ESTELA L. CRISOSTOMO, petitioner, vs.

the Court of Appeals and CARAVAN TRAVEL & TOURS

INTERNATIONAL, INC., respondents [G.R. No. 138334. August 25, 2003]
.

In May 1991, petitioner Estela L. Crisostomo contracted the services of

respondent Caravan Travel and Tours International, Inc. to arrange and
facilitate her booking, ticketing and accommodation in a tour dubbed Jewels
of Europe.
Pursuant to said contract, Menor went to her aunts residence on June 12,
1991 a Wednesday to deliver petitioners travel documents and plane
tickets. Petitioner, in turn, gave Menor the full payment for the package tour.
Menor then told her to be at the Ninoy Aquino International Airport (NAIA) on
Saturday, two hours before her flight on board British Airways.
Without checking her travel documents, petitioner went to NAIA on Saturday,
June 15, 1991, to petitioners dismay, she discovered that the flight she was
supposed to take had already departed the previous day. She learned that
her plane ticket was for the flight scheduled on June 14, 1991.
Subsequently, Menor prevailed upon petitioner to take another tour the
British Pageant which included England, Scotland and Wales in its
itinerary. For this tour package, petitioner was asked anew to pay US$785.00
or P20,881.00 She gave respondent US$300 or P7,980.00 as partial payment
and commenced the trip in July 1991.
Upon petitioners return from Europe, she demanded from respondent the
reimbursement of P61,421.70, representing the difference between the sum
she paid for Jewels of Europe and the amount she owed respondent for the
British Pageant tour. Despite several demands, respondent company
refused to reimburse the amount, contending that the same was nonrefundable.
Petitioner was thus constrained to file a complaint against respondent for
breach of contract of carriage and damages, which was docketed as Civil
Case No. 92-133 and raffled to Branch 59 of the Regional Trial Court of Makati
City.
The trial court held that respondent was negligent in erroneously advising
petitioner of her departure date through its employee, Menor, who was not
presented as witness to rebut petitioners testimony. However, petitioner
should have verified the exact date and time of departure by looking at her
ticket and should have simply not relied on Menors verbal representation.
The trial court thus declared that petitioner was guilty of contributory
negligence and accordingly, deducted 10% from the amount being claimed
as refund.
Respondent appealed to the Court of Appeals, which likewise found both
parties to be at fault. However, the appellate court held that petitioner is
more negligent than respondent because as a lawyer and well-traveled
person, she should have known better than to simply rely on what was told to
her. This being so, she is not entitled to any form of damages. Petitioner also
forfeited her right to the Jewels of Europe tour and must therefore pay
respondent the balance of the price for the British Pageant tour.
Upon denial of her motion for reconsideration, petitioner filed the instant
petition under Rule 45.

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SC RULING:
By definition, a contract of carriage or transportation is one whereby a certain
person or association of persons obligate themselves to transport persons,
things, or news from one place to another for a fixed price.[9] Such person or
association of persons are regarded as carriers and are classified as private or
special carriers and common or public carriers.[10] A common carrier is
defined under Article 1732 of the Civil Code as persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers
or goods or both, by land, water or air, for compensation, offering their
services to the public.

It is obvious from the above definition that respondent is not an entity

engaged in the business of transporting either passengers or goods and is
therefore, neither a private nor a common carrier. Respondent did not
undertake to transport petitioner from one place to another since its
covenant with its customers is simply to make travel arrangements in their
behalf. Respondents services as a travel agency include procuring tickets
and facilitating travel permits or visas as well as booking customers for tours.

While petitioner concededly bought her plane ticket through the efforts of
respondent company, this does not mean that the latter ipso facto is a
common carrier. At most, respondent acted merely as an agent of the airline,
with whom petitioner ultimately contracted for her carriage to Europe.
Respondents obligation to petitioner in this regard was simply to see to it
that petitioner was properly booked with the airline for the appointed date
and time.

The nature of the contractual relation between petitioner and respondent is

determinative of the degree of care required in the performance of the
latters obligation under the contract. For reasons of public policy, a common
carrier in a contract of carriage is bound by law to carry passengers as far as
human care and foresight can provide using the utmost diligence of very
cautious persons and with due regard for all the circumstances. As earlier
stated, however, respondent is not a common carrier but a travel
agency. It is thus not bound under the law to observe extraordinary
diligence in the performance of its obligation, as petitioner claims.

Since the contract between the parties is an ordinary one for services, the
standard of care required of respondent is that of a good father of a family
under Article 1173 of the Civil Code. This connotes reasonable care consistent
with that which an ordinarily prudent person would have observed when
confronted with a similar situation.

In sum, we do not agree with the finding of the lower court that Menors
negligence concurred with the negligence of petitioner and resultantly caused
damage to the latter. Menors negligence was not sufficiently proved,
considering that the only evidence presented on this score was petitioners
uncorroborated narration of the events. It is well-settled that the party
alleging a fact has the burden of proving it and a mere allegation cannot take
the place of evidence. If the plaintiff, upon whom rests the burden of proving
his cause of action, fails to show in a satisfactory manner facts upon which he
2 | Page

bases his claim, the defendant is under no obligation to prove his exception
or defense.

Contrary to petitioners claim, the evidence on record shows that respondent

exercised due diligence in performing its obligations under the contract and
followed standard procedure in rendering its services to petitioner. As
correctly observed by the lower court, the plane ticket[19] issued to
petitioner clearly reflected the departure date and time, contrary to
petitioners contention. The travel documents, consisting of the tour itinerary,
vouchers and instructions, were likewise delivered to petitioner two days prior
to the trip. Respondent also properly booked petitioner for the tour, prepared
the necessary documents and procured the plane tickets. It arranged
petitioners hotel accommodation as well as food, land transfers and
sightseeing excursions, in accordance with its avowed undertaking.

In the case at bar, the evidence on record shows that respondent company
performed its duty diligently and did not commit any contractual breach.
Hence, petitioner cannot recover and must bear her own damage.

WHEREFORE, the instant petition is DENIED for lack of merit. The decision of
the Court of Appeals in CA-G.R. CV No. 51932 is AFFIRMED. Accordingly,
petitioner is ordered to pay respondent the amount of P12,901.00
representing the balance of the price of the British Pageant Package Tour,
with legal interest thereon at the rate of 6% per annum, to be computed from
the time the counterclaim was filed until the finality of this Decision. After
this Decision becomes final and executory, the rate of 12% per annum shall
be imposed until the obligation is fully settled, this interim period being
deemed to be by then an equivalent to a forbearance of credit.[23]

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. [G.R. No. 125948. December 29, 1998]

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 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.
3 | Page

On June 15, 1994, petitioner filed with the Regional Trial Court of Batangas
City a complaint for tax refund with prayer for a writ of preliminary injunction
against respondents City of Batangas and Adoracion Arellano in her capacity
as City Treasurer.
In its complaint, petitioner alleged, inter alia, that: (1) the imposition and
collection of the business tax on its gross receipts violates Section 133 of the
Local Government Code; (2) the authority of cities to impose and collect a tax
on the gross receipts of "contractors and independent contractors" under
Sec. 141 (e) and 151 does not include the authority to collect such taxes on
transportation contractors for, as defined under Sec. 131 (h), the term
"contractors" excludes transportation contractors; and, (3) the City Treasurer
illegally and erroneously imposed and collected the said tax, thus meriting
the immediate refund of the tax paid.
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.
On October 3, 1994, the trial court rendered a decision dismissing the
complaint.
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.
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.

SC RULING:
A "common carrier" may be defined, broadly, as one who holds himself out to the
public as engaged in the business of transporting persons or property from place to
place, for compensation, offering his services to the public generally.
Article 1732 of the Civil Code defines a "common carrier" as "any person,
corporation, firm or association engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air, for compensation, offering their
services to the public."
The test for determining whether a party is a common carrier of goods is:
1.
He must be engaged in the business of carrying goods for others as a public
employment, and must hold himself out as ready to engage in the transportation of
goods for person generally as a business and not as a casual occupation;
2.
He must undertake to carry goods of the kind to which his business is
confined;
4 | Page

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 x x x avoids making any distinction between a person or enterprise
offering transportation service on a regular or scheduled basis and one offering such
service on an occasional, episodic or unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its services to the 'general public,' i.e., the
general community or population, and one who offers services or solicits business
only from a narrow segment of the general population. We think that Article 1877
deliberately refrained from making such distinctions.
So understood, the concept of 'common carrier' under Article 1732 may be
seen to coincide neatly with the notion of 'public service,' under the Public
Service Act (Commonwealth Act No. 1416, as amended) which at least
partially supplements the law on common carriers set forth in the Civil
Code. Under Section 13, paragraph (b) of the Public Service Act, 'public service'
includes:
'every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for general business purposes, any
common carrier, railroad, street railway, traction railway, subway motor vehicle,
either for freight or passenger, or both, with or without fixed route and whatever
may be its classification, freight or carrier service of any class, express service,
steamboat, or steamship line, pontines, ferries and water craft, engaged in the
transportation of passengers or freight or both, shipyard, marine repair shop, wharf
or dock, ice plant, ice-refrigeration plant, canal, irrigation system gas, electric light
heat and power, water supply and power petroleum, sewerage system, wire or
wireless communications systems, wire or wireless broadcasting stations and other
similar public services.' "(Underscoring Supplied)
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]

5 | Page

Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is
considered a "common carrier." Thus, Article 86 thereof provides that:
"Art. 86. Pipe line concessionaire as a common carrier. - A pipe line shall have the
preferential right to utilize installations for the transportation of petroleum owned by
him, but is obligated to utilize the remaining transportation capacity pro rata for the
transportation of such other petroleum as may be offered by others for transport,
and to charge without discrimination such rates as may have been approved by the
Secretary of Agriculture and Natural Resources."
Republic Act 387 also regards petroleum operation as a public utility.
portion of Article 7 thereof provides:

Pertinent

"that everything relating to the exploration for and exploitation of petroleum x x and
everything relating to the manufacture, refining, storage, or transportation by
special methods of petroleum, is hereby declared to be a public utility."
(Underscoring Supplied)
The Bureau of Internal Revenue likewise considers the petitioner a "common
carrier." In BIR Ruling No. 069-83, it declared:
"x x x since [petitioner] is a pipeline concessionaire that is engaged only in
transporting petroleum products, it is considered a common carrier under Republic
Act No. 387 x x x. Such being the case, it is not subject to withholding tax
prescribed by Revenue Regulations No. 13-78, as amended."
From the foregoing disquisition, there is no doubt that petitioner is a
"common carrier" and, therefore, exempt from the business tax as
provided for in Section 133 (j), of the Local Government Code, to wit:
"Section 133. Common Limitations on the Taxing Powers of Local
Government Units. - Unless otherwise provided herein, the exercise of the
taxing powers of provinces, cities, municipalities, and barangays shall not
extend to the levy of the following :
xxx

xxx

xxx

(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."
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. WHEREFORE, the petition is hereby
GRANTED.

6 | Page

SCHMITZ TRANSPORT & BROKERAGE CORPORATION, petitioner, vs. TRANSPORT VENTURE,

INC., INDUSTRIAL INSURANCE COMPANY, LTD., and BLACK SEA SHIPPING AND DODWELL now
INCHCAPE SHIPPING SERVICES, respondents. [G.R. No. 150255. April 22, 2005]

SYTCO Pte Ltd. Singapore shipped from Russia on board M/V Alexander
Saveliev (a vessel of Russian registry and owned by Black Sea) steel
sheets in coil.
The cargoes, which were to be discharged at the port of Manila in favor of the
consignee, Little Giant Steel Pipe Corporation (Little Giant), were
insured against all risks with Industrial Insurance Company Ltd.
(Industrial Insurance).
Schmitz Transport, whose services the consignee engaged to secure the
requisite clearances, to receive the cargoes from the shipside, and to deliver
them to its (the consignees) warehouse at Cainta, Rizal, in turn engaged the
services of TVI to send a barge and tugboat at shipside.
The weather condition had become inclement due to an approaching storm,
the unloading unto the barge of the 37 coils was accomplished. No tugboat
pulled the barge back to the pier, however.
Due to strong waves, the crew of the barge abandoned it and transferred to
the vessel. The barge pitched and rolled with the waves and eventually
capsized, washing the 37 coils into the sea. The following morning, a tugboat
finally arrived to pull the already empty and damaged barge back to the pier.
After earnest efforts to recover the lost cargoes, Little Giant thus filed a
formal claim against Industrial Insurance which paid it the amount of
damages.
Industrial Insurance later filed a complaint against Schmitz
Transport, TVI, and Black Sea for the recovery of the amount it paid to
Little Giant.
RTC held all the defendants negligent for unloading the cargoes outside of the
breakwater notwithstanding the storm signal.
To the trial courts decision, the defendants Schmitz Transport and TVI filed a
joint motion for reconsideration assailing the finding that they are common
carriers. And they argued that they were not motivated by gross or evident
bad faith and that the incident was caused by a fortuitous event.
The trial court denied the motion for reconsideration.
All the defendants appealed to the Court of Appeals which affirmed in toto
the decision of the trial court, it finding that all the defendants were common
carriers Black Sea and TVI for engaging in the transport of goods and
cargoes over the seas as a regular business and not as an isolated
transaction, and Schmitz Transport for entering into a contract with Little
Giant to transport the cargoes from ship to port for a fee.
In issue then are:
Whether the loss of the cargoes was due to a fortuitous event, independent
of any act of negligence on the part of petitioner Black Sea and TVI, and
If there was negligence, whether liability for the loss may attach to Black Sea,
petitioner and TVI.

SC RULING:
When a fortuitous event occurs, Article 1174 of the Civil Code absolves any party
from any and all liability arising therefrom:
7 | Page

ART. 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.
[T]he principle embodied in the act of God doctrine strictly requires that the act
must be occasioned solely by the violence of nature. Human intervention is to be
excluded from creating or entering into the cause of the mischief. When the effect
is found to be in part the result of the participation of man, whether due to his
active intervention or neglect or failure to act, the whole occurrence is then
humanized and removed from the rules applicable to the acts of God.
The appellate court, in affirming the finding of the trial court that human
intervention in the form of contributory negligence by all the defendants resulted to
the loss of the cargoes, held that unloading outside the breakwater, instead of
inside the breakwater, while a storm signal was up constitutes negligence. It thus
concluded that the proximate cause of the loss was Black Seas negligence in
deciding to unload the cargoes at an unsafe place and while a typhoon was
approaching.
From a review of the records of the case, there is no indication that there
was greater risk in loading the cargoes outside the breakwater. As the
defendants proffered, the weather on October 26, 1991 remained normal
with moderate sea condition such that port operations continued and
proceeded normally.
That no tugboat towed back the barge to the pier after the cargoes were
completely loaded by 12:30 in the morning is, however, a material fact
which the appellate court failed to properly consider and appreciate the
proximate cause of the loss of the cargoes. Had the barge been towed
back
promptly
to
the
pier,
the
deteriorating
sea
conditions
notwithstanding, the loss could have been avoided. But the barge was
left floating in open sea until big waves set in at 5:30 a.m., causing it to
sink along with the cargoes. The loss thus falls outside the act of God
doctrine.
The proximate cause of the loss having been determined, who among the
parties is/are responsible therefor?
Petitioner is a common carrier. For it undertook to transport the cargoes from the
shipside of M/V Alexander Saveliev to the consignees warehouse at Cainta, Rizal.
As the appellate court put it, as long as a person or corporation holds [itself] to the
public for the purpose of transporting goods as [a] business, [it] is already
considered a common carrier regardless if [it] owns the vehicle to be used or has to
hire one. That petitioner is a common carrier, the testimony of its own VicePresident and General Manager Noel Aro that part of the services it offers to its
clients as a brokerage firm includes the transportation of cargoes reflects so.
It is settled that under a given set of facts, a customs broker may be regarded as a
common carrier. Thus, this Court, in A.F. Sanchez Brokerage, Inc. v. The Honorable
Court of Appeals,[44] held:
8 | Page

The appellate court did not err in finding petitioner, a customs broker, to be also a
common carrier, as defined under Article 1732 of the Civil Code, to wit,
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.
xxx
Article 1732 does not distinguish between one whose principal business activity is
the carrying of goods and one who does such carrying only as an ancillary activity.
The contention, therefore, of petitioner that it is not a common carrier but a
customs broker whose principal function is to prepare the correct customs
declaration and proper shipping documents as required by law is bereft of merit. It
suffices that petitioner undertakes to deliver the goods for pecuniary consideration.
And in Calvo v. UCPB General Insurance Co. Inc., this Court held that as the
transportation of goods is an integral part of a customs broker, the customs broker
is also a common carrier. For to declare otherwise would be to deprive those with
whom [it] contracts the protection which the law affords them notwithstanding the
fact that the obligation to carry goods for [its] customers, is part and parcel of
petitioners business.
As for petitioners argument that being the agent of Little Giant, any negligence it
committed was deemed the negligence of its principal, it does not persuade.
True, petitioner was the broker-agent of Little Giant in securing the release of the
cargoes. In effecting the transportation of the cargoes from the shipside and into
Little Giants warehouse, however, petitioner was discharging its own personal
obligation under a contact of carriage.
TVI
Petitioner, which did not have any barge or tugboat, engaged the services of TVI as
handler to provide the barge and the tugboat. In their Service Contract, while
Little Giant was named as the consignee, petitioner did not disclose that it
was acting on commission and was chartering the vessel for Little Giant.
Little Giant did not thus automatically become a party to the Service
Contract and was not, therefore, bound by the terms and conditions
therein.
Not being a party to the service contract, Little Giant cannot directly sue
TVI based thereon but it can maintain a cause of action for negligence.
In the case of TVI, while it acted as a private carrier for which it was under
no duty to observe extraordinary diligence, it was still required to observe
ordinary diligence to ensure the proper and careful handling, care and
discharge of the carried goods.
Thus, Articles 1170 and 1173 of the Civil Code provide:

9 | Page

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 2202, paragraph 2, shall apply.
If the law or contract 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.
Was the reasonable care and caution which an ordinarily prudent person
would have used in the same situation exercised by TVI?
This Court holds not.
TVIs failure to promptly provide a tugboat did not only increase the risk that might
have been reasonably anticipated during the shipside operation, but was the
proximate cause of the loss. A man of ordinary prudence would not leave a heavily
loaded barge floating for a considerable number of hours, at such a precarious time,
and in the open sea, knowing that the barge does not have any power of its own
and is totally defenseless from the ravages of the sea. That it was nighttime and,
therefore, the members of the crew of a tugboat would be charging overtime pay
did not excuse TVI from calling for one such tugboat.
As for petitioner, for it to be relieved of liability, it should, following Article 1739 of
the Civil Code, prove that it exercised due diligence to prevent or minimize the loss,
before, during and after the occurrence of the storm in order that it may be
exempted from liability for the loss of the goods.
This Court holds then that petitioner and TVI are solidarily liable for the
loss of the cargoes. The following pronouncement of the Supreme Court is
instructive:
The foundation of LRTAs liability is the contract of carriage and its obligation to
indemnify the victim arises from the breach of that contract by reason of its failure
to exercise the high diligence required of the common carrier. In the discharge of its
commitment to ensure the safety of passengers, a carrier may choose to hire its
own employees or avail itself of the services of an outsider or an independent firm
to undertake the task. In either case, the common carrier is not relieved of its
responsibilities under the contract of carriage.
Should Prudent be made likewise liable? If at all, that liability could only be for tort
under the provisions of Article 2176 and related provisions, in conjunction with
Article 2180 of the Civil Code. x x x [O]ne might ask further, how then must the
liability of the common carrier, on one hand, and an independent contractor, on the
other hand, be described? It would be solidary. A contractual obligation can be
breached by tort and when the same act or omission causes the injury, one
resulting in culpa contractual and the other in culpa aquiliana, Article 2194 of the
Civil Code can well apply. In fine, a liability for tort may arise even under a contract,
where tort is that which breaches the contract. Stated differently, when an act
10 | P a g e

which constitutes a breach of contract would have itself constituted the source of a
quasi-delictual liability had no contract existed between the parties, the contract
can be said to have been breached by tort, thereby allowing the rules on tort to
apply.
BLACK SEA
As for Black Sea, its duty as a common carrier extended only from the time the
goods were surrendered or unconditionally placed in its possession and received for
transportation until they were delivered actually or constructively to consignee Little
Giant.
Parties to a contract of carriage may, however, agree upon a definition of delivery
that extends the services rendered by the carrier. In the case at bar, Bill of Lading
No. 2 covering the shipment provides that delivery be made to the port of
discharge or so near thereto as she may safely get, always afloat. The delivery of
the goods to the consignee was not from pier to pier but from the shipside of M/V
Alexander Saveliev and into barges, for which reason the consignee contracted the
services of petitioner. Since Black Sea had constructively delivered the cargoes to
Little Giant, through petitioner, it had discharged its duty. In fine, no liability may
thus attach to Black Sea.
WHEREFORE, judgment is hereby rendered ordering petitioner Schmitz Transport &
Brokerage Corporation, and Transport Venture Incorporation jointly and severally
liable.

A.F. SANCHEZ BROKERAGE INC., petitioners, vs. THE HON. COURT OF APPEALS and FGU
INSURANCE CORPORATION, respondents. [G.R. No. 147079. December 21, 2004]
Wyeth-Pharma GMBH shipped on board an aircraft oral contraceptives for

delivery to Manila in favor of the consignee, Wyeth-Suaco Laboratories, Inc.

and insured the shipment against all risks with FGU Insurance.
Upon arrival of the shipment it was discharged without exception and
delivered to the warehouse of the Philippine Skylanders, Inc. (PSI) for
safekeeping.
As customs broker, Sanchez Brokerage calculates and pays the customs
duties, taxes and storage fees for the cargo and thereafter delivers it to WyethSuaco.
Representatives of Sanchez Brokerage, paid PSI storage fee a receipt
for which was issued. On the receipt, another representative of
Sanchez Brokerage acknowledged that he received the cargoes
consisting of three pieces in good condition.
Among those who witnessed the release of the cargoes from the PSI warehouse
were employees of Elite Adjusters and Surveyors Inc. (Elite Surveyors), a marine
and cargo surveyor and insurance claim adjusters firm engaged by Wyeth-Suaco
on behalf of FGU Insurance.
Upon instructions of Wyeth-Suaco, the cargoes were delivered to Hizon
Laboratories Inc. for quality control check.
11 | P a g e

Representative of Wyeth-Suaco, acknowledged the delivery of the

cargoes by affixing his signature on the delivery receipt. Upon
inspection, however, he, together with Elite Surveyors, discovered that
44 cartons were in bad order. He thus placed a note above his signature
on the delivery receipt stating that 44 cartons of oral contraceptives
were in bad order.
The Elite Surveyors later issued Certificate indicated that prior to the loading of
the cargoes to the brokers trucks at the NAIA, they were inspected and found to
be in apparent good condition. Also noted was that at the time of delivery to
the warehouse of Hizon Laboratories Inc., slight to heavy rains fell, which could
account for the wetting of the tablets.
Hizon Laboratories Inc. issued a Destruction Report confirming that the tablets
were heavily damaged with water and emitted foul smell.
Wyeth-Suaco later demanded, by letterfrom Sanchez Brokerage the payment for
the loss arising from the damaged tablets.
As the Sanchez Brokerage refused to heed the demand, Wyeth-Suaco filed an
insurance claim against FGU Insurance which paid Wyeth-Suaco and issued
Subrogation Receipt in favor of FGU Insurance.
Hence, the filing by FGU Insurance of a complaint for damages before the
Regional Trial Court of Makati City against the Sanchez Brokerage.
The trial court dismissed the complaint, holding that the Survey Report prepared
by the Elite Surveyors is bereft of any evidentiary support and a mere product of
pure guesswork.
On appeal, the appellate court reversed the decision of the trial court, it holding
that the Sanchez Brokerage engaged not only in the business of customs
brokerage but also in the transportation and delivery of the cargo of its clients,
hence, a common carrier within the context of Article 1732 of the New Civil
Code.
Sanchez Brokerages Motion for Reconsideration denied by the appellate court.

SC RULING:
The appellate court did not err in finding petitioner, a customs broker, to
be also a common carrier, as defined under Article 1732 of the Civil Code,
to wit:
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.
Article 1732 does not distinguish between one whose principal business activity is
the carrying of goods and one who does such carrying only as an ancillary activity.
The contention, therefore, of petitioner that it is not a common carrier but a
customs broker whose principal function is to prepare the correct customs
declaration and proper shipping documents as required by law is bereft of merit. It
suffices that petitioner undertakes to deliver the goods for pecuniary consideration.

12 | P a g e

In this light, petitioner as a common carrier is mandated to observe, under Article

1733 of the Civil Code, extraordinary diligence in the vigilance over the goods it
transports according to all the circumstances of each case. In the event that the
goods are lost, destroyed or deteriorated, it is presumed to have been at fault or to
have acted negligently, unless it proves that it observed extraordinary diligence.
The concept of extra-ordinary diligence was explained in Compania
Maritima v. Court of Appeals:
The extraordinary diligence in the vigilance over the goods tendered for shipment
requires the common carrier to know and to follow the required precaution for
avoiding damage to, or destruction of the goods entrusted to it for sale, carriage
and delivery. It requires common carriers to render service with the greatest skill
and foresight and to use all reasonable means to ascertain the nature and
characteristics of goods tendered for shipment, and to exercise due care in the
handling and stowage, including such methods as their nature requires.
In the case at bar, it was established that petitioner received the cargoes from the
PSI warehouse in NAIA in good order and condition; and that upon delivery by
petitioner to Hizon Laboratories Inc., some of the cargoes were found to be in bad
order, as noted in the Delivery Receipt issued by petitioner, and as indicated in the
Survey Report of Elite Surveyors and the Destruction Report of Hizon Laboratories,
Inc.
While paragraph No. 4 of Article 1734[55] of the Civil Code exempts a common
carrier from liability if the loss or damage is due to the character of the goods or
defects in the packing or in the containers, the rule is that if the improper packing is
known to the carrier or his employees or is apparent upon ordinary observation, but
he nevertheless accepts the same without protest or exception notwithstanding
such condition, he is not relieved of liability for the resulting damage.
If the claim of petitioner that some of the cartons were already damaged upon
delivery to it were true, then it should naturally have received the cargo under
protest or with reservations duly noted on the receipt issued by PSI. But it made no
such protest or reservation.
Moreover, as observed by the appellate court, if indeed petitioners employees only
examined the cargoes outside the PSI warehouse and found some to be wet, they
would certainly have gone back to PSI, showed to the warehouseman the damage,
and demanded then and there for Bad Order documents or a certification confirming
the damage. Or, petitioner would have presented, as witness, the employees of the
PSI from whom Morales and Domingo took delivery of the cargo to prove that,
indeed, part of the cargoes was already damaged when the container was allegedly
opened outside the warehouse.
The 4-page weather data furnished by PAGASA on request of Sanchez Brokerage
hardly impresses, no witness having identified it and interpreted the technical terms
thereof.
The possibility on the other hand that, as found by Hizon Laboratories, Inc., the oral
contraceptives were damaged by rainwater while in transit to Antipolo City is more
likely then. Sanchez himself testified that in the past, there was a similar instance
when the shipment of Wyeth-Suaco was also found to be wet by rain.
13 | P a g e

Since petitioner received all the cargoes in good order and condition at the time
they were turned over by the PSI warehouseman, and upon their delivery to Hizon
Laboratories, Inc. a portion thereof was found to be in bad order, it was incumbent
on petitioner to prove that it exercised extraordinary diligence in the carriage of the
goods. It did not, however. Hence, its presumed negligence under Article 1735 of
the Civil Code remains unrebutted.

VIRGINES CALVO doing business under the name and style TRANSORIENT CONTAINER TERMINAL
SERVICES, INC., petitioner, vs. UCPB GENERAL INSURANCE CO., INC. (formerly Allied Guarantee
Ins. Co., Inc.) respondent. [G.R. No. 148496. March 19, 2002]

Petitioner Transorient Container Terminal Services, Inc. (TCTSI), entered into a

contract with San Miguel Corporation (SMC) for the transfer of semi-chemical
fluting paper and kraft liner board from the Port Area in Manila to SMCs
warehouse at the Tabacalera Compound, Manila. The cargo was insured by
respondent UCPB General Insurance Co., Inc.

The shipment arrived in Manila then unloaded from the vessel to the custody of
the arrastre operator, Manila Port Services, Inc. Petitioner withdrew the cargo
from the arrastre operator and delivered it to SMCs warehouse in Manila. The
goods were inspected by Marine Cargo Surveyors, who found that goods were
wet/stained/torn.
SMC collected payment from respondent UCPB under its insurance contract for
the damages. In turn, UCPB brought suit against petitioner.
RTC rendered judgment finding petitioner liable to respondent for the damage to
the shipment.
The decision was affirmed by the Court of Appeals on appeal. Hence this
petition for review on certiorari.
Whether the petitioner as a common carrier and not as private or special carrier
who did not hold its services to the public?

SC RULING:
If petitioner is not a common carrier, then she is indeed not liable beyond what
ordinary diligence in the vigilance over the goods transported by her. Consequently,
any damage to the cargo she agrees to transport cannot be presumed to have been
due to her fault or negligence.
Petitioner contended she is not a common carrier but a private carrier because, as a
customs broker and warehouseman, she does not indiscriminately hold her services
out to the public but only offers the same to select parties with whom she may
contract in the conduct of her business.
In De Guzman v. Court of Appeals, the Court dismissed a similar contention and
held the party to be a common carrier, thus:
The Civil Code defines common carriers in the following terms:
14 | P a g e

Article 1732. Common carriers are persons, corporations, firms or associations

engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air for compensation, offering their services to the public.
The above article makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such carrying
only as an ancillary activity . . . Article 1732 also carefully avoids making any
distinction between a person or enterprise offering transportation service on a
regular or scheduled basis and one offering such service on an occasional, episodic
or unscheduled basis. Neither does Article 1732 distinguish between a carrier
offering its services to the general public, i.e., the general community or
population, and one who offers services or solicits business only from a narrow
segment of the general population.
We think that Article 1732 deliberately
refrained from making such distinctions.
So understood, the concept of common carrier under Article 1732 may be seen to
coincide neatly with the notion of public service, under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at least partially supplements
the law on common carriers set forth in the Civil Code. Under Section 13, paragraph
(b) of the Public Service Act, public service includes:
x x x every person that now or hereafter may own, operate, manage, or control in
the Philippines, for hire or compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for general business purposes, any
common carrier, railroad, street railway, traction railway, subway motor vehicle,
either for freight or passenger, or both, with or without fixed route and whatever
may be its classification, freight or carrier service of any class, express service,
steamboat, or steamship line, pontines, ferries and water craft, engaged in the
transportation of passengers or freight or both, shipyard, marine repair shop, wharf
or dock, ice plant, ice-refrigeration plant, canal, irrigation system, gas, electric light,
heat and power, water supply and power petroleum, sewerage system, wire or
wireless communications systems, wire or wireless broadcasting stations and other
similar public services. x x x [8]
There is greater reason for holding petitioner to be a common carrier
because the transportation of goods is an integral part of her business. To
uphold petitioners contention would be to deprive those with whom she contracts
the protection which the law affords them notwithstanding the fact that the
obligation to carry goods for her customers, as already noted, is part and parcel of
petitioners business.
Now, as to petitioners liability, Art. 1733 of the Civil Code provides:
Common carriers, from the nature of their business and for reasons of public policy,
are bound to observe extraordinary diligence in the vigilance over the goods and for
the safety of the passengers transported by them, according to all the
circumstances of each case. . . .
In Compania Maritima v. Court of Appeals,[9] the meaning of extraordinary
diligence in the vigilance over goods was explained thus:
15 | P a g e

The extraordinary diligence in the vigilance over the goods tendered for shipment
requires the common carrier to know and to follow the required precaution for
avoiding damage to, or destruction of the goods entrusted to it for sale, carriage
and delivery. It requires common carriers to render service with the greatest skill
and foresight and to use all reasonable means to ascertain the nature and
characteristic of goods tendered for shipment, and to exercise due care in the
handling and stowage, including such methods as their nature requires.
Nor is there basis to exempt petitioner from liability under Art. 1734(4),
which provides:
Common carriers are responsible for the loss, destruction, or deterioration
of the goods, unless the same is due to any of the following causes only:
. . . .
(4) The character of the goods or defects in the packing or in the
containers.
. . . .
For this provision to apply, the rule is that if the improper packing or, in
this case, the defect/s in the container, is/are known to the carrier or his
employees or apparent upon ordinary observation, but he nevertheless
accepts the same without protest or exception notwithstanding such
condition, he is not relieved of liability for damage resulting therefrom. In
this case, petitioner accepted the cargo without exception despite the
apparent defects in some of the container vans. Hence, for failure of
petitioner to prove that she exercised extraordinary diligence in the
carriage of goods in this case or that she is exempt from liability, the
presumption of negligence as provided under Art. 1735 holds.
The decision of the Court of Appeals is AFFIRMED.

NATIONAL STEEL CORPORATION, petitioner, vs. COURT OF APPEALS AND VLASONS SHIPPING,
INC., respondents. [G.R. No. 112287. December 12, 1997]
VLASONS SHIPPING, INC., petitioner, vs. COURT OF APPEALS AND NATIONAL STEEL
CORPORATION, respondents. [G.R. No. 112350. December 12, 1997]

Plaintiff National Steel Corporation (NSC) as Charterer and defendant

Vlasons Shipping, Inc. (VSI) as Owner of vessel, entered into a Contract
of Voyage Charter Hire whereby NSC hired VSIs vessel, to make one (1)
voyage to load steel products at Iligan City and discharge them in Manila.
The vessel arrived with the cargo at Pier 12, Manila. When the hatches
containing the shipment were opened by plaintiffs agents, nearly all the skids of
tinplates and hot rolled sheets were allegedly found to be wet and rusty.
NSC called for a survey of the shipment by the Manila Adjusters and Surveyors
Company (MASCO). MASCO made a report of its ocular inspection conducted on
the cargo. 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.
16 | P a g e

Also, the M.I.T. Testing Laboratories issued Report states, The analysis of bad
order samples of packing materials xxx shows that wetting was caused by
contact with SEA WATER.
Plaintiff filed with the defendant its claim for damages suffered due to the
downgrading of the damaged tinplates. Plaintiff formally demanded payment of
said claim but defendant VSI refused and failed to pay.
SC RULING:
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. 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.
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. As
correctly concluded by the Court of Appeals, the MV Vlasons I was not a common
but a private carrier. 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. Recently, in Valenzuela Hardwood and Industrial Supply, Inc., vs.
Court of Appeals and Seven Brothers Shipping Corporation, the Court ruled:
x x x in a contract of private carriage, the parties may freely stipulate their duties
and obligations which perforce would be binding on them. Unlike in a contract
involving a common carrier, private carriage does not involve the general
public. Hence, the stringent provisions of the Civil Code on common carriers
protecting the general public cannot justifiably be applied to a ship transporting
commercial goods as a private carrier. Consequently, the public policy embodied
therein is not contravened by stipulations in a charter party that lessen or remove
the protection given by law in contracts involving common carriers.[17]
Extent of VSIs Responsibility and Liability Over NSCs Cargo

17 | P a g e

It is clear from the parties Contract of Voyage Charter Hire, dated July 17, 1974,
that VSI shall not be responsible for losses except on proven willful negligence of
the officers of the vessel. The NANYOZAI Charter Party, which was incorporated in
the parties contract of transportation, further provided that the shipowner shall not
be liable for loss of or damage to the cargo arising or resulting from
unseaworthiness, unless the same was caused by its lack of due diligence to make
the vessel seaworthy or to ensure that the same was properly manned, equipped
and supplied, and to make the holds and all other parts of the vessel in which
cargo [was] carried, fit and safe for its reception, carriage and preservation. 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.
Burden of Proof
In view of the aforementioned contractual stipulations, NSC must prove that the
damage to its shipment was caused by VSIs willful negligence or failure to exercise
due diligence in making MV Vlasons I seaworthy and fit for holding, carrying and
safekeeping the cargo. Ineluctably, the burden of proof was placed on NSC by the
parties agreement.
This view finds further support in the Code of Commerce which pertinently provides:
Art. 361. Merchandise shall be transported at the risk and venture of the shipper, if
the contrary has not been expressly stipulated.
Therefore, the damage and impairment suffered by the goods during the
transportation, due to fortuitous event, force majeure, or the nature and inherent
defect of the things, shall be for the account and risk of the shipper.
The burden of proof of these accidents is on the carrier.
Art. 362. The carrier, however, shall be liable for damages arising from the cause
mentioned in the preceding article if proofs against him show that they occurred on
account of his negligence or his omission to take the precautions usually adopted by
careful persons, unless the shipper committed fraud in the bill of lading, making him
to believe that the goods were of a class or quality different from what they really
were.
Because the MV Vlasons I was a private carrier, the shipowners
obligations are governed by the foregoing provisions of the Code of
Commerce and not by the Civil Code which, as a general rule, places the
prima facie presumption of negligence on a common carrier. It is a hornbook
doctrine that:
In an action against a private carrier for loss of, or injury to, cargo, the burden is on
the plaintiff to prove that the carrier was negligent or unseaworthy, and the fact
that the goods were lost or damaged while in the carriers custody does not put the
burden of proof on the carrier.
Since x x x a private carrier is not an insurer but undertakes only to exercise due
care in the protection of the goods committed to its care, the burden of proving
negligence or a breach of that duty rests on plaintiff and proof of loss of, or damage
18 | P a g e

to, cargo while in the carriers possession does not cast on it the burden of proving
proper care and diligence on its part or that the loss occurred from an excepted
cause in the contract or bill of lading. However, in discharging the burden of
proof, plaintiff is entitled to the benefit of the presumptions and
inferences by which the law aids the bailor in an action against a bailee,
and since the carrier is in a better position to know the cause of the loss
and that it was not one involving its liability, the law requires that it come
forward with the information available to it, and its failure to do so
warrants an inference or presumption of its liability. However, such
inferences and presumptions, while they may affect the burden of coming
forward with evidence, do not alter the burden of proof which remains on
plaintiff, and, where the carrier comes forward with evidence explaining
the loss or damage, the burden of going forward with the evidence is
again on plaintiff.
Where the action is based on the shipowners warranty of seaworthiness, the
burden of proving a breach thereof and that such breach was the proximate cause
of the damage rests on plaintiff, and proof that the goods were lost or damaged
while in the carriers possession does not cast on it the burden of proving
seaworthiness. x x x Where the contract of carriage exempts the carrier from
liability for unseaworthiness not discoverable by due diligence, the carrier has the
preliminary burden of proving the exercise of due diligence to make the vessel
seaworthy. [20]
In the instant case, the Court of Appeals correctly found that NSC has not taken the
correct position in relation to the question of who has the burden of proof. Thus, in
its brief (pp. 10-11), after citing Clause 10 and Clause 12 of the NANYOZAI Charter
Party (incidentally plaintiff-appellants [NSCs] interpretation of Clause 12 is not
even correct), it argues that a careful examination of the evidence will show that
VSI miserably failed to comply with any of these obligations as if defendantappellee [VSI] had the burden of proof.[21]
Was MV Vlasons I Seaworthy?
In any event, the records reveal that VSI exercised due diligence to make the ship
seaworthy and fit for the carriage of NSCs cargo of steel and tinplates. This is
shown by the fact that it was drydocked and inspected by the Philippine Coast
Guard before it proceeded to Iligan City for its voyage to Manila under the contract
of voyage charter hire. [24] The vessels voyage from Iligan to Manila was the
vessels first voyage after drydocking. The Philippine Coast Guard Station in Cebu
cleared it as seaworthy, fitted and equipped; it met all requirements for trading as
cargo vessel.
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.

19 | P a g e

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.
The fact that NSC actually accepted and proceeded to remove the cargo from the
ship during unfavorable weather will not make VSI liable for any damage caused
thereby. In passing, it may be noted that the NSC may seek indemnification, subject
to the laws on prescription, from the stevedoring company at fault in the discharge
operations. A stevedore company engaged in discharging cargo xxx has the duty
to load the cargo xxx in a prudent manner, and it is liable for injury to, or loss of,
cargo caused by its negligence xxx and where the officers and members and crew
of the vessel do nothing and have no responsibility in the discharge of cargo by
stevedores xxx the vessel is not liable for loss of, or damage to, the cargo caused
by the negligence of the stevedores xxx [34] as in the instant case.
Epilogue
At bottom, this appeal really hinges on a factual issue: when, how and who caused
the damage to the cargo? Ranged against NSC are two formidable truths. First,
both lower courts found that such damage was brought about during the unloading
process when rain and seawater seeped through the cargo due to the fault or
negligence of the stevedores employed by it. Basic is the rule that factual findings
of the trial court, when affirmed by the Court of Appeals, are binding on the
Supreme Court. Although there are settled exceptions, NSC has not satisfactorily
shown that this case is one of them. Second, the agreement between the
parties -- the Contract of Voyage Charter Hire -- placed the burden of proof
for such loss or damage upon the shipper, not upon the shipowner. Such
stipulation, while disadvantageous to NSC, is valid because the parties
entered into a contract of private charter, not one of common carriage.
Basic too is the doctrine that courts cannot relieve a party from the effects of a
private contract freely entered into, on the ground that it is allegedly one-sided or
unfair to the plaintiff. The charter party is a normal commercial contract and its
stipulations are agreed upon in consideration of many factors, not the least of which
is the transport price which is determined not only by the actual costs but also by
the risks and burdens assumed by the shipper in regard to possible loss or damage
to the cargo. In recognition of such factors, the parties even stipulated that the
shipper should insure the cargo to protect itself from the risks it undertook under
the charter party. That NSC failed or neglected to protect itself with such insurance
should not adversely affect VSI, which had nothing to do with such failure or
neglect.

LOADSTAR SHIPPING CO., INC., Petitioner,- versus- ASIA INSURANCE CORP., Respondent. G.R.
No. 157481

Petitioner Loadstar Shipping Co., Inc., registered owner and operator of the
vessel, entered into a voyage-charter with Northern Mindanao Transport
20 | P a g e

Company, Inc. for the carriage of bags of cement from Iligan City to Manila.
The shipper was Iligan Cement Corporation, while the consignee in Manila
was Market Developers, Inc. Prior to the voyage, the consignee insured the
shipment of cement with respondent Pioneer Asia Insurance Corporation.
The vessel left Iligan City for Manila in good weather. However, the following
morning, Captain Vicente C. Montera, ordered the vessel to be forced aground.
Consequently, the entire shipment of cement was good as gone due to exposure
to sea water. Petitioner thus failed to deliver the goods to the consignee in
Manila.
The consignee demanded from petitioner full reimbursement of the cost of the
lost shipment. Petitioner, however, refused to reimburse the consignee despite
repeated demands.
Respondent insurance company paid the consignee the value of the lost
shipment of cement. In return, the consignee executed a Loss and Subrogation
Receipt in favor of respondent concerning the latters subrogation rights against
petitioner.
It alleged that: (1) the M/V Weasel was not seaworthy at the commencement of
the voyage; (2) the weather and sea conditions then prevailing were usual and
expected for that time of the year and as such, was an ordinary peril of the
voyage for which the M/V Weasel should have been normally able to cope with;
and (3) petitioner was negligent in the selection and supervision of its agents
and employees then manning the M/V Weasel.
Petitioner alleged that no fault nor negligence could be attributed to it because it
exercised due diligence to make the ship seaworthy, as well as properly manned
and equipped. Petitioner insisted that the failure to deliver the subject cargo to
the consignee was due to force majeure. Petitioner claimed it could not be held
liable for an act or omission not directly attributable to it.
RTC rendered a Decision in favor of respondent.

Petitioner appealed to the Court of Appeals which affirmed the RTC Decision.

SC RULING:
On the first and second issues, petitioner contends that at the time of the voyage
the carriers voyage-charter with the shipper converted it into a private carrier.
Thus, the presumption of negligence against common carriers could not apply.
Petitioner further avers that the stipulation in the voyage-charter holding it free
from liability is valid and binds the respondent. In any event, petitioner insists that
it had exercised extraordinary diligence and that the proximate cause of the loss of
the cargo was a fortuitous event.
For its part, respondent dismisses as factual issues the inquiry on (1) whether the
loss of the cargo was due to force majeure or due to petitioners failure to exercise
extraordinary diligence; and (2) whether respondent is entitled to recover attorneys
fees and expenses of litigation.
Respondent further counters that the Court of Appeals was correct when it held that
petitioner was a common carrier despite the charter of the whole vessel, since the
charter was limited to the ship only.
21 | P a g e

Prefatorily, we stress that the finding of fact by the trial court, when affirmed by the
Court of Appeals, is not reviewable by this Court in a petition for review on
certiorari. However, the conclusions derived from such factual finding are not
necessarily pure issues of fact when they are inextricably intertwined with the
determination of a legal issue. In such instances, the conclusions made may be
raised in a petition for review before this Court.[10]
The threshold issues in this case are: (1) Given the circumstances of this
case, is petitioner a common or a private carrier? and (2) In either case,
did petitioner exercise the required diligence i.e., the extraordinary
diligence of a common carrier or the ordinary diligence of a private
carrier?
Article 1732 of the Civil Code defines a common carrier as follows:
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.
Petitioner is a corporation engaged in the business of transporting cargo by
water and for compensation, offering its services indiscriminately to the public.
Thus, without doubt, it is a common carrier. However, petitioner entered into a
voyage-charter with the Northern Mindanao Transport Company, Inc. Now, had the
voyage-charter converted petitioner into a private carrier?
We think not. The voyage-charter agreement between petitioner and
Northern Mindanao Transport Company, Inc. did not in any way convert the common
carrier into a private carrier. We have already resolved this issue with finality in
Planters Products, Inc. v. Court of Appeals[11] where we ruled that:
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.[12]
Conformably, petitioner remains a common carrier notwithstanding the
existence of the charter agreement with the Northern Mindanao Transport
Company, Inc. since the said charter is limited to the ship only and does
not involve both the vessel and its crew. As elucidated in Planters Products, its
charter is only a voyage-charter, not a bareboat charter.
As a common carrier, petitioner is required to observe extraordinary diligence in the
vigilance over the goods it transports.[13] When the goods placed in its care are
lost, petitioner is presumed to have been at fault or to have acted negligently.
Petitioner therefore has the burden of proving that it observed extraordinary
diligence in order to avoid responsibility for the lost cargo.
22 | P a g e

In Compania Maritima v. Court of Appeals,[15] we said:

it is incumbent upon the common carrier to prove that the loss, deterioration or
destruction was due to accident or some other circumstances inconsistent with its
liability.
. . .
The extraordinary diligence in the vigilance over the goods tendered for shipment
requires the common carrier to know and to follow the required precaution for
avoiding damage to, or destruction of the goods entrusted to it for safe carriage and
delivery. It requires common carriers to render service with the greatest skill and
foresight and to use all reasonable means to ascertain the nature and
characteristics of goods tendered for shipment, and to exercise due care in the
handling and stowage, including such methods as their nature requires.[16]
Article 1734 enumerates the instances when a carrier might be exempt from liability
for the loss of the goods. These are:
(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.[17]
Petitioner claims that the loss of the goods was due to a fortuitous event under
paragraph 1. Yet, its claim is not substantiated. On the contrary, we find supported
by evidence on record the conclusion of the trial court and the Court of Appeals that
the loss of the entire shipment of cement was due to the gross negligence of
petitioner.
Records show that in the evening of June 24, 1984, the sea and weather conditions
in the vicinity of Negros Occidental were calm. The records reveal that petitioner
took a shortcut route, instead of the usual route, which exposed the voyage to
unexpected hazard. Petitioner has only itself to blame for its misjudgment.
Petitioner heavily relies on Home Insurance Co. v. American Steamship Agencies,
Inc.[18] and Valenzuela Hardwood and Industrial Supply, Inc. v. Court of Appeals.
[19] The said cases involved a private carrier, not a common carrier. Moreover, the
issue in both cases is not the effect of a voyage-charter on a common carrier, but
the validity of a stipulation absolving the private carrier from liability in case of loss
of the cargo attributable to the negligence of the private carrier.
Lastly, on the third issue, we find consistent with law and prevailing jurisprudence
the Court of Appeals award of attorneys fees and expenses of litigation equivalent
to ten percent (10%) of the total claim. The contract between the parties in this
case contained a stipulation that in case of suit, attorneys fees and expenses of
litigation shall be limited to only ten percent (10%) of the total monetary award.
Given the circumstances of this case, we deem the said amount just and equitable.
23 | P a g e

PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, petitioner, vs. PKS SHIPPING

COMPANY, respondent. [G.R. No. 149038. April 9, 2003]

Davao Union Marketing Corporation (DUMC) contracted the services of

respondent PKS Shipping Company (PKS Shipping) for the shipment to
Tacloban City of bags of cement. DUMC insured the goods for its full value with
petitioner Philippine American General Insurance Company (Philamgen).
The goods were loaded aboard the dumb barge belonging to PKS Shipping. On
the evening, while the barge was being towed by respondents tugboat, 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 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.

SC RULING:
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.
24 | P a g e

The determination of possible liability on the

down to the question of whether it is a private
and, in either case, to the other question
observed the proper diligence (ordinary,
extraordinary, if a common carrier) required of

part of PKS Shipping boils

carrier or a common carrier
of whether or not it has
if a private carrier, or
it given the circumstances.

The Civil Code defines common carriers in the following terms:

Article 1732. Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air for compensation, offering their services to the public.
Complementary to the codal definition is Section 13, paragraph (b), of the Public
Service Act; it defines public service to be
x x x every person that now or hereafter may own, operate, manage, or control in
the Philippines, for hire or compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for general business purposes, any
common carrier, railroad, street railway, subway motor vehicle, either for freight or
passenger, or both, with or without fixed route and whatever may be its
classification, freight or carrier service of any class, express service, steamboat, or
steamship, or steamship line, pontines, ferries and water craft, engaged in the
transportation of passengers or freight or both, shipyard, marine repair shop, wharf
or dock, ice plant, ice refrigeration plant, canal, irrigation system, gas, electric light,
heat and power, water supply and power petroleum, sewerage system, wire or
wireless communication systems, wire or wireless broadcasting stations and other
similar public services. x x x. (Underscoring supplied).
The prevailing doctrine on the question is that enunciated in the leading case of De
Guzman vs. Court of Appeals.[2] Applying Article 1732 of the Code, in conjunction
with Section 13(b) of the Public Service Act, this Court has held:
The above article makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such carrying
only as an ancillary activity (in local idiom, as `a sideline). Article 1732 also
carefully avoids making any distinction between a person or enterprise offering
transportation service on a regular or scheduled basis and one offering such service
on an occasional, episodic or unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its services to the `general public, i.e., the
general community or population, and one who offers services or solicits business
only from a narrow segment of the general population. We think that Article 1732
deliberately refrained from making such distinctions.
So understood, the concept of `common carrier under Article 1732 may
be seen to coincide neatly with the notion of `public service, under the
Public Service Act (Commonwealth Act No. 1416, as amended) which at
least partially supplements the law on common carriers set forth in the
Civil Code.
Much of the distinction between a common or public carrier and a
private or special carrier lies in the character of the business, such that
if the undertaking is an isolated transaction, not a part of the business or
25 | P a g e

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, the person or corporation providing such service could
very well be just a private carrier. A typical case is that of a charter party which
includes both the vessel and its crew, such as in a bareboat or demise, where the
charterer obtains the use and service of all or some part of a ship for a period of
time or a voyage or voyages and gets the control of the vessel and its crew.
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. 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. 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;
(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.
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.
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.

ASIA LIGHTERAGE AND SHIPPING, INC., petitioner, vs. COURT OF APPEALS and PRUDENTIAL
GUARANTEE AND ASSURANCE, INC., respondents. [G.R. No. 147246. August 19, 2003]
26 | P a g e

White Wheat in bulk was shipped for delivery to the consignee, General Milling
Corporation in Manila. The shipment was insured by the private respondent
Prudential Guarantee and Assurance, Inc.
In Manila, 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.
The cargo did not reach its destination.
The private respondent indemnified the consignee. Thereafter, as subrogee, it
sought recovery of said amount from the petitioner, but to no avail.
The Regional Trial Court ruled in favor of the private respondent.
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.
Petitioners Motion for Reconsideration was likewise denied by the appellate
court.

SC RULING:
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.
Petitioner is a common carrier. Article 1732 of the Civil Code defines common
carriers as persons, corporations, firms or associations engaged in the business of
carrying or transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public.
In De Guzman vs. Court of Appeals, 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.
To be sure, petitioner fits the test of a common carrier as laid down in Bascos vs.
Court of Appeals. The test to determine a common carrier is whether the
given undertaking is a part of the business engaged in by the carrier
which he has held out to the general public as his occupation rather than
the quantity or extent of the business transacted.In the case at bar, the
petitioner admitted that it is engaged in the business of shipping and lighterage,
offering its barges to the public, despite its limited clientele for carrying or
transporting goods by water for compensation.

27 | P a g e

Petitioner failed to exercise extraordinary diligence in its care and custody

of the consignees goods.
Common carriers are bound to observe extraordinary diligence in the vigilance over
the goods transported by them. They are presumed to have been at fault or to
have acted negligently if the goods are lost, destroyed or deteriorated. To
overcome the presumption of negligence in the case of loss, destruction or
deterioration of the goods, the common carrier must prove that it exercised
extraordinary diligence. There are, however, exceptions to this rule. Article 1734 of
the Civil Code enumerates the instances when the presumption of negligence does
not attach:
Art. 1734. Common carriers are responsible for the loss, destruction, or
deterioration of the goods, unless the same is due to any of the following causes
only:
(1)

Flood, storm, earthquake, lightning, or other natural disaster or calamity;

(2)

Act of the public enemy in war, whether international or civil;

(3)

Act or omission of the shipper or owner of the goods;

(4)

The character of the goods or defects in the packing or in the containers;

(5)

Order or act of competent public authority.

In the case at bar, the barge completely sank after its towing bits broke, resulting in
the total loss of its cargo. Petitioner claims that this was caused by a typhoon,
hence, it should not be held liable for the loss of the cargo. However, petitioner
failed to prove that the typhoon is the proximate and only cause of the
loss of the goods, and that it has exercised due diligence before, during
and after the occurrence of the typhoon to prevent or minimize the loss.
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.
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.

PLANTERS PRODUCTS, INC., petitioner, vs. COURT OF APPEALS, SORIAMONT STEAMSHIP

AGENCIES AND KYOSEI KISEN KABUSHIKI KAISHA, respondents. G.R. No. 101503 September 15,
1993
28 | P a g e

Planters Products, Inc. (PPI), purchased fertilizer which the latter shipped
aboard the cargo vessel owned by private respondent Kyosei Kisen
Kabushiki Kaisha (KKKK) to La Union.
Prior to its voyage, a time charter-party on the vessel pursuant to the Uniform
General Charter was entered into between Mitsubishi as shipper/charterer and
KKKK as shipowner.
The survey report to the consignee (PPI) revealed a shortage in the cargo and
that a portion of the Urea fertilizer was contaminated with dirt. The same results
were contained in a Certificate of Shortage/Damaged Cargo which showed that
the cargo delivered was indeed short and were rendered unfit for commerce,
having been polluted with sand, rust and dirt.
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.
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.
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.

SC RULING:
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; 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;
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
29 | P a g e

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.
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. 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.
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. 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. 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.
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.
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
30 | P a g e

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, 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 barristerat-law
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.
To our mind, respondent carrier has sufficiently overcome, by clear and
convincing proof, the prima facie presumption of negligence.
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. 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.
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
31 | P a g e

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. 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.
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 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.

PEDRO DE GUZMAN, petitioner, vs. COURT OF APPEALS and ERNESTO CENDANA, respondents.
G.R. No. L-47822 December 22, 1988

Petitioner Pedro de Guzman, a merchant and authorized dealer of General Milk

Company in Pangasinan, contracted with respondent Ernesto Cendana, a junk
dealer, for the hauling of cartons of Liberty filled milk from a warehouse of
General Milk in Makati, Rizal, to petitioner's establishment in Urdaneta.
Accordingly, 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 Tarlac, by armed men who took with them the
truck, its driver, his helper and the cargo.
Petitioner commenced action against private respondent in the Court of First
Instance of Pangasinan, demanding the claimed value of the lost merchandise,
plus damages and attorney's fees. Petitioner argued that private respondent,
32 | P a g e

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.
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.
The trial court rendered a Decision finding private respondent to be a common
carrier and holding him liable for the value of the undelivered goods as well as
for 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.

SC RULING:
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, 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
33 | P a g e

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.
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"
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)
(2)
(3)
(4)
(5)

Flood, storm, earthquake, lightning or other natural disaster or calamity;

Act of the public enemy in war, whether international or civil;
Act or omission of the shipper or owner of the goods;
The character-of the goods or defects in the packing or-in the containers; and
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
34 | P a g e

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.
The precise issue that we address here relates to the specific requirements of the
duty of extraordinary diligence in the vigilance over the goods carried in the specific
context of hijacking or armed robbery.
As noted earlier, the duty of extraordinary diligence in the vigilance over goods is,
under Article 1733, given additional specification not only by Articles 1734 and 1735
but also by Article 1745, numbers 4, 5 and 6, Article 1745 provides in relevant part:
Any of the following or similar stipulations shall be considered unreasonable, unjust
and contrary to public policy:
xxx xxx xxx
(5) that the common carrier shall not be responsible for the acts or omissions of his
or its employees;
(6) that the common carrier's liability for acts committed by thieves, or of robbers
who 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. The decision of the trial
court shows that the accused acted with grave, if not irresistible, threat, violence or
force. 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).
35 | P a g e

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.

CHINA AIRLINES, petitioner, vs. DANIEL CHIOK, respondent. [G.R. No. 152122. July 30, 2003]

Daniel Chiok purchased from China Airlines, Ltd. (CAL) for air transportation
covering Manila-Taipei-Hongkong-Manila. Said ticket was exclusively
endorseable to Philippine Airlines, Ltd. (PAL).
In Hongkong, PAL office confirmed his return trip on board Flight No. PR 311 and
attached its own sticker.
For his return trip to Manila, however, upon reaching the PAL counter, Chiok saw
a poster stating that PAL Flight No. PR 311 was cancelled because of a typhoon
in Manila.
He was then informed that all the confirmed ticket holders of PAL Flight No. PR
311 were automatically booked for its next flight, which was to leave the next
day.
On the re-scheduled day, Chiok went to the airport. Carmen informed Chiok
that his name did not appear in PALs computer list of passengers and therefore
could not be permitted to board PAL Flight No. PR 307.
He sought to recover his luggage but found only 2 which were placed at the end
of the passengers line. Realizing that his new Samsonite luggage was missing.
Thereafter, Chiok confronted PALs reservation officer, Carie Chao, who
previously confirmed his flight back to Manila. Chao told Chiok that his name was
on the list and pointed to the latter his computer number listed on the PAL
confirmation sticker attached to his plane ticket.
Chao, once again, booked and confirmed the formers trip, this time on board
PAL Flight No. PR 311 scheduled to depart that evening. Later, Chiok went to the
PAL check-in counter and it was Carmen who attended to him.
Consequently, Chiok as plaintiff, filed a Complaint on November 9, 1982 for
damages, against PAL and CAL, Regional Trial Court, Manila.
The RTC held CAL and PAL jointly and severally liable to respondent. It did not,
however, rule on their respective cross-claims.
The two carriers appealed the RTC Decision to the CA.
36 | P a g e

Affirming the RTC, the Court of Appeals debunked petitioners claim that it had
merely acted as an issuing agent for the ticket covering the Hong Kong-Manila
leg of respondents journey.

SC RULING:
In the instant case, the CA ruled that under the contract of transportation, petitioner
-- as the ticket-issuing carrier (like KLM) -- was liable regardless of the fact that PAL
was to perform or had performed the actual carriage. It elucidated on this point as
follows:
By the very nature of their contract, defendant-appellant CAL is clearly liable
under the contract of carriage with [respondent] and remains to be so,
regardless of those instances when actual carriage was to be performed
by another carrier.
The issuance of a confirmed CAL ticket in favor of
[respondent] covering his entire trip abroad concretely attests to this. This also
serves as proof that defendant-appellant CAL, in effect guaranteed that the carrier,
such as defendant-appellant PAL would honor his ticket, assure him of a space
therein and transport him on a particular segment of his trip.
It is significant to note that the contract of air transportation was between petitioner
and respondent, with the former endorsing to PAL the Hong Kong-to-Manila segment
of the journey. Such contract of carriage has always been treated in this
jurisdiction as a single operation. This jurisprudential rule is supported by the
Warsaw Convention, to which the Philippines is a party, and by the existing
practices of the International Air Transport Association (IATA).
Article 1, Section 3 of the Warsaw Convention states:
Transportation to be performed by several successive air carriers shall be deemed,
for the purposes of this Convention, to be one undivided transportation, if it has
been regarded by the parties as a single operation, whether it has been agreed
upon under the form of a single contract or of a series of contracts, and it shall not
lose its international character merely because one contract or a series of contracts
is to be performed entirely within a territory subject to the sovereignty, suzerainty,
mandate, or authority of the same High Contracting Party.
Article 15 of IATA-Recommended Practice similarly provides:
Carriage to be performed by several successive carriers under one ticket,
or under a ticket and any conjunction ticket issued therewith, is regarded
as a single operation.
In American Airlines v. Court of Appeals, we have noted that under a general pool
partnership agreement, the ticket-issuing airline is the principal in a contract of
carriage, while the endorsee-airline is the agent.
Likewise, as the principal in the contract of carriage, the petitioner in British Airways
v. Court of Appeals was held liable, even when the breach of contract had occurred,
not on its own flight, but on that of another airline. The Decision followed our ruling
in Lufthansa German Airlines v. Court of Appeals, in which we had held that the
obligation of the ticket-issuing airline remained and did not cease, regardless of the
37 | P a g e

fact that another airline had undertaken to carry the passengers to one of their
destinations.
In the instant case, following the jurisprudence cited above, PAL acted as the
carrying agent of CAL. In the same way that we ruled against British Airways and
Lufthansa in the aforementioned cases, we also rule that CAL cannot evade liability
to respondent, even though it may have been only a ticket issuer for the Hong
Kong-Manila sector.
Moral damages cannot be awarded in breaches of carriage contracts, except in the
two instances contemplated in Articles 1764 and 2220 of the Civil Code, which we
quote:
Article 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.
x x x
xxx

x x x

Article 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. (Italics supplied)
There is no occasion for us to invoke Article 1764 here. We must therefore
determine if CAL or its agent (PAL) is guilty of bad faith that would entitle
respondent to moral damages.
In Lopez v. Pan American World Airways,[29] we defined bad faith as a breach of a
known duty through some motive of interest or ill will.
In the case at bar, the known duty of PAL was to transport herein respondent from
Hong Kong to Manila. That duty arose when its agent confirmed his reservation for
Flight PR 311 and it became demandable when he presented himself for the trip on
November 24, 1981.
It is true that due to a typhoon, PAL was unable to transport respondent on Flight PR
311 on November 24, 1981. This fact, however, did not terminate the carriers
responsibility to its passengers. PAL voluntarily obligated itself to automatically
transfer all confirmed passengers of PR 311 to the next available flight, PR 307, on
the following day. That responsibility was subsisting when respondent, holding a
confirmed ticket for the former flight, presented himself for the latter.
The records amply establish that he secured repeated confirmations of his PR 311
flight. Hence, he had every reason to expect that he would be put on the
replacement flight as a confirmed passenger. Instead, he was harangued and
prevented from boarding the original and the replacement flights. Thus, PAL
breached its duty to transport him. After he had been directed to pay the
terminal fee, his pieces of luggage were removed from the weighing-in
counter despite his protestations.
38 | P a g e

Time and time again, this Court has stressed that the business of common
carriers is imbued with public interest and duty; therefore, the law
governing them imposes an exacting standard. In Singson v. Court of Appeals,
we said:
x x x [T]he carrier's utter lack of care and sensitivity to the needs of its
passengers, clearly constitutive of gross negligence, recklessness and
wanton disregard of the rights of the latter, [are] acts evidently
indistinguishable or no different from fraud, malice and bad faith. As the
rule now stands, where in breaching the contract of carriage the defendant airline is
shown to have acted fraudulently, with malice or in bad faith, the award of moral
and exemplary damages, in addition to actual damages, is proper.[36] (Italics
supplied)
The acts of PALs employees, particularly Chan, clearly fell short of the extraordinary
standard of care that the law requires of common carriers. As narrated in Chans
oral deposition, the manner in which the airline discharged its responsibility to
respondent and its other passengers manifested a lack of the requisite diligence
and due regard for their welfare.
This Courts 1992 ruling in China Airlines v. Court of Appeals is likewise inapplicable.
In that case, we found no bad faith or malice in the airlines breach of its contractual
obligation. We held that, as shown by the flow of telexes from one of the airlines
offices to the others, petitioner therein had exercised diligent efforts in assisting the
private respondent change his flight schedule. In the instant case, petitioner
failed to exhibit the same care and sensitivity to respondents needs.
In the present case, we stress that respondent had repeatedly secured
confirmations of his PR 311 flight on November 24, 1981 -- initially from CAL and
subsequently from the PAL office in Hong Kong.
In view of the foregoing, we rule that moral and exemplary damages were properly
awarded by the lower courts.

JAPAN AIRLINES, petitioner, vs. JESUS SIMANGAN, respondent. G.R. No. 170141, April 22, 2008
WHEN an airline issues a ticket to a passenger confirmed on a particular
flight on a certain date, a contract of carriage arises, and the passenger
has every right to expect that he would fly on that flight and on that date.
If he does not, then the carrier opens itself to a suit for breach of contract
of carriage.

Respondent Jesus Simangan decided to donate a kidney to his ailing cousin,

Loreto Simangan, in UCLA School of Medicine in Los Angeles, California, U.S.A.
After series of tests, it proved that respondent's blood and tissue type were wellmatched with Loreto's.
To facilitate respondent's travel to the United States, UCLA wrote a letter to the
American Consulate in Manila to arrange for his visa. In due time, respondent
was issued an emergency U.S. visa by the American Embassy in Manila.
39 | P a g e

Having obtained an emergency U.S. visa, respondent purchased a round trip

plane ticket from petitioner JAL and was issued the corresponding boarding pass.
On the date of his flight, respondent was allowed to check-in at JAL's counter.
After passing through said immigration and security procedures, respondent was
allowed by JAL to enter its airplane.
While inside the airplane, JAL's airline crew suspected respondent of carrying a
falsified travel document and imputed that he would only use the trip to the
United States as a pretext to stay and work in Japan. Thereafter, respondent was
bumped off the flight.
Respondent went to JAL's ground office and waited there for three hours.
Meanwhile, the plane took off and he was left behind. Afterwards, he was
informed that his travel documents were, indeed, in order. Respondent was
refunded the cost of his plane ticket less the sum of US$500.00 which was
deducted by JAL. Subsequently, respondent's U.S. visa was cancelled.
Displeased by the turn of events, respondent filed an action for damages against
JAL with the Regional Trial Court (RTC).

JAL denied the material allegations of the complaint. It argued, among others,
that its failure to allow respondent to fly on his scheduled departure was due to
"a need for his travel documents to be authenticated by the United States
Embassy" because no one from JAL's airport staff had encountered a parole visa
before. It posited that the authentication required additional time; that
respondent was advised to take the flight the following day, July 30, 1992. JAL
alleged that respondent agreed to be rebooked.

RTC rendered its decision in favor of respondent (plaintiff). The RTC explained:
The foregoing act of the defendant in ordering the plaintiff to deplane while
already settled in his assigned seat clearly demonstrated that the defendant
breached its contract of carriage with the plaintiff as passenger in bad faith and
as such the plaintiff is entitled to moral and exemplary damages as well as to an
award of attorney's fees.

JAL appealed to the CA contending that it is not guilty of breach of contract of

carriage, hence, not liable for damages. It posited that it is the one entitled to
recover on its counterclaim.

CA affirmed the decision of the RTC with modification in that it lowered the
amount of moral and exemplary damages and deleted the award of attorney's
fees. The CA ratiocinated:

Citing Ortigas, Jr. v. Lufthansa German Airlines, the CA declared that "(i)n
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 passengers to the
award of moral damages in accordance with Article 2220 of the Civil Code."
40 | P a g e

Nevertheless, the CA modified the damages awarded by the RTC. It explained:

Fundamental in the law on damages is that one injured by a breach of a
contract, or by a wrongful or negligent act or omission shall have a fair and just
compensation commensurate to the loss sustained as consequence of the
defendant's act. Being discretionary on the court, the amount, however, should
not be palpably and scandalously excessive.

SC RULING:
Basically, there are three (3) issues to resolve here: (1) whether or not JAL is guilty
of contract of carriage; (2) whether or not respondent is entitled to moral and
exemplary damages; and (3) whether or not JAL is entitled to its counterclaim for
damages.
We have repeatedly held that the findings of fact of the CA are final and conclusive
and cannot be reviewed on appeal to the Supreme Court provided they are based
on substantial evidence. We have no jurisdiction, as a rule, to reverse their findings.
Among the exceptions to this rule are: (a) when the conclusion is a finding grounded
entirely on speculations, surmises or conjectures; (b) when the inference made is
manifestly mistaken, absurd or impossible; (c) where there is grave abuse of
discretion; (d) when the judgment is based on a misapprehension of facts; (e) when
the findings of facts are conflicting; (f) when the CA, in making its findings, went
beyond the issues of the case and the same is contrary to the admissions of both
appellant and appellee.
The said exceptions, which are being invoked by JAL, are not found here. We thus
sustain the coherent facts as established by the courts below, there being no
sufficient showing that the said courts committed reversible error in reaching their
conclusions.
JAL is guilty of breach of contract of carriage.
JAL maintained that it was not guilty of breach of contract of carriage as respondent
was not able to travel to the United States due to his own voluntary desistance.
We cannot agree. JAL did not allow respondent to fly. It informed respondent that
there was a need to first check the authenticity of his travel documents with the
U.S. Embassy. As admitted by JAL, "the flight could not wait for Mr. Simangan
because it was ready to depart."
Moreover, the reason behind the bumping off incident, as found by the RTC and CA,
was that JAL personnel imputed that respondent would only use the trip to the
United States as a pretext to stay and work in Japan.
Apart from the fact that respondent's plane ticket, boarding pass, travel authority
and personal articles already passed the rigid immigration and security routines,
JAL, as a common carrier, ought to know the kind of valid travel documents
respondent carried. As provided in Article 1755 of the New 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 a due regard for all the circumstances." Thus, We
41 | P a g e

find untenable JAL's defense of "verification of respondent's documents" in its

breach of contract of carriage.
It bears repeating that the power to admit or not an alien into the country is a
sovereign act which cannot be interfered with even by JAL.
In an action for breach of contract of carriage, all that is required of
plaintiff is to prove the existence of such contract and its non-performance
by the carrier through the latter's failure to carry the passenger safely to
his destination. Respondent has complied with these twin requisites.
Respondent is entitled to moral and exemplary damages and attorney's fees plus
legal interest.
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 Article 2219 of the Civil Code. As an exception, such
damages are recoverable: (1) in cases in which the mishap results in the
death of a passenger, as provided in Article 1764, in relation to Article
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 Article 2220.
The acts committed by JAL against respondent amounts to bad faith. As found by
the RTC, JAL breached its contract of carriage with respondent in bad faith. JAL
personnel summarily and insolently ordered respondent to disembark while the
latter was already settled in his assigned seat. He was ordered out of the plane
under the alleged reason that the genuineness of his travel documents should be
verified.
Clearly, JAL is liable for moral damages. It is firmly settled that moral damages are
recoverable in suits predicated on breach of a contract of carriage where it is proved
that the carrier was guilty of fraud or bad faith, as in this case. Inattention to and
lack of care for the interests of its passengers who are entitled to its utmost
consideration, particularly as to their convenience, amount to bad faith which
entitles the passenger to an award of moral damages. What the law considers as
bad faith which may furnish the ground for an award of moral damages would be
bad faith in securing the contract and in the execution thereof, as well as in the
enforcement of its terms, or any other kind of deceit.
JAL is also liable for exemplary damages as its above-mentioned acts constitute
wanton, oppressive and malevolent acts against respondent. Exemplary
damages, which are awarded by way of example or correction for the
public good, may be recovered in contractual obligations, as in this case, if
defendant acted in wanton, fraudulent, reckless, oppressive, or
malevolent manner.
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
42 | P a g e

them to control their employees, to tame their reckless instincts and to force them
to take adequate care of human beings and their property.
Neglect or malfeasance of the carrier's employees could give ground for an action
for damages. Passengers have a right to be treated by the carrier's employees with
kindness, respect, courtesy and due consideration and are entitled to be protected
against personal misconduct, injurious language, indignities and abuses from such
employees.
The assessment of P500,000.00 as moral damages and P100,000.00 as exemplary
damages in respondent's favor is, in Our view, reasonable and realistic. This award
is reasonably sufficient to indemnify him for the humiliation and embarrassment he
suffered. This also serves as an example to discourage the repetition of similar
oppressive acts.
With respect to attorney's fees, they may be awarded when defendant's act or
omission has compelled plaintiff to litigate with third persons or to incur expenses to
protect his interest. The Court, in Construction Development Corporation of the
Philippines v. Estrella, citing Traders Royal Bank Employees Union-Independent v.
National Labor Relations Commission, elucidated thus:
There are two commonly accepted concepts of attorney's fees, the socalled ordinary and extraordinary. In its ordinary concept, an attorney's
fee is the reasonable compensation paid to a lawyer by his client for the
legal services he has rendered to the latter. The basis of this
compensation is the fact of his employment by and his agreement with the
client.
In its extraordinary concept, an attorney's fee is an indemnity for
damages ordered by the court to be paid by the losing party in a litigation.
The basis of this is any of the cases provided by law where such award can
be made, such as those authorized in Article 2208, Civil Code, and is
payable not to the lawyer but to the client, unless they have agreed that
the award shall pertain to the lawyer as additional compensation or as
part thereof.
It was therefore erroneous for the CA to delete the award of attorney's fees on the
ground that the record is devoid of evidence to show the cost of the services of
respondent's counsel. The amount is actually discretionary upon the Court so long
as it passes the test of reasonableness. They may be recovered as actual or
compensatory damages when exemplary damages are awarded and whenever the
court deems it just and equitable, as in this case.
Considering the factual backdrop of this case, attorney's fees in the amount of
P200,000.00 is reasonably modest.
The above liabilities of JAL in the total amount of P800,000.00 earn legal interest
pursuant to the Court's ruling in Construction Development Corporation of the
Philippines v. Estrella, citing Eastern Shipping Lines, Inc. v. Court of Appeals, to wit:
Regarding the imposition of legal interest at the rate of 6% from the time
of the filing of the complaint, we held in Eastern Shipping Lines, Inc. v.
Court of Appeals, that when an obligation, regardless of its source, i.e.,
43 | P a g e

law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the

contravenor can be held liable for payment of interest in the concept of
actual and compensatory damages, subject to the following rules, to wit 1. When the obligation is breached, and it consists in the payment of a sum of
money, i.e., a loan or forbearance of money, the interest due should be that which
may have been stipulated in writing. Furthermore, the interest due shall itself earn
legal interest from the time it is judicially demanded. In the absence of stipulation,
the rate of interest shall be 12% per annum to be computed from default, i.e., from
judicial or extrajudicial demand under and subject to the provisions of Article 1169
of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached,
an interest on the amount of damages awarded may be imposed at the discretion of
the court at the rate of 6% per annum. No interest, however, shall be adjudged on
unliquidated claims or damages except when or until the demand can be
established with reasonable certainty. Accordingly, where the demand is established
with reasonable certainty, the interest shall begin to run from the time the claim is
made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty
cannot be so reasonably established at the time the demand is made, the interest
shall begin to run only from the date the judgment of the court is made (at which
time the quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest shall, in any
case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 12% per annum from such finality until its satisfaction,
this interim period being deemed to be by then an equivalent to a forbearance of
credit.78 (Emphasis supplied and citations omitted)
Accordingly, in addition to the said total amount of P800,000.00, JAL is liable to pay
respondent legal interest. Pursuant to the above ruling of the Court, the legal
interest is 6% and it shall be reckoned from September 21, 2000 when the RTC
rendered its judgment. From the time this Decision becomes final and executory,
the interest rate shall be 12% until its satisfaction.
JAL is not entitled to its counterclaim for damages.
This compulsory counterclaim of JAL arising from the filing of the complaint may not
be granted inasmuch as the complaint against it is obviously not malicious or
unfounded. It was filed by respondent precisely to claim his right to damages
against JAL. Well-settled is the rule that the commencement of an action does not
per se make the action wrongful and subject the action to damages, for the law
could not have meant to impose a penalty on the right to litigate.
We reiterate case law that if damages result from a party's exercise of a right, it is
damnum absque injuria.81 Lawful acts give rise to no injury. Walang perhuwisyong
maaring idulot ang paggamit sa sariling karapatan.
JAL is a common carrier. JAL's business is mainly with the traveling public.
It invites people to avail themselves of the comforts and advantages it
44 | P a g e

offers. Since JAL deals with the public, its bumping off of respondent
without a valid reason naturally drew public attention and generated a
public issue.
The publications involved matters about which the public has the right to be
informed because they relate to a public issue. This public issue or concern is a
legitimate topic of a public comment that may be validly published.
Assuming that respondent, indeed, caused the publication of his complaint, he may
not be held liable for damages for it. The constitutional guarantee of freedom of the
speech and of the press includes fair commentaries on matters of public interest.
This is explained by the Court in Borjal v. Court of Appeals,85 to wit:
To reiterate, fair commentaries on matters of public interest are privileged and
constitute a valid defense in an action for libel or slander. The doctrine of fair
comment means that while in general every discreditable imputation publicly made
is deemed false, because every man is presumed innocent until his guilt is judicially
proved, and every false imputation is deemed malicious, nevertheless, when the
discreditable imputation is directed against a public person in his public capacity, it
is not necessarily actionable. In order that such discreditable imputation to a public
official may be actionable, it must either be a false allegation of fact or a comment
based on a false supposition. If the comment is an expression of opinion, based on
established facts, then it is immaterial that the opinion happens to be mistaken, as
long as it might reasonably be inferred from the facts.86 (Citations omitted and
underscoring ours)
Even though JAL is not a public official, the rule on privileged commentaries on
matters of public interest applies to it. The privilege applies not only to public
officials but extends to a great variety of subjects, and includes matters of public
concern, public men, and candidates for office.
Hence, pursuant to the Borjal case, there must be an actual malice in order that a
discreditable imputation to a public person in his public capacity or to a public
official may be actionable. To be considered malicious, the libelous statements must
be shown to have been written or published with the knowledge that they are false
or in reckless disregard of whether they are false or not.

NORTHWEST AIRLINES, INC., petitioner, vs. STEVEN P. CHIONG, respondent. G.R. No. 155550,
January 31, 2008

Philimare purchased for Chiong a Northwest plane ticket for San Diego,
California.
Chiong arrived at the Manila International Airport4 (MIA), 3 hours before the
scheduled time of departure. Marilyn Calvo, Philimares Liaison Officer, met
Chiong at the departure gate, and the two proceeded to the Philippine Coast
Guard (PCG) Counter to present Chiongs seaman service record book for
45 | P a g e

clearance. Thereafter, Chiongs passport was duly stamped, after complying with
government requirements for departing seafarers.
Chiong proceeded to queue at the Northwest check-in counter. Northwest
personnel informed him that his name did not appear in the computers list of
confirmed departing passengers. Chiong was then directed to speak to a "man in
barong" standing outside Northwests counters from whom Chiong could
allegedly obtain a boarding pass. Posthaste, Chiong approached the "man in
barong" who demanded US$100.00 in exchange therefor. Without the said
amount, and anxious to board the plane, Chiong queued a number of times at
Northwests Check-in Counter and presented his ticket. However, the Northwest
personnel at the counter told him to simply wait and that he was being a pest.
Ultimately, Chiong was not allowed to board Northwest Flight that day and,
consequently, was unable to work at the M/V Elbia by April 1, 1989 (California,
U.S.A. time).
It appears that Chiongs name was crossed out and substituted with "W. Costine"
in Northwests Air Passenger Manifest.
Chiongs counsel demanded as recompense: (1) the amount equivalent to
Chiongs salary under the latters Crew Agreement with TransOcean; (2)
P15,000.00 for Chiongs expenses in fetching and bringing his family from Samar
to Manila; (3) P500,000.00 as moral damages; and (4) P500,000.00 as legal fees.
Northwest demurred. Thus, Chiong filed a Complaint for breach of contract of
carriage before the RTC. Northwest filed a Motion to Dismiss the complaint citing
the trial courts lack of jurisdiction over the subject matter of the case, but the
trial court denied the same.
In the course of proceedings, Northwest, filed a separate criminal complaint for
False Testimony against Chiong based on the latters testimony that he did not
leave the Philippines after April 1, 1989.
Northwest filed a Petition for Certiorari before the CA imputing grave abuse of
discretion to the RTC. Correlatively, Northwest moved for a suspension of the
proceedings before the trial court. However, both the Petition for Certiorari and
Motion for Suspension of the proceedings were denied by the CA and RTC,
respectively.
After trial, the RTC rendered a Decision finding preponderance of evidence in
favor of Chiong, and holding Northwest liable for breach of contract of carriage.
The RTC ruled that the evidence adduced by the parties supported the
conclusion that Chiong was deliberately prevented from checking-in and his
boarding pass unjustifiably withheld to accommodate an American passenger by
the name of W. Costine.
On appeal, the CA affirmed in toto the ruling of the RTC. Identical to the RTCs
findings. The CA declared that, in any event, Northwest failed to present any
evidence to prove that Chiong had worked under the original crew agreement.

SC RULING:
We are in complete accord with the common ruling of the lower courts that
Northwest breached the contract of carriage with Chiong, and as such, he is entitled
46 | P a g e

to compensatory, actual, moral and exemplary damages, attorneys fees and costs
of suit.
The records reveal that Chiong, as plaintiff in the trial court, satisfied the burden of
proof required in civil cases, i.e., preponderance of evidence.
Time and again, we have declared that a contract of carriage, in this case, air
transport, is primarily intended to serve the traveling public and thus, imbued with
public interest. The law governing common carriers consequently imposes an
exacting standard of conduct. As the aggrieved party, Chiong only had to prove the
existence of the contract and the fact of its non-performance by Northwest, as
carrier, in order to be awarded compensatory and actual damages.
We reiterate that Northwest failed to prove its claim that Chiong worked on M/V
Elbia from April 17 to October 5, 1989 under the original crew agreement.
Accordingly, we affirm the lower courts finding on Chiongs entitlement to actual
and compensatory damages.
We, likewise, uphold the findings of both courts on Northwests liability for moral
and exemplary damages, and attorneys fees.
Under Article 2220 of the Civil Code of the Philippines, an award of moral
damages, in breaches of contract, is in order upon a showing that the
defendant acted fraudulently or in bad faith. Bad faith does not simply
connote bad judgment or negligence. It imports a dishonest purpose or
some moral obliquity and conscious doing of a wrong. It means breach of a
known duty through some motive, interest or ill will that partakes of the
nature of fraud.30 Bad faith is in essence a question of intention.
In the case at bench, the courts carefully examined the evidence as to the conduct
and outward acts of Northwest indicative of its inward motive. It is borne out by the
records that Chiong was given the run-around at the Northwest check-in counter,
instructed to deal with a "man in barong" to obtain a boarding pass, and eventually
barred from boarding Northwest Flight No. 24 to accommodate an American, W.
Costine, whose name was merely inserted in the Flight Manifest, and did not even
personally check-in at the counter.
Under the foregoing circumstances, the award of exemplary damages is also correct
given the evidence that Northwest acted in an oppressive manner towards Chiong.
As for the award of attorneys fees, while we recognize that it is sound policy not to
set a premium on the right to litigate, we sustain the lower courts award thereof.
Attorneys fees may be awarded when a party is compelled to litigate or
incur expenses to protect his interest, or where the defendant acted in
gross and evident bad faith in refusing to satisfy the plaintiffs plainly
valid, just and demandable claim. In the case at bench, Northwest deliberately
breached its contract of carriage with Chiong and then repeatedly refused to satisfy
Chiongs valid, just and demandable claim. This unjustified refusal constrained
Chiong to not only lose income under the crew agreement, but to further incur
expenses and exert effort for almost two (2) decades in order to protect his interests
and vindicate his right. Therefore, this Court deems it just and equitable to grant
Chiong P200,000.00 as attorneys fees. The award is reasonable in view of the time
47 | P a g e

it has taken for this case to be resolved. WHEREFORE, premises considered, the
petition is hereby DENIED. The ruling of the Court of Appeals is hereby AFFIRMED.

SINGAPORE AIRLINES LIMITED, petitioner, vs. ANDION FERNANDEZ, respondent. [G.R. No. 142305.
December 10, 2003]

Respondent Andion Fernandez, pursuing a Masters Degree in Germany, was

invited to sing before the King and Queen of Malaysia in 1991.
For this singing engagement, an airline passage ticket was purchased from
petitioner Singapore Airlines which would transport her to Manila from Frankfurt,
Germany. From Manila, she would proceed to Malaysia on the next day.
The petitioner issued the respondent a Singapore Airlines ticket, leaving
Frankfurt, Germany bound for Singapore with onward connections from
Singapore to Manila.
By then, the aircraft bound for Manila had left as scheduled, leaving the
respondent and about 25 other passengers stranded in the Changi Airport in
Singapore.
Upon disembarkation at Singapore, the respondent approached the transit
counter who told her that there were no more flights to Manila for that day and
that respondent had no choice but to stay in Singapore.
The respondent never made it to Manila and was forced to take a direct flight
from Singapore to Malaysia on January 29, 1991, through the efforts of her
mother and travel agency in Manila. Her mother also had to travel to Malaysia
bringing with her respondents wardrobe and personal things needed for the
performance that caused them to incur an expense of about P50,000.
As a result of this incident, the respondents performance before the Royal
Family of Malaysia was below par. Because of the rude and unkind treatment
she received from the petitioners personnel in Singapore, the respondent was
engulfed with fear, anxiety, humiliation and embarrassment causing her to suffer
mental fatigue and skin rashes. She was thereby compelled to seek immediate
medical attention upon her return to Manila for acute urticaria.
The RTC rendered a decision that defendant Singapore Airlines is ordered to pay
herein plaintiff Andion H. Fernandez the sum of:
1. FIFTY THOUSAND
(P50,000.00) PESOS as compensatory or actual damages; 2.TWO HUNDRED and
FIFTY THOUSAND (P250,000.00) PESOS as moral damages considering plaintiffs
professional standing in the field of culture at home and abroad; 3. ONE
HUNDRED THOUSAND (P100,000.00) PESOS as exemplary damages; 4. SEVENTYFIVE THOUSAND (P75,000.00) PESOS as attorneys fees; and 5. To pay the costs
of suit.
The CA promulgated the assailed decision finding no reversible error in the
appealed decision of the trial court.

SC RULING:
48 | P a g e

When an airline issues a ticket to a passenger, confirmed for a particular

flight on a certain date, a contract of carriage arises. The passenger then
has every right to expect that he be transported on that flight and on that
date. If he does not, then the carrier opens itself to a suit for a breach of
contract of carriage.
The contract of air carriage is a peculiar one. Imbued with public interest, the law
requires common carriers to carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious persons with due
regard for all the circumstances. In an action for breach of contract of carriage, the
aggrieved party does not have to prove that the common carrier was at fault or was
negligent. All that is necessary to prove is the existence of the contract and the fact
of its non-performance by the carrier.
In the case at bar, it is undisputed that the respondent carried a confirmed ticket for
the two-legged trip from Frankfurt to Manila: 1) Frankfurt-Singapore; and 2)
Singapore-Manila. In her contract of carriage with the petitioner, the respondent
certainly expected that she would fly to Manila on Flight No. SQ 72 on January 28,
1991. Since the petitioner did not transport the respondent as covenanted
by it on said terms, the petitioner clearly breached its contract of carriage
with the respondent. The respondent had every right to sue the petitioner
for this breach. The defense that the delay was due to fortuitous events and
beyond petitioners control is unavailing. In PAL vs. CA,[22] we held that:
.... Undisputably, PALs diversion of its flight due to inclement weather was a
fortuitous event. Nonetheless, such occurrence did not terminate PALs contract
with its passengers. Being in the business of air carriage and the sole one to
operate in the country, PAL is deemed to be 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 carriers 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...
...
...If the cause of non-fulfillment of the contract is due to a fortuitous event, it has
to be the sole and only cause (Art. 1755 C.C., Art. 1733 C.C.). Since part of the
failure to comply with the obligation of common carrier to deliver its passengers
safely to their destination lay in the defendants failure to provide comfort and
convenience to its stranded passengers using extraordinary diligence, the cause of
non-fulfillment is not solely and exclusively due to fortuitous event, but due to
something which defendant airline could have prevented, defendant becomes liable
to plaintiff.
Indeed, in the instant case, petitioner was not without recourse to enable it to fulfill
its obligation to transport the respondent safely as scheduled as far as human care
and foresight can provide to her destination. Tagged as a premiere airline as it
claims to be and with the complexities of air travel, it was certainly well-equipped to
be able to foresee and deal with such situation. The petitioners indifference and
negligence by its absence and insensitivity was exposed by the trial court.
The petitioners diligence in communicating to its passengers the consequences of
the delay in their flights was wanting. As elucidated by the trial court:
49 | P a g e

It maybe that delay in the take off and arrival of commercial aircraft could not be
avoided and may be caused by diverse factors such as those testified to by
defendants pilot. However, knowing fully well that even before the plaintiff
boarded defendants Jumbo aircraft in Frankfurt bound for Singapore, it has already
incurred a delay of two hours. Nevertheless, defendant did not take the trouble of
informing plaintiff, among its other passengers of such a delay and that in such a
case, the usual practice of defendant airline will be that they have to stay overnight
at their connecting airport; and much less did it inquire from the plaintiff and the
other 25 passengers bound for Manila whether they are amenable to stay overnight
in Singapore and to take the connecting flight to Manila the next day. Such
information should have been given and inquiries made in Frankfurt because even
the defendant airlines manual provides that in case of urgency to reach his or her
destination on the same date, the head office of defendant in Singapore must be
informed by telephone or telefax so as the latter may make certain arrangements
with other airlines in Frankfurt to bring such a passenger with urgent business to
Singapore in such a manner that the latter can catch up with her connecting flight
such as S-27/28 without spending the night in Singapore
The respondent was not remiss in conveying her apprehension about the delay of
the flight when she was still in Frankfurt. Upon the assurance of petitioners
personnel in Frankfurt that she will be transported to Manila on the same date, she
had every right to expect that obligation fulfilled.
When a passenger contracts for a specific flight, he has a purpose in making that
choice which must be respected. This choice, once exercised, must not be impaired
by a breach on the part of the airline without the latter incurring any liability. For
petitioners failure to bring the respondent to her destination, as
scheduled, we find the petitioner clearly liable for the breach of its
contract of carriage with the respondent.
We are convinced that the petitioner acted in bad faith. Bad faith means a
breach of known duty through some motive of interest or ill will. Selfenrichment or fraternal interest, and not personal ill will, may well have
been the motive; but it is malice nevertheless. Bad faith was imputed by the
trial court when it found that the petitioners employees at the Singapore airport did
not accord the respondent the attention and treatment allegedly warranted under
the circumstances. The lady employee at the counter was unkind and of no help to
her. The respondent further alleged that without her threats of suing the company,
she was not allowed to use the companys phone to make long distance calls to her
mother in Manila. The male employee at the counter where it says: Immediate
Attention to Passengers with Immediate Booking was rude to her when he curtly
retorted that he was busy attending to other passengers in line. The trial court
concluded that this inattentiveness and rudeness of petitioners personnel to
respondents plight was gross enough amounting to bad faith. This is a finding that
is generally binding upon the Court which we find no reason to disturb.
Article 2232 of the Civil Code provides that in a contractual or quasi-contractual
relationship, exemplary damages may be awarded only if the defendant had acted
in a wanton, fraudulent, reckless, oppressive or malevolent manner. In this case,
petitioners employees acted in a wanton, oppressive or malevolent manner. The
award of exemplary damages is, therefore, warranted in this case. WHEREFORE,
the Petition is DENIED. The Decision of the Court of Appeals is AFFIRMED.
50 | P a g e

DELSAN TRANSPORT LINES, INC., petitioner, vs. THE HON. COURT OF APPEALS and AMERICAN
HOME ASSURANCE CORPORATION, respondents. [G.R. No. 127897. November 15, 2001]

Caltex Philippines entered into a contract of affreightment with the petitioner,

Delsan Transport Lines, Inc. Under the contract, petitioner took on board its
vessel industrial fuel oil of Caltex to be delivered to the Caltex Oil Terminal in
Zamboanga City. The shipment was insured with the private respondent,
American Home Assurance Corporation.
The vessel sank near Panay Gulf in the Visayas taking with it the entire cargo of
fuel oil.
Subsequently, private respondent paid Caltex the insured value of the lost cargo.
Exercising its right of subrogation under Article 2207 of the New Civil Code, the
private respondent demanded of the petitioner the same amount it paid to
Caltex.
Due to its failure to collect from the petitioner despite prior demand, private
respondent filed a complaint with the Regional Trial Court for collection of a sum
of money.
The trial court rendered a decision dismissing the complaint against herein
petitioner without pronouncement as to cost. The trial court found that the
vessel was seaworthy to undertake the voyage as determined by the Philippine
Coast Guard and that the incident was caused by unexpected inclement weather
condition or force majeure, thus exempting the common carrier (herein
petitioner) from liability for the loss of its cargo.
The Court of Appeals reversed the RTC decision. In the absence of any
explanation as to what may have caused the sinking of the vessel coupled with
the finding that the same was improperly manned, the appellate court ruled that
the petitioner is liable on its obligation as common carrier to herein private
respondent insurance company as subrogee of Caltex.

SC RULING:
Petitioner Delsan invokes the provision of Section 113 of the Insurance Code of the
Philippines, which states that in every marine insurance upon a ship or freight, or
freightage, or upon any thing which is the subject of marine insurance there is an
implied warranty by the shipper that the ship is seaworthy. Consequently, the
insurer will not be liable to the assured for any loss under the policy in case the
vessel would later on be found as not seaworthy at the inception of the insurance.
It theorized that when private respondent paid Caltex the value of its lost cargo, the
act of the private respondent is equivalent to a tacit recognition that the ill-fated
vessel was seaworthy; otherwise, private respondent was not legally liable to Caltex
due to the latters breach of implied warranty under the marine insurance policy
that the vessel was seaworthy.
The petitioner also invoked Section 116 of the Insurance Code of the Philippines, the
implied warranty of seaworthiness of the vessel, which the private respondent
admitted as having been fulfilled by its payment of the insurance proceeds to Caltex
of its lost cargo, extends to the vessels complement.
51 | P a g e

Petitioner cited the doctrine laid down in the case of Home Insurance Corporation
vs. CA,] the failure of the private respondent to present the insurance policy in
evidence is allegedly fatal to its claim inasmuch as there is no way to determine the
rights of the parties thereto.
Whether or not the payment made by the private respondent to Caltex for the
insured value of the lost cargo amounted to an admission that the vessel was
seaworthy, thus precluding any action for recovery against the petitioner.
The payment made by the private respondent for the insured value of the lost cargo
operates as waiver of its (private respondent) right to enforce the term of the
implied warranty against Caltex under the marine insurance policy. However, the
same cannot be validly interpreted as an automatic admission of the
vessels seaworthiness by the private respondent as to foreclose recourse
against the petitioner for any liability under its contractual obligation as a
common carrier. The fact of payment grants the private respondent subrogatory
right which enables it to exercise legal remedies that would otherwise be available
to Caltex as owner of the lost cargo against the petitioner common carrier. Article
2207 of the New Civil Code provides that:
Art. 2207. If the plaintiffs property has been insured, and he has received
indemnity from the insurance company for the injury or loss arising out of the wrong
or breach of contract complained of, the insurance company shall be subrogated to
the rights of the insured against the wrongdoer or the person who has violated the
contract. If the amount paid by the insurance company does not fully cover the
injury or loss, the aggrieved party shall be entitled to recover the deficiency from
the person causing the loss or injury.
The right of subrogation has its roots in equity. It is designed to promote and to
accomplish justice and is the mode which equity adopts to compel the ultimate
payment of a debt by one who in justice and good conscience ought to pay. It is not
dependent upon, nor does it grow out of, any privity of contract or upon written
assignment of claim. It accrues simply upon payment by the insurance company of
the insurance claim. Consequently, the payment made by the private respondent
(insurer) to Caltex (assured) operates as an equitable assignment to the former of
all the remedies which the latter may have against the petitioner.
From the nature of their business and for reasons of public policy, common carriers
are bound to observe extraordinary diligence in the vigilance over the goods and for
the safety of passengers transported by them, according to all the circumstances of
each case. In the event of loss, destruction or deterioration of the insured
goods, common carriers shall be responsible unless the same is brought
about, among others, by flood, storm, earthquake, lightning or other
natural disaster or calamity. In all other cases, if the goods are lost, destroyed or
deteriorated, common carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary diligence.
Seaworthiness relates to a vessels actual condition. Neither the granting
of classification or the issuance of certificates establishes seaworthiness.
(2-A Benedict on Admiralty, 7-3, Sec. 62)

52 | P a g e

Authorities are clear that diligence in securing certificates of

seaworthiness does not satisfy the vessel owners obligation.
Also
securing the approval of the shipper of the cargo, or his surveyor, of the
condition of the vessel or her stowage does not establish due diligence if
the vessel was in fact unseaworthy, for the cargo owner has no obligation
in relation to seaworthiness.
In the case at bar, petitioner is liable for the insured value of the lost
cargo of industrial fuel oil belonging to Caltex for its failure to rebut the
presumption of fault or negligence as common carrier occasioned by the
unexplained sinking of its vessel, MT Maysun, while in transit.
The presentation in evidence of the marine insurance policy is not indispensable in
this case before the insurer may recover from the common carrier the insured value
of the lost cargo in the exercise of its subrogatory right. The subrogation receipt, by
itself, is sufficient to establish not only the relationship of herein private respondent
as insurer and Caltex, as the assured shipper of the lost cargo of industrial fuel oil,
but also the amount paid to settle the insurance claim. The right of subrogation
accrues simply upon payment by the insurance company of the insurance claim.
The presentation of the insurance policy was necessary in the case of Home
Insurance Corporation v. CA[21] (a case cited by petitioner) because the shipment
therein (hydraulic engines) passed through several stages with different parties
involved in each stage. The insurance contract, which was not presented in
evidence in that case would have indicated the scope of the insurers liability, if any,
since no evidence was adduced indicating at what stage in the handling process the
damage to the cargo was sustained. Hence, our ruling on the presentation of
the insurance policy in the said case of Home Insurance Corporation is not
applicable to the case at bar. WHEREFORE, the instant petition is DENIED.

VICTORY LINER, INC., petitioner, vs. ROSALITO GAMMAD, APRIL ROSSAN P. GAMMAD, ROI
ROZANO P. GAMMAD and DIANA FRANCES P. GAMMAD, respondents. [G.R. No. 159636.
November 25, 2004]

The facts as testified by respondent Rosalito Gammad show that his wife Marie
Grace Pagulayan-Gammad, was on board an air-conditioned Victory Liner bus
bound for Tuguegarao, Cagayan from Manila. The bus while running at a high
speed fell on a ravine somewhere in Nueva Vizcaya, which resulted in the death
of Marie Grace and physical injuries to other passengers.
On May 14, 1996, respondent heirs of the deceased filed a complaint for
damages arising from culpa contractual against petitioner. In its answer, the
petitioner claimed that the incident was purely accidental and that it has always
exercised extraordinary diligence in its 50 years of operation.
The trial court rendered its decision in favor of respondents.
On appeal by petitioner, the Court of Appeals affirmed the decision of the trial
court with modification.
The issues for resolution are: (1) whether petitioners counsel was guilty of gross
negligence; (2) whether petitioner should be held liable for breach of contract of
carriage; and (3) whether the award of damages was proper.
53 | P a g e

SC RULING:
Petitioner was correctly found liable for breach of contract of carriage. A common
carrier is bound to carry its passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious
persons, with due regard to all the circumstances. In a contract of
carriage, it is presumed that the common carrier was at fault or was
negligent when a passenger dies or is injured. Unless the presumption is
rebutted, the court need not even 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.
In the instant case, there is no evidence to rebut the statutory presumption that the
proximate cause of Marie Graces death was the negligence of petitioner. Hence,
the courts below correctly ruled that petitioner was guilty of breach of contract of
carriage.
Nevertheless, the award of damages should be modified.
Article 1764[35] in relation to Article 2206[36] 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.
In the present case, respondent heirs of the deceased are entitled to indemnity for
the death of Marie Grace which under current jurisprudence is fixed at P50,000.00.
The award of compensatory damages for the loss of the deceaseds
earning capacity should be deleted for lack of basis.
As a rule,
documentary evidence should be presented to substantiate the claim for
damages for loss of earning capacity. By way of exception, damages for
loss of earning capacity may be awarded despite the absence of
documentary evidence when (1) the deceased is self-employed earning
less than the minimum wage under current labor laws, and judicial notice
may be taken of the fact that in the deceaseds line of work no
documentary evidence is available; or (2) the deceased is employed as a
daily wage worker earning less than the minimum wage under current
labor laws.
In People v. Oco, the evidence presented by the prosecution to recover damages for
loss of earning capacity was the bare testimony of the deceaseds wife that her
husband was earning P8,000.00 monthly as a legal researcher of a private
corporation. Finding that the deceased was neither self-employed nor employed as
a daily-wage worker earning less than the minimum wage under the labor laws
existing at the time of his death, the Court held that testimonial evidence alone is
insufficient to justify an award for loss of earning capacity.
Likewise, in People v. Caraig, damages for loss of earning capacity was not awarded
because the circumstances of the 3 deceased did not fall within the recognized
exceptions, and except for the testimony of their wives, no documentary proof
about their income was presented by the prosecution.
54 | P a g e

However, the fact of loss having been established, temperate damages in the
amount of P500,000.00 should be awarded to respondents. Under Article 2224 of
the Civil Code, temperate or moderate damages, which are more than nominal but
less than compensatory damages, may be recovered when the court finds that
some pecuniary loss has been suffered but its amount can not, from the nature of
the case, be proved with certainty.
In Pleno v. Court of Appeals, the Court sustained the trial courts award of
P200,000.00 as temperate damages in lieu of actual damages for loss of earning
capacity because the income of the victim was not sufficiently proven, thus
The trial court based the amounts of damages awarded to the petitioner on the
following circumstances:

As to the loss or impairment of earning capacity, there is no doubt that Pleno is an

ent[re]preneur and the founder of his own corporation, the Mayon Ceramics
Corporation. It appears also that he is an industrious and resourceful person with
several projects in line, and were it not for the incident, might have pushed them
through. On the day of the incident, Pleno was driving homeward with geologist
Longley after an ocular inspection of the site of the Mayon Ceramics Corporation.
His actual income however has not been sufficiently established so that this Court
cannot award actual damages, but, an award of temperate or moderate damages
may still be made on loss or impairment of earning capacity. That Pleno sustained a
permanent deformity due to a shortened left leg and that he also suffers from
double vision in his left eye is also established. Because of this, he suffers from
some inferiority complex and is no longer active in business as well as in social life.
In similar cases as in Borromeo v. Manila Electric Railroad Co., 44 Phil 165; Coriage,
et al. v. LTB Co., et al., L-11037, Dec. 29, 1960, and in Araneta, et al. v. Arreglado, et
al., L-11394, Sept. 9, 1958, the proper award of damages were given.

We rule that the lower courts awards of damages are more consonant with the
factual circumstances of the instant case. The trial courts findings of facts are clear
and well-developed. Each item of damages is adequately supported by evidence on
record.
Article 2224 of the Civil Code was likewise applied in the recent cases of People v.
Singh and People v. Almedilla,[44] to justify the award of temperate damages in lieu
of damages for loss of earning capacity which was not substantiated by the required
documentary proof.
Anent the award of moral damages, the same cannot be lumped with exemplary
damages because they are based on different jural foundations. These damages are
different in nature and require separate determination. In culpa contractual or
breach of contract, moral damages may be recovered when the defendant acted in
bad faith or was guilty of gross negligence (amounting to bad faith) or in wanton
disregard of contractual obligations and, as in this case, when the act of breach of
contract itself constitutes the tort that results in physical injuries. By special rule in
Article 1764 in relation to Article 2206 of the Civil Code, moral damages may also
55 | P a g e

be awarded in case the death of a passenger results from a breach of carriage. On

the other hand, exemplary damages, which are awarded by way of example or
correction for the public good may be recovered in contractual obligations if the
defendant acted in wanton, fraudulent, reckless, oppressive, or malevolent manner.
Respondents in the instant case should be awarded moral damages to compensate
for the grief caused by the death of the deceased resulting from the petitioners
breach of contract of carriage. Furthermore, the petitioner failed to prove that it
exercised the extraordinary diligence required for common carriers, it is presumed
to have acted recklessly.[49] Thus, the award of exemplary damages is proper.
Under the circumstances, we find it reasonable to award respondents the amount of
P100,000.00 as moral damages and P100,000.00 as exemplary damages. These
amounts are not excessive.
The actual damages awarded by the trial court reduced by the Court of Appeals
should be further reduced. In People v. Duban, it was held that only substantiated
and proven expenses or those that appear to have been genuinely incurred in
connection with the death, wake or burial of the victim will be recognized. A list of
expenses (Exhibit J), and the contract/receipt for the construction of the tomb
(Exhibit F) in this case, cannot be considered competent proof and cannot replace
the official receipts necessary to justify the award. Hence, actual damages should
be further reduced to P78,160.00,[54] which was the amount supported by official
receipts.
Pursuant to Article 2208 of the Civil Code, attorneys fees may also be recovered in
the case at bar where exemplary damages are awarded. The Court finds the award
of attorneys fees equivalent to 10% of the total amount adjudged against petitioner
reasonable.
Finally, in Eastern Shipping Lines, Inc. v. Court of Appeals, it was held that when an
obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or
quasi-delicts is breached, the contravenor can be held liable for payment of interest
in the concept of actual and compensatory damages, subject to the following rules,
to wit
1.
When the obligation is breached, and it consists in the payment of a sum of
money, i.e., a loan or forbearance of money, the interest due should be that which
may have been stipulated in writing. Furthermore, the interest due shall itself earn
legal interest from the time it is judicially demanded. In the absence of stipulation,
the rate of interest shall be 12% per annum to be computed from default, i.e., from
judicial or extrajudicial demand under and subject to the provisions of Article 1169
of the Civil Code.
2.
When an obligation, not constituting a loan or forbearance of money, is
breached, an interest on the amount of damages awarded may be imposed at the
discretion of the court at the rate of 6% per annum. No interest, however, shall be
adjudged on unliquidated claims or damages except when or until the demand can
be established with reasonable certainty. Accordingly, where the demand is
established with reasonable certainty, the interest shall begin to run from the time
the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such
certainty cannot be so reasonably established at the time the demand is made, the
interest shall begin to run only from the date the judgment of the court is made (at
which time the quantification of damages may be deemed to have been reasonably
56 | P a g e

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).
In the instant case, petitioner should be held liable for payment of interest as
damages for breach of contract of carriage. Considering that the amounts payable
by petitioner has been determined with certainty only in the instant petition, the
interest due shall be computed upon the finality of this decision at the rate of 12%
per annum until satisfaction, per paragraph 3 of the aforecited rule.[57]
WHEREFORE, in view of all the foregoing, the petition is partially granted. As
modified, petitioner Victory Liner, Inc., is ordered to pay respondents the following:
(1) P50,000.00 as indemnity for the death of Marie Grace Pagulayan-Gammad; (2)
P100,000.00 as moral damages; (3) P100,000.00 as exemplary damages; (4)
P78,160.00 as actual damages; (5) P500,000.00 as temperate damages; (6) 10% of
the total amount as attorneys fees; and the costs of suit. Furthermore, the total
amount adjudged against petitioner shall earn interest at the rate of 12% per
annum computed from the finality of this decision until fully paid.

LEA MER INDUSTRIES, INC., Petitioner, -versus - MALAYAN INSURANCE CO., INC., Respondent.
G.R. No. 161745. September 30, 2005

Ilian Silica Mining entered into a contract of carriage with Lea Mer Industries,
Inc., for the shipment of silica sand. Consigned to Vulcan Industrial and Mining
Corporation, the cargo was to be transported from Palawan to Manila. During
the voyage, the vessel sank, resulting in the loss of the cargo.
Malayan Insurance Co., Inc., as insurer, paid Vulcan the value of the lost cargo.
To recover the amount paid and in the exercise of its right of subrogation,
Malayan demanded reimbursement from Lea Mer, which refused to comply.
Consequently, Malayan instituted a Complaint with the Regional Trial Court (RTC)
of Manila of the amount that respondent had paid Vulcan.
The trial court dismissed the Complaint, upon finding that the cause of the loss
was a fortuitous event.
CA Reversed the trial court ruling, the CA held that the vessel was not
seaworthy when it sailed for Manila. Thus, the loss of the cargo was occasioned
by petitioners fault, not by a fortuitous event.

SC RULING:
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 -- when this service is offered to the public for compensation.
Petitioner is clearly a common carrier, because it offers to the public its business of
transporting goods through its vessels.
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Thus, the Court corrects the trial courts finding that petitioner became a
private carrier when Vulcan chartered it. Charter parties are classified as
contracts of demise (or bareboat) and affreightment, which are
distinguished as follows:
Under the demise or bareboat charter of the vessel, the charterer will
generally be considered as owner for the voyage or service stipulated.
The charterer mans the vessel with his own people and becomes, in effect,
the owner pro hac vice, subject to liability to others for damages caused
by negligence. To create a demise, the owner of a vessel must completely
and exclusively relinquish possession, command and navigation thereof to
the charterer; anything short of such a complete transfer is a contract of
affreightment (time or voyage charter party) or not a charter party at all.
The distinction is significant, because a demise or bareboat charter indicates a
business undertaking that is private in character. Consequently, the rights and
obligations of the parties to a contract of private carriage are governed principally
by their stipulations, not by the law on common carriers.
The Contract in the present case was one of affreightment, as shown by the fact
that it was petitioners crew that manned the tugboat M/V Ayalit and controlled the
barge Judy VII. Necessarily, petitioner was a common carrier, and the
pertinent law governs the present factual circumstances.
Extraordinary Diligence Required
Common carriers are bound to observe extraordinary diligence in their
vigilance over the goods and the safety of the passengers they transport, as
required by the nature of their business and for reasons of public policy.
Extraordinary diligence requires rendering service with the greatest skill and
foresight to avoid damage and destruction to the goods entrusted for carriage and
delivery.
Common carriers are presumed to have been at fault or to have acted negligently
for loss or damage to the goods that they have transported. This presumption can
be rebutted only by proof that they observed extraordinary diligence, or that the
loss or damage was occasioned by any of the following causes:
(1)

Flood, storm, earthquake, lightning, or other natural disaster or calamity;

(2)

Act of the public enemy in war, whether international or civil;

(3)

Act or omission of the shipper or owner of the goods;

(4)

The character of the goods or defects in the packing or in the containers;

(5)

Order or act of competent public authority.[28]

Rule on Fortuitous Events

Article 1174 of the Civil Code provides that no person shall be responsible for
a fortuitous event which could not be foreseen, or which, though foreseen, was
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inevitable. Thus, if the loss or damage was due to such an event, a common
carrier is exempted from liability.
Jurisprudence defines the elements of a fortuitous event as follows: (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.
To excuse the common carrier fully of any liability, the fortuitous event must have
been the proximate and only cause of the loss. Moreover, it should have exercised
due diligence to prevent or minimize the loss before, during and after the
occurrence of the fortuitous event.

Loss in the Instant Case

There is no controversy regarding the loss of the cargo in the
present case. As the common carrier, petitioner bore the burden of
proving that it had exercised extraordinary diligence to avoid the loss, or
that the loss had been occasioned by a fortuitous event -- an exempting
circumstance.
The evidence presented by petitioner in support of its defense of fortuitous event
was sorely insufficient. As required by the pertinent law, it was not enough for the
common carrier to show that there was an unforeseen or unexpected occurrence. It
had to show that it was free from any fault -- a fact it miserably failed to prove.
The alleged fortuitous event was not the sole and proximate cause of the loss.
There is a preponderance of evidence that the barge was not seaworthy when it
sailed for Manila. Respondent was able to prove that, in the hull of the barge, there
were holes that might have caused or aggravated the sinking. Because the
presumption of negligence or fault applied to petitioner, it was incumbent upon it to
show that there were no holes; or, if there were, that they did not aggravate the
sinking. The Petition is DENIED and the assailed Decision and Resolution are
AFFIRMED.

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

Nicanor Navidad, entered the EDSA LRT station while he was standing on the
platform near the LRT tracks, Junelito Escartin, the security guard approached
him. A misunderstanding or an altercation between the two apparently ensued
that led to a fist fight. At the exact moment that Navidad fell, an LRT train,
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operated by petitioner Rodolfo Roman, was coming in. Navidad was struck by
the moving train, and he was killed instantaneously.
The widow of Nicanor, herein respondent Marjorie Navidad, along with her
children, filed a complaint for damages against Junelito Escartin, Rodolfo Roman,
the LRTA, the Metro Transit Organization, Inc. (Metro Transit), and Prudent for the
death of her husband.
LRTA and Roman filed a counterclaim against Navidad and a cross-claim against
Escartin and Prudent. Prudent, in its answer, denied liability and averred that it
had exercised due diligence in the selection and supervision of its security
guards.
The trial court rendered its decision in favor of the plaintiffs and against the
defendants Prudent Security and Junelito Escartin ordering the latter to pay
jointly and severally the plaintiffs damages. The complaint against defendants
LRTA and Rodolfo Roman are dismissed for lack of merit. The compulsory
counterclaim of LRTA and Roman are likewise dismissed.
Prudent appealed to the Court of Appeals exonerating Prudent from any liability
for the death of Nicanor Navidad and, instead, holding the LRTA and Roman
jointly and severally liable thusly.
The appellate court ratiocinated that while the deceased might not have then as
yet boarded the train, a contract of carriage theretofore had already existed
when the victim entered the place where passengers were supposed to be after
paying the fare and getting the corresponding token therefor. In exempting
Prudent from liability, the court stressed that there was nothing to link the
security agency to the death of Navidad. It said that Navidad failed to show that
Escartin inflicted fist blows upon the victim and the evidence merely established
the fact of death of Navidad by reason of his having been hit by the train owned
and managed by the LRTA and operated at the time by Roman. The appellate
court faulted petitioners for their failure to present expert evidence to establish
the fact that the application of emergency brakes could not have stopped the
train.

SC RULING:
Law and jurisprudence dictate that a common carrier, both from the nature of its
business and for reasons of public policy, is burdened with the duty of exercising
utmost diligence in ensuring the safety of passengers. The Civil Code, governing
the liability of a common carrier for death of or injury to its passengers, provides:
Article 1755. A common carrier is bound to carry the passengers safely as far as
human care and foresight can provide, using the utmost diligence of very cautious
persons, with a due regard for all the circumstances.
Article 1756. In case of death of or injuries to passengers, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove that
they observed extraordinary diligence as prescribed in articles 1733 and 1755.
Article 1759. Common carriers are liable for the death of or injuries to passengers
through the negligence or willful acts of the formers employees, although such
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employees may have acted beyond the scope of their authority or in violation of the
orders of the common carriers.
This liability of the common carriers does not cease upon proof that they exercised
all the diligence of a good father of a family in the selection and supervision of their
employees.
Article 1763. A common carrier is responsible for injuries suffered by a passenger
on account of the willful acts or negligence of other passengers or of strangers, if
the common carriers employees through the exercise of the diligence of a good
father of a family could have prevented or stopped the act or omission.
The law requires common carriers to carry passengers safely using the utmost
diligence of very cautious persons with due regard for all circumstances. Such duty
of a common carrier to provide safety to its passengers so obligates it not only
during the course of the trip but for so long as the passengers are within its
premises and where they ought to be in pursuance to the contract of carriage. The
statutory provisions render a common carrier liable for death of or injury to
passengers (a) through the negligence or wilful acts of its employees or b) on
account of wilful acts or negligence of other passengers or of strangers if the
common carriers employees through the exercise of due diligence could have
prevented or stopped the act or omission. In case of such death or injury, a carrier
is presumed to have been at fault or been negligent, and by simple proof of injury,
the passenger is relieved of the duty to still establish the fault or negligence of the
carrier or of its employees and the burden shifts upon the carrier to prove that the
injury is due to an unforeseen event or to force majeure. In the absence of
satisfactory explanation by the carrier on how the accident occurred, which
petitioners, according to the appellate court, have failed to show, the presumption
would be that it has been at fault, an exception from the general rule that
negligence must be proved.
The foundation of LRTAs liability is the contract of carriage and its
obligation to indemnify the victim arises from the breach of that contract
by reason of its failure to exercise the high diligence required of the
common carrier. In the discharge of its commitment to ensure the safety of
passengers, a carrier may choose to hire its own employees or avail itself of the
services of an outsider or an independent firm to undertake the task. In either
case, the common carrier is not relieved of its responsibilities under the
contract of carriage.
Should Prudent be made likewise liable?
If at all, that liability could only be for tort under the provisions of Article 2176 and
related provisions, in conjunction with Article 2180, of the Civil Code. The premise,
however, for the employers liability is negligence or fault on the part of the
employee. Once such fault is established, the employer can then be made liable on
the basis of the presumption juris tantum that the employer failed to exercise
diligentissimi patris families in the selection and supervision of its employees. The
liability is primary and can only be negated by showing due diligence in the
selection and supervision of the employee, a factual matter that has not been
shown. Absent such a showing, one might ask further, how then must the liability of
the common carrier, on the one hand, and an independent contractor, on the other
hand, be described? It would be solidary. A contractual obligation can be breached
by tort and when the same act or omission causes the injury, one resulting in culpa
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contractual and the other in culpa aquiliana, Article 2194 of the Civil Code can well
apply. In fine, a liability for tort may arise even under a contract, where tort is that
which breaches the contract. Stated differently, when an act which constitutes a
breach of contract would have itself constituted the source of a quasi-delictual
liability had no contract existed between the parties, the contract can be said to
have been breached by tort, thereby allowing the rules on tort to apply.
Regrettably for LRT, as well as perhaps the surviving spouse and heirs of the late
Nicanor Navidad, this Court is concluded by the factual finding of the Court of
Appeals that there is nothing to link (Prudent) to the death of Nicanor (Navidad),
for the reason that the negligence of its employee, Escartin, has not been duly
proven x x x. This finding of the appellate court is not without substantial
justification in our own review of the records of the case.
There being, similarly, no showing that petitioner Rodolfo Roman himself is guilty of
any culpable act or omission, he must also be absolved from liability. Needless to
say, the contractual tie between the LRT and Navidad is not itself a juridical relation
between the latter and Roman; thus, Roman can be made liable only for his own
fault or negligence.
The award of nominal damages in addition to actual damages is untenable.
Nominal damages are adjudicated in order that a right of the plaintiff, which has
been violated or invaded by the defendant, may be vindicated or recognized, and
not for the purpose of indemnifying the plaintiff for any loss suffered by him. It is
an established rule that nominal damages cannot co-exist with
compensatory damages.
WHEREFORE, the assailed decision of the appellate court is AFFIRMED with
MODIFICATION but only in that (a) the award of nominal damages is DELETED and
(b) petitioner Rodolfo Roman is absolved from liability.

JOSE BARITUA and JB LINE, petitioners, vs. NIMFA DIVINA MERCADER, et al., respondents. [G.R.
No. 136048. January 23, 2001]

The late Dominador Mercader boarded petitioners bus Manila Station/terminal,

bound for Laoang Northern Samar as a paying passenger;
The late Dominador Mercader was not able to reach his destination while he was
on board, the said bus fell into the river as a result of which the late Dominador
Mercader died.
The accident happened because petitioners driver negligently and recklessly
operated the bus at a fast speed in wanton disregard of traffic rules and
regulations and the prevailing conditions then existing that caused [the] bus to
fall into the river.
The Court of Appeals affirmed the trial courts award of monetary damages in
favor of respondents, except the amount of Dominador Mercaders lost earnings,
which it reduced to P798,000. It held that petitioners failed to rebut the
presumption that in the event a passenger died or was injured, the carrier had
acted negligently. Petitioners, it added, presented no sufficient proof that they
had exercised extraordinary diligence.
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SC RULING:
We are not convinced by petitioners contention, either, that both the trial and the
appellate courts failed to state clearly and distinctly the facts and the law involved
in the case. As can be gleaned from their Decisions, both courts clearly laid down
their bases for awarding monetary damages to respondents.
Both the RTC and the CA found that a contract of carriage existed between
petitioners and Dominador Mercader when he boarded Bus No. 142 in Pasay City on
March 16, 1983. Petitioners failed to transport him to his destination, because the
bus fell into a river while traversing the Bugko Bailey Bridge. Although he survived
the fall, he later died of asphyxia secondary to drowning.
We agree with the findings of both courts that petitioners failed to observe
extraordinary diligence that fateful morning. It must be noted that a common
carrier, by the nature of its business and for reasons of public policy, is
bound to carry passengers safely as far as human care and foresight can
provide. It is supposed to do so by using the utmost diligence of very
cautious persons, with due regard for all the circumstances. In case of
death or injuries to passengers, it is presumed to have been at fault or to
have acted negligently, unless it proves that it observed extraordinary
diligence as prescribed in Articles 1733 and 1755 of the Civil Code.
We sustain the ruling of the CA that petitioners failed to prove that they had
observed extraordinary diligence.
We therefore believe that there is no reason to overturn the assailed CA Decision,
which affirmed that of the RTC. It is a well-settled rule that the trial courts factual
findings, when affirmed by the appellate court, are conclusive and binding, if they
are not tainted with arbitrariness or oversight of some fact or circumstance of
significance and influence. As clearly discussed above, petitioners have not
presented sufficient ground to warrant a deviation from this rule.
Finally, we cannot fault the appellate court in its computation of the damages and
lost earnings, since it effectively computed only net earnings in accordance with
existing jurisprudence. WHEREFORE, the Petition is hereby DENIED, and the assailed
Decision AFFIRMED.

JAPAN AIRLINES, petitioner, vs. THE COURT OF APPEALS ENRIQUE AGANA, MARIA ANGELA
NINA AGANA, ADALIA B. FRANCISCO and JOSE MIRANDA, respondents. [G.R. No. 118664. August
7, 1998]

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
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said airline, both flights were to make an overnight stopover at Narita, Japan, at
the airlines expense, thereafter proceeding to Manila the following day.
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 NAIAs 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. Private
respondents were forced to pay for their accommodations and meal expenses
from their personal funds from June 16 to June 21, 1991.
Private respondents commenced an action for damages against JAL before the
RTC.
Respondents 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.
The trial court rendered its judgment in favor of private respondents holding JAL
liable for damages.
JAL appealed the decision before the Court of Appeals, which, however, with the
exception of lowering the damages awarded affirmed the trial courts finding.

SC RULING:
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.
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.
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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. 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.
It has been held that airline passengers must take such risks incident to the mode
of travel. 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.
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.
The reliance in PAL v. CA 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 carriers
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. 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
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 NAIAs 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. The court may award nominal damages in
65 | P a g e

every obligation arising from any source enumerated in Article 1157, or in every
case where any property right has been invaded.
WHEREFORE, in view of the foregoing, the decision of the Court of Appeals 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 attorneys fees of P50,000.00 plus costs.

MR. & MRS. ENGRACIO FABRE, JR.* and PORFIRIO CABIL, petitioners, vs. COURT OF APPEALS,
THE WORD FOR THE WORLD CHRISTIAN FELLOWSHIP, INC., AMYLINE ANTONIO, JOHN
RICHARDS, GONZALO GONZALES, VICENTE V. QUE, JR., ICLI CORDOVA, ARLENE GOJOCCO,
ALBERTO ROXAS CORDERO, RICHARD BAUTISTA, JOCELYN GARCIA, YOLANDA CORDOVA,
NOEL ROQUE, EDWARD TAN, ERNESTO NARCISO, ENRIQUETA LOCSIN, FRANCIS NORMAN O.
LOPEZ, JULIUS CAESAR GARCIA, ROSARIO MA. V. ORTIZ, MARIETTA C. CLAVO, ELVIE SENIEL,
ROSARIO MARA-MARA, TERESITA REGALA, MELINDA TORRES, MARELLA MIJARES, JOSEFA
CABATINGAN, MARA NADOC, DIANE MAYO, TESS PLATA, MAYETTE JOCSON, ARLENE Y. MORTIZ,
LIZA MAYO, CARLOS RANARIO, ROSAMARIA T. RADOC and BERNADETTE FERRER, respondents.
[G.R. No. 111127. July 26, 1996]

Petitioners Engracio Fabre, Jr. and his wife were owners of a 1982 model Mazda
minibus. The couple had a driver, Porfirio J. Cabil, whom they hired in 1981, after
trying him out for two weeks. His job was to take school children to and from the
St. Scholasticas College in Malate, Manila.
On November 2, 1984 private respondent Word for the World Christian
Fellowship Inc. (WWCF) arranged with petitioners for the transportation of 33
members of its Young Adults Ministry from Manila to La Union and back in
consideration of which private respondent paid petitioners the amount of
P3,000.00.
The bus hit the left traffic steel brace and sign along the road and rammed the
fence of one Jesus Escano, then turned over and landed on its left side, coming
to a full stop only after a series of impacts. The bus came to rest off the road. A
coconut tree which it had hit fell on it and smashed its front portion.
Several passengers were injured.
The Lingayen police investigated the incident and on the basis of their finding
they filed a criminal complaint against the driver, Porfirio Cabil.
Amyline Antonio, who was seriously injured, brought this case in the RTC of
Makati, Metro Manila.
The trial court found that: No convincing evidence was shown that the minibus
was properly checked for travel to a long distance trip and that the driver was
properly screened and tested before being admitted for employment. Indeed, all
the evidence presented have shown the negligent act of the defendants which
ultimately resulted to the accident subject of this case. Accordingly, it gave
judgment for private respondents.
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The Court of Appeals affirmed the decision of the trial court with respect to
Amyline Antonio but dismissed it with respect to the other plaintiffs on the
ground that they failed to prove their respective claims. The Court of Appeals
modified the award of damages.
The Court of Appeals sustained the trial courts finding that petitioner Cabil failed
to exercise due care and precaution in the operation of his vehicle considering
the time and the place of the accident. The Court of Appeals held that the
Fabres were themselves presumptively negligent.

SC RULING:
First, it is unnecessary for our purpose to determine whether to decide this case on
the theory that petitioners are liable for breach of contract of carriage or culpa
contractual or on the theory of quasi delict or culpa aquiliana as both the Regional
Trial Court and the Court of Appeals held, for although the relation of
passenger and carrier is contractual both in origin and nature,
nevertheless the act that breaks the contract may be also a tort. In either
case, the question is whether the bus driver, petitioner Porfirio Cabil, was negligent.
The finding that Cabil drove his bus negligently, while his employer, the Fabres, who
owned the bus, failed to exercise the diligence of a good father of the family in the
selection and supervision of their employee is fully supported by the evidence on
record.
Pursuant to Arts. 2176 and 2180 of the Civil Code his negligence gave rise
to the presumption that his employers, the Fabres, were themselves
negligent in the selection and supervision of their employee.
Due diligence in selection of employees is not satisfied by finding that the
applicant possessed a professional drivers license. The employer should
also examine the applicant for his qualifications, experience and record of
service. Due diligence in supervision, on the other hand, requires the
formulation of rules and regulations for the guidance of employees and
the issuance of proper instructions as well as actual implementation and
monitoring of consistent compliance with the rules.
In the case at bar, the Fabres, in allowing Cabil to drive the bus to La Union,
apparently did not consider the fact that Cabil had been driving for school children
only, from their homes to the St. Scholasticas College in Metro Manila. They had
hired him only after a two-week apprenticeship. They had tested him for certain
matters, such as whether he could remember the names of the children he would
be taking to school, which were irrelevant to his qualification to drive on a long
distance travel, especially considering that the trip to La Union was his first. The
existence of hiring procedures and supervisory policies cannot be casually invoked
to overturn the presumption of negligence on the part of an employer.
Petitioners argue that under the contract, the WWCF was directly responsible for the
conduct of the trip. Neither of these contentions hold water.
It was held in an early case that: [A] person who hires a public automobile and gives
the driver directions as to the place to which he wishes to be conveyed, but
exercises no other control over the conduct of the driver, is not
67 | P a g e

responsible for acts of negligence of the latter or prevented from

recovering for injuries suffered from a collision between the automobile
and a train, caused by the negligence either of the locomotive engineer or
the automobile driver.
As already stated, this case actually involves a contract of carriage.
Art. 1732. Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air for compensation, offering their services to the public.
The above article makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such carrying
only as an ancillary activity (in local idiom, as a sideline). Article 1732 also
carefully avoids making any distinction between a person or enterprise offering
transportation service on a regular or scheduled basis and one offering such service
on an occasional, episodic or unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its services to the general public, i.e., the
general community or population, and one who offers services or solicits business
only from a narrow segment of the general population. We think that Article 1732
deliberately refrained from making such distinctions.
As common carriers, the Fabres were bound to exercise extraordinary diligence for
the safe transportation of the passengers to their destination. This duty of care is
not excused by proof that they exercised the diligence of a good father of the family
in the selection and supervision of their employee. As Art. 1759 of the Code
provides:
Common carriers are liable for the death of or injuries to passengers through the
negligence or wilful acts of the formers employees, although such employees may
have acted beyond the scope of their authority or in violation of the orders of the
common carriers.
This liability of the common carriers does not cease upon proof that they
exercised all the diligence of a good father of a family in the selection and
supervision of their employees.
The same circumstances detailed above, supporting the finding of the trial
court and of the appellate court that petitioners are liable under Arts.
2176 and 2180 for quasi delict, fully justify finding them guilty of breach
of contract of carriage under Arts. 1733, 1755 and 1759 of the Civil Code.
With respect to the other awards, while the decisions of the trial court and the Court
of Appeals do not sufficiently indicate the factual and legal basis for them, we find
that they are nevertheless supported by evidence in the records of this case.
Viewed as an action for quasi delict, this case falls squarely within the purview of
Art. 2219(2) providing for the payment of moral damages in cases of quasi delict.
On the theory that petitioners are liable for breach of contract of carriage, the award
of moral damages is authorized by Art. 1764, in relation to Art. 2220, since Cabils
gross negligence amounted to bad faith.
As above stated, the decision of the Court of Appeals can be sustained either on the
theory of quasi delict or on that of breach of contract. The question is whether, as
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the two courts below held, petitioners, who are the owners and driver of the bus,
may be made to respond jointly and severally to private respondent. We hold that
they may be. In Dangwa Trans. Co. Inc. v. Court of Appeals, on facts similar
to those in this case, this Court held the bus company and the driver
jointly and severally liable for damages for injuries suffered by a
passenger. Again, in Bachelor Express, Inc. v. Court of Appeals a driver found
negligent in failing to stop the bus in order to let off passengers when a fellow
passenger ran amuck, as a result of which the passengers jumped out of the
speeding bus and suffered injuries, was held also jointly and severally liable with the
bus company to the injured passengers.
The same rule of liability was applied in situations where the negligence of the
driver of the bus on which plaintiff was riding concurred with the negligence of a
third party who was the driver of another vehicle, thus causing an accident. In
Anuran v. Buo,[16] Batangas Laguna Tayabas Bus Co. v. Intermediate Appellate
Court, and Metro Manila Transit Corporation v. Court of Appeals, the bus company,
its driver, the operator of the other vehicle and the driver of the vehicle were jointly
and severally held liable to the injured passenger or the latters heirs.
The basis of this allocation of liability was explained in Viluan v. Court of Appeals,
thus:
Nor should it make any difference that the liability of petitioner [bus owner] springs
from contract while that of respondents [owner and driver of other vehicle] arises
from quasi-delict. As early as 1913, we already ruled in Gutierrez vs.
Gutierrez, 56 Phil. 177, that in case of injury to a passenger due to the
negligence of the driver of the bus on which he was riding and of the
driver of another vehicle, the drivers as well as the owners of the two
vehicles are jointly and severally liable for damages. Some members of the
Court, though, are of the view that under the circumstances they are liable on
quasi-delict.
It is true that in Philippine Rabbit Bus Lines, Inc. v. Court of Appeals this
Court exonerated the jeepney driver from liability to the injured
passengers and their families while holding the owners of the jeepney
jointly and severally liable, but that is because that case was expressly
tried and decided exclusively on the theory of culpa contractual. As this
Court there explained:
The trial court was therefore right in finding that Manalo [the driver] and
spouses Mangune and Carreon [the jeepney owners] were negligent.
However, its ruling that spouses Mangune and Carreon are jointly and
severally liable with Manalo is erroneous. The driver cannot be held
jointly and severally liable with the carrier in case of breach of the
contract of carriage. The rationale behind this is readily discernible.
Firstly, the contract of carriage is between the carrier and the passenger,
and in the event of contractual liability, the carrier is exclusively
responsible therefore to the passenger, even if such breach be due to the
negligence of his driver (see Viluan v. The Court of Appeals, et al., G.R.
Nos. L-21477-81, April 29, 1966, 16 SCRA 742) . . .
As in the case of BLTB, private respondents in this case and her co-plaintiffs did not
stake out their claim against the carrier and the driver exclusively on one theory,
much less on that of breach of contract alone. After all, it was permitted for them to
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allege alternative causes of action and join as many parties as may be liable on
such causes of action so long as private respondent and her co-plaintiffs do not
recover twice for the same injury. What is clear from the cases is the intent of the
plaintiff there to recover from both the carrier and the driver, thus justifying the
holding that the carrier and the driver were jointly and severally liable because their
separate and distinct acts concurred to produce the same injury.

WILLIAM TIU, doing business under the name and style of D Rough Riders, and VIRGILIO TE LAS
PIAS petitioners, vs. PEDRO A. ARRIESGADO, BENJAMIN CONDOR, SERGIO PEDRANO and
PHILIPPINE PHOENIX SURETY AND INSURANCE, INC., respondents. [G.R. No. 138060. September
1, 2004]

D Rough Riders passenger bus with plate number PBP-724 driven by Virgilio Te
Laspias was cruising along the national highway of Sitio Aggies, Poblacion,
Compostela, Cebu.
As the bus was approaching the bridge, Laspias saw the stalled truck, which
was then about 25 meters away. He applied the breaks and tried to swerve to
the left to avoid hitting the truck. But it was too late; the bus rammed into the
trucks left rear. The impact damaged the right side of the bus and left several
passengers injured. Pedro Arriesgado lost consciousness and suffered a fracture
in his right colles. His wife, Felisa, was later transferred to the Southern Island
Medical Center where she died shortly thereafter.
Respondent Pedro A. Arriesgado then filed a complaint for breach of contract of
carriage, damages and attorneys fees before the Regional Trial Court of Cebu
City.
The petitioners, for their part, filed a Third-Party Complaint.
The respondent PPSII, for its part, admitted that it had an existing contract with
petitioner Tiu, but averred that it had already attended to and settled the claims
of those who were injured during the incident. It could not accede to the claim of
respondent Arriesgado, as such claim was way beyond the scheduled indemnity
as contained in the contract of insurance.
After the parties presented their respective evidence, the trial court ruled in
favor of respondent Arriesgado.
After the petitioners motion for reconsideration of the said decision was denied,
the petitioners elevated the case to the Court of Appeals.
The appellate court rendered judgment affirming the trial courts decision with
the modification that the awards for moral and exemplary damages were
reduced to P25,000.

SC RULING:
We agree with the following findings of the trial court, which were affirmed by the
CA on appeal.
Petitioner Laspias negligence in driving the bus is apparent in the records. By his
own admission, he had just passed a bridge and was traversing the highway of
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Compostela, Cebu at a speed of 40 to 50 kilometers per hour before the collision

occurred. The maximum speed allowed by law on a bridge is only 30 kilometers per
hour. And, as correctly pointed out by the trial court, petitioner Laspias also
violated Section 35 of the Land Transportation and Traffic Code, Republic Act No.
4136, as amended:
Sec. 35. Restriction as to speed. (a) Any person driving a motor vehicle on a
highway shall drive the same at a careful and prudent speed, not greater nor less
than is reasonable and proper, having due regard for the traffic, the width of the
highway, and or any other condition then and there existing; and no person shall
drive any motor vehicle upon a highway at such speed as to endanger the life, limb
and property of any person, nor at a speed greater than will permit him to bring the
vehicle to a stop within the assured clear distance ahead.
Under Article 2185 of the Civil Code, a person driving a vehicle is presumed
negligent if at the time of the mishap, he was violating any traffic regulation.
Petitioner Tiu failed to Overcome the presumption Of negligence against him as One
engaged in the business Of common carriage.
The rules which common carriers should observe as to the safety of their
passengers are set forth in the Civil Code, Articles 1733,[32] 1755[33] and 1756. In
this case, respondent Arriesgado and his deceased wife contracted with petitioner
Tiu, as owner and operator of D Rough Riders bus service, for transportation from
Maya, Daanbantayan, Cebu, to Cebu City for the price of P18.00.[35] It is
undisputed that the respondent and his wife were not safely transported to the
destination agreed upon. In actions for breach of contract, only the existence
of such contract, and the fact that the obligor, in this case the common
carrier, failed to transport his passenger safely to his destination are the
matters that need to be proved. This is because under the said contract of
carriage, the petitioners assumed the express obligation to transport the
respondent and his wife to their destination safely and to observe
extraordinary diligence with due regard for all circumstances. Any injury
suffered by the passengers in the course thereof is immediately attributable to the
negligence of the carrier. Upon the happening of the accident, the presumption of
negligence at once arises, and it becomes the duty of a common carrier to prove
that he observed extraordinary diligence in the care of his passengers. It must be
stressed that in requiring the highest possible degree of diligence from common
carriers and in creating a presumption of negligence against them, the law compels
them to curb the recklessness of their drivers.
While evidence may be submitted to overcome such presumption of negligence, it
must be shown that the carrier observed the required extraordinary diligence, which
means that the carrier must show the utmost diligence of very cautious persons as
far as human care and foresight can provide, or that the accident was caused by
fortuitous event. As correctly found by the trial court, petitioner Tiu failed to
conclusively rebut such presumption. The negligence of petitioner Laspias as
driver of the passenger bus is, thus, binding against petitioner Tiu, as the owner of
the passenger bus engaged as a common carrier.
The Doctrine of Last Clear Chance Is Inapplicable in the Case at Bar

71 | P a g e

Contrary to the petitioners contention, the principle of last clear chance is

inapplicable in the instant case, as it only applies in a suit between the
owners and drivers of 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 and its owner
on the ground that the other driver was likewise guilty of negligence. The common
law notion of last clear chance permitted courts to grant recovery to a plaintiff who
has also been negligent provided that the defendant had the last clear chance to
avoid the casualty and failed to do so. Accordingly, it is difficult to see what role, if
any, the common law of last clear chance doctrine has to play in a jurisdiction
where the common law concept of contributory negligence as an absolute bar to
recovery by the plaintiff, has itself been rejected, as it has been in Article 2179 of
the Civil Code.
Respondents Pedrano and Condor were likewise Negligent
In Phoenix Construction, Inc. v. Intermediate Appellate Court,[45] where therein
respondent Dionisio sustained injuries when his vehicle rammed against a dump
truck parked askew, the Court ruled that the improper parking of a dump truck
without any warning lights or reflector devices created an unreasonable risk for
anyone driving within the vicinity, and for having created such risk, the truck driver
must be held responsible. In ruling against the petitioner therein, the Court
elucidated, thus:
In our view, Dionisios negligence, although later in point of time than the truck
drivers negligence, and therefore closer to the accident, was not an efficient
intervening or independent cause. What the petitioners describe as an intervening
cause was no more than a foreseeable consequence of the risk created by the
negligent manner in which the truck driver had parked the dump truck. In other
words, the petitioner truck driver owed a duty to private respondent Dionisio and
others similarly situated not to impose upon them the very risk the truck driver had
created. Dionisios negligence was not that of an independent and overpowering
nature as to cut, as it were, the chain of causation in fact between the improper
parking of the dump truck and the accident, nor to sever the juris vinculum of
liability.

We hold that private respondent Dionisios negligence was only contributory, that
the immediate and proximate cause of the injury remained the truck drivers lack
of due care.
In this case, both the trial and the appellate courts failed to consider that
respondent Pedrano was also negligent in leaving the truck parked askew without
any warning lights or reflector devices to alert oncoming vehicles, and that such
failure created the presumption of negligence on the part of his employer,
respondent Condor, in supervising his employees properly and adequately. As we
ruled in Poblete v. Fabros:
It is such a firmly established principle, as to have virtually formed part of the law
itself, that the negligence of the employee gives rise to the presumption of
negligence on the part of the employer. This is the presumed negligence in the
selection and supervision of employee. The theory of presumed negligence, in
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contrast with the American doctrine of respondeat superior, where the negligence of
the employee is conclusively presumed to be the negligence of the employer, is
clearly deducible from the last paragraph of Article 2180 of the Civil Code which
provides that the responsibility therein mentioned shall cease if the employers
prove that they observed all the diligence of a good father of a family to prevent
damages.
The petitioners were correct in invoking respondent Pedranos failure to observe
Article IV, Section 34(g) of the Rep. Act No. 4136, which provides:
(g) Lights when parked or disabled. Appropriate parking lights or flares visible one
hundred meters away shall be displayed at a corner of the vehicle whenever such
vehicle is parked on highways or in places that are not well-lighted or is placed in
such manner as to endanger passing traffic.
The manner in which the truck was parked clearly endangered oncoming traffic on
both sides, considering that the tire blowout which stalled the truck in the first place
occurred in the wee hours of the morning. The Court can only now surmise that the
unfortunate incident could have been averted had respondent Condor, the owner of
the truck, equipped the said vehicle with lights, flares, or, at the very least, an early
warning device. Hence, we cannot subscribe to respondents Condor and Pedranos
claim that they should be absolved from liability because, as found by the trial and
appellate courts, the proximate cause of the collision was the fast speed at which
petitioner Laspias drove the bus. To accept this proposition would be to come too
close to wiping out the fundamental principle of law that a man must respond for
the foreseeable consequences of his own negligent act or omission. Indeed, our law
on quasi-delicts seeks to reduce the risks and burdens of living in society and to
allocate them among its members. To accept this proposition would be to weaken
the very bonds of society.
The Liability of Respondent PPSII as Insurer
The trial court in this case did not rule on the liability of respondent PPSII, while the
appellate court ruled that, as no evidence was presented against it, the insurance
company is not liable.
A perusal of the records will show that when the petitioners filed the Third-Party
Complaint against respondent PPSII, they failed to attach a copy of the terms of the
insurance contract itself.
In fact, respondent PPSII did not dispute the existence of such contract, and
admitted that it was liable thereon. It claimed, however, that it had attended to and
settled the claims of those injured during the incident.
As can be gleaned from the Certificate of Cover, such insurance contract was issued
pursuant to the Compulsory Motor Vehicle Liability Insurance Law. It was expressly
provided therein that the limit of the insurers liability for each person was P12,000,
while the limit per accident was pegged at P50,000. An insurer in an indemnity
contract for third party liability is directly liable to the injured party up to the extent
specified in the agreement but it cannot be held solidarily liable beyond that
amount. The respondent PPSII could not then just deny petitioner Tius claim; it
should have paid P12,000 for the death of Felisa Arriesgado, and respondent
Arriesgados hospitalization expenses of P1,113.80, which the trial court found to
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have been duly supported by receipts. The total amount of the claims, even when
added to that of the other injured passengers which the respondent PPSII claimed to
have settled, would not exceed the P50,000 limit under the insurance agreement.
Indeed, the nature of Compulsory Motor Vehicle Liability Insurance is such that it is
primarily intended to provide compensation for the death or bodily injuries suffered
by innocent third parties or passengers as a result of the negligent operation and
use of motor vehicles. The victims and/or their dependents are assured of
immediate financial assistance, regardless of the financial capacity of motor vehicle
owners. As the Court, speaking through Associate Justice Leonardo A. Quisumbing,
explained in Government Service Insurance System v. Court of Appeals:
However, although the victim may proceed directly against the insurer for
indemnity, the third party liability is only up to the extent of the insurance policy
and those required by law. While it is true that where the insurance contract
provides for indemnity against liability to third persons, and such persons can
directly sue the insurer, the direct liability of the insurer under indemnity contracts
against third party liability does not mean that the insurer can be held liable in
solidum with the insured and/or the other parties found at fault. For the liability of
the insurer is based on contract; that of the insured carrier or vehicle owner is
based on tort.
Obviously, the insurer could be held liable only up to the extent of what was
provided for by the contract of insurance, in accordance with the CMVLI law. At the
time of the incident, the schedule of indemnities for death and bodily injuries,
professional fees and other charges payable under a CMVLI coverage was provided
for under the Insurance Memorandum Circular (IMC) No. 5-78 which was approved
on November 10, 1978. As therein provided, the maximum indemnity for death was
twelve thousand (P12,000.00) pesos per victim. The schedules for medical expenses
were also provided by said IMC, specifically in paragraphs (C) to (G).
Damages to be Awarded
The trial court correctly awarded moral damages in the amount of P50,000 in favor
of respondent Arriesgado. The award of exemplary damages by way of example or
correction of the public good, is likewise in order. As the Court ratiocinated in
Kapalaran Bus Line v. Coronado:
While the immediate beneficiaries of the standard of extraordinary diligence are,
of course, the passengers and owners of cargo carried by a common carrier, they
are not the only persons that the law seeks to benefit. For if common carriers
carefully observed the statutory standard of extraordinary diligence in respect of
their own passengers, they cannot help but simultaneously benefit pedestrians and
the passengers of other vehicles who are equally entitled to the safe and
convenient use of our roads and highways. The law seeks to stop and prevent the
slaughter and maiming of people (whether passengers or not) on our highways and
buses, the very size and power of which seem to inflame the minds of their drivers.
Article 2231 of the Civil Code explicitly authorizes the imposition of exemplary
damages in cases of quasi-delicts if the defendant acted with gross negligence.
The respondent Pedro A. Arriesgado, as the surviving spouse and heir of Felisa
Arriesgado, is entitled to indemnity in the amount of P50,000.00.67
74 | P a g e

The petitioners, as well as the respondents Benjamin Condor and Sergio Pedrano
are jointly and severally liable for said amount, conformably with the following
pronouncement of the Court in Fabre, Jr. vs. Court of Appeals:
The same rule of liability was applied in situations where the negligence of the
driver of the bus on which plaintiff was riding concurred with the negligence of a
third party who was the driver of another vehicle, thus causing an accident. In
Anuran v. Buo, Batangas Laguna Tayabas Bus Co. v. Intermediate Appellate Court,
and Metro Manila Transit Corporation v. Court of Appeals, the bus company, its
driver, the operator of the other vehicle and the driver of the vehicle were jointly
and severally held liable to the injured passenger or the latters heirs. The basis of
this allocation of liability was explained in Viluan v. Court of Appeals, thus:
Nor should it make difference that the liability of petitioner [bus owner] springs
from contract while that of respondents [owner and driver of other vehicle] arises
from quasi-delict. As early as 1913, we already ruled in Gutierrez vs. Gutierrez, 56
Phil. 177, that in case of injury to a passenger due to the negligence of the driver of
the bus on which he was riding and of the driver of another vehicle, the drivers as
well as the owners of the two vehicles are jointly and severally liable for damages.
Some members of the Court, though, are of the view that under the circumstances
they are liable on quasi-delict.69

LUCIA S. PAJARITO, petitioner, vs. HON. ALBERTO V. SEERIS, Presiding Judge of Branch II, Court
of First Instance of Zamboanga; JOSELITO AIZON, and FELIPE AIZON, respondents. G.R. No. L44627 December 14, 1978

The Joselito Aizon, driver of an Isuzu Passenger Bus bearing Plate No. SB-511
owned and operated by FELIPE AIZON, operating on the public road, and without
taking the necessary precautions, through reckless and fast driving, caused the
said Isuzu Passenger Bus to turn turtle, as a result of which, the persons of
MYRNA PAJARITO DE SAN LUIS and MUSA BARING, both passengers on board the
said Isuzu passenger bus sustained injuries on their persons which caused their
death.
Upon arraignment, said respondent entered a plea of guilty. In view of said plea,
the court rendered judgment convicting him of the offense charged and
sentencing him "to indemnify the heirs of the late Myrna Pajarito de San Luis.
After the judgment had become final and executory, a Writ of Execution was
issued against Joselito Aizon for the indemnity of P12,000.00, but the same was
returned unsatisfied because of his insolvency. Whereupon, petitioner Lucia S.
Pajarito, mother of the late Myrna Pajarito de San Luis, filed with the court a quo
a motion for the issuance of Subsidiary Writ of Execution and served a copy
thereof to private respondent Felipe Aizon, employer of Joselito Aizon as alleged
in the Information.
Felipe Aizon opposed the motion on the grounds, to wit: (1) that he is not the
employer of Joselito Aizon, the vehicle in question having been sold already to
Isaac Aizon, father of Joselito, but that the deed of transfer has not been
executed because the full price has not yet been paid; and (2) that in case of
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insolvency, Joselito has to suffer subsidiary imprisonment to satisfy the judgment

insofar as the indemnity is concerned.

The court denied petitioner's motion for Subsidiary Writ of Execution on the
ground that Felipe Aizon, alleged employer of Joselito, was not a party in the
aforesaid criminal case.
Petitioner moved for reconsideration of the foregoing ruling, but the same was
denied.

SC RULING:
Obviously, the question to be considered here is whether the subsidiary civil liability
established in Articles 102 and 103 of the Revised Penal Code may be enforced in
the same criminal case where the award was made, or in a separate civil action.
Under Article 100 of the Revised Penal Code, a person criminally liable for a felony is
also civilly liable. As a consequence, the institution of the criminal action carries
with it the institution of the civil action arising therefrom, except when there is a
separate civil action or reservation of the latter on the part of the complainant. As
explained in Ramcar, Incorporated v. De Leon: 1 "When no civil action is expressly
instituted, according to subsection (a) of section 1 of Rule 107, it shall be impliedly
jointly instituted with the criminal action.' That means as if two actions are joined in
one as twins, each one complete with the same completeness as any of the two
normal persons composing a twin. It means that the civil action may be tried and
prosecuted, with all the ancillary processes provided by law."
Pursuant to Article 103, in relation to Article 102, of the Revised Penal Code, an
employer may be subsidiary liable for the employee's civil liability in a criminal
action when: (1) the employer is engaged in any kind of industry; (2) the employee
committed the offense in the discharge of his duties; and (3) he is insolvent and has
not satisfied his civil liability. 2 The subsidiary civil liability of the employer,
however, arises only after conviction of the employee in the criminal case. In
Martinez v. Barredo, this Court ruled that a judgment of conviction sentencing a
defendant employee to pay an indemnity in the absence of any collusion between
the defendant and the offended party, is conclusive upon the employer in an action
for the enforcement of the latter's subsidiary liability.
The employer cannot be said to have been deprived of his day in court, because the
situation before us is not one wherein the employer is sued for a primary liability
under article 1903 of the Civil Code, but one in which enforcement is sought of a
subsidiary civil liability incident to and dependent upon his driver's criminal
negligence which is a proper issue to be tried and decided only in a criminal action.
In other words, the employer becomes ipso facto subsidiarily liable upon his driver's
conviction and upon proof of the latter's insolvency, in the same way that acquittal
wipes out not only the employee's primary civil liability but also his employer's
subsidiary liability for such criminal negligence.
It is high time that the employer exercised the greatest care in selecting his
employees, taking real and deep interest in their welfare; intervening in any
criminal action brought against them by reason of or as a result of the performance
of their duties, if only in the way of giving them the benefit of counsel; and
consequently doing away with the practice of leaving them to their fates. If these be
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done, the American rule requiring notice on the part of the employer shall have
been satisfied. (At pp. 3-4)
In Miranda v. Malate Garage & Taxicab, Inc., this Court further amplified the
rule that the decision convicting the employee is binding and conclusive
upon the employer, "not only with regard to (the latter's) civil liability but
also with regard to its amount because the liability of an employer cannot
be separated but follows that of his employee. That is why the law says
that his liability is subsidiary (Article 103, Revised Penal Code). To allow an
employer to dispute the civil liability fixed in the criminal case would be to amend,
nullify, or defeat a final judgment rendered by a competent court." And this Court, in
Miranda, further explained that the employer is in substance and in effect a party to
the criminal case, considering the subsidiary liability imposed upon him by law.
It is true that an employer, strictly speaking, is not a party to the criminal
case instituted against his employee, but in substance and in effect he is
considering the subsidiary liability imposed upon him by law. It is his
concern, as well as of his employee, to see to it that his interest be
protected in the criminal case by taking virtual participation in the
defense of his employee. He cannot leave him to his own fate because his
failure is also his. And if because of his indifference or inaction the
employee is convicted and damages are awarded against him, he cannot
later be heard to complain, if brought to court, for the enforcement of his
subsidiary liability, that he was not given his day in court . (At p. 675.
Emphasis supplied.)
The conclusiveness upon the employer of the judgment of conviction sentencing the
employee to pay civil indemnity, for the enforcement of the employer's subsidiary
civil liability under Article 103 was again reiterated in Manalo and Salvador v. Robles
Transportation Company, Inc., where the Court ruled that the sheriff's return
submitted in evidence in the action against the employer, Robles Transportation
Company, Inc., showing that the two writs of execution were not satisfied because
of the insolvency of the driver, is a prima facie evidence of the employee's
insolvency. Similarly, this Court ruled that the defendant's insolvency may be
proven by the certificate of the Director of Prisons that the employee is serving
subsidiary imprisonment; or by the certificate of the sheriff that the employee has
not satisfied his pecuniary liability and that no properties have been found
registered in his name.
Considering that the judgment of conviction, sentencing a defendant employee to
pay an indemnity under Articles 102 and 103 of the Revised Penal Code, is
conclusive upon the employer not only with regard to the latter's civil liability but
also with regard to its amount, this Court stated in Rotea, that in the action to
enforce the employer's subsidiary liability, the court has no other function than to
render decision based upon the indemnity awarded in the criminal case and has no
power to amend or modify it even if in its opinion an error has been committed in
the decision.
In view of the foregoing principles, and considering that Felipe Aizon does not deny
that he was the registered operator of the bus but only claims now that he sold the
bus to the father of the accused, it would serve no important purpose to require
petitioner to file a separate and independent action against the employer for the
enforcement of the latter's subsidiary civil liability. Under the circumstances, it
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would not only prolong the litigation but would require the heirs of the deceased
victim to incur unnecessary expenses. At any rate, the proceeding for the
enforcement of the subsidiary civil liability may be considered as part of the
proceeding for the execution of the judgment. A case in which an execution has
been issued is regarded as still pending so that all proceedings on the execution are
proceedings in the suit. 9 There is no question that the court which rendered the
judgment has a general supervisory control over its process of execution, and this
power carries with it the right to determine every question of fact and law which
may be involved in the execution.
The validity of the claim of Felipe Aizon that he is no longer the owner and operator
of the in fated bus as he sold it already to Isaac Aizon, father of the accused Joselito
Aizon, is a matter that could be litigated and resolved in the same criminal case. In
support of his opposition to the motion of the complainant, served upon him, for the
purpose of the enforcement of his subsidiary liability Felipe Aizon may adduce all
the evidence necessary for that purpose. Indeed, the enforcement of the employer's
subsidiary civil liability may be conveniently litigated within the same proceeding
because the execution of the judgment is a logical and integral part of the case
itself. This would certainly facilitate the application of justice to the rival claims of
the contending parties. "The purpose of procedure", observed this Court in Manila
Railroad Co. v. Attorney General, "is not to thwart justice. Its proper aim is to
facilitate the application of justice to the rival claims of the contending parties. It
was created not to hinder and delay but to facilitate and promote the administration
of justice." In proceedings to apply justice, it is the duty of the courts "to assist the
parties in obtaining just, speedy, and inexpensive determination" of their rival
claims. Thus, the Rules require that they should be liberally construed "to promote
their object and to assist the parties in obtaining just, speedy, and inexpensive
determination of every action and proceeding."
WHEREFORE, the Orders of respondent Court in Criminal Case No. 512 (1313) dated
July 27, 1976 and August 14, 1976 are hereby set aside. The Court a quo is directed
to hear and decide in the same proceeding the subsidiary liability of the alleged
owner and operator of the passenger bus
Separate Opinions
BARREDO, J., concurring:
I concur, but to make matters clearer, I must add that the only issues open at the
hearing to be held by the court a quo are: (1) whether or not Felipe Aizon was the
owner of the vehicle driven by the convicted accused, Joselito Aizon, or, whether or
not he was the employer of said accused at the time of the commission of the
offense on May 9, 1975, and (2) whether or not said Joselito Aizon is insolvent. As
stated in the main opinion, the judgment in the criminal case is conclusive upon the
employer not only with regard to his civil liability but also with regard to its amount
which is that found in the judgment of conviction. In other words, what is to be
decided by the trial court is not strictly speaking the subsidiary liability of the
employer, Felipe Aizon, for the judgment in the criminal case is deemed to include
that liability, but only the two issues related to it that I have mentioned.

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PHILTRANCO SERVICE ENTERPRISES, INC. and ROGACIONES MANILHIG, petitioner, vs. COURT
OF APPEALS and HEIRS OF THE LATE RAMON ACUESTA, respondents. [G.R. No. 120553. June
17, 1997]

Civil Case No. 373 was an action against herein petitioners for damages
instituted by the heirs of Ramon A. Acuesta. 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.
The victim Ramon A. Acuesta was riding in his easy rider bicycle. Defendant
Philtranco Bus driven by defendant Rogasiones Manilhig y Dolira was being
pushed by some persons in order to start its engine.
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, it proceeded
running.
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 petitioners had a different version of the incident. They alleged that 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 trial court handed down a decision ordering the petitioners to jointly and
severally pay the private respondents.
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
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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.
SC RULING:
Civil Case No. 373 is an action for damages based on quasi-delict 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, for damages arising from the tortious acts
of the driver is primary, direct, and joint and several or solidary with the driver. As
to solidarity, Article 2194 expressly provides:
ART. 2194. The responsibility of two or more persons who are liable for a quasidelict 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.
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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.
The award of P1 million for moral damages to the heirs of Ramon Acuesta has no
sufficient basis and is excessive and unreasonable.
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
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proportional to the suffering inflicted. 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. The Court of Appeals found that there was gross negligence on the
part of petitioner Manilhig. 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. 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. 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. 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.

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