CRISOSTOMO vs.
CA From the above definition, Caravan Travel and Tours is not an entity
Facts: Estela L. Crisostomo contracted the services of Caravan Travel
and Tours International, Inc. to arrange and facilitate her booking,
ticketing and accommodation in a tour dubbed "Jewels of Europe". The
package tour cost her P74, 322.70. She was given a 5% discount on
the amount, which included airfare, and the booking fee was also
waived because petitioner’s niece, Meriam Menor, was former’s
company’s ticketing manager.
Menor went to her aunt’s residence on a Wednesday to deliver
petitioner’s travel documents and plane tickets. Estela, in turn, gave
Menor the full payment for the package tour. Menor then told her to be
at the Ninoy Aquino International Airport (NAIA) on Saturday, two
hours before her flight on board British Airways.
Without checking her travel documents, Estela went to NAIA on
Saturday, to take the flight for the first leg of her journey from Manila to
Hongkong. She discovered that the flight she was supposed to take
had already departed the previous day. She learned that her plane
ticket was for the flight scheduled on June 14, 1991. She thus called
up Menor to complain.
Subsequently, Menor prevailed upon Estela to take another tour the
"British Pageant”, which cost P20, 881.00. She gave caravan travel
and tours P7, 980.00 as partial payment and commenced the trip in
July 1991.
Upon petitioner’s return from Europe, she demanded from respondent
the reimbursement of P61, 421.70, representing the difference
between the sum she paid for "Jewels of Europe" and the amount she
owed respondent for the "British Pageant" tour. Despite several
demands, respondent company refused to reimburse the amount,
contending that the same was non-refundable.
Estela filed a complaint against Caravan travel and Tours for breach of
contract of carriage and damages.
A) Will the action prosper?
B) Will she be entitled to damages?
Answer:
No, for there was no contract of carriage.
By definition, a contract of carriage or transportation is one whereby a
certain person or association of persons obligate themselves to
transport persons, things, or news from one place to another for a fixed
price.
respondent for the delivery of 750 cartons of Liberty Milk. On
engaged in the business of transporting either passengers or goods
and is therefore, neither a private nor a common carrier. Caravan
Travel and Tours did not undertake to transport Estela from one place
to another since its covenant with its customers is simply to make
travel arrangements in their behalf. Caravan travel and tour’s services
as a travel agency include procuring tickets and facilitating travel
permits or visas as well as booking customers for tours.
While Estela concededly bought her plane ticket through the efforts of
respondent company, this does not mean that the latter ipso facto is a
common carrier. At most, Caravan Travel and Tours acted merely as
an agent of the airline, with whom the former ultimately contracted for
her carriage to Europe.
B) No.
The negligence of the obligor in the performance of the obligation
renders him liable for damages for the resulting loss suffered by the
obligee. Fault or negligence of the obligor consists in his failure to
exercise due care and prudence in the performance of the obligation
as the nature of the obligation so demands.
In the case at bar, Caravan Travel and Tours exercised due diligence
in performing its obligations under the contract and followed standard
procedure in rendering its services to Estela. The plane ticket issued to
petitioner clearly reflected the departure date and time, contrary to
Estela’s contention. The travel documents, consisting of the tour
itinerary, vouchers and instructions, were likewise delivered to her two
days prior to the trip. The Caravan Travel and Tours also properly
booked Estela for the tour, prepared the necessary documents and
procured the plane tickets. It arranged Estela’s hotel accommodation
as well as food, land transfers and sightseeing excursions, in
accordance with its avowed undertaking.
From the foregoing, it is clear that the Caravan Travel and Tours
performed its prestation under the contract as well as everything else
that was essential to book Estela for the tour.
Hence, Estela cannot recover and must bear her own damage.
DE GUZMAN vs. CA
Facts:
Respondent Ernesto Cendana was a junk dealer. He buys scrap
materials and brings those that he gathered to Manila for resale using
2 six-wheeler trucks. On the return trip to Pangasinan, respondent
would load his vehicle with cargo which various merchants wanted
delivered, charging fee lower than the commercial rates. Sometime in
November 1970, petitioner Pedro de Guzman contracted with
December 1, 1970, respondent loaded the cargo. Only 150 boxes were
delivered to petitioner because the truck carrying the boxes was
hijacked along the way. Petitioner commenced an action claiming the
value of the lost merchandise. Petitioner argues that respondent, being
a common carrier, is bound to exercise extraordinary diligence, which it
failed to do. Private respondent denied that he was a common carrier,
and so he could not be held liable for force majeure. The trial court
ruled against the respondent, but such was reversed by the Court of
Appeals.
Issues:
(1) Whether or not private respondent is a common carrier
(2) Whether private respondent is liable for the loss of the goods
Held:
(1) Article 1732 makes no distinction between one whose principal
business activity is the carrying of persons or goods or both, and one
who does such carrying only as an ancillary activity. Article 1732 also
carefully avoids making any distinction between a person or enterprise
offering transportation service on a regular or scheduled basis and one
offering such service on an occasional, episodic or unscheduled basis.
Neither does Article 1732 distinguish between a carrier offering its
services to the "general public," i.e., the general community or
population, and one who offers services or solicits business only from
a narrow segment of the general population. 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
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. A
certificate of public convenience is not a requisite for the incurring of
liability under the Civil Code provisions governing common carriers.
(2) 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:
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; and
e. Order or act of competent public authority."
The hijacking of the carrier's truck - does not fall within any of the five
(5) categories of exempting causes listed in Article 1734. 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. 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." 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.
FIRST PHIL. INDUSTRIAL CORP. vs. CA
FACTS: FPIC 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[1] and renewed by
the Energy Regulatory Board in 1992.[2]
In January 1995, FPIC 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 FPIC to pay a local
tax based on its gross receipts for the fiscal year 1993 pursuant to the
LGC.[3] The respondent City Treasurer assessed a business tax on
the FPIC 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, FPIC paid the tax under protest in the amount of
P239,019.01 for the first quarter of 1993.
On January 20, 1994, FPIC filed a letter-protest[4] addressed to the
respondent City Treasurer, alleging exemption under Section 133 (j) of
the LGC. City Treasurer denied the protest contending that FPIC
cannot be considered engaged in transportation business, thus it
cannot claim.[5]
"Section 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: xxx
(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."
On June 15, 1994, FPIC filed with the Regional Trial Court of Batangas
City a complaint[6] for tax refund with prayer for a writ of preliminary
injunction against respondents City of Batangas and City Treasurer.
Respondents argued that FPIC cannot be exempt from taxes under
Section 133 (j) of the LGC 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, RTC ruled against FPIC. CA ruled against FPIC.
Affirmed RTC. MR denied.
ISSUES:
What is a common carrier?
Is FPIC, an oil pipeline operator, a common carrier?
Does Section 133 (j) of the LGC only refer to common carriers via land,
water and air AND via motor vehicle?
Does the law recognize pipeline operators as common carriers?
Why are common carriers exempt from local business tax?
HELD: There is merit in the petition. WHEREFORE, the petition is
hereby GRANTED. The decision of the respondent Court of Appeals
dated November 29, 1995 in CA-G.R. SP No. 36801 is REVERSED
and SET ASIDE.
ISSUE [1]: 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.
Article 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]
ISSUE [2]: Based on the above definitions and requirements, there is
no doubt that FPIC 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 FPIC
has a limited clientele does not exclude it from the definition of a
common carrier.
ISSUE [3]: Also, respondent's argument that the term "common carrier"
as used in Section 133 (j) of the LGC 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 FPIC, 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]
ISSUE [4]: Under the Petroleum Act of the Philippines (Republic Act
387), FPIC is considered a "common carrier." (Article 86)
Republic Act 387 also regards petroleum operation as a public utility.
(Article 7)
The Bureau of Internal Revenue likewise considers the FPIC a
"common carrier." (BIR Ruling No. 069-83)
ISSUE [5]: The legislative intent is to exclude from the taxing power of
the local government unit the imposition of business tax against
common carriers is to prevent a duplication of the so-called "common
carrier's tax."
FPIC is already paying three (3%) percent common carrier's tax on its
gross sales/earnings under the National Internal Revenue Code.[19]
To tax FPIC again on its gross receipts in its transportation of
petroleum business would defeat the purpose of the LGC.
 SPOUSES FERNANDO vs. NORTHWEST AIRLINES
Facts: Sometime on December 20, 2001, Jesus Fernando arrived at
the LA Airport via Northwest Airlines Flight No. NW02 to join his family
who flew earlier to the said place for a reunion for the Christmas
holidays. He was asked by the Immigration Officer to have his return
ticket verified and validated since the date reflected thereon. Instead
the personnel of the respondent merely glanced at his ticket without
checking its status with the computer and peremptorily said that the
ticket has been used and could not be considered as valid. He
presented his Elite Platinum World Perks Card but the personnel
refused to check the validity of the ticket in the computer, instead,
looked at Jesus Fernando with contempt, then informed the
Immigration Officer that the ticket is not valid.
The Immigration Officer brought Jesus Fernando to the interrogation
room of the Immigration and Naturalization Services (INS) where he
was asked humiliating questions for more than two (2) hours. When he
was finally cleared by the Immigration Officer, he was granted only a
twelve (12)-day stay in the United States (US), instead of the usual six
(6) months. He further incurred other expenses due to the said
incident.
The second incident happened on January 29, 2002, the Fernandos
were on their way back to the Philippines. When the Fernandos
reached the gate area where boarding passes need to be presented,
Northwest supervisor Linda Tang stopped them and demanded for the
presentation of their paper tickets. They failed to present the same
since Northwest issued electronic tickets (attached to the boarding
passes) which they showed to the supervisor. The personnel rudely
pulled them out of the queue. Elizabeth Fernando explained to Linda
Tang that the matter could be sorted out by simply verifying their
electronic tickets in her computer and all she had to do was click and
punch in their Elite Platinum World Perks Card number. But Linda
Tang arrogantly told them that if they wanted to board the plane, they
should produce their credit cards and pay for their new tickets,
otherwise Northwest would order their luggage off-loaded from the
plane. The Fernandos printed coupon tickets and rushe back to the
boarding gates since the plane was about to depart. But when the
Fernandos reached the boarding gate, the plane had already departed.
Hence this petition.
Issue: Whether there is a breach of contract of carriage in the case at
bar
Held: Yes. The Fernandos' cause of action against Northwest
stemmed from a breach of contract of carriage. A contract is a meeting
of minds between two persons whereby one agrees to give something
or render some service to another for a consideration. There is no
contract unless the following requisites concur: (1) consent of the
contracting parties; (2) an object certain which is the subject of the
contract; and (3) the cause of the obligation which is established.[30]
A contract of carriage is defined as one whereby a certain person or
association of persons obligate themselves to transport persons,
things, or goods from one place to another for a fixed price. Under
Article 1732 of the Civil Code, this "persons, corporations, firms, or
associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air, for compensation,
offering their services to the public" is called a common
carrier.Undoubtedly, a contract of carriage existed between Northwest
and the Fernandos. They voluntarily and freely gave their consent to
an agreement whose object was the transportation of the Fernandos
from LA to Manila, and whose cause or consideration was the fare paid
by the Fernandos to Northwest.
In Alitalia Airways v. CA, et al.,We held that when an airline issues a
ticket to a passenger confirmed for a particular flight on a certain date,
a contract of carriage arises. The passenger then has every right to
expect that he would fly on that flight and on that date. If he does not,
then the carrier opens itself to a suit for breach of contract of carnage
When Northwest confirmed the reservations of the Fernandos, it bound
itself to transport the Fernandos on their flight on 29 January 2002. We
note that the witness of Northwest admitted on cross-examination that
based on the documents submitted by the Fernandos, they were
confirmed passengers on the January 29, 2002 flight.
In an action based on a breach of contract of carriage, the aggrieved
party does not have to prove that the common carrier was at fault or
was negligent. All that he has to prove is the existence of the contract
and the fact of its non-performance by the carrier. As the aggrieved
party, the Fernandos only had to prove the existence of the contract
and the fact of its non-performance by Northwest, as carrier, in order to
be awarded compensatory and actual damages.
Therefore, having proven the existence of a contract of carriage
between Northwest and the Fernandos, and the fact of non-
performance by Northwest of its obligation as a common carrier, it is
clear that Northwest breached its contract of carriage with the
Fernandos. Thus, Northwest opened itself to claims for compensatory,
actual, moral and exemplary damages, attorney's fees and costs of
suit.
VLASONS SHIPPING vs. CA
FACTS: National Steel Corporation (NSC) as Charterer and defendant
Vlasons Shipping, Inc. (VSI) as Owner, entered into a Contract of
Voyage Charter Hire (Affreightment) 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. VSI carried
passengers or goods only for those it chose under a “special contract
of charter party.”
The vessel arrived with the cargo in Manila, but when the vessel’s
three (3) hatches containing the shipment were opened, nearly all the
skids of tin plates and hot rolled sheets were allegedly found to be wet
and rusty.
NSC filed its complaint against defendant before the CFI wherein it
claimed that it sustained losses 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 … -- all in violation of defendant’s undertaking
under their Contract of Voyage Charter Hire.”
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.
The trial court ruled in favor of VSI; it was affirmed by the CA on
appeal.
ISSUE: Whether or not Vlazons is a private carrier.
HELD: Yes. 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 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.”
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.” As correctly concluded by the Court of Appeals, the
MV Vlasons I “was not a common but a private carrier.” Consequently,
the rights and 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 Industrial Supply, Inc., vs.
Court of Appeals and Seven Brothers Shipping Corporation, the Court
ruled:
“ x x x [I]n 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.”
LOADSTAR SHIPPING CO. vs. CA
Facts: On November 19, 1984, Loadstar received on board its vessel
M/V Cherokee the following goods for shipment:
1. 705 bales of lawanit hardwood
2. 27 boxes and crates of tilewood assemblies and others
3. 49 bundles of mouldings R & W (3) Apitong Bolidenized
The goods, amounting to P6,067,178, were insured by Manila
Insurance Co. The vessel is insured by Prudential Guarantee and
Assurance, Inc. On November 20, 1984, on its way to Manila from
Agusan, the vessel sank off Limasawa Island. MIC paid the consignee
P6,075,000 for the value of the goods lost, and filed a complaint
against Loadstar and PGAI, claiming subrogation into the rights of the
consignee. When PGAI paid Loadstar, it was dropped from the
complaint. The trial court ruled against Loadstar, and this was affirmed
by the Court of Appeals.
Loadstar submits that the vessel was a private carrier because it was
not issued a 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.
LOADSTAR argues that as a private carrier, it cannot be presumed to
have been negligent, and the burden of proving otherwise devolved
upon MIC. It also maintains that the vessel was seaworthy, and that
the loss was due to force majeure. 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. 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. MIC,
on the other hand, claims that LOADSTAR was liable, notwithstanding
that the loss of the cargo was due to force 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.
Issues:
(1) Whether Loadstar was a common carrier or a private carrier
(2) Whether Loadstar exercised the degree of diligence required under
the circumstances
(3) Whether the stipulation that the goods are at “the owner’s risk” is
valid
(4) Whether the action has prescribed
Held:
(1) 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. 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." 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.
(2) The doctrine of limited liability does not apply where there was
negligence on the part of the vessel owner or agent. 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 area
where it sank was determined to be moderate. Since it was remiss 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.
(3) Three kinds of stipulations have often been made in a bill of lading.
The first is 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. 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.
(4) 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. In 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; it must, accordingly, be struck down.
NATIONAL STEEL CORPORATION vs. CA
Doctrine: The stringent provisions of the Civil Code on common
carriers protecting the general public cannot justifiably be applied to a
private carrier.
Facts: Plaintiff National Steel Corporation (NSC) as Charterer and
defendant Vlasons Shipping, Inc. (VSI) as Owner, entered into a
Contract of Voyage Charter Hire whereby NSC hired VSI’s vessel, the
MV Vlasons I to make one voyage to load steel products at Iligan City
and discharge them at North Harbor, Manila. The handling, loading
and unloading of the cargoes were the responsibility of the Charterer.
The skids of tinplates and hot rolled sheets shipped were allegedly
found to be wet and rusty. Plaintiff, alleging negligence, filed a claim for
damages against the defendant who denied liability 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 its voyage, the vessel encountered
very rough seas.
Issue: Whether or not the provisions of the Civil Code on common
carriers pursuant to which there exists a presumption of negligence
against the common carrier in case of loss or damage to the cargo are
applicable to a private carrier.
Held: No. 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.
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 [Mendoza vs.
Philippine Airlines, Inc., 90 Phil. 836, 842-843 (1952)]. A carrier which
does not qualify 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.
Because the MV Vlasons I was a private carrier, the ship owner’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 facie presumption of negligence on a common carrier.
BASCOS vs. CA
FACTS: Rodolfo A. Cipriano representing Cipriano Trading Enterprise
(CIPTRADE for short) entered into a hauling contract with Jibfair
Shipping Agency Corp whereby the former bound itself to haul the
latter’s 2,000 m/tons of soya bean meal to the warehouse in Calamba,
Laguna. To carry out its obligation, CIPTRADE, through Cipriano,
subcontracted with Bascos to transport and to deliver 400 sacks of
soya bean meal from the Manila Port Area to Calamba, Laguna.
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 their contract.
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 for breach of a
contract of carriage. The trial court granted the writ of preliminary
attachment.
In her answer, petitioner interposed the defense that there was no
contract of carriage since CIPTRADE leased her cargo truck to load
the cargo from Manila Port Area to Laguna and that the truck carrying
the cargo was hijacked and being a force majeure, exculpated
petitioner from any liability
After trial, the trial court rendered a decision in favor of Cipriano and
against Bascos ordering the latter to pay the former for actual
damages for attorney’s fees and cost of suit.
The “Urgent Motion To Dissolve/Lift preliminary Attachment” Bascos is
DENIED for being moot and academic.
Petitioner appealed to the Court of Appeals but respondent Court
affirmed the trial court’s judgment.
Hence this petition for review on certiorari
ISSUE:
(1) WON petitioner a common carrier
(2) WON the hijacking referred to a force majeure
HELD: The petition is DISMISSED and the decision of the Court of
Appeals is hereby AFFIRMED.
1. YES
In disputing the conclusion of the trial and appellate courts that
petitioner was a common carrier, she alleged in this petition that the
contract between her and Cipriano was lease of the truck. She also
stated that: she was not catering to the general public. Thus, in her
answer to the amended complaint, she 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.
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. 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.”
2. NO
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. 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. 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, 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; xx
(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;” xx
NOTES:
1. She cited as evidence certain affidavits which referred to the
contract as “lease”. These affidavits were made by Jesus Bascos and
by petitioner herself and Cipriano and CIPTRADE did not object to the
presentation of affidavits by petitioner where the transaction was
referred to as a lease contract. 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. 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.
2. 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.
A.F. SANCHEZ BROKERAGE vs. CA
A common carrier is liable to the resulting damage to the goods if the
improper packaging is known to the carrier or his employees or is
apparent upon ordinary observation, but he nevertheless accepts the
same without protest or exception.
Respondent FGU Insurance Corporation (FGU) brought an action for
reimbursement against petitioner A.F. Sanchez Brokerage Inc.
(Sanchez Brokerage) to collect the amount paid by the former to
Wyeth-Suaco Laboratories Inc. (Wyeth-Suaco) as insurance payment
for the goods delivered in bad condition.
A.F. Brokerage refused to admit liability for the damaged goods which
it delivered from Philippines Skylanders, Inc. (PSI) to Wyeth-Suaco as
it maintained that the damage was due to improper and insufficient
export packaging, discovered when the sealed containers were
opened outside the PSI warehouse.
The Regional Trial Court of Makati dismissed the said complaint;
however, the decision was subsequently reversed and set aside by the
Court of Appeals, finding that Sanchez Brokerage is liable for the
carriage of cargo as a ―common carrier‖ by definition of the New Civil
Code.
ISSUE:
Whether or not the FGU Insurance is liable for the delivery of the
damaged goods
HELD:
As defined under Article 1732 of the Civil Code, 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. It does not
distinguish between one whose principal business activity is the
carrying of goods and one who does such carrying only as an ancillary
activity. The contention therefore of Sanchez Brokerage that it is not a
common carrier but a customs broker whose principal function is to
prepare the correct customs declaration and proper shipping
documents as required by law is bereft of merit. It suffices that
petitioner undertakes to deliver the goods for pecuniary consideration.
In this light, Sanchez Brokerage as a common carrier is mandated to
observe, under Article 1733 of the Civil Code, extraordinary diligence
in the vigilance over the goods it transports according to all the
circumstances of each case. In the event that the goods are lost,
destroyed or deteriorated, it is presumed to have been at fault or to
have acted negligently, unless it proves that it observed extraordinary
diligence.
The concept of ―extra-ordinary diligence‖ was explained in Compania
Maritima v. Court of Appeals. 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 sale, 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 storage
including such methods as their nature requires.
It was established that Sanchez Brokerage received the cargoes from
the PSI warehouse in good order and condition and that upon delivery
by petitioner some of the cargoes were found to be in bad order as
noted in the Delivery Receipt and as indicated in the Survey and
Destruction Report.
While paragraph no. 4 of Article 1734 of the Civil Code exempts a
common carrier from liability if the loss or damage is due to the
character of the goods or defects in the packaging or in the containers,
the rule is that if the improper packaging is known to the carrier or his
employees or is apparent upon ordinary observation, but he
nevertheless accepts the same without protest or exception
notwithstanding such condition, he is not relieved of liability for the
resulting damage. If the claim of Sanchez Brokerage that some of the
cartons were already damaged upon delivery to it were true, then it
should naturally have received the cargo under protest or with
reservation duly noted on the receipt issued by PSI but it made no
such protest or reservation.
PLANTERS PRODUCTS INC. vs. CA
Facts:Planters Products, Inc. purchased from Mitsubishi International
Corporation 9,329.7069 metric tons of Urea 46% fertilizer, which the
latter shipped aboard the cargo vessel M/V Sun Plum on June 16,
1974. Prior to its voyage, a time-charter party was entered into
between Mitsubishi as shipper, and Kyosei Kisen Kabushiki Kaisha as
shipowner. Before loading the fertilizer aboard the vessel, four of her
holds were presumably inspected by the charterer’s representative and
found it fit to take the load. After loading the cargo, the steel hatches
were closed with heavy iron lids, covered with 3 layers of tarpaulin then
tied with steel bonds. It remained sealed throughout the entire voyage.
Upon arrival of the vessel, petitioner unloaded the cargo, which took 11
days. A private marine and cargo surveyor, Cargo Superintendents
Company, Inc. (CSCI) was hired by petitioner to determine the outturn
of the cargo shipped. CSCI reported shortage of 106.726 metric tons,
and contamination of 18 metric tons due to dirt. PPI sent a claim letter
against Soriamont Steamship Agencies, the resident agent of KKKK.
The request was denied, hence, PPI filed an action for damages
before the CFI Manila. The lower court sustained the petitioner’s claim,
but such decision was reversed by the appellate court, which absolved
the carrier from liability. The appellate court ruled that the vessel was a
private carrier and not a common carrier by reason of the charter party.
Issues:
(1) Whether a common carrier becomes a private carrier by reason of a
charter party
(2) Whether the ship owner was able to prove the exercise of the
diligence required under the circumstances
Held:
(1) 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; Charter parties are of two types: (a) 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, 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.
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. 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. 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, the exercise of ordinary diligence in the carriage of goods will
suffice. Moreover, in 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 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.
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. 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.
(2) 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 Bulk shipment of highly soluble goods like fertilizer carries with it the
deterioration of the cargo was due to fortuitous event, or some other risk of loss or damage, more so, with a variable weather condition
circumstances inconsistent with its liability. To our mind, respondent prevalent during its unloading, as was the case at bar. This is a risk the
carrier has sufficiently overcome, by clear and convincing proof, the shipper or the owner of the goods has to face. Clearly, respondent
prima facie presumption of negligence. carrier has sufficiently proved the inherent character of the goods
which makes it highly vulnerable to deterioration; as well as the
Before the fertilizer was loaded, the four (4) hatches of the vessel were inadequacy of its packaging which further contributed to the loss. On
cleaned, dried and fumigated. After completing the loading of the cargo the other hand, no proof was adduced by the petitioner showing that
in bulk in the ship's holds, the steel pontoon hatches were closed and the carrier was remiss in the exercise of due diligence in order to
sealed with iron lids, then covered with three (3) layers of serviceable minimize the loss or damage to the goods it carried.
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. 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" 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.
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 re-examined by the
consignee, but prior to unloading. A 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.
Common carriers are not responsible for the loss, destruction or
deterioration of the goods if caused by the character of the goods or
defects in the packaging or in the containers. 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 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. 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.
MINDANAO TERMINAL AND BROKERAGESERVICE, INC.- versus -
PHOENIX ASSURANCE COMPANY OF NEW YORK/MCGEE & CO.,
INC
FACTS: The stevedoring company Mindanao Terminal and Brokerage
Service, Inc is contracted by Del Monte Philippines, Inc., to load and
stow a shipment of fresh green Philippine bananas and fresh
pineapples belonging to Del Monte Fresh Produce International, Inc.
into the cargo hold of the vessel M/V Mistrau. The vessel was docked
at the port of Davao City and the goods were to be transported by it to
the port of Inchon, Korea in favor of consignee Taegu Industries, Inc.
The vessel set sail from the port of Davao City and arrived at the port
of Inchon, Korea. It was then discovered upon discharge that some of
the cargo was in bad condition. The Marine Cargo Damage Surveyor
of Incok Loss and Average Adjuster of Korea, through its
representative Byeong Yong Ahn (Byeong),surveyed the extent of the
damage of the shipment. In a survey report, it was stated that16,069
cartons of the banana shipment and2,185 cartons of the pineapple
shipment were so damaged that they no longer had commercial value.
Phoenix and McGee instituted an action for damages against
Mindanao Terminal After trial, the RTC held that the only participation
of Mindanao Terminal was to loathe cargoes on board theM/V Mistrau
under the direction and supervision of the ship’s officers, who would
not have accepted the cargoes on board the vessel and signed
theforeman’s report unless they were properly arranged and tightly
secured to withstand voyage across the open seas. Accordingly,
Mindanao Terminal cannot be held liable for whatever happened to the
cargoes after it had loaded and stowed them. Moreover, citing the
survey report, it was found by the RTC that the cargoes were damaged
on account of a typhoon which M/V Mistrau had encountered during
the voyage. It was further held that Phoenix and McGee had no cause
of action against Mindanao Terminal because the latter,whose services
were contracted by Del Monte, a distinct corporation from Del Monte
Produce, had no contract with the assured Del Monte Produce. The
RTC dismissed the complaint and awarded the counterclaim of
Mindanao Terminal in the amount of P83,945.80 as actual damages
and P100,000.00 as attorney’s fees.
ISSUE: Whether Mindanao Terminal is liable for not having exercised
extraordinary diligence in the transport and storage of the cargo.
RULING: No, in the present case, Mindanao Terminal, as a stevedore,
was only charged with the loading an d s t o w i n g o f t h e c a rg o e
s from the pier to the ship’s cargo hold; it was n e v e r t h e c u s t o d i
a n o f t h e s h i p m e n t o f D e l Monte Produce. A stevedore is not a
common carrier for it does not transport goods or passengers; it is not
akin to a warehouseman for it does not store goods for profit.
**Phoenix and McGee appealed to the Court of Appeals. The appellate
court reversed and set aside the decision The same court ordered
Mindanao Terminal to pay Phoenix and McGee “the total amount of
$210,265.45 plus legal interest from the filing of the complaint until fully
paid and attorney’s fees of 20% of the claim." It sustained Phoenix’s
and McGee’s argument that the damage in the cargoes was the result
of improper stowage by Mindanao Terminal.** Mindanao Ter
minal filed a motion for reconsideration, which the Court of Appeals
denied in its 26 February 2004 resolution. Hence, the present petition
for review.
ASIAN TERMINALS, INC. V ALLIED GUARANTEE INSURANCE, CO.
INC. (2015)
FACTS: Marina, the predecessor of Asian Terminals Inc., is an arrastre
operator based on Manila. On February 5, 1989, a shipment of kraft
linear board was loaded and received from the ports of Lake Charles,
LA, and Mobile, Al, USA for transport and delivery to San Miguel. Upon
offloading, it was assessed that a total of 158 rolls were damaged
during shipping. Further, upon the goods' withdrawal from arrastre and
their delivery to the customs broker, Dynamic and eventually to the
consignee San Miguel, another 54 rolls were found to have been
damaged, for a total of 212 rolls of damaged shipment worth
P755,666.84. Allied Insurance was the insurer of the shipment. Thus, it
paid San Miguel P755,666.84 and was subrogated in the latter's right.
Allied filed a Complaint against Transocean, Philippine Transmarine,
Dynamic and Marina seeking to be indemnified for the P755,666.84 it
lost paying San Miguel.
ISSUES: Whether or not petitioner has been proven liable for the
additional 54 rolls of damaged goods to respondent
RULING: Yes. Marina, the arrastre operator, from the above evidence,
was not able to overcome the presumption of negligence. The Bad
Order Cargo Receipts, the Turn Over Survey of Bad Order Cargoes as
well as the Request for Bad Order Survey did not establish that the
additional 54 rolls were in good condition while in the custody of the
arrastre. Said documents proved only that indeed the 158 rolls were
already damaged when they were discharged to the arrastre operator
and when it was subsequently withdrawn from the arrastre operator by
[the] customs broker. Further, the Turn Over Inspector and the Bad
Order Inspector who conducted the inspections and who signed the
Turn Over Survey of Bad [Order] Cargoes and the Request for Bad
Order Survey, respectively, were not presented by Marina as
witnesses to verify the correctness of the document and to testify that
only 158 rolls was reported and no others sustained damage while the
shipment was in its possession.
On the other hand, defendant Dynamic (which) in its capacity as
broker, withdrew the 357 rolls of kraft linear board from the custody of
defendant Marina and delivered the same to the consignee, San
Miguel Corporation's warehouse in Tabacalera at United Nations,
Manila, is considered a common carrier. It is noteworthy to mention
that "in general, the nature of the work of an arrastre operator covers
the handling of cargoes at piers and wharves," "To carry out its duties,
the arrastre is required to provide cargo handling equipment which
includes, among others, trailer, chassis for containers." Hence, the
"legal relationship betw.een the consignee and the arrastre operator is
akin to that of a depositor and the warehouseman. The relationship
between the consignee and the common carrier is similar to that of the
consignee and the arrastre operator. Since it is the duty of the arrastre
to take good care of the goods that are in its custody and to deliver
them in good condition to the consignee, such responsibility also
develops upon the carrier. Both the arrastre and the carrier are,
therefore, charged with and obligated to deliver the goods in good
condition to the consignee." Since the relationship of an arrastre
operator and a consignee is akin to that between a warehouseman and
a depositor, then, in instances when the consignee claims any loss, the
burden of proof is on the arrastre operator to show that it complied with
the obligation to deliver the goods and that the losses were not due to
its negligence or that of its employees. The broker, Dynamic, cannot
alone be held liable for the additional 54 rolls of damaged goods since
such damage occurred during the following instances: (1) while the
goods were in the custody of the arrastre ATI; (2) when they were in
transition from ATI's custody to that of Dynamic (i.e., during loading to
Dynamic's trucks); and (3) during Dynamic's custody. While the trial
court could not determine with pinpoint accuracy who among the two
caused which particular damage and in what proportion or quantity, it
was clear that both ATI and Dynamic failed to discharge the burden of
proving that damage on the 54 rolls did not occur during their custody.
As for petitioner ATI, in particular, what worked against it was the
testimony, as cited above, that its employees' use of the wrong lifting
equipment while loading the goods onto Dynamic's trucks had a role in
causing the damage. Such is a finding of fact made by the trial court
which this Court, without a justifiable ground, will not disturb, The
arrastre operator's principal work is that of handling cargo, so that its
drivers/operators or employees should observe the standards and
measures necessary to prevent losses and damage to shipments
under its custody. In the performance of its obligations, an arrastre
operator should observe the same degree of diligence as that required
of a common carrier and a warehouseman. Being the custodian of the
goods discharged from a vessel, an arrastre operator's duty is to take
good care of the goods and to turn them over to the party entitled to
their possession. With such a responsibility, the arrastre operator must
prove that the losses were not due to its negligence or to that of its
employees. And to prove the exercise of diligence in handling the
subject cargoes, petitioner must do more than merely show the
possibility that some other party could be responsible for the loss or
the damage. It must prove that it exercised due care in the handling
thereof. A mere sign-off from the customs broker's representative that
he had received the subject shipment "in good order and condition
without exception" would not absolve the arrastre from liability, simply
because the representative's signature merely signifies that said
person thereby frees the arrastre from any liability for loss or damage
to the cargo so withdrawn while the same was in the custody of such
representative to whom the cargo was released, but it does not
foreclose the remedy or right of the consignee (or its subrogee) to
prove that any loss or damage to the subject shipment occurred while
the same was under the custody, control and possession of the
arrastre operator. As it is now established that there was negligence
in both petitioner ATI's and Dynamic's performance of their duties in
the handling, storage and delivery of the subject shipment to San
Miguel, resulting in the loss of 54 rolls of kraft linear board, both shall
be solidarily liable for such loss.
JUANIZA vs JOSE
Facts: Eugenio Jose was the registered owner and operator of the
passenger jeepney. In 1969, said jeepney collided with a freight train of
the Philippine National Railways, resulting to the death of 7 and
physical injuries to 5 of its passengers. At the time of the accident,
Eugenio was legally married to Socorro Ramos but had been
cohabiting with Rosalia Arroyo for 16 years. The trial court rendered a
decision ordering Eugenio and Rosalia to jointly and severally pay
damages to the victims of the accident. The lower court based her
liability on Article 144 of the Civil Code which reads: "When a man and
woman living together as husband and wife, but they are not married,
or their marriage is void from the beginning, the property acquired by
either or both of them through their work or industry or their wages and
salaries shall be governed by the rules on co-ownership." Rosalia
claims that it was error for the trial court to consider her a co-owner of
the said jeepney, just because she had cohabited for many years as
wife of Eugenio.
Issues:
Were Eugenio and Rosalia co-owners of the jeepney?
Can Rosalia be held jointly and severally liable for damages with
Eugenio?
1. No. Article 144 of the Civil Code pertains only to those common law
relationships where neither of the parties are suffer from any legal
impediment to marry. Since Eugenio is legally married to Socorro
Ramos, there is an impediment for him to contract marriage with
Rosalia. Under the aforecited provision of the Civil Code, Arroyo
cannot be a co-owner of the jeepney. The jeepney belongs to the
conjugal partnership of Jose and Socorro. There is therefore no basis
for the liability of Rosalia for damages arising from the death of, and
physical injuries suffered by, the passengers of the jeepney which
figured in the collision.
2. No. It is settled in our jurisprudence that only the registered owner of
a public service vehicle is responsible for damages that may arise from
consequences incident to its operation, or maybe caused to any of the
passengers therein.
METRO MANILA TRANSIT CORPORATION vs. REYNALDO
CUEVAS
FACTS: Metro Manila Transit Corporation (MMTC) and Mina’s Transit
Corporation (Mina’s Transit) entered into an agreement to sell dated
August 31, 1990, whereby the latter bought several bus units from the
former at a stipulated price. They agreed that MMTC would retain the
ownership of the buses until certain conditions were met, but in the
meantime Mina’s Transit could operate the buses within Metro Manila.
On October 14, 1994, one of the buses subject of the agreement to sell
hit and damaged a Honda Motorcycle owned by Reynaldo and driven
by Junnel. Reynaldo and Junnel sued MMTC and Mina’s Transit for
damages in the Regional Trial Court (RTC).
MMTC denied liability claiming that although it retained the ownership
of the bus, the actual operator and employer of the bus driver was
Mina’s Transit; and that, in support of its cross-claim against Mina’s
Transit, a provision in the agreement to sell mandated Mina’s
Transport to hold it free from liability arising from the use and operation
of the bus units.
ISSUE1: Whether or not MMTC is liable considering that it was not the
actual operator and employer of the bus driver
HELD1: YES. In view of MMTC’s admission in its pleadings that it had
remained the registered owner of the bus at the time of the incident, it
could not escape liability for the personal injuries and property damage
suffered by the Cuevases. This is because of the registered-owner
rule, whereby the registered owner of the motor vehicle involved in a
vehicular accident could be held liable for the consequences.
x x x It is well settled that in case of motor vehicle mishaps, the
registered owner of the motor vehicle is considered as the employer of
the tortfeasor-driver, and is made primarily liable for the tort committed
by the latter under Article 2176, in relation with Article 2180, of the Civil
Code.
In Equitable Leasing Corporation v. Suyom, we ruled that in so far as
third persons are concerned, the registered owner of the motor vehicle
is the employer of the negligent driver, and the actual employer is
considered merely as an agent of such owner.
MMTC could not evade liability by passing the buck to Mina’s Transit.
The stipulation in the agreement to sell did not bind third parties like
the Cuevases, who were expected to simply rely on the data contained
in the registration certificate of the erring bus.
ISSUE2: May MMTC recover from Mina’s Transit (the actual employer
of the negligent driver)?
HELD2: YES. Although the registered-owner rule might seem to be
unjust towards MMTC, the law did not leave it without any remedy or
recourse. According to Filcar Transport Services v. Espinas, MMTC
could recover from Mina’s Transit, the actual employer of the negligent
driver, under the principle of unjust enrichment, by means of a cross-
claim seeking reimbursement of all the amounts that it could be
required to pay as damages arising from the driver’s negligence. A
cross-claim is a claim by one party against a co-party arising out of the
transaction or occurrence that is the subject matter either of the
original action or of a counterclaim therein, and may include a claim
that the party against whom it is asserted is or may be liable to the
cross-claimant for all or part of a claim asserted in the action against
the cross-claimant.

Held: The Court has reiterated the registered-owner rule in other rulings, like
in Filcar Transport Services v. Espinas, to wit:
 DELSAN TRANSPORT LINES vs AMERICAN HOMES INSURANCE
FACTS: Caltex Philippines entered into a one-year contract of
affreightment with the petitioner, Delsan Transport Lines, Inc. to
transport Caltex’s industrial fuel oil from the Batangas-Bataan Refinery
to different parts of the country. 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 with the private respondent, American Home Assurance
Corporation. 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. Petitioner attributes the sinking of MT Maysun
to fortuitous event or force majeure.
The insurance company paid Caltex the insured value of the lost cargo
and was subrogated of the rights of Caltex. However, despite repeated
demands, it failed to collect from petitioner carrier.
RTC’s decision: The vessel, MT Maysun, 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.
CA’s decision: Reversed RTC’s decision. PAGASA weather report
showed that the waves were not big. There was no explanation as to
what may have caused the sinking and found that the vessel was
improperly manned. Hence, common carrier is liable.
ISSUE: Is petitioner exempt from liability due to fortuitous event?
RULING:
No. Petitioner is liable for the insured value of the lost cargo of
industrial fuel oil belonging to Caltex for its failure to rebut the
presumption of fault or negligence as common carrier occasioned by
the unexplained sinking of its vessel, MT Maysun, while in transit.
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. This tale of strong
winds and big waves by the said officers of the petitioner however, was
effectively rebutted and belied by the weather report 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, 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.
NOTES:
Seaworthiness relates to a vessel’s actual condition. Neither the
granting of classification or the issuance of certificates establishes
seaworthiness. 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.
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 who in justice
and good conscience ought to pay. 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. 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.
ASIAN TERMINALS vs SIMON ENTERPRISE INC
Facts: On October 25, 1995, Contiquincybunge Export Company
loaded 6,843.700 metric tons of U.S. Soybean Meal in Bulk on board
the vessel M/V "Sea Dream" at the Port of Darrow, Louisiana, U.S.A.,
for delivery to the Port of Manila to respondent Simon Enterprises, Inc.,
as consignee. When the vessel arrived at the South Harbor in Manila,
the shipment was discharged to the receiving barges of petitioner
Asian Terminals, Inc. (ATI), the arrastre operator. Respondent later
received the shipment but claimed having received only 6,825.144
metric tons of U.S. Soybean Meal, or short by 18.556 metric tons,
which is estimated to be worth US$7,100.16 or P186,743.20. On
November 25, 1995, Contiquincybunge Export Company made
another shipment to respondent and allegedly loaded on board the
vessel M/V "Tern" at the Port of Darrow, Louisiana, U.S.A. 3,300.000
metric tons of U.S. Soybean Meal in Bulk for delivery to respondent at
the Port of Manila. The carrier issued its clean Berth Term Grain Bill of
Lading. On January 25, 1996, the carrier docked at the inner
Anchorage, South Harbor, Manila. The subject shipment was
discharged to the receiving barges of petitioner ATI and received by
respondent which, however, reported receiving only 3,100.137 metric
tons instead of the manifested 3,300.000 metric tons of shipment.
Respondent filed against petitioner ATI and the carrier a claim for the
shortage of 199.863 metric tons, estimated to be worth US$79,848.86
or P2,100,025.00, but its claim was denied.
Thus, on December 3, 1996, respondent filed with the Regional Trial
Court (RTC) of Manila an action for damages[5] against the unknown
owner of the vessels M/V "Sea Dream" and M/V "Tern," its local agent
Inter-Asia Marine Transport, Inc., and petitioner ATI... alleging that it
suffered the losses through the fault or negligence of the said
defendants.
In their Answer,[7] the unknown owner of the vessel M/V "Tern" and its
local agent Inter-Asia Marine Transport, Inc., prayed for the dismissal
of the complaint essentially alleging lack of cause of action and
prescription. They alleged as affirmative... defenses the following: that
the complaint does not state a cause of action; that plaintiff and/or
defendants are not the real parties-in-interest; that the cause of action
had already prescribed or laches had set in; that the claim should have
been filed within three days from... receipt of the cargo pursuant to the
provisions of the Code of Commerce; that the defendant could no
longer check the veracity of plaintiff's claim considering that the claim
was filed eight months after the cargo was discharged from the vessel;
that plaintiff hired its... own barges to receive the cargo and hence, any
damages or losses during the discharging operations were for plaintiff's
account and responsibility; that the statement of facts bears no
remarks on any short-landed cargo; that the draft survey report
indicates that the cargo... discharged was more than the figures
appearing in the bill of lading; that because the bill of lading states that
the goods are carried on a "shipper's weight, quantity and quality
unknown" terms and on "all terms, conditions and exceptions as per
charter party dated October 15,... 1995," the vessel had no way of
knowing the actual weight, quantity, and quality of the bulk cargo when
loaded at the port of origin and the vessel had to rely on the shipper for
such information; that the subject shipment was discharged in Manila
in the same condition and... quantity as when loaded at the port of
loading; that defendants' responsibility ceased upon discharge from the
ship's tackle; that the damage or loss was due to the inherent vice or
defect of the goods or to the insufficiency of packing thereof or perils or
dangers or accidents... of the sea, pre-shipment damage or to
improper handling of the goods by plaintiff or its representatives after
discharge from the vessel, for which defendants cannot be made
liable; that damage/loss occurred while the cargo was in the
possession, custody or control of plaintiff... or its representative, or due
to plaintiff's own negligence and careless actuations in the handling of
the cargo; that the loss is less than 0.75% of the entire cargo and
assuming arguendo that the shortage exists, the figure is well within
the accepted parameters when loading... this type of bulk cargo; that
defendants exercised the required diligence under the law in the
performance of their duties; that the vessel was seaworthy in all
respects; that the vessel went straight from the port of loading to
Manila, without passing through any intermediate... ports so there was
no chance for any loss of the cargo; the plaintiff's claim is excessive,
grossly overstated, unreasonable and a mere paper loss and is
certainly unsubstantiated and without any basis; the terms and
conditions of the relevant bill of lading and the charter... party, as well
as the provisions of the Carriage of Goods by Sea Act and existing
laws, absolve the defendants from any liability; that the subject
shipment was received in bulk and thus defendant carrier has no
knowledge of the condition, quality and quantity of the... cargo at the
time of loading; that the complaint was not referred to the arbitrators
pursuant to the bill of lading; that liability, if any, should not exceed the
CIF value of the lost cargo, or the limits of liability set forth in the bill of
lading and the charter party.
Petitioner ATI argues that:
Respondent failed to prove that the subject shipment suffered actual
loss/shortage as there was no competent evidence to prove that it
actually weighed 3,300 metric tons at the port of origin.
Stipulations in the bill of lading that the cargo was carried on a
"shipper's weight, quantity and quality unknown" is not contrary to
public policy. Thus, herein petitioner cannot be bound by the quantity
or weight of the cargo stated in the bill of lading.
Shortage/loss, if any, may have been due to the inherent nature of the
shipment and its insufficient packing considering that the subject cargo
was shipped in bulk and had a moisture content of 12.5%.
Respondent failed to substantiate its claim for damages as no
competent evidence was presented to prove the same.
Respondent has not presented any scintilla of evidence showing any
fault/negligence on the part of herein petitioner.
Issues: whether the appellate court erred in affirming the decision of
the trial court holding petitioner ATI solidarily liable with its co-
defendants for the shortage incurred in the... shipment of the goods to
respondent
Ruling:
In this case, respondent failed to prove that the subject shipment
suffered shortage, for it was not able to establish that the subject
shipment was weighed at the port of origin at Darrow, Louisiana,
U.S.A. and that the actual weight of the said shipment was 3,300
metric... tons.
the weight of the shipment as indicated in the bill of lading is not
conclusive as to the actual weight of the goods. Consequently, the
respondent must still prove the actual weight of the subject shipment at
the time it... was loaded at the port of origin so that a conclusion may
be made as to whether there was indeed a shortage for which
petitioner must be liable. This, the respondent failed to do.
Principles:
Though it is true that common carriers are presumed to have been at
fault or to have acted negligently if the goods transported by them are
lost, destroyed, or deteriorated, and that the common carrier must
prove that it exercised extraordinary diligence in order to overcome
the... presumption,[21] the plaintiff must still, before the burden is
shifted to the defendant, prove that the subject shipment suffered
actual shortage. This can only be done if the weight of the shipment at
the port of origin and its subsequent weight at the... port of arrival have
been proven by a preponderance of evidence, and it can be seen that
the former weight is considerably greater than the latter weight, taking
into consideration the exceptions provided in Article 1734[22] of the
Civil Code.
LOADSTAR SHIPPING CO., INC VS PIONEER ASIA INSURANCE
CORP
FACTS: Petitioner Loadstar Shipping Co., Inc. is the registered owner
and operator of the vessel M/V Weasel. It entered into a voyage-
charter with Northern Mindanao Transport Company, Inc. for the
carriage of 65,000 bags of cement from Iligan City to Manila. The
shipper was Iligan Cement Corporation, while the consignee in Manila
was Market Developers, Inc. The cement were loaded on board M/V
Weasel and stowed in the cargo holds for delivery to the consignee.
Prior to the voyage, the consignee insured the shipment of cement with
respondent Pioneer Asia Insurance Corporation. The weather was
good when they left but the following morning the captain ordered the
vessel to be forced aground and the entire shipment of cement was
exposed to sea water. Petitioner thus failed to deliver the goods to the
consignee in Manila. The consignee demanded from petitioner full
reimbursement of the cost of the lost shipment. Petitioner, however,
refused to reimburse the consignee despite repeated demands.
Respondent insurance company paid the consigneefor the value of the
lost shipment of cement. In return, the consignee executed a Loss and
Subrogation Receipt in favor of respondent concerning the latter’s
subrogation rights against petitioner.
ISSUE:
Had the voyage-charter entered into by Loadstar with the Northern
Mindanao Transport Company, Inc. converted the former into a private
carrier?
RULING:
No.The voyage-charter agreement between petitioner and Northern
Mindanao Transport Company, Inc. did not in any way convert the
common carrier into a private carrier since the said charter is limited to
the ship only and does not involve both the vessel and its crew.
As a common carrier, petitioner is required to observe extraordinary
diligence in the vigilance over the goods it transports. When the goods
placed in its care are lost, petitioner is presumed to have been at fault
or to have acted negligently. Petitioner therefore has the burden of
proving that it observed extraordinary diligence in order to avoid
responsibility for the lost cargo. However, petitioner failed to
substantiate its claim that the loss of the goods was due to a fortuitous
event. Records show that the sea and weather conditions in the vicinity
of Negros Occidental were calm.
NOTES: Planters Products, Inc. v. Court of Appeals : 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.
LEA MER INDUSTRIES vs MALAYAN INSURANCE CO
Rule Synopsis
In a charter contract of affreightment, the owner of the vessel retains
control over the same. He is thus considered a common carrier.
Case Summary
Lea Mer Industries, Inc. leased a barge to transport the goods of Ilian
Silica Mining. During the voyage, the vessel sank, resulting in the loss
of the cargo; there was a typhoon then. Malayan Insurance Co.
(insurer), as insurer paid the consignee, it then demanded
reimbursement from Lea Mer. The latter refused to pay arguing that it
is not liable since the cause of the loss was a fortuitous event.
Issues resolved —
Should Lea Mer Industries be held liable?
HELD – YES.
The Supreme Court held Lea Mer liable. It found that the latter is a
common carrier being engaged in the business of transporting goods
through its vessels and that it failed to exercise the extraordinary
diligence required of common carriers. In finding Lea Mer to be a
common carrier, it ruled that the charter contract between Lea Mer and
the consignee was one for affreightment, not bareboat or demise. The
SC distinguished the two types of charter thus: in a demise charter: a)
the owner of the vessel relinquishes its possession, command, and
navigation to the charterer; b) it is of private character, and c) what
governs is the stipulation of the parties; it is beyond the ambit of the
law on common carriers. Whereas, in an affreightment charter, as in
the case at hand: a) the owner of the vessel maintains the manning
and control over the boat, b) the owner is considered a common
carrier, and c) pertinent laws governing common carriers were
applicable. As such, Lea Mer had the burden of showing that it
exercised extraordinary diligence to prevent the loss or damage. In this
case, the Court found Lea Mer’s rebuttal evidence to be “sorely
insufficient.”
AIR FRANCE vs. CARRASCOSO and COURT OF APPEALS
Facts: On March 28, 1958, the defendant, Air France, through its
authorized agent, Philippine Air Lines, Inc., issued to plaintiff a “first
class” round trip airplane ticket from Manila to Rome. From Manila to
Bangkok, plaintiff travelled in “first class”, but at Bangkok, the Manager
of the defendant airline forced plaintiff to vacate the “first class” seat
that he was occupying because there was a “white man”, who, the
Manager alleged, had a “better right” to the seat. When asked to
vacate his “first class” seat, the plaintiff, as was to be expected,
refused, and told defendant’s Manager that his seat would be taken
over his dead body; a commotion ensued, and they came all across to
Mr. Carrascoso and pacified Mr. Carrascoso to give his seat to the
white man” and plaintiff reluctantly gave his “first class” seat in the
plane.
Issue: Whether there is a breach of contract of carriage between Air
France and Carrascoso that would hold Air France liable for damages.
Ruling: Yes. Petitioner’s contract with Carrascoso is one attended with
public duty. The stress of Carrascoso’s action as we have said, is
placed upon his wrongful expulsion. This is a violation of public duty by
the petitioner air carrier — a case of quasi-delict. Damages are proper.
LOADSTAR SHIPPING CO., INC. V. MALAYAN INSURANCE CO.,
INC
FACTS: Loadstar International Shipping, Inc. (Loadstar Shipping) and
Philippine Associated Smelting and Refining Corporation (PASAR)
entered into a Contract of Affreightment for domestic bulk transport of
the latter’s copper concentrates for a period of one year from
November 1, 1998 to October 31, 1999. The contract was extended up
to the end of October 2000.
On September 10, 2000, 5,065.47 wet metric tons (WMT) of copper
concentrates were loaded in Cargo Hold. Nos. 1 and 2 of MV “Bobcat”,
a marine vessel owned by Loadstar International Shipping Co., Inc.
(Loadstar International) and operated by Loadstar Shipping under a
charter party agreement. The shipper and consignee under the Bill of
Lading are Philex Mining Corporation (Philex) and PASAR,
respectively. The cargo was insured with Malayan Insurance
Company, Inc. (Malayan) under Open Policy No. M/OP/2000/001-582.
P & I Association is the third party liability insurer of Loadstar Shipping.
On said date (September 10, 2000), MV “Bobcat” sailed from Poro
Point, San Fernando, La Union bound for Isabel, Leyte. On September
12, 2000, while in the vicinity of Cresta de Gallo, the vessel’s chief
officer on routine inspection found a crack on starboard side of the
main deck which caused seawater to enter and wet the cargo inside
Cargo Hold No. 2 forward/aft. The cracks at the top deck starboard
side of Cargo Hold No. 2, measuring 1.21 meters long x 0.39 meters
wide, and at top deck aft section starboard side on other point,
measuring 0.82 meters long x 0.32 meters wide, were welded.
Immediately after the vessel arrived at Isabel, Leyte anchorage area,
on September 13, 2000, PASAR and Philex’s representatives boarded
and inspected the vessel and undertook sampling of the copper
concentrates. In its preliminary report dated September 15, 2000, the
Elite Adjusters and Surveyor, Inc. (Elite Surveyor) confirmed that
samples of copper concentrates from Cargo Hold No. 2 were
contaminated by seawater. Consequently, PASAR rejected 750 MT of
the 2,300 MT cargo discharged from Cargo Hold No. 2.
On November 6, 2000, PASAR sent a formal notice of claim in the
amount of [P]37,477,361.31 to Loadstar Shipping. In its final report
dated November 16, 2000, Elite Surveyor recommended payment to
the assured the amount of [P]32,351,102.32 as adjusted. On the basis
of such recommendation, Malayan paid PASAR the amount of
[P]32,351,102.32.
Meanwhile, on November 24, 2000, Malayan wrote Loadstar Shipping
informing the latter of a prospective buyer for the damaged copper
concentrates and the opportunity to nominate/refer other salvage
buyers to PASAR. On November 29, 2000, Malayan wrote Loadstar
Shipping informing the latter of the acceptance of PASAR’s proposal to
take the damaged copper concentrates at a residual value of
US$90,000.00. On December 9, 2000, Loadstar Shipping wrote
Malayan requesting for the reversal of its decision to accept PASAR’s
proposal and the conduct of a public bidding to allow Loadstar
Shipping to match or top PASAR’s bid by 10%.
On January 23, 2001, PASAR signed a subrogation receipt in favor of
Malayan. To recover the amount paid and in the exercise of its right of
subrogation, Malayan demanded reimbursement from Loadstar
Shipping, which refused to comply. Consequently, on September 19,
2001, Malayan instituted with the RTC a complaint for damages. The
complaint was later amended to include Loadstar International as party
defendant.
ISSUE: WON THE INSURER IS VALIDLY SUBROGATED TO THE
RIGHTS OF THE CONSIGNEE.
HELD: NO. Malayan’s claim against the petitioners is based on
subrogation to the rights possessed by PASAR as consignee of the
allegedly damaged goods. The right of subrogation stems from Article
2207 of the New Civil Code which states:
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 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.”
The right of subrogation is however, not absolute. “There are a few
recognized exceptions to this rule. For instance, if the assured by his
own act releases the wrongdoer or third party liable for the loss or
damage, from liability, the insurer’s right of subrogation is defeated. . . .
Similarly, where the insurer pays the assured the value of the lost
goods without notifying the carrier who has in good faith settled the
assured’s claim for loss, the settlement is binding on both the assured
and the insurer, and the latter cannot bring an action against the carrier
on his right of subrogation. . . . And where the insurer pays the assured
for a loss which is not a risk covered by the policy, thereby effecting
‘voluntary payment,’ the former has no right of subrogation against the
third party liable for the loss . . . .”
The rights of a subrogee cannot be superior to the rights possessed by
a subrogor. “Subrogation is the substitution of one person in the place
of another with reference to a lawful claim or right, so that he who is
substituted succeeds to the rights of the other in relation to a debt or
claim, including its remedies or securities. The rights to which the
subrogee succeeds are the same as, but not greater than, those of the
person for whom he is substituted, that is, he cannot acquire any claim,
security or remedy the subrogor did not have. In other words, a
subrogee cannot succeed to a right not possessed by the subrogor. A
subrogee in effect steps into the shoes of the insured and can recover
only if the insured likewise could have recovered.”
Consequently, an insurer indemnifies the insured based on the loss or
injury the latter actually suffered from. If there is no loss or injury, then
there is no obligation on the part of the insurer to indemnify the
insured. Should the insurer pay the insured and it turns out that
indemnification is not due, or if due, the amount paid is excessive, the
insurer takes the risk of not being able to seek recompense from the
alleged wrongdoer. This is because the supposed subrogor did not
possess the right to be indemnified and therefore, no right to collect is
passed on to the subrogee.
GANZON vs CA
FACTS: Ganzon, after having been issued three successive 60-day of
suspension order by Secretary of Local Government, filed a petition for
prohibition with the CA to bar Secretary Santos from implementing the
said orders. Ganzon was faced with 10 administrative complaints on
various charges on abuse of authority and grave misconduct.
ISSUE: Whether or not the Secretary of Local Government (as the
alter ego of the President) has the authority to suspend and remove
local officials.
RULING: The Constitution did nothing more, and insofar as existing
legislation authorizes the President (through the Secretary of Local
Government) to proceed against local officials administratively, the
Constitution contains no prohibition. The Chief Executive is not banned
from exercising acts of disciplinary authority because she did not
exercise control powers, but because no law allowed her to exercise
disciplinary authority.
In those case that this Court denied the President the power (to
suspend/remove) it was not because that the President cannot
exercise it on account of his limited power, but because the law lodged
the power elsewhere. But in those cases in which the law gave him the
power, the Court, as in Ganzon v. Kayanan, found little difficulty in
sustaining him.
We reiterate that we are not precluding the President, through the
Secretary of Interior from exercising a legal power, yet we are of the
opinion that the Secretary of interior is exercising that power
oppressively, and needless to say, with a grave abuse of discretion.
As we observed earlier, imposing 600 days of suspension which is not
a remote possibility Mayor Ganzon is to all intents and purposes, to
make him spend the rest of his term in inactivity. It is also to make, to
all intents and purposes, his suspension permanent.
SABENA BELGIAN WORLD AIRLINES V CA
Doctrine:
– Art. 1733 of the [Civil] Code provides that from the very nature of
their business and by reasons of public policy, common carriers are
bound to observe extraordinary diligence in the vigilance over the
goods transported by them.
– Art. 1735 establishes the presumption that 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
had observed extraordinary diligence as required in Article 1733.
– The Warsaw Convention 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 x x x by any agent of the carrier acting within the scope of his
employment.’
Facts:
Plaintiff Ma. Paula San Agustin, herein private respondent, was a
passenger on board Flight SN 284 of defendant airline originating from
Casablanca to Brussels, Belgium on her way back to Manila. She
checked in her luggage which contained her valuables, namely:
jewelries valued at $2,350.00; clothes $1,500.00; shoes/bag $150;
accessories $75; luggage itself $10.00; or a total of $4,265.00, for
which she was issued Tag No. 71423. She stayed overnight in
Brussels and her luggage was left on board Flight SN 284.
She arrived at Manila International Airport and immediately submitted
her Tag No. 71423 but her luggage was missing. She was advised to
accomplish and submit a property Irregularity Report which she
submitted and filed on the same day but when her luggage could not
be found, she filed a formal complaint with defendant’s Local Manager.
Subsequently, plaintiff was furnished copies of telexes of defendant’s
Brussel’s Office that the latter found her luggage and that they have
broken the locks for identification. Plaintiff was assured by the
defendant that it has notified its Manila Office that the luggage will be
shipped to Manila. But unfortunately plaintiff was informed that the
luggage was lost for the second time.
Plaintiff demanded from the defendant the money value of the luggage
and its contents or its exchange value, but defendant refused to settle
the claim. Defendant asserts in its Answer and its evidence tend to
show that while it admits that the plaintiff was a passenger with a piece
of checked in luggage, the loss of the luggage was due to plaintiff’s
sole if not contributory negligence.
Petitioner airline company, in contending that the alleged negligence of
private respondent should be considered the primary cause for the loss
of her luggage, avers that, despite her awareness that the flight ticket
had been confirmed only for Casablanca and Brussels, and that her
flight from Brussels to Manila had yet to be confirmed, she did not
retrieve the luggage upon arrival in Brussels. Petitioner insists that
private respondent, being a seasoned international traveler, must have
likewise been familiar with the standard provisions contained in her
flight ticket that items of value are required to be hand-carried by the
passenger and that the liability of the airline or loss, delay or damage
to baggage would be limited, in any event, to only US$20.00 per kilo
unless a higher value is declared in advance and corresponding
additional charges are paid thereon. At the Casablanca International
Airport, private respondent, in checking in her luggage, evidently did
not declare its contents or value, pursuant to Section 5(c), Article IX, of
the General Conditions of Carriage, which states that: “Passengers
shall not include in his checked baggage, and the carrier may refuse to
carry as checked baggage, fragile or perishable articles, money,
jewelry, precious metals, negotiable papers, securities or other
valuables.”
The trial court rendered judgment ordering Sabena Belgian World
Airlines to pay private respondent. Sabena appealed but the CA
affirmed in toto the trial court’s judgment, hence the present petition for
review.
Issue:
W/N the airline is liable for the lost luggage
Held:
Yes. Fault or negligence consists in the omission of that diligence
which is demanded by the nature of an obligation and corresponds
with the circumstances of the person, of the time, and of the place.
When the source of an obligation is derived from a contract, the mere
breach or non-fulfillment of the prestation gives rise to the presumption
of fault on the part of the obligor. This rule is not different in the case
of common carriers in the carriage of goods which, indeed, are bound
to observe not just the due diligence of a good father of a family but
that of “extraordinary” care in the vigilance over the goods.
The only exceptions to the foregoing extraordinary responsibility of the
common carrier is when the loss, destruction, or deterioration of the
goods is due to any of the following causes:
(1) Flood, storm, earthquake, lightning, or other natural disaster or
calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the
containers;

(5) Order or act of competent public authority.’
Not one of the above excepted causes obtains in this case.
The airline cannot invoke the tort doctrine of proximate cause because
the private respondent’s luggage was lost while it was in the custody of
petitioner. The “loss of said baggage not only once by twice,” said the
appellate court, “underscores the wanton negligence and lack of care”
on the part of the carrier. The above findings foreclose whatever rights
petitioner might have had to the possible limitation of liabilities enjoyed
by international air carriers under the Warsaw Convention.
In Alitalia vs. Intermediate Appellate Court, the Court held that “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 x x x by any agent of the carrier acting within the scope of his
employment.’
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, 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.
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. 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. Decision appealed from
AFFIRMED.
CALALAS VS. COURT OF APPEALS
FACTS: Respondent, Eliza Sunga took a passenger jeepney owned
and operated by petitioner Vicente Calalas. The jeepney was already
filled with passengers so she was given by the conductor an “extension
seat,” a wooden stool at the back of the door. As she was seated at the
rear end of the vehicle, Sunga gave way to the outgoing passenger.
Unfortunately, a truck driven by Iglecerio Verena and owned by
Francisco Salva bumped the left rear portion of the jeepney. As a
result, Sunga was injured.
Sunga then 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 truck.
RTC’s decision: Absolved Calalas of liability and ruled that Salva as
third-party defendant 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.
CA’s decision: reversed RTC’s ruling on the ground that Sunga’s
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. It also dismissed the third-party complaint
against Salva and adjudged Calalas liable for damages to Sunga.
ISSUES:
1. Whether or not respondent passenger is bound by the ruling in Civil
Case No. 3490 finding the driver and the owner of the truck liable for
quasi-delict.
2. Whether or not respondent carrier is responsible for the injury
caused to its passenger when the accident was caused by another
vehicle.
3. Whether or not the bumping of the jeepney by the truck owned by
Salva was a caso fortuito.
4. Whether or not respondent passenger is entitled to moral damages.
RULING:
1. No. The principle of res judicata does not apply where a party in a
pending case was never a party in a previous one. And besides, the
issues in Civil Case No. 3490 and in the present case are not 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
petitioner’s 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 or culpa contractual, is premised upon the negligence in the
performance of a contractual obligation.
2. Yes. The liability of petitioner arises from his negligence in the
performance of his contractual obligation or breach of contract of
carriage. Art. 1756 of the Civil Code provides that common carriers are
presumed to have been at fault or to have acted negligently in case of
death or injuries to passengers, 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. It is now the duty of petitioner to prove that he observed
extraordinary diligence in the care of his passengers. However, in this
case, petitioner failed to prove that he observed extraordinary diligence
in the care of his passengers. It was found that the jeepney was not
properly parked and he took more passengers than the allowed
seating capacity.
3. No. The taking of an “extension seat” is not an implied assumption
of risk on the part of the passenger. A caso fortuito is an event which
could not be foreseen, or which, though foreseen, was inevitable. This
requires that the following requirements be present: (a) the cause of
the breach is independent of the obligor’s will; (b) the event is
unforeseeable or unavoidable; (c) the event is such as to render it
impossible for the obligor to fulfill his obligation in a normal manner,
and (d) the obligor did not take part in causing the injury to the creditor.
Petitioner should have foreseen the danger of parking his jeepney with
its body protruding two meters into the highway.
4. No. Petitioner did not act in bad faith in the performance of the
contract of carriage. As a general rule, moral damages are not
recoverable in actions for damages predicated on a breach of contract
for it is not one of the items enumerated under Art. 2219 of the Civil
Code. 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.
NOTES:
In quasi-delict, the negligence or fault should be clearly established
because it s 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.
Doctrine of Proximate Cause
The doctrine of proximate cause is applicable only in actions for quasi-
delicts, not in actions involving breach of contract.
Presumption of Negligence
Upon the happening of the accident, the presumption of negligence at
once arises, and it becomes the duty of a common carrier to prove that
he observed extraordinary diligence in the care of his passengers.
Bad faith
The common carrier’s admission in open court that his driver failed to
assist the injured passenger in going to a nearby hospital cannot be
construed as an admission of bad faith. The rules on extraordinary
responsibility of common carriers remain basically unchanged even
when the contract is breached by tort although noncontradictory
principles on quasi-delict may then be assimilated as also forming part
of the governing law. (Sabena Belgian World Airlines vs. Court of
Appeals, 255 SCRA 38 [1996])
Proximate cause, which is determined by a mixed consideration of
logic, common sense, policy and precedent, is 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 occured. (Bank of the Philippine Islands vs. Court of
Appeals, 641 SCRA 326 [2000]) While the driver of an improperly
parked vehicle may be liable in case of collision, the driver of a moving
vehicle who had no opportunity to avoid the collision due to his own
making is not relieved of liability, such as when his negligence is the
immediate and proximate cause of the collision. (Austria vs. Court of
Appeals, 327 SCRA 668 [2000])
BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. V.
PHILIPPINE FIRST INSURANCE CO.
Facts:
- 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.
- 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.
- Philippine First Insurance paid the claim of Philippine Steel and was
thus subrogated.
- Philippine First then instituted a complaint for recovery of the
amount paid to the consignee as insured.
- Belgian claims 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. Belgian further argued that their liability, if there
be any, should not exceed the limitations of liability provided for in the
bill of lading and other pertinent laws. Finally, Belgian averred that, in
any event, they exercised due diligence and foresight required by law
to prevent any damage/loss to said shipment.
- The RTC dismissed the complaint.
- The CA reversed and ruled that Belgian 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. As to the extent of Belgian’s 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.
Issues:
- Whether the notice of loss was timely filed. (Belgian claims that
pursuant to Section 3, paragraph 6 of 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.)
Whether the package limitation of liability under COGSA is applicable.
(Belgian contends that assuming that they are liable their liability
should be limited to US$500 per package as provided in the Bill of
Lading and by Section 4(5)of COGS
Held:
- NO. 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.
- In this case, Belgian failed to rebut the prima facie presumption of
negligence. First, as stated in the Bill of Lading, Belgian received the
subject shipment in good order and condition in Germany. Second,
prior to the unloading of the cargo, an Inspection Report 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
issued by Jardine Davies Transport Services 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.Fourth, the Certificate of Analysis stated that, based on the
sample submitted and tested, the steel sheets found in bad order were
wet with fresh water. Fifth, Belgian -- in a letteraddressed to the
Philippine Steel --admitted that they were aware of the condition of the
four coils found in bad order and condition.
- YES. First, the 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. Here, prior
to unloading the cargo, an Inspection Report as to the condition of the
goods was prepared and signed by representatives of both parties.
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. 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.
- A claim is not barred by prescription as long as the one-year period
has not lapsed. In the present case, the cargo was discharged on July
31, 1990, while the Complaint51 was filed by respondent on July 25,
1991, within the one-year prescriptive period.
- YES. In this case, there was no stipulation in the Bill of Lading
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
Belgian’s 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. That notation was made only for the convenience of the
shipper and the bank processing the Letter of Credit.
- Second, a bill of lading is separate from the Other Letter of Credit
arrangements. Thus, Belgian’s liability should be computed based on
US$500 per package and not on the per metric ton price declared in
the Letter of Credit.
PHILIPPINE CHARTER INSURANCE CORP. VS. UNKNOWN
OWNER
FACTS: Petitioner Philippine Charter Insurance Corporation (PCIC) is
the insurer of a shipment on board the vessel M/V “National Honor,”
represented in the Philippines by its agent, National Shipping
Corporation of the Philippines (NSCP).
The M/V “National Honor” arrived at the Manila International Container
Terminal (MICT). The International Container Terminal Services,
Incorporated (ICTSI) was furnished with a copy of the crate cargo list
and bill of lading, and it knew the contents of the crate. The following
day, the vessel started discharging its cargoes using its winch crane.
The crane was operated by Olegario Balsa, a winchman from the
ICTSI, exclusive arrastre operator of MICT.
Denasto Dauz, Jr., the checker-inspector of the NSCP, along with the
crew and the surveyor of the ICTSI, conducted an inspection of the
cargo. They inspected the hatches, checked the cargo and found it in
apparent good condition. Claudio Cansino, the stevedore of the ICTSI,
placed two sling cables on each end of Crate No. 1. No sling cable was
fastened on the mid-portion of the crate. In Dauz’s experience, this
was a normal procedure. As the crate was being hoisted from the
vessel’s hatch, the mid-portion of the wooden flooring suddenly
snapped in the air, about five feet high from the vessel’s twin deck,
sending all its contents crashing down hard, resulting in extensive
damage to the shipment.
PCIC paid the damage, and as subrogee, filed a case against M/V
National Honor, NSCP and ICTSI. Both RTC and CA dismissed the
complaint.
ISSUE: Whether or not the presumption of negligence is applicable in
the instant case.
HELD: No. We agree with the contention of the petitioner that common
carriers, from the nature of their business and for reasons of public
policy, are mandated 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. he Court has
defined extraordinary diligence in the vigilance over the goods as
follows:
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 sale, 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 characteristic of
goods tendered for shipment, and to exercise due care in the handling
and stowage, including such methods as their nature requires.”
The common carrier’s duty to observe the requisite diligence in the
shipment of goods lasts from the time the articles are surrendered to or
unconditionally placed in the possession of, and received by, the
carrier for transportation until delivered to, or until the lapse of a
reasonable time for their acceptance, by the person entitled to receive
them.] >When the goods shipped are either lost or arrive in damaged
condition, a presumption arises against the carrier of its failure to
observe that diligence, and there need not be an express finding of
negligence to hold it liable. To overcome the presumption of
negligence in the case of loss, destruction or deterioration of the
goods, the common carrier must prove that it exercised extraordinary
diligence.
cargo is a closed list. To exculpate itself from liability for the
loss/damage to the cargo under any of the causes, the common carrier
is burdened to prove any of the aforecited causes claimed by it by a
preponderance of evidence. If the carrier succeeds, the burden of
evidence is shifted to the shipper to prove that the carrier is negligent.
“Defect” is the want or absence of something necessary for
completeness or perfection; a lack or absence of something essential
to completeness; a deficiency in something essential to the proper use
for the purpose for which a thing is to be used. On the other hand,
inferior means of poor quality, mediocre, or second rate. A thing may
be of inferior quality but not necessarily defective. In other words,
“defectiveness” is not synonymous with “inferiority.”
xxx
In the present case, the trial court declared that based on the record,
the loss of the shipment was caused by the negligence of the petitioner
as the shipper:
The same may be said with respect to defendant ICTSI. The breakage
and collapse of Crate No. 1 and the total destruction of its contents
were not imputable to any fault or negligence on the part of said
defendant in handling the unloading of the cargoes from the carrying
vessel, but was due solely to the inherent defect and weakness of the
materials used in the fabrication of said crate.
The crate should have three solid and strong wooden batten placed
side by side underneath or on the flooring of the crate to support the
weight of its contents.

However, under Article 1734 of the New Civil Code, the presumption of
negligence does not apply to any of the following causes:

1. Flood, storm, earthquake, lightning or other natural disaster or

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

It bears stressing that the enumeration in Article 1734 of the New Civil
Code which exempts the common carrier for the loss or damage to the

RCPI vs. VERCHEZ
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. Respondent Grace Verchez-
Infante (Grace) hired the services of Radio Communications of the
Philippines, Inc. (RCPI) to send a telegram to her sister respondent
Zenaida Verchez-Catibog (Zenaida), asking her to send money for
their mother Editha Verchez (Editha) who at that time was confined in
a hospital in Sorsogon. But it took 25 days before such message was
conveyed to Zenaida. When Editha died, her husband, respondent
Alfonso Verchez (Alfonso), along with his daughters Grace and
Zenaida and their respective spouses, filed an action for damages
against RCPI before the Regional Trial Court (RTC) of Sorsogon. They
alleged that the delay in the delivery of the message contributed to the
early death of Editha. RCPI argues that there is no privity of contract
between other respondents except with Grace, also the delay in the
delivery is caused by force majeure, maintaining further that they
exercised due diligence in choosing their employees; hence they must
be released from any liability. The RTC rendered judgement against
RCPI. RCPI appealed to the Court of Appeals (CA). The CA affirmed
the decision of the RTC.
ISSUE: Whether or not the award of moral damages is proper despite
the fact that there was no direct connection between the injury and the
alleged negligent acts
HELD: RCPI‘s stand fails. It bears noting that its liability is anchored on
culpa contractual or breach of contract with regard to Grace, and on
tort with regard to her co-plaintiffs-herein-co-respondents. Article 1170
of the Civil Code provides that 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 the case at bar, RCPI bound itself to deliver the telegram within the
shortest possible time. It took 25 days, however, for RCPI to deliver it.
RCPI invokes force majeure, specifically, the alleged radio noise and
interferences which adversely affected the transmission and/or
reception of the telegraphic message. Additionally, its messenger
claimed he could not locate the address of Zenaida and it was only on
the third attempt that he was able to deliver the telegram.
For the defense of force majeure to prosper, it is necessary that one
has committed no negligence or misconduct that may have occasioned
the loss. An act of God cannot be invoked to protect a person who has
failed to take steps to forestall the possible adverse consequences of
such a loss. One‘s negligence may have concurred with an act of God
in producing damage and injury to another; nonetheless, showing that
the immediate or proximate cause of the damage or injury was a
fortuitous event would not exempt one from liability. When the effect is
found to be partly the result of a person‘s participation – whether by
active intervention, neglect or failure to act – the whole occurrence is
humanized and removed from the rules applicable to acts of God.
Assuming arguendo that fortuitous circumstances prevented RCPI
from delivering the telegram at the soonest possible time, it should
have at least informed Grace of the non-transmission and the non-
delivery s that she could have taken steps to remedy the situation. But
it did not. There lies the fault or negligence.
And for quasi-delict, RCPI is liable to Grace‘s co-respondents following
Article 2176 of the Civil Code which provides that 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.
RCPI‘s liability as an employer could of course be avoided if it could
prove that it observed the diligence of a good father of a family to
prevent damage provided in Article 2180 of the Civil Code. RCPI failed,
however, to prove that it observed all the diligence of a good father of a
family to prevent damage.
NECESSITO vs. PARAS
FACTS: A mother and her son boarded a passenger auto-truck of the
Philippine Rabbit Bus Lines. While entering a wooden bridge, its front
wheels swerved to the right, the driver lost control and the truck fell into
a breast-deep creek. The mother drowned and the son sustained
injuries. These cases involve actions ex contractu against the owners
of PRBL filed by the son and the heirs of the mother. Lower Court
dismissed the actions, holding that the accident was a fortuitous event.
ISSUE: Whether or not the carrier is liable for the manufacturing defect
of the steering knuckle, and whether the evidence discloses that in
regard thereto the carrier exercised the diligence required by law (Art.
1755, new Civil Code)
HELD: Yes. While the carrier is not an insurer of the safety of the
passengers, the manufacturer of the defective appliance is considered
in law the agent of the carrier, and the good repute of the manufacturer
will not relieve the carrier from liability. The rationale of the carrier’s
liability is the fact that the passengers has no privity with the
manufacturer of the defective equipment; hence, he has no remedy
against him, while the carrier has. We find that the defect could be
detected. The periodical, usual inspection of the steering knuckle did
not measure up to the “utmost diligence of a very cautious person” as
“far as human care and foresight can provide” and therefore the
knuckle’s failure cannot be considered a fortuitous event that exempts
the carrier from responsibility.
CENTRAL vs. INSURANCE
Facts: July 25, 1990, Central Shipping received on board its vessel
276 pieces of round logs and undertook to transport said shipment to
Manila for delivery to Alaska Lumber Co. The cargo was insured for
P3m against total loss. While on voyage, the vessel completely sank.
Insurance Company alleged that the total loss of the shipment was
caused by the fault and negligence of the petitioner. The consignee,
Alaska presented a claim for the value of the shipment against the
petitioner but the latter failed and refused to settle the claim, hence
being the insurer, Insurance company paid and now seeks to be
subrogated by the shipping company. The shipping company argues
that the ship was seaworthy and properly manned, putting defense that
the proximate cause of the sinking vessel and the loss was a natural
disaster which could have not been foreseen. RTC was unconvinced
and favoured the insurance company. CA affirmed the RTC finding that
the south western monsoon encountered by the vessel was not
unforeseeable.
Issues:
(1) Whether the carrier is liable for the loss of the cargo; and (2)
whether the doctrine of limited liability is applicable. These issues
involve a determination of factual questions of whether the loss of the
cargo was due to the occurrence of a natural disaster; and if so,
whether its sole and proximate cause was such natural disaster or
whether petitioner was partly to blame for failing to exercise due
diligence in the prevention of that loss.
Ruling:
Petition is devoid of merit.
(1) Liability for lost cargo: From the nature of their business and for
reasons of public policy, common carriers are bound to observe
extraordinary diligence over the goods they transport, according to all
the circumstances of each case. In the event of loss, destruction or
deterioration of the insured goods, common carriers are responsible;
that is, unless they can prove that such loss, destruction or
deterioration was brought about -- among others -- by flood, storm,
earthquake, lightning or other natural disaster or calamity. In all other
cases not specified under Article 1734 of the Civil Code, common
carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary
diligence.
In the present case, petitioner has not given the Court sufficient cogent
reasons to disturb the conclusion of the CA that the weather
encountered by the vessel was not a storm as contemplated by Article
1734(1). Established is the fact that between 10:00 p.m. on July 25,
1990 and 1:25 a.m. on July 26, 1990, M/V Central Bohol encountered
a south western monsoon in the course of its voyage.
(2) Doctrine of Limited Liability: The doctrine of limited liability under
Article 587 of the Code of Commerce is not applicable to the present
case. This rule does not apply to situations in which the loss or the
injury is due to the concurrent negligence of the ship owner and the
captain. It has already been established that the sinking of M/V Central
Bohol had been caused by the fault or negligence of the ship captain
and the crew, as shown by the improper stowage of the cargo of logs.
Closer supervision on the part of the ship owner could have prevented
this fatal miscalculation. As such, the ship owner was equally
negligent. It cannot escape liability by virtue of the limited liability rule.
EASTERN SHIPPING LINES vs. IAC
FACTS: En route from Kobe, Japan to Manila, M/S Asiatica, the vessel
owned by petitioner carrier, Eastern Shipping Lines caught fire and
sank, resulting in the total loss of ship and cargo. The crew did not
know what caused the fire. When they noticed the smoke, there was
already a big fire which might have started twenty-four (24) hours
before they became aware of it. The respective respondent Insurers
paid the corresponding marine insurance values to the consignees
concerned and were thus subrogated unto the rights of the latter as the
insured.
See details below:
G.R. No. L-69044
Insurer 1 – Development Insurance and Surety Corporation
Cargo and Consignee 1a – 5,000 pieces of calorized lance pipes in 28
packages valued at P256,039.00 consigned to Philippine Blooming
Mills Co., Inc.
Cargo and Consignee 1b – 7 cases of spare parts valued at
P92,361.75, consigned to Central Textile Mills, Inc.
G.R. No. 71478
Insurer 2 – Nisshin Fire & Marine Insurance Co
Cargo and Consignee 2 – 128 cartons of garment fabrics and
accessories, in two (2) containers, consigned to Mariveles Apparel
Corporation
Insurer 3 – Dowa Fire & Marine Insurance Co., Ltd.
Cargo and Consignee 3 – Two cases of surveying instruments
consigned to Aman Enterprises and General Merchandise.
ISSUES:
1. Which law is applicable, the Civil Code provisions on Common
Carriers or the Carriage of Goods by Sea Act?
2. Who has the burden of proof to show negligence of the carrier? It is
petitioner-carrier’s contention that in accordance with COGSA, when
loss of fire is established, burden of proof on negligence shifts to the
shipper.
3. Will loss caused by fire exempt the carrier from liability?
4. What is the extent of carrier’s liability?
RULING:
1. 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. As the cargoes were transported from
Japan to the Philippines, the liability of petitioner-carrier is governed
primarily by the Civil Code. However, in all matters not regulated by the
Civil Code, the rights and obligations of common carrier shall be
governed by the Code of Commerce and by special laws. Thus, the
Carriage of Goods by Sea Act, a special law, is suppletory to the
provisions of the Civil Code.
2. In accordance with the New Civil Code, the burden of proving that it
has exercised the extraordinary diligence required by law, after finding
that transported good were lost caused by fire falls upon the carrier.
3. No. Fire may not be considered a natural disaster or calamity like
those enumerated in Article 1734 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 lightning or by other
natural disaster or calamity.
If fire were to be considered a “natural disaster” within the meaning of
Article 1734 of the Civil Code, it is required under Article 1739 that the
“natural disater” must have been the proximate and only cause of the
loss,  and that the carrier has exercised due diligence to prevent or
minimize the loss before, during or after the occurrence of the disaster.
4. Since there was actual fault on the part of the carrier, it is liable for
the loss. Article 1749 allows the limitation of liability. Although the Code
expressly permits a stipulation limiting the liability of a carrier it does
not of itself limit the liability to a fixed amount per package. Thus, the
COGSA which is suppletory to the provisions of the Civil Code,
supplements by establishing a statutory provision limiting the carrier’s
liability in the absence of a declaration of a higher value of goods,
which should not exceed US$500 per package.
NOTES:
Carriage Of Goods By Sea Act (COGSA)
APPLICATION
As a general rule, COGSA only applies to foreign trade. But it may also
apply to domestic trade when there is a paramount clause in the
contract.
PARAMOUNT CLAUSE – It is a clause which attracts the application
of another law to govern the rights and obligations of the parties.
Hence, the parties can stipulate that the COGSA will apply to the
contract of carriage and not the Civil Code or Code of Commerce.
HIERARCHY OF LAWS
A. If the COMMON carrier is coming to the Philippines:
1st: Civil Code
2nd: COGSA (in foreign trade)
3rd: Code of Commerce
B. If the PRIVATE carrier is coming to the Philippines:
1st: COGSA
2nd: Code of Commerce
3rd: Civil Code (excluding rules on common carriers)
C. If the private or common carrier is from the Philippines to a foreign
country:
BASCOS vs. CA and CIPRIANO
FACTS: Rodolfo A. Cipriano representing Cipriano Trading Enterprise
(CIPTRADE for short) entered into a hauling contract with Jibfair
Shipping Agency Corp whereby the former bound itself to haul the
latter’s 2,000 m/tons of soya bean meal to the warehouse in Calamba,
Laguna. To carry out its obligation, CIPTRADE, through Cipriano,
subcontracted with Bascos to transport and to deliver 400 sacks of
soya bean meal from the Manila Port Area to Calamba, Laguna.
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 their contract. 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 for breach of a contract of carriage. The trial
court granted the writ of preliminary attachment. In her answer,
petitioner interposed the defense that there was no contract of carriage
since CIPTRADE leased her cargo truck to load the cargo from Manila
Port Area to Laguna and that the truck carrying the cargo was hijacked
and being a force majeure, exculpated petitioner from any liability After
trial, the trial court rendered a decision in favor of Cipriano and against
Bascos ordering the latter to pay the former for actual damages for
attorney’s fees and cost of suit. The “Urgent Motion To Dissolve/Lift
preliminary Attachment” Bascos is DENIED for being moot and
academic.

Petitioner appealed to the Court of Appeals but respondent Court
affirmed the trial court’s judgment.
Hence this petition for review on certiorari
ISSUE:
(1) WON petitioner a common carrier
(2) WON the hijacking referred to a force majeure
HELD: The petition is DISMISSED and the decision of the Court of
Appeals is hereby AFFIRMED.
1. YES
In disputing the conclusion of the trial and appellate courts that
petitioner was a common carrier, she alleged in this petition that the
contract between her and Cipriano was lease of the truck. She also
stated that: she was not catering to the general public. Thus, in her
answer to the amended complaint, she 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.
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. 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.”
2. NO
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. 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. 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, 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; xx
(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;” xx
NOTES:
1. She cited as evidence certain affidavits which referred to the
contract as “lease”. These affidavits were made by Jesus Bascos and
by petitioner herself and Cipriano and CIPTRADE did not object to the
presentation of affidavits by petitioner where the transaction was
referred to as a lease contract. 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. 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.
2. 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.
EDGAR COKALIONG vs. UCPB
Nestor Angelia delivered to the Edgar Cokaliong Shipping Lines...
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...
scheduled to depart from Cebu City... for Tandag, Surigao del Sur.
[Petitioner] issued Bill of Lading No. 58, freight prepaid, covering the
cargo.
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
Feliciana Legaspi insured the cargo, covered by Bill of Lading No. 59,
with the UCPB General Insurance
`against all risks'
She also insured the cargo covered by Bill of Lading No. 58, with
[respondent]... 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.
Feliciana Legaspi filed a claim, with [respondent], for the value of the
cargo insured... 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
[Respondent] approved the claim of Feliciana Legaspi
She also filed a claim for the value of the cargo covered... by Bill of
Lading No. 58. She submitted to [respondent] a Receipt... purportedly
signed by Nestor Angelia for the goods he received from Feliciana
Legaspi
[Respondent] approved her claim
[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... which it
paid to Feliciana Legaspi for the... loss of the cargo
[petitioner] alleged that: (a) [petitioner] was cleared by the Board of
Marine Inquiry of any negligence in the burning of the vessel... 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.
Issues: Is petitioner liable for the loss of the goods?
Ruling: 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 Petition is partly meritorious.
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.
Having originated from an unchecked crack in the fuel oil service tank,
the fire could not have been caused by force majeure.
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.
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... we hold petitioner responsible for the loss of
the goods covered by Bills of Lading Nos. 58 and 59.
PHILAMGEN vs. MCG MARINE SERVICES
FACTS: On March 1, 1987, San Miguel Corporation insured several
beer bottle cases with petitioner Philippine American General
Insurance Company. The cargo were loaded on board the M/V
Peatheray Patrick-G to be transported from Mandaue City to Bislig,
Surigao del Sur.
After having been cleared by the Coast Guard Station in Cebu the
previous day, the vessel left the port of Mandaue City for Bislig,
Surigao del Sur on March 2, 1987. The weather was calm when the
vessel started its voyage.
The following day, M/V Peatheray Patrick-G listed and subsequently
sunk off Cawit Point, Cortes, Surigao del Sur. As a consequence
thereof, the cargo belonging to San Miguel Corporation was lost.
Petitioner paid San Miguel Corporation the full amount of the cargo
pursuant to the terms of their insurance contract, and as subrogee filed
with the Regional Trial Court (RTC) of Makati City a case for collection
against private respondents to recover the amount it paid.
Meanwhile, the Board of Marine Inquiry conducted its own
investigation and found that the cause of the sinking of the vessel was
the existence of strong winds and enormous waves in Surigao del Sur,
a fortuitous event that could not have been for seen at the time the M/V
Peatheray Patrick-G left the port of Mandaue City. It was further held
by the Board that said fortuitous event was the proximate and only
cause of the vessel's sinking.
ISSUE: Whether or not respondent MGG should be held liable.
HELD: No. [Common carriers, from the nature of their business and for
reasons of public policy, are mandated to observe extraordinary
diligence in the vigilance over the goods and for the safety of the
passengers transported 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 transported by
them are lost, destroyed or if the same deteriorated.
However, this presumption of fault or negligence does not arise in the
cases enumerated under Article 1734 of the Civil Code:
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) The character of the goods or defects in the packing or in the
containers;(5) Order or act of competent public authority.]
In order that a common carrier may be absolved from liability where
the loss, destruction or deterioration of the goods is due to a natural
disaster or calamity, it must further be shown that the such natural
disaster or calamity was the proximate and only cause of the loss;
there must be "an entire exclusion of human agency from the cause of
the injury of the loss."Moreover, even in cases where a natural disaster
is the proximate and only cause of the loss, a common carrier is still
required to exercise due diligence to prevent or minimize loss before,
during and after the occurrence of the natural disaster, for it to be
exempt from liability under the law for the loss of the goods. If a
common carrier fails to exercise due diligence--or that ordinary care
which the circumstances of the particular case demand -- to preserve
and protect the goods carried by it on the occasion of a natural
disaster, it will be deemed to have been negligent, and the loss will not
be considered as having been due to a natural disaster under Article
1734 (1).
[In the case at bar, the issues may be narrowed down to whether the
loss of the cargo was due to the occurrence of a natural disaster, and if
so, whether such natural disaster was the sole and proximate cause of
the loss or whether private respondents were partly to blame for failing
to exercise due diligence to prevent the loss of the cargo.
The parties do not dispute that on the day the M/V Peatheray Patrick-G
sunk, said vessel encountered strong winds and huge waves ranging
from six to ten feet in height. The vessel listed at the port side and
eventually sunk at Cawit Point, Cortes, Surigao del Sur.
The Court of Appeals, citing the decision of the Board of Marine Inquiry
in the administrative case against the vessel's crew (BMI--646-87),
found that the loss of the cargo was due solely to the existence of a
fortuitous event, particularly the presence of strong winds and huge
waves at Cortes, Surigao del Sur on March 3, 1987:]
CALVO vs. UCPB
FACTS: Petitioner Virgines Calvo is the owner of Transorient Container
Terminal Services, Inc. (TCTSI), a sole proprietorship customs broker.
She entered into a contract with San Miguel Corporation (SMC) for the
transfer of 114 reels of semi-chemical fluting paper and 124 reels of
kraft liner board from the Port Area in Manila to SMC’s warehouse in
Ermita, Manila. The cargo was insured by respondent UCPB General
Insurance Co., Inc. Upon delivery, the goods were inspected and 15
reels of the semi-chemical fluting paper and 3 reels of kraft liner board
were found damaged.
ISSUE:
1. Is a customs broker or warehouseman who offers his services to
select clients a common carrier?
2. Is petitioner liable for the damage of the goods?

RULING:
1. Pursuant to Article 1732, petitioner is a common carrier as
transportation of goods is an integral part of her business. Article 1732
defines “common carriers” as persons, corporations, firms or
associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air for compensation,
offering their services to the public. This article makes no distinction
between one whose principal business activity is the carrying of
persons or goods or both, and one who does such carrying only as an
ancillary activity . . . Article 1732 also carefully avoids making any
distinction between a person or enterprise offering transportation
service on a regular or scheduled basis and one offering such service
on an occasional, episodic or unscheduled basis. Neither does Article
1732 distinguish between a carrier offering its services to the “general
public,” i.e., the general community or population, and one who offers
services or solicits business only from a narrow segment of the general
population.

2. Petitioner is liable because she failed to prove that she exercised

extraordinary diligence in the carriage of goods, the presumption of
negligence as provided under Art. 1735 applies. Under Article 1735 of
the Civil Code, if the goods are proved to have been lost, destroyed or
deteriorated, common carriers are presumed to have been at fault or to
have acted negligently, unless they prove that they have observed the
extraordinary diligence required by law. The burden of the plaintiff is to
prove merely that the goods he transported have been lost, destroyed
or deteriorated. Thereafter, the burden is shifted to the carrier to prove
that he has exercised the extraordinary diligence required by law.
Thus, it has been held that the mere proof of delivery of goods in good
order to a carrier, and of their arrival at the place of destination in bad
order, makes out a prima facie case against the carrier, so that if no
explanation is given as to how the injury occurred, the carrier must be
held responsible.

NOTES:

Extraordinary diligence in the vigilance over goods, meaning

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 sale, 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 characteristic of
goods tendered for shipment, and to exercise due care in the handling
and stowage, including such methods as their nature requires.
 FABRE vs. CA
Facts: Petitioners were owners of 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, 1982, private
respondent Word for the World Christian Fellowship (WWCF) arranged
with petitioners for the transportation of members of young adult
ministry from Manila to La Union and back. The usual route to la
Union was through Carmen Pangasinan but unfortunately, the bridge
of Carmen was under repair so the driver was forced to take the detour
through Lingayen. At 11:30 that night, they met an accident, the bus
hit a fence and a coconut tree that caused passengers to be injured
including respondent Antonio. The latter filed a criminal complaint
against the driver, the trial court decided in favor of respondents. All
evidence presented have shown the negligent set of the defendants,
which ultimately resulted to the accident. Court of Appeals affirmed
the decision of the Trial Court, hence this petition.
Issue: Whether petitioners were negligent and liable for the injuries
suffered by respondents.
Held: 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 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 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.
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. 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").
PHILAMGEN INSURANCE vs. SWEETLINES
FACTS: Petitioners were insurers and importers of Polyethylene (basic
material for plastics). The polyethylenes are to be shipped from US
through an Indian Ship, SS Vishva Yash and are to be received in
Manila. After which, the subject matter is to be shipped to Davao. The
Indian vessel arrived at Manila and sought the services of respondent
Sweet Lines for the inter-island shipment to Davao. However, when
respondent’s MV Sweet Love arrived, petitioners found that some of
the
imported polyethylene were either missing or damaged beyond the
point of being useful for the intended purpose. Petitioners filed a suit
against Sweet Lines and Davao Veterans Arrastre based on the bills of
lading. However, bills of lading were not formally offered as evidence.
Hence it was not shown that a contractual prescriptive period was
indicated therein. Trial court ruled in favor of PHILAMGEN. CA
reversed on the basis of prescription
ISSUE: WON petitioner acted within the prescriptive period.
HELD: No. Philamgen did not act within the prescriptive period. The
shipment was discharged into the custody of the consignee on May 15,
1977, and it was from this date that petitioners' cause of action
accrued,
with thirty (30) days therefrom within which to file a claim with the
carrier for any loss or damage which may have been suffered by the
cargo and thereby perfect their right of action. Claim was filed only on
April 28, 1978, way beyond the period provided in the bills of lading
and violative of the contractual provision, the inevitable consequence
of which is the loss of petitioners' remedy or right to sue. The SC said,
“Even the filing of the complaint on May 12, 1978 is of no remedial or
practical consequence, since the time limits for the filing thereof,
whether viewed as a condition precedent or as a prescriptive period,
would in this case be productive of the same result, that is, that
petitioners had no right of action to begin with or, at any rate, their
claim was time-barred.”
DOMINGO ANG VS. AMERICAN STEAMSHIP AGENCIES INC.
FACTS: Yau Yae comerical Bank LTD of Hongkong represented by
Yau Yae agreed to sell 140 packsges of galvanized steel dursink
sheets to one Herminio G Teves. Said agreement was subject to the
terms and arrangements. Pursuant to said terms and arrangements,
Yau Yae through Tokyo boeki LTD of Tokyo Japan, shipped the
articles at Yakata, Japan and later to Manila which was processed by
American Staemship Agencies INC. in which under a shipping
agreement or bill of lading it consigned to order of the shipper with Mr
Teves. On May 9, 1961 the article arrived in manila, and under the bill
of lading of the arrival of the goods and requested payments of the
demand draft representing the purchased price of the article, however,
Mr Teves did not pay the demand draft to Hongkong and Shanghai
bank where it was to be processed the payments. Prompting the bank
to make corresponding protest and the bank likewise returned the bill
of lading and demand draft to Yau Yae which later endorsed the bill of
lading to Domingo Ang. Meanwhile, despite his non-payments of the
purchase price of the articles. Teves was able to obtain a bank
guaranty in favor of American Steamship agencies INC. as carriers
agent to the effect that he would surrender the negotiable bill of lading
duly endorsed by Yau Yae on the strength of this guaranty. Teves
succeded in securing a permit to deliver imported goods from the
carriers agent, which he presented to Bureau of customs which in turn
release to him the articles covered by the bill of lading. Subsequently,
Domingo Ang claimed for the articles from the American steamship
agencies Inc. by presenting the indorsed bill of lading, but he was
informed by the latter that the articled he claimed was already
delivered to Mr. Teves.
ISSUE: Whether or not the American Steamship Agencies Inc.
punishable under carriage of goods by Sea act for misdelivery of
goods?
HELD: When the delivery of articles carried by the herein defendant-
appellee (American steamship agencies Inc) on May 9, 1961 to
Herminio Teves but supposedly to Mr Domingo Ang ,plaintiff-appellant
and upon knowing by the plaintiff-appellant that the articles intended to
him was misdelivered to other person, he filed in court of first instance
of Manila on October 30, 1963 against American Steamship agencies
Inc for allegedly wrongful delivery of goods belonging to him.
The defendant-appellee filed motion to dismissed with the contention
that the ground of the plaitiff’s caused of action is prescribed under the
carriage of goods by sea act particular section 3(6) paragraph 4, which
provides that;
“In any event, the carrier and the ship shall be discharge from
all liability in respect to loss or damage unless suit is brought within
one year, after delivery of the goods or date when the goods should
have been delivered”
The defendant further contented that the action of the plaintiff-appellant
even allowing a reasonable time from the date of delivery on May 9,
1961, still initiated his action on October 30, 1963 which beyond the
prescribed period of One (1) year under the preceding paragraph.
The court rendered it decision dismissing the complaint of the plaintiff,
appellant for the ground of prescription, however the provision involved
in this case as mentioned earlier speaks ”loss or damage” despite that
the plaintiff filed motion for reconsideration and it has been denied by
the lower court, afterwards, the plaintiff directly appealed to the higher
court for the matter that; has plaintiff-appellant cause of action
prescribed under section 3(6) paragraph 4 of the carriage of goods by
sea act?
The court ruled that, the word” loss or damage “as speaks to the
provision in this case was not transpired because only the misdelivery
of goods occurred to the defendant, and upon admitted by the
defendant in motion to dismissed that the articles belongs for Mr. Ang
has been misdelivered to Mr. Teves.
Therefore it clearly shows that the defendant violates the provision of
civil code of the Philppines particular in Article 1144, which provides;
the following actions must be brought within ten (10) years from the
time the right of the action accrues, paragraph (1) upon a written
contract and Article 1146, the following action must be instituted within
four(4) years, paragraph (2) quasi delict, wherein it supplies the
deficiency provided in article 18 of the same code. To read” in matters
which are governed by the code of commerce and special laws, their
deficiency shall be supplied by the provision of this code.”
Wherefore, suits predicated not upon loss or damage but misdelivery
of goods that so, the defendant was not held liable for carriage of
goods by sea act and the court hereby reversed the dismissal order
afterwards remanded to the lower court for further proceedings.
MITSUI vs. CA
FACTS: Petitioner Mitsui O.S.K. Lines Ltd. is a foreign corporation
represented in the Philippines by its agent, Magsaysay Agencies. It
entered into a contract of carriage through Meister Transport, Inc., an
international freight forwarder, with private respondent Lavine
Loungewear Manufacturing Corporation to transport goods of the latter
from Manila to Le Havre, France. Petitioner undertook to deliver the
goods to France 28 days from initial loading. On July 24, 1991,
petitioner’s vessel loaded private respondent’s container van for
carriage at the said port of origin.
However, in Kaoshiung, Taiwan the goods were not transshipped
immediately, with the result that the shipment arrived in Le Havre only
on November 14, 1991. The consignee allegedly paid only half the
value of the said goods on the ground that they did not arrive in France
until the off season in that country. The remaining half was allegedly
charged to the account of private respondent which in turn demanded
payment from petitioner through its agent.
ISSUE: Whether private respondents’ action is for loss or damage to
goods shipped, within the meaning of 3(6) of the Carriage of Goods by
Sea Act (COGSA).
RULING: No, As defined in the Civil Code and as applied to Section
3(6), paragraph 4 of the Carriage of Goods by Sea Act, loss
contemplates merely a situation where no delivery at all was made by
the shipper of the goods because the same had perished, gone out of
commerce, or disappeared in such a way that their existence is
unknown or they cannot be recovered.
In the case at bar, there is neither deterioration nor disappearance
nor destruction of goods caused by the carrier’s breach of contract.
Whatever reduction there may have been in the value of the goods is
not due to their deterioration or disappearance because they had been
damaged in transit.
Precisely, the question before the trial court is not the particular
sense of damages as it refers to the physical loss or damage of a
shippers goods as specifically covered by 3(6) of COGSA but
petitioners potential liability for the damages it has caused in the
general sense and, as such, the matter is governed by the Civil Code,
the Code of Commerce and COGSA, for the breach of its contract of
carriage with private respondent.
MAYER STEEL PIPE vs. CA
FACTS: Hong Kong Government Supplies Department contracted
Mayer Steel Pipe Corporation to manufacture and supply various steel
pipes and fittings. Prior to the shipping, Mayer insured these pipes and
fittings against all risks with South Sea Surety and Insurance Co., Inc.
and Charter Insurance Corp., with Industrial Inspection Inc. appointed
as third-party inspector.
After examining the pipes and fittings, Industrial Inspection certified
that they are in good order condition. However, when the goods
reached Hong Kong, it was discovered that a substantial portion
thereof was damaged. The trial court found in favor of the insured.
However, when the case was elevated to the CA, it set aside the
decision of the trial court and dismissed the complaint on the ground of
prescription. It held that the action was barred under Sec. 3(6) of the
Carriage of Goods by Sea Act (COGSA) since it was filed only on April
17, 1986, more than two years from the time the goods were unloaded
from the vessel.
ISSUE: Whether or not the action is barred by prescription
HELD: Sec. 3(6) of the COGSA states that the carrier and the ship
shall be discharged from all liability for loss or damage to the goods if
no suit is filed within one year after delivery of the goods or the date
when they should have been delivered. Under this provision, only the
carrier’s liability is extinguished if no suit is brought within one year. But
the liability of the insurer is not extinguished because the insurer’s
liability is based not on the contract of carriage but on the contract of
insurance.
An insurance contract is a contract whereby one party, for a
consideration known as the premium, agrees to indemnify another for
loss or damage which he may suffer from a specified peril. An “all
risks” insurance policy covers all kinds of loss other than those due to
willful and fraudulent act of the insured. Thus, when private
respondents issued the “all risks” policies to Mayer, they bound
themselves to indemnify the latter in case of loss or damage to the
goods insured. Such obligation prescribes in ten years, in accordance
with Article 1144 of the New Civil Code.
DOLE PHILS vs. MARITIME COMPANY OF THE PHILS
Facts: The cargo subject of the instant case was discharged in
Dadiangas unto the custody of the consignee, Dole Philippines. The
corresponding claim for the damages sustained by the cargo was filed
by the plaintiff with the defendant, Maritime Company on May 4, 1972.
On June 11, 1973 the plaintiff filed a complaint in the CFI Manila
embodying 3 causes of action involving 3 separate and different
shipments. The third cause of action therein involved the cargo now
subject of this present litigation. On December 11, 1974, Judge Serafin
Cuevas issued an Order dismissing the first two causes of action. The
third cause of action which covered the cargo subject of this case now
was likewise dismissed but without prejudice as it was not covered by
the settlement. Because of the dismissal of the complaint with respect
to the third cause of action, DOLE instituted this present complaint on
January 6, 1975. Maritime filed an answer pleading inter alia the
affirmative defense of prescription under the provisions of the Carriage
of Goods by Sea Act. The Trial Court granted the motion, scheduling
the preliminary hearing on April 27, 1977. The record before the Court
does not show whether or not that hearing was held, but under date of
May 6, 1977, Maritime filed a formal motion to dismiss invoking once
more the ground of prescription. The Trial Court, after due
consideration, resolved the matter in favor of Maritime and dismissed
the complaint.
Issue:
Whether or not Article 1155 of the Civil Code applies in lieu of the
COGSA.
Held:
No. Article 1155 of the Civil Code provides that the prescription of
actions is interrupted by the making of an extrajudicial written demand
by the creditor
Section 3, paragraph 6 of the COGSA provides that:
the carrier and the ship shall be discharged from all liability in respect
of loss or damage unless suit is brought within one year after delivery
of the goods or the date when the goods should have been delivered;
Provided, That, if a notice of loss or damage, either apparent or
conceded, is not given as provided for in this section, that fact shall not
affect or prejudice the right of the shipper to bring suit within one year
after the delivery of the goods or the date when.the goods should have
been delivered.
1. Dole argues that since the provisions of the Civil Code are, by
express mandate of said Code, suppletory of deficiencies in the Code
of Commerce and special laws in matters governed by the latter and
there being a patent deficiency with respect to the tolling of the
prescriptive period provided for in the Carriage of Goods by Sea Act,
prescription under said Act is subject to the provisions of Article 1155
of the Civil Code on tolling. Since Dole's claim for loss or damage was
filed on May 4, 1972 amounted to a written extrajudicial demand which
would toll or interrupt prescription under Article 1155, it operated to toll
prescription also in actions under the Carriage of Goods by Sea Act.
These arguments might merit weightier consideration were it not for
the fact that the question has already received a definitive answer,
adverse to the position taken by Dole, in The Yek Tong Lin Fire &
Marine Insurance Co., Ltd. vs. American President Lines, Inc.
2. Dole argues that it was error for the court not to have considered the
action of plaintiff-appellant suspended by the extrajudicial demand
which took place, according to defendant's own motion to dismiss on
August 22, 1952.
Court noticed that while plaintiff avoids stating any date when the
goods arrived in Manila, it relies upon the allegation made in the
motion to dismiss that a protest was filed on August 22, 1952 — which
goes to show that plaintiff-appellant's counsel has not been laying the
facts squarely before the court for the consideration of the merits of the
case. We have already decided that in a case governed by the
Carriage of Goods by Sea Act, the general provisions of the Code of
Civil Procedure on prescription should not be made to apply. (Chua
Kuy vs. Everett Steamship Corp., G.R. No. L-5554, May 27, 1953.) We
hold that in such a case the general provisions of the new Civil Code
(Art. 1155) cannot be made to apply, as such application would have
the effect of extending the one-year period of prescription fixed in the
law. It is desirable that matters affecting transportation of goods by sea
be decided in as short a time as possible; the application of the
provisions of Article 1155 of the new Civil Code would unnecessarily
extend the period and permit delays in the settlement of questions
affecting transportation, contrary to the clear intent and purpose of the
law.
Under Dole's theory, when its claim was received by Maritime, the one-
year prescriptive period was interrupted and began to run anew from
May 4, 1972, affording Dole another period of one year counted from
that date within which to institute action on its claim for damage.
Unfortunately, Dole let the new period lapse without filing action. It
instituted Civil Case No. 91043 only on June 11, 1973, more than one
month after that period has expired and its right of action had
prescribed.
INSURANCE COMPANY vs. ASIAN TERMINALS
DOCTRINE:
The term “carriage of goods” in the Carriage of Goods by Sea Act
(COGSA) covers the period from the time the goods are loaded to the
vessel to the time they are discharged therefrom.
• The carrier and the ship shall be discharged from all liability in
respect of loss or damage unless suit is brought within one year after
delivery of the goods or the date when the goods should have been
delivered.
FACTS:
• On November 9, 2002, Macro-Lito Corporation, through M/V “DIMI
P” vessel, 185 packages of electrolytic tin free steel, complete and in
good condition. The goods are covered by a bill of lading, had a
declared value of $169,850.35 and was insured with the Insuracne
Company of North America (Petitioner) against all risk.
• The carrying vessel arrived at the port of Manila on November 19,
2002, and when the shipment was discharged therefrom, it was noted
that 7 of the packages were damaged and in bad condition.
• On Novermber 21, 2002, the shipment was then turned over to the
custody of Asian Terminals. Inc. (Respondent) for storage and
safekeeping pending its withrawal by the consignee.
• On November 29, 2002, prior to the withrawal of the shipment, a
joint inspection of the said cargo was conducted. The examination
report showed that an additional 5 packages were found to be
damaged and in bad order.
• On January 6, 2003, the consignee, San Miguel Corporation filed
separate claims against both the Petioner and the Respondent for the
damage caused to the packages.
• The Petitioner then paid San Miguel Corporation the amound of
PhP 431,592.14 which is based on a report of its independent adjuster.
• The Petitioner then formally demanded reparation against the
Respondent for the amount it paid San Miguel Corporation.
• For the failure of the Respondent to satisfy the demand of the
Petitioner, the Petitioner filed for an action for damages with the RTC
of Makati.
• The trial court found that indeed, the shipment suffered additional
damage under the custody of the Respondent prior to the turn over of
the said shipment to San Miguel. As to the extent of liability,
Respondent invoked the Contract for Cargo Handling Services
executed between the Philippine Ports Authority and the Respondent.
Under the contract, the Respondent’s liability for damage to cargoes in
its custody is limited to PhP5,000 for each package, unless the value
of the cargo shipment is otherwise specified or manifested in writing
together with the declared Bill of Lading. The trial Court found that the
shipper and consignee with the said requirements. However, the trial
court dismissed the complaint on the ground that the Petitioner’s claim
was barred by the statute of limitations. It held that the Carriage of
Goods by Sea Act (COGSA), embodied in Commonwealth Act No. 65
is applicable. The trial court held that under the said law, the shipper
has the right to bring a suit within one year after the delivery of the
goods or the date when the goods should have been delivered, in
respect of loss or damage thereto. Petitioner then filed before the
Supreme Court a petition for review on certiorari assailing the trial
court’s order of dismissal.
ISSUE/S:
1.) Whether or not the trial court committed an error in dismissing the
complaint of the petitioner based on the one-year prescriptive period
for filing a suit under the COGSA to an arrastre operator? YES.
2.) Whether or not the Petitioner is entitled to recover actual
damages against the Respondent? YES, but only PhP164,428.76
HELD:
The term “carriage of goods” covers the period from the time when the
goods are loaded to the time when they are discharged from the ship.
Thus, it can be inferred that the period of time when the goods have
been discharged from the ship and given to the custody of the arrastre
operator is not covered by the COGSA. The Petitioner, who filed the
present action for the 5 packages that were damaged while in the
custody of the respondent was not fortright in its claim, as it knew that
the damages it sought, based on the report of its adjuster covered 9
packages. Based on the report, only four of the nine packages were
damaged in the custody of the Respondent. The Petitioner can be
granted only the amount of damages that is due to it.
BENJAMIN CUA vs. WALLEN PHILIPPINES SHIPPING INC.
MANAY JR. vs. CEBU AIR, INC.
 AIR FRANCE vs. CARRASCOSO and COURT OF APPEALS
Facts: On March 28, 1958, the defendant, Air France, through its
authorized agent, Philippine Air Lines, Inc., issued to plaintiff a “first
class” round trip airplane ticket from Manila to Rome. From Manila to
Bangkok, plaintiff travelled in “first class”, but at Bangkok, the Manager
of the defendant airline forced plaintiff to vacate the “first class” seat
that he was occupying because there was a “white man”, who, the
Manager alleged, had a “better right” to the seat. When asked to
vacate his “first class” seat, the plaintiff, as was to be expected,
refused, and told defendant’s Manager that his seat would be taken
over his dead body; a commotion ensued, and they came all across to
Mr. Carrascoso and pacified Mr. Carrascoso to give his seat to the
white man” and plaintiff reluctantly gave his “first class” seat in the
plane.
Issue: Whether there is a breach of contract of carriage between Air
France and Carrascoso that would hold Air France liable for damages.
Ruling: Yes. Petitioner’s contract with Carrascoso is one attended with
public duty. The stress of Carrascoso’s action as we have said, is
placed upon his wrongful expulsion. This is a violation of public duty by
the petitioner air carrier — a case of quasi-delict. Damages are proper.
ALITALIA vs. COURT OF APPEALS
Facts: Dr. Felipa Pablo, a professor, was invited to take part at a
meeting in Ispra, Italy. 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.” But the other flights arriving from Rome did not
have her baggage on board. She returned to Manila without attending
the meeting in Ispra, Italy.
Issue: Whether or not the Warsaw Convention can restrict
compensation for the injury suffered by Dr. Pablo.
Ruling: 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
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.
CATHAY PACIFIC AIRWAYS, vs SPOUSES ARNULFO & EVELYN
FUENTEBELLA
Facts: In 1993, the Speaker of the House authorized Congressmen
Fuentebella, Lopez and Fugoso to travel on official business to
Sydney, Australia. Respondent spouses Fuentebella bought Business
Class tickets for Manila to Sydney via Hong Kong and back. They
changed their minds, however, and decided to upgrade to First Class.
From this point, the parties presented divergent versions of facts.
Petitioner admits that First Class tickets were issued to respondents,
but clarifies that the tickets were open-dated. Petitioner, through a
witness, explained that while respondents expressed their desire to
travel First Class, they could not be accommodated because they had
failed to confirm and the sections were full on the date and time of their
scheduled and booked flights. On their scheduled flight, respondents
queued in front of the First Class counter in the airport but were issued
boarding passes for Business Class seats in the Manila-Hong Kong leg
of their trip and Economy Class seats in the Hong Kong-Sydney
segment. They only discovered such when they were denied entry into
the First Class lounge. Upon complaining, respondent Fuentebella was
allegedly treated by the ground staff in a discourteous, arrogant and
rude manner. Respondents were able to travel First Class for the
Sydney-Hong Kong leg but on the Hong Kong-Manila segment, they
were again issued boarding passes for Business Class. Respondent
spouses filed a Complaint for damages against petitioner. Petitioner
maintained that respondents had flown on the sections and sectors
they had booked and confirmed. RTC ruled in favor of respondents
and awarded P5 million as moral damages, P1 million as exemplary
damages, and P500,000 as attorney’s fees. Upon review, the CA
upheld the disposition and the awards, with the modification that the
attorney's fees be reduced to P100,000. Petitioner prays that the
Complaint be dismissed, or in the alternative, that the damages be
substantially and equitably reduced.
Issues:
(1) WoN there was a breach of contract where passengers who were
given First Class tickets were flown in Economy and Business class –
YES
(2) WoN the award for moral and exemplary damages were proper in
such case – YES, but amount modified Ruling: Petition is partially
granted. CA Decision is affirmed with modification that moral and
exemplary damages are reduced to P500,000 and P50,000,
respectively. These amounts shall earn legal interest of 6% per annum
from the finality of this Decision until full payment.
Ruling:
(1) There was a breach of contract. In Air France v. Gillego, this Court
ruled that in an action based on a breach of contract of carriage, the
aggrieved party does not have to prove that the common carrier was at
fault or was negligent; all that he has to prove is the existence of the
contract and the fact of its nonperformance by the carrier. In this case,
both the trial and appellate courts found that respondents were entitled
to First Class accommodations under the contract of carriage, and that
petitioner failed to perform its obligation. By its issuance of First Class
tickets on the same day of the flight in place of Business Class tickets
that indicated the preferred and confirmed flight, petitioner led
respondents to believe that their request for an upgrade had been
approved.
(2) There is basis for the award of moral and exemplary damages;
however, the amounts were excessive. Moral and exemplary damages
are not ordinarily awarded in breach of contract cases. This Court has
held that damages may be awarded only when the breach is wanton
and deliberately injurious, or the one responsible had acted
fraudulently or with malice or bad faith. Bad faith is a question of fact
that must be proven by clear and convincing evidence. Both the trial
and the appellate courts found that petitioner had acted in bad faith.
After review of the records, We find no reason to deviate from their
finding.
However, the award of P5 million as moral damages is excessive,
considering that the highest amount ever awarded by this Court for
moral damages in cases involving airlines is P500,000. As We said in
Air France v. Gillego, "the mere fact that respondent was a
Congressman should not result in an automatic increase in the moral
and exemplary damages." We find that upon the facts established, the
amount of P500,000 as moral damages is reasonable to obviate the
moral suffering that respondents have undergone. With regard to
exemplary damages, jurisprudence shows that P50,000 is sufficient to
deter similar acts of bad faith attributable to airline representatives.
PHILIPPINE AIRLINES VS CIVIL AERONAUTICS BOARD
Facts: Grand Air applied for a Certificate of Public Convenience and
Necessity with the Civil Aeronautics Board (CAB). The Chief Hearing
Officer issued a notice of hearing directing Grand Air to serve a copy of
the application and notice to all scheduled Philippine Domestic
operators. Grand Air filed its compliance and requested for a
Temporary Operating Permit (TOP). PAL filed an opposition to the
application on the ground that the CAB had no jurisdiction to hear the
application until Grand Air first obtains a franchise to operate from
Congress. The Chief Hearing Officer denied the opposition and the
CAB approved the issuance of the TOP for a period of 3 months. The
opposition for the TOP was likewise denied. The CAB justified its
assumption of jurisdiction over Grand Air’s application on the basis of
Republic Act 776 which gives it the specific power to issue any TOP or
Certificate of Public Convenience and Necessity.
Issue: Whether or not the CAB can issue a Certificate of Public
Convenience and Necessity or TOP even though the prospective
operator does not have a legislative franchise?
Held: Yes, as mentioned by the CAB, it is duly authorized to do so
under Republic Act 776 and a legislative franchise is not necessary
before it may do so, since Congress has delegated the authority to
authorize the operation of domestic air transport services to the CAB,
an administrative agency. The delegation of such authority is not
without limits since Congress had set specific standard and limitations
on how such authority should be exercised.
Public convenience and necessity exists when the proposed facility will
meet a reasonable want of the public and supply a need which the
existing facilities do not adequately afford.
Thus, the Board should be allowed to continue hearing the application,
since it has jurisdiction over it provided that the applicant meets all the
requirements of the law.
ATO vs. RAMOS
FACTS: Respondent Spouses discovered that a portion of their
registered land in Baguio City was being used as part of the runway
and running shoulder of the Loakan Airport being operated by
petitioner Air Transportation Office (ATO). The respondents agreed
after negotiations to convey the affected portion by deed of sale to the
ATO in consideration of the amount of P778,150.00. However, the
ATO failed to pay despite repeated verbal and written demands.
Thus, the respondents filed an action for collection against the ATO
and some of its officials in the RTC. In their answer, the ATO and its
co-defendants invoked as an affirmative defense the issuance of
Proclamation No. 1358, whereby President Marcos had reserved
certain parcels of land that included the respondents affected portion
for use of the Loakan Airport. They asserted that the RTC had no
jurisdiction to entertain the action without the States consent
considering that the deed of sale had been entered into in the
performance of governmental functions.
The RTC held in favor of the Spouses, ordering the ATO to pay the
plaintiffs Spouses the amount of P778,150.00 being the value of the
parcel of land appropriated by the defendant ATO as embodied in the
Deed of Sale, plus an annual interest of 12% from August 11, 1995,
the date of the Deed of Sale until fully paid; (2) The amount of
P150,000.00 by way of moral damages and P150,000.00 as exemplary
damages; (3) the amount of P50,000.00 by way of attorneys fees plus
P15,000.00 representing the 10, more or less, court appearances of
plaintiffs counsel; (4) The costs of this suit.
On appeal, the CA affirmed the RTCs decision withmodification
deleting the awarded cost, and reducing the moral and exemplary
damage to P30,000.00 each, and attorneys fees is lowered to
P10,000.00.
ISSUE: Could ATO be sued without the State's consent?
HELD: An unincorporated government agency without any separate
juridical personality of its own enjoys immunity from suit because it is
invested with an inherent power of sovereignty. Accordingly, a claim for
damages against the agency cannot prosper; otherwise, the doctrine of
sovereign immunity is violated. However, the need to distinguish
between an unincorporated government agency performing
governmental function and one performing proprietary functions has
arisen. The immunity has been upheld in favor of the former because
its function is governmental or incidental to such function; it has not
been upheld in favor of the latter whose function was not in pursuit of a
necessary function of government but was essentially a business.
National Airports Corporation v. Teodoro, Sr. and Phil. Airlines Inc., 91
Phil. 203 (1952)
Civil Aeronautics Administration vs. Court of Appeals (167 SCRA 28
[1988]),the Supreme Court, reiterating the pronouncements laid down
in Teodoro, declared that the CAA (predecessor of ATO) is an agency
not immune from suit, it being engaged in functions pertaining to a
private entity.
The Civil Aeronautics Administration comes under the category of a
private entity. Although not a body corporate it was created, like the
National Airports Corporation, not to maintain a necessary function of
government, but to run what is essentially a business, even if revenues
be not its prime objective but rather the promotion of travel and the
convenience of the travelling public. It is engaged in an enterprise
which, far from being the exclusive prerogative of state, may, more
than the construction of public roads, be undertaken by private
concerns. National Airports Corp. v. Teodoro, 91 Phil. 203 (1952)
The CA thereby correctly appreciated the juridical character of the ATO
as an agency of the Government not performing a purely governmental
or sovereign function, but was instead involved in the management
and maintenance of the Loakan Airport, an activity that was not the
exclusive prerogative of the State in its sovereign capacity. Hence, the
ATO had no claim to the States immunity from suit. We uphold the CAs
aforequoted holding.
The doctrine of sovereign immunity cannot be successfully invoked to
defeat a valid claim for compensation arising from the taking without
just compensation and without the proper expropriation proceedings
being first resorted to of the plaintiffs property.Republic v.
Sandiganbayan, G.R. No. 90478, Nov. 2, 1991. DENIED.
KOREAN AIRLINES V. CA
Facts: Juanito Lapuz was contracted for employment in Saudi Arabia
through Pan Pacific Recruiting Services, Inc. He was supposed to
leave via Korean Airlines, but was initially listed as a “chance
passenger”. According to Lapuz, he was allowed to check in and was
cleared for departure. When he was on the stairs going to the airplane,
a KAL officer pointed at him and shouted, “Down! Down!” and he was
barred from taking the flight. When he asked for another booking, his
ticket was cancelled. He was unable to report for work and so he lost
his employment. KAL alleged that the agent of Pan Pacific was
informed that there are 2 seats possibly available. He gave priority to
Perico, while the other seat was won by Lapuz through lottery. But
because only 1 seat became available, it was given to Perico. The trial
court adjudged KAL liable for damages. The decision was affirmed by
the Court of Appeals, with modification on the damages awarded.
Issues:
(1) Whether there is already a contract of carriage between KAL and
Lapuz to hold KAL liable for breach of contract
(2) Whether moral and exemplary damages should be awarded, and to
what extent
Held:
(1) The status of Lapuz as standby passenger was changed to that of
a confirmed passenger when his name was entered in the passenger
manifest of KAL for its Flight No. KE 903. His clearance through
immigration and customs clearly shows that he had indeed been
confirmed as a passenger of KAL in that flight. KAL thus committed a
breach of the contract of carriage between them when it failed to bring
Lapuz to his destination. A contract to transport passengers is different
in kind and degree from any other contractual relation. The business of
the carrier is mainly with the traveling public. It invites people to avail
themselves of the comforts and advantages it offers. The contract of
air carriage generates a relation attended with a public duty.
Passengers have the right to be treated by the carrier's employees with
kindness, respect, courtesy and due consideration. They are entitled to
be protected against personal misconduct, injurious language,
indignities and abuses from such employees. So it is that any
discourteous conduct on the part of these employees toward a
passenger gives the latter an action for damages against the carrier.
The breach of contract was aggravated in this case when, instead of
courteously informing Lapuz of his being a "wait-listed" passenger, a
KAL officer rudely shouted "Down! Down!" while pointing at him, thus
causing him embarrassment and public humiliation. The evidence
presented by Lapuz shows that he had indeed checked in at the
departure counter, passed through customs and immigration, boarded
the shuttle bus and proceeded to the ramp of KAL's aircraft. In fact, his
baggage had already been loaded in KAL's aircraft, to be flown with
him to Jeddah. The contract of carriage between him and KAL had
already been perfected when he was summarily and insolently
prevented from boarding the aircraft.
(2) The Court of Appeals granted moral and exemplary damages
because:
a. The findings of the court a quo that the defendant-appellant has
committed breach of contract of carriage in bad faith and in wanton,
disregard of plaintiff-appellant's rights as passenger laid the basis and
justification of an award for moral damages.
b. In the instant case, we find that defendant-appellant Korean Air
Lines acted in a wanton, fraudulent, reckless, oppressive or malevolent
manner when it "bumped off" plaintiff-appellant on November 8, 1980,
and in addition treated him rudely and arrogantly as a "patay gutom na
contract worker fighting Korean Air Lines," which clearly shows malice
and bad faith, thus entitling plaintiff-appellant to moral damages.
c. Considering that the plaintiff-appellant's entitlement to moral
damages has been fully established by oral and documentary
evidence, exemplary damages may be awarded. In fact, exemplary
damages may be awarded, even though not so expressly pleaded in
the complaint. By the same token, to provide an example for the public
good, an award of exemplary damages is also proper.
A review of the record of this case shows that the injury suffered by
Lapuz is not so serious or extensive as to warrant an award of P1.5
million. The assessment of P100,000 as moral and exemplary
damages in his favor is, in our view, reasonable and realistic.
JAPAN AIRLINES V. ASUNCION
FACTS: This petition for review seeks to reverse and set aside the
October 9, 2002 decision of the Court of Appeals and its January 12,
2004 resolution, which affirmed in toto the June 10, 1997 decision of
the Regional Trial Court of Makati City, Branch 61 in Civil Case No. 92-
3635.
On March 27, 1992, respondents Michael and Jeanette Asuncion left
Manila on board Japan Airlines’ (JAL) Flight 742 bound for Los
Angeles. Their itinerary included a stop-over in Narita and an overnight
stay at Hotel Nikko Narita. Upon arrival at Narita, Mrs. Noriko Etou-
Higuchi of JAL endorsed their applications for shore pass and directed
them to the Japanese immigration official. A shore pass is required of a
foreigner aboard a vessel or aircraft who desires to stay in the
neighborhood of the port of call for not more than 72 hours.
During their interview, the Japanese immigration official noted that
Michael appeared shorter than his height as indicated in his passport.
Because of this inconsistency, respondents were denied shore pass
entries and were brought instead to the Narita Airport Rest House
where they were billeted overnight.
Mr. Atsushi Takemoto of the International Service Center (ISC), the
agency tasked by Japan’s Immigration Department to handle
passengers who were denied shore pass entries, brought respondents
to the Narita Airport Rest House where they stayed overnight until their
departure the following day for Los Angeles. Respondents were
charged US$400.00 each for their accommodation, security service
and meals.
On December 12, 1992, respondents filed a complaint for damages
claiming that JAL did not fully apprise them of their travel requirements
and that they were rudely and forcibly detained at Narita Airport.
Issue: Whether or not JAL is liable of breach of contract of carriage.
Side Issues:
· Whether or not JAL is liable for moral, exemplary damages,
· Whether or not the plaintiff is liable for attorney’s fee and cost of suit
incurred (JAL counterclaim)
Ruling:
The court finds that JAL did not breach its contract of carriage with
respondents. It may be true that JAL has the duty to inspect whether
its passengers have the necessary travel documents, however, such
duty does not extend to checking the veracity of every entry in these
documents. JAL could not vouch for the authenticity of a passport and
the correctness of the entries therein. The power to admit or not an
alien into the country is a sovereign act which cannot be interfered with
even by JAL. This is not within the ambit of the contract of carriage
entered into by JAL and herein respondents. As such, JAL should not
be faulted for the denial of respondents’ shore pass applications.
In the Respondents claim that petitioner breached its contract of
carriage when it failed to explain to the immigration authorities that
they had overnight vouchers at the Hotel Nikko Narita. They imputed
that JAL did not exhaust all means to prevent the denial of their shore
pass entry applications. JAL or any of its representatives have no
authority to interfere with or influence the immigration authorities. The
most that could be expected of JAL is to endorse respondents’
applications, which Mrs. Higuchi did immediately upon their arrival in
Narita.
Moral damages may be recovered in cases where one willfully causes
injury to property, or in cases of breach of contract where the other
party acts fraudulently or in bad faith. Exemplary damages are
imposed by way of example or correction for the public good, when the
party to a contract acts in wanton, fraudulent, oppressive or malevolent
manner. Attorney’s fees are allowed when exemplary damages are
awarded and when the party to a suit is compelled to incur expenses to
protect his interest.[17] There being no breach of contract nor proof
that JAL acted in wanton, fraudulent or malevolent manner, there is no
basis for the award of any form of damages.
Neither should JAL be held liable to reimburse respondents the
amount of US$800.00. It has been sufficiently proven that the amount
pertained to ISC, an agency separate and distinct from JAL, in
payment for the accommodations provided to respondents. The
payments did not in any manner accrue to the benefit of JAL.
However, we find that the Court of Appeals correctly dismissed JAL’s
counterclaim for litigation expenses, exemplary damages and
attorney’s fees. The action was filed by respondents in utmost good
faith and not manifestly frivolous. Respondents honestly believed that
JAL breached its contract. A person’s right to litigate should not be
penalized by holding him liable for damages. This is especially true
when the filing of the case is to enforce what he believes to be his
rightful claim against another although found to be erroneous.[
WHEREFORE, in view of the foregoing, the instant petition is PARTLY
GRANTED. The October 9, 2002 decision of the Court of Appeals and
its January 12, 2004 resolution in CA-G.R. CV No. 57440, are
REVERSED and SET ASIDE insofar as the finding of breach on the
part of petitioner and the award of damages, attorney’s fees and costs
of the suit in favor of respondents is concerned. Accordingly, there
being no breach of contract on the part of petitioner, the award of
actual, moral and exemplary damages, as well as attorney’s fees and
costs of the suit in favor of respondents Michael and Jeanette
Asuncion, is DELETED for lack of basis. However, the dismissal for
lack of merit of petitioner’s counterclaim for litigation expenses,
exemplary damages and attorney’s fees, is SUSTAINED. No
pronouncement as to costs.
ONG YIU VS. CA AND PAL
FACTS: On August 26, 1967, petitioner was a fare paying passenger
of respondent Philippine Air Lines, Inc. (PAL), on board Flight No. 463-
R, from Mactan Cebu, bound for Butuan City. He was scheduled to
attend the trial of Civil Case No. 1005 and Spec. Procs. No. 1125 in
the Court of First Instance, Branch II, thereat, set for hearing on August
28-31, 1967. As a passenger, he checked in one piece of luggage, a
blue “maleta” for which he was issued Claim Check No. 2106-R (Exh.
“A”). The plane left Mactan Airport, Cebu, at about 1:00 o’clock P.M.,
and arrived at Bancasi airport, Butuan City, at past 2:00 o’clock P.M.,
of the same day. Upon arrival, petitioner claimed his luggage but it
could not be found. The petitioner was worried about the missing
luggage because it contained vital documents needed for trial the next
day. At 10:00 o’clock that evening, petitioner wired PAL Cebu
demanding the delivery of his baggage before noon the next day,
otherwise, he would hold PAL liable for damages, and stating that
PAL’s gross negligence had caused him undue inconvenience, worry,
anxiety and extreme embarrassment (Exh. “B”). This telegram was
received by the Cebu PAL supervisor but the latter felt no need to wire
petitioner that his luggage had already been forwarded on the
assumption that by the time the message reached Butuan City, the
luggage would have arrived.
Early in the morning of the next day, August 27, 1967, petitioner went
to the Bancasi Airport to inquire about his luggage. He did not wait,
however, for the morning flight which arrived at 10:00 o’clock that
morning. This flight carried the missing luggage.
On August 22, 1974, the Court of Appeals,* finding that PAL was guilty
only of simple negligence, reversed the judgment of the trial Court
granting petitioner moral and exemplary damages, but ordered PAL to
pay plaintiff the sum of P100.00, the baggage liability assumed by it
under the condition of carriage printed at the back of the ticket.
ISSUE: Whether or not CA committed a grave error when it limited
PAL’s carriage liability to the amount of P100.00 as stipulate at the
back of the ticket.
HELD: Petitioner is neither entitled to exemplary damages. In
contracts, as provided for in Article 2232 of the Civil Code, exemplary
damages can be granted if the defendant acted in a wanton,
fraudulent, reckless, oppressive, or malevolent manner, which has not
been proven in this case.
Petitioner further contends that respondent Court committed grave
error when it limited PAL’s carriage liability to the amount of P100.00
as stipulated at the back of the ticket.
We agree with the foregoing finding. The pertinent Condition of
Carriage printed at the back of the plane ticket reads:
8. BAGGAGE LIABILITY … The total liability of the Carrier for lost or
damaged baggage of the passenger is LIMITED TO P100.00 for each
ticket unless a passenger declares a higher valuation in excess of
P100.00, but not in excess, however, of a total valuation of P1,000.00
and additional charges are paid pursuant to Carrier’s tariffs.
There is no dispute that petitioner did not declare any higher value for
his luggage, much less did he pay any additional transportation
charge.
But petitioner argues that there is nothing in the evidence to show that
he had actually entered into a contract with PAL limiting the latter’s
liability for loss or delay of the baggage of its passengers, and that
Article 1750* of the Civil Code has not been complied with.
While it may be true that petitioner had not signed the plane ticket
(Exh. “12”), 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”. Interposed therefrom within
the reglementary period.
MAPA VS. CA
CATHAY PACIFIC AIRWAYS v. REYES
FACTS: Wilfredo made a travel reservation with Sampaguita Travel for
his family s trip to Adelaide, Australia. Upon confirmation of their flight
schedule, Wilfredo paid for the airfare and was issued 4 Cathay Pacific
roundtrip airplane tickets for M anila-Hong Kong-Adelaide-Hong Kong-
Manila. One week before they were scheduled to fly back home,
Wilfredo re-confirmed his family s return flight with the Cathay Pacific
office in Adelaide. They were advis ed that the reservation was still
okay as scheduled . On the day of their scheduled departure from
Adelaide, Wilfredo and his family a rrived at the airport on time. When
the airport check-in opened, Wilfredo was in formed by a staff from
Cathay Pacific that Wilfredo s family did not have confirme d
reservations, and only Sixta s flight booking was confirmed. Although,
they were allowed to board the flight to Hong Kong, not all of them we
re allowed to board the flight to Manila as it was fully booked. Only
Wilfredo s m other-in-law, Sixta, was allowed to proceed to Manila from
Hong Kong. On the following day, the Reyeses were finally allowed to
board the next flight bound for Manila. Upon arriving in the Philippines,
Wilfredo went Sampaguita Travel to report the incident. He was
informed by Sampaguita Travel that it was actually Cathay Pacif ic
which cancelled their bookings.
ISSUE:
1. Whether Cathay Pacific breached its contract of carriage with the
Wilfredo s family? Yes
2. Whether Sampaguita breached its contract of services with Wilfredo
s family? Yes
HELD: Cathay Pacific breached its contract of carriage with the
Reyeses when it disall owed them to board the plane in Hong Kong
going to Manila on the date reflected on their tickets. Thus, Cathay
Pacific opened itself to claims for compensatory, actual, moral and
exemplary damages, attorney s fees and costs of suit. In contrast, the
contractual relation between Sampaguita Travel and respondents is a
contract for services. The object of the contract is arranging and facilita
ting the latter s booking and ticketing. It was even Sampaguita Travel
which issue d the tickets. Since the contract between the parties is an
ordinary one for services, the stan dard of care required of respondent
is that of a good father of a family under A rticle 1173 of the Civil Code.
This connotes reasonable care consistent with tha t which an ordinarily
prudent person would have observed when confronted with a similar
situation. The test to determine whether negligence attended the
perform ance of an obligation is: did the defendant in doing the alleged
negligent act u se that reasonable care and caution which an ordinarily
prudent person would hav e used in the same situation? If not, then he
is guilty of negligence. There was indeed failure on the part of
Sampaguita Travel to exercise due dilige nce in performing its
obligations under the contract of services. It was establi shed by
Cathay Pacific, through the generation of the PNRs, that Sampaguita
Trav el failed to input the correct ticket number for Wilfredo s ticket.
Cathay Pacific even asserted that Sampaguita Travel made two
fictitious bookings for Juanita a nd Michael. The negligence of
Sampaguita Travel renders it also liable for damages.
YRASUEGI vs. PAL
FACTS: THIS case portrays the peculiar story of an international flight
steward who was dismissed because of his failure to adhere to the
weight standards of the airline company.
The proper weight for a man of his height and body structure is from
147 to 166 pounds, the ideal weight being 166 pounds, as mandated
by the Cabin and Crew Administration Manual of PAL.
In 1984, the weight problem started, which prompted PAL to send him
to an extended vacation until November 1985. He was allowed to
return to work once he lost all the excess weight. But the problem
recurred. He again went on leave without pay from October 17, 1988 to
February 1989.
Despite the lapse of a ninety-day period given him to reach his ideal
weight, petitioner remained overweight. On January 3, 1990, he was
informed of the PAL decision for him to remain grounded until such
time that he satisfactorily complies with the weight standards. Again,
he was directed to report every two weeks for weight checks, which he
failed to comply with.
On April 17, 1990, petitioner was formally warned that a repeated
refusal to report for weight check would be dealt with accordingly. He
was given another set of weight check dates, which he did not report
to.
On November 13, 1992, PAL finally served petitioner a Notice of
Administrative Charge for violation of company standards on weight
requirements. Petitioner insists that he is being discriminated as those
similarly situated were not treated the same.
On June 15, 1993, petitioner was formally informed by PAL that due to
his inability to attain his ideal weight, “and considering the utmost
leniency” extended to him “which spanned a period covering a total of
almost five (5) years,” his services were considered terminated
“effective immediately.”
LABOR ARBITER: held that the weight standards of PAL are
reasonable in view of the nature of the job of petitioner. However, the
weight standards need not be complied with under pain of dismissal
since his weight did not hamper the performance of his duties.
NLRC affirmed.
CA: the weight standards of PAL are reasonable. Thus, petitioner was
legally dismissed because he repeatedly failed to meet the prescribed
weight standards. It is obvious that the issue of discrimination was only
invoked by petitioner for purposes of escaping the result of his
dismissal for being overweight.
ISSUE: WON he was validly dismissed.
HELD: YES
A reading of the weight standards of PAL would lead to no other
conclusion than that they constitute a continuing qualification of an
employee in order to keep the job. The dismissal of the employee
would thus fall under Article 282(e) of the Labor Code.
In the case at bar, the evidence on record militates against petitioner’s
claims that obesity is a disease. That he was able to reduce his weight
from 1984 to 1992 clearly shows that it is possible for him to lose
weight given the proper attitude, determination, and self-discipline.
Indeed, during the clarificatory hearing on December 8, 1992,
petitioner himself claimed that “[t]he issue is could I bring my weight
down to ideal weight which is 172, then the answer is yes. I can do it
now.”
Petitioner has only himself to blame. He could have easily availed the
assistance of the company physician, per the advice of PAL.
In fine, We hold that the obesity of petitioner, when placed in the
context of his work as flight attendant, becomes an analogous cause
under Article 282(e) of the Labor Code that justifies his dismissal from
the service. His obesity may not be unintended, but is nonetheless
voluntary. As the CA correctly puts it, “[v]oluntariness basically means
that the just cause is solely attributable to the employee without any
external force influencing or controlling his actions. This element runs
through all just causes under Article 282, whether they be in the nature
of a wrongful action or omission. Gross and habitual neglect, a
recognized just cause, is considered voluntary although it lacks the
element of intent found in Article 282(a), (c), and (d).”
NOTES:
The dismissal of petitioner can be predicated on the bona fide
occupational qualification defense. Employment in particular jobs may
not be limited to persons of a particular sex, religion, or national origin
unless the employer can show that sex, religion, or national origin is an
actual qualification for performing the job. The qualification is called a
bona fide occupational qualification (BFOQ). In short, the test of
reasonableness of the company policy is used because it is parallel to
BFOQ. BFOQ is valid “provided it reflects an inherent quality
reasonably necessary for satisfactory job performance.”
The business of PAL is air transportation. As such, it has committed
itself to safely transport its passengers. In order to achieve this, it must
necessarily rely on its employees, most particularly the cabin flight
deck crew who are on board the aircraft. The weight standards of PAL
should be viewed as imposing strict norms of discipline upon its
employees.
The primary objective of PAL in the imposition of the weight standards
for cabin crew is flight safety.
Separation pay, however, should be awarded in favor of the employee
as an act of social justice or based on equity. This is so because his
dismissal is not for serious misconduct. Neither is it reflective of his
moral character.
JAL vs. SIMANGAN
Facts: In 1991, respondent Jesus Simangan decided to donate a
kidney to his ailing cousin, Loreto Simangan, in UCLA School of
Medicine in Los Angeles, California, U.S.A. Upon request of UCLA,
respondent undertook a series of laboratory tests at the National
Kidney Institute in Quezon City to verify whether his blood and tissue
type are compatible with Loreto's. Fortunately, said tests proved that
respondent's blood and tissue type were wellmatched with Loreto's.
Respondent needed to go to the United States to complete his
preliminary workup and donation surgery. Hence, to facilitate
respondent's travel to the United States, UCLA wrote a letter to the
American Consulate in Manila to arrange for his visa. In due time,
respondent was issued an emergency U.S. visa by the American
Embassy in Manila. Having obtained an emergency U.S. visa,
respondent purchased a round trip plane ticket from petitioner JAL and
was issued the corresponding boarding pass. He was scheduled to a
particular flight bound for Los Angeles, California, U.S.A. via Narita,
Japan. On July 29, 1992, the date of his flight, respondent went to
Ninoy Aquino International Airport in the company of several relatives
and friends. He was allowed to check in at JAL's counter. His plane
ticket, boarding pass, travel authority and personal articles were
subjected to rigid immigration and security routines.1After passing
through said immigration and security procedures, respondent was
allowed by JAL to enter its airplane. While inside the airplane, JAL's
airline crew suspected respondent of carrying a falsified travel
document and imputed that he would only use the trip to the United
States as a pretext to stay and work in Japan. The stewardess asked
respondent to show his travel documents. Shortly after, the stewardess
along with a Japanese and a Filipino haughtily ordered him to stand up
and leave the plane. Respondent protested, explaining that he was
issued a U.S. visa. Just to allow him to board the plane, he pleaded
with JAL to closely monitor his movements when the aircraft stops over
in Narita. His pleas were ignored. He was then constrained to go out of
the plane.18 In a nutshell, respondent was bumped off the flight.
Displeased by the turn of events, respondent filed an action for
damages. He prayed that he be awarded P3 million as moral
damages, P1.5 million as exemplary damages and P500,000.00 as
attorney's fees. JAL denied the material allegations of the complaint.
He also lodged a counterclaim anchored on respondent's alleged
wrongful institution of the complaint. It prayed for litigation expenses,
exemplary damages and attorney's fees.
Issue:
1. Whether or not Jal is guilty of contract of carriage
2. Whether or not respondent is entitled to moral and exemplary
damages
3. Whether or not Jal is entitled to its counterclaim for damages.
Rulings:
1. Yes. That respondent purchased a round trip plane ticket from JAL
and was issued the corresponding boarding pass is uncontroverted.49
His plane ticket, boarding pass, travel authority and personal articles
were subjected to rigid immigration and security procedure.50 After
passing through said immigration and security procedure, he was
allowed by JAL to enter its airplane to fly to Los Angeles, California,
U.S.A. via Narita, Japan. Concisely, there was a contract of carriage
between JAL and respondent. Nevertheless, JAL made respondent get
off the plane on his scheduled departure on July 29, 1992. He was not
allowed by JAL to fly. JAL thus failed to comply with its obligation
under the contract of carriage.
Apart from the fact that respondent's plane ticket, boarding pass, travel
authority and personal articles already passed the rigid immigration
and security routines,JAL, as a common carrier, ought to know the kind
of valid travel documents respondent carried. As provided in Article
1755 of the New Civil Code: "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." It bears repeating that the power to admit or
not an alien into the country is a sovereign act which cannot be
interfered with even by JAL. In an action for breach of contract of
carriage, all that is required of plaintiff is to prove the existence of such
contract and its nonperformance by the carrier through the latter's
failure to carry the passenger safely to his destination. Respondent has
complied with these twin requisites.
2. Yes. 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 Article 2219 of the Civil Code.64 As an
exception, such damages are recoverable: (1) in cases in which the
mishap results in the death of a passenger, as provided in Article 1764,
in relation to Article 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 Article
2220. The acts committed by JAL against respondent amounts to bad
faith. As found by the RTC, JAL breached its contract of carriage with
respondent in bad faith. JAL personnel summarily and insolently
ordered respondent to disembark while the latter was already settled in
his assigned seat. He was ordered out of the plane under the alleged
reason that the genuineness of his travel documents should be
verified. Clearly, JAL is liable for moral damages. It is firmly settled that
moral damages are recoverable in suits predicated on breach of a
contract of carriage where it is proved that the carrier was guilty of
fraud or bad faith, as in this case. Inattention to and lack of care for the
interests of its passengers who are entitled to its utmost consideration,
particularly as to their convenience, amount to bad faith which entitles
the passenger to an award of moral damages. What the law considers
as bad faith which may furnish the ground for an award of moral
damages would be bad faith in securing the contract and in the
execution thereof, as well as in the enforcement of its terms, or any
other kind of deceit. JAL is also liable for exemplary damages as its
abovementioned acts constitute wanton, oppressive and malevolent
acts against respondent. Exemplary damages, which are awarded by
way of example or correction for the public good, may be recovered in
contractual obligations, as in this case, if defendant acted in wanton,
fraudulent, reckless, oppressive, or malevolent manner. Neglect or
malfeasance of the carrier's employees could give ground for an action
for damages. Passengers have a right to be treated by the carrier's
employees with kindness, respect, courtesy and due consideration and
are entitled to be protected against personal misconduct, injurious
language, indignities and abuses from such employees. The
assessment of P500,000.00 as moral damages and P100,000.00 as
exemplary damages in respondent's favor is, in Our view, reasonable
and realistic. This award is reasonably sufficient to indemnify him for
the humiliation and embarrassment he suffered. This also serves as an
example to discourage the repetition of similar oppressive acts.
3. No. This compulsory counterclaim of JAL arising from the filing of
the complaint may not be granted inasmuch as the complaint against it
is obviously not malicious or unfounded. It was filed by respondent
precisely to claim his right to damages against JAL. Wellsettled is the
rule that the commencement of an action does not per se make the
action wrongful and subject the action to damages, for the law could
not have meant to impose a penalty on the right to litigate.
During the trial, however, JAL presented a witness who testified that
JAL suffered further damages. Allegedly, respondent caused the
publications of his subject complaint against JAL in the newspaper for
which JAL suffered damages. Nevertheless, JAL's counterclaim cannot
be granted.JAL is a common carrier. JAL's business is mainly with the
traveling public. It invites people to avail themselves of the comforts
and advantages it offers. Since JAL deals with the public, its bumping
off of respondent without a valid reason naturally drew public attention
and generated a public issue. The publications involved matters about
which the public has the right to be informed because they relate to a
public issue. This public issue or concern is a legitimate topic of a
public comment that may be validly published. Assuming that
respondent, indeed, caused the publication of his complaint, he may
not be held liable for damages for it. The constitutional guarantee of
freedom of the speech and of the press includes fair commentaries on
matters of public interest. Hence, there must be an actual malice in
order that a discreditable imputation to a public person in his public
capacity or to a public official may be actionable. To be considered
malicious, the libelous statements must be shown to have been written
or published with the knowledge that they are false or in reckless
disregard of whether they are false or not. Considering that the
published articles involve matters of public interest and that its
expressed opinion is not malicious but based on established facts, the
imputations against JAL are not actionable. Therefore, JAL may not
claim damages for them.