Republic of the Philippines were denied by the Trial Court in an Order dated 13 the latter, who is of legal age,
the latter, who is of legal age, had the exclusive right to
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 80447 January 31, 1989
BALIWAG TRANSIT, INC., petitioner,
vs.
HON. COURT OF APPEALS and SPS. SOTERO
CAILIPAN, JR. and ZENAIDA LOPEZ and
GEORGE L. CAILIPAN, respondents.
Sta. Maria & Associates for petitioner.
Punzalan and Associates Law Office for respondents.
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
1
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,
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 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 settlement of the cause of action involved. A
plaintiff or as defendant, must be parties to said contract compromise is a contract whereby the parties, by
(Marimperio Compania Naviera, S.A. vs. Court of making reciprocal concessions, avoid a litigation or put
Appeals, No. L-40234, December 14, 1987, 156 SCRA an end to one already commenced (Article 2028, Civil
368). A real party-in-interest -plaintiff is one who has a Code). The Release of Claims executed by the injured
legal right while a real party-in-interest-defendant is one party himself wrote finish to this litigation.
who has a correlative legal obligation whose act or WHEREFORE, the Decision dated 22 October 1987 of
omission violates the legal right of the former (Lee vs. respondent Court of Appeals is SET ASIDE, the
Romillo, Jr., G.R. No. 60973, May 28, 1988). In the Decision of the Regional Trial Court of Bulacan, Branch
absence of any contract of carriage between Baliwag 20, is REINSTATED, and the Complaint and Third-
and George's parents, the latter are not real parties-in- Party Complaint are hereby ordered DISMISSED. No
interest in an action for breach of that contract. costs.
The general rule of the common law is that every action SO ORDERED.
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

2
SECOND DIVISION
G.R. No. 111127 July 26, 1996
MR. & MRS. ENGRACIO FABRE, JR. and
PORFIRIO CABIL, petitioners,
vs.
COURT OF APPEALS, THE WORD FOR THE
WORLD CHRISTIAN FELLOWSHIP, INC.,
AMYLINE ANTONIO, JOHN RICHARDS,
GONZALO GONZALES, VICENTE V. QUE, JR.,
ICLI CORDOVA, ARLENE GOJOCCO,
ALBERTO ROXAS CORDERO, RICHARD
BAUTISTA, JOCELYN GARCIA, YOLANDA
CORDOVA, NOEL ROQUE, EDWARD TAN,
ERNESTO NARCISO, ENRIQUETA LOCSIN,
FRANCIS NORMAN O. LOPES, JULIUS
CAESAR, GARCIA, ROSARIO MA. V. ORTIZ,
MARIETTA C. CLAVO, ELVIE SENIEL,
ROSARIO MARA-MARA, TERESITA REGALA,
MELINDA TORRES, MARELLA MIJARES,
JOSEFA CABATINGAN, MARA NADOC, DIANE
MAYO, TESS PLATA, MAYETTE JOCSON,
ARLENE Y. MORTIZ, LIZA MAYO, CARLOS
RANARIO, ROSAMARIA T. RADOC and
BERNADETTE FERRER, respondents.
MENDOZA, J.:p
This is a petition for review on certiorari of the decision
of the Court of Appeals1 in CA-GR No. 28245, dated
September 30, 1992, which affirmed with modification
the decision of the Regional Trial Court of Makati,
Branch 58, ordering petitioners jointly and severally to
pay damages to private respondent Amyline Antonio,
and its resolution which denied petitioners' motion for
reconsideration for lack of merit.
Petitioners Engracio Fabre, Jr. and his wife were owners
of a 1982 model Mazda minibus. They used the bus
principally in connection with a bus service for school
children which they operated in Manila. The couple had
a driver, Porfirio J. Cabil, whom they hired in 1981,
after trying him out for two weeks, His job was to take
school children to and from the St. Scholastica's College
in Malate, Manila.
On November 2, 1984 private respondent Word for the
World Christian Fellowship Inc. (WWCF) arranged
with petitioners for the transportation of 33 members of
its Young Adults Ministry from Manila to La Union and
back in consideration of which private respondent paid
petitioners the amount of P3,000.00.
3
The group was scheduled to leave on November 2,
1984, at 5:00 o'clock in the afternoon. However, as
several members of the party were late, the bus did not
leave the Tropical Hut at the corner of Ortigas Avenue
and EDSA until 8:00 o'clock in the evening. Petitioner
Porfirio Cabil drove the minibus.
The usual route to Caba, La Union was through Carmen,
Pangasinan. However, the bridge at Carmen was under
repair, sot hat petitioner Cabil, who was unfamiliar with
the area (it being his first trip to La Union), was forced
to take a detour through the town of Baay in Lingayen,
Pangasinan. At 11:30 that night, petitioner Cabil came
upon a sharp curve on the highway, running on a south
to east direction, which he described as "siete." The road
was slippery because it was raining, causing the bus,
which was running at the speed of 50 kilometers per
hour, to skid to the left road shoulder. The bus hit the
left traffic steel brace and sign along the road and
rammed the fence of one Jesus Escano, then turned over
and landed on its left side, coming to a full stop only
after a series of impacts. The bus came to rest off the
road. A coconut tree which it had hit fell on it and
smashed its front portion.
Several passengers were injured. Private respondent
Amyline Antonio was thrown on the floor of the bus and
pinned down by a wooden seat which came down by a
wooden seat which came off after being unscrewed. It
took three persons to safely remove her from this
portion. She was in great pain and could not move.
The driver, petitioner Cabil, claimed he did not see the
curve until it was too late. He said he was not familiar
with the area and he could not have seen the curve
despite the care he took in driving the bus, because it
was dark and there was no sign on the road. He said that
he saw the curve when he was already within 15 to 30
meters of it. He allegedly slowed down to 30 kilometers
per hour, but it was too late.
The Lingayen police investigated the incident the next
day, November 3, 1984. On the basis of their finding
they filed a criminal complaint against the driver,
Porfirio Cabil. The case was later filed with the
Lingayen Regional Trial Court. Petitioners Fabre paid
Jesus Escano P1,500.00 for the damage to the latter's
fence. On the basis of Escano's affidavit of desistance
the case against petitioners Fabre was dismissed.
Amyline Antonio, who was seriously injured, brought
this case in the RTC of Makati, Metro Manila. As a
result of the accident, she is now suffering from
paraplegia and is permanently paralyzed from the waist
down. During the trial she described the operations she
underwent and adduced evidence regarding the cost of
her treatment and therapy. Immediately after the
accident, she was taken to the Nazareth Hospital in
Baay, Lingayen. As this hospital was not adequately
equipped, she was transferred to the Sto. Niño Hospital,
also in the town of Ba-ay, where she was given
sedatives. An x-ray was taken and the damage to her
spine was determined to be too severe to be treated
there. She was therefore brought to Manila, first to the
Philippine General Hospital and later to the Makati
Medical Center where she underwent an operation to
correct the dislocation of her spine.
In its decision dated April 17, 1989, the trial court found
that:
No convincing evidence was shown that the minibus
was properly checked for travel to a long distance trip
and that the driver was properly screened and tested
before being admitted for employment. Indeed, all the
evidence presented have shown the negligent act of the
defendants which ultimately resulted to the accident
subject of this case.
Accordingly, it gave judgment for private respondents
holding:
Considering that plaintiffs Word for the World Christian
Fellowship, Inc. and Ms. Amyline Antonio were the
only ones who adduced evidence in support of their
claim for damages, the Court is therefore not in a
position to award damages to the other plaintiffs.
WHEREFORE, premises considered, the Court hereby
renders judgment against defendants Mr. & Mrs.
Engracio Fabre, Jr. and Porfirio Cabil y Jamil pursuant
to articles 2176 and 2180 of the Civil Code of the
Philippines and said defendants are ordered to pay
jointly and severally to the plaintiffs the following
amount:
1) P93,657.11 as compensatory and actual damages;
2) P500,000.00 as the reasonable amount of loss of
earning capacity of plaintiff Amyline Antonio;
3) P20,000.00 as moral damages;
4) P20,000.00 as exemplary damages; and
5) 25% of the recoverable amount as attorney's fees;
6) Costs of suit.
SO ORDERED.
The Court of Appeals affirmed the decision of the trial
court with respect to Amyline Antonio but dismissed it
with respect to the other plaintiffs on the ground that
they failed to prove their respective claims. The Court of
Appeals modified the award of damages as follows:
1) P93,657.11 as actual damages;
2) P600,000.00 as compensatory damages;
3) P50,000.00 as moral damages;
4) P20,000.00 as exemplary damages;
5) P10,000.00 as attorney's fees; and
6) Costs of suit.
The Court of Appeals sustained the trial court's finding
that petitioner Cabil failed to exercise due care and
precaution in the operation of his vehicle considering
the time and the place of the accident. The Court of
Appeals held that the Fabres were themselves
presumptively negligent. Hence, this petition.
Petitioners raise the following issues:
I. WHETHER OR NOT PETITIONERS WERE
NEGLIGENT.
II. WHETHER OF NOT PETITIONERS WERE
LIABLE FOR THE INJURIES SUFFERED BY
PRIVATE RESPONDENTS.
III WHETHER OR NOT DAMAGES CAN BE
AWARDED AND IN THE POSITIVE, UP TO WHAT
EXTENT.
Petitioners challenge the propriety of the award of
compensatory damages in the amount of P600,000.00. It
is insisted that, on the assumption that petitioners are
liable an award of P600,000.00 is unconscionable and
highly speculative. Amyline Antonio testified that she
was a casual employee of a company called "Suaco,"
earning P1,650.00 a month, and a dealer of Avon
products, earning an average of P1,000.00 monthly.
Petitioners contend that as casual employees do not have
security of tenure, the award of P600,000.00,
considering Amyline Antonio's earnings, is without
factual basis as there is no assurance that she would be
regularly earning these amounts.
With the exception of the award of damages, the petition
is devoid of merit.
First, it is unnecessary for our purpose to determine
whether to decide this case on the theory that petitioners
are liable for breach of contract of carriage or culpa
contractual or on the theory of quasi delict or culpa
aquiliana as both the Regional Trial Court and the Court
of Appeals held, for although the relation of passenger
and carrier is "contractual both in origin and nature,"
nevertheless "the act that breaks the contract may be
also a tort." 2 In either case, the question is whether the
bus driver, petitioner Porfirio Cabil, was negligent.
The finding that Cabil drove his bus negligently, while
his employer, the Fabres, who owned the bus, failed to
exercise the diligence of a good father of the family in
4
the selection and supervision of their employee is fully
supported by the evidence on record. These factual
findings of the two courts we regard as final and
conclusive, supported as they are by the evidence.
Indeed, it was admitted by Cabil that on the night in
question, it was raining, and as a consequence, the road
was slippery, and it was dark. He averred these facts to
justify his failure to see that there lay a sharp curve
ahead. However, it is undisputed that Cabil drove his
bus at the speed of 50 kilometers per hour and only
slowed down when he noticed the curve some 15 to 30
meters ahead. 3 By then it was too late for him to avoid
falling off the road. Given the conditions of the road and
considering that the trip was Cabil's first one outside of
Manila, Cabil should have driven his vehicle at a
moderate speed. There is testimony 4 that the vehicles
passing on that portion of the road should only be
running 20 kilometers per hour, so that at 50 kilometers
per hour, Cabil was running at a very high speed.
Considering the foregoing — the fact that it was raining
and the road was slippery, that it was dark, that he drove
his bus at 50 kilometers an hour when even on a good
day the normal speed was only 20 kilometers an hour,
and that he was unfamiliar with the terrain, Cabil was
grossly negligent and should be held liable for the
injuries suffered by private respondent Amyline
Antonio.
Pursuant to Arts. 2176 and 2180 of the Civil Code his
negligence gave rise to the presumption that his
employers, the Fabres, were themselves negligent in the
selection and supervisions of their employee.
Due diligence in selection of employees is not satisfied
by finding that the applicant possessed a professional
driver's license. The employer should also examine the
applicant for his qualifications, experience and record of
service. 5 Due diligence in supervision, on the other
hand, requires the formulation of rules and regulations
for the guidance of employees and issuance of proper
instructions as well as actual implementation and
monitoring of consistent compliance with the rules. 6
In the case at bar, the Fabres, in allowing Cabil to drive
the bus to La Union, apparently did not consider the fact
that Cabil had been driving for school children only,
from their homes to the St. Scholastica's College in
Metro Manila. 7They had hired him only after a two-
week apprenticeship. They had hired him only after a
two-week apprenticeship. They had tested him for
certain matters, such as whether he could remember the
names of the children he would be taking to school,
which were irrelevant to his qualification to drive on a
long distance travel, especially considering that the trip
to La Union was his first. The existence of hiring
procedures and supervisory policies cannot be casually
invoked to overturn the presumption of negligence on
the part of an employer. 8
Petitioners argue that they are not liable because (1) an
earlier departure (made impossible by the congregation's
delayed meeting) could have a averted the mishap and
(2) under the contract, the WWCF was directly
responsible for the conduct of the trip. Neither of these
contentions hold water. The hour of departure had not
been fixed. Even if it had been, the delay did not bear
directly on the cause of the accident. With respect to the
second contention, it was held in an early case that:
[A] person who hires a public automobile and gives the
driver directions as to the place to which he wishes to be
conveyed, but exercises no other control over the
conduct of the driver, is not responsible for acts of
negligence of the latter or prevented from recovering for
injuries suffered from a collision between the
automobile and a train, caused by the negligence or the
automobile driver. 9
As already stated, this case actually involves a contract
of carriage. Petitioners, the Fabres, did not have to be
engaged in the business of public transportation for the
provisions of the Civil Code on common carriers to
apply to them. As this Court has held: 10
Art. 1732. Common carriers are persons, corporations,
firms or associations engaged in the business of carrying
or transporting passengers or goods or both, by land,
water, or air for compensation, offering their services to
the public.
The above article makes no distinction between one
whose principal business activity is the carrying of
persons or goods or both, and one who does such
carrying only as an ancillary activity (in local idiom, as
"a sideline"). Article 1732 also carefully avoids making
any distinction between a person or enterprise offering
transportation service on a regular or scheduled basis
and one offering such service on an occasional, episodic
or unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its services to the
"general public," i.e., the general community or
population, and one who offers services or solicits
business only from a narrow segment of the general
population. We think that Article 1732 deliberately
refrained from making such distinctions.
As common carriers, the Fabres were found to exercise
"extraordinary diligence" for the safe transportation of
the passengers to their destination. This duty of care is
not excused by proof that they exercise the diligence of
a good father of the family in the selection and
supervision of their employee. As Art. 1759 of the Code
provides:
Common carriers are liable for the death of or injuries to
passengers through the negligence or willful acts of the
former's employees although such employees may have
acted beyond the scope of their authority or in violation
of the orders of the common carriers.
This liability of the common carriers does not cease
upon proof that they exercised all the diligence of a
good father of a family in the selection and supervision
of their employees.
The same circumstances detailed above, supporting the
finding of the trial court and of the appellate court that
petitioners are liable under Arts. 2176 and 2180
for quasi delict, fully justify findings them guilty of
breach of contract of carriage under Arts. 1733, 1755
and 1759 of the Civil Code.
Secondly, we sustain the award of damages in favor of
Amyline Antonio. However, we think the Court of
Appeals erred in increasing the amount of compensatory
damages because private respondents did not question
this award as inadequate. 11 To the contrary, the award
of P500,000.00 for compensatory damages which the
Regional Trial Court made is reasonable considering the
contingent nature of her income as a casual employee of
a company and as distributor of beauty products and the
fact that the possibility that she might be able to work
again has not been foreclosed. In fact she testified that
one of her previous employers had expressed
willingness to employ her again.
With respect to the other awards, while the decisions of
the trial court and the Court of Appeals do not
sufficiently indicate the factual and legal basis for them,
we find that they are nevertheless supported by evidence
in the records of this case. Viewed as an action for quasi
delict, this case falls squarely within the purview of Art.
2219(2) providing for the payment of moral damages in
cases of quasi delict. On the theory that petitioners are
liable for breach of contract of carriage, the award of
moral damages is authorized by Art. 1764, in relation to
Art. 2220, since Cabil's gross negligence amounted to
bad faith.12 Amyline Antonio's testimony, as well as the
testimonies of her father and copassengers, fully
establish the physical suffering and mental anguish she
5
endured as a result of the injuries caused by petitioners'
negligence.
The award of exemplary damages and attorney's fees
was also properly made. However, for the same reason
that it was error for the appellate court to increase the
award of compensatory damages, we hold that it was
also error for it to increase the award of moral damages
and reduce the award of attorney's fees, inasmuch as
private respondents, in whose favor the awards were
made, have not appealed. 13
As above stated, the decision of the Court of Appeals
can be sustained either on the theory of quasi delict or
on that of breach of contract. The question is whether, as
the two courts below held, petitioners, who are the
owners and driver of the bus, may be made to respond
jointly and severally to private respondent. We hold that
they may be. In Dangwa Trans. Co. Inc. v. Court of
Appeals, 14 on facts similar to those in this case, this
Court held the bus company and the driver jointly and
severally liable for damages for injuries suffered by a
passenger. Again, in Bachelor Express, Inc. v. Court of
Appeals 15 a driver found negligent in failing to stop the
bus in order to let off passengers when a fellow
passenger ran amuck, as a result of which the passengers
jumped out of the speeding bus and suffered injuries,
was held also jointly and severally liable with the bus
company to the injured passengers.
The same rule of liability was applied in situations
where the negligence of the driver of the bus on which
plaintiff was riding concurred with the negligence of a
third party who was the driver of another vehicle, thus
causing an accident. In Anuran v. Buño, 16 Batangas
Laguna Tayabas Bus Co. v. Intermediate Appellate
Court, 17 and Metro Manila Transit Corporation
v. Court of Appeals, 18 the bus company, its driver, the
operator of the other vehicle and the driver of the
vehicle were jointly and severally held liable to the
injured passenger or the latters' heirs. The basis of this
allocation of liability was explained in Viluan v. Court
of Appeals, 19 thus:
Nor should it make any difference that the liability of
petitioner [bus owner] springs from contract while that
of respondents [owner and driver of other vehicle] arises
from quasi-delict. As early as 1913, we already ruled
in Gutierrez vs. Gutierrez, 56 Phil. 177, that in case of
injury to a passenger due to the negligence of the driver
of the bus on which he was riding and of the driver of
another vehicle, the drivers as well as the owners of the
two vehicles are jointly and severally liable for
damages. Some members of the Court, though, are of
the view that under the circumstances they are liable
on quasi-delict. 20
It is true that in Philippine Rabbit Bus Lines,
Inc. v. Court of Appeals 21 this Court exonerated the
jeepney driver from liability to the injured passengers
and their families while holding the owners of the
jeepney jointly and severally liable, but that is because
that case was expressly tried and decided exclusively on
the theory of culpa contractual. As this Court there
explained:
The trial court was therefore right in finding that
Manalo (the driver) and spouses Mangune and Carreon
(the jeepney owners) were negligent. However, its
ruling that spouses Mangune and Carreon are jointly and
severally liable with Manalo is erroneous. The driver
cannot be held jointly and severally liable with carrier in
case of breach of the contract of carriage. The rationale
behind this is readily discernible. Firstly, the contract of
carriage is between the carrier is exclusively responsible
therefore to the passenger, even if such breach be due to
the negligence of his driver (see Viluan v. The Court of
Appeals, et al., G.R. Nos. L-21477-81, April 29, 1966,
16 SCRA 742). 22
As in the case of BLTB, private respondents in this case
and her coplaintiffs did not stake out their claim against
the carrier and the driver exclusively on one theory,
much less on that of breach of contract alone. After all,
it was permitted for them to allege alternative causes of
action and join as many parties as may be liable on such
causes of action 23 so long as private respondent and her
coplaintiffs do not recover twice for the same injury.
What is clear from the cases is the intent of the plaintiff
there to recover from both the carrier and the driver,
thus, justifying the holding that the carrier and the driver
were jointly and severally liable because their separate
and distinct acts concurred to produce the same injury.
WHEREFORE, the decision of the Court of Appeals is
AFFIRMED with MODIFICATION as to award of
damages. Petitioners are ORDERED to PAY jointly and
severally the private respondent Amyline Antonio the
following amounts:
1) P93,657.11 as actual damages;
2) P500,000.00 as the reasonable amount of loss of
earning capacity of plaintiff Amyline Antonio;
3) P20,000.00 as moral damages;
4) P20,000.00 as exemplary damages;
5) 25% of the recoverable amount as attorney's fees; and
6) costs of suit. SO ORDERED.

SECOND DIVISION
[G.R. No. 122494. October 8, 1998]
EVERETT STEAMSHIP
CORPORATION, petitioner, vs. COURT OF
APPEALS and HERNANDEZ TRADING CO.
INC., respondents.
DECISION
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 by Bill of Lading No. NGO53MN.
Upon arrival at the port of Manila, it was discovered
that the crate marked MARCO C/No. 14 was
missing.This was confirmed and admitted by petitioner
in its letter of January 13, 1992 addressed to private
respondent, which thereafter made a formal claim upon
petitioner for the value of the lost cargo amounting to
One Million Five Hundred Fifty Two Thousand Five
Hundred (Y1,552,500.00) Yen, the amount shown in an
Invoice No. MTM-941, dated November 14,
1991. However, petitioner offered to pay only One
Hundred Thousand (Y100,000.00) Yen, the maximum
amount stipulated under Clause 18 of the covering bill
of lading which limits the liability of petitioner.
Private respondent rejected the offer and thereafter
instituted a suit for collection docketed as Civil Case
No. C-15532, against petitioner before the Regional
Trial Court of Caloocan City, Branch 126.
At the pre-trial conference, both parties manifested that
they have no testimonial evidence to offer and agreed
instead to file their respective memoranda.
On July 16, 1993, the trial court rendered judgment [2] in
favor of private respondent, ordering petitioner to
pay: (a) Y1,552,500.00; (b) Y20,000.00 or its peso
6
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 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
7
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 The bill of lading in question confirms petitioners
stipulation, in this case the delivery of the goods or contention. To defeat the carriers limited liability, the
cargo shipped. In neither capacity can he assert aforecited Clause 18 of the bill of lading requires that
personally, in bar to any provision of the bill of the shipper should have declared in writing a higher
lading, the alleged circumstance that fair and free valuation of its goods before receipt thereof by the
agreement to such provision was vitiated by its being carrier and insert the said declaration in the bill of
in such fine print as to be hardly lading, with the extra freight paid. These requirements
readable. Parenthetically, it may be observed that in in the bill of lading were never complied with by the
one comparatively recent case (Phoenix Assurance shipper, hence, the liability of the carrier under the
Company vs. Macondray & Co., Inc., 64 SCRA 15) limited liability clause stands. The commercial Invoice
where this Court found that a similar package No. MTM-941 does not in itself sufficiently and
limitation clause was printed in the smallest type on convincingly show that petitioner has knowledge of the
the back of the bill of lading, it nonetheless ruled that value of the cargo as contended by private
the consignee was bound thereby on the strength of respondent. No other evidence was proffered by private
authority holding that such provisions on liability respondent to support is contention. Thus, we are
limitation are as much a part of a bill of lading as convinced that petitioner should be liable for the full
though physically in it and as though placed therein value of the lost cargo.
by agreement of the parties. In fine, the liability of petitioner for the loss of the cargo
There can, therefore, be no doubt or equivocation about is limited to One Hundred Thousand (Y100,000.00)
the validity and enforceability of freely-agreed-upon Yen, pursuant to Clause 18 of the bill of lading.
stipulations in a contract of carriage or bill of lading WHEREFORE, the decision of the Court of Appeals
limiting the liability of the carrier to an agreed dated June 14, 1995 in C.A.-G.R. CV No. 42803 is
valuation unless the shipper declares a higher value hereby REVERSED and SET ASIDE.
and inserts it into said contract or bill. This SO ORDERED.
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]

8
SECOND DIVISION
G.R. No. L-48757 May 30, 1988
MAURO GANZON, petitioner,
vs.
COURT OF APPEALS and GELACIO E.
TUMAMBING, respondents.
Antonio B. Abinoja for petitioner.
Quijano, Arroyo & Padilla Law Office for respondents.
SARMIENTO, J.:
The private respondent instituted in the Court of First
Instance of Manila 1 an action against the petitioner for
damages based on culpa contractual. The antecedent
facts, as found by the respondent Court, 2 are
undisputed:
On November 28, 1956, Gelacio Tumambing contracted
the services of Mauro B. Ganzon to haul 305 tons of
scrap iron from Mariveles, Bataan, to the port of Manila
on board the lighter LCT "Batman" (Exhibit 1,
Stipulation of Facts, Amended Record on Appeal, p.
38). Pursuant to that agreement, Mauro B. Ganzon sent
his lighter "Batman" to Mariveles where it docked in
three feet of water (t.s.n., September 28, 1972, p. 31).
On December 1, 1956, Gelacio Tumambing delivered
the scrap iron to defendant Filomeno Niza, captain of
the lighter, for loading which was actually begun on the
same date by the crew of the lighter under the captain's
supervision. When about half of the scrap iron was
already loaded (t.s.n., December 14, 1972, p. 20), Mayor
Jose Advincula of Mariveles, Bataan, arrived and
demanded P5,000.00 from Gelacio Tumambing. The
latter resisted the shakedown and after a heated
argument between them, Mayor Jose Advincula drew
his gun and fired at Gelacio Tumambing (t.s.n., March
19, 1971, p. 9; September 28, 1972, pp. 6-
7).<äre||anº•1àw> The 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,
9
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 said contract of transportation as the goods remained in
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
the custody and control of the carrier, albeit still
unloaded.
The petitioner has failed to show that the loss of the
scraps was due to any of the following causes
enumerated in Article 1734 of the Civil Code, namely:
(1) Flood, storm, earthquake, lightning, or other natural
disaster or calamity;
(2) Act of the public enemy in war, whether
international or civil;
(3) Act or omission of the shipper or owner of the
goods;
(4) The character of the goods or defects in the packing
or in the containers;
(5) Order or act of competent public authority.
Hence, the petitioner is presumed to have been at fault
or to have acted negligently. 6 By reason of this
presumption, the court is not even required to make an
express finding of fault or negligence before it could
hold the petitioner answerable for the breach of the
contract of carriage. Still, the petitioner could have been
exempted from any liability had he been able to prove
that he observed extraordinary diligence in the vigilance
over the goods in his custody, according to all the
circumstances of the case, or that the loss was due to an
unforeseen event or to force majeure. As it was, there
was hardly any attempt on the part of the petitioner to
prove that he exercised such extraordinary diligence.
It is in the second and third assignments of error where
the petitioner maintains that he is exempt from any
liability because the loss of the scraps was due mainly to
the intervention of the municipal officials of Mariveles
which constitutes a caso fortuito as defined in Article
1174 of the Civil Code. 7
We cannot sustain the theory of caso fortuito. In the invokes in tills petition. For Art. 1735 of the Civil Code,
courts below, the petitioner's defense was that the loss of conversely stated, means that the shipper will suffer the
the scraps was due to an "order or act of competent losses and deterioration arising from the causes
public authority," and this contention was correctly enumerated in Art. 1734; and in these instances, the
passed upon by the Court of Appeals which ruled that: burden of proving that damages were caused by the fault
... In the second place, before the appellee Ganzon could or negligence of the carrier rests upon him. However,
be absolved from responsibility on the ground that he the carrier must first establish that the loss or
was ordered by competent public authority to unload the deterioration was occasioned by one of the excepted
scrap iron, it must be shown that Acting Mayor Basilio causes or was due to an unforeseen event or to force
Rub had the power to issue the disputed order, or that it majeure. Be that as it may, insofar as Art. 362 appears to
was lawful, or that it was issued under legal process of require of the carrier only ordinary diligence, the same
authority. The appellee failed to establish this. Indeed, is .deemed to have been modified by Art. 1733 of the
no authority or power of the acting mayor to issue such Civil Code.
an order was given in evidence. Neither has it been Finding the award of actual and exemplary damages to
shown that the cargo of scrap iron belonged to the be proper, the same will not be disturbed by us. Besides,
Municipality of Mariveles. What we have in the record these were not sufficiently controverted by the
is the stipulation of the parties that the cargo of scrap petitioner.
iron was accilmillated by the appellant through separate WHEREFORE, the petition is DENIED; the assailed
purchases here and there from private individuals decision of the Court of Appeals is hereby AFFIRMED.
(Record on Appeal, pp. 38-39). The fact remains that the Costs against the petitioner.
order given by the acting mayor to dump the scrap iron This decision is IMMEDIATELY EXECUTORY.
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

10
EN BANC
G.R. No. L-18965 October 30, 1964
COMPAÑIA MARITIMA, petitioner,
vs.
INSURANCE COMPANY OF NORTH
AMERICA, respondent.
Rafael Dinglasan for petitioner.
Ozaeta Gibbs & Ozaeta for respondent.
BAUTISTA ANGELO, J.:
Sometime in October, 1952, Macleod and Company of
the Philippines contracted by telephone the services of
the Compañia Maritima, a shipping corporation, for the
shipment of 2,645 bales of hemp from the former's Sasa
private pier at Davao City to Manila and for their
subsequent transhipment to Boston, Massachusetts,
U.S.A. on board the S.S. Steel Navigator. This oral
contract was later on confirmed by a formal and written
booking issued by Macleod's branch office in Sasa and
handcarried to Compañia Maritima's branch office in
Davao in compliance with which the latter sent to
Macleod's private wharf LCT Nos. 1023 and 1025 on
which the loading of the hemp was completed on
October 29, 1952. These two lighters were manned each
by a patron and an assistant patron. The patrons of both
barges issued the corresponding carrier's receipts and
that issued by the patron of Barge No. 1025 reads in
part:
Received in behalf of S.S. Bowline Knot in good order
and condition from MACLEOD AND COMPANY OF
PHILIPPINES, Sasa Davao, for transhipment at Manila
onto S.S. Steel Navigator.
FINAL DESTINATION: Boston.
Thereafter, the two loaded barges left Macleod's wharf
and proceeded to and moored at the government's
marginal wharf in the same place to await the arrival of
the S.S. Bowline Knot belonging to Compañia Maritima
on which the hemp was to be loaded. During the night
of October 29, 1952, or at the early hours of October 30,
LCT No. 1025 sank, resulting in the damage or loss of
1,162 bales of hemp loaded therein. On October 30,
1952, Macleod promptly notified the carrier's main
office in Manila and its branch in Davao advising it of
its liability. The damaged hemp was brought to Odell
Plantation in Madaum, Davao, for cleaning, washing,
reconditioning, and redrying. During the period from
November 1-15, 1952, the carrier's trucks and lighters
hauled from Odell to Macleod at Sasa a total of 2,197.75
piculs of the reconditioned hemp out of the original
cargo of 1,162 bales weighing 2,324 piculs which had a
11
total value of 116,835.00. After reclassification, the
value of the reconditioned hemp was reduced to
P84,887.28, or a loss in value of P31,947.72. Adding to
this last amount the sum of P8,863.30 representing
Macleod's expenses in checking, grading, rebating, and
other fees for washing, cleaning and redrying in the
amount of P19.610.00, the total loss adds up to
P60,421.02.
All abaca shipments of Macleod, including the 1,162
bales loaded on the carrier's LCT No. 1025, were
insured with the Insurance Company of North America
against all losses and damages. In due time, Macleod
filed a claim for the loss it suffered as above stated with
said insurance company, and after the same had been
processed, the sum of P64,018.55 was paid, which was
noted down in a document which aside from being a
receipt of the amount paid, was a subrogation agreement
between Macleod and the insurance company wherein
the former assigned to the latter its rights over the
insured and damaged cargo. Having failed to recover
from the carrier the sum of P60,421.02, which is the
only amount supported by receipts, the insurance
company instituted the present action on October 28,
1953. After trial, the court a quo rendered judgment
ordering the carrier to pay the insurance company the
sum of P60,421.02, with legal interest thereon from the
date of the filing of the complaint until fully paid, and
the costs. This judgment was affirmed by the Court of
Appeals on December 14, 1960. Hence, this petition for
review.
The issues posed before us are: (1) Was there a contract
of carriage between the carrier and the shipper even if
the loss occurred when the hemp was loaded on a barge
owned by the carrier which was loaded free of charge
and was not actually loaded on the S.S. Bowline Knot
which would carry the hemp to Manila and no bill of
lading was issued therefore?; (2) Was the damage
caused to the cargo or the sinking of the barge where it
was loaded due to a fortuitous event, storm or natural
disaster that would exempt the carrier from liability?;
(3) Can respondent insurance company sue the carrier
under its insurance contract as assignee of Macleod in
spite of the fact that the liability of the carrier as insurer
is not recognized in this jurisdiction?; (4) Has the Court
of Appeals erred in regarding Exhibit NNN-1 as an
implied admission by the carrier of the correctness and
sufficiency of the shipper's statement of accounts
contrary to the burden of proof rule?; and (5) Can the
insurance company maintain this suit without proof of
its personality to do so?
1. This issue should be answered in the affirmative. As
found by the Court of Appeals, Macleod and Company
contracted by telephone the services of petitioner to ship
the hemp in question from the former's private pier at
Sasa, Davao City, to Manila, to be subsequently
transhipped to Boston, Massachusetts, U.S.A., which
oral contract was later confirmed by a formal and
written booking issued by the shipper's branch office,
Davao City, in virtue of which the carrier sent two of its
lighters to undertake the service. It also appears that the
patrons of said lighters were employees of the carrier
with due authority to undertake the transportation and to
sign the documents that may be necessary therefor so
much so that the patron of LCT No. 1025 signed the
receipt covering the cargo of hemp loaded therein as
follows: .
Received in behalf of S.S. Bowline Knot in good order
and condition from MACLEOD AND COMPANY OF
PHILIPPINES, Sasa Davao, for transhipment at Manila
onto S.S. Steel Navigator.
FINAL DESTINATION: Boston.
The fact that the carrier sent its lighters free of charge to
take the hemp from Macleod's wharf at Sasa preparatory
to its loading onto the ship Bowline Knot does not in
any way impair the contract of carriage already entered
into between the carrier and the shipper, for that
preparatory step is but part and parcel of said contract of
carriage. The lighters were merely employed as the first
step of the voyage, but once that step was taken and the
hemp delivered to the carrier's employees, the rights and
obligations of the parties attached thereby subjecting
them to the principles and usages of the maritime law.
In other words, here we have a complete contract of
carriage the consummation of which has already begun:
the shipper delivering the cargo to the carrier, and the
latter taking possession thereof by placing it on a lighter
manned by its authorized employees, under which
Macleod became entitled to the privilege secured to him
by law for its safe transportation and delivery, and the
carrier to the full payment of its freight upon completion
of the voyage.
The receipt of goods by the carrier has been said to lie at
the foundation of the contract to carry and deliver, and if
actually no goods are received there can be no such
contract. The liability and responsibility of the carrier
under a contract for the carriage of goods commence on
their actual delivery to, or receipt by, the carrier or an
authorized agent. ... and delivery to a lighter in charge
of a vessel for shipment on the vessel, where it is the
custom to deliver in that way, is a good delivery and
binds the vessel receiving the freight, the liability
commencing at the time of delivery to the lighter. ...
and, similarly, where there is a contract to carry goods
from one port to another, and they cannot be loaded
directly on the vessel and lighters are sent by the vessel
to bring the goods to it, the lighters are for the time its
substitutes, so that the bill of landing is applicable to the
goods as soon as they are placed on the lighters. (80
C.J.S., p. 901, emphasis supplied)
... The test as to whether the relation of shipper and
carrier had been established is, Had the control and
possession of the cotton been completely surrendered by
the shipper to the railroad company? Whenever the
control and possession of goods passes to the carrier and
nothing remains to be done by the shipper, then it can be
said with certainty that the relation of shipper and
carrier has been established. Railroad Co. v. Murphy, 60
Ark. 333, 30 S.W. 419, 46 A. St. Rep. 202; Pine Bluff &
Arkansas River Ry. v. MaKenzie, 74 Ark. 100, 86 S.W.
834; Matthews & Hood v. St. L., I.M. & S.R. Co., 123
Ark. 365, 185 S.W. 461, L.R.A. 1916E, 1194. (W.F.
Bogart & Co., et al. v. Wade, et al., 200 S.W. 148).
The claim that there can be no contract of affreightment
because the hemp was not actually loaded on the ship
that was to take it from Davao City to Manila is of no
moment, for, as already stated, the delivery of the hemp
to the carrier's lighter is in line with the contract. In fact,
the receipt signed by the patron of the lighter that
carried the hemp stated that he was receiving the cargo
"in behalf of S.S. Bowline Knot in good order and
condition." On the other hand, the authorities are to the
effect that a bill of lading is not indispensable for the
creation of a contract of carriage.
Bill of lading not indispensable to contract of carriage.
— As to the issuance of a bill of lading, although article
350 of the Code of Commerce provides that "the shipper
as well as the carrier of merchandise or goods may
mutua-lly demand that a bill of lading is not
indispensable. As regards the form of the contract of
carriage it can be said that provided that there is a
meeting of the minds and from such meeting arise rights
and obligations, there should be no limitations as to
form." The bill of lading is not essential to the contract,
although it may become obligatory by reason of the
regulations of railroad companies, or as a condition
imposed in the contract by the agreement of the parties
12
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 that it is a foreign corporation doing business in the
appellant is likewise liable to appellee who, as assignee Philippines with a personality to file the present action.
of Macleod, merely stepped into the shoes of and substi- WHEREFORE, the decision appealed from is affirmed,
tuted the latter in demanding from appellant the with costs against petitioner.
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

13
SECOND DIVISION
G.R. No. 92288 February 9, 1993
BRITISH AIRWAYS, INC., petitioner,
vs.
THE HON. COURT OF APPEALS, Twelfth
Division, and FIRST INTERNATIONAL TRADING
AND GENERAL SERVICES, respondents.
Quasha, Asperilla, Ancheta, Peña & Nolasco for
petitioner.
Monina P. Lee for private respondent.
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 Appeals1 affirming the decision of the trial
court2 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,
19903 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
14
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.
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
15
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.
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.

16
EN BANC
G.R. No. L-18965 October 30, 1964
COMPAÑIA MARITIMA, petitioner,
vs.
INSURANCE COMPANY OF NORTH
AMERICA, respondent.
Rafael Dinglasan for petitioner.
Ozaeta Gibbs & Ozaeta for respondent.
BAUTISTA ANGELO, J.:
Sometime in October, 1952, Macleod and Company of
the Philippines contracted by telephone the services of
the Compañia Maritima, a shipping corporation, for the
shipment of 2,645 bales of hemp from the former's Sasa
private pier at Davao City to Manila and for their
subsequent transhipment to Boston, Massachusetts,
U.S.A. on board the S.S. Steel Navigator. This oral
contract was later on confirmed by a formal and written
booking issued by Macleod's branch office in Sasa and
handcarried to Compañia Maritima's branch office in
Davao in compliance with which the latter sent to
Macleod's private wharf LCT Nos. 1023 and 1025 on
which the loading of the hemp was completed on
October 29, 1952. These two lighters were manned each
by a patron and an assistant patron. The patrons of both
barges issued the corresponding carrier's receipts and
that issued by the patron of Barge No. 1025 reads in
part:
Received in behalf of S.S. Bowline Knot in good order
and condition from MACLEOD AND COMPANY OF
PHILIPPINES, Sasa Davao, for transhipment at Manila
onto S.S. Steel Navigator.
FINAL DESTINATION: Boston.
Thereafter, the two loaded barges left Macleod's wharf
and proceeded to and moored at the government's
marginal wharf in the same place to await the arrival of
the S.S. Bowline Knot belonging to Compañia Maritima
on which the hemp was to be loaded. During the night
of October 29, 1952, or at the early hours of October 30,
LCT No. 1025 sank, resulting in the damage or loss of
1,162 bales of hemp loaded therein. On October 30,
1952, Macleod promptly notified the carrier's main
office in Manila and its branch in Davao advising it of
its liability. The damaged hemp was brought to Odell
Plantation in Madaum, Davao, for cleaning, washing,
reconditioning, and redrying. During the period from
November 1-15, 1952, the carrier's trucks and lighters
hauled from Odell to Macleod at Sasa a total of 2,197.75
piculs of the reconditioned hemp out of the original
cargo of 1,162 bales weighing 2,324 piculs which had a
17
total value of 116,835.00. After reclassification, the
value of the reconditioned hemp was reduced to
P84,887.28, or a loss in value of P31,947.72. Adding to
this last amount the sum of P8,863.30 representing
Macleod's expenses in checking, grading, rebating, and
other fees for washing, cleaning and redrying in the
amount of P19.610.00, the total loss adds up to
P60,421.02.
All abaca shipments of Macleod, including the 1,162
bales loaded on the carrier's LCT No. 1025, were
insured with the Insurance Company of North America
against all losses and damages. In due time, Macleod
filed a claim for the loss it suffered as above stated with
said insurance company, and after the same had been
processed, the sum of P64,018.55 was paid, which was
noted down in a document which aside from being a
receipt of the amount paid, was a subrogation agreement
between Macleod and the insurance company wherein
the former assigned to the latter its rights over the
insured and damaged cargo. Having failed to recover
from the carrier the sum of P60,421.02, which is the
only amount supported by receipts, the insurance
company instituted the present action on October 28,
1953. After trial, the court a quo rendered judgment
ordering the carrier to pay the insurance company the
sum of P60,421.02, with legal interest thereon from the
date of the filing of the complaint until fully paid, and
the costs. This judgment was affirmed by the Court of
Appeals on December 14, 1960. Hence, this petition for
review.
The issues posed before us are: (1) Was there a contract
of carriage between the carrier and the shipper even if
the loss occurred when the hemp was loaded on a barge
owned by the carrier which was loaded free of charge
and was not actually loaded on the S.S. Bowline Knot
which would carry the hemp to Manila and no bill of
lading was issued therefore?; (2) Was the damage
caused to the cargo or the sinking of the barge where it
was loaded due to a fortuitous event, storm or natural
disaster that would exempt the carrier from liability?;
(3) Can respondent insurance company sue the carrier
under its insurance contract as assignee of Macleod in
spite of the fact that the liability of the carrier as insurer
is not recognized in this jurisdiction?; (4) Has the Court
of Appeals erred in regarding Exhibit NNN-1 as an
implied admission by the carrier of the correctness and
sufficiency of the shipper's statement of accounts
contrary to the burden of proof rule?; and (5) Can the
insurance company maintain this suit without proof of
its personality to do so?
1. This issue should be answered in the affirmative. As
found by the Court of Appeals, Macleod and Company
contracted by telephone the services of petitioner to ship
the hemp in question from the former's private pier at
Sasa, Davao City, to Manila, to be subsequently
transhipped to Boston, Massachusetts, U.S.A., which
oral contract was later confirmed by a formal and
written booking issued by the shipper's branch office,
Davao City, in virtue of which the carrier sent two of its
lighters to undertake the service. It also appears that the
patrons of said lighters were employees of the carrier
with due authority to undertake the transportation and to
sign the documents that may be necessary therefor so
much so that the patron of LCT No. 1025 signed the
receipt covering the cargo of hemp loaded therein as
follows: .
Received in behalf of S.S. Bowline Knot in good order
and condition from MACLEOD AND COMPANY OF
PHILIPPINES, Sasa Davao, for transhipment at Manila
onto S.S. Steel Navigator.
FINAL DESTINATION: Boston.
The fact that the carrier sent its lighters free of charge to
take the hemp from Macleod's wharf at Sasa preparatory
to its loading onto the ship Bowline Knot does not in
any way impair the contract of carriage already entered
into between the carrier and the shipper, for that
preparatory step is but part and parcel of said contract of
carriage. The lighters were merely employed as the first
step of the voyage, but once that step was taken and the
hemp delivered to the carrier's employees, the rights and
obligations of the parties attached thereby subjecting
them to the principles and usages of the maritime law.
In other words, here we have a complete contract of
carriage the consummation of which has already begun:
the shipper delivering the cargo to the carrier, and the
latter taking possession thereof by placing it on a lighter
manned by its authorized employees, under which
Macleod became entitled to the privilege secured to him
by law for its safe transportation and delivery, and the
carrier to the full payment of its freight upon completion
of the voyage.
The receipt of goods by the carrier has been said to lie at
the foundation of the contract to carry and deliver, and if
actually no goods are received there can be no such
contract. The liability and responsibility of the carrier
under a contract for the carriage of goods commence on
their actual delivery to, or receipt by, the carrier or an
authorized agent. ... and delivery to a lighter in charge
of a vessel for shipment on the vessel, where it is the
custom to deliver in that way, is a good delivery and
binds the vessel receiving the freight, the liability
commencing at the time of delivery to the lighter. ...
and, similarly, where there is a contract to carry goods
from one port to another, and they cannot be loaded
directly on the vessel and lighters are sent by the vessel
to bring the goods to it, the lighters are for the time its
substitutes, so that the bill of landing is applicable to the
goods as soon as they are placed on the lighters. (80
C.J.S., p. 901, emphasis supplied)
... The test as to whether the relation of shipper and
carrier had been established is, Had the control and
possession of the cotton been completely surrendered by
the shipper to the railroad company? Whenever the
control and possession of goods passes to the carrier and
nothing remains to be done by the shipper, then it can be
said with certainty that the relation of shipper and
carrier has been established. Railroad Co. v. Murphy, 60
Ark. 333, 30 S.W. 419, 46 A. St. Rep. 202; Pine Bluff &
Arkansas River Ry. v. MaKenzie, 74 Ark. 100, 86 S.W.
834; Matthews & Hood v. St. L., I.M. & S.R. Co., 123
Ark. 365, 185 S.W. 461, L.R.A. 1916E, 1194. (W.F.
Bogart & Co., et al. v. Wade, et al., 200 S.W. 148).
The claim that there can be no contract of affreightment
because the hemp was not actually loaded on the ship
that was to take it from Davao City to Manila is of no
moment, for, as already stated, the delivery of the hemp
to the carrier's lighter is in line with the contract. In fact,
the receipt signed by the patron of the lighter that
carried the hemp stated that he was receiving the cargo
"in behalf of S.S. Bowline Knot in good order and
condition." On the other hand, the authorities are to the
effect that a bill of lading is not indispensable for the
creation of a contract of carriage.
Bill of lading not indispensable to contract of carriage.
— As to the issuance of a bill of lading, although article
350 of the Code of Commerce provides that "the shipper
as well as the carrier of merchandise or goods may
mutua-lly demand that a bill of lading is not
indispensable. As regards the form of the contract of
carriage it can be said that provided that there is a
meeting of the minds and from such meeting arise rights
and obligations, there should be no limitations as to
form." The bill of lading is not essential to the contract,
although it may become obligatory by reason of the
regulations of railroad companies, or as a condition
imposed in the contract by the agreement of the parties
18
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 that it is a foreign corporation doing business in the
appellant is likewise liable to appellee who, as assignee Philippines with a personality to file the present action.
of Macleod, merely stepped into the shoes of and substi- WHEREFORE, the decision appealed from is affirmed,
tuted the latter in demanding from appellant the with costs against petitioner.
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

19
FIRST DIVISION
G.R. No. 114061 August 3, 1994
KOREAN AIRLINES CO., LTD., petitioner,
vs.
COURT OF APPEALS and JUANITO C.
LAPUZ, respondents.
G.R. No. 113842 August 3, 1994
JUANITO C. LAPUZ, petitioner,
vs.
COURT OF APPEALS and KOREAN AIRLINES
CO., LTD., respondents.
M.A. Aguinaldo and Associates for Korean Airlines Co.,
Ltd.
Camacho and Associates for Juanito Lapuz.
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
20
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.
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-
21
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. 6 Damages 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 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.
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.

22

SECOND DIVISION
G.R. No. 95582 October 7, 1991
DANGWA TRANSPORTATION CO., INC. and
THEODORE LARDIZABAL y
MALECDAN, petitioners,
vs.
COURT OF APPEALS, INOCENCIA CUDIAMAT,
EMILIA CUDIAMAT BANDOY, FERNANDO
CUDLAMAT, MARRIETA CUDIAMAT, NORMA
CUDIAMAT, DANTE CUDIAMAT, SAMUEL
CUDIAMAT and LIGAYA CUDIAMAT, all Heirs
of the late Pedrito Cudiamat represented by
Inocencia Cudiamat, respondents.
Francisco S. Reyes Law Office for petitioners.
Antonio C. de Guzman for private respondents.
REGALADO, J.:
On May 13, 1985, private respondents filed a
complaint 1 for damages against petitioners for the death
of Pedrito Cudiamat as a result of a vehicular accident
which occurred on March 25, 1985 at Marivic, Sapid,
Mankayan, Benguet. Among others, it was alleged that
on said date, while petitioner Theodore M. Lardizabal
was driving a passenger bus belonging to petitioner
corporation in a reckless and imprudent manner and
without due regard to traffic rules and regulations and
safety to persons and property, it ran over its passenger,
Pedrito Cudiamat. However, instead of bringing Pedrito
immediately to the nearest hospital, the said driver, in
utter bad faith and without regard to the welfare of the
victim, first brought his other passengers and cargo to
their respective destinations before banging said victim
to the Lepanto Hospital where he expired.
On the other hand, petitioners alleged that they had
observed and continued to observe the extraordinary
diligence required in the operation of the transportation
company and the supervision of the employees, even as
they add that they are not absolute insurers of the safety
of the public at large. Further, it was alleged that it was
the victim's own carelessness and negligence which
gave rise to the subject incident, hence they prayed for
the dismissal of the complaint plus an award of damages
in their favor by way of a counterclaim.
On July 29, 1988, the trial court rendered a decision,
effectively in favor of petitioners, with this decretal
portion:
IN VIEW OF ALL THE FOREGOING, judgment is
hereby pronounced that Pedrito Cudiamat was
23
equity demands that there must be something given to the heirs of the victim to assuage
negligent, which negligence was the proximate cause of
their feelings. This, also considering that initially, defendant common carrier had made
his death. Nonetheless, defendants in equity, are hereby
overtures to amicably settle the case. It did offer a certain monetary consideration to the
ordered to pay the heirs of Pedrito Cudiamat the sum of
victim's heirs. 7
P10,000.00 which approximates the amount defendants
initially offered said heirs for the amicable settlement of
However, respondent court, in arriving at a different opinion, declares that:
the case. No costs.
SO ORDERED. 2
Not satisfied therewith, private respondents appealed to the Court of Appeals which, in a
decision 3 From the testimony of appellees'own witness in the person of Vitaliano Safarita, it is
in CA-G.R. CV No. 19504 promulgated on
evident that the subject bus was at full stop when the victim Pedrito Cudiamat boarded
August 14, 1990, set aside the decision of the lower
the same as it was precisely on this instance where a certain Miss Abenoja alighted from
court, and ordered petitioners to pay private
the bus. Moreover, contrary to the assertion of the appellees, the victim did indicate his
respondents:
intention to board the bus as can be seen from the testimony of the said witness when he
1. The sum of Thirty Thousand (P30,000.00) Pesos by
declared that Pedrito Cudiamat was no longer walking and made a sign to board the bus
way of indemnity for death of the victim Pedrito
when the latter was still at a distance from him. It was at the instance when Pedrito
Cudiamat;
Cudiamat was closing his umbrella at the platform of the bus when the latter made a
2. The sum of Twenty Thousand (P20,000.00) by way
sudden jerk movement (as) the driver commenced to accelerate the bus.
of moral damages;
3. The sum of Two Hundred Eighty Eight Thousand
Evidently, the incident took place due to the gross negligence of the appellee-driver in
(P288,000.00) Pesos as actual and compensatory
damages; prematurely stepping on the accelerator and in not waiting for the passenger to first
4. The costs of this suit. 4 secure his seat especially so when we take into account that the platform of the bus was at
Petitioners' motion for reconsideration was denied by the Court of Appeals in its the time slippery and wet because of a drizzle. The defendants-appellees utterly failed to
resolution dated October 4, 1990, 5 observe their duty and obligation as common carrier to the end that they should observe
hence this petition with the
extra-ordinary diligence in the vigilance over the goods and for the safety of the
central issue herein being whether respondent court
passengers transported by them according to the circumstances of each case (Article
erred in reversing the decision of the trial court and in
1733, New Civil Code). 8
finding petitioners negligent and liable for the damages
claimed.
After a careful review of the evidence on record, we find no reason to disturb the above
It is an established principle that the factual findings of
holding of the Court of Appeals. Its aforesaid findings are supported by the testimony of
the Court of Appeals as a rule are final and may not be
petitioners' own witnesses. One of them, Virginia Abalos, testified on cross-examination
reviewed by this Court on appeal. However, this is
as follows:
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 Q It is not a fact Madam witness, that at bunkhouse 54, that is before the place of the
incident, there is a crossing?
In the case at bar, the trial court and the Court of Appeal have discordant positions as to A The way going to the mines but it is not being pass(ed) by the bus.
who between the petitioners an the victim is guilty of negligence. Perforce, we have had Q And the incident happened before bunkhouse 56, is that not correct?
to conduct an evaluation of the evidence in this case for the prope calibration of their
conflicting factual findings and legal conclusions. A It happened between 54 and 53 bunkhouses. 9
The lower court, in declaring that the victim was negligent, made the following findings:
The bus conductor, Martin Anglog, also declared:
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 Q When you arrived at Lepanto on March 25, 1985, will you please inform this
can also be found wanting of the necessary diligence. In this connection, it is safe to Honorable Court if there was anv unusual incident that occurred?
assume that when the deceased Cudiamat attempted to board defendants' bus, the A When we delivered a baggage at Marivic because a person alighted there between
vehicle's door was open instead of being closed. This should be so, for it is hard to Bunkhouse 53 and 54.
believe that one would even attempt to board a vehicle (i)n motion if the door of said Q What happened when you delivered this passenger at this particular place in Lepanto?
vehicle is closed. Here lies the defendant's lack of diligence. Under such circumstances,
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.
24
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.
FIRST DIVISION
G.R. No. 145804 February 6, 2003
LIGHT RAIL TRANSIT AUTHORITY &
RODOLFO ROMAN, petitioners,
vs.
MARJORIE NAVIDAD, Heirs of the Late
NICANOR NAVIDAD & PRUDENT SECURITY
AGENCY, respondents.
DECISION
VITUG, J.:
The case before the Court is an appeal from the decision
and resolution of the Court of Appeals, promulgated on
27 April 2000 and 10 October 2000, respectively, in
CA-G.R. CV No. 60720, entitled "Marjorie Navidad and
Heirs of the Late Nicanor Navidad vs. Rodolfo Roman,
et. al.," which has modified the decision of 11 August
1998 of the Regional Trial Court, Branch 266, Pasig
City, exonerating Prudent Security Agency (Prudent)
from liability and finding Light Rail Transit Authority
(LRTA) and Rodolfo Roman liable for damages on
account of the death of Nicanor Navidad.
On 14 October 1993, about half an hour past seven
o’clock in the evening, Nicanor Navidad, then drunk,
entered the EDSA LRT station after purchasing a
"token" (representing payment of the fare). While
Navidad was standing on the platform near the LRT
tracks, Junelito Escartin, the security guard assigned to
the area approached Navidad. A misunderstanding or an
altercation between the two apparently ensued that led
to a fist fight. No evidence, however, was adduced to
indicate how the fight started or who, between the two,
delivered the first blow or how Navidad later fell on the
LRT tracks. At the exact moment that Navidad fell, an
LRT train, operated by petitioner Rodolfo Roman, was
coming in. Navidad was struck by the moving train, and
he was killed instantaneously.
On 08 December 1994, the widow of Nicanor, herein
respondent Marjorie Navidad, along with her children,
filed a complaint for damages against Junelito Escartin,
Rodolfo Roman, the LRTA, the Metro Transit
Organization, Inc. (Metro Transit), and Prudent for the
death of her husband. LRTA and Roman filed a
counterclaim against Navidad and a cross-claim against
Escartin and Prudent. Prudent, in its answer, denied
liability and averred that it had exercised due diligence
in the selection and supervision of its security guards.
The LRTA and Roman presented their evidence while
Prudent and Escartin, instead of presenting evidence,
filed a demurrer contending that Navidad had failed to
25
prove that Escartin was negligent in his assigned task.
On 11 August 1998, the trial court rendered its decision;
it adjudged:
"WHEREFORE, judgment is hereby rendered in favor
of the plaintiffs and against the defendants Prudent
Security and Junelito Escartin ordering the latter to pay
jointly and severally the plaintiffs the following:
"a) 1) Actual damages of P44,830.00;
2) Compensatory damages of P443,520.00;
3) Indemnity for the death of Nicanor Navidad in the
sum of P50,000.00;
"b) Moral damages of P50,000.00;
"c) Attorney’s fees of P20,000;
"d) Costs of suit.
"The complaint against defendants LRTA and Rodolfo
Roman are dismissed for lack of merit.
"The compulsory counterclaim of LRTA and Roman are
likewise dismissed."1
Prudent appealed to the Court of Appeals. On 27 August
2000, the appellate court promulgated its now assailed
decision exonerating Prudent from any liability for the
death of Nicanor Navidad and, instead, holding the
LRTA and Roman jointly and severally liable thusly:
"WHEREFORE, the assailed judgment is hereby
MODIFIED, by exonerating the appellants from any
liability for the death of Nicanor Navidad, Jr. Instead,
appellees Rodolfo Roman and the Light Rail Transit
Authority (LRTA) are held liable for his death and are
hereby directed to pay jointly and severally to the
plaintiffs-appellees, the following amounts:
a) P44,830.00 as actual damages;
b) P50,000.00 as nominal damages;
c) P50,000.00 as moral damages;
d) P50,000.00 as indemnity for the death of the
deceased; and
e) P20,000.00 as and for attorney’s fees."2
The appellate court ratiocinated that while the deceased
might not have then as yet boarded the train, a contract
of carriage theretofore had already existed when the
victim entered the place where passengers were
supposed to be after paying the fare and getting the
corresponding token therefor. In exempting Prudent
from liability, the court stressed that there was nothing
to link the security agency to the death of Navidad. It
said that Navidad failed to show that Escartin inflicted
fist blows upon the victim and the evidence merely
established the fact of death of Navidad by reason of his
having been hit by the train owned and managed by the
LRTA and operated at the time by Roman. The
appellate court faulted petitioners for their failure to
present expert evidence to establish the fact that the
application of emergency brakes could not have stopped
the train.
The appellate court denied petitioners’ motion for
reconsideration in its resolution of 10 October 2000.
In their present recourse, petitioners recite alleged errors
on the part of the appellate court; viz:
"I.
THE HONORABLE COURT OF APPEALS
GRAVELY ERRED BY DISREGARDING THE
FINDINGS OF FACTS BY THE TRIAL COURT
"II.
THE HONORABLE COURT OF APPEALS
GRAVELY ERRED IN FINDING THAT
PETITIONERS ARE LIABLE FOR THE DEATH OF
NICANOR NAVIDAD, JR.
"III.
THE HONORABLE COURT OF APPEALS
GRAVELY ERRED IN FINDING THAT RODOLFO
ROMAN IS AN EMPLOYEE OF LRTA."3
Petitioners would contend that the appellate court
ignored the evidence and the factual findings of the trial
court by holding them liable on the basis of a sweeping
conclusion that the presumption of negligence on the
part of a common carrier was not overcome. Petitioners
would insist that Escartin’s assault upon Navidad, which
caused the latter to fall on the tracks, was an act of a
stranger that could not have been foreseen or prevented.
The LRTA would add that the appellate court’s
conclusion on the existence of an employer-employee
relationship between Roman and LRTA lacked basis
because Roman himself had testified being an employee
of Metro Transit and not of the LRTA.
Respondents, supporting the decision of the appellate
court, contended that a contract of carriage was deemed
created from the moment Navidad paid the fare at the
LRT station and entered the premises of the latter,
entitling Navidad to all the rights and protection under a
contractual relation, and that the appellate court had
correctly held LRTA and Roman liable for the death of
Navidad in failing to exercise extraordinary diligence
imposed upon a common carrier.
Law and jurisprudence dictate that a common carrier,
both from the nature of its business and for reasons of
public policy, is burdened with the duty of exercising
utmost diligence in ensuring the safety of
passengers.4 The Civil Code, governing the liability of a
common carrier for death of or injury to its passengers,
provides:
"Article 1755. A common carrier is bound to carry the
passengers safely as far as human care and foresight can
provide, using the utmost diligence of very cautious
persons, with a due regard for all the circumstances.
"Article 1756. In case of death of or injuries to
passengers, common carriers are presumed to have been
at fault or to have acted negligently, unless they prove
that they observed extraordinary diligence as prescribed
in articles 1733 and 1755."
"Article 1759. Common carriers are liable for the death
of or injuries to passengers through the negligence or
willful acts of the former’s employees, although such
employees may have acted beyond the scope of their
authority or in violation of the orders of the common
carriers.
"This liability of the common carriers does not cease
upon proof that they exercised all the diligence of a
good father of a family in the selection and supervision
of their employees."
"Article 1763. A common carrier is responsible for
injuries suffered by a passenger on account of the
willful acts or negligence of other passengers or of
strangers, if the common carrier’s employees through
the exercise of the diligence of a good father of a family
could have prevented or stopped the act or omission."
The law requires common carriers to carry passengers
safely using the utmost diligence of very cautious
persons with due regard for all circumstances.5 Such
duty of a common carrier to provide safety to its
passengers so obligates it not only during the course of
the trip but for so long as the passengers are within its
premises and where they ought to be in pursuance to the
contract of carriage.6 The statutory provisions render a
common carrier liable for death of or injury to
passengers (a) through the negligence or wilful acts of
its employees or b) on account of wilful acts or
negligence of other passengers or of strangers if the
common carrier’s employees through the exercise of
due diligence could have prevented or stopped the act or
omission.7 In case of such death or injury, a carrier is
presumed to have been at fault or been negligent,
and8 by simple proof of injury, the passenger is relieved
of the duty to still establish the fault or negligence of the
carrier or of its employees and the burden shifts upon
the carrier to prove that the injury is due to an
unforeseen event or to force majeure.9 In the absence of
satisfactory explanation by the carrier on how the
26
accident occurred, which petitioners, according to the proven x x x." This finding of the appellate court is not
appellate court, have failed to show, the presumption without substantial justification in our own review of the
would be that it has been at fault,10 an exception from records of the case.
the general rule that negligence must be proved.11 There being, similarly, no showing that petitioner
The foundation of LRTA’s liability is the contract of Rodolfo Roman himself is guilty of any culpable act or
carriage and its obligation to indemnify the victim arises omission, he must also be absolved from liability.
from the breach of that contract by reason of its failure Needless to say, the contractual tie between the LRT
to exercise the high diligence required of the common and Navidad is not itself a juridical relation between the
carrier. In the discharge of its commitment to ensure the latter and Roman; thus, Roman can be made liable only
safety of passengers, a carrier may choose to hire its for his own fault or negligence.
own employees or avail itself of the services of an The award of nominal damages in addition to actual
outsider or an independent firm to undertake the task. In damages is untenable. Nominal damages are adjudicated
either case, the common carrier is not relieved of its in order that a right of the plaintiff, which has been
responsibilities under the contract of carriage. violated or invaded by the defendant, may be vindicated
Should Prudent be made likewise liable? If at all, that or recognized, and not for the purpose of indemnifying
liability could only be for tort under the provisions of the plaintiff for any loss suffered by him. 18 It is an
Article 217612 and related provisions, in conjunction established rule that nominal damages cannot co-exist
with Article 2180,13 of the Civil Code. The premise, with compensatory damages.19
however, for the employer’s liability is negligence or WHEREFORE, the assailed decision of the appellate
fault on the part of the employee. Once such fault is court is AFFIRMED with MODIFICATION but only in
established, the employer can then be made liable on the that (a) the award of nominal damages is DELETED
basis of the presumption juris tantum that the employer and (b) petitioner Rodolfo Roman is absolved from
failed to exercise diligentissimi patris families in the liability. No costs.
selection and supervision of its employees. The liability SO ORDERED.
is primary and can only be negated by showing due
diligence in the selection and supervision of the
employee, a factual matter that has not been shown.
Absent such a showing, one might ask further, how then
must the liability of the common carrier, on the one
hand, and an independent contractor, on the other hand,
be described? It would be solidary. A contractual
obligation can be breached by tort and when the same
act or omission causes the injury, one resulting in culpa
contractual and the other in culpa aquiliana, Article
219414 of the Civil Code can well apply.15 In fine, a
liability for tort may arise even under a contract, where
tort is that which breaches the contract.16 Stated
differently, when an act which constitutes a breach of
contract would have itself constituted the source of a
quasi-delictual liability had no contract existed between
the parties, the contract can be said to have been
breached by tort, thereby allowing the rules on tort to
apply.17
Regrettably for LRT, as well as perhaps the surviving
spouse and heirs of the late Nicanor Navidad, this Court
is concluded by the factual finding of the Court of
Appeals that "there is nothing to link (Prudent) to the
death of Nicanor (Navidad), for the reason that the
negligence of its employee, Escartin, has not been duly
THIRD DIVISION
G.R. No. L-47822 December 22, 1988
PEDRO DE GUZMAN, petitioner,
vs.
COURT OF APPEALS and ERNESTO
CENDANA, respondents.
Vicente D. Millora for petitioner.
Jacinto Callanta for private respondent.
FELICIANO, J.:
Respondent Ernesto Cendana, a junk dealer, was
engaged in buying up used bottles and scrap metal in
Pangasinan. Upon gathering sufficient quantities of such
scrap material, respondent would bring such material to
Manila for resale. He utilized two (2) six-wheeler trucks
which he owned for hauling the material to Manila. On
the return trip to Pangasinan, respondent would load his
vehicles with cargo which various merchants wanted
delivered to differing establishments in Pangasinan. For
that service, respondent charged freight rates which
were commonly lower than regular commercial rates.
Sometime in November 1970, petitioner Pedro de
Guzman a merchant and authorized dealer of General
Milk Company (Philippines), Inc. in Urdaneta,
Pangasinan, contracted with respondent for the hauling
of 750 cartons of Liberty filled milk from a warehouse
of General Milk in Makati, Rizal, to petitioner's
establishment in Urdaneta on or before 4 December
1970. Accordingly, on 1 December 1970, respondent
loaded in Makati the merchandise on to his trucks: 150
cartons were loaded on a truck driven by respondent
himself, while 600 cartons were placed on board the
other truck which was driven by Manuel Estrada,
respondent's driver and employee.
Only 150 boxes of Liberty filled milk were delivered to
petitioner. The other 600 boxes never reached petitioner,
since the truck which carried these boxes was hijacked
somewhere along the MacArthur Highway in Paniqui,
Tarlac, by armed men who took with them the truck, its
driver, his helper and the cargo.
On 6 January 1971, petitioner commenced action
against private respondent in the Court of First Instance
of Pangasinan, demanding payment of P 22,150.00, the
claimed value of the lost merchandise, plus damages
and attorney's fees. Petitioner argued that private
respondent, being a common carrier, and having failed
to exercise the extraordinary diligence required of him
by the law, should be held liable for the value of the
undelivered goods.
27
In his Answer, private respondent denied that he was a
common carrier and argued that he could not be held
responsible for the value of the lost goods, such loss
having been due to force majeure.
On 10 December 1975, the trial court rendered a
Decision 1 finding private respondent to be a common
carrier and holding him liable for the value of the
undelivered goods (P 22,150.00) as well as for P
4,000.00 as damages and P 2,000.00 as attorney's fees.
On appeal before the Court of Appeals, respondent
urged that the trial court had erred in considering him a
common carrier; in finding that he had habitually
offered trucking services to the public; in not exempting
him from liability on the ground of force majeure; and
in ordering him to pay damages and attorney's fees.
The Court of Appeals reversed the judgment of the trial
court and held that respondent had been engaged in
transporting return loads of freight "as a casual
occupation — a sideline to his scrap iron business" and
not as a common carrier. Petitioner came to this Court
by way of a Petition for Review assigning as errors the
following conclusions of the Court of Appeals:
1. that private respondent was not a common carrier;
2. that the hijacking of respondent's truck was force
majeure; and
3. that respondent was not liable for the value of the
undelivered cargo. (Rollo, p. 111)
We consider first the issue of whether or not private
respondent Ernesto Cendana may, under the facts earlier
set forth, be properly characterized as a common carrier.
The Civil Code defines "common carriers" in the
following terms:
Article 1732. Common carriers are persons,
corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods
or both, by land, water, or air for compensation, offering
their services to the public.
The above article makes no distinction between one
whose principal business activity is the carrying of
persons or goods or both, and one who does such
carrying only as an ancillary activity (in local Idiom as
"a sideline"). Article 1732 also carefully avoids making
any distinction between a person or enterprise offering
transportation service on a regular or scheduled
basis and one offering such service on an occasional,
episodic or unscheduled basis. Neither does Article
1732 distinguish between a carrier offering its services
to the "general public," i.e., the general community or
population, and one who offers services or solicits
business only from a narrow segment of the general
population. We think that Article 1733 deliberaom
making such distinctions.
So understood, the concept of "common carrier" under
Article 1732 may be seen to coincide neatly with the
notion of "public service," under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at
least partially supplements the law on common carriers
set forth in the Civil Code. Under Section 13, paragraph
(b) of the Public Service Act, "public service" includes:
... every person that now or hereafter may own, operate,
manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for
general business purposes, any common
carrier, railroad, street railway, traction railway, subway
motor vehicle, either for freight or passenger, or both,
with or without fixed route and whatever may be its
classification, freight or carrier service of any class,
express service, steamboat, or steamship line, pontines,
ferries and water craft, engaged in the transportation of
passengers or freight or both, shipyard, marine repair
shop, wharf or dock, ice plant,
ice-refrigeration plant, canal, irrigation system, gas,
electric light, heat and power, water supply and power
petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting
stations and other similar public services. ... (Emphasis
supplied)
It appears to the Court that private respondent is
properly characterized as a common carrier even though
he merely "back-hauled" goods for other merchants
from Manila to Pangasinan, although such back-hauling
was done on a periodic or occasional rather than regular
or scheduled manner, and even though private
respondent's principal occupation was not the carriage
of goods for others. There is no dispute that private
respondent charged his customers a fee for hauling their
goods; that fee frequently fell below commercial freight
rates is not relevant here.
The Court of Appeals referred to the fact that private
respondent held no certificate of public convenience,
and concluded he was not a common carrier. This is
palpable error. A certificate of public convenience is not
a requisite for the incurring of liability under the Civil
Code provisions governing common carriers. That
liability arises the moment a person or firm acts as a
common carrier, without regard to whether or not such
carrier has also complied with the requirements of the
applicable regulatory statute and implementing
regulations and has been granted a certificate of public
convenience or other franchise. To exempt private
respondent from the liabilities of a common carrier
because he has not secured the necessary certificate of
public convenience, would be offensive to sound public
policy; that would be to reward private respondent
precisely for failing to comply with applicable statutory
requirements. The business of a common carrier
impinges directly and intimately upon the safety and
well being and property of those members of the general
community who happen to deal with such carrier. The
law imposes duties and liabilities upon common carriers
for the safety and protection of those who utilize their
services and the law cannot allow a common carrier to
render such duties and liabilities merely facultative by
simply failing to obtain the necessary permits and
authorizations.
We turn then to the liability of private respondent as a
common carrier.
Common carriers, "by the nature of their business and
for reasons of public policy" 2 are held to a very high
degree of care and diligence ("extraordinary diligence")
in the carriage of goods as well as of passengers. The
specific import of extraordinary diligence in the care of
goods transported by a common carrier is, according to
Article 1733, "further expressed in Articles 1734,1735
and 1745, numbers 5, 6 and 7" of the Civil Code.
Article 1734 establishes the general rule that common
carriers are responsible for the loss, destruction or
deterioration of the goods which they carry, "unless the
same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning or other natural
disaster or calamity;
(2) Act of the public enemy in war, whether
international or civil;
(3) Act or omission of the shipper or owner of the
goods;
(4) The character-of the goods or defects in the packing
or-in the containers; and
(5) Order or act of competent public authority.
It is important to point out that the above list of causes
of loss, destruction or deterioration which exempt the
common carrier for responsibility therefor, is a closed
list. Causes falling outside the foregoing list, even if
they appear to constitute a species of force majeure fall
within the scope of Article 1735, which provides as
follows:
28
In all cases other than those mentioned in numbers 1, 2,
3, 4 and 5 of the preceding article, if the goods are lost,
destroyed or deteriorated, common carriers are
presumed to have been at fault or to have acted
negligently, unless they prove that they observed
extraordinary diligence as required in Article 1733.
(Emphasis supplied)
Applying the above-quoted Articles 1734 and 1735, we
note firstly that the specific cause alleged in the instant
case — the hijacking of the carrier's truck — does not
fall within any of the five (5) categories of exempting
causes listed in Article 1734. It would follow, therefore,
that the hijacking of the carrier's vehicle must be dealt
with under the provisions of Article 1735, in other
words, that the private respondent as common carrier is
presumed to have been at fault or to have acted
negligently. This presumption, however, may be
overthrown by proof of extraordinary diligence on the
part of private respondent.
Petitioner insists that private respondent had not
observed extraordinary diligence in the care of
petitioner's goods. Petitioner argues that in the
circumstances of this case, private respondent should
have hired a security guard presumably to ride with the
truck carrying the 600 cartons of Liberty filled milk. We
do not believe, however, that in the instant case, the
standard of extraordinary diligence required private
respondent to retain a security guard to ride with the
truck and to engage brigands in a firelight at the risk of
his own life and the lives of the driver and his helper.
The precise issue that we address here relates to the
specific requirements of the duty of extraordinary
diligence in the vigilance over the goods carried in the
specific context of hijacking or armed robbery.
As noted earlier, the duty of extraordinary diligence in
the vigilance over goods is, under Article 1733, given
additional specification not only by Articles 1734 and
1735 but also by Article 1745, numbers 4, 5 and 6,
Article 1745 provides in relevant part:
Any of the following or similar stipulations shall be
considered unreasonable, unjust and contrary to public
policy:
xxx xxx xxx
(5) that the common carrier shall not be responsible for
the acts or omissions of his or its employees;
(6) that the common carrier's liability for acts committed
by thieves, or of robbers who donot act with grave or
irresistible threat, violence or force, is dispensed with or
diminished; and
(7) that the common carrier shall not responsible for the
loss, destruction or deterioration of goods on account of
the defective condition of the car vehicle, ship, airplane
or other equipment used in the contract of carriage.
(Emphasis supplied)
Under Article 1745 (6) above, a common carrier is held
responsible — and will not be allowed to divest or to
diminish such responsibility — even for acts of
strangers like thieves or robbers, except where such
thieves or robbers in fact acted "with grave or
irresistible threat, violence or force." We believe and so
hold that the limits of the duty of extraordinary
diligence in the vigilance over the goods carried are
reached where the goods are lost as a result of a robbery
which is attended by "grave or irresistible threat,
violence or force."
In the instant case, armed men held up the second truck
owned by private respondent which carried petitioner's
cargo. The record shows that an information for robbery
in band was filed in the Court of First Instance of
Tarlac, Branch 2, in Criminal Case No. 198 entitled
"People of the Philippines v. Felipe Boncorno,
Napoleon Presno, Armando Mesina, Oscar Oria and
one John Doe." There, the accused were charged with
willfully and unlawfully taking and carrying away with
them the second truck, driven by Manuel Estrada and
loaded with the 600 cartons of Liberty filled milk
destined for delivery at petitioner's store in Urdaneta,
Pangasinan. The decision of the trial court shows that
the accused acted with grave, if not irresistible, threat,
violence or force.3 Three (3) of the five (5) hold-uppers
were armed with firearms. The robbers not only took
away the truck and its cargo but also kidnapped the
driver and his helper, detaining them for several days
and later releasing them in another province (in
Zambales). The hijacked truck was subsequently found
by the police in Quezon City. The Court of First
Instance convicted all the accused of robbery, though
not of robbery in band. 4
In these circumstances, we hold that the occurrence of
the loss must reasonably be regarded as quite beyond
the control of the common carrier and properly regarded
as a fortuitous event. It is necessary to recall that even
common carriers are not made absolute insurers against
all risks of travel and of transport of goods, and are not
held liable for acts or events which cannot be foreseen
or are inevitable, provided that they shall have complied
with the rigorous standard of extraordinary diligence.
We, therefore, agree with the result reached by the
Court of Appeals that private respondent Cendana is not
liable for the value of the undelivered merchandise
which was lost because of an event entirely beyond
private respondent's control.
ACCORDINGLY, the Petition for Review on certiorari
is hereby DENIED and the Decision of the Court of
Appeals dated 3 August 1977 is AFFIRMED. No
pronouncement as to costs.
SO ORDERED.

29
FIRST DIVISION
G.R. No. 115381 December 23, 1994
KILUSANG MAYO UNO LABOR
CENTER, petitioner,
vs.
HON. JESUS B. GARCIA, JR., the LAND
TRANSPORTATION FRANCHISING AND
REGULATORY BOARD, and the PROVINCIAL
BUS OPERATORS ASSOCIATION OF THE
PHILIPPINES, respondents.
Potenciano A. Flores for petitioner.
Robert Anthony C. Sison, Cesar B. Brillantes and Jose
Z. Galsim for private respondent.
Jose F. Miravite for movants.
KAPUNAN, J.:
Public utilities are privately owned and operated
businesses whose service are essential to the general
public. They are enterprises which specially cater to the
needs of the public and conduce to their comfort and
convenience. As such, public utility services are
impressed with public interest and concern. The same is
true with respect to the business of common carrier
which holds such a peculiar relation to the public
interest that there is superinduced upon it the right of
public regulation when private properties are affected
with public interest, hence, they cease to be juris
privati only. When, therefore, one devotes his property
to a use in which the public has an interest, he, in effect
grants to the public an interest in that use, and must
submit to the control by the public for the common
good, to the extent of the interest he has thus created.1
An abdication of the licensing and regulatory
government agencies of their functions as the instant
petition seeks to show, is indeed lamentable. Not only is
it an unsound administrative policy but it is inimical to
public trust and public interest as well.
The instant petition for certiorari assails the
constitutionality and validity of certain memoranda,
circulars and/or orders of the Department of
Transportation and Communications (DOTC) and the
Land Transportation Franchising and Regulatory Board
LTFRB)2 which, among others, (a) authorize provincial
bus and jeepney operators to increase or decrease the
prescribed transportation fares without application
therefor with the LTFRB and without hearing and
approval thereof by said agency in violation of Sec.
16(c) of Commonwealth Act No. 146, as amended,
30
otherwise known as the Public Service Act, and in
derogation of LTFRB's duty to fix and determine just
and reasonable fares by delegating that function to bus
operators, and (b) establish a presumption of public
need in favor of applicants for certificates of public
convenience (CPC) and place on the oppositor the
burden of proving that there is no need for the proposed
service, in patent violation not only of Sec. 16(c) of CA
146, as amended, but also of Sec. 20(a) of the same Act
mandating that fares should be "just and reasonable." It
is, likewise, violative of the Rules of Court which places
upon each party the burden to prove his own affirmative
allegations.3 The offending provisions contained in the
questioned issuances pointed out by petitioner, have
resulted in the introduction into our highways and
thoroughfares thousands of old and smoke-belching
buses, many of which are right-hand driven, and have
exposed our consumers to the burden of spiraling costs
of public transportation without hearing and due
process.
The following memoranda, circulars and/or orders are
sought to be nullified by the instant petition, viz: (a)
DOTC Memorandum Order 90-395, dated June 26,
1990 relative to the implementation of a fare range
scheme for provincial bus services in the country; (b)
DOTC Department Order No.
92-587, dated March 30, 1992, defining the policy
framework on the regulation of transport services; (c)
DOTC Memorandum dated October 8, 1992, laying
down rules and procedures to implement Department
Order No. 92-587; (d) LTFRB Memorandum Circular
No. 92-009, providing implementing guidelines on the
DOTC Department Order No. 92-587; and (e) LTFRB
Order dated March 24, 1994 in Case No. 94-3112.
The relevant antecedents are as follows:
On June 26, 1990; then Secretary of DOTC, Oscar M.
Orbos, issued Memorandum Circular No. 90-395 to then
LTFRB Chairman, Remedios A.S. Fernando allowing
provincial bus operators to charge passengers rates
within a range of 15% above and 15% below the
LTFRB official rate for a period of one (1) year. The
text of the memorandum order reads in full:
One of the policy reforms and measures that is in line
with the thrusts and the priorities set out in the Medium-
Term Philippine Development Plan (MTPDP) 1987 —
1992) is the liberalization of regulations in the transport
sector. Along this line, the Government intends to move
away gradually from regulatory policies and make
progress towards greater reliance on free market forces.
Based on several surveys and observations, bus
companies are already charging passenger rates above
and below the official fare declared by LTFRB on many
provincial routes. It is in this context that some form of
liberalization on public transport fares is to be tested on
a pilot basis.
In view thereof, the LTFRB is hereby directed to
immediately publicize a fare range scheme for all
provincial bus routes in country (except those operating
within Metro Manila). Transport Operators shall be
allowed to charge passengers within a range of fifteen
percent (15%) above and fifteen percent (15%) below
the LTFRB official rate for a period of one year.
Guidelines and procedures for the said scheme shall be
prepared by LTFRB in coordination with the DOTC
Planning Service.
The implementation of the said fare range scheme shall
start on 6 August 1990.
For compliance. (Emphasis ours.)
Finding the implementation of the fare range scheme
"not legally feasible," Remedios A.S. Fernando
submitted the following memorandum to Oscar M.
Orbos on July 24, 1990, to wit:
With reference to DOTC Memorandum Order No. 90-
395 dated 26 June 1990 which the LTFRB received on
19 July 1990, directing the Board "to immediately
publicize a fare range scheme for all provincial bus
routes in the country (except those operating within
Metro Manila)" that will allow operators "to charge
passengers within a range of fifteen percent (15%)
above and fifteen percent (15%) below the LTFRB
official rate for a period of one year" the undersigned is
respectfully adverting the Secretary's attention to the
following for his consideration:
1. Section 16(c) of the Public Service Act prescribes the
following for the fixing and determination of rates —
(a) the rates to be approved should be proposed by
public service operators; (b) there should be a
publication and notice to concerned or affected parties
in the territory affected; (c) a public hearing should be
held for the fixing of the rates; hence, implementation of
the proposed fare range scheme on August 6 without
complying with the requirements of the Public Service
Act may not be legally feasible.
2. To allow bus operators in the country to charge fares
fifteen (15%) above the present LTFRB fares in the
wake of the devastation, death and suffering caused by
the July 16 earthquake will not be socially warranted
and will be politically unsound; most likely public
criticism against the DOTC and the LTFRB will be
triggered by the untimely motu propioimplementation of
the proposal by the mere expedient of publicizing the
fare range scheme without calling a public hearing,
which scheme many as early as during the Secretary's
predecessor know through newspaper reports and
columnists' comments to be Asian Development Bank
and World Bank inspired.
3. More than inducing a reduction in bus fares by fifteen
percent (15%) the implementation of the proposal will
instead trigger an upward adjustment in bus fares by
fifteen percent (15%) at a time when hundreds of
thousands of people in Central and Northern Luzon,
particularly in Central Pangasinan, La Union, Baguio
City, Nueva Ecija, and the Cagayan Valley are suffering
from the devastation and havoc caused by the recent
earthquake.
4. In lieu of the said proposal, the DOTC with its
agencies involved in public transportation can consider
measures and reforms in the industry that will be
socially uplifting, especially for the people in the areas
devastated by the recent earthquake.
In view of the foregoing considerations, the undersigned
respectfully suggests that the implementation of the
proposed fare range scheme this year be further studied
and evaluated.
On December 5, 1990, private respondent Provincial
Bus Operators Association of the Philippines, Inc.
(PBOAP) filed an application for fare rate increase. An
across-the-board increase of eight and a half centavos
(P0.085) per kilometer for all types of provincial buses
with a minimum-maximum fare range of fifteen (15%)
percent over and below the proposed basic per kilometer
fare rate, with the said minimum-maximum fare range
applying only to ordinary, first class and premium class
buses and a fifty-centavo (P0.50) minimum per
kilometer fare for aircon buses, was sought.
On December 6, 1990, private respondent PBOAP
reduced its applied proposed fare to an across-the-board
increase of six and a half (P0.065) centavos per
kilometer for ordinary buses. The decrease was due to
the drop in the expected price of diesel.
The application was opposed by the Philippine
Consumers Foundation, Inc. and Perla C. Bautista
alleging that the proposed rates were exorbitant and
unreasonable and that the application contained no
allegation on the rate of return of the proposed increase
in rates.
31
On December 14, 1990, public respondent LTFRB
rendered a decision granting the fare rate increase in
accordance with the following schedule of fares on a
straight computation method, viz:
AUTHORIZED FARES
LUZON
MIN. OF 5 KMS. SUCCEEDING KM.
REGULAR P1.50 P0.37
STUDENT P1.15 P0.28
VISAYAS/MINDANAO
REGULAR P1.60 P0.375
STUDENT P1.20 P0.285
FIRST CLASS (PER KM.)
LUZON P0.385
VISAYAS/
MINDANAO P0.395
PREMIERE CLASS (PER KM.)
LUZON P0.395
VISAYAS/
MINDANAO P0.405
AIRCON (PER KM.) P0.415.4
On March 30, 1992, then Secretary of the Department of
Transportation and Communications Pete Nicomedes
Prado issued Department Order No.
92-587 defining the policy framework on the regulation
of transport services. The full text of the said order is
reproduced below in view of the importance of the
provisions contained therein:
WHEREAS, Executive Order No. 125 as amended,
designates the Department of Transportation and
Communications (DOTC) as the primary policy,
planning, regulating and implementing agency on
transportation;
WHEREAS, to achieve the objective of a viable,
efficient, and dependable transportation system, the
transportation regulatory agencies under or attached to
the DOTC have to harmonize their decisions and adopt
a common philosophy and direction;
WHEREAS, the government proposes to build on the
successful liberalization measures pursued over the last
five years and bring the transport sector nearer to a
balanced longer term regulatory framework;
NOW, THEREFORE, pursuant to the powers granted
by laws to the DOTC, the following policies and
principles in the economic regulation of land, air, and
water transportation services are hereby adopted:
1. Entry into and exit out of the industry. Following the
Constitutional dictum against monopoly, no franchise
holder shall be permitted to maintain a monopoly on any
route. A minimum of two franchise holders shall be
permitted to operate on any route.
The requirements to grant a certificate to operate, or
certificate of public convenience, shall be: proof of
Filipino citizenship, financial capability, public need,
and sufficient insurance cover to protect the riding
public.
In determining public need, the presumption of need for
a service shall be deemed in favor of the applicant. The
burden of proving that there is no need for a proposed
service shall be with the oppositor(s).
In the interest of providing efficient public transport
services, the use of the "prior operator" and the "priority
of filing" rules shall be discontinued. The route
measured capacity test or other similar tests of demand
for vehicle/vessel fleet on any route shall be used only
as a guide in weighing the merits of each franchise
application and not as a limit to the services offered.
Where there are limitations in facilities, such as
congested road space in urban areas, or at airports and
ports, the use of demand management measures in
conformity with market principles may be considered.
The right of an operator to leave the industry is
recognized as a business decision, subject only to the
filing of appropriate notice and following a phase-out
period, to inform the public and to minimize disruption
of services.
2. Rate and Fare Setting. Freight rates shall be freed
gradually from government controls. Passenger fares
shall also be deregulated, except for the lowest class of
passenger service (normally third class passenger
transport) for which the government will fix indicative
or reference fares. Operators of particular services may
fix their own fares within a range 15% above and below
the indicative or reference rate.
Where there is lack of effective competition for
services, or on specific routes, or for the transport of
particular commodities, maximum mandatory freight
rates or passenger fares shall be set temporarily by the
government pending actions to increase the level of
competition.
For unserved or single operator routes, the government
shall contract such services in the most advantageous
terms to the public and the government, following
public bids for the services. The advisability of bidding
out the services or using other kinds of incentives on
such routes shall be studied by the government.
3. Special Incentives and Financing for Fleet
Acquisition. As a matter of policy, the government shall
not engage in special financing and incentive programs,
including direct subsidies for fleet acquisition and
expansion. Only when the market situation warrants
government intervention shall programs of this type be
considered. Existing programs shall be phased out
gradually.
The Land Transportation Franchising and Regulatory
Board, the Civil Aeronautics Board, the Maritime
Industry Authority are hereby directed to submit to the
Office of the Secretary, within forty-five (45) days of
this Order, the detailed rules and procedures for the
Implementation of the policies herein set forth. In the
formulation of such rules, the concerned agencies shall
be guided by the most recent studies on the subjects,
such as the Provincial Road Passenger Transport Study,
the Civil Aviation Master Plan, the Presidential Task
Force on the Inter-island Shipping Industry, and the
Inter-island Liner Shipping Rate Rationalization Study.
For the compliance of all concerned. (Emphasis ours)
On October 8, 1992, public respondent Secretary of the
Department of Transportation and Communications
Jesus B. Garcia, Jr. issued a memorandum to the Acting
Chairman of the LTFRB suggesting swift action on the
adoption of rules and procedures to implement above-
quoted Department Order No. 92-587 that laid down
deregulation and other liberalization policies for the
transport sector. Attached to the said memorandum was
a revised draft of the required rules and procedures
covering (i) Entry Into and Exit Out of the Industry and
(ii) Rate and Fare Setting, with comments and
suggestions from the World Bank incorporated therein.
Likewise, resplendent from the said memorandum is the
statement of the DOTC Secretary that the adoption of
the rules and procedures is a pre-requisite to the
approval of the Economic Integration Loan from the
World Bank.5
On February 17, 1993, the LTFRB issued Memorandum
Circular
No. 92-009 promulgating the guidelines for the
implementation of DOTC Department Order No. 92-
587. The Circular provides, among others, the following
challenged portions:
xxx xxx xxx
IV. Policy Guidelines on the Issuance of Certificate of
Public Convenience.
The issuance of a Certificate of Public Convenience is
determined by public need. The presumption of public
need for a service shall be deemed in favor of the
32
applicant, while burden of proving that there is no need
for the proposed service shall be the oppositor'(s).
xxx xxx xxx
V. Rate and Fare Setting
The control in pricing shall be liberalized to introduce
price competition complementary with the quality of
service, subject to prior notice and public hearing. Fares
shall not be provisionally authorized without public
hearing.
A. On the General Structure of Rates
1. The existing authorized fare range system of plus or
minus 15 per cent for provincial buses and jeepneys
shall be widened to 20% and -25% limit in 1994 with
the authorized fare to be replaced by an indicative or
reference rate as the basis for the expanded fare range.
2. Fare systems for aircon buses are liberalized to cover
first class and premier services.
xxx xxx xxx
(Emphasis ours).
Sometime in March, 1994, private respondent PBOAP,
availing itself of the deregulation policy of the DOTC
allowing provincial bus operators to collect plus 20%
and minus 25% of the prescribed fare without first
having filed a petition for the purpose and without the
benefit of a public hearing, announced a fare increase of
twenty (20%) percent of the existing fares. Said
increased fares were to be made effective on March 16,
1994.
On March 16, 1994, petitioner KMU filed a petition
before the LTFRB opposing the upward adjustment of
bus fares.
On March 24, 1994, the LTFRB issued one of the
assailed orders dismissing the petition for lack of merit.
The dispositive portion reads:
PREMISES CONSIDERED, this Board after
considering the arguments of the parties, hereby
DISMISSES FOR LACK OF MERIT the petition filed
in the above-entitled case. This petition in this case was
resolved with dispatch at the request of petitioner to
enable it to immediately avail of the legal remedies or
options it is entitled under existing laws.
SO ORDERED.6
Hence, the instant petition for certiorari with an urgent
prayer for issuance of a temporary restraining order.
The Court, on June 20, 1994, issued a temporary
restraining order enjoining, prohibiting and preventing
respondents from implementing the bus fare rate
increase as well as the questioned orders and
memorandum circulars. This meant that provincial bus
fares were rolled back to the levels duly authorized by
the LTFRB prior to March 16, 1994. A moratorium was
likewise enforced on the issuance of franchises for the
operation of buses, jeepneys, and taxicabs.
Petitioner KMU anchors its claim on two (2) grounds.
First, the authority given by respondent LTFRB to
provincial bus operators to set a fare range of plus or
minus fifteen (15%) percent, later increased to plus
twenty (20%) and minus twenty-five (-25%) percent,
over and above the existing authorized fare without
having to file a petition for the purpose, is
unconstitutional, invalid and illegal. Second, the
establishment of a presumption of public need in favor
of an applicant for a proposed transport service without
having to prove public necessity, is illegal for being
violative of the Public Service Act and the Rules of
Court.
In its Comment, private respondent PBOAP, while not
actually touching upon the issues raised by the
petitioner, questions the wisdom and the manner by
which the instant petition was filed. It asserts that the
petitioner has no legal standing to sue or has no real
interest in the case at bench and in obtaining the reliefs
prayed for.
In their Comment filed by the Office of the Solicitor
General, public respondents DOTC Secretary Jesus B.
Garcia, Jr. and the LTFRB asseverate that the petitioner
does not have the standing to maintain the instant suit.
They further claim that it is within DOTC and LTFRB's
authority to set a fare range scheme and establish a
presumption of public need in applications for
certificates of public convenience.
We find the instant petition impressed with merit.
At the outset, the threshold issue of locus standi must be
struck. Petitioner KMU has the standing to sue.
The requirement of locus standi inheres from the
definition of judicial power. Section 1 of Article VIII of
the Constitution provides:
xxx xxx xxx
Judicial power includes the duty of the courts of justice
to settle actual controversies involving rights which are
legally demandable and enforceable, and to determine
whether or not there has been a grave abuse of
discretion amounting to lack or excess of jurisdiction on
the part of any branch or instrumentality of the
Government.
In Lamb v. Phipps,7 we ruled that judicial power is the
power to hear and decide causes pending between
parties who have the right to sue in the courts of law and
equity. Corollary to this provision is the principle
of locus standi of a party litigant. One who is directly
affected by and whose interest is immediate and
substantial in the controversy has the standing to sue.
The rule therefore requires that a party must show a
personal stake in the outcome of the case or an injury to
himself that can be redressed by a favorable decision so
as to warrant an invocation of the court's jurisdiction
and to justify the exercise of the court's remedial powers
in his behalf.8
In the case at bench, petitioner, whose members had
suffered and continue to suffer grave and irreparable
injury and damage from the implementation of the
questioned memoranda, circulars and/or orders, has
shown that it has a clear legal right that was violated and
continues to be violated with the enforcement of the
challenged memoranda, circulars and/or orders. KMU
members, who avail of the use of buses, trains and
jeepneys everyday, are directly affected by the
burdensome cost of arbitrary increase in passenger fares.
They are part of the millions of commuters who
comprise the riding public. Certainly, their rights must
be protected, not neglected nor ignored.
Assuming arguendo that petitioner is not possessed of
the standing to sue, this court is ready to brush aside this
barren procedural infirmity and recognize the legal
standing of the petitioner in view of the transcendental
importance of the issues raised. And this act of liberality
is not without judicial precedent. As early as
the Emergency Powers Cases, this Court had exercised
its discretion and waived the requirement of proper
party. In the recent case of Kilosbayan, Inc., et al. v.
Teofisto Guingona, Jr., et al.,9 we ruled in the same
lines and enumerated some of the cases where the same
policy was adopted, viz:
. . . A party's standing before this Court is a procedural
technicality which it may, in the exercise of its
discretion, set aside in view of the importance of the
issues raised. In the landmark Emergency Powers
Cases, [G.R. No. L-2044 (Araneta v. Dinglasan); G.R.
No. L-2756 (Araneta
v. Angeles); G.R. No. L-3054 (Rodriguez v. Tesorero de
Filipinas); G.R. No. L-3055 (Guerrero v. Commissioner
of Customs); and G.R. No. L-3056 (Barredo v.
Commission on Elections), 84 Phil. 368 (1949)], this
Court brushed aside this technicality because "the
transcendental importance to the public of these cases
demands that they be settled promptly and definitely,
brushing aside, if we must, technicalities of procedure.
33
(Avelino vs. Cuenco, G.R. No. L-2621)." Insofar as
taxpayers' suits are concerned, this Court had declared
that it "is not devoid of discretion as to whether or not it
should be entertained," (Tan v. Macapagal, 43 SCRA
677, 680 [1972]) or that it "enjoys an open discretion to
entertain the same or not." [Sanidad v. COMELEC, 73
SCRA 333 (1976)].
xxx xxx xxx
In line with the liberal policy of this Court on locus
standi, ordinary taxpayers, members of Congress, and
even association of planters, and
non-profit civic organizations were allowed to initiate
and prosecute actions before this court to question the
constitutionality or validity of laws, acts, decisions,
rulings, or orders of various government agencies or
instrumentalities. Among such cases were those
assailing the constitutionality of (a) R.A. No. 3836
insofar as it allows retirement gratuity and commutation
of vacation and sick leave to Senators and
Representatives and to elective officials of both Houses
of Congress (Philippine Constitution Association, Inc. v.
Gimenez, 15 SCRA 479 [1965]); (b) Executive Order
No. 284, issued by President Corazon C. Aquino on 25
July 1987, which allowed members of the cabinet, their
undersecretaries, and assistant secretaries to hold other
government offices or positions (Civil Liberties Union
v. Executive Secretary, 194 SCRA 317 [1991]); (c) the
automatic appropriation for debt service in the General
Appropriations Act (Guingona v. Carague, 196 SCRA
221 [1991]; (d) R.A. No. 7056 on the holding of
desynchronized elections (Osmeña v. Commission on
Elections, 199 SCRA 750 [1991]); (e) P.D. No. 1869
(the charter of the Philippine Amusement and Gaming
Corporation) on the ground that it is contrary to morals,
public policy, and order (Basco v. Philippine
Amusement and Gaming Corp., 197 SCRA 52 [1991]);
and (f) R.A. No. 6975, establishing the Philippine
National Police. (Carpio v. Executive Secretary, 206
SCRA 290 [1992]).
Other cases where we have followed a liberal policy
regarding locus standi include those attacking the
validity or legality of (a) an order allowing the
importation of rice in the light of the prohibition
imposed by R.A. No. 3452 (Iloilo Palay and Corn
Planters Association, Inc. v. Feliciano, 13 SCRA 377
[1965]; (b) P.D. Nos. 991 and 1033 insofar as they
proposed amendments to the Constitution and P.D. No.
1031 insofar as it directed the COMELEC to supervise,
control, hold, and conduct the referendum-plebiscite on
16 October 1976 (Sanidad v. Commission on
Elections, supra); (c) the bidding for the sale of the
3,179 square meters of land at Roppongi, Minato-ku,
Tokyo, Japan (Laurel v. Garcia, 187 SCRA 797 [1990]);
(d) the approval without hearing by the Board of
Investments of the amended application of the Bataan
Petrochemical Corporation to transfer the site of its
plant from Bataan to Batangas and the validity of such
transfer and the shift of feedstock from naphtha only to
naphtha and/or liquefied petroleum gas (Garcia v. Board
of Investments, 177 SCRA 374 [1989]; Garcia v. Board
of Investments, 191 SCRA 288 [1990]); (e) the
decisions, orders, rulings, and resolutions of the
Executive Secretary, Secretary of Finance,
Commissioner of Internal Revenue, Commissioner of
Customs, and the Fiscal Incentives Review Board
exempting the National Power Corporation from
indirect tax and duties (Maceda v. Macaraig, 197 SCRA
771 [1991]); (f) the orders of the Energy Regulatory
Board of 5 and 6 December 1990 on the ground that the
hearings conducted on the second provisional increase
in oil prices did not allow the petitioner substantial
cross-examination; (Maceda v. Energy Regulatory
Board, 199 SCRA 454 [1991]); (g) Executive Order No.
478 which levied a special duty of P0.95 per liter of
imported oil products (Garcia v. Executive Secretary,
211 SCRA 219 [1992]); (h) resolutions of the
Commission on Elections concerning the
apportionment, by district, of the number of elective
members of Sanggunians (De Guia vs. Commission on
Elections, 208 SCRA 420 [1992]); and (i) memorandum
orders issued by a Mayor affecting the Chief of Police
of Pasay City (Pasay Law and Conscience Union, Inc. v.
Cuneta, 101 SCRA 662 [1980]).
In the 1975 case of Aquino v. Commission on
Elections (62 SCRA 275 [1975]), this Court, despite its
unequivocal ruling that the petitioners therein had no
personality to file the petition, resolved nevertheless to
pass upon the issues raised because of the far-reaching
implications of the petition. We did no less in De Guia
v. COMELEC (Supra) where, although we declared that
De Guia "does not appear to have locus standi, a
standing in law, a personal or substantial interest," we
brushed aside the procedural infirmity "considering the
importance of the issue involved, concerning as it does
the political exercise of qualified voters affected by the
apportionment, and petitioner alleging abuse of
discretion and violation of the Constitution by
respondent."
Now on the merits of the case.
On the fare range scheme.
Section 16(c) of the Public Service Act, as amended,
reads:
Sec. 16. Proceedings of the Commission, upon notice
and hearing. — The Commission shall have
power, upon proper notice and hearing in accordance
with the rules and provisions of this Act, subject to the
limitations and exceptions mentioned and saving
provisions to the contrary:
xxx xxx xxx
(c) To fix and determine individual or joint rates, tolls,
charges, classifications, or schedules thereof, as well as
commutation, mileage kilometrage, and other special
rates which shall be imposed, observed, and followed
thereafter by any public service: Provided, That the
Commission may, in its discretion, approve rates
proposed by public services provisionally and without
necessity of any hearing; but it shall call a hearing
thereon within thirty days thereafter, upon publication
and notice to the concerns operating in the territory
affected: Provided, further, That in case the public
service equipment of an operator is used principally or
secondarily for the promotion of a private business, the
net profits of said private business shall be considered in
relation with the public service of such operator for the
purpose of fixing the rates. (Emphasis ours).
xxx xxx xxx
Under the foregoing provision, the Legislature delegated
to the defunct Public Service Commission the power of
fixing the rates of public services. Respondent LTFRB,
the existing regulatory body today, is likewise vested
with the same under Executive Order No. 202 dated
June 19, 1987. Section 5(c) of the said executive order
authorizes LTFRB "to determine, prescribe, approve and
periodically review and adjust, reasonable fares, rates
and other related charges, relative to the operation of
public land transportation services provided by
motorized vehicles."
Such delegation of legislative power to an
administrative agency is permitted in order to adapt to
the increasing complexity of modern life. As subjects
for governmental regulation multiply, so does the
difficulty of administering the laws. Hence,
specialization even in legislation has become necessary.
Given the task of determining sensitive and delicate
matters as
route-fixing and rate-making for the transport sector, the
responsible regulatory body is entrusted with the power
34
of subordinate legislation. With this authority, an
administrative body and in this case, the LTFRB, may
implement broad policies laid down in a statute by
"filling in" the details which the Legislature may neither
have time or competence to provide. However, nowhere
under the aforesaid provisions of law are the regulatory
bodies, the PSC and LTFRB alike, authorized to
delegate that power to a common carrier, a transport
operator, or other public service.
In the case at bench, the authority given by the LTFRB
to the provincial bus operators to set a fare range over
and above the authorized existing fare, is illegal and
invalid as it is tantamount to an undue delegation of
legislative authority. Potestas delegata non delegari
potest. What has been delegated cannot be delegated.
This doctrine is based on the ethical principle that such a
delegated power constitutes not only a right but a duty
to be performed by the delegate through the
instrumentality of his own judgment and not through the
intervening mind of another.10 A further delegation of
such power would indeed constitute a negation of the
duty in violation of the trust reposed in the delegate
mandated to discharge it directly.11 The policy of
allowing the provincial bus operators to change and
increase their fares at will would result not only to a
chaotic situation but to an anarchic state of affairs. This
would leave the riding public at the mercy of transport
operators who may increase fares every hour, every day,
every month or every year, whenever it pleases them or
whenever they deem it "necessary" to do so. In Panay
Autobus Co. v. Philippine Railway Co.,12 where
respondent Philippine Railway Co. was granted by the
Public Service Commission the authority to change its
freight rates at will, this Court categorically declared
that:
In our opinion, the Public Service Commission was not
authorized by law to delegate to the Philippine Railway
Co. the power of altering its freight rates whenever it
should find it necessary to do so in order to meet the
competition of road trucks and autobuses, or to change
its freight rates at will, or to regard its present rates as
maximum rates, and to fix lower rates whenever in the
opinion of the Philippine Railway Co. it would be to its
advantage to do so.
The mere recital of the language of the application of
the Philippine Railway Co. is enough to show that it is
untenable. The Legislature has delegated to the Public
Service Commission the power of fixing the rates of
public services, but it has not authorized the Public
Service Commission to delegate that power to a
common carrier or other public service. The rates of
public services like the Philippine Railway Co. have
been approved or fixed by the Public Service
Commission, and any change in such rates must be
authorized or approved by the Public Service
Commission after they have been shown to be just and
reasonable. The public service may, of course, propose
new rates, as the Philippine Railway Co. did in case No.
31827, but it cannot lawfully make said new rates
effective without the approval of the Public Service
Commission, and the Public Service Commission itself
cannot authorize a public service to enforce new rates
without the prior approval of said rates by the
commission. The commission must approve new rates
when they are submitted to it, if the evidence shows
them to be just and reasonable, otherwise it must
disapprove them. Clearly, the commission cannot
determine in advance whether or not the new rates of the
Philippine Railway Co. will be just and reasonable,
because it does not know what those rates will be.
In the present case the Philippine Railway Co. in effect
asked for permission to change its freight rates at will. It
may change them every day or every hour, whenever it
deems it necessary to do so in order to meet competition
or whenever in its opinion it would be to its advantage.
Such a procedure would create a most unsatisfactory
state of affairs and largely defeat the purposes of the
public service law.13(Emphasis ours).
One veritable consequence of the deregulation of
transport fares is a compounded fare. If transport
operators will be authorized to impose and collect an
additional amount equivalent to 20% over and above the
authorized fare over a period of time, this will unduly
prejudice a commuter who will be made to pay a fare
that has been computed in a manner similar to those of
compounded bank interest rates.
Picture this situation. On December 14, 1990, the
LTFRB authorized provincial bus operators to collect a
thirty-seven (P0.37) centavo per kilometer fare for
ordinary buses. At the same time, they were allowed to
impose and collect a fare range of plus or minus 15%
over the authorized rate. Thus P0.37 centavo per
kilometer authorized fare plus P0.05 centavos (which is
15% of P0.37 centavos) is equivalent to P0.42 centavos,
the allowed rate in 1990. Supposing the LTFRB grants
another five (P0.05) centavo increase per kilometer in
1994, then, the base or reference for computation would
have to be P0.47 centavos (which is P0.42 + P0.05
centavos). If bus operators will exercise their authority
to impose an additional 20% over and above the
authorized fare, then the fare to be collected shall
amount to P0.56 (that is, P0.47 authorized LTFRB rate
plus 20% of P0.47 which is P0.29). In effect, commuters
will be continuously subjected, not only to a double fare
adjustment but to a compounding fare as well. On their
part, transport operators shall enjoy a bigger chunk of
the pie. Aside from fare increase applied for, they can
still collect an additional amount by virtue of the
authorized fare range. Mathematically, the situation
translates into the following:
Year** LTFRB authorized Fare Range Fare to be
rate*** collected per
kilometer
1990 P0.37 15% (P0.05) P0.42
1994 P0.42 + 0.05 = 0.47 20% (P0.09) P0.56
1998 P0.56 + 0.05 = 0.61 20% (P0.12) P0.73
2002 P0.73 + 0.05 = 0.78 20% (P0.16) P0.94
Moreover, rate making or rate fixing is not an easy task.
It is a delicate and sensitive government function that
requires dexterity of judgment and sound discretion with
the settled goal of arriving at a just and reasonable rate
acceptable to both the public utility and the public.
Several factors, in fact, have to be taken into
consideration before a balance could be achieved. A rate
should not be confiscatory as would place an operator in
a situation where he will continue to operate at a loss.
Hence, the rate should enable public utilities to generate
revenues sufficient to cover operational costs and
provide reasonable return on the investments. On the
other hand, a rate which is too high becomes
discriminatory. It is contrary to public interest. A rate,
therefore, must be reasonable and fair and must
be affordable to the end user who will utilize the
services.
Given the complexity of the nature of the function of
rate-fixing and its far-reaching effects on millions of
commuters, government must not relinquish this
important function in favor of those who would benefit
and profit from the industry. Neither should the requisite
notice and hearing be done away with. The people,
represented by reputable oppositors, deserve to be given
full opportunity to be heard in their opposition to any
fare increase.
The present administrative procedure, 14 to our mind,
already mirrors an orderly and satisfactory arrangement
for all parties involved. To do away with such a
procedure and allow just one party, an interested party at
35
that, to determine what the rate should be, will
undermine the right of the other parties to due process.
The purpose of a hearing is precisely to determine what
a just and reasonable rate is.15 Discarding such
procedural and constitutional right is certainly inimical
to our fundamental law and to public interest.
On the presumption of public need.
A certificate of public convenience (CPC) is an
authorization granted by the LTFRB for the operation of
land transportation services for public use as required by
law. Pursuant to Section 16(a) of the Public Service Act,
as amended, the following requirements must be met
before a CPC may be granted, to wit: (i) the applicant
must be a citizen of the Philippines, or a corporation or
co-partnership, association or joint-stock company
constituted and organized under the laws of the
Philippines, at least 60 per centum of its stock or paid-
up capital must belong entirely to citizens of the
Philippines; (ii) the applicant must be financially
capable of undertaking the proposed service and
meeting the responsibilities incident to its operation; and
(iii) the applicant must prove that the operation of the
public service proposed and the authorization to do
business will promote the public interest in a proper and
suitable manner. It is understood that there must be
proper notice and hearing before the PSC can exercise
its power to issue a CPC.
While adopting in toto the foregoing requisites for the
issuance of a CPC, LTFRB Memorandum Circular No.
92-009, Part IV, provides for yet incongruous and
contradictory policy guideline on the issuance of a CPC.
The guidelines states:
The issuance of a Certificate of Public Convenience is
determined by public need. The presumption of public
need for a service shall be deemed in favor of the
applicant, while the burden of proving that there is no
need for the proposed service shall be the
oppositor's. (Emphasis ours).
The above-quoted provision is entirely incompatible and
inconsistent with Section 16(c)(iii) of the Public Service
Act which requires that before a CPC will be issued, the
applicant must prove by proper notice and hearing that
the operation of the public service proposed will
promote public interest in a proper and suitable manner.
On the contrary, the policy guideline states that the
presumption of public need for a public service shall be
deemed in favor of the applicant. In case of conflict
between a statute and an administrative order, the
former must prevail.
By its terms, public convenience or necessity generally
means something fitting or suited to the public
need.16 As one of the basic requirements for the grant of
a CPC, public convenience and necessity exists when
the proposed facility or service meets a reasonable want
of the public and supply a need which the existing
facilities do not adequately supply. The existence or
non-existence of public convenience and necessity is
therefore a question of fact that must be established by
evidence, real and/or testimonial; empirical data;
statistics and such other means necessary, in a public
hearing conducted for that purpose. The object and
purpose of such procedure, among other things, is to
look out for, and protect, the interests of both the public
and the existing transport operators.
Verily, the power of a regulatory body to issue a CPC is
founded on the condition that after full-dress hearing
and investigation, it shall find, as a fact, that the
proposed operation is for the convenience of the
public.17 Basic convenience is the primary consideration
for which a CPC is issued, and that fact alone must be
consistently borne in mind. Also, existing operators in
subject routes must be given an opportunity to offer
proof and oppose the application. Therefore, an
applicant must, at all times, be required to prove his
capacity and capability to furnish the service which he
has undertaken to
render. 18 And all this will be possible only if a public
hearing were conducted for that purpose.
Otherwise stated, the establishment of public need in
favor of an applicant reverses well-settled and
institutionalized judicial, quasi-judicial and
administrative procedures. It allows the party who
initiates the proceedings to prove, by mere application,
his affirmative allegations. Moreover, the offending
provisions of the LTFRB memorandum circular in
question would in effect amend the Rules of Court by
adding another disputable presumption in the
enumeration of 37 presumptions under Rule 131,
Section 5 of the Rules of Court. Such usurpation of this
Court's authority cannot be countenanced as only this
Court is mandated by law to promulgate rules
concerning pleading, practice and procedure. 19
Deregulation, while it may be ideal in certain situations,
may not be ideal at all in our country given the present
circumstances. Advocacy of liberalized franchising and
regulatory process is tantamount to an abdication by the
government of its inherent right to exercise police
power, that is, the right of government to regulate public
utilities for protection of the public and the utilities
themselves.
While we recognize the authority of the DOTC and the
LTFRB to issue administrative orders to regulate the
transport sector, we find that they committed grave
abuse of discretion in issuing DOTC Department Order
No. 92-587 defining the policy framework on the
regulation of transport services and LTFRB
Memorandum Circular No. 92-009 promulgating the
implementing guidelines on DOTC Department Order
No. 92-587, the said administrative issuances being
amendatory and violative of the Public Service Act and
the Rules of Court. Consequently, we rule that the
twenty (20%) per centum fare increase imposed by
respondent PBOAP on March 16, 1994 without the
benefit of a petition and a public hearing is null and void
and of no force and effect. No grave abuse of discretion
however was committed in the issuance of DOTC
Memorandum Order No. 90-395 and DOTC
Memorandum dated October 8, 1992, the same being
merely internal communications between administrative
officers.
WHEREFORE, in view of the foregoing, the instant
petition is hereby GRANTED and the challenged
administrative issuances and orders, namely: DOTC
Department Order No. 92-587, LTFRB Memorandum
Circular
No. 92-009, and the order dated March 24, 1994 issued
by respondent LTFRB are hereby DECLARED contrary
to law and invalid insofar as they affect provisions
therein (a) delegating to provincial bus and jeepney
operators the authority to increase or decrease the duly
prescribed transportation fares; and (b) creating a
presumption of public need for a service in favor of the
applicant for a certificate of public convenience and
placing the burden of proving that there is no need for
the proposed service to the oppositor.
The Temporary Restraining Order issued on June 20,
1994 is hereby MADE PERMANENT insofar as it
enjoined the bus fare rate increase granted under the
provisions of the aforementioned administrative
circulars, memoranda and/or orders declared invalid.
No pronouncement as to costs.
SO ORDERED.

36
SECOND DIVISION
[G.R. No. 125948. December 29, 1998]
FIRST PHILIPPINE INDUSTRIAL
CORPORATION, petitioner, vs. COURT OF
APPEALS, HONORABLE PATERNO V. TAC-AN,
BATANGAS CITY and ADORACION C.
ARELLANO, in her official capacity as City
Treasurer of Batangas, respondents.
DECISION
MARTINEZ, J.:
This petition for review on certiorari assails the
Decision of the Court of Appeals dated November 29,
1995, in CA-G.R. SP No. 36801, affirming the decision
of the Regional Trial Court of Batangas City, Branch
84, in Civil Case No. 4293, which dismissed petitioners'
complaint for a business tax refund imposed by the City
of Batangas.
Petitioner is a grantee of a pipeline concession under
Republic Act No. 387, as amended, to contract, install
and operate oil pipelines. The original pipeline
concession was granted in 1967[1] and renewed by the
Energy Regulatory Board in 1992.[2]
Sometime in January 1995, petitioner applied for a
mayor's permit with the Office of the Mayor of
Batangas City. However, before the mayor's permit
could be issued, the respondent City Treasurer required
petitioner to pay a local tax based on its gross receipts
for the fiscal year 1993 pursuant to the Local
Government Code.[3] The respondent City Treasurer
assessed a business tax on the petitioner amounting
to P956,076.04 payable in four installments based on the
gross receipts for products pumped at GPS-1 for the
fiscal year 1993 which amounted to P181,681,151.00. In
order not to hamper its operations, petitioner paid the
tax under protest in the amount of P239,019.01 for the
first quarter of 1993.
On January 20, 1994, petitioner filed a letter-protest
addressed to the respondent City Treasurer, the pertinent
portion of which reads:
"Please note that our Company (FPIC) is a pipeline
operator with a government concession granted under
the Petroleum Act. It is engaged in the business of
transporting petroleum products from the Batangas
refineries, via pipeline, to Sucat and JTF Pandacan
Terminals. As such, our Company is exempt from
paying tax on gross receipts under Section 133 of the
Local Government Code of 1991 x x x x
"Moreover, Transportation contractors are not included
in the enumeration of contractors under Section 131,
37
Paragraph (h) of the Local Government
Code. Therefore, the authority to impose tax 'on
contractors and other independent contractors' under
Section 143, Paragraph (e) of the Local Government
Code does not include the power to levy on
transportation contractors.
"The imposition and assessment cannot be categorized
as a mere fee authorized under Section 147 of the Local
Government Code. The said section limits the
imposition of fees and charges on business to such
amounts as may be commensurate to the cost of
regulation, inspection, and licensing. Hence, assuming
arguendo that FPIC is liable for the license fee, the
imposition thereof based on gross receipts is violative of
the aforecited provision. The amount of P956,076.04
(P239,019.01 per quarter) is not commensurate to the
cost of regulation, inspection and licensing. The fee is
already a revenue raising measure, and not a mere
regulatory imposition."[4]
On March 8, 1994, the respondent City Treasurer denied
the protest contending that petitioner cannot be
considered engaged in transportation business, thus it
cannot claim exemption under Section 133 (j) of the
Local Government Code.[5]
On June 15, 1994, petitioner filed with the Regional
Trial Court of Batangas City a complaint[6] for tax
refund with prayer for a writ of preliminary injunction
against respondents City of Batangas and Adoracion
Arellano in her capacity as City Treasurer. In its
complaint, petitioner alleged, inter alia, that: (1) the
imposition and collection of the business tax on its gross
receipts violates Section 133 of the Local Government
Code; (2) the authority of cities to impose and collect a
tax on the gross receipts of "contractors and independent
contractors" under Sec. 141 (e) and 151 does not include
the authority to collect such taxes on transportation
contractors for, as defined under Sec. 131 (h), the term
"contractors" excludes transportation contractors; and,
(3) the City Treasurer illegally and erroneously imposed
and collected the said tax, thus meriting the immediate
refund of the tax paid.[7]
Traversing the complaint, the respondents argued that
petitioner cannot be exempt from taxes under Section
133 (j) of the Local Government Code as said
exemption applies only to "transportation contractors
and persons engaged in the transportation by hire and
common carriers by air, land and water." Respondents
assert that pipelines are not included in the term
"common carrier" which refers solely to ordinary
carriers such as trucks, trains, ships and the
like. Respondents further posit that the term "common
carrier" under the said code pertains to the mode or
manner by which a product is delivered to its
destination.[8]
On October 3, 1994, the trial court rendered a decision
dismissing the complaint, ruling in this wise:
"xxx Plaintiff is either a contractor or other independent
contractor.
xxx the exemption to tax claimed by the plaintiff has
become unclear. It is a rule that tax exemptions are to be
strictly construed against the taxpayer, taxes being the
lifeblood of the government. Exemption may therefore
be granted only by clear and unequivocal provisions of
law.
"Plaintiff claims that it is a grantee of a pipeline
concession under Republic Act 387, (Exhibit A) whose
concession was lately renewed by the Energy
Regulatory Board (Exhibit B). Yet neither said law nor
the deed of concession grant any tax exemption upon
the plaintiff.
"Even the Local Government Code imposes a tax on
franchise holders under Sec. 137 of the Local Tax
Code.Such being the situation obtained in this case
(exemption being unclear and equivocal) resort to
distinctions or other considerations may be of help:
1. That the exemption granted under Sec. 133 (j)
encompasses only common carriers so as not to
overburden the riding public or commuters with
taxes. Plaintiff is not a common carrier, but a special
carrier extending its services and facilities to a single
specific or "special customer" under a "special contract."
2. The Local Tax Code of 1992 was basically enacted to
give more and effective local autonomy to local
governments than the previous enactments, to make
them economically and financially viable to serve the
people and discharge their functions with a concomitant
obligation to accept certain devolution of powers, x x x
So, consistent with this policy even franchise grantees
are taxed (Sec. 137) and contractors are also taxed under
Sec. 143 (e) and 151 of the Code."[9]
Petitioner assailed the aforesaid decision before this
Court via a petition for review. On February 27, 1995,
we referred the case to the respondent Court of Appeals
for consideration and adjudication.[10] On November 29,
1995, the respondent court rendered a
decision[11] affirming the trial court's dismissal of
petitioner's complaint. Petitioner's motion for
reconsideration was denied on July 18, 1996. [12]
Hence, this petition. At first, the petition was denied due
course in a Resolution dated November 11,
1996.[13] Petitioner moved for a reconsideration which
was granted by this Court in a Resolution[14] of January
20, 1997. Thus, the petition was reinstated.
Petitioner claims that the respondent Court of Appeals
erred in holding that (1) the petitioner is not a common
carrier or a transportation contractor, and (2) the
exemption sought for by petitioner is not clear under the
law.
There is merit in the petition.
A "common carrier" may be defined, broadly, as one
who holds himself out to the public as engaged in the
business of transporting persons or property from place
to place, for compensation, offering his services to the
public generally.
Article 1732 of the Civil Code defines a "common
carrier" as "any person, corporation, firm or association
engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public."
The test for determining whether a party is a common
carrier of goods is:
1. He must be engaged in the business of carrying goods
for others as a public employment, and must hold
himself out as ready to engage in the transportation of
goods for person generally as a business and not as a
casual occupation;
2. He must undertake to carry goods of the kind to
which his business is confined;
3. He must undertake to carry by the method by which
his business is conducted and over his established roads;
and
4. The transportation must be for hire.[15]
Based on the above definitions and requirements, there
is no doubt that petitioner is a common carrier. It is
engaged in the business of transporting or carrying
goods, i.e. petroleum products, for hire as a public
employment. It undertakes to carry for all persons
indifferently, that is, to all persons who choose to
employ its services, and transports the goods by land
and for compensation. The fact that petitioner has a
limited clientele does not exclude it from the definition
of a common carrier. In De Guzman vs. Court of
Appeals[16] we ruled that:
"The above article (Art. 1732, Civil Code) makes no
distinction between one whose principal business
activity is the carrying of persons or goods or both, and
one who does such carrying only as an ancillary activity
38
(in local idiom, as a 'sideline'). Article 1732 x x x avoids
making any distinction between a person or
enterprise offering transportation service on
a regular or scheduled basis and one offering such
service on an occasional, episodic or unscheduled
basis. Neither does Article 1732 distinguish between
a carrier offering its services to the 'general public,'
i.e., the general community or population, and one
who offers services or solicits business only from a
narrow segment of the general population. We think
that Article 1877 deliberately refrained from making
such distinctions.
So understood, the concept of 'common carrier' under
Article 1732 may be seen to coincide neatly with the
notion of 'public service,' under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at
least partially supplements the law on common carriers
set forth in the Civil Code. Under Section 13, paragraph
(b) of the Public Service Act, 'public service' includes:
'every person that now or hereafter may own, operate,
manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for
general business purposes, any common carrier,
railroad, street railway, traction railway, subway motor
vehicle, either for freight or passenger, or both, with or
without fixed route and whatever may be its
classification, freight or carrier service of any class,
express service, steamboat, or steamship line, pontines,
ferries and water craft, engaged in the transportation
of passengers or freight or both, shipyard, marine repair
shop, wharf or dock, ice plant, ice-refrigeration plant,
canal, irrigation system gas, electric light heat and
power, water supply and power petroleum, sewerage
system, wire or wireless communications systems, wire
or wireless broadcasting stations and other similar
public services.' "(Underscoring Supplied)
Also, respondent's argument that the term "common
carrier" as used in Section 133 (j) of the Local
Government Code refers only to common carriers
transporting goods and passengers through moving
vehicles or vessels either by land, sea or water, is
erroneous.
As correctly pointed out by petitioner, the definition of
"common carriers" in the Civil Code makes no
distinction as to the means of transporting, as long as it
is by land, water or air. It does not provide that the
transportation of the passengers or goods should be by
motor vehicle. In fact, in the United States, oil pipe line
operators are considered common carriers.[17]
Under the Petroleum Act of the Philippines (Republic
Act 387), petitioner is considered a "common
carrier." Thus, Article 86 thereof provides that:
"Art. 86. Pipe line concessionaire as a common
carrier. - A pipe line shall have the preferential right to
utilize installations for the transportation of petroleum
owned by him, but is obligated to utilize the remaining
transportation capacity pro rata for the transportation of
such other petroleum as may be offered by others for
transport, and to charge without discrimination such
rates as may have been approved by the Secretary of
Agriculture and Natural Resources."
Republic Act 387 also regards petroleum operation as a
public utility. Pertinent portion of Article 7 thereof
provides:
"that everything relating to the exploration for and
exploitation of petroleum x x and everything relating to
the manufacture, refining, storage, or transportation by
special methods of petroleum, is hereby declared to be
a public utility." (Underscoring Supplied)
The Bureau of Internal Revenue likewise considers the
petitioner a "common carrier." In BIR Ruling No. 069-
83, it declared:
"x x x since [petitioner] is a pipeline concessionaire that
is engaged only in transporting petroleum products, it is
considered a common carrier under Republic Act No.
387 x x x. Such being the case, it is not subject to
withholding tax prescribed by Revenue Regulations No.
13-78, as amended."
From the foregoing disquisition, there is no doubt that
petitioner is a "common carrier" and, therefore, exempt
from the business tax as provided for in Section 133 (j),
of the Local Government Code, to wit:
"Section 133. Common Limitations on the Taxing
Powers of Local Government Units. - Unless otherwise
provided herein, the exercise of the taxing powers of
provinces, cities, municipalities, and barangays shall not
extend to the levy of the following :
xxxxxxxxx
(j) Taxes on the gross receipts of transportation
contractors and persons engaged in the transportation of
passengers or freight by hire and common carriers by
air, land or water, except as provided in this Code."
The deliberations conducted in the House of
Representatives on the Local Government Code of 1991
are illuminating:
"MR. AQUINO (A). Thank you, Mr. Speaker.
Mr. Speaker, we would like to proceed to page 95, line November 29, 1995 in CA-G.R. SP No. 36801 is
1. It states : "SEC.121 [now Sec. 131]. Common REVERSED and SET ASIDE.
Limitations on the Taxing Powers of Local Government SO ORDERED.
Units." x x x
MR. AQUINO (A.). Thank you Mr. Speaker.
Still on page 95, subparagraph 5, on taxes on the
business of transportation. This appears to be one of
those being deemed to be exempted from the taxing
powers of the local government units. May we know
the reason why the transportation business is being
excluded from the taxing powers of the local
government units?
MR. JAVIER (E.). Mr. Speaker, there is an exception
contained in Section 121 (now Sec. 131), line 16,
paragraph 5. It states that local government units may
not impose taxes on the business of transportation,
except as otherwise provided in this code.
Now, Mr. Speaker, if the Gentleman would care to go to
page 98 of Book II, one can see there that provinces
have the power to impose a tax on business enjoying a
franchise at the rate of not more than one-half of 1
percent of the gross annual receipts. So, transportation
contractors who are enjoying a franchise would be
subject to tax by the province. That is the exception, Mr.
Speaker.
What we want to guard against here, Mr. Speaker, is
the imposition of taxes by local government units on
the carrier business. Local government units may
impose taxes on top of what is already being imposed by
the National Internal Revenue Code which is the so-
called "common carriers tax." We do not want a
duplication of this tax, so we just provided for an
exception under Section 125 [now Sec. 137] that a
province may impose this tax at a specific rate.
MR. AQUINO (A.). Thank you for that clarification,
Mr. Speaker. x x x[18]
It is clear that the legislative intent in excluding from the
taxing power of the local government unit the
imposition of business tax against common carriers is to
prevent a duplication of the so-called "common carrier's
tax."
Petitioner is already paying three (3%) percent common
carrier's tax on its gross sales/earnings under the
National Internal Revenue Code.[19] To tax petitioner
again on its gross receipts in its transportation of
petroleum business would defeat the purpose of the
Local Government Code.
WHEREFORE, the petition is hereby GRANTED. The
decision of the respondent Court of Appeals dated

39
THIRD DIVISION
[G.R. No. 112287. December 12, 1997]
NATIONAL STEEL
CORPORATION, petitioner, vs. COURT OF
APPEALS AND VLASONS SHIPPING,
INC., respondents.
[G.R. No. 112350. December 12, 1997]
VLASONS SHIPPING, INC., petitioner, vs. COURT
OF APPEALS AND NATIONAL STEEL
CORPORATION, respondents.
DECISION
PANGANIBAN, J.:
The Court finds occasion to apply the rules on the
seaworthiness of a private carrier, its owners
responsibility for damage to the cargo and its liability
for demurrage and attorneys fees. The Court also
reiterates the well-known rule that findings of facts of
trial courts, when affirmed by the Court of Appeals, are
binding on this Court.
The Case
Before us are two separate petitions for review filed by
National Steel Corporation (NSC) and Vlasons
Shipping, Inc. (VSI), both of which assail the August
12, 1993 Decision of the Court of Appeals. [1] The Court
of Appeals modified the decision of the Regional Trial
Court of Pasig, Metro Manila, Branch 163 in Civil Case
No. 23317. The RTC disposed as follows:
WHEREFORE, judgment is hereby rendered in favor of
defendant and against the plaintiff dismissing the
complaint with cost against plaintiff, and ordering
plaintiff to pay the defendant on the counterclaim as
follows:
1. The sum of P75,000.00 as unpaid freight
and P88,000.00 as demurrage with interest at the legal
rate on both amounts from April 7, 1976 until the same
shall have been fully paid;
2. Attorneys fees and expenses of litigation in the sum
of P100,000.00; and
3. Cost of suit.
SO ORDERED. [2]
On the other hand, the Court of Appeals ruled:
WHEREFORE, premises considered, the decision
appealed from is modified by reducing the award for
demurrage to P44,000.00 and deleting the award for
attorneys fees and expenses of litigation. Except as thus
modified, the decision is AFFIRMED. There is no
pronouncement as to costs.
SO ORDERED. [3]
The Facts
40
The MV Vlasons I is a vessel which renders tramping
service and, as such, does not transport cargo or
shipment for the general public. Its services are
available only to specific persons who enter into a
special contract of charter party with its owner. It is
undisputed that the ship is a private carrier.And it is in
this capacity that its owner, Vlasons Shipping, Inc.,
entered into a contract of affreightment or contract of
voyage charter hire with National Steel Corporation.
The facts as found by Respondent Court of Appeals are
as follows:
(1) On July 17, 1974, plaintiff National Steel
Corporation (NSC) as Charterer and defendant Vlasons
Shipping, Inc. (VSI) as Owner, entered into a Contract
of Voyage Charter Hire (Exhibit B; also Exhibit 1)
whereby NSC hired VSIs vessel, the MV VLASONS I
to make one (1) voyage to load steel products at Iligan
City and discharge them at North Harbor, Manila, under
the following terms and conditions, viz:
1. x x x x x x.
2. Cargo: Full cargo of steel products of not less than
2,500 MT, 10% more or less at Masters option.
3. x x x x x x
4. Freight/Payment: P30.00 /metric ton, FIOST
basis. Payment upon presentation of Bill of Lading
within fifteen (15) days.
5. Laydays/Cancelling: July 26, 1974/Aug. 5, 1974.
6. Loading/Discharging Rate: 750 tons per
WWDSHINC. (Weather Working Day of 24
consecutive hours, Sundays and Holidays Included).
7. Demurrage/Dispatch: P8,000.00/P4,000.00 per day.
8. x x x x x x
9. Cargo Insurance: Charterers and/or Shippers must
insure the cargoes. Shipowners not responsible for
losses/damages except on proven willful negligence of
the officers of the vessel.
10. Other terms:(a) All terms/conditions of NONYAZAI
C/P [sic] or other internationally recognized Charter
Party Agreement shall form part of this Contract.
xxxxxxxxx
The terms F.I.O.S.T. which is used in the shipping
business is a standard provision in the NANYOZAI
Charter Party which stands for Freight In and Out
including Stevedoring and Trading, which means that
the handling, loading and unloading of the cargoes are
the responsibility of the Charterer. Under Paragraph 5 of
the NANYOZAI Charter Party, it states, Charterers to
load, stow and discharge the cargo free of risk and
expenses to owners. x x x (Underscoring supplied).
Under paragraph 10 thereof, it is provided that (o)wners
shall, before and at the beginning of the voyage,
exercise due diligence to make the vessel seaworthy and
properly manned, equipped and supplied and to make
the holds and all other parts of the vessel in which cargo
is carried, fit and safe for its reception, carriage and
preservation. Owners shall not be liable for loss of or
damage of the cargo arising or resulting
from:unseaworthiness unless caused by want of due
diligence on the part of the owners to make the vessel
seaworthy, and to secure that the vessel is properly
manned, equipped and supplied and to make the holds
and all other parts of the vessel in which cargo is
carried, fit and safe for its reception, carriage and
preservation; xxx; perils, dangers and accidents of the
sea or other navigable waters; xxx; wastage in bulk or
weight or any other loss or damage arising from
inherent defect, quality or vice of the cargo;
insufficiency of packing; xxx; latent defects not
discoverable by due diligence; any other cause arising
without the actual fault or privity of Owners or without
the fault of the agents or servants of owners.
Paragraph 12 of said NANYOZAI Charter Party also
provides that (o)wners shall not be responsible for split,
chafing and/or any damage unless caused by the
negligence or default of the master and crew.
(2) On August 6, 7 and 8, 1974, in accordance with the
Contract of Voyage Charter Hire, the MV VLASONS I
loaded at plaintiffs pier at Iligan City, the NSCs
shipment of 1,677 skids of tinplates and 92 packages of
hot rolled sheets or a total of 1,769 packages with a total
weight of about 2,481.19 metric tons for carriage to
Manila. The shipment was placed in the three (3)
hatches of the ship. Chief Mate Gonzalo Sabando,
acting as agent of the vessel[,] acknowledged receipt of
the cargo on board and signed the corresponding bill of
lading, B.L.P.P. No. 0233 (Exhibit D) on August 8,
1974.
(3) The vessel arrived with the cargo at Pier 12, North
Harbor, Manila, on August 12, 1974. The following day,
August 13, 1974, when the vessels three (3) hatches
containing the shipment were opened by plaintiffs
agents, nearly all the skids of tinplates and hot rolled
sheets were allegedly found to be wet and rusty. The
cargo was discharged and unloaded by stevedores hired
by the Charterer. Unloading was completed only on
August 24, 1974 after incurring a delay of eleven (11)
days due to the heavy rain which interrupted the
unloading operations. (Exhibit E)
(4) To determine the nature and extent of the wetting
and rusting, NSC called for a survey of the shipment by
the Manila Adjusters and Surveyors Company
(MASCO). In a letter to the NSC dated March 17, 1975
(Exhibit G), MASCO made a report of its ocular
inspection conducted on the cargo, both while it was
still on board the vessel and later at the NDC warehouse
in Pureza St., Sta. Mesa, Manila where the cargo was
taken and stored.MASCO reported that it found wetting
and rusting of the packages of hot rolled sheets and
metal covers of the tinplates; that tarpaulin hatch covers
were noted torn at various extents; that container/metal
casings of the skids were rusting all over. MASCO
ventured the opinion that rusting of the tinplates was
caused by contact with SEA WATER sustained while
still on board the vessel as a consequence of the heavy
weather and rough seas encountered while en route to
destination (Exhibit F). It was also reported that
MASCOs surveyors drew at random samples of bad
order packing materials of the tinplates and delivered
the same to the M.I.T. Testing Laboratories for
analysis. On August 31, 1974, the M.I.T. Testing
Laboratories issued Report No. 1770 (Exhibit I) which
in part, states, The analysis of bad order samples of
packing materials xxx shows that wetting was caused by
contact with SEA WATER.
(5) On September 6, 1974, on the basis of the aforesaid
Report No. 1770, plaintiff filed with the defendant its
claim for damages suffered due to the downgrading of
the damaged tinplates in the amount
of P941,145.18.Then on October 3, 1974, plaintiff
formally demanded payment of said claim but defendant
VSI refused and failed to pay. Plaintiff filed its
complaint against defendant on April 21, 1976 which
was docketed as Civil Case No. 23317, CFI, Rizal.
(6) In its complaint, plaintiff claimed that it sustained
losses in the aforesaid amount of P941,145.18 as a result
of the act, neglect and default of the master and crew in
the management of the vessel as well as the want of due
diligence on the part of the defendant to make the vessel
seaworthy and to make the holds and all other parts of
the vessel in which the cargo was carried, fit and safe
for its reception, carriage and preservation -- all in
violation of defendants undertaking under their Contract
of Voyage Charter Hire.
(7) In its answer, defendant denied liability for the
alleged damage claiming that the MV VLASONS I was
seaworthy in all respects for the carriage of plaintiffs
cargo; that said vessel was not a common
41
carrier inasmuch as she was under voyage charter
contract with the plaintiff as charterer under the charter
party; that in the course of the voyage from Iligan City
to Manila, the MV VLASONS I encountered very rough
seas, strong winds and adverse weather condition,
causing strong winds and big waves to continuously
pound against the vessel and seawater to overflow on its
deck and hatch covers; that under the Contract of
Voyage Charter Hire, defendant shall not be responsible
for losses/damages except on proven willful negligence
of the officers of the vessel, that the officers of said MV
VLASONS I exercised due diligence and proper
seamanship and were not willfully negligent; that
furthermore the Voyage Charter Party provides that
loading and discharging of the cargo was on FIOST
terms which means that the vessel was free of risk and
expense in connection with the loading and discharging
of the cargo; that the damage, if any, was due to the
inherent defect, quality or vice of the cargo or to the
insufficient packing thereof or to latent defect of the
cargo not discoverable by due diligence or to any other
cause arising without the actual fault or privity of
defendant and without the fault of the agents or servants
of defendant; consequently, defendant is not liable; that
the stevedores of plaintiff who discharged the cargo in
Manila were negligent and did not exercise due care in
the discharge of the cargo; and that the cargo was
exposed to rain and seawater spray while on the pier or
in transit from the pier to plaintiffs warehouse after
discharge from the vessel; and that plaintiffs claim was
highly speculative and grossly exaggerated and that the
small stain marks or sweat marks on the edges of the
tinplates were magnified and considered total loss of the
cargo. Finally, defendant claimed that it had complied
with all its duties and obligations under the Voyage
Charter Hire Contract and had no responsibility
whatsoever to plaintiff. In turn, it alleged the following
counterclaim:
(a) That despite the full and proper performance by
defendant of its obligations under the Voyage Charter
Hire Contract, plaintiff failed and refused to pay the
agreed charter hire of P75,000.00 despite demands made
by defendant;
(b) That under their Voyage Charter Hire Contract,
plaintiff had agreed to pay defendant the sum
of P8,000.00 per day for demurrage. The vessel was on
demurrage for eleven (11) days in Manila waiting for
plaintiff to discharge its cargo from the vessel. Thus,
plaintiff was liable to pay defendant demurrage in the
total amount of P88,000.00.
(c) For filing a clearly unfounded civil action against
defendant, plaintiff should be ordered to pay defendant
attorneys fees and all expenses of litigation in the
amount of not less than P100,000.00.
(8) From the evidence presented by both parties, the trial
court came out with the following findings which were
set forth in its decision:
(a) The MV VLASONS I is a vessel of Philippine
registry engaged in the tramping service and is available
for hire only under special contracts of charter party as
in this particular case.
(b) That for purposes of the voyage covered by the
Contract of Voyage Charter Hire (Exh. 1), the MV
VLASONS I was covered by the required seaworthiness
certificates including the Certification of Classification
issued by an international classification society, the
NIPPON KAIJI KYOKAI (Exh. 4); Coastwise License
from the Board of Transportation (Exh. 5); International
Loadline Certificate from the Philippine Coast Guard
(Exh. 6); Cargo Ship Safety Equipment Certificate also
from the Philippine Coast Guard (Exh. 7); Ship Radio
Station License (Exh. 8); Certificate of Inspection by the
Philippine Coast Guard (Exh. 12); and Certificate of
Approval for Conversion issued by the Bureau of
Customs (Exh. 9). That being a vessel engaged in both
overseas and coastwise trade, the MV VLASONS I has
a higher degree of seaworthiness and safety.
(c) Before it proceeded to Iligan City to perform the
voyage called for by the Contract of Voyage Charter
Hire, the MV VLASONS I underwent drydocking in
Cebu and was thoroughly inspected by the Philippine
Coast Guard. In fact, subject voyage was the vessels
first voyage after the drydocking. The evidence shows
that the MV VLASONS I was seaworthy and properly
manned, equipped and supplied when it undertook the
voyage. It had all the required certificates of
seaworthiness.
(d) The cargo/shipment was securely stowed in three (3)
hatches of the ship. The hatch openings were covered by
hatchboards which were in turn covered by two or
double tarpaulins. The hatch covers were water
tight.Furthermore, under the hatchboards were steel
beams to give support.
(e) The claim of the plaintiff that defendant violated the
contract of carriage is not supported by evidence. The
provisions of the Civil Code on common carriers
pursuant to which there exists a presumption of
negligence in case of loss or damage to the cargo are not
applicable. As to the damage to the tinplates which was
allegedly due to the wetting and rusting thereof, there is
unrebutted testimony of witness Vicente Angliongto that
tinplates sweat by themselves when packed even
without being in contract (sic) with water from outside
especially when the weather is bad or raining. The rust
caused by sweat or moisture on the tinplates may be
considered as a loss or damage but then, defendant
cannot be held liable for it pursuant to Article 1734 of
the Civil Case which exempts the carrier from
responsibility for loss or damage arising from the
character of the goods x x x. All the 1,769 skids of the
tinplates could not have been damaged by water as
claimed by plaintiff.It was shown as claimed by plaintiff
that the tinplates themselves were wrapped in kraft
paper lining and corrugated cardboards could not be
affected by water from outside.
(f) The stevedores hired by the plaintiff to discharge the
cargo of tinplates were negligent in not closing the hatch
openings of the MV VLASONS I when rains occurred
during the discharging of the cargo thus allowing
rainwater to enter the hatches. It was proven that the
stevedores merely set up temporary tents to cover the
hatch openings in case of rain so that it would be easy
for them to resume work when the rains stopped by just
removing the tent or canvas. Because of this improper
covering of the hatches by the stevedores during the
discharging and unloading operations which were
interrupted by rains, rainwater drifted into the cargo
through the hatch openings. Pursuant to paragraph 5 of
the NANYOSAI [sic] Charter Party which was
expressly made part of the Contract of Voyage Charter
Hire, the loading, stowing and discharging of the cargo
is the sole responsibility of the plaintiff charterer and
defendant carrier has no liability for whatever damage
may occur or maybe [sic] caused to the cargo in the
process.
(g) It was also established that the vessel encountered
rough seas and bad weather while en route from Iligan
City to Manila causing sea water to splash on the ships
deck on account of which the master of the vessel (Mr.
Antonio C. Dumlao) filed a Marine Protest on August
13, 1974 (Exh. 15) which can be invoked by defendant
as a force majeure that would exempt the defendant
from liability.
(h) Plaintiff did not comply with the requirement
prescribed in paragraph 9 of the Voyage Charter Hire
contract that it was to insure the cargo because it did
42
not. Had plaintiff complied with the requirement, then it
could have recovered its loss or damage from the
insurer. Plaintiff also violated the charter party contract
when it loaded not only steel products, i.e. steel bars,
angular bars and the like but also tinplates and hot rolled
sheets which are high grade cargo commanding a higher
freight. Thus plaintiff was able to ship high grade cargo
at a lower freight rate.
(I) As regards defendants counterclaim, the contract of
voyage charter hire under paragraph 4 thereof, fixed the
freight at P30.00 per metric ton payable to defendant
carrier upon presentation of the bill of lading within
fifteen (15) days. Plaintiff has not paid the total freight
due of P75,000.00 despite demands. The evidence also
showed that the plaintiff was required and bound under
paragraph 7 of the same Voyage Charter Hire contract
to pay demurrage of P8,000.00 per day of delay in the
unloading of the cargoes. The delay amounted to eleven
(11) days thereby making plaintiff liable to pay
defendant for demurrage in the amount of P88,000.00.
Appealing the RTC decision to the Court of Appeals,
NSC alleged six errors:
I negligent in handling and caring for NSCs cargo;
The trial court erred in finding that the MV VLASONS I
was seaworthy, properly manned, equipped and
supplied, and that there is no proof of willful negligence
of the vessels officers.
II
The trial court erred in finding that the rusting of NSCs
tinplates was due to the inherent nature or character of
the goods and not due to contact with seawater.
III
The trial court erred in finding that the stevedores hired
by NSC were negligent in the unloading of NSCs
shipment.
IV
The trial court erred in exempting VSI from liability on
the ground of force majeure.
V I. Whether or not the provisions of the Civil Code of the
The trial court erred in finding that NSC violated the
contract of voyage charter hire.
VI
The trial court erred in ordering NSC to pay freight,
demurrage and attorneys fees, to VSI.[4]
As earlier stated, the Court of Appeals modified the
decision of the trial court by reducing the demurrage
from P88,000.00 to P44,000.00 and deleting the award
of attorneys fees and expenses of litigation. NSC and
VSI filed separate motions for reconsideration. In a
Resolution[5] dated October 20, 1993, the appellate court
denied both motions. Undaunted, NSC and VSI filed
their respective petitions for review before this
Court. On motion of VSI, the Court ordered on February
14, 1994 the consolidation of these petitions.[6]
The Issues
In its petition[7] and memorandum,[8] NSC raises the
following questions of law and fact:
Questions of Law
1. Whether or not a charterer of a vessel is liable for
demurrage due to cargo unloading delays caused by
weather interruption;
2. Whether or not the alleged seaworthiness certificates
(Exhibits 3, 4, 5, 6, 7, 8, 9, 11 and 12) were admissible
in evidence and constituted evidence of the vessels
seaworthiness at the beginning of the voyages; and
3. Whether or not a charterers failure to insure its cargo
exempts the shipowner from liability for cargo damage.
Questions of Fact
1. Whether or not the vessel was seaworthy and cargo-
worthy;
2. Whether or not vessels officers and crew were
3. Whether or not NSCs cargo of tinplates did sweat
during the voyage and, hence, rusted on their own; and
(4) Whether or not NSCs stevedores were negligent and
caused the wetting[/]rusting of NSCs tinplates.
In its separate petition, [9] VSI submits for the
consideration of this Court the following alleged errors
of the CA:
A. The respondent Court of Appeals committed an error
of law in reducing the award of demurrage
from P88,000.00 to P44,000.00.
B. The respondent Court of Appeals committed an error
of law in deleting the award of P100,000 for attorneys
fees and expenses of litigation.
Amplifying the foregoing, VSI raises the following
issues in its memorandum: [10]
Philippines on common carriers pursuant to which there
exist[s] a presumption of negligence against the
common carrier in case of loss or damage to the cargo
are applicable to a private carrier.
II. Whether or not the terms and conditions of the
Contract of Voyage Charter Hire, including the
Nanyozai Charter, are valid and binding on both
contracting parties.
The foregoing issues raised by the parties will be
discussed under the following headings:
1. Questions of Fact
2. Effect of NSCs Failure to Insure the Cargo
3. Admissibility of Certificates Proving Seaworthiness
4. Demurrage and Attorneys Fees.
The Courts Ruling
The Court affirms the assailed Decision of the Court of
Appeals, except in respect of the demurrage.
Preliminary Matter: Common Carrier or Private
Carrier?
At the outset, it is essential to establish whether VSI
contracted with NSC as a common carrier or as a private
carrier. The resolution of this preliminary question
determines the law, standard of diligence and burden of
proof applicable to the present case.
Article 1732 of the Civil Code defines a common carrier
as persons, corporations, firms or associations engaged
in the business of carrying or transporting passengers or
goods or both, by land, water, or air, for compensation,
offering their services to the public. It has been held that
the true test of a common carrier is the carriage of
passengers or goods, provided it has space, for all who
opt to avail themselves of its transportation service for a
fee. [11] A carrier which does not qualify under the above
test is deemed a private carrier. Generally, private
carriage is undertaken by special agreement and the
carrier does not hold himself out to carry goods for the
general public. The most typical, although not the only
form of private carriage, is the charter party, a maritime
contract by which the charterer, a party other than the
shipowner, obtains the use and service of all or some
part of a ship for a period of time or a voyage or
voyages. [12]
In the instant case, it is undisputed that VSI did not offer
its services to the general public. As found by the
Regional Trial Court, it carried passengers or goods
only for those it chose under a special contract of charter
party. [13] As correctly concluded by the Court of
Appeals, the MV Vlasons Iwas not a common but a
private carrier. [14] Consequently, the rights and
obligations of VSI and NSC, including their respective
liability for damage to the cargo, are determined
primarily by stipulations in their contract of private
carriage or charter party. [15] Recently, in Valenzuela
Hardwood and Industrial Supply, Inc., vs. Court of
Appeals and Seven Brothers Shipping
Corporation, [16] the Court ruled:
x x x in a contract of private carriage, the parties may
freely stipulate their duties and obligations which
perforce would be binding on them. Unlike in a contract
43
involving a common carrier, private carriage does not
involve the general public. Hence, the stringent
provisions of the Civil Code on common carriers
protecting the general public cannot justifiably be
applied to a ship transporting commercial goods as a
private carrier.Consequently, the public policy
embodied therein is not contravened by stipulations in a
charter party that lessen or remove the protection given
by law in contracts involving common carriers.[17]
Extent of VSIs Responsibility and Liability Over
NSCs Cargo
It is clear from the parties Contract of Voyage Charter
Hire, dated July 17, 1974, that VSI shall not be
responsible for losses except on proven willful
negligence of the officers of the vessel. The
NANYOZAI Charter Party, which was incorporated in
the parties contract of transportation, further provided
that the shipowner shall not be liable for loss of or
damage to the cargo arising or resulting from
unseaworthiness, unless the same was caused by its lack
of due diligence to make the vessel seaworthy or to
ensure that the same was properly manned, equipped
and supplied, and to make the holds and all other parts
of the vessel in which cargo [was] carried, fit and safe
for its reception, carriage and preservation. [18] The
NANYOZAI Charter Party also provided that [o]wners
shall not be responsible for split, chafing and/or any
damage unless caused by the negligence or default of
the master or crew.[19]
Burden of Proof
In view of the aforementioned contractual stipulations,
NSC must prove that the damage to its shipment was
caused by VSIs willful negligence or failure to exercise
due diligence in making MV Vlasons I seaworthy and fit
for holding, carrying and safekeeping the
cargo. Ineluctably, the burden of proof was placed on
NSC by the parties agreement.
This view finds further support in the Code of
Commerce which pertinently provides:
Art. 361. Merchandise shall be transported at the risk
and venture of the shipper, if the contrary has not been
expressly stipulated.
Therefore, the damage and impairment suffered by the
goods during the transportation, due to fortuitous event,
force majeure, or the nature and inherent defect of the
things, shall be for the account and risk of the shipper.
The burden of proof of these accidents is on the carrier.
Art. 362. The carrier, however, shall be liable for
damages arising from the cause mentioned in the
preceding article if proofs against him show that they
occurred on account of his negligence or his omission to
take the precautions usually adopted by careful persons,
unless the shipper committed fraud in the bill of lading,
making him to believe that the goods were of a class or
quality different from what they really were.
Because the MV Vlasons I was a private carrier, the
shipowners obligations are governed by the foregoing
provisions of the Code of Commerce and not by the
Civil Code which, as a general rule, places the prima
facie presumption of negligence on a common carrier. It
is a hornbook doctrine that:
In an action against a private carrier for loss of, or injury
to, cargo, the burden is on the plaintiff to prove that the
carrier was negligent or unseaworthy, and the fact that
the goods were lost or damaged while in the carriers
custody does not put the burden of proof on the carrier.
Since x x x a private carrier is not an insurer but
undertakes only to exercise due care in the protection of
the goods committed to its care, the burden of proving
negligence or a breach of that duty rests on plaintiff and
proof of loss of, or damage to, cargo while in the
carriers possession does not cast on it the burden of
proving proper care and diligence on its part or that the
loss occurred from an excepted cause in the contract or
bill of lading. However, in discharging the burden of
proof, plaintiff is entitled to the benefit of the
presumptions and inferences by which the law aids the
bailor in an action against a bailee, and since the carrier
is in a better position to know the cause of the loss and
that it was not one involving its liability, the law
requires that it come forward with the information
available to it, and its failure to do so warrants an
inference or presumption of its liability. However, such
inferences and presumptions, while they may affect the
burden of coming forward with evidence, do not alter
the burden of proof which remains on plaintiff, and,
where the carrier comes forward with evidence
explaining the loss or damage, the burden of going
forward with the evidence is again on plaintiff.
Where the action is based on the shipowners warranty of
seaworthiness, the burden of proving a breach thereof
and that such breach was the proximate cause of the
damage rests on plaintiff, and proof that the goods were
lost or damaged while in the carriers possession does
not cast on it the burden of proving seaworthiness. x x x
Where the contract of carriage exempts the carrier from
liability for unseaworthiness not discoverable by due
diligence, the carrier has the preliminary burden of
proving the exercise of due diligence to make the vessel
seaworthy. [20]
In the instant case, the Court of Appeals correctly found
that NSC has not taken the correct position in relation to
the question of who has the burden of proof. Thus, in its
brief (pp. 10-11), after citing Clause 10 and Clause 12 of
the NANYOZAI Charter Party (incidentally plaintiff-
appellants [NSCs] interpretation of Clause 12 is not
even correct), it argues that a careful examination of the
evidence will show that VSI miserably failed to comply
with any of these obligations as if defendant-appellee
[VSI] had the burden of proof.[21]
First Issue: Questions of Fact
Based on the foregoing, the determination of the
following factual questions is manifestly relevant: (1)
whether VSI exercised due diligence in making MV
Vlasons I seaworthy for the intended purpose under the
charter party; (2) whether the damage to the cargo
should be attributed to the willful negligence of the
officers and crew of the vessel or of the stevedores hired
by NSC; and (3) whether the rusting of the tinplates was
caused by its own sweat or by contact with seawater.
These questions of fact were threshed out and decided
by the trial court, which had the firsthand opportunity to
hear the parties conflicting claims and to carefully
weigh their respective evidence. The findings of the trial
court were subsequently affirmed by the Court of
Appeals. Where the factual findings of both the trial
court and the Court of Appeals coincide, the same are
binding on this Court. [22] We stress that, subject to some
exceptional instances, [23] only questions of law -- not
questions of fact -- may be raised before this Court in a
petition for review under Rule 45 of the Rules of
Court.After a thorough review of the case at bar, we find
no reason to disturb the lower courts factual findings, as
indeed NSC has not successfully proven the application
of any of the aforecited exceptions.
Was MV Vlasons I Seaworthy?
In any event, the records reveal that VSI exercised due
diligence to make the ship seaworthy and fit for the
carriage of NSCs cargo of steel and tinplates. This is
shown by the fact that it was drydocked and inspected
by the Philippine Coast Guard before it proceeded to
Iligan City for its voyage to Manila under the contract of
voyage charter hire. [24] The vessels voyage from Iligan
to Manila was the vessels first voyage after
drydocking. The Philippine Coast Guard Station in Cebu
cleared it as seaworthy, fitted and equipped; it met all
requirements for trading as cargo vessel. [25]The Court
44
of Appeals itself sustained the conclusion of the trial
court that MV Vlasons I was seaworthy. We find no
reason to modify or reverse this finding of both the trial
and the appellate courts.
Who Were Negligent: Seamen or Stevedores?
As noted earlier, the NSC had the burden of proving that
the damage to the cargo was caused by the negligence of
the officers and the crew of MV Vlasons I in making
their vessel seaworthy and fit for the carriage of
tinplates. NSC failed to discharge this burden.
Before us, NSC relies heavily on its claim that MV
Vlasons I had used an old and torn tarpaulin or canvas to
cover the hatches through which the cargo was loaded
into the cargo hold of the ship. It faults the Court of
Appeals for failing to consider such claim as an
uncontroverted fact [26] and denies that MV Vlasons
I was equipped with new canvas covers in tandem with
the old ones as indicated in the Marine Protest
xxx. [27] We disagree.
The records sufficiently support VSIs contention that
the ship used the old tarpaulin, only in addition to the
new one used primarily to make the ships hatches
watertight. The foregoing are clear from the marine
protest of the master of the MV Vlasons I, Antonio C.
Dumlao, and the deposition of the ships boatswain, Jose
Pascua. The salient portions of said marine protest read:
x x x That the M/V VLASONS I departed Iligan City or
or about 0730 hours of August 8, 1974, loaded with
approximately 2,487.9 tons of steel plates and tin plates
consigned to National Steel Corporation; that before
departure, the vessel was rigged, fully equipped and
cleared by the authorities; that on or about August 9,
1974, while in the vicinity of the western part of Negros
and Panay, we encountered very rough seas and strong
winds and Manila office was advised by telegram of the
adverse weather conditions encountered; that in the
morning of August 10, 1974, the weather condition
changed to worse and strong winds and big waves
continued pounding the vessel at her port side causing
sea water to overflow on deck andhatch (sic) covers and
which caused the first layer of the canvass covering to
give way while the new canvass covering still holding
on;
That the weather condition improved when we reached
Dumali Point protected by Mindoro; that we re-secured
the canvass covering back to position; that in the
afternoon of August 10, 1974, while entering Maricaban
Passage, we were again exposed to moderate seas and
heavy rains; that while approaching Fortune Island, we
encountered again rough seas, strong winds and big
waves which caused the same canvass to give way and
leaving the new canvass holding on;
xxx xxx xxx [28]
And the relevant portions of Jose Pascuas deposition are
as follows:
Q: What is the purpose of the canvas cover?
A: So that the cargo would not be soaked with water.
A: And will you describe how the canvas cover was
secured on the hatch opening?
WITNESS
A: It was placed flat on top of the hatch cover, with a
little canvas flowing over the sides and we place[d] a
flat bar over the canvas on the side of the hatches and
then we place[d] a stopper so that the canvas could not
be removed.
ATTY DEL ROSARIO
Q: And will you tell us the size of the hatch
opening? The length and the width of the hatch opening.
A: Forty-five feet by thirty-five feet, sir.
xxxxxxxxx
Q: How was the canvas supported in the middle of the
hatch opening?
A: There is a hatch board.
ATTY DEL ROSARIO
Q: What is the hatch board made of?
A: It is made of wood, with a handle.
Q: And aside from the hatch board, is there any other
material there to cover the hatch?
A: There is a beam supporting the hatch board.
Q: What is this beam made of?
A: It is made of steel, sir.
Q: Is the beam that was placed in the hatch opening
covering the whole hatch opening?
A: No, sir.
Q: How many hatch beams were there placed across the
opening?
A: There are five beams in one hatch opening.
ATTY DEL ROSARIO
Q: And on top of the beams you said there is a hatch
board. How many pieces of wood are put on top?
A: Plenty, sir, because there are several pieces on top of
the hatch beam.
Q: And is there a space between the hatch boards?
A: There is none, sir.
Q: They are tight together?
A: Yes, sir.
Q: How tight?
A: Very tight, sir.
Q: Now, on top of the hatch boards, according to you, is
the canvas cover. How many canvas covers?
A: Two, sir. [29]
That due diligence was exercised by the officers and the
crew of the MV Vlasons I was further demonstrated by
the fact that, despite encountering rough weather twice,
the new tarpaulin did not give way and the ships hatches
and cargo holds remained waterproof. As aptly stated by
the Court of Appeals, xxx we find no reason not to
sustain the conclusion of the lower court based on
overwhelming evidence, that the MV VLASONS I was
seaworthy when it undertook the voyage on August 8,
1974 carrying on board thereof plaintiff-appellants
shipment of 1,677 skids of tinplates and 92 packages of
hot rolled sheets or a total of 1,769 packages from NSCs
pier in Iligan City arriving safely at North Harbor, Port
Area, Manila, on August 12, 1974; xxx. [30]
Indeed, NSC failed to discharge its burden to show
negligence on the part of the officers and the crew
of MV Vlasons I. On the contrary, the records reveal that
it was the stevedores of NSC who were negligent in
unloading the cargo from the ship.
The stevedores employed only a tent-like material to
cover the hatches when strong rains occasioned by a
passing typhoon disrupted the unloading of the
cargo. This tent-like covering, however, was clearly
inadequate for keeping rain and seawater away from the
hatches of the ship.Vicente Angliongto, an officer of
VSI, testified thus:
ATTY ZAMORA:
Q: Now, during your testimony on November 5, 1979,
you stated on August 14 you went on board the vessel
upon notice from the National Steel Corporation in
order to conduct the inspection of the cargo. During the
course of the investigation, did you chance to see the
discharging operation?
WITNESS:
A: Yes, sir, upon my arrival at the vessel, I saw some of
the tinplates already discharged on the pier but majority
of the tinplates were inside the hall, all the hatches were
opened.
Q: In connection with these cargoes which were
unloaded, where is the place.
A: At the Pier.
Q: What was used to protect the same from weather?
ATTY LOPEZ:
We object, your Honor, this question was already
asked. This particular matter . . . the transcript of
45
stenographic notes shows the same was covered in the
direct examination.
ATTY ZAMORA:
Precisely, your Honor, we would like to go on detail,
this is the serious part of the testimony.
COURT:
All right, witness may answer.
ATTY LOPEZ:
Q: What was used in order to protect the cargo from the
weather?
A: A base of canvas was used as cover on top of the tin
plates, and tents were built at the opening of the hatches.
Q: You also stated that the hatches were already opened
and that there were tents constructed at the opening of
the hatches to protect the cargo from the rain. Now, will
you describe [to] the Court the tents constructed.
A: The tents are just a base of canvas which look like a
tent of an Indian camp raise[d] high at the middle with
the whole side separated down to the hatch, the size of
the hatch and it is soaks [sic] at the middle because of
those weather and this can be used only to temporarily
protect the cargo from getting wet by rains.
Q: Now, is this procedure adopted by the stevedores of
covering tents proper?
A: No, sir, at the time they were discharging the cargo,
there was a typhoon passing by and the hatch tent was
not good enough to hold all of it to prevent the water
soaking through the canvas and enter the cargo.
Q: In the course of your inspection, Mr. Anglingto [sic],
did you see in fact the water enter and soak into the
canvas and tinplates.
A: Yes, sir, the second time I went there, I saw it.
Q: As owner of the vessel, did you not advise the
National Steel Corporation [of] the procedure adopted
by its stevedores in discharging the cargo particularly in
this tent covering of the hatches?
A: Yes, sir, I did the first time I saw it, I called the
attention of the stevedores but the stevedores did not
mind at all, so, I called the attention of the
representative of the National Steel but nothing was
done, just the same. Finally, I wrote a letter to them. [31]
NSC attempts to discredit the testimony of Angliongto
by questioning his failure to complain immediately
about the stevedores negligence on the first day of
unloading, pointing out that he wrote his letter to
petitioner only seven days later. [32] The Court is not
persuaded. Angliongtos candid answer in his
aforequoted testimony satisfactorily explained the
delay. Seven days lapsed because he first called the
attention of the stevedores, then the NSCs
representative, about the negligent and defective
procedure adopted in unloading the cargo. This series of
actions constitutes a reasonable response in accord with
common sense and ordinary human experience. Vicente
Angliongto could not be blamed for calling the
stevedores attention first and then the NSCs
representative on location before formally informing
NSC of the negligence he had observed, because he was
not responsible for the stevedores or the unloading
operations. In fact, he was merely expressing concern
for NSC which was ultimately responsible for the
stevedores it had hired and the performance of their task
to unload the cargo.
We see no reason to reverse the trial and the appellate
courts findings and conclusions on this point, viz:
In the THIRD assigned error, [NSC] claims that the trial
court erred in finding that the stevedores hired by NSC
were negligent in the unloading of NSCs shipment. We
do not think so. Such negligence according to the trial
court is evident in the stevedores hired by [NSC], not
closing the hatch of MV VLASONS I when rains
occurred during the discharging of the cargo thus
allowing rain water and seawater spray to enter the
hatches and to drift to and fall on the cargo. It was
proven that the stevedores merely set up temporary tents
or canvas to cover the hatch openings when it rained
during the unloading operations so that it would be
easier for them to resume work after the rains stopped
by just removing said tents or canvass. It has also been
shown that on August 20, 1974, VSI President Vicente
Angliongto wrote [NSC] calling attention to the manner
the stevedores hired by [NSC] were discharging the
cargo on rainy days and the improper closing of the
hatches which allowed continuous heavy rain water to
leak through and drip to the tinplates covers and
[Vicente Angliongto] also suggesting that due to four
(4) days continuos rains with strong winds that the
hatches be totally closed down and covered with canvas
and the hatch tents lowered. (Exh 13). This letter was
received by [NSC] on 22 August 1974 while
discharging operations were still going on (Exhibit 13-
A). [33]
The fact that NSC actually accepted and proceeded to
remove the cargo from the ship during unfavorable
weather will not make VSI liable for any damage caused
thereby. In passing, it may be noted that the NSC may
seek indemnification, subject to the laws on
prescription, from the stevedoring company at fault in
the discharge operations. A stevedore company engaged
in discharging cargo xxx has the duty to load the cargo
xxx in a prudent manner, and it is liable for injury to, or
loss of, cargo caused by its negligence xxx and where
the officers and members and crew of the vessel do
nothing and have no responsibility in the discharge of
cargo by stevedores xxx the vessel is not liable for loss
of, or damage to, the cargo caused by the negligence of
the stevedoresxxx [34] as in the instant case.
Do Tinplates Sweat?
The trial court relied on the testimony of Vicente
Angliongto in finding that xxx tinplates sweat by
themselves when packed even without being in contact
with water from outside especially when the weather is
bad or raining xxx. [35] The Court of Appeals affirmed
the trial courts finding.
A discussion of this issue appears inconsequential and
unnecessary. As previously discussed, the damage to the
tinplates was occasioned not by airborne moisture but
by contact with rain and seawater which the stevedores
negligently allowed to seep in during the unloading.
Second Issue: Effect of NSCs Failure to Insure the
Cargo
The obligation of NSC to insure the cargo stipulated in
the Contract of Voyage Charter Hire is totally separate
and distinct from the contractual or statutory
responsibility that may be incurred by VSI for damage
to the cargo caused by the willful negligence of the
officers and the crew of MV Vlasons I. Clearly,
therefore, NSCs failure to insure the cargo will not
affect its right, as owner and real party in interest, to file
an action against VSI for damages caused by the latters
willful negligence.We do not find anything in the
charter party that would make the liability of VSI for
damage to the cargo contingent on or affected in any
manner by NSCs obtaining an insurance over the cargo.
Third Issue: Admissibility of Certificates Proving
Seaworthiness
NSCs contention that MV Vlasons I was not seaworthy
is anchored on the alleged inadmissibility of the
certificates of seaworthiness offered in evidence by
VSI. The said certificates include the following:
1. Certificate of Inspection of the Philippine Coast
Guard at Cebu
2. Certificate of Inspection from the Philippine Coast
Guard
3. International Load Line Certificate from the
Philippine Coast Guard
4. Coastwise License from the Board of Transportation
46
5. Certificate of Approval for Conversion issued by the
Bureau of Customs. [36]
NSC argues that the certificates are hearsay for not
having been presented in accordance with the Rules of
Court. It points out that Exhibits 3, 4 and 11 allegedly
are not written records or acts of public officers;
while Exhibits 5, 6, 7, 8, 9, 11 and 12 are not evidenced
by official publications or certified true copies as
required by Sections 25 and 26, Rule 132, of the Rules
of Court. [37]
After a careful examination of these exhibits, the Court
rules that Exhibits 3, 4, 5, 6, 7, 8, 9 and 12 are
inadmissible, for they have not been properly offered as
evidence. Exhibits 3 and 4 are certificates issued by
private parties, but they have not been proven by one
who saw the writing executed, or by evidence of the
genuineness of the handwriting of the maker, or by a
subscribing witness. Exhibits 5, 6, 7, 8, 9, and 12 are
photocopies, but their admission under the best evidence
rule have not been demonstrated.
We find, however, that Exhibit 11 is admissible under a
well-settled exception to the hearsay rule per Section 44
of Rule 130 of the Rules of Court, which provides that
(e)ntries in official records made in the performance of a
duty by a public officer of the Philippines, or by a
person in the performance of a duty specially enjoined
by law, are prima facie evidence of the facts therein
stated. [38] Exhibit 11 is an original certificate of the
Philippine Coast Guard in Cebu issued by Lieutenant
Junior Grade Noli C. Flores to the effect that the vessel
VLASONS I was drydocked x x x and PCG Inspectors
were sent on board for inspection x x x. After
completion of drydocking and duly inspected by PCG
Inspectors, the vessel VLASONS I, a cargo vessel, is in
seaworthy condition, meets all requirements, fitted and
equipped for trading as a cargo vessel was cleared by
the Philippine Coast Guard and sailed for Cebu Port on
July 10, 1974. (sic) NSCs claim, therefore, is obviously
misleading and erroneous.
At any rate, it should be stressed that that NSC has the
burden of proving that MV Vlasons I was not
seaworthy. As observed earlier, the vessel was a private
carrier and, as such, it did not have the obligation of a
common carrier to show that it was seaworthy. Indeed,
NSC glaringly failed to discharge its duty of proving the
willful negligence of VSI in making the ship seaworthy
resulting in damage to its cargo. Assailing the
genuineness of the certificate of seaworthiness is not
sufficient proof that the vessel was not seaworthy.
Fourth Issue: Demurrage and Attorneys Fees
The contract of voyage charter hire provides inter alia:
xxx xxx xxx
2. Cargo: Full cargo of steel products of not less than
2,500 MT, 10% more or less at Masters option.
xxx xxx xxx
6. Loading/Discharging Rate : 750 tons per
WWDSHINC.
7. Demurrage/Dispatch : P8,000.00/P4,000.00 per
day. [39]
The Court defined demurrage in its strict sense as the
compensation provided for in the contract of
affreightment for the detention of the vessel beyond the
laytime or that period of time agreed on for loading and
unloading of cargo. [40] It is given to compensate the
shipowner for the nonuse of the vessel. On the other
hand, the following is well-settled:
Laytime runs according to the particular clause of the
charter party. x x x If laytime is expressed in running
days, this means days when the ship would be run
continuously, and holidays are not excepted. A
qualification of weather permitting excepts only those
days when bad weather reasonably prevents the work
contemplated. [41]
In this case, the contract of voyage charter hire provided
for a four-day laytime; it also qualified laytime as
WWDSHINC or weather working days Sundays and
holidays included. [42] The running of laytime was thus
made subject to the weather, and would cease to run in
the event unfavorable weather interfered with the
unloading of cargo. [43] Consequently, NSC may not be
held liable for demurrage as the four-day laytime
allowed it did not lapse, having been tolled by
unfavorable weather condition in view of the
WWDSHINC qualification agreed upon by the
parties. Clearly, it was error for the trial court and the
Court of Appeals to have found and affirmed
respectively that NSC incurred eleven days of delay in
unloading the cargo. The trial court arrived at this
erroneous finding by subtracting from the twelve days,
specifically August 13, 1974 to August 24, 1974, the
only day of unloading unhampered by unfavorable
weather or rain which was August 22, 1974. Based on
our previous discussion, such finding is a reversible
error. As mentioned, the respondent appellate court also
erred in ruling that NSC was liable to VSI for
demurrage, even if it reduced the amount by half.
Attorneys Fees
VSI assigns as error of law the Court of Appeals questioned Decision of the Court of Appeals is
deletion of the award of attorneys fees. We AFFIRMED with the MODIFICATION that the
disagree. While VSI was compelled to litigate to protect demurrage awarded to VSI is deleted. No
its rights, such fact by itself will not justify an award of pronouncement as to costs.
attorneys fees under Article 2208 of the Civil Code SO ORDERED.
when x x x no sufficient showing of bad faith would be
reflected in a partys persistence in a case other than an
erroneous conviction of the righteousness of his cause x
x x. [44] Moreover, attorneys fees may not be awarded to
a party for the reason alone that the judgment rendered
was favorable to the latter, as this is tantamount to
imposing a premium on ones right to litigate or seek
judicial redress of legitimate grievances. [45]
Epilogue
At bottom, this appeal really hinges on a factual
issue: when, how and who caused the damage to the
cargo? Ranged against NSC are two formidable
truths. First, both lower courts found that such damage
was brought about during the unloading process when
rain and seawater seeped through the cargo due to the
fault or negligence of the stevedores employed by
it. Basic is the rule that factual findings of the trial court,
when affirmed by the Court of Appeals, are binding on
the Supreme Court.Although there are settled
exceptions, NSC has not satisfactorily shown that this
case is one of them.Second, the agreement between the
parties -- the Contract of Voyage Charter Hire -- placed
the burden of proof for such loss or damage upon the
shipper, not upon the shipowner. Such stipulation, while
disadvantageous to NSC, is valid because the parties
entered into a contract of private charter, not one of
common carriage. Basic too is the doctrine that courts
cannot relieve a party from the effects of a private
contract freely entered into, on the ground that it is
allegedly one-sided or unfair to the plaintiff. The charter
party is a normal commercial contract and its
stipulations are agreed upon in consideration of many
factors, not the least of which is the transport price
which is determined not only by the actual costs but also
by the risks and burdens assumed by the shipper in
regard to possible loss or damage to the cargo. In
recognition of such factors, the parties even stipulated
that the shipper should insure the cargo to protect itself
from the risks it undertook under the charter party.That
NSC failed or neglected to protect itself with such
insurance should not adversely affect VSI, which had
nothing to do with such failure or neglect.
WHEREFORE, premises considered, the instant
consolidated petitions are hereby DENIED. The

47
FIRST DIVISION
G.R. No. 157917 August 29, 2012
SPOUSES TEODORO1 and NANETTE
PERENA, Petitioners,
vs.
SPOUSES TERESITA PHILIPPINE NICOLAS and
L. ZARATE, NATIONAL RAILWAYS, and the
COURT OF APPEALS Respondents.
DECISION
BERSAMIN, J.:
The operator of a. school bus service is a common
carrier in the eyes of the law. He is bound to observe
extraordinary diligence in the conduct of his business.
He is presumed to be negligent when death occurs to a
passenger. His liability may include indemnity for loss
of earning capacity even if the deceased passenger may
only be an unemployed high school student at the time
of the accident.
The Case
By petition for review on certiorari, Spouses Teodoro
and Nanette Perefia (Perefias) appeal the adverse
decision promulgated on November 13, 2002, by which
the Court of Appeals (CA) affirmed with modification
the decision rendered on December 3, 1999 by the
Regional Trial Court (RTC), Branch 260, in Parañaque
City that had decreed them jointly and severally liable
with Philippine National Railways (PNR), their co-
defendant, to Spouses Nicolas and Teresita Zarate
(Zarates) for the death of their 15-year old son, Aaron
John L. Zarate (Aaron), then a high school student of
Don Bosco Technical Institute (Don Bosco).
Antecedents
The Pereñas were engaged in the business of
transporting students from their respective residences in
Parañaque City to Don Bosco in Pasong Tamo, Makati
City, and back. In their business, the Pereñas used a
KIA Ceres Van (van) with Plate No. PYA 896, which
had the capacity to transport 14 students at a time, two
of whom would be seated in the front beside the driver,
and the others in the rear, with six students on either
side. They employed Clemente Alfaro (Alfaro) as driver
of the van.
In June 1996, the Zarates contracted the Pereñas to
transport Aaron to and from Don Bosco. On August 22,
1996, as on previous school days, the van picked Aaron
up around 6:00 a.m. from the Zarates’ residence. Aaron
took his place on the left side of the van near the rear
door. The van, with its air-conditioning unit turned on
and the stereo playing loudly, ultimately carried all the
48
14 student riders on their way to Don Bosco.
Considering that the students were due at Don Bosco by
7:15 a.m., and that they were already running late
because of the heavy vehicular traffic on the South
Superhighway, Alfaro took the van to an alternate route
at about 6:45 a.m. by traversing the narrow path
underneath the Magallanes Interchange that was then
commonly used by Makati-bound vehicles as a short cut
into Makati. At the time, the narrow path was marked by
piles of construction materials and parked passenger
jeepneys, and the railroad crossing in the narrow path
had no railroad warning signs, or watchmen, or other
responsible persons manning the crossing. In fact, the
bamboo barandilla was up, leaving the railroad crossing
open to traversing motorists.
At about the time the van was to traverse the railroad
crossing, PNR Commuter No. 302 (train), operated by
Jhonny Alano (Alano), was in the vicinity of the
Magallanes Interchange travelling northbound. As the
train neared the railroad crossing, Alfaro drove the van
eastward across the railroad tracks, closely tailing a
large passenger bus. His view of the oncoming train was
blocked because he overtook the passenger bus on its
left side. The train blew its horn to warn motorists of its
approach. When the train was about 50 meters away
from the passenger bus and the van, Alano applied the
ordinary brakes of the train. He applied the emergency
brakes only when he saw that a collision was imminent.
The passenger bus successfully crossed the railroad
tracks, but the van driven by Alfaro did not. The train
hit the rear end of the van, and the impact threw nine of
the 12 students in the rear, including Aaron, out of the
van. Aaron landed in the path of the train, which
dragged his body and severed his head, instantaneously
killing him. Alano fled the scene on board the train, and
did not wait for the police investigator to arrive.
Devastated by the early and unexpected death of Aaron,
the Zarates commenced this action for damages against
Alfaro, the Pereñas, PNR and Alano. The Pereñas and
PNR filed their respective answers, with cross-claims
against each other, but Alfaro could not be served with
summons.
At the pre-trial, the parties stipulated on the facts and
issues, viz:
A. FACTS:
(1) That spouses Zarate were the legitimate parents of
Aaron John L. Zarate;
(2) Spouses Zarate engaged the services of spouses
Pereña for the adequate and safe transportation carriage
of the former spouses' son from their residence in
Parañaque to his school at the Don Bosco Technical
Institute in Makati City;
(3) During the effectivity of the contract of carriage and
in the implementation thereof, Aaron, the minor son of
spouses Zarate died in connection with a vehicular/train
collision which occurred while Aaron was riding the
contracted carrier Kia Ceres van of spouses Pereña, then
driven and operated by the latter's employee/authorized
driver Clemente Alfaro, which van collided with the
train of PNR, at around 6:45 A.M. of August 22, 1996,
within the vicinity of the Magallanes Interchange in
Makati City, Metro Manila, Philippines;
(4) At the time of the vehicular/train collision, the
subject site of the vehicular/train collision was a railroad
crossing used by motorists for crossing the railroad
tracks;
(5) During the said time of the vehicular/train collision,
there were no appropriate and safety warning signs and
railings at the site commonly used for railroad crossing;
(6) At the material time, countless number of Makati
bound public utility and private vehicles used on a daily
basis the site of the collision as an alternative route and
short-cut to Makati;
(7) The train driver or operator left the scene of the
incident on board the commuter train involved without
waiting for the police investigator;
(8) The site commonly used for railroad crossing by
motorists was not in fact intended by the railroad
operator for railroad crossing at the time of the vehicular
collision;
(9) PNR received the demand letter of the spouses
Zarate;
(10) PNR refused to acknowledge any liability for the
vehicular/train collision;
(11) The eventual closure of the railroad crossing
alleged by PNR was an internal arrangement between
the former and its project contractor; and
(12) The site of the vehicular/train collision was within
the vicinity or less than 100 meters from the Magallanes
station of PNR.
B. ISSUES
(1) Whether or not defendant-driver of the van is, in the
performance of his functions, liable for negligence
constituting the proximate cause of the vehicular
collision, which resulted in the death of plaintiff
spouses' son;
(2) Whether or not the defendant spouses Pereña being
the employer of defendant Alfaro are liable for any
negligence which may be attributed to defendant Alfaro;
(3) Whether or not defendant Philippine National
Railways being the operator of the railroad system is
liable for negligence in failing to provide adequate
safety warning signs and railings in the area commonly
used by motorists for railroad crossings, constituting the
proximate cause of the vehicular collision which
resulted in the death of the plaintiff spouses' son;
(4) Whether or not defendant spouses Pereña are liable
for breach of the contract of carriage with plaintiff-
spouses in failing to provide adequate and safe
transportation for the latter's son;
(5) Whether or not defendants spouses are liable for
actual, moral damages, exemplary damages, and
attorney's fees;
(6) Whether or not defendants spouses Teodorico and
Nanette Pereña observed the diligence of employers and
school bus operators;
(7) Whether or not defendant-spouses are civilly liable
for the accidental death of Aaron John Zarate;
(8) Whether or not defendant PNR was grossly
negligent in operating the commuter train involved in
the accident, in allowing or tolerating the motoring
public to cross, and its failure to install safety devices or
equipment at the site of the accident for the protection of
the public;
(9) Whether or not defendant PNR should be made to
reimburse defendant spouses for any and whatever
amount the latter may be held answerable or which they
may be ordered to pay in favor of plaintiffs by reason of
the action;
(10) Whether or not defendant PNR should pay
plaintiffs directly and fully on the amounts claimed by
the latter in their Complaint by reason of its gross
negligence;
(11) Whether or not defendant PNR is liable to
defendants spouses for actual, moral and exemplary
damages and attorney's fees.2
The Zarates’ claim against the Pereñas was upon breach
of the contract of carriage for the safe transport of
Aaron; but that against PNR was based on quasi-delict
under Article 2176, Civil Code.
In their defense, the Pereñas adduced evidence to show
that they had exercised the diligence of a good father of
the family in the selection and supervision of Alfaro, by
making sure that Alfaro had been issued a driver’s
license and had not been involved in any vehicular
49
accident prior to the collision; that their own son had
taken the van daily; and that Teodoro Pereña had
sometimes accompanied Alfaro in the van’s trips
transporting the students to school.
For its part, PNR tended to show that the proximate
cause of the collision had been the reckless crossing of
the van whose driver had not first stopped, looked and
listened; and that the narrow path traversed by the van
had not been intended to be a railroad crossing for
motorists.
Ruling of the RTC
On December 3, 1999, the RTC rendered its
decision,3 disposing:
WHEREFORE, premises considered, judgment is
hereby rendered in favor of the plaintiff and against the
defendants ordering them to jointly and severally pay
the plaintiffs as follows:
(1) (for) the death of Aaron- Php50,000.00;
(2) Actual damages in the amount of Php100,000.00;
(3) For the loss of earning capacity- Php2,109,071.00;
(4) Moral damages in the amount of Php4,000,000.00;
(5) Exemplary damages in the amount of
Php1,000,000.00;
(6) Attorney’s fees in the amount of Php200,000.00; and
(7) Cost of suit.
SO ORDERED.
On June 29, 2000, the RTC denied the Pereñas’ motion
for reconsideration,4 reiterating that the cooperative
gross negligence of the Pereñas and PNR had caused the
collision that led to the death of Aaron; and that the
damages awarded to the Zarates were not excessive, but
based on the established circumstances.
The CA’s Ruling
Both the Pereñas and PNR appealed (C.A.-G.R. CV No.
68916).
PNR assigned the following errors, to wit:5
The Court a quo erred in:
1. In finding the defendant-appellant Philippine National
Railways jointly and severally liable together with
defendant-appellants spouses Teodorico and Nanette
Pereña and defendant-appellant Clemente Alfaro to pay
plaintiffs-appellees for the death of Aaron Zarate and
damages.
2. In giving full faith and merit to the oral testimonies of
plaintiffs-appellees witnesses despite overwhelming
documentary evidence on record, supporting the case of
defendants-appellants Philippine National Railways.
The Pereñas ascribed the following errors to the RTC,
namely:
The trial court erred in finding defendants-appellants
jointly and severally liable for actual, moral and
exemplary damages and attorney’s fees with the other
defendants.
The trial court erred in dismissing the cross-claim of the
appellants Pereñas against the Philippine National
Railways and in not holding the latter and its train driver
primarily responsible for the incident.
The trial court erred in awarding excessive damages and
attorney’s fees.
The trial court erred in awarding damages in the form of
deceased’s loss of earning capacity in the absence of
sufficient basis for such an award.
On November 13, 2002, the CA promulgated its
decision, affirming the findings of the RTC, but limited
the moral damages to ₱ 2,500,000.00; and deleted the
attorney’s fees because the RTC did not state the factual
and legal bases, to wit:6
WHEREFORE, premises considered, the assailed
Decision of the Regional Trial Court, Branch 260 of
Parañaque City is AFFIRMED with the modification
that the award of Actual Damages is reduced to ₱
59,502.76; Moral Damages is reduced to ₱
2,500,000.00; and the award for Attorney’s Fees is
Deleted.
SO ORDERED.
The CA upheld the award for the loss of Aaron’s
earning capacity, taking cognizance of the ruling in
Cariaga v. Laguna Tayabas Bus Company and Manila
Railroad Company,7 wherein the Court gave the heirs of
Cariaga a sum representing the loss of the deceased’s
earning capacity despite Cariaga being only a medical
student at the time of the fatal incident. Applying the
formula adopted in the American Expectancy Table of
Mortality:–
2/3 x (80 - age at the time of death) = life expectancy
the CA determined the life expectancy of Aaron to be
39.3 years upon reckoning his life expectancy from age
of 21 (the age when he would have graduated from
college and started working for his own livelihood)
instead of 15 years (his age when he died). Considering
that the nature of his work and his salary at the time of
Aaron’s death were unknown, it used the prevailing
minimum wage of ₱ 280.00/day to compute Aaron’s
gross annual salary to be ₱ 110,716.65, inclusive of the
thirteenth month pay. Multiplying this annual salary by
Aaron’s life expectancy of 39.3 years, his gross income
would aggregate to ₱ 4,351,164.30, from which his
estimated expenses in the sum of ₱ 2,189,664.30 was
deducted to finally arrive at P 2,161,500.00 as net
income. Due to Aaron’s computed net income turning
out to be higher than the amount claimed by the Zarates,
only ₱ 2,109,071.00, the amount expressly prayed for by
them, was granted.
On April 4, 2003, the CA denied the Pereñas’ motion
for reconsideration.8
Issues
In this appeal, the Pereñas list the following as the errors
committed by the CA, to wit:
I. The lower court erred when it upheld the trial court’s
decision holding the petitioners jointly and severally
liable to pay damages with Philippine National
Railways and dismissing their cross-claim against the
latter.
II. The lower court erred in affirming the trial court’s
decision awarding damages for loss of earning capacity
of a minor who was only a high school student at the
time of his death in the absence of sufficient basis for
such an award.
III. The lower court erred in not reducing further the
amount of damages awarded, assuming petitioners are
liable at all.
Ruling
The petition has no merit.
1.
Were the Pereñas and PNR jointly
and severally liable for damages?
The Zarates brought this action for recovery of damages
against both the Pereñas and the PNR, basing their claim
against the Pereñas on breach of contract of carriage and
against the PNR on quasi-delict.
The RTC found the Pereñas and the PNR negligent. The
CA affirmed the findings.
We concur with the CA.
To start with, the Pereñas’ defense was that they
exercised the diligence of a good father of the family in
the selection and supervision of Alfaro, the van driver,
by seeing to it that Alfaro had a driver’s license and that
he had not been involved in any vehicular accident prior
to the fatal collision with the train; that they even had
their own son travel to and from school on a daily basis;
and that Teodoro Pereña himself sometimes
accompanied Alfaro in transporting the passengers to
and from school. The RTC gave scant consideration to
such defense by regarding such defense as inappropriate
in an action for breach of contract of carriage.
We find no adequate cause to differ from the
conclusions of the lower courts that the Pereñas
50
operated as a common carrier; and that their standard of
care was extraordinary diligence, not the ordinary
diligence of a good father of a family.
Although in this jurisdiction the operator of a school bus
service has been usually regarded as a private
carrier,9primarily because he only caters to some
specific or privileged individuals, and his operation is
neither open to the indefinite public nor for public use,
the exact nature of the operation of a school bus service
has not been finally settled. This is the occasion to lay
the matter to rest.
A carrier is a person or corporation who undertakes to
transport or convey goods or persons from one place to
another, gratuitously or for hire. The carrier is classified
either as a private/special carrier or as a common/public
carrier.10 A private carrier is one who, without making
the activity a vocation, or without holding himself or
itself out to the public as ready to act for all who may
desire his or its services, undertakes, by special
agreement in a particular instance only, to transport
goods or persons from one place to another either
gratuitously or for hire.11 The provisions on ordinary
contracts of the Civil Code govern the contract of
private carriage.The diligence required of a private
carrier is only ordinary, that is, the diligence of a good
father of the family. In contrast, a common carrier is a
person, corporation, firm or association engaged in the
business of carrying or transporting passengers or goods
or both, by land, water, or air, for compensation,
offering such services to the public.12 Contracts of
common carriage are governed by the provisions on
common carriers of the Civil Code, the Public Service
Act,13 and other special laws relating to transportation. A
common carrier is required to observe extraordinary
diligence, and is presumed to be at fault or to have acted
negligently in case of the loss of the effects of
passengers, or the death or injuries to passengers. 14
In relation to common carriers, the Court defined public
use in the following terms in United States v. Tan
Piaco,15viz:
"Public use" is the same as "use by the public". The
essential feature of the public use is not confined to
privileged individuals, but is open to the indefinite
public. It is this indefinite or unrestricted quality that
gives it its public character. In determining whether a
use is public, we must look not only to the character of
the business to be done, but also to the proposed mode
of doing it. If the use is merely optional with the
owners, or the public benefit is merely incidental, it is
not a public use, authorizing the exercise of the
jurisdiction of the public utility commission. There must
be, in general, a right which the law compels the owner
to give to the general public. It is not enough that the
general prosperity of the public is promoted. Public use
is not synonymous with public interest. The true
criterion by which to judge the character of the use is
whether the public may enjoy it by right or only by
permission.
In De Guzman v. Court of Appeals,16 the Court noted
that Article 1732 of the Civil Code avoided any
distinction between a person or an enterprise offering
transportation on a regular or an isolated basis; and has
not distinguished a carrier offering his services to the
general public, that is, the general community or
population, from one offering his services only to a
narrow segment of the general population.
Nonetheless, the concept of a common carrier embodied
in Article 1732 of the Civil Code coincides neatly with
the notion of public service under the Public Service
Act, which supplements the law on common carriers
found in the Civil Code. Public service, according to
Section 13, paragraph (b) of the Public Service Act,
includes:
x x x every person that now or hereafter may own,
operate, manage, or control in the Philippines, for hire
or compensation, with general or limited clientèle,
whether permanent or occasional, and done for the
general business purposes, any common carrier,
railroad, street railway, traction railway, subway motor
vehicle, either for freight or passenger, or both, with or
without fixed route and whatever may be its
classification, freight or carrier service of any class,
express service, steamboat, or steamship line, pontines,
ferries and water craft, engaged in the transportation of
passengers or freight or both, shipyard, marine repair
shop, ice-refrigeration plant, canal, irrigation system,
gas, electric light, heat and power, water supply and
power petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting
stations and other similar public services. x x x.17
Given the breadth of the aforequoted characterization of
a common carrier, the Court has considered as common
carriers pipeline operators,18 custom brokers and
warehousemen,19 and barge operators20 even if they had
limited clientèle.
As all the foregoing indicate, the true test for a common
carrier is not the quantity or extent of the business
actually transacted, or the number and character of the
conveyances used in the activity, but whether the
undertaking is a part of the activity engaged in by the
carrier that he has held out to the general public as his
business or occupation. If the undertaking is a single
transaction, not a part of the general business or
occupation engaged in, as advertised and held out to the
general public, the individual or the entity rendering
such service is a private, not a common, carrier. The
question must be determined by the character of the
business actually carried on by the carrier, not by any
secret intention or mental reservation it may entertain or
assert when charged with the duties and obligations that
the law imposes.21
Applying these considerations to the case before us,
there is no question that the Pereñas as the operators of a
school bus service were: (a) engaged in transporting
passengers generally as a business, not just as a casual
occupation; (b) undertaking to carry passengers over
established roads by the method by which the business
was conducted; and (c) transporting students for a fee.
Despite catering to a limited clientèle, the Pereñas
operated as a common carrier because they held
themselves out as a ready transportation
indiscriminately to the students of a particular school
living within or near where they operated the service
and for a fee.
The common carrier’s standard of care and vigilance as
to the safety of the passengers is defined by law. Given
the nature of the business and for reasons of public
policy, the common carrier is 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."22 Article 1755 of the Civil Code specifies that the
common carrier should "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." To successfully fend
off liability in an action upon the death or injury to a
passenger, the common carrier must prove his or its
observance of that extraordinary diligence; otherwise,
the legal presumption that he or it was at fault or acted
negligently would stand.23 No device, whether by
stipulation, posting of notices, statements on tickets, or
otherwise, may dispense with or lessen the
responsibility of the common carrier as defined under
Article 1755 of the Civil Code. 24
And, secondly, the Pereñas have not presented any
compelling defense or reason by which the Court might
51
now reverse the CA’s findings on their liability. On the
contrary, an examination of the records shows that the
evidence fully supported the findings of the CA.
As earlier stated, the Pereñas, acting as a common
carrier, were already presumed to be negligent at the
time of the accident because death had occurred to their
passenger.25 The presumption of negligence, being a
presumption of law, laid the burden of evidence on their
shoulders to establish that they had not been
negligent.26 It was the law no less that required them to
prove their observance of extraordinary diligence in
seeing to the safe and secure carriage of the passengers
to their destination. Until they did so in a credible
manner, they stood to be held legally responsible for the
death of Aaron and thus to be held liable for all the
natural consequences of such death.
There is no question that the Pereñas did not overturn
the presumption of their negligence by credible
evidence. Their defense of having observed the
diligence of a good father of a family in the selection
and supervision of their driver was not legally sufficient.
According to Article 1759 of the Civil Code, their
liability as a common carrier did not cease upon proof
that they exercised all the diligence of a good father of a
family in the selection and supervision of their
employee. This was the reason why the RTC treated this
defense of the Pereñas as inappropriate in this action for
breach of contract of carriage.
The Pereñas were liable for the death of Aaron despite
the fact that their driver might have acted beyond the
scope of his authority or even in violation of the orders
of the common carrier.27 In this connection, the records
showed their driver’s actual negligence. There was a
showing, to begin with, that their driver traversed the
railroad tracks at a point at which the PNR did not
permit motorists going into the Makati area to cross the
railroad tracks. Although that point had been used by
motorists as a shortcut into the Makati area, that fact
alone did not excuse their driver into taking that route.
On the other hand, with his familiarity with that
shortcut, their driver was fully aware of the risks to his
passengers but he still disregarded the risks.
Compounding his lack of care was that loud music was
playing inside the air-conditioned van at the time of the
accident. The loudness most probably reduced his
ability to hear the warning horns of the oncoming train
to allow him to correctly appreciate the lurking dangers
on the railroad tracks. Also, he sought to overtake a
passenger bus on the left side as both vehicles traversed
the railroad tracks. In so doing, he lost his view of the
train that was then coming from the opposite side of the
passenger bus, leading him to miscalculate his chances
of beating the bus in their race, and of getting clear of
the train. As a result, the bus avoided a collision with
the train but the van got slammed at its rear, causing the
fatality. Lastly, he did not slow down or go to a full stop
before traversing the railroad tracks despite knowing
that his slackening of speed and going to a full stop
were in observance of the right of way at railroad tracks
as defined by the traffic laws and regulations.28He
thereby violated a specific traffic regulation on right of
way, by virtue of which he was immediately presumed
to be negligent.29
The omissions of care on the part of the van driver
constituted negligence,30 which, according to Layugan v.
Intermediate Appellate Court,31 is "the omission to do
something which a reasonable man, guided by those
considerations which ordinarily regulate the conduct of
human affairs, would do, or the doing of something
which a prudent and reasonable man would not do,32 or
as Judge Cooley defines it, ‘(t)he failure to observe for
the protection of the interests of another person, that
degree of care, precaution, and vigilance which the
circumstances justly demand, whereby such other
person suffers injury.’"33
The test by which to determine the existence of
negligence in a particular case has been aptly stated in
the leading case of Picart v. Smith,34 thuswise:
The test by which to determine the existence of
negligence in a particular case may be stated as follows:
Did the defendant in doing the alleged negligent act use
that reasonable care and caution which an ordinarily
prudent person would have used in the same situation?
If not, then he is guilty of negligence. The law here in
effect adopts the standard supposed to be supplied by
the imaginary conduct of the discreet paterfamilias of
the Roman law. The existence of negligence in a given
case is not determined by reference to the personal
judgment of the actor in the situation before him. The
law considers what would be reckless, blameworthy, or
negligent in the man of ordinary intelligence and
prudence and determines liability by that.
The question as to what would constitute the conduct of
a prudent man in a given situation must of course be
always determined in the light of human experience and
in view of the facts involved in the particular case.
Abstract speculation cannot here be of much value but
this much can be profitably said: Reasonable men
govern their conduct by the circumstances which are
before them or known to them. They are not, and are not
supposed to be, omniscient of the future. Hence they can
be expected to take care only when there is something
before them to suggest or warn of danger. Could a
prudent man, in the case under consideration, foresee
harm as a result of the course actually pursued? If so, it
was the duty of the actor to take precautions to guard
against that harm. Reasonable foresight of harm,
followed by the ignoring of the suggestion born of this
prevision, is always necessary before negligence can be
held to exist. Stated in these terms, the proper criterion
for determining the existence of negligence in a given
case is this: Conduct is said to be negligent when a
prudent man in the position of the tortfeasor would have
foreseen that an effect harmful to another was
sufficiently probable to warrant his foregoing the
conduct or guarding against its consequences.
(Emphasis supplied)
Pursuant to the Picart v. Smith test of negligence, the
Pereñas’ driver was entirely negligent when he traversed
the railroad tracks at a point not allowed for a motorist’s
crossing despite being fully aware of the grave harm to
be thereby caused to his passengers; and when he
disregarded the foresight of harm to his passengers by
overtaking the bus on the left side as to leave himself
blind to the approach of the oncoming train that he knew
was on the opposite side of the bus.
Unrelenting, the Pereñas cite Phil. National Railways v.
Intermediate Appellate Court,35 where the Court held the
PNR solely liable for the damages caused to a passenger
bus and its passengers when its train hit the rear end of
the bus that was then traversing the railroad crossing.
But the circumstances of that case and this one share no
similarities. In Philippine National Railways v.
Intermediate Appellate Court, no evidence of
contributory negligence was adduced against the owner
of the bus. Instead, it was the owner of the bus who
proved the exercise of extraordinary diligence by
preponderant evidence. Also, the records are replete
with the showing of negligence on the part of both the
Pereñas and the PNR. Another distinction is that the
passenger bus in Philippine National Railways v.
Intermediate Appellate Court was traversing the
dedicated railroad crossing when it was hit by the train,
but the Pereñas’ school van traversed the railroad tracks
at a point not intended for that purpose.
At any rate, the lower courts correctly held both the
Pereñas and the PNR "jointly and severally" liable for
52
damages arising from the death of Aaron. They had
been impleaded in the same complaint as defendants
against whom the Zarates had the right to relief, whether
jointly, severally, or in the alternative, in respect to or
arising out of the accident, and questions of fact and of
law were common as to the Zarates.36 Although the basis
of the right to relief of the Zarates (i.e., breach of
contract of carriage) against the Pereñas was distinct
from the basis of the Zarates’ right to relief against the
PNR (i.e., quasi-delict under Article 2176, Civil Code),
they nonetheless could be held jointly and severally
liable by virtue of their respective negligence combining
to cause the death of Aaron. As to the PNR, the RTC
rightly found the PNR also guilty of negligence despite
the school van of the Pereñas traversing the railroad
tracks at a point not dedicated by the PNR as a railroad
crossing for pedestrians and motorists, because the PNR
did not ensure the safety of others through the placing of
crossbars, signal lights, warning signs, and other
permanent safety barriers to prevent vehicles or
pedestrians from crossing there. The RTC observed that
the fact that a crossing guard had been assigned to man
that point from 7 a.m. to 5 p.m. was a good indicium
that the PNR was aware of the risks to others as well as
the need to control the vehicular and other traffic there.
Verily, the Pereñas and the PNR were joint tortfeasors.
2.
Was the indemnity for loss of
Aaron’s earning capacity proper?
The RTC awarded indemnity for loss of Aaron’s earning
capacity. Although agreeing with the RTC on the
liability, the CA modified the amount. Both lower courts
took into consideration that Aaron, while only a high
school student, had been enrolled in one of the reputable
schools in the Philippines and that he had been a normal
and able-bodied child prior to his death. The basis for
the computation of Aaron’s earning capacity was not
what he would have become or what he would have
wanted to be if not for his untimely death, but the
minimum wage in effect at the time of his death.
Moreover, the RTC’s computation of Aaron’s life
expectancy rate was not reckoned from his age of 15
years at the time of his death, but on 21 years, his age
when he would have graduated from college.
We find the considerations taken into account by the
lower courts to be reasonable and fully warranted.
Yet, the Pereñas submit that the indemnity for loss of
earning capacity was speculative and
unfounded.1âwphi1 They cited People v. Teehankee,
Jr.,37 where the Court deleted the indemnity for victim
Jussi Leino’s loss of earning capacity as a pilot for being
speculative due to his having graduated from high
school at the International School in Manila only two
years before the shooting, and was at the time of the
shooting only enrolled in the first semester at the Manila
Aero Club to pursue his ambition to become a
professional pilot. That meant, according to the Court,
that he was for all intents and purposes only a high
school graduate.
We reject the Pereñas’ submission.
First of all, a careful perusal of the Teehankee, Jr. case
shows that the situation there of Jussi Leino was not
akin to that of Aaron here. The CA and the RTC were
not speculating that Aaron would be some highly-paid
professional, like a pilot (or, for that matter, an engineer,
a physician, or a lawyer). Instead, the computation of
Aaron’s earning capacity was premised on him being a
lowly minimum wage earner despite his being then
enrolled at a prestigious high school like Don Bosco in
Makati, a fact that would have likely ensured his success
in his later years in life and at work.
And, secondly, the fact that Aaron was then without a
history of earnings should not be taken against his
parents and in favor of the defendants whose negligence
not only cost Aaron his life and his right to work and
earn money, but also deprived his parents of their right
to his presence and his services as well. Our law itself
states that the loss of the earning capacity of the
deceased shall be the liability of the guilty party in favor
of the heirs of the deceased, and shall in every case be
assessed and awarded by the court "unless the deceased
on account of permanent physical disability not caused
by the defendant, had no earning capacity at the time of
his death."38 Accordingly, we emphatically hold in favor
of the indemnification for Aaron’s loss of earning
capacity despite him having been unemployed, because
compensation of this nature is awarded not for loss of
time or earnings but for loss of the deceased’s power or
ability to earn money.39
This favorable treatment of the Zarates’ claim is not
unprecedented. In Cariaga v. Laguna Tayabas Bus
Company and Manila Railroad Company,40 fourth-year
medical student Edgardo Carriaga’s earning capacity,
although he survived the accident but his injuries
rendered him permanently incapacitated, was computed
to be that of the physician that he dreamed to become.
The Court considered his scholastic record sufficient to
justify the assumption that he could have finished the
medical course and would have passed the medical November 13, 2002; and ORDER the petitioners to pay
board examinations in due time, and that he could have the costs of suit.
possibly earned a modest income as a medical SO ORDERED.
practitioner. Also, in People v. Sanchez,41 the Court
opined that murder and rape victim Eileen Sarmienta
and murder victim Allan Gomez could have easily
landed good-paying jobs had they graduated in due
time, and that their jobs would probably pay them high
monthly salaries from ₱ 10,000.00 to ₱ 15,000.00 upon
their graduation. Their earning capacities were
computed at rates higher than the minimum wage at the
time of their deaths due to their being already senior
agriculture students of the University of the Philippines
in Los Baños, the country’s leading educational
institution in agriculture.
3.
Were the amounts of damages excessive?
The Pereñas plead for the reduction of the moral and
exemplary damages awarded to the Zarates in the
respective amounts of ₱ 2,500,000.00 and ₱
1,000,000.00 on the ground that such amounts were
excessive.
The plea is unwarranted.
The moral damages of ₱ 2,500,000.00 were really just
and reasonable under the established circumstances of
this case because they were intended by the law to
assuage the Zarates’ deep mental anguish over their
son’s unexpected and violent death, and their moral
shock over the senseless accident. That amount would
not be too much, considering that it would help the
Zarates obtain the means, diversions or amusements that
would alleviate their suffering for the loss of their child.
At any rate, reducing the amount as excessive might
prove to be an injustice, given the passage of a long time
from when their mental anguish was inflicted on them
on August 22, 1996.
Anent the ₱ 1,000,000.00 allowed as exemplary
damages, we should not reduce the amount if only to
render effective the desired example for the public good.
As a common carrier, the Pereñas needed to be
vigorously reminded to observe their duty to exercise
extraordinary diligence to prevent a similarly senseless
accident from happening again. Only by an award of
exemplary damages in that amount would suffice to
instill in them and others similarly situated like them the
ever-present need for greater and constant vigilance in
the conduct of a business imbued with public interest.
WHEREFORE, we DENY the petition for review
on certiorari; AFFIRM the decision promulgated on

53
FIRST DIVISION
[G.R. No. 131166. September 30, 1999]
CALTEX (PHILIPPINES), INC. petitioner,
vs. SULPICIO LINES, INC., GO SIOC SO,
ENRIQUE S. GO, EUSEBIO S. GO, CARLOS S.
GO, VICTORIANO S. GO, DOMINADOR S. GO,
RICARDO S. GO, EDWARD S. GO, ARTURO S.
GO, EDGAR S. GO, EDMUND S. GO,
FRANCISCO SORIANO, VECTOR SHIPPING
CORPORATION, TERESITA G. CAEZAL AND
SOTERA E. CAEZAL, respondents.
DECISION
PARDO, J.:
Is the charterer of a sea vessel liable for damages
resulting from a collision between the chartered vessel
and a passenger ship?
When MT Vector left the port of Limay, Bataan, on
December 19, 1987 carrying petroleum products of
Caltex (Philippines), Inc. (hereinafter Caltex) no one
could have guessed that it would collide with MV Doa
Paz, killing almost all the passengers and crew members
of both ships, and thus resulting in one of the countrys
worst maritime disasters.
The petition before us seeks to reverse the Court of
Appeals decision[1]holding petitioner jointly liable with
the operator of MT Vector for damages when the latter
collided with Sulpicio Lines, Inc.s passenger ship MV
Doa Paz.
The facts are as follows:
On December 19, 1987, motor tanker MT Vector left
Limay, Bataan, at about 8:00 p.m., enroute to Masbate,
loaded with 8,800 barrels of petroleum products shipped
by petitioner Caltex.[2] MT Vector is a tramping motor
tanker owned and operated by Vector Shipping
Corporation, engaged in the business of transporting
fuel products such as gasoline, kerosene, diesel and
crude oil. During that particular voyage, the MT Vector
carried on board gasoline and other oil products owned
by Caltex by virtue of a charter contract between
them.[3]
On December 20, 1987, at about 6:30 a.m., the
passenger ship MV Doa Paz left the port of Tacloban
headed for Manila with a complement of 59 crew
members including the master and his officers, and
passengers totaling 1,493 as indicated in the Coast
Guard Clearance.[4] The MV Doa Paz is a passenger and
cargo vessel owned and operated by Sulpicio Lines, Inc.
plying the route of Manila/ Tacloban/ Catbalogan/
54
Manila/ Catbalogan/ Tacloban/ Manila, making trips
twice a week.
At about 10:30 p.m. of December 20, 1987, the two
vessels collided in the open sea within the vicinity of
Dumali Point between Marinduque and Oriental
Mindoro. All the crewmembers of MV Doa Paz died,
while the two survivors from MT Vector claimed that
they were sleeping at the time of the incident.
The MV Doa Paz carried an estimated 4,000 passengers;
many indeed, were not in the passenger manifest.Only
24 survived the tragedy after having been rescued from
the burning waters by vessels that responded to distress
calls.[5] Among those who perished were public school
teacher Sebastian Caezal (47 years old) and his daughter
Corazon Caezal (11 years old), both unmanifested
passengers but proved to be on board the vessel.
On March 22, 1988, the board of marine inquiry in BMI
Case No. 653-87 after investigation found that the MT
Vector, its registered operator Francisco Soriano, and its
owner and actual operator Vector Shipping Corporation,
were at fault and responsible for its collision with MV
Doa Paz.[6]
On February 13, 1989, Teresita Caezal and Sotera E.
Caezal, Sebastian Caezals wife and mother respectively,
filed with the Regional Trial Court, Branch 8, Manila, a
complaint for Damages Arising from Breach of Contract
of Carriage against Sulpicio Lines, Inc. (hereafter
Sulpicio). Sulpicio, in turn, filed a third party complaint
against Francisco Soriano, Vector Shipping Corporation
and Caltex (Philippines), Inc. Sulpicio alleged that
Caltex chartered MT Vector with gross and evident bad
faith knowing fully well that MT Vector was improperly
manned, ill-equipped, unseaworthy and a hazard to safe
navigation; as a result, it rammed against MV Doa Paz
in the open sea setting MT Vectors highly flammable
cargo ablaze.
On September 15, 1992, the trial court rendered decision
dismissing the third party complaint against
petitioner. The dispositive portion reads:
WHEREFORE, judgement is hereby rendered in favor
of plaintiffs and against defendant-3rd party plaintiff
Sulpicio Lines, Inc., to wit:
1. For the death of Sebastian E. Caezal and his 11-year
old daughter Corazon G. Caezal, including loss of future
earnings of said Sebastian, moral and exemplary
damages, attorneys fees, in the total amount of P
1,241,287.44 and finally;
2. The statutory costs of the proceedings.
Likewise, the 3rd party complaint is hereby
DISMISSED for want of substantiation and with costs
against the 3rd party plaintiff.
IT IS SO ORDERED.
DONE IN MANILA, this 15th day of September 1992.
ARSENIO M. GONONG
Judge[7]
On appeal to the Court of Appeals interposed by
Sulpicio Lines, Inc., on April 15, 1997, the Court of
Appeal modified the trial courts ruling and included
petitioner Caltex as one of the those liable for
damages.Thus:
WHEREFORE, in view of all the foregoing, the
judgment rendered by the Regional Trial Court is hereby
MODIFIED as follows:
WHEREFORE, defendant Sulpicio Lines, Inc., is
ordered to pay the heirs of Sebastian E. Caezal and
Corazon Caezal:
1. Compensatory damages for the death of Sebastian
E.Caezal and Corazon Caezal the total amount of ONE
HUNDRED THOUSAND PESOS (P100,000);
2. Compensatory damages representing the unearned
income of Sebastian E. Caezal, in the total amount of
THREE HUNDRED SIX THOUSAND FOUR
HUNDRED EIGHTY (P306,480.00) PESOS;
3. Moral damages in the amount of THREE HUNDRED
THOUSAND PESOS (P 300,000.00);
4. Attorneys fees in the concept of actual damages in the
amount of FIFTY THOUSAND PESOS (P 50,000.00);
5. Costs of the suit.
Third party defendants Vector Shipping Co. and Caltex
(Phils.), Inc. are held equally liable under the third party
complaint to reimburse/indemnify defendant Sulpicio
Lines, Inc. of the above-mentioned damages, attorneys
fees and costs which the latter is adjudged to pay
plaintiffs, the same to be shared half by Vector Shipping
Co. (being the vessel at fault for the collision) and the
other half by Caltex (Phils.), Inc. (being the charterer
that negligently caused the shipping of combustible
cargo aboard an unseaworthy vessel).
SO ORDERED.
JORGE S. IMPERIAL
Associate Justice
WE CONCUR:
RAMON U. MABUTAS. JR. PORTIA ALIO
HERMACHUELOS
Associate Justice Associate Justice[8]
Hence, this petition.
We find the petition meritorious.
First: The charterer has no liability for damages under
Philippine Maritime laws.
The respective rights and duties of a shipper and the
carrier depends not on whether the carrier is public or
private, but on whether the contract of carriage is a bill
of lading or equivalent shipping documents on the one
hand, or a charter party or similar contract on the
other.[9]
Petitioner and Vector entered into a contract of
affreightment, also known as a voyage charter.[10]
A charter party is a contract by which an entire ship, or
some principal part thereof, is let by the owner to
another person for a specified time or use; a contract of
affreightment is one by which the owner of a ship or
other vessel lets the whole or part of her to a merchant
or other person for the conveyance of goods, on a
particular voyage, in consideration of the payment of
freight.[11]
A contract of affreightment may be either time charter,
wherein the leased vessel is leased to the charterer for a
fixed period of time, or voyage charter, wherein the
ship is leased for a single voyage. In both cases, the
charter-party provides for the hire of the vessel only,
either for a determinate period of time or for a single or
consecutive voyage, the ship owner to supply the ships
store, pay for the wages of the master of the crew, and
defray the expenses for the maintenance of the ship.[12]
Under a demise or bareboat charter on the other hand,
the charterer mans the vessel with his own people and
becomes, in effect, the owner for the voyage or service
stipulated, subject to liability for damages caused by
negligence.
If the charter is a contract of affreightment, which leaves
the general owner in possession of the ship as owner for
the voyage, the rights and the responsibilities of
ownership rest on the owner. The charterer is free from
liability to third persons in respect of the ship.[13]
Second : MT Vector is a common carrier
Charter parties fall into three main categories: (1)
Demise or bareboat, (2) time charter, (3) voyage
charter.Does a charter party agreement turn the common
carrier into a private one? We need to answer this
question in order to shed light on the responsibilities of
the parties.
In this case, the charter party agreement did not convert
the common carrier into a private carrier. The parties
entered into a voyage charter, which retains the
character of the vessel as a common carrier.
55
In Planters Products, Inc. vs. Court of Appeals,[14] we
said:
It is therefore imperative that a public carrier shall
remain as such, notwithstanding the charter of the whole
or portion of a vessel by one or more persons, provided
the charter is limited to the ship only, as in the case of a
time-charter or voyage charter. It is only when the
charter includes both the vessel and its crew, as in a
bareboat or demise that a common carrier becomes
private, at least insofar as the particular voyage covering
the charter-party is concerned. Indubitably, a ship-owner
in a time or voyage charter retains possession and
control of the ship, although her holds may, for the
moment, be the property of the charterer.
Later, we ruled in Coastwise Lighterage Corporation vs.
Court of Appeals:[15]
Although a charter party may transform a common
carrier into a private one, the same however is not true
in a contract of affreightment xxx
A common carrier is a person or corporation whose
regular business is to carry passengers or property for all
persons who may choose to employ and to remunerate
him.[16] MT Vector fits the definition of a common
carrier under Article 1732 of the Civil Code. In Guzman
vs. Court of Appeals,[17] we ruled:
The Civil Code defines common carriers in the
following terms:
Article 1732. Common carriers are persons,
corporations, firms or associations engaged in the
business of carrying or transporting passengers for
passengers or goods or both, by land, water, or air for
compensation, offering their services to the public.
The above article makes no distinction between one
whose principal business activity is the carrying of
persons or goods or both, and one who does such
carrying only as an ancillary activity (in local idiom, as
a sideline).Article 1732 also carefully avoids making
any distinction between a person or enterprise offering
transportation service on a regular or scheduled
basis and one offering such services on a an occasional,
episodic or unscheduled basis. Neither does Article
1732 distinguish between a carrier offering its services
to the general public, i.e., the general community or
population, and one who offers services or solicits
business only from a narrow segment of the general
population. We think that Article 1733 deliberately
refrained from making such distinctions.
It appears to the Court that private respondent is
properly characterized as a common carrier even though
he merely back-hauled goods for other merchants from
Manila to Pangasinan, although such backhauling was
done on a periodic, occasional rather than regular or
scheduled manner, and even though
respondents principaloccupation was not the carriage of
goods for others. There is no dispute that private
respondent charged his customers a fee for hauling their
goods; that the fee frequently fell below commercial
freight rates is not relevant here.
Under the Carriage of Goods by Sea Act :
Sec. 3. (1) The carrier shall be bound before and at the
beginning of the voyage to exercise due diligence to -
(a) Make the ship seaworthy;
(b) Properly man, equip, and supply the ship;
xxx xxx xxx
Thus, the carriers are deemed to warrant impliedly the
seaworthiness of the ship. For a vessel to be
seaworthy, it must be adequately equipped for the
voyage and manned with a sufficient number of
competent officers and crew. The failure of a common
carrier to maintain in seaworthy condition the vessel
involved in its contract of carriage is a clear breach of
its duty prescribed in Article 1755 of the Civil Code. [18]
The provisions owed their conception to the nature of
the business of common carriers. This business is
impressed with a special public duty. The public must of
necessity rely on the care and skill of common carriers
in the vigilance over the goods and safety of the
passengers, especially because with the modern
development of science and invention, transportation
has become more rapid, more complicated and
somehow more hazardous.[19] For these reasons, a
passenger or a shipper of goods is under no obligation to
conduct an inspection of the ship and its crew, the
carrier being obliged by law to impliedly warrant its
seaworthiness.
This aside, we now rule on whether Caltex is liable for
damages under the Civil Code.
Third: Is Caltex liable for damages under the Civil
Code?
We rule that it is not.
Sulpicio argues that Caltex negligently shipped its
highly combustible fuel cargo aboard an unseaworthy
vessel such as the MT Vector when Caltex:
1. Did not take steps to have M/T Vectors certificate of
inspection and coastwise license renewed;
2. Proceeded to ship its cargo despite defects found by
Mr. Carlos Tan of Bataan Refinery Corporation;
3. Witnessed M/T Vector submitting fake documents
and certificates to the Philippine Coast Guard.
Sulpicio further argues that Caltex chose MT Vector to
transport its cargo despite these deficiencies:
1. The master of M/T Vector did not posses the required
Chief Mate license to command and navigate the vessel;
2. The second mate, Ronaldo Tarife, had the license of a
Minor Patron, authorized to navigate only in bays and
rivers when the subject collision occurred in the open
sea;
3. The Chief Engineer, Filoteo Aguas, had no license to
operate the engine of the vessel;
4. The vessel did not have a Third Mate, a radio
operator and a lookout; and
5. The vessel had a defective main engine.[20]
As basis for the liability of Caltex, the Court of Appeals
relied on Articles 20 and 2176 of the Civil Code, which
provide:
Article 20. - Every person who contrary to law,
willfully or negligently causes damage to another, shall
indemnify the latter for the same.
Article 2176. - Whoever by act or omission causes
damage to another, there being fault or negligence, is
obliged to pay for the damage done. Such fault or
negligence, if there is no pre-existing contractual
relation between the parties, is called a quasi-delict and
is governed by the provisions of this Chapter.
And what is negligence?
The Civil Code provides:
Article 1173. The fault or negligence of the obligor
consists in the omission of that diligence which is
required by the nature of the obligation and corresponds
with the circumstances of the persons, of the time and of
the place. When negligence shows bad faith, the
provisions of Article 1171 and 2201 paragraph 2, shall
apply.
If the law does not state the diligence which is to be
observed in the performance, that which is expected of a
good father of a family shall be required.
In Southeastern College, Inc. vs. Court of
Appeals,[21] we said that negligence, as commonly
understood, is conduct which naturally or reasonably
creates undue risk or harm to others. It may be the
failure to observe that degree of care, precaution, and
vigilance, which the circumstances justly demand, or the
omission to do something which ordinarily regulate the
conduct of human affairs, would do.
The charterer of a vessel has no obligation before
transporting its cargo to ensure that the vessel it
56
chartered complied with all legal requirements. The duty
rests upon the common carrier simply for being engaged
in public service.[22] The Civil Code demands diligence
which is required by the nature of the obligation and that
which corresponds with the circumstances of the
persons, the time and the place. Hence, considering the
nature of the obligation between Caltex and MT Vector,
the liability as found by the Court of Appeals is without
basis.
The relationship between the parties in this case is
governed by special laws. Because of the implied
warranty of seaworthiness,[23] shippers of goods, when
transacting with common carriers, are not expected to
inquire into the vessels seaworthiness, genuineness of its
licenses and compliance with all maritime laws. To
demand more from shippers and hold them liable in case
of failure exhibits nothing but the futility of our
maritime laws insofar as the protection of the public in
general is concerned. By the same token, we cannot
expect passengers to inquire every time they board a
common carrier, whether the carrier possesses the
necessary papers or that all the carriers employees are
qualified. Such a practice would be an absurdity in a
business where time is always of the
essence. Considering the nature of transportation
business, passengers and shippers alike customarily
presume that common carriers possess all the legal
requisites in its operation.
Thus, the nature of the obligation of Caltex demands
ordinary diligence like any other shipper in shipping his
cargoes.
A cursory reading of the records convinces us that
Caltex had reasons to believe that MT Vector could
legally transport cargo that time of the year.
Atty. Poblador: Mr. Witness, I direct your attention to
this portion here containing the entries here
under VESSELS DOCUMENTS
1. Certificate of Inspection No. 1290-85, issued
December 21, 1986, and Expires December 7, 1987, Mr.
Witness, what steps did you take regarding the
impending expiry of the C.I. or the Certificate of
Inspection No. 1290-85 during the hiring of MT Vector?
Apolinar Ng: At the time when I extended the Contract,
I did nothing because the tanker has a valid C.I. which
will expire on December 7, 1987 but on the last week of
November, I called the attention of Mr. Abalos to ensure
that the C.I. be renewed and Mr. Abalos, in turn, assured
me they will renew the same.
Q: What happened after that?
A: On the first week of December, I again made a
follow-up from Mr. Abalos, and said they were going to
send me a copy as soon as possible, sir. [24]
xxx xxx xxx
Q: What did you do with the C.I.?
A: We did not insist on getting a copy of the C.I. from
Mr. Abalos on the first place, because of our long
business relation, we trust Mr. Abalos and the fact that
the vessel was able to sail indicates that the documents
are in order.xxx[25]
On cross examination -
Atty. Sarenas: This being the case, and this being an
admission by you, this Certificate of Inspection has
expired on December 7. Did it occur to you not to let the
vessel sail on that day because of the very approaching
date of expiration?
Apolinar Ng: No sir, because as I said before, the
operation Manager assured us that they were able to
secure a renewal of the Certificate of Inspection and that
they will in time submit us a copy.[26]
Finally, on Mr. Ngs redirect examination:
Atty. Poblador: Mr. Witness, were you aware of the
pending expiry of the Certificate of Inspection in the
coastwise license on December 7, 1987. What was your
assurance for the record that this document was renewed
by the MT Vector?
Atty. Sarenas: xxx
Atty. Poblador: The certificate of Inspection?
A: As I said, firstly, we trusted Mr. Abalos as he is a
long time business partner; secondly, those three years,
they were allowed to sail by the Coast Guard. That are
some that make me believe that they in fact were able to
secure the necessary renewal.
Q: If the Coast Guard clears a vessel to sail, what would
that mean?
Atty. Sarenas: Objection.
Court: He already answered that in the cross
examination to the effect that if it was allowed, referring
to MV Vector, to sail, where it is loaded and that it was
scheduled for a destination by the Coast Guard, it means
that it has Certificate of Inspection extended as assured
to this witness by Restituto Abalos. That in no case MV
Vector will be allowed to sail if the Certificate of
Inspection is, indeed, not to be extended. That was his
repeated explanation to the cross-examination. So, there
is no need to clarify the same in the re-direct
examination.[27]
Caltex and Vector Shipping Corporation had been doing
business since 1985, or for about two years before the
tragic incident occurred in 1987. Past services rendered
showed no reason for Caltex to observe a higher degree
of diligence.
Clearly, as a mere voyage charterer, Caltex had the right
to presume that the ship was seaworthy as even the
Philippine Coast Guard itself was convinced of its
seaworthiness. All things considered, we find no legal
basis to hold petitioner liable for damages.
As Vector Shipping Corporation did not appeal from the
Court of Appeals decision, we limit our ruling to the
liability of Caltex alone. However, we maintain the
Court of Appeals ruling insofar as Vector is concerned .
WHEREFORE, the Court hereby GRANTS the
petition and SETS ASIDE the decision of the Court of
Appeals in CA-G. R. CV No. 39626, promulgated on
April 15, 1997, insofar as it held Caltex liable under the
third party complaint to reimburse/indemnify defendant
Sulpicio Lines, Inc. the damages the latter is adjudged to
pay plaintiffs-appellees. The Court AFFIRMS the
decision of the Court of Appeals insofar as it orders
Sulpicio Lines, Inc. to pay the heirs of Sebastian E.
Caezal and Corazon Caezal damages as set forth
therein.Third-party defendant-appellee Vector Shipping
Corporation and Francisco Soriano are held liable to
reimburse/indemnify defendant Sulpicio Lines, Inc.
whatever damages, attorneys fees and costs the latter is
adjudged to pay plaintiffs-appellees in the case.
No costs in this instance.
SO ORDERED.

57
FIRST DIVISION
G.R. No. 101503 September 15, 1993
PLANTERS PRODUCTS, INC., petitioner,
vs.
COURT OF APPEALS, SORIAMONT
STEAMSHIP AGENCIES AND KYOSEI KISEN
KABUSHIKI KAISHA, respondents.
Gonzales, Sinense, Jimenez & Associates for petitioner.
Siguion Reyna, Montecillo & Ongsiako Law Office for
private respondents.
BELLOSILLO, J.:
Does a charter-party1 between a shipowner and a
charterer transform a common carrier into a private one
as to negate the civil law presumption of negligence in
case of loss or damage to its cargo?
Planters Products, Inc. (PPI), purchased from Mitsubishi
International Corporation (MITSUBISHI) of New York,
U.S.A., 9,329.7069 metric tons (M/T) of Urea 46%
fertilizer which the latter shipped in bulk on 16 June
1974 aboard the cargo vessel M/V "Sun Plum" owned
by private respondent Kyosei Kisen Kabushiki Kaisha
(KKKK) from Kenai, Alaska, U.S.A., to Poro Point, San
Fernando, La Union, Philippines, as evidenced by Bill
of Lading No. KP-1 signed by the master of the vessel
and issued on the date of departure.
On 17 May 1974, or prior to its voyage, a time charter-
party on the vessel M/V "Sun Plum" pursuant to the
Uniform General Charter2 was entered into between
Mitsubishi as shipper/charterer and KKKK as
shipowner, in Tokyo, Japan.3 Riders to the aforesaid
charter-party starting from par. 16 to 40 were attached to
the pre-printed agreement. Addenda Nos. 1, 2, 3 and 4
to the charter-party were also subsequently entered into
on the 18th, 20th, 21st and 27th of May 1974,
respectively.
Before loading the fertilizer aboard the vessel, four (4)
of her holds4 were all presumably inspected by the
charterer's representative and found fit to take a load of
urea in bulk pursuant to par. 16 of the charter-party
which reads:
16. . . . At loading port, notice of readiness to be
accomplished by certificate from National Cargo Bureau
inspector or substitute appointed by charterers for his
account certifying the vessel's readiness to receive cargo
spaces. The vessel's hold to be properly swept, cleaned
and dried at the vessel's expense and the vessel to be
presented clean for use in bulk to the satisfaction of the
58
inspector before daytime commences. (emphasis
supplied)
After the Urea fertilizer was loaded in bulk by
stevedores hired by and under the supervision of the
shipper, the steel hatches were closed with heavy iron
lids, covered with three (3) layers of tarpaulin, then tied
with steel bonds. The hatches remained closed and
tightly sealed throughout the entire voyage.5
Upon arrival of the vessel at her port of call on 3 July
1974, the steel pontoon hatches were opened with the
use of the vessel's boom. Petitioner unloaded the cargo
from the holds into its steelbodied dump trucks which
were parked alongside the berth, using metal scoops
attached to the ship, pursuant to the terms and
conditions of the charter-partly (which provided for an
F.I.O.S. clause).6 The hatches remained open throughout
the duration of the discharge.7
Each time a dump truck was filled up, its load of Urea
was covered with tarpaulin before it was transported to
the consignee's warehouse located some fifty (50)
meters from the wharf. Midway to the warehouse, the
trucks were made to pass through a weighing scale
where they were individually weighed for the purpose of
ascertaining the net weight of the cargo. The port area
was windy, certain portions of the route to the
warehouse were sandy and the weather was variable,
raining occasionally while the discharge was in
progress.8 The petitioner's warehouse was made of
corrugated galvanized iron (GI) sheets, with an opening
at the front where the dump trucks entered and unloaded
the fertilizer on the warehouse floor. Tarpaulins and GI
sheets were placed in-between and alongside the trucks
to contain spillages of the ferilizer.9
It took eleven (11) days for PPI to unload the cargo,
from 5 July to 18 July 1974 (except July 12th, 14th and
18th).10A private marine and cargo surveyor, Cargo
Superintendents Company Inc. (CSCI), was hired by
PPI to determine the "outturn" of the cargo shipped, by
taking draft readings of the vessel prior to and after
discharge. 11 The survey report submitted by CSCI to
the consignee (PPI) dated 19 July 1974 revealed a
shortage in the cargo of 106.726 M/T and that a portion
of the Urea fertilizer approximating 18 M/T was
contaminated with dirt. The same results were contained
in a Certificate of Shortage/Damaged Cargo dated 18
July 1974 prepared by PPI which showed that the cargo
delivered was indeed short of 94.839 M/T and about 23
M/T were rendered unfit for commerce, having been
polluted with sand, rust and
dirt. 12
Consequently, PPI sent a claim letter dated 18
December 1974 to Soriamont Steamship Agencies
(SSA), the resident agent of the carrier, KKKK, for
P245,969.31 representing the cost of the alleged
shortage in the goods shipped and the diminution in
value of that portion said to have been contaminated
with dirt. 13
Respondent SSA explained that they were not able to
respond to the consignee's claim for payment because,
according to them, what they received was just a request
for shortlanded certificate and not a formal claim, and
that this "request" was denied by them because they
"had nothing to do with the discharge of the
shipment." 14 Hence, on 18 July 1975, PPI filed an
action for damages with the Court of First Instance of
Manila. The defendant carrier argued that the strict
public policy governing common carriers does not apply
to them because they have become private carriers by
reason of the provisions of the charter-party. The court a
quo however sustained the claim of the plaintiff against
the defendant carrier for the value of the goods lost or
damaged when it ruled thus: 15
. . . Prescinding from the provision of the law that a
common carrier is presumed negligent in case of loss or
damage of the goods it contracts to transport, all that a
shipper has to do in a suit to recover for loss or damage
is to show receipt by the carrier of the goods and to
delivery by it of less than what it received. After that, the
burden of proving that the loss or damage was due to
any of the causes which exempt him from liability is
shipted to the carrier, common or private he may be.
Even if the provisions of the charter-party aforequoted
are deemed valid, and the defendants considered private
carriers, it was still incumbent upon them to prove that
the shortage or contamination sustained by the cargo is
attributable to the fault or negligence on the part of the
shipper or consignee in the loading, stowing, trimming
and discharge of the cargo. This they failed to do. By
this omission, coupled with their failure to destroy the
presumption of negligence against them, the defendants
are liable (emphasis supplied).
On appeal, respondent Court of Appeals reversed the
lower court and absolved the carrier from liability for
the value of the cargo that was lost or
damaged. 16 Relying on the 1968 case of Home
Insurance Co. v. American Steamship Agencies,
Inc.,17 the appellate court ruled that the cargo vessel
M/V "Sun Plum" owned by private respondent KKKK
was a private carrier and not a common carrier by
reason of the time charterer-party. Accordingly, the
Civil Code provisions on common carriers which set
forth a presumption of negligence do not find
application in the case at bar. Thus —
. . . In the absence of such presumption, it was
incumbent upon the plaintiff-appellee to adduce
sufficient evidence to prove the negligence of the
defendant carrier as alleged in its complaint. It is an old
and well settled rule that if the plaintiff, upon whom
rests the burden of proving his cause of action, fails to
show in a satisfactory manner the facts upon which he
bases his claim, the defendant is under no obligation to
prove his exception or defense (Moran, Commentaries
on the Rules of Court, Volume 6, p. 2, citing Belen v.
Belen, 13 Phil. 202).
But, the record shows that the plaintiff-appellee
dismally failed to prove the basis of its cause of action,
i.e. the alleged negligence of defendant carrier. It
appears that the plaintiff was under the impression that
it did not have to establish defendant's negligence. Be
that as it may, contrary to the trial court's finding, the
record of the instant case discloses ample evidence
showing that defendant carrier was not negligent in
performing its obligation . . . 18 (emphasis supplied).
Petitioner PPI appeals to us by way of a petition for
review assailing the decision of the Court of Appeals.
Petitioner theorizes that the Home Insurance case has no
bearing on the present controversy because the issue
raised therein is the validity of a stipulation in the
charter-party delimiting the liability of the shipowner
for loss or damage to goods cause by want of due
deligence on its part or that of its manager to make the
vessel seaworthy in all respects, and not whether the
presumption of negligence provided under the Civil
Code applies only to common carriers and not to private
carriers. 19 Petitioner further argues that since the
possession and control of the vessel remain with the
shipowner, absent any stipulation to the contrary, such
shipowner should made liable for the negligence of the
captain and crew. In fine, PPI faults the appellate court
in not applying the presumption of negligence against
respondent carrier, and instead shifting the onus
probandi on the shipper to show want of due deligence
on the part of the carrier, when he was not even at hand
to witness what transpired during the entire voyage.
As earlier stated, the primordial issue here is whether a
common carrier becomes a private carrier by reason of a
59
charter-party; in the negative, whether the shipowner in
the instant case was able to prove that he had exercised
that degree of diligence required of him under the law.
It is said that etymology is the basis of reliable judicial
decisions in commercial cases. This being so, we find it
fitting to first define important terms which are relevant
to our discussion.
A "charter-party" is defined as a contract by which an
entire ship, or some principal part thereof, is let by the
owner to another person for a specified time or use; 20 a
contract of affreightment by which the owner of a ship
or other vessel lets the whole or a part of her to a
merchant or other person for the conveyance of goods,
on a particular voyage, in consideration of the payment
of freight; 21 Charter parties are of two types: (a)
contract of affreightment which involves the use of
shipping space on vessels leased by the owner in part or
as a whole, to carry goods for others; and, (b) charter by
demise or bareboat charter, by the terms of which the
whole vessel is let to the charterer with a transfer to him
of its entire command and possession and consequent
control over its navigation, including the master and the
crew, who are his servants. Contract of affreightment
may either be time charter, wherein the vessel is leased
to the charterer for a fixed period of time, or voyage
charter, wherein the ship is leased for a single
voyage. 22 In both cases, the charter-party provides for
the hire of vessel only, either for a determinate period of
time or for a single or consecutive voyage, the
shipowner to supply the ship's stores, pay for the wages
of the master and the crew, and defray the expenses for
the maintenance of the ship.
Upon the other hand, the term "common or public
carrier" is defined in Art. 1732 of the Civil Code. 23 The
definition extends to carriers either by land, air or water
which hold themselves out as ready to engage in
carrying goods or transporting passengers or both for
compensation as a public employment and not as a
casual occupation. The distinction between a "common
or public carrier" and a "private or special carrier" lies in
the character of the business, such that if the
undertaking is a single transaction, not a part of the
general business or occupation, although involving the
carriage of goods for a fee, the person or corporation
offering such service is a private carrier. 24
Article 1733 of the New Civil Code mandates that
common carriers, by reason of the nature of their
business, should observe extraordinary diligence in the
vigilance over the goods they carry.25 In the case of
private carriers, however, the exercise of ordinary
diligence in the carriage of goods will suffice.
Moreover, in the case of loss, destruction or
deterioration of the goods, common carriers are
presumed to have been at fault or to have acted
negligently, and the burden of proving otherwise rests
on them.26 On the contrary, no such presumption applies
to private carriers, for whosoever alleges damage to or
deterioration of the goods carried has the onus of
proving that the cause was the negligence of the carrier.
It is not disputed that respondent carrier, in the ordinary
course of business, operates as a common carrier,
transporting goods indiscriminately for all persons.
When petitioner chartered the vessel M/V "Sun Plum",
the ship captain, its officers and compliment were under
the employ of the shipowner and therefore continued to
be under its direct supervision and control. Hardly then
can we charge the charterer, a stranger to the crew and
to the ship, with the duty of caring for his cargo when
the charterer did not have any control of the means in
doing so. This is evident in the present case considering
that the steering of the ship, the manning of the decks,
the determination of the course of the voyage and other
technical incidents of maritime navigation were all
consigned to the officers and crew who were screened,
chosen and hired by the shipowner. 27
It is therefore imperative that a public carrier shall
remain as such, notwithstanding the charter of the whole
or portion of a vessel by one or more persons, provided
the charter is limited to the ship only, as in the case of a
time-charter or voyage-charter. It is only when the
charter includes both the vessel and its crew, as in a
bareboat or demise that a common carrier becomes
private, at least insofar as the particular voyage covering
the charter-party is concerned. Indubitably, a shipowner
in a time or voyage charter retains possession and
control of the ship, although her holds may, for the
moment, be the property of the charterer. 28
Respondent carrier's heavy reliance on the case of Home
Insurance Co. v. American Steamship Agencies, supra,
is misplaced for the reason that the meat of the
controversy therein was the validity of a stipulation in
the charter-party exempting the shipowners from
liability for loss due to the negligence of its agent, and
not the effects of a special charter on common carriers.
At any rate, the rule in the United States that a ship
chartered by a single shipper to carry special cargo is
not a common carrier, 29 does not find application in our
jurisdiction, for we have observed that the growing
concern for safety in the transportation of passengers
and /or carriage of goods by sea requires a more
exacting interpretation of admiralty laws, more
particularly, the rules governing common carriers.
We quote with approval the observations of Raoul
Colinvaux, the learned barrister-at-law 30 —
As a matter of principle, it is difficult to find a valid
distinction between cases in which a ship is used to
convey the goods of one and of several persons. Where
the ship herself is let to a charterer, so that he takes over
the charge and control of her, the case is different; the
shipowner is not then a carrier. But where her services
only are let, the same grounds for imposing a strict
responsibility exist, whether he is employed by one or
many. The master and the crew are in each case his
servants, the freighter in each case is usually without
any representative on board the ship; the same
opportunities for fraud or collusion occur; and the same
difficulty in discovering the truth as to what has taken
place arises . . .
In an action for recovery of damages against a common
carrier on the goods shipped, the shipper or consignee
should first prove the fact of shipment and its
consequent loss or damage while the same was in the
possession, actual or constructive, of the carrier.
Thereafter, the burden of proof shifts to respondent to
prove that he has exercised extraordinary diligence
required by law or that the loss, damage or deterioration
of the cargo was due to fortuitous event, or some other
circumstances inconsistent with its liability. 31
To our mind, respondent carrier has sufficiently
overcome, by clear and convincing proof, the prima
faciepresumption of negligence.
The master of the carrying vessel, Captain Lee Tae Bo,
in his deposition taken on 19 April 1977 before the
Philippine Consul and Legal Attache in the Philippine
Embassy in Tokyo, Japan, testified that before the
fertilizer was loaded, the four (4) hatches of the vessel
were cleaned, dried and fumigated. After completing the
loading of the cargo in bulk in the ship's holds, the steel
pontoon hatches were closed and sealed with iron lids,
then covered with three (3) layers of serviceable
tarpaulins which were tied with steel bonds. The hatches
remained close and tightly sealed while the ship was in
transit as the weight of the steel covers made it
impossible for a person to open without the use of the
ship's boom. 32
It was also shown during the trial that the hull of the
vessel was in good condition, foreclosing the possibility
60
of spillage of the cargo into the sea or seepage of water
inside the hull of the vessel. 33 When M/V "Sun Plum"
docked at its berthing place, representatives of the
consignee boarded, and in the presence of a
representative of the shipowner, the foreman, the
stevedores, and a cargo surveyor representing CSCI,
opened the hatches and inspected the condition of the
hull of the vessel. The stevedores unloaded the cargo
under the watchful eyes of the shipmates who were
overseeing the whole operation on rotation basis. 34
Verily, the presumption of negligence on the part of the
respondent carrier has been efficaciously overcome by
the showing of extraordinary zeal and assiduity
exercised by the carrier in the care of the cargo. This
was confirmed by respondent appellate court thus —
. . . Be that as it may, contrary to the trial court's
finding, the record of the instant case discloses ample
evidence showing that defendant carrier was not
negligent in performing its obligations. Particularly, the
following testimonies of plaintiff-appellee's own
witnesses clearly show absence of negligence by the
defendant carrier; that the hull of the vessel at the time
of the discharge of the cargo was sealed and nobody
could open the same except in the presence of the owner
of the cargo and the representatives of the vessel (TSN,
20 July 1977, p. 14); that the cover of the hatches was
made of steel and it was overlaid with tarpaulins, three
layers of tarpaulins and therefore their contents were
protected from the weather (TSN, 5 April 1978, p. 24);
and, that to open these hatches, the seals would have to
be broken, all the seals were found to be intact (TSN, 20
July 1977, pp. 15-16) (emphasis supplied).
The period during which private respondent was to
observe the degree of diligence required of it as a public
carrier began from the time the cargo was
unconditionally placed in its charge after the vessel's
holds were duly inspected and passed scrutiny by the
shipper, up to and until the vessel reached its destination
and its hull was reexamined by the consignee, but prior
to unloading. This is clear from the limitation clause
agreed upon by the parties in the Addendum to the
standard "GENCON" time charter-party which provided
for an F.I.O.S., meaning, that the loading, stowing,
trimming and discharge of the cargo was to be done by
the charterer, free from all risk and expense to the
carrier. 35 Moreover, a shipowner is liable for damage to
the cargo resulting from improper stowage only when
the stowing is done by stevedores employed by him, and
therefore under his control and supervision, not when
the same is done by the consignee or stevedores under
the employ of the latter. 36
Article 1734 of the New Civil Code provides that
common carriers are not responsible for the loss,
destruction or deterioration of the goods if caused by the
charterer of the goods or defects in the packaging or in
the containers. The Code of Commerce also provides
that all losses and deterioration which the goods may
suffer during the transportation by reason of fortuitous
event, force majeure, or the inherent defect of the goods,
shall be for the account and risk of the shipper, and that
proof of these accidents is incumbent upon the
carrier. 37 The carrier, nonetheless, shall be liable for the
loss and damage resulting from the preceding causes if
it is proved, as against him, that they arose through his
negligence or by reason of his having failed to take the
precautions which usage has established among careful
persons. 38
Respondent carrier presented a witness who testified on
the characteristics of the fertilizer shipped and the
expected risks of bulk shipping. Mr. Estanislao
Chupungco, a chemical engineer working with Atlas
Fertilizer, described Urea as a chemical compound
consisting mostly of ammonia and carbon monoxide
compounds which are used as fertilizer. Urea also
contains 46% nitrogen and is highly soluble in water.
However, during storage, nitrogen and ammonia do not
normally evaporate even on a long voyage, provided
that the temperature inside the hull does not exceed
eighty (80) degrees centigrade. Mr. Chupungco further
added that in unloading fertilizer in bulk with the use of
a clamped shell, losses due to spillage during such
operation amounting to one percent (1%) against the bill
of lading is deemed "normal" or "tolerable." The
primary cause of these spillages is the clamped shell
which does not seal very tightly. Also, the wind tends to
blow away some of the materials during the unloading
process.
The dissipation of quantities of fertilizer, or its
daterioration in value, is caused either by an extremely
high temperature in its place of storage, or when it
comes in contact with water. When Urea is drenched in
water, either fresh or saline, some of its particles
dissolve. But the salvaged portion which is in liquid
form still remains potent and usable although no longer
saleable in its original market value.
The probability of the cargo being damaged or getting
mixed or contaminated with foreign particles was made
greater by the fact that the fertilizer was transported in
"bulk," thereby exposing it to the inimical effects of the
elements and the grimy condition of the various pieces
of equipment used in transporting and hauling it.
The evidence of respondent carrier also showed that it
was highly improbable for sea water to seep into the
vessel's holds during the voyage since the hull of the
vessel was in good condition and her hatches were
tightly closed and firmly sealed, making the M/V "Sun
Plum" in all respects seaworthy to carry the cargo she
was chartered for. If there was loss or contamination of
the cargo, it was more likely to have occurred while the
same was being transported from the ship to the dump
trucks and finally to the consignee's warehouse. This
may be gleaned from the testimony of the marine and
cargo surveyor of CSCI who supervised the unloading.
He explained that the 18 M/T of alleged "bar order
cargo" as contained in their report to PPI was just an
approximation or estimate made by them after the
fertilizer was discharged from the vessel and segregated
from the rest of the cargo.
The Court notes that it was in the month of July when
the vessel arrived port and unloaded her cargo. It rained
from time to time at the harbor area while the cargo was
being discharged according to the supply officer of PPI,
who also testified that it was windy at the waterfront and
along the shoreline where the dump trucks passed
enroute to the consignee's warehouse.
Indeed, we agree with respondent carrier that bulk
shipment of highly soluble goods like fertilizer carries
with it the risk of loss or damage. More so, with a
variable weather condition prevalent during its
unloading, as was the case at bar. This is a risk the
shipper or the owner of the goods has to face. Clearly,
respondent carrier has sufficiently proved the inherent
character of the goods which makes it highly vulnerable
to deterioration; as well as the inadequacy of its
packaging which further contributed to the loss. On the
other hand, no proof was adduced by the petitioner
showing that the carrier was remise in the exercise of
due diligence in order to minimize the loss or damage to
the goods it carried.
WHEREFORE, the petition is DISMISSED. The
assailed decision of the Court of Appeals, which
reversed the trial court, is AFFIRMED. Consequently,
Civil Case No. 98623 of the then Court of the First
Instance, now Regional Trial Court, of Manila should
be, as it is hereby DISMISSED.
Costs against petitioner.
SO ORDERED.

61
SECOND DIVISION
G.R. No. 148496 March 19, 2002
VIRGINES CALVO doing business under the name
and style TRANSORIENT CONTAINER
TERMINAL SERVICES, INC., petitioner,
vs.
UCPB GENERAL INSURANCE CO., INC.
(formerly Allied Guarantee Ins. Co., Inc.) respondent.
MENDOZA, J.:
This is a petition for review of the decision,1 dated May
31, 2001, of the Court of Appeals, affirming the
decision2 of the Regional Trial Court, Makati City,
Branch 148, which ordered petitioner to pay respondent,
as subrogee, the amount of P93,112.00 with legal
interest, representing the value of damaged cargo
handled by petitioner, 25% thereof as attorney's fees,
and the cost of the suit.1âwphi1.nêt
The facts are as follows:
Petitioner Virgines Calvo is the owner of Transorient
Container Terminal Services, Inc. (TCTSI), a sole
proprietorship customs broker. At the time material to
this case, petitioner entered into a contract with San
Miguel Corporation (SMC) for the transfer of 114 reels
of semi-chemical fluting paper and 124 reels of kraft
liner board from the Port Area in Manila to SMC's
warehouse at the Tabacalera Compound, Romualdez St.,
Ermita, Manila. The cargo was insured by respondent
UCPB General Insurance Co., Inc.
On July 14, 1990, the shipment in question, contained in
30 metal vans, arrived in Manila on board "M/V
Hayakawa Maru" and, after 24 hours, were unloaded
from the vessel to the custody of the arrastre operator,
Manila Port Services, Inc. From July 23 to July 25,
1990, petitioner, pursuant to her contract with SMC,
withdrew the cargo from the arrastre operator and
delivered it to SMC's warehouse in Ermita, Manila. On
July 25, 1990, the goods were inspected by Marine
Cargo Surveyors, who found that 15 reels of the semi-
chemical fluting paper were "wet/stained/torn" and 3
reels of kraft liner board were likewise torn. The
damage was placed at P93,112.00.
SMC collected payment from respondent UCPB under
its insurance contract for the aforementioned amount. In
turn, respondent, as subrogee of SMC, brought suit
against petitioner in the Regional Trial Court, Branch
148, Makati City, which, on December 20, 1995,
rendered judgment finding petitioner liable to
respondent for the damage to the shipment.
The trial court held:
62
It cannot be denied . . . that the subject cargoes sustained
damage while in the custody of defendants. Evidence
such as the Warehouse Entry Slip (Exh. "E"); the
Damage Report (Exh. "F") with entries appearing
therein, classified as "TED" and "TSN", which the
claims processor, Ms. Agrifina De Luna, claimed to be
tearrage at the end and tearrage at the middle of the
subject damaged cargoes respectively, coupled with the
Marine Cargo Survey Report (Exh. "H" - "H-4-A")
confirms the fact of the damaged condition of the
subject cargoes. The surveyor[s'] report (Exh. "H-4-A")
in particular, which provides among others that:
" . . . we opine that damages sustained by shipment is
attributable to improper handling in transit presumably
whilst in the custody of the broker . . . ."
is a finding which cannot be traversed and overturned.
The evidence adduced by the defendants is not enough
to sustain [her] defense that [she is] are not liable.
Defendant by reason of the nature of [her] business
should have devised ways and means in order to prevent
the damage to the cargoes which it is under obligation to
take custody of and to forthwith deliver to the
consignee. Defendant did not present any evidence on
what precaution [she] performed to prevent [the] said
incident, hence the presumption is that the moment the
defendant accepts the cargo [she] shall perform such
extraordinary diligence because of the nature of the
cargo.
....
Generally speaking under Article 1735 of the Civil
Code, if the goods are proved to have been lost,
destroyed or deteriorated, common carriers are
presumed to have been at fault or to have acted
negligently, unless they prove that they have observed
the extraordinary diligence required by law. The burden
of the plaintiff, therefore, is to prove merely that the
goods he transported have been lost, destroyed or
deteriorated. Thereafter, the burden is shifted to the
carrier to prove that he has exercised the extraordinary
diligence required by law. Thus, it has been held that the
mere proof of delivery of goods in good order to a
carrier, and of their arrival at the place of destination in
bad order, makes out a prima facie case against the
carrier, so that if no explanation is given as to how the
injury occurred, the carrier must be held responsible. It
is incumbent upon the carrier to prove that the loss was
due to accident or some other circumstances
inconsistent with its liability." (cited in Commercial
Laws of the Philippines by Agbayani, p. 31, Vol. IV,
1989 Ed.)
Defendant, being a customs brother, warehouseman and
at the same time a common carrier is supposed [to]
exercise [the] extraordinary diligence required by law,
hence the extraordinary responsibility lasts from the
time the goods are unconditionally placed in the
possession of and received by the carrier for
transportation until the same are delivered actually or
constructively by the carrier to the consignee or to the
person who has the right to receive the same.3
Accordingly, the trial court ordered petitioner to pay the
following amounts --
1. The sum of P93,112.00 plus interest;
2. 25% thereof as lawyer's fee;
3. Costs of suit.4
The decision was affirmed by the Court of Appeals on
appeal. Hence this petition for review on certiorari.
Petitioner contends that:
I. THE COURT OF APPEALS COMMITTED
SERIOUS AND REVERSIBLE ERROR [IN]
DECIDING THE CASE NOT ON THE EVIDENCE
PRESENTED BUT ON PURE SURMISES,
SPECULATIONS AND MANIFESTLY MISTAKEN
INFERENCE.
II. THE COURT OF APPEALS COMMITTED
SERIOUS AND REVERSIBLE ERROR IN
CLASSIFYING THE PETITIONER AS A COMMON
CARRIER AND NOT AS PRIVATE OR SPECIAL
CARRIER WHO DID NOT HOLD ITS SERVICES TO
THE PUBLIC.5
It will be convenient to deal with these contentions in
the inverse order, for if petitioner is not a common
carrier, although both the trial court and the Court of
Appeals held otherwise, then she is indeed not liable
beyond what ordinary diligence in the vigilance over the
goods transported by her, would require.6 Consequently,
any damage to the cargo she agrees to transport cannot
be presumed to have been due to her fault or negligence.
Petitioner contends that contrary to the findings of the
trial court and the Court of Appeals, she is not a
common carrier but a private carrier because, as a
customs broker and warehouseman, she does not
indiscriminately hold her services out to the public but
only offers the same to select parties with whom she
may contract in the conduct of her business.
The contention has no merit. In De Guzman v. Court of
Appeals,7 the Court dismissed a similar contention and
held the party to be a common carrier, thus -
The Civil Code defines "common carriers" in the
following terms:
"Article 1732. Common carriers are persons,
corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods
or both, by land, water, or air for compensation, offering
their services to the public."
The above article makes no distinction between one
whose principal business activity is the carrying of
persons or goods or both, and one who does such
carrying only as an ancillary activity . . . Article 1732
also carefully avoids making any distinction between a
person or enterprise offering transportation service on
a regular or scheduled basis and one offering such
service on an occasional, episodic or unscheduled
basis. Neither does Article 1732 distinguish between a
carrier offering its services to the "general public," i.e.,
the general community or population, and one who
offers services or solicits business only from a
narrow segment of the general population. We think that
Article 1732 deliberately refrained from making such
distinctions.
So understood, the concept of "common carrier" under
Article 1732 may be seen to coincide neatly with the
notion of "public service," under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at
least partially supplements the law on common carriers
set forth in the Civil Code. Under Section 13, paragraph
(b) of the Public Service Act, "public service" includes:
" x x x every person that now or hereafter may own,
operate, manage, or control in the Philippines, for hire
or compensation, with general or limited clientele,
whether permanent, occasional or accidental, and done
for general business purposes, any common
carrier, railroad, street railway, traction railway, subway
motor vehicle, either for freight or passenger, or both,
with or without fixed route and whatever may be its
classification, freight or carrier service of any class,
express service, steamboat, or steamship line, pontines,
ferries and water craft, engaged in the transportation of
passengers or freight or both, shipyard, marine repair
shop, wharf or dock, ice plant, ice-refrigeration plant,
canal, irrigation system, gas, electric light, heat and
power, water supply and power petroleum, sewerage
system, wire or wireless communications systems, wire
or wireless broadcasting stations and other similar
public services. x x x" 8
There is greater reason for holding petitioner to be a
common carrier because the transportation of goods is
63
an integral part of her business. To uphold petitioner's
contention would be to deprive those with whom she
contracts the protection which the law affords them
notwithstanding the fact that the obligation to carry
goods for her customers, as already noted, is part and
parcel of petitioner's business.
Now, as to petitioner's liability, Art. 1733 of the Civil
Code provides:
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. . . .
In Compania Maritima v. Court of Appeals,9 the
meaning of "extraordinary diligence in the vigilance
over goods" was explained thus:
The extraordinary diligence in the vigilance over the
goods tendered for shipment requires the common
carrier to know and to follow the required precaution for
avoiding damage to, or destruction of the goods
entrusted to it for sale, carriage and delivery. It requires
common carriers to render service with the greatest skill
and foresight and "to use all reasonable means to
ascertain the nature and characteristic of goods tendered
for shipment, and to exercise due care in the handling
and stowage, including such methods as their nature
requires."
In the case at bar, petitioner denies liability for the
damage to the cargo. She claims that the "spoilage or
wettage" took place while the goods were in the custody
of either the carrying vessel "M/V Hayakawa Maru,"
which transported the cargo to Manila, or the arrastre
operator, to whom the goods were unloaded and who
allegedly kept them in open air for nine days from July
14 to July 23, 1998 notwithstanding the fact that some
of the containers were deformed, cracked, or otherwise
damaged, as noted in the Marine Survey Report (Exh.
H), to wit:
MAXU-2062880 - rain gutter deformed/cracked
ICSU-363461-3 - left side rubber gasket on door
distorted/partly loose
PERU-204209-4 - with pinholes on roof panel
right portion
TOLU-213674-3 - wood flooring we[t] and/or
with signs of water soaked
MAXU-201406-0 - with dent/crack on roof panel
ICSU-412105-0 - rubber gasket on left side/door
panel partly detached loosened.10
In addition, petitioner claims that Marine Cargo
Surveyor Ernesto Tolentino testified that he has no
personal knowledge on whether the container vans were
first stored in petitioner's warehouse prior to their
delivery to the consignee. She likewise claims that after
withdrawing the container vans from the arrastre
operator, her driver, Ricardo Nazarro, immediately
delivered the cargo to SMC's warehouse in Ermita,
Manila, which is a mere thirty-minute drive from the
Port Area where the cargo came from. Thus, the damage
to the cargo could not have taken place while these were
in her custody.11
Contrary to petitioner's assertion, the Survey Report
(Exh. H) of the Marine Cargo Surveyors indicates that
when the shipper transferred the cargo in question to the
arrastre operator, these were covered by clean
Equipment Interchange Report (EIR) and, when
petitioner's employees withdrew the cargo from the
arrastre operator, they did so without exception or
protest either with regard to the condition of container
vans or their contents. The Survey Report pertinently
reads --
Details of Discharge:
Shipment, provided with our protective supervision was
noted discharged ex vessel to dock of Pier #13 South
Harbor, Manila on 14 July 1990, containerized onto 30'
x 20' secure metal vans, covered by clean EIRs. Except
for slight dents and paint scratches on side and roof
panels, these containers were deemed to have [been]
received in good condition.
....
Transfer/Delivery:
On July 23, 1990, shipment housed onto 30' x 20' cargo
containers was [withdrawn] by Transorient Container
Services, Inc. . . . without exception.
[The cargo] was finally delivered to the consignee's
storage warehouse located at Tabacalera Compound,
Romualdez Street, Ermita, Manila from July 23/25,
1990.12
As found by the Court of Appeals:
From the [Survey Report], it [is] clear that the shipment
was discharged from the vessel to the arrastre, Marina
Port Services Inc., in good order and condition as
evidenced by clean Equipment Interchange Reports
(EIRs). Had there been any damage to the shipment,
there would have been a report to that effect made by
the arrastre operator. The cargoes were withdrawn by
the defendant-appellant from the arrastre still in good
order and condition as the same were received by the
former without exception, that is, without any report of of goods in this case or that she is exempt from liability,
damage or loss. Surely, if the container vans were the presumption of negligence as provided under Art.
deformed, cracked, distorted or dented, the defendant- 173515 holds.
appellant would report it immediately to the consignee WHEREFORE, the decision of the Court of Appeals,
or make an exception on the delivery receipt or note the dated May 31, 2001, is AFFIRMED.1âwphi1.nêt
same in the Warehouse Entry Slip (WES). None of these SO ORDERED.
took place. To put it simply, the defendant-appellant
received the shipment in good order and condition and
delivered the same to the consignee damaged. We can
only conclude that the damages to the cargo occurred
while it was in the possession of the defendant-
appellant. Whenever the thing is lost (or damaged) in
the possession of the debtor (or obligor), it shall be
presumed that the loss (or damage) was due to his fault,
unless there is proof to the contrary. No proof was
proffered to rebut this legal presumption and the
presumption of negligence attached to a common carrier
in case of loss or damage to the goods.13
Anent petitioner's insistence that the cargo could not
have been damaged while in her custody as she
immediately delivered the containers to SMC's
compound, suffice it to say that to prove the exercise of
extraordinary diligence, petitioner must do more than
merely show the possibility that some other party could
be responsible for the damage. It must prove that it used
"all reasonable means to ascertain the nature and
characteristic of goods tendered for [transport] and that
[it] exercise[d] due care in the handling [thereof]."
Petitioner failed to do this.
Nor is there basis to exempt petitioner from liability
under Art. 1734(4), which provides --
Common carriers are responsible for the loss,
destruction, or deterioration of the goods, unless the
same is due to any of the following causes only:
....
(4) The character of the goods or defects in the packing
or in the containers.
....
For this provision to apply, the rule is that if the
improper packing or, in this case, the defect/s in the
container, is/are known to the carrier or his employees
or apparent upon ordinary observation, but he
nevertheless accepts the same without protest or
exception notwithstanding such condition, he is not
relieved of liability for damage resulting therefrom.14 In
this case, petitioner accepted the cargo without
exception despite the apparent defects in some of the
container vans. Hence, for failure of petitioner to prove
that she exercised extraordinary diligence in the carriage

64
[G.R. No. 149038. April 9, 2003]
PHILIPPINE AMERICAN GENERAL
INSURANCE COMPANY, petitioner, vs. PKS
SHIPPING COMPANY, respondent.
DECISION
VITUG, J.:
The petition before the Court seeks a review of the
decision of the Court of Appeals in C.A. G.R. CV No.
56470, promulgated on 25 June 2001, which has
affirmed in toto the judgment of the Regional Trial
Court (RTC), Branch 65, of Makati, dismissing the
complaint for damages filed by petitioner insurance
corporation against respondent shipping company.
Davao Union Marketing Corporation (DUMC)
contracted the services of respondent PKS Shipping
Company (PKS Shipping) for the shipment to Tacloban
City of seventy-five thousand (75,000) bags of cement
worth Three Million Three Hundred Seventy-Five
Thousand Pesos (P3,375,000.00). DUMC insured the
goods for its full value with petitioner Philippine
American General Insurance Company
(Philamgen). The goods were loaded aboard the dumb
barge Limar Ibelonging to PKS Shipping. On the
evening of 22 December 1988, about nine oclock,
while Limar Iwas being towed by respondents
tugboat, MT Iron Eagle, the barge sank a couple of
miles off the coast of Dumagasa Point, in Zamboanga
del Sur, bringing down with it the entire cargo of 75,000
bags of cement.
DUMC filed a formal claim with Philamgen for the full
amount of the insurance. Philamgen promptly made
payment; it then sought reimbursement from PKS
Shipping of the sum paid to DUMC but the shipping
company refused to pay, prompting Philamgen to file
suit against PKS Shipping with the Makati RTC.
The RTC dismissed the complaint after finding that the
total loss of the cargo could have been caused either by
a fortuitous event, in which case the ship owner was not
liable, or through the negligence of the captain and crew
of the vessel and that, under Article 587 of the Code of
Commerce adopting the Limited Liability Rule, the ship
owner could free itself of liability by abandoning, as it
apparently so did, the vessel with all her equipment and
earned freightage.
Philamgen interposed an appeal to the Court of Appeals
which affirmed in toto the decision of the trial
court. The appellate court ruled that evidence to
establish that PKS Shipping was a common carrier at
the time it undertook to transport the bags of cement
65
was wanting because the peculiar method of the
shipping companys carrying goods for others was not
generally held out as a business but as a casual
occupation. It then concluded that PKS Shipping, not
being a common carrier, was not expected to observe
the stringent extraordinary diligence required of
common carriers in the care of goods. The appellate
court, moreover, found that the loss of the goods was
sufficiently established as having been due to fortuitous
event, negating any liability on the part of PKS Shipping
to the shipper.
In the instant appeal, Philamgen contends that the
appellate court has committed a patent error in ruling
that PKS Shipping is not a common carrier and that it is
not liable for the loss of the subject cargo. The fact that
respondent has a limited clientele, petitioner argues,
does not militate against respondents being a common
carrier and that the only way by which such carrier can
be held exempt for the loss of the cargo would be if the
loss were caused by natural disaster or
calamity. Petitioner avers that typhoon "APIANG" has
not entered the Philippine area of responsibility and that,
even if it did, respondent would not be exempt from
liability because its employees, particularly the
tugmaster, have failed to exercise due diligence to
prevent or minimize the loss.
PKS Shipping, in its comment, urges that the petition
should be denied because what Philamgen seeks is not a
review on points or errors of law but a review of the
undisputed factual findings of the RTC and the appellate
court. In any event, PKS Shipping points out, the
findings and conclusions of both courts find support
from the evidence and applicable jurisprudence.
The determination of possible liability on the part of
PKS Shipping boils down to the question of whether it
is a private carrier or a common carrier and, in either
case, to the other question of whether or not it has
observed the proper diligence (ordinary, if a private
carrier, or extraordinary, if a common carrier) required
of it given the circumstances.
The findings of fact made by the Court of Appeals,
particularly when such findings are consistent with
those of the trial court, may not at liberty be reviewed
by this Court in a petition for review under Rule 45 of
the Rules of Court.[1] The conclusions derived from
those factual findings, however, are not necessarily just
matters of fact as when they are so linked to, or
inextricably intertwined with, a requisite appreciation of
the applicable law. In such instances, the conclusions
made could well be raised as being appropriate issues in
a petition for review before this Court. Thus, an issue
whether a carrier is private or common on the basis of
the facts found by a trial court or the appellate court can
be a valid and reviewable question of law.
The Civil Code defines common carriers in the
following terms:
Article 1732. Common carriers are persons,
corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods
or both, by land, water, or air for compensation, offering
their services to the public.
Complementary to the codal definition is Section 13,
paragraph (b), of the Public Service Act; it defines
public service to be
x x x every person that now or hereafter may own,
operate, manage, or control in the Philippines, for hire
or compensation, with general or limited clientele,
whether permanent, occasional or accidental, and done
for general business purposes, any common carrier,
railroad, street railway, subway motor vehicle, either for
freight or passenger, or both, with or without fixed route
and whatever may be its classification, freight or carrier
service of any class, express service, steamboat, or
steamship, or steamship line, pontines, ferries and water
craft, engaged in the transportation of passengers or
freight or both, shipyard, marine repair shop, wharf or
dock, ice plant, ice refrigeration plant, canal, irrigation
system, gas, electric light, heat and power, water supply
and power petroleum, sewerage system, wire or wireless
communication systems, wire or wireless broadcasting
stations and other similar public services. x x
x. (Underscoring supplied).
The prevailing doctrine on the question is that
enunciated in the leading case of De Guzman vs. Court
of Appeals.[2] Applying Article 1732 of the Code, in
conjunction with Section 13(b) of the Public Service
Act, this Court has held:
The above article makes no distinction between one
whose principal business activity is the carrying of
persons or goods or both, and one who does such
carrying only as an ancillary activity (in local idiom, as
`a sideline).Article 1732 also carefully avoids making
any distinction between a person or enterprise offering
transportation service on a regular or scheduled
basis and one offering such service on an occasional,
episodic or unscheduled basis. Neither does Article
1732 distinguish between a carrier offering its services
to the `general public, i.e., the general community or
population, and one who offers services or solicits
business only from a narrow segment of the general
population. We think that Article 1732 deliberately
refrained from making such distinctions.
So understood, the concept of `common carrier under
Article 1732 may be seen to coincide neatly with the
notion of `public service, under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at
least partially supplements the law on common carriers
set forth in the Civil Code.
Much of the distinction between a common or public
carrier and a private or special carrier lies in the
character of the business, such that if the undertaking is
an isolated transaction, not a part of the business or
occupation, and the carrier does not hold itself out to
carry the goods for the general public or to a limited
clientele, although involving the carriage of goods for a
fee,[3] the person or corporation providing such service
could very well be just a private carrier. A typical case
is that of a charter party which includes both the vessel
and its crew, such as in a bareboat or demise, where the
charterer obtains the use and service of all or some part
of a ship for a period of time or a voyage or
voyages[4] and gets the control of the vessel and its
crew.[5] Contrary to the conclusion made by the
appellate court, its factual findings indicate that PKS
Shipping has engaged itself in the business of carrying
goods for others, although for a limited clientele,
undertaking to carry such goods for a fee.The regularity
of its activities in this area indicates more than just a
casual activity on its part.[6]Neither can the concept of a
common carrier change merely because individual
contracts are executed or entered into with patrons of
the carrier. Such restrictive interpretation would make it
easy for a common carrier to escape liability by the
simple expedient of entering into those distinct
agreements with clients.
Addressing now the issue of whether or not PKS
Shipping has exercised the proper diligence demanded
of common carriers, Article 1733 of the Civil Code
requires common carriers to observe extraordinary
diligence in the vigilance over the goods they carry. In
case of loss, destruction or deterioration of goods,
common carriers are presumed to have been at fault or
to have acted negligently, and the burden of proving
otherwise rests on them.[7] The provisions of Article
1733, notwithstanding, common carriers are exempt
from liability for loss, destruction, or deterioration of the
goods due to any of the following causes:
66
(1) Flood, storm, earthquake, lightning, or other natural WHEREFORE, the petition is DENIED. No costs.
disaster or calamity; SO ORDERED.
(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; and
(5) Order or act of competent public authority.[8]
The appellate court ruled, gathered from the testimonies
and sworn marine protests of the respective vessel
masters of Limar I and MT Iron Eagle, that there was no
way by which the barges or the tugboats crew could
have prevented the sinking of Limar I. The vessel was
suddenly tossed by waves of extraordinary height of six
(6) to eight (8) feet and buffeted by strong winds of 1.5
knots resulting in the entry of water into the barges
hatches. The official Certificate of Inspection of the
barge issued by the Philippine Coastguard and the
Coastwise Load Line Certificate would attest to the
seaworthiness of Limar I and should strengthen the
factual findings of the appellate court.
Findings of fact of the Court of Appeals generally
conclude this Court; none of the recognized exceptions
from the rule - (1) when the factual findings of the Court
of Appeals and the trial court are contradictory;
(2) when the conclusion is a finding grounded entirely
on speculation, surmises, or conjectures; (3) when the
inference made by the Court of Appeals from its
findings of fact is manifestly mistaken, absurd, or
impossible; (4) when there is a grave abuse of discretion
in the appreciation of facts; (5) when the appellate court,
in making its findings, went beyond the issues of the
case and such findings are contrary to the admissions of
both appellant and appellee; (6) when the judgment of
the Court of Appeals is premised on a misapprehension
of facts; (7) when the Court of Appeals failed to notice
certain relevant facts which, if properly considered,
would justify a different conclusion; (8) when the
findings of fact are themselves conflicting; (9) when the
findings of fact are conclusions without citation of the
specific evidence on which they are based; and
(10) when the findings of fact of the Court of Appeals
are premised on the absence of evidence but such
findings are contradicted by the evidence on record
would appear to be clearly extant in this instance.
All given then, the appellate court did not err in its
judgment absolving PKS Shipping from liability for the
loss of the DUMC cargo.
THIRD DIVISION
[G.R. No. 147246. August 19, 2003]
ASIA LIGHTERAGE AND SHIPPING,
INC., petitioner, vs. COURT OF APPEALS and
PRUDENTIAL GUARANTEE AND ASSURANCE,
INC., respondents.
DECISION
PUNO, J.:
On appeal is the Court of Appeals May 11, 2000
Decision[1] in CA-G.R. CV No. 49195 and February 21,
2001 Resolution[2] affirming with modification the April
6, 1994 Decision[3] of the Regional Trial Court of
Manila which found petitioner liable to pay private
respondent the amount of indemnity and attorney's fees.
First, the facts.
On June 13, 1990, 3,150 metric tons of Better Western
White Wheat in bulk, valued at US$423,192.35[4] was
shipped by Marubeni American Corporation of
Portland, Oregon on board the vessel M/V NEO
CYMBIDIUM V-26 for delivery to the consignee,
General Milling Corporation in Manila, evidenced by
Bill of Lading No. PTD/Man-4.[5] The shipment was
insured by the private respondent Prudential Guarantee
and Assurance, Inc. against loss or damage
for P14,621,771.75 under Marine Cargo Risk Note RN
11859/90.[6]
On July 25, 1990, the carrying vessel arrived in Manila
and the cargo was transferred to the custody of the
petitioner Asia Lighterage and Shipping, Inc. The
petitioner was contracted by the consignee as carrier to
deliver the cargo to consignee's warehouse at Bo.
Ugong, Pasig City.
On August 15, 1990, 900 metric tons of the shipment
was loaded on barge PSTSI III, evidenced by Lighterage
Receipt No. 0364[7] for delivery to consignee. The cargo
did not reach its destination.
It appears that on August 17, 1990, the transport of said
cargo was suspended due to a warning of an incoming
typhoon. On August 22, 1990, the petitioner proceeded
to pull the barge to Engineering Island off Baseco to
seek shelter from the approaching typhoon. PSTSI III
was tied down to other barges which arrived ahead of it
while weathering out the storm that night. A few days
after, the barge developed a list because of a hole it
sustained after hitting an unseen protuberance
underneath the water. The petitioner filed a Marine
Protest on August 28, 1990.[8] It likewise secured the
services of Gaspar Salvaging Corporation which
67
refloated the barge.[9] The hole was then patched with
clay and cement.
The barge was then towed to ISLOFF terminal before it
finally headed towards the consignee's wharf on
September 5, 1990. Upon reaching the Sta. Mesa
spillways, the barge again ran aground due to strong
current. To avoid the complete sinking of the barge, a
portion of the goods was transferred to three other
barges.[10]
The next day, September 6, 1990, the towing bits of the
barge broke. It sank completely, resulting in the total
loss of the remaining cargo.[11] A second Marine Protest
was filed on September 7, 1990.[12]
On September 14, 1990, a bidding was conducted to
dispose of the damaged wheat retrieved and loaded on
the three other barges.[13] The total proceeds from the
sale of the salvaged cargo was P201,379.75.[14]
On the same date, September 14, 1990, consignee sent a
claim letter to the petitioner, and another letter dated
September 18, 1990 to the private respondent for the
value of the lost cargo.
On January 30, 1991, the private respondent
indemnified the consignee in the amount
of P4,104,654.22.[15] Thereafter, as subrogee, it sought
recovery of said amount from the petitioner, but to no
avail.
On July 3, 1991, the private respondent filed a
complaint against the petitioner for recovery of the
amount of indemnity, attorney's fees and cost of
suit.[16] Petitioner filed its answer with counterclaim.[17]
The Regional Trial Court ruled in favor of the private
respondent. The dispositive portion of its Decision
states:
WHEREFORE, premises considered, judgment is
hereby rendered ordering defendant Asia Lighterage &
Shipping, Inc. liable to pay plaintiff Prudential
Guarantee & Assurance Co., Inc. the sum
of P4,104,654.22 with interest from the date complaint
was filed on July 3, 1991 until fully satisfied plus 10%
of the amount awarded as and for attorney's
fees. Defendant's counterclaim is hereby
DISMISSED. With costs against defendant.[18]
Petitioner appealed to the Court of Appeals insisting that
it is not a common carrier. The appellate court affirmed
the decision of the trial court with modification. The
dispositive portion of its decision reads:
WHEREFORE, the decision appealed from is hereby
AFFIRMED with modification in the sense that the
salvage value of P201,379.75 shall be deducted from the
amount of P4,104,654.22. Costs against appellant.
SO ORDERED.
Petitioners Motion for Reconsideration dated June 3,
2000 was likewise denied by the appellate court in a
Resolution promulgated on February 21, 2001.
Hence, this petition. Petitioner submits the following
errors allegedly committed by the appellate court, viz:[19]
(1) THE COURT OF APPEALS DECIDED THE
CASE A QUO IN A WAY NOT IN ACCORD WITH
LAW AND/OR WITH THE APPLICABLE
DECISIONS OF THE SUPREME COURT WHEN IT
HELD THAT PETITIONER IS A COMMON
CARRIER.
(2) THE COURT OF APPEALS DECIDED THE
CASE A QUO IN A WAY NOT IN ACCORD WITH
LAW AND/OR WITH THE APPLICABLE
DECISIONS OF THE SUPREME COURT WHEN IT
AFFIRMED THE FINDING OF THE LOWER
COURT A QUO THAT ON THE BASIS OF THE
PROVISIONS OF THE CIVIL CODE APPLICABLE
TO COMMON CARRIERS, THE LOSS OF THE
CARGO IS, THEREFORE, BORNE BY THE CARRIER
IN ALL CASES EXCEPT IN THE FIVE (5) CASES
ENUMERATED.
(3) THE COURT OF APPEALS DECIDED THE
CASE A QUO IN A WAY NOT IN ACCORD WITH
LAW AND/OR WITH THE APPLICABLE
DECISIONS OF THE SUPREME COURT WHEN IT
EFFECTIVELY CONCLUDED THAT PETITIONER
FAILED TO EXERCISE DUE DILIGENCE AND/OR
WAS NEGLIGENT IN ITS CARE AND CUSTODY
OF THE CONSIGNEES CARGO.
The issues to be resolved are:
(1) Whether the petitioner is a common carrier; and,
(2) Assuming the petitioner is a common carrier,
whether it exercised extraordinary diligence in its care
and custody of the consignees cargo.
On the first issue, we rule that petitioner is a common
carrier.
Article 1732 of the Civil Code defines common
carriers as persons, corporations, firms or associations
engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public.
Petitioner contends that it is not a common carrier but a
private carrier. Allegedly, it has no fixed and publicly
known route, maintains no terminals, and issues no
tickets. It points out that it is not obliged to carry
indiscriminately for any person. It is not bound to carry
goods unless it consents. In short, it does not hold out its
services to the general public.[20]
We disagree.
In De Guzman vs. Court of Appeals,[21] we held that
the definition of common carriers in Article 1732 of the
Civil Code makes no distinction between one whose
principal business activity is the carrying of persons or
goods or both, and one who does such carrying only as
an ancillary activity.We also did not distinguish between
a person or enterprise offering transportation service on
a regular or scheduled basis and one offering such
service on an occasional, episodic or unscheduled
basis. Further, we ruled that Article 1732 does not
distinguish between a carrier offering its services to
the general public, and one who offers services or
solicits business only from a narrow segment of the
general population.
In the case at bar, the principal business of the petitioner
is that of lighterage and drayage[22] and it offers its
barges to the public for carrying or transporting goods
by water for compensation.Petitioner is clearly a
common carrier. In De Guzman, supra,[23] we
considered private respondent Ernesto Cendaa to be a
common carrier even if his principal occupation was not
the carriage of goods for others, but that of buying used
bottles and scrap metal in Pangasinan and selling these
items in Manila.
We therefore hold that petitioner is a common carrier
whether its carrying of goods is done on an irregular
rather than scheduled manner, and with an only limited
clientele. A common carrier need not have fixed and
publicly known routes. Neither does it have to maintain
terminals or issue tickets.
To be sure, petitioner fits the test of a common carrier as
laid down in Bascos vs. Court of Appeals.[24] The test
to determine a common carrier is whether the given
undertaking is a part of the business engaged in by the
carrier which he has held out to the general public as his
occupation rather than the quantity or extent of the
business transacted.[25] In the case at bar, the petitioner
admitted that it is engaged in the business of shipping
and lighterage,[26] offering its barges to the public,
despite its limited clientele for carrying or transporting
goods by water for compensation.[27]
On the second issue, we uphold the findings of the
lower courts that petitioner failed to exercise
extraordinary diligence in its care and custody of the
consignees goods.
68
Common carriers are bound to observe extraordinary
diligence in the vigilance over the goods transported by
them.[28] They are presumed to have been at fault or to
have acted negligently if the goods are lost, destroyed or
deteriorated.[29] To overcome the presumption of
negligence in the case of loss, destruction or
deterioration of the goods, the common carrier must
prove that it exercised extraordinary diligence. There
are, however, exceptions to this rule. Article 1734 of the
Civil Code enumerates the instances when the
presumption of negligence does not attach:
Art. 1734. Common carriers are responsible for the loss,
destruction, or deterioration of the goods, unless the
same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning, or other natural
disaster or calamity;
(2) Act of the public enemy in war, whether
international or civil;
(3) Act or omission of the shipper or owner of the
goods;
(4) The character of the goods or defects in the packing
or in the containers;
(5) Order or act of competent public authority.
In the case at bar, the barge completely sank after its
towing bits broke, resulting in the total loss of its
cargo. Petitioner claims that this was caused by a
typhoon, hence, it should not be held liable for the loss
of the cargo. However, petitioner failed to prove that the
typhoon is the proximate and only cause of the loss of
the goods, and that it has exercised due diligence before,
during and after the occurrence of the typhoon to
prevent or minimize the loss.[30] The evidence show that,
even before the towing bits of the barge broke, it had
already previously sustained damage when it hit a
sunken object while docked at the Engineering Island. It
even suffered a hole. Clearly, this could not be solely
attributed to the typhoon. The partly-submerged vessel
was refloated but its hole was patched with only clay
and cement. The patch work was merely a provisional
remedy, not enough for the barge to sail safely. Thus,
when petitioner persisted to proceed with the voyage, it
recklessly exposed the cargo to further damage. A
portion of the cross-examination of Alfredo Cunanan,
cargo-surveyor of Tan-Gatue Adjustment Co., Inc.,
states:
CROSS-EXAMINATION BY ATTY. DONN LEE:[31]
xxxxxxxxx
q - Can you tell us what else transpired after that
incident?
a - After the first accident, through the initiative of the
barge owners, they tried to pull out the barge from the
place of the accident, and bring it to the anchor terminal
for safety, then after deciding if the vessel is stabilized,
they tried to pull it to the consignees warehouse, now
while on route another accident occurred, now this time
the barge totally hitting something in the course.
q - You said there was another accident, can you tell the
court the nature of the second accident?
a - The sinking, sir.
q - Can you tell the nature . . . can you tell the court, if
you know what caused the sinking?
a - Mostly it was related to the first accident because
there was already a whole (sic) on the bottom part of the
barge.
xxxxxxxxx
This is not all. Petitioner still headed to the consignees
wharf despite knowledge of an incoming
typhoon. During the time that the barge was heading
towards the consignee's wharf on September 5, 1990,
typhoon Loleng has already entered the Philippine area
of responsibility.[32] A part of the testimony of Robert
Boyd, Cargo Operations Supervisor of the petitioner,
reveals:
DIRECT-EXAMINATION BY ATTY. LEE:[33]
xxxxxxxxx
q - Now, Mr. Witness, did it not occur to you it might be
safer to just allow the Barge to lie where she was instead
of towing it?
a - Since that time that the Barge was refloated, GMC
(General Milling Corporation, the consignee) as I have
said was in a hurry for their goods to be delivered at
their Wharf since they needed badly the wheat that was
loaded in PSTSI-3. It was needed badly by the
consignee.
q - And this is the reason why you towed the Barge as
you did?
a - Yes, sir.
xxxxxxxxx
CROSS-EXAMINATION BY ATTY. IGNACIO:[34]
xxxxxxxxx
q - And then from ISLOFF Terminal you proceeded to
the premises of the GMC? Am I correct?
a - The next day, in the morning, we hired for additional
two (2) tugboats as I have stated.
q - Despite of the threats of an incoming typhoon as you
testified a while ago?
a - It is already in an inner portion of Pasig River. The
typhoon would be coming and it would be dangerous if
we are in the vicinity of Manila Bay.
q - But the fact is, the typhoon was incoming? Yes or
no?
a - Yes.
q - And yet as a standard operating procedure of your
Company, you have to secure a sort of Certification to
determine the weather condition, am I correct?
a - Yes, sir.
q - So, more or less, you had the knowledge of the
incoming typhoon, right?
a - Yes, sir.
q - And yet you proceeded to the premises of the GMC?
a - ISLOFF Terminal is far from Manila Bay and
anytime even with the typhoon if you are already inside
the vicinity or inside Pasig entrance, it is a safe place to
tow upstream.
Accordingly, the petitioner cannot invoke the
occurrence of the typhoon as force majeure to escape
liability for the loss sustained by the private
respondent. Surely, meeting a typhoon head-on falls
short of due diligence required from a common
carrier. More importantly, the officers/employees
themselves of petitioner admitted that when the towing
bits of the vessel broke that caused its sinking and the
total loss of the cargo upon reaching the Pasig River, it
was no longer affected by the typhoon. The typhoon
then is not the proximate cause of the loss of the cargo;
a human factor, i.e., negligence had intervened.
IN VIEW THEREOF, the petition is DENIED. The
Decision of the Court of Appeals in CA-G.R. CV No.
49195 dated May 11, 2000 and its Resolution dated
February 21, 2001 are hereby AFFIRMED.Costs against
petitioner.
SO ORDERED.

69
THIRD DIVISION Matute stayed at the Resort from September 8 to 11,
2000. He was originally scheduled to leave the Resort in
the afternoon of September 10, 2000, but was advised to
SPOUSES DANTE CRUZ and stay for another night because of strong winds and
G.R. No. 186312
LEONORA CRUZ, heavy rains.
Petitioners, Present:
On September 11, 2000, as it was still windy, Matute
CARPIO MORALES,
and 25 otherJ.,Resort guests including petitioners son and
Chairperson,
his wife trekked to the other side of
BRION, the Coco Beach mountain that was sheltered from the
- versus - BERSAMIN, wind where they boarded M/B Coco Beach III, which
ABAD,* andwas to ferry them to Batangas.
SUN HOLIDAYS, INC., VILLARAMA, JR., JJ.
Respondent. Shortly after the boat sailed, it started to rain. As it
Promulgated:
moved farther away from Puerto Galera and into the
June 29, 2010
open seas, the rain and wind got stronger, causing the
boat to tilt from side to side and the captain to step
x-------------------------------------- forward to the front, leaving the wheel to one of the
-----------x crew members.
The waves got more unwieldy. After getting hit by two
big waves which came one after the other, M/B Coco
DECISION Beach III capsized putting all passengers underwater.
The passengers, who had put on their life jackets,
struggled to get out of the boat. Upon seeing the captain,
CARPIO MORALES, J.: Matute and the other passengers who reached the
surface asked him what they could do to save the people
Spouses Dante and Leonora Cruz (petitioners) lodged a who were still trapped under the boat. The captain
Complaint on January 25, 2001[1]against Sun Holidays, replied Iligtas niyo na lang ang sarili niyo (Just save
Inc. (respondent) with the Regional Trial Court (RTC) yourselves).
of Pasig City for damages arising from the death of their
son Ruelito C. Cruz (Ruelito) who perished with his Help came after about 45 minutes when two boats
wife on September 11, 2000 on board the boat M/B owned by Asia Divers in Sabang, Puerto Galera passed
Coco Beach III that capsized en route to Batangas from by the capsized M/B Coco Beach III. Boarded on those
Puerto Galera, Oriental Mindoro where the couple had two boats were 22 persons, consisting of 18 passengers
stayed at Coco Beach Island Resort (Resort) owned and and four crew members, who were brought
operated by respondent. to Pisa Island.Eight passengers, including petitioners
son and his wife, died during the incident.
The stay of the newly wed Ruelito and his wife at the
Resort from September 9 to 11, 2000 was by virtue of a At the time of Ruelitos death, he was 28 years old and
tour package-contract with respondent that included employed as a contractual worker for Mitsui
transportation to and from the Resort and the point of Engineering & Shipbuilding Arabia, Ltd. in Saudi
departure in Batangas. Arabia, with a basic monthly salary of $900.[3]
Petitioners, by letter of October 26, 2000,[4] demanded
Miguel C. Matute (Matute),[2] a scuba diving instructor indemnification from respondent for the death of their
and one of the survivors, gave his account of the son in the amount of at least P4,000,000.
incident that led to the filing of the complaint as
follows: Replying, respondent, by letter dated November 7,
2000,[5] denied any responsibility for the incident which
70
it considered to be a fortuitous event. It nevertheless
offered, as an act of commiseration, the amount
of P10,000 to petitioners upon their signing of a waiver.
As petitioners declined respondents offer, they filed the
Complaint, as earlier reflected, alleging that respondent,
as a common carrier, was guilty of negligence in
allowing M/B Coco Beach III to sail notwithstanding
storm warning bulletins issued by the Philippine
Atmospheric, Geophysical and Astronomical Services
Administration (PAGASA) as early as 5:00 a.m. of
September 11, 2000.[6]
In its Answer,[7] respondent denied being a common
carrier, alleging that its boats are not available to the
general public as they only ferry Resort guests and crew
members. Nonetheless, it claimed that it exercised the
utmost diligence in ensuring the safety of its passengers;
contrary to petitioners allegation, there was no storm
on September 11, 2000 as the Coast Guard in fact
cleared the voyage; and M/B Coco Beach III was not
filled to capacity and had sufficient life jackets for its
passengers. By way of Counterclaim, respondent alleged
that it is entitled to an award for attorneys fees and
litigation expenses amounting to not less than P300,000.
Carlos Bonquin, captain of M/B Coco Beach III, averred
that the Resort customarily requires four conditions to
be met before a boat is allowed to sail, to wit: (1) the sea
is calm, (2) there is clearance from the Coast Guard, (3)
there is clearance from the captain and (4) there is
clearance from the Resorts assistant manager.[8] He
added that M/B Coco Beach III met all four conditions
on September 11, 2000,[9] but a subasco or squall,
characterized by strong winds and big waves, suddenly
occurred, causing the boat to capsize.[10]
By Decision of February 16, 2005,[11] Branch 267 of the
Pasig RTC dismissed petitioners Complaint and
respondents Counterclaim.
Petitioners Motion for Reconsideration having been
denied by Order dated September 2, 2005,[12] they
appealed to the Court of Appeals.
By Decision of August 19, 2008,[13] the appellate court
denied petitioners appeal, holding, among other things,
that the trial court correctly ruled that respondent is a
private carrier which is only required to observe
ordinary diligence; that respondent in fact observed
extraordinary diligence in transporting its guests on
board M/B Coco Beach III; and that the proximate cause
of the incident was a squall, a fortuitous event.
Petitioners Motion for Reconsideration having been
denied by Resolution dated January 16, 2009,[14] they
filed the present Petition for Review.[15]
Petitioners maintain the position they took before the
trial court, adding that respondent is a common carrier
since by its tour package, the transporting of its guests is
an integral part of its resort business. They inform that
another division of the appellate court in fact held
respondent liable for damages to the other survivors of
the incident.
Upon the other hand, respondent contends that
petitioners failed to present evidence to prove that it is a
common carrier; that the Resorts ferry services for
guests cannot be considered as ancillary to its business
as no income is derived therefrom; that it exercised
extraordinary diligence as shown by the conditions it
had imposed before allowing M/B Coco Beach III to
sail; that the incident was caused by a fortuitous event
without any contributory negligence on its part; and that
the other case wherein the appellate court held it liable
for damages involved different plaintiffs, issues and
evidence.[16]
The petition is impressed with merit.
Petitioners correctly rely on De Guzman v. Court of
Appeals[17] in characterizing respondent as a common
carrier.
The Civil Code defines common carriers in the
following terms:
Article 1732. Common carriers are persons,
corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods
or both, by land, water, or air for compensation, offering
their services to the public.
The above article makes no distinction between one
whose principal business activity is the carrying of
persons or goods or both, and one who does such
carrying only as an ancillary activity (in local idiom,
as a sideline). Article 1732 also carefully avoids
making any distinction between a person or enterprise
71
offering transportation service on a regular or
scheduled basis and one offering such service on
an occasional, episodic or unscheduled basis. Neither
does Article 1732 distinguish between a carrier
offering its services to the general public, i.e., the
general community or population, and one who offers
services or solicits business only from a narrow
segment of the general population. We think that
Article 1733 deliberately refrained from making such
distinctions.
So understood, the concept of common carrier under
Article 1732 may be seen to coincide neatly with the
notion of public service, under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at
least partially supplements the law on common carriers
set forth in the Civil Code. Under Section 13, paragraph
(b) of the Public Service Act, public service includes:
. . . every person that now or hereafter may own,
operate, manage, or control in the Philippines, for hire
or compensation, with general or limited clientele,
whether permanent, occasional or accidental, and done
for general business purposes, any common carrier,
railroad, street railway, traction railway, subway motor
vehicle, either for freight or passenger, or both, with or
without fixed route and whatever may be its
classification, freight or carrier service of any class,
express service, steamboat, or steamship line, pontines,
ferries and water craft, engaged in the transportation of
passengers or freight or both, shipyard, marine repair
shop, wharf or dock, ice plant, ice-refrigeration plant,
canal, irrigation system, gas, electric light, heat and
power, water supply and power petroleum, sewerage
system, wire or wireless communications systems, wire
or wireless broadcasting stations and other similar
public services . . .[18] (emphasis and underscoring
supplied.)
Indeed, respondent is a common carrier. Its ferry
services are so intertwined with its main business as to
be properly considered ancillary thereto. The constancy
of respondents ferry services in its resort operations is
underscored by its having its
own Coco Beach boats. And the tour packages it offers,
which include the ferry services, may be availed of by
anyone who can afford to pay the same. These services
are thus available to the public.
That respondent does not charge a separate fee or fare
for its ferry services is of no moment. It would be
imprudent to suppose that it provides said services at a
loss. The Court is aware of the practice of beach resort
operators offering tour packages to factor the
transportation fee in arriving at the tour package
price. That guests who opt not to avail of respondents
ferry services pay the same amount is likewise
inconsequential. These guests may only be deemed to
have overpaid.
As De Guzman instructs, Article 1732 of the Civil Code
defining common carriers has deliberately refrained
from making distinctions on whether the carrying of
persons or goods is the carriers principal business,
whether it is offered on a regular basis, or whether it is
offered to the general public. The intent of the law is
thus to not consider such distinctions. Otherwise, there
is no telling how many other distinctions may be
concocted by unscrupulous businessmen engaged in the
carrying of persons or goods in order to avoid the legal
obligations and liabilities of common carriers.
Under the Civil Code, common carriers, from the nature
of their business and for reasons of public policy, are
bound to observe extraordinary diligence for the safety
of the passengers transported by them, according to all
the circumstances of each case.[19] They are bound to
carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence of very
cautious persons, with due regard for all the
circumstances.[20]
When a passenger dies or is injured in the discharge of a
contract of carriage, it is presumed that the common
carrier is at fault or negligent. In fact, there is even no
need for the court to make an express finding of fault or
negligence on the part of the common carrier. This
statutory presumption may only be overcome by
evidence that the carrier exercised extraordinary
diligence.[21]
Respondent nevertheless harps on its strict compliance
with the earlier mentioned conditions of voyage before
it allowed M/B Coco Beach III to sail on September 11,
2000. Respondents position does not impress.
The evidence shows that PAGASA issued 24-hour
public weather forecasts and tropical cyclone warnings
for shipping on September 10 and 11, 2000 advising of
tropical depressions in Northern Luzon which would
also affect the province of Mindoro.[22] By the testimony
of Dr. Frisco Nilo, supervising weather specialist of
PAGASA, squalls are to be expected under such
weather condition.[23]
A very cautious person exercising the utmost diligence
would thus not brave such stormy weather and put other
peoples lives at risk. The extraordinary diligence
required of common carriers demands that they take
care of the goods or lives entrusted to their hands as if
they were their own. This respondent failed to do.
Respondents insistence that the incident was caused by a
fortuitous event does not impress either.
The elements of a "fortuitous event" are: (a) the cause of
the unforeseen and unexpected occurrence, or the failure
of the debtors to comply with their obligations, must
have been independent of human will; (b) the event that
constituted the caso fortuito must have been impossible
to foresee or, if foreseeable, impossible to avoid; (c) the
occurrence must have been such as to render it
impossible for the debtors to fulfill their obligation in a
normal manner; and (d) the obligor must have been free
from any participation in the aggravation of the resulting
injury to the creditor.[24]
To fully free a common carrier from any liability, the
fortuitous event must have been the proximate and
only cause of the loss. And it should have exercised due
diligence to prevent or minimize the loss before, during
and after the occurrence of the fortuitous event.[25]
Respondent cites the squall that occurred during the
voyage as the fortuitous event that overturned M/B Coco
Beach III. As reflected above, however, the occurrence
of squalls was expected under the weather condition
of September 11, 2000. Moreover, evidence shows
that M/B Coco Beach III suffered engine trouble before
it capsized and sank.[26] The incident was, therefore, not
completely free from human intervention.
72
The Court need not belabor how respondents evidence
likewise fails to demonstrate that it exercised due
diligence to prevent or minimize the loss before, during
and after the occurrence of the squall.
Article 1764[27] vis--vis Article 2206[28] of the Civil Code
holds the common carrier in breach of its contract of
carriage that results in the death of a passenger liable to
pay the following: (1) indemnity for death, (2)
indemnity for loss of earning capacity and (3) moral
damages.
Petitioners are entitled to indemnity for the death of
Ruelito which is fixed at P50,000.[29]
As for damages representing unearned income, the
formula for its computation is:
Net Earning Capacity = life expectancy x (gross annual
income - reasonable and necessary living expenses).
Life expectancy is determined in accordance with the
formula:
2 / 3 x [80 age of deceased at the time of death] [30]
The first factor, i.e., life expectancy, is computed by
applying the formula (2/3 x [80 age at death]) adopted in
the American Expectancy Table of Mortality or the
Actuarial of Combined Experience Table of
Mortality.[31]
The second factor is computed by multiplying the life
expectancy by the net earnings of the deceased, i.e., the
total earnings less expenses necessary in the creation of
such earnings or income and less living and other
incidental expenses.[32] The loss is not equivalent to the
entire earnings of the deceased, but only such portion as
he would have used to support his dependents or
heirs. Hence, to be deducted from his gross earnings are
the necessary expenses supposed to be used by the
deceased for his own needs.[33]
In computing the third factor necessary living
expense, Smith Bell Dodwell Shipping Agency Corp. v.
Borja[34] teaches that when, as in this case, there is no
showing that the living expenses constituted the smaller
percentage of the gross income, the living expenses are
fixed at half of the gross income.
Applying the above guidelines, the Court determines
Ruelito's life expectancy as follows:
Life expectancy = 2/3 x [80 - age of deceased at the time
of death]
2/3 x [80 - 28]
2/3 x [52]
Life expectancy = 35
Documentary evidence shows that Ruelito was earning a
basic monthly salary of $900[35] which, when converted
to Philippine peso applying the annual average
exchange rate of $1 = P44 in 2000,[36] amounts
to P39,600. Ruelitos net earning capacity is thus
computed as follows:
Net Earning Capacity = life expectancy x (gross annual
income -
reasonable and necessary living expenses).
= 35 x (P475,200 - P237,600)
= 35 x (P237,600)
Net Earning Capacity = P8,316,000
Respecting the award of moral damages, since
respondent common carriers breach of contract of
carriage resulted in the death of petitioners son,
following Article 1764 vis--vis Article 2206 of the Civil
Code, petitioners are entitled to moral damages.
Since respondent failed to prove that it exercised the
extraordinary diligence required of common carriers, it
is presumed to have acted recklessly, thus warranting
the award too of exemplary damages, which are granted
in contractual obligations if the defendant acted in a
wanton, fraudulent, reckless, oppressive or malevolent
manner.[37]
Under the circumstances, it is reasonable to award
petitioners the amount of P100,000 as moral damages
and P100,000 as exemplary damages.[38]
Pursuant to Article 2208[39] of the Civil Code, attorney's deemed to be by then an equivalent to a forbearance of
fees may also be awarded where exemplary damages are credit. (emphasis supplied).
awarded. The Court finds that 10% of the total amount
adjudged against respondent is reasonable for the
purpose.
Since the amounts payable by respondent have been
Finally, Eastern Shipping Lines, Inc. v. Court of determined with certainty only in the present petition,
Appeals[40] teaches that when an obligation, regardless the interest due shall be computed upon the finality of
of its source, i.e., law, contracts, quasi-contracts, delicts this decision at the rate of 12% per annum until
or quasi-delicts is breached, the contravenor can be held satisfaction, in accordance with paragraph number 3 of
liable for payment of interest in the concept of actual the immediately cited guideline in Easter Shipping
and compensatory damages, subject to the following Lines, Inc.
rules, to wit
WHEREFORE, the Court of Appeals Decision
1. When the obligation is breached, and it consists in the of August 19, 2008 is REVERSED and SET
payment of a sum of money, i.e., a loan or forbearance ASIDE. Judgment is rendered in favor of petitioners
of money, the interest due should be that which may ordering respondent to pay petitioners the following:
have been stipulated in writing. Furthermore, the (1) P50,000 as indemnity for the death of Ruelito Cruz;
interest due shall itself earn legal interest from the time (2) P8,316,000 as indemnity for Ruelitos loss of earning
it is judicially demanded. In the absence of stipulation, capacity; (3) P100,000 as moral damages; (4) P100,000
the rate of interest shall be 12% per annum to be as exemplary damages; (5) 10% of the total amount
computed from default, i.e., from judicial or adjudged against respondent as attorneys fees; and (6)
extrajudicial demand under and subject to the provisions the costs of suit.
of Article 1169 of the Civil Code.
The total amount adjudged against respondent shall earn
2. When an obligation, not constituting a loan or interest at the rate of 12% per annum computed from the
forbearance of money, is breached, an interest on the finality of this decision until full payment.
amount of damages awarded may be imposed at the
discretion of the court at the rate of 6% per annum. No SO ORDERED.
interest, however, shall be adjudged on unliquidated
claims or damages except when or until the demand can
be established with reasonable certainty. Accordingly,
where the demand is established with reasonable
certainty, the interest shall begin to run from the time
the claim is made judicially or extrajudicially (Art.
1169, Civil Code) but when such certainty cannot be so
reasonably established at the time the demand is made,
the interest shall begin to run only from the date the
judgment of the court is made (at which time the
quantification of damages may be deemed to have been
reasonably ascertained). The actual base for the
computation of legal interest shall, in any case, be on the
amount finally adjudged.

3. When the judgment of the court awarding a sum of

money becomes final and executory, the rate of legal
interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 12% per annum from such
finality until its satisfaction, this interim period being

73
SECOND DIVISION
[G.R. No. 111127. July 26, 1996]
MR. & MRS. ENGRACIO FABRE, JR.* and
PORFIRIO CABIL, petitioners, vs.COURT OF
APPEALS, THE WORD FOR THE WORLD
CHRISTIAN FELLOWSHIP, INC., AMYLINE
ANTONIO, JOHN RICHARDS, GONZALO
GONZALES, VICENTE V. QUE, JR., ICLI
CORDOVA, ARLENE GOJOCCO, ALBERTO
ROXAS CORDERO, RICHARD BAUTISTA,
JOCELYN GARCIA, YOLANDA CORDOVA,
NOEL ROQUE, EDWARD TAN, ERNESTO
NARCISO, ENRIQUETA LOCSIN, FRANCIS
NORMAN O. LOPEZ, JULIUS CAESAR GARCIA,
ROSARIO MA. V. ORTIZ, MARIETTA C.
CLAVO, ELVIE SENIEL, ROSARIO MARA-
MARA, TERESITA REGALA, MELINDA
TORRES, MARELLA MIJARES, JOSEFA
CABATINGAN, MARA NADOC, DIANE MAYO,
TESS PLATA, MAYETTE JOCSON, ARLENE Y.
MORTIZ, LIZA MAYO, CARLOS RANARIO,
ROSAMARIA T. RADOC and BERNADETTE
FERRER, respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari of the decision
of the Court of Appeals[1] in CA-GR No. 28245, dated
September 30, 1992, which affirmed with modification
the decision of the Regional Trial Court of Makati,
Branch 58, ordering petitioners jointly and severally to
pay damages to private respondent Amyline Antonio,
and its resolution which denied petitioners motion for
reconsideration for lack of merit.
Petitioners Engracio Fabre, Jr. and his wife were owners
of a 1982 model Mazda minibus. They used the bus
principally in connection with a bus service for school
children which they operated in Manila. The couple had
a driver, Porfirio J. Cabil, whom they hired in 1981,
after trying him out for two weeks. His job was to take
school children to and from the St. Scholasticas College
in Malate, Manila.
On November 2, 1984 private respondent Word for the
World Christian Fellowship Inc. (WWCF) arranged
with petitioners for the transportation of 33 members of
its Young Adults Ministry from Manila to La Union and
back in consideration of which private respondent paid
petitioners the amount of P3,000.00.
The group was scheduled to leave on November 2,
1984, at 5:00 oclock in the afternoon.However, as
74
several members of the party were late, the bus did not
leave the Tropical Hut at the corner of Ortigas Avenue
and EDSA until 8:00 oclock in the evening. Petitioner
Porfirio Cabil drove the minibus.
The usual route to Caba, La Union was through Carmen,
Pangasinan. However, the bridge at Carmen was under
repair, so that petitioner Cabil, who was unfamiliar with
the area (it being his first trip to La Union), was forced
to take a detour through the town of Ba-ay in Lingayen,
Pangasinan. At 11:30 that night, petitioner Cabil came
upon a sharp curve on the highway, running on a south
to east direction, which he described as siete. The road
was slippery because it was raining, causing the bus,
which was running at the speed of 50 kilometers per
hour, to skid to the left road shoulder. The bus hit the
left traffic steel brace and sign along the road and
rammed the fence of one Jesus Escano, then turned over
and landed on its left side, coming to a full stop only
after a series of impacts. The bus came to rest off the
road. A coconut tree which it had hit fell on it and
smashed its front portion.
Several passengers were injured. Private respondent
Amyline Antonio was thrown on the floor of the bus and
pinned down by a wooden seat which came off after
being unscrewed. It took three persons to safely remove
her from this position. She was in great pain and could
not move.
The driver, petitioner Cabil, claimed he did not see the
curve until it was too late. He said he was not familiar
with the area and he could not have seen the curve
despite the care he took in driving the bus, because it
was dark and there was no sign on the road. He said that
he saw the curve when he was already within 15 to 30
meters of it. He allegedly slowed down to 30 kilometers
per hour, but it was too late.
The Lingayen police investigated the incident the next
day, November 3, 1984. On the basis of their finding
they filed a criminal complaint against the driver,
Porfirio Cabil. The case was later filed with the
Lingayen Regional Trial Court. Petitioners Fabre paid
Jesus Escano P1,500.00 for the damage to the latters
fence. On the basis of Escanos affidavit of desistance
the case against petitioners Fabre was dismissed.
Amyline Antonio, who was seriously injured, brought
this case in the RTC of Makati, Metro Manila. As a
result of the accident, she is now suffering from
paraplegia and is permanently paralyzed from the waist
down. During the trial she described the operations she
underwent and adduced evidence regarding the cost of
her treatment and therapy. Immediately after the
accident, she was taken to the Nazareth Hospital in Ba-
ay, Lingayen. As this hospital was not adequately
equipped, she was transferred to the Sto. Nio Hospital,
also in the town of Ba-ay, where she was given
sedatives. An x-ray was taken and the damage to her
spine was determined to be too severe to be treated
there. She was therefore brought to Manila, first to the
Philippine General Hospital and later to the Makati
Medical Center where she underwent an operation to
correct the dislocation of her spine.
In its decision dated April 17, 1989, the trial court found
that:
No convincing evidence was shown that the minibus
was properly checked for travel to a long distance trip
and that the driver was properly screened and tested
before being admitted for employment. Indeed, all the
evidence presented have shown the negligent act of the
defendants which ultimately resulted to the accident
subject of this case.
Accordingly, it gave judgment for private respondents
holding:
Considering that plaintiffs Word for the World Christian
Fellowship, Inc. and Ms. Amyline Antonio were the
only ones who adduced evidence in support of their
claim for damages, the Court is therefore not in a
position to award damages to the other plaintiffs.
WHEREFORE, premises considered, the Court hereby
renders judgment against defendants Mr. & Mrs.
Engracio Fabre, Jr. and Porfirio Cabil y Jamil pursuant
to articles 2176 and 2180 of the Civil Code of the
Philippines and said defendants are ordered to pay
jointly and severally to the plaintiffs the following
amount:
1) P93,657.11 as compensatory and actual damages;
2) P500,000.00 as the reasonable amount of loss of
earning capacity of plaintiff Amyline Antonio;
3) P20,000.00 as moral damages;
4) P20,000.00 as exemplary damages; and
5) 25% of the recoverable amount as attorneys fees;
6) Costs of suit.
SO ORDERED.
The Court of Appeals affirmed the decision of the trial
court with respect to Amyline Antonio but dismissed it
with respect to the other plaintiffs on the ground that
they failed to prove their respective claims. The Court of
Appeals modified the award of damages as follows:
1) P93,657.11 as actual damages;
2) P600,000.00 as compensatory damages;
3) P50,000.00 as moral damages;
4) P20,000.00 as exemplary damages;
5) P10,000.00 as attorneys fees; and
6) Costs of suit.
The Court of Appeals sustained the trial courts finding
that petitioner Cabil failed to exercise due care and
precaution in the operation of his vehicle considering
the time and the place of the accident.The Court of
Appeals held that the Fabres were themselves
presumptively negligent. Hence, this
petition. Petitioners raise the following issues:
I. WHETHER OR NOT PETITIONERS WERE
NEGLIGENT.
II. WHETHER OR NOT PETITIONERS WERE
LIABLE FOR THE INJURIES SUFFERED BY
PRIVATE RESPONDENTS.
III. WHETHER OR NOT DAMAGES CAN BE
AWARDED AND IN THE POSITIVE, UP TO WHAT
EXTENT.
Petitioners challenge the propriety of the award of
compensatory damages in the amount of P600,000.00. It
is insisted that, on the assumption that petitioners are
liable, an award of P600,000.00 is unconscionable and
highly speculative. Amyline Antonio testified that she
was a casual employee of a company called Suaco,
earning P1,650.00 a month, and a dealer of Avon
products, earning an average of P1,000.00
monthly. Petitioners contend that as casual employees
do not have security of tenure, the award of
P600,000.00, considering Amyline Antonios earnings, is
without factual basis as there is no assurance that she
would be regularly earning these amounts.
With the exception of the award of damages, the petition
is devoid of merit.
First, it is unnecessary for our purpose to determine
whether to decide this case on the theory that petitioners
are liable for breach of contract of carriage or culpa
contractual or on the theory of quasi delict or culpa
aquiliana as both the Regional Trial Court and the Court
of Appeals held, for although the relation of passenger
and carrier is contractual both in origin and nature,
nevertheless the act that breaks the contract may be also
a tort.[2] In either case, the question is whether the bus
driver, petitioner Porfirio Cabil, was negligent.
The finding that Cabil drove his bus negligently, while
his employer, the Fabres, who owned the bus, failed to
exercise the diligence of a good father of the family in
the selection and supervision of their employee is fully
supported by the evidence on record. These factual
75
findings of the two courts we regard as final and
conclusive, supported as they are by the
evidence. Indeed, it was admitted by Cabil that on the
night in question, it was raining, and, as a consequence,
the road was slippery, and it was dark. He averred these
facts to justify his failure to see that there lay a sharp
curve ahead.However, it is undisputed that Cabil drove
his bus at the speed of 50 kilometers per hour and only
slowed down when he noticed the curve some 15 to 30
meters ahead.[3] By then it was too late for him to avoid
falling off the road. Given the conditions of the road and
considering that the trip was Cabils first one outside of
Manila, Cabil should have driven his vehicle at a
moderate speed. There is testimony[4] that the vehicles
passing on that portion of the road should only be
running 20 kilometers per hour, so that at 50 kilometers
per hour, Cabil was running at a very high speed.
Considering the foregoing the fact that it was raining
and the road was slippery, that it was dark, that he drove
his bus at 50 kilometers an hour when even on a good
day the normal speed was only 20 kilometers an hour,
and that he was unfamiliar with the terrain, Cabil was
grossly negligent and should be held liable for the
injuries suffered by private respondent Amyline
Antonio.
Pursuant to Arts. 2176 and 2180 of the Civil Code his
negligence gave rise to the presumption that his
employers, the Fabres, were themselves negligent in the
selection and supervision of their employee.
Due diligence in selection of employees is not satisfied
by finding that the applicant possessed a professional
drivers license. The employer should also examine the
applicant for his qualifications, experience and record of
service.[5] Due diligence in supervision, on the other
hand, requires the formulation of rules and regulations
for the guidance of employees and the issuance of
proper instructions as well as actual implementation and
monitoring of consistent compliance with the rules.[6]
In the case at bar, the Fabres, in allowing Cabil to drive
the bus to La Union, apparently did not consider the fact
that Cabil had been driving for school children only,
from their homes to the St. Scholasticas College in
Metro Manila.[7] They had hired him only after a two-
week apprenticeship.They had tested him for certain
matters, such as whether he could remember the names
of the children he would be taking to school, which
were irrelevant to his qualification to drive on a long
distance travel, especially considering that the trip to La
Union was his first. The existence of hiring procedures
and supervisory policies cannot be casually invoked to
overturn the presumption of negligence on the part of an
employer.[8]
Petitioners argue that they are not liable because (1) an
earlier departure (made impossible by the congregations
delayed meeting) could have averted the mishap and (2)
under the contract, the WWCF was directly responsible
for the conduct of the trip. Neither of these contentions
hold water.The hour of departure had not been
fixed. Even if it had been, the delay did not bear directly
on the cause of the accident. With respect to the second
contention, it was held in an early case that:
[A] person who hires a public automobile and gives the
driver directions as to the place to which he wishes to be
conveyed, but exercises no other control over the
conduct of the driver, is not responsible for acts of
negligence of the latter or prevented from recovering for
injuries suffered from a collision between the
automobile and a train, caused by the negligence either
of the locomotive engineer or the automobile driver.[9]
As already stated, this case actually involves a contract
of carriage. Petitioners, the Fabres, did not have to be
engaged in the business of public transportation for the
provisions of the Civil Code on common carriers to
apply to them. As this Court has held:[10]
Art. 1732. Common carriers are persons, corporations,
firms or associations engaged in the business of carrying
or transporting passengers or goods or both, by land,
water, or air for compensation, offering their services to
the public.
The above article makes no distinction between one
whose principal business activity is the carrying of
persons or goods or both, and one who does such
carrying only as an ancillary activity (in local idiom, as
a sideline). Article 1732 also carefully avoids making
any distinction between a person or enterprise offering
transportation service on a regular or scheduled basis
and one offering such service on an occasional, episodic
or unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its services to the
general public, i.e., the general community or
population, and one who offers services or solicits
business only from a narrow segment of the general
population. We think that Article 1732 deliberately
refrained from making such distinctions.
As common carriers, the Fabres were bound to exercise
extraordinary diligence for the safe transportation of the
passengers to their destination. This duty of care is not
excused by proof that they exercised the diligence of a
good father of the family in the selection and
supervision of their employee. As Art. 1759 of the Code
provides:
Common carriers are liable for the death of or injuries to
passengers through the negligence or wilful 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.
The same circumstances detailed above, supporting the
finding of the trial court and of the appellate court that
petitioners are liable under Arts. 2176 and 2180
for quasi delict, fully justify finding them guilty of
breach of contract of carriage under Arts. 1733, 1755
and 1759 of the Civil Code.
Secondly, we sustain the award of damages in favor of
Amyline Antonio. However, we think the Court of
Appeals erred in increasing the amount of compensatory
damages because private respondents did not question
this award as inadequate.[11] To the contrary, the award
of P500,000.00 for compensatory damages which the
Regional Trial Court made is reasonable considering the
contingent nature of her income as a casual employee of
a company and as distributor of beauty products and the
fact that the possibility that she might be able to work
again has not been foreclosed. In fact she testified that
one of her previous employers had expressed
willingness to employ her again.
With respect to the other awards, while the decisions of
the trial court and the Court of Appeals do not
sufficiently indicate the factual and legal basis for them,
we find that they are nevertheless supported by evidence
in the records of this case. Viewed as an action for quasi
delict, this case falls squarely within the purview of Art.
2219(2) providing for the payment of moral damages in
cases of quasi delict. On the theory that petitioners are
liable for breach of contract of carriage, the award of
moral damages is authorized by Art. 1764, in relation to
Art. 2220, since Cabils gross negligence amounted to
bad faith.[12] Amyline Antonios testimony, as well as the
testimonies of her father and co-passengers, fully
establish the physical suffering and mental anguish she
endured as a result of the injuries caused by petitioners
negligence.
The award of exemplary damages and attorneys fees
was also properly made. However, for the same reason
76
that it was error for the appellate court to increase the
award of compensatory damages, we hold that it was
also error for it to increase the award of moral damages
and reduce the award of attorneys fees, inasmuch as
private respondents, in whose favor the awards were
made, have not appealed.[13]
As above stated, the decision of the Court of Appeals
can be sustained either on the theory of quasi delict or
on that of breach of contract. The question is whether, as
the two courts below held, petitioners, who are the
owners and driver of the bus, may be made to respond
jointly and severally to private respondent. We hold that
they may be. In Dangwa Trans. Co. Inc. v. Court of
Appeals,[14]on facts similar to those in this case, this
Court held the bus company and the driver jointly and
severally liable for damages for injuries suffered by a
passenger. Again, in Bachelor Express, Inc. v. Court of
Appeals[15] a driver found negligent in failing to stop the
bus in order to let off passengers when a fellow
passenger ran amuck, as a result of which the passengers
jumped out of the speeding bus and suffered injuries,
was held also jointly and severally liable with the bus
company to the injured passengers.
The same rule of liability was applied in situations
where the negligence of the driver of the bus on which
plaintiff was riding concurred with the negligence of a
third party who was the driver of another vehicle, thus
causing an accident. In Anuran v. Buo,[16] Batangas
Laguna Tayabas Bus Co.v. Intermediate Appellate
Court,[17] and Metro Manila Transit Corporation v.
Court of Appeals,[18] the bus company, its driver, the
operator of the other vehicle and the driver of the
vehicle were jointly and severally held liable to the
injured passenger or the latters heirs. The basis of this
allocation of liability was explained in Viluan v. Court
of Appeals,[19] thus:
Nor should it make any difference that the liability of
petitioner [bus owner] springs from contract while that
of respondents [owner and driver of other vehicle] arises
from quasi-delict. As early as 1913, we already ruled in
Gutierrez vs. Gutierrez, 56 Phil. 177, that in case of
injury to a passenger due to the negligence of the driver
of the bus on which he was riding and of the driver of
another vehicle, the drivers as well as the owners of the
two vehicles are jointly and severally liable for
damages. Some members of the Court, though, are of
the view that under the circumstances they are liable
on quasi-delict.[20]
It is true that in Philippine Rabbit Bus Lines, Inc. v.
Court of Appeals[21] this Court exonerated the jeepney
driver from liability to the injured passengers and their
families while holding the owners of the jeepney jointly
and severally liable, but that is because that case was
expressly tried and decided exclusively on the theory
of culpa contractual. As this Court there explained:
The trial court was therefore right in finding that
Manalo [the driver] and spouses Mangune and Carreon
[the jeepney owners] were negligent. However, its
ruling that spouses Mangune and Carreon are jointly and
severally liable with Manalo is erroneous. The driver
cannot be held jointly and severally liable with the
carrier in case of breach of the contract of carriage. The
rationale behind this is readily discernible. Firstly, the
contract of carriage is between the carrier and the
passenger, and in the event of contractual liability, the
carrier is exclusively responsible therefore to the
passenger, even if such breach be due to the negligence
of his driver (see Viluan v. The Court of Appeals, et al.,
G.R. Nos. L-21477-81, April 29, 1966, 16 SCRA 742) .
. .[22]
As in the case of BLTB, private respondents in this case
and her co-plaintiffs did not stake out their claim against
the carrier and the driver exclusively on one theory,
much less on that of breach of contract alone. After all,
it was permitted for them to allege alternative causes of
action and join as many parties as may be liable on such
causes of action[23] so long as private respondent and her
co-plaintiffs do not recover twice for the same
injury. What is clear from the cases is the intent of the
plaintiff there to recover from both the carrier and the
driver, thus justifying the holding that the carrier and the
driver were jointly and severally liable because their
separate and distinct acts concurred to produce the same
injury.
WHEREFORE, the decision of the Court of Appeals is
AFFIRMED with MODIFICATION as to the award of
damages. Petitioners are ORDERED to PAY jointly and
severally the private respondent Amyline Antonio the
following amounts:
1) P93,657.11 as actual damages;
2) P500,000.00 as the reasonable amount of loss of
earning capacity of plaintiff Amyline Antonio;
3) P20,000.00 as moral damages;
4) P20,000.00 as exemplary damages;
5) 25% of the recoverable amount as attorneys fees; and
6) costs of suit.
SO ORDERED.
 Lading No. C320/C15991-2,[5]covering the aforesaid
shipment. The subject shipment was insured with
SECOND DIVISION private respondent Pioneer Insurance and Surety
Corporation in favor of Unilab against all risks in the
UNSWORTH TRANSPORT INTERNATIONAL (PHILS.), amount
G.R.ofNo.
P1,779,664.77
166250
INC., Risk Note Number MC RM UL 0627 92[6] and Open
Petitioner, Cargo Policy No. HO-022-RIU.[7]
Present:
- versus -
COURT OF APPEALS and PIONEER INSURANCE AND
SURETY CORPORATION,
Respondents.
x------------------------------------------------------------------
------------------x
DECISION
NACHURA, J.:
For review is the Court of Appeals (CA)
Decision[1] dated April 29, 2004 and Resolution[2]dated
November 26, 2004. The assailed Decision affirmed the
Regional Trial Court (RTC) decision[3] dated February
22, 2001; while the assailed Resolution denied petitioner
Unsworth Transport International (Philippines), Inc.,
American President Lines, Ltd. (APL), and Unsworth
Transport International, Inc.s (UTIs) motion for
reconsideration.
The facts of the case are:
On August 31, 1992, the shipper Sylvex Purchasing
Corporation delivered to UTI a shipment of 27 drums of
various raw materials for pharmaceutical manufacturing,
consisting of: 1) 3 drums (of) extracts, flavoring liquid,
flammable liquid x x x banana flavoring; 2) 2 drums (of)
flammable liquids x x x turpentine oil; 2 pallets. STC:
40 bags dried yeast; and 3) 20 drums (of) Vitabs:
Vitamin B Complex Extract.[4] UTI issued Bill of
77
under and by virtue of Marine
On the
CARPIO,
same day
J., that the bill of lading was issued, the
shipment
Chairperson,
was loaded in a sealed 1x40 container van,
withNACHURA,
no. APLU-982012, boarded on APLs vessel M/V
Pres.
PERALTA,
Jackson, Voyage 42, and transshipped to
APLsABAD, and Taft[8] for delivery to petitioner in favor
M/V Pres.
of the
MENDOZA,
consignee United
JJ. Laboratories, Inc. (Unilab).
On September
Promulgated:30, 1992, the shipment arrived at
the port of Manila. On October 6, 1992, petitioner
received
July 26,
the 2010
said shipment in its warehouse after it
stamped the Permit to Deliver Imported
Goods[9] procured by the Champs Customs
Brokerage.[10] Three days thereafter, or on October 9,
1992, Oceanica Cargo Marine Surveyors Corporation
(OCMSC) conducted a stripping survey of the shipment
located in petitioners warehouse. The survey results
stated:
2-pallets STC 40 bags Dried Yeast, both in good order
condition and properly sealed
19- steel drums STC Vitamin B Complex Extract, all in
good order condition and properly sealed
1-steel drum STC Vitamin B Complex Extra[ct] with
cut/hole on side, with approx. spilling of 1%[11]
On October 15, 1992, the arrastre Jardine Davies
Transport Services, Inc. (Jardine) issued Gate Pass No.
7614[12] which stated that 22 drums[13] Raw Materials for
Pharmaceutical Mfg. were loaded on a truck with Plate
No. PCK-434 facilitated by Champs for delivery to
Unilabs warehouse. The materials were noted to be
complete and in good order in the gate pass.[14] On the
same day, the shipment arrived in Unilabs warehouse
and was immediately surveyed by an independent
surveyor, J.G. Bernas Adjusters & Surveyors, Inc. (J.G.
Bernas). The Report stated:
1-p/bag torn on side contents partly spilled
1-s/drum #7 punctured and retaped on bottom side
content lacking
5-drums shortship/short delivery[15]
On October 23 and 28, 1992, the same independent
surveyor conducted final inspection surveys which
yielded the same results. Consequently, Unilabs quality
control representative rejected one paper bag containing
dried yeast and one steel drum containing Vitamin B
Complex as unfit for the intended purpose.[16]
On November 7, 1992, Unilab filed a formal
claim[17] for the damage against private respondent and
UTI. On November 20, 1992, UTI denied liability on
the basis of the gate pass issued by Jardine that the
goods were in complete and good condition; while
private respondent paid the claimed amount on March
23, 1993. By virtue of the Loss and Subrogation
Receipt[18]issued by Unilab in favor of private
respondent, the latter filed a complaint
for Damages against APL, UTI and petitioner with the
RTC of Makati.[19] The case was docketed as Civil Case
No. 93-3473 and was raffled to Branch 134.
After the termination of the pre-trial conference, trial on
the merits ensued. On February 22, 2001, the RTC
decided in favor of private respondent and against APL,
UTI and petitioner, the dispositive portion of which
reads:
WHEREFORE, judgment is hereby rendered in favor of
plaintif PIONEER INSURANCE & SURETY
CORPORATION and against the defendants
AMERICAN PRESIDENT LINES and UNSWORTH
TRANSPORT INTERNATIONAL (PHILS.), INC.
(now known as JUGRO TRANSPORT INTL., PHILS.),
ordering the latter to pay, jointly and severally, the
former the following amounts:
1. The sum of SEVENTY SIX THOUSAND TWO
HUNDRED THIRTY ONE and 27/100 (Php76,231.27)
with interest at the legal rate of 6% per annum to be
computed starting from September 30, 1993 until fully
paid, for and as actual damages;
2. The amount equivalent to 25% of the total sum as
attorneys fees;
3. Cost of this litigation.
SO ORDERED.[20]
On appeal, the CA affirmed the RTC decision on April
29, 2004. The CA rejected UTIs defense that it was
merely a forwarder, declaring instead that it was a
common carrier. The appellate court added that by
issuing the Bill of Lading, UTI acknowledged receipt of
the goods and agreed to transport and deliver them at a
specific place to a person named or his order. The court
further concluded that upon the delivery of the subject
shipment to petitioners warehouse, its liability became
similar to that of a depositary. As such, it ought to have
exercised ordinary diligence in the care of the goods.
And as found by the RTC, the CA agreed that petitioner
failed to exercise the required diligence. The CA also
rejected petitioners claim that its liability should be
limited to $500 per package pursuant to the Carriage of
Goods by Sea Act (COGSA) considering that the value
of the shipment was declared pursuant to the letter of
credit and the pro forma invoice. As to APL, the court
considered it as a common carrier notwithstanding the
non-issuance of a bill of lading inasmuch as a bill of
lading is not indispensable for the execution of a
contract of carriage.[21]
Unsatisfied, petitioner comes to us in this petition for
review on certiorari, raising the following issues:
1. WHETHER OR NOT THE HONORABLE
COURT OF APPEALS COMMITTED GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK
OR EXCESS OF JURISDICTION IN UPHOLDING
THE DECISION OF THE REGIONAL TRIAL
COURT DATED 22 FEBRUARY 2001, AWARDING
THE SUM OF SEVENTY SIX THOUSAND TWO
HUNDRED THIRTY ONE AND 27/100 PESOS
(PHP76,231.27) WITH LEGAL INTEREST AT 6%
PER ANNUM AS ACTUAL DAMAGES AND 25%
AS ATTORNEYS FEES.
2. WHETHER OR NOT PETITIONER UTI IS A
COMMON CARRIER.
3. WHETHER OR NOT PETITIONER UTI
EXERCISED THE REQUIRED ORDINARY
DILIGENCE.
78
4. WHETHER OR NOT THE PRIVATE
RESPONDENT SUFFICIENTLY ESTABLISHED
THE ALLEGED DAMAGE TO ITS CARGO.[22]
Petitioner admits that it is a forwarder but disagrees with
the CAs conclusion that it is a common carrier. It also
questions the appellate courts findings that it failed to
establish that it exercised extraordinary or ordinary
diligence in the vigilance over the subject shipment. As
to the damages allegedly suffered by private respondent,
petitioner counters that they were not sufficiently
proven. Lastly, it insists that its liability, in any event,
should be limited to $500 pursuant to the package
limitation rule. Indeed, petitioner wants us to review the
factual findings of the RTC and the CA and to evaluate
anew the evidence presented by the parties.
The petition is partly meritorious.
Well established is the rule that factual questions may
not be raised in a petition for review on certiorari as
clearly stated in Section 1, Rule 45 of the Rules of
Court, viz.:
Section 1. Filing of petition with Supreme Court. A
party desiring to appeal by certiorarifrom a judgment or
final order or resolution of the Court of Appeals, the
Sandiganbayan, the Regional Trial Court or other courts
whenever authorized by law, may file with the Supreme
Court a verified petition for review on certiorari. The
petition shall raise only questions of law which must be
distinctly set forth.
Admittedly, petitioner is a freight forwarder. The
term freight forwarder" refers to a firm holding itself out
to the general public (other than as a pipeline, rail,
motor, or water carrier) to provide transportation of
property for compensation and, in the ordinary
course of its business, (1) to
assemble and consolidate, or to provide for assembling
and consolidating, shipments, and to perform or provide
for break-bulk and distribution operations of the
shipments; (2) to assume responsibility for the
transportation of goods from the place of receipt to the
place of destination; and (3) to use for any part of the
transportation a carrier subject to the federal law
pertaining to common carriers.[23]
A freight forwarders liability is limited to damages
arising from its own negligence, including negligence in
choosing the carrier; however, where the forwarder
contracts to deliver goods to their destination instead of
merely arranging for their transportation, it becomes
liable as a common carrier for loss or damage to goods.
A freight forwarder assumes the responsibility of a
carrier, which actually executes the transport, even
though the forwarder does not carry the merchandise
itself.[24]
It is undisputed that UTI issued a bill of lading in favor
of Unilab. Pursuant thereto, petitioner undertook to
transport, ship, and deliver the 27 drums of raw
materials for pharmaceutical manufacturing to the
consignee.
A bill of lading is a written acknowledgement of the
receipt of goods and an agreement to transport and to
deliver them at a specified place to a person named or
on his or her order.[25] It operates both as a receipt and as
a contract. It is a receipt for the goods shipped and a
contract to transport and
deliver the same as therein stipulated. As a receipt, it
recites the date and place of shipment, describes the
goods as to quantity, weight, dimensions, identification
marks, condition, quality, and value. As a contract, it
names the contracting parties, which include the
consignee; fixes the route, destination, and freight rate
or charges; and stipulates the rights and obligations
assumed by the parties.[26]
Undoubtedly, UTI is liable as a common carrier.
Common carriers, as a general rule, are presumed to
have been at fault or negligent if the goods they
transported deteriorated or got lost or destroyed. That is,
unless they prove that they exercised extraordinary
diligence in transporting the goods. In order to avoid
responsibility for any loss or damage, therefore, they
have the burden of proving that they observed such
diligence.[27] Mere proof of delivery of the goods in
good order to a common carrier and of their arrival in
bad order at their destination constitutes a prima facie
case of fault or negligence against the carrier. If no
adequate explanation is given as to how the
deterioration, loss, or destruction of the goods happened,
the transporter shall be held responsible.[28]
Though it is not our function to evaluate anew the
evidence presented, we refer to the records of the case to
show that, as correctly found by the RTC and the CA,
petitioner failed to rebut the prima facie presumption of
negligence in the carriage of the subject shipment.
First, as stated in the bill of lading, the subject shipment
was received by UTI in apparent good order and
condition in New York, United States of
America. Second, the OCMSC Survey Report stated that
one steel drum STC Vitamin B Complex Extract was
discovered to be with a cut/hole on the side, with
approximate spilling of 1%. Third, though Gate Pass
No. 7614, issued by Jardine, noted that the subject
shipment was in good order and condition, it was
specifically stated that there were 22 (should be 27
drums per Bill of Lading No. C320/C15991-2) drums of
raw materials for pharmaceutical manufacturing. Last,
J.G. Bernas Survey Report stated that 1-s/drum was
punctured and retaped on the bottom side and the
content was lacking, and there was a short delivery of 5-
drums.
All these conclusively prove the fact of shipment in
good order and condition, and the consequent damage to
one steel drum of Vitamin B Complex Extract while in
the possession of petitioner which failed to explain the
reason for the damage. Further, petitioner failed to prove
that it observed the extraordinary diligence and
precaution which the law requires a common carrier to
exercise and to follow in order to avoid damage to or
destruction of the goods entrusted to it for safe carriage
and delivery.[29]
However, we affirm the applicability of the Package
Limitation Rule under the COGSA, contrary to the RTC
and the CAs findings.
It is to be noted that the Civil Code does not limit the
liability of the common carrier to a fixed amount per
package. In all matters not regulated by the Civil Code,
the rights and obligations of common carriers are
governed by the Code of Commerce and special laws.
Thus, the COGSA supplements the Civil Code by
establishing a provision limiting the carriers liability in
the absence of a shippers declaration of a higher value in
the bill of lading.[30]Section 4(5) of the COGSA
provides:
79
(5) Neither the carrier nor the ship shall in any event be
or become liable for any loss or damage to or in
connection with the transportation of goods in an
amount exceeding $500 per package of lawful money of
the United States, or in case of goods not shipped in
packages, per customary freight unit, or the equivalent
of that sum in other currency, unless the nature and
value of such goods have been declared by the shipper
before shipment and inserted in the bill of lading. This
declaration, if embodied in the bill of lading, shall
be prima facie evidence, but shall not be conclusive on
the carrier.
In the present case, the shipper did not declare a higher
valuation of the goods to be shipped. Contrary to the
CAs conclusion, the insertion of the words L/C No. LC
No. 1-187-008394/ NY 69867 covering shipment of raw
materials for pharmaceutical Mfg. x x x cannot be the
basis of petitioners liability.[31] Furthermore, the
insertion of an invoice number does not in itself
sufficiently and convincingly show that petitioner had
knowledge of the value of the cargo.[32]
In light of the foregoing, petitioners liability should be
limited to $500 per steel drum. In this case, as there was
only one drum lost, private respondent is entitled to
receive only $500 as damages for the loss. In addition to
said amount, as aptly held by the trial court, an interest
rate of 6% per annum should also be imposed, plus 25%
of the total sum as attorneys fees.
WHEREFORE, premises considered, the petition
is PARTIALLY GRANTED. The Court of Appeals
Decision dated April 29, 2004 and Resolution dated
November 26, 2004
are AFFIRMED with MODIFICATION by reducing
the principal amount due private respondent Pioneer
Insurance and Surety Corporation from P76,231.27 to
$500, with interest of 6% per annum from date of
demand, and 25% of the amount due as attorneys fees.
The other aspects of the assailed Decision and
Resolution STAND.
SO ORDERED.
SECOND DIVISION
LOADMASTERS CUSTOMS SERVICES, INC.,
Petitioner,
- versus -
GLODEL BROKERAGE CORPORATION and
R&B INSURANCE CORPORATION,
Respondents.
X -----------------------------------------------------------------
--------------------- X
DECISION
MENDOZA, J.:
This is a petition for review on certiorari under Rule 45
of the Revised Rules of Court assailing the August 24,
2007 Decision[1] of the Court of Appeals (CA) in CA-
G.R. CV No. 82822, entitled R&B Insurance
Corporation v. Glodel Brokerage Corporation and
Loadmasters Customs Services, Inc., which held
petitioner Loadmasters Customs Services,
Inc. (Loadmasters) liable to respondent Glodel
Brokerage Corporation (Glodel) in the amount
of P1,896,789.62 representing the insurance indemnity
which R&B Insurance Corporation (R&B
Insurance) paid to the insured-consignee, Columbia
Wire and Cable Corporation (Columbia).
THE FACTS:
On August 28, 2001, R&B Insurance issued Marine
Policy No. MN-00105/2001 in favor of Columbia to
insure the shipment of 132 bundles of electric copper
80
cathodes against All Risks.On August 28, 2001, the R&B Insurance. The dispositive portion of the decision
cargoes were shipped on board the vessel Richard Rey reads:
from179446
G.R. No. Isabela, Leyte, to Pier
10, North Harbor, Manila. They arrived on the same WHEREFORE, all premises considered, the plaintiff
Present:
date. having established by preponderance of evidence its
claims against defendant Glodel Brokerage Corporation,
CARPIO,
Columbia
J., Chairperson,
engaged the services of Glodel for the release judgment is hereby rendered ordering the latter:
NACHURA,
and withdrawal of the cargoes from the pier and the
PERALTA,
subsequent delivery to its warehouses/plants. Glodel, in
ABAD,
turn,
andengaged the services of Loadmasters for the use of 1. To pay plaintiff R&B Insurance Corporation the
MENDOZA,
its delivery
JJ. trucks to transport the cargoes to Columbias sum of P1,896,789.62 as actual and compensatory
warehouses/plants in Bulacan and Valenzuela City. damages, with interest from the date of complaint until
fully paid;
The goods were loaded on board twelve (12) trucks
owned by Loadmasters, driven by its employed drivers 2. To pay plaintiff R&B Insurance Corporation the
Promulgated:
and accompanied by its employed truck helpers. Six (6) amount equivalent to 10% of the principal amount
truckloads of copper cathodes were to be delivered to recovered as and for attorneys fees plus P1,500.00 per
January
Balagtas,
10, 2011Bulacan, while the other six (6) truckloads appearance in Court;
were destined for Lawang Bato, Valenzuela City. The
cargoes in six truckloads for Lawang Bato were duly 3. To pay plaintiff R&B Insurance Corporation the
delivered in Columbias warehouses there. Of the six (6) sum of P22,427.18 as litigation expenses.
trucks en route to Balagtas, Bulacan, however, only five
(5) reached the destination. One (1) truck, loaded with WHEREAS, the defendant Loadmasters Customs
11 bundles or 232 pieces of copper cathodes, failed to Services, Inc.s counterclaim for damages and attorneys
deliver its cargo. fees against plaintiff are hereby dismissed.
Later on, the said truck, an Isuzu with Plate No. NSD-
117, was recovered but without the copper
cathodes. Because of this incident, Columbia filed with
R&B Insurance a claim for insurance indemnity in the
amount of P1,903,335.39. After the requisite
investigation and adjustment, R&B Insurance With costs against defendant Glodel Brokerage
paid Columbia the amount of P1,896,789.62 as Corporation.
insurance indemnity. SO ORDERED.[4]
Both R&B Insurance and Glodel appealed the RTC
R&B Insurance, thereafter, filed a complaint for decision to the CA.
damages against both Loadmasters and Glodel before
the Regional Trial Court, Branch 14, Manila (RTC), On August 24, 2007, the CA rendered the assailed
docketed as Civil Case No. 02-103040. It sought decision which reads in part:
reimbursement of the amount it had paid
to Columbia for the loss of the subject cargo. It claimed Considering that appellee is an agent of appellant
that it had been subrogated to the right of the consignee Glodel, whatever liability the latter owes to appellant
to recover from the party/parties who may be held R&B Insurance Corporation as insurance indemnity
legally liable for the loss.[2] must likewise be the amount it shall be paid by appellee
Loadmasters.
On November 19, 2003, the RTC rendered a
decision[3] holding Glodel liable for damages for the loss WHEREFORE, the foregoing considered, the appeal is
of the subject cargo and dismissing Loadmasters PARTLY GRANTED in that the appellee Loadmasters
counterclaim for damages and attorneys fees against is likewise held liable to appellant Glodel in the amount
of P1,896,789.62 representing the insurance indemnity
appellant Glodel has been held liable to appellant R&B
Insurance Corporation.
Appellant Glodels appeal to absolve it from any liability
is herein DISMISSED.
SO ORDERED.[5]
Hence, Loadmasters filed the present petition for review
on certiorari before this Court presenting the following
ISSUES
1. Can Petitioner Loadmasters be held liable to
Respondent Glodel in spite of the fact that the latter
respondent Glodel did not file a cross-claim against it
(Loadmasters)?
2. Under the set of facts established and undisputed
in the case, can petitioner Loadmasters be legally
considered as an Agent of respondent Glodel?[6]
To totally exculpate itself from responsibility for the lost
goods, Loadmasters argues that it cannot be considered
an agent of Glodel because it never represented the
latter in its dealings with the consignee. At any rate, it
further contends that Glodel has no recourse against it
for its (Glodels) failure to file a cross-claim pursuant to
Section 2, Rule 9 of the 1997 Rules of Civil Procedure.
Glodel, in its Comment,[7] counters that Loadmasters is
liable to it under its cross-claim because the latter was
grossly negligent in the transportation of the subject
cargo. With respect to Loadmasters claim that it is
already estopped from filing a cross-claim, Glodel
insists that it can still do so even for the first time on
appeal because there is no rule that provides
otherwise.Finally, Glodel argues that its relationship
with Loadmasters is that of Charter wherein the
transporter (Loadmasters) is only hired for the specific
job of delivering the merchandise. Thus, the diligence
required in this case is merely ordinary diligence or that
of a good father of the family, not the extraordinary
diligence required of common carriers.
81
R&B Insurance, for its part, claims that Glodel is
deemed to have interposed a cross-claim against
Loadmasters because it was not prevented from
presenting evidence to prove its position even without
amending its Answer. As to the relationship between
Loadmasters and Glodel, it contends that a contract of
agency existed between the two corporations.[8]
Subrogation is the substitution of one person in the
place of another with reference to a lawful claim or
right, so that he who is substituted succeeds to the rights
of the other in relation to a debt or claim, including its
remedies or securities.[9] Doubtless, R&B Insurance is
subrogated to the rights of the insured to the extent of
the amount it paid the consignee under the marine
insurance, as provided under Article 2207 of the Civil
Code, which reads:
ART. 2207. If the plaintiffs property has been insured,
and he has received indemnity from the insurance
company for the injury or loss arising out of the wrong
or breach of contract complained of, the insurance
company shall be subrogated to the rights of the insured
against the wrong-doer or the person who has violated
the contract. If the amount paid by the insurance
company does not fully cover the injury or loss, the
aggrieved party shall be entitled to recover the
deficiency from the person causing the loss or injury.
As subrogee of the rights and interest of the consignee,
R&B Insurance has the right to seek reimbursement
from either Loadmasters or Glodel or both for breach of
contract and/or tort.
The issue now is who, between Glodel and
Loadmasters, is liable to pay R&B Insurance for the
amount of the indemnity it paid Columbia.
At the outset, it is well to resolve the issue of whether
Loadmasters and Glodel are common carriers to
determine their liability for the loss of the subject
cargo. Under Article 1732 of the Civil Code, common
carriers are persons, corporations, firms, or associations
engaged in the business of carrying or transporting
passenger or goods, or both by land, water or air for
compensation, offering their services to the public.
Based on the aforecited definition, Loadmasters is a
common carrier because it is engaged in the business of
transporting goods by land, through its trucking
service. It is a common carrier as distinguished from
a private carrier wherein the carriage is generally
undertaken by special agreement and it does not hold
itself out to carry goods for the general public.[10] The
distinction is significant in the sense that the rights and
obligations of the parties to a contract of private carriage
are governed principally by their stipulations, not by the
law on common carriers.[11]
In the present case, there is no indication that the
undertaking in the contract between Loadmasters and
Glodel was private in character. There is no showing
that Loadmasters solely and exclusively rendered
services to Glodel.
In fact, Loadmasters admitted that it is a common
carrier.[12]
In the same vein, Glodel is also considered a common
carrier within the context of Article 1732. In its
Memorandum,[13] it states that it is a corporation duly
organized and existing under the laws of the Republic of
the Philippines and is engaged in the business of
customs brokering. It cannot be considered otherwise
because as held by this Court in Schmitz Transport &
Brokerage Corporation v. Transport Venture, Inc., [14] a
customs broker is also regarded as a common carrier,
the transportation of goods being an integral part of its
business.
Loadmasters and Glodel, being both common carriers,
are mandated from the nature of their business and for
reasons of public policy, to observe the extraordinary
diligence in the vigilance over the goods transported by
them according to all the circumstances of such case, as
required by Article 1733 of the Civil Code. When the
Court speaks of extraordinary diligence, itis that
extreme measure of care and caution which persons of
unusual prudence and circumspection observe for
securing and preserving their own property or
rights.[15] This exacting standard imposed on common
carriers in a contract of carriage of goods is intended to
tilt the scales in favor of the shipper who is at the mercy
of the common carrier once the goods have been lodged
for shipment.[16] Thus, in case of loss of the goods, the
common carrier is presumed to have been at fault or to
have acted negligently.[17] This presumption of fault or
negligence, however, may be rebutted by proof that the
common carrier has observed extraordinary diligence
over the goods.
With respect to the time frame of this extraordinary
responsibility, the Civil Code provides that the exercise
of extraordinary diligence lasts from the time the goods
are unconditionally placed in the possession of, and
received by, the carrier for transportation until the same
are delivered, actually or constructively, by the carrier to
the consignee, or to the person who has a right to
receive them.[18]
Premises considered, the Court is of the view that both
Loadmasters and Glodel are jointly and severally liable
to R & B Insurance for the loss of the subject
cargo. Under Article 2194 of the New Civil Code, the
responsibility of two or more persons who are liable for
a quasi-delict is solidary.
Loadmasters claim that it was never privy to the
contract entered into by Glodel with the
consignee Columbia or R&B Insurance as subrogee, is
not a valid defense. It may not have a direct contractual
relation with Columbia, but it is liable for tort under the
provisions of Article 2176 of the Civil Code on quasi-
delicts which expressly provide:
ART. 2176. Whoever by act or omission causes damage
to another, there being fault or negligence, is obliged to
pay for the damage done. Such fault or negligence, if
there is no pre-existing contractual relation between the
parties, is called a quasi-delict and is governed by the
provisions of this Chapter.
Pertinent is the ruling enunciated in the case
of Mindanao Terminal and Brokerage Service, Inc. v.
Phoenix Assurance Company of New York,/McGee &
Co., Inc.[19] where this Court held that a tort may arise
despite the absence of a contractual relationship, to wit:
We agree with the Court of Appeals that the complaint
filed by Phoenix and McGee against Mindanao
Terminal, from which the present case has arisen, states
a cause of action. The present action is based on quasi-
delict, arising from the negligent and careless loading
and stowing of the cargoes belonging to Del Monte
Produce. Even assuming that both Phoenix and McGee
82
have only been subrogated in the rights of Del Monte
Produce, who is not a party to the contract of service
between Mindanao Terminal and Del Monte, still the
insurance carriers may have a cause of action in light of
the Courts consistent ruling that the act that breaks the
contract may be also a tort. In fine, a liability for tort
may arise even under a contract, where tort is that which
breaches the contract. In the present case, Phoenix and
McGee are not suing for damages for injuries arising
from the breach of the contract of service but from
the alleged negligent manner by which Mindanao
Terminal handled the cargoes belonging to Del Monte
Produce. Despite the absence of contractual relationship
between Del Monte Produce and Mindanao Terminal,
the allegation of negligence on the part of the defendant
should be sufficient to establish a cause of action arising
from quasi-delict. [Emphases supplied]
In connection therewith, Article 2180 provides:
ART. 2180. The obligation imposed by Article 2176 is
demandable not only for ones own acts or omissions,
but also for those of persons for whom one is
responsible.
xxxx
Employers shall be liable for the damages caused by
their employees and household helpers acting within the
scope of their assigned tasks, even though the former are
not engaged in any business or industry.
It is not disputed that the subject cargo was lost while in
the custody of Loadmasters whose employees (truck
driver and helper) were instrumental in the hijacking or
robbery of the shipment. As employer, Loadmasters
should be made answerable for the damages caused by
its employees who acted within the scope of their
assigned task of delivering the goods safely to the
warehouse.
Whenever an employees negligence causes damage or
injury to another, there instantly arises a
presumption juris tantum that the employer failed to
exercise diligentissimi patris families in the
selection (culpa in eligiendo) or supervision (culpa in
vigilando) of its employees.[20] To avoid liability for a
quasi-delict committed by its employee, an employer
must overcome the presumption by presenting
convincing proof that he exercised the care and
diligence of a good father of a family in the selection
and supervision of his employee.[21] In this regard,
Loadmasters failed.
Glodel is also liable because of its failure to exercise
extraordinary diligence. It failed to ensure that
Loadmasters would fully comply with the undertaking
to safely transport the subject cargo to the designated
destination. It should have been more prudent in
entrusting the goods to Loadmasters by taking
precautionary measures, such as providing escorts to
accompany the trucks in delivering the cargoes. Glodel
should, therefore, be held liable with Loadmasters. Its
defense of force majeure is unavailing.
At this juncture, the Court clarifies that there exists no
principal-agent relationship between Glodel and
Loadmasters, as erroneously found by the CA. Article
1868 of the Civil Code provides: By the contract of
agency a person binds himself to render some service or
to do something in representation or on behalf of
another, with the consent or authority of the latter. The
elements of a contract of agency are: (1) consent,
express or implied, of the parties to establish the
relationship; (2) the object is the execution of a juridical
act in relation to a third person; (3) the agent acts as a
representative and not for himself; (4) the agent acts
within the scope of his authority.[22]
Accordingly, there can be no contract of agency
between the parties. Loadmasters never represented
Glodel. Neither was it ever authorized to make such
representation. It is a settled rule that the basis for
agency is representation, that is, the agent acts for and
on behalf of the principal on matters within the scope of
his authority and said acts have the same legal effect as
if they were personally executed by the principal. On the
part of the principal, there must be an actual intention to
appoint or an intention naturally inferable from his
words or actions, while on the part of the agent, there
must be an intention to accept the appointment and act
on it.[23]Such mutual intent is not obtaining in this case.
What then is the extent of the respective liabilities of
Loadmasters and Glodel? Each wrongdoer is liable for
the total damage suffered by R&B Insurance. Where
there are several causes for the resulting damages, a
party is not relieved from liability, even partially. It is
sufficient that the negligence of a party is an efficient
cause without which the damage would not have
resulted. It is no defense to one of the concurrent
tortfeasors that the damage would not have resulted
from his negligence alone, without the negligence or
wrongful acts of the other concurrent tortfeasor. As
stated in the case of Far Eastern Shipping v. Court of
Appeals,[24]
X x x. Where several causes producing an injury are
concurrent and each is an efficient cause without which
the injury would not have happened, the injury may be
attributed to all or any of the causes and recovery may
be had against any or all of the responsible persons
although under the circumstances of the case, it may
appear that one of them was more culpable, and that the
duty owed by them to the injured person was not the
same. No actor's negligence ceases to be a proximate
cause merely because it does not exceed the negligence
of other actors. Each wrongdoer is responsible for the
entire result and is liable as though his acts were the sole
cause of the injury.
There is no contribution between joint tortfeasors whose
liability is solidary since both of them are liable for the
total damage. Where the concurrent or successive
negligent acts or omissions of two or more persons,
although acting independently, are in combination the
direct and proximate cause of a single injury to a third
person, it is impossible to determine in what proportion
each contributed to the injury and either of them is
responsible for the whole injury. Where their
concurring negligence resulted in injury or damage to a
third party, they become joint tortfeasors and are
solidarily liable for the resulting damage under Article
2194 of the Civil Code. [Emphasis supplied]
The Court now resolves the issue of whether Glodel can
collect from Loadmasters, it having failed to file a cross-
claim against the latter.
Undoubtedly, Glodel has a definite cause of action
against Loadmasters for breach of contract of service as
the latter is primarily liable for the loss of the subject
cargo. In this case, however, it cannot succeed in
seeking judicial sanction against Loadmasters because
the records disclose that it did not properly interpose a
cross-claim against the latter. Glodel did not even pray
83
that Loadmasters be liable for any and all claims that it
may be adjudged liable in favor of R&B
Insurance. Under the Rules, a compulsory
counterclaim, or a cross-claim, not set up shall be
barred.[25] Thus, a cross-claim cannot be set up for the
first time on appeal.
For the consequence, Glodel has no one to blame but
itself. The Court cannot come to its aid on equitable
grounds. Equity, which has been aptly described as a
justice outside legality, is applied only in the absence of,
and never against, statutory law or judicial rules of
procedure.[26] The Court cannot be a lawyer and take the
cudgels for a party who has been at fault or negligent.
WHEREFORE, the petition is PARTIALLY
GRANTED. The August 24, 2007Decision of the Court
of Appeals is MODIFIED to read as follows:
WHEREFORE, judgment is rendered declaring
petitioner Loadmasters Customs Services, Inc. and
respondent Glodel Brokerage Corporation jointly and
severally liable to respondent R&B Insurance
Corporation for the insurance indemnity it paid to
consignee Columbia Wire & Cable Corporation and
ordering both parties to pay, jointly and severally, R&B
Insurance Corporation a] the amount of P1,896,789.62
representing the insurance indemnity; b] the amount
equivalent to ten (10%) percent thereof for attorneys
fees; and c] the amount of P22,427.18 for litigation
expenses.
The cross-claim belatedly prayed for by respondent
Glodel Brokerage Corporation against petitioner
Loadmasters Customs Services, Inc. is DENIED.
SO ORDERED.
FIRST DIVISION
[G.R. No. 138334. August 25, 2003]
ESTELA L. CRISOSTOMO, petitioner, vs. THE
COURT OF APPEALS andCARAVAN TRAVEL &
TOURS INTERNATIONAL, INC., respondents.
DECISION
YNARES-SANTIAGO, J.:
In May 1991, petitioner Estela L. Crisostomo contracted
the services of respondent Caravan Travel and Tours
International, Inc. to arrange and facilitate her booking,
ticketing and accommodation in a tour dubbed Jewels of
Europe. The package tour included the countries of
England, Holland, Germany, Austria, Liechstenstein,
Switzerland and France at a total cost of
P74,322.70. Petitioner was given a 5% discount on the
amount, which included airfare, and the booking fee was
also waived because petitioners niece, Meriam Menor,
was respondent companys ticketing manager.
Pursuant to said contract, Menor went to her aunts
residence on June 12, 1991 a Wednesday to deliver
petitioners travel documents and plane
tickets. Petitioner, in turn, gave Menor the full payment
for the package tour. Menor then told her to be at the
Ninoy Aquino International Airport (NAIA)
on Saturday, two hours before her flight on board
British Airways.
Without checking her travel documents, petitioner went
to NAIA on Saturday, June 15, 1991, to take the flight
for the first leg of her journey from Manila to
Hongkong. To petitioners dismay, she discovered that
the flight she was supposed to take had already departed
the previous day. She learned that her plane ticket was
for the flight scheduled on June 14, 1991. She thus
called up Menor to complain.
Subsequently, Menor prevailed upon petitioner to take
another tour the British Pageant which included
England, Scotland and Wales in its itinerary. For this
tour package, petitioner was asked anew to pay
US$785.00 or P20,881.00 (at the then prevailing
exchange rate of P26.60). She gave respondent US$300
or P7,980.00 as partial payment and commenced the trip
in July 1991.
Upon petitioners return from Europe, she demanded
from respondent the reimbursement of P61,421.70,
representing the difference between the sum she paid for
Jewels of Europe and the amount she owed respondent
for the British Pageant tour. Despite several demands,
respondent company refused to reimburse the amount,
contending that the same was non-
84
refundable.[1]Petitioner was thus constrained to file a
complaint against respondent for breach of contract of
carriage and damages, which was docketed as Civil
Case No. 92-133 and raffled to Branch 59 of the
Regional Trial Court of Makati City.
In her complaint,[2] petitioner alleged that her failure to
join Jewels of Europe was due to respondents fault since
it did not clearly indicate the departure date on the plane
ticket. Respondent was also negligent in informing her
of the wrong flight schedule through its employee
Menor. She insisted that the British Pageant was merely
a substitute for the Jewels of Europe tour, such that the
cost of the former should be properly set-off against the
sum paid for the latter.
For its part, respondent company, through its Operations
Manager, Concepcion Chipeco, denied responsibility for
petitioners failure to join the first tour. Chipeco insisted
that petitioner was informed of the correct departure
date, which was clearly and legibly printed on the plane
ticket. The travel documents were given to petitioner
two days ahead of the scheduled trip. Petitioner had only
herself to blame for missing the flight, as she did not
bother to read or confirm her flight schedule as printed
on the ticket.
Respondent explained that it can no longer reimburse
the amount paid for Jewels of Europe, considering that
the same had already been remitted to its principal in
Singapore, Lotus Travel Ltd., which had already billed
the same even if petitioner did not join the tour. Lotus
European tour organizer, Insight International Tours
Ltd., determines the cost of a package tour based on a
minimum number of projected participants. For this
reason, it is accepted industry practice to disallow
refund for individuals who failed to take a booked
tour.[3]
Lastly, respondent maintained that the British Pageant
was not a substitute for the package tour that petitioner
missed. This tour was independently procured by
petitioner after realizing that she made a mistake in
missing her flight for Jewels of Europe. Petitioner was
allowed to make a partial payment of only US$300.00
for the second tour because her niece was then an
employee of the travel agency. Consequently,
respondent prayed that petitioner be ordered to pay the
balance of P12,901.00 for the British Pageant package
tour.
After due proceedings, the trial court rendered a
decision,[4] the dispositive part of which reads:
WHEREFORE, premises considered, judgment is
hereby rendered as follows:
1. Ordering the defendant to return and/or refund to the
plaintiff the amount of Fifty Three Thousand Nine
Hundred Eighty Nine Pesos and Forty Three Centavos
(P53,989.43) with legal interest thereon at the rate of
twelve percent (12%) per annum starting January 16,
1992, the date when the complaint was filed;
2. Ordering the defendant to pay the plaintiff the amount
of Five Thousand (P5,000.00) Pesos as and for
reasonable attorneys fees;
3. Dismissing the defendants counterclaim, for lack of
merit; and
4. With costs against the defendant.
SO ORDERED.[5]
The trial court held that respondent was negligent in
erroneously advising petitioner of her departure date
through its employee, Menor, who was not presented as
witness to rebut petitioners testimony. However,
petitioner should have verified the exact date and time
of departure by looking at her ticket and should have
simply not relied on Menors verbal representation. The
trial court thus declared that petitioner was guilty of
contributory negligence and accordingly, deducted 10%
from the amount being claimed as refund.
Respondent appealed to the Court of Appeals, which
likewise found both parties to be at fault.However, the
appellate court held that petitioner is more negligent
than respondent because as a lawyer and well-traveled
person, she should have known better than to simply
rely on what was told to her. This being so, she is not
entitled to any form of damages. Petitioner also forfeited
her right to the Jewels of Europe tour and must therefore
pay respondent the balance of the price for the British
Pageant tour. The dispositive portion of the judgment
appealed from reads as follows:
WHEREFORE, premises considered, the decision of the
Regional Trial Court dated October 26, 1995 is hereby
REVERSED and SET ASIDE. A new judgment is
hereby ENTERED requiring the plaintiff-appellee to
pay to the defendant-appellant the amount of
P12,901.00, representing the balance of the price of the
British Pageant Package Tour, the same to earn legal
interest at the rate of SIX PERCENT (6%) per annum,
to be computed from the time the counterclaim was filed
until the finality of this decision. After this decision
becomes final and executory, the rate of TWELVE
PERCENT (12%) interest per annum shall be
additionally imposed on the total obligation until
payment thereof is satisfied. The award of attorneys fees
is DELETED. Costs against the plaintiff-appellee.
SO ORDERED.[6]
Upon denial of her motion for
reconsideration,[7] petitioner filed the instant petition
under Rule 45 on the following grounds:
I not an entity engaged in the business of transporting
It is respectfully submitted that the Honorable Court of
Appeals committed a reversible error in reversing and
setting aside the decision of the trial court by ruling that
the petitioner is not entitled to a refund of the cost of
unavailed Jewels of Europe tour she being equally, if
not more, negligent than the private respondent, for in
the contract of carriage the common carrier is obliged to
observe utmost care and extra-ordinary diligence which
is higher in degree than the ordinary diligence required
of the passenger. Thus, even if the petitioner and private
respondent were both negligent, the petitioner cannot be
considered to be equally, or worse, more guilty than the
private respondent. At best, petitioners negligence is
only contributory while the private respondent [is
guilty] of gross negligence making the principle of pari
delicto inapplicable in the case;
II
The Honorable Court of Appeals also erred in not ruling
that the Jewels of Europe tour was not indivisible and
the amount paid therefor refundable;
III
The Honorable Court erred in not granting to the
petitioner the consequential damages due her as a result
of breach of contract of carriage.[8]
Petitioner contends that respondent did not observe the
standard of care required of a common carrier when it
informed her wrongly of the flight schedule. She could
not be deemed more negligent than respondent since the
latter is required by law to exercise extraordinary
diligence in the fulfillment of its obligation. If she were
negligent at all, the same is merely contributory and not
the proximate cause of the damage she suffered. Her
loss could only be attributed to respondent as it was the
direct consequence of its employees gross negligence.
Petitioners contention has no merit.
By definition, a contract of carriage or transportation is
one whereby a certain person or association of persons
obligate themselves to transport persons, things, or news
from one place to another for a fixed price.[9] Such
person or association of persons are regarded as carriers
and are classified as private or special carriers and
common or public carriers.[10] A common carrier is
85
defined under Article 1732 of the Civil Code as persons,
corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods
or both, by land, water or air, for compensation, offering
their services to the public.
It is obvious from the above definition that respondent is
either passengers or goods and is therefore, neither a
private nor a common carrier. Respondent did not
undertake to transport petitioner from one place to
another since its covenant with its customers is simply
to make travel arrangements in their behalf.
Respondents services as a travel agency include
procuring tickets and facilitating travel permits or visas
as well as booking customers for tours.
While petitioner concededly bought her plane ticket
through the efforts of respondent company, this does not
mean that the latter ipso facto is a common carrier. At
most, respondent acted merely as an agent of the airline,
with whom petitioner ultimately contracted for her
carriage to Europe. Respondents obligation to petitioner
in this regard was simply to see to it that petitioner was
properly booked with the airline for the appointed date
and time. Her transport to the place of destination,
meanwhile, pertained directly to the airline.
The object of petitioners contractual relation with
respondent is the latters service of arranging and
facilitating petitioners booking, ticketing and
accommodation in the package tour. In contrast, the
object of a contract of carriage is the transportation of
passengers or goods. It is in this sense that the contract
between the parties in this case was an ordinary one for
services and not one of carriage. Petitioners submission
is premised on a wrong assumption.
The nature of the contractual relation between petitioner
and respondent is determinative of the degree of care
required in the performance of the latters obligation
under the contract. For reasons of public policy, a
common carrier in a contract of carriage is bound by law
to carry passengers as far as human care and foresight
can provide using the utmost diligence of very cautious
persons and with due regard for all the
circumstances.[11] As earlier stated, however, respondent
is not a common carrier but a travel agency. It is thus
not bound under the law to observe extraordinary
diligence in the performance of its obligation, as
petitioner claims.
Since the contract between the parties is an ordinary one
for services, the standard of care required of respondent
is that of a good father of a family under Article 1173 of
the Civil Code.[12] This connotes reasonable care
consistent with that which an ordinarily prudent person
would have observed when confronted with a similar
situation. The test to determine whether negligence
attended the performance of an obligation is: did the
defendant in doing the alleged negligent act use that
reasonable care and caution which an ordinarily prudent
person would have used in the same situation? If not,
then he is guilty of negligence.[13]
In the case at bar, the lower court found Menor
negligent when she allegedly informed petitioner of the
wrong day of departure. Petitioners testimony was
accepted as indubitable evidence of Menors alleged
negligent act since respondent did not call Menor to the
witness stand to refute the allegation. The lower court
applied the presumption under Rule 131, Section 3
(e)[14] of the Rules of Court that evidence willfully
suppressed would be adverse if produced and thus
considered petitioners uncontradicted testimony to be
sufficient proof of her claim.
On the other hand, respondent has consistently denied
that Menor was negligent and maintains that petitioners
assertion is belied by the evidence on record. The date
and time of departure was legibly written on the plane
ticket and the travel papers were delivered two days in
advance precisely so that petitioner could prepare for the
trip. It performed all its obligations to enable petitioner
to join the tour and exercised due diligence in its
dealings with the latter.
We agree with respondent.
Respondents failure to present Menor as witness to rebut
petitioners testimony could not give rise to an inference
unfavorable to the former. Menor was already working
in France at the time of the filing of the
complaint,[15] thereby making it physically impossible
for respondent to present her as a witness. Then too,
even if it were possible for respondent to secure Menors
testimony, the presumption under Rule 131, Section 3(e)
would still not apply. The opportunity and possibility
for obtaining Menors testimony belonged to both
parties, considering that Menor was not just respondents
employee, but also petitioners niece. It was thus error
for the lower court to invoke the presumption that
respondent willfully suppressed evidence under Rule
131, Section 3(e). Said presumption would logically be
inoperative if the evidence is not intentionally omitted
but is simply unavailable, or when the same could have
been obtained by both parties.[16]
In sum, we do not agree with the finding of the lower
court that Menors negligence concurred with the
negligence of petitioner and resultantly caused damage
to the latter. Menors negligence was not sufficiently
proved, considering that the only evidence presented on
this score was petitioners uncorroborated narration of
the events. It is well-settled that the party alleging a fact
has the burden of proving it and a mere allegation
cannot take the place of evidence.[17] If the plaintiff,
upon whom rests the burden of proving his cause of
action, fails to show in a satisfactory manner facts upon
which he bases his claim, the defendant is under no
obligation to prove his exception or defense.[18]
Contrary to petitioners claim, the evidence on record
shows that respondent exercised due diligence in
performing its obligations under the contract and
followed standard procedure in rendering its services to
petitioner. As correctly observed by the lower court, the
plane ticket[19] issued to petitioner clearly reflected the
departure date and time, contrary to petitioners
contention. The travel documents, consisting of the tour
itinerary, vouchers and instructions, were likewise
delivered to petitioner two days prior to the trip.
Respondent also properly booked petitioner for the tour,
prepared the necessary documents and procured the
plane tickets. It arranged petitioners hotel
accommodation as well as food, land transfers and
sightseeing excursions, in accordance with its avowed
undertaking.
Therefore, it is clear that respondent performed its
prestation under the contract as well as everything else
that was essential to book petitioner for the tour. Had
petitioner exercised due diligence in the conduct of her
affairs, there would have been no reason for her to miss
the flight. Needless to say, after the travel papers were
delivered to petitioner, it became incumbent upon her to
take ordinary care of her concerns. This undoubtedly
would require that she at least read the documents in
order to assure herself of the important details regarding
the trip.
The negligence of the obligor in the performance of the
obligation renders him liable for damages for the
resulting loss suffered by the obligee. Fault or
negligence of the obligor consists in his failure to
exercise due care and prudence in the performance of
the obligation as the nature of the obligation so
demands.[20] There is no fixed standard of diligence
applicable to each and every contractual obligation and
each case must be determined upon its particular facts.
86
The degree of diligence required depends on the
circumstances of the specific obligation and whether
one has been negligent is a question of fact that is to be
determined after taking into account the particulars of
each case.[21]
The lower court declared that respondents employee
was negligent. This factual finding, however, is not
supported by the evidence on record. While factual
findings below are generally conclusive upon this court,
the rule is subject to certain exceptions, as when the trial
court overlooked, misunderstood, or misapplied some
facts or circumstances of weight and substance which
will affect the result of the case.[22]
In the case at bar, the evidence on record shows that
respondent company performed its duty diligently and
did not commit any contractual breach. Hence,
petitioner cannot recover and must bear her own
damage.
WHEREFORE, the instant petition is DENIED for
lack of merit. The decision of the Court of Appeals in
CA-G.R. CV No. 51932 is AFFIRMED. Accordingly,
petitioner is ordered to pay respondent the amount of
P12,901.00 representing the balance of the price of the
British Pageant Package Tour, with legal interest
thereon at the rate of 6% per annum, to be computed
from the time the counterclaim was filed until the
finality of this Decision. After this Decision becomes
final and executory, the rate of 12% per annum shall be
imposed until the obligation is fully settled, this interim
period being deemed to be by then an equivalent to a
forbearance of credit.[23]
SO ORDERED.
SECOND DIVISION
G.R. No. 105090 September 16, 1993
BISIG NG MANGGAGAWA SA CONCRETE
AGGREGATES, INC., (BIMCAI) FSM, AND ITS
UNION OFFICERS & MEMBERS,
ETC., petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION,
LABOR ARBITER ERNILO V. PEÑALOSA and
CONCRETE AGGREGATES CORP., respondents.
Jose C. Espinas for petitioner.
Rayala, Estrada & Associate Law Offices for private
respondent.
PUNO, J.:
The restoration of the right to strike is the most valuable
gain of labor after the EDSA revolution. It is the
employees' sole weapon which can effectively protect
their basic rights especially in a society where the levers
of powers are nearly monopolized by the propertied few
or their franchisees. In recognition of its importance, our
Constitution has accorded the rights to strike a distinct
status while our laws have assured that its rightful
exercise will not be negated by the issuance of
unnecessary injunctions. The impugned Order of the
public respondents in the case at bar infringes
petitioners' right to strike and hence must be struck
down.
The labor conflict between the parties broke out in the
open when
the petitioner union1 struck on April 6, 1992 protesting
issues ranging from unfair labor practices and union
busting allegedly committed by the private
respondent.2 The union picketed the premises of the
private respondent at Bagumbayan and Longos in
Quezon City; Angono and Antipolo in Rizal; San
Fernando, Pampanga and San Pedro, Laguna.
The strike hurt the private respondent. On April 8, 1992,
it filed with the NLRC a petition for injunction3 to stop
the strike which it denounced as illegal. It alleged:
xxx xxx xxx
13. On April 6, 1992, at around 7:00 p.m., respondents
led by its officers and some members staged a wild-cat
strike, without a valid notice of strike, nor observing
cooling-off period, and made even during the pendency
of a preventive mediation proceedings which was still
scheduled for April 10, 1992;
87
14. And during the said wild-cat strike, respondents
have set-up makeshifts, tents, banners and streamers and
other man-made obstructions at the main plant and
offices of petitioner which effectively impeding, as in
fact still effectively impeding the ingress and egress of
persons who have lawful business with the petitioner;
15. Furthermore, respondents have resorted, as in fact
still resorting to, unlawful and illegal acts including
among others threats, intimidations and coercions
against persons who have lawful business with the
petitioner and the non-striking employees who wish to
return to work;
16. Without complying with the legal requirements for a
valid strike, respondents' staging of the said "wild-cat
strike", is by law considered as illegal or unlawful act
which must be enjoined;
17. As a direct result of the aforesaid unlawful and
illegal acts of the respondents, petitioner which has on-
going projects for the government and other private
entities which require completion on and agreed
schedule, is at great and imminent danger to suffer
substantial damages and injury, which if not urgently
redressed, will inevitably become irreparable;
18. Said prohibited and unlawful acts have been
threatened and will continuously be committed unless
the injunction or temporary restraining order be issued
against the respondents; (pp. 2-5, Records).
xxx xxx xxx
23. The injury and damages to the government of
Republic of the Philippines, the petitioner and other
persons are unavoidable, so much so that the issuance of
a Temporary Restraining Order without notice becomes
imperative, as the police officers or agents of authority
called upon to enforce the right to ingress and egress are
unable to do so; (p. 6, ibid)
The petition was set for hearing on April 13, 1992 at 3
p.m. The union, however, claimed that it was not
furnished a copy of the petition. Allegedly, the company
misrepresented its address to be at Rm. 205-6 Herald
Bldg., Muralla St., Intramuros, Manila.
On April 13, 1992, the NLRC heard the evidence of the
company alone. The ex parte hearing started at 2:30
p.m. where testimonial and documentary evidence were
presented.4 Some thirty (30) minutes later, an Ocular
Inspection Report was submitted by an unnamed NLRC
representative5 which reads:
OCULAR INSPECTION REPORT
Authorization dated April 13, 1992 was issued to the
effect of directing the undersigned to conduct an ocular
inspection of the premises of the petitioner located at
Bagumbayan, Quezon City.
The inspection was conducted immediately upon receipt
hereof.
OBSERVATION
The passage was obstructed with pieces of rock, an old
ladder, pieces of wood and other hard objects that gave
rise to a strong indication that the passage to and from
the premises was not free. The barricades and
obstruction were put up fifty (50) meters or less away
from the main gate.
The business operation was completely paralized (sic)
as no person was noticed inside the company
compound. No persons and/or vehicles were seen
entering and leaving the premises. Ingress to and
engress from the company is presumed to be not free.
Before the day was over, the respondent NLRC (First
Division) issued a temporary restraining order against
the union, viz.:
. . . RESOLVED, to issue a Temporary Restraining
Order valid for twenty (20) days, subject to petitioner's
posting of a cash or surety bond of Twenty Thousand
(P20,000.00) Pesos conditioned to recompense
respondents for any loss, expense or damage they may
suffer in the event it is eventually found out that
petitioner is not entitled to the relief sought and herein
granted, DIRECTING: a) the respondents, their agents
and symphatizers to remove (subject to their right to
conduct a lawful picket) the man made
barricades/obstructions complained of and to direct from
further preventing and/or impeding the free ingress to
and egress from petitioner's main plant and office
premises of its employees, officials, vehicles, customers
or any party who may want to transact business thereat
through the use of any obstructive means prohibited by
law; b) any officer from the Legal Division of this
Commission to ensure compliance of the foregoing
restraining order and where necessary, to enlist in the
implementation of this Order, as deputized enforcement
officers, the assistance of peace officers of this
government that has jurisdiction over the strike areas;
c) Labor Arbiter Ernilo V. Peñalosa to immediately set
this case for further hearing with the aim of affording
respondents enough opportunity to contest/oppose the
issuance of temporary/permanent injunction prayed for
in the petition and to submit a report to this Commission
within ten (10) days from termination of said hearing.
No copy of this Order was furnished the union. The
union learned of the Order only when it was posted on
April 15, 1992 at the premises of the company. On April
21, 1992, it filed its Opposition/Answer to the petition
for Injunction. Among others, it alleged:
xxx xxx xxx
9. The allegation in paragraph 13 of an alleged illegal
strike for the reasons stated therein is denied. It is also
added that the question of strike legality is outside the
original jurisdiction of the NLRC except if the labor
dispute has been certified to it for compulsory
arbitration. Hence, not only is paragraph 13 denied,
denial is made likewise of paragraph 16 which asks that
the strike must be enjoined. Paragraph 16 is irrelevant to
the cause of action in injunction because only the illegal
or unlawful acts maybe enjoined. The strike itself
cannot be enjoined unless certified by the honorable
Secretary of Labor to the NLRC for compulsory
arbitration.
9. Paragraphs 14, 15, 17, 18, and 19 of the allegations
supporting the cause of action are also denied for being
self-serving and premature.
10. Respondents also deny the allegation in paragraph
20 as the public officers charged with the duty to protect
the petitioner's property are able and willing to furnish
adequate protection as shown by the fact that when the
temporary restraining order was served, the police and
other law enforcement agency personnel came
immediately to respond and enforced the order
peacefully.
On April 24, 1992, the union also filed its own Petition
for Injunction to enjoin the company "from asking the
aid of the police and the military officer in escorting
scabs to enter the struck establishment."
The records show that the case was heard on April 24
and 30, May 4 and 5, 1992 by respondent Labor Arbiter
Enrilo Peñalosa.6 On April 30, 1992, the company filed
a Motion for the Immediate Issuance of Preliminary
Injunction wherein it alleged:
xxx xxx xxx
7. In the meantime, the respondents are still committing
illegal acts, by resorting to grave threats, intimidation
against the non-striking employees and persons with
lawful transactions with the company since April 20,
1992, continuously up to this time, either by actual
threats and intimidation whenever these persons attempt
to report to work or transact business with the company,
or by calling at their houses or places of residence, and
then and there coerce not to report for work on pain of
bodily harm; As proof thereof, petitioner attaches the
affidavit of
88
Atty. Elmer Jolo, Augusto Bautista, Ronnie Mercado,
among others, as Annexes "A", "B" and "C" and made
integral parts thereof.
8. For these reasons, said workers and persons are
constrained to refrain from reporting for work or from
transacting business with the company;
9. Finally, no less than the president of the Union,
supported by the leaders of the strikers, threatened that
upon the expiration of the validity of the temporary
restraining order, they will "sisimentuhin namin and
gates ng Concrete Aggregates na kahit ipis ay hindi
makakapasok at makakalabas" ("We will cement the
gates of the Concrete Aggregates that even
cockcroaches could not pass through");
The union got wind of the motion only on May 4, 1992.
The next day, May 5, 1992, it opposed the motion,
alleging:
xxx xxx xxx
They were never furnished by the petitioner with a copy
of the original petition for injunction filed on April 8,
1992 because as seen from the petition, petitioner
addressed the respondents at Rm. 205-206 Herald Bldg.,
Muralla St., Manila as stated in paragraph 2 of the said
petition and they came to know only of the same when
Commission issued a temporary restraining order dated
April 15, 1992 which was served to them at the picket
line on April 15, 1992 and thus they opposed the same
on April 20, 1992 (pp. 99-100, Records).
. . . . The suspicion is that same is deliberate in order for
the union not to be able to immediately oppose the
petition praying for a temporary restraining order and so
petitioner was scot-free when it presented ex-
parte evidence. The motion for the immediate issuance
of a preliminary injunction foisted upon the Honorable
Commission with affidavits of employees debunked by
cross-examination and officers of the company making
fantastic claims is an attempt to have lightning strike
twice at the same place. We hope this Honorable
Commission is not fooled and therefore we beseech it to
examine carefully the pleadings and the transcript on
this question of threat or prohibited acts.
xxx xxx xxx
The allegation of damages if no injunction is secured is
therefore premature and irrelevant in this proceedings
because there is no proof that the strike is illegal. For if
the strike is legal then both sides must bear their own
losses in an economic contest: the company — loss of
income; the workers — loss of wages. These are the
stakes in an economic dispute. The desperate company
posture to enjoin even the strike itself is shown by its
letter to the Secretary of Labor dated April 6, 1992, a
copy of which is hereto attached as Annex "A". The
Secretary of Labor has not yet acted on this request. The
company believes probably that an injunction petition
would substitute the provision of Art. 263 of the Labor
Code.
The same day, however, the respondent NLRC issued its
disputed Order7 granting the company's motion for
preliminary injunction. It reads:
It appears that despite the issuance of a temporary
restraining order on April 14, 1991, the respondents
have not ceased in committing the illegal acts being
enjoined. As shown by petitioner during the hearings of
its main petition for preliminary and/or permanent
injunction, held on the first day of the implementation of
the temporary restraining order on April 20, 1992 and
the day thereafter, respondents, thru the formation of
human blockade, have prevented the company vehicles
and Employees' Shuttle Buses from entering the
company premises, and through forces and intimidation
made the non-striking employees on board the vehicles
and buses to get down: that even the company's
Assistant Manager for Operations, Mr. Ronnie Mercado,
who tried to help the non-striking employees to enter the
company premises was blocked by the strikers and was
even told "wala kaming pakialam sa restraining order
ninyo, basta hindi namin papapasukin para magtrabaho
and sino mang empleyado ng Concrete Aggregates.
Bubugbugin namin kayo pag kayo nagpilit." He was
further told that "Ikaw Mercado huwag kang mapapel
dito baka may mangyari sa iyo." As a result of the said
blockade, threats and intimidation, more or less 100
non-striking employees now, have not been able to
report for work; moreover, the inability of the
company's Longos Plant to operate fully had caused it to
lose the contracted RMC Sales of around 10,000 cubic
meters worth around P10 million, not to mention the
expected loss in sales for the next three (3) months at
P14 million per month since no customers, regular or
prospective, could transact business with the company.
But foremost of all, it has been shown that no less than
the President of the Union, Ramos Banas, with the
support of the leaders of the strikers, has threatened that
upon the expiration of the validity of the temporary
restraining order on May 5, 1992, they will not only
barricade the gates of the company but even seal them
all so that "even cockcroaches could not pass through."
While respondents witnesses, who were mentioned in
the testimonies/affidavits of petitioner's witnesses, tried
to deny the illegal acts imputed against them, the fact
remains undisputed that when the convoy of the
company cars and Employees Shuttle Buses with
reporting non-striking employees on board were about
to enter the compound of the company's Longos Plant in
Quezon City, they were stopped by the respondents on
the lame excuse that they were only to inquire as to who
those on board and that they asked those who are
allegedly non employees of the petitioner to get down. It
has been substantially established that out of the work
force of the Longos Plant, about 100 more or less
employees have not been able to enter the plant
premises from April 20, 1991 up to the present, for fear
of bodily harm from the strikers. Likewise, if it were
true, as claimed, that no threats and intimidation were
committed against the company officials who were to
report for work, then there is no reason why the
Manager for Operations, Ronnie Mercado, should be
complaining to the police nearby and for the latter to
advise respondents Ramon Banas and Ernest Lascona
behave well. Moreover, there is merit to the claim of
petitioner that even contract workers hired by it who,
even before the strike and up to the present, were
assigned to work inside the premises of the Longos were
denied entrance by the strikers for their being alleged
scabs. With this admission regarding the contract
worker, there is reason to believe the truth and veracity
of the statement as of petitioner's witnesses, especially
the reasonable fear that after the lapse of the twenty (20)
days duration of the temporary restraining order, the
respondents-strikers will again resort to barricading the
entrances of petitioner's plants to prevent anyone from
entering the said plant's premises.
On the bases of all the foregoing facts and
circumstances, the First Division of this Commission,
after due deliberation hereby RESOLVED: (pending
conclusion of the hearing on petitioner's main petition of
April 24, 1991), to issue preliminary injunction: a)
enjoining the respondents, their representative and
symphatizers, if any, without prejudice to their right to
conduct a peaceful and lawful picket, from preventing
the non-striking employees, officials of the company
and their vehicles, customers and visitors free ingress to
and egress from petitioner's plant and premises;
directing them to make the ingress to and egress from
said premises free from any and all obstruction at all
times; and requiring them to desist from further
89
threatening and intimidating at their houses or elsewhere
the non-striking employees who up to now could not
report for work and to allow them to report for work
unmolested; b) directing them, despite the union
president's statement that none of the feared illegal acts
will be committed after the lapse of the temporary
restraining order, to refrain from doing any illegal act
which will exacerbate the situation upon the expiration
of the temporary restraining order; c) applying the cash
or surety bond of P20,000.00 posted by petitioner for
the temporary restraining order that will expire on May
5, 1992 as the case or surety bond for this preliminary
injunction; d) deputizing any officer from the Legal
Division of this Commission to effectively enforce and
implement this injunctive order and, if necessary, to
enlist the assistance of the PNP or other peace officers
having jurisdiction over the strike areas in the
enforcement and implementation of this Order.
Let two (2) copies of this injunctive order be posted in
two (2) conspicuous places of each of the strike areas by
the Bailiff of this Commission for the information and
proper guidance of all concerned.
SO ORDERED.
The union then filed the instant petition
for certiorari and mandamus raising the following
issues:
xxx xxx xxx
3. Whether or not the respondent NLRC can issue a
preliminary injunction, as it did issue, after the lapse of
a twenty day temporary restraining order without
regard to the specific provision of Article 218 (e) of the
Labor Code, . . ., considering that in the Order dated
May 5, 1992 (attached as Annex "E" of this petition)
there is no finding of fact by the respondent NLRC in
any of the five pages of the aforesaid Order, to the effect
that, as required by law, "(4) That complainant has no
adequate remedy at law; and (5) That the public officers
charged with the duty to protect complainants property
are unable or unwilling to furnish adequate protection.
4. Whether or not public respondent NLRC and Labor
Arbiter have unlawfully neglected the performance of
an act which the law enjoins as a duty resulting from
office considering that after petitioner also filed on April
24, 1992 a petition asking a temporary restraining order
and injunction against the escorting by police
authorities of individuals "who seek to replace the
strikers in entering or leaving the premises of a strike
area or work in the place of the strikers and that the
police force will keep out of the picket lines unless
actual violence or other criminal acts occur therein" as
provided or Article 264 (d) of the Labor Code,
considering that the Labor Arbiter reluctantly allowed
petitioners to present their evidence in support of their
petition to enjoin the scabs being escorted by the police;
WHILE in contrast, it continuously set the motion for
immediate issuance of preliminary injunction of private
respondents on April 30, 1992, May 4 and 5, 1992 and
issued a temporary restraining order in favor of the
respondent corporation in an hour.
We ordered the public and private respondents to
comment on the petition.8 In its 29-page Comment,
Solicitor General Raul I. Goco9 took the position that
the petition is impressed with merit. In contrast, the
private respondent company, defended the validity of
the Order dated May 5, 1992 of the NLRC.10 Similarly,
the NLRC contended that it did not abuse its discretion
in issuing the disputed Order.11
We find for the petitioners.
Strike has been considered the most effective weapon of
labor in protecting the rights of employees to improve
the terms and conditions of their employment. It may be
that in highly developed countries, the significance of
strike as a coercive weapon has shrunk in view of the
preference for more peaceful modes of settling labor
disputes. In underdeveloped countries, however, where
the economic crunch continues to enfeeble the already
marginalized working class, the importance of the right
to strike remains undiminished as indeed it has proved
many a time as the only coercive weapon that can
correct abuses against labor. It remains as the great
equalizer.
In the Philippine milieu where social justice remains
more as a rhetoric than a reality, labor has vigilantly
fought to safeguard the sanctity of the right to strike. Its
struggle to gain the right to strike has not been easy and
effortless. Labor's early exercise of the right to strike
collided with the laws on rebellion and sedition and sent
its leaders languishing in prisons. The spectre of
incarceration did not spur its leaders to sloth; on the
contrary it spiked labor to work for its legitimization.
This effort was enhanced by the flowering of liberal
ideas in the United States which inevitably crossed our
shores. It was enormously boosted by the American
occupation of our country. Hence, on June 17, 1953,
Congress gave statutory recognition to the right to strike
when it enacted RA 875, otherwise known as the
Industrial Peace Act. For nearly two (2) decades, labor
enjoyed the right to strike until it was prohibited on
September 12, 1972 upon the declaration of martial law
in the country. The 14-year battle to end martial rule
produced many martyrs and foremost among them were
the radicals of the labor movement. It was not a mere
happenstance, therefore, that after the final battle against
martial rule was fought at EDSA in 1986, the new
government treated labor with a favored eye. Among
those chosen by then President Corazon C. Aquino to
draft the 1987 Constitution were recognized labor
leaders like Eulogio Lerum, Jose D. Calderon, Blas D.
Ople and Jaime S.L. Tadeo. These delegates helped
craft into the 1987 Constitution its Article XIII entitled
Social Justice and Human Rights. For the first time in
our constitutional history, the fundamental law of our
land mandated the State to ". . . guarantee the rights of
all workers to self-organization, collective bargaining
and negotiations, and peaceful concerted
activities, including the right to strike in accordance
with law." 12 This constitutional imprimatur given to the
right to strike constitutes signal victory for labor. Our
Constitutions of 1935 and 1973 did not accord
constitutional status to the right to strike. Even the
liberal US Federal Constitution did not elevate the right
to strike to a constitutional level. With a constitutional
matrix, enactment of a law implementing the right to
strike was an inevitability. RA 6715 came into being on
March 21, 1989, an intentional replication of RA
875. 13 In light of the genesis of the right to strike, it
ought to be obvious that the right should be read with a
libertarian latitude in favor of labor. In the wise words
of Father Joaquin G. Bernas, S.J., a distinguished
commissioner of the 1987 Constitutional Commission "
. . . the constitutional recognition of the right to strike
does serve as a reminder that injunctions, should be
reduced to the barest minimum". 14
In the case at bar, the records will show that the
respondent NLRC failed to comply with the letter and
spirit of Article 218 (e), (4) and (5) of the Labor Code in
issuing its Order of May 5, 1992. Article 218 (e) of the
Labor Code provides both the procedural and
substantive requirements which must strictly be
complied with before a temporary or permanent
injunction can issue in a labor dispute, viz.:
Art. 218. Powers of the Commission. — The
Commission shall have the power and authority:
xxx xxx xxx
(e) To enjoin or restrain any actual or threatened
commission of any or all prohibited or unlawful acts or
to require the performance of a particular act in any
90
labor dispute which, if not restrained or performed
forthwith, may cause grave or irreparable damage to any
party or render ineffectual any decision in favor of such
party: Provided, That no temporary or permanent
injunction in any case involving or growing out of a
labor dispute as defined in this Code shall be issued
except after hearing the testimony of witnesses, with
opportunity for cross-examination, in support of the
allegations of a complaint made under oath, and
testimony in opposition thereto, if offered, and only
after a finding of fact by the commission, to the effect:
(1) That prohibited or unlawful acts have been
threatened and will be committed and will be continued
unless restrained but no injunction or temporary
restraining order shall be issued on account of any
threat, prohibited or unlawful act, except against the
person or persons, association or organization making
the threat or committing the prohibited or unlawful act
or actually authorizing or ratifying the same after actual
knowledge thereof;
(2) That substantial and irreparable injury to
complainants property will follow;
(3) That as to each item of relief to be granted, greater
injury will be inflicted upon complainant by the denial
of relief than will be inflicted upon defendants by the
granting of relief;
(4) That complainant has no adequate remedy at
law; and
(5) That the public officers charged with the duty to
protect complainants property are unable or unwilling
to furnish adequate protection.
Such hearing shall be held after due and personal notice
thereof has been served, in such manner as the
Commission shall direct, to all known persons against
whom relief is sought, and also to the Chief Executive
and other public officials of the province or city within
which the unlawful have been threatened or committed
charged with the duty to protect complainant's property:
. . . (Emphasis ours)
In his Comment, the Solicitor General cited various
evidence on record showing the failure of public
respondents to fulfill the requirements, especially of
paragraphs four (4) and five (5) of the above cited law.
We quote with approval the pertinent portions of the
Comment:
xxx xxx xxx
It must be noted that to support the claim of threats,
intimidation, unlawful and prohibited acts, etc. allegedly
committed by the union against the non-striking
employees, the company even submitted a joint affidavit
signed by Joselito Concepcion, Renato Trambulo and
Armando Arcos. Said affidavit reads —
JOINT AFFIDAVIT
We ARMANDO ARCOS, CESAR NAVARRO and
RENATO TRAMBULO residents of Dasmariñas,
Cavite and JOSELITO CONCEPCION of Binangonan,
Rizal all of legal age, Filipino after having been sworn
hereby depose and say:
That we are contract worker (sic) of CAC under Engr.
Mercado;
That last April 20, 1992 at around 8:00 a.m. we were
denied entry at the Longos Plant by striking workers
particularly Ramon Banas, Ricardo Manalang, Rodrigo
Manalang, Rodrigo Lauihon and Ernesto Lascona;
That the abovenamed persons stopped us at the gate of
Longos Plant, told us to get off the bus, and in
threatening manner told us to leave and vacate the
premises otherwise something bad will happen to us;
That because of this unlawful, illegal and felonious acts
of the said persons we were compelled to do something
against our will that is to leave without being able to
report for work;
That the abovenamed person and the herein
complainants are residents of barangays in different
cities and municipalities hence the matter is not covered
by PD 1508;
That we are executing this affidavit to charge Ramon
Banas, Ricardo Manalang, Rodrigo Lauihon and
Ernesto Lascana with Grave Coercion. (Exh. "I", p.
896, Records) (Emphasis Supplied).
However, when presented before the Labor Arbiter, the
affiants themselves controverted the allegations in said
joint-affidavit. They innocently divulged having signed
the prepared affidavit without first reading the same.
Likewise, they admitted that they did not see or hear
Banas, Manalang, Lacuna and Lacejon threatened the
group of "non-strikers" including themselves of bodily
harm (pp. 13-14, 20-21, 35- 37, 46-47, 49-50, 54-61,
TSN, April 24, 1992). They testified, thus —
CROSS-EXAMINATION OF JOSELITO
CONCEPCION
ARBITER PEÑALOSA:
The question is . . . who prepared the affidavit? Alam
mo raw ba kung sino ang gumawa ng affidavit na ito?
ATTY. ESPINAS:
Sinong gumawa?
ATTY. MACARUBBO:
Para sa iyo?
MR. CONCEPCION: Dito sa second paragraph which says . . . told you to (p. 75, ibid) (Emphasis ours)
Si Attorney po. (pp. 20, 21, ibid) leave and vacate the premises otherwise something bad xxx xxx xxx
DIRECT TESTIMONY OF RENATO TRAMBULO will happen to us. Kung hindi kayo umalis . . . walang ATTY. ESPINAS:
ATTY. MACARUBBO: sinabing ganoon? O, lahat ng gustong pumasok, makakapasok na ngayon?
Mr. Witness, did you sign an affidavit dated April 24, MR. ARCOS: MR. WITNESS:
1992? Wala naman ho. Yes, sir.
MR. TRAMBULO: xxx xxx xxx (p. 85, ibid)
Yes, Sir. ATTY. ESPINAS: Furthermore, Atty. Elmer Jolo, the Personnel Manager
ATTY. MACARUBBO: Sino ang nagsabi sa inyo na "Hindi naman kayo joined by Mr. Mercado, disclosed that the public
Have you read this affidavit? empleyado, bumaba na kayo?" authorities charged to protect the company's properties
MR. TRAMBULO: MR. ARCOS: were neither unwilling or unable to furnish adequate
Hindi pa ho. Si Lacejon. Iyong may salamin. protection. As a matter of fact, the police regularly
xxx xxx xxx ATTY. ESPINAS: patrolling the area, was never requested assistance. Thus
ATTY. MACARUBBO: Pero walang sinabi si Lacejon na kung hindi kayo —
Perhaps, what you meant is . . . . bababa may masamang mangyayari sa inyo? CROSS-EXAMINATION OF ATTY. ELMER JOLO
ATTY. ESPINAS: MR. ARCOS: ATTY. ESPINAS:
No, no, no, . . . You can ask another question. His Wala naman ho. Did you not ask the assistance of the San Pedro
answer is - Before I, signed it but I have not read it yet. (pp. 59-61, id) policemen on this matter of obstruction and other
ATTY. MACARUBBO: Moreover, no less than Mr. Ronnie Mercado, the similar activities in obstructing the gates of the plant?
What do you mean that you have not read this? Assistant Manager for Operations of the Company, MR. WITNESS:
MR. TRAMBULO: testified that after the issuance of the ex parte temporary I did not.
Sa akin lang po, iyong sinabi sa akin na . . . iyong restraining order, the barricade blocking the gates were ATTY. ESPINAS:
hinarang kami, pinababa kami . . . iyon lang po ang removed and people were allowed free ingress and Did you not ask the policemen of Angono, Rizal to help
alam ko. Wala na po akong ibang alam. egress (please see also pp. 70-71, 96, TSN, April 30, you on this matter again of extracting the trucks which
ATTY. MACARUBBO: 1992). He stated thus — were supposed to deliver pre-stress material of that day?
Hinarang ka? CROSS-EXAMINATION OF MR. MERCADO MR. WITNESS:
MR. TRAMBULO: ATTY. ESPINAS: Personally I did not because I leave this police matter to
Hinarang kami, pinababa kami dahil hindi daw kami So after the temporary restraining order, were the my chief security officer.
empleyado sa kompanya. barricade removed? ATTY. ESPINAS:
ATTY. MACARUBBO: MR. WITNESS: Did your chief security officers ask the assistance of the
At iyon and ibig sabihin nito? Those blocking the gates, yes. policemen of Quezon City with respect to the Longos
MR. TRAMBULO: xxx xxx xxx Plant?
CROSS-EXAMINATION OF RENATO TRAMBULO ATTY. ESPINAS: MR. WITNESS:
ATTY. ESPINAS: But the barricades blocking the gates were already That I do not know.
What did Lacejon said (sic) removed. ATTY. ESPINAS:
MR. TRAMBULO: MR. WITNESS: Did you ask the aid of the policemen at Bagumbayan,
Pinababa na lang po kami sa service. Sabi niya, bumaba The barricades blocking the gates were already Quezon City to help you regarding the incident of April
na kayo dahil hindi naman kayo empleyado ng removed. 6, 1992 at 7:00 p.m.?
Concrete, kaya bumaba na lang po kami. (pp. 46-47, 49- (pp. 66-67, TSN, April 30, 1992) MR. WITNESS:
50, id) xxx xxx xxx I did not personally because I instructed this police
TESTIMONY OF ARMANDO ARCOS : ATTY. ESPINAS: matter to my chief security officer.
ATTY. ESPINAS: Let us go to Antipolo. After the restraining order the ATTY. ESPINAS:
Cross-examination. Sinabi ba ng mga taong ito na kung people were able to enter? Did your chief security officer seek the aid of the
hindi kayo bababa, masama ang mangyayari sa inyo? MR. WITNESS: policemen?
Meron bang sinabing ganoon? After the restraining order the people can already enter. MR. WITNESS:
ATTY. ARCOS: ATTY. ESPINAS: That I do not know.
Wala ho. They were escorted by the police? (pp. 41-43, TSN, April 30, 1992)
ATTY. ESPINAS: MR. WITNESS: CROSS-EXAMINATION OF MR. MERCADO
No, sir. ATTY. ESPINAS:

91
The policemen are from Quezon city. turned out to be "erroneous". 15 Consequently, the prayer for a temporary restraining order dated April 25,
MR. WITNESS: petitioner was denied the right to attend the hearing held 1992. The petition invoked Article 264(d) of the Labor
I think so, kasi nagpa-patrol sila. on April 13, 1992 while the private respondent enjoyed Code 16 to enjoin the private respondent from using the
ATTY. ESPINAS: a field day presenting its evidence ex parte. On the basis military and police authorities to escort scabs at the
Nagpatrol? They were called by the company? of uncontested evidence, the public respondent, on the struck establishment. Sadly contrasting is the haste with
MR. WITNESS: same day April 13, 1992, temporarily enjoined the which public respondent heard and acted on a similar
No, sir, kaya lang parati silang umiikot diyan. petitioner from committing certain alleged illegal acts. petition for injunction filed by the private respondent. In
ATTY. ESPINAS: Again, a copy of the Order was sent to the wrong the case of the private respondent, its prayer for an ex
So the policemen were present patrolling? address of the petitioner. Knowledge of the Order came parte temporary restraining order was heard on April
MR. WITNESS: to the petitioner only when its striking members read it 13, 1992 and it was granted on the same day. Its petition
Paminsan-minsan sumulpot lang. after it was posted at the struck areas of the private for preliminary injunction was filed on April 30, 1992,
(pp. 85-86, id) respondent. and was granted on May 5, 1992. In the case of
The foregoing testimonies of the senior officers of the To be sure, the issuance of an ex parte temporary petitioner, its petition for injunction was filed on April
company are further buttressed by the admission of one restraining order in a labor dispute is not per 24, 1992, and to date, the records do not reveal whether
of the laborers, also presented as witness by the se prohibited. Its issuance, however, should be the public respondent has granted or denied the same.
company, who testified that — characterized by care and caution for the law requires The disparate treatment is inexplicable considering that
CROSS-EXAMINATION OF AUGUSTUS BAUTISTA that it be clearly justified by considerations of extreme the subject matters of their petition are of similar
ATTY. ESPINAS: necessity, i.e., when the commission of unlawful acts is importance to the parties and to the public.
But they were not bodily stopped from entering after the causing substantial and irreparable injury to company IN VIEW WHEREOF, the petition
21. Were they? properties and the company is, for the moment, bereft of for certiorari and mandamus is granted. The Order
MR. WITNESS: an adequate remedy at law. This is as it ought to be, for dated May 5, 1992 of the public respondent in NLRC
No. imprudently issued temporary restraining orders can NCR IC No. 000249-92 is annulled and set aside. The
(p. 124, TSN, April 30, 1992) break the back of employees engaged in a legal strike. public respondents are likewise ordered to hear and
xxx xxx xxx Often times, they unduly tilt the balance of a labor resolve, with deliberate speed petitioner's petition for
ATTY. ESPINAS: warfare in favor of capital. When that happens, the injunction filed on April 30, 1992.
In other words, aside from the police there is a security deleterious effects of a wrongfully issued, ex SO ORDERED.
office detained? parte temporary restraining order on the rights of
MR. WITNESS: striking employees can no longer be repaired for they
Yes, we have our own. defy simple monetization. Moreover, experience shows
ATTY. ESPINAS: that ex parteapplications for restraining orders are often
And the security officer can request the aid of the based on fabricated facts and concealed truths. A more
policemen? becoming sense of fairness, therefore, demands that
MR. WITNESS: such ex parte applications should be more minutely
Yes. examined by hearing officers, lest, our constitutional
(pp. 128-129, id) policy of protecting labor becomes nothing but a
Verily, the factual circumstances proven by the evidence synthetic shibboleth. The immediate need to hear and
show that there was no concurrence of the five (5) resolve these ex parte applications does not provide any
prerequisites mandated by Art. 218 (e) of the Labor excuse to lower our vigilance in protecting labor against
Code. Thus there is no justification for the issuance of the issuance of indiscriminate injunctions. Stated
the questioned Order of preliminary injunction. otherwise, it behooves hearing officers receiving
The Comments of the private and public respondents did evidence in support of ex parte injunctions against
not dispute the correctness of these documentary and employees in strike to take a more active stance in
testimonial evidence. seeing to it that their right to social justice is in no way
Moreover, the records reveal the continuing misuse of violated despite their absence. This equalizing stance
unfair strategies to secure ex parte temporary restraining was not taken in the case at bar by the public
orders against striking employees. Petitioner union did respondents.
not receive any copy of private respondent's petition for Nor do we find baseless the allegation by petitioner that
injunction in Case No. 000249-92 filed on April 8, the public respondents have neglected to resolve with
1992. Its address as alleged by the private respondent reasonable dispatch its own Petition for Injunction with

92
SECOND DIVISION
G.R. No. L-49407 August 19, 1988
NATIONAL DEVELOPMENT
COMPANY, petitioner-appellant,
vs.
THE COURT OF APPEALS and DEVELOPMENT
INSURANCE & SURETY
CORPORATION, respondents-appellees.
No. L-49469 August 19, 1988
MARITIME COMPANY OF THE
PHILIPPINES, petitioner-appellant,
vs.
THE COURT OF APPEALS and DEVELOPMENT
INSURANCE & SURETY
CORPORATION, respondents- appellees.
Balgos & Perez Law Office for private respondent in
both cases.
PARAS, J.:
These are appeals by certiorari from the decision * of
the Court of Appeals in CA G.R. No: L- 46513-R
entitled "Development Insurance and Surety
Corporation plaintiff-appellee vs. Maritime Company of
the Philippines and National Development Company
defendant-appellants," affirming in toto the
decision ** in Civil Case No. 60641 of the then Court of
First Instance of Manila, Sixth Judicial District, the
dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered ordering
the defendants National Development Company and
Maritime Company of the Philippines, to pay jointly and
severally, to the plaintiff Development Insurance and
Surety Corp., the sum of THREE HUNDRED SIXTY
FOUR THOUSAND AND NINE HUNDRED
FIFTEEN PESOS AND EIGHTY SIX CENTAVOS
(364,915.86) with the legal interest thereon from the
filing of plaintiffs complaint on April 22, 1965 until
fully paid, plus TEN THOUSAND PESOS (Pl0,000.00)
by way of damages as and for attorney's fee.
On defendant Maritime Company of the Philippines'
cross-claim against the defendant National Development
Company, judgment is hereby rendered, ordering the
National Development Company to pay the cross-
claimant Maritime Company of the Philippines the total
amount that the Maritime Company of the Philippines
may voluntarily or by compliance to a writ of execution
pay to the plaintiff pursuant to the judgment rendered in
this case.
93
With costs against the defendant Maritime Company of
the Philippines.
(pp. 34-35, Rollo, GR No. L-49469)
The facts of these cases as found by the Court of
Appeals, are as follows:
The evidence before us shows that in accordance with a
memorandum agreement entered into between
defendants NDC and MCP on September 13, 1962,
defendant NDC as the first preferred mortgagee of three
ocean going vessels including one with the name 'Dona
Nati' appointed defendant MCP as its agent to manage
and operate said vessel for and in its behalf and account
(Exh. A). Thus, on February 28, 1964 the E. Philipp
Corporation of New York loaded on board the vessel
"Dona Nati" at San Francisco, California, a total of
1,200 bales of American raw cotton consigned to the
order of Manila Banking Corporation, Manila and the
People's Bank and Trust Company acting for and in
behalf of the Pan Asiatic Commercial Company, Inc.,
who represents Riverside Mills Corporation (Exhs. K-2
to K7-A & L-2 to L-7-A). Also loaded on the same
vessel at Tokyo, Japan, were the cargo of Kyokuto
Boekui, Kaisa, Ltd., consigned to the order of Manila
Banking Corporation consisting of 200 cartons of
sodium lauryl sulfate and 10 cases of aluminum foil
(Exhs. M & M-1). En route to Manila the vessel Dofia
Nati figured in a collision at 6:04 a.m. on April 15, 1964
at Ise Bay, Japan with a Japanese vessel 'SS Yasushima
Maru' as a result of which 550 bales of aforesaid cargo
of American raw cotton were lost and/or destroyed, of
which 535 bales as damaged were landed and sold on
the authority of the General Average Surveyor for Yen
6,045,-500 and 15 bales were not landed and deemed
lost (Exh. G). The damaged and lost cargoes was worth
P344,977.86 which amount, the plaintiff as insurer, paid
to the Riverside Mills Corporation as holder of the
negotiable bills of lading duly endorsed (Exhs. L-7-A,
K-8-A, K-2-A, K-3-A, K-4-A, K-5-A, A- 2, N-3 and R-
3}. Also considered totally lost were the aforesaid
shipment of Kyokuto, Boekui Kaisa Ltd., consigned to
the order of Manila Banking Corporation, Manila,
acting for Guilcon, Manila, The total loss was
P19,938.00 which the plaintiff as insurer paid to
Guilcon as holder of the duly endorsed bill of lading
(Exhibits M-1 and S-3). Thus, the plaintiff had paid as
insurer the total amount of P364,915.86 to the
consignees or their successors-in-interest, for the said
lost or damaged cargoes. Hence, plaintiff filed this
complaint to recover said amount from the defendants-
NDC and MCP as owner and ship agent respectively, of
the said 'Dofia Nati' vessel. (Rollo, L-49469, p.38)
On April 22, 1965, the Development Insurance and
Surety Corporation filed before the then Court of First
Instance of Manila an action for the recovery of the sum
of P364,915.86 plus attorney's fees of P10,000.00
against NDC and MCP (Record on Appeal), pp. 1-6).
Interposing the defense that the complaint states no
cause of action and even if it does, the action has
prescribed, MCP filed on May 12, 1965 a motion to
dismiss (Record on Appeal, pp. 7-14). DISC filed an
Opposition on May 21, 1965 to which MCP filed a reply
on May 27, 1965 (Record on Appeal, pp. 14-24). On
June 29, 1965, the trial court deferred the resolution of
the motion to dismiss till after the trial on the merits
(Record on Appeal, p. 32). On June 8, 1965, MCP filed
its answer with counterclaim and cross-claim against
NDC.
NDC, for its part, filed its answer to DISC's complaint
on May 27, 1965 (Record on Appeal, pp. 22-24). It also
filed an answer to MCP's cross-claim on July 16, 1965
(Record on Appeal, pp. 39-40). However, on October
16, 1965, NDC's answer to DISC's complaint was
stricken off from the record for its failure to answer
DISC's written interrogatories and to comply with the
trial court's order dated August 14, 1965 allowing the
inspection or photographing of the memorandum of
agreement it executed with MCP. Said order of October
16, 1965 likewise declared NDC in default (Record on
Appeal, p. 44). On August 31, 1966, NDC filed a
motion to set aside the order of October 16, 1965, but
the trial court denied it in its order dated September 21,
1966.
On November 12, 1969, after DISC and MCP presented
their respective evidence, the trial court rendered a
decision ordering the defendants MCP and NDC to pay
jointly and solidarity to DISC the sum of P364,915.86
plus the legal rate of interest to be computed from the
filing of the complaint on April 22, 1965, until fully
paid and attorney's fees of P10,000.00. Likewise, in said
decision, the trial court granted MCP's crossclaim
against NDC.
MCP interposed its appeal on December 20, 1969, while
NDC filed its appeal on February 17, 1970 after its
motion to set aside the decision was denied by the trial
court in its order dated February 13,1970.
On November 17,1978, the Court of Appeals
promulgated its decision affirming in toto the decision
of the trial court.
Hence these appeals by certiorari.
NDC's appeal was docketed as G.R. No. 49407, while
that of MCP was docketed as G.R. No. 49469. On July
25,1979, this Court ordered the consolidation of the
above cases (Rollo, p. 103). On August 27,1979, these
consolidated cases were given due course (Rollo, p.
108) and submitted for decision on February 29, 1980
(Rollo, p. 136).
In its brief, NDC cited the following assignments of
error:
I WITHOUT THE FAULT OR NEGLIGENCE OF THE
THE COURT OF APPEALS ERRED IN APPLYING
ARTICLE 827 OF THE CODE OF COMMERCE AND
NOT SECTION 4(2a) OF COMMONWEALTH ACT
NO. 65, OTHERWISE KNOWN AS THE CARRIAGE
OF GOODS BY SEA ACT IN DETERMINING THE
LIABILITY FOR LOSS OF CARGOES RESULTING
FROM THE COLLISION OF ITS VESSEL "DONA
NATI" WITH THE YASUSHIMA
MARU"OCCURRED AT ISE BAY, JAPAN OR
OUTSIDE THE TERRITORIAL JURISDICTION OF
THE PHILIPPINES.
II
THE COURT OF APPEALS ERRED IN NOT
DISMISSING THE C0MPLAINT FOR
REIMBURSEMENT FILED BY THE INSURER,
HEREIN PRIVATE RESPONDENT-APPELLEE,
AGAINST THE CARRIER, HEREIN PETITIONER-
APPELLANT. (pp. 1-2, Brief for Petitioner-Appellant
National Development Company; p. 96, Rollo).
On its part, MCP assigned the following alleged errors:
I THE AMOUNT OF P344,977.86 INSTEAD OF ONLY
THE RESPONDENT COURT OF APPEALS ERRED
IN NOT HOLDING THAT RESPONDENT
DEVELOPMENT INSURANCE AND SURETY
CORPORATION HAS NO CAUSE OF ACTION AS
AGAINST PETITIONER MARITIME COMPANY OF
THE PHILIPPINES AND IN NOT DISMISSING THE
COMPLAINT.
II
THE RESPONDENT COURT OF APPEALS ERRED
IN NOT HOLDING THAT THE CAUSE OF ACTION
OF RESPONDENT DEVELOPMENT INSURANCE
AND SURETY CORPORATION IF ANY EXISTS AS
AGAINST HEREIN PETITIONER MARITIME
COMPANY OF THE PHILIPPINES IS BARRED BY
THE STATUTE OF LIMITATION AND HAS
ALREADY PRESCRIBED.
III
94
THE RESPONDENT COURT OF APPEALS ERRED
IN ADMITTING IN EVIDENCE PRIVATE
RESPONDENTS EXHIBIT "H" AND IN FINDING
ON THE BASIS THEREOF THAT THE COLLISION
OF THE SS DONA NATI AND THE YASUSHIMA
MARU WAS DUE TO THE FAULT OF BOTH
VESSELS INSTEAD OF FINDING THAT THE
COLLISION WAS CAUSED BY THE FAULT,
NEGLIGENCE AND LACK OF SKILL OF THE
COMPLEMENTS OF THE YASUSHIMA MARU
COMPLEMENT OF THE SS DONA NATI
IV
THE RESPONDENT COURT OF APPEALS ERRED
IN HOLDING THAT UNDER THE CODE OF
COMMERCE PETITIONER APPELLANT
MARITIME COMPANY OF THE PHILIPPINES IS A
SHIP AGENT OR NAVIERO OF SS DONA NATI
OWNED BY CO-PETITIONER APPELLANT
NATIONAL DEVELOPMENT COMPANY AND
THAT SAID PETITIONER-APPELLANT IS
SOLIDARILY LIABLE WITH SAID CO-
PETITIONER FOR LOSS OF OR DAMAGES TO
CARGO RESULTING IN THE COLLISION OF SAID
VESSEL, WITH THE JAPANESE YASUSHIMA
MARU.
V latter paid to the consignee as earlier stated.
THE RESPONDENT COURT OF APPEALS ERRED
IN FINDING THAT THE LOSS OF OR DAMAGES
TO THE CARGO OF 550 BALES OF AMERICAN
RAW COTTON, DAMAGES WERE CAUSED IN
P110,000 AT P200.00 PER BALE AS ESTABLISHED
IN THE BILLS OF LADING AND ALSO IN
HOLDING THAT PARAGRAPH 1O OF THE BILLS
OF LADING HAS NO APPLICATION IN THE
INSTANT CASE THERE BEING NO GENERAL
AVERAGE TO SPEAK OF.
VI
THE RESPONDENT COURT OF APPEALS ERRED
IN HOLDING THE PETITIONERS NATIONAL
DEVELOPMENT COMPANY AND COMPANY OF
THE PHILIPPINES TO PAY JOINTLY AND
SEVERALLY TO HEREIN RESPONDENT
DEVELOPMENT INSURANCE AND SURETY
CORPORATION THE SUM OF P364,915.86 WITH
LEGAL INTEREST FROM THE FILING OF THE
COMPLAINT UNTIL FULLY PAID PLUS P10,000.00
AS AND FOR ATTORNEYS FEES INSTEAD OF
SENTENCING SAID PRIVATE RESPONDENT TO
PAY HEREIN PETITIONERS ITS COUNTERCLAIM
IN THE AMOUNT OF P10,000.00 BY WAY OF
ATTORNEY'S FEES AND THE COSTS. (pp. 1-4,
Brief for the Maritime Company of the Philippines; p.
121, Rollo)
The pivotal issue in these consolidated cases is the
determination of which laws govern loss or destruction
of goods due to collision of vessels outside Philippine
waters, and the extent of liability as well as the rules of
prescription provided thereunder.
The main thrust of NDC's argument is to the effect that
the Carriage of Goods by Sea Act should apply to the
case at bar and not the Civil Code or the Code of
Commerce. Under Section 4 (2) of said Act, the carrier
is not responsible for the loss or damage resulting from
the "act, neglect or default of the master, mariner, pilot
or the servants of the carrier in the navigation or in the
management of the ship." Thus, NDC insists that based
on the findings of the trial court which were adopted by
the Court of Appeals, both pilots of the colliding vessels
were at fault and negligent, NDC would have been
relieved of liability under the Carriage of Goods by Sea
Act. Instead, Article 287 of the Code of Commerce was
applied and both NDC and MCP were ordered to
reimburse the insurance company for the amount the
This issue has already been laid to rest by this Court of
Eastern Shipping Lines Inc. v. IAC (1 50 SCRA 469-
470 [1987]) where it was held under similar
circumstance "that the law of the country to which the
goods are to be transported governs the liability of the
common carrier in case of their loss, destruction or
deterioration" (Article 1753, Civil Code). Thus, the rule
was specifically laid down that for cargoes transported
from Japan to the Philippines, the liability of the carrier
is governed primarily by the Civil Code and in all
matters not regulated by said Code, the rights and
obligations of common carrier shall be governed by the
Code of commerce and by laws (Article 1766, Civil
Code). Hence, the Carriage of Goods by Sea Act, a
special law, is merely suppletory to the provision of the
Civil Code.
In the case at bar, it has been established that the goods
in question are transported from San Francisco,
California and Tokyo, Japan to the Philippines and that
they were lost or due to a collision which was found to
have been caused by the negligence or fault of both
captains of the colliding vessels. Under the above ruling,
it is evident that the laws of the Philippines will apply,
and it is immaterial that the collision actually occurred
in foreign waters, such as Ise Bay, Japan.
Under Article 1733 of the Civil Code, common carriers
from the nature of their business and for reasons of
public policy are bound to observe extraordinary
diligence in the vigilance over the goods and for the
safety of the passengers transported by them according
to all circumstances of each case. Accordingly, under
Article 1735 of the same Code, in all other than those
mentioned is Article 1734 thereof, the common carrier
shall be presumed to have been at fault or to have acted
negigently, unless it proves that it has observed the
extraordinary diligence required by law.
It appears, however, that collision falls among matters
not specifically regulated by the Civil Code, so that no
reversible error can be found in respondent courses
application to the case at bar of Articles 826 to 839,
Book Three of the Code of Commerce, which deal
exclusively with collision of vessels.
More specifically, Article 826 of the Code of Commerce
provides that where collision is imputable to the
personnel of a vessel, the owner of the vessel at fault,
shall indemnify the losses and damages incurred after an
expert appraisal. But more in point to the instant case is
Article 827 of the same Code, which provides that if the
collision is imputable to both vessels, each one shall
suffer its own damages and both shall be solidarily
responsible for the losses and damages suffered by their
cargoes.
Significantly, under the provisions of the Code of
Commerce, particularly Articles 826 to 839, the
shipowner or carrier, is not exempt from liability for
damages arising from collision due to the fault or
negligence of the captain. Primary liability is imposed
on the shipowner or carrier in recognition of the
universally accepted doctrine that the shipmaster or
captain is merely the representative of the owner who
has the actual or constructive control over the conduct
of the voyage (Y'eung Sheng Exchange and Trading Co.
v. Urrutia & Co., 12 Phil. 751 [1909]).
There is, therefore, no room for NDC's interpretation
that the Code of Commerce should apply only to
domestic trade and not to foreign trade. Aside from the
fact that the Carriage of Goods by Sea Act (Com. Act
No. 65) does not specifically provide for the subject of
collision, said Act in no uncertain terms, restricts its
application "to all contracts for the carriage of goods by
sea to and from Philippine ports in foreign trade." Under
95
Section I thereof, it is explicitly provided that "nothing
in this Act shall be construed as repealing any existing
provision of the Code of Commerce which is now in
force, or as limiting its application." By such
incorporation, it is obvious that said law not only
recognizes the existence of the Code of Commerce, but
more importantly does not repeal nor limit its
application.
On the other hand, Maritime Company of the
Philippines claims that Development Insurance and
Surety Corporation, has no cause of action against it
because the latter did not prove that its alleged
subrogers have either the ownership or special property
right or beneficial interest in the cargo in question;
neither was it proved that the bills of lading were
transferred or assigned to the alleged subrogers; thus,
they could not possibly have transferred any right of
action to said plaintiff- appellee in this case. (Brief for
the Maritime Company of the Philippines, p. 16).
The records show that the Riverside Mills Corporation
and Guilcon, Manila are the holders of the duly
endorsed bills of lading covering the shipments in
question and an examination of the invoices in
particular, shows that the actual consignees of the said
goods are the aforementioned companies. Moreover, no
less than MCP itself issued a certification attesting to
this fact. Accordingly, as it is undisputed that the
insurer, plaintiff appellee paid the total amount of
P364,915.86 to said consignees for the loss or damage
of the insured cargo, it is evident that said plaintiff-
appellee has a cause of action to recover (what it has
paid) from defendant-appellant MCP (Decision, CA-
G.R. No. 46513-R, p. 10; Rollo, p. 43).
MCP next contends that it can not be liable solidarity
with NDC because it is merely the manager and
operator of the vessel Dona Nati not a ship agent. As the
general managing agent, according to MCP, it can only
be liable if it acted in excess of its authority.
As found by the trial court and by the Court of Appeals,
the Memorandum Agreement of September 13, 1962
(Exhibit 6, Maritime) shows that NDC appointed MCP
as Agent, a term broad enough to include the concept of
Ship-agent in Maritime Law. In fact, MCP was even
conferred all the powers of the owner of the vessel,
including the power to contract in the name of the NDC
(Decision, CA G.R. No. 46513, p. 12; Rollo, p. 40).
Consequently, under the circumstances, MCP cannot
escape liability.
It is well settled that both the owner and agent of the
offending vessel are liable for the damage done where
both are impleaded (Philippine Shipping Co. v. Garcia
Vergara, 96 Phil. 281 [1906]); that in case of collision,
both the owner and the agent are civilly responsible for
the acts of the captain (Yueng Sheng Exchange and
Trading Co. v. Urrutia & Co., supra citing Article 586
of the Code of Commerce; Standard Oil Co. of New
York v. Lopez Castelo, 42 Phil. 256, 262 [1921]); that
while it is true that the liability of the naviero in the
sense of charterer or agent, is not expressly provided in
Article 826 of the Code of Commerce, it is clearly
deducible from the general doctrine of jurisprudence
under the Civil Code but more specially as regards
contractual obligations in Article 586 of the Code of
Commerce. Moreover, the Court held that both the
owner and agent (Naviero) should be declared jointly
and severally liable, since the obligation which is the
subject of the action had its origin in a tortious act and
did not arise from contract (Verzosa and Ruiz,
Rementeria y Cia v. Lim, 45 Phil. 423 [1923]).
Consequently, the agent, even though he may not be the
owner of the vessel, is liable to the shippers and owners
of the cargo transported by it, for losses and damages
occasioned to such cargo, without prejudice, however,
to his rights against the owner of the ship, to the extent
of the value of the vessel, its equipment, and the freight
(Behn Meyer Y Co. v. McMicking et al. 11 Phil. 276
[1908]).
As to the extent of their liability, MCP insists that their
liability should be limited to P200.00 per package or per
bale of raw cotton as stated in paragraph 17 of the bills
of lading. Also the MCP argues that the law on averages
should be applied in determining their liability.
MCP's contention is devoid of merit. The declared value
of the goods was stated in the bills of lading and
corroborated no less by invoices offered as evidence '
during the trial. Besides, common carriers, in the
language of the court in Juan Ysmael & Co., Inc. v.
Barrette et al., (51 Phil. 90 [1927]) "cannot limit its
liability for injury to a loss of goods where such injury
or loss was caused by its own negligence." Negligence
of the captains of the colliding vessel being the cause of
the collision, and the cargoes not being jettisoned to
save some of the cargoes and the vessel, the trial court
and the Court of Appeals acted correctly in not applying
the law on averages (Articles 806 to 818, Code of
Commerce).
MCP's claim that the fault or negligence can only be
attributed to the pilot of the vessel SS Yasushima Maru
and not to the Japanese Coast pilot navigating the vessel
Dona Nati need not be discussed lengthily as said claim
is not only at variance with NDC's posture, but also
contrary to the factual findings of the trial court
affirmed no less by the Court of Appeals, that both
pilots were at fault for not changing their excessive
speed despite the thick fog obstructing their visibility.
Finally on the issue of prescription, the trial court
correctly found that the bills of lading issued allow
trans-shipment of the cargo, which simply means that
the date of arrival of the ship Dona Nati on April
18,1964 was merely tentative to give allowances for
such contingencies that said vessel might not arrive on
schedule at Manila and therefore, would necessitate the
trans-shipment of cargo, resulting in consequent delay
of their arrival. In fact, because of the collision, the
cargo which was supposed to arrive in Manila on April
18, 1964 arrived only on June 12, 13, 18, 20 and July
10, 13 and 15, 1964. Hence, had the cargoes in question
been saved, they could have arrived in Manila on the
above-mentioned dates. Accordingly, the complaint in
the instant case was filed on April 22, 1965, that is, long
before the lapse of one (1) year from the date the lost or
damaged cargo "should have been delivered" in the light
of Section 3, sub-paragraph (6) of the Carriage of Goods
by Sea Act.
PREMISES CONSIDERED, the subject petitions are
DENIED for lack of merit and the assailed decision of
the respondent Appellate Court is AFFIRMED.
SO ORDERED.

96
FIRST DIVISION
[G.R. No. 71929 : December 4, 1990.]
192 SCRA 9
ALITALIA, Petitioner, vs. INTERMEDIATE
APPELLATE COURT and FELIPA E. PABLO,
Respondents.
DECISION
NARVASA, J.:
Dr. Felipa Pablo — an associate professor in the
University of the Philippines, 1 and a research grantee
of the Philippine Atomic Energy Agency — was invited
to take part at a meeting of the Department of Research
and Isotopes of the Joint FAO-IAEA Division of
Atomic Energy in Food and Agriculture of the United
Nations in Ispra, Italy. 2 She was invited in view of her
specialized knowledge in "foreign substances in food
and the agriculture environment." She accepted the
invitation, and was then scheduled by the organizers, to
read a paper on "The Fate of Radioactive Fusion
Products Contaminating Vegetable Crops." 3 The
program announced that she would be the second
speaker on the first day of the meeting. 4 To fulfill this
engagement, Dr. Pablo booked passage on petitioner
airline, ALITALIA.
She arrived in Milan on the day before the meeting in
accordance with the itinerary and time table set for her
by ALITALIA. She was however told by the
ALITALIA personnel there at Milan that her luggage
was "delayed inasmuch as the same . . . (was) in one of
the succeeding flights from Rome to Milan." 5 Her
luggage consisted of two (2) suitcases: one contained
her clothing and other personal items; the other, her
scientific papers, slides and other research material. But
the other flights arriving from Rome did not have her
baggage on board.
By then feeling desperate, she went to Rome to try to
locate her bags herself. There, she inquired about her
suitcases in the domestic and international airports, and
filled out the forms prescribed by ALITALIA for people
in her predicament. However, her baggage could not be
found. Completely distraught and discouraged, she
returned to Manila without attending the meeting in
Ispra, Italy. : nad
Once back in Manila she demanded that ALITALIA
make reparation for the damages thus suffered by her.
ALITALIA offered her "free airline tickets to
97
compensate her for any alleged damages. . . ." She
rejected the offer, and forthwith commenced the action
6 which has given rise to the present appellate
proceedings.
As it turned out, Prof. Pablo's suitcases were in fact
located and forwarded to Ispra, 7 Italy, but only on the
day after her scheduled appearance and participation at
the U.N. meeting there. 8 Of course Dr. Pablo was no
longer there to accept delivery; she was already on her
way home to Manila. And for some reason or other, the
suitcases were not actually restored to Prof. Pablo by
ALITALIA until eleven (11) months later, and four (4)
months after institution of her action. 9
After appropriate proceedings and trial, the Court of
First Instance rendered judgment in Dr. Pablo's favor:
10
"(1) Ordering the defendant (ALITALIA) to pay . . .
(her) the sum of TWENTY THOUSAND PESOS
(P20,000.00), Philippine Currency, by way of nominal
damages;
(2) Ordering the defendant to pay . . . (her) the sum of
FIVE THOUSAND PESOS (P5,000.00), Philippine
Currency, as and for attorney's fees; (and)
(3) Ordering the defendant to pay the costs of the suit."
ALITALIA appealed to the Intermediate Appellate
Court but failed to obtain a reversal of the judgment. 11
Indeed, the Appellate Court not only affirmed the Trial
Court's decision but also increased the award of nominal
damages payable by ALITALIA to P40,000.00. 12 That
increase it justified as follows: 13
"Considering the circumstances, as found by the Trial
Court and the negligence committed by defendant, the
amount of P20,000.00 under present inflationary
conditions as awarded . . . to the plaintiff as nominal
damages, is too little to make up for the plaintiff's
frustration and disappointment in not being able to
appear at said conference; and for the embarrassment
and humiliation she suffered from the academic
community for failure to carry out an official mission
for which she was singled out by the faculty to represent
her institution and the country. After weighing carefully
all the considerations, the amount awarded to the
plaintiff for nominal damages and attorney's fees should
be increased to the cost of her round trip air fare or at
the present rate of peso to the dollar at P40,000,00."
ALITALIA has appealed to this Court on Certiorari.
Here, it seeks to make basically the same points it tried
to make before the Trial Court and the Intermediate
Appellate Court, i.e.:
1) that the Warsaw Convention should have been
applied to limit ALITALIA'S liability; and
2) that there is no warrant in fact or in law for the award
to Dr. Pablo of nominal damages and attorney's fees. 14
In addition, ALITALIA postulates that it was error for
the Intermediate Appellate Court to have refused to pass
on all the assigned errors and in not stating the facts and
the law on which its decision is based. 15
Under the Warsaw Convention, 16 an air carrier is made
liable for damages for:
1) the death, wounding or other bodily injury of a
passenger if the accident causing it took place on board
the aircraft or in the course of its operations of
embarking or disembarking; 17
2) the destruction or loss of, or damage to, any
registered luggage or goods, if the occurrence causing it
took place during the carriage by air;" 18 and
3) delay in the transportation by air of passengers,
luggage or goods. 19
In these cases, it is provided in the Convention that the
"action for damages, however, founded, can only be
brought subject to conditions and limits set out" therein.
20
The Convention also purports to limit the liability of the
carriers in the following manner: 21
1. In the carriage of passengers the liability of the carrier
for each passenger is limited to the sum of 250,000
francs . . . Nevertheless, by special contract, the carrier
and the passenger may agree to a higher limit of
liability.: nad
2. a) In the carriage of registered baggage and of cargo,
the liability of the carrier is limited to a sum of 250
francs per kilogramme, unless the passenger or
consignor has made, at the time when the package was
handed over to the carrier, a special declaration of
interest in delivery at destination and has paid a
supplementary sum if the case so requires. In that case
the carrier will be liable to pay a sum not exceeding the
declared sum, unless he proves that sum is greater than
the actual value to the consignor at delivery.
b) In the case of loss, damage or delay of part of
registered baggage or cargo, or of any object contained
therein, the weight to be taken into consideration in
determining the amount to which the carrier's liability is
limited shall be only the total weight of the package or
packages concerned. Nevertheless, when the loss,
damage or delay of a part of the registered baggage or
cargo, or of an object contained therein, affects the
value of other packages covered by the same baggage
check or the same air way bill, the total weight of such
package or packages shall also be taken into
consideration in determining the limit of liability.
3. As regards objects of which the passenger takes
charge himself the liability of the carrier is limited to
5000 francs per passenger.
4. The limits prescribed . . shall not prevent the court
from awarding, in accordance with its own law, in
addition, the whole or part of the court costs and of the
other expenses of litigation incurred by the plaintiff. The
foregoing provision shall not apply if the amount of the
damages awarded, excluding court costs and other
expenses of the litigation, does not exceed the sum
which the carrier has offered in writing to the plaintiff
within a period of six months from the date of the
occurrence causing the damage, or before the
commencement of the action, if that is later.
The Warsaw Convention however denies to the carrier
availment "of the provisions which exclude or limit his
liability, if the damage is caused by his wilful
misconduct or by such default on his part as, in
accordance with the law of the court seized of the case,
is considered to be equivalent to wilful misconduct," or
"if the damage is (similarly) caused . . by any agent of
the carrier acting within the scope of his
employment." 22 The Hague Protocol amended the
Warsaw Convention by removing the provision that if
the airline took all necessary steps to avoid the damage,
it could exculpate itself completely, 23 and declaring
the stated limits of liability not applicable "if it is proved
that the damage resulted from an act or omission of the
carrier, its servants or agents, done with intent to cause
damage or recklessly and with knowledge that damage
would probably result." The same deletion was effected
by the Montreal Agreement of 1966, with the result that
a passenger could recover unlimited damages upon
proof of wilful misconduct. 24
The Convention does not thus operate as an exclusive
enumeration of the instances of an airline's liability, or
as an absolute limit of the extent of that liability. Such a
proposition is not borne out by the language of the
Convention, as this Court has now, and at an earlier
time, pointed out. 25 Moreover, slight reflection readily
leads to the conclusion that it should be deemed a limit
of liability only in those cases where the cause of the
death or injury to person, or destruction, loss or damage
to property or delay in its transport is not attributable to
or attended by any wilful misconduct, bad faith,
recklessness, or otherwise improper conduct on the part
98
of any official or employee for which the carrier is
responsible, and there is otherwise no special or
extraordinary form of resulting injury. The Convention's
provisions, in short, do not "regulate or exclude liability
for other breaches of contract by the carrier" 26 or
misconduct of its officers and employees, or for some
particular or exceptional type of damage. Otherwise, "an
air carrier would be exempt from any liability for
damages in the event of its absolute refusal, in bad faith,
to comply with a contract of carriage, which is
absurd." 27 Nor may it for a moment be supposed that
if a member of the aircraft complement should inflict
some physical injury on a passenger, or maliciously
destroy or damage the latter's property, the Convention
might successfully be pleaded as the sole gauge to
determine the carrier's liability to the passenger. Neither
may the Convention be invoked to justify the disregard
of some extraordinary sort of damage resulting to a
passenger and preclude recovery therefor beyond the
limits set by said Convention. It is in this sense that the
Convention has been applied, or ignored, depending on
the peculiar facts presented by each case.:-cralaw
In Pan American World Airways, Inc. v. I.A.C., 28 for
example, the Warsaw Convention was applied as
regards the limitation on the carrier's liability, there
being a simple loss of baggage without any otherwise
improper conduct on the part of the officials or
employees of the airline or other special injury sustained
by the passenger.
On the other hand, the Warsaw Convention has
invariably been held inapplicable, or as not restrictive of
the carrier's liability, where there was satisfactory
evidence of malice or bad faith attributable to its
officers and employees. 29 Thus, an air carrier was
sentenced to pay not only compensatory but also moral
and exemplary damages, and attorney's fees, for
instance, where its employees rudely put a passenger
holding a first-class ticket in the tourist or economy
section, 30 or ousted a brown Asiatic from the plane to
give his seat to a white man, 31 or gave the seat of a
passenger with a confirmed reservation to another, 32
or subjected a passenger to extremely rude, even
barbaric treatment, as by calling him a "monkey." 33
In the case at bar, no bad faith or otherwise improper
conduct may be ascribed to the employees of petitioner
airline; and Dr. Pablo's luggage was eventually returned
to her, belatedly, it is true, but without appreciable
damage. The fact is, nevertheless, that some special
species of injury was caused to Dr. Pablo because
petitioner ALITALIA misplaced her baggage and failed
to deliver it to her at the time appointed — a breach of
its contract of carriage, to be sure — with the result that
she was unable to read the paper and make the scientific
presentation (consisting of slides, autoradiograms or
films, tables and tabulations) that she had painstakingly
labored over, at the prestigious international conference,
to attend which she had traveled hundreds of miles, to
her chagrin and embarrassment and the disappointment
and annoyance of the organizers. She felt, not
unreasonably, that the invitation for her to participate at
the conference, extended by the Joint FAO/IAEA
Division of Atomic Energy in Food and Agriculture of
the United Nations, was a singular honor not only to
herself, but to the University of the Philippines and the
country as well, an opportunity to make some sort of
impression among her colleagues in that field of
scientific activity. The opportunity to claim this honor
or distinction was irretrievably lost to her because of
Alitalia's breach of its contract.
Apart from this, there can be no doubt that Dr. Pablo
underwent profound distress and anxiety, which
gradually turned to panic and finally despair, from the
time she learned that her suitcases were missing up to
the time when, having gone to Rome, she finally
realized that she would no longer be able to take part in
the conference. As she herself put it, she "was really
shocked and distraught and confused."
Certainly, the compensation for the injury suffered by
Dr. Pablo cannot under the circumstances be restricted
to that prescribed by the Warsaw Convention for delay
in the transport of baggage.
She is not, of course, entitled to be compensated for loss
or damage to her luggage. As already mentioned, her
baggage was ultimately delivered to her in Manila,
tardily but safely. She is however entitled to nominal
damages — which, as the law says, is adjudicated in
order that a right of the plaintiff, which has been
violated or invaded by the defendant, may be vindicated
and recognized, and not for the purpose of indemnifying
the plaintiff for any loss suffered — and this Court
agrees that the respondent Court of Appeals correctly set
the amount thereof at P40,000.00. As to the purely
technical argument that the award to her of such
nominal damages is precluded by her omission to
include a specific claim therefor in her complaint, it
suffices to draw attention to her general prayer,
following her plea for moral and exemplary damages
and attorney's fees, "for such other and further just and
equitable relief in the premises," which certainly is
broad enough to comprehend an application as well for
nominal damages. Besides, petitioner should have
realized that the explicit assertion, and proof, that Dr.
Pablo's right had been violated or invaded by it —
absent any claim for actual or compensatory damages,
the prayer thereof having been voluntarily deleted by
Dr. Pablo upon the return to her of her baggage —
necessarily raised the issue of nominal damages.: rd
This Court also agrees that respondent Court of Appeals
correctly awarded attorney's fees to Dr. Pablo, and the
amount of P5,000.00 set by it is reasonable in the
premises. The law authorizes recovery of attorney's fees
inter alia where, as here, "the defendant's act or
omission has compelled the plaintiff to litigate with
third persons or to incur expenses to protect his
interest," 34 or "where the court deems it just and
equitable." 35
WHEREFORE, no error being perceived in the
challenged decision of the Court of Appeals, it
appearing on the contrary to be entirely in accord with
the facts and the law, said decision is hereby
AFFIRMED, with costs against the petitioner.
SO ORDERED.

99
EN BANC
G.R. No. L-8095 March 31, 1915
F.C. FISHER, plaintiff,
vs.
YANGCO STEAMSHIP COMPANY, J.S.
STANLEY, as Acting Collector of Customs of the
Philippine Islands, IGNACIO VILLAMOR, as
Attorney-General of the Philippine Islands, and
W.H. BISHOP, as prosecuting attorney of the city of
Manila, respondents.
Haussermann, Cohn and Fisher for plaintiff.
Office of the Solicitor-General Harvey for respondents.
CARSON, J.:
The real question involved in these proceedings is
whether the refusal of the owners and officers of a steam
vessel, duly licensed to engage in the coastwise trade of
the Philippine Islands and engaged in that trade as a
common carrier, to accept for carriage "dynamite,
powder or other explosives" from any and all shippers
who may offer such explosives for carriage can be held
to be a lawful act without regard to any question as to
the conditions under which such explosives are offered
to carriage, or as to the suitableness of the vessel for the
transportation of such explosives, or as to the possibility
that the refusal to accept such articles of commerce in a
particular case may have the effect of subjecting any
person or locality or the traffic in such explosives to an
undue, unreasonable or unnecessary prejudice or
discrimination.
Summarized briefly, the complaint alleges that plaintiff
is a stockholder in the Yangco Steamship Company, the
owner of a large number of steam vessels, duly licensed
to engage in the coastwise trade of the Philippine
Islands; that on or about June 10, 1912, the directors of
the company adopted a resolution which was thereafter
ratified and affirmed by the shareholders of the
company, "expressly declaring and providing that the
classes of merchandise to be carried by the company in
its business as a common carrier do not include
dynamite, powder or other explosives, and expressly
prohibiting the officers, agents and servants of the
company from offering to carry, accepting for carriage
said dynamite, powder or other explosives;" that
thereafter the respondent Acting Collector of Customs
demanded and required of the company the acceptance
and carriage of such explosives; that he has refused and
suspended the issuance of the necessary clearance
documents of the vessels of the company unless and
until the company consents to accept such explosives for
100
carriage; that plaintiff is advised and believes that
should the company decline to accept such explosives
for carriage, the respondent Attorney-General of the
Philippine Islands and the respondent prosecuting
attorney of the city of Manila intend to institute
proceedings under the penal provisions of sections 4, 5,
and 6 of Act No. 98 of the Philippine Commission
against the company, its managers, agents and servants,
to enforce the requirements of the Acting Collector of
Customs as to the acceptance of such explosives for
carriage; that notwithstanding the demands of the
plaintiff stockholder, the manager, agents and servants
of the company decline and refuse to cease the carriage
of such explosives, on the ground that by reason of the
severity of the penalties with which they are threatened
upon failure to carry such explosives, they cannot
subject themselves to "the ruinous consequences which
would inevitably result" from failure on their part to
obey the demands and requirements of the Acting
Collector of Customs as to the acceptance for carriage
of explosives; that plaintiff believes that the Acting
Collector of Customs erroneously construes the
provisions of Act No. 98 in holding that they require the
company to accept such explosives for carriage
notwithstanding the above mentioned resolution of the
directors and stockholders of the company, and that if
the Act does in fact require the company to carry such
explosives it is to that extent unconstitutional and void;
that notwithstanding this belief of complainant as to the
true meaning of the Act, the questions involved cannot
be raised by the refusal of the company or its agents to
comply with the demands of the Acting Collector of
Customs, without the risk of irreparable loss and
damage resulting from his refusal to facilitate the
documentation of the company's vessels, and without
assuming the company to test the questions involved by
refusing to accept such explosives for carriage.
The prayer of the complaint is as follows:
Wherefore your petitioner prays to this honorable court
as follows:
First. That to the due hearing of the above entitled
action be issued a writ of prohibition perpetually
restraining the respondent Yangco Steamship Company,
its appraisers, agents, servants or other representatives
from accepting to carry and from carrying, in steamers
of said company dynamite, powder or other explosive
substance, in accordance with the resolution of the
board of directors and of the shareholders of said
company.
Second. That a writ of prohibition be issued perpetually
enjoining the respondent J.S. Stanley as Acting
Collector of Customs of the Philippine Islands, his
successors, deputies, servants or other representatives,
from obligating the said Yangco Steamship Company,
by any means whatever, to carry dynamite, powder or
other explosive substance.
Third. That a writ of prohibition be issued perpetually
enjoining the respondent Ignacio Villamor as Attorney-
General of the Philippine Islands, and W.H. Bishop as
prosecuting attorney of the city of Manila, their deputies
representatives or employees, from accusing the said
Yangco Steamship Company, its officers, agents or
servants, of the violation of Act No. 98 by reason of the
failure or omission of the said company to accept for
carriage out to carry dynamite powder or other
explosive.
Fourth. That the petitioner be granted such other remedy
as may be meet and proper.
To this complaint the respondents demurred, and we are
of opinion that the demurrer must be sustained, on the
ground that the complaint does not set forth facts
sufficient to constitute a cause of action.
It will readily be seen that plaintiff seeks in these
proceedings to enjoin the steamship company from
accepting for carriage on any of its vessels, dynamite,
powder or other explosives, under any conditions
whatsoever; to prohibit the Collector of Customs and the
prosecuting officers of the government from all attempts
to compel the company to accept such explosives for
carriage on any of its vessels under any conditions
whatsoever; and to prohibit these officials from any
attempt to invoke the penal provisions of Act No. 98, in
any case of a refusal by the company or its officers so to
do; and this without regard to the conditions as to safety
and so forth under which such explosives are offered for
carriage, and without regard also to any question as to
the suitableness for the transportation of such explosives
of the particular vessel upon which the shipper offers
them for carriage; and further without regard to any
question as to whether such conduct on the part of the
steamship company and its officers involves in any
instance an undue, unnecessary or unreasonable
discrimination to the prejudice of any person, locality or
particular kind of traffic.
There are no allegations in the complaint that for some
special and sufficient reasons all or indeed any of the
company's vessels are unsuitable for the business of
transporting explosives; or that shippers have declined
or will in future decline to comply with such reasonable
regulations and to take such reasonable precautions as
may be necessary and proper to secure the safety of the
vessels of the company in transporting such explosives.
Indeed the contention of petitioner is that a common
carrier in the Philippine Islands may decline to accept
for carriage any shipment of merchandise of a class
which it expressly or impliedly declines to accept from
all shippers alike, because as he contends "the duty of a
common carrier to carry for all who offer arises from the
public profession he has made, and limited by it."
In support of this contention counsel cites for a number
of English and American authorities, discussing and
applying the doctrine of the common law with reference
to common carriers. But it is unnecessary now to decide
whether, in the absence of statute, the principles on
which the American and English cases were decided
would be applicable in this jurisdiction. The duties and
liabilities of common carriers in this jurisdiction are
defined and fully set forth in Act No. 98 of the
Philippine Commission, and until and unless that statute
be declared invalid or unconstitutional, we are bound by
its provisions.
Sections 2, 3 and 4 of the Act are as follows:
SEC. 2. It shall be unlawful for any common carrier
engaged in the transportation of passengers or property
as above set forth to make or give any unnecessary or
unreasonable preference or advantage to any particular
person, company, firm, corporation or locality, or any
particular kind of traffic in any respect whatsoever, or to
subject any particular person, company, firm,
corporation or locality, or any particular kind of traffic,
to undue or unreasonable prejudice or discrimination
whatsoever, and such unjust preference or
discrimination is also hereby prohibited and declared to
be unlawful.
SEC. 3. No common carrier engaged in the carriage of
passengers or property as aforesaid shall, under any
pretense whatsoever, fail or refuse to receive for
carriage, and as promptly as it is able to do so without
discrimination, to carry any person or property offering
for carriage, and in the order in which such persons or
property are offered for carriage, nor shall any such
common carrier enter into any arrangement, contract or
agreement with any other person or corporation
whereby the latter is given an exclusive or preferential
or monopolize the carriage any class or kind of property
to the exclusion or partial exclusion of any other person
or persons, and the entering into any such arrangement,
101
contract or agreement, under any form or pretense
whatsoever, is hereby prohibited and declared to be
unlawful.
SEC. 4. Any willful violation of the provisions of this
Act by any common carrier engaged in the
transportation of passengers or property as hereinbefore
set forth is hereby declared to be punishable by a fine
not exceeding five thousand dollars money of the United
States, or by imprisonment not exceeding two years, or
both, within the discretion of the court.
The validity of this Act has been questioned on various
grounds, and it is vigorously contended that in so far as
it imposes any obligation on a common carrier to accept
for carriage merchandise of a class which he makes no
public profession to carry, or which he has expressly or
impliedly announced his intention to decline to accept
for carriage from all shippers alike, it is ultra vires,
unconstitutional and void.
We may dismiss without extended discussion any
argument or contention as to the invalidity of the statute
based on alleged absurdities inherent in its provisions or
on alleged unreasonable or impossible requirements
which may be read into it by a strained construction of
its terms.
We agree with counsel for petitioner that the provision
of the Act which prescribes that, "No common carrier ...
shall, under any pretense whatsoever, fail or refuse to
receive for carriage ... to carry any person or property
offering for carriage," is not to be construed in its literal
sense and without regard to the context, so as to impose
an imperative duty on all common carriers to accept for
carriage, and to carry all and any kind of freight which
may be offered for carriage without regard to the
facilities which they may have at their disposal. The
legislator could not have intended and did not intend to
prescribe that a common carrier running passenger
automobiles for hire must transport coal in his
machines; nor that the owner of a tank steamer,
expressly constructed in small watertight compartments
for the carriage of crude oil must accept common carrier
must accept and carry contraband articles, such as
opium, morphine, cocaine, or the like, the mere
possession of which is declared to be a criminal offense;
nor that common carriers must accept eggs offered for
transportation in paper parcels or any merchandise
whatever do defectively packed as to entail upon the
company unreasonable and unnecessary care or risks.
Read in connection with its context this, as well as all
the other mandatory and prohibitory provisions of the
statute, was clearly intended merely to forbid failures or
refusals to receive persons or property for carriage
involving any "unnecessary or unreasonable preference
or advantage to any particular person, company, firm,
corporation, or locality, or any particular kind of traffic
in any respect whatsoever," or which would "subject any
particular person, company, firm, corporation or
locality, or any particular kind of traffic to any undue or
unreasonable prejudice or discrimination whatsoever."
The question, then, of construing and applying the
statute, in cases of alleged violations of its provisions,
always involves a consideration as to whether the acts
complained of had the effect of making or giving an
"unreasonable or unnecessary preference or advantage"
to any person, locality or particular kind of traffic, or of
subjecting any person, locality, or particular kind of
traffic to any undue or unreasonable prejudice or
discrimination. It is very clear therefore that the
language of the statute itself refutes any contention as to
its invalidity based on the alleged unreasonableness of
its mandatory or prohibitory provisions.
So also we may dismiss without much discussion the
contentions as to the invalidity of the statute, which are
based on the alleged excessive severity of the penalties
prescribed for violation of its provisions. Upon general
principles it is peculiarly and exclusively within the
province of the legislator to prescribe the pains and
penalties which may be imposed upon persons
convicted of violations of the laws in force within his
territorial jurisdiction. With the exercise of his
discretion in this regard where it is alleged that
excessive fines or cruel and unusual punishments have
been prescribed, and even in such cases the courts will
not presume to interfere in the absence of the clearest
and most convincing argument and proof in support of
such contentions. (Weems vs. United States, 217 U.S.,
349; U.S. vs.Pico, 18 Phil. Rep., 386.) We need hardly
add that there is no ground upon which to rest a
contention that the penalties prescribed in the statute
under consideration are either excessive or cruel and
unusual, in the sense in which these terms are used in
the organic legislation in force in the Philippine Islands.
But it is contended that on account of the penalties
prescribed the statute should be held invalid upon the
principles announced in Ex parte Young (209 U.S., 123,
147, 148); Cotting vs. Goddard (183 U.S., 79, 102);
Mercantile Trust Co. vs. Texas Co. (51 Fed., 529);
Louisville Ry. vs. McCord (103 Fed., 216); Cons. Gas
Co. vs. Mayer (416 Fed., 150). We are satisfied however
that the reasoning of those cases is not applicable to the
statute under consideration. The principles announced in
those decisions are fairly indicated in the following
citations found in petitioner's brief:
But when the legislature, in an effort to prevent any
inquiry of the validity of a particular statute, so burdens
any challenge thereof in the courts that the party
affected is necessarily constrained to submit rather than
take the chances of the penalties imposed, then it
becomes a serious question whether the party is not
deprived of the equal protection of the laws.
(Cotting vs. Goddard, 183 U. S., 79, 102.)
It may therefore be said that when the penalties for
disobedience are by fines so enormous and
imprisonment so severe as to intimidate the company
and its officers from resorting to the courts to test the
validity of the legislation, the result is the same as if the
law in terms prohibited the company from seeking
judicial construction of laws which deeply affect its
rights.
It is urged that there is no principle upon which to base
the claim that a person is entitled to disobey a statute at
least once, for the purpose of testing its validity, without
subjecting himself to the penalties for disobedience
provided by the statute in case it is valid. This is not an
accurate statement of the case. Ordinarily a law creating
offenses in the nature of misdemeanors or felonies
relates to a subject over which the jurisdiction of the
legislature is complete in any event. In the case,
however, of the establishment of certain rates without
any hearing, the validity of such rates necessarily
depends upon whether they are high enough to permit at
least some return upon the investment (how much it is
not now necessary to state), and an inquiry as to that fact
is a proper subject of judicial investigation. If it turns
out that the rates are too low for that purpose, then they
are illegal. Now, to impose upon a party interested the
burden of obtaining a judicial decision of such a
question (no prior hearing having been given) only upon
the condition that, if unsuccessful, he must suffer
imprisonment and pay fines, as provided in these acts,
is, in effect, to close up all approaches to the courts, and
thus prevent any hearing upon the question whether the
rates as provided by the acts are not too low, and
therefore invalid. The distinction is obvious between a
case where the validity of the act depends upon the
existence of a fact which can be determined only after
investigation of a very complicated and technical
character, and the ordinary case of a statute upon a
102
subject requiring no such investigation, and over which
the jurisdiction of the legislature is complete in any
event.
We hold, therefore, that the provisions of the acts
relating to the enforcement of the rates, either for freight
or passengers, by imposing such enormous fines and
possible imprisonment as a result of an unsuccessful
effort to test the validity of the laws themselves, are
unconstitutional on their face, without regard to the
question of the insufficiency of those rates. (Ex
parte Young, 209 U.S., 123 147, 148.)
An examination of the general provisions of our statute,
of the circumstances under which it was enacted, the
mischief which it sought to remedy and of the nature of
the penalties prescribed for violations of its terms
convinces us that, unlike the statutes under
consideration in the above cited cases, its enactment
involved no attempt to prevent common carriers "from
resorting to the courts to test the validity of the
legislation;" no "effort to prevent any inquiry" as to its
validity. It imposes no arbitrary obligation upon the
company to do or to refrain from doing anything. It
makes no attempt to compel such carriers to do business
at a fixed or arbitrarily designated rate, at the risk of
separate criminal prosecutions for every demand of a
higher or a different rate. Its penalties can be imposed
only upon proof of "unreasonable," "unnecessary" and
"unjust" discriminations, and range from a maximum
which is certainly not excessive for willful, deliberate
and contumacious violations of its provisions by a great
and powerful corporation, to a minimum which may be
a merely nominal fine. With so wide a range of
discretion for a contention on the part of any common
carrier that it or its officers are "intimidated from
resorting to the courts to test the validity" of the
provisions of the statute prohibiting such
"unreasonable," "unnecessary" and "unjust"
discriminations, or to test in any particular case whether
a given course of conduct does in fact involve such
discrimination. We will presume, for the purpose of
declaring the statute invalid, that there is so real a
danger that the Courts of First Instance and this court on
appeal will abuse the discretion thus conferred upon us,
as to intimidate any common carrier, acting in good
faith, from resorting to the courts to test the validity of
the statute. Legislative enactments, penalizing
unreasonable discriminations, unreasonable restraints of
trade, and unreasonable conduct in various forms of
human activity are so familiar and have been so
frequently sustained in the courts, as to render extended
discussion unnecessary to refute any contention as to the
invalidity of the statute under consideration, merely it
imposes upon the carrier the obligation of adopting one
of various courses of conduct open to it, at the risk of
incurring a prescribed penalty in the event that the
course of conduct actually adopted by it should be held
to have involved an unreasonable, unnecessary or unjust
discrimination. Applying the test announced in Ex
parte Young, supra, it will be seen that the validity of
the Act does not depend upon "the existence of a fact
which can be determined only after investigation of a
very complicated and technical character," and that "the
jurisdiction of the legislature" over the subject with
which the statute deals "is complete in any event." There
can be no real question as to the plenary power of the
legislature to prohibit and to penalize the making of
undue, unreasonable and unjust discriminations by
common carriers to the prejudice of any person, locality
or particular kind of traffic. (See Munn vs.Illinois, 94
U.S., 113, and other cases hereinafter cited in support of
this proposition.)
Counsel for petitioner contends also that the statute, if
construed so as to deny the right of the steamship
company to elect at will whether or not it will engage in
a particular business, such as that of carrying explosives,
is unconstitutional "because it is a confiscation of
property, a taking of the carrier's property without due
process of law," and because it deprives him of his
liberty by compelling him to engage in business against
his will. The argument continues as follows:
To require of a carrier, as a condition to his continuing
in said business, that he must carry anything and every
thing is to render useless the facilities he may have for
the carriage of certain lines of freight. It would be
almost as complete a confiscation of such facilities as if
the same were destroyed. Their value as a means of
livelihood would be utterly taken away. The law is a
prohibition to him to continue in business; the
alternative is to get out or to go into some other business
— the same alternative as was offered in the case of the
Chicago & N.W. Ry. vs. Dey (35 Fed. Rep., 866, 880),
and which was there commented on as follows:
"Whatever of force there may be in such arguments, as
applied to mere personal property capable of removal
and use elsewhere, or in other business, it is wholly
without force as against railroad corporations, so large a
proportion of whose investment is in the soil and
fixtures appertaining thereto, which cannot be removed.
For a government, whether that government be a single
sovereign or one of the majority, to say to an individual
who has invested his means in so laudable an enterprise
as the construction of a railroad, one which tends so
much to the wealth and prosperity of the community,
that, if he finds that the rates imposed will cause him to
do business at a loss, he may quit business, and abandon
that road, is the very irony of despotism. Apples of
Sodom were fruit of joy in comparison. Reading, as I
do, in the preamble of the Federal Constitution, that it
was ordained to "establish justice," I can never believe
that it is within the property of an individual invested in
and used for a purpose in which even the Argus eyes of
the police power can see nothing injurious to public
morals, public health, or the general welfare. I read also
in the first section of the bill of rights of this state that
"all men are by nature free and equal, and have certain
inalienable rights, among which are those of enjoying
and defending life and liberty, acquiring, possessing,
and protecting property, and pursuing and obtaining
safety and happiness;" and I know that, while that
remains as the supreme law of the state, no legislature
can directly or indirectly lay its withering or destroying
hand on a single dollar invested in the legitimate
business of transportation." (Chicago & N.W.
Ry. vs. Dey, 35 Fed. Rep., 866, 880.)
It is manifest, however, that this contention is directed
against a construction of the statute, which, as we have
said, is not warranted by its terms. As we have already
indicated, the statute does not "require of a carrier, as a
condition to his continuing in said business, that he must
carry anything and everything," and thereby "render
useless the facilities he may have for the carriage of
certain lines of freight." It merely forbids failures or
refusals to receive persons or property for carriage
which have the effect of giving an "unreasonable or
unnecessary preference or advantage" to any person,
locality or particular kind of traffic, or of subjecting any
person, locality or particular kind of traffic to any undue
or unreasonable prejudice or discrimination.
Counsel expressly admits that the statute, "as a
prohibition against discrimination is a fair, reasonable
and valid exercise of government," and that "it is
necessary and proper that such discrimination be
prohibited and prevented," but he contends that "on the
other hand there is no reasonable warrant nor valid
excuse for depriving a person of his liberty by requiring
him to engage in business against his will. If he has a
rolling boat, unsuitable and unprofitable for passenger
103
trade, he may devote it to lumber carrying. To prohibit
him from using it unless it is fitted out with doctors and
stewards and staterooms to carry passengers would be
an invalid confiscation of this property. A carrier may
limit his business to the branches thereof that suit his
convenience. If his wagon be old, or the route
dangerous, he may avoid liability for loss of passengers'
lives and limbs by carrying freight only. If his vehicles
require expensive pneumatic tires, unsuitable for freight
transportation, ha may nevertheless carry passengers.
The only limitation upon his action that it is competent
for the governing authority to impose is to require him
to treat all alike. His limitations must apply to all, and
they must be established limitations. He cannot refuse to
carry a case of red jusi on the ground that he has carried
for others only jusi that he was green, or blue, or black.
But he can refuse to carry redjusi, if he has publicly
professed such a limitation upon his business and held
himself out as unwilling to carry the same for anyone."
To this it is sufficient answer to say that there is nothing
in the statute which would deprive any person of his
liberty "by requiring him to engage in business against
his will." The prohibitions of the statute against undue,
unnecessary or unreasonable regulations which the
legislator has seen fit to prescribe for the conduct of the
business in which the carrier is engaged of his own free
will and accord. In so far as the self-imposed limitations
by the carrier upon the business conducted by him, in
the various examples given by counsel, do not involve
an unreasonable or unnecessary discrimination the
statute would not control his action in any wise
whatever. It operates only in cases involving such
unreasonable or unnecessary preferences or
discriminations. Thus in the hypothetical case suggested
by the petitioner, a carrier engaged in the carriage of
green, blue or black jusi, and duly equipped therefor
would manifestly be guilty of "giving an unnecessary
and unreasonable preference to a particular kind of
traffic" and of subjecting to "an undue and reasonable
prejudice a particular kind of traffic," should he decline
to carry red jusi, to the prejudice of a particular shipper
or of those engaged in the manufacture of that kind
of jusi, basing his refusal on the ground of "mere whim
or caprice" or of mere personal convenience. So a public
carrier of passengers would not be permitted under this
statute to absolve himself from liability for a refusal to
carry a Chinaman, a Spaniard, an American, a Filipino,
or a mestizo by proof that from "mere whim or caprice
or personal scruple," or to suit his own convenience, or
in the hope of increasing his business and thus making
larger profits, he had publicly announced his intention
not to carry one or other of these classes of passengers.
The nature of the business of a common carrier as a
public employment is such that it is clearly within the
power of the state to impose such just and reasonable
regulations thereon in the interest of the public as the
legislator may deem proper. Of course such regulations
must not have the effect of depriving an owner of his
property without due process of law, nor of confiscating
or appropriating private property without just
compensation, nor of limiting or prescribing irrevocably
vested rights or privileges lawfully acquired under a
charter or franchise. But aside from such constitutional
limitations, the determination of the nature and extent of
the regulations which should be prescribed rests in the
hands of the legislator.
Common carriers exercise a sort of public office, and
have duties to perform in which the public is interested.
Their business is, therefore, affected with a public
interest, and is subject of public regulation. (New Jersey
Steam Nav. Co. vs. Merchants Bank, 6 How., 344, 382;
Munn vs. Illinois, 94 U.S., 113, 130.) Indeed, this right
of regulation is so far beyond question that it is well
settled that the power of the state to exercise legislative
control over railroad companies and other carriers "in all
respects necessary to protect the public against danger,
injustice and oppression" may be exercised through
boards of commissioners. (New York etc. R.
Co. vs. Bristol, 151 U.S., 556, 571; Connecticut etc. R.
Co. vs. Woodruff, 153 U.S., 689.)
Regulations limiting of passengers the number of
passengers that may be carried in a particular vehicle or
steam vessel, or forbidding the loading of a vessel
beyond a certain point, or prescribing the number and
qualifications of the personnel in the employ of a
common carrier, or forbidding unjust discrimination as
to rates, all tend to limit and restrict his liberty and to
control to some degree the free exercise of his discretion
in the conduct of his business. But since the Granger
cases were decided by the Supreme Court of the United
States no one questions the power of the legislator to
prescribe such reasonable regulations upon property
clothed with a public interest as he may deem expedient
or necessary to protect the public against danger,
injustice or oppression. (Munn vs. Illinois, 94 U.S., 113,
130; Chicago etc. R. Co. vs. Cutts, 94 U.S., 155;
Budd vs. New York, 143 U.S., 517;
Cotting vs. Goddard, 183 U.S., 79.) The right to enter
the public employment as a common carrier and to offer
one's services to the public for hire does not carry with it
the right to conduct that business as one pleases, without
regard to the interest of the public and free from such
reasonable and just regulations as may be prescribed for
the protection of the public from the reckless or careless
indifference of the carrier as to the public welfare and
for the prevention of unjust and unreasonable
discrimination of any kind whatsoever in the
performance of the carrier's duties as a servant of the
public.
Business of certain kinds, including the business of a
common carrier, holds such a peculiar relation to the
public interest that there is superinduced upon it the
right of public regulation. (Budd vs. New York, 143
U.S., 517, 533.) When private property is "affected with
a public interest it ceases to be juris privati only."
Property becomes clothed with a public interest when
used in a manner to make it of public consequence and
affect the community at large. "When, therefore, one
devotes his property to a use in which the public has an
interest, he, in effect, grants to the public an interest in
that use, and must submit to be controlled by the public
for the common good, to the extent of the interest he has
thus created. He may withdraw his grant by
discontinuing the use, but so long as he maintains the
use he must submit to control." (Munn vs. Illinois, 94
U.S., 113; Georgia R. & Bkg. Co. vs. Smith, 128 U.S.,
174; Budd vs. New York, 143 U.S., 517; Louisville etc.
Ry. Co. vs. Kentucky, 161 U.S., 677, 695.)
Of course this power to regulate is not a power to
destroy, and limitation is not the equivalent of
confiscation. Under pretense of regulating fares and
freight the state can not require a railroad corporation to
carry persons or property without reward. Nor can it do
that which in law amounts to a taking of private
property for public use without just compensation, or
without due process of law. (Chicago etc. R.
Co. vs. Minnesota, 134 U.S., 418; Minneapolis Eastern
R. Co. vs. Minnesota, 134 U.S., 467.) But the judiciary
ought not to interfere with regulations established and
palpably unreasonable as to make their enforcement
equivalent to the taking of property for public use
without such compensation as under all the
circumstances is just both to the owner and to the
public, that is, judicial interference should never occur
unless the case presents, clearly and beyond all doubt,
such a flagrant attack upon the rights of property under
the guise of regulations as to compel the court to say
104
that the regulation in question will have the effect to
deny just compensation for private property taken for
the public use. (Chicago etc. R. Co. vs. Wellman, 143
U.S., 339; Smyth vs. Ames, 169 U.S., 466, 524;
Henderson Bridge Co. vs. Henderson City, 173 U.S.,
592, 614.)
Under the common law of England it was early
recognized that common carriers owe to the public the
duty of carrying indifferently for all who may employ
them, and in the order in which application is made, and
without discrimination as to terms. True, they were
allowed to restrict their business so as to exclude
particular classes of goods, but as to the kinds of
property which the carrier was in the habit of carrying in
the prosecution of his business he was bound to serve all
customers alike (State vs. Cincinnati etc. R. Co., 47
Ohio St., 130, 134, 138; Louisville etc. Ry.
Co. vs. Quezon City Coal Co., 13 Ky. L. Rep., 832); and
it is to be observed in passing that these common law
rules are themselves regulations controlling, limiting
and prescribing the conditions under which common
carriers were permitted to conduct their business.
(Munn vs. Illinois, 94 U. S., 113, 133.)
It was found, in the course of time, that the correction of
abuses which had grown up with the enormously
increasing business of common carriers necessitated the
adoption of statutory regulations controlling the
business of common carriers, and imposing severe and
drastic penalties for violations of their terms. In
England, the Railway Clauses Consolidation Act was
enacted in 1845, the Railway and Canal Traffic Act in
1854, and since the passage of those Acts much
additional legislation has been adopted tending to limit
and control the conduct of their business by common
carriers. In the United States, the business of common
carriers has been subjected to a great variety of statutory
regulations. Among others Congress enacted "The
Interstate Commerce Act" (1887) and its amendments,
and the Elkins Act as amended (1906); and most if not
all of the States of the Union have adopted similar
legislation regulating the business of common carriers
within their respective jurisdictions. Unending litigation
has arisen under these statutes and their amendments,
but nowhere has the right of the state to prescribe just
and reasonable regulations controlling and limiting the
conduct of the business of common carriers in the public
interest and for the general welfare been successfully
challenged, though of course there has been wide
divergence of opinion as to the reasonableness, the
validity and legality of many of the regulations actually
adopted.
The power of the Philippine legislator to prohibit and to
penalize all and any unnecessary or unreasonable
discriminations by common carriers may be maintained
upon the same reasoning which justified the enactment
by the Parliament of England and the Congress of the
United States of the above mentioned statutes
prohibiting and penalizing the granting of certain
preferences and discriminations in those countries. As
we have said before, we find nothing confiscatory or
unreasonable in the conditions imposed in the Philippine
statute upon the business of common carriers. Correctly
construed they do not force him to engage in any
business his will or to make use of his facilities in a
manner or for a purpose for which they are not
reasonably adapted. It is only when he offers his
facilities as a common carrier to the public for hire, that
the statute steps in and prescribes that he must treat all
alike, that he may not pick and choose which customer
he will serve, and, specifically, that he shall not make
any undue or unreasonable preferences or
discriminations whatsoever to the prejudice not only of
any person or locality but also of any particular kind of
traffic.
The legislator having enacted a regulation prohibiting
common carriers from giving unnecessary or
unreasonable preferences or advantages to any particular
kind of traffic or subjecting any particular kind of traffic
to any undue or unreasonable prejudice or
discrimination whatsoever, it is clear that whatever may
have been the rule at the common law, common carriers
in this jurisdiction cannot lawfully decline to accept a
particular class of goods for carriage, to the prejudice of
the traffic in those goods, unless it appears that for some
sufficient reason the discrimination against the traffic in
such goods is reasonable and necessary. Mere whim or
prejudice will not suffice. The grounds for the
discrimination must be substantial ones, such as will
justify the courts in holding the discrimination to have
been reasonable and necessary under all circumstances
of the case.
The prayer of the petition in the case at bar cannot be
granted unless we hold that the refusal of the defendant
steamship company to accept for carriage on any of its
vessels "dynamite, gunpowder or other explosives"
would in no instance involve a violation of the
provisions of this statute. There can be little doubt,
however, that cases may and will arise wherein the
refusal of a vessel "engaged in the coastwise trade of the
Philippine Islands as a common carrier" to accept such
explosives for carriage would subject some person,
company, firm or corporation, or locality, or particular
kind of traffic to a certain prejudice or discrimination.
Indeed it cannot be doubted that the refusal of a
"steamship company, the owner of a large number of
vessels" engaged in that trade to receive for carriage any
such explosives on any of its vessels would subject the
traffic in such explosives to a manifest prejudice and
discrimination. The only question to be determined
therefore is whether such prejudice or discrimination
might in any case prove to be undue, unnecessary or
unreasonable.
This of course is, in each case, a question of fact, and
we are of the opinion that the facts alleged in the
complaint are not sufficient to sustain a finding in favor
of the contentions of the petitioner. It is not alleged in
the complaint that "dynamite, gunpowder and other
explosives" can in no event be transported with
reasonable safety on board steam vessels engaged in the
business of common carriers. It is not alleged that all, or
indeed any of the defendant steamship company's
vessels are unsuited for the carriage of such explosives.
It is not alleged that the nature of the business in which
the steamship company is engaged is such as to preclude
a finding that a refusal to accept such explosives on any
of its vessels would subject the traffic in such explosives
to an undue and unreasonable prejudice and
discrimination.
Plaintiff's contention in this regard is as follows:
In the present case, the respondent company has
expressly and publicly renounced the carriage of
explosives, and expressly excluded the same terms from
the business it conducts. This in itself were sufficient,
even though such exclusion of explosives were based on
no other ground than the mere whim, caprice or personal
scruple of the carrier. It is unnecessary, however, to
indulge in academic discussion of a moot question, for
the decision not a carry explosives rests on substantial
grounds which are self-evident.
We think however that the answer to the question
whether such a refusal to carry explosives involves an
unnecessary or unreasonable preference or advantage to
any person, locality or particular kind of traffic or
subjects any person, locality or particular to traffic to an
undue or unreasonable prejudice and discrimination is
by no means "self-evident," and that it is a question of
105
fact to be determined by the particular circumstances of
each case.
The words "dynamite, powder or other explosives" are
broad enough to include matches, and other articles of
like nature, and may fairly be held to include also
kerosene oil, gasoline and similar products of a highly
inflammable and explosive character. Many of these
articles of merchandise are in the nature of necessities in
any country open to modern progress and advancement.
We are not fully advised as to the methods of
transportation by which they are made commercially
available throughout the world, but certain it is that
dynamite, gunpowder, matches, kerosene oil and
gasoline are transported on many vessels sailing the
high seas. Indeed it is a matter of common knowledge
that common carriers throughout the world transport
enormous quantities of these explosives, on both land
and sea, and there can be little doubt that a general
refusal of the common carriers in any country to accept
such explosives for carriage would involve many
persons, firms and enterprises in utter ruin, and would
disastrously affect the interests of the public and the
general welfare of the community.
It would be going to far to say that a refusal by a steam
vessel engaged in the business of transporting general
merchandise as a common carrier to accept for carriage
a shipment of matches, solely on the ground of the
dangers incident to the explosive quality of this class of
merchandise, would not subject the traffic in matches to
an unnecessary, undue or unreasonable prejudice and
discrimination without proof that for some special
reason the particular vessel is not fitted to carry articles
of that nature. There may be and doubtless are some
vessels engaged in business as common carriers of
merchandise, which for lack of suitable deck space or
storage rooms might be justified in declining to carry
kerosene oil, gasoline, and similar products, even when
offered for carriage securely packed in cases; and few
vessels are equipped to transport those products in bulk.
But in any case of a refusal to carry such products which
would subject any person, locality or the traffic in such
products would be necessary to hear evidence before
making an affirmative finding that such prejudice or
discrimination was or was not unnecessary, undue or
unreasonable. The making of such a finding would
involve a consideration of the suitability of the vessel
for the transportation of such products ; the reasonable
possibility of danger or disaster resulting from their
transportation in the form and under the conditions in
which they are offered for carriage; the general nature of
the business done by the carrier and, in a word, all the
attendant circumstances which might affect the question
of the reasonable necessity for the refusal by the carrier
to undertake the transportation of this class of
merchandise.
But it is contended that whatever the rule may be as to
other explosives, the exceptional power and violence of
dynamite and gunpowder in explosion will always
furnish the owner of a vessel with a reasonable excuse
for his failure or refusal to accept them for carriage or to
carry them on board his boat. We think however that
even as to dynamite and gunpowder we would not be
justified in making such a holding unaided by evidence
sustaining the proposition that these articles can never
be carried with reasonable safety on any vessel engaged
in the business of a common carrier. It is said that
dynamite is so erratic an uncontrollable in its action that
it is impossible to assert that it can be handled with
safety in any given case. On the other hand it is
contended that while this may be true of some kinds of
dynamite, it is a fact that dynamite can be and is
manufactured so as to eliminate any real danger from
explosion during transportation. These are of course
questions of fact upon which we are not qualified to
pass judgment without the assistance of expert witnesses
who have made special studies as to the chemical
composition and reactions of the different kinds of
dynamite, or attained a thorough knowledge of its
properties as a result of wide experience in its
manufacture and transportation.
As we construe the Philippine statute, the mere fact that
violent and destructive explosions can be obtained by
the use of dynamite under certain conditions would not
be sufficient in itself to justify the refusal of a vessel,
duly licensed as a common carrier of merchandise, to
accept it for carriage, if it can be proven that in the
condition in which it is offered for carriage there is no
real danger to the carrier, nor reasonable ground to fear
that his vessel or those on board his vessel will be
exposed to unnecessary and unreasonable risk in
transporting it, having in mind the nature of his business
as a common carrier engaged in the coastwise trade in
the Philippine Islands, and his duty as a servant of the
public engaged in a public employment. So also, if by
the exercise of due diligence and the taking of
unreasonable precautions the danger of explosions can
be practically eliminated, the carrier would not be
justified in subjecting the traffic in this commodity to
prejudice or discrimination by proof that there would be demurrer renders that unnecessary at this time, though it
a possibility of danger from explosion when no such may not be improper to observe that a careful
precautions are taken. examination of those acts confirms us in the holding
The traffic in dynamite, gunpowder and other explosives upon which we base our ruling on this demurrer, that is
is vitally essential to the material and general welfare of to say "That whatever may have been the rule at the
the people of these Islands. If dynamite, gunpowder and common law, common carriers in this jurisdiction
other explosives are to continue in general use cannot lawfully decline to accept a particular class of
throughout the Philippines, they must be transported by goods for carriage, to the prejudice of the traffic in those
water from port to port in the various islands which goods, unless it appears that for some sufficient reason
make up the Archipelago. We are satisfied therefore that the discrimination against the traffic in such goods is
the refusal by a particular vessel, engaged as a common reasonable and necessary. Mere prejudice or whim will
carrier of merchandise in the coastwise trade of the not suffice. The grounds of the discrimination must be
Philippine Islands, to accept any or all of these substantial ones, such as will justify the courts in
explosives for carriage would constitute a violation of holding the discrimination to have been reasonable and
the prohibitions against discriminations penalized under necessary under all the circumstances of the case."
the statute, unless it can be shown by affirmative Unless an amended complaint be filed in the meantime,
evidence that there is so real and substantial a danger of let judgment be entered ten days hereafter sustaining the
disaster necessarily involved in the carriage of any or all demurrer and dismissing the complaint with costs
of these articles of merchandise as to render such refusal against the complainant, and twenty days thereafter let
a due or a necessary or a reasonable exercise of the record be filed in the archives of original actions in
prudence and discretion on the part of the shipowner. this court. So ordered.
The complaint in the case at bar lacking the necessary
allegations under this ruling, the demurrer must be
sustained on the ground that the facts alleged do not
constitute a cause of action.
A number of interesting questions of procedure are
raised and discussed in the briefs of counsel. As to all of
these questions we expressly reserve our opinion,
believing as we do that in sustaining the demurrer on the
grounds indicated in this opinion we are able to dispose
of the real issue involved in the proceedings without
entering upon the discussion of the nice questions which
it might have been necessary to pass upon had it
appeared that the facts alleged in the complaint
constitute a cause of action.
We think, however, that we should not finally dispose of
the case without indicating that since the institution of
these proceedings the enactment of Acts No. 2307 and
No. 2362 (creating a Board of Public Utility
Commissioners and for other purposes) may have
materially modified the right to institute and maintain
such proceedings in this jurisdiction. But the demurrer
having been formallly submitted for judgment before
the enactment of these statutes, counsel have not been
heard in this connection. We therefore refrain from any
comment upon any questions which might be raised as
to whether or not there may be another adequate and
appropriate remedy for the alleged wrong set forth in the
complaint. Our disposition of the question raised by the

106
SECOND DIVISION
G.R. No. 95536 March 23, 1992
ANICETO G. SALUDO, JR., MARIA SALVACION
SALUDO, LEOPOLDO G. SALUDO and
SATURNINO G. SALUDO, petitioners,
vs.
HON. COURT OF APPEALS, TRANS WORLD
AIRLINES, INC., and PHILIPPINE AIRLINES,
INC., respondents.
REGALADO, J.:
Assailed in this petition for review on certiorari is the
decision in CA-G.R. CV No. 20951 of respondent Court
of Appeals1 which affirmed the decision of the trial
court2 dismissing for lack of evidence herein petitioners'
complaint in Civil Case No R-2101 of the then Court of
First Instance of Southern Leyte, Branch I.
The facts, as recounted by the court a quo and adopted
by respondent court after "considering the evidence on
record," are as follows:
After the death of plaintiffs' mother, Crispina Galdo
Saludo, in Chicago Illinois, (on) October 23, 1976 (Exh.
A), Pomierski and Son Funeral Home of Chicago, made
the necessary preparations and arrangements for the
shipment, of the remains from Chicago to the
Philippines. The funeral home had the remains
embalmed (Exb. D) and secured a permit for the
disposition of dead human body on October 25, 1976
(Exh. C), Philippine Vice Consul in Chicago, Illinois,
Bienvenido M. Llaneta, at 3:00 p.m. on October 26,
1976 at the Pomierski & Son Funeral Home, sealed the
shipping case containing a hermetically sealed casket
that is airtight and waterproof wherein was contained
the remains of Crispina Saludo Galdo (sic) (Exb. B). On
the same date, October 26, 1976, Pomierski brought the
remains to C.M.A.S. (Continental Mortuary Air
Services) at the airport (Chicago) which made the
necessary arrangements such as flights, transfers, etc.;
C.M.A.S. is a national service used by undertakers to
throughout the nation (U.S.A.), they furnish the air
pouch which the casket is enclosed in, and they see that
the remains are taken to the proper air freight terminal
(Exh. 6-TWA). C.M.A.S. booked the shipment with
PAL thru the carrier's agent Air Care International, with
Pomierski F.H. as the shipper and Mario (Maria) Saludo
as the consignee. PAL Airway Bill No. 079-01180454
Ordinary was issued wherein the requested routing was
from Chicago to San Francisco on board TWA Flight
107
131 of October 27, 1976 and from San Francisco to
Manila on board PAL Flight No. 107 of the same date,
and from Manila to Cebu on board PAL Flight 149 of
October 29, 1976 (See Exh. E., Also Exh. 1-PAL).
In the meantime, plaintiffs Maria Salvacion Saludo and
Saturnino Saludo, thru a travel agent, were booked with
United Airlines from Chicago to California, and with
PAL from California to Manila. She then went to the
funeral director of Pomierski Funeral Home who had
her mother's remains and she told the director that they
were booked with United Airlines. But the director told
her that the remains were booked with TWA flight to
California. This upset her, and she and her brother had
to change reservations from UA to the TWA flight after
she confirmed by phone that her mother's remains
should be on that TWA flight. They went to the airport
and watched from the look-out area. She saw no body
being brought. So, she went to the TWA counter again,
and she was told there was no body on that flight.
Reluctantly, they took the TWA flight upon assurance
of her cousin, Ani Bantug, that he would look into the
matter and inform her about it on the plane or have it
radioed to her. But no confirmation from her cousin
reached her that her mother was on the West Coast.
Upon arrival at San Francisco at about 5:00 p.m., she
went to the TWA counter there to inquire about her
mother's remains. She was told they did not know
anything about it.
She then called Pomierski that her mother's remains
were not at the West Coast terminal, and Pomierski
immediately called C.M.A.S., which in a matter of 10
minutes informed him that the remains were on a plane
to Mexico City, that there were two bodies at the
terminal, and somehow they were switched; he relayed
this information to Miss Saludo in California; later
C.M.A.S. called and told him they were sending the
remains back to California via Texas (see Exh. 6-TWA).
It-turned out that TWA had carried a shipment under
PAL Airway Bill No. 079-ORD-01180454 on TWA
Flight 603 of October 27, 1976, a flight earlier than
TWA Flight 131 of the same date. TWA delivered or
transferred the said shipment said to contain human
remains to PAL at 1400H or 2:00 p.m. of the same date,
October 27, 1976 (Bee Exh. 1- TWA). "Due to a
switch(ing) in Chicago", this shipment was withdrawn
from PAL by CMAS at 1805H (or 6:05 p.m.) of the
same date, October 27 (Exh. 3-PAL, see Exh. 3-a-PAL).
What transpired at the Chicago (A)irport is explained in
a memo or incident report by Pomierski (Exh. 6-TWA)
to Pomierski's lawyers who in turn referred to said'
memo and enclosed it in their (Pomierski's lawyers)
answer dated July 18, 1981 to herein plaintiff's counsel
(See Exh. 5-TWA). In that memo or incident report
(Exh. 6-TWA), it is stated that the remains (of Crispina
Saludo) were taken to CMAS at the airport; that there
were two bodies at the (Chicago Airport) terminal, and
somehow they were switched, that the remains (of
Crispina Saludo) were on a plane to Mexico City; that
CMAS is a national service used by undertakers
throughout the nation (U.S.A.), makes all the necessary
arrangements, such as flights, transfers, etc., and see(s)
to it that the remains are taken to the proper air freight
terminal.
The following day October 28, 1976, the shipment or
remains of Crispina Saludo arrived (in) San Francisco
from Mexico on board American Airlines. This
shipment was transferred to or received by PAL at
1945H or 7:45 p.m. (Exh. 2-PAL, Exh. 2-a-PAL). This
casket bearing the remains of Crispina Saludo, which
was mistakenly sent to Mexico and was opened (there),
was resealed by Crispin F. Patagas for shipment to the
Philippines (See Exh. B-1). The shipment was
immediately loaded on PAL flight for Manila that same
evening and arrived (in) Manila on October 30, 1976, a
day after its expected arrival on October 29, 1976. 3
In a letter dated December 15, 1976,4 petitioners'
counsel informed private respondent Trans World
Airlines (TWA) of the misshipment and eventual delay
in the delivery of the cargo containing the remains of the
late Crispin Saludo, and of the discourtesy of its
employees to petitioners Maria Salvacion Saludo and
Saturnino Saludo. In a separate letter on June 10, 1977
addressed to co-respondent Philippine Airlines
(PAL),5 petitioners stated that they were holding PAL
liable for said delay in delivery and would commence
judicial action should no favorable explanation be given.
Both private respondents denied liability. Thus, a
damage suit6 was filed by petitioners before the then
Court of First Instance, Branch III, Leyte, praying for
the award of actual damages of P50,000.00, moral
damages of P1,000,000.00, exemplary damages,
attorney's fees and costs of suit.
As earlier stated, the court below absolved the two
respondent airlines companies of liability. The Court of
Appeals affirmed the decision of the lower court in toto,
and in a subsequent resolution,7 denied herein
petitioners' motion for reconsideration for lack of merit.
In predictable disagreement and dissatisfaction with the
conclusions reached by respondent appellate court,
petitioners now urge this Court to review the appealed
decision and to resolve whether or not (1) the delay in
the delivery of the casketed remains of petitioners'
mother was due to the fault of respondent airline
companies, (2) the one-day delay in the delivery of the
same constitutes contractual breach as would entitle
petitioners to damages, (3) damages are recoverable by
petitioners for the humiliating, arrogant and indifferent
acts of the employees of TWA and PAL, and (4) private
respondents should be held liable for actual, moral and
exemplary damages, aside from attorney's fees and
litigation expenses.8
At the outset and in view of the spirited exchanges of
the parties on this aspect, it is to be stressed that only
questions of law may be raised in a petition filed in this
Court to review on certiorari the decision of the Court
of Appeals.9 This being so, the factual findings of the
Court of Appeals are final and conclusive and cannot be
reviewed by the Supreme Court. The rule, however,
admits of established exceptions, to wit: (a) where there
is grave abuse of discretion; (b) when the finding is
grounded entirely on speculations, surmises or
conjectures;(c) when the inference made is manifestly-
mistaken, absurd or impossible; (d) when the judgment
of the Court of Appeals was based on a
misapprehension of facts; (e) when the factual findings
are conflicting; (f) when the Court of Appeals, in
making its findings, went beyond the issues of the case
and the same are contrary to the admissions of both
appellant and appellee; 10 (g) when the Court of Appeals
manifestly overlooked certain relevant facts not disputed
by the parties and which, if properly considered, would
justify a different conclusion; 11 and (h) where the
findings of fact of the Court of Appeals are contrary to
those of the trial court, or are mere conclusions without
citation of specific evidence, or where the facts of set
forth by the petitioner are not disputed by the
respondent, or where the findings of fact of the Court of
Appeals are premised on the absence of evidence and
are contradicted by the evidence on record. 12
To distinguish, a question of law is one which involves
a doubt or controversy on what the law is on a certain
state of facts; and, a question of fact, contrarily, is one in
which there is a doubt or difference as to the truth or
falsehood of the alleged facts. 13 One test, it has been
held, is whether the appellate court can determine the
issue raised without reviewing or evaluating the
108
evidence, in which case it is a question of law, otherwise
it will be a question of fact.14
Respondent airline companies object to the present
recourse of petitioners on the ground that this petition
raises only factual questions. 15 Petitioners maintain
otherwise or, alternatively, they are of the position that,
assuming that the petition raises factual questions, the
same are within the recognized exceptions to the general
rule as would render the petition cognizable and worthy
of review by the Court. 16
Since it is precisely the soundness of the inferences or
conclusions that may be drawn from the factual issues
which are here being assayed, we find that the issues
raised in the instant petition indeed warrant a second
look if this litigation is to come to a reasonable
denouement. A discussion seriatim of said issues will
further reveal that the sequence of the events involved is
in effect disputed. Likewise to be settled is whether or
not the conclusions of the Court of Appeals subject of
this review indeed find evidentiary and legal support.
I. Petitioners fault respondent court for "not finding that
private respondents failed to exercise extraordinary
diligence required by law which resulted in the
switching and/or misdelivery of the remains of Crispina
Saludo to Mexico causing gross delay in its shipment to
the Philippines, and consequently, damages to
petitioners." 17
Petitioner allege that private respondents received the
casketed remains of petitioners' mother on October 26,
1976, as evidenced by the issuance of PAL Air Waybill
No. 079-01180454 18 by Air Care International as
carrier's agent; and from said date, private respondents
were charged with the responsibility to exercise
extraordinary diligence so much so that for the alleged
switching of the caskets on October 27, 1976, or one
day after private respondents received the cargo, the
latter must necessarily be liable.
To support their assertion, petitioners rely on the
jurisprudential dictum, both under American and
Philippine law, that "(t)he issuance of a bill of lading
carries the presumption that the goods were delivered to
the carrier issuing the bill, for immediate shipment, and
it is nowhere questioned that a bill of lading is prima
facie evidence of the receipt of the goods by the carrier.
. . . In the absence of convincing testimony establishing
mistake, recitals in the bill of lading showing that the
carrier received the goods for shipment on a specified
date control (13 C.J.S. 235)." 19
A bill of lading is a written acknowledgment of the
receipt of the goods and an agreement to transport and
deliver them at a specified place to a person named or
on his order. Such instrument may be called a shipping
receipt, forwarder's receipt and receipt for
transportation. 20 The designation, however, is
immaterial. It has been hold that freight tickets for bus
companies as well as receipts for cargo transported by
all forms of transportation, whether by sea or land, fall
within the definition. Under the Tariff and Customs
Code, a bill of lading includes airway bills of
lading. 21 The two-fold character of a bill of lading is all
too familiar; it is a receipt as to the quantity and
description of the goods shipped and a contract to
transport the goods to the consignee or other person
therein designated, on the terms specified in such
instrument. 22
Logically, since a bill of lading acknowledges receipt of
goods to be transported, delivery of the goods to the
carrier normally precedes the issuance of the bill; or, to
some extent, delivery of the goods and issuance of the
bill are regarded in commercial practice as simultaneous
acts. 23 However, except as may be prohibited by law,
there is nothing to prevent an inverse order of events,
that is, the execution of the bill of lading even prior to
actual possession and control by the carrier of the cargo
to be transported. There is no law which requires that
the delivery of the goods for carriage and the issuance of
the covering bill of lading must coincide in point of time
or, for that matter, that the former should precede the
latter.
Ordinarily, a receipt is not essential to a complete
delivery of goods to the carrier for transportation but,
when issued, is competent and prima facie, but not
conclusive, evidence of delivery to the carrier. A bill of
lading, when properly executed and delivered to a
shipper, is evidence that the carrier has received the
goods described therein for shipment. Except as
modified by statute, it is a general rule as to the parties
to a contract of carriage of goods in connection with
which a bill of lading is issued reciting that goods have
been received for transportation, that the recital being in
essence a receipt alone, is not conclusive, but may be
explained, varied or contradicted by parol or other
evidence. 24
While we agree with petitioners' statement that "an
airway bill estops the carrier from denying receipt of
goods of the quantity and quality described in the bill," a
further reading and a more faithful quotation of the
authority cited would reveal that "(a) bill of lading may
contain constituent elements of estoppel and thus
become something more than a contract between the
shipper and the carrier. . . . (However), as between the
shipper and the carrier, when no goods have been
delivered for shipment no recitals in the bill can estop
the carrier from showing the true facts . . . Between the
consignor of goods and receiving carrier, recitals in a
bill of lading as to the goods shipped raise only a
rebuttable presumption that such goods were delivered
for shipment. As between the consignor and a receiving
carrier, the fact must outweigh the recital." 25 (Emphasis
supplied)
For this reason, we must perforce allow explanation by
private respondents why, despite the issuance of the
airway bill and the date thereof, they deny having
received the remains of Crispina Saludo on October 26,
1976 as alleged by petitioners.
The findings of the trial court, as favorably adopted by
the Court of Appeals and which we have earner quoted,
provide us with the explanation that sufficiently over
comes the presumption relied on by petitioners in
insisting that the remains of their mother were delivered
to and received by private respondents on October 26,
1976. Thus —
. . . Philippine Vice Consul in Chicago, Illinois,
Bienvenido M. Llaneta, at 3:00 p.m. on October 26,
1976 at the Pomierski & Son Funeral Home, sealed the
shipping case containing a hermetically sealed casket
that is airtight and waterproof wherein was contained
the remains of Crispina Saludo Galdo (sic) (Exh. B). On
the same date October 26, 1976, Pomierski brought the
remains to C.M.A.S. (Continental Mortuary Air
Services) at the airport (Chicago) which made the
necessary arrangements such as flights, transfers, etc;
C.M.A.S. is a national service used by undertakers
throughout the nation (U.S.A.), they furnish the air
pouch which the casket is enclosed in, and they see that
the remains are taken to the proper air freight terminal
(Exh. G-TWA). C.M.A.S. booked the shipment with PAL
thru the carrier's agent Air Care International, with
Pomierski F.H. as the shipper and Mario (Maria) Saludo
as the consignee. PAL Airway Bill No. 079- 01180454
Ordinary was issued wherein the requested routing was
from Chicago to San Francisco on board TWA Flight-
131 of October 27;1976, and from San Francisco to
Manila on board PAL Flight No. 107 of the same date,
and from Manila to Cebu on board PAL Flight 149 of
109
October 29, 1976 (See Exh. E, also Exh. 1-
PAL).26 (Emphasis ours.)
Moreover, we are persuaded to believe private
respondent PAL's account as to what transpired October
26, 1976:
. . . Pursuant thereto, on 26 October 1976, CMAS acting
upon the instruction of Pomierski, F.H., the shipper
requested booking of the casketed remains of Mrs.
Cristina (sic) Saludo on board PAL's San Francisco-
Manila Flight No. PR 107 on October 27, 1976.
2. To signify acceptance and confirmation of said
booking, PAL issued to said Pomierski F.H., PAL
Airway Bill No. 079-01180454 dated October 27,
1976 (sic, "10/26/76"). PAL confirmed the booking and
transporting of the shipment on board of its Flight PR
107 on October 27, 1976 on the basis of the
representation of the shipper and/or CMAS that the said
cargo would arrive in San Francisco from Chicago on
board United Airlines Flight US 121 on 27 October
1976.27
In other words, on October 26, 1976 the cargo
containing the casketed remains of Crispina Saludo was
booked for PAL Flight Number PR-107 leaving San
Francisco for Manila on October 27, 1976, PAL Airway
Bill No. 079-01180454 was issued, not as evidence of
receipt of delivery of the cargo on October 26, 1976, but
merely as a confirmation of the booking thus made for
the San Francisco-Manila flight scheduled on October
27, 1976. Actually, it was not until October 28, 1976
that PAL received physical delivery of the body at San
Francisco, as duly evidenced by the Interline Freight
Transfer Manifest of the American Airline Freight
System and signed for by Virgilio Rosales at 1945H, or
7:45 P.M. on said date.28
Explicit is the rule under Article 1736 of the Civil Code
that the extraordinary responsibility of the common
carrier begins from the time the goods are delivered to
the carrier. This responsibility remains in full force and
effect even when they are temporarily unloaded or
stored in transit, unless the shipper or owner exercises
the right of stoppage in transitu, 29 and terminates only
after the lapse of a reasonable time for the acceptance,
of the goods by the consignee or such other person
entitled to receive them. 30 And, there is delivery to the
carrier when the goods are ready for and have been
placed in the exclusive possession, custody and control
of the carrier for the purpose of their immediate
transportation and the carrier has accepted
them. 31 Where such a delivery has thus been accepted
by the carrier, the liability of the common carrier
commences eo instanti. 32
Hence, while we agree with petitioners that the
extraordinary diligence statutorily required to be
observed by the carrier instantaneously commences
upon delivery of the goods thereto, for such duty to
commence there must in fact have been delivery of the
cargo subject of the contract of carriage. Only when
such fact of delivery has been unequivocally established
can the liability for loss, destruction or deterioration of
goods in the custody of the carrier, absent the excepting
causes under Article 1734, attach and the presumption
of fault of the carrier under Article 1735 be invoked.
As already demonstrated, the facts in the case at bar
belie the averment that there was delivery of the cargo
to the carrier on October 26, 1976. Rather, as earlier
explained, the body intended to be shipped as agreed
upon was really placed in the possession and control of
PAL on October 28, 1976 and it was from that date that
private respondents became responsible for the agreed
cargo under their undertakings in PAL Airway Bill No.
079-01180454. Consequently, for the switching of
caskets prior thereto which was not caused by them, and
subsequent events caused thereby, private respondents
cannot be held liable.
Petitioners, proceeding on the premise that there was
delivery of the cargo to private respondents on October
26,1976 and that the latter's extraordinary responsibility
had by then become operative, insist on foisting the
blame on private respondents for the switching of the
two caskets which occurred on October 27, 1976. It is
argued that since there is no clear evidence establishing
the fault Continental Mortuary Air Services (CMAS) for
the mix-up, private respondents are presumably
negligent pursuant to Article 1735 of the Civil Code
and, for failure to rebut such presumption, they must
necessarily be held liable; or, assuming that CMAS was
at fault, the same does not absolve private respondents
of liability because whoever brought the cargo to the
airport or loaded it on the plane did so as agent of
private respondents.
This contention is without merit. As pithily explained by
the Court of Appeals:
The airway bill expressly provides that "Carrier certifies
goods described below were received for carriage", and
said cargo was "casketed human remains of Crispina
Saludo," with "Maria Saludo as Consignee; Pomierski
F.H. as Shipper; Air Care International as carrier's
agent." On the face of the said airway bill, the specific
flight numbers, specific routes of shipment and dates of
departure and arrival were typewritten, to wit: Chicago
TWA Flight 131/27 to San Francisco and from San
Francisco by PAL 107 on, October 27, 1976 to
Philippines and to Cebu via PAL Flight 149 on October
29, 1976. The airway bill also contains the following
typewritten words, as follows: all documents have been
examined (sic). Human remains of Crispina Saludo.
Please return back (sic) first available flight to SFO.
But, as it turned out and was discovered later the
casketed human remains which was issued PAL Airway
Bill #079-1180454 was not the remains of Crispina
Saludo, the casket containing her remains having been
shipped to Mexico City.
However, it should be noted that, Pomierski F.H., the
shipper of Mrs. Saludo's remains, hired Continental
Mortuary Services (hereafter referred to as C.M.A.S.),
which is engaged in the business of transporting and
forwarding human remains. Thus, C.M.A.S. made all
the necessary arrangements such as flights, transfers,
etc. — for shipment of the remains of Crispina Saludo.
The remains were taken on October 26th, 1976, to
C.M.A.S. at the airport. These people made all the
necessary arrangements, such as flights, transfers, etc.
This is a national service used by undertakers
throughout the nation. They furnished the air pouch
which the casket is enclosed in, and they see that the
remains are taken to the proper air frieght terminal. I
was very surprised when Miss Saludo called me to say
that the remains were not at the west coast terminal. I
immediately called C.M.A.S. They called me back in a
matter of ten minutes to inform me that the remains
were on a plane to Mexico City. The man said that there
were two bodies at the terminal, and somehow they were
switched. . . . (Exb. 6 — "TWA", which is the memo or
incident report enclosed in the stationery of Walter
Pomierski & Sons Ltd.)
Consequently, when the cargo was received from
C.M.A.S. at the Chicago airport terminal for shipment,
which was supposed to contain the remains of Crispina
Saludo, Air Care International and/or TWA, had no way
of determining its actual contents, since the casket was
hermetically sealed by the Philippine Vice-Consul in
Chicago and in an air pouch of C.M.A.S., to the effect
that Air Care International and/or TWA had to rely on
the information furnished by the shipper regarding the
cargo's content. Neither could Air Care International
and/or TWA open the casket for further verification,
110
since they were not only without authority to do so, but Do you have anything to show that PAL received the
even prohibited. cargo from TWA on October 27, 1976?
Thus, under said circumstances, no fault and/or MICHAEL GIOSSO:
negligence can be attributed to PAL (even if Air Care Yes, I do.
International should be considered as an agent of PAL) (Witness presenting a document)
and/or TWA, the entire fault or negligence being ATTY. JUAN COLLAS, JR.:
exclusively with C.M.A.S.33 (Emphasis supplied.) For purposes of clarity, Exhibit I is designated as
It can correctly and logically be concluded, therefore, Exhibit I-TWA.
that the switching occurred or, more accurately, was xxx xxx xxx
discovered on October 27, 1976; and based on the above ATTY. JUAN COLLAS, JR.:
findings of the Court of appeals, it happened while the This Exhibit I-TWA, could you tell what it is, what it
cargo was still with CMAS, well before the same was shows?
place in the custody of private respondents. MICHAEL GIOSSO:
Thus, while the Air Cargo Transfer Manifest of TWA of It shows transfer of manifest on 10-27-76 to PAL at
October 27, 197634 was signed by Garry Marcial of PAL 1400 and verified with two signatures as it completed
at 1400H, or 2:00 P.M., on the same date, thereby the transfer.
indicating acknowledgment by PAL of the transfer to ATTY. JUAN COLLAS, JR.:
them by TWA of what was in truth the erroneous cargo, Very good,. Who was the PAL employee who received
said misshipped cargo was in fact withdrawn by CMAS the cargo?
from PAL as shown by the notation on another copy of MICHAEL GIOSSO:
said manifest35 stating "Received by CMAS — Due to The name is Garry Marcial." 37
switch in Chicago 10/27-1805H," the authenticity of The deposition of Alberto A. Lim, PAL's cargo
which was never challenged. This shows that said supervisor at San Francisco, as deponent-witness for
misshipped cargo was in fact withdrawn by CMAS from PAL, makes this further clarification:
PAL and the correct shipment containing the body of ATTY. CESAR P. MANALAYSAY:
Crispina Saludo was received by PAL only on October You mentioned Airway Bill, Mr. Lim. I am showing to
28, 1976, at 1945H, or 7:45 P.M., per American Airlines you a PAL Airway Bill Number 01180454 which for
Interline Freight Transfer Manifest No. AA204312.36 purposes of evidence, I would like to request that the
Witness the deposition of TWA's ramp serviceman, same be marked as evidence Exhibit I for PAL.
Michael Giosso, on this matter: xxx xxx xxx
ATTY. JUAN COLLAS, JR.: In what circumstances did you encounter Exhibit I-
On that date, do (sic) you have occasion to handle or PAL?
deal with the transfer of cargo from TWA Flight No. ALBERTO A. LIM:
603 to PAL San Francisco? If I recall correctly, I was queried by Manila, our Manila
MICHAEL GIOSSO: office with regard to a certain complaint that a
Yes, I did. consignee filed that this shipment did not arrive on the
ATTY. JUAN COLLAS, JR.: day that the consignee expects the shipment to arrive.
What was your participation with the transfer of the ATTY CESAR P. MANALAYSAY:
cargo? Okay. Now, upon receipt of that query from your
MICHAEL GIOSSO: Manila office, did you conduct any investigation to
I manifested the freight on a transfer manifest and pinpoint the possible causes of mishandling?
physically moved it to PAL and concluded the transfer ALBERTO A. LIM:
by signing it off. Yes.
ATTY. JUAN COLLAS, JR.: xxx xxx xxx
You brought it there yourself? ATTY. CESAR P. MANALAYSAY:
MICHAEL GIOSSO: What is the result of your investigation?
Yes sir. ALBERTO A. LIM:
ATTY. JUAN COLIAS, JR.:
In the course of my investigation, I found that we I noticed that the Transfer Manifest of TWA marked as on board American Airlines. It was immediately loaded
received the body on October 28, 1976, from American Exhibit I-TWA bears the same numbers or the same by PAL on its flight for Manila.
Airlines. entries as the Airway Bill marked as Exhibit I-A PAL The foregoing points at C.M.A.S., not defendant TWA
ATTY. CESAR P. MANALAYSAY: tending to show that this is the human remains of Mrs much less defendant PAL, as the ONE responsible for
What body are you referring to? Cristina (sic) Saludo. Could you tell us whether this is the switching or mix-up of the two bodies at the
xxx xxx xxx true? Chicago Airport terminal, and started a chain reaction of
ALBERTO A. LIM: ALBERTO A. LIM: the misshipment of the body of Crispina Saludo and a
The remains of Mrs. Cristina (sic) Saludo. It is true that we received human remains shipment from one-day delay in the delivery thereof to its destination. 40
ATTY. CESAR P. MANALAYSAY: TWA as indicated on this Transfer Manifest. But in the Verily, no amount of inspection by respondent airline
Is that the same body mentioned in this Airway Bill? course of investigation, it was found out that the human companies could have guarded against the switching
ALBERTO A. LIM: remains transferred to us is not the remains of Mrs. that had already taken place. Or, granting that they
Yes. Cristina (sic) Saludo this is the reason why we did not could have opened the casket to inspect its contents,
ATTY. CESAR P. MANALAYSAY: board it on our flight. 38 private respondents had no means of ascertaining
What time did you receive said body on October 28, Petitioners consider TWA's statement that "it had to rely whether the body therein contained was indeed that of
1976? on the information furnished by the shipper" a lame Crispina Saludo except, possibly, if the body was that of
ALBERTO A. LIM: excuse and that its failure to prove that its personnel a male person and such fact was visually apparent upon
If I recall correctly, approximately 7:45 of October 28, verified and identified the contents of the casket before opening the casket. However, to repeat, private
1976. loading the same constituted negligence on the part of respondents had no authority to unseal and open the
ATTY. CESAR P. MANALAYSAY: TWA.39 same nor did they have any reason or justification to
Do you have any proof with you to back the statement? We upbold the favorable consideration by the Court of resort thereto.
ALBERTO A. LIM: Appeals of the following findings of the trial court: It is the right of the carrier to require good faith on the
Yes. We have on our records a Transfer Manifest from It was not (to) TWA, but to C.M.A.S. that the Pomierski part of those persons who deliver goods to be carried, or
American Airlines Number 204312 showing that we & Son Funeral Home delivered the casket containing the enter into contracts with it, and inasmuch as the freight
received a human remains shipment belong to Mrs. remains of Crispina Saludo. TWA would have no may depend on the value of the article to be carried, the
Cristina (sic) Saludo or the human remains of Mrs. knowledge therefore that the remains of Crispina Saludo carrier ordinarily has the right to inquire as to its value.
Cristina (sic) Saludo. were not the ones inside the casket that was being Ordinarily, too, it is the duty of the carrier to make
ATTY. CESAR P. MAIALAYSAY: presented to it for shipment. TWA would have to rely inquiry as to the general nature of the articles shipped
At this juncture, may I request that the Transfer on there presentations of C.M.A.S. The casket was and of their value before it consents to carry them; and
Manifest referred to by the witness be marked as an hermetically sealed and also sealed by the Philippine its failure to do so cannot defeat the shipper's right to
evidence as Exhibit II-PAL. Vice Consul in Chicago. TWA or any airline for that recovery of the full value of the package if lost, in the
xxx xxx xxx matter would not have opened such a sealed casket just absence of showing of fraud or deceit on the part of the
Mr. Lim, yesterday your co-defendant TWA presented for the purpose of ascertaining whose body was inside shipper. In the absence of more definite information, the
as their Exhibit I evidence tending to show that on and to make sure that the remains inside were those of carrier has a the right to accept shipper's marks as to the
October 27, 1976 at about 2:00 in the, afternoon they the particular person indicated to be by C.M.A.S. TWA contents of the package offered for transportation and is
delivered to you a cargo bearing human remains. Could had to accept whatever information was being furnished not bound to inquire particularly about them in order to
you go over this Exhibit I and please give us your by the shipper or by the one presenting the casket for take advantage of a false classification and where a
comments as to that exhibit? shipment. And so as a matter of fact, TWA carried to shipper expressly represents the contents of a package to
ATTY. ALBERTO C. MENDOZA: San Francisco and transferred to defendant PAL a be of a designated character, it is not the duty of the
That is a vague question. I would rather request that shipment covered by or under PAL Airway Bill No. carrier to ask for a repetition of the statement nor
counsel propound specific questions rather than asking 079-ORD-01180454, the airway bill for the shipment of disbelieve it and open the box and see for
for comments on Exhibit I-TWA. the casketed remains of Crispina Saludo. Only, it turned itself. 41 However, where a common carrier has
ATTY. CESAR P. MANALAYSAY: out later, while the casket was already with PAL, that reasonable ground to suspect that the offered goods are
In that case, I will reform my question. Could you tell us what was inside the casket was not the body of Crispina of a dangerous or illegal character, the carrier has the
whether TWA in fact delivered to you the human Saludo so much so that it had to be withdrawn by right to know the character of such goods and to insist
remains as indicated in that Transfer Manifest? C.M.A.S. from PAL. The body of Crispina Saludo had on an inspection, if reasonable and practical under the
ALBERTO A. LIM: been shipped to Mexico. The casket containing the circumstances, as a condition of receiving and
Yes, they did. remains of Crispina Saludo was transshipped from transporting such goods.42
ATTY. CESAR P. MANALAYSAY: Mexico and arrived in San Francisco the following day It can safely be said then that a common carrier is
entitled to fair representation of the nature and value of

111
the goods to be carried, with the concomitant right to
rely thereon, and further noting at this juncture that a
carrier has no obligation to inquire into the correctness
or sufficiency of such information. 43 The consequent
duty to conduct an inspection thereof arises in the event
that there should be reason to doubt the veracity of such
representations. Therefore, to be subjected to unusual
search, other than the routinary inspection procedure
customarily undertaken, there must exist proof that
would justify cause for apprehension that the baggage is
dangerous as to warrant exhaustive inspection, or even
refusal to accept carriage of the same; and it is the
failure of the carrier to act accordingly in the face of
such proof that constitutes the basis of the common
carrier's liability. 44
In the case at bar, private respondents had no reason
whatsoever to doubt the truth of the shipper's
representations. The airway bill expressly providing that
"carrier certifies goods received below were received for
carriage," and that the cargo contained "casketed human
remains of Crispina Saludo," was issued on the basis of
such representations. The reliance thereon by private
respondents was reasonable and, for so doing, they
cannot be said to have acted negligently. Likewise, no
evidence was adduced to suggest even an iota of
suspicion that the cargo presented for transportation was
anything other than what it was declared to be, as would
require more than routine inspection or call for the
carrier to insist that the same be opened for scrutiny of
its contents per declaration.
Neither can private respondents be held accountable on
the basis of petitioners' preposterous proposition that
whoever brought the cargo to the airport or loaded it on
the airplane did so as agent of private respondents, so
that even if CMAS whose services were engaged for the
transit arrangements for the remains was indeed at fault,
the liability therefor would supposedly still be
attributable to private respondents.
While we agree that the actual participation of CMAS
has been sufficiently and correctly established, to hold
that it acted as agent for private respondents would be
both an inaccurate appraisal and an unwarranted
categorization of the legal position it held in the entire
transaction.
It bears repeating that CMAS was hired to handle all the
necessary shipping arrangements for the transportation
of the human remains of Crispina Saludo to Manila.
Hence, it was to CMAS that the Pomierski & Son
Funeral Home, as shipper, brought the remains of
112
petitioners' mother for shipment, with Maria Saludo as
consignee. Thereafter, CMAS booked the shipment with
PAL through the carrier's agent, Air Care
International. 45 With its aforestated functions, CMAS
may accordingly be classified as a forwarder which, by
accepted commercial practice, is regarded as an agent of
the shipper and not of the carrier. As such, it merely
contracts for the transportation of goods by carriers, and
has no interest in the freight but receives compensation
from the shipper as his agent. 46
At this point, it can be categorically stated that, as culled
from the findings of both the trial court and appellate
courts, the entire chain of events which culminated in
the present controversy was not due to the fault or
negligence of private respondents. Rather, the facts of
the case would point to CMAS as the culprit. Equally
telling of the more likely possibility of CMAS' liability
is petitioners' letter to and demanding an explanation
from CMAS regarding the statement of private
respondents laying the blame on CMAS for the incident,
portions of which, reading as follows:
. . . we were informed that the unfortunate a mix-up
occurred due to your negligence. . . .
Likewise, the two airlines pinpoint the responsibility
upon your agents. Evidence were presented to prove that
allegation.
On the face of this overwhelming evidence we could
and should have filed a case against you. . . . 47
clearly allude to CMAS as the party at fault. This is
tantamount to an admission by petitioners that they
consider private respondents without fault, or is at the
very least indicative of the fact that petitioners
entertained serious doubts as to whether herein private
respondents were responsible for the unfortunate turn of
events.
Undeniably, petitioners' grief over the death of their
mother was aggravated by the unnecessary
inconvenience and anxiety that attended their efforts to
bring her body home for a decent burial. This is
unfortunate and calls for sincere commiseration with
petitioners. But, much as we would like to give them
consolation for their undeserved distress, we are barred
by the inequity of allowing recovery of the damages
prayed for by them at the expense of private respondents
whose fault or negligence in the very acts imputed to
them has not been convincingly and legally
demonstrated.
Neither are we prepared to delve into, much less
definitively rule on, the possible liability of CMAS as
the evaluation and adjudication of the same is not what
is presently at issue here and is best deferred to another
time and addressed to another forum.
II. Petitioners further fault the Court of Appeals for
ruling that there was no contractual breach on the part of
private respondents as would entitle petitioners to
damages.
Petitioners hold that respondent TWA, by agreeing to
transport the remains of petitioners' mother on its Flight
131 from Chicago to San Francisco on October 27,
1976, made itself a party to the contract of carriage and,
therefore, was bound by the terms of the issued airway
bill. When TWA undertook to ship the remains on its
Flight 603, ten hours earlier than scheduled, it
supposedly violated the express agreement embodied in
the airway bill. It was allegedly this breach of obligation
which compounded, if not directly caused, the switching
of the caskets.
In addition, petitioners maintain that since there is no
evidence as to who placed the body on board Flight 603,
or that CMAS actually put the cargo on that flight, or
that the two caskets at the Chicago airport were to be
transported by the same airline, or that they came from
the same funeral home, or that both caskets were
received by CMAS, then the employees or agents of
TWA presumably caused the mix-up by loading the
wrong casket on the plane. For said error, they contend,
TWA must necessarily be presumed negligent and this
presumption of negligence stands undisturbed unless
rebutting evidence is presented to show that the
switching or misdelivery was due to circumstances that
would exempt the carrier from liability.
Private respondent TWA professes otherwise. Having
duly delivered or transferred the cargo to its co-
respondent PAL on October 27, 1976 at 2:00 P.M., as
supported by the TWA Transfer Manifest, TWA
faithfully complied with its obligation under the airway
bill. Said faithful compliance was not affected by the
fact that the remains were shipped on an earlier flight as
there was no fixed time for completion of carriage
stipulated on. Moreover, the carrier did not undertake to
carry the cargo aboard any specified aircraft, in view of
the condition on the back of the airway bill which
provides:
CONDITIONS OF CONTRACT
xxx xxx xxx
It is agreed that no time is fixed for the completion of
carriage hereunder and that Carrier may without notice
substitute alternate carriers or aircraft. Carrier assumes
no obligation to carry the goods by any specified aircraft
or over any particular route or routes or to make
connection at any point according to any particular
schedule, and Carrier is hereby authorized to select, or
deviate from the route or routes of shipment,
notwithstanding that the same may be stated on the face
hereof. The shipper guarantees payment of all charges
and advances.48
Hence, when respondent TWA shipped the body on
earlier flight and on a different aircraft, it was acting
well within its rights. We find this argument tenable.
The contention that there was contractual breach on the
part of private respondents is founded on the postulation
that there was ambiguity in the terms of the airway bill,
hence petitioners' insistence on the application of the
rules on interpretation of contracts and documents. We
find no such ambiguity. The terms are clear enough as
to preclude the necessity to probe beyond the apparent
intendment of the contractual provisions.
The hornbook rule on interpretation of contracts
consecrates the primacy of the intention of the parties,
the same having the force of law between them. When
the terms of the agreement are clear and explicit, that
they do not justify an attempt to read into any alleged
intention of the parties, the terms are to be understood
literally just as they appear on the face of the
contract.49 The various stipulations of a contract shall be
interpreted together50 and such a construction is to be
adopted as will give effect to all provisions thereof.51 A
contract cannot be construed by parts, but its clauses
should be interpreted in relation to one another. The
whole contract must be interpreted or read together in
order to arrive at its true meaning. Certain stipulations
cannot be segregated and then made to control; neither
do particular words or phrases necessarily determine the
character of a contract. The legal effect of the contract is
not to be determined alone by any particular provision
disconnected from all others, but in the ruling intention
of the parties as gathered from all the language they
have used and from their contemporaneous and
subsequent acts. 52
Turning to the terms of the contract at hand, as
presented by PAL Air Waybill No. 079-01180454,
respondent court approvingly quoted the trial court's
disquisition on the aforequoted condition appearing on
the reverse side of the airway bill and its disposition of
this particular assigned error:
The foregoing stipulation fully answers plaintiffs'
objections to the one-day delay and the shipping of the
113
remains in TWA Flight 603 instead of TWA Flight 131.
Under the stipulation, parties agreed that no time was
fixed to complete the contract of carriage and that the
carrier may, without notice, substitute alternate carriers
or aircraft. The carrier did not assume the obligation to
carry the shipment on any specified aircraft.
xxx xxx xxx
Furthermore, contrary to the claim of plaintiffs-
appellants, the conditions of the Air Waybill are big
enough to be read and noticed. Also, the mere fact that
the cargo in question was shipped in TWA Flight 603, a
flight earlier on the same day than TWA Flight 131, did
not in any way cause or add to the one-day delay
complained of and/or the switching or mix-up of the
bodies.53
Indubitably, that private respondent can use substitute
aircraft even without notice and without the assumption
of any obligation whatsoever to carry the goods on any
specified aircraft is clearly sanctioned by the contract of
carriage as specifically provided for under the
conditions thereof.
Petitioners' invocation of the interpretative rule in the
Rules of Court that written words control printed words
in documents, 54 to bolster their assertion that the
typewritten provisions regarding the routing and flight
schedule prevail over the printed conditions, is tenuous.
Said rule may be considered only when there is
inconsistency between the written and printed words of
the contract.
As previously stated, we find no ambiguity in the
contract subject of this case that would call for the
application of said rule. In any event, the contract
has provided for such a situation by explicitly stating
that the above condition remains effective
"notwithstanding that the same (fixed time for
completion of carriage, specified aircraft, or any
particular route or schedule) may be stated on the face
hereof." While petitioners hinge private respondents'
culpability on the fact that the carrier "certifies goods
described below were received for carriage," they may
have overlooked that the statement on the face of the
airway bill properly and completely reads —
Carrier certifies goods described below were received
for carriage subject to the Conditions on the reverse
hereof the goods then being in apparent good order and
condition except as noted hereon. 55(Emphasis ours.)
Private respondents further aptly observe that the
carrier's certification regarding receipt of the goods for
carriage "was of a smaller print than the condition of the
Air Waybill, including Condition No. 5 — and thus if
plaintiffs-appellants had recognized the former, then
with more reason they were aware of the latter. 56
In the same vein, it would also be incorrect to accede to
the suggestion of petitioners that the typewritten
specifications of the flight, routes and dates of
departures and arrivals on the face of the airway bill
constitute a special contract which modifies the printed
conditions at the back thereof. We reiterate that
typewritten provisions of the contract are to be read and
understood subject to and in view of the printed
conditions, fully reconciling and giving effect to the
manifest intention of the parties to the agreement.
The oft-repeated rule regarding a carrier's liability for
delay is that in the absence of a special contract, a
carrier is not an insurer against delay in transportation of
goods. When a common carrier undertakes to convey
goods, the law implies a contract that they shall be
delivered at destination within a reasonable time, in the
absence, of any agreement as to the time of
delivery. 57 But where a carrier has made an express
contract to transport and deliver property within a
specified time, it is bound to fulfill its contract and is
liable for any delay, no matter from what cause it may
have arisen. 58 This result logically follows from the
well-settled rule that where the law creates a duty or
charge, and the party is disabled from performing it
without any default in himself, and has no remedy over,
then the law will excuse him, but where the party by his
own contract creates a duty or charge upon himself, he
is bound to make it good notwithstanding any accident
or delay by inevitable necessity because he might
have provided against it by contract. Whether or not
there has been such an undertaking on the part of the
carrier to be determined from the circumstances
surrounding the case and by application of the ordinary
rules for the interpretation of contracts.59
Echoing the findings of the trial court, the respondent
court correctly declared that —
In a similar case of delayed delivery of air cargo under a
very similar stipulation contained in the airway bill
which reads: "The carrier does not obligate itself to
carry the goods by any specified aircraft or on a
specified time. Said carrier being hereby authorized to
deviate from the route of the shipment without any
liability therefor", our Supreme Court ruled that
common carriers are not obligated by law to carry and to
deliver merchandise, and persons are not vested with the
right to prompt delivery, unless such common carriers
previously assume the obligation. Said rights and
obligations are created by a specific contract entered
into by the parties (Mendoza vs. PAL, 90 Phil. 836).
There is no showing by plaintiffs that such a special or
specific contract had been entered into between them
and the defendant airline companies.
And this special contract for prompt delivery should call
the attention of the carrier to the circumstances
surrounding the case and the approximate amount of
damages to be suffered in case of delay (See Mendoza
vs. PAL, supra). There was no such contract entered
into in the instant case.60
Also, the theory of petitioners that the specification of
the flights and dates of departure and arrivals constitute
a special contract that could prevail over the printed
stipulations at the back of the airway bill is vacuous. To
countenance such a postulate would unduly burden the
common carrier for that would have the effect of
unilaterally transforming every single bill of lading or
trip ticket into a special contract by the simple expedient
of filling it up with the particulars of the flight, trip or
voyage, and thereby imposing upon the carrier duties
and/or obligations which it may not have been ready or
willing to assume had it been timely, advised thereof.
Neither does the fact that the challenged condition No. 5
was printed at the back of the airway bill militate against
its binding effect on petitioners as parties to the contract,
for there were sufficient indications on the face of said
bill that would alert them to the presence of such
additional condition to put them on their guard.
Ordinary prudence on the part of any person entering or
contemplating to enter into a contract would prompt
even a cursory examination of any such conditions,
terms and/or stipulations.
There is a holding in most jurisdictions that the
acceptance of a bill of lading without dissent raises a
presumption that all terms therein were brought to the
knowledge of the shipper and agreed to by him, and in
the absence of fraud or mistake, he is estopped from
thereafter denying that he assented to such terms. This
rule applies with particular force where a shipper
accepts a bill of lading with full knowledge of its
contents, and acceptance under such circumstances
makes it a binding contract. In order that any
presumption of assent to a stipulation in a bill of lading
limiting the liability of a carrier may arise, it must
appear that the clause containing this exemption from
liability plainly formed a part of the contract contained
in the bill of lading. A stipulation printed on the back of
114
a receipt or bill of lading or on papers attached to such
receipt will be quite as effective as if printed on its face,
if it is shown that the consignor knew of its terms. Thus,
where a shipper accepts a receipt which states that its
conditions are to be found on the back, such receipt
comes within the general rule, and the shipper is held to
have accepted and to be bound by the conditions there to
be found. 61
Granting arguendo that Condition No. 5 partakes of the
nature of a contract of adhesion and as such must be
construed strictly against the party who drafted the same
or gave rise to any ambiguity therein, it should be borne
in mind that a contract of adhesion may be struck down
as void and unenforceable, for being subversive of
public policy, only when the weaker party is imposed
upon in dealing with the dominant bargaining party and
is reduced to the alternative of taking it or leaving it,
completely deprived of the opportunity to bargain on
equal footing. 62However, Ong Yiu vs. Court of Appeals,
et al 63 instructs us that contracts of adhesion are not
entirely prohibited. The one who adheres to the contract
is in reality free to reject it entirely; if he adheres, be
gives his consent. Accordingly, petitioners, far from
being the weaker party in this situation, duly signified
their presumed assent to all terms of the contract
through their acceptance of the airway bill and are
consequently bound thereby. It cannot be gainsaid that
petitioners' were not without several choices as to
carriers in Chicago with its numerous airways and
airliner servicing the same.
We wish to allay petitioners' apprehension that
Condition No. 5 of the airway bill is productive of
mischief as it would validate delay in delivery, sanction
violations of contractual obligations with impunity or
put a premium on breaches of contract.
Just because we have said that condition No. 5 of the
airway bill is binding upon the parties to and fully
operative in this transaction, it does not mean, and let
this serve as fair warning to respondent carriers, that
they can at all times whimsically seek refuge from
liability in the exculpatory sanctuary of said Condition
No. 5 or arbitrarily vary routes, flights and schedules to
the prejudice of their customers. This condition only
serves to insulate the carrier from liability in those
instances when changes in routes, flights and schedules
are clearly justified by the peculiar circumstances of a
particular case, or by general transportation practices,
customs and usages, or by contingencies or emergencies
in aviation such as weather turbulence, mechanical
failure, requirements of national security and the like.
And even as it is conceded that specific routing and
other navigational arrangements for a trip, flight or
voyage, or variations therein, generally lie within the
discretion of the carrier in the absence of specific
routing instructions or directions by the shipper, it is
plainly incumbent upon the carrier to exercise its rights
with due deference to the rights, interests and
convenience of its customers.
A common carrier undertaking to transport property has
the implicit duty to carry and deliver it within
reasonable time, absent any particular stipulation
regarding time of delivery, and to guard against delay.
In case of any unreasonable delay, the carrier shall be
liable for damages immediately and proximately
resulting from such neglect of duty. 64 As found by the
trial court, the delay in the delivery of the remains of
Crispina Saludo, undeniable and regrettable as it was,
cannot be attributed to the fault, negligence or malice of
private respondents,65 a conclusion concurred in by
respondent court and which we are not inclined to
disturb.
We are further convinced that when TWA opted to ship
the remains of Crispina Saludo on an earlier flight, it did
so in the exercise of sound discretion and with
reasonable prudence, as shown by the explanation of its
counsel in his letter of February 19, 1977 in response to
petitioners' demand letter:
Investigation of TWA's handling of this matter reveals
that although the shipment was scheduled on TWA
Flight 131 of October 27, 1976, it was actually boarded
on TWA Flight 603 of the same day, approximately 10
hours earlier, in order to assure that the shipment would
be received in San Francisco in sufficient time for
transfer to PAL. This transfer was effected in San
Francisco at 2:00 P.M. on October 27, 1976. 66
Precisely, private respondent TWA knew of the urgency
of the shipment by reason of this notation on the lower
portion of the airway bill: "All documents have been
certified. Human remains of Cristina (sic) Saludo.
Please return bag first available flight to SFO."
Accordingly, TWA took it upon itself to carry the
remains of Crispina Saludo on an earlier flight, which
we emphasize it could do under the terms of the airway
bill, to make sure that there would be enough time for
loading said remains on the transfer flight on board
PAL.
III. Petitioners challenge the validity of respondent
court's finding that private respondents are not liable for
tort on account of the humiliating, arrogant and
indifferent acts of their officers and personnel. They
posit that since their mother's remains were transported
ten hours earlier than originally scheduled, there was no
reason for private respondents' personnel to disclaim
knowledge of the arrival or whereabouts of the same
other than their sheer arrogance, indifference and
extreme insensitivity to the feelings of petitioners.
Moreover, being passengers and not merely consignors
of goods, petitioners had the right to be treated with
courtesy, respect, kindness and due consideration.
In riposte, TWA claims that its employees have always
dealt politely with all clients, customers and the public
in general. PAL, on the other hand, declares that in the
performance of its obligation to the riding public, other
customers and clients, it has always acted with justice,
honesty, courtesy and good faith.
Respondent appellate court found merit in and
reproduced the trial court's refutation of this assigned
error:
About the only evidence of plaintiffs that may have
reference to the manner with which the personnel of
defendants treated the two plaintiffs at the San Francisco
Airport are the following pertinent portions of Maria
Saludo's testimony:
Q When you arrived there, what did you do, if any?
A I immediately went to the TWA counter and I
inquired about whether my mother was there or if' they
knew anything about it.
Q What was the answer?
A They said they do not know. So, we waited.
Q About what time was that when you reached San
Francisco from Chicago?
A I think 5 o'clock. Somewhere around that in the
afternoon.
Q You made inquiry it was immediately thereafter?
A Right after we got off the plane.
Q Up to what time did you stay in the airport to wait
until the TWA people could tell you the whereabouts?
A Sorry, Sir, but the TWA did not tell us anything. We
stayed there until about 9 o'clock. They have not heard
anything about it. They did not say anything.
Q Do you want to convey to the Court that from 5 up to
9 o'clock in the evening you yourself went back to the
TWA and they could not tell you where the remains of
your mother were?
A Yes sir.
Q And after nine o'clock, what did you do?
115
A I told my brother my Mom was supposed to be on the
Philippine Airlines flight. "Why don't" we check with
PAL instead to see if she was there?" We tried to
comfort each other. I told him anyway that was a
shortest flight from Chicago to California. We will be
with our mother on this longer flight. So, we checked
with the PAL.
Q What did you find?
A We learned, Yes, my Mom would be on the flight.
Q Who was that brother?
A Saturnino Saludo.
Q And did you find what was your flight from San
Francisco to the Philippines?
A I do not know the number. It was the evening flight of
the Philippine Airline(s) from San Francisco to Manila.
Q You took that flight with your mother?
A We were scheduled to, Sir.
Q Now, you could not locate the remains of your mother
in San Francisco could you tell us what did you feel?
A After we were told that my mother was not there?
Q After you learned that your mother could not fly with
you from Chicago to California?
A Well, I was very upset. Of course, I wanted the
confirmation that my mother was in the West Coast. The
fliqht was about 5 hours from Chicago to California. We
waited anxiously all that time on the plane. I wanted to
be assured about my mother's remains. But there was
nothing and we could not get any assurance from
anyone about it.
Q Your feeling when you reached San Francisco and
you could not find out from the TWA the whereabouts
of the remains, what did you feel?
A Something nobody would be able to describe unless
he experiences it himself. It is a kind of panic. I think it's
a feeling you are about to go crazy. It is something I do
not want to live through again. (Inting, t.s.n., Aug. 9,
1983, pp. 14-18).
The foregoing does not show any humiliating or
arrogant manner with which the personnel of both
defendants treated the two plaintiffs. Even their alleged
indifference is not clearly established. The initial answer
of the TWA personnel at the counter that they did not
know anything about the remains, and later, their answer
that they have not heard anything about the remains, and
the inability of the TWA counter personnel to inform
the two plaintiffs of the whereabouts of the remains,
cannot be said to be total or complete indifference to the
said plaintiffs. At any rate, it is any rude or discourteous
conduct, malfeasance or neglect, the use of abusive or
insulting language calculated to humiliate and shame
passenger or had faith by or on the part of the
employees of the carrier that gives the passenger an
action for damages against the carrier (Zulueta vs. Pan
American World Airways, 43 SCRA 397; Air France vs.
Carrascoso, et al., 18 SCRA 155; Lopez, et al. vs. Pan
American World Airways, 16 SCRA 431; Northwest
Airlines, Inc. vs. Cuenca, 14 SCRA 1063), and none of
the above is obtaining in the instant case. 67
We stand by respondent court's findings on this point,
but only to the extent where it holds that the manner in
which private respondent TWA's employees dealt with
petitioners was not grossly humiliating, arrogant or
indifferent as would assume the proportions of malice or
bad faith and lay the basis for an award of the damages
claimed. It must however, be pointed out that the
lamentable actuations of respondent TWA's employees
leave much to be desired, particularly so in the face of
petitioners' grief over the death of their mother,
exacerbated by the tension and anxiety wrought by the
impasse and confusion over the failure to ascertain over
an appreciable period of time what happened to her
remains.
Airline companies are hereby sternly admonished that it
is their duty not only to cursorily instruct but to strictly
require their personnel to be more accommodating
towards customers, passengers and the general public.
After all, common carriers such as airline companies are
in the business of rendering public service, which is the
primary reason for their enfranchisement and
recognition in our law. Because the passengers in a
contract of carriage do not contract merely for
transportation, they have a right to be treated with
kindness, respect, courtesy and consideration. 68 A
contract to transport passengers is quite different in kind
and degree from any other contractual relation, and
generates a relation attended with public duty. The
operation of a common carrier is a business affected
with public interest and must be directed to serve the
comfort and convenience of passengers. 69 Passengers
are human beings with human feelings and emotions;
they should not be treated as mere numbers or statistics
for revenue.
The records reveal that petitioners, particularly Maria
and Saturnino Saludo, agonized for nearly five hours,
over the possibility of losing their mother's mortal
remains, unattended to and without any assurance from
the employees of TWA that they were doing anything
about the situation. This is not to say that petitioners
were to be regaled with extra special attention. They
were, however, entitled to the understanding and
humane consideration called for by and commensurate
with the extraordinary diligence required of common
carriers, and not the cold insensitivity to their
predicament. It is hard to believe that the airline's
counter personnel were totally helpless about the
situation. Common sense would and should have
dictated that they exert a little extra effort in making a
more extensive inquiry, by themselves or through their
superiors, rather than just shrug off the problem with a
callous and uncaring remark that they had no knowledge
about it. With all the modern communications
equipment readily available to them, which could have
easily facilitated said inquiry and which are used as a
matter of course by airline companies in their daily
operations, their apathetic stance while not legally
reprehensible is morally deplorable.
Losing a loved one, especially one's, parent, is a painful
experience. Our culture accords the tenderest human
feelings toward and in reverence to the dead. That the
remains of the deceased were subsequently delivered,
albeit belatedly, and eventually laid in her final resting
place is of little consolation. The imperviousness
displayed by the airline's personnel, even for just that
fraction of time, was especially condemnable
particularly in the hour of bereavement of the family of
Crispina Saludo, intensified by anguish due to the
uncertainty of the whereabouts of their mother's
remains. Hence, it is quite apparent that private
respondents' personnel were remiss in the observance of
that genuine human concern and professional
attentiveness required and expected of them.
The foregoing observations, however, do not appear to
be applicable or imputable to respondent PAL or its
employees. No attribution of discourtesy or indifference
has been made against PAL by petitioners and, in fact,
petitioner Maria Saludo testified that it was to PAL that
they repaired after failing to receive proper attention
from TWA. It was from PAL that they received
confirmation that their mother's remains would be on the
same flight to Manila with them.
We find the following substantiation on this particular
episode from the deposition of Alberto A. Lim, PAL's
cargo supervisor earlier adverted to, regarding their
investigation of and the action taken on learning of
petitioner's problem:
ATTY. ALBERTO C. MENDOZA:
Yes.
116
Mr. Lim, what exactly was your procedure adopted in that nominal damages are not intended for
your so called investigation? indemnification of loss suffered but for the vindication
ALBERTO A. LIM: or recognition of a right violated of invaded. They are
I called the lead agent on duty at that time and requested recoverable where some injury has been done but the
for a copy of airway bill, transfer manifest and other amount of which the evidence fails to show, the
documents concerning the shipment. assessment of damages being left to the discretion of the
ATTY ALBERTO C. MENDOZA: court according to the circumstances of the case.76 In the
Then, what? exercise of our discretion, we find an award of
ALBERTO A. LIM: P40,000.00 as nominal damages in favor of, petitioners
They proceeded to analyze exactly where PAL failed, if to be a reasonable amount under the circumstances of
any, in forwarding the human remains of Mrs. Cristina this case.
(sic) Saludo. And I found out that there was not (sic) WHEREFORE, with the modification that an award of
delay in shipping the remains of Mrs. Saludo to Manila. P40,000.00 as and by way of nominal damages is
Since we received the body from American Airlines on hereby granted in favor of petitioners to be paid by
28 October at 7:45 and we expedited the shipment so respondent Trans World Airlines, the appealed decision
that it could have been loaded on our flight leaving at is AFFIRMED in all other respects.
9:00 in the evening or just barely one hour and 15 SO ORDERED.
minutes prior to the departure of the aircraft. That is so
(sic) being the case, I reported to Manila these
circumstances. 70
IV. Finally, petitioners insist, as a consequence of the
delay in the shipment of their mother's remains allegedly
caused by wilful contractual breach, on their entitlement
to actual, moral and exemplary damages as well as
attorney's fees, litigation expenses, and legal interest.
The uniform decisional tenet in our jurisdiction bolds
that moral damages may be awarded for wilful or
fraudulent breach of contract 71 or when such breach is
attended by malice or bad faith. 72 However, in the
absence of strong and positive evidence of fraud, malice
or bad faith, said damages cannot be awarded.73 Neither
can there be an award of exemplary damages 74 nor of
attorney's fees 75 as an item of damages in the absence of
proof that defendant acted with malice, fraud or bad
faith.
The censurable conduct of TWA's employees cannot,
however, be said to have approximated the dimensions
of fraud, malice or bad faith. It can be said to be more of
a lethargic reaction produced and engrained in some
people by the mechanically routine nature of their work
and a racial or societal culture which stultifies what
would have been their accustomed human response to a
human need under a former and different ambience.
Nonetheless, the facts show that petitioners' right to be
treated with due courtesy in accordance with the degree
of diligence required by law to be exercised by every
common carrier was violated by TWA and this entitles
them, at least, to nominal damages from TWA alone.
Articles 2221 and 2222 of the Civil Code make it clear
THIRD DIVISION
G.R. No. 94761 May 17, 1993
MAERSK LINE, petitioner,
vs.
COURT OF APPEALS AND EFREN V.
CASTILLO, doing business under the name and
style of Ethegal Laboratories, respondents.
Bito, Lozada, Ortega & Castillo for petitioner.
Humberto A. Jambora for private respondent.
BIDIN, J.:
Petitioner Maersk Line is engaged in the transportation
of goods by sea, doing business in the Philippines
through its general agent Compania General de Tabacos
de Filipinas.
Private respondent Efren Castillo, on the other hand, is
the proprietor of Ethegal Laboratories, a firm engaged in
the manutacture of pharmaceutical products.
On November 12, 1976, private respondent ordered
from Eli Lilly. Inc. of Puerto Rico through its (Eli Lilly,
Inc.'s) agent in the Philippines, Elanco Products,
600,000 empty gelatin capsules for the manufacture of
his pharmaceutical products. The capsules were placed
in six (6) drums of 100,000 capsules each valued at US
$1,668.71.
Through a Memorandum of Shipment (Exh. "B"; AC
GR CV No.10340, Folder of Exhibits, pp. 5-6), the
shipper Eli Lilly, Inc. of Puerto Rico advised private
respondent as consignee that the 600,000 empty gelatin
capsules in six (6) drums of 100,000 capsules each,
were already shipped on board MV "Anders
Maerskline" under Voyage No. 7703 for shipment to the
Philippines via Oakland, California. In said
Memorandum, shipper Eli Lilly, Inc. specified the date
of arrival to be April 3, 1977.
For reasons unknown, said cargo of capsules were
mishipped and diverted to Richmond, Virginia, USA
and then transported back Oakland, Califorilia. The
goods finally arrived in the Philippines on June 10, 1977
or after two (2) months from the date specified in the
memorandum. As a consequence, private respondent as
consignee refused to take delivery of the goods on
account of its failure to arrive on time.
Private respondent alleging gross negligence and undue
delay in the delivery of the goods, filed an action before
the court a quo for rescission of contract with damages
against petitioner and Eli Lilly, Inc. as defendants.
117
Denying that it committed breach of contract, petitioner
alleged in its that answer that the subject shipment was
transported in accordance with the provisions of the
covering bill of lading and that its liability under the law
on transportation of good attaches only in case of loss,
destruction or deterioration of the goods as provided for
in Article 1734 of Civil Code (Rollo, p. 16).
Defendant Eli Lilly, Inc., on the other hand, filed its
answer with compulsory and cross-claim. In its cross-
claim, it alleged that the delay in the arrival of the the
subject merchandise was due solely to the gross
negligence of petitioner Maersk Line.
The issues having been joined, private respondent
moved for the dismissal of the complaint against Eli
Lilly, Inc.on the ground that the evidence on record
shows that the delay in the delivery of the shipment was
attributable solely to petitioner.
Acting on private respondent's motion, the trial court
dismissed the complaint against Eli Lilly, Inc.
Correspondingly, the latter withdraw its cross-claim
against petitioner in a joint motion dated December 3,
1979.
After trial held between respondent and petitioner, the
court a quo rendered judgment dated January 8, 1982 in
favor of respondent Castillo, the dispositive portion of
which reads:
IN VIEW OF THE FOREGOING, this Court believe
(sic) and so hold (sic) that there was a breach in the
performance of their obligation by the defendant Maersk
Line consisting of their negligence to ship the 6 drums
of empty Gelatin Capsules which under their own
memorandum shipment would arrive in the Philippines
on April 3, 1977 which under Art. 1170 of the New
Civil Code, they stood liable for damages.
Considering that the only evidence presented by the
defendant Maersk line thru its agent the Compania de
Tabacos de Filipinas is the testimony of Rolando
Ramirez who testified on Exhs. "1" to "5" which this
Court believe (sic) did not change the findings of this
Court in its decision rendered on September 4, 1980,
this Court hereby renders judgment in favor of the
plaintiff Efren Castillo as against the defendant Maersk
Line thru its agent, the COMPANIA GENERAL DE
TABACOS DE FILIPINAS and ordering:
(a) Defendant to pay the plaintiff Efren V. Castillo the
amount of THREE HUNDRED SIXTY NINE
THOUSAND PESOS, (P369,000.00) as unrealized
profit;.
(b) Defendant to pay plaintiff the sum of TWO
HUNDRED THOUSAND PESOS (P200,000.00), as
moral damages;
(c) Defendant to pay plaintiff the sum of TEN
THOUSAND PESOS (P10,000.00) as exemplary
damages;
(d) Defendant to pay plaintiff the sum of ELEVEN
THOUSAND SIX HUNDRED EIGHTY PESOS AND
NINETY SEVEN CENTAVOS (P11,680.97) as cost of
credit line; and
(e) Defendant to pay plaintiff the sum of FIFTY
THOUSAND PESOS (P50,000.00), as attorney's fees
and to pay the costs of suit.
That the above sums due to the plaintiff will bear the
legal rate of interest until they are fully paid from the
time the case was filed.
SO ORDERED. (AC-GR CV No. 10340, Rollo, p. 15).
On appeal, respondent court rendered its decision dated
August 1, 1990 affirming with modifications the lower
court's decision as follows:
WHEREFORE, the decision appealed from is affirmed
with a modification, and, as modified, the judgment in
this case should read as follows:
Judgment is hereby rendered ordering defendant-
appellant Maersk Line to pay plaintiff-appellee (1)
compensatory damages of P11,680.97 at 6% annual
interest from filing of the complaint until fully paid, (2)
moral damages of P50,000.00, (3) exemplary damages
of P20,000,00, (3) attorney's fees, per appearance fees,
and litigation expenses of P30,000.00, (4) 30% of the
total damages awarded except item (3) above, and the
costs of suit.
SO ORDERED. (Rollo, p. 50)
In its Memorandum, petitioner submits the following
"issues" for resolution of the court :
I
Whether or not the respondent Court of Appeals
committed an error when it ruled that a defendant's
cross-claim against a co-defendant survives or subsists
even after the dismissal of the complaint against
defendant-cross claimant.
II
Whether or not respondent Castillo is entitled to
damages resulting from delay in the delivery of the
shipment in the absence in the bill of lading of a
stipulation on the period of delivery.
III
Whether or not the respondent appellate court erred in
awarding actual, moral and exemplary damages and
attorney's fees despite the absence of factual findings
and/or legal bases in the text of the decision as support
for such awards.
IV
Whether or not the respondent Court of Appeals
committed an error when it rendered an ambiguous and
unexplained award in the dispositive portion of the
decision which is not supported by the body or the text
of the decision. (Rollo, pp.94-95).
With regard to the first issue raised by petitioner on
whether or not a defendant's cross-claim against co-
defendant (petitioner herein) survives or subsists even
after the dismissal of the complaint against defendant-
cross-claimant (petitioner herein), we rule in the
negative.
Apparently this issue was raised by reason of the
declaration made by respondent court in its questioned
decision, as follows:
Re the first assigned error: What should be rescinded in
this case is not the "Memorandum of Shipment" but the
contract between appellee and defendant Eli Lilly
(embodied in three documents, namely: Exhs. A, A-1
and A-2) whereby the former agreed to buy and the
latter to sell those six drums of gelatin capsules. It is by
virtue of the cross-claim by appellant Eli Lilly against
defendant Maersk Line for the latter's gross negligence
in diverting the shipment thus causing the delay and
damage to appellee that the trial court found appellant
Maersk Line liable. . . .
xxx xxx xxx
Re the fourth assigned error: Appellant Maersk Line's
insistence that appellee has no cause of action against it
and appellant Eli Lilly because the shipment was
delivered in good order and condition, and the bill of
lading in question contains "stipulations, exceptions and
conditions" Maersk Line's liability only to the "loss,
destruction or deterioration," indeed, this issue of lack of
cause of action has already been considered in our
foregoing discussion on the second assigned error, and
our resolution here is still that appellee has a cause of
action against appellant Eli Lilly. Since the latter had
filed a cross-claim against appellant Maersk Line, the
trial court committed no error, therefore, in holding the
latter appellant ultimately liable to appellee. (Rollo, pp.
47-50; Emphasis supplied)
Reacting to the foregoing declaration, petitioner submits
that its liability is predicated on the cross-claim filed its
co-defendant Eli Lilly, Inc. which cross-claim has been
dismissed, the original complaint against it should
118
likewise be dismissed. We disagree. It should be
recalled that the complaint was filed originally against
Eli Lilly, Inc. as shipper-supplier and petitioner as
carrier. Petitioner being an original party defendant
upon whom the delayed shipment is imputed cannot
claim that the dismissal of the complaint against Eli
Lilly, Inc. inured to its benefit.
Respondent court, erred in declaring that the trial court
based petitioner's liability on the cross-claim of Eli
Lilly, Inc. As borne out by the record, the trial court
anchored its decision on petitioner's delay or negligence
to deliver the six (6) drums of gelatin capsules within a
reasonable time on the basis of which petitioner was
held liable for damages under Article 1170 of the New
Civil Code which provides that those who in the
performance of their obligations are guilty of fraud,
negligence, or delay and those who in any manner
contravene the tenor thereof, are liable for damages.
Nonetheless, petitioner maintains that it cannot be held
for damages for the alleged delay in the delivery of the
600,000 empty gelatin capsules since it acted in good
faith and there was no special contract under which the
carrier undertook to deliver the shipment on or before a
specific date (Rollo, p. 103).
On the other hand, private respondent claims that during
the period before the specified date of arrival of the
goods, he had made several commitments and contract
of adhesion. Therefore, petitioner can be held liable for
the damages suffered by private respondent for the
cancellation of the contracts he entered into.
We have carefully reviewed the decisions of respondent
court and the trial court and both of them show that, in
finding petitioner liable for damages for the delay in the
delivery of goods, reliance was made on the rule that
contracts of adhesion are void. Added to this, the lower
court stated that the exemption against liability for delay
is against public policy and is thus, void. Besides,
private respondent's action is anchored on Article 1170
of the New Civil Code and not under the law on
Admiralty (AC-GR CV No. 10340, Rollo, p. 14).
The bill of lading covering the subject shipment among
others, reads:
6. GENERAL
(1) The Carrier does not undertake that the goods shall
arive at the port of discharge or the place of delivery at
any particular time or to meet any particular market or
use and save as is provided in clause 4 the Carrier shall
in no circumstances be liable for any direct, indirect or
consequential loss or damage caused by delay. If the
Carrier should nevertheless be held legally liable for any
such direct or indirect or consequential loss or damage
caused by delay, such liability shall in no event exceed
the freight paid for the transport covered by this Bill of
Lading. (Exh. "1-A"; AC-G.R. CV No. 10340, Folder of
Exhibits, p. 41)
It is not disputed that the aforequoted provision at the
back of the bill of lading, in fine print, is a contract of
adhesion. Generally, contracts of adhesion are
considered void since almost all the provisions of these
types of contracts are prepared and drafted only by one
party, usually the carrier (Sweet Lines v. Teves, 83
SCRA 361 [1978]). The only participation left of the
other party in such a contract is the affixing of his
signature thereto, hence the term "Adhesion" (BPI
Credit Corporation v. Court of Appeals, 204 SCRA 601
[1991]; Angeles v. Calasanz, 135 SCRA 323 [1985]).
Nonetheless, settled is the rule that bills of lading are
contracts not entirely prohibited (Ong Yiu v. Court of
Appeals, et al., 91 SCRA 223 [1979]; Servando, et al. v.
Philippine Steam Navigation Co., 117 SCRA 832
[1982]). One who adheres to the contract is in reality
free to reject it in its entirety; if he adheres, he gives his
consent (Magellan Manufacturing Marketing
Corporation v. Court of Appeals, et al., 201 SCRA 102
[1991]).
In Magellan, (supra), we ruled:
It is a long standing jurisprudential rule that a bill of
lading operates both as a receipt and as contract to
transport and deliver the same a therein stipulated. As a
contract, it names the parties, which includes the
consignee, fixes the route, destination, and freight rates
or charges, and stipulates the rights and obligations
assumed by the parties. Being a contract, it is the law
between the parties who are bound by its terms and
conditions provided that these are not contrary to law,
morals, good customs, public order and public policy. A
bill of lading usually becomes effective upon its
delivery to and acceptance by the shipper. It is presumed
that the stipulations of the bill were, in the absence of
fraud, concealment or improper conduct, known to the
shipper, and he is generally bound by his acceptance
whether he reads the bill or not. (Emphasis supplied)
However, the aforequoted ruling applies only if such
contracts will not create an absurd situation as in the
case at bar. The questioned provision in the subject bill
of lading has the effect of practically leaving the date of
arrival of the subject shipment on the sole determination
and will of the carrier.
While it is true that common carriers are not obligated
by law to carry and to deliver merchandise, and persons
are not vested with the right to prompt delivery, unless
such common carriers previously assume the obligation
to deliver at a given date or time (Mendoza v. Philippine
Air Lines, Inc., 90 Phil. 836 [1952]), delivery of
shipment or cargo should at least be made within a
reasonable time.
In Saludo, Jr. v. Court of Appeals (207 SCRA 498
[1992]) this Court held:
The oft-repeated rule regarding a carrier's liability for
delay is that in the absence of a special contract, a
carrier is not an insurer against delay in transportation of
goods. When a common carrier undertakes to convey
goods, the law implies a contract that they shall be
delivered at destination within a reasonable time, in the
absence, of any agreement as to the time of delivery. But
where a carrier has made an express contract to
transport and deliver properly within a specified time, it
is bound to fulfill its contract and is liable for any delay,
no matter from what cause it may have arisen. This
result logically follows from the well-settled rule that
where the law creates a duty or charge, and the default
in himself, and has no remedy over, then his own
contract creates a duty or charge upon himself, he is
bound to make it good notwithstanding any accident or
delay by inevitable necessity because he might have
provided against it by contract. Whether or not there has
been such an undertaking on the part of the carrier is to
be determined from the circumstances surrounding the
case and by application of the ordinary rules for the
interpretation of contracts.
An examination of the subject bill of lading (Exh. "1";
AC GR CV No. 10340, Folder of Exhibits, p. 41) shows
that the subject shipment was estimated to arrive in
Manila on April 3, 1977. While there was no special
contract entered into by the parties indicating the date of
arrival of the subject shipment, petitioner nevertheless,
was very well aware of the specific date when the goods
were expected to arrive as indicated in the bill of lading
itself. In this regard, there arises no need to execute
another contract for the purpose as it would be a mere
superfluity.
In the case before us, we find that a delay in the delivery
of the goods spanning a period of two (2) months and
seven (7) days falls was beyond the realm of
reasonableness. Described as gelatin capsules for use in
pharmaceutical products, subject shipment was
delivered to, and left in, the possession and custody of
119
petitioner-carrier for transport to Manila via Oakland, to the aggrieved party (Radio Communication of the
California. But through petitioner's negligence was Phils., Inc. v. Court of Appeals, 195 SCRA 147 [1991]).
mishipped to Richmond, Virginia. Petitioner's insitence Although attorney's fees are generally not recoverable, a
that it cannot be held liable for the delay finds no merit. party can be held lible for such if exemplary damages
Petition maintains that the award of actual, moral and are awarded (Artice 2208, New Civil Code). In the case
exemplary dames and attorney's fees are not valid since at bar, we hold that private respondent is entitled to
there are no factual findings or legal bases stated in the reasonable attorney`s fees since petitioner acte with
text of the trial court's decision to support the award gross negligence amounting to bad faith.
thereof. However, we find item 4 in the dispositive portion of
Indeed, it is settled that actual and compensataory respondent court`s decision which awarded thirty (30)
damages requires substantial proof (Capco v. Macasaet. percent of the total damages awarded except item 3
189 SCRA 561 [1990]). In the case at bar, private regarding attorney`s fees and litigation expenses in
respondent was able to sufficiently prove through an favor of private respondent, to be unconsionable, the
invoice (Exh. 'A-1'), certification from the issuer of the same should be deleted.
letter of credit (Exh.'A-2') and the Memorandum of WHEREFORE, with the modification regarding the
Shipment (Exh. "B"), the amount he paid as costs of the deletion of item 4 of respondent court`s decision, the
credit line for the subject goods. Therefore, respondent appealed decision is is hereby AFFIRMED in all
court acted correctly in affirming the award of eleven respects.
thousand six hundred eighty pesos and ninety seven SO ORDERED.
centavos (P11,680.97) as costs of said credit line.
As to the propriety of the award of moral damages,
Article 2220 of the Civil Code provides that moral
damages may be awarded in "breaches of contract where
the defendant acted fraudulently or in bad faith" (Pan
American World Airways v. Intermediate Appellate
Court, 186 SCRA 687 [1990]).
In the case before us, we that the only evidence
presented by petitioner was the testimony of Mr.
Rolando Ramirez, a claims manager of its agent
Compania General de Tabacos de Filipinas, who merely
testified on Exhs. '1' to '5' (AC-GR CV No. 10340, p. 2)
and nothing else. Petitioner never even bothered to
explain the course for the delay, i.e. more than two (2)
months, in the delivery of subject shipment. Under the
circumstances of the case, we hold that petitioner is
liable for breach of contract of carriage through gross
negligence amounting to bad faith. Thus, the award of
moral damages if therefore proper in this case.
In line with this pronouncement, we hold that exemplary
damages may be awarded to the private respondent. In
contracts, exemplary damages may be awarded if the
defendant acted in a wanton, fraudulent, reckless,
oppresive or malevolent manner. There was gross
negligence on the part of the petitioner in mishiping the
subject goods destined for Manila but was inexplicably
shipped to Richmond, Virginia, U.S.A. Gross
carelessness or negligence contitutes wanton
misconduct, hence, exemplary damages may be awarded
THIRD DIVISION
G.R. No. 118126 March 4, 1996
TRANS-ASIA SHIPPING LINES, INC., petitioner,
vs.
COURT OF APPEALS and ATTY. RENATO T.
ARROYO, respondents.
DAVIDE, JR., J.:p
As formulated by the petitioner, the issue in this petition
for review on certiorari under Rule 45 of the Rules of
Court is as follows:
In case of interruption of a vessel's voyage and the
consequent delay in that vessel's arrival at its port of
destination, is the right of a passenger affected thereby
to be determined and governed by the vague Civil Code
provision on common carriers, or shall it be, in the
absence of a specific provision thereongoverned by Art.
698 of the Code of Commerce?1
The petitioner considers it a "novel question of law."
Upon a closer evaluation, however, of the challenged
decision of the Court of Appeals of 23 November
1994,2 vis-a-vis, the decision of 29 June 1992 in Civil
Case No. 91-491 of the Regional Trial Court (RTC) of
Cagayan de Oro City, Branch 24,3 as well as the
allegations and arguments adduced by the parties, we
find the petitioner's formulation of the issue imprecise.
As this Court sees it, what stands for resolution is a
common carrier's liability for damages to a passenger
who disembarked from the vessel upon its return to the
port of origin, after it suffered engine trouble and had to
stop at sea, having commenced the contracted voyage
on one engine.
The antecedents are summarized by the Court of
Appeals as follows:
Plaintiff [herein private respondent Atty. Renato
Arroyo], a public attorney, bought a ticket [from]
defendant [herein petitioner], a corporation engaged in .
. . inter-island shipping, for the voyage of M/V Asia
Thailand vessel to Cagayan de Oro City from Cebu City
on November 12, 1991.
At around 5:30 in the evening of November 12, 1991,
plaintiff boarded the M/V Asia Thailand vessel. At that
instance, plaintiff noticed that some repair works [sic]
were being undertaken on the engine of the vessel. The
vessel departed at around 11:00 in the evening with only
one (1) engine running.
After an hour of slow voyage, the vessel stopped near
Kawit Island and dropped its anchor thereat. After half
120
an hour of stillness, some passengers demanded that
they should be allowed to return to Cebu City for they
were no longer willing to continue their voyage to,
Cagayan de Oro City. The captain acceeded [sic] to their
request and thus the vessel headed back to Cebu City.
At Cebu City, plaintiff together with the other
passengers who requested to be brought back to Cebu
City, were allowed to disembark. Thereafter, the vessel
proceeded to Cagayan de Oro City. Plaintiff, the next
day, boarded the M/V Asia Japan for its voyage to
Cagayan de Oro City, likewise a vessel of defendant.
On account of this failure of defendant to transport him
to the place of destination on November 12, 1991,
plaintiff filed before the trial court a complaint for
damages against defendant.4
In his complaint, docketed as Civil Case No. 91-491,
plaintiff (hereinafter private respondent) alleged that the
engines of the M/V Asia Thailand conked out in the
open sea, and for more than an hour it was stalled and at
the mercy of the waves, thus causing fear in the
passengers. It sailed back to Cebu City after it regained
power, but for unexplained reasons, the passengers,
including the private respondent, were arrogantly told to
disembark without the necessary precautions against
possible injury to them. They were thus
unceremoniously dumped, which only exacerbated the
private respondent's mental distress. He further alleged
that by reason of the petitioner's wanton, reckless, and
willful acts, he was unnecessarily exposed to danger
and, having been stranded in Cebu City for a day,
incurred additional expenses and loss of income. He
then prayed that he be awarded P1,100.00, P50,000.00,
and P25,000.00 as compensatory, moral; and exemplary
damages, respectively.5
In his pre-trial brief, the private respondent asserted that
his complaint was "an action for damages arising from
bad faith, breach of contract and from tort," with the
former arising from the petitioner's "failure to carry
[him] to his place of destination as contracted," while
the latter from the "conduct of the [petitioner] resulting
[in] the infliction of emotional distress" to the private
respondent.6
After due trial, the trial court rendered its decision7 and
ruled that the action was only for breach of contract,
with Articles 1170, 1172, and 1173 of the Civil Code as
applicable law — not Article 2180 of the same Code. It
was of the opinion that Article 1170 made a person
liable for damages if, in the performance of his
obligation, he was guilty of fraud, negligence, or delay,
or in any manner contravened the tenor thereof;
moreover, pursuant to Article 2201 of the same Code, to
be entitled to damages, the non-performance of the
obligation must have been tainted not only by fraud,
negligence, or delay, but also bad faith, malice, and
wanton attitude. It then disposed of the case as follows:
WHEREFORE, it not appearing from the evidence that
plaintiff was left in the Port of Cebu because of the
fault, negligence, malice or wanton attitude of
defendant's employees, the complaint is DISMISSED.
Defendant's counterclaim is likewise dismissed it not
appearing also that filing of the case by plaintiff was
motivated by malice or bad faith.8
The trial court made the following findings to support
its disposition:
In the light of the evidence adduced by the parties and
of the above provisions of the New Civil Code, the issue
to be resolved, in the resolution of this case is whether
or not, defendant thru its employees in [sic] the night of
November 12, 1991, committed fraud, negligence, bad
faith or malice when it left plaintiff in the Port of Cebu
when it sailed back to Cagayan de Oro City after it has
[sic] returned from Kawit Island.
Evaluation of the evidence of the parties tended to show
nothing that defendant committed fraud. As early as
3:00 p.m. of November 12, 1991, defendant did not hide
the fact that the cylinder head cracked. Plaintiff even
saw during its repair. If he had doubts as to the vessel's
capacity to sail, he had time yet to take another boat.
The ticket could be returned to defendant and
corresponding cash [would] be returned to him.
Neither could negligence, bad faith or malice on the part
of defendant be inferred from the evidence of the
parties. When the boat arrived at [the] Port of Cebu after
it returned from Kawit Island, there was an
announcement that passengers who would like to
disembark were given ten (10) minutes only to do so.
By this announcement, it could be inferred that the boat
will [sic] proceed to Cagayan de Oro City. If plaintiff
entertained doubts, he should have asked a member of
the crew of the boat or better still, the captain of the
boat. But as admitted by him, he was of the impression
only that the boat will not proceed to Cagayan de Oro
that evening so he disembarked. He was instead, the
ones [sic] negligent. Had he been prudent, with the
announcement that those who will disembark were
given ten minutes only, he should have lingered a little
by staying in his cot and inquired whether the boat will
proceed to Cagayan de Oro City or not. Defendant
cannot be expected to be telling [sic] the reasons to each
passenger. Announcement by microphone was enough.
The court is inclined to believe that the story of
defendant that the boat returned to the Port of Cebu
because of the request of the passengers in view of the
waves. That it did not return because of the defective
engines as shown by the fact that fifteen (15) minutes
after the boat docked [at] the Port of Cebu and those
who wanted to proceed to Cagayan de Oro disembarked,
it left for Cagayan de Oro City.
The defendant got nothing when the boat returned to
Cebu to let those who did not want to proceed to
Cagayan de Oro City including plaintiff disembarked.
On the contrary, this would mean its loss instead
because it will have to refund their tickets or they will
use it the next trip without paying anymore. It is hard
therefore, to imagine how defendant by leaving plaintiff
in Cebu could have acted in bad faith, negligently,
wantonly and with malice.
If plaintiff, therefore, was not able to [m]ake the trip that
night of November 12, 1991, it was not because
defendant maliciously did it to exclude him [from] the
trip. If he was left, it was because of his fault or
negligence.9
Unsatisfied, the private respondent appealed to the
Court of Appeals (CA-G.R. CV No. 39901) and
submitted for its determination the following assignment
of errors: (1) the trial court erred in not finding that the
defendant-appellee was guilty of fraud, delay,
negligence, and bad faith; and (2) the trial court. erred in
not awarding moral and exemplary damages.10
In its decision of 23 November 1994,11 the Court of
Appeals reversed the trial court's decision by applying
Article 1755 in relation to Articles 2201, 2208, 2217,
and 2232 of the Civil Code and, accordingly, awarded
compensatory, moral, and exemplary damages as
follows:
WHEREFORE, premises considered, the appealed
decision is hereby REVERSED and SET ASIDE and
another one is rendered ordering defendant-appellee to
pay plaintiff-appellant:
1. P20,000.00 as moral damages;
2. P10,000.00 as exemplary damages;
3. P5,000.00 as attorney's fees;
4. Cost of suit.
SO ORDERED.12
It did not, however, allow the grant of damages for the
delay in the performance of the petitioner's obligation as
the requirement of demand set forth in Article 1169 of
121
the Civil Code had not been met by the private
respondent. Besides, it found that the private respondent
offered no evidence to prove that his contract of carriage
with the petitioner provided for liability in case of delay
in departure, nor that a designation of the time of
departure was the controlling motive for the
establishment of the contract. On the latter, the court a
quo observed that the private respondent even admitted
he was unaware of the vessel's departure time, and it
was only when he boarded the vessel that he became
aware of such. Finally, the respondent Court found no
reasonable basis for the private respondent's belief that
demand was useless because the petitioner had rendered
it beyond its power to perform its obligation; on the
contrary, he even admitted that the petitioner had been
assuring the passengers that the vessel would leave on
time, and that it could still perform its obligation to
transport them as scheduled.
To justify its award of damages, the Court of Appeals
ratiocinated as follows:
It is an established and admitted fact that the vessel
before the voyage had undergone some repair work on
the cylinder head of the engine. It is likewise admitted
by defendant-appellee that it left the port of Cebu City
with only one engine running. Defendant-appellee
averred:
. . . The dropping of the vessel's anchor after running
slowly on only one engine when it departed earlier must
have alarmed some nervous passengers . . .
The entries in the logbook which defendant-appellee
itself offered as evidence categorically stated therein
that the vessel stopped at Kawit Island because of
engine trouble. It reads:
2330 HRS STBD ENGINE' EMERGENCY STOP
2350 HRS DROP ANCHOR DUE TO ENGINE
TROUBLE, 2 ENGINE STOP.
The stoppage was not to start and synchronized [sic] the
engines of the vessel as claimed by defendant-appellee.
It was because one of the engines of the vessel broke
down; it was because of the disability of the vessel
which from the very beginning of the voyage was
known to defendant-appellee.
Defendant-appellee from the very start of the voyage
knew for a fact that the vessel was not yet in its sailing
condition because the second engine was still being
repaired. Inspite of this knowledge, defendant-appellee
still proceeded to sail with only one engine running.
Defendant-appellee at that instant failed to exercise the
diligence which all common carriers should exercise in
transporting or carrying passengers. The law does not
merely require extraordinary diligence in the
performance of the obligation. The law mandates that
common carrier[s] should exercise utmost diligence the
transport of passengers.
Article 1755 of the New Civil Code provides:
Art. 1755. A common carrier is bound to carry the
passengers safely as far as human care and foresight can
provide, using the utmost diligence of very cautious
persons, with a due regard for all the circumstances.
Utmost diligence of a VERY CAUTIOUS person
dictates that defendant-appellee should have pursued the
voyage only when its vessel was already fit to sail.
Defendant-appellee should have made certain that the
vessel [could] complete the voyage before starting [to]
sail. Anything less than this, the vessel [could not] sail .
. . with so many passengers on board it.
However, defendant-appellant [sic] in complete
disregard of the safety of the passengers, chose to
proceed with its voyage even if only one engine was
running as the second engine was still being repaired
during the voyage. Defendant-appellee disregarded
the not very remote possibility that because of the
disability of the vessel, other problems might occur
which would endanger the lives of the passengers
sailing with a disabled vessel.
As expected, . . . engine trouble occurred. Fortunate[ly]
for defendant-appellee, such trouble only necessitated
the stoppage of the vessel and did not cause the vessel to
capsize. No wonder why some passengers requested to
be brought back to Cebu City. Common carriers which
are mandated to exercise utmost diligence should not be
taking these risks.
On this premise, plaintiff-appellant should not be faulted
why he chose to disembark from the vessel with the
other passengers when it returned back to Cebu City.
Defendant-appellee may call him a very "panicky
passenger" or a "nervous person", but this will not
relieve defendant-appellee from the liability it incurred
for its failure to exercise utmost diligence.13
xxx xxx xxx
As to the second assigned error, we find that plaintiff-
appellant is entitled to the award of moral and
exemplary damages for the breach committed by
defendant-appellee.
As discussed, defendant-appellee in sailing to Cagayan
de Oro City with only one engine and with full
knowledge of the true condition of the vessel, acted. in
bad faith with malice, in complete disregard for the
safety of the passengers and only for its own personal
advancement/interest.
The Civil Code provides:
Art. 2201.
xxx xxx xxx
In case of fraud, bad faith, malice or wanton attitude, the
obligor shall be responsible for all damages which may
be reasonably attributed to the non-performance of the
obligation.
Plaintiff-appellant is entitled to moral damages for the
mental anguish, fright and serious anxiety he suffered
during the voyage when the vessel's engine broke down
and when he disembarked from the vessel during the
wee hours of the morning at Cebu City when it
returned.14
Moral damages are recoverable in a damage suit
predicated upon a breach of contract of carriage where it
is proved that the carrier was guilty of fraud or bad faith
even if death does not result. 15
Fraud and bad faith by defendant-appellee having been
established, the award of moral damages is in order.16
To serve as a deterrent to the commission of similar acts
in the future, exemplary damages should be imposed
upon defendant-appellee. 17 Exemplary damages are
designed by our civil law to permit the courts to reshape
behavior that is socially deleterious in its consequence
by creating . . . negative incentives or deterrents against
such behavior.18
Moral damages having been awarded, exemplary
damages maybe properly awarded. When entitlement to
moral damages has been established, the award of
exemplary damages is proper.19
The petitioner then instituted this petition and submitted
the question of law earlier adverted to.
Undoubtedly, there was, between the petitioner and the
private respondent, a contract of common carriage. The
laws of primary application then are the provisions on
common carriers under Section 4, Chapter 3, Title VIII,
Book IV of the Civil Code, while for all other matters
not regulated thereby, the Code of Commerce and
special laws.20
Under Article 1733 of the Civil Code, the petitioner was
bound to observe extraordinary diligence in ensuring the
safety of the private respondent. That meant that the
petitioner was, pursuant to Article 1755 of the said
Code, bound to carry the private respondent safely as far
as human care and foresight could provide, using the
utmost diligence of very cautious persons, with due
regard for all the circumstances. In this case, we are in
122
full accord with the Court of Appeals that the petitioner
failed to discharge this obligation.
Before commencing the contracted voyage, the
petitioner undertook some repairs on the cylinder head
of one of the vessel's engines. But even before it could
finish these repairs, it allowed the vessel to leave the
port of origin on only one functioning engine, instead of
two. Moreover, even the lone functioning engine was
not in perfect condition as sometime after it had run its
course, it conked out. This caused the vessel to stop and
remain a drift at sea, thus in order to prevent the ship
from capsizing, it had to drop anchor. Plainly, the vessel
was unseaworthy even before the voyage began. For a
vessel to be seaworthy, it must be adequately equipped
for the voyage and manned with a sufficient number of
competent officers and crew. 21 The failure of a common
carrier to maintain in seaworthy condition its vessel
involved in a contract of carriage is a clear breach of its
duty prescribed in Article 1755 of the Civil Code.
As to its liability for damages to the private respondent,
Article 1764 of the Civil Code expressly provides:
Art. 1764. Damages in cases comprised in this Section
shall be awarded in accordance with Title XVIII of this
Book, concerning Damages. Article 2206 shall also
apply to the death of a passenger caused by the breach
of contract by common carrier.
The damages comprised in Title XVIII of the Civil
Code are actual or compensatory, moral, nominal,
temperate or moderate, liquidated, and exemplary.
In his complaint, the private respondent claims actual or
compensatory, moral, and exemplary damages.
Actual or compensatory damages represent the adequate
compensation for pecuniary loss suffered and for profits
the obligee failed to obtain.22
In contracts or quasi-contracts, the obligor is liable for
all the damages which may be reasonably attributed to
the non-performance of the obligation if he is guilty of
fraud, bad faith, malice, or wanton attitude.23
Moral damages include moral suffering, mental anguish,
fright, serious anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation, or similar
injury. They may be recovered in the cases enumerated
in Article 2219 of the Civil Code, likewise, if they are
the proximate result of, as in this case, the petitioner's
breach of the contract of carriage.24 Anent a breach of a
contract of common carriage, moral damages may be
awarded if the common carrier, like the petitioner, acted
fraudulently or in bad faith.25
Exemplary damages are imposed by way of example or
correction for the public good, in addition to moral,
temperate, liquidated or compensatory damages.26 In
contracts and quasi-contracts, exemplary damages may
be awarded if the defendant acted in a wanton,
fraudulent, reckless, oppressive or malevolent
manner.27 It cannot, however, be considered as a matter
of right; the court having to decide whether or not they
should be adjudicated.28Before the court may consider
an award for exemplary damages, the plaintiff must first
show that he is entitled to moral, temperate or
compensatory damages; but it is not necessary that he
prove the monetary value thereof.29
The Court of Appeals did not grant the private
respondent actual or compensatory damages, reasoning
that no delay was incurred since there was no demand,
as required by Article 1169 of the Civil Code. This
article, however, finds no application in this case
because, as found by the respondent Court, there was in
fact no delay in the commencement of the contracted
voyage. If any delay was incurred, it was after the
commencement of such voyage, more specifically, when
the voyage was subsequently interrupted when the
vessel had to stop near Kawit Island after the only
functioning engine conked out.
As to the rights and duties of the parties strictly arising
out of such delay, the Civil Code is silent. However, as
correctly pointed out by the petitioner, Article 698 of the
Code of Commerce specifically provides for such a
situation. It reads:
In case a voyage already begun should be interrupted,
the passengers shall be obliged to pay the fare in
proportion to the distance covered, without right to
recover for losses and damages if the interruption is due
to fortuitous event or force majeure, but with a right to
indemnity if the interruption should have been caused
by the captain exclusively. If the interruption should be
caused by the disability of the vessel and a passenger
should agree to await the repairs, he may not be required
to pay any increased price of passage, but his living
expenses during the stay shall be for his own account.
This article applies suppletorily pursuant to Article 1766
of the Civil Code.
Of course, this does not suffice for a resolution of the
case at bench for, as earlier stated, the cause of the delay
or interruption was the petitioner's failure to observe
extraordinary diligence. Article 698 must then be read
together with Articles 2199, 2200, 2201, and 2208 in
relation to Article 21 of the Civil Code. So read, it
means that the petitioner is liable for any pecuniary loss
or loss of profits which the private respondent may have
suffered by reason thereof. For the private respondent,
such would be the loss of income if unable to report to
his office on the day he was supposed to arrive were it
not for the delay. This, however, assumes that he stayed
on the vessel and was with it when it thereafter resumed
its voyage; but he did not. As he and some passengers
resolved not to complete the voyage, the vessel had to
return to its port of origin and allow them to disembark.
The private respondent then took the petitioner's other
vessel the following day, using the ticket he had
purchased for the previous day's voyage.
Any further delay then in the private respondent's arrival
at the port of destination was caused by his decision to
disembark. Had he remained on the first vessel, he
would have reached his destination at noon of 13
November 1991, thus been able to report to his office in
the afternoon. He, therefore, would have lost only the
salary for half of a day. But actual or compensatory
damages must be proved,30 which the private respondent
failed to do. There is no convincing evidence that he did
not receive his salary for 13 November 1991 nor that his
absence was not excused.
We likewise fully agree with the Court of Appeals that
the petitioner is liable for moral and exemplary
damages. In allowing its unseaworthy M/V Asia
Thailand to leave the port of origin and undertake the
contracted voyage, with full awareness that it was
exposed to perils of the sea, it deliberately disregarded
its solemn duty to exercise extraordinary diligence and
obviously acted with bad faith and in a wanton and
reckless manner. On this score, however, the petitioner
asserts that the safety or the vessel and passengers was
never at stake because the sea was "calm" in the vicinity
where it stopped as faithfully recorded in the vessel's log
book (Exhibit "4"). Hence, the petitioner concludes, the
private respondent was merely "over-reacting" to the
situation obtaining then.31
We hold that the petitioner's defense cannot exculpate it
nor mitigate its liability. On the contrary, such a claim
demonstrates beyond cavil the petitioner's lack of
genuine concern for the safety of its passengers. It was,
perhaps, only providential then the sea happened to be
calm. Even so, the petitioner should not expect its
passengers to act in the manner it desired. The
passengers were not stoics; becoming alarmed, anxious,
or frightened at the stoppage of a vessel at sea in an
unfamiliar zone as nighttime is not the sole prerogative
123
of the faint-hearted. More so in the light of the many
tragedies at sea resulting in the loss of lives of hopeless
passengers and damage to property simply because
common carriers failed in their duty to exercise
extraordinary diligence in the performance of their
obligations.
We cannot, however, give our affirmance to the award
of attorney's fees. Under Article 2208 of the Civil Code,
these are recoverable only in the concept of actual
damages,32 not as moral damages33 nor judicial
costs. 34 Hence, to merit such an award, it is settled that
the amount thereof must be proven. 35 Moreover, such
must be specifically prayed for — as was not done in
this case—and may not be deemed incorporated within a
general prayer for "such other relief and remedy as this
court may deem just and equitable."36 Finally, it must be
noted that aside from the following, the body of the
respondent Court's decision was devoid of any statement
regarding attorney's fees:
Plaintiff-appellant was forced to litigate in order that he
can claim moral and exemplary damages for the
suffering he encurred [sic]. He is entitled to attorney's
fees pursuant to Article 2208 of the Civil Code. It states:
Art. 2208. In the absence of stipulation, attorney's fees
and expenses of litigation, other than judicial costs
cannot be recovered except:
1. When exemplary damages are awarded;
2. When the defendant's act or omission has compelled
the plaintiff to litigate with third persons or to incur
expenses to protect his interest.
This Court holds that the above does not satisfy the
benchmark of "factual, legal and equitable justification"
needed as basis for an award of attorney's fees.3 7 In
sum, for lack of factual and legal basis, the award of
attorney's fees must be deleted.
WHEREFORE, the instant petition is DENIED and the
challenged decision of the Court of Appeals in CA-G.R.
CV No. 39901 is AFFIRMED subject to the
modification as to the award for attorney's fees which is
hereby SET ASIDE.
Costs against the petitioner.
SO ORDERED.