been
foreclosed. In fact she testified that one of her
previous employers had expressed willingness
to employ her again.
With respect to the other awards, while the
decisions of the trial court and the Court of
Appeals do not sufficiently indicate the factual
and legal basis for them, we find that they are
nevertheless supported by evidence in the
records of this case. Viewed as an action
for quasi delict, this case falls squarely within
the purview of Art. 2219(2) providing for the
payment of moral damages in cases of quasi
delict. On the theory that petitioners are liable
for breach of contract of carriage, the award of
moral damages is authorized by Art. 1764, in
relation to Art. 2220, since Cabil's gross
negligence amounted to bad faith.  Amyline
12
Antonio's testimony, as well as the testimonies
of her father and copassengers, fully establish
the physical suffering and mental anguish she
endured as a result of the injuries caused by
petitioners' negligence.
The award of exemplary damages and
attorney's fees was also properly made.
However, for the same reason that it was error
for the appellate court to increase the award of
compensatory damages, we hold that it was
also error for it to increase the award of moral
damages and reduce the award of attorney's
fees, inasmuch as private respondents, in
whose favor the awards were made, have not
appealed.  13
As above stated, the decision of the Court of
Appeals can be sustained either on the theory
of quasi delict or on that of breach of contract.
The question is whether, as the two courts
below held, petitioners, who are the owners
and driver of the bus, may be made to respond
jointly and severally to private respondent. We
hold that they may be. In Dangwa
Trans. Co. Inc. v. Court of Appeals,   on facts
14
similar to those in this case, this Court held the
bus company and the driver jointly and
severally liable for damages for injuries
suffered by a passenger. Again, in Bachelor
Express, Inc. v. Court of Appeals   a driver
15
found negligent in failing to stop the bus in
order to let off passengers when a fellow
passenger ran amuck, as a result of which the
passengers jumped out of the speeding bus
and suffered injuries, was held also jointly and
severally liable with the bus company to the
injured passengers.
The same rule of liability was applied in
situations where the negligence of the driver of
the bus on which plaintiff was riding concurred
with the negligence of a third party who was
the driver of another vehicle, thus causing an
accident. In Anuran v. Buño,   Batangas
16
Laguna Tayabas Bus Co. v. Intermediate
Appellate Court,  7 and Metro Manila Transit
1
Corporation v. Court of Appeals,   the bus18
company, its driver, the operator of the other
vehicle and the driver of the vehicle were
jointly and severally held liable to the injured
passenger or the latters' heirs. The basis of
this allocation of liability was explained
in Viluan v. Court of Appeals,   thus:
19
Nor should it make any difference that
the liability of petitioner [bus owner]
springs from contract while that of
respondents [owner and driver of other
vehicle] arises from quasi-delict. As
early as 1913, we already ruled
in Gutierrez vs. Gutierrez, 56 Phil. 177,
that in case of injury to a passenger
231
 due to the negligence of the driver of
the bus on which he was riding and of
the driver of another vehicle, the
drivers as well as the owners of the
two vehicles are jointly and severally
liable for damages. Some members of
the Court, though, are of the view that
under the circumstances they are
liable on quasi-delict. 20
ORDERED to PAY jointly and severally the
private respondent Amyline Antonio the
following amounts:
1) P93,657.11 as actual damages;
2) P500,000.00 as the reasonable amount of
loss of earning capacity of plaintiff Amyline
Antonio;

It is true that in Philippine Rabbit Bus Lines, 3) P20,000.00 as moral damages;

Inc. v. Court of Appeals   this
21
Court
exonerated the jeepney driver from liability to 4) P20,000.00 as exemplary damages;
the injured passengers and their families while
holding the owners of the jeepney jointly and 5) 25% of the recoverable amount as
severally liable, but that is because that case attorney's fees; and
was expressly tried and decided exclusively on
the theory of culpa contractual. As this Court 6) costs of suit.
there explained:
SO ORDERED.
The trial court was therefore right in finding
that Manalo (the driver) and spouses Mangune Regalado, Romero, Puno and Torres, Jr., JJ.,
and Carreon (the jeepney owners) were concur.
negligent. However, its ruling that spouses
Mangune and Carreon are jointly and severally
liable with Manalo is erroneous. The driver
Republic of the Philippines
cannot be held jointly and severally liable with
SUPREME COURT
carrier in case of breach of the contract of
Manila
carriage. The rationale behind this is readily
discernible. Firstly, the contract of carriage is
between the carrier is exclusively responsible THIRD DIVISION
therefore to the passenger, even if such
breach be due to the negligence of his driver G.R. No. L-47822 December 22, 1988
(see Viluan v. The Court of Appeals, et al.,
G.R. Nos. L-21477-81, April 29, 1966, 16 PEDRO DE GUZMAN, petitioner, 
SCRA 742).  22
vs.
COURT OF APPEALS and ERNESTO
As in the case of BLTB, private respondents in CENDANA, respondents.
this case and her coplaintiffs did not stake out
their claim against the carrier and the driver Vicente D. Millora for petitioner.
exclusively on one theory, much less on that of
breach of contract alone. After all, it was Jacinto Callanta for private respondent.
permitted for them to allege alternative causes
of action and join as many parties as may be FELICIANO, J.:
liable on such causes of action   so long as
23

private respondent and her coplaintiffs do not
recover twice for the same injury. What is clear
from the cases is the intent of the plaintiff there
to recover from both the carrier and the driver,
thus, justifying the holding that the carrier and
the driver were jointly and severally liable
because their separate and distinct acts
concurred to produce the same injury.
WHEREFORE, the decision of the Court of
Appeals is AFFIRMED with MODIFICATION
as to award of damages. Petitioners are
Respondent Ernesto Cendana, a junk dealer, was
engaged in buying up used bottles and scrap metal in
Pangasinan. Upon gathering sufficient quantities of
such scrap material, respondent would bring such
material to Manila for resale. He utilized two (2) six-
wheeler trucks which he owned for hauling the
material to Manila. On the return trip to Pangasinan,
respondent would load his vehicles with cargo which
various merchants wanted delivered to differing
establishments in Pangasinan. For that service,
respondent charged freight rates which were
commonly lower than regular commercial rates.

231
Sometime in November 1970, petitioner Pedro
de Guzman a merchant and authorized dealer
of General Milk Company (Philippines), Inc. in
Urdaneta, Pangasinan, contracted with
respondent for the hauling of 750 cartons of
Liberty filled milk from a warehouse of General
Milk in Makati, Rizal, to petitioner's
establishment in Urdaneta on or before 4
December 1970. Accordingly, on 1 December
1970, respondent loaded in Makati the
merchandise on to his trucks: 150 cartons
were loaded on a truck driven by respondent
himself, while 600 cartons were placed on
board the other truck which was driven by
Manuel Estrada, respondent's driver and
employee.
Only 150 boxes of Liberty filled milk were
delivered to petitioner. The other 600 boxes
never reached petitioner, since the truck which
carried these boxes was hijacked somewhere
along the MacArthur Highway in Paniqui,
Tarlac, by armed men who took with them the
truck, its driver, his helper and the cargo.
On 6 January 1971, petitioner commenced
action against private respondent in the Court
of First Instance of Pangasinan, demanding
payment of P 22,150.00, the claimed value of
the lost merchandise, plus damages and
attorney's fees. Petitioner argued that private
respondent, being a common carrier, and
having failed to exercise the extraordinary
diligence required of him by the law, should be
held liable for the value of the undelivered
goods.
In his Answer, private respondent denied that
he was a common carrier and argued that he
could not be held responsible for the value of
the lost goods, such loss having been due
to force majeure.
On 10 December 1975, the trial court rendered
a Decision   finding private respondent to be a
1 sideline"). Article 1732 also carefully avoids
common carrier and holding him liable for the
value of the undelivered goods (P 22,150.00)
as well as for P 4,000.00 as damages and P
2,000.00 as attorney's fees.
On appeal before the Court of Appeals,
respondent urged that the trial court had erred
in considering him a common carrier; in finding
that he had habitually offered trucking services
to the public; in not exempting him from liability
on the ground of force majeure; and in
ordering him to pay damages and attorney's
fees.
The Court of Appeals reversed the judgment
of the trial court and held that respondent had
been engaged in transporting return loads of
freight "as a casual occupation — a sideline to
his scrap iron business" and not as a common
carrier. Petitioner came to this Court by way of
a Petition for Review assigning as errors the
following conclusions of the Court of Appeals:
1. that private respondent was not a
common carrier;
2. that the hijacking of respondent's
truck was force majeure; and
3. that respondent was not liable for the
value of the undelivered cargo. (Rollo,
p. 111)
We consider first the issue of whether or not
private respondent Ernesto Cendana may,
under the facts earlier set forth, be properly
characterized as a common carrier.
The Civil Code defines "common carriers" in
the following terms:
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 (in local Idiom as "a
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. We think that Article 1733
deliberaom making such distinctions.
231
So understood, the 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:
... 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. ...
(Emphasis supplied)
It appears to the Court that private respondent
is properly characterized as a common carrier
even though he merely "back-hauled" goods
for other merchants from Manila to
Pangasinan, although such back-hauling was
done on a periodic or occasional rather than
regular or scheduled manner, and even
though private
respondent's principal occupation was not the
carriage of goods for others. There is no
dispute that private respondent charged his
customers a fee for hauling their goods; that
fee frequently fell below commercial freight
rates is not relevant here.
The Court of Appeals referred to the fact that
private respondent held no certificate of public
convenience, and concluded he was not a
common carrier. This is palpable error. A
certificate of public convenience is not a
requisite for the incurring of liability under the
Civil Code provisions governing common
carriers. That liability arises the moment a
person or firm acts as a common carrier,
without regard to whether or not such carrier
has also complied with the requirements of the
applicable regulatory statute and implementing
regulations and has been granted a certificate
of public convenience or other franchise. To
exempt private respondent from the liabilities
of a common carrier because he has not
secured the necessary certificate of public
convenience, would be offensive to sound
public policy; that would be to reward private
respondent precisely for failing to comply with
applicable statutory requirements. The
business of a common carrier impinges
directly and intimately upon the safety and well
being and property of those members of the
general community who happen to deal with
such carrier. The law imposes duties and
liabilities upon common carriers for the safety
and protection of those who utilize their
services and the law cannot allow a common
carrier to render such duties and liabilities
merely facultative by simply failing to obtain
the necessary permits and authorizations.
We turn then to the liability of private
respondent as a common carrier.
Common carriers, "by the nature of their
business and for reasons of public policy"   are
2
held to a very high degree of care and
diligence ("extraordinary diligence") in the
carriage of goods as well as of passengers.
The specific import of extraordinary diligence
in the care of goods transported by a common
carrier is, according to Article 1733, "further
expressed in Articles 1734, 1735 and 1745,
numbers 5, 6 and 7" of the Civil Code.
Article 1734 establishes the general rule that
common carriers are responsible for the loss,
destruction or deterioration of the goods which
they carry, "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 or omission of the shipper or
owner of the goods;
231
 (4) The character-of the goods or
defects in the packing or-in the
containers; and
(5) Order or act of competent public
authority.
It is important to point out that the above list of
causes of loss, destruction or deterioration
which exempt the common carrier for
responsibility therefor, is a closed list. Causes
falling outside the foregoing list, even if they
appear to constitute a species of force
majeure fall within the scope of Article 1735,
which provides as follows:
In all cases other than those
mentioned in numbers 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.
(Emphasis supplied)
Applying the above-quoted Articles 1734 and
1735, we note firstly that the specific cause
alleged in the instant case — the hijacking of
the carrier's truck — does not fall within any of
the five (5) categories of exempting causes
listed in Article 1734. It would follow, therefore,
that the hijacking of the carrier's vehicle must
be dealt with under the provisions of Article
1735, in other words, that the private
respondent as common carrier is presumed to
have been at fault or to have acted negligently.
This presumption, however, may be
overthrown by proof of extraordinary diligence
on the part of private respondent.
Petitioner insists that private respondent had
not observed extraordinary diligence in the
care of petitioner's goods. Petitioner argues
that in the circumstances of this case, private
respondent should have hired a security guard
presumably to ride with the truck carrying the
600 cartons of Liberty filled milk. We do not
believe, however, that in the instant case, the
standard of extraordinary diligence required
private respondent to retain a security guard to
ride with the truck and to engage brigands in a
firelight at the risk of his own life and the lives
of the driver and his helper.
The precise issue that we address here relates
to the specific requirements of the duty of
extraordinary diligence in the vigilance over
the goods carried in the specific context of
hijacking or armed robbery.
As noted earlier, the duty of extraordinary
diligence in the vigilance over goods is, under
Article 1733, given additional specification not
only by Articles 1734 and 1735 but also by
Article 1745, numbers 4, 5 and 6, Article 1745
provides in relevant part:
Any of the following or similar
stipulations shall be considered
unreasonable, unjust and contrary to
public policy:
xxx xxx xxx
(5) that the common carrier shall not
be responsible for the acts or
omissions of his or its employees;
(6) that the common carrier's liability
for acts committed by thieves, or of
robbers who donot act with grave or
irresistible threat, violence or force, is
dispensed with or diminished; and
(7) that the common carrier shall not
responsible for the loss, destruction or
deterioration of goods on account of
the defective condition of the car
vehicle, ship, airplane or other
equipment used in the contract of
carriage. (Emphasis supplied)
Under Article 1745 (6) above, a common
carrier is held responsible — and will not be
allowed to divest or to diminish such
responsibility — even for acts of strangers like
thieves or robbers, except where such thieves
or robbers in fact acted "with grave or
irresistible threat, violence or force." We
believe and so hold that the limits of the duty
of extraordinary diligence in the vigilance over
the goods carried are reached where the
goods are lost as a result of a robbery which is
attended by "grave or irresistible threat,
violence or force."
In the instant case, armed men held up the
second truck owned by private respondent
which carried petitioner's cargo. The record
shows that an information for robbery in band
was filed in the Court of First Instance of
Tarlac, Branch 2, in Criminal Case No. 198
entitled "People of the Philippines v. Felipe
231
Boncorno, Napoleon Presno, Armando
Mesina, Oscar Oria and one John Doe."
There, the accused were charged with willfully
and unlawfully taking and carrying away with
them the second truck, driven by Manuel
Estrada and loaded with the 600 cartons of
Liberty filled milk destined for delivery at
petitioner's store in Urdaneta, Pangasinan.
The decision of the trial court shows that the
accused acted with grave, if not irresistible,
threat, violence or force.  Three (3) of the five
3
(5) hold-uppers were armed with firearms. The
robbers not only took away the truck and its
cargo but also kidnapped the driver and his
helper, detaining them for several days and
later releasing them in another province (in
Zambales). The hijacked truck was
subsequently found by the police in Quezon
City. The Court of First Instance convicted all
the accused of robbery, though not of robbery
in band. 4
In these circumstances, we hold that the
occurrence of the loss must reasonably be
regarded as quite beyond the control of the
common carrier and properly regarded as a
fortuitous event. It is necessary to recall that
even common carriers are not made absolute
insurers against all risks of travel and of
transport of goods, and are not held liable for
acts or events which cannot be foreseen or
are inevitable, provided that they shall have
complied with the rigorous standard of
extraordinary diligence.
We, therefore, agree with the result reached
by the Court of Appeals that private
respondent Cendana is not liable for the value
of the undelivered merchandise which was lost
because of an event entirely beyond private
respondent's control.
ACCORDINGLY, the Petition for Review on
certiorari is hereby DENIED and the Decision
of the Court of Appeals dated 3 August 1977 is
AFFIRMED. No pronouncement as to costs.
SO ORDERED.
Fernan, C.J., Gutierrez, Jr., Bidin and Cortes,
JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-49407 August 19, 1988
NATIONAL DEVELOPMENT
COMPANY, petitioner-appellant, 
vs.
THE COURT OF APPEALS and
DEVELOPMENT INSURANCE & SURETY
CORPORATION, respondents-appellees.
No. L-49469 August 19, 1988
MARITIME COMPANY OF THE
PHILIPPINES, petitioner-appellant, 
vs.
THE COURT OF APPEALS and
DEVELOPMENT INSURANCE & SURETY
CORPORATION, respondents- appellees.
Balgos & Perez Law Office for private
respondent in both cases.
PARAS, J.:
These are appeals by certiorari from the
decision * of the Court of Appeals in CA G.R.
No: L- 46513-R entitled "Development
Insurance and Surety Corporation plaintiff-
appellee vs. Maritime Company of the
Philippines and National Development
Company defendant-appellants," affirming in
toto the decision ** in Civil Case No. 60641 of
the then Court of First Instance of Manila,
Sixth Judicial District, the dispositive portion of
which reads:
WHEREFORE, judgment is hereby
rendered ordering the defendants
National Development Company and
Maritime Company of the Philippines,
to pay jointly and severally, to the
plaintiff Development Insurance and
Surety Corp., the sum of THREE
HUNDRED SIXTY FOUR THOUSAND
AND NINE HUNDRED FIFTEEN
PESOS AND EIGHTY SIX
CENTAVOS (364,915.86) with the
legal interest thereon from the filing of
plaintiffs complaint on April 22, 1965
until fully paid, plus TEN THOUSAND
PESOS (Pl0,000.00) by way of
damages as and for attorney's fee.
On defendant Maritime Company of
the Philippines' cross-claim against the
231
defendant National Development
Company, judgment is hereby
rendered, ordering the National
Development Company to pay the
cross-claimant Maritime Company of
the Philippines the total amount that
the Maritime Company of the
Philippines may voluntarily or by
compliance to a writ of execution pay
to the plaintiff pursuant to the judgment
rendered in this case.
With costs against the defendant
Maritime Company of the Philippines.
(pp. 34-35, Rollo, GR No. L-49469)
The facts of these cases as found by
the Court of Appeals, are as follows:
The evidence before us shows that in
accordance with a memorandum
agreement entered into between
defendants NDC and MCP on
September 13, 1962, defendant NDC
as the first preferred mortgagee of
three ocean going vessels including
one with the name 'Dona Nati'
appointed defendant MCP as its agent
to manage and operate said vessel for
and in its behalf and account (Exh. A).
Thus, on February 28, 1964 the E.
Philipp Corporation of New York
loaded on board the vessel "Dona
Nati" at San Francisco, California, a
total of 1,200 bales of American raw
cotton consigned to the order of Manila
Banking Corporation, Manila and the
People's Bank and Trust Company
acting for and in behalf of the Pan
Asiatic Commercial Company, Inc.,
who represents Riverside Mills
Corporation (Exhs. K-2 to K7-A & L-2
to L-7-A). Also loaded on the same
vessel at Tokyo, Japan, were the
cargo of Kyokuto Boekui, Kaisa, Ltd.,
consigned to the order of Manila
Banking Corporation consisting of 200
cartons of sodium lauryl sulfate and 10
cases of aluminum foil (Exhs. M & M-
1). En route to Manila the vessel Dofia
Nati figured in a collision at 6:04 a.m.
on April 15, 1964 at Ise Bay, Japan
with a Japanese vessel 'SS
Yasushima Maru' as a result of which
550 bales of aforesaid cargo of
American raw cotton were lost and/or
destroyed, of which 535 bales as
damaged were landed and sold on the
authority of the General Average
Surveyor for Yen 6,045,-500 and 15
bales were not landed and deemed
lost (Exh. G). The damaged and lost
cargoes was worth P344,977.86 which
amount, the plaintiff as insurer, paid to
the Riverside Mills Corporation as
holder of the negotiable bills of lading
duly endorsed (Exhs. L-7-A, K-8-A, K-
2-A, K-3-A, K-4-A, K-5-A, A- 2, N-3
and R-3}. Also considered totally lost
were the aforesaid shipment of
Kyokuto, Boekui Kaisa Ltd., consigned
to the order of Manila Banking
Corporation, Manila, acting for Guilcon,
Manila, The total loss was P19,938.00
which the plaintiff as insurer paid to
Guilcon as holder of the duly endorsed
bill of lading (Exhibits M-1 and S-3).
Thus, the plaintiff had paid as insurer
the total amount of P364,915.86 to the
consignees or their successors-in-
interest, for the said lost or damaged
cargoes. Hence, plaintiff filed this
complaint to recover said amount from
the defendants-NDC and MCP as
owner and ship agent respectively, of
the said 'Dofia Nati' vessel. (Rollo, L-
49469, p.38)
On April 22, 1965, the Development Insurance
and Surety Corporation filed before the then
Court of First Instance of Manila an action for
the recovery of the sum of P364,915.86 plus
attorney's fees of P10,000.00 against NDC
and MCP (Record on Appeal), pp. 1-6).
Interposing the defense that the complaint
states no cause of action and even if it does,
the action has prescribed, MCP filed on May
12, 1965 a motion to dismiss (Record on
Appeal, pp. 7-14). DISC filed an Opposition on
May 21, 1965 to which MCP filed a reply on
May 27, 1965 (Record on Appeal, pp. 14-24).
On June 29, 1965, the trial court deferred the
resolution of the motion to dismiss till after the
trial on the merits (Record on Appeal, p. 32).
On June 8, 1965, MCP filed its answer with
counterclaim and cross-claim against NDC.
NDC, for its part, filed its answer to DISC's
complaint on May 27, 1965 (Record on
Appeal, pp. 22-24). It also filed an answer to
MCP's cross-claim on July 16, 1965 (Record
on Appeal, pp. 39-40). However, on October
231
16, 1965, NDC's answer to DISC's complaint THE LIABILITY FOR LOSS OF CARGOES
was stricken off from the record for its failure RESULTING FROM THE COLLISION OF ITS
to answer DISC's written interrogatories and to VESSEL "DONA NATI" WITH THE
comply with the trial court's order dated August YASUSHIMA MARU"OCCURRED AT ISE
14, 1965 allowing the inspection or BAY, JAPAN OR OUTSIDE THE
photographing of the memorandum of TERRITORIAL JURISDICTION OF THE
agreement it executed with MCP. Said order of PHILIPPINES.
October 16, 1965 likewise declared NDC in
default (Record on Appeal, p. 44). On August II
31, 1966, NDC filed a motion to set aside the
order of October 16, 1965, but the trial court THE COURT OF APPEALS ERRED IN NOT
denied it in its order dated September 21, DISMISSING THE C0MPLAINT FOR
1966. REIMBURSEMENT FILED BY THE
INSURER, HEREIN PRIVATE
On November 12, 1969, after DISC and MCP RESPONDENT-APPELLEE, AGAINST THE
presented their respective evidence, the trial CARRIER, HEREIN PETITIONER-
court rendered a decision ordering the APPELLANT. (pp. 1-2, Brief for Petitioner-
defendants MCP and NDC to pay jointly and Appellant National Development Company; p.
solidarity to DISC the sum of P364,915.86 plus 96, Rollo).
the legal rate of interest to be computed from
the filing of the complaint on April 22, 1965, On its part, MCP assigned the following
until fully paid and attorney's fees of alleged errors:
P10,000.00. Likewise, in said decision, the trial
court granted MCP's crossclaim against NDC.
I
MCP interposed its appeal on December 20,
THE RESPONDENT COURT OF APPEALS
1969, while NDC filed its appeal on February
ERRED IN NOT HOLDING THAT
17, 1970 after its motion to set aside the
RESPONDENT DEVELOPMENT
decision was denied by the trial court in its
INSURANCE AND SURETY CORPORATION
order dated February 13,1970.
HAS NO CAUSE OF ACTION AS AGAINST
PETITIONER MARITIME COMPANY OF THE
On November 17,1978, the Court of Appeals PHILIPPINES AND IN NOT DISMISSING THE
promulgated its decision affirming in toto the COMPLAINT.
decision of the trial court.
II
Hence these appeals by certiorari.
THE RESPONDENT COURT OF APPEALS
NDC's appeal was docketed as G.R. No. ERRED IN NOT HOLDING THAT THE
49407, while that of MCP was docketed as CAUSE OF ACTION OF RESPONDENT
G.R. No. 49469. On July 25,1979, this Court DEVELOPMENT INSURANCE AND SURETY
ordered the consolidation of the above cases CORPORATION IF ANY EXISTS AS
(Rollo, p. 103). On August 27,1979, these AGAINST HEREIN PETITIONER MARITIME
consolidated cases were given due course COMPANY OF THE PHILIPPINES IS
(Rollo, p. 108) and submitted for decision on BARRED BY THE STATUTE OF LIMITATION
February 29, 1980 (Rollo, p. 136). AND HAS ALREADY PRESCRIBED.

In its brief, NDC cited the following III

assignments of error:
THE RESPONDENT COURT OF APPEALS
I ERRED IN ADMITTING IN EVIDENCE
PRIVATE RESPONDENTS EXHIBIT "H" AND
THE COURT OF APPEALS ERRED IN IN FINDING ON THE BASIS THEREOF THAT
APPLYING ARTICLE 827 OF THE CODE OF THE COLLISION OF THE SS DONA NATI
COMMERCE AND NOT SECTION 4(2a) OF AND THE YASUSHIMA MARU WAS DUE TO
COMMONWEALTH ACT NO. 65, THE FAULT OF BOTH VESSELS INSTEAD
OTHERWISE KNOWN AS THE CARRIAGE OF FINDING THAT THE COLLISION WAS
OF GOODS BY SEA ACT IN DETERMINING
231
CAUSED BY THE FAULT, NEGLIGENCE
AND LACK OF SKILL OF THE
COMPLEMENTS OF THE YASUSHIMA
MARU WITHOUT THE FAULT OR
NEGLIGENCE OF THE COMPLEMENT OF
THE SS DONA NATI
IV
THE RESPONDENT COURT OF APPEALS
ERRED IN HOLDING THAT UNDER THE
CODE OF COMMERCE PETITIONER
APPELLANT MARITIME COMPANY OF THE
PHILIPPINES IS A SHIP AGENT OR
NAVIERO OF SS DONA NATI OWNED BY
CO-PETITIONER APPELLANT NATIONAL
DEVELOPMENT COMPANY AND THAT SAID
PETITIONER-APPELLANT IS SOLIDARILY
LIABLE WITH SAID CO-PETITIONER FOR
LOSS OF OR DAMAGES TO CARGO
RESULTING IN THE COLLISION OF SAID
VESSEL, WITH THE JAPANESE
YASUSHIMA MARU.
V under the Carriage of Goods by Sea Act.
THE RESPONDENT COURT OF APPEALS
ERRED IN FINDING THAT THE LOSS OF OR
DAMAGES TO THE CARGO OF 550 BALES
OF AMERICAN RAW COTTON, DAMAGES
WERE CAUSED IN THE AMOUNT OF
P344,977.86 INSTEAD OF ONLY P110,000
AT P200.00 PER BALE AS ESTABLISHED IN
THE BILLS OF LADING AND ALSO IN
HOLDING THAT PARAGRAPH 1O OF THE
BILLS OF LADING HAS NO APPLICATION IN
THE INSTANT CASE THERE BEING NO
GENERAL AVERAGE TO SPEAK OF.
VI
THE RESPONDENT COURT OF APPEALS
ERRED IN HOLDING THE PETITIONERS
NATIONAL DEVELOPMENT COMPANY AND
COMPANY OF THE PHILIPPINES TO PAY
JOINTLY AND SEVERALLY TO HEREIN
RESPONDENT DEVELOPMENT
INSURANCE AND SURETY CORPORATION
THE SUM OF P364,915.86 WITH LEGAL
INTEREST FROM THE FILING OF THE
COMPLAINT UNTIL FULLY PAID PLUS
P10,000.00 AS AND FOR ATTORNEYS FEES
INSTEAD OF SENTENCING SAID PRIVATE
RESPONDENT TO PAY HEREIN
PETITIONERS ITS COUNTERCLAIM IN THE
AMOUNT OF P10,000.00 BY WAY OF
ATTORNEY'S FEES AND THE COSTS. (pp.
1-4, Brief for the Maritime Company of the
Philippines; p. 121, Rollo)
The pivotal issue in these consolidated cases
is the determination of which laws govern loss
or destruction of goods due to collision of
vessels outside Philippine waters, and the
extent of liability as well as the rules of
prescription provided thereunder.
The main thrust of NDC's argument is to the
effect that the Carriage of Goods by Sea Act
should apply to the case at bar and not the
Civil Code or the Code of Commerce. Under
Section 4 (2) of said Act, the carrier is not
responsible for the loss or damage resulting
from the "act, neglect or default of the master,
mariner, pilot or the servants of the carrier in
the navigation or in the management of the
ship." Thus, NDC insists that based on the
findings of the trial court which were adopted
by the Court of Appeals, both pilots of the
colliding vessels were at fault and negligent,
NDC would have been relieved of liability
Instead, Article 287 of the Code of Commerce
was applied and both NDC and MCP were
ordered to reimburse the insurance company
for the amount the latter paid to the consignee
as earlier stated.
This issue has already been laid to rest by this
Court of Eastern Shipping Lines Inc. v. IAC (1
50 SCRA 469-470 [1987]) where it was held
under similar circumstance "that the law of the
country to which the goods are to be
transported governs the liability of the common
carrier in case of their loss, destruction or
deterioration" (Article 1753, Civil Code). Thus,
the rule was specifically laid down that for
cargoes transported from Japan to the
Philippines, the liability of the carrier is
governed primarily by the Civil Code and in all
matters not regulated by said Code, the rights
and obligations of common carrier shall be
governed by the Code of commerce and by
laws (Article 1766, Civil Code). Hence, the
Carriage of Goods by Sea Act, a special law,
is merely suppletory to the provision of the
Civil Code.
In the case at bar, it has been established that
the goods in question are transported from
San Francisco, California and Tokyo, Japan to
the Philippines and that they were lost or due
to a collision which was found to have been
caused by the negligence or fault of both
231
captains of the colliding vessels. Under the
above ruling, it is evident that the laws of the
Philippines will apply, and it is immaterial that
the collision actually occurred in foreign
waters, such as Ise Bay, Japan.
Under Article 1733 of the 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 the goods and for the safety of
the passengers transported by them according
to all circumstances of each case. Accordingly,
under Article 1735 of the same Code, in all
other than those mentioned is Article 1734
thereof, the common carrier shall be presumed
to have been at fault or to have acted
negigently, unless it proves that it has
observed the extraordinary diligence required
by law.
It appears, however, that collision falls among
matters not specifically regulated by the Civil
Code, so that no reversible error can be found
in respondent courses application to the case
at bar of Articles 826 to 839, Book Three of the
Code of Commerce, which deal exclusively
with collision of vessels.
More specifically, Article 826 of the Code of
Commerce provides that where collision is
imputable to the personnel of a vessel, the
owner of the vessel at fault, shall indemnify the
losses and damages incurred after an expert
appraisal. But more in point to the instant case
is Article 827 of the same Code, which
provides that if the collision is imputable to
both vessels, each one shall suffer its own
damages and both shall be solidarily
responsible for the losses and damages
suffered by their cargoes.
Significantly, under the provisions of the Code
of Commerce, particularly Articles 826 to 839,
the shipowner or carrier, is not exempt from
liability for damages arising from collision due
to the fault or negligence of the captain.
Primary liability is imposed on the shipowner
or carrier in recognition of the universally
accepted doctrine that the shipmaster or
captain is merely the representative of the
owner who has the actual or constructive
control over the conduct of the voyage (Y'eung
Sheng Exchange and Trading Co. v. Urrutia &
Co., 12 Phil. 751 [1909]).
There is, therefore, no room for NDC's
interpretation that the Code of Commerce
should apply only to domestic trade and not to
foreign trade. Aside from the fact that the
Carriage of Goods by Sea Act (Com. Act No.
65) does not specifically provide for the
subject of collision, said Act in no uncertain
terms, restricts its application "to all contracts
for the carriage of goods by sea to and from
Philippine ports in foreign trade." Under
Section I thereof, it is explicitly provided that
"nothing in this Act shall be construed as
repealing any existing provision of the Code of
Commerce which is now in force, or as limiting
its application." By such incorporation, it is
obvious that said law not only recognizes the
existence of the Code of Commerce, but more
importantly does not repeal nor limit its
application.
On the other hand, Maritime Company of the
Philippines claims that Development Insurance
and Surety Corporation, has no cause of
action against it because the latter did not
prove that its alleged subrogers have either
the ownership or special property right or
beneficial interest in the cargo in question;
neither was it proved that the bills of lading
were transferred or assigned to the alleged
subrogers; thus, they could not possibly have
transferred any right of action to said plaintiff-
appellee in this case. (Brief for the Maritime
Company of the Philippines, p. 16).
The records show that the Riverside Mills
Corporation and Guilcon, Manila are the
holders of the duly endorsed bills of lading
covering the shipments in question and an
examination of the invoices in particular,
shows that the actual consignees of the said
goods are the aforementioned companies.
Moreover, no less than MCP itself issued a
certification attesting to this fact. Accordingly,
as it is undisputed that the insurer, plaintiff
appellee paid the total amount of P364,915.86
to said consignees for the loss or damage of
the insured cargo, it is evident that said
plaintiff-appellee has a cause of action to
recover (what it has paid) from defendant-
appellant MCP (Decision, CA-G.R. No. 46513-
R, p. 10; Rollo, p. 43).
MCP next contends that it can not be liable
solidarity with NDC because it is merely the
manager and operator of the vessel Dona Nati
not a ship agent. As the general managing
231
agent, according to MCP, it can only be liable
if it acted in excess of its authority.
As found by the trial court and by the Court of
Appeals, the Memorandum Agreement of
September 13, 1962 (Exhibit 6, Maritime)
shows that NDC appointed MCP as Agent, a
term broad enough to include the concept of
Ship-agent in Maritime Law. In fact, MCP was
even conferred all the powers of the owner of
the vessel, including the power to contract in
the name of the NDC (Decision, CA G.R. No.
46513, p. 12; Rollo, p. 40). Consequently,
under the circumstances, MCP cannot escape
liability.
It is well settled that both the owner and agent
of the offending vessel are liable for the
damage done where both are impleaded
(Philippine Shipping Co. v. Garcia Vergara, 96
Phil. 281 [1906]); that in case of collision, both
the owner and the agent are civilly responsible
for the acts of the captain (Yueng Sheng
Exchange and Trading Co. v. Urrutia &
Co., supra citing Article 586 of the Code of
Commerce; Standard Oil Co. of New York v.
Lopez Castelo, 42 Phil. 256, 262 [1921]); that
while it is true that the liability of the naviero in
the sense of charterer or agent, is not
expressly provided in Article 826 of the Code
of Commerce, it is clearly deducible from the
general doctrine of jurisprudence under the
Civil Code but more specially as regards
contractual obligations in Article 586 of the
Code of Commerce. Moreover, the Court held
that both the owner and agent (Naviero)
should be declared jointly and severally liable,
since the obligation which is the subject of the
action had its origin in a tortious act and did
not arise from contract (Verzosa and Ruiz,
Rementeria y Cia v. Lim, 45 Phil. 423 [1923]).
Consequently, the agent, even though he may
not be the owner of the vessel, is liable to the
shippers and owners of the cargo transported
by it, for losses and damages occasioned to
such cargo, without prejudice, however, to his
rights against the owner of the ship, to the
extent of the value of the vessel, its
equipment, and the freight (Behn Meyer Y Co.
v. McMicking et al. 11 Phil. 276 [1908]).
As to the extent of their liability, MCP insists
that their liability should be limited to P200.00
per package or per bale of raw cotton as
stated in paragraph 17 of the bills of lading.
Also the MCP argues that the law on averages
should be applied in determining their liability.
MCP's contention is devoid of merit. The
declared value of the goods was stated in the
bills of lading and corroborated no less by
invoices offered as evidence ' during the trial.
Besides, common carriers, in the language of
the court in Juan Ysmael & Co., Inc. v.
Barrette et al., (51 Phil. 90 [1927]) "cannot limit
its liability for injury to a loss of goods where
such injury or loss was caused by its own
negligence." Negligence of the captains of the
colliding vessel being the cause of the
collision, and the cargoes not being jettisoned
to save some of the cargoes and the vessel,
the trial court and the Court of Appeals acted
correctly in not applying the law on averages
(Articles 806 to 818, Code of Commerce).
MCP's claim that the fault or negligence can
only be attributed to the pilot of the vessel SS
Yasushima Maru and not to the Japanese
Coast pilot navigating the vessel Dona Nati
need not be discussed lengthily as said claim
is not only at variance with NDC's posture, but
also contrary to the factual findings of the trial
court affirmed no less by the Court of Appeals,
that both pilots were at fault for not changing
their excessive speed despite the thick fog
obstructing their visibility.
Finally on the issue of prescription, the trial
court correctly found that the bills of lading
issued allow trans-shipment of the cargo,
which simply means that the date of arrival of
the ship Dona Nati on April 18,1964 was
merely tentative to give allowances for such
contingencies that said vessel might not arrive
on schedule at Manila and therefore, would
necessitate the trans-shipment of cargo,
resulting in consequent delay of their arrival. In
fact, because of the collision, the cargo which
was supposed to arrive in Manila on April 18,
1964 arrived only on June 12, 13, 18, 20 and
July 10, 13 and 15, 1964. Hence, had the
cargoes in question been saved, they could
have arrived in Manila on the above-
mentioned dates. Accordingly, the complaint in
the instant case was filed on April 22, 1965,
that is, long before the lapse of one (1) year
from the date the lost or damaged cargo
"should have been delivered" in the light of
Section 3, sub-paragraph (6) of the Carriage of
Goods by Sea Act.
PREMISES CONSIDERED, the subject
petitions are DENIED for lack of merit and the
assailed decision of the respondent Appellate
Court is AFFIRMED.
231
SO ORDERED.
Melencio-Herrera, (Chairperson), Padilla, and
Sarmiento, JJ., concur.
SECOND DIVISION
G.R. No. 209969, September 27, 2017
JOSE SANICO AND VICENTE
CASTRO, Petitioners,  In their answer, Sanico and Castro admitted
v.  amputated but claimed that it! was Colipano's
WERHERLINA P. COLIPANO, Respondent.
DECISION
CAGUIOA, J.:
Before the Court is a Petition for Review
on Certiorari1 under Rule 45 of the Rules of
Court filed by petitioners Jose Sanico (Sanico)
and Vicente Castro (Castro), assailing the
Decision2 dated September 30, 2013 of the
Court of Appeals (CA) in CA-G.R. CEB-CV No.
01889. The CA affirmed with modification the
Decision3 dated October 27, 2006 of the
Regional Trial Court, Branch 25, Danao City
(RTC) which found Sanico and Castro liable
for breach of' contract of carriage and awarded
actual and compensatory damages for loss of
income in favor of respondent Werherlina P.
Colipano (Colipano). The CA reduced the
compensatory damages that the RTC
awarded.
Antecedents
Colipano filed a complaint on January 7, 1997
for breach of contract of carriage and
damages against Sanico and Castro. 4 In her
complaint, Colipano claimed that at 4:00 P.M.
more or less of December 25, 1993, Christmas
Day, she and her daughter were; paying
passengers in the jeepney operated by
Sanico, which was driven by Castro. 5 Colipano
claimed she was made to sit on an empty beer
case at the edge of the rear entrance/exit of
the jeepney with her sleeping child on her
lap.6 And, at an uphill incline in the road to
Natimao-an, Carmen, Cebu, the jeepney slid
backwards because it did not have the power
to reach the top.7 Colipano pushed both her
feet against the step board to prevent herself
and her child from being thrown out of the exit,
but because the step board was wet, her left
foot slipped and got crushed between the step
board and a coconut tree which the jeepney
bumped, causing the jeepney to stop its
backward movement.8 Colipano's leg was
badly injured and was eventually
amputated.9 Colipano prayed for actual
damages, loss of income, moral damages,
exemplary damages, and attorney's fees.10
that Colipano's leg was crushed and
fault that her leg was crushed. 11 They admitted
that the jeepney slid backwards because the
jeepney lost power.12 The conductor then
instructed everyone not to panic but Colipano
tried to disembark and her foot got caught in
between the step board and the coconut
tree.13 Sanico claimed that he paid for all the
hospital and medical expenses of
Colipano,14 and that Colipano eventually freely
and voluntarily executed an Affidavit of
Desistance and Release of Claim. 15
After trial, the RTC found that Sanico and
Castro breached the contract of carriage
between them and Colipano but only awarded
actual and compensatory damages in favor of
Colipano. The dispositive portion of the RTC
Decision states:
WHEREFORE, premises considered, this
Court finds the defendants LIABLE for breach
of contract of carriage and are solidarily liable
to pay plaintiff:
1. Actual damages in the amount of
P2,098.80; and
2. Compensatory damages for loss of
income in the amount of
P360,000.00.
No costs.
SO ORDERED.16
231
Only Sanico and Castro appealed to the CA,
which affirmed with modification the RTC
Decision. The dispositive portion of the CA
Decision states:
IN LIGHT OF ALL THE FOREGOING, the
instant appeal is PARTIALLY GRANTED. The
Decision dated October 27, 2006 of the
Regional Trial Court, Branch 25, Danao City,
in Civil Case No. DNA-418, is AFFIRMED with
MODIFICATION in that the award for
compensatory damages for loss of income in
paragraph 2 of the dispositive portion of the
RTC's decision, is reduced to P200,000.00.
SO ORDERED.17
Without moving for the reconsideration of the
CA Decision, Sanico and Castro filed this
petition before the Court assailing the CA
Decision.
Issues
a. Whether the CA erred in finding
that Sanico and Castro breached
the contract of carriage with
Colipano;
b. Whether the Affidavit of Desistance
and Release of Claim is binding on
Colipano; and
c. Whether the CA erred in the
amount of damages awarded.
The Court's Ruling
The Court partly grants the petition.
Only Sanico breached the contract of carriage.
Here, it is beyond dispute that Colipano was
injured while she was a passenger in the
jeepney owned and operated by Sanico that
was being driven by Castro. Both the CA and
RTC found Sanico and Castro jointly and
severally liable. This, however, is erroneous
because only Sanico was the party to the
contract of carriage with Colipano.
Since the cause of action is based on a
breach of a contract of carriage, the liability of
Sanico is direct as the contract is between him
and Colipano. Castro, being merely the driver
of Sanico's jeepney, cannot be made liable as
he is not a party to the contract of carriage.
In Soberano v. Manila Railroad Co.,18 the
Court ruled that a complaint for breach of a
contract of carriage is dismissible as against
the employee who was driving the bus
because the parties to the contract of carriage
are only the passenger, the bus owner, and
the operator, viz.:
The complaint against Caccam was therefore
properly dismissed. He was not a party to the
contract; he was a mere employee of the BAL.
The parties to that contract are Juana
Soberano, the passenger, and the MRR and
its subsidiary, the BAL, the bus owner and
operator, respectively; and consequent to the
inability of the defendant companies to carry
Juana Soberano and her baggage arid
personal effects securely and safely to her
destination as imposed by law (art. 1733, in
relation to arts. 1736 and 1755, N.C.C.), their
liability to her becomes direct and immediate.19
Since Castro was not a party to the contract of
carriage, Colipano had no cause of action
against him and the pomplaint against him
should be dismissed. Although he was driving
the jeepney, he was a mere employee of
Sanico, who was the operator and owner of
the jeepney. The obligation to carry Colipano
safely to her destination was with Sanico. In
fact, the elements of a contract of carriage
existeid between Colipano and
Sanico: consent, as shown when Castro, as
employee of Sanico, accepted Colipano as a
passenger when he allowed Colipano to board
the jeepney, and as to Colipano, when she
boarded the jeepney; cause or consideration,
when Colipano, for her part, paid her fare;
and, object, the transportation of Colipano
from the place of departure to the place of
destination.20
Having established that the contract of
carriage was only between Sanico and
Colipano and that therefore Colipano had no
cause of action against Castro, the Court next
determines whether Sanico breached his
obligations to Colipano under the contract.
231
Sanico is liable as operator and owner of a
common carrier.
Specific to a contract of carriage, ithe Civil
Code requires common carriers to observe
extraordinary diligence in safely transporting
their passengers. Article 1733 of the Civil
Code states:
ART. 1733. Common carriers, fijpm the nature
of their business and for reasons of public
policy, are bbund 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 Articles 1755
and 1756.
This extraordinary diligence, following Article
1755 of the Civil Code, means that common
carriers have the obligation to carry
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.
In case of death of or injury to their
passengers, Article 1756 of the Civil Code
provides that common carriers are presumed
to have been at fault or negligent, and this
presumption can be overcome only by proof of
the extraordinary diligence exercised to
ensure the safety of the passengers. 21
Being an operator and owner of a common
carrier, Sanico was required to observe
extraordinary diligence in safely transporting
Colipano. When Colipano's leg was injured
while she was a passenger in Sanico's
jeepney, the presumption of fault or
negligence on Sanico's part arose and he had
the burden to prove that he exercised the
extraordinary diligence required of him. He
failed to do this.
In Calalas v. Court of Appeals, 22 the Court
found that allowing the respondent in that case
to be seated in an extension seat, which was a
wooden stool at the rear of the jeepney,
"placed [the respondent] in a peril greater than
that to which the other passengers were
exposed."23The Court further ruled that the
petitioner in Calalas was not only "unable to
overcome the presumption of negligence
imposed on him for the injury sustained by [the
respondent], but also, the evidence shows he
was actually negligent in transporting
passengers."24
Calalas squarely applies here. Sanico failed to
rebut the presumption of fault or negligence
under the Civil Code. More than this, the
evidence indubitably established Sanico's
negligence when Castro made Colipano sit on
an empty beer case at the edge of the rear
entrance/exit of the jeepney with her sleeping
child on her lap, which put her and her child in
greater peril than the other passengers. As the
CA correctly held:
For the driver, Vicente Castro, to allow a seat
extension made of an empty case of beer
clearly indicates lack of prudence. Permitting
Werherlina to occupy an improvised seat in
the rear portion of the jeepney, with a child on
her lap to boot, exposed her and her child in a
peril greater than that to which the other
passengers were exposed. The use of an
improvised seat extension is undeniable, in
view of the testimony of plaintiffs witness,
which is consistent with Werherlina's
testimonial assertion. Werherlina and her
witness's testimony were accorded belief by
the RTC. Factual findings of the trial court are
entitled to great weight on appeal and should
not be disturbed except for strong and valid
reasons, because the trial court ip in a better
position to examine the demeanor of the
witnesses while testifying.25
The CA also correctly held that the!defense of
engine failure, instead of exonerating Sanico,
only aggravated his already precarious
position.26 The engine failure "hinted lack of
regular check and maintenance to ensure that
the engine is at its best, considering that the
jeepney regularly passes through a
mountainous area."27 This failure to ensure
that the jeepney can safely transport
passengers through its route which required
navigation through a mountainous area is
proof of fault on Sanico's part. In the face of
such evidence, there is no question as to
Sanico's fault or negligence.
231

Further, common carriers may also be liable
for damages when they contravene the tenor
of their obligations. Article 1170 of the Civil
Code states:
ART. 1170. Those who in the performance of
their obligations are guilty of fraud, negligence,
or delay, and those who in any manner
contravene the tenor thereof, are liable for
damages.
In Magat v. Medialdea,28 the Court ruled: "The
phrase 'in any manner contravene the tenor' of
the obligation includes any illicit act or
omission which impairs the strict and faithful
fulfillment of the obligation and every kind of
defective performance."29 There is no question
here that making Colipano sit on the empty
beer case was a clear showing of how Sanico
contravened the tenor of his obligation to
safely transport Colipano from the place of
departure to the place of destination as far as
human care and foresight can provide, using
the utmost diligence of very cautious persons,
and with due regard for all the circumstances.
Sanico's attempt to evade liability by arguing
that he exercised extraordinary diligence when
he hired; Castro, who was allegedly an
experienced and time-tested driver, whom he
had even accompanied on a test-drive and in
whom he was personally convinced of the
driving skills,30are not enough to exonerate
him from liability - because the liability of
common carriers does not cease upon p!roof
that they exercised all the diligence of a good
father of a family irii the selection. and
supervision of their employees. This is the
express mandate of Article 1759 of the Civil
Code:
ART. 1759. Common carriers are liable for the
death of or injuries to passengers through the
negligence or willful acts of the former's
employees, although such employees may
have acted beyond the scope of their authority
or in violation of the orders of the common
carriers.
This liability of the common carriers does not
cease upon proof that they exercised all the
diligence of a good father of a family in the
selection and supervision of their employees.
The only defenses available to common
carriers are (1) proof that they observed
extraordinary diligence as prescribed in Article
1756,31 and (2) following Article 1174 of the
Civil Code, proof that the injury or death was
brought about by an event which "could not be
foreseen, or which, though foreseen, were
inevitable," or a fortuitous event.
The Court finds that neither of these defenses
obtain. Thus, Sanico is liable for damages to
Colipano because of the injury that Colipano
suffered as a passenger of Sanico's jeepney.
The Affidavit of Desistance and Release of
Claim is void.
Sanico cannot be exonerated from liability
under the Affidavit of Desistance and Release
of Claim32and his payment of the hospital and
medical bills of Colipano amounting to
P44,900.00.33
The RTC ruled that "the Affidavit of
Desistance and Release of Claim is not
binding on plaintiff [Colipano] in the absence
of proof that the contents thereof were
sufficiently translated and explained to
her."34 The CA affirmed the findings of the
RTC and ruled that the document was not
binding on Colipano, as follows:
Finally, We sustain the RTC's finding that the
affidavit of desistance and release of claim,
offered by defendants-appellants, are not
binding on Werherlina, quoting with approval
its reflection on the matter, saying:
xxx this Court finds that the Affidavit of
Desistance and Release of Claim is not
binding on plaintiff in the absence of proof that
the contents thereof were sufficiently
explained to her. It is clear from the plaintiffs
circumstances that she is not able to
understand English, more so stipulations
stated in the said Affidavit and Release. It is
understandable that in her pressing need, the
plaintiff may have been easily convinced to
sign the document with the promise that she
will be compensated for her injuries.35
The Court finds no reason to depart from
these findings of the CA and the RTC.
For there to be a valid waiver, the following
requisites are essential:
231
(1) that the person making the waiver
possesses the right, (2) that he has the
capacity and power to dispose of the right, (3)
that the waiver must be clear and unequivocal
although it may be made expressly or
impliedly, and (4) that the waiver is not
contrary to law, public policy, public order,
morals, good customs or prejudicial to a third
person with a right recognized by law.36
While the first two requirements can be said to
exist in this case, the third and fourth
requirements are, however, lacking.
For the waiver to be clear and unequivocal,
the person waiving the right should
understand what she is waiving and the effect
of such waiver. Both the CA and RTC made
the factual deitermination that Colipano was
not able to understand English and that there
was no proof that the documents and their
contents and effects were explained to her.
These findings of the RTC, affirmed by the
CA, are entitled to great weight and
respect.37 As this Court held in Philippine
National Railways Corp. v. Vizcara38:
It is a well-established rule that factual fill
dings by the CA are conclusive on the parties
and are not reviewable byj this Court. They
are entitled to great weight and respect, even
finality, especially when, as in this case, the
CA affirmed the factual findings arrived at by
the trial court.39
Although there are exceptions to this
rule,40 the exceptions are absent here.
Colipano could not have clearly and
unequivocally waived her right to claim
damages when she had no understanding of
the right she was waiving and the extent of
that right. Worse, she was made to sign a
document written in a language she did not
understand.
The fourth requirement for a valid waiver is
also lacking as the waiver, based on the
attendant facts, can only be construed as
contrary to public policy. The doctrine
in Gatchalian v. Delim,41which the CA
correctly cited,42 is applicable here:
Finally, because what is involved here is the
liability of a common carrier for injuries
sustained by passengers in respect of whose
safety a common carrier must
exercise extraordinary diligence, we must
construe any such purported waiver most
strictly against the common carrier. For a
waiver to be valid and effective, it must not be
contrary to law, morals, public policy or good
customs. To uphold a supposed waiver of any
right to claim damages by an injured
passenger, under circumstances like those
exhibited in this case, would be to dilute and
weaken the standard of extraordinary
diligence exacted by the law from common
carriers and hence to render that standard
unenforceable. We believe such a purported
waiver is offensive to public policy.43
"[P]ublic policy refers to the aims of the state
to promote the social and general well-being
of the inhabitants."44 The Civil Code requires
extraordinary diligence from common carriers
because the nature of their business requires
the public to put their safety and lives in the
hands of these common carriers. The State
imposes this extraordinary diligence to
promote the well-being of the public who avail
themselves of the services of common
carriers. Thus, in instances of injury or death,
a waiver of the right to claim damages is
strictly construed against the common carrier
so as not to dilute or weaken the public policy
behind the required standard of extraordinary
diligence.
It was for this reason that in Gatchalian, the
waiver was considered offensive to public
policy because it was shown that the
passenger was still in the hospital and was
dizzy when she signed the document. It was
also shown that when she saw the other
passengers signing the document, she signed
it without reading it. .
Similar to Gatchalian, Colipano testified that
she did not understand the document she
signed.45 She also did not understand the
nature and extent of her waiver as the content
of the document was not explained to
her.46 The waiver is therefore void because it
is contrary to public policy.47
The Court reiterates that waivers executed
under similar circumstances are indeed
contrary to public policy and are void.48 To
uphold waivers taken from injured passengers
who have no knowledge of their entitlement
under the law and the extent of liability of
231
common carriers would indeed dilute the
extraordinary diligence required from common
carriers, and contravene a public policy
reflected in the Civil Code.
Amount of compensatory damages granted is
incorrect.
On the amount of damages, the RiTC
awarded P2,098.80 as actual damages and
P360,000.00 as compensatoiy damages for
loss of income, as follows:
[T]his Court can only award actual damages in
the amount that is duly supported by receipts,
that is, P2,098.80 mid not P7,277.80 as
prayed for by plaintiff as there is no basis for
the amount prayed for. However, considering
that plaintiff has suffered the loss of one leg
which has caused her to be limited in her
movement thus resulting in loss of livelihood,
she is entitled to compensatory damages for
lost income at the rate of P12,000.00/year for
thirty years in the amount of P360,000.00.49
The CA, on the other hand, modified the
award of the RTC by reducing the
compensatory damages from P360,000.00 to
P200,000.00, thus:
By virtue of their negligence, defendants-
appellants are liable to pay Werheiiina
compensatory damages for loss of earning
capacity. In arriving at the proper amount, the
Supremip Court has consistently used the
following formula:
Net Earning Capacity
=Life Expectancy x [Gross Annual Income -
Living Expenses (50% of gross annual
income)]
� declarations made by a party in his own
� where life expectancy
=2/3 (80 - the age of the deceased).
Based on the stated formula, the damages
due to Werherlina for loss of earning capacity
is:
Net Earning Capacity
=[2/3 x (80-30)] x (P12,000.00 x (50%)
�
�
=(2/3 x 50) x P6,000.00
�
��
=33.33 x P6,000.00 �
��
=P200,000.00
The award of the sum of P200,000.00 as
compensatory damages for loss of earning
capacity is in order, notwithstanding the
objections of defendants-appellants with
respect to lack of evidence on Werherlina's
age and annual income.50
Sanico argues that Colipano failed to present
documentary evidence to support her age and
her income, so that her testimony is self-
serving and that there was no basis for the
award of compensatory damages in her
favor.51 Sanico is gravely mistaken.
The Court has held in Heirs of Pedro
Cleme�a y Zurbano v. Heirs of Irene B.
Bien52 that testimonial evidence cannot be
objected to on the ground of being self-
serving, thus:
"Self-serving evidence" is not to be taken
literally to mean any evidence that serves its
proponent's interest. The term, if used with
any legal sense, refers only to acts or
interest at some place and time out of court,
and it does not include testimony that he gives
as a witness in court. Evidence of this sort is
excluded on the same ground as any hearsay
evidence, that is, lack of opportunity for cross-
examination by the adverse party and on the
consideration that its admission would open
the door to fraud and fabrication. In contrast, a
party's testimony in court is sworn and subject
to cross-examination by the other party, and
therefore, not susceptible to an objection on
the ground that it is self-serving.53
231
Colipano was subjected to cross-examination
and both the RTC and CA believed her
testimony on her age and annual income. In
fact, as these are questions of facts, these
findings of the RTC and CA are likewise
binding on the Court.54
Further, although as a general rule,
documentary evidence is required to prove
loss of earning capacity, Colipano's testimony
on her annual earnings of P12,000.00 is an
allowed exception. There are two exceptions
to the general rule and Colipano's testimonial
evidence falls under the second
exception, viz.:
By way of exception, damages for loss of
earning capacity may be awarded despite the
absence of documentary evidence when (1)
the deceased is self-employed earning less
than the minimum wage under current labor
laws, and judicial notice may be taken of the
fact that in the deceased's line of work no
documentary evidence is available; or (2) the
deceased is employed as a daily wage worker
earning less than the minimum wage under
current labor laws.55
The CA applied the correct formula for
computing the loss of Colipano's earning
capacity:
Net earning capacity = Life expectancy x
[Gross Annual Income - Living Expenses (50%
of gross annual income)], where life
expectancy = 2/3 (80-the age of the
deceased).56
However, the CA erred when it used
Colipano's age at the time she testified as
basis for computing the loss of earning
capacity.57 The loss of earning capacity
commenced when Colipano's leg was crushed
on December 25, 1993. Given that Colipano
was 30 years old when she testified on
October 14, 1997, she was roughly 27 years
old on December 25, 1993 when the injury
was sustained. Following the foregoing
formula, the net earning capacity of Colipano
is P212,000.00.58
Sanico is liable to pay interest.
Interest is a form of actual or compensatory
damages as it belongs to Chapter 2 59 of Title
XVIII on Damages� of the Civil Code. Under
Article 2210 of the Civil Code, "[i]nterest may,
in the discretion of the court, be allowed upon
damages awarded for breach of contract."
Here, given the gravity of the breach of the
contract of carriage causing the serious injury
to the leg of Colipano that resulted in its
amputation, the Court deems it just and
equitable to award interest from the date of the
RTC decision. Since the award of damages
was given by the RTC in its Decision dated
October 27, 2006, the interest on the amount
awarded shall be deemed to run beginning
October 27, 2006.
As to the rate of interest, in Eastern Shipping
Lines, Inc. v. Court of Appeals,60 the Court
ruled that "[w]hen an obligation, not
constituting a loan or forbearance of money, is
breached, an interest on the amount of
damages awarded may be imposed at
the discretion of the court at the rate of 6%
per annum."61 Further, upon finality of the
judgment awarding a sum of money, the rate
of interest shall be 12% per annum from such
finality until satisfaction because the interim
period is considered a forbearance of credit. 62
Subsequently, in Nacar v. Gallery
Frames,63 the rate of legal interest for loans or
forbearance of any money, goods or credits
and the rate allowed in judgments was
lowered from 12% to 6%. Thus, the applicable
rate of interest to the award of damages to
Colipano is 6%.
WHEREFORE, premises considered, the
petition for review is hereby PARTLY
GRANTED. As to petitioner Vicente Castro,
the Decision of the Court of Appeals dated
September 30, 2013 is REVERSED and SET
ASIDE and the complaint against him is
dismissed for lack of cause of action. As to
petitioner Jose Sanico, the Decision of the
Court of Appeals is hereby AFFIRMED with
MODIFICATIONS, Petitioner Jose Sanico is
liable and ordered to pay respondent
Werherlina Colipano the following
amounts:Actual damages in the amount of
P2,098.80;
Compensatory damages for loss of income in
the amount of P212,000.00;
231

Interest on the total amount of the damages
awarded in 1 and 2 at the rate of 6% per
annum reckoned from October 27, 2006 until
finality of this Decision. The total amount of
the foregoing shall, in turn, earn interest at the
rate of 6% per annum from finality of this
Decision until full payment thereof.
SO ORDERED.
Peralta,**(Acting Chairperson), Perlas-
Bernabe, and Reyes, Jr., JJ., concur.
Carpio, J., on official leave.
FIRST DIVISION
[G.R. No. 71929 :  December 4, 1990.]
192 SCRA 9
ALITALIA, Petitioner,
vs.
 INTERMEDIATE APPELLATE COURT and
FELIPA E. PABLO, Respondents.
 
DECISION
NARVASA, J.:
Dr. Felipa Pablo — an associate professor in
the University of the Philippines, 1 and a
research grantee of the Philippine Atomic
Energy Agency — was invited to take part at a
meeting of the Department of Research and
Isotopes of the Joint FAO-IAEA Division of
Atomic Energy in Food and Agriculture of the
United Nations in Ispra, Italy. 2 She was
invited in view of her specialized knowledge in
"foreign substances in food and the agriculture
environment." She accepted the invitation, and
was then scheduled by the organizers, to read
a paper on "The Fate of Radioactive Fusion
Products Contaminating Vegetable Crops." 3
The program announced that she would be the
second speaker on the first day of the
meeting. 4 To fulfill this engagement, Dr.
Pablo booked passage on petitioner airline,
ALITALIA.
She arrived in Milan on the day before the
meeting in accordance with the itinerary and
time table set for her by ALITALIA. She was
however told by the ALITALIA personnel there
at Milan that her luggage was "delayed
inasmuch as the same . . . (was) in one of the
succeeding flights from Rome to Milan." 5 Her
luggage consisted of two (2) suitcases: one
contained her clothing and other personal
items; the other, her scientific papers, slides
and other research material. But the other
flights arriving from Rome did not have her
baggage on board.
By then feeling desperate, she went to Rome
to try to locate her bags herself. There, she
inquired about her suitcases in the domestic
and international airports, and filled out the
forms prescribed by ALITALIA for people in
her predicament. However, her baggage could
not be found. Completely distraught and
discouraged, she returned to Manila without
attending the meeting in Ispra, Italy. : nad
Once back in Manila she demanded that
ALITALIA make reparation for the damages
thus suffered by her. ALITALIA offered her
"free airline tickets to compensate her for any
alleged damages. . . ." She rejected the offer,
and forthwith commenced the action 6 which
has given rise to the present appellate
proceedings.
As it turned out, Prof. Pablo's suitcases were
in fact located and forwarded to Ispra, 7 Italy,
but only on the day after her scheduled
appearance and participation at the U.N.
meeting there. 8 Of course Dr. Pablo was no
longer there to accept delivery; she was
already on her way home to Manila. And for
some reason or other, the suitcases were not
actually restored to Prof. Pablo by ALITALIA
until eleven (11) months later, and four (4)
months after institution of her action. 9
After appropriate proceedings and trial, the
Court of First Instance rendered judgment in
Dr. Pablo's favor: 10
"(1) Ordering the defendant
(ALITALIA) to pay . . . (her) the sum of
TWENTY THOUSAND PESOS
(P20,000.00), Philippine Currency, by
way of nominal damages;
(2) Ordering the defendant to pay . . .
(her) the sum of FIVE THOUSAND
PESOS (P5,000.00), Philippine
Currency, as and for attorney's fees;
(and)
231
 (3) Ordering the defendant to pay the
costs of the suit."
ALITALIA appealed to the Intermediate
Appellate Court but failed to obtain a reversal
of the judgment. 11 Indeed, the Appellate
Court not only affirmed the Trial Court's
decision but also increased the award of
nominal damages payable by ALITALIA to
P40,000.00. 12 That increase it justified as
follows: 13
"Considering the circumstances, as
found by the Trial Court and the
negligence committed by defendant,
the amount of P20,000.00 under
present inflationary conditions as
awarded . . . to the plaintiff as nominal
damages, is too little to make up for
the plaintiff's frustration and
disappointment in not being able to
appear at said conference; and for the
embarrassment and humiliation she
suffered from the academic community
for failure to carry out an official
mission for which she was singled out
by the faculty to represent her
institution and the country. After
weighing carefully all the
considerations, the amount awarded to
the plaintiff for nominal damages and
attorney's fees should be increased to
the cost of her round trip air fare or at
the present rate of peso to the dollar at
P40,000,00."
ALITALIA has appealed to this Court
on Certiorari. Here, it seeks to make basically
the same points it tried to make before the
Trial Court and the Intermediate Appellate
Court, i.e.:
1) that the Warsaw Convention should
have been applied to limit ALITALIA'S
liability; and
2) that there is no warrant in fact or in
law for the award to Dr. Pablo of
nominal damages and attorney's fees.
14
In addition, ALITALIA postulates that it was
error for the Intermediate Appellate Court to
have refused to pass on all the assigned
errors and in not stating the facts and the law
on which its decision is based. 15
Under the Warsaw Convention, 16 an air
carrier is made liable for damages for:
1) the death, wounding or other bodily
injury of a passenger if the accident
causing it took place on board the
aircraft or in the course of its
operations of embarking or
disembarking; 17
2) the destruction or loss of, or
damage to, any registered luggage or
goods, if the occurrence causing it took
place during the carriage by air;" 18
and
3) delay in the transportation by air of
passengers, luggage or goods. 19
In these cases, it is provided in the Convention
that the "action for damages, however,
founded, can only be brought subject to
conditions and limits set out" therein. 20
The Convention also purports to limit the
liability of the carriers in the following manner:
21
1. In the carriage of passengers the
liability of the carrier for each
passenger is limited to the sum of
250,000 francs . . . Nevertheless, by
special contract, the carrier and the
passenger may agree to a higher limit
of liability.: nad
2. a) In the carriage of registered
baggage and of cargo, the liability of
the carrier is limited to a sum of 250
francs per kilogramme, unless the
passenger or consignor has made, at
the time when the package was
handed over to the carrier, a special
declaration of interest in delivery at
destination and has paid a
supplementary sum if the case so
requires. In that case the carrier will be
liable to pay a sum not exceeding the
declared sum, unless he proves that
sum is greater than the actual value to
the consignor at delivery.
b) In the case of loss, damage or delay
of part of registered baggage or cargo,
or of any object contained therein, the
weight to be taken into consideration in
determining the amount to which the
carrier's liability is limited shall be only
the total weight of the package or
packages concerned. Nevertheless,
when the loss, damage or delay of a
part of the registered baggage or
cargo, or of an object contained
therein, affects the value of other
packages covered by the same
baggage check or the same air way
231
 bill, the total weight of such package or
packages shall also be taken into
consideration in determining the limit of
liability.
3. As regards objects of which the
passenger takes charge himself the
liability of the carrier is limited to 5000
francs per passenger.
4. The limits prescribed . . shall not
prevent the court from awarding, in
accordance with its own law, in
addition, the whole or part of the court
costs and of the other expenses of
litigation incurred by the plaintiff. The
foregoing provision shall not apply if
the amount of the damages awarded,
excluding court costs and other
expenses of the litigation, does not
exceed the sum which the carrier has
offered in writing to the plaintiff within a
period of six months from the date of
the occurrence causing the damage, or
before the commencement of the
action, if that is later.
The Warsaw Convention however denies to
the carrier availment "of the provisions which
exclude or limit his liability, if the damage is
caused by his wilful misconduct or by such
default on his part as, in accordance with the
law of the court seized of the case, is
considered to be equivalent to wilful
misconduct," or "if the damage is (similarly)
caused . . by any agent of the carrier acting
within the scope of his employment."  22 The
Hague Protocol amended the Warsaw
Convention by removing the provision that if
the airline took all necessary steps to avoid the
damage, it could exculpate itself
completely,  23 and declaring the stated limits
of liability not applicable "if it is proved that the
damage resulted from an act or omission of
the carrier, its servants or agents, done with
intent to cause damage or recklessly and with
knowledge that damage would probably
result." The same deletion was effected by the
Montreal Agreement of 1966, with the result
that a passenger could recover unlimited
damages upon proof of wilful misconduct.  24
The Convention does not thus operate as an
exclusive enumeration of the instances of an
airline's liability, or as an absolute limit of the
extent of that liability. Such a proposition is not
borne out by the language of the Convention,
as this Court has now, and at an earlier time,
pointed out.  25 Moreover, slight reflection
readily leads to the conclusion that it should be
deemed a limit of liability only in those cases
where the cause of the death or injury to
person, or destruction, loss or damage to
property or delay in its transport is not
attributable to or attended by any wilful
misconduct, bad faith, recklessness, or
otherwise improper conduct on the part of any
official or employee for which the carrier is
responsible, and there is otherwise no special
or extraordinary form of resulting injury. The
Convention's provisions, in short, do not
"regulate or exclude liability for other breaches
of contract by the carrier" or misconduct of its
officers and employees, or for some particular
or exceptional type of damage. Otherwise, "an
air carrier would be exempt from any liability
for damages in the event of its absolute
refusal, in bad faith, to comply with a contract
of carriage, which is absurd."  27 Nor may it for
a moment be supposed that if a member of the
aircraft complement should inflict some
physical injury on a passenger, or maliciously
destroy or damage the latter's property, the
Convention might successfully be pleaded as
the sole gauge to determine the carrier's
liability to the passenger. Neither may the
Convention be invoked to justify the disregard
of some extraordinary sort of damage resulting
to a passenger and preclude recovery therefor
beyond the limits set by said Convention. It is
in this sense that the Convention has been
applied, or ignored, depending on the peculiar
facts presented by each case.:
In Pan American World Airways, Inc. v.
I.A.C.,  28 for example, the Warsaw
Convention was applied as regards the
limitation on the carrier's liability, there being a
simple loss of baggage without any otherwise
improper conduct on the part of the officials or
employees of the airline or other special injury
sustained by the passenger.
On the other hand, the Warsaw Convention
has invariably been held inapplicable, or as
not restrictive of the carrier's liability, where
there was satisfactory evidence of malice or
bad faith attributable to its officers and
employees.  29 Thus, an air carrier was
sentenced to pay not only compensatory but
also moral and exemplary damages, and
attorney's fees, for instance, where its
employees rudely put a passenger holding a
first-class ticket in the tourist or economy
section,  30 or ousted a brown Asiatic from the
plane to give his seat to a white man,  31 or
gave the seat of a passenger with a confirmed
reservation to another,  32 or subjected a
231
passenger to extremely rude, even barbaric
treatment, as by calling him a "monkey."  33
In the case at bar, no bad faith or otherwise
improper conduct may be ascribed to the
employees of petitioner airline; and Dr. Pablo's
luggage was eventually returned to her,
belatedly, it is true, but without appreciable
damage. The fact is, nevertheless, that some
special species of injury was caused to Dr.
Pablo because petitioner ALITALIA misplaced
her baggage and failed to deliver it to her at
the time appointed — a breach of its contract
of carriage, to be sure — with the result that
she was unable to read the paper and make
the scientific presentation (consisting of slides,
autoradiograms or films, tables and
tabulations) that she had painstakingly labored
over, at the prestigious international
conference, to attend which she had traveled
hundreds of miles, to her chagrin and
embarrassment and the disappointment and
annoyance of the organizers. She felt, not
unreasonably, that the invitation for her to
participate at the conference, extended by the
Joint FAO/IAEA Division of Atomic Energy in
Food and Agriculture of the United Nations,
was a singular honor not only to herself, but to
the University of the Philippines and the
country as well, an opportunity to make some
sort of impression among her colleagues in
that field of scientific activity. The opportunity
to claim this honor or distinction was
irretrievably lost to her because of Alitalia's
breach of its contract.
Apart from this, there can be no doubt that Dr.
Pablo underwent profound distress and
anxiety, which gradually turned to panic and
finally despair, from the time she learned that
her suitcases were missing up to the time
when, having gone to Rome, she finally
realized that she would no longer be able to
take part in the conference. As she herself put
it, she "was really shocked and distraught and
confused."
Certainly, the compensation for the injury
suffered by Dr. Pablo cannot under the
circumstances be restricted to that prescribed
by the Warsaw Convention for delay in the
transport of baggage.
She is not, of course, entitled to be
compensated for loss or damage to her
luggage. As already mentioned, her baggage
was ultimately delivered to her in Manila,
tardily but safely. She is however entitled to
nominal damages — which, as the law says, is
adjudicated in order that a right of the plaintiff,
which has been violated or invaded by the
defendant, may be vindicated and recognized,
and not for the purpose of indemnifying the
plaintiff for any loss suffered — and this Court
agrees that the respondent Court of Appeals
correctly set the amount thereof at
P40,000.00. As to the purely technical
argument that the award to her of such
nominal damages is precluded by her
omission to include a specific claim therefor in
her complaint, it suffices to draw attention to
her general prayer, following her plea for moral
and exemplary damages and attorney's fees,
"for such other and further just and equitable
relief in the premises," which certainly is broad
enough to comprehend an application as well
for nominal damages. Besides, petitioner
should have realized that the explicit assertion,
and proof, that Dr. Pablo's right had been
violated or invaded by it — absent any claim
for actual or compensatory damages, the
prayer thereof having been voluntarily deleted
by Dr. Pablo upon the return to her of her
baggage — necessarily raised the issue of
nominal damages.: rd
This Court also agrees that respondent Court
of Appeals correctly awarded attorney's fees to
Dr. Pablo, and the amount of P5,000.00 set by
it is reasonable in the premises. The law
authorizes recovery of attorney's fees inter alia
where, as here, "the defendant's act or
omission has compelled the plaintiff to litigate
with third persons or to incur expenses to
protect his interest,"  34 or "where the court
deems it just and equitable."  35
WHEREFORE, no error being perceived in the
challenged decision of the Court of Appeals, it
appearing on the contrary to be entirely in
accord with the facts and the law, said
decision is hereby AFFIRMED, with costs
against the petitioner.
SO ORDERED.
Cruz, Gancayco, Griño-Aquino and
Medialdea, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 122308 July 8, 1997
231
PURITA S. MAPA, CARMINA S. MAPA and
CORNELIO P. MAPA, petitioners,  majoring in communication.
vs.
COURT OF APPEALS and TRANS-WORLD
AIRLINES INC., respondents.
DAVIDE, JR., J.:
The main issue in this petition for review under
Rule 45 of the Rules of Court is the
applicability of Article 28(1) of the Warsaw
Convention,1 which provides as follows:
Art. 28. (1) An action for damages
must be brought, at the option of the
plaintiff, in the territory of one of the
High Contracting Parties, either before
the court of the domicile of the carrier
or of his principal place of business, or
where he has a place of business
through which the contract has been
made, or before the court at the place
of destination.
We are urged by the petitioners to reverse the
31 May 1995 Decision of the Court of Appeals
in CA-G.R. CV No. 39896 2 affirming the 24
July 1992 Order of the Regional Trial Court of
Quezon City, Branch 102, which dismissed
Civil Case No. Q-91-96203 on the ground of
lack of jurisdiction in view of the
aforementioned Article 28(1) of the Warsaw
Convention.
The antecedent facts, as summarized by the
Court of Appeals, are as follows:
Plaintiffs Cornelio P. Mapa and Purita
S. Mapa are respectable members of
the society. Mr. Mapa is an established
businessman and currently the
Regional General Manager of Akerlund
and Rausing, a multinational
packaging material manufacturer
based in Manila. He was previously the
Senior Vice President of Phimco
Industries, an affiliate company of
Swedish Match Company. Mrs. Mapa
is a successful businesswoman
engaged in the commercial
transactions of high value antique and
oriental arts decor items originating
from Asian countries. Carmina S.
Mapa is the daughter of plaintiffs Purita
and Cornelio and is a graduate of the
International School in Bangkok,
Thailand, now presently enrolled at the
Boston University where she is
Plaintiffs Mapa entered into contract of
air transportation with defendant TWA
as evidence by TWA ticket Nos.
015:9475:153:304 and
015:9475:153:305, purchased in
Bangkok, Thailand. Said TWA tickets
are for Los Angeles-New York-Boston-
St. Louis-Chicago. . . .
Domicile of carrier TWA is Kansas
City, Missouri, USA. Its principal place
of business is Kansas City, Missouri,
USA. TWA's place of business through
which the contracts were made is
Bangkok, Thailand. The place of
destination is Chicago, USA.
On August 10, 1990, plaintiffs Carmina
and Purita left Manila on board PAL
flight No. 104 for Los Angeles.
Carmina was to commence schooling
and thus was accompanied by Purita
to assist her in settling down at the
University.
They arrived Los Angeles on the same
date and stayed there until August 14,
1990 when they left for New York City.
On August 14, 1990, plaintiffs Purita
and Carmina S. Mapa arrived at the
John F. Kennedy (JFK) Airport, New
York, on TWA Flight No. 904.
On August 27, 1990, plaintiffs Purita
and Carmina S. Mapa departed for
Boston, taking a connecting flight on
TWA's carrier, TW 0901, from JFK
Airport, New York, to Boston's Logan
Airport, checking in seven (7) pieces of
luggage at the TWA counter in the JFK
Airport. The seven baggages were
received by a porter who issued seven
TWA baggage receipts numbered 17-
8270, 71, 72, 73, 74, 75, and 76
therefor.
From the entrance gate of the terminal
building, plaintiffs Purita and Carmina
proceeded to TWA's ticket counter and
presented their confirmed TWA tickets
numbered 015:9475:153:304 and
015:9475:153:305 with a 3:00 p.m.
departure time. They were issued their
231
boarding passes and were instructed
to proceed to gate 35 for boarding. At
about 2:40 p.m., plaintiffs noticed that
there was still no instruction to board
the aircraft so they made inquiries. The
TWA ground stewardess informed
plaintiffs that they were at the wrong
gate because their flight was boarding
at gate 1. Upon hearing this, plaintiffs
rushed to gate 1 which was in another
building terminal. At gate 1, they were
told by a TWA ground stewardess that
flight 901 had just departed. However,
they were consoled that another TWA
flight was leaving for Boston after 30
minutes and plaintiffs could use the
same boarding pass for the next flight.
At around 3:15 p.m., plaintiffs Purita
and Carmina were able to board the
next flight. However, the plane was not
immediately cleared for take off on
account of a thunderstorm. The
passengers were instructed to stay
inside the aircraft until 6:00 p.m. when
the plane finally left for Boston.
Upon arriving in Boston, plaintiffs
Purita and Carmina proceeded to the
carousel to claim their baggages and
found only three out of the seven they
checked in, to wit: one Samsonite on
the carousel, another Samsonite lying
on the floor near the carousel and a
third baggage, an American Tourister,
inside the unclaimed baggage office.
Plaintiffs immediately reported the loss
of their four baggages to the TWA
Baggage Office at Logan Airport.
TWA's representative confidently
assured them that their baggages
would be located within 24 hours and
not more than 48 hours.
On September 2, 1990, plaintiffs
received a letter from TWA, signed by
Mr. J.A. Butler, Customer Relations-
Baggage Service, apologizing for
TWA's failure to locate the missing
luggage and requesting plaintiffs to
accomplish a passenger property
questionnaire to facilitate a further
intensive and computerized search for
the lost luggage. Plaintiffs duly
accomplished the passenger property
questionnaire, taking pains to write
down in detail the contents of each
missing baggage. The total value of
the lost items amounted to $11,283.79.
On September 20, 1990, plaintiff's
counsel wrote TWA thru its General
Sales Manager in the Philippines,
Daniel Tuason, with office address at
Ground Floor, Saville Building, Sen.
Gil. J. Puyat Avenue corner Paseo de
Roxas, Makati, Metro Manila
demanding indemnification for the
grave damage and injury suffered by
the plaintiffs.
TWA again assured plaintiffs that
intensive search was being conducted.
On October 8, 1990, TWA offered to
amicably settle the case by giving
plaintiffs-appellants two options: (a)
transportation credit for future TWA
travel or (b) cash settlement. Five
months lapsed without any result on
TWA's intensive search.
On January 3, 1991, plaintiffs-
appellant opted for transportation
credit for future TWA travel.
On January 11, 1991, TWA
disregarded plaintiffs' option and
unilaterally declared the payment of
$2,560.00 as constituting full
satisfaction of the plaintiffs' claim.
On July 19, 1991, plaintiffs accepted
the check for $2,560.00, as partial
payment for the actual cost of their lost
baggages and their contents.
Despite demands by plaintiffs, TWA
failed and refused without just cause to
indemnify and redress plaintiffs for the
grave injury and damages they have
suffered.4
Purita S. Mapa, Carmina S. Mapa, and
Cornelio P. Mapa (herein petitioners) then filed
with the trial court on 1 August 1991 a
complaint5 for damages,6 which was docketed
as Civil Case No. Q-91-9620. Before a
responsive pleading was filed, the petitioners
filed an Amended Complaint.7 They prayed
that after due trial private respondent Trans-
World Airlines, Inc. (hereafter, TWA), be
ordered to pay them the following amounts: (1)
US$8,723.79, or its equivalent in Philippine
currency, representing the cost of the lost
luggage and its contents; (2) US$2,949.50, or
its equivalent in Philippine currency,
231
representing the cost of hotel, board and
lodging, and communication expenses; (3) P1
million, by way of moral damages; (4) P1
million, by way of exemplary damages, with
legal interest on said amounts from the date of
extrajudicial demand thereof; and (5)
P500,000.00 as attorney's fees, costs of the
suit, and other expenses of litigation.8
On 26 February 1992, TWA filed its Answer to
the Amended Complaint raising, as special
and affirmative defense, lack of jurisdiction of
Philippine courts over the action for damages
in the pursuant to Article 28(1) of the Warsaw
Convention, the action could only be brought
either in Bangkok where the contract was
entered into, or in Boston which was the place
of destination, or in Kansas City which is the
carrier's domicile and principal place of
business.
TWA further alleged that pursuant to the
Warsaw Convention and the Notice of
Baggage Limitations at the back of the tickets,
its liability to the petitioners is limited to
US$9.07 per pound, or US$20.00 per kilo,
which is in lieu of actual and compensatory
damages. Even assuming that petitioners' bag
weighed the maximum acceptable weight of
70 pounds, TWA's maximum liability is
$640.00 per bag or $2,560.00 for the four
pieces of baggage, which the petitioners have
been offered and have accepted. TWA also
submitted that it could not be liable for moral
and exemplary damages and attorney's fees
because it did not act in a wanton, fraudulent,
reckless, oppressive, or malevolent manner.9
On 7 February 1992, the petitioners filed their
second Amended Complaint10 to include a
claim of US$2,500, or its equivalent in
Philippine Currency, representing the
additional replacement cost of the items and
personal effects contained in their lost
luggage; and US$4,500 representing the travel
expenses, hotel, lodging, food and other
expenses of petitioner Cornelio Mapa, who
was constrained to join his family in Boston to
extend the necessary assistance in connection
with the lost luggage.
After the filing of TWA's Answer to the second
Amended Complaint,11 and petitioners' Reply
thereto, the trial court gave TWA ten days
within which to submit a memorandum in
support of its affirmative defenses; after which
the incident would be deemed submitted for
resolution.12 However, after TWA filed its
Memorandum,13 the trial court gave the
petitioners five days within which to file a reply
memorandum; and TWA, two days from
receipt of the latter to file its comment
thereon.14 The petitioners then filed their
Opposition (by way of Reply
Memorandum)15 to which TWA filed a
Reply.16 Thereafter, the petitioners submitted a
Rejoinder17; TWA, a Surrejoinder.18
On 24 July 1992, the trial court issued an
Order19 dismissing the case for lack of
jurisdiction in light of Article 28(1) of the
Warsaw Convention. Thus:
It is plaintiffs' theory that the Warsaw
Convention does not apply to the
instant case because plaintiffs'
contract of transportation does not
constitute "international transportation"
as defined in said convention. This
however is belied by the Passenger
Property Questionnaire which is Annex
C of plaintiffs' amended complaint.
Page two of said questionnaire
accomplished by plaintiffs under the
heading "Your Complete Itinerary"
shows that the TWA tickets issued to
the plaintiffs form part of the contract of
transportation to be performed from
Manila to the United States. Since the
Philippines and the United States are
parties to the convention, plaintiffs'
contracts of transportation come within
the meaning of International
Transportation.
xxx xxx xxx
On the basis of the foregoing, the
Court holds that the Warsaw
Convention is applicable to the case at
bar, even if the basis of plaintiffs'
present action is breach of contract of
carriage under the New Civil Code.
The next question to be resolved is
whether or not the Court has
jurisdiction to try the present case in
the light of the provision of Art. 28(1)
above-quoted.
Under Art. 28(1) supra, a complaint for
damages against an air carrier can be
instituted only in any of the following
places/courts:
231
 (1) The court of the domicile of
the carrier;
(2) The court of its principal
place of business;
(3) The court where it has a
place of business through
which the contract had been
made;
(4) The court of the place of
destination.
In interpreting the provision of Art.
28(1) of the Warsaw Convention, the
Supreme Court in the same case
of Augusto Benedicto Santos
vs. Northwest Airlines held:
Whether Article 28(1) refers to
jurisdiction or only to venue is a
question over which authorities are
sharply divided. While the petitioner
cites several cases holding that Article
28(1) refers to venue rather that
jurisdiction, there are later cases cited
by the private respondent supporting
the conclusion that the provision is
jurisdictional.
Venue and jurisdiction are entirely
distinct matters. Jurisdiction may not
be conferred by consent or waiver
upon a court which otherwise would
have no jurisdiction over the subject-
matter of an action; but the venue of
an action as fixed by statute may be
changed by the consent of the parties
and an objection that the plaintiff
brought his suit in the wrong country
may be waived by the failure of the
defendant to make a timely objection.
In either case, the court may render a
valid judgment. Rules as to jurisdiction
can never be left to the consent or
agreement of the parties, whether or
not prohibition exists against their
alteration.
A number of reasons tends to support
the characterization of Article 28(1) as
a jurisdiction and not a venue
provision. First, the wording of Article
32, which indicates the places where
the action for damages "must" be
brought, underscores the mandatory
nature of Article 28(1). Second, this
characterization is consistent with one
of the objectives of the Convention,
which is to "regulate in a uniform
manner the conditions of international
transportation by air." Third, the
Convention does not contain any
provision prescribing rules of
jurisdiction other than Article 28(1),
which means that the phrase "rules as
to jurisdiction" used in Article 32 must
refer only to Article 28(1). In fact, the
last sentence of Article 32 specifically
deals with the exclusive enumeration
in Article 28(1) as "jurisdictions,"
which, as such, cannot be left to the
will of the parties regardless of the time
when the damage occurred.
xxx xxx xxx
It has been shown by the defendant
that the domicile of the defendant
Trans World Airlines, Inc. is Kansas
City, Missouri, its principal place of
business is also in Kansas City,
Missouri, the carrier's place of
business through which the contracts
were made is Bangkok (Annexes A
and A-1, Amended Complaint), and the
place of destination was Boston.
The Philippines not being one of the
places specified in Art. 28(1)
abovequoted where the complaint may
be instituted, this Court therefore, does
not have jurisdiction over the present
case.
Evidently discontented with the trial court's
order, the petitioners appealed to the Court of
Appeals, contending that the lower court erred
in not holding that (1) it has jurisdiction over
the instant case and (2) the Warsaw
Convention is inapplicable in the instant case
because the subject matter of the case is not
included within the coverage of the said
convention.20 They claimed that their cause of
action could be based on breach of contract of
air carriage founded on Articles 1733, 1734,
1735, 1755, and 1756 of the New Civil Code
governing common carriers or Article 2176 of
the same Code governing tort or quasi-delict.
The appellate court disagreed with the
petitioners and affirmed the order of the trial
court. It held that the Warsaw Convention is
231
the law which governs the dispute between the
petitioners and TWA because what is involved
is international transportation defined by said
Convention in Article I(2). This holding is
founded on its determination that the two TWA
tickets for Los Angeles-New York-Boston-St.
Louis-Chicago purchased in Bangkok,
Thailand, were issued in conjunction with, and
therefore formed part of, the contract of
transportation performed from Manila,
Philippines, to the United States.
The respondent court further held that the
cause of action of the petitioners arose from
the loss of the four checked pieces of
baggage, which then falls under Article 18(1),
Chapter III (Liability of the Carrier) of the
Warsaw Conventions.21 Pursuant to Article
24(1) of the Convention, all actions for
damages, whether based on tort, code law or
common law, arising from loss of baggage
under Article 18 of the Warsaw Convention,
can only be brought subject to the conditions
and limits set forth in the Warsaw Convention.
Article 28(1) thereof sets forth conditions and
limits in that the action for damages may be
instituted only in the territory of one of the High
Contracting Parties, before the court of (1) the
domicile of the carrier, (2) the carrier's
principal place of business, (3) the place of
business through which the contract has been
made, or (4) the place of destination. Since the
Philippines is not one of these places, a
Philippine Court, like the RTC, has no
jurisdiction over the complaint for damages.
Respondent Court of Appeals likewise held
that the petitioners could not claim application
of Articles 1733, 1734, 1735, 1755, and 1756
of the New Civil Code on common carriers
without taking into consideration Article 1753
of the same Code, which provides that 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. Since the country of ultimate
destination is Chicago, the law of Chicago
shall govern the liability of TWA for the loss of
the four pieces of baggage. Neither is Article
2176 of the New Civil Code on torts or quasi-
delicts applicable in view of the private
international law principle of lex loci
delicti commissi.22 In addition, comformably
with Santos III v. Northwest Orient
Airlines,23 mere allegation of willful misconduct
resulting in a tort is insufficient to exclude the
case from the comprehension of the Warsaw
Convention.
Failing in their bid to reconsider the decision,
the petitioners filed this petition. They aver that
respondent Court of Appeals gravely erred (1)
in holding that the Warsaw Convention is
applicable to this case and (2) in applying
Article 1753 of the Civil Code and the principle
of lex loci delicti commissi.24
We resolved to give due course to the
petitioner after the filing by TWA of its
Comment on the petition and noted without
action for the reasons stated in the resolution
of 25 September 1996 petitioners' Reply and
Rejoinder. We then required the parties to
submit their respective memoranda. They did
in due time.
The petitioners insist that the Warsaw
Convention is not applicable to their case
because the contracts they had with TWA did
not involve an international transportation.
Whether the contracts were of international
transportation is to be solely determined from
the TWA tickets issued to them in Bangkok,
Thailand, which showed that their itinerary
was Los Angeles-New York-Boston-St. Louis-
Chicago. Accordingly, since the place of
departure (Los Angeles) and the place of
destination (Chicago) are both within the
territory of one High Contracting Party, with no
agreed stopping place in a territory subject to
the sovereignty, mandate, suzerainty or
authority of another Power, the contracts did
not constitute 'international transportation' as
defined by the convention. They also claim to
be without legal basis the contention of TWA
that their transportation contracts were of
international character because of the
handwritten notations in the tickets re "INT'S
TKT #079-4402956821-2" and "INT'L TKT
#079-4402956819." Notwithstanding such
notations, the TWA tickets, viz., (a) No.
015.9475:153:304 and (b) No.
015:9475:153:305 did not cease to be for the
itinerary therein designated. Besides, it is a
fact that petitioners Purita and Carmina Mapa
traveled from Manila to Los Angeles via
Philippine Airlines (PAL) by virtue of PAL
tickets issued independently of the TWA
tickets.
The pitch issue to be resolved under the
petitioner's first assigned error is whether the
contracts of transportation between Purita and
Carmina Mapa, on the one hand, and TWA, on
the other, were contracts of "international
transportation" under the Warsaw Convention.
231
If they were, then we should sustain the trial
court and the Court of Appeals in light of our
ruling in Santos v. Northwest Orient
Airlines.25 It appears clear to us that TWA
itself, the trial court, and the Court of Appeals
impliedly admit that if the sole basis were the
two TWA tickets for Los Angeles-New York-
Boston-St. Louis-Chicago, the contracts
cannot be brought within the term
"international transportation," as defined in
Article I(2) of the Warsaw Convention. As
provided therein, a contract is one
of international transportation only if
according to the contract made by the
parties, the place of departure and the
place of destination, whether or not
there be a break in the transportation
or a transshipment, are situated either
within the territories of two High
Contracting Parties, or within the
territory of a single High Contracting
Party, if there is an agreed stopping
place within a territory subject to the
sovereignty, mandate or authority of
another power, even though that
power is not a party to this convention.
There are then two categories of international
transportation, viz., (1) that where the place of
departure and the place of destination are
situated within the territories of two High
Contracting Parties regardless of whether or
not there be a break in the transportation or a
transshipment; and (2) that where the place of
departure and the place of destination are
within the territory of a single High Contracting
Party if there is an agreed stopping place
within a territory subject to the sovereignty,
mandate, or authority of another power, even
though the power is not a party of the
Convention.
The High Contracting Parties referred to in the
Convention are the signatories thereto and
those which subsequently adhered to it. In the
case of the Philippines, the Convention was
concurred in by the Senate, through
Resolution No. 19, on 16 May 1950. The
Philippine instrument of accession was signed
by President Elpidio Quirino on 13 October
1950 and was deposited with the Polish
Government on 9 November 1950. The
Convention became applicable to the
Philippines on 9 February 1951. Then, on 23
September 1955, President Ramon
Magsaysay issued Proclamation No. 201,
declaring the Philippines' formal adherence
thereto, "to the end that the same and every
article and clause thereof may be observed
and fulfilled in good faith by the Republic of the
Philippines and the citizens thereof. 26
The contracts of transportation in this case are
evidenced by the two TWA tickets, No.
015:9475:153:304 and No. 015:9475:153:305,
both purchased and issued in Bangkok,
Thailand. On the basis alone of the provisions
therein, it is obvious that the place of
departure and the place of destination are all
in the territory of the United States, or of a
single High Contracting Party. The contracts,
therefore, cannot come within the purview of
the first category of international
transportation. Neither can it be under the
second category since there was NO agreed
stopping place within a territory subject to the
sovereignty, mandate, or authority of another
power.
The only way to bring the contracts between
Purita and Carmina Mapa, on the one hand,
and TWA, on the other, within the first
category of "international transportation" is to
link them with, or to make them an integral
part of, the Manila-Los Angeles travel of Purita
and Carmina through PAL aircraft. The
"linkages" which have been pointed out by the
TWA, the trial court, and the Court of Appeals
are (1) the handwritten notations, viz., INT'L
TKT # 079-4402956821-2 and INT'L TKT #
079-4402956819, on the two TWA tickets; and
(2) the entries made by petitioners Purita and
Carmina Mapa in column YOUR COMPLETE
ITINERARY in TWA's Passenger Property
Questionnaire, wherein they mentioned their
travel from Manila to Los Angeles in flight PR
102.
The alleged "international tickets" mentioned in
the notations in conjunction with which the two
TWA tickets were issued were not presented.
Clearly then, there is at all no factual basis of
the finding that the TWA tickets were issued in
conjunction with the international tickets, which
are even, at least as of now, non-existent.
As regards the petitioner's entry in YOUR
COMPLETE ITINERARY column of the
Passenger Property Questionnaire wherein
they included the Manila-Los Angeles travel, it
must be pointed out that this was made on 4
September 199027 by petitioners Purita and
Carmina Mapa, and only in connection with
231
their claim for their lost pieces of baggage.
The loss occurred much earlier, or on 27
August 1990. The entry can by no means be
considered as a part of, or supplement to, their
contracts of transportation evidenced by the
TWA tickets which covered transportation
within the United States only.
It must be underscored that the first category
of international transportation under the
Warsaw Convention is based on "the contract
made by the parties." TWA does not claim that
the Manila-Los Angeles contracts of
transportation which brought Purita and
Carmina to Los Angeles were also its
contracts. It does not deny the assertion of the
petitioners that those contracts
were independent of the TWA tickets issued in
Bangkok, Thailand. No evidence was offered
that TWA and PAL had an agreement
concerning transportation of passengers from
points of departures not served with aircrafts
of one or the other. There could have been no
difficulty for such agreement, since TWA
admitted without qualification in paragraph 1 of
its Answer28 to the second Amended
Complaint the allegation in paragraph 1.1 of
the latter29 that TWA "is a foreign corporation
licensed to do business in the Philippines with
office address at Ground Floor, Saville
Building, Sen. Gil. J. Puyat Avenue, corner
Paseo de Roxas, Makati, Metro Manila."
TWA relies on Article I(3) of the Convention,
which provides as follows:
3. A carriage to be performed by
several successive air carriers is
deemed, for the purposes of this
Convention, to be one undivided
carriage, if it has been regarded by the
parties as a single operation, whether
it had been agreed upon under the
form of a single contract or of a series
of contracts, and it shall not lose its
international character merely because
one contract or a series of contracts is
to be performed entirely within a
territory subject to the sovereignty,
suzerainty, mandate, or authority of the
same High Contracting Party.
It also points to Article 15 of the IATA
Recommend Practice 1724, which provides:
Carriage to be performed by a several
successive carriers under one ticket, or under
a ticket and any conjunction ticket issued in
connection therewith, is regarded as a single
operation."30
The flaw of respondent's position is the
presumption that the parties have "regarded"
as an "undivided carriage" or as a "single
operation" the carriage from Manila to Los
Angeles through PAL then to New York-
Boston-St. Louis-Chicago through TWA. The
dismissal then of the second Amended
Complaint by the trial court and the Court of
Appeals' affirmance of the dismissal were not
based on indubitable facts or grounds, but no
inferences without established factual basis.
TWA should have offered evidence for its
affirmative defenses at the preliminary hearing
therefor. Section 5 of Rule 16 of the Rules of
Court expressly provides:
Sec. 5. Pleading grounds as
affirmative defenses. — Any of the
grounds for dismissal provided for in
this rule, except improper venue, may
be pleaded as an affirmative defense,
and a preliminary hearing may be had
thereon as if a motion to dismiss had
been filed.
Without any further evidence as earlier
discussed, the trial court should have denied
the affirmative defense of lack of jurisdiction
because it did not appear to be indubitable.
Section 3 of Rule 16 of the Rules of Court
provides:
Sec. 3. Hearing and order. — After
hearing the court may deny or grant
the motion or allow amendment of
pleading, or may defer the hearing and
determination of the motion until the
trial if the ground alleged therein does
not appear to be indubitable.
WHEREFORE, the instant petition is
GRANTED and the challenged decision of 31
May 1995 of respondent Court of Appeals in
CA-G.R. CV No. 39896, as well as the Order
of 24 July 1992 of the Regional Trial Court of
Quezon City, Branch 102, in Civil Case No. Q-
91-9620, is REVERSED and SET ASIDE.
The Regional Trial Court of Quezon City,
Branch 102, is hereby DIRECTED to proceed
with the pre-trial, if it has not been terminated,
and with the trial on the merits of the case and
then to render judgment thereon, taking into
231
account the foregoing observations on the
issue of jurisdiction.
SO ORDERED.
Narvasa, C.J., Melo, Francisco and
Panganiban, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 166640               July 31, 2009
HERMINIO MARIANO, JR., Petitioner,  accident was the recklessness of the driver of
vs.
ILDEFONSO C. CALLEJAS and EDGAR DE
BORJA, Respondents.
DECISION
PUNO, C.J.:
On appeal are the Decision1 and
2 Other cases were filed. Callejas filed a
Resolution  of the Court of Appeals in CA-G.R.
CV No. 66891, dated May 21, 2004 and
January 7, 2005 respectively, which reversed
the Decision3 of the Regional Trial Court (RTC)
of Quezon City, dated September 13, 1999,
which found respondents jointly and severally
liable to pay petitioner damages for the death
of his wife.
First, the facts:
Petitioner Herminio Mariano, Jr. is the
surviving spouse of Dr. Frelinda Mariano who
was a passenger of a Celyrosa Express bus
bound for Tagaytay when she met her death.
Respondent Ildefonso C. Callejas is the
registered owner of Celyrosa Express, while
respondent Edgar de Borja was the driver of
the bus on which the deceased was a
passenger.
At around 6:30 p.m. on November 12, 1991,
along Aguinaldo Highway, San Agustin,
Dasmariñas, Cavite, the Celyrosa Express
bus, carrying Dr. Mariano as its passenger,
collided with an Isuzu truck with trailer bearing
plate numbers PJH 906 and TRH 531. The
passenger bus was bound for Tagaytay while
the trailer truck came from the opposite
direction, bound for Manila. The trailer truck
bumped the passenger bus on its left middle
portion. Due to the impact, the passenger bus
fell on its right side on the right shoulder of the
highway and caused the death of Dr. Mariano
and physical injuries to four other passengers.
Dr. Mariano was 36 years old at the time of
her death. She left behind three minor
children, aged four, three and two years.
Petitioner filed a complaint for breach of
contract of carriage and damages against
respondents for their failure to transport his
wife and mother of his three minor children
safely to her destination. Respondents denied
liability for the death of Dr. Mariano. They
claimed that the proximate cause of the
the trailer truck which bumped their bus while
allegedly at a halt on the shoulder of the road
in its rightful lane. Thus, respondent Callejas
filed a third-party complaint against Liong Chio
Chang, doing business under the name and
style of La Perla Sugar Supply, the owner of
the trailer truck, for indemnity in the event that
he would be held liable for damages to
petitioner.lavvph!l
complaint,4 docketed as Civil Case No. NC-
397 before the RTC of Naic, Cavite, against La
Perla Sugar Supply and Arcadio Arcilla, the
truck driver, for damages he incurred due to
the vehicular accident. On September 24,
1992, the said court dismissed the complaint
against La Perla Sugar Supply for lack of
evidence. It, however, found Arcilla liable to
pay Callejas the cost of the repairs of his
passenger bus, his lost earnings, exemplary
damages and attorney’s fees.5
A criminal case, Criminal Case No. 2223-92,
was also filed against truck driver Arcilla in the
RTC of Imus, Cavite. On May 3, 1994, the said
court convicted truck driver Arcadio Arcilla of
the crime of reckless imprudence resulting to
homicide, multiple slight physical injuries and
damage to property.6
In the case at bar, the trial court, in its
Decision dated September 13, 1999, found
respondents Ildefonso Callejas and Edgar de
Borja, together with Liong Chio Chang, jointly
and severally liable to pay petitioner damages
and costs of suit. The dispositive portion of the
Decision reads:
231
ACCORDINGLY, the defendants are ordered
to pay as follows:
1. The sum of ₱50,000.00 as civil
indemnity for the loss of life;
2. The sum of ₱40,000.00 as actual
and compensatory damages;
3. The sum of ₱1,829,200.00 as
foregone income;
4. The sum of ₱30,000.00 as moral
damages;
5. The sum of ₱20,000.00 as
exemplary damages;
6. The costs of suit.
SO ORDERED.7
Respondents Callejas and De Borja appealed
to the Court of Appeals, contending that the
trial court erred in holding them guilty of
breach of contract of carriage.
On May 21, 2004, the Court of Appeals
reversed the decision of the trial court. It
reasoned:
. . . the presumption of fault or negligence
against the carrier is only a disputable
presumption. It 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. 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
private respondent's employees, and therefore
involving no issue of negligence in its duty to
provide safe and suitable cars 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. 8
The dispositive portion of the Decision reads:
WHEREFORE, the decision appealed from,
insofar as it found defendants-appellants
Ildefonso Callejas and Edgar de Borja liable
for damages to plaintiff-appellee Herminio E.
Mariano, Jr., is REVERSED and SET ASIDE
and another one entered absolving them from
any liability for the death of Dr. Frelinda Cargo
Mariano.9
The appellate court also denied the motion for
reconsideration filed by petitioner.
Hence, this appeal, relying on the following
ground:
THE DECISION OF THE HONORABLE
COURT OF APPEALS, SPECIAL
FOURTEENTH DIVISION IS NOT IN
ACCORD WITH THE FACTUAL BASIS OF
THE CASE.10
The following are the provisions of the Civil
Code pertinent to the case at bar:
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.
ART. 1756. In case of death of or injuries to
passengers, common carriers are presumed to
have been at fault or to have acted negligently,
unless they prove that they observed
extraordinary diligence as prescribed in
articles 1733 and 1755.
In accord with the above provisions, Celyrosa
Express, a common carrier, through its driver,
respondent De Borja, and its registered owner,
respondent Callejas, has the express
obligation "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,"11 and to observe extraordinary
diligence in the discharge of its duty. The
death of the wife of the petitioner in the course
of transporting her to her destination gave rise
231
to the presumption of negligence of the carrier.
To overcome the presumption, respondents
have to show that they observed extraordinary
diligence in the discharge of their duty, or that
the accident was caused by a fortuitous event.
This Court interpreted the above quoted
provisions in Pilapil v. Court of Appeals. 12 We
elucidated:
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.
In the case at bar, petitioner cannot succeed in
his contention that respondents failed to
overcome the presumption of negligence
against them. The totality of evidence shows
that the death of petitioner’s spouse was
caused by the reckless negligence of the
driver of the Isuzu trailer truck which lost its
brakes and bumped the Celyrosa Express
bus, owned and operated by respondents.
First, we advert to the sketch prepared by PO3
Magno S. de Villa, who investigated the
accident. The sketch13shows the passenger
bus facing the direction of Tagaytay City and
lying on its right side on the shoulder of the
road, about five meters away from the point of
impact. On the other hand, the trailer truck
was on the opposite direction, about 500
meters away from the point of impact. PO3 De
Villa stated that he interviewed De Borja,
respondent driver of the passenger bus, who
said that he was about to unload some
passengers when his bus was bumped by the
driver of the trailer truck that lost its brakes.
PO3 De Villa checked out the trailer truck and
found that its brakes really failed. He testified
before the trial court, as follows:
ATTY. ESTELYDIZ:
q You pointed to the Isuzu truck
beyond the point of impact. Did you
investigate why did (sic) the Isuzu
truck is beyond the point of impact?
a Because the truck has no brakes.
COURT:
q What is the distance between that
circle which is marked as Exh. 1-c to
the place where you found the same?
a More or less 500 meters.
q Why did you say that the truck has
no brakes?
a I tested it.
q And you found no brakes?
a Yes, sir.
xxx
q When you went to the scene of
accident, what was the position of
Celyrosa bus?
231
 a It was lying on its side. injuries and damage to property in Criminal
Case No. 2223-92, involving the same
COURT: incident.1avvph!1

q Right side or left side? IN VIEW WHEREOF, the petition is DENIED.

The Decision dated May 21, 2004 and the
a Right side. Resolution dated January 7, 2005 of the Court
of Appeals in CA-G.R. CV No. 66891 are
AFFIRMED.
ATTY. ESTELYDIZ:
SO ORDERED.
q On what part of the road was it lying?
REYNATO S. PUNO
a On the shoulder of the road.
Chief Justice
COURT:
WE CONCUR:
q How many meters from the point of
impact?
ANTONIO T. CARPIO
Associate Justice
a Near, about 5 meters.14

His police report bolsters his testimony and TERESITA J.

RENATO C.
states: LEONARDO-DE
CORONA
CASTRO
Associate Justice
Said vehicle 1 [passenger bus] was running Associate Justice
from Manila toward south direction when, in
the course of its travel, it was hit and bumped
LUCAS P. BERSAMIN
by vehicle 2 [truck with trailer] then running
Associate Justice
fast from opposite direction, causing said
vehicle 1 to fall on its side on the road
shoulder, causing the death of one and injuries CERTIFICATION
of some passengers thereof, and its damage,
after collission (sic), vehicle 2 Pursuant to Section 13, Article VIII of the
continiously (sic) ran and stopped at Constitution, I certify that the conclusions in
approximately 500 meters away from the the above decision had been reached in
piont (sic) of impact.15 consultation before the case was assigned to
the writer of the opinion of the Court’s Division.
In fine, the evidence shows that before the
collision, the passenger bus was cruising on REYNATO S. PUNO
its rightful lane along the Aguinaldo Highway Chief Justice
when the trailer truck coming from the
opposite direction, on full speed, suddenly
swerved and encroached on its lane, and
bumped the passenger bus on its left middle
portion. Respondent driver De Borja had every Republic of the Philippines
right to expect that the trailer truck coming SUPREME COURT
from the opposite direction would stay on its Manila
proper lane. He was not expected to know that
the trailer truck had lost its brakes. The
FIRST DIVISION
swerving of the trailer truck was abrupt and it
was running on a fast speed as it was found
500 meters away from the point of collision. G.R. No. L-46179 January 31, 1978
Secondly, any doubt as to the culpability of the
driver of the trailer truck ought to vanish when CANDIDA VIRATA, TOMAS VIRATA,
he pleaded guilty to the charge of reckless MANOLITO VIRATA, EDERLINDA VIRATA,
imprudence resulting to multiple slight physical NAPOLEON VIRATA, ARACELY VIRATA,
231
ZENAIDA VIRATA, LUZMINDA VIRATA,
PACITA VIRATA, and EVANGELINA
VIRATA, petitioners,  pending between the same parties for the
vs.
VICTORIO OCHOA, MAXIMO BORILLA and
THE COURT OF FIRST INSTANCE OF
CAVITE, 7th JUDICIAL DISTRICT, BRANCH
V, stationed at BACOOR,
CAVITE, respondents.
Remulla, Estrella & Associates for petitioners
Exequil C. Masangkay for respondents.
FERNANDEZ, J.:
This is an appeal by certiorari, from the order
of the Court of First Instance of Cavite, Branch
V, in Civil Case No. B-134 granting the motion
of the defendants to dismiss the complaint on
the ground that there is another action pending
between the same parties for the same
cause. 1
The record shows that on September 24, 1975
one Arsenio Virata died as a result of having
been bumped while walking along Taft
Avenue, Pasay City by a passenger jeepney
driven by Maximo Borilla and registered in the
name Of Victoria Ochoa; that Borilla is the
employer of Ochoa; that for the death of
Arsenio Virata, a action for homicide through
reckless imprudence was instituted on
September 25, 1975 against Maximo Borilla in
the Court of First Instance of Rizal at Pasay
City, docketed as C Case No. 3162-P of said
court; that at the hearing of the said criminal
case on December 12, 1975, Atty. Julio
Francisco, the private prosecutor, made a
reservation to file a separate civil action for
damages against the driver on his criminal
liability; that on February 19, 1976 Atty. Julio
Francisco filed a motion in said c case to
withdraw the reservation to file a separate civil
action; that thereafter, the private prosecutor
actively participated in the trial and presented
evidence on the damages; that on June 29,
1976 the heirs of Arsenio Virata again
reserved their right to institute a separate civil
action; that on July 19, 1977 the heirs of
Arsenio Virata, petitioners herein, commenced
Civil No. B-134 in the Court of First Instance of
Cavite at Bacoor, Branch V, for damages
based on quasi-delict against the driver
Maximo Borilla and the registered owner of the
jeepney, Victorio Ochoa; that on August 13,
1976 the defendants, private respondents filed
a motion to dismiss on the ground that there is
another action, Criminal Case No. 3162-P,
same cause; that on September 8, 1976 the
Court of First Instance of Rizal at Pasay City a
decision in Criminal Case No. 3612-P
acquitting the accused Maximo Borilla on the
ground that he caused an injury by name
accident; and that on January 31, 1977, the
Court of First Instance of Cavite at Bacoor
granted the motion to Civil Case No. B-134 for
damages. 2
The principal issue is weather or not the of the
Arsenio Virata, can prosecute an action for the
damages based on quasi-delict against
Maximo Borilla and Victoria Ochoa, driver and
owner, respectively on the passenger jeepney
that bumped Arsenio Virata.
It is settled that in negligence cases the
aggrieved parties may choose between an
action under the Revised Penal Code or of
quasi-delict under Article 2176 of the Civil
Code of the Philippines. What is prohibited by
Article 2177 of the Civil Code of the
Philippines is to recover twice for the same
negligent act.
The Supreme Court has held that:
According to the Code Commission:
'The foregoing provision (Article 2177)
though at first sight startling, is not so
novel or extraordinary when we
consider the exact nature of criminal
and civil negligence. The former is a
violation of the criminal law, while the
latter is a 'culpa aquiliana' or quasi-
delict, of ancient origin, having always
had its own foundation and
individuality, separate from criminal
negligence. Such distinction between
criminal negligence and 'culpa extra-
contractual' or quasi-delito has been
sustained by decision of the Supreme
Court of Spain and maintained as
clear, sound and perfectly tenable by
Maura, an outstanding Spanish jurist.
Therefore, under the proposed Article
2177, acquittal from an accusation of
criminal negligence, whether on
reasonable doubt or not, shall not be a
bar to a subsequent civil action, not for
civil liability arising from criminal
negligence, but for damages due to a
quasi-delict or 'culpa aquiliana'. But
231
said article forestalls a double
recovery. (Report of the Code
Commission, p. 162.)
Although, again, this Article 2177 does
seem to literally refer to only acts of
negligence, the same argument of
Justice Bocobo about construction that
upholds 'the spirit that given life' rather
than that which is literal that killeth the
intent of the lawmaker should be
observed in applying the same. And
considering that the preliminary
chapter on human relations of the new
Civil Code definitely establishes the
separability and independence of
liability in a civil action for acts criminal
in character (under Articles 29 to 32)
from the civil responsibility arising from
crime fixed by Article 100 of the Penal
Code, and, in a sense, the Rules of
Court, under Sections 2 and 3(c), Rule
111, contemplate also the same
separability, it is 'more congruent' with
the spirit of law, equity and justice, and
more in harmony with modern
progress', to borrow the felicitous
language in Rakes vs. Atlantic Gulf
and Pacific Co., 7 Phil. to 359, to hod
as We do hold, that Article 2176,
where it refers to 'fault covers not only
acts 'not punishable by law' but also
criminal in character, whether
intentional and voluntary or
consequently, a separate civil action
lies against the in a criminal act,
whether or not he is criminally
prosecuted and found guilty and
acquitted, provided that the offended
party is not allowed, if he is actually
charged also criminally, to recover
damages on both scores, and would
be entitled in such eventuality only to
the bigger award of the, two assuming
the awards made in the two cases
vary. In other words the extinction of
civil liability refereed to in Par. (c) of
Section 13, Rule 111, refers
exclusively to civil liability founded on
Article 100 of the Revised Penal Code,
whereas the civil liability for the same
act considered as a quasi-delict only
and not as a crime is not extinguished
even by a declaration in the criminal
case that the criminal act charged has
not happened or has not been
committed by the accused. Brief
stated, We hold, in reitration of Garcia,
that culpa aquilina includes voluntary
and negligent acts which may be
punishable by law. 3
The petitioners are not seeking to recover
twice for the same negligent act. Before
Criminal Case No. 3162-P was decided, they
manifested in said criminal case that they were
filing a separate civil action for damages
against the owner and driver of the passenger
jeepney based on quasi-delict. The acquittal of
the driver, Maximo Borilla, of the crime
charged in Criminal Case No. 3162-P is not a
bar to the prosecution of Civil Case No. B-134
for damages based on quasi-delict The source
of the obligation sought to be enforced in Civil
Case No. B-134 is quasi-delict, not an act or
omission punishable by law. Under Article
1157 of the Civil Code of the Philippines,
quasi-delict and an act or omission punishable
by law are two different sources of obligation.
Moreover, for the petitioners to prevail in the
action for damages, Civil Case No. B-134,
they have only to establish their cause of
action by preponderance of the evidence.
WHEREFORE, the order of dismissal
appealed from is hereby set aside and Civil
Case No. B-134 is reinstated and remanded to
the lower court for further proceedings, with
costs against the private respondents.
SO ORDERED.
Teehankee (Chairman), Makasiar, Muñoz
Palma and Guerrero, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 91856 October 5, 1990
YAKULT PHILIPPINES AND LARRY
SALVADO, petitioner, 
vs.
COURT OF APPEALS, WENCESLAO M.
POLO, in his capacity as Presiding Judge
of Br. 19 of the RTC of Manila, and ROY
CAMASO, respondents.
Tomas R. Leonidas for petitioners.
231
David B. Agoncillo for private respondent.
GANCAYCO, J.:
Can a civil action instituted after the criminal
action was filed prosper even if there was no
reservation to file a separate civil action? This
is the issue in this petition.
On December 24, 1982, a five-year old boy,
Roy Camaso, while standing on the sidewalk
of M. de la Fuente Street, Sampaloc, Manila,
was sideswiped by a Yamaha motorcycle
owned by Yakult Philippines and driven by its
employee, Larry Salvado.
Salvado was charged with the crime of
reckless imprudence resulting to slight
physical injuries in an information that was
filed on January 6, 1983 with the then City
Court of Manila, docketed as Criminal Case
No. 027184. On October 19, 1984 a complaint
for damages was filed by Roy Camaso
represented by his father, David Camaso,
against Yakult Philippines and Larry Salvado
in the Regional Trial Court of Manila docketed
as Civil Case No. 84-27317.
In due course a decision was rendered in the
civil case on May 26, 1989 ordering
defendants to pay jointly and severally the
plaintiff the sum of P13,006.30 for actual
expenses for medical services and hospital
bills; P3,000.00 attorney's fees and the costs
of the suit. Although said defendants appealed
the judgment, they nevertheless filed a petition
for certiorari in the Court of Appeals
challenging the jurisdiction of the trial court
over said civil case.
Petitioners' thesis is that the civil action for
damages for injuries arising from alleged
criminal negligence of Salvado, being without
malice, cannot be filed independently of the
criminal action under Article 33 of the Civil
Code. Further, it is contended that under
Section 1, Rule 111 of the 1985 Rules on
Criminal Procedure such a separate civil
action may not be filed unless reservation
thereof is expressly made.
In a decision dated November 3, 1989, the
Court of Appeals dismissed the petition. 1 A
motion for reconsideration thereof filed by
petitioners was denied on January 30, 1990.
Hence this petition.
The petition is devoid of merit.
Section 1, Rule 111 of the 1985 Rules of
Criminal Procedure provides as follows:
SEC. 1. Institution of criminal and civil
actions. — When a criminal action is
instituted, the civil action for the
recovery of civil liability is impliedly
instituted with the criminal action,
unless the offended party waives the
civil action, reserves his right to
institute it separately, or institutes the
civil action prior to the criminal action.
Such civil action includes recovery of
indemnity under the Revised Penal
Code, and damages under Articles 32,
33, 34 and 2176 of the Civil Code of
the Philippines arising from the same
act or omission of the accused.
A waiver of any of the civil actions
extinguishes the others. The institution
of, or the reservation of the right to file,
any of said civil actions separately
waives the others.
The reservation of the right to institute
the separate civil actions shall be
made before the prosecution starts to
present its evidence and under
circumstances affording the offended
party a reasonable opportunity to make
such reservation.
In no case may the offended party
recover damages twice for the same
act or omission of the accused.
When the offended party seeks to
enforce civil liability against the
accused by way of moral, nominal,
temperate or exemplary damages, the
filing fees for such civil action as
provided in these Rules shall constitute
a first lien on the judgment except in
an award for actual damages.
In cases wherein the amount of
damages, other than actual, is alleged
in the complaint or information, the
corresponding filing fees shall be paid
231
 by the offended party upon the filing
thereof in court for trial. (1a)
Although the incident in question and the
actions arising therefrom were instituted
before the promulgation of the 1985 Rules of
Criminal Procedure, its provisions which are
procedural may apply retrospectively to the
present case. 2
Under the aforecited provisions of the rule, the
civil action for the recovery of civil liability is
impliedly instituted with the criminal action
unless the offended party waives the civil
action, reserves his right to institute it
separately or institutes the civil action prior to
the criminal action.
Such civil action includes recovery of
indemnity under the Revised Penal Code, and
damages under Articles 32, 33, 34 and 2176
of the Civil Code of the Philippines arising from
the same act or omission of the accused.
It is also provided that the reservation of the
right to institute the separate civil action shall
be made before the prosecution starts to
present its evidence and under circumstances
affording the offended party a reasonable
opportunity to make such reservation.
In this case, the offended party has not waived
the civil action, nor reserved the right to
institute it separately. Neither has the offended
party instituted the civil action prior to the
criminal action. However, the civil action in this
case was filed in court before the presentation
of the evidence for the prosecution in the
criminal action of which the judge presiding on
the criminal case was duly informed, so that in
the disposition of the criminal action no
damages was awarded.
The civil liability sought arising from the act or
omission of the accused in this case is a quasi
delict as defined under Article 2176 of the Civil
Code as follows:
ART. 2176. Whoever by act or
omission causes damage to another,
there being fault or negligence, is
obliged to pay for the damage done.
Such fault or negligence, if there is no
pre-existing contractual relation
between the parties, is called a quasi-
delict and is governed by the
provisions of this Chapter.
The aforecited revised rule requiring such
previous reservation also covers quasi-
delict as defined under Article 2176 of the Civil
Code arising from the same act or omission of
the accused.
Although the separate civil action filed in this
case was without previous reservation in the
criminal case, nevertheless since it was
instituted before the prosecution presented
evidence in the criminal action, and the judge
handling the criminal case was informed
thereof, then the actual filing of the civil action
is even far better than a compliance with the
requirement of an express reservation that
should be made by the offended party before
the prosecution presents its evidence.
The purpose of this rule requiring reservation
is to prevent the offended party from
recovering damages twice for the same act or
omission.
Thus, the Court finds and so holds that the trial
court had jurisdiction over the separate civil
action brought before it.
WHEREFORE, the petition is DENIED. The
questioned decision of the Court of Appeals
dated November 3, 1989 and its resolution
dated January 30, 1990 are hereby
AFFIRMED.
SO ORDERED.
Narvasa, Melencio-Herrera, Gutierrez, Jr.,
Cruz, Feliciano, Padilla, Bidin, Sarmiento,
Cortes, Griño-Aquino, Medialdea and
Regalado, JJ., concur.
Fernan, C.J. and Paras, J., are on leave.
FIRST DIVISION
G.R. No. 145804             February 6, 2003
LIGHT RAIL TRANSIT AUTHORITY &
RODOLFO ROMAN, petitioners, 
vs.
MARJORIE NAVIDAD, Heirs of the Late
231
NICANOR NAVIDAD & PRUDENT
SECURITY AGENCY, respondents.
DECISION
VITUG, J.:
The case before the Court is an appeal from
the decision and resolution of the Court of
Appeals, promulgated on 27 April 2000 and 10
October 2000, respectively, in CA-G.R. CV
No. 60720, entitled "Marjorie Navidad and
Heirs of the Late Nicanor Navidad vs. Rodolfo
Roman, et. al.," which has modified the
decision of 11 August 1998 of the Regional
Trial Court, Branch 266, Pasig City,
exonerating Prudent Security Agency
(Prudent) from liability and finding Light Rail
Transit Authority (LRTA) and Rodolfo Roman
liable for damages on account of the death of
Nicanor Navidad.
On 14 October 1993, about half an hour past
seven o’clock in the evening, Nicanor Navidad,
then drunk, entered the EDSA LRT station
after purchasing a "token" (representing
payment of the fare). While Navidad was
standing on the platform near the LRT tracks,
Junelito Escartin, the security guard assigned
to the area approached Navidad. A
misunderstanding or an altercation between
the two apparently ensued that led to a fist
fight. No evidence, however, was adduced to
indicate how the fight started or who, between
the two, delivered the first blow or how
Navidad later fell on the LRT tracks. At the
exact moment that Navidad fell, an LRT train,
operated by petitioner Rodolfo Roman, was
coming in. Navidad was struck by the moving
train, and he was killed instantaneously.
On 08 December 1994, the widow of Nicanor,
herein respondent Marjorie Navidad, along
with her children, filed a complaint for
damages against Junelito Escartin, Rodolfo
Roman, the LRTA, the Metro Transit
Organization, Inc. (Metro Transit), and Prudent
for the death of her husband. LRTA and
Roman filed a counterclaim against Navidad
and a cross-claim against Escartin and
Prudent. Prudent, in its answer, denied liability
and averred that it had exercised due diligence
in the selection and supervision of its security
guards.
The LRTA and Roman presented their
evidence while Prudent and Escartin, instead
of presenting evidence, filed a demurrer
contending that Navidad had failed to prove
that Escartin was negligent in his assigned
task. On 11 August 1998, the trial court
rendered its decision; it adjudged:
"WHEREFORE, judgment is hereby rendered
in favor of the plaintiffs and against the
defendants Prudent Security and Junelito
Escartin ordering the latter to pay jointly and
severally the plaintiffs the following:
"a) 1) Actual damages of P44,830.00;
2) Compensatory damages of
P443,520.00;
3) Indemnity for the death of Nicanor
Navidad in the sum of P50,000.00;
"b) Moral damages of P50,000.00;
"c) Attorney’s fees of P20,000;
"d) Costs of suit.
"The complaint against defendants LRTA and
Rodolfo Roman are dismissed for lack of
merit.
"The compulsory counterclaim of LRTA and
Roman are likewise dismissed."1
Prudent appealed to the Court of Appeals. On
27 August 2000, the appellate court
promulgated its now assailed decision
exonerating Prudent from any liability for the
death of Nicanor Navidad and, instead,
holding the LRTA and Roman jointly and
severally liable thusly:
"WHEREFORE, the assailed judgment is
hereby MODIFIED, by exonerating the
appellants from any liability for the death of
Nicanor Navidad, Jr. Instead, appellees
Rodolfo Roman and the Light Rail Transit
Authority (LRTA) are held liable for his death
and are hereby directed to pay jointly and
severally to the plaintiffs-appellees, the
following amounts:
a) P44,830.00 as actual damages;
b) P50,000.00 as nominal damages;
c) P50,000.00 as moral damages;
231
 d) P50,000.00 as indemnity for the
death of the deceased; and
e) P20,000.00 as and for attorney’s
fees."2
The appellate court ratiocinated that while the
deceased might not have then as yet boarded
the train, a contract of carriage theretofore had
already existed when the victim entered the
place where passengers were supposed to be
after paying the fare and getting the
corresponding token therefor. In exempting
Prudent from liability, the court stressed that
there was nothing to link the security agency
to the death of Navidad. It said that Navidad
failed to show that Escartin inflicted fist blows
upon the victim and the evidence merely
established the fact of death of Navidad by
reason of his having been hit by the train
owned and managed by the LRTA and
operated at the time by Roman. The appellate
court faulted petitioners for their failure to
present expert evidence to establish the fact
that the application of emergency brakes could
not have stopped the train.
The appellate court denied petitioners’ motion
for reconsideration in its resolution of 10
October 2000.
In their present recourse, petitioners recite
alleged errors on the part of the appellate
court; viz:
"I.
THE HONORABLE COURT OF APPEALS
GRAVELY ERRED BY DISREGARDING THE
FINDINGS OF FACTS BY THE TRIAL
COURT
"II.
THE HONORABLE COURT OF APPEALS
GRAVELY ERRED IN FINDING THAT
PETITIONERS ARE LIABLE FOR THE
DEATH OF NICANOR NAVIDAD, JR.
"III.
THE HONORABLE COURT OF APPEALS
GRAVELY ERRED IN FINDING THAT
RODOLFO ROMAN IS AN EMPLOYEE OF
LRTA."3
Petitioners would contend that the appellate
court ignored the evidence and the factual
findings of the trial court by holding them liable
on the basis of a sweeping conclusion that the
presumption of negligence on the part of a
common carrier was not overcome. Petitioners
would insist that Escartin’s assault upon
Navidad, which caused the latter to fall on the
tracks, was an act of a stranger that could not
have been foreseen or prevented. The LRTA
would add that the appellate court’s conclusion
on the existence of an employer-employee
relationship between Roman and LRTA lacked
basis because Roman himself had testified
being an employee of Metro Transit and not of
the LRTA.
Respondents, supporting the decision of the
appellate court, contended that a contract of
carriage was deemed created from the
moment Navidad paid the fare at the LRT
station and entered the premises of the latter,
entitling Navidad to all the rights and
protection under a contractual relation, and
that the appellate court had correctly held
LRTA and Roman liable for the death of
Navidad in failing to exercise extraordinary
diligence imposed upon a common carrier.
Law and jurisprudence dictate that a common
carrier, both from the nature of its business
and for reasons of public policy, is burdened
with the duty of exercising utmost diligence in
ensuring the safety of passengers. 4 The Civil
Code, governing the liability of a common
carrier for death of or injury to its passengers,
provides:
"Article 1755. A common carrier is bound to
carry the passengers safely as far as human
care and foresight can provide, using the
utmost diligence of very cautious persons, with
a due regard for all the circumstances.
"Article 1756. In case of death of or injuries to
passengers, common carriers are presumed to
have been at fault or to have acted negligently,
unless they prove that they observed
extraordinary diligence as prescribed in
articles 1733 and 1755."
"Article 1759. Common carriers are liable for
the death of or injuries to passengers through
the negligence or willful acts of the former’s
employees, although such employees may
have acted beyond the scope of their authority
231
or in violation of the orders of the common
carriers.
"This liability of the common carriers does not
cease upon proof that they exercised all the
diligence of a good father of a family in the
selection and supervision of their employees."
"Article 1763. A common carrier is responsible
for injuries suffered by a passenger on
account of the willful acts or negligence of
other passengers or of strangers, if the
common carrier’s employees through the
exercise of the diligence of a good father of a
family could have prevented or stopped the act
or omission."
The law requires common carriers to carry
passengers safely using the utmost diligence
of very cautious persons with due regard for all
circumstances.5 Such duty of a common carrier
to provide safety to its passengers so
obligates it not only during the course of the
trip but for so long as the passengers are
within its premises and where they ought to be
in pursuance to the contract of carriage. 6 The
statutory provisions render a common carrier
liable for death of or injury to passengers (a)
through the negligence or wilful acts of its
employees or b) on account of wilful acts or
negligence of other passengers or of strangers
if the common carrier’s employees through the
exercise of due diligence could have
prevented or stopped the act or omission. 7 In
case of such death or injury, a carrier is
presumed to have been at fault or been
negligent, and8 by simple proof of injury, the
passenger is relieved of the duty to still
establish the fault or negligence of the carrier
or of its employees and the burden shifts upon
the carrier to prove that the injury is due to an
unforeseen event or to force majeure. 9 In the
absence of satisfactory explanation by the
carrier on how the accident occurred, which
petitioners, according to the appellate court,
have failed to show, the presumption would be
that it has been at fault, 10 an exception from
the general rule that negligence must be
proved.11
The foundation of LRTA’s liability is the
contract of carriage and its obligation to
indemnify the victim arises from the breach of
that contract by reason of its failure to exercise
the high diligence required of the common
carrier. In the discharge of its commitment to
ensure the safety of passengers, a carrier may
choose to hire its own employees or avail itself
of the services of an outsider or an
independent firm to undertake the task. In
either case, the common carrier is not relieved
of its responsibilities under the contract of
carriage.
Should Prudent be made likewise liable? If at
all, that liability could only be for tort under the
provisions of Article 2176 12 and related
provisions, in conjunction with Article 2180, 13 of
the Civil Code. The premise, however, for the
employer’s liability is negligence or fault on the
part of the employee. Once such fault is
established, the employer can then be made
liable on the basis of the presumption juris
tantum that the employer failed to exercise
diligentissimi patris families in the selection
and supervision of its employees. The liability
is primary and can only be negated by
showing due diligence in the selection and
supervision of the employee, a factual matter
that has not been shown. Absent such a
showing, one might ask further, how then must
the liability of the common carrier, on the one
hand, and an independent contractor, on the
other hand, be described? It would be solidary.
A contractual obligation can be breached by
tort and when the same act or omission
causes the injury, one resulting in culpa
contractual and the other in culpa aquiliana,
Article 219414 of the Civil Code can well
apply.15 In fine, a liability for tort may arise
even under a contract, where tort is that which
breaches the contract.16 Stated differently,
when an act which constitutes a breach of
contract would have itself constituted the
source of a quasi-delictual liability had no
contract existed between the parties, the
contract can be said to have been breached
by tort, thereby allowing the rules on tort to
apply.17
Regrettably for LRT, as well as perhaps the
surviving spouse and heirs of the late Nicanor
Navidad, this Court is concluded by the factual
finding of the Court of Appeals that "there is
nothing to link (Prudent) to the death of
Nicanor (Navidad), for the reason that the
negligence of its employee, Escartin, has not
been duly proven x x x." This finding of the
appellate court is not without substantial
justification in our own review of the records of
the case.
There being, similarly, no showing that
petitioner Rodolfo Roman himself is guilty of
231
any culpable act or omission, he must also be
absolved from liability. Needless to say, the
contractual tie between the LRT and Navidad
is not itself a juridical relation between the
latter and Roman; thus, Roman can be made
liable only for his own fault or negligence.
The award of nominal damages in addition to
actual damages is untenable. Nominal
damages are adjudicated in order that a right
of the plaintiff, which has been violated or
invaded by the defendant, may be vindicated
or recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered
by him.18 It is an established rule that nominal
damages cannot co-exist with compensatory
damages.19
WHEREFORE, the assailed decision of the
appellate court is AFFIRMED with
MODIFICATION but only in that (a) the award
of nominal damages is DELETED and (b)
petitioner Rodolfo Roman is absolved from
liability. No costs.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Ynares-
Santiago, Carpio and Azcuna, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 84458 November 6, 1989
ABOITIZ SHIPPING
CORPORATION, petitioner,  exclusive control of the cargoes loaded
vs.
HON. COURT OF APPEALS, ELEVENTH
DIVISION, LUCILA C. VIANA, SPS.
ANTONIO VIANA and GORGONIA VIANA,
and PIONEER STEVEDORING
CORPORATION, respondents.
Herenio E. Martinez for petitioner.
M.R. Villaluz Law Office for private
respondent.
REGALADO, J.:
In this appeal by certiorari, petitioner Aboitiz
Shipping Corporation seeks a review of the
decision 1 of respondent Court of Appeals,
dated July 29, 1988, the decretal portion of
which reads:
WHEREFORE, the judgment appealed
from as modified by the order of
October 27, 1982, is hereby affirmed
with the modification that appellant
Aboitiz Shipping is hereby ordered to
pay plaintiff-appellees the amount of
P30,000.00 for the death of Anacleto
Viana; actual damages of P9,800.00;
P150,000.00 for unearned income;
P7,200.00 as support for deceased's
parents; P20,000.00 as moral
damages; P10,000.00 as attorney's
fees; and to pay the costs.
The undisputed facts of the case, as found by
the court a quo and adopted by respondent
court, are as follows: .
The evidence disclosed that on May
11, 1975, Anacleto Viana boarded the
vessel M/V Antonia, owned by
defendant, at the port at San Jose,
Occidental Mindoro, bound for Manila,
having purchased a ticket (No.
117392) in the sum of P23.10 (Exh.
'B'). On May 12, 1975, said vessel
arrived at Pier 4, North Harbor, Manila,
and the passengers therein
disembarked, a gangplank having
been provided connecting the side of
the vessel to the pier. Instead of using
said gangplank Anacleto Viana
disembarked on the third deck which
was on the level with the pier. After
said vessel had landed, the Pioneer
Stevedoring Corporation took over the
on said vessel pursuant to the
Memorandum of Agreement dated July
26, 1975 (Exh. '2') between the third
party defendant Pioneer Stevedoring
Corporation and defendant Aboitiz
Shipping Corporation.
The crane owned by the third party
defendant and operated by its crane
231
 operator Alejo Figueroa was placed
alongside the vessel and one (1) hour
after the passengers of said vessel
had disembarked, it started operation
by unloading the cargoes from said
vessel. While the crane was being
operated, Anacleto Viana who had
already disembarked from said vessel
obviously remembering that some of
his cargoes were still loaded in the
vessel, went back to the vessel, and it
was while he was pointing to the crew
of the said vessel to the place where
his cargoes were loaded that the crane
hit him, pinning him between the side
of the vessel and the crane. He was
thereafter brought to the hospital
where he later expired three (3) days
thereafter, on May 15, 1975, the cause
of his death according to the Death
Certificate (Exh. "C") being "hypostatic
pneumonia secondary to traumatic
fracture of the pubic bone lacerating
the urinary bladder" (See also Exh.
"B"). For his hospitalization, medical,
burial and other miscellaneous
expenses, Anacleto's wife, herein
plaintiff, spent a total of P9,800.00
(Exhibits "E", "E-1", to "E-5"). Anacleto
Viana who was only forty (40) years
old when he met said fateful accident
(Exh. 'E') was in good health. His
average annual income as a farmer or
a farm supervisor was 400 cavans of
palay annually. His parents, herein
plaintiffs Antonio and Gorgonia Viana,
prior to his death had been recipient of
twenty (20) cavans of palay as support
or P120.00 monthly. Because of
Anacleto's death, plaintiffs suffered
mental anguish and extreme worry or
moral damages. For the filing of the
instant case, they had to hire a lawyer
for an agreed fee of ten thousand
(P10,000.00) pesos. 2
Private respondents Vianas filed a
complaint 3 for damages against petitioner
corporation (Aboitiz, for brevity) for breach of
contract of carriage.
In its answer. 4 Aboitiz denied responsibility
contending that at the time of the accident, the
vessel was completely under the control of
respondent Pioneer Stevedoring Corporation
(Pioneer, for short) as the exclusive
stevedoring contractor of Aboitiz, which
handled the unloading of cargoes from the
vessel of Aboitiz. It is also averred that since
the crane operator was not an employee of
Aboitiz, the latter cannot be held liable under
the fellow-servant rule.
Thereafter, Aboitiz, as third-party plaintiff, filed
a third-party complaint 5 against Pioneer
imputing liability thereto for Anacleto Viana's
death as having been allegedly caused by the
negligence of the crane operator who was an
employee of Pioneer under its exclusive
control and supervision.
Pioneer, in its answer to the third-party
complaint, 6 raised the defenses that Aboitiz
had no cause of action against Pioneer
considering that Aboitiz is being sued by the
Vianas for breach of contract of carriage to
which Pioneer is not a party; that Pioneer had
observed the diligence of a good father of a
family both in the selection and supervision of
its employees as well as in the prevention of
damage or injury to anyone including the
victim Anacleto Viana; that Anacleto Viana's
gross negligence was the direct and proximate
cause of his death; and that the filing of the
third-party complaint was premature by reason
of the pendency of the criminal case for
homicide through reckless imprudence filed
against the crane operator, Alejo Figueroa.
In a decision rendered on April 17, 1980 by the
trial court, 7 Aboitiz was ordered to pay the
Vianas for damages incurred, and Pioneer
was ordered to reimburse Aboitiz for whatever
amount the latter paid the Vianas. The
dispositive portion of said decision provides:
WHEREFORE, judgment is hereby
rendered in favor of the plantiffs:
(1) ordering defendant Aboitiz Shipping
Corporation to pay to plaintiffs the sum
of P12,000.00 for the death of
Anacleto Viana P9,800.00 as actual
damages; P533,200.00 value of the
10,664 cavans of palay computed at
P50.00 per cavan; P10,000.00 as
attorney's fees; F 5,000.00, value of
the 100 cavans of palay as support for
five (5) years for deceased (sic)
parents, herein plaintiffs Antonio and
Gorgonia Viana computed at P50.00
per cavan; P7,200.00 as support for
deceased's parents computed at
P120.00 a month for five years
pursuant to Art. 2206, Par. 2, of the
231
 Civil Code; P20,000.00 as moral
damages, and costs; and
(2) ordering the third party defendant
Pioneer Stevedoring Corporation to
reimburse defendant and third party
plaintiff Aboitiz Shipping Corporation
the said amounts that it is ordered to
pay to herein plaintiffs.
Both Aboitiz and Pioneer filed separate
motions for reconsideration wherein they
similarly raised the trial court's failure to
declare that Anacleto Viana acted with gross
negligence despite the overwhelming evidence
presented in support thereof. In addition,
Aboitiz alleged, in opposition to Pioneer's
motion, that under the memorandum of
agreement the liability of Pioneer as contractor
is automatic for any damages or losses
whatsoever occasioned by and arising from
the operation of its arrastre and stevedoring
service.
In an order dated October 27, 1982, 8 the trial
court absolved Pioneer from liability for failure
of the Vianas and Aboitiz to preponderantly
establish a case of negligence against the
crane operator which the court a quo ruled is
never presumed, aside from the fact that the
memorandum of agreement supposedly refers
only to Pioneer's liability in case of loss or
damage to goods handled by it but not in the
case of personal injuries, and, finally that
Aboitiz cannot properly invoke the fellow-
servant rule simply because its liability stems
from a breach of contract of carriage. The
dispositive portion of said order reads:
WHEREFORE, judgment is hereby
modified insofar as third party
defendant Pioneer Stevedoring
Corporation is concerned rendered in
favor of the plaintiffs-,:
(1) Ordering defendant Aboitiz
Shipping Corporation to pay the
plaintiffs the sum of P12,000.00 for the
death of Anacleto Viana; P9,000.00
(sic) as actual damages; P533,200.00
value of the 10,664 cavans of palay
computed at P50.00 per cavan;
P10,000.00 as attorney's fees;
P5,000.00 value of the 100 cavans of
palay as support for five (5) years for
deceased's parents, herein plaintiffs
Antonio and Gorgonia Viana,computed
at P50.00 per cavan; P7,200.00 as
support for deceased's parents
computed at P120.00 a month for five
years pursuant to Art. 2206, Par. 2, of
the Civil Code; P20,000.00 as moral
damages, and costs; and
(2) Absolving third-party defendant
Pioneer Stevedoring Corporation for
(sic) any liability for the death of
Anacleto Viana the passenger of M/V
Antonia owned by defendant third
party plaintiff Aboitiz Shipping
Corporation it appearing that the
negligence of its crane operator has
not been established therein.
Not satisfied with the modified judgment of the
trial court, Aboitiz appealed the same to
respondent Court of Appeals which affirmed
the findings of of the trial court except as to the
amount of damages awarded to the Vianas.
Hence, this petition wherein petitioner Aboitiz
postulates that respondent court erred:
(A) In holding that the doctrine laid
down by this honorable Court in La
Mallorca vs. Court of Appeals, et al.
(17 SCRA 739, July 27, 1966) is
applicable to the case in the face of the
undisputable fact that the factual
situation under the La Mallorca case is
radically different from the facts
obtaining in this case;
(B) In holding petitioner liable for
damages in the face of the finding of
the court a quo and confirmed by the
Honorable respondent court of
Appeals that the deceased, Anacleto
Viana was guilty of contributory
negligence, which, We respectfully
submit contributory negligence was the
proximate cause of his death;
specifically the honorable respondent
Court of Appeals failed to apply Art.
1762 of the New Civil Code;
(C) In the alternative assuming the
holding of the Honorable respondent
Court of Appears that petitioner may
be legally condemned to pay damages
to the private respondents we
respectfully submit that it committed a
reversible error when it dismissed
petitioner's third party complaint
231
 against private respondent Pioneer
Stevedoring Corporation instead of
compelling the latter to reimburse the
petitioner for whatever damages it may
be compelled to pay to the private
respondents Vianas. 9
At threshold, it is to be observed that both the
trial court and respondent Court of Appeals
found the victim Anacleto Viana guilty of
contributory negligence, but holding that it was
the negligence of Aboitiz in prematurely
turning over the vessel to the arrastre operator
for the unloading of cargoes which was the
direct, immediate and proximate cause of the
victim's death.
I. Petitioner contends that since one (1) hour
had already elapsed from the time Anacleto
Viana disembarked from the vessel and that
he was given more than ample opportunity to
unload his cargoes prior to the operation of the
crane, his presence on the vessel was no
longer reasonable e and he consequently
ceased to be a passenger. Corollarily, it insists
that the doctrine in La Mallorca vs. Court of
Appeals, et al. 10 is not applicable to the case
at bar.
The rule is that the relation of carrier and
passenger continues until the passenger has
been landed at the port of destination and has
left the vessel owner's dock or
premises. 11 Once created, the relationship will
not ordinarily terminate until the passenger
has, after reaching his destination, safely
alighted from the carrier's conveyance or had
a reasonable opportunity to leave the carrier's
premises. All persons who remain on the
premises a reasonable time after leaving the
conveyance are to be deemed passengers,
and what is a reasonable time or a reasonable
delay within this rule is to be determined from
all the circumstances, and includes a
reasonable time to see after his baggage and
prepare for his departure.12 The carrier-
passenger relationship is not terminated
merely by the fact that the person transported
has been carried to his destination if, for
example, such person remains in the carrier's
premises to claim his baggage.13
It was in accordance with this rationale that the
doctrine in the aforesaid case of La Mallorca
was enunciated, to wit:
It has been recognized as a rule that
the relation of carrier and passenger
does not cease at the moment the
passenger alights from the carrier's
vehicle at a place selected by the
carrier at the point of destination, but
continues until the passenger has had
a reasonable time or a reasonable
opportunity to leave the carrier's
premises. And, what is a reasonable
time or a reasonable delay within this
rule is to be determined from all the
circumstances. Thus, a person who,
after alighting from a train, walks along
the station platform is considered still a
passenger. So also, where a
passenger has alighted at his
destination and is proceeding by the
usual way to leave the company's
premises, but before actually doing so
is halted by the report that his brother,
a fellow passenger, has been shot,
and he in good faith and without intent
of engaging in the difficulty, returns to
relieve his brother, he is deemed
reasonably and necessarily delayed
and thus continues to be a passenger
entitled as such to the protection of the
railroad company and its agents.
In the present case, the father returned
to the bus to get one of his baggages
which was not unloaded when they
alighted from the bus. Racquel, the
child that she was, must have followed
the father. However, although the
father was still on the running board of
the bus waiting for the conductor to
hand him the bag or bayong, the bus
started to run, so that even he (the
father) had to jump down from the
moving vehicle. It was at this instance
that the child, who must be near the
bus, was run over and killed. In the
circumstances, it cannot be claimed
that the carrier's agent had exercised
the 'utmost diligence' of a 'very
cautious person' required by Article
1755 of the Civil Code to be observed
by a common carrier in the discharge
of its obligation to transport safely its
passengers. ... The presence of said
passengers near the bus was not
unreasonable and they are, therefore,
to be considered still as passengers of
the carrier, entitled to the protection
under their contract of carriage. 14
231
It is apparent from the foregoing that what
prompted the Court to rule as it did in said
case is the fact of the passenger's reasonable
presence within the carrier's premises. That
reasonableness of time should be made to
depend on the attending circumstances of the
case, such as the kind of common carrier, the
nature of its business, the customs of the
place, and so forth, and therefore precludes a
consideration of the time element per
se without taking into account such other
factors. It is thus of no moment whether in the
cited case of La Mallorca there was no
appreciable interregnum for the passenger
therein to leave the carrier's premises whereas
in the case at bar, an interval of one (1) hour
had elapsed before the victim met the
accident. The primary factor to be considered
is the existence of a reasonable cause as will
justify the presence of the victim on or near the
petitioner's vessel. We believe there exists
such a justifiable cause.
It is of common knowledge that, by the very
nature of petitioner's business as a shipper,
the passengers of vessels are allotted a longer
period of time to disembark from the ship than
other common carriers such as a passenger
bus. With respect to the bulk of cargoes and
the number of passengers it can load, such
vessels are capable of accommodating a
bigger volume of both as compared to the
capacity of a regular commuter bus.
Consequently, a ship passenger will need at
least an hour as is the usual practice, to
disembark from the vessel and claim his
baggage whereas a bus passenger can easily
get off the bus and retrieve his luggage in a
very short period of time. Verily, petitioner
cannot categorically claim, through the bare
expedient of comparing the period of time
entailed in getting the passenger's cargoes,
that the ruling in La Mallorca is inapplicable to
the case at bar. On the contrary, if we are to
apply the doctrine enunciated therein to the
instant petition, we cannot in reason doubt that
the victim Anacleto Viana was still a
passenger at the time of the incident. When
the accident occurred, the victim was in the act
of unloading his cargoes, which he had every
right to do, from petitioner's vessel. As earlier
stated, a carrier is duty bound not only to bring
its passengers safely to their destination but
also to afford them a reasonable time to claim
their baggage.
It is not definitely shown that one (1) hour prior
to the incident, the victim had already
disembarked from the vessel. Petitioner failed
to prove this. What is clear to us is that at the
time the victim was taking his cargoes, the
vessel had already docked an hour earlier. In
consonance with common shipping procedure
as to the minimum time of one (1) hour
allowed for the passengers to disembark, it
may be presumed that the victim had just
gotten off the vessel when he went to retrieve
his baggage. Yet, even if he had already
disembarked an hour earlier, his presence in
petitioner's premises was not without cause.
The victim had to claim his baggage which
was possible only one (1) hour after the vessel
arrived since it was admittedly standard
procedure in the case of petitioner's vessels
that the unloading operations shall start only
after that time. Consequently, under the
foregoing circumstances, the victim Anacleto
Viana is still deemed a passenger of said
carrier at the time of his tragic death.
II. Under the law, common carriers are, from
the nature of their business and for reasons of
public policy, 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. 15 More particularly, 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. 16 Thus, where a passenger
dies or is injured, the common carrier is
presumed to have been at fault or to have
acted negligently. 17 This gives rise to an
action for breach of contract of carriage where
all that is required of plaintiff is to prove the
existence of the contract of carriage and its
non-performance by the carrier, that is, the
failure of the carrier to carry the passenger
safely to his destination, 18which, in the instant
case, necessarily includes its failure to
safeguard its passenger with extraordinary
diligence while such relation subsists.
The presumption is, therefore, established by
law that in case of a passenger's death or
injury the operator of the vessel was at fault or
negligent, having failed to exercise
extraordinary diligence, and it is incumbent
upon it to rebut the same. This is in
consonance with the avowed policy of the
State to afford full protection to the passengers
of common carriers which can be carried out
only by imposing a stringent statutory
obligation upon the latter. Concomitantly, this
231
Court has likewise adopted a rigid posture in
the application of the law by exacting the
highest degree of care and diligence from
common carriers, bearing utmost in mind the
welfare of the passengers who often become
hapless victims of indifferent and profit-
oriented carriers. We cannot in reason deny
that petitioner failed to rebut the presumption
against it. Under the facts obtaining in the
present case, it cannot be gainsaid that
petitioner had inadequately complied with the
required degree of diligence to prevent the
accident from happening.
As found by the Court of Appeals, the
evidence does not show that there was a
cordon of drums around the perimeter of the
crane, as claimed by petitioner. It also
adverted to the fact that the alleged presence
of visible warning signs in the vicinity was
disputable and not indubitably established.
Thus, we are not inclined to accept petitioner's
explanation that the victim and other
passengers were sufficiently warned that
merely venturing into the area in question was
fraught with serious peril. Definitely, even
assuming the existence of the supposed
cordon of drums loosely placed around the
unloading area and the guard's admonitions
against entry therein, these were at most
insufficient precautions which pale into
insignificance if considered vis-a-vis the
gravity of the danger to which the deceased
was exposed. There is no showing that
petitioner was extraordinarily diligent in
requiring or seeing to it that said precautionary
measures were strictly and actually enforced
to subserve their purpose of preventing entry
into the forbidden area. By no stretch of liberal
evaluation can such perfunctory acts
approximate the "utmost diligence of very
cautious persons" to be exercised "as far as
human care and foresight can provide" which
is required by law of common carriers with
respect to their passengers.
While the victim was admittedly contributorily
negligent, still petitioner's aforesaid failure to
exercise extraordinary diligence was the
proximate and direct cause of, because it
could definitely have prevented, the former's
death. Moreover, in paragraph 5.6 of its
petition, at bar, 19 petitioner has expressly
conceded the factual finding of respondent
Court of Appeals that petitioner did not present
sufficient evidence in support of its submission
that the deceased Anacleto Viana was guilty of
gross negligence. Petitioner cannot now be
heard to claim otherwise.
No excepting circumstance being present, we
are likewise bound by respondent court's
declaration that there was no negligence on
the part of Pioneer Stevedoring Corporation, a
confirmation of the trial court's finding to that
effect, hence our conformity to Pioneer's being
absolved of any liability.
As correctly observed by both courts, Aboitiz
joined Pioneer in proving the alleged gross
negligence of the victim, hence its present
contention that the death of the passenger
was due to the negligence of the crane
operator cannot be sustained both on grounds,
of estoppel and for lack of evidence on its
present theory. Even in its answer filed in the
court below it readily alleged that Pioneer had
taken the necessary safeguards insofar as its
unloading operations were concerned, a fact
which appears to have been accepted by the
plaintiff therein by not impleading Pioneer as a
defendant, and likewise inceptively by Aboitiz
by filing its third-party complaint only after ten
(10) months from the institution of the suit
against it. Parenthetically, Pioneer is not within
the ambit of the rule on extraordinary diligence
required of, and the corresponding
presumption of negligence foisted on, common
carriers like Aboitiz. This, of course, does not
detract from what we have said that no
negligence can be imputed to Pioneer but, that
on the contrary, the failure of Aboitiz to
exercise extraordinary diligence for the safety
of its passenger is the rationale for our finding
on its liability.
WHEREFORE, the petition is DENIED and the
judgment appealed from is hereby
AFFIRMED in toto.
SO ORDERED.
Melencio-Herrera (Chairperson), Paras,
Padilla and Sarmiento, JJ., concur.
THIRD DIVISION
[G.R. No. 136048. January 23, 2001]
JOSE BARITUA and JB LINE, petitioners,
vs.
231
NIMFA DIVINA MERCADER in her capacity
and as guardian of DARWIN, GIOVANNI,
RODEL and DENNIS, all surnamed
MERCADER; LEONIDA Vda. de MERCADER
on her behalf and on behalf of her minor
child MARY JOY MERCADER; SHIRLEY
MERCADER DELA CRUZ; MARIA THERESA
MERCADER-GARCIA; DANILO
MERCADER; JOSE DANTE MERCADER;
and JOSEFINA MERCADER, respondents.
DECISION
PANGANIBAN, J.:
The Manchester ruling requiring the
payment of docket and other fees as a
condition for the acquisition of jurisdiction has
no retroactive effect and applies only to cases
filed after its finality.
The Case
Before us is a Petition for Review under
Rule 45 of the Rules of Court, assailing the
April 17, 1998 Decision[1] and the October 28,
1998 Resolution[2] of the Court of Appeals (CA)
in CA-GR CV No. 40772. The decretal portion
of said Decision reads as follows:
WHEREFORE, upon all the foregoing
premises considered, the DECISION appealed
from is AFFIRMED with the MODIFICATION
that the loss of earnings of the late Dominador
Mercader is reduced to P798,000.00.[3]
The assailed Resolution denied
petitioners Motion for Reconsideration.
The Court of Appeals sustained the
Decision of the Regional Trial Court (RTC) of
Laoang, Northern Samar (Branch 21). Except
for the modification of the loss of earnings, it
affirmed all the monetary damages granted by
the trial court to respondents. The decretal
portion of the assailed RTC Decision reads as
follows:[4]
WHEREFORE, on preponderance of
evidence, judgment is for [herein respondents]
and against [herein petitioners], ordering the
latter to pay the former:
(a) As compensatory damages for the death of
Dominador Mercader -- P50,000.00;
(b) For the loss of earnings of the late
Dominador Mercader -- P1,660,000.00, more
or less, based on the average life span of 75
years from the time of his death who earned a
net income of P5,000.00 monthly out of his
business;
(c) Actual damages of P30,000.00 receipted
purchases of goods in Manila; P5,750.00 for
the first class coffin and a 15-day wake
services evidenced by a receipt marked Exh.
D; [P]850.00 for the 50 x 60 headstone, receipt
marked Exh. E and P1,590.00 -- Deed of
Absolute Sale of a burial lot, marked Exh. F;
(d) 25% of whatever amount is collected by
[respondents] from [petitioners] but no less
than P50,000.00 plus P1,000.00 per hearing
by way of attorneys fees;
(e) As moral damages -- P50,000.00;
(f) As exemplary damages -- P30,000.00; and
(g) To pay the costs.
The Facts
The antecedents of the case are
succinctly summarized by the Court of
Appeals in this wise:
The original complaint was filed against JB
Lines, Inc. [Petitioner JB Lines, Inc.] filed a
motion to dismiss complaint, to strike out false-
impertinent matters therefrom, and/or for bill of
particulars on the primary grounds that
[respondents] failed to implead Jose Baritua
as an indispensable party and that the cause
of action is a suit against a wrong and non-
existent party. [Respondents] filed an
opposition to the said motion and an amended
complaint.
In an Order dated December 11, 1984 the trial
court denied the aforesaid motion and
admitted the amended complaint of
[respondents] impleading Jose Baritua and
alleged the following:
(10) The late Dominador Mercader is a
[b]usinessman mainly engaged in the buy and
231
sell of dry goods in Laoang, N. Samar. He
buys his goods from Manila and bring[s] them
to Laoang, Northern Samar for sale at his
store located in the said locality;
(11) Sometime on March 16, 1983, the late
Dominador Mercader boarded [petitioners] bus
No. 142 with Plate No. 484 EU at [petitioners]
Manila Station/terminal, bound for Brgy.
Rawis, Laoang Northern Samar as a paying
passenger;
(12) At that time, Dominador Mercader had
with him as his baggage, assorted goods (i.e.
long pants, short pants, dusters, etc.) which he
likewise loaded in [petitioners] bus;
(13) The late Dominador Mercader was not
able to reach his destination considering that
on March 17, 1983 at Beily (Bugco) Bridge,
Barangay Roxas, Mondragon, Northern
Samar, while he was on board [petitioners]
bus no. 142 with Plate No. 484 EU, the said
bus fell into the river as a result of which the
late Dominador Mercader died. x x x.
(14) The accident happened because
[petitioners] driver negligently and recklessly
operated the bus at a fast speed in wanton
disregard of traffic rules and regulations and
the prevailing conditions then existing that
caused [the] bus to fall into the river.
[Respondents] then filed a motion to declare
[petitioners] in default which motion was
opposed by [petitioners]. [Respondents]
withdrew the said motion prompting the trial
court to cancel the scheduled hearing of the
said motion to declare [petitioners] in default in
an Order dated January 23, 1985.
In its answer, [petitioners] denied specifically
all the material allegations in the complaint
and alleged the following:
2. The alleged person of Dominador Mercader
did not board bus 142 at [petitioners] Manila
station/terminal x x x as a (supposed paying
passenger). There is even no statement in the
complaint that Dominador Mercader (if it were
true that he was a passenger of bus 142 at the
[petitioners] Manila station/terminal) was
issued any passenger-freight ticket
conformably with law and practice. It is a fact
of public knowledge that, in compliance with
existing rules and laws, [Petitioner] Baritua, as
a public utility operator, issues, thru his
conductors, in appropriate situations, to a true
passenger, the familiar and known passenger
and freight ticket which reads in part:
NOTICE
Baggage carried at owners risk x x x liability
on prepaid freight otherwise declared.
x x x x x x x x x
Whole Fare Paid P ______________
Declared value ____________ x x x.
Description of Freight
_____________________________
Signature of Owner.
3. It is also a fact of public knowledge that
[Petitioner] Baritua does not have any Manila
station/terminal, because what he has is a
Pasay city station.
4. [Petitioner] Baritua had no prior knowledge
that, on or about March 17, 1983, and/or
previous thereto, the Bugko Bailey Bridge
(across Catarman-Laoang road) in Barangay
Roxas, Mondragon, Northern Samar, was in
virtual dilapida[ted] and dangerous condition,
in a state of decay and disrepair, thus calling
for the concerned government and public
officials performance of their coordinative and
joint duties and responsibilities, to repair,
improve and maintain that bridge, in good and
reasonably safe condition, but, far from
performing or complying with said subject
duties and responsibilities, the adverted
officials concerned, without just cause, not
only failed and neglected to cause such
needed repair, improvement and maintenance
of the Bugko Bailey Bridge, on or prior to
March 17, 1983, but also failed, and neglected
to either close the Bugko Bridge to public use
and travel, and/or to put appropriate warning
and cautionary signs, for repair, improvement,
maintenance, and safety purposes. So that,
as a proximate and direct consequence of the
aggregate officials nonfeasance, bad faith,
negligence, serious inefficiency, and callous
indifference to public safety, that Bugko Bridge
collapsed inward and caved in ruin, on that
March 17, 1983, while Barituas bus 142 was
cautiously and prudently passing and travelling
across the said bridge, as a result of which the
231
bus fell into the river and sea waters, despite
the exercise and compliance by Baritua and
his driver of their duties in the matter of their
requisite degree of diligence, caution and
prudence, Baritua also exercised and
complied with the requisite duty of diligence,
care, and prudence in the selection and
supervision over his driver, contrary to the
baseless imputation in paragraphs 14 and 20
of the original and amended complaints.
Moreover, Baritua and his driver did not violate
any traffic rule and regulation, contrary to
plaintiffs insinuation.
5. Furthermore, [Petitioner] Baritua and his
driver have no causative connection with the
alleged death of Dominador Mercader who,
according to a reliable source, was already
seriously suffering from a lingering illness even
prior to his alleged demise. Baritua also
learned lately, and so it is herein alleged that
Dominador Mercader contributed
considerably, to, and/or provided the
proximate and direct cause of his own death,
hence, he himself is to be blamed for whatever
may have happened to him or for whatever
may have been sustained by his supposed
heirs, vis--vis the suit against the wrong party.
6. Baritua and his driver, as earlier stated, did
not commit any actionable breach of contract
with the alleged Dominador Mercader or the
latters supposed heirs.
7. There is no factual nor any legal basis for
plaintiffs proffered claims for damages.
II. AFFIRMATIVE DEFENSES
8. Based on the preceding averments,
plaintiffs have neither a cause nor a right of
action against [Petitioner] Baritua and his
driver.
8.1. The allegation that supposedly the x x x
[p]laintiffs are the compulsory heirs of the late
DOMINADOR MERCADER x x x (par. 8,
complaint) is too vague and too broad, as the
subject allegation is a bare and pure
conclusionary averment unaccompanied by
the requisite statement of ultimate facts
constitutive of a cause or right of action.
8.2. Even assuming arguendo, without
however conceding, plaintiffs statement of a
cause of action, the complaint is nonetheless
replete with false and impertinent matters
which fit the rule on striking out pleadings or
parts thereof. To mention only a glaring few:
8.2.a. The allegation on exemplary damages x
x x is impertinent and immaterial in the
complaint against a supposed employer. For,
even theoretically assuming, without however
admitting a negligent act-omission on the part
of a driver, nevertheless, in such a
hypothetical situation, the causative
negligence, if any there was, is personal to the
wrongdoer, i.e., the employee-driver, to the
exclusion of the employer.
8.2.b. The allegation on supposed minimum
life of 75 years and on he expects to earn no
less than P1,680,000.00 x x x is false, a pure
hyperbole, and bereft of factual and legal
basis. Besides, what jurisprudential rule refers
to is only net earning. The law abhors a claim,
akin to plaintiffs allegation, which is manifestly
speculative, as it may not exist at
all. Furthermore, the questioned allegation in
the plaintiffs original and amended complaints
is not preceded by the requisite statement of
definitive facts, nor of any specific fact, which
could possibly afford a rational basis for a
reasonable expectation of supposed earning
that could be lost, or impaired.
8.2.c. Likewise, the allegations that allegedly x
x x the late Dominador Mercader boarded x x
x Bus No. 142 x x x and that supposedly the
latter had a baggage x x x containing drygoods
x x x in which case [petitioners have] to
pay the value thereof in such amount as may
be proven by [respondents] in court during the
trial x x x, apart from being false, are offensive
to the rule on concise statement of ultimate
facts. The assailed allegations also contravene
Interim Rule 11, (i)f any demand is for
damages in a civil action the amount thereof
must be specifically alleged. In consequence
of this averment, [respondents] have not yet
paid the correct docket fee, for which reason,
[respondents] case may be dismissed on that
ground alone.
8.3. In violation also of the same Interim Rule
11, regarding the requisite definitive amount of
claim, the allegation on the supposed funeral
expense x x x does not also indicate any
specific amount. So with the averment on
supposed moral damage which may not be
warranted because of absence of allegation of
fraud or bad faith, if any, there was, apart from
231
want of causative connection with the
defendant.
8.4. The allegation in paragraph 15 of the
original and amended complaint is also a pure
conclusionary averment, without a factual
premise.
9. [Petitioner] JB LINE, impleaded in the
amended complaint, is merely a business
name and sole proprietorship of defendant
Baritua. As such, JB Line is not a juridical
person, nor an entity authorized by law to sue
and be sued, hence, it cannot legally be a
party to any action. With this averment,
correlated with that in paragraphs 4-5 hereof,
[respondents] amended complaint is
essentially a suit against a wrong party.[5]
The RTC, after due trial, rendered the
aforesaid assailed Decision.
Ruling of the Court of Appeals
As earlier stated, the Court of Appeals
affirmed the trial courts award of monetary
damages in favor of respondents, except the
amount of Dominador Mercaders lost
earnings, which it reduced to P798,000. It held
that petitioners failed to rebut the presumption
that in the event a passenger died or was
injured, the carrier had acted
negligently. Petitioners, it added, presented no
sufficient proof that they had exercised
extraordinary diligence.
Hence, this Petition.[6]
The Issues
In their Memorandum, petitioners submit
the following issues for our consideration:
I
Did the honorable Court of Appeals (CA)
gravely abuse its discretion when it allowed to
pass sub silencio the trial courts failure to rule
frontally on petitioners plea for a bill of
particulars, and ignored the nature of
respondents prayer in the complaint pleading
for an award of --
a) P12,000.00 -- representing the
death compensation;
b) An amount to be proven in court,
representing actual damages;
c) P1,660,000.00 or more as may be
proven during the trial, by way of
loss of earnings;
d) An amount to be proven in court
as and by way of funeral expenses;
e) An amount to be proven during the
trial, representing moral damages;
f) An amount to be determined by
this Honorable Court, representing
exemplary damages;
g) An amount equivalent to 25% of
whatever amount the plaintiffs would
be able to collect from the
defendant but in no case less
than P50,000.00 plus an additional
amount of P1,000.00 per hearing as
and by way of Attorneys fees;
II
Did the CA also ignore the fact that the trial
court was not paid the correct amount of the
docket and other lawful fees; hence, without
jurisdiction over the original and amended
complaints or over the subject matter of the
case;
III
Did the CA likewise arbitrarily disregard
petitioners constitutional right to procedural
due process and fairness when it ignored and
thrust aside their right to present evidence and
to expect that their evidence will be duly
considered and appreciated; and
IV
In awarding excessive and extravagant
damages, did the CA and the trial court
adhere to the rule that their assailed decision
must state clearly and distinctly the facts and
the laws on which they are based?[7]
Distilling the alleged errors cited above,
petitioners raise two main issues for our
231
consideration: (1) whether the CA erred in
holding that the RTC had jurisdiction over the
subject matter of the case, and (2) whether the
CA disregarded petitioners procedural rights.
The Courts Ruling
The Petition is devoid of merit.
First Issue: Jurisdiction
Petitioners contend that since the correct
amounts of docket and other lawful fees were
not paid by respondents, then the trial court
did not acquire jurisdiction over the subject
matter of the case.
The Court, in Manchester Development
Corporation v. CA,[8] held that [t]he court
acquires jurisdiction over any case only upon
the payment of the prescribed docket fee. An
amendment of the complaint or similar
pleading will not thereby vest jurisdiction in the
court, much less the payment of the docket fee
based on the amounts sought in the amended
pleading. x x x.
Generally, the jurisdiction of a court is
determined by the statute in force at the
commencement of the action,[9] unless such
statute provides for its retroactive application.
[10]
 Once the jurisdiction of a court attaches, it
continues until the case is finally terminated.
[11]
 The trial court cannot be ousted therefrom
by subsequent happenings or events, although
of a character that would have prevented
jurisdiction from attaching in the first instance.
[12]
The Manchester ruling, which became
final in 1987, has no retroactive application
and cannot be invoked in the subject
Complaint filed in 1984. The Court explicitly
declared:
To put a stop to this irregularity, henceforth all
complaints, petitions, answers and other
similar pleadings should specify the amount of
damages being prayed for not only in the body
of the pleading but also in the prayer, and said
damages shall be considered in the
assessment of the filing fees in any case. Any
pleading that fails to comply with this
requirement shall not be accepted nor
admitted, or shall otherwise be expunged from
the record.[13] (emphasis supplied)
Second Issue: Petitioners Procedural
Rights
Motion for a Bill of Particulars
Petitioners argue that the Court of
Appeals erred when it passed sub silencio on
the trial courts failure to rule frontally on their
plea for a bill of particulars.
We are not impressed. It must be noted
that petitioners counsel manifested in open
court his desire to file a motion for a bill of
particulars. The RTC gave him ten days from
March 12, 1985 within which to do so. [14] He,
however, filed the aforesaid motion only on
April 2, 1985 or eleven days past the deadline
set by the trial court.[15] Moreover, such motion
was already moot and academic because,
prior to its filing, petitioners had already filed
their answer and several other pleadings to
the amended Complaint. Section 1, Rule 12 of
the Rules of Court, provides:
Section 1. When applied for; purpose.
-- Before responding to a pleading, a party
may move for a more definite statement or for
a bill of particulars of any matter which is not
averred with sufficient definiteness or
particularity to enable him properly to prepare
his responsive pleading. If the pleading is a
reply, the motion must be filed within ten (10)
days from service thereof. Such motion shall
point out the defects complained of, the
paragraphs wherein they are contained, and
the details desired.[16] (emphasis supplied)
Petitioners Right to Adduce Evidence
Petitioners also argue that their right to
present evidence was violated by the CA,
because it did not consider their contention
that the trial judges who heard the case were
biased and impartial. Petitioners contend, as
they did before the CA, that Judge Tomas B.
Noynay based his Decision on certain chosen
partial testimonies of [respondents] witnesses
x x x. They further maintain that Judge
Fortunato Operario, who initially handled the
231
case, questioned some witnesses in an
overzealous manner and assum[ed] the dual
role of magistrate and advocate. [17]
These arguments are not
meritorious. First, judges cannot be expected
to rely on the testimonies of every witness. In
ascertaining the facts, they determine who are
credible and who are not. In doing so, they
consider all the evidence before them. In other
words, the mere fact that Judge Noynay based
his decision on the testimonies of respondents
witnesses does not necessarily mean that he
did not consider those of petitioners. Second,
we find no sufficient showing that Judge
Operario was overzealous in questioning the
witnesses. His questions merely sought to
clarify their testimonies. In all, we reject
petitioners contention that their right to adduce
evidence was violated.
Alleged Failure to State Clearly the Facts
and the Law
We are not convinced by petitioners
contention, either, that both the trial and the
appellate courts failed to state clearly and
distinctly the facts and the law involved in the
case. As can be gleaned from their Decisions,
both courts clearly laid down their bases for
awarding monetary damages to respondents.
Both the RTC and the CA found that a
contract of carriage existed between
petitioners and Dominador Mercader when he
boarded Bus No. 142 in Pasay City on March
16, 1983. Petitioners failed to transport him to
his destination, because the bus fell into a
river while traversing the Bugko Bailey
Bridge. Although he survived the fall, he later
died of asphyxia secondary to drowning.
We agree with the findings of both courts
that petitioners failed to observe extraordinary
diligence[18] that fateful morning. It must be
noted that a common carrier, by the nature of
its business and for reasons of public policy, is
bound to carry passengers safely as far as
human care and foresight can provide. It is
supposed to do so by using the utmost
diligence of very cautious persons, with due
regard for all the circumstances.[19] In case of
death or injuries to passengers, it is presumed
to have been at fault or to have acted
negligently, unless it proves that it observed
extraordinary diligence as prescribed in
Articles 1733 and 1755[20] of the Civil Code.
We sustain the ruling of the CA that
petitioners failed to prove that they had
observed extraordinary diligence.
First, petitioners did not present evidence
on the skill or expertise of the driver of Bus No.
142 or the condition of that vehicle at the time
of the incident.
Second, the bus was overloaded at the
time. In fact, several individuals were standing
when the incident occurred.[21]
Third, the bus was overspeeding. Its
conductor testified that it had overtaken
several buses before it reached the Bugko
Bailey Bridge.[22] Moreover, prior to crossing
the bridge, it had accelerated and maintained
its speed towards the bridge. [23]
We therefore believe that there is no
reason to overturn the assailed CA Decision,
which affirmed that of the RTC. It is a well-
settled rule that the trial courts factual findings,
when affirmed by the appellate court, are
conclusive and binding, if they are not tainted
with arbitrariness or oversight of some fact or
circumstance of significance and influence.
[24]
 As clearly discussed above, petitioners
have not presented sufficient ground to
warrant a deviation from this rule.
Finally, we cannot fault the appellate court
in its computation of the damages and lost
earnings, since it effectively computed only net
earnings in accordance with existing
jurisprudence.[25]
WHEREFORE, the Petition is
hereby DENIED, and the assailed
Decision AFFIRMED. Costs against
petitioners.
SO ORDERED.
Melo, (Chairman), Vitug, Gonzaga-
Reyes, and Sandoval-Gutierrez, JJ., concur.
THIRD DIVISION
G.R. No. 143133           June 5, 2002
BELGIAN OVERSEAS CHARTERING AND
SHIPPING N.V. and JARDINE DAVIES
TRANSPORT SERVICES, INC., petitioners, 
231
vs.
PHILIPPINE FIRST INSURANCE CO.,
INC., respondents.
PANGANIBAN, J.:
Proof of the delivery of goods in good order to
a common carrier and of their arrival in bad
order at their destination constitutes prima
facie fault or negligence on the part of the
carrier. If no adequate explanation is given as
to how the loss, the destruction or the
deterioration of the goods happened, the
carrier shall be held liable therefor.
Statement of the Case
Before us is a Petition for Review under Rule
45 of the Rules of Court, assailing the July 15,
1998 Decision1 and the May 2, 2000
Resolution2 of the Court of Appeals3 (CA) in
CA-GR CV No. 53571. The decretal portion of
the Decision reads as follows:
"WHEREFORE, in the light of the
foregoing disquisition, the decision
appealed from is hereby REVERSED
and SET ASIDE. Defendants-
appellees are ORDERED to jointly and
severally pay plaintiffs-appellants the
following:
'1) FOUR Hundred Fifty One
Thousand Twenty-Seven
Pesos and 32/100
(P451,027.32) as actual
damages, representing the
value of the damaged cargo,
plus interest at the legal rate
from the time of filing of the
complaint on July 25, 1991,
until fully paid;
'2) Attorney's fees amounting
to 20% of the claim; and
'3) Costs of suit.'"4
The assailed Resolution denied petitioner's
Motion for Reconsideration.
The CA reversed the Decision of the Regional
Trial Court (RTC) of Makati City (Branch 134),
which had disposed as follows:
"WHEREFORE, in view of the
foregoing, judgment is hereby
rendered, dismissing the complaint, as
well as defendant's counterclaim." 5
The Facts
The factual antecedents of the case are
summarized by the Court of Appeals in this
wise:
"On June 13, 1990, CMC Trading A.G.
shipped on board the M/V 'Anangel
Sky' at Hamburg, Germany 242 coils
of various Prime Cold Rolled Steel
sheets for transportation to Manila
consigned to the Philippine Steel
Trading Corporation. On July 28, 1990,
M/V Anangel Sky arrived at the port of
Manila and, within the subsequent
days, discharged the subject cargo.
Four (4) coils were found to be in bad
order B.O. Tally sheet No. 154974.
Finding the four (4) coils in their
damaged state to be unfit for the
intended purpose, the consignee
Philippine Steel Trading Corporation
declared the same as total
loss.1âwphi1.nêt
"Despite receipt of a formal demand,
defendants-appellees refused to
submit to the consignee's claim.
Consequently, plaintiff-appellant paid
the consignee five hundred six
thousand eighty six & 50/100 pesos
(P506,086.50), and was subrogated to
the latter's rights and causes of action
against defendants-appellees.
Subsequently, plaintiff-appellant
instituted this complaint for recovery of
the amount paid by them, to the
consignee as insured.
"Impugning the propriety of the suit
against them, defendants-appellees
imputed that the damage and/or loss
was due to pre-shipment damage, to
the inherent nature, vice or defect of
the goods, or to perils, danger and
accidents of the sea, or to insufficiency
of packing thereof, or to the act or
omission of the shipper of the goods or
their representatives. In addition
thereto, defendants-appellees argued
that their liability, if there be any,
should not exceed the limitations of
231
 liability provided for in the bill of lading
and other pertinent laws. Finally,
defendants-appellees averred that, in
any event, they exercised due
diligence and foresight required by law
to prevent any damage/loss to said
shipment."6
Ruling of the Trial Court
The RTC dismissed the Complaint because
respondent had failed to prove its claims with
the quantum of proof required by law.7
It likewise debunked petitioners' counterclaim,
because respondent's suit was not manifestly
frivolous or primarily intended to harass them.8
Ruling of the Court of Appeals
In reversing the trial court, the CA ruled that
petitioners were liable for the loss or the
damage of the goods shipped, because they
had failed to overcome the presumption of
negligence imposed on common carriers.
The CA further held as inadequately proven
petitioners' claim that the loss or the
deterioration of the goods was due to pre-
shipment damage.9 It likewise opined that the
notation "metal envelopes rust stained and
slightly dented" placed on the Bill of Lading
had not been the proximate cause of the
damage to the four (4) coils.10
As to the extent of petitioners' liability, the CA
held that the package limitation under COGSA
was not applicable, because the words "L/C
No. 90/02447" indicated that a higher valuation
of the cargo had been declared by the shipper.
The CA, however, affirmed the award of
attorney's fees.
11
Hence, this Petition.
Issues
In their Memorandum, petitioners raise the
following issues for the Court's consideration:
I is untenable.
"Whether or not plaintiff by presenting
only one witness who has never seen
the subject shipment and
whose testimony is purely hearsay is
sufficient to pave the way for the
applicability of Article 1735 of the Civil
Code;
II
"Whether or not the consignee/plaintiff
filed the required notice of loss within
the time required by law;
III
"Whether or not a notation in the bill of
lading at the time of loading is
sufficient to show pre-shipment
damage and to exempt herein
defendants from liability;
IV
"Whether or not the "PACKAGE
LIMITATION" of liability under Section
4 (5) of COGSA is applicable to the
case at bar."12
In sum, the issues boil down to three:
1. Whether petitioners have overcome
the presumption of negligence of a
common carrier
2. Whether the notice of loss was
timely filed
3. Whether the package limitation of
liability is applicable
This Court's Ruling
The Petition is partly meritorious.
First Issue:
Proof of Negligence
Petitioners contend that the presumption of
fault imposed on common carriers should not
be applied on the basis of the lone testimony
offered by private respondent. The contention
Well-settled is the rule that common carriers,
from the nature of their business and for
reasons of public policy, are bound to
observe extraordinary diligence and vigilance
231
with respect to the safety of the goods and the
passengers they transport. 13 Thus, common
carriers are required to render service with the
greatest skill and foresight and "to use all
reason[a]ble means to ascertain the nature
and characteristics of the goods tendered for
shipment, and to exercise due care in the
handling and stowage, including such methods
as their nature requires."14 The extraordinary
responsibility lasts from the time the goods are
unconditionally placed in the possession of
and received for transportation by the carrier
until they are delivered, actually or
constructively, to the consignee or to the
person who has a right to receive them.15
This strict requirement is justified by the fact
that, without a hand or a voice in the
preparation of such contract, the riding public
enters into a contract of transportation with
common carriers.16 Even if it wants to, it
cannot submit its own stipulations for their
approval.17 Hence, it merely adheres to the
agreement prepared by them.
Owing to this high degree of diligence required
of them, common carriers, as a general rule,
are presumed to have been at fault or
negligent if the goods they transported
deteriorated or got lost or destroyed. 18 That is,
unless they prove that they exercised
extraordinary diligence in transporting the
goods.19 In order to avoid responsibility for any
loss or damage, therefore, they have the
burden of proving that they observed such
diligence.20
However, the presumption of fault or
negligence will not arise21 if the loss is due to
any of the following causes: (1) flood, storm,
earthquake, lightning, or other natural disaster
or calamity; (2) an act of the public enemy in
war, whether international or civil; (3) an act or
omission of the shipper or owner of the goods;
(4) the character of the goods or defects in the
packing or the container; or (5) an order or act
of competent public authority.22 This is a
closed list. If the cause of destruction, loss or
deterioration is other than the enumerated
circumstances, then the carrier is liable
therefor.23
Corollary to the foregoing, 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, the loss or the
destruction of the goods happened, the
transporter shall be held responsible.24
That petitioners failed to rebut the prima facie
presumption of negligence is revealed in the
case at bar by a review of the records and
more so by the evidence adduced by
respondent.25
First, as stated in the Bill of Lading, petitioners
received the subject shipment in good order
and condition in Hamburg, Germany.26
Second, prior to the unloading of the cargo, an
Inspection Report27 prepared and signed by
representatives of both parties showed the
steel bands broken, the metal envelopes rust-
stained and heavily buckled, and the contents
thereof exposed and rusty.
Third, Bad Order Tally Sheet No.
15497928 issued by Jardine Davies Transport
Services, Inc., stated that the four coils were in
bad order and condition. Normally, a request
for a bad order survey is made in case there is
an apparent or a presumed loss or damage.29
Fourth, the Certificate of Analysis30 stated that,
based on the sample submitted and tested,
the steel sheets found in bad order were wet
with fresh water.
Fifth, petitioners -- in a letter31 addressed to
the Philippine Steel Coating Corporation and
dated October 12, 1990 -- admitted that they
were aware of the condition of the four coils
found in bad order and condition.
These facts were confirmed by Ruperto
Esmerio, head checker of BM Santos
Checkers Agency. Pertinent portions of his
testimony are reproduce hereunder:
"Q. Mr. Esmerio, you mentioned that
you are a Head Checker. Will you
inform the Honorable Court with what
company you are connected?
A. BM Santos Checkers Agency, sir.
Q. How is BM Santos checkers
Agency related or connected with
defendant Jardine Davies Transport
Services?
231
 A. It is the company who contracts the
checkers, sir.
Q. You mentioned that you are a Head
Checker, will you inform this Honorable
Court your duties and responsibilities?
A. I am the representative of BM
Santos on board the vessel, sir, to
supervise the discharge of cargoes.
x x x           x x x           x x x
Q. On or about August 1, 1990, were
you still connected or employed with
BM Santos as a Head Checker?
A. Yes, sir.
Q. And, on or about that date, do you
recall having attended the discharging
and inspection of cold steel sheets in
coil on board the MV/AN ANGEL SKY?
A. Yes, sir, I was there.
x x x           x x x           x x x
Q. Based on your inspection since you
were also present at that time, will you
inform this Honorable Court the
condition or the appearance of the bad
order cargoes that were unloaded from
the MV/ANANGEL SKY?
ATTY. MACAMAY:
Objection, Your Honor, I think the
document itself reflects the condition of
the cold steel sheets and the best
evidence is the document itself, Your
Honor that shows the condition of the
steel sheets.
COURT:
Let the witness answer.
A. The scrap of the cargoes is
broken already and the rope is loosen
and the cargoes are dent on the
sides."32
All these conclusively prove the fact of
shipment in good order and condition and the
consequent damage to the four coils while in
the possession of petitioner,33 who notably
failed to explain why.34
Further, petitioners failed to prove that they
observed the extraordinary diligence and
precaution which the law requires a common
carrier to know and to follow to avoid damage
to or destruction of the goods entrusted to it for
safe carriage and delivery.35
True, the words "metal envelopes rust stained
and slightly dented" were noted on the Bill of
Lading; however, there is no showing that
petitioners exercised due diligence to forestall
or lessen the loss.36 Having been in the service
for several years, the master of the vessel
should have known at the outset that metal
envelopes in the said state would eventually
deteriorate when not properly stored while in
transit.37 Equipped with the proper knowledge
of the nature of steel sheets in coils and of the
proper way of transporting them, the master of
the vessel and his crew should have
undertaken precautionary measures to avoid
possible deterioration of the cargo. But none of
these measures was taken.38 Having failed to
discharge the burden of proving that they have
exercised the extraordinary diligence required
by law, petitioners cannot escape liability for
the damage to the four coils.39
In their attempt to escape liability, petitioners
further contend that they are exempted from
liability under Article 1734(4) of the Civil Code.
They cite the notation "metal envelopes rust
stained and slightly dented" printed on the Bill
of Lading as evidence that the character of the
goods or defect in the packing or the
containers was the proximate cause of the
damage. We are not convinced.
From the evidence on record, it cannot be
reasonably concluded that the damage to the
four coils was due to the condition noted on
the Bill of Lading.40 The aforecited exception
refers to cases when goods are lost or
damaged while in transit as a result of the
natural decay of perishable goods or the
fermentation or evaporation of substances
liable therefor, the necessary and natural wear
of goods in transport, defects in packages in
which they are shipped, or the natural
propensities of animals.41 None of these is
present in the instant case.
Further, even if the fact of improper packing
was known to the carrier or its crew or was
231
apparent upon ordinary observation, it is not
relieved of liability for loss or injury resulting
therefrom, once it accepts the goods
notwithstanding such condition. 42 Thus,
petitioners have not successfully proven the
application of any of the aforecited exceptions
in the present case.43
Second Issue:
Notice of Loss
Petitioners claim that pursuant to Section 3,
paragraph 6 of the Carriage of Goods by Sea
Act44 (COGSA), respondent should have filed
its Notice of Loss within three days from
delivery. They assert that the cargo was
discharged on July 31, 1990, but that
respondent filed its Notice of Claim only on
September 18, 1990.45
We are not persuaded. First, the above-cited
provision of COGSA provides that the notice of
claim need not be given if the state of the
goods, at the time of their receipt, has been
the subject of a joint inspection or survey. As
stated earlier, prior to unloading the cargo, an
Inspection Report46 as to the condition of the
goods was prepared and signed by
representatives of both parties.47
Second, as stated in the same provision, a
failure to file a notice of claim within three days
will not bar recovery if it is nonetheless filed
within one year.48 This one-year prescriptive
period also applies to the shipper, the
consignee, the insurer of the goods or any
legal holder of the bill of lading.49
In Loadstar Shipping Co., Inc, v. Court of
Appeals,50 we ruled that a claim is not barred
by prescription as long as the one-year period
has not lapsed. Thus, in the words of
the ponente, Chief Justice Hilario G. Davide
Jr.:
"Inasmuch as the neither the Civil
Code nor the Code of Commerce
states a specific prescriptive period on
the matter, the Carriage of Goods by
Sea Act (COGSA)--which provides for
a one-year period of limitation on
claims for loss of, or damage to,
cargoes sustained during transit--may
be applied suppletorily to the case at
bar."
In the present case, the cargo was discharged
on July 31, 1990, while the Complaint 51 was
filed by respondent on July 25, 1991, within
the one-year prescriptive period.
Third Issue:
Package Limitation
Assuming arguendo they are liable for
respondent's claims, petitioners contend that
their liability should be limited to US$500 per
package as provided in the Bill of Lading and
by Section 4(5)52 of COGSA.53
On the other hand, respondent argues that
Section 4(5) of COGSA is inapplicable,
because the value of the subject shipment was
declared by petitioners beforehand, as
evidenced by the reference to and the
insertion of the Letter of Credit or "L/C No.
90/02447" in the said Bill of Lading. 54
A bill of lading serves two functions. First, it is
a receipt for the goods shipped. 53 Second, it is
a contract by which three parties -- namely,
the shipper, the carrier, and the consignee --
undertake specific responsibilities and assume
stipulated obligations.56 In a nutshell, the
acceptance of the bill of lading by the shipper
and the consignee, with full knowledge of its
contents, gives rise to the presumption that it
constituted a perfected and binding contract.57
Further, a stipulation in the bill of lading
limiting to a certain sum the common carrier's
liability for loss or destruction of a cargo --
unless the shipper or owner declares a greater
value58 -- is sanctioned by law.59 There are,
however, two conditions to be satisfied: (1) the
contract is reasonable and just under the
circumstances, and (2) it has been fairly and
freely agreed upon by the parties. 60 The
rationale for this rule is to bind the shippers by
their agreement to the value (maximum
valuation) of their goods.61
It is to be noted, however, that the Civil Code
does not limit the liability of the common
carrier to a fixed amount per package. 62 In all
matters not regulated by the Civil Code, the
right and the obligations of common carriers
shall be governed by the Code of Commerce
and special laws.63 Thus, the COGSA, which is
suppletory to the provisions of the Civil Code,
supplements the latter by establishing a
statutory provision limiting the carrier's liability
231
in the absence of a shipper's declaration of a
higher value in the bill of lading. 64 The
provisions on limited liability are as much a
part of the bill of lading as though physically in
it and as though placed there by agreement of
the parties.65
In the case before us, there was no stipulation
in the Bill of Lading66 limiting the carrier's
liability. Neither did the shipper declare a
higher valuation of the goods to be shipped.
This fact notwithstanding, the insertion of the
words "L/C No. 90/02447 cannot be the basis
for petitioners' liability.
First, a notation in the Bill of Lading which
indicated the amount of the Letter of Credit
obtained by the shipper for the importation of
steel sheets did not effect a declaration of the
value of the goods as required by the
bill.67 That notation was made only for the
convenience of the shipper and the bank
processing the Letter of Credit.68
Second, in Keng Hua Paper Products v. Court
of Appeals,69 we held that a bill of lading was
separate from the Other Letter of Credit
arrangements. We ruled thus:
"(T)he contract of carriage, as
stipulated in the bill of lading in the
present case, must be treated
independently of the contract of sale
between the seller and the buyer, and
the contract of issuance of a letter of
credit between the amount of goods
described in the commercial invoice in
the contract of sale and the amount
allowed in the letter of credit will not
affect the validity and enforceability of
the contract of carriage as embodied in
the bill of lading. As the bank cannot
be expected to look beyond the
documents presented to it by the seller
pursuant to the letter of credit, neither
can the carrier be expected to go
beyond the representations of the
shipper in the bill of lading and to verify
their accuracy vis-à-vis the commercial
invoice and the letter of credit. Thus,
the discrepancy between the amount
of goods indicated in the invoice and
the amount in the bill of lading cannot
negate petitioner's obligation to private
respondent arising from the contract of
transportation."70
In the light of the foregoing, petitioners' liability
should be computed based on US$500 per
package and not on the per metric ton price
declared in the Letter of Credit. 71 In Eastern
Shipping Lines, Inc. v. Intermediate Appellate
Court,72 we explained the meaning
of packages:
"When what would ordinarily be
considered packages are shipped in a
container supplied by the carrier and
the number of such units is disclosed
in the shipping documents, each of
those units and not the container
constitutes the 'package' referred to in
the liability limitation provision of
Carriage of Goods by Sea Act."
Considering, therefore, the ruling in Eastern
Shipping Lines and the fact that the Bill of
Lading clearly disclosed the contents of the
containers, the number of units, as well as the
nature of the steel sheets, the four damaged
coils should be considered as the shipping unit
subject to the US$500 limitation.1âwphi1.nêt
WHEREFORE, the Petition is partly granted
and the assailed Decision MODIFIED.
Petitioners' liability is reduced to US$2,000
plus interest at the legal rate of six percent
from the time of the filing of the Complaint on
July 25, 1991 until the finality of this Decision,
and 12 percent thereafter until fully paid. No
pronouncement as to costs.
SO ORDERED.
Sandoval-Gutierrez, and Carpio, JJ., concur.
Puno, J., abroad, on official leave.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION 
G.R. No. 119756 March 18, 1999
FORTUNE EXPRESS, INC., petitioner, 
vs.
COURT OF APPEALS, PAULIE
U.CAORONG, and minor childrenYASSER
231
KING CAORONG, ROSE HEINNI and
PRINCE ALEXANDER, all surnamed
CAORONG, and represented by their
mother PAULIE U. CAORONG, respondents.
 
MENDOZA, J.:
This is an appeal by petition for review
on certiorari of the decision, dated July 29,
1994, of the Court of Appeals, which reversed
the decision of the Regional Trial Court,
Branch VI, Iligan City. The aforesaid decision
of the trial court dismissed the complaint of
public respondents against petitioner for
damages for breach of contract of carriage
filed on the ground that petitioner had not
exercised the required degree of diligence in
the operation of one of its buses. Atty. Talib
Caorong, whose heirs are private respondents
herein, was a passenger of the bus and was
killed in the ambush involving said bus.
The facts of the instant case are as follows:
Petitioner is a bus company in northern
Mindanao. Private respondent Paulie Caorong
is the widow of Atty. Caorong, while private
respondents Yasser King, Rose Heinni, and
Prince Alexander are their minor children.
On November 18, 1989, a bus of petitioner
figured in an accident with a jeepney in
Kauswagan, Lanao del Norte, resulting in the
death of several passengers of the jeepney,
including two Maranaos. Crisanto Generalao,
a volunteer field agent of the Constabulary
Regional Security Unit No. X, conducted an
investigation of the accident. He found that the
owner of the jeepney was a Maranao residing
in Delabayan, Lanao del Norte and that certain
Maranaos were planning to take revenge on
the petitioner by burning some of its buses.
Generalao rendered a report on his findings to
Sgt. Reynaldo Bastasa of the Philippine
Constabulary Regional Headquarters at
Cagayan de Oro. Upon the instruction of Sgt.
Bastasa, he went to see Diosdado Bravo,
operations manager of petitioner, its main
office in Cagayan de Oro City. Bravo assured
him that the necessary precautions to insure
the safety of lives and property would be
taken.1
At about 6:45 P.M. on November 22, 1989,
three armed Maranaos who pretended to be
passengers, seized a bus of petitioner at
Linamon, Lanao del Norte while on its way to
Iligan City. Among the passengers of the bus
was Atty. Caorong. The leader of the
Maranaos, identified as one Bashier
Mananggolo, ordered the driver, Godofredo
Cabatuan, to stop the bus on the side of the
highway. Mananggolo then shot Cabatuan on
the arm, which caused him to slump on the
steering wheel. The one of the companions of
Mananggolo started pouring gasoline inside
the bus, as the other held the passenger at
bay with a handgun. Mananggolo then ordered
the passenger to get off the bus. The
passengers, including Atty. Caorong, stepped
out of the bus and went behind the bushes in a
field some distance from the highway.2
However, Atty. Caorong returned to the bus to
retrieve something from the overhead rack. at
that time, one of the armed men was pouring
gasoline on the head of the driver. Cabatuan,
who had meantime regained consciousness,
heard Atty. Caorong pleading with the armed
men to spare the driver as he was innocent of
any wrong doing and was only trying to make
a living. The armed men were, however,
adamant as they repeated the warning that
they were going to burn the bus along with its
driver. During this exchange between Atty.
Caorong and the assailants, Cabatuan
climbed out of the left window of the bus and
crawled to the canal on the opposite side of
the highway. He heard shots from inside the
bus. Larry de la Cruz, one of the passengers,
saw that Atty. Caorong was hit. Then the bus
was set on fire. Some of the passengers were
able to pull Atty. Caorong out of the burning
bus and rush him to the Mercy Community
Hospital in Iligan City, but he died while
undergoing operation.3
The private respondents brought this suit for
breach of contract of carriage in the Regional
Trial Court, Branch VI, Iligan City. In its
decision, dated December 28, 1990, the trial
court dismissed the complaint, holding as
follows:
The fact that defendant, through
Operations Manager Diosdado Bravo,
was informed of the "rumors" that the
Moslems intended to take revenge by
burning five buses of defendant is
established since the latter also utilized
Crisanto Generalao as a witness. Yet
despite this information, the plaintiffs
231
charge, defendant did not take proper
precautions. . . . Consequently,
plaintiffs now fault the defendant for
ignoring the report. Their position is
that the defendant should have
provided its buses with security
guards. Does the law require common
carriers to install security guards in its
buses for the protection and safety of
its passengers? Is the failure to post
guards on omission of the duty to
"exercise the diligence of a good father
of the family" which could have
prevented the killing of Atty. Caorong?
To our mind, the diligence demanded
by law does not include the posting of
security guard in buses. It is an
obligation that properly belongs to the
State. Besides, will the presence of
one or two security guards suffice to
deter a determined assault of the
lawless and thus prevent the injury
complained of? Maybe so, but again,
perhaps not. In other words, the
presence of a security guard is not a
guarantee that the killing of Atty.
Caorong would have been definitely
avoided.
xxx xxx xxx
Accordingly, the failure of defendant to
accord faith and credit to the report of
Mr. Generalao and the fact that it did
not provide security to its buses
cannot, in the light of the
circumstances, be characterized as
negligence.
Finally, the evidence clearly shows that
the assalants did not have the least
intention of the harming any of the
passengers. They ordered all the
passengers to alight and set fire on the
bus only after all the passengers were
out of danger. The death of Atty.
Caorong was an unexpected and
unforseen occurrense over which
defendant had no control. Atty.
Caorong performed an act of charity
and heroism in coming to the succor of
the driver even in the face of danger.
He deserves the undying gratitude of
the driver whose life he saved. No one
should blame him for an act of
extraordinary charity and altruism
which cost his life. But neither should
any blame be laid on the doorstep of
defendant. His death was solely due to
the willfull acts of the lawless which
defendant could neither prevent nor to
stop.
WHEREFORE, in view of the
foregoing, the complaint is hereby
dismissed. For lack of merit, the
counter-claim is likewise dismissed. No
costs.4
On appeal, however, the Court of Appeals
reversed. It held:
In the case at bench, how did
defendant-appellee react to the tip or
information that certain Maranao
hotheads were planning to burn five of
its buses out of revenge for the deaths
of two Maranaos in an earlier collision
involving appellee's bus? Except for
the remarks of appellee's operations
manager that "we will have our action .
. . . and I'll be the one to settle it
personally," nothing concrete
whatsoever was taken by appellee or
its employees to prevent the execution
of the threat. Defendant-appellee
never adopted even a single safety
measure for the protection of its paying
passengers. Were there available
safeguards? Of course, there were:
one was frisking passengers
particularly those en route to the area
where the threats were likely to be
carried out such as where the earlier
accident occurred or the place of
influence of the victims or their locality.
If frisking was resorted to, even
temporarily, . . . . appellee might be
legally excused from liabilty. Frisking of
passengers picked up along the route
could have been implemented by the
bus conductor; for those boarding at
the bus terminal, frisking could have
been conducted by him and perhaps
by additional personnel of defendant-
appellee. On hindsight, the handguns
and especially the gallon of gasoline
used by the felons all of which were
brought inside the bus would have
been discovered, thus preventing the
burning of the bus and the fatal
shooting of the victim.
231
Appellee's argument that there is no WHEREFORE the decision appealed
law requiring it to provide guards on its from is hereby REVERSED and
buses and that the safety of citizens is another rendered ordering defendant-
the duty of the government, is not well appellee to pay plaintiffs-appellants the
taken. To be sure, appellee is not following:
expected to assign security guards on
all its buses; if at all, it has the duty to 1) P3,399,649.20 as death indemnity;
post guards only on its buses plying
predominantly Maranaos areas. As 2) P50,000.00 and P500.00 per
discussed in the next preceding appearance as attorney's fee and
paragraph, least appellee could have
done in response to the report was to
Costs against defendant-appellee. 5
adopt a system of verification such as
the frisking of passengers boarding at
its buses. Nothing, and no repeat, Hence, this appeal. Petitioner
nothing at all, was done by defendant- contends:
appellee to protect its innocent
passengers from the danger arising (A) THAT PUBLIC RESPONDENT
from the "Maranao threats." It must be ERRED IN REVERSING THE
observed that frisking is not a novelty DECISION OF THE REGIONAL TRIAL
as a safety measure in our society. COURT DATED DECEMBER 28, 1990
Sensitive places — in fact, nearly all DISMISSING THE COMPLAINT AS
important places — have applied this WELL AS THE COUNTERCLAIM,
method of security enhancement. AND FINDING FOR PRIVATE
Gadgets and devices are avilable in RESPONDENTS BY ORDERING
the market for this purpose. It would PETITIONER TO PAY THE
not have weighed much against the GARGANTUAN SUM OF
budget of the bus company if such P3,449,649.20 PLUS P500.00 PER
items were made available to its APPEARANCE AS ATTORNEY'S
personnel to cope up with situations FEES, AS WELL AS DENYING
such as the "Maranaos threats." PETITIONERS MOTION FRO
RECONSIDERATION AND THE
In view of the constitutional right to SUPPLEMENT TO SAID MOTION,
personal privacy, our pronouncement WHILE HOLDING, AMONG OTHERS,
in this decision should not be THAT THE PETITIONER BREACHED
construed as an advocacy of THE CONTRACT OF THE CARRIAGE
mandatory frisking in all public BY ITS FAILURE TO EXCERCISE
conveyances. What we are saying is THE REQUIRED DEGREE OF
that given the circumstances obtaining DILIGENCE;
in the case at bench that: (a) two
Maranaos died because of a vehicular (B) THAT THE ACTS OF THE
collision involving one of appellee's MARANAO OUTLAWS WERE SO
vehicles; (b) appellee received a GRAVE, IRRESISTABLE, VIOLENT,
written report from a member of the AND FORCEFULL, AS TO BE
Regional Security Unit, Constabulary REGARDED AS CASO FORTUITO;
Security Group, that the tribal/ethnic AND
group of the two deceased were
planning to burn five buses of appellee (C) THAT PUBLIC RESPONDENT
out of revenge; and (c) appelle did COURT OF APPEALS SERIOUSLY
nothing — absolutely nothing — for the ERRED IN HOLDING THAT
safety of its passengers travelling in PETITIONER COULD HAVE
the area of influence of the victims, PROVIDED ADEQUATE SECURITY
appellee has failed to exercise the IN PREDOMINANTLY MUSLIM
degree of dilegence required of AREAS AS PART OF ITS DUTY TO
common carriers. Hence, appellee OBSERVE EXTRA-ORDINARY
must be adjudge liable. DILIGENCE AS A COMMON
CARRIER.
xxx xxx xxx
231
The instant has no merit.
First. Petitioner's Breach of the Contract of
Carriage.
Art. 1763 of the Civil Code provides that a
common carrier is responsible for injuries
suffered by a passenger on account of wilfull
acts of other passengers, if the employees of
the common carrier could have prevented the
act through the exercise of the diligence of a
good father of a family. In the present case, it
is clear that because of the negligence of
petitioner's employees, the seizure of the bus
by Mananggolo and his men was made
possible.
Despite warning by the Philippine
Constabulary at Cagayan de Oro that the
Maranaos were planning to take revenge on
the petitioner by burning some of its buses and
the assurance of petitioner's operation
manager, Diosdado Bravo, that the necessary
precautions would be taken, petitioner did
nothing to protect the safety of its passengers.
Had petitioner and its employees been vigilant
they would not have failed to see that the
malefactors had a large quantity of gasoline
with them. Under the circumstances, simple
precautionary measures to protect the safety
of passengers, such as frisking passengers
and inspecting their baggages, preferably with
non-intrusive gadgets such as metal detectors,
before allowing them on board could have
been employed without violating the
passenger's constitutional rights. As this Court
amended in Gacal v. Philippine Air Lines,
Inc., 6 a common carrier can be held liable for
failing to prevent a hijacking by frisking
passengers and inspecting their baggages.
From the foregoing, it is evident that
petitioner's employees failed to prevent the
attack on one of petitioner's buses because
they did not exercise the diligence of a good
father of a family. Hence, petitioner should be
held liable for the death of Atty. Caorong.
Second. Seizure of Petitioner's Bus not a Case
of Force Majeure
The petitioner contends that the seizure of its
bus by the armed assailants was a fortuitous
event for which it could not be held liable.
Art. 1174 of the Civil Code defines a fortuitous
event as an occurence which could not be
foreseen, is inevitable. In Yobido v. Court of
Appeals, 7 we held that to considered as force
majeure, it is necessary that (1) the cause of
the breach of the obligation must be
independent of the human will; (2) the event
must be either unforeseeable or unavoidable;
(3) the occurence must be render it impossible
for the debtor to fulfill the obligation in a
normal manner; and (4) the obligor must be
free of participation in, or aggravation of, the
injury to the creditor. The absence of any of
the requisites mentioned above would prevent
the obligor from being excused from liability.
Thus, in Vasquez v. Court of Appeals, 8 it was
held that the common carrier was liable for its
failure to take the necessary precautions
against an approaching typhoon, of which it
was warned, resulting in the loss of the lives of
several passengers. The event was
forseeable, and, thus, the second requisite
mentioned above was not fulfilled. This ruling
applies by analogy to the present case.
Despite the report of PC agent Generalao that
the Maranaos were going to attack its buses,
petitioner took no steps to safeguard the lives
and properties of its passengers. The seizure
of the bus of the petitioner was foreseeable
and, therefore, was not a fortuitous event
which would exempt petitioner from liabilty.
Petitioner invokes the ruling in Pilapil v. Court
of Appeals, 9 and De Guzman v. Court of
Appeals, 10 in support of its contention that the
seizure of its bus by the assailants constitutes
force majeure. In Pilapil v. Court of
Appeals, 11 it was held that a common carrier
is not liable for failing to install window grills on
its buses to protect the passengers from
injuries cause by rocks hurled at the bus by
lawless elements. On the other hand, in De
Guzman v. Court of Appeals, 12 it was ruled
that a common carriers is not responsible for
goods lost as a result of a robbery which is
attended by grave or irresistable threat,
violence, or force.
It is clear that the cases of Pilapil and De
Guzman do not apply to the prensent case.
Art. 1755 of the Civil Code provides that "a
common carrier is bound to carry the
passengers as far as human care and
foresight can provide, using the utmost
diligence of very cautious persons, with due
regard for all the circumstances." Thus, we
231
held in Pilapil and De Guzman that the
respondents therein were not negligent in
failing to take special precautions against
threats to the safety of passengers which
could not be foreseen, such as tortious or
criminal acts of third persons. In the present
case, this factor of unforeseeability (the
second requisite for an event to be considered
force majeure) is lacking. As already stated,
despite the report of PC agent Generalao that
the Maranaos were planning to burn some of
petitioner's buses and the assurance of
petitioner's operation manager (Diosdado
Bravo) that the necessary precautions would
be taken, nothing was really done by petitioner
to protect the safety of passengers.
Third. Deceased not Guilty of Contributory
Negligence
The petitioner contends that Atty. Caorong
was guilty of contributory negligence in
returning to the bus to retrieve something. But
Atty. Caorong did not act recklessly. It should
be pointed out that the intended targets of the
violence were petitioners and its employees,
not its passengers. The assailant's motive was
to retaliate for the loss of life of two Maranaos
as a result of the collision between petitioner's
bus and the jeepney in which the two
Maranaos were riding. Mananggolo, the leader
of the group which had hijacked the bus,
ordered the passengers to get off the bus as
they intended to burn it and its driver. The
armed men actually allowed Atty. Caorong to
retrieve something from the bus. What
apparently angered them was his attempt to
help the driver of the bus by pleading for his
life. He was playing the role of the good
Samaritan. Certainly, this act cannot
considered an act of negligence, let alone
recklessness.
Fourth. Petitioner Liable to Private
Respaondents for Damages
We now consider the question of damages
that the heirs of Atty. Caorong, private
respondents herein, are entitled to recover
from the petitioner.
Indemnity for Death. Art. 1764 of the Civil
Code, in relation to Art. 2206 thereof, provides
for the payment of indemnity for the death of
passengers caused by the breach of contract
of carriage by a common carrier. Initially fixed
in Art. 2206 at P3,000.00, the amount of the
said indemnity for death has through the years
been gradually increased in view of the
declining value of the peso. It is presently fixed
at P50,000.00. 13 Private respondents are
entitled to this amount.
Actual Damages. Art. 2199 provides that
"except as provided by law or by stipulation,
one is entitled to an adequate compensation
only for such pecuniary loss suffered by him
as has duly proved." The trial court found that
the private respondents spent P30,000.00 for
the wake and burial of Atty. Caorong. 14 Since
petitioner does not question this finding of the
trial court, it is liable to private respondent in
the said amount as actual damages.
Moral Damages. Under Art. 2206, the "spouse,
legitimate and illegitimate descendants and
ascendants of the deceased may demand
moral damages for mental anguish by reason
of the death of the deceased." The trial court
found that private respondent Paulie Caorong
suffered pain from the death of her husband
and worry on how to provide support for their
minor children, private respondents Yasser
King, Rose Heinni, and Prince
Alexander. 15 The petitioner likewise does not
question this finding of the trial court. Thus, in
accordance with recent decisions of this
Court, 16 we hold that the petitioner is liable to
the private respondents in the amount of
P100,000.00 as moral damages for the death
of Atty. Caorong.
Exemplary Damages. Art. 2232 provides that
"in contracts and quasi-contracts, the court
may award exemplary damages if the
defendant acted in a wanton, fraudulent,
reckless, oppressive, or malevolent reckless
manner." In the present case, the petitioner
acted in a wanton and reckless manner.
Despite warning that the Maranaos were
planning to take revenge against the petitioner
by burning some of its buses, and contary to
the assurance made by its operations
manager that the necessary precautions would
be take, the petitioner and its employees did
nothing to protect the safety of passengers.
Under the circumtances, we deem it
reasonable to award private respondents
exemplary damages in the amount of
P100,000.00.17
Attorney's Fees. Pursuant to Art. 2208,
attorney's fees may be recovered when, as in
the instant case, exemplary damages are
231
awarded. In the recent case of Sulpicio Lines,
Inc. v. Court of Appeals, 18 we held an award
of P50,000.00 as attorney's fees to be
reasonable. Hence, the private respondents
are entitled to attorney's fees in that amount.
Compensation for Loss of Earning Capacity.
Art. 1764 of the Civil Code, in relation to Art.
2206 thereof, provides that in addition to the
indemnity for death arising from the breach of
contrtact of carriage by a common carrier, the
"defendant shall be liable for the loss of the
earning capacity of the deceased, and the
indemnity shall be paid to the heirs of the
latter." The formula established in decided
cases for computing net earning capacity is as
follows:19
Gross Necessary
Net Earning = Life x Annual — Living
Capacity Expectancy Income
Expenses
Life expectancy is equivalent to two thirds
(2/3) multiplied by the difference of eighty (80)
and the age of the deceased. 20 Since Atty.
Caorong was 37 years old at that time of his
death, 21 he had a life expectancy of 28 2/3
more years.22 His projected gross annual
income, computed based on his monthly
salary of P11,385.00. 23 as a lawyer in the
Department of Agrarian Reform at the time of
his death, was P148,005.00. 24 Allowing for
necessary living expenses of fifty percent
(50%) 25 of his projected gross annual income,
his total earning capacity amounts to
P2,121,404.90. 26 Hence, the petitioner is
liable to the private respondents in the said
amount as a compensation for loss of earning
capacity.
WHEREFORE, the decision, dated July 29,
1994, of the Court of Appeals is hereby
AFFIRMED with the MODIFICATION that
petitioner Fortune Express, Inc. is ordered to
pay the following amounts to private
respondents Paulie, Yasser King, Rose
Heinni, and Prince Alexander Caorong:
1. death indemnity in the amount of fifty
thousand pesos (P50,000.00);
2. actual damages in the amount of thirty
thousand pesos (P30,000.00);
3. moral damages in the amount of one
hundred thousand pesos (P100,000.00);
4. exemplary damages in the amount of one
hundred thousand pesos (P100,000.00);
5. attorney's fees in the amount of fifty
thousand pesos (P50,000.00);
6. compensation for loss of earning capacity in
the amount of two million one hundred twenty-
one thousand four hundred four pesos and
ninety centavos (P2,121,404.90); and
7. cost of suits.
SO ORDERED.
Bellosillo, Puno and Buena, JJ., concur.
Quisumbing, J., abroad on official business.
SECOND DIVISION
[G.R. No. 122039. May 31, 2000]
VICENTE CALALAS, petitioner,
vs. 
COURT OF APPEALS, ELIZA JUJEURCHE
SUNGA and FRANCISCO
SALVA, respondents.
D E C I S I ON
MENDOZA, J.:
This is a petition for review on certiorari of the
decision[1] of the Court of Appeals, dated
March 31, 1991, reversing the contrary
decision of the Regional Trial Court, Branch
36, Dumaguete City, and awarding damages
instead to private respondent Eliza Jujeurche
Sunga as plaintiff in an action for breach of
contract of carriage.
The facts, as found by the Court of Appeals,
are as follows:
At 10 oclock in the morning of August 23,
1989, private respondent Eliza Jujeurche G.
Sunga, then a college freshman majoring in
231
Physical Education at the Siliman University,
took a passenger jeepney owned and
operated by petitioner Vicente Calalas. As the
jeepney was filled to capacity of about 24
passengers, Sunga was given by the
conductor an "extension seat," a wooden stool
at the back of the door at the rear end of the
vehicle. Sclaw
On the way to Poblacion Sibulan, Negros
Occidental, the jeepney stopped to let a
passenger off. As she was seated at the rear
of the vehicle, Sunga gave way to the outgoing
passenger. Just as she was doing so, an Isuzu
truck driven by Iglecerio Verena and owned by
Francisco Salva bumped the left rear portion
of the jeepney. As a result, Sunga was injured.
She sustained a fracture of the "distal third of
the left tibia-fibula with severe necrosis of the
underlying skin." Closed reduction of the
fracture, long leg circular casting, and case
wedging were done under sedation. Her
confinement in the hospital lasted from August
23 to September 7, 1989. Her attending
physician, Dr. Danilo V. Oligario, an orthopedic
surgeon, certified she would remain on a cast
for a period of three months and would have to
ambulate in crutches during said period.
On October 9, 1989, Sunga filed a complaint
for damages against Calalas, alleging violation
of the contract of carriage by the former in
failing to exercise the diligence required of him
as a common carrier. Calalas, on the other
hand, filed a third-party complaint against
Francisco Salva, the owner of the Isuzu
truck. Korte
The lower court rendered judgment against
Salva as third-party defendant and absolved
Calalas of liability, holding that it was the driver
of the Isuzu truck who was responsible for the
accident. It took cognizance of another case
(Civil Case No. 3490), filed by Calalas against
Salva and Verena, for quasi-delict, in which
Branch 37 of the same court held Salva and
his driver Verena jointly liable to Calalas for
the damage to his jeepney. Rtcspped
On appeal to the Court of Appeals, the ruling
of the lower court was reversed on the ground
that Sungas cause of action was based on a
contract of carriage, not quasi-delict, and that
the common carrier failed to exercise the
diligence required under the Civil Code. The
appellate court dismissed the third-party
complaint against Salva and adjudged Calalas
liable for damages to Sunga. The dispositive
portion of its decision reads:
WHEREFORE, the decision appealed
from is hereby REVERSED and SET
ASIDE, and another one is entered
ordering defendant-appellee Vicente
Calalas to pay plaintiff-appellant:
(1) P50,000.00 as actual and
compensatory damages;
(2) P50,000.00 as moral damages;
(3) P10,000.00 as attorneys fees; and
(4) P1,000.00 as expenses of litigation;
and
(5) to pay the costs.
SO ORDERED.
Hence, this petition. Petitioner contends that
the ruling in Civil Case No. 3490 that the
negligence of Verena was the proximate
cause of the accident negates his liability and
that to rule otherwise would be to make the
common carrier an insurer of the safety of its
passengers. He contends that the bumping of
the jeepney by the truck owned by Salva was
a caso fortuito. Petitioner further assails the
award of moral damages to Sunga on the
ground that it is not supported by
evidence. Sdaadsc
The petition has no merit.
The argument that Sunga is bound by the
ruling in Civil Case No. 3490 finding the driver
and the owner of the truck liable for quasi-
delict ignores the fact that she was never a
party to that case and, therefore, the principle
of res judicata does not apply. Missdaa
Nor are the issues in Civil Case No. 3490 and
in the present case the same. The issue in
Civil Case No. 3490 was whether Salva and
his driver Verena were liable for quasi-delict
for the damage caused to petitioners jeepney.
On the other hand, the issue in this case is
whether petitioner is liable on his contract of
carriage. The first, quasi-delict, also known
as culpa aquiliana or culpa extra contractual,
has as its source the negligence of the
tortfeasor. The second, breach of contract
231
or culpa contractual, is premised upon the
negligence in the performance of a contractual
obligation.
Consequently, in quasi-delict, the negligence
or fault should be clearly established because
it is the basis of the action, whereas in breach
of contract, the action can be prosecuted
merely by proving the existence of the contract
and the fact that the obligor, in this case the
common carrier, failed to transport his
passenger safely to his destination. [2] In case
of death or injuries to passengers, Art. 1756 of
the Civil Code provides that common carriers
are presumed to have been at fault or to have
acted negligently unless they prove that they
observed extraordinary diligence as defined in
Arts. 1733 and 1755 of the Code. This
provision necessarily shifts to the common
carrier the burden of proof. Slxmis
There is, thus, no basis for the contention that
the ruling in Civil Case No. 3490, finding Salva
and his driver Verena liable for the damage to
petitioners jeepney, should be binding on
Sunga. It is immaterial that the proximate
cause of the collision between the jeepney and
the truck was the negligence of the truck
driver. The doctrine of proximate cause is
applicable only in actions for quasi-delict, not
in actions involving breach of contract. The
doctrine is a device for imputing liability to a
person where there is no relation between him
and another party. In such a case, the
obligation is created by law itself. But, where
there is a pre-existing contractual relation
between the parties, it is the parties
themselves who create the obligation, and the
function of the law is merely to regulate the
relation thus created. Insofar as contracts of
carriage are concerned, some aspects
regulated by the Civil Code are those
respecting the diligence required of common
carriers with regard to the safety of
passengers as well as the presumption of
negligence in cases of death or injury to
passengers. It provides: Slxsc
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
1746, Nos. 5,6, and 7, while the
extraordinary diligence for the safety of
the passengers is further set forth in
articles 1755 and 1756.
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 due regard
for all the circumstances.
Art. 1756. In case of death of or
injuries to passengers, common
carriers are presumed to have been at
fault or to have acted negligently,
unless they prove that they observed
extraordinary diligence as prescribed
by articles 1733 and 1755.
In the case at bar, upon the happening of the
accident, the presumption of negligence at
once arose, and it became the duty of
petitioner to prove that he had to observe
extraordinary diligence in the care of his
passengers. Scslx
Now, did the driver of jeepney carry Sunga
"safely as far as human care and foresight
could provide, using the utmost diligence of
very cautious persons, with due regard for all
the circumstances" as required by Art. 1755?
We do not think so. Several factors militate
against petitioners contention. Slx
First, as found by the Court of Appeals, the
jeepney was not properly parked, its rear
portion being exposed about two meters from
the broad shoulders of the highway, and facing
the middle of the highway in a diagonal angle.
This is a violation of the R.A. No. 4136, as
amended, or the Land Transportation and
Traffic Code, which provides:
Sec. 54. Obstruction of Traffic. - No
person shall drive his motor vehicle in
such a manner as to obstruct or
impede the passage of any vehicle,
nor, while discharging or taking on
passengers or loading or unloading
freight, obstruct the free passage of
other vehicles on the highway.
231
Second, it is undisputed that petitioners driver
took in more passengers than the allowed
seating capacity of the jeepney, a violation of
32(a) of the same law. It provides: Mesm
Exceeding registered capacity. - No
person operating any motor vehicle
shall allow more passengers or more
freight or cargo in his vehicle than its
registered capacity.
The fact that Sunga was seated in an
"extension seat" placed her in a peril greater
than that to which the other passengers were
exposed. Therefore, not only was petitioner
unable to overcome the presumption of
negligence imposed on him for the injury
sustained by Sunga, but also, the evidence
shows he was actually negligent in
transporting passengers. Calrky
We find it hard to give serious thought to
petitioners contention that Sungas taking an
"extension seat" amounted to an implied
assumption of risk. It is akin to arguing that the
injuries to the many victims of the tragedies in
our seas should not be compensated merely
because those passengers assumed a greater
risk of drowning by boarding an overloaded
ferry. This is also true of petitioners contention
that the jeepney being bumped while it was
improperly parked constitutes caso fortuito.
A caso fortuito is an event which could not be
foreseen, or which, though foreseen, was
inevitable.[3] This requires that the following
requirements be present: (a) the cause of the
breach is independent of the debtors will; (b)
the event is unforeseeable or unavoidable; (c)
the event is such as to render it impossible for
the debtor to fulfill his obligation in a normal
manner, and (d) the debtor did not take part in
causing the injury to the creditor.[4] Petitioner
should have foreseen the danger of parking
his jeepney with its body protruding two
meters into the highway. Kycalr
Finally, petitioner challenges the award of
moral damages alleging that it is excessive
and without basis in law. We find this
contention well taken.
In awarding moral damages, the Court of
Appeals stated: Kyle
Plaintiff-appellant at the time of the
accident was a first-year college
student in that school year 1989-1990
at the Silliman University, majoring in
Physical Education. Because of the
injury, she was not able to enroll in the
second semester of that school year.
She testified that she had no more
intention of continuing with her
schooling, because she could not walk
and decided not to pursue her degree,
major in Physical Education "because
of my leg which has a defect already."
Plaintiff-appellant likewise testified that
even while she was under
confinement, she cried in pain because
of her injured left foot. As a result of
her injury, the Orthopedic Surgeon
also certified that she has "residual
bowing of the fracture side." She
likewise decided not to further pursue
Physical Education as her major
subject, because "my left leg x x x has
a defect already."
Those are her physical pains and
moral sufferings, the inevitable
bedfellows of the injuries that she
suffered. Under Article 2219 of the
Civil Code, she is entitled to recover
moral damages in the sum of
P50,000.00, which is fair, just and
reasonable.
As a general rule, moral damages are not
recoverable in actions for damages predicated
on a breach of contract for it is not one of the
items enumerated under Art. 2219 of the Civil
Code.[5] As an exception, such damages are
recoverable: (1) in cases in which the mishap
results in the death of a passenger, as
provided in Art. 1764, in relation to Art.
2206(3) of the Civil Code; and (2) in the cases
in which the carrier is guilty of fraud or bad
faith, as provided in Art. 2220.[6]
In this case, there is no legal basis for
awarding moral damages since there was no
factual finding by the appellate court that
petitioner acted in bad faith in the performance
of the contract of carriage. Sungas contention
that petitioners admission in open court that
the driver of the jeepney failed to assist her in
going to a nearby hospital cannot be
construed as an admission of bad faith. The
fact that it was the driver of the Isuzu truck
who took her to the hospital does not imply
that petitioner was utterly indifferent to the
plight of his injured passenger. If at all, it is
231
merely implied recognition by Verena that he
was the one at fault for the accident. Exsm
WHEREFORE, the decision of the Court of
Appeals, dated March 31, 1995, and its
resolution, dated September 11, 1995, are
AFFIRMED, with the MODIFICATION that the
award of moral damages is DELETED.
SO ORDERED.
Bellosillo, (Chairman), and Buena, JJ., concur.
Quisumbing, and De Leon, Jr., JJ., on leave.
THIRD DIVISION
[G.R. No. 143360. September 5, 2002]
EQUITABLE LEASING
CORPORATION, petitioner,
vs.
LUCITA SUYOM, MARISSA ENANO,
MYRNA TAMAYO and FELIX
OLEDAN, respondents.
DECISION
PANGANIBAN, J.:
In an action based on quasi delict, the
registered owner of a motor vehicle is
solidarily liable for the injuries and damages
caused by the negligence of the driver, in spite
of the fact that the vehicle may have already
been the subject of an unregistered Deed of
Sale in favor of another person. Unless
registered with the Land Transportation Office,
the sale -- while valid and binding between the
parties -- does not affect third parties,
especially the victims of accidents involving
the said transport equipment. Thus, in the
present case, petitioner, which is the
registered owner, is liable for the acts of the
driver employed by its former lessee who has
become the owner of that vehicle by virtue of
an unregistered Deed of Sale.
Statement of the Case
Before us is a Petition for Review under
Rule 45 of the Rules of Court, assailing the
May 12, 2000 Decision[1] of the Court of
Appeals[2] (CA) in CA-GR CV No. 55474. The
decretal portion of the Decision reads as
follows:
WHEREFORE, premises considered, the
instant appeal is hereby DISMISSED for lack
of merit. The assailed decision, dated May 5,
1997, of the Regional Trial Court of Manila,
Branch 14, in Civil Case No. 95-73522, is
hereby AFFIRMED with MODIFICATION that
the award of attorneys fees is DELETED.[3]
On the other hand, in Civil Case No. 95-
73522, the Regional Trial Court (RTC) of
Manila (Branch 14) had earlier disposed in this
wise:
WHEREFORE, judgment is hereby rendered
in favor of the plaintiffs and against the
defendant Equitable Leasing Corporation
ordering said defendant to pay to the plaintiffs
the following:
A. TO MYRNA TAMAYO
1. the sum of P50,000.00 for the death of
Reniel Tamayo;
2. P50,000.00 as moral damages; and
3. P56,000.00 for the damage to the store and
its contents, and funeral expenses.
B. TO FELIX OLEDAN
1. the sum of P50,000.00 for the death of
Felmarie Oledan;
2. P50,000.00 as moral damages; and
3. P30,000.00 for medical expenses, and
funeral expenses.
C. TO MARISSA ENANO
1. P7,000.00 as actual damages
D. TO LUCITA SUYOM
1. The sum of P5,000.00 for the medical
treatment of her two sons.
The sum of P120,000.00 as and for attorneys
fees.[4]
231
 The Facts
On July 17, 1994, a Fuso Road Tractor
driven by Raul Tutor rammed into the house
cum store of Myrna Tamayo located at Pier
18, Vitas, Tondo, Manila. A portion of the
house was destroyed. Pinned to death under
the engine of the tractor were Respondent
Myrna Tamayos son, Reniel Tamayo, and
Respondent Felix Oledans daughter, Felmarie
Oledan. Injured were Respondent Oledan
himself, Respondent Marissa Enano, and two
sons of Respondent Lucita Suyom.
Tutor was charged with and later
convicted of reckless imprudence resulting in
multiple homicide and multiple physical injuries
in Criminal Case No. 296094-SA, Metropolitan
Trial Court of Manila, Branch 12.[5]
Upon verification with the Land
Transportation Office, respondents were
furnished a copy of Official Receipt No.
62204139[6] and Certificate of Registration No.
08262797,[7] showing that the registered owner
of the tractor was Equitable Leasing
Corporation/leased to Edwin Lim. On April 15,
1995, respondents filed against Raul Tutor,
Ecatine Corporation (Ecatine) and Equitable
Leasing Corporation (Equitable) a and held that petitioner [was] liable for
Complaint[8] for damages docketed as Civil
Case No. 95-73522 in the RTC of Manila,
Branch 14.
The trial court, upon motion of plaintiffs
counsel, issued an Order dropping Raul Tutor,
Ecatine and Edwin Lim from the Complaint,
because they could not be located and served
with summonses.[9] On the other hand, in its
Answer with Counterclaim, [10] petitioner alleged
that the vehicle had already been sold to
Ecatine and that the former was no longer in
possession and control thereof at the time of
the incident. It also claimed that Tutor was an
employee, not of Equitable, but of Ecatine.
After trial on the merits, the RTC rendered
its Decision ordering petitioner to pay actual
and moral damages and attorneys fees to
respondents. It held that since the Deed of
Sale between petitioner and Ecatine had not
been registered with the Land Transportation
Office (LTO), the legal owner was still
Equitable.[11] Thus, petitioner was liable to
respondents.[12]
Ruling of the Court of Appeals
Sustaining the RTC, the CA held that
petitioner was still to be legally deemed the
owner/operator of the tractor, even if that
vehicle had been the subject of a Deed of Sale
in favor of Ecatine on December 9, 1992. The
reason cited by the CA was that the Certificate
of Registration on file with the LTO still
remained in petitioners name. [13] In order that a
transfer of ownership of a motor vehicle can
bind third persons, it must be duly recorded in
the LTO.[14]
The CA likewise upheld respondents
claim for moral damages against petitioner
because the appellate court considered Tutor,
the driver of the tractor, to be an agent of the
registered owner/operator.[15]
Hence, this Petition.[16]
Issues
In its Memorandum, petitioner raises the
following issues for the Courts consideration:
I
Whether or not the Court of Appeals and the
trial court gravely erred when they decided
damages suffered by private respondents in
an action based on quasi delict for the
negligent acts of a driver who [was] not the
employee of the petitioner.
II
Whether or not the Court of Appeals and the
trial court gravely erred when they awarded
moral damages to private respondents despite
their failure to prove that the injuries they
suffered were brought by petitioners wrongful
act.[17]
This Courts Ruling
The Petition has no merit.
First Issue:
Liability for Wrongful Acts
Petitioner contends that it should not be
held liable for the damages sustained by
respondents and that arose from the
negligence of the driver of the Fuso Road
Tractor, which it had already sold to Ecatine at
231
the time of the accident. Not having employed
Raul Tutor, the driver of the vehicle, it could
not have controlled or supervised him.[18]
We are not persuaded. In negligence
cases, the aggrieved party may sue the
negligent party under (1) Article 100[19] of the
Revised Penal Code, for civil liability ex
delicto; or (2) under Article 2176 [20] of the Civil
Code, for civil liability ex quasi delicto.[21]
Furthermore, under Article 103 of the
Revised Penal Code, employers may be
held subsidiarily liable for felonies committed
by their employees in the discharge of the
latters duties.[22]This liability attaches when the
employees who are convicted of crimes
committed in the performance of their work are
found to be insolvent and are thus unable to
satisfy the civil liability adjudged.[23]
On the other hand, under Article 2176 in
relation to Article 2180 [24] of the Civil Code, an
action predicated on quasi delict may be
instituted against the employer for an
employees act or omission. The liability for the
negligent conduct of the subordinate
is direct and primary, but is subject to the
defense of due diligence in the selection and
supervision of the employee.[25]The
enforcement of the judgment against the
employer for an action based on Article 2176
does not require the employee to be insolvent,
since the liability of the former is solidary -- the
latter being statutorily considered a joint
tortfeasor.[26] To sustain a claim based on
quasi delict, the following requisites must be
proven: (a) damage suffered by the plaintiff,
(b) fault or negligence of the defendant, and
(c) connection of cause and effect between the
fault or negligence of the defendant and the
damage incurred by the plaintiff. [27]
These two causes of action (ex
delicto or ex quasi delicto) may be availed
of, subject to the caveat[28] that the offended
party cannot recover damages twice for the
same act or omission or under both causes.
[29]
 Since these two civil liabilities are distinct
and independent of each other, the failure to
recover in one will not necessarily preclude
recovery in the other.[30]
In the instant case, respondents -- having
failed to recover anything in the criminal case
-- elected to file a separate civil action for
damages, based on quasi delict under Article
2176 of the Civil Code.[31] The evidence is
clear that the deaths and the injuries suffered
by respondents and their kins were due to the
fault of the driver of the Fuso tractor.
Dated June 4, 1991, the Lease
Agreement[32] between petitioner and Edwin
Lim stipulated that it is the intention of the
parties to enter into a FINANCE LEASE
AGREEMENT.[33] Under such scheme,
ownership of the subject tractor was to be
registered in the name of petitioner, until the
value of the vehicle has been fully paid by
Edwin Lim.[34] Further, in the Lease Schedule,
[35]
 the monthly rental for the tractor was
stipulated, and the term of the Lease was
scheduled to expire on December 4, 1992.
After a few months, Lim completed the
payments to cover the full price of the tractor.
[36]
 Thus, on December 9, 1992, a Deed of
Sale[37] over the tractor was executed by
petitioner in favor of Ecatine represented by
Edwin Lim. However, the Deed was not
registered with the LTO.
We hold petitioner liable for the deaths
and the injuries complained of, because it was
the registered owner of the tractor at the time
of the accident on July 17, 1994. [38] The Court
has consistently ruled that, regardless of sales
made of a motor vehicle, the registered owner
is the lawful operator insofar as the public and
third persons are concerned; consequently, it
is directly and primarily responsible for the
consequences of its operation. [39] In
contemplation of law, the owner/operator of
record is the employer of the driver, the actual
operator and employer being considered as
merely its agent.[40] The same principle applies
even if the registered owner of any vehicle
does not use it for public service.[41]
Since Equitable remained the registered
owner of the tractor, it could not escape
primary liability for the deaths and the injuries
arising from the negligence of the driver.[42]
The finance-lease agreement between
Equitable on the one hand and Lim or Ecatine
on the other has already been superseded by
the sale. In any event, it does not bind third
persons. The rationale for this rule has been
aptly explained in Erezo v. Jepte,[43] which we
quote hereunder:
x x x. The main aim of motor vehicle
registration is to identify the owner so that if
any accident happens, or that any damage or
injury is caused by the vehicle on the public
highways, responsibility therefor can be fixed
on a definite individual, the registered
231
owner. Instances are numerous where
vehicles running on public highways caused
accidents or injuries to pedestrians or other
vehicles without positive identification of the
owner or drivers, or with very scant means of
identification. It is to forestall these
circumstances, so inconvenient or prejudicial
to the public, that the motor vehicle registration
is primarily ordained, in the interest of the
determination of persons responsible for
damages or injuries caused on public
highways.[44]
Further, petitioners insistence on FGU
Insurance Corp. v. Court of Appeals is
misplaced.[45] First, in FGU Insurance, the
registered vehicle owner, which was engaged
in a rent-a-car business, rented out the car. In
this case, the registered owner of the truck,
which is engaged in the business of financing
motor vehicle acquisitions, has actually sold
the truck to Ecatine, which in turn employed
Tutor. Second, in FGU Insurance, the
registered owner of the vehicle was not held
responsible for the negligent acts of the
person who rented one of its cars, because
Article 2180 of the Civil Code was not
applicable. We held that no vinculum juris as
employer and employee existed between the
owner and the driver.[46] In this case, the
registered owner of the tractor is considered
under the law to be the employer of the driver,
while the actual operator is deemed to be
its agent.[47] Thus, Equitable, the registered
owner of the tractor, is -- for purposes of the
law on quasi delict -- the employer of Raul
Tutor, the driver of the tractor. Ecatine, Tutors
actual employer, is deemed as merely an
agent of Equitable.[48]
True, the LTO Certificate of Registration,
dated 5/31/91, qualifies the name of the
registered owner as EQUITABLE LEASING
CORPORATION/Leased to Edwin Lim. But the
lease agreement between Equitable and Lim
has been overtaken by the Deed of Sale on
December 9, 1992, between petitioner and
Ecatine. While this Deed does not affect
respondents in this quasi delict suit, it
definitely binds petitioner because, unlike
them, it is a party to it.
We must stress that the failure of
Equitable and/or Ecatine to register the sale
with the LTO should not prejudice
respondents, who have the legal right to rely
on the legal principle that the registered
vehicle owner is liable for the damages caused
by the negligence of the driver. Petitioner
cannot hide behind its allegation that Tutor
was the employee of Ecatine. This will
effectively prevent respondents from
recovering their losses on the basis of the
inaction or fault of petitioner in failing to
register the sale. The non-registration is the
fault of petitioner, which should thus face the
legal consequences thereof.
Second Issue:
Moral Damages
Petitioner further claims that it is not liable
for moral damages, because respondents
failed to establish or show the causal
connection or relation between the factual
basis of their claim and their wrongful act or
omission, if any. [49]
Moral damages are not punitive in nature,
but are designed to compensate [50] and
alleviate in some way the physical suffering,
mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings,
moral shock, social humiliation, and similar
injury unjustly caused a person. [51] Although
incapable of pecuniary computation, moral
damages must nevertheless be somehow
proportional to and in approximation of the
suffering inflicted.[52] This is so because moral
damages are in the category of an award
designed to compensate the claimant for
actual injury suffered, not to impose a penalty
on the wrongdoer.[53]
Viewed as an action for quasi delict, the
present case falls squarely within the purview
of Article 2219 (2),[54] which provides for the
payment of moral damages in cases of quasi
delict.[55] Having established the liability of
petitioner as the registered owner of the
vehicle,[56] respondents have satisfactorily
shown the existence of the factual basis for
the award[57] and its causal connection to the
acts of Raul Tutor, who is deemed as
petitioners employee.[58] Indeed, the damages
and injuries suffered by respondents were the
proximate result of petitioners tortious act or
omission.[59]
Further, no proof of pecuniary loss is
necessary in order that moral damages may
be awarded, the amount of indemnity being
left to the discretion of the court. [60] The
evidence gives no ground for doubt that such
discretion was properly and judiciously
exercised by the trial court. [61] The award is in
fact consistent with the rule that moral
damages are not intended to enrich the injured
231
party, but to alleviate the moral suffering
undergone by that party by reason of the
defendants culpable action.[62]
WHEREFORE, the Petition
is DENIED and the assailed
Decision AFFIRMED. Costs against petitioner.
SO ORDERED.
Puno, (Chairman), Corona, and Carpio-
Morales, JJ., concur.
Sandoval-Gutierrez, J., on leave.
THIRD DIVISION
March 15, 2017
G.R. No. 164749
ROMULO ABROGAR and ERLINDA
ABROGAR, Petitioners  as the "1st Pop Cola Junior Marathon"
vs
COSMOS BOTTLING COMPANY and
INTERGAMES, INC., Respondents
DECISION
BERSAMIN, J.:
This case involves a claim for damages arising
from the negligence causing the death of a
participant in an organized marathon bumped
by a passenger jeepney on the route of the
race. The issues revolve on whether the
organizer and the sponsor of the marathon
were guilty of negligence, and, if so, was their
negligence the proximate cause of the death
of the participant; on whether the negligence
of the driver of the passenger jeepney was an
efficient intervening cause; on whether the
doctrine of assumption of risk was applicable
to the fatality; and on whether the heirs of the
fatality can recover damages for loss of
earning capacity of the latter who, being then a
minor, had no gainful employment.
The Case
By this appeal, the parents of the late Rommel
Abrogar (Rommel), a marathon runner, seek
the review and reversal of the decision
promulgated on March l 0, 2004, 1 whereby the
Court of Appeals (CA) reversed and set aside
the judgment rendered in their favor on May
10, 1991 by the Regional Trial Court (RTC),
Branch 83, in Quezon City2finding and
declaring respondents Cosmos Bottling
Company (Cosmos), a domestic soft-drinks
company whose products included Pop Cola,
and Intergames, Inc. (Intergames), also a
domestic corporation organizing and
supervising the 1st Pop Cola Junior Marathon"
held on June 15, 1980 in Quezon City,
solidarily liable for damages arising from the
untimely death of Rommel, then a minor 18
years of age,3 after being bumped by a
recklessly driven passenger jeepney along the
route of the marathon.
Antecedents
The CA narrated the antecedents in the
assailed judgment,4 viz.:
[T]o promote the sales of "Pop Cola",
defendant Cosmos, jointly with Intergames,
organized an endurance running contest billed
scheduled to be held on June 15, 1980. The
organizers plotted a 10-kilometer course
starting from the premises of the Interim
Batasang Pambansa (IBP for brevity), through
public roads and streets, to end at the Quezon
Memorial Circle. Plaintiffs' son Rommel
applied with the defendants to be allowed to
participate in the contest and after complying
with defendants' requirements, his application
was accepted and he was given an official
number. Consequently, on June 15, 1980 at
the designated time of the marathon, Rommel
joined the other participants and ran the
course plotted by the defendants. As it turned
out, the plaintiffs' (sic) further alleged, the
231
defendants failed to provide adequate safety
and precautionary measures and to exercise
the diligence required of them by the nature of
their undertaking, in that they failed to insulate
and protect the participants of the marathon
from the vehicular and other dangers along the
marathon route. Rommel was bumped by a
jeepney that was then running along the route
of the marathon on Don Mariano Marcos A
venue (DMMA for brevity), and in spite of
medical treatment given to him at the Ospital
ng Bagong Lipunan, he died later that same
day due to severe head injuries.
On October 28, 1980, the petitioners sued the
respondents in the then Court of First Instance
of Rizal (Quezon City) to recover various
damages for the untimely death of
Rommel (i.e., actual and compensatory
damages, loss of earning capacity, moral
damages, exemplary damages, attorney's fees
and expenses oflitigation).5
Cosmos denied liability, insisting that it had not
been the organizer of the marathon, but only
its sponsor; that its participation had been
limited to providing financial assistance to
Intergames;6 that the financial assistance it
had extended to Intergames, the sole
organizer of the marathon, had been in answer
to the Government's call to the private sector
to help promote sports development and
physical fitness;7 that the petitioners had no
cause of action against it because there was
no privity of contract between the participants
in the marathon and Cosmos; and that it had
nothing to do with the organization, operation
and running of the event.8
As counterclaim, Cosmos sought attorney's
fees and expenses of litigation from the
petitioners for their being unwarrantedly
included as a defendant in the case. It averred
a cross-claim against Intergames, stating that
the latter had guaranteed to hold Cosmos
"completely free and harmless from any claim
or action for liability for any injuries or bodily
harm which may be sustained by any of the
entries in the '1st Pop Cola Junior Marathon'
or for any damage to the property or properties
of third parties, which may likewise arise in the
course of the race."9 Thus, Cosmos sought to
hold Intergames solely liable should the claim
of the petitioners prosper.10
On its part, Intergames asserted that
Rommel's death had been an accident
exclusively caused by the negligence of the
jeepney driver; that it was not responsible for
the accident; that as the marathon organizer, it
did not assume the responsibilities of an
insurer of the safety of the participants; that it
nevertheless caused the participants to be
covered with accident insurance, but the
petitioners refused to accept the proceeds
thereof;11 that there could be no cause of
action against it because the acceptance and
approval of Rommel's application to join the
marathon had been conditioned on his waiver
of all rights and causes of action arising from
his participation in the marathon; 12 that it
exercised due diligence in the conduct of the
race that the circumstances called for and was
appropriate, it having availed of all its know-
how and expertise, including the adoption and
implementation of all known and possible
safety and precautionary measures in order to
protect the participants from injuries arising
from vehicular and other forms of
accidents;13 and, accordingly, the complaint
should be dismissed.
In their reply and answer to counterclaim, the
petitioners averred that contrary to its claims,
Intergames did not provide adequate
measures for the safety and protection of the
race participants, considering that motor
vehicles were traversing the race route and
the participants were made to run along the
flow of traffic, instead of against it; that
Intergames did not provide adequate traffic
marshals to secure the safety and protection
of the participants;14that Intergames could not
limit its liability on the basis of the accident
insurance policies it had secured to cover the
race participants; that the waiver signed by
Rommel could not be a basis for denying
liability because the same was null and void
for being contrary to law, morals, customs and
public policy;15 that their complaint sufficiently
stated a cause of action because in no way
could they be held liable for attorney's fees,
litigation expenses or any other relief due to
their having abided by the law and having
acted honestly, fairly, in good faith by
according to Intergames its due, as demanded
by the facts and circumstances.16
At the pre-trial held on April 12, 1981, the
parties agreed that the principal issue was
whether or not Cosmos and lntergames were
liable for the death of Rommel because of
negligence in conducting the marathon.17
231
 Judgment of the RTC
In its decision dated May 10, 1991, 18 the RTC
ruled as follows:
WHEREFORE, judgment is hereby rendered
in favor of plaintiffs-spouses Romulo Abrogar
and Erlinda Abrogar and against defendants
Cosmos Bottling Company, Inc. and
Intergames, Inc., ordering both defendants,
jointly and severally, to pay and deliver to the
plaintiffs the amounts of Twenty Eight
Thousand Sixty One Pesos and Sixty Three
Centavos (₱28,061.63) as actual damages;
One Hundred Thousand Pesos (₱100,000.00)
as moral damages; Fifty Thousand Pesos
(₱50,000.00) as exemplary damages and Ten
Percent (10%) of the total amount of One
Hundred Seventy Eight Thousand Sixty One
Pesos and Sixty Three Centavos
(₱178,061,63) or Seventeen Thousand Eight
Hundred Six Pesos and Sixteen Centavos
(₱17,806.16) as attorney's fees.
On the cross-claim of defendant Cosmos
Bottling Company, Inc., defendant Intergames,
Inc, is hereby ordered to reimburse to the
former any and all amounts which may be
recovered by the plaintiffs from it by virtue of
this Decision.
SO ORDERED.
The RTC observed that the safeguards
allegedly instituted by Intergames in
conducting the marathon had fallen short of
the yardstick to satisfy the requirements of due
diligence as called for by and appropriate
under the circumstances; that the accident had
happened because of inadequate preparation
and Intergames' failure to exercise due
diligence;19 that the respondents could not be
excused from liability by hiding behind the
waiver executed by Rommel and the
permission given to him by his parents
because the waiver could only be effective for
risks inherent in the marathon, such a:s
stumbling, heat stroke, heart attack during the
race, severe exhaustion and similar
occurrences;20 that the liability of the
respondents towards the participants and third
persons was solidary, because Cosmos, the
sponsor of the event, had been the principal
mover of the event, and, as such, had derived
benefits from the marathon that in turn had
carried responsibilities towards the participants
and the public; that the respondents'
agreement to free Cosmos from any liability
had been an agreement binding only between
them, and did not bind third persons; and that
Cosmos had a cause of action against
Intergames for whatever could be recovered
by the petitioners from Cosmos.21
Decision of the CA
All the parties appealed to the CA.
The petitioners contended that the RTC erred
in not awarding damages for loss of earning
capacity on the part of Rommel for the reason
that such damages were not recoverable due
to Rommel not yet having finished his
schooling; and that it would be premature to
award such damages upon the assumption
that he would finish college and be gainfully
employed.22
On their part, Cosmos and Intergames
separately raised essentially similar errors on
the part of the RTC, to wit: (1) in holding them
liable for the death of Rommel; (2) in finding
them negligent in conducting the marathon; (3)
in holding that Rommel and his parents did not
assume the risks of the marathon; (4) in not
holding that the sole and proximate cause of
the death of Rommel was the negligence of
the jeepney driver; and (5) in making them
liable, jointly and solidarily, for damages,
attorney's fees and expenses of litigation.23
The CA reduced the issues to four, namely:
1. Whether or not appellant Intergames was
negligent in its conduct of the "1 st Pop Cola
Junior Marathon" held on June 15, 1980 and if
so, whether its negligence was the proximate
cause of the death of Rommel Abrogar.
2. Whether or not appellant Cosmos can be
held jointly and solidarily liable with appellant
Intergames for the death of Rommel Abrogar,
assuming that appellant Intergames is found to
have been negligent in the conduct of the Pop
Cola marathon and such negligence was the
proximate cause of the death of Rommel
Abrogar.
3. Whether or not the appellants Abrogar are
entitled to be compensated for the "loss of
earning capacity" of their son Rommel.
231
4. Whether or not the appellants Abrogar are
entitled to the actual, moral, and exemplary
damages granted to them by the Trial Court.24
In its assailed judgment promulgated on March
10, 2004,25 the CA ruled as follows:
As to the first issue, this Court finds that
appellant Intergames was not negligent in
organizing the said marathon.
Negligence is the omission to do something
which a reasonable man, guided upon those
considerations which ordinarily regulate the
conduct to human affairs, would do, or doing
something which a prudent and reasonable
man would not do.
The whole theory of negligence presuppose
some uniform standard of behavior which must
be an external and objective one, rather than
the individual judgment good or bad, of the
particular actor; it must be, as far as possible,
the same for all persons; and at the same time
make proper allowance for the risk apparent to
the actor for his capacity to meet it, and for the
circumstances under which he must act.
The question as to what would constitute the
conduct of a prudent man in a given situation
must of course be always determined in the
light of human experience and of the acts
involved in the particular case.
In the case at bar, the trial court erred in
finding that the appellant Intergames failed to
satisfy the requirements of due diligence in the
conduct of the race.
The trial court in its decision said that the
accident in question could have been avoided
if the route of the marathon was blocked off
from the regular traffic, instead of allowing the
runners to run together with the flow of traffic.
Thus, the said court considered the appellant
Intergames at fault for proceeding with the
marathon despite the fact that the Northern
Police District, MPF, Quezon City did not allow
the road to be blocked off from traffic.
This Court finds that the standard of conduct
used by the trial court is not the ordinary
conduct of a prudent man in such a given
situation. According to the said court, the only
way to conduct a safe road race is to block off
the traffic for the duration of the event and
direct the cars and public utilities to take
alternative routes in the meantime that the
marathon event is being held. Such standard
is too high and is even inapplicable in the case
at bar because, there is no alternative route
from IBP to Don Mariano Marcos to Quezon
City Hall.
The Civil Code provides that if the law or
contract does not state the diligence which is
to be observed in the performance of an
obligation that which is expected of a good
father of the family shall only be required.
Accordingly, appellant Intergames is only
bound to exercise the degree of care that
would be exercised by an ordinarily careful
and prudent man in the same position and
circumstances and not that of the cautious
man of more than average prudence. Hence,
appellant Intergames is only expected to
observe ordinary diligence and not
extraordinary diligence.
In this case, the marathon was allowed by the
Northern Police District, MPF, Quezon City on
the condition that the road should not be
blocked off from traffic. Appellant Intergames
had no choice. It had to comply with it or else
the said marathon would not be allowed at all.
The trial court erred in contending that
appellant Intergames should have looked for
alternative places in Metro Manila given the
condition set by the Northern Police District,
MPF, Quezon City; precisely because as Mr.
Jose Castro has testified the said route was
found to be the best route after a careful study
and consideration of all the factors involved.
Having conducted several marathon events in
said route, appellant Intergames as well as the
volunteer groups and the other agencies
involved were in fact familiar with the said
route. And assuming that there was an
alternative place suitable for the said race, the
question is would they be allowed to block off
the said road from traffic?
Also, the trial court erred in stating that there
was no adequate number of marshals, police
officers and personnel to man the race so as
to prevent injury to the participants.
The general rule is that the party who relies on
negligence for his cause of action has the
burden of proving the existence of the same,
otherwise his action fails.
231
Here, the appellants-spouses failed to prove
that there was inadequate number of
marshals, police officers, and personnel
because they failed to prove what number is
considered adequate.
This court considers that seven (7) traffic
operatives, five (5) motorcycle policemen,
fifteen (15) patrolmen deployed along the
route, fifteen (15) boyscouts, twelve (12) CA
Ts, twenty (20) barangay tanods, three (3)
ambulances and three (3) medical teams were
sufficient to stage a safe marathon.
Moreover, the failure of Mr. Jose R. Castro, Jr.
to produce records of the lists of those
constituting the volunteer help during the
marathon is not fatal to the case considering
that one of the volunteers, Victor Landingin of
the Citizens Traffic Action (CTA) testified in
court that CTA fielded five units on June 15,
1980, assigned as follows: (1) at the sphere
head; (2) at the finish line; (3) tail ender; (4) &
(5) roving.
The trial court again erred in concluding that
the admission of P/Lt. Jesus Lipana, head of
the traffic policemen assigned at the
marathon, that he showed up only at the finish
line means that he did not bother to check on
his men and did not give them appropriate
instructions. P/Lt. Lipana in his testimony
explained that he did not need to be in the
start of the race because he had
predesignated another capable police officer
to start the race.
In addition, this Court finds that the
precautionary measures and preparations
adopted by appellant Intergames were
sufficient considering the circumstances
surrounding the case.
Appellant Intergames, using its previous
experiences in conducting safe and successful
road races, took all the necessary precautions
and made all the preparations for the race.
The initial preparations included: determination
of the route to be taken; and an ocular
inspection of the same to see if it was well-
paved, whether it had less corners for easy
communication and coordination, and whether
it was wide enough to accommodate runners
and transportation. Appellant Intergames
choose the Don Mariano Marcos Avenue
primarily because it was well-paved; had wide
lanes to accommodate runners and vehicular
traffic; had less corners thus facilitating easy
communication and coordination among the
organizers and cooperating agencies; and was
familiar to the race organizers and operating
agencies. The race covered a ten-kilometer
course from the IBP lane to the Quezon City
Hall Compound passing through the Don
Mariano Marcos A venue, which constituted
the main stretch of the route. Appellant
Intergames scheduled the marathon on a
Sunday morning, when traffic along the route
was at its lightest. Permission was sought from
the then Quezon City Mayor Adelina
Rodriguez for the use of the Quezon City Hall
Grandstand and the street fronting it as the
finish line. Police assistance was also obtained
to control and supervise the traffic. The
Quezon City Traffic Detachment took charge
of traffic control by assigning policemen to the
traffic route. The particular unit assigned
during the race underwent extensive training
and had been involved in past marathons,
including marathons in highly crowded areas.
The Philippine Boy Scouts tasked to assist the
police and monitor the progress of the race;
and Citizens Traffic Action Group tasked with
the monitoring of the race, which assigned five
units consisting of ten operatives, to provide
communication and assistance were likewise
obtained. Finally, medical equipments and
personnel were also requested from Camp
Aguinaldo, the Philippine Red Cross and the
Hospital ng Bagong Lipunan.
Neither does this Court find the appellant
Intergames' conduct of the marathon the
proximate cause of the death of Rommel
Abrogar. Proximate cause has been defined
as that which, in natural and continuous
sequence, unbroken by any efficient
intervening cause, produces injury, and
without which the result would not have
occurred.
It appears that Rommel Abrogar, while running
on Don Mariano Marcos A venue and after
passing the Philippine Atomic Energy
Commission Building, was bumped by a
jeepney which apparently was racing against a
minibus and the two vehicles were trying to
crowd each other. In fact, a criminal case was
filed against the jeepney driver by reason of
his having killed Rommel Abrogar.
This proves that the death of Rommel Abrogar
was caused by the negligence of the jeepney
driver. Rommel Abrogar cannot be faulted
231
because he was performing a legal act; the
marathon was conducted with the permission
and approval of all the city officials involved.
He had the right to be there. Neither can the
appellant Intergames be faulted, as the
organizer of the said marathon, because it was
not negligent in conducting the marathon.
Given the facts of this case, We believe that
no amount of precaution can prevent such an
accident. Even if there were fences or barriers
to separate the lanes for the runners and for
the vehicles, it would not prevent such an
accident in the event that a negligent driver
loses control of his vehicle. And even if the
road was blocked off from traffic, it would still
not prevent such an accident, if a jeepney
driver on the other side of the road races with
another vehicle loses control of his wheel and
as a result hits a person on the other side of
the road. Another way of saying this is: A
defendant's tort cannot be considered a legal
cause of plaintiffs damage if that damage
would have occurred just the same even
though the defendant's tort had not been
committed.
This Court also finds the doctrine of
assumption of risk applicable in the case at
bar. As explained by a well-known authority on
torts:
"The general principle underlying the defense
of assumption of risk is that a plaintiff who
voluntarily assumes a risk of harm arising from
the negligent or reckless conduct of the
defendant cannot recover for such harm. The
defense may arise where a plaintiff, by
contract or otherwise, expressly agrees to
accept a risk or harm arising from the
defendant's conduct, or where a plaintiff who
fully understands a risk or harm caused by the
defendant's conduct, or by a condition created
by the defendant, voluntarily chooses to enter
or remain, or to permit his property to enter or
remain, within the area of such risk, under
circumstances manifesting his willingness to
accept the risk.
xxxx
"Assumption of the risk in its primary sense
arises by assuming through contract, which
may be implied, the risk of a known danger. Its
essence is venturousness. It implies
intentional exposure to a known danger; It
embraces a mental state of willingness; It
pertains to the preliminary conduct of getting
into a dangerous employment or relationship,
it means voluntary incurring the risk of an
accident, which may or may not occur, and
which the person assuming the risk may be
careful to avoid; and it defeats recovery
because it is a previous abandonment of the
right to complain if an accident occurs.
"Of course, if the defense is predicated upon
an express agreement the agreement must be
valid, and in the light of this qualification the
rule has been stated that a plaintiff who, by
contract or otherwise, expressly agreed to
accept a risk of harm arising from the
defendant's negligent or reckless conduct,
cannot recover for such harm unless the
agreement is invalid as contrary to public
policy.
xxxx
"The defense of assumption of risk
presupposes: (1) that the plaintiff had actual
knowledge of the danger; (2) that he
understood and appreciated the risk from the
danger; and (3) that he voluntarily exposed
himself to such risk. x x x
"The term 'risk' as used in this connection
applies to known dangers, and not to things
from which danger may possibly flow. The risk
referred to is the particular risk, or one of the
risks, which the plaintiff accepted within the
context of the situation in which he placed
himself and the question is whether the
specific conduct or condition which caused the
injury was such a risk."
In this case, appellant Romulo Abrogar himself
admitted that his son, Rommel Abrogar,
surveyed the route of the marathon and even
attended a briefing before the race.
Consequently, he was aware that the
marathon would pass through a national road
and that the said road would not be blocked off
from traffic. And considering that he was
already eighteen years of age, had voluntarily
participated in the marathon, with his parents'
consent, and was well aware of the traffic
hazards along the route, he thereby assumed
all the risks of the race. This is precisely why
permission from the participant's parents,
submission of a medical certificate and a
waiver of all rights and causes of action arising
from the participation in the marathon which
the participant or his heirs may have against
231
appellant Intergames were required as
conditions in joining the marathon.
In the decision of the trial court, it stated that
the risk mentioned in the waiver signed by
Rommel Abrogar only involved risks such as
stumbling, suffering heatstroke, heart attack
and other similar risks. It did not consider
vehicular accident as one of the risks included
in the said waiver.
This Court does not agree. With respect to
voluntary participation in a sport, the doctrine
of assumption of risk applies to any facet of
the activity inherent in it and to any open and
obvious condition of the place where it is
carried on. We believe that the waiver included
vehicular accidents for the simple reason that
it was a road race run on public roads used by
vehicles. Thus, it cannot be denied that
vehicular accidents are involved. It was not a
track race which is held on an oval and
insulated from vehicular traffic. In a road race,
there is always the risk of runners being hit by
motor vehicles while they train or compete.
That risk is inherent in the sport and known to
runners. It is a risk they assume every time
they voluntarily engage in their sport.
Furthermore, where a person voluntarily
participates in a lawful game or contest, he
assumes the ordinary risks of such game or
contest so as to preclude recovery from the
promoter or operator of the game or contest
for injury or death resulting therefrom.
Proprietors of amusements or of places where
sports and games are played are not insurers
of safety of the public nor of their patrons.
In McLeod Store v. Vinson 213 Ky 667, 281
SW 799 (1926), it was held that a boy,
seventeen years of age, of ordinary
intelligence and physique, who entered a race
conducted by a department store, the purpose
of which was to secure guinea fowl which
could be turned in for cash prizes, had
assumed the ordinary risks incident thereto
and was barred from recovering against the
department store for injuries suffered when,
within catching distance, he stopped to catch a
guinea, and was tripped or stumbled and fell to
the pavement, six or eight others falling upon
him. The court further said: "In this (the race)
he was a voluntary participant. xxx The
anticipated danger was as obvious to him as it
was to appellant (the department store). While
not an adult, he was practically 17 years of
age, of ordinary intelligence, and perfectly able
to determine the risks ordinarily incident to
such games. An ordinary boy of that age is
practically as well advised as to the hazards of
baseball, basketball, football, foot races and
other games of skill and endurance as is an
adult x x x."
In the case at bar, the "1st Pop Cola Junior
Marathon" held on June 15, 1980 was a race
the winner of which was to represent the
country in the annual Spirit of Pheidippides
Marathon Classic in Greece, if he equals or
breaks the 29-minute mark for the 10-km.
race. Thus, Rommel Abrogar having
voluntarily participated in the race, with his
parents' consent, assumed all the risks of the
race.
Anent the second issue, this Court finds that
appellant Cosmos must also be absolved from
any liability in the instant case.
This Court finds that the trial court erred in
holding appellant Cosmos liable for being the
principal mover and resultant beneficiary of the
event.
In its decision it said that in view of the fact
that appellant Cosmos will be deriving certain
benefits from the marathon event, it has the
responsibility to ensure the safety of all the
participants and the public. It further said that
the stipulations in the contract entered into by
the two appellants, Cosmos and Intergames,
relieving the former from any liability does not
bind third persons.
This Court does not agree with the reasoning
of the trial court. The sponsorship contract
entered between appellant Cosmos and
appellant Intergames specifically states that:
1. COSMOS BOTTLING CORPORATION
shall pay INTERGAMES the amount of FIFTY
FIVE THOUSAND PESOS (₱55,000.00)
representing full sponsorship fee and in
consideration thereof, INTERGAMES shall
organize and stage a marathon race to be
called '1st POP COLA JUNIOR MARATHON.
xxxx
3. INTER GAMES shall draw up all the rules of
the marathon race, eligibility requirements of
participants as well as provide all the staff
required in the organization and actual staging
231
of the race. It is understood that all said staff
shall be considered under the direct employ of
INTERGAMES which shall have full control
over them.
xxxx
5. INTERGAMES shall secure all the
necessary permits, clearances, traffic and
police assistance in all the areas covered by
the entire route of the '1st POP COLA JUNIOR
MARATHON.
12. INTERGAMES shall hold COSMOS
BOTTLING CORPORATION, completely free
and harmless from any claim or action for
liability for any injuries or bodily harm which
may be sustained by any of the entries in the
'1st POP COLA JUNIOR MARATHON', or for
any damages to the property or properties of
third parties, which may likewise arise in the
course of the race.
From the foregoing, it is crystal clear that the
role of the appellant Cosmos was limited to
providing financial assistance in the form of
sponsorship. Appellant Cosmos' sponsorship
was merely in pursuance to the company's
commitment for spo1is development of the
youth as well as for advertising purposes. The
use of the name Cosmos was done for
advertising purposes only; it did not mean that
it was an organizer of the said marathon. As
pointed out by Intergames' President, Jose
Castro Jr., appellant Cosmos did not even
have the right to suggest the location and the
number of runners.
To hold a defendant liable for torts, it must be
clearly shown that he is the proximate cause
of the harm done to the plaintiff. The nexus or
connection of the cause and effect, between a
negligent act and the damage done, must be
established by competent evidence.
In this case, appellant Cosmos was not
negligent in entering into a contract with the
appellant Intergames considering that the
record of the latter was clean and that it has
conducted at least thirty (30) road races.
Also there is no direct or immediate causal
connection between the financial sponsorship
and the death of Rommel Abrogar. The
singular act of providing financial assistance
without participating in any manner in the
conduct of the marathon cannot be palmed off
as such proximate cause. In fact, the appellant
spouses never relied on any representation
that Cosmos organized the race. It was not
even a factor considered by the appellants-
spouses in allowing their son to join said
marathon.
In view of the fact that both defendants are not
liable for the death of Rommel Abrogar,
appellants-spouses are not entitled to actual,
moral, exemplary damages as well as for the
"loss of earning capacity" of their son. The
third and fourth issues are thus moot and
academic.
UPON THE VIEW WE TAKE OF THIS CASE,
THUS, the judgment appealed from must be,
as it hereby is, REVERSED and SET
ASIDE, and another entered DISMISSING the
complaint a quo. The appellants shall bear
their respective costs.
SO ORDERED.26
Issues
In this appeal, the petitioners submit that the
CA gravely erred:
A.
x x x in reversing the RTC Decision, (and) in
holding that respondent Intergames was not
negligent considering that:
1. Respondent Intergames failed to exercise
the diligence of a good father of the family in
the conduct of the marathon in that it did not
block off from traffic the marathon route; and
2. Respondent Intergames' preparations for
the race, including the number of marshal
during the marathon, were glaringly
inadequate to prevent the happening of the
injury to its participants.
B.
x x x in reversing the RTC Decision, (and) in
holding that the doctrine of assumption of risk
finds application to the case at bar even
though getting hit or run over by a vehicle is
not an inherent risk in a marathon race. Even
assuming arguendo that deceased Abrogar
made such waiver as claimed, still there can
231
be no valid waiver of one's right to life and limb
for being against public policy.
C.
x x x in reversing the RTC Decision, (and) in
absolving respondent Cosmos from liability to
petitioners on the sole ground that respondent
Cosmos' contract with respondent Intergames
contained a stipulation exempting the former
from liability.
D.
x x x m reversing the RTC Decision and
consequently holding respondents free from
liability, (and) in not awarding petitioners with
actual, moral and exemplary damages for the
death of their child, Rommel Abrogar. 27
Ruling of the Court
The appeal is partly meritorious.
I conclusions without citation of specific
Review of factual issues is allowed
because of
the conflict between the findings of fact
by the RTC and the CA on the issue of
negligence
The petitioners contend that Intergames was
negligent; that Cosmos as the sponsor and
Intergames as the organizer of the marathon
both had the obligation to provide a
reasonably safe place for the conduct of the
race byblocking the route of the race from
vehicular traffic and by providing adequate
manpower and personnel to ensure the safety
of the participants; and that Intergames had
foreseen the harm posed by the situation but
had not exercised the diligence of a good
father of a family to avoid the risk;28 hence, for
such omission, Intergames was negligent.29
Refuting, Cosmos and Intergames submit that
the latter as the organizer was not negligent
because it had undertaken all the
precautionary measures to ensure the safety
of the race; and that there was no duty on the
part of the latter as the organizer to keep a
racecourse "free and clear from reasonably
avoidable elements that would [occasion] or
have the probable tendency, to occasion
injury."30
The issue of whether one or both defendants
were negligent is a mixed issue of fact and
law. Does this not restrict the Court against
reviewing the records in this appeal
on certiorari in order to settle the issue?
The Court can proceed to review the factual
findings of the CA as an exception to the
general rule that it should not review issues of
fact on appeal on certiorari. We have
recognized exceptions to the rule that the
findings of fact of the CA are conclusive and
binding in the following instances: (1) when the
findings are grounded entirely on speculation,
surmises or conjectures; (2) when the
inference made is manifestly mistaken, absurd
or impossible; (3) when there is grave abuse
of discretion; (4) when the judgment is based
on a misapprehension of facts; (5) when the
findings of facts are conflicting; (6) when in
making its findings the CA went beyond the
issues of the case, or its findings are contrary
to the admissions of both the appellant and the
appellee; (7) when the findings are contrary to
the trial court; (8) when the findings are
evidence on which they are based; (9) when
the facts set forth in the petition as well as in
the petitioner's main and reply briefs are not
disputed by the respondent; (10) when the
findings of fact are premised on the supposed
absence of evidence and contradicted by the
evidence on record; and (11) when the CA
manifestly overlooked certain relevant facts
not disputed by the parties, which, if properly
considered, would justify a different
conclusion.31 Considering that the CA arrived
at factual findings contrary to those of the trial
court, our review of the records in this appeal
should have to be made.
Negligence is the failure to observe for the
protection of the interests of another person
that degree of care, precaution, and vigilance
which the circumstances justly demand,
whereby such other person suffers
injury.32 Under Article 1173 of the Civil Code, it
consists of the "omission of that diligence
which is required by the nature of the
obligation and corresponds with the
circumstances of the person, of the time and
of the place."33 The Civil Code makes liability
for negligence clear under Article 2176, 34 and
Article 20.35
231
To determine the existence of negligence, the
following time-honored test has been set
in Picart v. Smith:36
The test by which to determine the existence
of negligence in a particular case may be
stated as follows: 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. The law here in effect adopts the
standard supposed to be supplied by the
imaginary conduct of the
discreet paterfamilias of the Roman law. The
existence of negligence in a given case is not
determined by reference to the personal
judgment of the actor in the situation before
him. The law considers what would be
reckless, blameworthy, or negligent in the man
of ordinary intelligence and prudence and
determines liability by that.
The question as to what would constitute the
conduct of a prudent man in a given situation
must of course be always determined in the
light of human experience and in view of the
facts involved in the particular case. Abstract
speculation cannot here be of much value but
this much can be profitably said: Reasonable
men govern their conduct by the
circumstances which are before them or
known to them. They are not, and are not
supposed to be, omniscient of the future.
Hence they can be expected to take care only
when there is something before them to
suggest or warn of danger. Could a prudent
man, in the case under consideration, foresee
harm as a result of the course actually
pursued? If so, it was the duty of the actor to
take precautions to guard against that harm.
Reasonable foresight of harm, followed by the
ignoring of the suggestion born of this
prevision, is always necessary before
negligence can be held to exist. Stated in
these terms, the proper criterion for
determining the existence of negligence in a
given case is this: Conduct is said to be
negligent when a prudent man in the position
of the tortfeasor would have foreseen that an
effect harmful to another was sufficiently
probable to warrant his foregoing the conduct
or guarding against its consequences.37 (bold
underscoring supplied for emphasis)
A careful review of the evidence presented,
particularly the testimonies of the relevant
witnesses, in accordance with the foregoing
guidelines reasonably leads to the conclusion
that the safety and precautionary measures
undertaken by Intergames were short of the
diligence demanded by the circumstances of
persons, time and place under consideration.
Hence, Intergames as the organizer was guilty
of negligence.
The race organized by Intergames was a
junior marathon participated in by young
persons aged 14 to 18 years. It was plotted to
cover a distance of 10 kilometers, starting from
the IBP Lane,38 then going towards the
Batasang Pambansa, and on to the circular
route towards the Don Mariano Marcos
Highway,39 and then all the way back to the
Quezon City Hall compound where the finish
line had been set.40 In staging the event,
Intergames had no employees of its own to
man the race,41 and relied only on the
"cooperating agencies" and volunteers who
had worked with it in previous races. 42 The
cooperating agencies included the Quezon
City police, barangay tanods, volunteers from
the Boy Scouts of the Philippines, the
Philippine National Red Cross, the Citizens
Traffic Action Group, and the medical teams of
doctors and nurses coming from the Office of
the Surgeon General and the Ospital ng
Bagong Lipunan.43 According to Jose R.
Castro, Jr., the President of Intergames, the
preparations for the event included conducting
an ocular inspection of the route of the
race,44 sending out letters to the various
cooperating agencies,45 securing permits from
proper authorities,46 putting up directional
signs,47 and setting up the water stations.48
We consider the "safeguards" employed and
adopted by Intergames not adequate to meet
the requirement of due diligence.
For one, the police authorities specifically
prohibited Intergames from blocking Don
Mariano Marcos Highway in order not to impair
road accessibility to the residential villages
located beyond the IBP Lanc.49
However, contrary to the findings of the
CA,50 Intergames had a choice on where to
stage the marathon, considering its admission
of the sole responsibility for the conduct of the
event, including the choice of location.
Moreover, the CA had no basis for holding that
"the said route was found to be the best route
231
after a careful study and consideration of all
the factors involved."51 Castro, Jr. himself
attested that the route had been the best one
only within the vicinity of the Batasan
Pambansa, to wit:
COURT
q Was there any specific reason from ... Was
there any specific reason why you used this
route from Batasan to City Hall? Was there
any special reason?
a We have, your Honor, conducted for
example the Milo Marathon in that area in the
Batasan Pambansa and we found it to be
relatively safer than any other areas within the
vicinity. As a matter of fact, we had more
runners in the Milo Marathon at that time and
nothing happened, your Honor.52
The chosen route (IBP Lane, on to Don
Mariano Marcos Highway, and then to Quezon
City Hall) was not the only route appropriate
for the marathon. In fact, Intergames came
under no obligation to use such route
especially considering that the participants,
who were young and inexperienced runners,
would be running alongside moving vehicles.
Intergames further conceded that the
marathon could have been staged on a
blocked-off route like Roxas Boulevard in
Manila where runners could run against the
flow of vehicular traffic.53 Castro, Jr. stated in
that regard:
COURT TO WITNESS
q What law are you talking about when you
say I cannot violate the law?
a The police authority, your Honor, would not
grant us permit because that is one of the
conditions that if we are to conduct a race we
should run the race in accordance with the
flow of traffic.
q Did you not inform the police this is in
accordance with the standard safety measures
for a marathon race?
a I believed we argued along that line but but
(sic) again, if we insist the police again would
not grant us any permit like ... except in
the case of Roxas Boulevard when it is
normally closed from 8 a.m. when you can
run against the flow of traffic.
q You were aware for a runner to run on the
same route of the traffic would be risky
because he would not know what is coming
behind him?
a I believed we talked of the risk, your Honor
when the risk has been minimized to a certain
level. Yes, there is greater risk when you run
with the traffic than when you run against the
traffic to a certain level, it is correct but most of
the races in Manila or elsewhere are being run
in accordance with the flow of the traffic.
xxxx
ATTY. VINLUAN
q Following the observation of the Court,
considering the local condition, you will agree
with me the risks here are greater than in the
United States where drivers on the whole
follow traffic rules?
a That is correct.
q And because of that fact, it is with all the
more reason that you should take all
necessary precautions to insure the safety of
the runners?
a That is correct.54
xxxx
COURT:
xxxx
Q In your case in all the marathons that you
had managed, how many cases have you
encountered where the routes are blocked off
for vehicular traffic?
A These are the International Marathon,
Philippines Third World Marathon and the Milo
Marathon. We are blocking them to a certain
length of time.
Q What was the purpose of blocking the
routes? Is it for the safety of the runners or just
a matter of convenience?
231
A In blocking off the route, Your Honor, it is
light easier for the runners to run without
impediments to be rendered by the people or
by vehicles and at the same time it would be
also advantageous if the road will be blocked
off for vehicle traffic permitted to us by the
traffic authorities.
Q So, in this case, you actually requested for
the traffic authorities to block off the route?
A As far as I remember we asked Sgt. Pascual
to block off the route but considering that it is
the main artery to Fairview Village, it would not
be possible to block off the route since it will
cause a lot of inconvenience for the other
people in those areas and jeepney drivers.
Q In other words, if you have your way you
would have opted to block off the route.
A Yes, Your Honor.
Q But the fact is that the people did not agree.
A Yes, Your Honor, and it is stated in the
permit given to us.55
Based on the foregoing testimony of Castro,
Jr., Intergames had full awareness of the
higher risks involved in staging the race
alongside running vehicles, and had the option
to hold the race in a route where such risks
could be minimized, if not eliminated. But it did
not heed the danger already foreseen, if not
expected, and went ahead with staging the
race along the plotted route on Don Mariano
Marcos Highway on the basis of its
supposedly familiarity with the route. Such
familiarity of the organizer with the route and
the fact that previous races had been
conducted therein without any untoward
incident56 were not in themselves sufficient
safeguards. The standards for avoidance of
injury through negligence further required
Intergames to establish that it did take
adequate measures to avert the foreseen
danger, but it failed to do so.
Another failing on the part of Intergames was
the patent inadequacy of the personnel to man
the route. As borne by the records, Intergames
had no personnel of its own for that purpose,
and relied exclusively on the assistance of
volunteers, that is, "seven (7) traffic
operatives, five (5) motorcycle policemen,
fifteen (15) patrolmen deployed along the
route, fifteen (15) boy scouts, twelve (12)
CATs, twenty (20) barangay tanods, three (3)
ambulances and three (3) medical teams" 57 to
ensure the safety of the young runners who
would be running alongside moving vehicular
traffic, to make the event safe and well
coordinated.
Although the party relying on negligence as his
cause of action had the burden of proving the
existence of the same, Intergames'
coordination and supervision of the personnel
sourced from the cooperating agencies did not
satisfy the diligence required by the relevant
circumstances. In this regard, it can be pointed
out that the number of deployed personnel,
albeit sufficient to stage the marathon, did
not per se ensure the safe conduct of the race
without proof that such deployed volunteers
had been properly coordinated and instructed
on their tasks.
That the proper coordination and instruction
were crucial elements for the safe conduct of
the race was well known to Intergames.
Castro, Jr. stated as much, to wit:
ATTY. LOMBOS:
xxxx
Q You also said that if you block off one side
of the road, it is possible that it would be more
convenient to hold the race in that matter. Will
you tell the Honorable Court if it is possible
also to hold a race safely if the road is not
blocked off?
A Yes, sir.
Q How is it done.
A You can still run a race safely even if it is
partially blocked off as long as you have the
necessary cooperation with the police
authorities, and the police assigned along the
route of the race and the police assigned
would be there, this will contribute the safety of
the participants, and also the vehicular
division, as long as there are substantial
publicities in the newspapers, normally they
will take the precautions in the use of the
particular route of the race.
231
Q Let me clarify this. Did you say that it is
possible to hold a marathon safely if you have
this traffic assistance or coordination even if
the route is blocked or not blocked?
A It is preferable to have the route blocked but
in some cases, it would be impossible for the
portions of the road to be blocked totally. The
route of the race could still be safe for runners
if a proper coordination or the agencies are
notified especially police detailees to man the
particular stage.58
Sadly, Intergames' own evidence did not
establish the conduct of proper coordination
and instruction. Castro, Jr. described the
action plan adopted by Intergames in the
preparation for the race, as follows:
COURT
a Did you have any rehearsal let us say the
race was conducted on June 15, now before
June 15 you call a meeting of all these runners
so you can have more or less a map-up and
you would indicate or who will be stationed in
their places etc. Did you have such a
rehearsal?
WITNESS
a It is not being done, your honor, but you
have to specify them. You meet with the group
and you tell them that you wanted them to be
placed in their particular areas which we
pointed out to them for example in the case of
the Barangay Tanod, I specifically assigned
them in the areas and we sat down and we
met.
COURT
q Did you have any action, plan or brochure
which would indicate the assignment of each
of the participating group?
WITNESS
a Normally, sir, many of the races don't have
that except when they called them to meeting
either as a whole group or the entire
cooperating agency or meet them per group.
COURT
q Did you have a check list of the activities that
would have to be entered before the actual
marathon some kind of system where you will
indicate this particular activity has to be
checked etc. You did not have that?
WITNESS
q Are you asking, your honor, as a race
director of I will check this because if I do that,
I won't have a race because that is not being
done by any race director anywhere in the
world?
COURT
I am interested in your planning activities.
q In other words, what planning activities did
you perform before the actual marathon?
a The planning activities we had, your honor,
was to coordinate with the different agencies
involved informing them where they would be
more or less placed.
COURT
q Let us go to ... Who was supposed to be
coordinating with you as to the citizens action
group who was your ... you were referring to a
person who was supposed to be manning
these people and who was the person whom
you coordinate with the Traffic Action Group?
WITNESS
a I can only remember his name ... his family
name is Esguerra.
q How about with the Tanods?
a With the Tanods his name is Pedring
Serrano.
q And with the Boys Scouts? (sic)
a And with the Boys Scouts of the Phils. (sic) it
is Mr. Greg Panelo.
COURT
q When did you last meet rather how many
times did you meet with Esguerra before the
marathon on June 15?
231
WITNESS
a The Citizens Traffic Action Group, your
honor, had been with me m previous races.
COURT
q I am asking you a specific question. I am not
interested in the Citizen Traffic Action Group.
The marathon was on June 15, did you meet
with him on June 14, June 13 or June 12?
a We met once, your honor, I cannot
remember the date.
q You don't recall how many days before?
a I cannot recall at the moment.
q How about with Mr. Serrano, how many
times did you meet with him before the race?
a If my mind does not fail me, your honor, I
met him twice because he lives just within our
area and we always see each other.
q How about with Panelo, how many times did
you meet him?
a With Mr. Panelo, I did not meet with them,
your honor.
q Was there an occasion where before the
race you met with these three people together
since you did not meet with Panelo anytime?
Was there anytime where you met with
Serrano and Esguerra together?
WITNESS
a No, your honor.
COURT
g When you met once with Esguerra, where
did you meet? What place?
a I cannot recall at the moment, your honor,
since it was already been almost six years
ago.
g How about Serrano, where did you meet
him?
a We met in my place.
q From your house? He went in your house?
a Yes, your honor.
q So you did not have let us say a ... you don't
have records of your meetings with these
people?
WITNESS
a With the Citizens Traffic Action, your honor?
COURT
a Yes.
WITNESS
a I don't have, your honor.
COURT
q Because you are familiar, I was just thinking
this is an activity which requires planning etc.,
what I was thinking when you said this was
never done in any part of the world but all
activities it has to be planned. There must be
some planning, now are you saying that in this
particular case you had no written plan or
check list of activities what activities have to
be implemented on a certain point and time,
who are the persons whom you must meet in a
certain point and time.
WITNESS
a Normally, we did not have that, your honor,
except the check list of all the things that
should be ready at a particular time prior to the
race and the people to be involved and we
have a check list to see to it that everything
would be in order before the start of the race.
COURT
Proceed.
ATTY. VINLUAN
q Following the question of the Court Mr.
Castro, did you meet with Lt. Depano of the
Police Department who were supposed to
supervise the police officers assigned to help
during the race?
231
a I did not meet with him, sir.
q You did not meet with him?
a I did not meet with him.
q In fact, ever before or during the race you
had no occasion to talk to Lt. Depano. Is that
correct?
a That is correct, sir.
ATTY. VINLUAN
Based on the question of the Court and your
answer to the question of the Court, are you
trying to say that this planning before any race
of all these groups who have committed to
help in the race, this is not done in any part of
the world?
WITNESS
a In the latter years when your race became
bigger and bigger, this is being done now
slowly.
ATTY. VINLUAN
q But for this particular race you will admit that
you failed to do it when you have to coordinate
and even have a dry run of the race you failed
to do all of that in this particular race, yes or
no?
a Because there was ...
COURT
It was already answered by him when I asked
him. The Court has ... Everybody has a copy
how of this time planner. Any activity or even
meeting a girlfriend or most people plan.
A TTY. F .M. LOMBOS
If your honor please, before we proceed ...
WITNESS
In the latter years, your honor, when your race
became bigger and bigger, this is being done
now slowly.
q For this particular race you will admit that
you failed to do it?
a Because there was no need, sir.59
Probably sensing that he might have thereby
contradicted himself, Castro, Jr. clarified on re-
direct examination:
ATTY. LOMBOS
Q Now, you also responded to a question
during the same hearing and this appears on
page 26 of the transcript that you did not hold
any rehearsal or dry run for this particular
marathon. Could you tell the Court why you
did not hold any such rehearsal or dry run?
A Because I believe there was no need for us
to do that since we have been doing this for
many years and we have been the same
people, same organization with us for so many
years conducting several races including some
races in that area consisting of longer
distances and consisting of more runners, a lot
more runners in that areay (sic) so these
people, they know exactly what to do and
there was no need for us to have a rehearsal. I
believe this rehearsal would only be applicable
if I am new and these people are new then, we
have to rehearse.
ATTY. LOMBOS
q You also stated Mr. Castro that you did not
have any action plan or brochure which you
would indicate, an assignment of each of the
participating group as to what to do during the
race. Will you please explain what you meant
when you said you have no action plan or
brochure?
WITNESS
a What I mean of action plan, I did not have
any written action plan but I was fully aware of
what to do. I mean, those people did not just
go there out of nowhere. Obviously, there was
an action on my part because I have to
communicate with them previously and to tell
them exactly what the race is all about; where
to start; where it would end, and that is the
reason why we have the ambulances, we have
the Boy Scouts, we have the CT A, we have
the police, so it was very obvious that there
was a plan of action but not written because I
231
know pretty well exactly what to do. I was
dealing with people who have been doing this
for a long period of time.60
While the level of trust Intergames had on its
volunteers was admirable, the coordination
among the cooperating agencies was
predicated on circumstances unilaterally
assumed by Intergames. It was obvious that
Intergames' inaction had been impelled by its
belief that it did not need any action plan
because it had been dealing with people who
had been manning similar races for a long
period of time.
The evidence presented undoubtedly
established that Intergames' notion of
coordination only involved informing the
cooperating agencies of the date of the race,
the starting and ending points of the route, and
the places along the route to man. Intergames
did not conduct any general assembly with all
of them, being content with holding a few
sporadic meetings with the leaders of the
coordinating agencies. It held no briefings of
any kind on the actual duties to be performed
by each group of volunteers prior to the race. It
did not instruct the volunteers on how to
minimize, if not avert, the risks of danger in
manning the race, despite such being
precisely why their assistance had been
obtained in the first place.
Intergames had no right to assume that the
volunteers had already been aware of what
exactly they would be doing during the race. It
had the responsibility and duty to give to them
the proper instructions despite their
experience from the past races it had
organized considering that the particular race
related to runners of a different level of
experience, and involved different weather and
environmental conditions, and traffic
situations. It should have remembered that the
personnel manning the race were not its own
employees paid to perform their tasks, but
volunteers whose nature of work was remotely
associated with the safe conduct of road
races. Verily, that the volunteers showed up
and assumed their proper places or that they
were sufficient in number was not really
enough. It is worthy to stress that proper
coordination in the context of the event did not
consist in the mere presence of the volunteers,
but included making sure that they had been
properly instructed on their duties and tasks in
order to ensure the safety of the young
runners.
It is relevant to note that the participants of the
1st Pop Cola Junior Marathon were mostly
minors aged 14 to 18 years joining a race of
that kind for the first time. The combined
factors of their youth, eagerness and
inexperience ought to have put a reasonably
prudent organizer on higher guard as to their
safety and security needs during the race,
especially considering Intergames' awareness
of the risks already foreseen and of other risks
already known to it as of similar events in the
past organizer. There was no question at all
that a higher degree of diligence was required
given that practically all of the participants
were children or minors like Rommel; and that
the law imposes a duty of care towards
children and minors even if ordinarily there
was no such duty under the same
circumstances had the persons involved been
adults of sufficient discretion. 61 In that respect,
Intergames did not observe the degree of care
necessary as the organizer, rendering it liable
for negligence. As the Court has emphasized
in Corliss v. The Manila Railroad
Company,62 where the danger is great, a high
degree of care is necessary, and the failure to
observe it is a want of ordinary care under the
circumstances. 63
The circumstances of the persons, time and
place required far more than what Intergames
undertook in staging the race. Due diligence
would have made a reasonably prudent
organizer of the race participated in by young,
inexperienced or beginner runners to conduct
the race in a route suitably blocked off from
vehicular traffic for the safety and security not
only of the participants but the motoring public
as well. Since the marathon would be run
alongside moving vehicular traffic, at the very
least, Intergames ought to have seen to the
constant and closer coordination among the
personnel manning the route to prevent the
foreseen risks from befalling the participants.
But this it sadly failed to do.
II
The negligence of Intergames as the
organizer
was the proximate cause of the death of
Rommel
As earlier mentioned, the CA found that
Rommel, while running the marathon on Don
231
Mariano Marcos A venue and after passing the
Philippine Atomic Energy Commission
Building, was bumped by a passenger jeepney
that was racing with a minibus and two other
vehicles as if trying to crowd each other out.
As such, the death of Rommel was caused by
the negligence of the jeepney driver.
Intergames staunchly insists that it was not
liable, maintaining that even
assuming arguendo that it was negligent, the
negligence of the jeepney driver was the
proximate cause of the death of Rommel;
hence, it should not be held liable.
Did the negligence of Intergames give rise to
its liability for the death of ommel
notwithstanding the negligence of the jeepney
driver?
In order for liability from negligence to arise,
there must be not only proof of damage and
negligence, but also proof that the damage
was the consequence of the negligence. The
Court has said in Vda. de Gregorio v. Go
Chong Bing:64
x x x Negligence as a source of obligation both
under the civil law and in American cases was
carefully considered and it was held:
We agree with counsel for appellant that under
the Civil Code, as under the generally
accepted doctrine in the United States, the
plaintiff in an action such as that under
consideration, in order to establish his right to
a recovery, must establish by competent
evidence:
(1) Damages to the plaintiff.
(2) Negligence by act or omission of which
defendant personally or some person for
whose acts it must respond, was guilty.
(3) The connection of cause and effect
between the negligence and the damage."
(Taylor vs. Manila Electric Railroad and Light
Co., supra, p. 15.)
In accordance with the decision of the
Supreme Court of Spain, in order that a
person may be held guilty for damage through
negligence, it is necessary that there be an act
or omission on the part of the person who is to
be charged with the liability and that damage
is produced by the said act or
omission.65 (Emphasis supplied)
We hold that the negligence of Intergames
was the proximate cause despite the
intervening negligence of the jeepney driver.
Proximate cause is "that which, in natural and
continuous sequence, unbroken by any new
cause, produces an event, and without which
the event would not have occurred." 66 In Vda.
de Bataclan, et al. v. Medina,67 the Court,
borrowing from American Jurisprudence, has
more extensively defined proximate
cause thusly:
"* * * 'that cause, which, in natural and
continuous sequence, unbroken by any
efficient intervening cause, produces the injury
and without which the result would not have
occurred.' And more comprehensively, 'the
proximate legal cause is that acting first and
producing the injury, either immediately or by
setting other events in motion, all constituting
a natural and continuous chain of events, each
having a close causal connection with its
immediate predecessor, the final event in the
chain immediately effecting the injury as a
natural and probable result of the cause which
first acted, under such circumstances that the
person responsible for the first event should,
as an ordinarily prudent and intelligent person,
have reasonable ground to expect at the
moment of his act or default that an injury to
some person might probably result
therefrom."68
To be considered the proximate cause of the
injury, the negligence need not be the event
closest in time to the injury; a cause is still
proximate, although farther in time in relation
to the injury, if the happening of it set other
foreseeable events into motion resulting
ultimately in the damage.69 According to an
authority on civil law:70"A prior and remote
cause cannot be made the basis of an action,
if such remote cause did nothing more than
furnish the condition or give rise to the
occasion by which the injury was made
possible, if there intervened between such
prior or remote cause and the injury a distinct,
successive, unrelated and efficient cause,
even though such injury would not have
happened but for such condition or occasion.
If no damage exists in the condition except
because of the independent cause, such
condition was not the proximate cause. And if
231
an independent negligent act or defective
condition sets into operation the
circumstances which result in injury because
of the prior defective condition, such act or
condition is the proximate cause."
Bouvier adds:
In many cases important questions arise as to
which, in the chain of acts tending to the
production of a given state of things, is to be
considered the responsible cause. It is not
merely distance of place or of causation that
renders a cause remote. The cause nearest in
the order of causation, without any efficient
concurring cause to produce the result, may
be considered the direct cause. In the course
of decisions of cases in which it is necessary
to determine which of several causes is so far
responsible for the happening of the act or
injury complained of, what is known as the
doctrine of proximate cause is constantly
resorted to in order to ascertain whether the
act, omission, or negligence of the person
whom it is sought to hold liable was in law and
in fact responsible for the result which is the
foundation of the action.71
xxxx
The question of proximate cause is said to be
determined, not by the existence or non-
existence of intervening events, but by their
character and the natural connection between
the original act or omission and the injurious
consequences. When the intervening cause is
set in operation by the original negligence,
such negligence is still the proximate cause; x
x x If the party guilty of the first act of
negligence might have anticipated the
intervening cause, the connection is not
broken; x x x. Any number of causes and
effects may intervene, and if they arc such as
might with reasonable diligence have been
foreseen, the last result is to be considered as
the proximate result. But whenever a new
cause intervenes, which is not a consequence
of the first wrongful cause, which is not under
control of the wrongdoer, which could not have
been foreseen by the exercise of reasonable
diligence, and except for which the final
injurious consequence could not have
happened, then such injurious consequence
must be deemed too remote; x x x.72 (bold
underscoring supplied for emphasis)
An examination of the records in accordance
with the foregoing concepts supports the
conclusions that the negligence of Intergames
was the proximate cause of the death of
Rommel; and that the negligence of the
jeepney driver was not an efficient intervening
cause.
First of all, Intergames' negligence in not
conducting the race in a road blocked off from
vehicular traffic, and in not properly
coordinating the volunteer personnel manning
the marathon route effectively set the stage for
the injury complained of. The submission that
Intergames had previously conducted
numerous safe races did not persuasively
demonstrate that it had exercised due
diligence because, as the trial court pointedly
observed, "[t]hey were only lucky that no
accident occurred during the previous
marathon races but still the danger was
there."73
Secondly, injury to the participants arising from
an unfortunate vehicular accident on the route
was an event known to and foreseeable by
Intergames, which could then have been
avoided if only Intergames had acted with due
diligence by undertaking the race on a
blocked-off road, and if only Intergames had
enforced and adopted more efficient
supervision of the race through its volunteers.
And, thirdly, the negligence of the jeepney
driver, albeit an intervening cause, was not
efficient enough to break the chain of
connection between the negligence of
Intergames and the injurious consequence
suffered by Rommel. An intervening cause, to
be considered efficient, must be "one not
produced by a wrongful act or omission, but
independent of it, and adequate to bring the
injurious results. Any cause intervening
between the first wrongful cause and the final
injury which might reasonably have been
foreseen or anticipated by the original
wrongdoer is not such an efficient intervening
cause as will relieve the original wrong of its
character as the proximate cause of the final
injury."74
In fine, it was the duty of Intergames to guard
Rommel against the foreseen risk, but it failed
to do so.
III
231
 The doctrine of assumption of risk
had no application to Rommel
Unlike the R TC, the CA ruled that the doctrine
of assumption of risk applied herein; hence, it
declared Intergames and Cosmos not liable.
The CA rendered the following rationalization
to buttress its ruling, to wit:
In this case, appellant Romulo Abrogar himself
admitted that his son, Rommel Abrogar,
surveyed the route of the marathon and even
attended a briefing before the race.
Consequently, he was aware that the
marathon would pass through a national road
and that the said road would not be blocked off
from traffic. And considering that he was
already eighteen years of age, had voluntarily
participated in the marathon, with his parents'
consent, and was well aware of the traffic
hazards along the route, he thereby assumed
all the risks of the race. This is precisely why
permission from the participant's parents,
submission of a medical certificate and a
waiver of all rights and causes of action arising
from the participation in the marathon which
the participant or his heirs may have against
appellant Intergames were required as
conditions in joining the marathon.
In the decision of the trial court, it stated that
the risk mentioned in the waiver signed by
Rommel Abrogar only involved risks such as
stumbling, suffering heatstroke, heart attack
and other similar risks. It did not consider
vehicular accident as one of the risks included
in the said waiver.
This Court does not agree. With respect to
voluntary participation in a sport, the doctrine
of assumption of risk applies to any facet of
the activity inherent in it and to any open and
obvious condition of the place where it is
carried on. We believe that the waiver included
vehicular accidents for the simple reason that
it was a road race run on public roads used by
vehicles. Thus, it cannot be denied that
vehicular accidents are involved. It was not a
track race which is held on an oval and
insulated from vehicular traffic. In a road race,
there is always the risk of runners being hit by
motor vehicles while they train or compete.
That risk is inherent in the sport and known to
runners. It is a risk they assume every time
they voluntarily engage in their sport.
Furthermore, where a person voluntarily
participates in a lawful game or contest, he
assumes the ordinary risks of such game or
contest so as to preclude recovery from the
promoter or operator of the game or contest
for injury or death resulting therefrom.
Proprietors of amusements or of places where
sports and games are played are not insurers
of safety of the public nor of their patrons.
In Mc Leod Store v. Vinson 213 Ky 667, 281
SW 799 (1926), it was held that a boy,
seventeen years of age, of ordinary
intelligence and physique, who entered a race
conducted by a department store, the purpose
of which was to secure guinea fowl which
could be turned in for cash prizes, had
assumed the ordinary risks incident thereto
and was barred from recovering against the
department store for injuries suffered when,
within catching distance, he stopped to catch a
guinea, and was tripped or stumbled and fell to
the pavement, six or eight others falling upon
him. The comi further said: "In this (the race)
he was a voluntary participant. x x x The
anticipated danger was as obvious to him as it
was to appellant (the department store). While
not an adult, he was practically 17 years of
age, of ordinary intelligence, and perfectly able
to determine the risks ordinarily incident to
such games. An ordinary boy of that age is
practically as well advised as to the hazards of
baseball, basketball, football, foot races and
other games of skill and endurance as is an
adult x x x."
In the case at bar, the "1st Pop Cola Junior
Marathon" held on June 15, 1980 was a race
the winner of which was to represent the
country in the annual Spirit of Pheidippides
Marathon Classic in Greece, if he equals or
breaks the 29-minute mark for the 19-km.
race. Thus, Rommel Abrogar having
voluntarily participated in the race, with his
parents' consent, assumed all the risks of the
race.75
The doctrine of assumption of risk means that
one who voluntarily exposes himself to an
obvious, known and appreciated danger
assumes the risk of injury that may result
therefrom.76 It rests on the fact that the person
injured has consented to relieve the defendant
of an obligation of conduct toward him and to
take his chance of injury from a known risk,
and whether the former has exercised proper
caution or not is immaterial. 77 In other words, it
231
is based on voluntary consent, express or
implied, to accept danger of a known and
appreciated risk; it may sometimes include
acceptance of risk arising from the defendant's
negligence, but one does not ordinarily
assume risk of any negligence which he does
not know and appreciate.78 As a defense in
negligence cases, therefore, the doctrine
requires the concurrence of three elements,
namely: (1) the plaintiff must know that the risk
is present; (2) he must further understand its
nature; and (3) his choice to incur it must be
free and voluntary.79 According to
80
Prosser: "Knowledge of the risk is the
watchword of assumption of risk."
Contrary to the notion of the CA, the
concurrence of the three elements was not
shown to exist. Rommel could not have
assumed the risk of death when he
participated in the race because death was
neither a known nor normal risk incident to
running a race. Although he had surveyed the
route prior to the race and should be
presumed to know that he would be running
the race alongside moving vehicular traffic,
such knowledge of the general danger was not
enough, for some authorities have required
that the knowledge must be of the specific risk
that caused the harm to him. 81 In theory, the
standard to be applied is a subjective one, and
should be geared to the particular plaintiff and
his situation, rather than that of the reasonable
person of ordinary prudence who appears in
contributory negligence.82 He could not have
appreciated the risk of being fatally struck by
any moving vehicle while running the race.
Instead, he had every reason to believe that
the organizer had taken adequate measures to
guard all participants against any danger from
the fact that he was participating in an
organized marathon. Stated differently,
nobody in his right mind, including minors like
him, would have joined the marathon if he had
known of or appreciated the risk of harm or
even death from vehicular accident while
running in the organized running event.
Without question, a marathon route safe and
free from foreseeable risks was the
reasonable expectation of every runner
participating in an organized running event.
Neither was the waiver by Rommel, then a
minor, an effective form of express or implied
consent in the context of the doctrine of
assumption of risk. There is ample authority,
cited in Prosser,83 to the effect that a person
does not comprehend the risk involved in a
known situation because of his youth, 84 or lack
of information or experience, 85 and thus will not
be taken to consent to assume the risk.
Clearly, the doctrine of assumption of risk
does not apply to bar recovery by the
petitioners.
IV
Cosmos is not liable for the negligence
of Intergames as the organizer
Nonetheless, the CA did not err in absolving
Cosmos from liability.
The sponsorship of the marathon by Cosmos
was limited to financing the race. Cosmos did
nothing beyond that, and did not involve itself
at all in the preparations for the actual conduct
of the race. This verity was expressly
confirmed by Intergames, through Castro, Jr.,
who declared as follows:
COURT
q Do you discuss all your preparation with
Cosmos Bottling Company?
a As far as the Cosmos Bottling Company (sic)
was a sponsor as to the actual conduct of the
race, it is my responsibility. The conduct of the
race is my responsibility. The sponsor has
nothing to do as well as its code of the race
because they are not the ones running. I was
the one running. The responsibility of Cosmos
was just to provide the sponsor's money.
COURT
q They have no right to who (sic) suggest the
location, the number of runners, you decide
these yourself without consulting them?
a Yes, your honor.86
We uphold the finding by the CA that the role
of Cosmos was to pursue its corporate
commitment to sports development of the
youth as well as to serve the need for
advertising its business. In the absence of
evidence showing that Cosmos had a hand in
the organization of the race, and took part in
the determination of the route for the race and
the adoption of the action plan, including the
safety and security measures for the benefit of
the runners, we cannot but conclude that the
231
requirement for the direct or immediate causal
connection between the financial sponsorship
of Cosmos and the death of Rommel simply
did not exist. Indeed, Cosmos' mere
sponsorship of the race was, legally speaking,
too remote to be the efficient and proximate
cause of the injurious consequences.
V to be awarded in cases of quasi-delict if the
Damages
Article 2202 of the Civil Code lists the
damages that the plaintiffs in a suit upon
crimes and quasi-delicts can recover from the
defendant, viz.:
Art. 2202. In crimes and quasi-delicts, the
defendant shall be liable for all damages which
are the natural and probable consequences of
the act or omission complained of. It is not
necessary that such damages have been
foreseen or could have reasonably been
foreseen by the defendant.
Accordingly, Intergames was liable for all
damages that were the natural and probable
consequences of its negligence. In its
judgment, the RTC explained the award of
damages in favor of the petitioners, as follows:
As borne by the evidence on record, the
plaintiffs incurred medical, hospitalization and
burial expenses for their son in this aggregate
amount of ₱28,061.65 (Exhibits "D'', "D-1" and
"D-2"). In instituting this case, they have paid
their lawyer ₱5,000 as initial deposit, their
arrangement being that they would pay
attorney's fees to the extent of 10% of
whatever amount would be awarded to them in
this case.
For the loss of a son, it is unquestionable that
plaintiffs suffered untold grief which should
entitle them to recover moral damages, and
this Court believes that if only to assuage
somehow their untold grief but not necessarily
to compensate them to the fullest, the nominal
amount of ₱l00,00.00 should be paid by the
defendants.
For failure to adopt elementary and basic
precautionary measure to insure the safety of
the participants so that sponsors and
organizers of sports events should exercise
utmost diligence in preventing injury to the
participants and the public as well, exemplary
damages should also be paid by the
defendants and this Court considers the
amount of ₱50,000.00 as reasonable.87
Although we will not disturb the foregoing
findings and determinations, we need to add to
the justification for the grant of exemplary
damages. Article 2231 of the Civil
Code stipulates that exemplary damages are
defendant acted with gross negligence. The
foregoing characterization by the RTC
indicated that Intergames' negligence was
gross. We agree with the characterization.
Gross negligence, according to Mendoza v.
Spouses Gomez,88 is the absence of care or
diligence as to amount to a reckless disregard
of the safety of persons or property; it evinces
a thoughtless disregard of consequences
without exerting any effort to avoid them.
Indeed, the failure of Intergames to adopt the
basic precautionary measures for the safety of
the minor participants like Rommel was in
reckless disregard of their safety. Conduct is
reckless when it is an extreme departure from
ordinary care, in a situation in which a high
degree of danger is apparent; it must be more
than any mere mistake resulting from
inexperience, excitement, or confusion, and
more than mere thoughtlessness or
inadvertence, or simple inattention. 89 The RTC
did not recognize the right of the petitioners to
recover the loss of earning capacity of
Rommel. It should have, for doing so would
have conformed to jurisprudence whereby the
Court has unhesitatingly allowed such
recovery in respect of children, students and
other non-working or still unemployed victims.
The legal basis for doing so is Article 2206 (l)
of the Civil Code, which stipulates that the
defendant "shall be liable for the loss of the
earning capacity of the deceased, and the
indemnity shall be paid to the heirs of the
latter; such indemnity shall in every case be
assessed and awarded by the court, unless
the deceased on account of permanent
physical disability not caused by the
defendant, had no earning capacity at the time
of his death."
Indeed, damages for loss of earning capacity
may be awarded to the heirs of a deceased
non-working victim simply because earning
capacity, not necessarily actual earning, may
be lost.
In Metro Manila Transit Corporation v. Court of
Appeals,90 damages for loss of earning
231
capacity were granted to the heirs of a third-
year high school student of the University of
the Philippines Integrated School who had
been killed when she was hit and run over by
the petitioner's passenger bus as she crossed
Katipunan Avenue in Quezon City. The Court
justified the grant in this wise:
Compensation of this nature is awarded not for
loss of earnings but for loss of capacity to earn
money. Evidence must be presented that the
victim, if not yet employed at the time of death,
was reasonably certain to complete training for
a specific profession. In People v.
Teehankee, no award of compensation for
loss of earning capacity was granted to the
heirs of a college freshman because there was
no sufficient evidence on record to show that
the victim would eventually become a
professional pilot. But compensation should be
allowed for loss of earning capacity resulting
from the death of a minor who has not yet
commenced employment or training for a
specific profession if sufficient evidence is
presented to establish the amount
thereor.91 (bold underscoring supplied for
emphasis)
In People v. Sanchez,92 damages for loss of
earning capacity was also allowed to the heirs
of the victims of rape with homicide despite the
lack of sufficient evidence to establish what
they would have earned had they not been
killed. The Court rationalized its judgment with
the following observations:
Both Sarmenta and Gomez were senior
agriculture students at UPLB, the country's
leading educational institution in
agriculture.1âwphi1 As reasonably assumed
by the trial court, both victims would have
graduated in due course. Undeniably, their
untimely death deprived them of their future
time and earning capacity. For these
deprivation, their heirs are entitled to
compensation. xxxx. However, considering
that Sarmenta and Gomez would have
graduated in due time from a reputable
university, it would not be unreasonable to
assume that in 1993 they would have earned
more than the minimum wage. All factors
considered, the Court believes that it is fair
and reasonable to fix the monthly income that
the two would have earned in 1993 at
₱8,000.000 per month (or ₱96,000.00/year)
and their deductible living and other incidental
expenses at ₱3,000.00 per month (or
₱36,000.00/year).93 (bold underscoring
supplied for emphasis)
In Perena v. Zarate,94 the Court fixed damages
for loss of earning capacity to be paid to the
heirs of the 15-year-old high school student of
Don Bosco Technical Institute killed when a
moving train hit the school van ferrying him to
school while it was traversing the railroad
tracks. The RTC and the CA had awarded
damages for loss of earning capacity
computed on the basis of the minimum wage
in effect at the time of his death. Upholding
said findings, the Court opined:
x x x, the fact that Aaron was then without a
history of earnings should not be taken against
his parents and in favor of the defendants
whose negligence not only cost Aaron his life
and his right to work and earn money, but also
deprived his parents of their right to his
presence and his services as well. x x x.
Accordingly, we emphatically hold in favor of
the indemnification for Aaron's loss of earning
capacity despite him having been
unemployed, because compensation of this
nature is awarded not for loss of time or
earnings but for loss of the deceased's power
or ability to earn money.
The petitioners sufficiently showed that
Rommel was, at the time of his untimely but
much lamented death, able-bodied, in good
physical and mental state, and a student in
good standing.95 It should be reasonable to
assume that Rommel would have finished his
schooling and would turn out to be a useful
and productive person had he not died. Under
the foregoing jurisprudence, the petitioners
should be compensated for losing Rommel's
power or ability to earn. The basis for the
computation of earning capacity is not what he
would have become or what he would have
wanted to be if not for his untimely death, but
the minimum wage in effect at the time of his
death. The formula for this purpose is:
Net Earning Capacity = Life Expectancy x
[Gross Annual Income less Necessary Living
Expenses]
Life expectancy is equivalent to 2/3 multiplied
by the difference of 80 and the age of the
deceased. Since Rommel was 18 years of age
at the time of his death, his life expectancy
was 41 years. His projected gross annual
income, computed based on the minimum
231
wage for workers in the non-agricultural sector SO ORDERED.
in effect at the time of his death, 97then fixed at
₱l4.00/day, is ₱5,535.83. Allowing for LUCAS P. BERSAMIN
necessary living expenses of 50% of his Associate Justice
projected gross annual income, his total net
earning capacity is ₱l13,484.52. WE CONCUR:

Article 2211 of the Civil Code expressly PRESBITERO J. VELASCO, JR.

provides that interest, as a part of damages, Associate Justice
may be awarded in crimes and quasi-delicts at Chairperson
the discretion of the court. The rate of interest
provided under Article 2209 of the Civil
Code is 6% per annum in the absence of BIENVENIDO L. FRANCIS H.
stipulation to the contrary. The legal interest REYES JARDELEZA
rate of 6% per annum is to be imposed upon Associate Justice Associate Justice
the total amounts herein awarded from the
time of the judgment of the RTC on May 10,
1991 until finality of judgment. 98 Moreover,
pursuant to Article 221299 of the Civil NOEL G. TIJAM
Code, the legal interest rate of 6o/o per Associate Justice
annum is to be further imposed on the interest
earned up to the time this judgment of the ATTESTATION
Court becomes final and executory until its full
satisfaction.100 I attest that the conclusions in the above
Decision had been reached in consultation
Article 2208 of the Civil Code expressly allows before the case was assigned to the writer of
the recovery of attorney's fees and expenses the opinion of the Court’s Division.
of litigation when exemplary damages have
been awarded.1âwphi1 Thus, we uphold the PRESBITERO J. VELASCO, JR.
RTC's allocation of attorney's fees in favor of Associate Justice
the petitioners equivalent to 10% of the total Chairperson
amount to be recovered, inclusive of the
damages for loss of earning capacity and CERTIFICATION
interests, which we consider to be reasonable
under the circumstances. Pursuant to the Section 13, Article VIII of the
Constitution, and the Division Chairperson’s
WHEREFORE, the Court PARTLY Attestation, I certify that the conclusions in the
AFFIRMS the decision promulgated on March above Decision had been reached in
10, 2004 to the extent that it consultation before the case was assigned to
absolved COSMOS BOTTLING COMPANY, the writer of the opinion of the Court’s Division.
INC. from liability; REVERSES and SETS
ASIDE the decision as to INTERGAMES, MARIA LOURDES P.A. SERENO
INC., and REINSTATES as to it the judgment Chief Justice
rendered on May 10, 1991 by the Regional
Trial Court, Branch 83, in Quezon City subject
to the MODIFICATIONS that INTERGAMES,
INC. is ORDERED TO PAY to the petitioners,
in addition to the aw3:rds thereby allowed: (a)
the sum of ₱l13,484.52 as damages for the
loss of Rommel Abrogar's earning capacity; (b)
interest of 6% per annum on the actual SECOND DIVISION
damages, moral damages, exemplary
damages and loss of earning capacity G.R. No. 92735               June 8, 2000
reckoned from May 10, 1991 until full
payment; (c) compounded interest of 6% per
MONARCH INSURANCE CO., INC.,
annum from the finality of this decision until full
TABACALERA INSURANCE CO., INC and
payment; and (d) costs of suit.
Hon. Judge AMANTE
231
PURISIMA, petitioners,  sinking of the M/V P. Aboitiz, in accordance
vs.
COURT OF APPEALS and ABOITIZ
SHIPPING CORPORATION, respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 94867
ALLIED GUARANTEE INSURANCE
COMPANY, petitioner, 
vs.
COURT OF APPEALS, Presiding Judge,
RTC Manila, Br. 24 and ABOITIZ SHIPPING
CORPORATION,respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 95578
EQUITABLE INSURANCE
CORPORATION, petitioner,  petitioners filed separate suits against Aboitiz
vs.
COURT OF APPEALS, Former First
Division Composed of Hon. Justices
RODOLFO NOCON, PEDRO RAMIREZ, and
JESUS ELBINIAS and ABOITIZ SHIPPING
CORPORATION, respondents.
DE LEON, JR., J.:
Before us are three consolidated petitions.
G.R. No. 92735 is a petition for review filed
under Rule 45 of the Rules of Court assailing
the decision of the Court of Appeals dated
March 29, 1990 in CA-G.R. SP. Case No.
17427 which set aside the writ of execution
issued by the lower court for the full
indemnification of the claims of the petitioners,
Monarch Insurance Company (hereafter
"Monarch") and Tabacalera Insurance
Company, Incorporated (hereafter
"Tabacalera") against private respondent,
Aboitiz Shipping Corporation (hereafter
"Aboitiz") on the ground that the latter is
entitled to the benefit of the limited liability rule
in maritime law; G.R. No. 94867 is a petition
for certiorari under Rule 65 of the Rules of
Court to annul and set aside the decision of
the Court of Appeals dated August 15, 1990 in
CA-G.R. SP No. 20844 which ordered the
lower court to stay the execution of the
judgment in favor of the petitioner, Allied
Guarantee Insurance Company (hereafter
"Allied") against Aboitiz insofar as it impairs
the rights of the other claimants to their pro-
rata share in the insurance proceeds from the
with the rule on limited liability; and G.R. No.
95578 is a petition for review under Rule 45 of
the Rules of Court seeking a reversal of the
decision of the Court of Appeals dated August
24, 1990 and its resolution dated October 4,
1990 in C.A. G.R. Civil Case No. 15071 which
modified the judgment of the lower court's
award of actual damages to petitioner
Equitable Insurance Corporation (hereafter
"Equitable") to its pro-rata share in the
insurance proceeds from the sinking of the
M/V P. Aboitiz.
All cases arose from the loss of cargoes of
various shippers when the M/V P. Aboitiz, a
common carrier owned and operated by
Aboitiz, sank on her voyage from Hong Kong
to Manila on October 31, 1980. Seeking
indemnification for the loss of their cargoes,
the shippers, their successors-in-interest, and
the cargo insurers such as the instant
before the Regional Trial Courts. The claims
numbered one hundred and ten (110) for the
total amount of P41,230,115.00 which is
almost thrice the amount of the insurance
proceeds of P14,500,000.00 plus earned
freight of 500,000.00 according to Aboitiz. To
this day, some of these claims, including those
of herein petitioners, have not yet been
settled.
G.R. No. 92735.
Monarch and Tabacalera are insurance
carriers of lost cargoes. They indemnified the
shippers and were consequently subrogated to
their rights, interests and actions against
Aboitiz, the cargo carrier. 1 Because Aboitiz
refused to compensate Monarch, it filed two
complaints against Aboitiz, docketed as Civil
Cases Nos. 82-2767 and 82-2770. For its part,
Tabacalera also filed two complaints against
the same defendant, docketed as Civil Cases
Nos. 82-2768 and 82-2769. As these four (4)
cases had common causes of action, they
were consolidated and jointly tried. 2
In Civil Case No. 82-2767 where Monarch also
named Malaysian International Shipping
Corporation and Litonja Merchant Shipping
Agency as Aboitiz's co-defendants, Monarch
sough recovery of P29,719.88 representing
the value of three (3) pallets of glass tubing
that sank with the M/V P. Aboitiz, plus
attorney's fees of not less than P5,000.00,
231
litigation expenses, interest at the legal rate on
all these amounts, and the cost of suit. 3 Civil
Case. No. 82-2770 was a complaint filed by
Monarch against Aboitiz and co-
defendants Compagnie Maritime des
Chargeurs Reunis and F.E. Zuellig (M), Inc.
for the recovery of P39,597.00 representing
the value of the one case motor vehicle parts
which was lost when the M/V P. Aboitiz sank
on her way to Manila, plus Attorney's fees of
not less than P10,000.00 and cost of suit. 4
Tabacalera sought against Franco Belgian
Services, F.E. Zuellig and Aboitiz in Civil Case
No. 82-2768 the recovery of P284,218.00
corresponding to the value of nine (9) cases of
Renault spare parts, P213,207.00 for the value
of twenty-five (25) cases of door closers and
P42,254.00 representing the value of eighteen
(18) cases of plastic spangle, plus attorney's
fees of not less than P50,000.00 and cost of
suit. 5 In Civil Case No. 82-2769, Tabacalera
claimed from Hong Kong Island Shipping Co.,
Ltd., Citadel Lines and Aboitiz indemnification
in the amount of P75,058.00 for the value of
four (4) cartons of motor vehicle parts
foundered with the M/V P. Aboitiz, plus
attorney's fees of not less than P20,000.00
and cost of suit. 6
In its answer with counterclaim, Aboitiz
rejected responsibility for the claims on the
ground that the sinking of its cargo vessel was
due to force majeure or an act of
God. 7 Aboitiz was subsequently declared as in
default for its failure to appear during the pre-
trial. Its counsel fried a motion to set aside the
order of default with notice of his withdrawal as
such counsel. Before the motion could be
acted upon, Judge Bienvenido Ejercjto, the
presiding judge of the trial court, was
promoted to the then intermediate Appellate
Court. The cases were thus re-raffled to
Branch VII of the RTC of Manila presided by
Judge Amante P. Purisima, the co-petitioner in
G.R. No. 92735. Without resolving the pending
motion to set aside the order of default, the
trial court set the cases for hearing. However,
since Aboitiz had repeatedly failed to appear in
court, the trial court denied the said motion
and allowed Monarch and Tabacalera to
present evidence ex-parte. 8
Monarch and Tabacalera proffered in evidence
the survey of Perfect Lambert, a surveyor
commissioned to investigate the possible
cause of the sinking of the cargo vessel. The
survey established that on her voyage to
Manila from Hong Kong, the vessel did not
encounter weather so inclement that Aboitiz
would be exculpated from liability for losses. In
his note of protest, the master of M/V P.
Aboitiz described the wind force encountered
by the vessel as from ten (10) to fifteen (15)
knots, a weather condition classified as typical
and moderate in the South China Sea at that
particular time of the year. The survey added
that the seaworthiness of the vessel was in
question especially because the breaches of
the hull and the serious flooding of two (2)
cargo holds occurred simultaneously in
"seasonal weather." 9
In due course, the trial court rendered
judgment against Aboitiz but the complaint
against all the other defendants was
dismissed. Aboitiz was held liable for the
following: (a) in Civil Case No. 82-2767,
P29,719.88 with legal interest from the filing of
the complaint until fully paid plus attorney's
fees of P30,000.00 and cost of suit; (b) in Civil
Case No. 82-2768, P539,679.00 with legal
interest of 12% per annum from date of filing
of the complaint until fully paid, plus attorney's
fees of P30,000.00, litigation expenses and
cost of suit; (c) in Civil Case No. 82-2769,
P75,058.00 with legal interest of 12% per
annum from date of filing of the complaint
until-fully paid, plus P5,000.00 attorney's fees,
litigation expenses and cost of suit, and (d) in
Civil Case No. 82-2770, P39,579.66 with legal
interest of 12%per annum from date of filing of
the complaint until fully paid, plus attorney's
fees of P5,000.00, litigation expenses and cost
of suit.
Aboitiz filed a motion for reconsideration of the
decision and/or for new trial to lift the order of
default. The court denied the motion on
August 27, 1986. 10 Aboitiz appealed to the
Court of Appeals but the appeal was
dismissed for its failure to file appellant's brief.
It subsequently filed an urgent motion for
reconsideration of the dismissal with prayer for
the admission of its attached appellant's brief.
The appellate court denied that motion for lack
of merit in a Resolution dated July 8, 1988. 11
Aboitiz thus filed a petition for review before
this Court. Docketed as G.R. No. 84158, the
petition was denied in the Resolution of
October 10, 1988 for being filed out of time.
Aboitiz's motion for the reconsideration of said
231
Resolution was similarly denied. 12 Entry of
judgment was made in the case. 13
Consequently, Monarch and Tabacalera
moved for execution of judgment. The trial
court granted the motion on April 4,
1989 14 and issued separate writs of execution.
However, on April 12, 1989, Aboitiz, invoking
the real and hypothecary nature of liability in
maritime law, filed an urgent motion to quash
the writs of execution. 15 According to Aboitiz,
since its liability is limited to the value of the
vessel which was insufficient to satisfy the
aggregate claims of all 110 claimants, to
indemnify Monarch and Tabacalera ahead of
the other claimants would be prejudicial to the
latter. Monarch and Tabacalera opposed the
motion to quash. 16
On April 17, 1989, before the motion to quash
could be heard, the sheriff levied upon five (5)
heavy equipment owned by Aboitiz for the
public auction sale. At said sale, Monarch was
the highest bidder for one (1) unit FL-151 Fork
Lift (big) and one (1) unit FL-25 Fork Lift
(small). Tabacalera was also the highest
bidder for one (1) unit TCH TL-251 Hyster
Container Lifter, one (1) unit Hyster Top Lifter
(out of order), and one (1) unit ER-353 Crane.
The corresponding certificates of sale 17 were
issued to Monarch and Tabacalera.
On April 18, 1989, the day before the hearing
of the motion to quash, Aboitiz filed a
supplement to its motion, to add the fact that
an auction sale had taken place. On April 19,
1989, Judge Purisima issued an order denying
the motion to quash but freezing execution
proceedings for ten (10) days to give Aboitiz
time to secure a restraining order from a
higher court. 18 Execution was scheduled to
resume to fully satisfy the judgment when the
grace period shall have lapsed without such
restraining order having been obtained by
Aboitiz.
Aboitiz filed with the Court of Appeals a
petition for certiorari and prohibition with
prayer for preliminary injunction and/or
temporary restraining order under CA-G.R.
No. SP-17427. 19 On March 29, 1990, the
appellate court rendered a Decision the
dispositive portion of which reads:
WHEREFORE, the writ of certiorari is
hereby granted, annulling the subject
writs of execution, auction sale,
certificates of sale, and the assailed
orders of respondent Judge dated April
4 and April 19, 1989 insofar as the
money value of those properties of
Aboitiz, levied on execution and sold at
public auction, has exceeded the pro-
rata shares of Monarch and
Tabacalera in the insurance proceeds
of Aboitiz in relation to the pro-rata
shares of the 106 other claimants.
The writ of prohibition is also granted
to enjoin respondent Judge, Monarch
and Tabacalera from proceeding
further with execution of the judgments
in question insofar as the execution
would satisfy the claims of Monarch
and Tabacalera in excess of their pro-
rata shares and in effect reduce the
balance of the proceeds for distribution
to the other claimants to their
prejudice.
The question of whether or how much
of the claims of Monarch and
Tabacalera against the insurance
proceeds has already been settled
through the writ of execution and
auction sale in question, being factual
issues, shall be threshed out before
respondent judge.
The writ of preliminary injunction
issued in favor of Aboitiz, having
served its purpose, is hereby lifted. No
pronouncement as to costs.
SO ORDERED. 20
Hence, the instant petition for review
on certiorari where petitioners Monarch,
Tabacalera and Judge Purisima raise the
following assignment of errors:
1. The appellate court grievously erred
in re-opening the Purisima decisions,
already final and executory, on the
alleged ground that the issue of real
and hypothecary liability had not been
previously resolved by Purisima, the
appellate court, and this Hon. Supreme
Court;
2. The appellate court erred when it
resolved that Aboitiz is entitled to the
limited real and hypothecary liability of
231
 a ship owner, considering the facts on
record and the law on the matter.
3. The appellate court erred when it
concluded that Aboitiz does not have
to present evidence to prove its
entitlement to the limited real and
hypothecary liability.
4. The appellate court erred in ignoring
the case of "Aboitiz Shipping
Corporation v. CA and Allied Guaranty
Insurance Co., Inc. (G.R. No. 88159),
decided by this Honorable Supreme
Court as early as November 13, 1989,
considering that said case, now factual
and executory, is in pari materia with
the instant case.
5. The appellate court erred in not
concluding that irrespective of whether
Aboitiz is entitled to limited
hypothecary liability or not, there are
enough funds to satisfy all the
claimants.
6. The appellate court erred when it
concluded that Aboitiz had made an
"abandonment" as envisioned by Art.
587 of the Code of Commerce.
7. The appellate court erred when it
concluded that other claimants would
suffer if Tabacalera and Monarch
would be fully paid.
8. The appellate court erred in
concluding that certiorari was the
proper remedy for Aboitiz. 21
G.R. NOS. 94867 & 95578
Allied as insurer-subrogee of consignee Peak
Plastic and Metal Products Limited, filed a
complaint against Aboitiz for the recovery of
P278,536.50 representing the value of 676
bags of PVC compound and 10 bags of ABS
plastic lost on board the M/V P. Aboitiz, with
legal interest from the date of filing of the
complaint, plus attorney's fees, exemplary
damages and costs. 22 Docketed as Civil Case
No. 138643, the case was heard before the
Regional Trial Court of Manila, Branch XXIV,
presided by Judge Sergio D. Mabunay.
On the other hand, Equitable, as insurer-
subrogee of consignee-assured Axel
Manufacturing Corporation, filed an amended
complaint against Franco Belgian Services,
F.E. Zuellig, Inc. and Aboitiz for the recovery
of P194,794.85 representing the value of 76
drums of synthetic organic tanning substances
and 1,000 kilograms of optical bleaching
agents which were also lost on board the M/V
P. Aboitiz, with legal interest from the date of
filing of the complaint, plus 25% attorney's
fees, exemplary damages, litigation expenses
and costs of suit.23 Docketed as Civil Case No.
138396, the complaint was assigned to the
Regional Trial Court of Manila, Branch VIII.
In its answer with counterclaim in the two
cases, Aboitiz disclaimed responsibility for the
amounts being recovered, alleging that the
loss was due to a fortuitous event or an act of
God. It prayed for the dismissal of the cases
and the payment of attorney's fees, litigation
expenses plus costs of suit. It similarly relied
on the defenses of force mejeure,
seaworthiness of the vessel and exercise of
due diligence in the carriage of goods as
regards the cross-claim of its co-defendants. 24
In support of its position, Aboitiz presented the
testimonies of Capt. Gerry N. Racines, master
mariner of the M/V P. Aboitiz, and Justo C.
Iglesias, a meteorologist of the Philippine
Atmospheric Geophysical and Astronomical
Services Administration (PAGASA). The gist of
the testimony of Capt. Racines in the two
cases follows:
The M/V P. Aboitiz left Hong Kong for Manila
at about 7:30 in the evening of October 29,
1980 after securing a departure clearance
from the Hong Kong Port Authority. The
departure was delayed for two hours because
he (Capt. Racines) was observing the direction
of the storm that crossed the Bicol Region. He
proceeded with the voyage only after being
informed that the storm had abated. At about
8:00 o'clock in the morning of October 30,
1980, after more than twelve (12) hours of
navigation, the vessel suddenly encountered
rough seas with waves about fifteen to twenty-
five feet high. He ordered his chief engineer to
check the cargo holds. The latter found that
sea water had entered cargo hold Nos. 1 and
2. He immediately directed that water be
pumped out by means of the vessel's bilge
pump, a device capable of ejecting 180
231
gallons of water per minute. They were initially
successful in pumping out the water.
At 6:00 a.m. of October 31, 1980, however,
Capt. Racines received a report from his chief
engineer that the water level in the cargo holds
was rapidly rising. He altered the vessel's
course and veered towards the northern tip of
Luzon to prevent the vessel from being
continuously pummeled by the waves. Despite
diligent efforts of the officers and crew,
however, the vessel, which was approximately
250 miles away from the eye of the storm,
began to list on starboard side at 27 degrees.
Capt. Racines and his crew were not able to
make as much headway as they wanted
because by 12:00 noon of the same day, the
cargo holds were already flooded with sea
water that rose from three to twelve feet,
disabling the bilge pump from containing the
water.
The M/V P. Aboitiz sank at about 7:00 p.m. of
October 31, 1980 at latitude 18 degrees North,
longitude 170 degrees East in the South China
Sea in between Hong Kong, the Philippines
and Taiwan with the nearest land being the
northern tip of Luzon, around 270 miles from
Cape Bojeador, Bangui, Ilocos Norte.
Responding to the captain's distress call, the
M/V Kapuas (Capuas) manned by Capt.
Virgilio Gonzales rescued the officers and
crew of the ill-fated M/V P. Aboitiz and brought
them to Waileen, Taiwan where Capt. Racines
lodged his marine protest dated November 3,
1980.
Justo Iglesias, meteorologist of PAGASA and
another witness of Aboitiz, testified in both
cases that during the inclusive dates of
October 28-31, 1980, a stormy weather
condition prevailed within the Philippine area
of responsibility, particularly along the sea
route from Hong Kong to Manila, because of
tropical depression "Yoning." 25PAGASA
issued weather bulletins from October 28-30,
1980 while the storm was still within Philippine
territory. No domestic bulletins were issued the
following day when the storm which hit
Eastern Samar, Southern Quezon and
Southern Tagalog provinces, had made its exit
to the South China Sea through Bataan.
Allied and Equitable refuted the allegation that
the M/V P. Aboitiz and its cargo were lost due
to force majeure, relying mainly on the marine
protest filed by Capt. Racines as well as on
the Beaufort Scale of Wind. In his marine
protest under oath, Capt. Racines affirmed
that the wind force an October 29-30, 1980
was only ten (10) to fifteen (15) knots. Under
the Beaufort Scale of Wind, said wind velocity
falls under scale No. 4 that describes the sea
condition as "moderate breeze," and "small
waves becoming longer, fairly frequent white
horses." 26
To fortify its position, Equitable presented
Rogelio T. Barboza who testified that as
claims supervisor and processor of Equitable,
he recommended payment to Axel
Manufacturing Corporation as evidenced by
the cash voucher, return check and
subrogation receipt. Barboza also presented a
letter of demand to Aboitiz which, however, the
latter ignored. 27
On April 24, 1984, the trial court rendered a
decision that disposed of Civil Case No.
138643 as follows:
WHEREFORE, judgment is hereby
rendered ordering defendant Aboitiz
Shipping Company to pay plaintiff
Allied Guarantee Insurance Company,
Inc. the sum of P278,536.50, with legal
interest thereon from March 10, 1981,
then date of the filing of the complaint,
until fully paid, plus P30,000.00 as
attorney's fees, with costs of suit.
SO ORDERED. 28
A similar decision was arrived at in Civil Case
No. 138396, the dispositive portion of which
reads:
WHEREFORE, in view of the
foregoing, this Court hereby renders
judgment in favor of plaintiff and
against defendant Aboitiz Shipping
Corporation, to pay the sum of
P194,794.85 with legal rate of interest
thereon from February 27, 1981 until
fully paid; attorney's fees of twenty-five
(25%) percent of the total claim, plus
litigation expenses and costs of
litigation.
SO ORDERED. 29
In Civil Case No. 138643, Aboitiz appealed to
the Court of Appeals under CA-G.R. CV No.
04121. On March 23, 1987, the Court of
231
Appeals affirmed the decision of the lower
court. A motion for reconsideration of the said
decision was likewise denied by the Court of
Appeals on May 3, 1989. Aggrieved, Aboitiz
then filed a petition for review with this Court
docketed as G.R. No. 88159 which was
denied for lack merit. Entry of judgment was
made and the lower court's decision in Civil
Case No. 138643 became final and executory.
Allied prayed for the issuance of a writ of
execution in the lower court which was granted
by the latter on April 4, 1990. To stay the
execution of the judgment of the lower court,
Aboitiz filed a petition for certiorari and
prohibition with preliminary injunction with the
Court of Appeals docketed as CA-G.R. SP No.
20844. 30 On August 15, 1990, the Court of
Appeals rendered the assailed decision, the
dispositive portion of which reads as follows.
WHEREFORE, the challenged order of
the respondent Judge dated April 4,
1990 granting the execution is hereby
set aside. The respondent Judge is
further ordered to stay the execution of
the judgment insofar as it impairs the
rights of the 100 other claimants to the
insurance proceeds including the rights
of the petitioner to pay more than the
value of the vessel or the insurance
proceeds and to desist from executing
the judgment insofar as it prejudices
the pro-rata share of all claimants to
the insurance proceeds. No
pronouncement as to costs.
SO ORDERED. 31
Hence, Allied filed the instant petition
for certiorari, mandamus and injunction with
preliminary injunction and/or restraining order
before this Court alleging the following
assignment of errors:
1. Respondent Court of Appeals
gravely erred in staying the immediate
execution of the judgment of the lower
court as it has no authority nor
jurisdiction to directly or indirectly alter,
modify, amend, reverse or invalidate a
final judgment as affirmed by the
Honorable Supreme Court in G.R. No.
88159.
2. Respondent Court of Appeals with
grave abuse of discretion amounting to
lack or excess of jurisdiction, brushed
aside the doctrine in G.R. No. 88159
which is now the law of the case and
observance of time honored principles
of stare decisis, res adjudicata and
estoppel by judgment.
3. Real and hypothecary rule under
Articles 587, 590 and 837 of the Code
of Commerce which is the basis of the
questioned decision (Annex "C"
hereof) is without application in the
face of the facts found by the lower
court, sustained by the Court of
Appeals in CA-G.R. No. 04121 and
affirmed in toto by the Supreme Court
in G.R. No. 88159.
4. Certiorari as a special remedy is
unavailing for private respondent as
there was no grave abuse of discretion
nor lack or excess of jurisdiction for
Judge Mabunay to issue the order of
April 4, 1990 which was in accord with
law and jurisprudence, nor were there
intervening facts and/or supervening
events that will justify respondent court
to issue a writ of certiorari or a
restraining order on a final and
executory judgment of the Honorable
Supreme Court. 32
From the decision of the trial court in Civil
Case No. 138396 that favored Equitable,
Aboitiz likewise appealed to the Court of
Appeals through CA-G.R. CV No. 15071. On
August 24, 1990, the Court of Appeals
rendered the Decision quoting extensively its
Decision in CA-G.R. No. SP-17427 (now G.R.
No. 92735) and disposing of the appeal as
follows:
WHEREFORE, we hereby affirm the
trial court's awards of actual damages,
attorney's fees and litigation expenses,
with the exception of legal interest, in
favor of plaintiff-appellee Equitable
Insurance Corporation as subrogee of
the consignee for the loss of its
shipment aboard the M/V "P. Aboitiz"
and against defendant-appellant
Aboitiz Shipping Corporation.
However, the amount and payment of
those awards shall be subject to a
determination of the pro-rata share of
said appellee in relation to the pro-rata
shares of the 109 other claimants,
which determination shall be made by
231
 the trial court. This case is therefore
hereby ordered remanded to the trial
court which shall reopen the case and
receive evidence to determine
appellee's pro-rata share as aforesaid.
No pronouncement as to costs.
SO ORDERED. 33
On September 12, 1990, Equitable moved to
reconsider the Court of Appeals' Decision. The
Court of Appeals denied the motion for
reconsideration on October 4,
1990. 34 Consequently, Equitable filed with this
Court a petition for review alleging the
following assignment of errors:
1. Respondent Court of Appeals, with
grave abuse of discretion amounting to
lack or excess of jurisdiction,
erroneously brushed aside the doctrine
in G.R. No. 88159 which is now the
law of the case as held in G.R. No.
89757 involving the same and identical
set of facts and cause of action relative
to the sinking of the M/V "P. Aboitiz"
and observance of the time honored
principles of stare decisis, and
estoppel by judgment.
2. Real and hypothecary rule under
Articles 587, 590 and 837 of the Code
of Commerce which is the basis of the
assailed decision and resolution is
without application in the face of the
facts found by the trial court which
conforms to the conclusion and finding
of facts arrived at in a similar and
identical case involving the same
incident and parties similarly situated
in G.R. No. 88159 already declared as
the "law of the case" in a subsequent
decision of this Honorable Court in
G.R. No. 89757 promulgated on
August 6, 1990.
3. Respondent Court of Appeals
gravely erred in concluding that limited
liability rule applies in case of loss of
cargoes when the law itself does not
distinguish; fault of the shipowner or
privity thereto constitutes one of the
exceptions to the application of limited
liability under Article 587, 590 and 837
of the Code of Commerce, Civil Code
provisions on common carriers for
breach of contract of carriage
prevails. 35
These three petitions in G.R. Nos. 92735,
94867 and 95578 were consolidated in the
Resolution of August 5, 1991 on the ground
that the petitioners "have identical causes of
action against the same respondent and
similar reliefs are prayed for." 36
The threshold issue in these consolidated
petitions is the applicability of the limited
liability rule in maritime law in favor of Aboitiz
in order to stay the execution of the judgments
for full indemnification of the losses suffered
by the petitioners as a result of the sinking of
the M/V P. Aboitiz. Before we can address this
issue, however, there are procedural matters
that need to be threshed out.
First. At the outset, the Court takes note of the
fact that in G.R. No. 92735, Judge Amante
Purisima, whose decision in the Regional Trial
Court is sought to be upheld, is named as a
co-petitioner. In Calderon v. Solicitor
General, 37where the petitioner in the special
civil action of certiorari and mandamus was
also the judge whose order was being
assailed, the Court held that said judge had no
standing to file the petition because he was
merely a nominal or formal party-respondent
under Section 5 of Rule 65 of the Rules of
Court. He should not appear as a party
seeking the reversal of a decision that is
unfavorable to the action taken by him. The
Court there said:
Judge Calderon should be-reminded of
the well-known doctrine that a judge
should detach himself from cases
where his decision is appealed to a
higher court for review. The raison
d'etre for such doctrine is the fact that
a judge is not an active combatant in
such proceeding and must leave the
opposing parties to contend their
individual positions and for the
appellate court to decide the issues
without his active participation. By filing
this case, petitioner in a way ceased to
be judicial and has become adversarial
instead. 38
While the petition in G.R. No. 92735 does not
expressly show whether or not Judge Purisima
himself is personally interested in the
disposition of this petition or he was just
231
inadvertently named as petitioner by the real
parties in interest, the fact that Judge Purisima
is named as petitioner has not escaped this
Court's notice. Judges and litigants should be
reminded of the basic rule that courts or
individual judges are not supposed to be
interested "combatants" in any litigation they
resolve.
Second. The petitioners contend that the
inapplicability of the limited liability rule to
Aboitiz has already been decided on by no
less than this Court in G.R. No. 88159 as early
as November 13, 1989 which was
subsequently declared as "law of the case" in
G.R. No. 89757 on August 6, 1990. Herein
petitioners cite the aforementioned cases in
support of their theory that the limited liability
rule based on the real and hypothecary nature
of maritime law has no application in the cases
at bar.
The existence of what petitioners insist is
already the "law of the case" on the matter of
limited liability is at best illusory. Petitioners
are either deliberately misleading this Court or
profoundly confused. As elucidated in the case
of Aboitiz Shipping Corporation vs. General
Accident Fire and Life Assurance
Corporation, 39
An examination of the November 13,
1989 Resolution in G.R. No. 88159
(pp. 280-282, Rollo) shows that the
same settles two principal matters, first
of which is that the doctrine of primary
administrative jurisdiction is not
applicable therein; and second is that a
limitation of liability in said case would
render inefficacious the extraordinary
diligence required by law of common
carriers.
It should be pointed out, however, that
the limited liability discussed in said
case is not the same one now in issue
at bar, but an altogether different
aspect. The limited liability settled in
G.R. No. 88159 is that which attaches
to cargo by virtue of stipulations in the
Bill of Lading, popularly known as
package limitation clauses, which in
that case was contained in Section 8 of
the Bill of Lading and which limited the
carrier's liability to US$500.00 for the
cargo whose value was therein sought
to be recovered. Said resolution did
not tackle the matter of the Limited
Liability Rule arising out of the real and
hypothecary nature of maritime law,
which was not raised therein, and
which is the principal bone of
contention in this case. While the
matters threshed out in G.R. No.
88159, particularly those dealing with
the issues on primary administrative
jurisdiction and the package liability
limitation provided in the Bill of Lading
are now settled and should no longer
be touched, the instant case raises a
completely different issue. 40
Third. Petitioners asseverate that the
judgments of the lower courts, already final
and executory, cannot be directly or indirectly
altered, modified, amended, reversed or
invalidated.
The rule that once a decision becomes final
and executory, it is the ministerial duty of the
court to order its execution, is not an absolute
one: We have allowed the suspension of
execution in cases of special and exceptional
nature when it becomes imperative in the
higher interest of justice. 41 The unjust and
inequitable effects upon various other
claimants against Aboitiz should we allow the
execution of judgments for the full
indemnification of petitioners' claims impel us
to uphold the stay of execution as ordered by
the respondent Court of Appeals. We reiterate
our pronouncement in Aboitiz Shipping
Corporation vs. General Accident Fire and Life
Assurance Corporation on this very same
issue.
This brings us to the primary question
herein which is whether or not
respondent court erred in granting
execution of the full judgment award in
Civil Case No. 14425 (G.R. No.
89757), thus effectively denying the
application of the limited liability
enunciated under the appropriate
articles of the Code of
Commerce. . . . . Collaterally,
determination of the question of
whether execution of judgments which
have become final and executory may
be stayed is also an issue.
We shall tackle the latter issue first.
This Court has always been consistent
in its stand that the very purpose for its
231
 existence is to see the
accomplishment of the ends of justice.
Consistent with this view, a number of
decisions have originated herefrom,
the tenor of which is that no procedural
consideration is sancrosanct if such
shall result in the subverting of justice.
The right to execution after finality of a
decision is certainly no exception to
this. Thus, in Cabrias v. Adil (135
SCRA 355 [1885]), this Court ruled
that:
x x x           x x x          x x x
. . . every court having
jurisdiction to render a
particular judgment has
inherent power to enforce it,
and to exercise equitable
control over such enforcement.
The court has authority to
inquire whether its judgment
has been executed, and will
remove obstructions to the
enforcement thereof. Such
authority extends not only to
such orders and such writs as
may be necessary to prevent
an improper enforcement of
the judgment. If a judgment is
sought to be perverted and
made a medium of
consummating a wrong the
court on proper application can
prevent it. 42
Fourth. Petitioners in G.R. No. 92735 ever that
it was error for the respondent Court of
Appeals to allow Aboitiz the benefit of the
limited liability rule despite its failure to present
evidence to prove its entitlement thereto in the
court below. Petitioners Monarch and
Tabacalera remind this Court that from the
inception of G.R. No. 92735 in the lower court
and all the way to the Supreme Court, Aboitiz
had not presented an iota of evidence to
exculpate itself from the charge of negligence
for the simple reason that it was declared as in
default. 43
It is true that for having been declared in
default, Aboitiz was precluded from presenting
evidence to prove its defenses in the court a
quo. We cannot, however, agree with
petitioners that this circumstance prevents the
respondent Court of Appeals from taking
cognizance of Aboitiz' defenses on appeal.
It should be noted that Aboitiz was declared as
in default not for its failure to file an answer but
for its absence during pre-trial and the trial
proper. In Aboitiz' answer with counterclaim, it
claimed that the sinking of the M/V P. Aboitiz
was due to an act of God or unforeseen event
and that the said ship had been seaworthy and
fit for the voyage. Aboitiz also alleged that it
exercised the due diligence required by law,
and that considering the real and hypothecary
nature of maritime trade, the sinking justified
the extinguishment of its liability for the lost
shipment. 44
A judgment of default does not imply a waiver
of rights except that of being heard and
presenting evidence in defendant's favor. It
does not imply admission by the defendant of
the facts and causes of action of the plaintiff,
because the codal section 45 requires the latter
to adduce evidence in support of his
allegations as an indispensable condition
before final judgment could be given in his
favor. Nor could it be interpreted as an
admission by the defendant that the plaintiff's
causes of action find support in the law or that
the latter is entitled to the relief prayed
for. 46 This is especially true with respect to a
defendant who had filed his answer but had
been subsequently declared in default for
failing to appear at the trial since he has had
an opportunity to traverse, via his answer, the
material averments contained in the complaint.
Such defendant has a better standing than a
defendant who has neither answered nor
appeared at trial. 47 The former should be
allowed to reiterate all affirmative defenses
pleaded in his answer before the Court of
Appeals. Likewise, the Court of Appeals may
review the correctness of the evaluation of the
plaintiffs evidence by the lower court.
It should also be pointed out that Aboitiz is not
raising the issue of its entitlement to the limited
liability rule for the first time on appeal thus,
the respondent Court of Appeals may properly
rule on the same.
However, whether or not the respondent Court
of Appeals erred in finding, upon review, that
Aboitiz is entitled to the benefit of the limited
liability rule is an altogether different matter
which shall be discussed below.
231
Rule on Limited Liability. The petitioners assert
in common that the vessel M/V P. Aboitiz did
not sink by reason offorce majeure but
because of its unseaworthiness and the
concurrent fault and/or negligence of Aboitiz,
the captain and its crew, thereby barring
Aboitiz from availing of the benefit of the
limited liability rule.
The principle of limited liability is enunciated in
the following provisions of the Code of
Commerce:
Art. 587. The shipagent shall also be
civilly liable for the indemnities in favor
of third persons which may arise from
the conduct of the captain in the care
of goods which he loaded on the
vessel; but he may exempt himself
therefrom by abandoning the vessel
with all the equipments and the freight
it may have earned during the voyage.
Art. 590. The co-owners of a vessel
shall be civilly liable in the proportion of
their interests in the common fund for
the results of the acts of the captain
referred to in Art. 587.
Each co-owner may exempt himself
from his liability by the abandonment,
before a notary, of the part of the
vessel belonging to him.
Art. 837. The civil liability incurred by
shipowners in the case prescribed in
this section, shall be understood as
limited to the value of the vessel with
all its appurtenances and the
freightage served during the voyage.
Art. 837 appeals the principle of limited liability
in cases of collision hence, Arts. 587 and 590
embody the universal principle of limited
liability in all cases. In Yangco v.
Laserna, 48 this Court elucidated on the import
of Art. 587 as follows:
The provision accords a shipowner or
agent the right of abandonment; and
by necessary implication, his liability is
confined to that which he is entitled as
of right to abandon-"the vessel with all
her equipments and the freight it may
have earned during the voyage." It is
true that the article appears to deal
only with the limited liability of the
shipowners or agents for damages
arising from the misconduct of the
captain in the care of the goods which
the vessel carries, but this is a mere
deficiency of language and in no way
indicates the true extent of such
liability. The consensus of authorities is
to the effect that notwithstanding the
language of the aforequoted provision,
the benefit of limited liability therein
provided for, applies in all cases
wherein the shipowner or agent may
properly be held liable for the negligent
or illicit acts of the captain. 49
"No vessel, no liability," expresses in a nutshell
the limited liability rule. The shipowner's or
agent's liability is merely co-extensive with his
interest in the vessel such that a total loss
thereof results in its extinction. The total
destruction of the vessel extinguishes maritime
liens because there is no longer any res to
which it can attach. 50 This doctrine is based on
the real and hypothecary nature of maritime
law which has its origin in the prevailing
conditions of the maritime trade and sea
voyages during the medieval ages, attended
by innumerable hazards and perils. To offset
against these adverse conditions and to
encourage shipbuilding and maritime
commerce, it was deemed necessary to
confine the liability of the owner or agent
arising from the operation of a ship to the
vessel, equipment, and freight, or insurance, if
any. 51
Contrary to the petitioners' theory that the
limited liability rule has been rendered
obsolete by the advances in modern
technology which considerably lessen the risks
involved in maritime trade, this Court
continues to apply the said rule in appropriate
cases. This is not to say, however, that the
limited liability rule is without exceptions,
namely: (1) where the injury or death to a
passenger is due either to the fault of the
shipowner, or to the concurring negligence of
the shipowner and the captain; 52 (2) where the
vessel is insured; and (3) in workmen's
compensation claims. 53
We have categorically stated that Article 587
speaks only of situations where the fault or
negligence is committed solely by the captain.
In cases where the ship owner is likewise to
be blamed, Article 587 does not apply. Such a
231
situation will be covered by the provisions of
the Civil Code on common carriers. 54
A finding that a fortuitous event was the sole
cause of the loss of the M/V P. Aboitiz would
absolve Aboitiz from any and all liability
pursuant to Article 1734(1) of the Civil Code
which provides in part that common carriers
are responsible for the loss, destruction, or
deterioration of the goods they carry, unless
the same is due to flood, storm, earthquake,
lightning, or other natural disaster or calamity.
On the other hand, a finding that the M/V P.
Aboitiz sank by reason of fault and/or
negligence of Aboitiz, the ship captain and
crew of the M/V P. Aboitiz would render
inapplicable the rule on limited liability. These
issues are therefore ultimately questions of
fact which have been subject of conflicting
determinations by the trial courts, the Court of
Appeals and even this Court.
In Civil Cases Nos. 82-2767-82-2770 (now
G.R. No. 92735), after receiving Monarch's
and Tabacalera's evidence, the trial court
found that the complete loss of the shipment
on board the M/V P. Aboitiz when it sank was
neither due to a fortuitous event nor a storm or
natural cause. For Aboitiz' failure to present
controverting evidence, the trial court also
upheld petitioners' allegation that the M/V P.
Aboitiz was unseaworthy. 55 However, on
appeal, respondent Court of Appeals
exculpated Aboitiz from fault or negligence
and ruled that:
. . ., even if she (M/V P. Aboitiz) was
found to be unseaworthy,
this fault (distinguished from civil
liability) cannot be laid on the
shipowner's door. Such fault was
directly attributable to the captain. This
is so, because under Art. 612 of the
Code of Commerce, among the
inherent duties of a captain, are to
examine the vessel before sailing and
to comply with the laws on
navigation. 56
and that:
. . . although the shipowner may be
held civilly liable for the captain's fault .
. . having abandoned the vessel in
question, even if the vessel was
unseaworthy due to the captain's fault,
Aboitiz is still entitled to the benefit
under the rule of limited liability
accorded to shipowners by the Code of
Commerce. 57
Civil Case No. 138396 (now G.R. No. 95578)
was similarly resolved by the trial court, which
found that the sinking of the M/V P. Aboitiz
was not due to an act of God or force majeure.
It added that the evidence presented by the
petitioner Equitable demonstrated the
negligence of Aboitiz Shipping Corporation in
the management and operation of its, vessel
M/V P. Aboitiz. 58
However, Aboitiz' appeal was favorably acted
upon by the respondent Court of Appeals
which reiterated its ruling in G.R. No. 92735
that the unseaworthiness of the M/V P. Aboitiz
was not a fault directly attributable to Aboitiz
but to the captain, and that Aboitiz is entitled to
the benefit of the limited liability rule for having
abandoned its ship. 59
Finally, in Civil Case No. 138643 (now G.R.
No. 94867), the trial court held that the M/V P.
Aboitiz was not lost due to a fortuitous event
or force majeure, and that Aboitiz had failed to
satisfactorily establish that it had observed
extraordinary diligence in the vigilance over
the goods transported by it. 60
In CA-G.R. CV No. 04121, the Court of
Appeals initially ruled against Aboitiz and
found that the sinking of the vessel was due to
its unseaworthiness and the failure of its crew
and master to exercise extraordinary
diligence. 61Subsequently, however, Aboitiz'
petition before the Court of Appeals, docketed
as CA-G.R. SP No. 20844 (now G.R. No.
94867) to annul and set aside the order of
execution issued by the lower court was
resolved in favor of Aboitiz. The Court of
Appeals brushed aside the issue of Aboitiz'
negligence and/or fault and proceeded to allow
the application of the limited liability rule "to
accomplish the aims of justice." 62 It elaborated
thus: "To execute the judgment in this case
would prejudice the substantial right of other
claimants who have filed suits to claim their
cargoes that was lost in the vessel that sank
and also against the petitioner to be ordered to
pay more than what the law requires." 63
It should be pointed out that the issue of
whether or not the M/V P. Aboitiz sank by
reason of force majeure is not a novel one for
that question has already been the subject of
231
conflicting pronouncements by the Supreme
Court. In Aboitiz Shipping Corporation v. Court
of Appeals, 64 this Court approved the findings
of the trial court and the appellate court that
the sinking of the M/V P. Aboitiz was not due
to the waves caused by tropical storm
"Yoning" but due to the fault and negligence of
Aboitiz, its master and crew. 65 On the other
hand, in the later case of Country Bankers
Insurance Corporation v. Court of
Appeals, 66 this Court issued a Resolution on
August 28, 1991 denying the petition for
review on the ground that the Court of Appeals
committed no reversible error, thereby
affirming and adopting as its own, the findings
of the Court of Appeals that force majeure had
caused the M/V P. Aboitiz to founder.
In view of these conflicting pronouncements,
we find that now is the opportune time to settle
once and for all the issue or whether or
not force mejeure had indeed caused the M/V
P. Aboitiz to sink. After reviewing the records
of the instant cases, we categorically state that
by the facts on record, the M/V P. Aboitiz did
not go under water because of the storm
"Yoning."
It is true that as testified by Justo Iglesias,
meteorologist of Pag-Asa, during the inclusive
dates of October 28-31, 1980, a stormy
weather condition prevailed within the
Philippine area of responsibility, particularly
along the sea route from Hong Kong to Manila,
because of tropical depression "Yoning". 67 But
even Aboitiz' own evidence in the form of the
marine protest filed by Captain Racines
affirmed that the wind force when the M/V P.
Aboitiz foundered on October 31, 1980 was
only ten (10) to fifteen (15) knots which, under
the Beaufort Scale or Wind, falls within scale
No. 4 that describes the wind velocity as
"moderate breeze," and characterizes the
waves as "small . . . becoming longer, fairly
frequent white horses." 68 Captain Racines also
testified in open court that the ill-fated M/V P.
Aboitiz was two hundred (200) miles away
from storm "Yoning" when it sank. 69
The issue of negligence on the part of Aboitiz,
and the captain and crew of the M/V P. Aboitiz
has also been subject of conflicting rulings by
this Court. In G.R. No. 100373, Country
Bankers Insurance Corporation v. Court of
Appeals, this Court found no error in the
findings of the Court of Appeals that the M/V
P. Aboitiz sank by reason of force majeure,
and that there was no negligence on the part
of its officers and crew. In direct contradiction
is this Court's categorical declaration in Aboitiz
Shipping Corporation v. Court of Appeals," 70 to
wit:
The trial court and the appellate court
found that the sinking of the M/V P.
Aboitiz was not due to the waves
caused by tropical storm "Yoning" but
due to the fault and negligence of
petitioner, its master and crew. The
court reproduces with approval said
findings . . . . 71
However, in the subsequent case of Aboitiz
Shipping Corporation v. General Accident Fire
and Life Assurance Corporation, Ltd., 72 this
Court exculpated Aboitiz from fault and/or
negligence while holding that the
unseaworthiness of the M/V P. Aboitiz was
only attributable to the negligence of its
captain and crew. Thus,
On this point, it should be stressed that
unseaworthiness is not a fault that can
be laid squarely on petitioner's lap,
absent a factual basis for such
conclusion. The unseaworthiness
found in some cases where the same
has been ruled to exist is directly
attributable to the vessel's crew and
captain, more so on the part of the
latter since Article 612 of the Code of
Commerce provides that among the
inherent duties of a captain is to
examine a vessel before sailing and to
comply with the laws of navigation.
Such a construction would also put
matters to rest relative to the decision
of the Board of Marine Inquiry. While
the conclusion therein exonerating the
captain and crew of the vessel was not
sustained for lack of basis, the finding
therein contained to the effect that the
vessel was seaworthy deserves merit.
Despite appearances, it is not totally
incompatible with the findings of the
trial court and the Court of Appeals,
whose finding of "unseaworthiness"
clearly did not pertain to the structural
condition of the vessel which is the
basis of the BMI's findings, but to the
condition it was in at the time of the
sinking, which condition was a result of
the acts of the captain and the crew. 73
231
It therefore becomes incumbent upon this
Court to answer with finality the nagging
question of whether or not it was the
concurrent fault and/or negligence of Aboitiz
and the captain and crew of the ill-fated vessel
that had caused it to go under water.
Guided by our previous pronouncements and
illuminated by the evidence now on record, we
reiterate our findings in Aboitiz Shipping
Corporation v. General Accident Fire and Life
Assurance Corporation, Ltd. 74 , that the
unseaworthiness of the M/V P. Aboitiz had
caused it to founder. We, however, take
exception to the pronouncement therein that
said unseaworthiness could not be attributed
to the ship owner but only to the negligent acts
of the captain and crew of the M/V P. Aboitiz.
On the matter of Aboitiz' negligence, we
adhere to our ruling in Aboitiz Shipping
Corporation v. Court of Appeals, 75 that found
Aboitiz, and the captain and crew of the M/V
P. Aboitiz to have been concurrently negligent.
During the trial of Civil Case Nos. 82-2767-82-
2770 (now G.R. No. 92735), petitioners
Monarch and Tabacalera presented a survey
from Perfect Lambert, a surveyor based in
Hong Kong that conducted an investigation on
the possible cause of the sinking of the vessel.
The said survey established that the cause of
the sinking of the vessel was the leakage of
water into the M/V P. Aboitiz which probably
started in the forward part of the No. 1 hull,
although no explanation was proffered as to
why the No. 2 hull was likewise flooded.
Perfect Lambert surmised that the flooding
was due to a leakage in the shell plating or a
defect in the water tight bulk head between the
Nos. 1 and 2 holds which allowed the water
entering hull No. 1 to pass through hull No. 2.
The surveyor concluded that whatever the
cause of the leakage of water into these hulls,
the seaworthiness of the vessel was definitely
in question because the breaches of the hulls
and serious flooding of the two cargo holds
occurred simultaneously in seasonal
weather. 76
We agree with the uniform finding of the lower
courts that Aboitiz had failed to prove that it
observed the extraordinary diligence required
of it as a common carrier. We therefore
reiterate our pronouncement in Aboitiz
Corporation v. Court of Appeals  77 on the issue
of Aboitiz' liability in the sinking of its vessel, to
wit:
In accordance with Article 1732 of the
Civil Code, the defendant common
carrier from the nature of its business
and for reasons of public policy, is
bound to observe extraordinary
diligence in the vigilance over the
goods and for the safety of the
passengers transported by it according
to all circumstances of the case. While
the goods are in the possession of the
carrier, it is but fair that it exercise
extraordinary diligence in protecting
them from loss or damage, and if loss
occurs, the law presumes that it was
due to the carrier's fault or negligence;
that is necessary to protect the interest
of the shipper which is at the mercy of
the carrier . . . In the case at bar, the
defendant failed to prove hat the loss
of the subject cargo was not due to its
fault or negligence. 78
The failure of Aboitiz to present sufficient
evidence to exculpate itself from fault and/or
negligence in the sinking of its vessel in the
face of the foregoing expert testimony
constrains us to hold that Aboitiz was
concurrently at fault and/or negligent with the
ship captain and crew of the M/V P. Aboitiz.
This is in accordance with the rule that in
cases involving the limited liability of
shipowners, the initial burden of proof of
negligence or unseaworthiness rests on the
claimants. However, once the vessel owner or
any party asserts the right to limit its liability,
the burden of proof as to lack of privity or
knowledge on its part with respect to the
matter of negligence or unseaworthiness is
shifted to it. 79 This burden, Aboitiz had
unfortunately failed to discharge. That Aboitiz
failed to discharge the burden of proving that
the unseaworthiness of its vessel was not due
to its fault and/or negligence should not
however mean that the limited liability rule will
not be applied to the present cases. The
peculiar circumstances here demand that
there should be no strict adherence to
procedural rules on evidence lest the just
claims of shippers/insurers be frustrated. The
rule on limited liability should be applied in
accordance with the latest ruling in Aboitiz
Shipping Corporation v. General Accident Fire
and Life Assurance Corporation,
Ltd., 80 promulgated on January 21, 1993, that
claimants be treated as "creditors in an
insolvent corporation whose assets are not
enough to satisfy the totality of claims against
231
it." 81 To do so, the Court set out in that case
the procedural guidelines:
In the instant case, there is, therefore,
a need to collate all claims preparatory
to their satisfaction from the insurance
proceeds on the vessel M/V P. Aboitiz
and its pending freightage at the time
of its loss. No claimant can be given
precedence over the others by the
simple expedience of having
completed its action earlier than the
rest. Thus, execution of judgment in
earlier completed cases, even these
already final and executory must be
stayed pending completion of all cases
occasioned by the subject sinking.
Then and only then can all such claims
be simultaneously settled, either
completely or pro-rata should the
insurance proceeds and freightage be
not enough to satisfy all claims.
x x x           x x x          x x x
In fairness to the claimants and as a
matter of equity, the total proceeds of
the insurance and pending freightage
should now be deposited in trust.
Moreover, petitioner should institute
the necessary limitation and
distribution action before the proper
admiralty court within 15 days from
finality of this decision, and thereafter
deposit with it the proceeds from the
insurance company and pending
freightage in order to safeguard the
same pending final resolution of all
incidents, for final pro-rating and
settlement thereof. 82 (Emphasis
supplied.)
There is no record that Aboitiz. has instituted
such action or that it has deposited in trust the
insurance proceeds and freightage earned.
The pendency of the instant cases before the
Court is not a reason for Aboitiz to disregard
the aforementioned order of the Court. In fact,
had Aboitiz complied therewith, even these
cases could have been terminated earlier. We
are inclined to believe that instead of filing the
suit as directed by this Court, Aboitiz tolerated
the situation of several claimants waiting to gel
hold of its insurance proceeds, which, if
correctly handled must have multiplied in
amount by now. By its failure to abide by the
order of this Court, it had caused more
damage to the claimants over and above that
which they have endured as a direct
consequence of the sinking of the M/V P.
Aboitiz. It was obvious that from among the
many cases filed against it over the years,
Aboitiz was waiting for a judgment that might
prove favorable to it, in blatant violation of the
basic provisions of the Civil Code on abuse of
rights.
Well aware of the 110 claimants against it,
Aboitiz preferred to litigate the claims singly
rather than exert effort towards the
consolidation of all claims. Consequently,
courts have arrived at conflicting decisions
while claimants waited over the years for a
resolution of any of the cases that would lead
to the eventual resolution of the rest. Aboitiz
failed to give the claimants their due and to
observe honesty and good faith in the exercise
of its rights. 83
Aboitiz' blatant disregard of the order of this
Court in Aboitiz Shipping Corporation v.
General Accident Fire and Life Assurance
Corporation, Ltd. 84 cannot be anything but,
willful on its part. An act is considered willful if
it is done with knowledge of its injurious effect;
it is not required that the act be done
purposely to produce the injury. 85 Aboitiz is
well aware that by not instituting the said suit,
it caused the delay in the resolution of all
claims against it. Having willfully caused loss
or injury to the petitioners in a manner that is
contrary to morals, good customs or public
policy, Aboitiz is liable for damages to the
latter. 86
Thus, for its contumacious act of defying the
order of this Court to file the appropriate action
to consolidate all claims for settlement, Aboitiz
must be held liable for moral damages which
may be awarded in appropriate cases under
the Chapter on human relations of the Civil
Code (Articles 19 to 36). 87
On account of Aboitiz' refusal to satisfy
petitioners' claims in accordance with the
directive of the Court in Aboitiz Shipping
Corporation v. General Accident Fire and Life
Assurance Corporation, Ltd., it acted in gross
and evident bad faith. Accordingly, pursuant to
Article 2208 of the Civil Code, 88 petitioners
should be granted attorney's fees.
WHEREFORE, the petitions in G.R. Nos.
92735, 94867, and 95578 are DENIED. The
231
decisions of the Court of Appeals in CA-G.R.
No. SP-17427 dated March 29, 1990, CA-G.R.
SP No. 20844 dated August 15, 1990, and
CA-G.R. CV No. 15071 dated August 24, 1990
are AFFIRMED with the MODIFICATION that
respondent Aboitiz Shipping Corporation is
ordered to pay each of the respective
petitioners the amounts of P100,000.00 as
moral damages and P50,000.00 as attorney's
fees, and treble the cost of suit.
Respondent Aboitiz Shipping Corporation is
further directed to comply with the Order
promulgated by this Court on January 21,
1993 in Aboitiz Shipping Corporation v.
General Accident Fire and Life Assurance
Corporation, Ltd., G.R. No. 100446, January
21, 1993, to (a) institute the necessary
limitation and distribution action before the
proper Regional Trial Court, acting as
admiralty court, within fifteen (15) days from
the finality of this decision, and (b) thereafter
to deposit with the said court the insurance
proceeds from the loss of the vessel, M/V P.
Aboitiz, and the freightage earned in order to
safeguard the same pending final resolution of
all incidents relative to the final pro-rating
thereof and to the settlement of all
claims.1âwphi1.nêt
SO ORDERED.
Bellosillo, Mendoza, Quisumbing and Buena,
JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION  to his brother who happened to be around and
G.R. No. 60673 May 19, 1992
PAN AMERICAN WORLD AIRWAYS,
INC., petitioner, 
vs.
JOSE K. RAPADAS and THE COURT OF
APPEALS, respondents.
Froilan P. Pobre for private respondent.
GUTIERREZ, JR., J.:
This is a petition for review assailing the
decision of the respondent Court of Appeals
which affirmed in toto the trial court decision
on the liability of petitioner Pan American
World Airways for damages due to private
respondent. The trial court ruled that the
petitioner can not avail of a limitation of
liabilities for lost baggages of a passenger.
The dispositive portion of the trial court
decision reads:
WHEREFORE, in view of the foregoing
considerations, judgment is hereby
rendered ordering defendant to pay
plaintiff by way of actual damages the
equivalent peso value of the amount of
$5,228.90 and 100 paengs, nominal
damages in the amount of P20,000.00
and attorney's fees of P5,000.00, and
the costs of the suit. Defendant's
counterclaim is dismissed. (Rollo, p.
13)
On January 16, 1975, private respondent Jose
K. Rapadas held Passenger Ticket and
Baggage Claim Check No. 026-394830084-5
for petitioner's Flight No. 841 with the route
from Guam to Manila. While standing in line to
board the flight at the Guam airport, Rapadas
was ordered by petitioner's handcarry control
agent to check-in his Samsonite attache case.
Rapadas protested pointing to the fact that
other co-passengers were permitted to
handcarry bulkier baggages. He stepped out
of the line only to go back again at the end of it
to try if he can get through without having to
register his attache case. However, the same
man in charge of handcarry control did not fail
to notice him and ordered him again to register
his baggage. For fear that he would miss the
plane if he insisted and argued on personally
taking the valise with him, he acceded to
checking it in. He then gave his attache case
who checked it in for him, but without declaring
its contents or the value of its contents. He
was given a Baggage Claim Tag No. P-749-
713. (Exhibit "B" for the plaintiff-respondent)
Upon arriving in Manila on the same date,
January 16, 1975, Rapadas claimed and was
given all his checked-in baggages except the
attache case. Since Rapadas felt ill on his
arrival, he sent his son, Jorge Rapadas to
request for the search of the missing luggage.
The petitioner exerted efforts to locate the
luggage through the Pan American World
Airways-Manila International Airport (PAN AM-
MIA) Baggage Service.
231
On January 30, 1975, the petitioner required
the private respondent to put the request in
writing. The respondent filled in a Baggage
Claim Blank Form. Thereafter, Rapadas
personally followed up his claim. For several
times, he called up Mr. Panuelos, the head of
the Baggage Section of PAN AM. He also sent
letters demanding and reminding the petitioner
of his claim.
Rapadas received a letter from the petitioner's
counsel dated August 2, 1975 offering to settle
the claim for the sum of one hundred sixty
dollars ($160.00) representing the petitioner's
alleged limit of liability for loss or damage to a
passenger's personal property under the
contract of carriage between Rapadas and
PAN AM. Refusing to accept this kind of
settlement, Rapadas filed the instant action for
damages on October 1, 1975. Rapadas
alleged that PAN AM discriminated or singled
him out in ordering that his luggage be
checked in. He also alleged that PAN AM
neglected its duty in the handling and
safekeeping of his attache case from the point
of embarkation in Guam to his destination in
Manila. He placed the value of the lost attache
case and its contents at US$42,403.90.
According to him, the loss resulted in his
failure to pay certain monetary obligations,
failure to remit money sent through him to
relatives, inability to enjoy the fruits of his
retirement and vacation pay earned from
working in Tonga Construction Company (he
retired in August 1974) and inability to return
to Tonga to comply with then existing
contracts.
In its answer, petitioner-defendant PAN AM
acknowledged responsibility for the loss of the
attache case but asserted that the claim was
subject to the "Notice of Baggage Liability
Limitations" allegedly attached to and forming
part of the passenger ticket. The petitioner
argued that the same notice was also
conspicuously posted in its offices for the
guidance of the passengers.
At the trial, private respondent showed proof of
his retirement award and vacation pay
amounting to $4,750.00. He claimed that the
attache case also contained other money
consisting of $1,400 allegedly given to him by
his son, Jaime, as a round trip fare of his
(plaintiff-respondent) wife, but which amount
was later found to be actually intended by
Jaime as payment for arrears of a lot
purchased from Tropical Homes, Inc.; $3,000
allegedly given by his brothers for payment of
taxes and for constructing improvements on
the Rapadas estates; and $300.00 birthday
present of the spouses Mr. and Mrs. Ruben
Canonizado to plaintiff-respondent's wife. He
also claimed having kept several items in the
attache case, namely –– (1) contracts and
records of employment, letters of
commendation, testimonials and newspaper
clippings on his achievement for 13 years in
Tonga, New Zealand and Australia, drafts of
manuscripts, photographs and drivers license
alleged to be worth $20,000.00; a Polaroid
camera, films, calculator, and other personal
items worth $403.90; memorabilia, autographs
personally acquired from Charles Lindberg,
Lawrence Rockefeller and Ryoichi Sasakawa,
a commemorative palladium coin worth
Tongan 100 paengs and unused Tongan
stamps, all totalling $7,500.00; and a plan
worth $5,000.00 drawn by his son Jaime, who
is an architect, for the construction of a
residential house and a 6-story commercial
building. Rapadas claimed the amount of the
attache case itself to be $25.50. (See Decision
in Civil Case No. 99564 in Amended Record
on Appeal, pp. 61-85)
The lower court ruled in favor of complainant
Rapadas after finding no stipulation giving
notice to the baggage liability limitation. The
court rejected the claim of defendant PANAM
that its liability under the terms of the
passenger ticket is only up to $160.00.
However, it scrutinized all the claims of the
plaintiff. It discredited insufficient evidence to
show discriminatory acts or bad faith on the
part of petitioner PANAM.
On appeal, the Court of Appeals affirmed the
trial court decision. Hence, this petition.
The main issue raised in the case at bar is
whether or not a passenger is bound by the
terms of a passenger ticket declaring that the
limitations of liability set forth in the Warsaw
Convention (October 12, 1929; 137 League of
Nations Treaty Series II; See Proclamation No.
201 [1955], 51 O.G. 4933 [October, 1955]) as
amended by the Hague Protocol (September
28, 1955; 478 UNTS 373; III PTS 515), shall
apply in case of loss, damage or destruction to
a registered luggage of a passenger.
The petitioner maintains that its liability for the
lost baggage of respondent Rapadas was
231
limited to $160.00 since the latter did not
declare a higher value for his baggage and did
not pay the corresponding additional charges.
The private respondent, on the other hand,
insists that he is entitled to as much damages
as those awarded by the court and affirmed by
the respondent appellate court.
After a review of the various arguments of the
opposing parties as well as the records of the
case, the Court finds sufficient basis under the
particular facts of this case for the availment of
the liability limitations under the Warsaw
Convention.
There is no dispute, and the courts below
admit, that there was such a Notice appearing
on page two (2) of the airline ticket stating that
the Warsaw Convention governs in case of
death or injury to a passenger or of loss,
damage or destruction to a passenger's
luggage.
The Notice states:
If the passenger's journey involves an
ultimate destination or stop in a
country other than the country of
departure the Warsaw Convention may
be applicable and the Convention
governs and in most cases limits the
liability of carriers for death or personal
injury and in respect of loss of or
damage to baggage. See also notice
headed "Advice to International
Passengers on Limitation of Liability."
(The latter notice refers to limited
liability for death or personal injury to
passengers with proven damages not
exceeding US $75,000 per passenger;
Exhibit "K" for plaintiff respondent,
Table of Exhibits, p. 19)
Furthermore, paragraph 2 of the "Conditions of
Contract" also appearing on page 2 of the
ticket states:
2. Carriage hereunder is subject to the
rules and limitations relating to liability
established by the Warsaw Convention
unless such carriage is not
"international carriage" as defined by
that Convention. (Exhibit "K", supra)
We note that plaintiff-respondent Rapadas
presented as proof of the Passenger Ticket
and Baggage Check No. 026-394830084-5 a
xerox copy of its page 2 which contains the
Notice and Conditions of Contract, and also
page 3 which recites the Advice to
International Passengers on Limitation of
Liability. He also presented two xerox copies
of Flight Coupon No. 3 of the same passenger
ticket showing the fares paid for the trips
Honolulu to Guam, Guam to Manila, and
Manila to Honolulu to prove his obligations
which remained unpaid because of the
unexpected loss of money allegedly placed
inside the missing attache case. Rapadas
explained during the trial that the same
passenger ticket was returned by him to one
Mr. S.L. Faupula of the Union Steam Ship
Company of New Zealand, Ltd., Tonga who
demanded the payment of the fares or
otherwise, the return of the unused plane
tickets (including the subject Passenger Ticket
& Baggage Check No. 026-394830084-5). The
issuance of these tickets was facilitated by Mr.
Faupula on credit.
Meanwhile, the petitioner offered as evidence
Exhibit "1" also showing page 2 of the
passenger ticket to prove the notice and the
conditions of the contract of carriage. It
likewise offered Exhibit "1-A", a xerox copy of
a "Notice of Baggage Liability Limitations"
which the trial court disregarded and held to
be non-existent. The same Exhibit "1-A"
contained the following stipulations:
NOTICE OF BAGGAGE LIABILITY
LIMITATIONS –– Liability for loss,
delay, or damage to baggage is limited
as follows unless a higher value is
declared in advance and additional
charges are paid: (1) for most
international travel (including domestic
portions of international journeys) to
approximately $8.16 per pound
($18.00 per kilo; now $20.00 per
Exhibit "13") for checked baggage and
$360 (now $400 per Exhibit "13") per
passenger for unchecked baggage; (2)
for travel wholly between U.S. points,
to $500 per passenger on most
carriers (a few have lower limits).
Excess valuation may not be declared
on certain types of valuable articles.
Carriers assume no liability for fragile
or perishable articles. Further
information may be obtained from the
carrier. (Table of Exhibits, p. 45)
231
The original of the Passenger Ticket and
Baggage Check No. 026-394830084-5 itself
was not presented as evidence as it was
among those returned to Mr. Faupula. Thus,
apart from the evidence offered by the
defendant airline, the lower court had no other
basis for determining whether or not there was
actually a stipulation on the specific amounts
the petitioner had expressed itself to be liable
for loss of baggage.
Although the trial court rejected the evidence
of the defendant-petitioner of a stipulation
particularly specifying what amounts it had
bound itself to pay for loss of luggage, the
Notice and paragraph 2 of the "Conditions of
Contract" should be sufficient notice showing
the applicability of the Warsaw limitations.
The Warsaw Convention, as amended,
specifically provides that it is applicable
to international carriage which it defines in
Article 1, par. 2 as follows:
(2) For the purposes of this
Convention, the expression
"international carriage" means any
carriage in which, according to the
agreement between the parties, the
place of departure and the place of
destination, whether or not there be a
breach in the carriage or a
transhipment, are situated either within
the territories of two High Contracting
Parties or within the territory of a single
High Contracting Party if there is an
agreed stopping place within the
territory of another State, even if that
State is not a High Contracting Party.
Carriage between two points within the
territory of a single High Contracting
Party without an agreed stopping place
within the territory of another State is
not international carriage for the
purposes of this Convention. ("High
Contracting Party" refers to a state
which has ratified or adhered to the
Convention, or which has not
effectively denounced the Convention
[Article 40A(l)]).
Nowhere in the Warsaw Convention, as
amended, is such a detailed notice of baggage
liability limitations required. Nevertheless, it
should become a common, safe and practical
custom among air carriers to indicate
beforehand the precise sums equivalent to
those fixed by Article 22 (2) of the Convention.
The Convention governs the availment of the
liability limitations where the baggage check is
combined with or incorporated in the
passenger ticket which complies with the
provisions of Article 3, par. l (c). (Article 4, par.
2) In the case at bar, the baggage check is
combined with the passenger ticket in one
document of carriage. The passenger ticket
complies with Article 3, par. l (c) which
provides:
(l) In respect of the carriage of
passengers a ticket shall be delivered
containing:
(a) . . .
(b) . . .
(c) a notice to the effect that, if
the passenger's journey
involves an ultimate destination
or stop in a country other than
the country of departure, the
Warsaw Convention may be
applicable and that the
Convention governs and in
most cases limits the liability of
carriers for death or personal
injury and in respect of loss of
or damage to baggage.
We have held in the case of Ong Yiu v. Court
of Appeals, supra, and reiterated in a similar
case where herein petitioner was also sued for
damages, Pan American World Airways
v. Intermediate Appellate Court (164 SCRA
268 [1988]) that:
It (plane ticket) is what is known as a
contract of "adhesion", in regards
which it has been said that contracts of
adhesion wherein one party imposes a
ready made form of contract on the
other, as the plane ticket in the case at
bar, are contracts not entirely
prohibited. The one who adheres to
the contract is in reality free to reject it
entirely; if he adheres, he gives his
consent. (Tolentino, Civil Code, Vol.
IV, 1962 ed., p. 462, citing Mr. Justice
J.B.L. Reyes, Lawyer's Journal,
January 31, 1951, p. 49) And as held
in Randolph v. American Airlines, 103
231
 Ohio App. 172, 144 N.E. 2d 878;
Rosenchein v. Trans World Airlines,
Inc., 349 S.W. 2d 483, "a contract
limiting liability upon an agreed
valuation does not offend against the
policy of the law forbidding one from
contracting against his own
negligence.
Considering, therefore, that petitioner
had failed to declare a higher value for
his baggage, he cannot be permitted a
recovery in excess of P100.00 . . . (91
SCRA 223 at page 231)
We hasten to add that while contracts of
adhesion are not entirely prohibited, neither is
a blind reliance on them encouraged. In the
face of facts and circumstances showing they
should be ignored because of their basically
one sided nature, the Court does not hesitate
to rule out blind adherence to their terms. (See
Sweet Lines, Inc. v. Teves, 83 SCRA 361,
368-369[1978])
The arguments of the petitioner do not belie
the fact that it was indeed accountable for the
loss of the attache case. What the petitioner is
concerned about is whether or not the notice,
which it did not fail to state in the plane ticket
and which it deemed to have been read and
accepted by the private respondent will be
considered by this Court as adequate under
the circumstances of this case. As earlier
stated, the Court finds the provisions in the
plane ticket sufficient to govern the limitations
of liabilities of the airline for loss of luggage.
The passenger, upon contracting with the
airline and receiving the plane ticket, was
expected to be vigilant insofar as his luggage
is concerned. If the passenger fails to adduce
evidence to overcome the stipulations, he
cannot avoid the application of the liability
limitations.
The facts show that the private respondent
actually refused to register the attache case
and chose to take it with him despite having
been ordered by the PANAM agent to check it
in. In attempting to avoid registering the
luggage by going back to the line, private
respondent manifested a disregard of airline
rules on allowable handcarried baggages.
Prudence of a reasonably careful person also
dictates that cash and jewelry should be
removed from checked-in-luggage and placed
in one's pockets or in a handcarried Manila-
paper or plastic envelope.
The alleged lack of enough time for him to
make a declaration of a higher value and to
pay the corresponding supplementary charges
cannot justify his failure to comply with the
requirement that will exclude the application of
limited liability. Had he not wavered in his
decision to register his luggage, he could have
had enough time to disclose the true worth of
the articles in it and to pay the extra charges
or remove them from the checked-in-luggage.
Moreover, an airplane will not depart
meantime that its own employee is asking a
passenger to comply with a safety regulation.
Passengers are also allowed one handcarried
bag each provided it conforms to certain
prescribed dimensions. If Mr. Rapadas was
not allowed to handcarry the lost attache case,
it can only mean that he was carrying more
than the allowable weight for all his luggages
or more than the allowable number of
handcarried items or more than the prescribed
dimensions for the bag or valise. The evidence
on any arbitrary behavior of a Pan Am
employee or inexcusable negligence on the
part of the carrier is not clear from the petition.
Absent such proof, we cannot hold the carrier
liable because of arbitrariness, discrimination,
or mistreatment.
We are not by any means suggesting that
passengers are always bound to the stipulated
amounts printed on a ticket, found in a
contract of adhesion, or printed elsewhere but
referred to in handouts or forms. We simply
recognize that the reasons behind stipulations
on liability limitations arise from the difficulty, if
not impossibility, of establishing with a clear
preponderance of evidence the contents of a
lost valise or suitcase. Unless the contents are
declared, it will always be the word of a
passenger against that of the airline. If the loss
of life or property is caused by the gross
negligence or arbitrary acts of the airline or the
contents of the lost luggage are proved by
satisfactory evidence other than the self-
serving declarations of one party, the Court
will not hesitate to disregard the fine print in a
contract of adhesion. (See Sweet Lines Inc. v.
Teves, supra) Otherwise, we are constrained
to rule that we have to enforce the contract as
it is the only reasonable basis to arrive at a
just award.
231
We note that the finding on the amount lost is
more of a probability than a proved conclusion.
The trial court stated:
xxx xxx xxx
We come now to the actual loss of
$4,750.00 which the plaintiff claims
was the amount of his retirement
award and vacation pay. According to
the plaintiff, this was in cash of $100
denominations and was placed in an
envelope separate from the other
money he was carrying. Plaintiff
presented the memorandum award,
Exhibit T-1 and the vouchers of
payment, Exhibits T-2 and T-3. Under
the circumstances, recited by the
plaintiff in which the loss occurred, the
Court believes that plaintiff could really
have placed this amount in the attache
case considering that he was originally
handcarrying said attache case and
the same was looked, and he did not
expect that he would be required to
check it in. . . . (Amended Record on
Appeal, p. 75; Emphasis ours)
The above conclusion of the trial court does
not arise from the facts. That the attache case
was originally handcarried does not beg the
conclusion that the amount of $4,750.00 in
cash could have been placed inside. It may be
noted that out of a claim for US$42,403.90 as
the amount lost, the trial court found for only
US$5,228.90 and 100 paengs. The court had
doubts as to the total claim.
The lost luggage was declared as weighing
around 18 pounds or approximately 8
kilograms. At $20.00 per kilogram, the
petitioner offered to pay $160.00 as a higher
value was not declared in advance and
additional charges were not paid. We note,
however, that an amount of $400.00 per
passenger is allowed for unchecked luggage.
Since the checking-in was against the will of
the respondent, we treat the lost bag as
partaking of involuntarily and hurriedly
checked-in luggage and continuing its earlier
status as unchecked luggage. The fair liability
under the petitioner's own printed terms is
$400.00. Since the trial court ruled out
discriminatory acts or bad faith on the part of
Pan Am or other reasons warranting damages,
there is no factual basis for the grant of
P20,000.00 damages.
As to the question of whether or not private
respondent should be paid attorney's fees, the
Court sustains the finding of the trial court and
the respondent appellate court that it is just
and equitable for the private respondent to
recover expenses for litigation in the amount of
P5,000.00. Article 22(4) of the Warsaw
Convention, as amended does not preclude an
award of attorney's fees. That provision states
that the limits of liability prescribed in the
instrument "shall not prevent the court from
awarding, in accordance with its own law, in
addition, the whole or part of the court costs
and other expenses of litigation incurred by the
plaintiff." We, however, raise the award to
P10,000.00 considering the resort to the Court
of Appeals and this Court.
WHEREFORE, the petition is hereby
GRANTED and the decision of the respondent
Court of Appeals is REVERSED and SET
ASIDE. The petitioner is ordered to pay the
private respondent damages in the amount of
US$400.00 or its equivalent in Philippine
Currency at the time of actual payment,
P10,000.00 in attorney's fees, and costs of the
suit.
SO ORDERED.
Feleciano, Bidin, Davide, Jr. and Romero, JJ.,
concur.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 168433               February 10, 2009
UCPB GENERAL INSURANCE CO.,
INC., Petitioner, 
vs.
ABOITIZ SHIPPING CORP. EAGLE
EXPRESS LINES, DAMCO INTERMODAL
SERVICES, INC., and PIMENTEL CUSTOMS
BROKERAGE CO., Respondents.
231
 DECISION
TINGA, J.:
UCPB General Insurance Co., Inc. (UCPB)
assails the Decision1 of the Court of Appeals
dated October 29, 2004, which reversed the
Decision2 dated November 29, 1999 of the
Regional Trial Court of Makati City, Branch
146, and its Resolution3 dated June 14, 2005,
which denied UCPB’s motion for
reconsideration.
The undisputed facts, culled from the assailed
Decision, are as follows:
On June 18, 1991, three (3) units of waste
water treatment plant with accessories were
purchased by San Miguel Corporation (SMC
for brevity) from Super Max Engineering
Enterprises, Co., Ltd. of Taipei, Taiwan. The
goods came from Charleston, U.S.A. and
arrived at the port of Manila on board MV
"SCANDUTCH STAR". The same were then
transported to Cebu on board MV "ABOITIZ
SUPERCON II". After its arrival at the port of
Cebu and clearance from the Bureau of
Customs, the goods were delivered to and
received by SMC at its plant site on August 2,
1991. It was then discovered that one
electrical motor of DBS Drive Unit Model DE-
30-7 was damaged.
Pursuant to an insurance agreement, plaintiff-
appellee paid SMC the amount of
₱1,703,381.40 representing the value of the
damaged unit. In turn, SMC executed a
Subrogation Form dated March 31, 1992 in
favor of plaintiff-appellee.
Consequently, plaintiff-appellee filed a
Complaint on July 21, 1992 as subrogee of
SMC seeking to recover from defendants the
amount it had paid SMC.
On September 20, 1994, plaintiff-appellee
moved to admit its Amended Complaint
whereby it impleaded East Asiatic Co. Ltd.
(EAST for brevity) as among the defendants
for being the "general agent" of DAMCO. In its
Order dated September 23, 1994, the lower
court admitted the said amended complaint.
Upon plaintiff-appellee’s motion, defendant
DAMCO was declared in default by the lower
court in its Order dated January 6, 1995.
In the meantime, on January 25, 1995,
defendant EAST filed a Motion for Preliminary
Hearing on its affirmative defenses seeking
the dismissal of the complaint against it on the
ground of prescription, which motion was
however denied by the court a quo in its Order
dated September 1, 1995. Such denial was
elevated by defendant EAST to this Court
through a Petition for Certiorari on October 30,
1995 in CA G.R. SP No. 38840. Eventually,
this Court issued its Decision dated February
14, 1996 setting aside the lower court’s
assailed order of denial and further ordering
the dismissal of the complaint against
defendant EAST. Plaintiff-appellee moved for
reconsideration thereof but the same was
denied by this Court in its Resolution dated
November 8, 1996. As per Entry of Judgment,
this Court’s decision ordering the dismissal of
the complaint against defendant EAST
became final and executory on December 5,
1996.
Accordingly, the court a quo noted the
dismissal of the complaint against defendant
EAST in its Order dated December 5, 1997.
Thus, trial ensued with respect to the
remaining defendants.
On November 29, 1999, the lower court
rendered its assailed Decision, the dispositive
portion of which reads:
WHEREFORE, all the foregoing premises
considered, judgment is hereby rendered
declaring DAMCO Intermodal Systems, Inc.,
Eagle Express Lines, Inc. and defendant
Aboitiz Shipping solidarily liable to plaintiff-
subrogee for the damaged shipment and
orders them to pay plaintiff jointly and
severally the sum of ₱1,703,381.40.
No costs.
SO ORDERED.
Not convinced, defendants-appellants EAGLE
and ABOITIZ now come to this Court through
their respective appeals x x x4
The appellate court, as previously mentioned,
reversed the decision of the trial court and
ruled that UCPB’s right of action against
respondents did not accrue because UCPB
failed to file a formal notice of claim within 24
hours from (SMC’s) receipt of the damaged
merchandise as required under Art. 366 of the
231
Code of Commerce. According to the Court of
Appeals, the filing of a claim within the time
limitation in Art. 366 is a condition precedent to
the accrual of a right of action against the
carrier for the damages caused to the
merchandise.
In its Memorandum5 dated February 8, 2007,
UCPB asserts that the claim requirement
under Art. 366 of the Code of Commerce does
not apply to this case because the damage to
the merchandise had already been known to
the carrier. Interestingly, UCPB makes this
revelation: "x x x damage to the cargo was
found upon discharge from the foreign carrier
onto the International Container Terminal
Services, Inc. (ICTSI) in the presence of the
carrier’s representative who signed the
Request for Bad Order Survey 6 and the Turn
Over of Bad Order Cargoes. 7 On
transshipment, the cargo was already
damaged when loaded on board the inter-
island carrier."8 This knowledge, UCPB
argues, dispenses with the need to give the
carrier a formal notice of claim. Incidentally,
the carrier’s representative mentioned by
UCPB as present at the time the merchandise
was unloaded was in fact a representative of
respondent Eagle Express Lines (Eagle
Express).
UCPB claims that under the Carriage of
Goods by Sea Act (COGSA), notice of loss
need not be given if the condition of the cargo
has been the subject of joint inspection such
as, in this case, the inspection in the presence
of the Eagle Express representative at the
time the cargo was opened at the ICTSI.
UCPB further claims that the issue of the
applicability of Art. 366 of the Code of
Commerce was never raised before the trial
court and should, therefore, not have been
considered by the Court of Appeals.
Eagle Express, in its Memorandum 9 dated
February 7, 2007, asserts that it cannot be
held liable for the damage to the merchandise
as it acted merely as a freight forwarder’s
agent in the transaction. It allegedly facilitated
the transshipment of the cargo from Manila to
Cebu but represented the interest of the cargo
owner, and not the carrier’s. The only reason
why the name of the Eagle Express
representative appeared on the Permit to
Deliver Imported Goods was that the form did
not have a space for the freight forwarder’s
agent, but only for the agent of the shipping
line. Moreover, UCPB had previously judicially
admitted that upon verification from the
Bureau of Customs, it was East Asiatic Co.,
Ltd. (East Asiatic), regarding whom the original
complaint was dismissed on the ground of
prescription, which was the real agent of
DAMCO Intermodal Services, Inc. (DAMCO),
the ship owner.
Eagle Express argues that the applicability of
Art. 366 of the Code of Commerce was
properly raised as an issue before the trial
court as it mentioned this issue as a defense
in its Answer to UCPB’s Amended Complaint.
Hence, UCPB’s contention that the question
was raised for the first time on appeal is
incorrect.
Aboitiz Shipping Corporation (Aboitiz), on the
other hand, points out, in its
Memorandum10 dated March 29, 2007, that it
obviously cannot be held liable for the damage
to the cargo which, by UCPB’s admission, was
incurred not during transshipment to Cebu on
board one of Aboitiz’s vessels, but was
already existent at the time of unloading in
Manila. Aboitiz also argues that Art. 366 of the
Code of Commerce is applicable and serves
as a condition precedent to the accrual of
UCPB’s cause of action against it.lawphil.net
The Memorandum11 dated June 3, 2008, filed
by Pimentel Customs Brokerage Co. (Pimentel
Customs), is also a reiteration of the
applicability of Art. 366 of the Code of
Commerce.
It should be stated at the outset that the issue
of whether a claim should have been made by
SMC, or UCPB as SMC’s subrogee, within the
24-hour period prescribed by Art. 366 of the
Code of Commerce was squarely raised
before the trial court.
In its Answer to Amended Complaint12 dated
May 10, 1993, Eagle Express averred, thus:
The amended complaint states no cause of
action under the provisions of the Code of
Commerce and the terms of the bill of lading;
consignee made no claim against herein
defendant within twenty four (24) hours
following the receipt of the alleged cargo
regarding the condition in which said cargo
was delivered; however, assuming arguendo
231
that the damage or loss, if any, could not be
ascertained from the outside part of the
shipment, consignee never made any claim
against herein defendant at the time of receipt
of said cargo; herein defendant learned of the
alleged claim only upon receipt of the
complaint.13
Likewise, in its Answer14 dated September 21,
1992, Aboitiz raised the defense that UCPB
did not file a claim with it and that the
complaint states no cause of action.
UCPB obviously made a gross
misrepresentation to the Court when it claimed
that the issue regarding the applicability of the
Code of Commerce, particularly the 24-hour
formal claim rule, was not raised as an issue
before the trial court. The appellate court,
therefore, correctly looked into the validity of
the arguments raised by Eagle Express,
Aboitiz and Pimentel Customs on this point
after the trial court had so ill-advisedly
centered its decision merely on the matter of
extraordinary diligence.
Interestingly enough, UCPB itself has revealed
that when the shipment was discharged and
opened at the ICTSI in Manila in the presence
of an Eagle Express representative, the cargo
had already been found damaged. In fact, a
request for bad order survey was then made
and a turnover survey of bad order cargoes
was issued, pursuant to the procedure in the
discharge of bad order cargo. The shipment
was then repacked and transshipped from
Manila to Cebu on board MV Aboitiz Supercon
II. When the cargo was finally received by
SMC at its Mandaue City warehouse, it was
found in bad order, thereby confirming the
damage already uncovered in Manila. 15
In charging Aboitiz with liability for the
damaged cargo, the trial court condoned
UCPB’s wrongful suit against Aboitiz to whom
the damage could not have been attributable
since there was no evidence presented that
the cargo was further damaged during its
transshipment to Cebu. Even by the exercise
of extraordinary diligence, Aboitiz could not
have undone the damage to the cargo that
had already been there when the same was
shipped on board its vessel.
That said, it is nonetheless necessary to
ascertain whether any of the remaining parties
may still be held liable by UCPB. The
provisions of the Code of Commerce, which
apply to overland, river and maritime
transportation, come into play.
Art. 366 of the Code of Commerce states:
Art. 366. Within twenty-four hours following the
receipt of the merchandise, the claim against
the carrier for damage or average which may
be found therein upon opening the packages,
may be made, provided that the indications of
the damage or average which gives 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 law clearly requires that the claim for
damage or average must be made within 24
hours from receipt of the merchandise if, as in
this case, damage cannot be ascertained
merely from the outside packaging of the
cargo.
In Philippine Charter Insurance Corporation v.
Chemoil Lighterage Corporation, 16 petitioner,
as subrogee of Plastic Group Phil., Inc. (PGP),
filed suit against respondent therein for the
damage found on a shipment of chemicals
loaded on board respondent’s barge.
Respondent claimed that no timely notice in
accordance with Art. 366 of the Code of
Commerce was made by petitioner because
an employee of PGP merely made a phone
call to respondent’s Vice President, informing
the latter of the contamination of the cargo.
The Court ruled that the notice of claim was
not timely made or relayed to respondent in
accordance with Art. 366 of the Code of
Commerce.
The requirement to give notice of loss or
damage to the goods is not an empty
formalism. The fundamental reason or
purpose of such a stipulation is not to relieve
the carrier from just liability, but reasonably to
inform it that the shipment has been damaged
and that it is charged with liability therefor, and
to give it an opportunity to examine the nature
and extent of the injury. This protects the
carrier by affording it an opportunity to make
an investigation of a claim while the matter is
231
still fresh and easily investigated so as to
safeguard itself from false and fraudulent
claims.17
We have construed the 24-hour claim
requirement as a condition precedent to the
accrual of a right of action against a carrier for
loss of, or damage to, the goods. The shipper
or consignee must allege and prove the
fulfillment of the condition. Otherwise, no right
of action against the carrier can accrue in
favor of the former.18
The shipment in this case was received by
SMC on August 2, 1991. However, as found
by the Court of Appeals, the claims were dated
October 30, 1991, more than three (3) months
from receipt of the shipment and, at that, even
after the extent of the loss had already been
determined by SMC’s surveyor. The claim
was, therefore, clearly filed beyond the 24-
hour time frame prescribed by Art. 366 of the
Code of Commerce.
But what of the damage already discovered in
the presence of Eagle Express’s
representative at the time the shipment was
discharged in Manila? The Request for Bad
Order Survey and Turn Over Survey of Bad
Order Cargoes, respectively dated June 17,
1999 and June 28, 1991, evince the fact that
the damage to the cargo was already made
known to Eagle Express and, possibly, SMC,
as of those dates.
Sec. 3(6) of the COGSA provides a similar
claim mechanism as the Code of Commerce
but prescribes a period of three (3) days within
which notice of claim must be given if the loss
or damage is not apparent. It states:
Sec. 3(6). Unless notice of loss or damage
and the general nature of such loss or damage
be given in writing to the carrier or his agent at
the port of discharge or at the time of the
removal of the goods into the custody of the
person entitled to delivery thereof under the
contract of carriage, such removal shall be
prima facie evidence of the delivery by the
carrier of the goods as descibed in the bill of
lading. If the loss or damage is not apparent,
the notice must be given within three days of
the delivery.
Said notice of loss or damage may be
endorsed upon the receipt of the goods given
by the person taking delivery thereof.
The notice in writing need not be given if the
state of the goods has at the time of their
receipt been the subject of joint survey or
inspection.
UCPB seizes upon the last paragraph which
dispenses with the written notice if the state of
the goods has been the subject of a joint
survey which, in this case, was the opening of
the shipment in the presence of an Eagle
Express representative. It should be noted at
this point that the applicability of the above-
quoted provision of the COGSA was not raised
as an issue by UCPB before the trial court and
was only cited by UCPB in its Memorandum in
this case.
UCPB, however, is ambivalent as to which
party Eagle Express represented in the
transaction. By its own manifestation, East
Asiatic, and not Eagle Express, acted as the
agent through which summons and court
notices may be served on DAMCO. It would
be unjust to hold that Eagle Express’s
knowledge of the damage to the cargo is such
that it served to preclude or dispense with the
24-hour notice to the carrier required by Art.
366 of the Code of Commerce. Neither did the
inspection of the cargo in which Eagle
Express’s representative had participated lead
to the waiver of the written notice under the
Sec. 3(6) of the COGSA. Eagle Express, after
all, had acted as the agent of the freight
consolidator, not that of the carrier to whom
the notice should have been made.
At any rate, the notion that the request for bad
order survey and turn over survey of bad
cargoes signed by Eagle Express’s
representative is construable as compliant with
the notice requirement under Art. 366 of the
Code of Commerce was foreclosed by the
dismissal of the complaint against DAMCO’s
representative, East Asiatic.
As regards respondent Pimentel Customs, it is
sufficient to acknowledge that it had no
participation in the physical handling, loading
and delivery of the damaged cargo and
should, therefore, be absolved of liability.
Finally, UCPB’s misrepresentation that the
applicability of the Code of Commerce was not
raised as an issue before the trial court
warrants the assessment of double costs of
suit against it.
231
WHEREFORE, the petition is DENIED. The
Decision of the Court of Appeals in CA-G.R.
CV No. 68168, dated October 29, 2004 and its
Resolution dated June 14, 2005 are
AFFIRMED. Double costs against petitioner.
SO ORDERED.
DANTE O. TINGAM
Associate Justice
G.R. No. 101538 June 23, 1992
AUGUSTO BENEDICTO SANTOS III,
represented by his father and legal
guardian, Augusto Benedicto
Santos, petitioner, 
vs.
NORTHWEST ORIENT AIRLINES and
COURT OF APPEALS, respondents.

WE CONCUR:
CRUZ, J.:
LEONARDO A. QUISUMBING
Associate Justice This case involves the Proper interpretation of
Chairperson Article 28(1) of the Warsaw Convention,
reading as follows:
CONCHITA PRESBITERO J.
CARPIO MORALES VELASCO, JR. Art. 28. (1) An action for damage must
Associate Justice Associate Justice be brought at the option of the plaintiff,
in the territory of one of the High
Contracting Parties, either before the
ARTURO D. BRION court of the domicile of the carrier or of
Associate Justice his principal place of business, or
where he has a place of business
ATTESTATION through which the contract has been
made, or before the court at the place
I attest that the conclusions in the above of destination.
Decision had been reached in consultation
before the case was assigned to the writer of The petitioner is a minor and a resident of the
the opinion of the Court’s Division. Philippines. Private respondent Northwest
Orient Airlines (NOA) is a foreign corporation
LEONARDO A. QUISUMBING with principal office in Minnesota, U.S.A. and
Associate Justice licensed to do business and maintain a branch
Chairperson, Second Division office in the Philippines.

CERTIFICATION On October 21, 1986, the petitioner purchased

Pursuant to Section 13, Article VIII of the
Constitution, and the Division Chairperson’s
Attestation, it is hereby certified that the
conclusions in the above Decision had been
reached in consultation before the case was
assigned to the writer of the opinion of the
Court’s Division.
REYNATO S. PUNO 
Chief Justice
Republic of the Philippines
SUPREME COURT
Manila
EN BANC  Makati. On April 13, 1987, NOA moved to
from NOA a round-trip ticket in San Francisco.
U.S.A., for his flight from San Francisco to
Manila via Tokyo and back. The scheduled
departure date from Tokyo was December 20,
1986. No date was specified for his return to
San Francisco. 1
On December 19, 1986, the petitioner checked
in at the NOA counter in the San Francisco
airport for his scheduled departure to Manila.
Despite a previous confirmation and re-
confirmation, he was informed that he had no
reservation for his flight from Tokyo to Manila.
He therefore had to be wait-listed.
On March 12, 1987, the petitioner sued NOA
for damages in the Regional Trial Court of
dismiss the complaint on the ground of lack of

231
jurisdiction. Citing the above-quoted article, it
contended that the complaint could be
instituted only in the territory of one of the High
Contracting Parties, before:
1. the court of the domicile of the
carrier;
2. the court of its principal place of
business;
3. the court where it has a place of
business through which the contract
had been made;
4. the court of the place of destination.
The private respondent contended that the
Philippines was not its domicile nor was this its
principal place of business. Neither was the
petitioner's ticket issued in this country nor
was his destination Manila but San Francisco
in the United States.
On February 1, 1988, the lower court granted
the motion and dismissed the case. 2 The
petitioner appealed to the Court of Appeals,
which affirmed the decision of the lower
court. 3 On June 26, 1991, the petitioner filed
a motion for reconsideration, but the same
was denied. 4 The petitioner then came to this
Court, raising substantially the same issues it
submitted in the Court of Appeals.
The assignment of errors may be grouped into
two major issues, viz:
(1) the constitutionality of Article 28(1) of the
Warsaw Convention; and
(2) the jurisdiction of Philippine courts over the
case.
The petitioner also invokes Article 24 of the
Civil Code on the protection of minors.
I necessary to the decision of the case itself. 6
THE ISSUE OF CONSTITUTIONALITY
A. The petitioner claims that the lower court
erred in not ruling that Article 28(1) of the
Warsaw Convention violates the constitutional
guarantees of due process and equal
protection.
The Republic of the Philippines is a party to
the Convention for the Unification of Certain
Rules Relating to International Transportation
by Air, otherwise known as the Warsaw
Convention. It took effect on February 13,
1933. The Convention was concurred in by the
Senate, through its Resolution No. 19, on May
16, 1950. The Philippine instrument of
accession was signed by President Elpidio
Quirino on October 13, 1950, and was
deposited with the Polish government on
November 9, 1950. The Convention became
applicable to the Philippines on February 9,
1951. On September 23, 1955, President
Ramon Magsaysay issued Proclamation No.
201, declaring our formal adherence thereto.
"to the end that the same and every article and
clause thereof may be observed and fulfilled in
good faith by the Republic of the Philippines
and the citizens thereof." 5
The Convention is thus a treaty commitment
voluntarily assumed by the Philippine
government and, as such, has the force and
effect of law in this country.
The petitioner contends that Article 28(1)
cannot be applied in the present case because
it is unconstitutional. He argues that there is
no substantial distinction between a person
who purchases a ticket in Manila and a person
who purchases his ticket in San Francisco.
The classification of the places in which
actions for damages may be brought is
arbitrary and irrational and thus violates the
due process and equal protection clauses.
It is well-settled that courts will assume
jurisdiction over a constitutional question only
if it is shown that the essential requisites of a
judicial inquiry into such a question are first
satisfied. Thus, there must be an actual case
or controversy involving a conflict of legal
rights susceptible of judicial determination; the
constitutional question must have been
opportunely raised by the proper party; and
the resolution of the question is unavoidably
Courts generally avoid having to decide a
constitutional question. This attitude is based
on the doctrine of separation of powers, which
enjoins upon the departments of the
government a becoming respect for each
other's acts.
231
The treaty which is the subject matter of this
petition was a joint legislative-executive act.
The presumption is that it was first carefully
studied and determined to be constitutional
before it was adopted and given the force of
law in this country.
The petitioner's allegations are not convincing
enough to overcome this presumption.
Apparently, the Convention considered the
four places designated in Article 28 the most
convenient forums for the litigation of any
claim that may arise between the airline and
its passenger, as distinguished from all other
places. At any rate, we agree with the
respondent court that this case can be decided
on other grounds without the necessity of
resolving the constitutional issue.
B. The petitioner claims that the lower
court erred in not ruling that Art. 28(1)
of the Warsaw Convention is
inapplicable because of a fundamental
change in the circumstances that
served as its basis.
The petitioner goes at great lengths to show
that the provisions in the Convention were
intended to protect airline companies under
"the conditions prevailing then and which have
long ceased to exist." He argues that in view of
the significant developments in the airline
industry through the years, the treaty has
become irrelevant. Hence, to the extent that it
has lost its basis for approval, it has become
unconstitutional.
The petitioner is invoking the doctrine of rebus
sic stantibus. According to Jessup, "this
doctrine constitutes an attempt to formulate a
legal principle which would justify non-
performance of a treaty obligation if the
conditions with relation to which the parties
contracted have changed so materially and so
unexpectedly as to create a situation in which
the exaction of performance would be
unreasonable." 7 The key element of this
doctrine is the vital change in the condition of
the contracting parties that they could not have
foreseen at the time the treaty was concluded.
The Court notes in this connection the
following observation made in Day v. Trans
World Airlines, Inc.: 8
The Warsaw drafters wished to create
a system of liability rules that would
cover all the hazards of air travel . . .
The Warsaw delegates knew that, in
the years to come, civil aviation would
change in ways that they could not
foresee. They wished to design a
system of air law that would be both
durable and flexible enough to keep
pace with these changes . . . The ever-
changing needs of the system of civil
aviation can be served within the
framework they created.
It is true that at the time the Warsaw
Convention was drafted, the airline industry
was still in its infancy. However, that
circumstance alone is not sufficient justification
for the rejection of the treaty at this time. The
changes recited by the petitioner were,
realistically, not entirely unforeseen although
they were expected in a general sense only. In
fact, the Convention itself, anticipating such
developments, contains the following
significant provision:
Article 41. Any High Contracting Party
shall be entitled not earlier than two
years after the coming into force of this
convention to call for the assembling of
a new international conference in order
to consider any improvements which
may be made in this convention. To
this end, it will communicate with the
Government of the French Republic
which will take the necessary
measures to make preparations for
such conference.
But the more important consideration is that
the treaty has not been rejected by the
Philippine government. The doctrine of rebus
sic stantibusdoes not operate automatically to
render the treaty inoperative. There is a
necessity for a formal act of rejection, usually
made by the head of State, with a statement of
the reasons why compliance with the treaty is
no longer required.
In lieu thereof, the treaty may be denounced
even without an expressed justification for this
action. Such denunciation is authorized under
its Article 39, viz:
Article 39. (1) Any one of the High
Contracting Parties may denounce this
convention by a notification addressed
to the Government of the Republic of
Poland, which shall at once inform the
231
 Government of each of the High
Contracting Parties.
(2) Denunciation shall take effect six
months after the notification of
denunciation, and shall operate only as
regards the party which shall have
proceeded to denunciation.
Obviously. rejection of the treaty, whether on
the ground of rebus sic stantibus or pursuant
to Article 39, is not a function of the courts but
of the other branches of government. This is a
political act. The conclusion and renunciation
of treaties is the prerogative of the political
departments and may not be usurped by the
judiciary. The courts are concerned only with
the interpretation and application of laws and
treaties in force and not with their wisdom or
efficacy.
C. The petitioner claims that the lower
court erred in ruling that the plaintiff
must sue in the United States,
because this would deny him the right
to access to our courts.
The petitioner alleges that the expenses and
difficulties he will incur in filing a suit in the
United States would constitute a constructive
denial of his right to access to our courts for
the protection of his rights. He would
consequently be deprived of this vital guaranty
as embodied in the Bill of Rights.
Obviously, the constitutional guaranty of
access to courts refers only to courts with
appropriate jurisdiction as defined by law. It
does not mean that a person can go
to any court for redress of his grievances
regardless of the nature or value of his claim.
If the petitioner is barred from filing his
complaint before our courts, it is because they
are not vested with the appropriate jurisdiction
under the Warsaw Convention, which is part of
the law of our land.
II
THE ISSUE OF JURISDICTION.
A. The petitioner claims that the lower court
erred in not ruling that Article 28(1) of the
Warsaw Convention is a rule merely of venue
and was waived by defendant when it did not
move to dismiss on the ground of improper
venue.
By its own terms, the Convention applies to all
international transportation of persons
performed by aircraft for hire.
International transportation is defined in
paragraph (2) of Article 1 as follows:
(2) For the purposes of this
convention, the expression
"international transportation" shall
mean any transportation in which,
according to the contract made by the
parties, the place of departure and the
place of destination, whether or not
there be a break in the transportation
or a transshipment, are situated
[either] within the territories of two High
Contracting Parties . . .
Whether the transportation is "international" is
determined by the contract of the parties,
which in the case of passengers is the ticket.
When the contract of carriage provides for the
transportation of the passenger between
certain designated terminals "within the
territories of two High Contracting Parties," the
provisions of the Convention automatically
apply and exclusively govern the rights and
liabilities of the airline and its passenger.
Since the flight involved in the case at bar is
international, the same being from the United
States to the Philippines and back to the
United States, it is subject to the provisions of
the Warsaw Convention, including Article
28(1), which enumerates the four places
where an action for damages may be brought.
Whether Article 28(1) refers to jurisdiction or
only to venue is a question over which
authorities are sharply divided. While the
petitioner cites several cases holding that
Article 28(1) refers to venue rather than
jurisdiction, 9 there are later cases cited by the
private respondent supporting the conclusion
that the provision is jurisdictional. 10
Venue and jurisdiction are entirely distinct
matters. Jurisdiction may not be conferred by
consent or waiver upon d court which
otherwise would have no jurisdiction over the
subject-matter of an action; but the venue of
an action as fixed by statute may be changed
by the consent of the parties and an objection
that the plaintiff brought his suit in the wrong
county may be waived by the failure of the
defendant to make a timely objection. In either
231
case, the court may render a valid judgment.
Rules as to jurisdiction can never be left to the
consent or agreement of the parties, whether
or not a prohibition exists against their
alteration. 11
A number of reasons tends to support the
characterization of Article 28(1) as a
jurisdiction and not a venue provision. First,
the wording of Article 32, which indicates the
places where the action for damages "must"
be brought, underscores the mandatory nature
of Article 28(1). Second, this characterization
is consistent with one of the objectives of the
Convention, which is to "regulate in a uniform
manner the conditions of international
transportation by air." Third, the Convention
does not contain any provision prescribing
rules of jurisdiction other than Article 28(1),
which means that the phrase "rules as to
jurisdiction" used in Article 32 must refer only
to Article 28(1). In fact, the last sentence of
Article 32 specifically deals with the exclusive
enumeration in Article 28(1) as "jurisdictions,"
which, as such, cannot be left to the will of the
parties regardless of the time when the
damage occurred.
This issue was analyzed in the leading case
of Smith v. Canadian Pacific Airways,
Ltd., 12 where it was held:
. . . Of more, but still incomplete,
assistance is the wording of Article
28(2), especially when considered in
the light of Article 32. Article 28(2)
provides that "questions
of procedure shall be governed by the
law of the court to which the case is
submitted" (Emphasis supplied).
Section (2) thus may be read to leave
for domestic decision questions
regarding the suitability and location of
a particular Warsaw Convention case.
In other words, where the matter is governed
by the Warsaw Convention, jurisdiction takes
on a dual concept. Jurisdiction in the
international sense must be established in
accordance with Article 28(1) of the Warsaw
Convention, following which the jurisdiction of
a particular court must be established
pursuant to the applicable domestic law. Only
after the question of which court has
jurisdiction is determined will the issue of
venue be taken up. This second question shall
be governed by the law of the court to which
the case is submitted.
The petitioner submits that since Article 32
states that the parties are precluded "before
the damages occurred" from amending the
rules of Article 28(1) as to the place where the
action may be brought, it would follow that the
Warsaw Convention was not intended to
preclude them from doing so "after the
damages occurred."
Article 32 provides:
Art. 32. Any clause contained in the
contract and all special agreements
entered into before the damage
occurred by which the parties purport
to infringe the rules laid down by this
convention, whether by deciding the
law to be applied, or by altering the
rules as to jurisdiction, shall be null
and void. Nevertheless for the
transportation of goods, arbitration
clauses shall be allowed, subject to
this convention, if the arbitration is to
take place within one of the
jurisdictions referred to in the first
paragraph of Article 28.
His point is that since the requirements of
Article 28(1) can be waived "after the damages
(shall have) occurred," the article should be
regarded as possessing the character of a
"venue" and not of a "jurisdiction" provision.
Hence, in moving to dismiss on the ground of
lack of jurisdiction, the private respondent has
waived improper venue as a ground to
dismiss.
The foregoing examination of Article 28(1) in
relation to Article 32 does not support this
conclusion. In any event, we agree that even
granting arguendo that Article 28(1) is a venue
and not a jurisdictional provision, dismissal of
the case was still in order. The respondent
court was correct in affirming the ruling of the
trial court on this matter, thus:
Santos' claim that NOA waived venue
as a ground of its motion to dismiss is
not correct. True it is that NOA averred
in its MOTION TO DISMISS that the
ground thereof is "the Court has no
subject matter jurisdiction to entertain
the Complaint" which SANTOS
considers as equivalent to "lack of
231
 jurisdiction over the subject matter . . ."
However, the gist of NOA's argument
in its motion is that the Philippines is
not the proper place where SANTOS
could file the action — meaning that
the venue of the action is improperly
laid. Even assuming then that the
specified ground of the motion is
erroneous, the fact is the proper
ground of the motion — improper
venue — has been discussed therein.
Waiver cannot be lightly inferred. In case of
doubt, it must be resolved in favor of non-
waiver if there are special circumstances
justifying this conclusion, as in the petition at
bar. As we observed in Javier vs. Intermediate
Court of Appeals: 13
Legally, of course, the lack of proper
venue was deemed waived by the
petitioners when they failed to invoke it
in their original motion to dismiss. Even
so, the motivation of the private
respondent should have been taken
into account by both the trial judge and
the respondent court in arriving at their
decisions.
The petitioner also invokes KLM Royal Dutch
Airlines v. RTC, 14 a decision of our Court of
Appeals, where it was held that Article 28(1) is
a venue provision. However, the private
respondent avers that this was in effect
reversed by the case of Aranas v. United
Airlines, 15 where the same court held that
Article 28(1) is a jurisdictional provision.
Neither of these cases is binding on this Court,
of course, nor was either of them appealed to
us. Nevertheless, we here express our own
preference for the later case of Aranas insofar
as its pronouncements on jurisdiction conform
to the judgment we now make in this petition.
B. The petitioner claims that the lower
court erred in not ruling that under
Article 28(1) of the Warsaw
Convention, this case was properly
filed in the Philippines, because Manila
was the destination of the plaintiff.
The Petitioner contends that the facts of this
case are analogous to those in Aanestad v. Air
Canada. 16 In that case, Mrs. Silverberg
purchased a round-trip ticket from Montreal to
Los Angeles and back to Montreal. The date
and time of departure were specified but not of
the return flight. The plane crashed while on
route from Montreal to Los Angeles, killing
Mrs. Silverberg. Her administratrix filed an
action for damages against Air Canada in the
U.S. District Court of California. The defendant
moved to dismiss for lack of jurisdiction but the
motion was denied thus:
. . . It is evident that the contract
entered into between Air Canada and
Mrs. Silverberg as evidenced by the
ticket booklets and the Flight Coupon
No. 1, was a contract for Air Canada to
carry Mrs. Silverberg to Los Angeles
on a certain flight, a certain time and a
certain class, but that the time for her
to return remained completely in her
power. Coupon No. 2 was only a
continuing offer by Air Canada to give
her a ticket to return to Montreal
between certain dates. . . .
The only conclusion that can be
reached then, is that "the place of
destination" as used in the Warsaw
Convention is considered by both the
Canadian C.T.C. and the United States
C.A.B. to describe at least two "places
of destination," viz., the "place of
destination" of a particular flight either
an "outward destination" from the
"point of origin" or from the "outward
point of destination" to any place in
Canada.
Thus the place of destination under
Art. 28 and Art. 1 of the Warsaw
Convention of the flight on which Mrs.
Silverberg was killed, was Los Angeles
according to the ticket, which was the
contract between the parties and the
suit is properly filed in this Court which
has jurisdiction.
The Petitioner avers that the present case falls
squarely under the above ruling because the
date and time of his return flight to San
Francisco were, as in the Aanestad case, also
left open. Consequently, Manila and not San
Francisco should be considered the
petitioner's destination.
The private respondent for its part invokes the
ruling in Butz v. British Airways, 17 where the
United States District Court (Eastern District of
Pennsylvania) said:
231
 . . . Although the authorities which
addressed this precise issue are not
extensive, both the cases and the
commentators are almost unanimous
in concluding that the "place of
destination" referred to in the Warsaw
Convention "in a trip consisting of
several parts . . . is the ultimate
destination that is accorded treaty
jurisdiction." . . .
But apart from that distinguishing
feature, I cannot agree with the Court's
analysis in Aanestad; whether the
return portion of the ticket is
characterized as an option or a
contract, the carrier was legally bound
to transport the passenger back to the
place of origin within the prescribed
time and. the passenger for her part
agreed to pay the fare and, in fact, did
pay the fare. Thus there was mutuality
of obligation and a binding contract of
carriage, The fact that the passenger
could forego her rights under the
contract does not make it any less a
binding contract. Certainly, if the
parties did not contemplate the return
leg of the journey, the passenger
would not have paid for it and the
carrier would not have issued a round
trip ticket.
We agree with the latter case. The place of
destination, within the meaning of the Warsaw
Convention, is determined by the terms of the
contract of carriage or, specifically in this case,
the ticket between the passenger and the
carrier. Examination of the petitioner's ticket
shows that his ultimate destination is San
Francisco. Although the date of the return
flight was left open, the contract of carriage
between the parties indicates that NOA was
bound to transport the petitioner to San
Francisco from Manila. Manila should
therefore be considered merely an agreed
stopping place and not the destination.
The petitioner submits that the Butz case
could not have overruled the Aanestad case
because these decisions are from different
jurisdictions. But that is neither here nor there.
In fact, neither of these cases is controlling on
this Court. If we have preferred the Butz case,
it is because, exercising our own freedom of
choice, we have decided that it represents the
better, and correct, interpretation of Article
28(1).
Article 1(2) also draws a distinction between a
"destination" and an "agreed stopping place."
It is the "destination" and not an "agreed
stopping place" that controls for purposes of
ascertaining jurisdiction under the Convention.
The contract is a single undivided operation,
beginning with the place of departure and
ending with the ultimate destination. The use
of the singular in this expression indicates the
understanding of the parties to the Convention
that every contract of carriage has one place
of departure and one place of destination. An
intermediate place where the carriage may be
broken is not regarded as a "place of
destination."
C. The petitioner claims that the lower
court erred in not ruling that under Art.
28(1) of the Warsaw Convention, this
case was properly filed in the
Philippines because the defendant has
its domicile in the Philippines.
The petitioner argues that the Warsaw
Convention was originally written in French
and that in interpreting its provisions,
American courts have taken the broad view
that the French legal meaning must govern. In
French, he says, the "domicile" of the carrier
means every place where it has a branch
office.
The private respondent notes, however, that
in Compagnie Nationale Air France vs.
Giliberto, it was held:
The plaintiffs' first contention is that Air
France is domiciled in the United
States. They say that the domicile of a
corporation includes any country
where the airline carries on its
business on "a regular and substantial
basis," and that the United States
qualifies under such definition. The
meaning of domicile cannot, however,
be so extended. The domicile of a
corporation is customarily regarded as
the place where it is incorporated, and
the courts have given the meaning to
the term as it is used in article 28(1) of
the Convention. (See Smith v.
Canadian Pacific Airways, Ltd. (2d Cir.
1971), 452 F2d 798, 802; Nudo v.
231
 Societe Anonyme Belge d' Exploitation
de la Navigation Aerienne Sabena
Belgian World Airlines (E.D. pa. 1962).
207 F. Supp, 191; Karfunkel v.
Compagnie Nationale Air France
(S.D.N.Y. 1977), 427 F. Suppl. 971,
974). Moreover, the structure of article
28(1), viewed as a whole, is also
incompatible with the plaintiffs' claim.
The article, in stating that places of
business are among the bases of the
jurisdiction, sets out two places where
an action for damages may be
brought; the country where the
carrier's principal place of business is
located, and the country in which it has
a place of business through which the
particular contract in question was
made, that is, where the ticket was
bought, Adopting the plaintiffs' theory
would at a minimum blur these
carefully drawn distinctions by creating
a third intermediate category. It would
obviously introduce uncertainty into
litigation under the article because of
the necessity of having to determine,
and without standards or criteria,
whether the amount of business done
by a carrier in a particular country was
"regular" and "substantial." The
plaintiff's request to adopt this basis of
jurisdiction is in effect a request to
create a new jurisdictional standard for
the Convention.
Furthermore, it was argued in another
case that:
. . . In arriving at an interpretation of a
treaty whose sole official language is
French, are we bound to apply French
law? . . . We think this question and
the underlying choice of law issue
warrant some discussion
. . . We do not think this statement can
be regarded as a conclusion that
internal French law is to be "applied" in
the choice of law sense, to determine
the meaning and scope of the
Convention's terms. Of course, French
legal usage must be considered in
arriving at an accurate English
translation of the French. But when an
accurate English translation is made
and agreed upon, as here, the inquiry
into meaning does not then revert to a
quest for a past or present French law
to be "applied" for revelation of the
proper scope of the terms. It does not
follow from the fact that the treaty is
written in French that in interpreting it,
we are forever chained to French law,
either as it existed when the treaty was
written or in its present state of
development. There is no suggestion
in the treaty that French law was
intended to govern the meaning of
Warsaw's terms, nor have we found
any indication to this effect in its
legislative history or from our study of
its application and interpretation by
other courts. Indeed, analysis of the
cases indicates that the courts, in
interpreting and applying the Warsaw
Convention, have, not considered
themselves bound to apply French law
simply because the Convention is
written in French. . . .
We agree with these rulings.
Notably, the domicile of the carrier is only one
of the places where the complaint is allowed to
be filed under Article 28(1). By specifying the
three other places, to wit, the principal place of
business of the carrier, its place of business
where the contract was made, and the place of
destination, the article clearly meant that these
three other places were not comprehended in
the term "domicile."
D. The petitioner claims that the lower
court erred in not ruling that Art. 28(1)
of the Warsaw Convention does not
apply to actions based on tort.
The petitioner alleges that the gravamen of the
complaint is that private respondent acted
arbitrarily and in bad faith, discriminated
against the petitioner, and committed a willful
misconduct because it canceled his confirmed
reservation and gave his reserved seat to
someone who had no better right to it. In short.
the private respondent committed a tort.
Such allegation, he submits, removes the
present case from the coverage of the Warsaw
Convention. He argues that in at least two
American cases, 21 it was held that Article
28(1) of the Warsaw Convention does not
apply if the action is based on tort.
This position is negated by Husserl v. Swiss
Air Transport Company, 22 where the article in
question was interpreted thus:
231
 . . . Assuming for the present that
plaintiff's claim is "covered" by Article
17, Article 24 clearly excludes any
relief not provided for in the
Convention as modified by the
Montreal Agreement. It does not,
however, limit the kind of cause of
action on which the relief may be
founded; rather it provides that any
action based on the injuries specified
in Article 17 "however founded," i.e.,
regardless of the type of action on
which relief is founded, can only be
brought subject to the conditions and
limitations established by the Warsaw
System. Presumably, the reason for
the use of the phrase "however
founded," in two-fold: to accommodate
all of the multifarious bases on which a
claim might be founded in different
countries, whether under code law or
common law, whether under contract
or tort, etc.; and to include all bases on
which a claim seeking relief for an
injury might be founded in any one
country. In other words, if the injury
occurs as described in Article 17, any
relief available is subject to the
conditions and limitations established
by the Warsaw System, regardless of
the particular cause of action which
forms the basis on which a plaintiff
could seek relief . . .
The private respondent correctly contends that
the allegation of willful misconduct resulting in
a tort is insufficient to exclude the case from
the comprehension of the Warsaw
Convention. The petitioner has apparently
misconstrued the import of Article 25(l) of the
Convention, which reads as follows:
Art. 25 (1). The carrier shall not be
entitled to avail himself of the
provisions of this Convention which
exclude or limit his liability. if the
damage is caused by his willful
misconduct or by such default on his
part as, in accordance with the law of
the court to which the case is
submitted, is considered to be
equivalent to willful misconduct.
It is understood under this article that the court
called upon to determine the applicability of
the limitation provision must first be vested
with the appropriate jurisdiction. Article 28(1) is
the provision in the Convention which defines
that jurisdiction. Article 22 23 merely fixes the
monetary ceiling for the liability of the carrier in
cases covered by the Convention. If the carrier
is indeed guilty of willful misconduct, it can
avail itself of the limitations set forth in this
article. But this can be done only if the action
has first been commenced properly under the
rules on jurisdiction set forth in Article 28(1).
III
THE ISSUE OF PROTECTION TO MINORS
The petitioner calls our attention to Article 24
of the Civil Code, which states:
Art. 24. In all contractual property or
other relations, when one of the parties
is at a disadvantage on account of his
moral dependence, ignorance,
indigence, mental weakness, tender
age or other handicap, the courts must
be vigilant for his protection.
Application of this article to the present case is
misplaced. The above provision assumes that
the court is vested with jurisdiction to rule in
favor of the disadvantaged minor, As already
explained, such jurisdiction is absent in the
case at bar.
CONCLUSION
A number of countries have signified their
concern over the problem of citizens being
denied access to their own courts because of
the restrictive provision of Article 28(1) of the
Warsaw Convention. Among these is the
United States, which has proposed an
amendment that would enable the passenger
to sue in his own domicile if the carrier does
business in that jurisdiction. The reason for
this proposal is explained thus:
In the event a US citizen temporarily
residing abroad purchases a Rome to
New York to Rome ticket on a foreign
air carrier which is generally subject to
the jurisdiction of the US, Article 28
would prevent that person from suing
the carrier in the US in a "Warsaw
Case" even though such a suit could
be brought in the absence of the
Convention.
231
The proposal was incorporated in the
Guatemala Protocol amending the Warsaw
Convention, which was adopted at Guatemala
City on March
1971. 24 But it is still ineffective because it has
not yet been ratified by the required minimum
number of contracting parties. Pending such
ratification, the petitioner will still have to file
his complaint only in any of the four places
designated by Article 28(1) of the Warsaw
Convention.
The proposed amendment bolsters the ruling
of this Court that a citizen does not necessarily
have the right to sue in his own courts simply
because the defendant airline has a place of
business in his country.
The Court can only sympathize with the
petitioner, who must prosecute his claims in
the United States rather than in his own
country at least inconvenience. But we are
unable to grant him the relief he seeks
because we are limited by the provisions of
the Warsaw Convention which continues to
bind us. It may not be amiss to observe at this
point that the mere fact that he will have to
litigate in the American courts does not
necessarily mean he will litigate in vain. The
judicial system of that country in known for its
sense of fairness and, generally, its strict
adherence to the rule of law.
WHEREFORE, the petition is DENIED, with
costs against the petitioner. It is so ordered.
Narvasa, C.J., Gutierrez, Jr., Paras, Feliciano,
Padilla, Bidin, Griño-Aquino, Medialdea,
Regalado, Davide, Jr., Romero, Nocon and
Bellosillo, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION  which
G.R. No. 95536 March 23, 1992
ANICETO G. SALUDO, JR., MARIA
SALVACION SALUDO, LEOPOLDO G.
SALUDO and SATURNINO G.
SALUDO, petitioners,  freight
vs.
HON. COURT OF APPEALS, TRANS
WORLD AIRLINES, INC., and PHILIPPINE
AIRLINES, INC., respondents.
8,
REGALADO, J.:
Assailed in this petition for review
on certiorari is the decision in CA-G.R. CV No.
20951 of respondent Court of Appeals 1 which
affirmed the decision of the trial
court2 dismissing for lack of evidence herein
petitioners' complaint in Civil Case No R-2101
of the then Court of First Instance of Southern
Leyte, Branch I.
The facts, as recounted by the court a quo and
adopted by respondent court after "considering
the evidence on record," are as follows:
After the death of plaintiffs' mother,
Crispina Galdo Saludo, in Chicago
Illinois, (on) October 23, 1976 (Exh. A),
Pomierski and Son Funeral Home of
Chicago, made the necessary
preparations and arrangements for the
shipment, of the remains from Chicago
to the Philippines. The funeral home
had the remains embalmed (Exb. D)
and secured a permit for the
disposition of dead human body on
October 25, 1976 (Exh. C), Philippine
Vice Consul in Chicago, Illinois,
Bienvenido M. Llaneta, at 3:00 p.m. on
October 26, 1976 at the Pomierski &
Son Funeral Home, sealed the
shipping case containing a
hermetically sealed casket that is
airtight and waterproof wherein was
contained the remains of Crispina
Saludo Galdo (sic) (Exb. B). On the
same date, October 26, 1976,
Pomierski brought the remains to
C.M.A.S. (Continental Mortuary Air
Services) at the airport (Chicago)
made the necessary
arrangements such as flights,
transfers, etc.; C.M.A.S. is a national
service used by undertakers to
throughout the nation (U.S.A.), they
furnish the air pouch which the casket
is enclosed in, and they see that the
remains are taken to the proper air
terminal (Exh. 6-TWA).
C.M.A.S. booked the shipment with
PAL thru the carrier's agent Air Care
International, with Pomierski F.H. as
231
the shipper and Mario (Maria) Saludo
as the consignee. PAL Airway Bill No.
079-01180454 Ordinary was issued
wherein the requested routing was
from Chicago to San Francisco on
board TWA Flight 131 of October 27,
1976 and from San Francisco to
Manila on board PAL Flight No. 107 of
the same date, and from Manila to
Cebu on board PAL Flight 149 of
October 29, 1976 (See Exh. E., Also
Exh. 1-PAL).
In the meantime, plaintiffs Maria
Salvacion Saludo and Saturnino
Saludo, thru a travel agent, were
booked with United Airlines from
Chicago to California, and with PAL
from California to Manila. She then
went to the funeral director of
Pomierski Funeral Home who had her
mother's remains and she told the
director that they were booked with
United Airlines. But the director told
her that the remains were booked with
TWA flight to California. This upset
her, and she and her brother had to
change reservations from UA to the
TWA flight after she confirmed by
phone that her mother's remains
should be on that TWA flight. They
went to the airport and watched from
the look-out area. She saw no body
being brought. So, she went to the
TWA counter again, and she was told
there was no body on that flight.
Reluctantly, they took the TWA flight
upon assurance of her cousin, Ani
Bantug, that he would look into the
matter and inform her about it on the
plane or have it radioed to her. But no
confirmation from her cousin reached
her that her mother was on the West
Coast.
Upon arrival at San Francisco at about
5:00 p.m., she went to the TWA
counter there to inquire about her
mother's remains. She was told they
did not know anything about it.
She then called Pomierski that her
mother's remains were not at the West
Coast terminal, and Pomierski
immediately called C.M.A.S., which in
a matter of 10 minutes informed him
that the remains were on a plane to
Mexico City, that there were two
bodies at the terminal, and somehow
they were switched; he relayed this
information to Miss Saludo in
California; later C.M.A.S. called and
told him they were sending the
remains back to California via Texas
(see Exh. 6-TWA).
It-turned out that TWA had carried a
shipment under PAL Airway Bill No.
079-ORD-01180454 on TWA Flight
603 of October 27, 1976, a flight earlier
than TWA Flight 131 of the same date.
TWA delivered or transferred the said
shipment said to contain human
remains to PAL at 1400H or 2:00 p.m.
of the same date, October 27, 1976
(Bee Exh. 1- TWA). "Due to a
switch(ing) in Chicago", this shipment
was withdrawn from PAL by CMAS at
1805H (or 6:05 p.m.) of the same date,
October 27 (Exh. 3-PAL, see Exh. 3-a-
PAL).
What transpired at the Chicago
(A)irport is explained in a memo or
incident report by Pomierski (Exh. 6-
TWA) to Pomierski's lawyers who in
turn referred to said' memo and
enclosed it in their (Pomierski's
lawyers) answer dated July 18, 1981 to
herein plaintiff's counsel (See Exh. 5-
TWA). In that memo or incident report
(Exh. 6-TWA), it is stated that the
remains (of Crispina Saludo) were
taken to CMAS at the airport; that
there were two bodies at the (Chicago
Airport) terminal, and somehow they
were switched, that the remains (of
Crispina Saludo) were on a plane to
Mexico City; that CMAS is a national
service used by undertakers
throughout the nation (U.S.A.), makes
all the necessary arrangements, such
as flights, transfers, etc., and see(s) to
it that the remains are taken to the
proper air freight terminal.
The following day October 28, 1976,
the shipment or remains of Crispina
Saludo arrived (in) San Francisco from
Mexico on board American Airlines.
This shipment was transferred to or
received by PAL at 1945H or 7:45 p.m.
(Exh. 2-PAL, Exh. 2-a-PAL). This
casket bearing the remains of Crispina
231
 Saludo, which was mistakenly sent to
Mexico and was opened (there), was
resealed by Crispin F. Patagas for
shipment to the Philippines (See Exh.
B-1). The shipment was immediately
loaded on PAL flight for Manila that
same evening and arrived (in) Manila
on October 30, 1976, a day after its
expected arrival on October 29, 1976. 3
In a letter dated December 15,
1976,4 petitioners' counsel informed private
respondent Trans World Airlines (TWA) of the
misshipment and eventual delay in the delivery
of the cargo containing the remains of the late
Crispin Saludo, and of the discourtesy of its
employees to petitioners Maria Salvacion
Saludo and Saturnino Saludo. In a separate
letter on June 10, 1977 addressed to co-
respondent Philippine Airlines
(PAL),5 petitioners stated that they were
holding PAL liable for said delay in delivery
and would commence judicial action should no
favorable explanation be given.
Both private respondents denied liability. Thus,
a damage suit6 was filed by petitioners before
the then Court of First Instance, Branch III,
Leyte, praying for the award of actual
damages of P50,000.00, moral damages of
P1,000,000.00, exemplary damages,
attorney's fees and costs of suit.
As earlier stated, the court below absolved the
two respondent airlines companies of liability.
The Court of Appeals affirmed the decision of
the lower court in toto, and in a subsequent
resolution,7 denied herein petitioners' motion
for reconsideration for lack of merit.
In predictable disagreement and
dissatisfaction with the conclusions reached by
respondent appellate court, petitioners now
urge this Court to review the appealed
decision and to resolve whether or not (1) the
delay in the delivery of the casketed remains
of petitioners' mother was due to the fault of
respondent airline companies, (2) the one-day
delay in the delivery of the same constitutes
contractual breach as would entitle petitioners
to damages, (3) damages are recoverable by
petitioners for the humiliating, arrogant and
indifferent acts of the employees of TWA and
PAL, and (4) private respondents should be
held liable for actual, moral and exemplary
damages, aside from attorney's fees and
litigation expenses.8
At the outset and in view of the spirited
exchanges of the parties on this aspect, it is to
be stressed that only questions of law may be
raised in a petition filed in this Court to review
on certiorari the decision of the Court of
Appeals.9 This being so, the factual findings of
the Court of Appeals are final and conclusive
and cannot be reviewed by the Supreme
Court. The rule, however, admits of
established exceptions, to wit: (a) where there
is grave abuse of discretion; (b) when the
finding is grounded entirely on speculations,
surmises or conjectures;(c) when the inference
made is manifestly-mistaken, absurd or
impossible; (d) when the judgment of the Court
of Appeals was based on a misapprehension
of facts; (e) when the factual findings are
conflicting; (f) when the Court of Appeals, in
making its findings, went beyond the issues of
the case and the same are contrary to the
admissions of both appellant and
10
appellee;   (g) when the Court of Appeals
manifestly overlooked certain relevant facts
not disputed by the parties and which, if
properly considered, would justify a different
conclusion; 11 and (h) where the findings of fact
of the Court of Appeals are contrary to those
of the trial court, or are mere conclusions
without citation of specific evidence, or where
the facts of set forth by the petitioner are not
disputed by the respondent, or where the
findings of fact of the Court of Appeals are
premised on the absence of evidence and are
contradicted by the evidence on record. 12
To distinguish, a question of law is one which
involves a doubt or controversy on what the
law is on a certain state of facts; and, a
question of fact, contrarily, is one in which
there is a doubt or difference as to the truth or
falsehood of the alleged facts. 13 One test, it
has been held, is whether the appellate court
can determine the issue raised without
reviewing or evaluating the evidence, in which
case it is a question of law, otherwise it will be
a question of fact.14
Respondent airline companies object to the
present recourse of petitioners on the ground
that this petition raises only factual
questions. 15 Petitioners maintain otherwise or,
alternatively, they are of the position that,
assuming that the petition raises factual
questions, the same are within the recognized
exceptions to the general rule as would render
the petition cognizable and worthy of review by
the Court. 16
231
Since it is precisely the soundness of the
inferences or conclusions that may be drawn
from the factual issues which are here being
assayed, we find that the issues raised in the
instant petition indeed warrant a second look if
this litigation is to come to a reasonable
denouement. A discussion seriatim of said
issues will further reveal that the sequence of
the events involved is in effect disputed.
Likewise to be settled is whether or not the
conclusions of the Court of Appeals subject of
this review indeed find evidentiary and legal
support.
I. Petitioners fault respondent court for "not
finding that private respondents failed to
exercise extraordinary diligence required by
law which resulted in the switching and/or
misdelivery of the remains of Crispina Saludo
to Mexico causing gross delay in its shipment
to the Philippines, and consequently, damages
to petitioners." 17
Petitioner allege that private respondents
received the casketed remains of petitioners'
mother on October 26, 1976, as evidenced by
the issuance of PAL Air Waybill No. 079-
01180454 18 by Air Care International as
carrier's agent; and from said date, private
respondents were charged with the
responsibility to exercise extraordinary
diligence so much so that for the alleged
switching of the caskets on October 27, 1976,
or one day after private respondents received
the cargo, the latter must necessarily be liable.
To support their assertion, petitioners rely on
the jurisprudential dictum, both under
American and Philippine law, that "(t)he
issuance of a bill of lading carries the
presumption that the goods were delivered to
the carrier issuing the bill, for immediate
shipment, and it is nowhere questioned that a
bill of lading is prima facie evidence of the
receipt of the goods by the carrier. . . . In the
absence of convincing testimony establishing
mistake, recitals in the bill of lading showing
that the carrier received the goods for
shipment on a specified date control (13 C.J.S.
235)." 19
A bill of lading is a written acknowledgment of
the receipt of the goods and an agreement to
transport and deliver them at a specified place
to a person named or on his order. Such
instrument may be called a shipping receipt,
forwarder's receipt and receipt for
transportation. 20 The designation, however, is
immaterial. It has been hold that freight tickets
for bus companies as well as receipts for
cargo transported by all forms of
transportation, whether by sea or land, fall
within the definition. Under the Tariff and
Customs Code, a bill of lading includes airway
bills of lading. 21 The two-fold character of a bill
of lading is all too familiar; it is a receipt as to
the quantity and description of the goods
shipped and a contract to transport the goods
to the consignee or other person therein
designated, on the terms specified in such
instrument. 22
Logically, since a bill of lading acknowledges
receipt of goods to be transported, delivery of
the goods to the carrier normally precedes the
issuance of the bill; or, to some extent,
delivery of the goods and issuance of the bill
are regarded in commercial practice as
simultaneous acts. 23 However, except as may
be prohibited by law, there is nothing to
prevent an inverse order of events, that is, the
execution of the bill of lading even prior to
actual possession and control by the carrier of
the cargo to be transported. There is no law
which requires that the delivery of the goods
for carriage and the issuance of the covering
bill of lading must coincide in point of time or,
for that matter, that the former should precede
the latter.
Ordinarily, a receipt is not essential to a
complete delivery of goods to the carrier for
transportation but, when issued, is competent
and prima facie, but not conclusive, evidence
of delivery to the carrier. A bill of lading, when
properly executed and delivered to a shipper,
is evidence that the carrier has received the
goods described therein for shipment. Except
as modified by statute, it is a general rule as to
the parties to a contract of carriage of goods in
connection with which a bill of lading is issued
reciting that goods have been received for
transportation, that the recital being in essence
a receipt alone, is not conclusive, but may be
explained, varied or contradicted by parol or
other evidence. 24
While we agree with petitioners' statement that
"an airway bill estops the carrier from denying
receipt of goods of the quantity and quality
described in the bill," a further reading and a
more faithful quotation of the authority cited
would reveal that "(a) bill of lading may contain
constituent elements of estoppel and thus
231
become something more than a contract
between the shipper and the carrier. . . .
(However), as between the shipper and the
carrier, when no goods have been delivered
for shipment no recitals in the bill can estop
the carrier from showing the true facts . . .
Between the consignor of goods and receiving
carrier, recitals in a bill of lading as to the
goods shipped raise only a rebuttable
presumption that such goods were delivered
for shipment. As between the consignor and a
receiving carrier, the fact must outweigh the
recital."  25 (Emphasis supplied)
For this reason, we must perforce allow
explanation by private respondents why,
despite the issuance of the airway bill and the
date thereof, they deny having received the
remains of Crispina Saludo on October 26,
1976 as alleged by petitioners.
The findings of the trial court, as favorably
adopted by the Court of Appeals and which we
have earner quoted, provide us with the
explanation that sufficiently over comes the
presumption relied on by petitioners in
insisting that the remains of their mother were
delivered to and received by private
respondents on October 26, 1976. Thus —
. . . Philippine Vice Consul in Chicago,
Illinois, Bienvenido M. Llaneta, at 3:00
p.m. on October 26, 1976 at the
Pomierski & Son Funeral Home,
sealed the shipping case containing a
hermetically sealed casket that is
airtight and waterproof wherein was
contained the remains of Crispina
Saludo Galdo (sic) (Exh. B). On the
same date October 26, 1976,
Pomierski brought the remains to
C.M.A.S. (Continental Mortuary Air
Services) at the airport (Chicago)
which made the necessary
arrangements such as flights,
transfers, etc; C.M.A.S. is a national
service used by undertakers
throughout the nation (U.S.A.), they
furnish the air pouch which the casket
is enclosed in, and they see that the
remains are taken to the proper air
freight terminal (Exh. G-TWA).
C.M.A.S. booked the shipment with
PAL thru the carrier's agent Air Care
International, with Pomierski F.H. as
the shipper and Mario (Maria) Saludo
as the consignee. PAL Airway Bill No.
079- 01180454 Ordinary was issued
wherein the requested routing was
from Chicago to San Francisco on
board TWA Flight-131 of October
27;1976, and from San Francisco to
Manila on board PAL Flight No. 107 of
the same date, and from Manila to
Cebu on board PAL Flight 149 of
October 29, 1976 (See Exh. E, also
Exh. 1-PAL).26 (Emphasis ours.)
Moreover, we are persuaded to believe private
respondent PAL's account as to what
transpired October 26, 1976:
. . . Pursuant thereto, on 26 October
1976, CMAS acting upon the
instruction of Pomierski, F.H., the
shipper requested booking of the
casketed remains of Mrs. Cristina (sic)
Saludo on board PAL's San Francisco-
Manila Flight No. PR 107 on October
27, 1976.
2. To signify acceptance and
confirmation of said booking, PAL
issued to said Pomierski F.H., PAL
Airway Bill No. 079-01180454 dated
October 27, 1976 (sic, "10/26/76").
PAL confirmed the booking and
transporting of the shipment on board
of its Flight PR 107 on October 27,
1976 on the basis of the representation
of the shipper and/or CMAS that the
said cargo would arrive in San
Francisco from Chicago on board
United Airlines Flight US 121 on 27
October 1976.27
In other words, on October 26, 1976 the cargo
containing the casketed remains of Crispina
Saludo was booked for PAL Flight Number
PR-107 leaving San Francisco for Manila on
October 27, 1976, PAL Airway Bill No. 079-
01180454 was issued, not as evidence of
receipt of delivery of the cargo on October 26,
1976, but merely as a confirmation of the
booking thus made for the San Francisco-
Manila flight scheduled on October 27, 1976.
Actually, it was not until October 28, 1976 that
PAL received physical delivery of the body at
San Francisco, as duly evidenced by the
Interline Freight Transfer Manifest of the
American Airline Freight System and signed
for by Virgilio Rosales at 1945H, or 7:45 P.M.
on said date.28
231
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. 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, 29 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 And, there is
delivery to the carrier when the goods are
ready for and have been placed in the
exclusive possession, custody and control of
the carrier for the purpose of their immediate
transportation and the carrier has accepted
them. 31 Where such a delivery has thus been
accepted by the carrier, the liability of the
common carrier commences eo instanti. 32
Hence, while we agree with petitioners that the
extraordinary diligence statutorily required to
be observed by the carrier instantaneously
commences upon delivery of the goods
thereto, for such duty to commence there must
in fact have been delivery of the cargo subject
of the contract of carriage. Only when such
fact of delivery has been unequivocally
established can the liability for loss,
destruction or deterioration of goods in the
custody of the carrier, absent the excepting
causes under Article 1734, attach and the
presumption of fault of the carrier under Article
1735 be invoked.
As already demonstrated, the facts in the case
at bar belie the averment that there was
delivery of the cargo to the carrier on October
26, 1976. Rather, as earlier explained, the
body intended to be shipped as agreed upon
was really placed in the possession and
control of PAL on October 28, 1976 and it was
from that date that private respondents
became responsible for the agreed cargo
under their undertakings in PAL Airway Bill No.
079-01180454. Consequently, for the
switching of caskets prior thereto which was
not caused by them, and subsequent events
caused thereby, private respondents cannot
be held liable.
Petitioners, proceeding on the premise that
there was delivery of the cargo to private
respondents on October 26,1976 and that the
latter's extraordinary responsibility had by then
become operative, insist on foisting the blame
on private respondents for the switching of the
two caskets which occurred on October 27,
1976. It is argued that since there is no clear
evidence establishing the fault Continental
Mortuary Air Services (CMAS) for the mix-up,
private respondents are presumably negligent
pursuant to Article 1735 of the Civil Code and,
for failure to rebut such presumption, they
must necessarily be held liable; or, assuming
that CMAS was at fault, the same does not
absolve private respondents of liability
because whoever brought the cargo to the
airport or loaded it on the plane did so as
agent of private respondents.
This contention is without merit. As pithily
explained by the Court of Appeals:
The airway bill expressly provides that
"Carrier certifies goods described
below were received for carriage", and
said cargo was "casketed human
remains of Crispina Saludo," with
"Maria Saludo as Consignee;
Pomierski F.H. as Shipper; Air Care
International as carrier's agent." On the
face of the said airway bill, the specific
flight numbers, specific routes of
shipment and dates of departure and
arrival were typewritten, to wit:
Chicago TWA Flight 131/27 to San
Francisco and from San Francisco by
PAL 107 on, October 27, 1976 to
Philippines and to Cebu via PAL Flight
149 on October 29, 1976. The airway
bill also contains the following
typewritten words, as follows: all
documents have been examined (sic).
Human remains of Crispina Saludo.
Please return back (sic) first available
flight to SFO.
But, as it turned out and was
discovered later the casketed human
remains which was issued PAL Airway
Bill #079-1180454 was not the remains
of Crispina Saludo, the casket
containing her remains having been
shipped to Mexico City.
However, it should be noted that,
Pomierski F.H., the shipper of Mrs.
Saludo's remains, hired Continental
Mortuary Services (hereafter referred
to as C.M.A.S.), which is engaged in
the business of transporting and
forwarding human remains. Thus,
231
C.M.A.S. made all the necessary
arrangements such as flights,
transfers, etc. — for shipment of the
remains of Crispina Saludo.
The remains were taken on
October 26th, 1976, to
C.M.A.S. at the airport. These
people made all the necessary
arrangements, such as flights,
transfers, etc. This is a national
service used by undertakers
throughout the nation. They
furnished the air pouch which
the casket is enclosed in, and
they see that the remains are
taken to the proper air frieght
terminal. I was very surprised
when Miss Saludo called me to
say that the remains were not
at the west coast terminal. I
immediately called C.M.A.S.
They called me back in a
matter of ten minutes to inform
me that the remains were on a
plane to Mexico City. The man
said that there were two
bodies at the terminal, and
somehow they were switched. .
. . (Exb. 6 — "TWA", which is
the memo or incident report
enclosed in the stationery of
Walter Pomierski & Sons Ltd.)
Consequently, when the cargo was
received from C.M.A.S. at the Chicago
airport terminal for shipment, which
was supposed to contain the remains
of Crispina Saludo, Air Care
International and/or TWA, had no way
of determining its actual contents,
since the casket was hermetically
sealed by the Philippine Vice-Consul
in Chicago and in an air pouch of
C.M.A.S., to the effect that Air Care
International and/or TWA had to rely
on the information furnished by the
shipper regarding the cargo's content.
Neither could Air Care International
and/or TWA open the casket for
further verification, since they were not
only without authority to do so, but
even prohibited.
Thus, under said circumstances, no
fault and/or negligence can be
attributed to PAL (even if Air Care
International should be considered as
an agent of PAL) and/or TWA, the
entire fault or negligence being
exclusively with C.M.A.S.33 (Emphasis
supplied.)
It can correctly and logically be concluded,
therefore, that the switching occurred or, more
accurately, was discovered on October 27,
1976; and based on the above findings of the
Court of appeals, it happened while the cargo
was still with CMAS, well before the same was
place in the custody of private respondents.
Thus, while the Air Cargo Transfer Manifest of
TWA of October 27, 1976 34 was signed by
Garry Marcial of PAL at 1400H, or 2:00 P.M.,
on the same date, thereby indicating
acknowledgment by PAL of the transfer to
them by TWA of what was in truth the
erroneous cargo, said misshipped cargo was
in fact withdrawn by CMAS from PAL as
shown by the notation on another copy of said
manifest35 stating "Received by CMAS — Due
to switch in Chicago 10/27-1805H," the
authenticity of which was never challenged.
This shows that said misshipped cargo was in
fact withdrawn by CMAS from PAL and the
correct shipment containing the body of
Crispina Saludo was received by PAL only on
October 28, 1976, at 1945H, or 7:45 P.M., per
American Airlines Interline Freight Transfer
Manifest No. AA204312.36
Witness the deposition of TWA's ramp
serviceman, Michael Giosso, on this matter:
ATTY. JUAN COLLAS, JR.:
On that date, do (sic) you have
occasion to handle or deal with the
transfer of cargo from TWA Flight No.
603 to PAL San Francisco?
MICHAEL GIOSSO:
Yes, I did.
ATTY. JUAN COLLAS, JR.:
What was your participation with the
transfer of the cargo?
MICHAEL GIOSSO:
231
 I manifested the freight on a transfer
manifest and physically moved it to
PAL and concluded the transfer by
signing it off.
ATTY. JUAN COLLAS, JR.:
You brought it there yourself?
MICHAEL GIOSSO:
Yes sir.
ATTY. JUAN COLIAS, JR.:
Do you have anything to show that
PAL received the cargo from TWA on
October 27, 1976?
MICHAEL GIOSSO:
Yes, I do.
(Witness presenting a document)
ATTY. JUAN COLLAS, JR.:
For purposes of clarity, Exhibit I is
designated as Exhibit I-TWA.
x x x           x x x          x x x
ATTY. JUAN COLLAS, JR.:
This Exhibit I-TWA, could you tell what
it is, what it shows?
MICHAEL GIOSSO:
It shows transfer of manifest on 10-27-
76 to PAL at 1400 and verified with two
signatures as it completed the transfer.
ATTY. JUAN COLLAS, JR.:
Very good,. Who was the PAL
employee who received the cargo?
MICHAEL GIOSSO:
The name is Garry Marcial." 37
The deposition of Alberto A. Lim, PAL's cargo
supervisor at San Francisco, as deponent-
witness for PAL, makes this further
clarification:
ATTY. CESAR P. MANALAYSAY:
You mentioned Airway Bill, Mr. Lim. I
am showing to you a PAL Airway Bill
Number 01180454 which for purposes
of evidence, I would like to request that
the same be marked as evidence
Exhibit I for PAL.
x x x           x x x          x x x
In what circumstances did you
encounter Exhibit I-PAL?
ALBERTO A. LIM:
If I recall correctly, I was queried by
Manila, our Manila office with regard to
a certain complaint that a consignee
filed that this shipment did not arrive
on the day that the consignee expects
the shipment to arrive.
ATTY CESAR P. MANALAYSAY:
Okay. Now, upon receipt of that query
from your Manila office, did you
conduct any investigation to pinpoint
the possible causes of mishandling?
ALBERTO A. LIM:
Yes.
x x x           x x x          x x x
ATTY. CESAR P. MANALAYSAY:
What is the result of your
investigation?
ALBERTO A. LIM:
In the course of my investigation, I
found that we received the body on
October 28, 1976, from American
Airlines.
ATTY. CESAR P. MANALAYSAY:
What body are you referring to?
231
x x x           x x x          x x x
ALBERTO A. LIM:
The remains of Mrs. Cristina (sic)
Saludo.
ATTY. CESAR P. MANALAYSAY:
Is that the same body mentioned in
this Airway Bill?
ALBERTO A. LIM:
Yes.
ATTY. CESAR P. MANALAYSAY:
What time did you receive said body
on October 28, 1976?
ALBERTO A. LIM:
If I recall correctly, approximately 7:45
of October 28, 1976.
ATTY. CESAR P. MANALAYSAY:
Do you have any proof with you to
back the statement?
ALBERTO A. LIM:
Yes. We have on our records a
Transfer Manifest from American
Airlines Number 204312 showing that
we received a human remains
shipment belong to Mrs. Cristina (sic)
Saludo or the human remains of Mrs.
Cristina (sic) Saludo.
ATTY. CESAR P. MAIALAYSAY:
At this juncture, may I request that the
Transfer Manifest referred to by the
witness be marked as an evidence as
Exhibit II-PAL.
x x x           x x x          x x x
Mr. Lim, yesterday your co-defendant
TWA presented as their Exhibit I
evidence tending to show that on
October 27, 1976 at about 2:00 in the,
afternoon they delivered to you a cargo
bearing human remains. Could you go
over this Exhibit I and please give us
your comments as to that exhibit?
ATTY. ALBERTO C. MENDOZA:
That is a vague question. I would
rather request that counsel propound
specific questions rather than asking
for comments on Exhibit I-TWA.
ATTY. CESAR P. MANALAYSAY:
In that case, I will reform my question.
Could you tell us whether TWA in fact
delivered to you the human remains as
indicated in that Transfer Manifest?
ALBERTO A. LIM:
Yes, they did.
ATTY. CESAR P. MANALAYSAY:
I noticed that the Transfer Manifest of
TWA marked as Exhibit I-TWA bears
the same numbers or the same entries
as the Airway Bill marked as Exhibit I-
A PAL tending to show that this is the
human remains of Mrs Cristina (sic)
Saludo. Could you tell us whether this
is true?
ALBERTO A. LIM:
It is true that we received human
remains shipment from TWA as
indicated on this Transfer Manifest. But
in the course of investigation, it was
found out that the human remains
transferred to us is not the remains of
Mrs. Cristina (sic) Saludo this is the
reason why we did not board it on our
flight. 38
Petitioners consider TWA's statement that "it
had to rely on the information furnished by the
shipper" a lame excuse and that its failure to
prove that its personnel verified and identified
the contents of the casket before loading the
same constituted negligence on the part of
TWA.39
We upbold the favorable consideration by the
Court of Appeals of the following findings of
the trial court:
231
 It was not (to) TWA, but to C.M.A.S.
that the Pomierski & Son Funeral
Home delivered the casket containing
the remains of Crispina Saludo. TWA
would have no knowledge therefore
that the remains of Crispina Saludo
were not the ones inside the casket
that was being presented to it for
shipment. TWA would have to rely on
there presentations of C.M.A.S. The
casket was hermetically sealed and
also sealed by the Philippine Vice
Consul in Chicago. TWA or any airline
for that matter would not have opened
such a sealed casket just for the
purpose of ascertaining whose body
was inside and to make sure that the
remains inside were those of the
particular person indicated to be by
C.M.A.S. TWA had to accept whatever
information was being furnished by the
shipper or by the one presenting the
casket for shipment. And so as a
matter of fact, TWA carried to San
Francisco and transferred to defendant
PAL a shipment covered by or under
PAL Airway Bill No. 079-ORD-
01180454, the airway bill for the
shipment of the casketed remains of
Crispina Saludo. Only, it turned out
later, while the casket was already with
PAL, that what was inside the casket
was not the body of Crispina Saludo so
much so that it had to be withdrawn by
C.M.A.S. from PAL. The body of
Crispina Saludo had been shipped to
Mexico. The casket containing the
remains of Crispina Saludo was
transshipped from Mexico and arrived
in San Francisco the following day on
board American Airlines. It was
immediately loaded by PAL on its flight
for Manila.
The foregoing points at C.M.A.S., not
defendant TWA much less defendant
PAL, as the ONE responsible for the
switching or mix-up of the two bodies
at the Chicago Airport terminal, and
started a chain reaction of the
misshipment of the body of Crispina
Saludo and a one-day delay in the
delivery thereof to its destination. 40
Verily, no amount of inspection by respondent
airline companies could have guarded against
the switching that had already taken place. Or,
granting that they could have opened the
casket to inspect its contents, private
respondents had no means of ascertaining
whether the body therein contained was
indeed that of Crispina Saludo except,
possibly, if the body was that of a male person
and such fact was visually apparent upon
opening the casket. However, to repeat,
private respondents had no authority to unseal
and open the same nor did they have any
reason or justification to resort thereto.
It is the right of the carrier to require good faith
on the part of those persons who deliver
goods to be carried, or enter into contracts
with it, and inasmuch as the freight may
depend on the value of the article to be
carried, the carrier ordinarily has the right to
inquire as to its value. Ordinarily, too, it is the
duty of the carrier to make inquiry as to the
general nature of the articles shipped and of
their value before it consents to carry them;
and its failure to do so cannot defeat the
shipper's right to recovery of the full value of
the package if lost, in the absence of showing
of fraud or deceit on the part of the shipper. In
the absence of more definite information, the
carrier has a the right to accept shipper's
marks as to the contents of the package
offered for transportation and is not bound to
inquire particularly about them in order to take
advantage of a false classification and where a
shipper expressly represents the contents of a
package to be of a designated character, it is
not the duty of the carrier to ask for a repetition
of the statement nor disbelieve it and open the
box and see for itself. 41 However, where a
common carrier has reasonable ground to
suspect that the offered goods are of a
dangerous or illegal character, the carrier has
the right to know the character of such goods
and to insist on an inspection, if reasonable
and practical under the circumstances, as a
condition of receiving and transporting such
goods.42
It can safely be said then that a common
carrier is entitled to fair representation of the
nature and value of the goods to be carried,
with the concomitant right to rely thereon, and
further noting at this juncture that a carrier has
no obligation to inquire into the correctness or
sufficiency of such information. 43 The
consequent duty to conduct an inspection
thereof arises in the event that there should be
reason to doubt the veracity of such
representations. Therefore, to be subjected to
unusual search, other than the routinary
inspection procedure customarily undertaken,
231
there must exist proof that would justify cause
for apprehension that the baggage is
dangerous as to warrant exhaustive
inspection, or even refusal to accept carriage
of the same; and it is the failure of the carrier
to act accordingly in the face of such proof that
constitutes the basis of the common carrier's
liability. 44
In the case at bar, private respondents had no
reason whatsoever to doubt the truth of the
shipper's representations. The airway bill
expressly providing that "carrier certifies goods
received below were received for carriage,"
and that the cargo contained "casketed human
remains of Crispina Saludo," was issued on
the basis of such representations. The reliance
thereon by private respondents was
reasonable and, for so doing, they cannot be
said to have acted negligently. Likewise, no
evidence was adduced to suggest even an
iota of suspicion that the cargo presented for
transportation was anything other than what it
was declared to be, as would require more
than routine inspection or call for the carrier to
insist that the same be opened for scrutiny of
its contents per declaration.
Neither can private respondents be held
accountable on the basis of petitioners'
preposterous proposition that whoever brought
the cargo to the airport or loaded it on the
airplane did so as agent of private
respondents, so that even if CMAS whose
services were engaged for the transit
arrangements for the remains was indeed at
fault, the liability therefor would supposedly
still be attributable to private respondents.
While we agree that the actual participation of
CMAS has been sufficiently and correctly
established, to hold that it acted as agent for
private respondents would be both an
inaccurate appraisal and an unwarranted
categorization of the legal position it held in
the entire transaction.
It bears repeating that CMAS was hired to
handle all the necessary shipping
arrangements for the transportation of the
human remains of Crispina Saludo to Manila.
Hence, it was to CMAS that the Pomierski &
Son Funeral Home, as shipper, brought the
remains of petitioners' mother for shipment,
with Maria Saludo as consignee. Thereafter,
CMAS booked the shipment with PAL through
the carrier's agent, Air Care
International. 45 With its aforestated functions,
CMAS may accordingly be classified as a
forwarder which, by accepted commercial
practice, is regarded as an agent of the
shipper and not of the carrier. As such, it
merely contracts for the transportation of
goods by carriers, and has no interest in the
freight but receives compensation from the
shipper as his agent. 46
At this point, it can be categorically stated that,
as culled from the findings of both the trial
court and appellate courts, the entire chain of
events which culminated in the present
controversy was not due to the fault or
negligence of private respondents. Rather, the
facts of the case would point to CMAS as the
culprit. Equally telling of the more likely
possibility of CMAS' liability is petitioners' letter
to and demanding an explanation from CMAS
regarding the statement of private respondents
laying the blame on CMAS for the incident,
portions of which, reading as follows:
. . . we were informed that the
unfortunate a mix-up occurred due to
your negligence. . . .
Likewise, the two airlines pinpoint the
responsibility upon your agents.
Evidence were presented to prove that
allegation.
On the face of this overwhelming
evidence we could and should have
filed a case against you. . . . 47
clearly allude to CMAS as the party at fault.
This is tantamount to an admission by
petitioners that they consider private
respondents without fault, or is at the very
least indicative of the fact that petitioners
entertained serious doubts as to whether
herein private respondents were responsible
for the unfortunate turn of events.
Undeniably, petitioners' grief over the death of
their mother was aggravated by the
unnecessary inconvenience and anxiety that
attended their efforts to bring her body home
for a decent burial. This is unfortunate and
calls for sincere commiseration with
petitioners. But, much as we would like to give
them consolation for their undeserved distress,
we are barred by the inequity of allowing
recovery of the damages prayed for by them at
the expense of private respondents whose
231
fault or negligence in the very acts imputed to
them has not been convincingly and legally
demonstrated.
Neither are we prepared to delve into, much
less definitively rule on, the possible liability of
CMAS as the evaluation and adjudication of
the same is not what is presently at issue here
and is best deferred to another time and
addressed to another forum.
II. Petitioners further fault the Court of Appeals
for ruling that there was no contractual breach
on the part of private respondents as would
entitle petitioners to damages.
Petitioners hold that respondent TWA, by
agreeing to transport the remains of
petitioners' mother on its Flight 131 from
Chicago to San Francisco on October 27,
1976, made itself a party to the contract of
carriage and, therefore, was bound by the
terms of the issued airway bill. When TWA
undertook to ship the remains on its Flight
603, ten hours earlier than scheduled, it
supposedly violated the express agreement
embodied in the airway bill. It was allegedly
this breach of obligation which compounded, if
not directly caused, the switching of the
caskets.
In addition, petitioners maintain that since
there is no evidence as to who placed the
body on board Flight 603, or that CMAS
actually put the cargo on that flight, or that the
two caskets at the Chicago airport were to be
transported by the same airline, or that they
came from the same funeral home, or that
both caskets were received by CMAS, then
the employees or agents of TWA presumably
caused the mix-up by loading the wrong
casket on the plane. For said error, they
contend, TWA must necessarily be presumed
negligent and this presumption of negligence
stands undisturbed unless rebutting evidence
is presented to show that the switching or
misdelivery was due to circumstances that
would exempt the carrier from liability.
Private respondent TWA professes otherwise.
Having duly delivered or transferred the cargo
to its co-respondent PAL on October 27, 1976
at 2:00 P.M., as supported by the TWA
Transfer Manifest, TWA faithfully complied
with its obligation under the airway bill. Said
faithful compliance was not affected by the fact
that the remains were shipped on an earlier
flight as there was no fixed time for completion
of carriage stipulated on. Moreover, the carrier
did not undertake to carry the cargo aboard
any specified aircraft, in view of the condition
on the back of the airway bill which provides:
CONDITIONS OF CONTRACT
xxx xxx xxx
It is agreed that no time is fixed for the
completion of carriage hereunder and
that Carrier may without notice
substitute alternate carriers or aircraft.
Carrier assumes no obligation to carry
the goods by any specified aircraft or
over any particular route or routes or to
make connection at any point
according to any particular schedule,
and Carrier is hereby authorized to
select, or deviate from the route or
routes of shipment, notwithstanding
that the same may be stated on the
face hereof. The shipper guarantees
payment of all charges and
advances.48
Hence, when respondent TWA shipped the
body on earlier flight and on a different aircraft,
it was acting well within its rights. We find this
argument tenable.
The contention that there was contractual
breach on the part of private respondents is
founded on the postulation that there was
ambiguity in the terms of the airway bill, hence
petitioners' insistence on the application of the
rules on interpretation of contracts and
documents. We find no such ambiguity. The
terms are clear enough as to preclude the
necessity to probe beyond the apparent
intendment of the contractual provisions.
The hornbook rule on interpretation of
contracts consecrates the primacy of the
intention of the parties, the same having the
force of law between them. When the terms of
the agreement are clear and explicit, that they
do not justify an attempt to read into any
alleged intention of the parties, the terms are
to be understood literally just as they appear
on the face of the contract.49 The various
stipulations of a contract shall be interpreted
together50 and such a construction is to be
adopted as will give effect to all provisions
thereof.51 A contract cannot be construed by
parts, but its clauses should be interpreted in
231
relation to one another. The whole contract
must be interpreted or read together in order
to arrive at its true meaning. Certain
stipulations cannot be segregated and then
made to control; neither do particular words or
phrases necessarily determine the character
of a contract. The legal effect of the contract is
not to be determined alone by any particular
provision disconnected from all others, but in
the ruling intention of the parties as gathered
from all the language they have used and from
their contemporaneous and subsequent
acts. 52
Turning to the terms of the contract at hand,
as presented by PAL Air Waybill No. 079-
01180454, respondent court approvingly
quoted the trial court's disquisition on the
aforequoted condition appearing on the
reverse side of the airway bill and its
disposition of this particular assigned error:
The foregoing stipulation fully answers
plaintiffs' objections to the one-day
delay and the shipping of the remains
in TWA Flight 603 instead of TWA
Flight 131. Under the stipulation,
parties agreed that no time was fixed
to complete the contract of carriage
and that the carrier may, without
notice, substitute alternate carriers or
aircraft. The carrier did not assume the
obligation to carry the shipment on any
specified aircraft.
xxx xxx xxx
Furthermore, contrary to the claim of
plaintiffs-appellants, the conditions of
the Air Waybill are big enough to be
read and noticed. Also, the mere fact
that the cargo in question was shipped
in TWA Flight 603, a flight earlier on
the same day than TWA Flight 131, did
not in any way cause or add to the
one-day delay complained of and/or
the switching or mix-up of the bodies.53
Indubitably, that private respondent can use
substitute aircraft even without notice and
without the assumption of any obligation
whatsoever to carry the goods on any
specified aircraft is clearly sanctioned by the
contract of carriage as specifically provided for
under the conditions thereof.
Petitioners' invocation of the interpretative rule
in the Rules of Court that written words control
printed words in documents, 54 to bolster their
assertion that the typewritten provisions
regarding the routing and flight schedule
prevail over the printed conditions, is tenuous.
Said rule may be considered only when there
is inconsistency between the written and
printed words of the contract.
As previously stated, we find no ambiguity in
the contract subject of this case that would call
for the application of said rule. In any event,
the contract has provided for such a situation
by explicitly stating that the above condition
remains effective "notwithstanding that the
same (fixed time for completion of carriage,
specified aircraft, or any particular route or
schedule) may be stated on the face hereof."
While petitioners hinge private respondents'
culpability on the fact that the carrier "certifies
goods described below were received for
carriage," they may have overlooked that the
statement on the face of the airway bill
properly and completely reads —
Carrier certifies goods described below
were received for carriage subject to
the Conditions on the reverse
hereof the goods then being in
apparent good order and condition
except as noted hereon. 55(Emphasis
ours.)
Private respondents further aptly observe that
the carrier's certification regarding receipt of
the goods for carriage "was of a smaller print
than the condition of the Air Waybill, including
Condition No. 5 — and thus if plaintiffs-
appellants had recognized the former, then
with more reason they were aware of the
latter. 56
In the same vein, it would also be incorrect to
accede to the suggestion of petitioners that the
typewritten specifications of the flight, routes
and dates of departures and arrivals on the
face of the airway bill constitute a special
contract which modifies the printed conditions
at the back thereof. We reiterate that
typewritten provisions of the contract are to be
read and understood subject to and in view of
the printed conditions, fully reconciling and
giving effect to the manifest intention of the
parties to the agreement.
231
The oft-repeated rule regarding a carrier's
liability for delay is that in the absence of a
special contract, a carrier is not an insurer
against delay in transportation of goods. When
a common carrier undertakes to convey
goods, the law implies a contract that they
shall be delivered at destination within a
reasonable time, in the absence, of any
agreement as to the time of delivery. 57 But
where a carrier has made an express contract
to transport and deliver property within a
specified time, it is bound to fulfill its contract
and is liable for any delay, no matter from what
cause it may have arisen. 58 This result
logically follows from the well-settled rule that
where the law creates a duty or charge, and
the party is disabled from performing it without
any default in himself, and has no remedy
over, then the law will excuse him, but where
the party by his own contract creates a duty or
charge upon himself, he is bound to make it
good notwithstanding any accident or delay by
inevitable necessity because he might
have provided against it by contract. Whether
or not there has been such an undertaking on
the part of the carrier to be determined from
the circumstances surrounding the case and
by application of the ordinary rules for the
interpretation of contracts.59
Echoing the findings of the trial court, the
respondent court correctly declared that —
In a similar case of delayed delivery of
air cargo under a very similar
stipulation contained in the airway bill
which reads: "The carrier does not
obligate itself to carry the goods by any
specified aircraft or on a specified time.
Said carrier being hereby authorized to
deviate from the route of the shipment
without any liability therefor", our
Supreme Court ruled that common
carriers are not obligated by law to
carry and to deliver merchandise, and
persons are not vested with the right to
prompt delivery, unless such common
carriers previously assume the
obligation. Said rights and obligations
are created by a specific contract
entered into by the parties (Mendoza
vs. PAL, 90 Phil. 836).
There is no showing by plaintiffs that
such a special or specific contract had
been entered into between them and
the defendant airline companies.
And this special contract for prompt
delivery should call the attention of the
carrier to the circumstances
surrounding the case and the
approximate amount of damages to be
suffered in case of delay (See
Mendoza vs. PAL, supra). There was
no such contract entered into in the
instant case.60
Also, the theory of petitioners that the
specification of the flights and dates of
departure and arrivals constitute a special
contract that could prevail over the printed
stipulations at the back of the airway bill is
vacuous. To countenance such a postulate
would unduly burden the common carrier for
that would have the effect of unilaterally
transforming every single bill of lading or trip
ticket into a special contract by the simple
expedient of filling it up with the particulars of
the flight, trip or voyage, and thereby imposing
upon the carrier duties and/or obligations
which it may not have been ready or willing to
assume had it been timely, advised thereof.
Neither does the fact that the challenged
condition No. 5 was printed at the back of the
airway bill militate against its binding effect on
petitioners as parties to the contract, for there
were sufficient indications on the face of said
bill that would alert them to the presence of
such additional condition to put them on their
guard. Ordinary prudence on the part of any
person entering or contemplating to enter into
a contract would prompt even a cursory
examination of any such conditions, terms
and/or stipulations.
There is a holding in most jurisdictions that the
acceptance of a bill of lading without dissent
raises a presumption that all terms therein
were brought to the knowledge of the shipper
and agreed to by him, and in the absence of
fraud or mistake, he is estopped from
thereafter denying that he assented to such
terms. This rule applies with particular force
where a shipper accepts a bill of lading with
full knowledge of its contents, and acceptance
under such circumstances makes it a binding
contract. In order that any presumption of
assent to a stipulation in a bill of lading limiting
the liability of a carrier may arise, it must
appear that the clause containing this
exemption from liability plainly formed a part of
the contract contained in the bill of lading. A
stipulation printed on the back of a receipt or
231
bill of lading or on papers attached to such
receipt will be quite as effective as if printed on
its face, if it is shown that the consignor knew
of its terms. Thus, where a shipper accepts a
receipt which states that its conditions are to
be found on the back, such receipt comes
within the general rule, and the shipper is held
to have accepted and to be bound by the
conditions there to be found. 61
Granting arguendo that Condition No. 5
partakes of the nature of a contract of
adhesion and as such must be construed
strictly against the party who drafted the same
or gave rise to any ambiguity therein, it should
be borne in mind that a contract of adhesion
may be struck down as void and
unenforceable, for being subversive of public
policy, only when the weaker party is imposed
upon in dealing with the dominant bargaining
party and is reduced to the alternative of
taking it or leaving it, completely deprived of
the opportunity to bargain on equal
footing. 62However, Ong Yiu vs. Court of
Appeals, et al  63 instructs us that contracts of
adhesion are not entirely prohibited. The one
who adheres to the contract is in reality free to
reject it entirely; if he adheres, be gives his
consent. Accordingly, petitioners, far from
being the weaker party in this situation, duly
signified their presumed assent to all terms of
the contract through their acceptance of the
airway bill and are consequently bound
thereby. It cannot be gainsaid that petitioners'
were not without several choices as to carriers
in Chicago with its numerous airways and
airliner servicing the same.
We wish to allay petitioners' apprehension that
Condition No. 5 of the airway bill is productive
of mischief as it would validate delay in
delivery, sanction violations of contractual
obligations with impunity or put a premium on
breaches of contract.
Just because we have said that condition No.
5 of the airway bill is binding upon the parties
to and fully operative in this transaction, it
does not mean, and let this serve as fair
warning to respondent carriers, that they can
at all times whimsically seek refuge from
liability in the exculpatory sanctuary of said
Condition No. 5 or arbitrarily vary routes,
flights and schedules to the prejudice of their
customers. This condition only serves to
insulate the carrier from liability in those
instances when changes in routes, flights and
schedules are clearly justified by the peculiar
circumstances of a particular case, or by
general transportation practices, customs and
usages, or by contingencies or emergencies in
aviation such as weather turbulence,
mechanical failure, requirements of national
security and the like. And even as it is
conceded that specific routing and other
navigational arrangements for a trip, flight or
voyage, or variations therein, generally lie
within the discretion of the carrier in the
absence of specific routing instructions or
directions by the shipper, it is plainly
incumbent upon the carrier to exercise its
rights with due deference to the rights,
interests and convenience of its customers.
A common carrier undertaking to transport
property has the implicit duty to carry and
deliver it within reasonable time, absent any
particular stipulation regarding time of delivery,
and to guard against delay. In case of any
unreasonable delay, the carrier shall be liable
for damages immediately and proximately
resulting from such neglect of duty. 64 As found
by the trial court, the delay in the delivery of
the remains of Crispina Saludo, undeniable
and regrettable as it was, cannot be attributed
to the fault, negligence or malice of private
respondents,65 a conclusion concurred in by
respondent court and which we are not
inclined to disturb.
We are further convinced that when TWA
opted to ship the remains of Crispina Saludo
on an earlier flight, it did so in the exercise of
sound discretion and with reasonable
prudence, as shown by the explanation of its
counsel in his letter of February 19, 1977 in
response to petitioners' demand letter:
Investigation of TWA's handling of this
matter reveals that although the
shipment was scheduled on TWA
Flight 131 of October 27, 1976, it was
actually boarded on TWA Flight 603 of
the same day, approximately 10 hours
earlier, in order to assure that the
shipment would be received in San
Francisco in sufficient time for transfer
to PAL. This transfer was effected in
San Francisco at 2:00 P.M. on October
27, 1976. 66
Precisely, private respondent TWA knew of
the urgency of the shipment by reason of this
notation on the lower portion of the airway bill:
231
"All documents have been certified. Human
remains of Cristina (sic) Saludo. Please return
bag first available flight to SFO." Accordingly,
TWA took it upon itself to carry the remains of
Crispina Saludo on an earlier flight, which we
emphasize it could do under the terms of the
airway bill, to make sure that there would be
enough time for loading said remains on the
transfer flight on board PAL.
III. Petitioners challenge the validity of
respondent court's finding that private
respondents are not liable for tort on account
of the humiliating, arrogant and indifferent acts
of their officers and personnel. They posit that
since their mother's remains were transported
ten hours earlier than originally scheduled,
there was no reason for private respondents'
personnel to disclaim knowledge of the arrival
or whereabouts of the same other than their
sheer arrogance, indifference and extreme
insensitivity to the feelings of petitioners.
Moreover, being passengers and not merely
consignors of goods, petitioners had the right
to be treated with courtesy, respect, kindness
and due consideration.
In riposte, TWA claims that its employees
have always dealt politely with all clients,
customers and the public in general. PAL, on
the other hand, declares that in the
performance of its obligation to the riding
public, other customers and clients, it has
always acted with justice, honesty, courtesy
and good faith.
Respondent appellate court found merit in and
reproduced the trial court's refutation of this
assigned error:
About the only evidence of plaintiffs
that may have reference to the manner
with which the personnel of defendants
treated the two plaintiffs at the San
Francisco Airport are the following
pertinent portions of Maria Saludo's
testimony:
Q When you arrived there,
what did you do, if any?
A I immediately went to the
TWA counter and I inquired
about whether my mother was
there or if' they knew anything
about it.
Q What was the answer?
A They said they do not know.
So, we waited.
Q About what time was that
when you reached San
Francisco from Chicago?
A I think 5 o'clock. Somewhere
around that in the afternoon.
Q You made inquiry it was
immediately thereafter?
A Right after we got off the
plane.
Q Up to what time did you stay
in the airport to wait until the
TWA people could tell you the
whereabouts?
A Sorry, Sir, but the TWA did
not tell us anything. We stayed
there until about 9 o'clock.
They have not heard anything
about it. They did not say
anything.
Q Do you want to convey to
the Court that from 5 up to 9
o'clock in the evening you
yourself went back to the TWA
and they could not tell you
where the remains of your
mother were?
A Yes sir.
Q And after nine o'clock, what
did you do?
A I told my brother my Mom
was supposed to be on the
Philippine Airlines flight. "Why
don't" we check with PAL
instead to see if she was
there?" We tried to comfort
each other. I told him anyway
that was a shortest flight from
Chicago to California. We will
be with our mother on this
longer flight. So, we checked
with the PAL.
231
Q What did you find?
A We learned, Yes, my Mom
would be on the flight.
Q Who was that brother?
A Saturnino Saludo.
Q And did you find what was
your flight from San Francisco
to the Philippines?
A I do not know the number. It
was the evening flight of the
Philippine Airline(s) from San
Francisco to Manila.
Q You took that flight with your
mother?
A We were scheduled to, Sir.
Q Now, you could not locate
the remains of your mother in
San Francisco could you tell us
what did you feel?
A After we were told that my
mother was not there?
Q After you learned that your
mother could not fly with you
from Chicago to California?
A Well, I was very upset. Of
course, I wanted the
confirmation that my mother
was in the West Coast. The
fliqht was about 5 hours from
Chicago to California. We
waited anxiously all that time
on the plane. I wanted to be
assured about my mother's
remains. But there was nothing
and we could not get any
assurance from anyone about
it.
Q Your feeling when you
reached San Francisco and
you could not find out from the
TWA the whereabouts of the
remains, what did you feel?
A Something nobody would be
able to describe unless he
experiences it himself. It is a
kind of panic. I think it's a
feeling you are about to go
crazy. It is something I do not
want to live through again.
(Inting, t.s.n., Aug. 9, 1983, pp.
14-18).
The foregoing does not show any
humiliating or arrogant manner with
which the personnel of both
defendants treated the two plaintiffs.
Even their alleged indifference is not
clearly established. The initial answer
of the TWA personnel at the counter
that they did not know anything about
the remains, and later, their answer
that they have not heard anything
about the remains, and the inability of
the TWA counter personnel to inform
the two plaintiffs of the whereabouts of
the remains, cannot be said to be total
or complete indifference to the said
plaintiffs. At any rate, it is any rude or
discourteous conduct, malfeasance or
neglect, the use of abusive or insulting
language calculated to humiliate and
shame passenger or had faith by or on
the part of the employees of the carrier
that gives the passenger an action for
damages against the carrier (Zulueta
vs. Pan American World Airways, 43
SCRA 397; Air France vs. Carrascoso,
et al., 18 SCRA 155; Lopez, et al. vs.
Pan American World Airways, 16
SCRA 431; Northwest Airlines, Inc. vs.
Cuenca, 14 SCRA 1063), and none of
the above is obtaining in the instant
case. 67
We stand by respondent court's findings on
this point, but only to the extent where it holds
that the manner in which private respondent
TWA's employees dealt with petitioners was
not grossly humiliating, arrogant or indifferent
as would assume the proportions of malice or
bad faith and lay the basis for an award of the
damages claimed. It must however, be pointed
out that the lamentable actuations of
respondent TWA's employees leave much to
be desired, particularly so in the face of
petitioners' grief over the death of their mother,
exacerbated by the tension and anxiety
wrought by the impasse and confusion over
the failure to ascertain over an appreciable
period of time what happened to her remains.
231
Airline companies are hereby sternly
admonished that it is their duty not only to
cursorily instruct but to strictly require their
personnel to be more accommodating towards
customers, passengers and the general public.
After all, common carriers such as airline
companies are in the business of rendering
public service, which is the primary reason for
their enfranchisement and recognition in our
law. Because the passengers in a contract of
carriage do not contract merely for
transportation, they have a right to be treated
with kindness, respect, courtesy and
consideration. 68 A contract to transport
passengers is quite different in kind and
degree from any other contractual relation,
and generates a relation attended with public
duty. The operation of a common carrier is a
business affected with public interest and must
be directed to serve the comfort and
convenience of passengers. 69 Passengers are
human beings with human feelings and
emotions; they should not be treated as mere
numbers or statistics for revenue.
The records reveal that petitioners, particularly
Maria and Saturnino Saludo, agonized for
nearly five hours, over the possibility of losing
their mother's mortal remains, unattended to
and without any assurance from the
employees of TWA that they were doing
anything about the situation. This is not to say
that petitioners were to be regaled with extra
special attention. They were, however, entitled
to the understanding and humane
consideration called for by and commensurate
with the extraordinary diligence required of
common carriers, and not the cold insensitivity
to their predicament. It is hard to believe that
the airline's counter personnel were totally
helpless about the situation. Common sense
would and should have dictated that they exert
a little extra effort in making a more extensive
inquiry, by themselves or through their
superiors, rather than just shrug off the
problem with a callous and uncaring remark
that they had no knowledge about it. With all
the modern communications equipment readily
available to them, which could have easily
facilitated said inquiry and which are used as a
matter of course by airline companies in their
daily operations, their apathetic stance while
not legally reprehensible is morally deplorable.
Losing a loved one, especially one's, parent, is
a painful experience. Our culture accords the
tenderest human feelings toward and in
reverence to the dead. That the remains of the
deceased were subsequently delivered, albeit
belatedly, and eventually laid in her final
resting place is of little consolation. The
imperviousness displayed by the airline's
personnel, even for just that fraction of time,
was especially condemnable particularly in the
hour of bereavement of the family of Crispina
Saludo, intensified by anguish due to the
uncertainty of the whereabouts of their
mother's remains. Hence, it is quite apparent
that private respondents' personnel were
remiss in the observance of that genuine
human concern and professional attentiveness
required and expected of them.
The foregoing observations, however, do not
appear to be applicable or imputable to
respondent PAL or its employees. No
attribution of discourtesy or indifference has
been made against PAL by petitioners and, in
fact, petitioner Maria Saludo testified that it
was to PAL that they repaired after failing to
receive proper attention from TWA. It was from
PAL that they received confirmation that their
mother's remains would be on the same flight
to Manila with them.
We find the following substantiation on this
particular episode from the deposition of
Alberto A. Lim, PAL's cargo supervisor earlier
adverted to, regarding their investigation of
and the action taken on learning of petitioner's
problem:
ATTY. ALBERTO C. MENDOZA:
Yes.
Mr. Lim, what exactly was your
procedure adopted in your so called
investigation?
ALBERTO A. LIM:
I called the lead agent on duty at that
time and requested for a copy of
airway bill, transfer manifest and other
documents concerning the shipment.
ATTY ALBERTO C. MENDOZA:
Then, what?
ALBERTO A. LIM:
231
 They proceeded to analyze exactly
where PAL failed, if any, in forwarding
the human remains of Mrs. Cristina
(sic) Saludo. And I found out that there
was not (sic) delay in shipping the
remains of Mrs. Saludo to Manila.
Since we received the body from
American Airlines on 28 October at
7:45 and we expedited the shipment
so that it could have been loaded on
our flight leaving at 9:00 in the evening
or just barely one hour and 15 minutes
prior to the departure of the aircraft.
That is so (sic) being the case, I
reported to Manila these
circumstances. 70
IV. Finally, petitioners insist, as a petitioners to be paid by respondent Trans
consequence of the delay in the shipment of
their mother's remains allegedly caused by
wilful contractual breach, on their entitlement
to actual, moral and exemplary damages as
well as attorney's fees, litigation expenses,
and legal interest.
The uniform decisional tenet in our jurisdiction
bolds that moral damages may be awarded for
wilful or fraudulent breach of contract 71 or
when such breach is attended by malice or
bad faith. 72 However, in the absence of strong
and positive evidence of fraud, malice or bad
faith, said damages cannot be
awarded.73 Neither can there be an award of
exemplary damages 74 nor of attorney's
fees 75 as an item of damages in the absence
of proof that defendant acted with malice,
fraud or bad faith.
The censurable conduct of TWA's employees
cannot, however, be said to have
approximated the dimensions of fraud, malice
or bad faith. It can be said to be more of a
lethargic reaction produced and engrained in
some people by the mechanically routine
nature of their work and a racial or societal
culture which stultifies what would have been
their accustomed human response to a human
need under a former and different ambience.
Nonetheless, the facts show that petitioners'
right to be treated with due courtesy in
accordance with the degree of diligence
required by law to be exercised by every
common carrier was violated by TWA and this
entitles them, at least, to nominal damages
from TWA alone. Articles 2221 and 2222 of
the Civil Code make it clear that nominal
damages are not intended for indemnification
of loss suffered but for the vindication or
recognition of a right violated of invaded. They
are recoverable where some injury has been
done but the amount of which the evidence
fails to show, the assessment of damages
being left to the discretion of the court
according to the circumstances of the
case.76 In the exercise of our discretion, we
find an award of P40,000.00 as nominal
damages in favor of, petitioners to be a
reasonable amount under the circumstances
of this case.
WHEREFORE, with the modification that an
award of P40,000.00 as and by way of
nominal damages is hereby granted in favor of
World Airlines, the appealed decision is
AFFIRMED in all other respects.
SO ORDERED.
Melencio-Herrera, Paras, Padilla and Nocon,
JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 122494 October 8, 1998
EVERETT STEAMSHIP
CORPORATION, petitioner, 
vs.
COURT OF APPEALS and HERNANDEZ
TRADING CO. INC., respondents.
MARTINEZ, J.:
Petitioner Everett Steamship Corporation,
through this petition for review, seeks the
reversal of the decision1 of the Court of
Appeals, dated June 14, 1995, in CA-G.R. No.
428093, which affirmed the decision of the
Regional Trial Court of Kalookan City, Branch
126, in Civil Case No. C-15532, finding
petitioner liable to private respondent
Hernandez Trading Co., Inc. for the value of
the lost cargo.
231
Private respondent imported three crates of
bus spare parts marked as MARCO C/No. 12,
MARCO C/No. 13 and MARCO C/No. 14, from
its supplier, Maruman Trading Company, Ltd.
(Maruman Trading), a foreign corporation
based in Inazawa, Aichi, Japan. The crates
were shipped from Nagoya, Japan to Manila
on board "ADELFAEVERETTE," a vessel
owned by petitioner's principal, Everett Orient
Lines. The said crates were covered by Bill of
Lading No. NGO53MN.
Upon arrival at the port of Manila, it was
discovered that the crate marked MARCO
C/No. 14 was missing. This was confirmed
and admitted by petitioner in its letter of
January 13, 1992 addressed to private
respondent, which thereafter made a formal
claim upon petitioner for the value of the lost
cargo amounting to One Million Five Hundred
Fifty Two Thousand Five Hundred
(Y1,552,500.00) Yen, the amount shown in an
Invoice No. MTM-941, dated November 14,
1991. However, petitioner offered to pay only
One Hundred Thousand (Y100,000.00) Yen,
the maximum amount stipulated under Clause
18 of the covering bill of lading which limits the
liability of petitioner.
Private respondent rejected the offer and
thereafter instituted a suit for collection
docketed as Civil Case No. C-15532, against
petitioner before the Regional Trial Court of
Caloocan City, Branch 126.
At the pre-trial conference, both parties
manifested that they have no testimonial
evidence to offer and agreed instead to file
their respective memoranda.
On July 16, 1993, the trial court rendered
judgment 2 in favor of private respondent,
ordering petitioner to pay: (a) Y1,552,500.00;
(b) Y20,000.00 or its peso equivalent
representing the actual value of the lost cargo
and the material and packaging cost; (c) 10%
of the total amount as an award for and as
contingent attorney's fees; and (d) to pay the
cost of the suit. The trial court ruled:
Considering defendant's categorical
admission of loss and its failure to
overcome the presumption of
negligence and fault, the Court
conclusively finds defendant liable to
the plaintiff. The next point of inquiry
the Court wants to resolve is the extent
of the liability of the defendant. As
stated earlier, plaintiff contends that
defendant should be held liable for the
whole value for the loss of the goods in
the amount of Y1,552,500.00 because
the terms appearing at the back of the
bill of lading was so written in fine
prints and that the same was not
signed by plaintiff or shipper thus, they
are not bound by clause stated in
paragraph 18 of the bill of lading. On
the other hand, defendant merely
admitted that it lost the shipment but
shall be liable only up to the amount of
Y100,000.00.
The Court subscribes to the provisions
of Article 1750 of the New Civil Code
—
Art. 1750. "A contract fixing the
sum that may be recovered by
the owner or shipper for the
loss, destruction or
deterioration of the goods is
valid, if it is reasonable and just
under the circumstances, and
has been fairly and freely
agreed upon."
It is required, however, that the
contract must be reasonable and just
under the circumstances and has been
fairly and freely agreed upon. The
requirements provided in Art. 1750 of
the New Civil Code must be complied
with before a common carrier can
claim a limitation of its pecuniary
liability in case of loss, destruction or
deterioration of the goods it has
undertaken to transport.
In the case at bar, the Court is of the
view that the requirements of said
article have not been met. The fact that
those conditions are printed at the
back of the bill of lading in letters so
small that they are hard to read would
not warrant the presumption that the
plaintiff or its supplier was aware of
these conditions such that he had
"fairly and freely agreed" to these
conditions. It can not be said that the
plaintiff had actually entered into a
contract with the defendant,
embodying the conditions as printed at
231
 the back of the bill of lading that was
issued by the defendant to plaintiff.
On appeal, the Court of Appeals deleted the
award of attorney's fees but affirmed the trial
court's findings with the additional observation
that private respondent can not be bound by
the terms and conditions of the bill of lading
because it was not privy to the contract of
carriage. It said:
As to the amount of liability, no
evidence appears on record to show
that the appellee (Hernandez Trading
Co.) consented to the terms of the Bill
of Lading. The shipper named in the
Bill of Lading is Maruman Trading Co.,
Ltd. whom the appellant (Everett
Steamship Corp.) contracted with for
the transportation of the lost goods.
Even assuming arguendo that the
shipper Maruman Trading Co., Ltd.
accepted the terms of the bill of lading
when it delivered the cargo to the
appellant, still it does not necessarily
follow that appellee Hernandez
Trading, Company as consignee is
bound thereby considering that the
latter was never privy to the shipping
contract.
x x x           x x x          x x x
Never having entered into a contract
with the appellant, appellee should
therefore not be bound by any of the
terms and conditions in the bill of
lading.
Hence, it follows that the appellee may
recover the full value of the shipment
lost, the basis of which is not the
breach of contract as appellee was
never a privy to the any contract with
the appellant, but is based on Article
1735 of the New Civil Code, there
being no evidence to prove
satisfactorily that the appellant has
overcome the presumption of
negligence provided for in the law.
Petitioner now comes to us arguing that the
Court of Appeals erred (1) in ruling that the
consent of the consignee to the terms and
conditions of the bill of lading is necessary to
make such stipulations binding upon it; (2) in
holding that the carrier's limited package
liability as stipulated in the bill of lading does
not apply in the instant case; and (3) in
allowing private respondent to fully recover the
full alleged value of its lost cargo.
We shall first resolve the validity of the limited
liability clause in the bill of lading.
A stipulation in the bill of lading limiting the
common carrier's liability for loss or destruction
of a cargo to a certain sum, unless the shipper
or owner declares a greater value, is
sanctioned by law, particularly Articles 1749
and 1750 of the Civil Code which provide:
Art. 1749. A stipulation that the
common carrier's liability is limited to
the value of the goods appearing in the
bill of lading, unless the shipper or
owner declares a greater value, is
binding.
Art. 1750. A contract fixing the sum
that may be recovered by the owner or
shipper for the loss, destruction, or
deterioration of the goods is valid, if it
is reasonable and just under the
circumstances, and has been freely
and fairly agreed upon.
Such limited-liability clause has also been
consistently upheld by this Court in a number
of cases.3 Thus, inSea Land Service, Inc. vs.
Intermediate Appellate Court 4, we ruled:
It seems clear that even if said section
4 (5) of the Carriage of Goods by Sea
Act did not exist, the validity and
binding effect of the liability limitation
clause in the bill of lading here are
nevertheless fully sustainable on the
basis alone of the cited Civil Code
Provisions. That said stipulation is just
and reasonable is arguable from the
fact that it echoes Art. 1750 itself in
providing a limit to liability only if a
greater value is not declared for the
shipment in the bill of lading. To hold
otherwise would amount to questioning
the justness and fairness of the law
itself, and this the private respondent
does not pretend to do. But over and
above that consideration, the just and
reasonable character of such
stipulation is implicit in it giving the
shipper or owner the option of avoiding
231
 accrual of liability limitation by the
simple and surely far from onerous
expedient of declaring the nature and
value of the shipment in the bill of
lading.
Pursuant to the afore-quoted provisions of law,
it is required that the stipulation limiting the
common carrier's liability for loss must be
"reasonable and just under the circumstances,
and has been freely and fairly agreed upon."
The bill of lading subject of the present
controversy specifically provides, among
others:
18. All claims for which the carrier may
be liable shall be adjusted and settled
on the basis of the shipper's net
invoice cost plus freight and insurance
premiums, if paid, and in no event shall
the carrier be liable for any loss of
possible profits or any consequential
loss.
The carrier shall not be liable for any
loss of or any damage to or in any
connection with, goods in an amount
exceeding One Hundred thousand Yen
in Japanese Currency (Y100,000.00)
or its equivalent in any other currency
per package or customary freight unit
(whichever is least)unless the value of
the goods higher than this amount is
declared in writing by the shipper
before receipt of the goods by the
carrier and inserted in the Bill of
Lading and extra freight is paid as
required. (Emphasis supplied)
The above stipulations are, to our mind,
reasonable and just. In the bill of lading, the
carrier made it clear that its liability would only
be up to One Hundred Thousand
(Y100,000.00) Yen. However, the shipper,
Maruman Trading, had the option to declare a
higher valuation if the value of its cargo was
higher than the limited liability of the carrier.
Considering that the shipper did not declare a
higher valuation, it had itself to blame for not
complying with the stipulations.
The trial court's ratiocination that private
respondent could not have "fairly and freely"
agreed to the limited liability clause in the bill
of lading because the said conditions were
printed in small letters does not make the bill
of lading invalid.
We ruled in PAL, Inc. vs. Court of
Appeals5 that the "jurisprudence on the matter
reveals the consistent holding of the court that
contracts of adhesion are not invalid per
se and that it has on numerous occasions
upheld the binding effect thereof." Also,
in Philippine American General Insurance Co.,
Inc. vs. Sweet Lines, Inc.  6 this Court,
speaking through the learned Justice Florenz
D. Regalado, held:
. . . Ong Yiu vs. Court of Appeals, et.
al., instructs us that "contracts of
adhesion wherein one party imposes a
ready-made form of contract on the
other . . . are contracts not entirely
prohibited. The one who adheres to
the contract is in reality free to reject it
entirely; if the adheres he gives his
consent." In the present case, not
even an allegation of ignorance of a
party excuses non-compliance with the
contractual stipulations since the
responsibility for ensuring full
comprehension of the provisions of a
contract of carriage devolves not on
the carrier but on the owner, shipper,
or consignee as the case may be.
(Emphasis supplied)
It was further explained in Ong Yiu vs.
Court of Appeals 7 that stipulations in
contracts of adhesion are valid and
binding.
While it may be true that petitioner had
not signed the plane ticket . . ., he is
nevertheless bound by the provisions
thereof. "Such provisions have been
held to be a part of the contract of
carriage, and valid and binding upon
the passenger regardless of the latter's
lack of knowledge or assent to the
regulation." It is what is known as a
contract of "adhesion," in regards
which it has been said that contracts of
adhesion wherein one party imposes a
ready-made form of contract on the
other, as the plane ticket in the case at
bar, are contracts not entirely
prohibited. The one who adheres to
the contract is in reality free to reject it
entirely; if he adheres, he gives his
consent. . . ., a contract limiting liability
231
 upon an agreed valuation does not
offend against the policy of the law
forbidding one from contracting against
his own negligence. (Emphasis
supplied)
Greater vigilance, however, is required of the
courts when dealing with contracts of adhesion
in that the said contracts must be carefully
scrutinized "in order to shield the unwary (or
weaker party) from deceptive schemes
contained in ready-made covenants," 8 such as
the bill of lading in question. The stringent
requirement which the courts are enjoined to
observe is in recognition of Article 24 of the
Civil Code which mandates that "(i)n all
contractual, property or other relations, when
one of the parties is at a disadvantage on
account of his moral dependence, ignorance,
indigence, mental weakness, tender age or
other handicap, the courts must be vigilant for
his protection."
The shipper, Maruman Trading, we assume,
has been extensively engaged in the trading
business. It can not be said to be ignorant of
the business transactions it entered into
involving the shipment of its goods to its
customers. The shipper could not have known,
or should know the stipulations in the bill of
lading and there it should have declared a
higher valuation of the goods shipped.
Moreover, Maruman Trading has not been
heard to complain that it has been deceived or
rushed into agreeing to ship the cargo in
petitioner's vessel. In fact, it was not even
impleaded in this case.
The next issue to be resolved is whether or not
private respondent, as consignee, who is not a
signatory to the bill of lading is bound by the
stipulations thereof.
Again, in Sea-Land Service, Inc. vs.
Intermediate Appellate Court (supra), we held
that even if the consignee was not a signatory
to the contract of carriage between the shipper
and the carrier, the consignee can still be
bound by the contract. Speaking through Mr.
Chief Justice Narvasa, we ruled:
To begin with, there is no question of
the right, in principle, of a consignee in
a bill of lading to recover from the
carrier or shipper for loss of, or
damage to goods being transported
under said bill, although that document
may have been-as in practice it
oftentimes is-drawn up only by
the consignor and the carrier without
the intervention of the onsignee. . . . .
. . . the right of a party in the same
situation as respondent here, to
recover for loss of a shipment
consigned to him under a bill of lading
drawn up only by and between the
shipper and the carrier, springs from
either a relation of agency that may
exist between him and the shipper or
consignor, or his status as stranger in
whose favor some stipulation is made
in said contract, and who becomes a
party thereto when he demands
fulfillment of that stipulation, in this
case the delivery of the goods or cargo
shipped. In neither capacity can he
assert personally, in bar to any
provision of the bill of lading, the
alleged circumstance that fair and free
agreement to such provision was
vitiated by its being in such fine print
as to be hardly readable.
Parenthetically, it may be observed
that in one comparatively recent case
(Phoenix Assurance Company vs.
Macondray & Co., Inc., 64 SCRA 15)
where this Court found that a similar
package limitation clause was "printed
in the smallest type on the back of the
bill of lading," it nonetheless ruled that
the consignee was bound thereby on
the strength of authority holding that
such provisions on liability limitation
are as much a part of a bill of lading as
through physically in it and as though
placed therein by agreement of the
parties.
There can, therefore, be no doubt or
equivocation about the validity and
enforceability of freely-agreed-upon
stipulations in a contract of carriage or
bill of lading limiting the liability of the
carrier to an agreed valuation unless
the shipper declares a higher value
and inserts it into said contract or bill.
This proposition, moreover, rests upon
an almost uniform weight of authority.
(Emphasis supplied).
When private respondent formally claimed
reimbursement for the missing goods from
petitioner and subsequently filed a case
231
against the latter based on the very same bill
of lading, it (private respondent) accepted the
provisions of the contract and thereby made
itself a party thereto, or at least has come to
court to enforce it.9 Thus, private respondent
cannot now reject or disregard the carrier's
limited liability stipulation in the bill of lading. In
other words, private respondent is bound by
the whole stipulations in the bill of lading and
must respect the same.
Private respondent, however, insists that the
carrier should be liable for the full value of the
lost cargo in the amount of Y1,552,500.00,
considering that the shipper, Maruman
Trading, had "fully declared the shipment . . .,
the contents of each crate, the dimensions,
weight and value of the contents," 10 as shown
in the commercial Invoice No. MTM-941.
This claim was denied by petitioner,
contending that it did not know of the contents,
quantity and value of "the shipment which
consisted of three pre-packed crates
described in Bill of Lading No. NGO-53MN
merely as '3 CASES SPARE PARTS.'" 11
The bill of lading in question confirms
petitioner's contention. To defeat the carrier's
limited liability, the aforecited Clause 18 of the
bill of lading requires that the shipper should
have declared in writing a higher valuation of
its goods before receipt thereof by the carrier
and insert the said declaration in the bill of
lading, with extra freight paid. These
requirements in the bill of lading were never
complied with by the shipper, hence, the
liability of the carrier under the limited liability
clause stands. The commercial Invoice No.
MTM-941 does not in itself sufficiently and
convincingly show that petitioner has
knowledge of the value of the cargo as
contended by private respondent. No other
evidence was proffered by private respondent
to support is contention. Thus, we are
convinced that petitioner should be liable for
the full value of the lost cargo.
In fine, the liability of petitioner for the loss of
the cargo is limited to One Hundred Thousand
(Y100,000.00) Yen, pursuant to Clause 18 of
the bill of lading.
WHEREFORE, the decision of the Court of
Appeals dated June 14, 1995 in C.A.-G.R. CV
No. 42803 is hereby REVERSED and SET
ASIDE.
SO ORDERED.
Regalado, Melo, Puno and Mendoza, JJ.,
concur.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION 
G.R. No. 80256 October 2, 1992
BANKERS & MANUFACTURERS
ASSURANCE CORP., petitioner, 
vs.
COURT OS APPEALS, F. E. ZUELLIG &
CO., INC. and E. RAZON, INC., respondents.
MELO, J.:
After the Court of Appeals in CA-G.R. CV No.
08226 (July 8, 1987, Kapunan, Puno (P),
Marigomen, JJ.) affirmed the dismissal by
Branch XVI of the Regional Trial Court of
Manila of petitioner's complaint for recovery of
the amount it had paid its insured concerning
the loss of a portion of a shipment, petitioner
has interposed the instant petition for review
on certiorari.
Petitioner presents the following bare
operative facts: 108 cases of copper tubings
were imported by Ali Trading Company. The
tubings were insured by petitioner and arrived
in Manila on board and vessel S/S "Oriental
Ambassador" on November 4, 1978, and
turned over the private respondent E. Razon,
the Manila arrastre operator upon discharge at
the waterfront. The carrying vessel is
represented in the Philippines by its agent, the
other private respondent, F. E. Zuellig and
Co., Inc., Upon inspection by the importer, the
shipment was allegedly found to have
sustained loses by way of theft and pilferage
for which petitioner, as insurer, compensated
the importer in the amount of P31,014.00.
Petitioner, in subrogation of the importer-
consignee and on the basis of what it asserts
had been already established — that a portion
of that shipment was lost through theft and
pilferage — forthwith concludes that the
burden of proof of proving a case of non-
liability shifted to private respondents, one of
whom, the carrier, being obligated to exercise
231
extraordinary diligence in the transport and
care of the shipment. The implication of
petitioner's statement is that private
respondents have not shown why they are not
liable. The premises of the argument of
petitioner may be well-taken but the
conclusions are not borne out or supported by
the record.
It must be underscored that the shipment
involved in the case at bar was
"containerized". The goods under this
arrangement are stuffed, packed, and loaded
by the shipper at a place of his choice, usually
his own warehouse, in the absence of the
carrier. The container is sealed by the shipper
and thereafter picked up by the carrier.
Consequently, the recital of the bill of lading
for goods thus transported ordinarily would
declare "Said to Contain", "Shipper's Load and
Count", "Full Container Load", and the amount
or quantity of goods in the container in a
particular package is only prima
facie evidence of the amount or quantity which
may be overthrown by parol evidence.
A shipment under this arrangement is not
inspected or inventoried by the carrier whose
duty is only to transport and deliver the
containers in the same condition as when the
carrier received and accepted the containers
for transport. In the case at bar, the copper
tubings were placed in three containers. Upon
arrival in Manila on November 4, 1978, the
shipment was discharged in apparent good
order and condition and from the pier's
docking apron, the containers were shifted to
the container yard of Pier 3 for safekeeping.
Three weeks later, one of the container vans,
said to contain 19 cases of the cargo, was
"stripped" in the presence of petitioner's
surveyors, and three cases were found to be
in bad order. The 19 cases of the van stripped
were then kept inside Warehouse No. 3 of Pier
3 pending delivery. It should be stressed at
this point, that the three cases found in bad
order are not the cases for which the claim
below was presented, for although the three
cases appeared to be in bad order, the
contents remained good and intact.
The two other container vans were not moved
from the container yard and they
were not stripped. On December 8, 1978, the
cargo was released to the care of the
consignee's authorized customs broker, the
RGS Customs Brokerage. The broker,
accepting the shipment without exception as to
bad order, caused the delivery of the vans to
the consignee's warehouse in Makati. It was at
that place, when the contents of the two
containers were removed and inspected, that
petitioner's surveyors reported, that checked
against the packing list, the shipment in
Container No. OOLU2552969 was short of
seven cases (see p. 18, Rollo).
Under the prevailing circumstances, it is
therefore, not surprising why the Court of
Appeals in sustaining the trial court, simply
quoted the latter, thus:
It must be also considered that the
subject container was not stripped of
its content at the pier zone. The two
unstripped containers (together with
the 19 cases removed from the
stripped third container) were delivered
to, and received by, the customs
broker for the consignee without any
exception or notation of bad order of
shortlanding (Exhs. 1, 2 and 3 Vessel).
If there was any suspicion or indication
of irregularity or theft or pilferage,
plaintiff or consignee's representatives
should have noted the same on the
gate passes or insisted that some form
of protest form part of the documents
concerning the shipment. Yet, no such
step was taken. The shipment appears
to have been delivered to the customs
broker in good order and condition and
complete save for the three cases
noted as being apparently in bad
order.
Consider further that the stripping of
the subject container was done at the
consignee's warehouse where,
according to plaintiff's surveyor, the
loss of the seven cases was
discovered. The evidence is not settled
as whether the defendants'
representative were notified of, and
were present at, the unsealing and
opening of the container in the bodega.
Nor is the evidence clear how much
time elapsed between the release of
the shipment from the pier and the
stripping of the containers at
consignee bodega. All these fail to
discount the possibility that the loss in
question could have taken place after
231
 the container had left the pier. (pp. 20-
21, Rollo)
Verily, if any of the vans found in bad
condition, or if any inspection of the goods was
to be done in order to determine the condition
thereof, the same should have been done at
the pierside, the pier warehouse, or at any
time and place while the vans were under the
care and custody of the carrier or of the
arrastre operator. Unfortunately for petitioner,
even as one of the three vans was inspected
and stripped, the two other vans and the
contents of the owner previously stripped were
accepted without exception as to any
supposed bad order or condition by petitioner's
own broker. To all appearances, therefore, the
shipment was accepted by petitioner in good
order.
It logically follows that the case at bar presents
no occasion for the necessity of discussing the
diligence required of a carrier or of the theory
of prima facie liability of the carrier, for from all
indications, the shipment did not suffer loss or
damage while it was under the care of the
carrier, or of the arrastre operator, it must be
added.
WHEREFORE, the petition is hereby
DISMISSED and the decision of the Court of
Appeals AFFIRMED, with costs against
petitioner.
SO ORDERED.
Bidin, Davide, Jr. and Romero, JJ., concur.
Gutierrez, Jr., is on leave.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 125524           August 25, 1999
BENITO MACAM doing business under the
name and style BEN-MAC
ENTERPRISES, petitioner,  thus allegedly constrained to return the
vs.
COURT OF APPEALS, CHINA OCEAN
SHIPPING CO., and/or WALLEM
PHILIPPINES SHIPPING, INC.,respondents.
BELLOSILLO, J.:
On 4 April 1989 petitioner Benito Macam,
doing business under the name and style Ben-
Mac Enterprises, shipped on board the
vessel Nen Jiang, owned and operated by
respondent China Ocean Shipping Co.,
through local agent respondent Wallem
Philippines Shipping, Inc. (hereinafter
WALLEM), 3,500 boxes of watermelons
valued at US$5,950.00 covered by Bill of
Lading No. HKG 99012 and exported through
Letter of Credit No. HK 1031/30 issued by
National Bank of Pakistan, Hongkong
(hereinafter PAKISTAN BANK) and 1,611
boxes of fresh mangoes with a value of
US$14,273.46 covered by Bill of Lading No.
HKG 99013 and exported through Letter of
Credit No. HK 1032/30 also issued by
PAKISTAN BANK. The Bills of Lading
contained the following pertinent provision:
"One of the Bills of Lading must be
surrendered duly endorsed in exchange for the
goods or delivery order. 1 The shipment was
bound for Hongkong with PAKISTAN BANK as
consignee and Great Prospect Company of
Kowloon, Hongkong (hereinafter GPC) as
notify party.
On 6 April 1989, per letter of credit
requirement, copies of the bills of lading and
commercial invoices were submitted to
petitioner's depository bank, Consolidated
Banking Corporation (hereinafter
SOLIDBANK), which paid petitioner in
advance the total value of the shipment of
US$20,223.46.1âwphi1.nêt
Upon arrival in Hongkong, the shipment was
delivered by respondent WALLEM directly to
GPC, not to PAKISTAN BANK, and without
the required bill of lading having been
surrendered. Subsequently, GPC failed to pay
PAKISTAN BANK such that the latter, still in
possession of the original bills of lading,
refused to pay petitioner through SOLIDBANK.
Since SOLIDBANK already pre-paid petitioner
the value of the shipment, it demanded
payment from respondent WALLEM through
five (5) letters but was refused. Petitioner was
amount involved to SOLIDBANK, then
demanded payment from respondent
WALLEM in writing but to no avail.
231
On 25 September 1991 petitioner sought
collection of the value of the shipment of
US$20,223.46 or its equivalent of P546,033.42
from respondents before the Regional Trial
Court of Manila, based on delivery of the
shipment to GPC without presentation of the
bills of lading and bank guarantee.
Respondents contended that the shipment
was delivered to GPC without presentation of
the bills of lading and bank guarantee per
request of petitioner himself because the
shipment consisted of perishable goods. The
telex dated 5 April 1989 conveying such
request read —
AS PER SHPR'S REQUEST KINDLY
ARRANGE DELIVERY OF A/M SHIPT
TO RESPECTIVE CNEES WITHOUT
PRESENTATION OF OB/L2 and bank
guarantee since for prepaid shipt ofrt
charges already fully paid our end . . . .
3 and to implement the instruction, the delivery
Respondents explained that it is a standard
maritime practice, when immediate delivery is
of the essence, for the shipper to request or
instruct the carrier to deliver the goods to the
buyer upon arrival at the port of destination
without requiring presentation of the bill of
lading as that usually takes time. As proof
thereof, respondents apprised the trial court
that for the duration of their two-year business
relationship with petitioner concerning similar
shipments to GPC deliveries were effected
without presentation of the bills of
lading.4 Respondents advanced next that the
refusal of PAKISTAN BANK to pay the letters
of credit to SOLIDBANK was due to the latter's
failure to submit a Certificate of Quantity and
Quality. Respondents counterclaimed for
attorney's fees and costs of suit.
On 14 May 1993 the trial court ordered
respondents to pay, jointly and severally, the
following amounts: (1) P546,033.42 plus legal
interest from 6 April 1989 until full payment; (2)
P10,000.00 as attorney's fees; and, (3) the
costs. The counterclaims were dismissed for
lack of merit.5 The trial court opined that
respondents breached the provision in the bill
of lading requiring that "one of the Bills of
Lading must be surrendered duly endorsed in
exchange for the goods or delivery order,"
when they released the shipment to GPC
without presentation of the bills of lading and
the bank guarantee that should have been
issued by PAKISTAN BANK in lieu of the bills
of lading. The trial court added that the
shipment should not have been released to
GPC at all since the instruction contained in
the telex was to arrange delivery to the
respective consignees and not to any party.
The trial court observed that the only role of
GPC in the transaction as notify party was
precisely to be notified of the arrival of the
cargoes in Hongkong so it could in turn duly
advise the consignee.
Respondent Court of Appeals appreciated the
evidence in a different manner. According to it,
as established by previous similar transactions
between the parties, shipped cargoes were
sometimes actually delivered not to the
consignee but to notify party GPC without
need of the bills of lading or bank
guarantee.6 Moreover, the bills of lading were
viewed by respondent court to have been
properly superseded by the telex instruction
of the shipment must be to GPC, the real
importer/buyer of the goods as shown by the
export invoices,7 and not to PAKISTAN BANK
since the latter could very well present the bills
of lading in its possession; likewise, if it were
the PAKISTAN BANK to which the cargoes
were to be strictly delivered it would no longer
be proper to require a bank guarantee.
Respondent court noted that besides, GPC
was listed as a consignee in the telex. It
observed further that the demand letter of
petitioner to respondents never complained of
misdelivery of goods. Lastly, respondent court
found that petitioner's claim of having
reimbursed the amount involved to
SOLIDBANK was unsubstantiated. Thus, on
13 March 1996 respondent court set aside the
decision of the trial court and dismissed the
complaint together with the counterclaims. 8 On
5 July 1996 reconsideration was denied. 9
Petitioner submits that the fact that the
shipment was not delivered to the consignee
as stated in the bill of lading or to a party
designated or named by the consignee
constitutes a misdelivery thereof. Moreover,
petitioner argues that from the text of the telex,
assuming there was such an instruction, the
delivery of the shipment without the required
bill of lading or bank guarantee should be
made only to the designated consignee,
referring to PAKISTAN BANK.
231
We are not persuaded. The submission of
petitioner that "the fact that the shipment was
not delivered to the consignee as stated in the
Bill of Lading or to a party designated or
named by the consignee constitutes a
misdelivery thereof" is a deviation from his
cause of action before the trial court. It is clear
from the allegation in his complaint that it does
not deal with misdelivery of the cargoes but of
delivery to GPC without the required bills of
lading and bank guarantee —
6. The goods arrived in Hongkong and
were released by the defendant
Wallem directly to the buyer/notify
party, Great Prospect Company and
not to the consignee, the National
Bank of Pakistan, Hongkong, without
the required bills of lading and bank
guarantee for the release of the
shipment issued by the consignee of
the goods . . . .10
Even going back to an event that transpired
prior to the filing of the present case or when
petitioner wrote respondent WALLEM
demanding payment of the value of the
cargoes, misdelivery of the cargoes did not
come into the picture —
We are writing you on behalf of our
client, Ben-Mac Enterprises who
informed us that Bills of Lading No.
99012 and 99013 with a total value of
US$20,223.46 were released to Great
Prospect, Hongkong without the
necessary bank guarantee. We were
further informed that the consignee of
the goods, National Bank of Pakistan,
Hongkong, did not release or endorse
the original bills of lading. As a result
thereof, neither the consignee,
National Bank of Pakistan, Hongkong,
nor the importer, Great Prospect
Company, Hongkong, paid our client
for the goods . . . .11
At any rate, we shall dwell on petitioner's
submission only as a prelude to our discussion
on the imputed liability of respondents
concerning the shipped goods. Article 1736 of
the Civil Code provides —
Art. 1736. The extraordinary
responsibility of the common carriers
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. 12
We emphasize that the extraordinary
responsibility of the common carriers lasts until
actual or constructive delivery of the cargoes
to the consignee or to the person who has a
right to receive them. PAKISTAN BANK was
indicated in the bills of lading as consignee
whereas GPC was the notify party. However,
in the export invoices GPC was clearly named
as buyer/importer. Petitioner also referred to
GPC as such in his demand letter to
respondent WALLEM and in his complaint
before the trial court. This premise draws us to
conclude that the delivery of the cargoes to
GPC as buyer/importer which, conformably
with Art. 1736 had, other than the consignee,
the right to receive them14 was proper.
The real issue is whether respondents are
liable to petitioner for releasing the goods to
GPC without the bills of lading or bank
guarantee.
Respondents submitted in evidence a telex
dated 5 April 1989 as basis for delivering the
cargoes to GPC without the bills of lading and
bank guarantee. The telex instructed delivery
of various shipments to the respective
consignees without need of presenting the bill
of lading and bank guarantee per the
respective shipper's request since "for prepaid
shipt ofrt charges already fully paid." Petitioner
was named therein as shipper and GPC as
consignee with respect to Bill of Lading Nos.
HKG 99012 and HKG 99013. Petitioner
disputes the existence of such instruction and
claims that this evidence is self-serving.
From the testimony of petitioner, we gather
that he has been transacting with GPC as
buyer/importer for around two (2) or three (3)
years already. When mangoes and
watermelons are in season, his shipment to
GPC using the facilities of respondents is
twice or thrice a week. The goods are released
to GPC. It has been the practice of petitioner
to request the shipping lines to immediately
release perishable cargoes such as
watermelons and fresh mangoes through
telephone calls by himself or his "people." In
231
transactions covered by a letter of credit, bank
guarantee is normally required by the shipping
lines prior to releasing the goods. But for
buyers using telegraphic transfers, petitioner
dispenses with the bank guarantee because
the goods are already fully paid. In his several
years of business relationship with GPC and
respondents, there was not a single instance
when the bill of lading was first presented
before the release of the cargoes. He admitted
the existence of the telex of 3 July 1989
containing his request to deliver the shipment
to the consignee without presentation of the
bill of lading15 but not the telex of 5 April 1989
because he could not remember having made
such request.
Consider pertinent portions of petitioner's
testimony —
Q: Are you aware of any document
which would indicate or show that your
request to the defendant Wallem for
the immediate release of your fresh
fruits, perishable goods, to Great
Prospect without the presentation of
the original Bill of Lading?
A: Yes, by telegraphic transfer, which
means that it is fully paid. And I
requested immediate release of the
cargo because there was immediate
payment.
Q: And you are referring, therefore, to
this copy Telex release that you
mentioned where your Company's
name appears Ben-Mac?
Atty. Hernandez: Just for the
record, Your Honor, the
witness is showing a Bill of
Lading referring to SKG (sic)
93023 and 93026 with Great
Prospect Company.
Atty. Ventura:
Q: Is that the telegraphic transfer?
A: Yes, actually, all the shippers
partially request for the immediate
release of the goods when they are
perishable. I thought Wallem Shipping
Lines is not neophyte in the business.
As far as LC is concerned, Bank
guarantee is needed for the immediate
release of the goods . . . .15
Q: Mr. Witness, you testified that if is
the practice of the shipper of the
perishable goods to ask the shipping
lines to release immediately the
shipment. Is that correct?
A: Yes, sir.
Q: Now, it is also the practice of the
shipper to allow the shipping lines to
release the perishable goods to the
importer of goods without a Bill of
Lading or Bank guarantee?
A: No, it cannot be without the Bank
Guarantee.
Atty. Hernandez:
Q: Can you tell us an instance when
you will allow the release of the
perishable goods by the shipping lines
to the importer without the Bank
guarantee and without the Bill of
Lading?
A: As far as telegraphic transfer is
concerned.
Q: Can you explain (to) this Honorable
Court what telegraphic transfer is?
A: Telegraphic transfer, it means
advance payment that I am already
fully paid . . . .
Q: Mr. Macam, with regard to Wallem
and to Great Prospect, would you
know and can you recall that any of
your shipment was released to Great
Prospect by Wallem through
telegraphic transfer?
A: I could not recall but there were so
many instances sir.
Q: Mr. Witness, do you confirm before
this Court that in previous shipments of
your goods through Wallem, you
requested Wallem to release
immediately your perishable goods to
the buyer?
231
 A: Yes, that is the request of the
shippers of the perishable goods . . . .16
Q: Now, Mr. Macam, if you request the
Shipping Lines for the release of your
goods immediately even without the
presentation of OBL, how do you
course it?
A: Usually, I call up the Shipping Lines,
sir . . . .17
Q: You also testified you made this
request through phone calls. Who of
you talked whenever you made such
phone call?
A: Mostly I let my people to call, sir.
(sic)
Q: So everytime you made a shipment
on perishable goods you let your
people to call? (sic)
A: Not everytime, sir.
Q: You did not make this request in
writing?
A: No, sir. I think I have no written
request with Wallem . . . .18
Against petitioner's claim of "not remembering"
having made a request for delivery of subject
cargoes to GPC without presentation of the
bills of lading and bank guarantee as reflected
in the telex of 5 April 1989 are damaging
disclosures in his testimony. He declared that
it was his practice to ask the shipping lines to
immediately release shipment of perishable
goods through telephone calls by himself or
his "people." He no longer required
presentation of a bill of lading nor of a bank
guarantee as a condition to releasing the
goods in case he was already fully paid. Thus,
taking into account that subject shipment
consisted of perishable goods and
SOLIDBANK pre-paid the full amount of the
value thereof, it is not hard to believe the claim
of respondent WALLEM that petitioner indeed
requested the release of the goods to GPC
without presentation of the bills of lading and
bank guarantee.
The instruction in the telex of 5 April 1989 was
"to deliver the shipment to respective
consignees." And so petitioner argues that,
assuming there was such an instruction, the
consignee referred to was PAKISTAN BANK.
We find the argument too simplistic.
Respondent court analyzed the telex in its
entirety and correctly arrived at the conclusion
that the consignee referred to was not
PAKISTAN BANK but GPC —
There is no mistake that the originals
of the two (2) subject Bills of Lading
are still in the possession of the
Pakistani Bank. The appealed decision
affirms this fact. Conformably, to
implement the said telex instruction,
the delivery of the shipment must be to
GPC, the notify party or real
importer/buyer of the goods and not
the Pakistani Bank since the latter can
very well present the original Bills of
Lading in its possession. Likewise, if it
were the Pakistani Bank to whom the
cargoes were to be strictly delivered, it
will no longer be proper to require a
bank guarantee as a substitute for the
Bill of Lading. To construe otherwise
will render meaningless the telex
instruction. After all, the cargoes
consist of perishable fresh fruits and
immediate delivery thereof to the
buyer/importer is essentially a factor to
reckon with. Besides, GPC is listed as
one among the several consignees in
the telex (Exhibit 5-B) and the
instruction in the telex was to arrange
delivery of A/M shipment (not any
party) to respective consignees without
presentation of OB/L and bank
guarantee . . . .20
Apart from the foregoing obstacles to the
success of petitioner's cause, petitioner failed
to substantiate his claim that he returned to
SOLIDBANK the full amount of the value of
the cargoes. It is not far-fetched to entertain
the notion, as did respondent court, that he
merely accommodated SOLIDBANK in order
to recover the cost of the shipped cargoes
from respondents. We note that it was
SOLIDBANK which initially demanded
payment from respondents through five (5)
letters. SOLIDBANK must have realized the
absence of privity of contract between itself
and respondents. That is why petitioner
conveniently took the cudgels for the bank.
231
In view of petitioner's utter failure to establish
the liability of respondents over the cargoes,
no reversible error was committed by
respondent court in ruling against him.
WHEREFORE, the petition is DENIED. The
decision of respondent Court of Appeals of 13
March 1996 dismissing the complaint of
petitioner Benito Macam and the
counterclaims of respondents China Ocean
Shipping Co. and/or Wallem Philippines
Shipping, Inc., as well as its resolution of 5
July 1996 denying reconsideration, is
AFFIRMED.1âwphi1.nêt
SO ORDERED.
Mendoza, Quisumbing and Buena, JJ.,
concur.
FIRST DIVISION
G.R. No. 190271, September 14, 2016
TRANSIMEX CO., Petitioner,
v.
MAFRE ASIAN INSURANCE
CORP., Respondent.
DECISION
SERENO, C.J.:
This case involves a money claim filed by an
insurance company against the ship agent of a
common carrier. The dispute stemmed from
an alleged shortage in a shipment of fertilizer
delivered by the carrier to a consignee. Before
this Court, the ship agent insists that the
shortage was caused by bad weather, which
must be considered either a storm under
Article 1734 of the Civil Code or a peril of the
sea under the Carriage of Goods by Sea Act
(COGSA).
In the Decision2 and the Resolution3 assailed
in this Petition for Review on Certiorari,4 the
Court of Appeals (CA) affirmed the
Decision5 of the Regional Trial Court (RTC).
The RTC ordered petitioner Transimex Co.
(Transimex) to pay respondent Mafre Asian
Insurance Corp.6 the amount of P1,617,527.37
in addition to attorney's fees and costs.
Petitioner is the local ship agent of the vessel,
while respondent is the subrogee of Fertiphil
Corporation (Fertiphil),7 the consignee of a
shipment of Prilled Urea Fertilizer transported
by M/V Meryem Ana.
FACTUAL ANTECEDENTS
On 21 May 1996, M/V Meryem Ana received a
shipment consisting of 21,857 metric tons of
Prilled Urea Fertilizer from Helm Duengemittel
GMBH at Odessa, Ukraine. 8 The shipment
was covered by two separate bills of lading
and consigned to Fertiphil for delivery to two
ports - one in Poro Point, San Fernando, La
Union; and the other in Tabaco,
Albay.9 Fertiphil insured the cargo against all
risks under Marine Risk Note Nos. MN-MAR-
HO-0001341 and MN-MAR-HO-0001347
issued by respondent.10chanrobleslaw
On 20 June 1996, M/V Meryem Ana arrived at
Poro Point, La Union, and discharged
14,339.507 metric tons of fertilizer under the
first bill of lading.11 The ship sailed on to
Tabaco, Albay, to unload the remainder of the
cargo. The fertilizer unloaded at Albay
appeared to have a gross weight of 7,700
metric tons.12 The present controversy involves
only this second delivery.
As soon as the vessel docked at the Tabaco
port, the fertilizer was bagged and stored
inside a warehouse by employees of the
consignee.13 When the cargo was
subsequently weighed, it was discovered that
only 7,350.35 metric tons of fertilizer had been
delivered.14 Because of the alleged shortage of
349.65 metric tons, Fertiphil filed a claim with
respondent for P1,617,527.37, 15 which was
found compensable.16
After paying the claim of Fertiphil, respondent
231
demanded reimbursement from petitioner on
the basis of the right of subrogation. The claim
was denied, prompting respondent to file a
Complaint with the RTC for recovery of sum of
money.17 In support of its claim, respondent
presented a Report of Survey 18 and a
Certification19 from David Cargo Survey
Services to prove the shortage. In addition,
respondent submitted an Adjustment
Report20 prepared by Adjustment Standards
Corporation (ASC) to establish the outturn
quantity and condition of the fertilizer
discharged from the vessel at the Tabaco
port.21 In the report, the adjuster also stated
that the shortage was attributable to the
melting of the fertilizer while inside the
hatches, when the vessel took on water
because of the bad weather experienced at
sea.22 Two witnesses were then presented by
respondent to buttress its documentary
evidence.23
Petitioner, on the other hand, denied that there
was loss or damage to the cargo. 24 It
submitted survey certificates and presented
the testimony of a marine surveyor to prove
that there was, in fact, an excess of 3.340
metric tons of fertilizer delivered to the
consignee.25cralawred Petitioner also alleged
that defendants had exercised extraordinary
diligence in the transport and handling of the
cargo.26
THE RTC RULING
The RTC ruled in favor of respondent and
ordered petitioner to pay the claim of
P1,617,527.37. In its Decision, 27 the trial court
found that there was indeed a shortage in the
cargo delivered, for which the common carrier
must be held responsible under Article 1734 of
the Civil Code. The RTC also refused to give
credence to petitioner's claim of overage and
noted that the presumption of fault and/or
negligence on the part of the carrier remained
unrebutted. The trial court explained:
The defendants' defense is that there was no
loss/damage to the cargo because instead of a
shortage there was an overage of 3.340,
invoking the findings of Raul Pelagio, a marine
surveyor connected with Survey Specialists,
Inc. whose services were engaged by the
defendants. However, the Court notes that
what was loaded in the vessel M/V Meryem
Ana at Odessa, Ukraine on May 21, 1996 was
21,857 metric tons of prilled urea fertilizer
(Draft Survey Report, Exhibit F). How the
quantity loaded had increased to 21,860.34
has not been explained by the defendants.
Thus, the Court finds incredible the testimony
of Raul Pelagio that he found an overage of
3.340 metric tons. The Court is inclined to give
credence to the testimonies of witness Jaime
David, the cargo surveyor engaged by
consignee Fertiphil Corporation, and witness
Fabian Bon, a cargo surveyor of Adjustment
Standards Corporation, whose services were
engaged by plaintiff Mafre Asian Insurance
Corporation, there being no reason for the
Court to disregard their findings which jibe with
one another.
Thus, it appears crystal clear that on the
vessel M/V Meryem Ana was loaded in bulk on
May 21, 1996 at Odessa, Ukraine a cargo
consisting of 21,857 metric tons of prilled urea
fertilizer bound for delivery at Poro Point, San
Fernando, La Union and at Tabaco, Albay;
that the cargo unloaded at said ports of
destination had a shortage of 349.65 metric
tons.
xxxx
As to the defense that defendants had
supposedly exercised extraordinary care and
diligence in the transport and handling of the
cargo, the Court finds that the evidence
presented by the defendants is absolutely and
completely bereft of anything to support their
claim of having exercised extraordinary care
and diligence.
Hence, the presumption of fault and/or
negligence as provided in Art. 1735 of the Civil
Code on the part of the defendants stands
unrebutted as against the latter. 28
THE CA RULING
The CA affirmed the ruling of the RTC and
denied petitioner's appeal. 29 After evaluating
the evidence presented during trial, the
appellate court found no reason to disturb the
trial court's conclusion that there was indeed a
shortage in the shipment.30
231
The CA also rejected the assertion that
petitioner was not a common
carrier.31 Because the latter offered services to
the public for the transport of goods in
exchange for compensation, it was considered
a common carrier in accordance with Article
1732 of the Civil Code. The CA further noted
that petitioner had already admitted this fact in
the Answer32 and even raised the defenses
usually invoked by common carriers during
trial and on appeal, i.e., the exercise of
extraordinary care and diligence, and
fortuitous event.33 These defenses were,
however, found unmeritorious:
Defendants-appellants claim that the loss was
due to a fortuitous event as the Survey Report
of Jaime David stated that during its voyage,
the vessel encountered bad weather. But to
excuse a common carrier fully of any liability,
Article 1739 of the Civil Code requires that the
fortuitous event must have been the proximate
and only cause of the loss. Moreover, it should
have exercised due diligence to prevent or
minimize the loss before, during and after the
occurrence of the fortuitous event.
xxxx
In the present case, defendants-appellants did
not present proof that the "bad weather" they
encountered was a "storm" as contemplated
by Article 1734(1). String winds are the
ordinary vicissitudes of a sea voyage. Even if
the weather encountered by the ship was to be
deemed a natural disaster under Article 1739
of the Civil Code, defendants-appellants failed
to show that such natural disaster or calamity
was the proximate and only cause of the loss.
The shortage must not have been caused or
worsened by human participation. The
defense of fortuitous event or natural disaster
cannot be successfully made when the injury
could have been avoided by human
precaution.34chanroblesvirtuallawlibrary
Petitioner moved for reconsideration of the CA
Decision, but the motion was denied. 35 Not
only did the Motion for Reconsideration lack
meit according to the appellate court; it was
also filed out of time.36
PROCEEDINGS BEFORE THIS COURT
On 3 December 2009, Transimex filed a
Petition for Review on Certiorari37 before this
Court praying for the reversal of the CA
Decision and Resolution.38 Petitioner asserts
that the lower courts erred in holding it liable
for the alleged shortage in the shipment of
fertilizer. While it no longer questions the
existence of the shortage, it claims that the
loss or damage was caused by bad
weather.39 It then insists that the dispute is
governed by Section 4 of COGSA, which
exempts the carrier from liability for any loss or
damage arising from "perils, dangers and
accidents of the sea.40
In its Comment,41 respondent maintains that
petitioner was correctly held liable for the
shortage of the cargo in accordance with the
Civil Code provisions on common carriers. 42 It
insists that the factual findings of the lower
courts must be respected43 particularly in this
case, since petitioner failed to timely appeal
the Decision of the CA.44
Petitioner, in its Reply,45 takes a position
different from its initial stance as to the law
applicable to the dispute. It concedes that the
Civil Code primarily governs its liability as a
carrier, with COGSA as a suppletory
source.46 Under both laws, petitioner contends
that it is exempt from liability, because
damage to the cargo was caused by the bad
weather encountered by the vessel while at
sea. This kind of weather supposedly qualifies
as a violent storm under the Civil Code; or as
a peril, danger or accident of the sea under
COGSA.47
ISSUES
The following issues are presented for
resolution by this Court:
1. Whether the CA Decision has become
final and executory
2. Whether the transaction is governed
by the provisions of the Civil Code on
common carriers or by the provisions
of COGSA
231
 3. Whether petitioner is liable for the loss
or damage sustained by the cargo
because of bad weather
OUR RULING
We DENY the Petition.
This Court finds that the CA Decision has
become final because of the failure of
petitioner to timely file a motion for
reconsideration. Furthermore, contrary to the
argument raised by the latter, there is
insufficient evidence to establish that the loss
or damage to the cargo was caused by a
storm or a peril of the sea.
The CA Decision has become final and
executory.
In the assailed Resolution, in which the CA
ruled that petitioner's Motion for
Reconsideration was filed late, it explained:
Defendants-appellants' motion for
reconsideration of the Court's Decision dated
August 7, 2009 was filed out of time, as based
on the reply letter dated October 13, 2009 of
the Chief, Administrative Unit, Office of the
Postmaster, Makati City, copy of said Decision
was received by defendants-appellants'
counsel on September 4, 2009, not September
14, 2009 as alleged in the motion for
reconsideration. Consequently, the subject
Decision dated August 27, 2009 had become
final and executory considering that the motion
for reconsideration was filed only on
September 29, 2009, beyond the fifteen (15)-
day reglementary period which lasted until
September 19, 2009.48
The Court agrees. The Certification issued by
the Office of the Postmaster of Makati, which
states that the Decision was received by
respondent's counsel on 4 September 2009, is
entitled to full faith and credence. In the
absence of contradictory evidence, the
presumption is that the postmaster has
regularly performed his duty.49 In this case,
there is no reason to doubt his statement as to
the date respondent received the CA Decision.
Significantly, Transimex failed to address this
matter in its Petition. While it continued to
allege that it received the CA Decision on 14
September 2009, it did not refute the finding of
the appellate court that the former's Motion for
Reconsideration had been filed late. It was
only after respondent again asserted the
finality of the CA Decision in its Comment did
petitioner attempt to explain the discrepancy:
x x x Apparently, the said Decision dated 27
August 2009 was delivered by the postman to
the guard on duty at the ground floor of the
building where undersigned counsel's office is
located. It was the guard on duty who received
the said decision on 4 September 2009 but it
was only on 14 September 2009 that
undersigned counsel actually received the said
decision. Hence, the date of receipt of the
decision should be reckoned from the date of
receipt by the counsel of the decision and not
from the date of receipt of the guard who is not
an employee of the law office of the
undersigned counsel.
This Court notes that the foregoing account
remains unsupported by evidence. The guard
on duty or any employee of the law firm could
have easily substantiated the explanation
offered by counsel for petitioner, but no
statement from any of them was ever
submitted. Since petitioner was challenging
the official statement of the Office of the
Postmaster of Makati on the matter, the former
had the burden of proving its assertions and
presenting countervailing evidence.
Unfounded allegations would not suffice.
In any event, this Court has decided to review
the merits of this case in the interest of justice.
After a judicious evaluation of the arguments
interposed by the parties, we find no reason to
reverse the CA Decision and Resolution.
The provisions of the Civil Code on
common carriers are applicable.
231

As previously discussed, petitioner initially
argued that the CA erred in applying the
provisions of the Civil Code to this case. It
insisted that the contract of carriage between
the parties was governed by COGSA, 50 the law
applicable to "all contracts for the carriage of
goods by sea to and from Philippine ports in
foreign trade."51 This assertion is bereft of
merit.
This Court upholds the ruling of the CA with
respect to the applicable law. As expressly
provided in Article 1753 of the Civil Code,
"[t]he 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." Since the cargo in this case
was transported from Odessa, Ukraine, to
Tabaco, Albay, the liability of petitioner for the
alleged shortage must be determined in
accordance with the provisions of the Civil
Code on common carriers. In Eastern
Shipping Lines, Inc. v. BPI/MS Insurance
Corp., the Court declared:
According to the New Civil Code, 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.52
Besides, petitioner itself later conceded in its
Reply that the Civil Code provisions on
common carriers are primarily applicable to
the present dispute, while COGSA only
applies in a suppletory manner. 53
Petitioner is liable for the shortage
incurred by the shipment.
Having settled the foregoing preliminary
issues, the only argument left for this Court to
resolve is petitioner's assertion that it is
exempt from liability for the loss or damage to
the cargo. As grounds for this exemption,
petitioner cites both the Civil Code and
COGSA, particularly the provisions absolving
a carrier from loss or damage sustained as the
result of a "storm" or a "peril of the sea."
In its Petition, Transimex summarizes the
testimony of one witness for respondent
supposedly proving that the shortage in the
shipment was caused by inclement weather
encountered by the vessel at sea. Petitioner
claims that this testimony proves that damage
to the cargo was the result of the melting of
the fertilizer after seawater entered Hatch No.
1 of the vessel as a result of the bad weather
conditions at sea:
The evidence for the respondent clearly
proves that the loss/damage/shortage
[suffered by] the cargo was caused by the bad
weather encountered by the vessel during the
voyage from Odessa, Ukraine to Poro Point,
San Fernando, La Union, wherein due to bad
weather[,] sea water found its way inside
Hatch No. 1 resulting in the wetting, melting
and discoloration of the prilled urea fertilizer.
The fact that sea water found its way inside
Hatch No. 1 was clearly testified to by the
witness for the respondent. Jaime R. Davis
testified that:
"He was present during the discharging
operation, that he saw the hatches opened
whereupon he noticed the presence of
water thereat; accordingly, he informed the
master of the vessel of the presence of
water at the hatches to which the master of
the vessel replied that on the way they
encountered bad weather."54 (Emphasis in
the original)
Petitioner also cites a portion of the
Adjustment Report submitted by respondent
during trial as proof that damage to the cargo
was caused by a storm:
How the sea water found its way inside Hatch
No. 1 was clearly explained by another
witness for the respondent by the name of
Fabian Bon who stated in his Adjustment as
follows:
231
Our inquiries disclosed that the master of the
vessel interviewed by the consignee's
surveyor (David Cargo Survey Services) that
during sailing from Odessa (Ukraine) bound to
Poro Point, San Fernando, La Union,
Philippines, the vessel encountered bad
weather on June 3, 1996 and was rolling
from starboard to portside top of the 1, 2, 3,
4, 5, 6 & 7 hatch covers and sea water were
washing over all main deck.
On the following day, June 4, 1996, wind
reading up to 40 knots and very high swells
were coming from south west direction.
The vessel was rolling and pitching
heavily. Heavy sea water were washing all
main deck and were jumping from main
deck to top of the seven (7) hatch covers.
As a result, the master filed a Marine Note
of Protest on June 19, 1996 at the Port of
Poro Point, San Fernando, La Union,
Philippines.55 (Emphases in the original)
The question before this Court therefore
comes down to whether there is sufficient
proof that the loss or damage incurred by the
cargo was caused by a "storm" or a "peril of
the sea."
We rule in the negative. As will be discussed,
petitioner failed to prove the existence of a
storm or a peril of the sea within the context of
Article 1734(1) of the Civil Code or Section
4(2)(c) of COGSA. Furthermore, there was no
sufficient proof that the damage to the
shipment was solely and proximately caused
by bad weather.
The presence of a "storm" or a "peril of the
sea" was not established.
It must be emphasized that not all instances of
bad weather may be categorized as "storms"
or "perils of the sea" within the meaning of the
provisions of the Civil Code and COGSA on
common carriers. To be considered absolutory
causes under either statute, bad weather
conditions must reach a certain threshold of
severity.
With respect to storms, this Court has
explained the difference between a storm and
ordinary weather conditions in Central
Shipping Co. Inc. v. Insurance Company of
North America:56
Nonetheless, to our mind it would not be
sufficient to categorize the weather condition
at the time as a "storm" within the absolutory
causes enumerated in the law. Significantly,
no typhoon was observed within the Philippine
area of responsibility during that period.
According to PAGASA, a storm has a wind
force of 48 to 55 knots, equivalent to 55 to
63 miles per hour or 10 to 11 in the
Beaufort Scale. The second mate of the
vessel stated that the wind was blowing
around force 7 to 8 on the Beaufort
Scale. Consequently, the strong winds
accompanying the southwestern monsoon
could not be classified as a "storm." Such
winds are the ordinary vicissitudes of a sea
voyage.57 (Emphases supplied; citations
omitted)
The phrase "perils of the sea" carries the same
connotation. Although the term has not been
definitively defined in Philippine jurisprudence,
courts in the United States of America
generally limit the application of the phrase to
weather that is "so unusual, unexpected and
catastrophic as to be beyond reasonable
expectation."58 Accordingly, strong winds and
waves are not automatically deemed perils of
the sea, if these conditions are not unusual for
that particular sea area at that specific time, or
if they could have been reasonably anticipated
or foreseen.59 While cases decided by U.S.
courts are not binding precedents in this
jurisdiction, the Court considers these
pronouncements persuasive60 in light of the
fact that COGSA was originally an American
statute61 that was merely adopted by the
Philippine Legislature in 1936.
In this case, the documentary and testimonial
evidence cited by petitioner indicate that M/V
Meryem Anafaced winds of only up to 40 knots
while at sea. This wind force clearly fell short
of the 48 to 55 knots required for "storms"
under Article 1734(1) of the Civil Code based
on the threshold established by
PAGASA.63 Petitioner also failed to prove that
the inclement weather encountered by the
vessel was unusual, unexpected, or
catastrophic. In particular, the strong winds
and waves, which allegedly assaulted the ship,
231
were not shown to be worse than what should
have been expected in that particular location
during that time of the year. Consequently, this
Court cannot consider these weather
conditions as "perils of the sea" that would
absolve the carrier from liability.
As a side note, we observe that there are no
definite statutory standards for determining the
existence of a "storm" or "peril of the sea" that
would exempt a common carrier from liability.
Hence, in marine insurance cases, courts are
constrained to rely upon their own
understanding of these terms of art, or upon
imprecise accounts of the speed of the winds
encountered and the strength of the waves
experienced by a vessel. To obviate
uncertainty, it may be time for Congress to lay
down specific rules to distinguish "storms" and
other "perils of the sea" from the ordinary
action of the wind and waves. While uniform
measures of severity may prove difficult to
establish, the legislature may consider
providing more detailed standards to be used
by the judiciary in resolving maritime cases.
These may include wind velocity, violence of
the seas, the height of the waves, or even the
expected weather conditions in the area
involved at the time of the incident.
Petitioner failed to prove the other
requisites for exemption from liability
under Article 1734 of the Civil Code.
Even assuming that the inclement weather
encountered by the vessel amounted to a
"storm" under Article 1734(1) of the Civil Code,
there are two other reasons why this Court
cannot absolve petitioner from liability for loss
or damage to the cargo under the Civil Code.
First, there is no proof that the bad weather
encountered by M/V Meryem Ana was the
proximate and only cause of damage to the
shipment. Second, petitioner failed to establish
that it had exercised the diligence required
from common carriers to prevent loss or
damage to the cargo.
We emphasize that common carriers are
automatically presumed to have been at fault
or to have acted negligently if the goods they
were transporting were lost, destroyed or
damaged while in transit. 64 This presumption
can only be rebutted by proof that the carrier
exercised extraordinary diligence and caution
to ensure the protection of the shipment in the
event of foul weather. 65 As this Court explained
in Fortune Sea Carrier, Inc. v. BPI/MS
Insurance Corp.:
While the records of this case clearly establish
that M/V Sea Merchant was damaged as
result of extreme weather conditions, petitioner
cannot be absolved from liability. As pointed
out by this Court in Lea Mer Industries, Inc. v.
Malayan Insurance, Inc., a common carrier is
not liable for loss only when (1) the fortuitous
event was the only and proximate cause of the
loss and (2) it exercised due diligence to
prevent or minimize the loss. The second
element is absent here. As a common carrier,
petitioner should have been more vigilant in
monitoring weather disturbances within the
country and their (possible) effect on its routes
and destination. More specifically, it should
have been more alert on the possible
attenuating and dysfunctional effects of bad
weather on the parts of the ship. It should
have foreseen the likely prejudicial effects of
the strong waves and winds on the ship
brought about by inclement weather and
should have taken the necessary
precautionary measures through extraordinary
diligence to prevent the weakening or
dysfunction of the parts of the ship to avoid or
prune down the loss to cargo. 66 (citations
omitted)
In the instant case, there is absolutely no
evidence that petitioner satisfied the two
requisites. Before the trial court, petitioner
limited itself to the defense of denial. The latter
refused to admit that the shipment sustained
any loss or damage and even alleged overage
of the cargo delivered. 67 As a result, the
evidence it submitted was severely limited,
i.e., the testimony of a witness that supposedly
confirmed the alleged excess in the quantity of
the fertilizer delivered to the consignee in
Albay.68 No other evidence was presented to
demonstrate either the proximate and
exclusive cause of the loss or the
extraordinary diligence of the carrier.
Under these circumstances, the Court cannot
absolve petitioner from liability for the shortage
incurred by the shipment.
231

WHEREFORE, the Petition is DENIED. The
Court of Appeals Decision and Resolution
dated 27 August 2009 and 10 November
2009, respectively, are hereby AFFIRMED.
SO ORDERED.
Leonardo-De Castro, Perlas-Bernabe,
and Caguioa, JJ., concur.
Bersamin, J., on official leave.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION  Precision Analytical Services, Inc., was hired
G.R. No. 119197 May 16, 1997
TABACALERA INSURANCE CO.,
PRUDENTIAL GUARANTEE &
ASSURANCE, INC., and NEW ZEALAND
INSURANCE CO., LTD., petitioners,  sufficient to make the corn grains toxic and
vs.
NORTH FRONT SHIPPING SERVICES, INC.,
and COURT OF APPEALS, respondents.
BELLOSILLO, J.:
TABACALERA INSURANCE CO., Prudential
Guarantee & Assurance, Inc., and New
Zealand Insurance Co., Ltd., in this petition for
review on certiorari, assail the 22 December
1994 decision of the Court of Appeals and its
Resolution of 16 February 1995 which affirmed
the 1 June 1993 decision of the Regional Trial
Court dismissing their complaint for damages
against North Front Shipping Services, Inc.
On 2 August 1990, 20,234 sacks of corn
grains valued at P3,500,640.00 were shipped
on board North Front 777, a vessel owned by
North Front Shipping Services, Inc. The cargo
was consigned to Republic Flour Mills
Corporation in Manila under Bill of Lading No.
001 1 and insured with the herein mentioned
insurance companies. The vessel was
inspected prior to actual loading by
representatives of the shipper and was found
fit to carry the merchandise. The cargo was
covered with tarpaulins and wooden boards.
The hatches were sealed and could only be
opened by representatives of Republic Flour
Mills Corporation.
The vessel left Cagayan de Oro City on 2
August 1990 and arrived Manila on 16 August
1990. Republic Flour Mills Corporation was
advised of its arrival but it did not immediately
commence the unloading operations. There
were days when unloading had to be stopped
due to variable weather conditions and
sometimes for no apparent reason at all.
When the cargo was eventually unloaded
there was a shortage of 26.333 metric tons.
The remaining merchandise was already
moldy, rancid and deteriorating. The unloading
operations were completed on 5 September
1990 or twenty (20) days after the arrival of the
barge at the wharf of Republic Flour Mills
Corporation in Pasig City.
to examine the corn grains and determine the
cause of deterioration. A Certificate of
Analysis was issued indicating that the corn
grains had 18.56% moisture content and the
wetting was due to contact with salt water. The
mold growth was only incipient and not
unfit for consumption. In fact the mold growth
could still be arrested by drying.
Republic Flour Mills Corporation rejected the
entire cargo and formally demanded from
North Front Shipping Services, Inc., payment
for the damages suffered by it. The demands
however were unheeded. The insurance
companies were perforce obliged to pay
Republic Flour Mills Corporation
P2,189,433.40.
By virtue of the payment made by the
insurance companies they were subrogated to
the rights of Republic Flour Mills Corporation.
Thusly, they lodged a complaint for damages
against North Front Shipping Services, Inc.,
claiming that the loss was exclusively
attributable to the fault and negligence of the
carrier. The Marine Cargo Adjusters hired by
the insurance companies conducted a survey
and found cracks in the bodega of the barge
and heavy concentration of molds on the
tarpaulins and wooden boards. They did not
notice any seals in the hatches. The tarpaulins
were not brand new as there were patches on
them, contrary to the claim of North Front
Shipping Services, Inc., thus making it
possible for water to seep in. They also
231
discovered that the bulkhead of the barge was
rusty.
North Front Shipping Services, Inc., averred in
refutation that it could not be made culpable
for the loss and deterioration of the cargo as it
was never negligent. Captain Solomon
Villanueva, master of the vessel, reiterated
that the barge was inspected prior to the
actual loading and was found adequate and
seaworthy. In addition, they were issued a
permit to sail by the Coast Guard. The
tarpaulins were doubled and brand new and
the hatches were properly sealed. They did
not encounter big waves hence it was not
possible for water to seep in. He further
averred that the corn grains were farm wet and
not properly dried when loaded.
The court below dismissed the complaint and
ruled that the contract entered into between
North Front Shipping Services, Inc., and
Republic Flour Mills Corporation was a
charter-party agreement. As such,
only ordinary diligencein the care of goods
was required of North Front Shipping Services,
Inc. The inspection of the barge by the shipper
and the representatives of the shipping
company before actual loading, coupled with
the Permit to Sail issued by the Coast Guard,
sufficed to meet the degree of diligence
required of the carrier.
On the other hand, the Court of Appeals ruled
that as a common carrier required to observe
a higher degree of diligence North Front 777
satisfactorily complied with all the
requirements hence was issued a Permit to
Sail after proper inspection. Consequently, the
complaint was dismissed and the motion for
reconsideration rejected.
The charter-party agreement between North
Front Shipping Services, Inc., and Republic
Flour Mills Corporation did not in any way
convert the common carrier into a private
carrier. We have already resolved this issue
with finality in Planters Products, Inc. v. Court
of Appeals 2 thus —
A "charter-party" is defined as a
contract by which an entire ship, or
some principal part thereof, is let by
the owner to another person for a
specified time or use; a contract of
affreightment by which the owner of a
ship or other vessel lets the whole or a
part of her to a merchant or other
person for the conveyance of goods,
on a particular voyage, in
consideration of the payment of
freight . . . Contract of affreightment
may either be time charter, wherein the
vessel is leased to the charterer for a
fixed period of time, or voyage charter,
wherein the ship is leased for a single
voyage. In both cases, the charter-
party provides for the hire of the vessel
only, either for a determinate period of
time or for a single or consecutive
voyage, the ship owner to supply the
ship's store, pay for the wages of the
master of the crew, and defray the
expenses for the maintenance of the
ship.
Upon the other hand, the term
"common or public carrier" is defined in
Art. 1732 of the Civil Code. The
definition extends to carriers either by
land, air or water which hold
themselves out as ready to engage in
carrying goods or transporting
passengers or both for compensation
as a public employment and not as a
casual occupation . . .
It is therefore imperative that a public
carrier shall remain as such,
notwithstanding the charter of the
whole or portion of a vessel by one or
more persons, provided the charter is
limited to the shin only, as in the case
of a time-charter or voyage-
charter (emphasis supplied).
North Front Shipping Services, Inc., is a
corporation engaged in the business of
transporting cargo and offers its services
indiscriminately to the public. It is without
doubt a common carrier. As such it is required
to observe extraordinary diligence in its
vigilance over the goods it transports. 3 When
goods placed in its care are lost or damaged,
the carrier is presumed to have been at fault or
to have acted negligently. 4 North Front
Shipping Services, Inc., therefore has the
burden of proving that it
observed extraordinary diligence in order to
avoid responsibility for the lost cargo.
North Front Shipping Services, Inc., proved
that the vessel was inspected prior to actual
loading by representatives of the shipper and
231
was found fit to take a load of corn grains.
They were also issued Permit to Sail by the
Coast Guard. The master of the vessel
testified that the corn grains were farm wet
when loaded. However, this testimony was
disproved by the clean bill of lading issued by
North Front Shipping Services, Inc., which did
not contain a notation that the corn grains
were wet and improperly dried. Having been in
the service since 1968, the master of the
vessel would have known at the outset that
corn grains that were farm wet and not
properly dried would eventually deteriorate
when stored in sealed and hot compartments
as in hatches of a ship. Equipped with this
knowledge, the master of the vessel and his
crew should have undertaken precautionary
measures to avoid or lessen the cargo's
possible deterioration as they were presumed
knowledgeable about the nature of such
cargo. But none of such measures was taken.
In Compania Maritima v. Court of
Appeals 5 we ruled —
. . . Mere proof of delivery of the goods
in good order to a common carrier, and
of their arrival at the place of
destination in bad order, makes
out prima facie case against the
common carrier, so that if no
explanation is given as to how the loss,
deterioration or destruction of the
goods occurred, the common carrier
must be held responsible. Otherwise
stated, it is incumbent upon the
common carrier to prove that the loss,
deterioration or destruction was due to
accident or some other circumstances
inconsistent with its liability . . .
The extraordinary diligence in the
vigilance over the goods tendered for
shipment requires the common carrier
to know and to follow the required
precaution for avoiding damage to, or
destruction of the goods entrusted to it
for safe carriage and delivery. It
requires common carriers to render
service with the greatest skill and
foresight and "to use all reasonable
means to ascertain the nature and
characteristics of goods tendered for
shipment, and to exercise due care in
the handling and stowage, including
such methods as their nature requires"
(emphasis supplied).
In fine, we find that the carrier failed to
observe the required extraordinary diligence in
the vigilance over the goods placed in its care.
The proofs presented by North Front Shipping
Services, Inc., were insufficient to rebut
the prima facie presumption of private
respondent's negligence, more so if we
consider the evidence adduced by petitioners.
It is not denied by the insurance companies
that the vessel was indeed inspected before
actual loading and that North Front 777 was
issued a Permit to Sail. They proved the fact of
shipment and its consequent loss or damage
while in the actual possession of the carrier.
Notably, the carrier failed to volunteer any
explanation why there was spoilage and how it
occurred. On the other hand, it was shown
during the trial that the vessel had rusty
bulkheads and the wooden boards and
tarpaulins bore heavy concentration of molds.
The tarpaulins used were not new, contrary to
the claim of North Front Shipping Services,
Inc., as there were already several patches on
them, hence, making it highly probable for
water to enter.
Laboratory analysis revealed that the corn
grains were contaminated with salt water.
North Front Shipping Services, Inc., failed to
rebut all these arguments. It did not even
endeavor to establish that the loss, destruction
or deterioration of the goods was due to the
following: (a) flood, storm, earthquake,
lightning, or other natural disaster or calamity;
(b) act of the public enemy in war, whether
international or civil; (c) act or omission of the
shipper or owner of the goods; (d) the
character of the goods or defects in the
packing or in the containers; (e) order or act of
competent public authority. 6 This is a closed
list. If the cause of destruction, loss or
deterioration is other than the enumerated
circumstances, then the carrier is rightly liable
therefor.
However, we cannot attribute the destruction,
loss or deterioration of the cargo solely to the
carrier. We find the consignee Republic Flour
Mills Corporation guilty of contributory
negligence. It was seasonably notified of the
arrival of the barge but did not immediately
start the unloading operations. No explanation
was proffered by the consignee as to why
there was a delay of six (6) days. Had the
unloading been commenced immediately the
loss could have been completely avoided or at
231
least minimized. As testified to by the chemist
who analyzed the corn samples, the mold
growth was only at its incipient stage and
could still be arrested by drying. The corn
grains were not yet toxic or unfit for
consumption. For its contributory negligence,
Republic Flour Mills Corporation should share
at least 40% of the loss. 7
WHEREFORE, the Decision of the Court of
Appeals of 22 December 1994 and its
Resolution of 16 February 1995 are
REVERSED and SET ASIDE. Respondent
North Front Shipping Services, Inc., is ordered
to pay petitioners Tabacalera Insurance Co.,
Prudential Guarantee & Assurance, Inc., and
New Zealand Insurance Co. Ltd.,
P1,313,660.00 which is 60% of the amount
paid by the insurance companies to Republic
Flour Mills Corporation, plus interest at the
rate of 12% per annum from the time this
judgment becomes final until full payment.
SO ORDERED.
Vitug, Kapunan and Hermosisima, Jr., JJ.,
concur.
Padilla, J., is on leave.
THIRD DIVISION
G.R. No. 184513, March 09, 2016
DESIGNER BASKETS, INC., Petitioner, 
v.  surrender of the relevant bill(s) of lading due to
AIR SEA TRANSPORT, INC. AND ASIA
CARGO CONTAINER LINES,
INC., Respondents.
DECISION
JARDELEZA, J.:
This is a Petition for Review on Certiorari1 of
the August 16, 2007 Decision2 and September
2, 2008 Resolution3 of the Court of Appeals
(CA) in CA-G.R. CV No. 79790, absolving
respondents Air Sea Transport, Inc. (ASTI)
and Asia Cargo Container Lines, Inc. (ACCLI)
from liability in the complaint for sum of money
and damages filed by petitioner Designer
Baskets, Inc. (DBI).
The Facts
DBI is a domestic corporation engaged in the
production of housewares and handicraft items
for export.4Sometime in October 1995,
Ambiente, a foreign-based company, ordered
from DBI5 223 cartons of assorted wooden
items (the shipment).6 The shipment was worth
Twelve Thousand Five Hundred Ninety and
Eighty-Seven Dollars (US$12,590.87) and
payable through telegraphic
transfer.7 Ambiente designated ACCLI as the
forwarding agent that will ship out its order
from the Philippines to the United States (US).
ACCLI is a domestic corporation acting as
agent of ASTI, a US based corporation
engaged in carrier transport business, in the
Philippines.8
On January 7, 1996, DBI delivered the
shipment to ACCLI for sea transport from
Manila and delivery to Ambiente at 8306
Wilshire Blvd., Suite 1239, Beverly Hills,
California. To acknowledge receipt and to
serve as the contract of sea carriage, ACCLI
issued to DBI triplicate copies of ASTI Bill of
Lading No. AC/MLLA601317. 9 DBI retained
possession of the originals of the bills of lading
pending the payment of the goods by
Ambiente.10
On January 23, 1996, Ambiente and ASTI
entered into an Indemnity Agreement
(Agreement).11 Under the Agreement,
Ambiente obligated ASTI to deliver the
shipment to it or to its order "without the
the non-arrival or loss thereof."12 In exchange,
Ambiente undertook to indemnify and hold
ASTI and its agent free from any liability as a
result of the release of the
shipment.13 Thereafter, ASTI released the
shipment to Ambiente without the knowledge
of DBI, and without it receiving payment for the
total cost of the shipment.14
DBI then made several demands to Ambiente
for the payment of the shipment, but to no
avail. Thus, on October 7, 1996, DBI filed the
Original Complaint against ASTI, ACCLI and
ACCLFs incorporators-stockholders15 for the
payment of the value of the shipment in the
231
amount of US$12,590.87 or Three Hundred
Thirty-Three and Six Flundred Fifty-Eight
Pesos (P333,658.00), plus interest at the legal
rate from January 22, 1996, exemplary
damages, attorney's fees and cost of suit.16
In its Original Complaint, DBI claimed that
under Bill of Lading Number AC/MLLA601317,
ASTI and/or ACCLI is "to release and deliver
the cargo/shipment to the consignee, x x x,
only after the original copy or copies of [the]
Bill of Lading is or are surrendered to them;
otherwise, they become liable to the shipper
for the value of the shipment." 17 DBI also
averred that ACCLI should be jointly and
severally liable with its co-defendants because
ACCLI failed to register ASTI as a foreign
corporation doing business in the Philippines.
In addition, ACCLI failed to secure a license to
act as agent of ASTI.18
On February 20, 1997, ASTI, ACCLI, and
ACCLI's incorporators-stockholders filed a
Motion to Dismiss.19They argued that: (a) they
are not the real parties-in-interest in the action
because the cargo was delivered and
accepted by Ambiente. The case, therefore,
was a simple case of non�payment of the
buyer; (b) relative to the incorporators-
stockholders of ACCLI, piercing the corporate
veil is misplaced; (c) contrary to the allegation
of DBI, the bill of lading covering the shipment
does not contain a proviso exposing ASTI to
liability in case the shipment is released
without the surrender of the bill of lading; and
(d) the Original Complaint did not attach a
certificate of non-forum shopping.20
DBI filed an Opposition to the Motion to
Dismiss,21 asserting that ASTI and ACCLI
failed to exercise the required extraordinary
diligence when they allowed the cargoes to be
withdrawn by the consignee without the
surrender of the original bill of lading. ASTI,
ACCLI, and ACCLI's incorporators-
stockholders countered that it is DBI who
failed to exercise extraordinary diligence in
protecting its own interest. They averred that
whether or not the buyer-consignee pays the
seller is already outside of their concern.22
Before the trial court could resolve the motion
to dismiss, DBI filed an Amended
Complaint23 impleading Ambiente as a new
defendant and praying that it be held solidarity
liable with ASTI, ACCLI, and ACCLFs
incorporators-stockholders for the payment of
the value of the shipment. DBI alleged that it
received reliable information that the shipment
was released merely on the basis of a
company guaranty of Ambiente. 24 Further, DBI
asserted that ACCLI's incorporators-
stockholders have not yet fully paid their stock
subscriptions; thus, "under the circumstance of
[the] case," they should be held liable to the
extent of the balance of their subscriptions.25
In their Answer,26 ASTI, ACCLI, and ACCLI's
incorporators-stockholders countered that DBI
has no cause of action against ACCLI and its
incorporators-stockholders because the
Amended Complaint, on its face, is for
collection of sum of money by an unpaid seller
against a buyer. DBI did not allege any act of
the incorporators-stockholders which would
constitute as a ground for piercing the veil of
corporate fiction.27ACCLI also reiterated that
there is no stipulation in the bill of lading
restrictively subjecting the release of the cargo
only upon the presentation of the original bill of
lading.28 It regarded the issue of ASTI's lack of
license to do business in the Philippines as
"entirely foreign and irrelevant to the issue of
liability for breach of contract" between DBI
and Ambiente. It stated that the purpose of
requiring a license (to do business in the
Philippines) is to subject the foreign
corporation to the jurisdiction of Philippine
courts.29
On July 22, 1997, the trial court directed the
service of summons to Ambiente through the
Department of Trade and Industry.30 The
summons was served on October 6,
199731 and December 18, 1997. 32Ambiente
failed to file an Answer. Hence, DBI moved to
declare Ambiente in default, which the trial
court granted in its Order dated September 15,
1998.33
The Ruling of the Trial Court
In a Decision34 dated July 25, 2003, the trial
court found ASTI, ACCLI, and Ambiente
solidarity liable to DBI for the value of the
shipment. It awarded DBI the following:
1. US$12,590.87, or the equivalent of
[P]333,658.00 at the time of the
shipment, plus 12% interest per
annum from 07 January 1996 until
the same is fully paid;
231
 2. [P]50,000.00 in exemplary
damages;
3. [P]47,000.00 as and for attorney's
fees; and,
4. [P]10,000.00 as cost of suit.35
The trial court declared that the liability of
Ambiente is "very clear." As the buyer, it has
an obligation to pay for the value of the
shipment. The trial court noted that "[the case]
is a simple sale transaction which had been
perfected especially since delivery had already
been effected and with only the payment for
the shipment remaining left to be done."36
With respect to ASTI, the trial court held that
as a common carrier, ASTI is bound to
observe extraordinary diligence in the
vigilance over the goods. However, ASTI was
remiss in its duty when it allowed the
unwarranted release of the shipment to
Ambiente.37 The trial court found that the
damages suffered by DBI was due to ASTI's
release of the merchandise despite the non-
presentation of the bill of lading. That ASTI
entered into an Agreement with Ambiente to
release the shipment without the surrender of
the bill of lading is of no moment. 38 The
Agreement cannot save ASTI from liability
because in entering into such, it violated the
law, the terms of the bill of lading and the right
of DBI over the goods. 39
The trial court also added that the Agreement
only involved Ambiente and ASTI. Since DBI is
not privy to the Agreement, it is not bound by
its terms.40
The trial court found that ACCLI "has not done
enough to prevent the defendants Ambiente
and [ASTI] from agreeing among themselves
the release of the goods in total disregard of
[DBFs] rights and in contravention of the
country's civil and commercial laws." 41 As the
forwarding agent, ACCLI was "well aware that
the goods cannot be delivered to the
defendant Ambiente since [DBI] retained
possession of the originals of the bill of
lading."42 Consequently, the trial court held
ACCLI solidarily liable with ASTI.
As regards ACCLFs incorporators-
stockholders, the trial court absolved them
from liability. The trial court ruled that the
participation of ACCLFs incorporators-
stockholders in the release of the cargo is not
as direct as that of ACCLI.43
DBI, ASTI and ACCLI appealed to the CA. On
one hand, DBI took issue with the order of the
trial court awarding the value of the shipment
in Philippine Pesos instead of US Dollars. It
also alleged that even assuming that the
shipment may be paid in Philippine Pesos, the
trial court erred in pegging its value at the
exchange rate prevailing at the time of the
shipment, rather than at the exchange rate
prevailing at the time of payment.44
On the other hand, ASTI and ACCLI
questioned the trial court's decision finding
them solidarily liable with DBI for the value of
the shipment. They also assailed the trial
court's award of interest, exemplary damages,
attorney's fees and cost of suit in DBFs favor.45
The Ruling of the Court of Appeals
The CA affirmed the trial court's finding that
Ambiente is liable to DBI, but absolved ASTI
and ACCLI from liability. The CA found that
the pivotal issue is whether the law requires
that the bill of lading be surrendered by the
buyer/consignee before the carrier can release
the goods to the former. It then answered the
question in the negative, thus:
There is nothing in the applicable laws that
require the surrender of bills of lading
before the goods may be released to the
buyer/consignee. In fact, Article 353 of the
Code of Commerce suggests a contrary
conclusion, viz
"Art. 353. 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 shall be
considered canceled xxx 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."
231
The clear import of the above article is that the amount of US$12,590.87.
surrender of the bill of lading is not an absolute Defendant Ambiente's liability may
and mandatory requirement for the release of be paid in Philippine currency,
the goods to the consignee. The fact that the computed at the exchange rate
carrier is given the alternative option to prevailing at the time of
simply require a receipt for the goods payment;51 and
delivered suggests that the surrender of
the bill of lading may be dispensed with 3. The rate of interest to be imposed
when it cannot be produced by the on the total amount of
consignee for whatever cause.46 (Emphasis US$12,590.87 shall be 6% per
supplied.) annum computed from the filing of
the complaint on October 7, 1996
The CA stressed that DBI failed to present until the finality of this decision.
evidence to prove its assertion that the After this decision becomes final
surrender of the bill of lading upon delivery of and executory, the applicable rate
the goods is a common mercantile shall be 12% per annum until its
practice.47 Further, even assuming that such full satisfaction.
practice exists, it cannot prevail over law and
jurisprudence.48 SO ORDERED.52

Hence, this petition for review, which raises

As for ASTI, the CA explained that its only the sole issue of whether ASTI and ACCLI
obligation as a common carrier was to deliver may be held solidarily liable to DBI for the
the shipment in good condition. It did not value of the shipment.
include looking beyond the details of the
transaction between the seller and the Our Ruling
consignee, or more particularly, ascertaining
the payment of the goods by the buyer
Ambiente.49
We deny the petition.

Since the agency between ASTI and ACCLI

A common carrier may release the goods
was established and not disputed by any of
to the consignee even without the
the parties, neither can ACCLI, as a mere
surrender of the hill of lading.
agent of ASTI, be held liable. This must be so
in the absence of evidence that the agent
exceeded its authority.50

The CA, thus, ruled: This case presents an instance where an

unpaid seller sues not only the buyer, but the
carrier and the carrier's agent as well, for the
payment of the value of the goods sold. The
basis for ASTI and ACCLI's liability, as
WHEREFORE, in view of the foregoing, the
pleaded by DBI, is the bill of lading covering
Decision dated July 25, 2003 of Branch 255 of
the shipment.
the Regional Trial court of Las [Pi�as] City in
Civil Case No. LP-96-0235 is
hereby AFFIRMED with the
following MODIFICATIONS: A bill of lading is defined as "a written
acknowledgment of the receipt of goods and
an agreement to transport and to deliver them
1. Defendants-appellants Air Sea at a specified place to a person named or on
Transport, Inc. and Asia Cargo his order."53 It may also be defined as an
Container Lines, Inc. are instrument in writing, signed by a carrier or his
hereby ABSOLVED from all agent, describing the freight so as to identify it,
liabilities; stating the name of the consignor, the terms of
the contract of carriage, and agreeing or
2. The actual damages to be paid by directing that the freight be delivered to bearer,
defendant Ambiente shall be in the
231
to order or to a specified person at a specified
place.54
Under Article 350 of the Code of Commerce,
"the shipper as well as the carrier of the
merchandise or goods may mutually demand
that a bill of lading be made." A bill of lading,
when issued by the carrier to the shipper, is
the legal evidence of the contract of carriage
between the former and the latter. It defines
the rights and liabilities of the parties in
reference to the contract of carriage. The
stipulations in the bill of lading are valid and
binding unless they are contrary to law,
morals, customs, public order or public
policy.55
Here, ACCLI, as agent of ASTI, issued Bill of
Lading No. AC/MLLA601317 to DBI. This bill
of lading governs the rights, obligations and
liabilities of DBI and ASTI. DBI claims that Bill
of Lading No. AC/MLLA601317 contains a
provision stating that ASTI and ACCLI are "to
release and deliver the cargo/shipment to the
consignee, x x x, only after the original copy or
copies of the said Bill of Lading is or are
surrendered to them; otherwise they become
liable to [DBI] for the value of the
shipment."56Quite tellingly, however, DBI does
not point or refer to any specific clause or
provision on the bill of lading supporting this
claim. The language of the bill of lading shows
no such requirement. What the bill of lading
provides on its face is:
Received by the Carrier in apparent good
order and condition unless otherwise indicated
hereon, the Container(s) and/or goods
hereinafter mentioned to be transported and/or
otherwise forwarded from the Place of Receipt
to the intended Place of Delivery upon and
[subject] to all the terms and conditions
appearing on the face and back of this Bill of
Lading. If required by the Carrier this Bill of
Lading duly endorsed must be surrendered
in exchange for the Goods of delivery
order.57 (Emphasis supplied.)
There is no obligation, therefore, on the part of
ASTI and ACCLI to release the goods only
upon the surrender of the original bill of lading.
Further, a carrier is allowed by law to release
the goods to the consignee even without the
latter's surrender of the bill of lading. The third
paragraph of Article 353 of the Code of
Commerce is enlightening:
Article 353. The legal evidence of the contract
between the shipper and the carrier shall be
the bills of lading, by the contents of which the
disputes which may arise regarding their
execution and performance shall be decided,
no exceptions being admissible other than
those of falsity and material error in the
drafting.
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 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. (Emphasis
supplied.)
The general rule is that upon receipt of the
goods, the consignee surrenders the bill of
lading to the carrier and their respective
obligations are considered canceled. The law,
however, provides two exceptions where the
goods may be released without the surrender
of the bill of lading because the consignee can
no longer return it. These exceptions are when
the bill of lading gets lost or for other cause. In
either case, the consignee must issue a
receipt to the carrier upon the release of the
goods. Such receipt shall produce the same
effect as the surrender of the bill of lading.
We have already ruled that the non-surrender
of the original bill of lading does not violate the
carrier's duty of extraordinary diligence over
the goods.58 In Republic v. Lorenzo Shipping
231
Corporation,59 we found that the carrier
exercised extraordinary diligence when it
released the shipment to the consignee, not
upon the surrender of the original bill of lading,
but upon signing the delivery receipts and
surrender of the certified true copies of the
bills of lading. Thus, we held that the surrender
of the original bill of lading is not a condition
precedent for a common carrier to be
discharged of its contractual obligation.
Under special circumstances, we did not even
require presentation of any form of receipt by
the consignee, in lieu of the original bill of
lading, for the release of the goods. In Macam
v. Court of Appeals,60 we absolved the carrier
from liability for releasing the goods to the
consignee without the bills of lading despite
this provision on the bills of lading:
"One of the Bills of Lading must be
surrendered duly endorsed in exchange for the
goods or delivery order."61 (Citations omitted.)
In clearing the carrier from liability, we took
into consideration that the shipper sent a telex
to the carrier after the goods were shipped.
The telex instructed the carrier to deliver the
goods without need of presenting the bill of
lading and bank guarantee per the shipper's
request since "for prepaid shipt ofrt charges
already fully paid our end x x x."62 We also
noted the usual practice of the shipper to
request the shipping lines to immediately
release perishable cargoes through telephone
calls.
Also, in Eastern Shipping Lines v. Court of
Appeals,63 we absolved the carrier from liability
for releasing the goods to the supposed
consignee, Consolidated Mines, Inc. (CMI), on
the basis of an Undertaking for Delivery of
Cargo but without the surrender of the original
bill of lading presented by CMI. Similar to the
factual circumstance in this case, the
Undertaking in Eastern Shipping
Lines guaranteed to hold the carrier "harmless
from all demands, claiming liabilities, actions
and expenses."64 Though the central issue in
that case was who the consignee was in the
bill of lading, it is noteworthy how we gave
weight to the Undertaking in ruling in favor of
the carrier:
But assuming that CMI may not be considered
consignee, the petitioner cannot be faulted for
releasing the goods to CMI under the
circumstances, due to its lack of knowledge as
to who was the real consignee in view of CMI's
strong representations and letter of
undertaking wherein it stated that the bill of
lading would be presented later. This is
precisely the situation covered by the last
paragraph of Art. 353 of the [Code of
Commerce] to wit:
"If in case of loss or for any other reason
whatsoever, the consignee cannot return upon
receiving the merchandise the bill of lading
subscribed by the carrier, he shall give said
carrier a receipt of the goods delivered this
receipt producing the same effects as the
return of the bill of lading."65
Clearly, law and jurisprudence is settled that
the surrender of the original bill of lading is not
absolute; that in case of loss or any other
cause, a common carrier may release the
goods to the consignee even without it.
Here, Ambiente could not produce the bill of
lading covering the shipment not because it
was lost, but for another cause: the bill of
lading was retained by DBI pending
Ambiente's full payment of the shipment.
Ambiente and ASTI then entered into an
Indemnity Agreement, wherein the former
asked the latter to release the shipment even
without the surrender of the bill of lading. The
execution of this Agreement, and the
undisputed fact that the shipment was
released to Ambiente pursuant to it, to our
mind, operates as a receipt in substantial
compliance with the last paragraph of Article
353 of the Code of Commerce.
Articles 1733, 1734, and 1735 of the Civil
Code are not applicable.
DBI, however, challenges the Agreement,
arguing that the carrier released the goods
pursuant to it, notwithstanding the carrier's
knowledge that the bill of lading should first be
surrendered. As such, DBI claims that ASTI
231
and ACCLI are liable for damages because
they failed to exercise extraordinary diligence
in the vigilance over the goods pursuant to
Articles 1733, 1734, and 1735 of the Civil
Code.66
DBI is mistaken.
Articles 1733, 1734, and 1735 of the Civil
Code are not applicable in this case. The
Articles state:
Article 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 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 Articles 1755
and 1756.
Article 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 or omission of the shipper or owner
of the goods;
(4) character of the goods or defects in
the packing or in the containers;
(5) Order or act of competent public
authority.
Article 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.
Articles 1733, 1734, and 1735 speak of the
common carrier's responsibility over
the goods. They refer to the general liability of
common carriers in case of loss,
destruction or deterioration of goods and the
presumption of negligence against them. This
responsibility or duty 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.67 It is, in fact, undisputed that the goods
were timely delivered to the proper consignee
or to the one who was authorized to receive
them. DBFs only cause of action against ASTI
and ACCLI is the release of the goods to
Ambiente without the surrender of the bill of
lading, purportedly in violation of the terms of
the bill of lading. We have already found that
Bill of Lading No. AC/MLLA601317 does not
contain such express prohibition. Without any
prohibition, therefore, the carrier had no
obligation to withhold release of the goods.
Articles 1733, 1734, and 1735 do not give
ASTI any such obligation.
The applicable provision instead is Article 353
of the Code of Commerce, which we have
previously discussed. To reiterate, the Article
allows the release of the goods to the
consignee even without his surrender of the
original bill of lading. In such case, the duty of
the carrier to exercise extraordinary diligence
is not violated. Nothing, therefore, prevented
the consignee and the carrier to enter into an
indemnity agreement of the same nature as
the one they entered here. No law or public
policy is contravened upon its execution.
Article 1503 of the Civil Code does not
apply to contracts for carriage of goods.
In its petition, DBI continues to assert the
wrong application of Article 353 of the Code of
Commerce to its Amended Complaint. It
alleges that the third paragraph of Article 1503
of the Civil Code is the applicable provision
because: (a) Article 1503 is a special provision
that deals particularly with the situation of the
seller retaining the bill of lading; and (b) Article
1503 is a law which is later in point of time to
231
Article 353 of the Code of Commerce. 68 DBI
posits that being a special provision, Article
1503 of the Civil Code should prevail over
Article 353 of the Code of Commerce, a
general provision that makes no reference to
the seller retaining the bill of lading. 69
DBFs assertion is untenable. Article 1503 is an
exception to the general presumption provided
in the first paragraph of Article 1523, which
reads:
Article 1523. Where, in pursuance of a
contract of sale, the seller is authorized or
required to send the goods to the buyer,
delivery of the goods to a carrier, whether
named by the buyer or not, for the purpose
of transmission to the buyer is deemed to
be a delivery of the goods to the buyer,
except in the cases provided for in Articles
1503, first, second and third paragraphs, or
unless a contrary intent appears.
Unless otherwise authorized by the buyer, the
seller must make such contract with the carrier
on behalf of the buyer as may be reasonable,
having regard to the nature of the goods and
the other circumstances of the case. If the
seller omit so to do, and the goods are lost or
damaged in the course of transit, the buyer
may decline to treat the delivery to the carrier
as a delivery to himself, or may hold the seller
responsible in damages.
Unless otherwise agreed, where goods are
sent by the seller to the buyer under
circumstances in which the seller knows or
ought to know that it is usual to insure, the
seller must give such notice to the buyer as
may enable him to insure them during their
transit, and, if the seller fails to do so, the
goods shall be deemed to be at his risk during
such transit. (Emphasis supplied.)
Article 1503, on the other hand, provides:
Article 1503. When there is a contract of
sale of specific goods, the seller may, by the
terms of the contract, reserve the right of
possession or ownership in the goods until
certain conditions have been fulfilled. The right
of possession or ownership may be thus
reserved notwithstanding the delivery of the
goods to the buyer or to a carrier or other
bailee for the purpose of transmission to the
buyer.
Where goods are shipped, and by the bill of
lading the goods are deliverable to the seller
or his agent, or to the order of the seller or of
his agent, the seller thereby reserves the
ownership in the goods. But, if except for the
form of the bill of lading, the ownership would
have passed to the buyer on shipment of the
goods, the seller's property in the goods shall
be deemed to be only for the purpose of
securing performance by the buyer of his
obligations under the contract.
Where goods are shipped, and by the bill of
lading the goods are deliverable to order of
the buyer or of his agent, but possession
of the bill of lading is retained by the seller
or his agent, the seller thereby reserves a
right to the possession of the goods as
against the buyer.
Where the seller of goods draws on the buyer
for the price and transmits the bill of exchange
and bill of lading together to the buyer to
secure acceptance or payment of the bill of
exchange, the buyer is bound to return the bill
of lading if he does not honor the bill of
exchange, and if he wrongfully retains the bill
of lading he acquires no added right thereby.
If, however, the bill of lading provides that the
goods are deliverable to the buyer or to the
order of the buyer, or is indorsed in blank, or to
the buyer by the consignee named therein,
one who purchases in good faith, for value, the
bill of lading, or goods from the buyer will
obtain the ownership in the goods, although
the bill of exchange has not been honored,
provided that such purchaser has received
delivery of the bill of lading indorsed by the
consignee named therein, or of the goods,
without notice of the facts making the transfer
wrongful. (Emphasis supplied.)
Articles 1523 and 1503, therefore, refer to a
contract of sale between a seller and a buyer.
In particular, they refer to who between the
seller and the buyer has the right of
possession or ownership over the goods
subject of the sale. Articles 1523 and 1503 do
not apply to a contract of carriage between the
shipper and the common carrier. The third
paragraph of Article 1503, upon which DBI
relies, does not oblige the common carrier to
withhold delivery of the goods in the event that
231
the bill of lading is retained by the seller.
Rather, it only gives the seller a better right to
the possession of the goods as against the
mere inchoate right of the buyer. Thus, Articles
1523 and 1503 find no application here. The
case before us does not involve an action
where the seller asserts ownership over the
goods as against the buyer. Instead, we are
confronted with a complaint for sum of money
and damages filed by the seller against the
buyer and the common carrier due to the non-
payment of the goods by the buyer, and the
release of the goods by the carrier despite
non-surrender of the bill of lading. A contract
of sale is separate and distinct from a contract
of carriage. They involve different parties,
different rights, different obligations and
liabilities. Thus, we quote with approval the
ruling of the CA, to wit:
On the third assigned error, [w]e rule for the
defendants-appellants [ASTI and
ACCLI]. They are correct in arguing that the
nature of their obligation with plaintiff [DBI]
is separate and distinct from the
transaction of the latter with defendant
Ambiente. As carrier of the goods
transported by plaintiff, its obligation is
simply to ensure that such goods are
delivered on time and in good condition. In
the case [Macam v. Court of Appeals], the
Supreme Court emphasized that "the
extraordinary responsibility of the common
carriers lasts until actual or constructive
delivery of the cargoes to the consignee or to
the person who has the right to receive them."
xxx
It is therefore clear that the moment the
carrier has delivered the subject goods, its
responsibility ceases to exist and it is
thereby freed from all the liabilities arising
from the transaction. Any question
regarding the payment of the buyer to the
seller is no longer the concern of the
carrier. This easily debunks plaintiffs theory of
joint liability.70 x x x (Emphasis supplied;
citations omitted.)
The contract between DBI and ASTI is a
contract of carriage of goods; hence, ASTI's
liability should be pursuant to that contract and
the law on transportation of goods. Not being a
party to the contract of sale between DBI and
Ambiente, ASTI cannot be held liable for the
payment of the value of the goods sold. In this
regard, we cite Loadstar Shipping Company,
Incorporated v. Malayan Insurance Company,
Incorporated,71 thus:
Malayan opposed the petitioners' invocation of
the Philex-PASAR purchase agreement,
stating that the contract involved in this case is
a contract of affreightment between the
petitioners and PASAR, not the agreement
between Philex and PASAR, which was a
contract for the sale of copper concentrates.
On this score, the Court agrees with Malayan
that contrary to the trial court's disquisition, the
petitioners cannot validly invoke the penalty
clause under the Philex-PASAR purchase
agreement, where penalties are to be imposed
by the buyer PASAR against the seller Philex
if some elements exceeding the agreed
limitations are found on the copper
concentrates upon delivery. The petitioners
are not privy to the contract of sale of the
copper concentrates. The contract between
PASAR and the petitioners is a contract of
carriage of goods and not a contract of
sale. Therefore, the petitioners and PASAR
are bound by the laws on transportation of
goods and their contract of
affreightment. Since the Contract of
Affreightment between the petitioners and
PASAR is silent as regards the computation of
damages, whereas the bill of lading presented
before the trial court is undecipherable, the
New Civil Code and the Code of Commerce
shall govern the contract between the
parties.72 (Emphasis supplied; citations
omitted.)
In view of the foregoing, we hold that under Bill
of Lading No. AC/MLLA601317 and the
pertinent law and jurisprudence, ASTI and
ACCLI are not liable to DBI. We sustain the
finding of the CA that only Ambiente, as the
buyer of the goods, has the obligation to pay
for the value of the shipment. However, in view
of our ruling in Nacar v. Gallery Frames,73 we
modify the legal rate of interest imposed by the
CA. Instead of 12% per annum from the finality
of this judgment until its full satisfaction, the
rate of interest shall only be 6% per annum.
WHEREFORE, the petition is DENIED for lack
of merit. The August 16, 2007 Decision and
the September 2, 2008 Resolution of the Court
of Appeals in CA-G.R. CV No. 79790 are
hereby AFFIRMEDwith
the MODIFICATION that from the finality of
this decision until its full satisfaction, the
231
applicable rate of interest shall be 6% per
annum.
SO ORDERED.
Velasco, Jr., (Chairperson), Peralta, Perez,
and Reyes, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 149547             July 4, 2008
PHILIPPINE AIRLINES, INC., petitioner,  respondent and his group because they were
vs.
HON. ADRIANO SAVILLO, Presiding Judge
of RTC Branch 30 , Iloilo City, and
SIMPLICIO GRIÑO,respondents.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review
on Certiorari under Rule 45 of the Rules of
Court, assailing the Decision 1 dated 17 August
2001, rendered by the Court of Appeals in CA-
G.R. SP No. 48664, affirming in toto the
Order2 dated 9 June 1998, of Branch 30 of the
Regional Trial Court (RTC) of Iloilo City,
dismissing the Motion to Dismiss filed by
petitioner Philippine Airlines Inc. (PAL) in the
case entitled, Simplicio Griño v. Philippine
Airlines, Inc. and Singapore Airlines, docketed
as Civil Case No. 23773.
PAL is a corporation duly organized under
Philippine law, engaged in the business of
providing air carriage for passengers, baggage
and cargo.3
Public respondent Hon. Adriano Savillo is the
presiding judge of Branch 30 of the Iloilo RTC,
where Civil Case No. 23773 was filed; while
private respondent Simplicio Griño is the
plaintiff in the aforementioned case.
The facts are undisputed.
Private respondent was invited to participate in
the 1993 ASEAN Seniors Annual Golf
Tournament held in Jakarta, Indonesia. He
and several companions decided to purchase
their respective passenger tickets from PAL
with the following points of passage: MANILA-
SINGAPORE-JAKARTA-SINGAPORE-
MANILA. Private respondent and his
companions were made to understand by PAL
that its plane would take them from Manila to
Singapore, while Singapore Airlines would
take them from Singapore to Jakarta.4
On 3 October 1993, private respondent and
his companions took the PAL flight to
Singapore and arrived at about 6:00 o’clock in
the evening. Upon their arrival, they
proceeded to the Singapore Airlines office to
check-in for their flight to Jakarta scheduled at
8:00 o’clock in the same evening. Singapore
Airlines rejected the tickets of private
not endorsed by PAL. It was explained to
private respondent and his group that if
Singapore Airlines honored the tickets without
PAL’s endorsement, PAL would not pay
Singapore Airlines for their passage. Private
respondent tried to contact PAL’s office at the
airport, only to find out that it was closed.5
Stranded at the airport in Singapore and left
with no recourse, private respondent was in
panic and at a loss where to go; and was
subjected to humiliation, embarrassment,
mental anguish, serious anxiety, fear and
distress. Eventually, private respondent and
his companions were forced to purchase
tickets from Garuda Airlines and board its last
flight bound for Jakarta. When they arrived in
Jakarta at about 12:00 o’clock midnight, the
party who was supposed to fetch them from
the airport had already left and they had to
arrange for their transportation to the hotel at a
very late hour. After the series of nerve-
wracking experiences, private respondent
became ill and was unable to participate in the
tournament. 6
Upon his return to the Philippines, private
respondent brought the matter to the attention
of PAL. He sent a demand letter to PAL on 20
December 1993 and another to Singapore
Airlines on 21 March 1994. However, both
airlines disowned liability and blamed each
other for the fiasco. On 15 August 1997,
private respondent filed a Complaint for
Damages before the RTC docketed as Civil
Case No. 23773, seeking compensation for
moral damages in the amount
of P1,000,000.00 and attorney’s fees.7
231
Instead of filing an answer to private
respondent’s Complaint, PAL filed a Motion to
Dismiss8 dated 18 September 1998 on the
ground that the said complaint was barred on
the ground of prescription under Section 1(f) of
Rule 16 of the Rules of Court.9 PAL argued
that the Warsaw Convention,10 particularly
Article 29 thereof,11 governed this case, as it
provides that any claim for damages in
connection with the international transportation
of persons is subject to the prescription period
of two years. Since the Complaint was filed on
15 August 1997, more than three years after
PAL received the demand letter on 25 January
1994, it was already barred by prescription.
On 9 June 1998, the RTC issued an
Order12 denying the Motion to Dismiss. It
maintained that the provisions of the Civil
Code and other pertinent laws of the
Philippines, not the Warsaw Convention, were
applicable to the present case.
The Court of Appeals, in its assailed Decision
dated 17 August 2001, likewise dismissed the
Petition for Certiorari filed by PAL and affirmed
the 9 June 1998 Order of the RTC. It
pronounced that the application of the Warsaw
Convention must not be construed to preclude
the application of the Civil Code and other
pertinent laws. By applying Article 1144 of the
Civil Code,13 which allowed for a ten-year
prescription period, the appellate court
declared that the Complaint filed by private
respondent should not be dismissed.14
Hence, the present Petition, in which petitioner
raises the following issues:
I for personal injuries and the interests of air
THE COURT OF APPEALS ERRED
IN NOT GIVING DUE COURSE TO
THE PETITION AS RESPONDENT
JUDGE COMMITED GRAVE ABUSE
OF DISCRETION AMOUNTING TO
LACK OF JURSIDICTION IN
DENYING PAL’S MOTION TO
DISMISS.
II
THE COURT OF APPEALS ERRED
IN NOT APPLYING THE
PROVISIONS OF THE WARSAW
CONVENTION DESPITE THE FACT
THAT GRIÑO’S CAUSE OF ACTION
AROSE FROM A BREACH OF
CONTRACT FOR INTERNATIONAL
AIR TRANSPORT.
III
THE COURT OF APPEALS ERRED
IN NOT HOLDING THAT THE
COMPLAINT FILED BY GRIÑO
BEYOND THE TWO (2)-YEAR
PERIOD PROVIDED UNDER THE
WARSAW CONVENTION IS
ALREADY BARRED BY
PRESCRIPTION.15
The petition is without merit.
In determining whether PAL’s Motion to
Dismiss should have been granted by the trial
court, it must be ascertained if all the claims
made by the private respondent in his
Complaint are covered by the Warsaw
Convention, which effectively bars all claims
made outside the two-year prescription period
provided under Article 29 thereof. If the
Warsaw Convention covers all of private
respondent’s claims, then Civil Case No.
23773 has already prescribed and should
therefore be dismissed. On the other hand, if
some, if not all, of respondent’s claims are
outside the coverage of the Warsaw
Convention, the RTC may still proceed to hear
the case.
The Warsaw Convention applies to "all
international transportation of persons,
baggage or goods performed by any aircraft
for hire." It seeks to accommodate or balance
the interests of passengers seeking recovery
carriers seeking to limit potential liability. It
employs a scheme of strict liability favoring
passengers and imposing damage caps to
benefit air carriers.16 The cardinal purpose of
the Warsaw Convention is to provide
uniformity of rules governing claims arising
from international air travel; thus, it precludes
a passenger from maintaining an action for
personal injury damages under local law when
his or her claim does not satisfy the conditions
of liability under the Convention.17
Article 19 of the Warsaw Convention provides
for liability on the part of a carrier for "damages
occasioned by delay in the transportation by
air of passengers, baggage or goods." Article
24 excludes other remedies by further
231
providing that "(1) in the cases covered by
articles 18 and 19, any action for damages,
however founded, can only be brought subject
to the conditions and limits set out in this
convention." Therefore, a claim covered by the
Warsaw Convention can no longer be
recovered under local law, if the statute of
limitations of two years has already lapsed.
Nevertheless, this Court notes that
jurisprudence in the Philippines and the United
States also recognizes that the Warsaw
Convention does not "exclusively regulate" the
relationship between passenger and carrier on
an international flight. This Court finds that the
present case is substantially similar to cases in
which the damages sought were considered to
be outside the coverage of the Warsaw
Convention.
In United Airlines v. Uy,18 this Court
distinguished between the (1) damage to the
passenger’s baggage and (2) humiliation he
suffered at the hands of the airline’s
employees. The first cause of action was
covered by the Warsaw Convention which
prescribes in two years, while the second was
covered by the provisions of the Civil Code on
torts, which prescribes in four years.
Similar distinctions were made in American
jurisprudence. In Mahaney v. Air France,19 a
passenger was denied access to an airline
flight between New York and Mexico, despite
the fact that she held a confirmed reservation.
The court therein ruled that if the plaintiff were
to claim damages based solely on the delay
she experienced – for instance, the costs of
renting a van, which she had to arrange on her
own as a consequence of the delay – the
complaint would be barred by the two-year
statute of limitations. However, where the
plaintiff alleged that the airlines subjected her
to unjust discrimination or undue or
unreasonable preference or disadvantage, an
act punishable under the United States laws,
then the plaintiff may claim purely nominal
compensatory damages for humiliation and
hurt feelings, which are not provided for by the
Warsaw Convention. In another case, Wolgel
v. Mexicana Airlines,20the court pronounced
that actions for damages for the "bumping off"
itself, rather than the incidental damages due
to the delay, fall outside the Warsaw
Convention and do not prescribe in two years.
In the Petition at bar, private respondent’s
Complaint alleged that both PAL and
Singapore Airlines were guilty of gross
negligence, which resulted in his being
subjected to "humiliation, embarrassment,
mental anguish, serious anxiety, fear and
distress."21 The emotional harm suffered by
the private respondent as a result of having
been unreasonably and unjustly prevented
from boarding the plane should be
distinguished from the actual damages which
resulted from the same incident. Under the
Civil Code provisions on tort,22 such emotional
harm gives rise to compensation where gross
negligence or malice is proven.
The instant case is comparable to the case
of Lathigra v. British Airways.23
In Lathigra, it was held that the airlines’
negligent act of reconfirming the passenger’s
reservation days before departure and failing
to inform the latter that the flight had already
been discontinued is not among the acts
covered by the Warsaw Convention, since the
alleged negligence did not occur during the
performance of the contract of carriage but,
rather, days before the scheduled flight.
In the case at hand, Singapore Airlines barred
private respondent from boarding the
Singapore Airlines flight because PAL
allegedly failed to endorse the tickets of
private respondent and his companions,
despite PAL’s assurances to respondent that
Singapore Airlines had already confirmed their
passage. While this fact still needs to be heard
and established by adequate proof before the
RTC, an action based on these allegations will
not fall under the Warsaw Convention, since
the purported negligence on the part of PAL
did not occur during the performance of the
contract of carriage but days before the
scheduled flight. Thus, the present action
cannot be dismissed based on the statute of
limitations provided under Article 29 of the
Warsaw Convention.
Had the present case merely consisted of
claims incidental to the airlines’ delay in
transporting their passengers, the private
respondent’s Complaint would have been
time-barred under Article 29 of the Warsaw
Convention. However, the present case
involves a special species of injury resulting
from the failure of PAL and/or Singapore
Airlines to transport private respondent from
231
Singapore to Jakarta – the profound distress,
fear, anxiety and humiliation that private
respondent experienced when, despite PAL’s
earlier assurance that Singapore Airlines
confirmed his passage, he was prevented from
boarding the plane and he faced the daunting
possibility that he would be stranded in
Singapore Airport because the PAL office was
already closed.
These claims are covered by the Civil Code
provisions on tort, and not within the purview
of the Warsaw Convention. Hence, the
applicable prescription period is that provided
under Article 1146 of the Civil Code:
Art. 1146. The following actions must
be instituted within four years:
(1) Upon an injury to the rights of the
plaintiff;
(2) Upon a quasi-delict.
Private respondent’s Complaint was filed with
the RTC on 15 August 1997, which was less
than four years since PAL received his
extrajudicial demand on 25 January 1994.
Thus, private respondent’s claims have not yet
prescribed and PAL’s Motion to Dismiss must
be denied.
Moreover, should there be any doubt as to the
prescription of private respondent’s Complaint,
the more prudent action is for the RTC to
continue hearing the same and deny the
Motion to Dismiss. Where it cannot be
determined with certainty whether the action
has already prescribed or not, the defense of
prescription cannot be sustained on a mere
motion to dismiss based on what appears to
be on the face of the complaint. 24 And where
the ground on which prescription is based
does not appear to be indubitable, the court
may do well to defer action on the motion to
dismiss until after trial on the merits.25
IN VIEW OF THE FOREGOING, the instant
Petition is DENIED. The assailed Decision of
the Court of Appeals in CA-G.R. SP No.
48664, promulgated on 17 August 2001
is AFFIRMED. Costs against the petitioner.
SO ORDERED.
Ynares-Santiago, Chairperson, Austria-
Martinez, Nachura, Reyes, JJ., concur.
THIRD DIVISION
G.R. No. 146018               June 25, 2003
EDGAR COKALIONG SHIPPING LINES,
INC., Petitioner, 
vs.
UCPB GENERAL INSURANCE COMPANY,
INC., Respondent.
DECISION
PANGANIBAN, J.:
The liability of a common carrier for the loss of
goods may, by stipulation in the bill of lading,
be limited to the value declared by the shipper.
On the other hand, the liability of the insurer is
determined by the actual value covered by the
insurance policy and the insurance premiums
paid therefor, and not necessarily by the value
declared in the bill of lading.
The Case
Before the Court is a Petition for
Review1 under Rule 45 of the Rules of Court,
seeking to set aside the August 31, 2000
Decision2 and the November 17, 2000
Resolution3 of the Court of Appeals 4 (CA) in
CA-GR SP No. 62751. The dispositive part of
the Decision reads:
"IN THE LIGHT OF THE FOREGOING, the
appeal is GRANTED. The Decision appealed
from is REVERSED. [Petitioner] is hereby
condemned to pay to [respondent] the total
amount of ₱148,500.00, with interest thereon,
at the rate of 6% per annum, from date of this
Decision of the Court. [Respondent’s] claim for
attorney’s fees [is] DISMISSED. [Petitioner’s]
counterclaims are DISMISSED."5
The assailed Resolution denied petitioner’s
Motion for Reconsideration.
231
On the other hand, the disposition of the
Regional Trial Court’s 6 Decision,7 which was
later reversed by the CA, states:
"WHEREFORE, premises considered, the
case is hereby DISMISSED for lack of merit.
"No cost."8
The Facts
The facts of the case are summarized by the
appellate court in this wise:
"Sometime on December 11, 1991, Nestor
Angelia delivered to the Edgar Cokaliong
Shipping Lines, Inc. (now Cokaliong Shipping
Lines), [petitioner] for brevity, cargo consisting
of one (1) carton of Christmas décor and two
(2) sacks of plastic toys, to be transported on
board the M/V Tandag on its Voyage No. T-
189 scheduled to depart from Cebu City, on
December 12, 1991, for Tandag, Surigao del
Sur. [Petitioner] issued Bill of Lading No. 58,
freight prepaid, covering the cargo. Nestor
Angelia was both the shipper and consignee of
the cargo valued, on the face thereof, in the
amount of ₱6,500.00. Zosimo Mercado
likewise delivered cargo to [petitioner],
consisting of two (2) cartons of plastic toys and
Christmas decor, one (1) roll of floor mat and
one (1) bundle of various or assorted goods
for transportation thereof from Cebu City to
Tandag, Surigao del Sur, on board the said
vessel, and said voyage. [Petitioner]
issued Bill of Lading No. 59 covering the cargo
which, on the face thereof, was valued in the
amount of ₱14,000.00. Under the Bill of
Lading, Zosimo Mercado was both the shipper
and consignee of the cargo.
"On December 12, 1991, Feliciana Legaspi
insured the cargo, covered by Bill of Lading
No. 59, with the UCPB General Insurance Co.,
Inc., [respondent] for brevity, for the amount of
₱100,000.00 ‘against all risks’ under Open
Policy No. 002/9 1/254 for which she was
issued, by [respondent], Marine Risk Note No.
18409 on said date. She also insured the
cargo covered by Bill of Lading No. 58, with
[respondent], for the amount of ₱50,000.00,
under Open Policy No. 002/9 1/254  on the
basis of which [respondent] issued Marine
Risk Note No. 18410 on said date.
"When the vessel left port, it had thirty-four
(34) passengers and assorted cargo on board,
including the goods of Legaspi. After the
vessel had passed by the Mandaue-Mactan
Bridge, fire ensued in the engine room, and,
despite earnest efforts of the officers and crew
of the vessel, the fire engulfed and destroyed
the entire vessel resulting in the loss of the
vessel and the cargoes therein. The Captain
filed the required Marine Protest.
"Shortly thereafter, Feliciana Legaspi filed a
claim, with [respondent], for the value of the
cargo insured under Marine Risk Note No.
18409 and covered by Bill of Lading No. 59.
She submitted, in support of her claim,
a Receipt, dated December 11, 1991,
purportedly signed by Zosimo Mercado,
and Order Slips purportedly signed by him for
the goods he received from Feliciana Legaspi
valued in the amount of ₱110,056.00.
[Respondent] approved the claim of Feliciana
Legaspi and drew and issued UCPB Check
No. 612939, dated March 9, 1992, in the net
amount of ₱99,000.00, in settlement of her
claim after which she executed a Subrogation
Receipt/Deed, for said amount, in favor of
[respondent]. She also filed a claim for the
value of the cargo covered by Bill of Lading
No. 58. She submitted to [respondent]
a Receipt, dated December 11, 1991
and Order Slips, purportedly signed by Nestor
Angelia for the goods he received from
Feliciana Legaspi valued at ₱60,338.00.
[Respondent] approved her claim and remitted
to Feliciana Legaspi the net amount of
₱49,500.00, after which she signed
a Subrogation Receipt/Deed, dated March 9,
1992, in favor of [respondent].
"On July 14, 1992, [respondent], as subrogee
of Feliciana Legaspi, filed a complaint
anchored on torts against [petitioner], with the
Regional Trial Court of Makati City, for the
collection of the total principal amount of
₱148,500.00, which it paid to Feliciana
Legaspi for the loss of the cargo, praying that
judgment be rendered in its favor and against
the [petitioner] as follows:
‘WHEREFORE, it is respectfully prayed of this
Honorable Court that after due hearing,
judgment be rendered ordering [petitioner] to
pay [respondent] the following.
1. Actual damages in the amount of
₱148,500.00 plus interest thereon at
the legal rate from the time of filing of
this complaint until fully paid;
231
 2. Attorney’s fees in the amount of
₱10,000.00; and
3. Cost of suit.
‘[Respondent] further prays for such other
reliefs and remedies as this Honorable Court
may deem just and equitable under the
premises.’
"[Respondent] alleged, inter alia, in its
complaint, that the cargo subject of its
complaint was delivered to, and received by,
[petitioner] for transportation to Tandag,
Surigao del Sur under ‘Bill of Ladings,’
Annexes ‘A’ and ‘B’ of the complaint; that the
loss of the cargo was due to the negligence of
the [petitioner]; and that Feliciana Legaspi had
executed Subrogation Receipts/Deeds in favor
of [respondent] after paying to her the value of
the cargo on account of the Marine Risk
Notes it issued in her favor covering the cargo.
"In its Answer to the complaint, [petitioner]
alleged that: (a) [petitioner] was cleared by the
Board of Marine Inquiry of any negligence in
the burning of the vessel; (b) the complaint
stated no cause of action against [petitioner];
and (c) the shippers/consignee had already
been paid the value of the goods as stated in
the Bill of Lading and, hence, [petitioner]
cannot be held liable for the loss of the cargo
beyond the value thereof declared in the Bill of
Lading.
"After [respondent] rested its case, [petitioner]
prayed for and was allowed, by the Court a
quo, to take the depositions of Chester
Cokaliong, the Vice-President and Chief
Operating Officer of [petitioner], and a resident
of Cebu City, and of Noel Tanyu, an officer of
the Equitable Banking Corporation, in Cebu
City, and a resident of Cebu City, to be given
before the Presiding Judge of Branch 106 of
the Regional Trial Court of Cebu City. Chester
Cokaliong and Noel Tanyu did testify, by way
of deposition, before the Court and
declared inter alia, that: [petitioner] is a family
corporation like the Chester Marketing, Inc.;
Nestor Angelia had been doing business with
[petitioner] and Chester Marketing, Inc., for
years, and incurred an account with Chester
Marketing, Inc. for his purchases from said
corporation; [petitioner] did issue Bills of
Lading Nos. 58 and 59 for the cargo described
therein with Zosimo Mercado and Nestor
Angelia as shippers/consignees, respectively;
the engine room of the M/V Tandag caught fire
after it passed the Mandaue/Mactan Bridge
resulting in the total loss of the vessel and its
cargo; an investigation was conducted by the
Board of Marine Inquiry of the Philippine Coast
Guard which rendered a Report, dated
February 13, 1992 absolving [petitioner] of any
responsibility on account of the fire, which
Report of the Board was approved by the
District Commander of the Philippine Coast
Guard; a few days after the sinking of the
vessel, a representative of the Legaspi
Marketing filed claims for the values of the
goods under Bills of Lading Nos. 58 and 59 in
behalf of the shippers/consignees, Nestor
Angelia and Zosimo Mercado; [petitioner] was
able to ascertain, from the
shippers/consignees and the representative of
the Legaspi Marketing that the cargo covered
by Bill of Lading No. 59 was owned by Legaspi
Marketing and consigned to Zosimo Mercado
while that covered by Bill of Lading No. 58 was
purchased by Nestor Angelia from the Legaspi
Marketing; that [petitioner] approved the claim
of Legaspi Marketing for the value of the cargo
under Bill of Lading No. 59 and remitted to
Legaspi Marketing the said amount under
Equitable Banking Corporation Check No.
20230486 dated August 12, 1992, in the
amount of ₱14,000.00 for which the
representative of the Legaspi Marketing
signed Voucher No. 4379, dated August 12,
1992, for the said amount of ₱14,000.00 in full
payment of claims under Bill of Lading No. 59;
that [petitioner] approved the claim of Nestor
Angelia in the amount of ₱6,500.00 but that
since the latter owed Chester Marketing, Inc.,
for some purchases, [petitioner] merely set off
the amount due to Nestor Angelia under Bill of
Lading No. 58 against his account with
Chester Marketing, Inc.; [petitioner]
lost/[misplaced] the original of the check after
it was received by Legaspi Marketing, hence,
the production of the microfilm copy by Noel
Tanyu of the Equitable Banking Corporation;
[petitioner] never knew, before settling with
Legaspi Marketing and Nestor Angelia that the
cargo under both Bills of Lading were insured
with [respondent], or that Feliciana Legaspi
filed claims for the value of the cargo with
[respondent] and that the latter approved the
claims of Feliciana Legaspi and paid the total
amount of ₱148,500.00 to her; [petitioner]
came to know, for the first time, of the
payments by [respondent] of the claims of
Feliciana Legaspi when it was served with the
summons and complaint, on October 8, 1992;
after settling his claim, Nestor Angelia x x x
231
executed the Release and Quitclaim, dated
July 2, 1993, and Affidavit, dated July 2, 1993
in favor of [respondent]; hence, [petitioner]
was absolved of any liability for the loss of the
cargo covered by Bills of Lading Nos. 58 and
59; and even if it was, its liability should not
exceed the value of the cargo as stated in
the Bills of Lading.
"[Petitioner] did not anymore present any other
witnesses on its evidence-in-chief. x x
x"9 (Citations omitted)
Ruling of the Court of Appeals
The CA held that petitioner had failed "to prove
that the fire which consumed the vessel and its
cargo was caused by something other than its
negligence in the upkeep, maintenance and
operation of the vessel."10
Petitioner had paid ₱14,000 to Legaspi
Marketing for the cargo covered by Bill of
Lading No. 59. The CA, however, held that the
payment did not extinguish petitioner’s
obligation to respondent, because there was
no evidence that Feliciana Legaspi (the
insured) was the owner/proprietor of Legaspi
Marketing. The CA also pointed out the
impropriety of treating the claim under Bill of
Lading No. 58 -- covering cargo valued therein
at ₱6,500 -- as a setoff against Nestor
Angelia’s account with Chester Enterprises,
Inc.
Finally, it ruled that respondent "is not bound
by the valuation of the cargo under the Bills of
Lading, x x x nor is the value of the cargo
under said Bills of Lading conclusive on the
[respondent]. This is so because, in the first
place, the goods were insured with the
[respondent] for the total amount of
₱150,000.00, which amount may be
considered as the face value of the goods."11
Hence this Petition. 12
Issues
Petitioner raises for our consideration the
following alleged errors of the CA:
"I
"The Honorable Court of Appeals erred,
granting arguendo that petitioner is liable, in
holding that petitioner’s liability should be
based on the ‘actual insured value’ of the
goods and not from actual valuation declared
by the shipper/consignee in the bill of lading.
"II
"The Court of Appeals erred in not affirming
the findings of the Philippine Coast Guard, as
sustained by the trial court a quo, holding that
the cause of loss of the aforesaid cargoes
under Bill of Lading Nos. 58 and 59 was due to
force majeure and due diligence was
[exercised] by petitioner prior to, during and
immediately after the fire on [petitioner’s]
vessel.
"III
"The Court of Appeals erred in not holding that
respondent UCPB General Insurance has no
cause of action against the petitioner." 13
In sum, the issues are: (1) Is petitioner liable
for the loss of the goods? (2) If it is liable, what
is the extent of its liability?
This Court’s Ruling
The Petition is partly meritorious.
First Issue:
Liability for Loss
Petitioner argues that the cause of the loss of
the goods, subject of this case, was force
majeure. It adds that its exercise of due
diligence was adequately proven by the
findings of the Philippine Coast Guard.
We are not convinced. The uncontroverted
findings of the Philippine Coast Guard show
that the M/V Tandag sank due to a fire, which
resulted from a crack in the auxiliary engine
fuel oil service tank. Fuel spurted out of the
crack and dripped to the heating exhaust
manifold, causing the ship to burst into flames.
The crack was located on the side of the fuel
oil tank, which had a mere two-inch gap from
the engine room walling, thus precluding
constant inspection and care by the crew.
231
Having originated from an unchecked crack in
the fuel oil service tank, the fire could not have
been caused by force majeure. Broadly
speaking, force majeure generally applies to a
natural accident, such as that caused by a
lightning, an earthquake, a tempest or a public
enemy.14 Hence, fire is not considered a
natural disaster or calamity. In Eastern
Shipping Lines, Inc. v. Intermediate Appellate
Court,15 we explained:
"x x x. This must be so as it arises almost
invariably from some act of man or by human
means. It does not fall within the category of
an act of God unless caused by lighting or by
other natural disaster or calamity. It may even
be caused by the actual fault or privity of the
carrier.
"Article 1680 of the Civil Code, which
considers fire as an extraordinary fortuitous
event refers to leases or rural lands where a
reduction of the rent is allowed when more
than one-half of the fruits have been lost due
to such event, considering that the law adopts
a protective policy towards agriculture.
"As the peril of fire is not comprehended within
the exceptions in Article 1734, supra, Article
1735 of the Civil Code provides that in all
cases other than those mentioned in Article
1734, the common carrier shall be presumed
to have been at fault or to have acted
negligently, unless it proves that it has
observed the extraordinary diligence required
by law."
Where loss of cargo results from the failure of
the officers of a vessel to inspect their ship
frequently so as to discover the existence of
cracked parts, that loss cannot be attributed to
force majeure, but to the negligence of those
officials.16
The law provides that a common carrier is
presumed to have been negligent if it fails to
prove that it exercised extraordinary vigilance
over the goods it transported. Ensuring the
seaworthiness of the vessel is the first step in
exercising the required vigilance. Petitioner did
not present sufficient evidence showing what
measures or acts it had undertaken to ensure
the seaworthiness of the vessel. It failed to
show when the last inspection and care of the
auxiliary engine fuel oil service tank was
made, what the normal practice was for its
maintenance, or some other evidence to
establish that it had exercised extraordinary
diligence. It merely stated that constant
inspection and care were not possible, and
that the last time the vessel was dry-docked
was in November 1990. Necessarily, in
accordance with Article 173517 of the Civil
Code, we hold petitioner responsible for the
loss of the goods covered by Bills of Lading
Nos. 58 and 59.
Second Issue:
Extent of Liability
Respondent contends that petitioner’s liability
should be based on the actual insured value of
the goods, subject of this case. On the other
hand, petitioner claims that its liability should
be limited to the value declared by the
shipper/consignee in the Bill of Lading.
The records18 show that the Bills of Lading
covering the lost goods contain the stipulation
that in case of claim for loss or for damage to
the shipped merchandise or property, "[t]he
liability of the common carrier x x x shall not
exceed the value of the goods as appearing in
the bill of lading."19 The attempt by respondent
to make light of this stipulation is
unconvincing. As it had the consignees’ copies
of the Bills of Lading, 20 it could have easily
produced those copies, instead of relying on
mere allegations and suppositions. However, it
presented mere photocopies thereof to
disprove petitioner’s evidence showing the
existence of the above stipulation.
A stipulation that limits liability is valid 21 as long
as it is not against public policy. In Everett
Steamship Corporation v. Court of
Appeals,22 the Court stated:
"A stipulation in the bill of lading limiting the
common carrier’s liability for loss or
destruction of a cargo to a certain sum, unless
the shipper or owner declares a greater value,
is sanctioned by law, particularly Articles 1749
and 1750 of the Civil Code which provides:
‘Art. 1749. A stipulation that the common
carrier’s liability is limited to the value of the
goods appearing in the bill of lading, unless
the shipper or owner declares a greater value,
is binding.’
‘Art. 1750. A contract fixing the sum that may
be recovered by the owner or shipper for the
231
loss, destruction, or deterioration of the goods
is valid, if it is reasonable and just under the
circumstances, and has been freely and fairly
agreed upon.’
"Such limited-liability clause has also been
consistently upheld by this Court in a number
of cases. Thus, in Sea-Land Service, Inc. vs.
Intermediate Appellate Court, we ruled:
‘It seems clear that even if said section 4 (5) of
the Carriage of Goods by Sea Act did not
exist, the validity and binding effect of the
liability limitation clause in the bill of lading
here are nevertheless fully sustainable on the
basis alone of the cited Civil Code Provisions.
That said stipulation is just and reasonable is
arguable from the fact that it echoes Art. 1750
itself in providing a limit to liability only if a
greater value is not declared for the shipment
in the bill of lading. To hold otherwise would
amount to questioning the justness and
fairness of the law itself, and this the private
respondent does not pretend to do. But over
and above that consideration, the just and
reasonable character of such stipulation is
implicit in it giving the shipper or owner the
option of avoiding accrual of liability limitation
by the simple and surely far from onerous
expedient of declaring the nature and value of
the shipment in the bill of lading.’
"Pursuant to the afore-quoted provisions of
law, it is required that the stipulation limiting
the common carrier’s liability for loss must be
‘reasonable and just under the circumstances,
and has been freely and fairly agreed upon.
"The bill of lading subject of the present
controversy specifically provides, among
others:
’18. All claims for which the carrier may be
liable shall be adjusted and settled on the
basis of the shipper’s net invoice cost plus
freight and insurance premiums, if paid, and in
no event shall the carrier be liable for any loss
of possible profits or any consequential loss.
‘The carrier shall not be liable for any loss of or
any damage to or in any connection with,
goods in an amount exceeding One Hundred
Thousand Yen in Japanese Currency
(¥100,000.00) or its equivalent in any other
currency per package or customary freight unit
(whichever is least) unless the value of the
goods higher than this amount is declared in
writing by the shipper before receipt of the
goods by the carrier and inserted in the Bill of
Lading and extra freight is paid as required.’
"The above stipulations are, to our mind,
reasonable and just.1avvphi1 In the bill of
lading, the carrier made it clear that its liability
would only be up to One Hundred Thousand
(Y100,000.00) Yen. However, the shipper,
Maruman Trading, had the option to declare a
higher valuation if the value of its cargo was
higher than the limited liability of the carrier.
Considering that the shipper did not declare a
higher valuation, it had itself to blame for not
complying with the stipulations." (Italics
supplied)
In the present case, the stipulation limiting
petitioner’s liability is not contrary to public
policy. In fact, its just and reasonable
character is evident. The shippers/consignees
may recover the full value of the goods by the
simple expedient of declaring the true value of
the shipment in the Bill of Lading. Other than
the payment of a higher freight, there was
nothing to stop them from placing the actual
value of the goods therein. In fact, they
committed fraud against the common carrier
by deliberately undervaluing the goods in their
Bill of Lading, thus depriving the carrier of its
proper and just transport fare.
Concededly, the purpose of the limiting
stipulation in the Bill of Lading is to protect the
common carrier. Such stipulation obliges the
shipper/consignee to notify the common
carrier of the amount that the latter may be
liable for in case of loss of the goods. The
common carrier can then take appropriate
measures -- getting insurance, if needed, to
cover or protect itself. This precaution on the
part of the carrier is reasonable and prudent.
Hence, a shipper/consignee that undervalues
the real worth of the goods it seeks to
transport does not only violate a valid
contractual stipulation, but commits a
fraudulent act when it seeks to make the
common carrier liable for more than the
amount it declared in the bill of lading.
Indeed, Zosimo Mercado and Nestor Angelia
misled petitioner by undervaluing the goods in
their respective Bills of Lading. Hence,
petitioner was exposed to a risk that was
deliberately hidden from it, and from which it
could not protect itself.
231
It is well to point out that, for assuming a
higher risk (the alleged actual value of the
goods) the insurance company was paid the
correct higher premium by Feliciana Legaspi;
while petitioner was paid a fee lower than what
it was entitled to for transporting the goods
that had been deliberately undervalued by the
shippers in the Bill of Lading. Between the two
of them, the insurer should bear the loss in
excess of the value declared in the Bills of
Lading. This is the just and equitable solution.
In Aboitiz Shipping Corporation v. Court of
Appeals,23 the description of the nature and the
value of the goods shipped were declared and
reflected in the bill of lading, like in the present
case. The Court therein considered this
declaration as the basis of the carrier’s liability
and ordered payment based on such amount.
Following this ruling, petitioner should not be
held liable for more than what was declared by
the shippers/consignees as the value of the
goods in the bills of lading.
We find no cogent reason to disturb the CA’s
finding that Feliciana Legaspi was the owner
of the goods covered by Bills of Lading Nos.
58 and 59. Undoubtedly, the goods were
merely consigned to Nestor Angelia and
Zosimo Mercado, respectively; thus, Feliciana
Legaspi or her subrogee (respondent) was
entitled to the goods or, in case of loss, to
compensation therefor. There is no evidence
showing that petitioner paid her for the loss of
those goods. It does not even claim to have
paid her.
On the other hand, Legaspi Marketing filed
with petitioner a claim for the lost goods under
Bill of Lading No. 59, for which the latter
subsequently paid ₱14,000. But nothing in the
records convincingly shows that the former
was the owner of the goods. Respondent was,
however, able to prove that it was Feliciana
Legaspi who owned those goods, and who
was thus entitled to payment for their loss.
Hence, the claim for the goods under Bill of
Lading No. 59 cannot be deemed to have
been extinguished, because payment was
made to a person who was not entitled
thereto.
With regard to the claim for the goods that
were covered by Bill of Lading No. 58 and
valued at ₱6,500, the parties have not
convinced us to disturb the findings of the CA
that compensation could not validly take place.
Thus, we uphold the appellate court’s ruling on
this point.
WHEREFORE, the Petition is
hereby PARTIALLY GRANTED. The assailed
Decision is MODIFIED in the sense that
petitioner is ORDERED to pay respondent the
sums of ₱14,000 and ₱6,500, which represent
the value of the goods stated in Bills of Lading
Nos. 59 and 58, respectively. No costs.
SO ORDERED.
Puno, (Chairman), Sandoval-Gutierrez,
Corona, and Carpio-Morales, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION 
G.R. No. 102316 June 30, 1997
VALENZUELA HARDWOOD AND
INDUSTRIAL SUPPLY INC., petitioner, 
vs.
COURT OF APPEALS AND SEVEN
BROTHERS SHIPPING
CORPORATION, respondents.
PANGANIBAN, J.:
Is a stipulation in a charter party that the
"(o)wners shall not be responsible for loss,
split, short-landing, breakages and any kind of
damages to the cargo" 1 valid? This is the
main question raised in this petition for review
assailing the Decision of Respondent Court of
Appeals 2 in CA-G.R. No. CV-20156
promulgated on October 15, 1991. The Court
of Appeals modified the judgment of the
Regional Trial Court of Valenzuela, Metro
Manila, Branch 171, the dispositive portion of
which reads:
WHEREFORE, Judgment is hereby
rendered ordering South Sea Surety
and Insurance Co., Inc. to pay plaintiff
the sum of TWO MILLION PESOS
(P2,000,000.00) representing the value
of the policy of the lost logs with legal
interest thereon from the date of
demand on February 2, 1984 until the
amount is fully paid or in the
alternative, defendant Seven Brothers
231
 Shipping Corporation to pay plaintiff
the amount of TWO MILLION PESOS
(2,000,000.00) representing the value
of lost logs plus legal interest from the
date of demand on April 24, 1984 until
full payment thereof; the reasonable
attorney's fees in the amount
equivalent to five (5) percent of the
amount of the claim and the costs of
the suit.
Plaintiff is hereby ordered to pay
defendant Seven Brothers Shipping
Corporation the sum of TWO
HUNDRED THIRTY THOUSAND
PESOS (P230,000.00) representing
the balance of the stipulated freight
charges.
Defendant South Sea Surety and
Insurance Company's counterclaim is
hereby dismissed.
In its assailed Decision, Respondent Court of
Appeals held:
WHEREFORE, the appealed judgment
is hereby AFFIRMED except in so far
(sic) as the liability of the Seven
Brothers Shipping Corporation to the
plaintiff is concerned which is hereby
REVERSED and SET ASIDE. 3
The Facts
The factual antecedents of this case as
narrated in the Court of Appeals Decision are
as follows:
It appears that on 16 January 1984,
plaintiff (Valenzuela Hardwood and
Industrial Supply, Inc.) entered into an
agreement with the defendant Seven
Brothers (Shipping Corporation)
whereby the latter undertook to load on
board its vessel M/V Seven
Ambassador the former's lauan round
logs numbering 940 at the port of
Maconacon, Isabela for shipment to
Manila.
On 20 January 1984, plaintiff insured
the logs against loss and/or damage
with defendant South Sea Surety and
Insurance Co., Inc. for P2,000,000.00
and the latter issued its Marine Cargo
Insurance Policy No. 84/24229 for
P2,000,000.00 on said date.
On 24 January 1984, the plaintiff gave
the check in payment of the premium
on the insurance policy to Mr. Victorio
Chua.
In the meantime, the said vessel M/V
Seven Ambassador sank on 25
January 1984 resulting in the loss of
the plaintiff's insured logs.
On 30 January 1984, a check for
P5,625.00 (Exh. "E") to cover payment
of the premium and documentary
stamps due on the policy was tendered
due to the insurer but was not
accepted. Instead, the South Sea
Surety and Insurance Co., Inc.
cancelled the insurance policy it issued
as of the date of the inception for non-
payment of the premium due in
accordance with Section 77 of the
Insurance Code.
On 2 February 1984, plaintiff
demanded from defendant South Sea
Surety and Insurance Co., Inc. the
payment of the proceeds of the policy
but the latter denied liability under the
policy. Plaintiff likewise filed a formal
claim with defendant Seven Brothers
Shipping Corporation for the value of
the lost logs but the latter denied the
claim.
After due hearing and trial, the court a
quo rendered judgment in favor of
plaintiff and against defendants. Both
defendants shipping corporation and
the surety company appealed.
Defendant-appellant Seven Brothers
Shipping Corporation impute (sic) to
the court a quo the following
assignment of errors, to wit:
A. The lower court erred in holding that
the proximate cause of the sinking of
the vessel Seven Ambassadors, was
not due to fortuitous event but to the
negligence of the captain in stowing
and securing the logs on board,
causing the iron chains to snap and
the logs to roll to the portside.
231
 B. The lower court erred in declaring
that the non-liability clause of the
Seven Brothers Shipping Corporation
from logs (sic) of the cargo stipulated
in the charter party is void for being
contrary to public policy invoking article
1745 of the New Civil Code.
C. The lower court erred in holding
defendant-appellant Seven Brothers
Shipping Corporation liable in the
alternative and ordering/directing it to
pay plaintiff-appellee the amount of
two million (2,000,000.00) pesos
representing the value of the logs plus
legal interest from date of demand until
fully paid.
D. The lower court erred in ordering
defendant-appellant Seven Brothers
Shipping Corporation to pay appellee
reasonable attorney's fees in the
amount equivalent to 5% of the
amount of the claim and the costs of
the suit.
E. The lower court erred in not
awarding defendant-appellant Seven
Brothers Corporation its counter-claim
for attorney's fees.
F. The lower court erred in not
dismissing the complaint against
Seven Brothers Shipping Corporation.
Defendant-appellant South Sea Surety and
Insurance Co., Inc. assigns the following
errors:
A. The trial court erred in holding that
Victorio Chua was an agent of
defendant-appellant South Sea Surety
and Insurance Company, Inc. and
likewise erred in not holding that he
was the representative of the
insurance broker Columbia Insurance
Brokers, Ltd.
B. The trial court erred in holding that
Victorio Chua received
compensation/commission on the
premiums paid on the policies issued
by the defendant-appellant South Sea
Surety and Insurance Company, Inc.
C. The trial court erred in not applying
Section 77 of the Insurance Code.
D. The trial court erred in disregarding
the "receipt of payment clause"
attached to and forming part of the
Marine Cargo Insurance Policy No.
84/24229.
E. The trial court in disregarding the
statement of account or bill stating the
amount of premium and documentary
stamps to be paid on the policy by the
plaintiff-appellee.
F. The trial court erred in disregarding
the endorsement of cancellation of the
policy due to non-payment of premium
and documentary stamps.
G. The trial court erred in ordering
defendant-appellant South Sea Surety
and Insurance Company, Inc. to pay
plaintiff-appellee P2,000,000.00
representing value of the policy with
legal interest from 2 February 1984
until the amount is fully paid,
H. The trial court erred in not awarding
to the defendant-appellant the
attorney's fees alleged and proven in
its counterclaim.
The primary issue to be resolved
before us is whether defendants
shipping corporation and the surety
company are liable to the plaintiff for
the latter's lost logs. 4
The Court of Appeals affirmed in part the RTC
judgment by sustaining the liability of South
Sea Surety and Insurance Company ("South
Sea"), but modified it by holding that Seven
Brothers Shipping Corporation ("Seven
Brothers") was not liable for the lost cargo. 5 In
modifying the RTC judgment, the respondent
appellate court ratiocinated thus:
It appears that there is a stipulation in
the charter party that the ship owner
would be exempted from liability in
case of loss.
The court a quo erred in applying the
provisions of the Civil Code on
common carriers to establish the
liability of the shipping corporation. The
provisions on common carriers should
not be applied where the carrier is not
acting as such but as a private carrier.
231
 Under American jurisprudence, a
common carrier undertaking to carry a
special cargo or chartered to a special
person only, becomes a private carrier.
As a private carrier, a stipulation
exempting the owner from liability even
for the negligence of its agent is valid
(Home Insurance Company, Inc. vs.
American Steamship Agencies, Inc.,
23 SCRA 24).
The shipping corporation should not
therefore be held liable for the loss of
the logs. 6
South Sea and herein Petitioner Valenzuela
Hardwood and Industrial Supply, Inc.
("Valenzuela") filed separate petitions for
review before this Court. In a Resolution dated
June 2, 1995, this Court denied the petition of
South
Sea. 7 There the Court found no reason to
reverse the factual findings of the trial court
and the Court of Appeals that Chua was
indeed an authorized agent of South Sea
when he received Valenzuela's premium
payment for the marine cargo insurance policy
which was thus binding on the insurer. 8
The Court is now called upon to resolve the
petition for review filed by Valenzuela assailing
the CA Decision which exempted Seven
Brothers from any liability for the lost cargo.
The Issue
Petitioner Valenzuela's arguments resolve
around a single issue: "whether or not
respondent Court (of Appeals) committed a
reversible error in upholding the validity of the
stipulation in the charter party executed
between the petitioner and the private
respondent exempting the latter from liability
for the loss of petitioner's logs arising from the
negligence of its (Seven Brothers') captain." 9
The Court's Ruling
The petition is not meritorious.
Validity of Stipulation is Lis Mota
The charter party between the petitioner and
private respondent stipulated that the
"(o)wners shall not be responsible for loss,
split, short-landing, breakages and any kind of
damages to the cargo." 10 The validity of this
stipulation is the lis mota of this case.
It should be noted at the outset that there is no
dispute between the parties that the proximate
cause of the sinking of M/V Seven
Ambassadors resulting in the loss of its cargo
was the "snapping of the iron chains and the
subsequent rolling of the logs to the portside
due to the negligence of the captain in stowing
and securing the logs on board the vessel and
not due to fortuitous event." 11 Likewise
undisputed is the status of Private Respondent
Seven Brothers as a private carrier when it
contracted to transport the cargo of Petitioner
Valenzuela. Even the latter admits this in its
petition. 12
The trial court deemed the charter party
stipulation void for being contrary to public
policy, 13 citing Article 1745 of the Civil Code
which provides:
Art. 1745. Any of the following or
similar stipulations shall be considered
unreasonable, unjust and contrary to
public policy:
(1) That the goods are transported at
the risk of the owner or shipper;
(2) That the common carrier will not be
liable for any loss, destruction, or
deterioration of the goods;
(3) That the common carrier need not
observe any diligence in the custody of
the goods;
(4) That the common carrier shall
exercise a degree of diligence less
than that of a good father of a family,
or of a man of ordinary prudence in the
vigilance over the movables
transported;
(5) That the common carrier shall not
be responsible for the acts or
omissions of his or its employees;
(6) That the common carrier's liability
for acts committed by thieves, or of
robbers who do not act with grave or
irresistible threat, violence or force, is
dispensed with or diminished;
231
 (7) That the common carrier is not
responsible for the loss, destruction, or
deterioration of goods on account of
the defective condition of the car,
vehicle, ship, airplane or other
equipment used in the contract of
carriage.
Petitioner Valenzuela adds that the stipulation
is void for being contrary to Articles 586 and
587 of the Code of Commerce 14 and Articles
1170 and 1173 of the Civil Code. Citing Article
1306 and paragraph 1, Article 1409 of the Civil
Code, 15 petitioner further contends that said
stipulation "gives no duty or obligation to the
private respondent to observe the diligence of
a good father of a family in the custody and
transportation of the cargo."
The Court is not persuaded. As adverted to
earlier, it is undisputed that private respondent
had acted as a private carrier in transporting
petitioner's lauan logs. Thus, Article 1745 and
other Civil Code provisions on common
carriers which were cited by petitioner may not
be applied unless expressly stipulated by the
parties in their charter party. 16
In a contract of private carriage, the parties
may validly stipulate that responsibility for the
cargo rests solely on the charterer, exempting
the shipowner from liability for loss of or
damage to the cargo caused even by the
negligence of the ship captain. Pursuant to
Article 1306 17 of the Civil Code, such
stipulation is valid because it is freely entered
into by the parties and the same is not
contrary to law, morals, good customs, public
order, or public policy. Indeed, their contract of
private carriage is not even a contract of
adhesion. We stress that in a contract of
private carriage, the parties may freely
stipulate their duties and obligations which
perforce would be binding on them. Unlike in a
contract involving a common carrier, private
carriage does not involve the general public.
Hence, the stringent provisions of the Civil
Code on common carriers protecting the
general public cannot justifiably be applied to a
ship transporting commercial goods as a
private carrier. Consequently, the public policy
embodied therein is not contravened by
stipulations in a charter party that lessen or
remove the protection given by law in
contracts involving common carriers.
The issue posed in this case and the
arguments raised by petitioner are not novel;
they were resolved long ago by this Court
in Home Insurance Co. vs. American
Steamship Agencies, Inc. 18 In that case, the
trial court similarly nullified a stipulation
identical to that involved in the present case
for being contrary to public policy based on
Article 1744 of the Civil Code and Article 587
of the Code of Commerce. Consequently, the
trial court held the shipowner liable for
damages resulting for the partial loss of the
cargo. This Court reversed the trial court and
laid down, through Mr. Justice Jose P.
Bengzon, the following well-settled
observation and doctrine:
The provisions of our Civil Code on
common carriers were taken from
Anglo-American law. Under American
jurisprudence, a common carrier
undertaking to carry a special cargo or
chartered to a special person only,
becomes a private carrier. As a private
carrier, a stipulation exempting the
owner from liability for the negligence
of its agent is not against public policy,
and is deemed valid.
Such doctrine We find
reasonable. The Civil Code provisions
on common carriers should not be
applied where the carrier is not acting
as such but as a private carrier. The
stipulation in the charter party
absolving the owner from liability for
loss due to the negligence of its agent
would be void if the strict public policy
governing common carriers is
applied. Such policy has no force
where the public at large is not
involved, as in this case of a ship
totally chartered for the used of a
single party. 19(Emphasis supplied.)
Indeed, where the reason for the rule ceases,
the rule itself does not apply. The general
public enters into a contract of transportation
with common carriers without a hand or a
voice in the preparation thereof. The riding
public merely adheres to the contract; even if
the public wants to, it cannot submit its own
stipulations for the approval of the common
carrier. Thus, the law on common carriers
extends its protective mantle against one-
sided stipulations inserted in tickets, invoices
or other documents over which the riding
231
public has no understanding or, worse, no
choice. Compared to the general public, a
charterer in a contract of private carriage is not
similarly situated. It can — and in fact it usually
does — enter into a free and voluntary
agreement. In practice, the parties in a
contract of private carriage can stipulate the
carrier's obligations and liabilities over the
shipment which, in turn, determine the price or
consideration of the charter. Thus, a charterer,
in exchange for convenience and economy,
may opt to set aside the protection of the law
on common carriers. When the charterer
decides to exercise this option, he takes a
normal business risk.
Petitioner contends that the rule in Home
Insurance is not applicable to the present case
because it "covers only a stipulation exempting
a private carrier from liability for the negligence
of his agent, but it does not apply to a
stipulation exempting a private carrier like
private respondent from the negligence of his
employee or servant which is the situation in
this case." 20 This contention of petitioner is
bereft of merit, for it raises a distinction without
any substantive difference. The case Home
Insurance specifically dealt with "the liability of
the shipowner for acts or negligence of its
captain and crew" 21 and a charter party
stipulation which "exempts the owner of the
vessel from any loss or damage or delay
arising from any other source, even from the
neglect or fault of the captain or crew or some
other person employed by the owner on
board, for whose acts the owner would
ordinarily be liable except for said
paragraph." 22 Undoubtedly, Home
Insurance is applicable to the case at bar.
The naked assertion of petitioner that the
American rule enunciated in Home
Insurance is not the rule in the
Philippines 23 deserves scant consideration.
The Court there categorically held that said
rule was "reasonable" and proceeded to apply
it in the resolution of that case. Petitioner
miserably failed to show such circumstances
or arguments which would necessitate a
departure from a well-settled rule.
Consequently, our ruling in said case remains
a binding judicial precedent based on the
doctrine of stare decisis and Article 8 of the
Civil Code which provides that "(j)udicial
decisions applying or interpreting the laws or
the Constitution shall form part of the legal
system of the Philippines."
In fine, the respondent appellate court aptly
stated that "[in the case of] a private carrier, a
stipulation exempting the owner from liability
even for the negligence of its agents is
valid." 24
Other Arguments
On the basis of the foregoing alone, the
present petition may already be denied; the
Court, however, will discuss the other
arguments of petitioner for the benefit and
satisfaction of all concerned.
Articles 586 and 587, Code of Commerce
Petitioner Valenzuela insists that the charter
party stipulation is contrary to Articles 586 and
587 of the Code of Commerce which confer on
petitioner the right to recover damages from
the shipowner and ship agent for the acts or
conduct of the captain. 25 We are not
persuaded. Whatever rights petitioner may
have under the aforementioned statutory
provisions were waived when it entered into
the charter party.
Article 6 of the Civil Code provides that
"(r)ights may be waived, unless the waiver is
contrary to law, public order, public policy,
morals, or good customs, or prejudicial to a
person with a right recognized by law." As a
general rule, patrimonial rights may be waived
as opposed to rights to personality and family
rights which may not be made the subject of
waiver. 26 Being patently and undoubtedly
patrimonial, petitioner's right conferred under
said articles may be waived. This, the
petitioner did by acceding to the contractual
stipulation that it is solely responsible or any
damage to the cargo, thereby exempting the
private carrier from any responsibility for loss
or damage thereto. Furthermore, as discussed
above, the contract of private carriage binds
petitioner and private respondent alone; it is
not imbued with public policy considerations
for the general public or third persons are not
affected thereby.
Articles 1170 and 1173, Civil Code
Petitioner likewise argues that the stipulation
subject of this controversy is void for being
contrary to Articles 1170 and 1173 of the Civil
Code 27 which read:
231
 Art. 1170. Those who in the
performance of their obligations are
guilty of fraud, negligence, or delay,
and those who in any manner
contravene the tenor thereof, are liable
for damages
Art. 1173. The fault or negligence of
the obligor consists in the omission of
that diligence which is required by the
nature of the obligation and
corresponds with the circumstances of
the persons, of the time and of the
place. When negligence shows bad
faith, the provisions of articles 1171
and 2201, shall apply.
If the law does not state the diligence
which is to be observed in the
performance, that which is expected of
a good father of a family shall be
required.
The Court notes that the foregoing articles are
applicable only to the obligor or the one with
an obligation to perform. In the instant case,
Private Respondent Seven Brothers is not an
obligor in respect of the cargo, for this
obligation to bear the loss was shifted to
petitioner by virtue of the charter party. This
shifting of responsibility, as earlier observed, is
not void. The provisions cited by petitioner are,
therefore, inapplicable to the present case.
Moreover, the factual milieu of this case does
not justify the application of the second
paragraph of Article 1173 of the Civil Code
which prescribes the standard of diligence to
be observed in the event the law or the
contract is silent. In the instant case, Article
362 of the Code of Commerce 28 provides the
standard of ordinary diligence for the carriage
of goods by a carrier. The standard of
diligence under this statutory provision may,
however, be modified in a contract of private
carriage as the petitioner and private
respondent had done in their charter party.
Cases Cited by Petitioner Inapplicable
Petitioner cites Shewaram vs. Philippine
Airlines, Inc. 29 which, in turn, quoted Juan
Ysmael & Co. vs. Gabino Barreto & Co. 30 and
argues that the public policy considerations
stated there vis-a-vis contractual stipulations
limiting the carrier's liability be applied "with
equal force" to this case. 31 It also cites Manila
Railroad Co. vs.Compañia
Transatlantica  32 and contends that
stipulations exempting a party from liability for
damages due to negligence "should not be
countenanced" and should be "strictly
construed" against the party claiming its
benefit. 33We disagree.
The cases of Shewaram and Ysmael both
involve a common carrier; thus, they
necessarily justify the application of such
policy considerations and concomitantly
stricter rules. As already discussed above, the
public policy considerations behind the
rigorous treatment of common carriers are
absent in the case of private carriers. Hence,
the stringent laws applicable to common
carriers are not applied to private carries. The
case of Manila Railroad is also inapplicable
because the action for damages there does
not involve a contract for transportation.
Furthermore, the defendant therein made a
"promise to use due care in the lifting
operations" and, consequently, it was "bound
by its undertaking"'; besides, the exemption
was intended to cover accidents due to hidden
defects in the apparatus or other unforseeable
occurrences" not caused by its "personal
negligence." This promise was thus
constructed to make sense together with the
stipulation against liability for damages. 34 In
the present case, we stress that the private
respondent made no such promise. The
agreement of the parties to exempt the
shipowner from responsibility for any damage
to the cargo and place responsibility over the
same to petitioner is the lone stipulation
considered now by this Court.
Finally, petitioner points to Standard Oil Co. of
New York vs. Lopez Costelo, 35 Walter
A. Smith & Co. vs.Cadwallader Gibson
Lumber Co., 36 N. T . Hashim and
Co. vs. Rocha and Co., 37 Ohta Development
Co. vs.Steamship
"Pompey"  38 and Limpangco Sons vs. Yangco
Steamship Co. 39 in support of its contention
that the shipowner be held liable for
damages. 40 These however are not on all
fours with the present case because they do
not involve a similar factual milieu or an
identical stipulation in the charter party
expressly exempting the shipowner form
responsibility for any damage to the cargo.
Effect of the South Sea Resolution
231
In its memorandum, Seven Brothers argues
that petitioner has no cause of action against it
because this Court has earlier affirmed the
liability of South Sea for the loss suffered by
petitioner. Private respondent submits that
petitioner is not legally entitled to collect twice
for a single loss. 41 In view of the above
disquisition upholding the validity of the
questioned charter party stipulation and
holding that petitioner may not recover from
private respondent, the present issue is moot
and academic. It suffices to state that the
Resolution of this Court dated June 2,
1995 42 affirming the liability of South Sea does
not, by itself, necessarily preclude the
petitioner from proceeding against private
respondent. An aggrieved party may still
recover the deficiency for the person causing
the loss in the event the amount paid by the
insurance company does not fully cover the
loss. Article 2207 of the Civil Code provides:
Art. 2207. If the plaintiff's property has
been insured, and he has received
indemnity for 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 form
the person causing the loss or injury.
WHEREFORE, premises considered, the
petition is hereby DENIED for its utter failure to
show any reversible error on the part of
Respondent Court. The assailed Decision is
AFFIRMED.
SO ORDERED.
Narvasa, C.J., Davide, Jr., Melo and
Francisco, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION 
G.R. No. 127768 November 19, 1999
UNITED AIRLINES, petitioner, 
vs.
WILLIE J. UY, respondent.
 
BELLOSILLO, J.:
UNITED AIRLINES assails in this petition for
review on certiorari under Rule 45 the 29
August 1995 Decision of the Court of Appeals
in CA-G.R. CV No. 39761 which reversed the
7 August 1992 order issued by the trial court in
Civil Case No. Q-92-12410 1 granting
petitioner's motion to dismiss based on
prescription of cause of action. The issues
sought to be resolved are whether the notice
of appeal to the appellate court was timely
filed, and whether Art. 29 of the Warsaw
Convention 2 should apply to the case at bar.
On 13 October 1989 respondent Willie J. Uy, a
revenue passenger on United Airlines Flight
No. 819 for the San Francisco — Manila route,
checked in together with his luggage one
piece of which was found to be overweight at
the airline counter. To his utter humiliation, an
employee of petitioner rebuked him saying that
he should have known the maximum weight
allowance to be 70 kgs. per bag and that he
should have packed his things accordingly.
Then, in a loud voice in front of the milling
crowd, she told respondent to repack his
things and transfer some of them from the
overweight luggage to the lighter ones. Not
wishing to create further scene, respondent
acceded only to find his luggage still
overweight. The airline then billed him
overweight charges which he offered to pay
with a miscellaneous charge order (MCO) or
an airline pre-paid credit. However, the
airline's employee, and later its airport
supervisor, adamantly refused to honor the
MCO pointing out that there were conflicting
figures listed on it. Despite the explanation
from respondent that the last figure written on
the MCO represented his balance, petitioner's
employees did not accommodate him. Faced
with the prospect of leaving without his
luggage, respondent paid the overweight
charges with his American Express credit
card.
Respondent's troubles did not end there. Upon
arrival in Manila, he discovered that one of his
bags had been slashed and its contents
stolen. He particularized his losses to be
231
around US $5,310.00. In a letter dated 16
October 1989 respondent bewailed the insult,
embarrassment and humiliating treatment he
suffered in the hands of United Airlines
employees, notified petitioner of his loss and
requested reimbursement thereof. Petitioner
United Airlines, through Central Baggage
Specialist Joan Kroll, did not refute any of
respondent's allegations and mailed a check
representing the payment of his loss based on
the maximum liability of US $9.70 per pound.
Respondent, thinking the amount to be grossly
inadequate to compensate him for his losses,
as well as for the indignities he was subjected
to, sent two (2) more letters to petitioner
airline, one dated 4 January 1990 through a
certain Atty. Pesigan, and another dated 28
October 1991 through Atty. Ramon U. Ampil
demanding an out-of-court settlement of
P1,000,000.00. Petitioner United Airlines did
not accede to his demands.
Consequently, on 9 June 1992 respondent
filed a complaint for damages against United
Airlines alleging that he was a person of good
station, sitting in the board of directors of
several top 500 corporations and holding
senior executive positions for such similar
firms; 3 that petitioner airline accorded him ill
and shabby treatment to his extreme
embarrassment and humiliation; and, as such
he should be paid moral damages of at least
P1,000,000.00, exemplary damages of at least
P500,000.00, plus attorney's fees of at least
P50,000.00. Similarly, he alleged that the
damage to his luggage and its stolen contents
amounted to around $5,310.00, and requested
reimbursement therefor.
United Airlines moved to dismiss the complaint
on the ground that respondent's cause of
action had prescribed, invoking Art. 29 of the
Warsaw Convention which provides —
Art. 29 (1) The right to damages shall
be extinguished if an action is not
brought within two (2) years, reckoned
from the date of arrival at the
destination, or from the date on which
the aircraft ought to have arrived, or
from the date on which the
transportation stopped.
(2) The method of calculating the
period of limitation shall be determined
by the law of the court to which the
case is submitted.
Respondent countered that par. (1) of Art. 29
of the Warsaw Convention must be reconciled
with par. (2) thereof which states that "the
method of calculating the period of limitation
shall be determined by the law of the court to
which the case is submitted." Interpreting thus,
respondent noted that according to Philippine
laws the prescription of actions is interrupted
"when they are filed before the court, when
there is a written extrajudicial demand by the
creditors, and when there is any written
acknowledgment of the debt by the
debtor." 4 Since he made several demands
upon United Airlines: first, through his
personal letter dated 16 October
1989; second, through a letter dated 4 January
1990 from Atty. Pesigan; and, finally, through
a letter dated 28 October 1991 written for him
by Atty. Ampil, the two (2)-year period of
limitation had not yet been exhausted.
On 2 August 1992 the trial court ordered the
dismissal of the action holding that the
language of Art. 29 is clear that the action
must be brought within two (2) years from the
date of arrival at the destination. It held that
although the second paragraph of Art. 29
speaks of deference to the law of the local
court in "calculating the period of limitation,"
the same does not refer to the local forum's
rules in interrupting the prescriptive period but
only to the rules of determining the time in
which the action may be deemed commenced,
and within our jurisdiction the action shall be
deemed "brought" or commenced by the filing
of a complaint. Hence, the trial court
concluded that Art. 29 excludes the application
of our interruption rules.
Respondent received a copy of the dismissal
order on 17 August 1992. On 31 August 1992,
or fourteen (14) days later, he moved for the
reconsideration of the trial court's order. The
trial court denied the motion and respondent
received copy of the denial order on 28
September 1992. Two (2) days later, on 1
October 1992 respondent filed his notice of
appeal.
United Airlines once again moved for the
dismissal of the case this time pointing out that
respondent's fifteen (15)-day period to appeal
had already elapsed. Petitioner argued that
having used fourteen (14) days of the
reglementary period for appeal, respondent Uy
had only one (1) day remaining to perfect his
appeal, and since he filed his notice of appeal
231
two (2) days later, he failed to meet the
deadline.
In its questioned Decision dated 29 August
1995 5 the appellate court gave due course to
the appeal holding that respondent's delay of
two (2) days in filing his notice of appeal did
not hinder it from reviewing the appealed order
of dismissal since jurisprudence dictates that
an appeal may be entertained despite
procedural lapses anchored on equity and
justice.
On the applicability of the Warsaw Convention,
the appellate court ruled that the Warsaw
Convention did not preclude the operation of
the Civil Code and other pertinent laws.
Respondent's failure to file his complaint within
the two (2)-year limitation provided in the
Warsaw Convention did not bar his action
since he could still hold petitioner liable for
breach of other provisions of the Civil Code
which prescribe a different period or procedure
for instituting an action. Further, under
Philippine laws, prescription of actions is
interrupted where, among others, there is a
written extrajudicial demand by the creditors,
and since respondent Uy sent several demand
letters to petitioner United Airlines, the running
of the two (2)-year prescriptive period was in
effect suspended. Hence, the appellate court
ruled that respondent's cause of action had not
yet prescribed and ordered the records
remanded to the Quezon City trial court for
further proceedings.
Petitioner now contends that the appellate
court erred in assuming jurisdiction over
respondent's appeal since it is clear that the
notice of appeal was filed out of time. It argues
that the courts relax the stringent rule on
perfection of appeals only when there are
extraordinary circumstances, e.g., when the
Republic stands to lose hundreds of hectares
of land already titled and used for educational
purposes; when the counsel of record was
already dead; and wherein appellant was the
owner of the trademark for more than thirty
(30) years, and the circumstances of the
present case do not compare to the above
exceptional cases. 6
Sec. 1 of Rule 45 of the 1997 Rules of Civil
Procedure provides that "a party may appeal
by certiorari, from a judgment of the Court of
Appeals, by filing with the Supreme Court a
petition for certiorari, within fifteen (15) days
from notice of judgment or of the denial of his
motion for reconsideration filed in due time . . .
." This Rule however should not be interpreted
as "to sacrifice the substantial right of the
appellant in the sophisticated altar of
technicalities with impairment of the sacred
principles of justice." 7 It should be borne in
mind that the real purpose behind the
limitation of the period of appeal is to forestall
or avoid an unreasonable delay in the
administration of justice. Thus, we have ruled
that delay in the filing of a notice of appeal
does not justify the dismissal of the appeal
where the circumstances of the case show
that there is no intent to delay the
administration of justice on the part of
appellant's counsel, 8 or when there are no
substantial rights affected, 9 or when
appellant's counsel committed a mistake in the
computation of the period of appeal, an error
not attributable to negligence or bad faith. 10
In the instant case, respondent filed his notice
of appeal two (2) days later than the
prescribed period. Although his counsel failed
to give the reason for the delay, we are
inclined to give due course to his appeal due
to the unique and peculiar facts of the case
and the serious question of law it poses. In the
now almost trite but still good principle,
technicality, when it deserts its proper office as
an aid to justice and becomes its great
hindrance and chief enemy, deserves scant
consideration. 11
Petitioner likewise contends that the appellate
court erred in ruling that respondent's cause of
action has not prescribed since delegates to
the Warsaw Convention clearly intended the
two (2)-year limitation incorporated in Art. 29
as an absolute bar to suit and not to be made
subject to the various tolling provisions of the
laws of the forum. Petitioner argues that in
construing the second paragraph of Art. 29
private respondent cannot read into it
Philippine rules on interruption of prescriptive
periods and state that his extrajudicial demand
has interrupted the period of
prescription. 12 American jurisprudence has
declared that "Art. 29 (2) was not intended to
permit forums to consider local limitation tolling
provisions but only to let local law determine
whether an action had been commenced
within the two-year period, since the method of
commencing a suit varies from country to
country." 13
231
Within our jurisdiction we have held that the
Warsaw Convention can be applied, or
ignored, depending on the peculiar facts
presented by each case. 14 Thus, we have
ruled that the Convention's provisions do not
regulate or exclude liability for other breaches
of contract by the carrier or misconduct of its
officers and employees, or for some particular
or exceptional type of damage. 15 Neither may
the Convention be invoked to justify the
disregard of some extraordinary sort of
damage resulting to a passenger and preclude
recovery therefor beyond the limits set by said
Convention. 16 Likewise, we have held that the
Convention does not preclude the operation of
the Civil Code and other pertinent laws. 17 It
does not regulate, much less exempt, the
carrier from liability for damages for violating
the rights of its passengers under the contract
of carriage, especially if willful misconduct on
the part of the carrier's employees is found or
established. 18
Respondent's complaint reveals that he is
suing on two (2) causes of action: (a) the
shabby and humiliating treatment he received
from petitioner's employees at the San
Francisco Airport which caused him extreme
embarrassment and social humiliation; and,
(b) the slashing of his luggage and the loss of
his personal effects amounting to US
$5,310.00.
While his second cause of action — an action
for damages arising from theft or damage to
property or goods — is well within the bounds
of the Warsaw Convention, his first cause of
action — an action for damages arising from
the misconduct of the airline employees and
the violation of respondent's rights as
passenger — clearly is not.
Consequently, insofar as the first cause of
action is concerned, respondent's failure to file
his complaint within the two (2)-year limitation
of the Warsaw Convention does not bar his
action since petitioner airline may still be held
liable for breach of other provisions of the Civil
Code which prescribe a different period or
procedure for instituting the action, specifically,
Art. 1146 thereof which prescribes four (4)
years for filing an action based on torts.
As for respondent's second cause of action,
indeed the travaux preparatories of the
Warsaw Convention reveal that the delegates
thereto intended the two (2)-year limitation
incorporated in Art. 29 as an absolute bar to
suit and not to be made subject to the various
tolling provisions of the laws of the forum. This
therefore forecloses the application of our own
rules on interruption of prescriptive periods.
Article 29, par. (2), was intended only to let
local laws determine whether an action had
been commenced within the two (2)-year
period, and within our jurisdiction an action
shall be deemed commenced upon the filing of
a complaint. Since it is indisputable that
respondent filed the present action beyond the
two (2)-year time frame his second cause of
action must be barred. Nonetheless, it cannot
be doubted that respondent exerted efforts to
immediately convey his loss to petitioner, even
employed the services of two (2) lawyers to
follow up his claims, and that the filing of the
action itself was delayed because of
petitioner's evasion.
In this regard, Philippine Airlines, Inc. v. Court
of Appeals 19 is instructive. In this case of PAL,
private respondent filed an action for damages
against petitioner airline for the breakage of
the front glass of the microwave oven which
she shipped under PAL Air Waybill No. 0-79-
1013008-3. Petitioner averred that, the action
having been filed seven (7) months after her
arrival at her port of destination, she failed to
comply with par. 12, subpar. (a) (1), of the Air
Waybill which expressly provided that the
person entitled to delivery must make a
complaint to the carrier in writing in case of
visible damage to the goods, immediately after
discovery of the damage and at the latest
within 14 days from receipt of the goods.
Despite non-compliance therewith the Court
held that by private respondent's immediate
submission of a formal claim to petitioner,
which however was not immediately
entertained as it was referred from one
employee to another, she was deemed to
have substantially complied with the
requirement. The Court noted that with private
respondent's own zealous efforts in pursuing
her claim it was clearly not her fault that the
letter of demand for damages could only be
filed, after months of exasperating follow-up of
the claim, on 13 August 1990, and that if there
was any failure at all to file the formal claim
within the prescriptive period contemplated in
the Air Waybill, this was largely because of the
carrier's own doing, the consequences of
which could not in all fairness be attributed to
private respondent.
231
In the same vein must we rule upon the
circumstances brought before us. Verily,
respondent filed his complaint more than two
(2) years later, beyond the period of limitation
prescribed by the Warsaw Convention for filing
a claim for damages. However, it is obvious
that respondent was forestalled from
immediately filing an action because petitioner
airline gave him the runaround, answering his
letters but not giving in to his demands. True,
respondent should have already filed an action
at the first instance when his claims were
denied by petitioner but the same could only
be due to his desire to make an out-of-court
settlement for which he cannot be faulted.
Hence, despite the express mandate of Art. 29
of the Warsaw Convention that an action for
damages should be filed within two (2) years
from the arrival at the place of destination,
such rule shall not be applied in the instant
case because of the delaying tactics employed
by petitioner airline itself. Thus, private
respondent's second cause of action cannot
be considered as time-barred under Art. 29 of
the Warsaw Convention.
WHEREFORE, the assailed Decision of the
Court of Appeals reversing and setting aside
the appealed order of the trial court granting
the motion to dismiss the complaint, as well as
its Resolution denying reconsideration, is
AFFIRMED. Let the records of the case be
remanded to the court of origin for further
proceedings taking its bearings from this
disquisition.
SO ORDERED.
Mendoza, Quisumbing, Buena and De Leon,
Jr., JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION  value of the damaged cargo of molasses.
G.R. No. 114167 July 12, 1995
COASTWISE LIGHTERAGE
CORPORATION, petitioner,  amount of P700,000.00 which it paid to Pag-
vs.
COURT OF APPEALS and the PHILIPPINE
GENERAL INSURANCE
COMPANY, respondents.
RESOLUTION
FRANCISCO, R., J.:
This is a petition for review of a Decision
rendered by the Court of Appeals, dated
December 17, 1993, affirming Branch 35 of
the Regional Trial Court, Manila in holding that
herein petitioner is liable to pay herein private
respondent the amount of P700,000.00, plus
legal interest thereon, another sum of
P100,000.00 as attorney's fees and the cost of
the suit.
The factual background of this case is as
follows:
Pag-asa Sales, Inc. entered into a contract to
transport molasses from the province of
Negros to Manila with Coastwise Lighterage
Corporation (Coastwise for brevity), using the
latter's dumb barges. The barges were towed
in tandem by the tugboat MT Marica, which is
likewise owned by Coastwise.
Upon reaching Manila Bay, while approaching
Pier 18, one of the barges, "Coastwise 9",
struck an unknown sunken object. The forward
buoyancy compartment was damaged, and
water gushed in through a hole "two inches
wide and twenty-two inches long" 1 As a
consequence, the molasses at the cargo tanks
were contaminated and rendered unfit for the
use it was intended. This prompted the
consignee, Pag-asa Sales, Inc. to reject the
shipment of molasses as a total loss.
Thereafter, Pag-asa Sales, Inc. filed a formal
claim with the insurer of its lost cargo, herein
private respondent, Philippine General
Insurance Company (PhilGen, for short) and
against the carrier, herein petitioner,
Coastwise Lighterage. Coastwise Lighterage
denied the claim and it was PhilGen which
paid the consignee, Pag-asa Sales, Inc., the
amount of P700,000.00, representing the
In turn, PhilGen then filed an action against
Coastwise Lighterage before the Regional
Trial Court of Manila, seeking to recover the
asa Sales, Inc. for the latter's lost cargo.
PhilGen now claims to be subrogated to all the
contractual rights and claims which the
consignee may have against the carrier, which
is presumed to have violated the contract of
carriage.
231
The RTC awarded the amount prayed for by
PhilGen. On Coastwise Lighterage's appeal to
the Court of Appeals, the award was affirmed.
Hence, this petition.
There are two main issues to be resolved
herein. First, whether or not petitioner
Coastwise Lighterage was transformed into a
private carrier, by virtue of the contract of
affreightment which it entered into with the
consignee, Pag-asa Sales, Inc. Corollarily, if it
were in fact transformed into a private carrier,
did it exercise the ordinary diligence to which a
private carrier is in turn bound? Second,
whether or not the insurer was subrogated into
the rights of the consignee against the carrier,
upon payment by the insurer of the value of
the consignee's goods lost while on board one
of the carrier's vessels.
On the first issue, petitioner contends that the
RTC and the Court of Appeals erred in finding
that it was a common carrier. It stresses the
fact that it contracted with Pag-asa Sales, Inc.
to transport the shipment of molasses from
Negros Oriental to Manila and refers to this
contract as a "charter agreement". It then
proceeds to cite the case of Home Insurance
Company vs. American Steamship Agencies,
Inc.2 wherein this Court held: ". . . a common
carrier undertaking to carry a special cargo or
chartered to a special person only becomes a
private carrier."
Petitioner's reliance on the aforementioned
case is misplaced. In its entirety, the
conclusions of the court are as follows:
Accordingly, the charter party contract
is one of affreightment over the whole
vessel, rather than a demise. As such,
the liability of the shipowner for acts or
negligence of its captain and crew,
would remain in the absence of
stipulation.3
The distinction between the two kinds of
charter parties (i.e. bareboat or demise and
contract of affreightment) is more clearly set
out in the case of Puromines, Inc. vs. Court of
Appeals,4 wherein we ruled:
Under the demise or bareboat charter
of the vessel, the charterer will
generally be regarded as the owner for
the voyage or service stipulated. The
charterer mans the vessel with his own
people and becomes the owner pro
hac vice, subject to liability to others
for damages caused by negligence. To
create a demise, the owner of a vessel
must completely and exclusively
relinquish possession, command and
navigation thereof to the
charterer, anything short of such a
complete transfer is a contract of
affreightment (time or voyage charter
party) or not a charter party at all.
On the other hand a contract of
affreightment is one in which the owner
of the vessel leases part or all of its
space to haul goods for others. It is a
contract for special service to be
rendered by the owner of the vessel
and under such contract the general
owner retains the possession,
command and navigation of the ship,
the charterer or freighter merely having
use of the space in the vessel in return
for his payment of the charter
hire. . . . .
. . . . An owner who retains possession
of the ship though the hold is the
property of the charterer, remains
liable as carrier and must answer for
any breach of duty as to the care,
loading and unloading of the cargo. . . .
Although a charter party may transform a
common carrier into a private one, the same
however is not true in a contract of
affreightment on account of the
aforementioned distinctions between the two.
Petitioner admits that the contract it entered
into with the consignee was one of
affreightment.5 We agree. Pag-asa Sales, Inc.
only leased three of petitioner's vessels, in
order to carry cargo from one point to another,
but the possession, command and navigation
of the vessels remained with petitioner
Coastwise Lighterage.
Pursuant therefore to the ruling in the
aforecited Puromines case, Coastwise
Lighterage, by the contract of affreightment,
was not converted into a private carrier, but
remained a common carrier and was still liable
as such.
231
The law and jurisprudence on common
carriers both hold that the mere proof of
delivery of goods in good order to a carrier and
the subsequent arrival of the same goods at
the place of destination in bad order makes for
a prima facie case against the carrier.
It follows then that the presumption of
negligence that attaches to common carriers,
once the goods it transports are lost,
destroyed or deteriorated, applies to the
petitioner. This presumption, which is
overcome only by proof of the exercise of
extraordinary diligence, remained unrebutted
in this case.
The records show that the damage to the
barge which carried the cargo of molasses
was caused by its hitting an unknown sunken
object as it was heading for Pier 18. The
object turned out to be a submerged derelict
vessel. Petitioner contends that this
navigational hazard was the efficient cause of
the accident. Further it asserts that the fact
that the Philippine Coastguard "has not
exerted any effort to prepare a chart to
indicate the location of sunken derelicts within
Manila North Harbor to avoid navigational
accidents"6 effectively contributed to the
happening of this mishap. Thus, being
unaware of the hidden danger that lies in its
path, it became impossible for the petitioner to
avoid the same. Nothing could have prevented
the event, making it beyond the pale of even
the exercise of extraordinary diligence.
However, petitioner's assertion is belied by the
evidence on record where it appeared that far
from having rendered service with the greatest
skill and utmost foresight, and being free from
fault, the carrier was culpably remiss in the
observance of its duties.
Jesus R. Constantino, the patron of the vessel
"Coastwise 9" admitted that he was not
licensed. The Code of Commerce, which
subsidiarily governs common carriers (which
are primarily governed by the provisions of the
Civil Code) provides:
Art. 609. — Captains, masters, or
patrons of vessels must be Filipinos,
have legal capacity to contract in
accordance with this code, and prove
the skill capacity and qualifications
necessary to command and direct the
vessel, as established by marine and
navigation laws, ordinances or
regulations, and must not be
disqualified according to the same for
the discharge of the duties of the
position. . . .
Clearly, petitioner Coastwise Lighterage's
embarking on a voyage with an unlicensed
patron violates this rule. It cannot safely claim
to have exercised extraordinary diligence, by
placing a person whose navigational skills are
questionable, at the helm of the vessel which
eventually met the fateful accident. It may also
logically, follow that a person without license to
navigate, lacks not just the skill to do so, but
also the utmost familiarity with the usual and
safe routes taken by seasoned and legally
authorized ones. Had the patron been
licensed, he could be presumed to have both
the skill and the knowledge that would have
prevented the vessel's hitting the sunken
derelict ship that lay on their way to Pier 18.
As a common carrier, petitioner is liable for
breach of the contract of carriage, having
failed to overcome the presumption of
negligence with the loss and destruction of
goods it transported, by proof of its exercise of
extraordinary diligence.
On the issue of subrogation, which petitioner
contends as inapplicable in this case, we once
more rule against the petitioner. We have
already found petitioner liable for breach of the
contract of carriage it entered into with Pag-
asa Sales, Inc. However, for the damage
sustained by the loss of the cargo which
petitioner-carrier was transporting, it was not
the carrier which paid the value thereof to Pag-
asa Sales, Inc. but the latter's insurer, herein
private respondent PhilGen.
Article 2207 of the Civil Code is explicit on this
point:
Art. 2207. If the plaintiffs 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 violated the contract. . . .
This legal provision containing the equitable
principle of subrogation has been applied in a
231
long line of cases including Compania
Maritima v. Insurance Company of North
America;7 Fireman's Fund Insurance Company
v. Jamilla & Company, Inc.,8 and Pan Malayan
Insurance Corporation v. Court of
Appeals,9 wherein this Court explained:

Article 2207 of the Civil Code is

founded on the well-settled principle of
subrogation. If the insured property is
destroyed or damaged through the
fault or negligence of a party other
than the assured, then the insurer,
upon payment to the assured will be
subrogated to the rights of the assured
to recover from the wrongdoer to the
extent that the insurer has been
obligated to pay. Payment by the
insurer to the assured operated as an
equitable assignment to the former of
all remedies which the latter may have
against the third party whose
negligence or wrongful act caused the
loss. The right of subrogation is not
dependent upon, nor does it grow out
of, any privity of contract or upon
written assignment of claim. It accrues
simply upon payment of the insurance
claim by the insurer.

Undoubtedly, upon payment by respondent

insurer PhilGen of the amount of P700,000.00
to Pag-asa Sales, Inc., the consignee of the
cargo of molasses totally damaged while being
transported by petitioner Coastwise
Lighterage, the former was subrogated into all
the rights which Pag-asa Sales, Inc. may have
had against the carrier, herein petitioner
Coastwise Lighterage.

WHEREFORE, premises considered, this

petition is DENIED and the appealed decision
affirming the order of Branch 35 of the
Regional Trial Court of Manila for petitioner
Coastwise Lighterage to pay respondent
Philippine General Insurance Company the
"principal amount of P700,000.00 plus interest
thereon at the legal rate computed from March
29, 1989, the date the complaint was filed until
fully paid and another sum of P100,000.00 as
attorney's fees and costs"10 is likewise hereby
AFFIRMED

SO ORDERED.

Feliciano, Romero, Melo and Vitug, JJ.,

concur.
231