Absence of Delay

ABSENCE OF DELAY
Aniceto Saludo, Jr. vs. Hon. Court of Appeals, G.R. No. 95536, March 23, 1992
Assailed in this petition for review on certiorari is the decision in CA-G.R. CV No. 20951 of respondent
Court of Appeals 1 which affirmed the decision of the trial court 2 dismissing for lack of evidence herein
petitioners’ complaint in Civil Case No. R-2101 of the then Court of First Instance of Southern Leyte,
Branch I.chanrobles law library : red
The facts, as recounted by the court a quo and adopted by respondent court after "considering the
evidence on record," are as follows:jgc:chanrobles.com.ph
"After the death of plaintiffs’ mother, Crispina Galdo Saludo, in Chicago, Illinois, (on) October 23, 1976
(Exh. A), Pomierski and Son Funeral Home of Chicago, made the necessary preparations and
arrangements for the shipment of the remains from Chicago to the Philippines. The funeral home had
the remains embalmed (Exh. D) and secured a permit for the disposition of dead human body on
October 25, 1976 (Exh. C). Philippine Vice Consul in Chicago, Illinois, Bienvenido M. Llaneta, at 3:00 p.m.
on October 26, 1976 at the Pomierski & Son Funeral Home, sealed the shipping case containing a
hermetically sealed casket that is airtight and waterproof wherein was contained the remains of Crispina
Saludo Galdo (sic) (Exh. B). On the same date, October 26, 1976, Pomierski brought the remains to
C.M.A.S. (Continental Mortuary Air Services) at the airport (Chicago) which made the necessary
arrangements such as flights, transfers, etc.; C.M.A.S. is a national service used by undertakers
throughout the nation (U.S.A.), they furnish the air pouch which the casket is enclosed in, and they see
that the remains are taken to the proper air freight terminal (Exh. 6-TWA). C.M.A.S. booked the
shipment with PAL thru the carrier’s agent Air Care International, with Pomierski F.H. as the shipper and
Mario (Maria) Saludo as the consignee. PAL Airway Bill No. 079-01180454 Ordinary was issued wherein
the requested routing was from Chicago to San Francisco on board TWA Flight 131 of October 27, 1976,
and from San Francisco to Manila on board PAL Flight No. 107 of the same date, and from Manila to
Cebu on board PAL Flight 149 of October 29, 1976 (See Exh. E, also Exh. 1-PAL).
"In the meantime, plaintiffs Maria Salvacion Saludo and Saturnino Saludo, thru a travel agent, were
booked with United Airlines from Chicago to California, and with PAL from California to Manila. She then
went to the funeral director of Pomierski Funeral Home who had her mother’s remains and she told the
director that they were booked with United Airlines. But the director told her that the remains were
booked with TWA flight to California. This upset her, and she and her brother had to change
reservations from UA to the TWA flight after she confirmed by phone that her mother’s remains would
be on that TWA flight. They went to the airport and watched from the look-out area. She saw no body
being brought. So, she went to the TWA counter again, and she was told there was no body on that
flight. Reluctantly, they took the TWA flight upon assurance of her cousin, Ani Bantug, that he would
look into the matter and inform her about it on the plane or have it radioed to her. But no confirmation
from her cousin reached her that her mother was on the West Coast.
"Upon arrival at San Francisco at about 5:00 p.m., she went to the TWA counter there to inquire about
her mother’s remains. She was told they did not know anything about it.
"She then called Pomierski that her mother’s remains were not at the West Coast terminal, and
Pomierski immediately called C.M.A.S., which in a matter of 10 minutes informed him that the remains
were on a place to Mexico City, that there were two bodies at the terminal, and somehow they were
switched; he relayed this information to Miss Saludo in California; later C.M.A.S. called and told him they
were sending the remains back to California via Texas (see Exh. 6-TWA).
"It turned out that TWA had carried a shipment under PAL Airway Bill No. 079-ORD-01180454 on TWA
Flight 603 of October 27, 1976, a flight earlier than TWA Flight 131 of the same date. TWA delivered or
transferred the said shipment said to contain human remains to PAL at 1400 H or 2:00 p.m. of the same
date. October 27, 1976 (See Exh. 1-TWA).’Due to a switch(ing) in Chicago’, this shipment was withdrawn
from PAL by CMAS at 1805H (or 6:05 p.m.) of the same date, October 27 (Exh. 3-PAL, see Exh. 3-a-PAL).
"What transpired at the Chicago (A)irport is explained in a memo or incident report by Pomierski (Exh. 6-
TWA) to Pomierski’s lawyers who in turn referred to said memo and enclosed it in their (Pomierski’s
lawyers) answer dated July 18, 1981 to herein plaintiff’s counsel (See Exh. 5-TWA). In that memo or
incident report (Exh. 6-TWA), it is stated that the remains (of Crispina Saludo) were taken to CMAS at
the airport; that there were two bodies at the (Chicago Airport) terminal, and somehow they were
switched, that the remains (of Crispina Saludo) were on a plane to Mexico City; that CMAS is a national
service used by undertakers throughout the nation (U.S.A.), makes all the necessary arrangements, such
as flights, transfers, etc., and see(s) to it that the remains are taken to the proper air freight terminal.
"The following day October 28, 1976, the shipment or remains of Crispina Saludo arrived (in) San
Francisco from Mexico on board American Airlines. This shipment was transferred to or received by PAL
at 1945H or 7:45 p.m. (Exh. 2-PAL, Exh. 2-a-PAL). This casket bearing the remains of Crispina Saludo,
which was mistakenly sent to Mexico and was opened (there), was resealed by Crispin F. Padagas for
shipment to the Philippines (See Exh. B-1). The shipment was immediately loaded on PAL flight for
Manila that same evening and arrived (in) Manila on October 30, 1976, a day after its expected arrival
on October 29, 1976." 3
In a letter dated December 15, 1976, 4 petitioners’ counsel informed private respondent Trans World
Airlines (TWA) of the misshipment and eventual delay in the delivery of the cargo containing the
remains of the late Crispina Saludo, and of the discourtesy of its employees to petitioners Maria
Salvacion Saludo and Saturnino Saludo. In a separate letter on June 10, 1977 addressed to co-
respondent Philippine Airlines (PAL), 5 petitioners stated that they were holding PAL liable for said delay
in delivery and would commence judicial action should no favorable explanation be given.chanrobles
virtualawlibrary chanrobles.com:chanrobles.com.ph
Both private respondents denied liability. Thus, a damage suit 6 was filed by petitioners before the then
Court of First Instance, Branch III, Leyte, praying for the award of actual damages of P50,000.00, moral
damages of P1,000,000.00, exemplary damages, attorney’s fees and costs of suit.
As earlier stated, the court below absolved the two respondent airline companies of liability. The Court
of Appeals affirmed the decision of the lower court in toto, and in a subsequent resolution, 7 denied
herein petitioners’ motion for reconsideration for lack of merit.
In predictable disagreement and dissatisfaction with the conclusions reached by respondent appellate
court, petitioners now urge this Court to review the appealed decision and to resolve whether or not (1)
the delay in the delivery of the casketed remains of petitioners’ mother was due to the fault of
respondent airline companies, (2) the one-day delay in the delivery of the same constitutes contractual
breach as would entitle petitioners to damages, (3) damages are recoverable by petitioners for the
humiliating, arrogant and indifferent acts of the employees of TWA and PAL, and (4) private respondents
should be held liable for actual. moral and exemplary damages, aside from attorney’s fees and litigation
expenses. 8
At the outset and in view of the spirited exchanges of the parties on this aspect, it is to be stressed that
only questions of law may be raised in a petition filed in this Court to review on certiorari the decision of
the Court of Appeals. 9 This being so, the factual findings of the Court of Appeals are final and conclusive
and cannot be reviewed by the Supreme Court. The rule, however, admits of established exceptions, to
wit: (a) where there is grave abuse of discretion; (b) when the finding is grounded entirely on
speculations, surmises or conjectures; (c) when the inference made is manifestly mistaken, absurd or
impossible; (d) when the judgment of the Court of Appeals was based on a misapprehension of facts; (e)
when the factual findings are conflicting; (f) when the Court of Appeals, in making its findings, went
beyond the issues of the case and the same are contrary to the admissions of both appellant and
appellee; 10 (g) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by
the parties and which, if properly considered, would justify a different conclusion; 11 and (h) where the
findings of fact of the Court of Appeals are contrary to those of the trial court, or are mere conclusions
without citation of specific evidence, or where the facts set forth by the petitioner are not disputed by
the respondent, or where the findings of fact of the Court of Appeals are premised on the absence of
evidence and are contradicted by the evidence on record. 12
To distinguish, a question of law is one which involves a doubt or controversy on what the law is on a
certain state of facts; and, a question of fact, contrarily, is one in which there is a doubt or difference as
to the truth or falsehood of the alleged facts. 13 One test, it has been held, is whether the appellate
court can determine the issue raised without reviewing or evaluating the evidence, in which case it is a
question of law, otherwise it will be a question of fact. 14 Respondent airline companies object to the
present recourse of petitioners on the ground that this petition raises only factual questions. 15
petitioners maintain otherwise or, alternatively, they are of the position that, assuming that the petition
raises factual questions, the same are within the recognized exceptions to the general rule as would
render the petition cognizable and worthy of review by the Court. 16
Since it is precisely the soundness of the inferences or conclusions that may be drawn from the factual
issues which are here being assayed, we find that the issues raised in the instant petition indeed warrant
a second look if this litigation is to come to a reasonable denouement. A discussion seriatim of said
issues will further reveal that the sequence of the events involved is in effect disputed. Likewise to be
settled is whether or not the conclusions of the Court of Appeals subject of this review indeed find
evidentiary and legal support.chanrobles virtual lawlibrary
I. Petitioners fault respondent court for "not finding that private respondents failed to exercise
extraordinary diligence required by law which resulted in the switching and/or misdelivery of the
remains of Crispina Saludo to Mexico causing gross delay in its shipment to the Philippines, and
consequently, damages to petitioners." 17
Petitioners allege that private ‘respondents received the casketed remains of petitioners’ mother on
October 26, 1976, as evidenced by the issuance of PAL Air Way-bill No. 079-01180454 18 by Air Care
International as carrier’s agent; and from said date, private respondents were charged with the
responsibility to exercise extraordinary diligence so much so that for the alleged switching of the caskets
on October 27, 1976, or one day after private respondents received the cargo, the latter must
necessarily be liable.
To support their assertion, petitioners rely on the jurisprudential dictum, both under American and
Philippine law, that" (t)he issuance of a bill of lading carries the presumption that the goods were
delivered to the carrier issuing the bill, for immediate shipment, and it is nowhere questioned that a bill
of lading is prima facie evidence of the receipt of the goods by the carrier. . . . In the absence of
convincing testimony establishing mistake, recitals in the bill of lading showing that the carrier received
the goods for shipment on a specified date control (13 C.J.S. 235)." 19
A bill of lading is a written acknowledgment of the receipt of the goods and an agreement to transport
and deliver them at a specified place to a person named or on his order. Such instrument may be called
a shipping receipt, forwarder’s receipt and receipt for transportation. 20 The designation, however, is
immaterial. It has been held that freight tickets for bus companies as well as receipts for cargo
transported by all forms of transportation, whether by sea or land, fall within the definition. Under the
Tariff and Customs Code, a bill of lading includes airway bills of lading. 21 The two-fold character of a bill
of lading is all too familiar: it is a receipt as to the quantity and description of the goods shipped and a
contract to transport the goods to the consignee or other person therein designated, on the terms
specified in such instrument. 22
Logically, since a bill of lading acknowledges receipt of goods to be transported, delivery of the goods to
the carrier normally precedes the issuance of the bill; or, to some extent, delivery of the goods and
issuance of the bill are regarded in commercial practice as simultaneous acts. 23 However, except as
may be prohibited by law, there is nothing to prevent an inverse order of events, that is, the execution
of the bill, of lading even prior to actual possession and control by the carrier of the cargo to be
transported. There is no law which requires that the delivery of the goods for carriage and the issuance
of the covering bill of lading must coincide in point of time or, for that matter, that the former should
precede the latter.
Ordinarily, a receipt is not essential to a complete delivery of goods to the carrier for transportation but,
when issued, is competent and prima facie, but not conclusive, evidence of delivery to the carrier. A bill
of lading, when properly executed and delivered to a shipper, is evidence that the carrier has received
the goods described therein for shipment. Except as modified by statute, it is a general rule as to the
parties to a contract of carriage of goods in connection with which a bill of lading is issued reciting that
goods have been received for transportation, that the recital being in essence a receipt alone, is not
conclusive, but may be explained, varied or contradicted by parol or other evidence. 24
While we agree with petitioners’ statement that "an airway hill estops the carrier from denying receipt
of goods of the quantity and quality described in the bill," a further reading and a more faithful
quotation of the authority cited would reveal that" (a) bill of lading may contain constituent elements of
estoppel and thus become something more than a contract between the shipper and the carrier. . . .
(However), as between the shipper and the carrier, when no goods have been delivered for shipment no
recitals in the bill can estop the carrier from showing the true facts . . . Between the consignor of goods
and a receiving carrier, recitals in a bill of lading as to the goods shipped raise only a rebuttable
presumption that such goods were delivered for shipment. As between the consignor and a receiving
carrier, the fact must outweigh the recital." 25 (Emphasis supplied.)
For this reason, we must perforce allow explanation by private respondents why, despite the issuance of
the airway bill and the date thereof, they deny having received the remains of Crispina Saludo on
October 26, 1976 as alleged by petitioners.
The findings of the trial court, as favorably adopted by the Court of Appeals and which we have earlier
quoted, provide us with the explanation that sufficiently overcomes the presumption relied on by
petitioners in insisting that the remains of their mother were delivered to and received by private
respondents on October 26, 1976. Thus —
". . . Philippine Vice Consul in Chicago, Illinois, Bienvenido M. Llaneta, at 3:00 p.m. on October 26, 1976
at the Pomierski & Son Funeral Home, sealed the shipping case containing a hermetically sealed casket
that is airtight and waterproof wherein was contained the remains of Crispina Saludo Galdo (sic) (Exh.
B). On the same date October 26, 1976, Pomierski brought the remains to C.M.A.S. (Continental
Mortuary Air Services) at the airport (Chicago) which made the necessary arrangements such as flights,
transfers, etc; C.M.A.S. is a national service used by undertakers throughout the nation (U.S.A.), they
furnish the air pouch which the casket is enclosed in, and they see that the remains are taken to the
proper air freight terminal (Exh. G-TWA). C.M.A.S. booked the shipment with PAL thru the carrier’s agent
Air Care International, with Pomierski F.H. as the shipper and Mario (Maria) Saludo as the consignee.
PAL Airway Bill No. 079- 01180454 Ordinary was issued wherein the requested routing was from Chicago
to San Francisco on board TWA Flight 131 of October 27, 1976, and from San Francisco to Manila on
board PAL Flight No. 107 of the same date, and from Manila to Cebu on board PAL Flight 149 of October
29, 1976 (See Exh. E, also Exh. 1-PAL)." 26 (Emphasis supplied.)
Moreover, we are persuaded to believe private respondent PAL’s account as to what transpired on
October 26, 1976:jgc:chanrobles.com.ph
". . . pursuant thereto, on 26 October 1976, CMAS acting upon the instruction of Pomierski, F.H., the
shipper requested booking of the casketed remains of Mrs. Cristina (sic) Saludo on board PAL’s San
Francisco-Manila Flight No. PR 107 on October 27, 1976.
"2. To signify acceptance and confirmation of said booking, PAL issued to said Pomierski F.H., PAL Airway
Bill No. 079-01180454 dated October 27, 1976 (sic, ‘10/26/76’). PAL confirmed the booking and
transporting of the shipment on board of its Flight PR 107 on October 27, 1976 on the basis of the
representation of the shipper and/or CMAS that. the said cargo would arrive in San Francisco from
Chicago on board United Airlines Flight US 121 on 27 October 1976." 27
In other words,, on October 26, 1976 the cargo containing the casketed remains of Crispina Saludo was
booked for PAL Flight Number PR-107 leaving San Francisco for Manila on October 27, 1976. PAL Airway
Bill No. 079-01180454 was issued, not as evidence of receipt of delivery of the Cargo on October 26,
1976, but merely as a confirmation of the booking thus made for the San Francisco-Manila flight
scheduled on October 27, 1976. Actually, it was not until October 28, 1976 that PAL received physical
delivery of the body at San Francisco, as duly evidenced by the Interline Freight Transfer Manifest of the
American Airline Freight System and signed for by Virgilio Rosales at 1945H, or 7:45 P.M. on said date.
28
Explicit is the rule under Article 1736 of the Civil Code that the extraordinary responsibility of the
common carrier begins from the time the goods are delivered to the carrier. This responsibility remains
in full force and effect even when they are temporarily unloaded or stored in transit, unless the shipper
or owner exercises the right of stoppage in transitu, 29 and terminates only after the lapse of a
reasonable time for the acceptance of the goods by the consignee or such other person entitled to
receive them. 30 And, there is delivery to the carrier when the goods are ready for and have been
placed in the exclusive possession, custody and control of the carrier for the purpose of their immediate
transportation and the carrier has accepted them. 31 Where such a delivery has thus been accepted by
the carrier, the liability of the common carrier commences eo instanti. 32
Hence, while we agree with petitioners that the extraordinary diligence statutorily required to be
observed by the carrier instantaneously commences upon delivery of the goods thereto, for such duty to
commence there must in fact have been delivery of the cargo subject of the contract of carriage. Only
when such fact of delivery has been unequivocally established can the liability for loss, destruction or
deterioration of goods in the custody of the carrier, absent the excepting causes under Article 1734,
attach and the presumption of fault of the carrier under Article 1735 be invoked.
As already demonstrated, the facts, in the case at bar belie the averment that there was delivery of the
cargo to the carrier on October 26, 1976. Rather, as earlier explained, the body intended to be shipped
as agreed upon was, really placed in the possession and control of PAL on October 28, 1976 and it was
from that date that private respondents became responsible for the agreed cargo under their
undertakings in PAL Airway Bill No. 079-01180454. Consequently, for the switching of caskets prior
thereto which was not caused by them., and subsequent events caused thereby, private respondents
cannot be held liable.chanrobles.com.ph : virtual law library
Petitioners, proceeding on the premise that there was delivery of the cargo to private respondents on
October 26, 1976 and that the latter’s extraordinary responsibility had by then become operative, insist
on foisting the blame on private respondents for the switching of the two caskets which occurred on
October 27, 1976. It is argued that since there is no clear evidence establishing the fault of Continental
Mortuary Air Services (CMAS) for the mix-up, private respondents are presumably negligent pursuant to
Article 1735 of the Civil Code and, for failure to rebut such presumption, they must necessarily be held
liable; or, assuming that CMAS was at fault, the same does not absolve private respondents of liability
because whoever brought the cargo to the airport, or loaded it on the plane did so as agent of private
respondents.
This contention is without merit. As pithily explained by the Court of Appeals:jgc:chanrobles.com.ph
"The airway bill expressly provides that ‘Carrier certifies goods described below were received for
carriage’, and said cargo was ‘casketed human remains of Crispina Saludo’, with ‘Maria Saludo as
Consignee: Pomierski F.H. as Shipper;: Air Care International as carrier’s agent.’ On the face of the said
airway bill, the specific flight numbers, specific routes of shipment and dates of departure and arrival
were typewritten, to wit: Chicago TWA Flight 131/27 to San Francisco and from San Francisco by PAL
107 on October 27, 1976 to Philippines and to Cebu via PAL Flight 149 on October 29, 1976. The airway
bill also contains the following typewritten words, as follows: ‘all documents have been examined (sic).
Human remains of Crispina Saludo. Please return back (sic) first available flight to SFO.
"But, as it turned out and was discovered later the casketed human remains which was issued PAL
Airway Bill #079-1180454 was not the remains of Crispina Saludo, the casket containing her remains
having been shipped to Mexico City.
"However, it should be noted that, Pomierski F.H., the shipper of Mrs. Saludo’s remains, hired
Continental Mortuary Services (hereafter referred to as C.M.A.S.), which is engaged in the business of
transporting and forwarding human remains. Thus, C.M.A.S. made all the necessary arrangements —
such as flights, transfers, etc. — for shipment of the remains of Crispina Saludo.
‘The remains were taken on October 26th, 1976, to C.M.A.S. at the airport. These people made al l the
necessary arrangements, such as flights, transfers, etc. This is a national service used by undertakers
throughout the nation. They furnished the air pouch which the casket is enclosed in, and they see that
the remains are taken to the proper air freight terminal. I was very surprised when Miss Saludo called
me to say that the remains were not at the west coast terminal. I immediately called C.M.A.S. They
called me back in a matter of ten minutes to inform me that the remains were on a plane to Mexico City.
The man said that there were two bodies at the terminal, and somehow they were switched. . . (Exh. 6-
’TWA’, which is the memo or incident report enclosed in the stationery of Walter Pomierski & Sons Ltd.)’
"Consequently, when the cargo was received from C.M.A.S. at the Chicago airport terminal for
shipment, which was supposed to contain the remains of Crispina Saludo, Air Care International and/or
TWA, had no way of determining its actual contents, since the casket was hermetically sealed by the
Philippine Vice-Consul in Chicago and in an air pouch of C.M.A.S., to the effect that Air Care International
and/or TWA had to rely on the information furnished by the shipper regarding the cargo’s content.
Neither could Air Care International and/or TWA open the casket for further verification, since they
were not only without authority to do so, but even prohibited.
"Thus, under said circumstances, no fault and/or negligence can be attributed to PAL (even if Air Care
International should be considered as an agent of PAL) and/or TWA, the entire fault or negligence being
exclusively with C.M.A.S." 33 (Emphasis supplied.)
It can correctly and logically be concluded, therefore that the switching occurred or, more accurately,
was discovered on October 27, 1976; and based on the above findings of the Court of Appeals, it
happened while the cargo was still with CMAS, well before the same was placed in the custody of
private respondents.
Thus, while the Air Cargo Transfer Manifest of TWA of October 27, 1976 34 was signed by Garry Marcial
of PAL at 1400H, or 2:00 P.M., on the same date, thereby indicating acknowledgment by PAL of the
transfer to them by TWA of what was in truth the erroneous cargo, said misshipped cargo was in fact
withdrawn by CMAS from PAL as shown by the notation on another copy of said manifest 35 stating
"Received by CMAS — Due to switch in Chicago 10/27-1805H," the authenticity of which was never
challenged. This shows that said misshipped cargo was in fact withdrawn by CMAS from PAL and the
correct shipment containing the body of Crispina Saludo was received by PAL only on October 28, 1976,
at 1945H, or 7:45 P.M., per American Airlines Interline Freight Transfer Manifest No. AA204312. 36
Witness the deposition of TWA’s ramp serviceman, Michael Giosso, on this

matter:jgc:chanrobles.com.ph
"ATTY. JUAN COLLAS, JR.:chanrob1es virtual 1aw library
On that date, do (sic) you have occasion to handle or deal with the transfer of cargo from TWA Flight No.
603 to PAL San Francisco?
MICHAEL GIOSSO:chanrob1es virtual 1aw library
Yes, I did.
ATTY. JUAN COLLAS, JR.:chanrob1es virtual 1aw library
What was your participation with the transfer of the cargo?
I manifested the freight on a transfer manifest and physically moved it to PAL and concluded the
transfer by signing it off.
You brought it there yourself?
Yes sir.

Do you have anything to show that PAL received the cargo from TWA on October 27, 1976?
Yes, I do.(Witness presenting a document)
For purposes of clarity, Exhibit I is designated as Exhibit I-TWA.
x x x
This Exhibit I-TWA, could you tell what it is, what it shows?
It shows transfer of manifest on 10-27-76 to PAL at 1400 and verified with two signatures as it
completed the transfer.
Very good. Who was the PAL employee who received the cargo?
The name is Garry Marcial." 37
The deposition of Alberto A. Lim. PAL’s cargo supervisor at San Francisco, as deponent-witness for PAL,
makes this further clarification:jgc:chanrobles.com.ph
"ATTY. CESAR P. MANALAYSAY:chanrob1es virtual 1aw library
You mentioned Airway Bill, Mr. Lim. I am showing to you a PAL Airway Bill Number 01180454 which for
purposes of evidence, I would like to request that the same be marked as evidence Exhibit I for PAL.
x x x
In what circumstances did you encounter Exhibit I-PAL?

ALBERTO A. LIM:chanrob1es virtual 1aw library
If I recall correctly, I was queried by Manila, our Manila office with regard to a certain complaint that a
consignee filed that this shipment did not arrive on the day that the consignee expects the shipment to
arrive.
ATTY. CESAR P. MANALAYSAY:chanrob1es virtual 1aw library
Okay. Now, upon receipt of that query from your Manila office, did you conduct any investigation to
pinpoint the possible causes of mishandling?
Yes.
x x x
What is the result of your investigation?
In the course of my investigation, I found that we received the body on October 28, 1976, from
American Airlines.
What body are you referring to?
x x x
The remains of Mrs. Cristina (sic) Saludo.
Is that the same body mentioned in this Airway Bill?

Yes.
ATTY. CESAR P MANALAYSAY:chanrob1es virtual 1aw library
What time did you receive said body on October 28, 1976?
If I recall correctly, approximately 7:45 of October 28, 1976.
Do you have any proof with you to back the statement?
Yes. We have on our records a Transfer Manifest from American Airlines Number 204312 showing that
we received a human remains shipment belong to Mrs. Cristina (sic) Saludo or the human remains of
Mrs. Cristina (sic) Saludo.
At this juncture, may I request that the Transfer Manifest referred to by the witness be marked as an
evidence as Exhibit II-PAL.
x x x
Mr. Lim, yesterday your co-defendant TWA presented as their Exhibit I evidence tending to show that on
October 27, 1976 at about 2:00 in the afternoon they delivered to you a cargo bearing human remains.
Could you go over this Exhibit I and please give us your comments as to that exhibit?
ATTY. ALBERTO C. MENDOZA:chanrob1es virtual 1aw library
That is a vague question. I would rather request that counsel propound specific questions rather than
asking for comments on Exhibit I-TWA.
In that case, I will reform my question. Could you tell us whether TWA in fact delivered to you the
human remains as indicated in that Transfer Manifest?

Yes, they did.
I noticed that the Transfer Manifest of TWA marked as Exhibit I-TWA bears the same numbers or the
same entries as the Airway Bill marked as Exhibit I-A PAL tending to show that this is the human remains
of Mrs. Cristina (sic) Saludo. Could you tell us whether this is true?
It is true that we received human remains shipment from TWA as indicated on this Transfer Manifest.
But in the course of investigation, it was found out that the human remains transferred to us is not the
remains of Mrs. Cristina (sic) Saludo which is the reason why we did not board it on our flight." 38
Petitioners consider TWA’s statement that it had to rely on the information furnished by the shipper" a
lame, excuse and that its failure to prove that its personnel verified and identified the contents of the
casket before loading the same constituted negligence on the part of TWA. 39
We uphold the favorable consideration by the Court of Appeals of the following findings of the trial
court:jgc:chanrobles.com.ph
"It was not (to) TWA, but to C.M.A.S. that the Pomierski & Son Funeral Home delivered the casket
containing the remains of Crispina Saludo. TWA would have no knowledge therefore that the remains of
Crispina Saludo were not the ones inside the casket that was being presented to it for shipment. TWA
would have to rely on the representations of C.M.A.S. The casket was hermetically sealed and also
sealed by the Philippine Vice Consul in Chicago. TWA or any airline for that matter would not have
opened such sealed casket just for the purpose of ascertaining whose body was inside and to make sure
that the remains inside were those of the particular person indicated to be by C.M.A.S. TWA had to
accept whatever information was being furnished by the shipper or by the one presenting the casket for
shipment.And so as a matter of fact, TWA carried to San Francisco and transferred to defendant PAL a
shipment covered by or under PAL Airway Bill No. 079-ORD-01180454, the airway bill for the shipment
of the casketed remains of Crispina Saludo. Only, it turned out later, while the casket was already with
PAL, that what was inside the casket was not the body of Crispina Saludo so much so that it had to be
withdrawn by C.M.A.S. from PAL. The body of Crispina Saludo had been shipped to Mexico. The casket
containing the remains of Crispina Saludo was transshipped from Mexico and arrived in San Francisco
the following day on board American Airlines. It was immediately loaded by PAL on its flight for Manila.
"The foregoing points at C.M.A.S., not defendant TWA much less defendant PAL, as the ONE responsible
for the switching or mix-up of the two bodies at the Chicago Airport terminal, and started a chain
reaction of the misshipment of the body of Crispina Saludo and a one-day delay in the delivery thereof
to its destination. 40
Verily, no amount of inspection by respondent airline companies could have guarded against the
switching that had already taken place. Or, granting that they could have opened the casket to inspect
its contents, private respondents had no means of ascertaining whether the body therein contained was
indeed that of Crispina Saludo except, possibly, if the body was that of a male person and such fact was
visually apparent upon opening the casket. However, to repeat, private respondents had no authority to
unseal and open the same nor did they have any reason or justification to resort thereto.
It is the right of the carrier to require good faith on the part of those persons who deliver goods to be
carried, ar enter into contracts with it, and inasmuch as the freight may depend on the value of the
article to be carried, the carrier ordinarily has the right to inquire as to its value. Ordinarily, too, it is the
duty of the carrier to make inquiry as to the general nature of the articles shipped and of their value
before it consents to carry them; and its failure to do so cannot defeat the shipper’s right to recovery of
the full value of the package if lost, in the absence of showing of fraud or deceit on the part of the
shipper. In the absence of more definite information, the carrier has the right to accept shipper’s marks
as to the contents of the package offered for transportation and is not bound to inquire particularly
about them in order to take advantage of a false classification and where a shipper expressly represents
the contents of a package to be of a designated character, it is not the duty of the carrier to ask for a
repetition of the statement nor disbelieve it and open the box and see for itself. 41 However, where a
common carrier has reasonable ground to suspect that the offered goods are of a dangerous or illegal
character, the carrier has the right to know the character of such goods and to insist on an inspection, if
reasonable and practical under the circumstances, as a condition of receiving and transporting such
goods. 42
It can safely be said then that a common carrier is entitled to fair representation of the nature and value
of the goods to be carried, with the concomitant right to rely thereon, and further noting at this juncture
that a carrier has no obligation to inquire into the correctness or sufficiency of such information. 43 The
consequent duty to conduct an inspection thereof arises in the event that there should be reason to
doubt the veracity of such representations. Therefore, to be subjected to unusual search, other than the
routinary inspection procedure customarily undertaken, there must exist proof that would justify cause
for apprehension that the baggage is dangerous as to warrant exhaustive inspection, or even refusal to
accept carriage of the same; and it is the failure of the carrier to act accordingly in the face of such proof
that constitutes the basis of the common carrier’s liability. 44
In the case at bar, private respondents had no reason whatsoever to doubt the truth of the shipper’s
representations. The airway bill expressly providing that "carrier certifies goods received below were
received for carriage," and that the cargo contained "casketed human remains of Crispina Saludo," was
issued on the basis of such representations. The reliance thereon by private respondents was
reasonable and, for so doing, they cannot be said to have acted negligently. Likewise, no evidence was
adduced to suggest even an iota of suspicion that the cargo presented for transportation was anything
other than what it was declared to be, as would require more than routine inspection or call for the
carrier to insist that the same be opened for scrutiny of its contents per declaration.
Neither can private respondents he held accountable on the basis of petitioners’ preposterous
proposition that whoever brought the cargo to the airport or loaded it on the airplane did so as agent of
private respondents, so that even if CMAS whose services were engaged for the transit arrangements
for the remains was indeed at fault, the liability therefor would supposedly still be attributable to
private respondents.
While we agree that the actual participation of CMAS has been sufficiently and correctly established, to
hold that it acted as agent for private respondents would be both an inaccurate appraisal and an
unwarranted categorization of the legal position it held in the entire transaction.
It bears repeating that CMAS was hired to handle all the necessary shipping arrangements for the
transportation of the human remains of Crispina Saludo to Manila. Hence, it was to CMAS that the
Pomierski & Son Funeral Home, as shipper, brought the remains of petitioners’ mother for shipment,
with Maria Saludo as consignee. Thereafter, CMAS booked the shipment with PAL through the carrier’s
agent, Air Care International. 45 With its aforestated functions, CMAS may accordingly be classified as a
forwarder which, by accepted commercial practice, is regarded as an agent of the shipper and not of the
carrier. As such, it merely contracts for the transportation of goods by carriers, and has no interest in the
freight but receives compensation from the shipper as his agent. 46
At this point, it can be categorically stated that, as culled from the findings of both the trial court and
appellate courts, the entire chain of events which culminated in the present controversy was not due to
the fault or negligence of private respondents. Rather, the facts of the case would point to CMAS as the
culprit. Equally telling of the more likely possibility of CMAS’ liability is petitioners’ letter to and
demanding an explanation from CMAS regarding the statement of private respondents laying the blame
on CMAS for the incident, portions of which, reading as follows:jgc:chanrobles.com.ph
". . . we were informed that the unfortunate a mix-up occurred due to your negligence. . .
"Likewise, the two airlines pinpoint the responsibility upon your agents. Evidence were presented to
prove that allegation.
"On the face of this overwhelming evidence we could and should have filed a case against you. . ." 47
clearly allude to CMAS as the party at fault. This is tantamount to an admission by petitioners that they
consider private respondents without fault, or is at the very least indicative of the fact that petitioners
entertained serious doubts as to whether herein private respondents were responsible for the
unfortunate turn of events.
Undeniably, petitioners’ grief over the death of their mother was aggravated by the unnecessary
inconvenience and anxiety that attended their efforts to bring her body home for a decent burial. This is
unfortunate and calls for sincere commiseration with petitioners. But, much as we would like to give
them consolation for their undeserved distress, we are barred by the inequity of allowing recovery of
the damages prayed for by them at the expense of private respondents whose fault or negligence in the
very acts imputed to them has not been convincingly and legally demonstrated.
Neither are we prepared to delve into, much less definitively rule on, the possible liability of CMAS as
the evaluation and adjudication of the same is not what is presently at issue here and is best deferred to
another time and addressed to another forum.
II. Petitioners further fault the Court of Appeals for ruling that there was no contractual breach on the
part of private respondents as would entitle petitioners to damages.
Petitioners hold that respondent TWA, by agreeing to transport the remains of petitioners’ mother on
its Flight 131 from Chicago to San Francisco on October 27, 1976, made itself a party to the contract of
carriage and, therefore, was bound by the terms of the issued airway bill. When TWA undertook to ship
the remains on its Flight 603, ten hours earlier than scheduled, it supposedly violated the express
agreement embodied in the airway bill. It was allegedly this breach of obligation which compounded, if
not directly caused, the switching of the caskets.
In addition, petitioners maintain that since there is no evidence as to who placed the body on board
Flight 603, or that CMAS actually put the cargo on that flight, or that the two caskets at the Chicago
airport were to be transported by the same airline, or that they came from the same funeral home, or
that both caskets were received by CMAS, then the employees or agents of TWA presumably caused the
mix-up by loading the wrong casket on the plane. For said error, they contend, TWA must necessarily be
presumed negligent and this presumption of negligence stands undisturbed unless rebutting evidence is
presented to show that the switching or misdelivery was due to circumstances that would exempt the
carrier from liability.
Private respondent TWA professes otherwise. Having duly delivered or transferred the cargo to its co-
respondent PAL on October 27, 1976 at 2:00 P.M., as supported by the TWA Transfer Manifest, TWA
faithfully complied with its obligation under the airway bill. Said faithful compliance was not affected by
the fact that the remains were shipped on an earlier flight as there was no fixed time for completion of
carriage stipulated on. Moreover, the carrier did not undertake to carry the cargo aboard any specified
aircraft, in view of the condition on the back of the airway bill which provides:jgc:chanrobles.com.ph
"CONDITIONS OF CONTRACT
x x x
"It is agreed that no time is fixed for the completion of carriage hereunder and that Carrier may without
notice substitute alternate carriers or aircraft. Carrier assumes no obligation to carry the goods by any
specified aircraft or over any particular route or routes or to make connection at any point according to
any particular schedule, and Carrier is hereby authorized to select, or deviate from the route or routes of
shipment, notwithstanding that the same may be stated on the face hereof. The shipper guarantees
payment of all charges and advances." 48
Hence, when respondent TWA shipped the body on an earlier flight and on a different aircraft, it was
acting well within its rights. We find this argument tenable.
The contention that there was contractual breach on the part of private respondents is founded on the
postulation that there was ambiguity in the terms of the airway bill, hence petitioners’ insistence on the
application of the rules on interpretation of contracts and documents. We find no such ambiguity. The
terms are clear enough as to preclude the necessity to probe beyond the apparent intendment of the
contractual provisions.
The hornbook rule on interpretation of contracts consecrates the primacy of the intention of the parties,
the same having the force of law between them. When the terms of the agreement are clear and
explicit, that they do not justify an attempt to read into any alleged intention of the parties, the terms
are to be understood literally just as they appear on the face of the contract. 49 The various stipulations
of a contract shall be interpreted together 50 and such a construction is to be adopted as will give effect
to all provisions thereof. 51 A contract cannot be construed by parts, but its clauses should be
interpreted in relation to one another. The whole contract must be interpreted or read together in order
to arrive at its true meaning. Certain stipulations cannot be segregated and then made to control;
neither do particular words or phrases necessarily determine the character of a contract. The legal effect
of the contract is not to be determined alone by any particular provision disconnected from all others,
but in the ruling intention of the parties as gathered from all the language they have used and from their
contemporaneous and subsequent acts. 52
Turning to the terms of the contract at hand, as presented by PAL Air Waybill No. 079-01180454,
respondent court approvingly quoted the trial court’s disquisition on the aforequoted condition
appearing on the reverse side of the airway bill and its disposition of this particular assigned
error:jgc:chanrobles.com.ph
"The foregoing stipulation fully answers plaintiffs’ objections to the one-day delay and the shipping of
the remains in TWA Flight 603 instead of TWA Flight 131. Under the stipulation, parties agreed that no
time was fixed to complete the contract of carriage and that the carrier may, without notice, substitute
alternate carriers or aircraft. The carrier did not assume the obligation to carry the shipment on any
specified aircraft.
x x x
"Furthermore, contrary to the claim of plaintiffs-appellants, the conditions of the Air Waybill are big
enough to be read and noticed. Also, the mere fact that the cargo in question was shipped in TWA Flight
603, a flight earlier on the same day than TWA Flight 131, did not in any way cause or add to the one-
day delay complained of and/or the switching or mix-up of the bodies." 53
Indubitably, that private respondent can use substitute aircraft even without notice and without the
assumption of any obligation whatsoever to carry the goods on any specified aircraft is clearly
sanctioned by the contract of carriage as specifically provided for under the conditions thereof.
Petitioners’ invocation of the interpretative rule in the Rules of Court that written words control printed
words in documents, 54 to bolster their assertion that the typewritten provisions regarding the routing
and flight schedule prevail over the printed conditions, is tenuous. Said rule may be considered only
when there is inconsistency between the written and printed words of the contract.
As previously stated, we find no ambiguity in,the contract subject of this case that would call for the
application of said rule. In any event, the contract has provided for such a situation by explicitly stating
that the above condition remains effective "notwithstanding that the same (fixed time for completion of
carriage, specified aircraft, or any particular route or schedule) may be stated on the face hereof." While
petitioners hinge private respondents’ culpability on the fact that the carrier "certifies goods described
below were received for carriage," they may have overlooked that the statement on the face of the
airway bill properly and completely reads —
"Carrier certifies goods described below were received for carriage subject to the Conditions on the
reverse hereof the goods then being in apparent good order and condition except as noted hereon." 55
(Emphasis supplied.)
Private respondents further aptly observe that the carrier’s certification regarding receipt of the goods
for carriage "was of a Waybill, including Condition No. 5 — and thus if plaintiffs-appellants had
recognized the former, then with more reason they were aware of the latter." 56
In the same vein, it would also be incorrect to accede to the suggestion of petitioners that the
typewritten specifications of the flight, routes and dates of departures and arrivals on the face of the
airway bill constitute a special contract which modifies the printed conditions at the back thereof. We
reiterate that typewritten provisions of the contract are to be read and understood subject to and in
view of the printed conditions, fully reconciling and giving effect to the manifest intention of the parties
to the agreement.cralawnad
The oft-repeated rule regarding a carrier’s liability for delay is that in the absence of a special contract, a
carrier is not an insurer against delay in transportation of goods. When a common carrier undertakes to
convey goods, the law implies a contract that they shall be delivered at destination within a reasonable
time, in the absence of any agreement as to the time of delivery. 57 But where a carrier has made an
express contract to transport and deliver property within a specified time, it is bound to fulfill its
contract and is liable for any delay, no matter from what cause it may have arisen. 58 This result logically
follows from the well-settled rule that where the law creates a duty or charge, and the party is disabled
from performing it without any default in himself, and has no remedy over, then the law will excuse him,
but where the party by his own contract creates a duty or charge upon himself, he is bound to make it
good notwithstanding any accident or delay by inevitable necessity because he might have provided
against it by contract. Whether or not there has been such an undertaking on the part of the carrier is to
be determined from the circumstances surrounding the case and by application of the ordinary rules for
the interpretation of contracts. 59
Echoing the findings of the trial court, the respondent court correctly declared that —
"In a similar case of delayed delivery of air cargo under a very similar stipulation contained in the airway
bill which reads: ‘The carrier does not obligate itself to carry the goods by any specified aircraft or on a
specified time. Said carrier being hereby authorized to deviate from the route of the shipment without
any liability therefore’, our Supreme Court ruled that common carriers are not obligated by law to carry
and to deliver merchandise, and persons are not vested with the right to prompt delivery, unless such
common carriers previously assume the obligation. Said rights and obligations are created by a specific
contract entered into by the parties (Mendoza v. PAL, 90 Phil. 836).
"There is no showing by plaintiffs that such a special or specific contract had been entered into between
them and the defendant airline companies.
"And this special contract for prompt delivery should call the attention of the carrier to the
circumstances surrounding the case and the approximate amount of damages to be suffered in case of
delay (See Mendoza v. PAL, supra). There was no such contract entered into in the instant case." 60
Also, the theory of petitioners that the specification of the flights and dates of departures and arrivals
constitute a special contract that could prevail over the printed stipulations at the back of the airway bill
is vacuous. To countenance such a postulate would unduly burden the common carrier for that would
have the effect of unilaterally transforming every single bill of lading or trip ticket into a special contract
by the simple expedient of filling it up with the particulars of the flight, trip or voyage, and thereby
imposing upon the carrier duties and/or obligations which it may not have been ready or willing to
assume had it been timely advised thereof.
Neither does the fact that the challenged condition No. 5 was printed at the back of the airway bill
militate against its binding effect on petitioners as parties to the contract, for there were sufficient
indications on the face of said bill that would alert them to the presence of such additional condition to
put them on their guard. Ordinary prudence on the part of any person entering or contemplating to
enter into a contract would prompt even a cursory examination of any such conditions, terms and/or
stipulations.
There is a holding in most jurisdictions that the acceptance of a bill of lading without dissent raises a
presumption that all terms therein were brought to the knowledge of the shipper and agreed to by him,
and in the absence of fraud or mistake, he is estopped from thereafter denying that he assented to such
terms. This rule applies with particular force where a shipper accepts a bill of lading with full knowledge
of its contents, and acceptance, under such circumstances makes it a binding contract. In order that any
presumption of assent to a stipulation in a bill of lading limiting the liability of a carrier may arise, it must
appear that the clause containing this exemption from liability plainly formed a part of the contract
contained in the bill of lading. A stipulation printed on the back of a receipt or bill of lading or on papers
attached to such receipt will be quite as effective as if printed on its face, if it is shown that the
consignor knew of its terms. Thus, where a shipper accepts a receipt which states that its conditions are
to be found on the back, such receipt comes within the general rule, and the shipper is held to have
accepted and to be bound by the conditions there to be found. 61
Granting arguendo that Condition No. 5 partakes of the nature of a contract of adhesion and as such
must be construed strictly against the party who drafted the same or gave rise to any ambiguity therein,
it should be borne in mind that a contract of adhesion may be struck down as void and unenforceable,
for being subversive of public policy, only when the weaker party is imposed upon in dealing with the
dominant bargaining party and is reduced to the alternative of taking it or leaving it, completely
deprived of the opportunity to bargain on equal footing. 62 However, Ong Yiu v. Court of Appeals, Et. Al.
63 instructs us that contracts of adhesion are not entirely prohibited. The one who adheres to the
contract is in reality free to reject it entirely; if he adheres, he gives his consent. Accordingly, Petitioners,
far from being the weaker party in this situation, duly signified their presumed assent to all terms of the
contract through their acceptance of the airway bill and are consequently bound thereby. It cannot be
gainsaid that petitioners were not without several choices as to carriers in Chicago with its numerous
airways and airlines servicing the same.chanrobles law library : red
We wish to allay petitioners’ apprehension that Condition No. 5 of the airway bill is productive of
mischief as it would validate delay in delivery, sanction violations of contractual obligations with
impunity or put a premium on breaches of contract.
Just because we have said that Condition No. 5 of the airway bill is binding upon the parties to and fully
operative in this transaction, it does not mean, and let this serve as fair warning to respondent carriers,
that they can at all times whimsically seek refuge from liability in the exculpatory sanctuary of said
Condition No. 5 or arbitrarily vary routes, flights and schedules to the prejudice of their customers. This
condition only serves to insulate the carrier from liability in those instances when changes in routes,
flights and schedules are clearly justified by the peculiar circumstances of a particular case, or by general
transportation practices, customs and usages, or by contingencies or emergencies in aviation such as
weather turbulence, mechanical failure, requirements of national security and the like. And even as it is
conceded that specific routing and other navigational arrangements for a trip, flight or voyage, or
variations therein, generally lie within the discretion of the carrier in the absence of specific routing
instructions or directions by the shipper, it is plainly incumbent upon the carrier to exercise its rights
with due deference to the rights, interests and convenience of its customers.
A common carrier undertaking to transport property has the implicit duty to carry and deliver it within a
reasonable time, absent any particular stipulation regarding time of delivery, and to guard against delay.
In case of any unreasonable delay, the carrier shall be liable for damages immediately and proximately
resulting from such neglect of duty. 64 As found by the trial court, the delay in the delivery of the
remains of Crispina Saludo, undeniable and regrettable as it was, cannot be attributed to the fault,
negligence or malice of private respondents, 65 a conclusion concurred in by respondent court and
which we are not inclined to disturb.
We are further convinced that when TWA opted to ship the remains of Crispina Saludo on an earlier
flight, it did so in the exercise of sound discretion and with reasonable prudence, as shown by the
explanation of its counsel in his letter of February 19, 1977 in response to petitioners’ demand
letter:jgc:chanrobles.com.ph
"Investigation of TWA’s handling of this matter reveals that although the shipment was scheduled on
TWA Flight 131 of October 27, 1976, it was actually boarded on TWA Flight 603 of the same day,
approximately 10 hours earlier, in order to assure that the shipment would be received in San Francisco
in sufficient time for transfer to PAL. This transfer was effected in San Francisco at 2:00 P.M. on October
27, 1976. 66
Precisely, private respondent TWA knew of the urgency of the shipment by reason of this notation on
the lower portion of the airway bill: "All documents have been certified. Human remains of Cristina (sic)
Saludo. Please return bag first available flight to SFO." Accordingly, TWA took it upon itself to carry the
remains of Crispina Saludo on an earlier flight, which we emphasize it could do under the terms of the
airway bill, to make sure that there would be enough time for loading said remains on the transfer flight
on board PAL.
III. Petitioners challenge the validity of respondent court’s finding that private respondents are not liable
for tort on account of the humiliating, arrogant and indifferent acts of their officers and personnel. They
posit that since their mother’s remains were transported ten hours earlier than originally scheduled,
there was no reason for private respondents’ personnel to disclaim knowledge of the arrival or
whereabouts of the same other than their sheer arrogance, indifference and extreme insensitivity to the
feelings of petitioners. Moreover, being passengers and not merely consignors of goods, petitioners had
the right to be treated with courtesy, respect, kindness and due consideration.
In riposte, TWA claims that its employees have always dealt politely with all clients, customers and the
public in general. PAL, on the other hand, declares that in the performance of its obligation to the riding
public, other customers and clients, it has always acted with justice, honesty, courtesy and good faith.
Respondent appellate court found merit in and reproduced the trial court’s refutation of this assigned
error:jgc:chanrobles.com.ph
"About the only evidence of plaintiffs that may have reference to the manner with which the personnel
of defendants treated the two plaintiffs at the San Francisco Airport are the following pertinent portions
of Maria Saludo’s testimony:chanrob1es virtual 1aw library
‘Q When you arrived there, what did you do, if any?
A I immediately went to the TWA counter and I inquired about whether my mother was there or if they
knew anything about it.
Q What was the answer?
A They said they do not know. So, we waited.
Q About what time was that when you reached San Francisco from Chicago?
A I think 5 o’clock. Somewhere around that in the afternoon.
Q You made inquiry it was immediately thereafter?
A Right after we got off the plane.
Q Up to what time did you stay in the airport to wait until the TWA people could tell you the
whereabouts?
A Sorry, Sir, but the TWA did not tell us anything We stayed there until about 9 o’clock. They have not
heard anything about it. They did not say anything.
Q Do you want to convey to the Court that from 5 up to 9 o’clock in the evening you yourself went back
to the TWA and they could not tell you where the remains of your mother were?
A Yes sir.
Q And after nine o’clock, what did you do?
A I told my brother my Mom was supposed to be on the Philippine Airlines flight.’Why don’t we check
with PAL instead to see if she was there?’ We tried to comfort each other. I told him anyway that was a
shortest flight from Chicago to California. We will be with our mother on this longer flight. So, we
checked with the PAL.
Q What did you find?
A We learned, Yes, my Mom would be on the flight.
Q Who was that brother?
A Saturnino Saludo.
Q And did you find what was your flight from San Francisco to the Philippines?
A I do not know the number. It was the evening flight of the Philippine Airline(s) from San Francisco to
Manila.
Q You took that flight with your mother?
A We were scheduled to, Sir.
Q Now, you could not locate the remains of your mother in San Francisco could you tell us what did you
feel?
A After we were told that my mother was not there?
Q After you learned that your mother could not fly with you from Chicago to California?
A Well, I was very upset. Of course, I wanted the confirmation that my mother was in the West Coast.
The flight was about 5 hours from Chicago to California. We waited anxiously all that time on the plane. I
wanted to be assured about my mother’s remains. But there was nothing and we could not get any
assurance from anyone about it.
Q Your feeling when you reached San Francisco and you could not find out from the TWA the
whereabouts of the remains, what did you feel?
A Something nobody would be able to describe unless he experiences it himself. It is a kind of panic. I
think it’s a feeling you are about to go crazy. It is something do not want to live through again.’ (Inting,
t.s.n., Aug. 9, 1983, pp. 14-18).
"The foregoing does not show any humiliating or arrogant manner with which the personnel of both
defendants treated the two plaintiffs. Even their alleged indifference is not clearly established. The
initial answer of the TWA personnel at the counter that they did not know anything about the remains,
and later, their answer that they have not heard anything about the remains, and the inability of the
TWA counter personnel to inform the two plaintiffs of the whereabouts of the remains, cannot be said
to be total or complete indifference to the said plaintiffs. At any rate, it is any rude or discourteous
conduct, malfeasance or neglect, the use of abusive or insulting language calculated to humiliate and
shame passenger or bad faith by or on the part of the employees of the carrier that gives the passenger
an action for damages against the carrier (Zulueta v. Pan American World Airways, 43 SCRA 397; Air
France v. Carrascoso, Et Al., 18 SCRA 155; Lopez, Et. Al. v. Pan American World Airways, 16 SCRA 431;
Northwest Airlines, Inc. v. Cuenca, 14 SCRA 1063), and none of the above is obtaining in the instant
case." 67
We stand by respondent court’s findings on this point, but only to the extent where it holds that the
manner in which private respondent TWA’s employees dealt with petitioners was not grossly
humiliating, arrogant or indifferent as would assume the proportions of malice or bad faith and lay the
basis for an award of the damages claimed. It must however, be pointed out that the lamentable
actuations of respondent TWA’s employees leave much to be desired, particularly so in the face of
petitioners’ grief over the death of their mother, exacerbated by the tension and anxiety wrought by the
impasse and confusion over the failure to ascertain over an appreciable period of time what happened
to her remains.chanrobles lawlibrary : rednad
Airline companies are hereby sternly admonished that it is their duty not only to cursorily instruct but to
strictly require their personnel to be more accommodating towards customers, passengers and the
general public. After all, common carriers such as airline companies are in the business of rendering
public service, which is the primary reason for their enfranchisement and recognition in our law.
Because the passengers in a contract of carriage do not contract merely for transportation, they have a
right to be treated with kindness, respect, courtesy and consideration. 68 A contract to transport
passengers is quite different in kind and degree from any other contractual relation, and generates a
relation attended with public duty. The operation of a common carrier is a business affected with public
interest and must be directed to serve the comfort and convenience of passengers. 69 Passengers are
human beings with human feelings and emotions; they should not be treated as mere numbers or
statistics for revenue.
The records reveal that petitioners, particularly Maria and Saturnino Saludo, agonized for nearly five
hours, over the possibility of losing their mother’s mortal remains, unattended to and without any
assurance from the employees of TWA that they were doing anything about the situation. This is not to
say that petitioners were to be regaled with extra special attention. They were, however, entitled to the
understanding and humane consideration called for by and commensurate with the extraordinary
diligence required of common carriers, and not the cold insensitivity to their predicament. It is hard to
believe that the airline’s counter personnel were totally helpless about the situation. Common Sense
could and should have dictated that they exert a little extra effort in making a more extensive inquiry, by
themselves or through their superiors, rather than just shrug off the problem with a callous and
uncaring remark that they had no knowledge about it. With all the modern communications equipment
readily available to them, which could have easily facilitated said inquiry and which are used as a matter
of course by airline companies in their daily operations, their apathetic stance while not legally
reprehensible is morally deplorable.
Losing a loved one, especially one’s parent, is a painful experience. Our culture accords the tenderest
human feelings toward and in reverence to the dead. That the remains of the deceased were
subsequently delivered, albeit belatedly, and eventually laid in her final resting place is of little
consolation. The imperviousness displayed by the airline’s personnel, even for just that fraction of time,
was especially condemnable particularly in the hour of bereavement of the family of Crispina Saludo,
intensified by anguish due to the uncertainty of the whereabouts of their mother’s remains. Hence, it is
quite apparent that private respondents’ personnel were remiss in the observance of that genuine
human concern and professional attentiveness required and expected of them.
The foregoing observations, however, do not appear to be applicable or imputable to respondent PAL or
its employees. No attribution of discourtesy or indifference has been made against PAL by petitioners
and, in fact, petitioner Maria Saludo testified that it was to PAL that they repaired after failing to receive
proper attention from TWA. It was from PAL that they received confirmation that their mother’s
remains would be on the same flight to Manila with them.
We find the following substantiation on this particular episode from the deposition of Alberto A. Lim,
PAL’s cargo supervisor earlier adverted to, regarding their investigation of and the action taken on
learning of petitioner’s problem:jgc:chanrobles.com.ph
"ATTY. ALBERTO C. MENDOZA:chanrob1es virtual 1aw library
Yes.
Mr. Lim, what exactly was your procedure adopted in your so called investigation?
I called the lead agent on duty at that time and requested for a copy of airway bill, transfer manifest and
other documents concerning the shipment.
ATTY. ALBERTO C. MENDOZA:chanrob1es virtual 1aw library

Then, what?
They proceeded to analyze exactly where PAL failed, if any, in forwarding the human remains of Mrs.
Cristina (sic) Saludo. And found out that there was not (sic) delay in shipping the remains of Mrs. Saludo
to Manila. Since we received the body from American Airlines on 28 October at 7:45 and we expedited
the shipment so that it could have been loaded on our flight leaving at 9:00 in the evening or just barely
one hour and 15 minutes prior to the departure of the aircraft. That is so (sic) being the case, I reported
to Manila these circumstances." 70
IV. Finally, petitioners insist, as a consequence of the delay in the shipment of their mother’s remains
allegedly caused by willful contractual breach, on their entitlement to actual, moral and exemplary
damages as well as attorney’s fees, litigation expenses, and legal interest.
The uniform decisional tenet in our jurisdiction holds that moral damages may be awarded for willful or
fraudulent breach of contract 71 or when such breach is attended by malice or bad faith. 72 However, in
the absence of strong and positive evidence of fraud, malice or bad faith, said damages cannot be
awarded. 73 Neither can, there be an award of exemplary damages 74 nor of attorney’s fees 75 as an
item of damages in the absence of proof that defendant acted with malice, fraud or bad faith.
The censurable conduct of TWA’s employees cannot, however, be said to have approximated the
dimensions of fraud, malice or bad faith. It can be said to be more of a lethargic reaction produced and
engrained in some people by the mechanically routine nature of their work and a racial or societal
culture which stultifies what would have been their accustomed human response to a human need
under a former and different ambience.
Nonetheless, the facts show that petitioners’ right to be treated with due courtesy in accordance with
the degree of diligence required by law to be exercised by every common carrier was violated by TWA
and this entitles them, at least, to nominal damages from TWA alone. Articles 2221 and 2222 of the Civil
Code make it clear that nominal damages are not intended for indemnification of loss suffered but for
the vindication or recognition of a right violated or invaded. They are recoverable where some injury has
been done but the amount of which the evidence fails to show, the assessment of damages being left to
the discretion of the court according to the circumstances of the case. 76 In the exercise of our
discretion, we find an award of P40,000.00 as nominal damages in favor of petitioners to be a
reasonable amount under the circumstances of this case.
WHEREFORE, with the modification that an award or P40,000.00 as and by way of nominal damages is
hereby granted in favor of petitioners to be paid by respondent Trans World Airlines, the appealed
decision is AFFIRMED in all other respects.
G.R. No. 106664 March 8, 1995
PHILIPPINE AIR LINES, petitioner,

vs.
FLORANTE A. MIANO, respondent.
PUNO, J.:
The petitioner questions the Decision of the Regional Trial Court of Makati, Branch 148, dated July
29, 1992,1 awarding private respondent moral and exemplary damages and attorney's fees for want
of legal justification. We grant the petition.
The facts are uncontroverted.
On August 31, 1988, private respondent took petitioner's flight PR 722, Mabuhay Class, bound for
Frankfurt, Germany. He had an immediate onward connecting flight via Lufthansa flight LH 1452 to
Vienna, Austria. At the Ninoy Aquino International Airport, he checked-in one brown suitcase
weighing twenty (20) kilograms2 but did not declare a higher valuation. He claimed that his suitcase
contained money, documents, one Nikkon camera with zoom lens, suits, sweaters, shirts, pants,
shoes, and other accessories.3
Upon private respondent's arrival at Vienna via Lufthansa flight LH 1452, his checked-in baggage
was missing. He reported the matter to the Lufthansa authorities. After three (3) hours of waiting in
vain, he proceeded to Piestany, Czechoslovakia. Eleven (11) days after or on September 11, 1988,
his suitcase was delivered to him in his hotel in Piestany, Czechoslovakia. He claimed that because
of the delay in the delivery of his suitcase, he was forced to borrow money to buy some clothes, to
pay $200.00 for the transportation of his baggage from Vienna to Piestany, and lost his Nikkon
camera.4
In November 1988, private respondent wrote to petitioner a letter demanding: (1) P10,000.00 cost of
allegedly lost Nikkon camera; (2) $200.00 for alleged cost of transporting luggage from Vienna to
Piestany; and (3) P100,000.00 as damages. In its reply, petitioner informed private respondent that
his letter was forwarded to its legal department for investigation.
Private respondent felt his demand letter was left unheeded. He instituted an action for Damages
docketed as Civil Case No. 89-3496 before the Regional Trial Court of Makati.
Petitioner contested the complaint. It disclaimed any liability on the ground that there was neither a
report of mishandled baggage on flight PR 722 nor a tracer telex received from its Vienna Station. It,
however, contended that if at all liable its obligation is limited by the Warsaw Convention rate.
Petitioner filed a Third-Party Complaint against Lufthansa German Airlines imputing the mishandling
of private respondent's baggage, but was dismissed for its failure to prosecute.
In its decision, the trial court observed that petitioner's actuation was not attended by bad faith.
Nevertheless, it awarded private respondent damages and attorney's fees, the dispositive portion of
which reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff (private
respondent) and against the defendant (petitioner), thereby ordering the latter to pay
the following:
(a) U.S. $200.00 as cost of transporting the suitcase from Vienna to

Czechoslovakia;
(b) P40,000.00 as moral damages;
(c) P20,000.00 as exemplary damages; and
(d) P15,000.00 as attorney's fees.
SO ORDERED. 5
Hence, this petition for review.
In breach of contract of carriage by air, moral damages are awarded only if the defendant acted
fraudulently or in bad faith.6 Bad faith means a breach of a known duty through same motive of
interest or ill will.7
The trial court erred in awarding moral damages to private respondent. The established facts evince
that petitioner's late delivery of the baggage for eleven (11) days was not motivated by ill will or bad
faith. In fact, it immediately coordinated with its Central Baggage Services to trace private
respondent's suitcase and succeeded in finding it. At the hearing, petitioner's Manager for
Administration of Airport Services Department Miguel Ebio testified that their records disclosed that
Manila, the originating station, did not receive any tracer telex.8 A tracer telex, an airline lingo, is an
action of any station that the airlines operate from whom a passenger may complain or have not
received his baggage upon his arrival.9 It was reasonable to presume that the handling of the
baggage was normal and regular. Upon inquiry from their Frankfurt Station, it was however
discovered that the interline tag of private respondent's baggage was accidentally taken off.
According to Mr. Ebio, it was customary for destination stations to hold a tagless baggage until
properly identified. The tracer telex, which contained information on the baggage, is matched with
the tagless luggage for identification. Without the tracer telex, the color and the type of baggage are
used as basis for the matching. Thus, the delay.
Worthy to stress, the trial court made an unequivocal conclusion that petitioner did not act in bad
faith or with malice, viz.:
xxx xxx xxx
Absent a finding as to the bad intention of defendant (petitioner) PAL, this court finds
it appropriate to apply the Warsaw Convention with respect to the liability of Air
Carriers.10
xxx xxx xxx
The mere fact that defendant (petitioner) exerted effort to assist plaintiff (private
respondent) in his predicament as shown in defendant's (petitioner's) letter to plaintiff
(private respondent) (Exh. "E") and likewise the letter from Mr. Miguel Ebio,
Manager-Airport Services Administration of defendant (petitioner) PAL to its Senior
Counsel-Litigation, Atty. Marceliano Calica (Exh. "3") which reveals the fact that an
investigation was conducted as to mishandled baggage, coupled with the fact that
said information were then relayed to plaintiff (private respondent) as evidenced by a
letter of defendant (petitioner) to plaintiff (private respondent) (Exh. "4") does not
warrant a showing of malice on the part of defendant
( petitioner). 11
xxx xxx xxx
Under the circumstances obtaining, considering that defendant's (petitioner's)

actuation was not attendant with bad faith, the award of moral damages in the
amount of P40,000.00 is but just and fair. 12
Bad faith must be substantiated by evidence. In LBC vs. Court of

Appeals,13 we ruled:
Bad faith under the law cannot be presumed; it must be established by clear and
convincing evidence. Again, the unbroken jurisprudence is that in breach of contract
cases where the defendant is not shown to have acted fraudulently or in bad faith,
liability for damages is limited to the natural and probable consequences of the
breach of the obligation which the parties had foreseen or could reasonably have
foreseen. The damages, however, will not include liability far moral damages.
(Citations omitted)
We can neither sustain the award of exemplary damages. The prerequisite for the award of
exemplary damages in cases of contract or quasi-contract14 is that the defendant acted in wanton,
fraudulent, reckless, oppressive, or malevolent manner. 15 The undisputed facts do not so warrant the
characterization of the action of petitioner.
The award of attorney's fees must also be disallowed for lack of legal leg to stand on. The fact that
private respondent was compelled to litigate and incur expenses to protect and enforce his claim did
not justify the award of attorney's fees. The general rule is that attorney's fees cannot be recovered
as part of damages because of the policy that no premium should be placed on the right to
litigate.16 Petitioner is willing to pay the just claim of $200.00 as a result of the delay in the
transportation of the luggage in accord with the Warsaw Convention. Needless to say, the award of
attorney's fees must be deleted where the award of moral and exemplary damages are eliminated.
IN VIEW WHEREOF, the assailed Decision of July 29, 1992 is MODIFIED deleting the award of
moral and exemplary damages and attorney's fees. No costs.
SO ORDERED.
Narvasa, C.J., Bidin, Regalado and Mendoza, JJ., concur.

DUE DILIGENCE TO LESSEN THE LOSS
G.R. No. 150751 September 20, 2004
CENTRAL SHIPPING COMPANY, INC., petitioner,

vs.
INSURANCE COMPANY OF NORTH AMERICA, respondent.
DECISION
PANGANIBAN, J.:
A common carrier is presumed to be at fault or negligent. It shall be liable for the loss, destruction or
deterioration of its cargo, unless it can prove that the sole and proximate cause of such event is one
of the causes enumerated in Article 1734 of the Civil Code, or that it exercised extraordinary
diligence to prevent or minimize the loss. In the present case, the weather condition encountered by
petitioner’s vessel was not a "storm" or a natural disaster comprehended in the law. Given the known
weather condition prevailing during the voyage, the manner of stowage employed by the carrier was
insufficient to secure the cargo from the rolling action of the sea. The carrier took a calculated risk in
improperly securing the cargo. Having lost that risk, it cannot now disclaim any liability for the loss.
The Case
Before the Court is a Petition for Review1 under Rule 45 of the Rules of Court, seeking to reverse
and set aside the March 23, 2001 Decision2 of the Court of Appeals (CA) in CA-GR CV No. 48915.
The assailed Decision disposed as follows:
"WHEREFORE, the decision of the Regional Trial Court of Makati City, Branch 148 dated
August 4, 1994 is hereby MODIFIED in so far as the award of attorney’s fees is DELETED.
The decision is AFFIRMED in all other respects."3
The CA denied petitioner’s Motion for Reconsideration in its November 7, 2001 Resolution.4
The Facts
The factual antecedents, summarized by the trial court and adopted by the appellate court, are as
follows:
"On July 25, 1990 at Puerto Princesa, Palawan, the [petitioner] received on board its vessel,
the M/V ‘Central Bohol’, 376 pieces [of] Philippine Apitong Round Logs and undertook to
transport said shipment to Manila for delivery to Alaska Lumber Co., Inc.
"The cargo was insured for ₱3,000,000.00 against total loss under [respondent’s] Marine
Cargo Policy No. MCPB-00170.
"On July 25, 1990, upon completion of loading of the cargo, the vessel left Palawan and
commenced the voyage to Manila.
"At about 0125 hours on July 26, 1990, while enroute to Manila, the vessel listed about 10
degrees starboardside, due to the shifting of logs in the hold.
"At about 0128 hours, after the listing of the vessel had increased to 15 degrees, the ship
captain ordered his men to abandon ship and at about 0130 hours of the same day the
vessel completely sank. Due to the sinking of the vessel, the cargo was totally lost.
"[Respondent] alleged that the total loss of the shipment was caused by the fault and
negligence of the [petitioner] and its captain and as direct consequence thereof the
consignee suffered damage in the sum of ₱3,000,000.00.
"The consignee, Alaska Lumber Co. Inc., presented a claim for the value of the shipment to
the [petitioner] but the latter failed and refused to settle the claim, hence [respondent], being
the insurer, paid said claim and now seeks to be subrogated to all the rights and actions of
the consignee as against the [petitioner].
"[Petitioner], while admitting the sinking of the vessel, interposed the defense that the vessel
was fully manned, fully equipped and in all respects seaworthy; that all the logs were
properly loaded and secured; that the vessel’s master exercised due diligence to prevent or
minimize the loss before, during and after the occurrence of the storm.
"It raised as its main defense that the proximate and only cause of the sinking of its vessel
and the loss of its cargo was a natural disaster, a tropical storm which neither [petitioner] nor
the captain of its vessel could have foreseen."5
The RTC was unconvinced that the sinking of M/V Central Bohol had been caused by the weather or
any other caso fortuito. It noted that monsoons, which were common occurrences during the months
of July to December, could have been foreseen and provided for by an ocean-going vessel. Applying
the rule of presumptive fault or negligence against the carrier, the trial court held petitioner liable for
the loss of the cargo. Thus, the RTC deducted the salvage value of the logs in the amount of
₱200,000 from the principal claim of respondent and found that the latter was entitled to be
subrogated to the rights of the insured. The court a quo disposed as follows:
"WHEREFORE, premises considered, judgment is hereby rendered in favor of the

[respondent] and against the [petitioner] ordering the latter to pay the following:
1) the amount of ₱2,800,000.00 with legal interest thereof from the filing of this
complaint up to and until the same is fully paid;
2) ₱80,000.00 as and for attorney’s fees;
3) Plus costs of suit."6
Ruling of the Court of Appeals
The CA affirmed the trial court’s finding that the southwestern monsoon encountered by the vessel
was not unforeseeable. Given the season of rains and monsoons, the ship captain and his crew
should have anticipated the perils of the sea. The appellate court further held that the weather
disturbance was not the sole and proximate cause of the sinking of the vessel, which was also due
to the concurrent shifting of the logs in the hold that could have resulted only from improper stowage.
Thus, the carrier was held responsible for the consequent loss of or damage to the cargo, because
its own negligence had contributed thereto.
The CA found no merit in petitioner’s assertion of the vessel’s seaworthiness. It held that the
Certificates of Inspection and Drydocking were not conclusive proofs thereof. In order to consider a
vessel to be seaworthy, it must be fit to meet the perils of the sea.
Found untenable was petitioner’s insistence that the trial court should have given greater weight to
the factual findings of the Board of Marine Inquiry (BMI) in the investigation of the Marine Protest
filed by the ship captain, Enriquito Cahatol. The CA further observed that what petitioner had
presented to the court a quo were mere excerpts of the testimony of Captain Cahatol given during
the course of the proceedings before the BMI, not the actual findings and conclusions of the agency.
Citing Arada v. CA,7 it said that findings of the BMI were limited to the administrative liability of the
owner/operator, officers and crew of the vessel. However, the determination of whether the carrier
observed extraordinary diligence in protecting the cargo it was transporting was a function of the
courts, not of the BMI.
The CA concluded that the doctrine of limited liability was not applicable, in view of petitioner’s
negligence -- particularly its improper stowage of the logs.
Hence, this Petition.8
Issues
In its Memorandum, petitioner submits the following issues for our consideration:
"(i) Whether or not the weather disturbance which caused the sinking of the vessel M/V
Central Bohol was a fortuitous event.
"(ii) Whether or not the investigation report prepared by Claimsmen Adjustment Corporation
is hearsay evidence under Section 36, Rule 130 of the Rules of Court.
"(iii) Whether or not the finding of the Court of Appeals that ‘the logs in the hold shifted and
such shifting could only be due to improper stowage’ has a valid and factual basis.
"(iv) Whether or not M/V Central Bohol is seaworthy.
"(v) Whether or not the Court of Appeals erred in not giving credence to the factual finding of
the Board of Marine Inquiry (BMI), an independent government agency tasked to conduct
inquiries on maritime accidents.
"(vi) Whether or not the Doctrine of Limited Liability is applicable to the case at bar."9
The issues boil down to two: (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.
The Court’s Ruling
The Petition is devoid of merit.
First Issue:
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.10 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."11 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.12
In the present case, petitioner disclaims responsibility for the loss of the cargo by claiming the
occurrence of a "storm" under Article 1734(1). It attributes the sinking of its vessel solely to the
weather condition between 10:00 p.m. on July 25, 1990 and 1:25 a.m. on July 26, 1990.
At the outset, it must be stressed that only questions of law13 may be raised in a petition for review
on certiorari under Rule 45 of the Rules of Court. Questions of fact are not proper subjects in this
mode of appeal,14 for "[t]he Supreme Court is not a trier of facts."15 Factual findings of the CA may be
reviewed on appeal16 only under exceptional circumstances such as, among others, when the
inference is manifestly mistaken,17 the judgment is based on a misapprehension of facts,18 or the CA
manifestly overlooked certain relevant and undisputed facts that, if properly considered, would justify
a different conclusion.19
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 southwestern monsoon in the course of its voyage.
The Note of Marine Protest,20 which the captain of the vessel issued under oath, stated that he and
his crew encountered a southwestern monsoon about 2200 hours on July 25, 1990, and another
monsoon about 2400 hours on July 26, 1990. Even petitioner admitted in its Answer that the sinking
of M/V Central Bohol had been caused by the strong southwest monsoon.21 Having made such
factual representation, it cannot now be allowed to retreat and claim that the southwestern monsoon
was a "storm."
The pieces of evidence with respect to the weather conditions encountered by the vessel showed
that there was a southwestern monsoon at the time. Normally expected on sea voyages, however,
were such monsoons, during which strong winds were not unusual. Rosa S. Barba, weather
specialist of the Philippine Atmospheric Geophysical and Astronomical Services Administration
(PAGASA), testified that a thunderstorm might occur in the midst of a southwest monsoon.
According to her, one did occur between 8:00 p.m. on July 25, 1990, and 2 a.m. on July 26, 1990, as
recorded by the PAGASA Weather Bureau.22
Nonetheless, to our mind it would not be sufficient to categorize the weather condition at the time as
a "storm" within the absolutory causes enumerated in the law. Significantly, no typhoon was
observed within the Philippine area of responsibility during that period.23
According to PAGASA, a storm has a wind force of 48 to 55 knots,24 equivalent to 55 to 63 miles per
hour or 10 to 11 in the Beaufort Scale. The second mate of the vessel stated that the wind was
blowing around force 7 to 8 on the Beaufort Scale.25 Consequently, the strong winds accompanying
the southwestern monsoon could not be classified as a "storm." Such winds are the ordinary
vicissitudes of a sea voyage.26
Even if the weather encountered by the ship is to be deemed a natural disaster under Article 1739 of
the Civil Code, petitioner failed to show that such natural disaster or calamity was the proximate and
only cause of the loss. Human agency must be entirely excluded from the cause of injury or loss. In
other words, the damaging effects blamed on the event or phenomenon must not have been caused,
contributed to, or worsened by the presence of human participation.27 The defense of fortuitous
event or natural disaster cannot be successfully made when the injury could have been avoided by
human precaution.28
Hence, if a common carrier fails to exercise due diligence -- or that ordinary care that the
circumstances of the particular case demand -- to prevent or minimize the loss before, during and
after the occurrence of the natural disaster, the carrier shall be deemed to have been negligent. The
loss or injury is not, in a legal sense, due to a natural disaster under Article 1734(1).29
We also find no reason to disturb the CA’s finding that the loss of the vessel was caused not only by
the southwestern monsoon, but also by the shifting of the logs in the hold. Such shifting could been
due only to improper stowage. The assailed Decision stated:
"Notably, in Master Cahatol’s account, the vessel encountered the first southwestern
monsoon at about 1[0]:00 in the evening. The monsoon was coupled with heavy rains and
rough seas yet the vessel withstood the onslaught. The second monsoon attack occurred at
about 12:00 midnight. During this occasion, the master ‘felt’ that the logs in the hold shifted,
prompting him to order second mate Percival Dayanan to look at the bodega. Complying with
the captain’s order, 2nd mate Percival Dayanan found that there was seawater in the
bodega. 2nd mate Dayanan’s account was:
‘14.T – Kung inyo pong natatandaan ang mga pangyayari, maari mo bang isalaysay
ang naganap na paglubog sa barkong M/V Central Bohol?
‘S – Opo, noong ika-26 ng Julio 1990 humigit kumulang alas 1:20 ng umaga (dst)
habang kami ay nagnanabegar patungong Maynila sa tapat ng Cadlao Island at
Cauayan Island sakop ng El Nido, Palawan, inutusan ako ni Captain Enriquito
Cahatol na tingnan ko ang bodega; nang ako ay nasa bodega, nakita ko ang loob
nang bodega na maraming tubig at naririnig ko ang malakas na agos ng tubig-dagat
na pumapasok sa loob ng bodega ng barko; agad bumalik ako kay Captain Enriquito
Cahatol at sinabi ko ang malakas na pagpasok ng tubig-dagat sa loob nang bodega
ng barko na ito ay naka-tagilid humigit kumulang sa 020 degrees, nag-order si
Captain Cahatol na standby engine at tinawag ang lahat ng mga officials at mga
crew nang maipon kaming lahat ang barko ay naka-tagilid at ito ay tuloy-tuloy ang
pagtatagilid na ang ilan sa mga officials ay naka-hawak na sa barandilla ng barko at
di-nagtagal sumigaw nang ABANDO[N] SHIP si Captain Cahatol at kami ay
nagkanya-kanya nang talunan at languyan sa dagat na malakas ang alon at nang
ako ay lumingon sa barko ito ay di ko na nakita.’
"Additionally, [petitioner’s] own witnesses, boatswain Eduardo Viñas Castro and oiler
Frederick Perena, are one in saying that the vessel encountered two weather disturbances,
one at around 10 o’clock to 11 o’clock in the evening and the other at around 12 o’clock
midnight. Both disturbances were coupled with waves and heavy rains, yet, the vessel
endured the first and not the second. Why? The reason is plain. The vessel felt the strain
during the second onslaught because the logs in the bodega shifted and there were already
seawater that seeped inside."30
The above conclusion is supported by the fact that the vessel proceeded through the first
southwestern monsoon without any mishap, and that it began to list only during the second monsoon
immediately after the logs had shifted and seawater had entered the hold. In the hold, the sloshing of
tons of water back and forth had created pressures that eventually caused the ship to sink. Had the
logs not shifted, the ship could have survived and reached at least the port of El Nido. In fact, there
was another motor launch that had been buffeted by the same weather condition within the same
area, yet it was able to arrive safely at El Nido.31
In its Answer, petitioner categorically admitted the allegation of respondent in paragraph 5 of the
latter’s Complaint "[t]hat at about 0125 hours on 26 July 1990, while enroute to Manila, the M/V
‘Central Bohol’ listed about 10 degrees starboardside, due to the shifting of logs in the hold." Further,
petitioner averred that "[t]he vessel, while navigating through this second southwestern monsoon,
was under extreme stress. At about 0125 hours, 26 July 1990, a thud was heard in the cargo hold
and the logs therein were felt to have shifted. The vessel thereafter immediately listed by ten (10)
degrees starboardside."32
Yet, petitioner now claims that the CA’s conclusion was grounded on mere speculations and
conjectures. It alleges that it was impossible for the logs to have shifted, because they had fitted
exactly in the hold from the port to the starboard side.
After carefully studying the records, we are inclined to believe that the logs did indeed shift, and that
they had been improperly loaded.
According to the boatswain’s testimony, the logs were piled properly, and the entire shipment was
lashed to the vessel by cable wire.33 The ship captain testified that out of the 376 pieces of round
logs, around 360 had been loaded in the lower hold of the vessel and 16 on deck. The logs stored in
the lower hold were not secured by cable wire, because they fitted exactly from floor to ceiling.
However, while they were placed side by side, there were unavoidable clearances between them
owing to their round shape. Those loaded on deck were lashed together several times across by
cable wire, which had a diameter of 60 millimeters, and were secured from starboard to port.34
It is obvious, as a matter of common sense, that the manner of stowage in the lower hold was not
sufficient to secure the logs in the event the ship should roll in heavy weather. Notably, they were of
different lengths ranging from 3.7 to 12.7 meters.35 Being clearly prone to shifting, the round logs
should not have been stowed with nothing to hold them securely in place. Each pile of logs should
have been lashed together by cable wire, and the wire fastened to the side of the hold. Considering
the strong force of the wind and the roll of the waves, the loose arrangement of the logs did not rule
out the possibility of their shifting. By force of gravity, those on top of the pile would naturally roll
towards the bottom of the ship.
The adjuster’s Report, which was heavily relied upon by petitioner to strengthen its claim that the
logs had not shifted, stated that "the logs were still properly lashed by steel chains on deck."
Parenthetically, this statement referred only to those loaded on deck and did not mention anything
about the condition of those placed in the lower hold. Thus, the finding of the surveyor that the logs
were still intact clearly pertained only to those lashed on deck.
The evidence indicated that strong southwest monsoons were common occurrences during the
month of July. Thus, the officers and crew of M/V Central Bohol should have reasonably anticipated
heavy rains, strong winds and rough seas. They should then have taken extra precaution in stowing
the logs in the hold, in consonance with their duty of observing extraordinary diligence in
safeguarding the goods. But the carrier took a calculated risk in improperly securing the cargo.
Having lost that risk, it cannot now escape responsibility for the loss.
Second Issue:
Doctrine of Limited Liability
The doctrine of limited liability under Article 587 of the Code of Commerce36 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 shipowner and the captain.37 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
shipowner could have prevented this fatal miscalculation."38 As such, the shipowner was equally
negligent. It cannot escape liability by virtue of the limited liability rule.
WHEREFORE, the Petition is DENIED, and the assailed Decision and Resolution AFFIRMED.
Costs against petitioner.
SO ORDERED.
1. Duration of Liability
a. Delivery of Goods to Common Carrier
MAURO GANZON, petitioner,

vs.
COURT OF APPEALS and GELACIO E. TUMAMBING, respondents.
Antonio B. Abinoja for petitioner.
Quijano, Arroyo & Padilla Law Office for respondents.
SARMIENTO, J.:
The private respondent instituted in the Court of First Instance of Manila 1 an action against the petitioner for damages based on culpa
contractual. The antecedent facts, as found by the respondent Court, 2 are undisputed:
On November 28, 1956, Gelacio Tumambing contracted the services of Mauro B. Ganzon to haul
305 tons of scrap iron from Mariveles, Bataan, to the port of Manila on board the lighter LCT
"Batman" (Exhibit 1, Stipulation of Facts, Amended Record on Appeal, p. 38). Pursuant to that
agreement, Mauro B. Ganzon sent his lighter "Batman" to Mariveles where it docked in three feet of
water (t.s.n., September 28, 1972, p. 31). On December 1, 1956, Gelacio Tumambing delivered the
scrap iron to defendant Filomeno Niza, captain of the lighter, for loading which was actually begun
on the same date by the crew of the lighter under the captain's supervision. When about half of the
scrap iron was already loaded (t.s.n., December 14, 1972, p. 20), Mayor Jose Advincula of
Mariveles, Bataan, arrived and demanded P5,000.00 from Gelacio Tumambing. The latter resisted
the shakedown and after a heated argument between them, Mayor Jose Advincula drew his gun and
fired at Gelacio Tumambing (t.s.n., March 19, 1971, p. 9; September 28, 1972, pp. 6-7). The <äre||anº• 1àw>
gunshot was not fatal but Tumambing had to be taken to a hospital in Balanga, Bataan, for treatment
(t.s.n., March 19, 1971, p. 13; September 28, 1972, p. 15).
After sometime, the loading of the scrap iron was resumed. But on December 4, 1956, Acting Mayor
Basilio Rub, accompanied by three policemen, ordered captain Filomeno Niza and his crew to dump
the scrap iron (t.s.n., June 16, 1972, pp. 8-9) where the lighter was docked (t.s.n., September 28,
1972, p. 31). The rest was brought to the compound of NASSCO (Record on Appeal, pp. 20-22).
Later on Acting Mayor Rub issued a receipt stating that the Municipality of Mariveles had taken
custody of the scrap iron (Stipulation of Facts, Record on Appeal, p. 40; t.s.n., September 28, 1972,
p. 10.)
On the basis of the above findings, the respondent Court rendered a decision, the dispositive portion
of which states:
WHEREFORE, the decision appealed from is hereby reversed and set aside and a
new one entered ordering defendant-appellee Mauro Ganzon to pay plaintiff-
appellant Gelacio E. Tumambimg the sum of P5,895.00 as actual damages, the sum
of P5,000.00 as exemplary damages, and the amount of P2,000.00 as attorney's
fees. Costs against defendant-appellee Ganzon. 3
In this petition for review on certiorari, the alleged errors in the decision of the Court of Appeals are:
THE COURT OF APPEALS FINDING THE HEREIN PETITIONER GUILTY OF BREACH OF THE
CONTRACT OF TRANSPORTATION AND IN IMPOSING A LIABILITY AGAINST HIM
COMMENCING FROM THE TIME THE SCRAP WAS PLACED IN HIS CUSTODY AND CONTROL
HAVE NO BASIS IN FACT AND IN LAW.
II
THE APPELLATE COURT ERRED IN CONDEMNING THE PETITIONER FOR THE ACTS OF HIS
EMPLOYEES IN DUMPING THE SCRAP INTO THE SEA DESPITE THAT IT WAS ORDERED BY
THE LOCAL GOVERNMENT OFFICIAL WITHOUT HIS PARTICIPATION.
III
THE APPELLATE COURT FAILED TO CONSIDER THAT THE LOSS OF THE SCRAP WAS DUE
TO A FORTUITOUS EVENT AND THE PETITIONER IS THEREFORE NOT LIABLE FOR LOSSES
AS A CONSEQUENCE THEREOF. 4
The petitioner, in his first assignment of error, insists that the scrap iron had not been unconditionally
placed under his custody and control to make him liable. However, he completely agrees with the
respondent Court's finding that on December 1, 1956, the private respondent delivered the scraps to
Captain Filomeno Niza for loading in the lighter "Batman," That the petitioner, thru his employees,
actually received the scraps is freely admitted. Significantly, there is not the slightest allegation or
showing of any condition, qualification, or restriction accompanying the delivery by the private
respondent-shipper of the scraps, or the receipt of the same by the petitioner. On the contrary, soon
after the scraps were delivered to, and received by the petitioner-common carrier, loading was
commenced.
By the said act of delivery, the scraps were unconditionally placed in the possession and control of
the common carrier, and upon their receipt by the carrier for transportation, the contract of carriage
was deemed perfected. Consequently, the petitioner-carrier's extraordinary responsibility for the
loss, destruction or deterioration of the goods commenced. Pursuant to Art. 1736, such extraordinary
responsibility would cease only upon the delivery, actual or constructive, by the carrier to the
consignee, or to the person who has a right to receive them. 5 The fact that part of the shipment had
not been loaded on board the lighter did not impair the said contract of transportation as the goods
remained in the custody and control of the carrier, albeit still unloaded.
The petitioner has failed to show that the loss of the scraps was due to any of the following causes
enumerated in Article 1734 of the Civil Code, namely:
(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.
Hence, the petitioner is presumed to have been at fault or to have acted negligently. 6 By reason of
this presumption, the court is not even required to make an express finding of fault or negligence
before it could hold the petitioner answerable for the breach of the contract of carriage. Still, the
petitioner could have been exempted from any liability had he been able to prove that he observed
extraordinary diligence in the vigilance over the goods in his custody, according to all the
circumstances of the case, or that the loss was due to an unforeseen event or to force majeure. As it
was, there was hardly any attempt on the part of the petitioner to prove that he exercised such
extraordinary diligence.
It is in the second and third assignments of error where the petitioner maintains that he is exempt
from any liability because the loss of the scraps was due mainly to the intervention of the municipal
officials of Mariveles which constitutes a caso fortuito as defined in Article 1174 of the Civil Code. 7
We cannot sustain the theory of caso fortuito. In the courts below, the petitioner's defense was that
the loss of the scraps was due to an "order or act of competent public authority," and this contention
was correctly passed upon by the Court of Appeals which ruled that:
... In the second place, before the appellee Ganzon could be absolved from
responsibility on the ground that he was ordered by competent public authority to
unload the scrap iron, it must be shown that Acting Mayor Basilio Rub had the power
to issue the disputed order, or that it was lawful, or that it was issued under legal
process of authority. The appellee failed to establish this. Indeed, no authority or
power of the acting mayor to issue such an order was given in evidence. Neither has
it been shown that the cargo of scrap iron belonged to the Municipality of Mariveles.
What we have in the record is the stipulation of the parties that the cargo of scrap
iron was accilmillated by the appellant through separate purchases here and there
from private individuals (Record on Appeal, pp. 38-39). The fact remains that the
order given by the acting mayor to dump the scrap iron into the sea was part of the
pressure applied by Mayor Jose Advincula to shakedown the appellant for
P5,000.00. The order of the acting mayor did not constitute valid authority for
appellee Mauro Ganzon and his representatives to carry out.
Now the petitioner is changing his theory to caso fortuito. Such a change of theory on appeal we
cannot, however, allow. In any case, the intervention of the municipal officials was not In any case,
of a character that would render impossible the fulfillment by the carrier of its obligation. The
petitioner was not duty bound to obey the illegal order to dump into the sea the scrap iron. Moreover,
there is absence of sufficient proof that the issuance of the same order was attended with such force
or intimidation as to completely overpower the will of the petitioner's employees. The mere difficulty
in the fullfilment of the obligation is not considered force majeure. We agree with the private
respondent that the scraps could have been properly unloaded at the shore or at the NASSCO
compound, so that after the dispute with the local officials concerned was settled, the scraps could
then be delivered in accordance with the contract of carriage.
There is no incompatibility between the Civil Code provisions on common carriers and Articles
361 8 and 362 9 of the Code of Commerce which were the basis for this Court's ruling in Government
of the Philippine Islands vs. Ynchausti & Co.10 and which the petitioner invokes in tills petition. For
Art. 1735 of the Civil Code, conversely stated, means that the shipper will suffer the losses and
deterioration arising from the causes enumerated in Art. 1734; and in these instances, the burden of
proving that damages were caused by the fault or negligence of the carrier rests upon him. However,
the carrier must first establish that the loss or deterioration was occasioned by one of the excepted
causes or was due to an unforeseen event or to force majeure. Be that as it may, insofar as Art. 362
appears to require of the carrier only ordinary diligence, the same is .deemed to have been modified
by Art. 1733 of the Civil Code.
Finding the award of actual and exemplary damages to be proper, the same will not be disturbed by
us. Besides, these were not sufficiently controverted by the petitioner.
WHEREFORE, the petition is DENIED; the assailed decision of the Court of Appeals is hereby
AFFIRMED. Costs against the petitioner.
This decision is IMMEDIATELY EXECUTORY.
Yap, C.J., Paras and Padilla, JJ., concur.

ORIENTAL ASSURANCE CORPORATION, Petitioner, v. MANUEL ONG, DOING
BUSINESS UNDER THE BUSINESS NAME OF WESTERN PACIFIC TRANSPORT
SERVICES AND/OR ASIAN TERMINALS, INC., Respondents.
DECISION
LEONEN, J.:
The consignee's claim letter that was received by the arrastre operator two (2) days
after complete delivery of the cargo constitutes substantial compliance with the
time limitation for filing claims under the Gate Pass and the Management Contract.
However, the arrastre operator's liability for damage to the cargo is limited to
P5,000.00 per package in accordance with the Management Contract.
This Rule 45 Petition for Review on Certiorari1 seeks a review of the February 19,
2009 Decision2 and August 25, 2009 Resolution3 of the Court of Appeals in CA-GR.
CV No. 89311. The Court of Appeals affirmed the Regional Trial Court's dismissal of
the complaint on the ground that the claim of petitioner Oriental Assurance
Corporation (Oriental) had already prescribed.
JEA Steel Industries, Inc. (JEA Steel) imported from South Korea 72 aluminum-
zinc-alloy-coated steel sheets in coils. These steel sheets were transported to
Manila on board the vessel M/V Dooyang Glory as evidenced by Bill of Lading No.
HDMUBSOML-214s011.4
Upon arrival of the vessel at the Manila South Harbor on June 10, 2002, the 72 coils
were discharged and stored in Pier 9 under the custody of the arrastre contractor,
Asian Terminals, Inc. (Asian Terminals). 5
From the storage compound of Asian Terminals, the coils were loaded on the trucks
of Manuel Ong (Ong) and delivered to JEA Steel's plant in Barangay Lapidario,
Trece Martirez, Cavite on June 14, 20026 and June 17, 2002.7 Eleven of these coils
''were found to be in damaged condition, dented or their normal round shape
deformed."8
JEA Steel filed a claim with Oriental for the value of the 11 damaged coils, pursuant
to Marine Insurance Policy No. OAC/M-12292.9
Oriental paid JEA Steel the sum of P521,530.16 and subsequently demanded
indemnity from Ong and Asian Terminals (respondents), but they refused to pay.10
On May 19, 2003, Oriental filed a Complaint11 before the Regional Trial Court of
Manila for sum of money against respondents.12
Ong countered that the 11 coils were already damaged when they were loaded on
board his trucks and transported to the consignee.13
For its part, Asian Terminals claimed that it exercised due diligence in handling the
cargo, that the cargo was released to the consignee's representative in the same
condition as when received from the vessel, and that the damages were sustained
while in the custody of the vessel or the customs broker.14
Asian Terminals further argued that Oriental's claim was barred for the latter's
failure to file a notice of claim within the 15-day period provided in the Gate Pass
and in Article VII, Section 7.01 of the Contract for Cargo Handling Services
(Management Contract) between the Philippine Ports Authority and Asian
Terminals.15 The Gate Pass was signed by the consignee's representative to
acknowledge the delivery and receipt of the shipment.16 The dorsal side of this Gate
Pass stated:
PROVISIONS
Issuance of this Gate Pass constitutes delivery to and receipt by the consignee of
the goods as described above in good order and condition unless an accompanying
B.O. certificate duly signed and noted on the fact (sic) of this Gate Pass appears.
This Gate Pass is subject to all terms and conditions defined in the Management
Contract between the Philippine Ports Authority and Asian Terminals, Inc. and
amendment and alterations thereof particularly but not limited to the Article VI
thereof, limiting the contractor's liability to P5,000 per package unless the
transportation is otherwise specified or manifested or communicated in writing
together with the invoice value and supported by a certified packing list to the
contractor by the interested party or parties before the discharge of the goods and
corresponding arrastre charges have been paid providing exception or restriction
from liability among others, unless a formal claim with the required annexes shall
have been filed with the contractor within fifteen (15) days from date of issuance
by the contractor's certificate of loss, damage, injury or certificate of non-delivery.17
Asan Terminals added that its liability, if any, should not exceed P5,000.00,
pursuant to said Section 7.01.18
After trial, Branch 39, Regional Trial Court, Manila rendered its Decision19 on August
9, 2006 dismissing the complaint. It found no preponderance of evidence to
establish that respondents were the ones responsible for the damage to the 11
coils.20 Oriental's Motion for Reconsideration was likewise denied by the Regional
Trial Court in its Resolution21 dated June 6, 2007.
The Court of Appeals dismissed Oriental’s appeal on the ground that its claim had
already prescribed.22 The Court of Appeals found that 11 of the coi1s were already
damaged before they were loaded in Ong's trucks.23 Hence, the legal presumption
of negligence applies against Asian Terminals unless it is able to prove that it
exercised extraordinary diligence in the handling of the cargo.24 The Court of
Appeals held that as an arrastre operator, Asian Terminals was bound to observe
the same degree of care required of common carriers.25 The Court of Appeals
further ruled that while Asian Terminals failed to rebut the presumption of
negligence against it, it cannot be held liable to pay the value of the damaged coils
because Oriental's claim was filed beyond the 15-day prescriptive period stated in
the Gate Pass. According to the Court of Appeals, it can resolve the issue of
prescription despite not being assigned as an error on appeal as it was already
raised, although not tackled, in the lower court. The Court of Appeals also denied
petitioner's subsequent motion for reconsideration.26
Hence, this petition was filed before this Court. Respondents filed their respective
Comments,27 and Oriental filed its Motion to Admit Consolidated Reply28 together
with its Consolidated Reply.29
In compliance with this Court's January 18, 2012 Resolution30 Asian Terminals31 and
Oriental32 filed their respective memoranda. Ong filed a Manifestation33 adopting
the arguments contained in the Memorandum of Asian Terminals.
The issues for this Court's resolution are:
First, whether or not the Court of Appeals gravely erred in passing upon the issue
of prescription even though it was not an assigned error in the appeal;
Second, whether or not the claim against Asian Terminals, Inc. is barred by
prescription; and
Finally, whether or not the Court of Appeals gravely erred in ruling that Manuel Ong
is not liable for the damage of the cargo.34
Oriental submits that the court of Appeals cannot rule on the issue of prescription
as this was not included in the assignment of errors ... nor was this properly argued
by any of the parties in their respective briefs filed before the Court of Appeals."35
On the other hand, Asian Terminals counters that the Court of Appeals properly
reviewed the issue of prescription even though it was not raised in Oriental's appeal
brief. This issue is closely related to the liability of Asian Terminals for the damaged
shipment, the first error in Oriental's appeal. Moreover, Asian Terminals asserts
that it raised the issue of prescription before the trial court, although it was not
resolved.36
This Court agrees with Asian Terminals. The Court of Appeals properly passed upon
the issue of prescription.
Rule 51, Section 8 of the Rules of Court provides:
Section 8. Questions that may be decided. No error which does not affect the
jurisdiction over the subject matter or the validity of the judgment appealed from
or the proceedings therein will be considered unless stated in the assignment of
errors, or closely related to or dependent on an assigned error and properly argued
in the brief, save as the court may pass upon plain errors and clerical errors.
An assignment of error is generally required for appellate review.37 Section 8

provides that only errors which have been stated in the assignment of errors and
properly argued in the brief will be considered by the appellate court. The
exceptions to this rule are errors affecting jurisdiction over the subject matter as
well as plain and clerical errors.38
However, in a number of cases,39 this Court recognized the appellate courts' ample
authority to consider errors that were not assigned. This is in accord with the liberal
spirit of the Rules of Court with a view to securing a ''just, speedy and inexpensive
disposition" of every case.40 In Mendoza v. Bautista:41
[A]n appellate court is clothed with ample authority to review rulings even if they
are not assigned as errors in the appeal in these instances: (a) grounds not
assigned as errors but affecting jurisdiction over the subject matter; (b) matters
not assigned as errors on appeal but are evidently plain or clerical errors within
contemplation of law; (c) matters not assigned as errors on appeal but
consideration of which is necessary in arriving at a just decision and complete
resolution of the case or to serve the interests of justice or to avoid dispensing
piecemeal justice; (d) matters not specifically assigned as errors on appeal but
raised in the trial court and are matters of record having some bearing on the issue
submitted which the parties failed to raise or which the lower court ignored; (e)
matters not assigned as errors on appeal but closely related to an error assigned;
and (f) matters not assigned as errors on appeal but upon which the determination
of a question properly assigned, is dependent.42
Exceptions (d) and (e) apply in this case.
The issue of whether or not Oriental's claim has prescribed was raised in the
Regional Trial Court and evidence was presented by Asian Terminals.43 However,
this matter was no longer discussed by the Regional Trial Court in its decision in
view of its finding that Oriental failed to clearly establish that respondents were
responsible for the damaged coils.44
Moreover, it was Oriental that appealed to the Court of Appeals. It is

comprehensible that respondents failed to discuss the issue since the arguments in
their briefs were limited to refuting the matters raised by petitioner.
Oriental assigned the following as errors in its appeal to the Court of Appeals:
The trial court erred when it declared that [respondents] are not liable for the loss
and damage of the goods.
....
The trial court erred in dismissing [Oriental's] complaint and in refusing to grant the
reliefs prayed for[.]45
The issue of prescription is closely related to, and determinant of, the propriety of
the lower court's ruling, absolving respondents from liability for the damaged goods
and dismissing Oriental's complaint. Thus, this Court finds no error on the part of
the Court of Appeals in passing upon this issue.
II.A
Going to the substantive issue, Oriental contends that it was not aware of the
provisions46 of the Gate Pass or the Management Contract, neither of which it was a
party to.47 Consequently, it cannot be bound by the stipulation limiting the liability
of Asian Terminals.48
Asian Terminals counters that "[t]he provisions of the Management Contract and
the Gate Pass are binding on Oriental as insurer-subrogee and successor-in-interest
of the consignee."49
This Court finds for Asian Terminals. This issue on whether or not petitioner, who
was not a party to the Gate Pass or Management Contract, is bound by the 15-day
prescriptive period fixed in them to file a claim against the arrastre operator is not
new. This has long been settled by this Court.
In Government Service Insurance System v. Manila Railroad Company,50 this Court

held that the provisions of a gate pass or of an arrastre management contract are
binding on an insurer-subrogee even if the latter is not a party to it, viz:
The question whether plaintiff is bound by the stipulation in the Management

Contract, Exhibit 1, requiring the filing of a claim within 15 days from discharge of
the goods, as a condition precedent to the accrual of a cause of action against the
defendants, has already been settled in Northern Motors, Inc. vs. Prince Line et al,
107 Phil., 253, Mendoza vs. Phil. Air Lines, Inc., (9 Phil., 836), and Freixas & Co.
vs. Pacific Mail Steamship Co. (42 Phil., 199), adversely to plaintiff's pretense. We
have repeatedly held that, by availing himself of the services of the arrastre
operator and taking delivery therefrom in pursuance of a permit and a pass issued
by the latter, which were "subject to all the terms and conditions" of said
management contract, including, inter alia, the requirement thereof that .a claim is
filed with the Company within 15 days from the date of arrival of the goods", the
consignee — and, hence, the insurer, or plaintiff herein, as successor to the rights
of the consignee — became bound by the provisions of said contract. The second
assignment of error is, therefore, untenable.51
This doctrine was reiterated in the later case of Summa Insurance Corporation v.
Court of Appeals:52
In the performance of its job, an arrastre operator is bound by the management

contract it had executed with the Bureau of Customs. However, a management
contract, which is a sort of a stipulation pour autrui within the meaning of Article
1311 of the Civil Code, is also binding on a consignee because it is incorporated in
the gate pass and delivery receipt which must be presented by the consignee
before delivery can be effected to it. The insurer, as successor-in-interest of the
consignee, is likewise bound by the management contract. Indeed, upon taking
delivery of the cargo, a consignee (and necessarily its successor-in interest) tacitly
accepts the provisions of the management contract, including those which are
intended to limit the liability of one of the contracting parties, the arrastre
operator.53 (Citations omitted)
The fact that Oriental is not a party to the Gate Pass and the Management Contract
does not mean that it cannot be bound by their provisions. Oriental is subrogated to
the rights of the consignee simply upon its payment of the insurance claim.
Article 2207 of the Civil Code provides:
Article 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. (Emphasis added)
This Court explained the principle of subrogation m insurance contracts:
Article 2207 of the Civil Code is founded on the well-settled principle of

subrogation. If the insured property is destroyed or damaged through the fault or
negligence of a party other than the assured, then the insurer, upon payment to
the assured, will be subrogated to the rights of the assured to recover from the
wrongdoer to the extent that the insurer has been obligated to pay. Payment by the
insurer to the assured operates as an equitable assignment to the former of all
remedies which the latter may have against the third party whose negligence or
wrongful act caused the loss. The right of subrogation is not dependent upon, nor
does it grow out of, any privity of contract or upon written assignment of claim. It
accrues simply upon payment of the insurance claim by the insurer[.]54
As subrogee, petitioner merely stepped into the shoes of the consignee and may
only exercise those rights that the consignee may have against the wrongdoer who
caused the damage.55 "It can recover only the amount that is recoverable by the
assured."56 And since the right of action of the consignee is subject to a precedent
condition stipulated in the Gate Pass, which includes by reference the terms of the
Management Contract, necessarily a suit by the insurer is subject to the same
precedent condition.57
Petitioner's assertion that the 15-day prescriptive period could not be enforced
upon it to defeat its claim since the Gate Pass was pro forma and it was not given
notice of the Management Contract58 is untenable.
As stated earlier, the dorsal side of the Gate Pass signed by the consignee's
representative upon receipt of the cargo expressly refers to the Management
Contract between the Philippine Ports Authority and Asian Terminals. Hence, the
consignee and its subrogee, petitioner insurance company, are deemed to have
notice of this Management Contract.59
II.B
Petitioner asserts that under the Gate Pass, the 15-day period was to be reckoned
from the "date of issuance by the contractor's certificate of loss, damage, injury or
certificate of non-delivery." Since Asian Terminals did not issue any certificate of
damage, then the 15-day period did not begin to run.60
In both its Comment on the Petition and Memorandum, respondent Asian Terminals
no longer raised as an issue the matter regarding its responsibility for the 11
damaged coils. However, respondent Asian Terminals maintains its refusal of
liability for such loss, solely on the basis of petitioner's alleged failure to file a
formal claim within 15 days from the date of last delivery of the steel sheet coils to
the consignee's warehouse, in accordance with the Management Contract.
With regard to the reckoning of the 15-day prescriptive period, Asian Terminals
posits that "the fifteen day limit should be counted from the date consignee obtains
knowledge of the loss, damage or misdelivery of the shipment."61 The contractor's
issuance of a certificate of loss, damage, or non-delivery is not an indispensable
condition for the period to run.62 Asian Terminals adds that the consignee is
presumed to have learned of the damage on June 17, 2002, the date of complete
delivery of the shipment to the consignee's plant, since there was no showing that
the consignee learned of the damage later than this date.63 Thus, counting 15 days,
Oriental had until July 2, 2002 to file its claim.64 Asian Terminals received Oriental's
claim only on July 4, 2002; hence, the claim was barred by prescription.65
II.C
Again, the dorsal side of the Gate Pass states:
PROVISIONS
Issuance of this Gate Pass constitutes delivery to and receipt by the consignee of
the goods as described above in good order and condition unless an accompanying
B.O. certificate duly issued and noted on the fact (sic) of this Gate Pass appears.
This Gate Pass is subject to all terms and conditions defined in the Management
Contract between the Philippine Ports Authority and Asian Terminals, Inc. and
amendment and alterations thereof particularly but not limited to the Article VI
thereof, limiting the contractor's liability to P5,000 per package unless the
transportation is otherwise specified or manifested or communicated in writing
together with the invoice value and supported by a certified packing list to the
contractor by the interested party or parties before the discharge of the goods and
corresponding arrastre charges have been paid providing exception or restriction
from liability among others, unless a formal claim with the required annexes shall
have been filed with the contractor within fifteen (15) days from date of issuance
by the contractors certificate of loss, damage, injury or liability or certificate of non-
delivery.66 (Emphasis supplied)
Section 7.01 of the Contract for Cargo Handling Services67 dated March 17, 1992
between Philippine Ports Authority and then Marina Port Services, Inc., now Asian
Terminals, provides:
Section 7.01 Responsibility and Liability for Losses and Damages; Exceptions.—The
CONTRACTOR shall, at its own expense, handle all merchandise in all work
undertaken by it hereunder, diligently and in a skillful, workman-like and efficient
manner. The CONTRACTOR shall be solely responsible as an independent
contractor, and hereby agrees to accept liability and to pay to the shipping
company, consignees, consignors or other interested party or parties for the loss,
damage or non-delivery of cargoes in its custody and control to the extent of the
actual invoice value of each package which in no case shall be more than FIVE
THOUSAND PESOS (P5,000.00) each, unless the value of the cargo shipment is
otherwise specified or manifested or communicated in writing together with the
declared Bill of Lading value and supported by a certified packing list to the
CONTRACTOR by the interested party or parties before the discharge or loading
unto vessel of the goods. This amount of Five Thousand Pesos (P5,000.00) per
package may be reviewed and adjusted by the AUTHORITY from time to time. THE
CONTRACTOR shall not be responsible for the condition or the contents of any
package received nor for the weight nor for any loss, injury or damage to the said
cargo before or while the goods are being received or remains in the piers, sheds,
warehouses or facility, if the loss, injury or damage is caused by force majeure or
,other causes beyond the CONTRACTOR's control or capacity to prevent or
remedy; PROVIDED, that a formal claim together with the necessary copies
of Bill of Lading, Invoice, Certified Packing List and Computation arrived at
covering the loss, injury or damage or non-delivery of such goods shall
have been filed with the CONTRACTOR within fifteen (15) days from day of
issuance by the CONTRACTOR of a certificate of non-delivery; PROVIDED,
however, that if said CONTRACTOR fails to issue such certification within
fifteen (15) days from receipt of a written request by the
shipper/consignee or his duly authorized representative or any interested
party, said certification shall be deemed to have been issued, and
thereafter, the fifteen (15) day period within which to file the claim
commences; PROVIDED, finally, that the request for certification of loss
shall be made within thirty (30) days from the date of delivery of the
package to the consignee.68 (Emphasis supplied)
The issuance of a certificate is not an indispensable condition for the 15-day limit to
run. The Management Contract expressly states that upon the contractor's failure to
issue a certification within 15 days from receipt of a consignee or his duly
authorized representative or any interested party's written request, this certification
"shall be deemed to have been issued, and thereafter, the fifteen (15) day period
within which to file the claim commences." Further, neither petitioner alleges nor
the facts of this case show that a request for a certificate of loss or damage was
made by the consignee. Hence, the arrastre operator could not be expected to issue
one.
Based on the Management Contract, the consignee has a period of 30 days from
the date of delivery of the package to the consignee within which to request a
certificate of loss from the arrastre operator. From the date of the request for a
certificate of loss, the arrastre operator has a period of 15 days within which to
issue a certificate of non-delivery or loss, either actually or constructively.
Moreover, from the date of issuance of a certificate of non-delivery or loss, the
consignee has 15 days within which to file a formal claim covering the loss, injury,
damage, or non-delivery of such goods with an accompanying documentation
against the arrastre operator.
This Court has ruled that the purpose of the time limitation for filing claims is "to
apprise the arrastre operator of the existence of a claim and enable it to check on
the validity of the claimant's demand while the facts are still fresh for recollection of
the persons who took part in the undertaking and the pertinent papers are still
available."69 Despite the changes introduced in the Management Contract on filing
claims, the purpose is still the same.
This Court, in a number of cases,70 has liberally construed the requirement for filing
a formal claim and allowed claims filed even beyond the 15-day prescriptive period
after finding that the request for bad order survey or the provisional claim filed by
the consignee had sufficiently served the purpose of a formal claim.
In New Zealand Insurance Co., Ltd. v. Navarro,71 5,974 bags of soybean meal were
discharged from the carrying vessel and received by the arrastre operator on June
28, 1974. The arrastre operator completed its delivery of the shipment to the
consignee on July 9, 1974. On that same day, a bad order examination of the
goods delivered was requested by the consignee and was conducted by the arrastre
operator's own inspector, in the presence of representatives of both the Bureau of
Customs and the consignee. The inspector's ensuing bad order examination dated
July 9, 1974 certified that 173 out of the 5,974 bags of soybean meal shipped to
Manila were damaged in transitu and an additional 111 bags were damaged after
discharge from the vessel and receipt of the arrastre operator. On August 9, 1974,
the consignee filed a formal claim with the arrastre operator. New Zealand
Insurance Co., Ltd., the insurer of the goods, indemnified the consignee and
subsequently filed a complaint against the arrastre operator.
The trial court dismissed the complaint on the ground that the claim was filed with
the arrastre operator beyond 15 days from the issuance of the bad order
examination report, which the trial court considered as the certificate of loss,
damage, and injury referred to in the management contract.
This Court ruled that the request for, and the result of, the bad order examination,
filed and done on the last day of delivery of the cargo to the consignee served the
purpose of a formal claim. The arrastre operator had become aware of and had
verified the facts giving rise to its liability. Thus, the arrastre operator suffered no
prejudice by the lack of literal compliance with the 15-day limitation.
New Zealand held:
We took special note of the above pronouncement six (6) years later in Fireman's
Fund Insurance Co. v. Manila Port Service Co., et al. ...
However, the trial court has overlooked the significance of the request for, and the
result of, the bad order examination, which were filed and done within fifteen days
from the haulage of the goods from the vessel. Said request and result, in effect,
served the purpose of a claim, which is —
'to afford the carrier or depositary reasonable opportunity and facilities to check the
validity of the claims while facts are still fresh in the minds of the persons who took
part in the transaction and documents are still available.’ (Consunji vs. Manila Port
Service, L-15551, 29 November 1960)
Indeed, the examination undertake[n] by the defendant's own inspector not only
gave the defendant an opportunity to check the goods but is itself a verification of
its own liability ...
In other words, what the Court considered as the crucial factor in declaring the
defendant arrastre operator liable for the loss occasioned, in the Fireman's
Fund case) was the fact that defendant, by virtue of the consignee's request for a
bad order examination, had been able formally to verify the existence and extent of
its liability within fifteen (15) days from the date of discharge of the shipment from
the carrying vessel — i.e., within the same period stipulated under the Management
Contract for the consignee to file a formal claim. That a formal claim had been filed
by the consignee beyond the stipulated period of fifteen (15) days neither relieved
defendant of liability nor excused payment thereof, the purpose of a formal claim,
as contemplated in Consunji, having already been fully served and satisfied by the
consignee's timely request for, and the eventual result of, the bad order
examination of the nylon merchandise shipped.
Relating the doctrine of Fireman's Fund to the case at bar, ... as early as 9 July
1974 (the date of last delivery to the consignee's warehouse), respondent
Razon had been able to verify and ascertain for itself not only the
existence of its liability to the consignee but, more significantly, the exact
amount thereof — i.e., P5,746.61, representing the value of 111 bags of soybean
meal. We note further that such verification and ascertainment of liability on the
part of respondent Razon, had been accomplished "within thirty (30) days from the
date of delivery of last package to the consignee, broker or importer" as well as
"within fifteen (15) days from the date of issuance by the Contractor [respondent
Razon] of a certificate of loss, damage or injury or certificate of non-delivery" — the
periods prescribed under Article VI, Section 1 of the Management Contract here
involved, within which a request for certificate of loss and a formal claim,
respectively, must be filed by the consignee or his agent.72 (Emphasis supplied,
citations omitted)
The same doctrine was adopted in Insurance Co. of North America v. Asian
Terminals, Inc.73 This Court ruled that the Request for Bad Order Survey and the
ensuing examination report satisfied the purpose of a formal claim, as respondent
was made aware of and was able to verify that five (5) skids were damaged or in
bad order while in its custody before the last withdrawal of the shipment. Hence,
even if the formal claim was filed beyond the 15-day period stipulated in the
Contract, respondent was not prejudiced by it, since it already knew of the number
of skids damaged in its possession per the examination report on the request for
bad order survey.
Thus, in the foregoing cases, "substantial compliance with the 15-day time
limitation is allowed provided that the consignee has made a provisional claim thru
a request for bad order survey or examination report."74
II.D
However, this case presents a new situation in that unlike the previous cases, the
facts do not show that a provisional claim or a request for bad order survey was
made by the consignee. Instead, what was only established is that the consignee's
claim letter dated July 2, 2002 was received by respondent on July 4, 2002, or 17
days from last delivery of the coils to the consignee.
Even so, this Court adopts a reasonable interpretation of the stipulations in the
Management Contract and hold that petitioner's complaint is not time-barred.
First, under the express terms of the Management Contract, the consignee
had thirty (30) days from receipt of the cargo to request for a certificate of
loss from the arrastre operator. Upon receipt of such request, the arrastre operator
would have 15 days to issue a certificate of loss, either actually or
constructively. From the date of issuance of the certificate of loss or where no
certificate was issued, from the expiration of the 15-day period, the consignee has
15 days within which to file a formal claim with the arrastre operator.
In other words, the consignee had 45 to 60 days from the date of last delivery of
the goods within which to submit a formal claim to the arrastre operator.
The consignee's claim letter was received by respondent on July 4, 2002,75 or 17

days from the last delivery of the goods, still within the prescribed 30-day period to
request a certificate of loss, damage, or injury from the arrastre operator.
This Court finds that whether the consignee files a claim letter or requests for a
certificate of loss or bad order examination, the effect would be the same, in that
either would afford the arrastre contractor knowledge that the shipment has been
damaged and an opportunity to examine the nature and extent of the injury. Under
the Management Contract, the 30-day period is considered reasonable for the
contractor to make an investigation of a claim.
Hence, the consignee's claim letter is regarded as substantial compliance with the
condition precedent set forth in the Management Contract to hold the arrastre
operator liable.
In New Zealand Insurance Co., Ltd. v. Navarro,76 this Court stressed that an
arrastre operator, like respondent, is a public utility, discharging functions which
are heavily invested with public interest.
Provisions limiting the liability of a public utility operator through the imposition of
multiple prescriptive periods for the filing of claims by members of the general
public who must deal with the public utility operator, must be carefully scrutinized
and reasonably construed so as to protect the legitimate interest of the public which
the utility must serve.77
Second, evidence shows that upon Asian Terminals' request, Ultraphil Marine and
Cargo Survey Corporation78 conducted two (2) surveys.79 These were:
1. On June 17, 2002 at Pier 9, South Harbor,80 where it was observed that 11 of
the coils were damaged before the shipment was loaded on Ong's
truck;81 and
2. On June 27, 2002, at the warehouse of the consignee in Trece Martires,

Cavite, where the same quantity of damaged coils was observed.82
The surveyor prepared and submitted to Asian Terminals a Final Report dated June
29, 2002.83
Although its representative was not present during the inspections,84 the fact that
Asian Terminals requested for the cargo survey shows that it had knowledge of the
damage of the shipment while in its possession and that the survey was sought
specifically to ascertain the nature and extent of the damage. Thus, respondent
cannot escape liability for the damaged coils, simply by its own act of not sending a
representative, after it had contracted for the survey of the shipment.
II.E
As to the extent of Asian Terminals' liability, Section 7.01 of the Management

Contract provides that its liability is limited to the actual invoice value of each
package which should not be more than P5,000.00 each. The exception to this
limitation on liability is:
[U]nless the value of the cargo shipment is otherwise specified or manifested or

communicated in writing together with the declared Bill of Lading value and
supported by a certified packing list to the CONTRACTOR by the interested party or
parties before the discharge or loading unto vessel of the goods.85
In this case, the records do not show that the value of the shipment was specified
or manifested to Asian Terminals before discharge from the vessel. There was no
evidence proving the amount of arrastre fees paid by the consignee to Asian
Terminals so as to put the latter on notice of the value of the cargo or that the
invoice, packing list, and other shipping documents were presented to the Bureau
of Customs and to Asian Terminals for the proper assessment of the arrastre
charges and other fees. The Cargo Gate Passes86 issued by Asian Terminals do not
indicate the value of the cargo.
Accordingly, Asian Terminals' liability should be limited to the maximum

recoverable value ofP5,000.00 per package or coil, the customary freight unit.
Hence, the total recoverable amount is P55,000.00 for the 11 damaged coils. This
amount shall earn a legal interest at the rate of 6% per annum from the date of
finality of this judgment until its full satisfaction pursuant to Nacar v. Gallery
Frames.87
III
Both the Court of Appeals and the Regional Trial Court found that the 11 coils were
already damaged before the coils were loaded on Ong's truck. Hence, Ong could not
be responsible for the damaged shipment.
However, petitioner asserts that Ong should be held solidarily liable with Asian
Terminals for acting in bad faith when it did not apprise the consignee or Asian
Terminals about the damaged coils. This Court finds this contention untenable.
This issue was never raised by petitioner in the lower courts. In fact, Ong and Asian
Terminals "[Were] sued in the alternative because [petitioner was] uncertain
against whom it [was] entitled for relief."88 The rule is well-settled that no question
will be considered by the appellate court which has not been raised in the lower
court.89
[A] party cannot change his theory of the case or his cause of action on appeal.
Points of law, theories, issues and arguments not brought to the attention of the
lower court will not be considered by the reviewing court. The defenses not pleaded
in the answer cannot, on appeal, change fundamentally the nature of the issue in
the case. To do so would be unfair to the adverse party, who had no opportunity to
present evidence in connection with the new theory; this would offend the basic
rules of due process and fair play.90
Furthermore, there was no proof of Ong's bad faith. Mere allegation cannot take the
place of evidence. Besides, Ong's assertion that the loading of the cargo on the
trucks was undertaken by Asian Terminals and the unloading of the same cargo was
undertaken by the consignee at its warehouse91 remains unrebutted. In fact, Asian
Terminals caused the inspection of the shipment before they were loaded on Ong's
trucks on June 17, 2002.92 Moreover, at the consignee's warehouse, the inspection
was done in the presence of the consignee's authorized representative.93 Thus, Ong
is not obliged to inform the consignee or Asian Terminals about the damaged coils
as they would have presumably known about them.
WHEREFORE, the Petition for Review is GRANTED. The February 19, 2009
Decision and August 25, 2009 Resolution of the Court of Appeals in CA-G.R. CV No.
89311 are SET ASIDE. Respondent Asian Terminals, Inc. is ORDERED to pay
petitioner Oriental Assurance Corporation the amount of P55,000.00, with interest
at the legal rate of six percent (6%) per annum from the date of finality of this
judgment until fully paid.
b. Actual or Constructive Delivery
G.R. No. L-9840 April 22, 1957
LU DO & LU YM CORPORATION, petitioner-defendant,

vs.
I. V. BINAMIRA, respondent-plaintiff.
Ross, Selph, Carrascoso and Janda for petitioner.

I. V. Binamira in his own behalf.
BAUTISTA ANGELO, J.:
On April 4, 1954, plaintiff filed an action in the Court of First Instance of Cebu against defendant to
recover the sum of P324.63 as value of certain missing shipment, P150 as actual and compensatory
damages, and P600 as moral and pecuniary damages. After trial, the court rendered judgment
ordering defendant to pay plaintiff the sum of P216.84, with legal interest. On appeal, the Court of
Appeals affirmed the judgment, hence the present petition for review.
On August 10, 1951, the Delta Photo Supply Company of New York shipped on board the M/S
"FERNSIDE" at New York, U.S.A., six cases of films and/or photographic supplies consigned to the
order of respondent I. V. Binamira. For this shipment, Bill of Lading No. 29 was issued. The ship
arrived at the port of Cebu on September 23, 1951 and discharged her cargo on September 23, and
24, 1951, including the shipment in question, placing it in the possession and custody of the arrastre
operator of said port, the Visayan Cebu Terminal Company, Inc.
Petitioner, as agent of the carrier, hired the Cebu Stevedoring Company, Inc. to unload its cargo.
During the discharge, good order cargo was separated from the bad order cargo on board the ship,
and a separate list of bad order cargo was prepared by Pascual Villamor, checker of the stevedoring
company. All the cargo unloaded was received at the pier by the Visayan Cebu Terminal Company
Inc, arrastre operator of the port. This terminal company had also its own checker, Romeo Quijano,
who also recorded and noted down the good cargo from the bad one. The shipment in question, was
not included in the report of bad order cargo of both checkers, indicating that it was discharged from
the, ship in good order and condition.
On September 26, 1951, three days after the goods were unloaded from the ship, respondent took
delivery of his six cases of photographic supplies from the arrastre operator. He discovered that the
cases showed signs of pilferage and, consequently, he hired marine surveyors, R. J. del Pan &
Company, Inc., to examine them. The surveyors examined the cases and made a physical count of
their contents in the presence of representatives of petitioner, respondent and the stevedoring
company. The surveyors examined the cases and made a physical count of their contents in the
presence of representatives of petitioner, respondent and the stevedoring company. The finding of
the surveyors showed that some films and photographic supplies were missing valued at P324.63.
It appears from the evidence that the six cases of films and photographic supplies were discharged
from the ship at the port of Cebu by the stevedoring company hired by petitioner as agent of the
carrier. All the unloaded cargo, including the shipment in question, was received by the Visayan
Cebu Terminal Company Inc., the arrastre operator appointed by the Bureau of Customs. It also
appears that during the discharge, the cargo was checked both by the stevedoring company hired by
petitioner as well as by the arrastre operator of the port, and the shipment in question, when
discharged from the ship, was found to be in good order and condition. But after it was delivered to
respondent three days later, the same was examined by a marine surveyor who found that some
films and supplies were missing valued at P324.63.
The question now to be considered is: Is the carrier responsible for the loss considering that the
same occurred after the shipment was discharged from the ship and placed in the possession and
custody of the customs authorities?
The Court of Appeals found for the affirmative, making on this point the following comment:
In this jurisdiction, a common carrier has the legal duty to deliver goods to a consignee in the
same condition in which it received them. Except where the loss, destruction or deterioration
of the merchandise was due to any of the cases enumerated in Article 1734 of the new Civil
Code, a carrier is presumed to have been at fault and to have acted negligently, unless it
could prove that it observed extraordinary diligence in the care and handling of the goods
(Article 1735, supra). Such presumption and the liability of the carrier attach until the goods
are delivered actually or constructively, to the consignee, or to the person who has a right to
receive them (Article 1736, supra), and we believe delivery to the customs authorities is not
the delivery contemplated by Article 1736, supra, in connection with second paragraph of
Article 1498, supra, because, in such a case, the goods are then still in the hands of the
Government and their owner could not exercise dominion whatever over them until the duties
are paid. In the case at bar, the presumption against the carrier, represented appellant as its
agent, has not been successfully rebutted.
It is now contended that the Court of Appeals erred in its finding not only because it made wrong
interpretation of the law on the matter, but also because it ignored the provisions of the bill of lading
covering the shipment wherein it was stipulated that the responsibility of the carrier is limited only to
losses that may occur while the cargo is still under its custody and control.
We believe this contention is well taken. It is true that, as a rule, a common carrier is responsible for
the loss, destruction or deterioration of the goods it assumes to carry from one place to another
unless the same is due to any to any of the causes mentioned in Article 1734 on the new Civil Code,
and that, if the goods are lost, destroyed or deteriorated, for causes other that those mentioned, the
common carrier is presumed to have been at fault or to have acted negligently, unless it proves that
it has observed extraordinary diligence in their care (Article 1735, Idem.), and that this extraordinary
liability lasts from the time the goods are placed in the possession of the carrier until they are
delivered to the consignee, or "to the person who has the right to receive them" (Article 1736, Idem.),
but these provisions only apply when the loss, destruction or deterioration takes place while the
goods are in the possession of the carrier, and not after it has lost control of them. The reason is
obvious. While the goods are in its possession, it is but fair that it exercise extraordinary diligence in
protecting them from damage, and if loss occurs, the law presumes that it was due to its fault or
negligence. This is necessary to protect the interest the interest of the owner who is at its mercy.
The situation changes after the goods are delivered to the consignee.
While we agree with the Court of Appeals that while delivery of the cargo to the consignee, or to the
person who has a right to receive them", contemplated in Article 1736, because in such case the
goods are still in the hands of the Government and the owner cannot exercise dominion over them,
we believe however that the parties may agree to limit the liability of the carrier considering that the
goods have still to through the inspection of the customs authorities before they are actually turned
over to the consignee. This is a situation where we may say that the carrier losses control of the
goods because of a custom regulation and it is unfair that it be made responsible for what may
happen during the interregnum. And this is precisely what was done by the parties herein. In the bill
of lading that was issued covering the shipment in question, both the carrier and the consignee have
stipulated to limit the responsibility of the carrier for the loss or damage that may because to the
goods before they are actually delivered by insert in therein the following provisions:
1. . . . The Carrier shall not be liable in any capacity whatsoever for any delay, nondelivery or
misdelivery, or loss of or damage to the goods occurring while the goods are not in the actual
custody of the Carrier. . . . (Emphasis ours.)
(Paragraph 1, Exhibit "1")
2. . . . The responsibility of the Carrier in any capacity shall altogether cease and the goods
shall be considered to be delivered and at their own risk and expense in every respect when
taken into the custody of customs or other authorities. The Carrier shall not be required to
give any notification of disposition of the goods. . . . (Emphasis ours.)
3. Any provisions herein to the contrary notwithstanding, goods may be . . . by Carrier at

ship's tackle . . . and delivery beyond ship's tackle shall been tirely at the option of the Carrier
and solely at the expense of the shipper or consignee.
It therefore appears clear that the carrier does not assume liability for any loss or damage to the
goods once they have been "taken into the custody of customs or other authorities", or when they
have been delivered at ship's tackle. These stipulations are clear. They have been adopted precisely
to mitigate the responsibility of the carrier considering the present law on the matter, and we find
nothing therein that is contrary to morals or public policy that may justify their nullification. We are
therefore persuaded to conclude that the carrier is not responsible for the loss in question, it
appearing that the same happened after the shipment had been delivered to the customs authorities.
Wherefore, the decision appealed from is reversed, without pronouncement as to costs.

G.R. No. L-18965 October 30, 1964
COMPAÑIA MARITIMA, petitioner,

vs.
INSURANCE COMPANY OF NORTH AMERICA, respondent.
Rafael Dinglasan for petitioner.

Ozaeta Gibbs & Ozaeta for respondent.
BAUTISTA ANGELO, J.:
Sometime in October, 1952, Macleod and Company of the Philippines contracted by telephone the
services of the Compañia Maritima, a shipping corporation, for the shipment of 2,645 bales of hemp
from the former's Sasa private pier at Davao City to Manila and for their subsequent transhipment to
Boston, Massachusetts, U.S.A. on board the S.S. Steel Navigator. This oral contract was later on
confirmed by a formal and written booking issued by Macleod's branch office in Sasa and
handcarried to Compañia Maritima's branch office in Davao in compliance with which the latter sent
to Macleod's private wharf LCT Nos. 1023 and 1025 on which the loading of the hemp was
completed on October 29, 1952. These two lighters were manned each by a patron and an assistant
patron. The patrons of both barges issued the corresponding carrier's receipts and that issued by the
patron of Barge No. 1025 reads in part:
Received in behalf of S.S. Bowline Knot in good order and condition from MACLEOD AND
COMPANY OF PHILIPPINES, Sasa Davao, for transhipment at Manila onto S.S. Steel
Navigator.
FINAL DESTINATION: Boston.
Thereafter, the two loaded barges left Macleod's wharf and proceeded to and moored at the
government's marginal wharf in the same place to await the arrival of the S.S. Bowline Knot
belonging to Compañia Maritima on which the hemp was to be loaded. During the night of October
29, 1952, or at the early hours of October 30, LCT No. 1025 sank, resulting in the damage or loss of
1,162 bales of hemp loaded therein. On October 30, 1952, Macleod promptly notified the carrier's
main office in Manila and its branch in Davao advising it of its liability. The damaged hemp was
brought to Odell Plantation in Madaum, Davao, for cleaning, washing, reconditioning, and redrying.
During the period from November 1-15, 1952, the carrier's trucks and lighters hauled from Odell to
Macleod at Sasa a total of 2,197.75 piculs of the reconditioned hemp out of the original cargo of
1,162 bales weighing 2,324 piculs which had a total value of 116,835.00. After reclassification, the
value of the reconditioned hemp was reduced to P84,887.28, or a loss in value of P31,947.72.
Adding to this last amount the sum of P8,863.30 representing Macleod's expenses in checking,
grading, rebating, and other fees for washing, cleaning and redrying in the amount of P19.610.00,
the total loss adds up to P60,421.02.
All abaca shipments of Macleod, including the 1,162 bales loaded on the carrier's LCT No. 1025,
were insured with the Insurance Company of North America against all losses and damages. In due
time, Macleod filed a claim for the loss it suffered as above stated with said insurance company, and
after the same had been processed, the sum of P64,018.55 was paid, which was noted down in a
document which aside from being a receipt of the amount paid, was a subrogation agreement
between Macleod and the insurance company wherein the former assigned to the latter its rights
over the insured and damaged cargo. Having failed to recover from the carrier the sum of
P60,421.02, which is the only amount supported by receipts, the insurance company instituted the
present action on October 28, 1953. After trial, the court a quo rendered judgment ordering the
carrier to pay the insurance company the sum of P60,421.02, with legal interest thereon from the
date of the filing of the complaint until fully paid, and the costs. This judgment was affirmed by the
Court of Appeals on December 14, 1960. Hence, this petition for review.
The issues posed before us are: (1) Was there a contract of carriage between the carrier and the
shipper even if the loss occurred when the hemp was loaded on a barge owned by the carrier which
was loaded free of charge and was not actually loaded on the S.S. Bowline Knot which would carry
the hemp to Manila and no bill of lading was issued therefore?; (2) Was the damage caused to the
cargo or the sinking of the barge where it was loaded due to a fortuitous event, storm or natural
disaster that would exempt the carrier from liability?; (3) Can respondent insurance company sue the
carrier under its insurance contract as assignee of Macleod in spite of the fact that the liability of the
carrier as insurer is not recognized in this jurisdiction?; (4) Has the Court of Appeals erred in
regarding Exhibit NNN-1 as an implied admission by the carrier of the correctness and sufficiency of
the shipper's statement of accounts contrary to the burden of proof rule?; and (5) Can the insurance
company maintain this suit without proof of its personality to do so?
1. This issue should be answered in the affirmative. As found by the Court of Appeals, Macleod and
Company contracted by telephone the services of petitioner to ship the hemp in question from the
former's private pier at Sasa, Davao City, to Manila, to be subsequently transhipped to Boston,
Massachusetts, U.S.A., which oral contract was later confirmed by a formal and written booking
issued by the shipper's branch office, Davao City, in virtue of which the carrier sent two of its lighters
to undertake the service. It also appears that the patrons of said lighters were employees of the
carrier with due authority to undertake the transportation and to sign the documents that may be
necessary therefor so much so that the patron of LCT No. 1025 signed the receipt covering the
cargo of hemp loaded therein as follows: .
Received in behalf of S.S. Bowline Knot in good order and condition from MACLEOD AND
COMPANY OF PHILIPPINES, Sasa Davao, for transhipment at Manila onto S.S. Steel
Navigator.
FINAL DESTINATION: Boston.
The fact that the carrier sent its lighters free of charge to take the hemp from Macleod's wharf at
Sasa preparatory to its loading onto the ship Bowline Knot does not in any way impair the contract of
carriage already entered into between the carrier and the shipper, for that preparatory step is but
part and parcel of said contract of carriage. The lighters were merely employed as the first step of
the voyage, but once that step was taken and the hemp delivered to the carrier's employees, the
rights and obligations of the parties attached thereby subjecting them to the principles and usages of
the maritime law. In other words, here we have a complete contract of carriage the consummation of
which has already begun: the shipper delivering the cargo to the carrier, and the latter taking
possession thereof by placing it on a lighter manned by its authorized employees, under which
Macleod became entitled to the privilege secured to him by law for its safe transportation and
delivery, and the carrier to the full payment of its freight upon completion of the voyage.
The receipt of goods by the carrier has been said to lie at the foundation of the contract to
carry and deliver, and if actually no goods are received there can be no such contract. The
liability and responsibility of the carrier under a contract for the carriage of goods commence
on their actual delivery to, or receipt by, the carrier or an authorized agent. ... and delivery to
a lighter in charge of a vessel for shipment on the vessel, where it is the custom to deliver in
that way, is a good delivery and binds the vessel receiving the freight, the liability
commencing at the time of delivery to the lighter. ... and, similarly, where there is a contract
to carry goods from one port to another, and they cannot be loaded directly on the vessel
and lighters are sent by the vessel to bring the goods to it, the lighters are for the time its
substitutes, so that the bill of landing is applicable to the goods as soon as they are placed
on the lighters. (80 C.J.S., p. 901, emphasis supplied)
... The test as to whether the relation of shipper and carrier had been established is, Had the
control and possession of the cotton been completely surrendered by the shipper to the
railroad company? Whenever the control and possession of goods passes to the carrier and
nothing remains to be done by the shipper, then it can be said with certainty that the relation
of shipper and carrier has been established. Railroad Co. v. Murphy, 60 Ark. 333, 30 S.W.
419, 46 A. St. Rep. 202; Pine Bluff & Arkansas River Ry. v. MaKenzie, 74 Ark. 100, 86 S.W.
834; Matthews & Hood v. St. L., I.M. & S.R. Co., 123 Ark. 365, 185 S.W. 461, L.R.A. 1916E,
1194. (W.F. Bogart & Co., et al. v. Wade, et al., 200 S.W. 148).
The claim that there can be no contract of affreightment because the hemp was not actually loaded
on the ship that was to take it from Davao City to Manila is of no moment, for, as already stated, the
delivery of the hemp to the carrier's lighter is in line with the contract. In fact, the receipt signed by
the patron of the lighter that carried the hemp stated that he was receiving the cargo "in behalf of
S.S. Bowline Knot in good order and condition." On the other hand, the authorities are to the effect
that a bill of lading is not indispensable for the creation of a contract of carriage.
Bill of lading not indispensable to contract of carriage. — As to the issuance of a bill of

lading, although article 350 of the Code of Commerce provides that "the shipper as well as
the carrier of merchandise or goods may mutua-lly demand that a bill of lading is not
indispensable. As regards the form of the contract of carriage it can be said that provided
that there is a meeting of the minds and from such meeting arise rights and obligations, there
should be no limitations as to form." The bill of lading is not essential to the contract,
although it may become obligatory by reason of the regulations of railroad companies, or as
a condition imposed in the contract by the agreement of the parties themselves. The bill of
lading is juridically a documentary proof of the stipulations and conditions agreed upon by
both parties. (Del Viso, pp. 314-315; Robles vs. Santos, 44 O.G. 2268). In other words, the
Code does not demand, as necessary requisite in the contract of transportation, the delivery
of the bill of lading to the shipper, but gives right to both the carrier and the shipper to
mutually demand of each other the delivery of said bill. (Sp. Sup. Ct. Decision, May 6, 1895).
(Martin, Philippine Commercial Laws, Vol. II, Revised Edition, pp. 12-13)
The liability of the carrier as common carrier begins with the actual delivery of the goods for
transportation, and not merely with the formal execution of a receipt or bill of lading; the
issuance of a bill of lading is not necessary to complete delivery and acceptance. Even
where it is provided by statute that liability commences with the issuance of the bill of lading,
actual delivery and acceptance are sufficient to bind the carrier. (13 C.J.S., p. 288)
2. Petitioner disclaims responsibility for the damage of the cargo in question shielding itself behind
the claim of force majeure or storm which occurred on the night of October 29, 1952. But the
evidence fails to bear this out.
Rather, it shows that the mishap that caused the damage or loss was due, not to force majeure, but
to lack of adequate precautions or measures taken by the carrier to prevent the loss as may be
inferred from the following findings of the Court of Appeals:
Aside from the fact that, as admitted by appellant's own witness, the ill-fated barge had
cracks on its bottom (pp. 18-19, t.s.n., Sept. 13, 1959) which admitted sea water in the same
manner as rain entered "thru tank man-holes", according to the patron of LCT No. 1023 (exh.
JJJ-4) — conclusively showing that the barge was not seaworthy — it should be noted that
on the night of the nautical accident there was no storm, flood, or other natural disaster or
calamity. Certainly, winds of 11 miles per hour, although stronger than the average 4.6 miles
per hour then prevailing in Davao on October 29, 1952 (exh. 5), cannot be classified as
storm. For according to Beaufort's wind scale, a storm has wind velocities of from 64 to 75
miles per hour; and by Philippine Weather Bureau standards winds should have a velocity of
from 55 to 74 miles per hour in order to be classified as storm (Northern Assurance Co., Ltd.
vs. Visayan Stevedore Transportation Co., CA-G.R. No. 23167-R, March 12, 1959).
The Court of Appeals further added: "the report of R. J. del Pan & Co., Inc., marine surveyors,
attributes the sinking of LCT No. 1025 to the 'non-water-tight conditions of various buoyancy
compartments' (exh. JJJ); and this report finds confirmation on the above-mentioned admission of
two witnesses for appellant concerning the cracks of the lighter's bottom and the entrance of the rain
water 'thru manholes'." We are not prepared to dispute this finding of the Court of Appeals.
3. There can also be no doubt that the insurance company can recover from the carrier as assignee
of the owner of the cargo for the insurance amount it paid to the latter under the insurance contract.
And this is so because since the cargo that was damaged was insured with respondent company
and the latter paid the amount represented by the loss, it is but fair that it be given the right to
recover from the party responsible for the loss. The instant case, therefore, is not one between the
insured and the insurer, but one between the shipper and the carrier, because the insurance
company merely stepped into the shoes of the shipper. And since the shipper has a direct cause of
action against the carrier on account of the damage of the cargo, no valid reason is seen why such
action cannot be asserted or availed of by the insurance company as a subrogee of the shipper. Nor
can the carrier set up as a defense any defect in the insurance policy not only because it is not a
privy to it but also because it cannot avoid its liability to the shipper under the contract of carriage
which binds it to pay any loss that may be caused to the cargo involved therein. Thus, we find fitting
the following comments of the Court of Appeals:
It was not imperative and necessary for the trial court to pass upon the question of whether
or not the disputed abaca cargo was covered by Marine Open Cargo Policy No. MK-134
isued by appellee. Appellant was neither a party nor privy to this insurance contract, and
therefore cannot avail itself of any defect in the policy which may constitute a valid reason for
appellee, as the insurer, to reject the claim of Macleod, as the insured. Anyway, whatever
defect the policy contained, if any, is deemed to have been waived by the subsequent
payment of Macleod's claim by appellee. Besides, appellant is herein sued in its capacity as
a common carrier, and appellee is suing as the assignee of the shipper pursuant to exhibit
MM. Since, as above demonstrated, appellant is liable to Macleod and Company of the
Philippines for the los or damage to the 1,162 bales of hemp after these were received in
good order and condition by the patron of appellant's LCT No. 1025, it necessarily follows
that appellant is likewise liable to appellee who, as assignee of Macleod, merely stepped into
the shoes of and substi-tuted the latter in demanding from appellant the payment for the loss
and damage aforecited.
4. It should be recalled in connection with this issue that during the trial of this case the carrier asked
the lower court to order the production of the books of accounts of the Odell Plantation containing
the charges it made for the loss of the damaged hemp for verification of its accountants, but later it
desisted therefrom on the claim that it finds their production no longer necessary. This desistance
notwithstanding, the shipper however pre-sented other documents to prove the damage it suffered in
connection with the cargo and on the strength thereof the court a quo ordered the carrier to pay the
sum of P60,421.02. And after the Court of Appeals affirmed this award upon the theory that the
desistance of the carrier from producing the books of accounts of Odell Plantation implies an
admission of the correctness of the statements of accounts contained therein, petitioner now
contends that the Court of Appeals erred in basing the affirmance of the award on such erroneous
interpretation.
There is reason to believe that the act of petitioner in waiving its right to have the books of accounts
of Odell Plantation presented in court is tantamount to an admission that the statements contained
therein are correct and their verification not necessary because its main defense here, as well as
below, was that it is not liable for the loss because there was no contract of carriage between it and
the shipper and the loss caused, if any, was due to a fortuitous event. Hence, under the carrier's
theory, the correctness of the account representing the loss was not so material as would
necessitate the presentation of the books in question. At any rate, even if the books of accounts
were not produced, the correctness of the accounts cannot now be disputed for the same is
supported by the original documents on which the entries in said books were based which were
presented by the shipper as part of its evidence. And according to the Court of Appeals, these
documents alone sufficiently establish the award of P60,412.02 made in favor of respondent.
5. Finally, with regard to the question concerning the personality of the insurance company to
maintain this action, we find the same of no importance, for the attorney himself of the carrier
admitted in open court that it is a foreign corporation doing business in the Philippines with a
personality to file the present action.
WHEREFORE, the decision appealed from is affirmed, with costs against petitioner.
G.R. No. 200289 November 25, 2013
WESTWIND SHIPPING CORPORATION, Petitioner,

vs.
UCPB GENERAL INSURANCE CO., INC. and ASIAN TERMINALS INC., Respondents.
x-----------------------x
G.R. No. 200314
ORIENT FREIGHT INTERNATIONAL INC., Petitioner,

vs.
UCPB GENERAL INSURANCE CO., INC. and ASIAN TERMINALS INC., Respondents.
DECISION
PERALTA, J.:
These two consolidated cases challenge, by way of petition for certiorari under Rule 45 of the 1997
Rules of Civil Procedure, September 13, 2011 Decision1 and January 19, 2012 Resolution2 of the
Court of Appeals (CA) in CA-G.R. CV No. 86752, which reversed and set aside the January 27,
2006 Decision3 of the Manila City Regional Trial Court Branch (RTC) 30. The facts, as established by
the records, are as follows:
On August 23, 1993, Kinsho-Mataichi Corporation shipped from the port of Kobe, Japan, 197 metal
containers/skids of tin-free steel for delivery to the consignee, San Miguel Corporation (SMC). The
shipment, covered by Bill of Lading No. KBMA-1074,4 was loaded and received clean on board M/V
Golden Harvest Voyage No. 66, a vessel owned and operated by Westwind Shipping Corporation
(Westwind).
SMC insured the cargoes against all risks with UCPB General Insurance Co., Inc. (UCPB) for US
Dollars: One Hundred Eighty-Four Thousand Seven Hundred Ninety-Eight and Ninety-Seven
Centavos (US$184,798.97), which, at the time, was equivalent to Philippine Pesos: Six Million Two
Hundred Nine Thousand Two Hundred Forty-Five and Twenty-Eight Centavos (₱6,209,245.28).
The shipment arrived in Manila, Philippines on August 31, 1993 and was discharged in the custody
of the arrastre operator, Asian Terminals, Inc. (ATI), formerly Marina Port Services, Inc.5 During the
unloading operation, however, six containers/skids worth Philippine Pesos: One Hundred Seventeen
Thousand Ninety-Three and Twelve Centavos (₱117,093.12) sustained dents and punctures from
the forklift used by the stevedores of Ocean Terminal Services, Inc. (OTSI) in centering and shuttling
the containers/skids. As a consequence, the local ship agent of the vessel, Baliwag Shipping
Agency, Inc., issued two Bad Order Cargo Receipt dated September 1, 1993.
On September 7, 1993, Orient Freight International, Inc. (OFII), the customs broker of SMC,
withdrew from ATI the 197 containers/skids, including the six in damaged condition, and delivered
the same at SMC’s warehouse in Calamba, Laguna through J.B. Limcaoco Trucking (JBL). It was
discovered upon discharge that additional nine containers/skids valued at Philippine Pesos: One
Hundred Seventy-Five Thousand Six Hundred Thirty-Nine and Sixty-Eight Centavos (₱175,639.68)
were also damaged due to the forklift operations; thus, making the total number of 15
containers/skids in bad order.
Almost a year after, on August 15, 1994, SMC filed a claim against UCPB, Westwind, ATI, and OFII
to recover the amount corresponding to the damaged 15 containers/skids. When UCPB paid the
total sum of Philippine Pesos: Two Hundred Ninety-Two Thousand Seven Hundred Thirty-Two and
Eighty Centavos (₱292,732.80), SMC signed the subrogation receipt. Thereafter, in the exercise of
its right of subrogation, UCPB instituted on August 30, 1994 a complaint for damages against
Westwind, ATI, and OFII.6
After trial, the RTC dismissed UCPB’s complaint and the counterclaims of Westwind, ATI, and OFII.
It ruled that the right, if any, against ATI already prescribed based on the stipulation in the 16 Cargo
Gate Passes issued, as well as the doctrine laid down in International Container Terminal Services,
Inc. v. Prudential Guarantee & Assurance Co. Inc.7 that a claim for reimbursement for damaged
goods must be filed within 15 days from the date of consignee’s knowledge. With respect to
Westwind, even if the action against it is not yet barred by prescription, conformably with Section 3
(6) of the Carriage of Goods by Sea Act (COGSA) and Our rulings in E.E. Elser, Inc., et al. v. Court
of Appeals, et al.8 and Belgian Overseas Chartering and Shipping N.V. v. Phil. First Insurance Co.,
Inc.,9 the court a quo still opined that Westwind is not liable, since the discharging of the cargoes
were done by ATI personnel using forklifts and that there was no allegation that it (Westwind) had a
hand in the conduct of the stevedoring operations. Finally, the trial court likewise absolved OFII from
any liability, reasoning that it never undertook the operation of the forklifts which caused the dents
and punctures, and that it merely facilitated the release and delivery of the shipment as the customs
broker and representative of SMC.
On appeal by UCPB, the CA reversed and set aside the trial court. The fallo of its September 13,
2011 Decision directed:
WHEREFORE, premises considered, the instant appeal is hereby GRANTED. The Decision dated
January 27, 2006 rendered by the court a quo is REVERSED AND SET ASIDE. Appellee Westwind
Shipping Corporation is hereby ordered to pay to the appellant UCPB General Insurance Co., Inc.,
the amount of One Hundred Seventeen Thousand and Ninety-Three Pesos and Twelve Centavos
(Php117,093.12), while Orient Freight International, Inc. is hereby ordered to pay to UCPB the sum
of One Hundred Seventy-Five Thousand Six Hundred Thirty-Nine Pesos and Sixty-Eight Centavos
(Php175,639.68). Both sums shall bear interest at the rate of six (6%) percent per annum, from the
filing of the complaint on August 30, 1994 until the judgment becomes final and executory.
Thereafter, an interest rate of twelve (12%) percent per annum shall be imposed from the time this
decision becomes final and executory until full payment of said amounts.
SO ORDERED.10
While the CA sustained the RTC judgment that the claim against ATI already prescribed, it rendered
a contrary view as regards the liability of Westwind and OFII. For the appellate court, Westwind, not
ATI, is responsible for the six damaged containers/skids at the time of its unloading. In its rationale,
which substantially followed Philippines First Insurance Co., Inc. v. Wallem Phils. Shipping, Inc.,11 it
concluded that the common carrier, not the arrastre operator, is responsible during the unloading of
the cargoes from the vessel and that it is not relieved from liability and is still bound to exercise
extraordinary diligence at the time in order to see to it that the cargoes under its possession remain
in good order and condition. The CA also considered that OFII is liable for the additional nine
damaged containers/skids, agreeing with UCPB’s contention that OFII is a common carrier bound to
observe extraordinary diligence and is presumed to be at fault or have acted negligently for such
damage. Noting the testimony of OFII’s own witness that the delivery of the shipment to the
consignee is part of OFII’s job as a cargo forwarder, the appellate court ruled that Article 1732 of the
New Civil Code (NCC) does not distinguish between one whose principal business activity is the
carrying of persons or goods or both and one who does so as an ancillary activity. The appellate
court further ruled that OFII cannot excuse itself from liability by insisting that JBL undertook the
delivery of the cargoes to SMC’s warehouse. It opined that the delivery receipts signed by the
inspector of SMC showed that the containers/skids were received from OFII, not JBL. At the most,
the CA said, JBL was engaged by OFII to supply the trucks necessary to deliver the shipment, under
its supervision, to SMC.
Only Westwind and OFII filed their respective motions for reconsideration, which the CA denied;
hence, they elevated the case before Us via petitions docketed as G.R. Nos. 200289 and 200314,
respectively.
Westwind argues that it no longer had actual or constructive custody of the containers/skids at the
time they were damaged by ATI’s forklift operator during the unloading operations. In accordance
with the stipulation of the bill of lading, which allegedly conforms to Article 1736 of the NCC, it
contends that its responsibility already ceased from the moment the cargoes were delivered to ATI,
which is reckoned from the moment the goods were taken into the latter’s custody. Westwind adds
that ATI, which is a completely independent entity that had the right to receive the goods as
exclusive operator of stevedoring and arrastre functions in South Harbor, Manila, had full control
over its employees and stevedores as well as the manner and procedure of the discharging
operations.
As for OFII, it maintains that it is not a common carrier, but only a customs broker whose
participation is limited to facilitating withdrawal of the shipment in the custody of ATI by overseeing
and documenting the turnover and counterchecking if the quantity of the shipments were in tally with
the shipping documents at hand, but without participating in the physical withdrawal and loading of
the shipments into the delivery trucks of JBL. Assuming that it is a common carrier, OFII insists that
there is no need to rely on the presumption of the law – that, as a common carrier, it is presumed to
have been at fault or have acted negligently in case of damaged goods – considering the undisputed
fact that the damages to the containers/skids were caused by the forklift blades, and that there is no
evidence presented to show that OFII and Westwind were the owners/operators of the forklifts. It
asserts that the loading to the trucks were made by way of forklifts owned and operated by ATI and
the unloading from the trucks at the SMC warehouse was done by way of forklifts owned and
operated by SMC employees. Lastly, OFII avers that neither the undertaking to deliver nor the
acknowledgment by the consignee of the fact of delivery makes a person or entity a common carrier,
since delivery alone is not the controlling factor in order to be considered as such.
Both petitions lack merit.
The case of Philippines First Insurance Co., Inc. v. Wallem Phils. Shipping, Inc.12 applies, as it settled
the query on which between a common carrier and an arrastre operator should be responsible for
damage or loss incurred by the shipment during its unloading. We elucidated at length:
Common carriers, from the nature of their business and for reasons of public policy, are bound to
observe extraordinary diligence in the vigilance over the goods transported by them. Subject to
certain exceptions enumerated under Article 1734 of the Civil Code, common carriers are
responsible for the loss, destruction, or deterioration of the goods. The extraordinary responsibility of
the common carrier lasts from the time the goods are unconditionally placed in the possession of,
and received by the carrier for transportation until the same are delivered, actually or constructively,
by the carrier to the consignee, or to the person who has a right to receive them.
For marine vessels, Article 619 of the Code of Commerce provides that the ship captain is liable for
the cargo from the time it is turned over to him at the dock or afloat alongside the vessel at the port
of loading, until he delivers it on the shore or on the discharging wharf at the port of unloading,
unless agreed otherwise. In Standard Oil Co. of New York v. Lopez Castelo, the Court interpreted
the ship captain’s liability as ultimately that of the shipowner by regarding the captain as the
representative of the shipowner.
Lastly, Section 2 of the COGSA provides that under every contract of carriage of goods by sea, the
carrier in relation to the loading, handling, stowage, carriage, custody, care, and discharge of such
goods, shall be subject to the responsibilities and liabilities and entitled to the rights and immunities
set forth in the Act. Section 3 (2) thereof then states that among the carriers’ responsibilities are to
properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried.
xxxx
On the other hand, the functions of an arrastre operator involve the handling of cargo deposited on
the wharf or between the establishment of the consignee or shipper and the ship's tackle. 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.
Handling cargo is mainly the arrastre operator's principal work so its drivers/operators or employees
should observe the standards and measures necessary to prevent losses and damage to shipments
under its custody.
In Fireman’s Fund Insurance Co. v. Metro Port Service, Inc., the Court explained the relationship
and responsibility of an arrastre operator to a consignee of a cargo, to quote:
The legal relationship between the consignee and the arrastre operator is akin to that of a depositor
and 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 devolves 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.
(Emphasis supplied) (Citations omitted)
The liability of the arrastre operator was reiterated in Eastern Shipping Lines, Inc. v. Court of
Appeals with the clarification that the arrastre operator and the carrier are not always and
necessarily solidarily liable as the facts of a case may vary the rule.
Thus, in this case, the appellate court is correct insofar as it ruled that an arrastre operator and a
carrier may not be held solidarily liable at all times. But the precise question is which entity had
custody of the shipment during its unloading from the vessel?
The aforementioned Section 3 (2) of the COGSA states that among the carriers’ responsibilities are
to properly and carefully load, care for and discharge the goods carried. The bill of lading covering
the subject shipment likewise stipulates that the carrier’s liability for loss or damage to the goods
ceases after its discharge from the vessel. Article 619 of the Code of Commerce holds a ship captain
liable for the cargo from the time it is turned over to him until its delivery at the port of unloading.
In a case decided by a U.S. Circuit Court, Nichimen Company v. M/V Farland, it was ruled that like
the duty of seaworthiness, the duty of care of the cargo is non-delegable, and the carrier is
accordingly responsible for the acts of the master, the crew, the stevedore, and his other agents. It
has also been held that it is ordinarily the duty of the master of a vessel to unload the cargo and
place it in readiness for delivery to the consignee, and there is an implied obligation that this shall be
accomplished with sound machinery, competent hands, and in such manner that no unnecessary
injury shall be done thereto. And the fact that a consignee is required to furnish persons to assist in
unloading a shipment may not relieve the carrier of its duty as to such unloading.
xxxx
It is settled in maritime law jurisprudence that cargoes while being unloaded generally remain under
the custody of the carrier x x x.13
In Regional Container Lines (RCL) of Singapore v. The Netherlands Insurance Co. (Philippines),
Inc.14 and Asian Terminals, Inc. v. Philam Insurance Co., Inc.,15 the Court echoed the doctrine that
cargoes, while being unloaded, generally remain under the custody of the carrier. We cannot agree
with Westwind’s disputation that "the carrier in Wallem clearly exercised supervision during the
discharge of the shipment and that is why it was faulted and held liable for the damage incurred by
the shipment during such time." What Westwind failed to realize is that the extraordinary
responsibility of the common carrier lasts until the time the goods are actually or constructively
delivered by the carrier to the consignee or to the person who has a right to receive them. There is
actual delivery in contracts for the transport of goods when possession has been turned over to the
consignee or to his duly authorized agent and a reasonable time is given him to remove the
goods.16 In this case, since the discharging of the containers/skids, which were covered by only one
bill of lading, had not yet been completed at the time the damage occurred, there is no reason to
imply that there was already delivery, actual or constructive, of the cargoes to ATI. Indeed, the
earlier case of Delsan Transport Lines, Inc. v. American Home Assurance Corp.17 serves as a useful
guide, thus:
Delsan’s argument that it should not be held liable for the loss of diesel oil due to backflow because
the same had already been actually and legally delivered to Caltex at the time it entered the shore
tank holds no water. It had been settled that the subject cargo was still in the custody of Delsan
because the discharging thereof has not yet been finished when the backflow occurred. Since the
discharging of the cargo into the depot has not yet been completed at the time of the spillage when
the backflow occurred, there is no reason to imply that there was actual delivery of the cargo to the
consignee. Delsan is straining the issue by insisting that when the diesel oil entered into the tank of
Caltex on shore, there was legally, at that moment, a complete delivery thereof to Caltex. To be
sure, the extraordinary responsibility of common carrier lasts from the time the goods are
unconditionally placed in the possession of, and received by, the carrier for transportation until the
same are delivered, actually or constructively, by the carrier to the consignee, or to a person who
has the right to receive them. The discharging of oil products to Caltex Bulk Depot has not yet been
finished, Delsan still has the duty to guard and to preserve the cargo. The carrier still has in it the
responsibility to guard and preserve the goods, a duty incident to its having the goods transported.
To recapitulate, common carriers, from the nature of their business and for reasons of public policy,
are bound to observe extraordinary diligence in vigilance over the goods and for the safety of the
passengers transported by them, according to all the circumstances of each case. The mere proof of
delivery of goods in good order to the carrier, and their arrival in the place of destination in bad
order, make 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. It is incumbent upon the carrier to prove
that the loss was due to accident or some other circumstances inconsistent with its liability.18
The contention of OFII is likewise untenable. A customs broker has been regarded as a common
carrier because transportation of goods is an integral part of its business.19 In Schmitz Transport &
Brokerage Corporation v. Transport Venture, Inc.,20 the Court already reiterated: It is settled that
under a given set of facts, a customs broker may be regarded as a common carrier. Thus, this
1âwphi 1
Court, in A.F. Sanchez Brokerage, Inc. v. The Honorable Court of Appeals held:
The appellate court did not err in finding petitioner, a customs broker, to be also a common carrier,
as defined under Article 1732 of the Civil Code, to wit, Art. 1732. Common carriers are persons,
corporations, firms or associations engaged in the business of carrying or transporting passengers
or goods or both, by land, water, or air, for compensation, offering their services to the public.
xxxx
Article 1732 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
petitioner 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.
And in Calvo v. UCPB General Insurance Co. Inc., this Court held that as the transportation of goods
is an integral part of a customs broker, the customs broker is also a common carrier. For to declare
otherwise "would be to deprive those with whom [it] contracts the protection which the law affords
them notwithstanding the fact that the obligation to carry goods for [its] customers, is part and parcel
of petitioner’s business."21
That OFII is a common carrier is buttressed by the testimony of its own witness, Mr. Loveric
Panganiban Cueto, that part of the services it offers to clients is cargo forwarding, which includes the
delivery of the shipment to the consignee.22 Thus, for undertaking the transport of cargoes from ATI
to SMC’s warehouse in Calamba, Laguna, OFII is considered a common carrier. As long as a
person or corporation holds itself to the public for the purpose of transporting goods as a business, it
is already considered a common carrier regardless of whether it owns the vehicle to be used or has
to actually hire one.
As a common carrier, OFII is mandated to observe, under Article 1733 of the Civil
Code,23 extraordinary diligence in the vigilance over the goods24 it transports according to the peculiar
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.25 In the case at bar it was established that except for the six containers/skids
already damaged OFII received the cargoes from ATI in good order and condition; and that upon its
delivery to SMC additional nine containers/skids were found to be in bad order as noted in the
Delivery Receipts issued by OFII and as indicated in the Report of Cares Marine Cargo Surveyors.
Instead of merely excusing itself from liability by putting the blame to ATI and SMC it is incumbent
upon OFII to prove that it actively took care of the goods by exercising extraordinary diligence in the
carriage thereof. It failed to do so. Hence its presumed negligence under Article 1735 of the Civil
Code remains unrebutted.
WHEREFORE, premises considered the petitions of Westwind and OFII in G.R. Nos. 200289 and
200314 respectively are DENIED. The September 13 2011 Decision and January 19 2012
Resolution of the Court of Appeals in CA-G.R. CV No. 86752 which reversed and set aside the
January 27 2006 Decision of the Manila City Regional Trial Court Branch 30 are AFFIRMED.
2. Stipulation for Limitation of Liability
a. Void Stipulations
G.R. No. L-37750 May 19, 1978
SWEET LINES, INC., petitioner,

vs.
HON. BERNARDO TEVES, Presiding Judge, CFI of Misamis Oriental Branch VII, LEOVIGILDO
TANDOG, JR., and ROGELIO TIRO, respondents.
Filiberto Leonardo, Abelardo C. Almario & Samuel B. Abadiano for petitioner.
Leovigildo Vallar for private respondents.
SANTOS, J.:
This is an original action for Prohibition with Pre Injunction filed October 3, 1973 to restrain
respondent Judge from proceeding further with Civil Case No. 4091, entitled Leovigildo D. Tandog,
Jr. and Rogelio Tiro v. Sweet Lines, Inc." after he denied petitioner's Motion to Dismiss the
complaint, and the Motion for Reconsideration of said order. 1
Briefly, the facts of record follow. Private respondents Atty. Leovigildo Tandog and Rogelio Tiro, a
contractor by professions, bought tickets Nos. 0011736 and 011737 for Voyage 90 on December 31,
1971 at the branch office of petitioner, a shipping company transporting inter-island passengers and
cargoes, at Cagayan de Oro City. Respondents were to board petitioner's vessel, M/S "Sweet Hope"
bound for Tagbilaran City via the port of Cebu. Upon learning that the vessel was not proceeding to
Bohol, since many passengers were bound for Surigao, private respondents per advice, went to the
branch office for proper relocation to M/S "Sweet Town". Because the said vessel was already filled
to capacity, they were forced to agree "to hide at the cargo section to avoid inspection of the officers
of the Philippine Coastguard." Private respondents alleged that they were, during the trip," "exposed
to the scorching heat of the sun and the dust coming from the ship's cargo of corn grits," and that the
tickets they bought at Cagayan de Oro City for Tagbilaran were not honored and they were
constrained to pay for other tickets. In view thereof, private respondents sued petitioner for damages
and for breach of contract of carriage in the alleged sum of P10,000.00 before respondents Court of
First Instance of Misamis Oriental. 2
Petitioner moved to dismiss the complaint on the ground of improper venue. This motion was
premised on the condition printed at the back of the tickets, i.e., Condition No. 14, which reads:
14. It is hereby agreed and understood that any and all actions arising out of the
conditions and provisions of this ticket, irrespective of where it is issued, shall be filed
in the competent courts in the City of Cebu. 3
The motion was denied by the trial court. 4 Petitioner moved to reconnsider the order of denial, but
no avail. 5 Hence, this instant petition for prohibition for preliminary injunction, 'alleging that the
respondent judge has departed from the accepted and usual course of judicial preoceeding" and
"had acted without or in excess or in error of his jurisdicton or in gross abuse of discretion. 6
In Our resolution of November 20, 1973, We restrained respondent Judge from proceeding further
with the case and required respondent to comment. 7 On January 18, 1974, We gave due course to
the petition and required respondent to answer. 8 Thereafter, the parties submitted their respesctive
memoranda in support of their respective contentions. 9
Presented thus for Our resolution is a question is aquestion which, to all appearances, is one of first
impression, to wit — Is Condition No. 14 printed at the back of the petitioner's passage tickets
purchased by private respondents, which limits the venue of actions arising from the contract of
carriage to theCourt of First Instance of Cebu, valid and enforceable? Otherwise stated, may a
common carrier engaged in inter-island shipping stipulate thru condition printed at the back of
passage tickets to its vessels that any and all actions arising out of the ocntract of carriage should be
filed only in a particular province or city, in this case the City of Cebu, to the exclusion of all others?
Petitioner contends thaty Condition No. 14 is valid and enforceable, since private respndents
acceded to tit when they purchased passage tickets at its Cagayan de Oro branch office and took its
vessel M/S "Sweet Town" for passage to Tagbilaran, Bohol — that the condition of the venue of
actions in the City of Cebu is proper since venue may be validly waived, citing cases; 10 that is an
effective waiver of venue, valid and binding as such, since it is printed in bold and capital letters and
not in fine print and merely assigns the place where the action sing from the contract is institution
likewise citing cases; 11 and that condition No. 14 is unequivocal and mandatory, the words and
phrases "any and all", "irrespective of where it is issued," and "shag" leave no doubt that the
intention of Condition No. 14 is to fix the venue in the City of Cebu, to the exclusion of other places;
that the orders of the respondent Judge are an unwarranted departure from established
jurisprudence governing the case; and that he acted without or in excess of his jurisdiction in is the
orders complained of. 12
On the other hand, private respondents claim that Condition No. 14 is not valid, that the same is not
an essential element of the contract of carriage, being in itself a different agreement which requires
the mutual consent of the parties to it; that they had no say in its preparation, the existence of which
they could not refuse, hence, they had no choice but to pay for the tickets and to avail of petitioner's
shipping facilities out of necessity; that the carrier "has been exacting too much from the public by
inserting impositions in the passage tickets too burdensome to bear," that the condition which was
printed in fine letters is an imposition on the riding public and does not bind respondents, citing
cases; 13 that while venue 6f actions may be transferred from one province to another, such
arrangement requires the "written agreement of the parties", not to be imposed unilaterally; and that
assuming that the condition is valid, it is not exclusive and does not, therefore, exclude the filing of
the action in Misamis Oriental, 14
There is no question that there was a valid contract of carriage entered into by petitioner and private
respondents and that the passage tickets, upon which the latter based their complaint, are the best
evidence thereof. All the essential elements of a valid contract, i.e., consent, cause or consideration
and object, are present. As held in Peralta de Guerrero, et al. v. Madrigal Shipping Co., Inc., 15
It is a matter of common knowledge that whenever a passenger boards a ship for

transportation from one place to another he is issued a ticket by the shipper which
has all the elements of a written contract, Namely: (1) the consent of the contracting
parties manifested by the fact that the passenger boards the ship and the shipper
consents or accepts him in the ship for transportation; (2) cause or consideration
which is the fare paid by the passenger as stated in the ticket; (3) object, which is the
transportation of the passenger from the place of departure to the place of
destination which are stated in the ticket.
It should be borne in mind, however, that with respect to the fourteen (14) conditions — one of which
is "Condition No. 14" which is in issue in this case — printed at the back of the passage tickets,
these are commonly known as "contracts of adhesion," the validity and/or enforceability of which will
have to be determined by the peculiar circumstances obtaining in each case and the nature of the
conditions or terms sought to be enforced. For, "(W)hile generally, stipulations in a contract come
about after deliberate drafting by the parties thereto, ... there are certain contracts almost all the
provisions of which have been drafted only by one party, usually a corporation. Such contracts are
called contracts of adhesion, because the only participation of the party is the signing of his
signature or his 'adhesion' thereto. Insurance contracts, bills of lading, contracts of make of lots on
the installment plan fall into this category" 16
By the peculiar circumstances under which contracts of adhesion are entered into — namely, that it
is drafted only by one party, usually the corporation, and is sought to be accepted or adhered to by
the other party, in this instance the passengers, private respondents, who cannot change the same
and who are thus made to adhere thereto on the "take it or leave it" basis — certain guidelines in the
determination of their validity and/or enforceability have been formulated in order to that justice and
fan play characterize the relationship of the contracting parties. Thus, this Court speaking through
Justice J.B.L. Reyes in Qua Chee Gan v. Law Union and Rock Insurance Co., 17 and later through
Justice Fernando in Fieldman Insurance v. Vargas, 18 held —
The courts cannot ignore that nowadays, monopolies, cartels and concentration of
capital endowed with overwhelm economic power, manage to impose upon parties d
with them y prepared 'agreements' that the weaker party may not change one whit
his participation in the 'agreement' being reduced to the alternative 'to take it or leave
it,' labelled since Raymond Saleilles 'contracts by adherence' (contracts d' adhesion)
in contrast to those entered into by parties bargaining on an equal footing. Such
contracts (of which policies of insurance and international bill of lading are prime
examples) obviously cap for greater strictness and vigilance on the part of the courts
of justice with a view to protecting the weaker party from abuses and imposition, and
prevent their becoming traps for the unwary.
To the same effect and import, and, in recognition of the character of contracts of this kind, the
protection of the disadvantaged is expressly enjoined by the New Civil Code —
In all contractual property or other relations, when one of the parties is at a

disadvantage on account of his moral dependence, ignorance indigence, mental
weakness, tender age and other handicap, the courts must be vigilant for his
protection. 19
Considered in the light Of the foregoing norms and in the context Of circumstances Prevailing in the
inter-island ship. ping industry in the country today, We find and hold that Condition No. 14 printed at
the back of the passage tickets should be held as void and unenforceable for the following reasons
first, under circumstances obligation in the inter-island ship. ping industry, it is not just and fair to
bind passengers to the terms of the conditions printed at the back of the passage tickets, on which
Condition No. 14 is Printed in fine letters, and second, Condition No. 14 subverts the public policy on
transfer of venue of proceedings of this nature, since the same will prejudice rights and interests of
innumerable passengers in different s of the country who, under Condition No. 14, will have to file
suits against petitioner only in the City of Cebu.
1. It is a matter of public knowledge, of which We can take judicial notice, that there is a dearth of
and acute shortage in inter- island vessels plying between the country's several islands, and the
facilities they offer leave much to be desired. Thus, even under ordinary circumstances, the piers are
congested with passengers and their cargo waiting to be transported. The conditions are even worse
at peak and/or the rainy seasons, when Passengers literally scramble to whatever accommodations
may be availed of, even through circuitous routes, and/or at the risk of their safety — their immediate
concern, for the moment, being to be able to board vessels with the hope of reaching their
destinations. The schedules are — as often as not if not more so — delayed or altered. This was
precisely the experience of private respondents when they were relocated to M/S "Sweet Town" from
M/S "Sweet Hope" and then any to the scorching heat of the sun and the dust coming from the ship's
cargo of corn grits, " because even the latter was filed to capacity.
Under these circumstances, it is hardly just and proper to expect the passengers to examine their
tickets received from crowded/congested counters, more often than not during rush hours, for
conditions that may be printed much charge them with having consented to the conditions, so
printed, especially if there are a number of such conditions m fine print, as in this case. 20
Again, it should be noted that Condition No. 14 was prepared solely at the ms of the petitioner,
respondents had no say in its preparation. Neither did the latter have the opportunity to take the into
account prior to the purpose chase of their tickets. For, unlike the small print provisions of contracts
— the common example of contracts of adherence — which are entered into by the insured in his
awareness of said conditions, since the insured is afforded the op to and co the same, passengers
of inter-island v do not have the same chance, since their alleged adhesion is presumed only from
the fact that they purpose chased the tickets.
It should also be stressed that slapping companies are franchise holders of certificates of public
convenience and therefore, posses a virtual monopoly over the business of transporting passengers
between the ports covered by their franchise. This being so, shipping companies, like petitioner,
engaged in inter-island shipping, have a virtual monopoly of the business of transporting passengers
and may thus dictate their terms of passage, leaving passengers with no choice but to buy their
tickets and avail of their vessels and facilities. Finally, judicial notice may be taken of the fact that the
bulk of those who board these inter-island vested come from the low-income groups and are less
literate, and who have little or no choice but to avail of petitioner's vessels.
2. Condition No. 14 is subversive of public policy on transfers of venue of actions. For, although
venue may be changed or transferred from one province to another by agreement of the parties in
writing t to Rule 4, Section 3, of the Rules of Court, such an agreement will not be held valid where it
practically negates the action of the claimants, such as the private respondents herein. The
philosophy underlying the provisions on transfer of venue of actions is the convenience of the
plaintiffs as well as his witnesses and to promote 21 the ends of justice. Considering the expense and
trouble a passenger residing outside of Cebu City would incur to prosecute a claim in the City of
Cebu, he would most probably decide not to file the action at all. The condition will thus defeat,
instead of enhance, the ends of justice. Upon the other hand, petitioner has branches or offices in
the respective ports of call of its vessels and can afford to litigate in any of these places. Hence, the
filing of the suit in the CFI of Misamis Oriental, as was done in the instant case, will not cause
inconvenience to, much less prejudice, petitioner.
Public policy is ". . . that principle of the law which holds that no subject or citizen can lawfully do that
which has a tendency to be injurious to the public or against the public good ... 22 Under this
principle" ... freedom of contract or private dealing is restricted by law for the good of the
public. 23 Clearly, Condition No. 14, if enforced, will be subversive of the public good or interest, since
it will frustrate in meritorious cases, actions of passenger cants outside of Cebu City, thus placing
petitioner company at a decided advantage over said persons, who may have perfectly legitimate
claims against it. The said condition should, therefore, be declared void and unenforceable, as
contrary to public policy — to make the courts accessible to all who may have need of their services.
WHEREFORE, the petition for prohibition is DISMISS. ED. The restraining order issued on
November 20, 1973, is hereby LIFTED and SET ASIDE. Costs against petitioner.
Fernando (Chairman), Aquino, Concepcion, Jr., JJ., concur.
Antonio, J., reserves his vote.

b. Limitation of Liability to Fixed Amount
c. Limitation of Liability in Absence of Declaration of Greater Value
G.R. No. L-27796 March 25, 1976
ST. PAUL FIRE & MARINE INSURANCE CO., plaintiff-appellant,

vs.
MACONDRAY & CO., INC., BARBER STEAMSHIP LINES, INC., WILHELM WILHELMSEN
MANILA PORT SERVICE and/or MANILA RAILROAD COMPANY, defendants-appellees.
Chuidian Law Office for appellant.
Salcedo, Del Rosario Bito & Mesa for appellee Macondray & Co., Inc., Barber Steamship Lines, Inc.
and Wilhelm Wilhelmsen
Macaranas & Abrenica for appellee Manila Port Service and/or Manila Railroad Company.
ANTONIO, J.:
Certified to this Court by the Court of Appeals in its Resolution of May 8, 1967, 1 on the ground that
the appeal involves purely questions of law, thus: (a) whether or not, in case of loss or damage, the
liability of the carrier to the consignee is limited to the C.I.F. value of the goods which were lost or
damaged, and (b) whether the insurer who has paid the claim in dollars to the consignee should be
reimbursed in its peso equivalent on the date of discharge of the cargo or on the date of the
decision.
According to the records, on June 29, 1960, Winthrop Products, Inc., of New York, New York,
U.S.A., shipped aboard the SS "Tai Ping", owned and operated by Wilhelm Wilhelmsen 218 cartons
and drums of drugs and medicine, with the freight prepaid, which were consigned to Winthrop-
Stearns Inc., Manila, Philippines. Barber Steamship Lines, Inc., agent of Wilhelm Wilhelmsen issued
Bill of Lading No. 34, in the name of Winthrop Products, Inc. as shipper, with arrival notice in Manila
to consignee Winthrop-Stearns, Inc., Manila, Philippines. The shipment was insured by the shipper
against loss and/or damage with the St. Paul Fire & Marine Insurance Company under its insurance
Special Policy No. OC-173766 dated June 23, 1960 (Exhibit "S").
On August 7, 1960, the SS "Tai Ping" arrived at the Port of Manila and discharged its aforesaid
shipment into the custody of Manila Port Service, the arrastre contractor for the Port of Manila. The
said shipment was discharged complete and in good order with the exception of one (1) drum and
several cartons which were in bad order condition. Because consignee failed to receive the whole
shipment and as several cartons of medicine were received in bad order condition, the consignee
filed the corresponding claim in the amount of Fl,109.67 representing the C.I.F. value of the
damaged drum and cartons of medicine with the carrier, herein defendants- appellees (Exhibits "G"
and "H") and the Manila Port Service (Exhibits "I" & "J" However, both refused to pay such claim.
consequently, the consignee filed its claim with the insurer, St. Paul Fire & Marine insurance Co.
(Exhibit "N"), and the insurance company, on the basis of such claim, paid to the consignee the
insured value of the lost and damaged goods, including other expenses in connection therewith, in
the total amount of $1,134.46 U.S. currency (Exhibit "U").
On August 5, 1961, as subrogee of the rights of the shipper and/or consignee, the insurer, St. Paul
Fire & Marine Insurance Co., instituted with the Court of First Instance of Manila the present
action 2 against the defendants for the recovery of said amount of $1,134.46, plus costs.
On August 23, 1961, the defendants Manila Port Service and Manila Railroad Company resisted the
action, contending, among others, that the whole cargo was delivered to the consignee in the same
condition in which it was received from the carrying vessel; that their rights, duties and obligations as
arrastre contractor at the Port of Manila are governed by and subject to the terms, conditions and
limitations contained in the Management Contract between the Bureau of Customs and Manila Port
Service, and their liability is limited to the invoice value of the goods, but in no case more than
P500.00 per package, pursuant to paragraph 15 of the said Management Contract; and that they are
not the agents of the carrying vessel in the receipt and delivery of cargoes in the Port of Manila.
On September 7, 1961, the defendants Macondray & Co., Inc., Barber Steamship Lines, Inc. and
Wilhelm Wilhelmsen also contested the claim alleging, among others, that the carrier's liability for the
shipment ceased upon discharge thereof from the ship's tackle; that they and their co-defendant
Manila Port Service are not the agents of the vessel; that the said 218 packages were discharged
from the vessel SS "Tai Ping" into the custody of defendant Manila Port Service as operator of the
arrastre service for the Port of Manila; that if any damage was sustained by the shipment while it
was under the control of the vessel, such damage was caused by insufficiency of packing, force
majeure and/or perils of the sea; and that they, in good faith and for the purpose only of avoiding
litigation without admitting liability to the consignee, offered to settle the latter's claim in full by paying
the C.I.F. value of 27 lbs. caramel 4.13 kilos methyl salicylate and 12 pieces pharmaceutical vials of
the shipment, but their offer was declined by the consignee and/or the plaintiff.
After due trial, the lower court, on March 10, 1965 rendered judgment ordering defendants
Macondray & Co., Inc., Barber Steamship Lines, Inc. and Wilhelm Wilhelmsen to pay to the plaintiff,
jointly and severally, the sum of P300.00, with legal interest thereon from the filing of the complaint
until fully paid, and defendants Manila Railroad Company and Manila Port Service to pay to plaintiff,
jointly and severally, the sum of P809.67, with legal interest thereon from the filing of the complaint
until fully paid, the costs to be borne by all the said defendants. 3
On April 12, 1965, plaintiff, contending that it should recover the amount of $1,134.46, or its
equivalent in pesos at the rate of P3.90, instead of P2.00, for every US$1.00, filed a motion for
reconsideration, but this was denied by the lower court on May 5, 1965. Hence, the present appeal.
Plaintiff-appellant argues that, as subrogee of the consignee, it should be entitled to recover from the
defendants-appellees the amount of $1,134.46 which it actually paid to the consignee (Exhibits "N" &
"U") and which represents the value of the lost and damaged shipment as well as other legitimate
expenses such as the duties and cost of survey of said shipment, and that the exchange rate on the
date of the judgment, which was P3.90 for every US$1.00, should have been applied by the lower
court.
Defendants-appellees countered that their liability is limited to the C.I.F. value of the goods, pursuant
to contract of sea carriage embodied in the bill of lading that the consignee's (Winthrop-Stearns Inc.)
claim against the carrier (Macondray & Co., Inc., Barber Steamship Lines, Inc., Wilhelm Wilhelmsen
and the arrastre operators (Manila Port Service and Manila Railroad Company) was only for the sum
of Pl,109.67 (Exhibits "G", "H", "I" & "J"), representing the C.I.F. value of the loss and damage
sustained by the shipment which was the amount awarded by the lower court to the plaintiff-
appellant; 4 defendants appellees are not insurers of the goods and as such they should not be made
to pay the insured value therefor; the obligation of the defendants-appellees was established as of
the date of discharge, hence the rate of exchange should be based on the rate existing on that date,
i.e., August 7, 1960, 5 and not the value of the currency at the time the lower court rendered its
decision on March 10, 1965.
The appeal is without merit.
The purpose of the bill of lading is to provide for the rights and liabilities of the parties in reference to
the contract to carry. 6 The stipulation in the bill of lading limiting the common carrier's liability to the
value of the goods appearing in the bill, unless the shipper or owner declares a greater value, is
valid and binding. 7 This limitation of the carrier's liability is sanctioned by the freedom of the
contracting parties to establish such stipulations, clauses, terms, or conditions as they may deem
convenient, provided they are not contrary to law, morals, good customs and public policy. 8 A
stipulation fixing or limiting the sum that may be recovered from the carrier on the loss or
deterioration of the goods is valid, provided it is (a) reasonable and just under the
circumstances, 9 and (b) has been fairly and freely agreed upon.10 In the case at bar, the liabilities of
the defendants- appellees with respect to the lost or damaged shipments are expressly limited to the
C.I.F. value of the goods as per contract of sea carriage embodied in the bill of lading, which reads:
Whenever the value of the goods is less than $500 per package or other freight unit,
their value in the calculation and adjustment of claims for which the Carrier may be
liable shall for the purpose of avoiding uncertainties and difficulties in fixing value be
deemed to be the invoice value, plus frieght and insurance if paid, irrespective of
whether any other value is greater or less.
The limitation of liability and other provisions herein shall inure not only to the benefit
of the carrier, its agents, servants and employees, but also to the benefit of any
independent contractor performing services including stevedoring in connection with
the goods covered hereunder. (Paragraph 17, emphasis supplied.)
It is not pretended that those conditions are unreasonable or were not freely and fairly agreed upon.
The shipper and consignee are, therefore, bound by such stipulations since it is expressly stated in
the bill of lading that in "accepting this Bill of Lading, the shipper, owner and consignee of the goods,
and the holder of the Bill of Lading agree to be bound by all its stipulations, exceptions and
conditions, whether written, stamped or printed, as fully as if they were all signed by such shipper,
owner, consignee or holder. It is obviously for this reason that the consignee filed its claim against
the defendants-appellees on the basis of the C.I.F. value of the lost or damaged goods in the
aggregate amount of Pl,109.67 (Exhibits "G", "H", "I", and "J"). 11
The plaintiff-appellant, as insurer, after paying the claim of the insured for damages under the
insurance, is subrogated merely to the rights of the assured. As subrogee, it can recover only the
amount that is recoverable by the latter. Since the right of the assured, in case of loss or damage to
the goods, is limited or restricted by the provisions in the bill of lading, a suit by the insurer as
subrogee necessarily is subject to like limitations and restrictions.
The insurer after paying the claim of the insured for damages under the insurance is
subrogated merely to the rights of the insured and therefore can necessarily recover
only that to what was recoverable by the insured.12
Upon payment for a total loss of goods insured, the insurance is only subrogated to
such rights of action as the assured has against 3rd persons who caused or are
responsible for the loss. The right of action against another person, the equitable
interest in which passes to the insurer, being only that which the assured has, it
follows that if the assured has no such right of action, none passes to the insurer,
and if the assured's right of action is limited or restricted by lawful contract between
him and the person sought to be made responsible for the loss, a suit by the insurer,
in the Tight of the assured, is subject to like limitations or restrictions. 13
Equally untenable is the contention of the plaintiff-appellant that because of extraordinary inflation, it
should be reimbursed for its dollar payments at the rate of — exchange on the date of the judgment
and not on the date of the loss or damage. The obligation of the carrier to pay for the damage
commenced on the date it failed to deliver the shipment in good condition to the consignee.
The C.I.F. Manila value of the goods which were lost or damaged, according to the claim of the
consignee dated September 26, 1960 is $226.37 (for the pilferage, Exhibit "G") and $324.33
(shortlanded, Exhibit "H") or P456.14 and P653.53, respectively, in Philippine Currency. The peso
equivalent was based by the consignee on the exchange rate of P2.015 to $1.00 which was the rate
existing at that time. We find, therefore, that the trial court committed no error in adopting the
aforesaid rate of exchange.
G.R. No. L-37604 October 23, 1981
EASTERN AND AUSTRALIAN STEAMSHIP CO., LTD. AND F. E. ZUELLIG, INC., petitioners,
vs.
GREAT AMERICAN INSURANCE CO. and COURT OF FIRST INSTANCE OF MANILA, BRANCH
XIII, respondents.
DE CASTRO, * J.:
This is a petition for review on certiorari of the decision of the Court of First Instance of Manila,
Branch XIII, dated July 25, 1973, in Civil Case No. 88985, entitled "Great American Insurance Co.,
plaintiff, vs. Eastern & Australian Steamship Co., Ltd. and/or F.E. Zuellig, Inc., defendants," the
dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered, finding the defendants liable to the

plaintiff in the amount of $500.00, or its peso equivalent of P 3,217.50, with legal
interest thereon from November 20, 1972; and to further pay to the plaintiff an
amount equivalent to twenty-five per centum (25%) thereof by way of damages as
and for attorney's fees.
The facts of the case are as follows:
On December 10, 1971, the Jackson and Spring (Sydney) Pty. Ltd. shipped from Sydney, Australia,
one (1) case of impellers for warman pump on board the SS "Chitral," a vessel owned and operated
in the Philippines by Eastern & Australian Steamship Co., Ltd., thru its agent F.E. Zuellig, Inc. under
Bill of Lading No. 31, for delivery to Manila, Philippines in favor of consignee Benguet Consolidated,
Inc. The shipment was insured with Great American Insurance, Co. for P 35,921.81 against all risks.
On December 22, 1971 the SS "Chitral" arrived in Manila but failed to discharge the shipment or any
part thereof. Demand was made on herein petitioners for the delivery of said shipment, but having
failed to make delivery, a claim was presented against them for the value of the shipment.
Petitioners, likewise, failed to make good the claim. As a consequence of the loss of the shipment,
private respondent Great American Insurance Co. was compelled to pay the consignee P 35,921,81.
As subrogee, said private respondent filed a complaint dated Nov. 20, 1972 against herein
petitioners for recovery of the said amount with legal interest and attorney's fees.
In the answer dated Nov. 27, 1972 petitioners alleged that their liability for the loss of the shipment is
only limited to L100 Sterling or its peso equivalent of P1,544.40 as per stipulation in the Bill of Lading
and that even before the filing of the complaint, petitioners have signified their willingness to pay the
claim up to their limit of liability as stipulated in the Bill of Lading.
During the pre-trial on may 28, 1973, the loss of the subject shipment was admitted, and the parties
submitted the case for decision on one issue: whether petitioner's liability is limited to L100 Sterling
or its peso equivalent of P1,544.40 as stipulated in Clause 17 of the Bill of Lading 1 or whether
petitioner's liability should be $500 or its peso equivalent in the sum of P3,217.50 pursuant to Sec. 4
(5) of the Carriage of Goods by Sea Act. 2
The Court a quo found that under Section 4 (5) of the Carriage of Goods by Sea Act, the carrier and
the shipper may, in the absence of a declaration in the Bill of Lading of the value of the goods
shipped, fix a maximum liability of the shipper for the cargo lost or damages, but such maximum
shall not be less than $500.00 per package. Consequently, the agreement for a maximum liability of
only L100 Sterling contained in Clause 17 of the Bill of Lading was declared void for being contrary
to law and as adverted to above, petitioners were held liable.
From the decision of the lower court the present petition for review was instituted by petitioners
assigning the following errors:
THAT RESPONDENT CFI ERRED IN DECIDING THAT THE LIMIT OF LIABILITY IN THE SUM OF
L100 STERLING OR ITS PESO EQUIVALENT OF THE VESSEL/CARRIER, PER PACKAGE, AS
STIPULATED IN CLAUSE 17 OF THE BILL OF LADING, IS CONTRARY TO LAW, AND,
THEREFORE, VOID, and
II
THAT RESPONDENT COURT ERRED IN AWARDING ATTORNEY'S FEES AND COSTS IN

FAVOR OF PRIVATE RESPONDENT AND AGAINST THE HEREIN PETITIONERS.
Petitioners contend that the first paragraphs of Section 4(5) of the Carriage of Goods by Sea Act
prescribes a maximum liability of the vessel/carrier in the amount of $500.00 per package; that said
maximum liability, however, is not applicable in a shipment wherein the nature and a higher
valuation of the goods are indicated in the Bill of Lading; that the second paragraph refers to an
agreement of the shipper and the carrier which provides for another maximum necessarily higher
than $500.00 and that said proviso should not be read in connection with stipulations in Bills of
Lading limiting the vessel's liability to less than $500.00 per package, otherwise, the very intent of
the law setting the sum of $500.00 as the maximum liability of the carrier, per package, in the
absence of a higher valuation of the goods as indicated in the Bill of Lading would be nullified, for it
would thereby become not the maximum, but the minimum liability of the carrier.
Petitioners also contend that the New Civil Code, particularly Articles 1749 3 and 1750, 4 expressly
allow the limitation of the carrier's liability, provided it is just and reasonable. Hence, the limitation of
petitioners' liability to L100 Sterling or its peso equivalent as stipulated in the Bill of Lading is
perfectly legal and binding to the parties.
Private respondent alleges that Article 1749 imposes certain conditions for the validity of a
stipulation limiting the carrier's liability. These conditions are: (1) it must be in writing, signed by the
shipper or owner; (2) it must be supported by a valuable consideration other than the service
rendered by the carrier and (3) it must be reasonable, just and not contrary to public policy.
Respondent believes that an agreement limiting the carrier's liability does not per se give validity
thereto but it must be shown, among others, that the amount agreed upon is just and reasonable
under the circumstances.
There is no inconsistency between Section 4 (5) of the Carriage of Goods by Sea Act and Clause 17
of the Bill of Lading. The first part of the provision of Section 4 (5) of the Carriage of Goods by Sea
Act limits the melee, amount that may be recovered by the shipper in the absence of an agreement
as to the nature and value of goods shipped. Said provision does not prescribe the minimum and
hence, it could be any amount which is below $500.00. Clause 17 of the questioned Bill of Lading
also provides the melee, for which the carrier is liable. It prescribes that the carrier may only be held
liable for an amount not more than L100 Sterling which is below the melee, limit required in the
Carriage of Goods by Sea Act.
It should be noted that both the Carriage of Goods by Sea Act and Clause 17 of the Bill of Lading
allow the payment beyond the respective melee, limit imposed therein, provided that the value of the
goods have been declared in the Bin of Lading.
The second paragraph of Section 4 (5) of the Carriage of Goods by Sea Act prescribing the melee,
amount shall not be less than $500.00 refers to a situation where there is an agreement other than
set forth in the Bill of Lading providing for a melee, higher than $500.00 per package. In the case at
bar, it is apparent that there had been no agreement between the parties, and hence, Clause 17 of
the Bin of Lading shall prevail.
Petitioners' stand that the condition imposed in Clause 17 of the Bill of Lading should not be read in
the light of second paragraph of Section 4 (5) of the Carriage of Goods by Sea Act, is well taken.
Indeed, it would be to render ineffective the very intent of the law setting the sum of $500.00 as the
melee, liability of the vessel/carrier, per package, in the, absence of a higher valuation of the goods
as indicated in the Bail of Lading By providing that $500.00 is the maximum liability, the law does not
disallow an agreement for liability at a lesser amount.
Significantly, Article 1749 of the New Civil Code expressly allow the limitation of the carrier's liability.
Art. 1749 A stipulation that the common carrier's liability is limited to the value of the
goods appearing in the bill of lading, unless the shipper or owner declares a greater
value, is binding.
Thus, in the case of Northern Motors, Inc. Prince Line, 5 We said:
This Court has held as valid and binding a similar provision in a bill of lading limiting
the carrier's liability to a specific amount unless the shipper expressly declares a
higher valuation and pays the corresponding rate thereon.
Again, in Phoenix Assurance Company vs. Macondray & Co., Inc. 6, We are reiterating the validity of
a stipulation limiting the carrier's liability.
The right of the carrier to limit its liability has been recognized not only in Our jurisdiction but also in
American jurisprudence:
A stipulation in a contract of carriage that the carrier will not be liable beyond a
specified amount unless the shipper declares the goods to have a greater value is
generally deemed to be valid and will operate to limit the carrier's liability, even if the
loss or damage results from the carrier's negligence. Pursuant to such provision,
where the shipper is silent as to the value of his goods, the carrier's liability for loss or
damage thereto is limited to the amount specified in the contract of carriage and
where the shipper states the value of his goods, the carrier's liability for loss or
damage thereto is limited to that amount. Under a stipulation such as this, it is the
duty of the shipper to disclose, rather than the carrier's to demand the true value of
the goods and silence on the part of the shipper will be sufficient to limit recovery in
case of loss to the amount stated in the contract of carriage. 7
In view of the above findings, it is no longer necessary to discuss the second assignment of error.
WHEREFORE, the decision of the court a quo is hereby reversed and another one is entered finding
petitioners liable to private respondent in the amount of L100 Sterling or its peso equivalent of
P1,544.40. Without pronouncement as to costs.
SO ORDERED.
Makasiar, Fernandez, Guerrero and Melencio-Herrera, JJ., concur.
Teehankee (Chairman), concur in the result.

G. Safety of Passengers
VICTORY LINER, INC., Petitioner, v. ROSALITO GAMMAD, APRIL ROSSAN P.

GAMMAD, ROI ROZANO P. GAMMAD and DIANA FRANCES P.
GAMMAD, Respondents.
DECISION
YNARES-SANTIAGO, J.:
Assailed in this Petition for Review on Certiorari is the April 11, 2003 decision1 of
the Court of Appeals in CA-G.R. CV No. 63290 which affirmed with modification the
November 6, 1998 decision2 of the Regional Trial Court of Tuguegarao, Cagayan,
Branch 5 finding petitioner Victory Liner, Inc. liable for breach of contract of
carriage in Civil Case No. 5023.
The facts as testified by respondent Rosalito Gammad show that on March 14,
1996, his wife Marie Grace Pagulayan-Gammad,3 was on board an air-conditioned
Victory Liner bus bound for Tuguegarao, Cagayan from Manila. At about 3:00 a.m.,
the bus while running at a high speed fell on a ravine somewhere in Barangay
Baliling, Sta. Fe, Nueva Vizcaya, which resulted in the death of Marie Grace and
physical injuries to other passengers.4
On May 14, 1996, respondent heirs of the deceased filed a complaint5 for damages
arising from culpa contractual against petitioner. In its answer,6 the petitioner
claimed that the incident was purely accidental and that it has always exercised
extraordinary diligence in its 50 years of operation.
After several re-settings,7 pre-trial was set on April 10, 1997.8 For failure to appear
on the said date, petitioner was declared as in default.9 However, on petitioner's
motion10 to lift the order of default, the same was granted by the trial court.11
At the pre-trial on May 6, 1997, petitioner did not want to admit the proposed
stipulation that the deceased was a passenger of the Victory Liner Bus which fell on
the ravine and that she was issued Passenger Ticket No. 977785. Respondents, for
their part, did not accept petitioner's proposal to pay P50,000.00.12
After respondent Rosalito Gammad completed his direct testimony, cross-

examination was scheduled for November 17, 199713 but moved to December 8,
1997,14 because the parties and the counsel failed to appear. On December 8,
1997, counsel of petitioner was absent despite due notice and was deemed to have
waived right to cross-examine respondent Rosalito.15
Petitioner's motion to reset the presentation of its evidence to March 25,

199816 was granted. However, on March 24, 1998, the counsel of petitioner sent
the court a telegram17 requesting postponement but the telegram was received by
the trial court on March 25, 1998, after it had issued an order considering the case
submitted for decision for failure of petitioner and counsel to appear.18
On November 6, 1998, the trial court rendered its decision in favor of respondents,
the dispositive portion of which reads:
WHEREFORE, premises considered and in the interest of justice, judgment is hereby

rendered in favor of the plaintiffs and against the defendant Victory Liner,
Incorporated, ordering the latter to pay the following:
1. Actual Damages - - - - - - - - - - - - - - - - - - - - P 122,000.00
2. Death Indemnity - - - - - - - - - - - - - - - - - - - - - 50,000.00
3. Exemplary and Moral Damages - - - - - 400,000.00
4. Compensatory Damages - - - - - - - - - - 1,500,000.00
5. Attorney's Fees - - - - - - - - - - - - - - - - - - - - - 10% of the total amount

granted
6. Cost of the Suit.
SO ORDERED.19
On appeal by petitioner, the Court of Appeals affirmed the decision of the trial court
with modification as follows:
[T]he Decision dated 06 November 1998 is hereby MODIFIED to reflect that the
following are hereby adjudged in favor of plaintiffs-appellees:
1. Actual Damages in the amount of P88,270.00;
2. Compensatory Damages in the amount of P1,135,536,10;
3. Moral and Exemplary Damages in the amount of P400,000.00; and cralawlib rary
4. Attorney's fees equivalent to 10% of the sum of the actual, compensatory,

moral, and exemplary damages herein adjudged.
The court a quo's judgment of the cost of the suit against defendant-appellant is
hereby AFFIRMED.
SO ORDERED.20
Represented by a new counsel, petitioner on May 21, 2003 filed a motion for
reconsideration praying that the case be remanded to the trial court for cross -
examination of respondents' witness and for the presentation of its evidence; or in
the alternative, dismiss the respondents' complaint.21 Invoking APEX Mining, Inc. v.
Court of Appeals,22 petitioner argues, inter alia, that the decision of the trial court
should be set aside because the negligence of its former counsel, Atty. Antonio B.
Paguirigan, in failing to appear at the scheduled hearings and move for
reconsideration of the orders declaring petitioner to have waived the right to cross-
examine respondents' witness and right to present evidence, deprived petitioner of
its day in court.
On August 21, 2003, the Court of Appeals denied petitioner's motion for
reconsideration.23
Hence, this Petition for Review principally based on the fact that the mistake or
gross negligence of its counsel deprived petitioner of due process of law. Petitioner
also argues that the trial court's award of damages were without basis and should
be deleted.
The issues for resolution are: (1) whether petitioner's counsel was guilty of gross
negligence; (2) whether petitioner should be held liable for breach of contract of
carriage; and (3) whether the award of damages was proper.
It is settled that the negligence of counsel binds the client. This is based on the rule
that any act performed by a counsel within the scope of his general or implied
authority is regarded as an act of his client. Consequently, the mistake or
negligence of counsel may result in the rendition of an unfavorable judgment
against the client. However, the application of the general rule to a given case
should be looked into and adopted according to the surrounding circumstances
obtaining. Thus, exceptions to the foregoing have been recognized by the court in
cases where reckless or gross negligence of counsel deprives the client of due
process of law, or when its application will result in outright deprivation of the
client's liberty or property or where the interests of justice so require, and accord
relief to the client who suffered by reason of the lawyer's gross or palpable mistake
or negligence.24
The exceptions, however, are not present in this case. The record shows that Atty.
Paguirigan filed an Answer and Pre-trial Brief for petitioner. Although initially
declared as in default, Atty. Paguirigan successfully moved for the setting aside of
the order of default. In fact, petitioner was represented by Atty. Paguirigan at the
pre-trial who proposed settlement for P50,000.00. Although Atty. Paguirigan failed
to file motions for reconsideration of the orders declaring petitioner to have waived
the right to cross-examine respondents' witness and to present evidence, he
nevertheless, filed a timely appeal with the Court of Appeals assailing the decision
of the trial court. Hence, petitioner's claim that it was denied due process lacks
basis.
Petitioner too is not entirely blameless. Prior to the issuance of the order declaring
it as in default for not appearing at the pre-trial, three notices (dated October 23,
1996,25 January 30, 1997,26 and March 26, 1997,27 ) requiring attendance at the
pre-trial were sent and duly received by petitioner. However, it was only on April
27, 1997, after the issuance of the April 10, 1997 order of default for failure to
appear at the pre-trial when petitioner, through its finance and administrative
manager, executed a special power of attorney28 authorizing Atty. Paguirigan or any
member of his law firm to represent petitioner at the pre-trial. Petitioner is guilty,
at the least, of contributory negligence and fault cannot be imputed solely on
previous counsel.
The case of APEX Mining, Inc., invoked by petitioner is not on all fours with the case
at bar. In APEX, the negligent counsel not only allowed the adverse decision against
his client to become final and executory, but deliberately misrepresented in the
progress report that the case was still pending with the Court of Appeals when the
same was dismissed 16 months ago.29 These circumstances are absent in this case
because Atty. Paguirigan timely filed an appeal from the decision of the trial court
with the Court of Appeals.
In Gold Line Transit, Inc. v. Ramos,30 the Court was similarly confronted with the
issue of whether or not the client should bear the adverse consequences of its
counsel's negligence. In that case, Gold Line Transit, Inc. (Gold Line) and its lawyer
failed to appear at the pre-trial despite notice and was declared as in default. After
the plaintiff's presentation of evidence ex parte, the trial court rendered decision
ordering Gold Line to pay damages to the heirs of its deceased passenger. The
decision became final and executory because counsel of Gold Line did not file any
appeal. Finding that Goldline was not denied due process of law and is thus bound
by the negligence of its lawyer, the Court held as follows '
This leads us to the question of whether the negligence of counsel was so gross and
reckless that petitioner was deprived of its right to due process of law. We do not
believe so. It cannot be denied that the requirements of due process were observed
in the instant case. Petitioner was never deprived of its day in court, as in fact it
was afforded every opportunity to be heard. Thus, it is of record that notices were
sent to petitioner and that its counsel was able to file a motion to dismiss the
complaint, an answer to the complaint, and even a pre-trial brief. What was
irretrievably lost by petitioner was its opportunity to participate in the trial of the
case and to adduce evidence in its behalf because of negligence.
In the application of the principle of due process, what is sought to be safeguarded

against is not the lack of previous notice but the denial of the opportunity to be
heard. The question is not whether petitioner succeeded in defending its rights and
interests, but simply, whether it had the opportunity to present its side of the
controversy. Verily, as petitioner retained the services of counsel of its choice, it
should, as far as this suit is concerned, bear the consequences of its choice of a
faulty option. Its plea that it was deprived of due process echoes on hollow ground
and certainly cannot elicit approval nor sympathy.
To cater to petitioner's arguments and reinstate its petition for relief from judgment
would put a premium on the negligence of its former counsel and encourage the
non-termination of this case by reason thereof. This is one case where petitioner
has to bear the adverse consequences of its counsel's act, for a client is bound by
the action of his counsel in the conduct of a case and he cannot thereafter be heard
to complain that the result might have been different had his counsel proceeded
differently. The rationale for the rule is easily discernible. If the negligence of
counsel be admitted as a reason for opening cases, there would never be an end to
a suit so long as a new counsel could be hired every time it is shown that the prior
counsel had not been sufficiently diligent, experienced or learned.31
Similarly, in Macalalag v. Ombudsman,32 a Philippine Postal Corporation employee

charged with dishonesty was not able to file an answer and position paper. He was
found guilty solely on the basis of complainant's evidence and was dismissed with
forfeiture of all benefits and disqualification from government service. Challenging
the decision of the Ombudsman, the employee contended that the gross negligence
of his counsel deprived him of due process of law. In debunking his contention, the
Court said '
Neither can he claim that he is not bound by his lawyer's actions; it is only in case
of gross or palpable negligence of counsel when the courts can step in and accord
relief to a client who would have suffered thereby. If every perceived mistake,
failure of diligence, lack of experience or insufficient legal knowledge of the lawyer
would be admitted as a reason for the reopening of a case, there would be no end
to controversy. Fundamental to our judicial system is the principle that every
litigation must come to an end. It would be a clear mockery if it were otherwise.
Access to the courts is guaranteed, but there must be a limit to it.
Viewed vis - Ã -vis the foregoing jurisprudence, to sustain petitioner's argument

that it was denied due process of law due to negligence of its counsel would set a
dangerous precedent. It would enable every party to render inutile any adverse
order or decision through the simple expedient of alleging gross negligence on the
part of its counsel. The Court will not countenance such a farce which contradicts
long-settled doctrines of trial and procedure.33
Anent the second issue, petitioner was correctly found liable for breach of contract
of carriage. A common carrier is bound to carry its passengers safely as far as
human care and foresight can provide, using the utmost diligence of very cautious
persons, with due regard to all the circumstances. In a contract of carriage, it is
presumed that the common carrier was at fault or was negligent when a passenger
dies or is injured. Unless the presumption is rebutted, the court need not even
make an express finding of fault or negligence on the part of the common carrier.
This statutory presumption may only be overcome by evidence that the carrier
exercised extraordinary diligence.34
In the instant case, there is no evidence to rebut the statutory presumption that
the proximate cause of Marie Grace's death was the negligence of petitioner.
Hence, the courts below correctly ruled that petitioner was guilty of breach of
contract of carriage.
Nevertheless, the award of damages should be modified.

Article 176435 in relation to Article 220636 of the Civil Code, holds the common
carrier in breach of its contract of carriage that results in the death of a passenger
liable to pay the following: (1) indemnity for death, (2) indemnity for loss of
earning capacity, and (3) moral damages.
In the present case, respondent heirs of the deceased are entitled to indemnity for
the death of Marie Grace which under current jurisprudence is fixed at
P50,000.00.37
The award of compensatory damages for the loss of the deceased's earning
capacity should be deleted for lack of basis. As a rule, documentary evidence
should be presented to substantiate the claim for damages for loss of earning
capacity. By way of exception, damages for loss of earning capacity may be
awarded despite the absence of documentary evidence when (1) the deceased is
self-employed earning less than the minimum wage under current labor laws, and
judicial notice may be taken of the fact that in the deceased's line of work no
documentary evidence is available; or (2) the deceased is employed as a daily
wage worker earning less than the minimum wage under current labor laws.38
In People v. Oco,39 the evidence presented by the prosecution to recover damages

for loss of earning capacity was the bare testimony of the deceased's wife that her
husband was earning P8,000.00 monthly as a legal researcher of a private
corporation. Finding that the deceased was neither self-employed nor employed as
a daily-wage worker earning less than the minimum wage under the labor laws
existing at the time of his death, the Court held that testimonial evidence alone is
insufficient to justify an award for loss of earning capacity.
Likewise, in People v. Caraig,40 damages for loss of earning capacity was not
awarded because the circumstances of the 3 deceased did not fall within the
recognized exceptions, and except for the testimony of their wives, no documentary
proof about their income was presented by the prosecution. Thus '
The testimonial evidence shows that Placido Agustin, Roberto Raagas, and Melencio
Castro Jr. were not self-employed or employed as daily-wage workers earning less
than the minimum wage under the labor laws existing at the time of their death.
Placido Agustin was a Social Security System employee who received a monthly
salary of P5,000. Roberto Raagas was the President of Sinclair Security and Allied
Services, a family owned corporation, with a monthly compensation of P30,000.
Melencio Castro Jr. was a taxi driver of New Rocalex with an average daily earning
of P500 or a monthly earning of P7,500. Clearly, these cases do not fall under the
exceptions where indemnity for loss of earning capacity can be given despite lack of
documentary evidence. Therefore, for lack of documentary proof, no indemnity for
loss of earning capacity can be given in these cases. (Emphasis supplied) cralawl ibra ry
Here, the trial court and the Court of Appeals computed the award of compensatory
damages for loss of earning capacity only on the basis of the testimony of
respondent Rosalito that the deceased was 39 years of age and a Section Chief of
the Bureau of Internal Revenue, Tuguergarao District Office with a salary of
P83,088.00 per annum when she died.41 No other evidence was presented. The
award is clearly erroneous because the deceased's earnings does not fall within the
exceptions.
However, the fact of loss having been established, temperate damages in the
amount of P500,000.00 should be awarded to respondents. Under Article 2224 of
the Civil Code, temperate or moderate damages, which are more than nominal but
less than compensatory damages, may be recovered when the court finds that
some pecuniary loss has been suffered but its amount can not, from the nature of
the case, be proved with certainty.
In Pleno v. Court of Appeals,42 the Court sustained the trial court's award of
P200,000.00 as temperate damages in lieu of actual damages for loss of earning
capacity because the income of the victim was not sufficiently proven, thus'
The trial court based the amounts of damages awarded to the petitioner on the
following circumstances:
...
"As to the loss or impairment of earning capacity, there is no doubt that Pleno is an
ent[re]preneur and the founder of his own corporation, the Mayon Ceramics
Corporation. It appears also that he is an industrious and resourceful person with
several projects in line, and were it not for the incident, might have pushed them
through. On the day of the incident, Pleno was driving homeward with geologist
Longley after an ocular inspection of the site of the Mayon Ceramics Corporation.
His actual income however has not been sufficiently established so that this Court
cannot award actual damages, but, an award of temperate or moderate damages
may still be made on loss or impairment of earning capacity. That Pleno sustained a
permanent deformity due to a shortened left leg and that he also suffers from
double vision in his left eye is also established. Because of this, he suffers from
some inferiority complex and is no longer active in business as well as in social life.
In similar cases as in Borromeo v. Manila Electric Railroad Co., 44 Phil 165;
Coriage, et al. v. LTB Co., et al., L-11037, Dec. 29, 1960, and in Araneta, et al. v.
Arreglado, et al., L-11394, Sept. 9, 1958, the proper award of damages were
given."
...
We rule that the lower court's awards of damages are more consonant with the
factual circumstances of the instant case. The trial court's findings of facts are clear
and well-developed. Each item of damages is adequately supported by evidence on
record.
Article 2224 of the Civil Code was likewise applied in the recent cases of People v.
Singh43 and People v. Almedilla,44 to justify the award of temperate damages in lieu
of damages for loss of earning capacity which was not substantiated by the required
documentary proof.
Anent the award of moral damages, the same cannot be lumped with exemplary
damages because they are based on different jural foundations.45 These damages
are different in nature and require separate determination.46 In culpa contractual or
breach of contract, moral damages may be recovered when the defendant acted in
bad faith or was guilty of gross negligence (amounting to bad faith) or in wanton
disregard of contractual obligations and, as in this case, when the act of breach of
contract itself constitutes the tort that results in physical injuries. By special rule in
Article 1764 in relation to Article 2206 of the Civil Code, moral damages may also
be awarded in case the death of a passenger results from a breach of carriage.47 On
the other hand, exemplary damages, which are awarded by way of example or
correction for the public good may be recovered in contractual obligations if the
defendant acted in wanton, fraudulent, reckless, oppressive, or malevolent
manner.48
Respondents in the instant case should be awarded moral damages to compensate

for the grief caused by the death of the deceased resulting from the petitioner's
breach of contract of carriage. Furthermore, the petitioner failed to prove that it
exercised the extraordinary diligence required for common carriers, it is presumed
to have acted recklessly.49 Thus, the award of exemplary damages is proper. Under
the circumstances, we find it reasonable to award respondents the amount of
P100,000.00 as moral damages and P100,000.00 as exemplary damages. These
amounts are not excessive.50
The actual damages awarded by the trial court reduced by the Court of Appeals
should be further reduced. In People v. Duban,51 it was held that only substantiated
and proven expenses or those that appear to have been genuinely incurred in
connection with the death, wake or burial of the victim will be recognized. A list of
expenses (Exhibit "J"),52 and the contract/receipt for the construction of the tomb
(Exhibit "F")53 in this case, cannot be considered competent proof and cannot
replace the official receipts necessary to justify the award. Hence, actual damages
should be further reduced to P78,160.00,54 which was the amount supported by
official receipts.
Pursuant to Article 220855 of the Civil Code, attorney's fees may also be recovered
in the case at bar where exemplary damages are awarded. The Court finds the
award of attorney's fees equivalent to 10% of the total amount adjudged against
petitioner reasonable.
Finally, in Eastern Shipping Lines, Inc. v. Court of Appeals,56 it was held that when
an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts
or quasi-delicts is breached, the contravenor can be held liable for payment of
interest in the concept of actual and compensatory damages, subject to the
following rules, to wit '
1. When the obligation is breached, and it consists in the payment of a sum of

money, i.e., a loan or forbearance of money, the interest due should be that which
may have been stipulated in writing. Furthermore, the interest due shall itself earn
legal interest from the time it is judicially demanded. In the absence of stipulation,
the rate of interest shall be 12% per annum to be computed from default, i.e., from
judicial or extrajudicial demand under and subject to the provisions of Article 1169
of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is

breached, an interest on the amount of damages awarded may be imposed at the
discretion of the court at the rate of 6% per annum. No interest, however, shall be
adjudged on unliquidated claims or damages except when or until the demand can
be established with reasonable certainty. Accordingly, where the demand is
established with reasonable certainty, the interest shall begin to run from the time
the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such
certainty cannot be so reasonably established at the time the demand is made, the
interest shall begin to run only from the date the judgment of the court is made (at
which time the quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest shall, in any
case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 12% per annum from such finality until its
satisfaction, this interim period being deemed to be by then an equivalent to a
forbearance of credit. (Emphasis supplied).
In the instant case, petitioner should be held liable for payment of interest as
damages for breach of contract of carriage. Considering that the amounts payable
by petitioner has been determined with certainty only in the instant petition, the
interest due shall be computed upon the finality of this decision at the rate of 12%
per annum until satisfaction, per paragraph 3 of the aforecited rule.57
WHEREFORE, in view of all the foregoing, the petition is partially granted. The April
11, 2003 decision of the Court of Appeals in CA-G.R. CV No. 63290, which modified
the decision of the Regional Trial Court of Tuguegarao, Cagayan in Civil Case No.
5023, is AFFIRMED with MODIFICATION. As modified, petitioner Victory Liner, Inc.,
is ordered to pay respondents the following: (1) P50,000.00 as indemnity for the
death of Marie Grace Pagulayan-Gammad; (2) P100,000.00 as moral damages; (3)
P100,000.00 as exemplary damages; (4) P78,160.00 as actual damages; (5)
P500,000.00 as temperate damages; (6) 10% of the total amount as attorneys
fees; and the costs of suit.
Furthermore, the total amount adjudged against petitioner shall earn interest at the
rate of 12% per annum computed from the finality of this decision until fully paid.
G.R. No. L-55347 October 4, 1985
PHILIPPINE NATIONAL RAILWAYS, petitioner,

vs.
THE HONORABLE COURT OF APPEALS and ROSARIO TUPANG, respondents.
Arturo Samaniego for private respondent.
ESCOLIN, J.:
Invoking the principle of state immunity from suit, the Philippine National Railways, PNR for short,
instituted this petition for review on certiorari to set aside the decision of the respondent Appellate
Court which held petitioner PNR liable for damages for the death of Winifredo Tupang, a paying
passenger who fell off a train operated by the petitioner.
The pertinent facts are summarized by the respondent court as follows:
The facts show that on September 10, 1972, at about 9:00 o'clock in the evening,
Winifredo Tupang, husband of plaintiff Rosario Tupang, boarded 'Train No. 516 of
appellant at Libmanan, Camarines Sur, as a paying passenger bound for Manila.
Due to some mechanical defect, the train stopped at Sipocot, Camarines Sur, for
repairs, taking some two hours before the train could resume its trip to Manila.
Unfortunately, upon passing Iyam Bridge at Lucena, Quezon, Winifredo Tupang fell
off the train resulting in his death.The train did not stop despite the alarm raised by
the other passengers that somebody fell from the train. Instead, the train conductor
Perfecto Abrazado, called the station agent at Candelaria, Quezon, and requested
for verification of the information. Police authorities of Lucena City were dispatched
to the Iyam Bridge where they found the lifeless body of Winifredo Tupang.
As shown by the autopsy report, Winifredo Tupang died of cardio-respiratory failure

due to massive cerebral hemorrhage due to traumatic injury [Exhibits B and C,
Folder of Exhibits],Tupang was later buried in the public cemetery of Lucena City by
the local police authorities. [Rollo, pp. 91-92]
Upon complaint filed by the deceased's widow, Rosario Tupang, the then Court of First Instance of
Rizal, after trial, held the petitioner PNR liable for damages for breach of contract of carriage and
ordered "to pay the plaintiff the sum of P12,000,00 for the death of Winifredo Tupang, plus
P20,000.00 for loss of his earning capacity and the further sum of P10,000.00 as moral damages,
and P2,000.00 as attorney's fees, and costs. 1
On appeal, the Appellate Court sustained the holding of the trial court that the PNR did not exercise
the utmost diligence required by law of a common carrier. It further increased the amount
adjudicated by the trial court by ordering PNR to pay the plaintiff an additional sum of P5,000.00 as
exemplary damages.
Moving for reconsideration of the above decision, the PNR raised for the first time, as a defense, the
doctrine of state immunity from suit. It alleged that it is a mere agency of the Philippine government
without distinct or separate personality of its own, and that its funds are governmental in character
and, therefore, not subject to garnishment or execution. The motion was denied; the respondent
court ruled that the ground advanced could not be raised for the first time on appeal.
Hence, this petition for review.
The petition is devoid of merit. The PNR was created under Rep. Act 4156, as amended. Section 4
of the said Act provides:
The Philippine national Railways shall have the following powers:
a. To do all such other things and to transact all such business directly or indirectly
necessary, incidental or conducive to the attainment of the purpose of the
corporation; and
b. Generally, to exercise all powers of a corporation under the Corporation Law.
Under the foregoing section, the PNR has all the powers, the characteristics and attributes of a
corporation under the Corporation Law. There can be no question then that the PNR may sue and
be sued and may be subjected to court processes just like any other corporation. 2
The petitioner's contention that the funds of the PNR are not subject to garnishment or execution
hardly raises a question of first impression. In Philippine National Railways v. Union de Maquinistas,
et al., 3 then Justice Fernando, later Chief Justice, said. "The main issue posed in this certiorari
proceeding, whether or not the funds of the Philippine National Railways, could be garnished or
levied upon on execution was resolved in two recent decisions, the Philippine National Bank v. Court
of Industrial Relations [81 SCRA 314] and Philippine National Bank v. Hon. Judge Pabalan [83
SCRA 595]. This Court in both cases answered the question in the affirmative. There was no legal
bar to garnishment or execution. The argument based on non-suability of a state allegedly because
the funds are governmental in character was unavailing.So it must be again."
In support of the above conclusion, Justice Fernando cited the Court's holding in Philippine National
Bank v. Court of Industrial Relations, to wit: "The premise that the funds could be spoken of as public
in character may be accepted in the sense that the People's Homesite and Housing Corporation was
a government-owned entity. It does not follow though that they were exempt from
garnishment. National Shipyard and Steel Corporation v. Court of Industrial Relations is squarely in
point. As was explicitly stated in the opinion of then Justice, later Chief Justice, Concepcion: "The
allegation to the effect that the funds of the NASSCO are public funds of the government, and that,
as such, the same may not be garnished, attached or levied upon, is untenable for, as a
government- owned and controlled corporation, the NASSCO has a personality of its own, distinct
and separate from that of the Government. It has-pursuant to Section 2 of Executive Order No. 356,
dated October 23, 1950 * * *, pursuant to which the NASSCO has been established- 'all the powers
of a corporation under the Corporation Law * * *. 4
As far back as 1941, this Court in the case of Manila Hotel Employees Association v. Manila Hotel
Co., 5 laid down the rule that "when the government enters into commercial business, it abandons its
sovereign capacity and is to be treated like any other corporation. [Bank of the U.S. v. Planters'
Bank, 9 Waitch 904, 6 L. ed. 244]. By engaging in a particular business through the instrumentality
of a corporation the government divests itself pro hac vice of its sovereign character, so as to render
the corporation subject to the rules of law governing private corporations. 6 Of Similar import is the
pronouncement in Prisco v. CIR,' that "when the government engages in business, it abdicates part
of its sovereign prerogatives and descends to the level of a citizen, ... . " In fine, the petitioner PNR
cannot legally set up the doctrine of non-suability as a bar to the plaintiff's suit for damages.
The appellate court found, the petitioner does not deny, that the train boarded by the deceased
Winifredo Tupang was so over-crowded that he and many other passengers had no choice but to sit
on the open platforms between the coaches of the train. It is likewise undisputed that the train did
not even slow down when it approached the Iyam Bridge which was under repair at the time, Neither
did the train stop, despite the alarm raised by other passengers that a person had fallen off the train
at lyam Bridge. 7
The petitioner has the obligation to transport its passengers to their destinations and to observe
extraordinary diligence in doing so. Death or any injury suffered by any of its passengers gives rise
to the presumption that it was negligent in the performance of its obligation under the contract of
carriage. Thus, as correctly ruled by the respondent court, the petitioner failed to overthrow such
presumption of negligence with clear and convincing evidence.
But while petitioner failed to exercise extraordinary diligence as required by law, 8 it appears that the
deceased was chargeable with contributory negligence. Since he opted to sit on the open platform
between the coaches of the train, he should have held tightly and tenaciously on the upright metal
bar found at the side of said platform to avoid falling off from the speeding train. Such contributory
negligence, while not exempting the PNR from liability, nevertheless justified the deletion of the
amount adjudicated as moral damages. By the same token, the award of exemplary damages must
be set aside. Exemplary damages may be allowed only in cases where the defendant acted in a
wanton, fraudulent, reckless, oppressive or malevolent manner. 9 There being no evidence of fraud,
malice or bad faith on the part of petitioner, the grant of exemplary damages should be discarded.
WHEREFORE, the decision of the respondent appellate court is hereby modified by eliminating
therefrom the amounts of P10,000.00 and P5,000.00 adjudicated as moral and exemplary damages,
respectively. No costs.
SO ORDERED.
1. Duration of Liability
a. Waiting for Carrier or Boarding of Carrier
G.R. No. 95582 October 7, 1991
DANGWA TRANSPORTATION CO., INC. and THEODORE LARDIZABAL y

MALECDAN, petitioners,
vs.
COURT OF APPEALS, INOCENCIA CUDIAMAT, EMILIA CUDIAMAT BANDOY, FERNANDO
CUDLAMAT, MARRIETA CUDIAMAT, NORMA CUDIAMAT, DANTE CUDIAMAT, SAMUEL
CUDIAMAT and LIGAYA CUDIAMAT, all Heirs of the late Pedrito Cudiamat represented by
Inocencia Cudiamat, respondents.
Francisco S. Reyes Law Office for petitioners.

Antonio C. de Guzman for private respondents.
REGALADO, J.:
On May 13, 1985, private respondents filed a complaint 1 for damages against
petitioners for the death of Pedrito Cudiamat as a result of a vehicular accident which
occurred on March 25, 1985 at Marivic, Sapid, Mankayan, Benguet. Among others, it
was alleged that on said date, while petitioner Theodore M. Lardizabal was driving a
passenger bus belonging to petitioner corporation in a reckless and imprudent manner
and without due regard to traffic rules and regulations and safety to persons and
property, it ran over its passenger, Pedrito Cudiamat. However, instead of bringing
Pedrito immediately to the nearest hospital, the said driver, in utter bad faith and without
regard to the welfare of the victim, first brought his other passengers and cargo to their
respective destinations before banging said victim to the Lepanto Hospital where he
expired.
On the other hand, petitioners alleged that they had observed and continued to observe
the extraordinary diligence required in the operation of the transportation company and
the supervision of the employees, even as they add that they are not absolute insurers
of the safety of the public at large. Further, it was alleged that it was the victim's own
carelessness and negligence which gave rise to the subject incident, hence they prayed
for the dismissal of the complaint plus an award of damages in their favor by way of a
counterclaim.
On July 29, 1988, the trial court rendered a decision, effectively in favor of petitioners,
with this decretal portion:
IN VIEW OF ALL THE FOREGOING, judgment is hereby pronounced that

Pedrito Cudiamat was negligent, which negligence was the proximate cause of
his death. Nonetheless, defendants in equity, are hereby ordered to pay the heirs
of Pedrito Cudiamat the sum of P10,000.00 which approximates the amount
defendants initially offered said heirs for the amicable settlement of the case. No
costs.
SO ORDERED. 2
Not satisfied therewith, private respondents appealed to the Court of Appeals which, in a decision 3
in CA-G.R. CV No.
19504 promulgated on August 14, 1990, set aside the decision of the lower court, and
ordered petitioners to pay private respondents:
1. The sum of Thirty Thousand (P30,000.00) Pesos by way of indemnity for

death of the victim Pedrito Cudiamat;
2. The sum of Twenty Thousand (P20,000.00) by way of moral damages;
3. The sum of Two Hundred Eighty Eight Thousand (P288,000.00) Pesos as

actual and compensatory damages;
4. The costs of this suit. 4

Petitioners' motion for reconsideration was denied by the Court of Appeals in its resolution dated October 4, 1990, 5
hence this
petition with the central issue herein being whether respondent court erred in reversing
the decision of the trial court and in finding petitioners negligent and liable for the
damages claimed.
It is an established principle that the factual findings of the Court of Appeals as a rule
are final and may not be reviewed by this Court on appeal. However, this is subject to
settled exceptions, one of which is when the findings of the appellate court are contrary
to those of the trial court, in which case a reexamination of the facts and evidence may
be undertaken. 6
In the case at bar, the trial court and the Court of Appeal have discordant positions as to who between the petitioners an the victim
is guilty of negligence. Perforce, we have had to conduct an evaluation of the evidence in this case for the prope calibration of their
conflicting factual findings and legal conclusions.
The lower court, in declaring that the victim was negligent, made the following findings:
This Court is satisfied that Pedrito Cudiamat was negligent in trying to board a moving vehicle, especially
with one of his hands holding an umbrella. And, without having given the driver or the conductor any
indication that he wishes to board the bus. But defendants can also be found wanting of the necessary
diligence. In this connection, it is safe to assume that when the deceased Cudiamat attempted to board
defendants' bus, the vehicle's door was open instead of being closed. This should be so, for it is hard to
believe that one would even attempt to board a vehicle (i)n motion if the door of said vehicle is closed. Here
lies the defendant's lack of diligence. Under such circumstances, equity demands that there must be
something given to the heirs of the victim to assuage their feelings. This, also considering that initially,
defendant common carrier had made overtures to amicably settle the case. It did offer a certain monetary
consideration to the victim's heirs. 7
However, respondent court, in arriving at a different opinion, declares that:
From the testimony of appellees'own witness in the person of Vitaliano Safarita, it is evident that the subject
bus was at full stop when the victim Pedrito Cudiamat boarded the same as it was precisely on this instance
where a certain Miss Abenoja alighted from the bus. Moreover, contrary to the assertion of the appellees,
the victim did indicate his intention to board the bus as can be seen from the testimony of the said witness
when he declared that Pedrito Cudiamat was no longer walking and made a sign to board the bus when the
latter was still at a distance from him. It was at the instance when Pedrito Cudiamat was closing his umbrella
at the platform of the bus when the latter made a sudden jerk movement (as) the driver commenced to
accelerate the bus.
Evidently, the incident took place due to the gross negligence of the appellee-driver in prematurely stepping
on the accelerator and in not waiting for the passenger to first secure his seat especially so when we take
into account that the platform of the bus was at the time slippery and wet because of a drizzle. The
defendants-appellees utterly failed to observe their duty and obligation as common carrier to the end that
they should observe extra-ordinary diligence in the vigilance over the goods and for the safety of the
passengers transported by them according to the circumstances of each case (Article 1733, New Civil
Code). 8
After a careful review of the evidence on record, we find no reason to disturb the above holding of the Court of Appeals. Its aforesaid
findings are supported by the testimony of petitioners' own witnesses. One of them, Virginia Abalos, testified on cross-examination
as follows:
Q It is not a fact Madam witness, that at bunkhouse 54, that is before the place of the incident, there is a crossing?
A The way going to the mines but it is not being pass(ed) by the bus.
Q And the incident happened before bunkhouse 56, is that not correct?
A It happened between 54 and 53 bunkhouses. 9
The bus conductor, Martin Anglog, also declared:
Q When you arrived at Lepanto on March 25, 1985, will you please inform this Honorable Court if there was anv unusual
incident that occurred?
A When we delivered a baggage at Marivic because a person alighted there between Bunkhouse 53 and 54.
Q What happened when you delivered this passenger at this particular place in Lepanto?
A When we reached the place, a passenger alighted and I signalled my driver. When we stopped we went out because I
saw an umbrella about a split second and I signalled again the driver, so the driver stopped and we went down and we
saw Pedrito Cudiamat asking for help because he was lying down.
Q How far away was this certain person, Pedrito Cudiamat, when you saw him lying down — from the bus how far was
he?
A It is about two to three meters.
Q On what direction of the bus was he found about three meters from the bus, was it at the front or at the back?
A At the back, sir. 10 (Emphasis supplied.)
The foregoing testimonies show that the place of the accident and the place where one of the passengers alighted were both
between Bunkhouses 53 and 54, hence the finding of the Court of Appeals that the bus was at full stop when the victim boarded the
same is correct. They further confirm the conclusion that the victim fell from the platform of the bus when it suddenly accelerated
forward and was run over by the rear right tires of the vehicle, as shown by the physical evidence on where he was thereafter found
in relation to the bus when it stopped. Under such circumstances, it cannot be said that the deceased was guilty of negligence.
The contention of petitioners that the driver and the conductor had no knowledge that the victim would ride on the bus, since the
latter had supposedly not manifested his intention to board the same, does not merit consideration. When the bus is not in motion
there is no necessity for a person who wants to ride the same to signal his intention to board. A public utility bus, once it stops, is in
effect making a continuous offer to bus riders. Hence, it becomes the duty of the driver and the conductor, every time the bus stops,
to do no act that would have the effect of increasing the peril to a passenger while he was attempting to board the same. The
premature acceleration of the bus in this case was a breach of such duty. 11
It is the duty of common carriers of passengers, including common carriers by railroad train, streetcar, or motorbus, to stop their
conveyances a reasonable length of time in order to afford passengers an opportunity to board and enter, and they are liable for
injuries suffered by boarding passengers resulting from the sudden starting up or jerking of their conveyances while they are doing
so. 12
Further, even assuming that the bus was moving, the act of the victim in boarding the same cannot be considered negligent under
the circumstances. As clearly explained in the testimony of the aforestated witness for petitioners, Virginia Abalos, th bus had "just
started" and "was still in slow motion" at the point where the victim had boarded and was on its platform. 13
It is not negligence per se, or as a matter of law, for one attempt to board a train or streetcar which is moving slowly. 14
An
ordinarily prudent person would have made the attempt board the moving conveyance
under the same or similar circumstances. The fact that passengers board and alight
from slowly moving vehicle is a matter of common experience both the driver and
conductor in this case could not have been unaware of such an ordinary practice.
The victim herein, by stepping and standing on the platform of the bus, is already
considered a passenger and is entitled all the rights and protection pertaining to such a
contractual relation. Hence, it has been held that the duty which the carrier passengers
owes to its patrons extends to persons boarding cars as well as to those alighting
therefrom. 15
Common carriers, from the nature of their business and reasons of public policy, are bound to observe extraordina diligence for the
safety of the passengers transported by the according to all the circumstances of each case. 16
A common carrier is
bound to carry the passengers safely as far as human care and foresight can provide,
using the utmost diligence very cautious persons, with a due regard for all the
circumstances. 17
It has also been repeatedly held that in an action based on a contract of carriage, the court need not make an express finding of
fault or negligence on the part of the carrier in order to hold it responsible to pay the damages sought by the passenger. By contract
of carriage, the carrier assumes the express obligation to transport the passenger to his destination safely and observe
extraordinary diligence with a due regard for all the circumstances, and any injury that might be suffered by the passenger is right
away attributable to the fault or negligence of the carrier. This is an exception to the general rule that negligence must be proved,
and it is therefore incumbent upon the carrier to prove that it has exercised extraordinary diligence as prescribed in Articles 1733
and 1755 of the Civil Code. 18
Moreover, the circumstances under which the driver and the conductor failed to bring the gravely injured victim immediately to the
hospital for medical treatment is a patent and incontrovertible proof of their negligence. It defies understanding and can even be
stigmatized as callous indifference. The evidence shows that after the accident the bus could have forthwith turned at Bunk 56 and
thence to the hospital, but its driver instead opted to first proceed to Bunk 70 to allow a passenger to alight and to deliver a
refrigerator, despite the serious condition of the victim. The vacuous reason given by petitioners that it was the wife of the deceased
who caused the delay was tersely and correctly confuted by respondent court:
... The pretension of the appellees that the delay was due to the fact that they had to wait for about twenty minutes for
Inocencia Cudiamat to get dressed deserves scant consideration. It is rather scandalous and deplorable for a wife whose
husband is at the verge of dying to have the luxury of dressing herself up for about twenty minutes before attending to
help her distressed and helpless husband. 19
Further, it cannot be said that the main intention of petitioner Lardizabal in going to Bunk 70 was to inform the victim's family of the
mishap, since it was not said bus driver nor the conductor but the companion of the victim who informed his family thereof. 20
In
fact, it was only after the refrigerator was unloaded that one of the passengers thought
of sending somebody to the house of the victim, as shown by the testimony of Virginia
Abalos again, to wit:
Q Why, what happened to your refrigerator at that particular time?
A I asked them to bring it down because that is the nearest place to our house
and when I went down and asked somebody to bring down the refrigerator, I also
asked somebody to call the family of Mr. Cudiamat.
COURT:
Q Why did you ask somebody to call the family of Mr. Cudiamat?
A Because Mr. Cudiamat met an accident, so I ask somebody to call for the
family of Mr. Cudiamat.
Q But nobody ask(ed) you to call for the family of Mr. Cudiamat?
A No sir. 21
With respect to the award of damages, an oversight was, however, committed by respondent Court of Appeals in computing the
actual damages based on the gross income of the victim. The rule is that the amount recoverable by the heirs of a victim of a tort is
not the loss of the entire earnings, but rather the loss of that portion of the earnings which the beneficiary would have received. In
other words, only net earnings, not gross earnings, are to be considered, that is, the total of the earnings less expenses necessary
in the creation of such earnings or income and minus living and other incidental expenses. 22
We are of the opinion that the deductible living and other expense of the deceased may fairly and reasonably be fixed at P500.00 a
month or P6,000.00 a year. In adjudicating the actual or compensatory damages, respondent court found that the deceased was 48
years old, in good health with a remaining productive life expectancy of 12 years, and then earning P24,000.00 a year. Using the
gross annual income as the basis, and multiplying the same by 12 years, it accordingly awarded P288,000. Applying the aforestated
rule on computation based on the net earnings, said award must be, as it hereby is, rectified and reduced to P216,000.00. However,
in accordance with prevailing jurisprudence, the death indemnity is hereby increased to P50,000.00. 23
WHEREFORE, subject to the above modifications, the challenged judgment and resolution of respondent Court of Appeals are
hereby AFFIRMED in all other respects.

Absence of Delay - 220926 - 155813

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This contention is without merit. As pithily explained by the Court of Appeals:jgc:chanrobles.com.ph

Witness the deposition of TWA’s ramp serviceman, Michael Giosso, on this

"ATTY. JUAN COLLAS, JR.:chanrob1es virtual 1aw library

MICHAEL GIOSSO:chanrob1es virtual 1aw library

ATTY. JUAN COLLAS, JR.:chanrob1es virtual 1aw library

What was your participation with the transfer of the cargo?

MICHAEL GIOSSO:chanrob1es virtual 1aw library

ATTY. JUAN COLLAS, JR.:chanrob1es virtual 1aw library

You brought it there yourself?

MICHAEL GIOSSO:chanrob1es virtual 1aw library

ATTY. JUAN COLLAS, JR.:chanrob1es virtual 1aw library

MICHAEL GIOSSO:chanrob1es virtual 1aw library

Yes, I do.(Witness presenting a document)

ATTY. JUAN COLLAS, JR.:chanrob1es virtual 1aw library

For purposes of clarity, Exhibit I is designated as Exhibit I-TWA.

ATTY. JUAN COLLAS, JR.:chanrob1es virtual 1aw library

MICHAEL GIOSSO:chanrob1es virtual 1aw library

ATTY. JUAN COLLAS, JR.:chanrob1es virtual 1aw library

MICHAEL GIOSSO:chanrob1es virtual 1aw library

The name is Garry Marcial." 37

"ATTY. CESAR P. MANALAYSAY:chanrob1es virtual 1aw library

In what circumstances did you encounter Exhibit I-PAL?

ATTY. CESAR P. MANALAYSAY:chanrob1es virtual 1aw library

ALBERTO A. LIM:chanrob1es virtual 1aw library

ATTY. CESAR P. MANALAYSAY:chanrob1es virtual 1aw library

What is the result of your investigation?

ALBERTO A. LIM:chanrob1es virtual 1aw library

ATTY. CESAR P. MANALAYSAY:chanrob1es virtual 1aw library

What body are you referring to?

ALBERTO A. LIM:chanrob1es virtual 1aw library

The remains of Mrs. Cristina (sic) Saludo.

ATTY. CESAR P. MANALAYSAY:chanrob1es virtual 1aw library

Is that the same body mentioned in this Airway Bill?

ALBERTO A. LIM:chanrob1es virtual 1aw library

ATTY. CESAR P MANALAYSAY:chanrob1es virtual 1aw library

ALBERTO A. LIM:chanrob1es virtual 1aw library

If I recall correctly, approximately 7:45 of October 28, 1976.

ATTY. CESAR P. MANALAYSAY:chanrob1es virtual 1aw library

Do you have any proof with you to back the statement?

ALBERTO A. LIM:chanrob1es virtual 1aw library

ATTY. CESAR P. MANALAYSAY:chanrob1es virtual 1aw library

ATTY. ALBERTO C. MENDOZA:chanrob1es virtual 1aw library

ATTY. CESAR P. MANALAYSAY:chanrob1es virtual 1aw library

ALBERTO A. LIM:chanrob1es virtual 1aw library

ATTY. CESAR P. MANALAYSAY:chanrob1es virtual 1aw library

ALBERTO A. LIM:chanrob1es virtual 1aw library

‘Q When you arrived there, what did you do, if any?

Q What was the answer?

A They said they do not know. So, we waited.

A I think 5 o’clock. Somewhere around that in the afternoon.

Q You made inquiry it was immediately thereafter?

A Right after we got off the plane.

Q And after nine o’clock, what did you do?

Q What did you find?

A We learned, Yes, my Mom would be on the flight.

Q Who was that brother?

Q You took that flight with your mother?

A We were scheduled to, Sir.

A After we were told that my mother was not there?

"ATTY. ALBERTO C. MENDOZA:chanrob1es virtual 1aw library

ALBERTO A. LIM:chanrob1es virtual 1aw library

ATTY. ALBERTO C. MENDOZA:chanrob1es virtual 1aw library