PART A.

COMMON CARRIERS
1. Contract of Transportation
1.1 Perfection of the Contract

Passengers

BRITISH AIRWAYS, INC., petitioner, vs. THE HON. COURT OF APPEALS, Twelfth Division, and FIRST INTERNATIONAL
TRADING AND GENERAL SERVICES, respondents. G.R. No. 92288 February 9, 1993

NOCON, J.:

This is a petition for review on certiorari to annul and set aside the decision dated November 15, 1989 of the Court of
Appeals 1 affirming the decision of the trial court 2 in ordering petitioner British Airways, Inc. to pay private respondent First
International Trading and General Services actual damages, moral damages, corrective or exemplary damages, attorney's fees and
the costs as well as the Resolution dated February 15, 1990 3 denying petitioner's Motion for Reconsideration in the appealed
decision.

It appears on record that on February 15, 1981, private respondent First International Trading and General Services Co., a duly
licensed domestic recruitment and placement agency, received a telex message from its principal ROLACO Engineering and
Contracting Services in Jeddah, Saudi Arabia to recruit Filipino contract workers in behalf of said principal. 4

During the early part of March 1981, said principal paid to the Jeddah branch of petitioner British Airways, Inc. airfare tickets for 93
contract workers with specific instruction to transport said workers to Jeddah on or before March 30, 1981.

As soon as petitioner received a prepaid ticket advice from its Jeddah branch to transport the 93 workers, private respondent was
immediately informed by petitioner that its principal had forwarded 93 prepaid tickets. Thereafter, private respondent instructed its
travel agent, ADB Travel and Tours. Inc., to book the 93 workers with petitioner but the latter failed to fly said workers, thereby
compelling private respondent to borrow money in the amount of P304,416.00 in order to purchase airline tickets from the other
airlines as evidenced by the cash vouchers (Exhibits "B", "C" and "C-1 to C-7") for the 93 workers it had recruited who must leave
immediately since the visas of said workers are valid only for 45 days and the Bureau of Employment Services mandates that
contract workers must be sent to the job site within a period of 30 days.

Sometime in the first week of June, 1981, private respondent was again informed by the petitioner that it had received a prepaid
ticket advice from its Jeddah branch for the transportation of 27 contract workers. Immediatety, private respondent instructed its
travel agent to book the 27 contract workers with the petitioner but the latter was only able to book and confirm 16 seats on its June
9, 1981 flight. However, on the date of the scheduled flight only 9 workers were able to board said flight while the remaining 7
workers were rebooked to June 30, 1981 which bookings were again cancelled by the petitioner without any prior notice to either
private respondent or the workers. Thereafter, the 7 workers were rebooked to the July 4,1981 flight of petitioner with 6 more
workers booked for said flight. Unfortunately, the confirmed bookings of the 13 workers were again cancelled and rebooked to July 7,
1981.

On July 6, 1981, private respondent paid the travel tax of the said workers as required by the petitioner but when the receipt of the
tax payments was submitted, the latter informed private respondent that it can only confirm the seats of the 12 workers on its July
7, 1981 flight. However, the confirmed seats of said workers were again cancelled without any prior notice either to the private
respondent or said workers. The 12 workers were finally able to leave for Jeddah after private respondent had bought tickets from
the other airlines.

As a result of these incidents, private respondent sent a letter to petitioner demanding compensation for the damages it had
incurred by the latter's repeated failure to transport its contract workers despite confirmed bookings and payment of the
corresponding travel taxes.

On July 23, 1981, the counsel of private respondent sent another letter to the petitioner demanding the latter to pay the amount of
P350,000.00 representing damages and unrealized profit or income which was denied by the petitioner.

On August 8, 1981, private respondent received a telex message from its principal cancelling the hiring of the remaining recruited
workers due to the delay in transporting the workers to Jeddah. 5

On January 27, 1982, private respondent filed a complaint for damages against petitioner with the Regional Trial Court of Manila,
Branch 1 in Civil Case No. 82-4653.

On the other hand, petitioner, alleged in its Answer with counterclaims that it received a telex message from Jeddah on March 20,
1981 advising that the principal of private respondent had prepaid the airfares of 100 persons to transport private respondent's
contract workers from Manila to Jeddah on or before March 30, 1981. However, due to the unavailability of space and limited time,
petitioner had to return to its sponsor in Jeddah the prepaid ticket advice consequently not even one of the alleged 93 contract
workers were booked in any of its flights.

On June 5, 1981, petitioner received another prepaid ticket advice to transport 16 contract workers of private respondent to Jeddah
but the travel agent of the private respondent booked only 10 contract workers for petitioner's June 9, 1981 flight. However, only 9
contract workers boarded the scheduled flight with 1 passenger not showing up as evidenced by the Philippine Airlines' passenger
manifest for Flight BA-020 (Exhibit "7", "7-A", "7-B" and "7-C"). 6

Thereafter, private respondent's travel agent booked seats for 5 contract workers on petitioner's July 4, 1981 flight but said travel
agent cancelled the booking of 2 passengers while the other 3 passengers did not show up on said flight.

1
Sometime in July 1981, the travel agent of the private respondent booked 7 more contract workers in addition to the previous 5
contract workers who were not able to board the July 4, 1981 flight with the petitioner's July 7, 1981 flight which was accepted by
petitioner subject to reconfirmation.

However on July 6, 1981, petitioner's computer system broke down which resulted to petitioner's failure to get a reconfirmation from
Saudi Arabia Airlines causing the automatic cancellation of the bookings of private respondent's 12 contract workers. In the morning
of July 7, 1981, the computer system of the petitioner was reinstalled and immediately petitioner tried to reinstate the bookings of
the 12 workers with either Gulf Air or Saudi Arabia Airlines but both airlines replied that no seat was available on that date and had
to place the 12 workers on the wait list. Said information was duly relayed to the private respondent and the 12 workers before the
scheduled flight.

After due trial on or on August 27, 1985, the trial court rendered its decision, the dispositive portion of which reads as follows:

WHEREFORE, in view of all the foregoing, this Court renders judgment:

1. Ordering the defendant to pay the plaintiff actual damages in the sum of P308,016.00;

2. Ordering defendant to pay moral damages to the plaintiff in the amount of P20,000.00;

3. Ordering the defendant to pay the plaintiff P10,000.00 by way of corrective or exemplary damages;

4. Ordering the defendant to pay the plaintiff 30% of its total claim for and as attorney's fees; and

5. To pay the costs. 7

On March 13, 1986, petitioner appealed said decision to respondent appellate court after the trial court denied its Motion for
Reconsideration on February 28, 1986.

On November 15, 1989, respondent appellate court affirmed the decision of the trial court, the dispositive portion of which reads:

WHEREFORE, the decision appealed from is hereby AFFIRMED with costs against the appellant. 8

On December 9, 1989, petitioner filed a Motion for Reconsideration which was also denied.

Hence, this petition.

It is the contention of petitioner that private respondent has no cause of action against it there being no perfected contract of
carriage existing between them as no ticket was ever issued to private respondent's contract workers and, therefore, the obligation
of the petitioner to transport said contract workers did not arise. Furthermore, private respondent's failure to attach any ticket in the
complaint further proved that it was never a party to the alleged transaction.

Petitioner's contention is untenable.

Private respondent had a valid cause of action for damages against petitioner. A cause of action is an act or omission of one party in
violation of the legal right or rights of the other. 9 Petitioner's repeated failures to transport private respondent's workers in its flight
despite confirmed booking of said workers clearly constitutes breach of contract and bad faith on its part. In resolving petitioner's
theory that private respondent has no cause of action in the instant case, the appellate court correctly held that:

In dealing with the contract of common carriage of passengers for purpose of accuracy, there are two (2) aspects of the
same, namely: (a) the contract "to carry (at some future time)," which contract is consensual and is necessarily perfected
by mere consent (See Article 1356, Civil Code of the Philippines), and (b) the contract "of carriage" or "of common
carriage" itself which should be considered as a real contract for not until the carrier is actually used can the carrier be
said to have already assumed the obligation of a carrier. (Paras, Civil Code Annotated, Vol. V, p. 429, Eleventh Ed.)

In the instant case, the contract "to carry" is the one involved which is consensual and is perfected by the mere consent of
the parties.

There is no dispute as to the appellee's consent to the said contract "to carry" its contract workers from Manila to Jeddah.
The appellant's consent thereto, on the other hand, was manifested by its acceptance of the PTA or prepaid ticket advice
that ROLACO Engineering has prepaid the airfares of the appellee's contract workers advising the appellant that it must
transport the contract workers on or before the end of March, 1981 and the other batch in June, 1981.

Even if a PTA is merely an advice from the sponsors that an airline is authorized to issue a ticket and thus no ticket was
yet issued, the fact remains that the passage had already been paid for by the principal of the appellee, and the appellant
had accepted such payment. The existence of this payment was never objected to nor questioned by the appellant in the
lower court. Thus, the cause or consideration which is the fare paid for the passengers exists in this case.

The third essential requisite of a contract is an object certain. In this contract "to carry", such an object is the transport of
the passengers from the place of departure to the place of destination as stated in the telex.

Accordingly, there could be no more pretensions as to the existence of an oral contract of carriage imposing reciprocal
obligations on both parties.

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 In the case of appellee, it has fully complied with the obligation, namely, the payment of the fare and its willingness for its
contract workers to leave for their place of destination.

On the other hand, the facts clearly show that appellant was remiss in its obligation to transport the contract workers on
their flight despite confirmation and bookings made by appellee's travelling agent.

xxx xxx xxx

Besides, appellant knew very well that time was of the essence as the prepaid ticket advice had specified the period of
compliance therewith, and with emphasis that it could only be used if the passengers fly on BA. Under the circumstances,
the appellant should have refused acceptance of the PTA from appellee's principal or to at least inform appellee that it
could not accommodate the contract workers.

xxx xxx xxx

While there is no dispute that ROLACO Engineering advanced the payment for the airfares of the appellee's contract
workers who were recruited for ROLACO Engineering and the said contract workers were the intended passengers in the
aircraft of the appellant, the said contract "to carry" also involved the appellee for as recruiter he had to see to it that the
contract workers should be transported to ROLACO Engineering in Jeddah thru the appellant's transportation. For that
matter, the involvement of the appellee in the said contract "to carry" was well demonstrated when
the appellant upon receiving the PTA immediately advised the appellee thereof. 10

Petitioner also contends that the appellate court erred in awarding actual damages in the amount of P308,016.00 to private
respondent since all expenses had already been subsequently reimbursed by the latter's principal.

In awarding actual damages to private respondent, the appellate court held that the amount of P308,016.00 representing actual
damages refers to private respondent's second cause of action involving the expenses incurred by the latter which were not
reimbursed by ROLACO Engineering. However, in the Complaint 11 filed by private respondent, it was alleged that private
respondent suffered actual damages in the amount of P308,016.00 representing the money it borrowed from friends and financiers
which is P304,416.00 for the 93 airline tickets and P3,600.00 for the travel tax of the 12 workers. It is clear therefore that the actual
damages private respondent seeks to recover are the airline tickets and travel taxes it spent for its workers which were already
reimbursed by its principal and not for any other expenses it had incurred in the process of recruiting said contract workers.
Inasmuch as all expenses including the processing fees incurred by private respondent had already been paid for by the latter's
principal on a staggered basis as admitted in open court by its managing director, Mrs. Bienvenida Brusellas. 12 We do not find
anymore justification in the appellate court's decision in granting actual damages to private respondent.

Thus, while it may be true that private respondent was compelled to borrow money for the airfare tickets of its contract workers
when petitioner failed to transport said workers, the reimbursements made by its principal to private respondent failed to support
the latter's claim that it suffered actual damages as a result of petitioner's failure to transport said workers. It is undisputed that
private respondent had consistently admitted that its principal had reimbursed all its expenses.

Article 2199 of the Civil Code provides that:

Except as provided by law or by stipulations, one is entitled to an adequate compensation only for such pecuniary loss
suffered by him as he has duly proved. Such compensation is referred to as actual or compensatory damages.

Furthermore, actual or compensatory damages cannot be presumed, but must be duly proved, and proved with reasonable degree
of certainty. A court cannot rely on speculation, conjecture or guesswork as to the fact and amount of damages, but must depend
upon competent proof that they have suffered and on evidence of the actual amount thereof. 13

However, private respondent is entitled to an award of moral and exemplary damages for the injury suffered as a result of
petitioner's failure to transport the former's workers because of the latter's patent bad faith in the performance of its obligation. As
correctly pointed out by the appellate court:

As evidence had proved, there was complete failure on the part of the appellant to transport the 93 contract workers of
the appellee on or before March 30, 1981 despite receipt of the payment for their airfares, and acceptance of the same
by the appellant, with specific instructions from the appellee's principal to transport the contract workers on or before
March 30, 1981. No previous notice was ever registered by the appellant that it could not comply with the same. And
then followed the detestable act of appellant in unilaterally cancelling, booking and rebooking unreasonably the flight of
appellee's contract workers in June to July, 1981 without prior notice. And all of these actuations of the appellant indeed
constitute malice and evident bad faith which had caused damage and besmirched the reputation and business image of
the appellee. 14

As to the alleged damages suffered by the petitioner as stated in its counterclaims, the record shows that no claim for said damages
was ever made by the petitioner immediately after their alleged occurrence therefore said counterclaims were mere afterthoughts
when private respondent filed the present case.

WHEREFORE, the assailed decision is hereby AFFIRMED with the MODIFICATION that the award of actual damages be deleted from
said decision.

SO ORDERED.

FACTS:

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 February 15, 1981: First International Trading and General Services Co. (First Int'l), a duly licensed domestic recruitment
and placement agency, received a telex message from its principal ROLACO Engineering and Contracting Services (ROLACO) in
Jeddah, Saudi Arabia to recruit Filipino contract workers in its behalf
Early March 1981: ROLACO paid British Airways, Inc. (BA) Jeddah branch the airfare tickets for 93 contract workers with
specific instruction to transport the workers to Jeddah on or before March 30, 1981
As soon as BA received a prepaid ticket advice from its Jeddah branch informed First Int'l.
Thereafter, First Int'l instructed ADB Travel and Tours. Inc. (its travel agent) to book the 93 workers
with BA but it failed
So First Int'l had to borrow P304,416.00 for the purchase of airline tickets from the other
airlines for the 93 workers who must leave immediately since the visas are valid only for 45 days and the Bureau of
Employment Services mandates that contract workers must be sent to the job site within a period of 30 days
First week of June, 1981: First Int'l was again informed by BA that it had received a prepaid ticket advice from its Jeddah
branch for the transportation of 27 contract workers.
Immediately, First Int'l instructed its ADB to book the 27 contract workers with the BA but only 16 seats were
confirmed and booked on its June 9, 1981 flight.
June 9, 1981: only 9 workers were able to board said flight while the remaining 7 workers were rebooked to:
June 30, 1981 - again cancelled by British without any prior notice to either First Int'l or the workers
July 4,1981 - (6 + 7 workers) 13 workers were again cancelled and rebooked to July 7, 1981.
July 6, 1981: First Int'l paid the travel tax of the workers as required by BA but when the receipt of the tax payments was
submitted, only 12 seats were confirmed for July 7, 1981 flight
July 7, 1981: Flight was again cancelled without any prior notice
12 workers were finally able to leave for Jeddah after First Int'l had bought tickets from the other airlines
As a result of these incidents, First Int'l sent a letter to BA demanding compensation for the damages it had incurred by
the repeated failure to transport its contract workers despite confirmed bookings and payment of the corresponding travel
taxes.
July 23, 1981: the counsel of First Int'l sent another letter to BA demanding P350,000.00 damages and unrealized profit or
income - denied
August 8, 1981: First Int'l received a telex message from ROLACO cancelling the hiring of the remaining recruited workers
due to the delay in transporting the workers to Jeddah.
January 27, 1982: First Int'l filed a complaint for damages against First Int'l
CA Affirmed RTC: BA to pay First Int'l damages, attorneys fees and costs
ISSUE: W/N BA is not liable because there was no contract of carriage as no ticket was ever issued
HELD: Affirmed. MODIFICATION that the award of actual damages be deleted (reimbursed by ROLACO)
In dealing with the contract of common carriage of passengers for purpose of accuracy, there are two (2) aspects of the
same, namely:
(a) the contract "to carry (at some future time)," which contract is consensual and is necessarily perfected by
mere consent - applicable in this case
(b) the contract "of carriage" or "of common carriage" itself which should be considered as a real contract for
not until the carrier is actually used can the carrier be said to have already assumed the obligation of a carrier
Even if a prepaid ticket advice (PTA) is merely an advice from the sponsors that an airline is authorized to issue
a ticket and thus no ticket was yet issued, the fact remains that the passage had already been paid for by the principal of the
appellee, and the appellant had accepted such payment
Besides, appellant knew very well that time was of the essence as the prepaid ticket advice had specified the
period of compliance therewith, and with emphasis that it could only be used if the passengers fly on BA
involvement of the BA in the contract "to carry" was well demonstrated when the it immediately advised First
Int'l
Acts of BA indeed constitute malice and evident bad faith which had caused damage and besmirched the
reputation and business image fo First Int'l

KOREAN AIRLINES CO., LTD., petitioner, vs. COURT OF APPEALS and JUANITO C. LAPUZ, respondents. G.R. No. 114061
August 3, 1994
JUANITO C. LAPUZ, petitioner, vs. COURT OF APPEALS and KOREAN AIRLINES CO., LTD., respondents. G.R. No. 113842
August 3, 1994
CRUZ, J.:
Sometime in 1980, Juanito C. Lapuz, an automotive electrician, was contracted for employment in Jeddah, Saudi Arabia, for a period
of one year through Pan Pacific Overseas Recruiting Services, Inc. Lapuz was supposed to leave on November 8, 1980, via Korean
Airlines. Initially, he was "wait-listed," which meant that he could only be accommodated if any of the confirmed passengers failed to
show up at the airport before departure. When two of such passengers did not appear, Lapuz and another person by the name of
Perico were given the two unclaimed seats.
According to Lapuz, he was allowed to check in with one suitcase and one shoulder bag at the check-in counter of KAL. He passed
through the customs and immigration sections for routine check-up and was cleared for departure as Passenger No. 157 of KAL
Flight No. KE 903. Together with the other passengers, he rode in the shuttle bus and proceeded to the ramp of the KAL aircraft for
boarding. However, when he was at the third or fourth rung of the stairs, a KAL officer pointed to him and shouted "Down! Down!"
He was thus barred from taking the flight. When he later asked for another booking, his ticket was canceled by KAL. Consequently,
he was unable to report for his work in Saudi Arabia within the stipulated 2-week period and so lost his employment.
KAL, on the other hand, alleged that on November 8, 1980, Pan Pacific Recruiting Services Inc. coordinated with KAL for the
departure of 30 contract workers, of whom only 21 were confirmed and 9 were wait-listed passengers. The agent of Pan Pacific,
Jimmie Joseph, after being informed that there was a possibility of having one or two seats becoming available, gave priority to
Perico, who was one of the supervisors of the hiring company in Saudi Arabia. The other seat was won through lottery by Lapuz.
However, only one seat became available and so, pursuant to the earlier agreement that Perico was to be given priority, he alone
was allowed to board.
After trial, the Regional Trial Court of Manila, Branch 30, 1 adjudged KAL liable for damages, disposing as follows:
WHEREFORE, in view of the foregoing consideration, judgment is hereby rendered sentencing the defendant Korean Air
Lines to pay plaintiff Juanito C. Lapuz the following:
1. The amount of TWO HUNDRED SEVENTY-TWO THOUSAND ONE HUNDRED SIXTY (P272,160.00) PESOS as
actual/compensatory damages, with legal interest thereon from the date of the filing of the complaint until fully paid.
2. The sum of TWENTY-FIVE THOUSAND (P25,000.00) PESOS as and for attorney's fees; and
3. The costs of suit.
The case is hereby dismissed with respect to defendant Pan Pacific Overseas Recruiting Services, Inc.
The counterclaims and cross-claim of defendant Korean Air Lines Co., Ltd. are likewise dismissed.
On appeal, this decision was modified by the Court of Appeals 2 as follows:
WHEREFORE, in view of all the foregoing, the appealed judgment is hereby AFFIRMED with the following modifications:
the amount of actual damages and compensatory damages is reduced to P60,000.00 and defendant-appellant is hereby
ordered to pay plaintiff-appellant the sum of One Hundred Thousand Pesos (P100,000.00) by way of moral and
exemplary damages, at 6% interest per annum from the date of the filing of the Complaint until fully paid.

4
KAL and Lapuz filed their respective motions for reconsideration, which were both denied for lack of merit. Hence, the present
petitions for review which have been consolidated because of the identity of the parties and the similarity of the issues.
In G. R. No. 114061, KAL assails the decision of the appellate court on the following grounds:
1. That the Court of Appeals erred in concluding that petitioner committed a breach of contract of carriage
notwithstanding lack of proper, competent and sufficient evidence of the existence of such contract.
2. That the Court of Appeals erred in not according the proper evidentiary weight to some evidence presented and the fact
that private respondent did not have any boarding pass to prove that he was allowed to board and to prove that his airline
ticket was confirmed.
3. That the Court of Appeals erred in concluding that the standby passenger status of private respondent Lapuz was
changed to a confirmed status when his name was entered into the passenger manifest.
4. That the Court of Appeals abused its discretion in awarding moral and exemplary damages in the amount of
P100,000.00 in favor of private respondent notwithstanding its lack of basis and private respondent did not state such
amount in his complaint nor had private respondent proven the said damages.
5. That the Court of Appeals erred in dismissing the counterclaims.
6. That the Court of Appeals erred in dismissing the counterclaim of petitioner against Pan Pacific.
7. That the Court of Appeals erred in ruling that the 6% per annum legal interest on the judgment shall be computed from
the filing of the complaint.
In G. R. No. 113842, Lapuz seeks: (a) the setting aside of the decision of the Court of Appeals insofar as it modifies the award of
damages; b) actual and compensatory damages in the sum equivalent to 5 years' loss of earnings based on the petitioner's monthly
salary of 1,600 Saudi rials at the current conversion rate plus the cost of baggage and personal belongings worth P2,000 and the
service fee of P3,000 paid to the recruiting agency, all with legal interest from the filing of the complaint until fully paid; c) moral
damages of not less than P1 million and exemplary damages of not less than P500,000.00, both with interest at 6% per annum from
the filing of the complaint; and d) attorney's fees in the sum equivalent to 30% of the award of damages.
It is evident that the issues raised in these petitions relate mainly to the correctness of the factual findings of the Court of Appeals
and the award of damages. The Court has consistently affirmed that the findings of fact of the Court of Appeals and the other lower
courts are as a rule binding upon it, subject to certain exceptions. As nothing in the record indicates any of such exceptions, the
factual conclusions of the appellate court must be affirmed.
The status of Lapuz as standby passenger was changed to that of a confirmed passenger when his name was entered in the
passenger manifest of KAL for its Flight No. KE 903. His clearance through immigration and customs clearly shows that he had
indeed been confirmed as a passenger of KAL in that flight. KAL thus committed a breach of the contract of carriage between them
when it failed to bring Lapuz to his destination.
This Court has held that a contract to transport passengers is different in kind and degree from any other contractual relation. 3 The
business of the carrier is mainly with the traveling public. It invites people to avail themselves of the comforts and advantages it
offers. The contract of air carriage generates a relation attended with a public duty. Passengers have the right to be treated by the
carrier's employees with kindness, respect, courtesy and due consideration. They are entitled to be protected against personal
misconduct, injurious language, indignities and abuses from such employees. 4 So it is that any discourteous conduct on the part of
these employees toward a passenger gives the latter an action for damages against the carrier.
The breach of contract was aggravated in this case when, instead of courteously informing Lapuz of his being a "wait-listed"
passenger, a KAL officer rudely shouted "Down! Down!" while pointing at him, thus causing him embarrassment and public
humiliation.
KAL argues that "the evidence of confirmation of a chance passenger status is not through the entry of the name of a chance
passenger in the passenger manifest nor the clearance from the Commission on Immigration and Deportation, because they are
merely means of facilitating the boarding of a chance passenger in case his status is confirmed." We are not persuaded.
The evidence presented by Lapuz shows that he had indeed checked in at the departure counter, passed through customs and
immigration, boarded the shuttle bus and proceeded to the ramp of KAL's aircraft. In fact, his baggage had already been loaded in
KAL's aircraft, to be flown with him to Jeddah. The contract of carriage between him and KAL had already been perfected when he
was summarily and insolently prevented from boarding the aircraft.
KAL's allegation that the respondent court abused its discretion in awarding moral and exemplary damages is also not tenable.
The Court of Appeals granted moral and exemplary damages because:
The findings of the court a quo that the defendant-appellant has committed breach of contract of carriage in bad faith
and in wanton, disregard of plaintiff-appellant's rights as passenger laid the basis and justification of an award for moral
damages.
xxxx
In the instant case, we find that defendant-appellant Korean Air Lines acted in a wanton, fraudulent, reckless, oppressive
or malevolent manner when it "bumped off" plaintiff-appellant on November 8, 1980, and in addition treated him rudely
and arrogantly as a "patay gutom na contract worker fighting Korean Air Lines," which clearly shows malice and bad
faith, thus entitling plaintiff-appellant to moral damages.
xxxx
Considering that the plaintiff-appellant's entitlement to moral damages has been fully established by oral and
documentary evidence, exemplary damages may be awarded. In fact, exemplary damages may be awarded, even
though not so expressly pleaded in the complaint (Kapoe vs. Masa, 134 SCRA 231). By the same token, to provide an
example for the public good, an award of exemplary damages is also proper (Armovit vs. Court of Appeals, supra).

On the other hand, Lapuz's claim that the award of P100,000.00 as moral and exemplary damages is inadequate is not acceptable
either. His prayer for moral damages of not less than P1 million and exemplary damages of not less than P500,000.00 is overblown.
The well-entrenched principle is that moral damages depend upon the discretion of the court based on the circumstances of each
case. 5 This discretion is limited by the principle that the "amount awarded should not be palpably and scandalously excessive" as to
indicate that it was the result of prejudice or corruption on the part of the trial court. 6Damages are not intended to enrich the
complainant at the expense of the defendant. They are awarded only to alleviate the moral suffering that the injured party had
undergone by reason of the defendant's culpable action. 7 There is no hard-and-fast rule in the determination of what would be a fair
amount of moral damages since each case must be governed by its own peculiar facts.
A review of the record of this case shows that the injury suffered by Lapuz is not so serious or extensive as to warrant an award of
P1.5 million. The assessment of P100,000 as moral and exemplary damages in his favor is, in our view, reasonable and realistic.
Lapuz likewise claims that the respondent court could not rule upon the propriety of the award of actual damages because it had not
been assigned as an error by KAL. Not so. The rule is that only errors specifically assigned and properly argued in the brief will be
considered except errors affecting jurisdiction over the subject matter and plain as well as clerical errors. 8 But this is not without
qualification for, as the Court held in Vda. de Javellana vs. Court of Appeals: 9
. . . [T]he Court is clothed with ample authority to review matters, even if they are not assigned as errors in
their appeal, if it finds that their consideration is necessary in arriving at a just decision of the case.
A similar pronouncement was made in Baquiran vs. Court of Appeals 10 in this wise:
Issues, though not specifically raised in the pleading in the appellate court, may, in the interest of justice, be
properly considered by said court in deciding a case, if they are questions raised in the trial court and are
matters of record having some bearing on the issue submitted which the parties failed to raise or the lower
court ignored.
The Court of Appeals was therefore justified in decreasing the award of actual damages even if the issue was not assigned as an
error by KAL. Consideration of this question was necessary for the just and complete resolution of the present case. Furthermore,
there was enough evidence to warrant the reduction of the original award, as the challenged decision correctly observed:
A perusal of the plaintiff-appellant's contract of employment shows that the effectivity of the contract is for only one
year, renewable every year for five years. Although plaintiff-appellant intends to renew his contract, such renewal will

5
 still be subject to his foreign employer. Plaintiff-appellant had not yet started working with his foreign employer,
hence, there can be no basis as to whether his contract will be renewed by his foreign employer or not. Thus, the
damages representing the loss of earnings of plaintiff-appellant in the renewal of the contract of employment is at
most speculative. Damages may not be awarded on the basis of speculation or conjecture (Gachalian vs. Delim, 203
SCRA 126). Hence, defendant-appellant's liability is limited to the one year contract only. Plaintiff-appellant is,
therefore, entitled only to his lost earnings for one year, i.e., P60,000.00, which is 1/5 of P300,000.00, the total
amount of actual damages, representing lost earnings for five years prayed for in the Complaint.
Plaintiff-appellant's contention that in computing his lost earnings, the current rate of the Saudi Rial to the Philippine
Peso at the time of payment should be used, is untenable, considering that in his Complaint, plaintiff-appellant has
quantified in Philippine Peso his lost earnings for five years.
We disagree with the respondent court, however, on the date when the legal interest should commence to run. The rule is that the
legal interest of six percent (6%) on the amounts adjudged in favor of Lapuz should resume from the time of the rendition of the trial
court's decision instead of November 28, 1980, the date of the filing of the complaint.
On this matter, the Court has held:
If suit were for payment of a definite sum of money, the contention might be tenable. However, if it is for damages,
unliquidated and not known until definitely ascertained, assessed and determined by the courts after proof, interest
should be from the date of the decision. 11
xxxx
The obligation to pay interest on a sum filed in a judgment exists from the date of the sentence, when so declared;
for until the net amount of the debtor's liability has been determined, he cannot he considered delinquent in the
fulfillment of his obligation to pay the debt with interest thereon. 12
Finally, we find that the respondent court did not err in sustaining the trial court's dismissal of KAL's counterclaim against Pan Pacific
Overseas Recruiting Services Inc., whose responsibility ended with the confirmation by KAL of Lapuz as its passenger in its Flight No.
903.

DANGWA TRANSPORTATION CO., INC. and THEODORE LARDIZABAL y MALECDAN, petitioners, vs. COURT OF APPEALS,
INOCENCIA CUDIAMAT, EMILIA CUDIAMAT BANDOY, FERNANDO CUDLAMAT, MARRIETA CUDIAMAT, NORMA CUDIAMAT,
DANTE CUDIAMAT, SAMUEL CUDIAMAT and LIGAYA CUDIAMAT, all Heirs of the late Pedrito Cudiamat represented by
Inocencia Cudiamat, respondents. G.R. No. 95582 October 7, 1991
REGALADO, J.:p
On May 13, 1985, private respondents filed a complaint 1 for damages against petitioners for the death of Pedrito Cudiamat as a
result of a vehicular accident which occurred on March 25, 1985 at Marivic, Sapid, Mankayan, Benguet. Among others, it was alleged
that on said date, while petitioner Theodore M. Lardizabal was driving a passenger bus belonging to petitioner corporation in a
reckless and imprudent manner and without due regard to traffic rules and regulations and safety to persons and property, it ran
over its passenger, Pedrito Cudiamat. However, instead of bringing Pedrito immediately to the nearest hospital, the said driver, in
utter bad faith and without regard to the welfare of the victim, first brought his other passengers and cargo to their respective
destinations before banging said victim to the Lepanto Hospital where he expired.
On the other hand, petitioners alleged that they had observed and continued to observe the extraordinary diligence required in the
operation of the transportation company and the supervision of the employees, even as they add that they are not absolute insurers
of the safety of the public at large. Further, it was alleged that it was the victim's own carelessness and negligence which gave rise
to the subject incident, hence they prayed for the dismissal of the complaint plus an award of damages in their favor by way of a
counterclaim.
On July 29, 1988, the trial court rendered a decision, effectively in favor of petitioners, with this decretal portion:
IN VIEW OF ALL THE FOREGOING, judgment is hereby pronounced that Pedrito Cudiamat was negligent, which negligence
was the proximate cause of his death. Nonetheless, defendants in equity, are hereby ordered to pay the heirs of Pedrito
Cudiamat the sum of P10,000.00 which approximates the amount defendants initially offered said heirs for the amicable
settlement of the case. No costs.
SO ORDERED. 2
Not satisfied therewith, private respondents appealed to the Court of Appeals which, in a decision 3 in CA-G.R. CV No. 19504
promulgated on August 14, 1990, set aside the decision of the lower court, and ordered petitioners to pay private respondents:
1. The sum of Thirty Thousand (P30,000.00) Pesos by way of indemnity for death of the victim Pedrito Cudiamat;
2. The sum of Twenty Thousand (P20,000.00) by way of moral damages;
3. The sum of Two Hundred Eighty Eight Thousand (P288,000.00) Pesos as actual and compensatory damages;
4. The costs of this suit. 4
Petitioners' motion for reconsideration was denied by the Court of Appeals in its resolution dated October 4, 1990, 5 hence this
petition with the central issue herein being whether respondent court erred in reversing the decision of the trial court and in finding
petitioners negligent and liable for the damages claimed.
It is an established principle that the factual findings of the Court of Appeals as a rule are final and may not be reviewed by this
Court on appeal. However, this is subject to settled exceptions, one of which is when the findings of the appellate court are contrary
to those of the trial court, in which case a reexamination of the facts and evidence may be undertaken. 6
In the case at bar, the trial court and the Court of Appeal have discordant positions as to who between the petitioners an the victim
is guilty of negligence. Perforce, we have had to conduct an evaluation of the evidence in this case for the prope calibration of their
conflicting factual findings and legal conclusions.
The lower court, in declaring that the victim was negligent, made the following findings:
This Court is satisfied that Pedrito Cudiamat was negligent in trying to board a moving vehicle, especially with one of his
hands holding an umbrella. And, without having given the driver or the conductor any indication that he wishes to board
the bus. But defendants can also be found wanting of the necessary diligence. In this connection, it is safe to assume that
when the deceased Cudiamat attempted to board defendants' bus, the vehicle's door was open instead of being closed.
This should be so, for it is hard to believe that one would even attempt to board a vehicle (i)n motion if the door of said
vehicle is closed. Here lies the defendant's lack of diligence. Under such circumstances, equity demands that there must
be something given to the heirs of the victim to assuage their feelings. This, also considering that initially, defendant
common carrier had made overtures to amicably settle the case. It did offer a certain monetary consideration to the
victim's heirs. 7
However, respondent court, in arriving at a different opinion, declares that:
From the testimony of appellees'own witness in the person of Vitaliano Safarita, it is evident that the subject bus was at
full stop when the victim Pedrito Cudiamat boarded the same as it was precisely on this instance where a certain Miss
Abenoja alighted from the bus. Moreover, contrary to the assertion of the appellees, the victim did indicate his intention to
board the bus as can be seen from the testimony of the said witness when he declared that Pedrito Cudiamat was no
longer walking and made a sign to board the bus when the latter was still at a distance from him. It was at the instance
when Pedrito Cudiamat was closing his umbrella at the platform of the bus when the latter made a sudden jerk movement
(as) the driver commenced to accelerate the bus.
Evidently, the incident took place due to the gross negligence of the appellee-driver in prematurely stepping on the
accelerator and in not waiting for the passenger to first secure his seat especially so when we take into account that the
platform of the bus was at the time slippery and wet because of a drizzle. The defendants-appellees utterly failed to
observe their duty and obligation as common carrier to the end that they should observe extra-ordinary diligence in the
vigilance over the goods and for the safety of the passengers transported by them according to the circumstances of each
case (Article 1733, New Civil Code). 8
After a careful review of the evidence on record, we find no reason to disturb the above holding of the Court of Appeals. Its aforesaid
findings are supported by the testimony of petitioners' own witnesses. One of them, Virginia Abalos, testified on cross-examination
as follows:

6
 Q It is not a fact Madam witness, that at bunkhouse 54, that is before the place of the incident, there is a crossing?
A The way going to the mines but it is not being pass(ed) by the bus.
Q And the incident happened before bunkhouse 56, is that not correct?
A It happened between 54 and 53 bunkhouses. 9
The bus conductor, Martin Anglog, also declared:
Q When you arrived at Lepanto on March 25, 1985, will you please inform this Honorable Court if there was anv unusual
incident that occurred?
A When we delivered a baggage at Marivic because a person alighted there between Bunkhouse 53 and 54.
Q What happened when you delivered this passenger at this particular place in Lepanto?
A When we reached the place, a passenger alighted and I signalled my driver. When we stopped we went out because I
saw an umbrella about a split second and I signalled again the driver, so the driver stopped and we went down and we
saw Pedrito Cudiamat asking for help because he was lying down.
Q How far away was this certain person, Pedrito Cudiamat, when you saw him lying down from the bus how far was he?
A It is about two to three meters.
Q On what direction of the bus was he found about three meters from the bus, was it at the front or at the back?
A At the back, sir. 10 (Emphasis supplied.)
The foregoing testimonies show that the place of the accident and the place where one of the passengers alighted were both
between Bunkhouses 53 and 54, hence the finding of the Court of Appeals that the bus was at full stop when the victim boarded the
same is correct. They further confirm the conclusion that the victim fell from the platform of the bus when it suddenly accelerated
forward and was run over by the rear right tires of the vehicle, as shown by the physical evidence on where he was thereafter found
in relation to the bus when it stopped. Under such circumstances, it cannot be said that the deceased was guilty of negligence.
The contention of petitioners that the driver and the conductor had no knowledge that the victim would ride on the bus, since the
latter had supposedly not manifested his intention to board the same, does not merit consideration. When the bus is not in motion
there is no necessity for a person who wants to ride the same to signal his intention to board. A public utility bus, once it stops, is in
effect making a continuous offer to bus riders. Hence, it becomes the duty of the driver and the conductor, every time the bus stops,
to do no act that would have the effect of increasing the peril to a passenger while he was attempting to board the same. The
premature acceleration of the bus in this case was a breach of such duty. 11
It is the duty of common carriers of passengers, including common carriers by railroad train, streetcar, or motorbus, to stop their
conveyances a reasonable length of time in order to afford passengers an opportunity to board and enter, and they are liable for
injuries suffered by boarding passengers resulting from the sudden starting up or jerking of their conveyances while they are doing
so. 12
Further, even assuming that the bus was moving, the act of the victim in boarding the same cannot be considered negligent under
the circumstances. As clearly explained in the testimony of the aforestated witness for petitioners, Virginia Abalos, th bus had "just
started" and "was still in slow motion" at the point where the victim had boarded and was on its platform. 13
It is not negligence per se, or as a matter of law, for one attempt to board a train or streetcar which is moving slowly. 14 An
ordinarily prudent person would have made the attempt board the moving conveyance under the same or similar circumstances.
The fact that passengers board and alight from slowly moving vehicle is a matter of common experience both the driver and
conductor in this case could not have been unaware of such an ordinary practice.
The victim herein, by stepping and standing on the platform of the bus, is already considered a passenger and is entitled all the
rights and protection pertaining to such a contractual relation. Hence, it has been held that the duty which the carrier passengers
owes to its patrons extends to persons boarding cars as well as to those alighting therefrom. 15
Common carriers, from the nature of their business and reasons of public policy, are bound to observe extraordina diligence for the
safety of the passengers transported by the according to all the circumstances of each case. 16 A common carrier is bound to carry
the passengers safely as far as human care and foresight can provide, using the utmost diligence very cautious persons, with a due
regard for all the circumstances. 17
It has also been repeatedly held that in an action based on a contract of carriage, the court need not make an express finding of
fault or negligence on the part of the carrier in order to hold it responsible to pay the damages sought by the passenger. By contract
of carriage, the carrier assumes the express obligation to transport the passenger to his destination safely and observe
extraordinary diligence with a due regard for all the circumstances, and any injury that might be suffered by the passenger is right
away attributable to the fault or negligence of the carrier. This is an exception to the general rule that negligence must be proved,
and it is therefore incumbent upon the carrier to prove that it has exercised extraordinary diligence as prescribed in Articles 1733
and 1755 of the Civil Code. 18
Moreover, the circumstances under which the driver and the conductor failed to bring the gravely injured victim immediately to the
hospital for medical treatment is a patent and incontrovertible proof of their negligence. It defies understanding and can even be
stigmatized as callous indifference. The evidence shows that after the accident the bus could have forthwith turned at Bunk 56 and
thence to the hospital, but its driver instead opted to first proceed to Bunk 70 to allow a passenger to alight and to deliver a
refrigerator, despite the serious condition of the victim. The vacuous reason given by petitioners that it was the wife of the deceased
who caused the delay was tersely and correctly confuted by respondent court:
... The pretension of the appellees that the delay was due to the fact that they had to wait for about twenty minutes for
Inocencia Cudiamat to get dressed deserves scant consideration. It is rather scandalous and deplorable for a wife whose
husband is at the verge of dying to have the luxury of dressing herself up for about twenty minutes before attending to
help her distressed and helpless husband. 19
Further, it cannot be said that the main intention of petitioner Lardizabal in going to Bunk 70 was to inform the victim's family of the
mishap, since it was not said bus driver nor the conductor but the companion of the victim who informed his family thereof. 20 In
fact, it was only after the refrigerator was unloaded that one of the passengers thought of sending somebody to the house of the
victim, as shown by the testimony of Virginia Abalos again, to wit:
Q Why, what happened to your refrigerator at that particular time?
A I asked them to bring it down because that is the nearest place to our house and when I went down and asked
somebody to bring down the refrigerator, I also asked somebody to call the family of Mr. Cudiamat.
COURT:
Q Why did you ask somebody to call the family of Mr. Cudiamat?
A Because Mr. Cudiamat met an accident, so I ask somebody to call for the family of Mr. Cudiamat.
Q But nobody ask(ed) you to call for the family of Mr. Cudiamat?
A No sir. 21
With respect to the award of damages, an oversight was, however, committed by respondent Court of Appeals in computing the
actual damages based on the gross income of the victim. The rule is that the amount recoverable by the heirs of a victim of a tort is
not the loss of the entire earnings, but rather the loss of that portion of the earnings which the beneficiary would have received. In
other words, only net earnings, not gross earnings, are to be considered, that is, the total of the earnings less expenses necessary in
the creation of such earnings or income and minus living and other incidental expenses. 22
We are of the opinion that the deductible living and other expense of the deceased may fairly and reasonably be fixed at P500.00 a
month or P6,000.00 a year. In adjudicating the actual or compensatory damages, respondent court found that the deceased was 48
years old, in good health with a remaining productive life expectancy of 12 years, and then earning P24,000.00 a year. Using the
gross annual income as the basis, and multiplying the same by 12 years, it accordingly awarded P288,000. Applying the aforestated
rule on computation based on the net earnings, said award must be, as it hereby is, rectified and reduced to P216,000.00. However,
in accordance with prevailing jurisprudence, the death indemnity is hereby increased to P50,000.00. 23
WHEREFORE, subject to the above modifications, the challenged judgment and resolution of respondent Court of Appeals are hereby
AFFIRMED in all other respects. SO ORDERED.

7
This is still another case of the maltreatment of our overseas contract workers, this time by the airline supposed to bring the
passenger to his foreign assignment. Our OCW's sacrifice much in seeking employment abroad, where they are deprived of the
company of their loved ones, the direct protection of our laws, and the comfort of our own native culture and way of life. This Court
shall exert every effort to vindicate their rights when they are abused and shall accord them the commensurate reparation of their
injuries consistent with their dignity and worth as members of the working class.
WHEREFORE, the appealed judgment is AFFIRMED, but with the modification that the legal interest on the damages awarded to
private respondent should commence from the date of the decision of the trial court on November 14, 1990. The parties shall bear
their own costs. SO ORDERED.

FACTS:
May 13, 1985: Theodore M. Lardizabal was driving a passenger bus belonging to Dangwa Transportation Co. Inc. (Dangwa)

The bus was at full stop bet. Bunkhouses 53 and 54 when Pedro alighted
Pedro Cudiamat fell from the platform of the bus when it suddenly accelerated forward
Pedro was ran over by the rear right tires of the vehicle
Theodore first brought his other passengers and cargo to their respective destinations before bringing Pedro to
Lepanto Hospital where he expired
Private respondents filed a complaint for damages against Dangwa for the death of Pedro Cudiamat
Dangwa: observed and continued to observe the extraordinary diligence required in the operation of the co. and
the supervision of the employees even as they are not absolute insurers of the public at large
RTC: in favour of Dangwa holding Pedrito as negligent and his negligence was the cause of his death but still ordered to
pay in equity P 10,000 to the heirs of Pedrito
CA: reversed and ordered to pay Pedrito indemnity, moral damages, actual and compensatory damages and cost of the
suit
ISSUE: W/N Dangwa should be held liable for the negligence of its driver Theodore
HELD: YES. CA affirmed.
A public utility once it stops, is in effect making a continuous offer to bus riders (EVEN when moving as long as it is still
slow in motion)
Duty of the driver: do NOT make acts that would have the effect of increasing peril to a passenger while he is
attempting to board the same
Premature acceleration of the bus in this case = breach of duty
Stepping and standing on the platform of the bus is already considered a passenger and is entitled all the rights and
protection pertaining to such a contractual relation
Duty extends to boarding and alighting
GR: By contract of carriage, the carrier assumes the express obligation to transport the passenger to his destination safely
and observe extraordinary diligence with a due regard for all the circumstances, and any injury that might be suffered by the
passenger is right away attributable to the fault or negligence of the carrier
EX: carrier to prove that it has exercised extraordinary diligence as prescribed in Art. 1733 and 1755 of the Civil Code
Failure to immediately bring Pedrito to the hospital despite his serious condition = patent and incontrovertible proof of
their negligence
Hospital was in Bunk 56
1st proceeded to Bunk 70 to allow a passenger (who later called the family of Pedrito on his own will) to alight
and deliver a refrigerator
In tort, actual damages is based on net earnings

VDA. DE NUECA v. MANILA RAILROAD CO. 13 CAR 49 (1968)

Facts:
- At 3 p.m. on Dec. 22, 1958, Fermin Nueca brought 7 sacks of palay to Manila Railroad Co. (MRC) at its station in Barrio del
Rosario, Camarines Sur, to be shipped to the municipality of Libmanan of the same province.
- He paid P 0.70 as freight charge and was issued Way Bill No. 56515.
- The cargo was loaded on the freight wagon of Train 537. Passengers boarded the train and shunting operations started to
hook a wagon thereto.
- Before the train reached the turnoff switch, its passenger coach fell on its side some 40 m from the station. The wagon
pinned Nueca, killing him instantly.
- Nuecas widow and children bring this claim for damages, alleging that the Nueca was a passenger and his death was
caused by MRCs negligence.
- MRC disclaimed liability stating: (1) it exercised due care in safeguarding the passengers during the shunting operation,
(2) Nueca was not a passenger but a trespasser, (3) even if Nueca were a passenger, he illegally boarded the train without
permission by not paying the fare, (4) the mishap was not attributable to any defect in MRC equipment, (5) that the
accident happened due to force majeur.
- MRC presented evidence showing there was no mechanical defect, but it did not explain why the accident occurred or
show that force majeur caused the mishap.
- The lower court absolved MRC of liability and held that Nueca was a trespasser since he did not buy any ticket, and in any
case, was not in a proper place for passengers.
Issue:
1. W/N Nueca was a passenger?
2. W/N MRC is liable?
3. Was the accident due to MRCs negligence or force majeur?
4. Is Nueca liable for contributory negligence?
Held:
1. No, Nueca was not a passenger thus, MRC did not owe him extraordinary diligence.
A passenger is one who travels in a public conveyance by virtue of a contract, express or implied, with the carrier as to the payment
of the fare, or that which is accepted as an equivalent.
The relation of passenger and carrier commences when one puts himself in the care of the carrier, or directly under its control, with
the bona fide intention of becoming a passenger, and is accepted as such by the carrier as where he makes a contract for
trasportation and presents himself at the proper place and in a proper manner to be transported.
Even disregarding the matter of tickets, and assuming Nueca intended to be a passenger, he was never accepted as such by MRC as
he did not present himself at the proper place and in a proper manner to be transported.
2. Yes, the liability of railroad companies to persons upon the premises is determined by the general rules of negligence
relating to duties of owners/occupiers of property.
While railroad companies are not bound to the same degree of care in regard to strangers who are unlawfully upon the premises of
its passengers, it may still be liable to such strangers for negligent or tortious acts.
Here, Nueca was not on the track, but either unlawfully inside the baggage car or beside the track.
It is normal for people to walk on the track or roadbed when there is no oncoming train and to walk beside the track when a train
passes. This practice is tolerated by MRC. Generally, MRCs stations are not enclosed, and is easily accessible to the public.
3. MRC is negligent; doctrine of res ipsa loquitur applied.

8
The train was under the complete control of the railroad company at the time of the accident. The baggage car would not have been
derailed if the train had been properly operated.
Res ipsa loquitur is a rule of evidence peculiar to the law of negligence which recognizes that prima facie negligence may be
established without direct proof and furnishes a substitute for specific proof of negligence.
4. No.
An invitation to stay in the premises is implied from the lack of prohibition to outsiders to keep off the premises, hence, a stranger
who is injured by a derailed train while staying beside a railroad track is not guilty of contributory negligence.
Note: Our law on common carriers is lifted from Anglo-American statutes.

LIGHT RAIL TRANSIT AUTHORITY & RODOLFO ROMAN, petitioners, vs. MARJORIE NAVIDAD, Heirs of the Late NICANOR
NAVIDAD & PRUDENT SECURITY AGENCY, respondents. [G.R. No. 145804. February 6, 2003]

VITUG, J.:

The case before the Court is an appeal from the decision and resolution of the Court of Appeals, promulgated on 27 April 2000
and 10 October 2000, respectively, in CA-G.R. CV No. 60720, entitled Marjorie Navidad and Heirs of the Late Nicanor Navidad vs.
Rodolfo Roman, et. al., which has modified the decision of 11 August 1998 of the Regional Trial Court, Branch 266, Pasig City,
exonerating Prudent Security Agency (Prudent) from liability and finding Light Rail Transit Authority (LRTA) and Rodolfo Roman liable
for damages on account of the death of Nicanor Navidad.

On 14 October 1993, about half an hour past seven oclock in the evening, Nicanor Navidad, then drunk, entered the EDSA LRT
station after purchasing a token (representing payment of the fare). While Navidad was standing on the platform near the LRT
tracks, Junelito Escartin, the security guard assigned to the area approached Navidad. A misunderstanding or an altercation between
the two apparently ensued that led to a fist fight. No evidence, however, was adduced to indicate how the fight started or who,
between the two, delivered the first blow or how Navidad later fell on the LRT tracks. At the exact moment that Navidad fell, an LRT
train, operated by petitioner Rodolfo Roman, was coming in. Navidad was struck by the moving train, and he was killed
instantaneously.

On 08 December 1994, the widow of Nicanor, herein respondent Marjorie Navidad, along with her children, filed a complaint
for damages against Junelito Escartin, Rodolfo Roman, the LRTA, the Metro Transit Organization, Inc. (Metro Transit), and Prudent for
the death of her husband. LRTA and Roman filed a counterclaim against Navidad and a cross-claim against Escartin and
Prudent. Prudent, in its answer, denied liability and averred that it had exercised due diligence in the selection and supervision of its
security guards.

The LRTA and Roman presented their evidence while Prudent and Escartin, instead of presenting evidence, filed a demurrer
contending that Navidad had failed to prove that Escartin was negligent in his assigned task. On 11 August 1998, the trial court
rendered its decision; it adjudged:

WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants Prudent Security and Junelito
Escartin ordering the latter to pay jointly and severally the plaintiffs the following:

a) 1) Actual damages of P44,830.00;

2) Compensatory damages of P443,520.00;

3) Indemnity for the death of Nicanor Navidad in the sum of P50,000.00;

b) Moral damages of P50,000.00;

c) Attorneys fees of P20,000;

d) Costs of suit.

The complaint against defendants LRTA and Rodolfo Roman are dismissed for lack of merit.

The compulsory counterclaim of LRTA and Roman are likewise dismissed.[1]

Prudent appealed to the Court of Appeals. On 27 August 2000, the appellate court promulgated its now assailed decision exonerating Prudent from
any liability for the death of Nicanor Navidad and, instead, holding the LRTA and Roman jointly and severally liable thusly:

WHEREFORE, the assailed judgment is hereby MODIFIED, by exonerating the appellants from any liability for the death of Nicanor Navidad, Jr.Instead,
appellees Rodolfo Roman and the Light Rail Transit Authority (LRTA) are held liable for his death and are hereby directed to pay jointly and severally to the
plaintiffs-appellees, the following amounts:

a) P44,830.00 as actual damages;

b) P50,000.00 as nominal damages;

c) P50,000.00 as moral damages;

d) P50,000.00 as indemnity for the death of the deceased; and

e) P20,000.00 as and for attorneys fees.[2]

9
 The appellate court ratiocinated that while the deceased might not have then as yet boarded the train, a contract of carriage
theretofore had already existed when the victim entered the place where passengers were supposed to be after paying the fare and
getting the corresponding token therefor. In exempting Prudent from liability, the court stressed that there was nothing to link the
security agency to the death of Navidad. It said that Navidad failed to show that Escartin inflicted fist blows upon the victim and the
evidence merely established the fact of death of Navidad by reason of his having been hit by the train owned and managed by the
LRTA and operated at the time by Roman. The appellate court faulted petitioners for their failure to present expert evidence to
establish the fact that the application of emergency brakes could not have stopped the train.

The appellate court denied petitioners motion for reconsideration in its resolution of 10 October 2000.

In their present recourse, petitioners recite alleged errors on the part of the appellate court; viz:

I. THE HONORABLE COURT OF APPEALS GRAVELY ERRED BY DISREGARDING THE FINDINGS OF FACTS BY THE TRIAL COURT

II.THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT PETITIONERS ARE LIABLE FOR THE DEATH OF NICANOR
NAVIDAD, JR.

III.THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT RODOLFO ROMAN IS AN EMPLOYEE OF LRTA. [3]

Petitioners would contend that the appellate court ignored the evidence and the factual findings of the trial court by holding
them liable on the basis of a sweeping conclusion that the presumption of negligence on the part of a common carrier was not
overcome. Petitioners would insist that Escartins assault upon Navidad, which caused the latter to fall on the tracks, was an act of a
stranger that could not have been foreseen or prevented. The LRTA would add that the appellate courts conclusion on the existence
of an employer-employee relationship between Roman and LRTA lacked basis because Roman himself had testified being an
employee of Metro Transit and not of the LRTA.

Respondents, supporting the decision of the appellate court, contended that a contract of carriage was deemed created from
the moment Navidad paid the fare at the LRT station and entered the premises of the latter, entitling Navidad to all the rights and
protection under a contractual relation, and that the appellate court had correctly held LRTA and Roman liable for the death of
Navidad in failing to exercise extraordinary diligence imposed upon a common carrier.

Law and jurisprudence dictate that a common carrier, both from the nature of its business and for reasons of public policy, is
burdened with the duty of exercising utmost diligence in ensuring the safety of passengers. [4] The Civil Code, governing the liability
of a common carrier for death of or injury to its passengers, provides:

Article 1755. A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the
utmost diligence of very cautious persons, with a due regard for all the circumstances.

Article 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary diligence as prescribed in articles 1733 and 1755.

Article 1759. Common carriers are liable for the death of or injuries to passengers through the negligence or willful acts of the
formers employees, although such employees may have acted beyond the scope of their authority or in violation of the orders of the
common carriers.

This liability of the common carriers does not cease upon proof that they exercised all the diligence of a good father of a family in
the selection and supervision of their employees.

Article 1763. A common carrier is responsible for injuries suffered by a passenger on account of the willful acts or negligence of
other passengers or of strangers, if the common carriers employees through the exercise of the diligence of a good father of a
family could have prevented or stopped the act or omission.

The law requires common carriers to carry passengers safely using the utmost diligence of very cautious persons with due
regard for all circumstances.[5] Such duty of a common carrier to provide safety to its passengers so obligates it not only during the
course of the trip but for so long as the passengers are within its premises and where they ought to be in pursuance to the contract
of carriage.[6] The statutory provisions render a common carrier liable for death of or injury to passengers (a) through
the negligence or wilful acts of its employees or b) on account of wilful acts or negligence of other passengers or of
strangers if the common carriers employees through the exercise of due diligence could have prevented or stopped
the act or omission.[7] In case of such death or injury, a carrier is presumed to have been at fault or been negligent, and [8] by
simple proof of injury, the passenger is relieved of the duty to still establish the fault or negligence of the carrier or of its employees
and the burden shifts upon the carrier to prove that the injury is due to an unforeseen event or to force majeure. [9] In the absence of
satisfactory explanation by the carrier on how the accident occurred, which petitioners, according to the appellate court, have failed
to show, the presumption would be that it has been at fault, [10] an exception from the general rule that negligence must be proved.
[11]

The foundation of LRTAs liability is the contract of carriage and its obligation to indemnify the victim arises from the breach of
that contract by reason of its failure to exercise the high diligence required of the common carrier. In the discharge of its
commitment to ensure the safety of passengers, a carrier may choose to hire its own employees or avail itself of the services of an
outsider or an independent firm to undertake the task. In either case, the common carrier is not relieved of its responsibilities under
the contract of carriage.

Should Prudent be made likewise liable? If at all, that liability could only be for tort under the provisions of Article 2176 [12] and
related provisions, in conjunction with Article 2180, [13] of the Civil Code. The premise, however, for the employers liability is
negligence or fault on the part of the employee. Once such fault is established, the employer can then be made liable on the basis
of the presumption juris tantum that the employer failed to exercise diligentissimi patris families in the selection and supervision of
its employees. The liability is primary and can only be negated by showing due diligence in the selection and supervision of the

10
employee, a factual matter that has not been shown.Absent such a showing, one might ask further, how then must the liability of
the common carrier, on the one hand, and an independent contractor, on the other hand, be described? It would be solidary. A
contractual obligation can be breached by tort and when the same act or omission causes the injury, one resulting in culpa
contractual and the other in culpa aquiliana, Article 2194[14] of the Civil Code can well apply. [15] In fine, a liability for tort may arise
even under a contract, where tort is that which breaches the contract. [16] Stated differently, when an act which constitutes a breach
of contract would have itself constituted the source of a quasi-delictual liability had no contract existed between the parties, the
contract can be said to have been breached by tort, thereby allowing the rules on tort to apply. [17]

Regrettably for LRT, as well as perhaps the surviving spouse and heirs of the late Nicanor Navidad, this Court is concluded by
the factual finding of the Court of Appeals that there is nothing to link (Prudent) to the death of Nicanor (Navidad), for the reason
that the negligence of its employee, Escartin, has not been duly proven x x x. This finding of the appellate court is not without
substantial justification in our own review of the records of the case.

There being, similarly, no showing that petitioner Rodolfo Roman himself is guilty of any culpable act or omission, he must
also be absolved from liability. Needless to say, the contractual tie between the LRT and Navidad is not itself a juridical relation
between the latter and Roman; thus, Roman can be made liable only for his own fault or negligence.

The award of nominal damages in addition to actual damages is untenable. Nominal damages are adjudicated in order that a
right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose
of indemnifying the plaintiff for any loss suffered by him. [18] It is an established rule that nominal damages cannot co-exist with
compensatory damages.[19]

WHEREFORE, the assailed decision of the appellate court is AFFIRMED with MODIFICATION but only in that (a) the award of
nominal damages is DELETED and (b) petitioner Rodolfo Roman is absolved from liability. No costs. SO ORDERED.

Carriage of goods

MAURO GANZON, petitioner, vs. COURT OF APPEALS and GELACIO E. TUMAMBING, respondents. G.R. No. L-48757 May
30, 1988
SARMIENTO, J.:
The private respondent instituted in the Court of First Instance of Manila 1 an action against the petitioner for damages based on
culpa contractual. The antecedent facts, as found by the respondent Court, 2 are undisputed:
On November 28, 1956, Gelacio Tumambing contracted the services of Mauro B. Ganzon to haul 305 tons of scrap iron from
Mariveles, Bataan, to the port of Manila on board the lighter LCT "Batman" (Exhibit 1, Stipulation of Facts, Amended Record on
Appeal, p. 38). Pursuant to that agreement, Mauro B. Ganzon sent his lighter "Batman" to Mariveles where it docked in three feet of
water (t.s.n., September 28, 1972, p. 31). On December 1, 1956, Gelacio Tumambing delivered the scrap iron to defendant Filomeno
Niza, captain of the lighter, for loading which was actually begun on the same date by the crew of the lighter under the captain's
supervision. When about half of the scrap iron was already loaded (t.s.n., December 14, 1972, p. 20), Mayor Jose Advincula of
Mariveles, Bataan, arrived and demanded P5,000.00 from Gelacio Tumambing. The latter resisted the shakedown and after a heated
argument between them, Mayor Jose Advincula drew his gun and fired at Gelacio Tumambing (t.s.n., March 19, 1971, p. 9;
September 28, 1972, pp. 6-7The gunshot was not fatal but Tumambing had to be taken to a hospital in Balanga, Bataan, for
treatment (t.s.n., March 19, 1971, p. 13; September 28, 1972, p. 15).
After sometime, the loading of the scrap iron was resumed. But on December 4, 1956, Acting Mayor Basilio Rub, accompanied by
three policemen, ordered captain Filomeno Niza and his crew to dump the scrap iron (t.s.n., June 16, 1972, pp. 8-9) where the lighter
was docked (t.s.n., September 28, 1972, p. 31). The rest was brought to the compound of NASSCO (Record on Appeal, pp. 20-22).
Later on Acting Mayor Rub issued a receipt stating that the Municipality of Mariveles had taken custody of the scrap iron (Stipulation
of Facts, Record on Appeal, p. 40; t.s.n., September 28, 1972, p. 10.)
On the basis of the above findings, the respondent Court rendered a decision, the dispositive portion of which states:
WHEREFORE, the decision appealed from is hereby reversed and set aside and a new one entered ordering defendant-
appellee Mauro Ganzon to pay plaintiff-appellant Gelacio E. Tumambimg the sum of P5,895.00 as actual damages, the
sum of P5,000.00 as exemplary damages, and the amount of P2,000.00 as attorney's fees. Costs against defendant-
appellee Ganzon. 3
In this petition for review on certiorari, the alleged errors in the decision of the Court of Appeals are:
I. THE COURT OF APPEALS FINDING THE HEREIN PETITIONER GUILTY OF BREACH OF THE CONTRACT OF TRANSPORTATION AND IN
IMPOSING A LIABILITY AGAINST HIM COMMENCING FROM THE TIME THE SCRAP WAS PLACED IN HIS CUSTODY AND CONTROL HAVE
NO BASIS IN FACT AND IN LAW.
II. THE APPELLATE COURT ERRED IN CONDEMNING THE PETITIONER FOR THE ACTS OF HIS EMPLOYEES IN DUMPING THE SCRAP INTO
THE SEA DESPITE THAT IT WAS ORDERED BY THE LOCAL GOVERNMENT OFFICIAL WITHOUT HIS PARTICIPATION.
III. THE APPELLATE COURT FAILED TO CONSIDER THAT THE LOSS OF THE SCRAP WAS DUE TO A FORTUITOUS EVENT AND THE
PETITIONER IS THEREFORE NOT LIABLE FOR LOSSES AS A CONSEQUENCE THEREOF. 4
The petitioner, in his first assignment of error, insists that the scrap iron had not been unconditionally placed under his custody and
control to make him liable. However, he completely agrees with the respondent Court's finding that on December 1, 1956, the
private respondent delivered the scraps to Captain Filomeno Niza for loading in the lighter "Batman," That the petitioner, thru his
employees, actually received the scraps is freely admitted. Significantly, there is not the slightest allegation or showing of any
condition, qualification, or restriction accompanying the delivery by the private respondent-shipper of the scraps, or the receipt of
the same by the petitioner. On the contrary, soon after the scraps were delivered to, and received by the petitioner-common carrier,
loading was commenced.
By the said act of delivery, the scraps were unconditionally placed in the possession and control of the common carrier, and upon
their receipt by the carrier for transportation, the contract of carriage was deemed perfected. Consequently, the petitioner-carrier's
extraordinary responsibility for the loss, destruction or deterioration of the goods commenced. Pursuant to Art. 1736, such
extraordinary responsibility would cease only upon the delivery, actual or constructive, by the carrier to the consignee, or to the
person who has a right to receive them. 5 The fact that part of the shipment had not been loaded on board the lighter did not impair
the said contract of transportation as the goods remained in the custody and control of the carrier, albeit still unloaded.
The petitioner has failed to show that the loss of the scraps was due to any of the following causes enumerated in Article 1734 of
the Civil Code, namely:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act of competent public authority.
Hence, the petitioner is presumed to have been at fault or to have acted negligently. 6 By reason of this presumption, the court is
not even required to make an express finding of fault or negligence before it could hold the petitioner answerable for the breach of
the contract of carriage. Still, the petitioner could have been exempted from any liability had he been able to prove that he observed
extraordinary diligence in the vigilance over the goods in his custody, according to all the circumstances of the case, or that the loss

11
was due to an unforeseen event or to force majeure. As it was, there was hardly any attempt on the part of the petitioner to prove
that he exercised such extraordinary diligence.
It is in the second and third assignments of error where the petitioner maintains that he is exempt from any liability because the loss
of the scraps was due mainly to the intervention of the municipal officials of Mariveles which constitutes a caso fortuito as defined in
Article 1174 of the Civil Code. 7
We cannot sustain the theory of caso fortuito. In the courts below, the petitioner's defense was that the loss of the scraps was due to
an "order or act of competent public authority," and this contention was correctly passed upon by the Court of Appeals which ruled
that:
... In the second place, before the appellee Ganzon could be absolved from responsibility on the ground that he was
ordered by competent public authority to unload the scrap iron, it must be shown that Acting Mayor Basilio Rub had the
power to issue the disputed order, or that it was lawful, or that it was issued under legal process of authority. The appellee
failed to establish this. Indeed, no authority or power of the acting mayor to issue such an order was given in evidence.
Neither has it been shown that the cargo of scrap iron belonged to the Municipality of Mariveles. What we have in the
record is the stipulation of the parties that the cargo of scrap iron was accilmillated by the appellant through separate
purchases here and there from private individuals (Record on Appeal, pp. 38-39). The fact remains that the order given by
the acting mayor to dump the scrap iron into the sea was part of the pressure applied by Mayor Jose Advincula to
shakedown the appellant for P5,000.00. The order of the acting mayor did not constitute valid authority for appellee
Mauro Ganzon and his representatives to carry out.
Now the petitioner is changing his theory to caso fortuito. Such a change of theory on appeal we cannot, however, allow. In any
case, the intervention of the municipal officials was not In any case, of a character that would render impossible the fulfillment by
the carrier of its obligation. The petitioner was not duty bound to obey the illegal order to dump into the sea the scrap iron.
Moreover, there is absence of sufficient proof that the issuance of the same order was attended with such force or intimidation as to
completely overpower the will of the petitioner's employees. The mere difficulty in the fullfilment of the obligation is not
considered force majeure. We agree with the private respondent that the scraps could have been properly unloaded at the shore or
at the NASSCO compound, so that after the dispute with the local officials concerned was settled, the scraps could then be delivered
in accordance with the contract of carriage.
There is no incompatibility between the Civil Code provisions on common carriers and Articles 361 8 and 362 9 of the Code of
Commerce which were the basis for this Court's ruling in Government of the Philippine Islands vs. Ynchausti & Co.10 and which the
petitioner invokes in tills petition. For Art. 1735 of the Civil Code, conversely stated, means that the shipper will suffer the losses and
deterioration arising from the causes enumerated in Art. 1734; and in these instances, the burden of proving that damages were
caused by the fault or negligence of the carrier rests upon him. However, the carrier must first establish that the loss or
deterioration was occasioned by one of the excepted causes or was due to an unforeseen event or to force majeure. Be that as it
may, insofar as Art. 362 appears to require of the carrier only ordinary diligence, the same is .deemed to have been modified by Art.
1733 of the Civil Code.
Finding the award of actual and exemplary damages to be proper, the same will not be disturbed by us. Besides, these were not
sufficiently controverted by the petitioner.
WHEREFORE, the petition is DENIED; the assailed decision of the Court of Appeals is hereby AFFIRMED. Costs against the petitioner.
This decision is IMMEDIATELY EXECUTORY.

Separate Opinions
MELENCIO-HERRERA, J., dissenting:
I am constrained to dissent.
It is my view that petitioner can not be held liable in damages for the loss and destruction of the scrap iron. The loss of said cargo
was due to an excepted cause an 'order or act of competent public authority" (Article 1734[5], Civil Code).
The loading of the scrap iron on the lighter had to be suspended because of Municipal Mayor Jose Advincula's intervention, who was
a "competent public authority." Petitioner had no control over the situation as, in fact, Tumambing himself, the owner of the cargo,
was impotent to stop the "act' of said official and even suffered a gunshot wound on the occasion.
When loading was resumed, this time it was Acting Mayor Basilio Rub, accompanied by three policemen, who ordered the dumping
of the scrap iron into the sea right where the lighter was docked in three feet of water. Again, could the captain of the lighter and his
crew have defied said order?
Through the "order" or "act" of "competent public authority," therefore, the performance of a contractual obligation was rendered
impossible. The scrap iron that was dumped into the sea was "destroyed" while the rest of the cargo was "seized." The seizure is
evidenced by the receipt issues by Acting Mayor Rub stating that the Municipality of Mariveles had taken custody of the scrap iron.
Apparently, therefore, the seizure and destruction of the goods was done under legal process or authority so that petitioner should
be freed from responsibility.
Art. 1743. If through order of public authority the goods are seized or destroyed, the common carrier is not
responsible, provided said public authority had power to issue the order.
Separate Opinions
MELENCIO-HERRERA, J., dissenting:
I am constrained to dissent.
It is my view that petitioner can not be held liable in damages for the loss and destruction of the scrap iron. The loss of said cargo
was due to an excepted cause an 'order or act of competent public authority" (Article 1734[5], Civil Code).
The loading of the scrap iron on the lighter had to be suspended because of Municipal Mayor Jose Advincula's intervention, who was
a "competent public authority." Petitioner had no control over the situation as, in fact, Tumambing himself, the owner of the cargo,
was impotent to stop the "act' of said official and even suffered a gunshot wound on the occasion.
When loading was resumed, this time it was Acting Mayor Basilio Rub, accompanied by three policemen, who ordered the dumping
of the scrap iron into the sea right where the lighter was docked in three feet of water. Again, could the captain of the lighter and his
crew have defied said order?
Through the "order" or "act" of "competent public authority," therefore, the performance of a contractual obligation was rendered
impossible. The scrap iron that was dumped into the sea was "destroyed" while the rest of the cargo was "seized." The seizure is
evidenced by the receipt issues by Acting Mayor Rub stating that the Municipality of Mariveles had taken custody of the scrap iron.
Apparently, therefore, the seizure and destruction of the goods was done under legal process or authority so that petitioner should
be freed from responsibility.
Art. 1743. If through order of public authority the goods are seized or destroyed, the common carrier is not
responsible, provided said public authority had power to issue the order.
FACTS: Gelacio > Ganzon (via Capt. Niza) > Lighter Batman (common carrier) (loaded half)
November 28, 1956: Gelacio Tumambing (Gelacio) contracted the services of of Mauro B. Ganzon to haul 305 tons of scrap
iron from Mariveles, Bataan, to the port of Manila on board the light LCT Batman
December 1, 1956: Gelacio delivered the scrap iron to Filomeno Niza, captain of the lighter, for loading which was actually
begun on the same date by the crew of the lighter under the captains supervisor.
When about half of the scrap iron was already loaded, Mayor Jose Advincula of Mariveles, Bataan arrived and demanded
P5000 from Gelacio
Upon resisting, the Mayor fired at Gelacio so he had to be taken to the hospital
Loading of the scrap iron was resumed
December 4, 1956: Acting Mayor Basilio Rub (Rub), accompanied by 3 policemen, ordered captain Filomeno Niza and his
crew to dump the scrap iron where the lighter was docked
Later on Rub had taken custody of the scrap iron
RTC: in favor of Gelacio and against Ganzon
ISSUE: W/N Ganzon should be held liable under the contract of carriage

12
HELD: YES. Petition is DENIED.
Ganzon thru his employees, actually received the scraps is freely admitted.
Pursuant to Art. 1736, such extraordinary responsibility would cease only upon the delivery, actual or constructive, by the
carrier to the consignee, or to the person who has a right to receive them.
The fact that part of the shipment had not been loaded on board the lighter did not impair the said contract of
transportation as the goods remained in the custody and control of the carrier, albeit still unloaded.
failed to show that the loss of the scraps was due to any of the following causes enumerated in Article 1734 of the Civil
Code, namely:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act of competent public authority.
Hence, the petitioner is presumed to have been at fault or to have acted negligently.
By reason of this presumption, the court is not even required to make an express finding of fault or negligence before it
could hold the petitioner answerable for the breach of the contract of carriage.
exempted from any liability had he been able to prove that he observed extraordinary diligence in the vigilance
over the goods in his custody, according to all the circumstances of the case, or that the loss was due to an unforeseen event
or to force majeure. As it was, there was hardly any attempt on the part of the petitioner to prove that he exercised such
extraordinary diligence.
We cannot sustain the theory of caso fortuito - "order or act of competent public authority"(Art. 1174 of the Civil Code)
no authority or power of the acting mayor to issue such an order was given in evidence. Neither has it been
shown that the cargo of scrap iron belonged to the Municipality of Mariveles.
Ganzon was not duty bound to obey the illegal order to dump into the sea the scrap iron.
Moreover, there is absence of sufficient proof that the issuance of the same order was attended with
such force or intimidation as to completely overpower the will of the petitioner's employees. The mere difficulty in the
fullfilment of the obligation is not considered force majeure.

COMPAIA MARITIMA, petitioner, vs. INSURANCE COMPANY OF NORTH AMERICA, respondent. G.R. No. L-18965
October 30, 1964
BAUTISTA ANGELO, J.:
Sometime in October, 1952, Macleod and Company of the Philippines contracted by telephone the services of the Compaia
Maritima, a shipping corporation, for the shipment of 2,645 bales of hemp from the former's Sasa private pier at Davao City to
Manila and for their subsequent transhipment to Boston, Massachusetts, U.S.A. on board the S.S. Steel Navigator. This oral contract
was later on confirmed by a formal and written booking issued by Macleod's branch office in Sasa and handcarried to Compaia
Maritima's branch office in Davao in compliance with which the latter sent to Macleod's private wharf LCT Nos. 1023 and 1025 on
which the loading of the hemp was completed on October 29, 1952. These two lighters were manned each by a patron and an
assistant patron. The patrons of both barges issued the corresponding carrier's receipts and that issued by the patron of Barge No.
1025 reads in part:
Received in behalf of S.S. Bowline Knot in good order and condition from MACLEOD AND COMPANY OF PHILIPPINES, Sasa
Davao, for transhipment at Manila onto S.S. Steel Navigator.
FINAL DESTINATION: Boston.
Thereafter, the two loaded barges left Macleod's wharf and proceeded to and moored at the government's marginal wharf in the
same place to await the arrival of the S.S. Bowline Knot belonging to Compaia Maritima on which the hemp was to be loaded.
During the night of October 29, 1952, or at the early hours of October 30, LCT No. 1025 sank, resulting in the damage or loss of
1,162 bales of hemp loaded therein. On October 30, 1952, Macleod promptly notified the carrier's main office in Manila and its
branch in Davao advising it of its liability. The damaged hemp was brought to Odell Plantation in Madaum, Davao, for cleaning,
washing, reconditioning, and redrying. During the period from November 1-15, 1952, the carrier's trucks and lighters hauled from
Odell to Macleod at Sasa a total of 2,197.75 piculs of the reconditioned hemp out of the original cargo of 1,162 bales weighing 2,324
piculs which had a total value of 116,835.00. After reclassification, the value of the reconditioned hemp was reduced to P84,887.28,
or a loss in value of P31,947.72. Adding to this last amount the sum of P8,863.30 representing Macleod's expenses in checking,
grading, rebating, and other fees for washing, cleaning and redrying in the amount of P19.610.00, the total loss adds up to
P60,421.02.
All abaca shipments of Macleod, including the 1,162 bales loaded on the carrier's LCT No. 1025, were insured with the Insurance
Company of North America against all losses and damages. In due time, Macleod filed a claim for the loss it suffered as above stated
with said insurance company, and after the same had been processed, the sum of P64,018.55 was paid, which was noted down in a
document which aside from being a receipt of the amount paid, was a subrogation agreement between Macleod and the insurance
company wherein the former assigned to the latter its rights over the insured and damaged cargo. Having failed to recover from the
carrier the sum of P60,421.02, which is the only amount supported by receipts, the insurance company instituted the present action
on October 28, 1953. After trial, the court a quo rendered judgment ordering the carrier to pay the insurance company the sum of
P60,421.02, with legal interest thereon from the date of the filing of the complaint until fully paid, and the costs. This judgment was
affirmed by the Court of Appeals on December 14, 1960. Hence, this petition for review.
The issues posed before us are: (1) Was there a contract of carriage between the carrier and the shipper even if the loss occurred
when the hemp was loaded on a barge owned by the carrier which was loaded free of charge and was not actually loaded on the
S.S. Bowline Knot which would carry the hemp to Manila and no bill of lading was issued therefore?; (2) Was the damage caused to
the cargo or the sinking of the barge where it was loaded due to a fortuitous event, storm or natural disaster that would exempt the
carrier from liability?; (3) Can respondent insurance company sue the carrier under its insurance contract as assignee of Macleod in
spite of the fact that the liability of the carrier as insurer is not recognized in this jurisdiction?; (4) Has the Court of Appeals erred in
regarding Exhibit NNN-1 as an implied admission by the carrier of the correctness and sufficiency of the shipper's statement of
accounts contrary to the burden of proof rule?; and (5) Can the insurance company maintain this suit without proof of its personality
to do so?
1. This issue should be answered in the affirmative. As found by the Court of Appeals, Macleod and Company contracted by
telephone the services of petitioner to ship the hemp in question from the former's private pier at Sasa, Davao City, to Manila, to be
subsequently transhipped to Boston, Massachusetts, U.S.A., which oral contract was later confirmed by a formal and written booking
issued by the shipper's branch office, Davao City, in virtue of which the carrier sent two of its lighters to undertake the service. It
also appears that the patrons of said lighters were employees of the carrier with due authority to undertake the transportation and
to sign the documents that may be necessary therefor so much so that the patron of LCT No. 1025 signed the receipt covering the
cargo of hemp loaded therein as follows: .
Received in behalf of S.S. Bowline Knot in good order and condition from MACLEOD AND COMPANY OF PHILIPPINES, Sasa
Davao, for transhipment at Manila onto S.S. Steel Navigator.
FINAL DESTINATION: Boston.
The fact that the carrier sent its lighters free of charge to take the hemp from Macleod's wharf at Sasa preparatory to its loading
onto the ship Bowline Knot does not in any way impair the contract of carriage already entered into between the carrier and the
shipper, for that preparatory step is but part and parcel of said contract of carriage. The lighters were merely employed as the first
step of the voyage, but once that step was taken and the hemp delivered to the carrier's employees, the rights and obligations of
the parties attached thereby subjecting them to the principles and usages of the maritime law. In other words, here we have a
complete contract of carriage the consummation of which has already begun: the shipper delivering the cargo to the carrier, and the
latter taking possession thereof by placing it on a lighter manned by its authorized employees, under which Macleod became
entitled to the privilege secured to him by law for its safe transportation and delivery, and the carrier to the full payment of its
freight upon completion of the voyage.
The receipt of goods by the carrier has been said to lie at the foundation of the contract to carry and deliver, and if
actually no goods are received there can be no such contract. The liability and responsibility of the carrier under a
contract for the carriage of goods commence on their actual delivery to, or receipt by, the carrier or an authorized

13
 agent. ... and delivery to a lighter in charge of a vessel for shipment on the vessel, where it is the custom to deliver in that
way, is a good delivery and binds the vessel receiving the freight, the liability commencing at the time of delivery to the
lighter. ... and, similarly, where there is a contract to carry goods from one port to another, and they cannot be loaded
directly on the vessel and lighters are sent by the vessel to bring the goods to it, the lighters are for the time its
substitutes, so that the bill of landing is applicable to the goods as soon as they are placed on the lighters. (80 C.J.S., p.
901, emphasis supplied)
... The test as to whether the relation of shipper and carrier had been established is, Had the control and possession of the
cotton been completely surrendered by the shipper to the railroad company? Whenever the control and possession of
goods passes to the carrier and nothing remains to be done by the shipper, then it can be said with certainty that the
relation of shipper and carrier has been established. Railroad Co. v. Murphy, 60 Ark. 333, 30 S.W. 419, 46 A. St. Rep. 202;
Pine Bluff & Arkansas River Ry. v. MaKenzie, 74 Ark. 100, 86 S.W. 834; Matthews & Hood v. St. L., I.M. & S.R. Co., 123 Ark.
365, 185 S.W. 461, L.R.A. 1916E, 1194. (W.F. Bogart & Co., et al. v. Wade, et al., 200 S.W. 148).
The claim that there can be no contract of affreightment because the hemp was not actually loaded on the ship that was to take it
from Davao City to Manila is of no moment, for, as already stated, the delivery of the hemp to the carrier's lighter is in line with the
contract. In fact, the receipt signed by the patron of the lighter that carried the hemp stated that he was receiving the cargo "in
behalf of S.S. Bowline Knot in good order and condition." On the other hand, the authorities are to the effect that a bill of lading is
not indispensable for the creation of a contract of carriage.
Bill of lading not indispensable to contract of carriage. As to the issuance of a bill of lading, although article 350 of the
Code of Commerce provides that "the shipper as well as the carrier of merchandise or goods may mutua-lly demand that
a bill of lading is not indispensable. As regards the form of the contract of carriage it can be said that provided that there
is a meeting of the minds and from such meeting arise rights and obligations, there should be no limitations as to form."
The bill of lading is not essential to the contract, although it may become obligatory by reason of the regulations of
railroad companies, or as a condition imposed in the contract by the agreement of the parties themselves. The bill of
lading is juridically a documentary proof of the stipulations and conditions agreed upon by both parties. (Del Viso, pp. 314-
315; Robles vs. Santos, 44 O.G. 2268). In other words, the Code does not demand, as necessary requisite in the contract
of transportation, the delivery of the bill of lading to the shipper, but gives right to both the carrier and the shipper to
mutually demand of each other the delivery of said bill. (Sp. Sup. Ct. Decision, May 6, 1895). (Martin, Philippine
Commercial Laws, Vol. II, Revised Edition, pp. 12-13)
The liability of the carrier as common carrier begins with the actual delivery of the goods for transportation, and not
merely with the formal execution of a receipt or bill of lading; the issuance of a bill of lading is not necessary to complete
delivery and acceptance. Even where it is provided by statute that liability commences with the issuance of the bill of
lading, actual delivery and acceptance are sufficient to bind the carrier. (13 C.J.S., p. 288)
2. Petitioner disclaims responsibility for the damage of the cargo in question shielding itself behind the claim of force majeure or
storm which occurred on the night of October 29, 1952. But the evidence fails to bear this out.
Rather, it shows that the mishap that caused the damage or loss was due, not to force majeure, but to lack of adequate precautions
or measures taken by the carrier to prevent the loss as may be inferred from the following findings of the Court of Appeals:
Aside from the fact that, as admitted by appellant's own witness, the ill-fated barge had cracks on its bottom (pp. 18-19,
t.s.n., Sept. 13, 1959) which admitted sea water in the same manner as rain entered "thru tank man-holes", according to
the patron of LCT No. 1023 (exh. JJJ-4) conclusively showing that the barge was not seaworthy it should be noted that
on the night of the nautical accident there was no storm, flood, or other natural disaster or calamity. Certainly, winds of 11
miles per hour, although stronger than the average 4.6 miles per hour then prevailing in Davao on October 29, 1952 (exh.
5), cannot be classified as storm. For according to Beaufort's wind scale, a storm has wind velocities of from 64 to 75 miles
per hour; and by Philippine Weather Bureau standards winds should have a velocity of from 55 to 74 miles per hour in
order to be classified as storm (Northern Assurance Co., Ltd. vs. Visayan Stevedore Transportation Co., CA-G.R. No. 23167-
R, March 12, 1959).
The Court of Appeals further added: "the report of R. J. del Pan & Co., Inc., marine surveyors, attributes the sinking of LCT No. 1025
to the 'non-water-tight conditions of various buoyancy compartments' (exh. JJJ); and this report finds confirmation on the above-
mentioned admission of two witnesses for appellant concerning the cracks of the lighter's bottom and the entrance of the rain water
'thru manholes'." We are not prepared to dispute this finding of the Court of Appeals.
3. There can also be no doubt that the insurance company can recover from the carrier as assignee of the owner of the cargo for the
insurance amount it paid to the latter under the insurance contract. And this is so because since the cargo that was damaged was
insured with respondent company and the latter paid the amount represented by the loss, it is but fair that it be given the right to
recover from the party responsible for the loss. The instant case, therefore, is not one between the insured and the insurer, but one
between the shipper and the carrier, because the insurance company merely stepped into the shoes of the shipper. And since the
shipper has a direct cause of action against the carrier on account of the damage of the cargo, no valid reason is seen why such
action cannot be asserted or availed of by the insurance company as a subrogee of the shipper. Nor can the carrier set up as a
defense any defect in the insurance policy not only because it is not a privy to it but also because it cannot avoid its liability to the
shipper under the contract of carriage which binds it to pay any loss that may be caused to the cargo involved therein. Thus, we find
fitting the following comments of the Court of Appeals:
It was not imperative and necessary for the trial court to pass upon the question of whether or not the disputed abaca
cargo was covered by Marine Open Cargo Policy No. MK-134 isued by appellee. Appellant was neither a party nor privy to
this insurance contract, and therefore cannot avail itself of any defect in the policy which may constitute a valid reason for
appellee, as the insurer, to reject the claim of Macleod, as the insured. Anyway, whatever defect the policy contained, if
any, is deemed to have been waived by the subsequent payment of Macleod's claim by appellee. Besides, appellant is
herein sued in its capacity as a common carrier, and appellee is suing as the assignee of the shipper pursuant to exhibit
MM. Since, as above demonstrated, appellant is liable to Macleod and Company of the Philippines for the los or damage to
the 1,162 bales of hemp after these were received in good order and condition by the patron of appellant's LCT No. 1025,
it necessarily follows that appellant is likewise liable to appellee who, as assignee of Macleod, merely stepped into the
shoes of and substi-tuted the latter in demanding from appellant the payment for the loss and damage aforecited.
4. It should be recalled in connection with this issue that during the trial of this case the carrier asked the lower court to order the
production of the books of accounts of the Odell Plantation containing the charges it made for the loss of the damaged hemp for
verification of its accountants, but later it desisted therefrom on the claim that it finds their production no longer necessary. This
desistance notwithstanding, the shipper however pre-sented other documents to prove the damage it suffered in connection with
the cargo and on the strength thereof the court a quo ordered the carrier to pay the sum of P60,421.02. And after the Court of
Appeals affirmed this award upon the theory that the desistance of the carrier from producing the books of accounts of Odell
Plantation implies an admission of the correctness of the statements of accounts contained therein, petitioner now contends that the
Court of Appeals erred in basing the affirmance of the award on such erroneous interpretation.
There is reason to believe that the act of petitioner in waiving its right to have the books of accounts of Odell Plantation presented in
court is tantamount to an admission that the statements contained therein are correct and their verification not necessary because
its main defense here, as well as below, was that it is not liable for the loss because there was no contract of carriage between it
and the shipper and the loss caused, if any, was due to a fortuitous event. Hence, under the carrier's theory, the correctness of the
account representing the loss was not so material as would necessitate the presentation of the books in question. At any rate, even
if the books of accounts were not produced, the correctness of the accounts cannot now be disputed for the same is supported by
the original documents on which the entries in said books were based which were presented by the shipper as part of its evidence.
And according to the Court of Appeals, these documents alone sufficiently establish the award of P60,412.02 made in favor of
respondent.
5. Finally, with regard to the question concerning the personality of the insurance company to maintain this action, we find the same
of no importance, for the attorney himself of the carrier admitted in open court that it is a foreign corporation doing business in the
Philippines with a personality to file the present action.
WHEREFORE, the decision appealed from is affirmed, with costs against petitioner.

FACTS:

14
 October, 1952: Macleod and Company of the Philippines (Macleod) contracted by telephone the services of the Compaia
Maritima (CM), a shipping corporation, for:
shipment of 2,645 bales of hemp from the Macleod's Sasa private pier at Davao City to Manila
subsequent transhipment to Boston, Massachusetts, U.S.A. on board the S.S. Steel Navigator.
This oral contract was later on confirmed by a formal and written booking issued by Macleod's branch office in Sasa and
handcarried to CM's branch office in Davao in compliance with which the CM sent to Macleod's private wharf LCT Nos. 1023
and 1025 on which the loading of the hemp was completed on October 29, 1952.
The 2 lighters were manned each by a patron and an assistant patron.
The patrons of both barges issued the corresponding carrier's receipts and that issued by the patron
of Barge No. 1025 reads in part:
Received in behalf of S.S. Bowline Knot in good order and condition from MACLEOD AND
COMPANY OF PHILIPPINES, Sasa Davao, for transhipment at Manila onto S.S. Steel Navigator.
FINAL DESTINATION: Boston.
Early hours of October 30: LCT No. 1025 sank, resulting in the damage or loss of 1,162 bales of hemp loaded therein
Macleod promptly notified the carrier's main office in Manila and its branch in Davao advising it of its liability
The damaged hemp was brought to Odell Plantation in Madaum, Davao, for cleaning, washing, reconditioning, and
redrying.
total loss adds up to P60,421.02
All abaca shipments of Macleod were insured with the Insurance Company of North America against all losses and
damages
Macleod filed a claim for the loss it suffered with the insurance company and was paid P64,018.55
subrogation agreement between Macleod and the insurance company wherein the Macleod assigned its rights
over the insured and damaged cargo
October 28, 1953.: failing to recover from the carrier P60,421.02 (amount supported by receipts), the insurance company
instituted the present action
CA affirmed RTC: ordering CM to pay the insurance co.
ISSUE: W/N there was a contract of carriage bet. CM (carrier) and Macleod (shipper)
HELD: YES. Affirmed
receipt of goods by the carrier has been said to lie at the foundation of the contract to carry and deliver, and if actually no
goods are received there can be no such contract
The liability and responsibility of the carrier under a contract for the carriage of goods commence on
their actual delivery to, or receipt by, the carrier or an authorized agent. ... and delivery to a lighter in charge of a vessel for
shipment on the vessel, where it is the custom to deliver in that way
Whenever the control and possession of goods passes to the carrier and nothing remains to be done by the
shipper, then it can be said with certainty that the relation of shipper and carrier has been established
As regards the form of the contract of carriage it can be said that provided that there is a meeting of the minds and from
such meeting arise rights and obligations, there should be no limitations as to form
The bill of lading is not essential
Even where it is provided by statute that liability commences with the issuance of the bill of lading, actual delivery and
acceptance are sufficient to bind the carrier
marine surveyors, attributes the sinking of LCT No. 1025 to the 'non-water-tight conditions of various buoyancy
compartments

1.2 Parties
BALIWAG TRANSIT, INC., petitioner, vs. HON. COURT OF APPEALS and SPS. SOTERO CAILIPAN, JR. and ZENAIDA LOPEZ
and GEORGE L. CAILIPAN, respondents. G.R. No. 80447 January 31, 1989
MELENCIO-HERRERA, J.:
On 10 April 1985 a Complaint for damages arising from breach of contract of carriage was filed by private respondents, the Spouses
Sotero Cailipan, Jr. and Zenaida Lopez, and their son George, of legal age, against petitioner Baliwag Transit (Baliwag, for brevity).
The Complaint alleged that George, who was a paying passenger on a Baliwag bus on 17 December 1984, suffered multiple serious
physical injuries when he was thrown off said bus driven in a careless and negligent manner by Leonardo Cruz, the authorized bus
driver, along Barangay Patubig, Marilao, Bulacan. As a result, he was confined in the hospital for treatment, incurring medical
expenses, which were borne by his parents, the respondent Spouses, in the sum of about P200,000.00 plus other incidental
expenses of about P10,000.00.
On 26 April 1985 an Answer was filed by petitioner alleging that the cause of the injuries sustained by George was solely
attributable to his own voluntary act in that, without warning and provocation, he suddenly stood up from his seat and headed for
the door of the bus as if in a daze, opened it and jumped off while said bus was in motion, in spite of the protestations by the driver
and without the knowledge of the conductor.
Baliwag then filed a Third-Party Complaint against Fortune Insurance & Surety Company, Inc., on its third-party liability insurance in
the amount of P50,000.00. In its Answer, Fortune Insurance claimed limited liability, the coverage being subject to a Schedule of
Indemnities forming part of the insurance policy.
On 14 November 1985 and 18 November 1985, respectively, Fortune Insurance and Baliwag each filed Motions to Dismiss on the
ground that George, in consideration of the sum of P8,020.50 had executed a "Release of Claims" dated 16 May 1985. These
Motions were denied by the Trial Court in an Order dated 13 January 1986 as they were filed beyond the time for pleading and after
the Answer were already filed.
On 5 February 1986 Baliwag filed a Motion to Admit Amended Answer, which was granted by the Trial Court. The Amended Answer
incorporated the affirmative defense in the Motion to Dismiss to the effect that on 16 May 1985, George bad been paid all his claims
for damages arising from the incident subject matter of the complaint when he executed the following "Release of Claims":
For and in consideration of the payment to me/us of the sum of EIGHT THOUSAND TWENTY and 50/100 PESOS ONLY
(P8,020.50), the receipt of which is hereby acknowledged, I/we, being of lawful age, do hereby release, acquit and forever
discharge Fortune Insurance and/or Baliwag transit, Inc. his/her heirs, executors and assigns, from any and all liability now
accrued or hereafter to accrue on account of any and all claims or causes of action which I/we now or may here after have for
personal injuries, damage to property, loss of services, medical expenses, losses or damages of any and every kind or nature
whatsoever, now known or what may hereafter develop by me/us sustained or received on or about 17th day of December,
1984 through Reckless Imprudence Resulting to Physical Injuries, and I/we hereby declare that I/we fully understand the terms
of this settlement and voluntarily accept said sum for the purpose of making a full and final compromise adjustment and
settlement of the injuries and damages, expenses and inconvenience above mentioned. (Rollo, p. 11)
During the preliminary hearing on the aforementioned affirmative defense, Baliwag waived the presentation of testimonial evidence
and instead offered as its Exhibit "1" the "Release of Claims" signed by George and witnessed by his brother Benjamin L. Cailipan, a
licensed engineer.
By way of opposition to petitioner's affirmative defense, respondent Sotero Cailipan, Jr. testified that be is the father of George, who
at the time of the incident was a student, living with his parents and totally dependent on them for their support; that the expenses
for his hospitalization were shouldered by his parents; and that they had not signed the "Release of Claims."
In an Order dated 29 August 1986, the Regional Trial Court of Bulacan, Branch 20, 1 dismissed the Complaint and Third-party
Complaint, ruling that since the contract of carriage is between Baliwag and George L. Cailipan, the latter, who is of legal age, had
the exclusive right to execute the Release of Claims despite the fact that he is still a student and dependent on his parents for
support. Consequently, the execution by George of the Release of Claims discharges Baliwag and Fortune Insurance.
Aggrieved, the Spouses appealed to respondent Court of Appeals.
On 22 October 1987, the Appellate Court rendered a Decision 2 setting aside the appealed Order and holding that the "Release of
Claims" cannot operate as a valid ground for the dismissal of the case because it does not have the conformity of all the parties,
particularly George's parents, who have a substantial interest in the case as they stand to be prejudiced by the judgment because
they spent a sizeable amount for the medical bills of their son; that the Release of Claims was secured by Fortune Insurance for the

15
consideration of P8,020.50 as the full and final settlement of its liability under the insurance policy and not for the purpose of
releasing Baliwag from its liability as a carrier in this suit for breach of contract. The Appellate Court also ordered the remand of the
case to the lower Court for trial on the merits and for George to return the amount of P8,020.50 to Fortune Insurance.
Hence, this Petition for Review on certiorari by Baliwag assailing the Appellate Court judgment.
The issue brought to the fore is the legal effect of the Release of Claims executed by George during the pendency of this case.
We hold that since the suit is one for breach of contract of carriage, the Release of Claims executed by him, as the injured party,
discharging Fortune Insurance and Baliwag from any and all liability is valid. He was then of legal age, a graduating student of
Agricultural Engineering, and had the capacity to do acts with legal effect (Article 37 in relation to Article 402, Civil Code). Thus, he
could sue and be sued even without the assistance of his parents.
Significantly, the contract of carriage was actually between George, as the paying passenger, and Baliwag, as the common carrier.
As such carrier, Baliwag was bound to carry its passengers safely as far as human care and foresight could provide, and is liable for
injuries to them through the negligence or wilful acts of its employees (Articles 1755 and 1759, Civil Code). Thus, George had the
right to be safely brought to his destination and Baliwag had the correlative obligation to do so. Since a contract may be violated
only by the parties thereto, as against each other, in an action upon that contract, the real parties in interest, either as plaintiff or as
defendant, must be parties to said contract (Marimperio Compania Naviera, S.A. vs. Court of Appeals, No. L-40234, December 14,
1987, 156 SCRA 368). A real party-in-interest -plaintiff is one who has a legal right while a real party-in-interest-defendant is one who
has a correlative legal obligation whose act or omission violates the legal right of the former (Lee vs. Romillo, Jr., G.R. No. 60973,
May 28, 1988). In the absence of any contract of carriage between Baliwag and George's parents, the latter are not real parties-in-
interest in an action for breach of that contract.
The general rule of the common law is that every action must be brought in the name of the party whose legal right has
been invaded or infringed. 15 Enc. P1. & Pr. p. 484. "For the immediate wrong and damage the person injured is the only
one who can maintain the action." Id. p. 578. The person who sustains an injury is the person to bring an action for the
injury against the wrongdoer." Dicey parties to Actions, 347. (Cited in Green v. Shoemaker, 73 A 688, 23 L.R.A., N.S. 667).
There is no question regarding the genuineness and due execution of the Release of Claims. It is a duly notarized public document. It
clearly stipulates that the consideration of P8,020.50 received by George was "to release and forever discharge Fortune Insurance
and/or Baliwag from any and all liabilities now accrued or to accrue on account of any and all claims or causes of action ... for
personal injuries, damage to property, loss of services, medical expenses, losses or damages of any and every kind or nature
whatsoever, sustained by him on 17 December 1984 thru Reckless Imprudence Resulting to Physical Injuries." Consequently, the
ruling of respondent Appellate Court that the "Release of Claims" was intended only as the full and final settlement of a third-party
liability for bodily injury claim and not for the purpose of releasing Baliwag from its liability, if any, in a breach of a contract of
carriage, has to be rejected for being contrary to the very terms thereof. If the terms of a contract are clear and leave no doubt upon
the intention of the contracting parties, the literal meaning of its stipulations shall control (Article 1370, Civil Code). The phraseology
"any and all claims or causes of action" is broad enough to include all damages that may accrue to the injured party arising from the
unfortunate accident.
The Release of Claims had the effect of a compromise agreement since it was entered into for the purpose of making a full and final
compromise adjustment and settlement of the cause of action involved. A compromise is a contract whereby the parties, by making
reciprocal concessions, avoid a litigation or put an end to one already commenced (Article 2028, Civil Code). The Release of Claims
executed by the injured party himself wrote finish to this litigation.
WHEREFORE, the Decision dated 22 October 1987 of respondent Court of Appeals is SET ASIDE, the Decision of the Regional Trial
Court of Bulacan, Branch 20, is REINSTATED, and the Complaint and Third-Party Complaint are hereby ordered DISMISSED. No costs.
SO ORDERED.

FACTS:
December 17 1984: George, who was a paying passenger on a Baliwag bus (Baliwag) he was thrown off by the bus driven
in a careless and negligent manner by Leonardo Cruz, authorized bus driver, along Barangay Patubig, Marilao, Bulacan
suffered multiple serious physical injuries
confined in the hospital for treatment, incurring medical expenses, which were borne by his parents, Spouses
Sotero Cailipan, Jr. and Zenaida Lopez, in the sum of about P200,000.00 plus other incidental expenses of about P10,000.00
April 10 1985:
Baliwag: solely attributable to his own voluntary act in that, without warning and provocation, he suddenly
stood up from his seat and headed for the door of the bus as if in a daze, opened it and jumped off while said bus was in
motion, in spite of the protestations by the driver and without the knowledge of the conductor
Baliwag then filed a Third-Party Complaint against Fortune Insurance & Surety Company, Inc., on its third-party
liability insurance in the amount of P50,000.00
Fortune Insurance claimed limited liability, the coverage being subject to a Schedule of Indemnities
forming part of the insurance policy.
November 14 1985 and November 18 1985: Fortune Insurance and Baliwag each filed Motions to Dismiss on the ground
that George, in consideration of the sum of P8,020.50 had executed a notarized "Release of Claims" dated 16 May 1985. -
denied as they were filed beyond the time for pleading and after the Answer were already filed so Baliwag amended its answer
to include such
RTC: dismissed the Complaint and Third-party Complaint, ruling that since the contract of carriage is between Baliwag and
George L. Cailipan (of legal age) had the exclusive right to execute the Release of Claims despite the fact that he is still a
student and dependent on his parents for support
October 22 1987: setting aside the appealed Order and holding that the "Release of Claims" cannot operate as a valid
ground for the dismissal of the case because it does not have the conformity of all the parties, particularly George's parents,
who have a substantial interest in the case as they stand to be prejudiced by the judgment because they spent a sizeable
amount for the medical bills of their son
Baliwag filed Petition for Review on certiorari
ISSUE: W/N the contract signed by George during case pendency is valid discharging Fortune Insurance and Baliwag from any and
all liability
HELD: YES. CA SET ASIDE
George is of legal age, a graduating student of Agricultural Engineering, and had the capacity to do acts with legal effect
(Article 37 in relation to Article 402, Civil Code)
could sue and be sued even without the assistance of his parents
George had the right to be safely brought to his destination and Baliwag had the correlative obligation to do so
Since a contract may be violated only by the parties thereto, as against each other, in an action upon that contract, the
real parties in interest, either as plaintiff or as defendant, must be parties to said contract:
real party-in-interest -plaintiff - who has a legal right
real party-in-interest-defendant - who has a correlative legal obligation whose act or omission violates the legal
right of the former
In the absence of any contract of carriage between Baliwag and George's parents, the latter are not real parties-in-interest
in an action for breach of that contract
general rule of the common law is that every action must be brought in the name of the party whose legal right has been
invaded or infringed
The phraseology "any and all claims or causes of action" is broad enough to include all damages that may accrue to the
injured party arising from the unfortunate accident.
The Release of Claims had the effect of a compromise agreement since it was entered into for the purpose of
making a full and final compromise adjustment and settlement of the cause of action involved.
compromise - contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to
one already commenced (Article 2028, Civil Code).

EVERETT STEAMSHIP CORPORATION, petitioner, vs. COURT OF APPEALS and HERNANDEZ TRADING CO.
INC., respondents. [G.R. No. 122494. October 8, 1998]

16
MARTINEZ, J.:
Petitioner Everett Steamship Corporation, through this petition for review, seeks the reversal of the decision [1] of the Court of
Appeals, dated June 14, 1995, in CA-G.R. No. 428093, which affirmed the decision of the Regional Trial Court of Kalookan City,
Branch 126, in Civil Case No. C-15532, finding petitioner liable to private respondent Hernandez Trading Co., Inc. for the value of the
lost cargo.
Private respondent imported three crates of bus spare parts marked as MARCO C/No. 12, MARCO C/No. 13 and MARCO C/No.
14, from its supplier, Maruman Trading Company, Ltd. (Maruman Trading), a foreign corporation based in Inazawa, Aichi, Japan. The
crates were shipped from Nagoya, Japan to Manila on board ADELFAEVERETTE, a vessel owned by petitioners principal, Everett
Orient Lines. The said crates were covered byBill of Lading No. NGO53MN.
Upon arrival at the port of Manila, it was discovered that the crate marked MARCO C/No. 14 was missing. This was confirmed
and admitted by petitioner in its letter of January 13, 1992 addressed to private respondent, which thereafter made a formal claim
upon petitioner for the value of the lost cargo amounting to One Million Five Hundred Fifty Two Thousand Five Hundred
(Y1,552,500.00) Yen, the amount shown in an Invoice No. MTM-941, dated November 14, 1991. However, petitioner offered to pay
only One Hundred Thousand (Y100,000.00) Yen, the maximum amount stipulated under Clause 18 of the covering bill of lading
which limits the liability of petitioner.
Private respondent rejected the offer and thereafter instituted a suit for collection docketed as Civil Case No. C-15532, against
petitioner before the Regional Trial Court of Caloocan City, Branch 126.
At the pre-trial conference, both parties manifested that they have no testimonial evidence to offer and agreed instead to file
their respective memoranda.
On July 16, 1993, the trial court rendered judgment [2] in favor of private respondent, ordering petitioner to pay: (a)
Y1,552,500.00; (b) Y20,000.00 or its peso equivalent representing the actual value of the lost cargo and the material and packaging
cost; (c) 10% of the total amount as an award for and as contingent attorneys fees; and (d) to pay the cost of the suit. The trial court
ruled:
Considering defendants categorical admission of loss and its failure to overcome the presumption of negligence and
fault, the Court conclusively finds defendant liable to the plaintiff. The next point of inquiry the Court wants to resolve is
the extent of the liability of the defendant. As stated earlier, plaintiff contends that defendant should be held liable for
the whole value for the loss of the goods in the amount of Y1,552,500.00 because the terms appearing at the back of the
bill of lading was so written in fine prints and that the same was not signed by plaintiff or shipper thus, they are not
bound by the clause stated in paragraph 18 of the bill of lading. On the other hand, defendant merely admitted that it
lost the shipment but shall be liable only up to the amount of Y100,000.00.
The Court subscribes to the provisions of Article 1750 of the New Civil Code -
Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction
or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been fairly
and freely agreed upon.
It is required, however, that the contract must be reasonable and just under the circumstances and has been fairly and
freely agreed upon. The requirements provided in Art. 1750 of the New Civil Code must be complied with before a
common carrier can claim a limitation of its pecuniary liability in case of loss, destruction or deterioration of the goods it
has undertaken to transport.
In the case at bar, the Court is of the view that the requirements of said article have not been met. The fact that those
conditions are printed at the back of the bill of lading in letters so small that they are hard to read would not warrant the
presumption that the plaintiff or its supplier was aware of these conditions such that he had fairly and freely agreed to
these conditions. It can not be said that the plaintiff had actually entered into a contract with the defendant, embodying
the conditions as printed at the back of the bill of lading that was issued by the defendant to plaintiff.
On appeal, the Court of Appeals deleted the award of attorneys fees but affirmed the trial courts findings with the additional
observation that private respondent can not be bound by the terms and conditions of the bill of lading because it was not privy to
the contract of carriage. It said:
As to the amount of liability, no evidence appears on record to show that the appellee (Hernandez Trading Co.)
consented to the terms of the Bill of Lading. The shipper named in the Bill of Lading is Maruman Trading Co., Ltd. whom
the appellant (Everett Steamship Corp.) contracted with for the transportation of the lost goods.
Even assuming arguendo that the shipper Maruman Trading Co., Ltd. accepted the terms of the bill of lading when it
delivered the cargo to the appellant, still it does not necessarily follow that appellee Hernandez Trading Company as
consignee is bound thereby considering that the latter was never privy to the shipping contract.
xxxxxxxxx
Never having entered into a contract with the appellant, appellee should therefore not be bound by any of the terms and
conditions in the bill of lading.
Hence, it follows that the appellee may recover the full value of the shipment lost, the basis of which is not the breach of
contract as appellee was never a privy to the any contract with the appellant, but is based on Article 1735 of the New
Civil Code, there being no evidence to prove satisfactorily that the appellant has overcome the presumption of
negligence provided for in the law.
Petitioner now comes to us arguing that the Court of Appeals erred (1) in ruling that the consent of the consignee to the terms
and conditions of the bill of lading is necessary to make such stipulations binding upon it; (2) in holding that the carriers limited
package liability as stipulated in the bill of lading does not apply in the instant case; and (3) in allowing private respondent to fully
recover the full alleged value of its lost cargo.
We shall first resolve the validity of the limited liability clause in the bill of lading.
A stipulation in the bill of lading limiting the common carriers liability for loss or destruction of a cargo to a certain sum, unless
the shipper or owner declares a greater value, is sanctioned by law, particularly Articles 1749 and 1750 of the Civil Code which
provide:
ART. 1749. A stipulation that the common carriers liability is limited to the value of the goods appearing in the bill of
lading, unless the shipper or owner declares a greater value, is binding.
ART. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or
deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been freely and fairly
agreed upon.
Such limited-liability clause has also been consistently upheld by this Court in a number of cases. [3] Thus, in Sea Land
Service, Inc. vs Intermediate Appellate Court[4], we ruled:
It seems clear that even if said section 4 (5) of the Carriage of Goods by Sea Act did not exist, the validity and binding effect of the
liability limitation clause in the bill of lading here are nevertheless fully sustainable on the basis alone of the cited Civil Code
Provisions. That said stipulation is just and reasonable is arguable from the fact that it echoes Art. 1750 itself in providing a limit to
liability only if a greater value is not declared for the shipment in the bill of lading. To hold otherwise would amount to questioning
the justness and fairness of the law itself, and this the private respondent does not pretend to do. But over and above that
consideration, the just and reasonable character of such stipulation is implicit in it giving the shipper or owner the option of avoiding
accrual of liability limitation by the simple and surely far from onerous expedient of declaring the nature and value of the shipment
in the bill of lading..
Pursuant to the afore-quoted provisions of law, it is required that the stipulation limiting the common carriers liability for loss
must be reasonable and just under the circumstances, and has been freely and fairly agreed upon.
The bill of lading subject of the present controversy specifically provides, among others:
18. All claims for which the carrier may be liable shall be adjusted and settled on the basis of the shippers net invoice
cost plus freight and insurance premiums, if paid, and in no event shall the carrier be liable for any loss of possible
profits or any consequential loss.
The carrier shall not be liable for any loss of or any damage to or in any connection with, goods in an amount exceeding
One Hundred Thousand Yen in Japanese Currency (Y100,000.00) or its equivalent in any other currency per package or

17
 customary freight unit (whichever is least) unless the value of the goods higher than this amount is declared in writing
by the shipper before receipt of the goods by the carrier and inserted in the Bill of Lading and extra freight is paid as
required. (Emphasis supplied)
The above stipulations are, to our mind, reasonable and just. In the bill of lading, the carrier made it clear that its liability
would only be up to One Hundred Thousand (Y100,000.00) Yen. However, the shipper, Maruman Trading, had the option to
declare a higher valuation if the value of its cargo was higher than the limited liability of the carrier. Considering that
the shipper did not declare a higher valuation, it had itself to blame for not complying with the stipulations.
The trial courts ratiocination that private respondent could not have fairly and freely agreed to the limited liability clause in
the bill of lading because the said conditions were printed in small letters does not make the bill of lading invalid.
We ruled in PAL, Inc. vs. Court of Appeals[5] that the jurisprudence on the matter reveals the consistent holding of the court
that contracts of adhesion are not invalid per se and that it has on numerous occasions upheld the binding effect thereof. Also,
in Philippine American General Insurance Co., Inc. vs. Sweet Lines , Inc.[6] this Court , speaking through the learned Justice
Florenz D. Regalado, held:
x x x Ong Yiu vs. Court of Appeals, et.al., instructs us that contracts of adhesion wherein one party imposes a ready-
made form of contract on the other x x x are contracts not entirely prohibited. The one who adheres to the contract is in
reality free to reject it entirely; if he adheres he gives his consent. In the present case, not even an allegation of
ignorance of a party excuses non-compliance with the contractual stipulations since the responsibility for ensuring full
comprehension of the provisions of a contract of carriage devolves not on the carrier but on the owner, shipper, or
consignee as the case may be. (Emphasis supplied)
It was further explained in Ong Yiu vs Court of Appeals[7] that stipulations in contracts of adhesion are valid and binding.
While it may be true that petitioner had not signed the plane ticket x x, he is nevertheless bound by the provisions
thereof. Such provisions have been held to be a part of the contract of carriage, and valid and binding upon the
passenger regardless of the latters lack of knowledge or assent to the regulation. It is what is known as a contract of
adhesion, in regards which it has been said that contracts of adhesion wherein one party imposes a ready-made form of
contract on the other, as the plane ticket in the case at bar, are contracts not entirely prohibited. The one who adheres
to the contract is in reality free to reject it entirely; if he adheres, he gives his consent. x x x , a contract limiting liability
upon an agreed valuation does not offend against the policy of the law forbidding one from contracting against his own
negligence. (Emphasis supplied)
Greater vigilance, however, is required of the courts when dealing with contracts of adhesion in that the said contracts must
be carefully scrutinized in order to shield the unwary (or weaker party) from deceptive schemes contained in ready-made covenants,
[8]
such as the bill of lading in question. The stringent requirement which the courts are enjoined to observe is in recognition of
Article 24 of the Civil Code which mandates that (i)n all contractual, property or other relations, when one of the parties is at a
disadvantage on account of his moral dependence, ignorance, indigence, mental weakness, tender age or other
handicap, the courts must be vigilant for his protection.
The shipper, Maruman Trading, we assume, has been extensively engaged in the trading business. It can not be said to be
ignorant of the business transactions it entered into involving the shipment of its goods to its customers. The shipper could not have
known, or should know the stipulations in the bill of lading and there it should have declared a higher valuation of the goods
shipped. Moreover, Maruman Trading has not been heard to complain that it has been deceived or rushed into agreeing to ship the
cargo in petitioners vessel. In fact, it was not even impleaded in this case.
The next issue to be resolved is whether or not private respondent, as consignee, who is not a signatory to the bill of lading is
bound by the stipulations thereof.
Again, in Sea-Land Service, Inc. vs. Intermediate Appellate Court (supra), we held that even if the consignee was not a
signatory to the contract of carriage between the shipper and the carrier, the consignee can still be bound by the contract. Speaking
through Mr. Chief Justice Narvasa, we ruled:
To begin with, there is no question of the right, in principle, of a consignee in a bill of lading to recover from the carrier or
shipper for loss of, or damage to goods being transported under said bill, although that document may have been-
as in practice it oftentimes is-drawn up only by the consignor and the carrier without the intervention of
the consignee. x x x.
x x x the right of a party in the same situation as respondent here, to recover for loss of a shipment
consigned to him under a bill of lading drawn up only by and between the shipper and the carrier, springs
from either a relation of agency that may exist between him and the shipper or consignor, or his status as
stranger in whose favor some stipulation is made in said contract, and who becomes a party thereto when
he demands fulfillment of that stipulation, in this case the delivery of the goods or cargo shipped. In
neither capacity can he assert personally, in bar to any provision of the bill of lading, the alleged
circumstance that fair and free agreement to such provision was vitiated by its being in such fine print as
to be hardly readable. Parenthetically, it may be observed that in one comparatively recent case (Phoenix Assurance
Company vs. Macondray & Co., Inc., 64 SCRA 15) where this Court found that a similar package limitation clause
was printed in the smallest type on the back of the bill of lading, it nonetheless ruled that the consignee
was bound thereby on the strength of authority holding that such provisions on liability limitation are as
much a part of a bill of lading as though physically in it and as though placed therein by agreement of the
parties.
There can, therefore, be no doubt or equivocation about the validity and enforceability of freely-agreed-upon stipulations
in a contract of carriage or bill of lading limiting the liability of the carrier to an agreed valuation unless the shipper
declares a higher value and inserts it into said contract or bill. This proposition, moreover, rests upon an almost
uniform weight of authority. (Underscoring supplied)
When private respondent formally claimed reimbursement for the missing goods from petitioner and subsequently filed a case
against the latter based on the very same bill of lading, it (private respondent) accepted the provisions of the contract and thereby
made itself a party thereto, or at least has come to court to enforce it. [9] Thus, private respondent cannot now reject or disregard the
carriers limited liability stipulation in the bill of lading. In other words, private respondent is bound by the whole stipulations in the
bill of lading and must respect the same.
Private respondent, however, insists that the carrier should be liable for the full value of the lost cargo in the amount of
Y1,552,500.00, considering that the shipper, Maruman Trading, had "fully declared the shipment x x x, the contents of each crate,
the dimensions, weight and value of the contents,"[10] as shown in the commercial Invoice No. MTM-941.
This claim was denied by petitioner, contending that it did not know of the contents, quantity and value of "the shipment
which consisted of three pre-packed crates described in Bill of Lading No. NGO-53MN merely as 3 CASES SPARE PARTS. [11]
The bill of lading in question confirms petitioners contention. To defeat the carriers limited liability, the aforecited Clause 18 of
the bill of lading requires that the shipper should have declared in writing a higher valuation of its goods before receipt thereof
by the carrier and insert the said declaration in the bill of lading, with the extra freight paid. These requirements in the bill of
lading were never complied with by the shipper, hence, the liability of the carrier under the limited liability clause stands. The
commercial Invoice No. MTM-941 does not in itself sufficiently and convincingly show that petitioner has knowledge of the value of
the cargo as contended by private respondent. No other evidence was proffered by private respondent to support is
contention. Thus, we are convinced that petitioner should be liable for the full value of the lost cargo.
In fine, the liability of petitioner for the loss of the cargo is limited to One Hundred Thousand (Y100,000.00) Yen, pursuant to
Clause 18 of the bill of lading.
WHEREFORE, the decision of the Court of Appeals dated June 14, 1995 in C.A.-G.R. CV No. 42803 is hereby REVERSED and
SET ASIDE. SO ORDERED.

Exceptions -

SULPICIO LINES, INC., Petitioner, vs. The Honorable COURT OF APPEALS and TITO DURAN TABUQUILDE and ANGELINA
DE PAZ TABUQUILDE, respondents. G.R. No. 113578 July 14, 1995

18
QUIASON, J.:
This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court of the decision of the Court of Appeals in CA-
G.R. CV
No. 32864, which affirmed the decision of the Regional Trial Court, Branch 85, Quezon City in Civil Case No. Q-89-3048.
I
The Court of Appeals found:
On October 23, 1988, plaintiff Tito Duran Tabuquilde (hereinafter, "Tito") and his three-year old daughter Jennifer Anne
boarded the M/V Dona Marilyn at North Harbor, Manila, bringing with them several pieces of luggage.
In the morning of October 24, 1988, the M/V Dona Marilyn, while in transit, encountered inclement weather which caused
huge waves due to Typhoon Unsang.
Notwithstanding the fact that Storm Signal No. 2 had been raised by the PAG-ASA authorities over Leyte as early as 5:30
P.M. of October 23, 1988 and which signal was raised to Signal No. 3 by 10 P.M. of the same day, the ship captain ordered
the vessel to proceed to Tacloban when prudence dictated that he should have taken it to the nearest port for shelter,
thus violating his duty to exercise extraordinary diligence in the carrying of passengers safely to their destination.
At about the same time, plaintiff-appellee Angelina Tabuquilde (hereinafter, "Angelina") mother of Jennifer Anne,
contacted the Sulpicio Office to verify radio reports that the vessel M/V Dona Marilyn was missing. Employees of said
Sulpicio Lines assured her that the ship was merely "hiding" thereby assuaging her anxiety.
At around 2:00 P.M. of October 24, 1988, said vessel capsized, throwing plaintiff-appellee Tito and Jennifer Anne, along
with hundreds of passengers, into the tumultuous sea.
Tito tried to keep himself and his daughter afloat but to no avail as the waves got stronger and he was subsequently
separated from his daughter despite his efforts.
He found himself on Almagro Island in Samar the next day at round (sic) 11:00 A.M. and immediately searched for his
daughter among the survivors in the island, but the search proved fruitless.
In the meantime, Angelina tried to seek the assistance of the Sulpicio Lines in Manila to no avail, the latter refusing to
entertain her and hundreds of relatives of the other passengers who waited long hours outside the Manila Office. Angelina
spent sleepless nights worrying about her husband Tito and daughter Jennifer Anne in view of the refusal of Sulpicio Lines
to release a verification of the sinking of the ship.
On October 26, 1988, Tito and other survivors in the Almagro Island were fetched and were brought to Tacloban Medical
Center for treatment.
On October 31, 1988, Tito reported the loss of his daughter, was informed that the corpse of a child with his daughter's
description had been found. Subsequently, Tito wrote a letter to his wife, reporting the sad fact that Jennifer Anne was
dead. Angelina suffered from shock and severe grief upon receipt of the news.
On November 3, 1988, the coffin bearing the corpse of Jennifer Anne was buried in Tanauan, Leyte.
On November 24, 1988, a claim for damages was filed by Tito with the defendant Sulpicio Lines in connection with the
death of the plaintiff-appellee's daughter and the loss of Tito's belongings worth P27,580.00. (Appellees' Brief, pp. 2-4)
( Rollo, pp. 52-54).
On January 3, 1991, the trial court rendered a decision in Civil Case No. Q-89-3048 in favor of the plaintiffs Tito Duran Tabuquilde
and Angelina de Paz Tabuquilde (private respondents herein) and against defendant Sulpicio Lines, Inc. (petitioner herein) ordering
defendant to pay P27,580.00 as actual damages, P30,000.00 for the death of Jennifer Tabuquilde, P100,000.00 as moral damages,
P50,000.00 as exemplary damages, and P50,000.00 as attorney's fees, and costs.
Petitioner appealed to the Court of Appeals which affirmed the decision of the trial court. Petitioner then filed a motion for
reconsideration which was denied. Hence, this petition.
II
Generally, the findings of fact of the trial court are entitled to great weight and not disturbed except for cogent reasons (Gatmaitan
v. Court of Appeals, 200 SCRA 37 [1991]). One of the accepted reasons is when the findings of fact are not supported by the
evidence (Sandoval Shipyard, Inc. v. Clave, 94 SCRA 472 [1979]). Corollary to this is the rule that actual or compensatory damages,
to be recovered, must be proved; otherwise, if the proof is flimsy, no damages will be awarded (Dichoso v. Court of Appeals, 192
SCRA 169 [1990]).
In the case at bench, the trial court merely mentioned the fact of the loss and the value of the contents of the pieces of baggage
without stating the evidence on which it based its findings. There is no showing that the value of the contents of the lost pieces of
baggage was based on the bill of lading or was previously declared by respondent Tito D. Tabuquilde before he boarded the ship.
Hence, there can be no basis to award actual damages in the amount of P27,850.00.
The Court of Appeals was correct in confirming the award of damages for the death of the daughter of private respondents, a
passenger on board the stricken vessel of petitioner. It is true that under Article 2206 of the Civil Code of the Philippines, only deaths
caused by a crime as quasi delict are entitled to actual and compensatory damages without the need of proof of the said damages.
Said Article provides:
The amount of damages for death caused by a crime or quasi delict shall be at least Three Thousand Pesos,
even though there may have been mitigating circumstances. . . .
Deducing alone from said provision, one can conclude that damages arising from culpa contractual are not compensable without
proof of special damages sustained by the heirs of the victim.
However, the Civil Code, in Article 1764 thereof, expressly makes Article 2206 applicable "to the death of a passenger caused by the
breach of contract by a common carrier." Accordingly, a common carrier is liable for actual or compensatory damages under Article
2206 in relation to Article 1764 of the Civil Code for deaths of its passengers caused by the breach of the contract of transportation.
The trial court awarded an indemnity of P30,000.00 for the death of the daughter of private respondents. The award of damages
under Article 2206 has been increased to P50,000.00 (People v. Flores, 237 SCRA 653 [1994]).
With respect to the award of moral damages, the general rule is that said damages are not recoverable in culpa contractual except
when the presence of bad faith was proven (Trans World Air Lines v. Court of Appeals, 165 SCRA 143 [1988]). However, in breach of
contract of carriage, moral damages may be recovered when it results in the death of a passenger (Philippine Rabbit Bus Lines, Inc.
v. Esguerra, 117 SCRA 741 [1982]; Vasquez v. Court of Appeals, 138 SCRA 553 [1985]).
With respect to the award of exemplary damages, Article 2232 of the Civil Code of the Philippines gives the Court the discretion to
grant said damages in breach of contract when the defendant acted in a wanton, fraudulent and reckless manner (Air France v.
Carrascoso, 18 SCRA 155 [1966]).
Furthermore, in the case of Mecenas v. Court of Appeals, 180 SCRA 83 (1989), we ruled that:
. . . . 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 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. . . . (at p. 100).
A common carrier is obliged to transport its passengers to their destinations with the utmost diligence of a very cautious person
(Laguna Tayabas Bus Co. v. Tiongson, 16 SCRA 940 [1966]). The trial court found that petitioner failed to exercise the extraordinary
diligence required of a common carrier, which resulted in the sinking of the M/V Dona Marilyn.
The trial court correctly concluded that the sinking of M/V Dona Marilyn was due to gross negligence, thus:
. . . [i]t is undisputed that Typhoon Unsang entered the Philippine Area of Responsibility on October 21, 1988. The rain in
Metro Manila started after lunch of October 23, 1988, and at about 5:00 p.m. Public Storm Signal No. 1 was hoisted over
Metro Manila, Signal No. 2 in Leyte and Signal No. 3 in Samar. But at 10:00 o'clock (sic) in the morning of October 23,
1988, Public Storm Signal No. 1 was already hoisted over the province of Leyte, which is the destination of M/V Dona
Marilyn. This was raised to Signal No. 2 at 4:00 p.m. and Signal No. 3 at 10:00 p.m. on the same date. The following day,
October 24, 1988, at 4:00 a.m. and 10:00 a.m., Storm Signal No. 3 remained hoisted in Leyte. At 4 p.m. on October 24,

19
 1988, Storm Signal No. 3 remained hoisted in Leyte but was reduced to Storm Signal No. 2 (Exh. G). Signal No. 1 has
maximum winds at 60 kph within 36 hours; Signal No. 2 has maximum winds of from 60 kph to 100 kph within a period of
24 hours; and Signal No. 3 has maximum winds of 100 kph and above within a period of 12 hours.
Warnings of the storm signal are issued by PAG-ASA thru DZZA, Office of Civil Defense, Philippine Navy, Coast Guard,
Radio Stations, and other offices, every six (6) hours as soon as a cyclone enters the Philippine Area of Responsibility.
At 10:30 a.m. on October 24, 1988, the vessel was estimated to be between Mindoro and Masbate, and the center of the
typhoon then was around 130 degrees longitude with maximum winds of 65 kph (Exh. G-3), with a "radius of rough to
phenomenal sea at that time of 450 kms. North and 350 kms. elsewhere; 350 kms. North center and all throughout the
rest" (p. 12, TSN, Lumalda, Feb. 19, 1990).
xxx xxx xxx
In the same manner, (referring to the negligence of the crew of the ship that sank in Vasquez v. Court of Appeals, 138
SCRA 553 [1985]) the crew of the vessel M/V Dona Marilyn took a calculated risk when it proceeded despite the typhoon
brewing somewhere in the general direction to which the vessel was going. The crew assumed a greater risk when,
instead of dropping anchor in or at the periphery of the Port of Calapan, or returning to the port of Manila which is nearer,
proceeded on its voyage on the assumption that it will be able to beat and race with the typhoon and reach its destination
before it (Unsang) passes ( Rollo, pp. 45-47).
The award of attorney's fees by the trial court to respondents is also assailed by petitioner, citing Mirasol v. De la Cruz, 84 SCRA 337
(1978). In this case, the petitioner filed before the Municipal Court an action for forcible entry against the private respondent. The
said court dismissed the complaint. On appeal, the Court of First Instance of Camarines Sur sustained the decision of the lower
court, dismissed the appeal and awarded attorney's fees in the sum of not less than P500.00 in favor of private respondent. Upon
appeal to us, we deleted the award of attorney's fees because the text of the appealed decision was bereft of any findings of fact
and law to justify such an award. Moreover, there was no proof, other than the bare allegation of harassment that the adverse party
had acted in bad faith. The aforementioned decision is inapposite to the instant case where the decision clearly mentions the facts
and the law upon which the award of attorney's fees were based.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED with the MODIFICATION that the award of P27,580.00 as actual
damages for the loss of the contents of the pieces of baggage is deleted and that the award of P30,000.00 under Article 2206 in
relation Article 1764 is increased to P50,000.00.
SO ORDERED.

FACTS:
October 23, 1988: Tito Duran Tabuquilde (Tito) and his 3-year old daughter Jennifer Anne (Anne) boarded the M/V Dona
Marilyn at North Harbor, Manila, bringing with them several pieces of luggage.
Storm Signal No. 2 had been raised by the PAG-ASA authorities over Leyte as early as 5:30 P.M. of October 23,
1988 and which signal was raised to Signal No. 3 by 10 P.M
ship captain ordered the vessel to proceed to Tacloban when prudence dictated that he should have taken it to
the nearest port for shelter, thus violating his duty to exercise extraordinary diligence in the carrying of passengers safely to
their destination
October 24, 1988 morning: M/V Dona Marilyn, while in transit, encountered inclement weather which caused huge waves
due to Typhoon Unsang.
Angelina Tabuquilde contacted the Sulpicio Office to verify radio reports that the vessel M/V Dona Marilyn was
missing
Sulpicio Lines assured her that the ship was merely "hiding" thereby assuaging her anxiety
October 24, 1988 2:00 P.M.: vessel capsized, throwing Tito and Anne, along with hundreds of passengers, into the sea.
Tito tried to keep himself and his daughter afloat but to no avail as the waves got stronger and he was
subsequently separated from his daughter despite his efforts.
October 25, 1988 11:00 A.M.: He found himself on Almagro Island in Samar
He immediately searched for his daughter among the survivors in the island, but failed
Angelina tried to seek the assistance of the Sulpicio Lines in Manila to no avail
Angelina spent sleepless nights worrying about her husband and daughter in view of the refusal of Sulpicio
Lines to release a verification of the sinking of the ship
October 26, 1988: Tito and other survivors in the Almagro Island were fetched and were brought to Tacloban Medical
Center for treatment
October 31, 1988: Tito reported the loss of his daughter and was informed that the corpse of a child with his daughter's
description had been found
Tito wrote a letter to his wife, reporting the sad fact that Jennifer Anne was dead
Angelina suffered from shock and severe grief upon receipt of the news
November 3, 1988: coffin bearing the corpse of Anne was buried
November 24, 1988: Tito filed a claim for damages against Sulpicio Lines for the death of Anne and the loss of his
belongings worth P27,580
Trial Court: in favor of Tito
actual damages, P30,000.00 for the death of Anne
P100,000.00 as moral damages
P50,000.00 as exemplary damages
P50,000.00 as attorney's fees, and costs
ISSUE: W/N Tito has a right to recover damage for his lost belongings
HELD: NO. Court of Appeals is AFFIRMED with the MODIFICATION that the award of P27,580.00 as actual damages for the loss of the
contents of the pieces of baggage is deleted and that the award of P30,000.00 under Article 2206 in relation Article 1764 is
increased to P50,000.00.
There is no showing that the value of the contents of the lost pieces of baggage was based on the bill of lading or was
previously declared by Tito before he boarded the ship
Article 2206 of the Civil Code of the Philippines:
only deaths caused by a crime as quasi delict are entitled to actual and compensatory damages without the need of proof of the
said damages
The amount of damages for death caused by a crime or quasi delict shall be at least Three Thousand Pesos, even though there may
have been mitigating circumstances. . . .
o Deducing alone from said provision, one can conclude that damages arising from culpa contractual are not
compensable without proof of special damages sustained by the heirs of the victim.
o With respect to the award of moral damages, the general rule is that said damages are not recoverable in culpa
contractual except when the presence of bad faith was proven
o in breach of contract of carriage, moral damages may be recovered when it results in the death of a passenger
o With respect to the award of exemplary damages, Article 2232 of the Civil Code of the Philippines gives the
Court the discretion to grant said damages in breach of contract when the defendant acted in a wanton, fraudulent and
reckless manner
The crew assumed a greater risk when, instead of dropping anchor in or at the periphery of the Port of Calapan, or
returning to the port of Manila which is nearer, proceeded on its voyage on the assumption that it will be able to beat and race
with the typhoon and reach its destination before it (Unsang) passes

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

20
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 sufferingcranad(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 co-pilot,
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.

21
 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 neuro-surgeon, 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 crash-landing 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.

22
 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

23
present as plaintiff-appellee is still living. Whatever mathematical error defendant-appellant 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 crash-landed 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:

24
 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.

1.3 Ancillary Contracts

DELGADO BROTHERS, INC., petitioner, vs. HOME INSURANCE COMPANY and THE COURT OF APPEALS, respondents. G.R.
No. L-16567 March 27, 1961
BARRERA, J.:
This is an appeal by certiorari to review the decision of the Court of Appeals (in CA-G.R. No. 20441-R), reversing the judgment of
dismissal of the Court of First Instance of Manila (in Civil Case No. 29144) and, instead, ordering petitioner-defendant Delgado
Brothers, Inc. to pay to respondent-plaintiff Home Insurance Company, the sum of P1,436.86, plus 6% per annum interest from the
commencement of the action until fully paid.
On March 7, 1956, respondent Home Insurance Company filed with the Court of First Instance of Manila a complaint against
petitioner Delgado Brothers, Inc. alleging that on February 17, 1955, Victor Bijou & Co. of 14 East 37th Street, New York 16, New
York, U.S.A., shipped at New York for Manila aboard the vessel S.S. Leoville and consigned to the Judy Philippines, Inc. of Manila, a
shipment of 1 case Linen Handkerchiefs and 2 cases cotton piece goods, for which, the New York agent of said vessel, the Barber
Steamship Lines, Inc., issued Bill of Lading No. 119; that said shipment as insured with herein respondent by the shipper and/or
consignee; that said vessel arrived at the Port of Manila on March 30, 1955 and, thereafter, said shipment was unloaded complete
and in good order from said vessel by petitioner, but the latter delivered the same to the consignee with 1 case of Linen
Handkerchiefs in bad order, with a shortage of 503 yards of Linen Print Handkerchiefs, to the prejudice, loss and damage of shipper
and or consignee in the sum of P1,287.20; that the shipper and/or consignee filed its claim with petitioner for said loss in the sum of
$713.08 (P1,436.86); and since respondent dent paid the amount to the shipper and\or consignee, the former was subrogated to the
shipper's and/or consignee's rights and interests; that notwithstanding respondent's claim against petitioner, the latter failed and
refused to pay the shipper and/or consignee and/or respondent the total claim of P1,287.20; and that as it result of petitioner's gross
and evident bad faith to pay the claim of the shipper and/or consignee and/or respondent, it was compelled to file the Case and will
incur attorney's fees in the sum of P478.95. Respondent prayed that petitioner pay to it the sum of P1,287.20, with legal interest
thereon from the filing of the complaint until fully, paid; P149.66, the difference between P1,436.86 paid by respondent to the
shipper and/or consignee and the said sum of P1,287.20; and P478.95 as attorney's fees, plus costs.
To this complaint, petitioner filed its answer on March 27, 1956, alleging as special defense that since no claim whatsoever was filed
by respondent or the consignee, or their representatives against petitioner within the 15-day period from the date of the arrival of
the goods before they could file a suit in the court of proper jurisdiction within 1 year from the date of said arrival at the Port of
Manila, petitioner is completely relieved and released of any and all liability for loss or damage under the law and in accordance with
the pertinent provisions of the management Contract with the Bureau of Customs, covering the operation of the Arrastre Service for
the Port of Manila; and that petitioner in no way acts as an agent of the carrying vessel or of the importer or consignee. Petitioner,
therefore, prayed for the dismissal of respondent's complaint.
On October 16, 1956, petitioner filed a motion to dismiss the complaint, on the ground that "the court has no jurisdiction over the
subject matter of the complaint", to which, respondent filed an opposition on October 19, 1956, alleging that since the case is an
action in admiralty, it is within the original jurisdiction of the court. On October 20, 1956, the court issued an order denying
petitioner's motion to dismiss.
The case was, thereafter, tried and, after trial, the court, on March 6, 1957, rendered a decision dismissing the case and absolving
petitioner from liability to respondent, not on the ground of lack of jurisdiction raised by petitioner-defendant, but on the merits of
the latter's special defenses invoked in its answer.
Not satisfied with said decision, respondent appealed to the Court of Appeals which court, on December 29, 1959, rendered as
already adverted to, a decision reversing the judgment of the Court of First Instance of Manila and ordering petitioner to pay to
respondent the sum of P1,436.86, plus 6% per annum interest thereon from the commencement of the action until fully paid. Hence,
this appeal.
Petitioner, in this instance, claims that the Court of Appeals (as did the Court of First Instance of Manila) erred in not dismissing
respondent's complaint on the specific ground that it (Court of First Instance) had no jurisdiction over the subject matter of the
action, the same not being an admiralty case, and the amount sought to be recovered falling within the exclusive original
jurisdiction of the Municipal Court of Manila.
Appellant's contention is meritorious. In the case of Macondray & Company, Inc. v. Delgado Brothers, Inc. (G.R. No. L-13116, prom.
April 28, 1960), the facts and issues of which are identical, mutatis mutandis, to the case at bar, we held:
The case at bar does not deal with any maritime or with the administration and application of any maritime law. As custodian
of the sixty-eight (68) cartons of paints it had received from the MS Pleasantville, it was defendant's duty, like that of any
ordinary depositary, to take good care of said goods and to turn the same over to the party entitled to its possession, subject
to such qualifications as may have validly been imposed in the contract between the parties concerned. Such duty on the part
of the defendant would be the same if the final destination of the goods were Manila, not Iloilo, and the goods had not been
imported from another state. The only issues raised in the pleadings are (1) whether or not defendant had fully discharged its
obligation to deliver the aforementioned sixty-eight (68) cartons of paint; and (2) in the negative case, the amount of indemnity
due the plaintiff therefor. The determination of those questions does not require the application of any maritime law and
cannot affect either navigation or maritime commerce. The foreign origin of the goods is under the attending circumstances
immaterial to the law applicable to this case or the rights of the parties herein, or the procedure for the settlement of their
disputes. Indeed, it is well settled that
In case of controversy involving both maritime and nonmaritime subject matter, where the principal matter involved belongs to
the jurisdiction of a court of common law or of equity, admiralty will not take cognizance of incidental maritime matters
connected therewith but will relegate the whole controversy to the appropriate tribunal. (2 C.J.S. 66.). (Emphasis supplied.)
Respondent, however, submits that the above-quoted ruling is wrong and urges a re-examination of the issue, arguing that
petitioner's arrastre service is maritime in nature and, therefore, actions against petitioner arrastre operator properly come under
the jurisdiction of the Court of First Instance of Manila.
We have carefully considered respondent's argument but found nothing to justify a departure from our conclusion in
the Macondray case, supra. Section 2 of the Management Contract entered into between petitioner an the Bureau of Customs on
October 21, 1950 (effective January 1, 1951), reads as follows:
2. During the period while this agreement remains in force and effect, the CONTRACTOR (herein petitioner Delgado Brothers,
Inc.) shall be, and the shall manager of the Arrastre Service at the Port of Manila, subject always, how ever, to the terms
conditions, restrictions, subjections, supervisions and provisions in this agreement contained, with the exclusive right or
privilege of receiving, handling, caring for, and delivering all merchandise, imported and exported, upon or passing over, the
Philippine Government-owned wharves and piers in the Port of Manila; as also, the recording or checking of all merchandise
which may be delivered to the Port of Manila at shipside, except coal, lumber and firebricks in quantity case crude oil and
kerosene and gasoline in lots of over ten thousand cases or its equivalent, and whole cargoes of on commodity when consigned
to one consignee only as hereafter provided, and in general to furnish lighting and water services and other incidental services,

25
 in order to undertake such work and with full power to fix the number and salaries of, and to appoint and dismiss, all officers,
employees and laborers temporary and permanent, which may be necessary, and to do all acts and things which said
CONTRACTOR may consider conclusive to the interests of the Arrastre Service. (Emphasis supplied.)
Under this provision, petitioner's functions as arrastre operator are (1) to receive, handle, care for, and deliver all merchandise
imported and exported, upon or passing over Government-owned wharves and piers in the Port of Manila, (2) as well as to record or
cheek all merchandise which may be delivered to said port at shipside, and in general, (3) to furnish light and water services and
other incidental services in order to undertake its arrastre service. Note that there is nothing in those functions which relate to the
trade and business of navigation (1 Am. Jur. 564), nor to the use or operation of vessels (Id. at 568). Both as to the nature of the
functions and the place of their performance (upon wharves and piers shipside), petitioner's services are clearly not maritime. As we
held in the Macondray case, they are no different from those of a depositary or warehouseman. Granting, arguendo, that petitioner's
arrastre service depends on, assists, or furthers maritime transportation (Id. at 565), it may be deemed merely incidental to its
aforementioned functions as arrastre operator and does not, thereby, make petitioner's arrastre service maritime in character.
To give admiralty jurisdiction over a contract as maritime, such contract must relate to the trade and business of the sea; it
must be essentially and fully maritime in its character; it must provide for maritime services, maritime transactions, or
maritime casualties. (The James T. Furber, 129 Fed. 808, cited in 66 L.R.A. 212; emphasis supplied.) See also 2 C.J.S. 66, supra.
The case of Cebu Arrastre Service v. Collector of Internal Revenue (G.R. No. L-7444, prom. May 30, 1956) cited by respondent is
irrelevant to the present case, considering that the functions of the Cebu Arrastre Service involve the loading, and unloading of
coastwise vessels calling at the port of Cebu and, are, therefore, of a "stevedore", subject to the percentage tax under Section 191
of the Tax Code. Similarly, the case of American Stevedores v. Porello (330 U.S. 446, 91 L. Ed. 1011) is inapplicable, involving as it
does, stevedores or longshoremen, not an arrastre operator. In the instant case, Delgado Brothers, Inc. has nothing to do with the
loading or unloading of cargoes to and from the ships. Its operation on and its responsibility for the merchandise and goods begins
from the time they are placed upon the wharves or piers or delivered along sides of ships. Evans v. New York & Pacific Steamship
Co., Ltd., et al. (145 F. 841) cited by respondent is, likewise, not in point. It should be noted that in said case, the New York & Pacific
Steamship Co. Ltd. (owner of the steamship "Capac" and with whom appellant Evans has a contract evidenced by a bill of lading)
and not the warehouseman or depositary Beards Erie Basin Stores, was the one sued by said appellant Evans for recovery of the
value of 20 bales of rubber which said steamship failed to deliver. Hence, the District Court of New York properly held that the
contract with the steamship company was maritime in nature, over which it had jurisdiction to entertain and decide. Undoubtedly,
the Court of First Instance of Manila has jurisdiction in cases where suit is brought directly against the carrier or shipowner.
Respondent cannot invoke the rule against multiplicity of suits, for the simple reason that said rule has to be subservient to the
superior requirement that the court must have jurisdiction. (See International Harvester Company of the Philippines v. Judge Aragon,
et al., G.R. No. L-2372, prom. August 26, 1949, 84 Phil. 363.)
With these conclusions, it is needless to discuss the other points raised in the briefs.
WHEREFORE, the decision of the Court of Appeals appealed from is hereby reversed and set aside, and case dismissed, with costs
against the respondent. So ordered.
MAYER STEEL PIPE CORPORATION and HONGKONG GOVERNMENT SUPPLIES DEPARTMENT, petitioners, vs. COURT OF
APPEALS, SOUTH SEA SURETY AND INSURANCE CO., INC. and the CHARTER INSURANCE CORPORATION, respondents.
[G.R. No. 124050. June 19, 1997]
PUNO, J.:
This is a petition for review on certiorari to annul and set aside the Decision of respondent Court of Appeals dated December
14, 1995[1]and its Resolution dated February 22, 1996 [2] in CA-G.R. CV No. 45805 entitled Mayer Steel Pipe Corporation and
Hongkong Government Supplies Department v. South Sea Surety Insurance Co., Inc. and The Charter Insurance Corporation. [3]
In 1983, petitioner Hongkong Government Supplies Department (Hongkong) contracted petitioner Mayer Steel Pipe
Corporation (Mayer) to manufacture and supply various steel pipes and fittings. From August to October, 1983, Mayer shipped the
pipes and fittings to Hongkong as evidenced by Invoice Nos. MSPC-1014, MSPC-1015, MSPC-1025, MSPC-1020, MSPC-1017 and
MSPC-1022.[4]
Prior to the shipping, petitioner Mayer insured the pipes and fittings against all risks with private respondents South Sea
Surety and Insurance Co., Inc. (South Sea) and Charter Insurance Corp. (Charter). The pipes and fittings covered by Invoice Nos.
MSPC-1014, 1015 and 1025 with a total amount of US$212,772.09 were insured with respondent South Sea, while those covered by
Invoice Nos. 1020, 1017 and 1022 with a total amount of US$149,470.00 were insured with respondent Charter.
Petitioners Mayer and Hongkong jointly appointed Industrial Inspection (International) Inc. as third-party inspector to examine
whether the pipes and fittings are manufactured in accordance with the specifications in the contract. Industrial Inspection certified
all the pipes and fittings to be in good order condition before they were loaded in the vessel. Nonetheless, when the goods reached
Hongkong, it was discovered that a substantial portion thereof was damaged.
Petitioners filed a claim against private respondents for indemnity under the insurance contract. Respondent Charter paid
petitioner Hongkong the amount of HK$64,904.75. Petitioners demanded payment of the balance of HK$299,345.30 representing
the cost of repair of the damaged pipes. Private respondents refused to pay because the insurance surveyor's report allegedly
showed that the damage is a factory defect.
On April 17, 1986, petitioners filed an action against private respondents to recover the sum of HK$299,345.30. For their
defense, private respondents averred that they have no obligation to pay the amount claimed by petitioners because the damage to
the goods is due to factory defects which are not covered by the insurance policies.
The trial court ruled in favor of petitioners. It found that the damage to the goods is not due to manufacturing defects. It also
noted that the insurance contracts executed by petitioner Mayer and private respondents are "all risks" policies which insure against
all causes of conceivable loss or damage. The only exceptions are those excluded in the policy, or those sustained due to fraud or
intentional misconduct on the part of the insured. The dispositive portion of the decision states:
WHEREFORE, judgment is hereby rendered ordering the defendants jointly and severally, to pay the plaintiffs the
following:
1. the sum equivalent in Philippine currency of HK$299,345.30 with legal rate of interest as of the filing of the
complaint;
2. P100,000.00 as and for attorney's fees; and
3. costs of suit.
SO ORDERED.[5]
Private respondents elevated the case to respondent Court of Appeals.
Respondent court affirmed the finding of the trial court that the damage is not due to factory defect and that it was covered
by the "all risks" insurance policies issued by private respondents to petitioner Mayer. However, it set aside the decision of the trial
court and dismissed the complaint on the ground of prescription. It held that the action is barred under Section 3(6) of the Carriage
of Goods by Sea Act since it was filed only on April 17, 1986, more than two years from the time the goods were unloaded from the
vessel. Section 3(6) of the Carriage of Goods by Sea Act provides that "the carrier and the ship shall be discharged from all liability
in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should
have been delivered." Respondent court ruled that this provision applies not only to the carrier but also to the insurer, citing Filipino
Merchants Insurance Co., Inc. vs. Alejandro.[6]
Hence this petition with the following assignments of error:
1. The respondent Court of Appeals erred in holding that petitioners' cause of action had already prescribed on the
mistaken application of the Carriage of Goods by Sea Act and the doctrine of Filipino Merchants Co., Inc. v. Alejandro
(145 SCRA 42); and
2. The respondent Court of Appeals committed an error in dismissing the complaint.[7]
The petition is impressed with merit. Respondent court erred in applying Section 3(6) of the Carriage of Goods by Sea Act.
Section 3(6) of the Carriage of Goods by Sea Act states that the carrier and the ship shall be discharged from all liability for
loss or damage to the goods if no suit is filed within one year after delivery of the goods or the date when they should have been
delivered. Under this provision, only the carrier's liability is extinguished if no suit is brought within one year. But the liability of the
insurer is not extinguished because the insurer's liability is based not on the contract of carriage but on the contract of insurance. A

26
close reading of the law reveals that the Carriage of Goods by Sea Act governs the relationship between the carrier on the one hand
and the shipper, the consignee and/or the insurer on the other hand. It defines the obligations of the carrier under the contract of
carriage. It does not, however, affect the relationship between the shipper and the insurer. The latter case is governed by the
Insurance Code.
Our ruling in Filipino Merchants Insurance Co., Inc. v. Alejandro [8] and the other cases[9] cited therein does not support
respondent court's view that the insurer's liability prescribes after one year if no action for indemnity is filed against the carrier or
the insurer. In that case, the shipper filed a complaint against the insurer for recovery of a sum of money as indemnity for the loss
and damage sustained by the insured goods. The insurer, in turn, filed a third-party complaint against the carrier for reimbursement
of the amount it paid to the shipper. The insurer filed the third-party complaint on January 9, 1978, more than one year after delivery
of the goods on December 17, 1977. The court held that the Insurer was already barred from filing a claim against the carrier
because under the Carriage of Goods by Sea Act, the suit against the carrier must be filed within one year after delivery of the
goods or the date when the goods should have been delivered. The court said that "the coverage of the Act includes the insurer of
the goods."[10]
The Filipino Merchants case is different from the case at bar. In Filipino Merchants, it was the insurer which filed a claim
against the carrier for reimbursement of the amount it paid to the shipper. In the case at bar, it was the shipper which filed a claim
against the insurer.The basis of the shipper's claim is the "all risks" insurance policies issued by private respondents to petitioner
Mayer.
The ruling in Filipino Merchants should apply only to suits against the carrier filed either by the shipper, the consignee or the
insurer.When the court said in Filipino Merchants that Section 3(6) of the Carriage of Goods by Sea Act applies to the insurer, it
meant that the insurer, like the shipper, may no longer file a claim against the carrier beyond the one-year period provided in the
law. But it does not mean that the shipper may no longer file a claim against the insurer because the basis of the insurer's liability is
the insurance contract. An insurance contract is a contract whereby one party, for a consideration known as the premium, agrees to
indemnify another for loss or damage which he may suffer from a specified peril. [11] An "all risks" insurance policy covers all kinds of
loss other than those due to willful and fraudulent act of the insured.[12] Thus, when private respondents issued the "all risks" policies
to petitioner Mayer, they bound themselves to indemnify the latter in case of loss or damage to the goods insured. Such obligation
prescribes in ten years, in accordance with Article 1144 of the New Civil Code.[13]
IN VIEW WHEREOF, the petition is GRANTED. The Decision of respondent Court of Appeals dated December 14, 1995 and its
Resolution dated February 22, 1996 are hereby SET ASIDE and the Decision of the Regional Trial Court is hereby REINSTATED. No
costs.
SO ORDERED.

FACTS:
1983: Hongkong Government Supplies Department (Hongkong) contracted Mayer Steel Pipe Corporation (Mayer) to
manufacture and supply various steel pipes and fittings
August to October, 1983: Mayer shipped the pipes and fittings to Hongkong as evidenced by Invoice Nos. MSPC-1014,
MSPC-1015, MSPC-1025, MSPC-1020, MSPC-1017 and MSPC-1022
Prior to the shipping, Mayer insured the pipes and fittings against all risks with South Sea Surety and Insurance Co., Inc.
(South Sea) and Charter Insurance Corp. (Charter)
South Sea:Invoice Nos. MSPC-1014, 1015 and 1025 for US$212,772.09
Charter: Invoice Nos. 1020, 1017 and 1022 for US$149,470.00
Mayer and Hongkong jointly appointed Industrial Inspection (International) Inc. as third-party inspector to examine
whether the pipes and fittings are manufactured in accordance with the specifications in the contract
Industrial Inspection certified all the pipes and fittings to be in good order condition before they were loaded in
the vessel
When the goods reached Hongkong, it was discovered that a substantial portion thereof was damaged
Mayer and Hongkong a claim against private respondents for indemnity under the insurance contract
Charter paid petitioner Hongkong the amount of HK$64,904.75
demanded payment of the balance of HK$299,345.30 which was refused
April 17, 1986: filed an action to recover HK$299,345.30
Defense: insurance surveyor's report allegedly showed that the damage is a factory defect
Trial Court: in favor of Mayer and Hongkong
CA: reversed
affirmed the finding of the trial court that the damage is not due to factory defect and that it was covered by
the "all risks" insurance policies
BUT held that Section 3(6) of the Carriage of Goods by Sea Act provides that "the carrier and the ship shall be
discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the
date when the goods should have been delivered
applies not only to the carrier but also to the insurer
ISSUE: W/N Section 3(6) of the Carriage of Goods by Sea also applies to insurer
HELD: NO. Petition is granted. CA reversed. RTC reinstated
Section 3(6) of the Carriage of Goods by Sea Act states that the carrier and the ship shall be discharged from all liability
for loss or damage to the goods if no suit is filed within one year after delivery of the goods or the date when they should have
been delivered. Under this provision, only the carrier's liability is extinguished if no suit is brought within one year. But the
liability of the insurer is not extinguished because the insurer's liability is based not on the contract of carriage but on the
contract of insurance - governed by the Insurance Code
An insurance contract is a contract whereby one party, for a consideration known as the premium, agrees to indemnify
another for loss or damage which he may suffer from a specified peril
"all risks" insurance policy covers all kinds of loss other than those due to willful and fraudulent act of the
insured
prescribes in ten years, in accordance with Article 1144 of the New Civil Code

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