Transpo Cases

Republic of the Philippines
PEDRO DE GUZMAN, petitioner,
vs.
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. L-47822 December 22, 1988
COURT OF APPEALS and ERNESTO CENDANA, respondents.
FELICIANO, J.:
Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used bottles and scrap metal in Pangasinan. Upon gathering
sufficient quantities of such scrap material, respondent would bring such material to Manila for resale. He utilized two (2) six-wheeler trucks
which he owned for hauling the material to Manila. On the return trip to Pangasinan, respondent would load his vehicles with cargo which
various merchants wanted delivered to differing establishments in Pangasinan. For that service, respondent charged freight rates which were
commonly lower than regular commercial rates.
Sometime in November 1970, petitioner Pedro de Guzman a merchant and authorized dealer of General Milk Company (Philippines), Inc. in
Urdaneta, Pangasinan, contracted with respondent for the hauling of 750 cartons of Liberty filled milk from a warehouse of General Milk in
Makati, Rizal, to petitioner's establishment in Urdaneta on or before 4 December 1970. Accordingly, on 1 December 1970, respondent loaded
in Makati the merchandise on to his trucks: 150 cartons were loaded on a truck driven by respondent himself, while 600 cartons were placed
on board the other truck which was driven by Manuel Estrada, respondent's driver and employee.
Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600 boxes never reached petitioner, since the truck which carried
these boxes was hijacked somewhere along the MacArthur Highway in Paniqui, Tarlac, by armed men who took with them the truck, its driver,
his helper and the cargo.
On 6 January 1971, petitioner commenced action against private respondent in the Court of First Instance of Pangasinan, demanding
payment of P 22,150.00, the claimed value of the lost merchandise, plus damages and attorney's fees. Petitioner argued that private
respondent, being a common carrier, and having failed to exercise the extraordinary diligence required of him by the law, should be held liable
for the value of the undelivered goods.
In his Answer, private respondent denied that he was a common carrier and argued that he could not be held responsible for the value of the
lost goods, such loss having been due to force majeure.
On 10 December 1975, the trial court rendered a Decision 1 finding private respondent to be a common carrier and holding him liable for the
value of the undelivered goods (P 22,150.00) as well as for P 4,000.00 as damages and P 2,000.00 as attorney's fees.
On appeal before the Court of Appeals, respondent urged that the trial court had erred in considering him a common carrier; in finding that he
had habitually offered trucking services to the public; in not exempting him from liability on the ground of force majeure; and in ordering him to
pay damages and attorney's fees.
The Court of Appeals reversed the judgment of the trial court and held that respondent had been engaged in transporting return loads of
freight "as a casual
occupation a sideline to his scrap iron business" and not as a common carrier. Petitioner came to this Court by way of a Petition for Review
assigning as errors the following conclusions of the Court of Appeals:
1. that private respondent was not a common carrier;
2. that the hijacking of respondent's truck was force majeure; and
3. that respondent was not liable for the value of the undelivered cargo. (Rollo, p. 111)
We consider first the issue of whether or not private respondent Ernesto Cendana may, under the facts earlier set forth, be properly
characterized as a common carrier.
The Civil Code defines "common carriers" in the following terms:
Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air for compensation, offering their services to the public.
The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one
who does such carrying only as an ancillary activity (in local Idiom as "a sideline"). Article 1732 also carefully avoids making any distinction
between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an
occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the "general public,"
i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general
population. We think that Article 1733 deliberaom making such distinctions.
So understood, the concept of "common carrier" under Article 1732 may be seen to coincide neatly with the notion of "public service," under
the Public Service Act (Commonwealth Act No. 1416, as amended) which at least partially supplements the law on common carriers set forth
in the Civil Code. Under Section 13, paragraph (b) of the Public Service Act, "public service" includes:
... every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or compensation, with general or
limited clientele, whether permanent, occasional or accidental, and done for general business purposes, any common carrier, railroad, street
railway, traction railway, subway motor vehicle, either for freight or passenger, or both, with or without fixed route and whatever may be its
classification, freight or carrier service of any class, express service, steamboat, or steamship line, pontines, ferries and water craft, engaged
in the transportation of passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant,
ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water supply and power petroleum, sewerage system, wire
or wireless communications systems, wire or wireless broadcasting stations and other similar public services. ... (Emphasis supplied)
It appears to the Court that private respondent is properly characterized as a common carrier even though he merely "back-hauled" goods for
other merchants from Manila to Pangasinan, although such back-hauling was done on a periodic or occasional rather than regular or
scheduled manner, and even though private respondent's principal occupation was not the carriage of goods for others. There is no dispute
that private respondent charged his customers a fee for hauling their goods; that fee frequently fell below commercial freight rates is not
relevant here.
The Court of Appeals referred to the fact that private respondent held no certificate of public convenience, and concluded he was not a
common carrier. This is palpable error. A certificate of public convenience is not a requisite for the incurring of liability under the Civil Code
provisions governing common carriers. That liability arises the moment a person or firm acts as a common carrier, without regard to whether or
not such carrier has also complied with the requirements of the applicable regulatory statute and implementing regulations and has been
granted a certificate of public convenience or other franchise. To exempt private respondent from the liabilities of a common carrier because
he has not secured the necessary certificate of public convenience, would be offensive to sound public policy; that would be to reward private
respondent precisely for failing to comply with applicable statutory requirements. The business of a common carrier impinges directly and
intimately upon the safety and well being and property of those members of the general community who happen to deal with such carrier. The
law imposes duties and liabilities upon common carriers for the safety and protection of those who utilize their services and the law cannot
allow a common carrier to render such duties and liabilities merely facultative by simply failing to obtain the necessary permits and
authorizations.
We turn then to the liability of private respondent as a common carrier.
Common carriers, "by the nature of their business and for reasons of public policy" 2 are held to a very high degree of care and diligence
("extraordinary diligence") in the carriage of goods as well as of passengers. The specific import of extraordinary diligence in the care of goods
transported by a common carrier is, according to Article 1733, "further expressed in Articles 1734,1735 and 1745, numbers 5, 6 and 7" of the
Civil Code.
Article 1734 establishes the general rule that common carriers are responsible for the loss, destruction or deterioration of the goods which they
carry, "unless the same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character-of the goods or defects in the packing or-in the containers; and
(5) Order or act of competent public authority.
It is important to point out that the above list of causes of loss, destruction or deterioration which exempt the common carrier for responsibility
therefor, is a closed list. Causes falling outside the foregoing list, even if they appear to constitute a species of force majeure fall within the
scope of Article 1735, which provides as follows:
In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the preceding article, if the goods are lost,
destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they
prove that they observed extraordinary diligence as required in Article 1733. (Emphasis supplied)
Applying the above-quoted Articles 1734 and 1735, we note firstly that the specific cause alleged in the instant case the hijacking of the
carrier's truck does not fall within any of the five (5) categories of exempting causes listed in Article 1734. It would follow, therefore, that the
hijacking of the carrier's vehicle must be dealt with under the provisions of Article 1735, in other words, that the private respondent as common
carrier is presumed to have been at fault or to have acted negligently. This presumption, however, may be overthrown by proof of
extraordinary diligence on the part of private respondent.
Petitioner insists that private respondent had not observed extraordinary diligence in the care of petitioner's goods. Petitioner argues that in
the circumstances of this case, private respondent should have hired a security guard presumably to ride with the truck carrying the 600
cartons of Liberty filled milk. We do not believe, however, that in the instant case, the standard of extraordinary diligence required private
respondent to retain a security guard to ride with the truck and to engage brigands in a firelight at the risk of his own life and the lives of the
driver and his helper.
The precise issue that we address here relates to the specific requirements of the duty of extraordinary diligence in the vigilance over the
goods carried in the specific context of hijacking or armed robbery.
As noted earlier, the duty of extraordinary diligence in the vigilance over goods is, under Article 1733, given additional specification not only by
Articles 1734 and 1735 but also by Article 1745, numbers 4, 5 and 6, Article 1745 provides in relevant part:
Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public policy:
(5) that the common carrier shall not be responsible for the acts or omissions of his or its employees;
(6) that the common carrier's liability for acts committed by thieves, or of robbers who do not act with grave or irresistible threat, violence or
force, is dispensed with or diminished; and
(7) that the common carrier shall not responsible for the loss, destruction or deterioration of goods on account of the defective condition of the
car vehicle, ship, airplane or other equipment used in the contract of carriage. (Emphasis supplied)
Under Article 1745 (6) above, a common carrier is held responsible and will not be allowed to divest or to diminish such responsibility
even for acts of strangers like thieves or robbers, except where such thieves or robbers in fact acted "with grave or irresistible threat, violence
or force." We believe and so hold that the limits of the duty of extraordinary diligence in the vigilance over the goods carried are reached where
the goods are lost as a result of a robbery which is attended by "grave or irresistible threat, violence or force."
In the instant case, armed men held up the second truck owned by private respondent which carried petitioner's cargo. The record shows that
an information for robbery in band was filed in the Court of First Instance of Tarlac, Branch 2, in Criminal Case No. 198 entitled "People of the
Philippines v. Felipe Boncorno, Napoleon Presno, Armando Mesina, Oscar Oria and one John Doe." There, the accused were charged with
willfully and unlawfully taking and carrying away with them the second truck, driven by Manuel Estrada and loaded with the 600 cartons of
Liberty filled milk destined for delivery at petitioner's store in Urdaneta, Pangasinan. The decision of the trial court shows that the accused
acted with grave, if not irresistible, threat, violence or force. 3 Three (3) of the five (5) hold-uppers were armed with firearms. The robbers not
only took away the truck and its cargo but also kidnapped the driver and his helper, detaining them for several days and later releasing them in
another province (in Zambales). The hijacked truck was subsequently found by the police in Quezon City. The Court of First Instance
convicted all the accused of robbery, though not of robbery in band. 4
In these circumstances, we hold that the occurrence of the loss must reasonably be regarded as quite beyond the control of the common
carrier and properly regarded as a fortuitous event. It is necessary to recall that even common carriers are not made absolute insurers against
all risks of travel and of transport of goods, and are not held liable for acts or events which cannot be foreseen or are inevitable, provided that
they shall have complied with the rigorous standard of extraordinary diligence.
We, therefore, agree with the result reached by the Court of Appeals that private respondent Cendana is not liable for the value of the
undelivered merchandise which was lost because of an event entirely beyond private respondent's control.
ACCORDINGLY, the Petition for Review on certiorari is hereby DENIED and the Decision of the Court of Appeals dated 3 August 1977 is
AFFIRMED. No pronouncement as to costs.
SO ORDERED.
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 101503 September 15, 1993
PLANTERS PRODUCTS, INC., petitioner, vs.

COURT OF APPEALS, SORIAMONT STEAMSHIP AGENCIES AND KYOSEI KISEN KABUSHIKI KAISHA, respondents.
BELLOSILLO, J.:
Does a charter-party 1 between a shipowner and a charterer transform a common carrier into a private one as to negate the civil law
presumption of negligence in case of loss or damage to its cargo?
Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation (MITSUBISHI) of New York, U.S.A., 9,329.7069 metric tons
(M/T) of Urea 46% fertilizer which the latter shipped in bulk on 16 June 1974 aboard the cargo vessel M/V "Sun Plum" owned by private
respondent Kyosei Kisen Kabushiki Kaisha (KKKK) from Kenai, Alaska, U.S.A., to Poro Point, San Fernando, La Union, Philippines, as
evidenced by Bill of Lading No. KP-1 signed by the master of the vessel and issued on the date of departure.
On 17 May 1974, or prior to its voyage, a time charter-party on the vessel M/V "Sun Plum" pursuant to the Uniform General Charter 2 was
entered into between Mitsubishi as shipper/charterer and KKKK as shipowner, in Tokyo, Japan. 3 Riders to the aforesaid charter-party starting
from par. 16 to 40 were attached to the pre-printed agreement. Addenda Nos. 1, 2, 3 and 4 to the charter-party were also subsequently
entered into on the 18th, 20th, 21st and 27th of May 1974, respectively.
Before loading the fertilizer aboard the vessel, four (4) of her holds 4 were all presumably inspected by the charterer's representative and found
fit to take a load of urea in bulk pursuant to par. 16 of the charter-party which reads:
16. . . . At loading port, notice of readiness to be accomplished by certificate from National Cargo Bureau inspector or substitute appointed by
charterers for his account certifying the vessel's readiness to receive cargo spaces. The vessel's hold to be properly swept, cleaned and dried
at the vessel's expense and the vessel to be presented clean for use in bulk to the satisfaction of the inspector before daytime commences.
After the Urea fertilizer was loaded in bulk by stevedores hired by and under the supervision of the shipper, the steel hatches were closed with
heavy iron lids, covered with three (3) layers of tarpaulin, then tied with steel bonds. The hatches remained closed and tightly sealed
throughout the entire voyage. 5
Upon arrival of the vessel at her port of call on 3 July 1974, the steel pontoon hatches were opened with the use of the vessel's boom.
Petitioner unloaded the cargo from the holds into its steelbodied dump trucks which were parked alongside the berth, using metal scoops
attached to the ship, pursuant to the terms and conditions of the charter-partly (which provided for an F.I.O.S. clause). 6 The hatches remained
open throughout the duration of the discharge. 7
Each time a dump truck was filled up, its load of Urea was covered with tarpaulin before it was transported to the consignee's warehouse
located some fifty (50) meters from the wharf. Midway to the warehouse, the trucks were made to pass through a weighing scale where they
were individually weighed for the purpose of ascertaining the net weight of the cargo. The port area was windy, certain portions of the route to
the warehouse were sandy and the weather was variable, raining occasionally while the discharge was in progress. 8 The petitioner's
warehouse was made of corrugated galvanized iron (GI) sheets, with an opening at the front where the dump trucks entered and unloaded the
fertilizer on the warehouse floor. Tarpaulins and GI sheets were placed in-between and alongside the trucks to contain spillages of the ferilizer.
It took eleven (11) days for PPI to unload the cargo, from 5 July to 18 July 1974 (except July 12th, 14th and 18th). 10 A private marine and
cargo surveyor, Cargo Superintendents Company Inc. (CSCI), was hired by PPI to determine the "outturn" of the cargo shipped, by taking
draft readings of the vessel prior to and after discharge. 11 The survey report submitted by CSCI to the consignee (PPI) dated 19 July 1974
revealed a shortage in the cargo of 106.726 M/T and that a portion of the Urea fertilizer approximating 18 M/T was contaminated with dirt. The
same results were contained in a Certificate of Shortage/Damaged Cargo dated 18 July 1974 prepared by PPI which showed that the cargo
delivered was indeed short of 94.839 M/T and about 23 M/T were rendered unfit for commerce, having been polluted with sand, rust and dirt.
Consequently, PPI sent a claim letter dated 18 December 1974 to Soriamont Steamship Agencies (SSA), the resident agent of the carrier,
KKKK, for P245,969.31 representing the cost of the alleged shortage in the goods shipped and the diminution in value of that portion said to
have been contaminated with dirt. 13
Respondent SSA explained that they were not able to respond to the consignee's claim for payment because, according to them, what they
received was just a request for shortlanded certificate and not a formal claim, and that this "request" was denied by them because they "had
nothing to do with the discharge of the shipment." 14 Hence, on 18 July 1975, PPI filed an action for damages with the Court of First Instance of
Manila. The defendant carrier argued that the strict public policy governing common carriers does not apply to them because they have
become private carriers by reason of the provisions of the charter-party. The court a quo however sustained the claim of the plaintiff against
the defendant carrier for the value of the goods lost or damaged when it ruled thus: 15
. . . Prescinding from the provision of the law that a common carrier is presumed negligent in case of loss or damage of the goods it contracts
to transport, all that a shipper has to do in a suit to recover for loss or damage is to show receipt by the carrier of the goods and to delivery by
it of less than what it received. After that, the burden of proving that the loss or damage was due to any of the causes which exempt him from
liability is shipted to the carrier, common or private he may be. Even if the provisions of the charter-party aforequoted are deemed valid, and
the defendants considered private carriers, it was still incumbent upon them to prove that the shortage or contamination sustained by the
cargo is attributable to the fault or negligence on the part of the shipper or consignee in the loading, stowing, trimming and discharge of the
cargo. This they failed to do. By this omission, coupled with their failure to destroy the presumption of negligence against them, the defendants
are liable (emphasis supplied).
On appeal, respondent Court of Appeals reversed the lower court and absolved the carrier from liability for the value of the cargo that was lost
or damaged. 16 Relying on the 1968 case of Home Insurance Co. v. American Steamship Agencies, Inc., 17 the appellate court ruled that the
cargo vessel M/V "Sun Plum" owned by private respondent KKKK was a private carrier and not a common carrier by reason of the time
charterer-party. Accordingly, the Civil Code provisions on common carriers which set forth a presumption of negligence do not find application
in the case at bar. Thus
. . . In the absence of such presumption, it was incumbent upon the plaintiff-appellee to adduce sufficient evidence to prove the negligence of
the defendant carrier as alleged in its complaint. It is an old and well settled rule that if the plaintiff, upon whom rests the burden of proving his
cause of action, fails to show in a satisfactory manner the facts upon which he bases his claim, the defendant is under no obligation to prove
his exception or defense (Moran, Commentaries on the Rules of Court, Volume 6, p. 2, citing Belen v. Belen, 13 Phil. 202).
But, the record shows that the plaintiff-appellee dismally failed to prove the basis of its cause of action, i.e. the alleged negligence of
defendant carrier. It appears that the plaintiff was under the impression that it did not have to establish defendant's negligence. Be that as it
may, contrary to the trial court's finding, the record of the instant case discloses ample evidence showing that defendant carrier was not
negligent in performing its obligation . . . 18 (emphasis supplied).
Petitioner PPI appeals to us by way of a petition for review assailing the decision of the Court of Appeals. Petitioner theorizes that the Home
Insurance case has no bearing on the present controversy because the issue raised therein is the validity of a stipulation in the charter-party
delimiting the liability of the shipowner for loss or damage to goods cause by want of due deligence on its part or that of its manager to make
the vessel seaworthy in all respects, and not whether the presumption of negligence provided under the Civil Code applies only to common
carriers and not to private carriers. 19 Petitioner further argues that since the possession and control of the vessel remain with the shipowner,
absent any stipulation to the contrary, such shipowner should made liable for the negligence of the captain and crew. In fine, PPI faults the
appellate court in not applying the presumption of negligence against respondent carrier, and instead shifting the onus probandi on the shipper
to show want of due deligence on the part of the carrier, when he was not even at hand to witness what transpired during the entire voyage.
As earlier stated, the primordial issue here is whether a common carrier becomes a private carrier by reason of a charter-party; in the
negative, whether the shipowner in the instant case was able to prove that he had exercised that degree of diligence required of him under the
law.
It is said that etymology is the basis of reliable judicial decisions in commercial cases. This being so, we find it fitting to first define important
terms which are relevant to our discussion.
A "charter-party" is defined as a contract by which an entire ship, or some principal part thereof, is let by the owner to another person for a
specified time or use; 20 a contract of affreightment by which the owner of a ship or other vessel lets the whole or a part of her to a merchant or
other person for the conveyance of goods, on a particular voyage, in consideration of the payment of freight; 21 Charter parties are of two
types: (a) contract of affreightment which involves the use of shipping space on vessels leased by the owner in part or as a whole, to carry
goods for others; and, (b) charter by demise or bareboat charter, by the terms of which the whole vessel is let to the charterer with a transfer to
him of its entire command and possession and consequent control over its navigation, including the master and the crew, who are his
servants. Contract of affreightment may either be time charter, wherein the vessel is leased to the charterer for a fixed period of time, or
voyage charter, wherein the ship is leased for a single voyage. 22 In both cases, the charter-party provides for the hire of vessel only, either for
a determinate period of time or for a single or consecutive voyage, the shipowner to supply the ship's stores, pay for the wages of the master
and the crew, and defray the expenses for the maintenance of the ship.
Upon the other hand, the term "common or public carrier" is defined in Art. 1732 of the Civil Code. 23 The definition extends to carriers either by
land, air or water which hold themselves out as ready to engage in carrying goods or transporting passengers or both for compensation as a
public employment and not as a casual occupation. The distinction between a "common or public carrier" and a "private or special carrier" lies
in the character of the business, such that if the undertaking is a single transaction, not a part of the general business or occupation, although
involving the carriage of goods for a fee, the person or corporation offering such service is a private carrier. 24
Article 1733 of the New Civil Code mandates that common carriers, by reason of the nature of their business, should observe extraordinary
diligence in the vigilance over the goods they carry. 25 In the case of private carriers, however, the exercise of ordinary diligence in the carriage
of goods will suffice. Moreover, in the case of loss, destruction or deterioration of the goods, common carriers are presumed to have been at
fault or to have acted negligently, and the burden of proving otherwise rests on them. 26 On the contrary, no such presumption applies to
private carriers, for whosoever alleges damage to or deterioration of the goods carried has the onus of proving that the cause was the
negligence of the carrier.
It is not disputed that respondent carrier, in the ordinary course of business, operates as a common carrier, transporting goods indiscriminately
for all persons. When petitioner chartered the vessel M/V "Sun Plum", the ship captain, its officers and compliment were under the employ of
the shipowner and therefore continued to be under its direct supervision and control. Hardly then can we charge the charterer, a stranger to
the crew and to the ship, with the duty of caring for his cargo when the charterer did not have any control of the means in doing so. This is
evident in the present case considering that the steering of the ship, the manning of the decks, the determination of the course of the voyage
and other technical incidents of maritime navigation were all consigned to the officers and crew who were screened, chosen and hired by the
shipowner. 27
It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the whole or portion of a vessel by one or
more persons, provided the charter is limited to the ship only, as in the case of a time-charter or voyage-charter. It is only when the charter
includes both the vessel and its crew, as in a bareboat or demise that a common carrier becomes private, at least insofar as the particular
voyage covering the charter-party is concerned. Indubitably, a shipowner in a time or voyage charter retains possession and control of the
ship, although her holds may, for the moment, be the property of the charterer. 28
Respondent carrier's heavy reliance on the case of Home Insurance Co. v. American Steamship Agencies, supra, is misplaced for the reason
that the meat of the controversy therein was the validity of a stipulation in the charter-party exempting the shipowners from liability for loss due
to the negligence of its agent, and not the effects of a special charter on common carriers. At any rate, the rule in the United States that a ship
chartered by a single shipper to carry special cargo is not a common carrier, 29 does not find application in our jurisdiction, for we have
observed that the growing concern for safety in the transportation of passengers and /or carriage of goods by sea requires a more exacting
interpretation of admiralty laws, more particularly, the rules governing common carriers.
We quote with approval the observations of Raoul Colinvaux, the learned barrister-at-law
30
As a matter of principle, it is difficult to find a valid distinction between cases in which a ship is used to convey the goods of one and of several
persons. Where the ship herself is let to a charterer, so that he takes over the charge and control of her, the case is different; the shipowner is
not then a carrier. But where her services only are let, the same grounds for imposing a strict responsibility exist, whether he is employed by
one or many. The master and the crew are in each case his servants, the freighter in each case is usually without any representative on board
the ship; the same opportunities for fraud or collusion occur; and the same difficulty in discovering the truth as to what has taken place arises .
In an action for recovery of damages against a common carrier on the goods shipped, the shipper or consignee should first prove the fact of
shipment and its consequent loss or damage while the same was in the possession, actual or constructive, of the carrier. Thereafter, the
burden of proof shifts to respondent to prove that he has exercised extraordinary diligence required by law or that the loss, damage or
deterioration of the cargo was due to fortuitous event, or some other circumstances inconsistent with its liability. 31
To our mind, respondent carrier has sufficiently overcome, by clear and convincing proof, the prima facie presumption of negligence.
The master of the carrying vessel, Captain Lee Tae Bo, in his deposition taken on 19 April 1977 before the Philippine Consul and Legal
Attache in the Philippine Embassy in Tokyo, Japan, testified that before the fertilizer was loaded, the four (4) hatches of the vessel were
cleaned, dried and fumigated. After completing the loading of the cargo in bulk in the ship's holds, the steel pontoon hatches were closed and
sealed with iron lids, then covered with three (3) layers of serviceable tarpaulins which were tied with steel bonds. The hatches remained close
and tightly sealed while the ship was in transit as the weight of the steel covers made it impossible for a person to open without the use of the
ship's boom. 32
It was also shown during the trial that the hull of the vessel was in good condition, foreclosing the possibility of spillage of the cargo into the
sea or seepage of water inside the hull of the vessel. 33 When M/V "Sun Plum" docked at its berthing place, representatives of the consignee
boarded, and in the presence of a representative of the shipowner, the foreman, the stevedores, and a cargo surveyor representing CSCI,
opened the hatches and inspected the condition of the hull of the vessel. The stevedores unloaded the cargo under the watchful eyes of the
shipmates who were overseeing the whole operation on rotation basis. 34
Verily, the presumption of negligence on the part of the respondent carrier has been efficaciously overcome by the showing of extraordinary
zeal and assiduity exercised by the carrier in the care of the cargo. This was confirmed by respondent appellate court thus
. . . Be that as it may, contrary to the trial court's finding, the record of the instant case discloses ample evidence showing that defendant
carrier was not negligent in performing its obligations. Particularly, the following testimonies of plaintiff-appellee's own witnesses clearly show
absence of negligence by the defendant carrier; that the hull of the vessel at the time of the discharge of the cargo was sealed and nobody
could open the same except in the presence of the owner of the cargo and the representatives of the vessel (TSN, 20 July 1977, p. 14); that
the cover of the hatches was made of steel and it was overlaid with tarpaulins, three layers of tarpaulins and therefore their contents were
protected from the weather (TSN, 5 April 1978, p. 24); and, that to open these hatches, the seals would have to be broken, all the seals were
found to be intact (TSN, 20 July 1977, pp. 15-16) (emphasis supplied).
The period during which private respondent was to observe the degree of diligence required of it as a public carrier began from the time the
cargo was unconditionally placed in its charge after the vessel's holds were duly inspected and passed scrutiny by the shipper, up to and until
the vessel reached its destination and its hull was reexamined by the consignee, but prior to unloading. This is clear from the limitation clause
agreed upon by the parties in the Addendum to the standard "GENCON" time charter-party which provided for an F.I.O.S., meaning, that the
loading, stowing, trimming and discharge of the cargo was to be done by the charterer, free from all risk and expense to the carrier. 35
Moreover, a shipowner is liable for damage to the cargo resulting from improper stowage only when the stowing is done by stevedores
employed by him, and therefore under his control and supervision, not when the same is done by the consignee or stevedores under the
employ of the latter. 36
Article 1734 of the New Civil Code provides that common carriers are not responsible for the loss, destruction or deterioration of the goods if
caused by the charterer of the goods or defects in the packaging or in the containers. The Code of Commerce also provides that all losses and
deterioration which the goods may suffer during the transportation by reason of fortuitous event, force majeure, or the inherent defect of the
goods, shall be for the account and risk of the shipper, and that proof of these accidents is incumbent upon the carrier. 37 The carrier,
nonetheless, shall be liable for the loss and damage resulting from the preceding causes if it is proved, as against him, that they arose through
his negligence or by reason of his having failed to take the precautions which usage has established among careful persons. 38
Respondent carrier presented a witness who testified on the characteristics of the fertilizer shipped and the expected risks of bulk shipping.
Mr. Estanislao Chupungco, a chemical engineer working with Atlas Fertilizer, described Urea as a chemical compound consisting mostly of
ammonia and carbon monoxide compounds which are used as fertilizer. Urea also contains 46% nitrogen and is highly soluble in water.
However, during storage, nitrogen and ammonia do not normally evaporate even on a long voyage, provided that the temperature inside the
hull does not exceed eighty (80) degrees centigrade. Mr. Chupungco further added that in unloading fertilizer in bulk with the use of a clamped
shell, losses due to spillage during such operation amounting to one percent (1%) against the bill of lading is deemed "normal" or "tolerable."
The primary cause of these spillages is the clamped shell which does not seal very tightly. Also, the wind tends to blow away some of the
materials during the unloading process.
The dissipation of quantities of fertilizer, or its daterioration in value, is caused either by an extremely high temperature in its place of storage,
or when it comes in contact with water. When Urea is drenched in water, either fresh or saline, some of its particles dissolve. But the salvaged
portion which is in liquid form still remains potent and usable although no longer saleable in its original market value.
The probability of the cargo being damaged or getting mixed or contaminated with foreign particles was made greater by the fact that the
fertilizer was transported in "bulk," thereby exposing it to the inimical effects of the elements and the grimy condition of the various pieces of
equipment used in transporting and hauling it.
The evidence of respondent carrier also showed that it was highly improbable for sea water to seep into the vessel's holds during the voyage
since the hull of the vessel was in good condition and her hatches were tightly closed and firmly sealed, making the M/V "Sun Plum" in all
respects seaworthy to carry the cargo she was chartered for. If there was loss or contamination of the cargo, it was more likely to have
occurred while the same was being transported from the ship to the dump trucks and finally to the consignee's warehouse. This may be
gleaned from the testimony of the marine and cargo surveyor of CSCI who supervised the unloading. He explained that the 18 M/T of alleged
"bar order cargo" as contained in their report to PPI was just an approximation or estimate made by them after the fertilizer was discharged
from the vessel and segregated from the rest of the cargo.
The Court notes that it was in the month of July when the vessel arrived port and unloaded her cargo. It rained from time to time at the harbor
area while the cargo was being discharged according to the supply officer of PPI, who also testified that it was windy at the waterfront and
along the shoreline where the dump trucks passed enroute to the consignee's warehouse.
Indeed, we agree with respondent carrier that bulk shipment of highly soluble goods like fertilizer carries with it the risk of loss or damage.
More so, with a variable weather condition prevalent during its unloading, as was the case at bar. This is a risk the shipper or the owner of the
goods has to face. Clearly, respondent carrier has sufficiently proved the inherent character of the goods which makes it highly vulnerable to
deterioration; as well as the inadequacy of its packaging which further contributed to the loss. On the other hand, no proof was adduced by the
petitioner showing that the carrier was remise in the exercise of due diligence in order to minimize the loss or damage to the goods it carried.
WHEREFORE, the petition is DISMISSED. The assailed decision of the Court of Appeals, which reversed the trial court, is AFFIRMED.
Consequently, Civil Case No. 98623 of the then Court of the First Instance, now Regional Trial Court, of Manila should be, as it is hereby
DISMISSED.
Costs against petitioner.
SO ORDERED.
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 131621 September 28, 1999
LOADSTAR SHIPPING CO., INC., petitioner, vs.

COURT OF APPEALS and THE MANILA INSURANCE CO., INC., respondents.
DAVIDE, JR., C.J.:
Petitioner Loadstar Shipping Co., Inc. (hereafter LOADSTAR), in this petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure, seeks to reverse and set aside the following: (a) the 30 January 1997 decision 1 of the Court of Appeals in CA-G.R. CV No. 36401,
which affirmed the decision of 4 October 1991 2 of the Regional Trial Court of Manila, Branch 16, in Civil Case No. 85-29110, ordering
LOADSTAR to pay private respondent Manila Insurance Co. (hereafter MIC) the amount of P6,067,178, with legal interest from the filing of the
compliant until fully paid, P8,000 as attorney's fees, and the costs of the suit; and (b) its resolution of 19 November 1997, 3 denying
LOADSTAR's motion for reconsideration of said decision.
The facts are undisputed.1wphi1.nt
On 19 November 1984, LOADSTAR received on board its M/V "Cherokee" (hereafter, the vessel) the following goods for shipment:
a) 705 bales of lawanit hardwood;
b) 27 boxes and crates of tilewood assemblies and the others ;and
c) 49 bundles of mouldings R & W (3) Apitong Bolidenized.

The goods, amounting to P6,067,178, were insured for the same amount with MIC against various risks including "TOTAL LOSS BY TOTAL
OF THE LOSS THE VESSEL." The vessel, in turn, was insured by Prudential Guarantee & Assurance, Inc. (hereafter PGAI) for P4 million. On
20 November 1984, on its way to Manila from the port of Nasipit, Agusan del Norte, the vessel, along with its cargo, sank off Limasawa Island.
As a result of the total loss of its shipment, the consignee made a claim with LOADSTAR which, however, ignored the same. As the insurer,
MIC paid P6,075,000 to the insured in full settlement of its claim, and the latter executed a subrogation receipt therefor.
On 4 February 1985, MIC filed a complaint against LOADSTAR and PGAI, alleging that the sinking of the vessel was due to the fault and
negligence of LOADSTAR and its employees. It also prayed that PGAI be ordered to pay the insurance proceeds from the loss the vessel
directly to MIC, said amount to be deducted from MIC's claim from LOADSTAR.
In its answer, LOADSTAR denied any liability for the loss of the shipper's goods and claimed that sinking of its vessel was due to force
majeure. PGAI, on the other hand, averred that MIC had no cause of action against it, LOADSTAR being the party insured. In any event, PGAI
was later dropped as a party defendant after it paid the insurance proceeds to LOADSTAR.
As stated at the outset, the court a quo rendered judgment in favor of MIC, prompting LOADSTAR to elevate the matter to the court of
Appeals, which, however, agreed with the trial court and affirmed its decision in toto.
In dismissing LOADSTAR's appeal, the appellate court made the following observations:
1) LOADSTAR cannot be considered a private carrier on the sole ground that there was a single shipper on that fateful voyage. The court
noted that the charter of the vessel was limited to the ship, but LOADSTAR retained control over its crew. 4
2) As a common carrier, it is the Code of Commerce, not the Civil Code, which should be applied in determining the rights and liabilities of the
parties.
3) The vessel was not seaworthy because it was undermanned on the day of the voyage. If it had been seaworthy, it could have withstood the
"natural and inevitable action of the sea" on 20 November 1984, when the condition of the sea was moderate. The vessel sank, not because
of force majeure, but because it was not seaworthy. LOADSTAR'S allegation that the sinking was probably due to the "convergence of the
winds," as stated by a PAGASA expert, was not duly proven at the trial. The "limited liability" rule, therefore, is not applicable considering that,
in this case, there was an actual finding of negligence on the part of the carrier. 5
4) Between MIC and LOADSTAR, the provisions of the Bill of Lading do not apply because said provisions bind only the shipper/consignee
and the carrier. When MIC paid the shipper for the goods insured, it was subrogated to the latter's rights as against the carrier, LOADSTAR.
5) There was a clear breach of the contract of carriage when the shipper's goods never reached their destination. LOADSTAR's defense of
"diligence of a good father of a family" in the training and selection of its crew is unavailing because this is not a proper or complete defense in
culpa contractual.
6) "Art. 361 (of the Code of Commerce) has been judicially construed to mean that when goods are delivered on board a ship in good order
and condition, and the shipowner delivers them to the shipper in bad order and condition, it then devolves upon the shipowner to both allege
and prove that the goods were damaged by reason of some fact which legally exempts him from liability." Transportation of the merchandise at
the risk and venture of the shipper means that the latter bears the risk of loss or deterioration of his goods arising from fortuitous events, force
majeure, or the inherent nature and defects of the goods, but not those caused by the presumed negligence or fault of the carrier, unless
otherwise proved. 7
The errors assigned by LOADSTAR boil down to a determination of the following issues:
(1) Is the M/V "Cherokee" a private or a common carrier?

(2) Did LOADSTAR observe due and/or ordinary diligence in these premises.
Regarding the first issue, LOADSTAR submits that the vessel was a private carrier because it was not issued certificate of public convenience,
it did not have a regular trip or schedule nor a fixed route, and there was only "one shipper, one consignee for a special cargo."
In refutation, MIC argues that the issue as to the classification of the M/V "Cherokee" was not timely raised below; hence, it is barred by
estoppel. While it is true that the vessel had on board only the cargo of wood products for delivery to one consignee, it was also carrying
passengers as part of its regular business. Moreover, the bills of lading in this case made no mention of any charter party but only a statement
that the vessel was a "general cargo carrier." Neither was there any "special arrangement" between LOADSTAR and the shipper regarding the
shipment of the cargo. The singular fact that the vessel was carrying a particular type of cargo for one shipper is not sufficient to convert the
vessel into a private carrier.
As regards the second error, LOADSTAR argues that as a private carrier, it cannot be presumed to have been negligent, and the burden of
proving otherwise devolved upon MIC. 8
LOADSTAR also maintains that the vessel was seaworthy. Before the fateful voyage on 19 November 1984, the vessel was allegedly dry docked at
Keppel Philippines Shipyard and was duly inspected by the maritime safety engineers of the Philippine Coast Guard, who certified that the ship was fit
to undertake a voyage. Its crew at the time was experienced, licensed and unquestionably competent. With all these precautions, there could be no
other conclusion except that LOADSTAR exercised the diligence of a good father of a family in ensuring the vessel's seaworthiness.
LOADSTAR further claims that it was not responsible for the loss of the cargo, such loss being due to force majeure. It points out that when
the vessel left Nasipit, Agusan del Norte, on 19 November 1984, the weather was fine until the next day when the vessel sank due to strong
waves. MCI's witness, Gracelia Tapel, fully established the existence of two typhoons, "WELFRING" and "YOLING," inside the Philippine area
of responsibility. In fact, on 20 November 1984, signal no. 1 was declared over Eastern Visayas, which includes Limasawa Island. Tapel also
testified that the convergence of winds brought about by these two typhoons strengthened wind velocity in the area, naturally producing strong
waves and winds, in turn, causing the vessel to list and eventually sink.
LOADSTAR goes on to argue that, being a private carrier, any agreement limiting its liability, such as what transpired in this case, is valid.
Since the cargo was being shipped at "owner's risk," LOADSTAR was not liable for any loss or damage to the same. Therefore, the Court of
Appeals erred in holding that the provisions of the bills of lading apply only to the shipper and the carrier, and not to the insurer of the goods,
which conclusion runs counter to the Supreme Court's ruling in the case of St. Paul Fire & Marine Co. v. Macondray & Co., Inc., 9 and National
Union Fire Insurance Company of Pittsburgh v. Stolt-Nielsen Phils., Inc. 10
Finally, LOADSTAR avers that MIC's claim had already prescribed, the case having been instituted beyond the period stated in the bills of lading for
instituting the same suits based upon claims arising from shortage, damage, or non-delivery of shipment shall be instituted within sixty days from the
accrual of the right of action. The vessel sank on 20 November 1984; yet, the case for recovery was filed only on 4 February 1985.
MIC, on the other hand, claims that LOADSTAR was liable, notwithstanding that the loss of the cargo was due to force majeure, because the
same concurred with LOADSTAR's fault or negligence.
Secondly, LOADSTAR did not raise the issue of prescription in the court below; hence, the same must be deemed waived.
Thirdly, the " limited liability " theory is not applicable in the case at bar because LOADSTAR was at fault or negligent, and because it failed to
maintain a seaworthy vessel. Authorizing the voyage notwithstanding its knowledge of a typhoon is tantamount to negligence.
We find no merit in this petition.
Anent the first assigned error, we hold that LOADSTAR is a common carrier. It is not necessary that the carrier be issued a certificate of public
convenience, and this public character is not altered by the fact that the carriage of the goods in question was periodic, occasional, episodic or
unscheduled.
In support of its position, LOADSTAR relied on the 1968 case of Home Insurance Co. v. American Steamship Agencies, Inc., 11 where this
Court held that a common carrier transporting special cargo or chartering the vessel to a special person becomes a private carrier that is not
subject to the provisions of the Civil Code. Any stipulation in the charter party absolving the owner from liability for loss due to the negligence
of its agent is void only if the strict policy governing common carriers is upheld. Such policy has no force where the public at is not involved, as
in the case of a ship totally chartered for the use of a single party. LOADSTAR also cited Valenzuela Hardwood and Industrial Supply, Inc. v.
Court of Appeals 12 and National Steel Corp. v. Court of Appeals, 13 both of which upheld the Home Insurance doctrine.
These cases invoked by LOADSTAR are not applicable in the case at bar for the simple reason that the factual settings are different. The
records do not disclose that the M/V "Cherokee," on the date in question, undertook to carry a special cargo or was chartered to a special
person only. There was no charter party. The bills of lading failed to show any special arrangement, but only a general provision to the effect
that the M/V"Cherokee" was a "general cargo carrier." 14 Further, the bare fact that the vessel was carrying a particular type of cargo for one
shipper, which appears to be purely coincidental, is not reason enough to convert the vessel from a common to a private carrier, especially
where, as in this case, it was shown that the vessel was also carrying passengers.
Under the facts and circumstances obtaining in this case, LOADSTAR fits the definition of a common carrier under Article 1732 of the Civil
Code. In the case of De Guzman v. Court of Appeals, 15 the Court juxtaposed the statutory definition of "common carriers" with the peculiar
circumstances of that case, viz.:

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.
who does such carrying only as 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
population. We think that Article 1733 deliberately refrained from making such distinctions.
It appears to the Court that private respondent is properly characterized as a common carrier even though he merely "back-hauled" goods for other
merchants from Manila to Pangasinan, although such backhauling was done on a periodic or occasional rather than regular or scheduled manner, and
eventhough private respondent's principal occupation was not the carriage of goods for others. There is no dispute that private respondent charged his
customers a fee for hauling their goods; that fee frequently fell below commercial freight rates is not relevant here.
The Court of Appeals referred to the fact that private respondent held no certificate of public convenience, and concluded he was not a common carrier.
This is palpable error. A certificate of public convenience is not a requisite for the incurring of liability under the Civil Code provisions governing common
carriers. That liability arises the moment a person or firm acts as a common carrier, without regard to whether or not such carrier has also complied with
the requirements of the applicable regulatory statute and implementing regulations and has been granted a certificate of public convenience or other
franchise. To exempt private respondent from the liabilities of a common carrier because he has not secured the necessary certificate of public
convenience, would be offensive to sound public policy; that would be to reward private respondent precisely for failing to comply with applicable
statutory requirements The business of a common carrier impinges directly and intimately upon the safety and well being and property of those
members of the general community who happen to deal with such carrier. The law imposes duties and liabilities upon common carriers for the safety
and protection of those who utilize their services and the law cannot allow a common carrier to render such duties and liabilities merely facultative by
simply failing to obtain the necessary permits and authorizations.
Moving on to the second assigned error, we find that the M/V "Cherokee" was not seaworthy when it embarked on its voyage on 19 November
1984. The vessel was not even sufficiently manned at the time. "For a vessel to be seaworthy, it must be adequately equipped for the voyage
and manned with a sufficient number of competent officers and crew. The failure of a common carrier to maintain in seaworthy condition its
vessel involved in a contract of carriage is a clear breach of its duty prescribed in Article 1755 of the Civil Code." 16
Neither do we agree with LOADSTAR's argument that the "limited liability" theory should be applied in this case. The doctrine of limited liability
does not apply where there was negligence on the part of the vessel owner or agent. 17 LOADSTAR was at fault or negligent in not maintaining
a seaworthy vessel and in having allowed its vessel to sail despite knowledge of an approaching typhoon. In any event, it did not sink because
of any storm that may be deemed as force majeure, inasmuch as the wind condition in the performance of its duties, LOADSTAR cannot hide
behind the "limited liability" doctrine to escape responsibility for the loss of the vessel and its cargo.
LOADSTAR also claims that the Court of Appeals erred in holding it liable for the loss of the goods, in utter disregard of this Court's pronouncements in
St. Paul Fire & Marine Ins. Co. v. Macondray & Co., Inc., 18 and National Union Fire Insurance v. Stolt-Nielsen Phils., Inc. 19 It was ruled in these two
cases that after paying the claim of the insured for damages under the insurance policy, the insurer is subrogated merely to the rights of the assured,
that is, it can recover only the amount that may, in turn, be recovered by the latter. Since the right of the assured in case of loss or damage to the goods
is limited or restricted by the provisions in the bills of lading, a suit by the insurer as subrogee is necessarily subject to the same limitations and
restrictions. We do not agree. In the first place, the cases relied on by LOADSTAR involved a limitation on the carrier's liability to an amount fixed in the
bill of lading which the parties may enter into, provided that the same was freely and fairly agreed upon (Articles 1749-1750). On the other hand, the
stipulation in the case at bar effectively reduces the common carrier's liability for the loss or destruction of the goods to a degree less than extraordinary
(Articles 1744 and 1745), that is, the carrier is not liable for any loss or damage to shipments made at "owner's risk." Such stipulation is obviously null
and void for being contrary to public policy." 20 It has been said:
Three kinds of stipulations have often been made in a bill of lading. The first one exempting the carrier from any and all liability for loss or
damage occasioned by its own negligence. The second is one providing for an unqualified limitation of such liability to an agreed valuation.
And the third is one limiting the liability of the carrier to an agreed valuation unless the shipper declares a higher value and pays a higher rate
of. freight. According to an almost uniform weight of authority, the first and second kinds of stipulations are invalid as being contrary to public
policy, but the third is valid and enforceable. 21
Since the stipulation in question is null and void, it follows that when MIC paid the shipper, it was subrogated to all the rights which the latter
has against the common carrier, LOADSTAR.
Neither is there merit to the contention that the claim in this case was barred by prescription. MIC's cause of action had not yet prescribed at
the time it was concerned. Inasmuch as neither the Civil Code nor the Code of Commerce states a specific prescriptive period on the matter,
the Carriage of Goods by Sea Act (COGSA) which provides for a one-year period of limitation on claims for loss of, or damage to, cargoes
sustained during transit may be applied suppletorily to the case at bar. This one-year prescriptive period also applies to the insurer of the
goods. 22 In this case, the period for filing the action for recovery has not yet elapsed. Moreover, a stipulation reducing the one-year period is
null and void; 23 it must, accordingly, be struck down.
WHEREFORE, the instant petition is DENIED and the challenged decision of 30 January 1997 of the Court of Appeals in CA-G.R. CV No.
36401 is AFFIRMED. Costs against petitioner.1wphi1.nt
SO ORDERED.
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 125948 December 29, 1998
FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner,

vs.
COURT OF APPEALS, HONORABLE PATERNO V. TAC-AN, BATANGAS CITY and ADORACION C. ARELLANO, in her official capacity
as City Treasurer of Batangas, respondents.
MARTINEZ, J.:
This petition for review on certiorari assails the Decision of the Court of Appeals dated November 29, 1995, in CA-G.R. SP No. 36801,
affirming the decision of the Regional Trial Court of Batangas City, Branch 84, in Civil Case No. 4293, which dismissed petitioners' complaint
for a business tax refund imposed by the City of Batangas.
Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as amended, to contract, install and operate oil pipelines. The
original pipeline concession was granted in 1967 1 and renewed by the Energy Regulatory Board in 1992. 2
Sometime in January 1995, petitioner applied for a mayor's permit with the Office of the Mayor of Batangas City. However, before the mayor's
permit could be issued, the respondent City Treasurer required petitioner to pay a local tax based on its gross receipts for the fiscal year 1993
pursuant to the Local Government Code 3. The respondent City Treasurer assessed a business tax on the petitioner amounting to
P956,076.04 payable in four installments based on the gross receipts for products pumped at GPS-1 for the fiscal year 1993 which amounted
to P181,681,151.00. In order not to hamper its operations, petitioner paid the tax under protest in the amount of P239,019.01 for the first
quarter of 1993.
On January 20, 1994, petitioner filed a letter-protest addressed to the respondent City Treasurer, the pertinent portion of which reads:
Please note that our Company (FPIC) is a pipeline operator with a government concession granted under the Petroleum Act. It is engaged in
the business of transporting petroleum products from the Batangas refineries, via pipeline, to Sucat and JTF Pandacan Terminals. As such,
our Company is exempt from paying tax on gross receipts under Section 133 of the Local Government Code of 1991 . . . .
Moreover, Transportation contractors are not included in the enumeration of contractors under Section 131, Paragraph (h) of the Local
Government Code. Therefore, the authority to impose tax "on contractors and other independent contractors" under Section 143, Paragraph
(e) of the Local Government Code does not include the power to levy on transportation contractors.
The imposition and assessment cannot be categorized as a mere fee authorized under Section 147 of the Local Government Code. The said
section limits the imposition of fees and charges on business to such amounts as may be commensurate to the cost of regulation, inspection,
and licensing. Hence, assuming arguendo that FPIC is liable for the license fee, the imposition thereof based on gross receipts is violative of
the aforecited provision. The amount of P956,076.04 (P239,019.01 per quarter) is not commensurate to the cost of regulation, inspection and
licensing. The fee is already a revenue raising measure, and not a mere regulatory imposition. 4
On March 8, 1994, the respondent City Treasurer denied the protest contending that petitioner cannot be considered engaged in
transportation business, thus it cannot claim exemption under Section 133 (j) of the Local Government Code. 5
On June 15, 1994, petitioner filed with the Regional Trial Court of Batangas City a complaint 6 for tax refund with prayer for writ of preliminary
injunction against respondents City of Batangas and Adoracion Arellano in her capacity as City Treasurer. In its complaint, petitioner alleged,
inter alia, that: (1) the imposition and collection of the business tax on its gross receipts violates Section 133 of the Local Government Code;
(2) the authority of cities to impose and collect a tax on the gross receipts of "contractors and independent contractors" under Sec. 141 (e) and
151 does not include the authority to collect such taxes on transportation contractors for, as defined under Sec. 131 (h), the term "contractors"
excludes transportation contractors; and, (3) the City Treasurer illegally and erroneously imposed and collected the said tax, thus meriting the
immediate refund of the tax paid. 7
Traversing the complaint, the respondents argued that petitioner cannot be exempt from taxes under Section 133 (j) of the Local Government
Code as said exemption applies only to "transportation contractors and persons engaged in the transportation by hire and common carriers by
air, land and water." Respondents assert that pipelines are not included in the term "common carrier" which refers solely to ordinary carriers
such as trucks, trains, ships and the like. Respondents further posit that the term "common carrier" under the said code pertains to the mode
or manner by which a product is delivered to its destination. 8
On October 3, 1994, the trial court rendered a decision dismissing the complaint, ruling in this wise:
. . . Plaintiff is either a contractor or other independent contractor.
. . . the exemption to tax claimed by the plaintiff has become unclear. It is a rule that tax exemptions are to be strictly construed against the
taxpayer, taxes being the lifeblood of the government. Exemption may therefore be granted only by clear and unequivocal provisions of law.
Plaintiff claims that it is a grantee of a pipeline concession under Republic Act 387. (Exhibit A) whose concession was lately renewed by the
Energy Regulatory Board (Exhibit B). Yet neither said law nor the deed of concession grant any tax exemption upon the plaintiff.
Even the Local Government Code imposes a tax on franchise holders under Sec. 137 of the Local Tax Code. Such being the situation
obtained in this case (exemption being unclear and equivocal) resort to distinctions or other considerations may be of help:
1. That the exemption granted under Sec. 133 (j) encompasses only common carriers so as not to overburden the riding public or commuters
with taxes. Plaintiff is not a common carrier, but a special carrier extending its services and facilities to a single specific or "special customer"
under a "special contract."
2. The Local Tax Code of 1992 was basically enacted to give more and effective local autonomy to local governments than the previous
enactments, to make them economically and financially viable to serve the people and discharge their functions with a concomitant obligation
to accept certain devolution of powers, . . . So, consistent with this policy even franchise grantees are taxed (Sec. 137) and contractors are
also taxed under Sec. 143 (e) and 151 of the Code. 9
Petitioner assailed the aforesaid decision before this Court via a petition for review. On February 27, 1995, we referred the case to the
respondent Court of Appeals for consideration and adjudication. 10 On November 29, 1995, the respondent court rendered a decision 11
affirming the trial court's dismissal of petitioner's complaint. Petitioner's motion for reconsideration was denied on July 18, 1996. 12
Hence, this petition. At first, the petition was denied due course in a Resolution dated November 11, 1996. 13 Petitioner moved for a
reconsideration which was granted by this Court in a Resolution 14 of January 22, 1997. Thus, the petition was reinstated.
Petitioner claims that the respondent Court of Appeals erred in holding that (1) the petitioner is not a common carrier or a transportation
contractor, and (2) the exemption sought for by petitioner is not clear under the law.
There is merit in the petition.
A "common carrier" may be defined, broadly, as one who holds himself out to the public as engaged in the business of transporting persons or
property from place to place, for compensation, offering his services to the public generally.
Art. 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm or association engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public."
The test for determining whether a party is a common carrier of goods is:
1. He must be engaged in the business of carrying goods for others as a public employment, and must hold himself out as ready to engage in
the transportation of goods for person generally as a business and not as a casual occupation;
2. He must undertake to carry goods of the kind to which his business is confined;
3. He must undertake to carry by the method by which his business is conducted and over his established roads; and
4. The transportation must be for hire. 15
Based on the above definitions and requirements, there is no doubt that petitioner is a common carrier. It is engaged in the business of
transporting or carrying goods, i.e. petroleum products, for hire as a public employment. It undertakes to carry for all persons indifferently, that
is, to all persons who choose to employ its services, and transports the goods by land and for compensation. The fact that petitioner has a
limited clientele does not exclude it from the definition of a common carrier. In De Guzman vs. Court of Appeals 16 we ruled that:
The above article (Art. 1732, Civil Code) makes no distinction between one whose principal business activity is the carrying of persons or
goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as a "sideline"). Article 1732 . . . 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
population. We think that Article 1877 deliberately refrained from making such distinctions.
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
in the transportation of passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal,
irrigation system gas, electric light heat and power, water supply and power petroleum, sewerage system, wire or wireless communications
systems, wire or wireless broadcasting stations and other similar public services. (Emphasis Supplied)
Also, respondent's argument that the term "common carrier" as used in Section 133 (j) of the Local Government Code refers only to common
carriers transporting goods and passengers through moving vehicles or vessels either by land, sea or water, is erroneous.
As correctly pointed out by petitioner, the definition of "common carriers" in the Civil Code makes no distinction as to the means of
transporting, as long as it is by land, water or air. It does not provide that the transportation of the passengers or goods should be by motor
vehicle. In fact, in the United States, oil pipe line operators are considered common carriers. 17
Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a "common carrier." Thus, Article 86 thereof provides that:
Art. 86. Pipe line concessionaire as common carrier. A pipe line shall have the preferential right to utilize installations for the transportation
of petroleum owned by him, but is obligated to utilize the remaining transportation capacity pro rata for the transportation of such other
petroleum as may be offered by others for transport, and to charge without discrimination such rates as may have been approved by the
Secretary of Agriculture and Natural Resources.
Republic Act 387 also regards petroleum operation as a public utility. Pertinent portion of Article 7 thereof provides:
that everything relating to the exploration for and exploitation of petroleum . . . and everything relating to the manufacture, refining, storage, or
transportation by special methods of petroleum, is hereby declared to be a public utility. (Emphasis Supplied)
The Bureau of Internal Revenue likewise considers the petitioner a "common carrier." In BIR Ruling No. 069-83, it declared:
. . . since [petitioner] is a pipeline concessionaire that is engaged only in transporting petroleum products, it is considered a common carrier
under Republic Act No. 387 . . . . Such being the case, it is not subject to withholding tax prescribed by Revenue Regulations No. 13-78, as
amended.
From the foregoing disquisition, there is no doubt that petitioner is a "common carrier" and, therefore, exempt from the business tax as
provided for in Section 133 (j), of the Local Government Code, to wit:
Sec. 133. Common Limitations on the Taxing Powers of Local Government Units. Unless otherwise provided herein, the exercise of the
taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following:
(j) Taxes on the gross receipts of transportation contractors and persons engaged in the transportation of passengers or freight by hire and
common carriers by air, land or water, except as provided in this Code.
The deliberations conducted in the House of Representatives on the Local Government Code of 1991 are illuminating:
MR. AQUINO (A). Thank you, Mr. Speaker.
Mr. Speaker, we would like to proceed to page 95, line
1. It states: "SEC. 121 [now Sec. 131]. Common Limitations on the Taxing Powers of Local Government Units." . . .
MR. AQUINO (A.). Thank you Mr. Speaker.
Still on page 95, subparagraph 5, on taxes on the business of transportation. This appears to be one of those being deemed to be exempted
from the taxing powers of the local government units. May we know the reason why the transportation business is being excluded from the
taxing powers of the local government units?
MR. JAVIER (E.). Mr. Speaker, there is an exception contained in Section 121 (now Sec. 131), line 16, paragraph 5. It states that local
government units may not impose taxes on the business of transportation, except as otherwise provided in this code.
Now, Mr. Speaker, if the Gentleman would care to go to page 98 of Book II, one can see there that provinces have the power to impose a tax
on business enjoying a franchise at the rate of not more than one-half of 1 percent of the gross annual receipts. So, transportation contractors
who are enjoying a franchise would be subject to tax by the province. That is the exception, Mr. Speaker.
What we want to guard against here, Mr. Speaker, is the imposition of taxes by local government units on the carrier business. Local
government units may impose taxes on top of what is already being imposed by the National Internal Revenue Code which is the so-called
"common carriers tax." We do not want a duplication of this tax, so we just provided for an exception under Section 125 [now Sec. 137] that a
province may impose this tax at a specific rate.
MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker. . . . 18
It is clear that the legislative intent in excluding from the taxing power of the local government unit the imposition of business tax against
common carriers is to prevent a duplication of the so-called "common carrier's tax."
Petitioner is already paying three (3%) percent common carrier's tax on its gross sales/earnings under the National Internal Revenue Code.
To tax petitioner again on its gross receipts in its transportation of petroleum business would defeat the purpose of the Local Government
Code.
19
WHEREFORE, the petition is hereby GRANTED. The decision of the respondent Court of Appeals dated November 29, 1995 in CA-G.R. SP
No. 36801 is REVERSED and SET ASIDE.
SO ORDERED.
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 112287 December 12, 1997
NATIONAL STEEL CORPORATION, petitioner, vs.

COURT OF APPEALS AND VLASONS SHIPPING, INC., respondents.
G.R. No. 112350 December 12, 1997
VLASONS SHIPPING, INC., petitioner, vs.
COURT OF APPEALS AND NATIONAL STEEL CORPORATION, respondents.
PANGANIBAN, J.:
The Court finds occasion to apply the rules on the seaworthiness of private carrier, its owner's responsibility for damage to the cargo and its
liability for demurrage and attorney's fees. The Court also reiterates the well-known rule that findings of facts of trial courts, when affirmed by
the Court of Appeals, are binding on this Court.
The Case
Before us are two separate petitions for review filed by National Steel Corporation (NSC) and Vlasons Shipping, Inc. (VSI), both of which
assail the August 12, 1993 Decision of the Court of Appeals. 1 The Court of Appeals modified the decision of the Regional Trial Court of Pasig,
Metro Manila, Branch 163 in Civil Case No. 23317. The RTC disposed as follows:
WHEREFORE, judgment is hereby rendered in favor of defendant and against the plaintiff dismissing the complaint with cost against plaintiff,
and ordering plaintiff to pay the defendant on the counterclaim as follows:
1. The sum of P75,000.00 as unpaid freight and P88,000.00 as demurrage with interest at the legal rate on both amounts from April 7, 1976
until the same shall have been fully paid;
2. Attorney's fees and expenses of litigation in the sum of P100,000.00; and
3. Costs of suit.
SO ORDERED. 2
On the other hand, the Court of Appeals ruled:
WHEREFORE, premises considered, the decision appealed from is modified by reducing the award for demurrage to P44,000.00 and deleting
the award for attorney's fees and expenses of litigation. Except as thus modified, the decision is AFFIRMED. There is no pronouncement as to
costs.
SO ORDERED. 3
The Facts
The MV Vlasons I is a vessel which renders tramping service and, as such, does not transport cargo or shipment for the general public. Its
services are available only to specific persons who enter into a special contract of charter party with its owner. It is undisputed that the ship is
a private carrier. And it is in the capacity that its owner, Vlasons Shipping, Inc., entered into a contract of affreightment or contract of voyage
charter hire with National Steel Corporation.
The facts as found by Respondent Court of Appeals are as follows:
(1) On July 17, 1974, plaintiff National Steel Corporation (NSC) as Charterer and defendant Vlasons Shipping, Inc. (VSI) as Owner, entered
into a Contract of Voyage Charter Hire (Exhibit "B"; also Exhibit "1") whereby NSC hired VSI's vessel, the MV "VLASONS I" to make one (1)
voyage to load steel products at Iligan City and discharge them at North Harbor, Manila, under the following terms and conditions, viz:
1. . . .
2. Cargo: Full cargo of steel products of not less than 2,500 MT, 10% more or less at Master's option.
3. . . .
4. Freight/Payment: P30.00/metric ton, FIOST basis. Payment upon presentation of Bill of Lading within fifteen (15) days.
5. Laydays/Cancelling: July 26, 1974/Aug. 5, 1974.

6. Loading/Discharging Rate: 750 tons per WWDSHINC. (Weather Working Day of 24 consecutive hours, Sundays and Holidays Included).
7. Demurrage/Dispatch: P8,000.00/P4,000.00 per day.
8. . . .
9. Cargo Insurance: Charterer's and/or Shipper's must insure the cargoes. Shipowners not responsible for losses/damages except on proven
willful negligence of the officers of the vessel.
10. Other terms: (a) All terms/conditions of NONYAZAI C/P [sic] or other internationally recognized Charter Party Agreement shall form part of
this Contract.
The terms "F.I.O.S.T." which is used in the shipping business is a standard provision in the NANYOZAI Charter Party which stands for "Freight
In and Out including Stevedoring and Trading", which means that the handling, loading and unloading of the cargoes are the responsibility of
the Charterer. Under Paragraph 5 of the NANYOZAI Charter Party, it states, "Charterers to load, stow and discharge the cargo free of risk and
expenses to owners. . . . (Emphasis supplied).
Under paragraph 10 thereof, it is provided that "(o)wners shall, before and at the beginning of the voyage, exercise due diligence to make the
vessel seaworthy and properly manned, equipped and supplied and to make the holds and all other parts of the vessel in which cargo is
carried, fit and safe for its reception, carriage and preservation. Owners shall not be liable for loss of or damage of the cargo arising or
resulting from: unseaworthiness unless caused by want of due diligence on the part of the owners to make the vessel seaworthy, and to
secure that the vessel is properly manned, equipped and supplied and to make the holds and all other parts of the vessel in which cargo is
carried, fit and safe for its reception, carriage and preservation; . . . ; perils, dangers and accidents of the sea or other navigable waters; . . . ;
wastage in bulk or weight or any other loss or damage arising from inherent defect, quality or vice of the cargo; insufficiency of packing; . . . ;
latent defects not discoverable by due diligence; any other cause arising without the actual fault or privity of Owners or without the fault of the
agents or servants of owners."
Paragraph 12 of said NANYOZAI Charter Party also provides that "(o)wners shall not be responsible for split, chafing and/or any damage
unless caused by the negligence or default of the master and crew."
(2) On August 6, 7 and 8, 1974, in accordance with the Contract of Voyage Charter Hire, the MV "VLASONS I" loaded at plaintiffs pier at Iligan
City, the NSC's shipment of 1,677 skids of tinplates and 92 packages of hot rolled sheets or a total of 1,769 packages with a total weight of
about 2,481.19 metric tons for carriage to Manila. The shipment was placed in the three (3) hatches of the ship. Chief Mate Gonzalo Sabando,
acting as agent of the vessel[,] acknowledged receipt of the cargo on board and signed the corresponding bill of lading, B.L.P.P. No. 0233
(Exhibit "D") on August 8, 1974.
(3) The vessel arrived with the cargo at Pier 12, North Harbor, Manila, on August 12, 1974. The following day, August 13, 1974, when the
vessel's three (3) hatches containing the shipment were opened by plaintiff's agents, nearly all the skids of tinplates and hot rolled sheets were
allegedly found to be wet and rusty. The cargo was discharged and unloaded by stevedores hired by the Charterer. Unloading was completed
only on August 24, 1974 after incurring a delay of eleven (11) days due to the heavy rain which interrupted the unloading operations. (Exhibit
"E")
(4) To determine the nature and extent of the wetting and rusting, NSC called for a survey of the shipment by the Manila Adjusters and
Surveyors Company (MASCO). In a letter to the NSC dated March 17, 1975 (Exhibit "G"), MASCO made a report of its ocular inspection
conducted on the cargo, both while it was still on board the vessel and later at the NDC warehouse in Pureza St., Sta. Mesa, Manila where the
cargo was taken and stored. MASCO reported that it found wetting and rusting of the packages of hot rolled sheets and metal covers of the
tinplates; that tarpaulin hatch covers were noted torn at various extents; that container/metal casings of the skids were rusting all over.
MASCO ventured the opinion that "rusting of the tinplates was caused by contact with SEA WATER sustained while still on board the vessel
as a consequence of the heavy weather and rough seas encountered while en route to destination (Exhibit "F"). It was also reported that
MASCO's surveyors drew at random samples of bad order packing materials of the tinplates and delivered the same to the M.I.T. Testing
Laboratories for analysis. On August 31, 1974, the M.I.T. Testing Laboratories issued Report No. 1770 (Exhibit "I") which in part, states, "The
analysis of bad order samples of packing materials . . . shows that wetting was caused by contact with SEA WATER".
(5) On September 6, 1974, on the basis of the aforesaid Report No. 1770, plaintiff filed with the defendant its claim for damages suffered due
to the downgrading of the damaged tinplates in the amount of P941,145.18. Then on October 3, 1974, plaintiff formally demanded payment of
said claim but defendant VSI refused and failed to pay. Plaintiff filed its complaint against defendant on April 21, 1976 which was docketed as
Civil Case No. 23317, CFI, Rizal.
(6) In its complaint, plaintiff claimed that it sustained losses in the aforesaid amount of P941,145.18 as a result of the act, neglect and default
of the master and crew in the management of the vessel as well as the want of due diligence on the part of the defendant to make the vessel
seaworthy and to make the holds and all other parts of the vessel in which the cargo was carried, fit and safe for its reception, carriage and
preservation all in violation of defendant's undertaking under their Contract of Voyage Charter Hire.
(7) In its answer, defendant denied liability for the alleged damage claiming that the MV "VLASONS I" was seaworthy in all respects for the
carriage of plaintiff's cargo; that said vessel was not a "common carrier" inasmuch as she was under voyage charter contract with the plaintiff
as charterer under the charter party; that in the course of the voyage from Iligan City to Manila, the MV "VLASONS I" encountered very rough
seas, strong winds and adverse weather condition, causing strong winds and big waves to continuously pound against the vessel and
seawater to overflow on its deck and hatch covers, that under the Contract of Voyage Charter Hire, defendant shall not be responsible for
losses/damages except on proven willful negligence of the officers of the vessel, that the officers of said MV "VLASONS I" exercised due
diligence and proper seamanship and were not willfully negligent; that furthermore the Voyage Charter Party provides that loading and
discharging of the cargo was on FIOST terms which means that the vessel was free of risk and expense in connection with the loading and
discharging of the cargo; that the damage, if any, was due to the inherent defect, quality or vice of the cargo or to the insufficient packing
thereof or to latent defect of the cargo not discoverable by due diligence or to any other cause arising without the actual fault or privity of
defendant and without the fault of the agents or servants of defendant; consequently, defendant is not liable; that the stevedores of plaintiff
who discharged the cargo in Manila were negligent and did not exercise due care in the discharge of the cargo; land that the cargo was
exposed to rain and seawater spray while on the pier or in transit from the pier to plaintiff's warehouse after discharge from the vessel; and
that plaintiff's claim was highly speculative and grossly exaggerated and that the small stain marks or sweat marks on the edges of the
tinplates were magnified and considered total loss of the cargo. Finally, defendant claimed that it had complied with all its duties and
obligations under the Voyage Charter Hire Contract and had no responsibility whatsoever to plaintiff. In turn, it alleged the following
counterclaim:
(a) That despite the full and proper performance by defendant of its obligations under the Voyage Charter Hire Contract, plaintiff failed and
refused to pay the agreed charter hire of P75,000.00 despite demands made by defendant;
(b) That under their Voyage Charter Hire Contract, plaintiff had agreed to pay defendant the sum of P8,000.00 per day for demurrage. The
vessel was on demurrage for eleven (11) days in Manila waiting for plaintiff to discharge its cargo from the vessel. Thus, plaintiff was liable to
pay defendant demurrage in the total amount of P88,000.00.
(c) For filing a clearly unfounded civil action against defendant, plaintiff should be ordered to pay defendant attorney's fees and all expenses of
litigation in the amount of not less than P100,000.00.
(8) From the evidence presented by both parties, the trial court came out with the following findings which were set forth in its decision:
(a) The MV "VLASONS I" is a vessel of Philippine registry engaged in the tramping service and is available for hire only under special
contracts of charter party as in this particular case.
(b) That for purposes of the voyage covered by the Contract of Voyage Charter Hire (Exh. "1"), the MV VLASONS I" was covered by the
required seaworthiness certificates including the Certification of Classification issued by an international classification society, the NIPPON
KAIJI KYOKAI (Exh. "4"); Coastwise License from the Board of Transportation (Exh. "5"); International Loadline Certificate from the Philippine
Coast Guard (Exh. "6"); Cargo Ship Safety Equipment Certificate also from the Philippine Coast Guard (Exh. "7"); Ship Radio Station License
(Exh. "8"); Certificate of Inspection by the Philippine Coast Guard (Exh. "12"); and Certificate of Approval for Conversion issued by the Bureau
of Customs (Exh. "9"). That being a vessel engaged in both overseas and coastwise trade, the MV "VLASONS I" has a higher degree of
seaworthiness and safety.
(c) Before it proceeded to Iligan City to perform the voyage called for by the Contract of Voyage Charter Hire, the MV "VLASONS I" underwent
drydocking in Cebu and was thoroughly inspected by the Philippine Coast Guard. In fact, subject voyage was the vessel's first voyage after
the drydocking. The evidence shows that the MV "VLASONS I" was seaworthy and properly manned, equipped and supplied when it
undertook the voyage. It has all the required certificates of seaworthiness.
(d) The cargo/shipment was securely stowed in three (3) hatches of the ship. The hatch openings were covered by hatchboards which were in
turn covered by two or double tarpaulins. The hatch covers were water tight. Furthermore, under the hatchboards were steel beams to give
support.
(e) The claim of the plaintiff that defendant violated the contract of carriage is not supported by evidence. The provisions of the Civil Code on
common carriers pursuant to which there exists a presumption of negligence in case of loss or damage to the cargo are not applicable. As to
the damage to the tinplates which was allegedly due to the wetting and rusting thereof, there is unrebutted testimony of witness Vicente
Angliongto that tinplates "sweat" by themselves when packed even without being in contract (sic) with water from outside especially when the
weather is bad or raining. The trust caused by sweat or moisture on the tinplates may be considered as a loss or damage but then, defendant
cannot be held liable for it pursuant to Article 1734 of the Civil Case which exempts the carrier from responsibility for loss or damage arising
from the "character of the goods . . ." All the 1,769 skids of the tinplates could not have been damaged by water as claimed by plaintiff. It was
shown as claimed by plaintiff that the tinplates themselves were wrapped in kraft paper lining and corrugated cardboards could not be affected
by water from outside.
(f) The stevedores hired by the plaintiff to discharge the cargo of tinplates were negligent in not closing the hatch openings of the MV
"VLASONS I" when rains occurred during the discharging of the cargo thus allowing rainwater to enter the hatches. It was proven that the
stevedores merely set up temporary tents to cover the hatch openings in case of rain so that it would be easy for them to resume work when
the rains stopped by just removing the tent or canvas. Because of this improper covering of the hatches by the stevedores during the
discharging and unloading operations which were interrupted by rains, rainwater drifted into the cargo through the hatch openings. Pursuant to
paragraph 5 of the NANYOSAI [sic] Charter Party which was expressly made part of the Contract of Voyage Charter Hire, the loading, stowing
and discharging of the cargo is the sole responsibility of the plaintiff charterer and defendant carrier has no liability for whatever damage may
occur or maybe [sic] caused to the cargo in the process.
(g) It was also established that the vessel encountered rough seas and bad weather while en route from Iligan City to Manila causing sea
water to splash on the ship's deck on account of which the master of the vessel (Mr. Antonio C. Dumlao) filed a "Marine Protest" on August 13,
1974 (Exh. "15"); which can be invoked by defendant as a force majeure that would exempt the defendant from liability.
(h) Plaintiff did not comply with the requirement prescribed in paragraph 9 of the Voyage Charter Hire contract that it was to insure the cargo
because it did not. Had plaintiff complied with the requirement, then it could have recovered its loss or damage from the insurer. Plaintiff also
violated the charter party contract when it loaded not only "steel products", i.e. steel bars, angular bars and the like but also tinplates and hot
rolled sheets which are high grade cargo commanding a higher freight. Thus plaintiff was able to ship grade cargo at a lower freight rate.
(i) As regards defendant's counterclaim, the contract of voyage charter hire under Paragraph 4 thereof, fixed the freight at P30.00 per metric
ton payable to defendant carrier upon presentation of the bill of lading within fifteen (15) days. Plaintiff has not paid the total freight due of
P75,000.00 despite demands. The evidence also showed that the plaintiff was required and bound under paragraph 7 of the same Voyage
Charter Hire contract to pay demurrage of P8,000.00 per day of delay in the unloading of the cargoes. The delay amounted to eleven (11)
days thereby making plaintiff liable to pay defendant for demurrage in the amount of P88,000.00.
Appealing the RTC decision to the Court of Appeals, NSC alleged six errors:
I. The trial court erred in finding that the MV "VLASONS I" was seaworthy, properly manned, equipped and supplied, and that there is no
proof of willful negligence of the vessel's officers.
II. The trial court erred in finding that the rusting of NSC's tinplates was due to the inherent nature or character of the goods and not due to
contact with seawater.
III.
The trial court erred in finding that the stevedores hired by NSC were negligent in the unloading of NSC's shipment.
IV.
The trial court erred in exempting VSI from liability on the ground of force majeure.
V.
The trial court erred in finding that NSC violated the contract of voyage charter hire.
VI.
The trial court erred in ordering NSC to pay freight, demurrage and attorney's fees, to VSI. 4
As earlier stated, the Court of Appeals modified the decision of the trial court by reducing the demurrage from P88,000.00 to P44,000.00 and
deleting the award of attorneys fees and expenses of litigation. NSC and VSI filed separate motions for reconsideration. In a Resolution 5
dated October 20, 1993, the appellate court denied both motions. Undaunted, NSC and VSI filed their respective petitions for review before
this Court. On motion of VSI, the Court ordered on February 14, 1994 the consolidation of these petitions. 6
The Issues
In its petition 7 and memorandum, 8 NSC raises the following questions of law and fact:
Questions of Law
1. Whether or not a charterer of a vessel is liable for demurrage due to cargo unloading delays caused by weather interruption;
2. Whether or not the alleged "seaworthiness certificates" (Exhibits "3", "4", "5", "6", "7", "8", "9", "11" and "12") were admissible in
evidence and constituted evidence of the vessel's seaworthiness at the beginning of the voyages; and
3. Whether or not a charterer's failure to insure its cargo exempts the shipowner from liability for cargo damage.
Questions of Fact
1. Whether or not the vessel was seaworthy and cargo-worthy;
2. Whether or not vessel's officers and crew were negligent in handling and caring for NSC's cargo;
3. Whether or not NSC's cargo of tinplates did sweat during the voyage and, hence, rusted on their own; and
4. Whether or not NSC's stevedores were negligent and caused the wetting[/]rusting of NSC's tinplates.
In its separate petition, 9 VSI submits for the consideration of this Court the following alleged errors of the CA:
A. The respondent Court of Appeals committed an error of law in reducing the award of demurrage from P88,000.00 to P44,000.00.
B. The respondent Court of Appeals committed an error of law in deleting the award of P100,000 for attorney's fees and expenses of
litigation.
Amplifying the foregoing, VSI raises the following issues in its memorandum: 10
I. Whether or not the provisions of the Civil Code of the Philippines on common carriers pursuant to which there exist[s] a
presumption of negligence against the common carrier in case of loss or damage to the cargo are applicable to a private carrier.
II. Whether or not the terms and conditions of the Contract of Voyage Charter Hire, including the Nanyozai Charter, are valid and
binding on both contracting parties.
The foregoing issues raised by the parties will be discussed under the following headings:
1. Questions of Fact
2. Effect of NSC's Failure to Insure the Cargo
3. Admissibility of Certificates Proving Seaworthiness
4. Demurrage and Attorney's Fees.

The Court's Ruling
The Court affirms the assailed Decision of the Court of Appeals, except in respect of the demurrage.
Preliminary Matter: Common Carrier or Private Carrier?

At the outset, it is essential to establish whether VSI contracted with NSC as a common carrier or as a private carrier. The resolution of this
preliminary question determines the law, standard of diligence and burden of proof applicable to the present case.
Article 1732 of the Civil Code defines a common carrier as "persons, corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public." It has been held that
the true test of a common carrier is the carriage of passengers or goods, provided it has space, for all who opt to avail themselves of its
transportation service for a fee. 11 A carrier which does not qualify under the above test is deemed a private carrier. "Generally, private carriage
is undertaken by special agreement and the carrier does not hold himself out to carry goods for the general public. The most typical, although
not the only form of private carriage, is the charter party, a maritime contract by which the charterer, a party other than the shipowner, obtains
the use and service of all or some part of a ship for a period of time or a voyage or voyages." 12
In the instant case, it is undisputed that VSI did not offer its services to the general public. As found by the Regional Trial Court, it carried
passengers or goods only for those it chose under a "special contract of charter party." 13 As correctly concluded by the Court of Appeals, the
MV Vlasons I "was not a common but a private carrier." 14 Consequently, the rights and obligations of VSI and NSC, including their respective
liability for damage to the cargo, are determined primarily by stipulations in their contract of private carriage or charter party. 15 Recently, in
Valenzuela Hardwood and Industrial Supply, Inc., vs. Court of Appeals and Seven Brothers Shipping Corporation, 16 the Court ruled:
. . . in a contract of private carriage, the parties may freely stipulate their duties and obligations which perforce would be binding on them.
Unlike in a contract involving a common carrier, private carriage does not involve the general public. Hence, the stringent provisions of the
Civil Code on common carriers protecting the general public cannot justifiably be applied to a ship transporting commercial goods as a private
carrier. Consequently, the public policy embodied therein is not contravened by stipulations in a charter party that lessen or remove the
protection given by law in contracts involving common carriers. 17
Extent of VSI's Responsibility and Liability Over NSC's Cargo
It is clear from the parties' Contract of Voyage Charter Hire, dated July 17, 1974, that VSI "shall not be responsible for losses except on proven
willful negligence of the officers of the vessel." The NANYOZAI Charter Party, which was incorporated in the parties' contract of transportation
further provided that the shipowner shall not be liable for loss of or a damage to the cargo arising or resulting from unseaworthiness, unless
the same was caused by its lack of due diligence to make the vessel seaworthy or to ensure that the same was "properly manned, equipped
and supplied," and to "make the holds and all other parts of the vessel in which cargo [was] carried, fit and safe for its reception, carriage and
preservation." 18 The NANYOZAI Charter Party also provided that "[o]wners shall not be responsible for split, chafing and/or any damage
unless caused by the negligence or default of the master or crew." 19
Burden of Proof
In view of the aforementioned contractual stipulations, NSC must prove that the damage to its shipment was caused by VSI's willful
negligence or failure to exercise due diligence in making MV Vlasons I seaworthy and fit for holding, carrying and safekeeping the cargo.
Ineluctably, the burden of proof was placed on NSC by the parties' agreement.
This view finds further support in the Code of Commerce which pertinently provides:
Art. 361. Merchandise shall be transported at the risk and venture of the shipper, if the contrary has not been expressly stipulated.
Therefore, the damage and impairment suffered by the goods during the transportation, due to fortuitous event, force majeure, or the nature
and inherent defect of the things, shall be for the account and risk of the shipper.
The burden of proof of these accidents is on the carrier.
Art. 362. The carrier, however, shall be liable for damages arising from the cause mentioned in the preceding article if proofs against him show
that they occurred on account of his negligence or his omission to take the precautions usually adopted by careful persons, unless the shipper
committed fraud in the bill of lading, making him to believe that the goods were of a class or quality different from what they really were.
Because the MV Vlasons I was a private carrier, the shipowner's obligations are governed by the foregoing provisions of the Code of
Commerce and not by the Civil Code which, as a general rule, places the prima facie presumption of negligence on a common carrier. It is a
hornbook doctrine that:
In an action against a private carrier for loss of, or injury to, cargo, the burden is on the plaintiff to prove that the carrier was negligent or
unseaworthy, and the fact that the goods were lost or damaged while in the carrier's custody does not put the burden of proof on the carrier.
Since . . . a private carrier is not an insurer but undertakes only to exercise due care in the protection of the goods committed to its care, the
burden of proving negligence or a breach of that duty rests on plaintiff and proof of loss of, or damage to, cargo while in the carrier's
possession does not cast on it the burden of proving proper care and diligence on its part or that the loss occurred from an excepted cause in
the contract or bill of lading. However, in discharging the burden of proof, plaintiff is entitled to the benefit of the presumptions and inferences
by which the law aids the bailor in an action against a bailee, and since the carrier is in a better position to know the cause of the loss and that
it was not one involving its liability, the law requires that it come forward with the information available to it, and its failure to do so warrants an
inference or presumption of its liability. However, such inferences and presumptions, while they may affect the burden of coming forward with
evidence, do not alter the burden of proof which remains on plaintiff, and, where the carrier comes forward with evidence explaining the loss or
damage, the burden of going forward with the evidence is again on plaintiff.
Where the action is based on the shipowner's warranty of seaworthiness, the burden of proving a breach thereof and that such breach was the
proximate cause of the damage rests on plaintiff, and proof that the goods were lost or damaged while in the carrier's possession does not
cast on it the burden of proving seaworthiness. . . . Where the contract of carriage exempts the carrier from liability for unseaworthiness not
discoverable by due diligence, the carrier has the preliminary burden of proving the exercise of due diligence to make the vessel seaworthy. 20
In the instant case, the Court of Appeals correctly found the NSC "has not taken the correct position in relation to the question of who has the
burden of proof. Thus, in its brief (pp. 10-11), after citing Clause 10 and Clause 12 of the NANYOZAI Charter Party (incidentally plaintiffappellant's [NSC's] interpretation of Clause 12 is not even correct), it argues that 'a careful examination of the evidence will show that VSI
miserably failed to comply with any of these obligation's as if defendant-appellee [VSI] had the burden of
proof." 21
First Issue: Questions of Fact
Based on the foregoing, the determination of the following factual questions is manifestly relevant: (1) whether VSI exercised due diligence in
making MV Vlasons I seaworthy for the intended purpose under the charter party; (2) whether the damage to the cargo should be attributed to
the willful negligence of the officers and crew of the vessel or of the stevedores hired by NSC; and (3) whether the rusting of the tinplates was
caused by its own "sweat" or by contact with seawater.
These questions of fact were threshed out and decided by the trial court, which had the firsthand opportunity to hear the parties' conflicting
claims and to carefully weigh their respective evidence. The findings of the trial court were subsequently affirmed by the Court of Appeals.
Where the factual findings of both the trial court and the Court of Appeals coincide, the same are binding on this Court. 22 We stress that,
subject to some exceptional instances, 23 only questions of law not questions of fact may be raised before this Court in a petition for
review under Rule 45 of the Rules of Court. After a thorough review of the case at bar, we find no reason to disturb the lower court's factual
findings, as indeed NSC has not successfully proven the application of any of the aforecited exceptions.
Was MV Vlasons I Seaworthy?
In any event, the records reveal that VSI exercised due diligence to make the ship seaworthy and fit for the carriage of NSC's cargo of steel
and tinplates. This is shown by the fact that it was drylocked and inspected by the Philippine Coast Guard before it proceeded to Iligan City for
its voyage to Manila under the contract of voyage charter hire. 24 The vessel's voyage from Iligan to Manila was the vessel's first voyage after
drydocking. The Philippine Coast Guard Station in Cebu cleared it as seaworthy, fitted and equipped; it met all requirements for trading as
cargo vessel. 25 The Court of Appeals itself sustained the conclusion of the trial court that MV Vlasons I was seaworthy. We find no reason to
modify or reverse this finding of both the trial and the appellate courts.
Who Were Negligent: Seamen or Stevedores?
As noted earlier, the NSC had the burden of proving that the damage to the cargo was caused by the negligence of the officers and the crew
of MV Vlasons I in making their vessel seaworthy and fit for the carriage of tinplates. NSC failed to discharge this burden.
Before us, NSC relies heavily on its claim that MV Vlasons I had used an old and torn tarpaulin or canvas to cover the hatches through which
the cargo was loaded into the cargo hold of the ship. It faults the Court of Appeals for failing to consider such claim as an "uncontroverted fact"
26
and denies that MV Vlasons I "was equipped with new canvas covers in tandem with the old ones as indicated in the Marine Protest . . ." 27
We disagree.
The records sufficiently support VSI's contention that the ship used the old tarpaulin, only in addition to the new one used primarily to make
the ship's hatches watertight. The foregoing are clear from the marine protest of the master of the MV Vlasons I, Antonio C. Dumlao, and the
deposition of the ship's boatswain, Jose Pascua. The salient portions of said marine protest read:
. . . That the M/V "VLASONS I" departed Iligan City or about 0730 hours of August 8, 1974, loaded with approximately 2,487.9 tons of steel
plates and tin plates consigned to National Steel Corporation; that before departure, the vessel was rigged, fully equipped and cleared by the
authorities; that on or about August 9, 1974, while in the vicinity of the western part of Negros and Panay, we encountered very rough seas
and strong winds and Manila office was advised by telegram of the adverse weather conditions encountered; that in the morning of August 10,
1974, the weather condition changed to worse and strong winds and big waves continued pounding the vessel at her port side causing sea
water to overflow on deck andhatch (sic) covers and which caused the first layer of the canvass covering to give way while the new canvass
covering still holding on;
That the weather condition improved when we reached Dumali Point protected by Mindoro; that we re-secured the canvass covering back to
position; that in the afternoon of August 10, 1974, while entering Maricaban Passage, we were again exposed to moderate seas and heavy
rains; that while approaching Fortune Island, we encountered again rough seas, strong winds and big waves which caused the same canvass
to give way and leaving the new canvass holding on;
And the relevant portions of Jose Pascua's deposition are as follows:
q What is the purpose of the canvas cover?
a So that the cargo would not be soaked with water.
q And will you describe how the canvas cover was secured on the hatch opening?
WITNESS: a It was placed flat on top of the hatch cover, with a little canvas flowing over the sides and we place[d] a flat bar over the
canvas on the side of the hatches and then we place[d] a stopper so that the canvas could not be removed.
ATTY DEL ROSARIO
q And will you tell us the size of the hatch opening? The length and the width of the hatch opening.
a Forty-five feet by thirty-five feet, sir.
q How was the canvas supported in the middle of the hatch opening?
a There is a hatch board.
ATTY DEL ROSARIO

q What is the hatch board made of?
a It is made of wood, with a handle.
q And aside from the hatch board, is there any other material there to cover the hatch?
a There is a beam supporting the hatch board.
q What is this beam made of?
a It is made of steel, sir.
q Is the beam that was placed in the hatch opening covering the whole hatch opening?
q How many hatch beams were there placed across the opening?
a No, sir.
a There are five beams in one hatch opening.
ATTY DEL ROSARIO

q And on top of the beams you said there is a hatch board. How many pieces of wood are put on top?
a Plenty, sir, because there are several pieces on top of the hatch beam.
q And is there a space between the hatch boards?
q They are tight together?
q How tight?
a There is none, sir.
a Yes, sir.
a Very tight, sir.
q Now, on top of the hatch boards, according to you, is the canvass cover. How many canvas covers?
a Two, sir. 29
That due diligence was exercised by the officers and the crew of the MV Vlasons I was further demonstrated by the fact that, despite
encountering rough weather twice, the new tarpaulin did not give way and the ship's hatches and cargo holds remained waterproof. As aptly
stated by the Court of Appeals, ". . . we find no reason not to sustain the conclusion of the lower court based on overwhelming evidence, that
the MV 'VLASONS I' was seaworthy when it undertook the voyage on August 8, 1974 carrying on board thereof plaintiff-appellant's shipment
of 1,677 skids of tinplates and 92 packages of hot rolled sheets or a total of 1,769 packages from NSC's pier in Iligan City arriving safely at
North Harbor, Port Area, Manila, on August 12, 1974; . . . 30
Indeed, NSC failed to discharge its burden to show negligence on the part of the officers and the crew of MV Vlasons I. On the contrary, the
records reveal that it was the stevedores of NSC who were negligent in unloading the cargo from the ship.
The stevedores employed only a tent-like material to cover the hatches when strong rains occasioned by a passing typhoon disrupted the
unloading of the cargo. This tent-like covering, however, was clearly inadequate for keeping rain and seawater away from the hatches of the
ship. Vicente Angliongto, an officer of VSI, testified thus:
ATTY ZAMORA:
Q Now, during your testimony on November 5, 1979, you stated on August 14 you went on board the vessel upon notice from the National
Steel Corporation in order to conduct the inspection of the cargo. During the course of the investigation, did you chance to see the discharging
operation?
WITNESS: A Yes, sir, upon my arrival at the vessel, I saw some of the tinplates already discharged on the pier but majority of the tinplates
were inside the hall, all the hatches were opened.
Q In connection with these cargoes which were unloaded, where is the place.
A At the Pier.
Q What was used to protect the same from weather?

ATTY LOPEZ:
We object, your Honor, this question was already asked. This particular matter . . . the transcript of stenographic notes shows the same was
covered in the direct examination.
ATTY ZAMORA:
Precisely, your Honor, we would like to go on detail, this is the serious part of the testimony.
COURT:
All right, witness may answer.
ATTY LOPEZ:
Q What was used in order to protect the cargo from the weather?
A A base of canvas was used as cover on top of the tin plates, and tents were built at the opening of the hatches.
Q You also stated that the hatches were already opened and that there were tents constructed at the opening of the hatches to protect the
cargo from the rain. Now, will you describe [to] the Court the tents constructed.
A The tents are just a base of canvas which look like a tent of an Indian camp raise[d] high at the middle with the whole side separated down
to the hatch, the size of the hatch and it is soaks [sic] at the middle because of those weather and this can be used only to temporarily protect
the cargo from getting wet by rains.
Q Now, is this procedure adopted by the stevedores of covering tents proper?
A No, sir, at the time they were discharging the cargo, there was a typhoon passing by and the hatch tent was not good enough to hold all of it
to prevent the water soaking through the canvass and enter the cargo.
Q In the course of your inspection, Mr. Anglingto [sic], did you see in fact the water enter and soak into the canvass and tinplates.
A Yes, sir, the second time I went there, I saw it.
Q As owner of the vessel, did you not advise the National Steel Corporation [of] the procedure adopted by its stevedores in discharging the
cargo particularly in this tent covering of the hatches?
A Yes, sir, I did the first time I saw it, I called the attention of the stevedores but the stevedores did not mind at all, so, called the attention of
the representative of the National Steel but nothing was done, just the same. Finally, I wrote a letter to them. 31
NSC attempts to discredit the testimony of Angliongto by questioning his failure to complain immediately about the stevedores' negligence on
the first day of unloading, pointing out that he wrote his letter to petitioner only seven days later. 32 The Court is not persuaded. Angliongto's
candid answer in his aforequoted testimony satisfactorily explained the delay. Seven days lapsed because he first called the attention of the
stevedores, then the NSC's representative, about the negligent and defective procedure adopted in unloading the cargo. This series of actions
constitutes a reasonable response in accord with common sense and ordinary human experience. Vicente Angliongto could not be blamed for
calling the stevedores' attention first and then the NSC's representative on location before formally informing NSC of the negligence he had
observed, because he was not responsible for the stevedores or the unloading operations. In fact, he was merely expressing concern for NSC
which was ultimately responsible for the stevedores it had hired and the performance of their task to unload the cargo.
We see no reason to reverse the trial and the appellate courts' findings and conclusions on this point, viz:
In the THIRD assigned error, [NSC] claims that the trial court erred in finding that the stevedores hired by NSC were negligent in the unloading
of NSC's shipment. We do not think so. Such negligence according to the trial court is evident in the stevedores hired by [NSC], not closing the
hatch of MV 'VLASONS I' when rains occurred during the discharging of the cargo thus allowing rain water and seawater spray to enter the
hatches and to drift to and fall on the cargo. It was proven that the stevedores merely set up temporary tents or canvas to cover the hatch
openings when it rained during the unloading operations so that it would be easier for them to resume work after the rains stopped by just
removing said tents or canvass. It has also been shown that on August 20, 1974, VSI President Vicente Angliongto wrote [NSC] calling
attention to the manner the stevedores hired by [NSC] were discharging the cargo on rainy days and the improper closing of the hatches
which allowed continuous heavy rain water to leak through and drip to the tinplates' covers and [Vicente Angliongto] also suggesting that due
to four (4) days continuos rains with strong winds that the hatches be totally closed down and covered with canvas and the hatch tents
lowered. (Exh. "13"). This letter was received by [NSC] on 22 August 1974 while discharging operations were still going on (Exhibit "13-A"). 33
The fact that NSC actually accepted and proceeded to remove the cargo from the ship during unfavorable weather will not make VSI liable for
any damage caused thereby. In passing, it may be noted that the NSC may seek indemnification, subject to the laws on prescription, from the
stevedoring company at fault in the discharge operations. "A stevedore company engaged in discharging cargo . . . has the duty to load the
cargo . . . in a prudent manner, and it is liable for injury to, or loss of, cargo caused by its negligence . . . and where the officers and members
and crew of the vessel do nothing and have no responsibility in the discharge of cargo by stevedores . . . the vessel is not liable for loss of, or
damage to, the cargo caused by the negligence of the stevedores . . ." 34 as in the instant case.
Do Tinplates "Sweat"?
The trial court relied on the testimony of Vicente Angliongto in finding that ". . . tinplates 'sweat' by themselves when packed even without
being in contact with water from outside especially when the weather is bad or raining . . ." 35 The Court of Appeals affirmed the trial court's
finding.
A discussion of this issue appears inconsequential and unnecessary. As previously discussed, the damage to the tinplates was occasioned not
by airborne moisture but by contact with rain and seawater which the stevedores negligently allowed to seep in during the unloading.
Second Issue: Effect of NSC's Failure to Insure the Cargo
The obligation of NSC to insure the cargo stipulated in the Contract of Voyage Charter Hire is totally separate and distinct from the contractual
or statutory responsibility that may be incurred by VSI for damage to the cargo caused by the willful negligence of the officers and the crew of
MV Vlasons I. Clearly, therefore, NSC's failure to insure the cargo will not affect its right, as owner and real party in interest, to file an action
against VSI for damages caused by the latter's willful negligence. We do not find anything in the charter party that would make the liability of
VSI for damage to the cargo contingent on or affected in any manner by NSC's obtaining an insurance over the cargo.
Third Issue: Admissibility of Certificates Proving Seaworthiness
NSC's contention that MV Vlasons I was not seaworthy is anchored on the alleged inadmissibility of the certificates of seaworthiness offered in
evidence by VSI. The said certificates include the following:
1. Certificate of Inspection of the Philippines Coast Guard at Cebu
2. Certificate of Inspection from the Philippine Coast Guard
3. International Load Line Certificate from the Philippine Coast Guard
4. Coastwise License from the Board of Transportation
5. Certificate of Approval for Conversion issued by the Bureau of Customs 36
NSC argues that the certificates are hearsay for not having been presented in accordance with the Rules of Court. It points out that Exhibits 3,
4 and 11 allegedly are "not written records or acts of public officers"; while Exhibits 5, 6, 7, 8, 9, 11 and 12 are not "evidenced by official
publications or certified true copies" as required by Sections 25 and 26, Rule 132, of the Rules of Court. 37
After a careful examination of these exhibits, the Court rules that Exhibits 3, 4, 5, 6, 7, 8, 9 and 12 are inadmissible, for they have not been
properly offered as evidence. Exhibits 3 and 4 are certificates issued by private parties, but they have not been proven by one who saw the
writing executed, or by evidence of the genuineness of the handwriting of the maker, or by a subscribing witness. Exhibits, 5, 6, 7, 8, 9, and 12
are photocopies, but their admission under the best evidence rule have not been demonstrated.
We find, however, that Exhibit 11 is admissible under a well-settled exception to the hearsay rule per Section 44 of Rule 130 of the Rules of
Court, which provides that "(e)ntries in official records made in the performance of a duty by a public officer of the Philippines, or by a person
in the performance of a duty specially enjoined by law, are prima facie evidence of the facts therein stated." 38 Exhibit 11 is an original
certificate of the Philippine Coast Guard in Cebu issued by Lieutenant Junior Grade Noli C. Flores to the effect that "the vessel 'VLASONS I'
was drydocked . . . and PCG Inspectors were sent on board for inspection . . . After completion of drydocking and duly inspected by PCG
Inspectors, the vessel 'VLASONS I', a cargo vessel, is in seaworthy condition, meets all requirements, fitted and equipped for trading as a
cargo vessel was cleared by the Philippine Coast Guard and sailed for Cebu Port on July 10, 1974." (sic) NSC's claim, therefore, is obviously
misleading and erroneous.
At any rate, it should be stressed that NSC has the burden of proving that MV Vlasons I was not seaworthy. As observed earlier, the vessel
was a private carrier and, as such, it did not have the obligation of a common carrier to show that it was seaworthy. Indeed, NSC glaringly
failed to discharge its duty of proving the willful negligence of VSI in making the ship seaworthy resulting in damage to its cargo. Assailing the
genuineness of the certificate of seaworthiness is not sufficient proof that the vessel was not seaworthy.
Fourth Issue: Demurrage and Attorney's Fees
The contract of voyage charter hire provides inter alia:
2. Cargo: Full cargo of steel products of not less than 2,500 MT, 10% more or less at Master's option.
6. Loading/Discharging Rate: 750 tons per WWDSHINC.
7. Demurrage/Dispatch: P8,000.00/P4,000.00 per day. 39

The Court defined demurrage in its strict sense as the compensation provided for in the contract of affreightment for the detention of the
vessel beyond the laytime or that period of time agreed on for loading and unloading of cargo. 40 It is given to compensate the shipowner for
the nonuse of the vessel. On the other hand, the following is well-settled:
Laytime runs according to the particular clause of the charter party. . . . If laytime is expressed in "running days," this means days when the
ship would be run continuously, and holidays are not excepted. A qualification of "weather permitting" excepts only those days when bad
weather reasonably prevents the work contemplated. 41
In this case, the contract of voyage charter hire provided for a four-day laytime; it also qualified laytime as WWDSHINC or weather working
days Sundays and holidays included. 42 The running of laytime was thus made subject to the weather, and would cease to run in the event
unfavorable weather interfered with the unloading of cargo. 43 Consequently, NSC may not be held liable for demurrage as the four-day laytime
allowed it did not lapse, having been tolled by unfavorable weather condition in view of the WWDSHINC qualification agreed upon by the
parties. Clearly, it was error for the trial court and the Court of Appeals to have found and affirmed respectively that NSC incurred eleven days
of delay in unloading the cargo. The trial court arrived at this erroneous finding by subtracting from the twelve days, specifically August 13,
1974 to August 24, 1974, the only day of unloading unhampered by unfavorable weather or rain, which was August 22, 1974. Based on our
previous discussion, such finding is a reversible error. As mentioned, the respondent appellate court also erred in ruling that NSC was liable to
VSI for demurrage, even if it reduced the amount by half.
Attorney's Fees
VSI assigns as error of law the Court of Appeals' deletion of the award of attorney's fees. We disagree. While VSI was compelled to litigate to
protect its rights, such fact by itself will not justify an award of attorney's fees under Article 2208 of the Civil Code when ". . . no sufficient
showing of bad faith would be reflected in a party's persistence in a case other than an erroneous conviction of the righteousness of his
cause . . ." 44 Moreover, attorney's fees may not be awarded to a party for the reason alone that the judgment rendered was favorable to the
latter, as this is tantamount to imposing a premium on one's right to litigate or seek judicial redress of legitimate grievances. 45
Epilogue
At bottom, this appeal really hinges on a factual issue: when, how and who caused the damage to the cargo? Ranged against NSC are two
formidable truths. First, both lower courts found that such damage was brought about during the unloading process when rain and seawater
seeped through the cargo due to the fault or negligence of the stevedores employed by it. Basic is the rule that factual findings of the trial
court, when affirmed by the Court of Appeals, are binding on the Supreme Court. Although there are settled exceptions, NSC has not
satisfactorily shown that this case is one of them. Second, the agreement between the parties the Contract of Voyage Charter Hire
placed the burden of proof for such loss or damage upon the shipper, not upon the shipowner. Such stipulation, while disadvantageous to
NSC, is valid because the parties entered into a contract of private charter, not one of common carriage. Basic too is the doctrine that courts
cannot relieve a parry from the effects of a private contract freely entered into, on the ground that it is allegedly one-sided or unfair to the
plaintiff. The charter party is a normal commercial contract and its stipulations are agreed upon in consideration of many factors, not the least
of which is the transport price which is determined not only by the actual costs but also by the risks and burdens assumed by the shipper in
regard to possible loss or damage to the cargo. In recognition of such factors, the parties even stipulated that the shipper should insure the
cargo to protect itself from the risks it undertook under the charter party. That NSC failed or neglected to protect itself with such insurance
should not adversely affect VSI, which had nothing to do with such failure or neglect.
WHEREFORE, premises considered, the instant consolidated petitions are hereby DENIED. The questioned Decision of the Court of Appeals
is AFFIRMED with the MODIFICATION that the demurrage awarded to VSI is deleted. No pronouncement as to costs.
SO ORDERED.
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 149038
April 9, 2003
PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, petitioner,

vs.
PKS SHIPPING COMPANY, respondent.
VITUG, J.:
The petition before the Court seeks a review of the decision of the Court of Appeals in C.A. G.R. CV No. 56470, promulgated on 25 June
2001, which has affirmed in toto the judgment of the Regional Trial Court (RTC), Branch 65, of Makati, dismissing the complaint for damages
filed by petitioner insurance corporation against respondent shipping company.
Davao Union Marketing Corporation (DUMC) contracted the services of respondent PKS Shipping Company (PKS Shipping) for the shipment
to Tacloban City of seventy-five thousand (75,000) bags of cement worth Three Million Three Hundred Seventy-Five Thousand Pesos
(P3,375,000.00). DUMC insured the goods for its full value with petitioner Philippine American General Insurance Company (Philamgen). The
goods were loaded aboard the dumb barge Limar I belonging to PKS Shipping. On the evening of 22 December 1988, about nine oclock,
while Limar I was being towed by respondents tugboat, MT Iron Eagle, the barge sank a couple of miles off the coast of Dumagasa Point, in
Zamboanga del Sur, bringing down with it the entire cargo of 75,000 bags of cement.
DUMC filed a formal claim with Philamgen for the full amount of the insurance. Philamgen promptly made payment; it then sought
reimbursement from PKS Shipping of the sum paid to DUMC but the shipping company refused to pay, prompting Philamgen to file suit
against PKS Shipping with the Makati RTC.
The RTC dismissed the complaint after finding that the total loss of the cargo could have been caused either by a fortuitous event, in which
case the ship owner was not liable, or through the negligence of the captain and crew of the vessel and that, under Article 587 of the Code of
Commerce adopting the "Limited Liability Rule," the ship owner could free itself of liability by abandoning, as it apparently so did, the vessel
with all her equipment and earned freightage.
Philamgen interposed an appeal to the Court of Appeals which affirmed in toto the decision of the trial court. The appellate court ruled that
evidence to establish that PKS Shipping was a common carrier at the time it undertook to transport the bags of cement was wanting because
the peculiar method of the shipping companys carrying goods for others was not generally held out as a business but as a casual occupation.
It then concluded that PKS Shipping, not being a common carrier, was not expected to observe the stringent extraordinary diligence required
of common carriers in the care of goods. The appellate court, moreover, found that the loss of the goods was sufficiently established as having
been due to fortuitous event, negating any liability on the part of PKS Shipping to the shipper.
In the instant appeal, Philamgen contends that the appellate court has committed a patent error in ruling that PKS Shipping is not a common
carrier and that it is not liable for the loss of the subject cargo. The fact that respondent has a limited clientele, petitioner argues, does not
militate against respondents being a common carrier and that the only way by which such carrier can be held exempt for the loss of the cargo
would be if the loss were caused by natural disaster or calamity. Petitioner avers that typhoon "APIANG" has not entered the Philippine area of
responsibility and that, even if it did, respondent would not be exempt from liability because its employees, particularly the tugmaster, have
failed to exercise due diligence to prevent or minimize the loss.
PKS Shipping, in its comment, urges that the petition should be denied because what Philamgen seeks is not a review on points or errors of
law but a review of the undisputed factual findings of the RTC and the appellate court. In any event, PKS Shipping points out, the findings and
conclusions of both courts find support from the evidence and applicable jurisprudence.
The determination of possible liability on the part of PKS Shipping boils down to the question of whether it is a private carrier or a common
carrier and, in either case, to the other question of whether or not it has observed the proper diligence (ordinary, if a private carrier, or
extraordinary, if a common carrier) required of it given the circumstances.
The findings of fact made by the Court of Appeals, particularly when such findings are consistent with those of the trial court, may not at liberty
be reviewed by this Court in a petition for review under Rule 45 of the Rules of Court. 1 The conclusions derived from those factual findings,
however, are not necessarily just matters of fact as when they are so linked to, or inextricably intertwined with, a requisite appreciation of the
applicable law. In such instances, the conclusions made could well be raised as being appropriate issues in a petition for review before this
Court. Thus, an issue whether a carrier is private or common on the basis of the facts found by a trial court or the appellate court can be a
valid and reviewable question of law.
"Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air for compensation, offering their services to the public."
Complementary to the codal definition is Section 13, paragraph (b), of the Public Service Act; it defines "public service" to be
"x x x every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or compensation, with
general or limited clientele, whether permanent, occasional or accidental, and done for general business purposes, any common
carrier, railroad, street railway, subway motor vehicle, either for freight or passenger, or both, with or without fixed route and
whatever may be its classification, freight or carrier service of any class, express service, steamboat, or steamship, or steamship
line, pontines, ferries and water craft, engaged in the transportation of passengers or freight or both, shipyard, marine repair shop,
wharf or dock, ice plant, ice refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water supply and power
petroleum, sewerage system, wire or wireless communication systems, wire or wireless broadcasting stations and other similar
public services. x x x. (Underscoring supplied)."
The prevailing doctrine on the question is that enunciated in the leading case of De Guzman vs. Court of Appeals.2 Applying Article 1732 of the
Code, in conjunction with Section 13(b) of the Public Service Act, this Court has held:
"The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both,
and one who does such carrying only as an ancillary activity (in local idiom, as `a sideline). Article 1732 also carefully avoids making
any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such
service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services
to the `general public, i.e., the general community or population, and one who offers services or solicits business only from a narrow
segment of the general population. We think that Article 1732 deliberately refrained from making such distinctions.
"So understood, the concept of `common carrier under Article 1732 may be seen to coincide neatly with the notion of `public
service, under the Public Service Act (Commonwealth Act No. 1416, as amended) which at least partially supplements the law on
common carriers set forth in the Civil Code."
Much of the distinction between a "common or public carrier" and a "private or special carrier" lies in the character of the business, such that if
the undertaking is an isolated transaction, not a part of the business or occupation, and the carrier does not hold itself out to carry the goods
for the general public or to a limited clientele, although involving the carriage of goods for a fee,3 the person or corporation providing such
service could very well be just a private carrier. A typical case is that of a charter party which includes both the vessel and its crew, such as in
a bareboat or demise, where the charterer obtains the use and service of all or some part of a ship for a period of time or a voyage or
voyages4 and gets the control of the vessel and its crew.5 Contrary to the conclusion made by the appellate court, its factual findings indicate
that PKS Shipping has engaged itself in the business of carrying goods for others, although for a limited clientele, undertaking to carry such
goods for a fee. The regularity of its activities in this area indicates more than just a casual activity on its part. 6 Neither can the concept of a
common carrier change merely because individual contracts are executed or entered into with patrons of the carrier. Such restrictive
interpretation would make it easy for a common carrier to escape liability by the simple expedient of entering into those distinct agreements
with clients.
Addressing now the issue of whether or not PKS Shipping has exercised the proper diligence demanded of common carriers, Article 1733 of
the Civil Code requires common carriers to observe extraordinary diligence in the vigilance over the goods they carry. In case of loss,
destruction or deterioration of goods, common carriers are presumed to have been at fault or to have acted negligently, and the burden of
proving otherwise rests on them.7 The provisions of Article 1733, notwithstanding, common carriers are exempt from liability for loss,
destruction, or deterioration of the goods due to any of the following causes:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(4) The character of the goods or defects in the packing or in the containers; and
(5) Order or act of competent public authority.8
The appellate court ruled, gathered from the testimonies and sworn marine protests of the respective vessel masters of Limar I and MT Iron
Eagle, that there was no way by which the barges or the tugboats crew could have prevented the sinking of Limar I. The vessel was suddenly
tossed by waves of extraordinary height of six (6) to eight (8) feet and buffeted by strong winds of 1.5 knots resulting in the entry of water into
the barges hatches. The official Certificate of Inspection of the barge issued by the Philippine Coastguard and the Coastwise Load Line
Certificate would attest to the seaworthiness of Limar I and should strengthen the factual findings of the appellate court.
Findings of fact of the Court of Appeals generally conclude this Court; none of the recognized exceptions from the rule - (1) when the factual
findings of the Court of Appeals and the trial court are contradictory; (2) when the conclusion is a finding grounded entirely on speculation,
surmises, or conjectures; (3) when the inference made by the Court of Appeals from its findings of fact is manifestly mistaken, absurd, or
impossible; (4) when there is a grave abuse of discretion in the appreciation of facts; (5) when the appellate court, in making its findings, went
beyond the issues of the case and such findings are contrary to the admissions of both appellant and appellee; (6) when the judgment of the
Court of Appeals is premised on a misapprehension of facts; (7) when the Court of Appeals failed to notice certain relevant facts which, if
properly considered, would justify a different conclusion; (8) when the findings of fact are themselves conflicting; (9) when the findings of fact
are conclusions without citation of the specific evidence on which they are based; and (10) when the findings of fact of the Court of Appeals
are premised on the absence of evidence but such findings are contradicted by the evidence on record would appear to be clearly extant in
this instance.
All given then, the appellate court did not err in its judgment absolving PKS Shipping from liability for the loss of the DUMC cargo.
WHEREFORE, the petition is DENIED. No costs.
SO ORDERED.
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 147246
August 19, 2003
ASIA LIGHTERAGE AND SHIPPING, INC., petitioner, vs.

COURT OF APPEALS and PRUDENTIAL GUARANTEE AND ASSURANCE, INC., respondents.
PUNO, J.:
On appeal is the Court of Appeals' May 11, 2000 Decision1 in CA-G.R. CV No. 49195 and February 21, 2001 Resolution2 affirming with
modification the April 6, 1994 Decision3 of the Regional Trial Court of Manila which found petitioner liable to pay private respondent the amount
of indemnity and attorney's fees.
First, the facts.
On June 13, 1990, 3,150 metric tons of Better Western White Wheat in bulk, valued at US$423,192.35 4 was shipped by Marubeni American
Corporation of Portland, Oregon on board the vessel M/V NEO CYMBIDIUM V-26 for delivery to the consignee, General Milling Corporation in
Manila, evidenced by Bill of Lading No. PTD/Man-4.5 The shipment was insured by the private respondent Prudential Guarantee and
Assurance, Inc. against loss or damage for P14,621,771.75 under Marine Cargo Risk Note RN 11859/90.6
On July 25, 1990, the carrying vessel arrived in Manila and the cargo was transferred to the custody of the petitioner Asia Lighterage and Shipping, Inc.
The petitioner was contracted by the consignee as carrier to deliver the cargo to consignee's warehouse at Bo. Ugong, Pasig City.
On August 15, 1990, 900 metric tons of the shipment was loaded on barge PSTSI III, evidenced by Lighterage Receipt No. 03647 for delivery
to consignee. The cargo did not reach its destination.
It appears that on August 17, 1990, the transport of said cargo was suspended due to a warning of an incoming typhoon. On August 22, 1990,
the petitioner proceeded to pull the barge to Engineering Island off Baseco to seek shelter from the approaching typhoon. PSTSI III was tied
down to other barges which arrived ahead of it while weathering out the storm that night. A few days after, the barge developed a list because
of a hole it sustained after hitting an unseen protuberance underneath the water. The petitioner filed a Marine Protest on August 28, 1990. 8 It
likewise secured the services of Gaspar Salvaging Corporation which refloated the barge.9 The hole was then patched with clay and cement.
The barge was then towed to ISLOFF terminal before it finally headed towards the consignee's wharf on September 5, 1990. Upon reaching
the Sta. Mesa spillways, the barge again ran aground due to strong current. To avoid the complete sinking of the barge, a portion of the goods
was transferred to three other barges.10
The next day, September 6, 1990, the towing bits of the barge broke. It sank completely, resulting in the total loss of the remaining cargo. 11 A
second Marine Protest was filed on September 7, 1990.12
On September 14, 1990, a bidding was conducted to dispose of the damaged wheat retrieved and loaded on the three other barges. 13 The
total proceeds from the sale of the salvaged cargo was P201,379.75.14
On the same date, September 14, 1990, consignee sent a claim letter to the petitioner, and another letter dated September 18, 1990 to the
private respondent for the value of the lost cargo.
On January 30, 1991, the private respondent indemnified the consignee in the amount of P4,104,654.22.15 Thereafter, as subrogee, it sought
recovery of said amount from the petitioner, but to no avail.
On July 3, 1991, the private respondent filed a complaint against the petitioner for recovery of the amount of indemnity, attorney's fees and
cost of suit.16 Petitioner filed its answer with counterclaim.17
The Regional Trial Court ruled in favor of the private respondent. The dispositive portion of its Decision states:
WHEREFORE, premises considered, judgment is hereby rendered ordering defendant Asia Lighterage & Shipping, Inc. liable to pay plaintiff Prudential
Guarantee & Assurance Co., Inc. the sum of P4,104,654.22 with interest from the date complaint was filed on July 3, 1991 until fully satisfied plus 10%
of the amount awarded as and for attorney's fees. Defendant's counterclaim is hereby DISMISSED. With costs against defendant. 18
Petitioner appealed to the Court of Appeals insisting that it is not a common carrier. The appellate court affirmed the decision of the trial court
with modification. The dispositive portion of its decision reads:
WHEREFORE, the decision appealed from is hereby AFFIRMED with modification in the sense that the salvage value of P201,379.75 shall be
deducted from the amount of P4,104,654.22. Costs against appellant. SO ORDERED.
Petitioner's Motion for Reconsideration dated June 3, 2000 was likewise denied by the appellate court in a Resolution promulgated on
February 21, 2001.
Hence, this petition. Petitioner submits the following errors allegedly committed by the appellate court, viz:19
(1) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN ACCORD WITH LAW AND/OR WITH THE
APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT HELD THAT PETITIONER IS A COMMON CARRIER.
APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT AFFIRMED THE FINDING OF THE LOWER COURT A QUO
THAT ON THE BASIS OF THE PROVISIONS OF THE CIVIL CODE APPLICABLE TO COMMON CARRIERS, "THE LOSS OF THE
CARGO IS, THEREFORE, BORNE BY THE CARRIER IN ALL CASES EXCEPT IN THE FIVE (5) CASES ENUMERATED."
APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT EFFECTIVELY CONCLUDED THAT PETITIONER FAILED TO
EXERCISE DUE DILIGENCE AND/OR WAS NEGLIGENT IN ITS CARE AND CUSTODY OF THE CONSIGNEE'S CARGO.
The issues to be resolved are:
(1) Whether the petitioner is a common carrier; and,
(2) Assuming the petitioner is a common carrier, whether it exercised extraordinary diligence in its care and custody of the consignee's cargo.
On the first issue, we rule that petitioner is a common carrier.
Article 1732 of the Civil Code defines common carriers as persons, corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public.
Petitioner contends that it is not a common carrier but a private carrier. Allegedly, it has no fixed and publicly known route, maintains no
terminals, and issues no tickets. It points out that it is not obliged to carry indiscriminately for any person. It is not bound to carry goods unless
it consents. In short, it does not hold out its services to the general public.20
We disagree.
In De Guzman vs. Court of Appeals,21 we held that the definition of common carriers in Article 1732 of the Civil Code makes no distinction between
one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity. We also
did not distinguish between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an
occasional, episodic or unscheduled basis. Further, we ruled that Article 1732 does not distinguish between a carrier offering its services to the general
public, and one who offers services or solicits business only from a narrow segment of the general population.
In the case at bar, the principal business of the petitioner is that of lighterage and drayage 22 and it offers its barges to the public for carrying or
transporting goods by water for compensation. Petitioner is clearly a common carrier. In De Guzman, supra,23 we considered private
respondent Ernesto Cendaa to be a common carrier even if his principal occupation was not the carriage of goods for others, but that of
buying used bottles and scrap metal in Pangasinan and selling these items in Manila.
We therefore hold that petitioner is a common carrier whether its carrying of goods is done on an irregular rather than scheduled manner, and with an
only limited clientele. A common carrier need not have fixed and publicly known routes. Neither does it have to maintain terminals or issue tickets.
To be sure, petitioner fits the test of a common carrier as laid down in Bascos vs. Court of Appeals.24 The test to determine a common carrier is
"whether the given undertaking is a part of the business engaged in by the carrier which he has held out to the general public as his occupation rather
than the quantity or extent of the business transacted." 25 In the case at bar, the petitioner admitted that it is engaged in the business of shipping and
lighterage,26 offering its barges to the public, despite its limited clientele for carrying or transporting goods by water for compensation. 27
On the second issue, we uphold the findings of the lower courts that petitioner failed to exercise extraordinary diligence in its care and custody
of the consignee's goods.
Common carriers are bound to observe extraordinary diligence in the vigilance over the goods transported by them. 28 They are presumed to have been
at fault or to have acted negligently if the goods are lost, destroyed or deteriorated. 29 To overcome the presumption of negligence in the case of loss,
destruction or deterioration of the goods, the common carrier must prove that it exercised extraordinary diligence. There are, however, exceptions to this
rule. Article 1734 of the Civil Code enumerates the instances when the presumption of negligence does not attach:
Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the
following causes only:
(4) The character of the goods or defects in the packing or in the containers;

In the case at bar, the barge completely sank after its towing bits broke, resulting in the total loss of its cargo. Petitioner claims that this was
caused by a typhoon, hence, it should not be held liable for the loss of the cargo. However, petitioner failed to prove that the typhoon is the
proximate and only cause of the loss of the goods, and that it has exercised due diligence before, during and after the occurrence of the
typhoon to prevent or minimize the loss.30 The evidence show that, even before the towing bits of the barge broke, it had already previously
sustained damage when it hit a sunken object while docked at the Engineering Island. It even suffered a hole. Clearly, this could not be solely
attributed to the typhoon. The partly-submerged vessel was refloated but its hole was patched with only clay and cement. The patch work was
merely a provisional remedy, not enough for the barge to sail safely. Thus, when petitioner persisted to proceed with the voyage, it recklessly
exposed the cargo to further damage. A portion of the cross-examination of Alfredo Cunanan, cargo-surveyor of Tan-Gatue Adjustment Co.,
Inc., states:
CROSS-EXAMINATION BY ATTY. DONN LEE:31
q
Can you tell us what else transpired after that incident?
a - After the first accident, through the initiative of the barge owners, they tried to pull out the barge from the place of the accident, and
bring it to the anchor terminal for safety, then after deciding if the vessel is stabilized, they tried to pull it to the consignee's warehouse, now
while on route another accident occurred, now this time the barge totally hitting something in the course.
q
You said there was another accident, can you tell the court the nature of the second accident?
The sinking, sir.
Can you tell the nature . . . can you tell the court, if you know what caused the sinking?
Mostly it was related to the first accident because there was already a whole (sic) on the bottom part of the barge.
This is not all. Petitioner still headed to the consignee's wharf despite knowledge of an incoming typhoon. During the time that the barge was
heading towards the consignee's wharf on September 5, 1990, typhoon "Loleng" has already entered the Philippine area of responsibility.32 A
part of the testimony of Robert Boyd, Cargo Operations Supervisor of the petitioner, reveals:
DIRECT-EXAMINATION BY ATTY. LEE:33
q
Now, Mr. Witness, did it not occur to you it might be safer to just allow the Barge to lie where she was instead of towing it?
a - Since that time that the Barge was refloated, GMC (General Milling Corporation, the consignee) as I have said was in a hurry for their
goods to be delivered at their Wharf since they needed badly the wheat that was loaded in PSTSI-3. It was needed badly by the consignee.
q
And this is the reason why you towed the Barge as you did?
Yes, sir.
CROSS-EXAMINATION BY ATTY. IGNACIO:34

q
And then from ISLOFF Terminal you proceeded to the premises of the GMC? Am I correct?
The next day, in the morning, we hired for additional two (2) tugboats as I have stated.
Despite of the threats of an incoming typhoon as you testified a while ago?
It is already in an inner portion of Pasig River. The typhoon would be coming and it would be dangerous if we are in the vicinity of Manila Bay.
But the fact is, the typhoon was incoming? Yes or no?
Yes.
q - And yet as a standard operating procedure of your Company, you have to secure a sort of Certification to determine the weather
condition, am I correct? a - Yes, sir.
q
So, more or less, you had the knowledge of the incoming typhoon, right?
And yet you proceeded to the premises of the GMC?
Yes, sir.
a - ISLOFF Terminal is far from Manila Bay and anytime even with the typhoon if you are already inside the vicinity or inside Pasig
entrance, it is a safe place to tow upstream.
Accordingly, the petitioner cannot invoke the occurrence of the typhoon as force majeure to escape liability for the loss sustained by the
private respondent. Surely, meeting a typhoon head-on falls short of due diligence required from a common carrier. More importantly, the
officers/employees themselves of petitioner admitted that when the towing bits of the vessel broke that caused its sinking and the total loss of
the cargo upon reaching the Pasig River, it was no longer affected by the typhoon. The typhoon then is not the proximate cause of the loss of
the cargo; a human factor, i.e., negligence had intervened.
IN VIEW THEREOF, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No. 49195 dated May 11, 2000 and its
Resolution dated February 21, 2001 are hereby AFFIRMED. Costs against petitioner. SO ORDERED.
SUPREME COURT
Manila
THIRD DIVISION
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, 2001 1 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.
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.
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.
. . . 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
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. Borja 34 teaches that when, as in this
case, there is no showing that the living expenses constituted the smaller percentage of the gross income, the living expenses are fixed at half
of the gross income.
Applying the above guidelines, the Court determines Ruelito's life expectancy as follows:
Life expectancy =
2/3 x [80 - age of deceased at the time of death]

2/3 x [80 - 28]
2/3 x [52]
Life expectancy =
35
Documentary evidence shows that Ruelito was earning a basic monthly salary of $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, quasicontracts, 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.
SUPREME COURT
Manila
EN BANC
G.R. No. L-25599
April 4, 1968
HOME INSURANCE COMPANY, plaintiff-appellee,

vs.
AMERICAN STEAMSHIP AGENCIES, INC. and LUZON STEVEDORING CORPORATION, defendants,
AMERICAN STEAMSHIP AGENCIES, INC., defendant-appellant.
BENGZON, J.P., J.:

"Consorcio Pesquero del Peru of South America" shipped freight pre-paid at Chimbate, Peru, 21,740 jute bags of Peruvian fish meal through
SS Crowborough, covered by clean bills of lading Numbers 1 and 2, both dated January 17, 1963. The cargo, consigned to San Miguel
Brewery, Inc., now San Miguel Corporation, and insured by Home Insurance Company for $202,505, arrived in Manila on March 7, 1963 and
was discharged into the lighters of Luzon Stevedoring Company. When the cargo was delivered to consignee San Miguel Brewery Inc., there
were shortages amounting to P12,033.85, causing the latter to lay claims against Luzon Stevedoring Corporation, Home Insurance Company
and the American Steamship Agencies, owner and operator of SS Crowborough.
Because the others denied liability, Home Insurance Company paid the consignee P14,870.71 the insurance value of the loss, as full
settlement of the claim. Having been refused reimbursement by both the Luzon Stevedoring Corporation and American Steamship Agencies,
Home Insurance Company, as subrogee to the consignee, filed against them on March 6, 1964 before the Court of First Instance of Manila a
complaint for recovery of P14,870.71 with legal interest, plus attorney's fees.
In answer, Luzon Stevedoring Corporation alleged that it delivered with due diligence the goods in the same quantity and quality that it had
received the same from the carrier. It also claimed that plaintiff's claim had prescribed under Article 366 of the Code of Commerce stating that
the claim must be made within 24 hours from receipt of the cargo.
American Steamship Agencies denied liability by alleging that under the provisions of the Charter party referred to in the bills of lading, the
charterer, not the shipowner, was responsible for any loss or damage of the cargo. Furthermore, it claimed to have exercised due diligence in
stowing the goods and that as a mere forwarding agent, it was not responsible for losses or damages to the cargo.
On November 17, 1965, the Court of First Instance, after trial, absolved Luzon Stevedoring Corporation, having found the latter to have merely
delivered what it received from the carrier in the same condition and quality, and ordered American Steamship Agencies to pay plaintiff
P14,870.71 with legal interest plus P1,000 attorney's fees. Said court cited the following grounds:
(a) The non-liability claim of American Steamship Agencies under the charter party contract is not tenable because Article 587 of the
Code of Commerce makes the ship agent also civilly liable for damages in favor of third persons due to the conduct of the captain of
the carrier;
(b) The stipulation in the charter party contract exempting the owner from liability is against public policy under Article 1744 of the
Civil Code;
(c) In case of loss, destruction or deterioration of goods, common carriers are presumed at fault or negligent under Article 1735 of
the Civil Code unless they prove extraordinary diligence, and they cannot by contract exempt themselves from liability resulting from
their negligence or that of their servants; and
(d) When goods are delivered to the carrier in good order and the same are in bad order at the place of destination, the carrier is
prima facie liable.
Disagreeing with such judgment, American Steamship Agencies appealed directly to Us. The appeal brings forth for determination this legal
issue: Is the stipulation in the charter party of the owner's non-liability valid so as to absolve the American Steamship Agencies from liability for
loss?
The bills of lading,1 covering the shipment of Peruvian fish meal provide at the back thereof that the bills of lading shall be governed by and
subject to the terms and conditions of the charter party, if any, otherwise, the bills of lading prevail over all the agreements. 2 On the of the bills
are stamped "Freight prepaid as per charter party. Subject to all terms, conditions and exceptions of charter party dated London, Dec. 13,
1962."
A perusal of the charter party3 referred to shows that while the possession and control of the ship were not entirely transferred to the
charterer,4 the vessel was chartered to its full and complete capacity (Exh. 3). Furthermore, the, charter had the option to go north or south or
vice-versa,5 loading, stowing and discharging at its risk and expense.6 Accordingly, the charter party contract is one of affreightment over the
whole vessel rather than a demise. As such, the liability of the shipowner for acts or negligence of its captain and crew, would remain in the
absence of stipulation.
Section 2, paragraph 2 of the charter party, provides that the owner is liable for loss or damage to the goods caused by personal want of due
diligence on its part or its manager to make the vessel in all respects seaworthy and to secure that she be properly manned, equipped and
supplied or by the personal act or default of the owner or its manager. Said paragraph, however, exempts the owner of the vessel from any
loss or damage or delay arising from any other source, even from the neglect or fault of the captain or crew or some other person employed
by the owner on board, for whose acts the owner would ordinarily be liable except for said paragraph..
Regarding the stipulation, the Court of First Instance declared the contract as contrary to Article 587 of the Code of Commerce making the
ship agent civilly liable for indemnities suffered by third persons arising from acts or omissions of the captain in the care of the goods and
Article 1744 of the Civil Code under which a stipulation between the common carrier and the shipper or owner limiting the liability of the former
for loss or destruction of the goods to a degree less than extraordinary diligence is valid provided it be reasonable, just and not contrary to
public policy. The release from liability in this case was held unreasonable and contrary to the public policy on common carriers.
The provisions of our Civil Code on common carriers were taken from Anglo-American law.7 Under American jurisprudence, a common carrier
undertaking to carry a special cargo or chartered to a special person only, becomes a private carrier.8 As a private carrier, a stipulation
exempting the owner from liability for the negligence of its agent is not against public policy,9 and is deemed valid.
Such doctrine We find reasonable. The Civil Code provisions on common carriers should not be applied where the carrier is not acting as such
but as a private carrier. The stipulation in the charter party absolving the owner from liability for loss due to the negligence of its agent would
be void only if the strict public policy governing common carriers is applied. Such policy has no force where the public at large is not involved,
as in the case of a ship totally chartered for the use of a single party.
And furthermore, in a charter of the entire vessel, the bill of lading issued by the master to the charterer, as shipper, is in fact and legal
contemplation merely a receipt and a document of title not a contract, for the contract is the charter party.10 The consignee may not claim
ignorance of said charter party because the bills of lading expressly referred to the same. Accordingly, the consignees under the bills of lading
must likewise abide by the terms of the charter party. And as stated, recovery cannot be had thereunder, for loss or damage to the cargo,
against the shipowners, unless the same is due to personal acts or negligence of said owner or its manager, as distinguished from its other
agents or employees. In this case, no such personal act or negligence has been proved.
WHEREFORE, the judgment appealed from is hereby reversed and appellant is absolved from liability to plaintiff. No costs. So ordered.
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-61461 August 21, 1987
EPITACIO SAN PABLO, (Substituted by Heirs of E. San Pablo), petitioners,

vs.
PANTRANCO SOUTH EXPRESS, INC., respondent.
CARDINAL SHIPPING CORPORATION, petitioner,
vs.
HONORABLE BOARD OF TRANSPORTATION AND PANTRANCO SOUTH EXPRESS, INC., respondents.
GANCAYCO, J.:
The question that is posed in these petitions for review is whether the sea can be considered as a continuation of the highway. The corollary
issue is whether a land transportation company can be authorized to operate a ferry service or coastwise or interisland shipping service along
its authorized route as an incident to its franchise without the need of filing a separate application for the same.
The Pantranco South Express, Inc., hereinafter referred to as PANTRANCO is a domestic corporation engaged in the land transportation
business with PUB service for passengers and freight and various certificates for public conveniences CPC to operate passenger buses from
Metro Manila to Bicol Region and Eastern Samar. On March 27,1980 PANTRANCO through its counsel wrote to Maritime Industry Authority
(MARINA) requesting authority to lease/purchase a vessel named M/V "Black Double" "to be used for its project to operate a ferryboat service
from Matnog, Sorsogon and Allen, Samar that will provide service to company buses and freight trucks that have to cross San Bernardo Strait.
1 In a reply of April 29,1981 PANTRANCO was informed by MARINA that it cannot give due course to the request on the basis of the following
observations:
1. The Matnog-Allen run is adequately serviced by Cardinal Shipping Corp. and Epitacio San Pablo; MARINA policies on interisland shipping
restrict the entry of new operators to Liner trade routes where these are adequately serviced by existing/authorized operators.
2. Market conditions in the proposed route cannot support the entry of additional tonnage; vessel acquisitions intended for operations therein
are necessarily limited to those intended for replacement purposes only. 2
PANTRANCO nevertheless acquired the vessel MV "Black Double" on May 27, 1981 for P3 Million pesos. It wrote the Chairman of the Board
of Transportation (BOT) through its counsel, that it proposes to operate a ferry service to carry its passenger buses and freight trucks between
Allen and Matnog in connection with its trips to Tacloban City invoking the case of Javellana vs. Public Service Commission. 3 PANTRANCO
claims that it can operate a ferry service in connection with its franchise for bus operation in the highway from Pasay City to Tacloban City "for
the purpose of continuing the highway, which is interrupted by a small body of water, the said proposed ferry operation is merely a necessary
and incidental service to its main service and obligation of transporting its passengers from Pasay City to Tacloban City. Such being the
case ... there is no need ... to obtain a separate certificate for public convenience to operate a ferry service between Allen and Matnog to cater
exclusively to its passenger buses and freight trucks. 4
Without awaiting action on its request PANTRANCO started to operate said ferry service. Acting Chairman Jose C. Campos, Jr. of BOT
ordered PANTRANCO not to operate its vessel until the application for hearing on Oct. 1, 1981 at 10:00 A.M. 5 In another order BOT enjoined
PANTRANCO from operating the MV "Black Double" otherwise it will be cited to show cause why its CPC should not be suspended or the
pending application denied. 6
Epitacio San Pablo (now represented by his heirs) and Cardinal Shipping Corporation who are franchise holders of the ferry service in this
area interposed their opposition. They claim they adequately service the PANTRANCO by ferrying its buses, trucks and passengers. BOT then
asked the legal opinion from the Minister of Justice whether or not a bus company with an existing CPC between Pasay City and Tacloban
City may still be required to secure another certificate in order to operate a ferry service between two terminals of a small body of water. On
October 20, 1981 then Minister of Justice Ricardo Puno rendered an opinion to the effect that there is no need for bus operators to secure a
separate CPC to operate a ferryboat service holding as follows:
Further, a common carrier which has been granted a certificate of public convenience is expected to provide efficient, convenient and
adequate service to the riding public. (Hocking Valley Railroad Co. vs. Public Utilities Commission, 1 10 NE 521; Louiseville and NR Co. vs.
Railroad Commissioners, 58 SO 543) It is the right of the public which has accepted the service of a public utility operator to demand that the
service should be conducted with reasonable efficiency. (Almario, supra, citing 73 C.J.S. 990-991) Thus, when the bus company in the case at
bar proposes to add a ferry service to its Pasay Tacloban route, it merely does so in the discharge of its duty under its current certificate of
public convenience to provide adequate and convenient service to its riders. Requiring said bus company to obtain another certificate to
operate such ferry service when it merely forms a part and constitutes an improvement of its existing transportation service would simply
be duplicitous and superfluous. 7
Thus on October 23, 1981 the BOT rendered its decision holding that the ferry boat service is part of its CPC to operate from Pasay to
Samar/Leyte by amending PANTRANCO's CPC so as to reflect the same in this wise:
Let the original Certificate of public convenience granted to Pantranco South Express Co., Inc. be amended to embody the grant of authority to
operate a private ferry boat service as one of the conditions for the grant of the certificate subject to the condition that the ferryboat shall be for
the exclusive use of Pantranco buses, its passengers and freight trucks, and should it offer itself to the public for hire other than its own
passengers, it must apply for a separate certificate of public convenience as a public ferry boat service, separate and distinct from its land
transport systems. 8
Cardinal Shipping Corporation and the heirs of San Pablo filed separate motions for reconsideration of said decision and San Pablo filed a
supplemental motion for reconsideration that were denied by the BOT on July 21, 1981. 9
Hence, San Pablo filed the herein petition for review on certiorari with prayer for preliminary injunction 10 seeking the revocation of said
decision, and pending consideration of the petition, the issuance of a restraining order or preliminary injunction against the operation by
PANTRANCO of said ferry service. San Pablo raised the following issues:
A. DID THE RESPONDENT BOARD VIOLATE PETITIONERS' RIGHT TO DUE PROCESS, THE RULES OF PROCEDURE AND SECTION
16 (m) OF THE PUBLIC SERVICE ACT, WHEN IT ISSUED IN A COMPLAINT CASE THE DECISION DATED OCTOBER 23, 1981 WHICH
MOTU PROPIO AMENDED RESPONDENT PANTRANCO'S PUB CERTIFICATE TO INCLUDE AND AUTHORIZE OPERATION OF A
SHIPPING SERVICE ON THE ROUTE MATNOG, SORSOGON ALLEN, SAMAR EVEN AS THERE MUST BE A FORMAL
APPLICATION FOR AMENDMENT AND SEPARATE PROCEEDINGS HELD THEREFORE, ASSUMING AMENDMENT IS PROPER?
B. DID THE RESPONDENT BOARD ERR IN FINDING IN ITS DECISION OF OCTOBER 23, 1981, THAT THE SEA FROM THE PORT OF
MATNOG, SORSOGON, LUZON ISLAND TO THE PORT OF ALLEN, SAMAR ISLAND, OR FROM LUZON ISLAND TO SAMAR ISLAND IS A
MERE FERRY OR CONTINUATION OF THE HIGHWAY IT BEING 23 KILOMETERS OF ROUGH AND OPEN SEA AND ABOUT 2 HOURS
TRAVEL TIME REQUIRING BIG INTER-ISLAND VESSELS, NOT MERE BARGES, RAFTS OR SMALL BOATS UTILIZED IN FERRY
SERVICE?
C. DID THE RESPONDENT BOARD ERR WHEN IT RULED THAT RESPONDENT PANTRANCO'S VESSEL M/V BLACK DOUBLE IS
MERELY A PRIVATE CARRIER, NOT A PUBLIC FERRY OPERATING FOR PUBLIC SERVICE (ASSUMING THAT THE MATNOG-ALLEN
SEA ROUTE IS A MERE FERRY OR CONTINUATION OF HIGHWAY) EVEN IF SAID VESSEL IS FOR HIRE AND COLLECTS SEPARATE
FARES AND CATERS TO THE PUBLIC EVEN FOR A LIMITED CLIENTELE?
D. DID THE RESPONDENT BOARD ERR WHEN IT GRANTED RESPONDENT PANTRANCO AUTHORITY TO OPERATE A SHIPPING
SERVICE IN THE FACE OF THE LATTER'S CONTENTION AS AN AFTER THOUGH THAT IT NEED NOT APPLY THEREFOR, AND IN
SPITE OF ITS FAILURE TO SECURE THE PRE-REQUISITE MARITIME INDUSTRY AUTHORITY (MARINA) APPROVAL TO ACQUIRE A
VESSEL UNDER ITS MEMORANDUM CIRCULAR NO. 8-A AS WELL AS ITS PRIOR FAVORABLE ENDORSEMENT BEFORE ANY
SHIPPING AUTHORIZATION MAY BE GRANTED UNDER BOT MARINA AGREEMENT OF AUGUST 10, 1976 AND FEBRUARY 26,
1982?
E. DID RESPONDENT BOARD ERR WHEN IT GRANTED RESPONDENT PANTRANCO AUTHORITY TO OPERATE A SHIPPING SERVICE
ON A ROUTE ADEQUATELY SERVICED IF NOT ALREADY "SATURATED" WITH THE SERVICES OF TWO 12) EXISTING OPERATORS
PETITIONERS AND CARDINAL SHIPPING CORP.) IN VIOLATION OF THE PRINCIPLE OF PRIOR OPERATOR RULE'? 11
By the same token Cardinal Shipping Corporation filed a separate petition raising similar issues, namely:
a. the decision did not conform to the procedures laid down by law for an amendment of the original certificate of public convenience, and the
authority to operate a private ferry boat service to PANTRANCO was issued without ascertaining the established essential requisites for such
grant, hence, violative of due process requirements;
b. the grant to PANTRANCO of authority to operate a ferryboat service as a private carrier on said route contravenes existing government
policies relative to the rationalization of operations of all water transport utilities;
c. it contravenes the memorandum of agreement between MARINA and the Board of Transportation; d. the grant of authority to operate a ferry
service as a private carrier is not feasible; it lessens PANTRANCO's liability to passengers and cargo to a degree less than extraordinary
diligence?
e. PANTRANCO is not a private carrier when it operates its ferry service;
f. it runs counter to the "old operator" doctrine; and
g. the operation by PANTRANCO of the ferry service cnstitutes undue competition.
The foregoing considerations constitutes the substantial errors committed by the respondent Board which would more than amply justify
review of the questioned decision by this Honorable Court.12
Both cases were consolidated and are now admitted for decision.
The resolution of all said issues raised revolves on the validity of the questioned BOT decision.
The BOT resolved the issue of whether a ferry service is an extension of the highway and thus is a part of the authority originally granted
PANTRANCO in the following manner:
A ferry service, in law, is treated as a continuation of the highway from one side of the water over which passes to the other side for
transportation of passengers or of travellers with their teams vehicles and such other property as, they may carry or have with them. (U.S. vs.
Pudget Sound Nev. Co. DC Washington, 24 F. Supp. 431). It maybe said to be a necessary service of a specially constructed boat to carry
passengers and property across rivers or bodies of water from a place in one shore to a point conveniently opposite on the other shore and
continuation of the highway making a connection with the thoroughfare at each terminal (U.S. vs. Canadian Pac. N.Y. Co. 4 P. Supp, 85). It
comprises not merely the privilege of transportation but also the use for that purpose of the respective landings with outlets therefrom. (Nole
vs. Record, 74 OKL. 77; 176 Pac. 756). A ferry service maybe a public ferry or a private ferry. A public ferry service is one which all the public
have the right to resort to and for which a regular fare is established and the ferryman is a common carrier be inbound to take an who apply
and bound to keep his ferry in operation and good repair. (Hudspeth v. Hall, 11 Oa. 510; 36 SB 770). A ferry (private) service is mainly for the
use of the owner and though he may take pay for ferriage, he does not follow it as a business. His ferry is not open to the public at its demand
and he may or may not keep it in operation (Hudspeth vs. Hall, supra, St. Paul Fire and Marine Ins. 696), Harrison, 140 Ark 158; 215 S.W.
698).
The ferry boat service of Pantranco is a continuation of the highway traversed by its buses from Pasay City to Samar, Leyte passing through
Matnog (Sorsogon) through San Bernardino Strait to Alien (Samar). It is a private carrier because it will be used exclusively to transport its
own buses, passengers and freight trucks traversing the said route. It will cater exclusively to the needs of its own clientele (passengers on
board- Pantranco buses) and will not offer itself indiscriminately for hire or for compensation to the general public. Legally therefore, Pantranco
has the right to operate the ferry boat M/V BLACK DOUBLE, along the route from Matnog (Sorsogon) to Allen (Samar) and vice versa for the
exclusive use of its own buses, passengers and freight trucks without the need of applying for a separate certificate of public convenience or
provisional authority. Since its operation is an integral part of its land transport system, its original certificate of public convenience should be
amended to include the operation of such ferryboat for its own exclusive use
In Javellana 14 this Court recited the following definition of ferry :
The term "ferry" implied the continuation by means of boats, barges, or rafts, of a highway or the connection of highways located on the
opposite banks of a stream or other body of water. The term necessarily implies transportation for a short distance, almost invariably between
two points, which is unrelated to other transportation .(Emphasis supplied)
The term "ferry" is often employed to denote the right or franchise granted by the state or its authorized mandatories to continue by means of
boats, an interrupted land highway over the interrupting waters and to charge toll for the use thereof by the public. In this sense it has also
been defined as a privilege, a liberty, to take tolls for transporting passengers and goods across a lake or stream or some other body of water,
with no essential difference from a bridge franchise except as to the mode of transportation, 22 Am. Jur. 553.
A "ferry" has been defined by many courts as "a public highway or thoroughfare across a stream of water or river by boat instead of a bridge."
(St. Clare Country v. Interstate Car and Sand Transfer Co., 192 U.S. 454, 48 L. ed. 518; etc.)
The term ferry is often employed to denote the right or franchise granted by the state or its authorized mandatories to continue by means of
boats, an interrupted land highway over the interrupting waters and to charge toll for the use thereof by the public. (Vallejo Ferry Co. vs.
Solano Aquatic Club, 165 Cal. 255, 131 P. 864, Ann. Cas. 1914C 1179; etc.) (Emphasis supplied)
"Ferry" is service necessity for common good to reach point across a stream lagoon, lake, or bay. (U.S. vs. Canadian Pac. Ry. Co. DC Was., 4
Supp. 851,853)'
"Ferry" properly means a place of transit across a river or arm of the sea, but in law it is treated as a franchise, and defined as the exclusive
right to carry passengers across a river, or arm of the sea, from one vill to another, or to connect a continuous line of road leading from
township or vill to another. (Canadian Pac. Ry. Co. vs. C.C. A. Wash. 73 F. 2d. 831, 832)'
Includes various waters: (1) But an arm of the sea may include various subordinate descriptions of waters, where the tide ebbs and flows. It
may be a river, harbor, creek, basin, or bay; and it is sometimes used to designate very extensive reaches of waters within the projecting
capes or points or a country. (See Rex vs. Bruce, Deach C.C. 1093). (2) In an early case the court said: "The distinction between rivers
navigable and not navigable, that is, where the sea does, or does not, ebb and flow, is very ancient. Rex vs. Smith, 2 Dougl. 441, 99 Reprint
283. The former are called arms of the sea, while the latter pass under the denomination of private or inland rivers" Adams vs. Pease 2 Conn.
481, 484. (Emphasis supplied)
In the cases of Cababa vs. Public Service Commission, 16 Cababa vs. Remigio & Carillo and Municipality of Gattaran vs. Elizaga 17 this
Court considered as ferry service such water service that crosses rivers.
However, in Javellana We made clear distinction between a ferry service and coastwise or interisland service by holding that:
We are not unmindful of the reasons adduced by the Commission in considering the motorboat service between Calapan and Batangas as
ferry; but from our consideration of the law as it stands, particularly Commonwealth Act No. 146, known as the Public Service Act and the
provisions of the Revised Administrative Code regarding municipal ferries and those regarding the jurisdiction of the Bureau of Customs over
documentation, registration, licensing, inspection, etc. of steamboats, motorboats or motor vessels, and the definition of ferry as above quoted
we have the impression and we are inclined to believe that the Legislature intended ferry to mean the service either by barges or rafts, even
by motor or steam vessels, between the banks of a river or stream to continue the highway which is interrupted by the body of water, or in
some cases to connect two points on opposite shores of an arm of the sea such as bay or lake which does not involve too great a distance or
too long a time to navigate But where the line or service involves crossing the open sea like the body of water between the province of
Batangas and the island of Mindoro which the oppositors describe thus "the intervening waters between Calapan and Batangas are wide and
dangerous with big waves where small boat barge, or raft are not adapted to the service," then it is more reasonable to regard said line or
service as more properly belonging to interisland or coastwise trade. According to the finding of the Commission itself the distance between
Calapan is about 24 nautical miles or about 44.5 kilometers. We do not believe that this is the short distance contemplated by the Legislature
in referring to ferries whether within the jurisdiction of a single municipality or ferries between two municipalities or provinces. If we are to grant
that water transportation between Calapan and Batangas is ferry service, then there would be no reason for not considering the same service
between the different islands of the Philippines, such as Boac Marinduque and Batangas; Roxas City of Capiz and Romblon; Cebu City, Cebu
and Ormoc, Leyte; Guian, Samar and Surigao, Surigao; and Dumaguete, Negros Oriental and Oroquieta or Cagayan de Oro.
The Commission makes the distinction between ferry service and motorship in the coastwise trade, thus:
A ferry service is distinguished from a motorship or motorboat service engaged in the coastwise trade in that the latter is intended for the
transportation of passengers and/or freight for hire or compensation between ports or places in the Philippines without definite routes or lines
of service.
We cannot agree. The definiteness of the route of a boat is not the deciding factor. A boat of say the William Lines, Inc. goes from Manila to
Davao City via Cebu, Tagbilaran, Dumaguete, Zamboanga, every week. It has a definite route, and yet it may not for that reason be regarded
as engaged in ferry service. Again, a vessel of the Compania Maritima makes the trip from Manila to Tacloban and back, twice a week.
Certainly, it has a definite route. But that service is not ferry service, but rather interisland or coastwise trade.
We believe that it will be more in consonance with the spirit of the law to consider steamboat or motorboat service between the different
islands, involving more or less great distance and over more or less turbulent and dangerous waters of the open sea, to be coastwise or interisland service. Anyway, whether said service between the different islands is regarded as ferry service or coastwise trade service, as long as
the water craft used are steamboats, motorboats or motor vessels, the result will be the same as far as the Commission is concerned. " 18
(Emphasis supplied)
This Court takes judicial notice of the fact, and as shown by an examination of the map of the Philippines, that Matnog which is on the
southern tip of the island of Luzon and within the province of Sorsogon and Allen which is on the northeastern tip of the island of Samar, is
traversed by the San Bernardino Strait which leads towards the Pacific Ocean. The parties admit that the distance between Matnog and Allen
is about 23 kilometers which maybe negotiated by motorboat or vessel in about 1-1/2 hours as claimed by respondent PANTRANCO to 2
hours according to petitioners. As the San Bernardino Strait which separates Matnog and Allen leads to the ocean it must at times be choppy
and rough so that it will not be safe to navigate the same by small boats or barges but only by such steamboats or vessels as the MV "Black
Double. 19
Considering the environmental circumstances of the case, the conveyance of passengers, trucks and cargo from Matnog to Allen is certainly
not a ferry boat service but a coastwise or interisland shipping service. Under no circumstance can the sea between Matnog and Allen be
considered a continuation of the highway. While a ferry boat service has been considered as a continuation of the highway when crossing
rivers or even lakes, which are small body of waters - separating the land, however, when as in this case the two terminals, Matnog and Allen
are separated by an open sea it can not be considered as a continuation of the highway. Respondent PANTRANCO should secure a separate
CPC for the operation of an interisland or coastwise shipping service in accordance with the provisions of law. Its CPC as a bus transportation
cannot be merely amended to include this water service under the guise that it is a mere private ferry service.
The contention of private respondent PANTRANCO that its ferry service operation is as a private carrier, not as a common carrier for its
exclusive use in the ferrying of its passenger buses and cargo trucks is absurd. PANTRANCO does not deny that it charges its passengers
separately from the charges for the bus trips and issues separate tickets whenever they board the MV "Black Double" that crosses Matnog to
Allen, 20 PANTRANCO cannot pretend that in issuing tickets to its passengers it did so as a private carrier and not as a common carrier. The
Court does not see any reason why inspite of its amended franchise to operate a private ferry boat service it cannot accept walk-in
passengers just for the purpose of crossing the sea between Matnog and Allen. Indeed evidence to this effect has been submitted. 21 What is
even more difficult to comprehend is that while in one breath respondent PANTRANCO claims that it is a private carrier insofar as the
ferryboat service is concerned, in another breath it states that it does not thereby abdicate from its obligation as a common carrier to observe
extraordinary diligence and vigilance in the transportation of its passengers and goods. Nevertheless, considering that the authority granted to
PANTRANCO is to operate a private ferry, it can still assert that it cannot be held to account as a common carrier towards its passengers and
cargo. Such an anomalous situation that will jeopardize the safety and interests of its passengers and the cargo owners cannot be allowed.
What appears clear from the record is that at the beginning PANTRANCO planned to operate such ferry boat service between Matnog and
Alien as a common carrier so it requested authority from MARINA to purchase the vessel M/V "Black Double 22 in accordance with the
procedure provided for by law for such application for a certificate of public convenience. 23 However when its request was denied as the said
routes "are adequately serviced by existing/authorized operators, 24 it nevertheless purchased the vessel and started operating the same.
Obviously to go about this obstacle to its operation, it then contrived a novel theory that what it proposes to operate is a private ferryboat
service across a small body of water for the exclusive use of its buses, trucks and passengers as an incident to its franchise to convey
passengers and cargo on land from Pasay City to Tacloban so that it believes it need not secure a separate certificate of public convenience.
25
Based on this representation, no less than the Secretary of Justice was led to render an affirmative opinion on October 20, 1981, 26 followed
a few days later by the questioned decision of public respondent of October 23, 1981. 27 Certainly the Court cannot give its imprimatur to such
a situation.
Thus the Court holds that the water transport service between Matnog and Allen is not a ferry boat service but a coastwise or interisland
shipping service. Before private respondent may be issued a franchise or CPC for the operation of the said service as a common carrier, it
must comply with the usual requirements of filing an application, payment of the fees, publication, adducing evidence at a hearing and
affording the oppositors the opportunity to be heard, among others, as provided by law. 28
WHEREFORE, the petitions are hereby GRANTED and the Decision of the respondent Board of Transportation (BOT) of October 23, 1981 in
BOT Case No. 81-348-C and its Order of July 21, 1982 in the same case denying the motions for reconsideration filed by petitioners are
hereby Reversed and set aside and declared null and void. Respondent PANTRANCO is hereby permanently enjoined from operating the
ferryboat service and/or coastwise/interisland services between Matnog and Allen until it shall have secured the appropriate Certificate of
Public Convenience (CPC) in accordance with the requirements of the law, with costs against respondent PANTRANCO.
SO ORDERED.
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 115381 December 23, 1994
KILUSANG MAYO UNO LABOR CENTER, petitioner,

vs.
HON. JESUS B. GARCIA, JR., the LAND TRANSPORTATION FRANCHISING AND REGULATORY BOARD, and the PROVINCIAL BUS
OPERATORS ASSOCIATION OF THE PHILIPPINES, respondents.
KAPUNAN, J.:
Public utilities are privately owned and operated businesses whose service are essential to the general public. They are enterprises which
specially cater to the needs of the public and conduce to their comfort and convenience. As such, public utility services are impressed with
public interest and concern. The same is true with respect to the business of common carrier which holds such a peculiar relation to the public
interest that there is superinduced upon it the right of public regulation when private properties are affected with public interest, hence, they
cease to be juris privati only. When, therefore, one devotes his property to a use in which the public has an interest, he, in effect grants to the
public an interest in that use, and must submit to the control by the public for the common good, to the extent of the interest he has thus
created. 1
An abdication of the licensing and regulatory government agencies of their functions as the instant petition seeks to show, is indeed
lamentable. Not only is it an unsound administrative policy but it is inimical to public trust and public interest as well.
The instant petition for certiorari assails the constitutionality and validity of certain memoranda, circulars and/or orders of the Department of
Transportation and Communications (DOTC) and the Land Transportation Franchising and Regulatory Board LTFRB) 2 which, among others,
(a) authorize provincial bus and jeepney operators to increase or decrease the prescribed transportation fares without application therefor with
the LTFRB and without hearing and approval thereof by said agency in violation of Sec. 16(c) of Commonwealth Act No. 146, as amended,
otherwise known as the Public Service Act, and in derogation of LTFRB's duty to fix and determine just and reasonable fares by delegating
that function to bus operators, and (b) establish a presumption of public need in favor of applicants for certificates of public convenience (CPC)
and place on the oppositor the burden of proving that there is no need for the proposed service, in patent violation not only of Sec. 16(c) of CA
146, as amended, but also of Sec. 20(a) of the same Act mandating that fares should be "just and reasonable." It is, likewise, violative of the
Rules of Court which places upon each party the burden to prove his own affirmative allegations. 3 The offending provisions contained in the
questioned issuances pointed out by petitioner, have resulted in the introduction into our highways and thoroughfares thousands of old and
smoke-belching buses, many of which are right-hand driven, and have exposed our consumers to the burden of spiraling costs of public
transportation without hearing and due process.
The following memoranda, circulars and/or orders are sought to be nullified by the instant petition, viz: (a) DOTC Memorandum Order 90-395,
dated June 26, 1990 relative to the implementation of a fare range scheme for provincial bus services in the country; (b) DOTC Department
Order No.
92-587, dated March 30, 1992, defining the policy framework on the regulation of transport services; (c) DOTC Memorandum dated October 8,
1992, laying down rules and procedures to implement Department Order No. 92-587; (d) LTFRB Memorandum Circular No. 92-009, providing
implementing guidelines on the DOTC Department Order No. 92-587; and (e) LTFRB Order dated March 24, 1994 in Case No. 94-3112.
The relevant antecedents are as follows:
On June 26, 1990; then Secretary of DOTC, Oscar M. Orbos, issued Memorandum Circular No. 90-395 to then LTFRB Chairman, Remedios
A.S. Fernando allowing provincial bus operators to charge passengers rates within a range of 15% above and 15% below the LTFRB official
rate for a period of one (1) year. The text of the memorandum order reads in full:
One of the policy reforms and measures that is in line with the thrusts and the priorities set out in the Medium-Term
Philippine Development Plan (MTPDP) 1987 1992) is the liberalization of regulations in the transport sector. Along this
line, the Government intends to move away gradually from regulatory policies and make progress towards greater
reliance on free market forces.
Based on several surveys and observations, bus companies are already charging passenger rates above and below the
official fare declared by LTFRB on many provincial routes. It is in this context that some form of liberalization on public
transport fares is to be tested on a pilot basis.
In view thereof, the LTFRB is hereby directed to immediately publicize a fare range scheme for all provincial bus routes in
country (except those operating within Metro Manila). Transport Operators shall be allowed to charge passengers within a
range of fifteen percent (15%) above and fifteen percent (15%) below the LTFRB official rate for a period of one year.
Guidelines and procedures for the said scheme shall be prepared by LTFRB in coordination with the DOTC Planning
Service.
The implementation of the said fare range scheme shall start on 6 August 1990.
For compliance. (Emphasis ours.)
Finding the implementation of the fare range scheme "not legally feasible," Remedios A.S. Fernando submitted the following memorandum to
Oscar M. Orbos on July 24, 1990, to wit:
With reference to DOTC Memorandum Order No. 90-395 dated 26 June 1990 which the LTFRB received on 19 July 1990,
directing the Board "to immediately publicize a fare range scheme for all provincial bus routes in the country (except those
operating within Metro Manila)" that will allow operators "to charge passengers within a range of fifteen percent (15%)
above and fifteen percent (15%) below the LTFRB official rate for a period of one year" the undersigned is respectfully
adverting the Secretary's attention to the following for his consideration:
1. Section 16(c) of the Public Service Act prescribes the following for the fixing and determination of
rates (a) the rates to be approved should be proposed by public service operators; (b) there should
be a publication and notice to concerned or affected parties in the territory affected; (c) a public
hearing should be held for the fixing of the rates; hence, implementation of the proposed fare range
scheme on August 6 without complying with the requirements of the Public Service Act may not be
legally feasible.
2. To allow bus operators in the country to charge fares fifteen (15%) above the present LTFRB fares
in the wake of the devastation, death and suffering caused by the July 16 earthquake will not be
socially warranted and will be politically unsound; most likely public criticism against the DOTC and
the LTFRB will be triggered by the untimely motu propio implementation of the proposal by the mere
expedient of publicizing the fare range scheme without calling a public hearing, which scheme many
as early as during the Secretary's predecessor know through newspaper reports and columnists'
comments to be Asian Development Bank and World Bank inspired.
3. More than inducing a reduction in bus fares by fifteen percent (15%) the implementation of the
proposal will instead trigger an upward adjustment in bus fares by fifteen percent (15%) at a time
when hundreds of thousands of people in Central and Northern Luzon, particularly in Central
Pangasinan, La Union, Baguio City, Nueva Ecija, and the Cagayan Valley are suffering from the
devastation and havoc caused by the recent earthquake.
4. In lieu of the said proposal, the DOTC with its agencies involved in public transportation can
consider measures and reforms in the industry that will be socially uplifting, especially for the people
in the areas devastated by the recent earthquake.
In view of the foregoing considerations, the undersigned respectfully suggests that the implementation of the proposed
fare range scheme this year be further studied and evaluated.
On December 5, 1990, private respondent Provincial Bus Operators Association of the Philippines, Inc. (PBOAP) filed an application for fare
rate increase. An across-the-board increase of eight and a half centavos (P0.085) per kilometer for all types of provincial buses with a
minimum-maximum fare range of fifteen (15%) percent over and below the proposed basic per kilometer fare rate, with the said minimummaximum fare range applying only to ordinary, first class and premium class buses and a fifty-centavo (P0.50) minimum per kilometer fare for
aircon buses, was sought.
On December 6, 1990, private respondent PBOAP reduced its applied proposed fare to an across-the-board increase of six and a half
(P0.065) centavos per kilometer for ordinary buses. The decrease was due to the drop in the expected price of diesel.
The application was opposed by the Philippine Consumers Foundation, Inc. and Perla C. Bautista alleging that the proposed rates were
exorbitant and unreasonable and that the application contained no allegation on the rate of return of the proposed increase in rates.
On December 14, 1990, public respondent LTFRB rendered a decision granting the fare rate increase in accordance with the following
schedule of fares on a straight computation method, viz:
AUTHORIZED FARES
LUZON
MIN. OF 5 KMS. SUCCEEDING KM.
REGULAR P1.50 P0.37
STUDENT P1.15 P0.28
VISAYAS/MINDANAO
REGULAR P1.60 P0.375
STUDENT P1.20 P0.285
FIRST CLASS (PER KM.)
LUZON P0.385
VISAYAS/
MINDANAO P0.395
PREMIERE CLASS (PER KM.)
LUZON P0.395
VISAYAS/
MINDANAO P0.405
AIRCON (PER KM.) P0.415. 4

On March 30, 1992, then Secretary of the Department of Transportation and Communications Pete Nicomedes Prado issued Department
Order No.
92-587 defining the policy framework on the regulation of transport services. The full text of the said order is reproduced below in view of the
importance of the provisions contained therein:
WHEREAS, Executive Order No. 125 as amended, designates the Department of Transportation and Communications
(DOTC) as the primary policy, planning, regulating and implementing agency on transportation;
WHEREAS, to achieve the objective of a viable, efficient, and dependable transportation system, the transportation
regulatory agencies under or attached to the DOTC have to harmonize their decisions and adopt a common philosophy
and direction;
WHEREAS, the government proposes to build on the successful liberalization measures pursued over the last five years
and bring the transport sector nearer to a balanced longer term regulatory framework;
NOW, THEREFORE, pursuant to the powers granted by laws to the DOTC, the following policies and principles in the
economic regulation of land, air, and water transportation services are hereby adopted:
1. Entry into and exit out of the industry. Following the Constitutional dictum against monopoly, no franchise holder shall
be permitted to maintain a monopoly on any route. A minimum of two franchise holders shall be permitted to operate on
any route.
The requirements to grant a certificate to operate, or certificate of public convenience, shall be: proof of Filipino
citizenship, financial capability, public need, and sufficient insurance cover to protect the riding public.
In determining public need, the presumption of need for a service shall be deemed in favor of the applicant. The burden of
proving that there is no need for a proposed service shall be with the oppositor(s).
In the interest of providing efficient public transport services, the use of the "prior operator" and the "priority of filing" rules
shall be discontinued. The route measured capacity test or other similar tests of demand for vehicle/vessel fleet on any
route shall be used only as a guide in weighing the merits of each franchise application and not as a limit to the services
offered.
Where there are limitations in facilities, such as congested road space in urban areas, or at airports and ports, the use of
demand management measures in conformity with market principles may be considered.
The right of an operator to leave the industry is recognized as a business decision, subject only to the filing of appropriate
notice and following a phase-out period, to inform the public and to minimize disruption of services.
2. Rate and Fare Setting. Freight rates shall be freed gradually from government controls. Passenger fares shall also be
deregulated, except for the lowest class of passenger service (normally third class passenger transport) for which the
government will fix indicative or reference fares. Operators of particular services may fix their own fares within a range
15% above and below the indicative or reference rate.
Where there is lack of effective competition for services, or on specific routes, or for the transport of particular
commodities, maximum mandatory freight rates or passenger fares shall be set temporarily by the government pending
actions to increase the level of competition.
For unserved or single operator routes, the government shall contract such services in the most advantageous terms to
the public and the government, following public bids for the services. The advisability of bidding out the services or using
other kinds of incentives on such routes shall be studied by the government.
3. Special Incentives and Financing for Fleet Acquisition. As a matter of policy, the government shall not engage in special
financing and incentive programs, including direct subsidies for fleet acquisition and expansion. Only when the market
situation warrants government intervention shall programs of this type be considered. Existing programs shall be phased
out gradually.
The Land Transportation Franchising and Regulatory Board, the Civil Aeronautics Board, the Maritime Industry Authority
are hereby directed to submit to the Office of the Secretary, within forty-five (45) days of this Order, the detailed rules and
procedures for the Implementation of the policies herein set forth. In the formulation of such rules, the concerned agencies
shall be guided by the most recent studies on the subjects, such as the Provincial Road Passenger Transport Study, the
Civil Aviation Master Plan, the Presidential Task Force on the Inter-island Shipping Industry, and the Inter-island Liner
Shipping Rate Rationalization Study.
For the compliance of all concerned. (Emphasis ours)
On October 8, 1992, public respondent Secretary of the Department of Transportation and Communications Jesus B. Garcia, Jr. issued a
memorandum to the Acting Chairman of the LTFRB suggesting swift action on the adoption of rules and procedures to implement abovequoted Department Order No. 92-587 that laid down deregulation and other liberalization policies for the transport sector. Attached to the said
memorandum was a revised draft of the required rules and procedures covering (i) Entry Into and Exit Out of the Industry and (ii) Rate and
Fare Setting, with comments and suggestions from the World Bank incorporated therein. Likewise, resplendent from the said memorandum is
the statement of the DOTC Secretary that the adoption of the rules and procedures is a pre-requisite to the approval of the Economic
Integration Loan from the World Bank. 5
On February 17, 1993, the LTFRB issued Memorandum Circular
No. 92-009 promulgating the guidelines for the implementation of DOTC Department Order No. 92-587. The Circular provides, among others,
the following challenged portions:
xxx xxx xxx
IV. Policy Guidelines on the Issuance of Certificate of Public Convenience.
The issuance of a Certificate of Public Convenience is determined by public need. The presumption of public need for a
service shall be deemed in favor of the applicant, while burden of proving that there is no need for the proposed service
shall be the oppositor'(s).
xxx xxx xxx
V. Rate and Fare Setting
The control in pricing shall be liberalized to introduce price competition complementary with the quality of service, subject
to prior notice and public hearing. Fares shall not be provisionally authorized without public hearing.
A. On the General Structure of Rates
1. The existing authorized fare range system of plus or minus 15 per cent for provincial buses and jeepneys shall be
widened to 20% and -25% limit in 1994 with the authorized fare to be replaced by an indicative or reference rate as the
basis for the expanded fare range.
2. Fare systems for aircon buses are liberalized to cover first class and premier services.
xxx xxx xxx
(Emphasis ours).
Sometime in March, 1994, private respondent PBOAP, availing itself of the deregulation policy of the DOTC allowing provincial bus operators
to collect plus 20% and minus 25% of the prescribed fare without first having filed a petition for the purpose and without the benefit of a public
hearing, announced a fare increase of twenty (20%) percent of the existing fares. Said increased fares were to be made effective on March
16, 1994.
On March 16, 1994, petitioner KMU filed a petition before the LTFRB opposing the upward adjustment of bus fares.
On March 24, 1994, the LTFRB issued one of the assailed orders dismissing the petition for lack of merit. The dispositive portion reads:
PREMISES CONSIDERED, this Board after considering the arguments of the parties, hereby DISMISSES FOR LACK OF
MERIT the petition filed in the above-entitled case. This petition in this case was resolved with dispatch at the request of
petitioner to enable it to immediately avail of the legal remedies or options it is entitled under existing laws.
SO ORDERED. 6
Hence, the instant petition for certiorari with an urgent prayer for issuance of a temporary restraining order.
The Court, on June 20, 1994, issued a temporary restraining order enjoining, prohibiting and preventing respondents from implementing the
bus fare rate increase as well as the questioned orders and memorandum circulars. This meant that provincial bus fares were rolled back to
the levels duly authorized by the LTFRB prior to March 16, 1994. A moratorium was likewise enforced on the issuance of franchises for the
operation of buses, jeepneys, and taxicabs.
Petitioner KMU anchors its claim on two (2) grounds. First, the authority given by respondent LTFRB to provincial bus operators to set a fare
range of plus or minus fifteen (15%) percent, later increased to plus twenty (20%) and minus twenty-five (-25%) percent, over and above the
existing authorized fare without having to file a petition for the purpose, is unconstitutional, invalid and illegal. Second, the establishment of a
presumption of public need in favor of an applicant for a proposed transport service without having to prove public necessity, is illegal for being
violative of the Public Service Act and the Rules of Court.
In its Comment, private respondent PBOAP, while not actually touching upon the issues raised by the petitioner, questions the wisdom and the
manner by which the instant petition was filed. It asserts that the petitioner has no legal standing to sue or has no real interest in the case at
bench and in obtaining the reliefs prayed for.
In their Comment filed by the Office of the Solicitor General, public respondents DOTC Secretary Jesus B. Garcia, Jr. and the LTFRB
asseverate that the petitioner does not have the standing to maintain the instant suit. They further claim that it is within DOTC and LTFRB's
authority to set a fare range scheme and establish a presumption of public need in applications for certificates of public convenience.
We find the instant petition impressed with merit.
At the outset, the threshold issue of locus standi must be struck. Petitioner KMU has the standing to sue.
The requirement of locus standi inheres from the definition of judicial power. Section 1 of Article VIII of the Constitution provides:
xxx xxx xxx
Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally
demandable and enforceable, and to determine whether or not there has been a grave abuse of discretion amounting to
lack or excess of jurisdiction on the part of any branch or instrumentality of the Government.
In Lamb v. Phipps, 7 we ruled that judicial power is the power to hear and decide causes pending between parties who have the right to sue in
the courts of law and equity. Corollary to this provision is the principle of locus standi of a party litigant. One who is directly affected by and
whose interest is immediate and substantial in the controversy has the standing to sue. The rule therefore requires that a party must show a
personal stake in the outcome of the case or an injury to himself that can be redressed by a favorable decision so as to warrant an invocation
of the court's jurisdiction and to justify the exercise of the court's remedial powers in his behalf. 8
In the case at bench, petitioner, whose members had suffered and continue to suffer grave and irreparable injury and damage from the
implementation of the questioned memoranda, circulars and/or orders, has shown that it has a clear legal right that was violated and continues
to be violated with the enforcement of the challenged memoranda, circulars and/or orders. KMU members, who avail of the use of buses,
trains and jeepneys everyday, are directly affected by the burdensome cost of arbitrary increase in passenger fares. They are part of the
millions of commuters who comprise the riding public. Certainly, their rights must be protected, not neglected nor ignored.
Assuming arguendo that petitioner is not possessed of the standing to sue, this court is ready to brush aside this barren procedural infirmity
and recognize the legal standing of the petitioner in view of the transcendental importance of the issues raised. And this act of liberality is not
without judicial precedent. As early as the Emergency Powers Cases, this Court had exercised its discretion and waived the requirement of
proper party. In the recent case of Kilosbayan, Inc., et al. v. Teofisto Guingona, Jr., et al., 9 we ruled in the same lines and enumerated some of
the cases where the same policy was adopted, viz:
. . . A party's standing before this Court is a procedural technicality which it may, in the exercise of its discretion, set aside
in view of the importance of the issues raised. In the landmark Emergency Powers Cases, [G.R. No. L-2044 (Araneta v.
Dinglasan); G.R. No. L-2756 (Araneta
v. Angeles); G.R. No. L-3054 (Rodriguez v. Tesorero de Filipinas); G.R. No. L-3055 (Guerrero v. Commissioner of
Customs); and G.R. No. L-3056 (Barredo v. Commission on Elections), 84 Phil. 368 (1949)], this Court brushed aside this
technicality because "the transcendental importance to the public of these cases demands that they be settled promptly
and definitely, brushing aside, if we must, technicalities of procedure. (Avelino vs. Cuenco, G.R. No. L-2621)." Insofar as
taxpayers' suits are concerned, this Court had declared that it "is not devoid of discretion as to whether or not it should be
entertained," (Tan v. Macapagal, 43 SCRA 677, 680 [1972]) or that it "enjoys an open discretion to entertain the same or
not." [Sanidad v. COMELEC, 73 SCRA 333 (1976)].
xxx xxx xxx
In line with the liberal policy of this Court on locus standi, ordinary taxpayers, members of Congress, and even association
of planters, and
non-profit civic organizations were allowed to initiate and prosecute actions before this court to question the
constitutionality or validity of laws, acts, decisions, rulings, or orders of various government agencies or instrumentalities.
Among such cases were those assailing the constitutionality of (a) R.A. No. 3836 insofar as it allows retirement gratuity
and commutation of vacation and sick leave to Senators and Representatives and to elective officials of both Houses of
Congress (Philippine Constitution Association, Inc. v. Gimenez, 15 SCRA 479 [1965]); (b) Executive Order No. 284,
issued by President Corazon C. Aquino on 25 July 1987, which allowed members of the cabinet, their undersecretaries,
and assistant secretaries to hold other government offices or positions (Civil Liberties Union v. Executive Secretary, 194
SCRA 317 [1991]); (c) the automatic appropriation for debt service in the General Appropriations Act (Guingona v.
Carague, 196 SCRA 221 [1991]; (d) R.A. No. 7056 on the holding of desynchronized elections (Osmea v. Commission
on Elections, 199 SCRA 750 [1991]); (e) P.D. No. 1869 (the charter of the Philippine Amusement and Gaming
Corporation) on the ground that it is contrary to morals, public policy, and order (Basco v. Philippine Amusement and
Gaming Corp., 197 SCRA 52 [1991]); and (f) R.A. No. 6975, establishing the Philippine National Police. (Carpio v.
Executive Secretary, 206 SCRA 290 [1992]).
Other cases where we have followed a liberal policy regarding locus standi include those attacking the validity or legality
of (a) an order allowing the importation of rice in the light of the prohibition imposed by R.A. No. 3452 (Iloilo Palay and
Corn Planters Association, Inc. v. Feliciano, 13 SCRA 377 [1965]; (b) P.D. Nos. 991 and 1033 insofar as they proposed
amendments to the Constitution and P.D. No. 1031 insofar as it directed the COMELEC to supervise, control, hold, and
conduct the referendum-plebiscite on 16 October 1976 (Sanidad v. Commission on Elections, supra); (c) the bidding for
the sale of the 3,179 square meters of land at Roppongi, Minato-ku, Tokyo, Japan (Laurel v. Garcia, 187 SCRA 797
[1990]); (d) the approval without hearing by the Board of Investments of the amended application of the Bataan
Petrochemical Corporation to transfer the site of its plant from Bataan to Batangas and the validity of such transfer and
the shift of feedstock from naphtha only to naphtha and/or liquefied petroleum gas (Garcia v. Board of Investments, 177
SCRA 374 [1989]; Garcia v. Board of Investments, 191 SCRA 288 [1990]); (e) the decisions, orders, rulings, and
resolutions of the Executive Secretary, Secretary of Finance, Commissioner of Internal Revenue, Commissioner of
Customs, and the Fiscal Incentives Review Board exempting the National Power Corporation from indirect tax and duties
(Maceda v. Macaraig, 197 SCRA 771 [1991]); (f) the orders of the Energy Regulatory Board of 5 and 6 December 1990 on
the ground that the hearings conducted on the second provisional increase in oil prices did not allow the petitioner
substantial cross-examination; (Maceda v. Energy Regulatory Board, 199 SCRA 454 [1991]); (g) Executive Order No. 478
which levied a special duty of P0.95 per liter of imported oil products (Garcia v. Executive Secretary, 211 SCRA 219
[1992]); (h) resolutions of the Commission on Elections concerning the apportionment, by district, of the number of
elective members of Sanggunians (De Guia vs. Commission on Elections, 208 SCRA 420 [1992]); and (i) memorandum
orders issued by a Mayor affecting the Chief of Police of Pasay City (Pasay Law and Conscience Union, Inc. v. Cuneta,
101 SCRA 662 [1980]).
In the 1975 case of Aquino v. Commission on Elections (62 SCRA 275 [1975]), this Court, despite its unequivocal ruling
that the petitioners therein had no personality to file the petition, resolved nevertheless to pass upon the issues raised
because of the far-reaching implications of the petition. We did no less in De Guia v. COMELEC (Supra) where, although
we declared that De Guia "does not appear to have locus standi, a standing in law, a personal or substantial interest," we
brushed aside the procedural infirmity "considering the importance of the issue involved, concerning as it does the political
exercise of qualified voters affected by the apportionment, and petitioner alleging abuse of discretion and violation of the
Constitution by respondent."
Now on the merits of the case.
On the fare range scheme.
Section 16(c) of the Public Service Act, as amended, reads:
Sec. 16. Proceedings of the Commission, upon notice and hearing. The Commission shall have power, upon proper
notice and hearing in accordance with the rules and provisions of this Act, subject to the limitations and exceptions
mentioned and saving provisions to the contrary:
xxx xxx xxx
(c) To fix and determine individual or joint rates, tolls, charges, classifications, or schedules thereof, as well as
commutation, mileage kilometrage, and other special rates which shall be imposed, observed, and followed thereafter by
any public service: Provided, That the Commission may, in its discretion, approve rates proposed by public services
provisionally and without necessity of any hearing; but it shall call a hearing thereon within thirty days thereafter, upon
publication and notice to the concerns operating in the territory affected: Provided, further, That in case the public service
equipment of an operator is used principally or secondarily for the promotion of a private business, the net profits of said
private business shall be considered in relation with the public service of such operator for the purpose of fixing the rates.
(Emphasis ours).
xxx xxx xxx
Under the foregoing provision, the Legislature delegated to the defunct Public Service Commission the power of fixing the rates of
public services. Respondent LTFRB, the existing regulatory body today, is likewise vested with the same under Executive Order No.
202 dated June 19, 1987. Section 5(c) of the said executive order authorizes LTFRB "to determine, prescribe, approve and
periodically review and adjust, reasonable fares, rates and other related charges, relative to the operation of public land
transportation services provided by motorized vehicles."
Such delegation of legislative power to an administrative agency is permitted in order to adapt to the increasing complexity of modern life. As
subjects for governmental regulation multiply, so does the difficulty of administering the laws. Hence, specialization even in legislation has
become necessary. Given the task of determining sensitive and delicate matters as
route-fixing and rate-making for the transport sector, the responsible regulatory body is entrusted with the power of subordinate legislation.
With this authority, an administrative body and in this case, the LTFRB, may implement broad policies laid down in a statute by "filling in" the
details which the Legislature may neither have time or competence to provide. However, nowhere under the aforesaid provisions of law are
the regulatory bodies, the PSC and LTFRB alike, authorized to delegate that power to a common carrier, a transport operator, or other public
service.
In the case at bench, the authority given by the LTFRB to the provincial bus operators to set a fare range over and above the authorized
existing fare, is illegal and invalid as it is tantamount to an undue delegation of legislative authority. Potestas delegata non delegari potest.
What has been delegated cannot be delegated. This doctrine is based on the ethical principle that such a delegated power constitutes not only
a right but a duty to be performed by the delegate through the instrumentality of his own judgment and not through the intervening mind of
another. 10 A further delegation of such power would indeed constitute a negation of the duty in violation of the trust reposed in the delegate
mandated to discharge it directly. 11 The policy of allowing the provincial bus operators to change and increase their fares at will would result
not only to a chaotic situation but to an anarchic state of affairs. This would leave the riding public at the mercy of transport operators who may
increase fares every hour, every day, every month or every year, whenever it pleases them or whenever they deem it "necessary" to do so. In
Panay Autobus Co. v. Philippine Railway Co., 12 where respondent Philippine Railway Co. was granted by the Public Service Commission the
authority to change its freight rates at will, this Court categorically declared that:
In our opinion, the Public Service Commission was not authorized by law to delegate to the Philippine Railway Co. the
power of altering its freight rates whenever it should find it necessary to do so in order to meet the competition of road
trucks and autobuses, or to change its freight rates at will, or to regard its present rates as maximum rates, and to fix
lower rates whenever in the opinion of the Philippine Railway Co. it would be to its advantage to do so.
The mere recital of the language of the application of the Philippine Railway Co. is enough to show that it is untenable.
The Legislature has delegated to the Public Service Commission the power of fixing the rates of public services, but it has
not authorized the Public Service Commission to delegate that power to a common carrier or other public service. The
rates of public services like the Philippine Railway Co. have been approved or fixed by the Public Service Commission,
and any change in such rates must be authorized or approved by the Public Service Commission after they have been
shown to be just and reasonable. The public service may, of course, propose new rates, as the Philippine Railway Co. did
in case No. 31827, but it cannot lawfully make said new rates effective without the approval of the Public Service
Commission, and the Public Service Commission itself cannot authorize a public service to enforce new rates without the
prior approval of said rates by the commission. The commission must approve new rates when they are submitted to it, if
the evidence shows them to be just and reasonable, otherwise it must disapprove them. Clearly, the commission cannot
determine in advance whether or not the new rates of the Philippine Railway Co. will be just and reasonable, because it
does not know what those rates will be.
In the present case the Philippine Railway Co. in effect asked for permission to change its freight rates at will. It may
change them every day or every hour, whenever it deems it necessary to do so in order to meet competition or whenever
in its opinion it would be to its advantage. Such a procedure would create a most unsatisfactory state of affairs and largely
defeat the purposes of the public service law. 13 (Emphasis ours).
One veritable consequence of the deregulation of transport fares is a compounded fare. If transport operators will be authorized to impose and
collect an additional amount equivalent to 20% over and above the authorized fare over a period of time, this will unduly prejudice a commuter
who will be made to pay a fare that has been computed in a manner similar to those of compounded bank interest rates.
Picture this situation. On December 14, 1990, the LTFRB authorized provincial bus operators to collect a thirty-seven (P0.37) centavo per
kilometer fare for ordinary buses. At the same time, they were allowed to impose and collect a fare range of plus or minus 15% over the
authorized rate. Thus P0.37 centavo per kilometer authorized fare plus P0.05 centavos (which is 15% of P0.37 centavos) is equivalent to
P0.42 centavos, the allowed rate in 1990. Supposing the LTFRB grants another five (P0.05) centavo increase per kilometer in 1994, then, the
base or reference for computation would have to be P0.47 centavos (which is P0.42 + P0.05 centavos). If bus operators will exercise their
authority to impose an additional 20% over and above the authorized fare, then the fare to be collected shall amount to P0.56 (that is, P0.47
authorized LTFRB rate plus 20% of P0.47 which is P0.29). In effect, commuters will be continuously subjected, not only to a double fare
adjustment but to a compounding fare as well. On their part, transport operators shall enjoy a bigger chunk of the pie. Aside from fare increase
applied for, they can still collect an additional amount by virtue of the authorized fare range. Mathematically, the situation translates into the
following:
Year** LTFRB authorized Fare Range
rate*** Fare to be collected per kilometer
1990 P0.37 15% (P0.05) P0.42
1994 P0.42 + 0.05 = 0.47 20% (P0.09) P0.56
1998 P0.56 + 0.05 = 0.61 20% (P0.12) P0.73
2002 P0.73 + 0.05 = 0.78 20% (P0.16) P0.94
Moreover, rate making or rate fixing is not an easy task. It is a delicate and sensitive government function that requires dexterity of judgment
and sound discretion with the settled goal of arriving at a just and reasonable rate acceptable to both the public utility and the public. Several
factors, in fact, have to be taken into consideration before a balance could be achieved. A rate should not be confiscatory as would place an
operator in a situation where he will continue to operate at a loss. Hence, the rate should enable public utilities to generate revenues sufficient
to cover operational costs and provide reasonable return on the investments. On the other hand, a rate which is too high becomes
discriminatory. It is contrary to public interest. A rate, therefore, must be reasonable and fair and must be affordable to the end user who will
utilize the services.
Given the complexity of the nature of the function of rate-fixing and its far-reaching effects on millions of commuters, government must not
relinquish this important function in favor of those who would benefit and profit from the industry. Neither should the requisite notice and
hearing be done away with. The people, represented by reputable oppositors, deserve to be given full opportunity to be heard in their
opposition to any fare increase.
The present administrative procedure, 14 to our mind, already mirrors an orderly and satisfactory arrangement for all parties involved. To do
away with such a procedure and allow just one party, an interested party at that, to determine what the rate should be, will undermine the right
of the other parties to due process. The purpose of a hearing is precisely to determine what a just and reasonable rate is. 15 Discarding such
procedural and constitutional right is certainly inimical to our fundamental law and to public interest.
On the presumption of public need.
A certificate of public convenience (CPC) is an authorization granted by the LTFRB for the operation of land transportation services for public
use as required by law. Pursuant to Section 16(a) of the Public Service Act, as amended, the following requirements must be met before a
CPC may be granted, to wit: (i) the applicant must be a citizen of the Philippines, or a corporation or co-partnership, association or joint-stock
company constituted and organized under the laws of the Philippines, at least 60 per centum of its stock or paid-up capital must belong
entirely to citizens of the Philippines; (ii) the applicant must be financially capable of undertaking the proposed service and meeting the
responsibilities incident to its operation; and (iii) the applicant must prove that the operation of the public service proposed and the
authorization to do business will promote the public interest in a proper and suitable manner. It is understood that there must be proper notice
and hearing before the PSC can exercise its power to issue a CPC.
While adopting in toto the foregoing requisites for the issuance of a CPC, LTFRB Memorandum Circular No. 92-009, Part IV, provides for yet
incongruous and contradictory policy guideline on the issuance of a CPC. The guidelines states:
The issuance of a Certificate of Public Convenience is determined by public need. The presumption of public need for a service shall be
deemed in favor of the applicant, while the burden of proving that there is no need for the proposed service shall be the oppositor's. (Emphasis
ours).
The above-quoted provision is entirely incompatible and inconsistent with Section 16(c)(iii) of the Public Service Act which requires that before
a CPC will be issued, the applicant must prove by proper notice and hearing that the operation of the public service proposed will promote
public interest in a proper and suitable manner. On the contrary, the policy guideline states that the presumption of public need for a public
service shall be deemed in favor of the applicant. In case of conflict between a statute and an administrative order, the former must prevail.
By its terms, public convenience or necessity generally means something fitting or suited to the public need. 16 As one of the basic
requirements for the grant of a CPC, public convenience and necessity exists when the proposed facility or service meets a reasonable want
of the public and supply a need which the existing facilities do not adequately supply. The existence or
non-existence of public convenience and necessity is therefore a question of fact that must be established by evidence, real and/or
testimonial; empirical data; statistics and such other means necessary, in a public hearing conducted for that purpose. The object and purpose
of such procedure, among other things, is to look out for, and protect, the interests of both the public and the existing transport operators.
Verily, the power of a regulatory body to issue a CPC is founded on the condition that after full-dress hearing and investigation, it shall find, as
a fact, that the proposed operation is for the convenience of the public. 17 Basic convenience is the primary consideration for which a CPC is
issued, and that fact alone must be consistently borne in mind. Also, existing operators in subject routes must be given an opportunity to offer
proof and oppose the application. Therefore, an applicant must, at all times, be required to prove his capacity and capability to furnish the
service which he has undertaken to
render. 18 And all this will be possible only if a public hearing were conducted for that purpose.
Otherwise stated, the establishment of public need in favor of an applicant reverses well-settled and institutionalized judicial, quasi-judicial and
administrative procedures. It allows the party who initiates the proceedings to prove, by mere application, his affirmative allegations. Moreover,
the offending provisions of the LTFRB memorandum circular in question would in effect amend the Rules of Court by adding another
disputable presumption in the enumeration of 37 presumptions under Rule 131, Section 5 of the Rules of Court. Such usurpation of this
Court's authority cannot be countenanced as only this Court is mandated by law to promulgate rules concerning pleading, practice and
procedure. 19
Deregulation, while it may be ideal in certain situations, may not be ideal at all in our country given the present circumstances. Advocacy of
liberalized franchising and regulatory process is tantamount to an abdication by the government of its inherent right to exercise police power,
that is, the right of government to regulate public utilities for protection of the public and the utilities themselves.
While we recognize the authority of the DOTC and the LTFRB to issue administrative orders to regulate the transport sector, we find that they
committed grave abuse of discretion in issuing DOTC Department Order
No. 92-587 defining the policy framework on the regulation of transport services and LTFRB Memorandum Circular No. 92-009 promulgating
the implementing guidelines on DOTC Department Order No. 92-587, the said administrative issuances being amendatory and violative of the
Public Service Act and the Rules of Court. Consequently, we rule that the twenty (20%) per centum fare increase imposed by respondent
PBOAP on March 16, 1994 without the benefit of a petition and a public hearing is null and void and of no force and effect. No grave abuse of
discretion however was committed in the issuance of DOTC Memorandum Order No. 90-395 and DOTC Memorandum dated October 8, 1992,
the same being merely internal communications between administrative officers.
WHEREFORE, in view of the foregoing, the instant petition is hereby GRANTED and the challenged administrative issuances and orders,
namely: DOTC Department Order No. 92-587, LTFRB Memorandum Circular
No. 92-009, and the order dated March 24, 1994 issued by respondent LTFRB are hereby DECLARED contrary to law and invalid insofar as
they affect provisions therein (a) delegating to provincial bus and jeepney operators the authority to increase or decrease the duly prescribed
transportation fares; and (b) creating a presumption of public need for a service in favor of the applicant for a certificate of public convenience
and placing the burden of proving that there is no need for the proposed service to the oppositor.
The Temporary Restraining Order issued on June 20, 1994 is hereby MADE PERMANENT insofar as it enjoined the bus fare rate increase
granted under the provisions of the aforementioned administrative circulars, memoranda and/or orders declared invalid.
No pronouncement as to costs.
SO ORDERED.
SUPREME COURT
Manila
EN BANC
G.R. No. 124360 November 5, 1997
FRANCISCO S. TATAD, petitioner,

vs.
THE SECRETARY OF THE DEPARTMENT OF ENERGY AND THE SECRETARY OF THE DEPARTMENT OF FINANCE, respondents.
G.R. No. 127867 November 5, 1997
EDCEL C. LAGMAN, JOKER P. ARROYO, ENRIQUE GARCIA, WIGBERTO TANADA, FLAG HUMAN RIGHTS FOUNDATION, INC.,
FREEDOM FROM DEBT COALITION (FDC), SANLAKAS, petitioners,
vs.
HON. RUBEN TORRES in his capacity as the Executive Secretary, HON. FRANCISCO VIRAY, in his capacity as the Secretary of
Energy, CALTEX Philippines, Inc., PETRON Corporation and PILIPINAS SHELL Corporation, respondents.
PUNO, J.:
The petitions at bar challenge the constitutionality of Republic Act No. 8180 entitled "An Act Deregulating the Downstream Oil Industry and For
Other Purposes". 1 R.A. No. 8180 ends twenty six (26) years of government regulation of the downstream oil industry. Few cases carry a
surpassing importance on the life of every Filipino as these petitions for the upswing and downswing of our economy materially depend on the
oscillation of oil.
First, the facts without the fat. Prior to 1971, there was no government agency regulating the oil industry other than those dealing with ordinary
commodities. Oil companies were free to enter and exit the market without any government interference. There were four (4) refining
companies (Shell, Caltex, Bataan Refining Company and Filoil Refining) and six (6) petroleum marketing companies (Esso, Filoil, Caltex,
Getty, Mobil and Shell), then operating in the country. 2
In 1971, the country was driven to its knees by a crippling oil crisis. The government, realizing that petroleum and its products are vital to
national security and that their continued supply at reasonable prices is essential to the general welfare, enacted the Oil Industry Commission
Act. 3 It created the Oil Industry Commission (OIC) to regulate the business of importing, exporting, re-exporting, shipping, transporting,
processing, refining, storing, distributing, marketing and selling crude oil, gasoline, kerosene, gas and other refined petroleum products. The
OIC was vested with the power to fix the market prices of petroleum products, to regulate the capacities of refineries, to license new refineries
and to regulate the operations and trade practices of the industry. 4
In addition to the creation of the OIC, the government saw the imperious need for a more active role of Filipinos in the oil industry. Until the
early seventies, the downstream oil industry was controlled by multinational companies. All the oil refineries and marketing companies were
owned by foreigners whose economic interests did not always coincide with the interest of the Filipino. Crude oil was transported to the
country by foreign-controlled tankers. Crude processing was done locally by foreign-owned refineries and petroleum products were marketed
through foreign-owned retail outlets. On November 9, 1973, President Ferdinand E. Marcos boldly created the Philippine National Oil
Corporation (PNOC) to break the control by foreigners of our oil industry. 5 PNOC engaged in the business of refining, marketing, shipping,
transporting, and storing petroleum. It acquired ownership of ESSO Philippines and Filoil to serve as its marketing arm. It bought the
controlling shares of Bataan Refining Corporation, the largest refinery in the country. 6 PNOC later put up its own marketing subsidiary
Petrophil. PNOC operated under the business name PETRON Corporation. For the first time, there was a Filipino presence in the Philippine
oil market.
In 1984, President Marcos through Section 8 of Presidential Decree No. 1956, created the Oil Price Stabilization Fund (OPSF) to cushion the effects of
frequent changes in the price of oil caused by exchange rate adjustments or increase in the world market prices of crude oil and imported petroleum
products. The fund is used (1) to reimburse the oil companies for cost increases in crude oil and imported petroleum products resulting from exchange
rate adjustment and/or increase in world market prices of crude oil, and (2) to reimburse oil companies for cost underrecovery incurred as a result of the
reduction of domestic prices of petroleum products. Under the law, the OPSF may be sourced from :
1. any increase in the tax collection from ad valorem tax or customs duty imposed on petroleum products subject to tax under P.D. No. 1956
arising from exchange rate adjustment,
2. any increase in the tax collection as a result of the lifting of tax exemptions of government corporations, as may be determined by the
Minister of Finance in consultation with the Board of Energy,
3. any additional amount to be imposed on petroleum products to augment the resources of the fund through an appropriate order that may be
issued by the Board of Energy requiring payment of persons or companies engaged in the business of importing, manufacturing and/or
marketing petroleum products, or
4. any resulting peso costs differentials in case the actual peso costs paid by oil companies in the importation of crude oil and petroleum
products is less than the peso costs computed using the reference foreign exchange rate as fixed by the Board of Energy. 7
By 1985, only three (3) oil companies were operating in the country Caltex, Shell and the government-owned PNOC.
In May, 1987, President Corazon C. Aquino signed Executive Order No. 172 creating the Energy Regulatory Board to regulate the business of
importing, exporting, re-exporting, shipping, transporting, processing, refining, marketing and distributing energy resources "when warranted
and only when public necessity requires." The Board had the following powers and functions:
1. Fix and regulate the prices of petroleum products;
2. Fix and regulate the rate schedule or prices of piped gas to be charged by duly franchised gas companies which distribute gas by means of
underground pipe system;
3. Fix and regulate the rates of pipeline concessionaries under the provisions of R.A. No. 387, as amended . . . ;
4. Regulate the capacities of new refineries or additional capacities of existing refineries and license refineries that may be organized after the
issuance of (E.O. No. 172) under such terms and conditions as are consistent with the national interest; and
5. Whenever the Board has determined that there is a shortage of any petroleum product, or when public interest so requires, it may take such
steps as it may consider necessary, including the temporary adjustment of the levels of prices of petroleum products and the payment to the
Oil Price Stabilization Fund . . . by persons or entities engaged in the petroleum industry of such amounts as may be determined by the Board,
which may enable the importer to recover its cost of importation. 8
On December 9, 1992, Congress enacted R.A. No. 7638 which created the Department of Energy to prepare, integrate, coordinate, supervise
and control all plans, programs, projects, and activities of the government in relation to energy exploration, development, utilization,
distribution and conservation. 9 The thrust of the Philippine energy program under the law was toward privatization of government agencies
related to energy, deregulation of the power and energy industry and reduction of dependency on oil-fired plants. 10 The law also aimed to
encourage free and active participation and investment by the private sector in all energy activities. Section 5(e) of the law states that "at the
end of four (4) years from the effectivity of this Act, the Department shall, upon approval of the President, institute the programs and timetable
of deregulation of appropriate energy projects and activities of the energy industry."
Pursuant to the policies enunciated in R.A. No. 7638, the government approved the privatization of Petron Corporation in 1993. On December
16, 1993, PNOC sold 40% of its equity in Petron Corporation to the Aramco Overseas Company.
In March 1996, Congress took the audacious step of deregulating the downstream oil industry. It enacted R.A. No. 8180, entitled the
"Downstream Oil Industry Deregulation Act of 1996." Under the deregulated environment, "any person or entity may import or purchase any
quantity of crude oil and petroleum products from a foreign or domestic source, lease or own and operate refineries and other downstream oil
facilities and market such crude oil or use the same for his own requirement," subject only to monitoring by the Department of Energy. 11
The deregulation process has two phases: the transition phase and the full deregulation phase. During the transition phase, controls of the
non-pricing aspects of the oil industry were to be lifted. The following were to be accomplished: (1) liberalization of oil importation, exportation,
manufacturing, marketing and distribution, (2) implementation of an automatic pricing mechanism, (3) implementation of an automatic formula
to set margins of dealers and rates of haulers, water transport operators and pipeline concessionaires, and (4) restructuring of oil taxes. Upon
full deregulation, controls on the price of oil and the foreign exchange cover were to be lifted and the OPSF was to be abolished.
The first phase of deregulation commenced on August 12, 1996.
On February 8, 1997, the President implemented the full deregulation of the Downstream Oil Industry through E.O. No. 372.
The petitions at bar assail the constitutionality of various provisions of R.A No. 8180 and E.O. No. 372.
In G.R. No. 124360, petitioner Francisco S. Tatad seeks the annulment of section 5(b) of R.A. No. 8180. Section 5(b) provides:
b) Any law to the contrary notwithstanding and starting with the effectivity of this Act, tariff duty shall be imposed and collected on imported
crude oil at the rate of three percent (3%) and imported refined petroleum products at the rate of seven percent (7%), except fuel oil and LPG,
the rate for which shall be the same as that for imported crude oil: Provided, That beginning on January 1, 2004 the tariff rate on imported
crude oil and refined petroleum products shall be the same: Provided, further, That this provision may be amended only by an Act of
Congress.
The petition is anchored on three arguments:
First, that the imposition of different tariff rates on imported crude oil and imported refined petroleum products violates the equal protection
clause. Petitioner contends that the 3%-7% tariff differential unduly favors the three existing oil refineries and discriminates against prospective
investors in the downstream oil industry who do not have their own refineries and will have to source refined petroleum products from abroad.
Second, that the imposition of different tariff rates does not deregulate the downstream oil industry but instead controls the oil industry,
contrary to the avowed policy of the law. Petitioner avers that the tariff differential between imported crude oil and imported refined petroleum
products bars the entry of other players in the oil industry because it effectively protects the interest of oil companies with existing refineries.
Thus, it runs counter to the objective of the law "to foster a truly competitive market."
Third, that the inclusion of the tariff provision in section 5(b) of R.A. No. 8180 violates Section 26(1) Article VI of the Constitution requiring
every law to have only one subject which shall be expressed in its title. Petitioner contends that the imposition of tariff rates in section 5(b) of
R.A. No. 8180 is foreign to the subject of the law which is the deregulation of the downstream oil industry.
In G.R. No. 127867, petitioners Edcel C. Lagman, Joker P. Arroyo, Enrique Garcia, Wigberto Tanada, Flag Human Rights Foundation, Inc., Freedom
from Debt Coalition (FDC) and Sanlakas contest the constitutionality of section 15 of R.A. No. 8180 and E.O. No. 392. Section 15 provides:
Sec. 15. Implementation of Full Deregulation. Pursuant to Section 5(e) of Republic Act No. 7638, the DOE shall, upon approval of the
President, implement the full deregulation of the downstream oil industry not later than March 1997. As far as practicable, the DOE shall time
the full deregulation when the prices of crude oil and petroleum products in the world market are declining and when the exchange rate of the
peso in relation to the US dollar is stable. Upon the implementation of the full deregulation as provided herein, the transition phase is deemed
terminated and the following laws are deemed repealed:
E.O. No. 372 states in full, viz.:
WHEREAS, Republic Act No. 7638, otherwise known as the "Department of Energy Act of 1992," provides that, at the end of four years from
its effectivity last December 1992, "the Department (of Energy) shall, upon approval of the President, institute the programs and time table of
deregulation of appropriate energy projects and activities of the energy sector;"
WHEREAS, Section 15 of Republic Act No. 8180, otherwise known as the "Downstream Oil Industry Deregulation Act of 1996," provides that
"the DOE shall, upon approval of the President, implement full deregulation of the downstream oil industry not later than March, 1997. As far
as practicable, the DOE shall time the full deregulation when the prices of crude oil and petroleum products in the world market are declining
and when the exchange rate of the peso in relation to the US dollar is stable;"
WHEREAS, pursuant to the recommendation of the Department of Energy, there is an imperative need to implement the full deregulation of
the downstream oil industry because of the following recent developments: (i) depletion of the buffer fund on or about 7 February 1997
pursuant to the Energy Regulatory Board's Order dated 16 January 1997; (ii) the prices of crude oil had been stable at $21-$23 per barrel
since October 1996 while prices of petroleum products in the world market had been stable since mid-December of last year. Moreover, crude
oil prices are beginning to soften for the last few days while prices of some petroleum products had already declined; and (iii) the exchange
rate of the peso in relation to the US dollar has been stable for the past twelve (12) months, averaging at around P26.20 to one US dollar;
WHEREAS, Executive Order No. 377 dated 31 October 1996 provides for an institutional framework for the administration of the deregulated
industry by defining the functions and responsibilities of various government agencies;
WHEREAS, pursuant to Republic Act No. 8180, the deregulation of the industry will foster a truly competitive market which can better achieve
the social policy objectives of fair prices and adequate, continuous supply of environmentally-clean and high quality petroleum products;
NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Republic of the Philippines, by the powers vested in me by law, do hereby declare
the full deregulation of the downstream oil industry.
In assailing section 15 of R.A. No. 8180 and E.O. No. 392, petitioners offer the following submissions:
First, section 15 of R.A. No. 8180 constitutes an undue delegation of legislative power to the President and the Secretary of Energy because it
does not provide a determinate or determinable standard to guide the Executive Branch in determining when to implement the full deregulation
of the downstream oil industry. Petitioners contend that the law does not define when it is practicable for the Secretary of Energy to
recommend to the President the full deregulation of the downstream oil industry or when the President may consider it practicable to declare
full deregulation. Also, the law does not provide any specific standard to determine when the prices of crude oil in the world market are
considered to be declining nor when the exchange rate of the peso to the US dollar is considered stable.
Second, petitioners aver that E.O. No. 392 implementing the full deregulation of the downstream oil industry is arbitrary and unreasonable
because it was enacted due to the alleged depletion of the OPSF fund a condition not found in R.A. No. 8180.
Third, section 15 of R.A. No. 8180 and E.O. No. 392 allow the formation of a de facto cartel among the three existing oil companies Petron,
Caltex and Shell in violation of the constitutional prohibition against monopolies, combinations in restraint of trade and unfair competition.
Respondents, on the other hand, fervently defend the constitutionality of R.A. No. 8180 and E.O. No. 392. In addition, respondents contend
that the issues raised by the petitions are not justiciable as they pertain to the wisdom of the law. Respondents further aver that petitioners
have no locus standi as they did not sustain nor will they sustain direct injury as a result of the implementation of R.A. No. 8180.
The petitions were heard by the Court on September 30, 1997. On October 7, 1997, the Court ordered the private respondents oil companies
"to maintain the status quo and to cease and desist from increasing the prices of gasoline and other petroleum fuel products for a period of
thirty (30) days . . . subject to further orders as conditions may warrant."
We shall now resolve the petitions on the merit. The petitions raise procedural and substantive issues bearing on the constitutionality of R.A.
No. 8180 and E.O. No. 392. The procedural issues are: (1) whether or not the petitions raise a justiciable controversy, and (2) whether or not
the petitioners have the standing to assail the validity of the subject law and executive order. The substantive issues are: (1) whether or not
section 5 (b) violates the one title one subject requirement of the Constitution; (2) whether or not the same section violates the equal
protection clause of the Constitution; (3) whether or not section 15 violates the constitutional prohibition on undue delegation of power; (4)
whether or not E.O. No. 392 is arbitrary and unreasonable; and (5) whether or not R.A. No. 8180 violates the constitutional prohibition against
monopolies, combinations in restraint of trade and unfair competition.
We shall first tackle the procedural issues. Respondents claim that the avalanche of arguments of the petitioners assail the wisdom of R.A.
No. 8180. They aver that deregulation of the downstream oil industry is a policy decision made by Congress and it cannot be reviewed, much
less be reversed by this Court. In constitutional parlance, respondents contend that the petitions failed to raise a justiciable controversy.
Respondents' joint stance is unnoteworthy. Judicial power includes not only the duty of the courts to settle actual controversies involving rights
which are legally demandable and enforceable, but also the duty to determine whether or not there has been grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the government. 12 The courts, as guardians of the
Constitution, have the inherent authority to determine whether a statute enacted by the legislature transcends the limit imposed by the
fundamental law. Where a statute violates the Constitution, it is not only the right but the duty of the judiciary to declare such act as
unconstitutional and void. 13 We held in the recent case of Tanada v. Angara: 14
In seeking to nullify an act of the Philippine Senate on the ground that it contravenes the Constitution, the petition no doubt raises a justiciable
controversy. Where an action of the legislative branch is seriously alleged to have infringed the Constitution, it becomes not only the right but
in fact the duty of the judiciary to settle the dispute. The question thus posed is judicial rather than political. The duty to adjudicate remains to
assure that the supremacy of the Constitution is upheld. Once a controversy as to the application or interpretation of a constitutional provision
is raised before this Court, it becomes a legal issue which the Court is bound by constitutional mandate to decide.
Even a sideglance at the petitions will reveal that petitioners have raised constitutional issues which deserve the resolution of this Court in view of their
seriousness and their value as precedents. Our statement of facts and definition of issues clearly show that petitioners are assailing R.A. No. 8180
because its provisions infringe the Constitution and not because the law lacks wisdom. The principle of separation of power mandates that challenges
on the constitutionality of a law should be resolved in our courts of justice while doubts on the wisdom of a law should be debated in the halls of
Congress. Every now and then, a law may be denounced in court both as bereft of wisdom and constitutionally infirmed. Such denunciation will not
deny this Court of its jurisdiction to resolve the constitutionality of the said law while prudentially refusing to pass on its wisdom.
The effort of respondents to question the locus standi of petitioners must also fall on barren ground. In language too lucid to be
misunderstood, this Court has brightlined its liberal stance on a petitioner's locus standi where the petitioner is able to craft an issue of
transcendental significance to the people. 15 In Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas, Inc. v. Tan, 16 we stressed:
Objections to taxpayers' suit for lack of sufficient personality, standing or interest are, however, in the main procedural matters. Considering
the importance to the public of the cases at bar, and in keeping with the Court's duty, under the 1987 Constitution, to determine whether or not
the other branches of government have kept themselves within the limits of the Constitution and the laws and that they have not abused the
discretion given to them, the Court has brushed aside technicalities of procedure and has taken cognizance of these petitions.
There is not a dot of disagreement between the petitioners and the respondents on the far reaching importance of the validity of RA No. 8180
deregulating our downstream oil industry. Thus, there is no good sense in being hypertechnical on the standing of petitioners for they pose
issues which are significant to our people and which deserve our forthright resolution.
We shall now track down the substantive issues. In G.R. No. 124360 where petitioner is Senator Tatad, it is contended that section 5(b) of
R.A. No. 8180 on tariff differential violates the provision 17 of the Constitution requiring every law to have only one subject which should be
expressed in its title. We do not concur with this contention. As a policy, this Court has adopted a liberal construction of the one title one
subject rule. We have consistently ruled 18 that the title need not mirror, fully index or catalogue all contents and minute details of a law. A law
having a single general subject indicated in the title may contain any number of provisions, no matter how diverse they may be, so long as
they are not inconsistent with or foreign to the general subject, and may be considered in furtherance of such subject by providing for the
method and means of carrying out the general subject. 19 We hold that section 5(b) providing for tariff differential is germane to the subject of
R.A. No. 8180 which is the deregulation of the downstream oil industry. The section is supposed to sway prospective investors to put up
refineries in our country and make them rely less on imported petroleum. 20 We shall, however, return to the validity of this provision when we
examine its blocking effect on new entrants to the oil market.
We shall now slide to the substantive issues in G.R. No. 127867. Petitioners assail section 15 of R.A. No. 8180 which fixes the time frame for
the full deregulation of the downstream oil industry. We restate its pertinent portion for emphasis, viz.:
Sec. 15. Implementation of Full Deregulation Pursuant to section 5(e) of Republic Act No. 7638, the DOE shall, upon approval of the
President, implement the full deregulation of the downstream oil industry not later than March 1997. As far as practicable, the DOE shall time
the full deregulation when the prices of crude oil and petroleum products in the world market are declining and when the exchange rate of the
peso in relation to the US dollar is stable . . .
Petitioners urge that the phrases "as far as practicable," "decline of crude oil prices in the world market" and "stability of the peso exchange rate to the
US dollar" are ambivalent, unclear and inconcrete in meaning. They submit that they do not provide the "determinate or determinable standards" which
can guide the President in his decision to fully deregulate the downstream oil industry. In addition, they contend that E.O. No. 392 which advanced the
date of full deregulation is void for it illegally considered the depletion of the OPSF fund as a factor.
The power of Congress to delegate the execution of laws has long been settled by this Court. As early as 1916 in Compania General de
Tabacos de Filipinas vs. The Board of Public Utility Commissioners, 21 this Court thru, Mr. Justice Moreland, held that "the true distinction is
between the delegation of power to make the law, which necessarily involves a discretion as to what it shall be, and conferring authority or
discretion as to its execution, to be exercised under and in pursuance of the law. The first cannot be done; to the latter no valid objection can
be made." Over the years, as the legal engineering of men's relationship became more difficult, Congress has to rely more on the practice of
delegating the execution of laws to the executive and other administrative agencies. Two tests have been developed to determine whether the
delegation of the power to execute laws does not involve the abdication of the power to make law itself. We delineated the metes and bounds
of these tests in Eastern Shipping Lines, Inc. VS. POEA, 22 thus:
There are two accepted tests to determine whether or not there is a valid delegation of legislative power, viz: the completeness test and the
sufficient standard test. Under the first test, the law must be complete in all its terms and conditions when it leaves the legislative such that
when it reaches the delegate the only thing he will have to do is to enforce it. Under the sufficient standard test, there must be adequate
guidelines or limitations in the law to map out the boundaries of the delegate's authority and prevent the delegation from running riot. Both
tests are intended to prevent a total transference of legislative authority to the delegate, who is not allowed to step into the shoes of the
legislature and exercise a power essentially legislative.
The validity of delegating legislative power is now a quiet area in our constitutional landscape. As sagely observed, delegation of legislative
power has become an inevitability in light of the increasing complexity of the task of government. Thus, courts bend as far back as possible to
sustain the constitutionality of laws which are assailed as unduly delegating legislative powers. Citing Hirabayashi v. United States 23 as
authority, Mr. Justice Isagani A. Cruz states "that even if the law does not expressly pinpoint the standard, the courts will bend over backward
to locate the same elsewhere in order to spare the statute, if it can, from constitutional infirmity." 24
Given the groove of the Court's rulings, the attempt of petitioners to strike down section 15 on the ground of undue delegation of legislative power
cannot prosper. Section 15 can hurdle both the completeness test and the sufficient standard test. It will be noted that Congress expressly provided in
R.A. No. 8180 that full deregulation will start at the end of March 1997, regardless of the occurrence of any event. Full deregulation at the end of March
1997 is mandatory and the Executive has no discretion to postpone it for any purported reason. Thus, the law is complete on the question of the final
date of full deregulation. The discretion given to the President is to advance the date of full deregulation before the end of March 1997. Section 15 lays
down the standard to guide the judgment of the President he is to time it as far as practicable when the prices of crude oil and petroleum products in
the world market are declining and when the exchange rate of the peso in relation to the US dollar is stable.
Petitioners contend that the words "as far as practicable," "declining" and "stable" should have been defined in R.A. No. 8180 as they do not
set determinate or determinable standards. The stubborn submission deserves scant consideration. The dictionary meanings of these words
are well settled and cannot confuse men of reasonable intelligence. Webster defines "practicable" as meaning possible to practice or perform,
"decline" as meaning to take a downward direction, and "stable" as meaning firmly established. 25 The fear of petitioners that these words will
result in the exercise of executive discretion that will run riot is thus groundless. To be sure, the Court has sustained the validity of similar, if not
more general standards in other cases. 26
It ought to follow that the argument that E.O. No. 392 is null and void as it was based on indeterminate standards set by R.A. 8180 must
likewise fail. If that were all to the attack against the validity of E.O. No. 392, the issue need not further detain our discourse. But petitioners
further posit the thesis that the Executive misapplied R.A. No. 8180 when it considered the depletion of the OPSF fund as a factor in fully
deregulating the downstream oil industry in February 1997. A perusal of section 15 of R.A. No. 8180 will readily reveal that it only enumerated
two factors to be considered by the Department of Energy and the Office of the President, viz.: (1) the time when the prices of crude oil and
petroleum products in the world market are declining, and (2) the time when the exchange rate of the peso in relation to the US dollar is stable.
Section 15 did not mention the depletion of the OPSF fund as a factor to be given weight by the Executive before ordering full deregulation.
On the contrary, the debates in Congress will show that some of our legislators wanted to impose as a pre-condition to deregulation a showing
that the OPSF fund must not be in deficit. 27 We therefore hold that the Executive department failed to follow faithfully the standards set by R.A.
No. 8180 when it considered the extraneous factor of depletion of the OPSF fund. The misappreciation of this extra factor cannot be justified
on the ground that the Executive department considered anyway the stability of the prices of crude oil in the world market and the stability of
the exchange rate of the peso to the dollar. By considering another factor to hasten full deregulation, the Executive department rewrote the
standards set forth in R.A. 8180. The Executive is bereft of any right to alter either by subtraction or addition the standards set in R.A. No.
8180 for it has no power to make laws. To cede to the Executive the power to make law is to invite tyranny, indeed, to transgress the principle
of separation of powers. The exercise of delegated power is given a strict scrutiny by courts for the delegate is a mere agent whose action
cannot infringe the terms of agency. In the cases at bar, the Executive co-mingled the factor of depletion of the OPSF fund with the factors of
decline of the price of crude oil in the world market and the stability of the peso to the US dollar. On the basis of the text of E.O. No. 392, it is
impossible to determine the weight given by the Executive department to the depletion of the OPSF fund. It could well be the principal
consideration for the early deregulation. It could have been accorded an equal significance. Or its importance could be nil. In light of this
uncertainty, we rule that the early deregulation under E.O. No. 392 constitutes a misapplication of R.A. No. 8180.
We now come to grips with the contention that some provisions of R.A. No. 8180 violate section 19 of Article XII of the 1987 Constitution.
These provisions are:
(1) Section 5 (b) which states "Any law to the contrary notwithstanding and starting with the effectivity of this Act, tariff duty shall be imposed
and collected on imported crude oil at the rate of three percent (3%) and imported refined petroleum products at the rate of seven percent
(7%) except fuel oil and LPG, the rate for which shall be the same as that for imported crude oil. Provided, that beginning on January 1, 2004
the tariff rate on imported crude oil and refined petroleum products shall be the same. Provided, further, that this provision may be amended
only by an Act of Congress."
(2) Section 6 which states "To ensure the security and continuity of petroleum crude and products supply, the DOE shall require the refiners
and importers to maintain a minimum inventory equivalent to ten percent (10%) of their respective annual sales volume or forty (40) days of
supply, whichever is lower," and
(3) Section 9 (b) which states "To ensure fair competition and prevent cartels and monopolies in the downstream oil industry, the following
acts shall be prohibited:
(b) Predatory pricing which means selling or offering to sell any product at a price unreasonably below the industry average cost so as to
attract customers to the detriment of competitors.
On the other hand, section 19 of Article XII of the Constitution allegedly violated by the aforestated provisions of R.A. No. 8180 mandates: "The State
shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint of trade or unfair competition shall be allowed."
A monopoly is a privilege or peculiar advantage vested in one or more persons or companies, consisting in the exclusive right or power to
carry on a particular business or trade, manufacture a particular article, or control the sale or the whole supply of a particular commodity. It is a
form of market structure in which one or only a few firms dominate the total sales of a product or service. 28 On the other hand, a combination
in restraint of trade is an agreement or understanding between two or more persons, in the form of a contract, trust, pool, holding company, or
other form of association, for the purpose of unduly restricting competition, monopolizing trade and commerce in a certain commodity,
controlling its, production, distribution and price, or otherwise interfering with freedom of trade without statutory authority. 29 Combination in
restraint of trade refers to the means while monopoly refers to the end. 30
Article 186 of the Revised Penal Code and Article 28 of the New Civil Code breathe life to this constitutional policy. Article 186 of the Revised
Penal Code penalizes monopolization and creation of combinations in restraint of
trade, 31 while Article 28 of the New Civil Code makes any person who shall engage in unfair competition liable for damages. 32
Respondents aver that sections 5(b), 6 and 9(b) implement the policies and objectives of R.A. No. 8180. They explain that the 4% tariff
differential is designed to encourage new entrants to invest in refineries. They stress that the inventory requirement is meant to guaranty
continuous domestic supply of petroleum and to discourage fly-by-night operators. They also submit that the prohibition against predatory
pricing is intended to protect prospective entrants. Respondents manifested to the Court that new players have entered the Philippines after
deregulation and have now captured 3% 5% of the oil market.
The validity of the assailed provisions of R.A. No. 8180 has to be decided in light of the letter and spirit of our Constitution, especially section 19, Article
XII. Beyond doubt, the Constitution committed us to the free enterprise system but it is a system impressed with its own distinctness. Thus, while the
Constitution embraced free enterprise as an economic creed, it did not prohibit per se the operation of monopolies which can, however, be regulated in
the public interest. 33 Thus too, our free enterprise system is not based on a market of pure and unadulterated competition where the State pursues a
strict hands-off policy and follows the let-the-devil devour the hindmost rule. Combinations in restraint of trade and unfair competitions are absolutely
proscribed and the proscription is directed both against the State as well as the private sector. 34 This distinct free enterprise system is dictated by the
need to achieve the goals of our national economy as defined by section 1, Article XII of the Constitution which are: more equitable distribution of
opportunities, income and wealth; a sustained increase in the amount of goods and services produced by the nation for the benefit of the people; and
an expanding productivity as the key to raising the quality of life for all, especially the underprivileged. It also calls for the State to protect Filipino
enterprises against unfair competition and trade practices.
Section 19, Article XII of our Constitution is anti-trust in history and in spirit. It espouses competition. The desirability of competition is the
reason for the prohibition against restraint of trade, the reason for the interdiction of unfair competition, and the reason for regulation of
unmitigated monopolies. Competition is thus the underlying principle of section 19, Article XII of our Constitution which cannot be violated by
R.A. No. 8180. We subscribe to the observation of Prof. Gellhorn that the objective of anti-trust law is "to assure a competitive economy,
based upon the belief that through competition producers will strive to satisfy consumer wants at the lowest price with the sacrifice of the
fewest resources. Competition among producers allows consumers to bid for goods and services, and thus matches their desires with
society's opportunity costs." 35 He adds with appropriateness that there is a reliance upon "the operation of the 'market' system (free
enterprise) to decide what shall be produced, how resources shall be allocated in the production process, and to whom the various products
will be distributed. The market system relies on the consumer to decide what and how much shall be produced, and on competition, among
producers to determine who will manufacture it."
Again, we underline in scarlet that the fundamental principle espoused by section 19, Article XII of the Constitution is competition for it alone can release
the creative forces of the market. But the competition that can unleash these creative forces is competition that is fighting yet is fair. Ideally, this kind of
competition requires the presence of not one, not just a few but several players. A market controlled by one player (monopoly) or dominated by a
handful of players (oligopoly) is hardly the market where honest-to-goodness competition will prevail. Monopolistic or oligopolistic markets deserve our
careful scrutiny and laws which barricade the entry points of new players in the market should be viewed with suspicion.
Prescinding from these baseline propositions, we shall proceed to examine whether the provisions of R.A. No. 8180 on tariff differential,
inventory reserves, and predatory prices imposed substantial barriers to the entry and exit of new players in our downstream oil industry. If
they do, they have to be struck down for they will necessarily inhibit the formation of a truly competitive market. Contrariwise, if they are
insignificant impediments, they need not be stricken down.
In the cases at bar, it cannot be denied that our downstream oil industry is operated and controlled by an oligopoly, a foreign oligopoly at that.
Petron, Shell and Caltex stand as the only major league players in the oil market. All other players belong to the lilliputian league. As the
dominant players, Petron, Shell and Caltex boast of existing refineries of various capacities. The tariff differential of 4% therefore works to their
immense benefit. Yet, this is only one edge of the tariff differential. The other edge cuts and cuts deep in the heart of their competitors. It
erects a high barrier to the entry of new players. New players that intend to equalize the market power of Petron, Shell and Caltex by building
refineries of their own will have to spend billions of pesos. Those who will not build refineries but compete with them will suffer the huge
disadvantage of increasing their product cost by 4%. They will be competing on an uneven field. The argument that the 4% tariff differential is
desirable because it will induce prospective players to invest in refineries puts the cart before the horse. The first need is to attract new players
and they cannot be attracted by burdening them with heavy disincentives. Without new players belonging to the league of Petron, Shell and
Caltex, competition in our downstream oil industry is an idle dream.
The provision on inventory widens the balance of advantage of Petron, Shell and Caltex against prospective new players. Petron, Shell and
Caltex can easily comply with the inventory requirement of R.A. No. 8180 in view of their existing storage facilities. Prospective competitors
again will find compliance with this requirement difficult as it will entail a prohibitive cost. The construction cost of storage facilities and the cost
of inventory can thus scare prospective players. Their net effect is to further occlude the entry points of new players, dampen competition and
enhance the control of the market by the three (3) existing oil companies.
Finally, we come to the provision on predatory pricing which is defined as ". . . selling or offering to sell any product at a price unreasonably
below the industry average cost so as to attract customers to the detriment of competitors." Respondents contend that this provision works
against Petron, Shell and Caltex and protects new entrants. The ban on predatory pricing cannot be analyzed in isolation. Its validity is
interlocked with the barriers imposed by R.A. No. 8180 on the entry of new players. The inquiry should be to determine whether predatory
pricing on the part of the dominant oil companies is encouraged by the provisions in the law blocking the entry of new players. Text-writer
Hovenkamp, 36 gives the authoritative answer and we quote:
The rationale for predatory pricing is the sustaining of losses today that will give a firm monopoly profits in the future. The monopoly profits will
never materialize, however, if the market is flooded with new entrants as soon as the successful predator attempts to raise its price. Predatory
pricing will be profitable only if the market contains significant barriers to new entry.
As aforediscsussed, the 4% tariff differential and the inventory requirement are significant barriers which discourage new players to enter the
market. Considering these significant barriers established by R.A. No. 8180 and the lack of players with the comparable clout of PETRON,
SHELL and CALTEX, the temptation for a dominant player to engage in predatory pricing and succeed is a chilling reality. Petitioners' charge
that this provision on predatory pricing is anti-competitive is not without reason.
Respondents belittle these barriers with the allegation that new players have entered the market since deregulation. A scrutiny of the list of the alleged
new players will, however, reveal that not one belongs to the class and category of PETRON, SHELL and CALTEX. Indeed, there is no showing that
any of these new players intends to install any refinery and effectively compete with these dominant oil companies. In any event, it cannot be gainsaid
that the new players could have been more in number and more impressive in might if the illegal entry barriers in R.A. No. 8180 were not erected.
We come to the final point. We now resolve the total effect of the untimely deregulation, the imposition of 4% tariff differential on imported
crude oil and refined petroleum products, the requirement of inventory and the prohibition on predatory pricing on the constitutionality of R.A.
No. 8180. The question is whether these offending provisions can be individually struck down without invalidating the entire R.A. No. 8180.
The ruling case law is well stated by author Agpalo, 37 viz.:
The general rule is that where part of a statute is void as repugnant to the Constitution, while another part is valid, the valid portion, if
separable from the invalid, may stand and be enforced. The presence of a separability clause in a statute creates the presumption that the
legislature intended separability, rather than complete nullity of the statute. To justify this result, the valid portion must be so far independent of
the invalid portion that it is fair to presume that the legislature would have enacted it by itself if it had supposed that it could not constitutionally
enact the other. Enough must remain to make a complete, intelligible and valid statute, which carries out the legislative intent. . . .
The exception to the general rule is that when the parts of a statute are so mutually dependent and connected, as conditions, considerations,
inducements, or compensations for each other, as to warrant a belief that the legislature intended them as a whole, the nullity of one part will
vitiate the rest. In making the parts of the statute dependent, conditional, or connected with one another, the legislature intended the statute to
be carried out as a whole and would not have enacted it if one part is void, in which case if some parts are unconstitutional, all the other
provisions thus dependent, conditional, or connected must fall with them.
R.A. No. 8180 contains a separability clause. Section 23 provides that "if for any reason, any section or provision of this Act is declared
unconstitutional or invalid, such parts not affected thereby shall remain in full force and effect." This separability clause notwithstanding, we
hold that the offending provisions of R.A. No. 8180 so permeate its essence that the entire law has to be struck down. The provisions on tariff
differential, inventory and predatory pricing are among the principal props of R.A. No. 8180. Congress could not have deregulated the
downstream oil industry without these provisions. Unfortunately, contrary to their intent, these provisions on tariff differential, inventory and
predatory pricing inhibit fair competition, encourage monopolistic power and interfere with the free interaction of market forces. R.A. No. 8180
needs provisions to vouchsafe free and fair competition. The need for these vouchsafing provisions cannot be overstated. Before deregulation,
PETRON, SHELL and CALTEX had no real competitors but did not have a free run of the market because government controls both the
pricing and non-pricing aspects of the oil industry. After deregulation, PETRON, SHELL and CALTEX remain unthreatened by real competition
yet are no longer subject to control by government with respect to their pricing and non-pricing decisions. The aftermath of R.A. No. 8180 is a
deregulated market where competition can be corrupted and where market forces can be manipulated by oligopolies.
The fall out effects of the defects of R.A. No. 8180 on our people have not escaped Congress. A lot of our leading legislators have come out
openly with bills seeking the repeal of these odious and offensive provisions in R.A. No. 8180. In the Senate, Senator Freddie Webb has filed
S.B. No. 2133 which is the result of the hearings conducted by the Senate Committee on Energy. The hearings revealed that (1) there was a
need to level the playing field for the new entrants in the downstream oil industry, and (2) there was no law punishing a person for selling
petroleum products at unreasonable prices. Senator Alberto G. Romulo also filed S.B. No. 2209 abolishing the tariff differential beginning
January 1, 1998. He declared that the amendment ". . . would mean that instead of just three (3) big oil companies there will be other major oil
companies to provide more competitive prices for the market and the consuming public." Senator Heherson T . Alvarez, one of the principal
proponents of R.A. No. 8180, also filed S.B. No. 2290 increasing the penalty for violation of its section 9. It is his opinion as expressed in the
explanatory note of the bill that the present oil companies are engaged in cartelization despite R.A. No. 8180, viz,:
Since the downstream oil industry was fully deregulated in February 1997, there have been eight (8) fuel price adjustments made by the three
oil majors, namely: Caltex Philippines, Inc.; Petron Corporation; and Pilipinas Shell Petroleum Corporation. Very noticeable in the price
adjustments made, however, is the uniformity in the pump prices of practically all petroleum products of the three oil companies. This, despite
the fact, that their selling rates should be determined by a combination of any of the following factors: the prevailing peso-dollar exchange rate
at the time payment is made for crude purchases, sources of crude, and inventory levels of both crude and refined petroleum products. The
abovestated factors should have resulted in different, rather than identical prices.
The fact that the three (3) oil companies' petroleum products are uniformly priced suggests collusion, amounting to cartelization, among Caltex
Philippines, Inc., Petron Corporation and Pilipinas Shell Petroleum Corporation to fix the prices of petroleum products in violation of paragraph
(a), Section 9 of R.A. No. 8180.
To deter this pernicious practice and to assure that present and prospective players in the downstream oil industry conduct their business with
conscience and propriety, cartel-like activities ought to be severely penalized.
Senator Francisco S. Tatad also filed S.B. No. 2307 providing for a uniform tariff rate on imported crude oil and refined petroleum products. In
the explanatory note of the bill, he declared in no uncertain terms that ". . . the present set-up has raised serious public concern over the way
the three oil companies have uniformly adjusted the prices of oil in the country, an indication of a possible existence of a cartel or a cartel-like
situation within the downstream oil industry. This situation is mostly attributed to the foregoing provision on tariff differential, which has
effectively discouraged the entry of new players in the downstream oil industry."
In the House of Representatives, the moves to rehabilitate R.A. No. 8180 are equally feverish. Representative Leopoldo E. San Buenaventura
has filed H.B. No. 9826 removing the tariff differential for imported crude oil and imported refined petroleum products. In the explanatory note
of the bill, Rep. Buenaventura explained:
As we now experience, this difference in tariff rates between imported crude oil and imported refined petroleum products, unwittingly provided a built-inadvantage for the three existing oil refineries in the country and eliminating competition which is a must in a free enterprise economy. Moreover, it
created a disincentive for other players to engage even initially in the importation and distribution of refined petroleum products and ultimately in the
putting up of refineries. This tariff differential virtually created a monopoly of the downstream oil industry by the existing three oil companies as shown
by their uniform and capricious pricing of their products since this law took effect, to the great disadvantage of the consuming public.
Thus, instead of achieving the desired effects of deregulation, that of free enterprise and a level playing field in the downstream oil industry,
R.A. 8180 has created an environment conducive to cartelization, unfavorable, increased, unrealistic prices of petroleum products in the
country by the three existing refineries.
Representative Marcial C. Punzalan, Jr., filed H.B. No. 9981 to prevent collusion among the present oil companies by strengthening the
oversight function of the government, particularly its ability to subject to a review any adjustment in the prices of gasoline and other petroleum
products. In the explanatory note of the bill, Rep. Punzalan, Jr., said:
To avoid this, the proposed bill seeks to strengthen the oversight function of government, particularly its ability to review the prices set for
gasoline and other petroleum products. It grants the Energy Regulatory Board (ERB) the authority to review prices of oil and other petroleum
products, as may be petitioned by a person, group or any entity, and to subsequently compel any entity in the industry to submit any and all
documents relevant to the imposition of new prices. In cases where the Board determines that there exist collusion, economic conspiracy,
unfair trade practice, profiteering and/or overpricing, it may take any step necessary to protect the public, including the readjustment of the
prices of petroleum products. Further, the Board may also impose the fine and penalty of imprisonment, as prescribed in Section 9 of R.A.
8180, on any person or entity from the oil industry who is found guilty of such prohibited acts.
By doing all of the above, the measure will effectively provide Filipino consumers with a venue where their grievances can be heard and
immediately acted upon by government.
Thus, this bill stands to benefit the Filipino consumer by making the price-setting process more transparent and making it easier to prosecute
those who perpetrate such prohibited acts as collusion, overpricing, economic conspiracy and unfair trade.
Representative Sergio A.F . Apostol filed H.B. No. 10039 to remedy an omission in R.A. No. 8180 where there is no agency in government
that determines what is "reasonable" increase in the prices of oil products. Representative Dente O. Tinga, one of the principal sponsors of
R.A. No. 8180, filed H.B. No. 10057 to strengthen its anti-trust provisions. He elucidated in its explanatory note:
The definition of predatory pricing, however, needs to be tightened up particularly with respect to the definitive benchmark price and the specific anticompetitive intent. The definition in the bill at hand which was taken from the Areeda-Turner test in the United States on predatory pricing resolves the
questions. The definition reads, "Predatory pricing means selling or offering to sell any oil product at a price below the average variable cost for the
purpose of destroying competition, eliminating a competitor or discouraging a competitor from entering the market."
The appropriate actions which may be resorted to under the Rules of Court in conjunction with the oil deregulation law are adequate. But to
stress their availability and dynamism, it is a good move to incorporate all the remedies in the law itself. Thus, the present bill formalizes the
concept of government intervention and private suits to address the problem of antitrust violations. Specifically, the government may file an
action to prevent or restrain any act of cartelization or predatory pricing, and if it has suffered any loss or damage by reason of the antitrust
violation it may recover damages. Likewise, a private person or entity may sue to prevent or restrain any such violation which will result in
damage to his business or property, and if he has already suffered damage he shall recover treble damages. A class suit may also be allowed.
To make the DOE Secretary more effective in the enforcement of the law, he shall be given additional powers to gather information and to
require reports.
Representative Erasmo B. Damasing filed H.B. No. 7885 and has a more unforgiving view of R.A. No. 8180. He wants it completely repealed.
He explained:
Contrary to the projections at the time the bill on the Downstream Oil Industry Deregulation was discussed and debated upon in the plenary
session prior to its approval into law, there aren't any new players or investors in the oil industry. Thus, resulting in practically a cartel or
monopoly in the oil industry by the three (3) big oil companies, Caltex, Shell and Petron. So much so, that with the deregulation now being
partially implemented, the said oil companies have succeeded in increasing the prices of most of their petroleum products with little or no
interference at all from the government. In the month of August, there was an increase of Fifty centavos (50) per liter by subsidizing the same
with the OPSF, this is only temporary as in March 1997, or a few months from now, there will be full deregulation (Phase II) whereby the
increase in the prices of petroleum products will be fully absorbed by the consumers since OPSF will already be abolished by then. Certainly,
this would make the lives of our people, especially the unemployed ones, doubly difficult and unbearable.
The much ballyhooed coming in of new players in the oil industry is quite remote considering that these prospective investors cannot fight the existing
and well established oil companies in the country today, namely, Caltex, Shell and Petron. Even if these new players will come in, they will still have no
chance to compete with the said three (3) existing big oil companies considering that there is an imposition of oil tariff differential of 4% between
importation of crude oil by the said oil refineries paying only 3% tariff rate for the said importation and 7% tariff rate to be paid by businessmen who
have no oil refineries in the Philippines but will import finished petroleum/oil products which is being taxed with 7% tariff rates.
So, if only to help the many who are poor from further suffering as a result of unmitigated increase in oil products due to deregulation, it is a
must that the Downstream Oil Industry Deregulation Act of 1996, or R.A. 8180 be repealed completely.
Various resolutions have also been filed in the Senate calling for an immediate and comprehensive review of R.A. No. 8180 to prevent the
downpour of its ill effects on the people. Thus, S. Res. No. 574 was filed by Senator Gloria M. Macapagal entitled Resolution "Directing the
Committee on Energy to Inquire Into The Proper Implementation of the Deregulation of the Downstream Oil Industry and Oil Tax Restructuring
As Mandated Under R.A. Nos. 8180 and 8184, In Order to Make The Necessary Corrections In the Apparent Misinterpretation Of The Intent
And Provision Of The Laws And Curb The Rising Tide Of Disenchantment Among The Filipino Consumers And Bring About The Real
Intentions And Benefits Of The Said Law." Senator Blas P. Ople filed S. Res. No. 664 entitled resolution "Directing the Committee on Energy
To Conduct An Inquiry In Aid Of Legislation To Review The Government's Oil Deregulation Policy In Light Of The Successive Increases In
Transportation, Electricity And Power Rates, As well As Of Food And Other Prime Commodities And Recommend Appropriate Amendments To
Protect The Consuming Public." Senator Ople observed:
WHEREAS, since the passage of R.A. No. 8180, the Energy Regulatory Board (ERB) has imposed successive increases in oil prices which
has triggered increases in electricity and power rates, transportation fares, as well as in prices of food and other prime commodities to the
detriment of our people, particularly the poor;
WHEREAS, the new players that were expected to compete with the oil cartel-Shell, Caltex and Petron-have not come in;
WHEREAS, it is imperative that a review of the oil deregulation policy be made to consider appropriate amendments to the existing law such
as an extension of the transition phase before full deregulation in order to give the competitive market enough time to develop;
WHEREAS, the review can include the advisability of providing some incentives in order to attract the entry of new oil companies to effect a
dynamic competitive market;
WHEREAS, it may also be necessary to defer the setting up of the institutional framework for full deregulation of the oil industry as mandated
under Executive Order No. 377 issued by President Ramos last October 31, 1996 . . .
Senator Alberto G. Romulo filed S. Res. No. 769 entitled resolution "Directing the Committees on Energy and Public Services In Aid Of
Legislation To Assess The Immediate Medium And Long Term Impact of Oil Deregulation On Oil Prices And The Economy." Among the
reasons for the resolution is the finding that "the requirement of a 40-day stock inventory effectively limits the entry of other oil firms in the
market with the consequence that instead of going down oil prices will rise."
Parallel resolutions have been filed in the House of Representatives. Representative Dante O. Tinga filed H. Res. No. 1311 "Directing The
Committee on Energy To Conduct An Inquiry, In Aid of Legislation, Into The Pricing Policies And Decisions Of The Oil Companies Since The
Implementation of Full Deregulation Under the Oil Deregulation Act (R.A. No. 8180) For the Purpose of Determining In the Context Of The
Oversight Functions Of Congress Whether The Conduct Of The Oil Companies, Whether Singly Or Collectively, Constitutes Cartelization
Which Is A Prohibited Act Under R.A. No. 8180, And What Measures Should Be Taken To Help Ensure The Successful Implementation Of The
Law In Accordance With Its Letter And Spirit, Including Recommending Criminal Prosecution Of the Officers Concerned Of the Oil Companies
If Warranted By The Evidence, And For Other Purposes." Representatives Marcial C. Punzalan, Jr. Dante O. Tinga and Antonio E. Bengzon III
filed H.R. No. 894 directing the House Committee on Energy to inquire into the proper implementation of the deregulation of the downstream
oil industry. House Resolution No. 1013 was also filed by Representatives Edcel C. Lagman, Enrique T . Garcia, Jr. and Joker P. Arroyo
urging the President to immediately suspend the implementation of E.O. No. 392.
In recent memory there is no law enacted by the legislature afflicted with so much constitutional deformities as R.A. No. 8180. Yet, R.A. No.
8180 deals with oil, a commodity whose supply and price affect the ebb and flow of the lifeblood of the nation. Its shortage of supply or a
slight, upward spiral in its price shakes our economic foundation. Studies show that the areas most impacted by the movement of oil are food
manufacture, land transport, trade, electricity and water. 38 At a time when our economy is in a dangerous downspin, the perpetuation of R.A.
No. 8180 threatens to multiply the number of our people with bent backs and begging bowls. R.A. No. 8180 with its anti-competition provisions
cannot be allowed by this Court to stand even while Congress is working to remedy its defects.
The Court, however, takes note of the plea of PETRON, SHELL and CALTEX to lift our restraining order to enable them to adjust upward the price of
petroleum and petroleum products in view of the plummeting value of the peso. Their plea, however, will now have to be addressed to the Energy
Regulatory Board as the effect of the declaration of unconstitutionality of R.A. No. 8180 is to revive the former laws it repealed. 39 The length of our
return to the regime of regulation depends on Congress which can fasttrack the writing of a new law on oil deregulation in accord with the Constitution.
With this Decision, some circles will chide the Court for interfering with an economic decision of Congress. Such criticism is charmless for the Court is
annulling R.A. No. 8180 not because it disagrees with deregulation as an economic policy but because as cobbled by Congress in its present form, the
law violates the Constitution. The right call therefor should be for Congress to write a new oil deregulation law that conforms with the Constitution and
not for this Court to shirk its duty of striking down a law that offends the Constitution. Striking down R.A. No. 8180 may cost losses in quantifiable terms
to the oil oligopolists. But the loss in tolerating the tampering of our Constitution is not quantifiable in pesos and centavos. More worthy of protection
than the supra-normal profits of private corporations is the sanctity of the fundamental principles of the Constitution. Indeed when confronted by a law
violating the Constitution, the Court has no option but to strike it down dead. Lest it is missed, the Constitution is a covenant that grants and guarantees
both the political and economic rights of the people. The Constitution mandates this Court to be the guardian not only of the people's political rights but
their economic rights as well. The protection of the economic rights of the poor and the powerless is of greater importance to them for they are
concerned more with the exoterics of living and less with the esoterics of liberty. Hence, for as long as the Constitution reigns supreme so long will this
Court be vigilant in upholding the economic rights of our people especially from the onslaught of the powerful. Our defense of the people's economic
rights may appear heartless because it cannot be half-hearted.
IN VIEW WHEREOF, the petitions are granted. R.A. No. 8180 is declared unconstitutional and E.O. No. 372 void.
SO ORDERED.
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-28673 October 23, 1984
SAMAR MINING COMPANY, INC., plaintiff-appellee,

vs.
NORDEUTSCHER LLOYD and C.F. SHARP & COMPANY, INC., defendants-appellants.
CUEVAS, J.:+.wph!1
This is an appeal taken directly to Us on certiorari from the decision of the defunct Court of First Instance of Manila, finding defendants carrier
and agent, liable for the value of goods never delivered to plaintiff consignee. The issue raised is a pure question of law, which is, the liability
of the defendants, now appellants, under the bill of lading covering the subject shipment.
The case arose from an importation made by plaintiff, now appellee, SAMAR MINING COMPANY, INC., of one (1) crate Optima welded wedge
wire sieves through the M/S SCHWABENSTEIN a vessel owned by defendant-appellant NORDEUTSCHER LLOYD, (represented in the
Philippines by its agent, C.F. SHARP & CO., INC.), which shipment is covered by Bill of Lading No. 18 duly issued to consignee SAMAR
MINING COMPANY, INC. Upon arrival of the aforesaid vessel at the port of Manila, the aforementioned importation was unloaded and
delivered in good order and condition to the bonded warehouse of AMCYL. 1 The goods were however never delivered to, nor received by, the
consignee at the port of destination Davao.
When the letters of complaint sent to defendants failed to elicit the desired response, consignee herein appellee, filed a formal claim for
P1,691.93, the equivalent of $424.00 at the prevailing rate of exchange at that time, against the former, but neither paid. Hence, the filing of
the instant suit to enforce payment. Defendants-appellants brought in AMCYL as third party defendant.
The trial court rendered judgment in favor of plaintiff, ordering defendants to pay the amount of P1,691.93 plus attorney's fees and costs.
However, the Court stated that defendants may recoup whatever they may pay plaintiff by enforcing the judgment against third party defendant
AMCYL which had earlier been declared in default. Only the defendants appealed from said decision.
The issue at hand demands a close scrutiny of Bill of Lading No. 18 and its various clauses and stipulations which should be examined in the
light of pertinent legal provisions and settled jurisprudence. This undertaking is not only proper but necessary as well because of the nature of
the bill of lading which operates both as a receipt for the goods; and more importantly, as a contract to transport and deliver the same as
stipulated therein. 2 Being a contract, it is the law between the parties thereto 3 who are bound by its terms and conditions 4 provided that these
are not contrary to law, morals, good customs, public order and public policy. 5
Bill of Lading No. 18 sets forth in page 2 thereof 6 that one (1) crate of Optima welded wedge wire sieves was received by the carrier
NORDEUTSCHER LLOYD at the "port of loading" which is Bremen, Germany, while the freight had been prepaid up to the port of destination
or the "port of discharge of goods in this case, Davao, the carrier undertook to transport the goods in its vessel, M/S SCHWABENSTEIN only
up to the "port of discharge from ship-Manila. Thereafter, the goods were to be transshipped by the carrier to the port of destination or "port of
discharge of goods The stipulation is plainly indicated on the face of the bill which contains the following phrase printed below the space
provided for the port of discharge from ship", thus: t.hqw
if goods are to be transshipped at port of discharge, show destination under the column for "description of contents"
As instructed above, the following words appeared typewritten under the column for "description of contents": t.hqw
PORT OF DISCHARGE OF GOODS: DAVAO FREIGHT PREPAID
It is clear, then, that in discharging the goods from the ship at the port of Manila, and delivering the same into the custody of AMCYL, the
bonded warehouse, appellants were acting in full accord with the contractual stipulations contained in Bill of Lading No. 18. The delivery of the
goods to AMCYL was part of appellants' duty to transship the goods from Manila to their port of destination-Davao. The word "transship"
means:
to transfer for further transportation from one ship or conveyance to another
The extent of appellant carrier's responsibility and/or liability in the transshipment of the goods in question are spelled out and delineated
under Section 1, paragraph 3 of Bill of Lading No. 18, to wit: t.hqw
The carrier shall not be liable in any capacity whatsoever for any delay, loss or damage occurring before the goods enter ship's tackle to be
loaded or after the goods leave ship's tackle to be discharged, transshipped or forwarded ... (Emphasis supplied)
and in Section 11 of the same Bill, which provides: t.hqw
Whenever the carrier or m aster may deem it advisable or in any case where the goods are placed at carrier's disposal at or consigned to a
point where the ship does not expect to load or discharge, the carrier or master may, without notice, forward the whole or any part of the goods
before or after loading at the original port of shipment, ... This carrier, in making arrangements for any transshipping or forwarding vessels or
means of transportation not operated by this carrier shall be considered solely the forwarding agent of the shipper and without any other
responsibility whatsoever even though the freight for the whole transport has been collected by him. ... Pending or during forwarding or
transshipping the carrier may store the goods ashore or afloat solely as agent of the shipper and at risk and expense of the goods and the
carrier shall not be liable for detention nor responsible for the acts, neglect, delay or failure to act of anyone to whom the goods are entrusted
or delivered for storage, handling or any service incidental thereto (Emphasis supplied) 10
Defendants-appellants now shirk liability for the loss of the subject goods by claiming that they have discharged the same in full and good
condition unto the custody of AMCYL at the port of discharge from ship Manila, and therefore, pursuant to the aforequoted stipulation (Sec.
11) in the bill of lading, their responsibility for the cargo had ceased. 11
We find merit in appellants' stand. The validity of stipulations in bills of lading exempting the carrier from liability for loss or damage to the
goods when the same are not in its actual custody has been upheld by Us in PHOENIX ASSURANCE CO., LTD. vs. UNITED STATES LINES,
22 SCRA 674 (1968). Said case matches the present controversy not only as to the material facts but more importantly, as to the stipulations
contained in the bill of lading concerned. As if to underline their awesome likeness, the goods in question in both cases were destined for
Davao, but were discharged from ship in Manila, in accordance with their respective bills of lading.
The stipulations in the bill of lading in the PHOENIX case which are substantially the same as the subject stipulations before Us, provides: t
The carrier shall not be liable in any capacity whatsoever for any loss or damage to the goods while the goods are not in its actual custody.
(Par. 2, last subpar.)
The carrier or master, in making arrangements with any person for or in connection with all transshipping or forwarding of the goods or the use
of any means of transportation or forwarding of goods not used or operated by the carrier, shall be considered solely the agent of the shipper
and consignee and without any other responsibility whatsoever or for the cost thereof ... (Par. 16). 12
Finding the above stipulations not contrary to law, morals, good customs, public order or public policy, We sustained their validity 13 Applying
said stipulations as the law between the parties in the aforecited case, the Court concluded that: t.hqw
... The short form Bill of Lading ( ) states in no uncertain terms that the port of discharge of the cargo is Manila, but that the same was to be
transshipped beyond the port of discharge to Davao City. Pursuant to the terms of the long form Bill of Lading ( ), appellee's responsibility as a
common carrier ceased the moment the goods were unloaded in Manila and in the matter of transshipment, appellee acted merely as an
agent of the shipper and consignee. ... (Emphasis supplied) 14
Coming now to the case before Us, We hold, that by the authority of the above pronouncements, and in conformity with the pertinent
provisions of the New Civil Code, Section 11 of Bill of Lading No. 18 and the third paragraph of Section 1 thereof are valid stipulations between
the parties insofar as they exempt the carrier from liability for loss or damage to the goods while the same are not in the latter's actual custody.
The liability of the common carrier for the loss, destruction or deterioration of goods transported from a foreign country to the Philippines is
governed primarily by the New Civil Code. 15 In all matters not regulated by said Code, the rights and obligations of common carriers shall be
governed by the Code of Commerce and by special laws. 16 A careful perusal of the provisions of the New Civil Code on common carriers
(Section 4, Title VIII, Book IV) directs our attention to Article 1736 thereof, which reads:
Article 1736. The extraordinary responsibility of the common carrier lasts from the time the goods are unconditionally placed in the possession
of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to
the person who has a right to receive them, without prejudice to the provisions of article 1738.
Article 1738 referred to in the foregoing provision runs thus: t
Article 1738. The extraordinary liability of the common carrier continues to be operative even during the time the goods are stored in a
warehouse of the carrier at the place of destination, until the consignee has been advised of the arrival of the goods and has had reasonable
opportunity thereafter to remove them or otherwise dispose of them.
There is no doubt that Art. 1738 finds no applicability to the instant case. The said article contemplates a situation where the goods had
already reached their place of destination and are stored in the warehouse of the carrier. The subject goods were still awaiting transshipment
to their port of destination, and were stored in the warehouse of a third party when last seen and/or heard of. However, Article 1736 is
applicable to the instant suit. Under said article, the carrier may be relieved of the responsibility for loss or damage to the goods upon actual or
constructive delivery of the same by the carrier to the consignee, or to the person who has a right to receive them. In sales, actual delivery has
been defined as the ceding of corporeal possession by the seller, and the actual apprehension of corporeal possession by the buyer or by
some person authorized by him to receive the goods as his representative for the purpose of custody or disposal. 17 By the same token, there
is actual delivery in contracts for the transport of goods when possession has been turned over to the consignee or to his duly authorized
agent and a reasonable time is given him to remove the goods. 18 The court a quo found that there was actual delivery to the consignee
through its duly authorized agent, the carrier.
It becomes necessary at this point to dissect the complex relationship that had developed between appellant and appellee in the course of the
transactions that gave birth to the present suit. Two undertakings appeared embodied and/or provided for in the Bill of Lading 19 in question.
The first is FOR THE TRANSPORT OF GOODS from Bremen, Germany to Manila. The second, THE TRANSSHIPMENT OF THE SAME
GOODS from Manila to Davao, with appellant acting as agent of the consignee. 20 At the hiatus between these two undertakings of appellant
which is the moment when the subject goods are discharged in Manila, its personality changes from that of carrier to that of agent of the
consignee. Thus, the character of appellant's possession also changes, from possession in its own name as carrier, into possession in the
name of consignee as the latter's agent. Such being the case, there was, in effect, actual delivery of the goods from appellant as carrier to the
same appellant as agent of the consignee. Upon such delivery, the appellant, as erstwhile carrier, ceases to be responsible for any loss or
damage that may befall the goods from that point onwards. This is the full import of Article 1736, as applied to the case before Us.
But even as agent of the consignee, the appellant cannot be made answerable for the value of the missing goods, It is true that the
transshipment of the goods, which was the object of the agency, was not fully performed. However, appellant had commenced said
performance, the completion of which was aborted by circumstances beyond its control. An agent who carries out the orders and instructions
of the principal without being guilty of negligence, deceit or fraud, cannot be held responsible for the failure of the principal to accomplish the
object of the agency, 21 This can be gleaned from the following provisions of the New Civil Code on the obligations of the agent: t.hqw
Article 1884. The agent is bound by his acceptance to carry out the agency, and is liable for the damages which, through his non-performance,
the principal may suffer.
Article 1889. The agent shall be liable for damages if, there being a conflict between his interests and those of the principal, he should prefer
his own.
Article 1892. The agent may appoint a substitute if the principal has not prohibited him from doing so; but he shall be responsible for the acts
of the substitute:
(1) When he was not given the power to appoint one;
(2) When he was given such power but without designating the person and the person appointed was notoriously incompetent or insolvent.
Article 1909. The agent is responsible not only for fraud, but also for negligence which shall be judged with more or less rigor by the courts,
according to whether the agency was or was not for a compensation.
The records fail to reveal proof of negligence, deceit or fraud committed by appellant or by its representative in the Philippines. Neither is there
any showing of notorious incompetence or insolvency on the part of AMCYT, which acted as appellant's substitute in storing the goods
awaiting transshipment.
The actions of appellant carrier and of its representative in the Philippines being in full faith with the lawful stipulations of Bill of Lading No. 18
and in conformity with the provisions of the New Civil Code on common carriers, agency and contracts, they incur no liability for the loss of the
goods in question.
WHEREFORE, the appealed decision is hereby REVERSED. Plaintiff-appellee's complaint is hereby DISMISSED.
No costs.
SO ORDERED.1wph1.t

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-69044 May 29, 1987
EASTERN SHIPPING LINES, INC., petitioner,
vs.
INTERMEDIATE APPELLATE COURT and DEVELOPMENT INSURANCE & SURETY CORPORATION, respondents.
No. 71478 May 29, 1987
vs.
THE NISSHIN FIRE AND MARINE INSURANCE CO., and DOWA FIRE & MARINE INSURANCE CO., LTD., respondents.
MELENCIO-HERRERA, J.:
These two cases, both for the recovery of the value of cargo insurance, arose from the same incident, the sinking of the M/S ASIATICA when it
caught fire, resulting in the total loss of ship and cargo.
The basic facts are not in controversy:
In G.R. No. 69044, sometime in or prior to June, 1977, the M/S ASIATICA, a vessel operated by petitioner Eastern Shipping Lines, Inc.,
(referred to hereinafter as Petitioner Carrier) loaded at Kobe, Japan for transportation to Manila, 5,000 pieces of calorized lance pipes in 28
packages valued at P256,039.00 consigned to Philippine Blooming Mills Co., Inc., and 7 cases of spare parts valued at P92,361.75,
consigned to Central Textile Mills, Inc. Both sets of goods were insured against marine risk for their stated value with respondent Development
Insurance and Surety Corporation.
In G.R. No. 71478, during the same period, the same vessel took on board 128 cartons of garment fabrics and accessories, in two (2)
containers, consigned to Mariveles Apparel Corporation, and two cases of surveying instruments consigned to Aman Enterprises and General
Merchandise. The 128 cartons were insured for their stated value by respondent Nisshin Fire & Marine Insurance Co., for US $46,583.00, and
the 2 cases by respondent Dowa Fire & Marine Insurance Co., Ltd., for US $11,385.00.
Enroute for Kobe, Japan, to Manila, the vessel caught fire and sank, resulting in the total loss of ship and cargo. The respective respondent
Insurers paid the corresponding marine insurance values to the consignees concerned and were thus subrogated unto the rights of the latter
as the insured.
G.R. NO. 69044
On May 11, 1978, respondent Development Insurance & Surety Corporation (Development Insurance, for short), having been subrogated unto
the rights of the two insured companies, filed suit against petitioner Carrier for the recovery of the amounts it had paid to the insured before the
then Court of First instance of Manila, Branch XXX (Civil Case No. 6087).
Petitioner-Carrier denied liability mainly on the ground that the loss was due to an extraordinary fortuitous event, hence, it is not liable under
the law.
On August 31, 1979, the Trial Court rendered judgment in favor of Development Insurance in the amounts of P256,039.00 and P92,361.75,
respectively, with legal interest, plus P35,000.00 as attorney's fees and costs. Petitioner Carrier took an appeal to the then Court of Appeals
which, on August 14, 1984, affirmed.
Petitioner Carrier is now before us on a Petition for Review on Certiorari.
G.R. NO. 71478
On June 16, 1978, respondents Nisshin Fire & Marine Insurance Co. NISSHIN for short), and Dowa Fire & Marine Insurance Co., Ltd.
(DOWA, for brevity), as subrogees of the insured, filed suit against Petitioner Carrier for the recovery of the insured value of the cargo lost with
the then Court of First Instance of Manila, Branch 11 (Civil Case No. 116151), imputing unseaworthiness of the ship and non-observance of
extraordinary diligence by petitioner Carrier.
Petitioner Carrier denied liability on the principal grounds that the fire which caused the sinking of the ship is an exempting circumstance under
Section 4(2) (b) of the Carriage of Goods by Sea Act (COGSA); and that when the loss of fire is established, the burden of proving negligence
of the vessel is shifted to the cargo shipper.
On September 15, 1980, the Trial Court rendered judgment in favor of NISSHIN and DOWA in the amounts of US $46,583.00 and US
$11,385.00, respectively, with legal interest, plus attorney's fees of P5,000.00 and costs. On appeal by petitioner, the then Court of Appeals on
September 10, 1984, affirmed with modification the Trial Court's judgment by decreasing the amount recoverable by DOWA to US $1,000.00
because of $500 per package limitation of liability under the COGSA.
Hence, this Petition for Review on certiorari by Petitioner Carrier.
Both Petitions were initially denied for lack of merit. G.R. No. 69044 on January 16, 1985 by the First Division, and G. R. No. 71478 on
September 25, 1985 by the Second Division. Upon Petitioner Carrier's Motion for Reconsideration, however, G.R. No. 69044 was given due
course on March 25, 1985, and the parties were required to submit their respective Memoranda, which they have done.
On the other hand, in G.R. No. 71478, Petitioner Carrier sought reconsideration of the Resolution denying the Petition for Review and moved
for its consolidation with G.R. No. 69044, the lower-numbered case, which was then pending resolution with the First Division. The same was
granted; the Resolution of the Second Division of September 25, 1985 was set aside and the Petition was given due course.
At the outset, we reject Petitioner Carrier's claim that it is not the operator of the M/S Asiatica but merely a charterer thereof. We note that in
G.R. No. 69044, Petitioner Carrier stated in its Petition:
There are about 22 cases of the "ASIATICA" pending in various courts where various plaintiffs are represented by various
counsel representing various consignees or insurance companies. The common defendant in these cases is petitioner
herein, being the operator of said vessel. ... 1
Petitioner Carrier should be held bound to said admission. As a general rule, the facts alleged in a party's pleading are deemed admissions of
that party and binding upon it. 2 And an admission in one pleading in one action may be received in evidence against the pleader or his
successor-in-interest on the trial of another action to which he is a party, in favor of a party to the latter action. 3
The threshold issues in both cases are: (1) which law should govern the Civil Code provisions on Common carriers or the Carriage of
Goods by Sea Act? and (2) who has the burden of proof to show negligence of the carrier?
On the Law Applicable
The law of the country to which the goods are to be transported governs the liability of the common carrier in case of their loss, destruction or
deterioration. 4 As the cargoes in question were transported from Japan to the Philippines, the liability of Petitioner Carrier is governed
primarily by the Civil Code. 5 However, in all matters not regulated by said Code, the rights and obligations of common carrier shall be
governed by the Code of Commerce and by special laws. 6 Thus, the Carriage of Goods by Sea Act, a special law, is suppletory to the
provisions of the Civil Code. 7
On the Burden of Proof
Under the Civil Code, common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary
diligence in the vigilance over goods, according to all the circumstances of each case. 8 Common carriers are responsible for the loss,
destruction, or deterioration of the goods unless the same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning or other natural disaster or calamity;
xxx xxx xxx 9
Petitioner Carrier claims that the loss of the vessel by fire exempts it from liability under the phrase "natural disaster or calamity. " However, we
are of the opinion that fire may not be considered a natural disaster or calamity. This must be so as it arises almost invariably from some act of
man or by human means. 10 It does not fall within the category of an act of God unless caused by lightning 11 or by other natural disaster or
calamity. 12 It may even be caused by the actual fault or privity of the carrier. 13
Article 1680 of the Civil Code, which considers fire as an extraordinary fortuitous event refers to leases of rural lands where a reduction of the
rent is allowed when more than one-half of the fruits have been lost due to such event, considering that the law adopts a protection policy
towards agriculture. 14
As the peril of the fire is not comprehended within the exception in Article 1734, supra, Article 1735 of the Civil Code provides that all cases
than those mention in Article 1734, the common carrier shall be presumed to have been at fault or to have acted negligently, unless it proves
that it has observed the extraordinary deligence required by law.
In this case, the respective Insurers. as subrogees of the cargo shippers, have proven that the transported goods have been lost. Petitioner
Carrier has also proved that the loss was caused by fire. The burden then is upon Petitioner Carrier to proved that it has exercised the
extraordinary diligence required by law. In this regard, the Trial Court, concurred in by the Appellate Court, made the following Finding of fact:
The cargoes in question were, according to the witnesses defendant placed in hatches No, 2 and 3 cf the vessel,
Boatswain Ernesto Pastrana noticed that smoke was coming out from hatch No. 2 and hatch No. 3; that where the smoke
was noticed, the fire was already big; that the fire must have started twenty-four 24) our the same was noticed; that
carbon dioxide was ordered released and the crew was ordered to open the hatch covers of No, 2 tor commencement of
fire fighting by sea water: that all of these effort were not enough to control the fire.
Pursuant to Article 1733, common carriers are bound to extraordinary diligence in the vigilance over the goods. The
evidence of the defendant did not show that extraordinary vigilance was observed by the vessel to prevent the occurrence
of fire at hatches numbers 2 and 3. Defendant's evidence did not likewise show he amount of diligence made by the crew,
on orders, in the care of the cargoes. What appears is that after the cargoes were stored in the hatches, no regular
inspection was made as to their condition during the voyage. Consequently, the crew could not have even explain what
could have caused the fire. The defendant, in the Court's mind, failed to satisfactorily show that extraordinary vigilance
and care had been made by the crew to prevent the occurrence of the fire. The defendant, as a common carrier, is liable
to the consignees for said lack of deligence required of it under Article 1733 of the Civil Code. 15
Having failed to discharge the burden of proving that it had exercised the extraordinary diligence required by law, Petitioner Carrier cannot
escape liability for the loss of the cargo.
And even if fire were to be considered a "natural disaster" within the meaning of Article 1734 of the Civil Code, it is required under Article 1739
of the same Code that the "natural disaster" must have been the "proximate and only cause of the loss," and that the carrier has "exercised
due diligence to prevent or minimize the loss before, during or after the occurrence of the disaster. " This Petitioner Carrier has also failed to
establish satisfactorily.
Nor may Petitioner Carrier seek refuge from liability under the Carriage of Goods by Sea Act, It is provided therein that:
Sec. 4(2). Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from
(b) Fire, unless caused by the actual fault or privity of the carrier.
xxx xxx xxx
In this case, both the Trial Court and the Appellate Court, in effect, found, as a fact, that there was "actual fault" of the carrier shown by "lack of
diligence" in that "when the smoke was noticed, the fire was already big; that the fire must have started twenty-four (24) hours before the same
was noticed; " and that "after the cargoes were stored in the hatches, no regular inspection was made as to their condition during the voyage."
The foregoing suffices to show that the circumstances under which the fire originated and spread are such as to show that Petitioner Carrier or
its servants were negligent in connection therewith. Consequently, the complete defense afforded by the COGSA when loss results from fire is
unavailing to Petitioner Carrier.
On the US $500 Per Package Limitation:
Petitioner Carrier avers that its liability if any, should not exceed US $500 per package as provided in section 4(5) of the COGSA, which reads:
(5) Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with
the transportation of goods in an amount exceeding $500 per package lawful money of the United States, or in case of
goods not shipped in packages, per customary freight unit, or the equivalent of that sum in other currency, unless the
nature and value of such goods have been declared by the shipper before shipment and inserted in bill of lading. This
declaration if embodied in the bill of lading shall be prima facie evidence, but all be conclusive on the carrier.
By agreement between the carrier, master or agent of the carrier, and the shipper another maximum amount than that
mentioned in this paragraph may be fixed: Provided, That such maximum shall not be less than the figure above named.
In no event shall the carrier be Liable for more than the amount of damage actually sustained.
xxx xxx xxx
Article 1749 of the New Civil Code also allows the limitations of liability in this wise:
Art. 1749. A stipulation that the common carrier's liability as limited to the value of the goods appearing in the bill of lading,
unless the shipper or owner declares a greater value, is binding.
It is to be noted that the Civil Code does not of itself limit the liability of the common carrier to a fixed amount per package although the Code
expressly permits a stipulation limiting such liability. Thus, the COGSA which is suppletory to the provisions of the Civil Code, steps in and
supplements the Code by establishing a statutory provision limiting the carrier's liability in the absence of a declaration of a higher value of the
goods by the shipper in the bill of lading. The provisions of the Carriage of Goods by.Sea Act on limited liability are as much a part of a bill of
lading as though physically in it and as much a part thereof as though placed therein by agreement of the parties. 16
In G.R. No. 69044, there is no stipulation in the respective Bills of Lading (Exhibits "C-2" and "I-3") 1 7 limiting the carrier's liability for the loss
or destruction of the goods. Nor is there a declaration of a higher value of the goods. Hence, Petitioner Carrier's liability should not exceed US
$500 per package, or its peso equivalent, at the time of payment of the value of the goods lost, but in no case "more than the amount of
damage actually sustained."
The actual total loss for the 5,000 pieces of calorized lance pipes was P256,039 (Exhibit "C"), which was exactly the amount of the insurance
coverage by Development Insurance (Exhibit "A"), and the amount affirmed to be paid by respondent Court. The goods were shipped in 28
packages (Exhibit "C-2") Multiplying 28 packages by $500 would result in a product of $14,000 which, at the current exchange rate of P20.44
to US $1, would be P286,160, or "more than the amount of damage actually sustained." Consequently, the aforestated amount of P256,039
should be upheld.
With respect to the seven (7) cases of spare parts (Exhibit "I-3"), their actual value was P92,361.75 (Exhibit "I"), which is likewise the insured
value of the cargo (Exhibit "H") and amount was affirmed to be paid by respondent Court. however, multiplying seven (7) cases by $500 per
package at the present prevailing rate of P20.44 to US $1 (US $3,500 x P20.44) would yield P71,540 only, which is the amount that should be
paid by Petitioner Carrier for those spare parts, and not P92,361.75.
In G.R. No. 71478, in so far as the two (2) cases of surveying instruments are concerned, the amount awarded to DOWA which was already
reduced to $1,000 by the Appellate Court following the statutory $500 liability per package, is in order.
In respect of the shipment of 128 cartons of garment fabrics in two (2) containers and insured with NISSHIN, the Appellate Court also limited
Petitioner Carrier's liability to $500 per package and affirmed the award of $46,583 to NISSHIN. it multiplied 128 cartons (considered as
COGSA packages) by $500 to arrive at the figure of $64,000, and explained that "since this amount is more than the insured value of the
goods, that is $46,583, the Trial Court was correct in awarding said amount only for the 128 cartons, which amount is less than the maximum
limitation of the carrier's liability."
We find no reversible error. The 128 cartons and not the two (2) containers should be considered as the shipping unit.
In Mitsui & Co., Ltd. vs. American Export Lines, Inc. 636 F 2d 807 (1981), the consignees of tin ingots and the shipper of floor covering
brought action against the vessel owner and operator to recover for loss of ingots and floor covering, which had been shipped in vessel
supplied containers. The U.S. District Court for the Southern District of New York rendered judgment for the plaintiffs, and the defendant
appealed. The United States Court of Appeals, Second Division, modified and affirmed holding that:
When what would ordinarily be considered packages are shipped in a container supplied by the carrier and the number of
such units is disclosed in the shipping documents, each of those units and not the container constitutes the "package"
referred to in liability limitation provision of Carriage of Goods by Sea Act. Carriage of Goods by Sea Act, 4(5), 46
U.S.C.A.& 1304(5).
Even if language and purposes of Carriage of Goods by Sea Act left doubt as to whether carrier-furnished containers
whose contents are disclosed should be treated as packages, the interest in securing international uniformity would
suggest that they should not be so treated. Carriage of Goods by Sea Act, 4(5), 46 U.S.C.A. 1304(5).
... After quoting the statement in Leather's Best, supra, 451 F 2d at 815, that treating a container as a package is
inconsistent with the congressional purpose of establishing a reasonable minimum level of liability, Judge Beeks wrote,
414 F. Supp. at 907 (footnotes omitted):
Although this approach has not completely escaped criticism, there is, nonetheless, much to
commend it. It gives needed recognition to the responsibility of the courts to construe and apply the
statute as enacted, however great might be the temptation to "modernize" or reconstitute it by artful
judicial gloss. If COGSA's package limitation scheme suffers from internal illness, Congress alone
must undertake the surgery. There is, in this regard, obvious wisdom in the Ninth Circuit's conclusion
in Hartford that technological advancements, whether or not forseeable by the COGSA promulgators,
do not warrant a distortion or artificial construction of the statutory term "package." A ruling that these
large reusable metal pieces of transport equipment qualify as COGSA packages at least where, as
here, they were carrier owned and supplied would amount to just such a distortion.
Certainly, if the individual crates or cartons prepared by the shipper and containing his goods can
rightly be considered "packages" standing by themselves, they do not suddenly lose that character
upon being stowed in a carrier's container. I would liken these containers to detachable stowage
compartments of the ship. They simply serve to divide the ship's overall cargo stowage space into
smaller, more serviceable loci. Shippers' packages are quite literally "stowed" in the containers
utilizing stevedoring practices and materials analogous to those employed in traditional on board
stowage.
In Yeramex International v. S.S. Tando,, 1977 A.M.C. 1807 (E.D. Va.) rev'd on other grounds, 595 F 2nd 943 (4 Cir. 1979),
another district with many maritime cases followed Judge Beeks' reasoning in Matsushita and similarly rejected the
functional economics test. Judge Kellam held that when rolls of polyester goods are packed into cardboard cartons which
are then placed in containers, the cartons and not the containers are the packages.
xxx xxx xxx
The case of Smithgreyhound v. M/V Eurygenes, 18 followed the Mitsui test:
Eurygenes concerned a shipment of stereo equipment packaged by the shipper into cartons which were then placed by the shipper into a
carrier- furnished container. The number of cartons was disclosed to the carrier in the bill of lading. Eurygenes followed the Mitsui test and
treated the cartons, not the container, as the COGSA packages. However, Eurygenes indicated that a carrier could limit its liability to $500 per
container if the bill of lading failed to disclose the number of cartons or units within the container, or if the parties indicated, in clear and
unambiguous language, an agreement to treat the container as the package.
(Admiralty Litigation in Perpetuum: The Continuing Saga of Package Limitations and Third World Delivery Problems by Chester D. Hooper &
Keith L. Flicker, published in Fordham International Law Journal, Vol. 6, 1982-83, Number 1) (Emphasis supplied)
In this case, the Bill of Lading (Exhibit "A") disclosed the following data:
2 Containers
(128) Cartons)
Men's Garments Fabrics and Accessories Freight Prepaid
Say: Two (2) Containers Only.
Considering, therefore, that the Bill of Lading clearly disclosed the contents of the containers, the number of cartons or units, as well as the
nature of the goods, and applying the ruling in the Mitsui and Eurygenes cases it is clear that the 128 cartons, not the two (2) containers
should be considered as the shipping unit subject to the $500 limitation of liability.
True, the evidence does not disclose whether the containers involved herein were carrier-furnished or not. Usually, however, containers are
provided by the carrier. 19 In this case, the probability is that they were so furnished for Petitioner Carrier was at liberty to pack and carry the
goods in containers if they were not so packed. Thus, at the dorsal side of the Bill of Lading (Exhibit "A") appears the following stipulation in
fine print:
11. (Use of Container) Where the goods receipt of which is acknowledged on the face of this Bill of Lading are not already packed into
container(s) at the time of receipt, the Carrier shall be at liberty to pack and carry them in any type of container(s).
The foregoing would explain the use of the estimate "Say: Two (2) Containers Only" in the Bill of Lading, meaning that the goods could
probably fit in two (2) containers only. It cannot mean that the shipper had furnished the containers for if so, "Two (2) Containers" appearing as
the first entry would have sufficed. and if there is any ambiguity in the Bill of Lading, it is a cardinal principle in the construction of contracts
that the interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity. 20 This applies with even
greater force in a contract of adhesion where a contract is already prepared and the other party merely adheres to it, like the Bill of Lading in
this case, which is draw. up by the carrier. 21
On Alleged Denial of Opportunity to Present Deposition of Its Witnesses: (in G.R. No. 69044 only)
Petitioner Carrier claims that the Trial Court did not give it sufficient time to take the depositions of its witnesses in Japan by written
interrogatories.
We do not agree. petitioner Carrier was given- full opportunity to present its evidence but it failed to do so. On this point, the Trial Court found:
Indeed, since after November 6, 1978, to August 27, 1979, not to mention the time from June 27, 1978, when its answer was prepared and
filed in Court, until September 26, 1978, when the pre-trial conference was conducted for the last time, the defendant had more than nine
months to prepare its evidence. Its belated notice to take deposition on written interrogatories of its witnesses in Japan, served upon the
plaintiff on August 25th, just two days before the hearing set for August 27th, knowing fully well that it was its undertaking on July 11 the that
the deposition of the witnesses would be dispensed with if by next time it had not yet been obtained, only proves the lack of merit of the
defendant's motion for postponement, for which reason it deserves no sympathy from the Court in that regard. The defendant has told the
Court since February 16, 1979, that it was going to take the deposition of its witnesses in Japan. Why did it take until August 25, 1979, or more
than six months, to prepare its written interrogatories. Only the defendant itself is to blame for its failure to adduce evidence in support of its
defenses.
Petitioner Carrier was afforded ample time to present its side of the case. 23 It cannot complain now that it was denied due process when the
Trial Court rendered its Decision on the basis of the evidence adduced. What due process abhors is absolute lack of opportunity to be heard.
On the Award of Attorney's Fees:
Petitioner Carrier questions the award of attorney's fees. In both cases, respondent Court affirmed the award by the Trial Court of attorney's
fees of P35,000.00 in favor of Development Insurance in G.R. No. 69044, and P5,000.00 in favor of NISSHIN and DOWA in G.R. No. 71478.
Courts being vested with discretion in fixing the amount of attorney's fees, it is believed that the amount of P5,000.00 would be more
reasonable in G.R. No. 69044. The award of P5,000.00 in G.R. No. 71478 is affirmed.
WHEREFORE, 1) in G.R. No. 69044, the judgment is modified in that petitioner Eastern Shipping Lines shall pay the Development Insurance
and Surety Corporation the amount of P256,039 for the twenty-eight (28) packages of calorized lance pipes, and P71,540 for the seven (7)
cases of spare parts, with interest at the legal rate from the date of the filing of the complaint on June 13, 1978, plus P5,000 as attorney's fees,
and the costs.
2) In G.R.No.71478,the judgment is hereby affirmed.
SO ORDERED.
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-49407 August 19, 1988
NATIONAL DEVELOPMENT COMPANY, petitioner-appellant,

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

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-30212 September 30, 1987
BIENVENIDO GELISAN, petitioner,
vs.
BENITO ALDAY, respondent.
PADILLA, J.:
Review on certiorari of the judgment * rendered by the Court of Appeals, dated 11 October 1968, as amended by its resolution, dated 11
February 1969, in CA-G.R. No. 32670-R, entitled: "Benito Alday, plaintiff-appellant, vs. Roberto Espiritu and Bienvenido Gelisan, defendantsappellees," which ordered the herein petitioner Bienvenido Gelisan to pay, jointly and severally, with Roberto Espiritu, the respondent Benito
Alday the amount of P5,397.30, with. legal interest thereon from the filing of the complaint, and the costs of suit; and for the said Roberto
Espiritu to pay or refund the petitioner Bienvenido Gelisan whatever amount the latter may have paid to the respondent Benito Alday by virtue
of the judgment.
The uncontroverted facts of the case are, as follows:
Defendant Bienvenido Gelisan is the owner of a freight truck bearing plate No. TH-2377. On January 31, 1962, defendant
Bienvenido Gelisan and Roberto Espiritu entered into a contract marked Exhibit 3-Gelisan under which Espiritu hired the
same freight truck of Gelisan for the purpose of hauling rice, sugar, flour and fertilizer at an agreed price of P18.00 per trip
within the limits of the City of Manila provided the loads shall not exceed 200 sacks. It is also agreed that Espiritu shall
bear and pay all losses and damages attending the carriage of the goods to be hauled by him. The truck was taken by a
driver of Roberto Espiritu on February 1, 1962. Plaintiff Benito Alday, a trucking operator, and who owns about 15 freight
trucks, had known the defendant Roberto Espiritu since 1948 as a truck operator. Plaintiff had a contract to haul the
fertilizers of the Atlas Fertilizer Corporation from Pier 4, North Harbor, to its Warehouse in Mandaluyong. Alday met
Espiritu at the gate of Pier 4 and the latter offered the use of his truck with the driver and helper at 9 centavos per bag of
fertilizer. The offer was accepted by plaintiff Alday and he instructed his checker Celso Henson to let Roberto Espiritu haul
the fertilizer. Espiritu made two hauls of 200 bags of fertilizer per trip. The fertilizer was delivered to the driver and helper
of Espiritu with the necessary way bill receipts, Exhibits A and B. Espiritu, however, did not deliver the fertilizer to the Atlas
Fertolizer bodega at Mandaluyong. The signatures appearing in the way bill receipts Exhibits A and B of the Alday
Transportation admittedly not the signature of any representative or employee of the Atlas Fertilizer Corporation. Roberto
Espiritu could not be found, and plaintiff reported the loss to the Manila Police Department. Roberto Espiritu was later
arrested and booked for theft. ...
Subsequently, plaintiff Aiday saw the truck in question on Sto. Cristo St. and he notified the Manila Police Department,
and it was impounded by the police. It was claimed by Bienvenido Gelisan from the Police Department after he had been
notified by his employees that the truck had been impounded by the police; but as he could not produce at the time the
registration papers, the police would not release the truck to Gelisan. As a result of the impounding of the truck according
to Gelisan, ... and that for the release of the truck he paid the premium of P300 to the surety company. 1
Benito Alday was compelled to pay the value of the 400 bags of fertilizer, in the amount of P5,397.33, to Atlas Fertilizer Corporation so that, on
12 February 1962, he (Alday) filed a complaint against Roberto Espiritu and Bienvenido Gelisan with the Court of First Instance of Manila,
docketed therein as Civil Case No. 49603, for the recovery of damages suffered by him thru the criminal acts committed by the defendants.
The defendant, Roberto Espiritu failed to file an answer and was, accordingly, declared in default.
The defendant, Bienvenido Gelisan, upon the other hand, disowned responsibility. He claimed that he had no contractual relations with the
plaintiff Benito Alday as regards the hauling and/or delivery of the 400 bags of fertilizer mentioned in the complaint; that the alleged
misappropriation or nondelivery by defendant Roberto Espiritu of plaintiff's 400 bags of fertilizer, was entirely beyond his (Gelisan's) control
and knowledge, and which fact became known to him, for the first time, on 8 February 1962 when his freight truck, with plate No. TH-2377,
was impounded by the Manila Police Department, at the instance of the plaintiff; and that in his written contract of hire with Roberto Espiritu, it
was expressly provided that the latter will bear and pay all loss and damages attending the carriage of goods to be hauled by said Roberto
Espiritu.
After trial, the Court of First Instance of Manila ruled that Roberto Espiritu alone was liable to Benito Alday, since Bienvenido Gelisan was not
privy to the contract between Espiritu and Alday. The dispositive portion of the decision reads, as follows:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant Roberto Espiritu for the
sum of P6,000 with interest at the legal rate from the time of the filing of the complaint, and the costs of the suit. Plantiff's
complaint is dismissed with respect to defendant Bienvenido Gelisan, and judgment is rendered in favor of defendant
Bienvenido Gelisan and against the plaintiff for the sum of P350. 2
On appeal, however, the Court of Appeals, citing the case of Montoya vs. Ignacio, 3 found that Bienvenido Gelisan is likewise liable for being
the registered owner of the truck; and that the lease contract, executed by and between Bienvenido Gelisan and Roberto Espiritu, is not
binding upon Benito Alday for not having been previously approved by the Public Service Commission. Accordingly, it sentenced Bienvenido
Gelisan to pay, jointly and severally with Roberto Espiritu, Benito Alday the amount of P5,397.30, with legal interest thereon from the filing of
the complaint; and to pay the costs. Roberto Espiritu, in turn, was ordered to pay or refund Bienvenido Gelisan whatever amount the latter
may have paid to Benito Alday by virtue of the judgment. 4
Hence, the present recourse by Bienvenido Gelisan.
The petition is without merit. The judgment rendered by the Court of Appeals, which is sought to be reviewed, is in accord with the facts and
the law on the case and we find no cogent reason to disturb the same. The Court has invariably held in several decisions that the registered
owner of a public service vehicle is responsible for damages that may arise from consequences incident to its operation or that may be caused
to any of the passengers therein. 5 The claim of the petitioner that he is not hable in view of the lease contract executed by and between him
and Roberto Espiritu which exempts him from liability to third persons, cannot be sustained because it appears that the lease contract,
adverted to, had not been approved by the Public Service Commission. It is settled in our jurisprudence that if the property covered by a
franchise is transferred or leased to another without obtaining the requisite approval, the transfer is not binding upon the public and third
persons. 6
We also find no merit in the petitioner's argument that the rule requiring the previous approval by the Public Service Commission, of the
transfer or lease of the motor vehicle, may be applied only in cases where there is no positive Identification of the owner or driver, or where
there are very scant means of Identification, but not in those instances where the person responsible for damages has been fixed or
determined beforehand, as in the case at bar. The reason for the rule we reiterate in the present case, was explained by the Court in Montoya
vs. Ignacio, 7 thus:
There is merit in this contention. 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 mav take proper safeguards to protect the interest of the public. In fact, the law
requires that, before the 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 the 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. Since the lease of the jeepney in question was made without such approval the only conclusion that can be drawn
is that Marcelino Ignacio still continues to be its operator in contemplation of law, and as such is responsible for the
consequences incident to its operation, one of them being the collision under consideration.
Bienvenido Gelisan, the registered owner, is not however without recourse. He has a right to be indemnified by Roberto Espiritu for the
amount titat he may be required to pay as damages for the injury caused to Benito Alday, since the lease contract in question, although not
effective against the public for not having been approved by the Public Service Commission, is valid and binding between the contracting
parties. 8
We also find no merit in the petitioner's contention that his liability is only subsidiary. The Court has consistently considered the registered
owner/operator of a public service vehicle to be jointly and severally liable with the driver for damages incurred by passengers or third persons
as a consequence of injuries sustained in the operation of said vehicles. Thus, in the case of Vargas vs. Langcay, 9 the Court said:
We hold that the Court of Appeals erred in considering appellant-petitioner Diwata Vargas only subsidiarily liable under
Article 103 of the Revised Penal Code. This court, in previous decisions, has always considered the registered
owner/operator of a passenger vehicle, jointly and severally liable with the driver, for damages incurred by passengers or
third persons as a consequence of injuries (or death) sustained in the operation of said vehicles. (Montoya vs. Ignacio, 94
Phil., 182; Timbol vs. Osias, G.R. No. L-7547, April 30, 1955; Vda. de Medina vs. Cresencia, 99 Phil., 506; Necesito vs.
Paras, 104 Phil., 75; Erezo vs. Jepte, 102 Phil., 103; Tamayo vs. Aquino and Rayos vs Tamayo, 105 Phil., 949; 56 Off.
Gaz. [36] 5617.) In the case of Erezo vs. Jepte, Supra, We held:
* * * In synthesis, we hold that the registered owner, the defendant-appellant herein, is primarily responsible for the
damage caused * * * (Emphasis supplied)
In the case of Tamayo vs. Aquino, supra, We said:
* * * As Tamayo is the registered owner of the truck, his responsibffity to the public or to any passenger riding in the
vehicle or truck must be direct * * * (Emphasis supplied)
WHEREFORE, the petition is hereby DENIED. With costs against the petitioner.
SO ORDERED.
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 70876 July 19, 1990
MA. LUISA BENEDICTO, petitioner,

vs.
HON. INTERMEDIATE APPELLATE COURT and GREENHILLS WOOD INDUSTRIES COMPANY, INC. respondents.
FELICIANO, J.:
This Petition for Review asks us to set aside the Decision of the then Intermediate Appellate Court dated 30 January 1985 in A.C.-G.R. CV No.
01454, which affirmed in toto the decision of the Regional Trial Court ("RTC") of Dagupan City in Civil Case No. 5206. There, the RTC held
petitioner Ma. Luisa Benedicto liable to pay private respondent Greenhills Wood Industries Company, Inc. ("Greenhills") the amounts of
P16,016.00 and P2,000.00 representing the cost of Greenhills' lost sawn lumber and attorney's fees, respectively.
Private respondent Greenhills, a lumber manufacturing firm with business address at Dagupan City, operates sawmill in Maddela, Quirino.
Sometime in May 1980, private respondent bound itself to sell and deliver to Blue Star Mahogany, Inc., ("Blue Star") a company with business
operations in Valenzuela, Bulacan 100,000 board feet of sawn lumber with the understanding that an initial delivery would be made on 15 May
1980. 1 To effect its first delivery, private respondent's resident manager in Maddela, Dominador Cruz, contracted Virgilio Licuden, the driver of
a cargo truck bearing Plate No. 225 GA TH to transport its sawn lumber to the consignee Blue Star in Valenzuela, Bulacan. This cargo truck
was registered in the name of petitioner Ma. Luisa Benedicto, the proprietor of Macoven Trucking, a business enterprise engaged in hauling
freight, with main office in B.F. Homes, Paraaque.
On 15 May 1980, Cruz in the presence and with the consent of driver Licuden, supervised the loading of 7,690 board feet of sawn lumber with
invoice value of P16,918.00 aboard the cargo truck. Before the cargo truck left Maddela for Valenzuela, Bulacan, Cruz issued to Licuden
Charge Invoices Nos. 3259 and 3260 both of which were initialed by the latter at the bottom left corner. 2 The first invoice was for the amount
of P11,822.80 representing the value of 5,374 board feet of sawn lumber, while the other set out the amount of P5,095.20 as the value of
2,316 board feet. Cruz instructed Licuden to give the original copies of the two (2) invoices to the consignee upon arrival in Valenzuela,
Bulacan 3 and to retain the duplicate copies in order that he could afterwards claim the freightage from private respondent's Manila office. 4
On 16 May 1980, the Manager of Blue Star called up by long distance telephone Greenhills' president, Henry Lee Chuy, informing him that the
sawn lumber on board the subject cargo truck had not yet arrived in Valenzuela, Bulacan. The latter in turn informed Greenhills' resident
manager in its Maddela saw-mill of what had happened. In a letter 5 dated 18 May 1980, Blue Star's administrative and personnel manager,
Manuel R. Bautista, formally informed Greenhills' president and general manager that Blue Star still had not received the sawn lumber which
was supposed to arrive on 15 May 1980 and because of this delay, "they were constrained to look for other suppliers."
On 25 June 1980, after confirming the above with Blue Star and after trying vainly to persuade it to continue with their contract, private
respondent Greenhill's filed Criminal Case No. 668 against driver Licuden for estafa. Greenhills also filed against petitioner Benedicto Civil
Case No. D-5206 for recovery of the value of the lost sawn lumber plus damages before the RTC of Dagupan City.
In her answer, 6 petitioner Benedicto denied liability alleging that she was a complete stranger to the contract of carriage, the subject truck
having been earlier sold by her to Benjamin Tee, on 28 February 1980 as evidenced by a deed of sale. 7 She claimed that the truck had
remained registered in her name notwithstanding its earlier sale to Tee because the latter had paid her only P50,000.00 out of the total agreed
price of P68,000.00 However, she averred that Tee had been operating the said truck in Central Luzon from that date (28 February 1980)
onwards, and that, therefore, Licuden was Tee's employee and not hers.
On 20 June 1983, based on the finding that petitioner Benedicto was still the registered owner of the subject truck, and holding that Licuden
was her employee, the trial court adjudged as follows:
WHEREFORE, in the light of the foregoing considerations, this Court hereby renders judgment against defendant Maria
Luisa Benedicto, ordering her to pay the Greenhills Wood Industries Co. Inc., thru its President and General Manager, the
amount of P16,016 cost of the sawn lumber loaded on the cargo truck, with legal rate of interest from the filing of the
complaint to pay attorney's fees in the amount of P2,000.00; and to pay the costs of this suit.
SO ORDERED. 8
On 30 January 1985, upon appeal by petitioner, the Intermediate Appellate Court affirmed 9 the decision of the trial court in toto. Like the trial
court, the appellate court held that since petitioner was the registered owner of the subject vehicle, Licuden the driver of the truck, was her
employee, and that accordingly petitioner should be responsible for the negligence of said driver and bear the loss of the sawn lumber plus
damages. Petitioner moved for reconsideration, without success. 10
In the present Petition for Review, the sole issue raised is whether or not under the facts and applicable law, the appellate court was correct in
finding that petitioner, being the registered owner of the carrier, should be held liable for the value of the undelivered or lost sawn lumber.
Petitioner urges that she could not be held answerable for the loss of the cargo, because the doctrine which makes the registered owner of a
common carrier vehicle answerable to the public for the negligence of the driver despite the sale of the vehicle to another person, applies only
to cases involving death of or injury to passengers. What applies in the present case, according to petitioner, is the rule that a contract of
carriage requires proper delivery of the goods to and acceptance by the carrier. Thus, petitioner contends that the delivery to a person falsely
representing himself to be an agent of the carrier prevents liability from attaching to the registered owner.
The Court considers that petitioner has failed to show that appellate court committed reversible error in affirming the trial court's holding that
petitioner was liable for the cost of the sawn lumber plus damages.
There is no dispute that petitioner Benedicto has been holding herself out to the public as engaged in the business of hauling or transporting
goods for hire or compensation. Petitioner Benedicto is, in brief, a common carrier.
The prevailing doctrine on common carriers makes the registered owner liable for consequences flowing from the operations of the carrier,
even though the specific vehicle involved may already have been transferred to another person. This doctrine rests upon the principle that in
dealing with vehicles registered under the Public Service Law, the public has the right to assume that the registered owner is the actual or
lawful owner thereof It would be very difficult and often impossible as a practical matter, for members of the general public to enforce the rights
of action that they may have for injuries inflicted by the vehicles being negligently operated if they should be required to prove who the actual
owner is. 11 The registered owner is not allowed to deny liability by proving the identity of the alleged transferee. Thus, contrary to petitioner's
claim, private respondent is not required to go beyond the vehicle's certificate of registration to ascertain the owner of the carrier. In this
regard, the letter presented by petitioner allegedly written by Benjamin Tee admitting that Licuden was his driver, had no evidentiary value not
only because Benjamin Tee was not presented in court to testify on this matter but also because of the aforementioned doctrine. To permit the
ostensible or registered owner to prove who the actual owner is, would be to set at naught the purpose or public policy which infuses that
doctrine.
In fact, private respondent had no reason at all to doubt the authority of Licuden to enter into a contract of carriage on behalf of the registered
owner. It appears that, earlier, in the first week of May 1980, private respondent Greenhills had contracted Licuden who was then driving the
same cargo truck to transport and carry a load of sawn lumber from the Maddela sawmill to Dagupan City. 12 No one came forward to question
that contract or the authority of Licuden to represent the owner of the carrier truck.
Moreover, assuming the truth of her story, petitioner Benedicto retained registered ownership of the freight truck for her own benefit and
convenience, that is, to secure the payment of the balance of the selling price of the truck. She may have been unaware of the legal security
device of chattel mortgage; or she, or her buyer, may have been unwilling to absorb the expenses of registering a chattel mortgage over the
truck. In either case, considerations both of public policy and of equity require that she bear the consequences flowing from registered
ownership of the subject vehicle.
Petitioner Benedicto, however, insists that the said principle should apply only to cases involving negligence and resulting injury to or death of
passengers, and not to cases involving merely carriage of goods. We believe otherwise.
A common carrier, both from the nature of its business and for insistent reasons of public policy, is burdened by the law with the duty of
exercising extraordinary diligence not only in ensuring the safety of passengers but also in caring for goods transported by it. 13 The loss or
destruction or deterioration of goods turned over to the common carrier for conveyance to a designated destination, raises instantly a
presumption of fault or negligence on the part of the carrier, save only where such loss, destruction or damage arises from extreme
circumstances such as a natural disaster or calamity or act of the public enemy in time of war, or from an act or omission of the shipper himself
or from the character of the goods or their packaging or container. 14
This presumption may be overcome only by proof of extraordinary diligence on the part of the carrier. 15 Clearly, to permit a common carrier to
escape its responsibility for the passengers or goods transported by it by proving a prior sale of the vehicle or means of transportation to an
alleged vendee would be to attenuate drastically the carrier's duty of extraordinary diligence. It would also open wide the door to collusion
between the carrier and the supposed vendee and to shifting liability from the carrier to one without financial capability to respond for the
resulting damages. In other words, the thrust of the public policy here involved is as sharp and real in the case of carriage of goods as it is in
the transporting of human beings. Thus, to sustain petitioner Benedicto's contention, that is, to require the shipper to go behind a certificate of
registration of a public utility vehicle, would be utterly subversive of the purpose of the law and doctrine.
Petitioner further insists that there was no perfected contract of carriage for the reason that there was no proof that her consent or that of Tee
had been obtained; no proof that the driver, Licuden was authorized to bind the registered owner; and no proof that the parties had agreed on
the freightage to be paid.
Once more, we are not persuaded by petitioner's arguments which appear to be a transparent attempt to evade statutory responsibilities.
Driver Licuden was entrusted with possession and control of the freight truck by the registered owner (and by the alleged secret owner, for that
matter).itc-asl Driver Licuden, under the circumstances, was clothed with at least implied authority to contract to carry goods and to accept
delivery of such goods for carriage to a specified destination. That the freight to be paid may-not have been fixed before loading and carriage,
did not prevent the contract of carriage from arising, since the freight was at least determinable if not fixed by the tariff schedules in petitioner's
main business office. Put in somewhat different terms, driver Licuden is in law regarded as the employee and agent of the petitioner, for whose
acts petitioner must respond. A contract of carriage of goods was shown; the sawn lumber was loaded on board the freight truck; loss or nondelivery of the lumber at Blue Star's premises in Valenzuela, Bulacan was also proven; and petitioner has not proven either that she had
exercised extraordinary diligence to prevent such loss or non-delivery or that the loss or non-delivery was due to some casualty or force
majeure inconsistent with her liability. 16 Petitioner's liability to private respondent Greenhills was thus fixed and complete, without prejudice to
petitioner's right to proceed against her putative transferee Benjamin Tee and driver Licuden for reimbursement or contribution. 17
WHEREFORE, the Petition for Review is DENIED for lack of merit and the Decision of the former Intermediate Appellate Court dated 30
January 1985 is hereby AFFIRMED. Costs against petitioner.
SO ORDERED.
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 120553 June 17, 1997
PHILTRANCO SERVICE ENTERPRISES, INC. and ROGACIONES MANILHIG, petitioner,

vs.
COURT OF APPEALS and HEIRS OF THE LATE RAMON ACUESTA, respondents.
DAVIDE, JR., J.:

The petitioners interposed this appeal by way of a petition for review under Rule 45 of the Rules of Court from the 31 January 1995 Decision
of the Court of Appeals in CA-G.R. CV No. 41140 1 affirming the 22 January 1993 2 Decision of Branch 31 of the Regional Trial Court,
Calbayog City, in Civil Case No. 373, which ordered the petitioners to pay the private respondents damages as a result of a vehicular accident.
Civil Case No. 373 was an action against herein petitioners for damages instituted by the heirs of Ramon A. Acuesta, namely, Gregorio O.
Acuesta; Julio O. Acuesta; Ramon O. Acuesta, Jr.; Baltazar O. Acuesta; Rufino O. Acuesta; Maximo O. Acuesta; Neri O. Acuesta; Iluminada O.
Acuesta; Rosario Acuesta-Sanz; and Pamfilo O. Acuesta. Atty. Julio O. Acuesta also appeared as counsel for the plaintiffs (herein private
respondents). 3 The private respondents alleged that the petitioners were guilty of gross negligence, recklessness, violation of traffic rules and
regulations, abandonment of victim, and attempt to escape from a crime.
To support their allegations, the private respondents presented eight witnesses. On 10 February 1992, after the cross-examination of the last
witness, the private respondents' counsel made a reservation to present a ninth witness. The case was then set for continuation of the trial on
30 and 31 March 1992. Because of the non-appearance of the petitioners' counsel, the 30 March 1992 hearing was cancelled. The next day,
private respondents' counsel manifested that he would no longer present the ninth witness. He thereafter made an oral offer of evidence and
rested the case. The trial court summarized private respondents' evidence in this wise:
[I]n the early morning of March 24, 1990, about 6:00 o'clock, the victim Ramon A. Acuesta was riding in his easy rider bicycle (Exhibit "O"),
along the Gomez Street of Calbayog City. The Gomez Street is along the side of Nijaga Park. On the Magsaysay Blvd., also in Calbayog City,
defendant Philtranco Service Enterprises, Inc. (Philtranco for brevity) Bus No. 4025 with plate No. EVA-725 driven by defendant Rogasiones
Manilhig y Dolira was being pushed by some persons in order to start its engine. The Magsaysay Blvd. runs perpendicular to Gomez St. and
the said Philtranco bus 4025 was heading in the general direction of the said Gomez Street. Some of the persons who were pushing the bus
were on its back, while the others were on the sides. As the bus was pushed, its engine started thereby the bus continued on its running
motion and it occurred at the time when Ramon A. Acuesta who was still riding on his bicycle was directly in front of the said bus. As the
engine of the Philtranco bus started abruptly and suddenly, its running motion was also enhanced by the said functioning engine, thereby the
subject bus bumped on the victim Ramon A. Acuesta who, as a result thereof fell and, thereafter, was run over by the said bus. The bus did
not stop although it had already bumped and ran [sic] over the victim; instead, it proceeded running towards the direction of the Rosales
Bridge which is located at one side of the Nijaga Park and towards one end of the Gomez St., to which direction the victim was then heading
when he was riding on his bicycle. P/Sgt. Yabao who was then jogging thru the Gomez Street and was heading and meeting the victim Ramon
A. Acuesta as the latter was riding on his bicycle, saw when the Philtranco bus was being pushed by some passengers, when its engine
abruptly started and when the said bus bumped and ran over the victim. He approached the bus driver defendant Manilhig herein and
signalled to him to stop, but the latter did not listen. So the police officer jumped into the bus and introducing himself to the driver defendant as
policeman, ordered the latter to stop. The said defendant driver stopped the Philtranco bus near the Nijaga Park and Sgt. Yabao thereafter,
told the driver to proceed to the Police Headquarter which was only 100 meters away from Nijaga Park because he was apprehensive that the
said driver might be harmed by the relatives of the victim who might come to the scene of the accident. Then Sgt. Yabao cordoned the scene
where the vehicular accident occurred and had P/Cpl. Bartolome Bagot, the Traffic Investigator, conduct an investigation and make a sketch of
the crime scene. Sgt. Yambao Yabao was only about 20 meters away when he saw the bus of defendant Philtranco bumped [sic] and [sic] ran
over the victim. From the place where the victim was actually bumped by the bus, the said vehicle still had run to a distance of about 15
meters away. 4
For their part, the petitioners filed an Answer 5 wherein they alleged that petitioner Philtranco exercised the diligence of a good father of a
family in the selection and supervision of its employees, including petitioner Manilhig who had excellent record as a driver and had undergone
months of rigid training before he was hired. Petitioner Manilhig had always been a prudent professional driver, religiously observing traffic
rules and regulations. In driving Philtranco's buses, he exercised the diligence of a very cautious person.
As might be expected, the petitioners had a different version of the incident. They alleged that in the morning of 24 March 1990, Manilhig, in
preparation for his trip back to Pasay City, warmed up the engine of the bus and made a few rounds within the city proper of Calbayog. While
the bus was slowly and moderately cruising along Gomez Street, the victim, who was biking towards the same direction as the bus, suddenly
overtook two tricycles and swerved left to the center of the road. The swerving was abrupt and so sudden that even as Manilhig applied the
brakes and blew the bus horn, the victim was bumped from behind and run over by the bus. It was neither willful nor deliberate on Manilhig's
part to proceed with the trip after his bus bumped the victim, the truth being that when he looked at his rear-view window, he saw people
crowding around the victim, with others running after his bus. Fearing that he might be mobbed, he moved away from the scene of the
accident and intended to report the incident to the police. After a man boarded his bus and introduced himself as a policeman, Manilhig gave
himself up to the custody of the police and reported the accident in question.
The petitioners further claimed that it was the negligence of the victim in overtaking two tricycles, without taking precautions such as seeing
first that the road was clear, which caused the death of the victim. The latter did not even give any signal of his intention to overtake. The
petitioners then counterclaimed for P50,000 as and for attorney's fees; P1 million as moral damages; and P50,000 for litigation expenses.
However, the petitioners were not able to present their evidence, as they were deemed to have waived that right by the failure of their counsel
to appear at the scheduled hearings on 30 and 31 March 1992. The trial court then issued an Order 6 declaring the case submitted for
decision. Motions for the reconsideration of the said Order were both denied.
On 22 January 1992, the trial court handed down a decision ordering the petitioners to jointly and severally pay the private respondents the
following amounts:
1) P55, 615.72 as actual damages;
3) P1 million as moral damages;
5) P50,000 as attorney's fees; and
2) P200,000 as death indemnity for the death of the victim Ramon A. Acuesta;
4) P500,000 by way of exemplary damages;
6) the costs of suit.
Unsatisfied with the judgment, the petitioners appealed to the Court of Appeals imputing upon the trial court the following errors:
(1) in preventing or barring them from presenting their evidence;
(2) in finding that petitioner Manilhig was at fault;
(3) in not finding that Ramon was the one at fault and his own fault caused, or at least contributed to, his unfortunate accident;
(4) in awarding damages to the private respondents; and
(5) in finding that petitioner Philtranco was solidarily liable with Manilhig for damages.
In its decision of 31 January 1995, the Court of Appeals affirmed the decision of the trial court. It held that the petitioners were not denied due
process, as they were given an opportunity to present their defense. The records show that they were notified of the assignment of the case
for 30 and 31 March 1992. Yet, their counsel did not appear on the said dates. Neither did he file a motion for postponement of the hearings,
nor did he appeal from the denial of the motions for reconsideration of the 31 March 1992 Order of the trial court. The petitioners have thereby
waived their right to present evidence. Their expectation that they would have to object yet to a formal offer of evidence by the private
respondents was "misplaced," for it was within the sound discretion of the court to allow oral offer of evidence.
As to the second and third assigned errors, the respondent court disposed as follows:
. . . We cannot help but accord with the lower court's finding on appellant Manilhig's fault. First, it is not disputed that the bus driven by
appellant Manilhig was being pushed at the time of the unfortunate happening. It is of common knowledge and experience that when a vehicle
is pushed to a jump-start, its initial movement is far from slow. Rather, its movement is abrupt and jerky and it takes a while before the vehicle
attains normal speed. The lower court had thus enough basis to conclude, as it did, that the bumping of the victim was due to appellant
Manilhig's actionable negligence and inattention. Prudence should have dictated against jump-starting the bus in a busy section of the city.
Militating further against appellants' posture was the fact that the precarious pushing of subject bus to a jumpstart was done where the bus
had to take a left turn, thereby making the move too risky to take. The possibility that pedestrians on Gomez Street, where the bus turned left
and the victim was biking, would be unaware of a vehicle being pushed to a jumpstart, was too obvious to be overlooked. Verily, contrary to
their bare arguments, there was gross negligence on the part of appellants.
The doctrine of last clear chance theorized upon by appellants, is inapplicable under the premises because the victim, who was bumped from
behind, obviously, did not of course anticipate a Philtranco bus being pushed from a perpendicular street.
The respondent court sustained the awards of moral and exemplary damages and of attorney's fees, for they are warranted under Articles
2206, 2231, and 2208(1), respectively, of the Civil Code. Anent the solidary liability of petitioner Philtranco, the same finds support in Articles
2180 and 2194 of the said Code. The defense that Philtranco exercised the diligence of a good father of a family in the selection and
supervision of its employees crumbles in the face of the gross negligence of its driver, which caused the untimely death of the victim.
Their motion for reconsideration having been denied, the petitioners came to us claiming that the Court of Appeals gravely erred
I
. . . IN HOLDING THAT PETITIONERS WAIVED THEIR RIGHT TO PRESENT THEIR EVIDENCE, AND THAT
PETITIONERS WERE NOT DENIED DUE PROCESS.
II
. . . IN APPLYING ART. 2194, INSTEAD OF ART. 2180, OF THE CIVIL CODE, AND IN HOLDING THAT PETITIONER
PHILTRANCO CAN NOT INVOKE THE DEFENSE OF DILIGENCE OF A GOOD FATHER OF A FAMILY.
III
. . . IN AWARDING DAMAGES TO RESPONDENTS AND/OR IN NOT FINDING THE TRIAL COURT'S AWARD OF
DAMAGES EXCESSIVE.
We resolved to give due course to the petition and required the parties to submit their respective memoranda after due consideration of the
allegations, issues, and arguments adduced in the petition, the comment thereon by the private respondents, and the reply to the comment
filed by the petitioners. The petitioners filed their memorandum in due time; while the private respondents filed theirs only on 3 January 1997,
after their counsel was fined in the amount of P1,000 for failure to submit the required memorandum.
The first imputed error is without merit. The petitioners and their counsel, Atty. Jose Buban, were duly notified in open court of the order of the
trial court of 10 February 1992 setting the case for hearing on 30 and 31 March 1992. 9 On both dates neither the petitioners nor their counsel
appeared. In his motion for reconsideration, 10 Atty. Buban gave the following reasons for his failure to appear on the said hearings:
1. That when this case was called on March 27, 1992, counsel was very much indisposed due to the rigors of a very hectic campaign as he is
a candidate for City Councilor of Tacloban; he wanted to leave for Calbayog City, but he was seized with slight fever on the morning of said
date; but then, during the last hearing, counsel was made to understand that plaintiffs would formally offer their exhibits in writing, for which
reason, counsel for defendants waited for a copy of said formal offer, but counsel did not receive any copy as counsel for plaintiffs opted to
formally offer their exhibits orally in open court;
2. That counsel for defendants, in good faith believed that he would be given reasonable time within which to comment on the formal offer in
writing, only to know that counsel for plaintiffs orally offered their exhibits in open court and that the same were admitted by the Honorable
Court; and that when this case was called on March 30 and 31, 1992, the undersigned counsel honestly believed that said schedule would be
cancelled, pending on the submission of the comments made by the defendants on the formal offer; but it was not so, as the exhibits were
admitted in open court. 11
In its order of 26 May 1992, the trial court denied the motion, finding it to be "devoid of meritorious basis," as Atty. Buban could have filed a
motion for postponement. 12 Atty. Buban then filed a motion to reconsider 13 the order of denial, which was likewise denied by the trial court in
its order of 12 August 1992. 14 Nothing more was done by the petitioners after receipt of the order of 12 August 1992. A perusal of the first and
second motions for reconsideration discloses absence of any claim that the petitioners have meritorious defenses. Clearly, therefore, the trial
court committed no error in declaring the case submitted for decision on the basis of private respondent's evidence.
The second imputed error is without merit either.
Civil Case No. 373 is an action for damages based on quasi-delict 15 under Article 2176 and 2180 of the Civil Code against petitioner Manilhig
and his employer, petitioner Philtranco, respectively. These articles pertinently provide:
Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the
damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a
quasi-delict and is governed by the provisions of this Chapter.
Art. 2180. The obligation imposed by Article 2176 is demandable not only for one's own acts or omissions, but also for
those of persons for whom one is responsible.
The owners and managers of an establishment or enterprise are likewise responsible for damages caused by their
employees in the service of the branches in which the latter are employed or on the occasion of their functions.
Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of
their assigned tasks even though the former are not engaged in any business or industry.
The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed all the
diligence of a good father of a family to prevent damage.
We have consistently held that the liability of the registered owner of a public service vehicle, like petitioner Philtranco, 16 for damages arising
from the tortious acts of the driver is primary, direct, and joint and several or solidary with the driver. 17 As to solidarity, Article 2194 expressly
provides:
Art. 2194. The responsibility of two or more persons who are liable for a quasi-delict is solidary.
Since the employer's liability is primary, direct and solidary, its only recourse if the judgment for damages is satisfied by it is to recover what it
has paid from its employee who committed the fault or negligence which gave rise to the action based on quasi-delict. Article 2181 of the Civil
Code provides:
Art. 2181. Whoever pays for the damage caused by his dependents or employees may recover from the latter what he has paid or delivered in
satisfaction of the claim.
There is, however, merit in the third imputed error.
The trial court erroneously fixed the "death indemnity" at P200,000. The private respondents defended the award in their Opposition to the
Motion for Reconsideration by saying that "[i]n the case of Philippine Airlines, Inc. vs. Court of Appeals, 185 SCRA 110, our Supreme Court
held that the award of damages for death is computed on the basis of the life expectancy of the deceased." In that case, the "death indemnity"
was computed by multiplying the victim's gross annual income by his life expectancy, less his yearly living expenses. Clearly then, the "death
indemnity" referred to was the additional indemnity for the loss of earning capacity mentioned in Article 2206(1) of the Civil Code, and not the
basic indemnity for death mentioned in the first paragraph thereof. This article provides as follows:
Art. 2206. The amount of damages for death caused by a crime or quasi-delict shall be at least three thousand pesos, even though there may
have been mitigating circumstances. In addition:
(1) The defendant shall be liable for the loss of the earning capacity of the deceased, and the indemnity shall be paid to the heirs of the latter;
such indemnity shall in every case be assessed and awarded by the court, unless the deceased on account of permanent physical disability
not caused by the defendant, had no earning capacity at the time of his death;
(2) If the deceased was obliged to give support according to the provisions of article 291, the recipient who is not an heir called to the
decedent's inheritance by the law of testate or intestate succession, may demand support from the person causing the death, for a period of
not exceeding five years, the exact duration to be fixed by the court;
(3) The spouse, legitimate and illegitimate descendants and ascendants of the deceased may demand moral damages for mental anguish by
reason of the death of the deceased.
We concur with petitioners' view that the trial court intended the award of "P200,000.00 as death indemnity" not as compensation for loss of
earning capacity. Even if the trial court intended the award as indemnity for loss of earning capacity, the same must be struck out for lack of
basis. There is no evidence on the victim's earning capacity and life expectancy.
Only indemnity for death under the opening paragraph of Article 2206 is due, the amount of which has been fixed by current jurisprudence at
P50,000. 18
The award of P1 million for moral damages to the heirs of Ramon Acuesta has no sufficient basis and is excessive and unreasonable. This
was based solely on the testimony of one of the heirs, Atty. Julio Acuesta, contained in his "Direct Testimony . . . As Plaintiff, conducted by
Himself," 19 to wit:
Q. What was your feeling or reaction as a result of the death of your father Ramon A. Acuesta?
A. We, the family members, have suffered much from wounded feelings, moral shock, mental anguish, sleepless nights, to which we are
entitled to moral damages at the reasonable amount of ONE MILLION (P1,000,000.00) PESOS or at the sound discretion of this Hon. Court.
Since the other heirs of the deceased did not take the witness stand, the trial court had no basis for its award of moral damages to those who
did not testify thereon.
Moral damages are emphatically not intended to enrich a plaintiff at the expense of the defendant. They are awarded only to allow the former
to obtain means, diversion, or amusements that will serve to alleviate the moral suffering he has undergone due to the defendant's culpable
action and must, perforce, be proportional to the suffering inflicted. 20 In light of the circumstances in this case, an award of P50,000 for moral
damages is in order.
The award of P500,000 for exemplary damages is also excessive. In quasi-delicts, exemplary damages may be awarded if the party at fault
acted with gross negligence. 21 The Court of Appeals found that there was gross negligence on the part of petitioner Manilhig. 22 Under Article
2229 of the Civil Code, exemplary damages are imposed by way of example or correction for the public good, in addition to the moral,
temperate, liquidated, or compensatory damages. Considering its purpose, it must be fair and reasonable in every case and should not be
awarded to unjustly enrich a prevailing party. In the instant case, an award of P50,000 for the purpose would be adequate, fair, and
reasonable.
Finally, the award of P50,000 for attorney's fees must be reduced. The general rule is that attorney's fees cannot be recovered as part of
damages because of the policy that no premium should be placed on the right to
litigate. 23 Stated otherwise, the grant of attorney's fees as part of damages is the exception rather than the rule, as counsel's fees are not
awarded every time a party prevails in a suit. 24 Such attorney's fees can be awarded in the cases enumerated in Article 2208 of the Civil
Code, and in all cases it must be reasonable. In the instant case, the counsel for the plaintiffs is himself a co-plaintiff; it is then unlikely that he
demanded from his brothers and sisters P100,000 as attorney's fees as alleged in the complaint and testified to by
him. 25 He did not present any written contract for his fees. He is, however, entitled to a reasonable amount for attorney's fees, considering that
exemplary damages are awarded. Among the instances mentioned in Article 2208 of the Civil Code when attorney's fees may be recovered is
"(1) when exemplary damages are awarded." Under the circumstances in this case, an award of P25,000 for attorney's fees is reasonable.
The petitioners did not contest the award for actual damages fixed by the trial court. Hence, such award shall stand.
IN VIEW OF THE FOREGOING, the petition is hereby partly granted and the challenged decision of CA-G.R. CV No. 41140 is AFFIRMED,
subject to modifications as to the damages awarded, which are reduced as follows:
(a) Death indemnity, from P200,000 to P50,000;
(b) Moral damages, from P1 million to P50,000;
(c) Exemplary damages, from P500,000 to P50,000; and

No pronouncements as to costs in this instance.
SO ORDERED.
(d) Attorney's fees, from P50,000 to P25,000.
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-26815 May 26, 1981
ADOLFO L. SANTOS, petitioner,

vs.
ABRAHAM SIBUG and COURT OF APPEALS, respondents.
MELENCIO-HERRERA, J.:1wph1.t
The controversy in this case will be resolved on the basis of the following facts and expositions. Prior to April 26, 1963 (the ACCIDENT DATE),
Vicente U. Vidad (VIDAD, for short) was a duly authorized passenger jeepney operator. Also prior to the ACCIDENT DATE, petitioner Adolfo L.
Santos (SANTOS, for short) was the owner of a passenger jeep, but he had no certificate of public convenience for the operation of the
vehicle as a public passenger jeep. SANTOS then transferred his jeep to the name of VIDAD so that it could be operated under the latter's
certificate of public convenience. ln other words, SANTOS became what is known in ordinary parlance as a kabit operator. For the protection
of SANTOS, VIDAD executed a re-transfer document to the former, which was to be a private document presumably to be registered if and
where it was decided that the passenger jeep of SANTOS was to be withdrawn from the kabit arrangement.
On the ACCIDENT DATE, private respondent Abraham Sibug (SIBUG for short) was bumped by a passenger jeepney operated by VIDAD and driven by
Severe Gragas. As a result thereof, SIBUG filed a complaint for damages against VIDAD and Gragas with the Court of First Instance of Manila, Branch
XVII, then presided by Hon. Arsenic Solidum. That Civil Case will hereinafter be referred to as the BRANCH XVII CASE.
On December 5, 1963, a judgment was rendered by Branch XVII, sentencing VIDAD and Gragas, jointly and severally, to pay SIBUG the
sums of P506.20 as actual damages; P3,000.00 as moral damages; P500.00 as attorney's fees, and costs. 1
On April 10, 1964, the Sheriff of Manila levied on a motor vehicle, with Plate No. PUJ-343-64, registered in the name of VIDAD, and scheduled
the public auction sale thereof on May 8,1964.
On April 11, 1964, SANTOS presented a third-party claim with the Sheriff alleging actual ownership of the motor vehicle levied upon, and
stating that registration thereof in the name of VIDAD was merely to enable SANTOS to make use of VIDAD'S Certificate of Public
Convenience. After the third-party complaint was filed, SIBUG submitted to the Sheriff a bond issued by the Philippine Surety Insurance
Company (THE BONDING COMPANY, for short), To save the Sheriff from liability if he were to proceed with the sale and if SANTOS' thirdparty claim should be ultimately upheld.
On April 22, 1964, that is, before the scheduled sale of May 8, 1964, SANTOS instituted an action for Damages and injunction with a prayer
for Preliminary Mandatory Injunction against SIBUG; VIDAD; and the Sheriff in Civil Case No. 56842 of Branch X, of the same Court of First
Instance of Manila (hereinafter referred to as the BRANCH X CASE). The complaint was later amended to include the BONDING COMPANY
as a party defendant although its bond had not become effective. ln the Complaint, SANTOS alleged essentially that he was the actual owner
of the motor vehicle subject of levy: that a fictitious Deed of Sale of said motor vehicle was executed by him in VIDAD'S favor for purposes of
operating said vehicle as a passenger jeepney under the latter's franchise; that SANTOS did not receive any payment from VIDAD in
consideration of said sale; that to protect SANTOS' proprietary interest over the vehicle in question, VIDAD in turn had executed a Deed of
Sale in favor of SANTOS on June 27, 1962; that SANTOS was not a party in the BRANCH XVII CASE and was not in any manner liable to the
registered owner VIDAD and the driver Gragas; that SANTOS derived a daily income of P30.00 from the operation of said motor vehicle as a
passenger jeepney and stood to suffer irreparable damage will possession of said motor vehicle were not restored to him. SANTOS then
prayed that 1,) pending trial, a Writ of Preliminary Mandatory injunction be issued ex-parte commanding the Sheriff of Manila to restore the
motor vehicle to him and that the Sheriff be enjoined from proceeding with its sale; 2) that, after trial, the Deed of Sale in favor of VIDAD be
declared absolutely fictitious and, therefore, null and void, and adjudging SANTOS to be the absolute owner of the vehicle in questioned and
3) that damages be awarded to SANTOS as proven during the trial plus attorney's fees in the amount of P450.00 and costs. 2
No public sale was conducted on May 8, 1964. On May 11, 1964, Branch X issued a Restraining Order enjoining the Sheriff from conducting the public
auction sale of the motor vehicle levied upon. 3 The Restraining Order was issued wrongfully. Under the provisions of Section 17, Rule 39, the action
taken by the Sheriff cannot be restrained by another Court or by another Branch of the same Court. The Sheriff has the right to continue with the public
sale on his own responsibility, or he can desist from conducting the public sale unless the attaching creditor files a bond securing him against the thirdparty-claim. But the decision to proceed or not with the public sale lies with him. As said in Uy Piaoco vs. Osmea 9 Phil. 299, 307, "the powers of the
Sheriff involve both discretional power and personal liability." The mentioned discretional power and personal liability have been further elucidated in
Planes and Verdon vs. Madrigal & Co., et al., 94 Phil. 754, where it was held. 1wph1.t
The duty of the sheriff in connection with the execution and satisfaction of judgment of the court is governed by Rule 39 of the Rules of Court. Section
15 thereof provides for the procedure to be. followed where the property levied on execution 'is claimed by a by person. lf the third-party claim is
sufficient, the sheriff, upon receiving it, is not bound to proceed with the levy of the property, unless he is given by the judgment creditor an indemnity
bond against the claim (Mangaoang vs. Provincial Sheriff, 91 Phil., 368). Of course, the sheriff may proceed with the levy even without the Indemnity
bond, but in such case he will answer for any damages with his own personal funds (Waits vs. Peterson, et al., S Phil. 419 Alzua et al. vs. Johnson, 21
Phil., 308; Consults No. 341 de los abogados de Smith, Bell & Co., 48 Phil., 565). And the rule also provides that nothing therein contained shall prevent
a third person from vindicating his claim to the property by any proper action (Sec. 15 of Rule 39.).
It appears from the above that if the attaching creditor should furnish an adequate bond. the Sheriff has to proceed with the public auction.
When such bond is not filed, then the Sheriff shall decide whether to proceed. or to desist from proceeding, with the public auction. lf he
decides to proceed, he will incur personal liability in favor of the successful third-party claimant.
On October 14, 1965, Branch X affirmed SANTOS' ownership of the jeepney in question based on the evidence adduced, and decreed:
1wph1.t
WHEREFORE, judgment is hereby rendered, enjoining the defendants from proceeding with the sale of the vehicle in question ordering its
return to the plaintiff and furthermore sentencing the defendant Abraham Sibug to pay the plaintiff the sum of P15.00 a day from April 10, 1964
until the vehicle is returned to him, and P500.00 as attorney's fee's as well as the costs. 4
This was subsequently amended on December 5, 1965, upon motion for reconsideration filed by SANTOS, to include the BONDING
COMPANY as jointly slid severally liable with SIBUG. 51wph1.t
... provided that the liability of the Philippine Surety & insurance Co., Inc. shall in no case exceed P6,500.00. Abraham Sibug is furthermore
condemned to pay the Philippine Surety & Insurance Co., Inc. the same sums it is ordered to pay under this decision.
The jugdment in the BRANCH X CASE appears to be quite legally unpalatable For instance, since the undertaking furnished to the Sheriff by the
BONDING COMPANY did not become effective for the reason that the jeep was not sold, the public sale thereof having been restrained, there was no
reason for promulgating judgment against the BONDING COMPANY. lt has also been noted that the Complaint against VIDAD was dismissed.
Most important of all, the judgment against SIBUG was inequitable. ln asserting his rights of ownership to the vehicle in question, SANTOS
candidly admitted his participation in the illegal and pernicious practice in the transportation business known as the kabit system. Sec.. 20 (g)
of the Public Service Act, then the applicable law, specifically provided: 1wph1.t
... it shall be unlawful for any public service or for the owner, lessee or operator thereof, without the approval and authorization of the
Commission previously had ... (g) to sell, alienate, mortgage, encumber or lease its property, franchise, certificates, privileges, or rights, or
any part thereof.
In this case, SANTOS had fictitiously sold the jeepney to VIDAD, who had become the registered owner and operator of record at the time of
the accident. lt is true that VIDAD had executed a re-sale to SANTOS, but the document was not registered. Although SANTOS, as the kabit
was the true owner as against VIDAD, the latter, as the registered owner/operator and grantee of the franchise, is directly and primarily
responsible and liable for the damages caused to SIBUG, the injured party, as a consequence of the negligent or careless operation of the
vehicle. 6 This ruling is based on the principle that the operator of record is considered the operator of the vehicle in contemplation of law as
regards the public and third persons 7 even if the vehicle involved in the accident had been sold to another where such sale had not been
approved by the then Public Service Commission. 8 For the same basic reason, as the vehicle here in question was registered in VIDAD'S
name, the levy on execution against said vehicle should be enforced so that the judgment in the BRANCH XVII CASE may be satisfied,
notwithstanding the fact that the secret ownership of the vehicle belonged to another. SANTOS, as the kabit should not be allowed to defeat
the levy on his vehicle and to avoid his responsibilities as a kabit owner for he had led the public to believe that the vehicle belonged to
VIDAD. This is one way of curbing the pernicious kabit system that facilitates the commission of fraud against the travelling public.
As indicated in the Erezo case, supra, SANTOS' remedy. as the real owner of the vehicle, is to go against VIDAD, the actual operator who was
responsible for the accident, for the recovery of whatever damages SANTOS may suffer by reason of the execution. In fact, if SANTOS, as the
kabit had been impleaded as a party defendant in the BRANCH XVII CASE, he should be held jointly and severally liable with VIDAD and the
driver for damages suffered by SIBUG, 9 as well as for exemplary damages. 10
From the judgment in the BRANCH X CASE SIBUG appealed. Meanwhile, SANTOS moved for immidiately execution. SIBUG opposed it on
the ground that Branch X had no jurisdiction over the BRANCH XVII CASE, and that Branch X had no power to interfere by injunction with the
judgment of Branch XVII a Court of concurrent or coordinate jurisdiction. 11
On November 13, 1965, Branch X released an order authorizing immediate execution on the theory that the BRANCH X CASE is "principally
an action for the issuance of a writ of prohibition to forbid the Sheriff from selling at public auction property not belonging to the judgment
creditor (sic) and there being no attempt in this case to interfere with the Judgment or decree of another court of concurrent jurisdiction." 12
Without waiting for the resolution of his Motion for Reconsideration, SIBUG sought relief from respondent Appellate Court in a Petition for
certiorari with Preliminary injunction. On November 18, 1965, respondent Court of Appeals enjoined the enforcement of the Branch X Decision
and the Order of execution issued by said Branch. 13 On September 28, 1966, respondent Count of Appeals rendered the herein challenged
Decision nullifying the judgment renderred in the Branch X Case and permanently restraining V from taking cognizance of the BRANCH X
CASE SANTOS. It ruled that: 1wph1.t
... the respondent Court Branch X, indeed, encroached and interfered with the judgment of Branch XVII when it issued a restraining order and
finally a decision permanently enjoining the other court from excuting the decision rendered in Civil Case No. 54335. This to our mind
constitutes an interference with the powers and authority of the other court having co-equal and coordinate jurisdiction. To rule otherwise,
would indubitably lead to confusion which might hamper or hinder the proper administration of justice. ... 14
Respondent Court further held that SANTOS may not be permitted to prove his ownership over a particular vehicle being levied upon but
registered in another's name in a separated action, observing that: 1wph1.t
As the vehicle in question was registered in the name of Vicente U. Vidad, the government or any person affected by the representation that
said vehicle is registered under the name of a particular person had the right to rely on his declaration of ownership and registration: and the
registered owner or any other person for that matter cannot be permitted to repudiate said declaration with the objective of proving that said
registered vehicle is owned by another person and not by the registered owner (sec. 68, (a), Rule 123, and art. 1431, New Civil Code)
Were we to allow a third person to prove that he is the real owner of a particular vehicle and not the registered owner it would in effect be tantamount to
sanctioning the attempt of the registered owner of the particular vehicle in evading responsibility for it cannot be dispelled that the door would be
opened to collusion between a person and a registered owner for the latter to escape said responsibility to the public or to any person. ...
SANTOS now seeks a review of respondent Court's Decision contending that: 1wph1.t
1) The respondent Court of Appeals erred in holding that Branch X of the Court of First Instance of Manila has no jurisdiction to restrain by Writ
of Injunction the auction sale of petitioner's motor vehicle to satisfy the judgment indebtedness of another person:
2) The respondent Court of Appeals erred in holding that petitioner as owner of a motor vehicle that was levied upon pursuant to a Writ of
Execution issued by Branch XVII of the Court of i stance of Manila in Civil Case No. 54335 cannot be allowed to prove in a separate suit filed
in Branch X of the same court (Civil Case No. 56842) that he is the true owner of the said motor vehicle and not its registered owner;
3) The respondent Court of Appeals erred in declaring null and void the decision of the Court of First Instance of Manila (Branch X ) in Civil
Case No. 56482.
We gave due course to the Petition for Review on certiorari on December 14, 1966 and considered the case submitted for decision on July 20, 1967.
One of the issues ventilated for resolution is the general question of jurisdiction of a Court of First Instance to issue, at the instance of a third-party
claimant, an Injunction restraining the execution sale of a passenger jeepney levied upon by a judgment creditor in another Court of First Instance. The
corollary issue is whether or not the third-party claimant has a right to vindicate his claim to the vehicle levied upon through a separate action.
Since this case was submitted for decision in July, 1967, this Court, in Arabay, lnc. vs. Hon. Serafin Salvador, 15 speaking through Mr. Justice
Ramon Aquino, succinctly held: 1wph1.t
It is noteworthy that, generally, the rule, that no court has authority to interfere by injunction with the judgments or decrees of a concurrent or
coordinate jurisdiction having equal power to grant the injunctive relief, is applied in cases, where no third-party claimant is involved, in order
to prevent one court from nullifying the judgment or process of another court of the same rank or category, a power which devolves upon the
proper appellate court.
When the sheriff, acting beyond the bounds of his authority, seizes a stranger's property, the writ of injunction, which is issued to stop the
auction sale of that property, is not an interference with the writ of execution issued by another court because the writ of execution was
improperly implemented by the sheriff. Under that writ, he could attach the property of the judgment debtor. He is not authorized to levy upon
the property of the third-party claimant (Polaris Marketing Corporation vs. Plan, L-40666, January 22, 1976, 69 SCRA 93, 97; Manila Herald
Publishing Co., Inc. vs. Ramos, 88 Phil. 94, 102).
An earlier case, Abiera vs. Hon. Court of Appeals, et al., 16 explained the doctrine more extensively: 1wph1.t
Courts; Jurisdiction Courts without power to interfere by injunction with judgments or decrees of a court of concurrent jurisdiction. No court
has power to interfere by injunction with the judgments or decrees of a court of concurrent or coordinate jurisdiction having equal power to
grant the relief sought by injunction.
Same, Same; Same; When applicable. For this doctrine to apply, the injunction issued by one court must interfere with the judgment or
decree issued by another court of equal or coordinate jurisdiction and the relief sought by such injunction must be one which could be granted
by the court which rendered the judgment or issued the decree.
Same, Same Same; Exception Judgment rendered by another court in favor of a third person who claims property levied upon on execution.
Under section 17 of Rule 39 a third person who claims property levied upon on execution may vindicate such claim by action. A judgment
rendered in his favor - declaring him to be the owner of the property - would not constitute interference with the powers or processes of the
court which rendered the judgment to enforce which the execution was levied. lf that be so - and it is so because the property, being that of a
stranger, is not subject to levy - then an interlocutory order, such as injunction, upon a claim and prima facie showing of ownership by the
claimant, cannot be considered as such interference either.
Execution; Where property levied on claimed by third person; "Action" in section l7, Rule 39 of the Rules of Court, interpreted The right of a
person who claims to be the owner of property levied upon on execution to file a third-party claim with the sheriff is not exclusive, and he may
file an action to vindicate his claim even if the judgment creditor files an indemnity bond in favor of the sheriff to answer for any damages that
may be suffered by the third party claimant. By "action", as stated in the Rule, what is meant is a separate and independent action.
Applied to the case at bar, it mill have to be held that, contrary to the rationale in the Decision of respondent Court, it was appropriate, as a
matter of procedure, for SANTOS, as an ordinary third-party claimant, to vindicate his claim of ownership in a separate action under Section
17 of Rule 39. And the judgment rendered in his favor by Branch X, declaring him to be the owner of the property, did not as a basic
proposition, constitute interference with the powers or processes of Branch XVII which rendered the judgment, to enforce which the was levied
upon. And this is so because property belonging to a stranger is not ordinarily subject to levy. While it is true that the vehicle in question was in
custodia legis, and should not be interfered with without the permission of the proper Court, the property must be one in which the defendant
has proprietary interest. Where the Sheriff seizes a stranger's property, the rule does not apply and interference with his custody is not
interference with another Court's Order of attachment. 17
However, as a matter of substance and on the merits, the ultimate conclusion of respondent Court nullifying the Decision of Branch X
permanently enjoining the auction sale, should be upheld. Legally speaking, it was not a "stranger's property" that was levied upon by the
Sheriff pursuant to the judgment rendered by Branch XVII. The vehicle was, in fact, registered in the name of VIDAD, one of the judgment
debtors. And what is more, the aspect of public service, with its effects on the riding public, is involved. Whatever legal technicalities may be
invoked, we find the judgment of respondent Court of Appeals to be in consonance with justice.
WHEREFORE, as prayed for by private respondent Abraham Sibug, the petition for review on certiorari filed by Adolfo L. Santos is dismissed
with costs against the petitioner.
SO ORDERED.

SUPREME COURT
Manila
EN BANC
G.R. No. L-64693 April 27, 1984
LITA ENTERPRISES, INC., petitioner,
vs.
SECOND CIVIL CASES DIVISION, INTERMEDIATE APPELLATE COURT, NICASIO M. OCAMPO and FRANCISCA P. GARCIA,
respondents.
Manuel A. Concordia for petitioner.
Nicasio Ocampo for himself and on behalf of his correspondents.
ESCOLIN, J.:+.wph!1
"Ex pacto illicito non oritur actio" [No action arises out of an illicit bargain] is the tune-honored maxim that must be applied to the parties in the
case at bar. Having entered into an illegal contract, neither can seek relief from the courts, and each must bear the consequences of his acts.
The factual background of this case is undisputed.
Sometime in 1966, the spouses Nicasio M. Ocampo and Francisca Garcia, herein private respondents, purchased in installment from the
Delta Motor Sales Corporation five (5) Toyota Corona Standard cars to be used as taxicabs. Since they had no franchise to operate taxicabs,
they contracted with petitioner Lita Enterprises, Inc., through its representative, Manuel Concordia, for the use of the latter's certificate of
public convenience in consideration of an initial payment of P1,000.00 and a monthly rental of P200.00 per taxicab unit. To effectuate Id
agreement, the aforesaid cars were registered in the name of petitioner Lita Enterprises, Inc, Possession, however, remained with tile spouses
Ocampo who operated and maintained the same under the name Acme Taxi, petitioner's trade name.
About a year later, on March 18, 1967, one of said taxicabs driven by their employee, Emeterio Martin, collided with a motorcycle whose
driver, one Florante Galvez, died from the head injuries sustained therefrom. A criminal case was eventually filed against the driver Emeterio
Martin, while a civil case for damages was instituted by Rosita Sebastian Vda. de Galvez, heir of the victim, against Lita Enterprises, Inc., as
registered owner of the taxicab in the latter case, Civil Case No. 72067 of the Court of First Instance of Manila, petitioner Lita Enterprises, Inc.
was adjudged liable for damages in the amount of P25,000.00 and P7,000.00 for attorney's fees.
This decision having become final, a writ of execution was issued. One of the vehicles of respondent spouses with Engine No. 2R-914472 was
levied upon and sold at public auction for 12,150.00 to one Sonnie Cortez, the highest bidder. Another car with Engine No. 2R-915036 was
likewise levied upon and sold at public auction for P8,000.00 to a certain Mr. Lopez.
Thereafter, in March 1973, respondent Nicasio Ocampo decided to register his taxicabs in his name. He requested the manager of petitioner
Lita Enterprises, Inc. to turn over the registration papers to him, but the latter allegedly refused. Hence, he and his wife filed a complaint
against Lita Enterprises, Inc., Rosita Sebastian Vda. de Galvez, Visayan Surety & Insurance Co. and the Sheriff of Manila for reconveyance of
motor vehicles with damages, docketed as Civil Case No. 90988 of the Court of First Instance of Manila. Trial on the merits ensued and on
July 22, 1975, the said court rendered a decision, the dispositive portion of which reads: t.hqw
WHEREFORE, the complaint is hereby dismissed as far as defendants Rosita Sebastian Vda. de Galvez, Visayan Surety
& Insurance Company and the Sheriff of Manila are concerned.
Defendant Lita Enterprises, Inc., is ordered to transfer the registration certificate of the three Toyota cars not levied upon
with Engine Nos. 2R-230026, 2R-688740 and 2R-585884 [Exhs. A, B, C and D] by executing a deed of conveyance in
favor of the plaintiff.
Plaintiff is, however, ordered to pay Lita Enterprises, Inc., the rentals in arrears for the certificate of convenience from
March 1973 up to May 1973 at the rate of P200 a month per unit for the three cars. (Annex A, Record on Appeal, p. 102103, Rollo)
Petitioner Lita Enterprises, Inc. moved for reconsideration of the decision, but the same was denied by the court a quo on October 27, 1975.
(p. 121, Ibid.)
On appeal by petitioner, docketed as CA-G.R. No. 59157-R, the Intermediate Appellate Court modified the decision by including as part of its
dispositive portion another paragraph, to wit: t.hqw
In the event the condition of the three Toyota rears will no longer serve the purpose of the deed of conveyance because of
their deterioration, or because they are no longer serviceable, or because they are no longer available, then Lita
Enterprises, Inc. is ordered to pay the plaintiffs their fair market value as of July 22, 1975. (Annex "D", p. 167, Rollo.)
Its first and second motions for reconsideration having been denied, petitioner came to Us, praying that: t.hqw
1. ...
2. ... after legal proceedings, decision be rendered or resolution be issued, reversing, annulling or amending the decision
of public respondent so that:
(a) the additional paragraph added by the public respondent to the DECISION of the lower court (CFI) be deleted;
(b) that private respondents be declared liable to petitioner for whatever amount the latter has paid or was declared liable
(in Civil Case No. 72067) of the Court of First Instance of Manila to Rosita Sebastian Vda. de Galvez, as heir of the victim
Florante Galvez, who died as a result ot the gross negligence of private respondents' driver while driving one private
respondents' taxicabs. (p. 39, Rollo.)
Unquestionably, the parties herein operated under an arrangement, comonly known as the "kabit system", whereby a person who has been
granted a certificate of convenience allows another person who owns motors vehicles to operate under such franchise for a fee. A certificate of
public convenience is a special privilege conferred by the government . Abuse of this privilege by the grantees thereof cannot be
countenanced. The "kabit system" has been Identified as one of the root causes of the prevalence of graft and corruption in the government
transportation offices. In the words of Chief Justice Makalintal, 1 "this is a pernicious system that cannot be too severely condemned. It
constitutes an imposition upon the goo faith of the government.
Although not outrightly penalized as a criminal offense, the "kabit system" is invariably recognized as being contrary to public policy and,
therefore, void and inexistent under Article 1409 of the Civil Code, It is a fundamental principle that the court will not aid either party to enforce
an illegal contract, but will leave them both where it finds them. Upon this premise, it was flagrant error on the part of both the trial and
appellate courts to have accorded the parties relief from their predicament. Article 1412 of the Civil Code denies them such aid. It
provides:t.hqw
ART. 1412. if the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the following
rules shall be observed;
(1) when the fault, is on the part of both contracting parties, neither may recover what he has given by virtue of the
contract, or demand the performance of the other's undertaking.
The defect of inexistence of a contract is permanent and incurable, and cannot be cured by ratification or by prescription. As this Court said in
Eugenio v. Perdido, 2 "the mere lapse of time cannot give efficacy to contracts that are null void."
The principle of in pari delicto is well known not only in this jurisdiction but also in the United States where common law prevails. Under
American jurisdiction, the doctrine is stated thus: "The proposition is universal that no action arises, in equity or at law, from an illegal contract;
no suit can be maintained for its specific performance, or to recover the property agreed to be sold or delivered, or damages for its property
agreed to be sold or delivered, or damages for its violation. The rule has sometimes been laid down as though it was equally universal, that
where the parties are in pari delicto, no affirmative relief of any kind will be given to one against the other." 3 Although certain exceptions to the
rule are provided by law, We see no cogent reason why the full force of the rule should not be applied in the instant case.
WHEREFORE, all proceedings had in Civil Case No. 90988 entitled "Nicasio Ocampo and Francisca P. Garcia, Plaintiffs, versus Lita
Enterprises, Inc., et al., Defendants" of the Court of First Instance of Manila and CA-G.R. No. 59157-R entitled "Nicasio Ocampo and
Francisca P. Garica, Plaintiffs-Appellees, versus Lita Enterprises, Inc., Defendant-Appellant," of the Intermediate Appellate Court, as well as
the decisions rendered therein are hereby annuleled and set aside. No costs.
SO ORDERED.1wph1.t
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-65510 March 9, 1987
TEJA MARKETING AND/OR ANGEL JAUCIAN, petitioner,

vs.
HONORABLE INTERMEDIATE APPELLATE COURT * AND PEDRO N. NALE, respondents.
PARAS, J.:
"'Ex pacto illicito' non oritur actio" (No action arises out of illicit bargain) is the time-honored maxim that must be applied to the parties in the
case at bar. Having entered into an illegal contract, neither can seek relief from the courts, and each must bear the consequences of his acts."
(Lita Enterprises vs. IAC, 129 SCRA 81.)
The factual background of this case is undisputed. The same is narrated by the respondent court in its now assailed decision, as follows:
On May 9, 1975, the defendant bought from the plaintiff a motorcycle with complete accessories and a sidecar in the total
consideration of P8,000.00 as shown by Invoice No. 144 (Exh. "A"). Out of the total purchase price the defendant gave a
downpayment of P1,700.00 with a promise that he would pay plaintiff the balance within sixty days. The defendant,
however, failed to comply with his promise and so upon his own request, the period of paying the balance was extended
to one year in monthly installments until January 1976 when he stopped paying anymore. The plaintiff made demands but
just the same the defendant failed to comply with the same thus forcing the plaintiff to consult a lawyer and file this action
for his damage in the amount of P546.21 for attorney's fees and P100.00 for expenses of litigation. The plaintiff also
claims that as of February 20, 1978, the total account of the defendant was already P2,731.06 as shown in a statement of
account (Exhibit. "B"). This amount includes not only the balance of P1,700.00 but an additional 12% interest per annum
on the said balance from January 26, 1976 to February 27, 1978; a 2% service charge; and P 546.21 representing
attorney's fees.
In this particular transaction a chattel mortgage (Exhibit 1) was constituted as a security for the payment of the balance of
the purchase price. It has been the practice of financing firms that whenever there is a balance of the purchase price the
registration papers of the motor vehicle subject of the sale are not given to the buyer. The records of the LTC show that
the motorcycle sold to the defendant was first mortgaged to the Teja Marketing by Angel Jaucian though the Teja
Marketing and Angel Jaucian are one and the same, because it was made to appear that way only as the defendant had
no franchise of his own and he attached the unit to the plaintiff's MCH Line. The agreement also of the parties here was
for the plaintiff to undertake the yearly registration of the motorcycle with the Land Transportation Commission. Pursuant
to this agreement the defendant on February 22, 1976 gave the plaintiff P90.00, the P8.00 would be for the mortgage fee
and the P82.00 for the registration fee of the motorcycle. The plaintiff, however failed to register the motorcycle on that
year on the ground that the defendant failed to comply with some requirements such as the payment of the insurance
premiums and the bringing of the motorcycle to the LTC for stenciling, the plaintiff saying that the defendant was hiding
the motorcycle from him. Lastly, the plaintiff explained also that though the ownership of the motorcycle was already
transferred to the defendant the vehicle was still mortgaged with the consent of the defendant to the Rural Bank of
Camaligan for the reason that all motorcycle purchased from the plaintiff on credit was rediscounted with the bank.
On his part the defendant did not dispute the sale and the outstanding balance of P1,700. 00 still payable to the plaintiff.
The defendant was persuaded to buy from the plaintiff the motorcycle with the side car because of the condition that the
plaintiff would be the one to register every year the motorcycle with the Land Transportation Commission. In 1976,
however, the plaintfff failed to register both the chattel mortgage and the motorcycle with the LTC notwithstanding the fact
that the defendant gave him P90.00 for mortgage fee and registration fee and had the motorcycle insured with La Perla
Compana de Seguros (Exhibit "6") as shown also by the Certificate of cover (Exhibit "3"). Because of this failure of the
plaintiff to comply with his obligation to register the motorcycle the defendant suffered damages when he failed to claim
any insurance indemnity which would amount to no less than P15,000.00 for the more than two times that the motorcycle
figured in accidents aside from the loss of the daily income of P15.00 as boundary fee beginning October 1976 when the
motorcycle was impounded by the LTC for not being registered.
The defendant disputed the claim of the plaintiff that he was hiding from the plaintiff the motorcycle resulting in its not
being registered. The truth being that the motorcycle was being used for transporting passengers and it kept on travelling
from one place to another. The motor vehicle sold to him was mortgaged by the plaintiff with the Rural Bank of Camaligan
without his consent and knowledge and the defendant was not even given a copy of the mortgage deed. The defendant
claims that it is not true that the motorcycle was mortgaged because of re-discounting for rediscounting is only true with
Rural Banks and the Central Bank. The defendant puts the blame on the plaintiff for not registering the motorcycle with
the LTC and for not giving him the registration papers inspite of demands made. Finally, the evidence of the defendant
shows that because of the filing of this case he was forced to retain the services of a lawyer for a fee on not less than
P1,000.00.
xxx xxx xxx
... it also appears and the Court so finds that defendant purchased the motorcycle in question, particularly for the purpose
of engaging and using the same in the transportation business and for this purpose said trimobile unit was attached to the
plaintiffs transportation line who had the franchise, so much so that in the registration certificate, the plaintiff appears to be
the owner of the unit. Furthermore, it appears to have been agreed, further between the plaintiff and the defendant, that
plaintiff would undertake the yearly registration of the unit in question with the LTC. Thus, for the registration of the unit for
the year 1976, per agreement, the defendant gave to the plaintiff the amount of P82.00 for its registration, as well as the
insurance coverage of the unit.
Eventually, petitioner Teja Marketing and/or Angel Jaucian filed an action for "Sum of Money with Damages" against private respondent Pedro
N. Nale in the City Court of Naga City. The City Court rendered judgment in favor of petitioner, the dispositive portion of which reads:
WHEREFORE, decision is hereby rendered dismissing the counterclaim and ordering the defendant to pay plaintiff the
sum of P1,700.00 representing the unpaid balance of the purchase price with legal rate of interest from the date of the
filing of the complaint until the same is fully paid; to pay plaintiff the sum of P546.21 as attorney's fees; to pay plaintiff the
sum of P200.00 as expenses of litigation; and to pay the costs.
SO ORDERED.
On appeal to the Court of First Instance of Camarines Sur, the decision was affirmed in toto. Private respondent filed a petition for review with
the Intermediate Appellate Court and on July 18, 1983 the said Court promulgated its decision, the pertinent portion of which reads
However, as the purchase of the motorcycle for operation as a trimobile under the franchise of the private respondent
Jaucian, pursuant to what is commonly known as the "kabit system", without the prior approval of the Board of
Transportation (formerly the Public Service Commission) was an illegal transaction involving the fictitious registration of
the motor vehicle in the name of the private respondent so that he may traffic with the privileges of his franchise, or
certificate of public convenience, to operate a tricycle service, the parties being in pari delicto, neither of them may bring
an action against the other to enforce their illegal contract [Art. 1412 (a), Civil Code].
xxx xxx xxx
WHEREFORE, the decision under review is hereby set aside. The complaint of respondent Teja Marketing and/or Angel
Jaucian, as well as the counterclaim of petitioner Pedro Nale in Civil Case No. 1153 of the Court of First Instance of
Camarines Sur (formerly Civil Case No. 5856 of the City Court of Naga City) are dismissed. No pronouncement as to
costs.
SO ORDERED.
The decision is now before Us on a petition for review, petitioner Teja Marketing and/or Angel Jaucian presenting a lone assignment of error
whether or not respondent court erred in applying the doctrine of "pari delicto."
We find the petition devoid of merit.
Unquestionably, the parties herein operated under an arrangement, commonly known as the "kabit system" whereby a person who has been
granted a certificate of public convenience allows another person who owns motor vehicles to operate under such franchise for a fee. A
certificate of public convenience is a special privilege conferred by the government. Abuse of this privilege by the grantees thereof cannot be
countenanced. The "kabit system" has been Identified as one of the root causes of the prevalence of graft and corruption in the government
transportation offices.
Although not outrightly penalized as a criminal offense, the kabit system is invariably recognized as being contrary to public policy and,
therefore, void and in existent under Article 1409 of the Civil Code. It is a fundamental principle that the court will not aid either party to enforce
an illegal contract, but will leave both where it finds then. Upon this premise it would be error to accord the parties relief from their
predicament. Article 1412 of the Civil Code denies them such aid. It provides:
Art. 1412. If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the following
rules shall be observed:
1. When the fault is on the part of both contracting parties, neither may recover that he has given by virtue of the contract,
or demand, the performance of the other's undertaking.
The defect of in existence of a contract is permanent and cannot be cured by ratification or by prescription. The mere lapse of time cannot give
efficacy to contracts that are null and void.
WHEREFORE, the petition is hereby dismissed for lack of merit. The assailed decision of the Intermediate Appellate Court (now the Court of
Appeals) is AFFIRMED. No costs.
SO ORDERED.
SUPREME COURT
Manila
URBANO MAGBOO and EMILIA C. MAGBOO, plaintiffs-appellees,
EN BANC
G.R. No. L-16790
April 30, 1963
vs. DELFIN BERNARDO, defendant-appellant.
MAKALINTAL, J.:
Appeal from the Court of First Instance of Manila to the Court of Appeals, and certified by the latter to this Court on the ground that only
questions of law are involved.
The action of the spouses Urbano Magboo and Emilia C. Magboo against Delfin Bernardo is for enforcement of his subsidiary liability as
employer in accordance with Article 103, Revised Penal Code. The trial court ordered defendant to pay plaintiffs P3,000.00 and costs upon the
following stipulated facts:
1. That plaintiffs are the parents of Cesar Magboo, a child of 8 years old, who lived with them and was under their custody until his death on
October 24,1956 when he was killed in a motor vehicle accident, the fatal vehicle being a passenger jeepney with Plate No, AC-1963 (56)
owned by the defendant;
2. That at the time of the accident, said passenger jeepney was driven by Conrado Roque;
3. That the contract between Conrado Roque and defendant Delfin Bernardo was that Roque was to pay to defendant the sum of P8.00, which he paid
to said defendant, for privilege of driving the jeepney on October 24, 1956, it being their agreement that whatever earnings Roque could make out of the
use of the jeepney in transporting passengers from one point to another in the City of Manila would belong entirely to Conrado Roque;
4. That as a consequence of the accident and as a result of the death of Cesar Magboo in said accident, Conrado Roque was prosecuted for homicide
thru reckless imprudence before the Court of First Instance of Manila, the information having been docketed as Criminal Case No. 37736, and that upon
arraignment Conrado Roque pleaded guilty to the information and was sentenced to six (6) months of arresto mayor, with the accessory penalties of the
law; to indemnify the heirs of the deceased in the sum of P3,000.00, with subsidiary imprisonment in case of insolvency, and to pay the costs;
5. That pursuant to said judgment Conrado Roque served his sentence but he was not able to pay the indemnity because he was insolvent."
Appellant assails said decision, assigning three errors which boil down to the question of whether or not an employer-employee relationship
exists between a jeepney-owner and a driver under a "boundary system" arrangement. Appellant contends that the relationship is essentially
that of lessor and lessee.
A similar contention has been rejected by this Court in several cases. In National Labor Union v. Dinglasan, 52 O.G., No. 4, 1933, it was held
that the features which characterize the "boundary system" namely, the fact that the driver does not receive a fixed wage but gets only the
excess of the receipt of fares collected by him over the amount he pays to the jeep-owner and that the gasoline consumed by the jeep is for
the account of the driver are not sufficient to withdraw the relationship between them from that of employer and employee. The ruling was
subsequently cited and applied in Doce v. Workmen's Compensation Commission, L-9417, December 22, 1958, which involved the liability of
a bus owner for injury compensation to a conductor working under the "boundary system."
The same principle applies with greater reason in negligence cases concerning the right of third parties to recover damages for injuries sustained. In
Montoya v. Ignacio, L-5868, December 29, 1953, the owner and operator of a passenger jeepney leased it to another, but without the approval of the
Public Service Commission. In a subsequent collision a passenger died. We ruled that since the lease was made without such approval, which was
required by law, the owner continued to be the operator of the vehicle in legal contemplation and as such was responsible for the consequences
incident to its operation. The same responsibility was held to attach in a case where the injured party was not a passenger but a third person, who sued
on the theory of culpa aquiliana (Timbol vs. Osias, L-7547, April 30, 1955). There is no reason why a different rule should be applied in a subsidiary
liability case under Article 103 of the Revised Penal Code. As in the existence of an employer-employee relationship between the owner of the vehicle
and the driver. Indeed to exempt from liability the owner of a public vehicle who operates it under the "boundary system" on the ground that he is a mere
lessor would be not only to abet flagrant violations of the Public Service law but also to place the riding public at the mercy of reckless and irresponsible
drivers - reckless because the measure of their earnings depends largely upon the number of trips they make and, hence, the speed at which they
drive; and irresponsible because most if not all of them are in no position to pay the damages they might cause. (See Erezo vs. Jepte, L-9605,
September 30, 1957).
Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and approved by this Honorable Court, without
prejudice to the parties adducing other evidence to prove their case not covered by this stipulation of facts. 1wph1.t
Appellant further argues that he should not have been held subsidiarily liable because Conrado Roque (the driver of the jeepney) pleaded
guilty to the charge in the criminal case without appellant's knowledge and contrary to the agreement between them that such plea would not
be entered but, instead evidence would be presented to prove Roque's innocence. On this point we quote with approval the pertinent portion
of the decision appealed from:
"'With respect to the contention of the defendant that he was taken unaware by the spontaneous plea of guilt entered by the driver Conrado
Roque, and that he did not have a chance to prove the innocence of said Conrado Roque, the Court holds that at this stage, it is already too
late to try the criminal case all over again. Defendant's allegation that he relied on his belief that Conrado Roque would defend himself and
they had sufficient proof to show that Roque was not guilty of the crime charged cannot be entertained. Defendant should have taken it to
himself to aid in the defense of Conrado Roque. Having failed to take this step and the accused having been declared guilty by final judgment
of the crime of homicide thru reckless imprudence, there appears no more way for the defendant to escape his subsidiary liability as provided
for in Article 103 of the Revised Penal Code."'
WHEREFORE, the judgment appealed from, being in accordance with law, is hereby affirmed, with costs against defendant-appellant.
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-48757 May 30, 1988
MAURO GANZON, petitioner,
vs.
COURT OF APPEALS and GELACIO E. TUMAMBING, respondents.
Antonio B. Abinoja for petitioner.
Quijano, Arroyo & Padilla Law Office for respondents.
SARMIENTO, J.:
The private respondent instituted in the Court of First Instance of Manila 1 an action against the petitioner for damages based on culpa
contractual. The antecedent facts, as found by the respondent Court, 2 are undisputed:
On November 28, 1956, Gelacio Tumambing contracted the services of Mauro B. Ganzon to haul 305 tons of scrap iron from Mariveles,
Bataan, to the port of Manila on board the lighter LCT "Batman" (Exhibit 1, Stipulation of Facts, Amended Record on Appeal, p. 38). Pursuant
to that agreement, Mauro B. Ganzon sent his lighter "Batman" to Mariveles where it docked in three feet of water (t.s.n., September 28, 1972,
p. 31). On December 1, 1956, Gelacio Tumambing delivered the scrap iron to defendant Filomeno Niza, captain of the lighter, for loading
which was actually begun on the same date by the crew of the lighter under the captain's supervision. When about half of the scrap iron was
already loaded (t.s.n., December 14, 1972, p. 20), Mayor Jose Advincula of Mariveles, Bataan, arrived and demanded P5,000.00 from Gelacio
Tumambing. The latter resisted the shakedown and after a heated argument between them, Mayor Jose Advincula drew his gun and fired at
Gelacio Tumambing (t.s.n., March 19, 1971, p. 9; September 28, 1972, pp. 6-7).<re||an1w> The gunshot was not fatal but Tumambing had
to be taken to a hospital in Balanga, Bataan, for treatment (t.s.n., March 19, 1971, p. 13; September 28, 1972, p. 15).
After sometime, the loading of the scrap iron was resumed. But on December 4, 1956, Acting Mayor Basilio Rub, accompanied by three
policemen, ordered captain Filomeno Niza and his crew to dump the scrap iron (t.s.n., June 16, 1972, pp. 8-9) where the lighter was docked
(t.s.n., September 28, 1972, p. 31). The rest was brought to the compound of NASSCO (Record on Appeal, pp. 20-22). Later on Acting Mayor
Rub issued a receipt stating that the Municipality of Mariveles had taken custody of the scrap iron (Stipulation of Facts, Record on Appeal, p.
40; t.s.n., September 28, 1972, p. 10.)
On the basis of the above findings, the respondent Court rendered a decision, the dispositive portion of which states:
WHEREFORE, the decision appealed from is hereby reversed and set aside and a new one entered ordering defendantappellee Mauro Ganzon to pay plaintiff-appellant Gelacio E. Tumambimg the sum of P5,895.00 as actual damages, the
sum of P5,000.00 as exemplary damages, and the amount of P2,000.00 as attorney's fees. Costs against defendantappellee Ganzon. 3
In this petition for review on certiorari, the alleged errors in the decision of the Court of Appeals are:
I
THE COURT OF APPEALS FINDING THE HEREIN PETITIONER GUILTY OF BREACH OF THE CONTRACT OF TRANSPORTATION AND
IN IMPOSING A LIABILITY AGAINST HIM COMMENCING FROM THE TIME THE SCRAP WAS PLACED IN HIS CUSTODY AND CONTROL
HAVE NO BASIS IN FACT AND IN LAW.
II
THE APPELLATE COURT ERRED IN CONDEMNING THE PETITIONER FOR THE ACTS OF HIS EMPLOYEES IN DUMPING THE SCRAP
INTO THE SEA DESPITE THAT IT WAS ORDERED BY THE LOCAL GOVERNMENT OFFICIAL WITHOUT HIS PARTICIPATION.
III
THE APPELLATE COURT FAILED TO CONSIDER THAT THE LOSS OF THE SCRAP WAS DUE TO A FORTUITOUS EVENT AND THE
PETITIONER IS THEREFORE NOT LIABLE FOR LOSSES AS A CONSEQUENCE THEREOF. 4
The petitioner, in his first assignment of error, insists that the scrap iron had not been unconditionally placed under his custody and control to
make him liable. However, he completely agrees with the respondent Court's finding that on December 1, 1956, the private respondent
delivered the scraps to Captain Filomeno Niza for loading in the lighter "Batman," That the petitioner, thru his employees, actually received the
scraps is freely admitted. Significantly, there is not the slightest allegation or showing of any condition, qualification, or restriction
accompanying the delivery by the private respondent-shipper of the scraps, or the receipt of the same by the petitioner. On the contrary, soon
after the scraps were delivered to, and received by the petitioner-common carrier, loading was commenced.
By the said act of delivery, the scraps were unconditionally placed in the possession and control of the common carrier, and upon their receipt
by the carrier for transportation, the contract of carriage was deemed perfected. Consequently, the petitioner-carrier's extraordinary
responsibility for the loss, destruction or deterioration of the goods commenced. Pursuant to Art. 1736, such extraordinary responsibility would
cease only upon the delivery, actual or constructive, by the carrier to the consignee, or to the person who has a right to receive them. 5 The
fact that part of the shipment had not been loaded on board the lighter did not impair the said contract of transportation as the goods remained
in the custody and control of the carrier, albeit still unloaded.
The petitioner has failed to show that the loss of the scraps was due to any of the following causes enumerated in Article 1734 of the Civil
Code, namely:
Hence, the petitioner is presumed to have been at fault or to have acted negligently. 6 By reason of this presumption, the court is not even
required to make an express finding of fault or negligence before it could hold the petitioner answerable for the breach of the contract of
carriage. Still, the petitioner could have been exempted from any liability had he been able to prove that he observed extraordinary diligence in
the vigilance over the goods in his custody, according to all the circumstances of the case, or that the loss was due to an unforeseen event or
to force majeure. As it was, there was hardly any attempt on the part of the petitioner to prove that he exercised such extraordinary diligence.
It is in the second and third assignments of error where the petitioner maintains that he is exempt from any liability because the loss of the
scraps was due mainly to the intervention of the municipal officials of Mariveles which constitutes a caso fortuito as defined in Article 1174 of
the Civil Code. 7
We cannot sustain the theory of caso fortuito. In the courts below, the petitioner's defense was that the loss of the scraps was due to an "order
or act of competent public authority," and this contention was correctly passed upon by the Court of Appeals which ruled that:
... In the second place, before the appellee Ganzon could be absolved from responsibility on the ground that he was ordered by competent
public authority to unload the scrap iron, it must be shown that Acting Mayor Basilio Rub had the power to issue the disputed order, or that it
was lawful, or that it was issued under legal process of authority. The appellee failed to establish this. Indeed, no authority or power of the
acting mayor to issue such an order was given in evidence. Neither has it been shown that the cargo of scrap iron belonged to the Municipality
of Mariveles. What we have in the record is the stipulation of the parties that the cargo of scrap iron was accilmillated by the appellant through
separate purchases here and there from private individuals (Record on Appeal, pp. 38-39). The fact remains that the order given by the acting
mayor to dump the scrap iron into the sea was part of the pressure applied by Mayor Jose Advincula to shakedown the appellant for
P5,000.00. The order of the acting mayor did not constitute valid authority for appellee Mauro Ganzon and his representatives to carry out.
Now the petitioner is changing his theory to caso fortuito. Such a change of theory on appeal we cannot, however, allow. In any case, the
intervention of the municipal officials was not In any case, of a character that would render impossible the fulfillment by the carrier of its
obligation. The petitioner was not duty bound to obey the illegal order to dump into the sea the scrap iron. Moreover, there is absence of
sufficient proof that the issuance of the same order was attended with such force or intimidation as to completely overpower the will of the
petitioner's employees. The mere difficulty in the fullfilment of the obligation is not considered force majeure. We agree with the private
respondent that the scraps could have been properly unloaded at the shore or at the NASSCO compound, so that after the dispute with the
local officials concerned was settled, the scraps could then be delivered in accordance with the contract of carriage.
There is no incompatibility between the Civil Code provisions on common carriers and Articles 361 8 and 362 9 of the Code of Commerce
which were the basis for this Court's ruling in Government of the Philippine Islands vs. Ynchausti & Co.10 and which the petitioner invokes in
tills petition. For Art. 1735 of the Civil Code, conversely stated, means that the shipper will suffer the losses and deterioration arising from the
causes enumerated in Art. 1734; and in these instances, the burden of proving that damages were caused by the fault or negligence of the
carrier rests upon him. However, the carrier must first establish that the loss or deterioration was occasioned by one of the excepted causes or
was due to an unforeseen event or to force majeure. Be that as it may, insofar as Art. 362 appears to require of the carrier only ordinary
diligence, the same is .deemed to have been modified by Art. 1733 of the Civil Code.
Finding the award of actual and exemplary damages to be proper, the same will not be disturbed by us. Besides, these were not sufficiently
controverted by the petitioner.
WHEREFORE, the petition is DENIED; the assailed decision of the Court of Appeals is hereby AFFIRMED. Costs against the petitioner.
This decision is IMMEDIATELY EXECUTORY.

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 94151 April 30, 1991

vs.
THE COURT OF APPEALS and THE FIRST NATIONWIDE ASSURANCE CORPORATION, respondents.
Jimenez, Dala & Zaragoza for petitioner.
Reloy Law Office for private respondent.
GANCAYCO, J.:p
The extent of the liability of the common carrier and its insurer for damage to the cargo upon its delivery to the arrastre operator is the center
of this controversy.
The findings of fact of the trial court which were adopted by the appellate court and which are not disputed are as follows:
On September 4, 1978, thirteen coils of uncoated 7-wire stress relieved wire strand for prestressed concrete were shipped
on board the vessel "Japri Venture," owned and operated by the defendant Eastern Shipping Lines, Inc., at Kobe, Japan,
for delivery to Stresstek Post-Tensioning Phils., Inc. in Manila, as evidenced by the bill of lading, commercial invoice,
packing list and commercial invoice marked Exhibits A, B, C, D; 3, 4, 5 and 6-Razon which were insured by the plaintiff
First Nationwide Assurance Corporation for P171,923 (Exhibit E).
On September 16, 1978, the carrying vessel arrived in Manila and discharged the cargo to the custody of the defendant E.
Razon, Inc. (Exhibits 1, 2, 3, 4 and 5-ESL), from whom the consignee's customs broker received it for delivery to the
consignee's warehouse.
On February 19, 1979, the plaintiff indemnified the consignee in the amount of P171,923.00 for damage and loss to the
insured cargo, whereupon the former was subrogated for the latter (Exhibit I).
The plaintiff now seeks to recover from the defendants what it has indemnified the consignee, less P48,293.70, the
salvage value of the cargo, or the total amount of P123,629.30.
It appears that while enroute from Kobe to Manila, the carrying vessel "encountered very rough seas and stormy weather"
for three days, more or less, which caused it to roll and pound heavily, moving its master to execute a marine note of
protest upon arrival at the port of Manila on September 15, 1978 (Exhibit 1-Razon); that the coils wrapped in burlap cloth
and cardboard paper were stored in the lower hold of the hatch of the vessel which was flooded with water about one foot
deep; that the water entered the hatch when the vessel encountered heavy weather enroute to Manila (Exhibits G, 2, 2A,
2B-Razon); that upon request, a survey of bad order cargo was conducted at the pier in the presence of the
representatives of the consignee and the defendant E. Razon, Inc. and it was found that seven coils were rusty on one
side each (Exhibits F and 10-Razon); that upon survey conducted at the consignee's warehouse it was found that the
"wetting (of the cargo) was caused by fresh water" that entered the hatch when the vessel encountered heavy weather
enroute to Manila (p. 3, Exhibit G); and that all thirteen coils were extremely rusty and totally unsuitable for the intended
purpose (p. 3, Exhibit G), (pp. 217-218, orig. rec.) 1
The complaint that was filed by the First Nationwide Assurance Corporation (insurer) against Eastern Shipping Lines, Inc. and E. Razon, Inc.,
in the Regional Trial Court, Manila, was dismissed in a decision dated November 25, 1985. An appeal therefrom was interposed by the insurer
to the Court of Appeals wherein in due course a decision was rendered on April 27, 1990, the dispositive part of which reads as follows:
WHEREFORE, the judgment appealed from is hereby SET ASIDE. The appellees are ordered to pay the appellant the
sum of P123,629.30, with legal rate of interest from July 24, 1979 until fully paid, Eastern Shipping Lines, Inc. to assume
8/13 thereof, and E. Razon, Inc. to assume 5/13 thereof. No pronouncement as to costs.
SO ORDERED. 2
Only Eastern Shipping Lines, Inc. filed this petition for review by certiorari based on the following assigned errors:
I. IT REFUSED TO CONSIDER THE COUNTER-ASSIGNMENT OF ERRORS OF PETITIONER AS CONTAINED IN ITS
BRIEF FOR THE DEFENDANT-APPELLEE EASTERN SHIPPING LINES, INC. AND WHICH ARE ONLY MEANT TO
SUSTAIN THE DECISION OF DISMISSAL OF THE TRIAL COURT;
II. AGAINST ITS OWN FINDINGS OF FACT THAT THE CARGO WAS DISCHARGED AND DELIVERED COMPLETE
UNTO THE CUSTODY OF THE ARRASTRE OPERATOR UNDER CLEAN TALLY SHEETS, IT NEVERTHELESS
ARBITRARILY CONCLUDED PETITIONER AS LIABLE FOR THE CLAIMED DAMAGES;
III. IT FAILED TO HOLD PETITIONER RELIEVED OF ANY LIABILITY OVER THE CARGO NOTWITHSTANDING IT
FOUND THAT THE SAME WAS DISCHARGED AND DELIVERED UNTO THE CUSTODY OF THE ARRASTRE
OPERATOR UNDER CLEAN TALLY SHEETS AND ERGO TO BE CONSIDERED GOOD ORDER CARGO WHEN
DELIVERED; and,
IV. IT ARBITRARILY AWARDED INTEREST AT THE LEGAL RATE TO COMMENCE FROM THE DATE OF THE
COMPLAINT IN VIOLATION OF THE DOCTRINAL RULE THAT IN CASE OF UNLIQUIDATED CLAIMS SUCH AS THE
CLAIM IN QUESTION, INTEREST SHOULD ONLY COMMENCE FROM THE DATE OF THE DECISION OF THE TRIAL
COURT. 3
Under the first assigned error, petitioner contends that the appellate court did not consider its counter-assignment of errors which was only
meant to sustain the decision of dismissal of the trial court. An examination of the questioned decision shows that the appellate court did not
consider the counter-assignment of errors of petitioner as it did not appeal the decision of the trial court.
Nevertheless, when such counter-assignments are intended to sustain the judgment appealed from on other grounds, but not to seek
modification or reversal thereof, the appellate court should consider the same in the determination of the case but no affirmative relief can be
granted thereby other than what had been obtained from the lower court. 4 The contention of petitioner on this aspect is, thus, well-taken.
Be that as it may, under the second and third assigned errors, petitioner claims it should not be held liable as the shipment was discharged
and delivered complete into the custody of the arrastre operator under clean tally sheets.
While it is true the cargo was delivered to the arrastre operator in apparent good order condition, it is also undisputed that while en route from
Kobe to Manila, the vessel encountered "very rough seas and stormy weather", the coils wrapped in burlap cloth and cardboard paper were
stored in the lower hatch of the vessel which was flooded with water about one foot deep; that the water entered the hatch; that a survey of
bad order cargo which was conducted in the pier in the presence of representatives of the consignee and E. Razon, Inc., showed that seven
coils were rusty on one side (Exhibits F and 10-Razon); that a survey conducted at the consignee's warehouse also showed that the "wetting
(of the cargo) was caused by fresh water" that entered the hatch when the vessel encountered heavy rain en route to Manila (Exhibit G); and
that all thirteen coils were extremely rusty and totally unsuitable for the intended purpose. 5
Consequently, based on these facts, the appellate court made the following findings and conclusions:
Plainly, the heavy seas and rains referred to in the master's report were not caso fortuito, but normal occurrences that an
ocean-going vessel, particularly in the month of September which, in our area, is a month of rains and heavy seas would
encounter as a matter of routine. They are not unforeseen nor unforeseeable. These are conditions that ocean-going
vessels would encounter and provide for, in the ordinary course of a voyage. That rain water (not sea water) found its way
into the holds of the Jupri Venture is a clear indication that care and foresight did not attend the closing of the ship's
hatches so that rain water would not find its way into the cargo holds of the ship.
Moreover, under Article 1733 of the Civil Code, common carriers are bound to observe "extra-ordinary vigilance over
goods . . . .according to all circumstances of each case," and Article 1735 of the same Code states, to wit:
Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the preceding article, if
the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or
to have acted negligently, unless they prove that they observed extraordinary diligence as required in
article 1733.
Since the carrier has failed to establish any caso fortuito, the presumption by law of fault or negligence on the part of the
carrier applies; and the carrier must present evidence that it has observed the extraordinary diligence required by Article
1733 of the Civil Code in order to escape liability for damage or destruction to the goods that it had admittedly carried in
this case. No such evidence exists of record. Thus, the carrier cannot escape liability.
The Court agrees with and is bound by the foregoing findings of fact made by the appellate court. The presumption, therefore, that the cargo
was in apparent good condition when it was delivered by the vessel to the arrastre operator by the clean tally sheets has been overturned and
traversed. The evidence is clear to the effect that the damage to the cargo was suffered while aboard petitioner's vessel.
The last assigned error is untenable. The interest due on the amount of the judgment should commence from the date of judicial demand. 6
WHEREFORE, the petition is DISMISSED, with costs against petitioner.
SO ORDERED.
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 108897 October 2, 1997

SARKIES TOURS PHILIPPINES, INC., petitioner,
vs.
HONORABLE COURT OF APPEALS (TENTH DIVISION), DR. ELINO G. FORTADES, MARISOL A. FORTADES and FATIMA MINERVA A.
FORTADES, respondents.
ROMERO, J.:
This petition for review is seeking the reversal of the decision of the Court of Appeals in CA-G.R. CV No. 18979 promulgated on January 13,
1993, as well as its resolution of February 19, 1993, denying petitioner's motion for reconsideration for being a mere rehash of the arguments
raised in the appellant's brief.
The case arose from a damage suit filed by private respondents Elino, Marisol, and Fatima Minerva, all surnamed Fortades, against petitioner
for breach of contract of carriage allegedly attended by bad faith.
On August 31, 1984, Fatima boarded petitioner's De Luxe Bus No. 5 in Manila on her way to Legazpi City. Her brother Raul helped her load
three pieces of luggage containing all of her optometry review books, materials and equipment, trial lenses, trial contact lenses, passport and
visa, as well as her mother Marisol's U.S. immigration (green) card, among other important documents and personal belongings. Her
belongings were kept in the baggage compartment of the bus, but during a stopover at Daet, it was discovered that only one bag remained in
the open compartment. The others, including Fatima's things, were missing and might have dropped along the way. Some of the passengers
suggested retracing the route of the bus to try to recover the lost items, but the driver ignored them and proceeded to Legazpi City.
Fatima immediately reported the loss to her mother who, in turn, went to petitioner's office in Legazpi City and later at its head office in Manila.
Petitioner, however, merely offered her P1,000.00 for each piece of luggage lost, which she turned down. After returning to Bicol, disappointed
but not defeated, mother and daughter asked assistance from the radio stations and even from Philtranco bus drivers who plied the same
route on August 31st. The effort paid off when one of Fatima's bags was recovered. Marisol further reported the incident to the National
Bureau of Investigation's field office in Legazpi City and to the local police.
On September 20, 1984, respondents, through counsel, formally demanded satisfaction of their complaint from petitioner. In a letter dated
October 1, 1984, the latter apologized for the delay and said that "(a) team has been sent out to Bicol for the purpose of recovering or at least
getting the full detail" 1 of the incident.
After more than nine months of fruitless waiting, respondents decided to file the case below to recover the value of the remaining lost items, as
well as moral and exemplary damages, attorney's fees and expenses of litigation. They claimed that the loss was due to petitioner's failure to
observe extraordinary diligence in the care of Fatima's luggage and that petitioner dealt with them in bad faith from the start. Petitioner, on the
other hand, disowned any liability for the loss on the ground that Fatima allegedly did not declare any excess baggage upon boarding its bus.
On June 15, 1988, after trial on the merits, the court a quo adjudged the case in favor of respondents, viz.:
PREMISES CONSIDERED, judgment is hereby rendered in favor of the plaintiffs (herein respondents) and against the herein
defendant Sarkies Tours Philippines, Inc., ordering the latter to pay to the former the following sums of money, to wit:
1. The sum of P30,000.00 equivalent to the value of the personal belongings of plaintiff Fatima Minerva Fortades, etc. less the value
of one luggage recovered;
2. The sum of P90,000.00 for the transportation expenses, as well as moral damages;
3. The sum of P10,000.00 by way of exemplary damages;
4. The sum of P5,000.00 as attorney's fees; and
5. The sum of P5,000.00 as litigation expenses or a total of One Hundred Forty Thousand (P140,000.00) Pesos.
to be paid by herein defendant Sarkies Tours Philippines, Inc. to the herein plaintiffs within 30 days from receipt of this Decision.
SO ORDERED.
On appeal, the appellate court affirmed the trial court's judgment, but deleted the award of moral and exemplary damages. Thus,
WHEREFORE, premises considered, except as above modified, fixing the award for transportation expenses at P30,000.00 and the
deletion of the award for moral and exemplary damages, the decision appealed from is AFFIRMED, with costs against defendantappellant.
SO ORDERED.
Its motion for reconsideration was likewise rejected by the Court of Appeals, so petitioner elevated its case to this Court for a review.
After a careful scrutiny of the records of this case, we are convinced that the trial and appellate courts resolved the issues judiciously based on
the evidence at hand.
Petitioner claims that Fatima did not bring any piece of luggage with her, and even if she did, none was declared at the start of the trip. The
documentary and testimonial evidence presented at the trial, however, established that Fatima indeed boarded petitioner's De Luxe Bus No. 5
in the evening of August 31, 1984, and she brought three pieces of luggage with her, as testified by her brother Raul, 2 who helped her pack
her things and load them on said bus. One of the bags was even recovered by a Philtranco bus driver. In its letter dated October 1, 1984,
petitioner tacitly admitted its liability by apologizing to respondents and assuring them that efforts were being made to recover the lost items.
The records also reveal that respondents went to great lengths just to salvage their loss. The incident was reported to the police, the NBI, and
the regional and head offices of petitioner. Marisol even sought the assistance of Philtranco bus drivers and the radio stations. To expedite the
replacement of her mother's lost U.S. immigration documents, Fatima also had to execute an affidavit of loss. 3 Clearly, they would not have
gone through all that trouble in pursuit of a fancied loss.
Fatima was not the only one who lost her luggage. Apparently, other passengers had suffered a similar fate: Dr. Lita Samarista testified that
petitioner offered her P1,000.00 for her lost baggage and she accepted it; 4 Carleen Carullo-Magno lost her chemical engineering review
materials, while her brother lost abaca products he was transporting to Bicol. 5
Petitioner's receipt of Fatima's personal luggage having been thus established, it must now be determined if, as a common carrier, it is
responsible for their loss. Under 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 . . . transported by them," 6 and this liability "lasts from the time the
goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or
constructively, by the carrier to . . . the person who has a right to receive them," 7 unless the loss is due to any of the excepted causes under
Article 1734 thereof. 8
The cause of the loss in the case at bar was petitioner's negligence in not ensuring that the doors of the baggage compartment of its bus were
securely fastened. As a result of this lack of care, almost all of the luggage was lost, to the prejudice of the paying passengers. As the Court of
Appeals correctly observed:
. . . . Where the common carrier accepted its passenger's baggage for transportation and even had it placed in the vehicle by its
own employee, its failure to collect the freight charge is the common carrier's own lookout. It is responsible for the consequent loss
of the baggage. In the instant case, defendant appellant's employee even helped Fatima Minerva Fortades and her brother load the
luggages/baggages in the bus' baggage compartment, without asking that they be weighed, declared, receipted or paid for (TSN,
August 4, 1986, pp. 29, 34, 54, 57, 70; December 23, 1987, p. 35). Neither was this required of the other passengers (TSN, August
4, 1986, p. 104; February 5, 1988; p. 13).
Finally, petitioner questions the award of actual damages to respondents. On this point, we likewise agree with the trial and appellate courts'
conclusions. There is no dispute that of the three pieces of luggage of Fatima, only one was recovered. The other two contained optometry
books, materials, equipment, as well as vital documents and personal belongings. Respondents had to shuttle between Bicol and Manila in
their efforts to be compensated for the loss. During the trial, Fatima and Marisol had to travel from the United States just to be able to testify.
Expenses were also incurred in reconstituting their lost documents. Under these circumstances, the Court agrees with the Court of Appeals in
awarding P30,000.00 for the lost items and P30,000.00 for the transportation expenses, but disagrees with the deletion of the award of moral
and exemplary damages which, in view of the foregoing proven facts, with negligence and bad faith on the fault of petitioner having been duly
established, should be granted to respondents in the amount of P20,000.00 and P5,000.00, respectively.
WHEREFORE, the assailed decision of the Court of Appeals dated January 13, 1993, and its resolution dated February 19, 1993, are hereby
AFFIRMED with the MODIFICATION that petitioner is ordered to pay respondents an additional P20,000.00 as moral damages and P5,000.00
as exemplary damages. Costs against petitioner.
SO ORDERED.

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 102316 June 30, 1997

VALENZUELA HARDWOOD AND INDUSTRIAL SUPPLY INC., petitioner,
vs.
COURT OF APPEALS AND SEVEN BROTHERS SHIPPING CORPORATION, respondents.
PANGANIBAN, J.:
Is a stipulation in a charter party that the "(o)wners shall not be responsible for loss, split, short-landing, breakages and any kind of damages
to the cargo" 1 valid? This is the main question raised in this petition for review assailing the Decision of Respondent Court of Appeals 2 in CAG.R. No. CV-20156 promulgated on October 15, 1991. The Court of Appeals modified the judgment of the Regional Trial Court of Valenzuela,
Metro Manila, Branch 171, the dispositive portion of which reads:
WHEREFORE, Judgment is hereby rendered ordering South Sea Surety and Insurance Co., Inc. to pay plaintiff the sum
of TWO MILLION PESOS (P2,000,000.00) representing the value of the policy of the lost logs with legal interest thereon
from the date of demand on February 2, 1984 until the amount is fully paid or in the alternative, defendant Seven Brothers
Shipping Corporation to pay plaintiff the amount of TWO MILLION PESOS (2,000,000.00) representing the value of lost
logs plus legal interest from the date of demand on April 24, 1984 until full payment thereof; the reasonable attorney's fees
in the amount equivalent to five (5) percent of the amount of the claim and the costs of the suit.
Plaintiff is hereby ordered to pay defendant Seven Brothers Shipping Corporation the sum of TWO HUNDRED THIRTY
THOUSAND PESOS (P230,000.00) representing the balance of the stipulated freight charges.
Defendant South Sea Surety and Insurance Company's counterclaim is hereby dismissed.
In its assailed Decision, Respondent Court of Appeals held:
WHEREFORE, the appealed judgment is hereby AFFIRMED except in so far (sic) as the liability of the Seven Brothers
Shipping Corporation to the plaintiff is concerned which is hereby REVERSED and SET ASIDE. 3
The Facts
The factual antecedents of this case as narrated in the Court of Appeals Decision are as follows:
It appears that on 16 January 1984, plaintiff (Valenzuela Hardwood and Industrial Supply, Inc.) entered into an agreement
with the defendant Seven Brothers (Shipping Corporation) whereby the latter undertook to load on board its vessel M/V
Seven Ambassador the former's lauan round logs numbering 940 at the port of Maconacon, Isabela for shipment to
Manila.
On 20 January 1984, plaintiff insured the logs against loss and/or damage with defendant South Sea Surety and
Insurance Co., Inc. for P2,000,000.00 and the latter issued its Marine Cargo Insurance Policy No. 84/24229 for
P2,000,000.00 on said date.
On 24 January 1984, the plaintiff gave the check in payment of the premium on the insurance policy to Mr. Victorio Chua.
In the meantime, the said vessel M/V Seven Ambassador sank on 25 January 1984 resulting in the loss of the plaintiff's
insured logs.
On 30 January 1984, a check for P5,625.00 (Exh. "E") to cover payment of the premium and documentary stamps due on
the policy was tendered due to the insurer but was not accepted. Instead, the South Sea Surety and Insurance Co., Inc.
cancelled the insurance policy it issued as of the date of the inception for non-payment of the premium due in accordance
with Section 77 of the Insurance Code.
On 2 February 1984, plaintiff demanded from defendant South Sea Surety and Insurance Co., Inc. the payment of the
proceeds of the policy but the latter denied liability under the policy. Plaintiff likewise filed a formal claim with defendant
Seven Brothers Shipping Corporation for the value of the lost logs but the latter denied the claim.
After due hearing and trial, the court a quo rendered judgment in favor of plaintiff and against defendants. Both
defendants shipping corporation and the surety company appealed.
Defendant-appellant Seven Brothers Shipping Corporation impute (sic) to the court a quo the following assignment of
errors, to wit:
A. The lower court erred in holding that the proximate cause of the sinking of the vessel Seven Ambassadors, was not due
to fortuitous event but to the negligence of the captain in stowing and securing the logs on board, causing the iron chains
to snap and the logs to roll to the portside.
B. The lower court erred in declaring that the non-liability clause of the Seven Brothers Shipping Corporation from logs
(sic) of the cargo stipulated in the charter party is void for being contrary to public policy invoking article 1745 of the New
Civil Code.
C. The lower court erred in holding defendant-appellant Seven Brothers Shipping Corporation liable in the alternative and
ordering/directing it to pay plaintiff-appellee the amount of two million (2,000,000.00) pesos representing the value of the
logs plus legal interest from date of demand until fully paid.
D. The lower court erred in ordering defendant-appellant Seven Brothers Shipping Corporation to pay appellee
reasonable attorney's fees in the amount equivalent to 5% of the amount of the claim and the costs of the suit.
E. The lower court erred in not awarding defendant-appellant Seven Brothers Corporation its counter-claim for attorney's
fees.
F. The lower court erred in not dismissing the complaint against Seven Brothers Shipping Corporation.
Defendant-appellant South Sea Surety and Insurance Co., Inc. assigns the following errors:
A. The trial court erred in holding that Victorio Chua was an agent of defendant-appellant South Sea Surety and Insurance
Company, Inc. and likewise erred in not holding that he was the representative of the insurance broker Columbia
Insurance Brokers, Ltd.
B. The trial court erred in holding that Victorio Chua received compensation/commission on the premiums paid on the
policies issued by the defendant-appellant South Sea Surety and Insurance Company, Inc.
C. The trial court erred in not applying Section 77 of the Insurance Code.
D. The trial court erred in disregarding the "receipt of payment clause" attached to and forming part of the Marine Cargo
Insurance Policy No. 84/24229.
E. The trial court in disregarding the statement of account or bill stating the amount of premium and documentary stamps
to be paid on the policy by the plaintiff-appellee.
F. The trial court erred in disregarding the endorsement of cancellation of the policy due to non-payment of premium and
documentary stamps.
G. The trial court erred in ordering defendant-appellant South Sea Surety and Insurance Company, Inc. to pay plaintiffappellee P2,000,000.00 representing value of the policy with legal interest from 2 February 1984 until the amount is fully
paid,
H. The trial court erred in not awarding to the defendant-appellant the attorney's fees alleged and proven in its
counterclaim.
The primary issue to be resolved before us is whether defendants shipping corporation and the surety company are liable
to the plaintiff for the latter's lost logs. 4
The Court of Appeals affirmed in part the RTC judgment by sustaining the liability of South Sea Surety and Insurance Company ("South Sea"),
but modified it by holding that Seven Brothers Shipping Corporation ("Seven Brothers") was not liable for the lost cargo. 5 In modifying the
RTC judgment, the respondent appellate court ratiocinated thus:
It appears that there is a stipulation in the charter party that the ship owner would be exempted from liability in case of loss.
The court a quo erred in applying the provisions of the Civil Code on common carriers to establish the liability of the shipping corporation. The
provisions on common carriers should not be applied where the carrier is not acting as such but as a private carrier.
Under American jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a special person only, becomes a
private carrier.
As a private carrier, a stipulation exempting the owner from liability even for the negligence of its agent is valid (Home Insurance Company,
Inc. vs. American Steamship Agencies, Inc., 23 SCRA 24).
The shipping corporation should not therefore be held liable for the loss of the logs.
South Sea and herein Petitioner Valenzuela Hardwood and Industrial Supply, Inc. ("Valenzuela") filed separate petitions for review before this
Court. In a Resolution dated June 2, 1995, this Court denied the petition of South
Sea. 7 There the Court found no reason to reverse the factual findings of the trial court and the Court of Appeals that Chua was indeed an
authorized agent of South Sea when he received Valenzuela's premium payment for the marine cargo insurance policy which was thus
binding on the insurer. 8
The Court is now called upon to resolve the petition for review filed by Valenzuela assailing the CA Decision which exempted Seven Brothers
from any liability for the lost cargo.
The Issue
Petitioner Valenzuela's arguments resolve around a single issue: "whether or not respondent Court (of Appeals) committed a reversible error
in upholding the validity of the stipulation in the charter party executed between the petitioner and the private respondent exempting the latter
from liability for the loss of petitioner's logs arising from the negligence of its (Seven Brothers') captain." 9
The Court's Ruling
The petition is not meritorious.
Validity of Stipulation is Lis Mota
The charter party between the petitioner and private respondent stipulated that the "(o)wners shall not be responsible for loss, split, shortlanding, breakages and any kind of damages to the cargo." 10 The validity of this stipulation is the lis mota of this case.
It should be noted at the outset that there is no dispute between the parties that the proximate cause of the sinking of M/V Seven
Ambassadors resulting in the loss of its cargo was the "snapping of the iron chains and the subsequent rolling of the logs to the portside due
to the negligence of the captain in stowing and securing the logs on board the vessel and not due to fortuitous event." 11 Likewise undisputed
is the status of Private Respondent Seven Brothers as a private carrier when it contracted to transport the cargo of Petitioner Valenzuela.
Even the latter admits this in its petition. 12
The trial court deemed the charter party stipulation void for being contrary to public policy, 13 citing Article 1745 of the Civil Code which
provides:
Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public policy:
(1) That the goods are transported at the risk of the owner or shipper;
(2) That the common carrier will not be liable for any loss, destruction, or deterioration of the goods;
(3) That the common carrier need not observe any diligence in the custody of the goods;
(4) That the common carrier shall exercise a degree of diligence less than that of a good father of a family, or of a man of
ordinary prudence in the vigilance over the movables transported;
(5) That the common carrier shall not be responsible for the acts or omissions of his or its employees;
(6) That the common carrier's liability for acts committed by thieves, or of robbers who do not act with grave or irresistible
threat, violence or force, is dispensed with or diminished;
(7) That the common carrier is not responsible for the loss, destruction, or deterioration of goods on account of the
defective condition of the car, vehicle, ship, airplane or other equipment used in the contract of carriage.
Petitioner Valenzuela adds that the stipulation is void for being contrary to Articles 586 and 587 of the Code of Commerce 14 and Articles 1170
and 1173 of the Civil Code. Citing Article 1306 and paragraph 1, Article 1409 of the Civil Code, 15 petitioner further contends that said
stipulation "gives no duty or obligation to the private respondent to observe the diligence of a good father of a family in the custody and
transportation of the cargo."
The Court is not persuaded. As adverted to earlier, it is undisputed that private respondent had acted as a private carrier in transporting
petitioner's lauan logs. Thus, Article 1745 and other Civil Code provisions on common carriers which were cited by petitioner may not be
applied unless expressly stipulated by the parties in their charter party. 16
In a contract of private carriage, the parties may validly stipulate that responsibility for the cargo rests solely on the charterer, exempting the
shipowner from liability for loss of or damage to the cargo caused even by the negligence of the ship captain. Pursuant to Article 1306 17 of the
Civil Code, such stipulation is valid because it is freely entered into by the parties and the same is not contrary to law, morals, good customs,
public order, or public policy. Indeed, their contract of private carriage is not even a contract of adhesion. We stress that in a contract of private
carriage, the parties may freely stipulate their duties and obligations which perforce would be binding on them. Unlike in a contract involving a
common carrier, private carriage does not involve the general public. Hence, the stringent provisions of the Civil Code on common carriers
protecting the general public cannot justifiably be applied to a ship transporting commercial goods as a private carrier. Consequently, the
public policy embodied therein is not contravened by stipulations in a charter party that lessen or remove the protection given by law in
contracts involving common carriers.
The issue posed in this case and the arguments raised by petitioner are not novel; they were resolved long ago by this Court in Home
Insurance Co. vs. American Steamship Agencies, Inc. 18 In that case, the trial court similarly nullified a stipulation identical to that involved in
the present case for being contrary to public policy based on Article 1744 of the Civil Code and Article 587 of the Code of Commerce.
Consequently, the trial court held the shipowner liable for damages resulting for the partial loss of the cargo. This Court reversed the trial court
and laid down, through Mr. Justice Jose P. Bengzon, the following well-settled observation and doctrine:
The provisions of our Civil Code on common carriers were taken from Anglo-American law. Under American jurisprudence, a common carrier
undertaking to carry a special cargo or chartered to a special person only, becomes a private carrier. As a private carrier, a stipulation
exempting the owner from liability for the negligence of its agent is not against public policy, and is deemed valid.
Such doctrine We find reasonable. The Civil Code provisions on common carriers should not be applied where the carrier is not acting as
such but as a private carrier. The stipulation in the charter party absolving the owner from liability for loss due to the negligence of its agent
would be void if the strict public policy governing common carriers is applied. Such policy has no force where the public at large is not
involved, as in this case of a ship totally chartered for the used of a single party. 19 (Emphasis supplied.)
Indeed, where the reason for the rule ceases, the rule itself does not apply. The general public enters into a contract of transportation with
common carriers without a hand or a voice in the preparation thereof. The riding public merely adheres to the contract; even if the public wants
to, it cannot submit its own stipulations for the approval of the common carrier. Thus, the law on common carriers extends its protective mantle
against one-sided stipulations inserted in tickets, invoices or other documents over which the riding public has no understanding or, worse, no
choice. Compared to the general public, a charterer in a contract of private carriage is not similarly situated. It can and in fact it usually does
enter into a free and voluntary agreement. In practice, the parties in a contract of private carriage can stipulate the carrier's obligations and
liabilities over the shipment which, in turn, determine the price or consideration of the charter. Thus, a charterer, in exchange for convenience
and economy, may opt to set aside the protection of the law on common carriers. When the charterer decides to exercise this option, he takes
a normal business risk.
Petitioner contends that the rule in Home Insurance is not applicable to the present case because it "covers only a stipulation exempting a
private carrier from liability for the negligence of his agent, but it does not apply to a stipulation exempting a private carrier like private
respondent from the negligence of his employee or servant which is the situation in this case." 20 This contention of petitioner is bereft of merit,
for it raises a distinction without any substantive difference. The case Home Insurance specifically dealt with "the liability of the shipowner for
acts or negligence of its captain and crew" 21 and a charter party stipulation which "exempts the owner of the vessel from any loss or damage
or delay arising from any other source, even from the neglect or fault of the captain or crew or some other person employed by the owner on
board, for whose acts the owner would ordinarily be liable except for said paragraph." 22 Undoubtedly, Home Insurance is applicable to the
case at bar.
The naked assertion of petitioner that the American rule enunciated in Home Insurance is not the rule in the Philippines 23 deserves scant
consideration. The Court there categorically held that said rule was "reasonable" and proceeded to apply it in the resolution of that case.
Petitioner miserably failed to show such circumstances or arguments which would necessitate a departure from a well-settled rule.
Consequently, our ruling in said case remains a binding judicial precedent based on the doctrine of stare decisis and Article 8 of the Civil Code
which provides that "(j)udicial decisions applying or interpreting the laws or the Constitution shall form part of the legal system of the
Philippines."
In fine, the respondent appellate court aptly stated that "[in the case of] a private carrier, a stipulation exempting the owner from liability even
for the negligence of its agents is valid." 24
Other Arguments
On the basis of the foregoing alone, the present petition may already be denied; the Court, however, will discuss the other arguments of
petitioner for the benefit and satisfaction of all concerned.
Articles 586 and 587, Code of Commerce
Petitioner Valenzuela insists that the charter party stipulation is contrary to Articles 586 and 587 of the Code of Commerce which confer on
petitioner the right to recover damages from the shipowner and ship agent for the acts or conduct of the captain. 25 We are not persuaded.
Whatever rights petitioner may have under the aforementioned statutory provisions were waived when it entered into the charter party.
Article 6 of the Civil Code provides that "(r)ights may be waived, unless the waiver is contrary to law, public order, public policy, morals, or
good customs, or prejudicial to a person with a right recognized by law." As a general rule, patrimonial rights may be waived as opposed to
rights to personality and family rights which may not be made the subject of waiver. 26 Being patently and undoubtedly patrimonial, petitioner's
right conferred under said articles may be waived. This, the petitioner did by acceding to the contractual stipulation that it is solely responsible
or any damage to the cargo, thereby exempting the private carrier from any responsibility for loss or damage thereto. Furthermore, as
discussed above, the contract of private carriage binds petitioner and private respondent alone; it is not imbued with public policy
considerations for the general public or third persons are not affected thereby.
Articles 1170 and 1173, Civil Code
Petitioner likewise argues that the stipulation subject of this controversy is void for being contrary to Articles 1170 and 1173 of the Civil Code
which read:
27
Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene
the tenor thereof, are liable for damages
Art. 1173. The fault or negligence of the obligor consists in the omission of that diligence which is required by the nature of the obligation and
corresponds with the circumstances of the persons, of the time and of the place. When negligence shows bad faith, the provisions of articles
1171 and 2201, shall apply.
If the law does not state the diligence which is to be observed in the performance, that which is expected of a good father of a family shall be
required.
The Court notes that the foregoing articles are applicable only to the obligor or the one with an obligation to perform. In the instant case,
Private Respondent Seven Brothers is not an obligor in respect of the cargo, for this obligation to bear the loss was shifted to petitioner by
virtue of the charter party. This shifting of responsibility, as earlier observed, is not void. The provisions cited by petitioner are, therefore,
inapplicable to the present case.
Moreover, the factual milieu of this case does not justify the application of the second paragraph of Article 1173 of the Civil Code which
prescribes the standard of diligence to be observed in the event the law or the contract is silent. In the instant case, Article 362 of the Code of
Commerce 28 provides the standard of ordinary diligence for the carriage of goods by a carrier. The standard of diligence under this statutory
provision may, however, be modified in a contract of private carriage as the petitioner and private respondent had done in their charter party.
Cases Cited by Petitioner Inapplicable
Petitioner cites Shewaram vs. Philippine Airlines, Inc. 29 which, in turn, quoted Juan Ysmael & Co. vs. Gabino Barreto & Co. 30 and argues that
the public policy considerations stated there vis-a-vis contractual stipulations limiting the carrier's liability be applied "with equal force" to this
case. 31 It also cites Manila Railroad Co. vs. Compaia Transatlantica 32 and contends that stipulations exempting a party from liability for
damages due to negligence "should not be countenanced" and should be "strictly construed" against the party claiming its benefit. 33 We
disagree.
The cases of Shewaram and Ysmael both involve a common carrier; thus, they necessarily justify the application of such policy considerations
and concomitantly stricter rules. As already discussed above, the public policy considerations behind the rigorous treatment of common
carriers are absent in the case of private carriers. Hence, the stringent laws applicable to common carriers are not applied to private carries.
The case of Manila Railroad is also inapplicable because the action for damages there does not involve a contract for transportation.
Furthermore, the defendant therein made a "promise to use due care in the lifting operations" and, consequently, it was "bound by its
undertaking"'; besides, the exemption was intended to cover accidents due to hidden defects in the apparatus or other unforseeable
occurrences" not caused by its "personal negligence." This promise was thus constructed to make sense together with the stipulation against
liability for damages. 34 In the present case, we stress that the private respondent made no such promise. The agreement of the parties to
exempt the shipowner from responsibility for any damage to the cargo and place responsibility over the same to petitioner is the lone
stipulation considered now by this Court.
Finally, petitioner points to Standard Oil Co. of New York vs. Lopez Costelo, 35 Walter A. Smith & Co. vs. Cadwallader Gibson Lumber Co., 36
N. T . Hashim and Co. vs. Rocha and Co., 37 Ohta Development Co. vs. Steamship "Pompey" 38 and Limpangco Sons vs. Yangco Steamship
Co. 39 in support of its contention that the shipowner be held liable for damages. 40 These however are not on all fours with the present case
because they do not involve a similar factual milieu or an identical stipulation in the charter party expressly exempting the shipowner form
responsibility for any damage to the cargo.
Effect of the South Sea Resolution
In its memorandum, Seven Brothers argues that petitioner has no cause of action against it because this Court has earlier affirmed the liability
of South Sea for the loss suffered by petitioner. Private respondent submits that petitioner is not legally entitled to collect twice for a single
loss. 41 In view of the above disquisition upholding the validity of the questioned charter party stipulation and holding that petitioner may not
recover from private respondent, the present issue is moot and academic. It suffices to state that the Resolution of this Court dated June 2,
1995 42 affirming the liability of South Sea does not, by itself, necessarily preclude the petitioner from proceeding against private respondent.
An aggrieved party may still recover the deficiency for the person causing the loss in the event the amount paid by the insurance company
does not fully cover the loss. Article 2207 of the Civil Code provides:
Art. 2207. If the plaintiff's property has been insured, and he has received indemnity for the insurance company for the injury or loss arising out
of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the
wrongdoer or the person who has violated the contract. If the amount paid by the insurance company does not fully cover the injury or loss,
the aggrieved party shall be entitled to recover the deficiency form the person causing the loss or injury.
WHEREFORE, premises considered, the petition is hereby DENIED for its utter failure to show any reversible error on the part of Respondent
Court. The assailed Decision is AFFIRMED.
SO ORDERED.
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 113003 October 17, 1997
ALBERTA YOBIDO and CRESENCIO YOBIDO, petitioners,

vs.
COURT OF APPEALS, LENY TUMBOY, ARDEE TUMBOY and JASMIN TUMBOY, respondents.
ROMERO, J.:
In this petition for review on certiorari of the decision of the Court of Appeals, the issue is whether or not the explosion of a newly installed tire
of a passenger vehicle is a fortuitous event that exempts the carrier from liability for the death of a passenger.
On April 26, 1988, spouses Tito and Leny Tumboy and their minor children named Ardee and Jasmin, bearded at Mangagoy, Surigao del Sur, a Yobido
Liner bus bound for Davao City. Along Picop Road in Km. 17, Sta. Maria, Agusan del Sur, the left front tire of the bus exploded. The bus fell into a ravine
around three (3) feet from the road and struck a tree. The incident resulted in the death of 28-year-old Tito Tumboy and physical injuries to other
passengers.
On November 21, 1988, a complaint for breach of contract of carriage, damages and attorney's fees was filed by Leny and her children against Alberta
Yobido, the owner of the bus, and Cresencio Yobido, its driver, before the Regional Trial Court of Davao City. When the defendants therein filed their
answer to the complaint, they raised the affirmative defense of caso fortuito. They also filed a third-party complaint against Philippine Phoenix Surety
and Insurance, Inc. This third-party defendant filed an answer with compulsory counterclaim. At the pre-trial conference, the parties agreed to a
stipulation of facts. Upon a finding that the third party defendant was not liable under the insurance contract, the lower court dismissed the third party
complaint. No amicable settlement having been arrived at by the parties, trial on the merits ensued.
The plaintiffs asserted that violation of the contract of carriage between them and the defendants was brought about by the driver's failure to exercise
the diligence required of the carrier in transporting passengers safely to their place of destination. According to Leny Tumboy, the bus left Mangagoy at
3:00 o'clock in the afternoon. The winding road it traversed 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. Since it was "running fast," she cautioned the driver to slow down but he merely stared at her through
the mirror. At around 3:30 p.m., in Trento, she heard something explode and immediately, the bus fell into a ravine.
For their part, the defendants tried to establish that the accident was due to a fortuitous event. Abundio Salce, who was the bus conductor when the
incident happened, testified that the 42-seater bus was not full as there were only 32 passengers, such that he himself managed to get a seat. He
added that the bus was running at a speed of "60 to 50" and that it was going slow because of the zigzag road. He affirmed that the left front tire that
exploded was a "brand new tire" that he mounted on the bus on April 21, 1988 or only five (5) days before the incident. The Yobido Liner secretary,
Minerva Fernando, bought the new Goodyear tire from Davao Toyo Parts on April 20, 1988 and she was present when it was mounted on the bus by
Salce. She stated that all driver applicants in Yobido Liner underwent actual driving tests before they were employed. Defendant Cresencio Yobido
underwent such test and submitted his professional driver's license and clearances from the barangay, the fiscal and the police.
On August 29, 1991, the lower court rendered a decision 2 dismissing the action for lack of merit. On the issue of whether or not the tire
blowout was a caso fortuito, it found that "the falling of the bus to the cliff was a result of no other outside factor than the tire blow-out." It held
that the ruling in the La Mallorca and Pampanga Bus Co. v. De Jesus 3 that a tire blowout is "a mechanical defect of the conveyance or a fault
in its equipment which was easily discoverable if the bus had been subjected to a more thorough or rigid check-up before it took to the road
that morning" is inapplicable to this case. It reasoned out that in said case, it was found that the blowout was caused by the established fact
that the inner tube of the left front tire "was pressed between the inner circle of the left wheel and the rim which had slipped out of the wheel."
In this case, however, "the cause of the explosion remains a mystery until at present." As such, the court added, the tire blowout was "a caso
fortuito which is completely an extraordinary circumstance independent of the will" of the defendants who should be relieved of "whatever
liability the plaintiffs may have suffered by reason of the explosion pursuant to Article 1174 4 of the Civil Code."
Dissatisfied, the plaintiffs appealed to the Court of Appeals. They ascribed to the lower court the following errors: (a) finding that the tire
blowout was a caso fortuito; (b) failing to hold that the defendants did not exercise utmost and/or extraordinary diligence required of carriers
under Article 1755 of the Civil Code, and (c) deciding the case contrary to the ruling in Juntilla v. Fontanar, 5 and Necesito v. Paras. 6
On August 23, 1993, the Court of Appeals rendered the Decision 7 reversing that of the lower court. It held that:
To Our mind, 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. Owing to the statutory presumption of negligence against the carrier and its obligation to exercise the utmost diligence of very cautious persons
to carry the passenger safely as far as human care and foresight can provide, it is the burden of the defendants to prove that the cause of the blow-out
was a fortuitous event. It is not incumbent upon the plaintiff to prove that the cause of the blow-out is not caso-fortuito.
Proving that the tire that exploded is a new Goodyear tire is not sufficient to discharge defendants' burden. As enunciated in Necesito vs.
Paras, the passenger has neither choice nor control over the carrier in the selection and use of its equipment, and the good repute of the
manufacturer will not necessarily relieve the carrier from liability.
Moreover, there is evidence that the bus was moving fast, and the road was wet and rough. The driver could have explained that the blow-out
that precipitated the accident that caused the death of Toto Tumboy could not have been prevented even if he had exercised due care to avoid
the same, but he was not presented as witness.
The Court of Appeals thus disposed of the appeal as follows:
WHEREFORE, the judgment of the court a quo is set aside and another one entered ordering defendants to pay plaintiffs the sum of
P50,000.00 for the death of Tito Tumboy, P30,000.00 in moral damages, and P7,000.00 for funeral and burial expenses. SO ORDERED.
The defendants filed a motion for reconsideration of said decision which was denied on November 4, 1993 by the Court of Appeals. Hence,
the instant petition asserting the position that the tire blowout that caused the death of Tito Tumboy was a caso fortuito. Petitioners claim
further that the Court of Appeals, in ruling contrary to that of the lower court, misapprehended facts and, therefore, its findings of fact cannot
be considered final which shall bind this Court. Hence, they pray that this Court review the facts of the case.
The Court did re-examine the facts and evidence in this case because of the inapplicability of the established principle that the factual findings
of the Court of Appeals are final and may not be reviewed on appeal by this Court. This general principle is subject to exceptions such as the
one present in this case, namely, that the lower court and the Court of Appeals arrived at diverse factual findings. 8 However, upon such reexamination, we found no reason to overturn the findings and conclusions of the Court of Appeals.
As a rule, when a passenger boards a common carrier, he takes the risks incidental to the mode of travel he has taken. After all, a carrier is
not an insurer of the safety of its passengers and is not bound absolutely and at all events to carry them safely and without injury. 9 However,
when a passenger is injured or dies while travelling, the law presumes that the common carrier is negligent. Thus, the Civil Code provides:
Art. 1756. In case of death or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently, unless
they prove that they observed extraordinary diligence as prescribed in articles 1733 and 1755.
Article 1755 provides that "(a) common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using
the utmost diligence of very cautious persons, with a due regard for all the circumstances." Accordingly, in culpa contractual, once a passenger
dies or is injured, the carrier is presumed to have been at fault or to have acted negligently. This disputable presumption may only be
overcome by evidence that the carrier had observed extraordinary diligence as prescribed by Articles 1733, 10 1755 and 1756 of the Civil Code
or that the death or injury of the passenger was due to a fortuitous event. 11 Consequently, the court need not make an express finding of fault
or negligence on the part of the carrier to hold it responsible for damages sought by the passenger. 12
In view of the foregoing, petitioners' contention that they should be exempt from liability because the tire blowout was no more than a fortuitous event
that could not have been foreseen, must fail. A fortuitous event is possessed of the following characteristics: (a) the cause of the unforeseen and
unexpected occurrence, or the failure of the debtor to comply with his obligations, must be independent of human will; (b) it must be impossible to
foresee the event which constitutes the caso fortuito, or if it can be foreseen, it must be impossible to avoid; (c) the occurrence must be such as to
render it impossible for the debtor to fulfill his obligation in a normal manner; and (d) the obliger must be free from any participation in the aggravation of
the injury resulting to the creditor. 13 As Article 1174 provides, no person shall be responsible for a fortuitous event which could not be foreseen, or
which, though foreseen, was inevitable. In other words, there must be an entire exclusion of human agency from the cause of injury or loss. 14
Under the circumstances of this case, the explosion of the new tire may not be considered a fortuitous event. 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. 15
Moreover, 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. 16 This Court has had occasion to state:
While it may be true that the tire that blew-up was still good because the grooves of the tire were still visible, this fact alone does not make the explosion
of the tire a fortuitous event. No evidence was presented to show that the accident was due to adverse road conditions or that precautions were taken
by the jeepney driver to compensate for any conditions liable to cause accidents. The sudden blowing-up, therefore, could have been caused by too
much air pressure injected into the tire coupled by the fact that the jeepney was overloaded and speeding at the time of the accident. 17
It is interesting to note that petitioners proved through the bus conductor, Salce, that the bus was running at "60-50" kilometers per hour only or within
the prescribed lawful speed limit. However, they failed to rebut the testimony of Leny Tumboy that the bus was running so fast that she cautioned the
driver to slow down. These contradictory facts must, therefore, be resolved in favor of liability in view of the presumption of negligence of the carrier in
the law. Coupled with this is the established condition of the road rough, winding and wet due to the rain. It was incumbent upon the defense to
establish that it took precautionary measures considering partially dangerous condition of the road. As stated above, proof that the tire was new and of
good quality is not sufficient proof that it was not negligent. Petitioners should have shown that it undertook extraordinary diligence in the care of its
carrier, such as conducting daily routinary check-ups of the vehicle's parts. As the late Justice J.B.L. Reyes said:
It may be impracticable, as appellee argues, to require of carriers to test the strength of each and every part of its vehicles before each trip;
but we are of the opinion that a due regard for the carrier's obligations toward the traveling public demands adequate periodical tests to
determine the condition and strength of those vehicle portions the failure of which may endanger the safety of the passengers. 18
Having failed to discharge its duty to overthrow the presumption of negligence with clear and convincing evidence, petitioners are hereby held liable for
damages. Article 1764 19 in relation to Article 2206 20 of the Civil Code prescribes the amount of at least three thousand pesos as damages for the death
of a passenger. Under prevailing jurisprudence, the award of damages under Article 2206 has been increased to fifty thousand pesos (P50,000.00). 21
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, 22 as in this case. Exemplary damages, awarded by way of example
or correction for the public good when moral damages are awarded, 23 may likewise be recovered in contractual obligations if the defendant acted in
wanton, fraudulent, reckless, oppressive, or malevolent manner. 24 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. 25 As such, private respondents shall be entitled to
exemplary damages.
WHEREFORE, the Decision of the Court of Appeals is hereby AFFIRMED subject to the modification that petitioners shall, in addition to the
monetary awards therein, be liable for the award of exemplary damages in the amount of P20,000.00. Costs against petitioners.
SO ORDERED.
COMPAIA MARITIMA, petitioner,
SUPREME COURT
vs.
Manila
EN BANC
G.R. No. L-18965
October 30, 1964
INSURANCE COMPANY OF NORTH AMERICA, respondent.
BAUTISTA ANGELO, J.:

Sometime in October, 1952, Macleod and Company of the Philippines contracted by telephone the services of the Compaia Maritima, a shipping
corporation, for the shipment of 2,645 bales of hemp from the former's Sasa private pier at Davao City to Manila and for their subsequent transhipment
to Boston, Massachusetts, U.S.A. on board the S.S. Steel Navigator. This oral contract was later on confirmed by a formal and written booking issued
by Macleod's branch office in Sasa and handcarried to Compaia Maritima's branch office in Davao in compliance with which the latter sent to
Macleod's private wharf LCT Nos. 1023 and 1025 on which the loading of the hemp was completed on October 29, 1952. These two lighters were
manned each by a patron and an assistant patron. The patrons of both barges issued the corresponding carrier's receipts and that issued by the patron
of Barge No. 1025 reads in part:
Received in behalf of S.S. Bowline Knot in good order and condition from MACLEOD AND COMPANY OF PHILIPPINES, Sasa Davao, for
transhipment at Manila onto S.S. Steel Navigator. FINAL DESTINATION: Boston.
Thereafter, the two loaded barges left Macleod's wharf and proceeded to and moored at the government's marginal wharf in the same place to await the
arrival of the S.S. Bowline Knot belonging to Compaia Maritima on which the hemp was to be loaded. During the night of October 29, 1952, or at the
early hours of October 30, LCT No. 1025 sank, resulting in the damage or loss of 1,162 bales of hemp loaded therein. On October 30, 1952, Macleod
promptly notified the carrier's main office in Manila and its branch in Davao advising it of its liability. The damaged hemp was brought to Odell Plantation
in Madaum, Davao, for cleaning, washing, reconditioning, and redrying. During the period from November 1-15, 1952, the carrier's trucks and lighters
hauled from Odell to Macleod at Sasa a total of 2,197.75 piculs of the reconditioned hemp out of the original cargo of 1,162 bales weighing 2,324 piculs
which had a total value of 116,835.00. After reclassification, the value of the reconditioned hemp was reduced to P84,887.28, or a loss in value of
P31,947.72. Adding to this last amount the sum of P8,863.30 representing Macleod's expenses in checking, grading, rebating, and other fees for
washing, cleaning and redrying in the amount of P19.610.00, the total loss adds up to P60,421.02.
All abaca shipments of Macleod, including the 1,162 bales loaded on the carrier's LCT No. 1025, were insured with the Insurance Company of North
America against all losses and damages. In due time, Macleod filed a claim for the loss it suffered as above stated with said insurance company, and
after the same had been processed, the sum of P64,018.55 was paid, which was noted down in a document which aside from being a receipt of the
amount paid, was a subrogation agreement between Macleod and the insurance company wherein the former assigned to the latter its rights over the
insured and damaged cargo. Having failed to recover from the carrier the sum of P60,421.02, which is the only amount supported by receipts, the
insurance company instituted the present action on October 28, 1953. After trial, the court a quo rendered judgment ordering the carrier to pay the
insurance company the sum of P60,421.02, with legal interest thereon from the date of the filing of the complaint until fully paid, and the costs. This
judgment was affirmed by the Court of Appeals on December 14, 1960. Hence, this petition for review.
The issues posed before us are: (1) Was there a contract of carriage between the carrier and the shipper even if the loss occurred when the hemp was
loaded on a barge owned by the carrier which was loaded free of charge and was not actually loaded on the S.S. Bowline Knot which would carry the
hemp to Manila and no bill of lading was issued therefore?; (2) Was the damage caused to the cargo or the sinking of the barge where it was loaded
due to a fortuitous event, storm or natural disaster that would exempt the carrier from liability?; (3) Can respondent insurance company sue the carrier
under its insurance contract as assignee of Macleod in spite of the fact that the liability of the carrier as insurer is not recognized in this jurisdiction?; (4)
Has the Court of Appeals erred in regarding Exhibit NNN-1 as an implied admission by the carrier of the correctness and sufficiency of the shipper's
statement of accounts contrary to the burden of proof rule?; and (5) Can the insurance company maintain this suit without proof of its personality to do
so?
1. This issue should be answered in the affirmative. As found by the Court of Appeals, Macleod and Company contracted by telephone the
services of petitioner to ship the hemp in question from the former's private pier at Sasa, Davao City, to Manila, to be subsequently
transhipped to Boston, Massachusetts, U.S.A., which oral contract was later confirmed by a formal and written booking issued by the shipper's
branch office, Davao City, in virtue of which the carrier sent two of its lighters to undertake the service. It also appears that the patrons of said
lighters were employees of the carrier with due authority to undertake the transportation and to sign the documents that may be necessary
therefor so much so that the patron of LCT No. 1025 signed the receipt covering the cargo of hemp loaded therein as follows: .
Received in behalf of S.S. Bowline Knot in good order and condition from MACLEOD AND COMPANY OF PHILIPPINES, Sasa Davao, for
transhipment at Manila onto S.S. Steel Navigator.
FINAL DESTINATION: Boston.
The fact that the carrier sent its lighters free of charge to take the hemp from Macleod's wharf at Sasa preparatory to its loading onto the ship Bowline
Knot does not in any way impair the contract of carriage already entered into between the carrier and the shipper, for that preparatory step is but part
and parcel of said contract of carriage. The lighters were merely employed as the first step of the voyage, but once that step was taken and the hemp
delivered to the carrier's employees, the rights and obligations of the parties attached thereby subjecting them to the principles and usages of the
maritime law. In other words, here we have a complete contract of carriage the consummation of which has already begun: the shipper delivering the
cargo to the carrier, and the latter taking possession thereof by placing it on a lighter manned by its authorized employees, under which Macleod
became entitled to the privilege secured to him by law for its safe transportation and delivery, and the carrier to the full payment of its freight upon
completion of the voyage.
The receipt of goods by the carrier has been said to lie at the foundation of the contract to carry and deliver, and if actually no goods are received there
can be no such contract. The liability and responsibility of the carrier under a contract for the carriage of goods commence on their actual delivery to, or
receipt by, the carrier or an authorized agent. ... and delivery to a lighter in charge of a vessel for shipment on the vessel, where it is the custom to
deliver in that way, is a good delivery and binds the vessel receiving the freight, the liability commencing at the time of delivery to the lighter. ... and,
similarly, where there is a contract to carry goods from one port to another, and they cannot be loaded directly on the vessel and lighters are sent by the
vessel to bring the goods to it, the lighters are for the time its substitutes, so that the bill of landing is applicable to the goods as soon as they are placed
on the lighters. (80 C.J.S., p. 901, emphasis supplied)
... The test as to whether the relation of shipper and carrier had been established is, Had the control and possession of the cotton been completely
surrendered by the shipper to the railroad company? Whenever the control and possession of goods passes to the carrier and nothing remains to be
done by the shipper, then it can be said with certainty that the relation of shipper and carrier has been established. Railroad Co. v. Murphy, 60 Ark. 333,
30 S.W. 419, 46 A. St. Rep. 202; Pine Bluff & Arkansas River Ry. v. MaKenzie, 74 Ark. 100, 86 S.W. 834; Matthews & Hood v. St. L., I.M. & S.R. Co.,
123 Ark. 365, 185 S.W. 461, L.R.A. 1916E, 1194.
The claim that there can be no contract of affreightment because the hemp was not actually loaded on the ship that was to take it from Davao City to
Manila is of no moment, for, as already stated, the delivery of the hemp to the carrier's lighter is in line with the contract. In fact, the receipt signed by
the patron of the lighter that carried the hemp stated that he was receiving the cargo "in behalf of S.S. Bowline Knot in good order and condition." On
the other hand, the authorities are to the effect that a bill of lading is not indispensable for the creation of a contract of carriage.
Bill of lading not indispensable to contract of carriage. As to the issuance of a bill of lading, although article 350 of the Code of Commerce provides
that "the shipper as well as the carrier of merchandise or goods may mutua-lly demand that a bill of lading is not indispensable. As regards the form of
the contract of carriage it can be said that provided that there is a meeting of the minds and from such meeting arise rights and obligations, there should
be no limitations as to form." The bill of lading is not essential to the contract, although it may become obligatory by reason of the regulations of railroad
companies, or as a condition imposed in the contract by the agreement of the parties themselves. The bill of lading is juridically a documentary proof of
the stipulations and conditions agreed upon by both parties. (Del Viso, pp. 314-315; Robles vs. Santos, 44 O.G. 2268). In other words, the Code does
not demand, as necessary requisite in the contract of transportation, the delivery of the bill of lading to the shipper, but gives right to both the carrier and
the shipper to mutually demand of each other the delivery of said bill. (Sp. Sup. Ct. Decision, May 6, 1895). The liability of the carrier as common carrier
begins with the actual delivery of the goods for transportation, and not merely with the formal execution of a receipt or bill of lading; the issuance of a bill
of lading is not necessary to complete delivery and acceptance. Even where it is provided by statute that liability commences with the issuance of the
bill of lading, actual delivery and acceptance are sufficient to bind the carrier. (13 C.J.S., p. 288)
2. Petitioner disclaims responsibility for the damage of the cargo in question shielding itself behind the claim of force majeure or storm which occurred
on the night of October 29, 1952. But the evidence fails to bear this out. Rather, it shows that the mishap that caused the damage or loss was due, not
to force majeure, but to lack of adequate precautions or measures taken by the carrier to prevent the loss as may be inferred from the following findings
of the Court of Appeals:
Aside from the fact that, as admitted by appellant's own witness, the ill-fated barge had cracks on its bottom (pp. 18-19, t.s.n., Sept. 13, 1959) which
admitted sea water in the same manner as rain entered "thru tank man-holes", according to the patron of LCT No. 1023 (exh. JJJ-4) conclusively
showing that the barge was not seaworthy it should be noted that on the night of the nautical accident there was no storm, flood, or other natural
disaster or calamity. Certainly, winds of 11 miles per hour, although stronger than the average 4.6 miles per hour then prevailing in Davao on October
29, 1952 (exh. 5), cannot be classified as storm. For according to Beaufort's wind scale, a storm has wind velocities of from 64 to 75 miles per hour; and
by Philippine Weather Bureau standards winds should have a velocity of from 55 to 74 miles per hour in order to be classified as storm (Northern
Assurance Co., Ltd. vs. Visayan Stevedore Transportation Co., CA-G.R. No. 23167-R, March 12, 1959).
The Court of Appeals further added: "the report of R. J. del Pan & Co., Inc., marine surveyors, attributes the sinking of LCT No. 1025 to the 'non-watertight conditions of various buoyancy compartments' (exh. JJJ); and this report finds confirmation on the above-mentioned admission of two witnesses
for appellant concerning the cracks of the lighter's bottom and the entrance of the rain water 'thru manholes'." We are not prepared to dispute this
finding of the Court of Appeals.
3. There can also be no doubt that the insurance company can recover from the carrier as assignee of the owner of the cargo for the insurance amount
it paid to the latter under the insurance contract. And this is so because since the cargo that was damaged was insured with respondent company and
the latter paid the amount represented by the loss, it is but fair that it be given the right to recover from the party responsible for the loss. The instant
case, therefore, is not one between the insured and the insurer, but one between the shipper and the carrier, because the insurance company merely
stepped into the shoes of the shipper. And since the shipper has a direct cause of action against the carrier on account of the damage of the cargo, no
valid reason is seen why such action cannot be asserted or availed of by the insurance company as a subrogee of the shipper. Nor can the carrier set up as a
defense any defect in the insurance policy not only because it is not a privy to it but also because it cannot avoid its liability to the shipper under the contract of
carriage which binds it to pay any loss that may be caused to the cargo involved therein. Thus, we find fitting the following comments of the Court of Appeals:
It was not imperative and necessary for the trial court to pass upon the question of whether or not the disputed abaca cargo was covered by Marine
Open Cargo Policy No. MK-134 isued by appellee. Appellant was neither a party nor privy to this insurance contract, and therefore cannot avail itself of
any defect in the policy which may constitute a valid reason for appellee, as the insurer, to reject the claim of Macleod, as the insured. Anyway,
whatever defect the policy contained, if any, is deemed to have been waived by the subsequent payment of Macleod's claim by appellee. Besides,
appellant is herein sued in its capacity as a common carrier, and appellee is suing as the assignee of the shipper pursuant to exhibit MM. Since, as
above demonstrated, appellant is liable to Macleod and Company of the Philippines for the los or damage to the 1,162 bales of hemp after these were
received in good order and condition by the patron of appellant's LCT No. 1025, it necessarily follows that appellant is likewise liable to appellee who,
as assignee of Macleod, merely stepped into the shoes of and substi-tuted the latter in demanding from appellant the payment for the loss and damage aforecited.
4. It should be recalled in connection with this issue that during the trial of this case the carrier asked the lower court to order the production of the
books of accounts of the Odell Plantation containing the charges it made for the loss of the damaged hemp for verification of its accountants, but later it
desisted therefrom on the claim that it finds their production no longer necessary. This desistance notwithstanding, the shipper however pre-sented
other documents to prove the damage it suffered in connection with the cargo and on the strength thereof the court a quo ordered the carrier to pay the
sum of P60,421.02. And after the Court of Appeals affirmed this award upon the theory that the desistance of the carrier from producing the books of
accounts of Odell Plantation implies an admission of the correctness of the statements of accounts contained therein, petitioner now contends that the
Court of Appeals erred in basing the affirmance of the award on such erroneous interpretation.
There is reason to believe that the act of petitioner in waiving its right to have the books of accounts of Odell Plantation presented in court is tantamount
to an admission that the statements contained therein are correct and their verification not necessary because its main defense here, as well as below,
was that it is not liable for the loss because there was no contract of carriage between it and the shipper and the loss caused, if any, was due to a
fortuitous event. Hence, under the carrier's theory, the correctness of the account representing the loss was not so material as would necessitate the
presentation of the books in question. At any rate, even if the books of accounts were not produced, the correctness of the accounts cannot now be
disputed for the same is supported by the original documents on which the entries in said books were based which were presented by the shipper as
part of its evidence. And according to the Court of Appeals, these documents alone sufficiently establish the award of P60,412.02 made in favor of respondent.
5. Finally, with regard to the question concerning the personality of the insurance company to maintain this action, we find the same of no importance, for the
attorney himself of the carrier admitted in open court that it is a foreign corporation doing business in the Philippines with a personality to file the present action.
WHEREFORE, the decision appealed from is affirmed, with costs against petitioner.

G.R. No. L-9840
SUPREME COURT
Manila
EN BANC
April 22, 1957
LU DO & LU YM CORPORATION, petitioner-defendant,

vs.
I. V. BINAMIRA, respondent-plaintiff.

On April 4, 1954, plaintiff filed an action in the Court of First Instance of Cebu against defendant to recover the sum of P324.63 as value of
certain missing shipment, P150 as actual and compensatory damages, and P600 as moral and pecuniary damages. After trial, the court
rendered judgment ordering defendant to pay plaintiff the sum of P216.84, with legal interest. On appeal, the Court of Appeals affirmed the
judgment, hence the present petition for review.
On August 10, 1951, the Delta Photo Supply Company of New York shipped on board the M/S "FERNSIDE" at New York, U.S.A., six cases of
films and/or photographic supplies consigned to the order of respondent I. V. Binamira. For this shipment, Bill of Lading No. 29 was issued.
The ship arrived at the port of Cebu on September 23, 1951 and discharged her cargo on September 23, and 24, 1951, including the shipment
in question, placing it in the possession and custody of the arrastre operator of said port, the Visayan Cebu Terminal Company, Inc.
Petitioner, as agent of the carrier, hired the Cebu Stevedoring Company, Inc. to unload its cargo. During the discharge, good order cargo was
separated from the bad order cargo on board the ship, and a separate list of bad order cargo was prepared by Pascual Villamor, checker of
the stevedoring company. All the cargo unloaded was received at the pier by the Visayan Cebu Terminal Company Inc, arrastre operator of the
port. This terminal company had also its own checker, Romeo Quijano, who also recorded and noted down the good cargo from the bad one.
The shipment in question, was not included in the report of bad order cargo of both checkers, indicating that it was discharged from the, ship in
good order and condition.
On September 26, 1951, three days after the goods were unloaded from the ship, respondent took delivery of his six cases of photographic
supplies from the arrastre operator. He discovered that the cases showed signs of pilferage and, consequently, he hired marine surveyors, R.
J. del Pan & Company, Inc., to examine them. The surveyors examined the cases and made a physical count of their contents in the presence
of representatives of petitioner, respondent and the stevedoring company. The surveyors examined the cases and made a physical count of
their contents in the presence of representatives of petitioner, respondent and the stevedoring company. The finding of the surveyors showed
that some films and photographic supplies were missing valued at P324.63.
It appears from the evidence that the six cases of films and photographic supplies were discharged from the ship at the port of Cebu by the
stevedoring company hired by petitioner as agent of the carrier. All the unloaded cargo, including the shipment in question, was received by
the Visayan Cebu Terminal Company Inc., the arrastre operator appointed by the Bureau of Customs. It also appears that during the
discharge, the cargo was checked both by the stevedoring company hired by petitioner as well as by the arrastre operator of the port, and the
shipment in question, when discharged from the ship, was found to be in good order and condition. But after it was delivered to respondent
three days later, the same was examined by a marine surveyor who found that some films and supplies were missing valued at P324.63.
The question now to be considered is: Is the carrier responsible for the loss considering that the same occurred after the shipment was
discharged from the ship and placed in the possession and custody of the customs authorities?
The Court of Appeals found for the affirmative, making on this point the following comment:
In this jurisdiction, a common carrier has the legal duty to deliver goods to a consignee in the same condition in which it received them. Except
where the loss, destruction or deterioration of the merchandise was due to any of the cases enumerated in Article 1734 of the new Civil Code,
a carrier is presumed to have been at fault and to have acted negligently, unless it could prove that it observed extraordinary diligence in the
care and handling of the goods (Article 1735, supra). Such presumption and the liability of the carrier attach until the goods are delivered
actually or constructively, to the consignee, or to the person who has a right to receive them (Article 1736, supra), and we believe delivery to
the customs authorities is not the delivery contemplated by Article 1736, supra, in connection with second paragraph of Article 1498, supra,
because, in such a case, the goods are then still in the hands of the Government and their owner could not exercise dominion whatever over
them until the duties are paid. In the case at bar, the presumption against the carrier, represented appellant as its agent, has not been
successfully rebutted.
It is now contended that the Court of Appeals erred in its finding not only because it made wrong interpretation of the law on the matter, but
also because it ignored the provisions of the bill of lading covering the shipment wherein it was stipulated that the responsibility of the carrier is
limited only to losses that may occur while the cargo is still under its custody and control.
We believe this contention is well taken. It is true that, as a rule, a common carrier is responsible for the loss, destruction or deterioration of the
goods it assumes to carry from one place to another unless the same is due to any to any of the causes mentioned in Article 1734 on the new
Civil Code, and that, if the goods are lost, destroyed or deteriorated, for causes other that those mentioned, the common carrier is presumed
to have been at fault or to have acted negligently, unless it proves that it has observed extraordinary diligence in their care (Article 1735,
Idem.), and that this extraordinary liability lasts from the time the goods are placed in the possession of the carrier until they are delivered to
the consignee, or "to the person who has the right to receive them" (Article 1736, Idem.), but these provisions only apply when the loss,
destruction or deterioration takes place while the goods are in the possession of the carrier, and not after it has lost control of them. The
reason is obvious. While the goods are in its possession, it is but fair that it exercise extraordinary diligence in protecting them from damage,
and if loss occurs, the law presumes that it was due to its fault or negligence. This is necessary to protect the interest the interest of the owner
who is at its mercy. The situation changes after the goods are delivered to the consignee.
While we agree with the Court of Appeals that while delivery of the cargo to the consignee, or to the person who has a right to receive them",
contemplated in Article 1736, because in such case the goods are still in the hands of the Government and the owner cannot exercise
dominion over them, we believe however that the parties may agree to limit the liability of the carrier considering that the goods have still to
through the inspection of the customs authorities before they are actually turned over to the consignee. This is a situation where we may say
that the carrier losses control of the goods because of a custom regulation and it is unfair that it be made responsible for what may happen
during the interregnum. And this is precisely what was done by the parties herein. In the bill of lading that was issued covering the shipment in
question, both the carrier and the consignee have stipulated to limit the responsibility of the carrier for the loss or damage that may because to
the goods before they are actually delivered by insert in therein the following provisions:
1. . . . The Carrier shall not be liable in any capacity whatsoever for any delay, nondelivery or misdelivery, or loss of or damage to
the goods occurring while the goods are not in the actual custody of the Carrier. . . . (Emphasis ours.)
(Paragraph 1, Exhibit "1")
2. . . . The responsibility of the Carrier in any capacity shall altogether cease and the goods shall be considered to be delivered and
at their own risk and expense in every respect when taken into the custody of customs or other authorities. The Carrier shall not be
required to give any notification of disposition of the goods. . . . (Emphasis ours.)
3. Any provisions herein to the contrary notwithstanding, goods may be . . . by Carrier at ship's tackle . . . and delivery beyond ship's
tackle shall been tirely at the option of the Carrier and solely at the expense of the shipper or consignee.
It therefore appears clear that the carrier does not assume liability for any loss or damage to the goods once they have been "taken into the
custody of customs or other authorities", or when they have been delivered at ship's tackle. These stipulations are clear. They have been
adopted precisely to mitigate the responsibility of the carrier considering the present law on the matter, and we find nothing therein that is
contrary to morals or public policy that may justify their nullification. We are therefore persuaded to conclude that the carrier is not responsible
for the loss in question, it appearing that the same happened after the shipment had been delivered to the customs authorities.
Wherefore, the decision appealed from is reversed, without pronouncement as to costs.

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-36481-2 October 23, 1982
AMPARO C. SERVANDO, CLARA UY BICO, plaintiffs-appellees,
vs.
PHILIPPINE STEAM NAVIGATION CO., defendant-appellant.
Zoilo de la Cruz, Jr. & Associate for plaintiff-appellee Amparo Servando.
Benedicto, Sumbingco & Associate for appellee Clara Uy Bico.
Ross, Salcedo, del Rosario, Bito & Misa for defendant-appellant.
ESCOLIN, J.:
This appeal, originally brought to the Court of Appeals, seeks to set aside the decision of the Court of First Instance of Negros Occidental in
Civil Cases Nos. 7354 and 7428, declaring appellant Philippine Steam Navigation liable for damages for the loss of the appellees' cargoes as
a result of a fire which gutted the Bureau of Customs' warehouse in Pulupandan, Negros Occidental.
The Court of Appeals certified the case to Us because only pure questions of law are raised therein.
The facts culled from the pleadings and the stipulations submitted by the parties are as follows:
On November 6, 1963, appellees Clara Uy Bico and Amparo Servando loaded on board the appellant's vessel, FS-176, for carriage from
Manila to Pulupandan, Negros Occidental, the following cargoes, to wit:
Clara Uy Bico
1,528 cavans of rice valued
at P40,907.50;
Amparo Servando
44 cartons of colored paper,
toys and general merchandise valued at P1,070.50;
as evidenced by the corresponding bills of lading issued by the appellant. 1
Upon arrival of the vessel at Pulupandan, in the morning of November 18, 1963, the cargoes were discharged, complete and in good order,
unto the warehouse of the Bureau of Customs. At about 2:00 in the afternoon of the same day, said warehouse was razed by a fire of
unknown origin, destroying appellees' cargoes. Before the fire, however, appellee Uy Bico was able to take delivery of 907 cavans of rice 2
Appellees' claims for the value of said goods were rejected by the appellant.
On the bases of the foregoing facts, the lower court rendered a decision, the decretal portion of which reads as follows:
WHEREFORE, judgment is rendered as follows:

1. In case No. 7354, the defendant is hereby ordered to pay the plaintiff Amparo C. Servando the aggregate sum of
P1,070.50 with legal interest thereon from the date of the filing of the complaint until fully paid, and to pay the costs.
2. In case No. 7428, the defendant is hereby ordered to pay to plaintiff Clara Uy Bico the aggregate sum of P16,625.00
with legal interest thereon from the date of the filing of the complaint until fully paid, and to pay the costs.
Article 1736 of the Civil Code imposes upon common carriers the duty to observe extraordinary diligence from the moment the goods are
unconditionally placed in their possession "until the same are delivered, actually or constructively, by the carrier to the consignee or to the
person who has a right to receive them, without prejudice to the provisions of Article 1738. "
The court a quo held that the delivery of the shipment in question to the warehouse of the Bureau of Customs is not the delivery contemplated
by Article 1736; and since the burning of the warehouse occurred before actual or constructive delivery of the goods to the appellees, the loss
is chargeable against the appellant.
It should be pointed out, however, that in the bills of lading issued for the cargoes in question, the parties agreed to limit the responsibility of
the carrier for the loss or damage that may be caused to the shipment by inserting therein the following stipulation:
Clause 14. Carrier shall not be responsible for loss or damage to shipments billed 'owner's risk' unless such loss or
damage is due to negligence of carrier. Nor shall carrier be responsible for loss or damage caused by force majeure,
dangers or accidents of the sea or other waters; war; public enemies; . . . fire . ...
We sustain the validity of the above stipulation; there is nothing therein that is contrary to law, morals or public policy.
Appellees would contend that the above stipulation does not bind them because it was printed in fine letters on the back-of the bills of lading;
and that they did not sign the same. This argument overlooks the pronouncement of this Court in Ong Yiu vs. Court of Appeals, promulgated
June 29, 1979, 3 where the same issue was resolved in this wise:
While it may be true that petitioner had not signed the plane ticket (Exh. '12'), he is nevertheless bound by the provisions
thereof. 'Such provisions have been held to be a part of the contract of carriage, and valid and binding upon the
passenger regardless of the latter's lack of knowledge or assent to the regulation'. It is what is known as a contract of
'adhesion', in regards which it has been said that contracts of adhesion wherein one party imposes a ready made form of
contract on the other, as the plane ticket in the case at bar, are contracts not entirely prohibited. The one who adheres to
the contract is in reality free to reject it entirely; if he adheres, he gives his consent." (Tolentino, Civil Code, Vol. IV, 1962
Ed., p. 462, citing Mr. Justice J.B.L. Reyes, Lawyer's Journal, Jan. 31, 1951, p. 49).
Besides, the agreement contained in the above quoted Clause 14 is a mere iteration of the basic principle of law written in Article 1 1 7 4 of the
Civil Code:
Article 1174. Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the
nature of the obligation requires the assumption of risk, no person shall be responsible for those events which could not
be foreseen, or which, though foreseen, were inevitable.
Thus, where fortuitous event or force majeure is the immediate and proximate cause of the loss, the obligor is exempt from liability for nonperformance. The Partidas, 4 the antecedent of Article 1174 of the Civil Code, defines 'caso fortuito' as 'an event that takes place by accident
and could not have been foreseen. Examples of this are destruction of houses, unexpected fire, shipwreck, violence of robbers.'
In its dissertation of the phrase 'caso fortuito' the Enciclopedia Juridicada Espanola 5 says: "In a legal sense and, consequently, also in relation
to contracts, a 'caso fortuito' presents the following essential characteristics: (1) the cause of the unforeseen and unexpected occurrence, or of
the failure of the debtor to comply with his obligation, must be independent of the human will; (2) it must be impossible to foresee the event
which constitutes the 'caso fortuito', or if it can be foreseen, it must be impossible to avoid; (3) the occurrence must be such as to render it
impossible for the debtor to fulfill his obligation in a normal manner; and (4) the obligor must be free from any participation in the aggravation
of the injury resulting to the creditor." In the case at bar, the burning of the customs warehouse was an extraordinary event which happened
independently of the will of the appellant. The latter could not have foreseen the event.
There is nothing in the record to show that appellant carrier ,incurred in delay in the performance of its obligation. It appears that appellant had
not only notified appellees of the arrival of their shipment, but had demanded that the same be withdrawn. In fact, pursuant to such demand,
appellee Uy Bico had taken delivery of 907 cavans of rice before the burning of the warehouse.
Nor can the appellant or its employees be charged with negligence. The storage of the goods in the Customs warehouse pending withdrawal
thereof by the appellees was undoubtedly made with their knowledge and consent. Since the warehouse belonged to and was maintained by
the government, it would be unfair to impute negligence to the appellant, the latter having no control whatsoever over the same.
The lower court in its decision relied on the ruling laid down in Yu Biao Sontua vs. Ossorio 6, where this Court held the defendant liable for
damages arising from a fire caused by the negligence of the defendant's employees while loading cases of gasoline and petroleon products.
But unlike in the said case, there is not a shred of proof in the present case that the cause of the fire that broke out in the Custom's warehouse
was in any way attributable to the negligence of the appellant or its employees. Under the circumstances, the appellant is plainly not
responsible.
WHEREFORE, the judgment appealed from is hereby set aside. No costs.

SO ORDERED.
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 95536 March 23, 1992
ANICETO G. SALUDO, JR., MARIA SALVACION SALUDO, LEOPOLDO G. SALUDO and SATURNINO G. SALUDO, petitioners,
vs.
HON. COURT OF APPEALS, TRANS WORLD AIRLINES, INC., and PHILIPPINE AIRLINES, INC., respondents.
REGALADO, J.:
Assailed in this petition for review on certiorari is the decision in CA-G.R. CV No. 20951 of respondent Court of Appeals 1 which affirmed the
decision of the trial court 2 dismissing for lack of evidence herein petitioners' complaint in Civil Case No R-2101 of the then Court of First
Instance of Southern Leyte, Branch I.
The facts, as recounted by the court a quo and adopted by respondent court after "considering the evidence on record," are as follows:
After the death of plaintiffs' mother, Crispina Galdo Saludo, in Chicago Illinois, (on) October 23, 1976 (Exh. A), Pomierski and Son Funeral
Home of Chicago, made the necessary preparations and arrangements for the shipment, of the remains from Chicago to the Philippines. The
funeral home had the remains embalmed (Exb. D) and secured a permit for the disposition of dead human body on October 25, 1976 (Exh. C),
Philippine Vice Consul in Chicago, Illinois, Bienvenido M. Llaneta, at 3:00 p.m. on October 26, 1976 at the Pomierski & Son Funeral Home,
sealed the shipping case containing a hermetically sealed casket that is airtight and waterproof wherein was contained the remains of Crispina
Saludo Galdo (sic) (Exb. B). On the same date, October 26, 1976, Pomierski brought the remains to C.M.A.S. (Continental Mortuary Air
Services) at the airport (Chicago) which made the necessary arrangements such as flights, transfers, etc.; C.M.A.S. is a national service used
by undertakers to throughout the nation (U.S.A.), they furnish the air pouch which the casket is enclosed in, and they see that the remains are
taken to the proper air freight terminal (Exh. 6-TWA). C.M.A.S. booked the shipment with PAL thru the carrier's agent Air Care International,
with Pomierski F.H. as the shipper and Mario (Maria) Saludo as the consignee. PAL Airway Bill No. 079-01180454 Ordinary was issued
wherein the requested routing was from Chicago to San Francisco on board TWA Flight 131 of October 27, 1976 and from San Francisco to
Manila on board PAL Flight No. 107 of the same date, and from Manila to Cebu on board PAL Flight 149 of October 29, 1976.
In the meantime, plaintiffs Maria Salvacion Saludo and Saturnino Saludo, thru a travel agent, were booked with United Airlines from Chicago
to California, and with PAL from California to Manila. She then went to the funeral director of Pomierski Funeral Home who had her mother's
remains and she told the director that they were booked with United Airlines. But the director told her that the remains were booked with TWA
flight to California. This upset her, and she and her brother had to change reservations from UA to the TWA flight after she confirmed by phone
that her mother's remains should be on that TWA flight. They went to the airport and watched from the look-out area. She saw no body being
brought. So, she went to the TWA counter again, and she was told there was no body on that flight. Reluctantly, they took the TWA flight upon
assurance of her cousin, Ani Bantug, that he would look into the matter and inform her about it on the plane or have it radioed to her. But no
confirmation from her cousin reached her that her mother was on the West Coast.
Upon arrival at San Francisco at about 5:00 p.m., she went to the TWA counter there to inquire about her mother's remains. She was told they
did not know anything about it.
She then called Pomierski that her mother's remains were not at the West Coast terminal, and Pomierski immediately called C.M.A.S., which
in a matter of 10 minutes informed him that the remains were on a plane to Mexico City, that there were two bodies at the terminal, and
somehow they were switched; he relayed this information to Miss Saludo in California; later C.M.A.S. called and told him they were sending
the remains back to California via Texas (see Exh. 6-TWA).
It-turned out that TWA had carried a shipment under PAL Airway Bill No. 079-ORD-01180454 on TWA Flight 603 of October 27, 1976, a flight
earlier than TWA Flight 131 of the same date. TWA delivered or transferred the said shipment said to contain human remains to PAL at 1400H
or 2:00 p.m. of the same date, October 27, 1976 (Bee Exh. 1- TWA). "Due to a switch(ing) in Chicago", this shipment was withdrawn from PAL
by CMAS at 1805H (or 6:05 p.m.) of the same date, October 27 (Exh. 3-PAL, see Exh. 3-a-PAL).
What transpired at the Chicago (A)irport is explained in a memo or incident report by Pomierski (Exh. 6-TWA) to Pomierski's lawyers who in
turn referred to said' memo and enclosed it in their (Pomierski's lawyers) answer dated July 18, 1981 to herein plaintiff's counsel (See Exh. 5TWA). In that memo or incident report (Exh. 6-TWA), it is stated that the remains (of Crispina Saludo) were taken to CMAS at the airport; that
there were two bodies at the (Chicago Airport) terminal, and somehow they were switched, that the remains (of Crispina Saludo) were on a
plane to Mexico City; that CMAS is a national service used by undertakers throughout the nation (U.S.A.), makes all the necessary
arrangements, such as flights, transfers, etc., and see(s) to it that the remains are taken to the proper air freight terminal.
The following day October 28, 1976, the shipment or remains of Crispina Saludo arrived (in) San Francisco from Mexico on board American
Airlines. This shipment was transferred to or received by PAL at 1945H or 7:45 p.m. (Exh. 2-PAL, Exh. 2-a-PAL). This casket bearing the
remains of Crispina Saludo, which was mistakenly sent to Mexico and was opened (there), was resealed by Crispin F. Patagas for shipment to
the Philippines (See Exh. B-1). The shipment was immediately loaded on PAL flight for Manila that same evening and arrived (in) Manila on
October 30, 1976, a day after its expected arrival on October 29, 1976. 3
In a letter dated December 15, 1976, 4 petitioners' counsel informed private respondent Trans World Airlines (TWA) of the misshipment and
eventual delay in the delivery of the cargo containing the remains of the late Crispin Saludo, and of the discourtesy of its employees to
petitioners Maria Salvacion Saludo and Saturnino Saludo. In a separate letter on June 10, 1977 addressed to co-respondent Philippine
Airlines (PAL), 5 petitioners stated that they were holding PAL liable for said delay in delivery and would commence judicial action should no
favorable explanation be given.
Both private respondents denied liability. Thus, a damage suit 6 was filed by petitioners before the then Court of First Instance, Branch III, Leyte, praying
for the award of actual damages of P50,000.00, moral damages of P1,000,000.00, exemplary damages, attorney's fees and costs of suit.
As earlier stated, the court below absolved the two respondent airlines companies of liability. The Court of Appeals affirmed the decision of the
lower court in toto, and in a subsequent resolution, 7 denied herein petitioners' motion for reconsideration for lack of merit.
In predictable disagreement and dissatisfaction with the conclusions reached by respondent appellate court, petitioners now urge this Court to review
the appealed decision and to resolve whether or not (1) the delay in the delivery of the casketed remains of petitioners' mother was due to the fault of
respondent airline companies, (2) the one-day delay in the delivery of the same constitutes contractual breach as would entitle petitioners to damages,
(3) damages are recoverable by petitioners for the humiliating, arrogant and indifferent acts of the employees of TWA and PAL, and (4) private
respondents should be held liable for actual, moral and exemplary damages, aside from attorney's fees and litigation expenses. 8
At the outset and in view of the spirited exchanges of the parties on this aspect, it is to be stressed that only questions of law may be raised in
a petition filed in this Court to review on certiorari the decision of the Court of Appeals. 9 This being so, the factual findings of the Court of
Appeals are final and conclusive and cannot be reviewed by the Supreme Court. The rule, however, admits of established exceptions, to wit:
(a) where there is grave abuse of discretion; (b) when the finding is grounded entirely on speculations, surmises or conjectures;(c) when the
inference made is manifestly-mistaken, absurd or impossible; (d) when the judgment of the Court of Appeals was based on a misapprehension
of facts; (e) when the factual findings are conflicting; (f) when the Court of Appeals, in making its findings, went beyond the issues of the case
and the same are contrary to the admissions of both appellant and appellee; 10 (g) when the Court of Appeals manifestly overlooked certain
relevant facts not disputed by the parties and which, if properly considered, would justify a different conclusion; 11 and (h) where the findings of
fact of the Court of Appeals are contrary to those of the trial court, or are mere conclusions without citation of specific evidence, or where the
facts of set forth by the petitioner are not disputed by the respondent, or where the findings of fact of the Court of Appeals are premised on the
absence of evidence and are contradicted by the evidence on record. 12
To distinguish, a question of law is one which involves a doubt or controversy on what the law is on a certain state of facts; and, a question of
fact, contrarily, is one in which there is a doubt or difference as to the truth or falsehood of the alleged facts. 13 One test, it has been held, is
whether the appellate court can determine the issue raised without reviewing or evaluating the evidence, in which case it is a question of law,
otherwise it will be a question of fact. 14
Respondent airline companies object to the present recourse of petitioners on the ground that this petition raises only factual questions. 15
Petitioners maintain otherwise or, alternatively, they are of the position that, assuming that the petition raises factual questions, the same are
within the recognized exceptions to the general rule as would render the petition cognizable and worthy of review by the Court. 16
Since it is precisely the soundness of the inferences or conclusions that may be drawn from the factual issues which are here being assayed,
we find that the issues raised in the instant petition indeed warrant a second look if this litigation is to come to a reasonable denouement. A
discussion seriatim of said issues will further reveal that the sequence of the events involved is in effect disputed. Likewise to be settled is
whether or not the conclusions of the Court of Appeals subject of this review indeed find evidentiary and legal support.
I. Petitioners fault respondent court for "not finding that private respondents failed to exercise extraordinary diligence required by law which
resulted in the switching and/or misdelivery of the remains of Crispina Saludo to Mexico causing gross delay in its shipment to the Philippines,
and consequently, damages to petitioners." 17
Petitioner allege that private respondents received the casketed remains of petitioners' mother on October 26, 1976, as evidenced by the
issuance of PAL Air Waybill No. 079-01180454 18 by Air Care International as carrier's agent; and from said date, private respondents were
charged with the responsibility to exercise extraordinary diligence so much so that for the alleged switching of the caskets on October 27,
1976, or one day after private respondents received the cargo, the latter must necessarily be liable.
To support their assertion, petitioners rely on the jurisprudential dictum, both under American and Philippine law, that "(t)he issuance of a bill of
lading carries the presumption that the goods were delivered to the carrier issuing the bill, for immediate shipment, and it is nowhere
questioned that a bill of lading is prima facie evidence of the receipt of the goods by the carrier. . . . In the absence of convincing testimony
establishing mistake, recitals in the bill of lading showing that the carrier received the goods for shipment on a specified date control.
A bill of lading is a written acknowledgment of the receipt of the goods and an agreement to transport and deliver them at a specified place to
a person named or on his order. Such instrument may be called a shipping receipt, forwarder's receipt and receipt for transportation. 20 The
designation, however, is immaterial. It has been hold that freight tickets for bus companies as well as receipts for cargo transported by all
forms of transportation, whether by sea or land, fall within the definition. Under the Tariff and Customs Code, a bill of lading includes airway
bills of lading. 21 The two-fold character of a bill of lading is all too familiar; it is a receipt as to the quantity and description of the goods shipped
and a contract to transport the goods to the consignee or other person therein designated, on the terms specified in such instrument. 22
Logically, since a bill of lading acknowledges receipt of goods to be transported, delivery of the goods to the carrier normally precedes the issuance of
the bill; or, to some extent, delivery of the goods and issuance of the bill are regarded in commercial practice as simultaneous acts. 23 However, except
as may be prohibited by law, there is nothing to prevent an inverse order of events, that is, the execution of the bill of lading even prior to actual
possession and control by the carrier of the cargo to be transported. There is no law which requires that the delivery of the goods for carriage and the
issuance of the covering bill of lading must coincide in point of time or, for that matter, that the former should precede the latter.
Ordinarily, a receipt is not essential to a complete delivery of goods to the carrier for transportation but, when issued, is competent and prima
facie, but not conclusive, evidence of delivery to the carrier. A bill of lading, when properly executed and delivered to a shipper, is evidence that
the carrier has received the goods described therein for shipment. Except as modified by statute, it is a general rule as to the parties to a
contract of carriage of goods in connection with which a bill of lading is issued reciting that goods have been received for transportation, that
the recital being in essence a receipt alone, is not conclusive, but may be explained, varied or contradicted by parol or other evidence. 24
While we agree with petitioners' statement that "an airway bill estops the carrier from denying receipt of goods of the quantity and quality described in
the bill," a further reading and a more faithful quotation of the authority cited would reveal that "(a) bill of lading may contain constituent elements of
estoppel and thus become something more than a contract between the shipper and the carrier. . . . (However), as between the shipper and the carrier,
when no goods have been delivered for shipment no recitals in the bill can estop the carrier from showing the true facts . . . Between the consignor of
goods and receiving carrier, recitals in a bill of lading as to the goods shipped raise only a rebuttable presumption that such goods were delivered for
shipment. As between the consignor and a receiving carrier, the fact must outweigh the recital." 25 (Emphasis supplied)
For this reason, we must perforce allow explanation by private respondents why, despite the issuance of the airway bill and the date thereof,
they deny having received the remains of Crispina Saludo on October 26, 1976 as alleged by petitioners.
The findings of the trial court, as favorably adopted by the Court of Appeals and which we have earner quoted, provide us with the explanation
that sufficiently over comes the presumption relied on by petitioners in insisting that the remains of their mother were delivered to and received
by private respondents on October 26, 1976. Thus
. . . Philippine Vice Consul in Chicago, Illinois, Bienvenido M. Llaneta, at 3:00 p.m. on October 26, 1976 at the Pomierski & Son Funeral Home,
sealed the shipping case containing a hermetically sealed casket that is airtight and waterproof wherein was contained the remains of Crispina
Saludo Galdo (sic) (Exh. B). On the same date October 26, 1976, Pomierski brought the remains to C.M.A.S. (Continental Mortuary Air
Services) at the airport (Chicago) which made the necessary arrangements such as flights, transfers, etc; C.M.A.S. is a national service used
by undertakers throughout the nation (U.S.A.), they furnish the air pouch which the casket is enclosed in, and they see that the remains are
taken to the proper air freight terminal (Exh. G-TWA). C.M.A.S. booked the shipment with PAL thru the carrier's agent Air Care International,
with Pomierski F.H. as the shipper and Mario (Maria) Saludo as the consignee. PAL Airway Bill No. 079- 01180454 Ordinary was issued
wherein the requested routing was from Chicago to San Francisco on board TWA Flight-131 of October 27;1976, and from San Francisco to
Manila on board PAL Flight No. 107 of the same date, and from Manila to Cebu on board PAL Flight 149 of October 29, 1976 (See Exh. E,
also Exh. 1-PAL). 26 (Emphasis ours.)
Moreover, we are persuaded to believe private respondent PAL's account as to what transpired October 26, 1976:
. . . Pursuant thereto, on 26 October 1976, CMAS acting upon the instruction of Pomierski, F.H., the shipper requested booking of the
casketed remains of Mrs. Cristina (sic) Saludo on board PAL's San Francisco-Manila Flight No. PR 107 on October 27, 1976.
2. To signify acceptance and confirmation of said booking, PAL issued to said Pomierski F.H., PAL Airway Bill No. 079-01180454 dated
October 27, 1976 (sic, "10/26/76"). PAL confirmed the booking and transporting of the shipment on board of its Flight PR 107 on October 27,
1976 on the basis of the representation of the shipper and/or CMAS that the said cargo would arrive in San Francisco from Chicago on board
United Airlines Flight US 121 on 27 October 1976. 27
In other words, on October 26, 1976 the cargo containing the casketed remains of Crispina Saludo was booked for PAL Flight Number PR-107
leaving San Francisco for Manila on October 27, 1976, PAL Airway Bill No. 079-01180454 was issued, not as evidence of receipt of delivery of
the cargo on October 26, 1976, but merely as a confirmation of the booking thus made for the San Francisco-Manila flight scheduled on
October 27, 1976. Actually, it was not until October 28, 1976 that PAL received physical delivery of the body at San Francisco, as duly
evidenced by the Interline Freight Transfer Manifest of the American Airline Freight System and signed for by Virgilio Rosales at 1945H, or
7:45 P.M. on said date. 28
Explicit is the rule under Article 1736 of the Civil Code that the extraordinary responsibility of the common carrier begins from the time the
goods are delivered to the carrier. This responsibility remains in full force and effect even when they are temporarily unloaded or stored in
transit, unless the shipper or owner exercises the right of stoppage in transitu, 29 and terminates only after the lapse of a reasonable time for
the acceptance, of the goods by the consignee or such other person entitled to receive them. 30 And, there is delivery to the carrier when the
goods are ready for and have been placed in the exclusive possession, custody and control of the carrier for the purpose of their immediate
transportation and the carrier has accepted them. 31 Where such a delivery has thus been accepted by the carrier, the liability of the common
carrier commences eo instanti. 32
Hence, while we agree with petitioners that the extraordinary diligence statutorily required to be observed by the carrier instantaneously
commences upon delivery of the goods thereto, for such duty to commence there must in fact have been delivery of the cargo subject of the
contract of carriage. Only when such fact of delivery has been unequivocally established can the liability for loss, destruction or deterioration of
goods in the custody of the carrier, absent the excepting causes under Article 1734, attach and the presumption of fault of the carrier under
Article 1735 be invoked.
As already demonstrated, the facts in the case at bar belie the averment that there was delivery of the cargo to the carrier on October 26,
1976. Rather, as earlier explained, the body intended to be shipped as agreed upon was really placed in the possession and control of PAL on
October 28, 1976 and it was from that date that private respondents became responsible for the agreed cargo under their undertakings in PAL
Airway Bill No. 079-01180454. Consequently, for the switching of caskets prior thereto which was not caused by them, and subsequent events
caused thereby, private respondents cannot be held liable.
Petitioners, proceeding on the premise that there was delivery of the cargo to private respondents on October 26,1976 and that the latter's
extraordinary responsibility had by then become operative, insist on foisting the blame on private respondents for the switching of the two
caskets which occurred on October 27, 1976. It is argued that since there is no clear evidence establishing the fault Continental Mortuary Air
Services (CMAS) for the mix-up, private respondents are presumably negligent pursuant to Article 1735 of the Civil Code and, for failure to
rebut such presumption, they must necessarily be held liable; or, assuming that CMAS was at fault, the same does not absolve private
respondents of liability because whoever brought the cargo to the airport or loaded it on the plane did so as agent of private respondents.
This contention is without merit. As pithily explained by the Court of Appeals:
The airway bill expressly provides that "Carrier certifies goods described below were received for carriage", and said cargo was "casketed
human remains of Crispina Saludo," with "Maria Saludo as Consignee; Pomierski F.H. as Shipper; Air Care International as carrier's agent."
On the face of the said airway bill, the specific flight numbers, specific routes of shipment and dates of departure and arrival were typewritten,
to wit: Chicago TWA Flight 131/27 to San Francisco and from San Francisco by PAL 107 on, October 27, 1976 to Philippines and to Cebu via
PAL Flight 149 on October 29, 1976. The airway bill also contains the following typewritten words, as follows: all documents have been
examined (sic). Human remains of Crispina Saludo. Please return back (sic) first available flight to SFO.
But, as it turned out and was discovered later the casketed human remains which was issued PAL Airway Bill #079-1180454 was not the
remains of Crispina Saludo, the casket containing her remains having been shipped to Mexico City.
However, it should be noted that, Pomierski F.H., the shipper of Mrs. Saludo's remains, hired Continental Mortuary Services (hereafter referred
to as C.M.A.S.), which is engaged in the business of transporting and forwarding human remains. Thus, C.M.A.S. made all the necessary
arrangements such as flights, transfers, etc. for shipment of the remains of Crispina Saludo.
The remains were taken on October 26th, 1976, to C.M.A.S. at the airport. These people made all the necessary arrangements, such as
flights, transfers, etc. This is a national service used by undertakers throughout the nation. They furnished the air pouch which the casket is
enclosed in, and they see that the remains are taken to the proper air frieght terminal. I was very surprised when Miss Saludo called me to say
that the remains were not at the west coast terminal. I immediately called C.M.A.S. They called me back in a matter of ten minutes to inform
me that the remains were on a plane to Mexico City. The man said that there were two bodies at the terminal, and somehow they were
switched. . . . (Exb. 6 "TWA", which is the memo or incident report enclosed in the stationery of Walter Pomierski & Sons Ltd.)
Consequently, when the cargo was received from C.M.A.S. at the Chicago airport terminal for shipment, which was supposed to contain the
remains of Crispina Saludo, Air Care International and/or TWA, had no way of determining its actual contents, since the casket was
hermetically sealed by the Philippine Vice-Consul in Chicago and in an air pouch of C.M.A.S., to the effect that Air Care International and/or
TWA had to rely on the information furnished by the shipper regarding the cargo's content. Neither could Air Care International and/or TWA
open the casket for further verification, since they were not only without authority to do so, but even prohibited.
Thus, under said circumstances, no fault and/or negligence can be attributed to PAL (even if Air Care International should be considered as an
agent of PAL) and/or TWA, the entire fault or negligence being exclusively with C.M.A.S. 33 (Emphasis supplied.)
It can correctly and logically be concluded, therefore, that the switching occurred or, more accurately, was discovered on October 27, 1976;
and based on the above findings of the Court of appeals, it happened while the cargo was still with CMAS, well before the same was place in
the custody of private respondents.
Thus, while the Air Cargo Transfer Manifest of TWA of October 27, 1976 34 was signed by Garry Marcial of PAL at 1400H, or 2:00 P.M., on the
same date, thereby indicating acknowledgment by PAL of the transfer to them by TWA of what was in truth the erroneous cargo, said
misshipped cargo was in fact withdrawn by CMAS from PAL as shown by the notation on another copy of said manifest 35 stating "Received by
CMAS Due to switch in Chicago 10/27-1805H," the authenticity of which was never challenged. This shows that said misshipped cargo was
in fact withdrawn by CMAS from PAL and the correct shipment containing the body of Crispina Saludo was received by PAL only on October
28, 1976, at 1945H, or 7:45 P.M., per American Airlines Interline Freight Transfer Manifest No. AA204312. 36
Witness the deposition of TWA's ramp serviceman, Michael Giosso, on this matter:
ATTY. JUAN COLLAS, JR.:
PAL San Francisco?
MICHAEL GIOSSO:
On that date, do (sic) you have occasion to handle or deal with the transfer of cargo from TWA Flight No. 603 to
Yes, I did.
What was your participation with the transfer of the cargo?
MICHAEL GIOSSO: I manifested the freight on a transfer manifest and physically moved it to PAL and concluded the transfer by signing it off.
ATTY. JUAN COLLAS, JR.: You brought it there yourself?
MICHAEL GIOSSO: Yes sir.
ATTY. JUAN COLIAS, JR.:
MICHAEL GIOSSO:
Do you have anything to show that PAL received the cargo from TWA on October 27, 1976?
Yes, I do. (Witness presenting a document)
ATTY. JUAN COLLAS, JR.: For purposes of clarity, Exhibit I is designated as Exhibit I-TWA.
This Exhibit I-TWA, could you tell what it is, what it shows?
`MICHAEL GIOSSO: It shows transfer of manifest on 10-27-76 to PAL at 1400 and verified with two signatures as it completed the transfer.
ATTY. JUAN COLLAS, JR.: Very good,. Who was the PAL employee who received the cargo?
MICHAEL GIOSSO: The name is Garry Marcial." 37
The deposition of Alberto A. Lim, PAL's cargo supervisor at San Francisco, as deponent-witness for PAL, makes this further clarification:
ATTY. CESAR P. MANALAYSAY: You mentioned Airway Bill, Mr. Lim. I am showing to you a PAL Airway Bill Number 01180454 which for
purposes of evidence, I would like to request that the same be marked as evidence Exhibit I for PAL.
In what circumstances did you encounter Exhibit I-PAL?
ALBERTO A. LIM: If I recall correctly, I was queried by Manila, our Manila office with regard to a certain complaint that a consignee filed that
this shipment did not arrive on the day that the consignee expects the shipment to arrive.
ATTY CESAR P. MANALAYSAY: Okay. Now, upon receipt of that query from your Manila office, did you conduct any investigation to pinpoint
the possible causes of mishandling?
ALBERTO A. LIM: Yes.
ATTY. CESAR P. MANALAYSAY: What is the result of your investigation?
ALBERTO A. LIM: In the course of my investigation, I found that we received the body on October 28, 1976, from American Airlines.
ATTY. CESAR P. MANALAYSAY: What body are you referring to?
ALBERTO A. LIM: The remains of Mrs. Cristina (sic) Saludo.
ATTY. CESAR P. MANALAYSAY:
Is that the same body mentioned in this Airway Bill?
ALBERTO A. LIM: Yes.

ATTY. CESAR P. MANALAYSAY: What time did you receive said body on October 28, 1976?
ALBERTO A. LIM: If I recall correctly, approximately 7:45 of October 28, 1976.
ATTY. CESAR P. MANALAYSAY: Do you have any proof with you to back the statement?
ALBERTO A. LIM: Yes. We have on our records a Transfer Manifest from American Airlines Number 204312 showing that we received a
human remains shipment belong to Mrs. Cristina (sic) Saludo or the human remains of Mrs. Cristina (sic) Saludo.
ATTY. CESAR P. MAIALAYSAY: At this juncture, may I request that the Transfer Manifest referred to by the witness be marked as an
evidence as Exhibit II-PAL.
Mr. Lim, yesterday your co-defendant TWA presented as their Exhibit I evidence tending to show that on October 27, 1976 at about 2:00 in
the, afternoon they delivered to you a cargo bearing human remains. Could you go over this Exhibit I and please give us your comments as to
that exhibit?
ATTY. ALBERTO C. MENDOZA: That is a vague question. I would rather request that counsel propound specific questions rather than asking
for comments on Exhibit I-TWA.
ATTY. CESAR P. MANALAYSAY: In that case, I will reform my question. Could you tell us whether TWA in fact delivered to you the human
remains as indicated in that Transfer Manifest?
ALBERTO A. LIM: Yes, they did.
ATTY. CESAR P. MANALAYSAY: I noticed that the Transfer Manifest of TWA marked as Exhibit I-TWA bears the same numbers or the same
entries as the Airway Bill marked as Exhibit I-A PAL tending to show that this is the human remains of Mrs Cristina (sic) Saludo. Could you tell
us whether this is true?
ALBERTO A. LIM: It is true that we received human remains shipment from TWA as indicated on this Transfer Manifest. But in the course of
investigation, it was found out that the human remains transferred to us is not the remains of Mrs. Cristina (sic) Saludo this is the reason why
we did not board it on our flight. 38
Petitioners consider TWA's statement that "it had to rely on the information furnished by the shipper" a lame excuse and that its failure to
prove that its personnel verified and identified the contents of the casket before loading the same constituted negligence on the part of TWA. 39
We upbold the favorable consideration by the Court of Appeals of the following findings of the trial court:
It was not (to) TWA, but to C.M.A.S. that the Pomierski & Son Funeral Home delivered the casket containing the remains of Crispina Saludo.
TWA would have no knowledge therefore that the remains of Crispina Saludo were not the ones inside the casket that was being presented to
it for shipment. TWA would have to rely on there presentations of C.M.A.S. The casket was hermetically sealed and also sealed by the
Philippine Vice Consul in Chicago. TWA or any airline for that matter would not have opened such a sealed casket just for the purpose of
ascertaining whose body was inside and to make sure that the remains inside were those of the particular person indicated to be by C.M.A.S.
TWA had to accept whatever information was being furnished by the shipper or by the one presenting the casket for shipment. And so as a
matter of fact, TWA carried to San Francisco and transferred to defendant PAL a shipment covered by or under PAL Airway Bill No. 079-ORD01180454, the airway bill for the shipment of the casketed remains of Crispina Saludo. Only, it turned out later, while the casket was already
with PAL, that what was inside the casket was not the body of Crispina Saludo so much so that it had to be withdrawn by C.M.A.S. from PAL.
The body of Crispina Saludo had been shipped to Mexico. The casket containing the remains of Crispina Saludo was transshipped from
Mexico and arrived in San Francisco the following day on board American Airlines. It was immediately loaded by PAL on its flight for Manila.
The foregoing points at C.M.A.S., not defendant TWA much less defendant PAL, as the ONE responsible for the switching or mix-up of the two
bodies at the Chicago Airport terminal, and started a chain reaction of the misshipment of the body of Crispina Saludo and a one-day delay in
the delivery thereof to its destination. 40
Verily, no amount of inspection by respondent airline companies could have guarded against the switching that had already taken place. Or,
granting that they could have opened the casket to inspect its contents, private respondents had no means of ascertaining whether the body
therein contained was indeed that of Crispina Saludo except, possibly, if the body was that of a male person and such fact was visually
apparent upon opening the casket. However, to repeat, private respondents had no authority to unseal and open the same nor did they have
any reason or justification to resort thereto.
It is the right of the carrier to require good faith on the part of those persons who deliver goods to be carried, or enter into contracts with it, and
inasmuch as the freight may depend on the value of the article to be carried, the carrier ordinarily has the right to inquire as to its value.
Ordinarily, too, it is the duty of the carrier to make inquiry as to the general nature of the articles shipped and of their value before it consents
to carry them; and its failure to do so cannot defeat the shipper's right to recovery of the full value of the package if lost, in the absence of
showing of fraud or deceit on the part of the shipper. In the absence of more definite information, the carrier has a the right to accept shipper's
marks as to the contents of the package offered for transportation and is not bound to inquire particularly about them in order to take
advantage of a false classification and where a shipper expressly represents the contents of a package to be of a designated character, it is
not the duty of the carrier to ask for a repetition of the statement nor disbelieve it and open the box and see for itself. 41 However, where a
common carrier has reasonable ground to suspect that the offered goods are of a dangerous or illegal character, the carrier has the right to
know the character of such goods and to insist on an inspection, if reasonable and practical under the circumstances, as a condition of
receiving and transporting such goods. 42
It can safely be said then that a common carrier is entitled to fair representation of the nature and value of the goods to be carried, with the
concomitant right to rely thereon, and further noting at this juncture that a carrier has no obligation to inquire into the correctness or sufficiency
of such information. 43 The consequent duty to conduct an inspection thereof arises in the event that there should be reason to doubt the
veracity of such representations. Therefore, to be subjected to unusual search, other than the routinary inspection procedure customarily
undertaken, there must exist proof that would justify cause for apprehension that the baggage is dangerous as to warrant exhaustive
inspection, or even refusal to accept carriage of the same; and it is the failure of the carrier to act accordingly in the face of such proof that
constitutes the basis of the common carrier's liability. 44
In the case at bar, private respondents had no reason whatsoever to doubt the truth of the shipper's representations. The airway bill expressly
providing that "carrier certifies goods received below were received for carriage," and that the cargo contained "casketed human remains of
Crispina Saludo," was issued on the basis of such representations. The reliance thereon by private respondents was reasonable and, for so
doing, they cannot be said to have acted negligently. Likewise, no evidence was adduced to suggest even an iota of suspicion that the cargo
presented for transportation was anything other than what it was declared to be, as would require more than routine inspection or call for the
carrier to insist that the same be opened for scrutiny of its contents per declaration.
Neither can private respondents be held accountable on the basis of petitioners' preposterous proposition that whoever brought the cargo to
the airport or loaded it on the airplane did so as agent of private respondents, so that even if CMAS whose services were engaged for the
transit arrangements for the remains was indeed at fault, the liability therefor would supposedly still be attributable to private respondents.
While we agree that the actual participation of CMAS has been sufficiently and correctly established, to hold that it acted as agent for private
respondents would be both an inaccurate appraisal and an unwarranted categorization of the legal position it held in the entire transaction.
It bears repeating that CMAS was hired to handle all the necessary shipping arrangements for the transportation of the human remains of
Crispina Saludo to Manila. Hence, it was to CMAS that the Pomierski & Son Funeral Home, as shipper, brought the remains of petitioners'
mother for shipment, with Maria Saludo as consignee. Thereafter, CMAS booked the shipment with PAL through the carrier's agent, Air Care
International. 45 With its aforestated functions, CMAS may accordingly be classified as a forwarder which, by accepted commercial practice, is
regarded as an agent of the shipper and not of the carrier. As such, it merely contracts for the transportation of goods by carriers, and has no
interest in the freight but receives compensation from the shipper as his agent. 46
At this point, it can be categorically stated that, as culled from the findings of both the trial court and appellate courts, the entire chain of events
which culminated in the present controversy was not due to the fault or negligence of private respondents. Rather, the facts of the case would
point to CMAS as the culprit. Equally telling of the more likely possibility of CMAS' liability is petitioners' letter to and demanding an explanation
from CMAS regarding the statement of private respondents laying the blame on CMAS for the incident, portions of which, reading as follows:
. . . we were informed that the unfortunate a mix-up occurred due to your negligence. . . .
Likewise, the two airlines pinpoint the responsibility upon your agents. Evidence were presented to prove that allegation.
On the face of this overwhelming evidence we could and should have filed a case against you. . . .
47
clearly allude to CMAS as the party at fault. This is tantamount to an admission by petitioners that they consider private respondents without
fault, or is at the very least indicative of the fact that petitioners entertained serious doubts as to whether herein private respondents were
responsible for the unfortunate turn of events.
Undeniably, petitioners' grief over the death of their mother was aggravated by the unnecessary inconvenience and anxiety that attended their
efforts to bring her body home for a decent burial. This is unfortunate and calls for sincere commiseration with petitioners. But, much as we
would like to give them consolation for their undeserved distress, we are barred by the inequity of allowing recovery of the damages prayed for
by them at the expense of private respondents whose fault or negligence in the very acts imputed to them has not been convincingly and
legally demonstrated.
Neither are we prepared to delve into, much less definitively rule on, the possible liability of CMAS as the evaluation and adjudication of the
same is not what is presently at issue here and is best deferred to another time and addressed to another forum.
II. Petitioners further fault the Court of Appeals for ruling that there was no contractual breach on the part of private respondents as would
entitle petitioners to damages.
Petitioners hold that respondent TWA, by agreeing to transport the remains of petitioners' mother on its Flight 131 from Chicago to San
Francisco on October 27, 1976, made itself a party to the contract of carriage and, therefore, was bound by the terms of the issued airway bill.
When TWA undertook to ship the remains on its Flight 603, ten hours earlier than scheduled, it supposedly violated the express agreement
embodied in the airway bill. It was allegedly this breach of obligation which compounded, if not directly caused, the switching of the caskets.
In addition, petitioners maintain that since there is no evidence as to who placed the body on board Flight 603, or that CMAS actually put the
cargo on that flight, or that the two caskets at the Chicago airport were to be transported by the same airline, or that they came from the same
funeral home, or that both caskets were received by CMAS, then the employees or agents of TWA presumably caused the mix-up by loading
the wrong casket on the plane. For said error, they contend, TWA must necessarily be presumed negligent and this presumption of negligence
stands undisturbed unless rebutting evidence is presented to show that the switching or misdelivery was due to circumstances that would
exempt the carrier from liability.
Private respondent TWA professes otherwise. Having duly delivered or transferred the cargo to its co-respondent PAL on October 27, 1976 at
2:00 P.M., as supported by the TWA Transfer Manifest, TWA faithfully complied with its obligation under the airway bill. Said faithful compliance
was not affected by the fact that the remains were shipped on an earlier flight as there was no fixed time for completion of carriage stipulated
on. Moreover, the carrier did not undertake to carry the cargo aboard any specified aircraft, in view of the condition on the back of the airway
bill which provides:
CONDITIONS OF CONTRACT
It is agreed that no time is fixed for the completion of carriage hereunder and that Carrier may without notice substitute alternate carriers or
aircraft. Carrier assumes no obligation to carry the goods by any specified aircraft or over any particular route or routes or to make connection
at any point according to any particular schedule, and Carrier is hereby authorized to select, or deviate from the route or routes of shipment,
notwithstanding that the same may be stated on the face hereof. The shipper guarantees payment of all charges and advances. 48
Hence, when respondent TWA shipped the body on earlier flight and on a different aircraft, it was acting well within its rights. We find this
argument tenable.
The contention that there was contractual breach on the part of private respondents is founded on the postulation that there was ambiguity in
the terms of the airway bill, hence petitioners' insistence on the application of the rules on interpretation of contracts and documents. We find
no such ambiguity. The terms are clear enough as to preclude the necessity to probe beyond the apparent intendment of the contractual
provisions.
The hornbook rule on interpretation of contracts consecrates the primacy of the intention of the parties, the same having the force of law
between them. When the terms of the agreement are clear and explicit, that they do not justify an attempt to read into any alleged intention of
the parties, the terms are to be understood literally just as they appear on the face of the contract. 49 The various stipulations of a contract shall
be interpreted together 50 and such a construction is to be adopted as will give effect to all provisions thereof. 51 A contract cannot be construed
by parts, but its clauses should be interpreted in relation to one another. The whole contract must be interpreted or read together in order to
arrive at its true meaning. Certain stipulations cannot be segregated and then made to control; neither do particular words or phrases
necessarily determine the character of a contract. The legal effect of the contract is not to be determined alone by any particular provision
disconnected from all others, but in the ruling intention of the parties as gathered from all the language they have used and from their
contemporaneous and subsequent acts. 52
Turning to the terms of the contract at hand, as presented by PAL Air Waybill No. 079-01180454, respondent court approvingly quoted the trial
court's disquisition on the aforequoted condition appearing on the reverse side of the airway bill and its disposition of this particular assigned
error:
The foregoing stipulation fully answers plaintiffs' objections to the one-day delay and the shipping of the remains in TWA Flight 603 instead of
TWA Flight 131. Under the stipulation, parties agreed that no time was fixed to complete the contract of carriage and that the carrier may,
without notice, substitute alternate carriers or aircraft. The carrier did not assume the obligation to carry the shipment on any specified aircraft.
Furthermore, contrary to the claim of plaintiffs-appellants, the conditions of the Air Waybill are big enough to be read and noticed. Also, the
mere fact that the cargo in question was shipped in TWA Flight 603, a flight earlier on the same day than TWA Flight 131, did not in any way
cause or add to the one-day delay complained of and/or the switching or mix-up of the bodies. 53
Indubitably, that private respondent can use substitute aircraft even without notice and without the assumption of any obligation whatsoever to
carry the goods on any specified aircraft is clearly sanctioned by the contract of carriage as specifically provided for under the conditions
thereof.
Petitioners' invocation of the interpretative rule in the Rules of Court that written words control printed words in documents, 54 to bolster their
assertion that the typewritten provisions regarding the routing and flight schedule prevail over the printed conditions, is tenuous. Said rule may
be considered only when there is inconsistency between the written and printed words of the contract.
As previously stated, we find no ambiguity in the contract subject of this case that would call for the application of said rule. In any event, the
contract has provided for such a situation by explicitly stating that the above condition remains effective "notwithstanding that the same (fixed
time for completion of carriage, specified aircraft, or any particular route or schedule) may be stated on the face hereof." While petitioners
hinge private respondents' culpability on the fact that the carrier "certifies goods described below were received for carriage," they may have
overlooked that the statement on the face of the airway bill properly and completely reads
Carrier certifies goods described below were received for carriage subject to the Conditions on the reverse hereof the
goods then being in apparent good order and condition except as noted hereon. 55 (Emphasis ours.)
Private respondents further aptly observe that the carrier's certification regarding receipt of the goods for carriage "was of a smaller print than
the condition of the Air Waybill, including Condition No. 5 and thus if plaintiffs-appellants had recognized the former, then with more reason
they were aware of the latter. 56
In the same vein, it would also be incorrect to accede to the suggestion of petitioners that the typewritten specifications of the flight, routes and
dates of departures and arrivals on the face of the airway bill constitute a special contract which modifies the printed conditions at the back
thereof. We reiterate that typewritten provisions of the contract are to be read and understood subject to and in view of the printed conditions,
fully reconciling and giving effect to the manifest intention of the parties to the agreement.
The oft-repeated rule regarding a carrier's liability for delay is that in the absence of a special contract, a carrier is not an insurer against delay
in transportation of goods. When a common carrier undertakes to convey goods, the law implies a contract that they shall be delivered at
destination within a reasonable time, in the absence, of any agreement as to the time of delivery. 57 But where a carrier has made an express
contract to transport and deliver property within a specified time, it is bound to fulfill its contract and is liable for any delay, no matter from what
cause it may have arisen. 58 This result logically follows from the well-settled rule that where the law creates a duty or charge, and the party is
disabled from performing it without any default in himself, and has no remedy over, then the law will excuse him, but where the party by his
own contract creates a duty or charge upon himself, he is bound to make it good notwithstanding any accident or delay by inevitable necessity
because he might have provided against it by contract. Whether or not there has been such an undertaking on the part of the carrier to be
determined from the circumstances surrounding the case and by application of the ordinary rules for the interpretation of contracts. 59
Echoing the findings of the trial court, the respondent court correctly declared that
In a similar case of delayed delivery of air cargo under a very similar stipulation contained in the airway bill which reads: "The carrier does not
obligate itself to carry the goods by any specified aircraft or on a specified time. Said carrier being hereby authorized to deviate from the route
of the shipment without any liability therefor", our Supreme Court ruled that common carriers are not obligated by law to carry and to deliver
merchandise, and persons are not vested with the right to prompt delivery, unless such common carriers previously assume the obligation.
Said rights and obligations are created by a specific contract entered into by the parties (Mendoza vs. PAL, 90 Phil. 836).
There is no showing by plaintiffs that such a special or specific contract had been entered into between them and the defendant airline
companies.
And this special contract for prompt delivery should call the attention of the carrier to the circumstances surrounding the case and the
approximate amount of damages to be suffered in case of delay (See Mendoza vs. PAL, supra). There was no such contract entered into in
the instant case. 60
Also, the theory of petitioners that the specification of the flights and dates of departure and arrivals constitute a special contract that could
prevail over the printed stipulations at the back of the airway bill is vacuous. To countenance such a postulate would unduly burden the
common carrier for that would have the effect of unilaterally transforming every single bill of lading or trip ticket into a special contract by the
simple expedient of filling it up with the particulars of the flight, trip or voyage, and thereby imposing upon the carrier duties and/or obligations
which it may not have been ready or willing to assume had it been timely, advised thereof.
Neither does the fact that the challenged condition No. 5 was printed at the back of the airway bill militate against its binding effect on
petitioners as parties to the contract, for there were sufficient indications on the face of said bill that would alert them to the presence of such
additional condition to put them on their guard. Ordinary prudence on the part of any person entering or contemplating to enter into a contract
would prompt even a cursory examination of any such conditions, terms and/or stipulations.
There is a holding in most jurisdictions that the acceptance of a bill of lading without dissent raises a presumption that all terms therein were
brought to the knowledge of the shipper and agreed to by him, and in the absence of fraud or mistake, he is estopped from thereafter denying
that he assented to such terms. This rule applies with particular force where a shipper accepts a bill of lading with full knowledge of its
contents, and acceptance under such circumstances makes it a binding contract. In order that any presumption of assent to a stipulation in a
bill of lading limiting the liability of a carrier may arise, it must appear that the clause containing this exemption from liability plainly formed a
part of the contract contained in the bill of lading. A stipulation printed on the back of a receipt or bill of lading or on papers attached to such
receipt will be quite as effective as if printed on its face, if it is shown that the consignor knew of its terms. Thus, where a shipper accepts a
receipt which states that its conditions are to be found on the back, such receipt comes within the general rule, and the shipper is held to have
accepted and to be bound by the conditions there to be found. 61
Granting arguendo that Condition No. 5 partakes of the nature of a contract of adhesion and as such must be construed strictly against the
party who drafted the same or gave rise to any ambiguity therein, it should be borne in mind that a contract of adhesion may be struck down
as void and unenforceable, for being subversive of public policy, only when the weaker party is imposed upon in dealing with the dominant
bargaining party and is reduced to the alternative of taking it or leaving it, completely deprived of the opportunity to bargain on equal footing. 62
However, Ong Yiu vs. Court of Appeals, et al 63 instructs us that contracts of adhesion are not entirely prohibited. The one who adheres to the
contract is in reality free to reject it entirely; if he adheres, be gives his consent. Accordingly, petitioners, far from being the weaker party in this
situation, duly signified their presumed assent to all terms of the contract through their acceptance of the airway bill and are consequently
bound thereby. It cannot be gainsaid that petitioners' were not without several choices as to carriers in Chicago with its numerous airways and
airliner servicing the same.
We wish to allay petitioners' apprehension that Condition No. 5 of the airway bill is productive of mischief as it would validate delay in delivery,
sanction violations of contractual obligations with impunity or put a premium on breaches of contract.
Just because we have said that condition No. 5 of the airway bill is binding upon the parties to and fully operative in this transaction, it does
not mean, and let this serve as fair warning to respondent carriers, that they can at all times whimsically seek refuge from liability in the
exculpatory sanctuary of said Condition No. 5 or arbitrarily vary routes, flights and schedules to the prejudice of their customers. This condition
only serves to insulate the carrier from liability in those instances when changes in routes, flights and schedules are clearly justified by the
peculiar circumstances of a particular case, or by general transportation practices, customs and usages, or by contingencies or emergencies
in aviation such as weather turbulence, mechanical failure, requirements of national security and the like. And even as it is conceded that
specific routing and other navigational arrangements for a trip, flight or voyage, or variations therein, generally lie within the discretion of the
carrier in the absence of specific routing instructions or directions by the shipper, it is plainly incumbent upon the carrier to exercise its rights
with due deference to the rights, interests and convenience of its customers.
A common carrier undertaking to transport property has the implicit duty to carry and deliver it within reasonable time, absent any particular
stipulation regarding time of delivery, and to guard against delay. In case of any unreasonable delay, the carrier shall be liable for damages
immediately and proximately resulting from such neglect of duty. 64 As found by the trial court, the delay in the delivery of the remains of
Crispina Saludo, undeniable and regrettable as it was, cannot be attributed to the fault, negligence or malice of private respondents, 65 a
conclusion concurred in by respondent court and which we are not inclined to disturb.
We are further convinced that when TWA opted to ship the remains of Crispina Saludo on an earlier flight, it did so in the exercise of sound
discretion and with reasonable prudence, as shown by the explanation of its counsel in his letter of February 19, 1977 in response to
petitioners' demand letter:
Investigation of TWA's handling of this matter reveals that although the shipment was scheduled on TWA Flight 131 of October 27, 1976, it
was actually boarded on TWA Flight 603 of the same day, approximately 10 hours earlier, in order to assure that the shipment would be
received in San Francisco in sufficient time for transfer to PAL. This transfer was effected in San Francisco at 2:00 P.M. on October 27, 1976.
Precisely, private respondent TWA knew of the urgency of the shipment by reason of this notation on the lower portion of the airway bill: "All
documents have been certified. Human remains of Cristina (sic) Saludo. Please return bag first available flight to SFO." Accordingly, TWA took
it upon itself to carry the remains of Crispina Saludo on an earlier flight, which we emphasize it could do under the terms of the airway bill, to
make sure that there would be enough time for loading said remains on the transfer flight on board PAL.
III. Petitioners challenge the validity of respondent court's finding that private respondents are not liable for tort on account of the humiliating,
arrogant and indifferent acts of their officers and personnel. They posit that since their mother's remains were transported ten hours earlier
than originally scheduled, there was no reason for private respondents' personnel to disclaim knowledge of the arrival or whereabouts of the
same other than their sheer arrogance, indifference and extreme insensitivity to the feelings of petitioners. Moreover, being passengers and
not merely consignors of goods, petitioners had the right to be treated with courtesy, respect, kindness and due consideration.
In riposte, TWA claims that its employees have always dealt politely with all clients, customers and the public in general. PAL, on the other
hand, declares that in the performance of its obligation to the riding public, other customers and clients, it has always acted with justice,
honesty, courtesy and good faith.
Respondent appellate court found merit in and reproduced the trial court's refutation of this assigned error:
About the only evidence of plaintiffs that may have reference to the manner with which the personnel of defendants treated the two plaintiffs at
the San Francisco Airport are the following pertinent portions of Maria Saludo's testimony:
Q When you arrived there, what did you do, if any?

A I immediately went to the TWA counter and I inquired about whether my mother was there or if' they knew anything about it.
Q What was the answer?
A They said they do not know. So, we waited.
Q About what time was that when you reached San Francisco from Chicago?
A I think 5 o'clock. Somewhere around that in the afternoon.
Q You made inquiry it was immediately thereafter?
A Right after we got off the plane.
Q Up to what time did you stay in the airport to wait until the TWA people could tell you the whereabouts?
A Sorry, Sir, but the TWA did not tell us anything. We stayed there until about 9 o'clock. They have not heard anything about it. They did not
say anything.
Q Do you want to convey to the Court that from 5 up to 9 o'clock in the evening you yourself went back to the TWA and they could not tell you
where the remains of your mother were?
A Yes sir.
Q And after nine o'clock, what did you do?
A I told my brother my Mom was supposed to be on the Philippine Airlines flight. "Why don't" we check with PAL instead to see if she was
there?" We tried to comfort each other. I told him anyway that was a shortest flight from Chicago to California. We will be with our mother on
this longer flight. So, we checked with the PAL.
Q What did you find?
Q Who was that brother?
A We learned, Yes, my Mom would be on the flight.

A Saturnino Saludo.
Q And did you find what was your flight from San Francisco to the Philippines?
A I do not know the number. It was the evening flight of the Philippine Airline(s) from San Francisco to Manila.
Q You took that flight with your mother?
A We were scheduled to, Sir.
Q Now, you could not locate the remains of your mother in San Francisco could you tell us what did you feel?
A After we were told that my mother was not there?
Q After you learned that your mother could not fly with you from Chicago to California?
A Well, I was very upset. Of course, I wanted the confirmation that my mother was in the West Coast. The fliqht was about 5 hours from
Chicago to California. We waited anxiously all that time on the plane. I wanted to be assured about my mother's remains. But there was
nothing and we could not get any assurance from anyone about it.
Q Your feeling when you reached San Francisco and you could not find out from the TWA the whereabouts of the remains, what did you feel?
A Something nobody would be able to describe unless he experiences it himself. It is a kind of panic. I think it's a feeling you are about to go
crazy. It is something I do not want to live through again. (Inting, t.s.n., Aug. 9, 1983, pp. 14-18).
The foregoing does not show any humiliating or arrogant manner with which the personnel of both defendants treated the two plaintiffs. Even
their alleged indifference is not clearly established. The initial answer of the TWA personnel at the counter that they did not know anything
about the remains, and later, their answer that they have not heard anything about the remains, and the inability of the TWA counter personnel
to inform the two plaintiffs of the whereabouts of the remains, cannot be said to be total or complete indifference to the said plaintiffs. At any
rate, it is any rude or discourteous conduct, malfeasance or neglect, the use of abusive or insulting language calculated to humiliate and
shame passenger or had faith by or on the part of the employees of the carrier that gives the passenger an action for damages against the
carrier (Zulueta vs. Pan American World Airways, 43 SCRA 397; Air France vs. Carrascoso, et al., 18 SCRA 155; Lopez, et al. vs. Pan
American World Airways, 16 SCRA 431; Northwest Airlines, Inc. vs. Cuenca, 14 SCRA 1063), and none of the above is obtaining in the instant
case. 67
We stand by respondent court's findings on this point, but only to the extent where it holds that the manner in which private respondent TWA's
employees dealt with petitioners was not grossly humiliating, arrogant or indifferent as would assume the proportions of malice or bad faith
and lay the basis for an award of the damages claimed. It must however, be pointed out that the lamentable actuations of respondent TWA's
employees leave much to be desired, particularly so in the face of petitioners' grief over the death of their mother, exacerbated by the tension
and anxiety wrought by the impasse and confusion over the failure to ascertain over an appreciable period of time what happened to her
remains.
Airline companies are hereby sternly admonished that it is their duty not only to cursorily instruct but to strictly require their personnel to be
more accommodating towards customers, passengers and the general public. After all, common carriers such as airline companies are in the
business of rendering public service, which is the primary reason for their enfranchisement and recognition in our law. Because the
passengers in a contract of carriage do not contract merely for transportation, they have a right to be treated with kindness, respect, courtesy
and consideration. 68 A contract to transport passengers is quite different in kind and degree from any other contractual relation, and generates
a relation attended with public duty. The operation of a common carrier is a business affected with public interest and must be directed to
serve the comfort and convenience of passengers. 69 Passengers are human beings with human feelings and emotions; they should not be
treated as mere numbers or statistics for revenue.
The records reveal that petitioners, particularly Maria and Saturnino Saludo, agonized for nearly five hours, over the possibility of losing their
mother's mortal remains, unattended to and without any assurance from the employees of TWA that they were doing anything about the
situation. This is not to say that petitioners were to be regaled with extra special attention. They were, however, entitled to the understanding
and humane consideration called for by and commensurate with the extraordinary diligence required of common carriers, and not the cold
insensitivity to their predicament. It is hard to believe that the airline's counter personnel were totally helpless about the situation. Common
sense would and should have dictated that they exert a little extra effort in making a more extensive inquiry, by themselves or through their
superiors, rather than just shrug off the problem with a callous and uncaring remark that they had no knowledge about it. With all the modern
communications equipment readily available to them, which could have easily facilitated said inquiry and which are used as a matter of course
by airline companies in their daily operations, their apathetic stance while not legally reprehensible is morally deplorable.
Losing a loved one, especially one's, parent, is a painful experience. Our culture accords the tenderest human feelings toward and in
reverence to the dead. That the remains of the deceased were subsequently delivered, albeit belatedly, and eventually laid in her final resting
place is of little consolation. The imperviousness displayed by the airline's personnel, even for just that fraction of time, was especially
condemnable particularly in the hour of bereavement of the family of Crispina Saludo, intensified by anguish due to the uncertainty of the
whereabouts of their mother's remains. Hence, it is quite apparent that private respondents' personnel were remiss in the observance of that
genuine human concern and professional attentiveness required and expected of them.
The foregoing observations, however, do not appear to be applicable or imputable to respondent PAL or its employees. No attribution of
discourtesy or indifference has been made against PAL by petitioners and, in fact, petitioner Maria Saludo testified that it was to PAL that they
repaired after failing to receive proper attention from TWA. It was from PAL that they received confirmation that their mother's remains would
be on the same flight to Manila with them.
We find the following substantiation on this particular episode from the deposition of Alberto A. Lim, PAL's cargo supervisor earlier adverted to,
regarding their investigation of and the action taken on learning of petitioner's problem:
ATTY. ALBERTO C. MENDOZA:
Yes.
Mr. Lim, what exactly was your procedure adopted in your so called investigation?
ALBERTO A. LIM: I called the lead agent on duty at that time and requested for a copy of airway bill, transfer manifest and other documents
concerning the shipment.
ATTY ALBERTO C. MENDOZA:
Then, what?
ALBERTO A. LIM: They proceeded to analyze exactly where PAL failed, if any, in forwarding the human remains of Mrs. Cristina (sic) Saludo.
And I found out that there was not (sic) delay in shipping the remains of Mrs. Saludo to Manila. Since we received the body from American
Airlines on 28 October at 7:45 and we expedited the shipment so that it could have been loaded on our flight leaving at 9:00 in the evening or
just barely one hour and 15 minutes prior to the departure of the aircraft. That is so (sic) being the case, I reported to Manila these
circumstances. 70
IV. Finally, petitioners insist, as a consequence of the delay in the shipment of their mother's remains allegedly caused by wilful contractual
breach, on their entitlement to actual, moral and exemplary damages as well as attorney's fees, litigation expenses, and legal interest.
The uniform decisional tenet in our jurisdiction bolds that moral damages may be awarded for wilful or fraudulent breach of contract 71 or when
such breach is attended by malice or bad faith. 72 However, in the absence of strong and positive evidence of fraud, malice or bad faith, said
damages cannot be awarded. 73 Neither can there be an award of exemplary damages 74 nor of attorney's fees 75 as an item of damages in the
absence of proof that defendant acted with malice, fraud or bad faith.
The censurable conduct of TWA's employees cannot, however, be said to have approximated the dimensions of fraud, malice or bad faith. It can be
said to be more of a lethargic reaction produced and engrained in some people by the mechanically routine nature of their work and a racial or societal
culture which stultifies what would have been their accustomed human response to a human need under a former and different ambience.
Nonetheless, the facts show that petitioners' right to be treated with due courtesy in accordance with the degree of diligence required by law to
be exercised by every common carrier was violated by TWA and this entitles them, at least, to nominal damages from TWA alone. Articles
2221 and 2222 of the Civil Code make it clear that nominal damages are not intended for indemnification of loss suffered but for the
vindication or recognition of a right violated of invaded. They are recoverable where some injury has been done but the amount of which the
evidence fails to show, the assessment of damages being left to the discretion of the court according to the circumstances of the case. 76 In the
exercise of our discretion, we find an award of P40,000.00 as nominal damages in favor of, petitioners to be a reasonable amount under the
circumstances of this case.
WHEREFORE, with the modification that an award of P40,000.00 as and by way of nominal damages is hereby granted in favor of petitioners
to be paid by respondent Trans World Airlines, the appealed decision is AFFIRMED in all other respects.
SO ORDERED.
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 125524
August 25, 1999
BENITO MACAM doing business under the name and style BEN-MAC ENTERPRISES, petitioner, vs.
COURT OF APPEALS, CHINA OCEAN SHIPPING CO., and/or WALLEM PHILIPPINES SHIPPING, INC., respondents.
BELLOSILLO, J.:
On 4 April 1989 petitioner Benito Macam, doing business under the name and style Ben-Mac Enterprises, shipped on board the vessel Nen
Jiang, owned and operated by respondent China Ocean Shipping Co., through local agent respondent Wallem Philippines Shipping, Inc.
(hereinafter WALLEM), 3,500 boxes of watermelons valued at US$5,950.00 covered by Bill of Lading No. HKG 99012 and exported through
Letter of Credit No. HK 1031/30 issued by National Bank of Pakistan, Hongkong (hereinafter PAKISTAN BANK) and 1,611 boxes of fresh
mangoes with a value of US$14,273.46 covered by Bill of Lading No. HKG 99013 and exported through Letter of Credit No. HK 1032/30 also
issued by PAKISTAN BANK. The Bills of Lading contained the following pertinent provision: "One of the Bills of Lading must be surrendered
duly endorsed in exchange for the goods or delivery order.1 The shipment was bound for Hongkong with PAKISTAN BANK as consignee and
Great Prospect Company of Kowloon, Hongkong (hereinafter GPC) as notify party.
On 6 April 1989, per letter of credit requirement, copies of the bills of lading and commercial invoices were submitted to petitioner's depository
bank, Consolidated Banking Corporation (hereinafter SOLIDBANK), which paid petitioner in advance the total value of the shipment of
US$20,223.46.1wphi1.nt
Upon arrival in Hongkong, the shipment was delivered by respondent WALLEM directly to GPC, not to PAKISTAN BANK, and without the
required bill of lading having been surrendered. Subsequently, GPC failed to pay PAKISTAN BANK such that the latter, still in possession of
the original bills of lading, refused to pay petitioner through SOLIDBANK. Since SOLIDBANK already pre-paid petitioner the value of the
shipment, it demanded payment from respondent WALLEM through five (5) letters but was refused. Petitioner was thus allegedly constrained
to return the amount involved to SOLIDBANK, then demanded payment from respondent WALLEM in writing but to no avail.
On 25 September 1991 petitioner sought collection of the value of the shipment of US$20,223.46 or its equivalent of P546,033.42 from respondents
before the Regional Trial Court of Manila, based on delivery of the shipment to GPC without presentation of the bills of lading and bank guarantee.
Respondents contended that the shipment was delivered to GPC without presentation of the bills of lading and bank guarantee per request of
petitioner himself because the shipment consisted of perishable goods. The telex dated 5 April 1989 conveying such request read
AS PER SHPR'S REQUEST KINDLY ARRANGE DELIVERY OF A/M SHIPT TO RESPECTIVE CNEES WITHOUT PRESENTATION OF
OB/L2 and bank guarantee since for prepaid shipt ofrt charges already fully paid our end . . . . 3
Respondents explained that it is a standard maritime practice, when immediate delivery is of the essence, for the shipper to request or instruct
the carrier to deliver the goods to the buyer upon arrival at the port of destination without requiring presentation of the bill of lading as that
usually takes time. As proof thereof, respondents apprised the trial court that for the duration of their two-year business relationship with
petitioner concerning similar shipments to GPC deliveries were effected without presentation of the bills of lading. 4 Respondents advanced
next that the refusal of PAKISTAN BANK to pay the letters of credit to SOLIDBANK was due to the latter's failure to submit a Certificate of
Quantity and Quality. Respondents counterclaimed for attorney's fees and costs of suit.
On 14 May 1993 the trial court ordered respondents to pay, jointly and severally, the following amounts: (1) P546,033.42 plus legal interest
from 6 April 1989 until full payment; (2) P10,000.00 as attorney's fees; and, (3) the costs. The counterclaims were dismissed for lack of merit. 5
The trial court opined that respondents breached the provision in the bill of lading requiring that "one of the Bills of Lading must be
surrendered duly endorsed in exchange for the goods or delivery order," when they released the shipment to GPC without presentation of the
bills of lading and the bank guarantee that should have been issued by PAKISTAN BANK in lieu of the bills of lading. The trial court added that
the shipment should not have been released to GPC at all since the instruction contained in the telex was to arrange delivery to the respective
consignees and not to any party. The trial court observed that the only role of GPC in the transaction as notify party was precisely to be
notified of the arrival of the cargoes in Hongkong so it could in turn duly advise the consignee.
Respondent Court of Appeals appreciated the evidence in a different manner. According to it, as established by previous similar transactions
between the parties, shipped cargoes were sometimes actually delivered not to the consignee but to notify party GPC without need of the bills
of lading or bank guarantee.6 Moreover, the bills of lading were viewed by respondent court to have been properly superseded by the telex
instruction and to implement the instruction, the delivery of the shipment must be to GPC, the real importer/buyer of the goods as shown by
the export invoices,7 and not to PAKISTAN BANK since the latter could very well present the bills of lading in its possession; likewise, if it were
the PAKISTAN BANK to which the cargoes were to be strictly delivered it would no longer be proper to require a bank guarantee. Respondent
court noted that besides, GPC was listed as a consignee in the telex. It observed further that the demand letter of petitioner to respondents
never complained of misdelivery of goods. Lastly, respondent court found that petitioner's claim of having reimbursed the amount involved to
SOLIDBANK was unsubstantiated. Thus, on 13 March 1996 respondent court set aside the decision of the trial court and dismissed the
complaint together with the counterclaims.8 On 5 July 1996 reconsideration was denied.9
Petitioner submits that the fact that the shipment was not delivered to the consignee as stated in the bill of lading or to a party designated or
named by the consignee constitutes a misdelivery thereof. Moreover, petitioner argues that from the text of the telex, assuming there was such
an instruction, the delivery of the shipment without the required bill of lading or bank guarantee should be made only to the designated
consignee, referring to PAKISTAN BANK.
We are not persuaded. The submission of petitioner that "the fact that the shipment was not delivered to the consignee as stated in the Bill of
Lading or to a party designated or named by the consignee constitutes a misdelivery thereof" is a deviation from his cause of action before the
trial court. It is clear from the allegation in his complaint that it does not deal with misdelivery of the cargoes but of delivery to GPC without the
required bills of lading and bank guarantee
6. The goods arrived in Hongkong and were released by the defendant Wallem directly to the buyer/notify party, Great Prospect Company and
not to the consignee, the National Bank of Pakistan, Hongkong, without the required bills of lading and bank guarantee for the release of the
shipment issued by the consignee of the goods . . . .10
Even going back to an event that transpired prior to the filing of the present case or when petitioner wrote respondent WALLEM demanding
payment of the value of the cargoes, misdelivery of the cargoes did not come into the picture
We are writing you on behalf of our client, Ben-Mac Enterprises who informed us that Bills of Lading No. 99012 and 99013 with a total value of
US$20,223.46 were released to Great Prospect, Hongkong without the necessary bank guarantee. We were further informed that the consignee of the
goods, National Bank of Pakistan, Hongkong, did not release or endorse the original bills of lading. As a result thereof, neither the consignee, National
Bank of Pakistan, Hongkong, nor the importer, Great Prospect Company, Hongkong, paid our client for the goods . . . . 11
At any rate, we shall dwell on petitioner's submission only as a prelude to our discussion on the imputed liability of respondents concerning the
shipped goods. Article 1736 of the Civil Code provides
Art. 1736. The extraordinary responsibility of the common carriers lasts from the time the goods are unconditionally placed in the possession
of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to
the person who has a right to receive them, without prejudice to the provisions of article 1738.12
We emphasize that the extraordinary responsibility of the common carriers lasts until actual or constructive delivery of the cargoes to the
consignee or to the person who has a right to receive them. PAKISTAN BANK was indicated in the bills of lading as consignee whereas GPC
was the notify party. However, in the export invoices GPC was clearly named as buyer/importer. Petitioner also referred to GPC as such in his
demand letter to respondent WALLEM and in his complaint before the trial court. This premise draws us to conclude that the delivery of the
cargoes to GPC as buyer/importer which, conformably with Art. 1736 had, other than the consignee, the right to receive them 14 was proper.
The real issue is whether respondents are liable to petitioner for releasing the goods to GPC without the bills of lading or bank guarantee.
Respondents submitted in evidence a telex dated 5 April 1989 as basis for delivering the cargoes to GPC without the bills of lading and bank
guarantee. The telex instructed delivery of various shipments to the respective consignees without need of presenting the bill of lading and
bank guarantee per the respective shipper's request since "for prepaid shipt ofrt charges already fully paid." Petitioner was named therein as
shipper and GPC as consignee with respect to Bill of Lading Nos. HKG 99012 and HKG 99013. Petitioner disputes the existence of such
instruction and claims that this evidence is self-serving.
From the testimony of petitioner, we gather that he has been transacting with GPC as buyer/importer for around two (2) or three (3) years
already. When mangoes and watermelons are in season, his shipment to GPC using the facilities of respondents is twice or thrice a week. The
goods are released to GPC. It has been the practice of petitioner to request the shipping lines to immediately release perishable cargoes such
as watermelons and fresh mangoes through telephone calls by himself or his "people." In transactions covered by a letter of credit, bank
guarantee is normally required by the shipping lines prior to releasing the goods. But for buyers using telegraphic transfers, petitioner
dispenses with the bank guarantee because the goods are already fully paid. In his several years of business relationship with GPC and
respondents, there was not a single instance when the bill of lading was first presented before the release of the cargoes. He admitted the
existence of the telex of 3 July 1989 containing his request to deliver the shipment to the consignee without presentation of the bill of lading 15
but not the telex of 5 April 1989 because he could not remember having made such request.
Consider pertinent portions of petitioner's testimony
Q: Are you aware of any document which would indicate or show that your request to the defendant Wallem for the immediate release of your
fresh fruits, perishable goods, to Great Prospect without the presentation of the original Bill of Lading?
A: Yes, by telegraphic transfer, which means that it is fully paid. And I requested immediate release of the cargo because there was immediate
payment.
Q: And you are referring, therefore, to this copy Telex release that you mentioned where your Company's name appears Ben-Mac?
Atty. Hernandez: Just for the record, Your Honor, the witness is showing a Bill of Lading referring to SKG (sic) 93023 and 93026 with Great
Prospect Company.
Atty. Ventura:
Q: Is that the telegraphic transfer?
A: Yes, actually, all the shippers partially request for the immediate release of the goods when they are perishable. I thought Wallem Shipping
Lines is not neophyte in the business. As far as LC is concerned, Bank guarantee is needed for the immediate release of the goods . . . . 15
Q: Mr. Witness, you testified that if is the practice of the shipper of the perishable goods to ask the shipping lines to release immediately the
shipment. Is that correct?
A: Yes, sir.
Q: Now, it is also the practice of the shipper to allow the shipping lines to release the perishable goods to the importer of goods without a Bill of
Lading or Bank guarantee?
A: No, it cannot be without the Bank Guarantee.
Atty. Hernandez: Q: Can you tell us an instance when you will allow the release of the perishable goods by the shipping lines to the importer
without the Bank guarantee and without the Bill of Lading?
A: As far as telegraphic transfer is concerned.
Q: Can you explain (to) this Honorable Court what telegraphic transfer is?
A: Telegraphic transfer, it means advance payment that I am already fully paid . . . .
Q: Mr. Macam, with regard to Wallem and to Great Prospect, would you know and can you recall that any of your shipment was released to
Great Prospect by Wallem through telegraphic transfer?
A: I could not recall but there were so many instances sir.
Q: Mr. Witness, do you confirm before this Court that in previous shipments of your goods through Wallem, you requested Wallem to release
immediately your perishable goods to the buyer?
A: Yes, that is the request of the shippers of the perishable goods . . . .16
Q: Now, Mr. Macam, if you request the Shipping Lines for the release of your goods immediately even without the presentation of OBL, how do
you course it?
A: Usually, I call up the Shipping Lines, sir . . . .17
Q: You also testified you made this request through phone calls. Who of you talked whenever you made such phone call?
A: Mostly I let my people to call, sir. (sic)
Q: So everytime you made a shipment on perishable goods you let your people to call? (sic)
Q: You did not make this request in writing?
A: Not everytime, sir.
A: No, sir. I think I have no written request with Wallem . . . . 18
Against petitioner's claim of "not remembering" having made a request for delivery of subject cargoes to GPC without presentation of the bills
of lading and bank guarantee as reflected in the telex of 5 April 1989 are damaging disclosures in his testimony. He declared that it was his
practice to ask the shipping lines to immediately release shipment of perishable goods through telephone calls by himself or his "people." He
no longer required presentation of a bill of lading nor of a bank guarantee as a condition to releasing the goods in case he was already fully
paid. Thus, taking into account that subject shipment consisted of perishable goods and SOLIDBANK pre-paid the full amount of the value
thereof, it is not hard to believe the claim of respondent WALLEM that petitioner indeed requested the release of the goods to GPC without
presentation of the bills of lading and bank guarantee.
The instruction in the telex of 5 April 1989 was "to deliver the shipment to respective consignees." And so petitioner argues that, assuming
there was such an instruction, the consignee referred to was PAKISTAN BANK. We find the argument too simplistic. Respondent court
analyzed the telex in its entirety and correctly arrived at the conclusion that the consignee referred to was not PAKISTAN BANK but GPC
There is no mistake that the originals of the two (2) subject Bills of Lading are still in the possession of the Pakistani Bank. The appealed
decision affirms this fact. Conformably, to implement the said telex instruction, the delivery of the shipment must be to GPC, the notify party or
real importer/buyer of the goods and not the Pakistani Bank since the latter can very well present the original Bills of Lading in its possession.
Likewise, if it were the Pakistani Bank to whom the cargoes were to be strictly delivered, it will no longer be proper to require a bank guarantee
as a substitute for the Bill of Lading. To construe otherwise will render meaningless the telex instruction. After all, the cargoes consist of
perishable fresh fruits and immediate delivery thereof to the buyer/importer is essentially a factor to reckon with. Besides, GPC is listed as one
among the several consignees in the telex (Exhibit 5-B) and the instruction in the telex was to arrange delivery of A/M shipment (not any party)
to respective consignees without presentation of OB/L and bank guarantee . . . .20
Apart from the foregoing obstacles to the success of petitioner's cause, petitioner failed to substantiate his claim that he returned to
SOLIDBANK the full amount of the value of the cargoes. It is not far-fetched to entertain the notion, as did respondent court, that he merely
accommodated SOLIDBANK in order to recover the cost of the shipped cargoes from respondents. We note that it was SOLIDBANK which
initially demanded payment from respondents through five (5) letters. SOLIDBANK must have realized the absence of privity of contract
between itself and respondents. That is why petitioner conveniently took the cudgels for the bank.
In view of petitioner's utter failure to establish the liability of respondents over the cargoes, no reversible error was committed by respondent
court in ruling against him.
WHEREFORE, the petition is DENIED. The decision of respondent Court of Appeals of 13 March 1996 dismissing the complaint of petitioner
Benito Macam and the counterclaims of respondents China Ocean Shipping Co. and/or Wallem Philippines Shipping, Inc., as well as its
resolution of 5 July 1996 denying reconsideration, is AFFIRMED.1wphi1.nt
SO ORDERED.
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 94761 May 17, 1993

MAERSK LINE, petitioner,
vs.
COURT OF APPEALS AND EFREN V. CASTILLO, doing business under the name and style of Ethegal Laboratories, respondents.
BIDIN, J.:
Petitioner Maersk Line is engaged in the transportation of goods by sea, doing business in the Philippines through its general agent Compania
General de Tabacos de Filipinas.
Private respondent Efren Castillo, on the other hand, is the proprietor of Ethegal Laboratories, a firm engaged in the manutacture of
pharmaceutical products.
On November 12, 1976, private respondent ordered from Eli Lilly. Inc. of Puerto Rico through its (Eli Lilly, Inc.'s) agent in the Philippines,
Elanco Products, 600,000 empty gelatin capsules for the manufacture of his pharmaceutical products. The capsules were placed in six (6)
drums of 100,000 capsules each valued at US $1,668.71.
Through a Memorandum of Shipment (Exh. "B"; AC GR CV No.10340, Folder of Exhibits, pp. 5-6), the shipper Eli Lilly, Inc. of Puerto Rico
advised private respondent as consignee that the 600,000 empty gelatin capsules in six (6) drums of 100,000 capsules each, were already
shipped on board MV "Anders Maerskline" under Voyage No. 7703 for shipment to the Philippines via Oakland, California. In said
Memorandum, shipper Eli Lilly, Inc. specified the date of arrival to be April 3, 1977.
For reasons unknown, said cargo of capsules were mishipped and diverted to Richmond, Virginia, USA and then transported back Oakland,
Califorilia. The goods finally arrived in the Philippines on June 10, 1977 or after two (2) months from the date specified in the memorandum. As
a consequence, private respondent as consignee refused to take delivery of the goods on account of its failure to arrive on time.
Private respondent alleging gross negligence and undue delay in the delivery of the goods, filed an action before the court a quo for rescission
of contract with damages against petitioner and Eli Lilly, Inc. as defendants.
Denying that it committed breach of contract, petitioner alleged in its that answer that the subject shipment was transported in accordance with
the provisions of the covering bill of lading and that its liability under the law on transportation of good attaches only in case of loss, destruction
or deterioration of the goods as provided for in Article 1734 of Civil Code (Rollo, p. 16).
Defendant Eli Lilly, Inc., on the other hand, filed its answer with compulsory and cross-claim. In its cross-claim, it alleged that the delay in the
arrival of the the subject merchandise was due solely to the gross negligence of petitioner Maersk Line.
The issues having been joined, private respondent moved for the dismissal of the complaint against Eli Lilly, Inc.on the ground that the
evidence on record shows that the delay in the delivery of the shipment was attributable solely to petitioner.
Acting on private respondent's motion, the trial court dismissed the complaint against Eli Lilly, Inc. Correspondingly, the latter withdraw its
cross-claim against petitioner in a joint motion dated December 3, 1979.
After trial held between respondent and petitioner, the court a quo rendered judgment dated January 8, 1982 in favor of respondent Castillo,
the dispositive portion of which reads:
IN VIEW OF THE FOREGOING, this Court believe (sic) and so hold (sic) that there was a breach in the performance of their obligation by the
defendant Maersk Line consisting of their negligence to ship the 6 drums of empty Gelatin Capsules which under their own memorandum
shipment would arrive in the Philippines on April 3, 1977 which under Art. 1170 of the New Civil Code, they stood liable for damages.
Considering that the only evidence presented by the defendant Maersk line thru its agent the Compania de Tabacos de Filipinas is the
testimony of Rolando Ramirez who testified on Exhs. "1" to "5" which this Court believe (sic) did not change the findings of this Court in its
decision rendered on September 4, 1980, this Court hereby renders judgment in favor of the plaintiff Efren Castillo as against the defendant
Maersk Line thru its agent, the COMPANIA GENERAL DE TABACOS DE FILIPINAS and ordering:
(a) Defendant to pay the plaintiff Efren V. Castillo the amount of THREE HUNDRED SIXTY NINE THOUSAND PESOS, (P369,000.00) as
unrealized profit;.
(b) Defendant to pay plaintiff the sum of TWO HUNDRED THOUSAND PESOS (P200,000.00), as moral damages;
(c) Defendant to pay plaintiff the sum of TEN THOUSAND PESOS (P10,000.00) as exemplary damages;
(d) Defendant to pay plaintiff the sum of ELEVEN THOUSAND SIX HUNDRED EIGHTY PESOS AND NINETY SEVEN CENTAVOS
(P11,680.97) as cost of credit line; and
(e) Defendant to pay plaintiff the sum of FIFTY THOUSAND PESOS (P50,000.00), as attorney's fees and to pay the costs of suit.
That the above sums due to the plaintiff will bear the legal rate of interest until they are fully paid from the time the case was filed.
SO ORDERED. (AC-GR CV No. 10340, Rollo, p. 15).
On appeal, respondent court rendered its decision dated August 1, 1990 affirming with modifications the lower court's decision as follows:
WHEREFORE, the decision appealed from is affirmed with a modification, and, as modified, the judgment in this case should read as follows:
Judgment is hereby rendered ordering defendant-appellant Maersk Line to pay plaintiff-appellee (1) compensatory damages of P11,680.97 at
6% annual interest from filing of the complaint until fully paid, (2) moral damages of P50,000.00, (3) exemplary damages of P20,000,00, (3)
attorney's fees, per appearance fees, and litigation expenses of P30,000.00, (4) 30% of the total damages awarded except item (3) above,
and the costs of suit.
SO ORDERED. (Rollo, p. 50)
In its Memorandum, petitioner submits the following "issues" for resolution of the court :
I. Whether or not the respondent Court of Appeals committed an error when it ruled that a defendant's cross-claim against a co-defendant
survives or subsists even after the dismissal of the complaint against defendant-cross claimant.
II. Whether or not respondent Castillo is entitled to damages resulting from delay in the delivery of the shipment in the absence in the bill of
lading of a stipulation on the period of delivery.
III. Whether or not the respondent appellate court erred in awarding actual, moral and exemplary damages and attorney's fees despite the
absence of factual findings and/or legal bases in the text of the decision as support for such awards.
IV. Whether or not the respondent Court of Appeals committed an error when it rendered an ambiguous and unexplained award in the
dispositive portion of the decision which is not supported by the body or the text of the decision. (Rollo, pp.94-95).
With regard to the first issue raised by petitioner on whether or not a defendant's cross-claim against co-defendant (petitioner herein) survives
or subsists even after the dismissal of the complaint against defendant-cross-claimant (petitioner herein), we rule in the negative.
Apparently this issue was raised by reason of the declaration made by respondent court in its questioned decision, as follows:
Re the first assigned error: What should be rescinded in this case is not the "Memorandum of Shipment" but the contract between appellee
and defendant Eli Lilly (embodied in three documents, namely: Exhs. A, A-1 and A-2) whereby the former agreed to buy and the latter to sell
those six drums of gelatin capsules. It is by virtue of the cross-claim by appellant Eli Lilly against defendant Maersk Line for the latter's gross
negligence in diverting the shipment thus causing the delay and damage to appellee that the trial court found appellant Maersk Line liable. . . .
Re the fourth assigned error: Appellant Maersk Line's insistence that appellee has no cause of action against it and appellant Eli Lilly because
the shipment was delivered in good order and condition, and the bill of lading in question contains "stipulations, exceptions and conditions"
Maersk Line's liability only to the "loss, destruction or deterioration," indeed, this issue of lack of cause of action has already been considered
in our foregoing discussion on the second assigned error, and our resolution here is still that appellee has a cause of action against appellant
Eli Lilly. Since the latter had filed a cross-claim against appellant Maersk Line, the trial court committed no error, therefore, in holding the latter
appellant ultimately liable to appellee. (Rollo, pp. 47-50; Emphasis supplied)
Reacting to the foregoing declaration, petitioner submits that its liability is predicated on the cross-claim filed its co-defendant Eli Lilly, Inc.
which cross-claim has been dismissed, the original complaint against it should likewise be dismissed. We disagree. It should be recalled that
the complaint was filed originally against Eli Lilly, Inc. as shipper-supplier and petitioner as carrier. Petitioner being an original party defendant
upon whom the delayed shipment is imputed cannot claim that the dismissal of the complaint against Eli Lilly, Inc. inured to its benefit.
Respondent court, erred in declaring that the trial court based petitioner's liability on the cross-claim of Eli Lilly, Inc. As borne out by the record,
the trial court anchored its decision on petitioner's delay or negligence to deliver the six (6) drums of gelatin capsules within a reasonable time
on the basis of which petitioner was held liable for damages under Article 1170 of the New Civil Code which provides that those who in the
performance of their obligations are guilty of fraud, negligence, or delay and those who in any manner contravene the tenor thereof, are liable
for damages.
Nonetheless, petitioner maintains that it cannot be held for damages for the alleged delay in the delivery of the 600,000 empty gelatin
capsules since it acted in good faith and there was no special contract under which the carrier undertook to deliver the shipment on or before a
specific date.
On the other hand, private respondent claims that during the period before the specified date of arrival of the goods, he had made several
commitments and contract of adhesion. Therefore, petitioner can be held liable for the damages suffered by private respondent for the
cancellation of the contracts he entered into.
We have carefully reviewed the decisions of respondent court and the trial court and both of them show that, in finding petitioner liable for
damages for the delay in the delivery of goods, reliance was made on the rule that contracts of adhesion are void. Added to this, the lower
court stated that the exemption against liability for delay is against public policy and is thus, void. Besides, private respondent's action is
anchored on Article 1170 of the New Civil Code and not under the law on Admiralty (AC-GR CV No. 10340, Rollo, p. 14).
The bill of lading covering the subject shipment among others, reads:
6. GENERAL
(1) The Carrier does not undertake that the goods shall arive at the port of discharge or the place of delivery at any particular time or to meet
any particular market or use and save as is provided in clause 4 the Carrier shall in no circumstances be liable for any direct, indirect or
consequential loss or damage caused by delay. If the Carrier should nevertheless be held legally liable for any such direct or indirect or
consequential loss or damage caused by delay, such liability shall in no event exceed the freight paid for the transport covered by this Bill of
Lading. (Exh. "1-A"; AC-G.R. CV No. 10340, Folder of Exhibits, p. 41)
It is not disputed that the aforequoted provision at the back of the bill of lading, in fine print, is a contract of adhesion. Generally, contracts of
adhesion are considered void since almost all the provisions of these types of contracts are prepared and drafted only by one party, usually
the carrier (Sweet Lines v. Teves, 83 SCRA 361 [1978]). The only participation left of the other party in such a contract is the affixing of his
signature thereto, hence the term "Adhesion" (BPI Credit Corporation v. Court of Appeals, 204 SCRA 601 [1991]; Angeles v. Calasanz, 135
SCRA 323 [1985]).
Nonetheless, settled is the rule that bills of lading are contracts not entirely prohibited (Ong Yiu v. Court of Appeals, et al., 91 SCRA 223
[1979]; Servando, et al. v. Philippine Steam Navigation Co., 117 SCRA 832 [1982]). One who adheres to the contract is in reality free to reject
it in its entirety; if he adheres, he gives his consent (Magellan Manufacturing Marketing Corporation v. Court of Appeals, et al., 201 SCRA 102
[1991]).
In Magellan, (supra), we ruled:
It is a long standing jurisprudential rule that a bill of lading operates both as a receipt and as contract to transport and deliver the same a
therein stipulated. As a contract, it names the parties, which includes the consignee, fixes the route, destination, and freight rates or charges,
and stipulates the rights and obligations assumed by the parties. Being a contract, it is the law between the parties who are bound by its terms
and conditions provided that these are not contrary to law, morals, good customs, public order and public policy. A bill of lading usually
becomes effective upon its delivery to and acceptance by the shipper. It is presumed that the stipulations of the bill were, in the absence of
fraud, concealment or improper conduct, known to the shipper, and he is generally bound by his acceptance whether he reads the bill or not.
However, the aforequoted ruling applies only if such contracts will not create an absurd situation as in the case at bar. The questioned
provision in the subject bill of lading has the effect of practically leaving the date of arrival of the subject shipment on the sole determination
and will of the carrier.
While it is true that common carriers are not obligated by law to carry and to deliver merchandise, and persons are not vested with the right to
prompt delivery, unless such common carriers previously assume the obligation to deliver at a given date or time (Mendoza v. Philippine Air
Lines, Inc., 90 Phil. 836 [1952]), delivery of shipment or cargo should at least be made within a reasonable time.
In Saludo, Jr. v. Court of Appeals (207 SCRA 498 [1992]) this Court held:
The oft-repeated rule regarding a carrier's liability for delay is that in the absence of a special contract, a carrier is not an insurer against delay
in transportation of goods. When a common carrier undertakes to convey goods, the law implies a contract that they shall be delivered at
destination within a reasonable time, in the absence, of any agreement as to the time of delivery. But where a carrier has made an express
contract to transport and deliver properly within a specified time, it is bound to fulfill its contract and is liable for any delay, no matter from what
cause it may have arisen. This result logically follows from the well-settled rule that where the law creates a duty or charge, and the default in
himself, and has no remedy over, then his own contract creates a duty or charge upon himself, he is bound to make it good notwithstanding
any accident or delay by inevitable necessity because he might have provided against it by contract. Whether or not there has been such an
undertaking on the part of the carrier is to be determined from the circumstances surrounding the case and by application of the ordinary rules
for the interpretation of contracts.
An examination of the subject bill of lading (Exh. "1"; AC GR CV No. 10340, Folder of Exhibits, p. 41) shows that the subject shipment was
estimated to arrive in Manila on April 3, 1977. While there was no special contract entered into by the parties indicating the date of arrival of
the subject shipment, petitioner nevertheless, was very well aware of the specific date when the goods were expected to arrive as indicated in
the bill of lading itself. In this regard, there arises no need to execute another contract for the purpose as it would be a mere superfluity.
In the case before us, we find that a delay in the delivery of the goods spanning a period of two (2) months and seven (7) days falls was
beyond the realm of reasonableness. Described as gelatin capsules for use in pharmaceutical products, subject shipment was delivered to,
and left in, the possession and custody of petitioner-carrier for transport to Manila via Oakland, California. But through petitioner's negligence
was mishipped to Richmond, Virginia. Petitioner's insitence that it cannot be held liable for the delay finds no merit.
Petition maintains that the award of actual, moral and exemplary dames and attorney's fees are not valid since there are no factual findings or
legal bases stated in the text of the trial court's decision to support the award thereof.
Indeed, it is settled that actual and compensataory damages requires substantial proof (Capco v. Macasaet. 189 SCRA 561 [1990]). In the
case at bar, private respondent was able to sufficiently prove through an invoice (Exh. 'A-1'), certification from the issuer of the letter of credit
(Exh.'A-2') and the Memorandum of Shipment (Exh. "B"), the amount he paid as costs of the credit line for the subject goods. Therefore,
respondent court acted correctly in affirming the award of eleven thousand six hundred eighty pesos and ninety seven centavos (P11,680.97)
as costs of said credit line.
As to the propriety of the award of moral damages, Article 2220 of the Civil Code provides that moral damages may be awarded in "breaches
of contract where the defendant acted fraudulently or in bad faith" (Pan American World Airways v. Intermediate Appellate Court, 186 SCRA
687 [1990]).
In the case before us, we that the only evidence presented by petitioner was the testimony of Mr. Rolando Ramirez, a claims manager of its
agent Compania General de Tabacos de Filipinas, who merely testified on Exhs. '1' to '5' (AC-GR CV No. 10340, p. 2) and nothing else.
Petitioner never even bothered to explain the course for the delay, i.e. more than two (2) months, in the delivery of subject shipment. Under
the circumstances of the case, we hold that petitioner is liable for breach of contract of carriage through gross negligence amounting to bad
faith. Thus, the award of moral damages if therefore proper in this case.
In line with this pronouncement, we hold that exemplary damages may be awarded to the private respondent. In contracts, exemplary
damages may be awarded if the defendant acted in a wanton, fraudulent, reckless, oppresive or malevolent manner. There was gross
negligence on the part of the petitioner in mishiping the subject goods destined for Manila but was inexplicably shipped to Richmond, Virginia,
U.S.A. Gross carelessness or negligence contitutes wanton misconduct, hence, exemplary damages may be awarded to the aggrieved party.
Although attorney's fees are generally not recoverable, a party can be held lible for such if exemplary damages are awarded (Artice 2208,
New Civil Code). In the case at bar, we hold that private respondent is entitled to reasonable attorney`s fees since petitioner acte with gross
negligence amounting to bad faith.
However, we find item 4 in the dispositive portion of respondent court`s decision which awarded thirty (30) percent of the total damages
awarded except item 3 regarding attorney`s fees and litigation expenses in favor of private respondent, to be unconsionable, the same should
be deleted.
WHEREFORE, with the modification regarding the deletion of item 4 of respondent court`s decision, the appealed decision is is hereby
AFFIRMED in all respects.
SO ORDERED.

SUPREME COURT
Manila
EN BANC
G.R. No. L-28028
November 25, 1927
JUAN YSMAEL & CO., INC., plaintiff-appellee,

vs.
GABINO BARRETTO & CO., LTD., ET AL., defendants. ANDRES H. LIMGENGCO and VICENTE JAVIER, appellants.
Gibbs and McDonough for appellants.
Felipe Ysmael and Grey & Encarnacion for appellee.
STATEMENT
In this action plaintiff, a domestic corporation, seeks to recover from the defendants P9,940.95 the alleged value of four cases of
merchandise which it delivered to the steamship Andres on October 25, 1922, at Manila to be shipped to Surigao, but which were never
delivered to Salomon Sharuff, the consignee, or returned to the plaintiff. The original complaint was amended to include Gabino Barretto and
P. E. Soon as members of the limited partnership of Gabino Barretto & Company, Limited.
In their amended answers defendants make a specific denial of all of the material allegations of the complaint, and as special defense
allege that the four cases of merchandise in question were never delivered to them, and that under the provisions of paragraph the provisions
of paragraph 7 of the printed conditions appearing on the back of the bill of lading, plaintiff's right of action is barred for the reason that it was
not brought within sixty days from the time the cause of action accrued. The defendant Soon did not answer the complaint, and the defendants
further alleged:
I. That under and by virtue of provision 12 of the bill of lading referred to in plaintiff's amended complaint, the defendants are
not liable in excess of three hundred pesos (P300) for any package of silk unless the value and contents of such packages are
correctly declared in the bill of lading at the time of shipment, etc.
The evidence was taken upon such issues, and the lower court rendered judgment for the plaintiff for the full amount of its claim, from
which the defendants Andres H. Limgengco and Vicente Javier appeal and assign the following errors:
I. The lower court erred in finding that one hundred sixty-four cases of goods were delivered to and loaded on the steamship
Andres.
II. The lower court erred in holding that appellee was not bound by the terms of the bills of lading of covering the shipments.
III. The trial court erred in failing to take into consideration appellants' special defense based on clause 12 of the bills of lading.
IV. The lower court erred in rendering judgment against appellants in the sum of P9,940.95.
JOHNS, J.:
The only question involved in the first assignment of error is one of fact upon which in its decision the trial court said:
With regard to the first question, plaintiff's testimony, together with the manifest (Exhibit D), signed by "G. Barretto, Agents,"
for Andres Heras Limgengco covering the shipment of the merchandise in question, wherein 165 cases of merchandise appear as
belonging to the plaintiff corporation and the bills of lading, Exhibits I, J and K, signed by the second officer, Claro Galleros for the
shipment of the 165 cases, and Exhibits H, which is a triplicate copy of the bill of lading No. 62, on which the first officer of the
steamer Andres, Francisco Masingsong, made a note that among the merchandise discharged in Surigao were the four cases in
question, clearly shows that the defendants received from the plaintiff corporation 164 cases of merchandise, and delivered at
Surigao only 160 cases of such merchandise, and that defendants failed to deliver the said four cases in Surigao when plaintiff's
representative took delivery of the cargo at that port, and that the original figure "1" and the word "bulto" appearing on the back of
Exhibit 1 were changed by Galleros to read "5" and "bultos." The said Galleros admitted as a witness that he had Exhibit 1 in his
possession from Manila until the cargo was recounted in Surigao in the presence of the first officer, Francisco Masingsong, Salomon
Sharuff, the bodeguero and himself (Galleros). lawphil.net
The testimony of Claro Galleros to the effect that, according to the tallies made by him on the back of Exhibit 1 during the
course of loading, only 160 cases were loaded, on board the steamer Andres stands uncorroborated, and it is not supported by the
tallies themselves, as these tallies give a total of 161 cases. Mr. Galleros, testified that he had shown the annotation on the back of
Exhibit 1 reading `5 bultos en duda de menos' to Salamon Sharuff, and that Salomon Sharuff gave his conformity to the shortage,
and that on this occasion, among others, were present the first officer Francisco Masingsong, and the bodeguero in Surigao. Upon
this point, besides the testimony of Salomon Sharuff, who denied emphatically the assertion of Galleros just mentioned, we have the
note made and signed by the first officer on the face of Exhibit H that all the merchandise therein was discharged in Surigao. The
said Masingsong certainly would not have made such annotation after the delivery in Surigao, if Salomon Sharuff had in fact agreed
to the shortage as testified by Galleros, especially when we considered that the four cases, the value of which is claimed by plaintiff,
were included in said Exhibit H, and the fact that said Claro Galleros, in an affidavit signed by him before the Notary Public
Fernando Viola with regard to the lost of the four cases, did not mention the conformity of Salomon Sharuff to the said annotation of
"5 bultos en duda de menos." The defendants, without showing any legal reason therefor, did not present as witnesses the first
officer, Francisco Masingsong, and the helmsman of the steamer Andres and the bodeguero in Surigao to corroborate the testimony
of Claro Galleros.
There is ample evidence to support that finding. In fact it is sustained by a preponderance of the evidence.
The second assignment of error upon which appellants rely is founded upon paragraph 7 of the bill of lading, which is as follows:
All claims for shortage or damage must be made at the time of delivery to consignee or his agent, if the packages or
containers show exterior signs of damage; otherwise to be made in writing to the carrier within twenty-four hours from the time of
delivery. Claims for nondelivery or shipment must be presented in writing to the carrier within thirty days from the date of accrual.
Suits based upon claims arising from shortage, damage, or nondelivery of shipment shall be instituted within sixty days from date of
accrual of the right of action. Failure to make claims or to institute judicial proceedings as herein provided shall constitute a waiver of
the claim or right of action.
The goods in question were shipped from Manila on October 25, 1922, to be delivered to Salomon Sharuff in Surigao, Plaintiff's original
complaint was filed on April 17, 1923, or a little less than six months after the shipment was made.
Appellants cite and rely upon section 505 C, Corpus Juris, vol. 10, pp. 343-344, which is as follows:
Contractual Limitations As to Time For Bringing Suit. 1. In General. In the absence of any express statutory prohibition,
according to the great weight of authority, it is competent for the parties to a contract of shipment to agree on a limitation of time
shorter than the statutory limitation, within which action for breach of the contract shall be brought, and such a limitation will be
enforced if reasonable, although there is some authority to the contrary. Nevertheless to be effective such limitation must be
reasonable; and it has been said that the only limitations as to the validity of such contract are that they must be reasonable, and
that there must be prompt action on the part of the carrier in denying its liability, to the end that the shipper may be duly apprised of
the fact that suit will be necessary. Stipulations of this character are not opposed to public policy, and do not operate as a restriction
on the common-law liability of the carrier.
Also Ruling Case Law, volume 4, pp. 798-799, which reads:
256. Stipulations Limiting Time for Bringing Suit. Similar in character to the stipulations just considered prescribing a
certain time within which notice of loss must be given are the provisions frequently met with in bills of lading which require that any
action to recover for loss or damage to the article shipped should be begun within a specified period. The parties may, if they see fit,
fix by agreement a shorter time for the bringing of suit on the contract than that provided by the statute of limitations, and if the
period therein limited is reasonable, suit must brought within that time or the shipper's right of action will be barred. Such a provision
is prohibited by no rule of law nor by any consideration of public policy. Nor is it all affected by the existence within the jurisdiction of
a statutory or constitutional prohibition against carriers limiting or restricting their common law liability, since it is held that such a
stipulation does not in any way defeat the complete vestiture of the right to recover, but merely requires the assertion of that right by
action at an earlier period than would be necessary to defeat it through the operation of the ordinary statute of limitations. But the
limitation must be reasonable, and if the period of time specified is such that under the facts of the particular case the shipper could
not with reasonable diligence be enabled to bring suit before it expired, the attempted limitation is void. Thus, a provision that suit
must be brought within thirty days after the loss or damage occurred has been held unreasonable where it appeared that the transit
might reasonably consume the whole of that time. A period of forty days has on the other hand been held to be a reasonable
limitation.
Upon that question the trial court said:
Assuming, however, that the above quoted conditions came to the knowledge of the plaintiff, the Supreme court of the
Philippine Islands, has held that such stipulations in the bill of lading are not reasonable, and therefore, do not bar an action.
And it also said:
Granting, without deciding, that said conditions appearing on the back of the originals might have legal effect, the court is of
the opinion that in view of the fact that said conditions are not printed on the triplicate copies which were delivered to the plaintiff,
such conditions are not binding upon the plaintiff.
It appears that the plaintiff made its claim of loss within seven days after receipt of information that 160 cases only were delivered. Its
second claim was made on December 29, 1922, in which it said that, if the claim was not paid before January 3, 1923, it would be placed in
the hands of attorneys for collection. On January 3, 1923, Gabino Barretto & Company advised the plaintiff that it would not pay the claim, and
on April seventeenth plaintiff filed its complaint.
In the case of Aguinaldo vs. Daza (G. R. No. 25961), 1 in which the printed conditions on the bill of lading were identical with those in the
instant case, the action was not commenced for more than year after the delivery of the goods by the plaintiff and the receipt of the bill of
lading, and it was there held that:
We are of the opinion that, having regard to the situation involved in this shipment, and the slowness of communication
between Manila and Catbalogan, the contractual limitation stated in this bill of lading with respect to the time for presentation of the
written claim was insufficient. The same considerations are necessarily decisive with respect to the time required for the institution of
judicial action. It results that the stipulations relied upon by the defendant-appellee constitute no obstacle to the maintenance of the
present action.
All things considered, we are clearly of the opinion that the action was brought with a "reasonable time" as those words are specified
and defined in the authorities cited. It is true that both the plaintiff and the defendants are residents of the City of Manila, but it is also true that
Surigao where the goods in question were to be delivered is one of the most distant places from Manila in the Philippine Islands. In the very
nature of things, plaintiff would not want to commence its action until such time as it had made a full and careful investigation of all of the
material facts and even the law of the case, so as to determine whether or not defendants were liable for its loss.
In its third assignment of error, appellants rely on clause 12 of the bill of lading, which is as follows:
It is expressly understood that carrier shall not be liable for loss or damage from any cause or for any reason to an amount
exceeding three hundred pesos (P300) Philippine currency for any single package of silk or other valuable cargo, nor for an amount
exceeding one hundred pesos (P100) Philippine currency for any single package of other cargo, unless the value and contents of
such packages are correctly declared in this bill of lading at the time of shipment and freight paid in accord with the actual
measurement or weight of the cargo shipped.
That condition is printed on the back of the bill of lading.
In disposing of that question, the lower court points out that the conditions in question "are not printed on the triplicate copies which
were delivered to the plaintiff," and that by reason thereof they "are not binding upon the plaintiff." The clause in question provides that the
carrier shall not be liable for loss or damage from any cause or for any reason to an amount in excess of P300 "for any single package of silk
or other valuable cargo."
The ship in question was a common carrier and, as such, must have been operated as a public utility. It is a matter of common
knowledge that large quantities of silk are imported in the Philippine Islands, and that after being imported, they are sold by the merchants in
Manila and other large seaports, and then shipped to different points and places in the Islands. Hence, there is nothing unusual about the
shipment of silk. In truth and in fact, it is a matter of usual and ordinary business. There was no fraud or concealment in the shipment in
question. Clause 12 above quoted places a limit of P300 "for any single package of silk." The evidence shows that 164 "cases" were shipped,
and that the value of each case was very near P2,500. In this situation, the limit of defendants' liability for each case of silk "for loss or damage
from any cause or for any reason" would put it in the power of the defendants to have taken the whole cargo of 164 cases of silk at a valuation
of P300 for each case, or less than one-eight of its actual value. If that rule of law should be sustained, no silk would ever be shipped from one
island to another in the Philippines. Such a limitation of value is unconscionable and void as against public policy.
Corpus Juris, volume 10, p. 154, says:
PAR. 194. 6. Reasonable of Limitation. The validity of stipulations limiting the carriers liability is to be determined by their
reasonableness and their conformity to the sound public policy, in accordance with which the obligations of the carrier to the public
are settled. It cannot lawfully stipulate for exemption from liability, unless such exemption is just and reasonable, and unless the
contract is freely and fairly made. No contractual limitation is reasonable which is subversive of public policy.
PAR. 195. 7. What Limitations of Liability Permissible. a.
Negligence (1) Rule in America (a) In Absence of Organic or Statutory Provisions Regulating Subject aa. Majority Rule.
In the absence of statute, it is settled by the weight of authority in the United States, that whatever limitations against its commonlaw liability are permissible to a carrier, it cannot limit its liability for injury to or loss of goods shipped, where such injury or loss is
caused by its own negligence. This is the common-law doctrine and it makes no difference that there is no statutory prohibition
against contracts of this character.
PAR. 196. bb. Considerations on Which Rule Based. The rule, it is said, rests on considerations of public policy. The
undertaking is to carry the goods, and to relieve the shipper from all liability for loss or damage arising from negligence in performing
its contract is to ignore the contract itself. The natural effect of a limitation of liability against negligence is to induce want of care on
the part of the carrier in the performance of its duty. The shipper and the common carrier are not on equal terms; the shipper must
send his freight by the common carrier, or not at all; he is therefore entirely at the mercy of the carrier, unless protected by the higher
power of the law against being forced into contracts limiting the carrier's liability. Such contracts are wanting in the element of
voluntary assent.
PAR. 197. cc. Application and Extent of Rule (aa) Negligence of Servants. The rule prohibiting limitation of liability for
negligence is often stated as a prohibition of any contract relieving the carrier from loss or damage caused by its own negligence or
misfeasance, or that of its servants; and it has been specifically decided in many cases that no contract limitation will relieve the
carrier from responsibility for the negligence, unskillfulness, or carelessness of its employees.
Based upon the findings of fact of the trial court which are sustained by the evidence, the plaintiff delivered to the defendants 164 cases
of silk consigned and to be delivered by the defendants to Salomon Sharuff in Surigao. Four of such cases were never delivered, and the
evidence shows that their value is the alleged in the complaint.
There is no merit in the appeal. The judgment of the lower court is affirmed, with costs.
SUPREME COURT
PARMANAND SHEWARAM, plaintiff and appellee,
vs.
Manila
EN BANC
G.R. No. L-20099
July 7, 1966
PHILIPPINE AIR LINES, INC., defendant and appellant.
ZALDIVAR, J.:
Before the municipal court of Zamboanga City, plaintiff-appellee Parmanand Shewaram instituted an action to recover damages suffered by
him due to the alleged failure of defendant-appellant Philippines Air Lines, Inc. to observe extraordinary diligence in the vigilance and carriage
of his luggage. After trial the municipal court of Zamboanga City rendered judgment ordering the appellant to pay appellee P373.00 as actual
damages, P100.00 as exemplary damages, P150.00 as attorney's fees, and the costs of the action.
Appellant Philippine Air Lines appealed to the Court of First Instance of Zamboanga City. After hearing the Court of First Instance of
Zamboanga City modified the judgment of the inferior court by ordering the appellant to pay the appellee only the sum of P373.00 as actual
damages, with legal interest from May 6, 1960 and the sum of P150.00 as attorney's fees, eliminating the award of exemplary damages.
From the decision of the Court of First Instance of Zamboanga City, appellant appeals to this Court on a question of law, assigning two errors
allegedly committed by the lower court a quo, to wit:
1. The lower court erred in not holding that plaintiff-appellee was bound by the provisions of the tariff regulations filed by defendant-appellant
with the civil aeronautics board and the conditions of carriage printed at the back of the plane ticket stub.
2. The lower court erred in not dismissing this case or limiting the liability of the defendant-appellant to P100.00.
The facts of this case, as found by the trial court, quoted from the decision appealed from, are as follows:
That Parmanand Shewaram, the plaintiff herein, was on November 23, 1959, a paying passenger with ticket No. 4-30976, on defendant's aircraft flight
No. 976/910 from Zamboanga City bound for Manila; that defendant is a common carrier engaged in air line transportation in the Philippines, offering its
services to the public to carry and transport passengers and cargoes from and to different points in the Philippines; that on the above-mentioned date of
November 23, 1959, he checked in three (3) pieces of baggages a suitcase and two (2) other pieces; that the suitcase was mistagged by defendant's
personnel in Zamboanga City, as I.G.N. (for Iligan) with claim check No. B-3883, instead of MNL (for Manila). When plaintiff Parmanand Shewaram
arrived in Manila on the date of November 23, 1959, his suitcase did not arrive with his flight because it was sent to Iligan. So, he made a claim with
defendant's personnel in Manila airport and another suitcase similar to his own which was the only baggage left for that flight, the rest having been
claimed and released to the other passengers of said flight, was given to the plaintiff for him to take delivery but he did not and refused to take delivery
of the same on the ground that it was not his, alleging that all his clothes were white and the National transistor 7 and a Rollflex camera were not found
inside the suitcase, and moreover, it contained a pistol which he did not have nor placed inside his suitcase; that after inquiries made by defendant's
personnel in Manila from different airports where the suitcase in question must have been sent, it was found to have reached Iligan and the station
agent of the PAL in Iligan caused the same to be sent to Manila for delivery to Mr. Shewaram and which suitcase belonging to the plaintiff herein arrived
in Manila airport on November 24, 1959; that it was also found out that the suitcase shown to and given to the plaintiff for delivery which he refused to
take delivery belonged to a certain Del Rosario who was bound for Iligan in the same flight with Mr. Shewaram; that when the plaintiff's suitcase arrived
in Manila as stated above on November 24, 1959, he was informed by Mr. Tomas Blanco, Jr., the acting station agent of the Manila airport of the arrival
of his suitcase but of course minus his Transistor Radio 7 and the Rollflex Camera; that Shewaram made demand for these two (2) items or for the
value thereof but the same was not complied with by defendant.
It is admitted by defendant that there was mistake in tagging the suitcase of plaintiff as IGN. The tampering of the suitcase is more apparent when on
November 24, 1959, when the suitcase arrived in Manila, defendant's personnel could open the same in spite of the fact that plaintiff had it under key
when he delivered the suitcase to defendant's personnel in Zamboanga City. Moreover, it was established during the hearing that there was space in
the suitcase where the two items in question could have been placed. It was also shown that as early as November 24, 1959, when plaintiff was notified
by phone of the arrival of the suitcase, plaintiff asked that check of the things inside his suitcase be made and defendant admitted that the two items
could not be found inside the suitcase. There was no evidence on record sufficient to show that plaintiff's suitcase was never opened during the time it
was placed in defendant's possession and prior to its recovery by the plaintiff. However, defendant had presented evidence that it had authority to open
passengers' baggage to verify and find its ownership or identity. Exhibit "1" of the defendant would show that the baggage that was offered to plaintiff as
his own was opened and the plaintiff denied ownership of the contents of the baggage. This proven fact that baggage may and could be opened without
the necessary authorization and presence of its owner, applied too, to the suitcase of plaintiff which was mis-sent to Iligan City because of mistagging.
The possibility of what happened in the baggage of Mr. Del Rosario at the Manila Airport in his absence could have also happened to plaintiffs suitcase
at Iligan City in the absence of plaintiff. Hence, the Court believes that these two items were really in plaintiff's suitcase and defendant should be held
liable for the same by virtue of its contract of carriage.
It is clear from the above-quoted portions of the decision of the trial court that said court had found that the suitcase of the appellee was tampered, and
the transistor radio and the camera contained therein were lost, and that the loss of those articles was due to the negligence of the employees of the
appellant. The evidence shows that the transistor radio cost P197.00 and the camera cost P176.00, so the total value of the two articles was P373.00.
There is no question that the appellant is a common carrier.1 As such common carrier the appellant, from the nature of its business and for reasons of
public policy, is bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by it according
to the circumstances of each case. 2 It having been shown that the loss of the transistor radio and the camera of the appellee, costing P373.00, was
due to the negligence of the employees of the appellant, it is clear that the appellant should be held liable for the payment of said loss. 3
It is, however, contended by the appellant that its liability should be limited to the amount stated in the conditions of carriage printed at the back of the
plane ticket stub which was issued to the appellee, which conditions are embodied in Domestic Tariff Regulations No. 2 which was filed with the Civil
Aeronautics Board. One of those conditions, which is pertinent to the issue raised by the appellant in this case provides as follows:
The liability, if any, for loss or damage to checked baggage or for delay in the delivery thereof is limited to its value and, unless the passenger declares
in advance a higher valuation and pay an additional charge therefor, the value shall be conclusively deemed not to exceed P100.00 for each ticket.
The appellant maintains that in view of the failure of the appellee to declare a higher value for his luggage, and pay the freight on the basis of
said declared value when he checked such luggage at the Zamboanga City airport, pursuant to the abovequoted condition, appellee can not
demand payment from the appellant of an amount in excess of P100.00.
The law that may be invoked, in this connection is Article 1750 of the New Civil Code which provides as follows:
A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or deterioration of the goods is valid, if it is
reasonable and just under the circumstances, and has been fairly and freely agreed upon.
In accordance with the above-quoted provision of Article 1750 of the New Civil Code, the pecuniary liability of a common carrier may, by
contract, be limited to a fixed amount. It is required, however, that the contract must be "reasonable and just under the circumstances and has
been fairly and freely agreed upon."
The requirements provided in Article 1750 of the New Civil Code must be complied with before a common carrier can claim a limitation of its pecuniary
liability in case of loss, destruction or deterioration of the goods it has undertaken to transport. In the case before us We believe that the requirements of
said article have not been met. It can not be said that the appellee had actually entered into a contract with the appellant, embodying the conditions as
printed at the back of the ticket stub that was issued by the appellant to the appellee. The fact that those conditions are printed at the back of the ticket
stub in letters so small that they are hard to read would not warrant the presumption that the appellee was aware of those conditions such that he had
"fairly and freely agreed" to those conditions. The trial court has categorically stated in its decision that the "Defendant admits that passengers do not
sign the ticket, much less did plaintiff herein sign his ticket when he made the flight on November 23, 1959." We hold, therefore, that the appellee is not,
and can not be, bound by the conditions of carriage found at the back of the ticket stub issued to him when he made the flight on appellant's plane on
November 23, 1959.
The liability of the appellant in the present case should be governed by the provisions of Articles 1734 and 1735 of the New Civil Code, which We quote as follows:
ART. 1734. Common carries 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, or other natural disaster or calamity;

(5) Order or act of competent public authority.1wph1.t

ART. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4 and 5 of the preceding article, if the goods are lost, destroyed or
deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed
extraordinary diligence as required in Article 1733.
It having been clearly found by the trial court that the transistor radio and the camera of the appellee were lost as a result of the negligence of
the appellant as a common carrier, the liability of the appellant is clear it must pay the appellee the value of those two articles.
In the case of Ysmael and Co. vs. Barreto, 51 Phil. 90, cited by the trial court in support of its decision, this Court had laid down the rule that
the carrier can not limit its liability for injury to or loss of goods shipped where such injury or loss was caused by its own negligence.
Corpus Juris, volume 10, p. 154, says:
"Par. 194, 6. Reasonableness of Limitations. The validity of stipulations limiting the carrier's liability is to be determined by their
reasonableness and their conformity to the sound public policy, in accordance with which the obligations of the carrier to the public are settled.
It cannot lawfully stipulate for exemption from liability, unless such exemption is just and reasonable, and unless the contract is freely and fairly
made. No contractual limitation is reasonable which is subversive of public policy.
"Par. 195. 7. What Limitations of Liability Permissible. a. Negligence (1) Rule in America (a) In Absence of Organic or Statutory
Provisions Regulating Subject aa. Majority Rule. In the absence of statute, it is settled by the weight of authority in the United States,
that whatever limitations against its common-law liability are permissible to a carrier, it cannot limit its liability for injury to or loss of goods
shipped, where such injury or loss is caused by its own negligence. This is the common law doctrine and it makes no difference that there is
no statutory prohibition against contracts of this character.
"Par. 196. bb. Considerations on which Rule Based. The rule, it is said, rests on considerations of public policy. The undertaking is to carry
the goods, and to relieve the shipper from all liability for loss or damage arising from negligence in performing its contract is to ignore the
contract itself. The natural effect of a limitation of liability against negligence is to induce want of care on the part of the carrier in the
performance of its duty. The shipper and the common carrier are not on equal terms; the shipper must send his freight by the common carrier,
or not at all; he is therefore entirely at the mercy of the carrier unless protected by the higher power of the law against being forced into
contracts limiting the carrier's liability. Such contracts are wanting in the element of voluntary assent.
"Par. 197. cc. Application and Extent of Rule (aa) Negligence of Servants. The rule prohibiting limitation of liability for negligence is often
stated as a prohibition of any contract relieving the carrier from loss or damage caused by its own negligence or misfeasance, or that of its
servants; and it has been specifically decided in many cases that no contract limitation will relieve the carrier from responsibility for the
negligence, unskillfulness, or carelessness of its employer." (Cited in Ysmael and Co. vs. Barreto, 51 Phil. 90, 98, 99).
In view of the foregoing, the decision appealed from is affirmed, with costs against the appellant.
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-40597 June 29, 1979

AGUSTINO B. ONG YIU, petitioner, vs.
HONORABLE COURT OF APPEALS and PHILIPPINE AIR LINES, INC., respondents.
In this Petition for Review by Certiorari, petitioner, a practicing lawyer and businessman, seeks a reversal of the Decision of the Court of
Appeals in CA-G.R. No. 45005-R, which reduced his claim for damages for breach of contract of transportation.
The facts are as follows:
On August 26, 1967, petitioner was a fare paying passenger of respondent Philippine Air Lines, Inc. (PAL), on board Flight No. 463-R, from
Mactan Cebu, bound for Butuan City. He was scheduled to attend the trial of Civil Case No. 1005 and Spec. Procs. No. 1125 in the Court of
First Instance, Branch II, thereat, set for hearing on August 28-31, 1967. As a passenger, he checked in one piece of luggage, a blue "maleta"
for which he was issued Claim Check No. 2106-R (Exh. "A"). The plane left Mactan Airport, Cebu, at about 1:00 o'clock P.M., and arrived at
Bancasi airport, Butuan City, at past 2:00 o'clock P.M., of the same day. Upon arrival, petitioner claimed his luggage but it could not be found.
According to petitioner, it was only after reacting indignantly to the loss that the matter was attended to by the porter clerk, Maximo Gomez,
which, however, the latter denies, At about 3:00 o'clock P.M., PAL Butuan, sent a message to PAL, Cebu, inquiring about the missing luggage,
which message was, in turn relayed in full to the Mactan Airport teletype operator at 3:45 P.M. (Exh. "2") that same afternoon. It must have
been transmitted to Manila immediately, for at 3:59 that same afternoon, PAL Manila wired PAL Cebu advising that the luggage had been over
carried to Manila aboard Flight No. 156 and that it would be forwarded to Cebu on Flight No. 345 of the same day. Instructions were also given
that the luggage be immediately forwarded to Butuan City on the first available flight (Exh. "3"). At 5:00 P.M. of the same afternoon, PAL Cebu
sent a message to PAL Butuan that the luggage would be forwarded on Fright No. 963 the following day, August 27, 196'(. However, this
message was not received by PAL Butuan as all the personnel had already left since there were no more incoming flights that afternoon.
In the meantime, petitioner was worried about the missing luggage because it contained vital documents needed for trial the next day. At 10:00
o'clock that evening, petitioner wired PAL Cebu demanding the delivery of his baggage before noon the next day, otherwise, he would hold
PAL liable for damages, and stating that PAL's gross negligence had caused him undue inconvenience, worry, anxiety and extreme
embarrassment (Exh. "B"). This telegram was received by the Cebu PAL supervisor but the latter felt no need to wire petitioner that his
luggage had already been forwarded on the assumption that by the time the message reached Butuan City, the luggage would have arrived.
Early in the morning of the next day, August 27, 1967, petitioner went to the Bancasi Airport to inquire about his luggage. He did not wait,
however, for the morning flight which arrived at 10:00 o'clock that morning. This flight carried the missing luggage. The porter clerk, Maximo
Gomez, paged petitioner, but the latter had already left. A certain Emilio Dagorro a driver of a "colorum" car, who also used to drive for
petitioner, volunteered to take the luggage to petitioner. As Maximo Gomez knew Dagorro to be the same driver used by petitioner whenever
the latter was in Butuan City, Gomez took the luggage and placed it on the counter. Dagorro examined the lock, pressed it, and it opened.
After calling the attention of Maximo Gomez, the "maleta" was opened, Gomez took a look at its contents, but did not touch them. Dagorro
then delivered the "maleta" to petitioner, with the information that the lock was open. Upon inspection, petitioner found that a folder containing
certain exhibits, transcripts and private documents in Civil Case No. 1005 and Sp. Procs. No. 1126 were missing, aside from two gift items for
his parents-in-law. Petitioner refused to accept the luggage. Dagorro returned it to the porter clerk, Maximo Gomez, who sealed it and
forwarded the same to PAL Cebu.
Meanwhile, petitioner asked for postponement of the hearing of Civil Case No. 1005 due to loss of his documents, which was granted by the
Court (Exhs. "C" and "C-1"). Petitioner returned to Cebu City on August 28, 1967. In a letter dated August 29, 1967 addressed to PAL, Cebu,
petitioner called attention to his telegram (Exh. "D"), demanded that his luggage be produced intact, and that he be compensated in the sum of
P250,000,00 for actual and moral damages within five days from receipt of the letter, otherwise, he would be left with no alternative but to file
suit (Exh. "D").
On August 31, 1967, Messrs. de Leon, Navarsi, and Agustin, all of PAL Cebu, went to petitioner's office to deliver the "maleta". In the presence
of Mr. Jose Yap and Atty. Manuel Maranga the contents were listed and receipted for by petitioner (Exh. "E").
On September 5, 1967, petitioner sent a tracer letter to PAL Cebu inquiring about the results of the investigation which Messrs. de Leon,
Navarsi, and Agustin had promised to conduct to pinpoint responsibility for the unauthorized opening of the "maleta" (Exh. "F").
The following day, September 6, 1967, PAL sent its reply hereinunder quoted verbatim:
Dear Atty. Ong Yiu:
This is with reference to your September 5, 1967, letter to Mr. Ricardo G. Paloma, Acting Manager, Southern Philippines.
First of all, may we apologize for the delay in informing you of the result of our investigation since we visited you in your office last August 31,
1967. Since there are stations other than Cebu which are involved in your case, we have to communicate and await replies from them. We
regret to inform you that to date we have not found the supposedly lost folder of papers nor have we been able to pinpoint the personnel who
allegedly pilferred your baggage.
You must realize that no inventory was taken of the cargo upon loading them on any plane. Consequently, we have no way of knowing the real
contents of your baggage when same was loaded.
We realized the inconvenience you encountered of this incident but we trust that you will give us another opportunity to be of better service to
you.
Very truly yours,
PHILIPPINE AIR LINES, INC.
(Sgd) JEREMIAS S. AGUSTIN
(Exhibit G, Folder of Exhibits)
Branch Supervisor
Cebu
On September 13, 1967, petitioner filed a Complaint against PAL for damages for breach of contract of transportation with the Court of First
Instance of Cebu, Branch V, docketed as Civil Case No. R-10188, which PAL traversed. After due trial, the lower Court found PAL to have
acted in bad faith and with malice and declared petitioner entitled to moral damages in the sum of P80,000.00, exemplary damages of
P30,000.00, attorney's fees of P5,000.00, and costs.
Both parties appealed to the Court of Appeals petitioner in so far as he was awarded only the sum of P80,000.00 as moral damages; and
defendant because of the unfavorable judgment rendered against it.
On August 22, 1974, the Court of Appeals,* finding that PAL was guilty only of simple negligence, reversed the judgment of the trial Court
granting petitioner moral and exemplary damages, but ordered PAL to pay plaintiff the sum of P100.00, the baggage liability assumed by it
under the condition of carriage printed at the back of the ticket.
Hence, this Petition for Review by Certiorari, filed on May 2, 1975, with petitioner making the following Assignments of Error:
I. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING RESPONDENT PAL GUILTY ONLY OF SIMPLE NEGLIGENCE AND NOT
BAD FAITH IN THE BREACH OF ITS CONTRACT OF TRANSPORTATION WITH PETITIONER.
II. THE HONORABLE COURT OF APPEALS MISCONSTRUED THE EVIDENCE AND THE LAW WHEN IT REVERSED THE DECISION OF
THE LOWER COURT AWARDING TO PETITIONER MORAL DAMAGES IN THE AMOUNT OF P80,000.00, EXEMPLARY DAMAGES OF
P30,000.00, AND P5,000.00 REPRESENTING ATTORNEY'S FEES, AND ORDERED RESPONDENT PAL TO COMPENSATE PLAINTIFF
THE SUM OF P100.00 ONLY, CONTRARY TO THE EXPLICIT PROVISIONS OF ARTICLES 2220, 2229, 2232 AND 2234 OF THE CIVIL
CODE OF THE PHILIPPINES.
On July 16, 1975, this Court gave due course to the Petition.
There is no dispute that PAL incurred in delay in the delivery of petitioner's luggage. The question is the correctness of respondent Court's
conclusion that there was no gross negligence on the part of PAL and that it had not acted fraudulently or in bad faith as to entitle petitioner to
an award of moral and exemplary damages.
From the facts of the case, we agree with respondent Court that PAL had not acted in bad faith. Bad faith means a breach of a known duty
through some motive of interest or ill will. 2 It was the duty of PAL to look for petitioner's luggage which had been miscarried. PAL exerted due
diligence in complying with such duty.
As aptly stated by the appellate Court:
We do not find any evidence of bad faith in this. On the contrary, We find that the defendant had exerted diligent effort to locate plaintiff's
baggage. The trial court saw evidence of bad faith because PAL sent the telegraphic message to Mactan only at 3:00 o'clock that same
afternoon, despite plaintiff's indignation for the non-arrival of his baggage. The message was sent within less than one hour after plaintiff's
luggage could not be located. Efforts had to be exerted to locate plaintiff's maleta. Then the Bancasi airport had to attend to other incoming
passengers and to the outgoing passengers. Certainly, no evidence of bad faith can be inferred from these facts. Cebu office immediately
wired Manila inquiring about the missing baggage of the plaintiff. At 3:59 P.M., Manila station agent at the domestic airport wired Cebu that the
baggage was over carried to Manila. And this message was received in Cebu one minute thereafter, or at 4:00 P.M. The baggage was in fact
sent back to Cebu City that same afternoon. His Honor stated that the fact that the message was sent at 3:59 P.M. from Manila and completely
relayed to Mactan at 4:00 P.M., or within one minute, made the message appear spurious. This is a forced reasoning. A radio message of
about 50 words can be completely transmitted in even less than one minute depending upon atmospheric conditions. Even if the message
was sent from Manila or other distant places, the message can be received within a minute. that is a scientific fact which cannot be
questioned. 3
Neither was the failure of PAL Cebu to reply to petitioner's rush telegram indicative of bad faith, The telegram (Exh. B) was dispatched by
petitioner at around 10:00 P.M. of August 26, 1967. The PAL supervisor at Mactan Airport was notified of it only in the morning of the following
day. At that time the luggage was already to be forwarded to Butuan City. There was no bad faith, therefore, in the assumption made by said
supervisor that the plane carrying the bag would arrive at Butuan earlier than a reply telegram. Had petitioner waited or caused someone to
wait at the Bancasi airport for the arrival of the morning flight, he would have been able to retrieve his luggage sooner.
In the absence of a wrongful act or omission or of fraud or bad faith, petitioner is not entitled to moral damages.
Art. 2217. Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral
shock, social humiliation, and similar injury. Though incapable of pecuniary computation, moral damages may be recovered if they are the
proximate result of the defendant's wrongful act of omission.
Art. 2220. Willful injury to property may be a legal ground for awarding moral damages if the court should find that, under the circumstances,
such damages are justly due. The same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith.
Petitioner is neither entitled to exemplary damages. In contracts, as provided for in Article 2232 of the Civil Code, exemplary damages can be
granted if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner, which has not been proven in this case.
Petitioner further contends that respondent Court committed grave error when it limited PAL's carriage liability to the amount of P100.00 as
stipulated at the back of the ticket. In this connection, respondent Court opined:
As a general proposition, the plaintiff's maleta having been pilfered while in the custody of the defendant, it is presumed that the defendant
had been negligent. The liability, however, of PAL for the loss, in accordance with the stipulation written on the back of the ticket, Exhibit 12, is
limited to P100.00 per baggage, plaintiff not having declared a greater value, and not having called the attention of the defendant on its true
value and paid the tariff therefor. The validity of this stipulation is not questioned by the plaintiff. They are printed in reasonably and fairly big
letters, and are easily readable. Moreover, plaintiff had been a frequent passenger of PAL from Cebu to Butuan City and back, and he, being a
lawyer and businessman, must be fully aware of these conditions. 4
We agree with the foregoing finding. The pertinent Condition of Carriage printed at the back of the plane ticket reads:
8. BAGGAGE LIABILITY ... The total liability of the Carrier for lost or damaged baggage of the passenger is LIMITED TO P100.00 for each
ticket unless a passenger declares a higher valuation in excess of P100.00, but not in excess, however, of a total valuation of P1,000.00 and
additional charges are paid pursuant to Carrier's tariffs.
There is no dispute that petitioner did not declare any higher value for his luggage, much less did he pay any additional transportation charge.
But petitioner argues that there is nothing in the evidence to show that he had actually entered into a contract with PAL limiting the latter's
liability for loss or delay of the baggage of its passengers, and that Article 1750* of the Civil Code has not been complied with.
While it may be true that petitioner had not signed the plane ticket (Exh. "12"), he is nevertheless bound by the provisions thereof. "Such
provisions have been held to be a part of the contract of carriage, and valid and binding upon the passenger regardless of the latter's lack of
knowledge or assent to the regulation". 5 It is what is known as a contract of "adhesion", in regards which it has been said that contracts of
adhesion wherein one party imposes a ready made form of contract on the other, as the plane ticket in the case at bar, are contracts not
entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent. 6 And as held
in Randolph v. American Airlines, 103 Ohio App. 172, 144 N.E. 2d 878; Rosenchein vs. Trans World Airlines, Inc., 349 S.W. 2d 483, "a contract
limiting liability upon an agreed valuation does not offend against the policy of the law forbidding one from contracting against his own
negligence.
Considering, therefore, that petitioner had failed to declare a higher value for his baggage, he cannot be permitted a recovery in excess of
P100.00.Besides, passengers are advised not to place valuable items inside their baggage but "to avail of our V-cargo service " (Exh. "1"). I t
is likewise to be noted that there is nothing in the evidence to show the actual value of the goods allegedly lost by petitioner.
There is another matter involved, raised as an error by PAL the fact that on October 24, 1974 or two months after the promulgation of the
Decision of the appellate Court, petitioner's widow filed a Motion for Substitution claiming that petitioner died on January 6, 1974 and that she
only came to know of the adverse Decision on October 23, 1974 when petitioner's law partner informed her that he received copy of the
Decision on August 28, 1974. Attached to her Motion was an Affidavit of petitioner's law partner reciting facts constitutive of excusable
negligence. The appellate Court noting that all pleadings had been signed by petitioner himself allowed the widow "to take such steps as she
or counsel may deem necessary." She then filed a Motion for Reconsideration over the opposition of PAL which alleged that the Court of
Appeals Decision, promulgated on August 22, 1974, had already become final and executory since no appeal had been interposed therefrom
within the reglementary period.
Under the circumstances, considering the demise of petitioner himself, who acted as his own counsel, it is best that technicality yields to the
interests of substantial justice. Besides, in the 'last analysis, no serious prejudice has been caused respondent PAL.
In fine, we hold that the conclusions drawn by respondent Court from the evidence on record are not erroneous.
WHEREFORE, for lack of merit, the instant Petition is hereby denied, and the judgment sought to be reviewed hereby affirmed in toto.
No costs.
SO ORDERED.
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 75118 August 31, 1987
SEA-LAND SERVICE, INC., petitioner,

vs.
INTERMEDIATE APPELLATE COURT and PAULINO CUE, doing business under the name and style of "SEN HIAP HING,"
respondents.
NARVASA, J.:
The main issue here is whether or not the consignee of seaborne freight is bound by stipulations in the covering bill of lading limiting to a fixed
amount the liability of the carrier for loss or damage to the cargo where its value is not declared in the bill.
The factual antecedents, for the most part, are not in dispute.
On or about January 8, 1981, Sea-Land Service, Inc. (Sea-Land for brevity), a foreign shipping and forwarding company licensed to do
business in the Philippines, received from Seaborne Trading Company in Oakland, California a shipment consigned to Sen Hiap Hing the
business name used by Paulino Cue in the wholesale and retail trade which he operated out of an establishment located on Borromeo and
Plaridel Streets, Cebu City.
The shipper not having declared the value of the shipment, no value was indicated in the bill of lading. The bill described the shipment only as
"8 CTNS on 2 SKIDS-FILES. 1 Based on volume measurements Sea-land charged the shipper the total amount of US$209.28 2 for freight age
and other charges. The shipment was loaded on board the MS Patriot, a vessel owned and operated by Sea-Land, for discharge at the Port Of Cebu.
The shipment arrived in Manila on February 12, 1981, and there discharged in Container No. 310996 into the custody of the arrastre
contractor and the customs and port authorities. 3 Sometime between February 13 and 16, 1981, after the shipment had been transferred,
along with other cargoes to Container No. 40158 near Warehouse 3 at Pier 3 in South Harbor, Manila, awaiting trans-shipment to Cebu, it was
stolen by pilferers and has never been recovered. 4
On March 10, 1981, Paulino Cue, the consignee, made formal claim upon Sea-Land for the value of the lost shipment allegedly amounting to
P179,643.48. 5 Sea-Land offered to settle for US$4,000.00, or its then Philippine peso equivalent of P30,600.00. asserting that said amount
represented its maximum liability for the loss of the shipment under the package limitation clause in the covering bill of lading. 6 Cue rejected
the offer and thereafter brought suit for damages against Sea-Land in the then Court of First Instance of Cebu, Branch X. 7 Said Court, after
trial, rendered judgment in favor of Cue, sentencing Sea-Land to pay him P186,048.00 representing the Philippine currency value of the lost
cargo, P55,814.00 for unrealized profit with one (1%) percent monthly interest from the filing of the complaint until fully paid, P25,000.00 for
attorney's fees and P2,000.00 as litigation expenses. 8
Sea-Land appealed to the Intermediate Appellate Court. 9 That Court however affirmed the decision of the Trial Court xxx in all its parts ... . 10
Sea-Land thereupon filed the present petition for review which, as already stated, poses the question of whether, upon the facts above set
forth, it can be held liable for the loss of the shipment in any amount beyond the limit of US$600.00 per package stipulated in the bill of lading.
To begin with, there is no question of the right, in principle, of a consignee in a bill of lading to recover from the carrier or shipper for loss of, or
damage to, goods being transported under said bill ,although that document may have been as in practice it oftentimes is drawn up only
by the consignor and the carrier without the intervention of the consignee. In Mendoza vs. Philippine Air Lines, Inc. 11 the Court delved at
some length into the reasons behind this when, upon a claim made by the consignee of a motion picture film shipped by air that he was never
a party to the contract of transportation and was a complete stranger thereto, it said:
But appellant now contends that he is not suing on a breach of contract but on a tort as provided for in Art. 1902 of the Civil Code. We are a
little perplexed as to this new theory of the appellant. First, he insists that the articles of the Code of Commerce should be applied: that he
invokes the provisions of aid Code governing the obligations of a common carrier to make prompt delivery of goods given to it under a contract
of transportation. Later, as already said, he says that he was never a party to the contract of transportation and was a complete stranger to it,
and that he is now suing on a tort or a violation of his rights as a stranger (culpa aquiliana) If he does not invoke the contract of carriage
entered into with the defendant company, then he would hardly have any leg to stand on. His right to prompt delivery of the can of film at the
Phil. Air Port stems and is derived from the contract of carriage under which contract, the PAL undertook to carry the can of film safely and to
deliver it to him promptly. Take away or ignore that contract and the obligation to carry and to deliver and right to prompt delivery disappear.
Common carriers are not obligated by law to carry and to deliver merchandise, and persons are not vested with the right to prompt delivery,
unless such common carriers previously assume the obligation. Said rights and obligations are created by a specific contract entered into by
the parties. In the present case, the findings of the trial court which as already stated, are accepted by the parties and which we must accept
are to the effect that the LVN Pictures Inc. and Jose Mendoza on one side, and the defendant company on the other, entered into a contract of
transportation (p. 29, Rec. on Appeal). One interpretation of said finding is that the LVN Pictures Inc. through previous agreement with
Mendoza acted as the latter's agent. When he negotiated with the LVN Pictures Inc. to rent the film "Himala ng Birhen" and show it during the
Naga town fiesta, he most probably authorized and enjoined the Picture Company to ship the film for him on the PAL on September 17th.
Another interpretation is that even if the LVN Pictures Inc. as consignor of its own initiative, and acting independently of Mendoza for the time
being, made Mendoza as consignee, a stranger to the contract if that is possible, nevertheless when he, Mendoza appeared at the Phil Air
Port armed with the copy of the Air Way Bill (Exh. 1) demanding the delivery of the shipment to him, he thereby made himself a party to the
contract of transportation. The very citation made by appellant in his memorandum supports this view. Speaking of the possibility of a conflict
between the order of the shipper on the one hand and the order of the consignee on the other, as when the shipper orders the shipping
company to return or retain the goods shipped while the consignee demands their delivery, Malagarriga in his book Codigo de Comercio
Comentado, Vol. 1, p. 400, citing a decision of the Argentina Court of Appeals on commercial matters, cited by Tolentino in Vol. II of his book
entitled "Commentaries and Jurisprudence on the Commercial Laws of the Philippines" p. 209, says that the right of the shipper to
countermand the shipment terminates when the consignee or legitimate holder of the bill of lading appears with such big of lading before the
carrier and makes himself a party to the contract. Prior to that time he is a stranger to the contract.
Still another view of this phase of the case is that contemplated in Art. 1257, paragraph 2, of the old Civil Code (now Art, 1311, second
paragraph) which reads thus:
Should the contract contain any stipulation in favor of a third person, he may demand its fulfillment provided he has given notice of his
acceptance to the person bound before the stipulation has been revoked.
Here, the contract of carriage between the LVN Pictures Inc. and the defendant carrier contains the stipulations of delivery to Mendoza as
consignee. His demand for the delivery of the can of film to him at the Phil Air Port may be regarded as a notice of his acceptance of the
stipulation of the delivery in his favor contained in the contract of carriage and delivery. In this case he also made himself a party to the
contract, or at least has come to court to enforce it. His cause of action must necessarily be founded on its breach.
Since the liability of a common carrier for loss of or damage to goods transported by it under a contract of carriage is governed by the laws of
the country of destination 12 and the goods in question were shipped from the United States to the Philippines, the liability of petitioner SeaLand to the respondent consignee is governed primarily by the Civil Code, and as ordained by the said Code, suppletorily, in all matters not
determined thereby, by the Code of Commerce and special laws. 13 One of these suppletory special laws is the Carriage of Goods by Sea
Act, U.S. Public Act No. 521 which was made applicable to all contracts for the carriage of goods by sea to and from Philippine ports in foreign
trade by Commonwealth Act No. 65, approved on October 22, 1936. Sec. 4(5) of said Act in part reads:
(5) Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the transportation of
goods in an amount exceeding $500 per package lawful money of the United States, or in case of goods not shipped in packages, per
customary freight unit, or the equivalent of that sum in other currency, unless the nature and value of such goods have been declared by the
shipper before shipment and inserted in the bill of lading. This declaration, if embodied in the bill of lading, shall be prima facie evidence, but
shall not be conclusive on the carrier.
By agreement between the carrier, master, or agent of the carrier, and the shipper another maximum amount than that mentioned in this
paragraph may be fixed: Provided, That such maximum shall not be less than the figure above named. In no event shall the carrier be liable
for more than the amount of damage actually sustained.
Clause 22, first paragraph, of the long form bill of lading customarily issued by Sea-Land to its shipping clients 14 is a virtual copy of the first
paragraph of the foregoing provision. It says:
22. VALUATION. In the event of any loss, damage or delay to or in connection with goods exceeding in actual value $500 per package, lawful
money of the United States, or in case of goods not shipped in packages, per customary freight unit, the value of the goods shall be deemed
to be $500 per package or per customary freight unit, as the case may be, and the carrier's liability, if any, shall be determined on the basis of
a value of $500 per package or customary freight unit, unless the nature and a higher value shall be declared by the shipper in writing before
shipment and inserted in this Bill of Lading.
And in its second paragraph, the bill states:
If a value higher than $500 shag have been declared in writing by the shipper upon delivery to the carrier and inserted in this bill of lading and
extra freight paid, if required and in such case if the actual value of the goods per package or per customary freight unit shall exceed such
declared value, the value shall nevertheless be deemed to be declared value and the carrier's liability, if any, shall not exceed the declared
value and any partial loss or damage shall be adjusted pro rata on the basis of such declared value.
Since, as already pointed out, Article 1766 of the Civil Code expressly subjects the rights and obligations of common carriers to the provisions
of the Code of Commerce and of special laws in matters not regulated by said (Civil) Code, the Court fails to fathom the reason or justification
for the Appellate Court's pronouncement in its appealed Decision that the Carriage of Goods by Sea Act " ... has no application whatsoever in
this case. 15 Not only is there nothing in the Civil Code which absolutely prohibits agreements between shipper and carrier limiting the latter's
liability for loss of or damage to cargo shipped under contracts of carriage; it is also quite clear that said Code in fact has agreements of such
character in contemplation in providing, in its Articles 1749 and 1750, that:
ART. 1749 A stipulation that the common carrier's liability is limited to the value of the goods appearing in the bill of lading, unless the shipper
or owner declares a greater value, is binding.
ART. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or deterioration of the goods is
valid, if it is reasonable and just under the circumstances, and has been fairly and freely agreed upon.
Nothing contained in section 4(5) of the Carriage of Goods by Sea Act already quoted is repugnant to or inconsistent with any of the just-cited
provisions of the Civil Code. Said section merely gives more flesh and greater specificity to the rather general terms of Article 1749 (without
doing any violence to the plain intent thereof) and of Article 1750, to give effect to just agreements limiting carriers' liability for loss or damage
which are freely and fairly entered into.
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 justice and fairness of that law itself, and
this the private respondent does not pretend to do. But over and above that consideration, the lust and reasonable character of such
stipulation is implicit in it giving the shipper or owner the option of avoiding acrrual 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. And since the shipper here has not been heard to
complaint of having been "rushed," imposed upon or deceived in any significant way into agreeing to ship the cargo under a bill of lading
carrying such a stipulation in fact, it does not appear that said party has been heard from at all insofar as this dispute is concerned there
is simply no ground for assuming that its agreement thereto was not as the law would require, freely and fairly sought and given.
The private respondent had no direct part or intervention in the execution of the contract of carriage between the shipper and the carrier as set
forth in the bill of lading in question. As pointed out in Mendoza vs. PAL, supra, the right of a party in the same situation as respondent here, to
recover for loss of a shipment consigned to him under a bill of lading drawn up only by and between the shipper and the carrier, springs from
either a relation of agency that may exist between him and the shipper or consignor, or his status as a stranger in whose favor some
stipulation is made in said contract, and who becomes a party thereto when he demands fulfillment of that stipulation, in this case the delivery
of the goods or cargo shipped. In neither capacity can he assert personally, in bar to any provision of the bill of lading, the alleged
circumstance that fair and free agreement to such provision was vitiated by its being in such fine print as to be hardly readable.
Parenthetically, it may be observed that in one comparatively recent case 16 where this Court found that a similar package limitation clause
was "(printed in the smallest type on the back of the bill of lading, it nonetheless ruled that the consignee was bound thereby on the strength of
authority holding that such provisions on liability limitation are as much a part of a bill of lading as though physically in it and as though placed
therein by agreement of the parties.
There can, therefore, be no doubt or equivocation about the validity and enforceability of freely-agreed-upon stipulations in a contract of
carriage or bill of lading limiting the liability of the carrier to an agreed valuation unless the shipper declares a higher value and inserts it into
said contract or bill. This pro position, moreover, rests upon an almost uniform weight of authority. 17
The issue of alleged deviation is also settled by Clause 13 of the bill of lading which expressly authorizes trans-shipment of the goods at any
point in the voyage in these terms:
13. THROUGH CARGO AND TRANSSHIPMENT. The carrier or master, in the exercise of its or his discretion and although transshipment or
forwarding of the goods may not have been contemplated or provided for herein, may at port of discharge or any other place whatsoever
transship or forward the goods or any part thereof by any means at the risk and expense of the goods and at any time, whether before or after
loading on the ship named herein and by any route, whether within or outside the scope of the voyage or beyond the port of discharge or
destination of the goods and without notice to the shipper or consignee. The carrier or master may delay such transshipping or forwarding for
any reason, including but not limited to awaiting a vessel or other means of transportation whether by the carrier or others.
Said provision obviates the necessity to offer any other justification for offloading the shipment in question in Manila for transshipment to Cebu
City, the port of destination stipulated in the bill of lading. Nonetheless, the Court takes note of Sea-Land's explanation that it only directly
serves the Port of Manila from abroad in the usual course of voyage of its carriers, hence its maintenance of arrangements with a local
forwarder. Aboitiz and Company, for delivery of its imported cargo to the agreed final point of destination within the Philippines, such
arrangements not being prohibited, but in fact recognized, by law. 18
Furthermore, this Court has also ruled 19 that the Carriage of Goods by Sea Act is applicable up to the final port of destination and that the
fact that transshipment was made on an interisland vessel did not remove the contract of carriage of goods from the operation of said Act.
Private respondent also contends that the aforecited Clauses 22 and 13 of the bill of lading relied upon by petitioner Sea Land form no part of
the short-form bill of lading attached to his complaint before the Trial Court and appear only in the long form of that document which, he
claims. SeaLand offered (as its Exhibit 2) as an unused blank form with no entries or signatures therein. He, however, admitted in the Trial
Court that several times in the past shipments had been delivered to him through Sea-Land, 20 from which the assumption may fairly follow
that by the time of the consignment now in question, he was already reasonably apprised of the usual terms covering contracts of carriage
with said petitioner.
At any rate, as observed earlier, it has already been held that the provisions of the Carriage of Goods by Sea Act on package limitation [sec
4(5) of the Act hereinabove referred to] are as much a part of a bill of lading as though actually placed therein by agreement of the parties. 21
Private respondent, by making claim for loss on the basis of the bill of lading, to all intents and purposes accepted said bill. Having done so, he
... becomes bound by all stipulations contained therein whether on the front or the back thereof. Respondent cannot elude its provisions simply
because they prejudice him and take advantage of those that are beneficial. Secondly, the fact that respondent shipped his goods on board
the ship of petitioner and paid the corresponding freight thereon shows that he impliedly accepted the bill of lading which was issued in
connection with the shipment in question, and so it may be said that the same is finding upon him as if it had been actually signed by him or by
any other person in his behalf. ... 22.
There is one final consideration. The private respondent admits 23 that as early as on April 22, 1981, Sea-Land had offered to settle his claim
for US$4,000.00, the limit of said carrier's liability for loss of the shipment under the bill of lading. This Court having reached the conclusion
that said sum is all that is justly due said respondent, it does not appear just or equitable that Sea-Land, which offered that amount in good
faith as early as six years ago, should, by being made to pay at the current conversion rate of the dollar to the peso, bear for its own account
all of the increase in said rate since the time of the offer of settlement. The decision of the Regional Trial Court awarding the private
respondent P186,048.00 as the peso value of the lost shipment is clearly based on a conversion rate of P8.00 to US$1.00, said respondent
having claimed a dollar value of $23,256.00 for said shipment. 24 All circumstances considered, it is just and fair that Sea-Land's dollar
obligation be convertible at the same rate.
WHEREFORE, the Decision of the Intermediate Appellate Court complained of is reversed and set aside. The stipulation in the questioned bill
of lading limiting Sea-Land's liability for loss of or damage to the shipment covered by said bill to US$500.00 per package is held valid and
binding on private respondent. There being no question of the fact that said shipment consisted of eight (8) cartons or packages, for the loss of
which Sea-Land is therefore liable in the aggregate amount of US$4,000.00, it is the judgment of the Court that said petitioner discharge that
obligation by paying private respondent the sum of P32,000.00, the equivalent in Philippine currency of US$4,000.00 at the conversion rate of
P8.00 to $1.00. Costs against private respondent.
SO ORDERED.
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 88092 April 25, 1990
CITADEL LINES, INC., petitioner,
vs.
COURT OF APPEALS * and MANILA WINE MERCHANTS, INC., respondents.
Del Rosario & Del Rosario Law Offices for petitioner.
Limqueco and Macaraeg Law Office for private respondent.
REGALADO, J.:
Through this petition, we are asked to review the decision of the Court of Appeals dated December 20, 1988, in CA-G.R. No. CV-10070, 1
which affirmed the August 30, 1985 decision of the Regional Trial Court of Manila, Branch 27, in Civil Case No. 126415, entitled Manila Wine
Merchants, Inc. vs. Citadel Lines, Inc. and E. Razon, Inc., with a modification by deleting the award of attorney's fees and costs of suit.
The following recital of the factual background of this case is culled from the findings in the decision of the court a quo and adopted by
respondent court based on the evidence of record.
Petitioner Citadel Lines, Inc. (hereafter referred to as the CARRIER) is the general agent of the vessel "Cardigan Bay/Strait Enterprise," while
respondent Manila Wine Merchants, Inc. (hereafter, the CONSIGNEE) is the importer of the subject shipment of Dunhill cigarettes from
England.
On or about March 17, 1979, the vessel "Cardigan Bay/Strait Enterprise" loaded on board at Southampton, England, for carriage to Manila,
180 Filbrite cartons of mixed British manufactured cigarettes called "Dunhill International Filter" and "Dunhill International Menthol," as
evidenced by Bill of Lading No. 70621374 2 and Bill of Lading No. 70608680 3 of the Ben Line Containers Ltd. The shipment arrived at the Port
of Manila Pier 13, on April 18, 1979 in container van No. BENU 204850-9. The said container was received by E. Razon, Inc. (later known as
Metro Port Service, Inc. and referred to herein as the ARRASTRE) under Cargo Receipt No. 71923 dated April 18, 1979. 4
On April 30, 1979, the container van, which contained two shipments was stripped. One shipment was delivered and the other shipment
consisting of the imported British manufactured cigarettes was palletized. Due to lack of space at the Special Cargo Coral, the aforesaid
cigarettes were placed in two containers with two pallets in container No. BENU 204850-9, the original container, and four pallets in container
No. BENU 201009-9, with both containers duly padlocked and sealed by the representative of the CARRIER.
In the morning of May 1, 1979, the CARRIER'S headchecker discovered that container van No. BENU 201009-9 had a different padlock and
the seal was tampered with. The matter was reported to Jose G. Sibucao, Pier Superintendent, Pier 13, and upon verification, it was found
that 90 cases of imported British manufactured cigarettes were missing. This was confirmed in the report of said Superintendent Sibucao to
Ricardo Cosme, Assistant Operations Manager, dated May 1, 1979 5 and the Official Report/Notice of Claim of Citadel Lines, Inc. to E. Razon,
Inc. dated May 8, 1979. 6 Per investigation conducted by the ARRASTRE, it was revealed that the cargo in question was not formally turned
over to it by the CARRIER but was kept inside container van No. BENU 201009-9 which was padlocked and sealed by the representatives of
the CARRIER without any participation of the ARRASTRE.
When the CONSIGNEE learned that 90 cases were missing, it filed a formal claim dated May 21, 1979, 7 with the CARRIER, demanding the
payment of P315,000.00 representing the market value of the missing cargoes. The CARRIER, in its reply letter dated May 23, 1979, 8
admitted the loss but alleged that the same occurred at Pier 13, an area absolutely under the control of the ARRASTRE. In view thereof, the
CONSIGNEE filed a formal claim, dated June 4, 1979, 9 with the ARRASTRE, demanding payment of the value of the goods but said claim
was denied.
After trial, the lower court rendered a decision on August 30, 1985, exonerating the ARRASTRE of any liability on the ground that the subject
container van was not formally turned over to its custody, and adjudging the CARRIER liable for the principal amount of P312,480.00
representing the market value of the lost shipment, and the sum of P30,000.00 as and for attorney's fees and the costs of suit.
As earlier stated, the court of Appeals affirmed the decision of the court a quo but deleted the award of attorney's fees and costs of suit.
The two main issues for resolution are:
1. Whether the loss occurred while the cargo in question was in the custody of E. Razon, Inc. or of Citadel Lines, Inc; and
2. Whether the stipulation limiting the liability of the carrier contained in the bill of lading is binding on the consignee.
The first issue is factual in nature. The Court of Appeals declared in no uncertain terms that, on the basis of the evidence presented, the
subject cargo which was placed in a container van, padlocked and sealed by the representative of the CARRIER was still in its possession
and control when the loss occurred, there having been no formal turnover of the cargo to the ARRASTRE. Besides, there is the categorical
admission made by two witnesses, namely, Atty. Lope M. Velasco and Ruben Ignacio, Claims Manager and Head Checker, respectively, of the
CARRIER, 10 that for lack of space the containers were not turned over to and as the responsibility of E. Razon Inc. The CARRIER is now
estopped from claiming otherwise.
Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the
vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case. 11 If the
goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove
that they observed extra ordinary diligence as required in Article 1733 of the Civil Code. 12 The duty of the consignee is to prove merely that
the goods were lost. Thereafter, the burden is shifted to the carrier to prove that it has exercised the extraordinary diligence required by law.
And, its extraordinary responsibility lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier
for transportation until the same are delivered, actually or constructively, by the carrier to the consignee or to the person who has the right to
receive them. 13
Considering, therefore, that the subject shipment was lost while it was still in the custody of herein petitioner CARRIER, and considering
further that it failed to prove that the loss was occasioned by an excepted cause, the inescapable conclusion is that the CARRIER was
negligent and should be held liable therefor.
The cases cited by petitioner in support of its allegations to the contrary do not find proper application in the case at bar simply because those
cases involve a situation wherein the shipment was turned over to the custody and possession of the arrastre operator.
We, however, find the award of damages in the amount of P312,800.00 for the value of the goods lost, based on the alleged market value
thereof, to be erroneous. It is clearly and expressly provided under Clause 6 of the aforementioned bills of lading issued by the CARRIER that
its liability is limited to $2.00 per kilo. Basic is the rule, long since enshrined as a statutory provision, that a stipulation limiting the liability of the
carrier to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value, is binding. 14 Further, a
contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction or deterioration of the goods is valid, if it is
reasonable and just under the circumstances, and has been fairly and freely agreed upon. 15
The CONSIGNEE itself admits in its memorandum that the value of the goods shipped does not appear in the bills of lading. 16 Hence, the
stipulation on the carrier's limited liability applies. There is no question that the stipulation is just and reasonable under the circumstances and
have been fairly and freely agreed upon. In Sea-land Service, Inc. vs. Intermediate Appellate Court, et al. 17 we there explained what is a just
and reasonable, and a fair and free, stipulation, in this wise:
. . . That said stipulation is just and reasonable 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 justice and fairness of that 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. And since the shipper here has not been heard to complain of having
been "rushed," imposed upon or deceived in any significant way into agreeing to ship the cargo under a bill of lading
carrying such a stipulation in fact, it does not appear, that said party has been heard from at all insofar as this dispute is
concerned there is simply no ground for assuming that its agreement thereto was not as the law would require, freely
and fairly sought and well.
The bill of lading shows that 120 cartons weigh 2,978 kilos or 24.82 kilos per carton. Since 90 cartons were lost and the weight of said cartons
is 2,233.80 kilos, at $2.00 per kilo the CARRIER's liability amounts to only US$4,467.60.
WHEREFORE, the judgment of respondent court is hereby MODIFIED and petitioner Citadel Lines, Inc. is ordered to pay private respondent
Manila Wine Merchants, Inc. the sum of US$4,465.60. or its equivalent in Philippine currency at the exchange rate obtaining at the time of
payment thereof. In all other respects, said judgment of respondent Court is AFFIRMED.
SO ORDERED.
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 122494 October 8, 1998
EVERETT STEAMSHIP CORPORATION, petitioner,

vs.
COURT OF APPEALS and HERNANDEZ TRADING CO. INC., respondents.
MARTINEZ, J.:
Petitioner Everett Steamship Corporation, through this petition for review, seeks the reversal of the decision 1 of the Court of Appeals, dated
June 14, 1995, in CA-G.R. No. 428093, which affirmed the decision of the Regional Trial Court of Kalookan City, Branch 126, in Civil Case No.
C-15532, finding petitioner liable to private respondent Hernandez Trading Co., Inc. for the value of the lost cargo.
Private respondent imported three crates of bus spare parts marked as MARCO C/No. 12, MARCO C/No. 13 and MARCO C/No. 14, from its
supplier, Maruman Trading Company, Ltd. (Maruman Trading), a foreign corporation based in Inazawa, Aichi, Japan. The crates were shipped
from Nagoya, Japan to Manila on board "ADELFAEVERETTE," a vessel owned by petitioner's principal, Everett Orient Lines. The said crates
were covered by Bill of Lading No. NGO53MN.
Upon arrival at the port of Manila, it was discovered that the crate marked MARCO C/No. 14 was missing. This was confirmed and admitted by
petitioner in its letter of January 13, 1992 addressed to private respondent, which thereafter made a formal claim upon petitioner for the value
of the lost cargo amounting to One Million Five Hundred Fifty Two Thousand Five Hundred (Y1,552,500.00) Yen, the amount shown in an
Invoice No. MTM-941, dated November 14, 1991. However, petitioner offered to pay only One Hundred Thousand (Y100,000.00) Yen, the
maximum amount stipulated under Clause 18 of the covering bill of lading which limits the liability of petitioner.
Private respondent rejected the offer and thereafter instituted a suit for collection docketed as Civil Case No. C-15532, against petitioner
before the Regional Trial Court of Caloocan City, Branch 126.
At the pre-trial conference, both parties manifested that they have no testimonial evidence to offer and agreed instead to file their respective
memoranda.
On July 16, 1993, the trial court rendered judgment 2 in favor of private respondent, ordering petitioner to pay: (a) Y1,552,500.00; (b)
Y20,000.00 or its peso equivalent representing the actual value of the lost cargo and the material and packaging cost; (c) 10% of the total
amount as an award for and as contingent attorney's fees; and (d) to pay the cost of the suit. The trial court ruled:
Considering defendant's categorical admission of loss and its failure to overcome the presumption of negligence and fault, the Court
conclusively finds defendant liable to the plaintiff. The next point of inquiry the Court wants to resolve is the extent of the liability of the
defendant. As stated earlier, plaintiff contends that defendant should be held liable for the whole value for the loss of the goods in the amount
of Y1,552,500.00 because the terms appearing at the back of the bill of lading was so written in fine prints and that the same was not signed
by plaintiff or shipper thus, they are not bound by clause stated in paragraph 18 of the bill of lading. On the other hand, defendant merely
admitted that it lost the shipment but shall be liable only up to the amount of Y100,000.00.
The Court subscribes to the provisions of Article 1750 of the New Civil Code
Art. 1750. "A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction or deterioration of the goods is
valid, if it is reasonable and just under the circumstances, and has been fairly and freely agreed upon."
It is required, however, that the contract must be reasonable and just under the circumstances and has been fairly and freely agreed upon.
The requirements provided in Art. 1750 of the New Civil Code must be complied with before a common carrier can claim a limitation of its
pecuniary liability in case of loss, destruction or deterioration of the goods it has undertaken to transport.
In the case at bar, the Court is of the view that the requirements of said article have not been met. The fact that those conditions are printed at
the back of the bill of lading in letters so small that they are hard to read would not warrant the presumption that the plaintiff or its supplier was
aware of these conditions such that he had "fairly and freely agreed" to these conditions. It can not be said that the plaintiff had actually
entered into a contract with the defendant, embodying the conditions as printed at the back of the bill of lading that was issued by the
defendant to plaintiff.
On appeal, the Court of Appeals deleted the award of attorney's fees but affirmed the trial court's findings with the additional observation that
private respondent can not be bound by the terms and conditions of the bill of lading because it was not privy to the contract of carriage. It
said:
As to the amount of liability, no evidence appears on record to show that the appellee (Hernandez Trading Co.) consented to the terms of the
Bill of Lading. The shipper named in the Bill of Lading is Maruman Trading Co., Ltd. whom the appellant (Everett Steamship Corp.) contracted
with for the transportation of the lost goods.
Even assuming arguendo that the shipper Maruman Trading Co., Ltd. accepted the terms of the bill of lading when it delivered the cargo to the
appellant, still it does not necessarily follow that appellee Hernandez Trading, Company as consignee is bound thereby considering that the
latter was never privy to the shipping contract.
Never having entered into a contract with the appellant, appellee should therefore not be bound by any of the terms and conditions in the bill
of lading.
Hence, it follows that the appellee may recover the full value of the shipment lost, the basis of which is not the breach of contract as appellee
was never a privy to the any contract with the appellant, but is based on Article 1735 of the New Civil Code, there being no evidence to prove
satisfactorily that the appellant has overcome the presumption of negligence provided for in the law.
Petitioner now comes to us arguing that the Court of Appeals erred (1) in ruling that the consent of the consignee to the terms and conditions
of the bill of lading is necessary to make such stipulations binding upon it; (2) in holding that the carrier's limited package liability as stipulated
in the bill of lading does not apply in the instant case; and (3) in allowing private respondent to fully recover the full alleged value of its lost
cargo.
We shall first resolve the validity of the limited liability clause in the bill of lading.
A stipulation in the bill of lading limiting the common carrier's liability for loss or destruction of a cargo to a certain sum, unless the shipper or
owner declares a greater value, is sanctioned by law, particularly Articles 1749 and 1750 of the Civil Code which provide:
Art. 1749. A stipulation that the common carrier's liability is limited to the value of the goods appearing in the bill of lading, unless the shipper
or owner declares a greater value, is binding.
Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or deterioration of the goods is
valid, if it is reasonable and just under the circumstances, and has been freely and fairly agreed upon.
Such limited-liability clause has also been consistently upheld by this Court in a number of cases. 3 Thus, in Sea Land Service, Inc. vs.
Intermediate Appellate Court 4, we ruled:
It seems clear that even if said section 4 (5) of the Carriage of Goods by Sea Act did not exist, the validity and binding effect of the liability
limitation clause in the bill of lading here are nevertheless fully sustainable on the basis alone of the cited Civil Code Provisions. That said
stipulation is just and reasonable is arguable from the fact that it echoes Art. 1750 itself in providing a limit to liability only if a greater value is
not declared for the shipment in the bill of lading. To hold otherwise would amount to questioning the justness and fairness of the law itself,
and this the private respondent does not pretend to do. But over and above that consideration, the just and reasonable character of such
stipulation is implicit in it giving the shipper or owner the option of avoiding accrual of liability limitation by the simple and surely far from
onerous expedient of declaring the nature and value of the shipment in the bill of lading.
Pursuant to the afore-quoted provisions of law, it is required that the stipulation limiting the common carrier's 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 shipper's net invoice cost plus freight and
insurance premiums, if paid, and in no event shall the carrier be liable for any loss of possible profits or any consequential loss.
The carrier shall not be liable for any loss of or any damage to or in any connection with, goods in an amount exceeding One Hundred
thousand Yen in Japanese Currency (Y100,000.00) or its equivalent in any other currency per package or customary freight unit (whichever is
least) unless the value of the goods higher than this amount is declared in writing by the shipper before receipt of the goods by the carrier and
inserted in the Bill of Lading and extra freight is paid as required. (Emphasis supplied)
The above stipulations are, to our mind, reasonable and just. In the bill of lading, the carrier made it clear that its liability would only be up to
One Hundred Thousand (Y100,000.00) Yen. However, the shipper, Maruman Trading, had the option to declare a higher valuation if the value
of its cargo was higher than the limited liability of the carrier. Considering that the shipper did not declare a higher valuation, it had itself to
blame for not complying with the stipulations.
The trial court's ratiocination that private respondent could not have "fairly and freely" agreed to the limited liability clause in the bill of lading
because the said conditions were printed in small letters does not make the bill of lading invalid.
We ruled in PAL, Inc. vs. Court of Appeals 5 that the "jurisprudence on the matter reveals the consistent holding of the court that contracts of
adhesion are not invalid per se and that it has on numerous occasions upheld the binding effect thereof." Also, in Philippine American General
Insurance Co., Inc. vs. Sweet Lines, Inc. 6 this Court, speaking through the learned Justice Florenz D. Regalado, held:
. . . Ong Yiu vs. Court of Appeals, et. al., instructs us that "contracts of adhesion wherein one party imposes a ready-made form of contract on
the other . . . are contracts not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if the adheres he
gives his consent." In the present case, not even an allegation of ignorance of a party excuses non-compliance with the contractual
stipulations since the responsibility for ensuring full comprehension of the provisions of a contract of carriage devolves not on the carrier but
on the owner, shipper, or consignee as the case may be. (Emphasis supplied)
It was further explained in Ong Yiu vs. Court of Appeals 7 that stipulations in contracts of adhesion are valid and binding.
While it may be true that petitioner had not signed the plane
ticket . . ., he is nevertheless bound by the provisions thereof. "Such provisions have been held to be a part of the contract of carriage, and
valid and binding upon the passenger regardless of the latter's lack of knowledge or assent to the regulation." It is what is known as a contract
of "adhesion," in regards which it has been said that contracts of adhesion wherein one party imposes a ready-made form of contract on the
other, as the plane ticket in the case at bar, are contracts not entirely prohibited. The one who adheres to the contract is in reality free to reject
it entirely; if he adheres, he gives his consent. . . ., a contract limiting liability upon an agreed valuation does not offend against the policy of
the law forbidding one from contracting against his own negligence. (Emphasis supplied)
Greater vigilance, however, is required of the courts when dealing with contracts of adhesion in that the said contracts must be carefully
scrutinized "in order to shield the unwary (or weaker party) from deceptive schemes contained in ready-made covenants," 8 such as the bill of
lading in question. The stringent requirement which the courts are enjoined to observe is in recognition of Article 24 of the Civil Code which
mandates that "(i)n all contractual, property or other relations, when one of the parties is at a disadvantage on account of his moral
dependence, ignorance, indigence, mental weakness, tender age or other handicap, the courts must be vigilant for his protection."
The shipper, Maruman Trading, we assume, has been extensively engaged in the trading business. It can not be said to be ignorant of the
business transactions it entered into involving the shipment of its goods to its customers. The shipper could not have known, or should know
the stipulations in the bill of lading and there it should have declared a higher valuation of the goods shipped. Moreover, Maruman Trading has
not been heard to complain that it has been deceived or rushed into agreeing to ship the cargo in petitioner's vessel. In fact, it was not even
impleaded in this case.
The next issue to be resolved is whether or not private respondent, as consignee, who is not a signatory to the bill of lading is bound by the
stipulations thereof.
Again, in Sea-Land Service, Inc. vs. Intermediate Appellate Court (supra), we held that even if the consignee was not a signatory to the
contract of carriage between the shipper and the carrier, the consignee can still be bound by the contract. Speaking through Mr. Chief Justice
Narvasa, we ruled:
To begin with, there is no question of the right, in principle, of a consignee in a bill of lading to recover from the carrier or shipper for loss of, or
damage to goods being transported under said bill, although that document may have been-as in practice it oftentimes is-drawn up only by the
consignor and the carrier without the intervention of the
onsignee. . . . .
. . . the right of a party in the same situation as respondent here, to recover for loss of a shipment consigned to him under a bill of lading drawn
up only by and between the shipper and the carrier, springs from either a relation of agency that may exist between him and the shipper or
consignor, or his status as stranger in whose favor some stipulation is made in said contract, and who becomes a party thereto when he
demands fulfillment of that stipulation, in this case the delivery of the goods or cargo shipped. In neither capacity can he assert personally, in
bar to any provision of the bill of lading, the alleged circumstance that fair and free agreement to such provision was vitiated by its being in
such fine print as to be hardly readable. Parenthetically, it may be observed that in one comparatively recent case (Phoenix Assurance
Company vs. Macondray & Co., Inc., 64 SCRA 15) where this Court found that a similar package limitation clause was "printed in the smallest
type on the back of the bill of lading," it nonetheless ruled that the consignee was bound thereby on the strength of authority holding that such
provisions on liability limitation are as much a part of a bill of lading as through physically in it and as though placed therein by agreement of
the parties.
There can, therefore, be no doubt or equivocation about the validity and enforceability of freely-agreed-upon stipulations in a contract of
carriage or bill of lading limiting the liability of the carrier to an agreed valuation unless the shipper declares a higher value and inserts it into
said contract or bill. This proposition, moreover, rests upon an almost uniform weight of authority. (Emphasis supplied).
When private respondent formally claimed reimbursement for the missing goods from petitioner and subsequently filed a case against the
latter based on the very same bill of lading, it (private respondent) accepted the provisions of the contract and thereby made itself a party
thereto, or at least has come to court to enforce it. 9 Thus, private respondent cannot now reject or disregard the carrier's limited liability
stipulation in the bill of lading. In other words, private respondent is bound by the whole stipulations in the bill of lading and must respect the
same.
Private respondent, however, insists that the carrier should be liable for the full value of the lost cargo in the amount of Y1,552,500.00,
considering that the shipper, Maruman Trading, had "fully declared the shipment . . ., the contents of each crate, the dimensions, weight and
value of the contents," 10 as shown in the commercial Invoice No. MTM-941.
This claim was denied by petitioner, contending that it did not know of the contents, quantity and value of "the shipment which consisted of
three pre-packed crates described in Bill of Lading No. NGO-53MN merely as '3 CASES SPARE PARTS.'" 11
The bill of lading in question confirms petitioner's contention. To defeat the carrier's limited liability, the aforecited Clause 18 of the bill of lading
requires that the shipper should have declared in writing a higher valuation of its goods before receipt thereof by the carrier and insert the said
declaration in the bill of lading, with extra freight paid. These requirements in the bill of lading were never complied with by the shipper, hence,
the liability of the carrier under the limited liability clause stands. The commercial Invoice No. MTM-941 does not in itself sufficiently and
convincingly show that petitioner has knowledge of the value of the cargo as contended by private respondent. No other evidence was
proffered by private respondent to support is contention. Thus, we are convinced that petitioner should be liable for the full value of the lost
cargo.
In fine, the liability of petitioner for the loss of the cargo is limited to One Hundred Thousand (Y100,000.00) Yen, pursuant to Clause 18 of the
bill of lading.
WHEREFORE, the decision of the Court of Appeals dated June 14, 1995 in C.A.-G.R. CV No. 42803 is hereby REVERSED and SET ASIDE.
SO ORDERED.
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 121824 January 29, 1998

BRITISH AIRWAYS, petitioner,
vs.
COURT OF APPEALS, GOP MAHTANI, and PHILIPPINE AIRLINES, respondents.
ROMERO, J.:
In this appeal by certiorari, petitioner British Airways (BA) seeks to set aside the decision of respondent Court of Appeals 1 promulgated on
September 7, 1995, which affirmed the award of damages and attorney's fees made by the Regional Trial Court of Cebu, 7th Judicial Region,
Branch 17, in favor of private respondent GOP Mahtani as well as the dismissal of its third-party complaint against Philippine Airlines (PAL). 2
The material and relevant facts are as follows:
On April 16, 1989, Mahtani decided to visit his relatives in Bombay, India. In anticipation of his visit, he obtained the services of a certain Mr.
Gumar to prepare his travel plans. The latter, in turn, purchased a ticket from BA where the following itinerary was indicated: 3
CARRIER
FLIGHT
DATE
TIME
STATUS
MANILA
MNL
PR 310 Y
16 APR.
1730
OK
HONGKONG
HKG
BA 20 M
16 APR.
2100
OK
BOMBAY
BOM
BA 19 M
23 APR.
0840
OK
HONGKONG
HKG
PR 311 Y
MANILA
MNL
Since BA had no direct flights from Manila to Bombay, Mahtani had to take a flight to Hongkong via PAL, and upon arrival in Hongkong he had
to take a connecting flight to Bombay on board BA.
Prior to his departure, Mahtani checked in at the PAL counter in Manila his two pieces of luggage containing his clothings and personal effects,
confident that upon reaching Hongkong, 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 patiently waiting for his luggage for one week, BA finally
advised him to file a claim by accomplishing the "Property Irregularity Report." 4
Back in the Philippines, specifically on June 11, 1990, Mahtani filed his complaint for damages and attorney's fees 5 against BA and Mr. Gumar
before the trial court, docketed as Civil Case No. CEB-9076.
On September 4, 1990, BA filed its answer with counter claim 6 to the complaint raising, as special and affirmative defenses, that Mahtani did
not have a cause of action against it. Likewise, on November 9, 1990, BA filed a third-party complaint 7 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.
On February 25, 1991, PAL filed its answer to the third-party complaint, wherein it disclaimed any liability, arguing that there was, in fact,
adequate time to transfer the luggage to BA facilities in Hongkong. Furthermore, the transfer of the luggage to Hongkong authorities should be
considered as transfer to BA. 8
After appropriate proceedings and trial, on March 4, 1993, the trial court rendered its decision in favor of Mahtani, 9 the dispositive portion of
which reads as follows:
WHEREFORE, premises considered, judgment is rendered for the plaintiff and against the defendant for which defendant is ordered to pay
plaintiff the sum of Seven Thousand (P7,000.00) Pesos for the value of the two (2) suit cases; Four Hundred U.S. ($400.00) Dollars
representing the value of the contents of plaintiff's luggage; Fifty Thousand (P50,000.00) Pesos for moral and actual damages and twenty
percent (20%) of the total amount imposed against the defendant for attorney's fees and costs of this action.
The Third-Party Complaint against third-party defendant Philippine Airlines is DISMISSED for lack of cause of action.
SO ORDERED.
Dissatisfied, BA appealed to the Court of Appeals, which however, affirmed the trial court's findings. Thus:
WHEREFORE, in view of all the foregoing considerations, finding the Decision appealed from to be in accordance with law and evidence, the
same is hereby AFFIRMED in toto, with costs against defendant-appellant.
SO ORDERED. 10
BA is now before us seeking the reversal of the Court of Appeals' decision. In essence, BA assails the award of compensatory damages
and attorney's fees, as well as the dismissal of its third-party complaint against PAL. 11
Regarding the first assigned issue, BA asserts that the award of compensatory damages in the separate sum of P7,000.00 for the loss of
Mahtani's two pieces of luggage was without basis since Mahtani in his complaint 12 stated the following as the value of his personal
belongings:
8. On the said travel, plaintiff took with him the following items and its corresponding value, to wit:
1. personal belonging P10,000.00
2. gifts for his parents and relatives $5,000.00
Moreover, he failed to declare a higher valuation with respect to his luggage, a condition provided for in the ticket, which reads: 13
Liability for loss, delay, or damage to baggage is limited unless a higher value is declared in advance and additional charges are paid:
1. For most international travel (including domestic corporations of international journeys) the liability limit is approximately U.S. $9.07 per
pound (U.S. $20.000) per kilo for checked baggage and U.S. $400 per passenger for unchecked baggage.
Before we resolve the issues raised by BA, it is needful to state that the nature of an airline's contract of carriage partakes of two types,
namely: a contract to deliver a cargo or merchandise to its destination and a contract to transport passengers to their destination. A business
intended to serve the traveling public primarily, it is imbued with public interest, hence, the law governing common carriers imposes an
exacting standard. 14 Neglect or malfeasance by the carrier's employees could predictably furnish bases for an action for damages. 15
In the instant case, it is apparent that the contract of carriage was between Mahtani and BA. Moreover, it is indubitable that his luggage never
arrived in Bombay on time. Therefore, as in a number of cases 16 we have assessed the airlines' culpability in the form of damages for breach
of contract involving misplaced luggage.
In determining the amount of compensatory damages in this kind of cases, it is vital that the claimant satisfactorily prove during the trial the
existence of the factual basis of the damages and its causal connection to defendant's acts. 17 In this regard, the trial court granted the
following award as compensatory damages:
Since plaintiff did not declare the value of the contents in his luggage and even failed to show receipts of the alleged gifts for the members of
his family in Bombay, the most that can be expected for compensation of his lost luggage (2 suit cases) is Twenty U.S. Dollars ($20.00) per
kilo, or combined value of Four Hundred ($400.00) U.S. Dollars for Twenty kilos representing the contents plus Seven Thousand (P7,000.00)
Pesos representing the purchase price of the two (2) suit cases.
However, as earlier stated, it is the position of BA 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, 18 and therefore, its liability is limited, at most, only to the amount
stated in the ticket.
Considering the facts of the case, we cannot assent to such specious argument.
Admittedly, in a contract of air carriage a declaration by the passenger of a higher value is needed to recover a greater amount. Article 22(1) of
the Warsaw Convention, 19 provides as follows:
(2) In the transportation of checked baggage and goods, the liability of the carrier shall be limited to a sum of 250 francs per kilogram, unless
the consignor has made, at time the package was handed over to the carrier, a special declaration of the value at delivery and has paid a
supplementary sum if the case so requires. In that case the carrier will be liable to pay a sum not exceeding the declared sum, unless he
proves that the sum is greater than the actual value to the consignor at delivery.
American jurisprudence provides that an air carrier is not liable for the loss of baggage in an amount in excess of the limits specified in the
tariff which was filed with the proper authorities, such tariff being binding, on the passenger regardless of the passenger's lack of knowledge
thereof or assent thereto. 20 This doctrine is recognized in this jurisdiction. 21
Notwithstanding the foregoing, we have, nevertheless, ruled against blind reliance on adhesion contracts where the facts and circumstances
justify that they should be disregarded. 22
In addition, we have held that benefits of limited liability are subject to waiver such as when the air carrier failed to raise timely objections
during the trial when questions and answers regarding the actual claims and damages sustained by the passenger were asked. 23
Given the foregoing postulates, the inescapable conclusion is 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. In this regard, we quote the
pertinent transcript of stenographic notes of Mahtani's direct testimony: 24
Q How much are you going to ask from this court?
A P100,000.00.
Q What else?
A Exemplary damages.
Q How much?
A P100,000.00.
Q What else?
A The things I lost, $5,000.00 for the gifts I lost and my personal belongings, P10,000.00.
Q What about the filing of this case?
A The court expenses and attorney's fees is 30%.
Indeed, it is a well-settled doctrine that where the proponent offers evidence deemed by counsel of the adverse party to be inadmissible for
any reason, the latter has the right to object. However, such right is a mere privilege which can be waived. Necessarily, the objection must be
made at the earliest opportunity, lest silence when there is opportunity to speak may operate as a waiver of objections. 25 BA has precisely
failed in this regard.
To compound matters for BA, its counsel failed, not only to interpose a timely objection, but even conducted his own cross-examination as
well. 26 In the early case of Abrenica v. Gonda, 27 we ruled that:
. . . (I)t has been repeatedly laid down as a rule of evidence that a protest or objection against the admission of any evidence must be made at
the proper time, and that if not so made it will be understood to have been waived. The proper time to make a protest or objection is when,
from the question addressed to the witness, or from the answer thereto, or from the presentation of proof, the inadmissibility of evidence is, or
may be inferred.
Needless to say, factual findings of the trial court, as affirmed by the Court of Appeals, are entitled to great respect. 28 Since the actual value of
the luggage involved appreciation of evidence, a task within the competence of the Court of Appeals, its ruling regarding the amount is
assuredly a question of fact, thus, a finding not reviewable by this Court. 29
As to the issue of the dismissal of BA's third-party complaint against PAL, the Court of Appeals justified its ruling in this wise, and we quote: 30
Lastly, we sustain the trial court's ruling dismissing appellant's third-party complaint against PAL.
The contract of air transportation in this case pursuant to the ticket issued by appellant to plaintiff-appellee was exclusively between the
plaintiff Mahtani and defendant-appellant BA. When plaintiff boarded the PAL plane from Manila to Hongkong, PAL was merely acting as a
subcontractor or agent of BA. This is shown by the fact that in the ticket issued by appellant to plaintiff-appellee, it is specifically provided on
the "Conditions of Contract," paragraph 4 thereof that:
4. . . . carriage to be performed hereunder by several successive carriers is regarded as a single operation.

The rule that carriage by plane although performed by successive carriers is regarded as a single operation and that the carrier issuing the
passenger's ticket is considered the principal party and the other carrier merely subcontractors or agent, is a settled issue.
We cannot agree with the dismissal of the third-complaint.
In Firestone Tire and Rubber Company of the Philippines v. Tempengko, 31 we expounded on the nature of a third-party complaint thus:
The third-party complaint is, therefore, a procedural device whereby a "third party" who is neither a party nor privy to the act or deed
complained of by the plaintiff, may be brought into the case with leave of court, by the defendant, who acts, as third-party plaintiff to enforce
against such third-party defendant a right for contribution, indemnity, subrogation or any other relief, in respect of the plaintiff's claim. The thirdparty complaint is actually independent of and separate and distinct from the plaintiff's complaint. Were it not for this provision of the Rules of
Court, it would have to be filed independently and separately from the original complaint by the defendant against the third-party. But the Rules
permit defendant to bring in a third-party defendant or so to speak, to litigate his separate cause of action in respect of plaintiff's claim against
a third-party in the original and principal case with the object of avoiding circuitry of action and unnecessary proliferation of law suits and of
disposing expeditiously in one litigation the entire subject matter arising from one particular set of facts.
Undeniably, for the loss of his luggage, Mahtani is entitled to damages from BA, in view of their contract of carriage. Yet, BA adamantly
disclaimed its liability and instead imputed it to PAL which the latter naturally denies. In other words, BA and PAL are blaming each other for
the incident.
In resolving this issue, it is worth observing that the contract of air transportation was exclusively between Mahtani and BA, the latter merely
endorsing the Manila to Hongkong leg of the former's journey to PAL, as its subcontractor or agent. In fact, the fourth paragraph of the
"Conditions of Contracts" of the ticket 32 issued by BA to Mahtani confirms that the contract was one of continuous air transportation from
Manila to Bombay.
4. . . . carriage to be performed hereunder by several successive carriers is regarded as a single operation.
Prescinding from the above discussion, it is undisputed that PAL, in transporting Mahtani from Manila to Hongkong acted as the agent of BA.
Parenthetically, 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. 33 and is liable for damages which the principal may suffer by reason of its negligent act. 34 Hence, the Court of
Appeals erred when it opined that BA, being the principal, had no cause of action against PAL, its agent or sub-contractor.
Also, it is worth mentioning that both BA and PAL are members of the International Air Transport Association (IATA), wherein member airlines
are regarded as agents of each other in the issuance of the tickets and other matters pertaining to their relationship. 35 Therefore, in the instant
case, the contractual relationship between BA and PAL is one of agency, the former being the principal, since it was the one which issued the
confirmed ticket, and the latter the agent.
Our pronouncement that BA is the principal is consistent with our ruling in Lufthansa German Airlines v. Court of Appeals. 36 In that case,
Lufthansa issued a confirmed ticket to Tirso Antiporda covering five-leg trip aboard different airlines. Unfortunately, Air Kenya, one of the
airlines which was to carry Antiporda to a specific destination "bumped" him off.
An action for damages was filed against Lufthansa which, however, denied any liability, contending that its responsibility towards its passenger
is limited to the occurrence of a mishap on its own line. Consequently, when Antiporda transferred to Air Kenya, its obligation as a principal in
the contract of carriage ceased; from there on, it merely acted as a ticketing agent for Air Kenya.
In rejecting Lufthansa's argument, we ruled:
In the very nature of their contract, Lufthansa is clearly the principal in the contract of carriage with Antiporda and remains to be so, regardless
of those instances when actual carriage was to be performed by various carriers. The issuance of confirmed Lufthansa ticket in favor of
Antiporda covering his entire five-leg trip abroad successive carriers concretely attest to this.
Since the instant petition was based on breach of contract of carriage, Mahtani can only sue BA alone, and not PAL, since the latter was not a
party to the contract. However, this is not to say that PAL is relieved from any liability due to any of its negligent acts. In China Air Lines, Ltd. v.
Court of Appeals, 37 while not exactly in point, the case, however, illustrates the principle which governs this particular situation. In that case,
we recognized that a carrier (PAL), acting as an agent of another carrier, is also liable for its own negligent acts or omission in the performance
of its duties.
Accordingly, to deny BA the procedural remedy of filing a third-party complaint against PAL for the purpose of ultimately determining who was
primarily at fault as between them, is without legal basis. After all, such proceeding is in accord with the doctrine against multiplicity of cases
which would entail receiving the same or similar evidence for both cases and enforcing separate judgments therefor. It must be borne in mind
that the purpose of a third-party complaint is precisely to avoid delay and circuitry of action and to enable the controversy to be disposed of in
one suit. 38 It is but logical, fair and equitable to allow BA to sue PAL for indemnification, if it is proven that the latter's negligence was the
proximate cause of Mahtani's unfortunate experience, instead of totally absolving PAL from any liability.
WHEREFORE, in view of the foregoing, the decision of the Court of Appeals in CA-G.R. CV No. 43309 dated September 7, 1995 is hereby
MODIFIED, reinstating the third-party complaint filed by British Airways dated November 9, 1990 against Philippine Airlines. No costs.
SO ORDERED.

SUPREME COURT
Manila
EN BANC
G.R. No. L-16598
October 3, 1921
H. E. HEACOCK COMPANY, plaintiff-appellant,

vs.
MACONDRAY & COMPANY, INC., defendant-appellant.
JOHNSON, J.:
This action was commenced in the Court of First Instance of the City of Manila to recover the sum of P240 together with interest thereon. The
facts are stipulated by the parties, and are, briefly, as follows:
(1) On or about the 5th day of June, 1919, the plaintiff caused to be delivered on board of steamship Bolton Castle, then in the
harbor of New York, four cases of merchandise one of which contained twelve (12) 8-day Edmond clocks properly boxed and
marked for transportation to Manila, and paid freight on said clocks from New York to Manila in advance. The said steampship
arrived in the port of Manila on or about the 10th day of September, 1919, consigned to the defendant herein as agent and
representative of said vessel in said port. Neither the master of said vessel nor the defendant herein, as its agent, delivered to the
plaintiff the aforesaid twelve 8-day Edmond clocks, although demand was made upon them for their delivery.
(2) The invoice value of the said twelve 8-day Edmond clocks in the city of New York was P22 and the market value of the same in
the City of Manila at the time when they should have been delivered to the plaintiff was P420.
(3) The bill of lading issued and delivered to the plaintiff by the master of the said steamship Bolton Castle contained, among others,
the following clauses:
1. It is mutually agreed that the value of the goods receipted for above does not exceed $500 per freight ton, or, in
proportion for any part of a ton, unless the value be expressly stated herein and ad valorem freight paid thereon.
9. Also, that in the event of claims for short delivery of, or damage to, cargo being made, the carrier shall not be
liable for more than the net invoice price plus freight and insurance less all charges saved, and any loss or damage for
which the carrier may be liable shall be adjusted pro rata on the said basis.
(4) The case containing the aforesaid twelve 8-day Edmond clocks measured 3 cubic feet, and the freight ton value thereof was
$1,480, U. S. currency.
(5) No greater value than $500, U. S. currency, per freight ton was declared by the plaintiff on the aforesaid clocks, and no ad
valorem freight was paid thereon.
(6) On or about October 9, 1919, the defendant tendered to the plaintiff P76.36, the proportionate freight ton value of the aforesaid
twelve 8-day Edmond clocks, in payment of plaintiff's claim, which tender plaintiff rejected.
The lower court, in accordance with clause 9 of the bill of lading above quoted, rendered judgment in favor of the plaintiff against the
defendant for the sum of P226.02, this being the invoice value of the clocks in question plus the freight and insurance thereon, with legal
interest thereon from November 20, 1919, the date of the complaint, together with costs. From that judgment both parties appealed to this
court.
The plaintiff-appellant insists that it is entitled to recover from the defendant the market value of the clocks in question, to wit: the sum of
P420. The defendant-appellant, on the other hand, contends that, in accordance with clause 1 of the bill of lading, the plaintiff is entitled to
recover only the sum of P76.36, the proportionate freight ton value of the said clocks. The claim of the plaintiff is based upon the argument
that the two clause in the bill of lading above quoted, limiting the liability of the carrier, are contrary to public order and, therefore, null and void.
The defendant, on the other hand, contends that both of said clauses are valid, and the clause 1 should have been applied by the lower court
instead of clause 9.
I. The appeal of the plaintiff presents this question; May a common carrier, by stipulations inserted in the bill of lading, limit its liability for
the loss of or damage to the cargo to an agreed valuation of the latter? 1awph!l.net
Three kinds of stipulations have often been made in a bill of lading. The first is one exempting the carrier from any and all liability for
loss or damage occasioned by its own negligence. The second is one providing for an unqualified limitation of such liability to an agreed
valuation. And the third is one limiting the liability of the carrier to an agreed valuation unless the shipper declares a higher value and pays a
higher rate of freight. According to an almost uniform weight of authority, the first and second kinds of stipulations are invalid as being contrary
to public policy, but the third is valid and enforceable.
The authorities relied upon by the plaintiff-appellant (the Harter Act [Act of Congress of February 13, 1893]: Louisville Ry. Co. vs. Wynn,
88 Tenn., 320; and Galt vs. Adams Express Co., 4 McAr., 124; 48 Am. Rep., 742) support the proposition that the first and second stipulations
in a bill of lading are invalid which either exempt the carrier from liability for loss or damage occasioned by its negligence, or provide for an
unqualified limitation of such liability to an agreed valuation.
A reading of clauses 1 and 9 of the bill of lading here in question, however, clearly shows that the present case falls within the third
stipulation, to wit: That a clause in a bill of lading limiting the liability of the carrier to a certain amount unless the shipper declares a higher
value and pays a higher rate of freight, is valid and enforceable. This proposition is supported by a uniform lien of decisions of the Supreme
Court of the United States rendered both prior and subsequent to the passage of the Harter Act, from the case of Hart vs. Pennsylvania R. R.
Co. (decided Nov. 24, 1884; 112 U. S., 331), to the case of the Union Pacific Ry. Co. vs. Burke (decided Feb. 28, 1921, Advance Opinions,
1920-1921, p. 318).
In the case of Hart vs. Pennsylvania R. R. Co., supra, it was held that "where a contract of carriage, signed by the shipper, is fairly made
with a railroad company, agreeing on a valuation of the property carried, with the rate of freight based on the condition that the carrier
assumes liability only to the extent of the agreed valuation, even in case of loss or damage by the negligence of the carrier, the contract will be
upheld as proper and lawful mode of securing a due proportion between the amount for which the carrier may be responsible and the freight
he receives, and protecting himself against extravagant and fanciful valuations."
In the case of Union Pacific Railway Co. vs. Burke, supra, the court said: "In many cases, from the decision in Hart vs. Pennsylvania R.
R. Co. (112 U. S. 331; 28 L. ed., 717; 5 Sup. Ct. Rep., 151, decided in 1884), to Boston and M. R. Co. vs. Piper (246 U. S., 439; 62 L. ed.,
820; 38 Sup. Ct. Rep., 354; Ann. Cas. 1918 E, 469, decided in 1918), it has been declared to be the settled Federal law that if a common
carrier gives to a shipper the choice of two rates, the lower of the conditioned upon his agreeing to a stipulated valuation of his property in
case of loss, even by the carrier's negligence, if the shipper makes such a choice, understandingly and freely, and names his valuation, he
cannot thereafter recover more than the value which he thus places upon his property. As a matter of legal distinction, estoppel is made the
basis of this ruling, that, having accepted the benefit of the lower rate, in common honesty the shipper may not repudiate the conditions on
which it was obtained, but the rule and the effect of it are clearly established."
The syllabus of the same case reads as follows: "A carrier may not, by a valuation agreement with a shipper, limit its liability in case of
the loss by negligence of an interstate shipment to less than the real value thereof, unless the shipper is given a choice of rates, based on
valuation."
A limitation of liability based upon an agreed value to obtain a lower rate does not conflict with any sound principle of public
policy; and it is not conformable to plain principles of justice that a shipper may understate value in order to reduce the rate and then
recover a larger value in case of loss. (Adams Express Co. vs. Croninger 226 U. S. 491, 492.) See also Reid vs. Farbo (130 C. C.
A., 285); Jennings vs. Smith (45 C. C. A., 249); George N. Pierce Co. vs. Wells, Fargo and Co. (227 U. S., 278); Wells, Fargo & Co.
vs. Neiman-Marcus Co. (227 U. S., 469).
It seems clear from the foregoing authorities that the clauses (1 and 9) of the bill of lading here in question are not contrary to public
order. Article 1255 of the Civil Code provides that "the contracting parties may establish any agreements, terms and conditions they may deem
advisable, provided they are not contrary to law, morals or public order." Said clauses of the bill of lading are, therefore, valid and binding upon
the parties thereto.
II. The question presented by the appeal of the defendant is whether clause 1 or clause 9 of the bill of lading here in question is to be
adopted as the measure of defendant's liability. Clause 1 provides as follows:
1. It is mutually agreed that the value of the goods receipted for above does not exceed $500 per freight ton, or, in proportion
for any part of a ton, unless the value be expressly stated herein and ad valorem freight paid thereon. Clause 9 provides:
9. Also, that in the even of claims for short delivery of, or damage to, cargo being made, the carrier shall not be liable for more
than the net invoice price plus freight and insurance less all charges saved, and any loss or damage for which the carrier may be
liable shall be adjusted pro rata on the said basis.
The defendant-appellant contends that these two clauses, if construed together, mean that the shipper and the carrier stipulate and
agree that the value of the goods receipted for does not exceed $500 per freight ton, but should the invoice value of the goods be less than
$500 per freight ton, then the invoice value governs; that since in this case the invoice value is more than $500 per freight ton, the latter
valuation should be adopted and that according to that valuation, the proportionate value of the clocks in question is only P76.36 which the
defendant is ready and willing to pay to the plaintiff.
It will be noted, however, that whereas clause 1 contains only an implied undertaking to settle in case of loss on the basis of not
exceeding $500 per freight ton, clause 9 contains an express undertaking to settle on the basis of the net invoice price plus freight and
insurance less all charges saved. "Any loss or damage for which the carrier may be liable shall be adjusted pro rata on the said basis," clause
9 expressly provides. It seems to us that there is an irreconcilable conflict between the two clauses with regard to the measure of defendant's
liability. It is difficult to reconcile them without doing violence to the language used and reading exceptions and conditions into the undertaking
contained in clause 9 that are not there. This being the case, the bill of lading in question should be interpreted against the defendant carrier,
which drew said contract. "A written contract should, in case of doubt, be interpreted against the party who has drawn the contract." (6 R. C. L.
854.) It is a well-known principle of construction that ambiguity or uncertainty in an agreement must be construed most strongly against the
party causing it. (6 R. C. L., 855.) These rules as applicable to contracts contained in bills of lading. "In construing a bill of lading given by the
carrier for the safe transportation and delivery of goods shipped by a consignor, the contract will be construed most strongly against the
carrier, and favorably to the consignor, in case of doubt in any matter of construction." (Alabama, etc. R. R. Co. vs. Thomas, 89 Ala., 294; 18
Am. St. Rep., 119.)
It follows from all of the foregoing that the judgment appealed from should be affirmed, without any finding as to costs. So ordered.
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-37750 May 19, 1978
SWEET LINES, INC., petitioner,

vs.
HON. BERNARDO TEVES, Presiding Judge, CFI of Misamis Oriental Branch VII, LEOVIGILDO TANDOG, JR., and ROGELIO TIRO,
respondents.
SANTOS, J.:
This is an original action for Prohibition with Pre Injunction filed October 3, 1973 to restrain respondent Judge from proceeding further with
Civil Case No. 4091, entitled Leovigildo D. Tandog, Jr. and Rogelio Tiro v. Sweet Lines, Inc." after he denied petitioner's Motion to Dismiss the
complaint, and the Motion for Reconsideration of said order. 1
Briefly, the facts of record follow. Private respondents Atty. Leovigildo Tandog and Rogelio Tiro, a contractor by professions, bought tickets Nos.
0011736 and 011737 for Voyage 90 on December 31, 1971 at the branch office of petitioner, a shipping company transporting inter-island passengers
and cargoes, at Cagayan de Oro City. Respondents were to board petitioner's vessel, M/S "Sweet Hope" bound for Tagbilaran City via the port of Cebu.
Upon learning that the vessel was not proceeding to Bohol, since many passengers were bound for Surigao, private respondents per advice, went to
the branch office for proper relocation to M/S "Sweet Town". Because the said vessel was already filled to capacity, they were forced to agree "to hide at
the cargo section to avoid inspection of the officers of the Philippine Coastguard." Private respondents alleged that they were, during the trip," "exposed
to the scorching heat of the sun and the dust coming from the ship's cargo of corn grits," and that the tickets they bought at Cagayan de Oro City for
Tagbilaran were not honored and they were constrained to pay for other tickets. In view thereof, private respondents sued petitioner for damages and
for breach of contract of carriage in the alleged sum of P10,000.00 before respondents Court of First Instance of Misamis Oriental. 2
Petitioner moved to dismiss the complaint on the ground of improper venue. This motion was premised on the condition printed at the back of
the tickets, i.e., Condition No. 14, which reads:
14. It is hereby agreed and understood that any and all actions arising out of the conditions and provisions of this ticket, irrespective of where it
is issued, shall be filed in the competent courts in the City of Cebu. 3
The motion was denied by the trial court. 4 Petitioner moved to reconnsider the order of denial, but no avail. 5 Hence, this instant petition for
prohibition for preliminary injunction, 'alleging that the respondent judge has departed from the accepted and usual course of judicial
preoceeding" and "had acted without or in excess or in error of his jurisdicton or in gross abuse of discretion. 6
In Our resolution of November 20, 1973, We restrained respondent Judge from proceeding further with the case and required respondent to
comment. 7 On January 18, 1974, We gave due course to the petition and required respondent to answer. 8 Thereafter, the parties submitted
their respesctive memoranda in support of their respective contentions. 9
Presented thus for Our resolution is a question is aquestion which, to all appearances, is one of first impression, to wit Is Condition No. 14
printed at the back of the petitioner's passage tickets purchased by private respondents, which limits the venue of actions arising from the
contract of carriage to theCourt of First Instance of Cebu, valid and enforceable? Otherwise stated, may a common carrier engaged in interisland shipping stipulate thru condition printed at the back of passage tickets to its vessels that any and all actions arising out of the ocntract of
carriage should be filed only in a particular province or city, in this case the City of Cebu, to the exclusion of all others?
Petitioner contends thaty Condition No. 14 is valid and enforceable, since private respndents acceded to tit when they purchased passage
tickets at its Cagayan de Oro branch office and took its vessel M/S "Sweet Town" for passage to Tagbilaran, Bohol that the condition of the
venue of actions in the City of Cebu is proper since venue may be validly waived, citing cases; 10 that is an effective waiver of venue, valid and
binding as such, since it is printed in bold and capital letters and not in fine print and merely assigns the place where the action sing from the
contract is institution likewise citing cases; 11 and that condition No. 14 is unequivocal and mandatory, the words and phrases "any and all",
"irrespective of where it is issued," and "shag" leave no doubt that the intention of Condition No. 14 is to fix the venue in the City of Cebu, to
the exclusion of other places; that the orders of the respondent Judge are an unwarranted departure from established jurisprudence governing
the case; and that he acted without or in excess of his jurisdiction in is the orders complained of. 12
On the other hand, private respondents claim that Condition No. 14 is not valid, that the same is not an essential element of the contract of carriage,
being in itself a different agreement which requires the mutual consent of the parties to it; that they had no say in its preparation, the existence of which
they could not refuse, hence, they had no choice but to pay for the tickets and to avail of petitioner's shipping facilities out of necessity; that the carrier
"has been exacting too much from the public by inserting impositions in the passage tickets too burdensome to bear," that the condition which was
printed in fine letters is an imposition on the riding public and does not bind respondents, citing cases; 13 that while venue 6f actions may be transferred
from one province to another, such arrangement requires the "written agreement of the parties", not to be imposed unilaterally; and that assuming that
the condition is valid, it is not exclusive and does not, therefore, exclude the filing of the action in Misamis Oriental, 14
There is no question that there was a valid contract of carriage entered into by petitioner and private respondents and that the passage tickets,
upon which the latter based their complaint, are the best evidence thereof. All the essential elements of a valid contract, i.e., consent, cause or
consideration and object, are present. As held in Peralta de Guerrero, et al. v. Madrigal Shipping Co., Inc., 15
It is a matter of common knowledge that whenever a passenger boards a ship for transportation from one place to another he is issued a ticket by the shipper
which has all the elements of a written contract, Namely: (1) the consent of the contracting parties manifested by the fact that the passenger boards the ship and
the shipper consents or accepts him in the ship for transportation; (2) cause or consideration which is the fare paid by the passenger as stated in the ticket; (3)
object, which is the transportation of the passenger from the place of departure to the place of destination which are stated in the ticket.
It should be borne in mind, however, that with respect to the fourteen (14) conditions one of which is "Condition No. 14" which is in issue in this case printed
at the back of the passage tickets, these are commonly known as "contracts of adhesion," the validity and/or enforceability of which will have to be determined by
the peculiar circumstances obtaining in each case and the nature of the conditions or terms sought to be enforced. For, "(W)hile generally, stipulations in a contract
come about after deliberate drafting by the parties thereto, ... there are certain contracts almost all the provisions of which have been drafted only by one party,
usually a corporation. Such contracts are called contracts of adhesion, because the only participation of the party is the signing of his signature or his 'adhesion'
thereto. Insurance contracts, bills of lading, contracts of make of lots on the installment plan fall into this category" 16
By the peculiar circumstances under which contracts of adhesion are entered into namely, that it is drafted only by one party, usually the
corporation, and is sought to be accepted or adhered to by the other party, in this instance the passengers, private respondents, who cannot
change the same and who are thus made to adhere thereto on the "take it or leave it" basis certain guidelines in the determination of their
validity and/or enforceability have been formulated in order to that justice and fan play characterize the relationship of the contracting parties.
Thus, this Court speaking through Justice J.B.L. Reyes in Qua Chee Gan v. Law Union and Rock Insurance Co., 17 and later through Justice
Fernando in Fieldman Insurance v. Vargas, 18 held
The courts cannot ignore that nowadays, monopolies, cartels and concentration of capital endowed with overwhelm economic power, manage
to impose upon parties d with them y prepared 'agreements' that the weaker party may not change one whit his participation in the 'agreement'
being reduced to the alternative 'to take it or leave it,' labelled since Raymond Saleilles 'contracts by adherence' (contracts d' adhesion) in
contrast to those entered into by parties bargaining on an equal footing. Such contracts (of which policies of insurance and international bill of
lading are prime examples) obviously cap for greater strictness and vigilance on the part of the courts of justice with a view to protecting the
weaker party from abuses and imposition, and prevent their becoming traps for the unwary.
To the same effect and import, and, in recognition of the character of contracts of this kind, the protection of the disadvantaged is expressly
enjoined by the New Civil Code
In all contractual property or other relations, when one of the parties is at a disadvantage on account of his moral dependence, ignorance
indigence, mental weakness, tender age and other handicap, the courts must be vigilant for his protection. 19
Considered in the light Of the foregoing norms and in the context Of circumstances Prevailing in the inter-island ship. ping industry in the country today,
We find and hold that Condition No. 14 printed at the back of the passage tickets should be held as void and unenforceable for the following reasons
first, under circumstances obligation in the inter-island ship. ping industry, it is not just and fair to bind passengers to the terms of the conditions printed
at the back of the passage tickets, on which Condition No. 14 is Printed in fine letters, and second, Condition No. 14 subverts the public policy on
transfer of venue of proceedings of this nature, since the same will prejudice rights and interests of innumerable passengers in different s of the country
who, under Condition No. 14, will have to file suits against petitioner only in the City of Cebu.
1. It is a matter of public knowledge, of which We can take judicial notice, that there is a dearth of and acute shortage in interisland vessels plying between the
country's several islands, and the facilities they offer leave much to be desired. Thus, even under ordinary circumstances, the piers are congested with passengers
and their cargo waiting to be transported. The conditions are even worse at peak and/or the rainy seasons, when Passengers literally scramble to whatever
accommodations may be availed of, even through circuitous routes, and/or at the risk of their safety their immediate concern, for the moment, being to be able
to board vessels with the hope of reaching their destinations. The schedules are as often as not if not more so delayed or altered. This was precisely the
experience of private respondents when they were relocated to M/S "Sweet Town" from M/S "Sweet Hope" and then any to the scorching heat of the sun and the
dust coming from the ship's cargo of corn grits, " because even the latter was filed to capacity.
Under these circumstances, it is hardly just and proper to expect the passengers to examine their tickets received from crowded/congested
counters, more often than not during rush hours, for conditions that may be printed much charge them with having consented to the
conditions, so printed, especially if there are a number of such conditions m fine print, as in this case. 20
Again, it should be noted that Condition No. 14 was prepared solely at the ms of the petitioner, respondents had no say in its preparation.
Neither did the latter have the opportunity to take the into account prior to the purpose chase of their tickets. For, unlike the small print
provisions of contracts the common example of contracts of adherence which are entered into by the insured in his awareness of said
conditions, since the insured is afforded the op to and co the same, passengers of inter-island v do not have the same chance, since their
alleged adhesion is presumed only from the fact that they purpose chased the tickets.
It should also be stressed that slapping companies are franchise holders of certificates of public convenience and therefore, posses a virtual
monopoly over the business of transporting passengers between the ports covered by their franchise. This being so, shipping companies, like
petitioner, engaged in inter-island shipping, have a virtual monopoly of the business of transporting passengers and may thus dictate their
terms of passage, leaving passengers with no choice but to buy their tickets and avail of their vessels and facilities. Finally, judicial notice may
be taken of the fact that the bulk of those who board these inter-island vested come from the low-income groups and are less literate, and who
have little or no choice but to avail of petitioner's vessels.
2. Condition No. 14 is subversive of public policy on transfers of venue of actions. For, although venue may be changed or transferred from
one province to another by agreement of the parties in writing t to Rule 4, Section 3, of the Rules of Court, such an agreement will not be held
valid where it practically negates the action of the claimants, such as the private respondents herein. The philosophy underlying the provisions
on transfer of venue of actions is the convenience of the plaintiffs as well as his witnesses and to promote 21 the ends of justice. Considering
the expense and trouble a passenger residing outside of Cebu City would incur to prosecute a claim in the City of Cebu, he would most
probably decide not to file the action at all. The condition will thus defeat, instead of enhance, the ends of justice. Upon the other hand,
petitioner has branches or offices in the respective ports of call of its vessels and can afford to litigate in any of these places. Hence, the filing
of the suit in the CFI of Misamis Oriental, as was done in the instant case, will not cause inconvenience to, much less prejudice, petitioner.
Public policy is ". . . that principle of the law which holds that no subject or citizen can lawfully do that which has a tendency to be injurious to
the public or against the public good ... 22 Under this principle" ... freedom of contract or private dealing is restricted by law for the good of the
public. 23 Clearly, Condition No. 14, if enforced, will be subversive of the public good or interest, since it will frustrate in meritorious cases,
actions of passenger cants outside of Cebu City, thus placing petitioner company at a decided advantage over said persons, who may have
perfectly legitimate claims against it. The said condition should, therefore, be declared void and unenforceable, as contrary to public policy
to make the courts accessible to all who may have need of their services.
WHEREFORE, the petition for prohibition is DISMISSED. The restraining order issued on November 20, 1973, is hereby LIFTED and SET
ASIDE. Costs against petitioner.
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 88052 December 14, 1989
JOSE P. MECENAS, ROMEO P. MECENAS, LILIA P. MECENAS, ORLANDO P. MECENAS, VIOLETA M. ACERVO, LUZVIMINDA P.
MECENAS; and OFELIA M. JAVIER, petitioners,
vs.
HON. COURT OF APPEALS, CAPT. ROGER SANTISTEBAN and NEGROS NAVIGATION CO., INC., respondents.
FELICIANO, J.:
At 6:20 o'clock in the morning of 22 April 1980, the M/T "Tacloban City," a barge-type oil tanker of Philippine registry, with a gross tonnage of
1,241,68 tons, owned by the Philippine National Oil Company (PNOC) and operated by the PNOC Shipping and Transport Corporation (PNOC
Shipping), having unloaded its cargo of petroleum products, left Amlan, Negros Occidental, and headed towards Bataan. At about 1:00 o'clock
in the afternoon of that same day, the M/V "Don Juan," an interisland vessel, also of Philippine registry, of 2,391.31 tons gross weight, owned
and operated by the Negros Navigation Co., Inc. (Negros Navigation) left Manila bound for Bacolod with seven hundred fifty (750) passengers
listed in its manifest, and a complete set of officers and crew members.
On the evening of that same day, 22 April 1980, at about 10:30 o'clock, the "Tacloban City" and the "Don Juan" collided at the Talbas Strait near
Maestra de Ocampo Island in the vicinity of the island of Mindoro. When the collision occurred, the sea was calm, the weather fair and visibility good. As
a result of this collision, the M/V "Don Juan" sank and hundreds of its passengers perished. Among the ill-fated passengers were the parents of
petitioners, the spouses Perfecto Mecenas and Sofia Mecenas, whose bodies were never found despite intensive search by petitioners.
On 29 December 1980, petitioners filed a complaint in the then Court- of First Instance of Quezon City, docketed as Civil Case No. Q-31525,
against private respondents Negros Navigation and Capt. Roger Santisteban, the captain of the "Don Juan" without, however, impleading
either PNOC or PNOC Shipping. In their complaint, petitioners alleged that they were the seven (7) surviving legitimate children of Perfecto
Mecenas and Sofia Mecenas and that the latter spouses perished in the collision which had resulted from the negligence of Negros Navigation
and Capt. Santisteban. Petitioners prayed for actual damages of not less than P100,000.00 as well as moral and exemplary damages in such
amount as the Court may deem reasonable to award to them.
Another complaint, docketed as Civil Case No. Q-33932, was filed in the same court by Lilia Ciocon claiming damages against Negros
Navigation, PNOC and PNOC Shipping for the death of her husband Manuel Ciocon, another of the luckless passengers of the "Don Juan."
Manuel Ciocon's body, too, was never found.
The two (2) cases were consolidated and heard jointly by the Regional Trial Court of Quezon City, Branch 82. On 17 July 1986, after trial, the
trial court rendered a decision, the dispositive of which read as follows:
WHEREFORE, the Court hereby renders judgment ordering:
a) The defendant Negros Navigation Co., Inc. and Capt. Roger Santisteban jointly and severally liable to pay plaintiffs in Civil Case No Q31525, the sum of P400,000.00 for the death of plaintiffs' parents, Perfecto A. Mecenas and Sofia P. Mecenas; to pay said plaintiff's the sum of
P15.000,00 as and for attorney's fees; plus costs of the suit.
b) Each of the defendants Negros Navigation Co Inc. and Philippine National Oil Company/PNOC Shipping and Transportation Company, to
pay the plaintiff in Civil Case No. Q-33932, the sum of P100,000.00 for the death of Manuel Ciocon, to pay said plaintiff jointly and severally,
the sum of P1 5,000.00 as and for attorney's fees, plus costs of the suit. 1
Negros Navigation, Capt. Santisteban, PNOC and PNOC Shipping appealed the trial court's decision to the Court of Appeals. Later, PNOC
and PNOC Shipping withdrew their appeal citing a compromise agreement reached by them with Negros Navigation; the Court of Appeals
granted the motion by a resolution dated 5 September 1988, subject to the reservation made by Lilia Ciocon that she could not be bound by
the compromise agreement and would enforce the award granted her by the trial court.
In time, the Court of Appeals rendered a decision dated 26 January 1989 which decreed the following:
WHEREFORE, in view of the foregoing, the decision of the court a quo is hereby affirmed as modified with respect to Civil Case No. 31525,
wherein defendant appellant Negros Navigation Co. Inc. and Capt. Roger Santisteban are held jointly and severally liable to pay the plaintiffs
the amount of P100,000. 00 as actual and compensatory damages and P15,000.00 as attorney's fees and the cost of the suit. 2
The issue to be resolved in this Petition for Review is whether or not the Court of Appeals had erred in reducing the amount of the damages
awarded by the trial court to the petitioners from P400,000.00 to P100,000.00.
We note that the trial court had granted petitioners the sum of P400,000,00 "for the death of [their parents]" plus P15,000.00 as attorney's
fees, while the Court of Appeals awarded them P100,000.00 "as actual and compensatory damages" and P15,000.00 as attorney's fees. To
determine whether such reduction of the damages awarded was proper, we must first determine whether petitioners were entitled to an award
of damages other than actual or compensatory damages, that is, whether they were entitled to award of moral and exemplary damages.
We begin by noting that both the trial court and the Court of Appeals considered the action (Civil Case No. Q-31525) brought by the sons and daughters
of the deceased Mecenas spouses against Negros Navigation as based on quasi-delict. We believed that action is more appropriately regarded as
grounded on contract, the contract of carriage between the Mecenas spouses as regular passengers who paid for their boat tickets and Negros
Navigation; the surviving children while not themselves passengers are in effect suing the carrier in representation of their deceased parents. 3 Thus,
the suit (Civil Case No. Q-33932) filed by the widow Lilia Ciocon was correctly treated by the trial and appellate courts as based on contract (vis-a-vis
Negros Navigation) and as well on quasi-delict (vis-a-vis PNOC and PNOC Shipping). In an action based upon a breach of the contract of carriage, the
carrier under our civil law is liable for the death of passengers arising from the negligence or willful act of the carrier's employees although such
employees may have acted beyond the scope of their authority or even in violation of the instructions of the carrier, 4 which liability may include liability
for moral damages. 5 It follows that petitioners would be entitled to moral damages so long as the collision with the "Tacloban City" and the sinking of the
"Don Juan" were caused or attended by negligence on the part of private respondents.
In respect of the petitioners' claim for exemplary damages, it is only necessary to refer to Article 2232 of the Civil Code:
Article 2332. In contracts and quasi-contracts, the court may exemplary damages if the defendant acted in a wanton, fraudulent, reckless,
oppressive or malevolent manner. 6
Thus, whether petitioners are entitled to exemplary damages as claimed must depend upon whether or not private respondents acted
recklessly, that is, with gross negligence.
We turn, therefore, to a consideration of whether or not Negros Navigation and Capt. Santisteban were grossly negligent during the events
which culminated in the collision with "Tacloban City" and the sinking of the "Don Juan" and the resulting heavy loss of lives.
The then Commandant of the Philippine Coast Guard, Commodore B.C. Ochoco, in a decision dated 2 March 1981, held that the "Tacloban City" was
"primarily and solely [sic] at fault and responsible for the collision." 7 Initially, the Minister of National Defense upheld the decision of Commodore
Ochoco. 8 On Motion for Reconsideration, however, the Minister of National Defense reversed himself and held that both vessels had been at fault:
It is therefore evident from a close and thorough review of the evidence that fault is imputable to both vessels for the collision. Accordingly, the
decision dated March 12, 1982, subject of the Motion for Reconsideration filed by counsel of M/T Tacloban City, is hereby reversed. However,
the administrative penalties imposed oil both vessels and their respective crew concerned are hereby affirmed. 9
The trial court, after a review of the evidence submitted during the trial, arrived at the same conclusion that the Minister of National Defense
had reached that both the "Tacloban City" and the "Don Juan" were at fault in the collision. The trial court summarized the testimony and
evidence of PNOC and PNOC Shipping as well as of Negros Navigation in the following terms:
Defendant PNOC's version of the incident:
M/V Don Juan was first sighted at about 5 or 6 miles from Tacloban City (TSN, January 21, 1985, p. 13); it was on the starboard (right) side of Tacloban
City. This was a visual contact; not picked up by radar (p. 15, Ibid). Tacloban City was travelling 310 degrees with a speed of 6 knots, estimated speed
of Don Juan of 16 knots. As Don Juan approached, Tacloban City gave a leeway of 1 0 degrees to the left. 'The purpose was to enable Tacloban to see
the direction of Don Juan (p. 19, Ibid). Don Juan switched to green light, signifying that it will pass Tacloban City's right side; it will be a starboard to
starboard passing (p. 21, Ibid) Tacloban City's purpose in giving a leeway of 10 degrees at this point, is to give Don Juan more space for her passage.
This was increased by Tacloban City to an additional 15 degrees towards the left. The way was clear and Don Juan has not changed its course.
When Tacloban City altered its course the second time, from 300 degrees to 285 degrees, Don Juan was about 4.5 miles away (TSN, May 9,1985).
Despite executing a hardport maneuver, the collision nonetheless occurred. Don Juan rammed the Tacloban City near the starboard bow (p. 7, Ibid)."
NENACO's [Negros Navigation] version.

Don Juan first sighted Tacloban City 4 miles away, as shown by radar (p. 13, May 24, 1983). Tacloban City showed its red and green lights
twice; it proceeded to, and will cross, the path of Don Juan. Tacloban was on the left side of Don Juan (TSN, April 20,1983, p. 4).
Upon seeing Tacloban's red and green lights, Don Juan executed hard starboard (TSN, p. 4, Ibid.) This maneuver is in conformity with the rule
that 'when both vessels are head on or nearly head on, each vessel must turn to the right in order to avoid each other. (p. 5, Ibid).
Nonetheless, Tacloban appeared to be heading towards Don Juan (p. 6, Ibid),
When Don Juan executed hard starboard, Tacloban was about 1,500 feet away (TSN, May 24,1983, p. 6). Don Juan, after execution of hard
starboard, will move forward 200 meters before the vessel will respond to such maneuver (p. 7, Ibid). The speed of Don Juan at that time was
17 knits; Tacloban City 6.3 knots. t "Between 9 to 15 seconds from execution of hard starboard, collision occurred (p. 8, Ibid).
The trial court concluded: M/ V Don Juan and Tacloban City became aware of each other's presence in the area by visual contact at a
distance of something like 6 miles from each other. They were fully aware that if they continued on their course, they will meet head on. Don
Juan - steered to the right; Tacloban City continued its course to the left. There can be no excuse for them not to realize that, with such
maneuvers, they will collide. They executed maneuvers inadequate, and too late, to avoid collision.
The Court is of the considered view that the defendants are equally negligent and are liable for damages. (p. 4, decision).
11
The Court of Appeals, for its part, reached the same conclusion. 12
There is, therefore, no question that the "Don Juan" was at least as negligent as the M/T "Tacloban City" in the events leading up to the collision and the sinking of
the "Don Juan." The remaining question is whether the negligence on the part of the "Don Juan" reached that level of recklessness or gross negligence that our
Civil Code requires for the imposition of exemplary damages. Our own review of the record in the case at bar requires us to answer this in the affirmative.
In the first place, the report of the Philippine Coast Guard Commandant (Exhibit "l 0"), while holding the "Tacloban City" as "primarily and
solely [sic] at fault and responsible for the collision," did itself set out that there had been fault or negligence on the part of Capt. Santisteban
and his officers and crew before the collision and immediately after contact of the two (2) vessels. The decision of Commodore Ochoco said:
M/S Don Juan's Master, Capt. Rogelio Santisteban, was playing mahjong before and up to the time of collision. Moreover, after the collision, he failed to
institute appropriate measures to delay the sinking MS Don Juan and to supervise properly the execution of his order of abandonship. As regards the
officer on watch, Senior 3rd Mate Rogelio Devera, he admitted that he failed or did not call or inform Capt. Santisteban of the imminent danger of
collision and of the actual collision itself Also, he failed to assist his master to prevent the fast sinking of the ship. The record also indicates that Auxiliary
Chief Mate Antonio Labordo displayed laxity in maintaining order among the passengers after the collision.
We believe that the behaviour of the captain of the "Don Juan" in tills instance-playing mahjong "before and up to the time of collision
constitutes behaviour that is simply unacceptable on the part of the master of a vessel to whose hands the lives and welfare of at least seven
hundred fifty (750) passengers had been entrusted. Whether or not Capt. Santisteban was "off-duty" or "on-duty" at or around the time of
actual collision is quite immaterial; there is, both realistically speaking and in contemplation of law, no such thing as "off-duty" hours for the
master of a vessel at sea that is a common carrier upon whom the law imposes the duty of extraordinary diligence[t]he duty to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons,
with a due regard for all the circumstances. 14
The record does not show that was the first or only time that Capt. Santisteban had entertained himself during a voyage by playing mahjong with his
officers and passengers; Negros Navigation in permitting, or in failing to discover and correct such behaviour, must be deemed grossly negligent.
Capt. Santisteban was also faulted in the Philippine Coast Guard decision for failing after the collision, "to institute appropriate measures to delay the
sinking of M/V Don Juan." This appears to us to be a euphemism for failure to maintain the sea-worthiness or the water-tight integrity of the "Don Juan."
The record shows that the "Don Juan" sank within ten (10) to fifteen (15) minutes after initial contact with the "Tacloban City. 15 While the failure of Capt.
Santisteban to supervise his officers and crew in the process of abandoning the ship and his failure to avail of measures to prevent the too rapid sinking
of his vessel after collision, did not cause the collision by themselves, such failures doubtless contributed materially to the consequent loss of life and,
moreover, were indicative of the kind and level of diligence exercised by Capt. Santisteban in respect of his vessel and his officers and men prior to
actual contact between the two (2) vessels. The officer-on-watch in the "Don Juan" admitted that he had failed to inform Capt. Santisteban not only of
the "imminent danger of collision" but even of "the actual collision itself "
There is also evidence that the "Don Juan" was carrying more passengers than she had been certified as allowed to carry. The Certificate of
Inspection 16 dated 27 August 1979, issued by the Philippine Coast Guard Commander at Iloilo City, the Don Juan's home port, states:
Passengers allowed : 810
Total Persons Allowed : 864
The report of the Philippine Coast Guard (Exhibit "10") stated that the "Don Juan" had been "officially cleared with 878 passengers on board when she
sailed from the port of Manila on April 22, 1980 at about 1:00 p.m." This head-count of the passengers "did not include the 126 crew members, children
below three (3) years old and two (2) half-paying passengers" which had been counted as one adult passenger. 17 Thus, the total number of persons on
board the "Don Juan" on that ill-starred night of 22 April 1 980 was 1,004, or 140 persons more than the maximum lumber that could be safely carried
by the "Don Juan," per its own Certificate of Inspection. 18 We note in addition, that only 750 passengers had been listed in its manifest for its final
voyage; in other words, at least 128 passengers on board had not even been entered into the "Don Juan's" manifest. The "Don Juan's" Certificate of
Inspection showed that she carried life boat and life raft accommodations for only 864 persons, the maximum number of persons she was permitted to
carry; in other words, she did not carry enough boats and life rafts for all the persons actually on board that tragic night of 22 April 1980.
We hold that under these circumstances, a presumption of gross negligence on the part of the vessel (her officers and crew) and of its shipowner arises; this presumption was never rebutted by Negros Navigation.
The grossness of the negligence of the "Don Juan" is underscored when one considers the foregoing circumstances in the context of the following facts:
Firstly, the "Don Juan" was more than twice as fast as the "Tacloban City." The "Don Juan's" top speed was 17 knots; while that of the "Tacloban City"
was 6.3. knots. 19 Secondly, the "Don Juan" carried the full complement of officers and crew members specified for a passenger vessel of her class.
Thirdly, the "Don Juan" was equipped with radar which was functioning that night. Fourthly, the "Don Juan's" officer on-watch had sighted the "Tacloban
City" on his radar screen while the latter was still four (4) nautical miles away. Visual confirmation of radar contact was established by the "Don Juan"
while the "Tacloban City" was still 2.7 miles away. 20 In the total set of circumstances which existed in the instant case, the "Don Juan," had it taken
seriously its duty of extraordinary diligence, could have easily avoided the collision with the "Tacloban City," Indeed, the "Don Juan" might well have
avoided the collision even if it had exercised ordinary diligence merely.
It is true that the "Tacloban City" failed to follow Rule 18 of the International Rules of the Road which requires two (2) power- driven vessels meeting end
on or nearly end on each to alter her course to starboard (right) so that each vessel may pass on the port side (left) of the other. 21 The "Tacloban City,"
when the two (2) vessels were only three-tenths (0.3) of a mile apart, turned (for the second time) 150 to port side while the "Don Juan" veered hard to
starboard. This circumstance, while it may have made the collision immediately inevitable, cannot, however, be viewed in isolation from the rest of the
factual circumstances obtaining before and up to the collision. In any case, Rule 18 like all other International Rules of the Road, are not to be obeyed
and construed without regard to all the circumstances surrounding a particular encounter between two (2) vessels. 22 In ordinary circumstances, a
vessel discharges her duty to another by a faithful and literal observance of the Rules of Navigation, 23 and she cannot be held at fault for so doing even
though a different course would have prevented the collision. This rule, however, is not to be applied where it is apparent, as in the instant case, that her
captain was guilty of negligence or of a want of seamanship in not perceiving the necessity for, or in so acting as to create such necessity for, a
departure from the rule and acting accordingly. 24 In other words, "route observance" of the International Rules of the Road will not relieve a vessel from
responsibility if the collision could have been avoided by proper care and skill on her part or even by a departure from the rules. 25
In the petition at bar, the "Don Juan" having sighted the "Tacloban City" when it was still a long way off was negligent in failing to take early preventive
action and in allowing the two (2) vessels to come to such close quarters as to render the collision inevitable when there was no necessity for passing
so near to the "Tacloban City" as to create that hazard or inevitability, for the "Don Juan" could choose its own distance. 26, It is noteworthy that the
"Tacloban City," upon turning hard to port shortly before the moment of collision, signalled its intention to do so by giving two (2) short blasts with horn.
26
A The "Don Juan " gave no answering horn blast to signal its own intention and proceeded to turn hatd to starboard. 26B
We conclude that Capt. Santisteban and Negros Navigation are properly held liable for gross negligence in connection with the collision of the
"Don Juan" and "Tacloban City" and the sinking of the "Don Juan" leading to the death of hundreds of passengers. We find no necessity for
passing upon the degree of negligence or culpability properly attributable to PNOC and PNOC Shipping or the master of the "Tacloban City,"
since they were never impleaded here.
It will be recalled that the trial court had rendered a lump sum of P400,000.00 to petitioners for the death of their parents in the "Don Juan" tragedy.
Clearly, the trial court should have included a breakdown of the lump sum award into its component parts: compensatory damages, moral damages and
exemplary damages. On appeal, the Court of Appeals could have and should have itself broken down the lump sum award of the trial court into its
constituent parts; perhaps, it did, in its own mind. In any case, the Court of Appeals apparently relying upon Manchester Development Corporation V.
Court of Appeals 27 reduced the P400,000.00 lump sum award into a P100,000.00 for actual and compensatory damages only.
We believe that the Court of Appeals erred in doing so, It is true that the petitioners' complaint before the trial court had in the body indicated that the
petitioner-plaintiffs believed that moral damages in the amount of at least P1,400,000.00 were properly due to them (not P12,000,000.00 as the Court of
Appeals erroneously stated) as well as exemplary damages in the sum of P100,000.00 and that in the prayer of their complaint, they did not specify the
amount of moral and exemplary damages sought from the trial court. We do not believe, however, that the Manchester doctrine, which has been
modified and clarified in subsequent decision by the Court in Sun Insurance Office, Ltd. (SIOL), et al. v. Asuncion, et al. 28 can be applied in the instant
case so as to work a striking out of that portion of the trial court's award which could be deemed nationally to constitute an award of moral and
exemplary damages. Manchester was promulgated by the Court on 7 May 1987. Circular No. 7 of this Court, which embodied the doctrine in
Manchester, is dated 24 March 1988. Upon the other hand, the complaint in the case at bar was filed on 29 December 1980, that is, long before either
Manchester or Circular No. 7 of 24 March 1988 emerged. The decision of the trial court was itself promulgated on 17 July 1986, again, before
Manchester and Circular No. 7 were promulgated. We do not believe that Manchester should have been applied retroactively to this case where a
decision on the merits had already been rendered by the trial court, even though such decision was then under appeal and had not yet reached finality.
There is no indication at all that petitioners here sought simply to evade payment of the court's filing fees or to mislead the court in the assessment of
the filing fees. In any event, we apply Manchester as clarified and amplified by Sun Insurance Office Ltd. (SIOL), by holding that the petitioners shall pay
the additional filing fee that is properly payable given the award specified below, and that such additional filing fee shall constitute a lien upon the
judgment.
We consider, finally, the amount of damages-compensatory, moral and exemplary-properly imposable upon private respondents in this case. The
original award of the trial court of P400,000.00 could well have been disaggregated by the trial court and the Court of Appeals in the following manner:
1.
actual or compensatory damages proved in the course of trial consisting of actual expenses incurred by petitioners in their search for
their parents' bodies- -P126,000.00
2. actual or compensatory damages in case of wrongful death (P30,000.00 x 2) -P60,000.00
29
3. moral damages -P107,000.00

(4) exemplary damages -P107,000.00
Total -P400,000.00
Considering that petitioners, legitimate children of the deceased spouses Mecenas, are seven (7) in number and that they lost both father and
mothe in one fell blow of fate, and considering the pain and anxiety they doubtless experienced while searching for their parents among the
survivors and the corpses recovered from the sea or washed ashore, we believe that an additional amount of P200,000.00 for moral damages,
making a total of P307,000.00 for moral damages, making a total of P307,000.00 as moral damages, would be quite reasonable.
Exemplary damages are designed by our civil law to permit the courts to reshape behaviour that is socially deleterious in its consequence by creating
negative incentives or deterrents against such behaviour. In requiring compliance with the standard which is in fact that of the highest possible degree
of diligence, from common carriers and in creating a presumption of negligence against them, the law seels to compel them to control their employees,
to tame their reckless instincts and to force them to take adequate care of human beings and their property. The Court will take judicial notive of the
dreadful regularity with which grievous maritime disasters occur in our waters with massive loss of life. The bulk of our population is too poor to afford
domestic air transportation. So it is that notwithstanding the frequent sinking of passenger vessels in our waters, crowds of people continue to travel by
sea. This Court is prepared to use the instruments given to it by the law for securing the ends of law and public policy. One of those instruments is the
institution of exemplary damages; one of those ends, of special importance in an archipelagic state like the Philippines, is the safe and reliable carriage
of people and goods by sea. Considering the foregoing, we believe that an additional award in the amount of P200,000.00 as exmplary damages, is
quite modest.
The Court is aware that petitioners here merely asked for the restoration of the P 400.000.00 award of the trial court. We underscore once more, however, the
firmly settled doctrine that this Court may consider and resolved all issues which must be decided in order to render substantial justice to the parties, including
issues not explicity raised by the party affected. In the case at bar, as in Kapalaran Bus Line v. Coronado, et al., 30 both the demands of sustantial justice and the
imperious requirements of public policy compel us to the conclusion that the trial court's implicit award of moral and exemplary damages was erronoeusly deledted
and must be restored and augmented and brought more nearely to the level required by public policy and substantial justice.
WHEREFORE, the Petition for Review on certiorari is hereby GRANTED and the Decision of the Court of Appeals insofar as it redurce the
amount of damages awarded to petitioners to P100,000.00 is hereby REVERSED and SET ASIDE. The award granted by the trial court is
hereby RESTORED and AUGMENTED as follows:
(a) P 126,000.00 for actual damages; (b) P 60,000.00 as compensatory damages for wrongful death; (c) P 307,000.00 as moral damages;
(d) P 307,000.00 as exemplary damages making a total of P 800,000.00; and
(e) P 15,000.00 as attorney's fees.
Petitioners shall pay the additional filing fees properly due and payable in view of the award here made, which fees shall be computed by the
Clerks of Court of the trial court, and shall constitute a lien upon the judgment here awarded. Cost against private respondents.
SO ORDERED.
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 110398 November 7, 1997
NEGROS NAVIGATION CO., INC., petitioner,

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

P50,000.00 as exemplary damages, all in the total amount of P634,679.55; and
P300,000.00 as moral damages;

P40,000.00 as attorney's fees.
To Spouses Ricardo and Virginia de la Victoria:

P158,899.00 as compensatory damages for loss of earning capacity;
P30,000.00 as compensatory damages for wrongful death;
On appeal, the Court of Appeals 1 affirmed the decision of the Regional Trial Court with modification
1. Ordering and sentencing defendants-appellants, jointly and severally, to pay plaintiff-appellee Ramon Miranda the amount of
P23,075.00 as actual damages instead of P42,025.00;
2. Ordering and sentencing defendants-appellants, jointly and severally, to pay plaintiff-appellee Ramon Miranda the amount of
P150,000.00, instead of P90,000.00, as compensatory damages for the death of his wife and two children;
3. Ordering and sentencing defendants-appellants, jointly and severally, to pay plaintiffs-appellees Dela Victoria spouses the amount
of P50,000.00, instead of P30,000.00, as compensatory damages for the death of their daughter Elfreda Dela Victoria;
Hence this petition, raising the following issues:
(1) whether the members of private respondents' families were actually passengers of the Don Juan;
(2) whether the ruling in Mecenas v. Court of Appeals, 2 finding the crew members of petitioner to be grossly negligent in the performance of
their duties, is binding in this case;
(3) whether the total loss of the M/V Don Juan extinguished petitioner's liability; and
(4) whether the damages awarded by the appellate court are excessive, unreasonable and unwarranted.
First. The trial court held that the fact that the victims were passengers of the M/V Don Juan was sufficiently proven by private respondent
Ramon Miranda, who testified that he purchased tickets numbered 74411, 74412, 74413, and 74414 at P131.30 each from the Makati office of
petitioner for Voyage No. 47-A of the M/V Don Juan, which was leaving Manila on April 22, 1980. This was corroborated by the passenger
manifest (Exh. E) on which the numbers of the tickets and the names of Ardita Miranda and her children and Elfreda de la Victoria appear.
Petitioner contends that the purchase of the tickets does not necessarily mean that the alleged victims actually took the trip. Petitioner asserts
that it is common knowledge that passengers purchase tickets in advance but do not actually use them. Hence, private respondent should
also prove the presence of the victims on the ship. The witnesses who affirmed that the victims were on the ship were biased and unreliable.
This contention is without merit. Private respondent Ramon Miranda testified that he personally took his family and his niece to the vessel on
the day of the voyage and stayed with them on the ship until it was time for it to leave. There is no reason he should claim members of his
family to have perished in the accident just to maintain an action. People do not normally lie about so grave a matter as the loss of dear ones.
It would be more difficult for private respondents to keep the existence of their relatives if indeed they are alive than it is for petitioner to show
the contrary. Petitioner's only proof is that the bodies of the supposed victims were not among those recovered from the site of the mishap. But
so were the bodies of the other passengers reported missing not recovered, as this Court noted in the Mecenas 3 case.
Private respondent Miranda's testimony was corroborated by Edgardo Ramirez. Ramirez was a seminarian and one of the survivors of the
collision. He testified that he saw Mrs. Miranda and Elfreda de la Victoria on the ship and that he talked with them. He knew Mrs. Miranda who
was his teacher in the grade school. He also knew Elfreda who was his childhood friend and townmate. Ramirez said he was with Mrs.
Miranda and her children and niece from 7:00 p.m. until 10:00 p.m. when the collision happened and that he in fact had dinner with them.
Ramirez said he and Elfreda stayed on the deck after dinner and it was there where they were jolted by the collision of the two vessels.
Recounting the moments after the collision, Ramirez testified that Elfreda ran to fetch Mrs. Miranda. He escorted her to the room and then
tried to go back to the deck when the lights went out. He tried to return to the cabin but was not able to do so because it was dark and there
was a stampede of passengers from the deck.
Petitioner casts doubt on Ramirez' testimony, claiming that Ramirez could not have talked with the victims for about three hours and not run
out of stories to tell, unless Ramirez had a "storehouse" of stories. But what is incredible about acquaintances thrown together on a long
journey staying together for hours on end, in idle conversation precisely to while the hours away?
Petitioner also points out that it took Ramirez three (3) days before he finally contacted private respondent Ramon Miranda to tell him about
the fate of his family. But it is not improbable that it took Ramirez three days before calling on private respondent Miranda to tell him about the
last hours of Mrs. Miranda and her children and niece, in view of the confusion in the days following the collision as rescue teams and relatives
searched for survivors.
Indeed, given the facts of this case, it is improper for petitioner to even suggest that private respondents' relatives did not board the ill-fated
vessel and perish in the accident simply because their bodies were not recovered.
Second. In finding petitioner guilty of negligence and in failing to exercise the extraordinary diligence required of it in the carriage of
passengers, both the trial court and the appellate court relied on the findings of this Court in Mecenas v. Intermediate Appellate Court, 4 which
case was brought for the death of other passengers. In that case it was found that although the proximate cause of the mishap was the
negligence of the crew of the M/T Tacloban City, the crew of the Don Juan was equally negligent as it found that the latter's master, Capt.
Rogelio Santisteban, was playing mahjong at the time of collision, and the officer on watch, Senior Third Mate Rogelio De Vera, admitted that
he failed to call the attention of Santisteban to the imminent danger facing them. This Court found that Capt. Santisteban and the crew of the
M/V Don Juan failed to take steps to prevent the collision or at least delay the sinking of the ship and supervise the abandoning of the ship.
Petitioner Negros Navigation was found equally negligent in tolerating the playing of mahjong by the ship captain and other crew members
while on board the ship and failing to keep the M/V Don Juan seaworthy so much so that the ship sank within 10 to 15 minutes of its impact
with the M/T Tacloban City.
In addition, the Court found that the Don Juan was overloaded. The Certificate of Inspection, dated August 27, 1979, issued by the Philippine
Coast Guard Commander at Iloilo City stated that the total number of persons allowed on the ship was 864, of whom 810 are passengers, but
there were actually 1,004 on board the vessel when it sank, 140 persons more than the maximum number that could be safely carried by it.
Taking these circumstances together, and the fact that the M/V Don Juan, as the faster and better-equipped vessel, could have avoided a
collision with the PNOC tanker, this Court held that even if the Tacloban City had been at fault for failing to observe an internationallyrecognized rule of navigation, the Don Juan was guilty of contributory negligence. Through Justice Feliciano, this Court held:
The grossness of the negligence of the "Don Juan" is underscored when one considers the foregoing circumstances in the context of the
following facts: Firstly, the "Don Juan" was more than twice as fast as the "Tacloban City." The "Don Juan's" top speed was 17 knots; while that
of the "Tacloban City" was 6.3. knots. Secondly, the "Don Juan" carried the full complement of officers and crew members specified for a
passenger vessel of her class. Thirdly, the "Don Juan" was equipped with radar which was functioning that night. Fourthly, the "Don Juan's
officer on-watch had sighted the "Tacloban City" on his radar screen while the latter was still four (4) nautical miles away. Visual confirmation of
radar contact was established by the "Don Juan" while the "Tacloban City" was still 2.7 miles away. In the total set of circumstances which
existed in the instant case, the "Don Juan," had it taken seriously its duty of extraordinary diligence, could have easily avoided the collision
with the "Tacloban City." Indeed, the "Don Juan" might well have avoided the collision even if it had exercised ordinary diligence merely.
It is true that the "Tacloban City" failed to follow Rule 18 of the International Rules of the Road which requires two (2) power-driven vessels
meeting end on or nearly end on each to alter her course to starboard (right) so that each vessel may pass on the port side (left) of the other.
The "Tacloban City," when the two (2) vessels were only three-tenths (0.3) of a mile apart, turned (for the second time) 15 to port side while
the "Don Juan" veered hard to starboard. . . . [But] "route observance" of the International Rules of the Road will not relieve a vessel from
responsibility if the collision could have been avoided by proper care and skill on her part or even by a departure from the rules.
In the petition at bar, the "Don Juan" having sighted the "Tacloban City" when it was still a long way off was negligent in failing to take early
preventive action and in allowing the two (2) vessels to come to such close quarters as to render the collision inevitable when there was no
necessity for passing so near to the "Tacloban City" as to create that hazard or inevitability, for the "Don Juan" could choose its own distance.
It is noteworthy that the "Tacloban City," upon turning hard to port shortly before the moment of collision, signalled its intention to do so by
giving two (2) short blasts with its horn. The "Don Juan" gave no answering horn blast to signal its own intention and proceeded to turn hard to
starboard.
We conclude that Capt. Santisteban and Negros Navigation are properly held liable for gross negligence in connection with the collision of the
"Don Juan" and "Tacloban City" and the sinking of the "Don Juan" leading to the death of hundreds of passengers. . . . 5
Petitioner criticizes the lower court's reliance on the Mecenas case, arguing that, although this case arose out of the same incident as that
involved in Mecenas, the parties are different and trial was conducted separately. Petitioner contends that the decision in this case should be
based on the allegations and defenses pleaded and evidence adduced in it or, in short, on the record of this case.
The contention is without merit. What petitioner contends may be true with respect to the merits of the individual claims against petitioner but
not as to the cause of the sinking of its ship on April 22, 1980 and its liability for such accident, of which there can only be one truth. Otherwise,
one would be subscribing to the sophistry: truth on one side of the Pyrenees, falsehood on the other!
Adherence to the Mecenas case is dictated by this Court's policy of maintaining stability in jurisprudence in accordance with the legal maxim
"stare decisis et non quieta movere" (Follow past precedents and do not disturb what has been settled.) Where, as in this case, the same
questions relating to the same event have been put forward by parties similarly situated as in a previous case litigated and decided by a
competent court, the rule of stare decisis is a bar to any attempt to relitigate the same issue. 6 In Woulfe v. Associated Realties Corporation, 7
the Supreme Court of New Jersey held that where substantially similar cases to the pending case were presented and applicable principles
declared in prior decisions, the court was bound by the principle of stare decisis. Similarly, in State ex rel. Tollinger v. Gill, 8 it was held that
under the doctrine of stare decisis a ruling is final even as to parties who are strangers to the original proceeding and not bound by the
judgment under the res judicata doctrine. The Philadelphia court expressed itself in this wise: "Stare decisis simply declares that, for the sake
of certainty, a conclusion reached in one case should be applied to those which follow, if the facts are substantially the same, even though the
parties may be different." 9 Thus, in J.M. Tuason v. Mariano, supra, this Court relied on its rulings in other cases involving different parties in
sustaining the validity of a land title on the principle of "stare decisis et non quieta movere."
Indeed, the evidence presented in this case was the same as those presented in the Mecenas case, to wit:
Document Mecenas case This case
Decision of Commandant, Exh. 10 10 Exh. 11-B-NN/X Phil. Coast Guard in BMI Case No. 415-80 dated 3/26/81
Decision of the Minister Exh. 11 11 Exh. ZZ of National Defense dated 3/12/82

Resolution on the Exh. 13 12 Exh. AAA motion for reconsideration (private of the decision of the respondents) Minister of National defense
dated 7/27/84
Certificate of Exh. 1-A 13 Exh. 19-NN inspection dated 8/27/79
Certificate of Stability Exh. 6-A 14 Exh. 19-D-NN dated 12/16/76
Nor is it true that the trial court merely based its decision on the Mecenas case. The trial court made its own independent findings on the basis
of the testimonies of witnesses, such as Senior Third Mate Rogelio de Vera, who incidentally gave substantially the same testimony on
petitioner's behalf before the Board of Marine Inquiry. The trial court agreed with the conclusions of the then Minister of National Defense
finding both vessels to be negligent.
Third. The next issue is whether petitioner is liable to pay damages notwithstanding the total loss of its ship. The issue is not one of first
impression. The rule is well-entrenched in our jurisprudence that a shipowner may be held liable for injuries to passengers notwithstanding the
exclusively real and hypothecary nature of maritime law if fault can be attributed to the shipowner. 15
In Mecenas, this Court found petitioner guilty of negligence in (1) allowing or tolerating the ship captain and crew members in playing mahjong
during the voyage, (2) in failing to maintain the vessel seaworthy and (3) in allowing the ship to carry more passengers than it was allowed to
carry. Petitioner is, therefore, clearly liable for damages to the full extent.
Fourth. Petitioner contends that, assuming that the Mecenas case applies, private respondents should be allowed to claim only P43,857.14
each as moral damages because in the Mecenas case, the amount of P307,500.00 was awarded to the seven children of the Mecenas
couple. Under petitioner's formula, Ramon Miranda should receive P43,857.14, while the De la Victoria spouses should receive P97,714.28.
Here is where the principle of stare decisis does not apply in view of differences in the personal circumstances of the victims. For that matter,
differentiation would be justified even if private respondents had joined the private respondents in the Mecenas case. The doctrine of stare
decisis works as a bar only against issues litigated in a previous case. Where the issue involved was not raised nor presented to the court and
not passed upon by the court in the previous case, the decision in the previous case is not stare decisis of the question presently presented. 16
The decision in the Mecenas case relates to damages for which petitioner was liable to the claimants in that case.
In the case at bar, the award of P300,000.00 for moral damages is reasonable considering the grief petitioner Ramon Miranda suffered as a
result of the loss of his entire family. As a matter of fact, three months after the collision, he developed a heart condition undoubtedly caused
by the strain of the loss of his family. The P100,000.00 given to Mr. and Mrs. de la Victoria is likewise reasonable and should be affirmed.
As for the amount of civil indemnity awarded to private respondents, the appellate court's award of P50,000.00 per victim should be sustained.
The amount of P30,000.00 formerly set in De Lima v. Laguna Tayabas Co., 17 Heirs of Amparo delos Santos v. Court of Appeals, 18 and
Philippine Rabbit Bus Lines, Inc. v. Intermediate Appellate Court 19 as benchmark was subsequently increased to P50,000.00 in the case of
Sulpicio Lines, Inc. v. Court of Appeals, 20 which involved the sinking of another interisland ship on October 24, 1988.
We now turn to the determination of the earning capacity of the victims. With respect to Ardita Miranda, the trial court awarded damages
computed as follows: 21
In the case of victim Ardita V. Miranda whose age at the time of the accident was 48 years, her life expectancy was computed to be 21.33
years, and therefore, she could have lived up to almost 70 years old. Her gross earnings for 21.33 years based on P10,224.00 per annum,
would be P218,077.92. Deducting therefrom 30% as her living expenses, her net earnings would be P152,654.55, to which plaintiff Ramon
Miranda is entitled to compensatory damages for the loss of earning capacity of his wife. In considering 30% as the living expenses of Ardita
Miranda, the Court takes into account the fact that plaintiff and his wife were supporting their daughter and son who were both college
students taking Medicine and Law respectively.
In accordance with the ruling in Villa-Rey Transit, Inc. v. Court of Appeals, 22 we think the life expectancy of Ardita Miranda was correctly
determined to be 21.33 years, or up to age 69. Petitioner contends, however, that Mrs. Miranda would have retired from her job as a public
school teacher at 65, hence her loss of earning capacity should be reckoned up to 17.33 years only.
The accepted formula for determining life expectancy is 2/3 multiplied by (80 minus the age of the deceased). It may be that in the Philippines
the age of retirement generally is 65 but, in calculating the life expectancy of individuals for the purpose of determining loss of earning capacity
under Art. 2206(1) of the Civil Code, it is assumed that the deceased would have earned income even after retirement from a particular job. In
this case, the trial court took into account the fact that Mrs. Miranda had a master's degree and a good prospect of becoming principal of the
school in which she was teaching. There was reason to believe that her income would have increased through the years and she could still
earn more after her retirement, e.g., by becoming a consultant, had she not died. The gross earnings which Mrs. Miranda could reasonably be
expected to earn were it not for her untimely death was, therefore, correctly computed by the trial court to be P218,077.92 (given a gross
annual income of P10,224.00 and life expectancy of 21.33 years).
Petitioner contends that from the amount of gross earnings, 60% should be deducted as necessary living expenses, not merely 30% as the
trial court allowed. Petitioner contends that 30% is unrealistic, considering that Mrs. Miranda's earnings would have been subject to taxes,
social security deductions and inflation.
We agree with this contention. In Villa-Rey Transit, Inc. v. Court of Appeals, 23 the Court allowed a deduction of P1,184.00 for living expenses
from the P2,184.00 annual salary of the victim, which is roughly 54.2% thereof. The deceased was 29 years old and a training assistant in the
Bacnotan Cement Industries. In People v. Quilation, 24 the deceased was a 26-year old laborer earning a daily wage. The court allowed a
deduction of P120,000.00 which was 51.3% of his annual gross earnings of P234,000.00. In People v. Teehankee, 25 the court allowed a
deduction of P19,800.00, roughly 42.4% thereof from the deceased's annual salary of P46,659.21. The deceased, Maureen Hultman, was 17
years old and had just received her first paycheck as a secretary. In the case at bar, we hold that a deduction of 50% from Mrs. Miranda's
gross earnings (P218,077.92) would be reasonable, so that her net earning capacity should be P109,038.96. There is no basis for supposing
that her living expenses constituted a smaller percentage of her gross income than the living expenses in the decided cases. To hold that she
would have used only a small part of her income for herself, a larger part going to the support of her children would be conjectural and
unreasonable.
As for Elfreda de la Victoria, the trial court found that, at the time of her death, she was 26 years old, a teacher in a private school in Malolos,
Bulacan, earning P6,192.00 per annum. Although a probationary employee, she had already been working in the school for two years at the
time of her death and she had a general efficiency rating of 92.85% and it can be presumed that, if not for her untimely death, she would have
become a regular teacher. Hence, her loss of earning capacity is P111,456.00, computed as follows:
net earning = life x gross less reasonable
capacity (x) expectancy annual & necessary income living expenses (50%)
x = [2(80-26)] x [P6,192.00 - P3,096.00] 3
= 36 x 3,096.00
= P111,456.00
On the other hand, the award of actual damages in the amount of P23,075.00 was determined by the Court of Appeals on the basis receipts
submitted by private respondents. This amount is reasonable considering the expenses incurred by private respondent Miranda in organizing
three search teams to look for his family, spending for transportation in going to places such as Batangas City and Iloilo, where survivors and
the bodies of other victims were found, making long distance calls, erecting a monument in honor of the four victims, spending for obituaries in
the Bulletin Today and for food, masses and novenas.
Petitioner's contention that the expenses for the erection of a monument and other expenses for memorial services for the victims should be
considered included in the indemnity for death awarded to private respondents is without merit. Indemnity for death is given to compensate for
violation of the rights of the deceased, i.e., his right to life and physical integrity. 26 On the other hand, damages incidental to or arising out of
such death are for pecuniary losses of the beneficiaries of the deceased.
As for the award of attorney's fees, we agree with the Court of Appeals that the amount of P40,000.00 for private respondent Ramon Miranda
and P15,000.00 for the de la Victoria spouses is justified. The appellate court correctly held:
The Mecenas case cannot be made the basis for determining the award for attorney's fees. The award would naturally vary or differ in each
case. While it is admitted that plaintiff-appellee Ramon Miranda who is himself a lawyer, represented also plaintiffs-appellees Dela Victoria
spouses, we note that separate testimonial evidence were adduced by plaintiff-appellee Ramon Miranda (TSN, February 26, 1982, p. 6) and
plaintiffs-appellees spouses Dela Victoria (TSN, August 13, 1981, p. 43). Considering the amount of work and effort put into the case as
indicated by the voluminous transcripts of stenographic notes, we find no reason to disturb the award of P40,000.00 for plaintiff-appellee
Ramon Miranda and P15,000.00 for plaintiffs-appellees Dela Victoria spouses. 27
The award of exemplary damages should be increased to P300,000.00 for Ramon Miranda and P100,000.00 for the de la Victoria spouses in
accordance with our ruling in the Mecenas case:
Exemplary damages are designed by our civil law to permit the courts to reshape behaviour that is socially deleterious in its consequence by
creating negative incentives or deterrents against such behaviour. In requiring compliance with the standard of extraordinary diligence, a
standard which is in fact that of the highest possible degree of diligence, from common carriers and in creating a presumption of negligence
against them, the law seeks to compel them to control their employees, to tame their reckless instincts and to force them to take adequate
care of human beings and their property. The Court will take judicial notice of the dreadful regularity with which grievous maritime disasters
occur in our waters with massive loss of life. The bulk of our population is too poor to afford domestic air transportation. So it is that
notwithstanding the frequent sinking of passenger vessels in our waters, crowds of people continue to travel by sea. This Court is prepared to
use the instruments given to it by the law for securing the ends of law and public policy. One of those instruments is the institution of
exemplary damages; one of those ends, of special importance in an archipelagic state like the Philippines, is the safe and reliable carriage of
people and goods by sea. 28
WHEREFORE, the decision of the Court of Appeals is AFFIRMED with modification and petitioner is ORDERED to pay private respondents
damages as follows:
To private respondent Ramon Miranda:
P109,038.96 as compensatory damages for loss of earning capacity of his wife;
P150,000.00 as compensatory damages for wrongful death of three (3) victims;
To private respondents Spouses Ricardo and Virginia de la Victoria:

P111,456.00 as compensatory damages for loss of earning capacity;
P50,000.00 as compensatory damages for wrongful death;
Petitioners are further ordered to pay costs of suit.

In the event the Philippine National Oil Company and/or the PNOC Shipping and Transport Corporation pay or are required to pay all or a
portion of the amounts adjudged, petitioner Negros Navigation Co., Inc. shall reimburse either of them such amount or amounts as either may
have paid, and in the event of failure of Negros Navigation Co., Inc., to make the necessary reimbursement, PNOC and/or PNOC/STC shall
be entitled to a writ of execution without need of filing another action.
SO ORDERED.
SUPREME COURT
KOREAN AIRLINES CO., LTD., petitioner,
vs.
Manila
FIRST DIVISION
G.R. No. 114061 August 3, 1994
COURT OF APPEALS and JUANITO C. LAPUZ, respondents.
G.R. No. 113842 August 3, 1994

JUANITO C. LAPUZ, petitioner,
vs.
COURT OF APPEALS and KOREAN AIRLINES CO., LTD., respondents.
CRUZ, J.:
Sometime in 1980, Juanito C. Lapuz, an automotive electrician, was contracted for employment in Jeddah, Saudi Arabia, for a period of one
year through Pan Pacific Overseas Recruiting Services, Inc. Lapuz was supposed to leave on November 8, 1980, via Korean Airlines. Initially,
he was "wait-listed," which meant that he could only be accommodated if any of the confirmed passengers failed to show up at the airport
before departure. When two of such passengers did not appear, Lapuz and another person by the name of Perico were given the two
unclaimed seats.
According to Lapuz, he was allowed to check in with one suitcase and one shoulder bag at the check-in counter of KAL. He passed through
the customs and immigration sections for routine check-up and was cleared for departure as Passenger No. 157 of KAL Flight No. KE 903.
Together with the other passengers, he rode in the shuttle bus and proceeded to the ramp of the KAL aircraft for boarding. However, when he
was at the third or fourth rung of the stairs, a KAL officer pointed to him and shouted "Down! Down!" He was thus barred from taking the flight.
When he later asked for another booking, his ticket was canceled by KAL. Consequently, he was unable to report for his work in Saudi Arabia
within the stipulated 2-week period and so lost his employment.
KAL, on the other hand, alleged that on November 8, 1980, Pan Pacific Recruiting Services Inc. coordinated with KAL for the departure of 30
contract workers, of whom only 21 were confirmed and 9 were wait-listed passengers. The agent of Pan Pacific, Jimmie Joseph, after being
informed that there was a possibility of having one or two seats becoming available, gave priority to Perico, who was one of the supervisors of
the hiring company in Saudi Arabia. The other seat was won through lottery by Lapuz. However, only one seat became available and so,
pursuant to the earlier agreement that Perico was to be given priority, he alone was allowed to board.
After trial, the Regional Trial Court of Manila, Branch 30, 1 adjudged KAL liable for damages, disposing as follows:
WHEREFORE, in view of the foregoing consideration, judgment is hereby rendered sentencing the defendant Korean Air Lines to pay plaintiff
Juanito C. Lapuz the following:
1. The amount of TWO HUNDRED SEVENTY-TWO THOUSAND ONE HUNDRED SIXTY (P272,160.00) PESOS as actual/compensatory
damages, with legal interest thereon from the date of the filing of the complaint until fully paid.
2. The sum of TWENTY-FIVE THOUSAND (P25,000.00) PESOS as and for attorney's fees; and
3. The costs of suit.
The case is hereby dismissed with respect to defendant Pan Pacific Overseas Recruiting Services, Inc.
The counterclaims and cross-claim of defendant Korean Air Lines Co., Ltd. are likewise dismissed.
On appeal, this decision was modified by the Court of Appeals 2 as follows:
WHEREFORE, in view of all the foregoing, the appealed judgment is hereby AFFIRMED with the following modifications: the amount of actual
damages and compensatory damages is reduced to P60,000.00 and defendant-appellant is hereby ordered to pay plaintiff-appellant the sum
of One Hundred Thousand Pesos (P100,000.00) by way of moral and exemplary damages, at 6% interest per annum from the date of the
filing of the Complaint until fully paid.
KAL and Lapuz filed their respective motions for reconsideration, which were both denied for lack of merit. Hence, the present petitions for
review which have been consolidated because of the identity of the parties and the similarity of the issues.
In G. R. No. 114061, KAL assails the decision of the appellate court on the following grounds:
1. That the Court of Appeals erred in concluding that petitioner committed a breach of contract of carriage notwithstanding lack of proper,
competent and sufficient evidence of the existence of such contract.
2. That the Court of Appeals erred in not according the proper evidentiary weight to some evidence presented and the fact that private
respondent did not have any boarding pass to prove that he was allowed to board and to prove that his airline ticket was confirmed.
3. That the Court of Appeals erred in concluding that the standby passenger status of private respondent Lapuz was changed to a confirmed
status when his name was entered into the passenger manifest.
4. That the Court of Appeals abused its discretion in awarding moral and exemplary damages in the amount of P100,000.00 in favor of private
respondent notwithstanding its lack of basis and private respondent did not state such amount in his complaint nor had private respondent
proven the said damages.
5. That the Court of Appeals erred in dismissing the counterclaims.
6. That the Court of Appeals erred in dismissing the counterclaim of petitioner against Pan Pacific.
7. That the Court of Appeals erred in ruling that the 6% per annum legal interest on the judgment shall be computed from the filing of the
complaint.
In G. R. No. 113842, Lapuz seeks: (a) the setting aside of the decision of the Court of Appeals insofar as it modifies the award of damages; b)
actual and compensatory damages in the sum equivalent to 5 years' loss of earnings based on the petitioner's monthly salary of 1,600 Saudi
rials at the current conversion rate plus the cost of baggage and personal belongings worth P2,000 and the service fee of P3,000 paid to the
recruiting agency, all with legal interest from the filing of the complaint until fully paid; c) moral damages of not less than P1 million and
exemplary damages of not less than P500,000.00, both with interest at 6% per annum from the filing of the complaint; and d) attorney's fees in
the sum equivalent to 30% of the award of damages.
It is evident that the issues raised in these petitions relate mainly to the correctness of the factual findings of the Court of Appeals and the
award of damages. The Court has consistently affirmed that the findings of fact of the Court of Appeals and the other lower courts are as a rule
binding upon it, subject to certain exceptions. As nothing in the record indicates any of such exceptions, the factual conclusions of the
appellate court must be affirmed.
The status of Lapuz as standby passenger was changed to that of a confirmed passenger when his name was entered in the passenger
manifest of KAL for its Flight No. KE 903. His clearance through immigration and customs clearly shows that he had indeed been confirmed as
a passenger of KAL in that flight. KAL thus committed a breach of the contract of carriage between them when it failed to bring Lapuz to his
destination.
This Court has held that a contract to transport passengers is different in kind and degree from any other contractual relation. 3 The business
of the carrier is mainly with the traveling public. It invites people to avail themselves of the comforts and advantages it offers. The contract of
air carriage generates a relation attended with a public duty. Passengers have the right to be treated by the carrier's employees with kindness,
respect, courtesy and due consideration. They are entitled to be protected against personal misconduct, injurious language, indignities and
abuses from such employees. 4 So it is that any discourteous conduct on the part of these employees toward a passenger gives the latter an
action for damages against the carrier.
The breach of contract was aggravated in this case when, instead of courteously informing Lapuz of his being a "wait-listed" passenger, a KAL
officer rudely shouted "Down! Down!" while pointing at him, thus causing him embarrassment and public humiliation.
KAL argues that "the evidence of confirmation of a chance passenger status is not through the entry of the name of a chance passenger in the
passenger manifest nor the clearance from the Commission on Immigration and Deportation, because they are merely means of facilitating
the boarding of a chance passenger in case his status is confirmed." We are not persuaded.
The evidence presented by Lapuz shows that he had indeed checked in at the departure counter, passed through customs and immigration,
boarded the shuttle bus and proceeded to the ramp of KAL's aircraft. In fact, his baggage had already been loaded in KAL's aircraft, to be
flown with him to Jeddah. The contract of carriage between him and KAL had already been perfected when he was summarily and insolently
prevented from boarding the aircraft.
KAL's allegation that the respondent court abused its discretion in awarding moral and exemplary damages is also not tenable.
The Court of Appeals granted moral and exemplary damages because:
The findings of the court a quo that the defendant-appellant has committed breach of contract of carriage in bad faith and in wanton, disregard
of plaintiff-appellant's rights as passenger laid the basis and justification of an award for moral damages.
In the instant case, we find that defendant-appellant Korean Air Lines acted in a wanton, fraudulent, reckless, oppressive or malevolent
manner when it "bumped off" plaintiff-appellant on November 8, 1980, and in addition treated him rudely and arrogantly as a "patay gutom na
contract worker fighting Korean Air Lines," which clearly shows malice and bad faith, thus entitling plaintiff-appellant to moral damages.
Considering that the plaintiff-appellant's entitlement to moral damages has been fully established by oral and documentary evidence,
exemplary damages may be awarded. In fact, exemplary damages may be awarded, even though not so expressly pleaded in the complaint
(Kapoe vs. Masa, 134 SCRA 231). By the same token, to provide an example for the public good, an award of exemplary damages is also
proper (Armovit vs. Court of Appeals, supra).
On the other hand, Lapuz's claim that the award of P100,000.00 as moral and exemplary damages is inadequate is not acceptable either. His
prayer for moral damages of not less than P1 million and exemplary damages of not less than P500,000.00 is overblown.
The well-entrenched principle is that moral damages depend upon the discretion of the court based on the circumstances of each case. 5 This
discretion is limited by the principle that the "amount awarded should not be palpably and scandalously excessive" as to indicate that it was
the result of prejudice or corruption on the part of the trial court. 6 Damages are not intended to enrich the complainant at the expense of the
defendant. They are awarded only to alleviate the moral suffering that the injured party had undergone by reason of the defendant's culpable
action. 7 There is no hard-and-fast rule in the determination of what would be a fair amount of moral damages since each case must be
governed by its own peculiar facts.
A review of the record of this case shows that the injury suffered by Lapuz is not so serious or extensive as to warrant an award of P1.5
million. The assessment of P100,000 as moral and exemplary damages in his favor is, in our view, reasonable and realistic.
Lapuz likewise claims that the respondent court could not rule upon the propriety of the award of actual damages because it had not been
assigned as an error by KAL. Not so. The rule is that only errors specifically assigned and properly argued in the brief will be considered
except errors affecting jurisdiction over the subject matter and plain as well as clerical errors. 8 But this is not without qualification for, as the
Court held in Vda. de Javellana vs. Court of Appeals: 9
. . . [T]he Court is clothed with ample authority to review matters, even if they are not assigned as errors in their appeal, if it finds that their
consideration is necessary in arriving at a just decision of the case.
A similar pronouncement was made in Baquiran vs. Court of Appeals 10 in this wise:
Issues, though not specifically raised in the pleading in the appellate court, may, in the interest of justice, be properly considered by said court
in deciding a case, if they are questions raised in the trial court and are matters of record having some bearing on the issue submitted which
the parties failed to raise or the lower court ignored.
The Court of Appeals was therefore justified in decreasing the award of actual damages even if the issue was not assigned as an error by
KAL. Consideration of this question was necessary for the just and complete resolution of the present case. Furthermore, there was enough
evidence to warrant the reduction of the original award, as the challenged decision correctly observed:
A perusal of the plaintiff-appellant's contract of employment shows that the effectivity of the contract is for only one year, renewable every year
for five years. Although plaintiff-appellant intends to renew his contract, such renewal will still be subject to his foreign employer. Plaintiffappellant had not yet started working with his foreign employer, hence, there can be no basis as to whether his contract will be renewed by his
foreign employer or not. Thus, the damages representing the loss of earnings of plaintiff-appellant in the renewal of the contract of
employment is at most speculative. Damages may not be awarded on the basis of speculation or conjecture (Gachalian vs. Delim, 203 SCRA
126). Hence, defendant-appellant's liability is limited to the one year contract only. Plaintiff-appellant is, therefore, entitled only to his lost
earnings for one year, i.e., P60,000.00, which is 1/5 of P300,000.00, the total amount of actual damages, representing lost earnings for five
years prayed for in the Complaint.
Plaintiff-appellant's contention that in computing his lost earnings, the current rate of the Saudi Rial to the Philippine Peso at the time of
payment should be used, is untenable, considering that in his Complaint, plaintiff-appellant has quantified in Philippine Peso his lost earnings
for five years.
We disagree with the respondent court, however, on the date when the legal interest should commence to run. The rule is that the legal
interest of six percent (6%) on the amounts adjudged in favor of Lapuz should resume from the time of the rendition of the trial court's decision
instead of November 28, 1980, the date of the filing of the complaint.
On this matter, the Court has held:
If suit were for payment of a definite sum of money, the contention might be tenable. However, if it is for damages, unliquidated and not known
until definitely ascertained, assessed and determined by the courts after proof, interest should be from the date of the decision. 11
The obligation to pay interest on a sum filed in a judgment exists from the date of the sentence, when so declared; for until the net amount of
the debtor's liability has been determined, he cannot he considered delinquent in the fulfillment of his obligation to pay the debt with interest
thereon. 12
Finally, we find that the respondent court did not err in sustaining the trial court's dismissal of KAL's counterclaim against Pan Pacific Overseas
Recruiting Services Inc., whose responsibility ended with the confirmation by KAL of Lapuz as its passenger in its Flight No. 903.
This is still another case of the maltreatment of our overseas contract workers, this time by the airline supposed to bring the passenger to his
foreign assignment. Our OCW's sacrifice much in seeking employment abroad, where they are deprived of the company of their loved ones,
the direct protection of our laws, and the comfort of our own native culture and way of life. This Court shall exert every effort to vindicate their
rights when they are abused and shall accord them the commensurate reparation of their injuries consistent with their dignity and worth as
members of the working class.
WHEREFORE, the appealed judgment is AFFIRMED, but with the modification that the legal interest on the damages awarded to private
respondent should commence from the date of the decision of the trial court on November 14, 1990. The parties shall bear their own costs.
SO ORDERED.
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 119756 March 18, 1999
FORTUNE EXPRESS, INC., petitioner,

vs.
COURT OF APPEALS, PAULIE U.CAORONG, and minor childrenYASSER KING CAORONG, ROSE HEINNI and PRINCE ALEXANDER,
all surnamed CAORONG, and represented by their mother PAULIE U. CAORONG, respondents.
MENDOZA, J.:
This is an appeal by petition for review on certiorari of the decision, dated July 29, 1994, of the Court of Appeals, which reversed the decision of the Regional Trial
Court, Branch VI, Iligan City. The aforesaid decision of the trial court dismissed the complaint of public respondents against petitioner for damages for breach of
contract of carriage filed on the ground that petitioner had not exercised the required degree of diligence in the operation of one of its buses. Atty. Talib Caorong,
whose heirs are private respondents herein, was a passenger of the bus and was killed in the ambush involving said bus.
The facts of the instant case are as follows: Petitioner is a bus company in northern Mindanao. Private respondent Paulie Caorong is the
widow of Atty. Caorong, while private respondents Yasser King, Rose Heinni, and Prince Alexander are their minor children.
On November 18, 1989, a bus of petitioner figured in an accident with a jeepney in Kauswagan, Lanao del Norte, resulting in the death of several
passengers of the jeepney, including two Maranaos. Crisanto Generalao, a volunteer field agent of the Constabulary Regional Security Unit No. X,
conducted an investigation of the accident. He found that the owner of the jeepney was a Maranao residing in Delabayan, Lanao del Norte and that
certain Maranaos were planning to take revenge on the petitioner by burning some of its buses. Generalao rendered a report on his findings to Sgt.
Reynaldo Bastasa of the Philippine Constabulary Regional Headquarters at Cagayan de Oro. Upon the instruction of Sgt. Bastasa, he went to see
Diosdado Bravo, operations manager of petitioner, its main office in Cagayan de Oro City. Bravo assured him that the necessary precautions to insure
the safety of lives and property would be taken. 1
At about 6:45 P.M. on November 22, 1989, three armed Maranaos who pretended to be passengers, seized a bus of petitioner at Linamon, Lanao del
Norte while on its way to Iligan City. Among the passengers of the bus was Atty. Caorong. The leader of the Maranaos, identified as one Bashier
Mananggolo, ordered the driver, Godofredo Cabatuan, to stop the bus on the side of the highway. Mananggolo then shot Cabatuan on the arm, which
caused him to slump on the steering wheel. The one of the companions of Mananggolo started pouring gasoline inside the bus, as the other held the
passenger at bay with a handgun. Mananggolo then ordered the passenger to get off the bus. The passengers, including Atty. Caorong, stepped out of
the bus and went behind the bushes in a field some distance from the highway. 2
However, Atty. Caorong returned to the bus to retrieve something from the overhead rack. at that time, one of the armed men was pouring gasoline on
the head of the driver. Cabatuan, who had meantime regained consciousness, heard Atty. Caorong pleading with the armed men to spare the driver as
he was innocent of any wrong doing and was only trying to make a living. The armed men were, however, adamant as they repeated the warning that
they were going to burn the bus along with its driver. During this exchange between Atty. Caorong and the assailants, Cabatuan climbed out of the left
window of the bus and crawled to the canal on the opposite side of the highway. He heard shots from inside the bus. Larry de la Cruz, one of the
passengers, saw that Atty. Caorong was hit. Then the bus was set on fire. Some of the passengers were able to pull Atty. Caorong out of the burning
bus and rush him to the Mercy Community Hospital in Iligan City, but he died while undergoing operation. 3
The private respondents brought this suit for breach of contract of carriage in the Regional Trial Court, Branch VI, Iligan City. In its decision,
dated December 28, 1990, the trial court dismissed the complaint, holding as follows:
The fact that defendant, through Operations Manager Diosdado Bravo, was informed of the "rumors" that the Moslems intended to take revenge by
burning five buses of defendant is established since the latter also utilized Crisanto Generalao as a witness. Yet despite this information, the plaintiffs
charge, defendant did not take proper precautions. . . . Consequently, plaintiffs now fault the defendant for ignoring the report. Their position is that the
defendant should have provided its buses with security guards. Does the law require common carriers to install security guards in its buses for the
protection and safety of its passengers? Is the failure to post guards on omission of the duty to "exercise the diligence of a good father of the family"
which could have prevented the killing of Atty. Caorong? To our mind, the diligence demanded by law does not include the posting of security guard in
buses. It is an obligation that properly belongs to the State. Besides, will the presence of one or two security guards suffice to deter a determined
assault of the lawless and thus prevent the injury complained of? Maybe so, but again, perhaps not. In other words, the presence of a security guard is
not a guarantee that the killing of Atty. Caorong would have been definitely avoided.
Accordingly, the failure of defendant to accord faith and credit to the report of Mr. Generalao and the fact that it did not provide security to its buses
cannot, in the light of the circumstances, be characterized as negligence. Finally, the evidence clearly shows that the assalants did not have the least
intention of the harming any of the passengers. They ordered all the passengers to alight and set fire on the bus only after all the passengers were out
of danger. The death of Atty. Caorong was an unexpected and unforseen occurrense over which defendant had no control. Atty. Caorong performed an
act of charity and heroism in coming to the succor of the driver even in the face of danger. He deserves the undying gratitude of the driver whose life he
saved. No one should blame him for an act of extraordinary charity and altruism which cost his life. But neither should any blame be laid on the
doorstep of defendant. His death was solely due to the willfull acts of the lawless which defendant could neither prevent nor to stop.
WHEREFORE, in view of the foregoing, the complaint is hereby dismissed. For lack of merit, the counter-claim is likewise dismissed. No costs. 4
On appeal, however, the Court of Appeals reversed. It held:
In the case at bench, how did defendant-appellee react to the tip or information that
certain Maranao hotheads were planning to burn five of its buses out of revenge for the deaths of two Maranaos in an earlier collision involving
appellee's bus? Except for the remarks of appellee's operations manager that "we will have our action . . . . and I'll be the one to settle it personally,"
nothing concrete whatsoever was taken by appellee or its employees to prevent the execution of the threat. Defendant-appellee never adopted even a
single safety measure for the protection of its paying passengers. Were there available safeguards? Of course, there were: one was frisking passengers
particularly those en route to the area where the threats were likely to be carried out such as where the earlier accident occurred or the place of
influence of the victims or their locality. If frisking was resorted to, even temporarily, . . . . appellee might be legally excused from liabilty. Frisking of
passengers picked up along the route could have been implemented by the bus conductor; for those boarding at the bus terminal, frisking could have
been conducted by him and perhaps by additional personnel of defendant-appellee. On hindsight, the handguns and especially the gallon of gasoline
used by the felons all of which were brought inside the bus would have been discovered, thus preventing the burning of the bus and the fatal shooting
of the victim.
Appellee's argument that there is no law requiring it to provide guards on its buses and that the safety of citizens is the duty of the government, is not
well taken. To be sure, appellee is not expected to assign security guards on all its buses; if at all, it has the duty to post guards only on its buses plying
predominantly Maranaos areas. As discussed in the next preceding paragraph, least appellee could have done in response to the report was to adopt a
system of verification such as the frisking of passengers boarding at its buses. Nothing, and no repeat, nothing at all, was done by defendant-appellee
to protect its innocent passengers from the danger arising from the "Maranao threats." It must be observed that frisking is not a novelty as a safety
measure in our society. Sensitive places in fact, nearly all important places have applied this method of security enhancement. Gadgets and
devices are avilable in the market for this purpose. It would not have weighed much against the budget of the bus company if such items were made
available to its personnel to cope up with situations such as the "Maranaos threats."
In view of the constitutional right to personal privacy, our pronouncement in this decision should not be construed as an advocacy of mandatory frisking
in all public conveyances. What we are saying is that given the circumstances obtaining in the case at bench that: (a) two Maranaos died because of a
vehicular collision involving one of appellee's vehicles; (b) appellee received a written report from a member of the Regional Security Unit, Constabulary
Security Group, that the tribal/ethnic group of the two deceased were planning to burn five buses of appellee out of revenge; and (c) appelle did nothing
absolutely nothing for the safety of its passengers travelling in the area of influence of the victims, appellee has failed to exercise the degree of
dilegence required of common carriers. Hence, appellee must be adjudge liable.
WHEREFORE the decision appealed from is hereby REVERSED and another rendered ordering defendant-appellee to pay plaintiffs-appellants the
following: 1) P3,399,649.20 as death indemnity; 2) P50,000.00 and P500.00 per appearance as attorney's fee and Costs against defendant-appellee.
Hence, this appeal. Petitioner contends:

(A) THAT PUBLIC RESPONDENT ERRED IN REVERSING THE DECISION OF THE REGIONAL TRIAL COURT DATED DECEMBER 28, 1990 DISMISSING
THE COMPLAINT AS WELL AS THE COUNTERCLAIM, AND FINDING FOR PRIVATE RESPONDENTS BY ORDERING PETITIONER TO PAY THE
GARGANTUAN SUM OF P3,449,649.20 PLUS P500.00 PER APPEARANCE AS ATTORNEY'S FEES, AS WELL AS DENYING PETITIONERS MOTION FRO
RECONSIDERATION AND THE SUPPLEMENT TO SAID MOTION, WHILE HOLDING, AMONG OTHERS, THAT THE PETITIONER BREACHED THE
CONTRACT OF THE CARRIAGE BY ITS FAILURE TO EXCERCISE THE REQUIRED DEGREE OF DILIGENCE;
(B) THAT THE ACTS OF THE MARANAO OUTLAWS WERE SO GRAVE, IRRESISTABLE, VIOLENT, AND FORCEFULL, AS TO BE REGARDED AS CASO
FORTUITO; AND
(C) THAT PUBLIC RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN HOLDING THAT PETITIONER COULD HAVE PROVIDED ADEQUATE
SECURITY IN PREDOMINANTLY MUSLIM AREAS AS PART OF ITS DUTY TO OBSERVE EXTRA-ORDINARY DILIGENCE AS A COMMON CARRIER.
The instant has no merit.

First. Petitioner's Breach of the Contract of Carriage.
Art. 1763 of the Civil Code provides that a common carrier is responsible for injuries suffered by a passenger on account of wilfull acts of other passengers, if the
employees of the common carrier could have prevented the act through the exercise of the diligence of a good father of a family. In the present case, it is clear that
because of the negligence of petitioner's employees, the seizure of the bus by Mananggolo and his men was made possible.
Despite warning by the Philippine Constabulary at Cagayan de Oro that the Maranaos were planning to take revenge on the petitioner by
burning some of its buses and the assurance of petitioner's operation manager, Diosdado Bravo, that the necessary precautions would be
taken, petitioner did nothing to protect the safety of its passengers.
Had petitioner and its employees been vigilant they would not have failed to see that the malefactors had a large quantity of gasoline with
them. Under the circumstances, simple precautionary measures to protect the safety of passengers, such as frisking passengers and
inspecting their baggages, preferably with non-intrusive gadgets such as metal detectors, before allowing them on board could have been
employed without violating the passenger's constitutional rights. As this Court amended in Gacal v. Philippine Air Lines, Inc., 6 a common
carrier can be held liable for failing to prevent a hijacking by frisking passengers and inspecting their baggages.
From the foregoing, it is evident that petitioner's employees failed to prevent the attack on one of petitioner's buses because they did not
exercise the diligence of a good father of a family. Hence, petitioner should be held liable for the death of Atty. Caorong.
Second. Seizure of Petitioner's Bus not a Case of Force Majeure
The petitioner contends that the seizure of its bus by the armed assailants was a fortuitous event for which it could not be held liable.
Art. 1174 of the Civil Code defines a fortuitous event as an occurence which could not be foreseen, is inevitable. In Yobido v. Court of Appeals, 7 we
held that to considered as force majeure, it is necessary that (1) the cause of the breach of the obligation must be independent of the human will; (2) the
event must be either unforeseeable or unavoidable; (3) the occurence must be render it impossible for the debtor to fulfill the obligation in a normal
manner; and (4) the obligor must be free of participation in, or aggravation of, the injury to the creditor. The absence of any of the requisites mentioned
above would prevent the obligor from being excused from liability.
Thus, in Vasquez v. Court of Appeals, 8 it was held that the common carrier was liable for its failure to take the necessary precautions against an
approaching typhoon, of which it was warned, resulting in the loss of the lives of several passengers. The event was forseeable, and, thus, the second
requisite mentioned above was not fulfilled. This ruling applies by analogy to the present case. Despite the report of PC agent Generalao that the
Maranaos were going to attack its buses, petitioner took no steps to safeguard the lives and properties of its passengers. The seizure of the bus of the
petitioner was foreseeable and, therefore, was not a fortuitous event which would exempt petitioner from liabilty.
Petitioner invokes the ruling in Pilapil v. Court of Appeals, 9 and De Guzman v. Court of Appeals, 10 in support of its contention that the seizure of its bus
by the assailants constitutes force majeure. In Pilapil v. Court of Appeals, 11 it was held that a common carrier is not liable for failing to install window
grills on its buses to protect the passengers from injuries cause by rocks hurled at the bus by lawless elements. On the other hand, in De Guzman v.
Court of Appeals, 12 it was ruled that a common carriers is not responsible for goods lost as a result of a robbery which is attended by grave or
irresistable threat, violence, or force.
It is clear that the cases of Pilapil and De Guzman do not apply to the prensent case. Art. 1755 of the Civil Code provides that "a common carrier is
bound to carry the passengers as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for
all the circumstances." Thus, we held in Pilapil and De Guzman that the respondents therein were not negligent in failing to take special precautions
against threats to the safety of passengers which could not be foreseen, such as tortious or criminal acts of third persons. In the present case, this
factor of unforeseeability (the second requisite for an event to be considered force majeure) is lacking. As already stated, despite the report of PC agent
Generalao that the Maranaos were planning to burn some of petitioner's buses and the assurance of petitioner's operation manager (Diosdado Bravo)
that the necessary precautions would be taken, nothing was really done by petitioner to protect the safety of passengers.
Third. Deceased not Guilty of Contributory Negligence
The petitioner contends that Atty. Caorong was guilty of contributory negligence in returning to the bus to retrieve something. But Atty. Caorong did not
act recklessly. It should be pointed out that the intended targets of the violence were petitioners and its employees, not its passengers. The assailant's
motive was to retaliate for the loss of life of two Maranaos as a result of the collision between petitioner's bus and the jeepney in which the two
Maranaos were riding. Mananggolo, the leader of the group which had hijacked the bus, ordered the passengers to get off the bus as they intended to
burn it and its driver. The armed men actually allowed Atty. Caorong to retrieve something from the bus. What apparently angered them was his attempt
to help the driver of the bus by pleading for his life. He was playing the role of the good Samaritan. Certainly, this act cannot considered an act of
negligence, let alone recklessness.
Fourth. Petitioner Liable to Private Respaondents for Damages
We now consider the question of damages that the heirs of Atty. Caorong, private respondents herein, are entitled to recover from the petitioner.
Indemnity for Death. Art. 1764 of the Civil Code, in relation to Art. 2206 thereof, provides for the payment of indemnity for the death of passengers
caused by the breach of contract of carriage by a common carrier. Initially fixed in Art. 2206 at P3,000.00, the amount of the said indemnity for death
has through the years been gradually increased in view of the declining value of the peso. It is presently fixed at P50,000.00. 13 Private respondents are
entitled to this amount.
Actual Damages. Art. 2199 provides that "except as provided by law or by stipulation, one is entitled to an adequate compensation only for such
pecuniary loss suffered by him as has duly proved." The trial court found that the private respondents spent P30,000.00 for the wake and burial of Atty.
Caorong. 14 Since petitioner does not question this finding of the trial court, it is liable to private respondent in the said amount as actual damages.
Moral Damages. Under Art. 2206, the "spouse, legitimate and illegitimate descendants and ascendants of the deceased may demand moral damages
for mental anguish by reason of the death of the deceased." The trial court found that private respondent Paulie Caorong suffered pain from the death
of her husband and worry on how to provide support for their minor children, private respondents Yasser King, Rose Heinni, and Prince Alexander. 15
The petitioner likewise does not question this finding of the trial court. Thus, in accordance with recent decisions of this Court, 16 we hold that the
petitioner is liable to the private respondents in the amount of P100,000.00 as moral damages for the death of Atty. Caorong.
Exemplary Damages. Art. 2232 provides that "in contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in a
wanton, fraudulent, reckless, oppressive, or malevolent reckless manner." In the present case, the petitioner acted in a wanton and reckless manner.
Despite warning that the Maranaos were planning to take revenge against the petitioner by burning some of its buses, and contary to the assurance
made by its operations manager that the necessary precautions would be take, the petitioner and its employees did nothing to protect the safety of
passengers. Under the circumtances, we deem it reasonable to award private respondents exemplary damages in the amount of P100,000.00. 17
Attorney's Fees. Pursuant to Art. 2208, attorney's fees may be recovered when, as in the instant case, exemplary damages are awarded. In the recent
case of Sulpicio Lines, Inc. v. Court of Appeals, 18 we held an award of P50,000.00 as attorney's fees to be reasonable. Hence, the private respondents
are entitled to attorney's fees in that amount.
Compensation for Loss of Earning Capacity. Art. 1764 of the Civil Code, in relation to Art. 2206 thereof, provides that in addition to the indemnity for
death arising from the breach of contrtact of carriage by a common carrier, the "defendant shall be liable for the loss of the earning capacity of the
deceased, and the indemnity shall be paid to the heirs of the latter." The formula established in decided cases for computing net earning capacity is as
follows: 19 Gross Necessary Net Earning = Life x Annual Living Capacity Expectancy Income Expenses
Life expectancy is equivalent to two thirds (2/3) multiplied by the difference of eighty (80) and the age of the deceased. 20 Since Atty. Caorong was 37
years old at that time of his death, 21 he had a life expectancy of 28 2/3 more years. 22 His projected gross annual income, computed based on his
monthly salary of P11,385.00. 23 as a lawyer in the Department of Agrarian Reform at the time of his death, was P148,005.00. 24 Allowing for necessary
living expenses of fifty percent (50%) 25 of his projected gross annual income, his total earning capacity amounts to P2,121,404.90. 26 Hence, the
petitioner is liable to the private respondents in the said amount as a compensation for loss of earning capacity.
WHEREFORE, the decision, dated July 29, 1994, of the Court of Appeals is hereby AFFIRMED with the MODIFICATION that petitioner Fortune
Express, Inc. is ordered to pay the following amounts to private respondents Paulie, Yasser King, Rose Heinni, and Prince Alexander Caorong:
1. death indemnity in the amount of fifty thousand pesos (P50,000.00); 2. actual damages in the amount of thirty thousand pesos (P30,000.00);
3. moral damages in the amount of one hundred thousand pesos (P100,000.00); 4. exemplary damages in the amount of one hundred thousand
pesos (P100,000.00); 5. attorney's fees in the amount of fifty thousand pesos (P50,000.00); 6. compensation for loss of earning capacity in the
amount of two million one hundred twenty-one thousand four hundred four pesos and ninety centavos (P2,121,404.90); and 7. cost of suits.
SO ORDERED.
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. L-56487 October 21, 1991
REYNALDA GATCHALIAN, petitioner,
vs.
ARSENIO DELIM and the HON. COURT OF APPEALS, respondents.
FELICIANO, J.:p
At noon time on 11 July 1973, petitioner Reynalda Gatchalian boarded, as a paying passenger, respondent's "Thames" mini bus at a point in
San Eugenio, Aringay, La Union, bound for Bauang, of the same province. On the way, while the bus was running along the highway in Barrio
Payocpoc, Bauang, Union, "a snapping sound" was suddenly heard at one part of the bus and, shortly thereafter, the vehicle bumped a
cement flower pot on the side of the road, went off the road, turned turtle and fell into a ditch. Several passengers, including petitioner
Gatchalian, were injured. They were promptly taken to Bethany Hospital at San Fernando, La Union, for medical treatment. Upon medical
examination, petitioner was found to have sustained physical injuries on the leg, arm and forehead, specifically described as follows: lacerated
wound, forehead; abrasion, elbow, left; abrasion, knee, left; abrasion, lateral surface, leg, left. 1
On 14 July 1973, while injured. passengers were confined in the hospital, Mrs. Adela Delim, wife of respondent, visited them and later paid for
their hospitalization and medical expenses. She also gave petitioner P12.00 with which to pay her transportation expense in going home from
the hospital. However, before Mrs. Delim left, she had the injured passengers, including petitioner, sign an already prepared Joint Affidavit
which stated, among other things:
That we were passengers of Thames with Plate No. 52-222 PUJ Phil. 73 and victims after the said Thames met an accident at Barrio
Payocpoc Norte, Bauang, La Union while passing through the National Highway No. 3;
That after a thorough investigation the said Thames met the accident due to mechanical defect and went off the road and turned turtle to the
east canal of the road into a creek causing physical injuries to us;
That we are no longer interested to file a complaint, criminal or civil against the said driver and owner of the said Thames, because it was an
accident and the said driver and owner of the said Thames have gone to the extent of helping us to be treated upon our injuries.
Notwithstanding this document, petitioner Gathalian filed with the then Court of First Instance of La Union an action extra contractu to recover
compensatory and moral damages. She alleged in the complaint that her injuries sustained from the vehicular mishap had left her with a
conspicuous white scar measuring 1 by 1/2 inches on the forehead, generating mental suffering and an inferiority complex on her part; and
that as a result, she had to retire in seclusion and stay away from her friends. She also alleged that the scar diminished her facial beauty and
deprived her of opportunities for employment. She prayed for an award of: P10,000.00 for loss of employment and other opportunities;
P10,000.00 for the cost of plastic surgery for removal of the scar on her forehead; P30,000.00 for moral damages; and P1,000.00 as
attorney's fees.
In defense, respondent averred that the vehicular mishap was due to force majeure, and that petitioner had already been paid and moreover
had waived any right to institute any action against him (private respondent) and his driver, when petitioner Gatchalian signed the Joint
Affidavit on 14 July 1973.
After trial, the trial court dismissed the complaint upon the ground that when petitioner Gatchalian signed the Joint Affidavit, she relinquished
any right of action (whether criminal or civil) that she may have had against respondent and the driver of the mini-bus.
On appeal by petitioner, the Court of Appeals reversed the trial court's conclusion that there had been a valid waiver, but affirmed the dismissal
of the case by denying petitioner's claim for damages:
We are not in accord, therefore, of (sic) the ground of the trial court's dismissal of the complaint, although we conform to the trial court's
disposition of the case its dismissal.
IN VIEW OF THE FOREGOING considerations, there being no error committed by the lower court in dismissing the plaintiff-appellant's
complaint, the judgment of dismissal is hereby affirmed.
Without special pronouncement as to costs.
SO ORDERED. 3
In the present Petition for Review filed in forma pauperis, petitioner assails the decision of the Court of Appeals and ask this Court to award
her actual or compensatory damages as well as moral damages.
We agree with the majority of the Court of Appeals who held that no valid waiver of her cause of action had been made by petitioner. The
relevant language of the Joint Affidavit may be quoted again:
That we are no longer interested to file a complaint, criminal or civil against the said driver and owner of the said Thames, because it was an
accident and the said driver and owner of the said Thames have gone to the extent of helping us to be treated upon our injuries. (Emphasis
supplied)
A waiver, to be valid and effective, must in the first place be couched in clear and unequivocal terms which leave no doubt as to the intention
of a person to give up a right or benefit which legally pertains to him. 4 A waiver may not casually be attributed to a person when the terms
thereof do not explicitly and clearly evidence an intent to abandon a right vested in such person.
The degree of explicitness which this Court has required in purported waivers is illustrated in Yepes and Susaya v. Samar Express Transit
(supra), where the Court in reading and rejecting a purported waiver said:
. . . It appears that before their transfer to the Leyte Provincial Hospital, appellees were asked to sign as, in fact, they signed the document
Exhibit I wherein they stated that "in consideration of the expenses which said operator has incurred in properly giving us the proper medical
treatment, we hereby manifest our desire to waive any and all claims against the operator of the Samar Express Transit."
Even a cursory examination of the document mentioned above will readily show that appellees did not actually waive their right to claim
damages from appellant for the latter's failure to comply with their contract of carriage. All that said document proves is that they expressed a
"desire" to make the waiver which obviously is not the same as making an actual waiver of their right. A waiver of the kind invoked by
appellant must be clear and unequivocal (Decision of the Supreme Court of Spain of July 8, 1887) which is not the case of the one relied
upon in this appeal. (Emphasis supplied)
If we apply the standard used in Yepes and Susaya, we would have to conclude that the terms of the Joint Affidavit in the instant case cannot
be regarded as a waiver cast in "clear and unequivocal" terms. Moreover, the circumstances under which the Joint Affidavit was signed by
petitioner Gatchalian need to be considered. Petitioner testified that she was still reeling from the effects of the vehicular accident, having been
in the hospital for only three days, when the purported waiver in the form of the Joint Affidavit was presented to her for signing; that while
reading the same, she experienced dizziness but that, seeing the other passengers who had also suffered injuries sign the document, she too
signed without bothering to read the Joint Affidavit in its entirety. Considering these circumstances there appears substantial doubt whether
petitioner understood fully the import of the Joint Affidavit (prepared by or at the instance of private respondent) she signed and whether she
actually intended thereby to waive any right of action against private respondent.
Finally, because what is involved here is the liability of a common carrier for injuries sustained by passengers in respect of whose safety a
common carrier must exercise extraordinary diligence, we must construe any such purported waiver most strictly against the common carrier.
For a waiver to be valid and effective, it must not be contrary to law, morals, public policy or good
customs. 5 To uphold a supposed waiver of any right to claim damages by an injured passenger, under circumstances like those exhibited in
this case, would be to dilute and weaken the standard of extraordinary diligence exacted by the law from common carriers and hence to
render that standard unenforceable. 6 We believe such a purported waiver is offensive to public policy.
Petitioner Gatchalian also argues that the Court of Appeals, having by majority vote held that there was no enforceable waiver of her right of
action, should have awarded her actual or compensatory and moral damages as a matter of course.
We have already noted that a duty to exercise extraordinary diligence in protecting the safety of its passengers is imposed upon a common
carrier. 7 In case of death or injuries to passengers, a statutory presumption arises that the common carrier was at fault or had acted
negligently "unless it proves that it [had] observed extraordinary diligence as prescribed in Articles 1733 and 1755." 8 In fact, because of this
statutory presumption, it has been held that a court need not even make an express finding of fault or negligence on the part of the common
carrier in order to hold it liable. 9 To overcome this presumption, the common carrier must slow to the court that it had exercised extraordinary
diligence to prevent the injuries. 10 The standard of extraordinary diligence imposed upon common carriers is considerably more demanding
than the standard of ordinary diligence, i.e., the diligence of a good paterfamilias established in respect of the ordinary relations between
members of society. A common carrier is bound to carry its passengers safely" as far as human care and foresight can provide, using the
utmost diligence of a very cautious person, with due regard to all the circumstances". 11
Thus, the question which must be addressed is whether or not private respondent has successfully proved that he had exercised extraordinary
diligence to prevent the mishap involving his mini-bus. The records before the Court are bereft of any evidence showing that respondent had
exercised the extraordinary diligence required by law. Curiously, respondent did not even attempt, during the trial before the court a quo, to
prove that he had indeed exercised the requisite extraordinary diligence. Respondent did try to exculpate himself from liability by alleging that
the mishap was the result of force majeure. But allegation is not proof and here again, respondent utterly failed to substantiate his defense of
force majeure. To exempt a common carrier from liability for death or physical injuries to passengers upon the ground of force majeure, the
carrier must clearly show not only that the efficient cause of the casualty was entirely independent of the human will, but also that it was
impossible to avoid. Any participation by the common carrier in the occurrence of the injury will defeat the defense of force majeure. In
Servando v. Philippine Steam Navigation Company, 12 the Court summed up the essential characteristics of force majeure by quoting with
approval from the Enciclopedia Juridica Espaola:
Thus, where fortuitous event or force majeure is the immediate and proximate cause of the loss, the obligor is exempt from liability nonperformance. The Partidas, the antecedent of Article 1174 of the Civil Code, defines "caso fortuito" as 'an event that takes place by accident
and could not have been foreseen. Examples of this are destruction of houses, unexpected fire, shipwreck, violence of robber.
In its dissertation on the phrase "caso fortuito" the Enciclopedia Juridica Espaola says: 'In legal sense and, consequently, also in relation to
contracts, a "caso fortuito" presents the following essential characteristics: (1) the cause of the unforeseen and unexpected occurence, or of
the failure of the debtor to comply with his obligation, must be independent of the human will; (2) it must be impossible to foresee the event
which constitutes the "caso fortuito", or if it can be foreseen, it must be impossible to avoid; (3) the occurrence must be such as to render it
impossible for the debtor to fulfill his obligation in a normal manner; and (4) the obligor must be free from any participation in the aggravation
of the injury resulting to the creditor.
Upon the other hand, the record yields affirmative evidence of fault or negligence on the part of respondent common carrier. In her direct
examination, petitioner Gatchalian narrated that shortly before the vehicle went off the road and into a ditch, a "snapping sound" was suddenly
heard at one part of the bus. One of the passengers, an old woman, cried out, "What happened?" ("Apay addan samet nadadaelen?"). The
driver replied, nonchalantly, "That is only normal" ("Ugali ti makina dayta"). The driver did not stop to check if anything had gone wrong with
the bus. Moreover, the driver's reply necessarily indicated that the same "snapping sound" had been heard in the bus on previous occasions.
This could only mean that the bus had not been checked physically or mechanically to determine what was causing the "snapping sound"
which had occurred so frequently that the driver had gotten accustomed to it. Such a sound is obviously alien to a motor vehicle in good
operating condition, and even a modicum of concern for life and limb of passengers dictated that the bus be checked and repaired. The
obvious continued failure of respondent to look after the roadworthiness and safety of the bus, coupled with the driver's refusal or neglect to
stop the mini-bus after he had heard once again the "snapping sound" and the cry of alarm from one of the passengers, constituted wanton
disregard of the physical safety of the passengers, and hence gross negligence on the part of respondent and his driver.
We turn to petitioner's claim for damages. The first item in that claim relates to revenue which petitioner said she failed to realize because of
the effects of the vehicular mishap. Petitioner maintains that on the day that the mini-bus went off the road, she was supposed to confer with
the district supervisor of public schools for a substitute teacher's job, a job which she had held off and on as a "casual employee." The Court of
Appeals, however, found that at the time of the accident, she was no longer employed in a public school since, being a casual employee and
not a Civil Service eligible, she had been laid off. Her employment as a substitute teacher was occasional and episodic, contingent upon the
availability of vacancies for substitute teachers. In view of her employment status as such, the Court of Appeals held that she could not be said
to have in fact lost any employment after and by reason of the accident. 13 Such was the factual finding of the Court of Appeals, a finding
entitled to due respect from this Court. Petitioner Gatchalian has not submitted any basis for overturning this finding of fact, and she may not
be awarded damages on the basis of speculation or conjecture. 14
Petitioner's claim for the cost of plastic surgery for removal of the scar on her forehead, is another matter. A person is entitled to the physical
integrity of his or her body; if that integrity is violated or diminished, actual injury is suffered for which actual or compensatory damages are
due and assessable. Petitioner Gatchalian is entitled to be placed as nearly as possible in the condition that she was before the mishap. A
scar, especially one on the face of the woman, resulting from the infliction of injury upon her, is a violation of bodily integrity, giving raise to a
legitimate claim for restoration to her conditio ante. If the scar is relatively small and does not grievously disfigure the victim, the cost of
surgery may be expected to be correspondingly modest. In Araneta, et al. vs. Areglado, et al., 15 this Court awarded actual or compensatory
damages for, among other things, the surgical removal of the scar on the face of a young boy who had been injured in a vehicular collision.
The Court there held:
We agree with the appellants that the damages awarded by the lower court for the injuries suffered by Benjamin Araneta are inadequate. In
allowing not more than P1,000.00 as compensation for the "permanent deformity and something like an inferiority complex" as well as for
the "pathological condition on the left side of the jaw" caused to said plaintiff, the court below overlooked the clear evidence on record that to
arrest the degenerative process taking place in the mandible and restore the injured boy to a nearly normal condition, surgical intervention
was needed, for which the doctor's charges would amount to P3,000.00, exclusive of hospitalization fees, expenses and medicines.
Furthermore, the operation, according to Dr. Dio, would probably have to be repeated in order to effectuate a complete cure, while removal
of the scar on the face obviously demanded plastic surgery.
The father's failure to submit his son to a plastic operation as soon as possible does not prove that such treatment is not called for. The
damage to the jaw and the existence of the scar in Benjamin Araneta's face are physical facts that can not be reasoned out of existence. That
the injury should be treated in order to restore him as far as possible to his original condition is undeniable. The father's delay, or even his
negligence, should not be allowed to prejudice the son who has no control over the parent's action nor impair his right to a full indemnity.
. . . Still, taking into account the necessity and cost of corrective measures to fully repair the damage; the pain suffered by the injured party; his
feelings of inferiority due to consciousness of his present deformity, as well as the voluntary character of the injury inflicted; and further
considering that a repair, however, skillfully conducted, is never equivalent to the original state, we are of the opinion that the indemnity
granted by the trial court should be increased to a total of P18,000.00. (Emphasis supplied)
Petitioner estimated that the cost of having her scar surgically removed was somewhere between P10,000.00 to P15,000.00. 16 Upon the
other hand, Dr. Fe Tayao Lasam, a witness presented as an expert by petitioner, testified that the cost would probably be between P5,000.00
to P10,000.00. 17 In view of this testimony, and the fact that a considerable amount of time has lapsed since the mishap in 1973 which may be
expected to increase not only the cost but also very probably the difficulty of removing the scar, we consider that the amount of P15,000.00 to
cover the cost of such plastic surgery is not unreasonable.
Turning to petitioner's claim for moral damages, the long-established rule is that moral damages may be awarded where gross negligence on
the part of the common carrier is shown. 18 Since we have earlier concluded that respondent common carrier and his driver had been grossly
negligent in connection with the bus mishap which had injured petitioner and other passengers, and recalling the aggressive manuevers of
respondent, through his wife, to get the victims to waive their right to recover damages even as they were still hospitalized for their injuries,
petitioner must be held entitled to such moral damages. Considering the extent of pain and anxiety which petitioner must have suffered as a
result of her physical injuries including the permanent scar on her forehead, we believe that the amount of P30,000.00 would be a reasonable
award. Petitioner's claim for P1,000.00 as atttorney's fees is in fact even more modest. 19
WHEREFORE, the Decision of the Court of Appeals dated 24 October 1980, as well as the decision of the then Court of First Instance of La
Union dated 4 December 1975 are hereby REVERSED and SET ASIDE.Respondent is hereby ORDERED to pay petitioner Reynalda
Gatchalian the following sums: 1) P15,000.00 as actual or compensatory damages to cover the cost of plastic surgery for the removal of the
scar on petitioner's forehead; 2) P30,000.00 as moral damages; and 3) P1,000.00 as attorney's fees, the aggregate amount to bear interest at
the legal rate of 6% per annum counting from the promulgation of this decision until full payment thereof. Costs against private respondent.
SO ORDERED.
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-28256 March 17, 1982
SEVERO DEL CASTILLO, plaintiff-appellant,
vs.
LORENZO JAYMALIN MANUEL SABIT and BITRANCO and A. L. AMMEN TRANS. CO., INC., defendants-appellees.
A direct appeal from the Decision, dated January 25, 1967, of the Court of First Instance of Sorsogon, Branch 1, dismissing this case for
Damages (Civil Case No. 1784 below) by reason of plaintiff Severo del Castillo's death.
On June 29, 1960, Mario del Castillo, a deaf-mute, son of plaintiff Severo del Castillo, and a paying passenger of defendant Bicol
Transportation Company (Bitranco), operated by A.L. Ammen Transportation Co., Inc. (ALATCO) at Casiguran, Sorsogon, fell upon alighting
from Bus No. 624 of said companies and died as a result.
On September 5, 1962, an action for the recovery of damages for Mario's death was filed by his father, Severo, plaintiff herein, against the
driver and conductor of the bus, and the transportation companies. The Complaint alleged that Severo, a widower, was the sole heir.
Defendant transportation companies traversed the complaint by stating that the passenger bus involved was owned by Bicol Transportation
Co. alone; that the two companies had always exercised due diligence in the selection and supervision of their employees; and that the
proximate cause of Mario's death was his recklessness and gross negligence in jumping out of the bus while in motion.
Trial ensued with plaintiff having been able to present his evidence and rest his case. Defendants proceeded with the presentation of their
witnesses until July 9, 1966 when they filed a "Motion for Annulment of Proceedings after February 1, 1965", having learned that plaintiff
Severo had died on February 1, 1965, at which time plaintiff had not yet rested his case having done so only on January 28, 1966. the Court a
quo directed plaintiff's counsel to verify the existence of heirs and whether they were willing to be substituted as parties-plaintiffs."
On August 6, 1966, plaintiff's counsel filed a "Motion to Admit Amended Complaint" substituting Severo's son-in-law, one Wenceslao Haloc, as
party plaintiff. This was in virtue of a "Deed of Assignment" dated August 13, 1960, thumbmarked by Severo, and reading as follows:
KNOW ALL MEN BY THESE PRESENTS:
That I, SEVERO DEL CASTILLO, of age, a widower and a resident of Casiguran, Sorsogon, Philippines, for reasons of
my health and old age, do hereby transfer and assigned (sic) and by these presents do hereby assign and transfer unto
the said WENCESLAO (sic) HALOC, my son in-law, of Barrio Storom Casiguran, Sorsogon, Philippines, my rights,
privileges and all its accessory rights as such an heir to me (sic) for and in my behalf (sic) the case I originally instituted
for indemnity for the death of my son the late Mario Castillo, who died while a passenger in an Alatco Bus No. 624, June
29, 1960 at about 7:00 P.M. more or less at Barrio Storom, Casiguran, Sorsogon.
That I hereby declare that from this date August 13, 1960 on, my son-in-law Wenceslao Haloc, of legal age will be my
assignee as aforesaid.
(Sgd.) Thumb mark SEVERO DEL CASTILLO Res. Cert. No. A2920570 Issued on July 5, 1960 at Casiguran. Sorsogon
The Amended Complaint was admitted by the trial Court for lack of objection thereto on August 20, 1966.
Trial proceeded with defendants closing their evidence on November 25, 1966.
On January 26, 1967, the trial Court rendered judgment in defendants' favor dismissing the original and the amended Complaints upon the
following ratiocination
... Since Severo del Castillo died before the conclusion of this case, this action died with him. Wenceslao Haloc is without
personality to continue this case. He is not even an heir of Severo del Castillo.
Wenceslao Haloc appealed as a pauper directly to this Court contending that the Decision is "contrary to law."
Before this instance, it is urged that the trial Court erred:
1) In construing the Deed of Assignment as not a deed that transfers any benefit to the transferee.
2) In dismissing the case in virtue of the death of Severo del Castillo after the deed of assignment was executed and
further still after the evidence testimonial and documentary were already presented.
We find merit in the foregoing contentions.
This is not a case where the provisions of Section 17, Rule 3 of the Rules of Court on "death of a party" are applicable. Rather, it is a situation
where plaintiff, while alive, had assigned his rights to another, in which case, the proper procedure would have been for the transferee to have
been substituted for the transferor as plaintiff. 1 The rights of Severo to claim damages for his son were transferable. Severo had transferred
his rights as plaintiff to Wenceslao Haloc but after the assignment the case continued in Severo's name and there was no immediate and
formal substitution of party plaintiff. This is but a formality, however, and the fact remains that, after the assignment, the substantial plaintiff and
real party in interest became Haloc, with Severo as a sort of trustee of whatever fruits the litigation would bring
It was reversible error, therefore, for the trial Court to have dismissed the case by virtue of Severo's death. The action did not die with him. In
point is the following ruling of this Court:
... where an assignable right has been transferred before action brought, the proceeding ought to be instituted in the name
of the assignee; and where an assignment is effect pendente lite, it is proper to have the assignee substituted for the
original plaintiff. If such substitution should not be effected and the transfer of the right of action should not be brought to
the attention of the court, the original plaintiff, if successful in the litigation, would hold the fruits of the action as a sort of
trustee for the use and benefit of his assignee. ... 2
Relative to the aspect of damages, the trial Court ruled:
Common carriers are responsible for the death of their passengers (Articles 1764 and 2206 of the Civil Code). This liability
includes the loss of the earning capacity of the deceased. It appears proven that the defendant corporations failed to
exercise the diligence that was their duty to observe according to Articles 1733 and 1755. The conductor was apprised of
the fact that Mario del Castillo was deaf and dumb. With this knowledge the conductor should have taken extra-ordinary
care for the safety of the said passenger. In this he failed.
The trial Court then concluded that "under the circumstances obtaining in the case, the plaintiff Severo del Castillo would be entitled to actual
and moral damages but did not determine the amount of damages because it dismissed the case.
Technicality would require a remand of this case to the Court a quo, for a determination of the amount of damages [the total amount of
P41,000.00 (P6,000.00 as damages for death, and P35,000.00 for loss of earning capacity), and attorney's fees of P5,000.00, were claimed].
Considering, however, the pendency of this case for 13 years and in order to put an end to the controversy, we determine the damages at
P12,000.00 for the death of the victim, without interest, and P2,000.00 for attorney's fees. Loss of earning capacity in the amount of
P35,000.00 has not been proven specially considering that the victim was a deaf-mute.
WHEREFORE, the judgment appealed from is hereby reversed, and defendants hereby ordered jointly and severally, to pay Wenceslao
Haloc, the amount of P12,000.00 as damages for death, without interest, and P2,000.00 as attorney's fees.
No costs.
SO ORDERED.
SUPREME COURT
Manila
FIRST DIVISION
G.R. Nos. 66102-04 August 30, 1990
PHILIPPINE RABBIT BUS LINES, INC., petitioner,

vs.
THE HONORABLE INTERMEDIATE APPELLATE COURT AND CASIANO PASCUA, ET AL., respondents.
MEDIALDEA, J.:
This is a petition for review on certiorari of the decision of the Intermediate Appellate Court (now Court of Appeals) dated July 29, 1983 in ACG.R. Nos. CV-65885, CV-65886 and CV-65887 which reversed the decision of the Court of First Instance (now Regional Trial Court) of
Pangasinan dated December 27, 1978; and its resolution dated November 28, 1983 denying the motion for reconsideration.
It is an established principle that the factual findings of the Court of Appeals are final and may not be reviewed by this Court on appeal.
However, this principle is subject to certain exceptions. One of these is when the findings of the appellate court are contrary to those of the trial
court (see Sabinosa v. The Honorable Court of Appeals, et al., G.R. No. L-47981, July 24, 1989) in which case, a re-examination of the facts
and evidence may be undertaken. This is Our task now.
The antecedent facts are as follows:
About 11:00 o'clock in the morning on December 24, 1966, Catalina Pascua, Caridad Pascua, Adelaida Estomo, Erlinda Meriales, Mercedes
Lorenzo, Alejandro Morales and Zenaida Parejas boarded the jeepney owned by spouses Isidro Mangune and Guillerma Carreon and driven
by Tranquilino Manalo at Dau, Mabalacat, Pampanga bound for Carmen, Rosales, Pangasinan to spend Christmas at their respective homes.
Although they usually ride in buses, they had to ride in a jeepney that day because the buses were full. Their contract with Manalo was for
them to pay P24.00 for the trip. The private respondents' testimonial evidence on this contractual relationship was not controverted by
Mangune, Carreon and Manalo, nor by Filriters Guaranty Assurance Corporation, Inc., the insurer of the jeepney, with contrary evidence.
Purportedly riding on the front seat with Manalo was Mercedes Lorenzo. On the left rear passenger seat were Caridad Pascua, Alejandro
Morales and Zenaida Parejas. On the right rear passenger seat were Catalina Pascua, Adelaida Estomo, and Erlinda Meriales. After a brief
stopover at Moncada, Tarlac for refreshment, the jeepney proceeded towards Carmen, Rosales, Pangasinan.
Upon reaching barrio Sinayoan, San Manuel, Tarlac, the right rear wheel of the jeepney was detached, so it was running in an unbalanced position.
Manalo stepped on the brake, as a result of which, the jeepney which was then running on the eastern lane (its right of way) made a U-turn, invading
and eventually stopping on the western lane of the road in such a manner that the jeepney's front faced the south (from where it came) and its rear
faced the north (towards where it was going). The jeepney practically occupied and blocked the greater portion of the western lane, which is the right of
way of vehicles coming from the north, among which was Bus No. 753 of petitioner Philippine Rabbit Bus Lines, Inc. (Rabbit) driven by Tomas delos
Reyes. Almost at the time when the jeepney made a sudden U-turn and encroached on the western lane of the highway as claimed by Rabbit and delos
Reyes, or after stopping for a couple of minutes as claimed by Mangune, Carreon and Manalo, the bus bumped from behind the right rear portion of the
jeepney. As a result of the collision, three passengers of the jeepney (Catalina Pascua, Erlinda Meriales and Adelaida Estomo) died while the other
jeepney passengers sustained physical injuries. What could have been a festive Christmas turned out to be tragic.
The causes of the death of the three jeepney passengers were as follows (p. 101, Record on Appeal):
The deceased Catalina Pascua suffered the following injuries, to wit: fracture of the left parietal and temporal regions of the skull; fracture of
the left mandible; fracture of the right humenous; compound fracture of the left radious and ullma middle third and lower third; fracture of the
upper third of the right tibia and fillnea; avulsion of the head, left internal; and multiple abrasions. The cause of her death was shock,
secondary to fracture and multiple hemorrhage. The fractures were produced as a result of the hitting of the victim by a strong force. The
abrasions could be produced when a person falls from a moving vehicles (sic) and rubs parts of her body against a cement road
pavement. . . .
Erlinda Mariles (sic) sustained external lesions such as contusion on the left parietal region of the skull; hematoma on the right upper lid; and
abrasions (sic) on the left knee. Her internal lesions were: hematoma on the left thorax; multiple lacerations of the left lower lobe of the lungs;
contusions on the left lower lobe of the lungs; and simple fractures of the 2nd, 3rd, 4th, 5th, 6th, 7th, and 8th ribs, left. The forcible impact of
the jeep caused the above injuries which resulted in her death. . . .
The cause of death of Erlinda or Florida Estomo (also called as per autopsy of Dr. Panlasiqui was due to shock due to internal hemorrhage,
ruptured spleen and trauma. . . .
Caridad Pascua suffered physical injuries as follows (p. 101, Record on Appeal):
. . . lacerated wound on the forehead and occipital region, hematoma on the forehead, multiple abrasions on the forearm, right upper arm,
back and right leg. . . .
The police investigators of Tacpal and policemen of San Manuel, Tarlac, Tarlac, upon arrival at the scene of the mishap, prepared a sketch (common
exhibit "K" for private respondents "19" for Rabbit) showing the relative positions of the two vehicles as well as the alleged point of impact:
. . . The point of collision was a cement pave-portion of the Highway, about six (6) meters wide, with narrow shoulders with grasses beyond which are
canals on both sides. The road was straight and points 200 meters north and south of the point of collision are visible and unobstructed. Purportedly,
the point of impact or collision (Exh. "K-4", Pascua on the sketch Exh. "K"-Pascua) was on the western lane of the highway about 3 feet (or one yard)
from the center line as shown by the bedris (sic), dirt and soil (obviously from the undercarriage of both vehicles) as well as paint, marron (sic) from the
Rabbit bus and greenish from the jeepney. The point of impact encircled and marked with the letter "X" in Exh. "K"-4 Pascua, had a diameter of two
meters, the center of which was about two meters from the western edge of cement pavement of the roadway. Pictures taken by witness Bisquera in the
course of the investigation showed the relative positions of the point of impact and center line (Exh. "P"-Pascua) the back of the Rabbit bus (Exh. "P"-1Pascua"), the lifeless body of Catalina Pascua (Exh. "P-2 Pascua"), and the damaged front part of the Rabbit bus (Exh. "P-3 Pascua"). No skid marks of
the Rabbit bus was found in the vicinity of the collision, before or after the point of impact. On the other hand, there was a skid mark about 45 meters
long purportedly of the jeepney from the eastern shoulder of the road south of, and extending up to the point of impact.
At the time and in the vicinity of the accident, there were no vehicles following the jeepney, neither were there oncoming vehicles except the
bus. The weather condition of that day was fair.
After conducting the investigation, the police filed with the Municipal Court of San Manuel, Tarlac, a criminal complaint against the two drivers
for Multiple Homicide. At the preliminary investigation, a probable cause was found with respect to the case of Manalo, thus, his case was
elevated to the Court of First Instance. However, finding no sufficiency of evidence as regards the case of delos Reyes, the Court dismissed it.
Manalo was convicted and sentenced to suffer imprisonment. Not having appealed, he served his sentence.
Complaints for recovery of damages were then filed before the Court of First Instance of Pangasinan. In Civil Case No. 1136, spouses
Casiano Pascua and Juana Valdez sued as heirs of Catalina Pascua while Caridad Pascua sued in her behalf. In Civil Case No. 1139,
spouses Manuel Millares and Fidencia Arcica sued as heirs of Erlinda Meriales. In Civil Case No. 1140, spouses Mariano Estomo and Dionisia
Sarmiento also sued as heirs of Adelaida Estomo.
In all three cases, spouses Mangune and Carreon, Manalo, Rabbit and delos Reyes were all impleaded as defendants. Plaintiffs anchored their suits
against spouses Mangune and Carreon and Manalo on their contractual liability. As against Rabbit and delos Reyes, plaintiffs based their suits on their
culpability for a quasi-delict. Filriters Guaranty Assurance Corporation, Inc. was also impleaded as additional defendant in Civil Case No. 1136 only.
For the death of Catalina Pascua, plaintiffs in Civil Case No. 1136 sought to collect the aggregate amount of P70,060.00 in damages, itemized
as follows: P500.00 for burial expenses; P12,000.00 for loss of wages for 24 years; P10,000.00 for exemplary damages; P10,000.00 for moral
damages; and P3,000.00 for attorney's fees. In the same case, plaintiff Caridad Pascua claimed P550.00 for medical expenses; P240.00 for
loss of wages for two months; P2,000.00 for disfigurement of her face; P3,000.00 for physical pain and suffering; P2,500.00 as exemplary
damages and P2,000.00 for attorney's fees and expenses of litigation.
In Civil Case No. 1139, plaintiffs demanded P500.00 for burial expenses; P6,000.00 for the death of Erlinda, P63,000.00 for loss of income;
P10,000.00 for moral damages and P3,000.00 for attorney's fees or total of P80,000.00.
In Civil Case No. 1140, plaintiffs claimed P500.00 for burial expenses; P6,000.00 for the death of Adelaide, P56,160.00 for loss of her income
or earning capacity; P10,000.00 for moral damages; and P3,000.00 for attorney's fees.
Rabbit filed a cross-claim in the amount of P15,000.00 for attorney's fees and expenses of litigation. On the other hand, spouses Mangune and Carreon
filed a cross-claim in the amount of P6,168.00 for the repair of the jeepney and P3,000.00 for its non-use during the period of repairs.
On December 27, 1978, the trial court rendered its decision finding Manalo negligent, the dispositive portion of which reads:
PREMISES CONSIDERED, this Court is of the opinion and so holds:

1) That defendants Isidro Mangune, Guillerma Carreon and Tranquilino Manalo thru their negligence, breached contract of carriage with their
passengers the plaintiffs' and/or their heirs, and this Court renders judgment ordering said defendants, jointly and severally, to pay the plaintiffs
a) In Civil Case No. 1136, for the death of Catalina Pascua, to pay her heirs the amounts of P12,000.00 for indemnity for loss of her life;
P41,760.00 for loss of earnings; P324.40 for actual expenses and P2,000.00 for moral damages;
b) In the same Civil Case No.1136 for the injuries of Caridad Pascua, to pay her the amounts of P240.00 for loss of wages, P328.20 for actual
expenses and P500.00 for moral damages;
c) In Civil Case No.1139 for the death of Erlinda Meriales, to pay her heirs (the plaintiffs) the amount of P12,000.00 for indemnity for loss of
her life; P622.00 for actual expenses, P60,480.00 for loss of wages or income and P2,000.00 for moral damages;
d) In Civil Case No. 1140, for the death of Erlinda (also called Florida or Adelaida Estomo), to pay her heirs (the plaintiff the amount of P12,000.00 for
indemnity for the loss of her life; P580.00 for actual expenses; P53,160.00 for loss of wages or income and P2,000.00 for moral damages.
2) The defendant Filriters Guaranty Insurance Co., having contracted to ensure and answer for the obligations of defendants Mangune and
Carreon for damages due their passengers, this Court renders judgment against the said defendants Filriters Guaranty Insurance Co., jointly
and severally with said defendants (Mangune and Carreon) to pay the plaintiffs the amount herein above adjudicated in their favor in Civil
Case No. 1136 only. All the amounts awarded said plaintiff, as set forth in paragraph one (1) hereinabove;
3) On the cross claim of Phil. Rabbit Bus Lines, Inc. ordering the defendant, Isidro Mangune, Guillerma Carreon and Tranquilino Manalo, to
pay jointly and severally, cross-claimant Phil. Rabbit Bus Lines, Inc., the amounts of P216.27 as actual damages to its Bus No. 753 and
P2,173.60 for loss of its earning.
All of the above amount, shall bear legal interest from the filing of the complaints.
Costs are adjudged against defendants Mangune, Carreon and Manalo and Filriters Guaranty.
SO ORDERED
On appeal, the Intermediate Appellate Court reversed the above-quoted decision by finding delos Reyes negligent, the dispositive portion of
which reads (pp. 55-57, Rollo):
WHEREFORE, PREMISES CONSIDERED, the lower court's decision is hereby REVERSED as to item No. 3 of the decision which reads:
3) On the cross claim of Philippine Rabbit Bus Lines, Inc. ordering the defendants Isidro Mangune, Guillerma Carreon and Tranquilino Manalo,
to pay jointly and severally, the amounts of P216.27 as actual damages to its Bus No. 753 and P2,173.60 for loss of its earnings.
and another judgment is hereby rendered in favor of plaintiffs-appellants Casiana Pascua, Juan Valdez and Caridad Pascua, ordering the Philippine
Rabbit Bus Lines, Inc. and its driver Tomas delos Reyes to pay the former jointly and severally damages in amounts awarded as follows:
For the death of Catalina Pascua, the parents and/or heirs are awarded Civil Case No. 1136
a) Indemnity for the loss of life P12,000.00 b) Loss of Salaries or earning capacity 14,000.00
c) Actual damages (burial expenses) 800.00
d) For moral damages 10,000.00
f) For attorney's fees 3,000.00
Total P38,200.00 (sic)
For the physical injuries suffered by Caridad Pascua:
Civil Case No. 1136
a) Actual damages (hospitalization expenses) P550.00

c) Exemplary damages 2,000.00
e) Exemplary damages 3,000.00
b) Moral damages (disfigurement of the face and physical suffering 8,000.00
Total P10,550.00
For the death of Erlinda Arcega Meriales. the parents and/or heirs:
Civil Case No. 1139
a) Indemnity for loss of life P12,000.00 b) Loss of Salary or Earning Capacity 20,000.00 c) Actual damages (burial expenses) 500.00
d) Moral damages 15,000.00
e) Exemplary damages 15,000.00 f) Attorney's fees 3,000.00 Total P65,500.00
For the death of Florida Sarmiento Estomo:
Civil Case No. 1140
a) Indemnity for loss of life P12,000.00 b) Loss of Salary or Earning capacity 20,000.00 c) Actual damages (burial expenses) 500.00
d) Moral damages 3,000.00 e) Exemplary damages 3,000.00 f) Attorney's fees 3,000.00 Total P41,500.00
With costs against the Philippine Rabbit Bus Lines, Inc.
SO ORDERED.
The motion for reconsideration was denied. Hence, the present petition.
The issue is who is liable for the death and physical injuries suffered by the passengers of the jeepney?
The trial court, in declaring that Manalo was negligent, considered the following (p. 106, Record on Appeal):
(1) That the unrebutted testimony of his passenger plaintiff Caridad Pascua that a long ways (sic) before reaching the point of collision, the
Mangune jeepney was "running fast" that his passengers cautioned driver Manalo to slow down but did not heed the warning: that the right
rear wheel was detached causing the jeepney to run to the eastern shoulder of the road then back to the concrete pavement; that driver
Manalo applied the brakes after which the jeepney made a U-turn (half-turn) in such a manner that it inverted its direction making it face South
instead of north; that the jeepney stopped on the western lane of the road on the right of way of the oncoming Phil. Rabbit Bus where it was
bumped by the latter;
(2) The likewise unrebutted testimony of Police Investigator Tacpal of the San Manuel (Tarlac) Police who, upon responding to the reported
collission, found the real evidence thereat indicate in his sketch (Exh. K, Pascua ), the tracks of the jeepney of defendant Mangune and
Carreon running on the Eastern shoulder (outside the concrete paved road) until it returned to the concrete road at a sharp angle, crossing the
Eastern lane and the (imaginary) center line and encroaching fully into the western lane where the collision took place as evidenced by the
point of impact;
(3) The observation of witness Police Corporal Cacalda also of the San Manuel Police that the path of the jeepney they found on the road and
indicated in the sketch (Exh. K-Pascua) was shown by skid marks which he described as "scratches on the road caused by the iron of the
jeep, after its wheel was removed;"
(4) His conviction for the crime of Multiple Homicide and Multiple Serious Physical Injuries with Damage to Property thru Reckless Imprudence
by the Court of First Instance of Tarlac (Exh. 24-Rabbit) upon the criminal Information by the Provincial Fiscal of Tarlac (Exh. 23-Rabbit), as a
result of the collision, and his commitment to prison and service of his sentence (Exh. 25-Rabbit) upon the finality of the decision and his
failure to appeal therefrom; and
(5) The application of the doctrine of res-ipsa loquitar (sic) attesting to the circumstance that the collision occured (sic) on the right of way of
the Phil. Rabbit Bus.
The respondent court had a contrary opinion. Applying primarily (1) the doctrine of last clear chance, (2) the presumption that drivers who
bump the rear of another vehicle guilty and the cause of the accident unless contradicted by other evidence, and (3) the substantial factor test.
concluded that delos Reyes was negligent.
The misappreciation of the facts and evidence and the misapplication of the laws by the respondent court warrant a reversal of its questioned
decision and resolution.
We reiterate that "[t]he principle about "the last clear" chance, would call for application in a suit between the owners and drivers of the two
colliding vehicles. It does not arise where a passenger demands responsibility from the carrier to enforce its contractual obligations. For it
would be inequitable to exempt the negligent driver of the jeepney and its owners on the ground that the other driver was likewise guilty of
negligence." This was Our ruling in Anuran, et al. v. Buo et al., G.R. Nos. L-21353 and L-21354, May 20, 1966, 17 SCRA 224. 1 Thus, the
respondent court erred in applying said doctrine.
On the presumption that drivers who bump the rear of another vehicle guilty and the cause of the accident, unless contradicted by other
evidence, the respondent court said (p. 49, Rollo):
. . . the jeepney had already executed a complete turnabout and at the time of impact was already facing the western side of the road. Thus
the jeepney assumed a new frontal position vis a vis, the bus, and the bus assumed a new role of defensive driving. The spirit behind the
presumption of guilt on one who bumps the rear end of another vehicle is for the driver following a vehicle to be at all times prepared of a
pending accident should the driver in front suddenly come to a full stop, or change its course either through change of mind of the front driver,
mechanical trouble, or to avoid an accident. The rear vehicle is given the responsibility of avoiding a collision with the front vehicle for it is the
rear vehicle who has full control of the situation as it is in a position to observe the vehicle in front of it.
The above discussion would have been correct were it not for the undisputed fact that the U-turn made by the jeepney was abrupt (Exhibit "K,"
Pascua). The jeepney, which was then traveling on the eastern shoulder, making a straight, skid mark of approximately 35 meters, crossed the
eastern lane at a sharp angle, making a skid mark of approximately 15 meters from the eastern shoulder to the point of impact (Exhibit "K"
Pascua). Hence, delos Reyes could not have anticipated the sudden U-turn executed by Manalo. The respondent court did not realize that the
presumption was rebutted by this piece of evidence.
With regard to the substantial factor test, it was the opinion of the respondent court that (p. 52, Rollo):
. . . It is the rule under the substantial factor test that if the actor's conduct is a substantial factor in bringing about harm to another, the fact that
the actor neither foresaw nor should have foreseen the extent of the harm or the manner in which it occurred does not prevent him from being
liable (Restatement, Torts, 2d). Here, We find defendant bus running at a fast speed when the accident occurred and did not even make the
slightest effort to avoid the accident, . . . . The bus driver's conduct is thus a substantial factor in bringing about harm to the passengers of the
jeepney, not only because he was driving fast and did not even attempt to avoid the mishap but also because it was the bus which was the
physical force which brought about the injury and death to the passengers of the jeepney.
The speed of the bus was calculated by respondent court as follows (pp. 54-55, Rollo):
According to the record of the case, the bus departed from Laoag, Ilocos Norte, at 4:00 o'clock A.M. and the accident took place at
approximately around 12:30 P.M., after travelling roughly for 8 hours and 30 minutes. Deduct from this the actual stopover time of two Hours
(computed from the testimony of the driver that he made three 40-minute stop-overs), We will have an actual travelling time of 6 hours and 30
minutes.
Under the circumstances, We calculate that the Laoag-Tarlac route (365 kms.) driving at an average of 56 km. per hour would take 6 hours
and 30 minutes. Therefore, the average speed of the bus, give and take 10 minutes, from the point of impact on the highway with excellent
visibility factor would be 80 to 90 kms. per hour, as this is the place where buses would make up for lost time in traversing busy city streets.
Still, We are not convinced. It cannot be said that the bus was travelling at a fast speed when the accident occurred because the speed of 80
to 90 kilometers per hour, assuming such calculation to be correct, is yet within the speed limit allowed in highways. We cannot even fault
delos Reyes for not having avoided the collision. As aforestated, the jeepney left a skid mark of about 45 meters, measured from the time its
right rear wheel was detached up to the point of collision. Delos Reyes must have noticed the perilous condition of the jeepney from the time
its right rear wheel was detached or some 90 meters away, considering that the road was straight and points 200 meters north and south of
the point of collision, visible and unobstructed. Delos Reyes admitted that he was running more or less 50 kilometers per hour at the time of
the accident. Using this speed, delos Reyes covered the distance of 45 meters in 3.24 seconds. If We adopt the speed of 80 kilometers per
hour, delos Reyes would have covered that distance in only 2.025 seconds. Verily, he had little time to react to the situation. To require delos
Reyes to avoid the collision is to ask too much from him. Aside from the time element involved, there were no options available to him. As the
trial court remarked (pp. 107-108, Record on Appeal):
. . . They (plaintiffs) tried to impress this Court that defendant de los Reyes, could have taken either of two options: (1) to swerve to its right
(western shoulder) or (2) to swerve to its left (eastern lane), and thus steer clear of the Mangune jeepney. This Court does not so believe,
considering the existing exigencies of space and time.
As to the first option, Phil. Rabbit's evidence is convincing and unrebutted that the Western shoulder of the road was narrow and had tall
grasses which would indicate that it was not passable. Even plaintiffs own evidence, the pictures (Exhs. P and P-2, Pascua) are mute
confirmation of such fact. Indeed, it can be noticed in the picture (Exh. P-2, Pascua) after the Rabbit bus came to a full stop, it was tilted to
right front side, its front wheels resting most probably on a canal on a much lower elevation that of the shoulder or paved road. It too shows
that all of the wheels of the Rabbit bus were clear of the roadway except the outer left rear wheel. These observation appearing in said picture
(Exh P-2, Pascua) clearly shows coupled with the finding the Rabbit bus came to a full stop only five meters from the point of impact (see
sketch, Exh. K-Pascua) clearly show that driver de los Reyes veered his Rabbit bus to the right attempt to avoid hitting the Mangune's
jeepney. That it was not successful in fully clearing the Mangune jeepney as its (Rabbit's) left front hit said jeepney (see picture Exh. 10-ARabbit) must have been due to limitations of space and time.
Plaintiffs alternatively claim that defendant delos Reyes of the Rabbit bus could also have swerved to its left (eastern lane) to avoid bumping
the Mangune jeepney which was then on the western lane. Such a claim is premised on the hypothesis (sic) that the eastern lane was then
empty. This claim would appear to be good copy of it were based alone on the sketch made after the collision. Nonetheless, it loses force it
one were to consider the time element involved, for moments before that, the Mangune jeepney was crossing that very eastern lane at a sharp
angle. Under such a situation then, for driver delos Reyes to swerve to the eastern lane, he would run the greater risk of running smack in the
Mangune jeepney either head on or broadside.
After a minute scrutiny of the factual matters and duly proven evidence, We find that the proximate cause of the accident was the negligence
of Manalo and spouses Mangune and Carreon. They all failed to exercise the precautions that are needed precisely pro hac vice.
In culpa contractual, the moment a passenger dies or is injured, the carrier is presumed to have been at fault or to have acted negligently, and
this disputable presumption may only be overcome by evidence that he had observed extra-ordinary diligence as prescribed in Articles 1733,
1755 and 1756 of the New Civil Code 2 or that the death or injury of the passenger was due to a fortuitous event 3
The negligence of Manalo was proven during the trial by the unrebutted testimonies of Caridad Pascua, Police Investigator Tacpal, Police
Corporal Cacalda, his (Manalo's) conviction for the crime of Multiple Homicide and Multiple Serious Injuries with Damage to Property thru
Reckless Imprudence, and the application of the doctrine of res ipsa loquitur supra. The negligence of spouses Mangune and Carreon was
likewise proven during the trial (p. 110, Record on Appeal):
To escape liability, defendants Mangune and Carreon offered to show thru their witness Natalio Navarro, an alleged mechanic, that he
periodically checks and maintains the jeepney of said defendants, the last on Dec. 23, the day before the collision, which included the
tightening of the bolts. This notwithstanding the right rear wheel of the vehicle was detached while in transit. As to the cause thereof no
evidence was offered. Said defendant did not even attempt to explain, much less establish, it to be one caused by a caso fortuito. . . .
In any event, "[i]n an action for damages against the carrier for his failure to safely carry his passenger to his destination, an accident caused
either by defects in the automobile or through the negligence of its driver, is not a caso fortuito which would avoid the carriers liability for
damages (Son v. Cebu Autobus Company, 94 Phil. 892 citing Lasam, et al. v. Smith, Jr., 45 Phil. 657; Necesito, etc. v. Paras, et al., 104 Phil. 75).
The trial court was therefore right in finding that Manalo and spouses Mangune and Carreon were negligent. However, its ruling that spouses
Mangune and Carreon are jointly and severally liable with Manalo is erroneous The driver cannot be held jointly and severally liable with the
carrier in case of breach of the contract of carriage. The rationale behind this is readily discernible. Firstly, the contract of carriage is between
the carrier and the passenger, and in the event of contractual liability, the carrier is exclusively responsible therefore to the passenger, even if
such breach be due to the negligence of his driver (see Viluan v. The Court of Appeals, et al., G.R. Nos. L-21477-81, April 29, 1966, 16 SCRA
742). In other words, the carrier can neither shift his liability on the contract to his driver nor share it with him, for his driver's negligence is his.
4
Secondly, if We make the driver jointly and severally liable with the carrier, that would make the carrier's liability personal instead of merely
vicarious and consequently, entitled to recover only the share which corresponds to the driver, 5 contradictory to the explicit provision of Article
2181 of the New Civil Code. 6
We affirm the amount of damages adjudged by the trial court, except with respect to the indemnity for loss of life. Under Article 1764 in relation
to Article 2206 of the New Civil Code, the amount of damages for the death of a passenger is at least three thousand pesos (P3,000.00). The
prevailing jurisprudence has increased the amount of P3,000.00 to P30,000.00 (see Heirs of Amparo delos Santos, et al. v. Honorable Court of
Appeals, et al., G.R. No. 51165, June 21, 1990 citing De Lima v. Laguna Tayabas Co., G.R. Nos. L-35697-99, April 15, 1988, 160 SCRA 70).
ACCORDINGLY, the petition is hereby GRANTED. The decision of the Intermediate Appellate Court dated July 29, 1983 and its resolution
dated November 28, 1983 are SET ASIDE. The decision of the Court of First Instance dated December 27, 1978 is REINSTATED
MODIFICATION that only Isidro Mangune, Guillerma Carreon and Filriters Guaranty Assurance Corporation, Inc. are liable to the victims or
their heirs and that the amount of indemnity for loss of life is increased to thirty thousand pesos (P30,000.00).
SO ORDERED.

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 89880 February 6, 1991

EMMA ADRIANO BUSTAMANTE, in her own behalf as Guardian-Ad-Litem of minors: ROSSEL, GLORIA, YOLANDA, ERIC SON and
EDERIC, all surnamed BUSTAMANTE, Spouses SALVADOR JOCSON and PATRIA BONE-JOCSON, Spouses JOSE RAMOS and
ENRIQUETA CEBU-RAMOS, Spouses NARCISO-HIMAYA and ADORACION MARQUEZ-HIMAYA, and Spouses JOSE BERSAMINA and
MA. COMMEMORACION PEREA-BUSTAMANTE, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, FEDERICO DEL PILAR AND EDILBERTO MONTESIANO, respondents.
MEDIALDEA, J.:p
This is a petition for review on certiorari seeking the reversal of the decision of the respondent Court of Appeals dated February 15, 1989
which reversed and set aside the decision of the Regional Trial Court of Cavite, Branch XV ordering the defendants to pay jointly and severally
the plaintiffs indemnity for death and damages; and in further dismissing the complaint insofar as defendants-appellants Federico del Pilar and
Edilberto Montesiano are concerned; and its resolution dated August 17, 1989 denying the motion for reconsideration for lack of merit.
The facts giving rise to the controversy at bar are recounted by the trial court as follows:
At about 6:30 in the morning of April 20, 1983, a collision occurred between a gravel and sand truck, with Plate No. DAP 717, and a Mazda
passenger bus with Motor No. Y2231 and Plate No. DVT 259 along the national road at Calibuyo, Tanza, Cavite. The front left side portion
(barandilla) of the body of the truck sideswiped the left side wall of the passenger bus, ripping off the said wall from the driver's seat to the last
rear seat.
Due to the impact, several passengers of the bus were thrown out and died as a result of the injuries they sustained, Among those killed were
the following:
1. Rogelio Bustamante, 40, husband of plaintiff Emma Adriano Bustamante and father of plaintiffs Rossel, Gloria, Yolanda,
Ericson, and Ederic, all surnamed Bustamante;
2. Maria Corazon Jocson, 16, daughter of plaintiffs spouses Salvador and Patria Jocson;
3. Jolet C. Ramos, 16, daughter of plaintiffs spouses Jose and Enriqueta Ramos;
4. Enrico Himaya, 18, son of plaintiffs spouses Narciso and Adoracion Himaya; and
5. Noel Bersamina, 17, son of plaintiffs spouses Jose and Ma. Commemoracion Bersamina. (Rollo, p. 48)
During the incident, the cargo truck was driven by defendant Montesiano and owned by defendant Del Pilar; while the passenger bus was
driven by defendant Susulin. The vehicle was registered in the name of defendant Novelo but was owned and/or operated as a passenger bus
jointly by defendants Magtibay and Serrado, under a franchise, with a line from Naic, Cavite, to Baclaran, Paranaque, Metro Manila, and vice
versa, which Novelo sold to Magtibay on November 8, 1981, and which the latter transferred to Serrado (Cerrado) on January 18, 1983.
Immediately before the collision, the cargo truck and the passenger bus were approaching each other, coming from the opposite directions of
the highway. While the truck was still about 30 meters away, Susulin, the bus driver, saw the front wheels of the vehicle wiggling. He also
observed that the truck was heading towards his lane. Not minding this circumstance due to his belief that the driver of the truck was merely
joking, Susulin shifted from fourth to third gear in order to give more power and speed to the bus, which was ascending the inclined part of the
road, in order to overtake or pass a Kubota hand tractor being pushed by a person along the shoulder of the highway. While the bus was in the
process of overtaking or passing the hand tractor and the truck was approaching the bus, the two vehicles sideswiped each other at each
other's left side. After the impact, the truck skidded towards the other side of the road and landed on a nearby residential lot, hitting a coconut
tree and felling it." (Rollo, pp. 48-50)
After a careful perusal of the circumstances of the case, the trial court reached the conclusion "that the negligent acts of both drivers
contributed to or combined with each other in directly causing the accident which led to the death of the aforementioned persons. It could not
be determined from the evidence that it was only the negligent act of one of them which was the proximate cause of the collision. In view of
this, the liability of the two drivers for their negligence must be solidary. (Rollo, pp. 50-51) Accordingly, the trial court rendered a decision on
March 7, 1986, the dispositive portion is hereunder quoted as follows:
WHEREFORE, defendants Valeriano Magtibay, Simplicio Serrado, Ricardo Susulin, Efren Novelo, Federico del Pilar and Edilberto Montesiano
are hereby ordered to pay jointly and severally to the plaintiffs, as follows:
1. To plaintiffs Emma Adriano Bustamante and her minor children, the sum of P30,000.00 as indemnity for the death of Rogelio Bustamante;
U.S. $127,680.00 as indemnity for the loss of the earning capacity of the said deceased, at its prevailing rate in pesos at the time this decision
shall have become final and executory; P10,000.00 as moral damages; and P5,000.00 as exemplary damages;
2. To plaintiffs Salvador and Patria Jocson, the sum of P30,000.00 as indemnity for the death of their daughter, Maria Corazon Jocson;
P10,000.00 as moral damages; and P5,000.00 as exemplary damages;
3. To plaintiffs Jose and Enriqueta Ramos, the sum of P30,000.00 as indemnity for the death of their daughter, Jolet Ramos; P10,000.00 as
moral damages; and P5,000.00 as exemplary damages; and
4. To plaintiffs Narciso and Adoracion Himaya, the amount of P30,000.00 as indemnity for the death of their son, Enrico Himaya, P10,000.00
as moral damages; and P5,000.00 as exemplary damages; and
5. To plaintiffs Jose and Ma. Commemoracion Bersamina, the sum of P30,000.00 as indemnity for the death of their son, Noel Bersamina,
P10,000.00 as moral damages and P5,000.00 as exemplary damages.
The defendants are also required to pay the plaintiffs the sum of P10,000.00 as attorney's fees and to pay the costs of the suit.
The cross-claim of defendant Novelo is hereby allowed, and defendants Magtibay and Serrado, the actual owners and/or operators of the
passenger bus concerned, are hereby ordered to indemnify Novelo in such amount as he may be required to pay as damages to the plaintiffs.
The cross-claims and counter-claims of the other defendants are hereby dismissed for lack of merit.
SO ORDERED. (pp. 55-57, Rollo)
From said decision, only defendants Federico del Pilar and Edilberto Montesiano, owner and driver, respectively, of the sand and gravel truck
have interposed an appeal before the respondent Court of Appeals. The Court of Appeals decided the appeal on a different light. It rendered
judgment on February 15, 1989, to wit:
WHEREFORE, the appealed judgment is hereby REVERSED and SET ASIDE and the complaint dismissed insofar as
defendants-appellants Federico del Pilar and Edilberto Montesiano are concerned. No costs in this instance.
SO ORDERED. (p. 96, Rollo)
On March 9, 1989, the plaintiffs-appellees filed a motion for reconsideration of the aforementioned Court of Appeals' decision. However,
respondent Court of Appeals in a resolution dated August 17, 1989 denied the motion for lack of merit. Hence, this petition.
Petitioners raised the following questions of law, namely:
First. Whether the respondent Court can legally and validly absolve defendants-appellants from liability despite its own finding, as well as that
of the trial court that defendant-appellant Edilberto Montesiano, the cargo truck driver, was driving an old vehicle very fast, with its wheels
already wiggling, such that he had no more control of his truck.
Second. Whether the respondent court can validly and legally disregard the findings of fact made by the trial court which was in a better
position to observe the conduct and demeanor of the witnesses, particularly appellant Edilberto Montesiano, cargo truck driver, and which
conclusively found appellant Montesiano as jointly and severally negligent in driving his truck very fast and had lost control of his truck.
Third. Whether the respondent court has properly and legally applied the doctrine of "last clear chance" in the present case despite its own
finding that appellant cargo truck driver Edilberto Montesiano was admittedly negligent in driving his cargo truck very fast on a descending
road and in the presence of the bus driver coming from the opposite direction.
Fourth. Whether the respondent court has applied the correct law and the correct doctrine so as to reverse and set aside the judgment with
respect to defendants-appellants. (Rollo, pp. 133-134)
As a rule, findings of fact of the Court of Appeals are final and conclusive and cannot be reviewed on appeal, provided, they are borne out by
the record or are based on substantial evidence However, this rule admits of certain exceptions, as when the findings of facts are conclusions
without citation of specific evidence on which they are based; or the appellate court's findings are contrary to those of the trial court. (Sese v.
Intermediate Appellate Court, G.R. 66168, 31 July 1987, 152 SCRA 585).
Furthermore, only questions of law may be raised in a petition for review on certiorari under Rule 45 of the Revised Rules of Court. The
jurisdiction of the Supreme Court in cases brought to it from the Court of Appeals is limited to reviewing and revising the errors of law imputed
to it, its findings of fact being conclusive. It is not the function of the Supreme Court to analyze or weigh such evidence all over again, its
jurisdiction being limited to reviewing errors of law that might have been committed. Barring, therefore, a showing that the findings complained
of are totally devoid of support in the records, or that they are so glaringly erroneous as to constitute serious abuse of discretion, such findings
must stand for the Supreme Court is not expected or required to examine or contrast the oral and documentary evidence submitted by the
parties. (Andres v. Manufacturers Hanover and Trust Corp., G.R. 82670, 15 September 1989, 177 SCRA 618).
Bearing in mind these basic principles, We have opted to re-examine the findings of fact mainly because the appellate court's findings are
contrary to those of the trial court.
The trial court, in declaring that the negligent acts of both drivers directly caused the accident which led to the death of the aforementioned
persons, considered the following:
It was negligent on the part of driver Montesiano to have driven his truck fast, considering that it was an old vehicle, being a 1947 model as
admitted by its owner, defendant Del Pilar; that its front wheels were wiggling; that the road was descending; and that there was a passenger
bus approaching it. Likewise, driver Susulin was also guilty of negligence in not taking the necessary precaution to avoid the collision, in the
light of his admission that, at a distance of 30 meters, he already saw the front wheels of the truck wiggling and that the vehicle was usurping
his lane coming towards his direction. Had he exercised ordinary prudence, he could have stopped his bus or swerved it to the side of the road
even down to its shoulder. And yet, Susulin shifted to third gear so as to, as claimed by him, give more power and speed to his bus in
overtaking or passing a hand tractor which was being pushed along the shoulder of the road. (Rollo, p. 50)
The respondent Court of Appeals. ruling on the contrary, opined that "the bus driver had the last clear chance to avoid the collision and his
reckless negligence in proceeding to overtake the hand tractor was the proximate cause of the collision." (Rollo, p. 95). Said court also noted
that "the record also discloses that the bus driver was not a competent and responsible driver. His driver's license was confiscated for a traffic
violation on April 17, 1983 and he was using a ticket for said traffic violation on the day of the accident in question (pp. 16-18, TSN, July 23,
1984). He also admitted that he was not a regular driver of the bus that figured in the mishap and was not given any practical examination.
(pp. 11, 96, TSN, supra)." (Rollo, p96)
The respondent Court quoting People v. Vender, CA-G.R. 11114-41-CR, August 28, 1975 held that "We are not prepared to uphold the trial
court's finding that the truck was running fast before the impact. The national road, from its direction, was descending. Courts can take judicial
notice of the fact that a motor vehicle going down or descending is more liable to get out of control than one that is going up or ascending for
the simple reason that the one which is going down gains added momentum while that which is going up loses its initial speeding in so doing."
On the other hand, the trial court found and We are convinced that the cargo truck was running fast. It did not overlook the fact that the road
was descending as in fact it mentioned this circumstance as one of the factors disregarded by the cargo truck driver along with the fact that he
was driving an old 1947 cargo truck whose front wheels are already wiggling and the fact that there is a passenger bus approaching it. In
holding that the driver of the cargo truck was negligent, the trial court certainly took into account all these factors so it was incorrect for the
respondent court to disturb the factual findings of the trial court, which is in a better position to decide the question, having heard the witness
themselves and observed their deportment.
The respondent court adopted the doctrine of "last clear chance." The doctrine, stated broadly, is that the negligence of the plaintiff does not
preclude a recovery for the negligence of the defendant where it appears that the defendant, by exercising reasonable care and prudence,
might have avoided injurious consequences to the plaintiff notwithstanding the plaintiff's negligence. In other words, the doctrine of last clear
chance means that even though a person's own acts may have placed him in a position of peril, and an injury results, the injured person is
entitled to recovery. As the doctrine is usually stated, a person who has the last clear chance or opportunity of avoiding an accident,
notwithstanding the negligent acts of his opponent or that of a third person imputed to the opponent is considered in law solely responsible for
the consequences of the accident. (Sangco, Torts and Damages, 4th Ed., 1986, p. 165).
The practical import of the doctrine is that a negligent defendant is held liable to a negligent plaintiff, or even to a plaintiff who has been grossly
negligent in placing himself in peril, if he, aware of the plaintiffs peril, or according to some authorities, should have been aware of it in the
reasonable exercise of due case, had in fact an opportunity later than that of the plaintiff to avoid an accident (57 Am. Jur., 2d, pp. 798-799).
In the recent case of Philippine Rabbit Bus Lines, Inc. v. Intermediate Appellate Court, et al. (G.R. Nos. 66102-04, August 30, 1990), the Court
citing the landmark decision held in the case of Anuran, et al. v. Buno, et al. (123 Phil. 1073) ruled that the principle of "last clear chance"
applies "in a suit between the owners and drivers of colliding vehicles. It does not arise where a passenger demands responsibility from the
carrier to enforce its contractual obligations. For it would be inequitable to exempt the negligent driver of the jeepney and its owners on the
ground that the other driver was likewise guilty of negligence."
Furthermore, "as between defendants: The doctrine cannot be extended into the field of joint tortfeasors as a test of whether only one of them
should be held liable to the injured person by reason of his discovery of the latter's peril, and it cannot be invoked as between defendants
concurrently negligent. As against third persons, a negligent actor cannot defend by pleading that another had negligently failed to take action
which could have avoided the injury." (57 Am. Jur. 2d, pp. 806-807).
All premises considered, the Court is convinced that the respondent Court committed an error of law in applying the doctrine of last clear
chance as between the defendants, since the case at bar is not a suit between the owners and drivers of the colliding vehicles but a suit
brought by the heirs of the deceased passengers against both owners and drivers of the colliding vehicles. Therefore, the respondent court
erred in absolving the owner and driver of the cargo truck from liability.
Pursuant to the new policy of this Court to grant an increased death indemnity to the heirs of the deceased, their respective awards of
P30,000.00 are hereby increased to P50,000.00.
ACCORDINGLY, the petition is GRANTED; the appealed judgment and resolution of the Court of Appeals are hereby REVERSED and SET
ASIDE and the judgment of the lower court is REINSTATED with the modification on the indemnity for death of each of the victims which is
hereby increased to P50,000.00 each. No pronouncement as to costs.
SO ORDERED.
SUPREME COURT
Manila
EN BANC
G.R. No. L-9907
June 30, 1958
LOURDES J. LARA, ET AL., plaintiffs-appellants,

vs.
BRIGIDO R. VALENCIA, defendant-appellant.
Castillo, Cervantes, Occea, Lozano, Montana, Cunanan, Sison and Castillo and Eligio G. Lagman for defendant-appellant.
Donato C. Endriga and Emigdio Dakanay for plaintiffs-appellants.
This is an action for damages brought by plaintiffs against defendant in the Court of First Instance of Davao for the death of one Demetrio
Lara, Sr. allegedly caused by the negligent act of defendant. Defendant denied the charge of negligence and set up certain affirmative
defenses and a counterclaim.
The court after hearing rendered judgment ordering defendant to pay the plaintiffs the following amount: (a) P10,000 as moral damages; (b)
P3,000 as exemplary damages; and (c) P1,000 as attorney's fees, in addition to the costs of action. Both parties appealed to this Court
because the damages claimed in the complaint exceed the sum of P50,000.
In their appeal, plaintiffs claim that the court a quo erred in disregarding their claim of P41,400 as actual or compensatory damages and in
awarding as attorneys' fees only the sum of P1,000 instead of P3,000 as agreed upon between plaintiffs and their counsel. Defendant, on the
other hand, disputes the finding of the court a quo that the oath of Demetrio Lara, Sr. was due to the negligence of defendant and the portion
of the judgment which orders dependant to pay to plaintiffs moral and exemplary damages as well as attorneys' fees, said defendant
contending that the court should have declared that the death of Lara was due to unavoidable accident.
The deceased was an inspector of the Bureau of Forestry stationed in Davao with an annual salary of P1,800. The defendant is engaged in
the business of exporting logs from his lumber concession in Cotabato. Lara went to said concession upon instructions of his chief to classify
the logs of defendant which were about to be loaded on a ship anchored in the port of Parang. The work Lara of lasted for six days during
which he contracted malaria fever. In the morning of January 9, 1954, Lara who then in a hurry to return to Davao asked defendant if he could
take him in his pick-up as there was then no other means of transportation, to which defendant agreed, and in that same morning the pick-up
left Parang bound for Davao taking along six passengers, including Lara.
The pick-up has a front seat where the driver and two passengers can be accommodated and the back has a steel flooring enclosed with a
steel walling of 16 to 17 inches tall on the sides and with a 19 inches tall walling at the back. Before leaving Parang, the sitting arrangement
was as follows: defendant was at the wheel and seated with him in the front seat were Mrs. Valencia and Nicanor Quinain; on the back of the
pick-up were two improvised benches placed on each side, and seated on the right bench were Ricardo Alojipan and Antonio Lagahit, and on
the left one Bernardo and Pastor Geronimo. A person by the name of Leoning was seated on a box located on the left side while in the middle
Lara sat on a bag. Before leaving Parang, defendant invited Lara to sit with him on the front seat but Lara declined. It was their understanding
that upon reaching barrio Samoay, Cotabato, the passengers were to alight and take a bus bound for Davao, but when they arrived at that
place, only Bernardo alighted and the other passengers requested defendant to allow them to ride with him up to Davao because there was
then no available bus that they could take in going to that place. Defendant again accommodated the passengers.
When they continued their trip, the sitting arrangement of the passengers remained the same, Lara being seated on a bag in the middle with
his arms on a suitcase and his head cove red by a jacket. Upon reaching Km. 96, barrio Catidtuan, Lara accidentally fell from the pick-up and
as a result he suffered serious injuries. Valencia stopped the pick-up to see what happened to Lara. He sought the help of the residents of that
place and applied water to Lara but to no avail. They brought Lara to the nearest place where they could find a doctor and not having found
any they took him to St. Joseph's Clinic of Kidapawan. But when Lara arrived he was already dead. From there they proceeded to Davao City
and immediately notified the local authorities. An investigation was made regarding the circumstances surrounding the death of Lara but no
criminal action was taken against defendant.
It should be noted that the deceased went to the lumber concession of defendant in Parang, Cotabato upon instructions of his chief in order to
classify the logs of defendant which were then ready to be exported and to be loaded on a ship anchored in the port of Parang. It took Lara six
days to do his work during which he contracted malaria fever and for that reason he evinced a desire to return immediately to Davao. At that
time, there was no available bus that could take him back to Davao and so he requested the defendant if he could take him in his own pick-up.
Defendant agreed and, together with Lara, other passengers tagged along, most of them were employees of the Government. Defendant
merely accommodated them and did not charge them any fee for the service. It was also their understanding that upon reaching barrio
Samoay, the passengers would alight and transfer to a bus that regularly makes the trip to Davao but unfortunately there was none available
at the time and so the same passengers, including Lara, again requested the defendant to drive them to Davao. Defendant again
accommodated them and upon reaching Km. 96, Lara accidentally fell suffering fatal injuries.
It therefore appears that the deceased, as well his companions who rode in the pick-up of defendant, were merely accommodation
passengers who paid nothing for the service and so they can be considered as invited guests within the meaning of the law. As
accommodation passengers or invited guests, defendant as owner and driver of the pick-up owes to them merely the duty to exercise
reasonable care so that they may be transported safely to their destination. Thus, "The rule is established by the weight of authority that the
owner or operator of an automobile owes the duty to an invited guest to exercise reasonable care in its operation, and not unreasonably to
expose him to danger and injury by increasing the hazard of travel. This rule, as frequently stated by the courts, is that an owner of an
automobile owes a guest the duty to exercise ordinary or reasonable care to avoid injuring him. Since one riding in an automobile is no less a
guest because he asked for the privilege of doing so, the same obligation of care is imposed upon the driver as in the case of one expressly
invited to ride" (5 Am. Jur., 626-627). Defendant, therefore, is only required to observe ordinary care, and is not in duty bound to exercise
extraordinary diligence as required of a common carrier by our law (Articles 1755 and 1756, new Civil Code).
The question that now arises is: Is there enough evidence to show that defendant failed to observe ordinary care or diligence in transporting
the deceased from Parang to Davao on the date in question?
The trial court answered the question in the affirmative but in so doing it took into account only the following facts:
No debe perderse de vista el hecho, que los negocios de exportacion de trozos del demandado tiene un volumen de P1,200. Lara
era empleado de la Oficina de Montes, asalariado por el gobierno, no pagado por el demandado para classificar los trozos
exportados; debido a los trabajos de classificacion que duro 6 dias, en su ultimo dia Lara no durmio toda la noche, al dia siguiente,
Lara fue atacado de malaria, tenia inflamada la cara y cuerpo, sufria dolores de cabeza con erupciones en la cara y cuerpo; que en
la manana, del dia 2 de enero de 1954, fecha en que Lara salio de Davao para Parang, en aeroplano para clasificar los trozos del
demandado, el automobil de este condujo a aquel al aerodromo de Davao.
xxx
xxx
xxx
El viaje de Cotabato a Davao no es menos de 8 horas, su carretera esta en malas condiciones, desnivelada, con piedras salientes
y baches, que hacen del vehiculo no estable en su marcha. Lara estaba enfermo de cierta gravedad, tenia el cuerpo y cara
inflamados, atacado de malaria, con dolores de cabeza y con erupciones en la cara y cuerpo.
A la vista de estos hechos, el demandado debia de saber que era sumamente peligroso llevar 5 pasajeros en la parte trasera del
pick-up; particularmente, para la salud de Lara; el permitirlo, el demandado no ha tomado las precausiones, para evitar un posible
accidente fatal. La negative de Lara de ocupar el asiento delantero del pick-up no constituye a juicio del Juzgado una defensa, pues
el demendado conociendo el estado delicado de salud de Lara, no debio de haber permitido que aquel regrese a Davao en su pickup; si querria prestar a aquel un favor, debio de haver provisto a Lara de un automobil para su regrese a Davao, ya que el
demendado es un millionario; si no podia prestar a aquel este favor, debio de haver dejado a Lara en Samuay para coger aquel un
camion de pasajero de Cotabato a Davao.
Even if we admit as true the facts found by the trial court, still we find that the same are not sufficient to show that defendant has failed to take
the precaution necessary to conduct his passengers safely to their place of destination for there is nothing there to indicate that defendant has
acted with negligence or without taking the precaution that an ordinary prudent man would have taken under similar circumstances. It should
be noted that Lara went to the lumber concession of defendant in answer to a call of duty which he was bound to perform because of the
requirement of his office and he contracted the malaria fever in the course of the performance of that duty. It should also be noted that
defendant was not in duty bound to take the deceased in his own pick-up to Davao because from Parang to Cotabato there was a line of
transportation that regularly makes trips for the public, and if defendant agreed to take the deceased in his own car, it was only to
accommodate him considering his feverish condition and his request that he be so accommodated. It should also be noted that the
passengers who rode in the pick-up of defendant took their respective seats therein at their own choice and not upon indication of defendant
with the particularity that defendant invited the deceased to sit with him in the front seat but which invitation the deceased declined. The
reason for this can only be attributed to his desire to be at the back so that he could sit on a bag and travel in a reclining position because
such was more convenient for him due to his feverish condition. All the circumstances therefore clearly indicate that defendant had done what
a reasonable prudent man would have done under the circumstances.
There is every reason to believe that the unfortunate happening was only due to an unforeseen accident accused by the fact that at the time
the deceased was half asleep and must have fallen from the pick-up when it ran into some stones causing it to jerk considering that the road
was then bumpy, rough and full of stones.
The finding of the trial court that the pick-up was running at more than 40 kilometers per hour is not supported by the evidence. This is a mere
surmise made by the trial court considering the time the pick-up left barrio Samoay and the time the accident occured in relation to the
distance covered by the pick-up. And even if this is correct, still we say that such speed is not unreasonable considering that they were
traveling on a national road and the traffic then was not heavy. We may rather attribute the incident to lack of care on the part of the deceased
considering that the pick-up was open and he was then in a crouching position. Indeed, the law provides that "A passenger must observe the
diligence of a good father of a family to avoid injury to himself" (Article 1761, new Civil Code), which means that if the injury to the passenger
has been proximately caused by his own negligence, the carrier cannot be held liable.
All things considered, we are persuaded to conclude that the accident occurred not due to the negligence of defendant but to circumstances
beyond his control and so he should be exempt from liability.
Wherefore, the decision appealed from is reversed, without pronouncement as to costs.
SUPREME COURT
Manila
EN BANC
G.R. No. L-10605
June 30, 1958
PRECILLANO NECESITO, ETC., plaintiff-appellant,

vs.
NATIVIDAD PARAS, ET AL., defendants-appellees.
x---------------------------------------------------------x
G.R. No. L-10606
June 30, 1958
GERMAN NECESITO, ET AL., plaintiffs-appellants,

vs.
NATIVIDAD PARAS, ET AL., defendants-appellees.
REYES, J. B. L., J.:
These cases involve ex contractu against the owners and operators of the common carrier known as Philippine Rabbit Bus Lines, filed by one
passenger, and the heirs of another, who injured as a result of the fall into a river of the vehicle in which they were riding.
In the morning of January 28, 1964, Severina Garces and her one-year old son, Precillano Necesito, carrying vegetables, boarded passenger
auto truck or bus No. 199 of the Philippine Rabbit Bus Lines at Agno, Pangasinan. The passenger truck, driven by Francisco Bandonell, then
proceeded on its regular run from Agno to Manila. After passing Mangatarem, Pangasinan truck No. 199 entered a wooden bridge, but the
front wheels swerved to the right; the driver lost control, and after wrecking the bridge's wooden rails, the truck fell on its right side into a creek
where water was breast deep. The mother, Severina Garces, was drowned; the son, Precillano Necesito, was injured, suffering abrasions and
fracture of the left femur. He was brought to the Provincial Hospital at Dagupan, where the fracture was set but with fragments one centimeter
out of line. The money, wrist watch and cargo of vegetables were lost.
Two actions for damages and attorney's fees totalling over P85,000 having been filed in the Court of First Instance of Tarlac (Cases Nos. 908
and 909) against the carrier, the latter pleaded that the accident was due to "engine or mechanical trouble" independent or beyond the control
of the defendants or of the driver Bandonell.
After joint trial, the Court of First Instance found that the bus was proceeding slowly due to the bad condition of the road; that the accident was
caused by the fracture of the right steering knuckle, which was defective in that its center or core was not compact but "bubbled and cellulous",
a condition that could not be known or ascertained by the carrier despite the fact that regular thirty-day inspections were made of the steering
knuckle, since the steel exterior was smooth and shiny to the depth of 3/16 of an inch all around; that the knuckles are designed and
manufactured for heavy duty and may last up to ten years; that the knuckle of bus No. 199 that broke on January 28, 1954, was last inspected
on January 5, 1954, and was due to be inspected again on February 5th. Hence, the trial court, holding that the accident was exclusively due
to fortuitous event, dismissed both actions. Plaintiffs appealed directly to this Court in view of the amount in controversy.
We are inclined to agree with the trial court that it is not likely that bus No. 199 of the Philippine Rabbit Lines was driven over the deeply rutted
road leading to the bridge at a speed of 50 miles per hour, as testified for the plaintiffs. Such conduct on the part of the driver would have
provoked instant and vehement protest on the part of the passengers because of the attendant discomfort, and there is no trace of any such
complaint in the records. We are thus forced to assume that the proximate cause of the accident was the reduced strength of the steering
knuckle of the vehicle caused by defects in casting it. While appellants hint that the broken knuckle exhibited in court was not the real fitting
attached to the truck at the time of the accident, the records they registered no objection on that ground at the trial below. The issue is thus
reduced to the question whether or not the carrier is liable for the manufacturing defect of the steering knuckle, and whether the evidence
discloses that in regard thereto the carrier exercised the diligence required by law (Art. 1755, new Civil Code).
ART. 1755. A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost
diligence of very cautious persons, with a due regard for the all the circumstances.
It is clear that the carrier is not an insurer of the passengers' safety. His liability rests upon negligence, his failure to exercise the "utmost"
degree of diligence that the law requires, and by Art. 1756, in case of a passenger's death or injury the carrier bears the burden of satisfying
the court that he has duly discharged the duty of prudence required. In the American law, where the carrier is held to the same degree of
diligence as under the new Civil Code, the rule on the liability of carriers for defects of equipment is thus expressed: "The preponderance of
authority is in favor of the doctrine that a passenger is entitled to recover damages from a carrier for an injury resulting from a defect in an
appliance purchased from a manufacturer, whenever it appears that the defect would have been discovered by the carrier if it had exercised
the degree of care which under the circumstances was incumbent upon it, with regard to inspection and application of the necessary tests. For
the purposes of this doctrine, the manufacturer is considered as being in law the agent or servant of the carrier, as far as regards the work of
constructing the appliance. According to this theory, the good repute of the manufacturer will not relieve the carrier from liability" (10 Am. Jur.
205, s, 1324; see also Pennsylvania R. Co. vs. Roy, 102 U. S. 451; 20 L. Ed. 141; Southern R. Co. vs. Hussey, 74 ALR 1172; 42 Fed. 2d 70;
and Ed Note, 29 ALR 788; Ann. Cas. 1916E 929).
The rationale of the carrier's liability is the fact that the passenger has neither choice nor control over the carrier in the selection and use of the
equipment and appliances in use by the carrier. Having no privity whatever with the manufacturer or vendor of the defective equipment, the
passenger has no remedy against him, while the carrier usually has. It is but logical, therefore, that the carrier, while not in insurer of the safety
of his passengers, should nevertheless be held to answer for the flaws of his equipment if such flaws were at all discoverable. Thus Hannen,
J., in Francis vs. Cockrell, LR 5 Q. B. 184, said:
In the ordinary course of things, the passenger does not know whether the carrier has himself manufactured the means of carriage, or
contracted with someone else for its manufacture. If the carrier has contracted with someone else the passenger does not usually know who
that person is, and in no case has he any share in the selection. The liability of the manufacturer must depend on the terms of the contract
between him and the carrier, of which the passenger has no knowledge, and over which he can have no control, while the carrier can
introduce what stipulations and take what securities he may think proper. For injury resulting to the carrier himself by the manufacturer's want
of care, the carrier has a remedy against the manufacturer; but the passenger has no remedy against the manufacturer for damage arising
from a mere breach of contract with the carrier . . . . Unless, therefore, the presumed intention of the parties be that the passenger should, in
the event of his being injured by the breach of the manufacturer's contract, of which he has no knowledge, be without remedy, the only way in
which effect can be given to a different intention is by supposing that the carrier is to be responsible to the passenger, and to look for his
indemnity to the person whom he selected and whose breach of contract has caused the mischief. (29 ALR 789)
And in the leading case of Morgan vs. Chesapeake & O. R. Co. 15 LRA (NS) 790, 16 Ann. Cas. 608, the Court, in holding the carrier responsible for
damages caused by the fracture of a car axle, due to a "sand hole" in the course of moulding the axle, made the following observations.
The carrier, in consideration of certain well-known and highly valuable rights granted to it by the public, undertakes certain duties toward the
public, among them being to provide itself with suitable and safe cars and vehicles in which carry the traveling public. There is no such duty on
the manufacturer of the cars. There is no reciprocal legal relation between him and the public in this respect. When the carrier elects to have
another build its cars, it ought not to be absolved by that facts from its duty to the public to furnish safe cars. The carrier cannot lessen its
responsibility by shifting its undertaking to another's shoulders. Its duty to furnish safe cars is side by side with its duty to furnish safe track,
and to operate them in a safe manner. None of its duties in these respects can be sublet so as to relieve it from the full measure primarily
exacted of it by law. The carrier selects the manufacturer of its cars, if it does not itself construct them, precisely as it does those who grade its
road, and lay its tracks, and operate its trains. That it does not exercise control over the former is because it elects to place that matter in the
hands of the manufacturer, instead of retaining the supervising control itself. The manufacturer should be deemed the agent of the carrier as
respects its duty to select the material out of which its cars and locomotive are built, as well as in inspecting each step of their construction. If
there be tests known to the crafts of car builders, or iron moulders, by which such defects might be discovered before the part was
incorporated into the car, then the failure of the manufacturer to make the test will be deemed a failure by the carrier to make it. This is not a
vicarious responsibility. It extends, as the necessity of this business demands, the rule of respondeat superior to a situation which falls clearly
within its scope and spirit. Where an injury is inflicted upon a passenger by the breaking or wrecking of a part of the train on which he is riding,
it is presumably the result of negligence at some point by the carrier. As stated by Judge Story, in Story on Bailments, sec. 601a: "When the
injury or damage happens to the passenger by the breaking down or overturning of the coach, or by any other accident occurring on the
ground, the presumption prima facie is that it occurred by the negligence of the coachmen, and onus probandi is on the proprietors of the
coach to establish that there has been no negligence whatever, and that the damage or injury has been occasioned by inevitable casualty, or
by some cause which human care and foresight could not prevent; for the law will, in tenderness to human life and limb, hold the proprietors
liable for the slightest negligence, and will compel them to repel by satisfactory proofs every imputation thereof." When the passenger has
proved his injury as the result of a breakage in the car or the wrecking of the train on which he was being carried, whether the defect was in
the particular car in which he was riding or not, the burden is then cast upon the carrier to show that it was due to a cause or causes which the
exercise of the utmost human skill and foresight could not prevent. And the carrier in this connection must show, if the accident was due to a
latent defect in the material or construction of the car, that not only could it not have discovered the defect by the exercise of such care, but
that the builders could not by the exercise of the same care have discovered the defect or foreseen the result. This rule applies the same
whether the defective car belonged to the carrier or not.
In the case now before us, the record is to the effect that the only test applied to the steering knuckle in question was a purely visual
inspection every thirty days, to see if any cracks developed. It nowhere appears that either the manufacturer or the carrier at any time tested
the steering knuckle to ascertain whether its strength was up to standard, or that it had no hidden flaws would impair that strength. And yet the
carrier must have been aware of the critical importance of the knuckle's resistance; that its failure or breakage would result in loss of balance
and steering control of the bus, with disastrous effects upon the passengers. No argument is required to establish that a visual inspection
could not directly determine whether the resistance of this critically important part was not impaired. Nor has it been shown that the weakening
of the knuckle was impossible to detect by any known test; on the contrary, there is testimony that it could be detected. We are satisfied that
the periodical visual inspection of the steering knuckle as practiced by the carrier's agents did not measure up to the required legal standard of
"utmost diligence of very cautious persons" "as far as human care and foresight can provide", and therefore that the knuckle's failure can
not be considered a fortuitous event that exempts the carrier from responsibility (Lasam vs. Smith, 45 Phil. 657; Son vs. Cebu Autobus Co., 94
Phil., 892.)
It may be impracticable, as appellee argues, to require of carriers to test the strength of each and every part of its vehicles before each trip;
but we are of the opinion that a due regard for the carrier's obligations toward the traveling public demands adequate periodical tests to
determine the condition and strength of those vehicle portions the failure of which may endanger the safe of the passengers.
As to the damages suffered by the plaintiffs, we agree with appellee that no allowance may be made for moral damages, since under Article 2220 of the
new Civil Code, in case of suits for breach of contract, moral damages are recoverable only where the defendant acted fraudulently or in bad faith, and
there is none in the case before us. As to exemplary damages, the carrier has not acted in a "wanton, fraudulent, reckless, oppressive or malevolent
manner" to warrant their award. Hence, we believe that for the minor Precillano Necesito (G. R. No. L-10605), an indemnity of P5,000 would be
adequate for the abrasions and fracture of the femur, including medical and hospitalization expenses, there being no evidence that there would be any
permanent impairment of his faculties or bodily functions, beyond the lack of anatomical symmetry. As for the death of Severina Garces (G. R. No. L10606) who was 33 years old, with seven minor children when she died, her heirs are obviously entitled to indemnity not only for the incidental loses of
property (cash, wrist watch and merchandise) worth P394 that she carried at the time of the accident and for the burial expenses of P490, but also for
the loss of her earnings (shown to average P120 a month) and for the deprivation of her protection, guidance and company. In our judgment, an award
of P15,000 would be adequate (cf Alcantara vs. Surro, 49 Off. Gaz. 2769; 93 Phil., 472).
The low income of the plaintiffs-appellants makes an award for attorney's fees just and equitable (Civil Code, Art. 2208, par. 11). Considering
that he two cases filed were tried jointly, a fee of P3,500 would be reasonable.
In view of the foregoing, the decision appealed from is reversed, and the defendants-appellees are sentenced to indemnify the plaintiffsappellants in the following amounts: P5,000 to Precillano Necesito, and P15,000 to the heirs of the deceased Severina Garces, plus P3,500 by
way of attorney's fees and litigation expenses. Costs against defendants-appellees. So ordered.
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 118664 August 7, 1998
JAPAN AIRLINES, petitioner,

vs.
THE COURT OF APPEALS, ENRIQUE AGANA., MARIA ANGELA NINA AGANA, ADALIA B. FRANCISCO and JOSE MIRANDA,
respondents.
ROMERO, J.:
Before us is an appeal by certiorari filed by petitioner Japan Airlines, Inc. (JAL) seeking the reversal of the decision of the Court of Appeals,
which affirmed with modification the award of damages made by the trial court in favor of herein private respondents Enrique Agana, Maria
Angela Nina Agana, Adelia Francisco and Jose Miranda.
On June 13, 1991, private respondent Jose Miranda boarded JAL flight No. JL 001 in San Francisco, California bound for Manila. Likewise, on
the same day private respondents Enrique Agana, Maria Angela Nina Agana and Adelia Francisco left Los Angeles, California for Manila via
JAL flight No. JL 061. As an incentive for travelling on the said airline, both flights were to make an overnight stopover at Narita, Japan, at the
airlines' expense, thereafter proceeding to Manila the following day.
Upon arrival at Narita, Japan on June 14, 1991, private respondents were billeted at Hotel Nikko Narita for the night. The next day, private
respondents, on the final leg of their journey, went to the airport to take their flight to Manila. However, due to the Mt. Pinatubo eruption,
unrelenting ashfall blanketed Ninoy Aquino International Airport (NAIA), rendering it inaccessible to airline traffic. Hence, private respondents'
trip to Manila was cancelled indefinitely.
To accommodate the needs of its stranded passengers, JAL rebooked all the Manila-bound passengers on flight No. 741 due to depart on
June 16, 1991 and also paid for the hotel expenses for their unexpected overnight stay. On June 16, 1991, much to the dismay of the private
respondents, their long anticipated flight to Manila was again cancelled due to NAIA's indefinite closure. At this point, JAL informed the private
respondents that it would no longer defray their hotel and accommodation expense during their stay in Narita.
Since NAIA was only reopened to airline traffic on June 22, 1991, private respondents were forced to pay for their accommodations and meal
expenses from their personal funds from June 16 to June 21, 1991. Their unexpected stay in Narita ended on June 22, 1991 when they
arrived in Manila on board JL flight No. 741.
Obviously, still reeling from the experience, private respondents, on July 25, 1991, commenced an action for damages against JAL before the
Regional Trial Court of Quezon City, Branch 104. 2 To support their claim, private respondents asserted that JAL failed to live up to its duty to
provide care and comfort to its stranded passengers when it refused to pay for their hotel and accommodation expenses from June 16 to 21,
1991 at Narita, Japan. In other words, they insisted that JAL was obligated to shoulder their expenses as long as they were still stranded in
Narita. On the other hand, JAL denied this allegation and averred that airline passengers have no vested right to these amenities in case a
flight is cancelled due to "force majeure."
On June 18, 1992, the trial court rendered its judgment in favor of private respondents holding JAL liable for damages, viz.:
WHEREFORE, judgment is rendered in favor of plaintiffs ordering the defendant Japan Airlines to pay the plaintiffs Enrique Agana, Adalia B.
Francisco and Maria Angela Nina Agana the sum of One million Two Hundred forty-six Thousand Nine Hundred Thirty-Six Pesos
(P1,246,936.00) and Jose Miranda the sum of Three Hundred Twenty Thousand Six Hundred sixteen and 31/100 (P320,616.31) as actual,
moral and exemplary damages and pay attorney's fees in the amount of Two Hundred Thousand Pesos (P200,000.00), and to pay the costs of
suit.
Undaunted, JAL appealed the decision before the Court of Appeals, which, however, with the exception of lowering the damages awarded
affirmed the trial court's finding, 3 thus:
Thus, the award of moral damages should be as it is hereby reduced to P200,000.00 for each of the plaintiffs, the exemplary damages to
P300,000.00 and the attorney's fees to P100,000.00 plus the costs.
WHEREFORE, with the foregoing Modification, the judgment appealed from is hereby AFFIRMED in all other respects.
JAL filed a motion for reconsideration which proved futile and unavailing.
Failing in its bid to reconsider the decision, JAL has now filed this instant petition.
The issue to be resolved is whether JAL, as a common carrier has the obligation to shoulder the hotel and meal expenses of its stranded
passengers until they have reached their final destination, even if the delay were caused by "force majeure."
To begin with, there is no dispute that the Mt. Pinatubo eruption prevented JAL from proceeding to Manila on schedule. Likewise, private
respondents concede that such event can be considered as "force majeure" since their delayed arrival in Manila was not imputable to JAL.
However, private respondents contend that while JAL cannot be held responsible for the delayed arrival in Manila, it was nevertheless liable
for their living expenses during their unexpected stay in Narita since airlines have the obligation to ensure the comfort and convenience of its
passengers. While we sympathize with the private respondents' plight, we are unable to accept this contention.
We are not unmindful of the fact that in a plethora of cases we have consistently ruled that a contract to transport passengers is quite different
in kind, and degree from any other contractual relation. It is safe to conclude that it is a relationship imbued with public interest. Failure on the
part of the common carrier to live up to the exacting standards of care and diligence renders it liable for any damages that may be sustained
by its passengers. However, this is not to say that common carriers are absolutely responsible for all injuries or damages even if the same
were caused by a fortuitous event. To rule otherwise would render the defense of "force majeure," as an exception from any liability, illusory
and ineffective.
Accordingly, there is no question that when a party is unable to fulfill his obligation because of "force majeure," the general rule is that he
cannot be held liable for damages for non-performance. 6 Corollarily, when JAL was prevented from resuming its flight to Manila due to the
effects of Mt. Pinatubo eruption, whatever losses or damages in the form of hotel and meal expenses the stranded passengers incurred,
cannot be charged to JAL. Yet it is undeniable that JAL assumed the hotel expenses of respondents for their unexpected overnight stay on
June 15, 1991.
Admittedly, to be stranded for almost a week in a foreign land was an exasperating experience for the private respondents. To be sure, they
underwent distress and anxiety during their unanticipated stay in Narita, but their predicament was not due to the fault or negligence of JAL
but the closure of NAIA to international flights. Indeed, to hold JAL, in the absence of bad faith or negligence, liable for the amenities of its
stranded passengers by reason of a fortuitous event is too much of a burden to assume.
Furthermore, it has been held that airline passengers must take such risks incident to the mode of travel. 7 In this regard, adverse weather
conditions or extreme climatic changes are some of the perils involved in air travel, the consequences of which the passenger must assume or
expect. After all, common carriers are not the insurer of all risks. 8
Paradoxically, the Court of Appeals, despite the presence of "force majeure," still ruled against JAL relying in our decision in PAL v. Court of
Appeals, 9 thus:
The position taken by PAL in this case clearly illustrates its failure to grasp the exacting standard required by law. Undisputably, PAL's
diversion of its flight due to inclement weather was a fortuitous event. Nonetheless, such occurrence did not terminate PAL's contract with its
passengers. Being in the business of air carriage and the sole one to operate in the country, PAL is deemed equipped to deal with situations
as in the case at bar. What we said in one case once again must be stressed, i.e., the relation of carrier and passenger continues until the
latter has been landed at the port of destination and has left the carrier's premises. Hence, PAL necessarily would still have to exercise
extraordinary diligence in safeguarding the comfort, convenience and safety of its stranded passengers until they have reached their final
destination. On this score, PAL grossly failed considering the then ongoing battle between government forces and Muslim rebels in Cotabato
City and the fact that the private respondent was a stranger to the place.
The reliance is misplaced. The factual background of the PAL case is different from the instant petition. In that case there was indeed a
fortuitous event resulting in the diversion of the PAL flight. However, the unforeseen diversion was worsened when "private respondents
(passenger) was left at the airport and could not even hitch a ride in a Ford Fiera loaded with PAL personnel," 10 not to mention the apparent
apathy of the PAL station manager as to the predicament of the stranded passengers. 11 In light of these circumstances, we held that if the
fortuitous event was accompanied by neglect and malfeasance by the carrier's employees, an action for damages against the carrier is
permissible. Unfortunately, for private respondents, none of these conditions are present in the instant petition.
We are not prepared, however, to completely absolve petitioner JAL from any liability. It must be noted that private respondents bought tickets
from the United States with Manila as their final destination. While JAL was no longer required to defray private respondents' living expenses
during their stay in Narita on account of the fortuitous event, JAL had the duty to make the necessary arrangements to transport private
respondents on the first available connecting flight to Manila. Petitioner JAL reneged on its obligation to look after the comfort and
convenience of its passengers when it declassified private respondents from "transit passengers" to "new passengers" as a result of which
private respondents were obliged to make the necessary arrangements themselves for the next flight to Manila. Private respondents were
placed on the waiting list from June 20 to June 24. To assure themselves of a seat on an available flight, they were compelled to stay in the
airport the whole day of June 22, 1991 and it was only at 8:00 p.m. of the aforesaid date that they were advised that they could be
accommodated in said flight which flew at about 9:00 a.m. the next day.
We are not oblivious to the fact that the cancellation of JAL flights to Manila from June 15 to June 21, 1991 caused considerable disruption in
passenger booking and reservation. In fact, it would be unreasonable to expect, considering NAIA's closure, that JAL flight operations would
be normal on the days affected. Nevertheless, this does not excuse JAL from its obligation to make the necessary arrangements to transport
private respondents on its first available flight to Manila. After all, it had a contract to transport private respondents from the United States to
Manila as their final destination.
Consequently, the award of nominal damages is in order. Nominal damages are adjudicated in order that a right of a plaintiff, which has been
violated or invaded by the defendant, may be vindicated or recognized and not for the purpose of indemnifying any loss suffered by him. 12 The
court may award nominal damages in every obligation arising from any source enumerated in article 1157, or in every case where any
property right has been invaded. 13
WHEREFORE, in view of the foregoing, the decision of the Court of Appeals dated December 22, 1993 is hereby MODIFIED. The award of
actual, moral and exemplary damages is hereby DELETED. Petitioner JAL is ordered to pay each of the private respondents nominal
damages in the sum of P100,000.00 each including attorney' s fees of P50,000.00 plus costs.
SO ORDERED.
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 73998 November 14, 1988
PEDRO T. LAYUGAN, petitioner,
vs.
INTERMEDIATE APPELLATE COURT, GODOFREDO ISIDRO, and TRAVELLERS MULTI-INDEMNITY CORPORATION, respondents.
SARMIENTO, J.:
Assailed in this petition for review on certiorari are 1) the decision 1 of the then Intermediate Appellate Court 2 in AC-G.R. CV No. 01055,
entitled "Pedro T. Layugan, Plaintiff-Appellee, versus Godofredo Isidro, Defendant-Appellant and Third-Party Plaintiff-Appellee, versus
Travellers Multi-Indemnity Corporation, Third Party Defendant- Appellant, "which reversed and set aside the decision 3 of the Regional Trial
Court, Third Judicial Region, Branch XXVI, Cabanatuan City, and also dismissed the complaint, third party complaint, and the counter claims
of the parties and 2) the resolution 4 denying the plaintiff-appellee's (herein petitioner) motion for reconsideration, for lack of merit.
The findings of fact by the trial court which were adopted by the appellate court are as follows:
Pedro T. Layugan filed an action for damages against Godofredo Isidro, alleging that on May 15, 1979 while at Baretbet, Bagabag, Nueva
Vizcaya, the Plaintiff and a companion were repairing the tire of their cargo truck with Plate No. SU-730 which was parked along the right side
of the National Highway; that defendant's truck bearing Plate No. PW-583, driven recklessly by Daniel Serrano bumped the plaintiff, that as a
result, plaintiff was injured and hospitalized at Dr. Paulino J. Garcia Research and Medical Center and the Our Lady of Lourdes Hospital; that
he spent TEN THOUSAND PESOS (Pl0,000.00) and will incur more expenses as he recuperates from said injuries; that because of said
injuries he would be deprived of a lifetime income in the sum of SEVENTY THOUSAND PESOS (P70,000.00); and that he agreed to pay his
lawyer the sum of TEN THOUSAND PESOS (Pl0,000.00).
As prayed for by the plaintiffs counsel, the Court declared the defendant in default on October 12, 1979, and plaintiff's evidence was received
ex-parte on January 11, 1978 and February 19, 1980. The decision on behalf of the plaintiff was set aside to give a chance to the defendant to
file his answer and later on, a third-party complaint.
Defendant admitted his ownership of the vehicle involved in the accident driven by Daniel Serrano. Defendant countered that the plaintiff was
merely a bystander, not a truck helper being a brother-in-law law of the driver of said truck; that the truck allegedly being repaired was parked,
occupying almost half of the right lane towards Solano, Nueva Vizcaya, right after the curve; that the proximate cause of the incident was the
failure of the driver of the parked truck in installing the early warning device, hence the driver of the parked car should be liable for damages
sustained by the truck of the herein defendant in the amount of more than P20,000.00; that plaintiff being a mere bystander and hitchhiker
must suffer all the damages he incurred. By way of counterclaim defendant alleged that due to plaintiffs baseless complaint he was
constrained to engage the services of counsel for P5,000.00 and P200.00 per court appearance; that he suffered sleepless nights, humiliation,
wounded feelings which may be estimated at P30.000.00.
On May 29, 1981, a third-party complaint was filed by the defendant against his insurer, the Travellers Multi Indemnity Corporation; that the
third-party plaintiff, without admitting his liability to the plaintiff, claimed that the third-party defendant is liable to the former for contribution,
indemnity and subrogation by virtue of their contract under Insurance Policy No. 11723 which covers the insurer's liability for damages arising
from death, bodily injuries and damage to property.
Third-party defendant answered that, even assuming that the subject matter of the complaint is covered by a valid and existing insurance
policy, its liability shall in no case exceed the limit defined under the terms and conditions stated therein; that the complaint is premature as no
claim has been submitted to the third party defendant as prescribed under the Insurance Code; that the accident in question was
approximately caused by the carelessness and gross negligence of the plaintiff-, that by reason of the third-party complaint, third-party
defendant was constrained to engage the services of counsel for a fee of P3,000.00.
Pedro Layugan declared that he is a married man with one (1) child. He was employed as security guard in Mandaluyong, Metro Manila, with
a salary of SIX HUNDRED PESOS (600.00) a month. When he is off-duty, he worked as a truck helper and while working as such, he
sustained injuries as a result of the bumping of the cargo truck they were repairing at Baretbet, Bagabag, Nueva Vizcaya by the driver of the
defendant. He used to earn TWO HUNDRED PESOS (P200.00) to THREE HUNDRED PESOS (P300.00) monthly, at the rate of ONE
HUNDRED PESOS (Pl00.00) per trip. Due to said injuries, his left leg was amputated so he had to use crutches to walk. Prior to the incident,
he supported his family sufficiently, but after getting injured, his family is now being supported by his parents and brother.
GODOFREDO ISIDRO, defendant/third-party plaintiff, testified that his truck involved in this vehicular accident is insured with the Travellers
Multi Indemnity Corporation covering own damage and third-party liability, under vehicle policy No. 11723 (Exh. "1") dated May 30, 1978; that
after he filed the insurance claim the insurance company paid him the sum of P18,000.00 for the damages sustained by this truck but not the
third party liability.
DANIEL SERRANO, defendant driver, declared that he gave a statement before the municipal police of Bagabag, Nueva Vizcaya on May 16,
1979; that he knew the responsibilities of a driver; that before leaving, he checked the truck. The truck owner used to instruct him to be careful
in driving. He bumped the truck being repaired by Pedro Layugan, plaintiff, while the same was at a stop position. From the evidence
presented, it has been established clearly that the injuries sustained by the plaintiff was caused by defendant's driver, Daniel Serrano. The
police report confirmed the allegation of the plaintiff and admitted by Daniel Serrano on cross-examination. The collision dislodged the jack
from the parked truck and pinned the plaintiff to the ground. As a result thereof, plaintiff sustained injuries on his left forearm and left foot. The
left leg of the plaintiff from below the knee was later on amputated (Exh. "C") when gangrene had set in, thereby rendering him incapacitated
for work depriving him of his income. (pp. 118 to 120, Record on Appeal.)
Upon such findings, amply supported by the evidence on record, the trial court rendered its decision, the dispositive part of which reads as
follows: 6
WHEREFORE, premises considered, the defendant is hereby ordered:
a) To pay the plaintiff SEVENTY THOUSAND (P70,000.00) PESOS actual and compensatory damages;
b) TWO THOUSAND (P2,000.00) PESOS for attorney's fees;
c) FIVE THOUSAND (P5,000.00) PESOS for moral damages; and
d) To pay the costs of this suit. On the third-party complaint, the third-party defendant is ordered to indemnify the defendant/third party plaintiffa) The sum of FIFTY THOUSAND (P50,000.00) PESOS for actual and compensatory damages; and
b) The costs of this suit.
The Intermediate Appellate Court as earlier stated reversed the decision of the trial court and dismissed the complaint, the third-party
complaint, and the counterclaims of both appellants. 7
Hence, this petition.
The petitioner alleges the following errors. 8
1. WHETHER UPON THE GIVEN FACTS, THE INTERMEDIATE APPELLATE COURT ACTED CORRECTLY IN REVERSING AND SETTING
ASIDE AND DISMISSING THE PLAINTIFF-APPELLEE'S COMPLAINT.
2. WHETHER THE INTERMEDIATE APPELLATE COURT ACTED CORRECTLY IN APPLYING THE DOCTRINE OF "RES IPSA LOQUITUR"
WITH PROPER JURIS- PRUDENTIAL (sic) BASIS.
The crux of the controversy lies in the correctness or error of the decision of the respondent court finding the petitioner negligent under the
doctrine of Res ipsa loquitur (The thing speaks for itself). Corollary thereto, is the question as to who is negligent, if the doctrine is inapplicable.
The respondent corporation stresses that the issues raised in the petition being factual, the same is not reviewable by this Court in a petition
for review by certiorari. 9
Indeed, it is an elementary rule in the review of decisions of the Court of Appeals that its findings of fact are entitled to great respect and will
not ordinarily be disturbed by this Court. 10 For if we have to review every question of fact elevated to us, we would hardly have any more time
left for the weightier issues compelling and deserving our preferential attention. 11 Be that as it may, this rule is not inflexible. Surely there are
established exceptions 12 when the Court should review and rectify the findings of fact of the lower court, such as:
1) when the conclusion is a finding grounded entirely on speculation, surmise, or conjecture; 2) the inference made is manifestly mistaken; 3)
there is grave abuse of discretion; 4) the judgment is based on misapprehension of facts; 5) the Court of Appeals went beyond the issues of
the case if the findings are contrary to the admission of both the appellant and the appellee; 6) the findings of the Court of Appeals are
contrary to those of the trial court; 7) the said findings of fact are conclusions without citation of specific evidence on which they are based; 8)
the facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed by the respondents; and 9) when the
findings of fact of the Court of Appeals are premised on the absence of evidence and are contradicted on record.
Exceptions 1, 2, 4, 6, 7, and 9 obtain in the instant case to warrant a deviation from the general rule.
From its finding that the parked truck was loaded with ten (10) big round logs 13 the Court of Appeals inferred that because of its weight the
truck could not have been driven to the shoulder of the road and concluded that the same was parked on a portion of the road 14 at the time of
the accident. Consequently, the respondent court inferred that the mishap was due to the negligence of the driver of the parked truck. 15 The
inference or conclusion is manifestly erroneous. In a large measure, it is grounded on speculation, surmise, or conjecture. How the respondent
court could have reversed the finding of the trial court that a warning device was installed 16 escapes us because it is evident from the record
that really such a device, in the form of a lighted kerosene lamp, was installed by the driver of the parked truck three to four meters from the
rear of his parked truck. 17 We see this negative finding of the respondent appellate court as a misreading of the facts and the evidence on
record and directly contravening the positive finding of the trial court that an early warning device was in proper place when the accident
happened and that the driver of the private respondent was the one negligent. On the other hand, the respondent court, in refusing to give its
"imprimatur to the trial court's finding and conclusion that Daniel Serrano (private respondent Isidro's driver) was negligent in driving the truck
that bumped the parked truck", did not cite specific evidence to support its conclusion. In cavalier fashion, it simply and nebulously adverted to
unspecified "scanty evidence on record." 18
On the technical aspect of the case, the respondent corporation would want us to dismiss this petition on the ground that it was filed out of
time. It must be noted that there was a motion for extension, 19 albeit filed erroneously with the respondent court, dated March 19, 1986,
requesting for 30 days from March 20, 1986, to file the necessary petition or pleading before the Supreme Court". Also, on April 1, 1986, an
appearance of a new lawyer for the petitioner before the Supreme Court" with motion 20 was filed, again erroneously, with the Court of
Appeals, requesting for 20 days extension "to file the Petition for Review on Certiorari." Likewise a similar motion 21 was filed with this Court
also on April 1, 1986. On the other hand, the instant petition for review was filed on April 17, 1986 22 but it was only after three months, on
August 1, 1986, in its comment 23 that the respondent corporation raised the issue of tardiness. The respondent corporation should not have
waited in ambush before the comment was required and before due course was given. In any event, to exact its "a pound of flesh", so to
speak, at this very late stage, would cause a grave miscarriage of justice. Parenthetically, it must be noted that private respondent Isidro did
not raise this issue of late filing.
We now come to the merits of this petition.
The question before us is who was negligent? Negligence is the omission to do something which a reasonable man, guided by those
considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of something which a prudent and reasonable
man would not do 24 or as Judge Cooley defines it, "(T)he failure to observe for the protection of the interests of another person, that degree of
care, precaution, and vigilance which the circumstances justly demand, whereby such other person suffers injury. 25
In Picart vs. Smith, 26 decided more than seventy years ago but still a sound rule, we held:
The test by which to determine the existence of negligence in a particular case may be stated as follows: Did the defendant in doing the
alleged negligent act use that reasonable care and caution which an ordinarily prudent person would have used in the same situation? If not,
then he is guilty of negligence. The law here in effect adopts the standard supposed to be supplied by the imaginary conduct of the discreet
paterfamilias of the Roman law. The existence of negligence in a given case is not determined by reference to the personal judgment of the
actor in the situation before him. The Law considers what would be reckless, blameworthy, or negligent in the man of ordinary intelligence and
prudence and determines liability by that.
Respondent Isidro posits that any immobile object along the highway, like a parked truck, poses serious danger to a moving vehicle which has
the right to be on the highway. He argues that since the parked cargo truck in this case was a threat to life and limb and property, it was
incumbent upon the driver as well as the petitioner, who claims to be a helper of the truck driver, to exercise extreme care so that the motorist
negotiating the road would be properly forewarned of the peril of a parked vehicle. Isidro submits that the burden of proving that care and
diligence were observed is shifted to the petitioner, for, as previously claimed, his (Isidro's) Isuzu truck had a right to be on the road, while the
immobile cargo truck had no business, so to speak, to be there. Likewise, Isidro proffers that the petitioner must show to the satisfaction of a
reasonable mind that the driver and he (petitioner) himself, provided an early warning device, like that required by law, or, by some other
adequate means that would properly forewarn vehicles of the impending danger that the parked vehicle posed considering the time, place,
and other peculiar circumstances of the occasion. Absent such proof of care, as in the case at bar, Isidro concludes, would, under the doctrine
of Res ipsa loquitur, evoke the presumption of negligence on the part of the driver of the parked cargo truck as well as his helper, the petitioner
herein, who was fixing the flat tire of the said truck. 27
Respondent Isidro's contention is untenable.
The evidence on record discloses that three or four meters from the rear of the parked truck, a lighted kerosene lamp was placed. 28 Moreover,
there is the admission of respondent Isidro's driver, Daniel Serrano, to Wit: 29
Question No. 8 (by Patrolman Josefino Velasco)Will you narrate to me in brief how the accident happens (sic) if you can still remember?
Answer: (by Daniel Serrano)
That on or about 10:40 p.m., 15 May 1979 while driving Isuzu truck at Baretbet, Bagabag, Nueva Vizcaya and at KM 285, I met another
vehicle who (sic) did not dim his (sic) lights which cause (sic) me to be blinded with intense glare of the light that's why I did not notice a
parked truck who (sic) was repairing a front flat tire. When I was a few meters away, I saw the truck which was loaded with round logs. I step
(sic) on my foot brakes but it did not function with my many attempts. I have (sic) found out later that the fluid pipe on the rear right was cut
that's why the breaks did not function. (Emphasis supplied).
Whether the cargo truck was parked along the road or on half the shoulder of the right side of the road would be of no moment taking into
account the warning device consisting of the lighted kerosene lamp placed three or four meters from the back of the truck. 30 But despite this
warning which we rule as sufficient, the Isuzu truck driven by Daniel Serrano, an employee of the private respondent, still bumped the rear of
the parked cargo truck. As a direct consequence of such accident the petitioner sustained injuries on his left forearm and left foot. His left leg
was later amputated from below the knee when gangrene had set in. 31
It is clear from the foregoing disquisition that the absence or want of care of Daniel Serrano has been established by clear and convincing
evidence. It follows that in stamping its imprimatur upon the invocation by respondent Isidro of the doctrine of Res ipsa loquitur to escape
liability for the negligence of his employee, the respondent court committed reversible error.
The respondent court ruled: 32
In addition to this, we agree with the following arguments of appellant Godofredo Isidro which would show that the accident was caused due to
the negligence of the driver of the cargo truck:
... In the case at bar the burden of proving that care and diligence was (sic) observed is shifted evidently to the plaintiff, for, as adverted to, the
motorists have the right to be on the road, while the immobile truck has no business, so to speak, to be there. It is thus for the plaintiff to show
to the satisfaction of a reasonable mind that the driver and he himself did employ early warning device such as that required by law or by
some other adequate means or device that would properly forewarn vehicles of the impending danger that the parked vehicle posed
considering the time, place and other peculiar circumstances of the occasion. Absent such proof of care, as in the case at bar, will evoke the
presumption of negligence under the doctrine of res ipsa loquitur, on the part of the driver of the parked cargo truck as well as plaintiff who was
fixing the flat tire of said truck. (pp. 14-17, Appellant's Brief). (Emphasis supplied).
At this juncture, it may be enlightening and helpful in the proper resolution of the issue of negligence to examine the doctrine of Res ipsa loquitur.
This doctrine is stated thus: "Where the thing which causes injury is shown to be under the management of the defendant, and the accident is
such as in the ordinary course of things does not happen if those who have the management use proper care, it affords reasonable evidence,
in the absence of an explanation by the defendant, that the accident arose from want of care. 33 Or as Black's Law Dictionary 34 puts it:
Res ipsa loquitur. The thing speaks for itself Rebuttable presumption or inference that defendant was negligent, which arises upon proof that
instrumentality causing injury was in defendant's exclusive control, and that the accident was one which ordinarily does not happen in absence
of negligence. Res ipsa loquitur is rule of evidence whereby negligence of alleged wrongdoer may be inferred from mere fact that accident
happened provided character of accident and circumstances attending it lead reasonably to belief that in absence of negligence it would not
have occurred and that thing which caused injury is shown to have been under management and control of alleged wrongdoer. Hillen v.
Hooker Const. Co., Tex. Civ. App., 484 S.W. 2d 133, 155. Under doctrine of "res ipsa loquitur" the happening of an injury permits an inference
of negligence where plaintiff produces substantial evidence that injury was caused by an agency or instrumentality under exclusive control and
management of defendant, and that the occurrence was such that in the ordinary course of things would not happen if reasonable care had
been used.
In this jurisdiction we have applied this doctrine in quite a number of cases, notably in Africa et al. vs. Caltex, Inc., et al.,
the case of F.F. Cruz and Co., Inc. vs. CA. 36
35
and the latest is in
The doctrine of Res ipsa loquitur as a rule of evidence is peculiar to the law of negligence which recognizes that prima facie negligence may
be established without direct proof and furnishes a substitute for specific proof of negligence. 37 The doctrine is not a rule of substantive law 38
but merely a mode of proof or a mere procedural convenience. 39 The rule, when applicable to the facts and circumstances of a particular
case, is not intended to and does not dispense with the requirement of proof of culpable negligence on the part of the party charged. 40 It
merely determines and regulates what shall be prima facie evidence thereof and facilitates the burden of plaintiff of proving a breach of the
duty of due care. 41 The doctrine can be invoked when and only when, under the circumstances involved, direct evidence is absent and not
readily available. 42 Hence, it has generally been held that the presumption of inference arising from the doctrine cannot be availed of, or is
overcome, where plaintiff has knowledge and testifies or presents evidence as to the specific act of negligence which is the cause of the injury
complained of or where there is direct evidence as to the precise cause of the accident and all the facts and circumstances attendant on the
occurrence clearly appear. 43 Finally, once the actual cause of injury is established beyond controversy, whether by the plaintiff or by the
defendant, no presumptions will be involved and the doctrine becomes inapplicable when the circumstances have been so completely
eludicated that no inference of defendant's liability can reasonably be made, whatever the source of the evidence, 44 as in this case.
The private respondent is sued under Art. 2176 in relation to Art. 2180, paragraph 5, of the Civil Code. In the latter, when an injury is caused
by the negligence of a servant or employee there instantly arises a presumption of law that there was negligence on the part of the master or
employer either in the selection of the servant or employee, or in supervision over him after selection, or both. Such presumption is juris
tantum and not juris et de jure and consequently, may be rebutted. If follows necessarily that if the employer shows to the satisfaction of the
court that in the selection and in the supervision he has exercised the care and diligence of a good father of a family, the presumption is
overcome and he is relieved from liability. 45 In disclaiming liability for the incident, the private respondent stresses that the negligence of his
employee has already been adequately overcome by his driver's statement that he knew his responsibilities as a driver and that the truck
owner used to instruct him to be careful in driving. 46
We do not agree with the private respondent in his submission. In the first place, it is clear that the driver did not know his responsibilities
because he apparently did not check his vehicle before he took it on the road. If he did he could have discovered earlier that the brake fluid
pipe on the right was cut, and could have repaired it and thus the accident could have been avoided. Moveover, to our mind, the fact that the
private respondent used to intruct his driver to be careful in his driving, that the driver was licensed, and the fact that he had no record of any
accident, as found by the respondent court, are not sufficient to destroy the finding of negligence of the Regional Trial Court given the facts
established at the trial 47 The private respondent or his mechanic, who must be competent, should have conducted a thorough inspection of
his vehicle before allowing his driver to drive it. In the light of the circumstances obtaining in the case, we hold that Isidro failed to prove that
the diligence of a good father of a family in the supervision of his employees which would exculpate him from solidary liability with his driver to
the petitioner. But even if we concede that the diligence of a good father of a family was observed by Isidro in the supervision of his driver,
there is not an iota of evidence on record of the observance by Isidro of the same quantum of diligence in the supervision of his mechanic, if
any, who would be directly in charge in maintaining the road worthiness of his (Isidro's) truck. But that is not all. There is paucity of proof that
Isidro exercised the diligence of a good father of a family in the selection of his driver, Daniel Serrano, as well as in the selection of his
mechanic, if any, in order to insure the safe operation of his truck and thus prevent damage to others. Accordingly, the responsibility of Isidro
as employer treated in Article 2180, paragraph 5, of the Civil Code has not ceased.
WHEREFORE, the petition is hereby GRANTED. The Decision of the respondent court as well as its Resolution denying the petitioner's
motion for reconsideration are hereby SET ASIDE and the decision of the trial court, dated January 20, 1983, is hereby REINSTATED in toto.
With costs against the private respondents.
SO ORDERED.
SUPREME COURT
Manila
EN BANC
G.R. No. L-21486
May 14, 1966
LA MALLORCA and PAMPANGA BUS COMPANY, petitioner,

vs.
VALENTIN DE JESUS, MANOLO TOLENTINO and COURT OF APPEALS, respondents.
Manuel O. Chan for petitioners.
Sixto T. Antonio for respondents.
MAKALINTAL, J.:
La Mallorca and Pampanga Bus Company, Inc., commonly known as La Mallorca-Pambusco, filed this appeal by certiorari from the decision
of the Court of Appeals which affirmed that rendered by the Court of First Instance of Bulacan in its civil case No. 2100, entitled "Valentin de
Jesus and Manolo Tolentino vs. La Mallorca-Pambusco." The court a quo sentenced the defendant, now petitioner, "to pay to plaintiffs the
amount of P2,132.50 for actual damages; P14,400.00 as compensatory damages; P10,000.00 to each plaintiff by way of moral damages; and
P3,000.00 as counsel fees."
Two errors are attributed to the appellate Court: (1) "in sustaining the decision (of the court a quo) holding that the petitioners were liable for
the accident which was caused by a blow-out of one of the tires of the bus and in not considering the same as caso fortuito," and (2) in holding
petitioners liable for moral damages.
The suit arose by reason of the death of Lolita de Jesus, 20-year old daughter of Valentin de Jesus and wife of Manolo Tolentino, in a head-on
collision between petitioner's bus, on which she was a passenger, and a freight truck traveling in the opposite direction, in a barrio in Marilao
Bulacan, in the morning of October 8, 1959. The immediate cause of the collision was the fact that the driver of the bus lost control of the
wheel when its left front tire suddenly exploded.
Petitioner maintains that a tire blow-out is a fortuitous event and gives rise to no liability for negligence, citing the rulings of the Court of
Appeals in Rodriguez vs. Red Line Transportation Co., CA-G.R. No. 8136, December 29, 1954, and People vs. Palapad, CA-G.R. No. 18480,
June 27, 1958. These rulings, however, not only are not not binding on this Court but were based on considerations quite different from those
that obtain in the at bar. The appellate Court there made no findings of any specified acts of negligence on the part of the defendants and
confined itself to the question of whether or not a tire blow-out, by itself alone and without a showing as to the causative factors, would
generate liability. In the present case, the cause of the blow-out was known. The inner tube of the left front tire, according to petitioner's own
evidence and as found by the Court of Appeals "was pressed between the inner circle of the left wheel and the rim which had slipped out of
the wheel." This was, said Court correctly held, a mechanical defect of the conveyance or a fault in its equipment which was easily
discoverable if the bus had been subjected to a more thorough, or rigid check-up before it took to the road that morning.
Then again both the trial court and the Court of Appeals found as a fact that the bus was running quite fast immediately before the accident.
Considering that the tire which exploded was not new petitioner describes it as "hindi masyadong kalbo," or not so very worn out the
plea of caso fortuito cannot be entertained.1wph1.t
The second issue raised by petitioner is already a settled one. In this jurisdiction moral damages are recoverable by reason of the death of a
passenger caused by the breach of contract of a common carrier, as provided in Article 1764, in relation to Article 2206, of the Civil Code.
These articles have been applied by this Court in a number of cases, among them Necesito, etc. vs. Paras, et al., L-10605-06, June 30, 1958;
Mercado vs. Lira, L-13328-29, Sept. 29, 1961; Villa-Rey Transit vs. Bello, L-18957, April 23, 1963.
Wherefore, the judgment appealed from is affirmed, with costs against petitioners.
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 84458 November 6, 1989
ABOITIZ SHIPPING CORPORATION, petitioner,

vs.
HON. COURT OF APPEALS, ELEVENTH DIVISION, LUCILA C. VIANA, SPS. ANTONIO VIANA and GORGONIA VIANA, and PIONEER
STEVEDORING CORPORATION, respondents.
REGALADO, J.:
In this appeal by certiorari, petitioner Aboitiz Shipping Corporation seeks a review of the decision 1 of respondent Court of Appeals, dated July
29, 1988, the decretal portion of which reads:
WHEREFORE, the judgment appealed from as modified by the order of October 27, 1982, is hereby affirmed with the modification that
appellant Aboitiz Shipping is hereby ordered to pay plaintiff-appellees the amount of P30,000.00 for the death of Anacleto Viana; actual
damages of P9,800.00; P150,000.00 for unearned income; P7,200.00 as support for deceased's parents; P20,000.00 as moral damages;
P10,000.00 as attorney's fees; and to pay the costs.
The undisputed facts of the case, as found by the court a quo and adopted by respondent court, are as follows: .
The evidence disclosed that on May 11, 1975, Anacleto Viana boarded the vessel M/V Antonia, owned by defendant, at the port at San Jose, Occidental
Mindoro, bound for Manila, having purchased a ticket (No. 117392) in the sum of P23.10 (Exh. 'B'). On May 12, 1975, said vessel arrived at Pier 4,
North Harbor, Manila, and the passengers therein disembarked, a gangplank having been provided connecting the side of the vessel to the pier. Instead
of using said gangplank Anacleto Viana disembarked on the third deck which was on the level with the pier. After said vessel had landed, the Pioneer
Stevedoring Corporation took over the exclusive control of the cargoes loaded on said vessel pursuant to the Memorandum of Agreement dated July
26, 1975 (Exh. '2') between the third party defendant Pioneer Stevedoring Corporation and defendant Aboitiz Shipping Corporation.
The crane owned by the third party defendant and operated by its crane operator Alejo Figueroa was placed alongside the vessel and one (1) hour after
the passengers of said vessel had disembarked, it started operation by unloading the cargoes from said vessel. While the crane was being operated,
Anacleto Viana who had already disembarked from said vessel obviously remembering that some of his cargoes were still loaded in the vessel, went
back to the vessel, and it was while he was pointing to the crew of the said vessel to the place where his cargoes were loaded that the crane hit him,
pinning him between the side of the vessel and the crane. He was thereafter brought to the hospital where he later expired three (3) days thereafter, on
May 15, 1975, the cause of his death according to the Death Certificate (Exh. "C") being "hypostatic pneumonia secondary to traumatic fracture of the
pubic bone lacerating the urinary bladder" (See also Exh. "B"). For his hospitalization, medical, burial and other miscellaneous expenses, Anacleto's
wife, herein plaintiff, spent a total of P9,800.00 (Exhibits "E", "E-1", to "E-5"). Anacleto Viana who was only forty (40) years old when he met said fateful
accident (Exh. 'E') was in good health. His average annual income as a farmer or a farm supervisor was 400 cavans of palay annually. His parents,
herein plaintiffs Antonio and Gorgonia Viana, prior to his death had been recipient of twenty (20) cavans of palay as support or P120.00 monthly.
Because of Anacleto's death, plaintiffs suffered mental anguish and extreme worry or moral damages. For the filing of the instant case, they had to hire
a lawyer for an agreed fee of ten thousand (P10,000.00) pesos. 2
Private respondents Vianas filed a complaint 3 for damages against petitioner corporation (Aboitiz, for brevity) for breach of contract of carriage.
In its answer. 4 Aboitiz denied responsibility contending that at the time of the accident, the vessel was completely under the control of
respondent Pioneer Stevedoring Corporation (Pioneer, for short) as the exclusive stevedoring contractor of Aboitiz, which handled the
unloading of cargoes from the vessel of Aboitiz. It is also averred that since the crane operator was not an employee of Aboitiz, the latter
cannot be held liable under the fellow-servant rule.
Thereafter, Aboitiz, as third-party plaintiff, filed a third-party complaint 5 against Pioneer imputing liability thereto for Anacleto Viana's death as having
been allegedly caused by the negligence of the crane operator who was an employee of Pioneer under its exclusive control and supervision.
Pioneer, in its answer to the third-party complaint, 6 raised the defenses that Aboitiz had no cause of action against Pioneer considering that Aboitiz is
being sued by the Vianas for breach of contract of carriage to which Pioneer is not a party; that Pioneer had observed the diligence of a good father of a
family both in the selection and supervision of its employees as well as in the prevention of damage or injury to anyone including the victim Anacleto
Viana; that Anacleto Viana's gross negligence was the direct and proximate cause of his death; and that the filing of the third-party complaint was
premature by reason of the pendency of the criminal case for homicide through reckless imprudence filed against the crane operator, Alejo Figueroa.
In a decision rendered on April 17, 1980 by the trial court, 7 Aboitiz was ordered to pay the Vianas for damages incurred, and Pioneer was
ordered to reimburse Aboitiz for whatever amount the latter paid the Vianas. The dispositive portion of said decision provides:
WHEREFORE, judgment is hereby rendered in favor of the plantiffs:
(1) ordering defendant Aboitiz Shipping Corporation to pay to plaintiffs the sum of P12,000.00 for the death of Anacleto Viana P9,800.00 as
actual damages; P533,200.00 value of the 10,664 cavans of palay computed at P50.00 per cavan; P10,000.00 as attorney's fees; F 5,000.00,
value of the 100 cavans of palay as support for five (5) years for deceased (sic) parents, herein plaintiffs Antonio and Gorgonia Viana
computed at P50.00 per cavan; P7,200.00 as support for deceased's parents computed at P120.00 a month for five years pursuant to Art.
2206, Par. 2, of the Civil Code; P20,000.00 as moral damages, and costs; and
(2) ordering the third party defendant Pioneer Stevedoring Corporation to reimburse defendant and third party plaintiff Aboitiz Shipping
Corporation the said amounts that it is ordered to pay to herein plaintiffs.
Both Aboitiz and Pioneer filed separate motions for reconsideration wherein they similarly raised the trial court's failure to declare that Anacleto
Viana acted with gross negligence despite the overwhelming evidence presented in support thereof. In addition, Aboitiz alleged, in opposition
to Pioneer's motion, that under the memorandum of agreement the liability of Pioneer as contractor is automatic for any damages or losses
whatsoever occasioned by and arising from the operation of its arrastre and stevedoring service.
In an order dated October 27, 1982, 8 the trial court absolved Pioneer from liability for failure of the Vianas and Aboitiz to preponderantly
establish a case of negligence against the crane operator which the court a quo ruled is never presumed, aside from the fact that the
memorandum of agreement supposedly refers only to Pioneer's liability in case of loss or damage to goods handled by it but not in the case of
personal injuries, and, finally that Aboitiz cannot properly invoke the fellow-servant rule simply because its liability stems from a breach of
contract of carriage. The dispositive portion of said order reads:
WHEREFORE, judgment is hereby modified insofar as third party defendant Pioneer Stevedoring Corporation is concerned rendered in favor of the plaintiffs-, :
(1) Ordering defendant Aboitiz Shipping Corporation to pay the plaintiffs the sum of P12,000.00 for the death of Anacleto Viana; P9,000.00
(sic) as actual damages; P533,200.00 value of the 10,664 cavans of palay computed at P50.00 per cavan; P10,000.00 as attorney's fees;
P5,000.00 value of the 100 cavans of palay as support for five (5) years for deceased's parents, herein plaintiffs Antonio and Gorgonia
Viana,computed at P50.00 per cavan; P7,200.00 as support for deceased's parents computed at P120.00 a month for five years pursuant to
Art. 2206, Par. 2, of the Civil Code; P20,000.00 as moral damages, and costs; and
(2) Absolving third-party defendant Pioneer Stevedoring Corporation for (sic) any liability for the death of Anacleto Viana the passenger of M/V Antonia owned by
defendant third party plaintiff Aboitiz Shipping Corporation it appearing that the negligence of its crane operator has not been established therein.
Not satisfied with the modified judgment of the trial court, Aboitiz appealed the same to respondent Court of Appeals which affirmed the
findings of of the trial court except as to the amount of damages awarded to the Vianas.
Hence, this petition wherein petitioner Aboitiz postulates that respondent court erred:
(A) In holding that the doctrine laid down by this honorable Court in La Mallorca vs. Court of Appeals, et al. (17 SCRA 739, July 27, 1966) is
applicable to the case in the face of the undisputable fact that the factual situation under the La Mallorca case is radically different from the
facts obtaining in this case;
(B) In holding petitioner liable for damages in the face of the finding of the court a quo and confirmed by the Honorable respondent court of
Appeals that the deceased, Anacleto Viana was guilty of contributory negligence, which, We respectfully submit contributory negligence was
the proximate cause of his death; specifically the honorable respondent Court of Appeals failed to apply Art. 1762 of the New Civil Code;
(C) In the alternative assuming the holding of the Honorable respondent Court of Appears that petitioner may be legally condemned to pay
damages to the private respondents we respectfully submit that it committed a reversible error when it dismissed petitioner's third party
complaint against private respondent Pioneer Stevedoring Corporation instead of compelling the latter to reimburse the petitioner for whatever
damages it may be compelled to pay to the private respondents Vianas. 9
At threshold, it is to be observed that both the trial court and respondent Court of Appeals found the victim Anacleto Viana guilty of contributory
negligence, but holding that it was the negligence of Aboitiz in prematurely turning over the vessel to the arrastre operator for the unloading of
cargoes which was the direct, immediate and proximate cause of the victim's death.
I. Petitioner contends that since one (1) hour had already elapsed from the time Anacleto Viana disembarked from the vessel and that he was
given more than ample opportunity to unload his cargoes prior to the operation of the crane, his presence on the vessel was no longer
reasonable e and he consequently ceased to be a passenger. Corollarily, it insists that the doctrine in La Mallorca vs. Court of Appeals, et al. 10
is not applicable to the case at bar.
The rule is that the relation of carrier and passenger continues until the passenger has been landed at the port of destination and has left the
vessel owner's dock or premises. 11 Once created, the relationship will not ordinarily terminate until the passenger has, after reaching his
destination, safely alighted from the carrier's conveyance or had a reasonable opportunity to leave the carrier's premises. All persons who
remain on the premises a reasonable time after leaving the conveyance are to be deemed passengers, and what is a reasonable time or a
reasonable delay within this rule is to be determined from all the circumstances, and includes a reasonable time to see after his baggage and
prepare for his departure. 12 The carrier-passenger relationship is not terminated merely by the fact that the person transported has been
carried to his destination if, for example, such person remains in the carrier's premises to claim his baggage. 13
It was in accordance with this rationale that the doctrine in the aforesaid case of La Mallorca was enunciated, to wit:
It has been recognized as a rule that the relation of carrier and passenger does not cease at the moment the passenger alights from the carrier's
vehicle at a place selected by the carrier at the point of destination, but continues until the passenger has had a reasonable time or a reasonable
opportunity to leave the carrier's premises. And, what is a reasonable time or a reasonable delay within this rule is to be determined from all the
circumstances. Thus, a person who, after alighting from a train, walks along the station platform is considered still a passenger. So also, where a
passenger has alighted at his destination and is proceeding by the usual way to leave the company's premises, but before actually doing so is halted by
the report that his brother, a fellow passenger, has been shot, and he in good faith and without intent of engaging in the difficulty, returns to relieve his
brother, he is deemed reasonably and necessarily delayed and thus continues to be a passenger entitled as such to the protection of the railroad
company and its agents.
In the present case, the father returned to the bus to get one of his baggages which was not unloaded when they alighted from the bus. Racquel, the
child that she was, must have followed the father. However, although the father was still on the running board of the bus waiting for the conductor to
hand him the bag or bayong, the bus started to run, so that even he (the father) had to jump down from the moving vehicle. It was at this instance that
the child, who must be near the bus, was run over and killed. In the circumstances, it cannot be claimed that the carrier's agent had exercised the
'utmost diligence' of a 'very cautious person' required by Article 1755 of the Civil Code to be observed by a common carrier in the discharge of its
obligation to transport safely its passengers. ... The presence of said passengers near the bus was not unreasonable and they are, therefore, to be
considered still as passengers of the carrier, entitled to the protection under their contract of carriage. 14
It is apparent from the foregoing that what prompted the Court to rule as it did in said case is the fact of the passenger's reasonable presence
within the carrier's premises. That reasonableness of time should be made to depend on the attending circumstances of the case, such as the
kind of common carrier, the nature of its business, the customs of the place, and so forth, and therefore precludes a consideration of the time
element per se without taking into account such other factors. It is thus of no moment whether in the cited case of La Mallorca there was no
appreciable interregnum for the passenger therein to leave the carrier's premises whereas in the case at bar, an interval of one (1) hour had
elapsed before the victim met the accident. The primary factor to be considered is the existence of a reasonable cause as will justify the
presence of the victim on or near the petitioner's vessel. We believe there exists such a justifiable cause.
It is of common knowledge that, by the very nature of petitioner's business as a shipper, the passengers of vessels are allotted a longer period
of time to disembark from the ship than other common carriers such as a passenger bus. With respect to the bulk of cargoes and the number
of passengers it can load, such vessels are capable of accommodating a bigger volume of both as compared to the capacity of a regular
commuter bus. Consequently, a ship passenger will need at least an hour as is the usual practice, to disembark from the vessel and claim his
baggage whereas a bus passenger can easily get off the bus and retrieve his luggage in a very short period of time. Verily, petitioner cannot
categorically claim, through the bare expedient of comparing the period of time entailed in getting the passenger's cargoes, that the ruling in
La Mallorca is inapplicable to the case at bar. On the contrary, if we are to apply the doctrine enunciated therein to the instant petition, we
cannot in reason doubt that the victim Anacleto Viana was still a passenger at the time of the incident. When the accident occurred, the victim
was in the act of unloading his cargoes, which he had every right to do, from petitioner's vessel. As earlier stated, a carrier is duty bound not
only to bring its passengers safely to their destination but also to afford them a reasonable time to claim their baggage.
It is not definitely shown that one (1) hour prior to the incident, the victim had already disembarked from the vessel. Petitioner failed to prove this. What
is clear to us is that at the time the victim was taking his cargoes, the vessel had already docked an hour earlier. In consonance with common shipping
procedure as to the minimum time of one (1) hour allowed for the passengers to disembark, it may be presumed that the victim had just gotten off the
vessel when he went to retrieve his baggage. Yet, even if he had already disembarked an hour earlier, his presence in petitioner's premises was not
without cause. The victim had to claim his baggage which was possible only one (1) hour after the vessel arrived since it was admittedly standard
procedure in the case of petitioner's vessels that the unloading operations shall start only after that time. Consequently, under the foregoing
circumstances, the victim Anacleto Viana is still deemed a passenger of said carrier at the time of his tragic death.
II. Under the law, common carriers are, from the nature of their business and for reasons of public policy, 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. 15 More particularly, a common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the
utmost diligence of very cautious persons, with a due regard for all the circumstances. 16 Thus, where a passenger dies or is injured, the
common carrier is presumed to have been at fault or to have acted negligently. 17 This gives rise to an action for breach of contract of carriage
where all that is required of plaintiff is to prove the existence of the contract of carriage and its non-performance by the carrier, that is, the
failure of the carrier to carry the passenger safely to his destination, 18 which, in the instant case, necessarily includes its failure to safeguard
its passenger with extraordinary diligence while such relation subsists.
The presumption is, therefore, established by law that in case of a passenger's death or injury the operator of the vessel was at fault or negligent,
having failed to exercise extraordinary diligence, and it is incumbent upon it to rebut the same. This is in consonance with the avowed policy of the State
to afford full protection to the passengers of common carriers which can be carried out only by imposing a stringent statutory obligation upon the latter.
Concomitantly, this Court has likewise adopted a rigid posture in the application of the law by exacting the highest degree of care and diligence from
common carriers, bearing utmost in mind the welfare of the passengers who often become hapless victims of indifferent and profit-oriented carriers. We
cannot in reason deny that petitioner failed to rebut the presumption against it. Under the facts obtaining in the present case, it cannot be gainsaid that
petitioner had inadequately complied with the required degree of diligence to prevent the accident from happening.
As found by the Court of Appeals, the evidence does not show that there was a cordon of drums around the perimeter of the crane, as claimed by
petitioner. It also adverted to the fact that the alleged presence of visible warning signs in the vicinity was disputable and not indubitably established.
Thus, we are not inclined to accept petitioner's explanation that the victim and other passengers were sufficiently warned that merely venturing into the
area in question was fraught with serious peril. Definitely, even assuming the existence of the supposed cordon of drums loosely placed around the
unloading area and the guard's admonitions against entry therein, these were at most insufficient precautions which pale into insignificance if
considered vis-a-vis the gravity of the danger to which the deceased was exposed. There is no showing that petitioner was extraordinarily diligent in
requiring or seeing to it that said precautionary measures were strictly and actually enforced to subserve their purpose of preventing entry into the
forbidden area. By no stretch of liberal evaluation can such perfunctory acts approximate the "utmost diligence of very cautious persons" to be
exercised "as far as human care and foresight can provide" which is required by law of common carriers with respect to their passengers .
While the victim was admittedly contributorily negligent, still petitioner's aforesaid failure to exercise extraordinary diligence was the proximate
and direct cause of, because it could definitely have prevented, the former's death. Moreover, in paragraph 5.6 of its petition, at bar, 19
petitioner has expressly conceded the factual finding of respondent Court of Appeals that petitioner did not present sufficient evidence in
support of its submission that the deceased Anacleto Viana was guilty of gross negligence. Petitioner cannot now be heard to claim otherwise.
No excepting circumstance being present, we are likewise bound by respondent court's declaration that there was no negligence on the part of Pioneer
Stevedoring Corporation, a confirmation of the trial court's finding to that effect, hence our conformity to Pioneer's being absolved of any liability.
As correctly observed by both courts, Aboitiz joined Pioneer in proving the alleged gross negligence of the victim, hence its present contention that the
death of the passenger was due to the negligence of the crane operator cannot be sustained both on grounds, of estoppel and for lack of evidence on
its present theory. Even in its answer filed in the court below it readily alleged that Pioneer had taken the necessary safeguards insofar as its unloading
operations were concerned, a fact which appears to have been accepted by the plaintiff therein by not impleading Pioneer as a defendant, and likewise
inceptively by Aboitiz by filing its third-party complaint only after ten (10) months from the institution of the suit against it. Parenthetically, Pioneer is not
within the ambit of the rule on extraordinary diligence required of, and the corresponding presumption of negligence foisted on, common carriers like
Aboitiz. This, of course, does not detract from what we have said that no negligence can be imputed to Pioneer but, that on the contrary, the failure of
Aboitiz to exercise extraordinary diligence for the safety of its passenger is the rationale for our finding on its liability.
WHEREFORE, the petition is DENIED and the judgment appealed from is hereby AFFIRMED in toto.
SO ORDERED.

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 128607 January 31, 2000
ALFREDO MALLARI, SR. and ALFREDO MALLARI, JR., petitioners,
vs.
COURT OF APPEALS and BULLETIN PUBLISHING CORPORATION, respondents.
BELLOSILLO, J.:
ALFREDO MALLARI SR. and ALFREDO MALLARI JR. in this petition for review on certiorari seek to set aside the Decision of the Court of
Appeals1 which reversed the court a quo and adjudged petitioners to be liable for damages due to negligence as a common carrier resulting in
the death of a passenger.
On 14 October 1987, at about 5:00 o'clock in the morning, the passenger jeepney driven by petitioner Alfredo Mallari Jr. and owned by his copetitioner Alfredo Mallari Sr. collided with the delivery van of respondent Bulletin Publishing Corp. (BULLETIN, for brevity) along the National
Highway in Barangay San Pablo, Dinalupihan, Bataan. Petitioner Mallari Jr. testified that he went to the left lane of the highway and overtook a
Fiera which had stopped on the right lane. Before he passed by the Fiera, he saw the van of respondent BULLETIN coming from the opposite
direction. It was driven by one Felix Angeles. The sketch of the accident showed that the collision occurred after Mallari Jr. overtook the Fiera
while negotiating a curve in the highway. The points of collision were the and the left rear portion of the passenger jeepney and the left front
side of the delivery van of BULLETIN. The two (2) right wheels of the delivery van were on the right shoulder of the road and pieces of debris
from the accident were found scattered along the shoulder of the road up to a certain portion of the lane travelled by the passenger jeepney.
The impact caused the jeepney to turn around and fall on its left side resulting in injuries to its passengers one of whom was Israel Reyes who
eventually died due to the gravity of his injuries.1wphi1.nt
On 16 December 1987 Claudia G. Reyes, the widow of Israel M. Reyes, filed a complaint for damages with the Regional Trial Court of
Olongapo City against Alfredo Mallari Sr. and Alfredo Mallari Jr., and also against BULLETIN, its driver Felix Angeles, and the N.V. Netherlands
Insurance Company. The complaint alleged that the collision which resulted in the death of Israel Reyes was caused by the fault and
negligence of both drivers of the passenger jeepney and the Bulletin Isuzu delivery van. The complaint also prayed that the defendants be
ordered jointly and severally to pay plaintiff P1,006,777.40 in compensatory damages, P40,000.00 for hospital and medical expenses,
P18,270.00 for burial expenses plus such amounts as may be fixed by the trial court for exemplary damages and attorney's fees.
The trial court found that the proximate cause of the collision was the negligence of Felix Angeles, driver of the Bulletin delivery van,
considering the fact that the left front portion of the delivery truck driven by Felix Angeles hit and bumped the left rear portion of the passenger
jeepney driven by Alfredo Mallari Jr. Hence, the trial court ordered BULLETIN and Felix Angeles to pay jointly and severally Claudia G. Reyes,
widow of the deceased victim, the sums of P42,106.93 for medical expenses; P8,600.00 for funeral and burial expenses; P1,006,777.40 for
loss of earning capacity; P5,000.00 for moral damages and P10,000.00 for attorney's fees. The trial court also ordered N.V. Netherlands
Insurance Company to indemnify Claudia G. Reyes P12,000.00 as death indemnity and P2,500.00 for funeral expenses which when paid
should be deducted from the liabilities of respondent BULLETIN and its driver Felix Angeles to the plaintiff. It also dismissed the complaint
against the other defendants Alfredo Mallari Sr. and Alfredo Mallari Jr.
On appeal the Court of Appeals modified the decision of the trial court and found no negligence on the part of Angeles and consequently of his
employer, respondent BULLETIN. Instead, the appellate court ruled that the collision was caused by the sole negligence of petitioner Alfredo
Mallari Jr. who admitted that immediately before the collision and after he rounded a curve on the highway, he overtook a Fiera which had
stopped on his lane and that he had seen the van driven by Angeles before overtaking the Fiera. The Court of Appeals ordered petitioners
Mallari Jr. and Mallari Sr. to compensate Claudia G. Reyes P1,006,777.50 for loss of earning capacity, P50,000.00 as indemnity for death and
P10,000.00 for attorney's fees. It absolved from any liability respondent BULLETIN, Felix Angeles and N.V. Netherlands Insurance Company.
Hence this petition.
Petitioners contend that there is no evidence to show that petitioner Mallari Jr. overtook a vehicle at a curve on the road at the time of the
accident and that the testimony of Angeles on the overtaking made by Mallari Jr. was not credible and unreliable. Petitioner also submits that
the trial court was in a better position than the Court of Appeals to assess the evidence and observe the witnesses as well as determine their
credibility; hence, its finding that the proximate cause of the collision was the negligence of respondent Angeles, driver of the delivery van
owned by respondent BULLETIN, should be given more weight and consideration.
We cannot sustain petitioners. Contrary to their allegation that there was no evidence whatsoever that petitioner Mallari Jr. overtook a vehicle
at a curve on the road at the time of or before the accident, the same petitioner himself testified that such fact indeed did occur
Q: And what was that accident all about?
A: Well, what happened, sir, is that at about that time 5:00 o'clock in that morning of October 14 while I was negotiating on the highway at San
Pablo, Dinalupihan, Bataan, I was then following a blue Ford Fierra and my distance behind was about twenty (20) feet and then I passed that
blue Ford Fierra. I overtook and when I was almost on the right lane of the highway towards Olongapo City there was an oncoming delivery
van of the Bulletin Publishing Corporation which bumped the left rear portion of the jeepney which I was driving and as a result of which the
jeepney . . . turned around and fell on its left side and as a result of which some of my passengers including me were injured, sir . . . .
Q: Before you overtook the Ford Fierra jeepney did you look . . . whether there was any vehicle coming towards you?
Q: Did you see the Bulletin van or the Press van coming towards you?
A: Yes, sir.
A: Yes, sir.
Q: At the moment the Ford Fierra . . . stop(ped) and in overtaking the Fierra, did you not have an option to stop and not to overtake the Ford
Fierra?
A: Well, at the time when the Ford Fierra stopped in front of me I slowed down with the intention of applying the brake, however, when I saw
the oncoming vehicle which is the Press van is very far. . . which is 100 feet distance, . . . it is sufficient to overtake the Ford Fierra so I
overt(ook) it . . . .
Q: You said that you took into consideration the speed of the oncoming Press van but you also could not estimate the speed of the press van
because it was dark at that time, which of these statements are true?
A: What I wanted to say, I took into consideration the speed of the oncoming vehicle, the Press van, although at the moment I could not
estimate the speed of the oncoming vehicle . . . .2
The Court of Appeals correctly found, based on the sketch and spot report of the police authorities which were not disputed by petitioners, that
the collision occurred immediately after petitioner Mallari Jr. overtook a vehicle in front of it while traversing a curve on the highway. 3 This act of
overtaking was in clear violation of Sec. 41, pars. (a) and (b), of RA 4136 as amended, otherwise known as The Land Transportation and
Traffic Code which provides:
Sec. 41. Restrictions on overtaking and passing. (a) The driver of a vehicle shall not drive to the left side of the center line of a highway in
overtaking or passing another vehicle proceeding in the same direction, unless such left side is clearly visible and is free of oncoming traffic for
a sufficient distance ahead to permit such overtaking or passing to be made in safety.
(b) The driver of a vehicle shall not overtake or pass another vehicle proceeding in the same direction when approaching the crest of a grade,
nor upon a curve in the highway, where the driver's view along the highway is obstructed within a distance of five hundred feet ahead except
on a highway having two or more lanes for movement of traffic in one direction where the driver of a vehicle may overtake or pass another
vehicle: Provided That on a highway, within a business or residential district, having two or more lanes for movement of traffic in one direction,
the driver of a vehicle may overtake or pass another vehicle on the right.
The rule is settled that a driver abandoning his proper lane for the purpose of overtaking another vehicle in an ordinary situation has the duty
to see to it that the road is clear and not to proceed if he cannot do so in safety.4 When a motor vehicle is approaching or rounding a curve,
there is special necessity for keeping to the right side of the road and the driver does not have the right to drive on the left hand side relying
upon having time to turn to the right if a car approaching from the opposite direction comes into view.5
In the instant case, by his own admission, petitioner Mallari Jr. already saw that the BULLETIN delivery van was coming from the opposite
direction and failing to consider the speed thereof since it was still dark at 5:00 o'clock in the morning mindlessly occupied the left lane and
overtook two (2) vehicles in front of it at a curve in the highway. Clearly, the proximate cause of the collision resulting in the death of Israel
Reyes, a passenger of the jeepney, was the sole negligence of the driver of the passenger jeepney, petitioner Alfredo Mallari Jr., who
recklessly operated and drove his jeepney in a lane where overtaking was not allowed by traffic rules. Under Art. 2185 of the Civil Code,
unless there is proof to the contrary, it is presumed that a person driving a motor vehicle has been negligent if at the time of the mishap he was
violating a traffic regulation. As found by the appellate court, petitioners failed to present satisfactory evidence to overcome this legal
presumption.
The negligence and recklessness of the driver of the passenger jeepney is binding against petitioner Mallari Sr., who admittedly was the owner
of the passenger jeepney engaged as a common carrier, considering the fact that in an action based on contract of carriage, the court need
not make an express finding of fault or negligence on the part of the carrier in order to hold it responsible for the payment of damages sought
by the passenger. Under Art. 1755 of the Civil Code, a common carrier is bound to carry the passengers safely as far as human care and
foresight can provide using the utmost diligence of very cautious persons with due regard for all the circumstances. Moreover, under Art. 1756
of the Civil Code, in case of death or injuries to passengers, a common carrier is presumed to have been at fault or to have acted negligently,
unless it proves that it observed extraordinary diligence. Further, pursuant to Art. 1759 of the same Code, it is liable for the death of or injuries
to passengers through the negligence or willful acts of the former's employees. This liability of the common carrier does not cease upon proof
that it exercised all the diligence of a good father of a family in the selection of its employees. Clearly, by the contract of carriage, the carrier
jeepney owned by Mallari Sr. assumed the express obligation to transport the passengers to their destination safely and to observe
extraordinary diligence with due regard for all the circumstances, and any injury or death that might be suffered by its passengers is right away
attributable to the fault or negligence of the carrier.
The monetary award ordered by the appellate court to be paid by petitioners to the widow of the deceased passenger Israel M. Reyes of
P1,006,777.50 for loss of earning capacity, P50,000.00 as civil indemnity for death, and P10,000.00 for attorney's fees, all of which were not
disputed by petitioners, is a factual matter binding and conclusive upon this Court.1wphi1.nt
WHEREFORE, the Petition is DENIED and the Decision of the Court of Appeals dated 20 September 1995 reversing the decision of the trial
court being in accord with law and evidence is AFFIRMED. Consequently, petitioners are ordered jointly and severally to pay Claudia G.
Reyes P1,006,777.50 for loss of earning capacity, P50,000.00 as civil indemnity for death, and P10,000.00 for attorney's fees. Costs against
petitioners.
SO ORDERED.
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-25785 February 26, 1981
SATURNINO BAYASEN, petitioner,
vs.
COURT OF APPEALS, respondent.
FERNANDEZ, J.:
This is a petition for certiorari to review the decision of the Court of Appeals 1 promulgated on November 17, 1965, in CA-G.R. N.. 05105-CR
affirming and modifying the decision of the Court of First Instance of Mountain Province, Second Judicial District, in Criminal Case No. 1056
entitled "People of the Philippines vs. Saturnino Bayasen" 2 convicting the accused, petitioner herein, of the crime of Homicide Thru Reckless
Imprudence.
The records show that the petitioner was charged in December 1963 by the Provincial Fiscal of Mountain Province of the crime of Homicide
Thru Reckless Imprudence allegedly committed as follows:
That on or about the 15th day of August, 1963, at Langtiw, Municipality of Sagada, Province of Mountain, Philippines and
within the jurisdiction of this Honorable Court, the said accused, being then the driver and person in-charge of Rural
health Unit Jeep bearing Plate No. 5735, Philippines, willfully, unlawfully and feloniously drove, managed and operated
the said jeep along Suyo Municipal Road, Sagada, Mountain Province in a negligent, careless and imprudent manner,
lack of foresight and skill, without due care and absolute disregard of traffic laws, rules and regulations and other
conditions of the road, making it to run in an unreasonable rate of speed, without taking the necessary precaution to
prevent accident to persons and damage to property in violation of law, and as a result of which said jeep driven and
operated by the herein accused fell over a precipice in the abovementioned place causing thereby the death of Elena
Awichen shortly thereafter.
Contrary to law. 3
After trial, the petitioner was found guilty of the charge and was sentenced to an indeterminate penalty of Four (4) Months and One (1) Day of
arresto mayor as minimum. to One (1) Year, Seven (7) Months and Ten (10) Days of prision correccional as maximum, to indemnify the heirs
of the deceased Elena Awichen the amount of P3,000.00 as compensatory damages and P1,000.00 as fees of the attorney contracted by the
said heirs and P1,886.00 for burial expenses of the deceased, and to pay the costs. 4 From this decision, the petitioner appealed to the Court
of Appeals 5 which affirmed the decision of the trial court with the following modifications: the indemnity was increased to P6,000.00; the award
of attorney's fees was set aside, and the maximum of the prison term was raised to One (1) Year, Seven (7) Months, and Seventeen (17) Days
of prision correccional. 6
The motion for reconsideration of the petitioner was denied by Justices Angeles, Capistrano, Mojica and Soriano. Justice Magno S. Gatmaitan
voted to grant the said motion. 7
From the decision of the respondent Court of Appeals, the petitioner has appealed to this Court assigning the following errors:
I. THE COURT OF APPEALS ERRED IN CONCLUDING THAT THE ACCUSED-PETITIONER SATURNINO BAYASEN WAS NEGLIGENT
IN DRIVING HIS JEEP, AFTER TAKING INTO CONSIDERATION ALLEGED PREVIOUS INCIDENTS IN WHICH THE ACCUSED WAS
ALLEGEDLY INVOLVED, THEREBY DECIDING A QUESTION OF SUBSTANCE THAT OF PRESUMED NEGLIGENCE NOT IN
ACCORD WITH LAW OR ESTABLISHED RULES OF EVIDENCE SPECIFICALLY THE RULE OF RES INTER ALIOS ACTA.
II. THE COURT OF APPEALS ERRED IN HOLDING THAT THE PROXIMATE CAUSE OF THE DEATH OF AWICHEN WAS THE
PETITIONER'S "NEGLIGENCE IN DRIVING AT AN UNREASONABLE SPEED," WHICH FINDING IS OPENLY CONTRARY TO THE
EVIDENCE OF THE PROSECUTION.
III.
THE COURT OF APPEALS ERRED IN NOT ACQUITTING THE ACCUSED-PETITIONER OF THE CRIME CHARGED.
The facts, as found by the Court of Appeals, are:

On the morning of August 15, 1963, Saturnino Bayasen, the Rural Health Physician in Sagada, Mountain Province, went to barrio Ambasing to
visit a patient. Two nurses from the Saint Theodore's Hospital in Sagada, viz., Elena Awichen and Dolores Balcita, rode with him in the jeep
assigned for the use of the Rural Health Unit as they had requested for a ride to Ambasing. Later, at Ambasing, the girls, who wanted to gather
flowers, again asked if they could ride with him up to a certain place on the way to barrio Suyo which he intended to visit anyway. Dr. Bayasen
again allowed them to ride, Elena sitting herself between him and Dolores. On the way, at barrio Langtiw, the jeep went over a precipice About
8 feet below the road, it was blocked by a pine tree. The three were thrown out of the jeep. Elena was found lying in a creek further below.
Among other injuries, she suffered a skull fracture which caused her death. 9
The Court of Appeals concluded:
It is not therefore improbable that due to lack of sufficient skin and confidence in driving, he lost his nerve when confronted by an emergency
due to his negligence in driving at an unreasonable speed on a narrow and slippery road and was at a loss what to do indeed, at no time
did he step on the brakes he failed to control the jeep after it skidded. On the whole, we are, satisfied that the fatal and unfortunate accident
was due to appellant's failure to exercise due diligence under the circumstances. 10
The main issue raised by the petitioner is whether or not he is entitled to acquittal on the ground that the finding of the Court of Appeals that
the proximate cause of the death of Awichen was the petitioner's "negligence in driving at an unreasonable speed" is openly contrary to the
evidence of the prosecution.
The majority opinion of the Court of Appeals is that the accused- petitioner was negligent in driving his jeep because he was driving at "an
unreasonable speed".
A careful examination of 'he evidence introduced by the prosecution shows no "legally sufficient" proof that the accused was negligent in
driving his jeep. The star witness of the prosecution, Dolores Balcita who was one of the passengers in the jeep, testified that the accusedpetitioner, Saturnino Bayasen was driving his jeep moderately just before the accident and categorically stated that she did not know what
caused the jeep to fall into the precipice.
The pertinent portions of her testimony are:
ATTY. GOMEZ:
Q From Ambasing to the place where the jeep fell over the precipice, was the driver running fast or
slow?
A He was with moderate speed, sir. 11
In the course of the cross-examination, the Court asked the witness the following:
COURT: to the witness)
Q Could you inform this Court as to what caused the jeep to fall into the embankment?
A I do not know, sir. 12
When asked whether the jeep hit anything before it fell into the precipice, the witness answered that she did not feel any bump or jolt. Her
testimony on this point reads:
COURT (to the witness)
Q Did the jeep hit anything before it fell into the embankment ?
A I did not feel any bump, sir.
Q Going to Suyo you were passing by a mountain is that right?
A Yes, sir.
Q On what side was that mountain?
A On the left side.
Q And while the jeep was going toward Suyo, how far was it from the mountain along the left side?
A I do not know, sir.
Q Where was the jeep nearer to while it was on the way to Suyo to the embankment or the
mountain?
A I do not know, sir. I was not aware of that.
Q During the time that the jeep was traversing toward Suyo, was there any conversation transpiring?
A Just before the accident, I did not hear anything, sir. 13
It is clear from the last part of the Testimony of the witness, Dolores Balcita, that there was no conversation between the passengers in the
jeep that could have distracted the attention of the accused while driving the jeep. As to the condition of the jeep itself, the same witness
testified that she "did not notice anything wrong" 14 with it from the time they drove from Sagada to Ambasing, and from there to the place
where the jeep fell off the road. Regarding the road, she said that it was fair enough to drive on, but that it was moist or wet, and the weather
was fair, too. 15 As to whether the accused-petitioner was under the influence of liquor at the time of the accident, she testified that he was not.
16
In the light of the testimony of Dolores Balcita, the eyewitness of the accident presented by the prosecution, there is absolutely no evidence
on record to show that the accused was negligent in driving his jeep.
The petitioner testified that before reaching the portion of the road where the jeep fell he noticed that the rear wheel skidded, while driving from
8 to 10 kilometers per hour; that as a precautionary measure, he directed the jeep towards the side of the mountain, along the side of the
mountain, but not touching the mountain; that while doing so, the late Elena Awichen suddenly held the steering wheel and he felt that her foot
stepped on his right foot which was pressed then on the accelerator; and that immediately after, the jeep suddenly swerved to the right and
went off. 17
In rebuttal to this testimony, Dolores Balcita, testified thus:
COURT :
Witness may answer.
A When I said I was [not] looking at him, I did not see and with the space of time that I was still conscious, I did not feel any movement from
my side.
COURT :
Your answer is not responsive. Is it true what the accused said?
A I did not see, sir. 18
From the foregoing testimony of Dolores Balcita, it is apparent that she "did not see" what Elena Awichen suddenly did, and she "did not feel
any movement from (her) side". These answers of Dolores Balcita are all in the negative and equivocal. They do not deny or preclude the truth
of the positive testimony of the accused. As held by this Court:
The testimony of a credible witness that he saw or heard at a particular time and place is more reliable than that of an equally credible witness
who with the same opportunities, testified that he did not see or hear the same thing at the same time and place. 19
Hence as to the relative weight to be given to the positive and consistent. testimony of the accused and to the negative and equivocal answers
of Dolores Balcita, the former is more worthy of credence .
Furthermore , the statement of Dolores Balcita that the accused was driving at moderate speed and not "an unreasonable ,speed' is bolstered
by the testimony, of Pablo Lizardo. then mayor of Sagada, Mountain Province, who found the jeep at second gear when he examined it not
long after the incident. 20 Such fact shows that the accused-petitioner could not have been driving the jeep at a fast rate of speed.
Mr. Justice Gatmaitan, in voting to grant the motion for reconsideration, said:
... but that statement of the Majority would most clearly show that its position is that appellant's negligence, the proximate cause of the
tragedy, was appellant's unreasonable speed which has been refuted by the very evidence of prosecution, for here, it can hardly be debated
that the proximate cause was the skidding of the rear wheels, there is nothing, absolutely nothing in the entire record which would pin upon
him the fault for that, prosecution witnesses concede that he was driving moderately, the skidding of the rear wheels was to my mind,
undisputably an unforeseen cause, because of this, I cannot rest easy on conviction and therefore register my final vote for acquittal. 21
It is obvious that the proximate cause of the tragedy was the skidding of the rear wheels of the jeep and not the "unreasonable speed" of the
petitioner because there is no evidence on record to prove or support the finding that the petitioner was driving a at "an unreasonable speed".
It is a well known physical tact that cars may skid on greasy or slippery roads, as in the instant case, without fault on account of the manner of
handling the car. Skidding means partial or complete loss of control of the car under circumstances not necessarily implying negligence. It may
occur without fault.
No negligence as a matter of law can, therefore, be charged to the petitioner. In fact, the moment he felt that the rear wheels of the jeep
skidded, he promptly drove it to the left hand side of the road, parallel to the slope of the mountain, because as he said, he wanted to play
safe and avoid the embankment. 22
Under the particular circumstances of the instant case, the petitioner- driver who skidded could not be regarded as negligent, the skidding
being an unforeseen event, so that the petitioner had a valid excuse for his departure from his regular course. The negligence of the petitioner
not having been sufficiently established, his guilt of the crime charged has not been proven beyond reasonable doubt. He is, therefore, entitled
to acquittal.
WHEREFORE, the decision of the Court of Appeals sought to be reviewed is hereby set aside and the petitioner is ACQUITTED of the crime
charged in the information in Criminal Case No. 1056 of the Court of First Instance of Mountain Province, with costs de oficio.
SO ORDERED.
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 125138 March 2, 1999

NICHOLAS Y. CERVANTES, petitioner,
vs.
COURT OF APPEALS AND THE PHILIPPINE AIR LINES, INC., respondent.
PURISMA, J.:
This Petition for Review on certiorari assails the 25 July 1995 decision of the Court of Appeals 1 in CA GR CV No. 41407, entitled "Nicholas Y.
Cervantes vs. Philippine Air Lines Inc.", affirming in toto the judgment of the trial court dismissing petitioner's complaint for damages.
On March 27, 1989, the private respondent, Philippines Air Lines, Inc. (PAL), issued to the herein petitioner, Nicholas Cervantes (Cervantes), a
round trip plane ticket for Manila-Honolulu-Los Angeles-Honolulu-Manila, which ticket expressly provided an expiry of date of one year from
issuance, i.e., until March 27, 1990. The issuance of the said plane ticket was in compliance with a Compromise Agreement entered into
between the contending parties in two previous suits, docketed as Civil Case Nos. 3392 and 3451 before the Regional Trial Court in Surigao
City. 2
On March 23, 1990, four days before the expiry date of subject ticket, the petitioner used it. Upon his arrival in Los Angeles on the same day,
he immediately booked his Los Angeles-Manila return ticket with the PAL office, and it was confirmed for the April 2, 1990 flight.
Upon learning that the same PAL plane would make a stop-over in San Francisco, and considering that he would be there on April 2, 1990,
petitioner made arrangements with PAL for him to board the flight In San Francisco instead of boarding in Las Angeles.
On April 2, 1990, when the petitioner checked in at the PAL counter in San Francisco, he was not allowed to board. The PAL personnel
concerned marked the following notation on his ticket: "TICKET NOT ACCEPTED DUE EXPIRATION OF VALIDITY."
Aggrieved, petitioner Cervantes filed a Complaint for Damages, for breach of contract of carriage docketed as Civil Case No. 3807 before
Branch 32 of the Regional Trial Court of Surigao del Norte in Surigao City. But the said complaint was dismissed for lack of merit. 3
On September 20, 1993, petitioner interposed an appeal to the Court of Appeals, which came out with a Decision, on July 25, 1995, upholding
the dismissal of the case.
On May 22, 1996, petitioner came to this Court via the Petition for Review under consideration.
The issues raised for resolution are: (1) Whether or not the act of the PAL agents in confirming subject ticket extended the period of validity of
petitioner's ticket; (2) Whether or not the defense of lack of authority was correctly ruled upon; and (3) Whether or not the denial of the award
for damages was proper.
To rule on the first issue, there is a need to quote the findings below. As a rule, conclusions and findings of fact arrived at by the trial court are
entitled to great weight on appeal and should not be disturbed unless for strong and cogent reasons. 4
The facts of the case as found by the lower court 5 are, as follows:
The plane ticket itself (Exhibit A for plaintiff; Exhibit 1 for defendant) provides that it is not valid after March 27, 1990. (Exhibit 1-F). It is also
stipulated in paragraph 8 of the Conditions of Contract (Exhibit 1, page 2) as follows:
8. This ticket is good for carriage for one year from date of issue, except as otherwise provided in this ticket, in carrier's tariffs, conditions of
carriage, or related regulations. The fare for carriage hereunder is subject to change prior to commencement of carriage. Carrier may refuse
transportation if the applicable fare has not been paid. 6
The question on the validity of subject ticket can be resolved in light of the ruling in the case of Lufthansa vs. Court of Appeals. 7 In the said
case, the Tolentinos were issued first class tickets on April 3, 1982, which will be valid until April 10, 1983. On June 10, 1982, they changed
their accommodations to economy class but the replacement tickets still contained the same restriction. On May 7, 1983, Tolentino requested
that subject tickets be extended, which request was refused by the petitioner on the ground that the said tickets had already expired. The nonextension of their tickets prompted the Tolentinos to bring a complaint for breach of contract of carriage against the petitioner. In ruling against
the award of damages, the Court held that the "ticket constitute the contract between the parties. It is axiomatic that when the terms are clear
and leave no doubt as to the intention of the contracting parties, contracts are to be interpreted according to their literal meaning."
In his effort to evade this inevitable conclusion, petitioner theorized that the confirmation by the PAL's agents in Los Angeles and San
Francisco changed the compromise agreement between the parties.
As aptly by the appellate court:
. . . on March 23, 1990, he was aware of the risk that his ticket could expire, as it did, before he returned to the Philippines.' (pp. 320-321,
Original Records) 8
The question is: "Did these two (2) employees, in effect, extend the validity or lifetime of the ticket in question? The answer is in the negative.
Both had no authority to do so. Appellant knew this from the very start when he called up the Legal Department of appellee in the Philippines
before he left for the United States of America. He had first hand knowledge that the ticket in question would expire on March 27, 1990 and
that to secure an extension, he would have to file a written request for extension at the PAL's office in the Philippines (TSN, Testimony of
Nicholas Cervantes, August 2, 1991, pp. 20-23). Despite this knowledge, appellant persisted to use the ticket in question." 9
From the aforestated facts, it can be gleaned that the petitioner was fully aware that there was a need to send a letter to the legal counsel of
PAL for the extension of the period of validity of his ticket.
Since the PAL agents are not privy to the said Agreement and petitioner knew that a written request to the legal counsel of PAL was
necessary, he cannot use what the PAL agents did to his advantage. The said agents, according to the Court of Appeals, 10 acted without
authority when they confirmed the flights of the petitioner.
Under Article 1989 11 of the New Civil Code, the acts an agent beyond the scope of his authority do not bind the principal, unless the latter
ratifies the same expressly or impliedly. Furthermore, when the third person (herein petitioner) knows that the agent was acting beyond his
power or authority, the principal cannot be held liable for the acts of the agent. If the said third person is aware of such limits of authority, he is
to blame, and is not entitled to recover damages from the agent, unless the latter undertook to secure the principal's ratification. 12
Anent the second issue, petitioner's stance that the defense of lack of authority on the part of the PAL employees was deemed waived under
Rule 9, Section 2 of the Revised Rules of Court, is unsustainable. Thereunder, failure of a party to put up defenses in their answer or in a
motion to dismiss is a waiver thereof.
Petitioner stresses that the alleged lack of authority of the PAL employees was neither raised in the answer nor in the motion to dismiss. But
records show that the question of whether there was authority on the part of the PAL employees was acted upon by the trial court when
Nicholas Cervantes was presented as a witness and the depositions of the PAL employees, Georgina M. Reyes and Ruth Villanueva, were
presented.
The admission by Cervantes that he was told by PAL's legal counsel that he had to submit a letter requesting for an extension of the validity of
subject tickets was tantamount to knowledge on his part that the PAL employees had no authority to extend the validity of subject tickets and
only PAL's legal counsel was authorized to do so.
However, notwithstanding PAL's failure to raise the defense of lack of authority of the said PAL agents in its answer or in a motion to dismiss,
the omission was cured since the said issue was litigated upon, as shown by the testimony of the petitioner in the course of trial. Rule 10,
Section 5 of the 1997 Rules of Civil Procedure provides:
Sec. 5. Amendment to conform, or authorize presentation of evidence. When issues not raised by the pleadings are tried with express or
implied consent of the parties, as if they had been raised in the pleadings. Such amendment of the pleadings as may be necessary to cause
them to conform to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgment; but failure
to amend does not affect the result of the trial of these issues. . . .
Thus, "when evidence is presented by one party, with the express or implied consent of the adverse party, as to issues not alleged in the
pleadings, judgment may be rendered validly as regards the said issue, which shall be treated as if they have been raised in the pleadings.
There is implied consent to the evidence thus presented when the adverse party fails to object thereto." 13
Re: the third issue, an award of damages is improper because petitioner failed to show that PAL acted in bad faith in refusing to allow him to
board its plane in San Francisco.
In awarding moral damages for breach of contract of carriage, the breach must be wanton and deliberately injurious or the one responsible
acted fraudulently or with malice or bad faith. 14 Petitioner knew there was a strong possibility that he could not use the subject ticket, so much
so that he bought a back-up ticket to ensure his departure. Should there be a finding of bad faith, we are of the opinion that it should be on the
petitioner. What the employees of PAL did was one of simple negligence. No injury resulted on the part of petitioner because he had a back-up
ticket should PAL refuse to accommodate him with the use of subject ticket.
Neither can the claim for exemplary damages be upheld. Such kind of damages is imposed by way of example or correction for the public
good, and the existence of bad faith is established. The wrongful act must be accompanied by bad faith, and an award of damages would be
allowed only if the guilty party acted in a wanton, fraudulent, reckless or malevolent manner. 15 Here, there is no showing that PAL acted in
such a manner. An award for attorney's fees is also improper.
WHEREFORE, the Petition is DENIED and the decision of the Court of Appeals dated July 25, 1995 AFFIRMED in toto. No pronouncement as
to costs.
SO ORDERED.
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 122039 May 31, 2000
VICENTE CALALAS, petitioner, vs.

COURT OF APPEALS, ELIZA JUJEURCHE SUNGA and FRANCISCO SALVA, respondents.
MENDOZA, J.:
This is a petition for review on certiorari of the decision1 of the Court of Appeals, dated March 31, 1991, reversing the contrary decision of the
Regional Trial Court, Branch 36, Dumaguete City, and awarding damages instead to private respondent Eliza Jujeurche Sunga as plaintiff in
an action for breach of contract of carriage.
The facts, as found by the Court of Appeals, are as follows:
At 10 o'clock in the morning of August 23, 1989, private respondent Eliza Jujeurche G. Sunga, then a college freshman majoring in Physical Education
at the Siliman University, took a passenger jeepney owned and operated by petitioner Vicente Calalas. As the jeepney was filled to capacity of about 24
passengers, Sunga was given by the conductor an "extension seat," a wooden stool at the back of the door at the rear end of the vehicle. On the way to
Poblacion Sibulan, Negros Occidental, the jeepney stopped to let a passenger off. As she was seated at the rear of the vehicle, Sunga gave way to the
outgoing passenger. Just as she was doing so, an Isuzu truck driven by Iglecerio Verena and owned by Francisco Salva bumped the left rear portion of
the jeepney. As a result, Sunga was injured. She sustained a fracture of the "distal third of the left tibia-fibula with severe necrosis of the underlying
skin." Closed reduction of the fracture, long leg circular casting, and case wedging were done under sedation. Her confinement in the hospital lasted
from August 23 to September 7, 1989. Her attending physician, Dr. Danilo V. Oligario, an orthopedic surgeon, certified she would remain on a cast for a
period of three months and would have to ambulate in crutches during said period. On October 9, 1989, Sunga filed a complaint for damages against
Calalas, alleging violation of the contract of carriage by the former in failing to exercise the diligence required of him as a common carrier. Calalas, on
the other hand, filed a third-party complaint against Francisco Salva, the owner of the Isuzu truck.
The lower court rendered judgment against Salva as third-party defendant and absolved Calalas of liability, holding that it was the driver of the Isuzu
truck who was responsible for the accident. It took cognizance of another case (Civil Case No. 3490), filed by Calalas against Salva and Verena, for
quasi-delict, in which Branch 37 of the same court held Salva and his driver Verena jointly liable to Calalas for the damage to his jeepney.
On appeal to the Court of Appeals, the ruling of the lower court was reversed on the ground that Sunga's cause of action was based on a contract of
carriage, not quasi-delict, and that the common carrier failed to exercise the diligence required under the Civil Code. The appellate court dismissed the
third-party complaint against Salva and adjudged Calalas liable for damages to Sunga. The dispositive portion of its decision reads:
WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE, and another one is entered ordering defendant-appellee
Vicente Calalas to pay plaintiff-appellant:
(1) P50,000.00 as actual and compensatory damages; (2) P50,000.00 as moral damages; (3) P10,000.00 as attorney's fees; and
(4) P1,000.00 as expenses of litigation; and (5) to pay the costs.
SO ORDERED.
Hence, this petition. Petitioner contends that the ruling in Civil Case No. 3490 that the negligence of Verena was the proximate cause of the
accident negates his liability and that to rule otherwise would be to make the common carrier an insurer of the safety of its passengers. He
contends that the bumping of the jeepney by the truck owned by Salva was a caso fortuito. Petitioner further assails the award of moral
damages to Sunga on the ground that it is not supported by evidence. The petition has no merit.
The argument that Sunga is bound by the ruling in Civil Case No. 3490 finding the driver and the owner of the truck liable for quasi-delict
ignores the fact that she was never a party to that case and, therefore, the principle of res judicata does not apply.
Nor are the issues in Civil Case No. 3490 and in the present case the same. The issue in Civil Case No. 3490 was whether Salva and his driver Verena
were liable for quasi-delict for the damage caused to petitioner's jeepney. On the other hand, the issue in this case is whether petitioner is liable on his
contract of carriage. The first, quasi-delict, also known as culpa aquiliana or culpa extra contractual, has as its source the negligence of the tortfeasor.
The second, breach of contract or culpa contractual, is premised upon the negligence in the performance of a contractual obligation.
Consequently, in quasi-delict, the negligence or fault should be clearly established because it is the basis of the action, whereas in breach of contract,
the action can be prosecuted merely by proving the existence of the contract and the fact that the obligor, in this case the common carrier, failed to
transport his passenger safely to his destination. 2 In case of death or injuries to passengers, Art. 1756 of the Civil Code provides that common carriers
are presumed to have been at fault or to have acted negligently unless they prove that they observed extraordinary diligence as defined in Arts. 1733
and 1755 of the Code. This provision necessarily shifts to the common carrier the burden of proof.
There is, thus, no basis for the contention that the ruling in Civil Case No. 3490, finding Salva and his driver Verena liable for the damage to
petitioner's jeepney, should be binding on Sunga. It is immaterial that the proximate cause of the collision between the jeepney and the truck
was the negligence of the truck driver. The doctrine of proximate cause is applicable only in actions for quasi-delict, not in actions involving
breach of contract. The doctrine is a device for imputing liability to a person where there is no relation between him and another party. In such
a case, the obligation is created by law itself. But, where there is a pre-existing contractual relation between the parties, it is the parties
themselves who create the obligation, and the function of the law is merely to regulate the relation thus created. Insofar as contracts of
carriage are concerned, some aspects regulated by the Civil Code are those respecting the diligence required of common carriers with regard
to the safety of passengers as well as the presumption of negligence in cases of death or injury to passengers. It provides:
Art. 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in
the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case.
Such extraordinary diligence in the vigilance over the goods is further expressed in articles 1734, 1735, and 1746, Nos. 5, 6, and 7, while the
extraordinary diligence for the safety of the passengers is further set forth in articles 1755 and 1756.
Art. 1755. A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost
diligence of very cautious persons, with due regard for all the circumstances.
Art. 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently,
unless they prove that they observed extraordinary diligence as prescribed by articles 1733 and 1755.
In the case at bar, upon the happening of the accident, the presumption of negligence at once arose, and it became the duty of petitioner to
prove that he had to observe extraordinary diligence in the care of his passengers.
Now, did the driver of jeepney carry Sunga "safely as far as human care and foresight could provide, using the utmost diligence of very cautious
persons, with due regard for all the circumstances" as required by Art. 1755? We do not think so. Several factors militate against petitioner's contention.
First, as found by the Court of Appeals, the jeepney was not properly parked, its rear portion being exposed about two meters from the broad
shoulders of the highway, and facing the middle of the highway in a diagonal angle. This is a violation of the R.A. No. 4136, as amended, or
the Land Transportation and Traffic Code, which provides:
Sec. 54. Obstruction of Traffic. No person shall drive his motor vehicle in such a manner as to obstruct or impede the passage of any vehicle, nor,
while discharging or taking on passengers or loading or unloading freight, obstruct the free passage of other vehicles on the highway.
Second, it is undisputed that petitioner's driver took in more passengers than the allowed seating capacity of the jeepney, a violation of 32(a)
of the same law. It provides:
Exceeding registered capacity. No person operating any motor vehicle shall allow more passengers or more freight or cargo in his vehicle
than its registered capacity.
The fact that Sunga was seated in an "extension seat" placed her in a peril greater than that to which the other passengers were exposed.
Therefore, not only was petitioner unable to overcome the presumption of negligence imposed on him for the injury sustained by Sunga, but
also, the evidence shows he was actually negligent in transporting passengers.
We find it hard to give serious thought to petitioner's contention that Sunga's taking an "extension seat" amounted to an implied assumption of risk. It is
akin to arguing that the injuries to the many victims of the tragedies in our seas should not be compensated merely because those passengers
assumed a greater risk of drowning by boarding an overloaded ferry. This is also true of petitioner's contention that the jeepney being bumped while it
was improperly parked constitutes caso fortuito. A caso fortuito is an event which could not be foreseen, or which, though foreseen, was inevitable. 3
This requires that the following requirements be present: (a) the cause of the breach is independent of the debtor's will; (b) the event is unforeseeable
or unavoidable; (c) the event is such as to render it impossible for the debtor to fulfill his obligation in a normal manner, and (d) the debtor did not take
part in causing the injury to the creditor.4 Petitioner should have foreseen the danger of parking his jeepney with its body protruding two meters into the
highway.
Finally, petitioner challenges the award of moral damages alleging that it is excessive and without basis in law. We find this contention well taken.
In awarding moral damages, the Court of Appeals stated: Plaintiff-appellant at the time of the accident was a first-year college student in that
school year 1989-1990 at the Silliman University, majoring in Physical Education. Because of the injury, she was not able to enroll in the
second semester of that school year. She testified that she had no more intention of continuing with her schooling, because she could not walk
and decided not to pursue her degree, major in Physical Education "because of my leg which has a defect already."
Plaintiff-appellant likewise testified that even while she was under confinement, she cried in pain because of her injured left foot. As a result of
her injury, the Orthopedic Surgeon also certified that she has "residual bowing of the fracture side." She likewise decided not to further pursue
Physical Education as her major subject, because "my left leg . . . has a defect already."
Those are her physical pains and moral sufferings, the inevitable bedfellows of the injuries that she suffered. Under Article 2219 of the Civil
Code, she is entitled to recover moral damages in the sum of P50,000.00, which is fair, just and reasonable.
As a general rule, moral damages are not recoverable in actions for damages predicated on a breach of contract for it is not one of the items
enumerated under Art. 2219 of the Civil Code.5 As an exception, such damages are recoverable: (1) in cases in which the mishap results in
the death of a passenger, as provided in Art. 1764, in relation to Art. 2206(3) of the Civil Code; and (2) in the cases in which the carrier is guilty
of fraud or bad faith, as provided in Art. 2220.6
In this case, there is no legal basis for awarding moral damages since there was no factual finding by the appellate court that petitioner acted in bad
faith in the performance of the contract of carriage. Sunga's contention that petitioner's admission in open court that the driver of the jeepney failed to
assist her in going to a nearby hospital cannot be construed as an admission of bad faith. The fact that it was the driver of the Isuzu truck who took her
to the hospital does not imply that petitioner was utterly indifferent to the plight of his injured passenger. If at all, it is merely implied recognition by
Verena that he was the one at fault for the accident.
WHEREFORE, the decision of the Court of Appeals, dated March 31, 1995, and its resolution, dated September 11, 1995, are AFFIRMED,
with the MODIFICATION that the award of moral damages is DELETED.
SO ORDERED.
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 139875
December 4, 2000
GREGORIO PESTAO and METRO CEBU AUTOBUS CORPORATION, petitioners,

vs.
Spouses TEOTIMO SUMAYANG and PAZ C. SUMAYANG, respondents.
PANGANIBAN, J.:
Factual findings of the Court of Appeals, affirming those of the trial judge, are binding on this Court. In quasi-delicts, such findings are crucial
because negligence is largely a matter of evidence. In computing an award for lost earning capacity, the life expectancy of the deceased, not
that of the heir, is used as basis.
The Case
Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the April 21, 1999 Decision and the August 6,
1999 Resolution of the Court of Appeals1 (CA) in CA-GR CV No. 30289. The questioned Decision disposed as follows:
"WHEREFORE, premises considered, the instant appeal is hereby DENIED. The assailed Decision of the lower court is hereby AFFIRMED
with the aforesaid modification regarding the award of death penalty."
The Resolution of August 6, 1999 denied reconsideration.2
The Facts
The events leading to this Petition were summarized by the Court of Appeals as follows:
"It appears from the records that at around 2:00 o'clock [o]n the afternoon of August 9, 1986, Ananias Sumayang was riding a motorcycle
along the national highway in Ilihan, Tabagon, Cebu. Riding with him was his friend Manuel Romagos. As they came upon a junction where
the highway connected with the road leading to Tabagon, they were hit by a passenger bus driven by [Petitioner] Gregorio Pestao and owned
by [Petitioner] Metro Cebu Autobus Corporation (Metro Cebu, for brevity), which had tried to overtake them, sending the motorcycle and its
passengers hurtling upon the pavement. Both Ananias Sumayang and Manuel Romagos were rushed to the hospital in Sogod, where
Sumayang was pronounced dead on arrival. Romagos was transferred to the Cebu Doctors' Hospital, but he succumbed to his injuries the day
after.
"Apart from the institution of criminal charges against Gregorio Pestao, [Respondents] Teotimo and Paz Sumayang, as heirs of Ananias
Sumayang, filed this civil action for damages against Gregorio Pestao, as driver of the passenger bus that rammed the deceased's
motorcycle, Metro Cebu, as owner and operator of the said bus, and Perla Compania de Seguros, as insurer of Metro Cebu. The case was
docketed as Civil Case No. CEB-6108.
"On November 9, 1987, upon motion of [Petitioner] Pestao, Judge Pedro C. Son ordered the consolidation of the said case with Criminal
Case No. 10624, pending in Branch 16 of the same Court, involving the criminal prosecution of Gregorio Pestao for [d]ouble [h]omicide thru
[r]eckless [i]mprudence. Joint trial of the two cases thereafter ensued, where the following assertions were made:
'[Respondents] rely mainly on the testimonies of Ignacio Neis, Pat. Aquilino Dinoy and Teotimo Sumayang, father of the deceased. Neis
declared that he saw the incident while he was sitting on a bench beside the highway; that both vehicles c[a]me from the North; that as the
motorcycle approached the junction to Tab[a]gon, the driver Ananias Sumayang signalled with his left arm to indicate that he was taking the
Tab[a]gon Road; that the motorcycle did turn left but as it did so, it was bumped by an overspeeding bus; that the force of the impact threw
Ananias Sumayang and his companion Manuel Romagos about 14 meters away. The motorcycle, Neis continued, was badly damaged as it
was dragged by the bus.
'On the other hand, Pat. Dinoy testified that he was in the nearby house of Ruben Tiu [when] he heard the sound or noise caused by the
collision; that he immediately went to the scene where he found Ananias Sumayang and Manuel Romagos lying on the road bleeding and
badly injured; that he requested the driver of a PU vehicle to take them to a hospital; that he took note of the various distances which he
included in his sketch (Exh. J) that the probable point of impact was at the left lane of the highway and right at the junction to Tab[a]gon (Exh
J-11); that he based his conclusion on the 'scratches' caused by the motorcycle's footrest on the asphalt pavement; that he described the
damage caused to the motorcycle in his sketch (Exh J); that on the part of the bus, the right end of its front bumper was bent and the right
portion of the radiator grill was dented. Pat. Dinoy acknowledged that he met at the scene Ignacio Neis who informed him that he saw the
incident.
'On the contrary, Pestao blamed Sumayang for the accident. He testified that when he first blew the horn the motorcycle which was about 15
or 20 meters ahead went to the right side of the highway that he again blew the horn and accelerated in order to overtake the motorcycle; that
when he was just one meter behind, the motorcycle suddenly turned left towards the Tab[a]gon [R]oad and was bumped by his bus; that he
was able to apply his break only after the impact. Pestao's testimony was corroborated by Ireneo Casilia who declared that he was one of the
passengers of the bus; that the motorcycle suddenly turned left towards Tab[a]gon [R]oad without giving any signal to indicate its maneuver;
that the bus was going at 40 kph when the accident occurred.
'To substantiate its defense of bonos pater familias [petitioner] [c]orporation recalled to the witness box Gregorio Pestao who explained how
his driving experience and ability were tested by the company before he was hired. He further declared that the management gave regular
lectures to drivers and conductors touching on various topics like speeding, parking, loading and treatment of passengers, and that before he
took to the road at 2:30 AM of that day he checked together with the mechanic the tires, brake, signal lights as well as the tools to be brought
along. He did the same thing before commencing his return trip from Hagnaya, San Remegio later in the day.
'The corporation also presented its maintenance supervisor, Agustin Pugeda, Jr., and its manager, Alfonso Corominas, Jr. who corroborated
Pestao's testimony that his driving ability was thoroughly tested, and that all drivers underwent periodic lecture on various aspects of safety
driving including pertinent traffic regulations. They also confirmed the thorough checkup of every vehicle before it would depart and that the
performance of the drivers was being monitored by several inspectors posted at random places along the route.'
"In judgment, the lower court found [petitioners] liable to the [respondents], in the amounts of P30,000.00 for death indemnity, P829,079 for
loss of earning capacity of the deceased Ananias Sumayang, and P36,000.00 for necessary interment expenses. The liability of defendant
Perla Compania de Seguros, Inc., however, was limited only to the amount stipulated in the insurance policy, which [was] P12,000 for death
indemnity and P4,500.00 for burial expenses.
"In so ruling, the lower court found [Petitioner] Pestao to have been negligent in driving the passenger bus that hit the deceased. It was
shown that Pestao negligently attempted to overtake the motorcycle at a dangerous speed as they were coming upon a junction in the road,
and as the motorcycle was about to turn left towards Tabagon. The court likewise found Metro Cebu directly and primarily liable, along with
Pestao, the latter's employer under Article 2180 of the Civil Code, as [Petitioner] Metro Cebu failed to present evidence to prove that it had
observed . . . [the] diligence of a good father of a family to prevent damage. Nor has Metro Cebu proven that it had exercised due diligence in
the supervision of its employees and in the maintenance of vehicles."3
Ruling of the Court of Appeals
The CA affirmed respondent's liability for the accident and for Sumayang's death. Pestao was negligent when he tried to overtake the victim's
motorcycle at the Tabagon junction. As a professional driver operating a public transport vehicle, he should have taken extra precaution to
avoid accidents, knowing that it was perilous to overtake at a junction, where adjoining roads had brought about merging and diverging traffic.
The appellate court opined that Metro Cebu had shown laxity in the conduct of its operations and in the supervision of its employees. By
allowing the bus to ply its route despite the defective speedometer, said petitioner showed its indifference towards the proper maintenance of
its vehicles. Having failed to observe the extraordinary diligence required of public transportation companies, it was held vicariously liable to
the victims of the vehicular accident.
In accordance with prevailing jurisprudence, the CA raised to P50,000 the granted indemnity for the death of the victim. It also affirmed the
award of loss of earning capacity based on his life expectancy. Such liability was assessed, not as a pension for the claiming heirs, but as a
penalty and an indemnity for the driver's negligent act.
Hence, this Petition.4
Issues
Petitioners submit the following issues5 for our consideration:
1) The Court of Appeals misapplied facts of weight and substance affecting the result of the case.
2) The Court of Appeals misapplied R.A. 4136 as regards the behavior of the deceased at the time of the accident.
3) The Court of Appeals erred in ruling that the award of damages representing income that deceased could have earned be
considered a penalty.
4) The Court of Appeals, contrary to Article 2204, Civil Code, raised the award of P30,000.00 damages representing indemnity for
death to P50,000.00.
5) The Court of Appeals used as basis for the loss of earning capacity, the life expectancy of the [d]eceased instead of that of the
respondents which was shorter."6
In short, they raise these questions: whether the CA erred (1) in applying Section 45 of RA 4136 when it ruled that negligence in driving was
the proximate cause of the accident; (2) in increasing the civil indemnity from P30,000 to P50,000; and (3) in using the life expectancy of the
deceased instead of the life expectancies of respondents.
The Court's Ruling
The Petition has no merit.
First Issue: Negligence
Petitioners contend that Pestao was not under any obligation to slow down when he overtook the motorcycle, because the deceased had
given way to him upon hearing the bus horn. Seeing that the left side of the road was clearly visible and free of oncoming traffic, Pestao
accelerated his speed to pass the motorcycle. Having given way to the bus, the motorcycle driver should have slowed down until he had been
overtaken.
They further contend that the motorcycle was not in the middle of the road nearest to the junction as found by the trial and the appellate
courts, but was on the inner lane. This explains why the damage on the bus were all on the right side - the right end of the bumper and the
right portion of the radiator grill were bent and dented. Hence, they insist that it was the victim who was negligent.
We disagree. Petitioners are raising a question of fact based on Pestao's testimony contradicting that of Eyewitness Ignacio Neis and on the
location of the dents on the bumper and the grill. Neis testified that as the two vehicles approached the junction, the victim raised his left arm
to signal that he was turning left to Tabagon, but that the latter and his companion were thrown off the motorcycle after it was bumped by the
overspeeding bus.
These contentions have already been passed upon by the trial and the appellate courts. We find no cogent reason to reverse or modify their
factual findings. The CA agreed with the trial court that the vehicular collision was caused by Pestao's negligence when he attempted to
overtake the motorcycle. As a professional driver operating a public transport bus, he should have anticipated that overtaking at a junction was
a perilous maneuver and should thus have exercised extreme caution.
Factual findings of the CA affirming those of the trial court are conclusive and binding on this Court. Petitioners failed to demonstrate that this
case falls under any of the recognized exceptions to this rule.7 Indeed, the issue of negligence is basically factual and, in quasi-delicts, crucial
in the award of damages.
Petitioners aver that the CA was wrong in attributing the accident to a faulty speedometer and in implying that the accident could have been
avoided had this instrument been properly functioning.
This contention has no factual basis. Under Articles 2180 and 2176 of the Civil Code, owners and managers are responsible for damages
caused by their employees. When an injury is caused by the negligence of a servant or an employee, the master or employer is presumed to
be negligent either in the selection or in the supervision of that employee. This presumption may be overcome only by satisfactorily showing
that the employer exercised the care and the diligence of a good father of a family in the selection and the supervision of its employee. 8
The CA said that allowing Pestao to ply his route with a defective speedometer showed laxity on the part of Metro Cebu in the operation of its
business and in the supervision of its employees. The negligence alluded to here is in its supervision over its driver, not in that which directly
caused the accident. The fact that Pestao was able to use a bus with a faulty speedometer shows that Metro Cebu was remiss in the
supervision of its employees and in the proper care of its vehicles. It had thus failed to conduct its business with the diligence required by law.
Second Issue: Life Indemnity
Petitioners aver that the CA erred in increasing the award for life indemnity from P30,000 to P50,000, without specifying any aggravating
circumstance to justify the increment as provided in the Civil Code.9
This contention is untenable. The indemnity for death caused by a quasi-delict used to be pegged at P3,000, based on Article 2206 of the Civil
Code. However, the amount has been gradually increased through the years because of the declining value of our currency. At present,
prevailing jurisprudence fixes the amount at P50,000.10
Third Issue: Loss of Earning Capacity
Petitioners cite Villa Rey Transit, Inc. v. Court of Appeals, 11 which held:
"The determination of the indemnity to be awarded to the heirs of a deceased person has therefore no fixed basis. . . . The life expectancy of
the deceased or of the beneficiary, whichever is shorter, is an important factor . . . "
They contend that the CA used the wrong basis for its computation of earning capacity.
We disagree. The Court has consistently computed the loss of earning capacity based on the life expectancy of the deceased, 12 and not on
that of the heir.13 Even Villa Rey Transit did likewise.
The award for loss of earning capacity is based on two factors: (1) the number of years on which the computation of damages is based and (2)
the rate at which the loss sustained by the heirs is fixed.14 The first factor refers to the life expectancy, which takes into consideration the
nature of the victim's work, lifestyle, age and state of health prior to the accident. The second refers to the victim's earning capacity minus the
necessary living expenses. Stated otherwise, the amount recoverable is that portion of the earnings of the deceased which the beneficiary
would have received the net earnings of the deceased.15
WHEREFORE, the Petition is DENIED and the assailed Decision and Resolution AFFIRMED. Cost against petitioners.1wphi1.nt
SO ORDERED.
SUPREME COURT
Manila
EN BANC
G.R. No. L-8034
November 18, 1955
CORNELIA A. DE GILLACO, ET AL., plaintiffs-appellees,

vs.
MANILA RAILROAD COMPANY, defendant-appellant.
First Assistant Corporate Counsel Federico C. Alikpala and Attorney Higino R. Francisco for appellant.
Restituto Luna for appellees.
REYES, J.B.L., J.:
The Manila Railroad Company has appealed from a judgment of the Court of First Instance of Laguna sentencing it to pay P4,000 damages to
the appellees herein, the widow and children of the late Tomas Gillaco, shot by an employee of the Company in April, 1946.
The judgment was rendered upon the following stipulation of facts:
That at about 7:30 a.m., on the morning of April 1, 1946, Lieut. Tomas Gillaco, husband of the plaintiff, was a passenger in the early
morning train of the Manila Railroad Company from Calamba, Laguna to Manila;
That when the train reached the Paco Railroad station, Emilio Devesa, a train guard of the Manila Railroad Company assigned in
the Manila-San Fernando, La Union Line, happened to be in said station waiting for the same train which would take him to Tutuban
Station, where he was going to report for duty;
That Emilio Devesa had a long standing personal grudge against Tomas Gillaco, same dating back during the Japanese occupation;
That because of this personal grudge, Devesa shot Gillaco with the carbine furnished to him by the Manila Railroad Company for his
use as such train guard, upon seeing him inside the train coach;
That Tomas Gillaco died as a result of the would which he sustained from the shot fired by Devesa.
It is also undisputed that Devesa was convicted with homicide by final judgment of the Court of Appeals.
Appellant's contention is that, on the foregoing facts, no liability attaches to it as employer of the killer, Emilio Devesa; that it is not responsible
subsidiary ex delicto, under Art. 103 of the Revised Penal Code, because the crime was not committed while the slayer was in the actual
performance of his ordinary duties and service; nor is it responsible ex contractu, since the complaint did not aver sufficient facts to establish
such liability, and no negligence on appellant's party was shown. The Court below held the Railroad company responsible on the ground that a
contract of transportation implies protection of the passengers against acts of personal violence by the agents or employees of the carrier.
There can be no quarrel with the principle that a passenger is entitled to protection from personal violence by the carrier or its agents or
employees, since the contract of transportation obligates the carrier to transport a passenger safely to his destination. But under the law of the
case, this responsibility extends only to those that the carrier could foresee or avoid through the exercise of the degree of car and diligence
required of it.
Discussing the basis of a carrier's liability under the old Civil Code of 1889 (which was in force in 1946, when Gillaco was shot) this Court said
in Lasam vs. Smith (45 Phil., 657):
In our opinion, the conclusions of the court below are entirely correct. That upon the facts stated the defendant's liability, if any, is
contractual, is well settled by previous decisions of the court, beginning with the case of Rakes vs. Atlantic, Gulf & Pacific Co. (7
Phil., 359), and the distinction between extra-contractual liability and contractual liability has been so ably and exhaustively
discussed in various other cases that nothing further need here be said upon that subject. (See Cangco vs. Manila Railroad Co., 38
Phil., 768; Manila Railroad vs. Compaia Transatlantica and Atlantic, Gulf & Pacific Co., 38 Phil., 875; De Guia vs. Manila Electric
Railroad & Light Co., 40 Phil., 706). It is sufficient to reiterate that the source of the defendant's legal liability is the contract of
carriage; that by entering into that contract he bound himself to carry the plaintiff safely and securely to their destination; and that
having failed to do so he is liable in damages unless he shows that the failure to fulfill his obligation was due to causes mentioned in
article 1105 of the Civil Code, which reads as follows:
"No one shall be liable for events which could not be foreseen or which, even if foreseen, were inevitable, with the exception of the
cases in which the law expressly provides otherwise and those in which the obligation itself imposes such liability."
The act of guard Devesa in shooting passenger Gillaco (because of a personal grudge nurtured against the latter since the Japanese
occupation) was entirely unforeseeable by the Manila Railroad Co. The latter had no means to ascertain or anticipate that the two would meet,
nor could it reasonably foresee every personal rancor that might exist between each one of its many employees and any one of the thousands
of eventual passengers riding in its trains. The shooting in question was therefore "caso fortuito" within the definition of article 105 of the old
Civil Code, being both unforeseeable and inevitable under the given circumstances; and pursuant to established doctrine, the resulting breach
of appellant's contract of safe carriage with the late Tomas Gillaco was excused thereby.
No doubt that a common carrier is held to a very high degree of care and diligence in the protection of its passengers; but, considering the
vast and complex activities of modern rail transportation, to require of appellant that it should guard against all possible misunderstanding
between each and every one of its employees and every passenger that might chance to ride in its conveyances at any time, strikes us as
demanding diligence beyond what human care and foresight can provide.
The lower Court and the appellees both relied on the American authorities that particularly hold carriers to be insurers of the safety of their
passengers against willful assault and intentional ill treatment on the part of their servants, it being immaterial that the act should be one of
private retribution on the part of the servant, impelled by personal malice toward the passenger (10 Am. Jur. 108; Ed. Note to Gassenheimer
vs. Wester R. Co. 40 LRA (NS), p. 999, et seq.) But as can be inferred from the previous jurisprudence of this Court , the Civil Code of 1889
did not impose such absolute liability (Lasam vs. Smith, supra). The liability of a carrier as an insurer was not recognized in this jurisdiction
(Government vs. Inchausti & Co., 40 Phil., 219; Oriental Comm. Co. vs. Naviera Filipina, 38 Off. Gaz., 1020).
Another very important consideration that must be borne in mind is that, when the crime took place, the guard Devesa had no duties to
discharge in connection with the transportation of the deceased from Calamba to Manila. The stipulation of facts is clear that when Devesa
shot and killed Gillaco, Devesa was assigned to guard the Manila-San Fernando (La Union) trains, and he was at Paco Station awaiting
transportation to Tutuban, the starting point of the train that he was engaged to guard. In fact, his tour of duty was to start at 9:00 a.m., two
hours after the commission of the crime. Devesa was therefore under no obligation to safeguard the passenger of the Calamba-Manila train,
where the deceased was riding; and the killing of Gillaco was not done in line of duty. The position of Devesa at the time was that of another
would be passenger, a stranger also awaiting transportation, and not that of an employee assigned to discharge any of the duties that the
Railroad had assumed by its contract with the deceased. As a result, Devesa's assault cannot be deemed in law a breach of Gillaco's contract
of transportation by a servant or employee of the carrier. We agree with the position taken by the Supreme Court of Texas in a similar case,
where it held:
The only good reason for making the carrier responsible for the misconduct of the servant perpetrated in his own interest, and not in
that of his employer, or otherwise within the scope of his employment, is that the servant is clothed with the delegated authority, and
charge with the duty by the carrier, to execute his undertaking with the passenger. And it cannot be said, we think, that there is any
such delegation to the employees at a station with reference to passenger embarking at another or traveling on the train. Of course,
we are speaking only of the principle which holds a carrier responsible for wrong done to passenger by servants acting in their own
interest, and not in that of the employer. That principle is not the ordinary rule, respondent superior, by which the employer is held
responsible only for act or omissions of the employee in the scope of his employment; but the only reason in our opinion for a
broader liability arises from the fact that the servant, in mistreating the passenger wholly for some private purpose of his own, in the
very act, violates the contractual obligation of the employer for the performance of which he has put the employee in his place. The
reason does not exist where the employee who committed the assault was never in a position in which it became his duty to his
employer to represent him in discharging any duty of the latter toward the passenger. The proposition that the carrier clothes every
employee engaged in the transportation business with the comprehensive duty of protecting every passenger with whom he may in
any way come in contact, and hereby makes himself liable for every assault commited by such servant, without regard to the inquiry
whether or not the passenger has come within the sphere of duty of that servant as indicated by the employment, is regarded as not
only not sustained by the authorities, but as being unsound and oppressive both to the employer and the employee. (Houston & T.
C. R. Co. vs. Bush, 32 LRA (NS), p. 1205.)
Wherefore, the judgment appealed from is reversed and the complaint ordered dismissed, without cost. So ordered.

SUPREME COURT
Manila
EN BANC
G.R. No. L-22272
June 26, 1967
ANTONIA MARANAN, plaintiff-appellant,

vs.
PASCUAL PEREZ, ET AL., defendants.
PASCUAL PEREZ, defendant appellant.
Pedro Panganiban for plaintiff-appellant.
Magno T. Bueser for defendant-appellant.
BENGZON, J.P., J.:
Rogelio Corachea, on October 18, 1960, was a passenger in a taxicab owned and operated by Pascual Perez when he was stabbed and
killed by the driver, Simeon Valenzuela.
Valenzuela was prosecuted for homicide in the Court of First Instance of Batangas. Found guilty, he was sentenced to suffer imprisonment and
to indemnify the heirs of the deceased in the sum of P6,000. Appeal from said conviction was taken to the Court of Appeals.1wph1.t
On December 6 1961, while appeal was pending in the Court of Appeals, Antonia Maranan, Rogelio's mother, filed an action in the Court of
First Instance of Batangas to recover damages from Perez and Valenzuela for the death of her son. Defendants asserted that the deceased
was killed in self-defense, since he first assaulted the driver by stabbing him from behind. Defendant Perez further claimed that the death was
a caso fortuito for which the carrier was not liable.
The court a quo, after trial, found for the plaintiff and awarded her P3,000 as damages against defendant Perez. The claim against defendant
Valenzuela was dismissed. From this ruling, both plaintiff and defendant Perez appealed to this Court, the former asking for more damages
and the latter insisting on non-liability. Subsequently, the Court of Appeals affirmed the judgment of conviction earlier mentioned, during the
pendency of the herein appeal, and on May 19, 1964, final judgment was entered therein. (Rollo, p. 33).
Defendant-appellant relies solely on the ruling enunciated in Gillaco v. Manila Railroad Co., 97 Phil. 884, that the carrier is under no absolute
liability for assaults of its employees upon the passengers. The attendant facts and controlling law of that case and the one at bar are very
different however. In the Gillaco case, the passenger was killed outside the scope and the course of duty of the guilty employee. As this Court
there found:
x x x when the crime took place, the guard Devesa had no duties to discharge in connection with the transportation of the deceased
from Calamba to Manila. The stipulation of facts is clear that when Devesa shot and killed Gillaco, Devesa was assigned to guard
the Manila-San Fernando (La Union) trains, and he was at Paco Station awaiting transportation to Tutuban, the starting point of the
train that he was engaged to guard. In fact, his tour of duty was to start at 9:00 two hours after the commission of the crime. Devesa
was therefore under no obligation to safeguard the passengers of the Calamba-Manila train, where the deceased was riding; and
the killing of Gillaco was not done in line of duty. The position of Devesa at the time was that of another would be passenger, a
stranger also awaiting transportation, and not that of an employee assigned to discharge any of the duties that the Railroad had
assumed by its contract with the deceased. As a result, Devesa's assault can not be deemed in law a breach of Gillaco's contract of
transportation by a servant or employee of the carrier. . . . (Emphasis supplied)
Now here, the killing was perpetrated by the driver of the very cab transporting the passenger, in whose hands the carrier had entrusted the
duty of executing the contract of carriage. In other words, unlike the Gillaco case, the killing of the passenger here took place in the course of
duty of the guilty employee and when the employee was acting within the scope of his duties.
Moreover, the Gillaco case was decided under the provisions of the Civil Code of 1889 which, unlike the present Civil Code, did not impose
upon common carriers absolute liability for the safety of passengers against wilful assaults or negligent acts committed by their employees.
The death of the passenger in the Gillaco case was truly a fortuitous event which exempted the carrier from liability. It is true that Art. 1105 of
the old Civil Code on fortuitous events has been substantially reproduced in Art. 1174 of the Civil Code of the Philippines but both articles
clearly remove from their exempting effect the case where the law expressly provides for liability in spite of the occurrence of force majeure.
And herein significantly lies the statutory difference between the old and present Civil Codes, in the backdrop of the factual situation before
Us, which further accounts for a different result in the Gillaco case. Unlike the old Civil Code, the new Civil Code of the Philippines expressly
makes the common carrier liable for intentional assaults committed by its employees upon its passengers, by the wording of Art. 1759 which
categorically states that
Common carriers are liable for the death of or injuries to passengers through the negligence or willful acts of the former's
employees, although such employees may have acted beyond the scope of their authority or in violation of the orders of the
common carriers.
The Civil Code provisions on the subject of Common Carriers1 are new and were taken from Anglo-American Law.2 There, the basis of the
carrier's liability for assaults on passengers committed by its drivers rests either on (1) the doctrine of respondeat superior or (2) the principle
that it is the carrier's implied duty to transport the passenger safely.3
Under the first, which is the minority view, the carrier is liable only when the act of the employee is within the scope of his authority and duty. It
is not sufficient that the act be within the course of employment only.4
Under the second view, upheld by the majority and also by the later cases, it is enough that the assault happens within the course of the
employee's duty. It is no defense for the carrier that the act was done in excess of authority or in disobedience of the carrier's orders. 5 The
carrier's liability here is absolute in the sense that it practically secures the passengers from assaults committed by its own employees. 6
As can be gleaned from Art. 1759, the Civil Code of the Philippines evidently follows the rule based on the second view. At least three very
cogent reasons underlie this rule. As explained in Texas Midland R.R. v. Monroe, 110 Tex. 97, 216 S.W. 388, 389-390, and Haver v. Central
Railroad Co., 43 LRA 84, 85: (1) the special undertaking of the carrier requires that it furnish its passenger that full measure of protection
afforded by the exercise of the high degree of care prescribed by the law, inter alia from violence and insults at the hands of strangers and
other passengers, but above all, from the acts of the carrier's own servants charged with the passenger's safety; (2) said liability of the carrier
for the servant's violation of duty to passengers, is the result of the formers confiding in the servant's hands the performance of his contract to
safely transport the passenger, delegating therewith the duty of protecting the passenger with the utmost care prescribed by law; and (3) as
between the carrier and the passenger, the former must bear the risk of wrongful acts or negligence of the carrier's employees against
passengers, since it, and not the passengers, has power to select and remove them.
Accordingly, it is the carrier's strict obligation to select its drivers and similar employees with due regard not only to their technical competence
and physical ability, but also, no less important, to their total personality, including their patterns of behavior, moral fibers, and social attitude.
Applying this stringent norm to the facts in this case, therefore, the lower court rightly adjudged the defendant carrier liable pursuant to Art.
1759 of the Civil Code. The dismissal of the claim against the defendant driver was also correct. Plaintiff's action was predicated on breach of
contract of carriage7 and the cab driver was not a party thereto. His civil liability is covered in the criminal case wherein he was convicted by
final judgment.
In connection with the award of damages, the court a quo granted only P3,000 to plaintiff-appellant. This is the minimum compensatory
damages amount recoverable under Art. 1764 in connection with Art. 2206 of the Civil Code when a breach of contract results in the
passenger's death. As has been the policy followed by this Court, this minimal award should be increased to P6,000. As to other alleged actual
damages, the lower court's finding that plaintiff's evidence thereon was not convincing, 8 should not be disturbed. Still, Arts. 2206 and 1764
award moral damages in addition to compensatory damages, to the parents of the passenger killed to compensate for the mental anguish they
suffered. A claim therefor, having been properly made, it becomes the court's duty to award moral damages.9 Plaintiff demands P5,000 as
moral damages; however, in the circumstances, We consider P3,000 moral damages, in addition to the P6,000 damages afore-stated, as
sufficient. Interest upon such damages are also due to plaintiff-appellant. 10
Wherefore, with the modification increasing the award of actual damages in plaintiff's favor to P6,000, plus P3,000.00 moral damages, with
legal interest on both from the filing of the complaint on December 6, 1961 until the whole amount is paid, the judgment appealed from is
affirmed in all other respects. No costs. So ordered.

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-55347 October 4, 1985
PHILIPPINE NATIONAL RAILWAYS, petitioner,
vs.
THE HONORABLE COURT OF APPEALS and ROSARIO TUPANG, respondents.
Arturo Samaniego for private respondent.
ESCOLIN, J.:
Invoking the principle of state immunity from suit, the Philippine National Railways, PNR for short, instituted this petition for review on certiorari
to set aside the decision of the respondent Appellate Court which held petitioner PNR liable for damages for the death of Winifredo Tupang, a
paying passenger who fell off a train operated by the petitioner.
The pertinent facts are summarized by the respondent court as follows:
The facts show that on September 10, 1972, at about 9:00 o'clock in the evening, Winifredo Tupang, husband of plaintiff
Rosario Tupang, boarded 'Train No. 516 of appellant at Libmanan, Camarines Sur, as a paying passenger bound for
Manila. Due to some mechanical defect, the train stopped at Sipocot, Camarines Sur, for repairs, taking some two hours
before the train could resume its trip to Manila. Unfortunately, upon passing Iyam Bridge at Lucena, Quezon, Winifredo
Tupang fell off the train resulting in his death.The train did not stop despite the alarm raised by the other passengers that
somebody fell from the train. Instead, the train conductor Perfecto Abrazado, called the station agent at Candelaria,
Quezon, and requested for verification of the information. Police authorities of Lucena City were dispatched to the Iyam
Bridge where they found the lifeless body of Winifredo Tupang.
As shown by the autopsy report, Winifredo Tupang died of cardio-respiratory failure due to massive cerebral hemorrhage
due to traumatic injury [Exhibits B and C, Folder of Exhibits],Tupang was later buried in the public cemetery of Lucena City
by the local police authorities. [Rollo, pp. 91-92]
Upon complaint filed by the deceased's widow, Rosario Tupang, the then Court of First Instance of Rizal, after trial, held the petitioner PNR
liable for damages for breach of contract of carriage and ordered "to pay the plaintiff the sum of P12,000,00 for the death of Winifredo Tupang,
plus P20,000.00 for loss of his earning capacity and the further sum of P10,000.00 as moral damages, and P2,000.00 as attorney's fees, and
costs. 1
On appeal, the Appellate Court sustained the holding of the trial court that the PNR did not exercise the utmost diligence required by law of a
common carrier. It further increased the amount adjudicated by the trial court by ordering PNR to pay the plaintiff an additional sum of
P5,000.00 as exemplary damages.
Moving for reconsideration of the above decision, the PNR raised for the first time, as a defense, the doctrine of state immunity from suit. It
alleged that it is a mere agency of the Philippine government without distinct or separate personality of its own, and that its funds are
governmental in character and, therefore, not subject to garnishment or execution. The motion was denied; the respondent court ruled that the
ground advanced could not be raised for the first time on appeal.
Hence, this petition for review.
The petition is devoid of merit. The PNR was created under Rep. Act 4156, as amended. Section 4 of the said Act provides:
The Philippine national Railways shall have the following powers:
a. To do all such other things and to transact all such business directly or indirectly necessary, incidental or conducive to
the attainment of the purpose of the corporation; and
b. Generally, to exercise all powers of a corporation under the Corporation Law.
Under the foregoing section, the PNR has all the powers, the characteristics and attributes of a corporation under the Corporation Law. There
can be no question then that the PNR may sue and be sued and may be subjected to court processes just like any other corporation. 2
The petitioner's contention that the funds of the PNR are not subject to garnishment or execution hardly raises a question of first impression.
In Philippine National Railways v. Union de Maquinistas, et al., 3 then Justice Fernando, later Chief Justice, said. "The main issue posed in this
certiorari proceeding, whether or not the funds of the Philippine National Railways, could be garnished or levied upon on execution was
resolved in two recent decisions, the Philippine National Bank v. Court of Industrial Relations [81 SCRA 314] and Philippine National Bank v.
Hon. Judge Pabalan [83 SCRA 595]. This Court in both cases answered the question in the affirmative. There was no legal bar to garnishment
or execution. The argument based on non-suability of a state allegedly because the funds are governmental in character was unavailing.So it
must be again."
In support of the above conclusion, Justice Fernando cited the Court's holding in Philippine National Bank v. Court of Industrial Relations, to
wit: "The premise that the funds could be spoken of as public in character may be accepted in the sense that the People's Homesite and
Housing Corporation was a government-owned entity. It does not follow though that they were exempt from garnishment. National Shipyard
and Steel Corporation v. Court of Industrial Relations is squarely in point. As was explicitly stated in the opinion of then Justice, later Chief
Justice, Concepcion: "The allegation to the effect that the funds of the NASSCO are public funds of the government, and that, as such, the
same may not be garnished, attached or levied upon, is untenable for, as a government- owned and controlled corporation, the NASSCO has
a personality of its own, distinct and separate from that of the Government. It has-pursuant to Section 2 of Executive Order No. 356, dated
October 23, 1950 * * *, pursuant to which the NASSCO has been established- 'all the powers of a corporation under the Corporation Law * * *.
4
As far back as 1941, this Court in the case of Manila Hotel Employees Association v. Manila Hotel Co., 5 laid down the rule that "when the
government enters into commercial business, it abandons its sovereign capacity and is to be treated like any other corporation. [Bank of the
U.S. v. Planters' Bank, 9 Waitch 904, 6 L. ed. 244]. By engaging in a particular business through the instrumentality of a corporation the
government divests itself pro hac vice of its sovereign character, so as to render the corporation subject to the rules of law governing private
corporations. 6 Of Similar import is the pronouncement in Prisco v. CIR,' that "when the government engages in business, it abdicates part of
its sovereign prerogatives and descends to the level of a citizen, ... . " In fine, the petitioner PNR cannot legally set up the doctrine of nonsuability as a bar to the plaintiff's suit for damages.
The appellate court found, the petitioner does not deny, that the train boarded by the deceased Winifredo Tupang was so over-crowded that
he and many other passengers had no choice but to sit on the open platforms between the coaches of the train. It is likewise undisputed that
the train did not even slow down when it approached the Iyam Bridge which was under repair at the time, Neither did the train stop, despite the
alarm raised by other passengers that a person had fallen off the train at lyam Bridge. 7
The petitioner has the obligation to transport its passengers to their destinations and to observe extraordinary diligence in doing so. Death or
any injury suffered by any of its passengers gives rise to the presumption that it was negligent in the performance of its obligation under the
contract of carriage. Thus, as correctly ruled by the respondent court, the petitioner failed to overthrow such presumption of negligence with
clear and convincing evidence.
But while petitioner failed to exercise extraordinary diligence as required by law, 8 it appears that the deceased was chargeable with
contributory negligence. Since he opted to sit on the open platform between the coaches of the train, he should have held tightly and
tenaciously on the upright metal bar found at the side of said platform to avoid falling off from the speeding train. Such contributory negligence,
while not exempting the PNR from liability, nevertheless justified the deletion of the amount adjudicated as moral damages. By the same
token, the award of exemplary damages must be set aside. Exemplary damages may be allowed only in cases where the defendant acted in a
wanton, fraudulent, reckless, oppressive or malevolent manner. 9 There being no evidence of fraud, malice or bad faith on the part of
petitioner, the grant of exemplary damages should be discarded.
WHEREFORE, the decision of the respondent appellate court is hereby modified by eliminating therefrom the amounts of P10,000.00 and
P5,000.00 adjudicated as moral and exemplary damages, respectively. No costs.
SO ORDERED.

CESAR L. ISAAC, plaintiff-appellant,
SUPREME COURT
vs.
Manila
EN BANC
G.R. No. L-9671
August 23, 1957
A. L. AMMEN TRANSPORTATION CO., INC., defendant-appellee.

A. L. Ammen Transportation Co., Inc., hereinafter referred to as defendant, is a corporation engaged in the business of transporting
passengers by land for compensation in the Bicol provinces and one of the lines it operates is the one connecting Legaspi City, Albay with
Naga City, Camarines Sur. One of the buses which defendant was operating is Bus No. 31. On May 31, 1951, plaintiff boarded said bus as a
passenger paying the required fare from Ligao, Albay bound for Pili, Camarines Sur, but before reaching his destination, the bus collided with
a motor vehicle of the pick-up type coming from the opposite direction, as a result of which plaintiff's left arm was completely severed and the
severed portion fell inside the bus. Plaintiff was rushed to a hospital in Iriga, Camarines Sur where he was given blood transfusion to save his
life. After four days, he was transferred to another hospital in Tabaco, Albay, where he under went treatment for three months. He was moved
later to the Orthopedic Hospital where he was operated on and stayed there for another two months. For these services, he incurred expenses
amounting to P623.40, excluding medical fees which were paid by defendant.
As an aftermath, plaintiff brought this action against defendants for damages alleging that the collision which resulted in the loss of his left arm
was mainly due to the gross incompetence and recklessness of the driver of the bus operated by defendant and that defendant incurred in
culpa contractual arising from its non-compliance with its obligation to transport plaintiff safely to his, destination. Plaintiff prays for judgment
against defendant as follows: (1) P5,000 as expenses for his medical treatment, and P3,000 as the cost of an artificial arm, or a total of
P8,000; (2) P6,000 representing loss of earning; (3) P75,000 for diminution of his earning capacity; (4) P50,000 as moral damages; and (5)
P10,000 as attorneys' fees and costs of suit.
Defendant set up as special defense that the injury suffered by plaintiff was due entirely to the fault or negligence of the driver of the pick-up
car which collided with the bus driven by its driver and to the contributory negligence of plaintiff himself. Defendant further claims that the
accident which resulted in the injury of plaintiff is one which defendant could not foresee or, though foreseen, was inevitable.
The after trial found that the collision occurred due to the negligence of the driver of the pick-up car and not to that of the driver of the bus it
appearing that the latter did everything he could to avoid the same but that notwithstanding his efforts, he was not able to avoid it. As a
consequence, the court dismissed complaint, with costs against plaintiff. This is an appeal from said decision.
It appears that plaintiff boarded a bus of defendant as paying passenger from Ligao, Albay, bound for Pili, Camarines Sur, but before reaching
his destination, the bus collided with a pick-up car which was coming from the opposite direction and, as a, result, his left arm was completely
severed and fell inside the back part of the bus. Having this background in view, and considering that plaintiff chose to hold defendant liable on
its contractual obligation to carry him safely to his place of destination, it becomes important to determine the nature and extent of the liability
of a common carrier to a passenger in the light of the law applicable in this jurisdiction.
In this connection, appellant invokes the rule that, "when an action is based on a contract of carriage, as in this case, all that is necessary to sustain
recovery is proof of the existence of the contract of the breach thereof by act or omission", and in support thereof, he cites several Philippine cases. 1
With the ruling in mind, appellant seems to imply that once the contract of carriage is established and there is proof that the same was broken by failure
of the carrier to transport the passenger safely to his destination, the liability of the former attaches. On the other hand, appellee claims that is a wrong
presentation of the rule. It claims that the decisions of this Court in the cases cited do not warrant the construction sought to be placed upon, them by
appellant for a mere perusal thereof would show that the liability of the carrier was predicated not upon mere breach of its contract of carriage but upon
the finding that its negligence was found to be the direct or proximate cause of the injury complained of. Thus, appellee contends that "if there is no
negligence on the part of the common carrier but that the accident resulting in injuries is due to causes which are inevitable and which could not have
been avoided or anticipated notwithstanding the exercise of that high degree of care and skill which the carrier is bound to exercise for the safety of his
passengers", neither the common carrier nor the driver is liable therefor.
We believe that the law concerning the liability of a common carrier has now suffered a substantial modification in view of the innovations
introduced by the new Civil Code. These innovations are the ones embodied in Articles 1733, 1755 and 1756 in so far as the relation between
a common carrier and its passengers is concerned, which, for ready reference, we quote hereunder:
ART. 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extra ordinary diligence
in the vigilance over the goods and for the safety of the passengers transported by them according to all the circumstances of each case.
Such extraordinary diligence in the vigilance over the goods is further expressed in articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while the
extraordinary diligence for the safety of the passengers is further set forth in articles 1755 and 1756.
diligence of very cautious persons, with a due regard for all the circumstances.
ART. 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently,
unless they prove that they observed extraordinary diligence as prescribed in articles 1733 and 1755.
The Code Commission, in justifying this extraordinary diligence required of a common carrier, says the following:
A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost deligence of very
cautions persons, with due regard for all circumstances. This extraordinary diligence required of common carriers is calculated to protect the
passengers from the tragic mishaps that frequently occur in connection with rapid modern transportation. This high standard of care is
imperatively demanded by the precariousness of human life and by the consideration that every person must in every way be safeguarded
against all injury. (Report of the Code Commission, pp. 35-36)" (Padilla, Civil Code of the Philippines, Vol. IV, 1956 ed., p. 197).
From the above legal provisions, we can make the following restatement of the principles governing the liability of a common carrier: (1) the
liability of a carrier is contractual and arises upon breach of its obligation. There is breach if it fails to exert extraordinary diligence according to
all circumstances of each case; (2) a carrier is obliged to carry its passenger with the utmost diligence of a very cautious person, having due
regard for all the circumstances; (3) a carrier is presumed to be at fault or to have acted negligently in case of death of, or injury to,
passengers, it being its duty to prove that it exercised extraordinary diligence; and (4) the carrier is not an insurer against all risks of travel.
The question that now arises is: Has defendant observed extraordinary diligence or the utmost diligence of every cautious person, having due
regard for all circumstances, in avoiding the collision which resulted in the injury caused to the plaintiff?
After examining the evidence in connection with how the collision occurred, the lower court made the following finding:
Hemos examinado muy detenidamente las pruebas presentadas en la vista, principalmente, las declaraciones que hemos acotado arriba, y hernos
Ilegado a la conclusion de que el demandado ha hecho, todo cuanto estuviere de su parte para evitar el accidente, pero sin embargo, no ha podido
evitarlo.
EI hecho de que el demandado, antes del choque, tuvo que hacer pasar su truck encima de los montones de grava que estaban depositados en la
orilla del camino, sin que haya ido mas alla, por el grave riesgo que corrian las vidas de sus pasajeros, es prueba concluyente de lo que tenemos
dicho, a saber: que el cuanto esuba de su parte, para evitar el accidente, sin que haya podidoevitardo, por estar fuera de su control.
The evidence would appear to support the above finding. Thus, it appears that Bus No. 31, immediately prior to the collision, was running at a
moderate speed because it had just stopped at the school zone of Matacong, Polangui, Albay. The pick-up car was at full speed and was
running outside of its proper lane. The driver of the bus, upon seeing the manner in which the pick-up was then running, swerved the bus to
the very extreme right of the road until its front and rear wheels have gone over the pile of stones or gravel situated on the rampart of the road.
Said driver could not move the bus farther right and run over a greater portion of the pile, the peak of which was about 3 feet high, without
endangering the safety of his passengers. And notwithstanding all these efforts, the rear left side of the bus was hit by the pick-up car.
Of course, this finding is disputed by appellant who cannot see eye to eye with the evidence for the appellee and insists that the collision took
place because the driver of the bus was going at a fast speed. He contends that, having seen that a car was coming from the opposite
direction at a distance which allows the use of moderate care and prudence to avoid an accident, and knowing that on the side of the road
along which he was going there was a pile of gravel, the driver of the bus should have stopped and waited for the vehicle from the opposite
direction to pass, and should have proceeded only after the other vehicle had passed. In other words, according to appellant, the act of the
driver of the bus in squeezing his way through of the bus in squeezing his way through between the oncoming pick-up and the pile of gravel
under the circumstances was considered negligent.
But this matter is one of credibility and evaluation of the evidence. This is evidence. This is the function of the trial court. The trial court has already
spoken on this matter as we have pointed out above. This is also a matter of appreciation of the situation on the part of the driver. While the position
taken by appellant appeals more to the sense of caution that one should observe in a given situation to avoid an accident or mishap, such however can
not always be expected from one who is placed suddenly in a predicament where he is not given enough time to take the course of action as he should
under ordinary circumstances. One who is placed in such a predicament cannot exercise such coolness or accuracy of judgment as is required of him
under ordinary circumstances and he cannot therefore be expected to observe the same judgment, care and precaution as in the latter. For this reason,
authorities abound where failure to observe the same degree of care that as ordinary prudent man would exercise under ordinary circumstances when
confronted with a sadden emergency was held to be warranted and a justification to exempt the carrier from liability. Thus, it was held that "where a
carrier's employee is confronted with a sudden emergency, the fact that he is obliged to act quickly and without a chance for deliberation must be taken
into account, and he is held to the some degree of care that he would otherwise be required to exercise in the absence of such emergency but must
exercise only such care as any ordinary prudent person would exercise under like circumstances and conditions, and the failure on his part to exercise
the best judgement the case renders possible does not establish lack of care and skill on his part which renders the company, liable. . . . (13 C. J. S.,
1412; 10 C. J.,970). Considering all the circumstances, we are persuaded to conclude that the driver of the bus has done what a prudent man could
have done to avoid the collision and in our opinion this relieves appellee from legibility under our law.
A circumstances which miliates against the stand of appellant is the fact borne out by the evidence that when he boarded the bus in question,
he seated himself on the left side thereof resting his left arm on the window sill but with his left elbow outside the window, this being his
position in the bus when the collision took place. It is for this reason that the collision resulted in the severance of said left arm from the body
of appellant thus doing him a great damage. It is therefore apparent that appellant is guilty of contributory negligence. Had he not placed his
left arm on the window sill with a portion thereof protruding outside, perhaps the injury would have been avoided as is the case with the other
passenger. It is to be noted that appellant was the only victim of the collision.
It is true that such contributory negligence cannot relieve appellee of its liability but will only entitle it to a reduction of the amount of damage
caused (Article 1762, new Civil Code), but this is a circumstance which further militates against the position taken by appellant in this case.
It is the prevailing rule that it is negligence per se for a passenger on a railroad voluntarily or inadvertently to protrude his arm, hand, elbow, or any other
part of his body through the window of a moving car beyond the outer edge of the window or outer surface of the car, so as to come in contact with
objects or obstacles near the track, and that no recovery can be had for an injury which but for such negligence would not have been sustained.
Plaintiff, (passenger) while riding on an interurban car, to flick the ashes, from his cigar, thrust his hand over the guard rail a sufficient distance
beyond the side line of the car to bring it in contact with the trunk of a tree standing beside the track; the force of the blow breaking his wrist.
Held, that he was guilty of contributory negligence as a matter of law. (Malakia vs. Rhode Island Co., 89 A., 337.)
Wherefore, the decision appealed from is affirmed, with cost against appellant.
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 85691 July 31, 1990
BACHELOR EXPRESS, INCORPORATED, and CRESENCIO RIVERA, petitioners,

vs.
THE HONORABLE COURT OF APPEALS (Sixth Division), RICARDO BETER, SERGIA BETER, TEOFILO RAUTRAUT and ZOETERA
RAUTRAUT, respondents.
GUTIERREZ, JR., J.:
This is a petition for review of the decision of the Court of Appeals which reversed and set aside the order of the Regional Trial Court, Branch I,
Butuan City dismissing the private respondents' complaint for collection of "a sum of money" and finding the petitioners solidarily liable for
damages in the total amount of One Hundred Twenty Thousand Pesos (P120,000.00). The petitioners also question the appellate court's
resolution denying a motion for reconsideration.
On August 1, 1980, Bus No. 800 owned by Bachelor Express, Inc. and driven by Cresencio Rivera was the situs of a stampede which resulted
in the death of passengers Ornominio Beter and Narcisa Rautraut.
The evidence shows that the bus came from Davao City on its way to Cagayan de Oro City passing Butuan City; that while at Tabon-Tabon, Butuan City, the bus
picked up a passenger; that about fifteen (15) minutes later, a passenger at the rear portion suddenly stabbed a PC soldier which caused commotion and panic
among the passengers; that when the bus stopped, passengers Ornominio Beter and Narcisa Rautraut were found lying down the road, the former already dead
as a result of head injuries and the latter also suffering from severe injuries which caused her death later. The passenger assailant alighted from the bus and ran
toward the bushes but was killed by the police. Thereafter, the heirs of Ornominio Beter and Narcisa Rautraut, private respondents herein (Ricardo Beter and
Sergia Beter are the parents of Ornominio while Teofilo Rautraut and Zoetera [should be Zotera] Rautraut are the parents of Narcisa) filed a complaint for "sum of
money" against Bachelor Express, Inc. its alleged owner Samson Yasay and the driver Rivera.
In their answer, the petitioners denied liability for the death of Ornominio Beter and Narcisa Rautraut. They alleged that ... the driver was able to transport his
passengers safely to their respective places of destination except Ornominio Beter and Narcisa Rautraut who jumped off the bus without the knowledge and
consent, much less, the fault of the driver and conductor and the defendants in this case; the defendant corporation had exercised due diligence in the choice of its
employees to avoid as much as possible accidents; the incident on August 1, 1980 was not a traffic accident or vehicular accident; it was an incident or event very
much beyond the control of the defendants; defendants were not parties to the incident complained of as it was an act of a third party who is not in any way
connected with the defendants and of which the latter have no control and supervision; ..." (Rollo, pp. 112-113). itc-asl
After due trial, the trial court issued an order dated August 8, 1985 dismissing the complaint.
Upon appeal however, the trial court's decision was reversed and set aside. The dispositive portion of the decision of the Court of Appeals states:
WHEREFORE, the Decision appealed from is REVERSED and SET ASIDE and a new one entered finding the appellees jointly and solidarily
liable to pay the plaintiffs-appellants the following amounts:
1) To the heirs of Ornominio Beter, the amount of Seventy Five Thousand Pesos (P75,000.00) in loss of earnings and support, moral
damages, straight death indemnity and attorney's fees; and,
2) To the heirs of Narcisa Rautraut, the amount of Forty Five Thousand Pesos (P45,000.00) for straight death indemnity, moral damages and
attorney's fees. Costs against appellees. (Rollo, pp. 71-72)
The petitioners now pose the following questions
What was the proximate cause of the whole incident? Why were the passengers on board the bus panicked (sic) and why were they shoving
one another? Why did Narcisa Rautraut and Ornominio Beter jump off from the running bus?
The petitioners opine that answers to these questions are material to arrive at "a fair, just and equitable judgment." (Rollo, p. 5) They claim that
the assailed decision is based on a misapprehension of facts and its conclusion is grounded on speculation, surmises or conjectures.
As regards the proximate cause of the death of Ornominio Beter and Narcisa Rautraut, the petitioners maintain that it was the act of the
passenger who ran amuck and stabbed another passenger of the bus. They contend that the stabbing incident triggered off the commotion
and panic among the passengers who pushed one another and that presumably out of fear and moved by that human instinct of selfpreservation Beter and Rautraut jumped off the bus while the bus was still running resulting in their untimely death." (Rollo, p. 6) Under these
circumstances, the petitioners asseverate that they were not negligent in the performance of their duties and that the incident was completely
and absolutely attributable to a third person, the passenger who ran amuck, for without his criminal act, Beter and Rautraut could not have
been subjected to fear and shock which compelled them to jump off the running bus. They argue that they should not be made liable for
damages arising from acts of third persons over whom they have no control or supervision.
Furthermore, the petitioners maintain that the driver of the bus, before, during and after the incident was driving cautiously giving due regard to
traffic rules, laws and regulations. The petitioners also argue that they are not insurers of their passengers as ruled by the trial court.
The liability, if any, of the petitioners is anchored on culpa contractual or breach of contract of carriage. The applicable provisions of law under
the New Civil Code are as follows:
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.
ART. 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence
in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case.
diligence of very cautious persons, with a due regard for all the circumstances.
ART. 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently,
unless they prove that they observed extraordinary diligence as prescribed in Articles 1733 and 1755.
There is no question that Bachelor Express, Inc. is a common carrier. Hence, from the nature of its business and for reasons of public policy
Bachelor Express, Inc. is bound to carry its passengers safely as far as human care and foresight can provide using the utmost diligence of
very cautious persons, with a due regard for all the circumstances.
In the case at bar, Ornominio Beter and Narcisa Rautraut were passengers of a bus belonging to petitioner Bachelor Express, Inc. and, while
passengers of the bus, suffered injuries which caused their death. Consequently, pursuant to Article 1756 of the Civil Code, petitioner Bachelor
Express, Inc. is presumed to have acted negligently unless it can prove that it had observed extraordinary diligence in accordance with Articles
1733 and 1755 of the New Civil Code.
Bachelor Express, Inc. denies liability for the death of Beter and Rautraut on its posture that the death of the said passengers was caused by a
third person who was beyond its control and supervision. In effect, the petitioner, in order to overcome the presumption of fault or negligence
under the law, states that the vehicular incident resulting in the death of passengers Beter and Rautraut was caused by force majeure or caso
fortuito over which the common carrier did not have any control.
Article 1174 of the present Civil Code states:
Except in cases expressly specified by law, or when it is otherwise declared by stipulations, or when the nature of the obligation requires the
assumption of risk, no person shall be responsible for those events which could not be foreseen, or which though foreseen, were inevitable.
The above-mentioned provision was substantially copied from Article 1105 of the old Civil Code which states"
No one shall be liable for events which could not be foreseen or which, even if foreseen, were inevitable, with the exception of the cases in
which the law expressly provides otherwise and those in which the obligation itself imposes liability.
In the case of Lasam v. Smith (45 Phil. 657 [1924]), we defined "events" which cannot be foreseen and which, having been foreseen, are
inevitable in the following manner:
... The Spanish authorities regard the language employed as an effort to define the term 'caso fortuito' and hold that the two expressions are
synonymous. (Manresa Comentarios al Codigo Civil Espaol, vol. 8, pp. 88 et seq.; Scaevola, Codigo Civil, vol. 19, pp. 526 et seq.)
The antecedent to Article 1105 is found in Law II, Title 33, Partida 7, which defines caso fortuito as 'occasion que acaese por aventura de que
non se puede ante ver. E son estos, derrivamientos de casas e fuego que enciende a so ora, e quebrantamiento de navio, fuerca de ladrones'
(An event that takes place by incident and could not have been foreseen. Examples of this are destruction of houses, unexpected fire,
shipwreck, violence of robbers ...)
Escriche defines caso fortuito as an unexpected event or act of God which could neither be foreseen nor resisted, such as floods, torrents, shipwrecks,
conflagrations, lightning, compulsion, insurrections, destruction of buildings by unforeseen accidents and other occurrences of a similar nature.
In discussing and analyzing the term caso fortuito the Enciclopedia Juridica Espaola says: 'In a legal sense and, consequently, also in
relation to contracts, a caso fortuito presents the following essential characteristics: (1) The cause of the unforeseen and unexpected
occurrence, or of the failure of the debtor to comply with his obligation, must be independent of the human will. (2) It must be impossible to
foresee the event which constitutes the caso fortuito, or if it can be foreseen, it must be impossible to avoid. (3) The occurrence must be such
as to render it impossible for the debtor to fulfill his obligation in a normal manner. And (4) the obligor (debtor) must be free from any
participation in the aggravation of the injury resulting to the creditor. (5) Enciclopedia Juridica Espaola, 309)
As will be seen, these authorities agree that some extraordinary circumstance independent of the will of the obligor or of his employees, is an
essential element of a caso fortuito. ...
The running amuck of the passenger was the proximate cause of the incident as it triggered off a commotion and panic among the passengers such
that the passengers started running to the sole exit shoving each other resulting in the falling off the bus by passengers Beter and Rautraut causing
them fatal injuries. The sudden act of the passenger who stabbed another passenger in the bus is within the context of force majeure.
However, in order that a common carrier may be absolved from liability in case of force majeure, it is not enough that the accident was caused
by force majeure. The common carrier must still prove that it was not negligent in causing the injuries resulting from such accident. Thus, as
early as 1912, we ruled:
From all the foregoing, it is concluded that the defendant is not liable for the loss and damage of the goods shipped on the lorcha Pilar by the
Chinaman, Ong Bien Sip, inasmuch as such loss and damage were the result of a fortuitous event or force majeure, and there was no
negligence or lack of care and diligence on the part of the defendant company or its agents.
This principle was reiterated in a more recent case, Batangas Laguna Tayabas Co. v. Intermediate Appellate Court (167 SCRA 379 [1988]), wherein we
ruled:
... [F]or their defense of force majeure or act of God to prosper the accident must be due to natural causes and exclusively without human intervention.
Therefore, the next question to be determined is whether or not the petitioner's common carrier observed extraordinary diligence to safeguard
the lives of its passengers.
In this regard the trial court and the appellate court arrived at conflicting factual findings.
The trial court found the following facts:
The parties presented conflicting evidence as to how the two deceased Narcisa Rautruat and Ornominio Beter met their deaths.
However, from the evidence adduced by the plaintiffs, the Court could not see why the two deceased could have fallen off the bus when their
own witnesses testified that when the commotion ensued inside the bus, the passengers pushed and shoved each other towards the door
apparently in order to get off from the bus through the door. But the passengers also could not pass through the door because according to the
evidence the door was locked.
On the other hand, the Court is inclined to give credence to the evidence adduced by the defendants that when the commotion ensued inside
the bus, the two deceased panicked and, in state of shock and fear, they jumped off from the bus by passing through the window.
It is the prevailing rule and settled jurisprudence that transportation companies are not insurers of their passengers. The evidence on record
does not show that defendants' personnel were negligent in their duties. The defendants' personnel have every right to accept passengers
absent any manifestation of violence or drunkenness. If and when such passengers harm other passengers without the knowledge of the
transportation company's personnel, the latter should not be faulted. (Rollo, pp. 46-47)
A thorough examination of the records, however, show that there are material facts ignored by the trial court which were discussed by the
appellate court to arrive at a different conclusion. These circumstances show that the petitioner common carrier was negligent in the provision
of safety precautions so that its passengers may be transported safely to their destinations. The appellate court states:
A critical eye must be accorded the lower court's conclusions of fact in its tersely written ratio decidendi. The lower court concluded that the
door of the bus was closed; secondly, the passengers, specifically the two deceased, jumped out of the window. The lower court therefore
concluded that the defendant common carrier is not liable for the death of the said passengers which it implicitly attributed to the unforeseen
acts of the unidentified passenger who went amuck.
There is nothing in the record to support the conclusion that the solitary door of the bus was locked as to prevent the passengers from passing
through. Leonila Cullano, testifying for the defense, clearly stated that the conductor opened the door when the passengers were shouting that
the bus stop while they were in a state of panic. Sergia Beter categorically stated that she actually saw her son fall from the bus as the door
was forced open by the force of the onrushing passengers.
Pedro Collango, on the other hand, testified that he shut the door after the last passenger had boarded the bus. But he had quite conveniently
neglected to say that when the passengers had panicked, he himself panicked and had gone to open the door. Portions of the testimony of
Leonila Cullano, quoted below, are illuminating:
Q When you said the conductor opened the door, the door at the front or rear portion of the bus?
A Front door.
Q And these two persons whom you said alighted, where did they pass, the fron(t) door or rear door?
A Front door.
Q What happened after there was a commotion at the rear portion of the bus? A When the commotion occurred, I stood up and I noticed that
there was a passenger who was sounded (sic). The conductor panicked because the passengers were shouting 'stop, stop'. The conductor
opened the bus.'
Accordingly, there is no reason to believe that the deceased passengers jumped from the window when it was entirely possible for them to
have alighted through the door. The lower court's reliance on the testimony of Pedro Collango, as the conductor and employee of the common
carrier, is unjustified, in the light of the clear testimony of Leonila Cullano as the sole uninterested eyewitness of the entire episode. Instead we
find Pedro Collango's testimony to be infused by bias and fraught with inconsistencies, if not notably unreliable for lack of veracity. On direct
examination, he testified:
Q So what happened to the passengers inside your bus?
COURT: Q While the bus was in motion?
A Some of the passengers jumped out of the window.
A Yes, your Honor, but the speed was slow because we have just picked up a passenger.
Atty. Gambe: Q You said that at the time of the incident the bus was running slow because you have just picked up a passenger. Can you
estimate what was your speed at that time?
Atty. Calo: No basis, your Honor, he is neither a driver nor a conductor.
COURT:
Let the witness answer. Estimate only, the conductor experienced.
COURT:
Kilometers or miles?
Witness: Not less than 30 to 40 miles.
A Miles.
Atty. Gambe: Q That is only your estimate by your experience?
A Yes, sir, estimate.
At such speed of not less than 30 to 40 miles ..., or about 48 to 65 kilometers per hour, the speed of the bus could scarcely be considered
slow considering that according to Collango himself, the bus had just come from a full stop after picking a passenger (Tsn, p. 4, Id.) and that
the bus was still on its second or third gear (Tsn., p. 12, Id.).
In the light of the foregoing, the negligence of the common carrier, through its employees, consisted of the lack of extraordinary diligence
required of common carriers, in exercising vigilance and utmost care of the safety of its passengers, exemplified by the driver's belated stop
and the reckless opening of the doors of the bus while the same was travelling at an appreciably fast speed. At the same time, the common
carrier itself acknowledged, through its administrative officer, Benjamin Granada, that the bus was commissioned to travel and take on
passengers and the public at large, while equipped with only a solitary door for a bus its size and loading capacity, in contravention of rules
and regulations provided for under the Land Transportation and Traffic Code (RA 4136 as amended.) (Rollo, pp. 23-26)
Considering the factual findings of the Court of Appeals-the bus driver did not immediately stop the bus at the height of the commotion; the bus was
speeding from a full stop; the victims fell from the bus door when it was opened or gave way while the bus was still running; the conductor panicked and
blew his whistle after people had already fallen off the bus; and the bus was not properly equipped with doors in accordance with law-it is clear that the
petitioners have failed to overcome the presumption of fault and negligence found in the law governing common carriers.
The petitioners' argument that the petitioners "are not insurers of their passengers" deserves no merit in view of the failure of the petitioners to
prove that the deaths of the two passengers were exclusively due to force majeure and not to the failure of the petitioners to observe
extraordinary diligence in transporting safely the passengers to their destinations as warranted by law. (See Batangas Laguna Tayabas Co. v.
Intermediate Appellate Court, supra).
The petitioners also contend that the private respondents failed to show to the court that they are the parents of Ornominio Beter and Narcisa
Rautraut respectively and therefore have no legal personality to sue the petitioners. This argument deserves scant consideration. We find this
argument a belated attempt on the part of the petitioners to avoid liability for the deaths of Beter and Rautraut. The private respondents were
Identified as the parents of the victims by witnesses during the trial and the trial court recognized them as such. The trial court dismissed the
complaint solely on the ground that the petitioners were not negligent.
Finally, the amount of damages awarded to the heirs of Beter and Rautraut by the appellate court is supported by the evidence. The appellate court stated:
Ornominio Beter was 32 years of age at the time of his death, single, in good health and rendering support and service to his mother. As far as
Narcisa Rautraut is concerned, the only evidence adduced is to the effect that at her death, she was 23 years of age, in good health and
without visible means of support.
In accordance with Art. 1764 in conjunction with Art. 2206 of the Civil Code, and established jurisprudence, several factors may be considered
in determining the award of damages, namely: 1) life expectancy (considering the state of health of the deceased and the mortality tables are
deemed conclusive) and loss of earning capacity; (2) pecuniary loss, loss of support and service; and (3) moral and mental suffering.
In the case of People v. Daniel (No. L-66551, April 25, 1985, 136 SCRA 92, at page 104), the High Tribunal, reiterating the rule in Villa Rey Transit, Inc.
v. Court of Appeals (31 SCRA 511), stated that the amount of loss of earring capacity is based mainly on two factors, namely, (1) the number of years on
the basis of which the damages shall be computed; and (2) the rate at which the losses sustained by the heirs should be fixed.
As the formula adopted in the case of Davila v. Philippine Air Lines, 49 SCRA 497, at the age of 30 one's normal life expectancy is 33-1/3 years based
on the American Expectancy Table of Mortality (2/3 x 80-32).itc-asl By taking into account the pace and nature of the life of a carpenter, it is
reasonable to make allowances for these circumstances and reduce the life expectancy of the deceased Ornominio Beter to 25 years (People v. Daniel,
supra). To fix the rate of losses it must be noted that Art. 2206 refers to gross earnings less necessary living expenses of the deceased, in other words,
only net earnings are to be considered (People v. Daniel, supra; Villa Rey Transit, Inc. v. Court of Appeals, supra).
Applying the foregoing rules with respect to Ornominio Beter, it is both just and reasonable, considering his social standing and position, to fix the
deductible, living and incidental expenses at the sum of Four Hundred Pesos (P400.00) a month, or Four Thousand Eight Hundred Pesos (P4,800.00)
annually. As to his income, considering the irregular nature of the work of a daily wage carpenter which is seasonal, it is safe to assume that he shall
have work for twenty (20) days a month at Twenty Five Pesos (P150,000.00) for twenty five years. Deducting therefrom his necessary expenses, his
heirs would be entitled to Thirty Thousand Pesos (P30,000.00) representing loss of support and service (P150,000.00 less P120,000.00). In addition,
his heirs are entitled to Thirty Thousand Pesos (P30,000.00) as straight death indemnity pursuant to Article 2206 (People v. Daniel, supra). For
damages for their moral and mental anguish, his heirs are entitled to the reasonable sum of P10,000.00 as an exception to the general rule against
moral damages in case of breach of contract rule Art. 2200 (Necesito v. Paras, 104 Phil. 75). As attorney's fees, Beter's heirs are entitled to P5,000.00.
All in all, the plaintiff-appellants Ricardo and Sergia Beter as heirs of their son Ornominio are entitled to an indemnity of Seventy Five Thousand Pesos
(P75,000.00).
In the case of Narcisa Rautraut, her heirs are entitled to a straight death indemnity of Thirty Thousand Pesos (P30,000.00), to moral damages in the
amount of Ten Thousand Pesos (P10,000.00) and Five Thousand Pesos (P5,000.00) as attorney's fees, or a total of Forty Five Thousand Pesos
(P45,000.00) as total indemnity for her death in the absence of any evidence that she had visible means of support. (Rollo, pp. 30-31)
WHEREFORE, the instant petition is DISMISSED. The questioned decision dated May 19, 1988 and the resolution dated August 1, 1988 of
the Court of Appeals are AFFIRMED.
SO ORDERED.
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 119756 March 18, 1999
FORTUNE EXPRESS, INC., petitioner,

vs.
COURT OF APPEALS, PAULIE U.CAORONG, and minor childrenYASSER KING CAORONG, ROSE HEINNI and PRINCE ALEXANDER,
all surnamed CAORONG, and represented by their mother PAULIE U. CAORONG, respondents.
MENDOZA, J.:
This is an appeal by petition for review on certiorari of the decision, dated July 29, 1994, of the Court of Appeals, which reversed the decision
of the Regional Trial Court, Branch VI, Iligan City. The aforesaid decision of the trial court dismissed the complaint of public respondents
against petitioner for damages for breach of contract of carriage filed on the ground that petitioner had not exercised the required degree of
diligence in the operation of one of its buses. Atty. Talib Caorong, whose heirs are private respondents herein, was a passenger of the bus and
was killed in the ambush involving said bus.
The facts of the instant case are as follows:
Petitioner is a bus company in northern Mindanao. Private respondent Paulie Caorong is the widow of Atty. Caorong, while private
respondents Yasser King, Rose Heinni, and Prince Alexander are their minor children.
On November 18, 1989, a bus of petitioner figured in an accident with a jeepney in Kauswagan, Lanao del Norte, resulting in the death of
several passengers of the jeepney, including two Maranaos. Crisanto Generalao, a volunteer field agent of the Constabulary Regional Security
Unit No. X, conducted an investigation of the accident. He found that the owner of the jeepney was a Maranao residing in Delabayan, Lanao
del Norte and that certain Maranaos were planning to take revenge on the petitioner by burning some of its buses. Generalao rendered a
report on his findings to Sgt. Reynaldo Bastasa of the Philippine Constabulary Regional Headquarters at Cagayan de Oro. Upon the
instruction of Sgt. Bastasa, he went to see Diosdado Bravo, operations manager of petitioner, its main office in Cagayan de Oro City. Bravo
assured him that the necessary precautions to insure the safety of lives and property would be taken. 1
At about 6:45 P.M. on November 22, 1989, three armed Maranaos who pretended to be passengers, seized a bus of petitioner at Linamon,
Lanao del Norte while on its way to Iligan City. Among the passengers of the bus was Atty. Caorong. The leader of the Maranaos, identified as
one Bashier Mananggolo, ordered the driver, Godofredo Cabatuan, to stop the bus on the side of the highway. Mananggolo then shot
Cabatuan on the arm, which caused him to slump on the steering wheel. The one of the companions of Mananggolo started pouring gasoline
inside the bus, as the other held the passenger at bay with a handgun. Mananggolo then ordered the passenger to get off the bus. The
passengers, including Atty. Caorong, stepped out of the bus and went behind the bushes in a field some distance from the highway. 2
However, Atty. Caorong returned to the bus to retrieve something from the overhead rack. at that time, one of the armed men was pouring gasoline on
the head of the driver. Cabatuan, who had meantime regained consciousness, heard Atty. Caorong pleading with the armed men to spare the driver as
he was innocent of any wrong doing and was only trying to make a living. The armed men were, however, adamant as they repeated the warning that
they were going to burn the bus along with its driver. During this exchange between Atty. Caorong and the assailants, Cabatuan climbed out of the left
window of the bus and crawled to the canal on the opposite side of the highway. He heard shots from inside the bus. Larry de la Cruz, one of the
passengers, saw that Atty. Caorong was hit. Then the bus was set on fire. Some of the passengers were able to pull Atty. Caorong out of the burning
bus and rush him to the Mercy Community Hospital in Iligan City, but he died while undergoing operation. 3
The private respondents brought this suit for breach of contract of carriage in the Regional Trial Court, Branch VI, Iligan City. In its decision,
dated December 28, 1990, the trial court dismissed the complaint, holding as follows:
The fact that defendant, through Operations Manager Diosdado Bravo, was informed of the "rumors" that the Moslems intended to take revenge by
burning five buses of defendant is established since the latter also utilized Crisanto Generalao as a witness. Yet despite this information, the plaintiffs
charge, defendant did not take proper precautions. . . . Consequently, plaintiffs now fault the defendant for ignoring the report. Their position is that the
defendant should have provided its buses with security guards. Does the law require common carriers to install security guards in its buses for the
protection and safety of its passengers? Is the failure to post guards on omission of the duty to "exercise the diligence of a good father of the family"
which could have prevented the killing of Atty. Caorong? To our mind, the diligence demanded by law does not include the posting of security guard in
buses. It is an obligation that properly belongs to the State. Besides, will the presence of one or two security guards suffice to deter a determined
assault of the lawless and thus prevent the injury complained of? Maybe so, but again, perhaps not. In other words, the presence of a security guard is
not a guarantee that the killing of Atty. Caorong would have been definitely avoided.
Accordingly, the failure of defendant to accord faith and credit to the report of Mr. Generalao and the fact that it did not provide security to its
buses cannot, in the light of the circumstances, be characterized as negligence.
Finally, the evidence clearly shows that the assalants did not have the least intention of the harming any of the passengers. They ordered all
the passengers to alight and set fire on the bus only after all the passengers were out of danger. The death of Atty. Caorong was an
unexpected and unforseen occurrense over which defendant had no control. Atty. Caorong performed an act of charity and heroism in coming
to the succor of the driver even in the face of danger. He deserves the undying gratitude of the driver whose life he saved. No one should
blame him for an act of extraordinary charity and altruism which cost his life. But neither should any blame be laid on the doorstep of
defendant. His death was solely due to the willfull acts of the lawless which defendant could neither prevent nor to stop.
WHEREFORE, in view of the foregoing, the complaint is hereby dismissed. For lack of merit, the counter-claim is likewise dismissed. No costs. 4
On appeal, however, the Court of Appeals reversed. It held:

In the case at bench, how did defendant-appellee react to the tip or information that certain Maranao hotheads were planning to burn five of its buses
out of revenge for the deaths of two Maranaos in an earlier collision involving appellee's bus? Except for the remarks of appellee's operations manager
that "we will have our action . . . . and I'll be the one to settle it personally," nothing concrete whatsoever was taken by appellee or its employees to
prevent the execution of the threat. Defendant-appellee never adopted even a single safety measure for the protection of its paying passengers. Were
there available safeguards? Of course, there were: one was frisking passengers particularly those en route to the area where the threats were likely to
be carried out such as where the earlier accident occurred or the place of influence of the victims or their locality. If frisking was resorted to, even
temporarily, . . . . appellee might be legally excused from liabilty. Frisking of passengers picked up along the route could have been implemented by the
bus conductor; for those boarding at the bus terminal, frisking could have been conducted by him and perhaps by additional personnel of defendantappellee. On hindsight, the handguns and especially the gallon of gasoline used by the felons all of which were brought inside the bus would have been
discovered, thus preventing the burning of the bus and the fatal shooting of the victim.
Appellee's argument that there is no law requiring it to provide guards on its buses and that the safety of citizens is the duty of the government, is not
well taken. To be sure, appellee is not expected to assign security guards on all its buses; if at all, it has the duty to post guards only on its buses plying
predominantly Maranaos areas. As discussed in the next preceding paragraph, least appellee could have done in response to the report was to adopt a
system of verification such as the frisking of passengers boarding at its buses. Nothing, and no repeat, nothing at all, was done by defendant-appellee
to protect its innocent passengers from the danger arising from the "Maranao threats." It must be observed that frisking is not a novelty as a safety
measure in our society. Sensitive places in fact, nearly all important places have applied this method of security enhancement. Gadgets and
devices are avilable in the market for this purpose. It would not have weighed much against the budget of the bus company if such items were made
available to its personnel to cope up with situations such as the "Maranaos threats."
In view of the constitutional right to personal privacy, our pronouncement in this decision should not be construed as an advocacy of
mandatory frisking in all public conveyances. What we are saying is that given the circumstances obtaining in the case at bench that: (a) two
Maranaos died because of a vehicular collision involving one of appellee's vehicles; (b) appellee received a written report from a member of
the Regional Security Unit, Constabulary Security Group, that the tribal/ethnic group of the two deceased were planning to burn five buses of
appellee out of revenge; and (c) appelle did nothing absolutely nothing for the safety of its passengers travelling in the area of influence
of the victims, appellee has failed to exercise the degree of dilegence required of common carriers. Hence, appellee must be adjudge liable.
WHEREFORE the decision appealed from is hereby REVERSED and another rendered ordering defendant-appellee to pay plaintiffsappellants the following:
1) P3,399,649.20 as death indemnity; 2) P50,000.00 and P500.00 per appearance as attorney's fee and Costs against defendant-appellee. 5
Hence, this appeal. Petitioner contends:
(A) THAT PUBLIC RESPONDENT ERRED IN REVERSING THE DECISION OF THE REGIONAL TRIAL COURT DATED DECEMBER 28, 1990
DISMISSING THE COMPLAINT AS WELL AS THE COUNTERCLAIM, AND FINDING FOR PRIVATE RESPONDENTS BY ORDERING PETITIONER
TO PAY THE GARGANTUAN SUM OF P3,449,649.20 PLUS P500.00 PER APPEARANCE AS ATTORNEY'S FEES, AS WELL AS DENYING
PETITIONERS MOTION FRO RECONSIDERATION AND THE SUPPLEMENT TO SAID MOTION, WHILE HOLDING, AMONG OTHERS, THAT THE
PETITIONER BREACHED THE CONTRACT OF THE CARRIAGE BY ITS FAILURE TO EXCERCISE THE REQUIRED DEGREE OF DILIGENCE;
(B) THAT THE ACTS OF THE MARANAO OUTLAWS WERE SO GRAVE, IRRESISTABLE, VIOLENT, AND FORCEFULL, AS TO BE REGARDED AS
CASO FORTUITO; AND
(C) THAT PUBLIC RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN HOLDING THAT PETITIONER COULD HAVE PROVIDED
ADEQUATE SECURITY IN PREDOMINANTLY MUSLIM AREAS AS PART OF ITS DUTY TO OBSERVE EXTRA-ORDINARY DILIGENCE AS A
COMMON CARRIER.
The instant has no merit.
First. Petitioner's Breach of the Contract of Carriage.

Art. 1763 of the Civil Code provides that a common carrier is responsible for injuries suffered by a passenger on account of wilfull acts of other
passengers, if the employees of the common carrier could have prevented the act through the exercise of the diligence of a good father of a
family. In the present case, it is clear that because of the negligence of petitioner's employees, the seizure of the bus by Mananggolo and his
men was made possible.
Despite warning by the Philippine Constabulary at Cagayan de Oro that the Maranaos were planning to take revenge on the petitioner by
burning some of its buses and the assurance of petitioner's operation manager, Diosdado Bravo, that the necessary precautions would be
taken, petitioner did nothing to protect the safety of its passengers.
Had petitioner and its employees been vigilant they would not have failed to see that the malefactors had a large quantity of gasoline with
them. Under the circumstances, simple precautionary measures to protect the safety of passengers, such as frisking passengers and
inspecting their baggages, preferably with non-intrusive gadgets such as metal detectors, before allowing them on board could have been
employed without violating the passenger's constitutional rights. As this Court amended in Gacal v. Philippine Air Lines, Inc., 6 a common
carrier can be held liable for failing to prevent a hijacking by frisking passengers and inspecting their baggages.
From the foregoing, it is evident that petitioner's employees failed to prevent the attack on one of petitioner's buses because they did not
exercise the diligence of a good father of a family. Hence, petitioner should be held liable for the death of Atty. Caorong.
Second. Seizure of Petitioner's Bus not a Case of Force Majeure
The petitioner contends that the seizure of its bus by the armed assailants was a fortuitous event for which it could not be held liable.
Art. 1174 of the Civil Code defines a fortuitous event as an occurence which could not be foreseen, is inevitable. In Yobido v. Court of Appeals,
7
we held that to considered as force majeure, it is necessary that (1) the cause of the breach of the obligation must be independent of the
human will; (2) the event must be either unforeseeable or unavoidable; (3) the occurence must be render it impossible for the debtor to fulfill
the obligation in a normal manner; and (4) the obligor must be free of participation in, or aggravation of, the injury to the creditor. The absence
of any of the requisites mentioned above would prevent the obligor from being excused from liability.
Thus, in Vasquez v. Court of Appeals, 8 it was held that the common carrier was liable for its failure to take the necessary precautions against
an approaching typhoon, of which it was warned, resulting in the loss of the lives of several passengers. The event was forseeable, and, thus,
the second requisite mentioned above was not fulfilled. This ruling applies by analogy to the present case. Despite the report of PC agent
Generalao that the Maranaos were going to attack its buses, petitioner took no steps to safeguard the lives and properties of its passengers.
The seizure of the bus of the petitioner was foreseeable and, therefore, was not a fortuitous event which would exempt petitioner from liabilty.
Petitioner invokes the ruling in Pilapil v. Court of Appeals, 9 and De Guzman v. Court of Appeals, 10 in support of its contention that the seizure
of its bus by the assailants constitutes force majeure. In Pilapil v. Court of Appeals, 11 it was held that a common carrier is not liable for failing
to install window grills on its buses to protect the passengers from injuries cause by rocks hurled at the bus by lawless elements. On the other
hand, in De Guzman v. Court of Appeals, 12 it was ruled that a common carriers is not responsible for goods lost as a result of a robbery which
is attended by grave or irresistable threat, violence, or force.
It is clear that the cases of Pilapil and De Guzman do not apply to the prensent case. Art. 1755 of the Civil Code provides that "a common carrier is
bound to carry the passengers as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for
all the circumstances." Thus, we held in Pilapil and De Guzman that the respondents therein were not negligent in failing to take special precautions
against threats to the safety of passengers which could not be foreseen, such as tortious or criminal acts of third persons. In the present case, this
factor of unforeseeability (the second requisite for an event to be considered force majeure) is lacking. As already stated, despite the report of PC agent
Generalao that the Maranaos were planning to burn some of petitioner's buses and the assurance of petitioner's operation manager (Diosdado Bravo)
that the necessary precautions would be taken, nothing was really done by petitioner to protect the safety of passengers.
Third. Deceased not Guilty of Contributory Negligence

The petitioner contends that Atty. Caorong was guilty of contributory negligence in returning to the bus to retrieve something. But Atty. Caorong
did not act recklessly. It should be pointed out that the intended targets of the violence were petitioners and its employees, not its passengers.
The assailant's motive was to retaliate for the loss of life of two Maranaos as a result of the collision between petitioner's bus and the jeepney
in which the two Maranaos were riding. Mananggolo, the leader of the group which had hijacked the bus, ordered the passengers to get off the
bus as they intended to burn it and its driver. The armed men actually allowed Atty. Caorong to retrieve something from the bus. What
apparently angered them was his attempt to help the driver of the bus by pleading for his life. He was playing the role of the good Samaritan.
Certainly, this act cannot considered an act of negligence, let alone recklessness.
Fourth. Petitioner Liable to Private Respaondents for Damages
We now consider the question of damages that the heirs of Atty. Caorong, private respondents herein, are entitled to recover from the petitioner.
Indemnity for Death. Art. 1764 of the Civil Code, in relation to Art. 2206 thereof, provides for the payment of indemnity for the death of
passengers caused by the breach of contract of carriage by a common carrier. Initially fixed in Art. 2206 at P3,000.00, the amount of the said
indemnity for death has through the years been gradually increased in view of the declining value of the peso. It is presently fixed at
P50,000.00. 13 Private respondents are entitled to this amount.
Actual Damages. Art. 2199 provides that "except as provided by law or by stipulation, one is entitled to an adequate compensation only for such
pecuniary loss suffered by him as has duly proved." The trial court found that the private respondents spent P30,000.00 for the wake and burial of Atty.
Caorong. 14 Since petitioner does not question this finding of the trial court, it is liable to private respondent in the said amount as actual damages.
Moral Damages. Under Art. 2206, the "spouse, legitimate and illegitimate descendants and ascendants of the deceased may demand moral damages
for mental anguish by reason of the death of the deceased." The trial court found that private respondent Paulie Caorong suffered pain from the death
of her husband and worry on how to provide support for their minor children, private respondents Yasser King, Rose Heinni, and Prince Alexander. 15
The petitioner likewise does not question this finding of the trial court. Thus, in accordance with recent decisions of this Court, 16 we hold that the
petitioner is liable to the private respondents in the amount of P100,000.00 as moral damages for the death of Atty. Caorong.
Exemplary Damages. Art. 2232 provides that "in contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in a
wanton, fraudulent, reckless, oppressive, or malevolent reckless manner." In the present case, the petitioner acted in a wanton and reckless manner.
Despite warning that the Maranaos were planning to take revenge against the petitioner by burning some of its buses, and contary to the assurance
made by its operations manager that the necessary precautions would be take, the petitioner and its employees did nothing to protect the safety of
passengers. Under the circumtances, we deem it reasonable to award private respondents exemplary damages in the amount of P100,000.00. 17
Attorney's Fees. Pursuant to Art. 2208, attorney's fees may be recovered when, as in the instant case, exemplary damages are awarded. In
the recent case of Sulpicio Lines, Inc. v. Court of Appeals, 18 we held an award of P50,000.00 as attorney's fees to be reasonable. Hence, the
private respondents are entitled to attorney's fees in that amount.
Compensation for Loss of Earning Capacity. Art. 1764 of the Civil Code, in relation to Art. 2206 thereof, provides that in addition to the
indemnity for death arising from the breach of contrtact of carriage by a common carrier, the "defendant shall be liable for the loss of the
earning capacity of the deceased, and the indemnity shall be paid to the heirs of the latter." The formula established in decided cases for
computing net earning capacity is as follows: 19
Gross Necessary
Net Earning = Life x Annual Living Capacity Expectancy Income Expenses
Life expectancy is equivalent to two thirds (2/3) multiplied by the difference of eighty (80) and the age of the deceased. 20 Since Atty. Caorong
was 37 years old at that time of his death, 21 he had a life expectancy of 28 2/3 more years. 22 His projected gross annual income, computed
based on his monthly salary of P11,385.00. 23 as a lawyer in the Department of Agrarian Reform at the time of his death, was P148,005.00. 24
Allowing for necessary living expenses of fifty percent (50%) 25 of his projected gross annual income, his total earning capacity amounts to
P2,121,404.90. 26 Hence, the petitioner is liable to the private respondents in the said amount as a compensation for loss of earning capacity.
WHEREFORE, the decision, dated July 29, 1994, of the Court of Appeals is hereby AFFIRMED with the MODIFICATION that petitioner
Fortune Express, Inc. is ordered to pay the following amounts to private respondents Paulie, Yasser King, Rose Heinni, and Prince Alexander
Caorong:
1. death indemnity in the amount of fifty thousand pesos (P50,000.00);
2. actual damages in the amount of thirty thousand pesos (P30,000.00);
3. moral damages in the amount of one hundred thousand pesos (P100,000.00);
4. exemplary damages in the amount of one hundred thousand pesos (P100,000.00);
5. attorney's fees in the amount of fifty thousand pesos (P50,000.00);
6. compensation for loss of earning capacity in the amount of two million one hundred twenty-one thousand four hundred four pesos and
ninety centavos (P2,121,404.90); and
7. cost of suits.
SO ORDERED.
SUPREME COURT
Manila
EN BANC
G.R. No. L-11037
December 29, 1960
EDGARDO CARIAGA, ET AL., plaintiffs-appellants,

vs.
LAGUNA TAYABAS BUS COMPANY, defendant-appellant.
MANILA RAILROAD COMPANY, defendant-appellee.
DIZON, J.:
At about 1:00 p.m. on June 18, 1952, Bus No. 133 of the Laguna Tayabas Bus Co. hereinafter referred to as the LTB driven by Alfredo
Moncada, left its station at Azcarraga St., Manila, for Lilio, Laguna, with Edgardo Cariaga, a fourth-year medical student of the University of
Santo Tomas, as one of its passengers. At about 3:00 p.m., as the bus reached that part of the poblacion of Bay, Laguna, where the national
highway crossed a railroad track, it bumped against the engine of a train then passing by with such terrific force that the first six wheels of the
latter were derailed, the engine and the front part of the body of the bus was wrecked, the driver of the bus died instantly, while many of its
passengers, Edgardo among them, were severely injured. Edgardo was first confined at the San Pablo City Hospital from 5:00 p.m., June 18,
1952, to 8:25 a.m., June 20 of the same year when he was taken to the De los Santos Clinic, Quezon City. He left that clinic on October 14 to
be transferred to the University of Santo Tomas Hospital where he stayed up to November 15. On this last date he was taken back to the De
los Santos Clinic where he stayed until January 15, 1953. He was unconscious during the first 35 days after the accident; at the De los Santos
Clinic Dr. Gustilo removed the fractured bones which lacerated the right frontal lobe of his brain and at the University of Santo Tomas Hospital
Dr. Gustilo performed another operation to cover a big hole on the right frontal part of the head with a tantalum plate.
The LTB paid the sum of P16,964.45 for all the hospital, medical and miscellaneous expenses incurred from June 18, 1952 to April, 1953.
From January 15, 1953 up to April of the same year Edgardo stayed in a private house in Quezon, City, the LTB having agreed to give him a
subsistence allowance of P10.00 daily during his convalescence, having spent in this connection the total sum of P775.30 in addition to the
amount already referred to.
On April 24, 1953 the present action was filed to recover for Edgardo Cariaga, from the LTB and the MRR Co., and total sum of P312,000.00
as actual, compensatory, moral and exemplary damages, and for his parents, the sum of P18,00.00 in the same concepts. The LTB disclaimed
liability claiming that the accident was due to the negligence of its co-defendant, the Manila Railroad Company, for not providing a crossing bar
at the point where the national highway crossed the railway track, and for this reason filed the corresponding cross-claim against the latter
company to recover the total sum of P18,194.75 representing the expenses paid to Edgardo Cariaga. The Manila Railroad Company, in turn,
denied liability upon the complaint and cross-claim alleging that it was the reckless negligence of the bus driver that caused the accident.
The lower court held that it was the negligence of the bus driver that caused the accident and, as a result, rendered judgment sentencing the
LTB to pay Edgardo Cariaga the sum of P10,490.00 as compensatory damages, with interest at the legal rate from the filing of the complaint,
and dismissing the cross-claim against the Manila Railroad Company. From this decision the Cariagas and the LTB appealed.
The Cariagas claim that the trial court erred: in awarding only P10,490.00 as compensatory damages to Edgardo; in not awarding them actual
and moral damages, and in not sentencing appellant LTB to pay attorney's fees.
On the other hand, the LTB's principal contention in this appeal is that the trial court should have held that the collision was due to the fault of
both the locomotive driver and the bus driver and erred, as a consequence, in not holding the Manila Railroad Company liable upon the crossclaim filed against it.
We shall first dispose of the appeal of the bus company. Its first contention is that the driver of the train locomotive, like the bus driver, violated
the law, first, in sounding the whistle only when the collision was about to take place instead of at a distance at least 300 meters from the
crossing, and second, in not ringing the locomotive bell at all. Both contentions are without merits.
After considering the evidence presented by both parties the lower court expressly found:
. . . While the train was approximately 300 meters from the crossing, the engineer sounded two long and two short whistles and upon reaching
a point about 100 meters from the highway, he sounded a long whistle which lasted up to the time the train was about to cross it. The bus
proceeded on its way without slackening its speed and it bumped against the train engine, causing the first six wheels of the latter to be
derailed.
. . . that the train whistle had been sounded several times before it reached the crossing. All witnesses for the plaintiffs and the defendants are
uniform in stating that they heard the train whistle sometime before the impact and considering that some of them were in the bus at the time,
the driver thereof must have heard it because he was seated on the left front part of the bus and it was his duty and concern to observe such
fact in connection with the safe operation of the vehicle. The other L.T.B. bus which arrived ahead at the crossing, heeded the warning by
stopping and allowing the train to pass and so nothing happened to said vehicle. On the other hand, the driver of the bus No. 133 totally
ignored the whistle and noise produced by the approaching train and instead he tried to make the bus pass the crossing before the train by not
stopping a few meters from the railway track and in proceeding ahead.
The above findings of the lower court are predicated mainly upon the testimony of Gregorio Ilusondo, a witness for the Manila Railroad
Company. Notwithstanding the efforts exerted by the LTB to assail his credibility, we do not find in the record any fact or circumstance
sufficient to discredit his testimony. We have, therefore, no other alternative but to accept the findings of the trial court to the effect, firstly, that
the whistle of locomotive was sounded four times two long and two short "as the train was approximately 300 meters from the crossing";
secondly, that another LTB bus which arrived at the crossing ahead of the one where Edgardo Cariaga was a passenger, paid heed to the
warning and stopped before the "crossing", while as the LTB itself now admits (Brief p. 5) the driver of the bus in question totally
disregarded the warning.
But to charge the MRR Co. with contributory negligence, the LTB claims that the engineer of the locomotive failed to ring the bell altogether, in
violation of the section 91 of Article 1459, incorporated in the charter of the said MRR Co. This contention as is obvious is the very
foundation of the cross-claim interposed by the LTB against its co-defendant. The former, therefore, had the burden of proving it affirmatively
because a violation of law is never presumed. The record discloses that this burden has not been satisfactorily discharged.
The Cariagas, as appellants, claim that the award of P10,000.00 compensatory damages to Eduardo is inadequate considering the nature and
the after effects of the physical injuries suffered by him. After a careful consideration of the evidence on this point we find their contentions to
be well-founded.
From the deposition of Dr. Romeo Gustilo, a neurosurgeon, it appears that, as a result of the injuries suffered by Edgardo, his right forehead
was fractured necessitating the removal of practically all of the right frontal lobe of his brain. From the testimony of Dr. Jose A. Fernandez, a
psychiatrist, it may be gathered that, because of the physical injuries suffered by Edgardo, his mentality has been so reduced that he can no
longer finish his studies as a medical student; that he has become completely misfit for any kind of work; that he can hardly walk around
without someone helping him, and has to use a brace on his left leg and feet.
Upon the whole evidence on the matter, the lower court found that the removal of the right frontal lobe of the brain of Edgardo reduced his
intelligence by about 50%; that due to the replacement of the right frontal bone of his head with a tantalum plate Edgardo has to lead a quite
and retired life because "if the tantalum plate is pressed in or dented it would cause his death."
The impression one gathers from this evidence is that, as a result of the physical injuries suffered by Edgardo Cariaga, he is now in a helpless
condition, virtually an invalid, both physically and mentally.
Appellant LTB admits that under Art. 2201 of the Civil Code the damages for which the obligor, guilty of a breach of contract but who acted in
good faith, is liable shall be those that are the natural and probable consequences of the breach and which the parties had forseen or could
have reasonably forseen at the time the obligation was constituted, provided such damages, according to Art. 2199 of the same Code, have
been duly proved. Upon this premise it claims that only the actual damages suffered by Edgardo Cariaga consisting of medical, hospital and
other expenses in the total sum of P17,719.75 are within this category. We are of the opinion, however, that the income which Edgardo
Cariaga could earn if he should finish the medical course and pass the corresponding board examinations must be deemed to be within the
same category because they could have reasonably been foreseen by the parties at the time he boarded the bus No. 133 owned and
operated by the LTB. At that time he was already a fourth-year student in medicine in a reputable university. While his scholastic may not be
first rate (Exhibits 4, 4-A to 4-C), it is, nevertheless, sufficient to justify the assumption that he could have passed the board test in due time. As
regards the income that he could possibly earn as a medical practitioner, it appears that, according to Dr. Amado Doria, a witness for the LTB,
the amount of P300.00 could easily be expected as the minimum monthly income of Edgardo had he finished his studies.
Upon consideration of all the facts mentioned heretofore this Court is of the opinion, and so holds, that the compensatory damages awarded
to Edgardo Cariaga should be increased to P25,000.00.
Edgardo Cariaga's claim for moral damages and attorney's fees was denied by the trial court, the pertinent portion of its decision reading as
follows:
Plaintiffs' claim for moral damages cannot also be granted. Article 2219 of the Civil Code enumerates the instances when moral damages may
be covered and the case under consideration does not fall under any one of them. The present action cannot come under paragraph 2 of said
article because it is not one of the quasi-delict and cannot be considered as such because of the pre-existing contractual relation between the
Laguna Tayabas Bus Company and Edgardo Cariaga. Neither could defendant Laguna Tayabas Bus Company be held liable to pay moral
damages to Edgardo Cariaga under Article 2220 of the Civil Code on account of breach of its contract of carriage because said defendant did
not act fraudulently or in bad faith in connection therewith. Defendant Laguna Tayabas Bus Company had exercised due diligence in the
selection and supervision of its employees like the drivers of its buses in connection with the discharge of their duties and so it must be
considered an obligor in good faith.
The plaintiff Edgardo Cariaga is also not entitled to recover for attorney's fees, because this case does not fall under any of the instances
enumerated in Article 2208 of the Civil Code.
We agree with the trial court and, to the reason given above, we add those given by this Court in Cachero vs. Manila Yellow Taxicab Co., Inc.
(101 Phil., 523, 530, 533):
A mere perusal of plaintiff's complaint will show that this action against the defendant is predicated on an alleged breach of contract of
carriage, i.e., the failure of the defendants to bring him "safely and without mishaps" to his destination, and it is to be noted that the chauffeur
of defendant's taxicab that plaintiff used when he received the injuries involved herein, Gregorio Mira, has not even made a party defendant to
this case.
Considering, therefore, the nature of plaintiff's action in this case, is he entitled to compensation for moral damages? Article 2219 of the Civil
Code says the following:
Art. 2219. Moral damages may be recovered in the following and analogous cases:
(1) A criminal offense resulting in physical injuries;
(2) Quasi-delicts causing physical injuries;
(3) Seduction, abduction, rape, or other lascivious acts;

(6) Illegal search;
(4) Adultery or concubinage;
(7) Libel, slander or any other form of defamation;
(5) Illegal or arbitrary detention or arrest;
(8) Malicious prosecution;
(9) Acts mentioned in Article 309;
(10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34, and 35.
Of course enumerated in the just quoted Article 2219 only the first two may have any bearing on the case at bar. We find, however, with regard
to the first that the defendant herein has not committed in connection with this case any "criminal offense resulting in physical injuries". The
one that committed the offense against the plaintiff is Gregorio Mira, and that is why he has been already prosecuted and punished therefor.
Altho (a) owners and managers of an establishment and enterprise are responsible for damages caused by their employees in the service of
the branches in which the latter are employed or on the occasion of their functions; (b) employers are likewise liable for damages caused by
their employees and household helpers acting within the scope of their assigned task (Article 218 of the Civil Code); and (c) employers and
corporations engaged in any kind of industry are subsidiary civilly liable for felonies committed by their employees in the discharge of their
duties (Art. 103, Revised Penal Code), plaintiff herein does not maintain this action under the provisions of any of the articles of the codes just
mentioned and against all the persons who might be liable for the damages caused, but as a result of an admitted breach of contract of
carriage and against the defendant employer alone. We, therefore, hold that the case at bar does not come within the exception of paragraph
1, Article 2219 of the Civil Code.
The present complaint is not based either on a "quasi-delict causing physical injuries" (Art. 2219, par. 2 of the Civil Code). From the report of
the Code Commission on the new Civil Code. We copy the following:
A question of nomenclature confronted the Commission. After a careful deliberation, it was agreed to use the term "quasi-delict" for those
obligations which do not arise from law, contracts, quasi-contracts, or criminal offenses. They are known in Spanish legal treaties as "culpa
aquiliana", "culpa-extra-contractual" or "cuasi-delitos". The phrase "culpa-extra-contractual" or its translation "extra-contractual-fault" was
eliminated because it did not exclude quasi-contractual or penal obligations. "Aquilian fault" might have been selected, but it was thought
inadvisable to refer to so ancient a law as the "Lex Aquilia". So "quasi-delict" was chosen, which more nearly corresponds to the Roman Law
classification of the obligations and is in harmony with the nature of this kind of liability.
The Commission also thought of the possibility of adopting the word "tort" from Anglo-American law. But "tort" under that system is much
broader than the Spanish-Philippine concept of obligations arising from non-contractual negligence. "Tort" in Anglo-American jurisprudence
includes not only negligence, but also intentional criminal act, such as assault and battery, false imprisonment and deceit. In the general plan
of the Philippine legal system, intentional and malicious acts are governed by the Penal Code, although certain exceptions are made in the
Project. (Report of the Code Commission, pp. 161-162).
In the case of Cangco, vs. Manila Railroad, 38 Phil. 768, We established the distinction between obligation derived from negligence and
obligation as a result of a breach of contract. Thus, we said:
It is important to note that the foundation of the legal liability of the defendant is the contract of carriage, and that the obligation to respond for
the damage which plaintiff has suffered arises, if at all, from the breach of that contract by reason of the failure of defendant to exercise due
care in its performance. That is to say, its liability is direct and immediate, differing essentially in the legal viewpoint from the presumptive
responsibility for the negligence of its servants, imposed by Article 1903 of the Civil Code (Art. 2180 of the new), which can be rebutted by
proof of the exercise of due care in their selection of supervision. Article 1903 is not applicable to obligations arising EX CONTRACTU, but
only to extra-contractual obligations or to use the technical form of expression, that article relates only to CULPA AQUILIANA' and not to
CULPA CONTRACTUAL.lawphil.net
The decisions in the cases of Castro vs. Acro Taxicab Co., (82 Phil., 359; 46 Off. Gaz., No. 5, p. 2023); Lilius, et al. vs. Manila Railroad, 59
Phil., 758) and others, wherein moral damages were awarded to the plaintiffs, are not applicable to the case at bar because said decision
were rendered before the effectivity of the new Civil Code (August 30, 1950) and for the further reason that the complaints filed therein were
based on different causes of action.
In view of the foregoing the sum of P2,000 was awarded as moral damages by the trial court has to be eliminated, for under the law it is not a
compensation awardable in a case like the one at bar.
What has been said heretofore relative to the moral damages claimed by Edgardo Cariaga obviously applies with greater force to a similar
claim (4th assignment of error) made by his parents.
The claim made by said spouses for actual and compensatory damages is likewise without merits. As held by the trial court, in so far as the
LTB is concerned, the present action is based upon a breach of contract of carriage to which said spouses were not a party, and neither can
they premise their claim upon the negligence or quasi-delict of the LTB for the simple reason that they were not themselves injured as a result
of the collision between the LTB bus and train owned by the Manila Railroad Company.
Wherefore, modified as above indicated, the appealed judgement is hereby affirmed in all other respects, with costs against appellant LTB.

SUPREME COURT
Manila
EN BANC
G.R. No. L-25499 February 18, 1970

VILLA REY TRANSIT, INC., petitioner,
vs.
THE COURT OF APPEALS, TRINIDAD A. QUINTOS, PRIMA A. QUINTOS, AND JULITA A. QUINTOS, respondents.
Laurea and Pison for petitioner.
Bonifacio M. Abad, Jr. for respondents.
CONCEPCION, C.J.:
Petitioner, Villa Rey Transit, Inc., seeks the review by certiorari of a decision of the Court of Appeals affirming that of the Court of First Instance
of Pangasinan. The basic facts are set forth in said decision of the Court of Appeals, from which We quote:
At about 1:30 in the morning of March 17, 1960, an Izuzu First Class passenger bus owned and operated by the
defendant, bearing Plate No. TPU-14871-Bulacan and driven by Laureano Casim, left Lingayen, Pangasinan, for Manila.
Among its paying passengers was the deceased, Policronio Quintos, Jr. who sat on the first seat, second row, right side of
the bus. At about 4:55 o'clock a.m. when the vehicle was nearing the northern approach of the Sadsaran Bridge on the
national highway in barrio Sto. Domingo, municipality of Minalin, Pampanga, it frontally hit the rear side of a bullcart filled
with hay. As a result the end of a bamboo pole placed on top of the hayload and tied to the cart to hold it in place, hit the
right side of the windshield of the bus. The protruding end of the bamboo pole, about 8 feet long from the rear of the
bullcart, penetrated through the glass windshield and landed on the face of Policronio Quintos, Jr. who, because of the
impact, fell from his seat and was sprawled on the floor. The pole landed on his left eye and the bone of the left side of his
face was fractured. He suffered other multiple wounds and was rendered unconscious due, among other causes to severe
cerebral concussion. A La Mallorca passenger bus going in the opposite direction towards San Fernando, Pampanga,
reached the scene of the mishap and it was stopped by Patrolman Felino Bacani of the municipal police force of Minalin
who, in the meantime, had gone to the scene to investigate. Patrolman Bacani placed Policronio Quintos, Jr. and three
other injured men who rode on the bullcart aboard the La Mallorca bus and brought them to the provincial hospital of
Pampanga at San Fernando for medical assistance. Notwithstanding such assistance, Policronio Quintos, Jr. died at 3:15
p.m. on the same day, March 17, 1960, due to traumatic shock due to cerebral injuries.
The private respondents, Trinidad, Prima and Julita, all surnamed Quintos, are the sisters and only surviving heirs of Policronio Quintos Jr.,
who died single, leaving no descendants nor ascendants. Said respondents herein brought this action against herein petitioner, Villa Rey
Transit, Inc., as owner and operator of said passenger bus, bearing Plate No. TPU-14871-Bulacan, for breach of the contract of carriage
between said petitioner and the deceased Policronio Quintos, Jr., to recover the aggregate sum of P63,750.00 as damages, including
attorney's fees. Said petitioner defendant in the court of first instance contended that the mishap was due to a fortuitous event, but this
pretense was rejected by the trial court and the Court of Appeals, both of which found that the accident and the death of Policronio had been
due to the negligence of the bus driver, for whom petitioner was liable under its contract of carriage with the deceased. In the language of His
Honor, the trial Judge:
The mishap was not the result of any unforeseeable fortuitous event or emergency but was the direct result of the
negligence of the driver of the defendant. The defendant must, therefore, respond for damages resulting from its breach of
contract for carriage. As the complaint alleged a total damage of only P63,750.00 although as elsewhere shown in this
decision the damages for wake and burial expenses, loss of income, death of the victim, and attorneys fee reach the
aggregate of P79,615.95, this Court finds it just that said damages be assessed at total of only P63,750.00 as prayed for
in plaintiffs' amended complaint.
The despositive part of the decision of the trial Court reads:
WHEREFORE, judgment is hereby rendered ordering the defendant to pay to the plaintiffs the amount of P63,750.00 as
damages for breach of contract of carriage resulting from the death of Policronio Quintos, Jr.
which, as above indicated, was affirmed by the Court of Appeals. Hence, the present petition for review on certiorari, filed by Villa Rey Transit,
Inc.
The only issue raised in this appeal is the amount of damages recoverable by private respondents herein. The determination of such amount
depends, mainly upon two (2) factors, namely: (1) the number of years on the basis of which the damages shall be computed and (2) the rate
at which the losses sustained by said respondents should be fixed.
The first factor was based by the trial court the view of which was concurred in by the Court of Appeals upon the life expectancy of
Policronio Quintos, Jr., which was placed at 33-1/3 years he being over 29 years of age (or around 30 years for purposes of computation) at
the time of his demise by applying the formula (2/3 x [80-301 = life expectancy) adopted in the American Expectancy Table of Mortality or
the actuarial of Combined Experience Table of Mortality. Upon the other hand, petitioner maintains that the lower courts had erred in adopting
said formula and in not acting in accordance with Alcantara v. Surro1 in which the damages were computed on a four (4) year basis, despite
the fact that the victim therein was 39 years old, at the time of his death, and had a life expectancy of 28.90 years.
The case cited is not, however, controlling in the one at bar. In the Alcantara case, none of the parties had questioned the propriety of the fouryear basis adopted by the trial court in making its award of damages. Both parties appealed, but only as regards the amount thereof. The
plaintiffs assailed the non-inclusion, in its computation, of the bonus that the corporation, which was the victim's employer, had awarded to
deserving officers and employees, based upon the profits earned less than two (2) months before the accident that resulted in his death. The
defendants, in turn, objected to the sum awarded for the fourth year, which was treble that of the previous years, based upon the increases
given, in that fourth year, to other employees of the same corporation. Neither this objection nor said claim for inclusion of the bonus was
sustained by this Court. Accordingly, the same had not thereby laid down any rule on the length of time to be used in the computation of
damages. On the contrary, it declared:
The determination of the indemnity to be awarded to the heirs of a deceased person has therefore no fixed basis. Much is
left to the discretion of the court considering the moral and material damages involved, and so it has been said that
"(t)here can be no exact or uniform rule for measuring the value of a human life and the measure of damages cannot be
arrived at by precise mathematical calculation, but the amount recoverable depends on the particular facts and
circumstances of each case. The life expectancy of the deceased or of the beneficiary, whichever is shorter, is an
important factor.' (25 C.J.S. 1241.) Other factors that are usually considered are: (1) pecuniary loss to plaintiff or
beneficiary (25 C.J.S. 1243-1250) ; (2) loss of support (25 C.J.S., 1250-1251); (3) loss of service (25 C.J.S. 1251-1254);
(4) loss of society (25 C.J.S. 1254-1255); (5) mental suffering of beneficiaries (25 C.J.S., 1258-1259) ; and (6) medical
and funeral expenses (26 C.J.S., 1254-1260)."2
Thus, life expectancy is, not only relevant, but, also, an important element in fixing the amount recoverable by private respondents herein.
Although it is not the sole element determinative of said amount, no cogent reason has been given to warrant its disregard and the adoption,
in the case at bar, of a purely arbitrary standard, such as a four-year rule. In short, the Court of Appeals has not erred in basing the
computation of petitioner's liability upon the life expectancy of Policronio Quintos, Jr.
With respect to the rate at which the damages shall be computed, petitioner impugns the decision appealed from upon the ground that the
damages awarded therein will have to be paid now, whereas most of those sought to be indemnified will be suffered years later. This
argument is basically true, and this is, perhaps, one of the reasons why the Alcantara case points out the absence of a "fixed basis" for the
ascertainment of the damages recoverable in litigations like the one at bar. Just the same, the force of the said argument of petitioner herein is
offset by the fact that, although payment of the award in the case at bar will have to take place upon the finality of the decision therein, the
liability of petitioner herein had been fixed at the rate only of P2,184.00 a year, which is the annual salary of Policronio Quintos, Jr. at the time
of his death, as a young "training assistant" in the Bacnotan Cement Industries, Inc. In other words, unlike the Alcantara case, on which
petitioner relies, the lower courts did not consider, in the present case, Policronio's potentiality and capacity to increase his future income.
Indeed, upon the conclusion of his training period, he was supposed to have a better job and be promoted from time to time, and, hence, to
earn more, if not considering the growing importance of trade, commerce and industry and the concomitant rise in the income level of
officers and employees
therein much more.
At this juncture, it should be noted, also, that We are mainly concerned with the determination of the losses or damages sustained by the
private respondents, as dependents and intestate heirs of the deceased, and that said damages consist, not of the full amount of his earnings,
but of the support, they received or would have received from him had he not died in consequence of the negligence of petitioner's agent. In
fixing the amount of that support, We must reckon with the "necessary expenses of his own living", which should be deducted from his
earnings. Thus, it has been consistently held that earning capacity, as an element of damages to one's estate for his death by wrongful act is
necessarily his net earning capacity or his capacity to acquire money, "less the necessary expense for his own living.3 Stated otherwise, the
amount recoverable is not loss of the entire earning, but rather the loss of that portion of the earnings which the beneficiary would have
received.4 In other words, only net earnings, not gross earning, are to be considered5 that is, the total of the earnings less expenses necessary
in the creation of such earnings or income6 and less living and other incidental expenses.7
All things considered, We are of the opinion that it is fair and reasonable to fix the deductible living and other expenses of the deceased at the
sum of P1,184.00 a year, or about P100.00 a month, and that, consequently, the loss sustained by his sisters may be roughly estimated at
P1,000.00 a year or P33,333.33 for the 33-1/3 years of his life expectancy. To this sum of P33,333.33, the following should be added: (a)
P12,000.00, pursuant to Arts. 104 and 107 of the Revised Penal Code, in relation to Article 2206 of our Civil Code, as construed and applied
by this Court;8 (b) P1,727.95, actually spent by private respondents for medical and burial expenses; and (c) attorney's fee, which was fixed by
the trial court, at P500.00, but which, in view of the appeal taken by petitioner herein, first to the Court of Appeals and later to this Supreme
Court, should be increased to P2,500.00. In other words, the amount adjudged in the decision appealed from should be reduced to the
aggregate sum of P49,561.28, with interest thereon, at the legal rate, from December 29, 1961, date of the promulgation of the decision of the
trial court.
Thus modified, said decision and that of the Court of Appeals are hereby affirmed, in all other respects, with costs against petitioner, Villa Rey
Transit, Inc. It is so ordered.
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 74442 August 31, 1987
PAN AMERICAN WORLD AIRWAYS, INC., petitioner,

vs.
THE INTERMEDIATE APPELLATE COURT, TEOFISTA P. TINITIGAN, joined by her husband, SEVERINO TINITIGAN, respondents.
PARAS, J.:
Before Us is a petition to review by certiorari the judgment 1 of the respondent Court of Appeals (IAC) affirming with modification the decision 2
rendered by the trial court in favor of the plaintiffs 3 and against the defendant 4 sentencing the latter to pay the former the sum of US$1,546.15
or its equivalent in Philippine Currency as actual and compensatory damages, P500,000.00 as moral damages, P200,000.00 as exemplary
damages, P100,000.00 as attorney's fees and to pay the costs of litigation. The modification consists in that the payment of US$1,546.15 or its
equivalent in Philippine Currency must be valued at the present rate of exchange.
The statement of the case is as follows:
On February 5, 1975, private respondent herein, Teofista P. Tinitigan, filed a complaint against petitioner herein, Pan American World Airways,
Inc. (Pan Am for brevity) for damages arising from defendant's alleged refusal to accommodate her on Pan Am Flight No. 431 from Sto.
Domingo, Republica Dominica to San Juan, Puerto Rico on April 29, 1973 notwithstanding the fact that she possessed a confirmed plane
ticket purchased from Pan Ams Office at Sto. Domingo and thus causing her 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, attorney's fees of P100,000.00 and actual damages sustained by her in the amount of US$1,546.15.
In its Answer, defendant denied that plaintiff was a confirmed passenger since the ticket for Flight No. 431 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. Plaintiff was
advised by defendant of this fact when plaintiff changed her ticket for a new route with San Juan as additional part of her itinerary.
After due trial, the lower court rendered judgment on August 6, 1980 in favor of plaintiff and awarded the amount of damages as prayed for.
Defendant appealed said decision on both questions of fact and law to the respondent court assigning errors, to wit:
I The lower court erred in holding that plaintiff had a confirmed reservation on Pan Am Flight 431 from Santo Domingo, Republica Dominica to
San Juan, Puerto Rico on April 29, 197 3.
II Te lower court erred in holding defendant- appellant liable for compensatory damages in the sum of US$1,546.15, moral damages in the
sum of P500,000.00 and exemplary damages in the sum of P200,000.00, it being contrary to law and the evidence.
III The lower court erred in awarding attorney's fees to plaintiff.- -
IV. The lower court erred in not dismissing the complaint.
Respondent-appellate Court affirmed the assailed judgment of the trial court with modification as earlier stated. Hence, the instant petition,
appellant-petitioner submitting the following grounds:
I. Respondent is a holder of an open, unconfirmed or a standby ticket.
II. Private respondent's ticket was not issued with an assigned seat.
III. The issuance of the boarding card to respondent Tinitigan and the fact that she was allowed to go through the departure area passing
through customs and immigration did not make her a confirmed passenger.
IV. There is no evidence to support respondent court's findings that private respondent's seat was given to a white man.
V. The conclusion that the luggage of private respondent was taken on board flight 431 is not borne out by the evidence.
VI. Petitioner did not breach its contract with private respondent.
VII. There is no evidence to support private respondent's alleged loss of $1,000.00 in pofits.
In other words, the aforementioned grounds can be briefly stated as follows:
I. The respondent court misappreciated and ignored the facts of the case;
II. The conclusions of the respondent court were not supported by the evidence.
Evidence for the plaintiff in the lower court consisted of Teofista Tinitigan's sole testimony in open court supported by documentary evidence
marked as Exhibits "A" to "J" while evidence for the defendant consisted of documents marked as Exhibits "1" to "12."
Findings of fact of the lower court show that plaintiff, a businesswoman and a multimillionaire in her own right as evidenced by Exhs. "J" to "J-7",
(proprietor of Sampaguita Restaurant, New York City USA; Treasurer of the Molave Development Corp., Phil., proprietor of Cavite Household
Appliances and Rowena's Handicraft, Phil.), was on a business trip with a Pan-Am ticket (San Francisco-Miami-Haiti-San Francisco). While in Haiti, she
inquired from Pan-Am employees how she could proceed to San Juan, Puerto Rico for business reasons. Whereupon she was advised that her ticket
was valid for Sto. Domingo, Republica Dominica only but in Santo Domingo she could make arrangements with Pan-Am for her trip to San Juan.
While in Sto. Domingo, after talking thru the telephone with Mrs. Lilibeth Warner, the former said that she (plaintiff) must be in San Juan that same day,
to sign her contract or lose it. Plaintiff expected to make a profit of $1,000 in said contract. Plaintiff then proceeded to the airport at about 2 o'clock in the
afternoon, or 3 hours ahead of the scheduled Pan Am flight. She was told to wait and upon the arrival of the plane bound for San Juan, she surrendered
to the Pan Am employees passenger ticket No. 0264200919952 (Exh. "3") with Sto. Domingo-Miami Route and she was issued passenger ticket No.
023443466114 (Exh. "D" of Exh. "2") for flight No. 431 with Sto. Domingo-San Juan-Miami route. She was also issued baggage claim No. 474-618 (Exh.
"A") and given the corresponding boarding pass (Exh. "B") and assigned seat 3-A (Exh. "B-1") after she paid the fare and terminal fee. Appellee was
then instructed to proceed to the Immigration Section where her passport (Exh. "C") was stamped accordingly.
While plaintiff was standing in line preparatory to boarding the aircraft, Rene Nolasco, a Pan Am employee ordered her in a loud voice to step
out of line because her ticket was not confirmed to her consternation and embarrassment in the presence of several people who heard and
order. Despite her Pleas that she should be in San Juan because it was very important to her, she was not allowed to board the aircraft. And
as if to add insult to injury, she saw that her seat was given to a white man prompting her to engage Nolasco, who knows both the English and
Spanish languages, in a heated argument provoking her into telling him that she would file a suit against Pan Am. Later, a few Pan Am
employees went near her to tell her she could finally board the plane and on the pretext that they would inspect her baggage, they led her to
another place, which she finally realized, was not the departure area. Meanwhile, 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. It was a good thing that the Hotel people remembered her
because they do not usually accommodate female guests, without any luggage to stay in the hotel. While normally, hotel accommodation was
paid before departure, plaintiff was made to pay the room accommodation petition in advance (Exh. "E").
She finally retrieved her luggage after five days in San Francisco after presenting her baggage ticket (Exh. "A"). She brought the matter to the
attention of Mr. V.W. Smith, Manager of Pan Am in San Francisco, who sent a letter of apology (Exh. "G") for the "inconveniences" Pan Am
caused her (plaintiff) and attached a refund check (Exh. "H") reflecting the value of the flight coupon issued for the flight from Sto. Domingo to
San Juan in which plaintiff was denied boarding.
On the other hand, there was no oral evidence for defendant Pan Am. Evidence consisted of documents which included depositions and
counter depositions of witnesses and the following:
Exh. "1", Pan Am manifest on Fight 431 dated April 29, 1973 from Sto. Domingo to San Juan, Dominican Republic; Exh, 2, Ticket Coupon No.
026443466114 dated April 29, 1973 issued to plaintiff with status "open" with routing Sto. Domingo-Miami; Exh. 3, Ticket Coupon No. 0264200919952
dated April 29, 1973; Exh. 4, Letter of defendant's witness Raul Fiallo to Director of Pan Am Manila dated March 29, 1974 furnishing a copy of said letter
to Pan Am Sto. Domingo; Exh. 5 ltem No. 26 in Exhibit I enclosed in blue ink which reads "T. Tinitigan NB"; Exh. 6, Message sent by deponent Raul
Fiallo to Mr. McKenzie, Pan Am ,Manila; Exh. 7, Brown envelope containing the deposition of the witness; Exhs. 8, 8- A to 8-G, Certification of the
deposition officer and the deposition of Raul Fiallo consisting of 8 pages in Spanish, Exh. 8-A-1, Signature of the deponent appearing at the left hand
margin in every page of the deposition; Exhs. 9, 9-A to 9-F, Translation of the deposition from Spanish to English consisting of 7 pages; Exh. 10 Official
Receipt representing fee of the Languages Internationale in translating the deposition from Spanish to English; Exh. 11, Deponents answer to cross
interrogatories written in Spanish; and Exh. 12, Translation to deponents answer to cross-interrogatories from Spanish to English by Languages
International upon plaintiff's request. (pp. 46-47, Record on Appeal)
Considering the aforementioned evidence for both parties, the lower court said:
Examining the evidence presented, the Court finds that the same preponderates in favor of the plaintiff. The plaintiff having been issued by the
defendant with the necessary ticket (Exh. "D"), baggage claim symbol (Exh. "A"), the requisite boarding pass (Exh. "B") with assigned seat 3-A and her
having been cleared through immigration (Exhs. C and C-1) all clearly and unmistakably show that plaintiff was indeed a confirmed passenger of
defendant's Flight No. 431 for San Juan and that for all legal intents and purposes the contract of carriage between the plaintiff and the defendant was
already perfected which bound the latter to transport the former to her place of destination on said Flight. This conclusion finds eloquent support in
Exhibit Q of the defendant showing that plaintiff was included in the passenger manifest of said flight. The failure therefore of the defendant to
accommodate plaintiff in said flight and the taking in by it of a white man in lieu of plaintiff, who was brazenly ordered by an employee of the defendant
to get off the line and unceremoniously whisked off from the departure area on the pretext that her luggage had to undergo custom's inspection to
plaintiff's chargrin and great humiliation smacks of a clear case of racial discrimination for which the defendant should be held liable in damages to the
plaintiff.
Moreover, the written apology offered by the defendant to the plaintiff, thru its Manager in San Francisco, (Exh. G) is a tell-tale indication of an
admission of fault by the defendant for the "inconvenience" it caused plaintiff.
The defense put up by the defendant to the effect that the issuance by it of the boarding pass in favor of plaintiff with an assigned seat was
merely in compliance with the formal requirements of immigration fails to generate belief. There was no evidence presented, save the
evidently self-serving declaration of deponent Fiallo Rodriguez, of such a requirement by the immigration laws of said foreign country.
Considering the sex, age and the social and -business stature of the plaintiff in the community, the amounts of moral damages claimed by her
in the complaint cannot be said to be unreasonable. Moreover, the award of exemplary damages is called for under the circumstances to
teach defendant a lesson for the public good.
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant sentencing the latter to pay the former the sum
of US$1,546.15 or its equivalent in Philippine Currency, as actual and compensatory damages, P200,000.00 as moral damages, P200,000.00
as exemplary damages, P20,000.00 as attorney's fee's and the costs of litigation. SO ORDERED. (pp. 47-49, Record on Appeal)
In its ruling, the appellate respondent court was merely echoing the findings of the lower court and in finding no merit in the appeal, gave the
following reasons:
FIRST: It is clear from the evidence that defendant issued a Passenger Ticket and Baggage Check No. 026443466114 (Exh. "D") with
assigned seat 3-A (Exh. "B-1") and the corresponding pass (Exh. "B") and baggage claim symbol (Exh. "A"). Plaintiff was made to pay the fare
and terminal fee. At the immigration section, plaintiff's passport (Exh. "C") was stamped accordingly (Exh. "C-3"). Plaintiff's name was included
in the passenger manifest (Exh. "1," "5") of PAN AM for Flight 431 dated April 19, 1973. And these show that plaintiff was indeed a confirmed
passenger of defendant's Flight 431 for San Juan on April 29, 1973. There was, therefore, 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.
Defendant has from the start argued that plaintiff was merely to chance passenger thus she had to give way to a passenger with a confirmed
reservation. However, defendant through Mr. Jose Raul Fiolla Rodriguez, testified that he cannot say exactly what the total capacity of the
plane on Flight 431 was; that he does not know whether Mrs. Tinitigan was allowed to buy a ticket because there was still space available; that
he cannot say whether Mrs. Tinitigan was the first or last to buy a ticket to San Juan because there is no knowing; that there is no way of
knowing who occupied the seat (3-A) assigned to Mrs. Tinitigan; that he does not know if the ticket number of the person who occupied seat 3A was higher or lower that the ticket number of Mrs. Tinitigan because it cannot be determined; that a higher number than that of Mrs.
Tinitigan's ticket does not necessarily mean that Mrs. Tinitigan bought her ticket ahead; that no one else with open ticket was assigned the
same seat number as Mrs. Tinitigan; that PAN AM does not practice the principle of "first come, first served."
In other words, defendant would like us to believe that plaintiff was a chance passenger only and was not assured of her flight on that day.
Defendant, however has no way of proving the same as it was not certain whether plaintiff was a chance passenger or not.
Bad faith means a breach of a known duty through some motive or interest or ill will. Self enrichment or fraternal interest and not personal illwill may
have been the motive of defendant, but it is malice nevertheless. The fact that plaintiff was ordered out under some pretext in order to accommodate a
white man in an airline owned by an American firm with a reputation for bumping off non- caucasian to accommodate whites is very regrettable.
When defendant's employee ordered plaintiff to step out of line because her ticket was not confirmed despite plaintiff's pleas that she should be in San
Juan that day, this caused plaintiff embarrassment because so many people heard the same and plaintiff was prevented from boarding the plane at all
while her seat (3-A) was given to another passenger (a white man). For being subjected to such indignities, plaintiff suffered social humiliation, wounded
feelings, serious anxiety, and mental anguish. Defendant should be held liable to plaintiff for moral damages.
A contract to transport passengers is quite different in kind and degree from any other contractual relation. And this, because of the relation
which an air-carrier sustains with the public. Its business is mainly with the travelling public. It invites people to avail of the comforts and
advantages it offers. The contract of carriage therefore, generates a relation attended with a public duty. Neglect or malfeasance of the
carrier's employees, naturally, could give ground for an action for damages. 5
By not allowing plaintiff to board Flight 431 on April 29, 1973, plaintiff was not able to sign a contract with Mrs. Lilibeth Warner who had earlier
placed an order for a sizeable number of "capiz", shells in which transaction plaintiff expected to derive a profit of US $1,000.00. Plaintiff had
to return to the Hotel El Embajador drom the aircraft costing her US$20.00. She had to pay for additional accommodations in said hotel for
US$26.15 and the damage to her personal property amounted to US$500.00. Defendant should be held liable to the plaintiff in the amount of
US$1,546.15 or its equivalent in Philippine Currency at the present rate of exchange as actual or compensatory damages.
Defendant having breached its contract with plaintiff in bad faith, it is not error for the trial court to have awarded exemplary damages. The rational
behind exemplary or corrective damages is, as the name implies, to provide an example or correction for public good . 6 In view of it nature, it should be
imposed in such amount as to sufficiently and effectively deter similar breach of contract in the future by defendant and other airlines.
An award of attorney's fees is also in order, having found bad faith on the part of defendant.
WHEREFORE, the decision appealed from is hereby AFFIRMED with the following modifications: defendant is sentenced to pay the plaintiff
the sum of US$1,546.15 or its equivalent in Philippine Currency at the present rate of exchange with the US dollar.
Costs against defendant-appellant.
SO ORDERED. (pp. 3-5, Decision, pp. 96-98, Rollo)
It is noted that petitioner submitted in this petition the same grounds enumerated in its Motion for Reconsideration of the assailed judgment of the
respondent appellate court anchoring its claim mainly on the appreciation of facts as supported by the evidence on record. These same grounds are
also raised in petitioner's appeal from the judgment of the lower court to the respondent appellate court which affirmed the said assailed judgment.
All of the issues raised by petitioner are factual issues which the trial court ruled upon by favoring plaintiff's evidence as more credible than the evidence
for the defendant. A cursory reading of the decision of the trial court as well as the decision of the appellate court reveals that all evidence available
were considered. It is not the function of this Court to analyze or weigh evidence all over again, as Our jurisdiction is limited to reviewing errors of law
that might have been committed by the lower courts. Moreover, the findings of the lower court as to the credibility of the witnesses will not be generally
disturbed on appeal and if the appeal is on questions of fact, the factual findings of the appellate court are binding on Us (Collector of Customs of
Manila vs. IAC, 137 SCRA 3).
We believe, however the amount of some damages awarded to be exorbitant: We therefore reduce the moral and exemplary damages to the
combined total sum of Two Hundred Thousand (P200,000.00) Pesos and the attorney's 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 is hereby retained and granted.
WHEREFORE, as modified, the assailed decision of respondent appellate court is hereby AFFIRMED.
SO ORDERED.

SUPREME COURT
Manila
EN BANC
G.R. No. L-19407
November 23, 1966
JUANA SOBERANO and JOSE B. SOBERANO, plaintiffs-appellants,

vs.
MANILA RAILROAD COMPANY, through the Acting General Manager, Colonel Salvador T. Villa; THE BENGUET AUTO LINE, through
the Superintendent, Mr. Casiano Rivera; and SANTIAGO CACCAM, Driver, defendants-appellees.
CASTRO, J.:
This is an appeal, purely on questions of law, from a decision of the Court of First Instance of Baguio City, ordering the defendant Manila
Railroad Company to pay the plaintiffs Juana Soberano and her husband Jose Soberano the sum of P5,070.60, with legal interest from June
6, 1956, the date of the filing of the complaint, and to pay the costs.
In the morning of March 8, 1955 in Cabugao, Ilocos Sur, Juana Soberano boarded bus No. 155, with plate No. TPU-5994, of the Benguet Auto
Line (BAL), a subsidiary of the Manila Railroad Co. (MRR),1 driven by Santiago Caccam, bound for Baguio City. In that trip, Juana brought with
her 3,024 chicken eggs to be sold in Baguio City, and some personal belongings which she needed in that trip. About three kilometers away
from Baguio City, along the Naguilian road, the bus hit a stone embankment, causing it to fall into a 65-foot deep precipice, resulting in death
to two of its passengers and serious physical injuries to Juana and loss and destruction of all her belongings.
From the scene of the accident, Juana was brought to the Baguio General Hospital. Radiologist Dr. Hector Lopez after examining her injuries, certified
that she sustained comminuted fracture in the left mandible near the articulation, cracked fracture in the right temporal bone, crushed fractures, both
scapular, and fracture in the 2nd, 3rd and 4th ribs. She was confined in that hospital until April 14, 1955, when she was transferred to the National
Orthopedic Hospital, whereat she stayed until June 6, 1955 when she was discharged. She was also treated by Dr. Luis Martinez of the V. Luna
Hospital, and Dr. J.V. de los Santos, both orthopedists, and late by Dr. J. O. Floirendo, an EENT specialist, for "visual and other defects."
Santiago Caccam was thereafter charged in the Court of First Instance of Baguio City with the crime of double homicide and serious physical
injuries thru reckless imprudence. He pleaded guilty to the crime of double homicide and serious physical injuries thru simple imprudence and
was sentenced accordingly. Juana Soberano did not intervene in the criminal case because she filed a formal reservation to institute a
separate civil action for damages and indemnity against the MRR and the BAL.
Because of the loss of the eggs and the destruction of the personal effects that Juana brought with her in that trip, Jose Soberano, her husband,
demanded from the defendant companies the value thereof amounting to P370.66 (exh. C-3), of which sum the MRR paid P300 (exh. 2). The MRR also
paid the daily expenses, allowances, subsistence, hospitalization, medical fees and medicines of Juana Soberano, as well as the service fees of her
caretaker. The MRR has paid a total sum of P4,219 (exhs. 3 & 4). Later the MRR offered to settle the case extrajudicially, tendering to the Soberanos
the additional sum of P5,000. The offer was rejected, and the Soberanos filed the present action against the defendant companies and Caccam, to
recover from them damages in the total sum of P76,757.76. 2 The defendant companies in due time filed their answer to the complaint with counterclaim
for damages by way of attorney's fees, and praying that the complaint against them be dismissed, or, in the alternative, that the court approve their offer
of settlement. The Soberanos filed a reply to the counterclaim and prayed for its dismissal .
After due trial, the lower court rendered the decision appealed from, dismissing at the same time the complaint against Caccam. The
Soberanos moved to have the decision reconsidered. The motion for reconsideration was denied; hence the present recourse.
The nine errors imputed by the Soberanos to the lower court actually pose only two basic issues, namely, whether the dismissal of the
complaint against Caccam is proper, and whether the amount of damages awarded is adequate.
Upon the first issue it is the contention of the Soberanos that the lower court, instead of dismissing their complaint against Caccam, should have priorly
declared him in default for failure to file an answer to the complaint. It is true that Caccam did not file any answer to the complaint; but it is also true that
the plaintiffs did not move to declare him in default. And no default order may be issued against a defendant who fails to file a timely answer to a
complaint except "upon motion of the plaintiff" (sec. 6, Rule 35, old Rules of Court, now sec. 1, Rule 18, Revised Rules of Court), and a court cannot
issue a default order motu proprio (Viacrucis, et al. vs. Estenzo, etc., et al., L-18457, June 30, 1962). In spite of the lack of a formal motion to secure a
default order against Caccam, however, the Soberanos contend that at the hearing held on July 11, 1959, their counsel, Atty. Marcos Vega, before
closing his evidence, manifested to the lower court that because Caccam failed to file an answer to the complaint, he should "be declared in default and
that we be allowed to present evidence against him in accordance with our complaint." This manifestation would nevertheless not have precluded the
dismissal of the complaint against Caccam. In resolving this manifestation, the lower court asked Vega upon what basis the complaint is predicated,
whether on culpa contractual or culpa aquiliana. Vega at first said, "It can be taken as both." But when the lower court pointedly declared that it "cannot
allow you or give you both remedies," said counsel replied that the complaint is predicated upon culpa contractual. Because of this reply, the lower court
ruled that the Soberanos cannot go against Caccam, because he cannot be held liable on culpa contractual. Vega was given another chance to make a
choice, but he finally decided to proceed on the basis of "culpa contractual because we cannot get anything from Caccam", adding that we are ready to
present evidence to sustain our allegations against Santiago Caccam, we will close because moral damages against him cannot be recovered just the
same."
That the complaint is in fact predicated on culpa contractual can be seen front a perusal thereof. While it names three defendants, the MRR
the BAL, and Santiago Caccam, the prayer thereof shows that the action is directed against the first two only, "to declare the defendant
companies Manila Railroad Company and Benguet Auto Line solidarily liable." And although paragraph 11 of the complaint recites that the
incident was "due to the negligence and reckless imprudence of the defendant driver Santiago Caccam," it is significant that there is no prayer
for declaration of liability against Caccam.
The complaint against Caccam was therefore properly dismissed. He was not a party to the contract; he was a mere employee of the BAL. The parties
to that contract are Juana Soberano, the passenger, and the MRR and its subsidiary, the BAL, the bus owner and operator, respectively; and
consequent to the inability of the defendant companies to carry Juana Soberano and her baggage and personal effects securely and safely to her
destination as imposed by law (art. 1733, in relation to arts. 1736 and 1755, N.C.C.), their liability to her becomes direct and immediate.
We now come to the question of damages.

The Soberanos initially contend that the lower court erred in disallowing their claim of P200, representing the expenses of Juana Soberano in attending
as a witness in the criminal case and attorney's fees incurred in connection therewith. This claim was correctly denied by the lower court, because these
expenses were properly taxable in the criminal case. It may be argued that the Soberanos could not have recovered this sum in the criminal case
because Juana Soberano expressly filed a formal reservation to institute a separate civil action for damages, but such reservation did not preserve
whatever rights they had against Caccam on the basis of the latter's imprudence. The reservation is ineffective as to Caccam as it did not include him
among those against whom their rights had been reserved. And the Soberanos not having intervened in the criminal case, this claim must be
considered as having been impliedly adjudicated in the criminal case, and cannot therefore be ventilated in the present action.
The Soberanos next contend that the lower court erred in denying their claim for moral damages in the sum of P15,000, for the physical
suffering, mental anguish, serious anxiety and fright they suffered as a consequence of the mishap. The lower court denied this claim on the
strength of the oft-reiterated ruling of this Court that moral damages cannot be recovered against the employer in actions based on a breach
of contract of carriage in the absence of malice, fraud, or bad faith.
The lower court rightly denied the claim for moral damages as far as Jose Soberano is concerned. In case of physical injuries, moral damages
are recoverable only by the party injured and not by his next of kin, unless there is express statutory provision to the contrary (Strebel v.
Figueras, L-4722, Dec. 29, 1954; Araneta et al. v. Arreglado, et al., L-11394, Sept. 9, 1958). In this case it was Juana Soberano, not her
husband Jose, who sustained the bodily injuries.
With respect to the claim of Juana Soberano for moral damages, the rule is well-settled in this jurisdiction that in cases of breach of contract of
carriage, moral damages are recoverable only "where the defendant has acted fraudulently or in bad faith" (art. 2220, N.C.C.), and the terms
fraud and bad faith have reference to "wanton, reckless, oppressive, malevolent conduct", or, in the very least, to "negligence so gross as to
amount to malice." (Fores Miranda, L-12163, March 4, 1959; Necesito, etc. v. Paras,et al., L-10605-10606, June 30, 1958).
To prove malice and bad faith on the part of the defendant companies, the Soberanos aver that the said defendants intentionally omitted the name of
Juana as one of the offended parties in the information in criminal case 1086, and that her name was included therein only upon the intervention of the
Soberanos themselves; that the defendant companies prevailed upon Caccam to plead guilty to the lesser crime of double homicide and serious
physical injuries thru simple imprudence, purposely to prevent the introduction of evidence of gross negligence amounting to malice against the said
companies; that the BAL physician, Dr. Nievera, disowned having been an attending physician of Juana Soberano, and, together with MRR physician
Dr. Salvador, suppressed the introduction of the X-ray plates takenof Juana as evidence to prove the extent of the injuries suffered by the latter; and
that the defendant companies exerted undue influence upon Dr. Fernandez, who treated Juana's dental injuries, not to testify to such matters or identify
a medical certificate issued by him, describing the dental injuries suffered by Juana. These incidents, even if true, cannot be considered as acts
committed fraudulently or in bad faith by the defendant companies in the operation of their transportation business which directly resulted in the mishap
that caused the injuries to Juana. Moreover, the allegation in paragraph 11 of the complaint that the incident was "due to the negligence and reckless
imprudence of the defendant driver Santiago Caccam", does not per se justify an inference of malice or bad faith on the part of the defendant
companies (Rex Taxicab Co. v. Bautista, et al., L-15392, Sept. 30, 1962; Cachero v. Manila Yellow Taxicab Co., Inc., L-8721, May 23, 1957), for fraud,
malice, or bad faith must be proved to support a claim for moral damages if only physical injuries are sustained (Lira vs. Mercado, L-13358, Sept. 29,
1961).
The absence of fraud, malice, or bad faith on the part of the defendant companies justifies the denial of Juana Soberano's claim for moral
damages as well as the denial of the claim for exemplary damages (art. 2232, N.C.C.).
The third claim for attorney's fees was also properly denied by the lower court. The Soberanos aver that they were obliged to file a separate civil
action for damages against the defendant companies. This claim is predicated upon paragraphs (2) and (5) of article 2208 of the New Civil Code, which
provide that attorney's fees and expenses of litigation may be recovered when the defendant's act or omission has compelled the plaintiff to litigate with
third persons or incur expenses to protect his interest, or when the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's
plainly valid, just and demandable claim. It will be observed that the defendant companies offered to settle the case by offering to the Soberanos the
additional sum of P5,000. The Soberanos, however, rejected the offer and proceeded to court to recover damages in the total sum of P76,757.76. It was
not, therefore, the defendant companies that compelled the Soberanos to litigate, or to incur expenses in connection with the litigation instituted by
them. The Soberanos went to court after rejecting the defendant companies' offer of settlement. The latter can not likewise be considered to have acted
in gross and evident bad faith in not satisfying the claim of the Soberanos, because, as the lower court puts it, the Soberanos "have asked for too
much", and the "defendant was justified in resisting this action." We are not without precedent on this point. In Globe Assn. vs. Arcache, L-12378, May
28, 1958, this Court observed that the refusal of the defendant therein to pay the amount claimed was due not to malice but to the fact that the plaintiff
therein demanded more than it should, and consequently ruled that the defendant had the right to refuse it; and in the Cachero case, supra, this Court
held that the plaintiff in that case cannot recover attorney's fees, because the litigation was caused not by the defendant's failure to pay but by the
plaintiff's "exorbitant charge."
We now come to the claim for additional unpaid allowances of Juana Soberano while she was undergoing medical and dental treatment in
Manila and Quezon City, in the total sum of P600. In our view, this claim has merit.
The allowance of ten pesos for each day of stay in Quezon City of Juana Soberano was recommended for approval by the superintendent of
the BAL, Mr. C. Rivera (exh. C-4) and by the MRR physician, Dr. Salgado, and appears to have been "OK" by the MRR administrative officer,
Mr. F.C. Unson (exh. C-5). These exhibits C-4 and C-5 were admitted in evidence without objection from the Government Corporate Counsel
who represented the defendant companies. The defendant companies have already paid to Jose Soberano the total sum of P600, covering
Juana Soberano's stay for 60 days in a private house, from June 7 to July 5, 1955, and from July 7 to August 5, 1955 (exhs. 3-I and 3-J).
As to the balance of P600, it was error for the lower court to include this sum in the assessment of loss of earning capacity, because this amount
represents expenses for board and lodging, short order such as milk and fruit, laundry and transportation of Juana Soberano incurred during her stay in
a private house in Quezon City, after her discharge from the National Orthopedic Hospital, which continued stay was upon the advice of her attending
physician that she go to that hospital every other day for physical therapy (exh. C-3). It will be seen under exhibits C-4 and C-5 that the defendant
companies agreed to pay the Soberanos the sum of P10.00 a day for her said stay beginning "June 7, 1955 not to exceed 60 days, depending upon the
advice of the attending physician or other bone specialist." The deposition of, and a medical certificate issued by, Dr. Juan 0. Floirendo, in EENT
specialist who treated Juana Soberano for "visual and other defects", show that he treated her for more than sixty days, from September 10, 1955 to
February 2, 1956 (exh. L). The balance of P600 should, therefore, be paid to Juana Soberano.
We come finally to the claim for loss of earning capacity in the total sum of P50,000, based upon the expectancy that Juana Soberano, who
was 37 years old at the time of the accident, would live for 20 more years and be able to earn an average annual income of P2,500. On this
point, the lower court found that "Juana Soberano suffered greatly and that her injuries left her permanently disfigured and partially disabled as
she walks with a stiff neck and her arms have partly lost their full freedom." After finding however, that she is not altogether a helpless woman
and can still engage in business, the lower court awarded to her P5,000 to compensate loss of earnings as a result of her partial disability.
The appellants contend that the award is inadequate. We agree.
This Court, in three cases, allowed in one, and increased in the two others, the amount of compensatory damages. In Borromeo v. Manila
Electric Railroad and Light Co., 44 Phil. 165 (1922), this Court awarded P2,000 in future damages to the plaintiff therein, after finding that due
to the accident, wherein Borromeo's left foot was passed over by the rear wheels of the electric car of the defendant company and had to be
amputated, he had to use an artificial foot in order to be able to walk; that he could no longer be employed as a marine engineer which he had
been for sixteen years; that at the time of the accident he was a chief engineer with a monthly salary of P375; and that because he knew of no
other profession, his incapacity had put an end to his activities and had destroyed his principal source of professional earnings in the future. In
Cariaga, et al. v. Laguna Tayabas Bus Co., et al., L-11037, Dec. 29, 1960, this Court increased the award of compensatory damages from
P10,490 to P25,000, after finding that Edgardo Cariaga's right forehead was fractured, necessitating the removal of practically all of the right
frontal lobe of his brain; that he had become a misfit for any kind of work; that he could hardly walk around without someone helping him and
he had to use a brace on his left leg and foot; that he was a virtual invalid, physically and mentally; that at the time of the accident he was
already a fourth-year student in medicine in a reputable university; that his scholastic record is sufficient to justify the assumption that had he
continued his studies, he would have finished the course and would have passed the board examinations; and that he could possibly have
earned as a medical practitioner the minimum monthly income of P300. And in Araneta, et al. v. Arreglado, et al., L-11394, September 9, 1958,
this Court increased the award of compensatory damages from P1,000 to P18,000, after finding that Benjamin Araneta sustained "permanent
deformity and something like an inferiority complex" as well as a "pathological condition on the left side of the jaw" caused by the defendant
Dario Arreglado who inflicted the injury upon him voluntarily; that to arrest the degenerative process taking place in the mandible and to
restore the injured boy to a nearly normal condition, surgical intervention was needed; that a repair, however skillfully conducted, is never
equivalent to the original state; and that because of the injury, the boy had suffered greatly.
In the case at bar, the nature and extent of the physical injuries suffered by Juana Soberano and thereafter effects upon her life and activities,
are by three reputable physicians: Dr. Hector Lopes, a radiologist of the Baguio General Hospital; Dr. Angel Poblete, an orthopedist of the
National Orthopedic Hospital; and Dr. Juan O. Floirendo, an EENT specialist. Dr. Lopez declared that Juana Soberano suffered comminuted
fracture in the left mandible near the articulation, cracked fracture in the right temporal bone, crushed fractures both scapular, and fracture in
the 2nd, 3rd and 4th ribs. As a result of these injuries, Dr. Poblete said that she suffered and would continue to suffer limitation of mouth
opening, bad approximation of the jaw alignment which is drawn inside, limitation of neck and shoulder movements with numbness on the right
side of the face and right and left side of the body, disturbance in vision, and poor mastication resulting in indigestion. Dr. Poblete further
testified that she will be "abnormal and naturally she could not be expected to live a normal life." Dr. Floirendo declared that she suffers from
pain along the cheeks on both sides of her face, double vision, and paralysis of the ocular muscles due to partial disequilibrium of the eye
muscles.
Juana Soberano herself categorically declared, and this was not contradicted, that prior to the accident, she had a complete and healthy set of
teeth; that as a result of the accident she lost three of her teeth, and the remaining ones in the upper jaw had to be extracted because they
were already loose and a denture had perforce to be made for her; and that her face is permanently disfigured (exhs. K & K-1).
There is absolutely no doubt that the resultant physical handicaps would entail for Juana Soberano a loss of positive economic values. In fact,
they will greatly adversely affect her occupation as a pending merchant which she has been since 1950 (exh. A), earning from 1950 to March
8, 1955, when the accident happened, an average annual net income of about P1,500 (exhs. B, B-1 to B-5, inclusive). It is to be assumed that
had the interruption to her occupation through defendant's wrongful act not occurred, she would continue earning this average income.
Considering all the facts detailed above, this Court is of the opinion that the sum of P5,000 in compensatory damages awarded to her for loss
of earning capacity is inadequate; the amount should be increased to P15,000.
She should also be awarded the sum of P45.35, representing unrealized profits from the 3,024 chicken eggs which she brought with her in the
trip and which were destroyed. She brought those eggs to be sold in Baguio City. She bought them at nine centavos each, was to sell them in
Baguio City to definite customers at an agreed price of ten and a half centavos each, or with a profit of one and a half centavos per egg.
Finally, all the awards to Juana Soberano should earn interest at the legal rate from the date the judgment a quo was rendered, on November
25, 1960, and not from the date of the filing of the complaint.
ACCORDINGLY, the judgment appealed from is modified to read as follows: "Judgment is therefore rendered ordering the Manila Railroad
Company to pay to the plaintiffs (1) P600 representing the balance of the unpaid allowances due to Juana Soberano in connection with her
stay in a private house in Quezon City during the period of her medical treatment; (2) P15,000 for loss of earning capacity; and (3) P45.36 for
unrealized profits, all of these sums to earn interest at the legal rate from November 25, 1960." Costs against the defendants-appellees.
SUPREME COURT
Manila
EN BANC
G.R. No. L-24471
August 30, 1968
SILVERIO MARCHAN and PHILIPPINE RABBIT BUS CO., INC., petitioners,

vs.
ARSENIO MENDOZA, LEONARDA ILAYA, and ZENAIDA MENDOZA, respondents.
FERNANDO, J.:
Petitioners, the driver of the passenger bus responsible for the injuries sustained by respondent for which he was duly prosecuted and
thereafter convicted for serious, less serious, and slight physical injuries, and the bus firm, the Philippine Rabbit Bus Lines, seek the reversal
of a Court of Appeals decision of December 14, 1964 and a resolution of March 31, 1965, holding them liable both for compensatory and
exemplary damages as well as attorney's fees. It is the contention of petitioners that errors of law were committed when, in the aforesaid
decision, it was held that there was an implied contract of carriage between the petitioner bus firm and respondents, the breach of which was
the occasion for their liability for compensatory and exemplary damages as well as attorneys fees.
The facts as found by the Court of Appeals follow: "In the evening of February 22, 1954, between 9:00 and 9:30 o'clock, a passenger bus No.
141 of the Philippine Rabbit Bus Lines, bearing Plate No. TPU-708 which was then driven by Silverio Marchan fell into a ditch somewhere in
Barrio Malanday, Polo, Bulacan, while travelling on its way to Manila; as a result of which plaintiffs-appellees Arsenio Mendoza, his wife and
child, [respondents in this proceeding], who were then inside the bus as passengers were thrown out to the ground resulting in their multiple
injuries. Plaintiff Arsenio Mendoza suffered the most serious injuries which damaged his vertebrae causing the paralysis of his lower
extremities which up to the time when this case was tried he continued to suffer. The physician who attended and treated plaintiff Arsenio
Mendoza opined that he may never walk again. Consequently the driver of said bus Silverio Marchan [now petitioner] was prosecuted for
serious, less serious and slight physical injuries through reckless imprudence before the Justice of the Peace Court of Polo Bulacan, and
thereafter convicted as charged on June 29, 1956 ..., which judgment of conviction was subsequently affirmed by the Court of First Instance of
same province ... In this present action before us, plaintiffs-appellees Arsenio Mendoza, his wife and child sought to recover damages against
defendant-appellant Arsenio Marchan, then the driver of bus No. 141 of the Philippine Rabbit Bus Lines, and from defendants-appellants
Bienvenido P. Buan and Natividad Paras in their capacity as administrator and administratix, respectively of the estate of the late Florencio P.
Buan, doing business under the style name of the Philippine Rabbit Bus Lines, predicated not only on a breach of contract of carriage for
failure of defendants operator as well as the defendant driver to safely convey them to their destination, but also on account of a criminal
negligence on the part of defendant Silverio Marchan resulting to plaintiff-appellee's multiple physical damages." 1
The Court of Appeals in the decision under review found that there was a preponderance of evidence to the effect that while respondents
Arsenio Mendoza, his wife, Leonarda Ilaya, and child, Zenaida Mendoza "were waiting for a passenger bus on January 22, 1954 at about 9:00
in the evening at Malanday, they boarded defendants-appellants' bus bearing No. 141 of the Philippine Rabbit Bus Lines with Plate No. TPU708 bound for Manila. And they were treated as passengers thereto, for they paid their corresponding fares. As they travelled along the
highway bound for Manila, said bus was traveling at a high rate of speed without due regard to the safety of the passengers. So much so that
one of the passengers had to call the attention of Silverio Marchan who was then at the steering wheel of said bus to lessen the speed or to
slow down, but then defendant Silverio Marchan did not heed the request of said passenger; neither did he slacken his speed. On the
contrary, defendant Silverio Marchan even increased his speed while approaching a six-by-six truck which was then parked ahead, apparently
for the purpose of passing the said parked truck and to avoid collision with the incoming vehicle from the opposite direction. But, when
appellant Silverio Marchan veered his truck to resume position over the right lane, the rear tires of said truck skidded because of his high rate
of speed, thereby causing said truck to fall into a ditch. Substantially, the happening of the accident' resulting to the multiple injuries of
plaintiffs-appellees, was explained by defendant Silverio Marchan who declared that while he was driving his bus from Barrio Malanday bound
towards Manila on a road test, he suddenly noticed an oncoming vehicle. He thus shifted his light from dim to bright. Just then, he noticed a
six-by-six truck parked on the right lane of the road where he was driving. Confronted with such situation that if he would apply his brake he
would bump his bus against the parked truck he then increased his speed with the view of passing the said parked truck, and thereafter he
veered to negotiate for the proper position on the right lane, but in so doing he swerved to the right in order to avoid collision from the
oncoming vehicle the rear portion of the bus skidded and fell into the ditch." 2
Hence the finding of negligence in the decision under review. Thus: "From the facts as established preponderantly by the plaintiff and
substantially corroborated by the defendant Silverio Marchan, it is clear that the cause of the accident was the gross negligence of the
defendant Silverio Marchan who when driving his vehicle on the night in question was expected to have employed the highest degree of care;
and should have been assiduously prudent in handling his vehicle to insure the safety of his passengers. There is no reason why he could not
have stopped his vehicle when noticing a parked truck ahead of him if he was not driving at a high speed. His admission to the effect that if he
would apply his brake he would bump or hit the parked truck ahead of him, since there was no time for him to stop the bus he was driving, is a
patent indication that he was travelling at a high rate of speed without taking the necessary precaution under the circumstance, considering
that it was then nighttime. It is our considered view that under the situation as pictured before us by the driver of said bus, he should not have
increased his speed and by-passed the parked truck obviously with the view of preventing a collision with the incoming vehicle. Any prudent
person placed under the situation of the appellant would not have assumed the risk as what appellant did. The most natural reaction that could
be expected from one under the circumstance was for him to have slackened and reduced his speed. But this was not done simply because
defendant-appellant could not possibly do so under the circumstance because he was then travelling at a high rate of speed. In fact, he had
increased his speed in order to avoid ramming the parked truck without, however, taking the necessary precaution to insure the safety of his
passengers."3
On the above facts, the Court of Appeals, in its decision of December 14, 1964, affirmed the amount of P40,000.00 awarded by the court
below as compensatory damages modifying the appealed lower court decision by holding petitioners to pay the amount of P30,000.00 as
exemplary damages and sustaining the award of attorney's fees in the amount of P5,000.00. Then came the resolution of March 31, 1965 by
the Court of Appeals, where the motion for reconsideration of petitioners was denied for lack of merit.
In their brief as petitioners, the first error assigned is the alleged absence of an implied contract of carriage by the petitioner bus firm and
respondent. On this point, it was the holding of the Court of Appeals: "Since it is undisputed by the evidence on record that appellant Silverio
Marchan was then at the steering wheel of the vehicle of the defendant transportation company at that moment, the riding public is not
expected to inquire from time to time before they board the passenger bus whether or not the driver who is at the steering wheel of said bus
was authorized to drive said vehicle or that said driver is acting within the scope of his authority and observing the existing rules and
regulations required of him by the management. To hold otherwise would in effect render the aforequoted provision of law (Article 1759)
ineffective."4 It is clear from the above Civil Code provision that common carriers cannot escape liability "for the death of or injuries to
passengers through the negligence and willful acts of the former's employees, although such employees may have acted beyond the scope of
their authority or in violation of the orders..." 5 From Vda. de Medina v. Cresencia,6 where this Court, through Justice J.B.L. Reyes, stressed
the "direct and immediate" liability of the carrier under the above legal provision, "not merely subsidiary or secondary," to Maranan v. Perez,7 a
1967 decision, the invariable holding has been the responsibility for breach of the contract of carriage on the part of the carrier. According to
the facts as above disclosed, which this Court cannot disturb, the applicability of Article 1759 is indisputable. Hence, the total absence of merit
of the first assignment of error.
The next two errors assigned would dispute the holding of the Court of Appeals in imposing liability in the respective amounts of P40,000.00
for compensatory damages and P30,000.00 for exemplary damages. Again, such assignments of error cannot be looked upon with favor.
What the Court of Appeals did deserves not reprobation but approval by this Court.
As to why the amount in compensatory damages should be fixed in the sum of P40,000.00 is explained in the appealed decision thus:
"Likewise, it is our considered view that the amount of P40,000.00 awarded by the court below as compensatory damages is quite reasonable
and fair, considering that plaintiff Arsenio Mendoza had suffered paralysis on the lower extremities, which will incapacitate him to engage in his
customary occupation throughout the remaining years of his life, especially so if we take into account that plaintiff Arsenio Mendoza was only
26 years old when he met an accident on January 22, 1954; and taking the average span of life of a Filipino, he may be expected to live for 30
years more; and bearing in mind the earning capacity of Arsenio Mendoza who before the happening of this accident derived an income of
almost P100.00 a month from the business of his father-in-law as Assistant Supervisor of the small [fairs] and his income of P100.00 a month
which he derived as a professional boxer."8 Considering that respondent Arsenio Mendoza was only in his middle twenties when, thru the
negligence of petitioners, he lost the use of his limbs, being condemned for the remainder of his life to be a paralytic, in effect leading a
maimed, well-nigh useless existence, the fixing of such liability in the amount of P40,000.00 as compensatory damages was well within the
discretion of the Court of Appeals. 1wph1.t
As to the finding of liability for exemplary damages, the Court of Appeals, in its resolution of March 31, 1965, stated the following: "We now
come to the imposition of exemplary damages upon defendants-appellants' carrier. It is argued that this Court is without jurisdiction to
adjudicate this exemplary damages since there was no allegation nor prayer, nor proof, nor counterclaim of error for the same by the
appellees. It is to be observed however, that in the complaint, plaintiffs "prayed for such other and further relief as this Court may deem just
and equitable." Now, since the body of the complaint sought to recover damages against the defendant-carrier wherein plaintiffs prayed for
indemnification for the damages they suffered as a result of the negligence of said Silverio Marchan who is appellant's employee; and since
exemplary damages is intimately connected with general damages, plaintiffs may not be expected to single out by express term the kind of
damages they are trying to recover against the defendant's carrier. Suffice it to state that when plaintiffs prayed in their complaint for such
other relief and remedies that may be availed of under the premises, in effect, therefore, the court is called upon the exercise and use its
discretion whether the imposition of punitive or exemplary damages even though not expressly prayed or pleaded in the plaintiffs' complaint." 9
In support of the above view, Singson v. Aragon was cited by the Court of Appeals. 10 As was there held by this Court: "From the above legal
provisions it appears that exemplary damages may be imposed by way of example or correction only in addition, among others, to
compensatory damages, but that they cannot be recovered as a matter of right, their determination depending upon the discretion of the court.
It further appears that the amount of exemplary damages need not be proved, because its determination depends upon the amount of
compensatory damages that may be awarded to the claimant. If the amount of exemplary damages need not be proved, it need not also be
alleged, and the reason is obvious because it is merely incidental or dependent upon what the court may award as compensatory damages.
Unless and until this premise is determined and established, what may be claimed as exemplary damages would amount to a mere surmise or
speculation. It follows as a necessary consequence that the amount of exemplary damages need not be pleaded in the complaint because the
same cannot be predetermined. One can merely ask that it be determined by the court if in the use of its discretion the same is warranted by
the evidence, and this is just what appellee has done.".
Such a principle has been repeatedly upheld. 11 In Corpuz v. Cuaderno, 12 this Court, again through Justice J.B.L. Reyes, made clear that the
amount "lies within the province of the court a quo, ..." It must be admitted, of course, that where it could be shown that a tribunal acted "with
vindictiveness or wantonness and not in the exercise of honest judgment," then there is room for the interposition of the corrective power of
this Tribunal.
No such reproach can be hurled at the decision and resolution now under review. No such indictment would be justified. As noted earlier, both
the second and the third assignments of error are devoid of merit.
Nor is there any occasion to consider further the fourth assigned error, petitioner being dissatisfied with the award of P5,000.00 as attorney's
fees to respondents. On its face, such an assignment of an alleged error is conspicuously futile. 1wph1.t
The judgment, however, must be modified in accordance with the ruling of this Court in Soberano v. Manila Railroad Co. 13 Respondents are
entitled to interest for the amount of compensatory damages from the date of the decision of the lower court and legal interest on the
exemplary damages from the date of the decision of the Court of Appeals.
WHEREFORE, as thus modified, the decision is affirmed, petitioners being liable for the sum of P40,000.00 in the concept of compensatory
damages with interest at the legal rate from and after January 26, 1960, and the sum of P30,000.00 as exemplary damages with interest at
the legal rate from and after December 14, 1964, as well as for the sum of P5,000.00 as attorney's fees, likewise earning a legal rate of
interest from and after January 26, 1960. Costs against petitioners.

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-63135 June 24, 1983
GLORIA DARROCHA DE CALISTON, petitioner,
vs.
THE HONORABLE COURT OF APPEALS AND GERONIMO DALMACIO, respondents.
Alexander J. Cawit for petitioner.
Rexco U. Alejano for private respondent.
RESOLUTION
PLANA, J.:
While driving a passenger bus in Bacolod City, private respondent Geronimo Dalmacio ran over Juana Sonza Vda. de Darrocha (a USVA
pensioner) who died instantly, survived by her only child, Gloria Darrocha de Caliston, the herein petitioner.
Prosecuted for homicide thru reckless imprudence, Dalmacio was convicted by the Court of First Instance of Negros Occidental, sentenced to
imprisonment and ordered to pay the herein petitioner P15,000.00 for the death of the victim, P5,000.00 as moral damages, P5,000.00 for
burial expenses and P10,000.00 for loss of pension which the deceased had failed to receive.
On appeal, the former Court of Appeals modified the CFI decision by absolving Dalmacio from the payment of the P10,000.00 for loss of
pension and credited him for the amount of P5,000.00 previously paid to the herein petitioner under a vehicular insurance policy obtained by
the bus owner.
The above modifications are now assailed in this petition for review on which the private respondent has filed his comment.
The deletion of the P10,000.00 awarded for loss of pension is unjustified. Under Article 2206 of the Civil Code
The amount of damages for death caused by a crime or quasi-delict shall be at least three thousand pesos, even though
there may have been mitigating circumstances. In addition:
(1) The defendant shall be liable for the loss of the earning capacity of the deceased, and the indemnity shag be paid to
the heirs of the latter. . .
The pension of the decedent being a sure income that was cut short by her death for which Dalmacio was responsible, the surviving heir of the
former is entitled to the award of P 10,000.00 which is just equivalent to the pension the decedent would have received for one year if she did
not die.
On the other hand, the P5,000.00 paid to the herein petitioner by the insurer of the passenger bus which figured in the accident may be
deemed to have come from the bus owner who procured the insurance. Since the civil liability (ex-delicto) of the latter for the death caused by
his driver is subsidiary and, at bottom, arises from the same culpa, the insurance proceeds should be credited in favor of the errant driver.
WHEREFORE, the petition is hereby granted partially in that the P10,000.00 award for loss of pension deleted in the appealed Court of
Appeals decision is hereby reinstated. Costs against private respondent.
SO ORDERED.
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-54470 May 8, 1990
PHILIPPINE AIRLINES, INC., petitioner,

vs.
HON. COURT OF APPEALS and NATIVIDAD VDA. DE PADILLA, substituted by her legal heirs, namely: AUGUSTO A. PADILLA,
ALBERTO A. PADILLA, CRESENCIO R. ABES (representing the deceased Isabel Padilla Abes) MIGUEL A. PADILLA and RAMON A.
PADILLA, respondents.
GRIO-AQUINO, J.:
The only legal issue raised by the petitioner in this thirty-year-old case is whether the indemnity for the death of private respondent's son, the
late Nicanor A. Padilla should be computed on the basis of his life expectancy, as the trial court and the Court of Appeals did, rather than the
life expectancy of private respondent, his only legal heir, as the petitioner contends.
On November 23, 1960, at 5:30 P.M., Starlight Flight No. 26 of the Philippine Air Lines (hereafter PAL) took off from the Manduriao Airport in
Iloilo, on its way to Manila, with 33 persons on board, including the plane's complement. The plane did not reach its destination but crashed on
Mt. Baco, Mindoro, one hour and fifteen minutes after takeoff .The plane was Identified as PI-C133, a DC-3 type aircraft manufactured in 1942
and acquired by PAL in 1948. It had flown almost 18,000 hours at the time of its illfated flight. It had been certified as airworthy by the Civil
Aeronautics Administration.
Among the fatalities was Nicanor Padilla who was a passenger on the star crossed flight. He was 29 years old, single. His mother, Natividad A.
Vda. de Padilla, was his only legal heir.
As a result of her son's death, Mrs. Padilla filed a complaint (which was amended twice) against PAL, demanding payment of P600,000 as
actual and compensatory damages, plus exemplary damages and P60,000 as attorney's fees.
In its answer, PAL denied that the accident was caused by its negligence or that of any of the plane's flight crew, and that, moreover, the
damages sought were excessive and speculative.
On November 23, 1964, the trial court issued a pre-trial order requiring the parties to file on or before January 30, 1965 a stipulation of facts,
or a negative manifestation in case they failed to submit a stipulation.
On June 8, 1965, the parties submitted a partial stipulation of facts providing as follows:
1. Plaintiff is the widow of the late Alberto R. Padilla Filipino, of legal age, and a resident of and with postal address at No. 970 (formerly No.
247) Gral. Solano St., San Miguel, Manila, while defendant Philippine Air Lines, Inc. is a corporation duly organized, registered and existing
under and by virtue of the laws of the Philippines, engaged, as a common carrier in the business of carrying or transporting by air passengers
and goods, offering its services to the public as such for compensation, with offices at Makati Bldg., Makati, Rizal.
2. Nicanor A. Padilla was born on January 10, 1931. He was a son by lawful marriage of plaintiff and Alberto R. Padilla, who died on
September 2, 1948.
3. Nicanor A. Padilla finished the elementary grades in 1943, high school in 1947, graduated the Reserve Officer's Course (Infantry Basic
Course) Armed Forces of the Philippines in 1949, and graduated with the degree of Bachelor of Literature in 1951 and the degree of Bachelor
of Laws in 1954, all in Ateneo de Manila.
4. He was admitted by the Supreme Court of the Philippines to practice law on January 28, 1955, and from January 1958, to the time of his
death on November 23, 1960, he was associated with the law offices of Senator Ambrosio Padilla, brother of his father, Alberto R. Padilla.
5. At the time of his death, he was the President and General Manager of the Padilla Shipping Co., Inc. He was also Vice-President and
Treasurer of the Allied Overseas Trading Co., Inc.
6. He was a member of the Board of Directors of the Junior Chamber of Commerce (Jaycees) International and Chairman of its Committee on
Governmental Affairs for the term 1960-1961. This Committee on Governmental Affairs published a pamphlet entitled "Good Government is
our Business," for which the deceased was named "Jaycee of the Month of January 1960."
7. Nicanor A. Padilla, while travelling and being transported and flown as a paid passenger on one [of] defendant's aircraft, a DC-3 with
registry No. PI-C133, on "Star Light Flight" No. 26 bound for Manila from the City of Iloilo on November 23, 1960, was killed when said plane
crashed in the area of Mount Baco, Oriental Mindoro
8. Nicanor A. Padilla died single, leaving as his nearest of kin and sole heiress to his estate his mother the plaintiff herein with whom he was
residing at the time of his death at 970 Gral. Solano St., Manila.
9. The aircraft (PI-C133) that crashed on Mt. Baco, Oriental Mindoro on November 23, 1960, was a twin-engine passenger plane of the
Philippine Air Lines of the DC-3 type. It was manufactured by Douglas Aircraft Corporation of the United States for the U.S. Army and was
purchased from the latter by the Commercial Air lines, Inc., on September 25, 1946. The defendant Philippine Air Lines acquired the plane
from the Commercial Air Lines, Inc., on October 15, 1948. The aircraft was registered by Philippine Air Lines with the Civil Aeronautics
Administration as PI-C142 on May 10, 1949. On October 15, 1953, PI-C142 met with a non-fatal accident at Piat, Tuguegarao, Cagayan. PAL
requested the Civil Aeronautics Administration for a change in the identification mark. Said request was granted and the registration number
was changed from PI-C142 to PI-C133 on July 29, 1954. As [ofl November 22, 1960, the day before the fatal crash on Mt. Baco, PI-C133 had
a total flying time of 17,996:33 hours.
10. PI-C133 was issued a certificate of airworthiness by the Civil Aeronautics Administration on September 13, 1960 which was to expire on
September 12, 1961; a copy of which is attached hereto as Exhibit "I" and made a part of this stipulation.
11. Other facts on which the parties cannot agree will be subject to proof at the trial. (pp. 34-39, Record on Appeal; p. 11 7, Rollo.)
On January 15, 1966, the parties submitted another partial stipulation of facts:
1. That in the book written by Salvador B. Salvosa, M.S. University of Michigan and member of the Actuarial Society of the Philippine, entitled;
"Filipino Experience Mortality Table," the complete life expectancy of Filipinos appear on page 3 thereof, a photostat of which is attached
hereto as Exhibit "A."
2. That in said Exhibit "A", the columns under the heading "Age x," refers to the age of the individual, and the columns "oe x" refers to the
corresponding number of years the individuals expected to live. Thus, under the column "Age x," a person aged 29, the corresponding life
expectancy of said person under column "oex" is "42.60" years; and under said column "Age x" a person aged 60, corresponding life expec
tancy of said person under column 'oex' is "17.90" years;
3. That Salvador B. Salvosa's "Filipino Experience Mortality Table," including the table of life expectancy are used by the Philippine
International life Insurance Co., the Sterling Life Insurance Co., the Cardinal Life Insurance Co., and Star life Insurance Co., and that the same
has been approved by the Insurance Commissioner for the use of life insurance companies doing business in the Philippines as shown by a
certificate issued by said Commissioner which is attached hereto as Exhibit "B";
4. That the book of Nelson and Warren, Consulting Actuaries of St. Luis and Kansas cities, Missouri, entitled: "Principal Mortality Tables",
contains a table of comparison of complete life expectancy based on principal mortality tables used by life insurance companies, a photostat of
which is likewise attached hereto as Exhibits "C", "C-l", "C-2", and "C-3";
5. That of the life expectancy based on the different systems mentioned in said Exhibits "C", "C-1", "C-2" and "C-3", the following are also used
in the Philippines for life insurance purposes: (a) the American Experience appearing in Exhibit "B", 'fifth columns on both pages, the first
column corresponding to the age of the individual (pages 12 and 13 of the book); (b) the Standard Industrial, appearing in the same Exhibit
"B", "sixth column on both pages (pages 12 and 13 of the book); and (c) the 1941 Commissioner Standard Ordinary, or CSO 1941 for short,
appearing in Exhibit "B-1", third column, on both pages (pages 14 and 15 of the book).
6. That the materiality and applicability [sic] of the life expectancy tables shown in Exhibit A or Exhibits "C", "C-1", "C-2" and "C-3" are left to
the judgment of the Honorable Court. (pp. 39-42, Record on Appeal; p. 117, Rollo.)
On March 19, 1970, a third joint partial stipulation of facts was submitted by the parties to the trial court which reads, thus:
JOINT FIRST PARTIAL STIPULATION OF FACTS

Plaintiff and defendant through their respective counsel, respectfully submit the following partial stipulation of facts:
1. Defendant in November, 1960 and even before was authorized and rated to repair aircrafts of U.S. and foreign registries and as such holds
the following:
Description Exhibit
a) US FAA Air Agency 1 Certificate
b) US FAA Repair Station Operations Specifications (2 pages) PI- 2 and 2-A
c) CAA Rating Grant to operate Repair Station with ratings on [sic] (i) Aircraft Metal propeller Hubs Overhaul Shop, (ii) Aircraft Engine
Overhaul Shop. 3
d) PI.-CAA Rating Grant to operate a repair station with ratings on (i) Aircraft of Composite Construction; (ii) Aircraft of all Metal Construction;
(iii) Aircraft Instrument. 4
2. Defendant maintained and repaired aircrafts of the U.S. Air Force, U.S. Navy and commercial carriers like PANAM Northwest Airways, KLM
and other foreign airlines.
3. Also in 1960 defendant was maintaining and following a CAA approved system of aircraft maintenance control using worksheets and work
card which record the specific job on any particular aircraft. They are:
a) Preflight inspections consisting of the
(i) Through Check: the visual inspection of an aircraft prior to flight and performed in stations where maintenance men are assigned.
(ii) Terminating Check: the visual inspection of the aircraft performed in stations were aircraft terminated a flight and where maintenance
men are assigned.
(iii) After Maintenance Check: the visual inspection of an aircraft preparatory to any flight following the completion of any check from Check
No. 1 to Cheek No. 6, to wit:
(a) Check No. 1 known as daily inspection check; (b) Check No. 2 which is accomplished every 125 hours;
(c) Check No. 3 which is accomplished every 250 flying hours; (d) Check No. 4 which is accomplished every 500 flying hours;
(e) Check No. 5 which is accomplished every 1,250 flying hours; (f) Check No. 6 which is a series broken down into 6- A, 6-B, 6-C, 6-D, 6-E
and 6-F;
4. The Quality Control Division is the custodian of all worksheets for the checks performed and under PI-CAA regulations, is required to keep
the records for at least 90 days.
5. The forms used and accomplished for the various checks were:
Description Exhibit
a) Preflight check sheet, including DC-3C Daily Airplane and Engine Routine and Cleaning Routine; 5,6 & 6-A
b) Check No. 2, consisting of 37 work control cards; 7-A to 7-KK
c) Check No. 3 consisting of 49 work control cards; 8, 8-A to 8-XX
d) Check No. 4 consisting of a work control card; 9, 9-A to 9-F
e) Check No. 5 consisting of 00, 10-A to 9 work control cards; 10-H
f) Check No. 6-A consisting of 11, 11-A to 112 work control cards; 11-(G)
g) Check No. 6-B consisting of 12, 12-A to 114 work control cards; 12-(J)
h) Check No. 6-C consisting of 13, 13-A to 117 work control cards 13-(I)
i) Check No. 6-D consisting of 14,14-A to 110 work control cards; 14-(E)
j) Check No. 6-E consisting of 15,15-A to 120 work control cards; 15-(E)
k) Check No. 6-F consisting of 16,16-A to 118 work control cards 16-(M)
The parties reserve their right to agree to additional stipulation of facts and/or to adduce evidence on other matters not covered by this
stipulation.
All exhibits mentioned and identified are attached to this stipulation. (pp. 42-46, Record on Appeal; p. 117, Rollo.)
During the hearing on September 4, 1972, the parties stipulated that they were reproducing the testimonial and documentary evidence
presented in Civil Cases Nos. 5728 and 2790 of the Court of First Instance of Iloilo, arising out of the same accident. Certified copy of said
transcript of stenographic notes were then submitted to the trial court.
A fourth partial stipulation of facts was submitted by the parties, reading as follows:
PARTIAL STIPULATION OF FACTS
Plaintiff and defendant respectfully submit the following partial stipulation of facts:
1. For the convenience and brevity of these proceedings, considering that defendant's evidence on the basic issues of fortuitous event and
extraordinary diligence of the carrier consists of the witnesses and documents presented in Civil Case No. 5720 of the Court of First Instance
of Iloilo entitled "Pedro R. Davila vs. Preciosa C. Tirol," now pending appeal before the Supreme Court in G.R. No. L-28512, defendant has
proposed to reproduce in this case the testimonies of same witnesses and documentary evidence Identified and marked in the course of the
same proceedings, as reflected in the corresponding transcript of stenographic notes, to wit:
Transcript of Witnesses Stenographic Notes At Pages Exhibit
a Mario Rodriguez October 30, 1962 1 - 67 37
b. Pedro N. Mallari March 19, 1963 17 - 39)
January 7, 1963 17 - 74 39
c. Arturo Camatoy March 19, 1963 39 - 75) 41
e. Melecio Joson March 20, 1963 91 - 161) 42

h. Vicente Sison October 14, 1963 27 - 74)
October 31, 1962 67 - 153 38
f. Alfredo Subesa March 20, 1963 162 - 166)
i. Felipe Paculaba October 15, 1963 4 15
October 14, 1963 6 - 11 40
d. Ponciano Saldaa March 19, 1963 75 - 88)

g. Eduardo Estrella October 14, 1963 11 - 27)
j. Antonio Lopez October 15, 1963 15 - 25) 43
k. Isaac Lamela October 15, 1963 26 - 55) l. Ramon Pedrosa December 19, 1963 6 - 83 44 m. Cesar Mijares December 20, 1963 15 - 89 45
n. Jaime Manzano February 6, 1964 3 - 15) 46 o. Offer of documentary evidence February 6, 1964 18 - 76)
2. The transcript of stenographic notes are attached hereto and marked as above set forth.
3. If aforenamed witnesses were called to testify in this case, they would give the same testimony as shown in the afore-mentioned transcript
of stenographic notes on direct examination, cross-examination and re-direct examination, as the case may be plaintiffs counsel hereby
adopting the manifestations, objections, cross and recross examination by the plaintiff's counsels in Davila vs. PAL, supra and so far as the
joint hearings held on December 20, 1963 and February 6, 1964, also of plaintiff's counsels in Abeto, et al. vs. PAL, Civil Case No. 5790, also
of the Court of First Instance of Iloilo.
4. All the documentary evidence marked in the course of the hearings shown in the transcripts of stenographic notes attached hereto have
already been marked correspondingly before the Commissioner of this Honorable Court on a hearing held on May 24, 1968 with the same
exhibit identification.
5. Defendant reserves its right to present evidence on the question of damages.
6. Plaintiff reserves her right to present such further evidence as she may deem proper in rebuttal. (pp. 47-50, Record on Appeal; p. 117,
Rollo.)
In addition to the stipulations of facts, private respondent Padilla testified that her son, Nicanor Padilla, prior to his death, was 29 years old,
single, in good health, President and General Manager of Padilla Shipping Company at Iloilo City, and a legal assistant of the Padilla Law
Office; that upon learning of the death of her son in the plane crash, she suffered shock and mental anguish, because her son who was still
single was living with her; and that Nicanor had a life insurance of P20,000, the proceeds of which were paid to his sister.
Eduardo Mate, manager of the Allied Overseas Trading Company, testified that the deceased, Nicanor Padilla, was one of the incorporators of
the company and also its vice-president and treasurer, receiving a monthly salary of P455.
Isaac M. Reyes, auditor of the Padilla Shipping Company, declared that the deceased was the President and General of the firm and received
a salary of P1,500 monthly.
The trial court in its decision stated that on March 19, 1970, it was manifested in court that "the parties agreed that they will abide with
whatever decision the Supreme Court may have in similar cases involving the same airplane crash accident then pending before other courts
pending decision in Supreme Court" (p. 51, Rec. on Appeal; p. 117, Rollo)
On August 31, 1973, the trial court promulgated a decision, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered ordering the defendant Philippine Air Lines, Inc. to pay the plaintiff Natividad A. Vda. de Padilla
the sum of P477,000.00 as award for the expected income of the deceased Nicanor; P10,000.00 as moral damages; P10,000.00 as attorney's
fees; and to pay the costs. (pp. 59-60, Record on Appeal; p. 117, Rollo.)
On Appeal to the Court of Appeals (CA-G.R. No. 56079-R) dated July 17, 1980, the decision of the trial court was affirmed in toto.
As pointed out at the outset, the lone issue is whether or not the respondent court erred in computing the awarded indemnity on the basis of
the life expectancy of the late Nicanor A. Padilla rather than on the life expectancy of private respondent, and thus erred in awarding what
appears to the petitioner as the excessive sum of P477,000 as indemnity for loss of earnings.
Petitioner relies on "the principle of law generally recognized and applied by the courts in the United States" that "the controlling element in
determining loss of earnings arising from death is, as established by authorities, the life expectancy of the deceased or of the beneficiary,
whichever is shorter (p. 19, Brief for the Defendant-Appellant; p. 119, Rollo).
However, resort to foreign jurisprudence would be proper only if no law or jurisprudence is available locally to settle a controversy. Even in the
absence of local statute and case law, foreign jurisprudence is only persuasive.
For the settlement of the issue at hand, there are enough applicable local laws and jurisprudence. Under Article 1764 and Article 2206(1) of
the Civil Code, the award of damages for death is computed on the basis of the life expectancy of the deceased, not of his beneficiary. The
articles provide:
Art. 1764. Damages in cases comprised in this Section shall be awarded in accordance with Title XVIII of this Book, concerning Damages.
Article 2206 shall also apply to the death of a passenger caused by the breach of contract by a common carrier.
Art. 2206. The amount of damages for death caused by a crime or quasi- delict shall be at least three thousand pesos, even though there may
have been mitigating circumstances. In addition:
(1) The defendant shall be liable for the loss of the earning capacity of the deceased, and the indemnity shall be paid to the heirs of the latter;
such indemnity shall in every case be assessed and awarded by the court, unless the deceased on account of permanent physical disability
not caused by the defendant, had no earning capacity at the time of his death; . . . (Emphasis supplied.)
In the case of Davila vs. PAL, 49 SCRA 497 which involved the same tragic plane crash, this Court determined not only PALs liability for
negligence or breach of contract, but also the manner of computing the damages due the plaintiff therein which it based on the life expectancy
of the deceased, Pedro Davila, Jr. This Court held thus:
The deceased, Pedro Davila, Jr., was single and 30 years of age when he died. At that age one's normal life expectancy is 33-1/3 years,
according to the formula (2/3 x [80-30]) adopted by this Court in the case of Villa Rey Transit, Inc. vs. Court of Appeals on the basis of the
American Expectancy Table of Mortality or the Actuarial of Combined Experience Table of Mortality. However, although the deceased was in
relatively good health, his medical history shows that he had complained of and been treated for such ailments as backaches, chest pains and
occasional feelings of tiredness. It is reasonable to make an allowance for these circumstances and consider, for purposes of this case, a
reduction of his life expectancy to 25 years.
Considering the fact that the deceased was getting his income from three (3) different sources, namely, from managing a radio station, from
law practice and from farming, the expenses incidental to the generation of such income were necessarily more than if he had only one
source. Together with his living expenses, a deduction of P600.00 a month, or P7,200.00 a year, seems to Us reasonable, leaving a net yearly
income of P7,800.00. This amount, multiplied by 25 years, or P195,000.00 is the amount which should be awarded to the plaintiffs in this
particular respect. (pp. 504-505, Rollo.)
The petitioner's recourse to our decision in Alcantara vs. Surro, 93 Phil. 472, undermines instead of supporting its stand here, for the
indemnity in that case was also based on the life expectancy of the deceased and not of his beneficiaries.
The petitioner's contention that actual damages under Article 2206 of the Civil Code must be proven by clear and satisfactory evidence is
correct, but its perception that such evidence was not presented in this case, is error.
The witnesses Mate and Reyes, who were respectively the manager and auditor of Allied Overseas Trading Company and Padilla Shipping
Company, were competent to testify on matters within their personal knowledge because of their positions, such as the income and salary of
the deceased, Nicanor A. Padilla (Sec. 30, Rule 130, Rules of Court). As observed by the Court of Appeals, since they were cross-examined
by petitioner's counsel, any objections to their competence and the admissibility of their testimonies, were deemed waived. The payrolls of the
companies and the decedent's income tax returns could, it is true, have constituted the best evidence of his salaries, but there is no rule
disqualifying competent officers of the corporation from testifying on the compensation of the deceased as an officer of the same corporation,
and in any event, no timely objection was made to their testimonies.
Following the procedure used by the Supreme Court in the case of Davila vs. PAL, 49 SCRA 497, the trial court determined the victims gross
annual income to be P23,100 based on his yearly salaries of P18,000 from the Padilla Shipping Company and P5,100 from the Allied
Overseas Trading Corporation. Considering that he was single, the court deducted P9,200 as yearly living expenses, resulting in a net income
of P13,900 (not P15,900 as erroneously stated in the decision). Since Nicanor Padilla was only 29 years old and in good health, the trial court
allowed him a life expectancy of 30 years. Multiplying his annual net income of P13,900 by his life expectancy of 30 years, the product is
P417,000 (not P477,000) which is the amount of death indemnity due his mother and only forced heir (p. 58, Record on Appeal; p. 117, Rollo).
While as a general rule, an appellee who has not appealed is not entitled to affirmative relief other than the ones granted in the decision of the
court below (Aparri vs. CA, 13 SCRA 611; Dy vs. Kuizon, 113 Phil. 592; Borromeo vs. Zaballero, 109 Phil. 332), we nevertheless find merit in
the private respondent's plea for relief for the long delay this case has suffered on account of the petitioner's multiple appeals. Indeed,
because of the 16 year delay in the disposition of this case, the private respondent herself has already joined her son in the Great Beyond
without being able to receive the indemnity she well deserved. Considering how inflation has depleted the value of the judgment in her favor, in
the interest of justice, the petitioner should pay legal rate of interest on the indemnity due her. The failure of the trial court to award such
interest amounts to a "plain error" which we may rectify on appeal although it was not specified in the appellee's brief (Sec. 7, Rule 51, Rules
of Court).
WHEREFORE, the petition is dismissed. The decision of the trial court is affirmed with modification. The petitioner is ordered to pay the private
respondent or her heirs death indemnity in the sum of P417,000 (not P477,000), with legal rate of interest of 6% per annum from the date of
the judgment on August 31, 1973, until it is fully paid. Costs against the petitioner.
SO ORDERED.
SUPREME COURT
TRANQUILINO CACHERO, plaintiff-appellant,
vs.
Manila
EN BANC
G.R. No. L-8721
May 23, 1957
MANILA YELLOW TAXICAB CO., INC., defendant-appellant.
FELIX, J.:
There is no dispute as to the following facts: on December 13, 1952, Atty. Tranquilino F. Cachero boarded a Yellow Taxicab, with plate No.
2159-52 driven by Gregorio Mira Abinion and owned by the Manila Yellow Taxicab Co., Inc. On passing Oroquieta between Doroteo Jose and
Lope de Vega streets, Gregorio Mira Abinion bumped said taxicab against a Meralco post, No. 1-4/387, with the result that the cab was badly
smashed and the plaintiff fell out of the vehicle to the ground, suffering thereby physical injuries, slight in nature.
The chauffeur was subsequently prosecuted by the City Fiscal and on February 26, 1963, upon his plea of guilty the Municipal Court of Manila
sentenced him to suffer 1 month and 1 day of arresto mayor, and to pay the costs. On December 17, 1952, Tranquilino F. Cachero addressed
a letter to the Manila Yellow Taxicab Co., Inc., which was followed by another of January 6, 1953, which reads as follows:
MANILA, January 6, 1953

The MANILA YELLOW TAXICAB CO., INC.
1338 Arlegui, Manila
Dear Sirs:
As you have been already advised by the letter dated December 17, 1952, on December 13, 1952, while I was a passenger of your
taxicab bearing plate No. 2159 and driven by your chauffeur Gregorio Mira and through his negligence and the bad condition of the
said car, he bumped the same against the pavement on the street (Oroquieta between Doroteo Jose and Lope de Vega streets,
Manila) and hit the Meralco post on said street, resulting in the smashing of the said taxicab, and as a result thereof I was gravely
injured and suffered and is still suffering physical, mental and moral damages and not being able to resume my daily calling.
For the said damages, I hereby make a demand for the payment of the sum of P79,245.65, covering expenses for transportation to
the hospital for medical treatment, medicines, doctors bills, actual monetary loss, moral, compensatory and exemplary damages,
etc., within 5 days from date of receipt hereof.
I trust to hear from you on the matter within the period of 5 days above specified.
Truly yours,
(Sgd.) TRANQUILINO F. CACHERO

2256 Int. B, Misericordia St.,
Sta. Cruz, Manila
(Exhibit K)
The Taxicab Co. to avoid expenses and time of litigation offered to settle the case amicably with plaintiff but the latter only agreed to reduce his
demand to the sum of P72,050.20 as his only basis for settlement which, of course, was not accepted by said company. So plaintiff instituted
this action on February 2, 1953, in the Court of First Instance of Manila, praying in the complaint that the defendant be condemned to pay him:
(a) The sum of P72,050.20, the total sum of the itemized losses and/or damages under paragraph 7 of the complaint, with legal
interest thereon from the date of the filing of the complaint;
(b) The sum of P5,000 as attorney's fee; and the costs of the suit; and
Plaintiff further respectfully prays for such other and further reliefs as the facts and the law pertaining to the case may warrant.
The defendant answered the complaint setting forth affirmative defenses and a counterclaim for P930 as damages and praying for the
dismissal of plaintiff's action. After hearing the Court rendered decision only July 20, 1954, the dispositive part of which is as follows:
IN VIEW OF THE FOREGOING, the Court hereby renders judgment in favor of the plaintiff and against the defendant, sentencing the latter to
pay the former the following: (1) For medicine, doctor's fees for services rendered and transportation, P700; (2) professional fee as attorney
for the defendant in Criminal Case No. 364, "People vs. Manolo Maddela et al." of the Court of First Instance of Nueva Vizcaya, P3,000; (3)
professional fees as attorney for the defendant in Civil Case No. 23891 of the Municipal Court of Manila, "Virginia Tangulan vs. Leonel da
Silva," and for the taking of the deposition of Gabina Angrepan in a case against the Philippine National Bank, P200; and(4) moral damages in
the amount of P2,000.
Defendant's counterclaim is hereby dismissed.
Defendant shall also pay the costs."
From this decision both parties appealed to Us, plaintiff limiting his appeal to the part of the decision which refers to the moral damages
awarded to him which he considered inadequate, and to the failure of said judgment to grant the attorney's fees asked for in the prayer of his
complaint. Defendant in turn alleges that the trial Court erred in awarding to the plaintiff the following:
(1) P700 for medicine, doctor's fees and transportation expenses;
(2) P3,000 as supposedly unearned full professional fees as attorney for the defendant in Criminal Case No. 364, "People vs. Manolo
Maddela et al.";
(3) P200 as supposedly unearned professional fees as attorney for the defendant in Civil Case No. 23891 of the Manila Municipal Court,
"Virginia Tangulan vs. Leonel de Silva", and for failure to take the deposition of a certain Gabina Angrepan in an unnamed case; and
(4) P2,000 as moral damages, amounting to the grand total of P5,900, these amounts being very much greater than what plaintiff deserves.
In connection with his appeal, plaintiff calls attention to the testimonies of Dr. Modesto S. Purisima and of Dr. Francisco Aguilar, a member of
the staff of the National Orthopedic Hospital, which he considers necessary as a basis for ascertaining not only the physical sufferings
undergone by him, but also for determining the adequate compensation for moral damages that he should be awarded by reason of said
accident.
The exact nature of plaintiff's injuries, their degree of seriousness and the period of his involuntary disability can be determined by the medical
certificate (Exhibit D) issued by the National Orthopedic Hospital on December 16, 1952, and the testimonies of Dr. Francisco Aguilar,
physician in said hospital, and of Dr. Modesto Purisima, a private practitioner. The medical certificate (Exhibit D) lists: (a) a subluxation of the
right shoulder joint; (b) a contusion on the right chest; and (c) a "suspicious fracture" of the upper end of the right humerus. Dr. Aguilar who
issued the medical certificate admitted, however, with regard to the "suspicious fracture", that in his opinion with (the aid of) the x-ray there
was no fracture. According to this doctor plaintiff went to the National 0rthopedic Hospital at least six times during the period from December
16, 1952, to April 7, 1953; that he strapped plaintiffs body (see Exhibit E), which strap was not removed until after a period of six weeks had
elapsed Dr. Modesto Purisima, a private practitioner, testified that he advised and treated plaintiff from, December 14, 1952, to the end of
March (1953). Plaintiff was never hospitalized for treatment of the injuries he received in said accident.
Counsel for the defendant delves quite extensively on these injuries. He says in his brief the following:
Just what is a subluxation? Luxation is another term for dislocation (Dorland, W.A.N., The American Illustrated Medical Dictionary (13th ed.), p.
652), and hence, a sublaxation is an incomplete or partial dislocation (Ibid., p. 1115). While a dislocation is the displacement of a bone or
bones from its or their normal setting (and, therefore, applicable and occurs only to joints and not to rigid or non-movable parts of the skeletal
system) (Ibid., p. 358; Christopher, F., A Textbook of Surgery (5th ed.), p. 342), it should be distinguished from a fracture which is a break or
rupture in a bone or cartilage, usually due to external violence (Christopher, F., A Textbook of Surgery (5th Ed.) p. 194; Dorland, W.A.N., The
American Illustrated Medical Dictionary (13th ed.), P.459). Because, unlike fracture which may be partial (a crack in the bone) or total (a
complete break in the bone), there can be no half-way situations with regard to dislocations of the shoulder joint (the head or ball of the
humerus the humerus is the bone from the elbow to the shoulder) must be either inside the socket of the scapula or shoulder blade (in
which case there is no dislocation) or out of the latter (in which event there is a dislocation), to denote a condition where due to external
violence, the muscles and ligaments connecting the humerus to the scapula have subjected to strain intense enough to produce temporary
distention or lessening of their tautness and consequently resulting in the loosening or wrenching of the ball of the humerus from its snug fit in
the socket of the scapula, by using the terms subluxation or partial dislocation(as used in the medical certificate), is to fall into a misnomer a
term often used by "chiropractors" and by those who would want to sound impressive, but generally unfavored by the medical profession. To
describe the above condition more aptly, the medical profession usually employs the expression luxatio imperfecta, or, in simple language, a
sprain (Dorland, W.A.N., The American Illustrated Medical Dictionary (13th ed.), p. 652). The condition we have described is a paraphrase of
the definition of a sprain. Plaintiff suffered this very injury (a sprained or wrenched shoulder joint) and a cursory scrutiny of his x-ray plates
(Exhibits A and B) by a qualified orthopedic surgeon or by a layman with a picture or x-ray plate of a normal shoulder joint (found in any
standard textbook on human anatomy; the one we used was Schemer, J.P., Morris' Human Anatomy (10 ed., p. 194) for comparison will bear
out our claim.
Treatment for a sprain is by the use of adhesive or elastic bandage, elevation of the joint, heat, effleurage and later massage (Christopher, F.,
A Textbook of Surgery (5th ed., p. 116). The treatment given to the plaintiff was just exactly that Dr. Aguilar bandaged (strapped) plaintiff's right
shoulder and chest (t.s.n., p. 31) in an elevated position (with the forearm horizontal to the chest (see photograph, Exhibit E), and certain
vitamins were prescribed for him (t.s.n., p. 131). He also underwent massage for some time by Drs. Aguilar and Purisima. The medicines and
appurtenances to treatment purchased by plaintiff from the Orthopedic Hospital, Botica Boie and Metro Drug Store were, by his own
admission, adhesive plaster, bandage, gauze, oil and "tintura arnica" (t.s.n., p. 3 continuation of transcript ), and Dr. Purisima also
prescribed "Numotizin", a beat generating ointment (t.s.n., p. 23), all of which are indicated for a sprain, and by their nature, can cure nothing
more serious than a sprain anyway. Fractures and true dislocations cannot be cured by the kind of treatment and medicines which plaintiff
received. A true dislocation, for instance, is treated by means of reduction through traction of the arm until the humeral head returns to the
proper position in the scapular socket (pulling the arm at a 60 degree angle and guiding the ball of the humerus into proper position, in its
socket) while the patient is under deep anaesthesia, and then, completely immobilizing the part until the injured capsule has healed
(Christopher, F., A Textbook of Surgery, pp. 343 and 344). No evidence was submitted that plaintiff ever received the latter kind of treatment.
Dr. Purisima even declared that after the plaintiff's first visit to the Orthopedic Hospital the latter informed him that there was no fracture or
dislocation (t.s.n., p. 26). Dr. Purisima's statement is the truth of the matter as we have already explained joints of the shoulder being only
subject to total dislocation (due to their anatomical design), not to partial ones, and any injury approximating dislocation but not completely, it
being classified as mere sprains, slight or bad.
The second and last injury plaintiff sustained was a contusion. What is a contusion? It is just a high flown expression for a bruise or the act of
bruising (Dorland, W.A.N., The American Illustrated Medical Dictionary (13th ed. p. 290). No further discussion need be made on this particular
injury since the nature of a bruise is of common knowledge (it's a bit uncomfortable but not disabling unless it occurs on movable parts like the
fingers or elbow which is not the case, herein having occurred in the right chest) and the kind of medical treatment or help it is also well
known. (pp. 10-14, defendant-appellant's brief).
The trial Judge undoubtedly did not give much value to the testimonies of the doctors when in the statement of facts made in his decision he
referred to the physical injuries received by the plaintiff as slight in nature and the latter is estopped from discussing the same in order to make
them appear as serious, because in the statement of facts made in his brief as appellant, he says the following:
The facts of the case as found by the lower court in its decision, with the permission of this Honorable Court, we respectfully quote them
hereunder as our STATEMENT OF FACTS for the purpose of this appeal.
Before entering into a discussion of the merits of plaintiff's appeal, We will say a few words as to the nature of the action on which his demand
for damages is predicated.
The nature of an action as in contract or in tort is determined from the essential elements of the complaint, taken as a whole, in the case of
doubt a construction to sustain the action being given to it.
While the prayer for relief or measure of damages sought does not necessarily determine the character of the action, it may be material in the
determination of the question and therefore entitled to consideration and in case of doubt will open determine character of the action and
indeed there are actions whose character is necessarily determined thereby. (1 C.J.S. 1100)
A mere perusal of plaintiff complaint will show that his action against the defendant is predicated on an alleged breach of contract of carriage,
i.e., the failure of the defendant to bring him "safely and without mishaps" to his destination, and it is to be noted that the chauffeur of
defendant's taxicab that plaintiff used when he received the injuries involved herein, Gregorio Mira, has not even been made a party defendant
to this case.
Considering, therefore, the nature of plaintiff's action in this case, is he entitled to compensation for moral damages? Article 2219 of the Civil
Code says the following:
ART. 2219. Moral damages may be recovered in the following and analogous cases:
(3) Seduction, abduction, rape, or other lascivious acts;

(6) Illegal search;
(4) Adultery or concubinage;
(7) Libel, slander or any other form of defamation;
(5) Illegal or arbitrary detention or arrest;
(8) Malicious prosecution;
(9) Acts mentioned in Article 309;
(10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34 and 35.
Of the cases enumerated in the just quoted Article 2219 only the first two may have any bearing on the case at bar. We find, however, with
regard to the first that the defendant herein has not committed in connection with this case any "criminal offense resulting in physical injuries".
The one that committed the offense against the plaintiff is Gregorio Mira, and that is why he has been already prosecuted and punished
therefor. Although (a) owners and managers of an establishment or enterprise are responsible for damages caused by their employees in the
service of the branches in which the latter are employed or on the occasion of their functions; (b) employers are likewise liable for damages
caused by their employees and household helpers acting within the scope of their assigned task (Article 2180 of the Civil Code); and (c)
employers and corporations engaged in any kind of industry are subsidiarily civilly liable for felonies committed by their employees in the
discharge of their duties (Art. 103, Revised Penal Code), plaintiff herein does not maintain this action under the provisions of any of the articles
of the codes just mentioned and against all the persons who might be liable for the damages caused, but as a result of an admitted breach of
contract of carriage and against the defendant employer alone. We, therefore, hold that the case at bar does not come within the exception of
paragraph 1, Article 2219 of the Civil Code.
The present complaint is not based either on a "quasi delict causing physical injuries" (Art. 2219 par. 2, of the Civil Code). From the report of
the Code Commission on the new Civil Code We copy the following:
A question of nomenclature confronted the Commission. After a careful deliberation, it was agreed to use the term "quasi-delict" for those
obligations which do not arise from law, contracts quasi-contracts or criminal offenses. They are known in Spanish legal treatises as "culpa
aquiliana", "culpa-extra-contractual" or "cuasi-delitos". The phrase "culpa-extra-contractual" or its translation "extra-contractual fault" was
eliminated because it did not exclude quasi-contractual or penal obligations. "Aquilian fault" might have been selected, but it was thought
inadvisable to refer to so ancient a law as the "Lex Aquilia". So "quasi-delicts" was chosen, which more nearly corresponds to the Roman Law
classification of obligations, and is in harmony with the nature of this kind of liability.
The Commission also thought of the possibility of adopting the word "tort" from Anglo-American Law. But "tort" under that system is much
broader than the Spanish-Philippine concept of obligations arising from non-contractual negligence." "Tort" in Anglo-American jurisprudence
includes not only negligence, but also intentional criminal acts, such as assault and battery, false imprisonment and deceit. In the general plan
of the Philippine legal system, intentional and malicious are governed by the Penal Code, although certain exceptions are made in the Project.
(Report of the Code Commission, pp. 161-162).
In the case of Cangco vs. Manila Railroad, 38 Phil. 768, We established the distinction between obligation derived from negligence and
obligation as a result of a breach of a contract. Thus, We said:
It is important to note that the foundation of the legal liability of the defendant is the contract of carriage, and that the obligation to respond for
the damage which plaintiff has suffered arises, if at all, from the breach of that contract by reason of the failure of defendant to exercise due
care in its performance. That is to say, its liability is direct and immediate, differing essentially in the legal view point from that presumptive
responsibility for the negligence of its servants, imposed by Article 1903 of the Civil Code (Art. 2180 of the new), which can be rebutted by
proof of the exercise of due care in their selection or supervision. Article 1903 is not applicable to obligation arising EX CONTRACTU, but only
to extra-contractual obligations or to use the technical form of expression, that article, relates only to CULPA AQUILIANA and not to CULPA
CONTRACTUAL.
The decisions in the cases of Castro vs. Acro Taxicab (82 Phil., 359, 46 Off. Gaz., Na. 5, p. 2023); Lilius et al. vs. Manila Railroad, (59 Phil.
758) and others, wherein moral damages, are awarded to the plaintiffs, are not applicable to the case at bar because said decisions were
rendered before the effectivity of the new Civil Code (August 30, 1950) and for the further reason that the complaints filed therein were based
on different causes of action.
In view of the foregoing the sum of P2,000 awarded as moral damages by the trial Court has to be eliminated, for under the law it is not a
compensation awardable in a case like the one at bar.
As to plaintiff's demand for P5,000 as attorney's fees, the Civil Code provides the following:
ART, 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs, cannot be recovered, except:
(1) When exemplary damages are awarded;
(2) When the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest;
(3) In criminal cases of malicious prosecution against the plaintiff;
(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;
(5) Where the defendant acted in gross and evident had faith in refusing to satisfy the plaintiff's plainly valid, just and demandable claim;
(6) In actions for legal support;
(7) In actions for the recovery of wages of household helpers, laborers and skilled workers;
(8) in actions for indemnity under workmen's compensation and employers liability laws;
(9) In a separate civil action to recover civil liability arising from a crime;
(10) When at least double judicial costs are awarded;
(11) In any other case where the court deems it just and equitable that attorney's fees and expenses of litigation should be recovered.
In all cases, the attorney's fees and expenses of litigation must be reasonable.
The present case does not come under any of exceptions enumerated in the preceding article, specially of paragraph 2 thereof, because
defendant's failure to meet its responsibility was not the plaintiff to litigate or to incur expenses to protect his interests. The present action was
instituted because plaintiff an exorbitant amount for damages (P60,000) and naturally the defendant did not and could not yield to such
demand. This is neither a case that comes under paragraph 11 of Article 2208 because the Lower Court did not deem it just and equitable to
award any amount for attorney's fees. As We agree with the trial Judge on this point, We cannot declare that he erred for not awarding to
plaintiff any such fees in this case.
Coming now to the appeal of the defendant, the Court, after due consideration of the evidence appearing on record:
(1) Approves the award of P700 for medicine, doctors' fees and transportation expenses;
(2) Reduces the award of P3,000 as attorney's fees to the sum of P2,000, as Manolo Maddela, defendant in Criminal Case No. 364 of the
Court of First Instance of Nueva Vizcaya testified that he has already paid to plaintiff part of the latter's fees of P3,000, the amount of which
was not disclosed, though it was incumbent upon the plaintiff to establish how much he had been paid of said fees;
(3) Approves the award of P200 as unearned professional fees as attorney for the defendant in Civil Case No. 238191 of the Municipal Court
of Manila whom plaintiff was unable to represent, and for the latter's failure to take the deposition of one Agripina Angrepan due to the
automobile accident referred to in this case.
Before closing this decision We deem it convenient to quote the following passage of defendant's brief as appellant:
Realizing its obligation under its contract of carriage with the plaintiff, and because the facts of the case, as have been shown, mark it as more
proper for the Municipal Court only, the defendant, to avoid the expense and time of litigation, offered to settle the case amicably with plaintiff,
but the latter refused and insisted on his demand for P72,050.20 (Exhibit K) as the only basis for settlement, thus adding a clearly petty case
to the already overflowing desk of the Honorable Members of this Court.
We admire and respect at all times a man for standing up and fighting for his rights, and when said right consists in injuries sustained due to a
breach of a contract of carriage with us, sympathy and understanding are added thereto. But when a person starts demanding P72,050.20 for
a solitary bruise and sprain, injuries for which the trial court, even at its generous although erroneous best, could only grant P5,900, then
respect and sympathy give way to something else. It is time to fight, for, in our humble opinion, there is nothing more loathsome nor truly
worthy of condemnation than one who uses his injuries for other purposes than just rectification. If plaintiff's claim is granted, it would be a
blessing, not a misfortune, to be injured. (p. 34-35)
This case was instituted by a lawyer who, as an officer of the courts, should be the first in helping Us in the administration of justice, and after
going over the record of this case, we do not hesitate to say that the demand of P72,050.20 for a subluxation of the right humerus bone and
an insignificant contusion in the chest, has not even the semblance of reasonableness. As a matter of fact, Dr. Aguilar himself said that the xray plates (Exhibits A, Band C) " did not show anything significant except that it shows a slight subluxation of the right shoulder, and that there
is a suspicious fracture", which ultimately he admitted not to exist. The plaintiff himself must have felt embarrassed by his own attitude when
after receiving defendant's brief as appellant, he makes in his brief as appellee the categorical statement that he DOES NOT NOW INSIST
NOR PRETEND IN THE LEAST to Collect from the defendant all the damages he had claimed in his complaint, but instead he is submitting
his case to the sound discretion of the Honorable Court for the award of a reasonable and equitable damages allowable by law, to compensate
the plaintiff of the suffering and losses he had undergone and incurred of the accident oftentimes mentioned in this brief in which plaintiff was
injured" (p. 17-18).This acknowledgment comes too late, for plaintiff has already deprived the Court of Appeals of the occasion to exercise its
appellate jurisdiction over this case which he recklessly dumped to this Court. We certainly cannot look with at favor at his attitude of plaintiff.
WHEREFORE, the decision appealed from is hereby modified by reducing the amount awarded as professional fees from P3,000 to P2,000
and by eliminating the moral damages of P2,000 awarded by the Lower Court to the plaintiff. Said decision is in all other respects affirmed,
without pronouncement as to costs. It is so ordered.

SUPREME COURT
Manila
EN BANC
G.R. No. L-12163
March 4, 1959
PAZ FORES, petitioner,

vs.
IRENEO MIRANDA, respondent.
Alberto O. Villaraza for petitioner.
Almazan and Ereneta for respondent.
REYES, J.B.L., J.:
Defendant-petitioner Paz Fores brings this petition for review of the decision of the Court of Appeals (C.A. Case No. 1437-R) awarding to the
plaintiff-respondent Ireneo Miranda the sums of P5,000 by way of actual damages and counsel fees, and P10,000 as moral damages, with
costs.
Respondent was one of the passengers on a jeepney driven by Eugenio Luga. While the vehicle was descending the Sta. Mesa bridge at an
excessive rate of speed, the driver lost control thereof, causing it to swerve and to his the bridge wall. The accident occurred on the morning of
March 22, 1953. Five of the passengers were injured, including the respondent who suffered a fracture of the upper right humerus. He was
taken to the National Orthopedic Hospital for treatment, and later was subjected to a series of operations; the first on May 23, 1953, when wire
loops were wound around the broken bones and screwed into place; a second, effected to insert a metal splint, and a third one to remove
such splint. At the time of the trial, it appears that respondent had not yet recovered the use of his right arm.
The driver was charged with serious physical injuries through reckless imprudence, and upon interposing a plea of guilty was sentenced
accordingly.
The contention that the evidence did not sufficiently establish the identity of the vehicle as the belonging to the petitioner was rejected by the
appellate court which found, among other things, that is carried plate No. TPU-1163, SERIES OF 1952, Quezon City, registered in the name of
Paz Fores, (appellant herein) and that the vehicle even had the name of "Doa Paz" painted below its wind shield. No evidence to the contrary
was introduced by the petitioner, who relied on an attack upon the credibility of the two policemen who went to the scene of the incident.
A point to be further remarked is petitioner's contention that on March 21, 1953, or one day before the accident happened, she allegedly sold
the passenger jeep that was involved therein to a certain Carmen Sackerman.
The initial problem raised by the petitioner in this appeal may be formulated thus "Is the approval of the Public Service Commission
necessary for the sale of a public service vehicle even without conveying therewith the authority to operate the same?" Assuming the dubious
sale to be a fact, the court of Appeals answered the query in the affirmative. The ruling should be upheld.
Section 20 of the Public Service Act (Commonwealth Act No. 146) provides:
Sec. 20. Subject to established limitations and exceptions and saving provisions to the contrary, it shall be unlawful for any public
service or for the owner, lessee or operator thereof, without the previous approval and authority of the Commission previously had
xxx
xxx
xxx
(g) To sell, alienate, mortgage, encumber or lease its property, franchises, certificates, privileges, or rights, or any part thereof; or
merge or consolidate its property, franchises, privileges or rights, or any part thereof, with those of any other public service. The
approval herein required shall be given, after notice to the public and after hearing the persons interested at a public hearing, if it be
shown that there are just and reasonable grounds for making the mortgage or encumbrance, for liabilities of more than one year
maturity, or the sale, alienation, lease, merger, or consolidation to be approved and that the same are not detrimental to the public
interest, and in case of a sale, the date on which the same is to be consummated shall be fixed in the order of approval: Provided,
however, That nothing herein contained shall be construed to prevent the transaction from being negotiated or completed before its
approval or to prevent the sale, alienation, or lease by any public service of any of its property in the ordinary course of its business.
Interpreting the effects of this particular provision of law, we have held in the recent cases of Montoya vs. Ignacio, * 50 Off. Gaz. No. 1, p. 108;
Timbol vs. Osias, et al., G. R. No. L-7547, April 30, 1955, and Medina vs. Cresencia, 99 Phil., 506; 52 Off. Gaz. No. 10, p. 4606, that a transfer
contemplated by the law, if made without the requisite approval of the Public Service Commission, is not effective and binding in so far as the
responsibility of the grantee under the franchise in relation to the public is concerned. Petitioner assails, however, the applicability of these
rulings to the instant case, contending that in those cases, the operator did not convey, by lease or by sale, the vehicle independently of his
rights under the franchise. This line of reasoning does not find support in the law. The provisions of the statute are clear and prohibit the sale,
alienation, lease, or encumbrance of the property, franchise, certificate, privileges or rights, or any part thereof of the owner or operator of the
public service Commission. The law was designed primarily for the protection of the public interest; and until the approval of the public Service
Commission is obtained the vehicle is, in contemplation of law, still under the service of the owner or operator standing in the records of the
Commission which the public has a right to rely upon.
The proviso contained in the aforequoted law, to the effect that nothing therein shall be construed "to prevent the transaction from being
negotiated or complete before its approval", means only that the sale without the required approval is still valid and binding between the
parties (Montoya vs. Ignacio, supra). The phrase "in the ordinary course of its business" found in the other proviso" or to prevent the sale,
alienation, or lease by any public service of any of its property". As correctly observed by the lower court, could not have been intended to
include the sale of the vehicle itself, but at most may refer only to such property that may be conceivably disposed or by the carrier in the
ordinary course of its business, like junked equipment or spare parts.
The case of Indalecio de Torres vs. Vicente Ona (63 Phil., 594, 597) is enlightening; and there, it was held:
Under the law, the Public Service Commission has not only general supervision and regulation of, but also full jurisdiction and
control over all public utilities including the property, equipment and facilities used, and the property rights and franchise enjoyed by
every individual and company engaged i the performance of a public service in the sense this phrase is used in the Public Service
Act or Act No. 3108). By virtue of the provisions of said Act, motor vehicles used in the performance of a service, as the
transportation of freight from one point to another, have to this date been considered and they cannot but be so consideredpublic service property; and, by reason of its own nature, a TH truck, which means that the operator thereof places it at the disposal
of anybody who is willing to pay a rental of its use, when he desires to transfer or carry his effects, merchandise or any other cargo
from one place to another, is necessarily a public service property. (Emphasis supplied)
Of course, this court has held in the case of Bachrach Motor co. vs. Zamboanga Transportation Co., 52 Phil., 244, that there may be a nunc
pro tunc authorization which has the effect of having the approval retroact to the date of the transfer; but such outcome cannot prejudice rights
intervening in the meantime. It appears that no such approval was given by the Commission before the accident occurred.
The P10,000 actual damages awarded by the Court of First Instance of Manila were reduced by the Court of Appeals to only P2,000, on the
ground that a review of the records failed to disclose a sufficient basis for the trial court's appraisal, since the only evidence presented on this
point consisted of respondent's bare statement that his expenses and loss of income amounted to P20,000. On the other hand, "it cannot be
denied," the lower court said, "that appellee (respondent) did incur expenses"' It is well to note further that respondent was a painter by
profession and a professor of Fine Arts, so that the amount of P2,000 awarded cannot be said to be excessive (see Arts. 2224 and 2225, Civil
Code of the Philippines). The attorney's fees in the sum of P3,000 also awarded to the respondent are assailed on the ground that the Court of
First Instance did not provided for the same, and since no appeal was interposed by said respondent, it was allegedly error for the Court of
Appeals to award them motu proprio. Petitioner fails to note that attorney's fees are included in the concept of actual damages under the Civil
Code and may be awarded whenever the court deems it is just and equitable (Art. 2208, Civil Code of the Philippines). We see no reason to
alter these awards.
Anent the moral damages ordered to be paid to the respondent, the same must be discarded. We have repeatedly ruled (Cachero vs. Manila
Yellow Taxicab Co. Inc., 101 Phil., 523; 54 Off. Gaz., [26], 6599; Necesito, et al vs. Paras, 104 Phil., 75; 56 Off. Gaz., [23] 4023, that moral
damages are not recoverable in damage actions predicted on a breach of the contract of transportation, in view of Articles 2219 and 2220 of
the new Civil Code, which provide as follows:
Art. 2219. Moral damages may be recovered in the following and analogous cases:

xxx
xxx
xxx
Art. 2220. Willful injury to property may be a legal ground for awarding moral damages if the court should find that, under
circumstances, such damages are justify due. The same rule applies to breaches of contract where the defendant acted fraudulently
or in bad faith.
By contrasting the provisions of these two article it immediately becomes apparent that:
(a) In case of breach of contract (including one of transportation) proof of bad faith or fraud (dolus), i.e., wanton or deliberately injurious
conduct, is essential to justify an award of moral damages; and
(b) That a breach of contract can not be considered included in the descriptive term "analogous cases" used in Art. 2219; not only because Art.
2220 specifically provides for the damages that are caused by contractual breach, but because the definition of quasi-delict in Art. 2176 of the
Code expressly excludes the cases where there is a "preexisting contractual relation between the parties."
Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage
dome. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict and is
governed by the provisions of this Chapter.
The exception to the basic rule of damages now under consideration is a mishap resulting in the death of a passenger, in which case Article
1764 makes the common carrier expressly subject to the rule of Art. 2206, that entitles the deceased passenger to "demand moral damages
for mental anguish by reason of the death of the deceased" (Necesito vs. Paras, 104 Phil., 84, Resolution on motion to reconsider, September
11, 1958). But the exceptional rule of Art. 1764 makes it all the more evident that where the injured passenger does not die, moral damages
are not recoverable unless it is proved that the carrier was guilty of malice or bad faith. We think it is clear that the mere carelessness of the
carrier's driver does not per se constitute of justify an inference of malice or bad faith on the part of the carrier; and in the case at bar there is
no other evidence of such malice to support the award of moral damages by the Court of Appeals. To award moral damages for breach of
contract, therefore, without proof of bad faith or malice on the part of the defendant, as required by Art. 220, would be to violate the clear
provisions of the law, and constitute unwarranted judicial legislation.
The Court of Appeals has invoked our rulings in Castro vs. Acro Taxicab Co., G.R. No. 49155, December 14, 1948 and Layda vs. Court of
Appeals, 90 Phil., 724; but these doctrines were predicated upon our former law of damages, before judicial discretion in fixing them became
limited by the express provisions of the new Civil Code (previously quoted). Hence, the aforesaid rulings are now inapplicable.
Upon the other hand, the advantageous position of a party suing a carrier for breach of the contract of transportations explains, to some
extent, the limitations imposed by the new Code on the amount of the recovery. The action for breach of contract imposes on the defendant
carrier a presumption of liability upon mere proof of injury to the passenger; that latter is relieved from the duty to established the fault of the
carrier, or of his employees, and the burden is placed on the carrier to prove that it was due to an unforseen event or to force majeure (Cangco
vs. Manila Railroad Co., 38 Phil., 768, 777). Moreover, the carrier, unlike in suits for quasi-delict, may not escape liability by proving that it has
exercised due diligence in the selection and supervision of its employees (Art. 1759, new civil code; Cangco vs. Manila Railroad Co., supra;
Prado vs. Manila Electric Co., 51 Phil., 900).
The difference in conditions, defenses and proof, as well as the codal concept of quasi-delict as essentially extra contractual negligence,
compel us to differentiate between action ex contractu, and actions quasi ex delicto, and prevent us from viewing the action for breach of
contract as simultaneously embodying an action on tort. Neither can this action be taken as one to enforce on employee's liability under Art.
103 of the Revised Penal Code, since the responsibility is not alleged to be subsidiary, nor is there on record any averment or proof that the
driver of appellant was insolvent. In fact, he is not even made a party to the suit.
It is also suggested that a carrier's violation of its engagement to safety transport the passenger involves a breach of the passenger's
confidence, and therefore should be regarded as a breach of contract in bad faith, justifying recovery of moral damages under Art. 2220. This
theory is untenable, for under it the carrier would always be deemed in bad faith, in every case its obligation to the passenger is infringed, and
it would be never accountable for simple negligence; while under the law (Art. 1756). the presumption is that common carriers acted
negligently (and not maliciously), and Art. 1762 speaks of negligence of the common carrier.
ART. 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary diligence as prescribed in article 1733 and 1755.
ART. 1762. The contributory negligence of the passenger does not bar recovery of damages for his death or injuries, if the
proximate cause thereof is the negligence of the common carrier, but the amount of damages shall be equitably reduced.
The distinction between fraud, bad faith or malice in the sense of deliberate or wanton wrong doing and negligence (as mere carelessness) is
too fundamental in our law to be ignored (Arts. 1170-1172); their consequences being clearly differentiated by the Code.
ART. 2201. In contracts and quasi-contracts, the damages for which the obligor who acted in good faith is liable shall be those that
are the natural and probable consequences of the breach of the obligation, and which the parties have foreseen or could have
reasonably foreseen at the time the obligation was constituted.
In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all damages which may be reasonably
attributed to the non-performance of the obligation.
It is to be presumed, in the absence of statutory provision to the contrary, that this difference was in the mind of the lawmakers when in Art.
2220 they limited recovery of moral damages to breaches of contract in bad faith. It is true that negligence may be occasionally so gross as to
amount to malice; but that fact must be shown in evidence, and a carrier's bad faith is not to be lightly inferred from a mere finding that the
contract was breached through negligence of the carrier's employees.
In view of the foregoing considerations, the decision of the Court of Appeals is modified by eliminating the award of P5,000.00 by way of moral
damages. (Court of Appeals Resolution of May 5, 1957). In all other respects, the judgment is affirmed. No costs in this instance. So ordered.

SUPREME COURT
Manila
EN BANC
G.R. No. L-22415
March 30, 1966
FERNANDO LOPEZ, ET AL., plaintiffs-appellants,

vs.
PAN AMERICAN WORLD AIRWAYS, defendant-appellant.
BENGZON, J.P., J.:

Plaintiffs and defendant appeal from a decision of the Court of First Instance of Rizal. Since the value in controversy exceeds P200,000 the
appeals were taken directly to this Court upon all questions involved (Sec. 17, par. 3[5], Judiciary Act).
Stated briefly the facts not in dispute are as follows: Reservations for first class accommodations in Flight No. 2 of Pan American World
Airways hereinafter otherwise called PAN-AM from Tokyo to San Francisco on May 24, 1960 were made with
PAN-AM on March 29, 1960, by "Your Travel Guide" agency, specifically, by Delfin Faustino, for then Senator Fernando Lopez, his wife Maria
J. Lopez, his son-in-law Alfredo Montelibano, Jr., and his daughter, Mrs. Alfredo Montelibano, Jr., (Milagros Lopez Montelibano). PAN-AM's
San Francisco head office confirmed the reservations on March 31, 1960.
First class tickets for the abovementioned flight were subsequently issued by
PAN-AM on May 21 and 23, 1960, in favor of Senator Lopez and his party. The total fare of P9,444 for all of them was fully paid before the
tickets were issued.
As scheduled Senator Lopez and party left Manila by Northwest Airlines on May 24, 1960, arriving in Tokyo at 5:30 P.M. of that day. As soon
as they arrived Senator Lopez requested Minister Busuego of the Philippine Embassy to contact PAN-AM's Tokyo office regarding their first
class accommodations for that evening's flight. For the given reason that the first class seats therein were all booked up, however, PAN-AM's
Tokyo office informed Minister Busuego that PAN-AM could not accommodate Senator Lopez and party in that trip as first class passengers.
Senator Lopez thereupon gave their first class tickets to Minister Busuego for him to show the same to PAN-AM's Tokyo office, but the latter
firmly reiterated that there was no accommodation for them in the first class, stating that they could not go in that flight unless they took the
tourist class therein.
Due to pressing engagements awaiting Senator Lopez and his wife, in the United States he had to attend a business conference in San
Francisco the next day and she had to undergo a medical check-up in Mayo Clinic, Rochester, Minnesota, on May 28, 1960 and needed three
days rest before that in San Francisco Senator Lopez and party were constrained to take PAN-AM's flight from Tokyo to San Francisco as
tourist passengers. Senator Lopez however made it clear, as indicated in his letter to PAN-AM's Tokyo office on that date (Exh. A), that they
did so "under protest" and without prejudice to further action against the airline.1wph1.t
Suit for damages was thereafter filed by Senator Lopez and party against PAN-AM on June 2, 1960 in the Court of First Instance of Rizal.
Alleging breach of contracts in bad faith by defendant, plaintiffs asked for P500,000 actual and moral damages, P100,000 exemplary
damages, P25,000 attorney's fees plus costs. PAN-AM filed its answer on June 22, 1960, asserting that its failure to provide first class
accommodations to plaintiffs was due to honest error of its employees. It also interposed a counterclaim for attorney's fees of P25,000.
Subsequently, further pleadings were filed, thus: plaintiffs' answer to the counterclaim, on July 25, 1960; plaintiffs' reply attached to motion for
its admittance, on December 2, 1961; defendant's supplemental answer, on March 8, 1962; plaintiffs' reply to supplemental answer, on March
10, 1962; and defendant's amended supplemental answer, on July 10, 1962.
After trial which took twenty-two (22) days ranging from November 25, 1960 to January 5, 1963 the Court of First Instance rendered its
decision on November 13, 1963, the dispositive portion stating:
In view of the foregoing considerations, judgment is hereby rendered in favor of the plaintiffs and against the defendant, which is accordingly
ordered to pay the plaintiffs the following: (a) P100,000.00 as moral damages; (b) P20,000.00 as exemplary damages; (c) P25,000.00 as
attorney's fees, and the costs of this action.
So ordered.
Plaintiffs, however, on November 21, 1963, moved for reconsideration of said judgment, asking that moral damages be increased to P400,000
and that six per cent (6%) interest per annum on the amount of the award be granted. And defendant opposed the same. Acting thereon the
trial court issued an order on December 14, 1963, reconsidering the dispositive part of its decision to read as follows:
In view of the foregoing considerations, judgment is hereby rendered in favor of the plaintiffs and against the defendant, which is accordingly
ordered to pay the plaintiffs the following: (a) P150,000.00 as moral damages; (b) P25,000.00 as exemplary damages; with legal interest on
both from the date of the filing of the complaint until paid; and (c) P25,000.00 as attorney's fees; and the costs of this action.
So ordered.
It is from said judgment, as thus reconsidered, that both parties have appealed.
Defendant, as stated, has from the start admitted that it breached its contracts with plaintiffs to provide them with first class accommodations
in its Tokyo-San Francisco flight of May 24, 1960. In its appeal, however, it takes issue with the finding of the court a quo that it acted in bad
faith in the branch of said contracts. Plaintiffs, on the other hand, raise questions on the amount of damages awarded in their favor, seeking
that the same be increased to a total of P650,000.
Anent the issue of bad faith the records show the respective contentions of the parties as follows.
According to plaintiffs, defendant acted in bad faith because it deliberately refused to comply with its contract to provide first class
accommodations to plaintiffs, out of racial prejudice against Orientals. And in support of its contention that what was done to plaintiffs is an
oftrepeated practice of defendant, evidence was adduced relating to two previous instances of alleged racial discrimination by defendant
against Filipinos in favor of "white" passengers. Said previous occasions are what allegedly happened to (1) Benito Jalbuena and (2) Cenon S.
Cervantes and his wife.
And from plaintiffs' evidence this is what allegedly happened; Jalbuena bought a first class ticket from PAN-AM on April 13, 1960; he confirmed
it on April 15, 1960 as to the Tokyo-Hongkong flight of April 20, 1960; PAN-AM similarly confirmed it on April 20, 1960. At the airport he and
another Oriental Mr. Tung were asked to step aside while other passengers - including "white" passengers boarded PAN-AM's plane.
Then PAN-AM officials told them that one of them had to stay behind. Since Mr. Tung was going all the way to London, Jalbuena was chosen
to be left behind. PAN-AM's officials could only explain by saying there was "some mistake". Jalbuena thereafter wrote PAN-AM to protest the
incident (Exh. B).
As to Cenon S. Cervantes it would appear that in Flight No. 6 of PAN-AM on September 29, 1958 from Bangkok to Hongkong, he and his wife
had to take tourist class, although they had first class tickets, which they had previously confirmed, because their seats in first class were
given to "passengers from London."
Against the foregoing, however, defendant's evidence would seek to establish its theory of honest mistake, thus:
The first class reservations of Senator Lopez and party were made on March 29, 1960 together with those of four members of the Rufino
family, for a total of eight (8) seats, as shown in their joint reservation card (Exh. 1). Subsequently on March 30, 1960, two other Rufinos
secured reservations and were given a separate reservation card (Exh. 2). A new reservation card consisting of two pages (Exhs. 3 and 4)
was then made for the original of eight passengers, namely, Senator Lopez and party and four members of the Rufino family, the first page
(Exh. 3) referring to 2 Lopezes, 2 Montelibanos and 1 Rufino and the second page (Exh. 4) referring to 3 Rufinos. On April 18, 1960 "Your
Travel Guide" agency cancelled the reservations of the Rufinos. A telex message was thereupon sent on that date to PAN-AM's head office at
San Francisco by Mariano Herranz, PAN-AM's reservations employee at its office in Escolta, Manila. (Annex A-Acker's to Exh. 6.) In said
message, however, Herranz mistakenly cancelled all the seats that had been reserved, that is, including those of Senator Lopez and party.
The next day April 1960 Herranz discovered his mistake, upon seeing the reservation card newly prepared by his co-employee Pedro
Asensi for Sen. Lopez and party to the exclusion of the Rufinos (Exh. 5). It was then that Herranz sent another telex wire to the San Francisco
head office, stating his error and asking for the reinstatement of the four (4) first class seats reserved for Senator Lopez and party (Annex A-
Velasco's to Exh. 6). San Francisco head office replied on April 22, 1960 that Senator Lopez and party are waitlisted and that said office is
unable to reinstate them (Annex B-Velasco's to Exh. 6).
Since the flight involved was still more than a month away and confident that reinstatement would be made, Herranz forgot the matter and told
no one about it except his co-employee, either Armando Davila or Pedro Asensi or both of them (Tsn., 123-124, 127, Nov. 17, 1961).
Subsequently, on April 27, 1960, Armando Davila, PAN-AM's reservations employee working in the same Escolta office as Herranz, phoned
PAN-AM's ticket sellers at its other office in the Manila Hotel, and confirmed the reservations of Senator Lopez and party.
PAN-AM's reservations supervisor Alberto Jose, discovered Herranz's mistake after "Your Travel Guide" phone on May 18, 1960 to state that
Senator Lopez and party were going to depart as scheduled. Accordingly, Jose sent a telex wire on that date to PAN-AM's head office at San
Francisco to report the error and asked said office to continue holding the reservations of Senator Lopez and party (Annex B-Acker's to Exh.
6). Said message was reiterated by Jose in his telex wire of May 19, 1960 (Annex C-Acker's to Exh. 6). San Francisco head office replied on
May 19, 1960 that it regrets being unable to confirm Senator Lopez and party for the reason that the flight was solidly booked (Exh. 7). Jose
sent a third telex wire on May 20, 1960 addressed to PAN-AM's offices at San Francisco, New York (Idlewild Airport), Tokyo and Hongkong,
asking all-out assistance towards restoring the cancelled spaces and for report of cancellations at their end (Annex D-Acker's to Exh. 6). San
Francisco head office reiterated on May 20, 1960 that it could not reinstate the spaces and referred Jose to the Tokyo and Hongkong offices
(Exh. 8). Also on May 20, the Tokyo office of PAN-AM wired Jose stating it will do everything possible (Exh. 9).
Expecting that some cancellations of bookings would be made before the flight time, Jose decided to withhold from Senator Lopez and party,
or their agent, the information that their reservations had been cancelled.
Armando Davila having previously confirmed Senator Lopez and party's first class reservations to PAN-AM's ticket sellers at its Manila Hotel
office, the latter sold and issued in their favor the corresponding first class tickets on the 21st and 23rd of May, 1960.
From the foregoing evidence of defendant it is in effect admitted that defendant through its agents first cancelled plaintiffs, reservations
by mistake and thereafter deliberately and intentionally withheld from plaintiffs or their travel agent the fact of said cancellation, letting them go
on believing that their first class reservations stood valid and confirmed. In so misleading plaintiffs into purchasing first class tickets in the
conviction that they had confirmed reservations for the same, when in fact they had none, defendant wilfully and knowingly placed itself into
the position of having to breach its a foresaid contracts with plaintiffs should there be no last-minute cancellation by other passengers before
flight time, as it turned out in this case. Such actuation of defendant may indeed have been prompted by nothing more than the promotion of
its self-interest in holding on to Senator Lopez and party as passengers in its flight and foreclosing on their chances to seek the services of
other airlines that may have been able to afford them first class accommodations. All the time, in legal contemplation such conduct already
amounts to action in bad faith. For bad faith means a breach of a known duty through some motive of interest or ill-will (Spiegel vs. Beacon
Participations, 8 NE 2d 895, 907). As stated in Kamm v. Flink, 113 N.J.L. 582, 175 A. 62, 99 A.L.R. 1, 7: "Self-enrichment or fraternal interest,
and not personal ill-will, may well have been the motive; but it is malice nevertheless."
As of May 18, 1960 defendant's reservations supervisor, Alberto Jose knew that plaintiffs' reservations had been cancelled. As of May 20 he
knew that the San Francisco head office stated with finality that it could not reinstate plaintiffs' cancelled reservations. And yet said
reservations supervisor made the "decision" to use his own, word to withhold the information from the plaintiffs. Said Alberto Jose in his
testimony:
Q Why did you not notify them?
A Well, you see, sir, in my fifteen (15) years of service with the air lines business my experience is that even if the flights are solidly booked
months in advance, usually the flight departs with plenty of empty seats both on the first class and tourist class. This is due to late cancellation
of passengers, or because passengers do not show up in the airport, and it was our hope others come in from another flight and, therefore,
are delayed and, therefore, missed their connections. This experience of mine, coupled with that wire from Tokyo that they would do
everything possible prompted me to withhold the information, but unfortunately, instead of the first class seat that I was hoping for and which I
anticipated only the tourists class was open on which Senator and Mrs. Lopez, Mr. and Mrs. Montelibano were accommodated. Well, I fully
realize now the gravity of my decision in not advising Senator and Mrs. Lopez, Mr. and Mrs. Montelibano nor their agents about the erroneous
cancellation and for which I would like them to know that I am very sorry.
Q So it was not your duty to notify Sen. Lopez and parties that their reservations had been cancelled since May 18, 1960?
A As I said before it was my duty. It was my duty but as I said again with respect to that duty I have the power to make a decision or use my
discretion and judgment whether I should go ahead and tell the passenger about the cancellation. (Tsn., pp. 17-19, 28-29, March 15, 1962.)
At the time plaintiffs bought their tickets, defendant, therefore, in breach of its known duty, made plaintiffs believe that their reservation had not
been cancelled. An additional indication of this is the fact that upon the face of the two tickets of record, namely, the ticket issued to Alfredo
Montelibano, Jr. on May 21, 1960 (Exh. 22) and that issued to Mrs. Alfredo Montelibano, Jr., on May 23, 1960 (Exh. 23), the reservation status
is stated as "OK". Such willful-non-disclosure of the cancellation or pretense that the reservations for plaintiffs stood and not simply the
erroneous cancellation itself is the factor to which is attributable the breach of the resulting contracts. And, as above-stated, in this respect
defendant clearly acted in bad faith.
As if to further emphasize its bad faith on the matter, defendant subsequently promoted the employee who cancelled plaintiffs' reservations
and told them nothing about it. The record shows that said employee Mariano Herranz was not subjected to investigation and
suspension by defendant but instead was given a reward in the form of an increase of salary in June of the following year (Tsn., 86-88, Nov.
20, 1961).
At any rate, granting all the mistakes advanced by the defendant, there would at least be negligence so gross and reckless as to amount to
malice or bad faith (Fores vs. Miranda, L-12163, March 4, 1959; Necesito v. Paras, L-10605-06, June 30, 1958). Firstly, notwithstanding the
entries in the reservation cards (Exhs. 1 & 3) that the reservations cancelled are those of the Rufinos only, Herranz made the mistake, after
reading said entries, of sending a wire cancelling all the reservations, including those of Senator Lopez and party (Tsn., pp. 108-109, Nov. 17,
1961). Secondly, after sending a wire to San Francisco head office on April 19, 1960 stating his error and asking for reinstatement, Herranz
simply forgot about the matter. Notwithstanding the reply of San Francisco head Office on April 22, 1960 that it cannot reinstate Senator Lopez
and party (Annex B-Velasco's to Exh. 6), it was assumed and taken for granted that reinstatement would be made. Thirdly, Armando Davila
confirmed plaintiff's reservations in a phone call on April 27, 1960 to defendant's ticket sellers, when at the time it appeared in plaintiffs'
reservation card (Exh. 5) that they were only waitlisted passengers. Fourthly, defendant's ticket sellers issued plaintiffs' tickets on May 21 and
23, 1960, without first checking their reservations just before issuing said tickets. And, finally, no one among defendant's agents notified
Senator Lopez and party that their reservations had been cancelled, a precaution that could have averted their entering with defendant into
contracts that the latter had already placed beyond its power to perform.
Accordingly, there being a clear admission in defendant's evidence of facts amounting to a bad faith on its part in regard to the breach of its
contracts with plaintiffs, it becomes unnecessary to further discuss the evidence adduced by plaintiffs to establish defendant's bad faith. For
what is admitted in the course of the trial does not need to be proved (Sec. 2, Rule 129, Rules of Court).
Addressing ourselves now to the question of damages, it is well to state at the outset those rules and principles. First, moral damages are
recoverable in breach of contracts where the defendant acted fraudulently or in bad faith (Art. 2220, New Civil Code). Second, in addition to
moral damages, exemplary or corrective damages may be imposed by way of example or correction for the public good, in breach of contract
where the defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent manner (Articles 2229, 2232, New Civil Code). And,
third, a written contract for an attorney's services shall control the amount to be paid therefor unless found by the court to be unconscionable
or unreasonable (Sec. 24, Rule 138, Rules of Court).
First, then, as to moral damages. As a proximate result of defendant's breach in bad faith of its contracts with plaintiffs, the latter suffered
social humiliation, wounded feelings, serious anxiety and mental anguish. For plaintiffs were travelling with first class tickets issued by
defendant and yet they were given only the tourist class. At stop-overs, they were expected to be among the first-class passengers by those
awaiting to welcome them, only to be found among the tourist passengers. It may not be humiliating to travel as tourist passengers; it is
humiliating to be compelled to travel as such, contrary to what is rightfully to be expected from the contractual undertaking.
Senator Lopez was then Senate President Pro Tempore. International carriers like defendant know the prestige of such an office. For the
Senate is not only the Upper Chamber of the Philippine Congress, but the nation's treaty-ratifying body. It may also be mentioned that in his
aforesaid office Senator Lopez was in a position to preside in impeachment cases should the Senate sit as Impeachment Tribunal. And he was
former Vice-President of the Philippines. Senator Lopez was going to the United States to attend a private business conference of the
Binalbagan-Isabela Sugar Company; but his aforesaid rank and position were by no means left behind, and in fact he had a second
engagement awaiting him in the United States: a banquet tendered by Filipino friends in his honor as Senate President Pro Tempore (Tsn., pp.
14-15, Nov. 25, 1960). For the moral damages sustained by him, therefore, an award of P100,000.00 is appropriate.
Mrs. Maria J. Lopez, as wife of Senator Lopez, shared his prestige and therefore his humiliation. In addition she suffered physical discomfort
during the 13-hour trip,(5 hours from Tokyo to Honolulu and 8 hours from Honolulu to San Francisco). Although Senator Lopez stated that "she
was quite well" (Tsn., p. 22, Nov. 25, 1960) he obviously meant relatively well, since the rest of his statement is that two months before, she
was attackedby severe flu and lost 10 pounds of weight and that she was advised by Dr. Sison to go to the United States as soon as possible
for medical check-up and relaxation, (Ibid). In fact, Senator Lopez stated, as shown a few pages after in the transcript of his testimony, that
Mrs. Lopez was sick when she left the Philippines:
A. Well, my wife really felt very bad during the entire trip from Tokyo to San Francisco. In the first place, she was sick when we left
the Philippines, and then with that discomfort which she [experienced] or suffered during that evening, it was her worst experience. I
myself, who was not sick, could not sleep because of the discomfort. (Tsn., pp. 27-28, Nov. 25, 1960).
It is not hard to see that in her condition then a physical discomfort sustained for thirteen hours may well be considered a physical suffering.
And even without regard to the noise and trepidation inside the plane which defendant contends, upon the strengh of expert testimony, to
be practically the same in first class and tourist class the fact that the seating spaces in the tourist class are quite narrower than in first
class, there beingsix seats to a row in the former as against four to a row in the latter, and that in tourist class there is very little space for
reclining in view of the closer distance between rows (Tsn., p. 24, Nov. 25, 1960), will suffice to show that the aforesaid passenger indeed
experienced physical suffering during the trip. Added to this, of course, was the painfull thought that she was deprived by defendant after
having paid for and expected the same of the most suitable, place for her, the first class, where evidently the best of everything would have
been given her, the best seat, service, food and treatment. Such difference in comfort between first class and tourist class is too obvious to be
recounted, is in fact the reason for the former's existence, and is recognized by the airline in charging a higher fare for it and by the
passengers in paying said higher rate Accordingly, considering the totality of her suffering and humiliation, an award to Mrs. Maria J. Lopez of
P50,000.00 for moral damages will be reasonable.
Mr. and Mrs. Alfredo Montelibano, Jr., were travelling as immediate members of the family of Senator Lopez. They formed part of the Senator's
party as shown also by the reservation cards of PAN-AM. As such they likewise shared his prestige and humiliation. Although defendant
contends that a few weeks before the flight they had asked their reservations to be charged from first class to tourist class which did not
materialize due to alleged full booking in the tourist class the same does not mean they suffered no shared in having to take tourist class
during the flight. For by that time they had already been made to pay for first class seats and therefore to expect first class accommodations.
As stated, it is one thing to take the tourist class by free choice; a far different thing to be compelled to take it notwithstanding having paid for
first class seats. Plaintiffs-appellants now ask P37,500.00 each for the two but we note that in their motion for reconsideration filed in the court
a quo, they were satisfied with P25,000.00 each for said persons. (Record on Appeal, p. 102). For their social humiliation, therefore, the award
to them of P25,000.00 each is reasonable.
The rationale behind exemplary or corrective damages is, as the name implies, to provide an example or correction for public good. Defendant
having breached its contracts in bad faith, the court, as stated earlier, may award exemplary damages in addition to moral damages (Articles
2229, 2232, New Civil Code).
In view of its nature, it should be imposed in such an amount as to sufficiently and effectively deter similar breach of contracts in the future by
defendant or other airlines. In this light, we find it just to award P75,000.00 as exemplary or corrective damages.
Now, as to attorney's fees, the record shows a written contract of services executed on June 1, 1960 (Exh. F) whereunder plaintiffs-appellants
engaged the services of their counsel Atty. Vicente J. Francisco and agreedto pay the sum of P25,000.00 as attorney's fees upon the
termination of the case in the Court of First Instance, and an additional sum of P25,000.00 in the event the case is appealed to the Supreme
Court. As said earlier, a written contract for attorney's services shall control the amount to be paid therefor unless found by the court to be
unconscionable or unreasonable. A consideration of the subject matter of the present controversy, of the professional standing of the attorney
for plaintiffs-appellants, and of the extent of the service rendered by him, shows that said amount provided for in the written agreement is
reasonable. Said lawyer whose prominence in the legal profession is well known studied the case, prepared and filed the complaint,
conferred with witnesses, analyzed documentary evidence, personally appeared at the trial of the case in twenty-two days, during a period of
three years, prepared four sets of cross-interrogatories for deposition taking, prepared several memoranda and the motion for reconsideration,
filed a joint record on appeal with defendant, filed a brief for plaintiffs as appellants consisting of 45 printed pages and a brief for plaintiffs as
appellees consisting of 265 printed pages. And we are further convinced of its reasonableness because defendant's counsel likewise valued at
P50,000.00 the proper compensation for his services rendered to defendant in the trial court and on appeal.
In concluding, let it be stressed that the amount of damages awarded in this appeal has been determined by adequately considering the
official, political, social, and financial standing of the offended parties on one hand, and the business and financial position of the offender on
the other (Domingding v. Ng, 55 O.G. 10). And further considering the present rate of exchange and the terms at which the amount of
damages awarded would approximately be in U.S. dollars, this Court is all the more of the view that said award is proper and reasonable.
Wherefore, the judgment appealed from is hereby modified so as to award in favor of plaintiffs and against defendant, the following: (1)
P200,000.00 as moral damages, divided among plaintiffs, thus: P100,000.00 for Senate President Pro Tempore Fernando Lopez; P50,000.00
for his wife Maria J. Lopez; P25,000.00 for his son-in-law Alfredo Montelibano, Jr.; and P25,000.00 for his daughter Mrs. Alfredo Montelibano,
Jr.; (2) P75,000.00 as exemplary or corrective damages; (3) interest at the legal rate of 6% per annum on the moral and exemplary damages
aforestated, from December 14, 1963, the date of the amended decision of the court a quo, until said damages are fully paid; (4) P50,000.00
as attorney's fees; and (5) the costs. Counterclaim dismissed.So ordered.
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-28773 June 30, 1975
FRANCISCO ORTIGAS, JR., plaintiff-appellant-appellee,

vs.
LUFTHANSA GERMAN AIRLINES, defendant-appellant-appellee.
BARREDO, J.:
Direct appeals of both parties plaintiff, Francisco Ortigas, and defendant Lufthansa German Airlines, from the decision of the Court of First
Instance of Manila, Branch X, "condemning the defendant to pay plaintiff the amount of P100,000 as moral damages, P30,000 as exemplary
or corrective damages, with interest on both sums at the legal rate from the commencement of this suit until fully paid, P20,000 as attorney's
fees and the costs" for the former's failure to "comply with its obligation to give first class accommodation to (the latter) a (Filipino) passenger
holding a first class ticket," aggravated by the giving of the space instead to a Belgian and the improper conduct of its agents in dealing with
him during the occasion of such discriminatory violation of its contract of carriage.
Defendant buttresses its appeal on the following:
ASSIGNMENT OF ERRORS
I . THE LOWER COURT ACTED WITH GRAVE ABUSE OF DISCRETION IN DENYING THE DEFENDANT'S URGENT MOTION FOR
POSTPONEMENT DATED SEPTEMBER 24, 1966.
II . THE LOWER COURT CONSEQUENTLY ERRED IN ORDERING THE STRIKING FROM THE RECORDS THE TESTIMONY OF
WITNESS IVO LAZZARI AND IN DEEMING THE CASE SUBMITTED FOR DECISION ON THE EVIDENCE OF THE PLAINTIFF ALONE.
III. THE LOWER COURT ERRED IN CONDEMNING DEFENDANT TO PAY THE PLAINTIFF THE AMOUNT OF P100,000.00 AS MORAL
DAMAGES, P30,000.00 AS EXEMPLARY OR CORRECTIVE DAMAGES, WITH INTEREST ON BOTH SUMS AT THE LEGAL RATE FROM
THE COMMENCEMENT OF THIS SUIT UNTIL FULLY PAID, P20,000.00 AS ATTORNEY'S FEES, AND COSTS. (Pp. 12-13, p. 118, Record.)
On the other hand, plaintiff's sole ground for his appeal is that "the trial court erred in ordering Lufthansa to pay Ortigas only P100,000 as
moral damages, P20,000 as exemplary or corrective damages, and P20,000 as attorney's fees." (Plaintiff-Appellant's Brief, p. a.) Thus, apart
from the contention of defendant that it has been denied its full day in court, the only issue raised by both appellants relate to the amount of
the damages awarded by the trial court, plaintiff claiming it is less than he is entitled to and the defendant insisting on the opposite.
Lufthansa maintains it has not had its full day in court because the trial court abruptly ended the trial by denying its last motion for
postponement notwithstanding it was well founded and forthwith ordering the striking out of the testimony of its absent witness whose crossexamination had not been finished and then declaring the case submitted for decision. In this connection, the record reveals the following
facts:
Plaintiff's complaint was filed with the court below on December 24, 1963 and after issues were joined, a pre-trial was held, the parties
submitted a partial stipulation of facts and thereafter went to trial, the last day of which was on September 28, 1966. As to what happened in
between, a detailed account is made in the brief of Ortigas as plaintiff-appellee as follows:
... Thereafter the case was set for hearing twenty four (24) times, or on April 27, 1964, July 9, 1964, August 20, 1964, October 1, 1964,
November 11, 1964, December 22, 1964, February 3, 1965, March 18, 1965, May 5, 1965, June 11, 1965, July 22, 1965, August 26, 1965 and
September 8, 1965, September 22, 1965, November 3, 1965, November 24, 1965, December 17, 1965, December 29, 1965, January 14,
1966, February 2, 1966, April 19, 1966, April 20, 1966, July 5, 6 and 7, 1966, August 25, 1966 and September 28, 1966.
One (1) hearing, or that of August 25, 1966, was cancelled because the trial judge, Hon. Jose L. Moya, was then sick. Other postponements
were as follows:
Postponements at instance of plaintiff
Three (3) settings were cancelled upon motion of plaintiff on grounds that defendant's counsel (Atty. Crispin Baizas) himself must have found
sufficient, for he gave his conformity thereto. These were the hearings set for:
July 9, 1964 postponed upon plaintiff's motion, dated June 27, 1964, or 12 days before the hearing, on the ground that he had to attend an
important business matter in Mindanao, which was so urgent that "for plaintiff to even make a flying trip to Manila for the scheduled hearing
might jeopardize and render to naught a project to which plaintiff has already expended considerable time, money and effort" (RA pp. 28-29.
Note: All reference herein will be to plaintiff's Record on Appeal).
August 26, 1965 postpone upon plaintiff's motion, dated August 23, 1965, for the reason that he was in London for business reasons and
could not return to the Philippines on time for the hearing. This motion is not reproduced in any Record on Appeal but is admitted.
July 5-7, 1966 18 days before the dates set for the hearing, counsel for plaintiff filed a motion, dated June 17, 1966, for Postponement on
the ground that Atty. Rodegelio M. Jalandoni, who had been personally handling this case was then in Washington, D.C. on business and
would not be back until the middle part of August, 1966. Considering that the trial of the case was far advanced, it would be difficult for another
lawyer to substitute for Atty. Jalandoni. Defendant's counsel agreed to the motion (RA pp. 50-51).
Postponement at instance of both parties
Four (4) settings, or those of August 20, 1964, October 1, 1964, November 11, 1964 and December 22, 1964, were cancelled upon the joint
motion of the parties on the ground that negotiations for the possible settlement of this case were pending (RA pp. 31-34).
While both attorneys for plaintiff and defendant signed the joint motions for postponement, the initiative to have the hearings cancelled actually
came from defendant's counsel who claimed that he needed time to consult with his client. Plaintiff welcomed the possibility of compromise
and acceded to join the requests for postponement but became impatient at and suspicious of the attempt to delay so that in the motion to
postpone the December 22, 1964 hearing, plaintiff insisted on the insertion of the phrase "be postponed for the last time" (RA p.
34).1wph1.t These took place after the pre-trial but before plaintiff had started presenting his evidence.
Postponement at instance of defendant
Of the remaining 16 settings, at least TEN (10) were postponed or could not proceed except for a few minutes because either Atty. Crispin
Baizas, counsel for defendant, was not available or needed time to prepare or had to attend a meeting somewhere else, or, as in the case of
September 28, 1966, defendants witnesses wanted to avoid the inconvenience of coming to the Philippines. The situation became such that
on two (2) occasions the court a quo warned the defendant and/or its counsel that it was postponing the trial "for the last time" and "definitely
for the last time." Thus:
February 3, 1965 On this date, although plaintiff was ready to present his evidence and the Court to hear the parties, Atty. Baizas asked for
postponement for the reason that he had to be somewhere else. The undersigned graciously obliged by not objecting, albeit the motion was
made without warning and in open court.
March 18, 1965 Once again the hearing scheduled for this date was postponed on motion of Atty. Baizas in open court. The undersigned
did not object because, as far as he can now recall, the excuse given was that opposite counsel had another appointment.
June 11, 1965 The Court was free the whole morning of this day and plaintiff actually took the witness stand. After plaintiff was through with
his direct testimony, Atty. Zaida R. Alberto, who appeared for the defendant, asked that the cross-examination be postponed for the next
hearing, on the ground that Atty. Baizas knew more of the defense. The following appears of record:
"ATTY. ALBERTO:
COURT:
If Your Honor please, may I request to allow the cross examination at the next hearing.
You can handle the cross examination now.
ATTY. ALBERTO:
The defense are more in the knowledge of Atty. Baizas.
COURT: If you postpone the cross-examination we will forget the testimony and will be spending much time referring to his testimony, so you
better cross-examine him while his testimony is still fresh.
ATTY. ALBERTO:
COURT:
May I ask for a reconsideration, Your Honor, anyway it is past 11:00 o'clock I do not think there will be enough time.
We still have one hour.
ATTY. ALBERTO:
I ask for a reconsideration, Your Honor.
COURT: On motion of the defendant's counsel, the continuation of the trial is postponed to July 22, 1965, at 8:30 a.m. The parties were
notified in open court of this new assignment." (t.s.n. pp. 43-44, June 11, 1965)
Notwithstanding there was an hour left, which was precious considering the crowded calendar of the Court, and Judge Moya wanted to hear
the cross-examination because plaintiff's testimony was fresh, the Court pleased counsel for the defendant and postponed the hearing to July
22, 1965.
September 22, 1965 At this hearing the undersigned requested that Dr. Isidro Pertiera be permitted to take the witness stand. He is a heart
specialist and it was difficult to bring him to court because of his many patients. His direct testimony did not take long, after which Atty. Baizas
asked for postponement, for the reason that he did not expect Dr. Pertiera to testify and, since the subject of the testimony was important and
technical, he needed time to be able to cross-examine. The undersigned, understanding the predicament of Atty. Baizas, did not offer any
objection.
November 3, 1965 This scheduled hearing was postponed upon motion dated October 7, 1965, of Atty. Baizas on the ground that he was
leaving on a business trip abroad. The undersigned again did not object.
November 24, 1965 It will be recalled that the hearing of September 22, 1965, supra, was postponed to enable Atty. Baizas to prepare for
his cross-examination of Dr. Pertiera. On this date, November 24, 1965, Atty. Baizas cross-examined briefly the doctor, but announced:
"ATTY. BAIZAS: May I announce, your Honor, that after I cross-examine the Doctor I will ask for a postponement of my cross examination of
Atty. Ortigas because I will have to attend a meeting of the PAL Board of Directors this morning. My cross examination will not be very long."
(t.s.n., pp. 34, November 24, 1965)
The PAL Board of Directors' meeting was certainly not more important than the occupation of the Court, and it was still early, but counsel was
insistent. The Court was beginning to be perturbed by the dilatory motions; yet it granted counsel's requested postponement but "for the last
time." Thus:
"ATTY. BAIZAS: That is all. May I make that request, Your Honor, that it is simply that I have to be present at the meeting. I wish to finish my
cross examination on Atty. Ortigas but it is merely that the meeting is held for today at 10:00 o'clock and I would like to ask for a postponement
to continue the cross examination.
COURT: I will grant this for the last time. On motion of Atty. Baizas, the continuation of the hearing is postponed for the last time to
December 17, 1965, at 8:30 a.m., by agreement between him and Atty. Jalandoni." (t.s.n., p. 17, November 24, 1965)
December 17, 1965 Although at the hearing of November 24, 1965 trial was postponed for the last time to December 17, 1965, the Court's
warning did not seem to register because on December 7, 1965 defendant's counsel filed another motion for postponement alleging that he
had received a telegram to the effect that the meeting of the Legal Committee of IATA that he was attending, originally scheduled for
December 10-15, had been deferred and would begin on December 13 and as it was for 5 days, it would not be possible for him to return for
the December 17 hearing; hence, he requested that said hearing be reset for December 27 and 29. In his undated motion filed on December
7,1965 counsel averred that:
"There is no intention whatever to delay the case but because of the circumstances above-stated, undersigned counsel is constrained to ask,
for the last time, for the cancellation of the hearing on December 17 and for its resetting on such dates as may be convenient to this
Honorable Court, preferably December 27 and 29." (RA p. 41)
The undersigned opposed said motion and alleged:
"That this case has been pending since December 24, 1963, or almost two years now, and trial thereof has been repeatedly suspended and/or
postponed;
That at the hearing of November 24, 1965, this Honorable Court precisely postponed continuation of the trial thereof for the last time to
December 17, a date which was fixed by agreement of the parties;
That when counsel for defendant left, as alleged, on December 6, 1965 he did so with full knowledge of the intransferable character of the trial
set for December 17;
That defendant can well be represented by Atty. Baizas' associate, Atty. Alberto, who, as a matter of fact, handled this case when trial started
on June 11, 1965 and has been actively collaborating with Atty. Baizas since then;
That when plaintiff testified on direct examination on June 11, 1965 said Atty. Alberto appeared for defendant and that plaintiff is now merely
due for further cross-examination." (RA p. 43)
In spite of said opposition, the Trial Court once more granted defendant's request but was more categorical this time with its admonition
against further postponements and used the word "definitely" in its order which read:
"ORDER
For the reasons stated in the defendant's motion for postponement and in view of the fact that it seeks a deferment of the hearing for only a
few days, the continuation of the trial is postponed definitely for the last time to December 29, 1965, at 8:30 a.m.
"SO ORDERED.
"Manila, Philippines, December 11, 1965.
JOSE L. MOYA
Judge"
March 10, 1966 The hearing on this date lasted for only a few minutes, with the undersigned offering the documentary evidence for the
plaintiff. Thereupon, defendant's counsel again asked for postponement so he could go over said evidence. Since he had no witnesses to
present, the Court once more postponed the trial to April 19, 1966 without any objection on the part of the undersigned.
April 19, 1966 The hearing for this day was cancelled upon motion of defendant's counsel (RA p. 49) on his representation that
defendant's witness Ivo Lazzari had arrived from Italy at midnight of April 18, 1.966 and was not in a condition to take the witness stand. The
Court again accommodatingly transferred the hearing to the following day, April 20, 1966, although it had other cases scheduled for that date
and the case at bar was not among them, just so Lazzari's trip would not be useless. The undersigned likewise did not oppose the transfer of
hearing. (Pp. 2-13 Brief, p. 132 Record.)
Defendant does not seriously deny these facts. Seemingly, the controversy between the parties revolves around defendant's motion for
postponement of the hearing set for September 28, 1966 which was denied by the trial court. It is this denial that is the subject of the first
above-quoted alleged errors assigned by Lufthansa in its brief as defendant-appellant.
At the time this incident of postponement arose, plaintiff had already closed his evidence, and so it was the turn of the defendant to prove its
defenses. The starting date for this was April 19, 1966, but, upon motion of defendant's counsel, it was deferred to the next day, April 20, 1966,
on which date defendant's first witness, Ivo Lazzari, took the witness stand. His testimony, however, was not finished in the morning and
afternoon of that day nor during the whole day of April 22, 1966. Atty. Rodegelio M. Jalandoni was still cross-examining him when the hearing
was continued "to the first available date in the calendar". Eventually, the next continuation of the trial was set at first for July 5, 6 and 7, 1966,
but upon motion of plaintiff's counsel, it was reset for August 25, 1966, on which date, in spite of the presence of Lazzari who came from
Rome purposely for the trial together with another expected witness, Severino Caselli, and still another witness, C.H. Dehio, who came from
Hongkong, no trial could be held because of the absence of the judge. Hence, another date, September 28, 1966 was fixed with notice to the
parties received by them respectively the month previous.
On September 24, 1966, defendant's counsel filed a motion for postponement thus:
COMES NOW the defendant by undersigned counsel and to this Honorable Court respectfully states:
1. The above-entitled case is set for hearing on September 28, 1966 at 8:30 o'clock in the morning.
2. The witnesses who are scheduled to testify for the defendant at said hearing are to come from Rome, Italy;
3. Word has been received from the defendant that said witn will not be able to come for the hearing aforementioned.
WHEREFORE, it is respectfully prayed that the hearing of this case scheduled for September 28 be postponed to some other date most
convenient to this Honorable Court, preferably on any of the following dates: October 21, 17; Novembers, 3, 8, 9 or 11, 1966.
... . (Page 53, Record on Appeal, p. 29, Rec.)
On September 27, 1966, plaintiff's counsel filed the following opposition to the above motion:
COMES NOW plaintiff, through undersigned counsel and, in opposition to defendant's urgent motion for postponement, dated September 24,
1966, to this Honorable Court respectfully states:
That this case has been pending since December, 1963;
That defendant's aforesaid motion does not give any valid reason for postponing the hearing, since it does not state why defendant's
witnesses cannot come to Manila on the scheduled dates of continuation of trial;
That the convenience and motive of defendant and its witnesses in not exerting every effort to testify are not the concern of the plaintiff, and
more so of this Honorable Court, and that the speedy and proper administration of justice dictates that the hearing proceed irrespective of
defendant's obvious disregard of the need thereofl;
That defendant's attitude is aggravated by the fact that, being an airline company, it has all facilities to have its employees available as
witnesses at any time it desires.
WHEREFORE, it is respectfully prayed that defendant's aforesaid motion for postponement be denied.
In view of this opposition, on the same day, His Honor issued an order of denial:
No reason whatsoever having been alleged or shown why the defendant's witnesses will not be able to come from Rome to Manila on the day
of the hearing, and this case having been pending since December, 1963, the motion for postponement is denied. (Pp. 56-57, id.)
On the day set for the hearing, September 28, 1966, Atty. Zaida Ruby S. Alberto appeared for defendant and verbally moved for
reconsideration of the foregoing order of denial. She argued that:
Actually, it is not intended to delay the termination of this case. As a matter of fact, on August 15, 1966, the date set for the hearing of this
case, we were ready with the presentation of our evidence as our two witnesses from Rome were here. But unfortunately, Your Honor was
indisposed, so the hearing was postponed to this date. I really do not know why our witness failed to come. However, I intend to make an
inquiry about the matter so that I could file the corresponding explanation for their failure to appear in Court today. May I, therefore, reiterate
my motion for reconsideration, with the reservation that I be allowed to file my explanation for the failure of these two witnesses coming from
Rome to appear for today's hearing. (Page 2, t.s.n., Sept. 28/66.)
But as counsel could not give the exact reason why defendant's witness scheduled to testify were absent, the trial court denied the motion;
ruling that "no ground has been alleged in support thereof." (p. 6, t.s.n., September 28, 1966.)
This order was immediately followed by a motion of plaintiff's counsel for the striking out of the entire testimony of the witness, Ivo Lazzari,
upon the ground that counsel had not yet finished his cross-examination of him and his absence was unexplained. No objection appears to
have been made to such motion, albeit counsel for defendant tried to point out that Atty. Jalandoni had already finished his cross-examination
of the witness. After verifying from the records that such was not the case, His Honor issued the following order:
The witness Ivo Lazzari not having appeared at the hearing set for today, for which reason his cross-examination cannot be continued, on
motion of the plaintiff's counsel, his testimony is striken from the record, and this case is deemed submitted for decision on the evidence
already presented. (Pp. 57-58, Rec. on Ap., id.)
Thus the trial ended and parties were allowed to submit their respective memoranda.
On October 19, 1966, however, defendant's counsel filed the following motion for reconsideration:
MOTION FOR RECONSIDERATION .
COMES NOW defendant by undersigned counsel this Honorable Court moving for a reconsideration of the orders dated September 27 and
September 28, 1966, respectively, respectfully states:
1. On September 26, 1966 a motion for postponement of the hearing on September 28, 1966 was filed by undersigned counsel for the
reason that word had just been received from the defendant that the witnesses who were scheduled to testify at the said hearing and who
were to come from Rome, Italy, would not be able to come to the Philippines for said hearing. This motion was denied in the order of
September 27, 1966;
2. No reason could be stated in the aforesaid motion for postponement because at the time it was prepared, counsel for defendant did not
really know the specific reasons for the inability of said witnesses to come. A simple telex message had been sent by the Far East Manager of
the defendant company to defendant's representatives in Manila advising the latter that the witnesses in question could not come. Copy of
said telex message is attached to and made part of this motion for reconsideration as Annex "I";
3. For this reason on September 28, 1966, when the case was called, counsel for the defendant reiterated the motion for postponement and
requested this Honorable Court for time to submit an explanation on the failure of defendant's witnesses to come as a letter elaborating on the
matter would surely follow the telex' message. This request was however denied by the Honorable Court and upon motion of plaintiff's
counsel, another order was issued striking out from the record the testimony of defendant's only witness so far, Ivo Lazzari, whose crossexamination was to be continued that date, for the latter's failure to appear at the hearing, and deeming the case submitted for decision;
4. It is alleged by opposing counsel that the witnesses did not come for the hearing of September 28, 1966 because it was inconvenient for
them and for defendant. This accusation is absolutely without basis and malicious;
5. If inconvenience were the only reason for the witnesses' failure to come, then they would not also have come previously because it was
just as inconvenient for them then. It will be recalled that Ivo Lazzari had been here in April 1966 when he was presented on direct
examination and partly on cross-examination. On August 25, 1966, the case was also scheduled for hearing. All of defendant's witnesses
came here from Rome, Italy for said hearing. Even Mr. C. H. Dehio was also here to testify. Unfortunately, the Presiding (Judge) of this
Honorable Court was indisposed on that particular morning and so the hearing on said date was cancelled. We mention this only to show that
the failure of the witnesses to come for the hearing on September 28 was not caused by mere inconvenience;
6. Defendant had and had no intention to delay the proceedings whatsoever. The witnesses in question could not come because of certain
circumstances that rendered their coming over virtually impossible. Both witnesses, Ivo Lazzari and Saverino Casilli are employees of
defendant company at the Rome office. The air traffic in Rome has been particularly heavy this season. Some of the personnel of the
Lufthansa Rome office were on leave and these two employees had to assume some of the duties of those employees who were on leave,
aside from performing their own regular duties, If they were to leave their posts to come for the hearing on September 28, there would be
grave disruption to the public service and for this reason they were not able to come. These facts are contained in a letter dated September
29, 1966 written to undersigned counsel by C. H. Dehio, IATA Agency Manager, Far East and Australasia, Lufthansa German Air Lines, copy
of which is attached to and made part of this motion for reconsideration as Annex "2";. The envelope in which said letter contained is likewise
attached to and made part of this motion as Annex "2-A";
7. Witness Ivo Lazzari had first shed his testimony on direct examination and on September 28, 1966, opposing counsel was to continue
cross-examination of said witness. The other witness Saverino Casilli was to be presented after Ivo Lazzari would have finished testifying.
Both witnesses are material for the defense and no other person could testify on the facts that are the subject of their testimony. The inability
of said witnesses to come for the hearing on September 28 was not due to any fault or neglect on the part of defendant who in fact had
exerted every effort to have them come, but because of the supervening circumstances above-described, their coming over could not have
been possible without seriously disrupting public service;
8. There is no question that the granting or denial of a motion for postponement rests upon the sound discretion of the court. We submit
however that under the circumstances, the ends of justice would have been better served by granting the motion on question. The reason for
defendant's motion for postponement is valid and meritorious, and the grant of a postponement based on such ground would not have
adversely affected the substantial rights of plaintiffs.
"Continuances and postponements of trial are part and parcel of our judicial system of justice, and where no substantial rights are affected and
the intention to delay is not manifest, it is sound judicial discretion to allow them. (Rexwell vs. Canlas, No. L-16746, Dec. 30, 1961)
"There is even authority for the view that the right to a speedy trial is not violated by granting a continuance on the ground of absence of
material witness. (People vs. Romero, G.R. No. L-4517-20, May 25, 1953)
The lower court erred in denying a motion for postponement filed by defense to await arrival of a material witness." (People vs. Narsolis, et al.
G.R. No. L-2764, March 24, 1950)
"A miscarriage of justice may result from the accidental or excusable absence of a material witness, where presence can be secured by the
grant of a reasonable continuance." (Luna vs. Arcenas, 34 Phil. 80, 98-99)
8. Defendant has a valid and meritorious defense, and if given opportunity to present its side of the case, it would certainly diminish, if not
altogether disprove plaintiffs claim.
... court litigations are primarily for the search of truth. ... A trial by which both parties are given the chance to adduce truth is the best way to
find out such truth. A denial of this chance would be too technical. The dispensation of justice and the vindication of grievances should not be
barred by technicalities." (Ronquillo vs. Marasigan, L-11621, May 21, 1962; Santiago vs. Joaquin, L-15237, May 31, 1963, emphasis ours.)
"Judicial experience dictates that it is better that cases are tried on the merits even with a little delay than that substantial rights of a party
litigant be sacrificed on the altar of technicality." (Uy vs. Demetillo, CA-G.R. No. 32665-R, Jan. 14, 1964.)
9. An affidavit of merit by Clarita C. de la Riva, Manager, Rocha & Cua., Inc., General Sales Agents, Lufthansa German Airlines is likewise
attached to and made an integral part of this motion for reconsideration as Annex "3";
10. The order dated September 27, denying defendant's motion for postponement and the order of September 28, 1966 striking off from the
records the testimony on direct examination of the witness Ivo Lazzari and holding the case submitted for decision on the evidence presented
would unduly prejudice defendant's stand, and would amount to a denial of due process to defendant.
"The paramount interests of justice demand such reasonable allowances as would prevent, without doing an injustice to the opposing party,
the loss by a litigant of his chance to duly present his side of the case before the court. With a view of avoiding a possible miscarriage of
justice, the exercise of the court's discretion ought to lean, in a reasonable degree toward bringing about a presentation of evidence on both
sides. ..." (Gerona vs. Calada, CA-G.R. No. 23955-R March 30, 1963, Tormes vs. Balzado, CA-G.R. No. 32019-R, April 17, 1964.)
WHEREFORE, it is respectfully prayed that the orders of the Honorable Court dated September 27, and September 28, 1966, respectively, be
reconsidered and set aside; that the testimony of defendant's witness Ivo Lazzari be allowed to remain on record and that a date be set for the
continuation of defendant's evidence.
Manila, Philippines, October 19, 1966.
CRISPIN D. BAIZAS & ASSOCIATES
By: s/t/ Crispin D. Baizas
VERIFICATION
Counsel for the defendant
Suite 305 Shurdut Building
Intramuros, Manila
I, CRISPIN D. BAIZAS, after having been sworn according to law, depose and say:
I am the counsel for the defendant in the above-entitled case;
I have prepared the foregoing motion for reconsideration and all the allegations contained therein are true and correct of my own knowledge
and to the best of my information and belief.
s/t/ CRISPIN D. BAIZAS
SUBSCRIBED AND SWORN TO BEFORE ME this 19th day of October. 1966 in the City of Manila, affiant exhibiting to me his Res. Cert. No.
A- 5892423 issued on January 28, 1966 at Makati, Rizal.
s/ (Illigible)
NOTARY PUBLIC
Until December 31, 1967
Doc. No. 1377
Page No. 77
Book No. III
Series of 1966.
to which, plaintiff's counsel filed the following opposition:
COMES NOW plaintiff, through undersigned counsel, and, in opposition to defendant's motion for reconsideration, dated October 19, 1966, to
this Honorable Court respectfully states that:
1. This is in effect the second motion for reconsideration that defendant has filed against the order of September 27, 1966 denying its motion
for postponement of the hearing of September 28. The first motion for reconsideration was made in open court by Atty. Zaida S. Alberto and
denied on the same date.
2. Defendant now claims that it did not intend to delay the trial of this case and seeks to justify the failure of its witnesses, Ivo Lazzari and
Saverino Casilli, to appear on September 28 on the ground that:
"... The air traffic in Rome has been particularly heavy this season. Some of the personnel of the Lufthansa Rome office were on leave and
these two employees had to assume some of the duties of these employees who were on leave, aside from performing their own regular
duties. If they were to leave their posts to come for the hearing on September 28, there would be grave disruption to the public service and for
this reason they were not able to come. ..." (p. 3, Defendant's Motion for Reconsideration.)
3. Note that the above alleged facts are contained in a mere letter that was written by a certain Mr. C.H. Dehio, an employee of defendant in
Hongkong, to its counsel on September 29, 1966, or one day after the hearing of September 28, when presumably defendant's aforesaid
employee had already been informed that this Honorable Court had denied the postponement and considered this case as submitted for
decision. Defendant is an airline company and has all the telex facilities to communicate in a matter of minutes with its various agencies. The
ground for failure to appear, to wit, supposed pressure of work of said employees, is as easy to conceive and gratuitously state as to flick
one's fingers. We wish to call attention to the significant fact that the statement of Mr. Dehio in his letter is not under oath. Incorporating said
statement in the body of the motion for reconsideration that is sworn to by counsel merely `to the best of his information and belief, or in an
affidavit of Mrs. Clarita C. de la Riva (Annex 3) who was only referring to hearsay information derived from Mr. Dehio's aforesaid letter, is
insufficient verification of the motion for reconsideration under Section 6, Rule 7 of the Rules of Court. Even Mr. Dehio had he executed the
affidavit himself, would have been disqualified to swear to the facts because he is stationed in Hongkong. So that, when defendant's counsel
and Mrs. de la Riva verified the motion on "information and belief" derived from Mr. Dehio's letter, their statements were hearsay thrice
removed.
4. But assuming said facts to be true, did this justify the failure of defendant's witnesses to appear at the scheduled hearing or constitute a
valid excuse for defendant's inability to present evidence. We respectfully submit that they do not. The September 28 hearing was set as early
as August 25, 1966, or more than one (1) month previous, to suit the schedules not only of this Honorable Court but of the parties as well.
Surely, it was incumbent on defendant, if it has deference to this Honorable Court and our administration of justice to see to it that its
witnesses, particularly Ivo Lazzari who was on the witness stand and due for cross-examination, would be available, rather than granting leave
to its other employees and burdening the two needed witnesses with additional work. Defendant is not a neophyte in the airline business.
Assuming arguendo that it is true that the volume of air traffic in Europe was high in "September and early October", it should have foreseen
the situation and taken appropriate measures to assure compliance with its obligation to this Honorable Court. The witnesses are defendant's
employees and subject to its exclusive control. Instead, defendant allegedly rendered itself short handed by granting leave to its other
employees, and now comes to court with a lame excuse requesting that it be extricated from a predicament that it has deliberatedly brought
upon itself. For the execuse that with the workload for Mr. Lazzari and Mr. Casilli becoming heavier than usual "it would seriously disrupt our
service to the travelling public if, during this time, they were to leave their jobs for several days" (Please see Mr. Dehio's letter, Annex "2") is
lame, by any standard. The local newspapers are constantly carrying news articles of how large and expanded is the Lufthansa as an airline
outfit. Surely, of its hundred (if not thousands) of available employees, two like Lazzari and Casilli could have been dispensed from their work
temporarily to defend the company against the just grievance asserted by an injured passenger before a court of justice. At the most,
defendant was after the promotion of its own interest in holding the two employees to their jobs, and is not avoiding "grave disruption to the
public service" as counsel exaggerates Mr. Dehio's expression "seriously disrupt our service to the travelling public" two distinct ideas, the
latter signifying self-interest as distinguished from public necessity. This Honorable Court can take judicial notice that there are many other
airlines-operating in the same areas as doe, Lufthansa and competing with it.
5. As we explained at the September 28 hearing, the truth of the matter is that, contrary to the unverified representations of defendant, the
reason for the non-attendance of defendant's witnesses was to avoid the inconvenience of coming to the Philippines to testify. In other words,
after Ivo Lazzari and Saverino Casilli were unable to testify last August 25, 1966, defendant thought of avoiding having said witnesses come
again to Manila. We say this because sometime on September 20, 1966, Atty. Leonardo P. Valmonte (an assistant attorney of plaintiff who is
helping in this case) had a telephone conversation with defendant's counsel, Atty. Zaida S. Alberto in connection with the former's request for a
copy of a certain exhibit, and in the course of their conversation Atty. Alberto informed Atty. Valmonte that the trial scheduled for September 28,
1966 would not proceed because they were intending "to secure the permission of the court to take the testimonies of their witnesses by way
of deposition". In short, even before the receipt of the alleged telex (Annex "1" of Motion) by defendant's counsel on September 22, 1966, said
counsel announcing that the trial could not proceed because they were going to resort to depositions of their witnesses in Rome, rather than
have said witnesses come to Manila. The decision to take depositions having been made on or before September 20, it was an easy matter to
have Lufthansa's Hongkong office send the telex of September 22 stating that they would be unable to provide witnesses on September 28.
No reason was given why witnesses could not be provided 6 or 7 days thence. If in truth there was unexpected increase in air traffic, surely 6
or 7 days were more than sufficient to make the necessary arrangements so that the work of Lazzari and Casilli could be taken over
temporarily just so these witnesses could appear before this Honorable Court at the appointed date. Attached hereto as Annex "A" is the
affidavit of Atty. Leonardo P. Valmonte on his aforesaid conversation with Atty. Alberto.
6. At the hearing on September 28, when we made reference to the above-referred to conversation between Attys. Valmonte and Alberto, the
latter did not deny that she had in truth spoken to Atty. Valmonte in the tenor above related. As a matter of fact, she admitted that defendant
was intending to take the depositions of its witnesses in Rome.
7. When this honorable Court denied the motion for postponement on September 28, 1966, it did so in the exercise of its sound judicial
discretion, for no valid reason was given why the witnesses could not appear, whereas this case had been pending for about three (3) years
and had been postponed several times with repeated warnings on defendant that said postponements were for the last time. And now, in its
motion for reconsideration, defendant has failed to effectively allege the ground for the failure of said witnesses to come, and even if said
ground be admitted as true for argument's sake, it merely showed "inofficiousness, lack of resourcefulness and diligence, if not total
indifference" on the part of defendant to protect in court its interests and to prevent needless delays in the discharge of judicial business.
"Postponement not based on valid reasons. Where a party seeks postponement of the hearing of this case for reasons caused by his own
inofficiousness, lack of resourcefulness and diligence if not total indifference to his own interests or to the interests of those he represents,
thereby resulting in his failure to present his own evidence, the court would not extend to him its mantle of protection. If it was he who created
the situation that brought about the resulting adverse consequences, he cannot plead for his day in court nor claim that he was so denied of
it." (De Leon vs. People's Homesite and Housing Corporation, CA-G.R. No. 31169-R, Aug. 31,1963.)
8. In the case of Hap Hong Hardware Co. vs. Philippine Company, GR. No. L-16773 (May 23, 1961), the Supreme Court, in sustaining the trial
court's denial of a motion for postponement and on the ground that the defendant's witnesses, officers of the company, had not come because
it was the beginning of the milling season in the municipality of San Jose, Mindoro Occidental and their presence in the Central was very,
necessary, held that the trial court was perfectly justified in denying said motion for postponement because the reason adduced was "not
unavoidable and one that could not have been foreseen." Said the Supreme Court:
"The reason adduced in support of the motion for postponement is not unavoidable and one that could not have been foreseen. Defendant
ought to have known long before the date of trial that the milling season would start when the trial of the case would be held. The motion
should have been presented long in advance of the hearing, so that the court could have taken steps to postpone the trial without
inconvenience to the adverse party. As it is, however, the motion was presented on the day of the trial. Knowing as it should have known that
postponements lie in the court's discretion and there being no apparent reason why the defendant could not have presented the motion earlier,
thus avoiding inconvenience to the adverse party, the appellant cannot claim that the trial court erred in denying postponement. Under all the
circumstances we hold that the Court was perfectly justified in denying the motion for postponement."
In the case at bar, the same unjustified excuse is adduced that the witnesses, who are employees (not even officers) of defendant, had
work to do, albeit date of trial was set one month previous.
9. The cases cited by defendant are not in point, the facts involved therein being very different from those attending the case at bar. For
example, in the cited case of Lino Luna vs. Arcenas, 34 Phil. 93, the trial judge declined to grant a continuance of a few hours to give counsel
an opportunity to secure the presence of the defendant. The Supreme Court held that considering that it did not appear that defendant was
indulging in dilatory tactics, the denial of the motion for short Postponement was improper. Again, in the case of People vs. Romero, G.R. No.
L-4517, May 25, 1953, the prosecution witnesses, although subpoenaed, failed to appear; whereupon the fiscal asked that they be ordered
arrested and that in the meantime the trial be postponed. The Supreme Court likewise held that the denial of the postponement was improper.
These fact situations, however, as can immediately be seen are completely different from that of Lufthansa whose non-presentation of its
employees-witnesses was motivated by the desire to avoid inconvenience to them, hence its frustrated plan to have their depositions taken in
Rome.
10. Complaints regarding delays in the disposition of court cases are prevalent and have recently found expression not only in executive
pronouncements but in judicial admonitions. The unclogging of court dockets remains a pressing problem to the despair of litigants. As the
Court of Appeals put it:
"The records reveals that the trial of the case was postponed five times at the instance of appellants themselves, and for this reason the trial
was delayed for more than one year and three months. In granting these several postponements, the trial judge was over liberal already, and
to have allowed another postponement would have been to jeopardize plaintiff's interest. Obviously courts cannot unduly protect the interests
of one party to the detriment of the other. Already, there are complaints regarding delays in the disposition of court cases. The unclogging of
our court dockets still remains a pressing problem in the despair of many a litigant. However to eliminate, at least minimize, these delays is as
much our concern and any act of trial courts conducive towards this purposeful end will be encouraged by appellate court's." (Rosario vs. De
Leon, CA-G.R. No. 6495-R, April 25, 1941; 40 O.G. 752.)
11. Prejudice will be occasioned plaintiff if defendant's belated motion for reconsideration is granted. Notwithstanding defendant's counsel's
receipt of Mr. Dehio's letter, dated September 25, 1966, a few days after said date, defendant delayed the filing of its motion for
reconsideration until after about three (3) weeks later. In the meantime, it knew as of September 28 that this Honorable Court had striken out
the testimony of Ivo Lazzari, considered the case submitted for decision on the evidence on record, and given plaintiff's counsel 7 days to
present his memorandum. Plaintiff and his counsel exerted all efforts and worked overtime just so to be able to submit his memorandum within
the short period allowed. Said memorandum was finished on time, and has been served on defendant's counsel and submitted to Court. In
other words, defendant purposely waited until the submission of plaintiffs memorandum before presenting its motion for reconsideration based
on alleged information received three (3) weeks previous. To grant defendant's instant motion for reconsideration would place plaintiff at a
great disadvantage, because defendant is now fully aware of every facet of plaintiff's cause and can simply tailor its defenses and evidence in
refutation thereof.
12. Defendant claims that plaintiff is taking undue advantage of a technicality and it should not be deprived of its day in court on this ground.
Suffice it to state that it is never technical to invoke one's rights, and that while the Rules of Court should be liberally construed, their strict
observance has been considered indispensable to the prevention of needless delays and the orderly and speedy discharge of judicial
business. Thus:
"Although the Rules of Court should be liberally construed, however their strict observance which have been considered indispensable to the
prevention of needless delays and to the orderly and speedy discharge of judicial business, is as imperative necessity. Thus, the rules
prescribing the time within which certain act must be done, or certain proceedings taken, are considered absolutely indispensable to the
prevention of needless delays and to the orderly and speedy discharge of judicial business, is as imperative necessity. Thus, the rules
prescribing the time within which certain act must be done, or certain proceedings taken, are considered absolutely indispensable to the
prevention of needless delays and to the orderly and speedy discharge of judicial business and therefore must be strictly complied with."
(Alvero vs. De la Rosa, 76 Phil. 428, cited in Francisco on Civil Procedure, Vol. 1, P. 89)
"Rules of Courts, promulgated by authority of law, have the force and effect of law; and rules of court prescribing the time within which certain
acts must be done, or certain proceedings taken are considered absolutely indispensable to the prevention of needless delays and to the
orderly and speedy discharge of judicial business. "Conlu vs. Court of Appeals, et al., G.R. No. L-14027, January 29, 1960, citing Shioji vs.
Harvey, 43 Phil. 333; Alvero vs. De la Rosa, et al., 42 Off. Gaz., p. 316, (Supra.)
WHEREFORE, it is respectfully prayed that defendant's motion for reconsideration, dated October 19, 1966, be denied.
Manila, October 31, 1966. (Pages 74-88, Record on Appeal, id.)
By way of reply to the above opposition, defendant's counsel alleged:
Defendant could have from the beginning taken depositions in Rome, but so as to avoid any inconvenience to plaintiff and that the court may
see and hear the witnesses testify to better determine the credibility of their testimony defendant had been bringing the witnesses here. As a
matter of fact, defendant even without leave of court may take the depositions of its witness by merely giving the Court notice of its intention to
do so.
"After answer has been filed no leave at court is required as a prerequisite to taking depositions ... (Marzo vs. Moore McCormick Line, Inc. 8
Feb. Rules of Service, p. 560; cited in Moran Comments on Rules of Court Vol. II, p. 18)
"After issue is joined, depositions may be taken without leave of court. (Lyons vs. Bronx Towing Line, Inc., 1 Fed. Service p. 341)
"After answer is served, depositions may be taken as of course and application should not be made to the court for leave. (Schultz vs. State
Mutual Life Assurance Company, 1 Fed. Rules of Service, p. 340, US Dist. Ct. Dist. of Oregon, Oct. 14, 1938)
"The statements made by Atty. Valmonte are false and malicious. An affidavit executed by Atty. Zaida Ruby Alberto is attached to and made
part of this Reply as Annex "1". (Pages 92-93, Record on Appeal, id.)
On October 24, 1966, the trial court resolved the incident in a brief order holding that "(f)or the reasons stated in the plaintiff's opposition to the
motion for reconsideration, it is denied."
In its appeal, defendant reiterates insistently its position that the denial of its motion for postponement as well as the order striking out the
testimony of Ivo Lazzari were issued in grave abuse of discretion and should be set aside. Before going any further, however, it may be
mentioned that since defendant has not assigned as error, although it discusses in its brief, the denial of its last motion for reconsideration,
plaintiff contends that such failure constitutes a bar to any further consideration of the merits of the arguments of defendant relative to the main
denial-of-postponement and striking-out orders. To be sure, there is technical plausibility in such pose of plaintiff, but considering the
importance of the other matters involved in this case, it would serve the interests of justice more if We passed on the merits of the substantial
issues in this controversy. After all, "this Court is clothed with ample authority to review matters, even if they are not assigned as errors in the
appeal, if it finds that their consideration is necessary in arriving at a just decision of the case." (Saura Import & Export Co., Inc. vs. Philippine
International Surety Co., Inc., L-15184, May 31, 1963, 8 SCRA 143.) And considering the inter-relation between the omitted assignment of
error and those actually assigned and discussed by defendant's counsel, We can apply here the ruling in Hernandez vs. Andal, 78 Phil. 196, to
the effect that "an unassigned error closely related to an error properly assigned or upon which the determination of the question raised by the
error properly assigned is dependent, will be considered by the appellate court notwithstanding the failure to assign it as an error." (at pp. 209210.)
Now, with respect to defendant's first assignment of error, We feel that the rather extended recital We have made above of the incidents and
proceedings related to the trial court's order denying defendant's motion for postponement of the hearing set for September 28, 1966 is selfrevealing. It argues against the charge that His Honor's order of denial was improper and unjustified.
The case had been pending for about three years and had actually suffered during that period even more than the usually permissible number
of continuances, quite often to suit the convenience of defendant's counsel. Notice of the September 28, 1966 schedule had been served on
counsel the month previous. It must be assumed that due preparations and arrangements were to be made since the receipt of that notice to
insure the presence in Manila for the expected witnesses on the date set. Under the circumstances, the excuse given by defendant that the
witnesses could not leave their respective stations and places of work to attend the trial is plainly unacceptable. There was enough time and
opportunity for defendant to have made the corresponding adjustments in the assignments of its personnel so as to enable its witnesses to be
in court. The trouble is that defendant relied on the assumption that the court could be made to wait until the volume and other conditions of its
business would permit it to comply with the schedule of the court. For an airline company engaged in international transportation and
presumably having all the facilities to have any of its employees available practically anywhere in the world at a moment's notice, if it only took
due care to do this, defendant's attitude cannot be countenanced.
What is more, the motion of September 24, 1966 gave no reason at all why defendant's witnesses supposed to come from Rome would be
unable to be at the trial. Even as late as the day of the hearing, September 28, 1966, the court could not be told the reason for such inability.
All that counsel could say was that she "intend(ed) to inquire and file the explanation" later. This was not as it should have been, for the telex
advising the Manila office that the witnesses would not be available was received on September 22nd yet, and certainly there was enough
time to investigate and find out the reason for such unavailability. And as no justifiable reason could be advanced in support of the verbal
motion for reconsideration. We cannot say that His Honor acted improperly when he denied the same.
We reiterate, the case had been pending for more than three years, with so many postponements, and the least that defendant should have
done to merit favorable action on the part of the trial judge was to be ready with an explanation of its inability to proceed with the trial, giving
the detailed and good reasons therefor. As it is, there was actually no basis at all for the exercise of discretion on the part of the trial judge in a
manner favorable to it. Trials may be postponed because of the absence of evidence only when such absence is justified. Mere absence is not
a justification in itself. Section 4 of Rule 22 is sufficiently clear on this point. It provides that "A motion to postpone a trial on the ground of
absence of evidence can be granted only upon affidavit showing the materiality of evidence expected to be obtained, and that due diligence
has been used to procure it." This means that it must be shown to the court that due diligence had been exercised in either securing the
presence of the evidence (witnesses) or preventing the absence thereof.
There is, of course, defendant's motion for reconsideration of October 19, 1966 praying for the setting aside of the court's order of denial as
well as the other order striking out the testimony of witness Lazzari. But, as already noted, the only excuse given in said motion is that:
... The witnesses in question could not come because of certain circumstances that rendered their coming over virtually impossible. Both
witnesses, Ivo Lazzari and Saverino Casilli are employees of defendant company at the Rome office. The air traffic in Rome has been
particularly heavy this season. Some of the personnel of the Lufthansa Rome office were on leave and these two employees had to assume
some of the duties of those employees who were on leave aside from performing their own regular duties. If they were to leave their posts to
come for the hearing on September 28, there would be grave disruption to the public service and for this reason they were not able to
come. ... (Page 47, Rec. on Ap., p. 32, Record.)
Indeed, even if such reason were given earlier on September 24, 1966 the court would have been as well justified in denying the requested
postponement. We cannot see any reason why, despite its having knowledge of the date of the hearing about a month before, defendant did
not see to it that its expected witnesses were not assigned to do duty on the day they were supposed to appear in court. We cannot believe
Lufthansa could be so undermanned that such a simple adjustment of its personnel had to be "impossible."
Moreover, the Rome based witnesses were not the only possible witnesses of defendant. To begin with, Mr. C.H. Dehio, the IATA Agency
Manager, Far East and Australasia, Lufthansa German Air Lines, who, according to the record, had already attended previous hearings as a
prospective witness could have been made to go to court. There is nothing in the record to show that he was also rendered incapable of doing
so. Then there could still be local witnesses, it is no excuse that presenting other witnesses would have disrupted the presentation of
defendant's case, for parties may be allowed to maintain their own way of presenting their evidence only where this can be done without injury
to the expeditious disposition of the case and the best interests of the administration of justice.
Coming now to the second assigned error regarding the striking out of the unfinished testimony of Lazarri, the Court is also of the opinion and
so holds that the trial court's action cannot be categorized as arbitrary or oppressive or as amounting to a grave abuse of discretion. To be
sure, this second order was but a logical consequence of the previous order denying defendant's motion for postponement. With such denial,
the next thing in order was to declare the presentation of evidence of the defendant terminated. Accordingly, it was necessary to determine
what evidence could be considered to be for the defendant. And so when counsel for plaintiff asked the court to strike out the testimony so far
given by Lazarri, there was practically no alternative for the court but to grant the same. Indeed, defendant's counsel could not and did not
offer any objection thereto.
Oral testimony may be taken into account only when it is complete, that is, if the witness has been wholly cross-examined by the adverse party
or the right to cross-examine is lost wholly or in part thru the fault of such adverse party. But when cross-examination is not and cannot be
done or completed due to causes attributable to the party offering the witness, the uncompleted testimony is thereby rendered incompetent.
The right of a party to cross-examine the witnesses of his adversary is invaluable as it is inviolable in civil cases, no less than the right of the
accused in criminal cases. The express recognition of such right of the accused in the Constitution does not render the right thereto of parties
in civil cases less constitutionally based, for it is an indispensable part of the due process guaranteed by the fundamental law. Subject to
appropriate supervision by the judge in order to avoid unnecessary delays on account of its being unduly protracted and to needed injunctions
protective of the right of the witness against self-incrimination and oppressive and unwarranted harrassment and embarrassment, a party is
absolutely entitled to a full cross-examination as prescribed in Section 8 of Rule 132 thus: "Upon the termination of the direct examination, the
witness may be cross-examined by the adverse party as to any matters stated in the direct examination, or connected therewith, with sufficient
fullness and freedom to test his accuracy and truthfulness and freedom from interest or bias, or the reverse, and to elicit all important facts
bearing upon the issue." Until such cross-examination has been finished, the testimony of the witness cannot be considered as complete and
may not, therefore, be allowed to form part of the evidence to be considered by the court in deciding the case.
In the case at bar, however, We have opted not to rely exclusively on the foregoing considerations. In order to satisfy Ourselves as to whether
or not defendant stands to be irreparably prejudiced by the impugned action of the trial court relative to the testimony of Lazzari, We have just
the same gone over the transcript thereof. After considering the same, however, We are of the impression that even his direct testimony,
without taking into account anymore his answers to the cross-examination questions of counsel for plaintiff, cannot be of much weight in
establishing the defenses in defendant's answer. But it would seem more appropriate to elaborate on this point when We come to the
discussion of the mutual accusation of the parties that the trial court erred in the portion of its discretion awarding damages to plaintiff.
The last issue submitted for Our resolution relates to the award of damages made by the trial court in favor of Ortigas against Lufthansa in the
amounts aforestated, as to which, as already noted at the outset, both parties have appealed taking opposite positions. In this respect, the
appealed decision made the following findings and discussion of the material facts:
In October, 1963, the Sharp Travel Service, the travel department of C. F. Sharp, Inc., the majority interest-in-which is held by Rocha y Cia.,
Inc., General Agents of the defendant, Lufthansa German Airlines issued to the plaintiff First Class Pan American Ticket No. 026492147076 to
81 which would take him from Manila, the place of departure, to Hongkong, various cities in the United States, Europe, Asia, the Far East, and
then back to Manila, the place of destination. Ortigas' ticket for all these different legs of his journey was first class.
He left Manila October 12, 1963, as scheduled. In New York, he decided to leave out some cities, included in his original itinerary, to be in
Hongkong on the 19th day of November, 1963, for several appointments he had there. He went to the Trans World Airlines and had his Pan
American ticket changed with First Class TWA Ticket No. 115-460-451- 878 to 881. His TWA ticket was also first class for the entire trip from
New York to several European cities, including Rome, and thence to the Far East, with Manila also as the place of destination.
Ortigas arrived in due course in Rome. To be sure he could fly first class to Hongkong on November 18, 1963, for his appointments there the
next day, Ortigas repaired to the office of the Alitalia on Saturday, November 16, 1963, to book passage. The man at the counter of the Alitalia
office told him it had no flight on Monday but the Lufthansa had. The man thereupon called up the office of the Lufthansa and, after talking to
an employee thereof, told Ortigas that the Lufthansa had no first class, but only economy, seats available on its Monday flight.
Ortigas answered that he was not willing to take an economy seat and requested the employee to call up other airlines. Then the phone rang.
The employee answered and afterwards informed Ortigas that the Lufthansa had a first class seat available for its Monday flight. Ortigas
immediately asked him to get the seat and to see to it that his ticket be confirmed and validated for the flight and a first class seat. The man
thereafter asked for Ortigas' passport and other travel papers and attached a validating sticker (Exhibit "D-1") on flight coupon No. 4 (Exhibit
"B") which corresponded to the Rome-Hongkong leg of his TWA Ticket No. 115-460-461-878 The sticker recites:
Flight Res.
Carrier No. Date Time Status
LH 646 18 Nov. 12:35 P.M. O.K.
Wishing to be doubly sure, Ortigas again requested the Alitalia employee to call back the Lufthansa office to recheck whether his ticket was
really confirmed and validated. The man did so, after which he told Ortigas that his ticket had been checked, validated, and confirmed as
shown by the word "O.K." on the sticker. The same employee later wrote on the cover of the plaintiff's ticket "10.15 Terminal-36, via Gioliti"
(Exhibits "C" and "C-1") and told him to be in the air terminal on Monday, November 18, at 10:00 A.M.
The following Monday, Ortigas checked out of his hotel and took a taxi to the terminal, arriving there about 9:30 A.M. He unloaded his baggage
and proceeded to the counter in charge of the Lufthansa passengers. The lady at the counter told him the Lufthansa had no space for him that
day. Ortigas requested her to check with her main office, which she did by calling it up. After calling, she apologized and said the plaintiff's
ticket was in order and would be confirmed and validated. On her request, Ortigas had his luggage weighed and was given the free luggage
allowance of a first class passenger. He was furthermore asked to pay 800 liras for bus fare and 700 liras as embarkation tax. Then Ortigas,
along with other passengers, one of whom was Amado Castro of the Development Bank of the Philippines, boarded a bus for the airport.
At the airport, the plaintiff handed over his ticket to the man behind the Lufthansa counter, who told him everything was all right. At that
juncture, the plaintiff heard his name called. He inquired if he was being called from an employee of the Lufthansa and, on receiving an
affirmative answer, said he was Ortigas. The employee asked for his passport and other papers and, after examining his passport, where his
Filipino nationality appears, said he could not board the plane that day because his seat would be given to a Belgian. Ortigas asked the man
why he was doing that to him when his ticket was confirmed and validated first class. The Lufthansa employee replied he was sorry but
Ortigas could not leave.
Fearing he would have a recurrence of his heart ailment, Ortigas took a nitroglycerin pill which his doctor advised him to take on occasions of
stress. The plaintiff then told the Lufthansa man to bring the Belgian over so that his papers may be examined to determine whether he had a
preferred right to Ortigas' seat but the Lufthansa employee turned down the request, raised his voice, and said if the plaintiff desired, he could
take an economy seat and he would be allowed a refund. Ortigas retorted he was not interested in a refund and what he wanted was to travel
first class in accordance with his ticket.
This argument occurred in the presence of the other passengers, one of whom was Amado Castro, and the plaintiff felt embarrassed and
humiliated because the Lufthansa employee was shouting at him and treating him the way he did. Ortigas made another request, namely, that
the employee call other airlines to inquire if they had flights to Hongkong that day but he once more turned down the plea and insisted that
Ortigas travel economy, with the promise that he will be transferred to first class in Cairo and onward to Hongkong.
After promising to, the man went inside a room and, after a while, came out and assured the plaintiff he would travel first class from Cairo to
Hongkong because he sent a communication that it should be done. He then jotted down some letters on Ortigas' ticket. The plaintiff replied
he was not satisfied with the arrangement but was constrained to agree to it because he had to be in Hongkong the next day, his luggage was
in all probability already inside the plane, he was not certain he could still secure a hotel reservation, the manager of the hotel where he stayed
having told him it would be hard for him to get another reservation once he checks out, and he was assured he would be given first class
passage from Cairo onward.
Upon arrival in Cairo, the plaintiff requested the Lufthansa agent to transfer him to first class but the agent said he could not and that he did
not receive any communication from Rome to that effect. Ortigas also requested the man to find out if there were other airlines having planes
leaving that day but his request was likewise denied. The man, however, promised that at Dharham, Ortigas will be transferred to first class.
Ortigas had no alternative but to continue traveling as before but he did so again under protest.
At Dharham, the plaintiff once more requested a transfer to first class but was also told by the Lufthansa agent that he had not received any
communication about the change and the request could not be granted. The plaintiff had to travel perforce economy from Dharham. In
Calcutta, Ortigas once again requested a transfer or that he be assisted in booking passage on other planes but was also refused. It was only
in Bangkok when the chief steward asked him if he wanted to move over to first class but having been already embarrassed and humiliated
and the trip to Hongkong being only three hours, he said he would not as a sign of protest.
In Hongkong, Ortigas protested against the treatment given him but was told by the Lufthansa office he had to file his protest in Manila, it
being the point of destination. He did so by means of a letter, dated November 25, 1963 (Exhibit "F"), followed by another letter, dated
December 20, 1963 (Exhibit "C"), and not having received any definite answer, he brought this suit.
Although Ortigas' ticket for the flight from Rome to Hongkong was validated and confirmed by the Alitalia, its act bound and obligated the
Lufthansa. The Alitalia and Lufthansa are members of the International Air Transport Association (IATA). It is admitted that as such member,
the Alitalia can issue tickets for other members of the association like the Lufthansa, Pan American World Airways, and others. Par. 10, Order
of April 29, 1964, and Exhibit "H", certification of the manager of the Alitalia. Aside from being members of the IATA, the Alitalia and Lufthansa
are pool partners and conduct a joint service with interchangeable flights for the European-Far East-and Australia sectors. Par. 11, Order of
April 29, 1964. Under the pool agreement (Exhibit "DD") they undertake to adhere to the appropriate IATA regulations and to take measures to
provide district sales offices with every possibility for close cooperation in the promotion of the pool services covered by the agreement,
including "reservation and booking". They furthermore, in effect confirm in the agreement that tickets of one, other than free and reduced
tickets, may be validated by the other.
Finally, Manuel Otayza, general manager of Filital, Inc., which is the general agent of the Alitalia in the Philippines, testified that space
reservation through telephone calls between airlines is permitted by IATA's, "Manual of Traffic Conference Resolutions" and that telephone
calls for reservation by one airline to another is in fact accepted procedure in accordance with the official airline guide of the Air Traffic
Conference and International Air Transport Association (Exhibit "W").
The placing by the Alitalia of a sticker on the plaintiff's ticket obligated the Lufthansa to give him a first class seat on its flight from Rome to
Hongkong on November 18, 1963. The same witness, Manuel Otayza, testified that the placing of a validating sticker on a ticket is standard
airline procedure; that a sticker changes are status of a reservation; that consequently while Ortigas' ticket was "open", that is, it had no
reservation for a particular flight between Rome and Hongkong, the moment a validating sticker was placed thereon, stating the flight number
of the airline, the day and hour of departure, with the letters "O-K", his ticket was changed from an "open" to a "confirmed" or "validated" ticket;
and that the sticker on Ortigas' ticket meant that first class space was confirmed for him on Lufthansa flight 646 to Hongkong on November 18,
1963, at 12:35 P.M.
Aside from Otayza's testimony, it is admitted that in the stipulation of facts that "the letters "O.K." (Exhibit D-2) appearing on the "Res. Status"
box of the sticker (Exhibit D-1) attached to Flight Coupon No. 4 of TWA Ticket No. 015-410:451-880 (Exhibit "D") means space confirmed, per
IATA Resolution 275, page 4, Issue 2, a photostatic copy of which is attached hereto as Exhibit "O"; that validate means to stamp or write on
the passenger ticket an indication that the passenger ticket has been officially issued by the carrier; that "the placing of a sticker on a flight
coupon is a revalidation thereof for the flight mentioned in said sticker and is an alteration effected on said coupon, in accordance with the
procedure laid down in IATA Resolution 275d, Page 1, Issue 1, a photostatic copy of which is attached thereto as Exhibit "S";. and that "prior
endorsement was not necessary for Alitalia to revalidate TWA Ticket No. 115-410-880 Exhibit "D" because Alitalia is the carrier originally
designated in the "Via carrier" box of said ticket, in accordance with IATA Resolution No. 279, photostatic copy of which is attached hereto as
Exhibit 'T'."
There was, therefore, a valid and binding contract between Lufthansa and the plaintiff to transport him as a first class passenger from Rome to
Hongkong on November 18, 1963, and this agreement the defendant violated by compelling the plaintiff to travel as an economy passenger. It
cannot be said the breach was the result of an honest mistake or excusable negligence. There is evidence the defendant acted with `bad faith
and in wilful disregard of the plaintiffs rights.
Ortigas' ticket was confirmed on the early morning of November 16, 1963, more than 48 hours before his departure on the afternoon of
November 18. There was, therefore, ample time to send a telex message from Rome to the defendant's main office in Frankfurt, which is only
about 2-1/2 flying hours away, to reserve a first class seat for the plaintiff.
At the terminal on Via Gioliti, he was again told that he had a first class seat, his luggage was checked in divesting him of control thereof, and
transported to the airport some 37 kilometers distant. He was in this manner deprived of the opportunity of availing himself of the facilities of
other airlines and compelled to take the Lufthansa flight even against his will.
In the airport, although he, was found entitled to fly first class, he was told after his Filipino passport was seen, that his seat would be given to
a Belgian, without any reason or explanation whatsoever. His simple request that the Belgian's ticket be produced and examined to see who
had a better right to a first class seat was turned down. So was his equally simple request that other airlines be called to find out if any of them
could accept him as a first class passenger to Hongkong that day. He was deceived into boarding the Lufthansa plane at Rome by falsely
assuring him he will be transferred to first class at Cairo, the next stop in the flight. The same false and deceptive promise was given him at
Dharham and Calcutta.
Indubitable proof of the defendant's bad faith is found in the fact that while its employee was assuring the plaintiff he would be transferred to
first class in Cairo, he was at the same time writing on his ticket the following notation: "TRVLDY/c ROME HEG ROME ST", which means
"Travelled economy class Rome to Hongkong St", thereby barring Ortigas from asserting any right to demand first class accommodation. The
defendant's employee, therefore, knew all along the plaintiff would not travel first class, and yet he deliberately made him believe he would be
transferred to first class from Cairo to Hongkong.
From the circumstances, it is clear that the defendant not only breached its duty to the plaintiff but also did not want to release him as a
passenger and wished to hold on to him even if it would cause him inconvenience and embarrassment. (Pages 97-109, Record on Appeal.) .
Disputing the foregoing conclusions, Lufthansa claims firstly that the Alitalia employee who validated and confirmed Ortigas' reservation must
have made a mistake because actually, he was informed by the Lufthansa Rome office that Ortigas could only be waitlisted. Assuming,
however, there was such an error, it has been indisputably proven that under the so-called pool arrangement among different airline
companies pursuant to the International Air Transport Association (IATA) agreement of which Alitalia and Lufthansa are signatories, both
companies are constituted thereby as agents of each other in the issuing of tickets and other matters pertaining to their relations with those
who would need their services, and since there can be no question that on its face, the annotations made by Alitalia on the ticket here in
dispute cannot have any (other meaning than that the reservation of Ortigas for the Rome Hongkong flight was validated and confirmed,
Lufthansa's disclaimer is unavailing. Besides, it appears that when Ortigas checked in at the airport, the Lufthansa lady employee thereat told
him, after making the proper verification, that the reservation was correct. What is more, in the unconcluded testimony of Ivo Lazzari, the
striking out of which is questioned by Lufthansa, he admitted that it was a fact that the said reservation of plaintiff for first class was confirmed,
albeit he qualified that this was done already in the morning of November 18th, the day of the flight, almost at the last hour. What seems to
have happened was that somehow the first class accommodations for that flight were overboard and Lufthansa tried to solve the problem by
downgrading Ortigas to the economy class in favor of a Belgian, as Ortigas was told by the Lufthansa employee who paged him over the
public address system for the purpose just as he was about to go to the departure area, with his luggage already checked and his overweight
fees duly paid, so much so that they were already loaded in the plane. Verily, such treatment given to plaintiff was completely wrong and
absolutely unjustifiable. Nobody, much less a common carrier who is under constant special obligation to give utmost consideration to the
convenience of its customers, may be permitted to relieve itself from any difficulty situation created by its own lack of diligence in the conduct
of its affairs in a manner prejudicial to such customers. It is Our considered view that when it comes to contracts of common carriage,
inattention and lack of care on the part of the carrier resulting in the failure of the passenger to be accommodated in the class contracted for
amounts to bad faith or fraud which entitles the passenger to the award of moral damages in accordance with Article 2220 of the Civil Code.
But in the instant case, the breach appears to be of graver nature, since the preference given to the Belgian passenger over plaintiff was done
willfully and in wanton disregard of plaintiff's rights and his dignity as a human being and as a Filipino, who may not be discriminated against
with impunity.
Lufthansa contends, however, that there could not have been any possible discrimination by reason of race against Ortigas because from his
appearance, said plaintiff can easily be taken for a European or white more than his own witness Amado Castro and besides, there were other
orientals in the same flight on that occasion. It is argued that any such policy would be self-defeating, since it would certainly be damaging to
its own business. Again, this ratiocination cannot carry the day for Lufthansa, for what appears from the evidence in this case is not really a
case of a general policy of discriminating against orientals or non-whites, but a specific act of Lufthansa employee at the airport of giving
preference to a Belgian after examining Ortigas passport wherein his Filipino nationality is noted. Indeed, the fact that despite plaintiffs
protestations and demand that he be shown how it could happen that somebody else, particularly that Belgian, should be given his place when
his reservation was validated and confirmed and actually, he had already checked in and his baggage was already in the plane, nothing was
done to satisfy him, merely infused bad faith into the breach of contract already committed of depriving plaintiff of his reserved
accommodation. In other words, from the legal standpoint, such preference given to a European surely aggravated the damage or injury
suffered by plaintiff, but the very act alone of deliberately downgrading him despite his confirmed reservation for first class accommodation is
sufficient ground for relief. And considering that there are already recorded cases in this Court wherein Filipinos have been similarly
discriminated against by foreign airline company employees in the treatment of passengers this new instance can easily be believed and
correspondingly dealt with in fixing and assessing the liability of herein defendant.
As found by the court below what worsened the situation of Ortigas was that Lufthansa succeeded in keeping him as its passenger by
assuring him that he would be given first class accommodation at Cairo, the next station, the proper arrangements therefor having been made
already, when in truth such was not the case. Thus, instead of complying with the request of Ortigas that other airlines be contacted to find out
it they had first class space for him, the Lufthansa employee who had indifferently told him about his downgrading paid very little attention if
ever to said request. And to keep him from giving the business to another company, he was made to believe that he would be given first class
accommodation at Cairo. Although molested and embarrassed to the point that he had to take nitroglycerine pills to ward off a possible heart
attack, Ortigas hardly had any choice, since his luggage was already in the plane. To his disappointment, when the plane reached Cairo, he
was told by the Lufthansa office there that no word at all had been received from Rome and they had no space for him in first class. Worse,
similar false representations were made to him at Dharham and Calcutta. It was only at Bangkok where for the first time, Ortigas was at last
informed that he could have a first class seat in that leg of the flight, from Bangkok to Hongkong. This Ortigas rejected, if only to make patent
his displeasure and indignation at being so inconsiderately treated in the earlier part of his journey.
Lufthansa insists in its brief that it could have proven that there was no such "entrapment of a captive passenger" had it been allowed the
postponement it sought of the September 28, 1966 hearing. It is argued that there could have been no way by which its Rome office could
have assured Ortigas about what he would be given in Cairo, the flight being fully booked as it was without any assurance of any first class
seat being vacated by then. We are not impressed. In view of the insistence of plaintiff that he be given the first class accommodation he had
contracted and paid for, the least that the, Rome office should have done was to communicate with Cairo and strongly urge that all possible
effort be made to comply with his well grounded request. As it happened, however, the Cairo office informed Ortigas when he arrived there
that they had not received any word at all from Rome. On the contrary, as pointed out by the trial court, contrary to the verbal assurance given
Ortigas, the Lufthansa employee made annotations on his ticket that he was travelling economy class from Rome to Hongkong. If, as
contended by Lufthansa, Ortigas was duly advised to make arrangements for transfer to first class as soon as he arrived at each station on the
way, why was such notation made that he was travelling up to Hongkong in economy class? All these only go to show that any evidence of
defendant tending to disprove the testimony of Ortigas would in any event have been inconclusive or unreliable.
Likewise, Lufthansa maintains that it could have proven that Ortigas did not take offense at being downgraded, as in fact, according to
Lufthansa, he was in jovial mood throughout the trip enjoying his conversation and exchange of amenities with his seatmate, who by strange
coincidence happened to be the Manager of Lufthansa German Airlines for the district of Australia and New Zealand holding said position
since 1962. 1 Moreover, it is argued, the economy class accommodations are not much different from first class and Ortigas was not delayed in
his trip. We cannot see the point. A passenger contracts for first class accommodations for many reasons peculiar to himself and pays a higher
price therefor, and it is certainly not for the airplane to say later, after it deprives him of his space in order to favor another passenger, that
economy class is anyway just as good as first class. That Ortigas was rightfully indignant is not difficult to imagine. No person in his normal
senses and possessed of human dignity would have been unperturbed and unruffled by the treatment he had received. More, he was under
express admonition of his doctor taking care of his ailing coronary condition to travel only in first class. Indeed, that he complained and made
himself emphatically clear while still in Rome is sufficiently substantiated in the record, as it was more or less admitted by defendant's witness
Lazzari when he testified that he heard about plaintiff's complaint that same day, November 18, 1963.
In the light of all the foregoing, there can be no doubt as to the right of Ortigas to damages, both moral and exemplary. Precedents We have
consistently adhered to so dictate. Beginning with Cuenca, 2 wherein the Court rejected the theory that an air carrier is liable only in the event
of death or injury suffered by a passenger, because, according to the Court, to so hold would be tantamount to declaring the carrier "exempt
from any liability for damages in the event of its absolute refusal, in bad faith, to comply with a contract of carriage, which is absurd", We have
uniformly upheld the right of a passenger to damages in all cases wherein, after having contracted and paid for first class accommodations
duly confirmed and validated, he is transferred over his objection to economy, class, which he has to take in order to be able to arrive at his
destination on his scheduled time.
In the case of Nicolas L. Cuenca, then Commissioner of Public Highways of the Philippines, he boarded a Northwest plane in Manila with a
first class ticket to Tokyo, but upon arrival at Okinawa, an agent of the company rudely compelled him, over his protest, to move over to the
tourist class, which he had to do, so he could reach the international conference he was attending on time. Under these facts, the Court held
that the P20,000 awarded by the lower court to Cuenca "may well be considered as nominal and also as exemplary, the Court of Appeals
having modified the trial court's designation thereof as moral, saying it should have been nominal.
In Lopez 3, Honorable Fernando Lopez, then an incumbent senator and former Vice President of the Philippines, together with his wife and his
daughter and son-in-law, made first class reservations with the Pan American World Airways in its Tokyo-San Francisco flight. The reservation
having been confirmed, first class tickets were subsequently issued in their favor. Mistakenly, however, defendant's agent cancelled said
reservation, but expecting some cancellations before the flight scheduled about a month later, the reservations supervisor decided to withhold
the information from them, with the result that upon arrival in Tokyo, the Lopezes discovered they had no first class accommodations and were
thus compelled to take the tourist class, just so the senator could be on time for his pressing engagements in the United States. In the light of
these facts, the Court held there was a breach of the contract of carriage and viewed as the element of bad faith entitling the plaintiffs to moral
damages for such contractual breach, the failure of the agents of the defendant to inform the plaintiffs on time that their reservation for first
class had long before been cancelled by mistake. According to the Court, such omission placed plaintiffs in a predicament that enabled the
company to keep the plaintiffs as their passengers in the tourist class, thereby retaining the business and promoting the company's selfinterest at the expense of, embarrassment, discomfort and humiliation on the part of the plaintiffs.
In Air France vs. Carrascoso 4 plaintiff Mr. Rafael Carrascoso, a civil engineer who was going to Lourdes, France, as a member of a religious
group of pilgrims was issued by the Philippine Air Lines, as agent of the defendant Air France, a ticket for first class round trip from Manila to
Rome. From Manila, Carrascoso travelled first class, as per said ticket, but at Bangkok, the Manager of the defendant airline forced him to
vacate the first class seat because there was a white man who allegedly had a better right thereto, without, however, showing him the basis for
such preference. Upon these factual premises, the Court held:
It is really correct to say that the Court of Appeals in the quoted portion first transcribed did not use the term `bad faith'. But can it be doubted
that the recital of facts therein points to bad faith? The manager not only prevented Carrascoso from enjoying his right to a first class seat,
worse, he imposed his arbitrary will; he forcibly ejected him from his seat, made him suffer the humiliation of having to go to the tourist class
compartment just to give way to another passenger whose right thereto has not been established. Certainly, this is bad faith. Unless, of
course, bad faith has assumed a meaning different from what is understood in law. For, bad faith, contemplates a "state of mind affirmatively
operating with furtive design or with some motive of self-interest or ill will or for ulterior purpose." (Words & Phrases, Perm. Ed., Vol. 5, p. 13,
citing Warfield Natural Gas Co. vs. Allen, 59 S.W. (2d) 534, 538.)
And if the foregoing were not yet sufficient, there is the express finding of bad faith in the judgment of the Court of First Instance, thus:
"The evidence shows that defendant violated its contract of transportation with plaintiff in bad faith, with the aggravating circumstances that
defendant's Manager in Bangkok went to the extent of threatening the plaintiff in the presence of many passengers to have him thrown out of
the airplane to give the "first class" seat that he was occupying to, again using the words of the witness Ernesto G. Cuento, a "white man"
whom he (defendant's Manager) wished to accommodate, and the defendant has not proven that this "white man" had any "better right" to
occupy the "first class" seat that the plaintiff was occupying, duly paid for, and for which the corresponding "first class" ticket was issued by the
defendant to him." (R.A., p. 74; emphasis supplied.) (at pp. 166-167.)
These precedents, as may be seen, apply four-square to herein plaintiffs case. Defendant's liability for willful and wanton breach of its contract
of carriage with plaintiff is, therefore, indubitable.
Coming now to the amount that should be awarded by way of damages to the plaintiff, it is also the teaching of the cases aforecited that
defendant is liable not only for moral but also for exemplary damages. As earlier stated, the court below fixed the compensation for moral
damages at P100,000 and the exemplary at P30,000. The Court believes that these amounts are not enough.
According to the lower court:
Although the plaintiff has not held any elective public office, he has however, a distinguished record as a private citizen, a lawyer,
businessman, a civic and religious leader, a member of numerous government boards and organizations as well as of local and international
bodies, and is the recipient of awards and citations for outstanding services and achievements.
He was, and still is, moreover suffering from a heart ailment and has been advised by his physician to travel first class because it is more
relaxing and comfortable. His position as chairman of the boards of directors of the corporation he represented also required that he travel in
that manner. He was, furthermore, carrying a special passport issued by the Philippine Government to represent it and business corporations
abroad.
His sickness and the need for him to travel in the most comfortable manner possible were made known to the defendant's employee, but he
paid no heed to them. Instead, he engaged Ortigas in a heated discussion, summarily brushed off his protests and pleas, humiliated him, and
tricked him into boarding his employer's plane, endangering thereby his health and obliging him to take medicine to forestall an attack.
There is, finally, evidence that he was discriminated against because of his nationality for he was told to yield his first class seat to a Belgian
only after his passport was examined and his Filipino citizenship must have been noted. .
Under the circumstances and measured by the criterion, jurisprudence has followed, the compensation the plaintiff should be entitled to
receive must be fixed at P100,000.00 as moral damages, P30,000.00 as exemplary damages or corrective damages, and P20,000.00 as
attorney's fees. (Pp. 111-113, Record on Appeal.)
We have reviewed the evidence and We are convinced there is more than ample basis for these findings. But under the circumstances
revealed in the record, it is Our considered opinion that the award of moral damages should be increased to P150,000.
We cannot go along with defendant's pose that in Cuenca the amount awarded was only P20,000, for the very obvious reason that in that
case what was involved was only one leg of the flight contracted for, namely, that from Okinawa to Tokyo, whereas in the case not at bar, the
offense was repeated four times, at Rome, Cairo, Dharham and Calcutta, with apparent cold indifference of defendant's agents to plaintiff's
plight. Besides, it appears that Cuenca did not appeal from the trial court's decision fixing said amount, hence there was no occasion for the
Supreme Court to award more. This was also what happened in the Carrascoso case, where the plaintiff did not complain against the award of
only P25,000-moral-and P10,000-exemplary damages made by the trial court. It was Air France who claimed that these were even excessive.
Verily, however, such, discriminatory acts of the defendants in those cases which were not only violative of their contractual obligations but
also offensive to human dignity and national or racial pride constitute about the most justifiable ground for the award of moral damages, for the
resulting injury therefrom cannot but cause immense mental anguish, besmirched reputation, wounded feelings, moral shock and social
humiliation. (See Article 2217 of the Civil Code.) We reiterate, they are to be considered as infecting with bad faith the breach of contract
committed, under Article 2220 of the same Code. (Lopez vs. Pan Am., supra.)
Lufthansa suggests that compared to the P100,000 awarded to Vice President Lopez in the case aforementioned, the P100,000 given by the
trial court to Ortigas are "grossly excessive". It does not appear to Us to be so. As pointed out by His Honor, "although plaintiff has not held
any elective public office, he has, however, a distinguished record as a private citizen, a lawyer, businessman, a civic and religious leader, a
member of numerous boards and organizations as well as local and international bodies, and is the recipient of awards and citations for
outstanding services and achievements." Indeed, under the proven facts in the record, We cannot regard plaintiff in any inferior position vis-avis Vice President Lopez in the highest circles of Philippine society and in the business and religious world, not to speak of his standing in
government officialdom.
Beside there is again the disparity between then Lopez case and this one that here the offense, which, as in Cuenca, is aggravated by the
Lufthansa employee at Rome having falsely noted on the ticket that Ortigas was travelling in economy from Rome to Hongkong, 5 was
repeated four times in the same trip, namely in Rome, Cairo, Dharham and Calcutta. More importantly, unlike in the case of Lopez, Ortigas
was suffering from a weak heart and under doctor's advice to travel only in first class, hence, his being compelled to stay in economy or tourist
class during the major part of his trip, must have given him added apprehensive feelings about his safety. And, moreover, it is to benoted that
in the Lopez case, which was decided in 1966, aside from taking into account the personal circumstances of the plaintiff, the Court considered
"the present rate of exchange and the terms at which amount of damages awarded would approximately be in U.S. dollars", hence, We may
not justifiably do differently here..
Furthermore, it may not be amiss to mention here that in Zulueta vs. Pan American Airways Inc., 43 SCRA 397, the Court awarded the
plaintiffs: Zulueta, the husband, his wife and a minor daughter, a total of P775,000 as damages consisting of P500,000 as moral, P200,000 as
exemplary and P75,000 as attorney's fees, apart from actual damages. In that case, the Zulueta's were coming home to Manila from Honolulu
in a Pan-American plane. At Wake, however, where the plane arrived at 4:00 o'clock in the morning, Zulueta could not be found at flight time
because, without letting anyone know, not even his wife or daughter, he had relieved himself, according to him, at the beach behind the
terminal. When at last, he was found, the Pan-Am employee who first met him while walking back from the beach remonstrated him thus:
"What in the hell do you think you are! Get on that plane." This angered Zulueta who engaged the said employee in an exchange of angry
words. In the meanwhile, the pilot who had been tipped by a "man from the State Department", also a passenger in that flight, that there might
be a bomb in the plane and expressed apprehension for the safety of the flight unless Zulueta could be found, ordered the unloading of the
bags of the Zuluetas, and when three of the four of them had already been unloaded, he ordered Zulueta to open them, but the latter refused.
Another exchange of angry words followed, in the course of which, according to Zulueta's evidence, the pilot went to the extent of referring to
him and his family as "those monkeys". Ultimately, the plane left without Zulueta, albeit his wife and daughter were on board, because the
captain refused to allow Zulueta to board until after his bags were opened and inspected, which Zulueta refused entirely to do. Although, said
decision is not yet final, because of the pendency of a second motion for reconsideration the Court has not yet resolved, the Court has already
allowed the partial execution of the judgment, thus enabling Zuluetas to collect already one-half of the amount or over P335,000, which
amount, according to the concurring and dissenting opinion there of the writer of the instant decision could be the least that should anyway be
allowed. Of course, the Court did not itemize the award but granted the same to the family as a whole, but it is evident that in the final
distribution, Zulueta would get for himself from at least P150,000 to not more than P200,00. 6
We hold that the foregoing considerations justify the increase of the award of moral damages from P100,000 to P150,000.
Finally, We have the dispute regarding the amount of exemplary damages awarded. In this respect, it is Our considered opinion that defendant
should Pay P100,000 instead of the P30,000 awarded by the trial court. The record of this case taken together with what are revealed in the
other similar cases decided by this Court, those aforediscussed, convinces Us that defendant, as an airline, should be made to pay an amount
that can really serve as a deterrent against a seeming pattern of indifference and unconcern, and what is worse, of discrimination for racial
reasons, discernible in the treatment of air passengers. This is not the first case, and unless the proper sanctions are applied, it does not
appear it is going to be the last yet, of instances wherein Filipino passengers having validated and confirmed tickets for first class would be
shoved to the economy class, over their valid objections and without any regard at all to their feelings and convenience, only to favor other
passengers presumed by the airlines to be of superior race, hence, deserving preference. It is high time everyone concerned were made to
realize that the laws of the Philippines do not permit any act of discrimination against its citizens, specially when this accompanies a clear
breach of contractual obligations of common carriers whose business is affected with public interest and must be directed to serve the
convenience and comfort of the passengers. When any disregard of such laws is committed, the Supreme Court, as the interpreter of such
laws, must exact the commensurate liability which they contemplate.
"Exemplary damages are required by public policy, for wanton acts must be repressed. They are an antidote so that the poison of wickedness
may not run through the body politic." (Report of Code Commission, pp. 75-76) by authority of the decided cases aforediscussed, 7 acts of
similar nature as those herein involved fall within the category of those justifying the imposition of exemplary damages pursuant to the codal
concept just stated.
The rationale behind exemplary or corrective damages is, as the name implies, to provide an example or correction for public good. ... In view
of its nature, it should be imposed in such an amount as to sufficiently and effectively deter similar breach of contracts by defendant or other
airlines." (Lopez v. Pan-American World Airways, supra; see also Rotea vs. Halili, 109 Phil. 495; People vs. Medroso, Jr., G.R. No. L-37633,
Jan. 31, 1975, 62 SCRA 245; Cotabato Timberland Co. Inc. vs. Plaridel Lumber Co., Inc., 13 SCRA 235) Thus, all relevant matters considered,
P100,000 of exemplary damages, which practically amounts only to not more than $15,000 U.S. under the present rate of exchange, would
serve the ends for which the liability has been conceived.
WHEREFORE, the judgment appealed from is modified by raising the award of moral and exemplary damages to plaintiff Ortigas to
P150,000.00 and P100,000.00, respectively. In all other respects, including as to the payment of interests on the said amounts, the same is
affirmed.

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-31420 October 23, 1982
PHILIPPINE RABBIT BUS LINES, INC. and NICASIO DE LOS REYES, petitioners,
vs.
PATROCINIO ESGUERRA, TRANSPORT CONTRACTORS, INC. and MODESTO JOAQUIN, respondents.
Angel A. Sison for petitioners.
Sycip, Salazar, Luna, Manalo & Feliciano for respondent Patrocinio Esguerra.
RELOVA, J.:
In this petition for certiorari, petitioners pray that the portion of the decision of the Court of Appeals sentencing the Philippine Rabbit Bus Lines,
Inc. to pay solidarily the sum of P 5,000.00 as moral damages and sentencing both petitioners to pay respondent Patrocinio Esguerra the sum
of P 2,000.00 as attorney's fees, be revoked.
Records show that the Court of First Instance of Manila rendered a decision in Civil Case No. 53698, entitled: Patrocinio Esguerra versus
Philippine Rabbit Bus Lines, Inc., Nicasio de los Reyes, Transport Contractors, Inc. and Modesto Joaquin, the dispositive portion of which
reads:
WHEREFORE, judgment is hereby rendered dismissing the complaint against defendants Transport Contractors, Inc. and
Modesto Joaquin but sentencing defendants Nicasio de los Reyes and Philippine Rabbit Bus Lines, Inc., jointly and
severally, to pay the plaintiff the sum of P25,085.40 as compensatory damages, P5,000.00 as moral damages, P2,000.00
as attorney's fees and the costs of suit. The cross-claim of defendants Philippine Rabbit Bus Lines, Inc. and Transport
Contractors, Inc. against each other are hereby dismissed.
The Court of Appeals modified the decision of the lower court as follows:
From the foregoing it would appear that all the defendants are solidarily liable; but plaintiffs not having appealed the
judgment, no affirmative relief therefrom which absolved defendants Transport Contractors, Inc. and Modesto Joaquin
from the complaint as to make them co-responsible with appellants Rabbit Bus and Nicasio de los Reyes. Hence, except
the obviously erroneous addition of the items for compensatory damages which would be P20,085.40, not P25,085.40 as
stated in the dispositive part of the appealed decision, the judgment appealed from is in accordance with law and the
evidence.
WHEREFORE, modified as indicated above, the judgment appealed from is affirmed in all other respects, with costs
against all the defendants.
However, in a resolution, dated December 8, 1969, the Court of Appeals modified the dispositive portion of its decision promulgated on July
10, 1969 in the sense that:
. . . the defendants-appellees Transport Contractors, Inc. and Modesto Joaquin are ordered to pay solidarily with the
defendants-appellants Philippine Rabbit Bus Lines, Inc. and Nicasio de los Reyes sums awarded in the judgment, with
costs in this instance against all the defendants.
Patrocinio Esguerra was a paying passenger of Bus No. 223 of Philippine Rabbit Bus Lines, Inc. He boarded the said bus at the Manila
terminal about four o'clock in the afternoon of November 6, 1961, bound for San Fernando, Pampanga. He sat at the left-end of the fourth row
behind the driver, close to the window. As the bus approached barrio San Marcos, Calumpit, Bulacan, a freight truck owned and operated by
the Transport Contractors, Inc. was coming from the opposite direction. The vehicles sideswiped each other. The window glass near the
driver's seat of the Rabbit Bus was detached and the left side of its body was damaged. The left forearm of Patrocinio Esguerra was hit by a
hard blunt object, breaking the bones into small fragments while the soft tissues of the muscles and the skin were mascerated. He was
immediately brought to the Bulacan Provincial Hospital in Malolos, Bulacan for treatment. The left arm was amputated.
Plaintiff filed a case against the Philippine Rabbit Bus Lines, Inc. and the Transport Contractors, Inc., together with their respective drivers,
praying that judgment be rendered in favor of the plaintiff and against the defendants requiring them to pay, jointly and severally damages,
actual and compensatory, moral and exemplary, litigation expenses and costs.
The Court of Appeals found that the two drivers of the two vehicles were reckless in driving. The two vehicles sideswiped each other at the
middle of the road.
By and large, it is not denied that plaintiff's arm was so seriously injured as to need amputation as a result of the collision.
It is neither denied that the Transcon truck hit the arm when it came in contact with the Rabbit Bus. It is immaterial which
part of the truck hit it. The defendant carrier failed to exonerate itself from its presumed fault.
In this petition, Philippine Rabbit Bus Lines, Inc. and Nicasio de los Reyes contend that the award of P 5,000.00 moral damages is contrary to
law and violates the prevailing jurisprudence; that the award of P 2,000.00 attorney's fees is bereft of legal and factual basis; that moral
damages are not allowable against the carrier, if ex-contracto, except when the mishap results in death and where it is proved that the carrier
was guilty of fraud or bad faith even if death did not result; that as passenger Esguerra did not die and no fraud or bad faith had been imputed,
much less proved, against the carrier, they cannot be adjudged to pay moral damages. Further, petitioners claim that there is no evidence
adduced by passenger Esguerra showing actual proof of expenses for attorney's fees.
The contention of petitioners with respect to the award of moral damages is meritorious. This Court has repeatedly held (Cachero v. Manila
Yellow Taxicab, Inc., G. R. No. L-8721, promulgated May 23, 1957; Necesito v. Paras, et al., G. R. No. L-10605-10606, promulgated June 30,
1958; Fores v. Miranda, G. R. No. L-12163, promulgated March 4, 1959; Tamayo v. Aquino, et al., G. R. No. L-12634, promulgated May 29,
1959) that moral damages are not recoverable in actions for damages predicated on a breach of the contract of transportation, as in the
instant case, in view of the provisions of Articles 2219 and 2220 of the New Civil Code. The exceptions are (1) where the mishap results in the
death of a passenger, and (2) where it is proved that the carrier was guilty of fraud or bad faith, even if death does not result. (Rex Taxicab
Co., Inc. vs. Jose Bautista, et al., G. R. No. L-15392, Sept. 30,1960).<re||an1w>
The Court of Appeals found that the two vehicles sideswiped each other at the middle of the road. In other words. both vehicles were in their
respective lanes and that they did not invade the lane of the other. It cannot be said therefore that there was fraud or bad faith on the part of
the carrier's driver. This being the case, no moral damages are recoverable.
However, with respect to attorney's fee of P2,000.00, the same need not be proved as herein petitioners contended. The same is allowed in
the discretion of the court after considering several factors which are discernible from the facts brought out during the trial. In this case, plaintiff
was compelled to litigate and incur expenses in order to protect his interest.
ACCORDINGLY, this petition is granted with respect to that portion of the decision of the Court of Appeals sentencing herein petitioners to pay
the sum of P5,000.00, as moral damages, which is hereby set aside. However, that portion of the decision sentencing petitioners to pay
respondent Patrocinio Esguerra the sum of P2,000.00, as attorney's fees, stays.
SO ORDERED.
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-46340 April 28, 1983
SWEET LINES, INC., petitioner,

vs.
THE HONORABLE COURT OF APPEALS, MICAELA B. QUINTOS, FR. JOSE BACATAN, S.J., MARCIANO CABRAS and ANDREA
VELOSO, respondents.
RESOLUTION
For having by-passed a port of call without previous notice, petitioner shipping company and the ship captain were sued for damages by four
of its passengers, private respondents herein, before the then Court of First Instance of Cebu, Branch VIII,
Briefly, the facts of record show that private respondents purchased first- class tickets from petitioner at the latter's office in Cebu City. They
were to board petitioner's vessel, M/V Sweet Grace, bound for Catbalogan, Western Samar. Instead of departing at the scheduled hour of
about midnight on July 8, 1972, the vessel set sail at 3:00 A.M. of July 9, 1972 only to be towed back to Cebu due to engine trouble, arriving
there at about 4:00 P.M. on the same day. Repairs having been accomplished, the vessel lifted anchor again on July 10, 1972 at around 8:00
A.M.
Instead of docking at Catbalogan, which was the first port of call, the vessel proceeded direct to Tacloban at around 9:00 P.M. of July 10, 1972.
Private respondents had no recourse but to disembark and board a ferryboat to Catbalogan.
Hence, this suit for damages for breach of contract of carriage which the Trial Court, affirmed by respondent Appellate Court, awarded as
follows:
IN THE LIGHT OF THE FOREGOING OBSERVATIONS, judgment is rendered ordering the defendant Sweet Lines, Incorporated to pay to the
plaintiffs the following:
l) P175,000.00 as moral damages divided among the plaintiffs as follows: P30,000.00 for Mrs. Micaela B. Quintos, P26,000.00 for Jesuit
Father Jose Bacatan; P10,000.00 for Mrs. Andrea Veloso and P10,000.00 for plaintiff Mike Cabras;
2) P30,000.00 as exemplary or corrective damages;
3) Interest at the legal rate of 6% per annum on the moral and exemplary damages as set forth above from the date of this decision until said
damages are fully paid;
4) P5,000.00 as attorney's fees; and
5) The costs.
Counterclaim dismissed.
The governing provisions are found in the Code of Commerce and read as follows:
ART. 614. A captain who, having agreed to make a voyage, fails to fulfill his undertaking, without being prevented by fortuitous event or force
majeure, shall indemnify all the losses which his failure may cause, without prejudice to criminal penalties which may be proper.
and
ART. 698. In case of interruption of a voyage already begun, the passengers shall only be obliged to pay the fare in proportion to the distance
covered, without right to recover damages if the interruption is due to fortuitous event or force majeure, but with a right to indemnity, if the
interruption should have been caused by the captain exclusively. If the interruption should be caused by the disability of the vessel, and the
passenger should agree to wait for her repairs, he may not be required to pay any increased fare of passage, but his living expenses during
the delay shall be for his own account.
The crucial factor then is the existence of a fortuitous event or force majeure. Without it, the right to damages and indemnity exists against a
captain who fails to fulfill his undertaking or where the interruption has been caused by the captain exclusively.
As found by both Courts below, there was no fortuitous event or force majeure which prevented the vessel from fulfilling its undertaking of
taking private respondents to Catbalogan. In the first place, mechanical defects in the carrier are not considered a caso fortuito that exempts
the carrier from responsibility. 1
In the second place, even granting arguendo that the engine failure was a fortuitous event, it accounted only for the delay in departure. When
the vessel finally left the port of Cebu on July 10, 1972, there was no longer any force majeure that justified by-passing a port of call. The
vessel was completely repaired the following day after it was towed back to Cebu. In fact, after docking at Tacloban City, it left the next day for
Manila to complete its voyage. 2
The reason for by-passing the port of Catbalogan, as admitted by petitioner's General Manager, was to enable the vessel to catch up with its
schedule for the next week. The record also discloses that there were 50 passengers for Tacloban compared to 20 passengers for
Catbalogan, 3 so that the Catbalogan phase could be scrapped without too much loss for the company.
In defense, petitioner cannot rely on the conditions in small bold print at the back of the ticket reading.
The passenger's acceptance of this ticket shall be considered as an acceptance of the following conditions:
3. In case the vessel cannot continue or complete the trip for any cause whatsoever, the carrier reserves the right to bring the passenger to
his/her destination at the expense of the carrier or to cancel the ticket and refund the passenger the value of his/her ticket;
11. The sailing schedule of the vessel for which this ticket was issued is subject to change without previous notice. (Exhibit "l -A")
Even assuming that those conditions are squarely applicable to the case at bar, petitioner did not comply with the same. It did not cancel the
ticket nor did it refund the value of the tickets to private respondents. Besides, it was not the vessel's sailing schedule that was involved.
Private respondents' complaint is directed not at the delayed departure the next day but at the by- passing of Catbalogan, their destination.
Had petitioner notified them previously, and offered to bring them to their destination at its expense, or refunded the value of the tickets
purchased, perhaps, this controversy would not have arisen.
Furthermore, the conditions relied upon by petitioner cannot prevail over Articles 614 and 698 of the Code of Commerce heretofore quoted.
The voyage to Catbalogan was "interrupted" by the captain upon instruction of management. The "interruption" was not due to fortuitous event
or for majeure nor to disability of the vessel. Having been caused by the captain upon instruction of management, the passengers' right to
indemnity is evident. The owner of a vessel and the ship agent shall be civilly liable for the acts of the captain. 4
Under Article 2220 of the Civil Code, moral damages are justly due in breaches of contract where the defendant acted fraudulently or in bad
faith. Both the Trial Court and the Appellate Court found that there was bad faith on the part of petitioner in that:
(1) Defendants-appellants did not give notice to plaintiffs- appellees as to the change of schedule of the vessel;
(2) Knowing fully well that it would take no less than fifteen hours to effect the repairs of the damaged engine, defendants-appellants instead
made announcement of assurance that the vessel would leave within a short period of time, and when plaintiffs-appellees wanted to leave the
port and gave up the trip, defendants-appellants' employees would come and say, 'we are leaving, already.'
(3) Defendants-appellants did not offer to refund plaintiffs-appellees' tickets nor provide them with transportation from Tacloban City to
Catbalogan. 5
That finding of bad faith is binding on us, since it is not the function of the Court to analyze and review evidence on this point all over again,
aside from the fact that we find it faithful to the meaning of bad faith enunciated thus:
Bad faith means a breach of a known duty through some motive or interest or illwill. Self-enrichment or fraternal interest, and not personal
illwill may have been the motive, but it is malice nevertheless. 7
Under the circumstances, however, we find the award of moral damages excessive and accordingly reduce them to P3,000.00, respectively,
for each of the private respondents.
The total award of attorney's fees of P5,000.00 is in order considering that the case has reached this Tribunal.
Insofar as exemplary damages are concerned, although there was bad faith, we are not inclined to grant them in addition to moral damages.
Exemplary damages cannot be recovered as a matter of right; the Court decides whether or not they should be adjudicated. 8 The objective to
meet its schedule might have been called for, but petitioner should have taken the necessary steps for the protection of its passengers under
its contract of carriage.
Article 2215(2) of the Civil Code 9 invoked by petitioner is inapplicable herein. The harm done to private respondents outweighs any benefits
they may have derived from being transported to Tacloban instead of being taken to Catbalogan, their destination and the vessel's first port of
call, pursuant to its normal schedule.
ACCORDINGLY, the judgment appealed from is hereby modified in that petitioner is hereby sentenced to indemnify private respondents in the
sum of P3,000.00 each, without interest, plus P1,250.00, each, by way of att/rney's fees and litigation expenses. Costs against petitioner.
SO ORDERED.

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 78656 August 30, 1988
TRANS WORLD AIRLINES, petitioner,
vs.
COURT OF APPEALS and ROGELIO A. VINLUAN, respondents.
Guerrero & Torres Law Offices for petitioner.
Angara, Abello, Concepcion, Regala & Cruz for private respondent.
The Solicitor General for public respondent.
GANCAYCO, J.:
Rogelio A. Vinluan is a practicing lawyer who had to travel in April, 1979 to several cities in Europe and the U.S. to attend to some matters
involving several clients. He entered into a contract for air carriage for valuable consideration with Japan Airlines first class from Manila to
Tokyo, Moscow, Paris, Hamburg, Zurich, New York, Los Angeles, Honolulu and back to Manila thru the same airline and other airlines it
represents for which he was issued the corresponding first class tickets for the entire trip.
On April 18, 1979, while in Paris, he went to the office of Trans World Airlines (TWA) at the De Gaulle Airport and secured therefrom confirmed
reservation for first class accommodation on board its Flight No. 41 from New York to San Francisco which was scheduled to depart on April
20, 1979. A validated stub was attached to the New York-Los Angeles portion of his ticket evidencing his confirmed reservation for said flight
with the mark "OK " 1 On April 20, 1979, at about 8:00 o'clock A.M., Vinluan reconfirrred his reservation for first class accommodation on board
TWA Flight No. 41 with its New York office. He was advised that his reservation was confirmed. He was even requested to indicate his seat
preference on said flight on said scheduled date of departure of TWA Flight No. 41. Vinluan presented his ticket for check-in at the counter of
TWA at JFK International Airport at about 9:45 o'clock A.M., the scheduled time of the departure being 11:00 o'clock A.M. He was informed that
there was no first class seat available for him on the flight. He asked for an explanation but TWA employees on duty declined to give any
reason. When he began to protest, one of the TWA employees, a certain Mr. Braam, rudely threatened him with the words "Don't argue with
me, I have a very bad temper."
To be able to keep his schedule, Vinluan was compelled to take the economy seat offered to him and he was issued a refund application" as
he was downgraded from first class to economy class.
While waiting for the departure of Flight No. 41. Vinluan noticed that other passengers who were white Caucasians and who had checked-in
later than him were given preference in some first class seats which became available due to "no show" passengers.
On February 15, 1980, Vinluan filed an action for damages against the TWA in the Court of First Instance of Rizal alleging breach of contract
and bad faith. After trial on the merits, a decision was rendered the dispositive part of which reads as follows:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant holding the latter liable to
the for-mer for the amount representing the difference in fare between first class and economy class accommodations on
board Flight No. 6041 from New York to San Francisco, the amount of P500,000.00 as moral damages, the amount of
P300,000.00 as exemplary damages, and the amount of P100,000.00 as and for attorney's fees, all such amounts to earn
interest at the rate of twelve (12%) percent per annum from February 15, 1980 when the complainant was filed until fully
paid.
Correspondingly, defendant's counterclaim is dismissed. Costs against the defendant.
SO ORDERED.
Not satisfied therewith, the TWA appealed to the Court of Appeals wherein in due course a decision was rendered on May 27, 1987, 2 the
dispositive part of which reads as follows:
WHEREFORE, the decision dated March 8, 1984 is hereby modified by (1) fixing the interest which appellant must pay on
the awards of moral and exemplary damages at six per cent (6%) per annum from the date of the decision a quo, March
8, 1984 until date of full payment and (2) reducing the attorne's fees to P50,000.00 without interest, the rest of the
decision is affirmed. Cost against appellant.
SO ORDERED.
Hence, the herein petition for review.
The theory of the petitioner is that because of maintenance problems of the aircraft on the day of the flight, TWA Flight No. 41 was cancelled
and a special Flight No. 6041 was organized to operate in lieu of Flight No. 41. 3 Flight No. 41 was to have utilized a Lockheed 1011 with 34
first class seats, but instead, a smaller Boeing 707 with only 16 first class seats was substituted for use in Flight No. 6041. Hence, passengers
who had first class reservations on Flight No. 41 had to be accommodated on Flight No. 6041 on a first-come, first-served basis. An
announcement was allegedly made to all passengers in the entire terminal of the airport advising them to get boarding cards for Flight No.
6041 to San Francisco and that the first ones getting them would get first preference as to seats in the aircraft. It denied declining to give any
explanation for the downgrading of private respondent as well as the discourteous attitude of Mr. Braam.
On the other hand, private respondent asserts that he did not hear such announcement at the terminal and that he was among the early
passengers to present his ticket for check-in only to be informed that there was no first class seat available for him and that he had to be
downgraded.
The petitioner contends that the respondent Court of Appeals committed a grave abuse of discretion in finding that petitioner acted maliciously
and discriminatorily, and in granting excessive moral and exemplary damages and attorney's fees.
The contention is devoid of merit. Private respondent had a first class ticket for Flight No. 41 of petitioner from New York to San Francisco on
April 20, 1979. It was twice confirmed and yet respondent unceremoniously told him that there was no first class seat available for him and
that he had to be downgraded to the economy class. As he protested, he was arrogantly threatened by one Mr. Braam. Worst still, while he
was waiting for the flight, he saw that several Caucasians who arrived much later were accommodated in first class seats when the other
passengers did not show up.
The discrimination is obvious and the humiliation to which private respondent was subjected is undeniable. Consequently, the award of moral
and exemplary damages by the respondent court is in order. 4
Indeed, private respondent had shown that the alleged switch of planes from a Lockheed 1011 to a smaller Boeing 707 was because there
were only 138 confirmed economy class passengers who could very well be accommodated in the smaller plane and not because of
maintenance problems.
Petitioner sacrificed the comfort of its first class passengers including private respondent Vinluan for the sake of econonmy. Such inattention
and lack of care for the interest of its passengers who are entitled to its utmost consideration, particularly as to their convenience, amount to
bad faith which entitles the passenger to the award of moral damages. 5 More so in this case where instead of courteously informing private
respondent of his being downgraded under the circumstances, he was angrily rebuffed by an employee of petitioner.
At the time of this unfortunate incident, the private respondent was a practicing lawyer, a senior partner of a big law firm in Manila. He was a
director of several companies and was active in civic and social organizations in the Philippines. Considering the circumstances of this case
and the social standing of private respondent in the community, he is entitled to the award of moral and exemplary damages. However, the
moral damages should be reduced to P300,000.00, and the exemplary damages should be reduced to P200,000.00. This award should be
reasonably sufficient to indemnify private respondent for the humiliation and embarrassment that he suffered and to serve as an example to
discourage the repetition of similar oppressive and discriminatory acts.
WHEREFORE, with the above modification reducing the moral and exemplary damages as above-stated, the decision subject of the petition
for review is AFFIRMED in all other respects, without pronouncement as to costs in this instance.
SO ORDERED.

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 88561 April 20, 1990
DR. HERMAN ARMOVIT, DORA ARMOVIT and JACQUELINE ARMOVIT, petitioners,
vs.
COURT OF APPEALS, and NORTHWEST AIRLINES, INC., respondents.
GANGAYCO, J.:
This is a case which involves a Filipino physician and his family residing in the United States who came home to the Philippines on a
Christmas visit. They were bumped off at the Manila International Airport on their return flight to the U.S. because of an erroneous entry in their
plane tickets relating to their time of departure.
In October 1981, the petitioners decided to spend their Christmas holidays with relatives and friends in the Philippines, so they purchased from
private respondent, (Northwest Airlines, Inc.) three (3) round trip airline tickets from the U.S. to Manila and back, plus three (3) tickets for the
rest of the children, though not involved in the suit. Each ticket of the petitioners which was in the handwriting of private respondent's tickets
sales agent contains the following entry on the Manila to Tokyo portion of the return flight:
from Manila to Tokyo, NW flight 002, date 17 January, time 10:30 A.M. Status, OK.
On their return trip from Manila to the U.S. scheduled on January 17, 1982, petitioner arrived at the check-in counter of private respondent at
the Manila International Airport at 9:15 in the morning, which is a good one (1) hour and fifteen (15) minutes ahead of the 10:30 A.M.
scheduled flight time recited in their tickets. Petitioners were rudely informed that they cannot be accommodated inasmuch as Flight 002
scheduled at 9:15 a.m. was already taking off and the 10:30 A.M. flight time entered in their plane tickets was erroneous.
Previous to the said date of departure petitioners re-confirmed their reservations through their representative Ernesto Madriaga who
personally presented the three (3) tickets at the private respondent's Roxas Boulevard office. 2 The departure time in the three (3) tickets of
petitioners was not changed when re-confirmed. The names of petitioners appeared in the passenger manifest and confirmed as Passenger
Nos. 306, 307, and 308, Flight 002. 3
Herein petitioner Dr. Armovit protested in extreme agitation that because of the bump-off he will not be able to keep his appointments with his
patients in the U.S. Petitioners suffered anguish, wounded feelings, and serious anxiety day and night of January 17th until the morning of
January 18th when they were finally informed that seats will be available for them on the flight that day.
Because of the refusal of the private respondent to heed the repeated demands of the petitioners for compensatory damages arising from the
aforesaid breach of their air-transport contracts, 4 petitioners were compelled to file an action for damages in the Regional Trial Court of
Manila.
After trial on the merits, a decision was rendered on July 2, 1985, the dispositive part of which reads as follows:
WHEREFORE, in view of the foregoing considerations, judgment is hereby rendered ordering defendant to pay plaintiffs
actual, moral, exemplary and nominal damages, plus attorney's fees, as follows:
a) Actual damages in favor of Dr. Herman Armovit in the sum of P1,300.00, with interest at the legal
rate from January 17, 1982;
b) Moral damages of P500,000.00, exemplary damages of P500,000.00, and nominal damages of
P100,000.00 in favor of Dr. Herman Armovit;
c) Moral damages of P300,000.00, exemplary damages of P300,000.00, and nominal damages of
P50,000.00 in favor of Mrs. Dora Armovit;
d) Moral damages of P300,000.00, exemplary damages of P300,000.00, and nominal damages of
P50,000.00 in favor of Miss Jacqueline Armovit; and
e) Attorney's fees of 5% of the total awards under the above paragraphs.
plus costs of suit. 5
Not satisfied therewith, private respondent interposed an appeal to the Court of Appeals wherein in due course a decision was rendered on
June 20, 1989, the relevant portion and dispositive part of which read as follows:
Plaintiffs-appellees had complied with the "72-hour reconfirmation rule." They had obtained reconfirmation from
defendant-appellant of the time and date of their flight, as indicated in their tickets. The trial court said so and We find
nothing significance to warrant a disturbance of such finding.
On the allowance of damages, the trial court has discretion to grant and fix the amounts to be paid the prevailing party. In
this case, there was gross negligence on the part of defendant-appellant in reconfirming the time and date of departure of
Flight No. 002 as indicated in the three (3) tickets (Exhibits A, A-1 and A-2). And, as admitted by defendant-appellant,
plaintiffs-appellees had arrived at the airport at 9:15 A.M. or one (1) hour before departure time of 10:30 A.M.
Appellees' actual damages in the amount of P1,300.00 is maintained for being unrebutted by the Appellant.
However, We modify the allowance of the other awards made by the trial court.
The moral damages of P900,000.00 awarded to Appellees must be eliminated considering the following:
1. That the appellees did not take the witness stand to testify on their "social humiliation, wounded feelings and anxiety"
and the breach of contract was not malicious or fraudulent. (Art. 2220, Civil Code). It has been held that:
Nor was there error in the appealed decision in denying moral damages, not only on account of the plaintiffs failure to take
the witness stand and testify to her social humiliation, wounded feelings, anxiety, etc., as the decision holds, but primarily
because a breach of contract like that of defendant not being malicious or fraudulent, does not warrant the award of moral
damages under Article 2220 of the Civil Code (Ventilla vs. Centeno, L-14333, 28 Jan. 1961; Fores vs. Miranda, L-12163; 4
March 1959 Francisco vs. GSIS, 7 SCRA 577).
2. Furthermore, moral damages, though incapable of pecuniary estimation, are in the category of an award designed to
compensate the claimant for actual injury suffered and not to impose a penalty on the wrongdoer (San Andres vs. Court of
Appeals, 116 SCRA 85). In a later case, the Supreme Court held that moral damages are emphatically not intended to
enrich a complainant at the expense of the defendant (R & B Surety vs. IAC, 129 SCRA 745) citing Grand Union
Supermarket, Inc. vs. Espino, Jr. 94 SCRA 966).
However, there is no question that appellant acted with negligence in not informing appellees about the change of hour of
departure. To provide an example or correction for the public good, therefore, the award of exemplary damages is proper
(Art. 2229 & 2231 Civil Code; Lopez v. Pan American World Airways, 16 SCRA 431; Prudenciado vs. Alliance Transport,
148 SCRA 440). Nonetheless, the awards granted by the trial court are far too exhorbitant and excessive compared to the
actual loss of P1,300.00. The authority of the Court of Appeals to modify or change the amounts of awards has been
upheld in a long line of decisions. We reduce the award of exemplary damages from P500,000.00 to P100,000.00 in favor
of Dr. Herman Armovit, from P500,000.00 to P50,000.00 in favor of Mrs. Dora Armovit; and from P300,000.00 to
P20,000.00 in favor of Miss Jacqueline Armovit. (Gellada vs. Warner Barnes, 57 O.G. (4) 7347, Sadie vs. Bachrach, 57
O.G. (4) 636, Prudenciado vs. Alliance Transport, supra). The award of nominal damages has to be eliminated since we
are already awarding actual loss. Nominal damages cannot co-exist with actual or compensatory damages (Vda. de
Medina, et al. v. Cresencia, et al., 99 Phil. 506).
The award of 5% of the total damages as attorney's fees is reasonable.
3. WHEREFORE, with the above modifications, the decision appealed from is hereby AFFIRMED in all other respects.
A motion for reconsideration thereof filed by the petitioners was denied in a resolution dated May 29, 1989.
Both petitioners and private respondent elevated the matter to this Court for review by certiorari.
The petition of private respondent was docketed as G.R. No. 86776. It was denied in a resolution of this Court dated July 10, 1989, and the
motion for reconsideration thereof was denied in a resolution dated September 6, 1989. On October 12, 1989 this Court ordered the entry of
judgment in this case and for the records to be remanded to the court of origin for prompt execution of the judgment.
In the herein petition for review on certiorari filed by petitioner they claim that the questioned decision and resolution of the Court of Appeals
should be struck down as an unlawful, unjust and reasonless departure from the decisions of this Court as far as the award for moral damages
and the drastic reduction of the exemplary damages are concerned.
The petition is impressed with merit.
The appellate court observed that private respondent was guilty of gross negligence not only in the issuance of the tickets by the erroneous
entry of the date of departure and without changing or correcting the error when the said three (3) tickets were presented for re-confirmation.
Nevertheless it deleted the award of moral damages on the ground that petitioners did not take the witness stand to testify on "their social
humiliation, wounded feelings and anxiety, and that the breach of contract was not malicious or fraudulent." 8
We disagree.
In Air France vs. Carrascoso, 9 Lopez vs. Pan American World Airways, 10 and Zulueta vs. Pan American World Airways, 11 this Court awarded
damages for the gross negligence of the airline which amounted to malice and bad faith and which tainted the breach of air transportation
contract.
Thus in Air France, this Court observed:
A contract to transport passengers is quite different in kind and degree from any other contractual relation. And this,
because of the relation which an air carrier sustains with the public. Its business is mainly with the traveling public. It
invites people to avail of the comforts and advantages it offers. The contract of air carriage, therefore, generates a relation
attended with a public duty. Neglect or malfeasance of the carrier's employees, naturally, could give ground for an action
for damages.
Passengers do not contract merely for transportation. They have the right to be treated by the carrier's employees with
kindness, respect, courtesy and due consideration. They are entitled to be protected against personal misconduct,
injurious language, indignities and abuses from such employees. So it is, that any rude or discourteous conduct on the
part of employees towards a passenger gives the latter an action for damages against the carrier. 12
The gross negligence committed by private respondent in the issuance of the tickets with entries as to the time of the flight, the failure to
correct such erroneous entries and the manner by which petitioners were rudely informed that they were bumped off are clear indicia of such
malice and bad faith and establish that private respondent committed a breach of contract which entitles petitioners to moral damages.
The appellate court observed that the petitioners failed to take the witness stand and testify on the matter. It overlooked however, that the
failure of the petitioner to appear in court to testify was explained by them. The assassination of Senator Benigno Aquino, Jr. on August 21,
1983 following the year they were bumped off caused a turmoil in the country. This turmoil spilled over to the year 1984 when they were
scheduled to testify. However, the violent demonstrations in the country were sensationalized in the U.S. media so petitioners were advised to
refrain from returning to the Philippines at the time.
Nevertheless, Atty. Raymund Armovit, brother of petitioner Dr. Armovit, took the witness stand as he was with the petitioners from the time they
checked in up to the time of their ultimate departure. He was a witness when the check-in officer rudely informed the petitioners that their flight
had already taken off, while petitioner Dr. Armovit remonstrated that their tickets reflected their flight time to be 10:30 A.M.; that in anger and
frustration, Dr. Armovit told the said check-in-officer that he had to be accommodated that morning so that he could attend to all his
appointments in the U.S.; that petitioner Jacqueline Armovit also complained about not being able to report for work at the expiration of her
leave of absence; that while petitioner had to accept private respondent's offer for hotel accommodations at the Philippine Village Hotel so that
they could follow up and wait for their flight out of Manila the following day, petitioners did not use their meal coupons supplied because of the
limitations thereon so they had to spend for lunch, dinner, and breakfast in the sum of P1,300.00 while waiting to be flown out of Manila; that
Dr. Armovit had to forego the professional fees for the medical appointments he missed due to his inability to take the January 17 flight; that
the petitioners were finally able to fly out of Manila on January 18, 1982, but were assured of this flight only on the very morning of that day, so
that they experienced anxiety until they were assured seats for that flight. 13
No doubt Atty. Raymund Armovit's testimony adequately and sufficiently established the serious anxiety, wounded feelings and social
humiliation that petitioners suffered upon having been bumped off. However, considering the circumstances of this case whereby the private
respondent attended to the plight of the petitioners, taking care of their accommodations while waiting and boarding them in the flight back to
the U.S. the following day, the Court finds that the petitioners are entitled to moral damages in the amount of P100,000.00 each.
By the same token to provide an example for the public good, an award of exemplary damages is also proper. 14 The award of the appellate
court is adequate.
Nevertheless, the deletion of the nominal damages by the appellate court is well-taken since there is an award of actual damages. Nominal
damages cannot co-exist with actual or compensatory damages. 15
WHEREFORE, the petition is GRANTED. The questioned judgment of the Court of Appeals is hereby modified such that private respondent
shall pay the following:
(a) actual damages in favor of Dr. Armovit in the sum of P1,300.00 with interest at the legal rate from January 17, 1982;
(b) moral damages at P100,000.00 and exemplary damages and P100,000.00 in favor of Dr. Armovit;
(c) moral damages of P100,000.00 and exemplary damages of P50,000.00 in favor of Mrs. Dora Armovit;
(d) moral damages of P100,000.00 and exemplary damages in the amount of P20,000.00 in favor of Miss Jacqueline
Armovit; and
(e) attorney's fees at 5% of the total awards under the above paragraphs, plus the cost of suit.
SO ORDERED.
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-33836 March 16, 1987
DRA. SOFIA L. PRUDENCIADO, petitioner,

vs.
ALLIANCE TRANSPORT SYSTEM, INC. and JOSE LEYSON, et al., respondents.
PARAS, J.:
This is a petition for review on certiorari of the decision 1 of the Court of Appeals dated May 4,1971 in CA-G.R. No. 34832R entitled Dra. Sofia
L. Prudenciado v. Alliance Transport System, Inc. and Jose Leyson, which modified the decision 2 of the Court of First Instance of Rizal,
Quezon City, in Civil Case No. Q-5235 reducing the amount of moral damages from P25,000 to P2,000 and eliminating the award of
exemplary damages and attorney's fees but granting actual damages of P2,451.27.
The decretal portion of said decision reads:
WHEREFORE, the decision appealed from is hereby modified, ordering appellants jointly and severally to pay plaintiff the sum of P2,451.27
for actual damages representing the cost of the repair of the car of Plaintiff; (2) the sum of P2,000.00 as moral damages. No pronouncement
as to costs.
The antecedent facts of this case as found by the trial court and by the Court of Appeals are as follows:
At about 2:05 p.m. of May 11, 1960, Dra. Sofia L. Prudenciado was driving her own Chevrolet Bel Air car along Arroceros Street with the
intention of crossing Taft Avenue in order to turn left, to go to the Philippine Normal College Compound where she would hold classes. She
claimed that she was driving her car at the rate of 10 kmph; that before crossing Taft Ave. she stopped her car and looked to the right and to
the left and not noticing any on-coming vehicle on either side she slowly proceeded on first gear to cross the same, but when she was almost
at the center, near the island thereof, Jose Leyson who was driving People's Taxicab owned and operated by Alliance Transport System, Inc.,
suddenly bumped and struck Dra. Prudenciado's car, thereby causing physical injuries in different parts of her body, suffering more particularly
brain concussion which subjected her to several physical examinations and to an encephalograph test while her car was damaged to the
extent of P2,451.27. The damage to the taxicab amounted to P190.00 (Decision in Civil Case No. Q-5235, CFI, Rizal; Record on Appeal, pp.
63-64; Decision, CA-G.R. No. 34832-R, Rollo, pp. 37-38).
Dra. Prudenciado filed a complaint for damages at the Court of First Instance of Rizal, Quezon City against the Alliance Transport System and
Jose Leyson docketed as aforestated, Civil Case No. Q-5232 (Record on Appeal, pp. 2-11).
After due hearing, the Court of First Instance of Rizal, Quezon City, found Jose Leyson guilty of negligence in the performance of his duties as
taxicab driver which is the proximate cause of the accident in question. On the other hand, defendant Alliance Transport System, Inc. failed to
prove to the satisfaction of the court that it had exercised the required diligence of a good father of the family in the selection, supervision and
control of its employees including defendant Leyson. Consequently, both defendants were held jointly and severally liable for the physical
injuries suffered by the plaintiff Dra. Sofia L. Prudenciado as well as for the damage to her car, in addition to the other consequential damages
prayed for. The dispositive portion of said decision reads:
IN VIEW OF THE FOREGOING CONSIDERATIONS judgment is rendered, one in favor of plaintiff and against the defendants, by ordering the
said defendants, jointly and severally, to pay the plaintiff the sum of P2,451.27 for actual damages representing the cost for the repair of the
car of plaintiff; P25,000.00 as moral damages; P5,000.00 as exemplary damages; and the further sum of P3,000.00 as attorney's fees, with
costs against the defendants. (Record on Appeal, pp. 71-73).
On appeal, the Court of Appeals rendered the assailed decision on May 14, 1971 and denied petitioner's motion for reconsideration in its
resolution dated July 20, 1971.
Hence, this petition.
The petition was given due course in the resolution of this Court dated September 6, 1971 and petitioner filed her brief on November 10, 1971
(Rollo, p. 69) while respondents filed their brief on January 24, 1972 (Rollo, p. 86). Petitioner filed her Reply Brief on March 1, 1972 (Rollo, p.
96); after which the case was considered submitted for decision on the same date (Rollo, p. 99).
In her brief, petitioner raised the following assignment of errors:
I. THE RESPONDENT COURT OF APPEALS ERRED IN REDUCING THE AWARD OF MORAL DAMAGES TO THE PETITIONER FROM
P25,000.00 AWARDED BY THE COURT OF FIRST INSTANCE OF RIZAL, BRANCH V, QUEZON CITY, TO P2,000.00 NOTWITHSTANDING
THE FACT THAT THERE WAS NO FINDING THAT THE AWARD WAS PALPABLY AND SCANDALOUSLY EXCESSIVE AS TO INDICATE
THAT IT WAS THE RESULT OF PASSION OR CORRUPTION ON THE PART OF THE TRIAL COURT;
II. THE RESPONDENT COURT OF APPEALS ERRED IN ELIMINATING THE AWARD OF EXEMPLARY DAMAGES OF P5,000.00
NOTWITHSTANDING THE FACT THAT THE FINDING OF THE SAID COURT ON THE EVIDENCE AND THE LAW APPLICABLE JUSTIFIED
THE AWARD OF EXEMPLARY DAMAGES AS HELD BY THE SAID TRIAL COURT;
III. THE COURT OF APPEALS ERRED IN FINDING THAT HER DEMOTION IN RANK AS A PROFESSOR IN THE UNITED STATES WAS
NOT SUBSTANTIATED AND IN MAKING THIS FINDING A BASIS FOR THE REDUCTION OF THE AWARD OF MORAL DAMAGES,
NOTWITHSTANDING THAT IT IS ALREADY TOO FAR FETCHED AND IT MERELY CONFIRMS THE TRUTH OF THE FACT THAT THE
ACCUSED SUFFERED LOSS OF HER USUAL LIVELINESS; VIVACITY ACTIVITY SELF-CONFIDENCE AND THAT SHE FEELS
UNCERTAIN AND INSECURE AND THAT SHE WAS SUBJECTED TO EXTREME FRIGHT AND SERIOUS ANXIETY, SERIOUS
APPREHENSION OF LOSING HER LIFE OR HER SENSES OR REASON AND OF HER PHYSICAL MOBILITY ANYTIME AND THAT SHE
SUFFERED GREAT SHOCK AND SEVERE PAINS ON HER BACK NEAR THE LEFT SIDE OF HER SPINAL COLUMN OF THE LUMBAR
REGION;
IV. THE RESPONDENT COURT OF APPEALS ALSO ERRED IN ELIMINATING THE AWARD OF ATTORNEY'S FEES TO THE
PETITIONERS NOTWITHSTANDING THE FACT THAT SAID AWARD IS LEGAL AND PROPER;
V. THE RESPONDENT COURT OF APPEALS ERRED IN ELIMINATING THE COSTS TAXED AGAINST THE RESPONDENTS
NOTWITHSTANDING THE FACT THAT SAID COSTS ARE LEGAL AND PROPER;
VI. THE RESPONDENT COURT OF APPEALS ERRED IN FINDING THAT THE CLAIM OF DR. SOFIA L. PRUDENCIADO OF HER LOSS
OF HER USUAL LIVELINESS, VIVACITY ACTIVITY AND HER USUAL SELF CONFIDENCE, SUCH THAT SHE NOW FEELS UNCERTAIN
AND INSECURE... EXTREME FRIGHT AND SERIOUS ANXIETY, SERIOUS APPREHENSION OF LOSING HER LIFE OR HER SENSES OR
REASON; OF HER PHYSICAL MOBILITY ANYTIME ... GREAT SHOCK AND SEVERE PAINS ON HER BACK NEAR THE LEFT SIDE OF
HER SPINAL COLUMN IN THE LUMBAR REGION IS UNCORROBORATED NOTWITHSTANDING THE FACT OF THE CERTIFICATE,
EXHIBIT "G" OF DR. DOMINADOR VERGARA, OF THE VETERANS MEMORIAL HOSPITAL AND DR. CONRADO ARAMIL, BRAIN
SPECIALIST AND THE CORROBORATING TESTIMONY OF THE LATTER AFTER EXAMINATION AND TREATMENT OF PETITIONER;
VII. THE RESPONDENT COURT OF APPEALS ERRED IN SO MODIFYING THE DECISION OF THE TRIAL COURT NOTWITHSTANDING
THE FACT THAT IT HAD NO POWER TO DO SO UNDER THE FACTS AND CIRCUMSTANCES OF THIS CASE AS FOUND BY THE
COURT OF APPEALS;
VIII. THE RESPONDENT COURT OF APPEALS ERRED IN MODIFYING THE DECISION OF THE TRIAL COURT NOTWITHSTANDING
THE FACT THAT THE DECISION OF SAID TRIAL COURT IS IN ACCORDANCE WITH LAW.
The Court of Appeals and the trial court are in accord in the finding that the accident was caused by the negligence of the taxi driver. The bone
of contention is however in the award of damages, which crystalizes the errors assigned into one issue, which is whether or not the Court of
Appeals is justified in modifying or changing the grant of damages by the trial court.
It is well settled that factual findings of the Court of Appeals are binding on the Supreme Court, but said findings are subject to scrutiny if such
are diametrically opposed to those of the trial court (Samson v. CA, et al. G.R. No. L-40071, January 29, 1986).
The Court of Appeals concedes that a concussion of the brain was suffered by Dra. Prudenciado but as to how serious was the concussion or
how it had later become, and the disastrous extent of the injuries which she alleges to have sustained as a result of the accident, are seriously
doubted by said Appellate Court.
Specifically, said Court finds that Dra. Prudenciado's claim (which was sustained b the trial court) that because of aforesaid concussion, she
eventually lost her usual liveliness, vivacity activity and her usual self- confidence, to the extent that now she feels uncertain and insecure, not
to mention a sense of extreme fright and serious anxiety, serious apprehension of losing her life, or her senses or reason or her physical
mobility momentarily, plus experiences of great shock and severe pains on her back near the left side of her spinal column in the lumbar
region, was not supported by the deposition of Dr. Conrado Aramil the list who attended to the plaintiff from May 14 to May 26, 1960 (TSN,
July 13, 1960, pp. 72-73). From said deposition, it was gathered that Dra. Prudenciado suffered a mild abnormality, compatible with mold
concussion of the brain (TSN, July 13, 1960, pp. 47-48); that the symptoms of any brain concussion usually are headache, dizziness, voting
and lack of pep or alertness; and that the possible after effects that may be produced are persistent or irregular headaches, fluctuating
dizziness. Accordingly, Dra. Prudenciado was advised "Just to watch herself if she would develop any alarming symptoms such as headache,
dizziness or vomitings, to have her re-checked after several months for her to be sure." (Ibid, pp. 51-52). It might also produce intellectual
deterioration or lessening of intelligence, and even insanity.
Dra. Prudenciado sought to establish that she had precisely suffered are those after effects except insanity; but the Court of Appeals ruled that
her proof consisted merely in her own uncorroborated testimony. In support of her allegation she could not show any medical certificate
tending to prove that she was indeed medically treated abroad for her brain ailment nor was there any showing in the documents presented
that she was demoted to the rank of technical assistant because the San Francisco State College does not believe in her mental capacity any
more.
Finally, her statements that she is almost completely losing her voice, that she has a terrible headache when her head is pressed, that she has
lost her sense of taste, that she is nervous and temperamental and that she has lapses of memory, are belied by the deposition of Dr. Aramil
that the patient's EEG was already normal on May 26, 1960; and on cross-examination he declared that she was clinically symtomless when
she was discharged from the hospital (TSN, July 13, 1960, pp. 75-76; 78-79).
There is no argument that moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation, and similar injury. Though incapable of pecuniary computation, moral damages may be recovered if
they are the proximate result of defendant's wrongful act or omission (People v. Baylon, 129 SCRA 62 [1984]).
In the same manner, it is undisputed that the trial courts are given discretion to determine the amount of moral damages Alcantara v. Surro, 93
Phil. 472) and that the Court of Appeals can only modify or change the amount awarded when they are palpably and scandalously excessive
"so as to indicate that it was the result of passion, prejudice or corruption on the part of the trial court (Gellada v. Warner Barnes & Co., Inc., 57
O.G. (4) 7347, 7358; Sadie v. Bachrach Motors Co., Inc., 57 O.G. (4) 636 and Adone v. Bachrach Motor Co., Inc., 57 O.G. 656). But in more
recent cases where the awards of moral and exemplary damages are far too excessive compared to the, actual losses sustained by the
aggrieved party, this Court ruled that they should be reduced to more reasonable amounts.
Thus, in the case of San Andres v. Court of Appeals (116 SCRA 85 [1982]) the Supreme Court ruled that while the amount of moral damages
is a matter left largely to the sound discretion of a court, the same when found excessive should be reduced to more reasonable amounts,
considering the attendant facts and circumstances. Moral damages, though incapable of pecuniary estimation, are in the category of an award
designed to compensate the claimant for actual injury suffered and not to impose a penalty on the wrongdoer.
In a much later case (Siguenza v. Court of Appeals, 137 SCRA 578-579 [1985]), the Supreme court, reiterating the above ruling, reduced the
awards of moral and exemplary damages which were far too excessive compared to the actual losses sustained by the aggrieved parties and
where the records show that the injury suffered was not serious or gross and, therefore, out of proportion to the amount of damages
generously awarded by the trial court.
In any case the Court held that "moral damages are emphatically not intended to enrich a complainant at the expense of a defendant. They
are awarded only to enable the injured party to obtain means, diversion or amusements that will serve to alleviate the moral suffering he has
undergone, by reason of the defendants' culpable action." The award of moral damages must be proportionate to the suffering inflicted & B
Surety & Insurance Co., Inc. v. Intermediate Appellate Court, 129 SCRA 745 [1984] citing Grand Union Supermarket, Inc. v. Espino, Jr., 94
SCRA 966).
Coming back to the case at bar, a careful review of the records makes it readily apparent that the injuries sustained by Dra. Prudenciado are
not as serious or extensive as they were claimed to be, to warrant the damages awarded by the trial court. In fact, a closer scrutiny of the
exhibits showing a moderate damage to the car can by no stretch of the imagination produce a logical conclusion that such disastrous effects
of the accident sought to be established, actually took place, not to mention the fact that such were not supported by the medical findings
presented. Unquestionably, therefore, the damages imposed' by the lower court should be reduced to more reasonable levels.
On the other hand, it will be observed that the reduction of the damages made by the Court of Appeals is both too drastic and unrealistic, to
pass the test of reasonableness, which appears to be the underlying basis to justify such reduction.
While the damages sought to be recovered were not satisfactorily established to the extent desired by the petitioner, it was nonetheless not
disputed that an accident occurred due to the fault and negligence of the respondents; that Dra. Prudenciado suffered a brain concussion
which although mild can admittedly produce the effects complained of by her and that these symptoms can develop after several years and
can lead to some, serious handicaps or predispose the patient to other sickness (TSN, July 13, 1960, pp. 52-54). Being a doctor by
profession, her fears can be more real and intense than an ordinary person. Otherwise stated, she is undeniably a proper recipient of moral
damages which are proportionate to her suffering.
As to exemplary damages, Article 2231 of the Civil Code provides:
In quasi-delicts, exemplary damages may be granted if the defendant acted with grave negligence.
The rationale behind exemplary or corrective damages is, as the name implies, to provide an example or correction for the public good (Lopez,
et al. v. Pan American World Airways, 16 SCRA 431).
The findings of the trial court in the case at bar which became the basis of the award of exemplary damages are to the effect that it is more
apparent from the facts, conditions and circumstances obtaining in the record of the case that respondent driver was running at high speed
after turning to the right along Taft Ave. coming from Ayala Boulevard, considering that the traffic was clear. Failing to notice petitioner's car, he
failed to apply his brakes and did not even swerve to the right to avoid the collision (Record on Appeal, pp. 69-70).
The Court of Appeals conforms with aforesaid findings of the trial court but is not prepared to accept that there was gross negligence on the
part of the driver to justify the imposition of exemplary damages.
However, a driver running at full speed on a rainy day, on a slippery road in complete disregard of the hazards to life and limb of other people
cannot be said to be acting in anything less than gross negligence. The frequent incidence of accidents of this nature caused by taxi drivers
indeed demands corrective measures.
PREMISES CONSIDERED, the assailed decision of the Court of Appeals is hereby MODIFIED insofar as the award of damages is concerned;
and respondents are ordered to jointly and severally pay the petitioner; (1) the sum of P2,451.27 for actual damages representing the cost of
the repair of her car; (2) the sum of P15,000.00 as moral damages; (3) the sum of P5,000.00 as exemplary damages; and (4) the sum of
P3,000.00 as attorney's fees. No pronouncement as to costs.
SO ORDERED.

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