Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No.

85331 August 25, 1989 KAPALARAN BUS LINE, petitioner, vs. ANGEL CORONADO, LOPE GRAJERA, DIONISIO SHINYO, and THE COURT OF APPEALS, respondents, Leopoldo M. Consunto for petitioner. Danilo S. Cruz for intervenor-appellee. Conrado Manicad for private respondents. FELICIANO, J.: Petitioner Kapalaran Bus Line ("Kapalaran") seeks the reversal or modification of the Court of Appeals' decision in CA G.R. CV No. 12476 and the absolution of petitioner from all liability arising from the collision between one of petitioner's buses and a jeepney owned by respondent Coronado, driven by respondent Grajera and in which jeepney respondent Shinyo was a passenger. The facts of this case as found by the trial court and adopted by the Court of Appeals, are summarized in the trial court's decision and quoted in the Court of Appeals' own judgment in the following terms: The accident happened on the National Highway at 10:30 A.M. on August 2, 1982. The jeepney driven by Lope Grajera was then corning from Pila, Laguna on its way towards the direction of Sta. Cruz, traversing the old highway. As it reached the intersection where there is a traffic sign 'yield,' it stopped and cautiously treated the intersection as a "Thru Stop' street, which it is not. The KBL bus was on its way from Sta. Cruz, Laguna, driven by its regular driver Virgilio Llamoso, on its way towards Manila. The regular itinerary of the KBL bus is through the town proper of Pila, Laguna, but at times it avoids this if a bus is already fully loaded with passengers and can no longer accommodate additional passengers. As the KBL bus neared the intersection, Virgilio Llamoso inquired from his conductor if they could still accommodate passengers and learning that they were already full, he decided to bypass Pila and instead, to proceed along the national highway. Virgilio Llamoso admitted that there was another motor vehicle ahead of him. The general rule is that the vehicle on the national highway has the right-of-way as against a feeder road. Another general rule is that the vehicle coming from the right has the right-of-way over the vehicle coming from the left. The general rules on right-of-way may be invoked only if both vehicles approach the intersection at almost the same time. In the case at bar, both roads are national roads. Also, the KBL bus was still far from the intersection when the jeepney reached the same. As testified to by Atty. Conrado L. Manicad who was driving a Mustang car coming from the direction of Sta. Cruz and proceeding towards the direction of Manila, he stopped at the intersection to give way to the jeepney driven by Grajera. Behind Manicad were two vehicles, a car of his client and another car. A Laguna Transit bus had just entered the town of Pila ahead of Atty. Manicad. The sketch marked Exhibit 'E' indicates very clearly that the jeepney had already traversed the intersection when it met the KBL bus head-on. It is also obvious that the point of impact was on the right lane of the highway which is the lane properly belonging to the jeepney. As testified to by Lope Grajera, the KBL bus

ignored the stopped vehicles of Atty. Manicad and the other vehicles behind Atty. Manicad and overtook both vehicles at the intersection, therefore, causing the accident. Judging from the testimony of Atty. Conrado L. Manicad and the sketch (Exhibit 'E'), the sequence of events shows that the first vehicle to arrive at the intersection was the jeepney. Seeing that the road was clear, the jeepney which had stopped at the intersection began to move forward, and for his part, Atty. Manicad stopped his car at the intersection to give way to the jeepney. At about this time, the KBL bus was approaching the intersection and its driver was engaged in determining from his conductor if they would still pass through the town proper of Pila. Upon learning that they were already full, he turned his attention to the road and found the stopped vehicles at the intersection with the jeepney trying to cross the intersection. The KBL bus had no more room within which to stop without slamming into the rear of the vehicle behind the car of Atty. Manicad. The KBL driver chose to gamble on proceeding on its way, unfortunately, the jeepney driven by Grajera, which had the right-of-way, was about to cross the center of the highway and was directly on the path of the KBL bus. The gamble made by Llamoso did not pay off. The impact indicates that the KBL bus was travelling at a fast rate of speed because, after the collision, it did not stop; it travelled for another 50 meters and stopped only when it hit an electric post (pp. 3-4, Decision; pp. 166167, Record). 1 On 14 September 1982, Kapalaran, apparently believing that the best defense was offense, filed a complaint for damage to property and physical injuries through reckless imprudence against respondents Angel Coronado and Lope Grajera in the Regional Trial Court, Branch 27, Sta. Cruz, Laguna. Respondents answered with their own claims (counter-claims) for damages. A third-party complaint and/or a complaint for intervention was also filed in the same case against Kapalaran by jeepney passenger Dionisio Shinyo. On 15 October 1986, after trial, the trial court rendered a judgment in favor of private respondents and ordering Kapalaran (a) to pay Angel Coronado the sum of P40,000.00 as compensation for the totally wrecked jeepney, plus the sum of P5,000.00 as attorney's fees and litigation expenses, and (b) to Dionisio Shinyo the sum of P35,000.00 representing the expenses incurred by said intervenor for his treatment including his car-hire, the further sum of P30,000.00 representing the expenses said defendant will incur for his second operation to remove the intramedulary nail from his femur, the additional sum of P50,000.00 to serve as moral damages for the pain and suffering inflicted on said defendant, plus the sum of P10,000.00 in the concept of exemplary damages to serve as a deterrent to others who, like the plaintiff, may be minded to induce accident victims to perjure themselves in a sworn statement, and the sum of P15,000.00 as attorney's fees and litigation expenses. From the above judgment, Kapalaran appealed to the Court of Appeals assailing the trial court's findings on the issue of fault and the award of damages. The Court of Appeals, on 28 June 1988, affirmed the decision of the trial court but modified the award of damages by setting aside the grant of exemplary damages as well as the award of attomey's fee and litigation expenses made to Dionisio Shinyo. 2 This decision of the Court of Appeals is now before us on a Petition for Review, a motion for reconsideration by Kapalaran having been denied by that court on 13 October 1988. Kapalaran assails the findings of fact of the Regional Trial Court and of the Court of Appeals, and insists before this Court that respondent Grajera, driver of the jeepney, was at fault and not the driver of Kapalaran's bus. It must be remembered that it is not the function of this Court to

analyze and weigh evidence presented by the parties all over again and that our jurisdiction is in principle limited to reviewing errors of law that might have been committed by the Court of Appeals. Kapalaran has made no compelling showing of any misapprehension of facts on the part of the Court of Appeals that would require us to review and overturn the factual findings of that court. On the contrary, examination of the record shows that not only are the conclusions of fact of the Court of Appeals and the trial court on who the bus driver or the jeepney driver had acted negligently and was at fault in the collision of their vehicles, amply supported by the evidence of record, but also that Kapalaran's bus driver was grossly negligent and had acted wantonly and in obvious disregard of the applicable rules on safety on the highway. Kapalaran's driver had become aware that some vehicles ahead of the bus and travelling in the same direction had already stopped at the intersection obviously to give way either to pedestrians or to another vehicle about to enter the intersection. The bus driver, who was driving at a speed too high to be safe and proper at or near an intersection on the highway, and in any case too high to be able to slow down and stop behind the cars which had preceded it and which had stopped at the intersection, chose to swerve to the left lane and overtake such preceding vehicles, entered the intersection and directly smashed into the jeepney within the intersection. Immediately before the collision, the bus driver was actually violating the following traffic rules and regulations, among others, in the Land Transportation and Traffic Code, Republic Act No. 4136, as amended: Sec. 35. Restriction as to speed. (a) Any person driving a motor vehicle on a highway shall drive the same at a careful and prudent speed, not greater nor less than is reasonable and proper, having due regard for the traffic, the width of the highway, and or any other condition then and there existing; and no person shall drive any motor vehicle upon a highway at such a speed as to endanger the life, limb and property of any person, nor at a speed greater than will permit him to bring the vehicle to a stop within the assured clear distance ahead. xxx xxx xxx Sec. 41. Restrictions on overtaking and passing. _1 (a) The driver of a vehicle shall not drive to the left side of the center line of a highway in overtaking or passing another vehicle, proceeding in the same direction, unless such left side is clearly visible, and is free of oncoming traffic for a sufficient distance ahead to permit such overtaking or passing to be made in safety. xxx xxx xxx (c) The driver of a vehicle shall not overtake or pass any other vehicle proceeding in the same direction, at any railway grade crossing, or at any intersection of highways, unless such intersection or crossing is controlled by traffic signal, or unless permitted to do so by a watchman or a peace officer, except on a highway having two or more lanes for movement of traffic in one direction where the driver of a vehicle may overtake or pass another vehicle on the right. Nothing in this section shall be construed to prohibit a driver overtaking or passing, upon the right, another vehicle which is making or about to make a left turn. xxx xxx xxx (Emphasis supplied) Thus, a legal presumption arose that the bus driver was negligent 3 a presumption Kapalaran was unable to overthrow. Petitioner's contention that the jeepney should have stopped before entering the "Y-intersection" because of the possibility that another vehicle behind the cars which had stopped might not similarly stop and might swerve to the left to proceed to the highway en route to Manila, is more ingenious than substantial. It also offers illustration of the familiar litigation tactic of shifting blame from one's own shoulders to those of the other party. But the jeepney driver, seeing the

cars closest to the intersection on the opposite side of the highway come to a stop to give way to him, had the right to assume that other vehicles further away and behind the stopped cars would similarly come to a stop and not seek illegally to overtake the stopped vehicles and come careening into the intersection at an unsafe speed. 4 Petitioner's bus was still relatively far away from the intersection when the jeepney entered the same; the bus collided head on into the jeepney because the bus had been going at an excessively high velocity immediately before and at the time of overtaking the stopped cars, and so caught the jeepney within the intersection. It was also the responsibility of the bus driver to see to it, when it overtook the two (2) cars ahead which had stopped at the intersection, that the left lane of the road within the intersection and beyond was clear. The point of impact was on the left side of the intersection (the light lane so far as concerns the jeepney coming from the opposite side), which was precisely the lane or side on which the jeepney had a right to be. Petitioner Kapalaran also assails the award of moral damages against itself, upon the ground that its own bus driver, third-party defendant, was apparently not held liable by the trial court . 5 Hence, Kapalaran argues that there was no justification for holding it, the employer, liable for damages, considering that such liability was premised upon the bus driver's negligence and that petitioner "as mere employer" was not guilty of such negligence or imprudence. 6 This contention in thoroughly unpersuasive. The patent and gross negligence on the part of the petitioner Kapalaran's driver raised the legal presumption that Kapalaran as employer was guilty of negligence either in the selection or in the supervision of its bus driver, 7 Where the employer is held liable for damages, it has of course a right of recourse against its own negligent employee. If petitioner Kapalaran was interested in maintaining its right of recourse against or reimbursement from its own driver, 8 it should have appealled from that portion of the trial court's decision which had failed to hold the bus driver is not "merely subsidiary," and is not limited to cases where the employee "cannot pay his liability" nor are private respondents compelled frist to proceed against the bus driver. The liability of the employer under Article 2180 of the Civil Code is direct and immediate; it is not conditioned upon prior recourse against the negligent employee and a prior showing of the insolvency of such employee. 9 So far as the record shows, petitioner Kapalaran was unable to rebut the presumption of negligence on its own part. The award of moral damages against petitioner Kapalaran is not only entirely in order; it is also quite modest consideirng Dionisio Shinyo's death during the pendency of this petition, a death hastened by, if not directly due to, the grievous injuries sustained by him in the violent collision. The Court of Appeals deleted the award of exemplary damages which the trial court had granted in order "to serve as a deterrent to others who, like the plaintiff [Kapalaran], may be minded to induce accident victims to perjure themselves in a sworn statement." The Court of Appeals held that htere was no basis for this award of exemplary damages, stating that it was not "such a reprehensible act to try to gather witnesses for one's cause" and that there was no evidence of use of "presure or influence" to induce the accident victims to perjure themselves While that might have been so, both the trial court and the Court of Appeals overlook another and far more compelling basis for the award of exemplary damages against petitioner Kapalaran in this case. There is no question that petitioner's bus driver was grossly and very probably criminally negligent in his reckless disregard of the rights of other vehicles and their pasangers and of pedestrian as well The Court is entitled to take judicial notice of the gross negligence and the appalling disregard of the physical safety and property of others so commonly exhibited today by the drivers of passanger bussses and similar vehicles on our highways. The law requires petitioner as common carrier to exercise extraordinary diligence incarrying and transporting their passanger safely "as far as human care and foresight can proved, using the utmost diligence of very cautious persons, with due regard for all circumstances." 10 In requiring the highest possible degree of diligence from common carriers and creating a presumption of negligence against them, the law compels them to curb the recklessness of their drivers. 11 While the immediate beneficiaries of the standard of

extraordinary diligence are, of course, the passengers and owners of cargo carried by a common carrier, they are not only persons that the law seeks to benefit. For if common carriers carefully observed the statutory standard of extraordinary diligence in respect of of their own passengers, they cannot help but simultaneously benefit pedestrians and the owners and passengers of other vehicles who are equally entitled to the safe and convenient use of our roads and highways. 12 The law seeks to stop and prevent the slaughter and maiming of people (whether passengers or not) and the destruction of property (whether freight or not) on our highways by buses, the very size and power of which seem often to inflame the minds of their drivers. Article 2231 of the Civil Code explicitly authorizes the imposition of exemplary damages in cases of quasi-delicts "if the defendant acted with gross negligence." Thus we believe that the award of exemplary damages by the trial court was quite proper, although granted for the wrong reason, and should not only be restored but augmented in the present case. The Court is aware that respondent Shinyo did not file a separate petition for review to set aside that portion of the Court of Appeals' decision which deleted the grant by the trial court of exemplary damages. It is settled, however, that issues which must be resolved if substantial justice is to be rendered to the parties, may and should be considered and decided by this Court even if those issues had not been explicitly raised by the party affected. 13 In the instant case, it is not only the demands of substantial justice but also the compelling considerations of public policy noted above, which impel us to the conclusion that the trial court's award of exemplary damages was erroneously deleted and must be restored and brought more nearly to the level which public policy and substantial justice require. In much the same vein, we believe that the award by the trial court of P15,000.00 as attorney's fees and litigation expenses, deleted by the Court of Appeals, should similarly be restored, being both authorized by law 14 and demanded by substantial justice in the instant case. WHEREFORE, the Petition for Review on certiorari is DENIED for lack of merit and the Decision of the Court of Appeals is hereby AFFIRMED, except (1) that the award of exemplary damages to Dionisio Shinyo shall be restored and increased from P10,000.00 to P25,000.00, and (2) that the grant of attorney's fees and litigation expenses in the sum of P15,000.00 to Dionisio Shinyo shall similarly be restored. Costs against petitioner. SO ORDERED. Fernan, C.J., Gutierrez, Jr., Bidin and Cortes, JJ., concur.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-45637 May 31, 1985 ROBERTO JUNTILLA, petitioner, vs. CLEMENTE FONTANAR, FERNANDO BANZON and BERFOL CAMORO, respondents. Valentin A. Zozobrado for petitioner. Ruperto N. Alfarara for respondents. GUTIERREZ, JR., J.: This is a petition for review, on questions of law, of the decision of the Court of First Instance of Cebu which reversed the decision of the City Court of Cebu and exonerated the respondents from any liability arising from a vehicular accident. The background facts which led to the filing of a complaint for breach of contract and damages against the respondents are summarized by the Court of First Instance of Cebu as follows:

The facts established after trial show that the plaintiff was a passenger of the public utility jeepney bearing plate No. PUJ-71-7 on the course of the trip from Danao City to Cebu City. The jeepney was driven by defendant Berfol Camoro. It was registered under the franchise of defendant Clemente Fontanar but was actually owned by defendant Fernando Banzon. When the jeepney reached Mandaue City, the right rear tire exploded causing the vehicle to turn turtle. In the process, the plaintiff who was sitting at the front seat was thrown out of the vehicle. Upon landing on the ground, the plaintiff momentarily lost consciousness. When he came to his senses, he found that he had a lacerated wound on his right palm. Aside from this, he suffered injuries on his left arm, right thigh and on his back. (Exh. "D"). Because of his shock and injuries, he went back to Danao City but on the way, he discovered that his "Omega" wrist watch was lost. Upon his arrival in Danao City, he immediately entered the Danao City Hospital to attend to his injuries, and also requested his father-in-law to proceed immediately to the place of the accident and look for the watch. In spite of the efforts of his father-in-law, the wrist watch, which he bought for P 852.70 (Exh. "B") could no longer be found. xxx xxx xxx Petitioner Roberto Juntilla filed Civil Case No. R-17378 for breach of contract with damages before the City Court of Cebu City, Branch I against Clemente Fontanar, Fernando Banzon and Berfol Camoro. The respondents filed their answer, alleging inter alia that the accident that caused losses to the petitioner was beyond the control of the respondents taking into account that the tire that exploded was newly bought and was only slightly used at the time it blew up. After trial, Judge Romulo R. Senining of the Civil Court of Cebu rendered judgment in favor of the petitioner and against the respondents. The dispositive portion of the decision reads: WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendants and the latter are hereby ordered, jointly and severally, to pay the plaintiff the sum of P750.00 as reimbursement for the lost Omega wrist watch, the sum of P246.64 as unrealized salary of the plaintiff from his employer, the further sum of P100.00 for the doctor's fees and medicine, an additional sum of P300.00 for attorney's fees and the costs. The respondents appealed to the Court of First Instance of Cebu, Branch XIV. Judge Leonardo B. Canares reversed the judgment of the City Court of Cebu upon a finding that the accident in question was due to a fortuitous event. The dispositive portion of the decision reads: WHEREFORE, judgment is hereby rendered exonerating the defendants from any liability to the plaintiff without pronouncement as to costs. A motion for reconsideration was denied by the Court of First Instance. The petitioner raises the following alleged errors committed by the Court of First Instance of Cebu on appeal a. The Honorable Court below committed grave abuse of discretion in failing to take cognizance of the fact that defendants and/or their employee failed to exercise "utmost and/or extraordinary diligence" required of common carriers contemplated under Art. 1755 of the Civil Code of the Philippines. b. The Honorable Court below committed grave abuse of discretion by deciding the case contrary to the doctrine laid down by the Honorable Supreme Court in the case of Necesito et al. v. Paras, et al. We find the petition impressed with merit. The City Court and the Court of First Instance of Cebu found that the right rear tire of the passenger jeepney in which the petitioner was riding blew up causing the vehicle to fall on its

side. The petitioner questions the conclusion of the respondent court drawn from this finding of fact. The Court of First Instance of Cebu erred when it absolved the carrier from any liability upon a finding that the tire blow out is a fortuitous event. The Court of First Instance of Cebu ruled that: After reviewing the records of the case, this Court finds that the accident in question was due to a fortuitous event. A tire blow-out, such as what happened in the case at bar, is an inevitable accident that exempts the carrier from liability, there being absence of a showing that there was misconduct or negligence on the part of the operator in the operation and maintenance of the vehicle involved. The fact that the right rear tire exploded, despite being brand new, constitutes a clear case of caso fortuito which can be a proper basis for exonerating the defendants from liability. ... The Court of First Instance relied on the ruling of the Court of Appeals in Rodriguez v. Red Line Transportation Co., CA G.R. No. 8136, December 29, 1954, where the Court of Appeals ruled that: A tire blow-out does not constitute negligence unless the tire was already old and should not have been used at all. Indeed, this would be a clear case of fortuitous event. The foregoing conclusions of the Court of First Instance of Cebu are based on a misapprehension of overall facts from which a conclusion should be drawn. The reliance of the Court of First Instance on the Rodriguez case is not in order. In La Mallorca and Pampanga Bus Co. v. De Jesus, et al. (17 SCRA 23), we held that: Petitioner maintains that a tire blow-out is a fortuitous event and gives rise to no liability for negligence, citing the rulings of the Court of Appeals in Rodriguez v. Red Line Transportation Co., CA G.R. No. 8136, December 29, 1954, and People v. Palapad, CA-G.R. No. 18480, June 27, 1958. These rulings, however, not only are not binding on this Court but were based on considerations quite different from those that obtain in the case at bar. The appellate court there made no findings of any specific acts of negligence on the part of the defendants and confined itself to the question of whether or not a tire blow-out, by itself alone and without a showing as to the causative factors, would generate liability. ... In the case at bar, there are specific acts of negligence on the part of the respondents. The records show that the passenger jeepney turned turtle and jumped into a ditch immediately after its right rear tire exploded. The evidence shows that the passenger jeepney was running at a very fast speed before the accident. We agree with the observation of the petitioner that a public utility jeep running at a regular and safe speed will not jump into a ditch when its right rear tire blows up. There is also evidence to show that the passenger jeepney was overloaded at the time of the accident. The petitioner stated that there were three (3) passengers in the front seat and fourteen (14) passengers in the rear. While it may be true that the tire that blew-up was still good because the grooves of the tire were still visible, this fact alone does not make the explosion of the tire a fortuitous event. No evidence was presented to show that the accident was due to adverse road conditions or that precautions were taken by the jeepney driver to compensate for any conditions liable to cause accidents. The sudden blowing-up, therefore, could have been caused by too much air pressure injected into the tire coupled by the fact that the jeepney was overloaded and speeding at the time of the accident. In Lasam v. Smith (45 Phil. 657), we laid down the following essential characteristics of caso fortuito: xxx xxx xxx ... In a legal sense and, consequently, also in relation to contracts, a caso fortuito presents the following essential characteristics: (1) The cause of the

unforeseen and unexpected occurrence, or of the failure of the debtor to comply with his obligation, must be independent of the human will. (2) It must be impossible to foresee the event which constitutes the caso fortuito, or if it can be foreseen, it must be impossible to avoid. (3) The occurrence must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner. And (4) the obligor (debtor) must be free from any participation in the aggravation of the injury resulting to the creditor. (5 Encyclopedia Juridica Espanola, 309.) In the case at bar, the cause of the unforeseen and unexpected occurrence was not independent of the human will. The accident was caused either through the negligence of the driver or because of mechanical defects in the tire. Common carriers should teach their drivers not to overload their vehicles, not to exceed safe and legal speed limits, and to know the correct measures to take when a tire blows up thus insuring the safety of passengers at all times. Relative to the contingency of mechanical defects, we held in Necesito, et al. v. Paras, et al. (104 Phil. 75), that: ... The preponderance of authority is in favor of the doctrine that a passenger is entitled to recover damages from a carrier for an injury resulting from a defect in an appliance purchased from a manufacturer, whenever it appears that the defect would have been discovered by the carrier if it had exercised the degree of care which under the circumstances was incumbent upon it, with regard to inspection and application of the necessary tests. For the purposes of this doctrine, the manufacturer is considered as being in law the agent or servant of the carrier, as far as regards the work of constructing the appliance. According to this theory, the good repute of the manufacturer will not relieve the carrier from liability' (10 Am. Jur. 205, s, 1324; see also Pennsylvania R. Co. v. Roy, 102 U.S. 451; 20 L. Ed. 141; Southern R. Co. v. Hussey, 74 ALR 1172; 42 Fed. 2d 70; and Ed Note, 29 ALR 788.: Ann. Cas. 1916E 929). The rationale of the carrier's liability is the fact that the passenger has neither choice nor control over the carrier in the selection and use of the equipment and appliances in use by the carrier. Having no privity whatever with the manufacturer or vendor of the defective equipment, the passenger has no remedy against him, while the carrier usually has. It is but logical, therefore, that the carrier, while not an insurer of the safety of his passengers, should nevertheless be held to answer for the flaws of his equipment if such flaws were at all discoverable. ... It is sufficient to reiterate that the source of a common carrier's legal liability is the contract of carriage, and by entering into the said contract, it binds itself to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of a very cautious person, with a due regard for all the circumstances. The records show that this obligation was not met by the respondents. The respondents likewise argue that the petitioner cannot recover any amount for failure to prove such damages during the trial. The respondents submit that if the petitioner was really injured, why was he treated in Danao City and not in Mandaue City where the accident took place. The respondents argue that the doctor who issued the medical certificate was not presented during the trial, and hence not cross-examined. The respondents also claim that the petitioner was not wearing any wrist watch during the accident. It should be noted that the City Court of Cebu found that the petitioner had a lacerated wound on his right palm aside from injuries on his left arm, right thigh and on his back, and that on his way back to Danao City, he discovered that his "Omega" wrist watch was lost. These are findings of facts of the City Court of Cebu which we find no reason to disturb. More so when we consider the fact that the Court of First Instance of Cebu impliedly concurred in these matters when it confined itself to the question of whether or not the tire blow out was a fortuitous event.

WHEREFORE, the decision of the Court of First Instance of Cebu, Branch IV appealed from is hereby REVERSED and SET ASIDE, and the decision of the City Court of Cebu, Branch I is REINSTATED, with the modification that the damages shall earn interest at 12% per annum and the attorney's fees are increased to SIX HUNDRED PESOS (P600.00). Damages shall earn interests from January 27, 1975. SO ORDERED. Teehankee (Chairman), Melencio-Herrera, Plana, Relova, De la Fuente and Alampay, JJ., concur.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-69044 May 29, 1987 EASTERN SHIPPING LINES, INC., petitioner, vs. INTERMEDIATE APPELLATE COURT and DEVELOPMENT INSURANCE & SURETY CORPORATION,respondents. No. 71478 May 29, 1987 EASTERN SHIPPING LINES, INC., petitioner, vs. THE NISSHIN FIRE AND MARINE INSURANCE CO., and DOWA FIRE & MARINE INSURANCE CO., LTD.,respondents. MELENCIO-HERRERA, J.: These two cases, both for the recovery of the value of cargo insurance, arose from the same incident, the sinking of the M/S ASIATICA when it caught fire, resulting in the total loss of ship and cargo. The basic facts are not in controversy: In G.R. No. 69044, sometime in or prior to June, 1977, the M/S ASIATICA, a vessel operated by petitioner Eastern Shipping Lines, Inc., (referred to hereinafter as Petitioner Carrier) loaded at Kobe, Japan for transportation to Manila, 5,000 pieces of calorized lance pipes in 28 packages valued at P256,039.00 consigned to Philippine Blooming Mills Co., Inc., and 7 cases of spare parts valued at P92,361.75, consigned to Central Textile Mills, Inc. Both sets of goods were insured against marine risk for their stated value with respondent Development Insurance and Surety Corporation. In G.R. No. 71478, during the same period, the same vessel took on board 128 cartons of garment fabrics and accessories, in two (2) containers, consigned to Mariveles Apparel Corporation, and two cases of surveying instruments consigned to Aman Enterprises and General Merchandise. The 128 cartons were insured for their stated value by respondent Nisshin Fire & Marine Insurance Co., for US $46,583.00, and the 2 cases by respondent Dowa Fire & Marine Insurance Co., Ltd., for US $11,385.00. Enroute for Kobe, Japan, to Manila, the vessel caught fire and sank, resulting in the total loss of ship and cargo. The respective respondent Insurers paid the corresponding marine insurance values to the consignees concerned and were thus subrogated unto the rights of the latter as the insured. G.R. NO. 69044 On May 11, 1978, respondent Development Insurance & Surety Corporation (Development Insurance, for short), having been subrogated unto the rights of the two insured companies, filed

suit against petitioner Carrier for the recovery of the amounts it had paid to the insured before the then Court of First instance of Manila, Branch XXX (Civil Case No. 6087). Petitioner-Carrier denied liability mainly on the ground that the loss was due to an extraordinary fortuitous event, hence, it is not liable under the law. On August 31, 1979, the Trial Court rendered judgment in favor of Development Insurance in the amounts of P256,039.00 and P92,361.75, respectively, with legal interest, plus P35,000.00 as attorney's fees and costs. Petitioner Carrier took an appeal to the then Court of Appeals which, on August 14, 1984, affirmed. Petitioner Carrier is now before us on a Petition for Review on Certiorari. G.R. NO. 71478 On June 16, 1978, respondents Nisshin Fire & Marine Insurance Co. NISSHIN for short), and Dowa Fire & Marine Insurance Co., Ltd. (DOWA, for brevity), as subrogees of the insured, filed suit against Petitioner Carrier for the recovery of the insured value of the cargo lost with the then Court of First Instance of Manila, Branch 11 (Civil Case No. 116151), imputing unseaworthiness of the ship and non-observance of extraordinary diligence by petitioner Carrier. Petitioner Carrier denied liability on the principal grounds that the fire which caused the sinking of the ship is an exempting circumstance under Section 4(2) (b) of the Carriage of Goods by Sea Act (COGSA); and that when the loss of fire is established, the burden of proving negligence of the vessel is shifted to the cargo shipper. On September 15, 1980, the Trial Court rendered judgment in favor of NISSHIN and DOWA in the amounts of US $46,583.00 and US $11,385.00, respectively, with legal interest, plus attorney's fees of P5,000.00 and costs. On appeal by petitioner, the then Court of Appeals on September 10, 1984, affirmed with modification the Trial Court's judgment by decreasing the amount recoverable by DOWA to US $1,000.00 because of $500 per package limitation of liability under the COGSA. Hence, this Petition for Review on certiorari by Petitioner Carrier. Both Petitions were initially denied for lack of merit. G.R. No. 69044 on January 16, 1985 by the First Division, and G. R. No. 71478 on September 25, 1985 by the Second Division. Upon Petitioner Carrier's Motion for Reconsideration, however, G.R. No. 69044 was given due course on March 25, 1985, and the parties were required to submit their respective Memoranda, which they have done. On the other hand, in G.R. No. 71478, Petitioner Carrier sought reconsideration of the Resolution denying the Petition for Review and moved for its consolidation with G.R. No. 69044, the lower-numbered case, which was then pending resolution with the First Division. The same was granted; the Resolution of the Second Division of September 25, 1985 was set aside and the Petition was given due course. At the outset, we reject Petitioner Carrier's claim that it is not the operator of the M/S Asiatica but merely a charterer thereof. We note that in G.R. No. 69044, Petitioner Carrier stated in its Petition: There are about 22 cases of the "ASIATICA" pending in various courts where various plaintiffs are represented by various counsel representing various consignees or insurance companies. The common defendant in these cases is petitioner herein, being the operator of said vessel. ... 1 Petitioner Carrier should be held bound to said admission. As a general rule, the facts alleged in a party's pleading are deemed admissions of that party and binding upon it. 2 And an admission in one pleading in one action may be received in evidence against the pleader or his successorin-interest on the trial of another action to which he is a party, in favor of a party to the latter action. 3 The threshold issues in both cases are: (1) which law should govern the Civil Code provisions on Common carriers or the Carriage of Goods by Sea Act? and (2) who has the burden of proof to show negligence of the carrier?

On the Law Applicable The law of the country to which the goods are to be transported governs the liability of the common carrier in case of their loss, destruction or deterioration. 4 As the cargoes in question were transported from Japan to the Philippines, the liability of Petitioner Carrier is governed primarily by the Civil Code. 5 However, in all matters not regulated by said Code, the rights and obligations of common carrier shall be governed by the Code of Commerce and by special laws. 6 Thus, the Carriage of Goods by Sea Act, a special law, is suppletory to the provisions of the Civil Code. 7 On the Burden of Proof Under the Civil Code, common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over goods, according to all the circumstances of each case. 8 Common carriers are responsible for the loss, destruction, or deterioration of the goods unless the same is due to any of the following causes only: (1) Flood, storm, earthquake, lightning or other natural disaster or calamity; xxx xxx xxx 9 Petitioner Carrier claims that the loss of the vessel by fire exempts it from liability under the phrase "natural disaster or calamity. " However, we are of the opinion that fire may not be considered a natural disaster or calamity. This must be so as it arises almost invariably from some act of man or by human means. 10 It does not fall within the category of an act of God unless caused by lightning 11 or by other natural disaster or calamity. 12 It may even be caused by the actual fault or privity of the carrier. 13 Article 1680 of the Civil Code, which considers fire as an extraordinary fortuitous event refers to leases of rural lands where a reduction of the rent is allowed when more than one-half of the fruits have been lost due to such event, considering that the law adopts a protection policy towards agriculture. 14 As the peril of the fire is not comprehended within the exception in Article 1734, supra, Article 1735 of the Civil Code provides that all cases than those mention in Article 1734, the common carrier shall be presumed to have been at fault or to have acted negligently, unless it proves that it has observed the extraordinary deligence required by law. In this case, the respective Insurers. as subrogees of the cargo shippers, have proven that the transported goods have been lost. Petitioner Carrier has also proved that the loss was caused by fire. The burden then is upon Petitioner Carrier to proved that it has exercised the extraordinary diligence required by law. In this regard, the Trial Court, concurred in by the Appellate Court, made the following Finding of fact: The cargoes in question were, according to the witnesses defendant placed in hatches No, 2 and 3 cf the vessel, Boatswain Ernesto Pastrana noticed that smoke was coming out from hatch No. 2 and hatch No. 3; that where the smoke was noticed, the fire was already big; that the fire must have started twenty-four 24) our the same was noticed; that carbon dioxide was ordered released and the crew was ordered to open the hatch covers of No, 2 tor commencement of fire fighting by sea water: that all of these effort were not enough to control the fire. Pursuant to Article 1733, common carriers are bound to extraordinary diligence in the vigilance over the goods. The evidence of the defendant did not show that extraordinary vigilance was observed by the vessel to prevent the occurrence of fire at hatches numbers 2 and 3. Defendant's evidence did not likewise show he amount of diligence made by the crew, on orders, in the care of the cargoes. What appears is that after the cargoes were stored in the hatches, no regular inspection was made as to their condition during the voyage. Consequently, the crew could not have even explain what could have caused the fire. The defendant, in the Court's mind, failed to satisfactorily show that extraordinary

vigilance and care had been made by the crew to prevent the occurrence of the fire. The defendant, as a common carrier, is liable to the consignees for said lack of deligence required of it under Article 1733 of the Civil Code. 15 Having failed to discharge the burden of proving that it had exercised the extraordinary diligence required by law, Petitioner Carrier cannot escape liability for the loss of the cargo. And even if fire were to be considered a "natural disaster" within the meaning of Article 1734 of the Civil Code, it is required under Article 1739 of the same Code that the "natural disaster" must have been the "proximate and only cause of the loss," and that the carrier has "exercised due diligence to prevent or minimize the loss before, during or after the occurrence of the disaster. " This Petitioner Carrier has also failed to establish satisfactorily. Nor may Petitioner Carrier seek refuge from liability under the Carriage of Goods by Sea Act, It is provided therein that: Sec. 4(2). Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from (b) Fire, unless caused by the actual fault or privity of the carrier. xxx xxx xxx In this case, both the Trial Court and the Appellate Court, in effect, found, as a fact, that there was "actual fault" of the carrier shown by "lack of diligence" in that "when the smoke was noticed, the fire was already big; that the fire must have started twenty-four (24) hours before the same was noticed; " and that "after the cargoes were stored in the hatches, no regular inspection was made as to their condition during the voyage." The foregoing suffices to show that the circumstances under which the fire originated and spread are such as to show that Petitioner Carrier or its servants were negligent in connection therewith. Consequently, the complete defense afforded by the COGSA when loss results from fire is unavailing to Petitioner Carrier. On the US $500 Per Package Limitation: Petitioner Carrier avers that its liability if any, should not exceed US $500 per package as provided in section 4(5) of the COGSA, which reads: (5) Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the transportation of goods in an amount exceeding $500 per package lawful money of the United States, or in case of goods not shipped in packages, per customary freight unit, or the equivalent of that sum in other currency, unless the nature and value of such goods have been declared by the shipper before shipment and inserted in bill of lading. This declaration if embodied in the bill of lading shall be prima facie evidence, but all be conclusive on the carrier. By agreement between the carrier, master or agent of the carrier, and the shipper another maximum amount than that mentioned in this paragraph may be fixed: Provided, That such maximum shall not be less than the figure above named. In no event shall the carrier be Liable for more than the amount of damage actually sustained. xxx xxx xxx Article 1749 of the New Civil Code also allows the limitations of liability in this wise: Art. 1749. A stipulation that the common carrier's liability as limited to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value, is binding. It is to be noted that the Civil Code does not of itself limit the liability of the common carrier to a fixed amount per package although the Code expressly permits a stipulation limiting such liability. Thus, the COGSA which is suppletory to the provisions of the Civil Code, steps in and supplements the Code by establishing a statutory provision limiting the carrier's liability in the absence of a declaration of a higher value of the goods by the shipper in the bill of lading. The

provisions of the Carriage of Goods by.Sea Act on limited liability are as much a part of a bill of lading as though physically in it and as much a part thereof as though placed therein by agreement of the parties. 16 In G.R. No. 69044, there is no stipulation in the respective Bills of Lading (Exhibits "C-2" and "I3") 1 7 limiting the carrier's liability for the loss or destruction of the goods. Nor is there a declaration of a higher value of the goods. Hence, Petitioner Carrier's liability should not exceed US $500 per package, or its peso equivalent, at the time of payment of the value of the goods lost, but in no case "more than the amount of damage actually sustained." The actual total loss for the 5,000 pieces of calorized lance pipes was P256,039 (Exhibit "C"), which was exactly the amount of the insurance coverage by Development Insurance (Exhibit "A"), and the amount affirmed to be paid by respondent Court. The goods were shipped in 28 packages (Exhibit "C-2") Multiplying 28 packages by $500 would result in a product of $14,000 which, at the current exchange rate of P20.44 to US $1, would be P286,160, or "more than the amount of damage actually sustained." Consequently, the aforestated amount of P256,039 should be upheld. With respect to the seven (7) cases of spare parts (Exhibit "I-3"), their actual value was P92,361.75 (Exhibit "I"), which is likewise the insured value of the cargo (Exhibit "H") and amount was affirmed to be paid by respondent Court. however, multiplying seven (7) cases by $500 per package at the present prevailing rate of P20.44 to US $1 (US $3,500 x P20.44) would yield P71,540 only, which is the amount that should be paid by Petitioner Carrier for those spare parts, and not P92,361.75. In G.R. No. 71478, in so far as the two (2) cases of surveying instruments are concerned, the amount awarded to DOWA which was already reduced to $1,000 by the Appellate Court following the statutory $500 liability per package, is in order. In respect of the shipment of 128 cartons of garment fabrics in two (2) containers and insured with NISSHIN, the Appellate Court also limited Petitioner Carrier's liability to $500 per package and affirmed the award of $46,583 to NISSHIN. it multiplied 128 cartons (considered as COGSA packages) by $500 to arrive at the figure of $64,000, and explained that "since this amount is more than the insured value of the goods, that is $46,583, the Trial Court was correct in awarding said amount only for the 128 cartons, which amount is less than the maximum limitation of the carrier's liability." We find no reversible error. The 128 cartons and not the two (2) containers should be considered as the shipping unit. In Mitsui & Co., Ltd. vs. American Export Lines, Inc. 636 F 2d 807 (1981), the consignees of tin ingots and the shipper of floor covering brought action against the vessel owner and operator to recover for loss of ingots and floor covering, which had been shipped in vessel supplied containers. The U.S. District Court for the Southern District of New York rendered judgment for the plaintiffs, and the defendant appealed. The United States Court of Appeals, Second Division, modified and affirmed holding that: When what would ordinarily be considered packages are shipped in a container supplied by the carrier and the number of such units is disclosed in the shipping documents, each of those units and not the container constitutes the "package" referred to in liability limitation provision of Carriage of Goods by Sea Act. Carriage of Goods by Sea Act, 4(5), 46 U.S.C.A.& 1304(5). Even if language and purposes of Carriage of Goods by Sea Act left doubt as to whether carrier-furnished containers whose contents are disclosed should be treated as packages, the interest in securing international uniformity would suggest that they should not be so treated. Carriage of Goods by Sea Act, 4(5), 46 U.S.C.A. 1304(5). ... After quoting the statement in Leather's Best, supra, 451 F 2d at 815, that treating a container as a package is inconsistent with the congressional purpose

of establishing a reasonable minimum level of liability, Judge Beeks wrote, 414 F. Supp. at 907 (footnotes omitted): Although this approach has not completely escaped criticism, there is, nonetheless, much to commend it. It gives needed recognition to the responsibility of the courts to construe and apply the statute as enacted, however great might be the temptation to "modernize" or reconstitute it by artful judicial gloss. If COGSA's package limitation scheme suffers from internal illness, Congress alone must undertake the surgery. There is, in this regard, obvious wisdom in the Ninth Circuit's conclusion in Hartford that technological advancements, whether or not forseeable by the COGSA promulgators, do not warrant a distortion or artificial construction of the statutory term "package." A ruling that these large reusable metal pieces of transport equipment qualify as COGSA packages at least where, as here, they were carrier owned and supplied would amount to just such a distortion. Certainly, if the individual crates or cartons prepared by the shipper and containing his goods can rightly be considered "packages" standing by themselves, they do not suddenly lose that character upon being stowed in a carrier's container. I would liken these containers to detachable stowage compartments of the ship. They simply serve to divide the ship's overall cargo stowage space into smaller, more serviceable loci. Shippers' packages are quite literally "stowed" in the containers utilizing stevedoring practices and materials analogous to those employed in traditional on board stowage. In Yeramex International v. S.S. Tando,, 1977 A.M.C. 1807 (E.D. Va.) rev'd on other grounds, 595 F 2nd 943 (4 Cir. 1979), another district with many maritime cases followed Judge Beeks' reasoning in Matsushita and similarly rejected the functional economics test. Judge Kellam held that when rolls of polyester goods are packed into cardboard cartons which are then placed in containers, the cartons and not the containers are the packages. xxx xxx xxx The case of Smithgreyhound v. M/V Eurygenes, 18 followed the Mitsui test: Eurygenes concerned a shipment of stereo equipment packaged by the shipper into cartons which were then placed by the shipper into a carrier- furnished container. The number of cartons was disclosed to the carrier in the bill of lading. Eurygenes followed the Mitsui test and treated the cartons, not the container, as the COGSA packages. However, Eurygenes indicated that a carrier could limit its liability to $500 per container if the bill of lading failed to disclose the number of cartons or units within the container, or if the parties indicated, in clear and unambiguous language, an agreement to treat the container as the package. (Admiralty Litigation in Perpetuum: The Continuing Saga of Package Limitations and Third World Delivery Problems by Chester D. Hooper & Keith L. Flicker, published in Fordham International Law Journal, Vol. 6, 1982-83, Number 1) (Emphasis supplied) In this case, the Bill of Lading (Exhibit "A") disclosed the following data: 2 Containers (128) Cartons) Men's Garments Fabrics and Accessories Freight Prepaid

Say: Two (2) Containers Only. Considering, therefore, that the Bill of Lading clearly disclosed the contents of the containers, the number of cartons or units, as well as the nature of the goods, and applying the ruling in the Mitsui and Eurygenes cases it is clear that the 128 cartons, not the two (2) containers should be considered as the shipping unit subject to the $500 limitation of liability. True, the evidence does not disclose whether the containers involved herein were carrierfurnished or not. Usually, however, containers are provided by the carrier. 19 In this case, the probability is that they were so furnished for Petitioner Carrier was at liberty to pack and carry the goods in containers if they were not so packed. Thus, at the dorsal side of the Bill of Lading (Exhibit "A") appears the following stipulation in fine print: 11. (Use of Container) Where the goods receipt of which is acknowledged on the face of this Bill of Lading are not already packed into container(s) at the time of receipt, the Carrier shall be at liberty to pack and carry them in any type of container(s). The foregoing would explain the use of the estimate "Say: Two (2) Containers Only" in the Bill of Lading, meaning that the goods could probably fit in two (2) containers only. It cannot mean that the shipper had furnished the containers for if so, "Two (2) Containers" appearing as the first entry would have sufficed. and if there is any ambiguity in the Bill of Lading, it is a cardinal principle in the construction of contracts that the interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity. 20 This applies with even greater force in a contract of adhesion where a contract is already prepared and the other party merely adheres to it, like the Bill of Lading in this case, which is draw. up by the carrier. 21 On Alleged Denial of Opportunity to Present Deposition of Its Witnesses: (in G.R. No. 69044 only) Petitioner Carrier claims that the Trial Court did not give it sufficient time to take the depositions of its witnesses in Japan by written interrogatories. We do not agree. petitioner Carrier was given- full opportunity to present its evidence but it failed to do so. On this point, the Trial Court found: xxx xxx xxx Indeed, since after November 6, 1978, to August 27, 1979, not to mention the time from June 27, 1978, when its answer was prepared and filed in Court, until September 26, 1978, when the pre-trial conference was conducted for the last time, the defendant had more than nine months to prepare its evidence. Its belated notice to take deposition on written interrogatories of its witnesses in Japan, served upon the plaintiff on August 25th, just two days before the hearing set for August 27th, knowing fully well that it was its undertaking on July 11 the that the deposition of the witnesses would be dispensed with if by next time it had not yet been obtained, only proves the lack of merit of the defendant's motion for postponement, for which reason it deserves no sympathy from the Court in that regard. The defendant has told the Court since February 16, 1979, that it was going to take the deposition of its witnesses in Japan. Why did it take until August 25, 1979, or more than six months, to prepare its written interrogatories. Only the defendant itself is to blame for its failure to adduce evidence in support of its defenses. xxx xxx xxx 22 Petitioner Carrier was afforded ample time to present its side of the case. 23 It cannot complain now that it was denied due process when the Trial Court rendered its Decision on the basis of the evidence adduced. What due process abhors is absolute lack of opportunity to be heard. 24 On the Award of Attorney's Fees: Petitioner Carrier questions the award of attorney's fees. In both cases, respondent Court affirmed the award by the Trial Court of attorney's fees of P35,000.00 in favor of Development

Insurance in G.R. No. 69044, and P5,000.00 in favor of NISSHIN and DOWA in G.R. No. 71478. Courts being vested with discretion in fixing the amount of attorney's fees, it is believed that the amount of P5,000.00 would be more reasonable in G.R. No. 69044. The award of P5,000.00 in G.R. No. 71478 is affirmed. WHEREFORE, 1) in G.R. No. 69044, the judgment is modified in that petitioner Eastern Shipping Lines shall pay the Development Insurance and Surety Corporation the amount of P256,039 for the twenty-eight (28) packages of calorized lance pipes, and P71,540 for the seven (7) cases of spare parts, with interest at the legal rate from the date of the filing of the complaint on June 13, 1978, plus P5,000 as attorney's fees, and the costs. 2) In G.R.No.71478,the judgment is hereby affirmed. SO ORDERED. Narvasa, Cruz, Feliciano and Gancayco, JJ., concur.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 153563 February 07, 2005 NATIONAL TRUCKING AND FORWARDING CORPORATION, petitioner, vs. LORENZO SHIPPING CORPORATION, Respondent. DECISION QUISUMBING, J.: For review on certiorari are the Decision1 dated January 16, 2002, of the Court of Appeals, in CA-G.R. CV No. 48349, and its Resolution,2 of May 13, 2002, denying the motion for reconsideration of herein petitioner National Trucking and Forwarding Corporation (NTFC). The impugned decision affirmed in toto the judgment3 dated November 14, 1994 of the Regional Trial Court (RTC) of Manila, Branch 53, in Civil Case No. 90-52102. The undisputed facts, as summarized by the appellate court, are as follows: On June 5, 1987, the Republic of the Philippines, through the Department of Health (DOH), and the Cooperative for American Relief Everywhere, Inc. (CARE) signed an agreement wherein CARE would acquire from the United States government donations of non-fat dried milk and other food products from January 1, 1987 to December 31, 1989. In turn, the Philippines would transport and distribute the donated commodities to the intended beneficiaries in the country. The government entered into a contract of carriage of goods with herein petitioner National Trucking and Forwarding Corporation (NTFC). Thus, the latter shipped 4,868 bags of non-fat dried milk through herein respondent Lorenzo Shipping Corporation (LSC) from September to December 1988. The consignee named in the bills of lading issued by the respondent was Abdurahman Jama, petitioners branch supervisor in Zamboanga City. On reaching the port of Zamboanga City, respondents agent, Efren Ruste4 Shipping Agency, unloaded the 4,868 bags of non-fat dried milk and delivered the goods to petitioners warehouse. Before each delivery, Rogelio Rizada and Ismael Zamora, both delivery checkers of Efren Ruste Shipping Agency, requested Abdurahman to surrender the original bills of lading, but the latter merely presented certified true copies thereof. Upon completion of each delivery, Rogelio and Ismael asked Abdurahman to sign the delivery receipts. However, at times when Abdurahman had to attend to other business before a delivery was completed, he instructed his subordinates to sign the delivery receipts for him.

Notwithstanding the precautions taken, the petitioner allegedly did not receive the subject goods. Thus, in a letter dated March 11, 1989, petitioner NTFC filed a formal claim for nondelivery of the goods shipped through respondent. In its letter of April 26, 1989, the respondent explained that the cargo had already been delivered to Abdurahman Jama. The petitioner then decided to investigate the loss of the goods. But before the investigation was over, Abdurahman Jama resigned as branch supervisor of petitioner. Noting but disbelieving respondents insistence that the goods were delivered, the government through the DOH, CARE, and NTFC as plaintiffs filed an action for breach of contract of carriage, against respondent as defendant, with the RTC of Manila. After trial, the RTC resolved the case as follows: WHEREFORE, judgment is hereby rendered in favor of the defendant and against the plaintiffs, dismissing the latters complaint, and ordering the plaintiffs, pursuant to the defendants counterclaim, to pay, jointly and solidarily, to the defendant, actual damages in the amount of P50,000.00, and attorneys fees in the amount ofP70,000.00, plus the costs of suit. SO ORDERED.5 Dissatisfied with the foregoing ruling, herein petitioner appealed to the Court of Appeals. It faulted the lower court for not holding that respondent failed to deliver the cargo, and that respondent failed to exercise the extraordinary diligence required of common carriers. Petitioner also assailed the lower court for denying its claims for actual, moral, and exemplary damages, and for awarding actual damages and attorneys fees to the respondent.6 The Court of Appeals found that the trial court did not commit any reversible error. It dismissed the appeal, and affirmed the assailed decision in toto. Undaunted, petitioner now comes to us, assigning the following errors: I THE COURT OF APPEALS GRAVELY ERRED WHEN IT FAILED TO APPRECIATE AND APPLY THE LEGAL STANDARD OF EXTRAORDINARY DILIGENCE IN THE SHIPMENT AND DELIVERY OF GOODS TO THE RESPONDENT AS A COMMON CARRIER, AS WELL AS THE ACCOMPANYING LEGAL PRESUMPTION OF FAULT OR NEGLIGENCE ON THE PART OF THE COMMON CARRIER, IF THE GOODS ARE LOST, DESTROYED OR DETERIORATED, AS REQUIRED UNDER THE CIVIL CODE. II THE COURT OF APPEALS GRAVELY ERRED WHEN IT SUSTAINED THE BASELESS AND ARBITRARY AWARD OF ACTUAL DAMAGES AND ATTORNEYS FEES INASMUCH AS THE ORIGINAL COMPLAINT WAS FILED IN GOOD FAITH, WITHOUT MALICE AND WITH THE BEST INTENTION OF PROTECTING THE INTEREST AND INTEGRITY OF THE GOVERNMENT AND ITS CREDIBILITY AND RELATIONSHIP WITH INTERNATIONAL RELIEF AGENCIES AND DONOR STATES AND ORGANIZATION.7 The issues for our resolution are: (1) Is respondent presumed at fault or negligent as common carrier for the loss or deterioration of the goods? and (2) Are damages and attorneys fees due respondent? Anent the first issue, petitioner contends that the respondent is presumed negligent and liable for failure to abide by the terms and conditions of the bills of lading; that Abdurahman Jamas failure to testify should not be held against petitioner; and that the testimonies of Rogelio Rizada and Ismael Zamora, as employees of respondents agent, Efren Ruste Shipping Agency, were biased and could not overturn the legal presumption of respondents fault or negligence. For its part, the respondent avers that it observed extraordinary diligence in the delivery of the goods. Prior to releasing the goods to Abdurahman, Rogelio and Ismael required the surrender of the original bills of lading, and in their absence, the certified true copies showing that Abdurahman was indeed the consignee of the goods. In addition, they required Abdurahman or his designated subordinates to sign the delivery receipts upon completion of each delivery.

We rule for respondent. Article 17338 of the Civil Code demands that a common carrier observe extraordinary diligence over the goods transported by it. Extraordinary diligence is that extreme measure of care and caution which persons of unusual prudence and circumspection use for securing and preserving their own property or rights.9 This exacting standard imposed on common carriers in a contract of carriage of goods is intended to tilt the scales in favor of the shipper who is at the mercy of the common carrier once the goods have been lodged for shipment. Hence, in case of loss of goods in transit, the common carrier is presumed under the law to have been at fault or negligent.10 However, the presumption of fault or negligence, may be overturned by competent evidence showing that the common carrier has observed extraordinary diligence over the goods. In the instant case, we agree with the court a quo that the respondent adequately proved that it exercised extraordinary diligence. Although the original bills of lading remained with petitioner, respondents agents demanded from Abdurahman the certified true copies of the bills of lading. They also asked the latter and in his absence, his designated subordinates, to sign the cargo delivery receipts. This practice, which respondents agents testified to be their standard operating procedure, finds support in Article 353 of the Code of Commerce: ART. 353. . . . After the contract has been complied with, the bill of lading which the carrier has issued shall be returned to him, and by virtue of the exchange of this title with the thing transported, the respective obligations and actions shall be considered cancelled, . In case the consignee, upon receiving the goods, cannot return the bill of lading subscribed by the carrier, because of its loss or of any other cause, he must give the latter a receipt for the goods delivered, this receipt producing the same effects as the return of the bill of lading. (Emphasis supplied) Conformably with the aforecited provision, the surrender of the original bill of lading is not a condition precedent for a common carrier to be discharged of its contractual obligation. If surrender of the original bill of lading is not possible, acknowledgment of the delivery by signing the delivery receipt suffices. This is what respondent did. We also note that some delivery receipts were signed by Abdurahmans subordinates and not by Abdurahman himself as consignee. Further, delivery checkers Rogelio and Ismael testified that Abdurahman was always present at the initial phase of each delivery, although on the few occasions when Abdurahman could not stay to witness the complete delivery of the shipment, he authorized his subordinates to sign the delivery receipts for him. This, to our mind, is sufficient and substantial compliance with the requirements. We further note that, strangely, petitioner made no effort to disapprove Abdurahmans resignation until after the investigation and after he was cleared of any responsibility for the loss of the goods. With Abdurahman outside of its reach, petitioner cannot now pass to respondent what could be Abdurahmans negligence, if indeed he were responsible. On the second issue, petitioner submits there is no basis for the award of actual damages and attorneys fees. It maintains that its original complaint for sum of money with damages for breach of contract of carriage was not fraudulent, in bad faith, nor malicious. Neither was the institution of the action rash nor precipitate. Petitioner avers the filing of the action was intended to protect the integrity and interest of the government and its relationship and credibility with international relief agencies and donor states. On the other hand, respondent maintains that petitioners suit was baseless and malicious because instead of going after its absconding employee, petitioner wanted to recoup its losses from respondent. The trial court and the Court of Appeals were justified in granting actual damages and reasonable attorneys fees to respondent. On this point, we agree with petitioner.

The right to litigate should bear no premium. An adverse decision does not ipso facto justify an award of attorneys fees to the winning party.11 When, as in the instant case, petitioner was compelled to sue to protect the credibility of the government with international organizations, we are not inclined to grant attorneys fees. We find no ill motive on petitioners part, only an erroneous belief in the righteousness of its claim. Moreover, an award of attorneys fees, in the concept of damages under Article 2208 of the Civil Code,12 requires factual and legal justifications. While the law allows some degree of discretion on the part of the courts in awarding attorneys fees and expenses of litigation, the discretion must be exercised with great care approximating as closely as possible, the instances exemplified by the law.13 We have searched but found nothing in petitioners suit that justifies the award of attorneys fees. Respondent failed to show proof of actual pecuniary loss, hence, no actual damages are due in favor of respondent.14 WHEREFORE, the petition is PARTIALLY GRANTED. The assailed decision and resolution of the Court of Appeals in CA-G.R. CV No. 48349 dated January 16, 2002 and May 13, 2002 respectively, denying petitioners claim for actual, moral and exemplary damages are AFFIRMED. The award of actual damages and attorneys fees to respondent pursuant to the latters counterclaim in the trial court is DELETED. SO ORDERED. Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio and Azcuna, JJ., concur.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 164820 March 28, 2007 VICTORY LINER, INC., Petitioner, vs. PABLO M. RACE, Respondent. DECISION CHICO-NAZARIO, J.: In this Petition for Review on Certiorari under Rule 45 of the Rules of Court, 1 petitioner Victory Liner Inc. seeks to set aside the Decision of the Court of Appeals dated 26 April 2004 in CAG.R. SP No. 74010,2 affirming the Decision and Resolution of the National Labor Relations Commission (NLRC) dated 30 July 2002 and 30 August 2002, respectively, in NLRC-CA029327-01.3 In its Decision and Resolution, the NLRC vacated the Decision4 of Labor Arbiter Salimathar V. Nambi (Labor Arbiter Nambi) dated 31 July 2001 in NLRC-NCR-00-09-08922-99 and ordered the petitioner to reinstate respondent Pablo M. Race to his former position as a bus driver without loss of seniority rights and other privileges and benefits with full backwages computed from the time of his illegal dismissal in January 1998 up to his actual reinstatement. Culled from the records are the following facts: In June 1993, respondent was employed by the petitioner as a bus driver. As a requisite for his hiring, the respondent deposited a cash bond in the amount of P10,000.00 to the petitioner. Respondent was assigned to the Alaminos, Pangasinan - Cubao, Quezon City, route on the evening schedule.5 On the night of 24 August 1994, respondent drove his assigned bus from Alaminos, Pangasinan, destined to Cubao, Quezon City. While traversing Moncada, Tarlac, the bus he was driving was bumped by a Dagupan-bound bus. As a consequence thereof, respondent suffered a fractured left leg and was rushed to the Country Medical and Trauma Center in Tarlac City where he was operated on and confined from 24 August 1994 up to 10 October

1994. One month after his release from the said hospital, the respondent was confined again for further treatment of his fractured left leg at the Specialist Group Hospital in Dagupan City. His confinement therein lasted a month. Petitioner shouldered the doctors professional fee and the operation, medication and hospital expenses of the respondent in the aforestated hospitals.6 In January 1998, the respondent, still limping heavily, went to the petitioners office to report for work. He was, however, informed by the petitioner that he was considered resigned from his job. Respondent refused to accede and insisted on having a dialogue with the petitioners officer named Yolanda Montes (Montes). During their meeting, Montes told him that he was deemed to have resigned from his work and to accept a consideration ofP50,000.00. Respondent rejected the explanation and offer. Thereafter, before Christmas of 1998, he again conversed with Montes who reiterated to him that he was regarded as resigned but raised the consideration therein to P100,000.00. Respondent rebuffed the increased offer.7 On 30 June 1999, respondent, through his counsel, sent a letter to the petitioner demanding employment-related money claims. There being no response from the petitioner, the respondent filed before the Labor Arbiter on 1 September 1999 a complaint for (1) unfair labor practice; (2) illegal dismissal; (3) underpayment of wages; (4) nonpayment of overtime and holiday premium, service incentive leave pay, vacation and sick leave benefits, 13th month pay; (5) excessive deduction of withholding tax and SSS premium; and (6) moral and exemplary damages and attorneys fees. This was docketed as NLRC-NCR-00-09-08922-99.8 In its Position Paper dated 27 March 2000, petitioner claimed that respondent was paid strictly on commission basis; that respondent was a mere field personnel who performed his duties and functions outside the petitioners premises and whose time of work cannot be determined with reasonable certainty; that petitioner, therefore, was exempted from paying the respondent overtime compensation, night shift differential, holiday pay and service incentive leave; that notwithstanding the specific exemptions provided for in the Labor Code, the petitioner gave the respondent benefits better than those received by the other bus drivers of the petitioner; that during his employment, respondent was charged with and found guilty of numerous offenses which were sufficient bases for his dismissal; that the prescriptive period for the filing of an action or claim for reinstatement and payment of labor standard benefits is four years from the time the cause of action accrued; and that the respondents cause of action against petitioner had already prescribed because when the former instituted the aforesaid complaint on 1 September 1999, more than five years had already lapsed from the accrual of his cause of action on 24 August 1994.9 In his Reply dated 30 June 2000, respondent explained that when he stated in his complaint that he was illegally dismissed on 24 August 1994, what he meant and referred to was the date when he was no longer in a position to drive since he was hospitalized from 24 August 1994 up to 10 October 1994. Respondent also admitted that it was only in January 1998 that he informed the petitioner of his intent to report back for work.10 On 31 July 2001, Labor Arbiter Nambi rendered his Decision dismissing the complaint of respondent for lack of merit. He stated that the prescriptive period for filing an illegal dismissal case is four years from the dismissal of the employee concerned. Since the respondent stated in his complaint that he was dismissed from work on 24 August 1994 and he filed the complaint only on 1 September 1999, Labor Arbiter Nambi concluded that respondents cause of action against petitioner had already prescribed. He also noted that respondent committed several labor-related offenses against the petitioner which may be considered as just causes for the termination of his employment under Article 282 of the Labor Code. Further, Labor Arbiter Nambi opined that respondent was not a regular employee but a mere field personnel and, therefore, not entitled to service incentive leave, holiday pay, overtime pay and 13th month pay. He also ruled that respondent failed to present evidence showing that the latter was entitled to the abovestated money claims. The fallo of the said decision reads:

WHEREFORE, considering that the causes of action in this case rooted from the purported illegal dismissal of Pablo M. Race on August 24, 1994 when he figured in a vehicular accident, or on October 10, 1994 when he was released from the hospital, and he filed his complaint only on September 1, 1999 after a lapse of more than five (5) years, the action has long prescribed, aside from the fact that there is absolutely no evidence that respondent Victory Liner, Inc. is guilty of unfair labor practice and unjust dismissal, in addition to its specific exemptions from the letters of Article 82 of the Labor Code, as amended, the complaint and money claims are hereby DISMISSED by reason of prescription and for utter lack of merit and total absence of legal and factual basis in support thereof.11 Respondent appealed to the NLRC. On 30 July 2002, the NLRC promulgated its Decision reversing the decision of Labor Arbiter Nambi. It ordered the reinstatement of the respondent to his former position without loss of seniority rights and other privileges and benefits with full back-wages computed from the time of his illegal dismissal in January 1998 up to his actual reinstatement. It held that the respondents cause of action accrued, not on 24 August 1994, but in January 1998, when the respondent reported for work but was rejected by the petitioner. Thus, the respondents filing of complaint on 1 September 1999 was well-within the four-year prescriptive period. It also ruled that respondent was illegally dismissed by the petitioner as the latter failed to accord him due process. It found that the petitioner did not give the respondent a written notice apprising him of acts or omissions being complained of and a written notice informing him of the termination of his employment. In conclusion, the NLRC stated: WHEREFORE, in view of all the foregoing, respondent-appellees company is hereby ordered to reinstate complainant-appellant to his former position without loss of seniority rights and other privileges and benefits with full backwages computed from the time of his illegal dismissal on (sic) January 1988 up to his actual reinstatement. Except for this modification, the appealed decision is hereby AFFIRMED.12 Petitioner filed a Motion for Reconsideration of the NLRC Decision alleging, among other things, that the award of backwages to the respondent computed from January 1988 up to the promulgation of the NLRC Decision on 30 July 2002 was unlawful and unjust considering that respondent was employed only in June 1993. The NLRC, however, denied the same for lack of merit in its Resolution dated 30 August 2002. Petitioner assailed the NLRC Decision and Resolution, dated 30 July 2002 and 30 August 2002, respectively, via a Petition for Certiorari to the Court of Appeals. On 26 April 2004, the Court of Appeals dismissed the Petition, and found no grave abuse of discretion on the part of the NLRC. It ruled that the NLRC committed a simple typographical error when it stated in the fallo that the backwages of respondent shall be computed from January 1988 instead of January 1998 because in the paragraph prior to the dispositive portion, the NLRC categorically declared that the full backwages of the respondent was to be computed from January1998. In addition, the NLRC has indicated in its Statement of Facts that respondent was hired by the petitioner sometime in June 1993. It also held that the respondents filing of complaint on 1 September 1999 was within the four-year prescriptive period since the cause of action accrued when the respondent reported for work in January 1998 and was informed that he was considered resigned. It ratiocinated that respondent did not abandon his work and, instead, continued to be an employee of petitioner after he was discharged from the hospital, viz: Race did not abandon his work and continued to be an employee of Victory Liner, and their contemporaneous conduct show this. He has his pay slip covering the period of August 1-15, 1998 (p. 114, record), he was consulting the company physician who issued him receipts dated October 28, 1996 and July 21 1997 (p. 115, record), and he wrote a letter dated March 18, 1996 addressed to Gerarda Villa, Vice-President for Victory Liner, signifying his intention to be a dispatcher or conductor due to his injured leg (p. 116, Record). Further, annexed to Victory Liners Consolidated Supplemental Position Paper and Formal Offer of Evidence with Erratum is Exhibit "6-A-Race" (p. 56, record) submitted before the Labor Arbiter, where Race stated before

the investigator that after his release from the hospital he reported to Victory Liner twice a month. He also said that he filed for a sick leave which was approved for the maximum of 120 days. After his sick leave, he filed for disability leave, and this was also approved and ran until sometime in May 1997.13 It also found that the petitioner failed to comply with the requirements of due process in terminating the employment of respondent. The decretal portion of the said decision reads: WHEREFORE, the petition is DENIED DUE COURSE and DISMISSED.14 Petitioner filed the instant petition on the following grounds: THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED CONTRARY TO LAW AND JURISPRUDENCE WHEN IT HELD IN THE ASSAILED DECISION THAT: A. THE CAUSE OF ACTION OF RESPONDENT FOR ILLEGAL DISMISSAL HAS NOT YET PRESCRIBED DESPITE HAVING BEEN FILED AFTER FOUR (4) YEARS AND NINE (9) MONTHS FROM THE ACCRUAL OF THE ALLEGED ACTIONABLE WRONG; B. RESPONDENT IS ENTITLED TO REINSTATEMENT WITH FULL BACKWAGES AND OTHER BENEFITS CONSIDERING THAT THE TERMINATION OF HIS EMPLOYMENT BY PETITIONER WAS LEGAL AND JUSTIFIED.15 Anent the first issue, petitioner insisted that respondent had already abandoned his work and ceased to be its employee since November 1994; that the alleged "pay slip" for the period August 1-15, 1998 was not actually a pay slip but a mere cash advance/monetary aid extended to the respondent as the large amount of P65,000.00 stated therein was clearly inconsistent and disproportionate to the respondents low salary of P192.00 a day; that the petitioner merely accommodated the respondent as its former employee when the latter consulted the petitioners physician on 28 October 1996 and 21 July 1997; that the respondents letter dated 18 March 1996 to the petitioners Vice-President Gerarda Villa was only an application for the position of dispatcher or conductor and that such application was not granted; and that the foregoing circumstances cannot be considered as an indication of employer-employee relationship between the petitioner and respondent.16 Moreover, petitioner asserted that although the respondent reported for work twice a month after he was discharged from the hospital, it does not imply that the respondent was still considered as an employee at that time by the petitioner; that it allowed the respondent to have a 120-day sick leave because the latter was a former employee; and that it granted disability leave to the respondent since the latter was a former employee and that respondents application for disability leave implied an admission on the part of the respondent that he was no longer fit to work as a bus driver.17 Petitioner also asseverated that, based on the four-fold tests in determining the employeremployee relationship which includes the payment of wages and power to control the conduct of the employees, the respondent was no longer its employee upon the latters discharge from the hospital in November 1994 because at such time, the respondent was no longer fit to work as a bus driver and respondent did not render services to the petitioner. Thus, petitioner reasoned that it had no more power to control the conduct of, and it no longer paid any wages to, the respondent.18 Petitioner also argued that the cause of action of respondent had accrued on 10 November 1994; that from 10 November 1994 up to November 1998, the respondent did not render any services to nor filed a case or action against the petitioner; that the respondents filing of a complaint against petitioner on 1 September 1999 was clearly beyond the four-year prescriptive period allowed by law; that if the reckoning period of the accrual of a cause of action would be the time when the written demand was made by the respondent on the petitioner, then the fouryear prescriptive period would be interminable as it could be extended to one or more years; that this is not the spirit or intent of the law; that otherwise there is no more need to provide the

four-year prescriptive period as any complainant may simply allow the lapse of four years and file the action thereafter and that it would be considered as a compliance by simply making a purported demand for reinstatement after more than four years.19 These contentions are devoid of merit. It should be emphasized at the outset that as a rule, this Court is not a trier of facts and this applies with greater force in labor cases. Hence, factual findings of quasi-judicial bodies like the NLRC, particularly when they coincide with those of the Labor Arbiter and if supported by substantial evidence, are accorded respect and even finality by this Court. But where the findings of the NLRC and the Labor Arbiter are contradictory, as in the present case, this Court may delve into the records and examine for itself the questioned findings.20 In illegal dismissal cases, the employee concerned is given a period of four years from the time of his dismissal within which to institute a complaint. This is based on Article 1146 of the New Civil Code which states that actions based upon an injury to the rights of the plaintiff must be brought within four years. We explained the rationale in the case of Callanta v. Carnation Philippines, Inc.,21 thus: [O]nes employment, profession, trade or calling is a "property right," and the wrongful interference therewith is an actionable wrong. The right is considered to be property within the protection of a constitutional guaranty of due process of law. Clearly then, when one is arbitrarily and unjustly deprived of his job or means of livelihood, the action instituted to contest the legality of ones dismissal from employment constitutes, in essence, an action predicated "upon an injury to the rights of the plaintiff," as contemplated under Art. 1146 of the New Civil Code, which must be brought within four years. The four-year prescriptive period shall commence to run only upon the accrual of a cause of action of the worker. It is settled that in illegal dismissal cases, the cause of action accrues from the time the employment of the worker was unjustly terminated. 22 Thus, the four-year prescriptive period shall be counted and computed from the date of the employees dismissal up to the date of the filing of complaint for unlawful termination of employment.23 Proceeding therefrom, we shall now discuss and determine when the respondents cause of action accrued in order to ascertain whether the same had already prescribed. It is error to conclude that the employment of the respondent was unjustly terminated on 10 November 1994 because he was, at that time, still confined at the Specialist Group Hospital, Dagupan City, for further treatment of his fractured left leg. He must be considered as merely on sick leave at such time. Likewise, the respondent cannot also be deemed as illegally dismissed from work upon his release from the said hospital in December 1994 up to December 1997 since the records show that the respondent still reported for work to the petitioner and was granted sick and disability leave by the petitioner during the same period.24 The respondent must be considered as unjustly terminated from work in January 1998 since this was the first time he was informed by the petitioner that he was deemed resigned from his work. During that same occasion, the petitioner, in fact, tried to convince the respondent to accept an amount of P50,000.00 as a consolation for his dismissal but the latter rejected it.25 Thus, it was only at this time that the respondents cause of action accrued. Consequently, the respondents filing of complaint for illegal dismissal on 1 September 1999 was well within the four-year prescriptive period. It is also significant to note that from 10 November 1994 up to December 1997, the petitioner never formally informed the respondent of the fact of his dismissal either through a written notice or hearing. Indeed, it cannot be gainfully said that respondent was unlawfully dismissed on 10 November 1994 and that the cause of action accrued on that date. As to the alleged abandonment of work by the respondent on 10 November 1994, it should be emphasized that two factors must be present in order to constitute an abandonment: (a) the failure to report for work or absence without valid or justifiable reason; and (2) a clear intention to sever employer-employee relationship. The second factor is the more determinative factor

and is manifested by overt acts from which it may be deduced that the employee has no more intention to work. The intent to discontinue the employment must be shown by clear proof that it was deliberate and unjustified. Mere absence from work does not imply abandonment.26 It is apparent that respondent did not abandon his work. His absence from work for a long period of time was obviously due to the fact that he was still recuperating from two operations on his fractured leg. Petitioner knew this very well. In fact, petitioner shouldered the respondents medication and hospital expenses during the latters confinement and operation in two hospitals.27 Moreover, when the respondent was able to walk, although limping heavily, he still reported for work to the petitioner and was granted sick and disability leave.28 Clearly then, respondent did not abandon his job on 10 November 1994. In the same vein, the employer-employee relationship between the petitioner and respondent cannot be deemed to have been extinguished on 10 November 1994. It should be borne in mind that there are four tests in determining the existence of employer-employee relationship: (1) the manner of selection and engagement; (2) the payment of wages; (3) the presence or absence of the power of dismissal; and (4) the presence or absence of the power of control. The so-called "control test" is commonly regarded as the most crucial and determinative indicator of the presence or absence of an employer-employee relationship. Under the control test, an employer-employee relationship exists where the person for whom the services are performed reserves the right to control not only the end achieved, but also the manner and means to be used in reaching that end.29 Applying the aforecited tests, the employer-employee relationship between petitioner and respondent continued even after the latters discharge from the hospital in December 1994 up to 1997. Respondent had reported for work to the petitioner after his release from the hospital in December 1994. Subsequently, respondent was also granted a 120-day sick leave and disability leave by the petitioner.30 Respondent also availed himself of the services of the petitioners physician on two occasions after his release from the hospital in December 1994.31 On the other hand, the petitioner failed to establish the fact that the respondent ceased to be its employee on 10 November 1994. Except for its flimsy reason that the sick leave, disability leave and physician consultations were given to the respondent as mere accommodations for a former employee, the petitioner did not present any evidence showing that its employeremployee relationship with the respondent was extinguished on 10 November 1994. Evidently, these circumstances clearly manifest that petitioner exercised control over the respondent and that the latter was still under the employment of the petitioner even after December 1994. Given the foregoing considerations, petitioners assertion that the respondents cause of action accrued on 10 November 1994 must fail. Apropos the second issue, petitioner contended that the order for the reinstatement of the respondent as bus driver was unconstitutional for being tantamount to involuntary servitude; that when the respondent filed his complaint for illegal dismissal, the latter no longer desired to be reinstated to his former position as bus driver; that the respondents unwillingness to be reinstated as bus driver was also evident from his letter to the petitioner where the respondent manifested his intention to be hired as a dispatcher or conductor; and that to reinstate the respondent as bus driver despite the fact that it is against his will is involuntary servitude.32 Petitioner also argued that the order for the reinstatement was contrary to law; that as a common carrier, it is obliged under the law to observe extra-ordinary diligence in the conduct of its business; that it will violate such obligation if it will reinstate the respondent as bus driver; that to allow the respondent to drive a bus, despite the fact that the latter sustained a fractured left leg and was still limping, would imperil the lives of the passengers and the property of the petitioner; and that the award of backwages to the respondent was unjustified.33 The Labor Code mandates that before an employer may legally dismiss an employee from the service, the requirement of substantial and procedural due process must be complied with.

Under the requirement of substantial due process, the grounds for termination of employment must be based on just or authorized causes. The following are just causes for the termination of employment under Article 282 of the Labor Code: (a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work; (b) Gross and habitual neglect by the employee of his duties; (c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative; (d) Commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly authorized representative; and (e) Other causes analogous to the foregoing. Abandonment of work, or the deliberate and unjustified refusal of an employee to resume his employment, may be a just cause for the termination of employment under paragraph (b) of Article 282 of the Labor Code since it is a form of neglect of duty. As earlier discussed, the petitioner insisted that respondent had already abandoned his work on 10 November 1994 and, thus, the latters employment was deemed terminated as of such date. We, however, found that there was no abandonment of work on the part of the respondent. Petitioner also alleged that respondent was guilty of insubordination as well as gross and habitual neglect in the performance of his duties for reckless driving and for being involved in several vehicular accidents.34 The records, nonetheless, failed to show that the said charges were proven and that respondent was duly informed and heard with regard to the accusations. Since the petitioner, as an employer, is burdened to prove just cause for terminating the employment of respondent with clear and convincing evidence, and that petitioner failed to discharge this burden, we hold that respondent was dismissed without just cause by the petitioner. It has been established that petitioners failed to comply with the requirement of substantial due process in terminating the employment of respondent. We will now determine whether the petitioner had complied with the procedural aspect of a lawful dismissal. In the termination of employment, the employer must (a) give the employee a written notice specifying the ground or grounds of termination, giving to said employee reasonable opportunity within which to explain his side; (b) conduct a hearing or conference during which the employee concerned, with the assistance of counsel if the employee so desires, is given the opportunity to respond to the charge, present his evidence or rebut the evidence presented against him; and (c) give the employee a written notice of termination indicating that upon due consideration of all circumstances, grounds have been established to justify his termination.35 Petitioner miserably failed to comply with the foregoing requirements. There was nothing in the records which evinces that petitioner had sent a written notice to the respondent informing him of the ground or grounds of his termination or the reason why he was deemed resigned. It does not also appear that the petitioner held a hearing or conference where the respondent was given the opportunity to answer the charges of abandonment, insubordination and habitual neglect of duty against him. Neither did the petitioner send a written notice to the respondent informing the latter that his service is terminated after considering all the circumstances. In view of the fact that the petitioner neglected to observe the substantial and procedural due process in terminating the employment of respondent, we rule that the latter was illegally dismissed from work by the petitioner. Consequently, the respondent is entitled to reinstatement without loss of seniority rights, full backwages, inclusive of allowances, and other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement as provided for under Article 279 of the Labor Code.

It appears, however, that respondent was not seeking reinstatement. In his complaint for illegal dismissal against petitioner, respondent stated: RELIEF Complainant/s pray/s for the following: Reinstatement: No More.36 Respondent also sent to the petitioner a letter applying for the position of a dispatcher or conductor.37 In the said letter, the respondent explained that since he cannot drive anymore due to his leg injury, he was willing to be hired as a dispatcher or conductor. The abovestated facts obviously show that respondent was unwilling to be reinstated as a bus driver. Even assuming that respondent is willing to be reinstated as petitioners bus driver, the reinstatement is still unwarranted. There is a serious doubt as to whether the respondent is physically capable of driving a bus based on the following undisputed facts: (1) respondent was operated on and confined twice in two different hospitals for a fractured left leg; (2) steel plates were attached to his fractured leg;38 (3) each confinement lasted for a month; (4) after his discharge from the second confinement, respondent was still limping heavily; (5) when respondent had reported for work to the petitioner in January 1998, he was also limping; 39 and (6) respondent does not have a medical certificate which guarantees that his leg injury has already healed and that he is now physically capable of driving a bus. It should be stressed that petitioner is a common carrier and, as such, is obliged to exercise extra-ordinary diligence in transporting its passengers safely.40 To allow the respondent to drive the petitioners bus under such uncertain condition would, undoubtedly, expose to danger the lives of the passengers and the property of the petitioner. This would place the petitioner in jeopardy of violating its extra-ordinary diligence obligation and, thus, may be subjected to numerous complaints and court suits. It is clear therefore that the reinstatement of respondent not only would be deleterious to the riding public but would also put unreasonable burden on the business and interest of the petitioner. In this regard, it should be remembered that an employer may not be compelled to continue to employ such persons whose continuance in the service will patently be inimical to his interests.41 Based on the foregoing facts and circumstances, the reinstatement of the respondent is no longer feasible. Thus, in lieu of reinstatement, payment to respondent of separation pay equivalent to one month pay for every year of service is in order.42 WHEREFORE, the petition is PARTLY GRANTED insofar as it prays for the non-reinstatement of respondent. The Decision of the Court of Appeals dated 26 April 2004 in CA-G.R. SP No. 74010, is hereby AFFIRMED with the following MODIFICATIONS: Petitioner is ordered to pay the respondent, in lieu of reinstatement, separation pay of ONE (1) MONTH PAY for every year of service, and full backwages inclusive of allowances and other benefits or their monetary equivalent from 1 January 1998 up to the finality of this Decision. No costs. SO ORDERED. MINITA V. CHICO-NAZARIO Associate Justice

Republic of the Philippines SUPREME COURT Manila SPECIAL THIRD DIVISION G.R. No. 164820 December 8, 2008 VICTORY LINER, INC., petitioner, vs. PABLO RACE, respondent. RESOLUTION

CHICO-NAZARIO, J.: Petitioner Victory Liner, Inc. filed the present Motion for Reconsideration seeking modification of our Decision dated 28 March 2007. In the said Decision, we found that respondent Pablo Race, employed as one of petitioners bus drivers, was illegally dismissed by petitioner since petitioner failed to comply with both substantive and procedural due process in terminating respondents employment. However, considering the leg injury sustained by respondent in an accident which already rendered him incapable of driving a bus, we ordered payment of his separation pay instead of his reinstatement. The dispositive portion of our Decision reads: WHEREFORE, the petition is PARTLY GRANTED insofar as it prays for the nonreinstatement of respondent. The Decision of the Court of Appeals dated 26 April 2004 in CA-G.R. SP No. 74010, is hereby AFFIRMED with the following MODIFICATIONS: Petitioner is ordered to pay the respondent, in lieu of reinstatement, separation pay of ONE (1) MONTH PAY for every year of service, and full backwages inclusive of allowances and other benefits or their monetary equivalent from 1 January 1998 up to the finality of this Decision. No costs.1 Petitioner impugns the Decision on two grounds: (1) the award of full backwages inclusive of allowances and other benefits or their monetary equivalent to respondent is not warranted; and (2) the dismissal of respondent is authorized under Article 284 of the Labor Code. We find petitioners motion to be partly meritorious, compelling us to modify our Decision accordingly. Article 279 of the Labor Code, as amended, provides that an illegally dismissed employee shall be entitled to reinstatement, full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement. Based on this provision, an illegally dismissed employee shall be entitled to (1) reinstatement and (2) full backwages. In the event that reinstatement is no longer possible, then payment of separation pay may be ordered in its stead, hence, the illegally dismissed employee may claim (1) separation pay, and (2) full backwages.2 Nonetheless, this statutory provision is not absolute, and its application has been qualified and/or limited by our jurisprudence. Foremost is the case of Agabon v. National Labor Relations Commission,3 which definitively settled that where there is valid or authorized cause for the dismissal of the employee, but the employer failed to comply with statutory due process in effecting the same, the dismissal is not illegal. Logically, if there is no illegal dismissal in such a case, then we can deduce that the dismissed employee cannot avail himself of the rights under Article 279 of the Labor Code, i.e., reinstatement and full backwages. What the employee can demand from the employer, according to Agabon, is the payment of nominal damages as indemnification for the violation of the formers statutory rights. In San Miguel Corporation v. Javate, Jr.,4 we affirmed the consistent findings and conclusions of the Labor Arbiter, National Labor Relations Commission (NLRC), and Court of Appeals that the employee was illegally dismissed since he was still fit to resume his work; but the employers liability was mitigated by its evident good faith in terminating the employees services based on the terms of its Health, Welfare and Retirement Plan.5 Hence, the employee was ordered reinstated to his former position without loss of seniority and other privileges appertaining to him prior to his dismissal, but the award of backwages was limited to only one year considering the mitigating circumstance of good faith attributed to the employer. In another case, Dolores v. National Labor Relations Commission,6 the employee was terminated for her continuous absence without permission. Although we found that the employee was indeed guilty of breach of trust and violation of company rules, we still declared the employees dismissal illegal as it was too severe a penalty considering that she had served the employer company for 21 years, it was her first offense, and her leave to study the French language would ultimately benefit the employer who no longer had to spend for translation

services. Even so, other than ordering the employees reinstatement, we awarded the said employee backwages limited to a period of two years, given that the employer acted without malice or bad faith in terminating the employees services.7 While in the aforementioned cases of illegal dismissal, we ordered the employees reinstatement, but awarded only limited backwages in recognition of the employers good faith, there were also instances when we only required the employer to reinstate the dismissed employee without any award for backwages at all. The employee in Itogon-Suyoc Mines, Inc. v. National Labor Relations Commission,8was found guilty of breach of trust for stealing high-grade stones from his employer. However, taking into account the employees 23 years of previously unblemished service to his employer and absent any showing that his continued employment would result in the employers oppression or selfdestruction, we considered the employees dismissal a drastic punishment. We deemed that the ends of social and compassionate justice would be served by ordering the employee reinstated but without backwages in view of the employers obvious good faith. Similarly, in San Miguel Corporation v. Secretary of Labor,9 the employee was dismissed after he was caught buying from his co-workers medicines that were given gratis to them by the employer company, and re-selling said medicines, in subversion of the employers efforts to give medical benefits to its workers. We likewise found in this case that the employees dismissal was too drastic a punishment in light of his voluntary confession that he committed trafficking of company-supplied medicines out of necessity, as well as his promise not to repeat the same mistake. We ordered the employees reinstatement but without backwages, again, in consideration of the employers good faith in dismissing him. Reference may also be made to the case of Manila Electric Company v. National Labor Relations Commission,10wherein the employee was found responsible for the irregularities in the installation of electrical connections to a residence, for which reason, his services were terminated by the employers company. We, however, affirmed the findings of the NLRC and the Labor Arbiter that the employee should not have been dismissed considering his 20 years of service to the employer without any previous derogatory record and his being awarded in the past two commendations for honesty. We thus ruled that the employees reinstatement is proper, without backwages, bearing in mind the employers good faith in terminating his services. In our Decision in the present Petition, respondent suffered leg injury after figuring in an accident on 24 August 1994 while driving petitioners bus, for which he was operated on and confined at the hospital. We are unable to sustain petitioners position that respondent abandoned his job as early as 1994. For the next four years, respondent was reporting to petitioners office twice a month and still receiving his salary and medical assistance from petitioner. It was only in January 1998 that respondent was actually dismissed from employment when he was expressly informed that he was considered resigned from his job. We further found that respondent was not afforded procedural due process prior to his dismissal in 1998. We ordered that petitioner pay respondent (1) separation pay of one month for every year of service, in lieu of reinstatement; and (2) full backwages inclusive of allowances and other benefits or their monetary equivalent from 1 January 1998 up to the finality of this Decision. In its present motion, petitioner is asserting that it should be deemed to have acted in good faith when it considered respondent as resigned from work because the Court itself stated in the Decision that respondents reinstatement is no longer feasible due to his leg injury, and that to allow the respondent to drive petitioners bus in his present physical condition would place petitioner in jeopardy of violating its obligation as a common carrier to always exercise extraordinary diligence. Thus, invoking good faith, petitioner denies any liability to respondent for the payment of his backwages and allowances from 1 January 1998 to the date of finality of our Decision. We agree.

While we cannot subscribe to petitioners argument that respondent had already abandoned his job in 1994, we may concede that petitioner, given the particular circumstances of this case, had sufficient basis to reasonably and in good faith deem respondent resigned by 1998. In attributing good faith to petitioner, we give due regard to the following circumstances: First, respondent had been working for petitioner for only 15 months, from June 1993 to August 1994, when the accident occurred causing injury to his leg. Hence, he was able to render actual service to petitioner as a bus driver for the mere period of a little over a year, since his injury already kept him from working from 1994 onwards. Second, respondents leg injury prevented him from working as a bus driver for petitioner. In January 1998, when he went to petitioners office and was informed that he was deemed resigned from work, he was still limping heavily. Respondent neither alleged nor proved that despite the injury to his leg, he could still drive a bus. In fact, respondents letter to petitioners Vice President, dated 18 March 1996,11 requesting that he be transferred to the position of dispatcher or conductor, is very revealing of the fact that he could no longer drive a bus because of his leg injury. Third, despite respondents inability to render actual service for four years following the accident in 1994, petitioner still continued to pay him his salary and shoulder his medical expenses. When petitioner informed respondent that he was deemed resigned in 1998, petitioner even offered respondent the amount of P50,000.00 as financial assistance; and when respondent refused to receive the said amount, petitioner raised its offer toP100,000.00. Even though we do not have an exact determination of respondents monthly salary,12 it is safe to assume that the P100,000.00 would have been sufficient separation pay. In 1998, respondent had been in petitioners employ for only five years and, should he have agreed to accept the P100,000.00, he would have received a separation pay of P20,000.00 for every year of service (although strictly speaking, he rendered actual service for only a year and three months). And finally, as we discussed in our Decision,13 petitioner is a common carrier and, as such, is obliged to exercise extra-ordinary diligence in transporting its passengers 14 safely. Understandably, petitioner feared that it would be exposing to danger the lives of its passengers if it allowed the respondent to drive its bus despite the fact that his leg was injured. Although we still cannot depart from our original ruling that respondent was illegally dismissed since petitioner was, at the beginning, unable to identify with certitude its basis for respondents termination,15 as well as the date of effectivity thereof,16 we are now convinced, taking into account the foregoing circumstances, that petitioner acted without malice and in good faith when it formally informed respondent in 1998 that he was deemed resigned from work. We then proceed to determining what is the effect of petitioners good faith on its liability for backwages. Unrebutted and, thus, already established, is the fact that respondent is unable to drive a bus since the accident in August 1994. Yet, petitioner still kept him in its employ, gave him his salary, and paid for his medical expenses for the next four years, despite the fact that respondent did not render actual service for the said period. Respondent wanted to continue working for petitioner as a dispatcher or conductor, but he failed to show that such positions were available and that he would have been qualified and capable for the said jobs. We have previously recognized that the constitutional policy of providing full protection to labor is not intended to oppress or destroy management.17 The employer cannot be compelled to continuously pay an employee who can no longer perform the tasks for which he was hired. Seeing as petitioner continued to pay respondent his salaries and medical expenses for four years following the accident which caused his leg injury, despite the fact that respondent was unable to render actual service to petitioner, it would be the height of injustice to still require petitioner to pay respondent full backwages from the time of his termination in 1998 until the finality of this Decision. Reasons of fairness and equity, as well as the particular factual

circumstances attendant in this case, dictate us to modify our Decision by ordering petitioner to pay respondent limited backwages (inclusive of allowances and other benefits or their monetary equivalent) for five years,18 from 1 January 1998 to 31 December 2002, in addition to the separation pay of one month for every year of service awarded in lieu of reinstatement. We must clarify, however, that for purposes of computing respondents separation pay, he must still be deemed in petitioners employ until the finality of this Decision since his termination remains illegal, and is only mitigated by petitioners good faith. With respect to the second ground, petitioner invokes Article 284 of the Labor Code which provides that "an employer may terminate the services of an employee who has been found to be suffering from any disease and whose continued employment is prohibited by law or is prejudicial to his health as well as to the health of his co-employees." According to petitioner, the dismissal of respondent on account of his physical infirmity may be deemed analogous to a termination for health reasons because respondents physical disability r endered him incapable of performing his job as a bus driver. Moreover, respondents continued employment under such circumstance is prohibited by law because it would place petitioner in jeopardy of violating its common carrier obligation to observe extra-ordinary diligence. We note that petitioner cites Article 284 of the Labor Code as an authorized cause in dismissing respondent for the first time in its Motion for Reconsideration before us. Petitioner did not raise Article 284 as an authorized cause in terminating respondents employment during the proceedings before the Labor Arbiter, NLRC, and Court of Appeals, and even in its Petition for Review before us. To reiterate, petitioner alleged causes for dismissing respondent were abandonment of work, insubordination and gross and habitual neglect of duty. Petitioners reference to Article 284 of the Labor Code at such a belated stage cannot be allowed. The rule is well-settled that points of law, theories, issues, and arguments not adequately brought to the attention of the lower court (or in this case, the appropriate quasi-judicial administrative body) need not be considered by the reviewing court as they cannot be raised for the first time on appeal, much more in a motion for reconsideration as in this case, because this would be offensive to the basic rules of fair play, justice and due process. 19 This last ditch effort to shift to a new theory and raise a new matter in the hope of a favorable result is a pernicious practice that has been consistently rejected.20 We are not prepared to make a conclusion of law herein that may have far-reaching consequences based on an argument that was belatedly raised and evidently a mere after-thought. WHEREFORE, in view of the foregoing, the Motion is PARTIALLY GRANTED. The dispositive portion of the Decision dated 28 March 2007 in G.R. No. 164820 is MODIFIED in that petitioner is ordered to pay the respondent, in lieu of reinstatement, SEPARATION PAY of one (1) month pay for every year of service, andLIMITED BACKWAGES, inclusive of allowances and other benefits or their monetary equivalent, for a period of five (5) years, computed from 1 January 1998 to 31 December 2002. SO ORDERED. MINITA V. CHICO-NAZARIO Associate Justice

FIRST DIVISION [G.R. No. L-46558 : July 31, 1981.] PHILIPPINE AIR LINES, INC., Petitioner, vs. THE COURT OF APPEALS and JESUS V. SAMSON, Respondents. DECISION GUERRERO, J.:

This is a petition for review on Certiorari of the decision of the Court of Appeals 1 dated April 18, 1977, affirming with modification the decision of the Court of First Instance of Albay in Civil Case No. 1279, entitled Jesus V. Samson, plaintiff, vs. Philippine Air Lines, Inc., defendant, for damages. The dispositive portion of the trial courts decision reads: WHEREFORE, for all the foregoing considerations, judgment is hereby rendered in favor of the plaintiff and against the defendant ordering the defendant to pay the plaintiff, the following sums: P1988,000.00 as unearned income or damages; P50,000.00 for moral damages; P20,000.00 as attorneys fees and P5,000.00 as expenses of litigation, or a total of P273,000.00. Costs against the defendant. The appellate court modified the above decision, to wit: However, Plaintiff-Appellee, who has been deprived of his job since 1954, is entitled to the legal rate of interest on the P198,000.00 unearned income from the filing of the complaint cranad(Sec. 8, Rule 51, Rules of Court). WHEREFORE, with the modification indicated above, the judgment appealed from is affirmed, with costs against defendant-appellant. The complaint filed on July 1, 1954 by plaintiff Jesus V. Samson, private respondent herein, averred that on January 8, 1951, he flew as co-pilot on a regular flight from Manila to Legaspi with stops at Daet, Camarines Norte and Pili, Camarines Sur, with Captain Delfin Bustamante as commanding pilot of a C-47 plane belonging to defendant Philippine Air Lines, Inc., now the herein petitioner; that on attempting to land the plane at Daet airport, Captain Delfin Bustamante due to his very slow reaction and poor judgment overshot the airfield and as a result, notwithstanding the diligent efforts of the plaintiff co-pilot to avert an accident, the airplane crashlanded beyond the runway; that the jolt caused the head of the plaintiff to hit and break through the thick front windshield of the airplane causing him severe brain concussion, wounds and abrasions on the forehead with intense pain and suffering cranad(par. 6, complaint).:onad The complaint further alleged that instead of giving plaintiff expert and proper medical treatment called for by the nature and severity of his injuries, defendant simply referred him to a company physician, a general medical practitioner, who limited the treatment to the exterior injuries without examining the severe brain concussion of plaintiff cranad(par. 7, complaint); that several days after the accident, defendant Philippine Air Lines called back the plaintiff to active duty as co-pilot, and inspite of the latters repeated request for expert medical assistance, defendant had not given him any cranad(par. 8, complaint); that as a consequence of the brain injury sustained by plaintiff from the crash, he had been having periodic dizzy spells and had been suffering from general debility and nervousness cranad(par. 9, complaint); that defendant airline company instead of submitting the plaintiff to expert medical treatment, discharged the latter from its employ on December 21, 1953 on grounds of physical disability, thereby causing plaintiff not only to lose his job but to become physically unfit to continue as aviator due to defendants negligence in not giving him the proper medical attention cranad(pars. 10-11, complaint). Plaintiff prayed for damages in the amount of P180,000.00 representing his unearned income, P50,000.00 as moral damages, P20,000.00 as attorneys fees and P5,000.00 as expenses, or a total of P255,000.00. In its answer filed on July 28, 1954, defendant PAL denied the substantial averments in the complaint, alleging among others, that the accident was due solely and exclusively to inevitable unforeseen circumstances whereby plaintiff sustained only superficial wounds and minor injuries which were promptly treated by defendants medical personnel cranad(par. 5, answer); that plaintiff did not sustain brain injury or cerebral concussion from the accident since he passed the annual physical and medical examination given thereafter on April 24, 1951; that the headaches and dizziness experienced by plaintiff were due to emotional disturbance over his inability to pass the required up-grading or promotional course given by defendant companycranad(par. 6,

answer), and that, as confirmed by an expert neuro-surgeon, plaintiff was suffering-from neurosis and in view of this unfitness and disqualification from continuing as a pilot, defendant had to terminate plaintiffs employment cranad(pars. 7, 9, answer). Further, defendant alleged that by the very nature of its business as a common carrier, it is bound to employ only pilots who are proficient and in good mental, emotional and physical condition; that the pilot, Captain Delfin Bustamante, was a competent and proficient pilot, and although he was already afflicted with a tumor of the nasopharynx even before the accident of January 8, 1951, the Civil Aeronautics Administration, in passing upon the fitness of pilots, gave Capt. Bustamante a waiver of physical standards to enable him to retain his first class airman certificate since the affliction had not in the least affected his proficiency cranad(pars. 16-17, answer). By way of counterclaim, defendant prayed for P10,000.00 as expenses for the litigation. On March 25, 1958, defendant filed a Motion to Dismiss on the ground that the complaint is essentially a Workmens Compensation claim, stating a cause of action not cognizable within the general jurisdiction of the court. The Motion to Dismiss was denied in the order of April 14, 1958. After the reception of evidence, the trial court rendered on January 15, 1973 the decision, the dispositive portion of which has been earlier cited. The defendant Philippine Air Lines, Inc. appealed the decision to the Court of Appeals as being contrary to law and unsupported by the evidence. It raised as errors of the trial court cranad(a) the holding that the damages allegedly suffered by plaintiff are attributable to the accident of January 8, 1951 which was due to the negligence of defendant in having allowed Capt. Delfin Bustamante to continue flying despite his alleged slow reaction and poor judgment; cranad(b) the finding that defendant was negligent in not having given plaintiff proper and adequate expert medical treatment and assistance for the injuries allegedly sustained in the accident of January 8, 1951; and cranad(c) in ordering defendant to pay actual or compensatory damages, moral damages and attorneys fees to the plaintiff. On April 18, 1977, the Court of Appeals rendered its decision affirming the judgment of the lower court but modified the award of damages by imposing legal rate of interest on the P198,000.00 unearned income from the filing of the complaint, citing Sec. 8, Rule 51 of the Rules of Court. Its motion for reconsideration of the above judgment having been denied, Philippine Air Lines, Inc. filed this instant petition for Certiorari on the ground that the decision is not in accord with law or with the applicable jurisprudence, aside from its being replete with findings in the nature of speculation, surmises and conjectures not borne out by the evidence on record thereby resulting to misapprehension of facts and amounting to a grave abuse of discretion cranad(p. 7, Petition). Petitioner raises the fundamental question in the case at bar as follows: Is there a causal connection between the injuries suffered by private respondent during the accident on 8 January 1951 and the subsequent periodic dizzy spells, headache and general debility of which private respondent complained every now and then, on the one hand, and such periodic dizzy spells, headache and general debility allegedly caused by the accident and private respondents eventual discharge from employment, on the other? PAL submits that respondent courts award of damages to private respondent is anchored on findings in the nature of speculations, surmises and conjectures and not borne out by the evidence on record, thereby resulting in a misapprehension of facts and amounting to a grave abuse of discretion. Petitioners submission is without merit. As found by the respondent court, the following are the essential facts of the case: It appears that plaintiff, a licensee aviator, was employed by defendant a few years prior to January 8, 1951 as a regular co-pilot on a guaranteed basic salary of P750.00 a month. He was assigned to and/or paired with pilot Delfin Bustamante.

Sometime in December 1950, he complained to defendant through its authorized official about the slow reaction and poor judgment of pilot Delfin Bustamante. Notwithstanding said complaint, defendant allowed the pilot to continue flying. On January 8, 1951, the two manned the regular afternoon flight of defendants plane from Manila to Legaspi, with stops at Daet, Camarines Norte, and Pili, Camarines Sur. Upon making a landing at Daet, the pilot, with his slow reaction and poor judgment, overshot the airfield and, as a result of and notwithstanding diligent efforts of plaintiff to avert an accident, the airplane crash-landed beyond the runway into a mangrove. The jolt and impact caused plaintiff to hit his head upon the front windshield of the plane thereby causing his brain concussions and wounds on the forehead, with concomittant intense pain. Plaintiff was not given proper medical attention and treatment demanded by the nature and severity of his injuries. Defendant merely referred him to its clinic attended by general practitioners on his external injuries. His brain injury was never examined, much less treated. On top of that negligence, defendant recalled plaintiff to active duty as a copilot, completely ignoring his plea for expert medical assistance. Suffering periodic dizzy spells, headache and general debility, plaintiff every now and then complained to defendant. To make matters worst for plaintiff, defendant discharged him from his employment on December 21, 1953. In consequence, plaintiff has been beset with additional worries, basically financial. He is now a liability instead of a provider, of his family. On July 1, 1954, plaintiff filed a complaint for damages. Defendant vainly sought to dismiss the complaint after filing an answer. Then, the judgment and this appeal. Continuing, the respondent Court of Appeals further held: There is no question about the employment of plaintiff by defendant, his age and salary, the overshooting by pilot Bustamante of the airfield and crashlanding in a mangrove, his hitting his head on the front windshield of the plane, his intermittent dizzy spells, headache and general debility for which he was discharged from his employment on December 21, 1953. As the lower court aptly stated: From the evidence adduced by the parties, the Court finds the following facts to be uncontroverted: That the plaintiff Jesus V. Samson, on January 8, 1951 and a few years prior thereto, December 21, 1953, was a duly licensed pilot employed as a regular co-pilot of the defendant with assignment in its domestic air service in the Philippines; that on January 8, 1951, the defendants airplane met an accident in crashlanding at the Daet Airport, Camarines Norte by overshooting the runway and reaching the mangroves at the edge of the landing strip; that the jolt caused plaintiffs head to hit the front windshield of the airplane causing him to suffer wounds and abrasion on the forehead; that the defendant, instead of giving the plaintiff expert and proper medical treatment called for by the nature and severity of the injuries of the plaintiff, simply referred him to the clinic of the defendants physicians who are only general medical practitioners and not brain specialists; that the defendants physicians limited their treatment to the exterior injuries on the forehead of the plaintiff and made no examination of the severe concussion of the brain of the plaintiff; that the Medical Director and Flight Surgeon of the defendant were not able to definitely determine the cause of the complaint of the plaintiff as to the periodic attack of dizziness, spells and headache; that due to this laxity of the defendants physician and the continuous suffering of the ailment of the plaintiff complained of, he demanded for expert medical assistance for his brain injury and to send him to the United States, which demand was turned down and in effect denied by the defendant; that instead the defendant referred the plaintiff to a neurologist, Dr. Victor Reyes; that

from the time that said accident occurred on January 21, 1953, he was ordered grounded on several occasions because of his complaint of dizzy spells and headache; that instead of submitting the plaintiff to expert medical treatment as demanded by him and denied by the defendant, he was discharged from its employment on December 21, 1953 on the ground of physical disability, and that the plaintiff, at the time when the defendants plane met the accident, up to the time he was discharged, was regularly employed as a co-pilot and receiving a basic salary of P750.00 a month plus extra pay for flying time, and bonuses amounting to P300.00 a month. Even defendant-appellant itself admits as not controverted the following facts which generally admit what have been stated above as not controverted. In the case at bar, the following facts are not the subject of controversy: (1) First, that from July 1950 to 21 December 1953, plaintiff was employed with defendant company as a first officer or co-pilot and served in that capacity in defendants domestic services. (2) Second, that on January 1951, plaintiff did fly on defendants PI-C 94, as first officer or co-pilot, with the late Capt. Delfin Bustamante in command as pilot; that while making a landing at the Daet airport on that date, PI-C 94 did meet an accident as stated above. (3) Third, that at or about the time of the discharge from defendant company, plaintiff had complained of spells of dizziness, headaches and nervousness, by reason of which he was grounded from flight duty. In short, that at that time, or approximately from November 1953 up to the date of his discharge on 21 December 1953, plaintiff was actually physically unfit to discharge his duties as pilot. (4) Fourth, that plaintiffs unfitness for flight duty was properly established after a thorough medical examination by competent medical experts.cralaw cranad(pp. 11-12, appellants brief) hence, there can hardly be an issue, factual, legal or medical. Taking exception from the rest of the essential facts of the case as found by the respondent court PAL claims said facts are not fully borne out by the evidence on record and insists that the injuries suffered by private respondent during the accident on January 8, 1951 were superficial in nature; that the periodic spells, headache, and general debility complaint of every now and then by private respondent subsequent to the Jan. 8, 1951 incident were due to emotional disturbances and that no negligence can be attributed to Capt. Delfin Bustamante much less to PAL for the occurrence on January 8, 1951, hence PAL cannot be held liable for damages. Petitioner claims absence of any causal connection between private respondents superficial injuries and his alleged subsequent periodic spells, headache and general debility, pointing out that these subsequent ailments were found by competent physician, including an expert neurosurgeon, to be due to emotional disturbances insights the conclusions of Dr. Trajano V. Bernardo that respondents complaints were psychosomatic symptoms on the basis of declarations made by respondent himself, which conclusions are supported by similar diagnosis made by Drs. Damaceno J. Ago and Villaraza stating that respondent Samson was suffering from neurosis as well as the report of Dr. Victor Reyes, a neurological specialist, indicating that the symptoms were probably, most probably due to psychogenic factors and have no organic basis. In claiming that there is no factual basis for the finding of the respondent court that the crashlanding caused respondents brain concussion . cra ., with concomittant intense pain, for on the contrary, testimonial evidence establish the superficiality of the injuries sustained by respondent during the accident of January 8, 1951, petitioner quotes portions of the testimony of Dr.

Manuel S. Sayas, who declared that he removed the band-aid on the forehead of respondent and that he found out after removal that the latter had two contussed superficial wounds over the supra orbiter regions or just above the eyes measuring one centimeter long and one millimeter deep. He examined and found his blood pressure normal, no discharges from the nose and ears. Dr. Trajano V. Bernardo also testified that when he examined respondent Samson three days after the accident, the wound was already healed and found nothing wrong with his ears, nose and throat so that he was declared fit for duty after the sixth day. Petitioner goes further. It contends that there is no causal connection between respondents superficial injuries sustained during the accident on January 8, 1951 and plaintiffs discharge from employment with PAL on December 21, 1953. According to PAL, it was the repeated recurrence of respondents neurasthenic symptoms cranad(dizzy spells, headache, nervousness) which prompted PALs Flight Surgeon, Dr. Bernardo, to recommend that plaintiff be grounded permanently as respondent was psychologically unfit to resume his duties as pilot. PAL concludes that respondents eventual discharge from employment with PAL was effected for absolutely valid reasons, and only after he was thoroughly examined and found unfit to carry out his responsibilities and duties as a pilot.:onad We agree with the respondent court in finding that the dizzy spells, headache and general debility of private respondent Samson was an after-effect of the crash-landing and We find that such holding is supported by substantial evidence, which We quote from the courts decision, to wit: Defendant would imply that plaintiff suffered only superficial wounds which were treated and not brain injury. It would, by the opinion of its company doctors, Dr. Bernardo and Dr. Reyes, attribute the dizzy spells and headache to organic or as phychosomatic, neurasthenic or psychogenic, which we find outlandishly exaggerated. That plaintiffs condition as psychosomatic rather than organic in nature is allegedly confirmed by the fact that on six cranad(6) separate occasions after the accident he passed the required CAA physical examination for airmans certificate. cranad(Exhs. 78, 79, 80, 81, 83 and 92). We noticed, however, that there were other similar physical examinations conducted by the CAA on the person of plaintiff the report on which were not presented in evidence. Obviously, only those which suited defendants cause were hand-picked and offered in evidence. We hesitate to accept the opinion of the defendants two physicians, considering that Dr. Bernardo admittedly referred to Dr. Reyes because he could not determine the cause of the dizzy spells and headache and the latter admitted that it is extremely hard to be certain of the cause of his dizzy spells, and suggested a possibility that it was due to postraumatic syndrome, evidently due to the injuries suffered by the plaintiff in hitting the forehead against the windshield of the plane during the accident. Judgment are not based on possibilities. The admitted difficulty of defendants doctors in determining the cause of the dizzy spells and headache cannot be a sound basis for finding against the plaintiff and in favor of defendant. Whatever it might be, the fact is that such dizzy spells, headache and general debility was an after-effect of the crash-landing. Be it brain injury or psychosomatic, neurasthenic or psychogenic, there is no gainsaying the fact that it was caused by the crash-landing. As an effect of the cause, not fabricated or concocted, plaintiff has to be indemnified. The fact is that such effect caused his discharge. We are prone to believe the testimony of the plaintiffs doctors. Dr. Morales, a surgeon, found that blood was coming from plaintiffs ears and nose. He testified that plaintiff was suffering from cerebral concussion as a result of traumatic injury to the brain caused by his head hitting on the windshield of the plane during the crash-landing cranad(Exhibit G).

Dr. Conrado Aramil, a neurologist and psychiatrist with experience in two hospitals abroad, found abnormality reflected by the electroencephalogram examination in the frontal area on both sides of plaintiffs head cranad(Exhibits K, K-1). The opinion of these two specialist renders unnecessary that of plaintiffs wife who is a physician in her own right and because of her relation to the plaintiff, her testimony and opinion may not be discussed here, although her testimony is crystallized by the opinions of Dr. Ador Dionisio, Dr. Marquez, Dr. Jose O. Chan, Dr. Yambao and Dr. Sandico. Even the doctors presented by defendant admit vital facts about plaintiffs brain injury. Dr. Bernardo admits that due to the incident, the plaintiff continuously complained of his fainting spells, dizziness and headache everytime he flew as a co-pilot and everytime he went to defendants clinic no less than 25 times cranad(Exhibits 15 to 36), that he complained of the same to Dr. Reyes; that he promised to help send plaintiff to the United States for expert medical assistance provided that whatever finding thereat should not be attributed to the crash-landing incident to which plaintiff did not agree and that plaintiff was completely ignored by the defendant in his plea for expert medical assistance. They admitted that they could not determine definitely the cause of the fainting spells, dizziness and headache, which justifies the demand for expert medical assistance. We also find the imputation of gross negligence by respondent court to PAL for having allowed Capt. Delfin Bustamante to fly on that fateful day of the accident on January 8, 1951 to be correct, and We affirm the same, duly supported as it is by substantial evidence, clearly established and cited in the decision of said court which states as follows: The pilot was sick. He admittedly had tumor of the nasopharynx cranad(nose). He is now in the Great Beyond. The spot is very near the brain and the eyes. Tumor on the spot will affect the sinus, the breathing, the eyes which are very near it. No one will certify the fitness to fly a plane of one suffering from the disease. . cra . The fact First Pilot Bustamante has a long standing tumor of the Nasopharynx for which reason he was grounded since November 1947 is admitted in the letter cranad(Exh. 69-A) of Dr. Bernardo to the Medical Director of the CAA requesting waiver of physical standards. The request for waiver of physical standards is itself a positive proof that the physical condition of Capt. Bustamante is short of the standard set by the CAA. The Deputy Administrator of the CAA granted the request relying on the representation and recommendation made by Dr. Bernardo cranad(See Exh. 69). We noted, however, that the request cranad(Exh. 69-A) says that it is believed that his continuing to fly as a co-pilot does not involve any hazard.cralaw cranad(Italics supplied). Flying as a First Officer entails a very different responsibility than flying as a mere co-pilot. Defendant requested the CAA to allow Capt. Bustamante to fly merely as a co-pilot and it is safe to conclude that the CAA approved the request thus allowing Bustamante to fly only as a co-pilot. For having allowed Bustamante to fly as a First Officer on January 8, 1951, defendant is guilty of gross negligence and therefore should be made liable for the resulting accident. As established by the evidence, the pilot used to get treatments from Dr. Sycangco. He used to complain of pain in the face more particularly in the nose which caused him to have sleepless nights. Plaintiffs observation of the pilot was reported to the Chief Pilot who did nothing about it. Captain Carbonel of the defendant corroborated plaintiff of this matter. The complaint against the slow reaction of the pilot at least proved the observation. The observation could be disregarded. The fact that the complaint was not in writing does not detract anything from the seriousness thereof, considering that a miscalculation would not only cause the death of the crew but also of the passengers.

One month prior to the crash-landing, when the pilot was preparing to land in Daet, plaintiff warned him that they were not in the vicinity of Daet but above the town of Ligao. The plane hit outside the airstrip. In another instance, the pilot would hit the Mayon Volcano had not plaintiff warned him. These more than prove what plaintiff had complained of. Disregard thereof by defendant is condemnable. To bolster the claim that Capt. Bustamante has not suffered from any kind of sickness which hampered his flying ability, appellant contends that for at least one or more years following the accident of January 8, 1951, Capt. Bustamante continued to fly for defendant company as a pilot, and did so with great skill and proficiency, and without any further accident or mishap, citing tsn. pp. 756-765, January 20, 1965. We have painstakingly perused the records, particularly the transcript of stenographic notes cited, but found nothing therein to substantiate appellants contention. Instead, We discovered that the citation covers the testimony of Dr. Bernardo on the physical condition of Bustamante and nothing about his skills or proficiency to fly nor on the mishaps or accidents, matters which are beyond Dr. Bernardos competence anyway. Assuming that the pilot was not sick or that the tumor did not affect the pilot in managing the plane, the evidence shows that the overshooting of the runway and crash-landing at the mangrove was caused by the pilot for which acts the defendant must answer for damages caused thereby. And for this negligence of defendants employee, it is liable cranad(Joaquin vs. Aniceto, 12 SCRA 308). At least, the law presumes the employer negligent imposing upon it the burden of proving that it exercised the diligence of a good father of a family in the supervision of its employees. Defendant would want to tie plaintiff to the report he signed about the crash-landing. The report was prepared by his pilot and because the latter pleaded that he had a family too and would have nowhere to go if he lost his job, plaintiffs compassion would not upturn the truth about the crash-landing. We are for the truth not logic of any argumentation. At any rate, it is incorrect to say that the Accident Report cranad(Exh. 12 & 12-A), signed by plaintiff, exculpated Capt. Bustamante from any fault. We observed that the Report does not categorically state that Capt. Bustamante was not at fault. It merely relates in chronological sequence what Capt. Bustamante and plaintiff did from the take-off from Manila to the landing in Daet which resulted in an accident. On the contrary, we may infer the negligence of Bustamante from the following portion of the Report, to wit: . cra . I felt his brakes strong but as we neared the intersection of the NE-SW runway, the brakes were not as strong and I glanced at the system pressure which indicated 900 lbs. per sq. m. It was during the above precise instance that Capt. Bustamante lost his bearing and disposition. Had he maintained the pressure on the brakes the plane would not have overshot the runway. Verily, Bustamante displayed slow reaction and poor judgment.cranad(CA decision, pp. 8-12). This Court is not impressed by, much less can We accept petitioners invocation to calibrate once again the evidence testified to in detail and plucked from the voluminous transcript to support petitioners own conclusion. It is not the task of this Court to discharge the functions of a trier of facts much less to enter into a calibration of the evidence, notwithstanding petitioners wail that the judgment of the respondent court is based entirely on speculations, surmises and conjectures. We are convinced that respondent courts judgment is supported by strong, clear and substantial evidence.:onad Petitioner is a common carrier 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, as defined in Art. 1732, New Civil Code. The law is clear in requiring a common carrier to exercise the highest degree of care in the discharge of its duty and business of carriage and transportation under Arts. 1733, 1755 and 1756 of the New Civil Code. These Articles provide:

Art. 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case. Such extraordinary diligence in the vigilance over the goods is further expressed in Articles 1734, and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for the safety of the passengers is further set forth in articles 1755 and 1756. Art. 1755. A common carrier is bound to carry the passenger safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances. Art. 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed in Articles 1733 and 1755. The duty to exercise the utmost diligence on the part of common carriers is for the safety of passengers as well as for the members of the crew or the complement operating the carrier, the airplane in the case at bar. And this must be so for any omission, lapse or neglect thereof will certainly result to the damage, prejudice, nay injuries and even death to all aboard the plane, passengers and crew members alike. Now to the damages. The Court of Appeals affirmed the award of damages made by the trial court, stating that the damages awarded plaintiff by the lower court are in accordance with the facts, law and jurisprudence. The court further observed that defendant -appellant is still fortunate, considering that the unearned income was reckoned with only up to 1968 and not up to the present as plaintiff-appellee is still living. Whatever mathematical error defendantappellant could show by abstract argumentation, the same must be compensated by such deficiency of the damages awarded to plaintiff-appellee. As awarded by the trial court, private respondent was entitled to P198,000.00 as unearned income or compensatory damages; P50,000.00 for moral damages, P20,000.00 as attorneys fees and P5,000.00 as expenses of litigation, or a total of P273,000.00. The trial court arrived at the sum of P198,000.00 as unearned income or damages by considering that respondent Samson could have continued to work as airline pilot for fifteen more years, he being only 38 years at the time the services were terminated by the defendant cranad(PAL) and he would have earned P120,000.00 from 1954 to 1963 or a period of ten cranad(10) years at the rate of one thousand per month cranad(P750.00 basic salary plus P300.00 extra pay for extra flying time and bonuses; and considering further that in 1964 the basic pay of defendants pilot was increased to P12,000.00 annually, the plaintiff could have earned from 1964 to 1968 the sum of P60,000.00 in the form of salaries and another P18,000.00 as bonuses and extra pay for extra flying time at the same rate of P300 a month, or a grand total of P198,000.00 for the entire period. This claim of the plaintiff for loss or impairment of earning capacity is based on the provision of Article 2205 of the New Civil Code of the Philippines which provides that damages may be recovered for loss or impairment of earning capacity in cases of temporary or permanent personal injury. This provision of law has been construed and interpreted in the case of Aureliano Ropato, et al. vs. La Mallorca General Partnership, 56 O.G., 7812, which rules that law allows the recovery of damages for loss or impairment of earning capacity in cases of temporary or permanent personal injury. chanroblesvirtualawlibrary(Decision, CFI, pp. 98-99, Record on Appeal) The respondent appellate court modified the above award by ordering payment of legal interest on the P198,000.00 unearned income from the filing of the claim, citing Sec. 8, Rule 51 of the Rules of Court. Petitioner assails the award of the total sum of P198,000.00 as unearned income up to 1968 as being tenuous because firstly, the trial courts finding affirmed by the respondent court is allegedly based on pure speculation and conjecture and secondly, the award of P300.00 a month as extra pay for extra flying time from 1954 to 1968 is likewise speculative. PAL likewise

rejects the award of moral damages in the amount of P50,000.00 on the ground that private respondents action before the trial court does not fall under any of the cases enumerated in the law cranad(Art. 2219 of the New Civil Code) for which moral damages are recoverable and that although private respondents action gives the appearance that it is covered under quasi-delict as provided in Art. 21 of the New Civil Code, the definition of quasi-delict in Art. 2176 of the New Civil Code expressly excludes cases where there is a pre-existing contractual relation between the parties, as in the case under consideration, where an employer-employee relationship existed between PAL and private respondent. It is further argued that private respondents action cannot be deemed to be covered by Art. 21, inasmuch as there is no evidence on record to show that PAL wilfully cause(d) loss or injury to cranad(private respondent) in a manner that is contrary to morals, good customs or public policy . cra . Nor can private respondents action be considered analogous to either of the foregoing, for the reasons are obvious that it is not. chanroblesvirtualawlibrary(Memorandum of petitioner, pp. 418-421, Records) Having affirmed the gross negligence of PAL in allowing Capt. Delfin Bustamante to fly the plane to Daet on January 8, 1951 whose slow reaction and poor judgment was the cause of the crash-landing of the plane which resulted in private respondent Samson hitting his head against the windshield and causing him injuries for which reason PAL terminated his services and employment as pilot after refusing to provide him with the necessary medical treatment of respondents periodic spells, headache and general debility produced from said injuries, We must necessarily affirm likewise the award of damages or compensation under the provisions of Art. 1711 and Art. 1712 of the New Civil Code which provide: Art. 1711. Owners of enterprises and other employers are obliged to pay compensation for the death or injuries to their laborers, workmen, mechanics or other employees, even though the event may have been purely accidental or entirely due to a fortuitous cause, if the death or personal injury arose out of and in the course of the employment. The employer is also liable for compensation if the employee contracts any illness or disease caused by such employment or as the result of the nature of the employment. If the mishap was due to the employees own notorious negligence, or voluntary act, or drunkenness, the employer shall not be liable for compensation. When the employees lack of due care contributed to his death or injury, the compensation shall be equitably reduced. Art. 1712. If the death or injury is due to the negligence of a fellow-worker, the latter and the employer shall be solidarily liable for compensation. If a fellow-workers intentional or malicious act is the only cause of the death or injury, the employer shall not be answerable, unless it should be shown that the latter did not exercise due diligence in the selection or supervision of the plaintiffs fellow-worker. The grant of compensatory damages to the private respondent made by the trial court and affirmed by the appellate court by computing his basic salary per annum at P750.00 a month as basic salary and P300.00 a month for extra pay for extra flying time including bonus given in December every year is justified. The correct computation however should be P750 plus P300 x 12 months = P12,600 per annum x 10 years = P126,000.00 cranad(not P120,000.00 as computed by the court a quo). The further grant of increase in the basic pay of the pilots to P12,000 annually for 1964 to 1968 totalling P60,000.00 and another P18,000.00 as bonuses and extra pay for extra flying time at the same rate of P300.00 a month totals P78,000.00. Adding P126,000.00 cranad(1964 to 1968 compensation) makes a grand total of P204,000.00 cranad(not P198,000.00 as originally computed). As to the grant of moral damages in the sum of P50,000.00 We also approve the same. We have noted and considered the holding of the appellate court in the matter of bad faith on the part of PAL, stated hereunder, this wise: None of the essential facts material to the determination of the case have been seriously assailed: the overshooting of runway and crash-landing into the mangroves; the hitting of plaintiffs head to the front windshield of the plane; the oozing of blood out

of his ears, nose and mouth; the intermittent dizzy spells, headaches and general debility thereafter for which he was discharged from his employment; the condition of not to attribute the cause of the ailment to the crash-landing imposed in bad faith for a demanded special medical service abroad; and the resultant brain injury which defendants doctors could not understand nor diagnose. xxx The act of defendant-appellant in unjustly refusing plaintiff-appellees demand for special medical service abroad for the reason that plaintiff-appellees deteriorating physical condition was not due to the accident violates the provisions of Article 19 of the Civil Code on human relations to act with justice, give everyone his due, and observe honesty and good faith. chanroblesvirtualawlibrary(CA Resolution, pp. 151-152, Records) We reject the theory of petitioner that private respondent is not entitled to moral damages. Under the facts found by the trial court and affirmed by the appellate court and under the law and jurisprudence cited and applied, the grant of moral damages in the amount of P50,000.00 is proper and justified. The fact that private respondent suffered physical injuries in the head when the plane crashlanded due to the negligence of Capt. Bustamante is undeniable. The negligence of the latter is clearly a quasi-delict and therefore Article 2219, cranad(2) New Civil Code is applicable, justifying the recovery of moral damages. Even from the standpoint of the petitioner that there is an employer-employee relationship between it and private respondent arising from the contract of employment, private respondent is still entitled to moral damages in view of the finding of bad faith or malice by the appellate court, which finding We hereby affirm, applying the provisions of Art. 2220, New Civil Code which provides that willful injury to property may be a legal ground for awarding moral damages if the court should find that, under the circumstances, such damages are justly due. The same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith. The justification in the award of moral damages under Art. 19 of the New Civil Code on Human Relations which requires that every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith, as applied by respondent court is also well-taken and We hereby give Our affirmance thereto. With respect to the award of attorneys fees in the sum of P20,000.00 the same is likewise correct. As pointed out in the decision of the Court of Appeals, the plaintiff is entitled to attorneys fees because he was forced to litigate in order to enforce his valid claim cranad(Ganaban vs. Bayle, 30 SCRA 365; De la Cruz vs. De la Cruz, 22 SCRA 33; and many others); defendant acted in bad faith in refusing plaintiffs valid claimcranad(Filipino Pipe Foundry Corporation vs. Central Bank, 23 SCRA 1044); and plaintiff was dismissed and was forced to go to court to vindicate his right cranad(Nadura vs. Benguet Consolidated, Inc., 5 SCRA 879). We also agree with the modification made by the appellate court in ordering payment of legal interest from the date judicial demand was made by Pilot Samson against PAL with the filing of the complaint in the lower court. We affirm the ruling of the respondent court which reads: Lastly, the defendant-appellant claims that the legal rate of interest on the unearned compensation should be computed from the date of the judgment in the lower court, not from the filing of the complaint, citing a case where the issue raised in the Supreme Court was limited to when the judgment was rendered in the lower court or in the appellate court, which does not mean that it should not be computed from the filing of the complaint. Articles 1169, 2209 and 2212 of the Civil Code govern when interest shall be computed. Thereunder interest begins to accrue upon demand, extrajudicial or judicial. A complaint

is a judicial demand cranad(Cabarroguis vs. Vicente, 107 Phil. 340). Under Article 2212 of the Civil Code, interest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent upon this point. chanroblesvirtualawlibrary(CA Resolution, pp. 153-154, Records). The correct amount of compensatory damages upon which legal interest shall accrue from the filing of the complaint is P204,000.00 as herein computed and not P198,000.00. WHEREFORE, in view of all the foregoing, the judgment of the appellate court is hereby affirmed with slight modification in that the correct amount of compensatory damages is P204,000.00. With costs against petitioner. SO ORDERED. Makasiar and De Castro, JJ., concur. Teehankee and Melencio-Herrera, JJ., concur in the result.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 167346 April 2, 2007 SOLIDBANK CORPORATION/ METROPOLITAN BANK AND TRUST COMPANY, * Petitioner, vs. SPOUSES PETER and SUSAN TAN, Respondents. DECISION CORONA, J.: Assailed in this petition for review by certiorari under Rule 45 of the Rules of Court are the decision1 and resolution2 of the Court of Appeals (CA) dated November 26, 2004 and March 1, 2005, respectively, in CA-G.R. CV No. 58618,3 affirming the decision of the Regional Trial Court (RTC) of Manila, Branch 31.4 On December 2, 1991, respondents representative, Remigia Frias, deposited with petitioner ten checks worthP455,962. Grace Neri, petitioners teller no. 8 in its Juan Luna, Manila Branch, received two deposit slips for the checks, an original and a duplicate. Neri verified the checks and their amounts in the deposit slips then returned the duplicate copy to Frias and kept the original copy for petitioner. In accordance with the usual practice between petitioner and respondents, the latters passbook was left with petitioner for the recording of the deposits on the banks ledger. Later, respondents retrieved the passbook and discovered that one of the checks, Metropolitan Bank and Trust Company (Metrobank) check no. 403954, payable to cash in the sum of P250,000 was not posted therein. Immediately, respondents notified petitioner of the problem. Petitioner showed respondent Peter Tan a duplicate copy of a deposit slip indicating the list of checks deposited by Frias. But it did not include the missing check. The deposit slip bore the stamp mark "teller no. 7" instead of "teller no. 8" who previously received the checks. Still later, respondent Peter Tan learned from Metrobank (where he maintained an account) that Metrobank check no. 403954 had cleared after it was inexplicably deposited by a certain Dolores Lagsac in Premier Bank in San Pedro, Laguna. Respondents demanded that petitioner pay the amount of the check but it refused, hence, they filed a case for collection of a sum of money in the RTC of Manila, Branch 31. In its answer, petitioner averred that the deposit slips Frias used when she deposited the checks were spurious. Petitioner accused respondents of engaging in a scheme to illegally exact money from it. It added that, contrary to the claim of respondents, it was "teller no. 7" who

received the deposit slips and, although respondents insisted that Frias deposited ten checks, only nine checks were actually received by said teller. By way of counterclaim, it sought payment of P1,000,000 as actual and moral damages and P500,000 as exemplary damages. After trial, the RTC found petitioner liable to respondents: Upon examination of the oral, as well as of the documentary evidence which the parties presented at the trial in support of their respective contentions, and after taking into consideration all the circumstances of the case, this Court believes that the loss of Metrobank Check No. 403954 in the sum of P250,000.00 was due to the fault of [petitioner][It] retained the original copy of the [deposit slip marked by "Teller No. 7"]. There is a presumption in law that evidence willfully suppressed would be adverse if produced. Art. 1173 of the Civil Code states that "the fault or negligence of the obligor consists in the omission of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the person of the time and of the place"; and that "if the law or contract does not state the diligence which is to be observed in the performance, the same as expected of a good father of a family shall be required." For failure to comply with its obligation, [petitioner] is presumed to have been at fault or to have acted negligently unless they prove that they observe extraordinary diligence as prescribed in Arts. 1733 and 1735 of the Civil Code (Art. 1756) xxx xxx xxx WHEREFORE, premises considered, judgment is hereby rendered in favor of [respondents], ordering [petitioner] to pay the sum of P250,000, with legal interest from the time the complaint [for collection of a sum of money] was filed until satisfied; P25,000.00 moral damages; P25,000.00 exemplary damages plus 20% of the amount due [respondents] as and for attorneys fees. With costs. SO ORDERED.5 Petitioner appealed to the CA which affirmed in toto the RTCs assailed decision: Serious doubt [was] engendered by the fact that [petitioner] did not present the original of the deposit slip marked with "Teller No. 7" and on which the entry as to Metrobank Check No. 403954 did not appear. Even the most cursory look at the handwriting thereon reveal[ed] a very marked difference with that in the other deposit slips filled up [by Frias] on December 2, 1991. Said circumstances spawn[ed] the belief thus, the said deposit slip was prepared by [petitioner] itself to cover up for the lost check.6 Petitioner filed a motion for reconsideration but the CA dismissed it. Hence, this appeal.1a\^/phi1.net Before us, petitioner faults the CA for upholding the RTC decision. Petitioner argues that: (1) the findings of the RTC and the CA were not supported by the evidence and records of the case; (2) the award of damages in favor of respondents was unwarranted and (3) the application by the RTC, as affirmed by the CA, of the provisions of the Civil Code on common carriers to the instant case was erroneous.7 The petition must fail. On the first issue, petitioner contends that the lower courts erred in finding it negligent for the loss of the subject check. According to petitioner, the fact that the check was deposited in Premier Bank affirmed its claim that it did not receive the check. At the outset, the Court stresses that it accords respect to the factual findings of the trial court and, unless it overlooked substantial matters that would alter the outcome of the case, this Court will not disturb such findings.8We meticulously reviewed the records of the case and found no reason to deviate from the rule. Moreover, since the CA affirmed these findings on appeal, they are final and conclusive on us.9 We therefore sustain the RTCs and CAs findings that petitioner was indeed negligent and responsible for respondents lost check. On the issue of damages, petitioner argues that the moral and exemplary damages awarded by the lower courts had no legal basis. For the award of moral damages to stand, petitioner avers

that respondents should have proven the existence of bad faith by clear and convincing evidence. According to petitioner, simple negligence cannot be a basis for its award. It insists that the award of exemplary damages is justified only when the act complained of was done in a wanton, fraudulent and oppressive manner.10 We disagree. While petitioner may argue that simple negligence does not warrant the award of moral damages, it nonetheless cannot insist that that was all it was guilty of. It refused to produce the original copy of the deposit slip which could have proven its claim that it did not receive respondents missing check. Thus, in suppressing the best evidence that could have bolstered its claim and confirmed its innocence, the presumption now arises that it withheld the same for fraudulent purposes.11 Moreover, in presenting a false deposit slip in its attempt to feign innocence, petitioners bad faith was apparent and unmistakable. Bad faith imports a dishonest purpose or some moral obliquity or conscious doing of a wrong that partakes of the nature of fraud.12 As to the award of exemplary damages, the law allows it by way of example for the public good. The business of banking is impressed with public interest and great reliance is made on the banks sworn profession of diligence and meticulousness in giving irreproachable service. 13 For petitioners failure to carry out its responsibility and to account for respondents lost check, we hold that the lower courts did not err in awarding exemplary damages to the latter. On the last issue, we hold that the trial court did not commit any error. A cursory reading of its decision reveals that it anchored its conclusion that petitioner was negligent on Article 1173 of the Civil Code.14 In citing the different provisions of the Civil Code on common carriers, 15 the trial court merely made reference to the kind of diligence that petitioner should have performed under the circumstances. In other words, like a common carrier whose business is also imbued with public interest, petitioner should have exercised extraordinary diligence to negate its liability to respondents. Assuming arguendo that the trial court indeed used the provisions on common carriers to pin down liability on petitioner, still we see no reason to strike down the RTC and CA rulings on this ground alone. In one case,16 the Court did not hesitate to apply the doctrine of last clear chance (commonly used in transportation laws involving common carriers) to a banking transaction where it adjudged the bank responsible for the encashment of a forged check. There, we enunciated that the degree of diligence required of banks is more than that of a good father of a family in keeping with their responsibility to exercise the necessary care and prudence in handling their clients money. We find no compelling reason to disallow the application of the provisions on common carriers to this case if only to emphasize the fact that banking institutions (like petitioner) have the duty to exercise the highest degree of diligence when transacting with the public. By the nature of their business, they are required to observe the highest standards of integrity and performance, and utmost assiduousness as well.17 WHEREFORE, the assailed decision and resolution of the Court of Appeals dated November 26, 2004 and March 1, 2005, respectively, in CA-G.R. CV No. 58618 are hereby AFFIRMED. Accordingly, the petition is DENIED. Costs against petitioner. SO ORDERED. RENATO C. CORONA Associate Justice

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 131166 September 30, 1999 CALTEX (PHILIPPINES), INC., petitioner, vs. SULPICIO LINES, INC., GO SIOC SO, ENRIQUE S. GO, EUSEBIO S. GO, CARLOS S. GO, VICTORIANO S. GO, DOMINADOR S. GO, RICARDO S. GO, EDWARD S. GO, ARTURO S. GO, EDGAR S. GO, EDMUND S. GO, FRANCISCO SORIANO, VECTOR SHIPPING CORPORATION, TERESITA G. CAEZAL, AND SOTERA E. CAEZAL, respondents. PARDO, J.: Is the charterer of a sea vessel liable for damages resulting from a collision between the chartered vessel and a passenger ship? When MT Vector left the port of Limay, Bataan, on December 19, 1987 carrying petroleum products of Caltex (Philippines), Inc. (hereinafter Caltex) no one could have guessed that it would collide with MV Doa Paz, killing almost all the passengers and crew members of both ships, and thus resulting in one of the country's worst maritime disasters. The petition before us seeks to reverse the Court of Appeals decision 1 holding petitioner jointly liable with the operator of MT Vector for damages when the latter collided with Sulpicio Lines, Inc.'s passenger ship MV Doa Paz. The facts are as follows: On December 19, 1987, motor tanker MT Vector left Limay, Bataan, at about 8:00 p.m., enroute to Masbate, loaded with 8,800 barrels of petroleum products shipped by petitioner Caltex. 2 MT Vector is a tramping motor tanker owned and operated by Vector Shipping Corporation, engaged in the business of transporting fuel products such as gasoline, kerosene, diesel and crude oil. During that particular voyage, the MT Vector carried on board gasoline and other oil products owned by Caltex by virtue of a charter contract between them. 3 On December 20, 1987, at about 6:30 a.m., the passenger ship MV Doa Paz left the port of Tacloban headed for Manila with a complement of 59 crew members including the master and his officers, and passengers totaling 1,493 as indicated in the Coast Guard Clearance. 4 The MV Doa Paz is a passenger and cargo vessel owned and operated by Sulpicio Lines, Inc. plying the route of Manila/ Tacloban/ Catbalogan/ Manila/ Catbalogan/ Tacloban/ Manila, making trips twice a week. At about 10:30 p.m. of December 20, 1987, the two vessels collided in the open sea within the vicinity of Dumali Point between Marinduque and Oriental Mindoro. All the crewmembers of MV Doa Paz died, while the two survivors from MT Vector claimed that they were sleeping at the time of the incident. The MV Doa Paz carried an estimated 4,000 passengers; many indeed, were not in the passenger manifest. Only 24 survived the tragedy after having been rescued from the burning waters by vessels that responded to distress calls. 5 Among those who perished were public school teacher Sebastian Caezal (47 years old) and his daughter Corazon Caezal (11 years old), both unmanifested passengers but proved to be on board the vessel. On March 22, 1988, the board of marine inquiry in BMI Case No. 659-87 after investigation found that the MT Vector, its registered operator Francisco Soriano, and its owner and actual operator Vector Shipping Corporation, were at fault and responsible for its collision with MV Doa Paz. 6

On February 13, 1989, Teresita Caezal and Sotera E. Caezal, Sebastian Caezal's wife and mother respectively, filed with the Regional Trial Court, Branch 8, Manila, a complaint for "Damages Arising from Breach of Contract of Carriage" against Sulpicio Lines, Inc. (hereafter Sulpicio). Sulpicio, in turn, filed a third party complaint against Francisco Soriano, Vector Shipping Corporation and Caltex (Philippines), Inc. Sulpicio alleged that Caltex chartered MT Vector with gross and evident bad faith knowing fully well that MT Vector was improperly manned, ill-equipped, unseaworthy and a hazard to safe navigation; as a result, it rammed against MV Doa Paz in the open sea setting MT Vector's highly flammable cargo ablaze. On September 15, 1992, the trial court rendered decision dismissing, the third party complaint against petitioner. The dispositive portion reads: WHEREFORE, judgment is hereby rendered in favor of plaintiffs and against defendant-3rd party plaintiff Sulpicio Lines, Inc., to wit: 1. For the death of Sebastian E. Caezal and his 11-year old daughter Corazon G. Caezal, including loss of future earnings of said Sebastian, moral and exemplary damages, attorney's fees, in the total amount of P 1,241,287.44 and finally; 2. The statutory costs of the proceedings. Likewise, the 3rd party complaint is hereby DISMISSED for want of substantiation and with costs against the 3rd party plaintiff. IT IS SO ORDERED. DONE IN MANILA, this 15th day of September 1992. ARSENIO M. GONONG On appeal to the Court of Appeals interposed by Sulpicio Lines, Inc., on April 15, 1997, the Court of Appeal modified the trial court's ruling and included petitioner Caltex as one of the those liable for damages. Thus: WHEREFORE, in view of all the foregoing, the judgment rendered by the Regional Trial Court is hereby MODIFIED as follows: WHEREFORE, defendant Sulpicio Lines, Inc., is ordered to pay the heirs of Sebastian E. Caezal and Corazon Caezal: 1. Compensatory damages for the death of Sebastian E. Caezal and Corazon Caezal the total amount of ONE HUNDRED THOUSAND PESOS (P100,000); 2. Compensatory damages representing the unearned income of Sebastian E. Caezal, in the total amount of THREE HUNDRED SIX THOUSAND FOUR HUNDRED EIGHTY (P306,480.00) PESOS; 3. Moral damages in the amount of THREE HUNDRED THOUSAND PESOS (P300,000.00); 4. Attorney's fees in the concept of actual damages in the amount of FIFTY THOUSAND PESOS (P50,000.00); 5. Costs of the suit. Third party defendants Vector Shipping Co. and Caltex (Phils.), Inc. are held equally liable under the third party complaint to reimburse/indemnify defendant Sulpicio Lines, Inc. of the above-mentioned damages, attorney's fees and costs which the latter is adjudged to pay plaintiffs, the same to be shared half by Vector Shipping Co. (being the vessel at fault for the collision) and the other half by Caltex (Phils.), Inc. (being the charterer that negligently caused the shipping of combustible cargo aboard an unseaworthy vessel). SO ORDERED. JORGE S. IMPERIALAssociate Justice WE CONCUR: RAMON U. MABUTAS, JR. PORTIA ALIO HERMACHUELOS

Associate Justice Associate Justice. 8 Hence, this petition. We find the petition meritorious. First: The charterer has no liability for damages under Philippine Maritime laws. The respective rights and duties of a shipper and the carrier depends not on whether the carrier is public or private, but on whether the contract of carriage is a bill of lading or equivalent shipping documents on the one hand, or a charter party or similar contract on the other. 9 Petitioner and Vector entered into a contract of affreightment, also known as a voyage charter. 10 A charter party is a contract by which an entire ship, or some principal part thereof, is let by the owner to another person for a specified time or use; a contract of affreightment is one by which the owner of a ship or other vessel lets the whole or part of her to a merchant or other person for the conveyance of goods, on a particular voyage, in consideration of the payment of freight. 11 A contract of affreightment may be either time charter, wherein the leased vessel is leased to the charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single voyage. In both cases, the charter-party provides for the hire of the vessel only, either for a determinate period of time or for a single or consecutive voyage, the ship owner to supply the ship's store, pay for the wages of the master of the crew, and defray the expenses for the maintenance of the ship. 12 Under a demise or bareboat charter on the other hand, the charterer mans the vessel with his own people and becomes, in effect, the owner for the voyage or service stipulated, subject to liability for damages caused by negligence. If the charter is a contract of affreightment, which leaves the general owner in possession of the ship as owner for the voyage, the rights and the responsibilities of ownership rest on the owner. The charterer is free from liability to third persons in respect of the ship. 13 Second: MT Vector is a common carrier Charter parties fall into three main categories: (1) Demise or bareboat, (2) time charter, (3) voyage charter. Does a charter party agreement turn the common carrier into a private one? We need to answer this question in order to shed light on the responsibilities of the parties. In this case, the charter party agreement did not convert the common carrier into a private carrier. The parties entered into a voyage charter, which retains the character of the vessel as a common carrier. In Planters Products, Inc. vs. Court of Appeals, 14 we said: It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the whole portion of a vessel of one or more persons, provided the charter is limited to the ship only, as in the case of a timecharter or the voyage charter. It is only when the charter includes both the vessel and its crew, as in a bareboat or demise that a common carrier becomes private, at least insofar as the particular voyage covering the charter-party is concerned. Indubitably, a ship-owner in a time or voyage charter retains possession and control of the ship, although her holds may, for the moment, be the property of the charterer. Later, we ruled in Coastwise Lighterage Corporation vs. Court of Appeals: 15 Although a charter party may transform a common carrier into a private one, the same however is not true in a contract of affreightment . . . A common carrier is a person or corporation whose regular business is to carry passengers or property for all persons who may choose to employ and to remunerate him. 16 MT Vector fits the definition of a common carrier under Article 1732 of the Civil Code. In Guzman vs. Court of Appeals, 17 we ruled:

The Civil Code defines "common carriers" in the following terms: Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers for passengers or goods or both, by land, water, or air for compensation, offering their services to the public. The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as "a sideline"). Article 1732 also carefully avoids making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such services on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the "general public," i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population. We think that Article 1733 deliberately refrained from making such distinctions. It appears to the Court that private respondent is properly characterized as a common carrier even though he merely "back-hauled" goods for other merchants from Manila to Pangasinan, although such backhauling was done on a periodic, occasional rather than regular or scheduled manner, and even though respondent's principal occupation was not the carriage of goods for others. There is no dispute that private respondent charged his customers a fee for hauling their goods; that the fee frequently fell below commercial freight rates is not relevant here. Under the Carriage of Goods by Sea Act : Sec. 3. (1) The carrier shall be bound before and at the beginning of the voyage to exercise due diligence to (a) Make the ship seaworthy; (b) Properly man, equip, and supply the ship; xxx xxx xxx Thus, the carriers are deemed to warrant impliedly the seaworthiness of the ship. For a vessel to be seaworthy, it must be adequately equipped for the voyage and manned with a sufficient number of competent officers and crew. The failure of a common carrier to maintain in seaworthy condition the vessel involved in its contract of carriage is a clear breach of its duty prescribed in Article 1755 of the Civil Code. 18 The provisions owed their conception to the nature of the business of common carriers. This business is impressed with a special public duty. The public must of necessity rely on the care and skill of common carriers in the vigilance over the goods and safety of the passengers, especially because with the modern development of science and invention, transportation has become more rapid, more complicated and somehow more hazardous.19 For these reasons, a passenger or a shipper of goods is under no obligation to conduct an inspection of the ship and its crew, the carrier being obliged by law to impliedly warrant its seaworthiness. This aside, we now rule on whether Caltex is liable for damages under the Civil Code. Third: Is Caltex liable for damages under the Civil Code? We rule that it is not. Sulpicio argues that Caltex negligently shipped its highly combustible fuel cargo aboard an unseaworthy vessel such as the MT Vector when Caltex: 1. Did not take steps to have M/T Vector's certificate of inspection and coastwise license renewed; 2. Proceeded to ship its cargo despite defects found by Mr. Carlos Tan of Bataan Refinery Corporation;

3. Witnessed M/T Vector submitting fake documents and certificates to the Philippine Coast Guard. Sulpicio further argues that Caltex chose MT Vector transport its cargo despite these deficiencies. 1. The master of M/T Vector did not posses the required Chief Mate license to command and navigate the vessel; 2. The second mate, Ronaldo Tarife, had the license of a Minor Patron, authorized to navigate only in bays and rivers when the subject collision occurred in the open sea; 3. The Chief Engineer, Filoteo Aguas, had no license to operate the engine of the vessel; 4. The vessel did not have a Third Mate, a radio operator and lookout; and 5. The vessel had a defective main engine. 20 As basis for the liability of Caltex, the Court of Appeals relied on Articles 20 and 2176 of the Civil Code, which provide: Art. 20. Every person who contrary to law, willfully or negligently causes damage to another, shall indemnify the latter for the same. Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict and is governed by the provisions of this Chapter. And what is negligence? The Civil Code provides: Art. 1173. The fault or negligence of the obligor consists in the omission of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the persons, of the time and of the place. When negligence shows bad faith, the provisions of Article 1171 and 2201 paragraph 2, shall apply. If the law does not state the diligence which is to be observed in the performance, that which is expected of a good father of a family shall be required. In Southeastern College, Inc. vs. Court of Appeals, 21 we said that negligence, as commonly understood, is conduct which naturally or reasonably creates undue risk or harm to others. It may be the failure to observe that degree of care, precaution, and vigilance, which the circumstances justly demand, or the omission to do something which ordinarily regulate the conduct of human affairs, would do. The charterer of a vessel has no obligation before transporting its cargo to ensure that the vessel it chartered complied with all legal requirements. The duty rests upon the common carrier simply for being engaged in "public service." 22 The Civil Code demands diligence which is required by the nature of the obligation and that which corresponds with the circumstances of the persons, the time and the place. Hence, considering the nature of the obligation between Caltex and MT Vector, liability as found by the Court of Appeals is without basis. The relationship between the parties in this case is governed by special laws. Because of the implied warranty of seaworthiness, 23 shippers of goods, when transacting with common carriers, are not expected to inquire into the vessel's seaworthiness, genuineness of its licenses and compliance with all maritime laws. To demand more from shippers and hold them liable in case of failure exhibits nothing but the futility of our maritime laws insofar as the protection of the public in general is concerned. By the same token, we cannot expect passengers to inquire every time they board a common carrier, whether the carrier possesses the necessary papers or that all the carrier's employees are qualified. Such a practice would be an absurdity in a business where time is always of the essence. Considering the nature of transportation business, passengers and shippers alike customarily presume that common carriers possess all the legal requisites in its operation.

Thus, the nature of the obligation of Caltex demands ordinary diligence like any other shipper in shipping his cargoes. A cursory reading of the records convinces us that Caltex had reasons to believe that MT Vector could legally transport cargo that time of the year. Atty. Poblador: Mr. Witness, I direct your attention to this portion here containing the entries here under "VESSEL'S DOCUMENTS 1. Certificate of Inspection No. 1290-85, issued December 21, 1986, and Expires December 7, 1987", Mr. Witness, what steps did you take regarding the impending expiry of the C.I. or the Certificate of Inspection No. 1290-85 during the hiring of MT Vector? Apolinario Ng: At the time when I extended the Contract, I did nothing because the tanker has a valid C.I. which will expire on December 7, 1987 but on the last week of November, I called the attention of Mr. Abalos to ensure that the C.I. be renewed and Mr. Abalos, in turn, assured me they will renew the same. Q: What happened after that? A: On the first week of December, I again made a follow-up from Mr. Abalos, and said they were going to send me a copy as soon as possible, sir. 24 xxx xxx xxx Q: What did you do with the C.I.? A: We did not insist on getting a copy of the C.I. from Mr. Abalos on the first place, because of our long business relation, we trust Mr. Abalos and the fact that the vessel was able to sail indicates that the documents are in order. . . . 25 On cross examination Atty. Sarenas: This being the case, and this being an admission by you, this Certificate of Inspection has expired on December 7. Did it occur to you not to let the vessel sail on that day because of the very approaching date of expiration? Apolinar Ng: No sir, because as I said before, the operation Manager assured us that they were able to secure a renewal of the Certificate of Inspection and that they will in time submit us a copy. 26 Finally, on Mr. Ng's redirect examination: Atty. Poblador: Mr. Witness, were you aware of the pending expiry of the Certificate of Inspection in the coastwise license on December 7, 1987. What was your assurance for the record that this document was renewed by the MT Vector? Atty. Sarenas: . . . Atty. Poblador: The certificate of Inspection? A: As I said, firstly, we trusted Mr. Abalos as he is a long time business partner; secondly, those three years; they were allowed to sail by the Coast Guard. That are some that make me believe that they in fact were able to secure the necessary renewal. Q: If the Coast Guard clears a vessel to sail, what would that mean? Atty. Sarenas: Objection. Court: He already answered that in the cross examination to the effect that if it was allowed, referring to MV Vector, to sail, where it

is loaded and that it was scheduled for a destination by the Coast Guard, it means that it has Certificate of Inspection extended as assured to this witness by Restituto Abalos. That in no case MV Vector will be allowed to sail if the Certificate of inspection is, indeed, not to be extended. That was his repeated explanation to the cross-examination. So, there is no need to clarify the same in the re-direct examination. 27 Caltex and Vector Shipping Corporation had been doing business since 1985, or for about two years before the tragic incident occurred in 1987. Past services rendered showed no reason for Caltex to observe a higher degree of diligence. Clearly, as a mere voyage charterer, Caltex had the right to presume that the ship was seaworthy as even the Philippine Coast Guard itself was convinced of its seaworthiness. All things considered, we find no legal basis to hold petitioner liable for damages. As Vector Shipping Corporation did not appeal from the Court of Appeals' decision, we limit our ruling to the liability of Caltex alone. However, we maintain the Court of Appeals' ruling insofar as Vector is concerned. WHEREFORE, the Court hereby GRANTS the petition and SETS ASIDE the decision of the Court of Appeals in CA-G.R. CV No. 39626, promulgated on April 15, 1997, insofar as it held Caltex liable under the third party complaint to reimburse/indemnify defendant Sulpicio Lines, Inc. the damages the latter is adjudged to pay plaintiffs-appellees. The Court AFFIRMS the decision of the Court of Appeals insofar as it orders Sulpicio Lines, Inc. to pay the heirs of Sebastian E. Caezal and Corazon Caezal damages as set forth therein. Third-party defendant-appellee Vector Shipping Corporation and Francisco Soriano are held liable to reimburse/indemnify defendant Sulpicio Lines, Inc. whatever damages, attorneys' fees and costs the latter is adjudged to pay plaintiffs-appellees in the case. No costs in this instance. SO ORDERED. Davide, Jr., C.J., Kapunan and Ynares-Santiago, JJ., concur. Puno, J., no part due to close relation with a party.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 127897 November 15, 2001 DELSAN TRANSPORT LINES, INC., petitioner, vs. THE HON. COURT OF APPEALS and AMERICAN HOME ASSURANCE CORPORATION, respondents. DE LEON, JR., J.: Before us is a petition for review on certiorari of the Decision1 of the Court of Appeals in CAG.R. CV No. 39836 promulgated on June 17, 1996, reversing the decision of the Regional Trial Court of Makati City, Branch 137, ordering petitioner to pay private respondent the sum of Five Million Ninety-Six Thousand Six Hundred Thirty-Five Pesos and Fifty-Seven Centavos (P5,096,635.57) and costs and the Resolution2 dated January 21, 1997 which denied the subsequent motion for reconsideration. The facts show that Caltex Philippines (Caltex for brevity) entered into a contract of affreightment with the petitioner, Delsan Transport Lines, Inc., for a period of one year whereby the said common carrier agreed to transport Caltexs industrial fuel oil from the BatangasBataan Refinery to different parts of the country. Under the contract, petitioner took on board its

vessel, MT Maysun 2,277.314 kiloliters of industrial fuel oil of Caltex to be delivered to the Caltex Oil Terminal in Zamboanga City. The shipment was insured with the private respondent, American Home Assurance Corporation. On August 14, 1986, MT Maysum set sail from Batangas for Zamboanga City. Unfortunately, the vessel sank in the early morning of August 16, 1986 near Panay Gulf in the Visayas taking with it the entire cargo of fuel oil. Subsequently, private respondent paid Caltex the sum of Five Million Ninety-Six Thousand Six Hundred Thirty-Five Pesos and Fifty-Seven Centavos (P5,096,635.67) representing the insured value of the lost cargo. Exercising its right of subrogation under Article 2207 of the New Civil Code, the private respondent demanded of the petitioner the same amount it paid to Caltex. Due to its failure to collect from the petitioner despite prior demand, private respondent filed a complaint with the Regional Trial Court of Makati City, Branch 137, for collection of a sum of money. After the trial and upon analyzing the evidence adduced, the trial court rendered a decision on November 29, 1990 dismissing the complaint against herein petitioner without pronouncement as to cost. The trial court found that the vessel, MT Maysum, was seaworthy to undertake the voyage as determined by the Philippine Coast Guard per Survey Certificate Report No. M5-016-MH upon inspection during its annual dry-docking and that the incident was caused by unexpected inclement weather condition or force majeure, thus exempting the common carrier (herein petitioner) from liability for the loss of its cargo.3 The decision of the trial court, however, was reversed, on appeal, by the Court of Appeals. The appellate court gave credence to the weather report issued by the Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAGASA for brevity) which showed that from 2:00 oclock to 8:oo oclock in the morning on August 16, 1986, the wind speed remained at 10 to 20 knots per hour while the waves measured from .7 to two (2) meters in height only in the vicinity of the Panay Gulf where the subject vessel sank, in contrast to herein petitioners allegation that the waves were twenty (20) feet high. In the absence of any explanation as to what may have caused the sinking of the vessel coupled with the finding that the same was improperly manned, the appellate court ruled that the petitioner is liable on its obligation as common carrier4 to herein private respondent insurance company as subrogee of Caltex. The subsequent motion for reconsideration of herein petitioner was denied by the appellate court. Petitioner raised the following assignments of error in support of the instant petition,5 to wit: I THE COURT OF APPEALS ERRED IN REVERSING THE DECISION OF THE REGIONAL TRIAL COURT. II THE COURT OF APPEALS ERRED AND WAS NOT JUSTIFIED IN REBUTTING THE LEGAL PRESUMPTION THAT THE VESSEL MT "MAYSUN" WAS SEAWORTHY. III THE COURT OF APPEALS ERRED IN NOT APPLYING THE DOCTRINE OF THE SUPREME COURT IN THE CASE OF HOME INSURANCE CORPORATION V. COURT OF APPEALS. Petitioner Delsan Transport Lines, Inc. invokes the provision of Section 113 of the Insurance Code of the Philippines, which states that in every marine insurance upon a ship or freight, or freightage, or upon any thin which is the subject of marine insurance there is an implied warranty by the shipper that the ship is seaworthy. Consequently, the insurer will not be liable to the assured for any loss under the policy in case the vessel would later on be found as not seaworthy at the inception of the insurance. It theorized that when private respondent paid Caltex the value of its lost cargo, the act of the private respondent is equivalent to a tacit recognition that the ill-fated vessel was seaworthy; otherwise, private respondent was not legally liable to Caltex due to the latters breach of implied warranty under the marine insurance policy that the vessel was seaworthy.

The petitioner also alleges that the Court of Appeals erred in ruling that MT Maysun was not seaworthy on the ground that the marine officer who served as the chief mate of the vessel, Francisco Berina, was allegedly not qualified. Under Section 116 of the Insurance Code of the Philippines, the implied warranty of seaworthiness of the vessel, which the private respondent admitted as having been fulfilled by its payment of the insurance proceeds to Caltex of its lost cargo, extends to the vessels complement. Besides, petitioner avers that although Berina had merely a 2nd officers license, he was qualified to act as the vessels chief officer under Chapter IV(403), Category III(a)(3)(ii)(aa) of the Philippine Merchant Marine Rules and Regulations. In fact, all the crew and officers of MT Maysun were exonerated in the administrative investigation conducted by the Board of Marine Inquiry after the subject accident.6 In any event, petitioner further avers that private respondent failed, for unknown reason, to present in evidence during the trial of the instant case the subject marine cargo insurance policy it entered into with Caltex. By virtue of the doctrine laid down in the case of Home Insurance Corporation vs. CA,7 the failure of the private respondent to present the insurance policy in evidence is allegedly fatal to its claim inasmuch as there is no way to determine the rights of the parties thereto. Hence, the legal issues posed before the Court are: I Whether or not the payment made by the private respondent to Caltex for the insured value of the lost cargo amounted to an admission that the vessel was seaworthy, thus precluding any action for recovery against the petitioner. II Whether or not the non-presentation of the marine insurance policy bars the complaint for recovery of sum of money for lack of cause of action. We rule in the negative on both issues. The payment made by the private respondent for the insured value of the lost cargo operates as waiver of its (private respondent) right to enforce the term of the implied warranty against Caltex under the marine insurance policy. However, the same cannot be validly interpreted as an automatic admission of the vessels seaworthiness by the private respondent as to foreclose recourse against the petitioner for any liability under its contractual obligation as a common carrier. The fact of payment grants the private respondent subrogatory right which enables it to exercise legal remedies that would otherwise be available to Caltex as owner of the lost cargo against the petitioner common carrier.8 Article 2207 of the New civil Code provides that: Art. 2207. If the plaintiffs property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. If the amount paid by the insurance company does not fully cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency from the person causing the loss or injury. The right of subrogation has its roots in equity. It is designed to promote and to accomplish justice and is the mode which equity adopts to compel the ultimate payment of a debt by one who in justice and good conscience ought to pay.9 It is not dependent upon, nor does it grow out of, any privity of contract or upon written assignment of claim. It accrues simply upon payment by the insurance company of the insurance claim.10 Consequently, the payment made by the private respondent (insurer) to Caltex (assured) operates as an equitable assignment to the former of all the remedies which the latter may have against the petitioner. From the nature of their business and for reasons of public policy, common carriers are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of passengers transported by them, according to all the circumstance of each case. 11 In the event of loss, destruction or deterioration of the insured goods, common carriers shall be responsible

unless the same is brought about, among others, by flood, storm, earthquake, lightning or other natural disaster or calamity.12 In all other cases, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence.13 In order to escape liability for the loss of its cargo of industrial fuel oil belonging to Caltex, petitioner attributes the sinking of MT Maysun to fortuitous even or force majeure. From the testimonies of Jaime Jarabe and Francisco Berina, captain and chief mate, respectively of the ill-fated vessel, it appears that a sudden and unexpected change of weather condition occurred in the early morning of August 16, 1986; that at around 3:15 oclock in the morning a squall ("unos") carrying strong winds with an approximate velocity of 30 knots per hour and big waves averaging eighteen (18) to twenty (20) feet high, repeatedly buffeted MT Maysun causing it to tilt, take in water and eventually sink with its cargo. 14 This tale of strong winds and big waves by the said officers of the petitioner however, was effectively rebutted and belied by the weather report15 from the Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAGASA), the independent government agency charged with monitoring weather and sea conditions, showing that from 2:00 oclock to 8:00 oclock in the morning on August 16, 1986, the wind speed remained at ten (10) to twenty (20) knots per hour while the height of the waves ranged from .7 to two (2) meters in the vicinity of Cuyo East Pass and Panay Gulf where the subject vessel sank. Thus, as the appellate court correctly ruled, petitioners vessel, MT Maysun, sank with its entire cargo for the reason that it was not seaworthy. There was no squall or bad weather or extremely poor sea condition in the vicinity when the said vessel sank. The appellate court also correctly opined that the petitioners witnesses, Jaime Jarabe and Francisco Berina, ship captain and chief mate, respectively, of the said vessel, could not be expected to testify against the interest of their employer, the herein petitioner common carrier. Neither may petitioner escape liability by presenting in evidence certificates16 that tend to show that at the time of dry-docking and inspection by the Philippine Coast Guard, the vessel MT Maysun, was fit for voyage. These pieces of evidence do not necessarily take into account the actual condition of the vessel at the time of the commencement of the voyage. As correctly observed by the Court of appeals: At the time of dry-docking and inspection, the ship may have appeared fit. The certificates issued, however, do not negate the presumption of unseaworthiness triggered by an unexplained sinking. Of certificates issued in this regard, authorities are likewise clear as to their probative value, (thus): Seaworthiness relates to a vessels actual condition. Neither the granting of classification or the issuance of certificates established seaworthiness. (2-A Benedict on Admiralty, 7-3, Sec. 62). And also: Authorities are clear that diligence in securing certificates of seaworthiness does not satisfy the vessel owners obligation. Also securing the approval of the shipper of the cargo, or his surveyor, of the condition of the vessel or her stowage does not establish due diligence if the vessel was in fact unseaworthy, for the cargo owner has no obligation in relation to seaworthiness. (Ibid.)17 Additionally, the exoneration of MT Maysuns officers and crew by the Board of Marine Inquiry merely concerns their respective administrative liabilities. It does not in any way operate to absolve the petitioner common carrier from its civil liabilities. It does not in any way operate to absolve the petitioner common carrier from its civil liability arising from its failure to observe extraordinary diligence in the vigilance over the goods it was transporting and for the negligent acts or omissions of its employees, the determination of which properly belongs to the courts.18 In the case at bar, petitioner is liable for the insured value of the lost cargo of industrial fuel oil belonging to Caltex for its failure to rebut the presumption of fault or negligence as

common carrier19 occasioned by the unexplained sinking of its vessel, MT Maysun, while in transit. Anent the second issue, it is our view and so hold that the presentation in evidence of the marine insurance policy is not indispensable in this case before the insurer may recover from the common carrier the insured value of the lost cargo in the exercise of its subrogatory right. The subrogation receipt, by itself, is sufficient to establish not only the relationship of herein private respondent as insurer and Caltex, as the assured shipper of the lost cargo of industrial fuel oil, but also the amount paid to settle the insurance claim. The right of subrogation accrues simply upon payment by the insurance company of the insurance claim.20 The presentation of the insurance policy was necessary in the case of Home Insurance Corporation v. CA21 (a case cited by petitioner) because the shipment therein (hydraulic engines) passed through several stages with different parties involved in each stage. First, from the shipper to the port of departure; second, from the port of departure to the M/S Oriental Statesman; third, from the M/S Oriental Statesman to the M/S Pacific Conveyor; fourth, from the M/S Pacific Conveyor to the port or arrival; fifth, from the port of arrival to the arrastre operator; sixth, from the arrastre operator to the hauler, Mabuhay Brokerage Co., Inc. (private respondent therein); and lastly, from the hauler to the consignee. We emphasized in that case that in the absence of proof of stipulations to the contrary, the hauler can be liable only for any damage that occurred from the time it received the cargo until it finally delivered it to the consignee. Ordinarily, it cannot be held responsible for the handling of the cargo before it actually received it. The insurance contract, which was not presented in evidence in that case would have indicated the scope of the insurers liability, if any, since no evidence was adduced indicating at what stage in the handling process the damage to the cargo was sustained. Hence, our ruling on the presentation of the insurance policy in the said case of Home Insurance Corporation is not applicable to the case at bar. In contrast, there is no doubt that the cargo of industrial fuel oil belonging to Caltex, in the case at bar, was lost while on board petitioners vessel, MT Maysun, which sank while in transit in the vicinity of Panay Gulf and Cuyo East Pass in the early morning of August 16, 1986. WHEREFORE, the instant petition is DENIED. The Decision dated June 17, 1996 of the Court of Appeals in CA-G.R. CV No. 39836 is AFFIRMED. Costs against the petitioner. SO ORDERED. Bellosillo, Mendoza, Quisumbing, and Buena, JJ., concur.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 112287 December 12, 1997 NATIONAL STEEL CORPORATION, petitioner, vs. COURT OF APPEALS AND VLASONS SHIPPING, INC., respondents. G.R. No. 112350 December 12, 1997 VLASONS SHIPPING, INC., petitioner, vs. COURT OF APPEALS AND NATIONAL STEEL CORPORATION, respondents. PANGANIBAN, J.: The Court finds occasion to apply the rules on the seaworthiness of private carrier, its owner's responsibility for damage to the cargo and its liability for demurrage and attorney's fees. The

Court also reiterates the well-known rule that findings of facts of trial courts, when affirmed by the Court of Appeals, are binding on this Court. The Case Before us are two separate petitions for review filed by National Steel Corporation (NSC) and Vlasons Shipping, Inc. (VSI), both of which assail the August 12, 1993 Decision of the Court of Appeals. 1 The Court of Appeals modified the decision of the Regional Trial Court of Pasig, Metro Manila, Branch 163 in Civil Case No. 23317. The RTC disposed as follows: WHEREFORE, judgment is hereby rendered in favor of defendant and against the plaintiff dismissing the complaint with cost against plaintiff, and ordering plaintiff to pay the defendant on the counterclaim as follows: 1. The sum of P75,000.00 as unpaid freight and P88,000.00 as demurrage with interest at the legal rate on both amounts from April 7, 1976 until the same shall have been fully paid; 2. Attorney's fees and expenses of litigation in the sum of P100,000.00; and 3. Costs of suit. SO ORDERED. 2 On the other hand, the Court of Appeals ruled: WHEREFORE, premises considered, the decision appealed from is modified by reducing the award for demurrage to P44,000.00 and deleting the award for attorney's fees and expenses of litigation. Except as thus modified, the decision is AFFIRMED. There is no pronouncement as to costs. SO ORDERED. 3 The Facts The MV Vlasons I is a vessel which renders tramping service and, as such, does not transport cargo or shipment for the general public. Its services are available only to specific persons who enter into a special contract of charter party with its owner. It is undisputed that the ship is a private carrier. And it is in the capacity that its owner, Vlasons Shipping, Inc., entered into a contract of affreightment or contract of voyage charter hire with National Steel Corporation. The facts as found by Respondent Court of Appeals are as follows: (1) On July 17, 1974, plaintiff National Steel Corporation (NSC) as Charterer and defendant Vlasons Shipping, Inc. (VSI) as Owner, entered into a Contract of Voyage Charter Hire (Exhibit "B"; also Exhibit "1") whereby NSC hired VSI's vessel, the MV "VLASONS I" to make one (1) voyage to load steel products at Iligan City and discharge them at North Harbor, Manila, under the following terms and conditions, viz: 1. . . . 2. Cargo: Full cargo of steel products of not less than 2,500 MT, 10% more or less at Master's option. 3. . . . 4. Freight/Payment: P30.00/metric ton, FIOST basis. Payment upon presentation of Bill of Lading within fifteen (15) days. 5. Laydays/Cancelling: July 26, 1974/Aug. 5, 1974. 6. Loading/Discharging Rate: 750 tons per WWDSHINC. (Weather Working Day of 24 consecutive hours, Sundays and Holidays Included). 7. Demurrage/Dispatch: P8,000.00/P4,000.00 per day. 8. . . . 9. Cargo Insurance: Charterer's and/or Shipper's must insure the cargoes. Shipowners not responsible for losses/damages except on proven willful negligence of the officers of the vessel. 10. Other terms: (a) All terms/conditions of NONYAZAI C/P [sic] or other internationally recognized Charter Party Agreement shall form part of this Contract. xxx xxx xxx

The terms "F.I.O.S.T." which is used in the shipping business is a standard provision in the NANYOZAI Charter Party which stands for "Freight In and Out including Stevedoring and Trading", which means that the handling, loading and unloading of the cargoes are the responsibility of the Charterer. Under Paragraph 5 of the NANYOZAI Charter Party, it states, "Charterers to load, stow and discharge the cargo free of risk and expenses to owners. . . . (Emphasis supplied). Under paragraph 10 thereof, it is provided that "(o)wners shall, before and at the beginning of the voyage, exercise due diligence to make the vessel seaworthy and properly manned, equipped and supplied and to make the holds and all other parts of the vessel in which cargo is carried, fit and safe for its reception, carriage and preservation. Owners shall not be liable for loss of or damage of the cargo arising or resulting from: unseaworthiness unless caused by want of due diligence on the part of the owners to make the vessel seaworthy, and to secure that the vessel is properly manned, equipped and supplied and to make the holds and all other parts of the vessel in which cargo is carried, fit and safe for its reception, carriage and preservation; . . . ; perils, dangers and accidents of the sea or other navigable waters; . . . ; wastage in bulk or weight or any other loss or damage arising from inherent defect, quality or vice of the cargo; insufficiency of packing; . . . ; latent defects not discoverable by due diligence; any other cause arising without the actual fault or privity of Owners or without the fault of the agents or servants of owners." Paragraph 12 of said NANYOZAI Charter Party also provides that "(o)wners shall not be responsible for split, chafing and/or any damage unless caused by the negligence or default of the master and crew." (2) On August 6, 7 and 8, 1974, in accordance with the Contract of Voyage Charter Hire, the MV "VLASONS I" loaded at plaintiffs pier at Iligan City, the NSC's shipment of 1,677 skids of tinplates and 92 packages of hot rolled sheets or a total of 1,769 packages with a total weight of about 2,481.19 metric tons for carriage to Manila. The shipment was placed in the three (3) hatches of the ship. Chief Mate Gonzalo Sabando, acting as agent of the vessel[,] acknowledged receipt of the cargo on board and signed the corresponding bill of lading, B.L.P.P. No. 0233 (Exhibit "D") on August 8, 1974. (3) The vessel arrived with the cargo at Pier 12, North Harbor, Manila, on August 12, 1974. The following day, August 13, 1974, when the vessel's three (3) hatches containing the shipment were opened by plaintiff's agents, nearly all the skids of tinplates and hot rolled sheets were allegedly found to be wet and rusty. The cargo was discharged and unloaded by stevedores hired by the Charterer. Unloading was completed only on August 24, 1974 after incurring a delay of eleven (11) days due to the heavy rain which interrupted the unloading operations. (Exhibit "E") (4) To determine the nature and extent of the wetting and rusting, NSC called for a survey of the shipment by the Manila Adjusters and Surveyors Company (MASCO). In a letter to the NSC dated March 17, 1975 (Exhibit "G"), MASCO made a report of its ocular inspection conducted on the cargo, both while it was still on board the vessel and later at the NDC warehouse in Pureza St., Sta. Mesa, Manila where the cargo was taken and stored. MASCO reported that it found wetting and rusting of the packages of hot rolled sheets and metal covers of the tinplates; that tarpaulin hatch covers were noted torn at various extents; that container/metal casings of the skids were rusting all over. MASCO ventured the opinion that "rusting of the tinplates was caused by contact with SEA WATER sustained while still on board the vessel as a consequence of the heavy weather and rough seas encountered while en route to destination (Exhibit "F"). It was also reported that MASCO's surveyors drew at random samples of bad order packing materials of the tinplates and delivered the same to the M.I.T. Testing Laboratories for analysis. On August 31, 1974, the M.I.T. Testing Laboratories issued Report No. 1770

(Exhibit "I") which in part, states, "The analysis of bad order samples of packing materials . . . shows that wetting was caused by contact with SEA WATER". (5) On September 6, 1974, on the basis of the aforesaid Report No. 1770, plaintiff filed with the defendant its claim for damages suffered due to the downgrading of the damaged tinplates in the amount of P941,145.18. Then on October 3, 1974, plaintiff formally demanded payment of said claim but defendant VSI refused and failed to pay. Plaintiff filed its complaint against defendant on April 21, 1976 which was docketed as Civil Case No. 23317, CFI, Rizal. (6) In its complaint, plaintiff claimed that it sustained losses in the aforesaid amount of P941,145.18 as a result of the act, neglect and default of the master and crew in the management of the vessel as well as the want of due diligence on the part of the defendant to make the vessel seaworthy and to make the holds and all other parts of the vessel in which the cargo was carried, fit and safe for its reception, carriage and preservation all in violation of defendant's undertaking under their Contract of Voyage Charter Hire. (7) In its answer, defendant denied liability for the alleged damage claiming that the MV "VLASONS I" was seaworthy in all respects for the carriage of plaintiff's cargo; that said vessel was not a "common carrier" inasmuch as she was under voyage charter contract with the plaintiff as charterer under the charter party; that in the course of the voyage from Iligan City to Manila, the MV "VLASONS I" encountered very rough seas, strong winds and adverse weather condition, causing strong winds and big waves to continuously pound against the vessel and seawater to overflow on its deck and hatch covers, that under the Contract of Voyage Charter Hire, defendant shall not be responsible for losses/damages except on proven willful negligence of the officers of the vessel, that the officers of said MV "VLASONS I" exercised due diligence and proper seamanship and were not willfully negligent; that furthermore the Voyage Charter Party provides that loading and discharging of the cargo was on FIOST terms which means that the vessel was free of risk and expense in connection with the loading and discharging of the cargo; that the damage, if any, was due to the inherent defect, quality or vice of the cargo or to the insufficient packing thereof or to latent defect of the cargo not discoverable by due diligence or to any other cause arising without the actual fault or privity of defendant and without the fault of the agents or servants of defendant; consequently, defendant is not liable; that the stevedores of plaintiff who discharged the cargo in Manila were negligent and did not exercise due care in the discharge of the cargo; land that the cargo was exposed to rain and seawater spray while on the pier or in transit from the pier to plaintiff's warehouse after discharge from the vessel; and that plaintiff's claim was highly speculative and grossly exaggerated and that the small stain marks or sweat marks on the edges of the tinplates were magnified and considered total loss of the cargo. Finally, defendant claimed that it had complied with all its duties and obligations under the Voyage Charter Hire Contract and had no responsibility whatsoever to plaintiff. In turn, it alleged the following counterclaim: (a) That despite the full and proper performance by defendant of its obligations under the Voyage Charter Hire Contract, plaintiff failed and refused to pay the agreed charter hire of P75,000.00 despite demands made by defendant; (b) That under their Voyage Charter Hire Contract, plaintiff had agreed to pay defendant the sum of P8,000.00 per day for demurrage. The vessel was on demurrage for eleven (11) days in Manila waiting for plaintiff to discharge its cargo from the vessel. Thus, plaintiff was liable to pay defendant demurrage in the total amount of P88,000.00.

(c) For filing a clearly unfounded civil action against defendant, plaintiff should be ordered to pay defendant attorney's fees and all expenses of litigation in the amount of not less than P100,000.00. (8) From the evidence presented by both parties, the trial court came out with the following findings which were set forth in its decision: (a) The MV "VLASONS I" is a vessel of Philippine registry engaged in the tramping service and is available for hire only under special contracts of charter party as in this particular case. (b) That for purposes of the voyage covered by the Contract of Voyage Charter Hire (Exh. "1"), the MV VLASONS I" was covered by the required seaworthiness certificates including the Certification of Classification issued by an international classification society, the NIPPON KAIJI KYOKAI (Exh. "4"); Coastwise License from the Board of Transportation (Exh. "5"); International Loadline Certificate from the Philippine Coast Guard (Exh. "6"); Cargo Ship Safety Equipment Certificate also from the Philippine Coast Guard (Exh. "7"); Ship Radio Station License (Exh. "8"); Certificate of Inspection by the Philippine Coast Guard (Exh. "12"); and Certificate of Approval for Conversion issued by the Bureau of Customs (Exh. "9"). That being a vessel engaged in both overseas and coastwise trade, the MV "VLASONS I" has a higher degree of seaworthiness and safety. (c) Before it proceeded to Iligan City to perform the voyage called for by the Contract of Voyage Charter Hire, the MV "VLASONS I" underwent drydocking in Cebu and was thoroughly inspected by the Philippine Coast Guard. In fact, subject voyage was the vessel's first voyage after the drydocking. The evidence shows that the MV "VLASONS I" was seaworthy and properly manned, equipped and supplied when it undertook the voyage. It has all the required certificates of seaworthiness. (d) The cargo/shipment was securely stowed in three (3) hatches of the ship. The hatch openings were covered by hatchboards which were in turn covered by two or double tarpaulins. The hatch covers were water tight. Furthermore, under the hatchboards were steel beams to give support. (e) The claim of the plaintiff that defendant violated the contract of carriage is not supported by evidence. The provisions of the Civil Code on common carriers pursuant to which there exists a presumption of negligence in case of loss or damage to the cargo are not applicable. As to the damage to the tinplates which was allegedly due to the wetting and rusting thereof, there is unrebutted testimony of witness Vicente Angliongto that tinplates "sweat" by themselves when packed even without being in contract (sic) with water from outside especially when the weather is bad or raining. The trust caused by sweat or moisture on the tinplates may be considered as a loss or damage but then, defendant cannot be held liable for it pursuant to Article 1734 of the Civil Case which exempts the carrier from responsibility for loss or damage arising from the "character of the goods . . ." All the 1,769 skids of the tinplates could not have been damaged by water as claimed by plaintiff. It was shown as claimed by plaintiff that the tinplates themselves were wrapped in kraft paper lining and corrugated cardboards could not be affected by water from outside.

(f) The stevedores hired by the plaintiff to discharge the cargo of tinplates were negligent in not closing the hatch openings of the MV "VLASONS I" when rains occurred during the discharging of the cargo thus allowing rainwater to enter the hatches. It was proven that the stevedores merely set up temporary tents to cover the hatch openings in case of rain so that it would be easy for them to resume work when the rains stopped by just removing the tent or canvas. Because of this improper covering of the hatches by the stevedores during the discharging and unloading operations which were interrupted by rains, rainwater drifted into the cargo through the hatch openings. Pursuant to paragraph 5 of the NANYOSAI [sic] Charter Party which was expressly made part of the Contract of Voyage Charter Hire, the loading, stowing and discharging of the cargo is the sole responsibility of the plaintiff charterer and defendant carrier has no liability for whatever damage may occur or maybe [ sic] caused to the cargo in the process. (g) It was also established that the vessel encountered rough seas and bad weather while en route from Iligan City to Manila causing sea water to splash on the ship's deck on account of which the master of the vessel (Mr. Antonio C. Dumlao) filed a "Marine Protest" on August 13, 1974 (Exh. "15"); which can be invoked by defendant as a force majeure that would exempt the defendant from liability. (h) Plaintiff did not comply with the requirement prescribed in paragraph 9 of the Voyage Charter Hire contract that it was to insure the cargo because it did not. Had plaintiff complied with the requirement, then it could have recovered its loss or damage from the insurer. Plaintiff also violated the charter party contract when it loaded not only "steel products", i.e. steel bars, angular bars and the like but also tinplates and hot rolled sheets which are high grade cargo commanding a higher freight. Thus plaintiff was able to ship grade cargo at a lower freight rate. (i) As regards defendant's counterclaim, the contract of voyage charter hire under Paragraph 4 thereof, fixed the freight at P30.00 per metric ton payable to defendant carrier upon presentation of the bill of lading within fifteen (15) days. Plaintiff has not paid the total freight due of P75,000.00 despite demands. The evidence also showed that the plaintiff was required and bound under paragraph 7 of the same Voyage Charter Hire contract to pay demurrage of P8,000.00 per day of delay in the unloading of the cargoes. The delay amounted to eleven (11) days thereby making plaintiff liable to pay defendant for demurrage in the amount of P88,000.00. Appealing the RTC decision to the Court of Appeals, NSC alleged six errors: I The trial court erred in finding that the MV "VLASONS I" was seaworthy, properly manned, equipped and supplied, and that there is no proof of willful negligence of the vessel's officers. II The trial court erred in finding that the rusting of NSC's tinplates was due to the inherent nature or character of the goods and not due to contact with seawater. III The trial court erred in finding that the stevedores hired by NSC were negligent in the unloading of NSC's shipment. IV

The trial court erred in exempting VSI from liability on the ground of force majeure. V The trial court erred in finding that NSC violated the contract of voyage charter hire. VI The trial court erred in ordering NSC to pay freight, demurrage and attorney's fees, to VSI. 4 As earlier stated, the Court of Appeals modified the decision of the trial court by reducing the demurrage from P88,000.00 to P44,000.00 and deleting the award of attorneys fees and expenses of litigation. NSC and VSI filed separate motions for reconsideration. In a Resolution 5 dated October 20, 1993, the appellate court denied both motions. Undaunted, NSC and VSI filed their respective petitions for review before this Court. On motion of VSI, the Court ordered on February 14, 1994 the consolidation of these petitions. 6 The Issues In its petition 7 and memorandum, 8 NSC raises the following questions of law and fact: Questions of Law 1. Whether or not a charterer of a vessel is liable for demurrage due to cargo unloading delays caused by weather interruption; 2. Whether or not the alleged "seaworthiness certificates" (Exhibits "3", "4", "5", "6", "7", "8", "9", "11" and "12") were admissible in evidence and constituted evidence of the vessel's seaworthiness at the beginning of the voyages; and 3. Whether or not a charterer's failure to insure its cargo exempts the shipowner from liability for cargo damage. Questions of Fact 1. Whether or not the vessel was seaworthy and cargo-worthy; 2. Whether or not vessel's officers and crew were negligent in handling and caring for NSC's cargo; 3. Whether or not NSC's cargo of tinplates did sweat during the voyage and, hence, rusted on their own; and 4. Whether or not NSC's stevedores were negligent and caused the wetting[/]rusting of NSC's tinplates. In its separate petition, 9 VSI submits for the consideration of this Court the following alleged errors of the CA: A. The respondent Court of Appeals committed an error of law in reducing the award of demurrage from P88,000.00 to P44,000.00. B. The respondent Court of Appeals committed an error of law in deleting the award of P100,000 for attorney's fees and expenses of litigation. Amplifying the foregoing, VSI raises the following issues in its memorandum: 10 I. Whether or not the provisions of the Civil Code of the Philippines on common carriers pursuant to which there exist[s] a presumption of negligence against the common carrier in case of loss or damage to the cargo are applicable to a private carrier. II. Whether or not the terms and conditions of the Contract of Voyage Charter Hire, including the Nanyozai Charter, are valid and binding on both contracting parties. The foregoing issues raised by the parties will be discussed under the following headings: 1. Questions of Fact 2. Effect of NSC's Failure to Insure the Cargo 3. Admissibility of Certificates Proving Seaworthiness 4. Demurrage and Attorney's Fees. The Court's Ruling The Court affirms the assailed Decision of the Court of Appeals, except in respect of the demurrage. Preliminary Matter: Common Carrier or Private Carrier?

At the outset, it is essential to establish whether VSI contracted with NSC as a common carrier or as a private carrier. The resolution of this preliminary question determines the law, standard of diligence and burden of proof applicable to the present case. Article 1732 of the Civil Code defines a common carrier as "persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public." It has been held that the true test of a common carrier is the carriage of passengers or goods, provided it has space, for all who opt to avail themselves of its transportation service for a fee. 11 A carrier which does not qualify under the above test is deemed a private carrier. "Generally, private carriage is undertaken by special agreement and the carrier does not hold himself out to carry goods for the general public. The most typical, although not the only form of private carriage, is the charter party, a maritime contract by which the charterer, a party other than the shipowner, obtains the use and service of all or some part of a ship for a period of time or a voyage or voyages." 12 In the instant case, it is undisputed that VSI did not offer its services to the general public. As found by the Regional Trial Court, it carried passengers or goods only for those it chose under a "special contract of charter party." 13 As correctly concluded by the Court of Appeals, the MV Vlasons I "was not a common but a private carrier." 14 Consequently, the rights and obligations of VSI and NSC, including their respective liability for damage to the cargo, are determined primarily by stipulations in their contract of private carriage or charter party. 15Recently, in Valenzuela Hardwood and Industrial Supply, Inc., vs. Court of Appeals and Seven Brothers Shipping Corporation, 16 the Court ruled: . . . in a contract of private carriage, the parties may freely stipulate their duties and obligations which perforce would be binding on them. Unlike in a contract involving a common carrier, private carriage does not involve the general public. Hence, the stringent provisions of the Civil Code on common carriers protecting the general public cannot justifiably be applied to a ship transporting commercial goods as a private carrier. Consequently, the public policy embodied therein is not contravened by stipulations in a charter party that lessen or remove the protection given by law in contracts involving common carriers. 17 Extent of VSI's Responsibility and Liability Over NSC's Cargo It is clear from the parties' Contract of Voyage Charter Hire, dated July 17, 1974, that VSI "shall not be responsible for losses except on proven willful negligence of the officers of the vessel." The NANYOZAI Charter Party, which was incorporated in the parties' contract of transportation further provided that the shipowner shall not be liable for loss of or a damage to the cargo arising or resulting from unseaworthiness, unless the same was caused by its lack of due diligence to make the vessel seaworthy or to ensure that the same was "properly manned, equipped and supplied," and to "make the holds and all other parts of the vessel in which cargo [was] carried, fit and safe for its reception, carriage and preservation." 18 The NANYOZAI Charter Party also provided that "[o]wners shall not be responsible for split, chafing and/or any damage unless caused by the negligence or default of the master or crew." 19 Burden of Proof In view of the aforementioned contractual stipulations, NSC must prove that the damage to its shipment was caused by VSI's willful negligence or failure to exercise due diligence in making MV Vlasons I seaworthy and fit for holding, carrying and safekeeping the cargo. Ineluctably, the burden of proof was placed on NSC by the parties' agreement. This view finds further support in the Code of Commerce which pertinently provides: Art. 361. Merchandise shall be transported at the risk and venture of the shipper, if the contrary has not been expressly stipulated.

Therefore, the damage and impairment suffered by the goods during the transportation, due to fortuitous event, force majeure, or the nature and inherent defect of the things, shall be for the account and risk of the shipper. The burden of proof of these accidents is on the carrier. Art. 362. The carrier, however, shall be liable for damages arising from the cause mentioned in the preceding article if proofs against him show that they occurred on account of his negligence or his omission to take the precautions usually adopted by careful persons, unless the shipper committed fraud in the bill of lading, making him to believe that the goods were of a class or quality different from what they really were. Because the MV Vlasons I was a private carrier, the shipowner's obligations are governed by the foregoing provisions of the Code of Commerce and not by the Civil Code which, as a general rule, places the prima faciepresumption of negligence on a common carrier. It is a hornbook doctrine that: In an action against a private carrier for loss of, or injury to, cargo, the burden is on the plaintiff to prove that the carrier was negligent or unseaworthy, and the fact that the goods were lost or damaged while in the carrier's custody does not put the burden of proof on the carrier. Since . . . a private carrier is not an insurer but undertakes only to exercise due care in the protection of the goods committed to its care, the burden of proving negligence or a breach of that duty rests on plaintiff and proof of loss of, or damage to, cargo while in the carrier's possession does not cast on it the burden of proving proper care and diligence on its part or that the loss occurred from an excepted cause in the contract or bill of lading. However, in discharging the burden of proof, plaintiff is entitled to the benefit of the presumptions and inferences by which the law aids the bailor in an action against a bailee, and since the carrier is in a better position to know the cause of the loss and that it was not one involving its liability, the law requires that it come forward with the information available to it, and its failure to do so warrants an inference or presumption of its liability. However, such inferences and presumptions, while they may affect the burden of coming forward with evidence, do not alter the burden of proof which remains on plaintiff, and, where the carrier comes forward with evidence explaining the loss or damage, the burden of going forward with the evidence is again on plaintiff. Where the action is based on the shipowner's warranty of seaworthiness, the burden of proving a breach thereof and that such breach was the proximate cause of the damage rests on plaintiff, and proof that the goods were lost or damaged while in the carrier's possession does not cast on it the burden of proving seaworthiness. . . . Where the contract of carriage exempts the carrier from liability for unseaworthiness not discoverable by due diligence, the carrier has the preliminary burden of proving the exercise of due diligence to make the vessel seaworthy. 20 In the instant case, the Court of Appeals correctly found the NSC "has not taken the correct position in relation to the question of who has the burden of proof. Thus, in its brief (pp. 10-11), after citing Clause 10 and Clause 12 of the NANYOZAI Charter Party (incidentally plaintiffappellant's [NSC's] interpretation of Clause 12 is not even correct), it argues that 'a careful examination of the evidence will show that VSI miserably failed to comply with any of these obligation's as if defendant-appellee [VSI] had the burden of proof." 21 First Issue: Questions of Fact Based on the foregoing, the determination of the following factual questions is manifestly relevant: (1) whether VSI exercised due diligence in making MV Vlasons I seaworthy for the intended purpose under the charter party; (2) whether the damage to the cargo should be attributed to the willful negligence of the officers and crew of the vessel or of the stevedores

hired by NSC; and (3) whether the rusting of the tinplates was caused by its own "sweat" or by contact with seawater. These questions of fact were threshed out and decided by the trial court, which had the firsthand opportunity to hear the parties' conflicting claims and to carefully weigh their respective evidence. The findings of the trial court were subsequently affirmed by the Court of Appeals. Where the factual findings of both the trial court and the Court of Appeals coincide, the same are binding on this Court. 22 We stress that, subject to some exceptional instances, 23 only questions of law not questions of fact may be raised before this Court in a petition for review under Rule 45 of the Rules of Court. After a thorough review of the case at bar, we find no reason to disturb the lower court's factual findings, as indeed NSC has not successfully proven the application of any of the aforecited exceptions. Was MV Vlasons I Seaworthy? In any event, the records reveal that VSI exercised due diligence to make the ship seaworthy and fit for the carriage of NSC's cargo of steel and tinplates. This is shown by the fact that it was drylocked and inspected by the Philippine Coast Guard before it proceeded to Iligan City for its voyage to Manila under the contract of voyage charter hire. 24 The vessel's voyage from Iligan to Manila was the vessel's first voyage after drydocking. The Philippine Coast Guard Station in Cebu cleared it as seaworthy, fitted and equipped; it met all requirements for trading as cargo vessel. 25 The Court of Appeals itself sustained the conclusion of the trial court that MV Vlasons Iwas seaworthy. We find no reason to modify or reverse this finding of both the trial and the appellate courts. Who Were Negligent: Seamen or Stevedores? As noted earlier, the NSC had the burden of proving that the damage to the cargo was caused by the negligence of the officers and the crew of MV Vlasons I in making their vessel seaworthy and fit for the carriage of tinplates. NSC failed to discharge this burden. Before us, NSC relies heavily on its claim that MV Vlasons I had used an old and torn tarpaulin or canvas to cover the hatches through which the cargo was loaded into the cargo hold of the ship. It faults the Court of Appeals for failing to consider such claim as an "uncontroverted fact" 26 and denies that MV Vlasons I "was equipped with new canvas covers in tandem with the old ones as indicated in the Marine Protest . . ." 27 We disagree. The records sufficiently support VSI's contention that the ship used the old tarpaulin, only in addition to the new one used primarily to make the ship's hatches watertight. The foregoing are clear from the marine protest of the master of the MV Vlasons I, Antonio C. Dumlao, and the deposition of the ship's boatswain, Jose Pascua. The salient portions of said marine protest read: . . . That the M/V "VLASONS I" departed Iligan City or about 0730 hours of August 8, 1974, loaded with approximately 2,487.9 tons of steel plates and tin plates consigned to National Steel Corporation; that before departure, the vessel was rigged, fully equipped and cleared by the authorities; that on or about August 9, 1974, while in the vicinity of the western part of Negros and Panay, we encountered very rough seas and strong winds and Manila office was advised by telegram of the adverse weather conditions encountered; that in the morning of August 10, 1974, the weather condition changed to worse and strong winds and big waves continued pounding the vessel at her port side causing sea water to overflow on deck andhatch (sic) covers and which caused the first layer of the canvass covering to give way while the new canvass covering still holding on; That the weather condition improved when we reached Dumali Point protected by Mindoro; that we re-secured the canvass covering back to position; that in the afternoon of August 10, 1974, while entering Maricaban Passage, we were again exposed to moderate seas and heavy rains; that while approaching Fortune Island, we encountered

again rough seas, strong winds and big waves which caused the same canvass to give way and leaving the new canvass holding on; xxx xxx xxx 28 And the relevant portions of Jose Pascua's deposition are as follows: q What is the purpose of the canvas cover? a So that the cargo would not be soaked with water. q And will you describe how the canvas cover was secured on the hatch opening? WITNESS a It was placed flat on top of the hatch cover, with a little canvas flowing over the sides and we place[d] a flat bar over the canvas on the side of the hatches and then we place[d] a stopper so that the canvas could not be removed. ATTY DEL ROSARIO q And will you tell us the size of the hatch opening? The length and the width of the hatch opening. a Forty-five feet by thirty-five feet, sir. xxx xxx xxx q How was the canvas supported in the middle of the hatch opening? a There is a hatch board. ATTY DEL ROSARIO q What is the hatch board made of? a It is made of wood, with a handle. q And aside from the hatch board, is there any other material there to cover the hatch? a There is a beam supporting the hatch board. q What is this beam made of? a It is made of steel, sir. q Is the beam that was placed in the hatch opening covering the whole hatch opening? a No, sir. q How many hatch beams were there placed across the opening? a There are five beams in one hatch opening. ATTY DEL ROSARIO q And on top of the beams you said there is a hatch board. How many pieces of wood are put on top? a Plenty, sir, because there are several pieces on top of the hatch beam. q And is there a space between the hatch boards? a There is none, sir. q They are tight together? a Yes, sir. q How tight? a Very tight, sir. q Now, on top of the hatch boards, according to you, is the canvass cover. How many canvas covers? a Two, sir. 29 That due diligence was exercised by the officers and the crew of the MV Vlasons I was further demonstrated by the fact that, despite encountering rough weather twice, the new tarpaulin did not give way and the ship's hatches and cargo holds remained waterproof. As aptly stated by the Court of Appeals, ". . . we find no reason not to sustain the conclusion of the lower court based on overwhelming evidence, that the MV 'VLASONS I' was seaworthy when it undertook

the voyage on August 8, 1974 carrying on board thereof plaintiff-appellant's shipment of 1,677 skids of tinplates and 92 packages of hot rolled sheets or a total of 1,769 packages from NSC's pier in Iligan City arriving safely at North Harbor, Port Area, Manila, on August 12, 1974; . . . 30 Indeed, NSC failed to discharge its burden to show negligence on the part of the officers and the crew of MV Vlasons I. On the contrary, the records reveal that it was the stevedores of NSC who were negligent in unloading the cargo from the ship. The stevedores employed only a tent-like material to cover the hatches when strong rains occasioned by a passing typhoon disrupted the unloading of the cargo. This tent-like covering, however, was clearly inadequate for keeping rain and seawater away from the hatches of the ship. Vicente Angliongto, an officer of VSI, testified thus: ATTY ZAMORA: Q Now, during your testimony on November 5, 1979, you stated on August 14 you went on board the vessel upon notice from the National Steel Corporation in order to conduct the inspection of the cargo. During the course of the investigation, did you chance to see the discharging operation? WITNESS: A Yes, sir, upon my arrival at the vessel, I saw some of the tinplates already discharged on the pier but majority of the tinplates were inside the hall, all the hatches were opened. Q In connection with these cargoes which were unloaded, where is the place. A At the Pier. Q What was used to protect the same from weather? ATTY LOPEZ: We object, your Honor, this question was already asked. This particular matter . . . the transcript of stenographic notes shows the same was covered in the direct examination. ATTY ZAMORA: Precisely, your Honor, we would like to go on detail, this is the serious part of the testimony. COURT: All right, witness may answer. ATTY LOPEZ: Q What was used in order to protect the cargo from the weather? A A base of canvas was used as cover on top of the tin plates, and tents were built at the opening of the hatches. Q You also stated that the hatches were already opened and that there were tents constructed at the opening of the hatches to protect the cargo from the rain. Now, will you describe [to] the Court the tents constructed. A The tents are just a base of canvas which look like a tent of an Indian camp raise[d] high at the middle with the whole side separated down to the hatch, the size of the hatch and it is soaks [sic] at the middle because of those weather and this can be used only to temporarily protect the cargo from getting wet by rains. Q Now, is this procedure adopted by the stevedores of covering tents proper? A No, sir, at the time they were discharging the cargo, there was a typhoon passing by and the hatch tent was not good enough to hold all of it to prevent the water soaking through the canvass and enter the cargo.

Q In the course of your inspection, Mr. Anglingto [sic], did you see in fact the water enter and soak into the canvass and tinplates. A Yes, sir, the second time I went there, I saw it. Q As owner of the vessel, did you not advise the National Steel Corporation [of] the procedure adopted by its stevedores in discharging the cargo particularly in this tent covering of the hatches? A Yes, sir, I did the first time I saw it, I called the attention of the stevedores but the stevedores did not mind at all, so, called the attention of the representative of the National Steel but nothing was done, just the same. Finally, I wrote a letter to them. 31 NSC attempts to discredit the testimony of Angliongto by questioning his failure to complain immediately about the stevedores' negligence on the first day of unloading, pointing out that he wrote his letter to petitioner only seven days later. 32 The Court is not persuaded. Angliongto's candid answer in his aforequoted testimony satisfactorily explained the delay. Seven days lapsed because he first called the attention of the stevedores, then the NSC's representative, about the negligent and defective procedure adopted in unloading the cargo. This series of actions constitutes a reasonable response in accord with common sense and ordinary human experience. Vicente Angliongto could not be blamed for calling the stevedores' attention first and then the NSC's representative on location before formally informing NSC of the negligence he had observed, because he was not responsible for the stevedores or the unloading operations. In fact, he was merely expressing concern for NSC which was ultimately responsible for the stevedores it had hired and the performance of their task to unload the cargo. We see no reason to reverse the trial and the appellate courts' findings and conclusions on this point, viz: In the THIRD assigned error, [NSC] claims that the trial court erred in finding that the stevedores hired by NSC were negligent in the unloading of NSC's shipment. We do not think so. Such negligence according to the trial court is evident in the stevedores hired by [NSC], not closing the hatch of MV 'VLASONS I' when rains occurred during the discharging of the cargo thus allowing rain water and seawater spray to enter the hatches and to drift to and fall on the cargo. It was proven that the stevedores merely set up temporary tents or canvas to cover the hatch openings when it rained during the unloading operations so that it would be easier for them to resume work after the rains stopped by just removing said tents or canvass. It has also been shown that on August 20, 1974, VSI President Vicente Angliongto wrote [NSC] calling attention to the manner the stevedores hired by [NSC] were discharging the cargo on rainy days and the improper closing of the hatches which allowed continuous heavy rain water to leak through and drip to the tinplates' covers and [Vicente Angliongto] also suggesting that due to four (4) days continuos rains with strong winds that the hatches be totally closed down and covered with canvas and the hatch tents lowered. (Exh. "13"). This letter was received by [NSC] on 22 August 1974 while discharging operations were still going on (Exhibit "13-A"). 33 The fact that NSC actually accepted and proceeded to remove the cargo from the ship during unfavorable weather will not make VSI liable for any damage caused thereby. In passing, it may be noted that the NSC may seek indemnification, subject to the laws on prescription, from the stevedoring company at fault in the discharge operations. "A stevedore company engaged in discharging cargo . . . has the duty to load the cargo . . . in a prudent manner, and it is liable for injury to, or loss of, cargo caused by its negligence . . . and where the officers and members and crew of the vessel do nothing and have no responsibility in the discharge of cargo by stevedores . . . the vessel is not liable for loss of, or damage to, the cargo caused by the negligence of the stevedores . . ." 34 as in the instant case. Do Tinplates "Sweat"?

The trial court relied on the testimony of Vicente Angliongto in finding that ". . . tinplates 'sweat' by themselves when packed even without being in contact with water from outside especially when the weather is bad or 35 raining . . ." The Court of Appeals affirmed the trial court's finding. A discussion of this issue appears inconsequential and unnecessary. As previously discussed, the damage to the tinplates was occasioned not by airborne moisture but by contact with rain and seawater which the stevedores negligently allowed to seep in during the unloading. Second Issue: Effect of NSC's Failure to Insure the Cargo The obligation of NSC to insure the cargo stipulated in the Contract of Voyage Charter Hire is totally separate and distinct from the contractual or statutory responsibility that may be incurred by VSI for damage to the cargo caused by the willful negligence of the officers and the crew of MV Vlasons I. Clearly, therefore, NSC's failure to insure the cargo will not affect its right, as owner and real party in interest, to file an action against VSI for damages caused by the latter's willful negligence. We do not find anything in the charter party that would make the liability of VSI for damage to the cargo contingent on or affected in any manner by NSC's obtaining an insurance over the cargo. Third Issue: Admissibility of Certificates Proving Seaworthiness NSC's contention that MV Vlasons I was not seaworthy is anchored on the alleged inadmissibility of the certificates of seaworthiness offered in evidence by VSI. The said certificates include the following: 1. Certificate of Inspection of the Philippines Coast Guard at Cebu 2. Certificate of Inspection from the Philippine Coast Guard 3. International Load Line Certificate from the Philippine Coast Guard 4. Coastwise License from the Board of Transportation 5. Certificate of Approval for Conversion issued by the Bureau of Customs 36 NSC argues that the certificates are hearsay for not having been presented in accordance with the Rules of Court. It points out that Exhibits 3, 4 and 11 allegedly are "not written records or acts of public officers"; while Exhibits 5, 6, 7, 8, 9, 11 and 12 are not "evidenced by official publications or certified true copies" as required by Sections 25 and 26, Rule 132, of the Rules of Court. 37 After a careful examination of these exhibits, the Court rules that Exhibits 3, 4, 5, 6, 7, 8, 9 and 12 are inadmissible, for they have not been properly offered as evidence. Exhibits 3 and 4 are certificates issued by private parties, but they have not been proven by one who saw the writing executed, or by evidence of the genuineness of the handwriting of the maker, or by a subscribing witness. Exhibits, 5, 6, 7, 8, 9, and 12 are photocopies, but their admission under the best evidence rule have not been demonstrated. We find, however, that Exhibit 11 is admissible under a well-settled exception to the hearsay rule per Section 44 of Rule 130 of the Rules of Court, which provides that "(e)ntries in official records made in the performance of a duty by a public officer of the Philippines, or by a person in the performance of a duty specially enjoined by law, areprima facie evidence of the facts therein stated." 38 Exhibit 11 is an original certificate of the Philippine Coast Guard in Cebu issued by Lieutenant Junior Grade Noli C. Flores to the effect that "the vessel 'VLASONS I' was drydocked . . . and PCG Inspectors were sent on board for inspection . . . After completion of drydocking and duly inspected by PCG Inspectors, the vessel 'VLASONS I', a cargo vessel, is in seaworthy condition, meets all requirements, fitted and equipped for trading as a cargo vessel was cleared by the Philippine Coast Guard and sailed for Cebu Port on July 10, 1974." (sic) NSC's claim, therefore, is obviously misleading and erroneous. At any rate, it should be stressed that NSC has the burden of proving that MV Vlasons I was not seaworthy. As observed earlier, the vessel was a private carrier and, as such, it did not have the

obligation of a common carrier to show that it was seaworthy. Indeed, NSC glaringly failed to discharge its duty of proving the willful negligence of VSI in making the ship seaworthy resulting in damage to its cargo. Assailing the genuineness of the certificate of seaworthiness is not sufficient proof that the vessel was not seaworthy. Fourth Issue: Demurrage and Attorney's Fees The contract of voyage charter hire provides inter alia: xxx xxx xxx 2. Cargo: Full cargo of steel products of not less than 2,500 MT, 10% more or less at Master's option. xxx xxx xxx 6. Loading/Discharging Rate: 750 tons per WWDSHINC. 7. Demurrage/Dispatch: P8,000.00/P4,000.00 per day. 39 The Court defined demurrage in its strict sense as the compensation provided for in the contract of affreightment for the detention of the vessel beyond the laytime or that period of time agreed on for loading and unloading of cargo. 40 It is given to compensate the shipowner for the nonuse of the vessel. On the other hand, the following is well-settled: Laytime runs according to the particular clause of the charter party. . . . If laytime is expressed in "running days," this means days when the ship would be run continuously, and holidays are not excepted. A qualification of "weather permitting" excepts only those days when bad weather reasonably prevents the work contemplated. 41 In this case, the contract of voyage charter hire provided for a four-day laytime; it also qualified laytime as WWDSHINC or weather working days Sundays and holidays included. 42 The running of laytime was thus made subject to the weather, and would cease to run in the event unfavorable weather interfered with the unloading of cargo. 43 Consequently, NSC may not be held liable for demurrage as the four-day laytime allowed it did not lapse, having been tolled by unfavorable weather condition in view of the WWDSHINC qualification agreed upon by the parties. Clearly, it was error for the trial court and the Court of Appeals to have found and affirmed respectively that NSC incurred eleven days of delay in unloading the cargo. The trial court arrived at this erroneous finding by subtracting from the twelve days, specifically August 13, 1974 to August 24, 1974, the only day of unloading unhampered by unfavorable weather or rain, which was August 22, 1974. Based on our previous discussion, such finding is a reversible error. As mentioned, the respondent appellate court also erred in ruling that NSC was liable to VSI for demurrage, even if it reduced the amount by half. Attorney's Fees VSI assigns as error of law the Court of Appeals' deletion of the award of attorney's fees. We disagree. While VSI was compelled to litigate to protect its rights, such fact by itself will not justify an award of attorney's fees under Article 2208 of the Civil Code when ". . . no sufficient showing of bad faith would be reflected in a party's persistence in a case other than an erroneous conviction of the righteousness of his cause . . ." 44 Moreover, attorney's fees may not be awarded to a party for the reason alone that the judgment rendered was favorable to the latter, as this is tantamount to imposing a premium on one's right to litigate or seek judicial redress of legitimate grievances. 45 Epilogue At bottom, this appeal really hinges on a factual issue: when, how and who caused the damage to the cargo? Ranged against NSC are two formidable truths. First, both lower courts found that such damage was brought about during the unloading process when rain and seawater seeped through the cargo due to the fault or negligence of the stevedores employed by it. Basic is the rule that factual findings of the trial court, when affirmed by the Court of Appeals, are binding on the Supreme Court. Although there are settled exceptions, NSC has not satisfactorily shown that this case is one of them. Second, the agreement between the parties the Contract of Voyage Charter Hire placed the burden of proof for such loss or damage upon the shipper,

not upon the shipowner. Such stipulation, while disadvantageous to NSC, is valid because the parties entered into a contract of private charter, not one of common carriage. Basic too is the doctrine that courts cannot relieve a parry from the effects of a private contract freely entered into, on the ground that it is allegedly one-sided or unfair to the plaintiff. The charter party is a normal commercial contract and its stipulations are agreed upon in consideration of many factors, not the least of which is the transport price which is determined not only by the actual costs but also by the risks and burdens assumed by the shipper in regard to possible loss or damage to the cargo. In recognition of such factors, the parties even stipulated that the shipper should insure the cargo to protect itself from the risks it undertook under the charter party. That NSC failed or neglected to protect itself with such insurance should not adversely affect VSI, which had nothing to do with such failure or neglect. WHEREFORE, premises considered, the instant consolidated petitions are hereby DENIED. The questioned Decision of the Court of Appeals is AFFIRMED with the MODIFICATION that the demurrage awarded to VSI is deleted. No pronouncement as to costs. SO ORDERED. Narvasa, C.J., Romero, Melo and Francisco, JJ., concur.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 160239 November 25, 2009 ANGELINA SORIENTE and ALL OTHER PERSONS CLAIMING RIGHTS UNDER HER, Petitioners, vs. THE ESTATE OF THE LATE ARSENIO E. CONCEPCION, represented by NENITA S. CONCEPCION,Respondents. DECISION PERALTA, J.: This is a petition for review on certiorari1 of the Order2 dated October 3, 2003 of the Regional Trial Court of Mandaluyong City, Branch 213, National Capital Judicial Region in Civil Case No. MC-03-407-A, which affirmed the Decision dated April 8, 2003 of the Metropolitan Trial Court of Mandaluyong City, Branch 59 in Civil Case No. 17973, ordering petitioner to vacate the property, subject matter of this unlawful detainer case, and surrender the possession thereof to respondent. The facts, as stated by the trial court,3 are as follows: Respondent Nenita S. Concepcion established that she was the registered owner of the lot occupied by petitioner Angelina Soriente at No. 637 Cavo F. Sanchez Street, Mandaluyong City, Metro Manila. The lot, with an area of 295 square meters, is covered by Transfer Certificate of Title (TCT) No. 128924 issued by the Register of Deeds of Metro Manila, District II. During the lifetime of Arsenio E. Concepcion, who acquired the lot in 1978, he allowed and tolerated the occupancy of the lot by petitioner, who was already staying on the property. Petitioner was allowed to stay on the lot for free, but on a temporary basis until such time that Concepcion and/or his family needed to develop the lot. After Arsenio E. Concepcion died on December 27, 1989, his family initiated steps to develop the lot, but petitioners occupancy of the lot prevented them from pursuing their plan. Verbal demands to vacate the lot was made on petitioner. Petitioner pleaded for time to transfer to another place, but she never left. In June 2000, Elizabeth Concepcion-Dela Cruz, daughter of respondent, filed a complaint for conciliation proceedings before the barangay at the instance of respondent. However, the

parties did not reach a settlement, which resulted in the issuance of a Certificate to File Action5 dated February 17, 2001 by the Barangay Captain of Barangay Hagdan Bato Itaas, Mandaluyong City. Respondent sent petitioner a demand letter dated September 22, 2000 by registered mail, demanding that she peacefully surrender the property and extending financial assistance for her relocation. Despite receipt of the demand letter, petitioner did not vacate the premises. On April 27, 2001, respondent filed against petitioner a Complaint6 for unlawful detainer with the Metropolitan Trial Court of Mandaluyong City, Branch 59 (trial court). The Complaint was docketed as Civil Case No. 17973. The Complaint alleged that respondent was the registered owner of the subject property, while petitioner had no title to the property and her free occupancy thereof was merely tolerated by respondent. Moreover, petitioner was occupying the premises together with her family, and she had maintained boarders for a fee. Respondent prayed that petitioner be ordered to vacate the lot, surrender the possession thereof to respondent, pay monthly rent ofP5,000.00 from June 2000 until she vacates the premises, and pay actual, moral and exemplary damages, as well as litigation expenses. It appears from the records of the case that petitioner Soriente, as a defendant in the lower court, did not file a separate Answer, but affixed her signature to the Answer filed by defendant Alfredo Caballero in another ejectment case, docketed as Civil Case No. 17974, which was filed by respondent against Caballero. Hence, respondent, through counsel, filed a Motion to Render Judgment7 under Section 7, Rule 70 of the 1997 Revised Rules of Civil Procedure for Sorientes failure to file an Answer to the Complaint. Petitioner filed an Opposition to the Motion to Render Judgment.8 In an Order9 dated December 5, 2001, the trial court denied the Motion to Render Judgment. It stated that the allegations of the Complaint in Civil Case No. 17973 and 17974 are similar, the only substantial difference being the time when defendants occupied the subject property allegedly through the tolerance of Arsenio Concepcion. The trial court believed that in signing the Answer filed in Civil Case No. 17974, Soriente intended to adopt the same as her own, as both defendants Caballero and Soriente had a common defense against plaintiffs (respondents) separate claim against them. The trial court denied the Motion to Render Judgment in the interest of justice and considered that the two cases, including Civil Case No. 17932 against Severina Sadol, had been consolidated. Pursuant to Section 7 of the 1991 Revised Rule on Summary Procedure, the trial court set a preliminary conference on October 9, 2001 at 8:30 a.m. The preliminary conference was reset to November 15, 2001, and then to December 18, 2001 because the Motion to Render Judgment was still pending resolution. On December 18, 2001, the preliminary conference was reset to January 24, 2002 as prayed for by defendants on the ground that their common counsel was absent despite proper notice, and plaintiff (respondent) did not object to the resetting.10 On January 24, 2002, the scheduled preliminary conference was again reset to March 5, 2002 because no notice was sent to defendants counsel, and plaintiff (respondent) and her counsel were both absent despite proper notice. On March 5, 2002, the trial court reset the preliminary conference to April 16, 2002 on the ground that there was no notice sent to defendants counsel. In the scheduled preliminary conference held on February 18, 2003, only plaintiffs (respondents) counsel and defendants Severina Sadol and Alf redo Caballero were present. Plaintiffs (respondents) counsel submitted a secretarys certificate attesting to the existence of a board resolution authorizing him to enter into a compromise agreement. A representative of defendant (petitioner) Angelina Soriente appeared, but failed to submit a Special Power of Attorney authorizing her to enter into a compromise agreement. Counsel for defendants was not in court, and there was no proof of service on her for the hearing. However, defendants Sadol and Caballero informed the court that they informed their counsel of the hearing scheduled that day. In view of the absence of defendant Angelina Soriente or her authorized representative,

plaintiffs (respondents) counsel moved that the case be submitted for decision, and that he be given 15 days within which to submit his position paper.11 In its Order12 dated February 18, 2003, the trial court granted the motion of plaintiffs (respondents) counsel and considered the case against defendant (petitioner) Angelina Soriente submitted for decision in accordance with Section 7 of the Rules on Summary Procedure.13 On April 8, 2003, the trial court rendered a Decision14 holding that respondent established by preponderance of evidence that she was entitled to the relief prayed for. The dispositive portion of the Decision reads: WHEREFORE, judgment is hereby rendered ordering defendant Angelina Soriente and all other persons claiming rights under her to: 1. Vacate the subject premises and surrender the possession thereof to plaintiff; 2. Pay the amount of PESOS: FIVE THOUSAND (P5,000.00) per month as reasonable compensation for use and occupation of the premises as of June 2000 until she finally vacates the subject premises; 3. Pay the amount [of] PESOS: THREE THOUSAND (P3,000.00) as attorneys fees; and 4. Pay the litigation expenses and cost of suit.15 Petitioner appealed the trial courts Decision to the RTC of Mandaluyong City, Branch 213, raising the following issues: 1. The lower court erred in holding that the plaintiff was able to establish that she is the registered owner of the lot occupied by the defendant-appellant instead of dismissing the complaint outright for lack of legal capacity to sue. 2. The lower court erred in holding that the plaintiff was able to establish by preponderance of evidence that she is entitled to the relief prayed for despite lack of jurisdiction. 3. The lower court erred in holding that this instant case subject of this appeal be decided in accordance with Section 7 of the Rules on Summary Procedure.16 In an Order17 dated October 3, 2003, the RTC affirmed the trial courts Decision, disposing thus: PRESCINDING FROM THE FOREGOING CONSIDERATIONS, judgment is hereby rendered AFFIRMING IN TOTO the decision dated April 8, 2003 rendered by the Metropolitan Trial Court, Branch 59, Mandaluyong City.18 The RTC held: Case records readily disclosed that the ownership of the subject lot belongs to the late Arsenio E. Concepcion, married to herein Plaintiff-Appellee Nenita S. Concepcion, as evidenced by the Transfer Certificate of Title No. 12892 (Annex "A" in the complaint for Unlawful Detainer). This Certificate of Title shall be received as evidence in all courts of the Philippines and shall be conclusive as to all matters contained therein principally, the identity of the owner of the land covered thereby except as provided in the Land Registration Act. Said title can be attacked only for fraud within one year after the date of the issuance of the decree of registration. Such attack must be direct and not by a collateral proceeding. The title represented by the certificate cannot be changed, altered, modified, enlarged or diminished in a collateral proceeding such as this instant appeal from the decision rendered by the Metropolitan Trial Court of Mandaluyong City in an ejectment case. As should be known by Appellant Soriente through counsel, no title to registered land in derogation to that of the registered owner shall be acquired by prescription or adverse possession. Prescription is unavailing not only against the registered owner Arsenio E. Concepcion but also against his hereditary successors because the latter merely steps into the shoes of the decedent by operation of law and are merely the continuation of the personalities of their predecessors-in-interest (Barcelona v. Barcelona, 100 Phil 251; PD 1529, Sec. 47). x x x xxxx Noteworthy to mention in the case at bar is the ruling laid down in Calubayan v. Pascual, 21 SCRA 146, where the Supreme Court [held] that a person who occupies the land of another at

the latters tolerance or permission, without any contract between them, is necessarily bound by an implied promise that he will vacate upon demand, failing which a summary action for ejectment is the proper remedy against [him]. x x x19 Petitioner filed this petition raising the following issues: I THE REGIONAL TRIAL COURT ERRED IN AFFIRMING THE DECISION OF THE LOWER COURT IN HOLDING THAT THE PLAINTIFF WAS ABLE TO ESTABLISH THAT SHE IS THE REGISTERED OWNER OF THE LOT OCCUPIED BY THE DEFENDANT-APPELLANT INSTEAD OF DISMISSING THE COMPLAINT OUTRIGHT FOR LACK OF LEGAL CAPACITY TO SUE. II THE REGIONAL TRIAL COURT ERRED IN AFFIRMING THE DECISION OF THE LOWER COURT IN HOLDING THAT THE PLAINTIFF WAS ABLE TO ESTABLISH BY PREPONDERANCE OF EVIDENCE THAT SHE IS ENTITLED TO THE RELIEF PRAYED FOR DESPITE LACK OF JURISDICTION. III THE REGIONAL TRIAL COURT ERRED IN HOLDING THAT THIS INSTANT CASE SUBJECT OF THIS APPEAL BE DECIDED IN ACCORDANCE WITH SECTION 7 OF THE RULES ON SUMMARY PROCEDURE.20 Petitioner appealed from the RTCs decision directly to this Court on pure questions of law. There is a question of law in a given case when the doubt or difference arises as to what the law is on a certain state of facts; there is a question of fact when the doubt or difference arises as to the truth or the falsehood of alleged facts.21 Moreover, Republic v. Sandiganbayan22 ruled: x x x A question of law exists when the doubt or controversy concerns the correct application of law or jurisprudence to a certain set of facts; or when the issue does not call for an examination of the probative value of the evidence presented, the truth or falsehood of facts being admitted. A question of fact exists when the doubt or difference arises as to the truth or falsehood of facts or when the query invites calibration of the whole evidence considering mainly the credibility of the witnesses, the existence and relevancy of specific surrounding circumstances as well as their relation to each other and to the whole, and the probability of the situation.23 The Court notes that petitioner raised both questions of fact and law in her petition. The Court shall resolve only the pertinent questions of law raised. First, petitioner questioned respondent Nenita Concepcions capacity to sue as a representative of the Estate of her husband, Arsenio Concepcion, alleging absence of proof of the issuance of the requisite letters testamentary or letters of administration evidencing her legal capacity to sue in behalf of the Estate of Arsenio Concepcion in contravention of Section 4, Rule 8 of the 1997 Rules of Civil Procedure, thus: Sec. 4. Capacity. Facts showing the capacity of a party to sue or be sued in a representative capacity or the legal existence of an organized association of persons that is made a party, must be averred. A party desiring to raise an issue as to the legal existence of any party or the capacity of any party to sue or be sued in a representative capacity, shall do so by specific denial, which shall include such supporting particulars as are peculiarly within the pleaders knowledge. Petitioner asserts that lack of legal capacity to sue is a ground for dismissal under Section 1 (d) of Rule 16 of the Revised Rules of Court, and considering that a motion to dismiss is a prohibited pleading under the summary procedure, the trial court failed to exercise its duty to order the outright dismissal of the complaint as mandated under Section 424 of the 1991 Revised Rule on Summary Procedure. Petitioners contention lacks merit. Section 4, Rule 8 of the 1997 Rules of Civil Procedure provides:

Sec. 4. Capacity. x x x A party desiring to raise an issue as to the legal existence of any party or the capacity of any party to sue or be sued in a representative capacity, shall do so by specific denial, which shall include such supporting particulars as are peculiarly within the pleaders knowledge.25 Based on the provision cited above, the RTC correctly ruled: The argument is not tenable. This court, upon cursory reading of the provisions of Rule 8, Section 4 of the Rules of Court, in relation to the Rules on Summary Procedure, finds it relevant to note x x x that although a Motion to Dismiss or a Motion for Bill of Particulars cannot be availed of to challenge the capacity of the party under the Rules on Summary Procedure, the DefendantAppellant should have at least SPECIFICALLY DENIED such capacity of the party in the Answer, which should have included such supporting particulars as are peculiarly within the pleaders knowledge. The case records clearly disclosed that no such specific denial was made by the appellant and this court believes that the lower court had carefully and dutifully taken into account the applicable rules particularly Section 4 of the Revised Rules on Summary Procedure, in relation to Section 4, Rule 8 of the Rules of Court and pertinent jurisprudence, before rendering the assailed decision dated April 8, 2003. The presumption of the regular performance of duties applies in this case and the same shall prevail over mere allegations of the herein Defendant-Appellant.26 Further, as the successor-in-interest of the late Arsenio E. Concepcion and co-owner of the subject property, respondent Nenita S. Concepcion is entitled to prosecute the ejectment case not only in a representative capacity, but as a real party-in-interest. Article 487 of the Civil Code states, "Any one of the co-owners may bring an action in ejectment." Hence, assuming that respondent failed to submit the proper documents showing her capacity to sue in a representative capacity for the estate of her deceased husband, the Court, in the interest of speedy disposition of cases, may deem her capacitated to prosecute the ejectment case as a real party-in-interest being a co-owner of the subject property considering that the trial court has jurisdiction over the subject matter and has also acquired jurisdiction over the parties, including respondent Nenita S. Concepcion. Second, petitioner questions whether respondent has established by a preponderance of evidence that she is entitled to the relief prayed for, which is the ejectment of petitioner from the subject property. Petitioner contends that respondent admitted in her Complaint that her right to the subject property arose only in 1978, when the late Arsenio E. Concepcion acquired the same. Petitioner alleges that to the contrary, substantial evidence exists that she and her predecessors-in-interest have continuously and openly occupied and possessed, in the concept of owner, the subject property since time immemorial. The Court holds that the RTC correctly affirmed the ejectment of petitioner from the property. To make out a case of unlawful detainer under Section 1,27 Rule 70 of the Rules of Court, the Complaint must allege that the defendant is unlawfully withholding from the plaintiff the possession of certain real property after the expiration or termination of the formers right to hold possession by virtue of a contract, express or implied, and that the action is being brought within one year from the time the defendants possession became unlawful.28 The Complaint alleged that petitioner occupied the subject property by tolerance of the late Arsenio Concepcion. While tolerance is lawful, such possession becomes illegal upon demand to vacate by the owner and the possessor by tolerance refuses to comply with such demand.29 Respondent sent petitioner a demand letter dated September 22, 2000 to vacate the subject property, but petitioner did not comply with the demand. A person who occupies the land of another at the latters tolerance or permission, without any contract between them, is necessarily bound by an implied promise that he will vacate upon demand, failing which a summary action for ejectment is the proper remedy against him. 30 Under Section 1, Rule 70 of the Rules of Court, the one-year period within which a complaint for unlawful detainer can be filed should be counted from the date of demand, because only upon the lapse of that period

does the possession become unlawful.31 Respondent filed the ejectment case against petitioner on April 27, 2001, which was less than a year from the date of formal demand. Clearly, therefore, the action was filed within the one-year period prescribed for filing an ejectment or unlawful detainer case. The sole issue for resolution in an unlawful detainer case is physical or material possession.32 All that the trial court can do is to make an initial determination of who is the owner of the property, so that it can resolve who is entitled to its possession absent other evidence to resolve ownership.33 Courts in ejectment cases decide questions of ownership only it is necessary to decide the question of possession.34 The reason for this rule is to prevent the defendant from trifling with the summary nature of an ejectment suit by the simple expedient of asserting ownership over the disputed property.35 In this case, the trial court found that respondent owns the property on the basis of Transfer Certificate of Title No. 12892,36 which was "issued in the name of Arsenio E. Concepcion, x x x married to Nenita L. Songco." It is settled rule that the person who has a Torrens title over a land is entitled to possession thereof.37 Hence, as the registered owner of the subject property, respondent is preferred to possess it.38 The validity of respondents certificate of title cannot be attacked by petitioner in this case for ejectment. Under Section 48 of Presidential Decree No. 1529, a certificate of title shall not be subject to collateral attack.39 It cannot be altered, modified or cancelled, except in a direct proceeding for that purpose in accordance with law.40 The issue of the validity of the title of the respondents can only be assailed in an action expressly instituted for that purpose.41 Whether or not the petitioner has the right to claim ownership over the property is beyond the power of the trial court to determine in an action for unlawful detainer.42 Although petitioner alleges that substantial evidence exists that she and her predecessors-ininterest had continuously and openly occupied and possessed, in the concept of owner, the subject property since time immemorial, petitioner failed to present evidence to substantiate her allegation. Whereas respondent holds a Torrens title over the subject property; hence, she is entitled to the possession of the property.43 The court's adjudication of ownership in an ejectment case is merely provisional, and affirmance of the trial courts decision would not bar or prejudice an action between the same parties involving title to the property, if and when such action is brought seasonably before the proper forum.44 Lastly, petitioner contends that the lower court erred in deciding this case in accordance with Section 7 of the Rules on Summary Procedure, thus: SEC. 7. Preliminary conference; appearance of parties. Not later than thirty (30) days after the last answer is filed, a preliminary conference shall be held. The rules on pre-trial in ordinary cases shall be applicable to the preliminary conference unless inconsistent with the provisions of this Rule. The failure of the plaintiff to appear in the preliminary conference shall be a cause for the dismissal of his complaint. The defendant who appears in the absence of the plaintiff shall be entitled to judgment on his counterclaim in accordance with Section 6 hereof. All cross-claims shall be dismissed. If a sole defendant shall fail to appear, the plaintiff shall be entitled to judgment in accordance with Section 6hereof. This Rule shall not apply where one of two or more defendants sued under a common cause of action who had pleaded a common defense shall appear at the preliminary conference.45 Section 6 of the 1991 Revised Rules on Summary Procedure, which is referred to by Section 7 above, states: SEC. 6. Effect of failure to answer. Should the defendant fail to answer the complaint within the period above provided, the court, motu proprio, or on motion of the plaintiff, shall render judgment as may be warranted by the facts alleged in the complaint and limited to what is

prayed for therein: Provided, however, That the court may in its discretion reduce the amount of damages and attorneys fees claimed for being excessive or otherwise unconscionable. This is without prejudice to the applicability of Section 4, Rule 18 of the Rules of Court, if there are two or more defendants. Petitioner asserts that considering that the cases against her, defendants Caballero and Sadol were consolidated, and she and defendant Caballero signed and filed one common Answer to the Complaint, thus, pleading a common defense, the trial court should not have rendered judgment on her case based on Section 7 of the 1991 Revised Rules on Summary Procedure when she failed to appear in the preliminary conference. The contention lacks merit. The Court notes that the ejectment case filed by respondent against petitioner was docketed in the trial court as Civil Case No. 17973, the case against Alfredo Caballero was docketed as Civil Case No. 17974, while the case against Severina Sadol was docketed as Civil Case No. 17932. These cases were consolidated by the trial court. Under Section 7 of the 1991 Revised Rules on Summary Procedure, if a sole defendant shall fail to appear in the preliminary conference, the plaintiff shall be entitled to judgment in accordance with Section 6 of the Rule, that is, the court shall render judgment as may be warranted by the facts alleged in the Complaint and limited to what is prayed for therein. However, "[t]his Rule (Sec. 7) shall not apply where one of two or more defendants sued under a common cause of action, who had pleaded a common defense, shall appear at the preliminary conference." Petitioner claims that the preceding provision applies to her as a defendant, since the ejectment cases were consolidated by the trial court, and she and Caballero filed the same Answer to the Complaint; hence, the trial court should not have rendered judgment against her when she failed to appear in the preliminary conference.46 The Court holds that the italicized provision above does not apply in the case of petitioner, since she and Caballero were not co-defendants in the same case. The ejectment case filed against petitioner was distinct from that of Caballero, even if the trial court consolidated the cases and, in the interest of justice, considered the Answer filed by Caballero in Civil Case No. 17974 as the Answer also of petitioner since she affixed her signature thereto. Considering that petitioner was sued in a separate case for ejectment from that of Caballero and Sadol, petitioners failure to appear in the preliminary conference entitled respondent to the rendition of judgment by the trial court on the ejectment case filed against petitioner, docketed as Civil Case No. 17973, in accordance with Section 7 of the 1991 Revised Rules on Summary Procedure. WHEREFORE, the petition is DENIED. The Order dated October 3, 2003 of the Regional Trial Court of Mandaluyong City, Branch 213, National Capital Judicial Region in Civil Case No. MC03-407-A is AFFIRMED. No costs. SO ORDERED. DIOSDADO M. PERALTA Associate Justice

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 114167 July 12, 1995 COASTWISE LIGHTERAGE CORPORATION, petitioner, vs.

COURT OF APPEALS and the PHILIPPINE GENERAL INSURANCE COMPANY, respondents. RESOLUTION FRANCISCO, R., J.: This is a petition for review of a Decision rendered by the Court of Appeals, dated December 17, 1993, affirming Branch 35 of the Regional Trial Court, Manila in holding that herein petitioner is liable to pay herein private respondent the amount of P700,000.00, plus legal interest thereon, another sum of P100,000.00 as attorney's fees and the cost of the suit. The factual background of this case is as follows: Pag-asa Sales, Inc. entered into a contract to transport molasses from the province of Negros to Manila with Coastwise Lighterage Corporation (Coastwise for brevity), using the latter's dumb barges. The barges were towed in tandem by the tugboat MT Marica, which is likewise owned by Coastwise. Upon reaching Manila Bay, while approaching Pier 18, one of the barges, "Coastwise 9", struck an unknown sunken object. The forward buoyancy compartment was damaged, and water gushed in through a hole "two inches wide and twenty-two inches long" 1 As a consequence, the molasses at the cargo tanks were contaminated and rendered unfit for the use it was intended. This prompted the consignee, Pag-asa Sales, Inc. to reject the shipment of molasses as a total loss. Thereafter, Pag-asa Sales, Inc. filed a formal claim with the insurer of its lost cargo, herein private respondent, Philippine General Insurance Company (PhilGen, for short) and against the carrier, herein petitioner, Coastwise Lighterage. Coastwise Lighterage denied the claim and it was PhilGen which paid the consignee, Pag-asa Sales, Inc., the amount of P700,000.00, representing the value of the damaged cargo of molasses. In turn, PhilGen then filed an action against Coastwise Lighterage before the Regional Trial Court of Manila, seeking to recover the amount of P700,000.00 which it paid to Pag-asa Sales, Inc. for the latter's lost cargo. PhilGen now claims to be subrogated to all the contractual rights and claims which the consignee may have against the carrier, which is presumed to have violated the contract of carriage. The RTC awarded the amount prayed for by PhilGen. On Coastwise Lighterage's appeal to the Court of Appeals, the award was affirmed. Hence, this petition. There are two main issues to be resolved herein. First, whether or not petitioner Coastwise Lighterage was transformed into a private carrier, by virtue of the contract of affreightment which it entered into with the consignee, Pag-asa Sales, Inc. Corollarily, if it were in fact transformed into a private carrier, did it exercise the ordinary diligence to which a private carrier is in turn bound? Second, whether or not the insurer was subrogated into the rights of the consignee against the carrier, upon payment by the insurer of the value of the consignee's goods lost while on board one of the carrier's vessels. On the first issue, petitioner contends that the RTC and the Court of Appeals erred in finding that it was a common carrier. It stresses the fact that it contracted with Pag-asa Sales, Inc. to transport the shipment of molasses from Negros Oriental to Manila and refers to this contract as a "charter agreement". It then proceeds to cite the case of Home Insurance Company vs. American Steamship Agencies, Inc. 2 wherein this Court held: ". . . a common carrier undertaking to carry a special cargo or chartered to a special person only becomes a private carrier." Petitioner's reliance on the aforementioned case is misplaced. In its entirety, the conclusions of the court are as follows: Accordingly, the charter party contract is one of affreightment over the whole vessel, rather than a demise. As such, the liability of the shipowner for acts or negligence of its captain and crew, would remain in the absence of stipulation. 3

The distinction between the two kinds of charter parties (i.e. bareboat or demise and contract of affreightment) is more clearly set out in the case of Puromines, Inc. vs. Court of Appeals, 4 wherein we ruled: Under the demise or bareboat charter of the vessel, the charterer will generally be regarded as the owner for the voyage or service stipulated. The charterer mans the vessel with his own people and becomes the owner pro hac vice, subject to liability to others for damages caused by negligence. To create a demise, the owner of a vessel must completely and exclusively relinquish possession, command and navigation thereof to the charterer, anything short of such a complete transfer is a contract of affreightment (time or voyage charter party) or not a charter party at all. On the other hand a contract of affreightment is one in which the owner of the vessel leases part or all of its space to haul goods for others. It is a contract for special service to be rendered by the owner of the vessel and under such contract the general owner retains the possession, command and navigation of the ship, the charterer or freighter merely having use of the space in the vessel in return for his payment of the charter hire. . . . . . . . . An owner who retains possession of the ship though the hold is the property of the charterer, remains liable as carrier and must answer for any breach of duty as to the care, loading and unloading of the cargo. . . . Although a charter party may transform a common carrier into a private one, the same however is not true in a contract of affreightment on account of the aforementioned distinctions between the two. Petitioner admits that the contract it entered into with the consignee was one of affreightment. 5 We agree. Pag-asa Sales, Inc. only leased three of petitioner's vessels, in order to carry cargo from one point to another, but the possession, command and navigation of the vessels remained with petitioner Coastwise Lighterage. Pursuant therefore to the ruling in the aforecited Puromines case, Coastwise Lighterage, by the contract of affreightment, was not converted into a private carrier, but remained a common carrier and was still liable as such. The law and jurisprudence on common carriers both hold that the mere proof of delivery of goods in good order to a carrier and the subsequent arrival of the same goods at the place of destination in bad order makes for a prima facie case against the carrier. It follows then that the presumption of negligence that attaches to common carriers, once the goods it transports are lost, destroyed or deteriorated, applies to the petitioner. This presumption, which is overcome only by proof of the exercise of extraordinary diligence, remained unrebutted in this case. The records show that the damage to the barge which carried the cargo of molasses was caused by its hitting an unknown sunken object as it was heading for Pier 18. The object turned out to be a submerged derelict vessel. Petitioner contends that this navigational hazard was the efficient cause of the accident. Further it asserts that the fact that the Philippine Coastguard "has not exerted any effort to prepare a chart to indicate the location of sunken derelicts within Manila North Harbor to avoid navigational accidents" 6 effectively contributed to the happening of this mishap. Thus, being unaware of the hidden danger that lies in its path, it became impossible for the petitioner to avoid the same. Nothing could have prevented the event, making it beyond the pale of even the exercise of extraordinary diligence. However, petitioner's assertion is belied by the evidence on record where it appeared that far from having rendered service with the greatest skill and utmost foresight, and being free from fault, the carrier was culpably remiss in the observance of its duties.

Jesus R. Constantino, the patron of the vessel "Coastwise 9" admitted that he was not licensed. The Code of Commerce, which subsidiarily governs common carriers (which are primarily governed by the provisions of the Civil Code) provides: Art. 609. Captains, masters, or patrons of vessels must be Filipinos, have legal capacity to contract in accordance with this code, and prove the skill capacity and qualifications necessary to command and direct the vessel, as established by marine and navigation laws, ordinances or regulations, and must not be disqualified according to the same for the discharge of the duties of the position. . . . Clearly, petitioner Coastwise Lighterage's embarking on a voyage with an unlicensed patron violates this rule. It cannot safely claim to have exercised extraordinary diligence, by placing a person whose navigational skills are questionable, at the helm of the vessel which eventually met the fateful accident. It may also logically, follow that a person without license to navigate, lacks not just the skill to do so, but also the utmost familiarity with the usual and safe routes taken by seasoned and legally authorized ones. Had the patron been licensed, he could be presumed to have both the skill and the knowledge that would have prevented the vessel's hitting the sunken derelict ship that lay on their way to Pier 18. As a common carrier, petitioner is liable for breach of the contract of carriage, having failed to overcome the presumption of negligence with the loss and destruction of goods it transported, by proof of its exercise of extraordinary diligence. On the issue of subrogation, which petitioner contends as inapplicable in this case, we once more rule against the petitioner. We have already found petitioner liable for breach of the contract of carriage it entered into with Pag-asa Sales, Inc. However, for the damage sustained by the loss of the cargo which petitioner-carrier was transporting, it was not the carrier which paid the value thereof to Pag-asa Sales, Inc. but the latter's insurer, herein private respondent PhilGen. Article 2207 of the Civil Code is explicit on this point: Art. 2207. If the plaintiffs property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who violated the contract. . . . This legal provision containing the equitable principle of subrogation has been applied in a long line of cases including Compania Maritima v. Insurance Company of North America; 7 Fireman's Fund Insurance Company v. Jamilla & Company, Inc., 8 and Pan Malayan Insurance Corporation v. Court of Appeals, 9 wherein this Court explained: Article 2207 of the Civil Code is founded on the well-settled principle of subrogation. If the insured property is destroyed or damaged through the fault or negligence of a party other than the assured, then the insurer, upon payment to the assured will be subrogated to the rights of the assured to recover from the wrongdoer to the extent that the insurer has been obligated to pay. Payment by the insurer to the assured operated as an equitable assignment to the former of all remedies which the latter may have against the third party whose negligence or wrongful act caused the loss. The right of subrogation is not dependent upon, nor does it grow out of, any privity of contract or upon written assignment of claim. It accrues simply upon payment of the insurance claim by the insurer. Undoubtedly, upon payment by respondent insurer PhilGen of the amount of P700,000.00 to Pag-asa Sales, Inc., the consignee of the cargo of molasses totally damaged while being transported by petitioner Coastwise Lighterage, the former was subrogated into all the rights which Pag-asa Sales, Inc. may have had against the carrier, herein petitioner Coastwise Lighterage.

WHEREFORE, premises considered, this petition is DENIED and the appealed decision affirming the order of Branch 35 of the Regional Trial Court of Manila for petitioner Coastwise Lighterage to pay respondent Philippine General Insurance Company the "principal amount of P700,000.00 plus interest thereon at the legal rate computed from March 29, 1989, the date the complaint was filed until fully paid and another sum of P100,000.00 as attorney's fees and costs" 10 is likewise hereby AFFIRMED SO ORDERED. Feliciano, Romero, Melo and Vitug, JJ., concur. EN BANC [G.R. No. L-9534. September 29, 1956.] MANILA STEAMSHIP CO., INC., Petitioner, vs. INSA ABDULHAMAN (MORO) and LIM HONG TO,Respondents. DECISION REYES, J. B. L., J.: This case was begun in the Court of First Instance of Zamboanga (Civil Case No. 170) by Insa Abdulhaman against the Manila Steamship Co., owner of the M/S Bowline Knot, and Lim Hong To, owner of the M/L Consuelo V, to recover damages for the death of his ( Plaintiffs) five children and loss of personal properties on board the M/L Consuelo V as a result of a maritime collision between said vessel and the M/S Bowline Knot on May 4, 1948, a few kilometers distant from San Ramon Beach, Zamboanga City. On appeal, the Court of Appeals found the following facts to have been established:chanroblesvirtuallawlibrary From 7:chanroblesvirtuallawlibrary00 to 8:chanroblesvirtuallawlibrary00 oclock in the evening of May 4, 1948, the M/L Consuelo V, laden with cargoes and passengers left the port of Zamboanga City bound for Siokon under the command of Faustino Macrohon. She was then towing a kumpit, named Sta. Maria Bay. The weather was good and fair. Among her passengers were the Plaintiff Insa Abdulhaman, his wife Carimla Mora and their five children already mentioned. The Plaintiff and his wife paid their fare before the voyage started. On that same night the M/S Bowline Knot was navigating from Maribojoc towards Zamboanga. Between 9:chanroblesvirtuallawlibrary30 to 10:chanroblesvirtuallawlibrary00 in the evening the dark clouds bloated with rain began to fall and the gushing strong wind began to blow steadily harder, lashing the waves into a choppy and roaring sea. Such weather lasted for about an hour and then it became fair although it was showering and the visibility was good enough. When some of the passengers of the M/L Consuelo V were then sleeping and some were lying down awake, all of a sudden they felt the shocking collision of the M/L Consuelo V and a big motorship, which later on was identified as the M/V Bowline Knot. Because the M/L Consuelo V capsized, her crew and passengers, before realizing what had happened, found themselves swimming and floating on the crest of the waves and as a result of which nine (9) passengers were dead and missing and all the cargoes carried on said boat, including those of the Plaintiff as appear in the list, Exhibit A, were also lost. Among the dead passengers found were Maria, Amlasa, Bidoaya and Bidalla, all surnamed Inasa, while the body of the child Abdula Inasa of 6 years of age was never recovered. Before the collision, none of the passengers were warned or informed of the impending danger as the collision was so sudden and unexpected. All those rescued at sea were brought by the M/V Bowline Knot to Zamboanga City. (Decision of C. A., pp. 5-6). As the cause of the collision, the Court of Appeals affirmed the findings of the Board of Marine Inquiry, that the commanding officer of the colliding vessels had both been negligent in operating their respective vessels. Wherefore, the Court held the owners of both vessels solidarily liable to Plaintiff for the damages caused to him by the collision, under Article 827 of

the Code of Commerce; chan roblesvirtualawlibrarybut exempted Defendant Lim Hong To from liability by reason of the sinking and total loss of his vessel, the M/L Consuelo V, while the other Defendant, the Manila Steamship Co., owner of the M/S Bowline Knot, was ordered to pay all ofPlaintiffs damages in the amount of P20,784.00 plus one-half of the costs. It is from this judgment that Defendant Manila Steamship Co. had appealed to this Court. Petitioner Manila Steamship Co. pleads that it is exempt from any liability to Plaintiff under Article 1903 of the Civil Code because it had exercised the diligence of a good father of a family in the selection of its employees, particularly Third Mate Simplicio Ilagan, the officer in command of its vessels, the M/S Bowline Knot, at the time of the collision. This defense is untenable. While it is true that Plaintiffs action against Petitioner is based on a tort or quasidelict, the tort in question is not a civil tort under the Civil Code but a maritime tort resulting in a collision at sea, governed by Articles 826-939 of the Code of Commerce. Under Article 827 of the Code of Commerce, in case of collision between two vessels imputable to both of them, each vessel shall suffer her own damage and both shall be solidarily liable for the damages occasioned to their cargoes. The characteristic language of the law in making the vessels solidarily liable for the damages due to the maritime collision emphasizes the direct nature of the responsibilities on account of the collision incurred by the shipowner under maritime law, as distinguished from the civil law and mercantile law in general. This direct responsibility is recognized in Article 618 of the Code of Commerce under which the captain shall be civilly liable to the ship agent, and the latter is the one liable to third persons, as pointed out in the collision case of Yueng Sheng Exchange & Trading Co. vs. Urrutia & Co., 12 Phil. 747, 753:chanroblesvirtuallawlibrary The responsibility involved in the present action is that derived from the management of the vessel, which was defective on account of lack of skill, negligence, or fault, either of the captain or of the crew, for which the captain is responsible to the agent, who in his turn is responsible to the third party prejudiced or damaged. (Article 618, Code of Commerce). In fact, it is a general principle, well established maritime law and custom, that shipowners and ship agents are civilly liable for the acts of the captain (Code of Commerce, Article 586) and for the indemnities due the third persons (Article 587); chan roblesvirtualawlibraryso that injured parties may immediately look for reimbursement to the owner of the ship, it being universally recognized that the ship master or captain is primarily the representative of the owner (Standard Oil Co. vs. Lopez Castelo, 42 Phil. 256, 260). This direct liability, moderated and limited by the owners right of abandonment of the vessel and earned freight (Article 587), has been declared to exist, not only in case of breached contracts, but also in cases of tortious negligence (Yu Biao Sontua vs. Osorio, 43 Phil. 511, 515):chanroblesvirtuallawlibrary In the second assignment of error, the Appellant contends that the Defendant ought not to be held liable for the negligence of his agents and employees. It is proven that the agents and employees, through whose negligence the explosion and fire in question occurred, were agents, employees and mandatories of the Defendant. Where the vessel is one of freight, a public concern or public utility, its owner or agents is liable for the tortious acts of his agents (Articles 587, 613, and 618 Code of Commerce; chan roblesvirtualawlibraryand Article 1902, 1903, 1908, Civil Code). This principle has been repeatedly upheld in various decisions of this court. The doctrines cited by the Appellant in support of his theory have reference to the relations between principal and agent in general, but not to the relations between ship agent and his agents and employees; chan roblesvirtualawlibraryfor this reason they cannot be applied in the present case. It is easy to see that to admit the defense of due diligence of a bonus paterfamilias (in the selection and vigilance of the officers and crew) as exempting the shipowner from any liability for their faults, would render nugatory the solidary liability established by Article 827 of the Code of Commerce for the greater protection of injured parties. Shipowners would be able to escape

liability in practically every case, considering that the qualifications and licensing of ship masters and officers are determined by the State, and that vigilance is practically impossible to exercise over officers and crew of vessels at sea. To compel the parties prejudiced to look to the crew for indemnity and redress would be an illusory remedy for almost always its members are, from captains down, mere wage earners. We, therefore, find no reversible error in the refusal of the Court of Appeals to consider the defense of the Manila Steamship Co., that it is exempt from liability for the collision with the M/L Consuelo V due to absence of negligence on its parts in the selection and supervision of the officers and crew of the M/S Bowline Knot. The case of Walter S. Smith & Co. vs. Cadwallader Gibson Lumber Co., 55 Phil. 517, invoked byPetitioner, is not the point. Said case treated of a civil tort, in that the vessel of the Defendant, allegedly negligently managed by its captain in the course of its maneuvers to moor at Plaintiffs wharf, struck the same and partially demolished it, causing damage to Plaintiff. Because the tort allegedly committed was civil, the provisions of Article 1903 of the Civil Code were correctly applied. The present case, on the other hand, involves tortious conduct resulting in a maritime collision; chan roblesvirtualawlibrarywherefore, the liability of the shipowner is, as already stated, governed by the provisions of the Code of Commerce and not by the Civil Code. We agree, however, with Petitioner-Appellant, that the Court of Appeals was in error in declaring the Respondent Lim Hong To, owner of the M/L Consuelo V, exempt from liability to the original Plaintiff, Abdulhaman, in view of the total loss of his own vessel, that sank as a result of the collision. It is to be noted that both the master and the engineer of the motor launch Consuelo V were not duly licensed as such (Exh. 2). In applying for permission to operate, despite the lack of properly trained and experienced, crew, Respondent Lim Hong To gave as a reason that the income derived from the vessel is insufficient to pay licensed officers who demand high salaries, and expressly declared:chanroblesvirtuallawlibrary That in case of any accident, damage or loss, I shall assume full risk and responsibility for all the consequences thereof. (Exhibit 2). His permit to operate, in fact, stipulated that in case of any accident, damage or loss, the registered owner thereof shall assume full risk and responsibility for all the consequences thereof, and that said vessel shall be held answerable for any negligence, disregard or violation of any of the conditions herein imposed and for any consequence arising from such negligence, disregard or violations. (Exhibit 3.) The Court of Appeals held that neither the letter (Exhibit 2) nor the permit (Exhibit 3) contained any waiver of the right of Respondent Lim Hong To to limit his liability to the value of his motor launch and that he did not lose the statutory right to limit his liability by abandonment of the vessel, as conferred by Article 587 of the Code of Commerce. We find the ruling untenable. Disregarding the question whether mere inability to meet the salary demands of duly licensed masters and engineers constitutes non-availability thereof that would excuse noncompliance with the law and authorize operation without licensed officers under Act 3553, the fact remains that by operating with an unlicensed master, Lim Hong To deliberately increased the risk to which the passengers and shippers of cargo aboard the Consuelo V would be subjected. In his desire to reap greater benefits in the maritime trade, Lim Hong To willfully augmented the dangers and hazards to his vessels unwarry passengers, who would normally assume that the launch officers possessed the necessary skill and experience to evade the perils of the sea. Hence, the liability of said Respondentcannot be the identical to that of a shipowner who bears in mind the safety of the passengers and cargo by employing duly licensed officers. To hold, as the Court of Appeals has done, that Lim Hong To may limit his liability to the value of his vessels, is to erase all difference between compliance with law and the deliberate disregard thereof. To such proposition we cannot assent.

The international rule is to the effect that the right of abandonment of vessels, as a legal limitation of a shipowners liability, does not apply to cases where the injury or the average is due to shipowners own fault. Faria (Derecho Comercial Maritimo, Vol. I, pp. 122-123), on the authority of judicial precedents from various nations, sets the rule to be as follows:chanroblesvirtuallawlibrary Esta generalmente admitido que el propietario del buque no tiene derecho a la limitacion legal de responsibilidad si los daos o averias que dan origen a la limitacion provienen de sus propias culpas. El Convenio de Bruselas de 25 de agosto de 1924 tambien invalida la limitacion en el caso de culpa personal en los accidentes o averas sobrevenidos (Art. 2). To the same effect, a noted French author states:chanroblesvirtuallawlibrary La limitacion de la responsabilidad maritima ha sido admitida para proteger a los armadores contra los actos abusivos de sus encargados y no dejar su patrimonio entero a la discrecion del personal de sus buques, porque este personal cumple sus obligaciones en condiciones especiales; chan roblesvirtualawlibrarypero los armadores no tienen por sobre los demas derecho a ser amparados contra ellos mismos ni a ser protegidos contra sus propios actos. (Danjon, Derecho Maritimo, Vol. 2, p. 332). (Emphasis supplied.) That Lim Hong To understood that he would incur greater liability than that normally borne by shipowners, is clear from his assumption of full risk and responsibility for all the consequences of the operation of the M/L Consuelo V; chan roblesvirtualawlibrarya responsibility expressly assumed in his letter Exhibit 2, and imposed in his special permit, in addition to the vessel itself being held answerable. This express assumption of full risk and responsibility would be meaningless unless intended to broaden the liability of Respondent Lim Hong To beyond the value of his vessel. In resume, we hold:chanroblesvirtuallawlibrary (1) That the Manila Steamship Co., owner of the M/S Bowline Knot, is directly and primarily responsible in tort for the injuries caused to the Plaintiff by the collision of said vessel with the launch Consuelo V, through the negligence of the crews of both vessels, and it may not escape liability on the ground that it exercised due diligence in the selection and supervision of the officers and crew of the Bowline Knot; (2) That Lim Hong To, as owner of the motor launch Consuelo V, having caused the same to sail without licensed officers, is liable for the injuries caused by the collision over and beyond the value of said launch; (3) That both vessels being at fault, the liability of Lim Hong To and Manila Steamship Co. to the Plaintiff herein is in solidum, as prescribed by Article 827 of the Code of Commerce. In view of the foregoing, the decision of the Court of Appeals is modified, and that of the Court of First Instance affirmed, in the sense of declaring both original Defendants solidarily liable to Plaintiff Insa Abdulhaman in the sum of P20,784.00 and the cost of the litigation, without prejudice to the right of the one who should pay the judgment in full to demand contribution from his co-Defendant. Paras, C.J., Padilla, Montemayor, Bautista Angelo, Labrador, Concepcion, Endencia and Felix,JJ., concur.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 110398 November 7, 1997 NEGROS NAVIGATION CO., INC., petitioner, vs.

THE COURT OF APPEALS, RAMON MIRANDA, SPS. RICARDO and VIRGINIA DE LA VICTORIA, respondents. MENDOZA, J.: This is a petition for review on certiorari of the decision of the Court of Appeals affirming with modification the Regional Trial Court's award of damages to private respondents for the death of relatives as a result of the sinking of petitioner's vessel. In April of 1980, private respondent Ramon Miranda purchased from the Negros Navigation Co., Inc. four special cabin tickets (#74411, 74412, 74413 and 74414) for his wife, daughter, son and niece who were going to Bacolod City to attend a family reunion. The tickets were for Voyage No. 457-A of the M/V Don Juan, leaving Manila at 1:00 p.m. on April 22, 1980. The ship sailed from the port of Manila on schedule. At about 10:30 in the evening of April 22, 1980, the Don Juan collided off the Tablas Strait in Mindoro, with the M/T Tacloban City, an oil tanker owned by the Philippine National Oil Company (PNOC) and the PNOC Shipping and Transport Corporation (PNOC/STC). As a result, the M/V Don Juan sank. Several of her passengers perished in the sea tragedy. The bodies of some of the victims were found and brought to shore, but the four members of private respondents' families were never found. Private respondents filed a complaint on July 16, 1980 in the Regional Trial Court of Manila, Branch 34, against the Negros Navigation, the Philippine National Oil Company (PNOC), and the PNOC Shipping and Transport Corporation (PNOC/STC), seeking damages for the death of Ardita de la Victoria Miranda, 48, Rosario V. Miranda, 19, Ramon V. Miranda, Jr., 16, and Elfreda de la Victoria, 26. In its answer, petitioner admitted that private respondents purchased ticket numbers 74411, 74412, 74413 and 74414; that the ticket numbers were listed in the passenger manifest; and that the Don Juan left Pier 2, North Harbor, Manila on April 22, 1980 and sank that night after being rammed by the oil tanker M/T Tacloban City, and that, as a result of the collision, some of the passengers of the M/V Don Juan died. Petitioner, however, denied that the four relatives of private respondents actually boarded the vessel as shown by the fact that their bodies were never recovered. Petitioner further averred that the Don Juan was seaworthy and manned by a full and competent crew, and that the collision was entirely due to the fault of the crew of the M/T Tacloban City. On January 20, 1986, the PNOC and petitioner Negros Navigation Co., Inc. entered into a compromise agreement whereby petitioner assumed full responsibility for the payment and satisfaction of all claims arising out of or in connection with the collision and releasing the PNOC and the PNOC/STC from any liability to it. The agreement was subsequently held by the trial court to be binding upon petitioner, PNOC and PNOC/STC. Private respondents did not join in the agreement. After trial, the court rendered judgment on February 21, 1991, the dispositive portion of which leads as follows: WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of the plaintiffs, ordering all the defendants to pay jointly and severally to the plaintiffs damages as follows: To Ramon Miranda: P42,025.00 for actual damages; P152,654.55 as compensatory damages for loss of earning capacity of his wife; P90,000.00 as compensatory damages for wrongful death of three (3) victims; P300,000.00 as moral damages;

P50,000.00 as exemplary damages, all in the total amount of P634,679.55; and P40,000.00 as attorney's fees. To Spouses Ricardo and Virginia de la Victoria: P12,000.00 for actual damages; P158,899.00 as compensatory damages for loss of earning capacity; P30,000.00 as compensatory damages for wrongful death; P100,000.00 as moral damages; P20,000.00 as exemplary damages, all in the total amount of P320,899.00; and P15,000.00 as attorney's fees. On appeal, the Court of Appeals 1 affirmed the decision of the Regional Trial Court with modification 1. Ordering and sentencing defendants-appellants, jointly and severally, to pay plaintiffappellee Ramon Miranda the amount of P23,075.00 as actual damages instead of P42,025.00; 2. Ordering and sentencing defendants-appellants, jointly and severally, to pay plaintiffappellee Ramon Miranda the amount of P150,000.00, instead of P90,000.00, as compensatory damages for the death of his wife and two children; 3. Ordering and sentencing defendants-appellants, jointly and severally, to pay plaintiffsappellees Dela Victoria spouses the amount of P50,000.00, instead of P30,000.00, as compensatory damages for the death of their daughter Elfreda Dela Victoria; Hence this petition, raising the following issues: (1) whether the members of private respondents' families were actually passengers of the Don Juan; (2) whether the ruling in Mecenas v. Court of Appeals, 2 finding the crew members of petitioner to be grossly negligent in the performance of their duties, is binding in this case; (3) whether the total loss of the M/V Don Juan extinguished petitioner's liability; and (4) whether the damages awarded by the appellate court are excessive, unreasonable and unwarranted. First. The trial court held that the fact that the victims were passengers of the M/V Don Juan was sufficiently proven by private respondent Ramon Miranda, who testified that he purchased tickets numbered 74411, 74412, 74413, and 74414 at P131.30 each from the Makati office of petitioner for Voyage No. 47-A of the M/V Don Juan, which was leaving Manila on April 22, 1980. This was corroborated by the passenger manifest (Exh. E) on which the numbers of the tickets and the names of Ardita Miranda and her children and Elfreda de la Victoria appear. Petitioner contends that the purchase of the tickets does not necessarily mean that the alleged victims actually took the trip. Petitioner asserts that it is common knowledge that passengers purchase tickets in advance but do not actually use them. Hence, private respondent should also prove the presence of the victims on the ship. The witnesses who affirmed that the victims were on the ship were biased and unreliable. This contention is without merit. Private respondent Ramon Miranda testified that he personally took his family and his niece to the vessel on the day of the voyage and stayed with them on the ship until it was time for it to leave. There is no reason he should claim members of his family to have perished in the accident just to maintain an action. People do not normally lie about so grave a matter as the loss of dear ones. It would be more difficult for private respondents to keep the existence of their relatives if indeed they are alive than it is for petitioner to show the contrary. Petitioner's only proof is that the bodies of the supposed victims were not among those

recovered from the site of the mishap. But so were the bodies of the other passengers reported missing not recovered, as this Court noted in the Mecenas 3 case. Private respondent Miranda's testimony was corroborated by Edgardo Ramirez. Ramirez was a seminarian and one of the survivors of the collision. He testified that he saw Mrs. Miranda and Elfreda de la Victoria on the ship and that he talked with them. He knew Mrs. Miranda who was his teacher in the grade school. He also knew Elfreda who was his childhood friend and townmate. Ramirez said he was with Mrs. Miranda and her children and niece from 7:00 p.m. until 10:00 p.m. when the collision happened and that he in fact had dinner with them. Ramirez said he and Elfreda stayed on the deck after dinner and it was there where they were jolted by the collision of the two vessels. Recounting the moments after the collision, Ramirez testified that Elfreda ran to fetch Mrs. Miranda. He escorted her to the room and then tried to go back to the deck when the lights went out. He tried to return to the cabin but was not able to do so because it was dark and there was a stampede of passengers from the deck. Petitioner casts doubt on Ramirez' testimony, claiming that Ramirez could not have talked with the victims for about three hours and not run out of stories to tell, unless Ramirez had a "storehouse" of stories. But what is incredible about acquaintances thrown together on a long journey staying together for hours on end, in idle conversation precisely to while the hours away? Petitioner also points out that it took Ramirez three (3) days before he finally contacted private respondent Ramon Miranda to tell him about the fate of his family. But it is not improbable that it took Ramirez three days before calling on private respondent Miranda to tell him about the last hours of Mrs. Miranda and her children and niece, in view of the confusion in the days following the collision as rescue teams and relatives searched for survivors. Indeed, given the facts of this case, it is improper for petitioner to even suggest that private respondents' relatives did not board the ill-fated vessel and perish in the accident simply because their bodies were not recovered. Second. In finding petitioner guilty of negligence and in failing to exercise the extraordinary diligence required of it in the carriage of passengers, both the trial court and the appellate court relied on the findings of this Court inMecenas v. Intermediate Appellate Court, 4 which case was brought for the death of other passengers. In that case it was found that although the proximate cause of the mishap was the negligence of the crew of the M/TTacloban City, the crew of the Don Juan was equally negligent as it found that the latter's master, Capt. Rogelio Santisteban, was playing mahjong at the time of collision, and the officer on watch, Senior Third Mate Rogelio De Vera, admitted that he failed to call the attention of Santisteban to the imminent danger facing them. This Court found that Capt. Santisteban and the crew of the M/V Don Juan failed to take steps to prevent the collision or at least delay the sinking of the ship and supervise the abandoning of the ship. Petitioner Negros Navigation was found equally negligent in tolerating the playing of mahjong by the ship captain and other crew members while on board the ship and failing to keep the M/V Don Juan seaworthy so much so that the ship sank within 10 to 15 minutes of its impact with the M/T Tacloban City. In addition, the Court found that the Don Juan was overloaded. The Certificate of Inspection, dated August 27, 1979, issued by the Philippine Coast Guard Commander at Iloilo City stated that the total number of persons allowed on the ship was 864, of whom 810 are passengers, but there were actually 1,004 on board the vessel when it sank, 140 persons more than the maximum number that could be safely carried by it. Taking these circumstances together, and the fact that the M/V Don Juan, as the faster and better-equipped vessel, could have avoided a collision with the PNOC tanker, this Court held that even if the Tacloban City had been at fault for failing to observe an internationallyrecognized rule of navigation, the Don Juan was guilty of contributory negligence. Through Justice Feliciano, this Court held:

The grossness of the negligence of the "Don Juan" is underscored when one considers the foregoing circumstances in the context of the following facts: Firstly, the "Don Juan" was more than twice as fast as the "Tacloban City." The "Don Juan's" top speed was 17 knots; while that of the "Tacloban City" was 6.3. knots. Secondly, the "Don Juan" carried the full complement of officers and crew members specified for a passenger vessel of her class. Thirdly, the "Don Juan" was equipped with radar which was functioning that night. Fourthly, the "Don Juan's officer on-watch had sighted the "Tacloban City" on his radar screen while the latter was still four (4) nautical miles away. Visual confirmation of radar contact was established by the "Don Juan" while the "Tacloban City" was still 2.7 miles away. In the total set of circumstances which existed in the instant case, the "Don Juan," had it taken seriously its duty of extraordinary diligence, could have easily avoided the collision with the "Tacloban City." Indeed, the "Don Juan" might well have avoided the collision even if it had exercised ordinary diligence merely. It is true that the "Tacloban City" failed to follow Rule 18 of the International Rules of the Road which requires two (2) power-driven vessels meeting end on or nearly end on each to alter her course to starboard (right) so that each vessel may pass on the port side (left) of the other. The "Tacloban City," when the two (2) vessels were only three-tenths (0.3) of a mile apart, turned (for the second time) 15 to port side while the "Don Juan" veered hard to starboard. . . . [But] "route observance" of the International Rules of the Road will not relieve a vessel from responsibility if the collision could have been avoided by proper care and skill on her part or even by a departure from the rules. In the petition at bar, the "Don Juan" having sighted the "Tacloban City" when it was still a long way off was negligent in failing to take early preventive action and in allowing the two (2) vessels to come to such close quarters as to render the collision inevitable when there was no necessity for passing so near to the "Tacloban City" as to create that hazard or inevitability, for the "Don Juan" could choose its own distance. It is noteworthy that the "Tacloban City," upon turning hard to port shortly before the moment of collision, signalled its intention to do so by giving two (2) short blasts with its horn. The "Don Juan" gave no answering horn blast to signal its own intention and proceeded to turn hard to starboard. We conclude that Capt. Santisteban and Negros Navigation are properly held liable for gross negligence in connection with the collision of the "Don Juan" and "Tacloban City" and the sinking of the "Don Juan" leading to the death of hundreds of passengers. . . . 5 Petitioner criticizes the lower court's reliance on the Mecenas case, arguing that, although this case arose out of the same incident as that involved in Mecenas, the parties are different and trial was conducted separately. Petitioner contends that the decision in this case should be based on the allegations and defenses pleaded and evidence adduced in it or, in short, on the record of this case. The contention is without merit. What petitioner contends may be true with respect to the merits of the individual claims against petitioner but not as to the cause of the sinking of its ship on April 22, 1980 and its liability for such accident, of which there can only be one truth. Otherwise, one would be subscribing to the sophistry: truth on one side of the Pyrenees, falsehood on the other! Adherence to the Mecenas case is dictated by this Court's policy of maintaining stability in jurisprudence in accordance with the legal maxim "stare decisis et non quieta movere" (Follow past precedents and do not disturb what has been settled.) Where, as in this case, the same questions relating to the same event have been put forward by parties similarly situated as in a previous case litigated and decided by a competent court, the rule of stare decisis is a bar to any attempt to relitigate the same issue. 6 In Woulfe v. Associated Realties Corporation, 7the Supreme Court of New Jersey held that where substantially similar cases to the pending case were presented and applicable principles declared in prior decisions, the court was bound by

the principle of stare decisis. Similarly, in State ex rel. Tollinger v. Gill, 8 it was held that under the doctrine of stare decisis a ruling is final even as to parties who are strangers to the original proceeding and not bound by the judgment under the res judicata doctrine. The Philadelphia court expressed itself in this wise: "Stare decisis simply declares that, for the sake of certainty, a conclusion reached in one case should be applied to those which follow, if the facts are substantially the same, even though the parties may be different." 9 Thus, in J.M. Tuason v. Mariano, supra, this Court relied on its rulings in other cases involving different parties in sustaining the validity of a land title on the principle of"stare decisis et non quieta movere." Indeed, the evidence presented in this case was the same as those presented in the Mecenas case, to wit: Document Mecenas case This case Decision of Commandant, Exh. 10 10 Exh. 11-B-NN/X Phil. Coast Guard in BMI Case No. 415-80 dated 3/26/81 Decision of the Minister Exh. 11 11 Exh. ZZ of National Defense dated 3/12/82 Resolution on the Exh. 13 12 Exh. AAA motion for reconsideration (private of the decision of the respondents) Minister of National defense dated 7/27/84 Certificate of Exh. 1-A 13 Exh. 19-NN inspection dated 8/27/79 Certificate of Stability Exh. 6-A 14 Exh. 19-D-NN dated 12/16/76 Nor is it true that the trial court merely based its decision on the Mecenas case. The trial court made its own independent findings on the basis of the testimonies of witnesses, such as Senior Third Mate Rogelio de Vera, who incidentally gave substantially the same testimony on petitioner's behalf before the Board of Marine Inquiry. The trial court agreed with the conclusions of the then Minister of National Defense finding both vessels to be negligent. Third. The next issue is whether petitioner is liable to pay damages notwithstanding the total loss of its ship. The issue is not one of first impression. The rule is well-entrenched in our jurisprudence that a shipowner may be held liable for injuries to passengers notwithstanding the exclusively real and hypothecary nature of maritime law if fault can be attributed to the shipowner. 15 In Mecenas, this Court found petitioner guilty of negligence in (1) allowing or tolerating the ship captain and crew members in playing mahjong during the voyage, (2) in failing to maintain the vessel seaworthy and (3) in allowing the ship to carry more passengers than it was allowed to carry. Petitioner is, therefore, clearly liable for damages to the full extent. Fourth. Petitioner contends that, assuming that the Mecenas case applies, private respondents should be allowed to claim only P43,857.14 each as moral damages because in the Mecenas case, the amount of P307,500.00 was awarded to the seven children of the Mecenas couple. Under petitioner's formula, Ramon Miranda should receive P43,857.14, while the De la Victoria spouses should receive P97,714.28. Here is where the principle of stare decisis does not apply in view of differences in the personal circumstances of the victims. For that matter, differentiation would be justified even if private respondents had joined the private respondents in the Mecenas case. The doctrine of stare decisis works as a bar only against issues litigated in a previous case. Where the issue involved

was not raised nor presented to the court and not passed upon by the court in the previous case, the decision in the previous case is not stare decisis of the question presently presented. 16 The decision in the Mecenas case relates to damages for which petitioner was liable to the claimants in that case. In the case at bar, the award of P300,000.00 for moral damages is reasonable considering the grief petitioner Ramon Miranda suffered as a result of the loss of his entire family. As a matter of fact, three months after the collision, he developed a heart condition undoubtedly caused by the strain of the loss of his family. The P100,000.00 given to Mr. and Mrs. de la Victoria is likewise reasonable and should be affirmed. As for the amount of civil indemnity awarded to private respondents, the appellate court's award of P50,000.00 per victim should be sustained. The amount of P30,000.00 formerly set in De Lima v. Laguna Tayabas Co., 17 Heirs of Amparo delos Santos v. Court of Appeals, 18 and Philippine Rabbit Bus Lines, Inc. v. Intermediate Appellate Court19 as benchmark was subsequently increased to P50,000.00 in the case of Sulpicio Lines, Inc. v. Court of Appeals, 20 which involved the sinking of another interisland ship on October 24, 1988. We now turn to the determination of the earning capacity of the victims. With respect to Ardita Miranda, the trial court awarded damages computed as follows: 21 In the case of victim Ardita V. Miranda whose age at the time of the accident was 48 years, her life expectancy was computed to be 21.33 years, and therefore, she could have lived up to almost 70 years old. Her gross earnings for 21.33 years based on P10,224.00 per annum, would be P218,077.92. Deducting therefrom 30% as her living expenses, her net earnings would be P152,654.55, to which plaintiff Ramon Miranda is entitled to compensatory damages for the loss of earning capacity of his wife. In considering 30% as the living expenses of Ardita Miranda, the Court takes into account the fact that plaintiff and his wife were supporting their daughter and son who were both college students taking Medicine and Law respectively. In accordance with the ruling in Villa-Rey Transit, Inc. v. Court of Appeals, 22 we think the life expectancy of Ardita Miranda was correctly determined to be 21.33 years, or up to age 69. Petitioner contends, however, that Mrs. Miranda would have retired from her job as a public school teacher at 65, hence her loss of earning capacity should be reckoned up to 17.33 years only. The accepted formula for determining life expectancy is 2/3 multiplied by (80 minus the age of the deceased). It may be that in the Philippines the age of retirement generally is 65 but, in calculating the life expectancy of individuals for the purpose of determining loss of earning capacity under Art. 2206(1) of the Civil Code, it is assumed that the deceased would have earned income even after retirement from a particular job. In this case, the trial court took into account the fact that Mrs. Miranda had a master's degree and a good prospect of becoming principal of the school in which she was teaching. There was reason to believe that her income would have increased through the years and she could still earn more after her retirement, e.g., by becoming a consultant, had she not died. The gross earnings which Mrs. Miranda could reasonably be expected to earn were it not for her untimely death was, therefore, correctly computed by the trial court to be P218,077.92 (given a gross annual income of P10,224.00 and life expectancy of 21.33 years). Petitioner contends that from the amount of gross earnings, 60% should be deducted as necessary living expenses, not merely 30% as the trial court allowed. Petitioner contends that 30% is unrealistic, considering that Mrs. Miranda's earnings would have been subject to taxes, social security deductions and inflation. We agree with this contention. In Villa-Rey Transit, Inc. v. Court of Appeals, 23 the Court allowed a deduction of P1,184.00 for living expenses from the P2,184.00 annual salary of the victim, which is roughly 54.2% thereof. The deceased was 29 years old and a training assistant in the

Bacnotan Cement Industries. In People v. Quilation, 24the deceased was a 26-year old laborer earning a daily wage. The court allowed a deduction of P120,000.00 which was 51.3% of his annual gross earnings of P234,000.00. In People v. Teehankee, 25 the court allowed a deduction of P19,800.00, roughly 42.4% thereof from the deceased's annual salary of P46,659.21. The deceased, Maureen Hultman, was 17 years old and had just received her first paycheck as a secretary. In the case at bar, we hold that a deduction of 50% from Mrs. Miranda's gross earnings (P218,077.92) would be reasonable, so that her net earning capacity should be P109,038.96. There is no basis for supposing that her living expenses constituted a smaller percentage of her gross income than the living expenses in the decided cases. To hold that she would have used only a small part of her income for herself, a larger part going to the support of her children would be conjectural and unreasonable. As for Elfreda de la Victoria, the trial court found that, at the time of her death, she was 26 years old, a teacher in a private school in Malolos, Bulacan, earning P6,192.00 per annum. Although a probationary employee, she had already been working in the school for two years at the time of her death and she had a general efficiency rating of 92.85% and it can be presumed that, if not for her untimely death, she would have become a regular teacher. Hence, her loss of earning capacity is P111,456.00, computed as follows: net earning = life x gross less reasonable capacity (x) expectancy annual & necessary income living expenses (50%) x = [2(80-26)] x [P6,192.00 - P3,096.00] 3 = 36 x 3,096.00 = P111,456.00 On the other hand, the award of actual damages in the amount of P23,075.00 was determined by the Court of Appeals on the basis receipts submitted by private respondents. This amount is reasonable considering the expenses incurred by private respondent Miranda in organizing three search teams to look for his family, spending for transportation in going to places such as Batangas City and Iloilo, where survivors and the bodies of other victims were found, making long distance calls, erecting a monument in honor of the four victims, spending for obituaries in the Bulletin Today and for food, masses and novenas. Petitioner's contention that the expenses for the erection of a monument and other expenses for memorial services for the victims should be considered included in the indemnity for death awarded to private respondents is without merit. Indemnity for death is given to compensate for violation of the rights of the deceased, i.e., his right to life and physical integrity. 26 On the other hand, damages incidental to or arising out of such death are for pecuniary losses of the beneficiaries of the deceased. As for the award of attorney's fees, we agree with the Court of Appeals that the amount of P40,000.00 for private respondent Ramon Miranda and P15,000.00 for the de la Victoria spouses is justified. The appellate court correctly held: The Mecenas case cannot be made the basis for determining the award for attorney's fees. The award would naturally vary or differ in each case. While it is admitted that plaintiff-appellee Ramon Miranda who is himself a lawyer, represented also plaintiffsappellees Dela Victoria spouses, we note that separate testimonial evidence were adduced by plaintiff-appellee Ramon Miranda (TSN, February 26, 1982, p. 6) and plaintiffs-appellees spouses Dela Victoria (TSN, August 13, 1981, p. 43). Considering the amount of work and effort put into the case as indicated by the voluminous transcripts of stenographic notes, we find no reason to disturb the award of P40,000.00

for plaintiff-appellee Ramon Miranda and P15,000.00 for plaintiffs-appellees Dela Victoria spouses. 27 The award of exemplary damages should be increased to P300,000.00 for Ramon Miranda and P100,000.00 for the de la Victoria spouses in accordance with our ruling in the Mecenas case: Exemplary damages are designed by our civil law to permit the courts to reshape behaviour that is socially deleterious in its consequence by creating negative incentives or deterrents against such behaviour. In requiring compliance with the standard of extraordinary diligence, a standard which is in fact that of the highest possible degree of diligence, from common carriers and in creating a presumption of negligence against them, the law seeks to compel them to control their employees, to tame their reckless instincts and to force them to take adequate care of human beings and their property. The Court will take judicial notice of the dreadful regularity with which grievous maritime disasters occur in our waters with massive loss of life. The bulk of our population is too poor to afford domestic air transportation. So it is that notwithstanding the frequent sinking of passenger vessels in our waters, crowds of people continue to travel by sea. This Court is prepared to use the instruments given to it by the law for securing the ends of law and public policy. One of those instruments is the institution of exemplary damages; one of those ends, of special importance in an archipelagic state like the Philippines, is the safe and reliable carriage of people and goods by sea.28 WHEREFORE, the decision of the Court of Appeals is AFFIRMED with modification and petitioner is ORDERED to pay private respondents damages as follows: To private respondent Ramon Miranda: P23,075.00 for actual damages; P109,038.96 as compensatory damages for loss of earning capacity of his wife; P150,000.00 as compensatory damages for wrongful death of three (3) victims; P300,000.00 as moral damages; P300,000.00 as exemplary damages, all in the total amount of P882,113.96; and P40,000.00 as attorney's fees. To private respondents Spouses Ricardo and Virginia de la Victoria: P12,000.00 for actual damages; P111,456.00 as compensatory damages for loss of earning capacity; P50,000.00 as compensatory damages for wrongful death; P100,000.00 as moral damages; P100,000.00 as exemplary damages, all in the total amount of P373,456.00; and P15,000.00 as attorney's fees. Petitioners are further ordered to pay costs of suit. In the event the Philippine National Oil Company and/or the PNOC Shipping and Transport Corporation pay or are required to pay all or a portion of the amounts adjudged, petitioner Negros Navigation Co., Inc. shall reimburse either of them such amount or amounts as either may have paid, and in the event of failure of Negros Navigation Co., Inc., to make the necessary reimbursement, PNOC and/or PNOC/STC shall be entitled to a writ of execution without need of filing another action. SO ORDERED. Regalado and Puno, JJ., concur.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 106999 June 20, 1996 PHILIPPINE HOME ASSURANCE CORPORATION, petitioner, vs. COURT OF APPEALS and EASTERN SHIPPING LINES, INC., respondents. KAPUNAN, J.:p Eastern Shipping Lines, Inc. (ESLI) loaded on board SS Eastern Explorer in Kobe, Japan, the following shipment for carriage to Manila and Cebu, freight pre-paid and in good order and condition, viz: (a) two (2) boxes internal combustion engine parts, consigned to William Lines, Inc. under Bill of Lading No. 042283; (b) ten (l0) metric ton. (334 bags) ammonium chloride, consigned to Orca's Company under Bill of Lading No. KCE-I2; (c) two hundred (200) bags Glue 300, consigned to Pan Oriental Match Company under Bill of Lading No. KCE-8; and (d) garments, consigned to Ding Velayo under Bills of Lading Nos. KMA-73 and KMA-74. While the vessel was off Okinawa, Japan, a small flame was detected on the acetylene cylinder located in the accommodation area near the engine room on the main deck level. As the crew was trying to extinguish the fire, the acetylene cylinder suddenly exploded sending a flash of flame throughout the accommodation area, thus causing death and severe injuries to the crew and instantly setting fire to the whole superstructure of the vessel. The incident forced the master and the crew to abandon the ship. Thereafter, SS Eastern Explorer was found to be a constructive total loss and its voyage was declared abandoned. Several hours later, a tugboat under the control of Fukuda Salvage Co. arrived near the vessel and commenced to tow the vessel for the port of Naha, Japan. Fire fighting operations were again conducted at the said port. After the fire was extinguished, the cargoes which were saved were loaded to another vessel for delivery to their original ports of destination. ESLI charged the consignees several amounts corresponding to additional freight and salvage charges, as follows: (a) for the goods covered by Bill of Lading No. 042283, ESLI charged the consignee the sum of P1,927.65, representing salvage charges assessed against the goods; (b) for the goods covered by Bill of Lading No. KCE-12, ESLI charged the consignee the sum of P2,980.64 for additional freight and P826.14 for salvage charges against the goods; (c) for the goods covered by Bill of Lading No. KCE-8, ESLI charged the consignee the sum of P3,292.26 for additional freight and P4,130.68 for salvage charges against the goods; and (d) for the goods under Bills of Lading Nos. KMA-73 and KMA-74, ESLI charged the consignee the sum of P8,337.06 for salvage charges against the goods. The charges were all paid by Philippine Home Assurance Corporation (PHAC) under protest for and in behalf of the consignees. PHAC, as subrogee of the consignees, thereafter filed a complaint before the Regional Trial Court of Manila, Branch 39, against ESLI to recover the sum paid under protest on the ground that the same were actually damages directly brought about by the fault, negligence, illegal act and/or breach of contract of ESLI. In its answer, ESLI contended that it exercised the diligence required by law in the handling, custody and carriage of the shipment; that the fire was caused by an unforeseen event; that the additional freight charges are due and demandable pursuant to the Bill of Lading; 1 and that salvage charges are properly collectible under Act No. 2616, known as the Salvage Law. The trial court dismissed PHAC's complaint and ruled in favor of ESLI ratiocinating thus:

The question to be resolved is whether or not the fire on the vessel which was caused by the explosion of an acetylene cylinder loaded on the same was the fault or negligence of the defendant. Evidence has been presented that the SS "Eastern Explorer" was a seaworthy vessel (Deposition of Jumpei Maeda, October 23, 1980, p. 3) and before the ship loaded the Acetylene Cylinder No. NCW 875, the same has been tested, checked and examined and was certified to have complied with the required safety measures and standards (Deposition of Senjei Hayashi, October 23, 1980, pp. 2-3). When the fire was detected by the crew, fire fighting operations was immediately conducted but due to the explosion of the acetylene cylinder, the crew were unable to contain the fire and had to abandon the ship to save their lives and were saved from drowning by passing vessels in the vicinity. The burning of the vessel rendering it a constructive total loss and incapable of pursuing its voyage to the Philippines was, therefore, not the fault or negligence of defendant but a natural disaster or calamity which nobody would like to happen. The salvage operations conducted by Fukuda Salvage Company (Exhibits "4-A" and "6-A") was perfectly a legal operation and charges made on the goods recovered were legitimate charges. Act No. 2616, otherwise known as the Salvage Law, is thus applicable to the case at bar. Section 1 of Act No. 2616 states: Sec 1. When in case of shipwreck, the vessel or its cargo shall be beyond the control of the crew, or shall have been abandoned by them, and picked up and conveyed to a safe place by other persons, the latter shall be entitled to a reward for the salvage. Those who, not being included in the above paragraph, assist in saving a vessel or its cargo from shipwreck, shall be entitled to like reward. In relation to the above provision, the Supreme Court has ruled in Erlanger & Galinger v. Swedish East Asiatic Co., Ltd., 34 Phil. 178, that three elements are necessary to a valid salvage claim, namely (a)a marine peril (b) service voluntarily rendered when not required as an existing duty or from a special contract and (c) success in whole or in part, or that the service rendered contributed to such success. The above elements are all present in the instant case. Salvage charges may thus be assessed on the cargoes saved from the vessel. As provided for in Section 13 of the Salvage Law, "The expenses of salvage, as well as the reward for salvage or assistance, shall be a charge on the things salvaged or their value." In Manila Railroad Co. v. Macondray Co., 37 Phil. 583, it was also held that "when a ship and its cargo are saved together, the salvage allowance should be charged against the ship and cargo in the proportion of their respective values, the same as in a case of general average . . ." Thus, the "compensation to be paid by the owner of the cargo is in proportion to the value of the vessel and the value of the cargo saved." (Atlantic Gulf and Pacific Co. v. Uchida Kisen Kaisha, 42 Phil. 321). (Memorandum for Defendant, Records, pp. 212-213). With respect to the additional freight charged by defendant from the consignees of the goods, the same are also validly demandable.

As provided by the Civil Code: Art. 1174. Except in cases expressly specified by law, or when it is otherwise declared by stipulation, or when the nature of the obligation require the assumption of risk, no person shall be responsible for those events which could not be foreseen, or which though foreseen, were inevitable. Art 1266. The debtor in obligations to do shall also be released when the prestation becomes legally or physically impossible without the fault of the obligor." The burning of "EASTERN EXPLORER" while off Okinawa rendered it physically impossible for defendant to comply with its obligation of delivering the goods to their port of destination pursuant to the contract of carriage. Under Article 1266 of the Civil Code, the physical impossibility of the prestation extinguished defendant's obligation.. It is but legal and equitable for the defendant therefore, to demand additional freight from the consignees for forwarding the goods from Naha, Japan to Manila and Cebu City on board another vessel, the "EASTERN MARS." This finds support under Article 844 of the Code of Commerce which provides as follows: Art. 844. A captain who may have taken on board the goods saved from the wreck shall continue his course to the port of destination; and on arrival should deposit the same, with judicial intervention at the disposal of their legitimate owners. . . . The owners of the cargo shall defray all the expenses of this arrival as well as the payment of the freight which, after taking into consideration the circumstances of the case, may be fixed by agreement or by a judicial decision. Furthermore, the terms and conditions of the Bill of Lading authorize the imposition of additional freight charges in case of forced interruption or abandonment of the voyage. At the dorsal portion of the Bills of Lading issued to the consignees is this stipulation: 12. All storage, transshipment, forwarding or other disposition of cargo at or from a port of distress or other place where there has been a forced interruption or abandonment of the voyage shall be at the expense of the owner, shipper, consignee of the goods or the holder of this bill of lading who shall be jointly and severally liable for all freight charges and expenses of every kind whatsoever, whether payable in advance or not that may be incurred by the cargo in addition to the ordinary freight, whether the service be performed by the named carrying vessel or by carrier's other vessels or by strangers. All such expenses and charges shall be due and payable day by day immediately when they are incurred. The bill of lading is a contract and the parties are bound by its terms (Gov't of the Philippine Islands vs. Ynchausti and Co., 40 Phil. 219). The provision quoted is binding upon the consignee. Defendant therefore, can validly require payment of additional freight from the consignee. Plaintiff can not thus recover the additional freight paid by the consignee to defendant. (Memorandum for Defendant, Record, pp. 215-216). 2 On appeal to the Court of Appeals, respondent court affirmed the trial court's findings and conclusions, 3 hence, the present petition for review before this Court on the following errors:

I. THE RESPONDENT COURT ERRONEOUSLY ADOPTED WITH APPROVAL THE TRIAL COURT'S FINDINGS THAT THE BURNING OF THE SS "EASTERN EXPLORER", RENDERING ET A CONSTRUCTIVE TOTAL LOSS, IS A NATURAL DISASTER OR CALAMITY WHICH NOBODY WOULD LIKE TO HAPPEN, DESPITE EXISTING JURISPRUDENCE TO THE CONTRARY. II. THE RESPONDENT COURT ARBITRARILY RULED THAT THE BURNING OF THE SS "EASTERN EXPLORER" WAS NOT THE FAULT AND NEGLIGENCE OF RESPONDENT EASTERN SHIPPING LINES. III. THE RESPONDENT COURT COMMITTED GRAVE ABUSE OF DISCRETION IN RULING THAT DEFENDANT HAD EXERCISED THE EXTRAORDINARY DILIGENCE IN THE VIGILANCE OVER THE GOODS AS REQUIRED BY LAW. IV. THE RESPONDENT COURT ARBITRARILY RULED THAT THE MARINE NOTE OF PROTEST AND STATEMENT OF FACTS ISSUED BY THE VESSEL'S MASTER ARE NOT HEARSAY DESPITE THE FACT THAT THE VESSEL'S MASTER, CAPT. LICAYLICAY WAS NOT PRESENTED COURT, WITHOUT EXPLANATION WHATSOEVER FOR HIS NON-PRESENTATION, THUS, PETITIONER WAS DEPRIVED OF ITS RIGHT TO CROSS- EXAMINE THE AUTHOR THEREOF. V. THE RESPONDENT COURT ERRONEOUSLY ADOPTED WITH APPROVAL THE TRIAL COURT'S CONCLUSION THAT THE EXPENSES OR AVERAGES INCURRED IN SAVING THE CARGO CONSTITUTE GENERAL AVERAGE. VI. THE RESPONDENT COURT ERRONEOUSLY ADOPTED THE TRIAL COURT'S RULING THAT PETITIONER WAS LIABLE TO RESPONDENT CARRIER FOR ADDITIONAL FREIGHT AND SALVAGE CHARGES. 4 It is quite evident that the foregoing assignment of errors challenges the findings of fact and the appreciation of evidence made by the trial court and later affirmed by respondent court. While it is a well-settled rule that only questions of law may be raised in a petition for review under Rule 45 of the Rules of Court, it is equally well-settled that the same admits of the following exceptions, namely: (a) when the conclusion is a finding grounded entirely on speculation, surmises or conjectures; (b) when the inference made is manifestly mistaken, absurd or impossible; (c) where there is a grave abuse of discretion; (d) when the judgment is based on a misapprehension of facts; (e) when the findings of fact are conflicting; (f) when the Court of Appeals, in making its findings, went beyond the issues of the case and the same is contrary to the admissions of both appellant and appellee; (g) when the findings of the Court of Appeals are contrary to those of the trial court; (h) when the findings of fact are conclusions without citation of specific evidence on which they are based; (i) when the facts set forth in the petition as well as in the petitioners' main and reply briefs are not disputed by the respondents; and (j) when the finding of fact of the Court of Appeals is premised on the supposed absence of evidence and is contradicted by the evidence on record. 5 Thus, if there is a showing, as in the instant case, that the findings complained of are totally devoid of support in the records, or that they are so glaringly erroneous as to constitute grave abuse of discretion, the same may be properly reviewed and evaluated by this Court. It is worthy to note at the outset that the goods subject of the present controversy were neither lost nor damaged in transit by the fire that razed the carrier. In fact, the said goods were all delivered to the consignees, even if the transshipment took longer than necessary. What is at issue therefore is not whether or not the carrier is liable for the loss, damage, or deterioration of the goods transported by them but who, among the carrier, consignee or insurer of the goods, is liable for the additional charges or expenses incurred by the owner of the ship in the salvage operations and in the transshipment of the goods via a different carrier.

In absolving respondent carrier of any liability, respondent Court of Appeals sustained the trial court's finding that the fire that gutted the ship was a natural disaster or calamity. Petitioner takes exception to this conclusion and we agree. In our jurisprudence, fire may not be considered a natural disaster or calamity since it almost always arises from some act of man or by human means. It cannot be an act of God unless caused by lightning or a natural disaster or casualty not attributable to human agency. 6 In the case at bar, it is not disputed that a small flame was detected on the acetylene cylinder and that by reason thereof, the same exploded despite efforts to extinguish the fire. Neither is there any doubt that the acetylene cylinder, obviously fully loaded, was stored in the accommodation area near the engine room and not in a storage area considerably far, and in a safe distance, from the engine room. Moreover, there was no showing, and none was alleged by the parties, that the fire was caused by a natural disaster or calamity not attributable to human agency. On the contrary, there is strong evidence indicating that the acetylene cylinder caught fire because of the fault and negligence of respondent ESLI, its captain and its crew. First, the acetylene cylinder which was fully loaded should not have been stored in the accommodation area near the engine room where the heat generated therefrom could cause the acetylene cylinder to explode by reason of spontaneous combustion. Respondent ESLI should have easily foreseen that the acetylene cylinder, containing highly inflammable material was in real danger of exploding because it was stored in close proximity to the engine room. Second, respondent ESLI should have known that by storing the acetylene cylinder in the accommodation area supposed to be reserved for passengers, it unnecessarily exposed its passengers to grave danger and injury. Curious passengers, ignorant of the danger the tank might have on humans and property, could have handled the same or could have lighted and smoked cigarettes while repairing in the accommodation area. Third, the fact that the acetylene cylinder was checked, tested and examined and subsequently certified as having complied with the safety measures and standards by qualified experts 7 before it was loaded in the vessel only shows to a great extent that negligence was present in the handling of the acetylene cylinder after it was loaded and while it was on board the ship. Indeed, had the respondent and its agents not been negligent in storing the acetylene cylinder near the engine room, then the same would not have leaked and exploded during the voyage. Verily, there is no merit in the finding of the trial court to which respondent court erroneously agreed that the fire was not the fault or negligence of respondent but a natural disaster or calamity. The records are simply wanting in this regard. Anent petitioner's objection to the admissibility of Exhibits "4'' and ''5", the Statement of Facts and the Marine Note of Protest issued by Captain Tiburcio A. Licaylicay, we find the same impressed with merit because said documents are hearsay evidence. Capt. Licaylicay, Master of S.S. Eastern Explorer who issued the said documents, was not presented in court to testify to the truth of the facts he stated therein; instead, respondent ESLI presented Junpei Maeda, its Branch Manager in Tokyo and Yokohama, Japan, who evidently had no personal knowledge of the facts stated in the documents at issue. It is clear from Section 36, Rule 130 of the Rules of Court that any evidence, whether oral or documentary, is hearsay if its probative value is not based on the personal knowledge of the witness but on the knowledge of some other person not on the witness stand. Consequently, hearsay evidence, whether objected to or not, has no probative value unless the proponent can show that the evidence falls within the exceptions to the hearsay evidence rule. 8 It is excluded because the party against whom it is presented is deprived of his right and opportunity to cross-examine the persons to whom the statements or writings are attributed. On the issue of whether or not respondent court committed an error in concluding that the expenses incurred in saving the cargo are considered general average, we rule in the

affirmative. As a rule, general or gross averages include all damages and expenses which are deliberately caused in order to save the vessel, its cargo, or both at the same time, from a real and known risk 9 While the instant case may technically fall within the purview of the said provision, the formalities prescribed under Articles 813 10 and 814 11 of the Code of Commerce in order to incur the expenses and cause the damage corresponding to gross average were not complied with. Consequently, respondent ESLI's claim for contribution from the consignees of the cargo at the time of the occurrence of the average turns to naught. Prescinding from the foregoing premises, it indubitably follows that the cargo consignees cannot be made liable to respondent carrier for additional freight and salvage charges. Consequently, respondent carrier must refund to herein petitioner the amount it paid under protest for additional freight and salvage charges in behalf of the consignees. WHEREFORE, the judgment appealed from is hereby REVERSED and SET ASIDE. Respondent Eastern Shipping Lines, Inc. is ORDERED to return to petitioner Philippine Home Assurance Corporation the amount it paid under protest in behalf of the consignees herein. SO ORDERED. Padilla, Bellosillo, Vitug and Hermosisima, Jr., JJ., concur.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 116940 June 11, 1997 THE PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, INC., petitioner, vs. COURT OF APPEALS and FELMAN SHIPPING LINES, respondents. BELLOSILLO, J.: This case deals with the liability, if any, of a shipowner for loss of cargo due to its failure to observe the extraordinary diligence required by Art. 1733 of the Civil Code as well as the right of the insurer to be subrogated to the rights of the insured upon payment of the insurance claim. On 6 July 1983 Coca-Cola Bottlers Philippines, Inc., loaded on board "MV Asilda," a vessel owned and operated by respondent Felman Shipping Lines (FELMAN for brevity), 7,500 cases of 1-liter Coca-Cola softdrink bottles to be transported from Zamboanga City to Cebu City for consignee Coca-Cola Bottlers Philippines, Inc., Cebu. 1 The shipment was insured with petitioner Philippine American General Insurance Co., Inc. (PHILAMGEN for brevity), under Marine Open Policy No. 100367-PAG. "MV Asilda" left the port of Zamboanga in fine weather at eight o'clock in the evening of the same day. At around eight forty-five the following morning, 7 July 1983, the vessel sank in the waters of Zamboanga del Norte bringing down her entire cargo with her including the subject 7,500 cases of 1-liter Coca-Cola softdrink bottles. On 15 July 1983 the consignee Coca-Cola Bottlers Philippines, Inc., Cebu plant, filed a claim with respondent FELMAN for recovery of damages it sustained as a result of the loss of its softdrink bottles that sank with "MV Asilda." Respondent denied the claim thus prompting the consignee to file an insurance claim with PHILAMGEN which paid its claim of P755,250.00. Claiming its right of subrogation PHILAMGEN sought recourse against respondent FELMAN which disclaimed any liability for the loss. Consequently, on 29 November 1983 PHILAMGEN sued the shipowner for sum of money and damages. In its complaint PHILAMGEN alleged that the sinking and total loss of "MV Asilda" and its cargo were due to the vessel's unseaworthiness as she was put to sea in an unstable condition. It

further alleged that the vessel was improperly manned and that its officers were grossly negligent in failing to take appropriate measures to proceed to a nearby port or beach after the vessel started to list. On 15 February 1985 FELMAN filed a motion to dismiss based on the affirmative defense that no right of subrogation in favor of PHILAMGEN was transmitted by the shipper, and that, in any event, FELMAN had abandoned all its rights, interests and ownership over " MV Asilda" together with her freight and appurtenances for the purpose of limiting and extinguishing its liability under Art. 587 of the Code of Commerce. 2 On 17 February 1986 the trial court dismissed the complaint of PHILAMGEN. On appeal the Court of Appeals set aside the dismissal and remanded the case to the lower court for trial on the merits. FELMAN filed a petition forcertiorari with this Court but it was subsequently denied on 13 February 1989. On 28 February 1992 the trial court rendered judgment in favor of FELMAN. 3 It ruled that "MV Asilda" was seaworthy when it left the port of Zamboanga as confirmed by certificates issued by the Philippine Coast Guard and the shipowner's surveyor attesting to its seaworthiness. Thus the loss of the vessel and its entire shipment could only be attributed to either a fortuitous event, in which case, no liability should attach unless there was a stipulation to the contrary, or to the negligence of the captain and his crew, in which case, Art. 587 of the Code of Commerce should apply. The lower court further ruled that assuming "MV Asilda" was unseaworthy, still PHILAMGEN could not recover from FELMAN since the assured (Coca-Cola Bottlers Philippines, Inc.) had breached its implied warranty on the vessel's seaworthiness. Resultantly, the payment made by PHILAMGEN to the assured was an undue, wrong and mistaken payment. Since it was not legally owing, it did not give PHILAMGEN the right of subrogation so as to permit it to bring an action in court as a subrogee. On 18 March 1992 PHILAMGEN appealed the decision to the Court of Appeals. On 29 August 1994 respondent appellate court rendered judgment finding "MV Asilda" unseaworthy for being top-heavy as 2,500 cases of Coca-Cola softdrink bottles were improperly stowed on deck. In other words, while the vessel possessed the necessary Coast Guard certification indicating its seaworthiness with respect to the structure of the ship itself, it was not seaworthy with respect to the cargo. Nonetheless, the appellate court denied the claim of PHILAMGEN on the ground that the assured's implied warranty of seaworthiness was not complied with. Perfunctorily, PHILAMGEN was not properly subrogated to the rights and interests of the shipper. Furthermore, respondent court held that the filing of notice of abandonment had absolved the shipowner/agent from liability under the limited liability rule. The issues for resolution in this petition are: (a) whether "MV Asilda" was seaworthy when it left the port of Zamboanga; (b) whether the limited liability under Art. 587 of the Code of Commerce should apply; and, (c) whether PHILAMGEN was properly subrogated to the rights and legal actions which the shipper had against FELMAN, the shipowner. "MV Asilda" was unseaworthy when it left the port of Zamboanga. In a joint statement, the captain as well as the chief mate of the vessel confirmed that the weather was fine when they left the port of Zamboanga. According to them, the vessel was carrying 7,500 cases of 1-liter Coca-Cola softdrink bottles, 300 sacks of seaweeds, 200 empty CO2 cylinders and an undetermined quantity of empty boxes for fresh eggs. They loaded the empty boxes for eggs and about 500 cases of Coca-Cola bottles on deck. 4 The ship captain stated that around four o'clock in the morning of 7 July 1983 he was awakened by the officer on duty to inform him that the vessel had hit a floating log. At that time he noticed that the weather had deteriorated with strong southeast winds inducing big waves. After thirty minutes he observed that the vessel was listing slightly to starboard and would not correct itself despite the heavy rolling and pitching. He then ordered his crew to shift the cargo from starboard to portside until the vessel was balanced. At about seven o'clock in the morning, the master of the vessel stopped the engine

because the vessel was listing dangerously to portside. He ordered his crew to shift the cargo back to starboard. The shifting of cargo took about an hour afterwhich he rang the engine room to resume full speed. At around eight forty-five, the vessel suddenly listed to portside and before the captain could decide on his next move, some of the cargo on deck were thrown overboard and seawater entered the engine room and cargo holds of the vessel. At that instance, the master of the vessel ordered his crew to abandon ship. Shortly thereafter, "MV Asilda" capsized and sank. He ascribed the sinking to the entry of seawater through a hole in the hull caused by the vessel's collision with a partially submerged log. 5 The Elite Adjusters, Inc., submitted a report regarding the sinking of " MV Asilda." The report, which was adopted by the Court of Appeals, reads We found in the course of our investigation that a reasonable explanation for the series of lists experienced by the vessel that eventually led to her capsizing and sinking, was that the vessel wastop-heavy which is to say that while the vessel may not have been overloaded, yet the distribution or stowage of the cargo on board was done in such a manner that the vessel was in top-heavy condition at the time of her departure and which condition rendered her unstable and unseaworthy for that particular voyage. In this connection, we wish to call attention to the fact that this vessel was designed as a fishing vessel . . . and it was not designed to carry a substantial amount or quantity of cargo on deck. Therefore, we believe strongly that had her cargo been confined to those that could have been accommodated under deck, her stability would not have been affected and the vessel would not have been in any danger of capsizing, even given the prevailing weather conditions at that time of sinking. But from the moment that the vessel was utilized to load heavy cargo on its deck, the vessel was rendered unseaworthy for the purpose of carrying the type of cargo because the weight of the deck cargo so decreased the vessel's metacentric height as to cause it to become unstable. Finally, with regard to the allegation that the vessel encountered big waves, it must be pointed out that ships are precisely designed to be able to navigate safely even during heavy weather and frequently we hear of ships safely and successfully weathering encounters with typhoons and although they may sustain some amount of damage, the sinking of ship during heavy weather is not a frequent occurrence and is not likely to occur unless they are inherently unstable and unseaworthy . . . . We believe, therefore, and so hold that the proximate cause of the sinking of the M/V "Asilda" was her condition of unseaworthiness arising from her having been top-heavy when she departed from the Port of Zamboanga. Her having capsized and eventually sunk was bound to happen and was therefore in the category of an inevitable occurrence (emphasis supplied). 6 We subscribe to the findings of the Elite Adjusters, Inc., and the Court of Appeals that the proximate cause of the sinking of "MV Asilda" was its being top-heavy. Contrary to the ship captain's allegations, evidence shows that approximately 2,500 cases of softdrink bottles were stowed on deck. Several days after "MV Asilda" sank, an estimated 2,500 empty Coca-Cola plastic cases were recovered near the vicinity of the sinking. Considering that the ship's hatches were properly secured, the empty Coca-Cola cases recovered could have come only from the vessel's deck cargo. It is settled that carrying a deck cargo raises the presumption of unseaworthiness unless it can be shown that the deck cargo will not interfere with the proper management of the ship. However, in this case it was established that "MV Asilda" was not designed to carry substantial amount of cargo on deck. The inordinate loading of cargo deck

resulted in the decrease of the vessel's metacentric height 7 thus making it unstable. The strong winds and waves encountered by the vessel are but the ordinary vicissitudes of a sea voyage and as such merely contributed to its already unstable and unseaworthy condition. On the second issue, Art. 587 of the Code of Commerce is not applicable to the case at bar. 8 Simply put, the ship agent is liable for the negligent acts of the captain in the care of goods loaded on the vessel. This liability however can be limited through abandonment of the vessel, its equipment and freightage as provided in Art. 587. Nonetheless, there are exceptional circumstances wherein the ship agent could still be held answerable despite the abandonment, as where the loss or injury was due to the fault of the shipowner and the captain. 9 The international rule is to the effect that the right of abandonment of vessels, as a legal limitation of a shipowner's liability, does not apply to cases where the injury or average was occasioned by the shipowner's own fault. 10 It must be stressed at this point that Art. 587 speaks only of situations where the fault or negligence is committed solely by the captain. Where the shipowner is likewise to be blamed, Art. 587 will not apply, and such situation will be covered by the provisions of the Civil Code on common carrier. 11 It was already established at the outset that the sinking of "MV Asilda" was due to its unseaworthiness even at the time of its departure from the port of Zamboanga. It was top-heavy as an excessive amount of cargo was loaded on deck. Closer supervision on the part of the shipowner could have prevented this fatal miscalculation. As such, FELMAN was equally negligent. It cannot therefore escape liability through the expedient of filing a notice of abandonment of the vessel by virtue of Art. 587 of the Code of Commerce. Under Art 1733 of the Civil Code, "(c)ommon carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case . . ." In the event of loss of goods, common carriers are presumed to have acted negligently. FELMAN, the shipowner, was not able to rebut this presumption. In relation to the question of subrogation, respondent appellate court found " MV Asilda" unseaworthy with reference to the cargo and therefore ruled that there was breach of warranty of seaworthiness that rendered the assured not entitled to the payment of is claim under the policy. Hence, when PHILAMGEN paid the claim of the bottling firm there was in effect a "voluntary payment" and no right of subrogation accrued in its favor. In other words, when PHILAMGEN paid it did so at its own risk. It is generally held that in every marine insurance policy the assured impliedly warrants to the assurer that the vessel is seaworthy and such warranty is as much a term of the contract as if expressly written on the face of the policy. 12 Thus Sec. 113 of the Insurance Code provides that "(i)n every marine insurance upon a ship or freight, or freightage, or upon anything which is the subject of marine insurance, a warranty is implied that the ship is seaworthy." Under Sec. 114, a ship is "seaworthy when reasonably fit to perform the service, and to encounter the ordinary perils of the voyage, contemplated by the parties to the policy." Thus it becomes the obligation of the cargo owner to look for a reliable common carrier which keeps its vessels in seaworthy condition. He may have no control over the vessel but he has full control in the selection of the common carrier that will transport his goods. He also has full discretion in the choice of assurer that will underwrite a particular venture. We need not belabor the alleged breach of warranty of seaworthiness by the assured as painstakingly pointed out by FELMAN to stress that subrogation will not work in this case. In policies where the law will generally imply a warranty of seaworthiness, it can only be excluded by terms in writing in the policy in the clearest language. 13 And where the policy stipulates that the seaworthiness of the vessel as between the assured and the assurer is admitted, the question of seaworthiness cannot be raised by the assurer without showing concealment or misrepresentation by the assured. 14

The marine policy issued by PHILAMGEN to the Coca-Cola bottling firm in at least two (2) instances has dispensed with the usual warranty of worthiness. Paragraph 15 of the Marine Open Policy No. 100367-PAG reads "(t)he liberties as per Contract of Affreightment the presence of the Negligence Clause and/or Latent Defect Clause in the Bill of Lading and/or Charter Party and/or Contract of Affreightment as between the Assured and the Company shall not prejudice the insurance. The seaworthiness of the vessel as between the Assured and the Assurers is hereby admitted." 15 The same clause is present in par. 8 of the Institute Cargo Clauses (F.P.A.) of the policy which states "(t)he seaworthiness of the vessel as between the Assured and Underwriters in hereby admitted . . . ." 16 The result of the admission of seaworthiness by the assurer PHILAMGEN may mean one or two things: (a) that the warranty of the seaworthiness is to be taken as fulfilled; or, (b) that the risk of unseaworthiness is assumed by the insurance company. 17 The insertion of such waiver clauses in cargo policies is in recognition of the realistic fact that cargo owners cannot control the state of the vessel. Thus it can be said that with such categorical waiver, PHILAMGEN has accepted the risk of unseaworthiness so that if the ship should sink by unseaworthiness, as what occurred in this case, PHILAMGEN is liable. Having disposed of this matter, we move on to the legal basis for subrogation. PHILAMGEN's action against FELMAN is squarely sanctioned by Art. 2207 of the Civil Code which provides: Art. 2207. If the plaintiff's property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. If the amount paid by the insurance company does not fully cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency from the person causing the loss or injury. In Pan Malayan Insurance Corporation v. Court of Appeals, 18 we said that payment by the assurer to the assured operates as an equitable assignment to the assurer of all the remedies which the assured 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 payment by the insurance company of the insurance claim. It accrues simply upon payment by the insurance company of the insurance claim. The doctrine of subrogation has its roots in equity. It is designed to promote and to accomplish justice and is the mode which equity adopts to compel the ultimate payment of a debt by one who in justice, equity and good conscience ought to pay. 19 Therefore, the payment made by PHILAMGEN to Coca-Cola Bottlers Philippines, Inc., gave the former the right to bring an action as subrogee against FELMAN. Having failed to rebut the presumption of fault, the liability of FELMAN for the loss of the 7,500 cases of 1-liter Coca-Cola softdrink bottles is inevitable. WHEREFORE, the petition is GRANTED. Respondent FELMAN SHIPPING LINES is ordered to pay petitioner PHILIPPINE AMERICAN GENERAL INSURANCE CO., INC., Seven Hundred Fifty-five Thousand Two Hundred and Fifty Pesos (P755,250.00) plus legal interest thereon counted from 29 November 1983, the date of judicial demand, pursuant to Arts. 2212 and 2213 of the Civil Code. 20 SO ORDERED. Vitug, Kapunan and Hermosisima, Jr., JJ., concur. Padilla, J., is on leave.

Republic of the Philippines SUPREME COURT Manila

THIRD DIVISION G.R. No. 143133 June 5, 2002 BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. and JARDINE DAVIES TRANSPORT SERVICES, INC.,petitioners, vs. PHILIPPINE FIRST INSURANCE CO., INC., respondents. PANGANIBAN, J.: Proof of the delivery of goods in good order to a common carrier and of their arrival in bad order at their destination constitutes prima facie fault or negligence on the part of the carrier. If no adequate explanation is given as to how the loss, the destruction or the deterioration of the goods happened, the carrier shall be held liable therefor. Statement of the Case Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the July 15, 1998 Decision1 and the May 2, 2000 Resolution2 of the Court of Appeals3 (CA) in CA-GR CV No. 53571. The decretal portion of the Decision reads as follows: "WHEREFORE, in the light of the foregoing disquisition, the decision appealed from is hereby REVERSED and SET ASIDE. Defendants-appellees are ORDERED to jointly and severally pay plaintiffs-appellants the following: '1) FOUR Hundred Fifty One Thousand Twenty-Seven Pesos and 32/100 (P451,027.32) as actual damages, representing the value of the damaged cargo, plus interest at the legal rate from the time of filing of the complaint on July 25, 1991, until fully paid; '2) Attorney's fees amounting to 20% of the claim; and '3) Costs of suit.'"4 The assailed Resolution denied petitioner's Motion for Reconsideration. The CA reversed the Decision of the Regional Trial Court (RTC) of Makati City (Branch 134), which had disposed as follows: "WHEREFORE, in view of the foregoing, judgment is hereby rendered, dismissing the complaint, as well as defendant's counterclaim."5 The Facts The factual antecedents of the case are summarized by the Court of Appeals in this wise: "On June 13, 1990, CMC Trading A.G. shipped on board the M/V 'Anangel Sky' at Hamburg, Germany 242 coils of various Prime Cold Rolled Steel sheets for transportation to Manila consigned to the Philippine Steel Trading Corporation. On July 28, 1990, M/V Anangel Sky arrived at the port of Manila and, within the subsequent days, discharged the subject cargo. Four (4) coils were found to be in bad order B.O. Tally sheet No. 154974. Finding the four (4) coils in their damaged state to be unfit for the intended purpose, the consignee Philippine Steel Trading Corporation declared the same as total loss. "Despite receipt of a formal demand, defendants-appellees refused to submit to the consignee's claim. Consequently, plaintiff-appellant paid the consignee five hundred six thousand eighty six & 50/100 pesos (P506,086.50), and was subrogated to the latter's rights and causes of action against defendants-appellees. Subsequently, plaintiffappellant instituted this complaint for recovery of the amount paid by them, to the consignee as insured. "Impugning the propriety of the suit against them, defendants-appellees imputed that the damage and/or loss was due to pre-shipment damage, to the inherent nature, vice or defect of the goods, or to perils, danger and accidents of the sea, or to insufficiency of packing thereof, or to the act or omission of the shipper of the goods or their representatives. In addition thereto, defendants-appellees argued that their liability, if there be any, should not exceed the limitations of liability provided for in the bill of lading

and other pertinent laws. Finally, defendants-appellees averred that, in any event, they exercised due diligence and foresight required by law to prevent any damage/loss to said shipment."6 Ruling of the Trial Court The RTC dismissed the Complaint because respondent had failed to prove its claims with the quantum of proof required by law.7 It likewise debunked petitioners' counterclaim, because respondent's suit was not manifestly frivolous or primarily intended to harass them.8 Ruling of the Court of Appeals In reversing the trial court, the CA ruled that petitioners were liable for the loss or the damage of the goods shipped, because they had failed to overcome the presumption of negligence imposed on common carriers. The CA further held as inadequately proven petitioners' claim that the loss or the deterioration of the goods was due to pre-shipment damage.9 It likewise opined that the notation "metal envelopes rust stained and slightly dented" placed on the Bill of Lading had not been the proximate cause of the damage to the four (4) coils.10 As to the extent of petitioners' liability, the CA held that the package limitation under COGSA was not applicable, because the words "L/C No. 90/02447" indicated that a higher valuation of the cargo had been declared by the shipper. The CA, however, affirmed the award of attorney's fees. Hence, this Petition.11 Issues In their Memorandum, petitioners raise the following issues for the Court's consideration: I "Whether or not plaintiff by presenting only one witness who has never seen the subject shipment and whose testimony is purely hearsay is sufficient to pave the way for the applicability of Article 1735 of the Civil Code; II "Whether or not the consignee/plaintiff filed the required notice of loss within the time required by law; III "Whether or not a notation in the bill of lading at the time of loading is sufficient to show pre-shipment damage and to exempt herein defendants from liability; IV "Whether or not the "PACKAGE LIMITATION" of liability under Section 4 (5) of COGSA is applicable to the case at bar."12 In sum, the issues boil down to three: 1. Whether petitioners have overcome the presumption of negligence of a common carrier 2. Whether the notice of loss was timely filed 3. Whether the package limitation of liability is applicable This Court's Ruling The Petition is partly meritorious. First Issue: Proof of Negligence Petitioners contend that the presumption of fault imposed on common carriers should not be applied on the basis of the lone testimony offered by private respondent. The contention is untenable. Well-settled is the rule that common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence and vigilance with respect to the safety of the goods and the passengers they transport.13 Thus, common carriers are required to

render service with the greatest skill and foresight and "to use all reason[a]ble means to ascertain the nature and characteristics of the goods tendered for shipment, and to exercise due care in the handling and stowage, including such methods as their nature requires." 14 The extraordinary responsibility lasts from the time the goods are unconditionally placed in the possession of and received for transportation by the carrier until they are delivered, actually or constructively, to the consignee or to the person who has a right to receive them.15 This strict requirement is justified by the fact that, without a hand or a voice in the preparation of such contract, the riding public enters into a contract of transportation with common carriers.16 Even if it wants to, it cannot submit its own stipulations for their approval. 17 Hence, it merely adheres to the agreement prepared by them. Owing to this high degree of diligence required of them, common carriers, as a general rule, are presumed to have been at fault or negligent if the goods they transported deteriorated or got lost or destroyed.18 That is, unless they prove that they exercised extraordinary diligence in transporting the goods.19 In order to avoid responsibility for any loss or damage, therefore, they have the burden of proving that they observed such diligence.20 However, the presumption of fault or negligence will not arise21 if the loss is due to any of the following causes: (1) flood, storm, earthquake, lightning, or other natural disaster or calamity; (2) an act of the public enemy in war, whether international or civil; (3) an act or omission of the shipper or owner of the goods; (4) the character of the goods or defects in the packing or the container; or (5) an order or act of competent public authority. 22 This is a closed list. If the cause of destruction, loss or deterioration is other than the enumerated circumstances, then the carrier is liable therefor.23 Corollary to the foregoing, mere proof of delivery of the goods in good order to a common carrier and of their arrival in bad order at their destination constitutes a prima facie case of fault or negligence against the carrier. If no adequate explanation is given as to how the deterioration, the loss or the destruction of the goods happened, the transporter shall be held responsible.24 That petitioners failed to rebut the prima facie presumption of negligence is revealed in the case at bar by a review of the records and more so by the evidence adduced by respondent.25 First, as stated in the Bill of Lading, petitioners received the subject shipment in good order and condition in Hamburg, Germany.26 Second, prior to the unloading of the cargo, an Inspection Report27 prepared and signed by representatives of both parties showed the steel bands broken, the metal envelopes ruststained and heavily buckled, and the contents thereof exposed and rusty. Third, Bad Order Tally Sheet No. 15497928 issued by Jardine Davies Transport Services, Inc., stated that the four coils were in bad order and condition. Normally, a request for a bad order survey is made in case there is an apparent or a presumed loss or damage.29 Fourth, the Certificate of Analysis30 stated that, based on the sample submitted and tested, the steel sheets found in bad order were wet with fresh water. Fifth, petitioners -- in a letter31 addressed to the Philippine Steel Coating Corporation and dated October 12, 1990 -- admitted that they were aware of the condition of the four coils found in bad order and condition. These facts were confirmed by Ruperto Esmerio, head checker of BM Santos Checkers Agency. Pertinent portions of his testimony are reproduce hereunder: "Q. Mr. Esmerio, you mentioned that you are a Head Checker. Will you inform the Honorable Court with what company you are connected? A. BM Santos Checkers Agency, sir. Q. How is BM Santos checkers Agency related or connected with defendant Jardine Davies Transport Services? A. It is the company who contracts the checkers, sir.

Q. You mentioned that you are a Head Checker, will you inform this Honorable Court your duties and responsibilities? A. I am the representative of BM Santos on board the vessel, sir, to supervise the discharge of cargoes. xxx xxx xxx Q. On or about August 1, 1990, were you still connected or employed with BM Santos as a Head Checker? A. Yes, sir. Q. And, on or about that date, do you recall having attended the discharging and inspection of cold steel sheets in coil on board the MV/AN ANGEL SKY? A. Yes, sir, I was there. xxx xxx xxx Q. Based on your inspection since you were also present at that time, will you inform this Honorable Court the condition or the appearance of the bad order cargoes that were unloaded from the MV/ANANGEL SKY? ATTY. MACAMAY: Objection, Your Honor, I think the document itself reflects the condition of the cold steel sheets and the best evidence is the document itself, Your Honor that shows the condition of the steel sheets. COURT: Let the witness answer. A. The scrap of the cargoes is broken already and the rope is loosen and the cargoes are dent on the sides."32 All these conclusively prove the fact of shipment in good order and condition and the consequent damage to the four coils while in the possession of petitioner,33 who notably failed to explain why.34 Further, petitioners failed to prove that they observed the extraordinary diligence and precaution which the law requires a common carrier to know and to follow to avoid damage to or destruction of the goods entrusted to it for safe carriage and delivery.35 True, the words "metal envelopes rust stained and slightly dented" were noted on the Bill of Lading; however, there is no showing that petitioners exercised due diligence to forestall or lessen the loss.36 Having been in the service for several years, the master of the vessel should have known at the outset that metal envelopes in the said state would eventually deteriorate when not properly stored while in transit.37 Equipped with the proper knowledge of the nature of steel sheets in coils and of the proper way of transporting them, the master of the vessel and his crew should have undertaken precautionary measures to avoid possible deterioration of the cargo. But none of these measures was taken.38 Having failed to discharge the burden of proving that they have exercised the extraordinary diligence required by law, petitioners cannot escape liability for the damage to the four coils.39 In their attempt to escape liability, petitioners further contend that they are exempted from liability under Article 1734(4) of the Civil Code. They cite the notation "metal envelopes rust stained and slightly dented" printed on the Bill of Lading as evidence that the character of the goods or defect in the packing or the containers was the proximate cause of the damage. We are not convinced. From the evidence on record, it cannot be reasonably concluded that the damage to the four coils was due to the condition noted on the Bill of Lading.40 The aforecited exception refers to cases when goods are lost or damaged while in transit as a result of the natural decay of perishable goods or the fermentation or evaporation of substances liable therefor, the necessary and natural wear of goods in transport, defects in packages in which they are shipped, or the natural propensities of animals.41 None of these is present in the instant case.

Further, even if the fact of improper packing was known to the carrier or its crew or was apparent upon ordinary observation, it is not relieved of liability for loss or injury resulting therefrom, once it accepts the goods notwithstanding such condition.42 Thus, petitioners have not successfully proven the application of any of the aforecited exceptions in the present case.43 Second Issue: Notice of Loss Petitioners claim that pursuant to Section 3, paragraph 6 of the Carriage of Goods by Sea Act44 (COGSA), respondent should have filed its Notice of Loss within three days from delivery. They assert that the cargo was discharged on July 31, 1990, but that respondent filed its Notice of Claim only on September 18, 1990.45 We are not persuaded. First, the above-cited provision of COGSA provides that the notice of claim need not be given if the state of the goods, at the time of their receipt, has been the subject of a joint inspection or survey. As stated earlier, prior to unloading the cargo, an Inspection Report46 as to the condition of the goods was prepared and signed by representatives of both parties.47 Second, as stated in the same provision, a failure to file a notice of claim within three days will not bar recovery if it is nonetheless filed within one year.48 This one-year prescriptive period also applies to the shipper, the consignee, the insurer of the goods or any legal holder of the bill of lading.49 In Loadstar Shipping Co., Inc, v. Court of Appeals,50 we ruled that a claim is not barred by prescription as long as the one-year period has not lapsed. Thus, in the words of the ponente, Chief Justice Hilario G. Davide Jr.: "Inasmuch as the neither the Civil Code nor the Code of Commerce states a specific prescriptive period on the matter, the Carriage of Goods by Sea Act (COGSA)--which provides for a one-year period of limitation on claims for loss of, or damage to, cargoes sustained during transit--may be applied suppletorily to the case at bar." In the present case, the cargo was discharged on July 31, 1990, while the Complaint51 was filed by respondent on July 25, 1991, within the one-year prescriptive period. Third Issue: Package Limitation Assuming arguendo they are liable for respondent's claims, petitioners contend that their liability should be limited to US$500 per package as provided in the Bill of Lading and by Section 4(5)52 of COGSA.53 On the other hand, respondent argues that Section 4(5) of COGSA is inapplicable, because the value of the subject shipment was declared by petitioners beforehand, as evidenced by the reference to and the insertion of the Letter of Credit or "L/C No. 90/02447" in the said Bill of Lading.54 A bill of lading serves two functions. First, it is a receipt for the goods shipped.53 Second, it is a contract by which three parties -- namely, the shipper, the carrier, and the consignee -undertake specific responsibilities and assume stipulated obligations.56 In a nutshell, the acceptance of the bill of lading by the shipper and the consignee, with full knowledge of its contents, gives rise to the presumption that it constituted a perfected and binding contract.57 Further, a stipulation in the bill of lading limiting to a certain sum the common carrier's liability for loss or destruction of a cargo -- unless the shipper or owner declares a greater value58 -- is sanctioned by law.59 There are, however, two conditions to be satisfied: (1) the contract is reasonable and just under the circumstances, and (2) it has been fairly and freely agreed upon by the parties.60 The rationale for this rule is to bind the shippers by their agreement to the value (maximum valuation) of their goods.61 It is to be noted, however, that the Civil Code does not limit the liability of the common carrier to a fixed amount per package.62 In all matters not regulated by the Civil Code, the right and the obligations of common carriers shall be governed by the Code of Commerce and special

laws.63 Thus, the COGSA, which is suppletory to the provisions of the Civil Code, supplements the latter by establishing a statutory provision limiting the carrier's liability in the absence of a shipper's declaration of a higher value in the bill of lading.64 The provisions on limited liability are as much a part of the bill of lading as though physically in it and as though placed there by agreement of the parties.65 In the case before us, there was no stipulation in the Bill of Lading 66 limiting the carrier's liability. Neither did the shipper declare a higher valuation of the goods to be shipped. This fact notwithstanding, the insertion of the words "L/C No. 90/02447 cannot be the basis for petitioners' liability. First, a notation in the Bill of Lading which indicated the amount of the Letter of Credit obtained by the shipper for the importation of steel sheets did not effect a declaration of the value of the goods as required by the bill.67 That notation was made only for the convenience of the shipper and the bank processing the Letter of Credit.68 Second, in Keng Hua Paper Products v. Court of Appeals,69 we held that a bill of lading was separate from the Other Letter of Credit arrangements. We ruled thus: "(T)he contract of carriage, as stipulated in the bill of lading in the present case, must be treated independently of the contract of sale between the seller and the buyer, and the contract of issuance of a letter of credit between the amount of goods described in the commercial invoice in the contract of sale and the amount allowed in the letter of credit will not affect the validity and enforceability of the contract of carriage as embodied in the bill of lading. As the bank cannot be expected to look beyond the documents presented to it by the seller pursuant to the letter of credit, neither can the carrier be expected to go beyond the representations of the shipper in the bill of lading and to verify their accuracy vis--vis the commercial invoice and the letter of credit. Thus, the discrepancy between the amount of goods indicated in the invoice and the amount in the bill of lading cannot negate petitioner's obligation to private respondent arising from the contract of transportation."70 In the light of the foregoing, petitioners' liability should be computed based on US$500 per package and not on the per metric ton price declared in the Letter of Credit.71 In Eastern Shipping Lines, Inc. v. Intermediate Appellate Court,72 we explained the meaning of packages: "When what would ordinarily be considered packages are shipped in a container supplied by the carrier and the number of such units is disclosed in the shipping documents, each of those units and not the container constitutes the 'package' referred to in the liability limitation provision of Carriage of Goods by Sea Act." Considering, therefore, the ruling in Eastern Shipping Lines and the fact that the Bill of Lading clearly disclosed the contents of the containers, the number of units, as well as the nature of the steel sheets, the four damaged coils should be considered as the shipping unit subject to the US$500 limitation. WHEREFORE, the Petition is partly granted and the assailed Decision MODIFIED. Petitioners' liability is reduced to US$2,000 plus interest at the legal rate of six percent from the time of the filing of the Complaint on July 25, 1991 until the finality of this Decision, and 12 percent thereafter until fully paid. No pronouncement as to costs. SO ORDERED. Sandoval-Gutierrez, and Carpio, JJ., concur. Puno, J., abroad, on official leave.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION

G.R. No. 102316 June 30, 1997 VALENZUELA HARDWOOD AND INDUSTRIAL SUPPLY INC., petitioner, vs. COURT OF APPEALS AND SEVEN BROTHERS SHIPPING CORPORATION, respondents. PANGANIBAN, J.: Is a stipulation in a charter party that the "(o)wners shall not be responsible for loss, split, shortlanding, breakages and any kind of damages to the cargo" 1 valid? This is the main question raised in this petition for review assailing the Decision of Respondent Court of Appeals 2 in CAG.R. No. CV-20156 promulgated on October 15, 1991. The Court of Appeals modified the judgment of the Regional Trial Court of Valenzuela, Metro Manila, Branch 171, the dispositive portion of which reads: WHEREFORE, Judgment is hereby rendered ordering South Sea Surety and Insurance Co., Inc. to pay plaintiff the sum of TWO MILLION PESOS (P2,000,000.00) representing the value of the policy of the lost logs with legal interest thereon from the date of demand on February 2, 1984 until the amount is fully paid or in the alternative, defendant Seven Brothers Shipping Corporation to pay plaintiff the amount of TWO MILLION PESOS (2,000,000.00) representing the value of lost logs plus legal interest from the date of demand on April 24, 1984 until full payment thereof; the reasonable attorney's fees in the amount equivalent to five (5) percent of the amount of the claim and the costs of the suit. Plaintiff is hereby ordered to pay defendant Seven Brothers Shipping Corporation the sum of TWO HUNDRED THIRTY THOUSAND PESOS (P230,000.00) representing the balance of the stipulated freight charges. Defendant South Sea Surety and Insurance Company's counterclaim is hereby dismissed. In its assailed Decision, Respondent Court of Appeals held: WHEREFORE, the appealed judgment is hereby AFFIRMED except in so far (sic) as the liability of the Seven Brothers Shipping Corporation to the plaintiff is concerned which is hereby REVERSED and SET ASIDE. 3 The Facts The factual antecedents of this case as narrated in the Court of Appeals Decision are as follows: It appears that on 16 January 1984, plaintiff (Valenzuela Hardwood and Industrial Supply, Inc.) entered into an agreement with the defendant Seven Brothers (Shipping Corporation) whereby the latter undertook to load on board its vessel M/V Seven Ambassador the former's lauan round logs numbering 940 at the port of Maconacon, Isabela for shipment to Manila. On 20 January 1984, plaintiff insured the logs against loss and/or damage with defendant South Sea Surety and Insurance Co., Inc. for P2,000,000.00 and the latter issued its Marine Cargo Insurance Policy No. 84/24229 for P2,000,000.00 on said date. On 24 January 1984, the plaintiff gave the check in payment of the premium on the insurance policy to Mr. Victorio Chua. In the meantime, the said vessel M/V Seven Ambassador sank on 25 January 1984 resulting in the loss of the plaintiff's insured logs. On 30 January 1984, a check for P5,625.00 (Exh. "E") to cover payment of the premium and documentary stamps due on the policy was tendered due to the insurer but was not accepted. Instead, the South Sea Surety and Insurance Co., Inc. cancelled the insurance policy it issued as of the date of the inception for

non-payment of the premium due in accordance with Section 77 of the Insurance Code. On 2 February 1984, plaintiff demanded from defendant South Sea Surety and Insurance Co., Inc. the payment of the proceeds of the policy but the latter denied liability under the policy. Plaintiff likewise filed a formal claim with defendant Seven Brothers Shipping Corporation for the value of the lost logs but the latter denied the claim. After due hearing and trial, the court a quo rendered judgment in favor of plaintiff and against defendants. Both defendants shipping corporation and the surety company appealed. Defendant-appellant Seven Brothers Shipping Corporation impute (sic) to the court a quo the following assignment of errors, to wit: A. The lower court erred in holding that the proximate cause of the sinking of the vessel Seven Ambassadors, was not due to fortuitous event but to the negligence of the captain in stowing and securing the logs on board, causing the iron chains to snap and the logs to roll to the portside. B. The lower court erred in declaring that the non-liability clause of the Seven Brothers Shipping Corporation from logs (sic) of the cargo stipulated in the charter party is void for being contrary to public policy invoking article 1745 of the New Civil Code. C. The lower court erred in holding defendant-appellant Seven Brothers Shipping Corporation liable in the alternative and ordering/directing it to pay plaintiffappellee the amount of two million (2,000,000.00) pesos representing the value of the logs plus legal interest from date of demand until fully paid. D. The lower court erred in ordering defendant-appellant Seven Brothers Shipping Corporation to pay appellee reasonable attorney's fees in the amount equivalent to 5% of the amount of the claim and the costs of the suit. E. The lower court erred in not awarding defendant-appellant Seven Brothers Corporation its counter-claim for attorney's fees. F. The lower court erred in not dismissing the complaint against Seven Brothers Shipping Corporation. Defendant-appellant South Sea Surety and Insurance Co., Inc. assigns the following errors: A. The trial court erred in holding that Victorio Chua was an agent of defendantappellant South Sea Surety and Insurance Company, Inc. and likewise erred in not holding that he was the representative of the insurance broker Columbia Insurance Brokers, Ltd. B. The trial court erred in holding that Victorio Chua received compensation/commission on the premiums paid on the policies issued by the defendant-appellant South Sea Surety and Insurance Company, Inc. C. The trial court erred in not applying Section 77 of the Insurance Code. D. The trial court erred in disregarding the "receipt of payment clause" attached to and forming part of the Marine Cargo Insurance Policy No. 84/24229. E. The trial court in disregarding the statement of account or bill stating the amount of premium and documentary stamps to be paid on the policy by the plaintiff-appellee. F. The trial court erred in disregarding the endorsement of cancellation of the policy due to non-payment of premium and documentary stamps. G. The trial court erred in ordering defendant-appellant South Sea Surety and Insurance Company, Inc. to pay plaintiff-appellee P2,000,000.00 representing value of the policy with legal interest from 2 February 1984 until the amount is fully paid,

H. The trial court erred in not awarding to the defendant-appellant the attorney's fees alleged and proven in its counterclaim. The primary issue to be resolved before us is whether defendants shipping corporation and the surety company are liable to the plaintiff for the latter's lost logs. 4 The Court of Appeals affirmed in part the RTC judgment by sustaining the liability of South Sea Surety and Insurance Company ("South Sea"), but modified it by holding that Seven Brothers Shipping Corporation ("Seven Brothers") was not liable for the lost cargo. 5 In modifying the RTC judgment, the respondent appellate court ratiocinated thus: It appears that there is a stipulation in the charter party that the ship owner would be exempted from liability in case of loss. The court a quo erred in applying the provisions of the Civil Code on common carriers to establish the liability of the shipping corporation. The provisions on common carriers should not be applied where the carrier is not acting as such but as a private carrier. Under American jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a special person only, becomes a private carrier. As a private carrier, a stipulation exempting the owner from liability even for the negligence of its agent is valid (Home Insurance Company, Inc. vs. American Steamship Agencies, Inc., 23 SCRA 24). The shipping corporation should not therefore be held liable for the loss of the logs. 6 South Sea and herein Petitioner Valenzuela Hardwood and Industrial Supply, Inc. ("Valenzuela") filed separate petitions for review before this Court. In a Resolution dated June 2, 1995, this Court denied the petition of South Sea. 7 There the Court found no reason to reverse the factual findings of the trial court and the Court of Appeals that Chua was indeed an authorized agent of South Sea when he received Valenzuela's premium payment for the marine cargo insurance policy which was thus binding on the insurer. 8 The Court is now called upon to resolve the petition for review filed by Valenzuela assailing the CA Decision which exempted Seven Brothers from any liability for the lost cargo. The Issue Petitioner Valenzuela's arguments resolve around a single issue: "whether or not respondent Court (of Appeals) committed a reversible error in upholding the validity of the stipulation in the charter party executed between the petitioner and the private respondent exempting the latter from liability for the loss of petitioner's logs arising from the negligence of its (Seven Brothers') captain." 9 The Court's Ruling The petition is not meritorious. Validity of Stipulation is Lis Mota The charter party between the petitioner and private respondent stipulated that the "(o)wners shall not be responsible for loss, split, short-landing, breakages and any kind of damages to the cargo." 10 The validity of this stipulation is the lis mota of this case. It should be noted at the outset that there is no dispute between the parties that the proximate cause of the sinking of M/V Seven Ambassadors resulting in the loss of its cargo was the "snapping of the iron chains and the subsequent rolling of the logs to the portside due to the negligence of the captain in stowing and securing the logs on board the vessel and not due to fortuitous event." 11 Likewise undisputed is the status of Private Respondent Seven Brothers as a private carrier when it contracted to transport the cargo of Petitioner Valenzuela. Even the latter admits this in its petition. 12

The trial court deemed the charter party stipulation void for being contrary to public policy, 13 citing Article 1745 of the Civil Code which provides: Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public policy: (1) That the goods are transported at the risk of the owner or shipper; (2) That the common carrier will not be liable for any loss, destruction, or deterioration of the goods; (3) That the common carrier need not observe any diligence in the custody of the goods; (4) That the common carrier shall exercise a degree of diligence less than that of a good father of a family, or of a man of ordinary prudence in the vigilance over the movables transported; (5) That the common carrier shall not be responsible for the acts or omissions of his or its employees; (6) That the common carrier's liability for acts committed by thieves, or of robbers who do not act with grave or irresistible threat, violence or force, is dispensed with or diminished; (7) That the common carrier is not responsible for the loss, destruction, or deterioration of goods on account of the defective condition of the car, vehicle, ship, airplane or other equipment used in the contract of carriage. Petitioner Valenzuela adds that the stipulation is void for being contrary to Articles 586 and 587 of the Code of Commerce 14 and Articles 1170 and 1173 of the Civil Code. Citing Article 1306 and paragraph 1, Article 1409 of the Civil Code, 15 petitioner further contends that said stipulation "gives no duty or obligation to the private respondent to observe the diligence of a good father of a family in the custody and transportation of the cargo." The Court is not persuaded. As adverted to earlier, it is undisputed that private respondent had acted as a private carrier in transporting petitioner's lauan logs. Thus, Article 1745 and other Civil Code provisions on common carriers which were cited by petitioner may not be applied unless expressly stipulated by the parties in their charter party. 16 In a contract of private carriage, the parties may validly stipulate that responsibility for the cargo rests solely on the charterer, exempting the shipowner from liability for loss of or damage to the cargo caused even by the negligence of the ship captain. Pursuant to Article 1306 17 of the Civil Code, such stipulation is valid because it is freely entered into by the parties and the same is not contrary to law, morals, good customs, public order, or public policy. Indeed, their contract of private carriage is not even a contract of adhesion. We stress that in a contract of private carriage, the parties may freely stipulate their duties and obligations which perforce would be binding on them. Unlike in a contract involving a common carrier, private carriage does not involve the general public. Hence, the stringent provisions of the Civil Code on common carriers protecting the general public cannot justifiably be applied to a ship transporting commercial goods as a private carrier. Consequently, the public policy embodied therein is not contravened by stipulations in a charter party that lessen or remove the protection given by law in contracts involving common carriers. The issue posed in this case and the arguments raised by petitioner are not novel; they were resolved long ago by this Court in Home Insurance Co. vs. American Steamship Agencies, Inc. 18 In that case, the trial court similarly nullified a stipulation identical to that involved in the present case for being contrary to public policy based on Article 1744 of the Civil Code and Article 587 of the Code of Commerce. Consequently, the trial court held the shipowner liable for damages resulting for the partial loss of the cargo. This Court reversed the trial court and laid down, through Mr. Justice Jose P. Bengzon, the following well-settled observation and doctrine: The provisions of our Civil Code on common carriers were taken from AngloAmerican law. Under American jurisprudence, a common carrier undertaking to

carry a special cargo or chartered to a special person only, becomes a private carrier. As a private carrier, a stipulation exempting the owner from liability for the negligence of its agent is not against public policy, and is deemed valid. Such doctrine We find reasonable. The Civil Code provisions on common carriers should not be applied where the carrier is not acting as such but as a private carrier. The stipulation in the charter party absolving the owner from liability for loss due to the negligence of its agent would be void if the strict public policy governing common carriers is applied. Such policy has no force where the public at large is not involved, as in this case of a ship totally chartered for the used of a single party. 19 (Emphasis supplied.) Indeed, where the reason for the rule ceases, the rule itself does not apply. The general public enters into a contract of transportation with common carriers without a hand or a voice in the preparation thereof. The riding public merely adheres to the contract; even if the public wants to, it cannot submit its own stipulations for the approval of the common carrier. Thus, the law on common carriers extends its protective mantle against one-sided stipulations inserted in tickets, invoices or other documents over which the riding public has no understanding or, worse, no choice. Compared to the general public, a charterer in a contract of private carriage is not similarly situated. It can and in fact it usually does enter into a free and voluntary agreement. In practice, the parties in a contract of private carriage can stipulate the carrier's obligations and liabilities over the shipment which, in turn, determine the price or consideration of the charter. Thus, a charterer, in exchange for convenience and economy, may opt to set aside the protection of the law on common carriers. When the charterer decides to exercise this option, he takes a normal business risk. Petitioner contends that the rule in Home Insurance is not applicable to the present case because it "covers only a stipulation exempting a private carrier from liability for the negligence of his agent, but it does not apply to a stipulation exempting a private carrier like private respondent from the negligence of his employee or servant which is the situation in this case." 20 This contention of petitioner is bereft of merit, for it raises a distinction without any substantive difference. The case Home Insurance specifically dealt with "the liability of the shipowner for acts or negligence of its captain and crew" 21 and a charter party stipulation which "exempts the owner of the vessel from any loss or damage or delay arising from any other source, even from the neglect or fault of the captain or crew or some other person employed by the owner on board, for whose acts the owner would ordinarily be liable except for said paragraph." 22 Undoubtedly, Home Insurance is applicable to the case at bar. The naked assertion of petitioner that the American rule enunciated in Home Insurance is not the rule in the Philippines 23 deserves scant consideration. The Court there categorically held that said rule was "reasonable" and proceeded to apply it in the resolution of that case. Petitioner miserably failed to show such circumstances or arguments which would necessitate a departure from a well-settled rule. Consequently, our ruling in said case remains a binding judicial precedent based on the doctrine of stare decisis and Article 8 of the Civil Code which provides that "(j)udicial decisions applying or interpreting the laws or the Constitution shall form part of the legal system of the Philippines." In fine, the respondent appellate court aptly stated that "[in the case of] a private carrier, a stipulation exempting the owner from liability even for the negligence of its agents is valid." 24 Other Arguments On the basis of the foregoing alone, the present petition may already be denied; the Court, however, will discuss the other arguments of petitioner for the benefit and satisfaction of all concerned. Articles 586 and 587, Code of Commerce

Petitioner Valenzuela insists that the charter party stipulation is contrary to Articles 586 and 587 of the Code of Commerce which confer on petitioner the right to recover damages from the shipowner and ship agent for the acts or conduct of the captain. 25 We are not persuaded. Whatever rights petitioner may have under the aforementioned statutory provisions were waived when it entered into the charter party. Article 6 of the Civil Code provides that "(r)ights may be waived, unless the waiver is contrary to law, public order, public policy, morals, or good customs, or prejudicial to a person with a right recognized by law." As a general rule, patrimonial rights may be waived as opposed to rights to personality and family rights which may not be made the subject of waiver. 26 Being patently and undoubtedly patrimonial, petitioner's right conferred under said articles may be waived. This, the petitioner did by acceding to the contractual stipulation that it is solely responsible or any damage to the cargo, thereby exempting the private carrier from any responsibility for loss or damage thereto. Furthermore, as discussed above, the contract of private carriage binds petitioner and private respondent alone; it is not imbued with public policy considerations for the general public or third persons are not affected thereby. Articles 1170 and 1173, Civil Code Petitioner likewise argues that the stipulation subject of this controversy is void for being contrary to Articles 1170 and 1173 of the Civil Code 27 which read: Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages Art. 1173. The fault or negligence of the obligor consists in the omission of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the persons, of the time and of the place. When negligence shows bad faith, the provisions of articles 1171 and 2201, shall apply. If the law does not state the diligence which is to be observed in the performance, that which is expected of a good father of a family shall be required. The Court notes that the foregoing articles are applicable only to the obligor or the one with an obligation to perform. In the instant case, Private Respondent Seven Brothers is not an obligor in respect of the cargo, for this obligation to bear the loss was shifted to petitioner by virtue of the charter party. This shifting of responsibility, as earlier observed, is not void. The provisions cited by petitioner are, therefore, inapplicable to the present case. Moreover, the factual milieu of this case does not justify the application of the second paragraph of Article 1173 of the Civil Code which prescribes the standard of diligence to be observed in the event the law or the contract is silent. In the instant case, Article 362 of the Code of Commerce 28 provides the standard of ordinary diligence for the carriage of goods by a carrier. The standard of diligence under this statutory provision may, however, be modified in a contract of private carriage as the petitioner and private respondent had done in their charter party. Cases Cited by Petitioner Inapplicable Petitioner cites Shewaram vs. Philippine Airlines, Inc. 29 which, in turn, quoted Juan Ysmael & Co. vs. Gabino Barreto & Co. 30 and argues that the public policy considerations stated there vis-a-vis contractual stipulations limiting the carrier's liability be applied "with equal force" to this case. 31 It also cites Manila Railroad Co. vs.Compaia Transatlantica 32 and contends that stipulations exempting a party from liability for damages due to negligence "should not be countenanced" and should be "strictly construed" against the party claiming its benefit.33 We disagree. The cases of Shewaram and Ysmael both involve a common carrier; thus, they necessarily justify the application of such policy considerations and concomitantly stricter rules. As already discussed above, the public policy considerations behind the rigorous treatment of common carriers are absent in the case of private carriers. Hence, the stringent laws applicable to

common carriers are not applied to private carries. The case of Manila Railroad is also inapplicable because the action for damages there does not involve a contract for transportation. Furthermore, the defendant therein made a "promise to use due care in the lifting operations" and, consequently, it was "bound by its undertaking"'; besides, the exemption was intended to cover accidents due to hidden defects in the apparatus or other unforseeable occurrences" not caused by its "personal negligence." This promise was thus constructed to make sense together with the stipulation against liability for damages. 34 In the present case, we stress that the private respondent made no such promise. The agreement of the parties to exempt the shipowner from responsibility for any damage to the cargo and place responsibility over the same to petitioner is the lone stipulation considered now by this Court. Finally, petitioner points to Standard Oil Co. of New York vs. Lopez Costelo, 35 Walter A. Smith & Co. vs.Cadwallader Gibson Lumber Co., 36 N. T . Hashim and Co. vs. Rocha and Co., 37 Ohta Development Co. vs.Steamship "Pompey" 38 and Limpangco Sons vs. Yangco Steamship Co. 39 in support of its contention that the shipowner be held liable for damages. 40 These however are not on all fours with the present case because they do not involve a similar factual milieu or an identical stipulation in the charter party expressly exempting the shipowner form responsibility for any damage to the cargo. Effect of the South Sea Resolution In its memorandum, Seven Brothers argues that petitioner has no cause of action against it because this Court has earlier affirmed the liability of South Sea for the loss suffered by petitioner. Private respondent submits that petitioner is not legally entitled to collect twice for a single loss. 41 In view of the above disquisition upholding the validity of the questioned charter party stipulation and holding that petitioner may not recover from private respondent, the present issue is moot and academic. It suffices to state that the Resolution of this Court dated June 2, 1995 42 affirming the liability of South Sea does not, by itself, necessarily preclude the petitioner from proceeding against private respondent. An aggrieved party may still recover the deficiency for the person causing the loss in the event the amount paid by the insurance company does not fully cover the loss. Article 2207 of the Civil Code provides: Art. 2207. If the plaintiff's property has been insured, and he has received indemnity for the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. If the amount paid by the insurance company does not fully cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency form the person causing the loss or injury. WHEREFORE, premises considered, the petition is hereby DENIED for its utter failure to show any reversible error on the part of Respondent Court. The assailed Decision is AFFIRMED. SO ORDERED. Narvasa, C.J., Davide, Jr., Melo and Francisco, JJ., concur.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-23733 October 31, 1969 HERMINIO L. NOCUM, plaintiff-appellee, vs. LAGUNA TAYABAS BUS COMPANY, defendant-appellant. Fernando M. Mangubat and Felimon H. Mendoza for plaintiff-appellee. Domingo E. de Lara and Associates for defendant-appellant.

BARREDO, J.: Appeal of the Laguna Tayabas Bus Co., defendant in the Court below, from a judgment of the said court (Court of First Instance of Batangas) in its Civil Case No. 834, wherein appellee Herminio L. Nocum was plaintiff, sentencing appellant to pay appellee the sum of P1,351.00 for actual damages and P500.00 as attorney's fees with legal interest from the filing of the complaint plus costs. Appellee, who was a passenger in appellant's Bus No. 120 then making a trip within the barrio of Dita, Municipality of Bay, Laguna, was injured as a consequence of the explosion of firecrackers, contained in a box, loaded in said bus and declared to its conductor as containing clothes and miscellaneous items by a co-passenger. The findings of fact of the trial court are not assailed. The appeal is purely on legal questions. Appellee has not filed any brief. All that We have before Us is appellant's brief with the following assignment of errors: I BASED ON THE FACTS THE LOWER COURT FOUND AS ESTABLISHED, IT ERRED AS A MATTER OF LAW IN NOT ABSOLVING APPELLANT FROM LIABILITY RESULTING FROM THE EXPLOSION OF FIRECRACKERS CONTAINED IN A PACKAGE, THE CONTENTS OF WHICH WERE MISREPRESENTED BY A PASSENGER. II THE LOWER COURT ERRED, AS A MATTER OF LAW, IN AWARDING DAMAGES WITH LEGAL INTEREST IN FAVOR OF THE APPELLEE. III THE LOWER COURT ERRED IN NOT DISMISSING THE COMPLAINT, WITH COSTS AGAINST THE APPELLEE. Upon consideration of the points raised and discussed by appellant, We find the appeal to be well taken. The main basis of the trial court's decision is that appellant did not observe the extraordinary or utmost diligence of a very cautious person required by the following articles of the Civil Code: ART. 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case. Such extraordinary diligence in the vigilance over the goods is further expressed in articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for the safety of the passengers is further set forth in articles 1755 and 1756. ART. 1755. A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances. ART 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed in articles 1733 and 1755. Analyzing the evidence presented by the parties, His Honor found: According to Severino Andaya, a witness for the plaintiff, a man with a box went up the baggage compartment of the bus where he already was and said box was placed under the seat. They left Azcarraga at about 11:30 in the morning and when the explosion occurred, he was thrown out. PC investigation report states that thirty seven (37) passengers were injured (Exhibits "O" and "2"). The bus conductor, Sancho Mendoza, testified that the box belonged to a passenger whose name he does not know and who told him that it contained miscellaneous items and clothes. He helped the owner in loading the baggage which weighed about twelve (12) kilos and because of company regulation, he charged him for it twenty-five centavos

(P0.25). From its appearance there was no indication at all that the contents were explosives or firecrackers. Neither did he open the box because he just relied on the word of the owner. Dispatcher Nicolas Cornista of defendant company corroborrated the testimony of Mendoza and he said, among other things, that he was present when the box was loaded in the truck and the owner agreed to pay its fare. He added that they were not authorized to open the baggages of passengers because instruction from the management was to call the police if there were packages containing articles which were against regulations. xxx xxx xxx There is no question that Bus No. 120 was road worthy when it left its Manila Terminal for Lucena that morning of December 5, 1960. The injuries suffered by the plaintiff were not due to mechanical defects but to the explosion of firecrackers inside the bus which was loaded by a co-passenger. ... Turning to the present case, it is quite clear that extraordinary or utmost diligence of a very cautious person was not observed by the defendant company. The service manual, exhibits "3" and "3-A," prohibits the employees to allow explosives, such as dynamite and firecrackers to be transported on its buses. To implement this particular rule for 'the safety of passengers, it was therefore incumbent upon the employees of the company to make the proper inspection of all the baggages which are carried by the passengers. But then, can it not be said that the breach of the contract was due to fortuitous event? The Supreme Court in the case of Lasam vs. Smith, 45 Phil. 657, quoted Escriche's definition of caso fortuito as "an unexpected event or act of God which could neither be foreseen nor resisted, such as floods, torrents, shipwrecks, conflagrations, lightning, compulsions, insurrections, destructions of buildings by unforeseen accidents and other occurrences of a similar nature." In other words, the cause of the unexpected event must be independent of the will of man or something which cannot be avoided. This cannot be said of the instant case. If proper and rigid inspection were observed by the defendant, the contents of the box could have been discovered and the accident avoided. Refusal by the passenger to have the package opened was no excuse because, as stated by Dispatcher Cornista, employees should call the police if there were packages containing articles against company regulations. Neither was failure by employees of defendant company to detect the contents of the packages of passengers because like the rationale in the Necesito vs. Paras case (supra), a passenger has neither choice nor control in the exercise of their discretion in determining what are inside the package of co-passengers which may eventually prove fatal. We cannot agree. No doubt, the views of His Honor do seem to be in line with the reasons that the Code Commission had for incorporating the above-quoted provisions in its draft of the Civil Code. Indeed, in approving the said draft, Congress must have concurred with the Commission that by requiring the highest degree of diligence from common carriers in the safe transport of their passengers and by creating a presumption of negligence against them, the recklessness of their drivers which is a common sight even in crowded areas and, particularly, on the highways throughout the country may, somehow, if not in a large measure, be curbed. We are not convinced, however, that the exacting criterion of said provisions has not been met by appellant in the circumstances of this particular case. It is undisputed that before the box containing the firecrackers were allowed to be loaded in the bus by the conductor, inquiry was made with the passenger carrying the same as to what was in it, since its "opening ... was folded and tied with abaca." (Decision p. 16, Record on Appeal.) According to His Honor, "if proper and rigid inspection were observed by the defendant, the contents of the box could have been discovered and the accident avoided. Refusal by the passenger to have the package opened was no excuse because, as stated by Dispatcher

Cornista, employees should call the police if there were packages containing articles against company regulations." That may be true, but it is Our considered opinion that the law does not require as much. Article 1733 is not as unbending as His Honor has held, for it reasonably qualifies the extraordinary diligence required of common carriers for the safety of the passengers transported by them to be "according to all the circumstances of each case." In fact, Article 1755 repeats this same qualification: "A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances." In this particular case before Us, it must be considered that while it is true the passengers of appellant's bus should not be made to suffer for something over which they had no control, as enunciated in the decision of this Court cited by His Honor,1 fairness demands that in measuring a common carrier's duty towards its passengers, allowance must be given to the reliance that should be reposed on the sense of responsibility of all the passengers in regard to their common safety. It is to be presumed that a passenger will not take with him anything dangerous to the lives and limbs of his co-passengers, not to speak of his own. Not to be lightly considered must be the right to privacy to which each passenger is entitled. He cannot be subjected to any unusual search, when he protests the innocuousness of his baggage and nothing appears to indicate the contrary, as in the case at bar. In other words, inquiry may be verbally made as to the nature of a passenger's baggage when such is not outwardly perceptible, but beyond this, constitutional boundaries are already in danger of being transgressed. Calling a policeman to his aid, as suggested by the service manual invoked by the trial judge, in compelling the passenger to submit to more rigid inspection, after the passenger had already declared that the box contained mere clothes and other miscellaneous, could not have justified invasion of a constitutionally protected domain. Police officers acting without judicial authority secured in the manner provided by law are not beyond the pale of constitutional inhibitions designed to protect individual human rights and liberties. Withal, what must be importantly considered here is not so much the infringement of the fundamental sacred rights of the particular passenger herein involved, but the constant threat any contrary ruling would pose on the right of privacy of all passengers of all common carriers, considering how easily the duty to inspect can be made an excuse for mischief and abuse. Of course, when there are sufficient indications that the representations of the passenger regarding the nature of his baggage may not be true, in the interest of the common safety of all, the assistance of the police authorities may be solicited, not necessarily to force the passenger to open his baggage, but to conduct the needed investigation consistent with the rules of propriety and, above all, the constitutional rights of the passenger. It is in this sense that the mentioned service manual issued by appellant to its conductors must be understood. Decisions in other jurisdictions cited by appellant in its brief, evidently because of the paucity of local precedents squarely in point, emphasize that there is need, as We hold here, for evidence of circumstances indicating cause or causes for apprehension that the passenger's baggage is dangerous and that it is failure of the common carrier's employee to act in the face of such evidence that constitutes the cornerstone of the common carrier's liability in cases similar to the present one. The principle that must control the servants of the carrier in a case like the one before us is correctly stated in the opinion in the case of Clarke v. Louisville & N.R. Co. 20 Ky L. Rep. 839, 49 S.W. 1120. In that case Clarke was a passenger on the defendant's train. Another passenger took a quantity of gasoline into the same coach in which Clarke was riding. It ignited and exploded, by reason of which he was severely injured. The trial court peremptorily instructed the jury to find for the defendant. In the opinion, affirming the judgment, it is said: "It may be stated briefly, in assuming the liability of a railroad to its passengers for injury done by another passenger, only where the conduct of this passenger had been such before the injury as to induce a reasonably prudent and

vigilant conductor to believe that there was reasonable ground to apprehend violence and danger to the other passengers, and in that case asserting it to be the duty of the conductor of the railroad train to use all reasonable means to prevent such injury, and if he neglects this reasonable duty, and injury is done, that then the company is responsible; that otherwise the railroad is not responsible." The opinion quotes with approval from the case of Gulf, C. & S. F. R. Co. vs. Shields, 9 Tex. Civ. App. 652, 29 S. W. 652, in which case the plaintiff was injured by alcohol which had been carried upon the train by another passenger. In the opinion in that case it is said: "It was but a short period of time after the alcohol was spilt when it was set on fire and the accident occurred, and it was not shown that appellant's employees knew that the jug contained alcohol. In fact, it is not shown that the conductor or any other employee knew that Harris had a jug with him until it fell out of the sack, though the conductor had collected ... (his) fare, and doubtless knew that he had the sack on the seat with him. ... It cannot be successfully denied that Harris had the right as a passenger to carry baggage on the train, and that he had a right to carry it in a sack if he chose to do so. We think it is equally clear that, in the absence of some intimation or circumstance indicating that the sack contained something dangerous to other passengers, it was not the duty of appellant's conductor or any other employee to open the sack and examine its contents." Quinn v. Louisville & N. R. Co. 98 Ky. 231, 32 S. W. 742; Wood v. Louisville & N. R. Co. 101 Ky. 703, 42 S. W. 349; Louisville & N. R. Co. v. Vincent, 29 Ky. L. Rep. 1049, 96 S. W. 898; Louisville & N. R. Co. v. Renfro, 142 Ky. 590, 33 L. R. A. (N. S.) 133, 135 S. W. 266.2 (Emphasis supplied) Explosive or Dangerous Contents. A carrier is ordinarily not liable for injuries to passengers from fires or explosions caused by articles brought into its conveyances by other passengers, in the absence of any evidence that the carrier, through its employees, was aware of the nature of the article or had any reason to anticipate danger therefrom. (Bogard v. Illinois C. R Co. 144 Ky. 649, 139 S. W. 855, 36 L. R. A.[N. S.] 337; Clarke v. Louisville & N. R. Co. 101 Ky. 34, 39 S. W. 840, 36 L. R. A. 123 [explosion of can of gasoline]; East Indian R. Co. v. Mukerjee [1901] A. C. [Eng.] 396, 3 B. R. C. 420 P. C. [explosion of fireworks]; Annotation: 37 L. R. A. [N. S.] 725.)3 Appellant further invokes Article 1174 of the Civil Code which relieves all obligors, including, of course, common carriers like appellant, from the consequence of fortuitous events. The court a quo held that "the breach of contract (in this case) was not due to fortuitous event and that, therefore, the defendant is liable in damages." Since We hold that appellant has succeeded in rebutting the presumption of negligence by showing that it has exercised extraordinary diligence for the safety of its passengers, "according to the circumstances of the (each) case", We deem it unnecessary to rule whether or not there was any fortuitous event in this case. ACCORDINGLY, the appealed judgment of the trial court is reversed and the case is dismissed, without costs. Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez and Fernando, JJ., concur. Castro, J., concurs in the result. Teehankee, J., reserves his vote.

G.R. No. 136048

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION January 23, 2001

JOSE BARITUA and JB LINE, petitioners, vs. NIMFA DIVINA MERCADER in her capacity and as guardian of DARWIN, GIOVANNI, RODEL and DENNIS, all surnamed MERCADER; LEONIDA Vda. de MERCADER on her behalf and on behalf of her minor child MARY JOY MERCADER; SHIRLEY MERCADER DELA CRUZ; MARIA THERESA MERCADER-GARCIA; DANILO MERCADER; JOSE DANTE MERCADER; JOSEFINA MERCADER, respondents. PANGANIBAN, J.: The Manchester ruling requiring the payment of docket and other fees as a condition for the acquisition of jurisdiction has no retroactive effect and applies only to cases filed after its finality. The Case Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the April 17, 1998 Decision1 and the October 28, 1998 Resolution2 of the Court of Appeals (CA) in CA-GR CY No. 40772. The decretal portion of said Decision reads as follows: "WHEREFORE, upon all the foregoing premises considered, the DECISION appealed from is AFFIRMEDwith the MODIFICATION that the loss of earnings of the late Dominador Mercader is reduced to P798,000.00."3 The assailed Resolution denied petitioners' Motion for Reconsideration. The Court of Appeals sustained the Decision of the Regional Trial Court (RTC) of Laoang, Northern Samar (Branch 21). Except for the modification of the loss of earnings, it affirmed all the monetary damages granted by the trial court to respondents. The decretal portion of the assailed RTC Decision reads as follows:4 "WHEREFORE, on preponderance of evidence, judgment is for [herein respondents] and against [herein petitioners], ordering the latter to pay the former: (a) As compensatory damages for the death of Dominador Mercader -- P50,000.00; (b) For the loss of earnings of the late Dominador Mercader -- P1,660,000.00, more or less, based on the average life span of 75 years from the time of his death who earned a net income of P5,000.00 monthly out of his business; (c) Actual damages of P30,000.00 receipted purchases of goods in Manila; P5,750.00 for the first class coffin and a 15-day wake services evidenced by a receipt marked Exh. 'D'; [P.]850.00 for the 50 x 60 headstone, receipt marked Exh. 'E' and P1,590.00 -- Deed of Absolute Sale of a burial lot, marked Exh. 'F'; (d) 25% of whatever amount is collected by [respondents] from [petitioners] but no less than P50,000.00 plus P1 ,000.00 per hearing by way of attorney's fees; (e) As moral damages -- P50,000.00; (f) As exemplary damages -- P30,000.00; and (g) To pay the costs." The Facts The antecedents of the case are succinctly summarized by the Court of Appeals in this wise: "The original complaint was filed against JB Lines, Inc. [Petitioner JB Lines, Inc.] filed a motion to dismiss complaint, to strike out false-impertinent matters therefrom, and/or for bill of particulars on the primary grounds that [respondents] failed to implead Jose Baritua as an indispensable party and that the cause of action is a suit against a wrong and non-existent party. [Respondents] filed an opposition to the said motion and an amended complaint. "In an Order dated December 11, 1984 the trial court denied the aforesaid motion and admitted the amended complaint of [respondents] impleading Jose Baritua and alleged the following: '(10) The late Dominador Mercader is a [b]usinessman mainly engaged in the buy and sell of dry goods in Laoang, N. Samar. He buys his goods from Manila

and bring[s] them to Laoang, Northern Samar for sale at his store located in the said locality; (11) Sometime on March 16, 1983, the late Dominador Mercader boarded [petitioners'] bus No. 142 with Plate No. 484 EU at [petitioners'] Manila Station/terminal, bound for Brgy. Rawis, Laoang Northern Samar as a paying passenger; (12) At that time, Dominador Mercader had with him as his baggage, assorted goods (i.e. long pants, short pants, dusters, etc.) which he likewise loaded in [petitioners'] bus; (13) The late Dominador Mercader was not able to reach his destination considering that on March 17, 1983 at Beily (Bugco) Bridge, Barangay Roxas, Mondragon, Northern Samar, while he was on board [petitioners'] bus no. 142 with Plate No. 484 EU, the said bus fell into the river as a result of which the late Dominador Mercader died. x x x. (14) The accident happened because [petitioners'] driver negligently and recklessly operated the bus at a fast speed in wanton disregard of traffic rules and regulations and the prevailing conditions then existing that caused [the] bus to fall into the river.' "[Respondents] then filed a motion to declare [petitioners] in default which motion was opposed by [petitioners]. [Respondents] withdrew the said motion prompting the trial court to cancel the scheduled hearing of the said motion to declare [petitioners] in default in an Order dated January 23, 1985. "In its answer, [petitioners] denied specifically all the material allegations in the complaint and alleged the following: '2. The alleged person of Dominador Mercader did not board bus 142 at [petitioners'] Manila station/terminal x x x as a (supposed paying passenger). There is even no statement in the complaint that Dominador Mercader (if it were true that he was a passenger of bus 142 'at the [petitioners'] Manila station/terminal') was issued any passenger-freight ticket conformably with law and practice. It is a fact of public knowledge that, in compliance with existing rules and laws, [Petitioner] Baritua, as a public utility operator, issues, thru his conductors, in appropriate situations, to a true passenger, the familiar and known passenger and freight ticket which reads in part: 'NOTICE Baggage carried at owner's risk x x x liability on prepaid freight otherwise declared. xxx xxx xxx Whole Fare Paid P ___________________________ Declared value x x x. Description of Freight ________________________ Signature of Owner .' 3. It is also a fact of public knowledge that [Petitioner] Baritua does not have any 'Manila station/terminal,' because what he has is a Pasay city station. 4. [Petitioner] Baritua had no prior knowledge that, on or about March 17, 1983, and/or previous thereto, the Bugko Bailey Bridge (across Catarman-Laoang road) in Barangay Roxas, Mondragon, Northern Samar, was in virtual' dilapida[ted] and dangerous condition, in a state of decay and disrepair, thus calling for the concerned government and public officials' performance of their coordinative and joint duties and responsibilities, to repair, improve and maintain that bridge, in good and reasonably safe condition, but, far from performing or complying with said subject duties and responsibilities, the adverted officials

concerned, without just cause, not only failed and neglected to cause such needed repair, improvement and maintenance of the Bugko Bailey Bridge, on or prior to March 17, 1983, but also failed, and neglected to either close the Bugko Bridge to public use and travel, and/or to put appropriate warning and cautionary signs, for repair, improvement, maintenance, and safety purposes. So that, as a proximate and direct consequence of the aggregate officials' nonfeasance, bad faith, negligence, serious inefficiency, and callous indifference to public safety, that Bugko Bridge collapsed inward and caved in ruin, on that March 17, 1983, while Baritua's bus 142 was cautiously and prudently passing and travelling across the said bridge, as a result of which the bus fell into the river and sea waters, despite the exercise and compliance by Baritua and his driver of their duties in the matter of their requisite degree of diligence, caution and prudence, Baritua also exercised and complied with the requisite duty of diligence, care, and prudence in the selection and supervision over his driver, contrary to the baseless imputation in paragraphs 14 and 20 of the original and amended complaints. Moreover, Baritua and his driver did not violate any traffic rule and regulation, contrary to plaintiffs' insinuation. 5. Furthermore, [Petitioner] Baritua and his driver have no causative connection with the alleged death of Dominador Mercader who, according to a reliable source, was already seriously suffering from a lingering illness even prior to his alleged demise. Baritua also learned lately, and so it is herein alleged that Dominador Mercader contributed considerably, to, and/or provided the proximate and direct cause of his own death, hence, he himself is to be blamed for whatever may have happened to him or for whatever may have been sustained by his supposed heirs, vis--vis the suit against the wrong party. 6. Baritua and his driver, as earlier stated, did not commit any actionable breach of contract with the alleged Dominador Mercader or the latter's supposed heirs. 7. There is no factual nor any legal basis for plaintiffs' proffered claims for damages. II. AFFIRMATIVE DEFENSES 8. Based on the preceding averments, plaintiffs have neither a cause nor a right of action against [Petitioner] Baritua and his driver. 8.1. The allegation that supposedly the 'x x x [p]laintiffs are the compulsory heirs of the late DOMINADOR MERCADER x x x' (par. 8, complaint) is too vague and too broad, as the subject allegation is a bare and pure conclusionary averment unaccompanied by the requisite statement of ultimate facts constitutive of a cause or right of action. 8.2. Even assuming arguendo, without however conceding, plaintiffs statement of a cause of action, the complaint is nonetheless replete with false and impertinent matters which fit the rule on striking out pleadings or parts thereof. To mention only a glaring few: 8.2.a. The allegation on exemplary damages x x x is impertinent and immaterial in the complaint against a supposed employer. For, even theoretically assuming, without however admitting a negligent act-omission on the part of a driver, nevertheless, in such a hypothetical situation, the causative negligence, if any there was, is personal to the wrongdoer, i.e., the employee-driver, to the exclusion of the employer. 8.2.b. The allegation on supposed 'minimum life of 75 years' and on 'he expects to earn no less than P1,680,000.00 x x x is false, a pure hyperbole, and bereft of factual and legal basis. Besides, what jurisprudential rule refers to is only net earning. The law abhors a claim, akin to plaintiffs' allegation, which is

manifestly speculative, as it may not exist at all. Furthermore, the questioned allegation in the plaintiff's original and amended complaints is not preceded by the requisite statement of definitive facts, nor of any specific fact, which could possibly afford a rational basis for a reasonable expectation of supposed earning that could be lost, or impaired. 8.2.c. Likewise, the allegations that allegedly 'x x x the late Dominador Mercader boarded x x x Bus No. 142 x x x and that supposedly the latter had a baggage x x x containing drygoods x x x in which case [petitioners have] to pay the value thereof in such amount as may be proven by [respondents] in court during the trial x x x, apart from being false, are offensive to the rule on concise statement of ultimate facts. The assailed allegations also contravene Interim Rule 11, '(i)f any demand is for damages in a civil action the amount thereof must be specifically alleged.' In consequence of this averment, [respondents] have not yet paid the correct docket fee, for which reason, [respondents'] case may be dismissed on that ground alone. 8.3. In violation also of the same Interim Rule 11, regarding the requisite definitive amount of claim, the allegation on the supposed funeral expense x x x does not also indicate any specific amount. So with the averment on supposed moral damage which may not be warranted because of absence of allegation of fraud or bad faith, if any, there was, apart from want of causative connection with the defendant. 8.4. The allegation in paragraph 15 of the original and amended complaint is also a pure conclusionary averment, without a factual premise. 9. [Petitioner] JB LINE, impleaded in the amended, complaint, is merely a business name and sole proprietorship of defendant Baritua. As such, JB Line is not a juridical person, nor an entity authorized by law to sue and be sued, hence, it cannot legally be a party to any action. With this averment, correlated with that in paragraphs 4-5 hereof, [respondents'] amended complaint is essentially a suit against a wrong party."5 The RTC, after due trial, rendered the aforesaid assailed Decision. Ruling of the Court of Appeals As earlier stated, the Court of Appeals affirmed the trial court's award of monetary damages in favor of respondents, except the amount of Dominador Mercader's lost earnings, which it reduced to P798,000. It held that petitioners failed to rebut the presumption that in the event a passenger died or was injured, the carrier had acted negligently. Petitioners, it added, presented no sufficient proof that they had exercised extraordinary diligence. Hence, this Petition.6 The Issues In their Memorandum, petitioners submit the following issues for our consideration: "I Did the honorable Court of Appeals (CA) gravely abuse its discretion when it allowed to pass sub silenciothe trial court's failure to rule frontally on petitioners' plea for a bill of particulars, and ignored the nature of respondents' prayer in the complaint pleading for an award of -'a) P12,000.00 -- representing the death compensation; b) An amount to be proven in court. representing actual damages; c) P1,660,000.00 or more as may be proven during the trial, by way of loss of earnings; d) An amount to be proven in court as and by way of funeral expenses; e) An amount to be proven during the trial representing moral damages;

f) An amount to be determined by this Honorable Court, representing exemplary damages; g) An amount equivalent to 25% of whatever amount the plaintiffs would be able to collect from the defendant but in no case less than P50,000.00 plus an additional amount of P1,000.00 per hearing as and by way of Attorney's fees;' "II Did the CA also ignore the fact that the trial court was not paid the correct amount of the docket and other lawful fees; hence, without jurisdiction over the original and amended complaints or over the subject matter of the case; "III Did the CA likewise arbitrarily disregard petitioners' constitutional right to procedural due process and fairness when it ignored and thrust aside their right to present evidence and to expect that their evidence will be duly considered and appreciated; and "IV. In awarding excessive and extravagant damages, did the CA and the trial court adhere to the rule that their assailed decision must state clearly and distinctly the facts and the laws on which they are based?"7 Distilling the alleged errors cited above, petitioners raise two main issues for our consideration: (1) whether the CA erred in holding that the RTC had jurisdiction over the subject matter of the case, and (2) whether the CA disregarded petitioners' procedural rights. The Court's Ruling The Petition is devoid of merit. First Issue: Jurisdiction Petitioners contend that since the correct amounts of docket and other lawful fees were not paid by respondents, then the trial court did not acquire jurisdiction over the subject matter of the case. The Court, in Manchester Development Corporation v. CA,8 held that "[t]he court acquires jurisdiction over any case only upon the payment of the prescribed docket fee. An amendment of the complaint or similar pleading will not thereby vest jurisdiction in the court, much less the payment of the docket fee based on the amounts sought in the amended pleading. x x x." Generally, the jurisdiction of a court is determined by the statute in force at the commencement of the action,9unless such statute provides for its retroactive application.10 Once the jurisdiction of a court attaches, it continues until the case is finally terminated. 11 The trial court cannot be ousted therefrom by subsequent happenings or events, although of a character that would have prevented jurisdiction from attaching in the first instance.12 The Manchester ruling, which became final in 1987, has no retroactive application and cannot be invoked in the subject Complaint filed in 1984. The Court explicitly declared: "To put a stop to this irregularity, henceforth all complaints, petitions, answers and other similar pleadings should specify the amount of damages being prayed for not only in the body of the pleading but also in the prayer, and said damages shall be considered in the assessment of the filing fees in any case. Any pleading that fails to comply with this requirement shall not be accepted nor admitted, or shall otherwise be expunged from the record."13 (emphasis supplied) Second Issue: Petitioners' Procedural Rights Motion for a Bill of Particulars Petitioners argue that the Court of Appeals erred when it passed sub silencio on the trial court's failure to rule frontally on their plea for a bill of particulars. We are not impressed. It must be noted that petitioners' counsel manifested in open court his desire to file a motion for a bill of particulars. The RTC gave him ten days from March 12, 1985

within which to do so.14 He, however, filed the aforesaid motion only on April 2, 1985 or eleven days past the deadline set by the trial court.15Moreover, such motion was already moot and academic because, prior to its filing, petitioners had already filed their answer and several other pleadings to the amended Complaint. Section 1, Rule 12 of the Rules of Court, provides: "Section 1. When applied for; purpose. -- Before responding to a pleading, a party may move for a more definite statement or for a bill of particulars of any matter which is not averred with sufficient definiteness or particularity to enable him properly to prepare his responsive pleading. If the pleading is a reply, the motion must be filed within ten (10) days from service thereof. Such motion shall point out the defects complained of, the paragraphs wherein they are contained, and the details desired."16 (emphasis supplied) Petitioners' Right to Adduce Evidence Petitioners also argue that their right to present evidence was violated by the CA, because it did not consider their contention that the trial judges who heard the case were biased and impartial. Petitioners contend, as they did before the CA, that Judge Tomas B. Noynay based his Decision" on certain chosen partial testimonies of [respondents'] witnesses x x x." They further maintain that Judge Fortunato Operario, who initially handled the case, questioned some witnesses in an overzealous manner and "assum[ed] the dual role of magistrate and advocate."17 These arguments are not meritorious. First, judges cannot be expected to rely on the testimonies of every witness. In ascertaining the facts, they determine who are credible and who are not. In doing so, they consider all the evidence before them. In other words, the mere fact that Judge Noynay based his decision on the testimonies of respondents' witnesses does not necessarily mean that he did not consider those of petitioners. Second, we find no sufficient showing that Judge Operario was overzealous in questioning the witnesses. His questions merely sought to clarify their testimonies. In all, we reject petitioners' contention that their right to adduce evidence was violated. Alleged Failure to State Clearly the Facts and the Law We are not convinced by petitioners' contention, either, that both the trial and the appellate courts failed to state clearly and distinctly the facts and the law involved in the case. As can be gleaned from their Decisions, both courts clearly laid down their bases for awarding monetary damages to respondents. Both the RTC and the CA found that a contract of carriage existed between petitioners and Dominador Mercader when he boarded Bus No. 142 in Pasay City on March 16, 1983. Petitioners failed to transport him to his destination, because the bus fell into a river while traversing the Bugko Bailey Bridge. Although he survived the fall, he later died of asphyxia secondary to drowning. We agree with the findings of both courts that petitioners failed to observe extraordinary diligence18 that fateful morning. It must be noted that a common carrier, by the nature of its business and for reasons of public policy, is bound to carry passengers safely as far as human care and foresight can provide. It is supposed to do so by using the utmost diligence of very cautious persons, with due regard for all the circunistances.19 In case of death or injuries to passengers, it is presumed to have been at fault or to have acted negligently, unless it proves that it observed extraordinary diligence as prescribed in Articles 1733 and 175520 of the Civil Code. We sustain the ruling of the CA that petitioners failed to prove that they had observed extraordinary diligence. First, petitioners did not present evidence on the skill or expertise of the driver of Bus No. 142 or the condition of that vehicle at the time of the incident. Second, the bus was overloaded at the time. In fact, several individuals were standing when the incident occurred.21

Third, the bus was overspeeding. Its conductor testified that it had overtaken several buses before it reached the Bugko Bailey Bridge.22 Moreover, prior to crossing the bridge, it had accelerated and maintained its speed towards the bridge.23 We therefore believe that there is no reason to overturn the assailed CA Decision, which affirmed that of the RTC. It is a well-settled rule that the trial court's factual findings, when affirmed by the appellate court, are conclusive and binding, if they are not tainted with arbitrariness or oversight of some fact or circumstance of significance and influence. 24 As clearly discussed above, petitioners have not presented sufficient ground to warrant a deviation from this rule. Finally, we cannot fault the appellate court in its computation of the damages and lost earnings, since it effectively computed only net earnings in accordance with existing jurisprudence. 25 WHEREFORE, the Petition is hereby DENIED, and the assailed Decision AFFIRMED. Costs against petitioners. SO ORDERED. Melo, Vitug, Gonzaga-Reyes, and Sandoval-Gutierrez, JJ., concur.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 166640 July 31, 2009 HERMINIO MARIANO, JR., Petitioner, vs. ILDEFONSO C. CALLEJAS and EDGAR DE BORJA, Respondents. DECISION PUNO, C.J.: On appeal are the Decision1 and Resolution2 of the Court of Appeals in CA-G.R. CV No. 66891, dated May 21, 2004 and January 7, 2005 respectively, which reversed the Decision3 of the Regional Trial Court (RTC) of Quezon City, dated September 13, 1999, which found respondents jointly and severally liable to pay petitioner damages for the death of his wife. First, the facts: Petitioner Herminio Mariano, Jr. is the surviving spouse of Dr. Frelinda Mariano who was a passenger of a Celyrosa Express bus bound for Tagaytay when she met her death. Respondent Ildefonso C. Callejas is the registered owner of Celyrosa Express, while respondent Edgar de Borja was the driver of the bus on which the deceased was a passenger. At around 6:30 p.m. on November 12, 1991, along Aguinaldo Highway, San Agustin, Dasmarias, Cavite, the Celyrosa Express bus, carrying Dr. Mariano as its passenger, collided with an Isuzu truck with trailer bearing plate numbers PJH 906 and TRH 531. The passenger bus was bound for Tagaytay while the trailer truck came from the opposite direction, bound for Manila. The trailer truck bumped the passenger bus on its left middle portion. Due to the impact, the passenger bus fell on its right side on the right shoulder of the highway and caused the death of Dr. Mariano and physical injuries to four other passengers. Dr. Mariano was 36 years old at the time of her death. She left behind three minor children, aged four, three and two years. Petitioner filed a complaint for breach of contract of carriage and damages against respondents for their failure to transport his wife and mother of his three minor children safely to her destination. Respondents denied liability for the death of Dr. Mariano. They claimed that the proximate cause of the accident was the recklessness of the driver of the trailer truck which bumped their bus while allegedly at a halt on the shoulder of the road in its rightful lane. Thus, respondent Callejas filed a third-party complaint against Liong Chio Chang, doing business

under the name and style of La Perla Sugar Supply, the owner of the trailer truck, for indemnity in the event that he would be held liable for damages to petitioner.lavvph!l Other cases were filed. Callejas filed a complaint,4 docketed as Civil Case No. NC-397 before the RTC of Naic, Cavite, against La Perla Sugar Supply and Arcadio Arcilla, the truck driver, for damages he incurred due to the vehicular accident. On September 24, 1992, the said court dismissed the complaint against La Perla Sugar Supply for lack of evidence. It, however, found Arcilla liable to pay Callejas the cost of the repairs of his passenger bus, his lost earnings, exemplary damages and attorneys fees.5 A criminal case, Criminal Case No. 2223-92, was also filed against truck driver Arcilla in the RTC of Imus, Cavite. On May 3, 1994, the said court convicted truck driver Arcadio Arcilla of the crime of reckless imprudence resulting to homicide, multiple slight physical injuries and damage to property.6 In the case at bar, the trial court, in its Decision dated September 13, 1999, found respondents Ildefonso Callejas and Edgar de Borja, together with Liong Chio Chang, jointly and severally liable to pay petitioner damages and costs of suit. The dispositive portion of the Decision reads: ACCORDINGLY, the defendants are ordered to pay as follows: 1. The sum of P50,000.00 as civil indemnity for the loss of life; 2. The sum of P40,000.00 as actual and compensatory damages; 3. The sum of P1,829,200.00 as foregone income; 4. The sum of P30,000.00 as moral damages; 5. The sum of P20,000.00 as exemplary damages; 6. The costs of suit. SO ORDERED.7 Respondents Callejas and De Borja appealed to the Court of Appeals, contending that the trial court erred in holding them guilty of breach of contract of carriage. On May 21, 2004, the Court of Appeals reversed the decision of the trial court. It reasoned: . . . the presumption of fault or negligence against the carrier is only a disputable presumption. It gives in where contrary facts are established proving either that the carrier had exercised the degree of diligence required by law or the injury suffered by the passenger was due to a fortuitous event. Where, as in the instant case, the injury sustained by the petitioner was in no way due to any defect in the means of transport or in the method of transporting or to the negligent or wilful acts of private respondent's employees, and therefore involving no issue of negligence in its duty to provide safe and suitable cars as well as competent employees, with the injury arising wholly from causes created by strangers over which the carrier had no control or even knowledge or could not have prevented, the presumption is rebutted and the carrier is not and ought not to be held liable. To rule otherwise would make the common carrier the insurer of the absolute safety of its passengers which is not the intention of the lawmakers. 8 The dispositive portion of the Decision reads: WHEREFORE, the decision appealed from, insofar as it found defendants-appellants Ildefonso Callejas and Edgar de Borja liable for damages to plaintiff-appellee Herminio E. Mariano, Jr., is REVERSED and SET ASIDE and another one entered absolving them from any liability for the death of Dr. Frelinda Cargo Mariano.9 The appellate court also denied the motion for reconsideration filed by petitioner. Hence, this appeal, relying on the following ground: THE DECISION OF THE HONORABLE COURT OF APPEALS, SPECIAL FOURTEENTH DIVISION IS NOT IN ACCORD WITH THE FACTUAL BASIS OF THE CASE.10 The following are the provisions of the Civil Code pertinent to the case at bar: ART. 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case.

ART. 1755. A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances. ART. 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed in articles 1733 and 1755. In accord with the above provisions, Celyrosa Express, a common carrier, through its driver, respondent De Borja, and its registered owner, respondent Callejas, has the express obligation "to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances," 11 and to observe extraordinary diligence in the discharge of its duty. The death of the wife of the petitioner in the course of transporting her to her destination gave rise to the presumption of negligence of the carrier. To overcome the presumption, respondents have to show that they observed extraordinary diligence in the discharge of their duty, or that the accident was caused by a fortuitous event. This Court interpreted the above quoted provisions in Pilapil v. Court of Appeals.12 We elucidated: While the law requires the highest degree of diligence from common carriers in the safe transport of their passengers and creates a presumption of negligence against them, it does not, however, make the carrier an insurer of the absolute safety of its passengers. Article 1755 of the Civil Code qualifies the duty of extraordinary care, vigilance and precaution in the carriage of passengers by common carriers to only such as human care and foresight can provide. What constitutes compliance with said duty is adjudged with due regard to all the circumstances. Article 1756 of the Civil Code, in creating a presumption of fault or negligence on the part of the common carrier when its passenger is injured, merely relieves the latter, for the time being, from introducing evidence to fasten the negligence on the former, because the presumption stands in the place of evidence. Being a mere presumption, however, the same is rebuttable by proof that the common carrier had exercised extraordinary diligence as required by law in the performance of its contractual obligation, or that the injury suffered by the passenger was solely due to a fortuitous event. In fine, we can only infer from the law the intention of the Code Commission and Congress to curb the recklessness of drivers and operators of common carriers in the conduct of their business. Thus, it is clear that neither the law nor the nature of the business of a transportation company makes it an insurer of the passenger's safety, but that its liability for personal injuries sustained by its passenger rests upon its negligence, its failure to exercise the degree of diligence that the law requires. In the case at bar, petitioner cannot succeed in his contention that respondents failed to overcome the presumption of negligence against them. The totality of evidence shows that the death of petitioners spouse was caused by the reckless negligence of the driver of the Isuzu trailer truck which lost its brakes and bumped the Celyrosa Express bus, owned and operated by respondents. First, we advert to the sketch prepared by PO3 Magno S. de Villa, who investigated the accident. The sketch13shows the passenger bus facing the direction of Tagaytay City and lying on its right side on the shoulder of the road, about five meters away from the point of impact. On the other hand, the trailer truck was on the opposite direction, about 500 meters away from the point of impact. PO3 De Villa stated that he interviewed De Borja, respondent driver of the passenger bus, who said that he was about to unload some passengers when his bus was bumped by the driver of the trailer truck that lost its brakes. PO3 De Villa checked out the trailer truck and found that its brakes really failed. He testified before the trial court, as follows:

ATTY. ESTELYDIZ: q You pointed to the Isuzu truck beyond the point of impact. Did you investigate why did (sic) the Isuzu truck is beyond the point of impact? a Because the truck has no brakes. COURT: q What is the distance between that circle which is marked as Exh. 1-c to the place where you found the same? a More or less 500 meters. q Why did you say that the truck has no brakes? a I tested it. q And you found no brakes? a Yes, sir. xxx q When you went to the scene of accident, what was the position of Celyrosa bus? a It was lying on its side. COURT: q Right side or left side? a Right side. ATTY. ESTELYDIZ: q On what part of the road was it lying? a On the shoulder of the road. COURT: q How many meters from the point of impact? a Near, about 5 meters.14 His police report bolsters his testimony and states: Said vehicle 1 [passenger bus] was running from Manila toward south direction when, in the course of its travel, it was hit and bumped by vehicle 2 [truck with trailer] then running fast from opposite direction, causing said vehicle 1 to fall on its side on the road shoulder, causing the death of one and injuries of some passengers thereof, and its damage, after collission (sic), vehicle 2 continiously (sic) ran and stopped at approximately 500 meters away from the piont (sic) of impact.15 In fine, the evidence shows that before the collision, the passenger bus was cruising on its rightful lane along the Aguinaldo Highway when the trailer truck coming from the opposite direction, on full speed, suddenly swerved and encroached on its lane, and bumped the passenger bus on its left middle portion. Respondent driver De Borja had every right to expect that the trailer truck coming from the opposite direction would stay on its proper lane. He was not expected to know that the trailer truck had lost its brakes. The swerving of the trailer truck was abrupt and it was running on a fast speed as it was found 500 meters away from the point of collision. Secondly, any doubt as to the culpability of the driver of the trailer truck ought to vanish when he pleaded guilty to the charge of reckless imprudence resulting to multiple slight physical injuries and damage to property in Criminal Case No. 2223-92, involving the same incident. IN VIEW WHEREOF, the petition is DENIED. The Decision dated May 21, 2004 and the Resolution dated January 7, 2005 of the Court of Appeals in CA-G.R. CV No. 66891 are AFFIRMED. SO ORDERED. REYNATO S. PUNO Chief Justice

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 140349 June 29, 2005 SULPICIO LINES, INC., petitioner, vs. FIRST LEPANTO-TAISHO INSURANCE CORPORATION, respondent. DECISION CHICO-NAZARIO, J.: Before Us is a Petition for Review on Certiorari assailing the Decision1 of the Court of Appeals reversing the Decision2 of the Regional Trial Court (RTC) of Manila, Branch XIV, dismissing the complaint for damages for failure of the plaintiff to prove its case with a preponderance of evidence. Assailed as well is the Resolution3 of the Court of Appeals denying petitioners Motion for Reconsideration. THE FACTS On 25 February 1992, Taiyo Yuden Philippines, Inc. (owner of the goods) and Delbros, Inc. (shipper) entered into a contract, evidenced by Bill of Lading No. CEB/SIN-008/92 issued by the latter in favor of the owner of the goods, for Delbros, Inc. to transport a shipment of goods consisting of three (3) wooden crates containing one hundred thirty-six (136) cartons of inductors and LC compound on board the V Singapore V20 from Cebu City to Singapore in favor of the consignee, Taiyo Yuden Singapore Pte, Ltd. For the carriage of said shipment from Cebu City to Manila, Delbros, Inc. engaged the services of the vessel M/V Philippine Princess, owned and operated by petitioner Sulpicio Lines, Inc. (carrier). The vessel arrived at the North Harbor, Manila, on 24 February 1992. During the unloading of the shipment, one crate containing forty-two (42) cartons dropped from the cargo hatch to the pier apron. The owner of the goods examined the dropped cargo, and upon an alleged finding that the contents of the crate were no longer usable for their intended purpose, they were rejected as a total loss and returned to Cebu City. The owner of the goods filed a claim with herein petitioner-carrier for the recovery of the value of the rejected cargo which was refused by the latter. Thereafter, the owner of the goods sought payment from respondent First Lepanto-Taisho Insurance Corporation (insurer) under a marine insurance policy issued to the former. Respondent-insurer paid the claim less thirty-five percent (35%) salvage value or P194, 220.31. The payment of the insurance claim of the owner of the goods by the respondent-insurer subrogated the latter to whatever right or legal action the owner of the goods may have against Delbros, Inc. and petitioner-carrier, Sulpicio Lines, Inc. Thus, respondent-insurer then filed claims for reimbursement from Delbros, Inc. and petitioner-carrier Sulpicio Lines, Inc. which were subsequently denied. On 04 November 1992, respondent-insurer filed a suit for damages docketed as Civil Case No. 92-63337 with the trial court against Delbros, Inc. and herein petitioner-carrier. On 05 February 1993, petitioner-carrier filed its Answer with Counterclaim. Delbros, Inc. filed on 15 April 1993 its Answer with Counterclaim and Cross-claim, alleging that assuming the contents of the crate in question were truly in bad order, fault is with herein petitioner-carrier which was responsible for the unloading of the crates. Petitioner-carrier filed its Answer to Delbros, Inc.s cross-claim asserting that it observed extraordinary diligence in the handling, storage and general care of the shipment and that subsequent inspection of the shipment by the Manila Adjusters and Surveyors Company showed that the contents of the third crate that had fallen were found to be in apparent sound condition, except that "2 cello bags each of 50 pieces ferri inductors No. LC FL 112270K-60 (c) were unaccounted for and missing as per packaging list."

After hearing, the trial court dismissed the complaint for damages as well as the counterclaim filed by therein defendant Sulpicio Lines, Inc. and the cross-claim filed by Delbros, Inc. According to the RTC: The plaintiff has failed to prove its case. The first witness for the plaintiff merely testified about the payment of the claim based on the documents accompanying the claim which were the Packing List, Commercial Invoices, Bill of Lading, Claims Statement, Marine Policies, Survey Report, Marine Risk Note, and the letter to Third Party carriers and shipping lines (Exhibit A-J). The check was paid and delivered to the assured as evidenced by the check voucher and the subrogation receipt. On cross-examination by counsel for the Sulpicio Lines, he said that their company paid the claim less 35% salvage value based on the adjuster report. This testimony is hearsay. The second witness for the plaintiff, Arturo Valdez, testified, among others, that he, together with a co-surveyor and a representative of Sulpicio Lines had conducted a survey of the shipment at the compound of Sulpicio Lines. He prepared a survey report (Exhibits G and G-1) and took a picture of shipment (Exhibit G-2). On cross-examination, he said that two cartons were torn at the sides with top portion flaps opened and the 41 cartons were properly sealed and in good order conditions. Two cartons were already opened and slightly damaged. He merely looked at them but did not conduct an inspection of the contents. What he was referring to as slightly damaged were the cartons only and not the contents. From the foregoing evidence, it is apparent that the plaintiff had failed to prove its case with a preponderance of evidence. . WHEREFORE, in view of the foregoing considerations, judgment is hereby rendered dismissing the Complaint, defendant Sulpicio Lines counterclaim and defendant Delbros Inc.s crossclaim.4 A Motion for Reconsideration was then filed by herein respondent-insurer and subsequently denied by the trial court in an Order dated 07 February 1995 on the ground that it did not raise any new issue. Thus, respondent-insurer instituted an appeal with the Court of Appeals, which reversed the dismissal of the complaint by the lower court, the decretal portion of which reads: WHEREFORE, the appeal is granted. The decision appealed from is REVERSED. Defendantsappellees Delbros and Sulpicio Lines are hereby ordered to pay, jointly and severally, plaintiffappellant the sum of P194,220.31 representing actual damages, plus legal interest counted from the filing of the complaint until fully paid.5 The appellate court disposed of the issues in the case in this wise: Furthermore, the evidence shows that one of the three crates fell during the unloading at the pier in Manila. The wooden crate which fell was damaged such that this particular crate was not anymore sent to Singapore and was instead shipped back to Cebu from Manila. Upon examination, it was found that two (2) cartons of the forty-two (42) cartons contained in this crate were externally damaged. They were torn at the sides and their top portions or flaps were open. These facts were admitted by all the parties. Defendant-appellees, however, insist that it was only the external packaging that was damaged, and that there was no actual damage to the goods such that would make them liable to the shipper. This theory is erroneous. When the goods are placed at a common carriers possession for delivery to a specified consignee, they are in good order and condition and are supposed to be transported and delivered to the consignee in the same state. In the case herein, the goods were received by defendantappellee Delbros in Cebu properly packed in cardboard cartons and then placed in wooden crates, for delivery to the consignee in Singapore. However, before the shipment reached Singapore (while it was in Manila) one crate and 2 cartons contained therein were not anymore in their original state. They were no longer fit to be sent to Singapore. .

As We have already found, there is damage suffered by the goods of the shipper. This consists in the destruction of one wooden crate and the tearing of two of the cardboard boxes therein rendering then unfit to be sent to Singapore. Defendant-appellee Sulpicio Lines admits that this crate fell while it was being unloaded at the Manila pier. Falling of the crate was negligence on the part of defendant-appellee Sulpicio Lines under the doctrine of res ipsa loquitur. Defendantappellee Sulpicio Lines cannot exculpate itself from liability because it failed to prove that it exercised due diligence in the selection and supervision of its employees to prevent the damage.6 On 21 June 1999, herein petitioner-carrier filed its Motion for Reconsideration of the decision of the Court of Appeals which was subsequently denied in a Resolution dated 13 October 1999. Hence, the instant petition. During the pendency of the appeal before this Court, Delbros, Inc. filed a manifestation stating that its appeal7filed before this Court had been dismissed for being filed out of time and thus the case as against it was declared closed and terminated. As a consequence, it paid in full the amount of the damages awarded by the appellate court to the respondent-insurer. Before this Court, Delbros, Inc. prays for reimbursement, contribution, or indemnity from its co-defendant, herein petitioner-carrier Sulpicio Lines, Inc. for whatever it had paid to respondent-insurer in consonance with the decision of the appellate court declaring both Delbros, Inc. and petitionercarrier Sulpicio Lines, Inc. jointly and severally liable. ISSUES Petitioner-carrier raises the following issues in its petition: 1. The Court of Appeals erred in not holding that the trial court justly and correctly dismissed the complaint against Sulpicio Lines, which dismissal is already final. 2. The Court of Appeals erred in not dismissing the appeal for failure of appellant to comply with the technical requirement of the Rules of Court. RULING OF THE COURT We shall first address the procedural issue raised by petitioner-carrier, Sulpicio Lines, Inc. that the Court of Appeals should have dismissed the appeal for failure of respondent-insurer to attach a copy of the decision of the trial court to its appellants brief in violation of Rule 44, Section 13(h) of the Rules of Civil Procedure.8 A perusal of the records will show, however, that in a Resolution9 dated 13 August 1996, the Court of Appeals required herein respondent-insurer to submit seven (7) copies of the questioned decision within five (5) days from notice. Said Resolution was properly complied with. As a rule, the right to appeal is a statutory right and one who seeks to avail of that right must comply with the manner required by the pertinent rules for the perfection of an appeal. Nevertheless, this Court has allowed the filing of an appeal upon subsequent compliance with the requirements imposed by law, where a strict application of the technical rules will impair the proper administration of justice. As enunciated by the Court in the case of Jaro v. Court of Appeals:10 There is ample jurisprudence holding that the subsequent and substantial compliance of an appellant may call for the relaxation of the rules of procedure. In Cusi-Hernandez vs. Diaz [336 SCRA 113] and Piglas-Kamao vs. National Labor Relations Commission [357SCRA 640], we ruled that the subsequent submission of the missing documents with the motion for reconsideration amounts to substantial compliance. The reasons behind the failure of the petitioners in these two cases to comply with the required attachments were no longer scrutinized.11 We see no error, therefore, on the part of the Court of Appeals when it gave due course to the appeal after respondent-insurer had submitted copies of the RTC decision, albeit belatedly. We now come to the substantial issues alleged by petitioner-carrier. The pivotal question to be considered in the resolution of this issue is whether or not, based on the evidence presented

during the trial, the owner of the goods, respondent-insurers predecessor-in-interest, did incur damages, and if so, whether or not petitioner-carrier is liable for the same. It cannot be denied that the shipment sustained damage while in the custody of petitionercarrier. It is not disputed that one of the three (3) crates did fall from the cargo hatch to the pier apron while petitioner-carrier was unloading the cargo from its vessel. Neither is it impugned that upon inspection, it was found that two (2) cartons were torn on the side and the top flaps were open and that two (2) cello bags, each of 50 pieces ferri inductors, were missing from the cargo. Petitioner-carrier contends that its liability, if any, is only to the extent of the cargo damage or loss and should not include the lack of fitness of the shipment for transport to Singapore due to the damaged packing. This is erroneous. Petitioner-carrier seems to belabor under the misapprehension that a distinction must be made between the cargo packaging and the contents of the cargo. According to it, damage to the packaging is not tantamount to damage to the cargo. It must be stressed that in the case at bar, the damage sustained by the packaging of the cargo while in petitioner-carriers custody resulted in its unfitness to be transported to its consignee in Singapore. Such failure to ship the cargo to its final destination because of the ruined packaging, indeed, resulted in damages on the part of the owner of the goods. The falling of the crate during the unloading is evidence of petitioner-carriers negligence in handling the cargo. As a common carrier, it is expected to observe extraordinary diligence in the handling of goods placed in its possession for transport.12 The standard of extraordinary diligence imposed upon common carriers is considerably more demanding than the standard of ordinary diligence, i.e., the diligence of a good paterfamiliasestablished in respect of the ordinary relations between members of society.13 A common carrier is bound to transport its cargo and its passengers safely "as far as human care and foresight can provide, using the utmost diligence of a very cautious person, with due regard to all circumstances."14 The extraordinary diligence in the vigilance over the goods tendered for shipment requires the common carrier to know and to follow the required precaution for avoiding the damage to, or destruction of, the goods entrusted to it for safe carriage and delivery. 15It requires common carriers to render service with the greatest skill and foresight and "to use all reasonable means to ascertain the nature and characteristic of goods tendered for shipment, and to exercise due care in the handling and stowage, including such methods as their nature requires."16 Thus, when the shipment suffered damages as it was being unloaded, petitioner-carrier is presumed to have been negligent in the handling of the damaged cargo. Under Articles 173517 and 175218 of the Civil Code, common carriers are presumed to have been at fault or to have acted negligently in case the goods transported by them are lost, destroyed or had deteriorated. To overcome the presumption of liability for loss, destruction or deterioration of goods under Article 1735, the common carrier must prove that they observed extraordinary diligence as required in Article 173319 of the Civil Code.20 Petitioner-carrier miserably failed to adduce any shred of evidence of the required extraordinary diligence to overcome the presumption that it was negligent in transporting the cargo. Coming now to the issue of the extent of petitioner-carriers liability, it is undisputed that respondent-insurer paid the owner of the goods under the insurance policy the amount of P194,220.31 for the alleged damages the latter has incurred. Neither is there dispute as to the fact that Delbros, Inc. paid P194,220.31 to respondent-insurer in satisfaction of the whole amount of the judgment rendered by the Court of Appeals. The question then is: To what extent is Sulpicio Lines, Inc., as common carrier, liable for the damages suffered by the owner of the goods? Upon respondent-insurers payment of the alleged amount of loss suffered by the insured (the owner of the goods), the insurer is entitled to be subrogated pro tanto to any right of action which the insured may have against the common carrier whose negligence or wrongful act caused the loss.21 Subrogation is the substitution of one person in the place of another with

reference to a lawful claim or right, so that he who is substituted succeeds to the rights of the other in relation to a debt or claim, including its remedies or securities.22 The rights to which the subrogee succeeds are the same as, but not greater than, those of the person for whom he is substituted, that is, he cannot acquire any claim, security or remedy the subrogor did not have.23 In other words, a subrogee cannot succeed to a right not possessed by the subrogor.24 A subrogee in effect steps into the shoes of the insured and can recover only if the insured likewise could have recovered.25 As found by the Court of Appeals, there was damage suffered by the goods which consisted in the destruction of one wooden crate and the tearing of two (2) cardboard boxes therein which rendered them unfit to be sent to Singapore.26 The falling of the crate was negligence on the part of Sulpicio Lines, Inc. for which it cannot exculpate itself from liability because it failed to prove that it exercised extraordinary diligence.27 Hence, we uphold the ruling of the appellate court that herein petitioner-carrier is liable to pay the amount paid by respondent-insurer for the damages sustained by the owner of the goods. As stated in the manifestation filed by Delbros, Inc., however, respondent-insurer had already been paid the full amount granted by the Court of Appeals, hence, it will be tantamount to unjust enrichment for respondent-insurer to again recover damages from herein petitioner-carrier. With respect to Delbros, Inc.s prayer contained in its manifestation that, in case the decision in the instant case be adverse to petitioner-carrier, a pronouncement as to the matter of reimbursement, indemnification or contribution in favor of Delbros, Inc. be included in the decision, this Court will not pass upon said issue since Delbros, Inc. has no personality before this Court, it not being a party to the instant case. Notwithstanding, this shall not bar any action Delbros, Inc. may institute against petitioner-carrier Sulpicio Lines, Inc. with respect to the damages the latter is liable to pay. WHEREFORE, premises considered, the assailed Decision of the Court of Appeals dated 26 May 1999 and its Resolution dated 13 October 1999 are hereby AFFIRMED. No costs. SO ORDERED. Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Tinga, JJ., concur.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 160219 July 21, 2008 VECTOR SHIPPING CORPORATION and FRANCISCO SORIANO, Petitioners, vs. ADELFO B. MACASA, EMELIA B. MACASA, TIMOTEO B. MACASA, CORNELIO B. MACASA, JR., and ROSARIO C. MACASA, SULPICIO LINES, INC., GO GUIOC SO, ENRIQUE S. GO, EUSEBIO S. GO, RICARDO S. GO, VICTORIANO S. GO, EDWARD S. GO, ARTURO S. GO, EDGAR S. GO and EDMUNDO S. GO,Respondents. DECISION NACHURA, J.: Before this Court is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Civil Procedure seeking the reversal of the Court of Appeals (CA) Decision2 dated September 24, 2003, which affirmed with modification the Decision3 of the Regional Trial Court (RTC), Branch 17 of Davao City, dated May 5, 1995. The Facts On December 19, 1987, spouses Cornelio (Cornelio) and Anacleta Macasa (Anacleta), together with their eight-year-old grandson, Ritchie Macasa, (Ritchie) boarded the MV Doa Paz, owned and operated by respondent Sulpicio Lines, Inc. (Sulpicio Lines), at Tacloban, Leyte bound for

Manila. On the fateful evening of December 20, 1987, MV Doa Paz collided with the MT Vector, an oil tanker owned and operated by petitioners Vector Shipping Corporation (Vector Shipping) and Francisco Soriano (Soriano), which at the time was loaded with 860,000 gallons of gasoline and other petroleum products, in the vicinity of Dumali Point, Tablas Strait, between Marinduque and Oriental Mindoro. Only twenty-six persons survived: 24 passengers of MV Doa Paz and 2 crew members of MT Vector. Both vessels were never retrieved. Worse, only a few of the victims bodies, who either drowned or were burned alive, were recovered. Cornelio, Anacleta and Ritchie were among the victims whose bodies have yet to be recovered up to this day. Respondents Adelfo, Emilia, Timoteo, and Cornelio, Jr., all surnamed Macasa, are the children of Cornelio and Anacleta. On the other hand, Timoteo and his wife, respondent Rosario Macasa, are the parents of Ritchie (the Macasas). Some of the Macasas went to the North Harbor in Manila to await the arrival of Cornelio, Anacleta and Ritchie. When they heard the news that MV Doa Paz was rammed at sea by another vessel, bewildered, the Macasas went to the office of Sulpicio Lines to check on the veracity of the news, but the latter denied that such an incident occurred. According to the Macasas, Sulpicio Lines was uncooperative and was reluctant to entertain their inquiries. Later, they were forced to rely on their own efforts to search for the bodies of their loved ones, but to no avail. The Macasas manifested that before they filed a case in court, Sulpicio Lines, through counsel, intimated its intention to settle, and offered the amount of P250,000.00 for the death of Cornelio, Anacleta and Ritchie. The Macasas rejected the said offer. Thus, on October 2, 1991, the Macasas filed a Complaint for Damages arising out of breach of contract of carriage against Sulpicio Lines before the RTC. The complaint imputed negligence to Sulpicio Lines because it was remiss in its obligations as a common carrier. The Macasas prayed for civil indemnity in the amount of P800,000.00 for the death of Cornelio, Anacleta and Ritchie, as well as for Cornelios and Anacletas alleged unearned income since they were both working as vocational instructors before their demise. The Macasas also claimed P100,000.00 as actual and compensatory damages for the lost cash, checks, jewelries and other personal belongings of the latter, P600,000.00 in moral damages, P100,000.00 by way of exemplary damages, and P100,000.00 as costs and attorneys fees. Sulpicio Lines traversed the complaint, alleging, among others that (1) MV Doa Paz was seaworthy in all aspects; (2) it exercised extraordinary diligence in transporting their passengers and goods; (3) it acted in good faith as it gave immediate assistance to the survivors and kin of the victims; (4) the sinking of MV Doa Paz was without contributory negligence on its part; and (5) the collision was MT Vectors fault since it was allowed to sail with an expired coastwise license, expired certificate of inspection and it was manned by unqualified and incompetent crew members per findings of the Board of Marine Inquiry (BMI) in BMI Case No. 653-87 which had exonerated Sulpicio Lines from liability. Thus, Sulpicio Lines filed a Third-Party Complaint against Vector Shipping, Soriano and Caltex Philippines Inc. (Caltex), the charterer of MT Vector. Trial on the merits ensued. The RTCs Ruling In its Decision4 dated May 5, 1995, the RTC awarded P200,000.00 as civil indemnity for the death of Cornelio, Anacleta and Ritchie; P100,000.00 as actual damages; P500,000.00 as moral damages; P100,000.00 as exemplary damages; and P50,000.00 as attorneys fees. The case was disposed of in this wise: Accordingly, as a result of this decision, on plaintiffs complaint against third-party (sic) defendant Sulpicio Lines Inc., third-party defendant Caltex Philippines, Inc. and third-party defendant MT Vector Shipping Corporation and/or Francisco Soriano, are liable against defendant third-party plaintiff, Sulpicio Lines, for reimbursement, subrogation and indemnity on all amounts, defendant Sulpicio Lines was ordered liable against plaintiffs, by way of actual,

moral, exemplary damages and attorneys fee, MT Vector Shipping Lines and/or Francisco Soriano, third-party defendants, are ordered jointly and severally, liable to pay third-party plaintiff, Sulpicio Lines, by way of reimbursement, subrogation and indemnity, of all the above amounts, ordered against defendant Sulpicio Lines, Inc., to pay in favor of plaintiff, with interest and cost of suit. SO ORDERED.5 Aggrieved, Sulpicio Lines, Caltex, Vector Shipping and Soriano appealed to the CA. The CAs Ruling In the assailed Decision6 dated September 24, 2003, the CA held: WHEREFORE, all premises considered, the assailed decision is hereby modified in that thirdparty defendant-appellant Caltex Phils., Inc. is hereby exonerated from liability. The P100,000 actual damages is deleted while the indemnity for (sic) is reduced to P150,000. All other aspects of the appealed judgment are perforce affirmed. SO ORDERED.7 The Issues Hence, this Petition raising the following issues: 1) May the decision of the Board Marine Inquiry (BMI) which, to date, is still pending with the Department of National Defense (DND) and, therefore, deemed vacated as it is not yet final and executory, be binding upon the court? 2) In the absence of clear, convincing, solid, and concrete proof of including, but not limited to, absence of eyewitnesses on that tragic maritime incident on 20 December 1987, will it be in consonance with law, logic, principles of physics, and/or allied science, to hold that MT VECTOR is the vessel solely at fault and responsible for the collision? How about MV DOA PAZ, a bigger ship of 2,324.08 gross tonnage (5-deck cargo passenger vessel, then cruising at 16.5 knots)? As compared to MT VECTOR of 629.82 gross tonner tanker, then cruising at 4.5 knots? May it be considered that, as between the two vessels, MV DOA PAZ could ha[ve] avoid[ed] such collision had there been an official on the bridge, and that MV DOA PAZ could had been earlier alarmed by its radar for an approaching vessel? 3) May VECTOR and SORIANO be held liable to indemnify/reimburse SULPICIO the amounts it is ordered to pay the MACASAs because SULPICIOs liability arises from breach of contract of carriage, inasmuch as in "culpa contractual" it is sufficient to prove the existence of the contract, because carrier is presumed to be at fault or to have acted negligently it being its duty to exercise extraordinary diligence, and cannot make the [safety] of its passengers dependent upon the diligence of VECTOR and SORIANO? 4) Will it be in accord with existing law and/or jurisprudence that both vessels (MV DOA PAZ and MT VECTOR) be declared mutually at fault and, therefore, each must [bear] its own loss? In the absence of CLEAR and CONVINCING proof[,] who is solely at fault?8 Petitioners posit that the factual findings of the BMI are not binding on the Court as such is limited to administrative liabilities and does not absolve the common carrier from its failure to observe extraordinary diligence; that this Courts ruling in Caltex (Philippines), Inc. v. Sulpicio Lines, Inc.9 is not res adjudicata to this case, since there were several other cases which did not reach this Court but, however, attained finality, previously holding that petitioners and Sulpicio Lines are jointly and severally liable to the victims;10 that the collision was solely due to the fault of MV Doa Paz as it was guilty of navigational fault and negligence; that due to the absence of the ship captain and other competent officers who were not at the bridge at the time of collision, and running at a speed of 16.5 knots, it was the MV Doa Paz which rammed MT Vector; and that it was improbable for a slower vessel like MT Vector which, at the time, was running at a speed of merely 4.5 knots to ram a much faster vessel like the MV Doa Paz.11 On the other hand, Sulpicio Lines claims that this Courts ruling in Caltex (Philippines), Inc. v. Sulpicio Lines, Inc.12is res adjudicata to this case being of similar factual milieu and that the

same is the law of the case on the matter; that the BMI proceedings are administrative in nature and can proceed independently of any civil action filed with the regular courts; that the BMI findings, as affirmed by the Philippine Coast Guard, holding that MT Vector was solely at fault at the time of collision, were based on substantial evidence and by reason of its special knowledge and technical expertise, the BMIs findings of facts are generally accorded respect by the courts; and that, as such, said BMI factual findings cannot be the subject of the instant petition for review asking this Court to look again into the pieces of evidence already presented. Thus, Sulpicio Lines prays that the instant Petition be denied for lack of merit.13 In their memorandum, the Macasas manifest that they are basically concerned with their claims against Sulpicio Lines for breach of contract of carriage. The Macasas opine that the arguments raised by Sulpicio Lines in its attempt to avoid liability to the Macasas are without basis in fact and in law because the RTCs Decision is supported by applicable provisions of law and settled jurisprudence on contract of carriage. However, they disagree with the CA on the deletion of the RTCs award of P100,000.00 actual damages. The CAs simple justification that if indeed the victims had such huge amount of money, they could have traveled by plane instead of taking the MV Doa Paz, according to the Macasas, is unjust, misplaced and adds insult to injury. They insist that the claim for actual damages was duly established in the hearings before the RTC by ample proof that Cornelio and Anacleta were both professionals; that they were in possession of personal effects and jewelries; and that since it was the Christmas season, the spouses intended a vacation in Manila and buy things to bring home as gifts. The Macasas also appeal that the reduction of the civil indemnity for the death of Cornelio, Anacleta and Ritchie from P200,000.00 to P150,000.00 be reconsidered. Thus, the Macasas pray that the RTC Decision be affirmed in toto and/or the CA Decision be modified with respect to the deleted award of actual damages and the reduced civil indemnity for the death of the victims. 14 This Courts Ruling The instant Petition lacks merit. It is a well-established doctrine that in petitions for review on certiorari under Rule 45 of the Rules of Civil Procedure, only questions of law may be raised by the parties and passed upon by this Court. This Court defined a question of law, as distinguished from a question of fact, to wit: A question of law arises when there is doubt as to what the law is on a certain state of facts, while there is a question of fact when the doubt arises as to the truth or falsity of the alleged facts. For a question to be one of law, the same must not involve an examination of the probative value of the evidence presented by the litigants or any of them. The resolution of the issue must rest solely on what the law provides on the given set of circumstances. Once it is clear that the issue invites a review of the evidence presented, the question posed is one of fact. Thus, the test of whether a question is one of law or of fact is not the appellation given to such question by the party raising the same; rather, it 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 is a question of fact.15 Petitioners insistence that MV Doa Paz was at fault at the time of the collision will entail this Courts review and determination of the weight, credence, and probative value of the evidence presented. This Court is being asked to evaluate the pieces of evidence which were adequately passed upon by both the RTC and the CA. Without doubt, this matter is essentially factual in character and, therefore, outside the ambit of a petition for review oncertiorari under Rule 45 of the Rules of Civil Procedure. Petitioners ought to remember that this Court is not a trier of facts. It is not for this Court to weigh these pieces of evidence all over again.16 Likewise, we take judicial notice17 of our decision in Caltex (Philippines), Inc. v. Sulpicio Lines, Inc.18 In that case, while Caltex was exonerated from any third-party liability, this Court sustained the CA ruling that Vector Shipping and Soriano are liable to reimburse and indemnify

Sulpicio Lines for whatever damages, attorneys fees and costs the latter is adjudged to pay the victims therein. Petitioners invocation of the pendency before this Court of Francisco Soriano v. Sulpicio Lines, Inc.19 along with Vector Shipping Corporation and Francisco Soriano v. American Home Assurance Co. and Sulpicio Lines, Inc.20 is unavailing. It may be noted that in a Resolution dated February 13, 2006, this Court denied the petition in Francisco Soriano v. Sulpicio Lines, Inc. for its failure to sufficiently show that the CA committed any reversible error in the challenged decision as to warrant the exercise of this Courts discretionary appellate jurisdiction. As a result, the CA decision21 dated November 17, 2003 holding that Sulpicio Lines has a right to reimbursement and indemnification from the third-party defendants Soriano and Vector Shipping, who are the same petitioners in this case, was sustained by this Court. Considering that in the cases which have reached this Court, we have consistently upheld the third-party liability of petitioners, we see no cogent reason to deviate from this ruling.1avvphi1 Moreover, in Caltex (Philippines), Inc. v. Sulpicio Lines, Inc.,22 we held that MT Vector fits the definition of a common carrier under Article 173223 of the New Civil Code. Our ruling in that case is instructive: Thus, the carriers are deemed to warrant impliedly the seaworthiness of the ship. For a vessel to be seaworthy, it must be adequately equipped for the voyage and manned with a sufficient number of competent officers and crew. The failure of a common carrier to maintain in seaworthy condition the vessel involved in its contract of carriage is a clear breach of its duty prescribed in Article 1755 of the Civil Code. The provisions owed their conception to the nature of the business of common carriers. This business is impressed with a special public duty. The public must of necessity rely on the care and skill of common carriers in the vigilance over the goods and safety of the passengers, especially because with the modern development of science and invention, transportation has become more rapid, more complicated and somehow more hazardous. For these reasons, a passenger or a shipper of goods is under no obligation to conduct an inspection of the ship and its crew, the carrier being obliged by law to impliedly warrant its seaworthiness. Thus, we are disposed to agree with the findings of the CA when it aptly held: We are not swayed by the lengthy disquisition of MT Vector and Francisco Soriano urging this Court to absolve them from liability. All evidence points to the fact that it was MT Vectors negligent officers and crew which caused it to ram into MV Doa Paz. More so, MT Vector was found to be carrying expired coastwise license and permits and was not properly manned. As the records would also disclose, there is a defect in the ignition system of the vessel, and it was not convincingly shown whether the necessitated repairs were in fact undertaken before the said ship had set to sea. In short, MT Vector was unseaworthy at the time of the mishap. That the said vessel was allowed to set sail when it was, to everyone in the groups knowledge, not fit to do so translates into rashness and imprudence.24 We reiterate, anew, the rule that findings of fact of the CA are generally binding and conclusive on this Court.25While this Court has recognized several exceptions26 to this rule, none of these exceptions finds application in this case. It bears emphasis also that this Court accords respect to the factual findings of the trial court, especially if affirmed by the CA on appeal. Unless the trial court overlooked substantial matters that would alter the outcome of the case, this Court will not disturb such findings. In any event, we have meticulously reviewed the records of the case and found no reason to depart from the rule.27 Lastly, we cannot turn a blind eye to this gruesome maritime tragedy which is now a dark page in our nations history. We commiserate with all the victims, particularly with the Macasas who were denied justice for almost two decades in this case. To accept petitioners submission that this Court, along with the RTC and the CA, should await the review by the Department of National Defense of the BMI findings, would, in effect, limit the courts jurisdiction to expeditiously try, hear and decide cases filed before them. It would not only prolong the

Macasas agony but would result in yet another tragedy at the expense of speedy justice. This, we cannot allow. WHEREFORE, the instant Petition is DENIED. The assailed Court of Appeals Decision dated September 24, 2003 is hereby AFFIRMED. Costs against petitioners. SO ORDERED. ANTONIO EDUARDO B. NACHURA Associate Justice

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 168402 August 6, 2008 ABOITIZ SHIPPING CORPORATION, petitioner, vs. INSURANCE COMPANY OF NORTH AMERICA, respondent. DECISION REYES, R.T., J.: THE RIGHT of subrogation attaches upon payment by the insurer of the insurance claims by the assured. As subrogee, the insurer steps into the shoes of the assured and may exercise only those rights that the assured may have against the wrongdoer who caused the damage. Before Us is a petition for review on certiorari of the Decision1 of the Court of Appeals (CA) which reversed the Decision2 of the Regional Trial Court (RTC). The CA ordered petitioner Aboitiz Shipping Corporation to pay the sum of P280,176.92 plus interest and attorney's fees in favor of respondent Insurance Company of North America (ICNA). The Facts Culled from the records, the facts are as follows: On June 20, 1993, MSAS Cargo International Limited and/or Associated and/or Subsidiary Companies (MSAS) procured a marine insurance policy from respondent ICNA UK Limited of London. The insurance was for a transshipment of certain wooden work tools and workbenches purchased for the consignee Science Teaching Improvement Project (STIP), Ecotech Center, Sudlon Lahug, Cebu City, Philippines.3ICNA issued an "all-risk" open marine policy,4 stating: This Company, in consideration of a premium as agreed and subject to the terms and conditions printed hereon, does insure for MSAS Cargo International Limited &/or Associated &/or Subsidiary Companies on behalf of the title holder: - Loss, if any, payable to the Assured or order.5 The cargo, packed inside one container van, was shipped "freight prepaid" from Hamburg, Germany on board M/S Katsuragi. A clean bill of lading 6 was issued by Hapag-Lloyd which stated the consignee to be STIP, Ecotech Center, Sudlon Lahug, Cebu City. The container van was then off-loaded at Singapore and transshipped on board M/S Vigour Singapore. On July 18, 1993, the ship arrived and docked at the Manila International Container Port where the container van was again off-loaded. On July 26, 1993, the cargo was received by petitioner Aboitiz Shipping Corporation (Aboitiz) through its duly authorized booking representative, Aboitiz Transport System. The bill of lading 7 issued by Aboitiz contained the notation "grounded outside warehouse." The container van was stripped and transferred to another crate/container van without any notation on the condition of the cargo on the Stuffing/Stripping Report. 8 On August 1, 1993, the container van was loaded on board petitioner's vessel, MV Super Concarrier I. The vessel left Manila en route to Cebu City on August 2, 1993.

On August 3, 1993, the shipment arrived in Cebu City and discharged onto a receiving apron of the Cebu International Port. It was then brought to the Cebu Bonded Warehousing Corporation pending clearance from the Customs authorities. In the Stripping Report 9 dated August 5, 1993, petitioner's checker noted that the crates were slightly broken or cracked at the bottom. On August 11, 1993, the cargo was withdrawn by the representative of the consignee, Science Teaching Improvement Project (STIP) and delivered to Don Bosco Technical High School, Punta Princesa, Cebu City. It was received by Mr. Bernhard Willig. On August 13, 1993, Mayo B. Perez, then Claims Head of petitioner, received a telephone call from Willig informing him that the cargo sustained water damage. Perez, upon receiving the call, immediately went to the bonded warehouse and checked the condition of the container and other cargoes stuffed in the same container. He found that the container van and other cargoes stuffed there were completely dry and showed no sign of wetness.10 Perez found that except for the bottom of the crate which was slightly broken, the crate itself appeared to be completely dry and had no water marks. But he confirmed that the tools which were stored inside the crate were already corroded. He further explained that the "grounded outside warehouse" notation in the bill of lading referred only to the container van bearing the cargo.11 In a letter dated August 15, 1993, Willig informed Aboitiz of the damage noticed upon opening of the cargo.12 The letter stated that the crate was broken at its bottom part such that the contents were exposed. The work tools and workbenches were found to have been completely soaked in water with most of the packing cartons already disintegrating. The crate was properly sealed off from the inside with tarpaper sheets. On the outside, galvanized metal bands were nailed onto all the edges. The letter concluded that apparently, the damage was caused by water entering through the broken parts of the crate. The consignee contacted the Philippine office of ICNA for insurance claims. On August 21, 1993, the Claimsmen Adjustment Corporation (CAC) conducted an ocular inspection and survey of the damage. CAC reported to ICNA that the goods sustained water damage, molds, and corrosion which were discovered upon delivery to consignee.13 On September 21, 1993, the consignee filed a formal claim14 with Aboitiz in the amount of P276,540.00 for the damaged condition of the following goods: ten (10) wooden workbenches three (3) carbide-tipped saw blades one (1) set of ball-bearing guides one (1) set of overarm router bits twenty (20) rolls of sandpaper for stroke sander In a Supplemental Report dated October 20, 1993,15 CAC reported to ICNA that based on official weather report from the Philippine Atmospheric, Geophysical and Astronomical Services Administration, it would appear that heavy rains on July 28 and 29, 1993 caused water damage to the shipment. CAC noted that the shipment was placed outside the warehouse of Pier No. 4, North Harbor, Manila when it was delivered on July 26, 1993. The shipment was placed outside the warehouse as can be gleaned from the bill of lading issued by Aboitiz which contained the notation "grounded outside warehouse." It was only on July 31, 1993 when the shipment was stuffed inside another container van for shipment to Cebu. Aboitiz refused to settle the claim. On October 4, 1993, ICNA paid the amount of P280,176.92 to consignee. A subrogation receipt was duly signed by Willig. ICNA formally advised Aboitiz of the claim and subrogation receipt executed in its favor. Despite follow-ups, however, no reply was received from Aboitiz. RTC Disposition ICNA filed a civil complaint against Aboitiz for collection of actual damages in the sum of P280,176.92, plus interest and attorney's fees.16 ICNA alleged that the damage sustained by

the shipment was exclusively and solely brought about by the fault and negligence of Aboitiz when the shipment was left grounded outside its warehouse prior to delivery. Aboitiz disavowed any liability and asserted that the claim had no factual and legal bases. It countered that the complaint stated no cause of action, plaintiff ICNA had no personality to institute the suit, the cause of action was barred, and the suit was premature there being no claim made upon Aboitiz. On November 14, 2003, the RTC rendered judgment against ICNA. The dispositive portion of the decision17 states: WHEREFORE, premises considered, the court holds that plaintiff is not entitled to the relief claimed in the complaint for being baseless and without merit. The complaint is hereby DISMISSED. The defendant's counterclaims are, likewise, DISMISSED for lack of basis.18 The RTC ruled that ICNA failed to prove that it is the real party-in-interest to pursue the claim against Aboitiz. The trial court noted that Marine Policy No. 87GB 4475 was issued by ICNA UK Limited with address at Cigna House, 8 Lime Street, London EC3M 7NA. However, complainant ICNA Phils. did not present any evidence to show that ICNA UK is its predecessor-in-interest, or that ICNA UK assigned the insurance policy to ICNA Phils. Moreover, ICNA Phils.' claim that it had been subrogated to the rights of the consignee must fail because the subrogation receipt had no probative value for being hearsay evidence. The RTC reasoned: While it is clear that Marine Policy No. 87GB 4475 was issued by Insurance Company of North America (U.K.) Limited (ICNA UK) with address at Cigna House, 8 Lime Street, London EC3M 7NA, no evidence has been adduced which would show that ICNA UK is the same as or the predecessor-in-interest of plaintiff Insurance Company of North America ICNA with office address at Cigna-Monarch Bldg., dela Rosa cor. Herrera Sts., Legaspi Village, Makati, Metro Manila or that ICNA UK assigned the Marine Policy to ICNA. Second, the assured in the Marine Policy appears to be MSAS Cargo International Limited &/or Associated &/or Subsidiary Companies. Plaintiff's witness, Francisco B. Francisco, claims that the signature below the name MSAS Cargo International is an endorsement of the marine policy in favor of Science Teaching Improvement Project. Plaintiff's witness, however, failed to identify whose signature it was and plaintiff did not present on the witness stand or took (sic) the deposition of the person who made that signature. Hence, the claim that there was an endorsement of the marine policy has no probative value as it is hearsay. Plaintiff, further, claims that it has been subrogated to the rights and interest of Science Teaching Improvement Project as shown by the Subrogation Form (Exhibit "K") allegedly signed by a representative of Science Teaching Improvement Project. Such representative, however, was not presented on the witness stand. Hence, the Subrogation Form is self-serving and has no probative value.19 (Emphasis supplied) The trial court also found that ICNA failed to produce evidence that it was a foreign corporation duly licensed to do business in the Philippines. Thus, it lacked the capacity to sue before Philippine Courts, to wit: Prescinding from the foregoing, plaintiff alleged in its complaint that it is a foreign insurance company duly authorized to do business in the Philippines. This allegation was, however, denied by the defendant. In fact, in the Pre-Trial Order of 12 March 1996, one of the issues defined by the court is whether or not the plaintiff has legal capacity to sue and be sued. Under Philippine law, the condition is that a foreign insurance company must obtain licenses/authority to do business in the Philippines. These licenses/authority are obtained from the Securities and Exchange Commission, the Board of Investments and the Insurance Commission. If it fails to obtain these licenses/authority, such foreign corporation doing business in the Philippines cannot sue

before Philippine courts. Mentholatum Co., Inc. v. Mangaliman, 72 Phil. 524. (Emphasis supplied) CA Disposition ICNA appealed to the CA. It contended that the trial court failed to consider that its cause of action is anchored on the right of subrogation under Article 2207 of the Civil Code. ICNA said it is one and the same as the ICNA UK Limited as made known in the dorsal portion of the Open Policy.20 On the other hand, Aboitiz reiterated that ICNA lacked a cause of action. It argued that the formal claim was not filed within the period required under Article 366 of the Code of Commerce; that ICNA had no right of subrogation because the subrogation receipt should have been signed by MSAS, the assured in the open policy, and not Willig, who is merely the representative of the consignee. On March 29, 2005, the CA reversed and set aside the RTC ruling, disposing as follows: WHEREFORE, premises considered, the present appeal is hereby GRANTED. The appealed decision of the Regional Trial Court of Makati City in Civil Case No. 94-1590 is hereby REVERSED and SET ASIDE. A new judgment is hereby rendered ordering defendant-appellee Aboitiz Shipping Corporation to pay the plaintiff-appellant Insurance Company of North America the sum of P280,176.92 with interest thereon at the legal rate from the date of the institution of this case until fully paid, and attorney's fees in the sum of P50,000, plus the costs of suit.21 The CA opined that the right of subrogation accrues simply upon payment by the insurance company of the insurance claim. As subrogee, ICNA is entitled to reimbursement from Aboitiz, even assuming that it is an unlicensed foreign corporation. The CA ruled: At any rate, We find the ground invoked for the dismissal of the complaint as legally untenable. Even assuming arguendo that the plaintiff-insurer in this case is an unlicensed foreign corporation, such circumstance will not bar it from claiming reimbursement from the defendant carrier by virtue of subrogation under the contract of insurance and as recognized by Philippine courts. x x x xxxx Plaintiff insurer, whether the foreign company or its duly authorized Agent/Representative in the country, as subrogee of the claim of the insured under the subject marine policy, is therefore the real party in interest to bring this suit and recover the full amount of loss of the subject cargo shipped by it from Manila to the consignee in Cebu City. x x x22 The CA ruled that the presumption that the carrier was at fault or that it acted negligently was not overcome by any countervailing evidence. Hence, the trial court erred in dismissing the complaint and in not finding that based on the evidence on record and relevant provisions of law, Aboitiz is liable for the loss or damage sustained by the subject cargo. Issues The following issues are up for Our consideration: (1) THE HONORABLE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN RULING THAT ICNA HAS A CAUSE OF ACTION AGAINST ABOITIZ BY VIRTUE OF THE RIGHT OF SUBROGATION BUT WITHOUT CONSIDERING THE ISSUE CONSISTENTLY RAISED BY ABOITIZ THAT THE FORMAL CLAIM OF STIP WAS NOT MADE WITHIN THE PERIOD PRESCRIBED BY ARTICLE 366 OF THE CODE OF COMMERCE; AND, MORE SO, THAT THE CLAIM WAS MADE BY A WRONG CLAIMANT. (2) THE HONORABLE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN RULING THAT THE SUIT FOR REIMBURSEMENT AGAINST ABOITIZ WAS PROPERLY FILED BY ICNA AS THE LATTER WAS AN AUTHORIZED AGENT OF THE INSURANCE COMPANY OF NORTH AMERICA (U.K.) ("ICNA UK").

(3) THE HONORABLE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN RULING THAT THERE WAS PROPER INDORSEMENT OF THE INSURANCE POLICY FROM THE ORIGINAL ASSURED MSAS CARGO INTERNATIONAL LIMITED ("MSAS") IN FAVOR OF THE CONSIGNEE STIP, AND THAT THE SUBROGATION RECEIPT ISSUED BY STIP IN FAVOR OF ICNA IS VALID NOTWITHSTANDING THE FACT THAT IT HAS NO PROBATIVE VALUE AND IS MERELY HEARSAY AND A SELF-SERVING DOCUMENT FOR FAILURE OF ICNA TO PRESENT A REPRESENTATIVE OF STIP TO IDENTIFY AND AUTHENTICATE THE SAME. (4) THE HONORABLE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN RULING THAT THE EXTENT AND KIND OF DAMAGE SUSTAINED BY THE SUBJECT CARGO WAS CAUSED BY THE FAULT OR NEGLIGENCE OF ABOITIZ.23 (Underscoring supplied) Elsewise stated, the controversy rotates on three (3) central questions: (a) Is respondent ICNA the real party-in-interest that possesses the right of subrogation to claim reimbursement from petitioner Aboitiz? (b) Was there a timely filing of the notice of claim as required under Article 366 of the Code of Commerce? (c) If so, can petitioner be held liable on the claim for damages? Our Ruling We answer the triple questions in the affirmative. A foreign corporation not licensed to do business in the Philippines is not absolutely incapacitated from filing a suit in local courts. Only when that foreign corporation is "transacting" or "doing business" in the country will a license be necessary before it can institute suits.24 It may, however, bring suits on isolated business transactions, which is not prohibited under Philippine law.25 Thus, this Court has held that a foreign insurance company may sue in Philippine courts upon the marine insurance policies issued by it abroad to cover internationalbound cargoes shipped by a Philippine carrier, even if it has no license to do business in this country. It is the act of engaging in business without the prescribed license, and not the lack of license per se, which bars a foreign corporation from access to our courts.26 In any case, We uphold the CA observation that while it was the ICNA UK Limited which issued the subject marine policy, the present suit was filed by the said company's authorized agent in Manila. It was the domestic corporation that brought the suit and not the foreign company. Its authority is expressly provided for in the open policy which includes the ICNA office in the Philippines as one of the foreign company's agents. As found by the CA, the RTC erred when it ruled that there was no proper indorsement of the insurance policy by MSAS, the shipper, in favor of STIP of Don Bosco Technical High School, the consignee. The terms of the Open Policy authorize the filing of any claim on the insured goods, to be brought against ICNA UK, the company who issued the insurance, or against any of its listed agents worldwide.27 MSAS accepted said provision when it signed and accepted the policy. The acceptance operated as an acceptance of the authority of the agents. Hence, a formal indorsement of the policy to the agent in the Philippines was unnecessary for the latter to exercise the rights of the insurer. Likewise, the Open Policy expressly provides that: The Company, in consideration of a premium as agreed and subject to the terms and conditions printed hereon, does insure MSAS Cargo International Limited &/or Associates &/or Subsidiary Companies in behalf of the title holder: - Loss, if any, payable to the Assured or Order. The policy benefits any subsequent assignee, or holder, including the consignee, who may file claims on behalf of the assured. This is in keeping with Section 57 of the Insurance Code which states:

A policy may be so framed that it will inure to the benefit of whosoever, during the continuance of the risk, may become the owner of the interest insured. (Emphasis added) Respondent's cause of action is founded on it being subrogated to the rights of the consignee of the damaged shipment. The right of subrogation springs from Article 2207 of the Civil Code, which states: 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) As this Court held in the case of Pan Malayan Insurance Corporation v. Court of Appeals,28 payment by the insurer to the assured operates as an equitable assignment of all remedies the assured may have against the third party who caused the damage. 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.29 Upon payment to the consignee of indemnity for damage to the insured goods, ICNA's entitlement to subrogation equipped it with a cause of action against petitioner in case of a contractual breach or negligence.30 This right of subrogation, however, has its limitations. First, both the insurer and the consignee are bound by the contractual stipulations under the bill of lading.31 Second, the insurer can be subrogated only to the rights as the insured may have against the wrongdoer. If by its own acts after receiving payment from the insurer, the insured releases the wrongdoer who caused the loss from liability, the insurer loses its claim against the latter.32 The giving of notice of loss or injury is a condition precedent to the action for loss or injury or the right to enforce the carrier's liability. Circumstances peculiar to this case lead Us to conclude that the notice requirement was complied with. As held in the case of Philippine American General Insurance Co., Inc. v. Sweet Lines, Inc.,33 this notice requirement protects the carrier by affording it an opportunity to make an investigation of the claim while the matter is still fresh and easily investigated. It is meant to safeguard the carrier from false and fraudulent claims. Under the Code of Commerce, the notice of claim must be made within twenty four (24) hours from receipt of the cargo if the damage is not apparent from the outside of the package. For damages that are visible from the outside of the package, the claim must be made immediately. The law provides: Article 366. Within twenty four hours following the receipt of the merchandise, the claim against the carrier for damages or average which may be found therein upon opening the packages, may be made, provided that the indications of the damage or average which give rise to the claim cannot be ascertained from the outside part of such packages, in which case the claim shall be admitted only at the time of receipt. After the periods mentioned have elapsed, or the transportation charges have been paid, no claim shall be admitted against the carrier with regard to the condition in which the goods transported were delivered. (Emphasis supplied) The periods above, as well as the manner of giving notice may be modified in the terms of the bill of lading, which is the contract between the parties. Notably, neither of the parties in this case presented the terms for giving notices of claim under the bill of lading issued by petitioner for the goods. The shipment was delivered on August 11, 1993. Although the letter informing the carrier of the damage was dated August 15, 1993, that letter, together with the notice of claim, was received

by petitioner only on September 21, 1993. But petitioner admits that even before it received the written notice of claim, Mr. Mayo B. Perez, Claims Head of the company, was informed by telephone sometime in August 13, 1993. Mr. Perez then immediately went to the warehouse and to the delivery site to inspect the goods in behalf of petitioner.34 In the case of Philippine Charter Insurance Corporation (PCIC) v. Chemoil Lighterage Corporation,35the notice was allegedly made by the consignee through telephone. The claim for damages was denied. This Court ruled that such a notice did not comply with the notice requirement under the law. There was no evidence presented that the notice was timely given. Neither was there evidence presented that the notice was relayed to the responsible authority of the carrier. As adverted to earlier, there are peculiar circumstances in the instant case that constrain Us to rule differently from the PCIC case, albeit this ruling is being made pro hac vice, not to be made a precedent for other cases. Stipulations requiring notice of loss or claim for damage as a condition precedent to the right of recovery from a carrier must be given a reasonable and practical construction, adapted to the circumstances of the case under adjudication, and their application is limited to cases falling fairly within their object and purpose.36 Bernhard Willig, the representative of consignee who received the shipment, relayed the information that the delivered goods were discovered to have sustained water damage to no less than the Claims Head of petitioner, Mayo B. Perez. Immediately, Perez was able to investigate the claims himself and he confirmed that the goods were, indeed, already corroded. Provisions specifying a time to give notice of damage to common carriers are ordinarily to be given a reasonable and practical, rather than a strict construction.37 We give due consideration to the fact that the final destination of the damaged cargo was a school institution where authorities are bound by rules and regulations governing their actions. Understandably, when the goods were delivered, the necessary clearance had to be made before the package was opened. Upon opening and discovery of the damaged condition of the goods, a report to this effect had to pass through the proper channels before it could be finalized and endorsed by the institution to the claims department of the shipping company. The call to petitioner was made two days from delivery, a reasonable period considering that the goods could not have corroded instantly overnight such that it could only have sustained the damage during transit. Moreover, petitioner was able to immediately inspect the damage while the matter was still fresh. In so doing, the main objective of the prescribed time period was fulfilled. Thus, there was substantial compliance with the notice requirement in this case. To recapitulate, We have found that respondent, as subrogee of the consignee, is the real party in interest to institute the claim for damages against petitioner; and pro hac vice, that a valid notice of claim was made by respondent. We now discuss petitioner's liability for the damages sustained by the shipment. The rule as stated in Article 1735 of the Civil Code is that in cases where the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence required by law.38 Extraordinary diligence is that extreme measure of care and caution which persons of unusual prudence and circumspection use for securing and preserving their own property rights.39 This standard is intended to grant favor to the shipper who is at the mercy of the common carrier once the goods have been entrusted to the latter for shipment. 40 Here, the shipment delivered to the consignee sustained water damage. We agree with the findings of the CA that petitioner failed to overturn this presumption: x x x upon delivery of the cargo to the consignee Don Bosco Technical High School by a representative from Trabajo Arrastre, and the crates opened, it was discovered that the workbenches and work tools suffered damage due to "wettage" although by then they were already physically dry. Appellee carrier having failed to discharge the burden of

proving that it exercised extraordinary diligence in the vigilance over such goods it contracted for carriage, the presumption of fault or negligence on its part from the time the goods were unconditionally placed in its possession (July 26, 1993) up to the time the same were delivered to the consignee (August 11, 1993), therefore stands. The presumption that the carrier was at fault or that it acted negligently was not overcome by any countervailing evidence. x x x41 (Emphasis added) The shipment arrived in the port of Manila and was received by petitioner for carriage on July 26, 1993. On the same day, it was stripped from the container van. Five days later, on July 31, 1993, it was re-stuffed inside another container van. On August 1, 1993, it was loaded onto another vessel bound for Cebu. During the period between July 26 to 31, 1993, the shipment was outside a container van and kept in storage by petitioner. The bill of lading issued by petitioner on July 31, 1993 contains the notation "grounded outside warehouse," suggesting that from July 26 to 31, the goods were kept outside the warehouse. And since evidence showed that rain fell over Manila during the same period, We can conclude that this was when the shipment sustained water damage. To prove the exercise of extraordinary diligence, petitioner must do more than merely show the possibility that some other party could be responsible for the damage. It must prove that it used "all reasonable means to ascertain the nature and characteristic of the goods tendered for transport and that it exercised due care in handling them.42 Extraordinary diligence must include safeguarding the shipment from damage coming from natural elements such as rainfall. Aside from denying that the "grounded outside warehouse" notation referred not to the crate for shipment but only to the carrier van, petitioner failed to mention where exactly the goods were stored during the period in question. It failed to show that the crate was properly stored indoors during the time when it exercised custody before shipment to Cebu. As amply explained by the CA: On the other hand, the supplemental report submitted by the surveyor has confirmed that it was rainwater that seeped into the cargo based on official data from the PAGASA that there was, indeed, rainfall in the Port Area of Manila from July 26 to 31, 1993. The Surveyor specifically noted that the subject cargo was under the custody of appellee carrier from the time it was delivered by the shipper on July 26, 1993 until it was stuffed inside Container No. ACCU-213798-4 on July 31, 1993. No other inevitable conclusion can be deduced from the foregoing established facts that damage from "wettage" suffered by the subject cargo was caused by the negligence of appellee carrier in grounding the shipment outside causing rainwater to seep into the cargoes. Appellee's witness, Mr. Mayo tried to disavow any responsibility for causing "wettage" to the subject goods by claiming that the notation "GROUNDED OUTSIDE WHSE." actually refers to the container and not the contents thereof or the cargoes. And yet it presented no evidence to explain where did they place or store the subject goods from the time it accepted the same for shipment on July 26, 1993 up to the time the goods were stripped or transferred from the container van to another container and loaded into the vessel M/V Supercon Carrier I on August 1, 1993 and left Manila for Cebu City on August 2, 1993. x x x If the subject cargo was not grounded outside prior to shipment to Cebu City, appellee provided no explanation as to where said cargo was stored from July 26, 1993 to July 31, 1993. What the records showed is that the subject cargo was stripped from the container van of the shipper and transferred to the container on August 1, 1993 and finally loaded into the appellee's vessel bound for Cebu City on August 2, 1993. The Stuffing/Stripping Report (Exhibit "D") at the Manila port did not indicate any such defect or damage, but when the container was stripped upon arrival in Cebu City port after being discharged from appellee's vessel, it was noted that only one (1) slab was slightly broken at the bottom allegedly hit by a forklift blade (Exhibit "F").43 (Emphasis added)

Petitioner is thus liable for the water damage sustained by the goods due to its failure to satisfactorily prove that it exercised the extraordinary diligence required of common carriers. WHEREFORE, the petition is DENIED and the appealed Decision AFFIRMED. SO ORDERED. RUBEN T. REYES Associate Justice

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 95536 March 23, 1992 ANICETO G. SALUDO, JR., MARIA SALVACION SALUDO, LEOPOLDO G. SALUDO and SATURNINO G. SALUDO, petitioners, vs. HON. COURT OF APPEALS, TRANS WORLD AIRLINES, INC., and PHILIPPINE AIRLINES, INC., respondents. REGALADO, J.: Assailed in this petition for review on certiorari is the decision in CA-G.R. CV No. 20951 of respondent Court of Appeals 1 which affirmed the decision of the trial 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. The facts, as recounted by the court a quo and adopted by respondent court after "considering the evidence on record," are as follows: After the death of plaintiffs' mother, Crispina Galdo Saludo, in Chicago Illinois, (on) October 23, 1976 (Exh. A), Pomierski and Son Funeral Home of Chicago, made the necessary preparations and arrangements for the shipment, of the remains from Chicago to the Philippines. The funeral home had the remains embalmed (Exb. D) and secured a permit for the disposition of dead human body on October 25, 1976 (Exh. C), Philippine Vice Consul in Chicago, Illinois, Bienvenido M. Llaneta, at 3:00 p.m. on October 26, 1976 at the Pomierski & Son Funeral Home, sealed the shipping case containing a hermetically sealed casket that is airtight and waterproof wherein was contained the remains of Crispina Saludo Galdo (sic) (Exb. B). On the same date, October 26, 1976, Pomierski brought the remains to C.M.A.S. (Continental Mortuary Air Services) at the airport (Chicago) which made the necessary arrangements such as flights, transfers, etc.; C.M.A.S. is a national service used by undertakers to throughout the nation (U.S.A.), they furnish the air pouch which the casket is enclosed in, and they see that the remains are taken to the proper air freight terminal (Exh. 6TWA). 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 should be on that TWA flight. They went to the airport and watched from the look-out area. She saw no body being brought. So, she went to the TWA counter again, and she was told there was no body on that flight. Reluctantly, they took the TWA flight upon assurance of her cousin, Ani Bantug, that he would look into the matter and inform her about it on the plane or have it radioed to her. But no confirmation from her cousin reached her that her mother was on the West Coast. Upon arrival at San Francisco at about 5:00 p.m., she went to the TWA counter there to inquire about her mother's remains. She was told they did not know anything about it. She then called Pomierski that her mother's remains were not at the West Coast terminal, and Pomierski immediately called C.M.A.S., which in a matter of 10 minutes informed him that the remains were on a plane to Mexico City, that there were two bodies at the terminal, and somehow they were switched; he relayed this information to Miss Saludo in California; later C.M.A.S. called and told him they were sending the remains back to California via Texas (see Exh. 6-TWA). It-turned out that TWA had carried a shipment under PAL Airway Bill No. 079ORD-01180454 on TWA Flight 603 of October 27, 1976, a flight earlier than TWA Flight 131 of the same date. TWA delivered or transferred the said shipment said to contain human remains to PAL at 1400H or 2:00 p.m. of the same date, October 27, 1976 (Bee Exh. 1- TWA). "Due to a switch(ing) in Chicago", this shipment was withdrawn from PAL by CMAS at 1805H (or 6:05 p.m.) of the same date, October 27 (Exh. 3-PAL, see Exh. 3-a-PAL). What transpired at the Chicago (A)irport is explained in a memo or incident report by Pomierski (Exh. 6-TWA) to Pomierski's lawyers who in turn referred to said' memo and enclosed it in their (Pomierski's lawyers) answer dated July 18, 1981 to herein plaintiff's counsel (See Exh. 5-TWA). In that memo or incident report (Exh. 6-TWA), it is stated that the remains (of Crispina Saludo) were taken to CMAS at the airport; that there were two bodies at the (Chicago Airport) terminal, and somehow they were switched, that the remains (of Crispina Saludo) were on a plane to Mexico City; that CMAS is a national service used by undertakers throughout the nation (U.S.A.), makes all the necessary arrangements, such as flights, transfers, etc., and see(s) to it that the remains are taken to the proper air freight terminal. The following day October 28, 1976, the shipment or remains of Crispina Saludo arrived (in) San Francisco from Mexico on board American Airlines. This shipment was transferred to or received by PAL at 1945H or 7:45 p.m. (Exh. 2PAL, 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. Patagas for shipment to the Philippines (See Exh. B-1). The shipment was immediately loaded on PAL flight for Manila that same evening and arrived (in) Manila on October 30, 1976, a day after its expected arrival on October 29, 1976. 3 In a letter dated December 15, 1976, 4 petitioners' counsel informed private respondent Trans World Airlines (TWA) of the misshipment and eventual delay in the delivery of the cargo containing the remains of the late Crispin Saludo, and of the discourtesy of its employees to

petitioners Maria Salvacion Saludo and Saturnino Saludo. In a separate letter on June 10, 1977 addressed to co-respondent Philippine Airlines (PAL), 5 petitioners stated that they were holding PAL liable for said delay in delivery and would commence judicial action should no favorable explanation be given. Both private respondents denied liability. Thus, a damage 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 airlines companies of liability. The Court of Appeals affirmed the decision of the lower court in toto, and in a subsequent resolution, 7 denied herein petitioners' motion for reconsideration for lack of merit. In predictable disagreement and dissatisfaction with the conclusions reached by respondent appellate court, petitioners now urge this Court to review the appealed decision and to resolve whether or not (1) the delay in the delivery of the casketed remains of petitioners' mother was due to the fault of respondent airline companies, (2) the one-day delay in the delivery of the same constitutes contractual breach as would entitle petitioners to damages, (3) damages are recoverable by petitioners for the humiliating, arrogant and indifferent acts of the employees of TWA and PAL, and (4) private respondents should be held liable for actual, moral and exemplary damages, aside from attorney's fees and litigation expenses. 8 At the outset and in view of the spirited exchanges of the parties on this aspect, it is to be stressed that only questions of law may be raised in a petition filed in this Court to review on certiorari the decision of the Court of Appeals. 9 This being so, the factual findings of the Court of Appeals are final and conclusive and cannot be reviewed by the Supreme Court. The rule, however, admits of established exceptions, to wit: (a) where there is grave abuse of discretion; (b) when the finding is grounded entirely on speculations, surmises or conjectures;(c) when the inference made is manifestly-mistaken, absurd or impossible; (d) when the judgment of the Court of Appeals was based on a misapprehension of facts; (e) when the factual findings are conflicting; (f) when the Court of Appeals, in making its findings, went beyond the issues of the case and the same are contrary to the admissions of both appellant and 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; 11and (h) where the findings of fact of the Court of Appeals are contrary to those of the trial court, or are mere conclusions without citation of specific evidence, or where the facts of set forth by the petitioner are not disputed by the respondent, or where the findings of fact of the Court of Appeals are premised on the absence of evidence and are contradicted by the evidence on record. 12 To distinguish, a question of law is one which involves a doubt or controversy on what the law is on a certain state of facts; and, a question of fact, contrarily, is one in which there is a doubt or difference as to the truth or falsehood of the alleged facts. 13 One test, it has been held, is whether the appellate court can determine the issue raised without reviewing or evaluating the evidence, in which case it is a question of law, otherwise it will be a question of fact. 14 Respondent airline companies object to the present recourse of petitioners on the ground that this petition raises only factual questions. 15 Petitioners maintain otherwise or, alternatively, they are of the position that, assuming that the petition raises factual questions, the same are within the recognized exceptions to the general rule as would render the petition cognizable and worthy of review by the Court. 16 Since it is precisely the soundness of the inferences or conclusions that may be drawn from the factual issues which are here being assayed, we find that the issues raised in the instant petition indeed warrant a second look if this litigation is to come to a reasonable denouement. A discussion seriatim of said issues will further reveal that the sequence of the events involved is in effect disputed. Likewise to be settled is whether or not the conclusions of the Court of Appeals subject of this review indeed find evidentiary and legal support.

I. Petitioners fault respondent court for "not finding that private respondents failed to exercise extraordinary diligence required by law which resulted in the switching and/or misdelivery of the remains of Crispina Saludo to Mexico causing gross delay in its shipment to the Philippines, and consequently, damages to petitioners." 17 Petitioner allege that private respondents received the casketed remains of petitioners' mother on October 26, 1976, as evidenced by the issuance of PAL Air Waybill No. 079-01180454 18 by Air Care International as carrier's agent; and from said date, private respondents were charged with the responsibility to exercise extraordinary diligence so much so that for the alleged switching of the caskets on October 27, 1976, or one day after private respondents received the cargo, the latter must necessarily be liable. To support their assertion, petitioners rely on the jurisprudential dictum, both under American and Philippine law, that "(t)he issuance of a bill of lading carries the presumption that the goods were delivered to the carrier issuing the bill, for immediate shipment, and it is nowhere questioned that a bill of lading is prima facie evidence of the receipt of the goods by the carrier. . . . In the absence of convincing testimony establishing mistake, recitals in the bill of lading showing that the carrier received the goods for shipment on a specified date control (13 C.J.S. 235)."19 A bill of lading is a written acknowledgment of the receipt of the goods and an agreement to transport and deliver them at a specified place to a person named or on his order. Such instrument may be called a shipping receipt, forwarder's receipt and receipt for transportation. 20 The designation, however, is immaterial. It has been hold that freight tickets for bus companies as well as receipts for cargo transported by all forms of transportation, whether by sea or land, fall within the definition. Under the Tariff and Customs Code, a bill of lading includes airway bills of lading. 21 The two-fold character of a bill of lading is all too familiar; it is a receipt as to the quantity and description of the goods shipped and a contract to transport the goods to the consignee or other person therein designated, on the terms specified in such instrument. 22 Logically, since a bill of lading acknowledges receipt of goods to be transported, delivery of the goods to the carrier normally precedes the issuance of the bill; or, to some extent, delivery of the goods and issuance of the bill are regarded in commercial practice as simultaneous acts. 23 However, except as may be prohibited by law, there is nothing to prevent an inverse order of events, that is, the execution of the bill of lading even prior to actual possession and control by the carrier of the cargo to be transported. There is no law which requires that the delivery of the goods for carriage and the issuance of the covering bill of lading must coincide in point of time or, for that matter, that the former should precede the latter. Ordinarily, a receipt is not essential to a complete delivery of goods to the carrier for transportation but, when issued, is competent and prima facie, but not conclusive, evidence of delivery to the carrier. A bill of lading, when properly executed and delivered to a shipper, is evidence that the carrier has received the goods described therein for shipment. Except as modified by statute, it is a general rule as to the parties to a contract of carriage of goods in connection with which a bill of lading is issued reciting that goods have been received for transportation, that the recital being in essence a receipt alone, is not conclusive, but may be explained, varied or contradicted by parol or other evidence. 24 While we agree with petitioners' statement that "an airway bill estops the carrier from denying receipt of goods of the quantity and quality described in the bill," a further reading and a more faithful quotation of the authority cited would reveal that "(a) bill of lading may contain constituent elements of estoppel and thus become something more than a contract between the shipper and the carrier. . . . (However), as between the shipper and the carrier, when no goods have been delivered for shipment no recitals in the bill can estop the carrier from showing the true facts . . . Between the consignor of goods and receiving carrier, recitals in a bill of lading as to the goods shipped raise only a rebuttable presumption that such goods were delivered for

shipment. As between the consignor and a receiving carrier, the fact must outweigh the recital." 25 (Emphasis supplied) For this reason, we must perforce allow explanation by private respondents why, despite the issuance of the airway bill and the date thereof, they deny having received the remains of Crispina Saludo on October 26, 1976 as alleged by petitioners. The findings of the trial court, as favorably adopted by the Court of Appeals and which we have earner quoted, provide us with the explanation that sufficiently over comes the presumption relied on by petitioners in insisting that the remains of their mother were delivered to and received by private respondents on October 26, 1976. Thus . . . Philippine Vice Consul in Chicago, Illinois, Bienvenido M. Llaneta, at 3:00 p.m. on October 26, 1976 at the Pomierski & Son Funeral Home, sealed the shipping case containing a hermetically sealed casket that is airtight and waterproof wherein was contained the remains of Crispina Saludo Galdo (sic) (Exh. B). On the same date October 26, 1976, Pomierski brought the remains to C.M.A.S. (Continental Mortuary Air Services) at the airport (Chicago) which made the necessary arrangements such as flights, transfers, etc; C.M.A.S. is a national service used by undertakers throughout the nation (U.S.A.), they furnish the air pouch which the casket is enclosed in, and they see that the remains are taken to the proper air freight terminal (Exh. G-TWA). C.M.A.S. booked the shipment with PAL thru the carrier's agent Air Care International, with Pomierski F.H. as the shipper and Mario (Maria) Saludo as the consignee. PAL Airway Bill No. 07901180454 Ordinary was issued wherein the requested routing was from Chicago to San Francisco on board TWA Flight-131 of October 27;1976, and from San Francisco to Manila on board PAL Flight No. 107 of the same date, and from Manila to Cebu on board PAL Flight 149 of October 29, 1976 (See Exh. E, also Exh. 1-PAL). 26 (Emphasis ours.) Moreover, we are persuaded to believe private respondent PAL's account as to what transpired October 26, 1976: . . . Pursuant thereto, on 26 October 1976, CMAS acting upon the instruction of Pomierski, F.H., the shipper requested booking of the casketed remains of Mrs. Cristina (sic) Saludo on board PAL's San Francisco-Manila Flight No. PR 107 on October 27, 1976. 2. To signify acceptance and confirmation of said booking, PAL issued to said Pomierski F.H., PAL Airway Bill No. 079-01180454 dated October 27, 1976 (sic, "10/26/76"). PAL confirmed the booking and transporting of the shipment on board of its Flight PR 107 on October 27, 1976 on the basis of the representation of the shipper and/or CMAS that the said cargo would arrive in San Francisco from Chicago on board United Airlines Flight US 121 on 27 October 1976. 27 In other words, on October 26, 1976 the cargo containing the casketed remains of Crispina Saludo was booked for PAL Flight Number PR-107 leaving San Francisco for Manila on October 27, 1976, PAL Airway Bill No. 079-01180454 was issued, not as evidence of receipt of delivery of the cargo on October 26, 1976, but merely as a confirmation of the booking thus made for the San Francisco-Manila flight scheduled on October 27, 1976. Actually, it was not until October 28, 1976 that PAL received physical delivery of the body at San Francisco, as duly evidenced by the Interline Freight Transfer Manifest of the American Airline Freight System and signed for by Virgilio Rosales at 1945H, or 7:45 P.M. on said date. 28 Explicit is the rule under Article 1736 of the Civil Code that the extraordinary responsibility of the common carrier begins from the time the goods are delivered to the carrier. This responsibility remains in full force and effect even when they are temporarily unloaded or stored in transit, unless the shipper or owner exercises the right of stoppage in transitu, 29 and terminates only after the lapse of a reasonable time for the acceptance, of the goods by the consignee or such

other person entitled to receive them. 30 And, there is delivery to the carrier when the goods are ready for and have been placed in the exclusive possession, custody and control of the carrier for the purpose of their immediate transportation and the carrier has accepted them. 31 Where such a delivery has thus been accepted by the carrier, the liability of the common carrier commences eo instanti. 32 Hence, while we agree with petitioners that the extraordinary diligence statutorily required to be observed by the carrier instantaneously commences upon delivery of the goods thereto, for such duty to commence there must in fact have been delivery of the cargo subject of the contract of carriage. Only when such fact of delivery has been unequivocally established can the liability for loss, destruction or deterioration of goods in the custody of the carrier, absent the excepting causes under Article 1734, attach and the presumption of fault of the carrier under Article 1735 be invoked. As already demonstrated, the facts in the case at bar belie the averment that there was delivery of the cargo to the carrier on October 26, 1976. Rather, as earlier explained, the body intended to be shipped as agreed upon was really placed in the possession and control of PAL on October 28, 1976 and it was from that date that private respondents became responsible for the agreed cargo under their undertakings in PAL Airway Bill No. 079-01180454. Consequently, for the switching of caskets prior thereto which was not caused by them, and subsequent events caused thereby, private respondents cannot be held liable. Petitioners, proceeding on the premise that there was delivery of the cargo to private respondents on October 26,1976 and that the latter's extraordinary responsibility had by then become operative, insist on foisting the blame on private respondents for the switching of the two caskets which occurred on October 27, 1976. It is argued that since there is no clear evidence establishing the fault Continental Mortuary Air Services (CMAS) for the mix-up, private respondents are presumably negligent pursuant to Article 1735 of the Civil Code and, for failure to rebut such presumption, they must necessarily be held liable; or, assuming that CMAS was at fault, the same does not absolve private respondents of liability because whoever brought the cargo to the airport or loaded it on the plane did so as agent of private respondents. This contention is without merit. As pithily explained by the Court of Appeals: The airway bill expressly provides that "Carrier certifies goods described below were received for carriage", and said cargo was "casketed human remains of Crispina Saludo," with "Maria Saludo as Consignee; Pomierski F.H. as Shipper; Air Care International as carrier's agent." On the face of the said airway bill, the specific flight numbers, specific routes of shipment and dates of departure and arrival were typewritten, to wit: Chicago TWA Flight 131/27 to San Francisco and from San Francisco by PAL 107 on, October 27, 1976 to Philippines and to Cebu via PAL Flight 149 on October 29, 1976. The airway bill also contains the following typewritten words, as follows: all documents have been examined (sic). Human remains of Crispina Saludo. Please return back (sic) first available flight to SFO. But, as it turned out and was discovered later the casketed human remains which was issued PAL Airway Bill #079-1180454 was not the remains of Crispina Saludo, the casket containing her remains having been shipped to Mexico City. However, it should be noted that, Pomierski F.H., the shipper of Mrs. Saludo's remains, hired Continental Mortuary Services (hereafter referred to as C.M.A.S.), which is engaged in the business of transporting and forwarding human remains. Thus, C.M.A.S. made all the necessary arrangements such as flights, transfers, etc. for shipment of the remains of Crispina Saludo. The remains were taken on October 26th, 1976, to C.M.A.S. at the airport. These people made all the necessary arrangements, such as flights, transfers, etc. This is a national service used by

undertakers throughout the nation. They furnished the air pouch which the casket is enclosed in, and they see that the remains are taken to the proper air frieght terminal. I was very surprised when Miss Saludo called me to say that the remains were not at the west coast terminal. I immediately called C.M.A.S. They called me back in a matter of ten minutes to inform me that the remains were on a plane to Mexico City. The man said that there were two bodies at the terminal, and somehow they were switched. . . . (Exb. 6 "TWA", which is the memo or incident report enclosed in the stationery of Walter Pomierski & Sons Ltd.) Consequently, when the cargo was received from C.M.A.S. at the Chicago airport terminal for shipment, which was supposed to contain the remains of Crispina Saludo, Air Care International and/or TWA, had no way of determining its actual contents, since the casket was hermetically sealed by the Philippine Vice-Consul in Chicago and in an air pouch of C.M.A.S., to the effect that Air Care International and/or TWA had to rely on the information furnished by the shipper regarding the cargo's content. Neither could Air Care International and/or TWA open the casket for further verification, since they were not only without authority to do so, but even prohibited. Thus, under said circumstances, no fault and/or negligence can be attributed to PAL (even if Air Care International should be considered as an agent of PAL) and/or TWA, the entire fault or negligence being exclusively with C.M.A.S. 33 (Emphasis supplied.) It can correctly and logically be concluded, therefore, that the switching occurred or, more accurately, was discovered on October 27, 1976; and based on the above findings of the Court of appeals, it happened while the cargo was still with CMAS, well before the same was place in the custody of private respondents. Thus, while the Air Cargo Transfer Manifest of TWA of October 27, 1976 34 was signed by Garry Marcial of PAL at 1400H, or 2:00 P.M., on the same date, thereby indicating acknowledgment by PAL of the transfer to them by TWA of what was in truth the erroneous cargo, said misshipped cargo was in fact withdrawn by CMAS from PAL as shown by the notation on another copy of said manifest 35 stating "Received by CMAS Due to switch in Chicago 10/271805H," the authenticity of which was never challenged. This shows that said misshipped cargo was in fact withdrawn by CMAS from PAL and the correct shipment containing the body of Crispina Saludo was received by PAL only on October 28, 1976, at 1945H, or 7:45 P.M., per American Airlines Interline Freight Transfer Manifest No. AA204312. 36 Witness the deposition of TWA's ramp serviceman, Michael Giosso, on this matter: ATTY. JUAN COLLAS, JR.: On that date, do (sic) you have occasion to handle or deal with the transfer of cargo from TWA Flight No. 603 to PAL San Francisco? MICHAEL GIOSSO: Yes, I did. ATTY. JUAN COLLAS, JR.: What was your participation with the transfer of the cargo? MICHAEL GIOSSO: I manifested the freight on a transfer manifest and physically moved it to PAL and concluded the transfer by signing it off. ATTY. JUAN COLLAS, JR.: You brought it there yourself? MICHAEL GIOSSO: Yes sir.

ATTY. JUAN COLIAS, JR.: Do you have anything to show that PAL received the cargo from TWA on October 27, 1976? MICHAEL GIOSSO: Yes, I do. (Witness presenting a document) ATTY. JUAN COLLAS, JR.: For purposes of clarity, Exhibit I is designated as Exhibit I-TWA. xxx xxx xxx ATTY. JUAN COLLAS, JR.: This Exhibit I-TWA, could you tell what it is, what it shows? MICHAEL GIOSSO: It shows transfer of manifest on 10-27-76 to PAL at 1400 and verified with two signatures as it completed the transfer. ATTY. JUAN COLLAS, JR.: Very good,. Who was the PAL employee who received the cargo? MICHAEL GIOSSO: The name is Garry Marcial." 37 The deposition of Alberto A. Lim, PAL's cargo supervisor at San Francisco, as deponentwitness for PAL, makes this further clarification: ATTY. CESAR P. MANALAYSAY: You mentioned Airway Bill, Mr. Lim. I am showing to you a PAL Airway Bill Number 01180454 which for purposes of evidence, I would like to request that the same be marked as evidence Exhibit I for PAL. xxx xxx xxx In what circumstances did you encounter Exhibit I-PAL? ALBERTO A. LIM: If I recall correctly, I was queried by Manila, our Manila office with regard to a certain complaint that a consignee filed that this shipment did not arrive on the day that the consignee expects the shipment to arrive. ATTY CESAR P. MANALAYSAY: Okay. Now, upon receipt of that query from your Manila office, did you conduct any investigation to pinpoint the possible causes of mishandling? ALBERTO A. LIM: Yes. xxx xxx xxx ATTY. CESAR P. MANALAYSAY: What is the result of your investigation? ALBERTO A. LIM: In the course of my investigation, I found that we received the body on October 28, 1976, from American Airlines. ATTY. CESAR P. MANALAYSAY: What body are you referring to? xxx xxx xxx ALBERTO A. LIM: The remains of Mrs. Cristina (sic) Saludo. ATTY. CESAR P. MANALAYSAY: Is that the same body mentioned in this Airway Bill?

ALBERTO A. LIM: Yes. ATTY. CESAR P. MANALAYSAY: What time did you receive said body on October 28, 1976? ALBERTO A. LIM: If I recall correctly, approximately 7:45 of October 28, 1976. ATTY. CESAR P. MANALAYSAY: Do you have any proof with you to back the statement? ALBERTO A. LIM: Yes. We have on our records a Transfer Manifest from American Airlines Number 204312 showing that we received a human remains shipment belong to Mrs. Cristina (sic) Saludo or the human remains of Mrs. Cristina (sic) Saludo. ATTY. CESAR P. MAIALAYSAY: At this juncture, may I request that the Transfer Manifest referred to by the witness be marked as an evidence as Exhibit II-PAL. xxx xxx xxx Mr. Lim, yesterday your co-defendant TWA presented as their Exhibit I evidence tending to show that on October 27, 1976 at about 2:00 in the, afternoon they delivered to you a cargo bearing human remains. Could you go over this Exhibit I and please give us your comments as to that exhibit? ATTY. ALBERTO C. MENDOZA: That is a vague question. I would rather request that counsel propound specific questions rather than asking for comments on Exhibit I-TWA. ATTY. CESAR P. MANALAYSAY: In that case, I will reform my question. Could you tell us whether TWA in fact delivered to you the human remains as indicated in that Transfer Manifest? ALBERTO A. LIM: Yes, they did. ATTY. CESAR P. MANALAYSAY: I noticed that the Transfer Manifest of TWA marked as Exhibit ITWA bears the same numbers or the same entries as the Airway Bill marked as Exhibit I-A PAL tending to show that this is the human remains of Mrs Cristina (sic) Saludo. Could you tell us whether this is true? ALBERTO A. LIM: It is true that we received human remains shipment from TWA as indicated on this Transfer Manifest. But in the course of investigation, it was found out that the human remains transferred to us is not the remains of Mrs. Cristina (sic) Saludo this is the reason why we did not board it on our flight. 38 Petitioners consider TWA's statement that "it had to rely on the information furnished by the shipper" a lame excuse and that its failure to prove that its personnel verified and identified the contents of the casket before loading the same constituted negligence on the part of TWA. 39 We upbold the favorable consideration by the Court of Appeals of the following findings of the trial court: It was not (to) TWA, but to C.M.A.S. that the Pomierski & Son Funeral Home delivered the casket containing the remains of Crispina Saludo. TWA would have

no knowledge therefore that the remains of Crispina Saludo were not the ones inside the casket that was being presented to it for shipment. TWA would have to rely on there presentations of C.M.A.S. The casket was hermetically sealed and also sealed by the Philippine Vice Consul in Chicago. TWA or any airline for that matter would not have opened such a sealed casket just for the purpose of ascertaining whose body was inside and to make sure that the remains inside were those of the particular person indicated to be by C.M.A.S. TWA had to accept whatever information was being furnished by the shipper or by the one presenting the casket for shipment. And so as a matter of fact, TWA carried to San Francisco and transferred to defendant PAL a shipment covered by or under PAL Airway Bill No. 079-ORD-01180454, the airway bill for the shipment of the casketed remains of Crispina Saludo. Only, it turned out later, while the casket was already with PAL, that what was inside the casket was not the body of Crispina Saludo so much so that it had to be withdrawn by C.M.A.S. from PAL. The body of Crispina Saludo had been shipped to Mexico. The casket containing the remains of Crispina Saludo was transshipped from Mexico and arrived in San Francisco the following day on board American Airlines. It was immediately loaded by PAL on its flight for Manila. The foregoing points at C.M.A.S., not defendant TWA much less defendant PAL, as the ONE responsible for the switching or mix-up of the two bodies at the Chicago Airport terminal, and started a chain reaction of the misshipment of the body of Crispina Saludo and a one-day delay in the delivery thereof to its destination. 40 Verily, no amount of inspection by respondent airline companies could have guarded against the switching that had already taken place. Or, granting that they could have opened the casket to inspect its contents, private respondents had no means of ascertaining whether the body therein contained was indeed that of Crispina Saludo except, possibly, if the body was that of a male person and such fact was visually apparent upon opening the casket. However, to repeat, private respondents had no authority to unseal and open the same nor did they have any reason or justification to resort thereto. It is the right of the carrier to require good faith on the part of those persons who deliver goods to be carried, or enter into contracts with it, and inasmuch as the freight may depend on the value of the article to be carried, the carrier ordinarily has the right to inquire as to its value. Ordinarily, too, it is the duty of the carrier to make inquiry as to the general nature of the articles shipped and of their value before it consents to carry them; and its failure to do so cannot defeat the shipper's right to recovery of the full value of the package if lost, in the absence of showing of fraud or deceit on the part of the shipper. In the absence of more definite information, the carrier has a the right to accept shipper's marks as to the contents of the package offered for transportation and is not bound to inquire particularly about them in order to take advantage of a false classification and where a shipper expressly represents the contents of a package to be of a designated character, it is not the duty of the carrier to ask for a repetition of the statement nor disbelieve it and open the box and see for itself. 41 However, where a common carrier has reasonable ground to suspect that the offered goods are of a dangerous or illegal character, the carrier has the right to know the character of such goods and to insist on an inspection, if reasonable and practical under the circumstances, as a condition of receiving and transporting such goods. 42 It can safely be said then that a common carrier is entitled to fair representation of the nature and value of the goods to be carried, with the concomitant right to rely thereon, and further noting at this juncture that a carrier has no obligation to inquire into the correctness or sufficiency of such information. 43 The consequent duty to conduct an inspection thereof arises in the event that there should be reason to doubt the veracity of such representations.

Therefore, to be subjected to unusual search, other than the routinary inspection procedure customarily undertaken, there must exist proof that would justify cause for apprehension that the baggage is dangerous as to warrant exhaustive inspection, or even refusal to accept carriage of the same; and it is the failure of the carrier to act accordingly in the face of such proof that constitutes the basis of the common carrier's liability.44 In the case at bar, private respondents had no reason whatsoever to doubt the truth of the shipper's representations. The airway bill expressly providing that "carrier certifies goods received below were received for carriage," and that the cargo contained "casketed human remains of Crispina Saludo," was issued on the basis of such representations. The reliance thereon by private respondents was reasonable and, for so doing, they cannot be said to have acted negligently. Likewise, no evidence was adduced to suggest even an iota of suspicion that the cargo presented for transportation was anything other than what it was declared to be, as would require more than routine inspection or call for the carrier to insist that the same be opened for scrutiny of its contents per declaration. Neither can private respondents be held accountable on the basis of petitioners' preposterous proposition that whoever brought the cargo to the airport or loaded it on the airplane did so as agent of private respondents, so that even if CMAS whose services were engaged for the transit arrangements for the remains was indeed at fault, the liability therefor would supposedly still be attributable to private respondents. While we agree that the actual participation of CMAS has been sufficiently and correctly established, to hold that it acted as agent for private respondents would be both an inaccurate appraisal and an unwarranted categorization of the legal position it held in the entire transaction. It bears repeating that CMAS was hired to handle all the necessary shipping arrangements for the transportation of the human remains of Crispina Saludo to Manila. Hence, it was to CMAS that the Pomierski & Son Funeral Home, as shipper, brought the remains of petitioners' mother for shipment, with Maria Saludo as consignee. Thereafter, CMAS booked the shipment with PAL through the carrier's agent, Air Care International. 45 With its aforestated functions, CMAS may accordingly be classified as a forwarder which, by accepted commercial practice, is regarded as an agent of the shipper and not of the carrier. As such, it merely contracts for the transportation of goods by carriers, and has no interest in the freight but receives compensation from the shipper as his agent. 46 At this point, it can be categorically stated that, as culled from the findings of both the trial court and appellate courts, the entire chain of events which culminated in the present controversy was not due to the fault or negligence of private respondents. Rather, the facts of the case would point to CMAS as the culprit. Equally telling of the more likely possibility of CMAS' liability is petitioners' letter to and demanding an explanation from CMAS regarding the statement of private respondents laying the blame on CMAS for the incident, portions of which, reading as follows: . . . we were informed that the unfortunate a mix-up occurred due to your negligence. . . . Likewise, the two airlines pinpoint the responsibility upon your agents. Evidence were presented to prove that allegation. On the face of this overwhelming evidence we could and should have filed a case against you. . . . 47 clearly allude to CMAS as the party at fault. This is tantamount to an admission by petitioners that they consider private respondents without fault, or is at the very least indicative of the fact that petitioners entertained serious doubts as to whether herein private respondents were responsible for the unfortunate turn of events. Undeniably, petitioners' grief over the death of their mother was aggravated by the unnecessary inconvenience and anxiety that attended their efforts to bring her body home for a decent burial. This is unfortunate and calls for sincere commiseration with petitioners. But, much as we would

like to give them consolation for their undeserved distress, we are barred by the inequity of allowing recovery of the damages prayed for by them at the expense of private respondents whose fault or negligence in the very acts imputed to them has not been convincingly and legally demonstrated. Neither are we prepared to delve into, much less definitively rule on, the possible liability of CMAS as the evaluation and adjudication of the same is not what is presently at issue here and is best deferred to another time and addressed to another forum. II. Petitioners further fault the Court of Appeals for ruling that there was no contractual breach on the part of private respondents as would entitle petitioners to damages. Petitioners hold that respondent TWA, by agreeing to transport the remains of petitioners' mother on its Flight 131 from Chicago to San Francisco on October 27, 1976, made itself a party to the contract of carriage and, therefore, was bound by the terms of the issued airway bill. When TWA undertook to ship the remains on its Flight 603, ten hours earlier than scheduled, it supposedly violated the express agreement embodied in the airway bill. It was allegedly this breach of obligation which compounded, if not directly caused, the switching of the caskets. In addition, petitioners maintain that since there is no evidence as to who placed the body on board Flight 603, or that CMAS actually put the cargo on that flight, or that the two caskets at the Chicago airport were to be transported by the same airline, or that they came from the same funeral home, or that both caskets were received by CMAS, then the employees or agents of TWA presumably caused the mix-up by loading the wrong casket on the plane. For said error, they contend, TWA must necessarily be presumed negligent and this presumption of negligence stands undisturbed unless rebutting evidence is presented to show that the switching or misdelivery was due to circumstances that would exempt the carrier from liability. Private respondent TWA professes otherwise. Having duly delivered or transferred the cargo to its co-respondent PAL on October 27, 1976 at 2:00 P.M., as supported by the TWA Transfer Manifest, TWA faithfully complied with its obligation under the airway bill. Said faithful compliance was not affected by the fact that the remains were shipped on an earlier flight as there was no fixed time for completion of carriage stipulated on. Moreover, the carrier did not undertake to carry the cargo aboard any specified aircraft, in view of the condition on the back of the airway bill which provides: CONDITIONS OF CONTRACT xxx xxx xxx It is agreed that no time is fixed for the completion of carriage hereunder and that Carrier may without notice substitute alternate carriers or aircraft. Carrier assumes no obligation to carry the goods by any specified aircraft or over any particular route or routes or to make connection at any point according to any particular schedule, and Carrier is hereby authorized to select, or deviate from the route or routes of shipment, notwithstanding that the same may be stated on the face hereof. The shipper guarantees payment of all charges and advances. 48 Hence, when respondent TWA shipped the body on earlier flight and on a different aircraft, it was acting well within its rights. We find this argument tenable. The contention that there was contractual breach on the part of private respondents is founded on the postulation that there was ambiguity in the terms of the airway bill, hence petitioners' insistence on the application of the rules on interpretation of contracts and documents. We find no such ambiguity. The terms are clear enough as to preclude the necessity to probe beyond the apparent intendment of the contractual provisions. The hornbook rule on interpretation of contracts consecrates the primacy of the intention of the parties, the same having the force of law between them. When the terms of the agreement are clear and explicit, that they do not justify an attempt to read into any alleged intention of the parties, the terms are to be understood literally just as they appear on the face of the contract. 49 The various stipulations of a contract shall be interpreted together 50and 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. 07901180454, respondent court approvingly quoted the trial court's disquisition on the aforequoted condition appearing on the reverse side of the airway bill and its disposition of this particular assigned error: The foregoing stipulation fully answers plaintiffs' objections to the one-day delay and the shipping of the remains in TWA Flight 603 instead of TWA Flight 131. Under the stipulation, parties agreed that no time was fixed to complete the contract of carriage and that the carrier may, without notice, substitute alternate carriers or aircraft. The carrier did not assume the obligation to carry the shipment on any specified aircraft. xxx xxx xxx Furthermore, contrary to the claim of plaintiffs-appellants, the conditions of the Air Waybill are big enough to be read and noticed. Also, the mere fact that the cargo in question was shipped in TWA Flight 603, a flight earlier on the same day than TWA Flight 131, did not in any way cause or add to the one-day delay complained of and/or the switching or mix-up of the bodies. 53 Indubitably, that private respondent can use substitute aircraft even without notice and without the assumption of any obligation whatsoever to carry the goods on any specified aircraft is clearly sanctioned by the contract of carriage as specifically provided for under the conditions thereof. Petitioners' invocation of the interpretative rule in the Rules of Court that written words control printed words in documents, 54 to bolster their assertion that the typewritten provisions regarding the routing and flight schedule prevail over the printed conditions, is tenuous. Said rule may be considered only when there is inconsistency between the written and printed words of the contract. As previously stated, we find no ambiguity in the contract subject of this case that would call for the application of said rule. In any event, the contract has provided for such a situation by explicitly stating that the above condition remains effective "notwithstanding that the same (fixed time for completion of carriage, specified aircraft, or any particular route or schedule) may be stated on the face hereof." While petitioners hinge private respondents' culpability on the fact that the carrier "certifies goods described below were received for carriage," they may have overlooked that the statement on the face of the airway bill properly and completely reads Carrier certifies goods described below were received for carriage subject to the Conditions on the reverse hereof the goods then being in apparent good order and condition except as noted hereon. 55 (Emphasis ours.) Private respondents further aptly observe that the carrier's certification regarding receipt of the goods for carriage "was of a smaller print than the condition of the Air Waybill, including Condition No. 5 and thus if plaintiffs-appellants had recognized the former, then with more reason they were aware of the latter. 56 In the same vein, it would also be incorrect to accede to the suggestion of petitioners that the typewritten specifications of the flight, routes and dates of departures and arrivals on the face of the airway bill constitute a special contract which modifies the printed conditions at the back thereof. We reiterate that typewritten provisions of the contract are to be read and understood

subject to and in view of the printed conditions, fully reconciling and giving effect to the manifest intention of the parties to the agreement. 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 haveprovided against it by contract. Whether or not there has been such an undertaking on the part of the carrier to be determined from the circumstances surrounding the case and by application of the ordinary rules for the interpretation of contracts. 59 Echoing the findings of the trial court, the respondent court correctly declared that In a similar case of delayed delivery of air cargo under a very similar stipulation contained in the airway bill which reads: "The carrier does not obligate itself to carry the goods by any specified aircraft or on a specified time. Said carrier being hereby authorized to deviate from the route of the shipment without any liability therefor", our Supreme Court ruled that common carriers are not obligated by law to carry and to deliver merchandise, and persons are not vested with the right to prompt delivery, unless such common carriers previously assume the obligation. Said rights and obligations are created by a specific contract entered into by the parties (Mendoza vs. PAL, 90 Phil. 836). There is no showing by plaintiffs that such a special or specific contract had been entered into between them and the defendant airline companies. And this special contract for prompt delivery should call the attention of the carrier to the circumstances surrounding the case and the approximate amount of damages to be suffered in case of delay (See Mendoza vs. PAL, supra). There was no such contract entered into in the instant case. 60 Also, the theory of petitioners that the specification of the flights and dates of departure and arrivals constitute a special contract that could prevail over the printed stipulations at the back of the airway bill is vacuous. To countenance such a postulate would unduly burden the common carrier for that would have the effect of unilaterally transforming every single bill of lading or trip ticket into a special contract by the simple expedient of filling it up with the particulars of the flight, trip or voyage, and thereby imposing upon the carrier duties and/or obligations which it may not have been ready or willing to assume had it been timely, advised thereof. Neither does the fact that the challenged condition No. 5 was printed at the back of the airway bill militate against its binding effect on petitioners as parties to the contract, for there were sufficient indications on the face of said bill that would alert them to the presence of such additional condition to put them on their guard. Ordinary prudence on the part of any person entering or contemplating to enter into a contract would prompt even a cursory examination of any such conditions, terms and/or stipulations. There is a holding in most jurisdictions that the acceptance of a bill of lading without dissent raises a presumption that all terms therein were brought to the knowledge of the shipper and agreed to by him, and in the absence of fraud or mistake, he is estopped from thereafter denying that he assented to such terms. This rule applies with particular force where a shipper accepts a bill of lading with full knowledge of its contents, and acceptance under such circumstances makes it a binding contract. In order that any presumption of assent to a

stipulation in a bill of lading limiting the liability of a carrier may arise, it must appear that the clause containing this exemption from liability plainly formed a part of the contract contained in the bill of lading. A stipulation printed on the back of a receipt or bill of lading or on papers attached to such receipt will be quite as effective as if printed on its face, if it is shown that the consignor knew of its terms. Thus, where a shipper accepts a receipt which states that its conditions are to be found on the back, such receipt comes within the general rule, and the shipper is held to have accepted and to be bound by the conditions there to be found. 61 Granting arguendo that Condition No. 5 partakes of the nature of a contract of adhesion and as such must be construed strictly against the party who drafted the same or gave rise to any ambiguity therein, it should be borne in mind that a contract of adhesion may be struck down as void and unenforceable, for being subversive of public policy, only when the weaker party is imposed upon in dealing with the dominant bargaining party and is reduced to the alternative of taking it or leaving it, completely deprived of the opportunity to bargain on equal footing. 62However, Ong Yiu vs. Court of Appeals, et al 63 instructs us that contracts of adhesion are not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, be gives his consent. Accordingly, petitioners, far from being the weaker party in this situation, duly signified their presumed assent to all terms of the contract through their acceptance of the airway bill and are consequently bound thereby. It cannot be gainsaid that petitioners' were not without several choices as to carriers in Chicago with its numerous airways and airliner servicing the same. We wish to allay petitioners' apprehension that Condition No. 5 of the airway bill is productive of mischief as it would validate delay in delivery, sanction violations of contractual obligations with impunity or put a premium on breaches of contract. Just because we have said that condition No. 5 of the airway bill is binding upon the parties to and fully operative in this transaction, it does not mean, and let this serve as fair warning to respondent carriers, that they can at all times whimsically seek refuge from liability in the exculpatory sanctuary of said Condition No. 5 or arbitrarily vary routes, flights and schedules to the prejudice of their customers. This condition only serves to insulate the carrier from liability in those instances when changes in routes, flights and schedules are clearly justified by the peculiar circumstances of a particular case, or by general transportation practices, customs and usages, or by contingencies or emergencies in aviation such as weather turbulence, mechanical failure, requirements of national security and the like. And even as it is conceded that specific routing and other navigational arrangements for a trip, flight or voyage, or variations therein, generally lie within the discretion of the carrier in the absence of specific routing instructions or directions by the shipper, it is plainly incumbent upon the carrier to exercise its rights with due deference to the rights, interests and convenience of its customers. A common carrier undertaking to transport property has the implicit duty to carry and deliver it within reasonable time, absent any particular stipulation regarding time of delivery, and to guard against delay. In case of any unreasonable delay, the carrier shall be liable for damages immediately and proximately resulting from such neglect of duty. 64 As found by the trial court, the delay in the delivery of the remains of Crispina Saludo, undeniable and regrettable as it was, cannot be attributed to the fault, negligence or malice of private respondents, 65 a conclusion concurred in by respondent court and which we are not inclined to disturb. We are further convinced that when TWA opted to ship the remains of Crispina Saludo on an earlier flight, it did so in the exercise of sound discretion and with reasonable prudence, as shown by the explanation of its counsel in his letter of February 19, 1977 in response to petitioners' demand letter: Investigation of TWA's handling of this matter reveals that although the shipment was scheduled on TWA Flight 131 of October 27, 1976, it was actually boarded on TWA Flight 603 of the same day, approximately 10 hours earlier, in order to assure that the shipment would be received in San Francisco in sufficient time for

transfer to PAL. This transfer was effected in San Francisco at 2:00 P.M. on October 27, 1976. 66 Precisely, private respondent TWA knew of the urgency of the shipment by reason of this notation on the lower portion of the airway bill: "All documents have been certified. Human remains of Cristina (sic) Saludo. Please return bag first available flight to SFO." Accordingly, TWA took it upon itself to carry the remains of Crispina Saludo on an earlier flight, which we emphasize it could do under the terms of the airway bill, to make sure that there would be enough time for loading said remains on the transfer flight on board PAL. III. Petitioners challenge the validity of respondent court's finding that private respondents are not liable for tort on account of the humiliating, arrogant and indifferent acts of their officers and personnel. They posit that since their mother's remains were transported ten hours earlier than originally scheduled, there was no reason for private respondents' personnel to disclaim knowledge of the arrival or whereabouts of the same other than their sheer arrogance, indifference and extreme insensitivity to the feelings of petitioners. Moreover, being passengers and not merely consignors of goods, petitioners had the right to be treated with courtesy, respect, kindness and due consideration. In riposte, TWA claims that its employees have always dealt politely with all clients, customers and the public in general. PAL, on the other hand, declares that in the performance of its obligation to the riding public, other customers and clients, it has always acted with justice, honesty, courtesy and good faith. Respondent appellate court found merit in and reproduced the trial court's refutation of this assigned error: About the only evidence of plaintiffs that may have reference to the manner with which the personnel of defendants treated the two plaintiffs at the San Francisco Airport are the following pertinent portions of Maria Saludo's testimony: Q When you arrived there, what did you do, if any? A I immediately went to the TWA counter and I inquired about whether my mother was there or if' they knew anything about it. Q What was the answer? A They said they do not know. So, we waited. Q About what time was that when you reached San Francisco from Chicago? A I think 5 o'clock. Somewhere around that in the afternoon. Q You made inquiry it was immediately thereafter? A Right after we got off the plane. Q Up to what time did you stay in the airport to wait until the TWA people could tell you the whereabouts? A Sorry, Sir, but the TWA did not tell us anything. We stayed there until about 9 o'clock. They have not heard anything about it. They did not say anything. Q Do you want to convey to the Court that from 5 up to 9 o'clock in the evening you yourself went back to the TWA and they could not tell you where the remains of your mother were? A Yes sir. Q And after nine o'clock, what did you do? A I told my brother my Mom was supposed to be on the Philippine Airlines flight. "Why don't" we check with PAL instead to see if she was there?" We tried to comfort each other. I told him anyway that was a shortest flight from Chicago to California. We will be with our mother on this longer flight. So, we checked with the PAL. Q What did you find?

A We learned, Yes, my Mom would be on the flight. Q Who was that brother? A Saturnino Saludo. Q And did you find what was your flight from San Francisco to the Philippines? A I do not know the number. It was the evening flight of the Philippine Airline(s) from San Francisco to Manila. Q You took that flight with your mother? A We were scheduled to, Sir. Q Now, you could not locate the remains of your mother in San Francisco could you tell us what did you feel? A After we were told that my mother was not there? Q After you learned that your mother could not fly with you from Chicago to California? A Well, I was very upset. Of course, I wanted the confirmation that my mother was in the West Coast. The fliqht was about 5 hours from Chicago to California. We waited anxiously all that time on the plane. I wanted to be assured about my mother's remains. But there was nothing and we could not get any assurance from anyone about it. Q Your feeling when you reached San Francisco and you could not find out from the TWA the whereabouts of the remains, what did you feel? A Something nobody would be able to describe unless he experiences it himself. It is a kind of panic. I think it's a feeling you are about to go crazy. It is something I do not want to live through again. (Inting, t.s.n., Aug. 9, 1983, pp. 14-18). The foregoing does not show any humiliating or arrogant manner with which the personnel of both defendants treated the two plaintiffs. Even their alleged indifference is not clearly established. The initial answer of the TWA personnel at the counter that they did not know anything about the remains, and later, their answer that they have not heard anything about the remains, and the inability of the TWA counter personnel to inform the two plaintiffs of the whereabouts of the remains, cannot be said to be total or complete indifference to the said plaintiffs. At any rate, it is any rude or discourteous conduct, malfeasance or neglect, the use of abusive or insulting language calculated to humiliate and shame passenger or had faith by or on the part of the employees of the carrier that gives the passenger an action for damages against the carrier (Zulueta vs. Pan American World Airways, 43 SCRA 397; Air France vs. Carrascoso, et al., 18 SCRA 155; Lopez, et al. vs. Pan American World Airways, 16 SCRA 431; Northwest Airlines, Inc. vs. Cuenca, 14 SCRA 1063), and none of the above is obtaining in the instant case. 67 We stand by respondent court's findings on this point, but only to the extent where it holds that the manner in which private respondent TWA's employees dealt with petitioners was not grossly humiliating, arrogant or indifferent as would assume the proportions of malice or bad faith and lay the basis for an award of the damages claimed. It must however, be pointed out that the lamentable actuations of respondent TWA's employees leave much to be desired, particularly so in the face of petitioners' grief over the death of their mother, exacerbated by the tension and anxiety wrought by the impasse and confusion over the failure to ascertain over an appreciable period of time what happened to her remains.

Airline companies are hereby sternly admonished that it is their duty not only to cursorily instruct but to strictly require their personnel to be more accommodating towards customers, passengers and the general public. After all, common carriers such as airline companies are in the business of rendering public service, which is the primary reason for their enfranchisement and recognition in our law. Because the passengers in a contract of carriage do not contract merely for transportation, they have a right to be treated with kindness, respect, courtesy and consideration. 68 A contract to transport passengers is quite different in kind and degree from any other contractual relation, and generates a relation attended with public duty. The operation of a common carrier is a business affected with public interest and must be directed to serve the comfort and convenience of passengers.69 Passengers are human beings with human feelings and emotions; they should not be treated as mere numbers or statistics for revenue. The records reveal that petitioners, particularly Maria and Saturnino Saludo, agonized for nearly five hours, over the possibility of losing their mother's mortal remains, unattended to and without any assurance from the employees of TWA that they were doing anything about the situation. This is not to say that petitioners were to be regaled with extra special attention. They were, however, entitled to the understanding and humane consideration called for by and commensurate with the extraordinary diligence required of common carriers, and not the cold insensitivity to their predicament. It is hard to believe that the airline's counter personnel were totally helpless about the situation. Common sense would and should have dictated that they exert a little extra effort in making a more extensive inquiry, by themselves or through their superiors, rather than just shrug off the problem with a callous and uncaring remark that they had no knowledge about it. With all the modern communications equipment readily available to them, which could have easily facilitated said inquiry and which are used as a matter of course by airline companies in their daily operations, their apathetic stance while not legally reprehensible is morally deplorable. Losing a loved one, especially one's, parent, is a painful experience. Our culture accords the tenderest human feelings toward and in reverence to the dead. That the remains of the deceased were subsequently delivered, albeit belatedly, and eventually laid in her final resting place is of little consolation. The imperviousness displayed by the airline's personnel, even for just that fraction of time, was especially condemnable particularly in the hour of bereavement of the family of Crispina Saludo, intensified by anguish due to the uncertainty of the whereabouts of their mother's remains. Hence, it is quite apparent that private respondents' personnel were remiss in the observance of that genuine human concern and professional attentiveness required and expected of them. The foregoing observations, however, do not appear to be applicable or imputable to respondent PAL or its employees. No attribution of discourtesy or indifference has been made against PAL by petitioners and, in fact, petitioner Maria Saludo testified that it was to PAL that they repaired after failing to receive proper attention from TWA. It was from PAL that they received confirmation that their mother's remains would be on the same flight to Manila with them. We find the following substantiation on this particular episode from the deposition of Alberto A. Lim, PAL's cargo supervisor earlier adverted to, regarding their investigation of and the action taken on learning of petitioner's problem: ATTY. ALBERTO C. MENDOZA: Yes. Mr. Lim, what exactly was your procedure adopted in your so called investigation? ALBERTO A. LIM: I called the lead agent on duty at that time and requested for a copy of airway bill, transfer manifest and other documents concerning the shipment.

ATTY ALBERTO C. MENDOZA: Then, what? ALBERTO A. LIM: They proceeded to analyze exactly where PAL failed, if any, in forwarding the human remains of Mrs. Cristina (sic) Saludo. And I found out that there was not (sic) delay in shipping the remains of Mrs. Saludo to Manila. Since we received the body from American Airlines on 28 October at 7:45 and we expedited the shipment so that it could have been loaded on our flight leaving at 9:00 in the evening or just barely one hour and 15 minutes prior to the departure of the aircraft. That is so (sic) being the case, I reported to Manila these circumstances. 70 IV. Finally, petitioners insist, as a consequence of the delay in the shipment of their mother's remains allegedly caused by wilful contractual breach, on their entitlement to actual, moral and exemplary damages as well as attorney's fees, litigation expenses, and legal interest. The uniform decisional tenet in our jurisdiction bolds that moral damages may be awarded for wilful or fraudulent breach of contract 71 or when such breach is attended by malice or bad faith. 72 However, in the absence of strong and positive evidence of fraud, malice or bad faith, said damages cannot be awarded. 73 Neither can there be an award of exemplary damages 74 nor of attorney's fees 75 as an item of damages in the absence of proof that defendant acted with malice, fraud or bad faith. The censurable conduct of TWA's employees cannot, however, be said to have approximated the dimensions of fraud, malice or bad faith. It can be said to be more of a lethargic reaction produced and engrained in some people by the mechanically routine nature of their work and a racial or societal culture which stultifies what would have been their accustomed human response to a human need under a former and different ambience. Nonetheless, the facts show that petitioners' right to be treated with due courtesy in accordance with the degree of diligence required by law to be exercised by every common carrier was violated by TWA and this entitles them, at least, to nominal damages from TWA alone. Articles 2221 and 2222 of the Civil Code make it clear that nominal damages are not intended for indemnification of loss suffered but for the vindication or recognition of a right violated of invaded. They are recoverable where some injury has been done but the amount of which the evidence fails to show, the assessment of damages being left to the discretion of the court according to the circumstances of the case. 76 In the exercise of our discretion, we find an award of P40,000.00 as nominal damages in favor of, petitioners to be a reasonable amount under the circumstances of this case. WHEREFORE, with the modification that an award of P40,000.00 as and by way of nominal damages is hereby granted in favor of petitioners to be paid by respondent Trans World Airlines, the appealed decision is AFFIRMED in all other respects. SO ORDERED. Melencio-Herrera, Paras, Padilla and Nocon, JJ., concur.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 168081 October 17, 2008 ARMANDO G. YRASUEGUI, petitioners, vs. PHILIPPINE AIRLINES, INC., respondents.

DECISION REYES, R.T., J.: THIS case portrays the peculiar story of an international flight steward who was dismissed because of his failure to adhere to the weight standards of the airline company. He is now before this Court via a petition for review on certiorari claiming that he was illegally dismissed. To buttress his stance, he argues that (1) his dismissal does not fall under 282(e) of the Labor Code; (2) continuing adherence to the weight standards of the company is not a bona fide occupational qualification; and (3) he was discriminated against because other overweight employees were promoted instead of being disciplined. After a meticulous consideration of all arguments pro and con, We uphold the legality of dismissal. Separation pay, however, should be awarded in favor of the employee as an act of social justice or based on equity. This is so because his dismissal is not for serious misconduct. Neither is it reflective of his moral character. The Facts Petitioner Armando G. Yrasuegui was a former international flight steward of Philippine Airlines, Inc. (PAL). He stands five feet and eight inches (58") with a large body frame. The proper weight for a man of his height and body structure is from 147 to 166 pounds, the ideal weight being 166 pounds, as mandated by the Cabin and Crew Administration Manual1 of PAL. The weight problem of petitioner dates back to 1984. Back then, PAL advised him to go on an extended vacation leave from December 29, 1984 to March 4, 1985 to address his weight concerns. Apparently, petitioner failed to meet the companys weight standards, prompting another leave without pay from March 5, 1985 to November 1985. After meeting the required weight, petitioner was allowed to return to work. But petitioners weight problem recurred. He again went on leave without pay from October 17, 1988 to February 1989. On April 26, 1989, petitioner weighed 209 pounds, 43 pounds over his ideal weight. In line with company policy, he was removed from flight duty effective May 6, 1989 to July 3, 1989. He was formally requested to trim down to his ideal weight and report for weight checks on several dates. He was also told that he may avail of the services of the company physician should he wish to do so. He was advised that his case will be evaluated on July 3, 1989.2 On February 25, 1989, petitioner underwent weight check. It was discovered that he gained, instead of losing, weight. He was overweight at 215 pounds, which is 49 pounds beyond the limit. Consequently, his off-duty status was retained. On October 17, 1989, PAL Line Administrator Gloria Dizon personally visited petitioner at his residence to check on the progress of his effort to lose weight. Petitioner weighed 217 pounds, gaining 2 pounds from his previous weight. After the visit, petitioner made a commitment 3 to reduce weight in a letter addressed to Cabin Crew Group Manager Augusto Barrios. The letter, in full, reads: Dear Sir: I would like to guaranty my commitment towards a weight loss from 217 pounds to 200 pounds from today until 31 Dec. 1989. From thereon, I promise to continue reducing at a reasonable percentage until such time that my ideal weight is achieved. Likewise, I promise to personally report to your office at the designated time schedule you will set for my weight check. Respectfully Yours, F/S Armando Yrasuegui4 Despite the lapse of a ninety-day period given him to reach his ideal weight, petitioner remained overweight. On January 3, 1990, he was informed of the PAL decision for him to remain grounded until such time that he satisfactorily complies with the weight standards. Again, he was directed to report every two weeks for weight checks.

Petitioner failed to report for weight checks. Despite that, he was given one more month to comply with the weight requirement. As usual, he was asked to report for weight check on different dates. He was reminded that his grounding would continue pending satisfactory compliance with the weight standards.5 Again, petitioner failed to report for weight checks, although he was seen submitting his passport for processing at the PAL Staff Service Division. On April 17, 1990, petitioner was formally warned that a repeated refusal to report for weight check would be dealt with accordingly. He was given another set of weight check dates. 6 Again, petitioner ignored the directive and did not report for weight checks. On June 26, 1990, petitioner was required to explain his refusal to undergo weight checks.7 When petitioner tipped the scale on July 30, 1990, he weighed at 212 pounds. Clearly, he was still way over his ideal weight of 166 pounds. From then on, nothing was heard from petitioner until he followed up his case requesting for leniency on the latter part of 1992. He weighed at 219 pounds on August 20, 1992 and 205 pounds on November 5, 1992. On November 13, 1992, PAL finally served petitioner a Notice of Administrative Charge for violation of company standards on weight requirements. He was given ten (10) days from receipt of the charge within which to file his answer and submit controverting evidence.8 On December 7, 1992, petitioner submitted his Answer.9 Notably, he did not deny being overweight. What he claimed, instead, is that his violation, if any, had already been condoned by PAL since "no action has been taken by the company" regarding his case "since 1988." He also claimed that PAL discriminated against him because "the company has not been fair in treating the cabin crew members who are similarly situated." On December 8, 1992, a clarificatory hearing was held where petitioner manifested that he was undergoing a weight reduction program to lose at least two (2) pounds per week so as to attain his ideal weight.10 On June 15, 1993, petitioner was formally informed by PAL that due to his inability to attain his ideal weight, "and considering the utmost leniency" extended to him "which spanned a period covering a total of almost five (5) years," his services were considered terminated "effective immediately."11 His motion for reconsideration having been denied,12 petitioner filed a complaint for illegal dismissal against PAL. Labor Arbiter, NLRC and CA Dispositions On November 18, 1998, Labor Arbiter Valentin C. Reyes ruled13 that petitioner was illegally dismissed. The dispositive part of the Arbiter ruling runs as follows: WHEREFORE, in view of the foregoing, judgment is hereby rendered, declaring the complainants dismissal illegal, and ordering the respondent to reinstate him to his former position or substantially equivalent one, and to pay him: a. Backwages of Php10,500.00 per month from his dismissal on June 15, 1993 until reinstated, which for purposes of appeal is hereby set from June 15, 1993 up to August 15, 1998 at P651,000.00; b. Attorneys fees of five percent (5%) of the total award. SO ORDERED.14 The Labor Arbiter held that the weight standards of PAL are reasonable in view of the nature of the job of petitioner.15 However, the weight standards need not be complied with under pain of dismissal since his weight did not hamper the performance of his duties.16 Assuming that it did, petitioner could be transferred to other positions where his weight would not be a negative factor.17 Notably, other overweight employees, i.e., Mr. Palacios, Mr. Cui, and Mr. Barrios, were promoted instead of being disciplined.18 Both parties appealed to the National Labor Relations Commission (NLRC).19

On October 8, 1999, the Labor Arbiter issued a writ of execution directing the reinstatement of petitioner without loss of seniority rights and other benefits.20 On February 1, 2000, the Labor Arbiter denied21 the Motion to Quash Writ of Execution22 of PAL. On March 6, 2000, PAL appealed the denial of its motion to quash to the NLRC.23 On June 23, 2000, the NLRC rendered judgment24 in the following tenor: WHEREFORE, premises considered[,] the Decision of the Arbiter dated 18 November 1998 as modified by our findings herein, is hereby AFFIRMED and that part of the dispositive portion of said decision concerning complainants entitlement to backwages shall be deemed to refer to complainants entitlement to his full backwages, inclusive of allowances and to his other benefits or their monetary equivalent instead of simply backwages, from date of dismissal until his actual reinstatement or finality hereof. Respondent is enjoined to manifests (sic) its choice of the form of the reinstatement of complainant, whether physical or through payroll within ten (10) days from notice failing which, the same shall be deemed as complainants reinstatement through payroll and execution in case of non-payment shall accordingly be issued by the Arbiter. Both appeals of respondent thus, are DISMISSED for utter lack of merit.25 According to the NLRC, "obesity, or the tendency to gain weight uncontrollably regardless of the amount of food intake, is a disease in itself."26 As a consequence, there can be no intentional defiance or serious misconduct by petitioner to the lawful order of PAL for him to lose weight. 27 Like the Labor Arbiter, the NLRC found the weight standards of PAL to be reasonable. However, it found as unnecessary the Labor Arbiter holding that petitioner was not remiss in the performance of his duties as flight steward despite being overweight. According to the NLRC, the Labor Arbiter should have limited himself to the issue of whether the failure of petitioner to attain his ideal weight constituted willful defiance of the weight standards of PAL.28 PAL moved for reconsideration to no avail.29 Thus, PAL elevated the matter to the Court of Appeals (CA) via a petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure.30 By Decision dated August 31, 2004, the CA reversed31 the NLRC: WHEREFORE, premises considered, we hereby GRANT the petition. The assailed NLRC decision is declared NULL and VOID and is hereby SET ASIDE. The private respondents complaint is hereby DISMISSED. No costs. SO ORDERED.32 The CA opined that there was grave abuse of discretion on the part of the NLRC because it "looked at wrong and irrelevant considerations"33 in evaluating the evidence of the parties. Contrary to the NLRC ruling, the weight standards of PAL are meant to be a continuing qualification for an employees position.34 The failure to adhere to the weight standards is an analogous cause for the dismissal of an employee under Article 282(e) of the Labor Code in relation to Article 282(a). It is not willful disobedience as the NLRC seemed to suggest.35 Said the CA, "the element of willfulness that the NLRC decision cites is an irrelevant consideration in arriving at a conclusion on whether the dismissal is legally proper."36 In other words, "the relevant question to ask is not one of willfulness but one of reasonableness of the standard and whether or not the employee qualifies or continues to qualify under this standard."37 Just like the Labor Arbiter and the NLRC, the CA held that the weight standards of PAL are reasonable.38 Thus, petitioner was legally dismissed because he repeatedly failed to meet the prescribed weight standards.39 It is obvious that the issue of discrimination was only invoked by petitioner for purposes of escaping the result of his dismissal for being overweight.40 On May 10, 2005, the CA denied petitioners motion for reconsideration.41 Elaborating on its earlier ruling, the CA held that the weight standards of PAL are a bona fide occupational qualification which, in case of violation, "justifies an employees separation from the service."42 Issues In this Rule 45 petition for review, the following issues are posed for resolution: I.

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT PETITIONERS OBESITY CAN BE A GROUND FOR DISMISSAL UNDER PARAGRAPH (e) OF ARTICLE 282 OF THE LABOR CODE OF THE PHILIPPINES; II. WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT PETITIONERS DISMISSAL FOR OBESITY CAN BE PREDICATED ON THE "BONA FIDE OCCUPATIONAL QUALIFICATION (BFOQ) DEFENSE"; III. WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT PETITIONER WAS NOT UNDULY DISCRIMINATED AGAINST WHEN HE WAS DISMISSED WHILE OTHER OVERWEIGHT CABIN ATTENDANTS WERE EITHER GIVEN FLYING DUTIES OR PROMOTED; IV. WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED WHEN IT BRUSHED ASIDE PETITIONERS CLAIMS FOR REINSTATEMENT [AND] WAGES ALLEGEDLY FOR BEING MOOT AND ACADEMIC.43 (Underscoring supplied) Our Ruling I. The obesity of petitioner is a ground for dismissal under Article 282(e) 44 of the Labor Code. A reading of the weight standards of PAL would lead to no other conclusion than that they constitute a continuing qualification of an employee in order to keep the job. Tersely put, an employee may be dismissed the moment he is unable to comply with his ideal weight as prescribed by the weight standards. The dismissal of the employee would thus fall under Article 282(e) of the Labor Code. As explained by the CA: x x x [T]he standards violated in this case were not mere "orders" of the employer; they were the "prescribed weights" that a cabin crew must maintain in order to qualify for and keep his or her position in the company. In other words, they were standards that establish continuing qualifications for an employees position. In this sense, the failure to maintain these standards does not fall under Article 282(a) whose express terms require the element of willfulness in order to be a ground for dismissal. The failure to meet the employers qualifying standards is in fact a ground that does not squarely fall under grounds (a) to (d) and is therefore one that falls under Article 282(e) the "other causes analogous to the foregoing." By its nature, these "qualifying standards" are norms that apply prior to and after an employee is hired. They apply prior to employment because these are the standards a job applicant must initially meet in order to be hired. They apply after hiring because an employee must continue to meet these standards while on the job in order to keep his job. Under this perspective, a violation is not one of the faults for which an employee can be dismissed pursuant to pars. (a) to (d) of Article 282; the employee can be dismissed simply because he no longer "qualifies" for his job irrespective of whether or not the failure to qualify was willful or intentional. x x x45 Petitioner, though, advances a very interesting argument. He claims that obesity is a "physical abnormality and/or illness."46 Relying on Nadura v. Benguet Consolidated, Inc.,47 he says his dismissal is illegal: Conscious of the fact that Naduras case cannot be made to fall squarely within the specific causes enumerated in subparagraphs 1(a) to (e), Benguet invokes the provisions of subparagraph 1(f) and says that Naduras illness occasional attacks of asthma is a cause analogous to them. Even a cursory reading of the legal provision under consideration is sufficient to convince anyone that, as the trial court said, "illness cannot be included as an analogous cause by any stretch of imagination."

It is clear that, except the just cause mentioned in sub-paragraph 1(a), all the others expressly enumerated in the law are due to the voluntary and/or willful act of the employee. How Naduras illness could be considered as "analogous" to any of them is beyond our understanding, there being no claim or pretense that the same was contracted through his own voluntary act.48 The reliance on Nadura is off-tangent. The factual milieu in Nadura is substantially different from the case at bar.First, Nadura was not decided under the Labor Code. The law applied in that case was Republic Act (RA) No. 1787. Second, the issue of flight safety is absent in Nadura, thus, the rationale there cannot apply here. Third, inNadura, the employee who was a miner, was laid off from work because of illness, i.e., asthma. Here, petitioner was dismissed for his failure to meet the weight standards of PAL. He was not dismissed due to illness. Fourth, the issue in Nadura is whether or not the dismissed employee is entitled to separation pay and damages. Here, the issue centers on the propriety of the dismissal of petitioner for his failure to meet the weight standards of PAL.Fifth, in Nadura, the employee was not accorded due process. Here, petitioner was accorded utmost leniency. He was given more than four (4) years to comply with the weight standards of PAL. In the case at bar, the evidence on record militates against petitioners claims that obesity is a disease. That he was able to reduce his weight from 1984 to 1992 clearly shows that it is possible for him to lose weight given the proper attitude, determination, and self-discipline. Indeed, during the clarificatory hearing on December 8, 1992, petitioner himself claimed that "[t]he issue is could I bring my weight down to ideal weight which is 172, then the answer is yes. I can do it now."49 True, petitioner claims that reducing weight is costing him "a lot of expenses." 50 However, petitioner has only himself to blame. He could have easily availed the assistance of the company physician, per the advice of PAL.51He chose to ignore the suggestion. In fact, he repeatedly failed to report when required to undergo weight checks, without offering a valid explanation. Thus, his fluctuating weight indicates absence of willpower rather than an illness. Petitioner cites Bonnie Cook v. State of Rhode Island, Department of Mental Health, Retardation and Hospitals,52decided by the United States Court of Appeals (First Circuit). In that case, Cook worked from 1978 to 1980 and from 1981 to 1986 as an institutional attendant for the mentally retarded at the Ladd Center that was being operated by respondent. She twice resigned voluntarily with an unblemished record. Even respondent admitted that her performance met the Centers legitimate expectations. In 1988, Cook re-applied for a similar position. At that time, "she stood 52" tall and weighed over 320 pounds." Respondent claimed that the morbid obesity of plaintiff compromised her ability to evacuate patients in case of emergency and it also put her at greater risk of serious diseases. Cook contended that the action of respondent amounted to discrimination on the basis of a handicap. This was in direct violation of Section 504(a) of the Rehabilitation Act of 1973,53 which incorporates the remedies contained in Title VI of the Civil Rights Act of 1964. Respondent claimed, however, that morbid obesity could never constitute a handicap within the purview of the Rehabilitation Act. Among others, obesity is a mutable condition, thus plaintiff could simply lose weight and rid herself of concomitant disability. The appellate Court disagreed and held that morbid obesity is a disability under the Rehabilitation Act and that respondent discriminated against Cook based on "perceived" disability. The evidence included expert testimony that morbid obesity is a physiological disorder. It involves a dysfunction of both the metabolic system and the neurological appetite suppressing signal system, which is capable of causing adverse effects within the musculoskeletal, respiratory, and cardiovascular systems. Notably, the Court stated that "mutability is relevant only in determining the substantiality of the limitation flowing from a given impairment," thus "mutability only precludes those conditions that an individual can easily and quickly reverse by behavioral alteration."

Unlike Cook, however, petitioner is not morbidly obese. In the words of the District Court for the District of Rhode Island, Cook was sometime before 1978 "at least one hundred pounds more than what is considered appropriate of her height." According to the Circuit Judge, Cook weighed "over 320 pounds" in 1988. Clearly, that is not the case here. At his heaviest, petitioner was only less than 50 pounds over his ideal weight. In fine, We hold that the obesity of petitioner, when placed in the context of his work as flight attendant, becomes an analogous cause under Article 282(e) of the Labor Code that justifies his dismissal from the service. His obesity may not be unintended, but is nonetheless voluntary. As the CA correctly puts it, "[v]oluntariness basically means that the just cause is solely attributable to the employee without any external force influencing or controlling his actions. This element runs through all just causes under Article 282, whether they be in the nature of a wrongful action or omission. Gross and habitual neglect, a recognized just cause, is considered voluntary although it lacks the element of intent found in Article 282(a), (c), and (d)."54 II. The dismissal of petitioner can be predicated on the bona fide occupational qualification defense. Employment in particular jobs may not be limited to persons of a particular sex, religion, or national origin unless the employer can show that sex, religion, or national origin is an actual qualification for performing the job. The qualification is called a bona fide occupational qualification (BFOQ).55 In the United States, there are a few federal and many state job discrimination laws that contain an exception allowing an employer to engage in an otherwise unlawful form of prohibited discrimination when the action is based on a BFOQ necessary to the normal operation of a business or enterprise.56 Petitioner contends that BFOQ is a statutory defense. It does not exist if there is no statute providing for it.57Further, there is no existing BFOQ statute that could justify his dismissal.58 Both arguments must fail. First, the Constitution,59 the Labor Code,60 and RA No. 727761 or the Magna Carta for Disabled Persons62contain provisions similar to BFOQ. Second, in British Columbia Public Service Employee Commission (BSPSERC) v. The British Columbia Government and Service Employees Union (BCGSEU),63 the Supreme Court of Canada adopted the so-called "Meiorin Test" in determining whether an employment policy is justified. Under this test, (1) the employer must show that it adopted the standard for a purpose rationally connected to the performance of the job;64 (2) the employer must establish that the standard is reasonably necessary65 to the accomplishment of that work-related purpose; and (3) the employer must establish that the standard is reasonably necessary in order to accomplish the legitimate work-related purpose. Similarly, in Star Paper Corporation v. Simbol,66 this Court held that in order to justify a BFOQ, the employer must prove that (1) the employment qualification is reasonably related to the essential operation of the job involved; and (2) that there is factual basis for believing that all or substantially all persons meeting the qualification would be unable to properly perform the duties of the job.67 In short, the test of reasonableness of the company policy is used because it is parallel to BFOQ.68 BFOQ is valid "provided it reflects an inherent quality reasonably necessary for satisfactory job performance."69 In Duncan Association of Detailman-PTGWTO v. Glaxo Wellcome Philippines, Inc.,70 the Court did not hesitate to pass upon the validity of a company policy which prohibits its employees from marrying employees of a rival company. It was held that the company policy is reasonable considering that its purpose is the protection of the interests of the company against possible competitor infiltration on its trade secrets and procedures. Verily, there is no merit to the argument that BFOQ cannot be applied if it has no supporting statute. Too, the Labor Arbiter,71 NLRC,72 and CA73 are one in holding that the weight standards of PAL are reasonable. A common carrier, from the nature of its business and for reasons of public policy, is bound to observe extraordinary diligence for the safety of the passengers it

transports.74 It 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 for all the circumstances.75 The law leaves no room for mistake or oversight on the part of a common carrier. Thus, it is only logical to hold that the weight standards of PAL show its effort to comply with the exacting obligations imposed upon it by law by virtue of being a common carrier. The business of PAL is air transportation. As such, it has committed itself to safely transport its passengers. In order to achieve this, it must necessarily rely on its employees, most particularly the cabin flight deck crew who are on board the aircraft. The weight standards of PAL should be viewed as imposing strict norms of discipline upon its employees. In other words, the primary objective of PAL in the imposition of the weight standards for cabin crew is flight safety. It cannot be gainsaid that cabin attendants must maintain agility at all times in order to inspire passenger confidence on their ability to care for the passengers when something goes wrong. It is not farfetched to say that airline companies, just like all common carriers, thrive due to public confidence on their safety records. People, especially the riding public, expect no less than that airline companies transport their passengers to their respective destinations safely and soundly. A lesser performance is unacceptable. The task of a cabin crew or flight attendant is not limited to serving meals or attending to the whims and caprices of the passengers. The most important activity of the cabin crew is to care for the safety of passengers and the evacuation of the aircraft when an emergency occurs. Passenger safety goes to the core of the job of a cabin attendant. Truly, airlines need cabin attendants who have the necessary strength to open emergency doors, the agility to attend to passengers in cramped working conditions, and the stamina to withstand grueling flight schedules. On board an aircraft, the body weight and size of a cabin attendant are important factors to consider in case of emergency. Aircrafts have constricted cabin space, and narrow aisles and exit doors. Thus, the arguments of respondent that "[w]hether the airlines flight attendants are overweight or not has no direct relation to its mission of transporting passengers to their destination"; and that the weight standards "has nothing to do with airworthiness of respondents airlines," must fail. The rationale in Western Air Lines v. Criswell76 relied upon by petitioner cannot apply to his case. What was involved there were two (2) airline pilots who were denied reassignment as flight engineers upon reaching the age of 60, and a flight engineer who was forced to retire at age 60. They sued the airline company, alleging that the age-60 retirement for flight engineers violated the Age Discrimination in Employment Act of 1967. Age-based BFOQ and being overweight are not the same. The case of overweight cabin attendants is another matter. Given the cramped cabin space and narrow aisles and emergency exit doors of the airplane, any overweight cabin attendant would certainly have difficulty navigating the cramped cabin area. In short, there is no need to individually evaluate their ability to perform their task. That an obese cabin attendant occupies more space than a slim one is an unquestionable fact which courts can judicially recognize without introduction of evidence.77 It would also be absurd to require airline companies to reconfigure the aircraft in order to widen the aisles and exit doors just to accommodate overweight cabin attendants like petitioner. The biggest problem with an overweight cabin attendant is the possibility of impeding passengers from evacuating the aircraft, should the occasion call for it. The job of a cabin attendant during emergencies is to speedily get the passengers out of the aircraft safely. Being overweight necessarily impedes mobility. Indeed, in an emergency situation, seconds are what cabin attendants are dealing with, not minutes. Three lost seconds can translate into three lost lives. Evacuation might slow down just because a wide-bodied cabin attendant is blocking the narrow aisles. These possibilities are not remote.

Petitioner is also in estoppel. He does not dispute that the weight standards of PAL were made known to him prior to his employment. He is presumed to know the weight limit that he must maintain at all times.78 In fact, never did he question the authority of PAL when he was repeatedly asked to trim down his weight. Bona fides exigit ut quod convenit fiat. Good faith demands that what is agreed upon shall be done. Kung ang tao ay tapat kanyang tutuparin ang napagkasunduan. Too, the weight standards of PAL provide for separate weight limitations based on height and body frame for both male and female cabin attendants. A progressive discipline is imposed to allow non-compliant cabin attendants sufficient opportunity to meet the weight standards. Thus, the clear-cut rules obviate any possibility for the commission of abuse or arbitrary action on the part of PAL. III. Petitioner failed to substantiate his claim that he was discriminated against by PAL. Petitioner next claims that PAL is using passenger safety as a convenient excuse to discriminate against him.79We are constrained, however, to hold otherwise. We agree with the CA that "[t]he element of discrimination came into play in this case as a secondary position for the private respondent in order to escape the consequence of dismissal that being overweight entailed. It is a confession-and-avoidance position that impliedly admitted the cause of dismissal, including the reasonableness of the applicable standard and the private respondents failure to comply."80 It is a basic rule in evidence that each party must prove his affirmative allegation.81 Since the burden of evidence lies with the party who asserts an affirmative allegation, petitioner has to prove his allegation with particularity. There is nothing on the records which could support the finding of discriminatory treatment. Petitioner cannot establish discrimination by simply naming the supposed cabin attendants who are allegedly similarly situated with him. Substantial proof must be shown as to how and why they are similarly situated and the differential treatment petitioner got from PAL despite the similarity of his situation with other employees. Indeed, except for pointing out the names of the supposed overweight cabin attendants, petitioner miserably failed to indicate their respective ideal weights; weights over their ideal weights; the periods they were allowed to fly despite their being overweight; the particular flights assigned to them; the discriminating treatment they got from PAL; and other relevant data that could have adequately established a case of discriminatory treatment by PAL. In the words of the CA, "PAL really had no substantial case of discrimination to meet."82 We are not unmindful that findings of facts of administrative agencies, like the Labor Arbiter and the NLRC, are accorded respect, even finality.83 The reason is simple: administrative agencies are experts in matters within their specific and specialized jurisdiction.84 But the principle is not a hard and fast rule. It only applies if the findings of facts are duly supported by substantial evidence. If it can be shown that administrative bodies grossly misappreciated evidence of such nature so as to compel a conclusion to the contrary, their findings of facts must necessarily be reversed. Factual findings of administrative agencies do not have infallibility and must be set aside when they fail the test of arbitrariness.85 Here, the Labor Arbiter and the NLRC inexplicably misappreciated evidence. We thus annul their findings. To make his claim more believable, petitioner invokes the equal protection clause guaranty86 of the Constitution. However, in the absence of governmental interference, the liberties guaranteed by the Constitution cannot be invoked.87 Put differently, the Bill of Rights is not meant to be invoked against acts of private individuals.88 Indeed, the United States Supreme Court, in interpreting the Fourteenth Amendment,89 which is the source of our equal protection guarantee, is consistent in saying that the equal protection erects no shield against private conduct, however discriminatory or wrongful.90 Private actions, no matter how egregious, cannot violate the equal protection guarantee.91

IV. The claims of petitioner for reinstatement and wages are moot. As his last contention, petitioner avers that his claims for reinstatement and wages have not been mooted. He is entitled to reinstatement and his full backwages, "from the time he was illegally dismissed" up to the time that the NLRC was reversed by the CA.92 At this point, Article 223 of the Labor Code finds relevance: In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as the reinstatement aspect is concerned, shall immediately be executory, even pending appeal. The employee shall either be admitted back to work under the same terms and conditions prevailing prior to his dismissal or separation or, at the option of the employer, merely reinstated in the payroll. The posting of a bond by the employer shall not stay the execution for reinstatement provided herein. The law is very clear. Although an award or order of reinstatement is self-executory and does not require a writ of execution,93 the option to exercise actual reinstatement or payroll reinstatement belongs to the employer. It does not belong to the employee, to the labor tribunals, or even to the courts. Contrary to the allegation of petitioner that PAL "did everything under the sun" to frustrate his "immediate return to his previous position,"94 there is evidence that PAL opted to physically reinstate him to a substantially equivalent position in accordance with the order of the Labor Arbiter.95 In fact, petitioner duly received the return to work notice on February 23, 2001, as shown by his signature.96 Petitioner cannot take refuge in the pronouncements of the Court in a case97 that "[t]he unjustified refusal of the employer to reinstate the dismissed employee entitles him to payment of his salaries effective from the time the employer failed to reinstate him despite the issuance of a writ of execution"98 and ""even if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory on the part of the employer to reinstate and pay the wages of the employee during the period of appeal until reversal by the higher court."99 He failed to prove that he complied with the return to work order of PAL. Neither does it appear on record that he actually rendered services for PAL from the moment he was dismissed, in order to insist on the payment of his full backwages. In insisting that he be reinstated to his actual position despite being overweight, petitioner in effect wants to render the issues in the present case moot. He asks PAL to comply with the impossible. Time and again, the Court ruled that the law does not exact compliance with the impossible.100 V. Petitioner is entitled to separation pay. Be that as it may, all is not lost for petitioner. Normally, a legally dismissed employee is not entitled to separation pay. This may be deduced from the language of Article 279 of the Labor Code that "[a]n employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement." Luckily for petitioner, this is not an ironclad rule. Exceptionally, separation pay is granted to a legally dismissed employee as an act "social justice,"101 or based on "equity."102 In both instances, it is required that the dismissal (1) was not for serious misconduct; and (2) does not reflect on the moral character of the employee. 103 Here, We grant petitioner separation pay equivalent to one-half (1/2) months pay for every year of service.104 It should include regular allowances which he might have been receiving.105 We are not blind to the fact that he was not dismissed for any serious misconduct or to any act which would reflect on his moral character. We also recognize that his employment with PAL lasted for more or less a decade. WHEREFORE, the appealed Decision of the Court of Appeals is AFFIRMED but MODIFIED in that petitioner Armando G. Yrasuegui is entitled to separation pay in an amount equivalent to

one-half (1/2) months pay for every year of service, which should include his regular allowances. SO ORDERED. RUBEN T. REYES Associate Justice