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NORTHWEST AIRLINES, INC. (TORRES) V CA284 SCRA 408DAVIDE, JR.

, January 20, 1998 NATURE PETITION FOR Review on certiorari of a decision of the CA FACTS - RolandoTorres (TORRES) went to Chicago to purchase firearms for the Philippine Senate, and on his wayback he checked-in and presented before Northwest Airlines, Inc (NAI)s representatives his 2 identicalbaggage, 1 of which contains the firearms which NAIs representatives tagged with marking ContainsFirearms. Upon arrival in Manila, TORRES allegedly was not able to claim his baggage containing thefirearms as it was recalled by US Customs verification. When the baggage was returned, the firearms weregone.-NAI refused to settle amicably so Torres prayed before TC for NAI to pay AD, MD, TD, ED, and attorneysfees.ANSWER : (a) US Customs agents ordered the return of the baggage; (b) in Chicago, the baggage did notcontain any firearms when opened by US Customs agents; (c) since the baggage ordered back to Chicagodid not contain any firearms then the baggage which Torres received upon arrival must have contained themissing firearms-plaintiff presented its evidence. NAI filed M OTION TO D ISMISS BY WAY OF D EMURRER TO E VIDENCE with M OTION FOR S UMMARY J UDGMENT where they moved for (a) dismissal of the complaint in so far as it prays MD, ED, TD andattorneys fees as the evidence presented did not entitle him to such Demurrer part (r33); (b) summary judgment to be rendered awarding plaintiff $640 as AD as limited by the Warsaw Convention and thecontract of carriage Motion for summary judgment part (R35). Plaintiff did not object BUT insisted that heis entitled to damages prayed for (i.e. MD, ED, TD and attorneys fees) - said order was deemed submittedfor resolution TC : full-blown decision ordering NAI to pay Torres (1) $9009.32 with legal interest representing the valueof the goods lost by the plaintiff act of NAI personnel in Tokyo Airport in just guessing which baggagecontained firearms = willful misconduct (removed limitation to liability of NAI under the Sec22(2) of theWarsaw Convention; (2) P100k attys fees; (3) P5,181.09 filing fees; (4) P20k expenses for litigation; (5)P50k as MD for the inconvenience,

anxiety and worry by reason of unjustifiable refusal to settle-TORRES and NAI appealed; TORRES argues that AD, MD, ED should have been awarded; NAI argues: (1)denial of due process because of premature resolution of case, preventing NAI from presenting evidence; (2) error in awarding damages, attys fees and expenses of litigation CA : sustained TCs award BUT TC erred in determining by way of summary judgment the amount of damages (R34.3); TC could not dispose of the case on its entirety as NAI moved for summary judgment onAD issue, and for dismissal by way of demurrer to evidence of MD and attorneys fees no motion heardfor said claims under R34.2; on demurrer to evidence, in TCs impliedly not granting demurrer to evidence,NAI should have been allowed to present evidence (R35.1). remanded case to TC,-CA: NAIs MOTION FOR PARTIAL RECONSIDERATION OF The DECISION deniedNorthwest contests: TORRES right to AD was based on (1) loss of firearms; (2) finding of willful misconductarbitrary; (3) TORRES failed to produce US license for shipment of firearms importation illegal, nodamages could arise therefrom ISSUE 1. WON TC did err in deciding the entire case on its merits when a demurrer to evidence had been filed2. WON a summary judgment is proper HELD 1. YES Reasoning. Under R33.1 of ROC, the TC had no other choice than to grant or deny the demurrer BUT notdeny the demurrer and grant claims on a finding that TORRES has established a preponderance of evidence in support of such claims. TC should merely deny demurrer and set a date for the reception of NAIs evidence in chief.2. NO. Ratio. R35 now allow parties to submit not only affidavits but also depositions or admissions in support of their respective contentions. A motion for summary judgment may be filed by the claimant at any timeafter the answer is filed or by the defending party at any timesummary judgment is allowed if, except as to amount of damages, there is no genuine issue as to anymaterial fact and the moving party is entitled to a judgment as a matter of law. There is still a genuineissue on the fact and amount of actual damages so MOTION FOR SUMMARY JUDGMENT NOT In ORDER. Reasoning. NAI, in submitting for summary judgment, deemed to have hypothetically admitted arguendothat the firearms were lost BUT it did not waive the presentation of evidence that it was not in fact liablefor the alleged loss of firearms. -ONNAIS LIABILITY LIMITATION ARGUMENT BASED ON WARSAW CONVENTION Alitalia v IAC: Warsaw Conventionshould only be deemed a limit of liability in cases where the cause of death or injury to person, or destruction, loss or damage to property or delay in its transpord is not attributable to or attended by anywillful misconduct, bad faith, recklessness, or otherwise improper conduct on the part of any official oremployee for which the carrier is responsible and there is otherwise no special or extraordinary form of resulting injury. Disposition. IN VIEW WHEREOF, judgment is hereby rendered (1)PARTLY GRANTING the NIAs petition bysetting aside that portion affirming the summary judgment as to the right of TORRES to AD; (2) Denyingfor want of merit TORRES petition; (3) remanding caseto TC for reception f evidence for NAI and forrendition of judgment on the merits. No pronouncement as to costs.

EASTERN SHIPPING LINES, INC. vs. CAG.R. No. 116356 June 29, 1998 The Facts: Respondent elevated a complaint against petitioner for unpaid fees for pilotageservice rendered. Despite repeated demands, petitioner failed to pay and prays bedirected to pay with legal rate of interest from the filing of the complaint and othersuch other relief. The petitioner assailed the constitutionality of the EO 1088 upon which respondentbased its claims. Petitioner insists that it should pay pilotage fees in accordance withand on the basis of the memorandum circulars issued by the PPA, the administrativebody vested under PD 857. The trial court directed the petitioner to pay respondent on sum of unpaid pilotagefees, legal rate of interest, attorney's fees and costs. The trial court added that thefactual antecedents of the controversy are simple; the petitioner insists on paying thefees prescribed under PPA circulars because EO 1088 sets a higher rate, petitionerthen assailed its constitutionality. The Court of Appeals affirmed the trial courtsdecision in toto. Hence, the petition. Issue: WON EO 1088 is valid Ruling: Yes. EO 1088 provides for adjusted pilotage service rates without withdrawing thepower of the PPA to impose, prescribe, increase or decrease rates, charges or fees. The reason is because EO 1088 is not meant simply to fix new pilotage rates. Itslegislative purpose is the "rationalization of pilotage service charges, through theimposition of uniform and adjusted rates for foreign and coastwise vessels in all Philippine ports. ______________ BRITISH AIRWAYS vs. COURT OF APPEALS Facts: Mahtani obtained the services of a certain Mr. Gemar to prepare his travel plan to Bombay, India. Mr. Gemar purchased a ticket from British Airways, however since it had no ticket flights from Manila to Bombay, Mahtani had to take a connecting flight to Bombay. Prior to his departure, Mahtani checked in the PAL counter in Manila his two pieces of luggage containing his clothing and personal effects, confident that upon reaching Hong Kong, the same would be transferred to the BA flight bound for Bombay. Unfortunately, when Mahtani arrived in Bombay, he discovered that his luggage was missing and that upon inquiry from the BA representatives, he was told that the same might have been diverted to London. After plaintiff waited for his luggage for one week, BA finally advised him to file a claim. Mahtani filed his complaint for damages. BA filed a third-party complaint against PAL alleging that the reason for the non-transfer of the luggage was due to the latter's late arrival in Hongkong, thus leaving hardly any time for the proper transfer of Mahtani's luggage to the BA aircraft bound for Bombay. RTC rendered its decision in favor of Mahtani, which CA affirmed, hence the instant petition. BA alleged that there should have been no separate award for the luggage and the contents thereof since Mahtani failed to declare a separate higher valuation for the luggage and therefore, its liability is limited, at most, only to the amount stated in the ticket. Issue: Whether or not BA is liable for the compensatory damages.

Held: Yes. The contract of transportation was exclusively between Mahtani and BA. The latter merely endorsing the Manila to Hong Kong log of the formers journey to PAL, as its subcontractor or agent. Conditions of contacts was one of continuous air transportation from Manila to Bombay. The Court of Appeals should have been cognizant of the well-settled rule that an agent is also responsible for any negligence in the performance of its function and is liable for damages which the principal may suffer by reason of its negligent act. The third-party complaint was therefore reinstated. Since the instant petition was based on breach of contract of carriage, Mahtani can only sue BA and not PAL, since the latter was not a party in the contract. The contention of BA with respect to limited liability was overruled although it is recognized in the Philippines, stating that BA had waived the defense of limited liability when it allowed Mahtani to testify as to the actual damages he incurred due to the misplacement of his luggage, without any objection. _____ AF Sanchez Brokerage vs CA and FGU Insurance (Dec 21, 2004) Facts: AF Sanchez is engaged in a broker business wherein its main job is to calculate customs duty, fees and charges as well as storage fees for the cargoes. Part also of the services being given by AF Sanchez is the delivery of the shipment to the consignee upon the instruction of the shipper. Wyett engaged the services of AF Sanchez where the latter delivered the shipment to Hizon Laboratories upon instruction of Wyett. Upon inspection, it was found out that at least 44 cartons containing contraceptives were in bad condition. Wyett claimed insurance from FGU. FGU exercising its right of subrogation claims damages against AF Sanchez who delivered the damaged goods. AF Sanchez contended that it is not a common carrier but a brokerage firm. Issue: Is AF Sanchez a common carrier? Held: SC held that Art 1732 of the Civil Code in defining common carrier does not distinguish whether the activity is undertaken as a principal activity or merely as an ancillary activity. In this case, while it is true that AF Sanchez is principally engaged as a broker, it cannot be denied from the evidence presented that part of the services it offers to its customers is the delivery of the goods to their respective consignees. Addendum: AF Sanchez claimed that the proximate cause of the damage is improper packing. Under the CC, improper packing of the goods is an exonerating circumstance. But in this case, the SC held that though the goods were improperly packed, since AF Sanchez knew of the condition and yet it accepted the shipment without protest or reservation, the defense is deemed waived. Foul Bill of Lading reservation or protest on a shipment or goods improperly packed. __________ Philamgem vs. PKS Shippinf Company

Facts:Davao Union Marketing Corporation (DUMC) contracted the services of respondentPKS Shipping Company (PKS Shipping) for the shipment to Tacloban City of seventy-five thousand (75,000) bags of cement worth Three Million Three Hundred SeventyFive Thousand Pesos (P3,375,000.00). DUMC insured the goods for its full value withpetitioner Philippine American General Insurance Company (Philamgen). During thetransport, the barge where the bags of cement were loaded, sank. Upon demand of payment by DUMC, Philamgen immediately paid them. Hence, it soughtreimbursement from PKS Shipping but the latter refused. Issue:(1) Whether PKS Shipping is a common carrier or a private carrier; and( 2) WON PKS Shipping exercised the required diligence over the goods they carry.Or, WON PKS Shipping is liable. Held: (1) PKS Shipping is a common carrier.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. Theregularity of its activities in this area indicates more than just a casual activity on itspart. Neither can the concept of a common carrier change merely becauseindividual contracts are executed or entered into with patrons of the carrier. (2) PKS Shipping is not liable.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 bargeissued by the Philippine Coastguard and the Coastwise Load Line Certificate wouldattest to the seaworthiness of Limar I. As such, under Art. 1733, NCC, commoncarriers are exempt from liability for loss, destruction, or deterioration of the goodsdue to any of the following causes, among others:(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity x x x _______ Asia Lighterage & Shipping, Inc. vs CA & Prudential Guarantee and Assurance, Inc. G.R. No. 147246August 19, 2003 On appeal is the CAs May 11, 2000 Decision in CA-G.R. CV No. 49195 and February 21, 2001 Resolution affirming with modification the April 6,1994 Decision of the RTC of Manila which found petitioner liable to pay private respondent the amount of indemnity and attorneys fees. FACTS: Asia Lighterage and Shipping, Inc was contracted as carrier to deliver 3,150 metric tons of Better Western White Wheat in bulk, (US$423,192.35) to the consignees (General Milling Corporation) warehouse at Bo. Ugong, Pasig City. The cargo was transferred to its custody on July 25, 1990. The shipment was insured by Prudential Guarantee and Assurance, Inc. against loss/damage for P14,621,771.75. On August 15, 1990, 900 metric tons of the shipment was loaded on barge PSTSI III for delivery to consignee. However, 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. 5 days later, 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. It filed a Marine Protest on August 28, 1990 and also secured the services of Gaspar Salvaging Corporation to refloat the barge. The hole was then patched with clay and cement. The barge was then towed to ISLOFF terminal before it finally headed towards the consignees 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 3 other barges.

The next day, the towing bits of the barge broke. It sank completely, resulting in the total loss of the remaining cargo. A 2nd Marine Protest was filed on September 7, 1990. 7 days later, a bidding was conducted to dispose of the damaged wheat retrieved & loaded on the 3 other barges. The total proceeds from the sale of the salvaged cargo was P201,379.75. On the same date, 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. Thereafter, as subrogee, it sought recovery of said amount from the petitioner, but to no avail. ISSUES: 1. Whether petitioner is a common carrier. 2. Assuming petitioner is a common carrier, whether it exercised extraordinary care and diligence in its care and custody of the consignees cargo. HELD: 1. 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. In De Guzman vs. CA (G.R. No. L-47822, 22 December 1988) it was 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. There is also no distinction between a person or enterprise offering transportation service on a regular/scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Further, 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.Private respondent Ernesto Cendaa was considered to be a common carrier even if his principal occupation was not thecarriage of goods for others, but that of buying used bottles and scrap metal in Pangasinan and selling these items in Manila. To be sure, petitioner fits the test of a common carrier as laid down in Bascos vs. CA (G.R. No. 101089, 07 April 1993, 221 SCRA 318). 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. In the case at bar, the petitioner admitted that it is engaged in the business of shipping, lighterage and drayage, offering its barges to the public, despite its limited clientele for carrying/transporting goods by water for compensation. Petitioner is clearly a common carrier. Therefore, 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. 2. The findings of the lower courts should be upheld. Petitioner failed to exercise extraordinary diligence in its care and custody of the consignees goods. Common carriers are bound to observe extraordinary diligence in the vigilance over the goods transported by them. They are presumed to have been at fault or to have acted negligently if the goods are lost, destroyed or deteriorated. 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/omission of the shipper/owner of the goods; (4) The character of the goods or defects in the packing or in the containers; (5) Order/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/minimize the loss. 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. Moreover, petitioner still headed to the consignees wharf despite knowledge of an incoming typhoon. During the time that the barge was heading towards the consignees wharf on September 5, 1990, typhoon Loleng has already entered the Philippine area of responsibility. 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. ___________ Calvo v. UCPB General Insurance G.R. No. 148496 March 19, 2002 Facts: Petitioner Virgines Calvo, owner of Transorient Container Terminal Services, Inc. (TCTSI), and a custom broker, 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 to the Tabacalera Compound, Ermita, Manila. The cargo was insured by respondent UCPB General Insurance Co., Inc. On July 14, 1990, contained in 30 metal vans, arrived in Manila on board M/V Hayakawa Maru. After 24 hours, they were unloaded from vessel to the custody of the arrastre operator, Manila Port Services, Inc. From July 23 to 25, 1990, petitioner, pursuant to her contract with SMC, withdrew the cargo from the arrastre operator and delivered it to SMCs warehouse in Manila. On July 25, the goods were inspected by Marine Cargo Surveyors, reported that 15 reels of the semi-chemical fluting paper were wet/stained/torn and 3 reels of kraft liner board were also torn. The damages cost P93,112.00. SMC collected the said amount from respondent UCPB under its insurance contract. Respondent on the other hand, as a subrogee of SMC, brought a suit against petitioner in RTC, Makati City. On December 20, 1995, the RTC rendered judgment finding petitioner liable for the damage to the shipment. The decision was affirmed by the CA. Issue: Whether or not Calvo is a common carrier? Held: In this case the contention of the petitioner, that he is not a common carrier but a private carrier, has no merit.

Article 1732 makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as 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 1733 deliberately refrained from making such distinction. (De Guzman v. CA, 68 SCRA 612) Te concept of common carrier under Article 1732 coincide with the notion of public service, under the Public Service Act which partially supplements the law on common carrier. Under Section 13, paragraph (b) of the Public Service Act, it 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 _________ FGU INSURANCE CORP. VS. G.P. SARMIENTO TRUCKING CORP. (GPS)G.R. No. 141910. August 6, 2002 Facts: GPS is an exclusive contractor and hauler of Concepcion Industries, Inc. One day, it was to deliver certaingoods of Concepcion Industries, Inc. aboard one of its trucks. On its way, the truck collided with an unidentifiedtruck, resulting in damage to the cargoes.FGU, insurer of the shipment paid to Concepcion Industries, Inc. the amount of the damage and filed a suit againstGPS. GPS filed a motion to dismiss for failure to prove that it was a common carrier. Issue: Whether or not GPS falls under the category of a common carrier. Held: Note that GPS is an exclusive contractor and hauler of Concepcion Industries, Inc. offering its service to noother individual or entity. A common carrier is one which offers its services whether to the public in general or to a limited clientele in particular but never on an exclusive basis. Therefore, GPS does not fit the category of a common carrier although it is not freedfrom its liability based on culpa contractual. _______ DE GUZMAN VS. COURT OF APPEALS 168 SCRA 612 Facts: Cendena was a junk dealer and was engaged in buying used bottles and scrap materials in Pangasinan and brought these to Manila for resale. He used two 6-wheeler trucks. On the return trip to Pangasinan, he would load his vehicles with cargo which various merchants wanted delivered to Pangasinan. For that service, he charged freight lower than

regular rates. General Milk Co. contacted with him for the hauling of 750 cartons of milk. On the way to Pangasinan, one of the trucks was hijacked by armed men who took with them the truck and its cargo and kidnapped the driver and his helper. Only 150 cartons of milk were delivered. The Milk Co. sued to claim the value of the lost merchandise based on an alleged contract of carriage. Cendena denied that he was a common carrier and contended that he could not be liable for the loss it was due to force majeure. The trial court ruled that he was a common carrier. The CA reversed. Issue: Whether or not Cendena is a common carrier? Held: Yes, Cendena is properly characterized as a common carrier even though he merely backhauled goods for other merchants, and even if it was done on a periodic basis rather than on a regular basis, and even if his principal occupation was not the carriage of goods. Article 1732 makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity. It also avoids making a distinction between a person or enterprise offering transportation services on a regular or scheduled basis and one offering service on an occasional, episodic or unscheduled basis. Neither does it make a distinction between a carrier offering its services to the general public and one who offers services or solicits business only from a narrow segment of population. ___________ Albano vs. Reyes (175 SCRA 264) Facts: On April 20, 1987, the PPA ( Philippine Ports Authority ) Board adopted its Resolution No. 850 directing PPA management to prepare the Invitation to Bid and all relevant documents and technical requirements necessary for the public bidding of the development, management and operation for the MICT ( leasing as well as to implement this project. Respondent Secretary Reyes created a 7 man Special MICT Bidding Committee charged with all bid proposals. After evaluation of the seven companies that submitted bids, the committee recommended the award of the contract to ICTSI for having offered the best technical and financial proposal. However, before the MICT contract could be signed, 2 cases were filed against respondents which assailed the legality and regularity of the bidding. But on May 18, 1988, the President of the Philippines approved the proposed MICT Contract with specific directives on the part of the PPA and the contractor ICTSI. Meanwhile, Rodolfo Albano, the petitioner filed a petition assailing the award of the MICT contract to ICTSI claiming that the former is a public utility and therefore needs a legislative franchise before it can legally operate as a public utility, pursuant to Article 12, Sec 11 of the 1987 Constitution. Issue: Whether or not the MICT needs a legislative franchise from Congress to legally operate as a public utility? Held: NO. EO No. 30 dated July16, 1986 provides for the immediate recall of the franchise granted to the Manila International Port Terminals Inc., and authorize the PPA to take over,

manage and operate the Manila International Port Complex at North Harbor, Manila and undertake the provision of cargo handling and port related services thereat, in accordance with PD 857 and other applicable laws and regulations. Sec. 6 of PD 857 otherwise known as the Revised Charter of the PPA provides as one of the corporate duties of the PPA is to provide services ( whether on its own, by contract, or otherwise ) within the Port Districts and the approaches thereof including but not limited to As stated above, PPA has been tasked under EO No. 30, with the management and operation of the Manila International Port Complex in accordance with PD 857 and other applicable laws and regulations. However, PD 857 itself authorizes the PPA to perform the service by itself, by contracting it out, or through other means. Reading EO No. 30 and PD 857 together, the inescapable conclusion is that the lawmaker has empowered the PPA to undertake by itself the operation and management of the MICP or to authorize its operation and management by another by contract or other means at its option. The latter power having been delegated to the PPA, a franchise from Congress to authorize an entity other than the PPA to operate and manage the MICP becomes unnecessary. Therefore, PPAs act of privatizing the MICT and awarding the Contract to ICTSI are wholly within its jurisdiction under its Charter which empowers the PPA to supervise, control, regulate, construct, maintain, operate and provide such facilities necessary in the ports vested ___

G.R. No. 88195-96 January 27, 1994 "Y" TRANSIT CO, INC., petitioner, vs. THE NATIONAL LABOR RELATIONS COMMISSION AND YUJUICO TRANSIT EMPLOYEES UNION (ASSOCIATED LABOR UNION), MANUEL VILLARTA, respondents. Cruz, Durian, Agabin, Atienza, Alday & Tuason for petitioner. Evaristo S. Orosa for private respondents.

ROMERO, J.: This is a special civil action for certiorari filed by "Y" Transit Co., Inc. for the annulment of the decision of the National labor Relations Commission, the dispositive portion of which reads as follows: WHEREFORE, the appealed Order should be as it is hereby REVERSED reinstating the levy made by the Sheriff on July 13 and 16, 1982. Accordingly, the sale of the levied properties may proceed pursuant to existing laws.

SO ORDERED. 1
The antecedent facts of the case are as follows: In March 1960 and sometime thereafter, Yujuico Transit Co., Inc., mortgaged ten (10) of its buses to the Development Bank of the Philippines (DBP) to secure a loan in the amount of P2,795,129.36. Thereafter, the Board of Directors of Yujuico Transit Co., Inc. passed a resolution authorizing its President, Jesus Yujuico to enter into a dacion en pago arrangement with the DBP, whereby Jesus Yujuico would transfer to the DBP the Saint Martin Technical Institute in consideration of the full settlement of the obligations of three companies, one of which was Yujuico Transit Co, Inc. Accordingly, on or about October 24, 1978, the transfer of the

property was made and DBP released the mortgages constituted on the buses of Yujuico Transit Co., Inc. Consequently, the company transferred the ownership of its mortgaged properties, including the buses, to Jesus Yujuico. Meanwhile, sometime in June and July 1979, the Yujuico Transit Employees Union (Associated labor Union) filed two (2) consolidated complaints against Yujuico Transit Co., Inc. for Unfair Labor Practice and violations of Presidential Decrees Nos. 525, 1123, 1614 and 851 (non-payment of living allowances). On May 21, 1980, Jesus Yujuico sold the subject buses to herein petitioner "Y" Transit Co., Inc. for P3,485,400.00. On July 23, 1981, the Labor Arbiter rendered a decision dismissing the complaint for unfair labor practice but holding Yujuico Transit Co., Inc. liable under the aforementioned Presidential Decrees in the amount of P142,790.49. On February 9, 1982, a writ of execution for the said amount was issued by the Labor Arbiter. On June 14, 1982, an alias writ of execution was issued and levy was made upon the ten (10) buses. Thereafter, "Y" Transit Co., Inc. filed Affidavits of Third Party Claim. Private respondents herein opposed the Third party claim on the ground that the transactions leading to the transfer of the buses to "Y" Transit Co., Inc. were void because they lacked the approval of the BOT as required by the Public Service Act. They also argued that the buses were still registered in the name of Yujuico Transit Co. which was, therefore, still the lawful owner thereof. The Labor Arbiter found that "Y" Transit Co., Inc. had valid title to the buses and that the BOT, by its subsequent acts had approved the transfer. The decision stated further, thus:

The fact that the registration certificates of most of the vehicles in question are still in the name of Yujuico Transit Co., Inc. at the time of the levy on execution does not militate against the claimant. Registration of a motor vehicle is not the operative act that transfers ownership, unlike in land registration cases. Furthermore, the evidence shows that the claimant cannot be faulted for its failure to have the certificates of registration transferred in its own name. Prior to the levy, claimant had already paid for the transfer fee, the fee for the cancellation of mortgage and other fees required by the BLT. Moreover, the registration fees of the vehicles whose last digit of their plate numbers made the vehicles due for registration were already paid for by the claimant (Exhibits "N" to "N-7"). Therefore, there was already a constructive registration made by the claimant (Mariano B. Arroyo vs. Maria Corazon Yu de Sane, et al., 54 Phil. 511, 518), sufficient notice to affect the rights of third-parties. It is now ministerial on the part of the BLT to issue the Registration Certificates in the name of the claimant, but the same was held in abeyance pending the computerization of the records of BOT on public utility vehicles. On all fours is the ruling of the Supreme Court in Mariano B. Arroyo vs. Ma. Corazon Yu de Sane, 54 Phil. 511, which upheld the right of PNB as mortgagee over motorized water vessels as superior over the rights of a judgment creditor who had already secured a writ of attachment and execution over the vessels, it appearing that the delay was caused by the Collector of Custom's uncertainty as to the necessity of the registration of the vessels. 2
Accordingly, the Third-Party Claim was granted and the release of all the buses levied for execution was ordered. On appeal, the NLRC reversed the labor arbiter's decision on the ground that the transfer of the buses lacked the BOT approval. It ordered the reinstatement of the levy and the auction of properties. "Y" Transit Co., Inc. thereafter filed this special civil action for certiorari under Rule 65 of the Rules of Court praying for the issuance of a Restraining Order and/or a Writ of Preliminary Injunction and for the annulment of the NLRC decision as it was issued with grave abuse of discretion amounting to lack of jurisdiction. In this petition, "Y" Transit Co., Inc. raised the following issue, to writ: I

The public respondent NLRC committed palpable legal error and grave abuse of discretion amounting to lack of jurisdiction when it held that there was no valid transfer of ownership in favor of the petitioner, completely disregarding the preponderance of

evidence and existing jurisprudence which support the validity of the transfer of ownership to the petitioner. 3
On July 6, 1989, petitioner filed a motion to cite Labor Arbiter Benigno C. Villarente, Jr. for contempt of court and for the issuance of an order for the immediate release of the property. Petitioner argues that the Labor Arbiter refused to release the vehicles levied on June 5, 1989 despite notice that a TRO has been issued by the Supreme Court; that there was no reason to hold on to the levy as petitioner had already posted a bond to answer for the damages and award in the above-entitled case; that the labor arbiter wrongly required the payment of storage charges and sheriff's fees before releasing the levied buses. Did public respondent commit grave abuse of discretion in reinstating the levy on the buses which have been allegedly transferred to a third party, herein petitioner "Y" Transit Co., Inc.? We rule in the negative. The following facts have been established before the NLRC: that the transfer of ownership from Yujuico Transit Co., Inc. to Jesus Yujuico, and from Jesus Yujuico to "Y" Transit Co., Inc. lacked the prior approval of the BOT as required by Section 20 of the Public Service Act; 4 that the buses were transferred to "Y" Transit Co., Inc. during the pendency of the action; and that until the time of the execution, the buses were still registered in the name of Yujuico Transit Co., Inc. In Montoya v. Ignacio, 5 we held: . . . The law really requires the approval of the Public Service Commission in order that a franchise, or any privilege pertaining thereto, may be sold or leased without infringing the certificate issued to the grantee. The reason is obvious. Since a franchise is personal in nature any transfer or lease thereof should be notified to the Public Service Commission so that the latter may take proper safeguards to protect the interest of the public. In fact, the law requires that, before approval is granted, there should be a public hearing with notice to all interested parties in order that the commission may determine if there are good and reasonable grounds justifying the transfer or lease of the property covered by the franchise, or if the sale or lease is detrimental to public interest. Such being the reason and philosophy behind this requirement, it follows that if the property covered by the franchise is transferred, or leased to another without obtaining the requisite approval, the transfer is not binding against Public Service Commission and in contemplation of law, the grantee continues to be responsible under the franchise in relation to the Commission and to the public. . . . It may be argued that Section 16, paragraph (h) provides in its last part that "nothing herein contained shall be construed to prevent the sale, alienation, or lease by any public utility of any of its property in the ordinary course of business," which gives the impression that the approval of Public Service Commission is but a mere formality which does not affect the effectivity of the transfer or lease of the property belonging to a public utility. But such provision only means that even if the approval has not been obtained the transfer or lease is valid and binding between the parties although not effective against the public and the Public Service Commission. The approval is only necessary to protect public interest . (Emphasis ours) There being no prior BOT approval in the transfer of property from Yujuico Transit Co., Inc. to Jesus Yujuico, it only follows that as far as the BOT and third parties are concerned, Yujuico Transit Co., Inc. still owned the properties. and Yujuico, and later, "Y" Transit Co., Inc. only held the same as agents of the former. In Tamayo v.Aquino, 6 the Supreme Court stated, thus: . . . In operating the truck without transfer thereof having been approved by the Public Service Commission, the transferee acted merely as agent of the registered owner and should be responsible to him (the registered owner) for any damages that he may cause the latter by his negligence. Conversely, where the registered owner is liable for obligations to third parties and vehicles registered under his name are levied upon to satisfy his obligations, the transferee of such vehicles cannot prevent the levy by asserting his ownership because as far as the law is concerned, the one in whose name the vehicle is registered remains to be the owner and the transferee merely holds the vehicles for the registered owner. Thus, "Y" Transit Co., Inc. cannot now argue that the buses could not be levied upon to satisfy the money judgment in favor of herein respondents. However, this does not deprive the transferee of the right to recover from the registered owner any damages which may have been incurred by the former since the . . . transfer or lease is valid and binding between the parties. . . . 7 Thus, had there been any real contract between "Y" Transit Co., Inc. and Yujuico Transit Co., Inc. of "Y" Transit Co., Inc. and Jesus Yujuico regarding the sale or transfer of the buses, the former may avail of its remedies to recover damages. Regarding the Motion for Contempt filed by petitioner, we are constrained to deny the same since the Order to levy upon petitioner's alleged properties was issued even before the issuance by the Court of a temporary restraining order. From the records, it appeared that Labor Arbiter Villarente ordered the public auction of the subject properties on May 12, 1989. The sheriff levied on the properties on June 5, 1989. The Supreme Court issued the Temporary Restraining Order on June 19, 1989 and this was received

by the Labor Arbiter on June 22, 1989. On June 28, 1989, the Labor Arbiter directed the sheriff to release the two buses already levied upon by him. Likewise, we find no error in requiring petitioner to pay the storage fees prior to the release of the properties. Storage costs are imposed in accordance with the provisions of Rule IX of the NLRC Manuel of Instructions for Sheriffs, to wit: Sec. 3. Storing of Levied Property. To avoid pilferage of or damage to levied property, the same shall be inventoried and stored in a bonded warehouse, wherever available, or in a secured place as may be determined by the sheriff with notice to and conformity of the losing party or third party claimant. In case of disagreement, the same shall be referred to the Labor Arbiter or proper officer who issued the writ of execution for proper disposition. For this purpose, sheriffs should inform the Labor Arbiter or proper officer issuing the writ of corresponding storage fees, furnishing him as well as the parties with a copy of the inventory. The storage fees shall be shouldered by the losing party. WHEREFORE, in view of the foregoing, this petition is hereby DISMISSED. The Motion to Cite Labor Arbiter Benigno Villarente, Jr. is DENIED and petitioner is ordered to PAY storage costs and sheriff's fees. This decision is immediately executory. SO ORDERED.

___________ SINGSON vs. COURT OF APPEALS and CATHAY PACIFIC AIRWAYS (G.R. No. 119995. November 18, 1997) FACTS: Petitioner CARLOS SINGSON and his cousin Crescentino Tiongson bought from respondent Cathay Pacific Airways two (2) open-dated, identically routed, round trip plane tickets (Manila to LA and vice versa). Each ticket consisted of six (6) flight coupons, each would be detached at the start of each leg of the trip. Singson failed to obtain a booking in LA for their to Manila; apparently, the coupon corresponding to the 5th leg of the trip was missing and instead the 3rd was still attached. It was not until few days later that the defendant finally was able to arrange for his return to Manila. Singson commenced an action for damages based on breach of contract of carriage against CATHAY before the Regional Trial Court. CATHAY alleged that there was no contract of carriage yet existing such that CATHAYs refusal to immediately book him could not be construed as breach of contract of carriage. The trial court rendered a decision in favor of petitioner herein holding that CATHAY was guilty of gross negligence amounting to malice and bad faith for which it was adjudged to pay petitioner P20,000.00 for actual damages with interest at the legal rate of twelve percent (12%) per annum from 26 August 1988 when the complaint was filed until fully paid, P500,000.00 for moral damages, P400,000.00 for exemplary damages, P100,000.00 for attorneys fees, and, to pay the costs. On appeal by CATHAY, the Court of Appeals reversed the trial courts finding that there was gross negligence amounting to bad faith or fraud and, accordingly, modified its judgment by deleting the awards for moral and exemplary damages, and the attorneys fees as well.

ISSUES: 1.) whether a breach of contract was committed by CATHAY when it failed to confirm the booking of petitioner. 2.) whether the carrier was liable not only for actual damages but also for moral and exemplary damages, and attorneys fees. HELD: 1.) Yes. x x x the round trip ticket issued by the carrier to the passenger was in itself a complete written contract by and between the carrier and the passenger. It had all the elements of a complete written contract, to wit: (a) the consent of the contracting parties manifested by the fact that the passenger agreed to be transported by the carrier to and from Los Angeles via San Francisco and Hong Kong back to the Philippines, and the carriers acceptance to bring him to his destination and then back home; (b) cause or consideration, which was the fare paid by the passenger as stated in his ticket; and, (c) object, which was the transportation of the passenger from the place of departure to the place of destination and back, which are also stated in his ticket. In fact, the contract of carriage in the instant case was already partially executed as the carrier complied with its obligation to transport the passenger to his destination, i.e., Los Angeles. , x x x the loss of the coupon was attributable to the negligence of CATHAYs agents and was the proximate cause of the nonconfirmation of petitioner's return flight. 2.) Yes. x x x Although the rule is that moral damages predicated upon a breach of contract of carriage may only be recoverable in instances where the mishap results in the death of a passenger, or where the carrier is guilty of fraud or bad faith, there are situations where the negligence of the carrier is so gross and reckless as to virtually amount to bad faith, in which case, the passenger likewise becomes entitled to recover moral damages. x x x these circumstances reflect the carriers utter lack of care and sensitivity to the needs of its passengers, clearly constitutive of gross negligence, recklessness and wanton disregard of the rights of the latter, acts evidently indistinguishable or no different from fraud, malice and bad faith. As the rule now stands, where in breaching the contract of carriage the defendant airline is shown to have acted fraudulently, with malice or in bad faith, the award of moral and exemplary damages, in addition to actual damages, is proper. However, the P500,000.00 moral damages and P400,000.00 exemplary damages awarded by the trial court have to be reduced. The well-entrenched principle is that the grant of moral damages depends upon the discretion of the court based on the circumstances of each case. 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. 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. 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. In the instant case, the injury suffered by petitioner is not so serious or extensive as to warrant an award amounting to P900,000.00. The assessment of P200,000.00 as moral damages and P50,000.00 as exemplary damages in his favor is, in our view, reasonable and realistic. On the issue of actual damages, we agree with the Court of Appeals that the amount of P20,000.00 granted by the trial court to petitioner should not be disturbed.

As regards attorney's fees, they may be awarded when the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest. It was therefore erroneous for the Court of Appeals to delete the award made by the trial court; consequently, petitioner should be awarded attorney's fees and the amount of P25,000.00, instead of P100,000.00 earlier awarded, may be considered rational, fair and reasonable. ____ First Philippine Industrial Corp. vs. CA Facts: Petitioner is a grantee of a pipeline concession under Republic Act No. 387. Sometime in January 1995, petitioner applied for mayors permit in Batangas. However, the Treasurer required petitioner to pay a local tax based on gross receipts amounting to P956,076.04. In order not to hamper its operations, petitioner paid the taxes for the first quarter of 1993 amounting to P239,019.01 under protest. On January 20, 1994, petitioner filed a letterprotest to the City Treasurer, claiming that it is exempt from local tax since it is engaged in transportation business. The respondent City Treasurer denied the protest, thus, petitioner filed a complaint before the Regional Trial Court of Batangas for tax refund. Respondents assert that pipelines are not included in the term common carrier which refers solely to ordinary carriers or motor vehicles. The trial court dismissed the complaint, and such was affirmed by the Court of Appeals. Issue: Whether a pipeline business is included in the term common carrier so as to entitle the petitioner to the exemption Held: 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. 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. _______

NATIONAL STEEL CORPORATION vs. COURT OF APPEALS Facts: On July 17, 1974, plaintiff NSC as charterer and defendant VSI as owner, entered into a Contract of Voyage Charter Hire whereby NSC hired VSIs vessel, the MV VLASONS I to make one voyage to load steel products at Iligan City and discharge them at North Harbor Manila. When the vessels 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 plaintiff. 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 but defendant refused and failed to pay. RTC ruled against the plaintiff, stating that the vessel was seaworthy and that there is no proof of willful negligence of the vessel's officers. This was affirmed by CA but modified the award of damages, hence the appeal. Issue: W/N VSI contracted with NSC as a common carrier or as a private carrier. Held: It is a private carrier. In the instant case, it is undisputed that VSI did not offer its services to the general public. It carried passengers or goods only for those it chose under a special contract of charter party. It is a private carrier that 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. 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 contracts of private carriage or charter party. Unlike in a contract involving a common carrier, private carriage does not involve the general public. Hence, the stringent provisions of the Civil Code on common carriers protecting the general public cannot justifiably be applied to a ship transporting commercial goods as a private carrier. It is clear from the parties Contract of Voyage Charter Hire, that VSI shall not be responsible for losses except on proven wilful negligence of the officers of the vessel. The NANYOZAI Charter Party(an internationally recognized Charter Party Agreement), 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. In view of the above, NSC must prove that the damage to its shipment was caused by VSIs wilful 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. The CA decision, affirming the RTC decision in favor of defendant and dismissing the complaint is Affirmed. ___ Planters Products vs. CA Case Digest Planters Products vs. Court of Appeals G.R. No. 101503 September 15, 1993 Facts: Planters Product Inc. purchased from Mitsubishi international corporation metric tons of Urea fertilizer, which the latter shipped aboard the cargo vessel M/V Sun Plum owned by private respondent Kyosei Kisen Kabushiki Kaisha. Prior to its voyage, a time charter-party on the vessel respondent entered into between Mitsubishi as shipper/charterer and KKKK as ship owner, in Tokyo, Japan.

Before loading the fertilizer aboard the vessel, (4) of her holds were presumably inspected by the charterers representative and found fit to take a load of urea in bulk. 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. Upon arrival of vessel at port, the petitioner unloaded the cargo pursuant to the terms and conditions of the charter-party. The hatches remained open throughout the duration of the discharge. Upon arrival at petitioners warehouse a survey conducted over the cargo revealed a shortage and the most of the fertilizer was contaminated with dirt. As such, Planters filed an action for damages. The defendant argued that the public policy governing common carriers do not apply to them because they have become private carriers by reason of the provisions of the charter-party. Issue: Whether or not the charter-party contract between the ship owner and the charterer transforms a common carrier into a private carrier? Held: A charter party may either her be time charter wherein the vessel is leased to the charterer, wherein the ship 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 time or for a single or consecutive voyage. It is therefor imperative that such common carrier shall remain as such, notwithstanding the charter of the whole or part of the 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 ship and its crew as in bareboat or demise that it becomes a private carrier. Undoubtedly, a shipowner in a time or voyage charter retains in possession and control of the ship, although her holds may be the property of the charterer. ____ Crisostomo vs Court of Appeals FACTS: A travel agency is not an entity engaged in thebusiness of transporting either passengersor goods and is therefore, neither a private nor acommon carrier. Respondent did not undertake totransport petitioner from one place to another since itscovenant with its customers is simply to make travel arrangements in their behalf. Respondents services as a travel agency include procuring tickets andfacilitating travel permits or visas as well as bookingcustomers for tours. It is in this sense that the contractbetween the parties in this case was an ordinary onefor services and not one of carriage.Petitioner Estela L. Crisostomo contracted the servicesof respondent Caravan Travel and ToursInternational, Inc. to arrange and facilitate herbooking, ticketing, and accommodation in a tour dubbed Jewels of Europe. A 5% discount on the total cost of P74,322.70 which included the airfare was given to the petitioner. The booking fee was also waived because petitioners niece, Meriam Menor,was respondents ticketing manager. On June 12, 1991, Menor went to her aunts residenceto deliver petitioners travel documents and planetickets. In return, petitioner gave the full payment forthe package tour. Menor then told her to be at the NAIA on Saturday, June 15, 1991, two hours before herflight on board British Airways. Without checking hertravel documents, petitioner went to NAIA and to herdismay, she discovered that the flight she wassupposed to take had already departed the previousday. She learned that her plane ticket was for the flightscheduled on June 14, 1991. She called up Menor tocomplain and Menor suggested upon petitioner to takeanother tour

British Pageant. Petitioner was asked anew to pay US$785.00. Petitioner gave respondentUS$300 as partial payment and commenced the trip. ISSUE: Whether or not respondent Caravan did notobserve the standard of care required of a commoncarrier when it informed the petitioner wrongly of theflight schedule. HELD: The petition was denied for lack of merit. Thedecision of the Court of Appeals was affirmed.A common carrier is defined under Article 1732 of theCivil Code as persons, corporations, firms orassociations engaged in the business of carrying ortransporting passengers or goods or both, by land,water or air, for compensation, affecting their servicesto the public. It is obvious from the above definitionthat respondent is not an entity engaged in thebusiness of transporting either passengers or goodsand is therefore, neither a private nor a commoncarrier. Respondent did not undertake to transportpetitioner from one place to another since its covenantwith its customers is simply to make travel arrangements in their behalf. Respondents services as a travel agency include procuring tickets andfacilitating travel permits or visas as well as bookingcustomers for tours. It is in this sense that the contract between the parties in this case was an ordinary onefor services and not one of carriage.The standard of care required of respondent is that of a good father of a family under Article 1173 of the CivilCode. This connotes reasonable care consistent withthat which an ordinarily prudent person would haveobserved when confronted with a similar situation. It isclear that respondent performed its prestation underthe contract as well as everything else that wasessential to book petitioner for the tour. Hadpetitioner exercised due diligence in the conduct of heraffairs, there would have been no reason for her tomiss the flight. Needless to say, after the travel paperswere delivered to petitioners, it became incumbentupon her to take ordinary care of her concerns. Thisundoubtedly would require that she at least read thedocuments in order to assure herself of the importantdetails regarding the trip. ___ Caltex [Philippines], Inc. vs. Sulpicio Lines, Inc. Facts: On December 20, 1987, motor tanker MV Vector, carrying petroleum products of Caltex, collided in the open sea with passenger ship MV Doa Paz, causing the death of all but 25 of the latters passengers. Among those who died were Sebastian Canezal and his daughter Corazon Canezal. On March 22, 1988, the board of marine inquiry found that Vector Shipping Corporation was at fault. On February 13, 1989, Teresita Caezal and Sotera E. Caezal, Sebastian Caezals wife and mother respectively, filed with the Regional Trial Court of Manila a complaint for damages arising from breach of contract of carriage against Sulpicio Lines. Sulpicio filed a third-party complaint against Vector and Caltex. The trial court dismissed the complaint against Caltex, but the Court of Appeals included the same in the liability. Hence, Caltex filed this petition. Issue: Is the charterer of a sea vessel liable for damages resulting from a collision between the chartered vessel and a passenger ship? Held: First: The charterer has no liability for damages under Philippine Maritime laws. Petitioner and Vector entered into a contract of affreightment, also known as a voyage charter.

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. 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. 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. Second: MT Vector is a common carrier 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. It is 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. 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. The public must of necessity rely on the care and skill of common carriers in the vigilance over the goods and safety of the passengers, especially because with the modern development of science and invention, transportation has become more rapid, more complicated and somehow more hazardous. For these reasons, a passenger or a shipper of goods is under no obligation to conduct an inspection of the ship and its crew, the carrier being obliged by law to impliedly warrant its seaworthiness. Third: Is Caltex liable for damages under the Civil Code? The charterer of a vessel has no obligation before transporting its cargo to ensure that the vessel it chartered complied with all legal requirements. The duty rests upon the common carrier simply for being engaged in "public service." The relationship between the parties in this case is governed by special laws. Because of the implied warranty of seaworthiness, 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. 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. ___ HOME INSURANCE COMPANY vs. AMERICAN STEAMSHIP AGENCIES, INC.

Facts: A Peruvian firm shipped fishmeal through the SS Chowborough consigned to the San Miguel Brewery and insured by the Home Insurance Co. The cargo arrived in Manila and was discharged into the lighters of Luzon Stevedoring Co. When the cargo was delivered to SMB there were shortages. Home Insurance Co. paid SMB P14,000 after its demand. Home Insurance filed for reimbursement from Luzon Stevedoring and American Steamship Agencies, owner and operator of the vessel. The lower court absolved Luzon after finding that it observed the required diligence but ordered ASA to reimburse Home Insurance, declaring that Art. 587 of the Code of Commerce makes the ship agent civilly liable for damages in favor of third persons due to the conduct of carriers captain and that the stipulation in the charter party exempting owner from liability is against public policy under Art. 1744, NCC. ASA appealed, alleging that under the provisions of the Charter Party referred to in the bills of lading, the charterer, not the shipowner is responsible for any loss or damage of the cargo. Issue: Are the provisions of the NCC applicable? Held: No. The NCC provisions on common carriers should not apply where the common carrier is not acting as such but as a private carrier. Under American Jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a special person only becomes a private carrier. As a private carrier, a stipulation exempting the owner from liability for the negligence of its agent is valid. The stipulation in the charter party absolving the owner from liability for loss due to the negligence of its agent would be void only if strict public policy governing common carrier is applied. Such policy has no force where the public at large is not involved, as in the case of a ship totally chartered for the use of a single party. The stipulation exempting the owner from liability for negligence of its agent is not against public policy and is deemed valid. Recovery cant be had, for loss or damage to the cargo against shipowners, unless the same is due to personal acts or negligence of said owner or its managers, as distinguished from agents or employees. ____ G.R. No. 186312 June 29, 2010 SPOUSES DANTE CRUZ and LEONORA CRUZ, Petitioners, vs. SUN HOLIDAYS, INC., Respondent. DECISION CARPIO MORALES, J.: Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on January 25, 20011 against Sun Holidays, Inc. (respondent) with the Regional Trial Court (RTC) of Pasig City for damages arising from the death of their son Ruelito C. Cruz (Ruelito) who perished with his wife on September 11, 2000 on board the boat M/B Coco Beach III that capsized en route to Batangas from Puerto Galera, Oriental Mindoro where the couple had stayed at Coco Beach Island Resort (Resort) owned and operated by respondent. The stay of the newly wed Ruelito and his wife at the Resort from September 9 to 11, 2000 was by virtue of a tour package-contract with respondent that included transportation to and from the Resort and the point of departure in Batangas. Miguel C. Matute (Matute),2 a scuba diving instructor and one of the survivors, gave his account of the incident that led to the filing of the complaint as follows:

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 stay for another night because of strong winds and heavy rains. On September 11, 2000, as it was still windy, Matute and 25 other Resort guests including petitioners son and his wife trekked to the other side of the Coco Beach mountain that was sheltered from the wind where they boarded M/B Coco Beach III, which was to ferry them to Batangas. Shortly after the boat sailed, it started to rain. As it moved farther away from Puerto Galera and into the open seas, the rain and wind got stronger, causing the boat to tilt from side to side and the captain to step forward to the front, leaving the wheel to one of the crew members. The waves got more unwieldy. After getting hit by two big waves which came one after the other, M/B Coco 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, Matute and the other passengers who reached the surface asked him what they could do to save the people who were still trapped under the boat. The captain replied "Iligtas niyo na lang ang sarili niyo" (Just save yourselves). Help came after about 45 minutes when two boats owned by Asia Divers in Sabang, Puerto Galera passed by the capsized M/B Coco Beach III. Boarded on those two boats were 22 persons, consisting of 18 passengers and four crew members, who were brought to Pisa Island. Eight passengers, including petitioners son and his wife, died during the incident. At the time of Ruelitos death, he was 28 years old and employed as a contractual worker for Mitsui Engineering & Shipbuilding Arabia, Ltd. in Saudi Arabia, with a basic monthly salary of $900.3 Petitioners, by letter of October 26, 2000,4 demanded indemnification from respondent for the death of their son in the amount of at least P4,000,000. Replying, respondent, by letter dated November 7, 2000,5 denied any responsibility for the incident which 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 Appeals17 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 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. 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 176427 vis--vis Article 220628 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. Borja34 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 $90035 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.381avvphi1 Pursuant to Article 220839 of the Civil Code, attorney's fees may also be awarded where exemplary damages are awarded. The Court finds that 10% of the total amount adjudged against respondent is reasonable for the purpose. Finally, Eastern Shipping Lines, Inc. v. Court of Appeals40 teaches that when an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the contravenor can be held liable for payment of interest in the concept of actual and compensatory damages, subject to the following rules, to wit 1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged. 3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit. (emphasis supplied). Since the amounts payable by respondent have been determined with certainty only in the present petition, the interest due shall be computed upon the finality of this decision at the rate of 12% per annum until satisfaction, in accordance with paragraph number 3 of the immediately cited guideline in Easter Shipping Lines, Inc. WHEREFORE, the Court of Appeals Decision of August 19, 2008 is REVERSED and SET ASIDE. Judgment is rendered in favor of petitioners ordering respondent to pay petitioners the following: (1) P50,000 as indemnity for the death of Ruelito Cruz; (2) P8,316,000 as indemnity for Ruelitos loss of earning capacity; (3) P100,000 as moral damages; (4) P100,000 as exemplary damages; (5) 10% of the total amount adjudged against respondent as attorneys fees; and (6) the costs of suit. The total amount adjudged against respondent shall earn interest at the rate of 12% per annum computed from the finality of this decision until full payment. SO ORDERED. __________________________________________________________
Fabre vs. Court of Appeals 259 SCRA 426 G.R. No. 111127 July 26, 1996 Facts: Petitioners Engracio Fabre, Jr. and his wife were owners of a Mazda minibus. They used the bus principally in connection with a bus service for school children which they operated in Manila. It was driven by Porfirio Cabil. On November 2, 1984 private respondent Word for the World Christian Fellowship Inc. (WWCF) arranged with the 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 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. 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. Because of the mishap, several passengers were injured particularly Amyline Antonio.

Criminal complaint was filed against the driver and the spouses were also made jointly liable. Spouses Fabre on the other hand contended that they are not liable since they are not a common carrier. The RTC of Makati ruled in favor of the plaintiff and the defendants were ordered to pay jointly and severally to the plaintiffs. The Court of Appeals affirmed the decision of the trial court. Issue: Whether the spouses Fabre are common carriers? Held: Petition was denied. Spouses Fabre are common carriers. The Supreme Court held that 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.

_______ Baritua vs. Mercader Facts: The late Dominador Mercader, a businessman engaged in the buy and sell of drygoods in Laoang, N. Samar, boarded the bus of herein petitioner JB Line boundedfrom Manila to N. Samar. However, while said bus was traversing the Beily Bridge inN. Samar, the bus fell into the river, as a result, D. Mercader died. Petitioner alleges,among others, that there is no statement in the complaint of Mercader that he wasissued any passenger-freight ticket Issue: WON a contract of carriage existed between petitioners and Mercader. Or, WON petitioners are liable for the death of Mercader. Held: A contract of carriage exists, thus, petitioners are liable.Petitioners failed to transport D. Mercader to his destination, because the bus fellinto a river while traversing the Bugko Bailey Bridge. Although he survived the fall,he later died of asphyxia secondary to drowning. The Court agreed with the findings of both the RTC and the CA that fateful morning.It must be noted that a common carrier, by the nature of its business and forreasons of public policy, is bound to carry passengers safely as far as human careand foresight can provide. It is supposed to do so by using the utmost diligence of very cautious persons, with due regard for all the circumstances. In case of death orinjuries to passengers, it is presumed to have been at fault or to have actednegligently, unless it proves that it observed extraordinary diligence as prescribedin Articles 1733 and 1755 of the Civil Code. __________ United Airlines, Inc vs. CA Facts: Respondent Aniceto Fontanilla purchased from petitioner United Airlines, throughthe Philippine Travel Bureau in Manila three (3) Visit the U.S.A. tickets for himself,his wife and his minor son Mychal. The Fontanillas proceeded to the US as planned;they used the 1st coupon. Fontanilla then bought two (2) additional coupons each forhimself, his wife and his son from petitioner at its office in Washington DullesAirport. After paying the penalty for rewriting their tickets, the Fontanillas wereissued tickets with corresponding boarding passes with the words CHECK-INREQUIRED, for United Airlines Flight No. 1108. However, the Fontanillas were notable to board said flight but instead were able to board United Airlines Flight No.803.

Issue:(1) Whether or not private respondents were able to prove with adequate evidencehis allegations of breach of contract in bad faith; and(2) What law is applicable, the Philippine Law or the US Law? Held:(1) No. Aniceto Fontanillas assertion that upon arrival at the airport at 9:45 a.m.,he immediately proceeded to the check-in counter, and that Linda Allen punched insomething into the computer is specious and not supported by the evidence onrecord. In support of their allegations, private respondents submitted a copy of theboarding pass. Explicitly printed on the boarding pass are the words Check-InRequired. Curiously, the said pass did not indicate any seat number. If indeed theFontanillas checked in at the designated time as they claimed, why then were theynot assigned seat numbers? pine Law. The appellate court, however, erred in applying the laws of the United States as, in the case at bar, Philippine law is the applicable law.Although, the contract of carriage was to be performed in the United States, thetickets were purchased through petitioners agent in Manila. It is true that thetickets were rewritten in Washington, D.C. however, such fact did not change the nature of the original contract of carriage entered into by the parties in Manila. ____
G.R. No. 116940 June 11, 1997 THE PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, INC., petitioner, vs. COURT OF APPEALS and FELMAN SHIPPING LINES, respondents.

BELLOSILLO,

J.:

This case deals with the liability, if any, of a shipowner for loss of cargo due to its failure to observe the extraordinary diligence required by Art. 1733 of the Civil Code as well as the right of the insurer to be subrogated to the rights of the insured upon payment of the insurance claim. On 6 July 1983 Coca-Cola Bottlers Philippines, Inc., loaded on board "MV Asilda," a vessel owned and operated by respondent Felman Shipping Lines (FELMAN for brevity), 7,500 cases of 1-liter Coca-Cola softdrink bottles to be transported from Zamboanga City to Cebu City for consignee Coca-Cola Bottlers Philippines, Inc., Cebu. 1 The shipment was insured with petitioner Philippine American General Insurance Co., Inc. (PHILAMGEN for brevity), under Marine Open Policy No. 100367-PAG. "MV Asilda" left the port of Zamboanga in fine weather at eight o'clock in the evening of the same day. At around eight forty-five the following morning, 7 July 1983, the vessel sank in the waters of Zamboanga del Norte bringing down her entire cargo with her including the subject 7,500 cases of 1-liter Coca-Cola softdrink bottles. On 15 July 1983 the consignee Coca-Cola Bottlers Philippines, Inc., Cebu plant, filed a claim with respondent FELMAN for recovery of damages it sustained as a result of the loss of its softdrink bottles that sank with "MV Asilda." Respondent denied the claim thus prompting the consignee to file an insurance claim with PHILAMGEN which paid its claim of P755,250.00. Claiming its right of subrogation PHILAMGEN sought recourse against respondent FELMAN which disclaimed any liability for the loss. Consequently, on 29 November 1983 PHILAMGEN sued the shipowner for sum of money and damages. In its complaint PHILAMGEN alleged that the sinking and total loss of " MV Asilda" and its cargo were due to the vessel's unseaworthiness as she was put to sea in an unstable condition. It further alleged that the vessel was improperly manned and that its officers were grossly negligent in failing to take appropriate measures to proceed to a nearby port or beach after the vessel started to list. On 15 February 1985 FELMAN filed a motion to dismiss based on the affirmative defense that no right of subrogation in favor of PHILAMGEN was transmitted by the shipper, and that, in any event, FELMAN had abandoned all its rights, interests and ownership over "MV Asilda" together with her freight and appurtenances for the purpose of limiting and extinguishing its liability under Art. 587 of the Code of Commerce. 2

On 17 February 1986 the trial court dismissed the complaint of PHILAMGEN. On appeal the Court of Appeals set aside the dismissal and remanded the case to the lower court for trial on the merits. FELMAN filed a petition for certiorari with this Court but it was subsequently denied on 13 February 1989. On 28 February 1992 the trial court rendered judgment in favor of FELMAN. 3 It ruled that "MV Asilda" was seaworthy when it left the port of Zamboanga as confirmed by certificates issued by the Philippine Coast Guard and the shipowner's surveyor attesting to its seaworthiness. Thus the loss of the vessel and its entire shipment could only be attributed to either a fortuitous event, in which case, no liability should attach unless there was a stipulation to the contrary, or to the negligence of the captain and his crew, in which case, Art. 587 of the Code of Commerce should apply. The lower court further ruled that assuming "MV Asilda" was unseaworthy, still PHILAMGEN could not recover from FELMAN since the assured (Coca-Cola Bottlers Philippines, Inc.) had breached its implied warranty on the vessel's seaworthiness. Resultantly, the payment made by PHILAMGEN to the assured was an undue, wrong and mistaken payment. Since it was not legally owing, it did not give PHILAMGEN the right of subrogation so as to permit it to bring an action in court as a subrogee. On 18 March 1992 PHILAMGEN appealed the decision to the Court of Appeals. On 29 August 1994 respondent appellate court rendered judgment finding "MV Asilda" unseaworthy for being top-heavy as 2,500 cases of Coca-Cola softdrink bottles were improperly stowed on deck. In other words, while the vessel possessed the necessary Coast Guard certification indicating its seaworthiness with respect to the structure of the ship itself, it was not seaworthy with respect to the cargo. Nonetheless, the appellate court denied the claim of PHILAMGEN on the ground that the assured's implied warranty of seaworthiness was not complied with. Perfunctorily, PHILAMGEN was not properly subrogated to the rights and interests of the shipper. Furthermore, respondent court held that the filing of notice of abandonment had absolved the shipowner/agent from liability under the limited liability rule. The issues for resolution in this petition are: (a) whether "MV Asilda" was seaworthy when it left the port of Zamboanga; (b) whether the limited liability under Art. 587 of the Code of Commerce should apply; and, (c) whether PHILAMGEN was properly subrogated to the rights and legal actions which the shipper had against FELMAN, the shipowner. "MV Asilda" was unseaworthy when it left the port of Zamboanga. In a joint statement, the captain as well as the chief mate of the vessel confirmed that the weather was fine when they left the port of Zamboanga. According to them, the vessel was carrying 7,500 cases of 1-liter Coca-Cola softdrink bottles, 300 sacks of seaweeds, 200 empty CO2 cylinders and an undetermined quantity of empty boxes for fresh eggs. They loaded the empty boxes for eggs and about 500 cases of Coca-Cola bottles on deck. 4 The ship captain stated that around four o'clock in the morning of 7 July 1983 he was awakened by the officer on duty to inform him that the vessel had hit a floating log. At that time he noticed that the weather had deteriorated with strong southeast winds inducing big waves. After thirty minutes he observed that the vessel was listing slightly to starboard and would not correct itself despite the heavy rolling and pitching. He then ordered his crew to shift the cargo from starboard to portside until the vessel was balanced. At about seven o'clock in the morning, the master of the vessel stopped the engine because the vessel was listing dangerously to portside. He ordered his crew to shift the cargo back to starboard. The shifting of cargo took about an hour afterwhich he rang the engine room to resume full speed. At around eight forty-five, the vessel suddenly listed to portside and before the captain could decide on his next move, some of the cargo on deck were thrown overboard and seawater entered the engine room and cargo holds of the vessel. At that instance, the master of the vessel ordered his crew to abandon ship. Shortly thereafter, "MV Asilda" capsized and sank. He ascribed the sinking to the entry of seawater through a hole in the hull caused by the vessel's collision with a partially submerged log. 5 The Elite Adjusters, Inc., submitted a report regarding the sinking of "MV Asilda." The report, which was adopted by the Court of Appeals, reads We found in the course of our investigation that a reasonable explanation for the series of lists experienced by the vessel that eventually led to her capsizing and sinking, was that the vessel wastop-heavy which is to say that while the vessel may not have been overloaded, yet the distribution or stowage of the cargo on board was done in such a manner that the vessel was in top-heavy condition at the time of her departure and which condition rendered her unstable and unseaworthy for that particular voyage. In this connection, we wish to call attention to the fact that this vessel was designed as a fishing vessel . . . and it was not designed to carry a substantial amount or quantity of cargo on deck. Therefore, we believe strongly that had her cargo been confined to those that could have been accommodated under deck, her stability would not have been affected and the vessel would not have been in any danger of capsizing, even given the prevailing weather conditions at that time of sinking. But from the moment that the vessel was utilized to load heavy cargo on its deck, the vessel was rendered unseaworthy for the purpose of carrying the type of cargo because the weight of the deck cargo so decreased the vessel's metacentric height as to cause it to become unstable.

Finally, with regard to the allegation that the vessel encountered big waves, it must be pointed out that ships are precisely designed to be able to navigate safely even during heavy weather and frequently we hear of ships safely and successfully weathering encounters with typhoons and although they may sustain some amount of damage, the sinking of ship during heavy weather is not a frequent occurrence and is not likely to occur unless they are inherently unstable and unseaworthy . . . .

We believe, therefore, and so hold that the proximate cause of the sinking of the M/V "Asilda" was her condition of unseaworthiness arising from her having been top-heavy when she departed from the Port of Zamboanga. Her having capsized and eventually sunk was bound to happen and was therefore in the category of an inevitable occurrence (emphasis supplied). 6
We subscribe to the findings of the Elite Adjusters, Inc., and the Court of Appeals that the proximate cause of the sinking of " MV Asilda" was its being top-heavy. Contrary to the ship captain's allegations, evidence shows that approximately 2,500 cases of softdrink bottles were stowed on deck. Several days after "MV Asilda" sank, an estimated 2,500 empty Coca-Cola plastic cases were recovered near the vicinity of the sinking. Considering that the ship's hatches were properly secured, the empty Coca-Cola cases recovered could have come only from the vessel's deck cargo. It is settled that carrying a deck cargo raises the presumption of unseaworthiness unless it can be shown that the deck cargo will not interfere with the proper management of the ship. However, in this case it was established that "MV Asilda" was not designed to carry substantial amount of cargo on deck. The inordinate loading of cargo deck resulted in the decrease of the vessel's metacentric height 7 thus making it unstable. The strong winds and waves encountered by the vessel are but the ordinary vicissitudes of a sea voyage and as such merely contributed to its already unstable and unseaworthy condition. On the second issue, Art. 587 of the Code of Commerce is not applicable to the case at bar. 8 Simply put, the ship agent is liable for the negligent acts of the captain in the care of goods loaded on the vessel. This liability however can be limited through abandonment of the vessel, its equipment and freightage as provided in Art. 587. Nonetheless, there are exceptional circumstances wherein the ship agent could still be held answerable despite the abandonment, as where the loss or injury was due to the fault of the shipowner and the captain. 9 The international rule is to the effect that the right of abandonment of vessels, as a legal limitation of a shipowner's liability, does not apply to cases where the injury or average was occasioned by the shipowner's own fault. 10 It must be stressed at this point that Art. 587 speaks only of situations where the fault or negligence is committed solely by the captain. Where the shipowner is likewise to be blamed, Art. 587 will not apply, and such situation will be covered by the provisions of the Civil Code on common carrier. 11 It was already established at the outset that the sinking of "MV Asilda" was due to its unseaworthiness even at the time of its departure from the port of Zamboanga. It was top-heavy as an excessive amount of cargo was loaded on deck. Closer supervision on the part of the shipowner could have prevented this fatal miscalculation. As such, FELMAN was equally negligent. It cannot therefore escape liability through the expedient of filing a notice of abandonment of the vessel by virtue of Art. 587 of the Code of Commerce. Under Art 1733 of the Civil Code, "(c)ommon carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case . . ." In the event of loss of goods, common carriers are presumed to have acted negligently. FELMAN, the shipowner, was not able to rebut this presumption. In relation to the question of subrogation, respondent appellate court found " MV Asilda" unseaworthy with reference to the cargo and therefore ruled that there was breach of warranty of seaworthiness that rendered the assured not entitled to the payment of is claim under the policy. Hence, when PHILAMGEN paid the claim of the bottling firm there was in effect a "voluntary payment" and no right of subrogation accrued in its favor. In other words, when PHILAMGEN paid it did so at its own risk. It is generally held that in every marine insurance policy the assured impliedly warrants to the assurer that the vessel is seaworthy and such warranty is as much a term of the contract as if expressly written on the face of the policy. 12 Thus Sec. 113 of the Insurance Code provides that "(i)n every marine insurance upon a ship or freight, or freightage, or upon anything which is the subject of marine insurance, a warranty is implied that the ship is seaworthy." Under Sec. 114, a ship is "seaworthy when reasonably fit to perform the service, and to encounter the ordinary perils of the voyage, contemplated by the parties to the policy." Thus it becomes the obligation of the cargo owner to look for a reliable common carrier which keeps its vessels in seaworthy condition. He may have no control over the vessel but he has full control in the selection of the common carrier that will transport his goods. He also has full discretion in the choice of assurer that will underwrite a particular venture. We need not belabor the alleged breach of warranty of seaworthiness by the assured as painstakingly pointed out by FELMAN to stress that subrogation will not work in this case. In policies where the law will generally imply a warranty of seaworthiness, it can only be excluded by terms in writing in the policy in the clearest language. 13 And where the policy stipulates that the seaworthiness of the vessel as between the assured and the assurer is admitted, the question of seaworthiness cannot be raised by the assurer without showing concealment or misrepresentation by the assured. 14

The marine policy issued by PHILAMGEN to the Coca-Cola bottling firm in at least two (2) instances has dispensed with the usual warranty of worthiness. Paragraph 15 of the Marine Open Policy No. 100367-PAG reads "(t)he liberties as per Contract of Affreightment the presence of the Negligence Clause and/or Latent Defect Clause in the Bill of Lading and/or Charter Party and/or Contract of Affreightment as between the Assured and the Company shall not prejudice the insurance. The seaworthiness of the vessel as between the Assured and the Assurers is hereby admitted." 15 The same clause is present in par. 8 of the Institute Cargo Clauses (F.P.A.) of the policy which states "(t)he seaworthiness of the vessel as between the Assured and Underwriters in hereby admitted . . . ." 16 The result of the admission of seaworthiness by the assurer PHILAMGEN may mean one or two things: (a) that the warranty of the seaworthiness is to be taken as fulfilled; or, (b) that the risk of unseaworthiness is assumed by the insurance company. 17 The insertion of such waiver clauses in cargo policies is in recognition of the realistic fact that cargo owners cannot control the state of the vessel. Thus it can be said that with such categorical waiver, PHILAMGEN has accepted the risk of unseaworthiness so that if the ship should sink by unseaworthiness, as what occurred in this case, PHILAMGEN is liable. Having disposed of this matter, we move on to the legal basis for subrogation. PHILAMGEN's action against FELMAN is squarely sanctioned by Art. 2207 of the Civil Code which provides: Art. 2207. If the plaintiff's property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. If the amount paid by the insurance company does not fully cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency from the person causing the loss or injury. In Pan Malayan Insurance Corporation v. Court of Appeals, 18 we said that payment by the assurer to the assured operates as an equitable assignment to the assurer of all the remedies which the assured may have against the third party whose negligence or wrongful act caused the loss. The right of subrogation is not dependent upon, nor does it grow out of any privity of contract or upon payment by the insurance company of the insurance claim. It accrues simply upon payment by the insurance company of the insurance claim. The doctrine of subrogation has its roots in equity. It is designed to promote and to accomplish justice and is the mode which equity adopts to compel the ultimate payment of a debt by one who in justice, equity and good conscience ought to pay. 19 Therefore, the payment made by PHILAMGEN to Coca-Cola Bottlers Philippines, Inc., gave the former the right to bring an action as subrogee against FELMAN. Having failed to rebut the presumption of fault, the liability of FELMAN for the loss of the 7,500 cases of 1-liter Coca-Cola softdrink bottles is inevitable. WHEREFORE, the petition is GRANTED. Respondent FELMAN SHIPPING LINES is ordered to pay petitioner PHILIPPINE AMERICAN GENERAL INSURANCE CO., INC., Seven Hundred Fifty-five Thousand Two Hundred and Fifty Pesos (P755,250.00) plus legal interest thereon counted from 29 November 1983, the date of judicial demand, pursuant to Arts. 2212 and 2213 of the Civil Code. 20 SO ORDERED. _____

PAL vs. CA Facts: Private respondent Jesus Samson was a regular co-pilot of PAL. During one of his flights fromManila to Legazpi with Captain Delfin Bustamante, they made a crash landing at Daet whereSamson suffered physical injuries in the head. Samson alleges that the accident was due to thegross negligence of PAL in allowing Bustamante who was suffering from a long standing tumor of the Nasopharynx but was also allowed by the Civil Aeronautics Administration to fly as a co- pilot; and that because of the tumor Bustamante has a slow reaction and poor judgment. Issue: WON PAL was negligent as a common carrier in allowing Bustamante to fly as a First Officer the day of the accident. Or, WON the same carrier is liable for the accident even if Bustamantewas not sick.

Held: YES and YES.For having allowed Bustamante to fly as a First Officer on January 8, 1951, defendant is guiltyof gross negligence and therefore should be made liable for the resulting accident.(Even) assuming that the pilot was not sick or that the tumor did not affect the pilot in managingthe plane, the evidence shows that overshooting of the runway and crash-landing at the mangrove was caused by the pilot for which acts the defendant must answer for damages causedthereby. And for the negligence of defendants employee, it is liable. At least, the law presumesthe employer negligent imposing upon it the burden of proving that it exercised the diligence of agood father of a family in the supervision of its employees. As defined in Art. 1732, NCC, petitioner is a common carrier. The law is clear in requiring acommon carrier to exercise the highest degree of care in the discharge of its duty and business of carriage and transportation under Art. 1733, 1755 and 1756, NCC.The duty to exercise the utmost diligence on the part of common carriers is for the safety of passengers as well as for the members of the crew or the complement operating the carrier, theairplane in the case at bar. And this must be so for any omission, lapse or neglect thereof willcertainly result to the damage, prejudice, nay injuries and even death to all aboard the plane, passengers and crew members alike ______ Sarkies Tours Phils. V. IACG.R. No. 108897 October 2, 1997 Facts: On August 31, 1984, Fatima boarded petitioners bus from Manila to Legazpi. Her belongings consisting of 3 bags were kept at the baggage compartment of the bus, butduring the stopover in Daet, it was discovered that only one remained. The others mighthave dropped along the way. Other passengers suggested having the route traced, but thedriver ignored it.Fatima immediately told the incident to her mother, who went to petitioners office inLegazpi and later in Manila. Petitioner offered P1,000 for each bag, but she turned itdown. Disappointed, she sought help from Philtranco bus drivers and radio stations. Oneof the bags was recovered. She was told by petitioner that a team is looking for the lostluggage.After nine months of fruitless waiting, respondents filed a case to recover the lost items,as well as moral and exemplary damages, attorneys fees and expenses of litigation.The trial court ruled in favor of respondents, which decision was affirmed withmodification by the Court of Appeals, deleting moral and exemplary damages. Issue: Whether CC is liable for the loss of the luggage? Held: CC is liable. Under the Civil Code, "common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence inthe vigilance over the goods . . . transported by them," and this liability "lasts from thetime the goods are unconditionally placed in the possession of, and received by thecarrier for transportation until the same are delivered, actually or constructively, by thecarrier to . . . the person who has a right to receive them," unless the loss is due to any of the excepted causes under Article 1734 such as "(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) Thecharacter of the goods or defects in the packing or in the containers; (5) Order or act of competent public authority.The cause of the loss in the case at bar was petitioner's negligence in not ensuring that thedoors of the baggage compartment of its bus were securely fastened. As a result of thislack of care, almost all of the luggage was lost, to the prejudice of the paying passengers _____

REPUBLIC OF THE PHIL., represented by the DEPARTMENT OF HEALTH, NATIONAL TRUCKING AND FORWARDING CORPORATION (NTFC) and COOPERATIVE FOR AMERICAN RELIEF EVERYWHERE, INC. (CARE) VS. LORENZO SHIPPING CORPORATION (LSC) G.R. No. 153563. February 7, 2005 EXTRAORDINARY DILIGENCE; PRESUMPTION OF FAULT OR NEGLIGENCE REBUTTABLE Facts: The Philippine government entered into a contract of carriage of goods with petitioner NTFC whereby the latter shipped bags of non-fat dried milk through respondent LSC. The consignee named in the bills of lading issued by the respondent was Abdurahma Jama, petitioners branch supervisor in Zamboanga City. On reaching the port of Zamboanga City, the respondents agent unloaded the goods and delivered the same to petitioners warehouse. Before each delivery, the delivery checkers of respondents agent requested Jama to surrender the original bills of lading, but the latter merely presented certified true copies thereof. Upon completion of each delivery, the delivery checkers asked Jama to sign the delivery receipts. However, at times when Jama had to attend to other business before a delivery was completed, he instructed his subordinates to sign the delivery receipts for him. Notwithstanding the precautions taken, petitioner NTFC allegedly did not receive the good and filed a formal claim for non-delivery of the goods shipped through respondent. Respondent explained that the cargo had already been delivered to Jama. The government through the DOH, CARE and NTFC as plaintiffs filed an action for breach of contract of carriage against respondent as defendant. Issue: Whether or not respondent is presumed at fault or negligent as common carrier for the loss or deterioration of the goods. Held: Article 1733 of the Civil Code demands that a common carrier observe extraordinary diligence over the goods transported by it. Extraordinary diligence is that extreme measure of care and caution which persons of unusual prudence and circumspection use for securing and preserving their own property or rights. This exacting standard imposed on common carriers in a contract of carriage of goods is intended to tilt the scales in favor of the shipper who is at the mercy of the common carrier once the goods have been lodged for shipment. Hence, in case of loss of goods in transit, the common carrier is presumed under the law to have been at fault or negligent. However, the presumption of fault or negligence may be overturned by competent evidence showing that the common carrier has observed extraordinary diligence over the goods. The respondent has observed such extraordinary diligence in the delivery of the goods. Prior to releasing the goods to Jama, the delivery checkers required the surrender of the original bills of lading, and in their absence, the certified true copies showing that Jama was indeed the consignee of the goods. In addition, they required Jama or his designated subordinates to sign the delivery receipts upon completion of each delivery. ________ CENTRAL SHIPPING COMPANY, INC., petitioner, vs. INSURANCE COMPANY OF NORTH AMERICA, respondent. G.R. No. 150751 September 20, 2004 121 SCRA 769 Facts: On July 25, 1990 at Puerto Princesa, Palawan, the petitioner received on board its vessel, the M/V Central Bohol, 376 pieces of Round Logs and undertook to transport said shipment to Manila for delivery to Alaska Lumber Co., Inc. The cargo is insured for P3, 000, 000.00 against total lost under respondents MarineCargo Policy.

After loading the logs, the vessel starts its voyage. After few hours of the trip, the ship tilts 10 degrees to its side, due to the shifting of the logs in the hold. It continues to tilt causing the captain and the crew to abandon ship. The ship sank. Respondent alleged that the loss is due to the negligence and fault of the captain. While petitioner contends that the happening is due to monsoons which is unforeseen or casa fortuito. Issue: Whether or not petitioner is liable for the loss of cargo? Held: From the nature of their business and for reasons of public policy, common carriers are bound to observe extraordinary diligence over the goods they transport, according to all the circumstances of each case. In the event of loss, destruction or deterioration of the insured goods, common carriers are responsible; that is, unless they can prove that such loss, destruction or deterioration was brought about -- among others -- by "flood, storm, earthquake, lightning or other natural disaster or calamity." In all other cases not specified under Article 1734 of the Civil Code, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence. The contention of the petitioner that the loss is due to casa fortuito exempting them from liability is untenable. Petitioner failed to show that such natural disaster or calamity was the proximate and only cause of the loss. Human agency must be entirely excluded from the cause of injury or loss. In other words, the damaging effects blamed on the event or phenomenon must not have been caused, contributed to, or worsened by the presence of human participation. The defense of fortuitous event or natural disaster cannot be successfully made when the injury could have been avoided by human precaution. The monsoon is not the proximate cause of the sinking but is due to the improper stowage of logs. The logs were not secured by cable wires, causing the logs to shift and later on the sinking the ship. This shows that they did not exercise extraordinary diligence, making them liable for such loss. ________
G.R. No. 135377 October 7, 2003

DSR-SENATOR LINES AND C.F. SHARP AND COMPANY, INC., petitioners, vs. FEDERAL PHOENIX ASSURANCE CO., INC., respondent. DECISION SANDOVAL-GUTIERREZ, J.: Before us is a petition for review on certiorari1 assailing the Decision2 dated June 5, 1998 of the Court of Appeals in CA-G.R. CV No. 50833 which affirmed the Decision of the Regional Trial Court (RTC), Manila City, Branch 16, in Civil Case No. 94-69699, "Federal Phoenix Assurance Company, Inc. vs. DSR-Senator Lines and C.F. Sharp & Co., Inc.," for damages arising from the loss of cargo while in transit. Berde Plants, Inc. (Berde Plants) delivered 632 units of artificial trees to C.F. Sharp and Company, Inc. (C.F. Sharp), the General Ship Agent of DSR-Senator Lines, a foreign shipping corporation, for transportation and delivery to the consignee, Al-Mohr International Group, in Riyadh, Saudi Arabia. C.F. Sharp issued International Bill of Lading No. SENU MNL-26548 3 for the cargo with an invoice value of $34,579.60. Under the Bill of Lading, the port of discharge for the cargo was at the Khor Fakkan port and the port of delivery was Riyadh, Saudi Arabia, via Port Dammam. The cargo was loaded in M/S "Arabian Senator." Federal Phoenix Assurance Company, Inc. (Federal Phoenix Assurance) insured the cargo against all risks in the amount of P941,429.61.4

On June 7, 1993, M/S "Arabian Senator" left the Manila South Harbor for Saudi Arabia with the cargo on board. When the vessel arrived in Khor Fakkan Port, the cargo was reloaded on board DSR-Senator Lines feeder vessel, M/V "Kapitan Sakharov," bound for Port Dammam, Saudi Arabia. However, while in transit, the vessel and all its cargo caught fire. On July 5, 1993, DSR-Senator Lines informed Berde Plants that M/V "Kapitan Sakharov" with its cargo was gutted by fire and sank on or about July 4, 1993. On December 16, 1993, C.F. Sharp issued a certification to that effect. Consequently, Federal Phoenix Assurance paid Berde Plants P941,429.61 corresponding to the amount of insurance for the cargo. In turn Berde Plants executed in its favor a "Subrogation Receipt"5 dated January 17, 1994. On February 8, 1994, Federal Phoenix Assurance sent a letter to C.F. Sharp demanding payment of P941,429.61 on the basis of the Subrogation Receipt. C.F. Sharp denied any liability on the ground that such liability was extinguished when the vessel carrying the cargo was gutted by fire. Thus, on March 11, 1994, Federal Phoenix Assurance filed with the RTC, Branch 16, Manila a complaint for damages against DSRSenator Lines and C.F. Sharp, praying that the latter be ordered to pay actual damages ofP941,429.61, compensatory damages of P100,000.00 and costs. On August 22, 1995, the RTC rendered a Decision in favor of Federal Phoenix Assurance, the dispositive portion of which reads: "WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff and against the defendants who are hereby ordered jointly and severally to pay plaintiff: I. The amount of P941,439.61 (should be P941,429.616) with legal interest of 6% per annum from the date of the letter of demand of February 8, 1993 (EXH. L) and 12% per annum from the date the judgment becomes final and executory until its satisfaction (Eastern Shipping Lines vs. Court of Appeals, G.R. No. 97412, July 12, 1994); II. The amount of P15,000.00 by way of reasonable attorneys fees; and III. To pay costs. "The counterclaim of defendants is DISMISSED. "SO ORDERED."7 On appeal, the Court of Appeals rendered a Decision dated June 5, 1998, affirming the RTC Decision, thus: "In the present recourse, the appellant carrier was presumed to have acted negligently for the fire that gutted the feeder vessel and the consequent loss or destruction of the cargo. Hence, the appellant carrier is liable for appellees claim under the New Civil Code of the Philippines. "Contrary to C.F. Sharp and Co., Inc.s pose, its liability as ship agent continued and remained until the cargo was delivered to the consignee. The status of the appellant as ship agent subsisted and its liability as a ship agent was co-terminous with and subsisted as long as the cargo was not delivered to the consignee under the terms of the Bill of Lading. "IN LIGHT OF ALL THE FOREGOING, the appeal of the appellants is DISMISSED. The Decision appealed from is affirmed. With costs against the appellants. "SO ORDERED."8 On September 7, 1998, the Court of Appeals denied the motion for reconsideration of DSR-Senator Lines and C.F. Sharp, prompting them to file with this Court the instant petition. We find the petition bereft of merit. Article 1734 of the Civil Code provides: "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." Fire is not one of those enumerated under the above provision which exempts a carrier from liability for loss or destruction of the cargo. In Eastern Shipping Lines, Inc. vs. Intermediate Appellate Court,9 we ruled that since the peril of fire is not comprehended within the exceptions in Article 1734, then the common carrier shall be presumed to have been at fault or to have acted negligently, unless it proves that it has observed the extraordinary diligence required by law. Even if fire were to be considered a natural disaster within the purview of Article 1734, it is required under Article 1739 10 of the same Code that the natural disaster must have been the proximate and only cause of the loss, and that the carrier has exercised due diligence to prevent or minimize the loss before, during or after the occurrence of the disaster. We have held that a common carriers duty to observe the requisite diligence in the shipment of goods lasts from the time the articles are surrendered to or unconditionally placed in the possession of, and received by, the carrier for transportation until delivered to or until the lapse of a reasonable time for their acceptance by the person entitled to receive them. When the goods shipped either are lost or arrive in damaged condition, a presumption arises against the carrier of its failure to observe that diligence, and there need not be an express finding of negligence to hold it liable.11 s
1awphi1.nt

Common carriers are obliged to observe extraordinary diligence in the vigilance over the goods transported by them. Accordingly, they are presumed to have been at fault or to have acted negligently if the goods are lost, destroyed or deteriorated. There are very few instances when the presumption of negligence does not attach and these instances are enumerated in Article 1734. In those cases where the presumption is applied, the common carrier must prove that it exercised extraordinary diligence in order to overcome the presumption.12 Respondent Federal Phoenix Assurance raised the presumption of negligence against petitioners. However, they failed to overcome it by sufficient proof of extraordinary diligence. WHEREFORE, the instant petition is DENIED. The assailed Decision of the Court of Appeals dated June 5, 1998, in CA-G.R. CV No. 50833 is hereby AFFIRMED. SO ORDERED.

__________ Eastern Shipping Lines, Inc. v. IAC and Development Insurance & Surety Corp. G.R. No. L-69044 May 29, 1987 Eastern Shipping Lines, Inc. v. The Nisshin Fire and Marine Insurance Co., andDowa Fire & Marine Insurance Co., Ltd. G.R. No. 71478 May 29, 1987 Melencio-Herrera, J. FACTS:

(G.R. No. L-69044): a vessel operated by petitioner Eastern Shipping Lines, Inc., loaded atKobe, Japan for transportation to Manila, 5000 pieces of calorized lance pipes in 28packages consigned to Philippine Blooming Mills Co., Inc., and 7 cases of spare partsconsigned to Central Textile Mills, Inc.; both sets of goods were insured with DevelopmentInsurance and Surety Corp. (G.R. No. 71478): the same vessel took on board 128 cartons of garment fabrics andaccessories, in 2 containers, consigned to Mariveles Apparel Corporation, and two cases of surveying instruments consigned to Aman Enterprises and General Merchandise the vessel caught fire and sank, resulting in the total loss of ship and cargo ISSUES: 1. which law should govern the Civil Code provisions on Common carriers or theCarriage of Goods by Sea Act?; 2. who has the burden of proof to show negligence of thecarrier? 3. what is the extent of the carriers liability? HELD: 1. The law of the country to which the goods are to be transported governs theliability of the common carrier in case of their loss, destruction or deterioration. As thecargoes were transported from Japan to the Philippines, the liability of Petitioner Carrier isgoverned primarily by the Civil Code. However, in all matters not regulated by said Code,the rights and obligations of common carrier shall be governed by the Code of Commerceand by special laws. Thus, the Carriage of Goods by Sea Act, a special law, is suppletory tothe provisions of the Civil Code. 2. Article 1735 of the Civil Code provides that all cases than those mention in Article 1734,the common carrier shall be presumed to have been at fault or to have acted negligently,unless it proves that it has observed the extraordinary diligence required by law. Theburden is upon Eastern Shipping Lines to prove that it has exercised the extraordinarydiligence required by law. Note: fire not considered a natural disaster or calamity within the contemplation of Art.1734 for it arises almost invariably from some act of man or by human means; it does notfall within the category of an act of God unless caused by lightning or by other naturaldisaster or calamity having failed to discharge the burden of proving that it had exercised the extraordinarydiligence required by law, Eastern Shipping Lines cannot escape liability for the loss of thecargo As it was at fault, it cannot seek the protective mantle of Sec. 4(2) of Carriage of Goods bySea Act which provides: Neither the carrier nor the ship shall be responsible for loss ordamage arising or resulting from x x x (b) Fire, unless caused by the actual fault or privity of the carrier. there was actual fault of the carrier shown by lack of diligence in that when the smoke wasnoticed, the fire was already big; that the fire must have started 24 hours before the samewas noticed; and that after the cargoes were stored in the hatches, no regular inspectionwas made as to their condition during the voyage.

3. See Art. 1749.G.R. No. 69044: no stipulation in the Bills of Lading limiting the carriers liability for the lossor destruction of the goods; no declaration of a higher value of the goods; Hence, Eastern Shipping Lines liability should not exceed US $500 per package (as provided in 4(5) of theCOGSA), or its peso equivalent, at the time of payment of the value of the goods lost, but inno case more than the amount of damage actually sustained ______ Compania Maritima vs Court of Appeals and Vicente Concepcion (162 SCRA 685) Facts: Vicente Concepcion is doing business under the name of Consolidated Construction. Being a Manila based contractor, Concepcion had to ship his construction equipment to Cagayan de Oro. On August 28, 1964, Concepcion shipped 1 unit pay loader, 4 units of 6x6 Roe trucks, and 2 pieces of water tanks. The aforementioned equipment was loaded aboard the MV Cebu, which left Manila on August 30, 1964 and arrived at Cagayan de Oro on September 1, 1964. The Reo trucks and water tanks were safely unloaded however the pay loader suffered damage while being unloaded. The damaged pay loader was taken to the petitioners compound in Cagayan de Oro. Consolidated Construction thru Vicente Concepcion wrote Compania Maritima to demand a replacement of the broken pay loader and also asked for damages. Unable to get a response, Concepcion sent another demand letter. Petitioner meanwhile, sent the damaged payloader to Manila, it was weighed at San Miguel Corporation, where it was found that the payloader actually weighed 7.5 tons and not 2.5 tons as declared in its bill of lading. Due to this, petitioner denied the claim for damages of Consolidated Construction. Consolidated then filed an action for damages against petitioner with the Court of First Instance of Manila. The Court of First Instance dismissed the complaint stating that the proximate cause of the fall of the payloader which caused its damage was the act or omission of Vicente Concepcion for misrepresenting the weight of the payloader as 2.5 tons instead of its true weight of 7.5 tons. On appeal, the Court of Appeals, reversed the decision of the Court of First Instance and ordered the plaintiff to pay Concepcion damages. Hence this petition. Issue: Whether or not the act of respondent Concepcion of misdeclaring the true weight of the payloader the proximate and only cause of the damage of the payloader? Held: No, Compania Maritima is liable for the damage to the payloader. The General rule under Articles 1735 and 1752 of the Civil Code is that common carriers are presumed to be at fault or to have acted negligently in case the goods transported by them are lost, destroyed, or had deteriorated. To overcome the presumption of liability for the loss destruction or deterioration common carriers must prove that they have exercised extraordinary diligence as required by Article 1733 of the Civil Code. Extraordinary Diligence in the vigilance over the goods tendered for shipment requires the common carrier to know and follow the required precaution fro avoiding damage or destruction of the goods entrusted to it for safe carriage and delivery. It requires common carriers to render service with the greatest skill and foresight and to use all reasonable means to ascertain the nature and characteristics of goods tendered for shipment and to exercise due care in the handling and stowage including such methods as their nature requires.

The Supreme Court further held that the weight in a bill of lading are prima facie evidence of the amount received and the fact that the weighing was done by another will not relieve the common carrier where it accepted such weight and entered it in on the bill of lading. The common carrier can protect themselves against mistakes in the bill of lading as to weight by exercising extraordinary diligence before issuing such._______ Mauro Ganzon v. CA and Gelacio Tumambing G.R. No. L-48757 May 30, 1988 Sarmiento, J. FACTS: Tumambing contracted the services of Ganzon to haul 305 tons of scrap iron fromMariveles, Bataan, to the port of Manila on board the lighter LCT Batman; pursuant tothe agreement, Ganzon sent his lighter Batman to Mariveles where it docked; Tumambing delivered the scrap iron to Filomeno Niza, captain of the lighter, for loading;when about half of the scrap iron was already loaded, Mayor Jose Advincula of Mariveles,Bataan, arrived and demanded P5,000.00 from Tumambing (note: extortion); Tumambingresisted the shakedown and after a heated argument between them, Advincula drew hisgun and fired at Tumambing, because of which he sustained physical injuries. Acting Mayor Basilio Rub, accompanied by three policemen, ordered captain Niza and hiscrew to dump the scrap iron where the lighter was docked; the rest was brought to thecompound of NASSCO; Rub issued a receipt stating that the Municipality of Mariveles had taken custody of the scrap iron ISSUES: WON Ganzon is guilty of breach of contract of transportation HELD: Yes. the scraps were unconditionally placed in the possession and control of the commoncarrier owned by Ganzon, and upon their receipt by the carrier for transportation, thecontract of carriage was deemed perfected; hence, Ganzons extraordinary responsibilityfor the loss, destruction or deterioration of the goods commenced; pursuant to Art. 1736,such extraordinary responsibility would cease only upon the delivery, actual orconstructive, by the carrier to the consignee, or to the person who has a right to receivethem; the fact that part of the shipment had not been loaded on board the lighter did notimpair the said contract of transportation as the goods remained in the custody andcontrol of the carrier, albeit still unloaded Ganzon has failed to show that the loss of the scraps was due to any of the causesenumerated in Art. 1734; hence he is presumed to have been at fault or to have actednegligently; he could have been exempted from any liability had he been able to provethat 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 unforeseenevent or to force majeure, but he failed to do so. theory of caso fortuito not applicable.

Ganzons defense was that the loss of the scraps was due to an order or act of competentpublic authority. Ganzon was not duty bound to obey the illegal order to dump into the sea the scrap iron;moreover, there is absence of sufficient proof that the issuance of the same order wasattended with such force or intimidation as to completely overpower the will of thepetitioners employees; mere difficulty in the fulfillment of the obligation is not considered force majeure. _________________ [G.R. No. 146018. June 25, 2003] EDGAR COKALIONG SHIPPING LINES, INC., petitioner, vs. UCPB GENERAL INSURANCE COMPANY, INC., respondent. DECISION PANGANIBAN, J.: The liability of a common carrier for the loss of goods may, by stipulation in the bill of lading, be limited to the value declared by the shipper. On the other hand, the liability of the insurer is determined by the actual value covered by the insurance policy and the insurance premiums paid therefor, and not necessarily by the value declared in the bill of lading. The Case Before the Court is a Petition for Review[1] under Rule 45 of the Rules of Court, seeking to set aside the August 31, 2000 Decision[2] and the November 17, 2000 Resolution[3] of the Court of Appeals[4] (CA) in CA-GR SP No. 62751. The dispositive part of the Decision reads: IN THE LIGHT OF THE FOREGOING, the appeal is GRANTED. The Decision appealed from is REVERSED. [Petitioner] is hereby condemned to pay to [respondent] the total amount of P148,500.00, with interest thereon, at the rate of 6% per annum, from date of this Decision of the Court. [Respondents] claim for attorneys fees [is] DISMISSED. [Petitioners] counterclaims are DISMISSED.[5] The assailed Resolution denied petitioners Motion for Reconsideration. On the other hand, the disposition of the Regional Trial Courts[6] Decision,[7] which was later reversed by the CA, states: WHEREFORE, premises considered, the case is hereby DISMISSED for lack of merit. No cost.[8] The Facts The facts of the case are summarized by the appellate court in this wise: Sometime on December 11, 1991, Nestor Angelia delivered to the Edgar Cokaliong Shipping Lines, Inc. (now Cokaliong Shipping Lines), [petitioner] for brevity, cargo consisting

of one (1) carton of Christmas dcor and two (2) sacks of plastic toys, to be transported on board the M/V Tandag on its Voyage No. T-189 scheduled to depart from Cebu City, on December 12, 1991, for Tandag, Surigao del Sur. [Petitioner] issued Bill of Lading No. 58, freight prepaid, covering the cargo. Nestor Angelia was both the shipper and consignee of the cargo valued, on the face thereof, in the amount of P6,500.00. Zosimo Mercado likewise delivered cargo to [petitioner], consisting of two (2) cartons of plastic toys and Christmas decor, one (1) roll of floor mat and one (1) bundle of various or assorted goods for transportation thereof from Cebu City to Tandag, Surigao del Sur, on board the said vessel, and said voyage. [Petitioner] issued Bill of Lading No. 59 covering the cargo which, on the face thereof, was valued in the amount of P14,000.00. Under the Bill of Lading, Zosimo Mercado was both the shipper and consignee of the cargo. On December 12, 1991, Feliciana Legaspi insured the cargo, covered by Bill of Lading No. 59, with the UCPB General Insurance Co., Inc., [respondent] for brevity, for the amount of P100,000.00 against all risks under Open Policy No. 002/91/254 for which she was issued, by [respondent], Marine Risk Note No. 18409 on said date. She also insured the cargo covered by Bill of Lading No. 58, with [respondent], for the amount of P50,000.00, under Open Policy No. 002/91/254 on the basis of which [respondent] issued Marine Risk Note No. 18410 on said date. When the vessel left port, it had thirty-four (34) passengers and assorted cargo on board, including the goods of Legaspi. After the vessel had passed by the Mandaue-Mactan Bridge, fire ensued in the engine room, and, despite earnest efforts of the officers and crew of the vessel, the fire engulfed and destroyed the entire vessel resulting in the loss of the vessel and the cargoes therein. The Captain filed the required Marine Protest. Shortly thereafter, Feliciana Legaspi filed a claim, with [respondent], for the value of the cargo insured under Marine Risk Note No. 18409 and covered by Bill of Lading No. 59. She submitted, in support of her claim, a Receipt, ated December 11, 1991, purportedly signed by Zosimo Mercado, and Order Slips purportedly signed by him for the goods he received from Feliciana Legaspi valued in the amount of P110,056.00. [Respondent] approved the claim of Feliciana Legaspi and drew and issued UCPB Check No. 612939, dated March 9, 1992, in the net amount of P99,000.00, in settlement of her claim after which she executed a Subrogation Receipt/Deed, for said amount, in favor of [respondent]. She also filed a claim for the value of the cargo covered by Bill of Lading No. 58. She submitted to [respondent] a Receipt, dated December 11, 1991 and Order Slips, purportedly signed by Nestor Angelia for the goods he received from Feliciana Legaspi valued at P60,338.00. [Respondent] approved her claim and remitted to Feliciana Legaspi the net amount of P49,500.00, after which she signed a Subrogation Receipt/Deed, dated March 9, 1992, in favor of [respondent]. On July 14, 1992, [respondent], as subrogee of Feliciana Legaspi, filed a complaint anchored on torts against [petitioner], with the Regional Trial Court of Makati City, for the collection of the total principal amount of P148,500.00, which it paid to Feliciana Legaspi for the loss of the cargo, praying that judgment be rendered in its favor and against the [petitioner] as follows: WHEREFORE, it is respectfully prayed of this Honorable Court that after due hearing, judgment be rendered ordering [petitioner] to pay [respondent] the following. 1. Actual damages in the amount of P148,500.00 plus interest thereon at the legal rate from the time of filing of this complaint until fully paid; 2. Attorneys fees in the amount of P10,000.00; and

3. Cost of suit. [Respondent] further prays for such other reliefs and remedies as this Honorable Court may deem just and equitable under the premises. [Respondent] alleged, inter alia, in its complaint, that the cargo subject of its complaint was delivered to, and received by, [petitioner] for transportation to Tandag, Surigao del Sur under Bill of Ladings, Annexes A and B of the complaint; that the loss of the cargo was due to the negligence of the [petitioner]; and that Feliciana Legaspi had executed Subrogation Receipts/Deeds in favor of [respondent] after paying to her the value of the cargo on account of the Marine Risk Notes it issued in her favor covering the cargo. In its Answer to the complaint, [petitioner] alleged that: (a) [petitioner] was cleared by the Board of Marine Inquiry of any negligence in the burning of the vessel; (b) the complaint stated no cause of action against [petitioner]; and (c) the shippers/consignee had already been paid the value of the goods as stated in the Bill of Lading and, hence, [petitioner] cannot be held liable for the loss of the cargo beyond the value thereof declared in the Bill of Lading. After [respondent] rested its case, [petitioner] prayed for and was allowed, by the Court a quo, to take the depositions of Chester Cokaliong, the Vice-President and Chief Operating Officer of [petitioner], and a resident of Cebu City, and of Noel Tanyu, an officer of the Equitable Banking Corporation, in Cebu City, and a resident of Cebu City, to be given before the Presiding Judge of Branch 106 of the Regional Trial Court of Cebu City. Chester Cokaliong and Noel Tanyu did testify, by way of deposition, before the Court and declared inter alia, that: [petitioner] is a family corporation like the Chester Marketing, Inc.; Nestor Angelia had been doing business with [petitioner] and Chester Marketing, Inc., for years, and incurred an account with Chester Marketing, Inc. for his purchases from said corporation; [petitioner] did issue Bills of Lading Nos. 58 and 59 for the cargo described therein with Zosimo Mercado and Nestor Angelia as shippers/consignees, respectively; the engine room of the M/V Tandag caught fire after it passed the Mandaue/Mactan Bridge resulting in the total loss of the vessel and its cargo; an investigation was conducted by the Board of Marine Inquiry of the Philippine Coast Guard which rendered a Report, dated February 13, 1992 absolving [petitioner] of any responsibility on account of the fire, which Report of the Board was approved by the District Commander of the Philippine Coast Guard; a few days after the sinking of the vessel, a representative of the Legaspi Marketing filed claims for the values of the goods under Bills of Lading Nos. 58 and 59 in behalf of the shippers/consignees, Nestor Angelia and Zosimo Mercado; [petitioner] was able to ascertain, from the shippers/consignees and the representative of the Legaspi Marketing that the cargo covered by Bill of Lading No. 59 was owned by Legaspi Marketing and consigned to Zosimo Mercado while that covered by Bill of Lading No. 58 was purchased by Nestor Angelia from the Legaspi Marketing; that [petitioner] approved the claim of Legaspi Marketing for the value of the cargo under Bill of Lading No. 59 and remitted to Legaspi Marketing the said amount under Equitable Banking Corporation Check No. 20230486 dated August 12, 1992, in the amount of P14,000.00 for which the representative of the Legaspi Marketing signed Voucher No. 4379, dated August 12, 1992, for the said amount of P14,000.00 in full payment of claims under Bill of Lading No. 59; that [petitioner] approved the claim of Nestor Angelia in the amount of P6,500.00 but that since the latter owed Chester Marketing, Inc., for some purchases, [petitioner] merely set off the amount due to Nestor Angelia under Bill of Lading No. 58 against his account with Chester Marketing, Inc.; [petitioner] lost/[misplaced] the original of the check after it was received by Legaspi Marketing, hence, the production of the microfilm copy by Noel Tanyu of the Equitable Banking Corporation; [petitioner] never knew, before settling with Legaspi Marketing and Nestor Angelia that the cargo under both Bills of Lading were insured with [respondent], or that Feliciana Legaspi filed claims for the

value of the cargo with [respondent] and that the latter approved the claims of Feliciana Legaspi and paid the total amount of P148,500.00 to her; [petitioner] came to know, for the first time, of the payments by [respondent] of the claims of Feliciana Legaspi when it was served with the summons and complaint, on October 8, 1992; after settling his claim, Nestor Angelia x x x executed the Release and Quitclaim, dated July 2, 1993, and Affidavit, dated July 2, 1993 in favor of [respondent]; hence, [petitioner] was absolved of any liability for the loss of the cargo covered by Bills of Lading Nos. 58 and 59; and even if it was, its liability should not exceed the value of the cargo as stated in the Bills of Lading. [Petitioner] did not anymore present any other witnesses on its evidence-in-chief. x x x[9] (Citations omitted) Ruling of the Court of Appeals The CA held that petitioner had failed to prove that the fire which consumed the vessel and its cargo was caused by something other than its negligence in the upkeep, maintenance and operation of the vessel.[10] Petitioner had paid P14,000 to Legaspi Marketing for the cargo covered by Bill of Lading No. 59. The CA, however, held that the payment did not extinguish petitioners obligation to respondent, because there was no evidence that Feliciana Legaspi (the insured) was the owner/proprietor of Legaspi Marketing. The CA also pointed out the impropriety of treating the claim under Bill of Lading No. 58 -- covering cargo valued therein at P6,500 -- as a setoff against Nestor Angelias account with Chester Enterprises, Inc. Finally, it ruled that respondent is not bound by the valuation of the cargo under the Bills of Lading, x x x nor is the value of the cargo under said Bills of Lading conclusive on the [respondent]. This is so because, in the first place, the goods were insured with the [respondent] for the total amount of P150,000.00, which amount may be considered as the face value of the goods.[11] Hence this Petition.[12] Issues Petitioner raises for our consideration the following alleged errors of the CA: I The Honorable Court of Appeals erred, granting arguendo that petitioner is liable, in holding that petitioners liability should be based on the actual insured value of the goods and not from actual valuation declared by the shipper/consignee in the bill of lading. II The Court of Appeals erred in not affirming the findings of the Philippine Coast Guard, as sustained by the trial court a quo, holding that the cause of loss of the aforesaid cargoes under Bill of Lading Nos. 58 and 59 was due to force majeure and due diligence was [exercised] by petitioner prior to, during and immediately after the fire on [petitioners] vessel. III

The Court of Appeals erred in not holding that respondent UCPB General Insurance has no cause of action against the petitioner.[13] In sum, the issues are: (1) Is petitioner liable for the loss of the goods? (2) If it is liable, what is the extent of its liability? This Courts Ruling The Petition is partly meritorious. First Issue: Liability for Loss Petitioner argues that the cause of the loss of the goods, subject of this case, was force majeure. It adds that its exercise of due diligence was adequately proven by the findings of the Philippine Coast Guard. We are not convinced. The uncontroverted findings of the Philippine Coast Guard show that the M/V Tandag sank due to a fire, which resulted from a crack in the auxiliary engine fuel oil service tank. Fuel spurted out of the crack and dripped to the heating exhaust manifold, causing the ship to burst into flames. The crack was located on the side of the fuel oil tank, which had a mere two-inch gap from the engine room walling, thus precluding constant inspection and care by the crew. Having originated from an unchecked crack in the fuel oil service tank, the fire could not have been caused by force majeure. Broadly speaking, force majeure generally applies to a natural accident, such as that caused by a lightning, an earthquake, a tempest or a public enemy.[14] Hence, fire is not considered a natural disaster or calamity. In Eastern Shipping Lines, Inc. v. Intermediate Appellate Court,[15] we explained: x x x. This must be so as it arises almost invariably from some act of man or by human means. It does not fall within the category of an act of God unless caused by lighting or by other natural disaster or calamity. It may even be caused by the actual fault or privity of the carrier. Article 1680 of the Civil Code, which considers fire as an extraordinary fortuitous event refers to leases or rural lands where a reduction of the rent is allowed when more than onehalf of the fruits have been lost due to such event, considering that the law adopts a protective policy towards agriculture. As the peril of fire is not comprehended within the exceptions in Article 1734, supra, Article 1735 of the Civil Code provides that in all cases other than those mentioned in Article 1734, the common carrier shall be presumed to have been at fault or to have acted negligently, unless it proves that it has observed the extraordinary diligence required by law. Where loss of cargo results from the failure of the officers of a vessel to inspect their ship frequently so as to discover the existence of cracked parts, that loss cannot be attributed to force majeure, but to the negligence of those officials.[16] The law provides that a common carrier is presumed to have been negligent if it fails to prove that it exercised extraordinary vigilance over the goods it transported. Ensuring the seaworthiness of the vessel is the first step in exercising the required vigilance. Petitioner

did not present sufficient evidence showing what measures or acts it had undertaken to ensure the seaworthiness of the vessel. It failed to show when the last inspection and care of the auxiliary engine fuel oil service tank was made, what the normal practice was for its maintenance, or some other evidence to establish that it had exercised extraordinary diligence. It merely stated that constant inspection and care were not possible, and that the last time the vessel was dry-docked was in November 1990. Necessarily, in accordance with Article 1735[17] of the Civil Code, we hold petitioner responsible for the loss of the goods covered by Bills of Lading Nos. 58 and 59. Second Issue: Extent of Liability Respondent contends that petitioners liability should be based on the actual insured value of the goods, subject of this case. On the other hand, petitioner claims that its liability should be limited to the value declared by the shipper/consignee in the Bill of Lading. The records[18] show that the Bills of Lading covering the lost goods contain the stipulation that in case of claim for loss or for damage to the shipped merchandise or property, [t]he liability of the common carrier x x x shall not exceed the value of the goods as appearing in the bill of lading.[19] The attempt by respondent to make light of this stipulation is unconvincing. As it had the consignees copies of the Bills of Lading,[20] it could have easily produced those copies, instead of relying on mere allegations and suppositions. However, it presented mere photocopies thereof to disprove petitioners evidence showing the existence of the above stipulation. A stipulation that limits liability is valid[21] as long as it is not against public policy. In Everett Steamship Corporation v. Court of Appeals,[22] the Court stated: 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 provides: 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. Thus, in Sea-Land Service, Inc. vs. Intermediate Appellate Court, 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 (100,000.00) 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. The above stipulations are, to our mind, reasonable and just. In the bill of lading, the carrier made it clear that its liability would only be up to One Hundred Thousand (Y100,000.00) Yen. However, the shipper, Maruman Trading, had the option to declare a higher valuation if the value of its cargo was higher than the limited liability of the carrier. Considering that the shipper did not declare a higher valuation, it had itself to blame for not complying with the stipulations. (Italics supplied) In the present case, the stipulation limiting petitioners liability is not contrary to public policy. In fact, its just and reasonable character is evident. The shippers/consignees may recover the full value of the goods by the simple expedient of declaring the true value of the shipment in the Bill of Lading. Other than the payment of a higher freight, there was nothing to stop them from placing the actual value of the goods therein. In fact, they committed fraud against the common carrier by deliberately undervaluing the goods in their Bill of Lading, thus depriving the carrier of its proper and just transport fare. Concededly, the purpose of the limiting stipulation in the Bill of Lading is to protect the common carrier. Such stipulation obliges the shipper/consignee to notify the common carrier of the amount that the latter may be liable for in case of loss of the goods. The common carrier can then take appropriate measures -- getting insurance, if needed, to cover or protect itself. This precaution on the part of the carrier is reasonable and prudent. Hence, a shipper/consignee that undervalues the real worth of the goods it seeks to transport does not only violate a valid contractual stipulation, but commits a fraudulent act when it seeks to make the common carrier liable for more than the amount it declared in the bill of lading. Indeed, Zosimo Mercado and Nestor Angelia misled petitioner by undervaluing the goods in their respective Bills of Lading. Hence, petitioner was exposed to a risk that was deliberately hidden from it, and from which it could not protect itself. It is well to point out that, for assuming a higher risk (the alleged actual value of the goods) the insurance company was paid the correct higher premium by Feliciana Legaspi; while petitioner was paid a fee lower than what it was entitled to for transporting the goods that had been deliberately undervalued by the shippers in the Bill of Lading. Between the two of

them, the insurer should bear the loss in excess of the value declared in the Bills of Lading. This is the just and equitable solution. In Aboitiz Shipping Corporation v. Court of Appeals,[23] the description of the nature and the value of the goods shipped were declared and reflected in the bill of lading, like in the present case. The Court therein considered this declaration as the basis of the carriers liability and ordered payment based on such amount. Following this ruling, petitioner should not be held liable for more than what was declared by the shippers/consignees as the value of the goods in the bills of lading. We find no cogent reason to disturb the CAs finding that Feliciana Legaspi was the owner of the goods covered by Bills of Lading Nos. 58 and 59. Undoubtedly, the goods were merely consigned to Nestor Angelia and Zosimo Mercado, respectively; thus, Feliciana Legaspi or her subrogee (respondent) was entitled to the goods or, in case of loss, to compensation therefor. There is no evidence showing that petitioner paid her for the loss of those goods. It does not even claim to have paid her. On the other hand, Legaspi Marketing filed with petitioner a claim for the lost goods under Bill of Lading No. 59, for which the latter subsequently paid P14,000. But nothing in the records convincingly shows that the former was the owner of the goods. Respondent was, however, able to prove that it was Feliciana Legaspi who owned those goods, and who was thus entitled to payment for their loss. Hence, the claim for the goods under Bill of Lading No. 59 cannot be deemed to have been extinguished, because payment was made to a person who was not entitled thereto. With regard to the claim for the goods that were covered by Bill of Lading No. 58 and valued at P6,500, the parties have not convinced us to disturb the findings of the CA that compensation could not validly take place. Thus, we uphold the appellate courts ruling on this point. WHEREFORE, the Petition is hereby PARTIALLY GRANTED. The assailed Decision is MODIFIED in the sense that petitioner is ORDERED to pay respondent the sums of P14,000 and P6,500, which represent the value of the goods stated in Bills of Lading Nos. 59 and 58, respectively. No costs. SO ORDERED. ______ BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. and JARDINE DAVIES TRANSPORT SERVICES,INC., petitioners, PHILIPPINE FIRST INSURANCE CO., INC.,respondents, G.R. No. 143133, June 5,2002 Proof of the delivery of goods in good order to a common carrier and of their arrival in bad order at their destination constitutes prima facie fault or negligence on the part of the carrier. If no adequate explanation is given as to how the loss, the destruction or the deterioration of the goods happened, the carrier shall be held liabletherefor. Facts: On June 13, 1990, CMC Trading A.G. shipped on board the M/V 'Anangel Sky' at Hamburg, Germany 242coils of various Prime Cold Rolled Steel sheets for transportation to Manila consigned to the Philippine SteelTrading Corporation. On July 28, 1990, M/V Anangel Sky arrived at the port of Manila and, within thesubsequent days, discharged the subject cargo.

Four (4) coils were found to be in bad order. Finding the four(4) coils in their damaged state to be unfit for the intended purpose, the consignee Philippine Steel TradingCorporation declared the same as total loss.Petitioners refused to submit to the consignee's claim. Consequently, respondent paid the consignee and wassubrogated to the latter's rights. Subsequently, respondent instituted this complaint for recovery of the amount paid by them, to the consignee as insured.Petitioners imputed that the damage and/or loss was due to preshipment damage. In addition thereto, theyargued that their liability, if there be any, should not exceed the limitations of liability provided for in the bill of lading and other pertinent laws. Finally, they averred that, in any event, they exercised due diligence andforesight required by law to prevent any damage/loss to said shipment.RTC dismissed the Complaint because respondent had failed to prove its claims. In reversing the trial court, theCA ruled that petitioners were liable for the loss or the damage of the goods shipped, because they had failed toovercome the presumption of negligence imposed on common carriers. Issue #1: Whether or not a notation in the bill of lading at the time of loading is sufficient to show preshipment damage and to exempt herein defendants from liability. Held: NO. Mere proof of delivery of the goods in good order to a common carrier and of their arrival in badorder at their destination constitutes a prima facie case of fault or negligence against the carrier . If noadequate explanation is given as to how the deterioration, the loss or the destruction of the goods happened,the transporter shall be held responsible. Petitioners failed to rebut the prima facie presumption of negligencein the case at bar. True, the words "metal envelopes rust stained and slightly dented" were noted on the Bill of Lading; however, there is no showing that petitioners exercised due diligence to forestall or lessen theloss. Having failed to discharge the burden of proving that they have exercised the extraordinary diligencerequired by law, petitioners cannot escape liability for the damage to the four coils. Issue #2: Whether or not the consignee/plaintiff filed the required notice of loss within the time required bylaw. Held: YES. Pursuant to Section 3, paragraph 6 of the Carriage of Goods by Sea Act (COGSA), a failure to file anotice of claim within three days will not bar recovery if it is nonetheless filed within one year. This one-year prescriptive period applies to the shipper, the consignee, the insurer of the goodsor any legalholder of the bill of lading. In the present case, the cargo was discharged on July 31, 1990, while the Complaint was filed by respondent on July 25, 1991, within the one-year prescriptive period. Issue #3: Whether or not the "PACKAGE LIMITATION" of liability under Section 4 (5) of COGSA is applicable. Held: YES. In the case before us, there was no stipulation in the Bill of Lading limiting the carrier's liability.Neither did the shipper declare a higher valuation of the goods to be shipped. This fact notwithstanding, theinsertion of the words "L/C No. 90/02447 cannot be the basis for petitioners' liability.A notation in the Bill of Lading which indicated the amount of the Letter of Credit obtained by the shipper forthe importation of steel sheets did not effect a declaration of the value of the goods as required by the bill. Inthe light of the foregoing, petitioners' liability should be computed based on US$500 per package and not on the per metric ton price declared in the Letter of Credit. ______

TABACALERA INSURANCE CO., PRUDENTIAL GUARANTEE & ASSURANCE, INC., and NEW ZEALAND INSURANCE CO., LTD. vs. NORTH FRONT SHIPPING SERVICES, INC., and COURT OF APPEALS [G.R. No. 119197. May 16, 1997] FACTS: Petitioners are insurers of a shipment of sacks of corn grains consigned to Republic Flour Mills Corporation in Manila. The cargo was shipped by North Front Shipping Services, Inc. The consignee was advised of its arrival but the unloading was delayed for six days for unknown reason, and the merchandise was already moldy, rancid and deteriorating. The moisture content and the wetting was due to contact with salt water but the mold growth was only incipient and not sufficient to make the corn grains toxic and unfit for consumption. In fact the mold growth could still be arrested by drying. However, Republic Flour rejected the entire cargo which therefore forced the petitioners to pay the former. Now, as subrogees, they lodged a complaint for damages against respondents claiming that the loss was exclusively attributable to the fault and negligence of the carrier. The Marine Cargo Adjusters hired by the insurance companies conducted a survey and found cracks in the bodega of the barge and heavy concentration of molds on the tarpaulins and wooden boards. They did not notice any seals in the hatches. The tarpaulins were not brand new as there were patches on them, contrary to the claim of North Front Shipping Services, Inc., thus making it possible for water to seep in. They also discovered that the bulkhead of the barge was rusty. The trial court dismissed the complaint and ruled that the contract entered into between North Front Shipping Services, Inc., and Republic Flour Mills Corporation was a charter-party agreement. As such, only ordinary diligence in the care of goods was required. On the other hand, the Court of Appeals ruled that as a common carrier required to observe a higher degree of diligence North Front 777 satisfactorily complied with all the requirements hence was issued a Permit to Sail after proper inspection. ISSUE: Whether or not a charter-party agreement between P and R requires extraordinary diligence. HELD: Yes. The charter-party agreement between North Front Shipping Services, Inc., and Republic Flour Mills Corporation did not in any way convert the common carrier into a private carrier. xxx North Front Shipping Services, Inc., is a corporation engaged in the business of transporting cargo and offers its services indiscriminately to the public. It is without doubt a common carrier. As such it is required to observe extraordinary diligence in its vigilance over the goods it transports. When goods placed in its care are lost or damaged, the carrier is presumed to have been at fault or to have acted negligently. North Front Shipping Services, Inc., therefore has the burden of proving that it observed extraordinary diligence in order to avoid responsibility for the lost cargo. However, we cannot attribute the destruction, loss or deterioration of the cargo solely to the carrier. We find the consignee Republic Flour Mills Corporation guilty of contributory negligence. It was seasonably notified of the arrival of the barge but did not immediately start the unloading operations. No explanation was proffered by the consignee as to why there was a delay of six (6) days. Had the unloading been commenced immediately the loss could have been completely avoided or at least minimized. As testified to by the chemist

who analyzed the corn samples, the mold growth was only at its incipient stage and could still be arrested by drying. The corn grains were not yet toxic or unfit for consumption. _____________________ Philippine Home Assurance vs. Court of Appeals (257 SCRA 468) Facts: Eastern Shipping Lines, Inc. (ESLI) loaded on board SS Eastern Explorer in Kobe, Japan, a shipment for carriage to Manila and Cebu freight prepaid and in good order and condition. While the vessel is off Okinawa, Japan, a small flame was detected on the acetylene cylinder located in the main deck level. As the crew was trying to extinguish the fire, the acetylene cylinder suddenly exploded sending a flash of flame throughout the accommodation area, thus causing death and severe injuries to the crew and instantly setting fire to the whole superstructure of the vessel. The incident forces the master and the crew to abandon the ship. Thereafter, SS Eastern Explorer was found to be constructive total loss and its voyage was declared abandoned. Several hours later, a tugboat under the control of Fukuda Salvage Co. arrived near the vessel and commenced to tow the vessel for the port of Naha, Japan. After the fire was extinguished, the cargoes which were saved were loaded to another vessel for delivery for their original of port of destination. ESLI charged the consignees several amounts corresponding to additional freight and salvage charges. The charges were all paid by Philippine Home Assurance Corporation (PHAC) under protest for and in behalf of the consignees. PHAC, as subrogee of the consignees, thereafter filed a complaint before the Regional Trial Court of Manila, Branch 39, against ESLI to recover the sum paid under protest on the ground that the same were actually damages directly brought about by the fault, negligence, illegal act and/or breach of contract of ESLI. In its answer, ESLI contended that it exercised the diligence required by law in the handling, custody and carriage of the shipment; that the fire was caused by unforeseen event; that the additional freight charges are due and demandable pursuant to the Bill of Lading, and that salvage charges are properly collectible under Act. No. 2616, known as the Salvage Law. The trial court dismissed the PHACs complaint and ruled in favor of ESLI. The court said that the Supreme Court has ruled in Erlanger and Galinger vs. Swedish East Asiatic Co., Ltd., 34 Phil. 178, that three elements are (1) a marine peril (2) service voluntary rendered when not required as an existing duty or from a special contract and (3) success in whole or in part, or that the service rendered contributed to such success. The court said that the above elements are all present in the instant case. Salvage charges may thus be assessed on the cargoes saved from the vessel. As provided for in Section 13 of the Salvage Law, The expenses of salvage, as well as the reward for salvage or assistance shall be a charge on the things salvaged or their value. In Manila Railroad Co. vs. Macondray Co., 37 Phil. 583. It was also held that When a ship and its cargo are saved together, the salvage allowance should be charged against the ship and the cargo in the proportion of their respective values, the same as in the case of general average Thus, the compensation to be paid by the owner of the cargo is in proportion to the value of the vessel and the value of the cargo saved. On appeal to the Court of Appeals, respondent court affirmed the trial courts findings and conclusion; hence, the present petition for review before this Court on the following error, among others: Issue: Whether or not the respondent Court erroneously adopted with approval the Trial Courts conclusion that the expenses or averages incurred in saving the cargo constitute general average?

Held: On the issue whether or not respondent court committed an error in concluding that the expenses incurred in saving the cargo are considered general average, we rule in the affirmative. As a rule, general or gross averages include all damages and expenses which are deliberately caused in order to save vessels, its cargo or both at the same time, from a real and known risk. While the instant case may technically fall within the purview of the said provision, the formalities prescribed under Article 813 and 814 of the Code of Commerce in order to incur the expenses and cause the damage corresponding to gross average were not complied with. Consequently, respondent ESLIs claim for contribution from the consignees of the cargo at the time of the occurrence of the average turns to naught. The Court reversed and set aside the judgment of the respondent court and ordered respondent Eastern Shipping Lines. Inc. to return to petitioner Philippine Home Assurance Corporation the amount it paid under protest in behalf of the consignees. ________________ PHILIPPINE AIRLINES, INC., Petitioner , [G.R. No. 119706. March 14, 1996] vs. COURT OF APPEALS and GILDA C. MEJIA, respondents. FACTS: Plaintiff, Gilda C. Mejia, shipped thru defendant, Philippine Airlines, one (1) unit microwave oven, fromSan Francisco, U.S.A. to Manila, Philippines. Upon arrival, however, of said article in Manila, Philippines,plaintiff discovered that its front glass door was broken and the damage rendered it unserviceable.Demands both oral and written were made by plaintiff against the defendant for the reimbursement of the value of the damaged microwave oven, and transportation charges paid by plaintiff to defendantcompany.Plaintiff filed the instant action for damages against defendant in the lower court. Defendant Airlines alleged inter alia, by way of special and affirmative defenses, that the court has no jurisdiction over thecase; that plaintiff has no valid cause of action against defendant since it acted only in good faith and incompliance with the requirements of the law, regulations, conventions and contractual commitments;and that defendant had always exercised the required diligence in the selection, hiring and supervision of its employees.Petitioner airlines argues that the legal principle enunciated in Fieldmens Insurance does not apply to thepresent case because the provisions of the contract involved here are neither ambiguous nor obscure.The trial court justified its award of actual, moral and exemplary damages, and attorneys fees in favor of private respondent that since the plaintiffs baggage destination was the Philippines, Philippine lawgoverns the liability of the defendant for damages for the microwave oven. And that, plaintiff hasestablished that defendant acted in bad faith when it denied the formers claim on the ground that the formal claim was filed beyond the period as provided in the Air Waybill when actually, Concepcion DioThe court finds that the petitioner acted in bad faith in denying private respondents claim, which was affirmed by the Court of Appeals. Hence this appeal for Certiorari.,sister of plaintiff has immediately filed the formal claim upon discovery of the damage. ISSUE: WON the air waybill should be strictly construed against petitioner.WON PAL acted in bad faith justifying the grant for damages. RULING: NO. SC held that there can be no further question as to the validity of the terms of the air waybill, even if the same constitutes a contract of adhesion. Whether or not the provisions thereof particularly on thelimited liability of the carrier are binding on private respondent in this instance must be determined fromthe facts and circumstances involved vis-a-vis the nature of the provisions sought to be enforced, takingcare that equity and fair

play should characterize the transaction under review. However, it should beborne in mind that a contract of adhesion may be struck down as void and unenforceable, for beingsubversive of public policy, only when the weaker party is imposed upon in dealing with the dominantbargaining party and is reduced to the alternative of taking it or leaving it, completely deprived of theopportunity to bargain on equal footing.Just because we have said that Condition No. 5 of the airway bill is binding upon the parties to and fullyoperative 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 saidCondition No. 5. We find nothing objectionable about the lower courts reliance upon the FieldmensInsurance case, the principles wherein squarely apply to the present petition. The parallelism betweenthe aforementionedcase and this one is readily apparent for, just as in the instant case, it is the bindingeffect of the provisions in a contract of adhesion (an insurance policy in Fieldmens Insurance) that is putto test.. It will be noted that petitioner never denied that the damage to the microwave oven was sustainedwhile the same was in its custody. The possibility that said damage was due to causes beyond the controlof PAL has effectively been ruled out since the entire process in handling of the cargo was done almostexclusively by, and with the intervention or, at the very least, under the direct supervision of a responsiblePAL personnel.The acceptance in due course by PAL of private respondents cargo as packed and its advice against theneed for declaration of its actual value operated as an assurance to private respondent that in fact therewas no need for such a declaration. Petitioner can hardly be faulted for relying on the representations of PALs own personnel.There was glaringly no attempt what so ever on the part of petitioner to explain the cause of the damageto the oven which constitutes gross carelessness or negligence which by itself justifies the present awardof damages. The unprofessional indifference of PALs personnel despite full and actual knowledge of thedamage to private respondents cargo, just to be exculpated from liability on pure technicality andbureaucratic subterfuge, smacks of willful misconduct and insensitivity to a passengers plight tantamountto bad faith and renders unquestionable petitioners liability for damages.The assailed judgment of respondent Court of Appeals is AFFIRMED. _____________________________

G.R. No. 119641 May 17, 1996 PHILIPPINE AIRLINES, INC., petitioner, vs. COURT OF APPEALS, DR. JOSEFINO MIRANDA and LUISA MIRANDA, respondents.

REGALADO, J.:p In this appeal by certiorari, petitioner Philippine Airlines, Inc. (PAL) assails the decision of respondent Court of Appeals in CA-G.R. CV No. 29147 1 which affirmed the judgment of the trial court finding herein petitioner liable as follows:
Wherefore, premises considered, judgment is hereby rendered ordering the defendant, Philippine Airlines or PAL, to pay to the plaintiffs, Dr. Josefino Miranda and Luisa Miranda, the sum of P100,000.00 as moral damages; P30,000.00 as exemplary or corrective damages; P10,000.00 as attorney's fees; and the costs. 2

The factual antecedents of the present petition reveal that sometime in May, 1988, Dr. Josefino Miranda and his wife, Luisa, who were residents of Surigao City, went to the United States of

America on a regular flight of Philippine Airlines, Inc. (PAL). On June 19, 1988, after a stay of over a month there, they obtained confirmed bookings from PAL's San Francisco Office for PAL Flight PR 101 from San Francisco to Manila via Honolulu on June 21, 1988; PAL flight PR 851 from Manila to Cebu on June 24, 1988; and PAL Flight PR 905 from Cebu to Surigao also on June 24, 1988. Accordingly, on June 21, 1988, private respondents boarded PAL Flight PR 101 in San Francisco with five (5) pieces of baggage. After a stopover at Honolulu, and upon arrival in Manila on June 23, 1988, they were told by the PAL personnel that their baggage consisting of two balikbayan boxes, two pieces of luggage and one fishing rod case were off-loaded at Honolulu, Hawaii due to weight limitations. Consequently, private respondents missed their connecting flight from Manila to Cebu City, as originally scheduled, since they had to wait for their baggage which arrived the following day, June 24, 1988, after their pre-scheduled connecting flight had left. They consequently also missed their other scheduled connecting flight from Cebu City to Surigao City. On June 25, 1988, they departed for Cebu City and therefrom private respondents had to transfer to PAL Flight 471 for Surigao City. On the way to Surigao City, the pilot announced that they had to return to Mactan Airport due to some mechanical problem. While at Mactan Airport, the passengers were provided by PAL with lunch and were booked for the afternoon flight to Surigao City. However, said flight was also canceled. Since there were no more lights for Surigao City that day, private respondents asked to be billeted at the Cebu Plaza Hotel where they usually stay whenever they happen to be in Cebu City. They were, however, told by the PAL employees that they could not be accommodated at said hotel supposedly because it was fully booked. Contrarily, when Dr. Miranda called the hotel, he was informed that he and his wife could be accommodated there. Although reluctant at first, PAL eventually agreed to private respondents' overnight stay at said hotel. Oscar Jereza, PAL duty manager, approved the corresponding hotel authority with standard meals. It was only after private respondents' insistence that their meals be ordered a la carte that they were allowed to do so by PAL provided that they sign for their orders. Inasmuch as the shuttle bus had already left by the time private respondents were ready to go to the hotel, PAL offered them P150.00 to include the fare for the return trip to the airport. Dr. Miranda asked for P150.00 more as he and his wife, along with all of their baggage, could not be accommodated in just one taxi, aside from the need for tipping money for hotel boys. Upon refusal of this simple request, Dr. Miranda then declared that he would forego the amenities offered by PAL. Thus, the voucher for P150.00 and the authority for the hotel accommodations prepared by PAL were voided due to private respondents' decision not to avail themselves thereof. To aggravate the muddled situation, when private respondents tried to retrieve their baggage, they were told this time that the same were loaded on another earlier PAL flight to Surigao City. Thus, private respondents proceeded to the hotel sans their baggage and of which they were deprived for the remainder of their trip. Private respondents were finally able to leave on board the first PAL flight to Surigao City only on June 26, 1988. Thereafter, they instituted an action for damages which, after trial as well as on appeal, was decided in their favor. Petitioner PAL has come to us via the instant petition for review on certiorari, wherein it challenges the affirmatory decision of respondent Court of Appeals 3 (1) for applying Articles 2220, 2232 and 2208 of the Civil Code when it sustained the award of the court a quo for moral and exemplary damages and attorney's fees despite absence of bad faith on its part; and (2) for not applying the express provisions of the contract of carriage and pertinent provisions of the Warsaw Convention limiting its liability to US$20.00 per kilo of baggage.

I. Anent the first issue, petitioner argues that there was no bad faith on its part for while there was admittedly a delay in fulfilling its obligation under the contract of carriage with respect to the transport of passengers and the delivery of their baggage, such delay was justified by the paramount consideration of ensuring the safety of its passengers. It likewise maintains that its employees treated private respondents fairly and with courtesy to the extent of acceding to most of their demands in order to mitigate the inconvenience occasioned by the measures undertaken by the airline to ensure passenger safety. 4 It reiterated its position that the off-loading of private respondents' baggage was due to "weight limitations," as lengthily explained by petitioner from an aeronautically technical viewpoint, 5 taking into consideration such variable factors as flight distance, weather, air resistance, runway condition and fuel requirement. Given the variable weather conditions, it claimed that the weight limitation for each flight can only be ascertained shortly before take-off. While admittedly there would be a resulting inconvenience in the accommodations of the passengers and the handling of their cargo, the same is outweighed by the paramount concern for the safety of the flight. Petitioner moreover impugns the Court of Appeal's allegedly improper reliance on the inaccurate interpretation of the testimony of PAL's baggage service representative, Edgar Mondejar, * that private respondents' baggage were off-loaded to give preference to baggage and/or cargo originating from Honolulu. PAL argues that Mondejar's knowledge of what transpired in Honolulu was merely based on the telex report forwarded to PAL's Manila station stating that the off-loading was due to weight limitations. 6 Petitioner enumerates the following incidents as indicative of its good faith in dealing with private respondents: (1) The cancellation of the flight to Surigao City due to mechanical/engine trouble was to ensure the safety of passengers and cargo; (2) PAL offered to shoulder private respondents' preferred accommodations, meals and transportation while in Cebu City with more than the usual amenities given in cases of flight disruption, and gave them priority in the following day's flight to Surigao City; (3) PAL employees did not act rudely towards private respondents and its managerial personnel even gave them special attention; (4) It was reasonable for PAL to limit the transportation expense to P150.00, considering that the fare between the airport and the hotel was only P75.00, and they would be picked up by the shuttle bus from the hotel to the airport, while the request for money for tips could not be justified; and (5) The inadvertent loading of private respondents' baggage on the replacement flight to Surigao City was at most simple and excusable negligence due to the numerous flight disruptions and large number of baggage on that day. Petitioner strenuously, and understandably, insists that its employees did not lie to private respondents regarding the want of accommodations at the latter's hotel of preference. The only reason why Cebu Plaza Hotel was not initially offered to them by PAL was because of the earlier advice of the hotel personnel that not all the stranded PAL passengers could be accommodated therein. It claimed that it was in accordance with the airline's policy of housing all affected passengers in one location for easy communication and transportation, which accommodations in this instance could be provided by Magellan Hotel. However, upon insistence of the Mirandas on their preference for Cebu Plaza Hotel, Jeremias Tumulak, PAL's passenger relations officer, told them that they could use the office phone and that if they could arrange for such accommodation PAL would shoulder the expenses. This concession, so petitioner avers, negates any malicious intent on its part. Crucial to the determination of the propriety of the award of damages in this case is the lower court's findings on the matter of bad faith, which deserves to be quoted at length:

These claims were reasonable and appeared to be supported by the evidence. Thus it cannot be denied that plaintiffs had to undergo some personal inconveniences in Manila for lack of their baggage. It is also highly probable that plaintiffs' scheduled return to Surigao City was upset because of their having to wait for one day for their missing things. Consequently, it was quite evident that the off-loading of plaintiffs' baggage in Honolulu was the proximate cause of plaintiffs subsequent inconveniences for which they claimed to have suffered social humiliation, wounded feelings, frustration and mental anguish. xxx xxx xxx In the present case there was a breach of contract committed in bad faith by the defendant airlines. As previously noted, plaintiffs had a confirmed booking on PAL Flight PR 101 from San Francisco to Manila. Therefore plaintiffs were entitled to an assured passage not only for themselves but for their baggage as well. They had a legal right to rely on this. The evidence showed that plaintiffs' baggage were properly loaded and stowed in the plane when it left San Francisco for Honolulu. The off-loading or bumping off by defendant airlines of plaintiffs' baggage to give way to other passengers or cargo was an arbitrary and oppressive act which clearly amounted to a breach of contract committed in bad faith and with malice. In the aforecited case, the Supreme Court defined bad faith as a breach of a known duty through some motive of interest or ill will. Self-enrichment or fraternal interest, and not personal ill will, may have been the motive, but it is malice nevertheless (infra). As correctly pointed out in the Memorandum for Plaintiffs dated June 18, 1990 (pp. 45), the following excerpt from the testimony of Edgar Mondejar clearly demonstrated the act of discrimination perpetrated by defendant on the herein plaintiffs (TSN, Edgar Mondejar, Feb. 28, 1990, pp. 26-28), thus: Q Before a plane departs, your office will see to it the plane loads the exact weight limitation insofar as the cargoes (sic) and passengers are concerned, is that correct? A Yes. Q And so with the PR 101 flight starting mainland USA, it complied with the weight limitation, passengers and baggages (sic) limitation, is that correct? A Yes. Q In other words the trip from the mainland USA started in Hawaii to off-load cargoes (sic), you complied with the weight limitation and so on? A Yes. Q But you are saying upon arriving in Honolulu certain containers were off-loaded?

A Yes. Q That would be therefore some containers were off-loaded to give way to some other containers starting from Honolulu towards Manila? A Yes. Q In other words Mr. Mondejar, preference was given to cargoes (sic) newly loaded at Honolulu instead of the cargoes (sic) already from mainland USA, is that correct? A Yes.
The aforesaid testimony constituted a clear admission in defendant's evidence of facts amounting to a breach of contract in bad faith. This being so, defendant must be held liable in damages for the consequences of its action. 7 (Corrections indicated in original text.)

The trial court further found that the situation was aggravated by the following incidents: the poor treatment of the Mirandas by the PAL employees during the stopover at Mactan Airport in Cebu; the cavalier and dubious response of petitioner's personnel to the Miranda spouses' request to be billeted at the Cebu Plaza Hotel by denying the same allegedly because it was fully booked, which claim was belied by the fact that Dr. Miranda was easily able to arrange for accommodations thereat; and, the PAL employees' negligent, almost malicious, act of sending off the baggage of private respondents to Surigao City, while they were still in Cebu, without any explanation for this gross oversight. 8 The Court of Appeals affirmed these findings of the trial court by stating that While we recognize an airline's prerogative to off-load baggag(e) to conform with weight limitations for the purpose of ensuring the safety of passengers, We, however, cannot sanction the motion (sic) and manner it was carried out in this case.
It is uncontroverted that appellees' baggag(e) were properly weighed and loaded in the plane when it left San Francisco for Honolulu. When they reached Honolulu, they were not informed that their baggag(e) would be off-loaded. Ironically, if the purpose of the offloading was to conform with the weight limitations, why were other containers loaded in Honolulu? The real reason was revealed by Edgar Montejar, baggage service representative of the appellant. . . . 9

xxx xxx xxx


As earlier noted, the off-loading of appellees' baggag(e) was done in bad faith because it was not really for the purpose of complying with weight limitations but to give undue preference to newly-loaded baggag(e) in Honolulu. This was followed by another mishandling of said baggag(e) in the twice-cancelled connecting flight from Cebu to Surigao. Appellees' sad experience was further aggravated by the misconduct of appellant's personnel in Cebu, who lied to appellees in denying their request to be billeted at Cebu Plaza Hotel. 10

The Court has time and again ruled, and it cannot be over-emphasized, that a contract of air carriage generates a relation attended with a public duty and any discourteous conduct on the part

of a carrier's employee toward a passenger gives the latter an action for damages and, more so, where there is bad faith. 11 It is settled that bad faith must be duly proved and not merely presumed. The existence of bad faith, being a factual question, and the Supreme Court not being a trier of facts, the findings thereon of the trial court as well as of the Court of Appeals shall not be disturbed on appeal and are entitled to great weight and respect. 12 Said findings are final and conclusive upon the Supreme Court except, inter alia, where the findings of the Court of Appeals and the trial court are contrary to each other. 13 It is evident that the issues raised in this petition are the correctness of the factual findings of the Court of Appeals of bad faith on the part of petitioner and the award of damages against it. This Court has consistently held that the findings of the Court of Appeals and the other lower courts are as a rule binding upon it, subject to certain exceptions created by case law. As nothing in the record indicates any of such exceptions, the factual conclusions of the appellate court must be affirmed. 14 It is now firmly settled that moral damages are recoverable in suits predicated on breach of a contract of carriage where it is proved that the carrier was guilty of fraud or bad faith. 15 Inattention to and lack of care for the interests of its passengers who are entitled to its utmost consideration, particularly as to their convenience, amount to bad faith which entitles the passenger to an award of moral damages. What the law considers as bad faith which may furnish the ground for an award of moral damages would be bad faith in securing the contract and in the execution thereof, as well as in the enforcement of its terms, or any other kind of deceit. 16 Such unprofessional and proscribed conduct is attributable to petitioner airline in the case at bar and the adverse doctrinal rule is accordingly applicable to it. In Cathay Pacific Airways, Ltd. vs. Court of Appeals, et al., 17 a case which is virtually on all fours with the present controversy, we stated: In the case at bar, both the trial court and the appellate court found that CATHAY was grossly negligent and reckless when it failed to deliver the luggage of petitioner at the appointed place and time. We agree. . . . While the mere failure of CATHAY to deliver respondent's luggage at the agreed place and time did not ipso facto amount to willful misconduct since the luggage was eventually delivered to private respondent, albeit belatedly, We are persuaded that the employees of CATHAY acted in bad faith, . . . . . ., if the defendant airline is shown to have acted fraudulently or in bad faith, the award of moral and exemplary damages is proper. It must, of course, be borne in mind that moral damages are not awarded to penalize the defendant but to compensate the plaintiff for the injuries he may have suffered. 18 in a contractual or quasicontractual relationship, exemplary damages, on the other hand, may be awarded only if the defendant had acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. 19 Attorney's fees in the concept of damages may be awarded where there is a finding of bad faith. 20 The evidence on record amply sustains, and we correspondingly find, that the awards assessed against petitioner on the aforestated items of damages are justified and reasonable. At this juncture, it may also be pointed out that it is PAL's duty to provide assistance to private respondents and, for that matter, any other passenger similarly inconvenienced due to delay in the completion of the transport and the receipt of their baggage. Therefore, its unilateral and voluntary act of providing cash assistance is deemed part of its obligation as an air carrier, and is hardly

anything to rave about. Likewise, arrangements for and verification of requested hotel accommodations for private respondents could and should have been done by PAL employees themselves, and not by Dr. Miranda. It was rather patronizing of PAL to make much of the fact that they allowed Dr. Miranda to use its office telephone in order to get a hotel room. While it may be true that there was no direct evidence on record of blatant rudeness on the part of PAL employees towards the Mirandas, the fact that private respondents were practically compelled to haggle for accommodations, a situation unbefitting persons of their stature, is rather demeaning and it partakes of discourtesy magnified by PAL's condescending attitude. Moreover, it cannot be denied that the PAL employees herein concerned were definitely less than candid, to put it mildly, when they withheld information from private respondents that they could actually be accommodated in a hotel of their choice. Indeed, the flamboyant testimony of Oscar Jereza, * as PAL's duty manager, merely pays lip-service to, without putting into reality, the avowed company policy of invariably making available and always granting the requests for the kind and standard of accommodations demanded by and appropriate for its passengers. 21 Certainly, a more efficient service, and not a lackadaisical and disorganized system, is expected of the nation's flag carrier, especially on an international flight. For, on the picayune matter of transportation expenses, PAL was obviously and unduly scrimping even on the small amount to be given to the Mirandas. PAL failed to consider that they were making arrangements for two paying round-trip passengers, not penny-ante freeloaders, who had been inconvenienced by the numerous delays in flight services and careless handling of their belongings by PAL. The niggardly attitude of its personnel in this unfortunate incident, as well as their hairsplitting attempts at justification, is a disservice to the image which our national airline seeks to project in its costly advertisements. We agree with the findings of the lower court that the request of private respondents for monetary assistance of P300.00 for taxi fare was indeed justified, considering that there were two of them and they had several pieces of luggage which had to be ferried between the airport and the hotel. Also, the request for a small additional sum for tips is equally reasonable since tipping, especially in a firstrate hotel, is an accepted practice, of which the Court can take judicial notice. This is aside from the fact that private respondents, having just arrived from an extended trip abroad, had already run out of Philippine currency, which predicament was exacerbated by their additional stay in Manila due to the off-loading of their baggage. All these inconveniences should have warranted a commonsensical and more understanding treatment from PAL, considering that private respondents found themselves in. this unpleasant situation through no fault of theirs. 2. On its second issue, petitioner avers that the express provisions on private respondents' tickets stipulating that liability for delay in delivery of baggage shall be limited to US$20.00 per kilo of baggage delayed, unless the passenger declares a higher valuation, constitutes the contract of carriage between PAL and private respondents. It further contends that these express provisions are in compliance with the provisions of the Warsaw Convention for the Unification of Rules Relating to International Carrier by Air, to which the Philippines is a signatory. Thereunder, it is asserted that PAL flight PR 101 from San Francisco, U.S.A., to Manila, Philippines is an "international transportation" well within the coverage of the Warsaw Convention. Petitioner obstinately insists on the applicability of the provisions of the Warsaw Convention regarding the carrier's limited liability since the off-loading was supposedly justified and not attended

by bad faith. Neither was there any claim for loss of baggage as in fact private respondents' baggage were, albeit delayed, received by them in good condition. 22 The court a quo debunked petitioner's arguments by this holding:
The defense raised by defendant airlines that it can be held liable only under the terms of the Warsaw Convention (Answer, Special and Affirmative Defenses, dated October 26, 1988) is of no moment. For it has also been held that Articles 17, 18 and 19 of the Warsaw Convention of 1929 merely declare the air carriers liable for damages in the cases enumerated therein, if the conditions specified are present. Neither the provisions of said articles nor others regulate or exclude liability for other breaches of contract by air carriers (Northwest Airlines, Inc. vs. Nicolas Cuenca, et al., 14 SCRA 1063). 23

This ruling of the trial court was affirmed by respondent Court of Appeals, thus:
We are not persuaded. Appellees do not seek payment for loss of any baggage. They are claiming damages arising from the discriminatory off-loading of their baggag(e). That cannot be limited by the printed conditions in the tickets and baggage checks. Neither can the Warsaw Convention exclude nor regulate the liability for other breaches of contract by air carriers. A recognition of the Warsaw Convention does not preclude the operation of our Civil Code and related laws in determining the extent of liability of common carriers in breach of contract of carriage, particularly for willful misconduct of their employees. 24

The congruent finding of both the trial court and respondent court that there was discriminatory offloading being a factual question is, as stated earlier, binding upon and can no longer be passed upon by this Court, especially in view of and in deference to the affirmance of the same by respondent appellate court. There was no error on the part of the Court of Appeals when it refused to apply the provisions of the Warsaw Convention, for in the words of this Court in the aforequoted Cathay Pacific case: . . . although the Warsaw Convention has the force and effect of law in this country, being a treaty commitment assumed by the Philippine government, said convention does not operate as an exclusive enumeration of the instances for declaring a carrier liable for breach of contract of carriage or as an absolute limit of the extent of that liability. The Warsaw Convention declares the carrier liable in the enumerated cases and under certain limitations. However, it must not be construed to preclude the operation of the Civil Code and pertinent laws. It does not regulate, much less exempt, the carrier from liability for damages for violating the rights of its passengers under the contract of carriage, especially if willful misconduct on the part of the carrier's employees is found or established, which is the case before Us. . . . ACCORDINGLY, finding no reversible error, the challenged judgment of respondent Court of Appeals is hereby AFFIRMED in toto. SO ORDERED. ____
Baliwag Transit Incs (BTI) vs CA & Martinez G.R. No. L-57493 January 7, 1987

Facts: Martinez, claiming to be an employee of two bus lines operating under different grants of franchise but were issued only one ID Number: Baliwag Transit owned and operated by thelate Tuazon and Baliwag Transit Inc (BTI) owned by de Tengco, (Martinez) filed a petitionwith the Social Security Commission to compel BTI to remit his premium contributions to SSS.BTI denied ever employing Martinez, and alleges that he was in fact employed by Tuason whooperated a separate and distinct bus line from BTI. The Social Security Commission grantedMartinezs petition. On appeal, the CA reversed the decision of the commission, finding thatTuason was operating under the kabit system; that while Tuason was the owner and operator, his buses were not registered with the Public Service Commission in his own name; and thusordered BTI to remit Martinez premiums to SSS. Issue: WON the issuance by SSS of one ID Number to the two bus lines necessarily indicatesthat one of them is operating under the kabit -system. Held: No.The Kabit System has been defined by the Supreme Court as an arrangement whereby a person who has been granted a certificate of convenience allows another person who owns motor vehicles to operate under such franchise for a fee. The determining factor, therefore, is the possession of a franchise to operate which negates theexistence of the Kabit System and not the issuance of one SSS ID Number for both bus linesfrom which the existence of said system was inferred. Thus, it is evident that both bus lines operated under their own franchises but opted to retain thefirm name Baliwag Transit with slight modification, by the inclusion of the word Inc. in thecase of herein petitioner, obviously to take advantage of the goodwill such firm name enjoyswith the riding public. Conversely, the conclusion of the Court of Appeals that the late PascualTuazon, during the time material to this case operated his buses under the Kabit System on theground that while he was actually the owner and operator, his buses were not registered with thePublic Service Commission (now the Bureau of Land Transportation) in his own name, is notsupported by the records. __________________
Servando vs. Philippine Steam Navigation Co. (117 SCRA 832) Facts: Bico and Servando loaded on board the FS-176 the following cargoes: 1.528 cavans of rice and 44 cartons of colored paper, toys and general merchandise. Upon the arrival of the vessel, the cargoes were discharged, complete and in good order to the warehouse of the Bureau of Customs. At 2:00 pm of the same day, a fire of unknown reasons razed the warehouse. Before the fire, Bico was able to take delivery of 907 cavans of rice. The petitioners are now claiming for the value of the destroyed goods from the common carrier. The Trial Court ordered the respondent to pay the plaintiffs the amount of their lost goods on the basis that the delivery of the shipment to the warehouse is not the delivery contemplated by Article 1736 of the New Civil Code, since the loss occurred before actual or constructive delivery. The petitioners argued that the stipulation in the bills of lading does not bind them because they did not sign the same. The stipulation states that the carrier shall not be responsible for loss unless such loss was due to the carriers negligence. Neither shall it be liable for loss due to fortuitous events such as dangers of the sea and war. Issue: Whether or not the carrier should be held liable for the destruction of the goods Held: No. There is nothing on record to show that the carrier incurred in delay in the performance of its obligation. Since the carrier even notified the plaintiffs of the arrival of their shipments and had demanded that they be withdrawn.

The carrier also cannot be charged with negligence since the storage of the goods was in the Customs warehouse and was undoubtedly made with their knowledge and consent. Since the warehouse belonged and maintained by the Government, it would be unfair to impute negligence to the appellant since it has no control over the same.

_____________________
Samar Mining Co., Inc. vs. Nordeutscher Lloyd (132 SCRA 529) Facts: Samar Mining imported 1 crate optima welded wire (amounting to around USD 424 or PhP 1,700) from Germany, which was shipped on a vessel owned by Nordeutscher Lloyd (M/S Schwabenstein). The shipment was unloaded in Manila into a barge for transshipment to Davao and temporarily stored in a bonded warehouse owned by AMCYL. The goods never reached Davao and were never delivered to or received by the consignee, Samar Mining Co. CFI ruled in favor of Samar Mining holding Nordeutscher Lloyd liable. However, defendants may recoup whatever they may pay Samar Mining by enforcing the judgment against third party defendant AMCYL. Issue: Whether Nordeustscher Lloyd is liable for the loss of the goods as common carrier? Held: No. At the time of the loss of the goods, the character of possession of Nordeutscher Lloyd shifted from common carrier to agent of Samar Mining Co. The Bill of Lading is serves both as a receipt of goods and is likewise the contract to transport and deliver the same as stipulated. It is a contract and is therefore the law between the parties. The Bill of Lading in question stipulated that Nordeutscher Lloyd only undertook to transport the goods in its vessel only up to the port of discharge from ship, which is Manila. The Bill of Lading further stipulated that the goods were to be transshipped by the carrier from Manila to the port of destination Davao. By unloading the shipment in Manila and delivering the goods to the warehouse of AMCYL, the appellant was acting within the contractual stipulations contained in the Bill of Lading. Article 1736 of the Civil Code relives the carrier of responsibility over the shipment as soon as the carrier makes actual or constructive delivery of the goods to the consignee or to the person who has a right to receive them. Under the Civil Code provisions governing Agency, an agent can only be held liable in cases where his acts are attended by fraud, negligence, deceit or if there is a conflict of interest between him and the principal. Under the same law an agent is likewise liable if he appoints a substitute when he was not given the power to appoint one or otherwise appoints one that is notoriously incompetent or insolvent. These facts were not proven in the record. __________________________________________________________

G.R. No. 141910. August 6, 2002 Facts: GPS is an exclusive contractor and hauler of Concepcion Industries, Inc. One day, it was to deliver certain goods of Concepcion Industries, Inc. aboard one of its trucks. On its way, the truck collided with an unidentified truck, resulting in damage to the cargoes. FGU, insurer of the shipment paid to Concepcion Industries, Inc. the amount of the damage and filed a suit against GPS. GPS filed a motion to dismiss for failure to prove that it was a common carrier. Issue: Whether or not GPS falls under the category of a common carrier. Held: Note that GPS is an exclusive contractor and hauler of Concepcion Industries, Inc. offering its service to no other individual or entity. A common carrier is one which offers its services whether to the public in general or to a limited clientele in particular but never on an exclusive basis. Therefore, GPS does not fit the category of a common carrier although it is not freed from its liability based on culpa contractual. _____________________________ Schmitz Transport & Brokerage Corporation vs. Transport Venture, Inc. (458 SCRA 557) FACTS: Petitioner, who was in charge of securing requisite clearances, receive the cargoes from the shipside and deliver it to the consignee Little Giant Steel Pipe Corporation warehouse at

Cainta, Rizal, hired the services of respondent Transport Venture Incorporation (TVI)s tugboat for the hot rolled steel sheets in coil. Coils were unloaded to the barge but there was no tugboat to pull the barge to the pier. Due to strong waves caused by approaching storm, the barge was abandoned. Later, the barge capsized washing 37 coils into the sea. Consignee was executed a subrogation receipt by Industrial Insurance after the formers filing of formal claim. Industrial Insurance filed a complaint against both petitioner and respondent herein. The trial court held that petitioner and respondent TVI were jointly and severally liable for the subrogation. ISSUE: Whether or not the loss of cargoes was due to fortuitous event. RULING: NO. In order, to be considered a fortuitous event: (1) the cause of the unforeseen and unexpected occurrence, or the failure of the debtor to comply with his obligation, must be independent of human will; (2) it must be impossible to foresee the event which constitute the caso fortuito, or if it can be foreseen it must be impossible to avoid; (3) the occurrence must be such as to render it impossible for the debtor to fulfill his obligation in any manner; and (4) the obligor must be free from any participation in the aggravation of the injury resulting to the creditor. Petitioner and respondent TVI were jointly and severally liable for the amount of paid by the consignee plus interest computed from the date of decision of the trial court. __________________________________ Pan American World Airways v. IAC Facts: PanAm Airlines refused to accommodate Respondent Tinitigan on Pan Am Flight No. 431 from Sto. Domingo, Republica Dominica to San Juan, Puerto Rico notwithstanding that she possessed a confirmed plane ticket. While plaintiff was standing in line to board the aircraft, a Pan Am employee ordered her in a loud voice to step out of line because her ticket was not confirmed to her embarrassment in the presence of several people who heard and order. Despite her Pleas she was not allowed to board the aircraft. And her seat was also given to a Caucasian. The plane took off without her but with her luggage on board. She was forced to return to her hotel without any luggage much less an extra dress. While in Sto. Domingo, Tinitigan is expected to be in San Juan that same day to meet a client to sign a contract or lose it. She was expected to make a profit of $1,000 in said contract but because she was unable to board the flight, said profit was lost. The refusal of accommodation, and consequent loss of profit, caused Respondent Tinitigan to suffer mental anguish, serious anxiety, besmirched reputation, wounded feelings and social humiliation. She prayed that she be awarded moral damages of P500,000.00, exemplary damages of P200,000.00, attorneys fees of P100,000.00 and actual damages sustained by her in the amount of US$1,546.15. Defendant denied that plaintiff was a confirmed passenger since the ticket issued to her was on an open space basis, which meant that she could only be accommodated if any of the confirmed passengers failed to show up at the airport before departure. The lower court rendered judgment in favor of plaintiff and awarded the amount of damages as prayed for. Said decision was affirmed, hence the instant petition.

Issue: Whether or not the award of damages was proper. Held: Yes, but subject to modifications. Evidence shows petitioner as confirmed passenger. 1.) Defendant issued a Passenger Ticket and Baggage Check with assigned seat and the corresponding pass and baggage claim symbol. 2.) Plaintiff paid the fare and terminal fee. 3.) plaintiffs passport was stamped by immigration. 4.) Plaintiffs name was included in the passenger manifest. There is a contract or carriage perfected between plaintiff and defendant for the latter to take plaintiff to her place of destination. By refusing to accommodate plaintiff in said flight, defendant had willfully and knowingly violated the contract of carriage and failed to bring the plaintiff to her place of destination under its contract with plaintiff. There is showing of bad faith. Self-enrichment or fraternal interest and not personal ill will may have been the motive of defendant, but it is malice nevertheless. Malice is shown by the fact that that plaintiff was ordered out of the line under some pretext in order to accommodate a white man. SC reduced the moral and exemplary damages to the combined total sum of Two Hundred Thousand (P200,000.00) Pesos and the attorneys fees to Twenty Thousand (P20,000.00) Pesos. The award of actual damages in the amount of One Thousand Five Hundred Forty Six American dollars and fifteen cents (US$1,546.15) computed at the exchange rate prevailing at the time of payment was retained and granted. ____________ YOBIDO vs. CA and TUMBOY G.R. No. 113003 October 17, 1997 Facts: Spouses Tito and Leny Tumboy and their minor children boarded at Mangagoy, Surigao del Sur a Yobido Liner bus bound for Davao City. Along Picop Road in, the left front tire of the bus exploded. The bus fell into a ravine and struck a tree. The incident resulted in the death of Tito Tumboy and physical injuries to other passengers. The winding road was not cemented and was wet due to the rain; it was rough with crushed rocks. The bus which was full of passengers had cargoes on top. Leny testified that it was running fast and she cautioned the driver to slow down but he merely stared at her through the mirror. However, Salce, the bus conductor, testified that the bus was running speed for only 50-60 kmh. The left front tire that exploded was a brand new Goodyear tire that he mounted on the bus only 5 days before the incident. She stated that all driver applicants in Yobido Liner underwent actual driving tests before they were employed. The defendant is invoking that the tire blowout was a caso fortuito. Issue: 1. WON the tire blowout was purely caso fotuito? NO 2. WON the defendant bus liner is liable for damages resulting from the death of Tito? YES

Held: 1. The explosion of the tire is not in itself a fortuitous event. The cause of the blow-out, if due to a factory defect, improper mounting, excessive tire pressure, is not an unavoidable event. On the other hand, there may have been adverse conditions on the road that were unforeseeable and/or inevitable, which could make the blow-out a caso fortuito. The fact that the cause of the blow-out was not known does not relieve the carrier of liability. There are human factors involved in the situation. The fact that the tire was new did not imply that it was entirely free from manufacturing defects or that it was properly mounted on the vehicle. Neither may the fact that the tire bought and used in the vehicle is of a brand name noted for quality, resulting in the conclusion that it could not explode within five days use. Be that as it may, it is settled that an accident caused either by defects in the automobile or through the negligence of its driver is not a caso fortuito that would exempt the carrier from liability for damages. 2. A common carrier may not be absolved from liability in case of force majeure or fortuitous event alone. The common carrier must still prove that it was not negligent in causing the death or injury resulting from an accident. Having failed to discharge its duty to overthrow the presumption of negligence with clear and convincing evidence, petitioners are hereby held liable for damages. Moral damages are generally not recoverable in culpa contractual except when bad faith had been proven. However, the same damages may be recovered when breach of contract of carriage results in the death of a passenger. Because petitioners failed to exercise the extraordinary diligence required of a common carrier, which resulted in the death of Tito Tumboy, it is deemed to have acted recklessly (Article 1756). ________ SOUTHERN LINES INC VS CA AND CITY OF ILOILO

DOCTRINE:IF THE FACT OF IMPROPER PACKING IS KNOWN TO THE CARRIER OR HIS SERVANTS, OR APPARENT UPON ORDINARY OBSERVATION, BUT IT ACCEPTS THE GOODS NOTWITHSTANDING SUCH CONDITION, IT IS NOT RELIEVED OF LIABILITY FOR LOSS OR INJURY RESULTING THEREFROM.

FACTS:

The City of Iloilo requisitioned for rice from the National Rice and Corn Corporation

(NARIC). NARIC shipped 1,726 sacks of rice consigned to the City of Iloilo on board of SS General

Wright belong to Southern Lines. The City of Iloilo received the shipment and paid the amount stated in the bill of lading

(around Php 63K). However, at the bottom of the bill of lading, it was noted that City of Iloilo received the

merchandise in the same condition as when shipped, except that it received only 1,685 sacks. Upon actual weighing, it was discovered that the shortage was equal to 41 sacks of rice. Thus, the City of Iloilo filed a complaint against NARIC and Southern Lines for the

recovery of the value of the shortage of the shipment of rice (Php 6,486.35). The lower court absolved NARIC but sentenced Southern Lines to pay the amount. CA affirmed. Hence, this petition for review. Southern Lines claims exemption from liability by contending that the shortage in the

shipment of rice was due to such factors as shrinkage, leakage or spillage of the rice on account of the bad condition of the sacks at the time it received the same and negligence of the agents of City of Iloilo in receiving the shipment. ISSUES: Whether Southern Lines is liable for the loss or shortage of the rice shipped.YES Whether the City of Iloilo is precluded from filing an action for damages on account of its

failure to present a claim within 24 hours from receipt of the shipment as stated in the bill of lading.NO

HELD: YES. The SC held that the contention of Southern Lines with respect to the improper

packing is untenable.Under Art. 361 of the Code of Commerce, the carrier, in order to free itself from liability, was only obliged to prove that the damages suffered by the goods were by virtue of the nature or defect of the articles. Under Art. 362, the plaintiff, in order to hold the defendant liable, was obliged to prove that the damages to the goods is by virtue of their nature, occurred on account of its negligence or because the defendant did not take the precaution adopted by careful persons.It held that if the fact of improper packing is known to the carrier or his servants, or apparent upon ordinary observation, but it accepts the goods notwithstanding such condition, it is not relieved of liability for loss or injury resulting therefrom.

NO. The SC noted that Southern Lines failed to plead this defense in its answer to City of

Iloilos complaint and, therefore, the same is deemed waived and cannot be raised for the first time.The SC also cited the finding of the CA that City of Iloilo filed the action within a reasonable time; that the action is one for the refund of the amount paid in excess, and not for damages or the recovery of shortage; the bill of lading does not at all limit the time for the filing of action for the refund of money paid in excess.

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