G.R. No.

116863 February 12, 1998

KENG HUA PAPER PRODUCTS CO. INC., petitioner,

vs.
COURT OF APPEALS; REGIONAL TRIAL COURT OF MANILA, BR. 21; and SEA-LAND SERVICE, INC., respondents.

PANGANIBAN, J.:

What is the nature of a bill of lading? When does a bill of lading become binding on a consignee? Will an alleged overshipment justify
the consignee's refusal to receive the goods described in the bill of lading? When may interest be computed on unpaid demurrage
charges?

Statement of the Case

These are the main questions raised in this petition assailing the Decision 1 of the Court of Appeals 2 promulgated on May 20, 1994 in
C.A.-G.R. CV No. 29953 affirming in toto the decision 3 dated September 28, 1990 in Civil Case No. 85-33269 of the Regional Trial
Court of Manila, Branch 21. The dispositive portion of the said RTC decision reads:

WHEREFORE, the Court finds by preponderance of evidence that Plaintiff has proved its cause of action and right to
relief. Accordingly, judgment is hereby rendered in favor of the Plaintiff and against Defendant, ordering the
Defendant to pay plaintiff:

1. The sum of P67,340.00 as demurrage charges, with interest at the legal rate from the date of the extrajudicial
demand until fully paid;

2. A sum equivalent to ten (10%) percent of the total amount due as Attorney's fees and litigation expenses.

Send copy to respective counsel of the parties.

SO ORDERED.4

The Facts

The factual antecedents of this case as found by the Court of Appeals are as follows:

Plaintiff (herein private respondent), a shipping company, is a foreign corporation licensed to do business in the
Philippines. On June 29, 1982, plaintiff received at its Hong Kong terminal a sealed container, Container No. SEAU
67523, containing seventy-six bales of "unsorted waste paper" for shipment to defendant (herein petitioner), Keng
Hua Paper Products, Co. in Manila. A bill of lading (Exh. A) to cover the shipment was issued by the plaintiff.

On July 9, 1982, the shipment was discharged at the Manila International Container Port. Notices of arrival were
transmitted to the defendant but the latter failed to discharge the shipment from the container during the "free time"
period or grace period. The said shipment remained inside the plaintiff's container from the moment the free time
period expired on July 29, 1982 until the time when the shipment was unloaded from the container on November 22,
1983, or a total of four hundred eighty-one (481) days. During the 481-day period, demurrage charges accrued.
Within the same period, letters demanding payment were sent by the plaintiff to the defendant who, however, refused
to settle its obligation which eventually amounted to P67,340.00. Numerous demands were made on the defendant
but the obligation remained unpaid. Plaintiff thereafter commenced this civil action for collection and damages.

In its answer, defendant, by way of special and affirmative defense, alleged that it purchased fifty (50) tons of waste
paper from the shipper in Hong Kong, Ho Kee Waste Paper, as manifested in Letter of Credit No. 824858 (Exh. 7. p.
110. Original Record) issued by Equitable Banking Corporation, with partial shipment permitted; that under the letter
of credit, the remaining balance of the shipment was only ten (10) metric tons as shown in Invoice No. H-15/82 (Exh.
8, p. 111, Original Record); that the shipment plaintiff was asking defendant to accept was twenty (20) metric tons
which is ten (10) metric tons more than the remaining balance; that if defendant were to accept the shipment, it would
be violating Central Bank rules and regulations and custom and tariff laws; that plaintiff had no cause of action
against the defendant because the latter did not hire the former to carry the merchandise; that the cause of action
should be against the shipper which contracted the plaintiff's services and not against defendant; and that the
defendant duly notified the plaintiff about the wrong shipment through a letter dated January 24, 1983 (Exh. D for
plaintiff, Exh. 4 for defendant, p. 5. Folder of Exhibits).

As previously mentioned, the RTC found petitioner liable for demurrage; attorney's fees and expenses of litigation. The petitioner
appealed to the Court of Appeals, arguing that the lower court erred in (1) awarding the sum of P67,340 in favor of the private
respondent, (2) rejecting petitioner's contention that there was overshipment, (3) ruling that petitioner's recourse was against the
shipper, and (4) computing legal interest from date of extrajudicial demand.5

Respondent Court of Appeals denied the appeal and affirmed the lower court's decision in toto. In a subsequent resolution,6 it also
denied the petitioner's motion for reconsideration.

Hence, this petition for review.7

The Issues

In its memorandum, petitioner submits the following issues:

 I. Whether or not petitioner had accepted the bill of lading;

II. Whether or not the award of the sum of P67,340.00 to private respondent was proper;

III. Whether or not petitioner was correct in not accepting the overshipment;

IV. Whether or not the award of legal interest from the date of private respondent's
extrajudicial demand was proper;8

In the main, the case revolves around the question of whether petitioner bound by the bill of lading. We shall, thus, discuss
the above four issues as they intertwine with this main question.

The Court's Ruling

The petition is partly meritorious. We affirm petitioner's liability for demurrage, but modify the interest rate thereon.

Main Issue: Liability Under the Bill of Lading

A bill of lading serves two functions. First, it is a receipt for the goods shipped. Second, it is a contract by which three parties,
namely, the shipper, the carrier, and the consignee undertake specific responsibilities and assume stipulated obligations. 9 A
"bill of lading delivered and accepted constitutes the contract of carriage even though not signed," 10 because the
"(a)cceptance of a paper containing the terms of a proposed contract generally constitutes an acceptance of the contract and
of all of its terms and conditions of which the acceptor has actual or constructive notice." 11 In a nutshell, the acceptance of a
bill of lading by the shipper and the consignee, with full knowledge of its contents, gives rise to the presumption that the
same was a perfected and binding contract. 12

In the case at bar, both lower courts held that the bill of lading was a valid and perfected contract between the shipper (Ho
Kee), the consignee (Petitioner Keng Hua), and the carrier (Private Respondent Sea-Land). Section 17 of the bill of lading
provided that the shipper and the consignee were liable for the payment of demurrage charges for the failure to discharge the
containerized shipment beyond the grace period allowed by tariff rules. Applying said stipulation, both lower courts found
petitioner liable. The aforementioned section of the bill of lading reads:

17. COOPERAGE FINES. The shipper and consignee shall be liable for, indemnify the carrier and ship and
hold them harmless against, and the carrier shall have a lien on the goods for, all expenses and charges for
mending cooperage, baling, repairing or reconditioning the goods, or the van, trailers or containers, and all
expenses incurred in protecting, caring for or otherwise made for the benefit of the goods, whether the
goods be damaged or not, and for any payment, expense, penalty fine, dues, duty, tax or impost, loss,
damage, detention, demurrage, or liability of whatsoever nature, sustained or incurred by or levied upon the
carrier or the ship in connection with the goods or by reason of the goods being or having been on board, or
because of shipper's failure to procure consular or other proper permits, certificates or any papers that may
be required at any port or place or shipper's failure to supply information or otherwise to comply with all
laws, regulations and requirements of law in connection with the goods of from any other act or omission of
the shipper or consignee: (Emphasis supplied.)

Petitioner contends, however, that it should not be bound by the bill of lading because it never gave its consent thereto.
Although petitioner admits "physical acceptance" of the bill of lading, it argues that its subsequent actions belie the finding
that it accepted the terms and conditions printed therein. 13 Petitioner cites as support the "Notice of Refused or On Hand
Freight" it received on November 2, 1982 from private respondent, which acknowledged that petitioner declined to accept the
shipment. Petitioner adds that it sent a copy of the said notice to the shipper on December 23, 1982. Petitioner points to its
January 24, 1983 letter to the private respondent, stressing "that its acceptance of the bill of lading would be tantamount to an
act of smuggling as the amount it had imported (with full documentary support) was only (at that time) for 10,000 kilograms
and not for 20,313 kilograms as stated in the bill of lading" and "could lay them vulnerable to legal sanctions for violation of
customs and tariff as well as Central Bank laws." 14 Petitioner further argues that the demurrage "was a consequence of the
shipper's mistake" of shipping more than what was bought. The discrepancy in the amount of waste paper it actually
purchased, as reflected in the invoice vis-a-vis the excess amount in the bill of lading, allegedly justifies its refusal to accept
the shipment. 15

Petitioner Bound by
the Bill of Lading

We are not persuaded. Petitioner admits that it "received the bill of lading immediately after the arrival of the shipment" 16 on
July 8, 1982. 17 Having been afforded an opportunity to examine the said document, petitioner did not immediately object to or
dissent from any term or stipulation therein. It was only six months later, on January 24, 1983, that petitioner sent a letter to
private respondent saying that it could not accept the shipment. Petitioner's inaction for such a long period conveys the clear
inference that it accepted the terms and conditions of the bill of lading. Moreover, said letter spoke only of petitioner's
inability to use the delivery permit, i.e. to pick up the cargo, due to the shipper's failure to comply with the terms and
conditions of the letter of credit, for which reason the bill of lading and other shipping documents were returned by the
"banks" to the shipper. 18 The letter merely proved petitioner's refusal to pick up the cargo, not its rejection of the bill of
lading.

Petitioner's reliance on the Notice of Refused or On Hand Freight, as proof of its nonacceptance of the bill of lading, is of no
consequence. Said notice was not written by petitioner; it was sent by private respondent to petitioner in November 1982, or
four months after petitioner received the bill of lading. If the notice has any legal significance at all, it is to highlight
petitioner's prolonged failure to object to the bill of lading. Contrary to petitioner's contention, the notice and the letter
support — not belie — the findings of the two lower courts that the bill of lading was impliedly accepted by petitioner.

As aptly stated by Respondent Court of Appeals:

 In the instant case, (herein petitioner) cannot and did not allege non-receipt of its copy of the bill of lading
from the shipper. Hence, the terms and conditions as well as the various entries contained therein were
brought to its knowledge. (Herein petitioner) accepted the bill of lading without interposing any objection as
to its contents. This raises the presumption that (herein petitioner) agreed to the entries and stipulations
imposed therein.

Moreover, it is puzzling that (herein petitioner) allowed months to pass, six (6) months to be exact, before
notifying (herein private respondent) of the "wrong shipment". It was only on January 24, 1983 that (herein
petitioner) sent (herein private respondent) such a letter of notification (Exh D for plaintiff, Exh. 4 for
defendant; p. 5, Folder of Exhibits). Thus, for the duration of those six months (herein private respondent
never knew the reason for (herein petitioner's) refusal to discharge the shipment.

After accepting the bill of lading, receiving notices of arrival of the shipment, failing to object thereto, (herein
petitioner) cannot now deny that it is bound by the terms in the bill of lading. If it did not intend to be bound,
(herein petitioner) would not have waited for six months to lapse before finally bringing the matter to (herein
private respondent's attention. The most logical reaction in such a case would be to immediately verify the
matter with the other parties involved. In this case, however, (herein petitioner) unreasonably detained
(herein private respondent's) vessel to the latter's prejudice. 19

Petitioner's attempt to evade its obligation to receive the shipment on the pretext that this may cause it to violate customs,
tariff and central bank laws must likewise fail. Mere apprehension of violating said laws, without a clear demonstration that
taking delivery of the shipment has become legally impossible, 20 cannot defeat the petitioner's contractual obligation and
liability under the bill of lading.

In any event, the issue of whether petitioner accepted the bill of lading was raised for the first time only in petitioner's
memorandum before this Court. Clearly, we cannot now entertain an issue raised for the very first time on appeal, in
deference to the well-settled doctrine that "(a)n issue raised for the first time on appeal and not raised timely in the
proceedings in the lower court is barred by estoppel. Questions raised on appeal must be within the issues framed by the
parties and, consequently, issues not raised in the trial court cannot be raised for the first time on appeal." 21

In the case at bar, the prolonged failure of petitioner to receive and discharge the cargo from the private respondent's vessel
constitutes a violation of the terms of the bill of lading. It should thus be liable for demurrage to the former.

In The Apollon, 22 Justice Story made the following relevant comment on the nature of demurrage:

In truth, demurrage is merely an allowance or compensation for the delay or detention of a vessel. It is often
a matter of contract, but not necessarily so. The very circumstance that in ordinary commercial voyages, a
particular sum is deemed by the parties a fair compensation for delays, is the very reason why it is, and
ought to be, adopted as a measure of compensation, in cases ex delicto. What fairer rule can be adopted
than that which founds itself upon mercantile usage as to indemnity, and fixes a recompense upon the
deliberate consideration of all the circumstances attending the usual earnings and expenditures in common
voyages? It appears to us that an allowance, by way of demurrage, is the true measure of damages in all
cases of mere detention, for that allowance has reference to the ship's expenses, wear and tear, and
common employment.23

Amount of Demurrage Charges

Petitioner argues that it is not obligated to pay any demurrage charges because, prior to the filing of the complaint, private
respondent made no demand for the sum of P67,340. Moreover, private respondent's loss and prevention manager, Loi
Gillera, demanded P50,260; but its counsel, Sofronio Larcia, subsequently asked for a different amount of P37,800.

Petitioner's position is puerile. The amount of demurrage charges in the sum of P67,340 is a factual conclusion of the trial
court that was affirmed by the Court of Appeals and, thus, binding on this Court. 24Besides, such factual finding is supported
by the extant evidence. 25 The apparent discrepancy was a result of the variance of the dates when the two demands were
made. Necessarily, the longer the cargo remained unclaimed, the higher the demurrage. Thus, while in his letter dated April
24, 1983, 26 private respondent's counsel demanded payment of only P37,800, the additional demurrage incurred petitioner
due to its continued refusal to receive delivery of the cargo ballooned to P67,340 by November 22, 1983. The testimony of
Counsel Sofronio Larcia as regards said letter of April 24, 1983 elucidates, viz:

Q Now, after you sent this letter, do you know what happened?

A Defendant continued to refuse to take delivery of the shipment and the shipment stayed at
the port for a longer period.

Q So, what happened to the shipment?

A The shipment incurred additional demurrage charges which amounted to P67,340.00 as of

November 22, 1983 or more than a year after — almost a year after the shipment arrived at
the port.

Q So, what did you do?

27
A We requested our collection agency to pursue the collection of this amount.

Bill of Lading Separate from

Other Letter of Credit Arrangements
In a letter of credit, there are three distinct and independent contracts:

(1) the contract of sale between the buyer and the seller, (2) the contract of the buyer with the issuing bank, and (3) the letter
of credit proper in which the bank promises to pay the seller pursuant to the terms and conditions stated therein. "Few things
are more clearly settled in law than that the three contracts which make up the letter of credit arrangement are to be
maintained in a state of perpetual separation." 28 A transaction involving the purchase of goods may also require, apart from a
letter of credit, a contract of transportation specially when the seller and the buyer are not in the same locale or country, and
the goods purchased have to be transported to the latter.

Hence, the contract of carriage, as stipulated in the bill of lading in the present case, must be treated independently of the
contract of sale between the seller and the buyer, and the contract for the issuance of a letter of credit between the buyer and
the issuing bank. Any discrepancy between the amount of the goods described in the commercial invoice in the contract of
sale and the amount allowed in the letter of credit will not affect the validity and enforceability of the contract of carriage as
embodied in the bill of lading. As the bank cannot be expected to look beyond the documents presented to it by the seller
pursuant to the letter of credit, 29 neither can the carrier be expected to go beyond the representations of the shipper in the
bill of lading and to verify their accuracy vis-a-viz the commercial invoice and the letter of a credit. Thus, the discrepancy
between the amount of goods indicated in the invoice and the amount in the bill of lading cannot negate petitioner's
obligation to private respondent arising from the contract of transportation. Furthermore, private respondent, as carrier, had
no knowledge of the contents of the container. The contract of carriage was under the arrangement known as "Shipper's Load
And Count," and shipper was solely responsible for the loading of the container while carrier was oblivious to the contents of
the shipment. Petitioner's remedy in case of overshipment lies against the seller/shipper, not against the carrier.

Payment of Interest

Petitioner posits that it "first knew" of the demurrage claim of P67,340 only when it received, by summons, private
respondent's complaint. Hence, interest may not be allowed to run from the date of private respondent's extrajudicial
demands on March 8, 1983 for P50,260 or on April 24, 1983 for P37,800, considering that, in both cases, "there was no demand
for interest." 30 We agree.

Jurisprudence teaches us:

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.31

The case before us involves an obligation not arising from a loan or forbearance of money; thus, pursuant to Article 2209 of
the Civil Code, the applicable interest rate is six percent per annum. Since the bill of lading did not specify the amount of
demurrage, and the sum claimed by private respondent increased as the days went by, the total amount demanded cannot be
deemed to have been established with reasonable certainty until the trial court rendered its judgment. Indeed, "(u)nliquidated
damages or claims, it is said, are those which are not or cannot be known until definitely ascertained, assessed and
determined by the courts after presentation of proof. " 32 Consequently, the legal interest rate is six percent, to be computed
from September 28, 1990, the date of the trial court's decision. And in accordance with Philippine National Bank33 and Eastern
Shipping, 34 the rate of twelve percent per annum shall be charged on the total then outstanding, from the time the judgment
becomes final and executory until its satisfaction.

Finally, the Court notes that the matter of attorney's fees was taken up only in the dispositive portion of the trial court's
decision. This falls short of the settled requirement that the text of the decision should state the reason for the award of
attorney's fees, for without such justification, its award would be a "conclusion without a premise, its basis being improperly
left to speculation and conjecture."35

WHEREFORE, the assailed Decision is hereby AFFIRMED with the MODIFICATION that the legal interest of six percent per
annum shall be computed from September 28, 1990 until its full payment before finality of judgment. The rate of interest shall
be adjusted to twelve percent per annum, computed from the time said judgment became final and executory until full
satisfaction. The award of attorney's fees is DELETED.

SO ORDERED.
G.R. No. L-45598 April 26, 1939

TAN PHO, petitioner,

vs.
HASSAMAL DALAMAL, respondent.

Sumulong, Lavides and Sumulong for petitioner.

Agapito R. Conchu for respondent.

CONCEPCION, J.:

In this appeal on certiorari, the question raised is whether the delivery of certain merchandise by the carrier to an agent without
presenting the bill of lading, constitutes misdelivery or nondelivery.

The facts are briefly, as follows: Enrique Aldeguer purchased on credit from Hassamal Dalamal certain merchandise valued at P583.60.
Hassamal Dalamal, the plaintiff and herein respondent, shipped said merchandise on the ship of Tan Pho, defendant and herein
petitioner, and endorsed the bill of lading to the Chartered Bank of China, India & Australia, which, in turn, endorsed it to the Philippines
National Bank. The said bill of lading was made to order and contains the initials of Enrique Aldeguer, "E. A." Upon arrival of the goods
in Sorsogon, the agent of the defendant-petitioner delivered the merchandise to Enrique Aldeguer who presented the invoice and
signed a receipt. The plaintiff-respondent, upon learning that Aldeguer had received the merchandise, made him sign a forty-day draft
for the value of said merchandise. The Philippine National Bank, with the consent of the plaintiff-respondent, gave Aldeguer an
extension of ten days to pay the amount of the merchandise in question, and upon the expiration of the period, the plaintiff-respondent
required Aldeguer to pay the merchandise. Unable to get such payment, the plaintiff-respondent brought suit on November 28, 1934,
that is, after the expiration of 174 days from the delivery of the merchandise to Aldeguer.

The bill of lading signed by the parties provides in part as follows:

SECTION. 7. . . . Claim for nondelivery of shipment must be presented in writing to the carrier within thirty days from the date
of accrual. Suits based upon claims arising from shortage, damage, or nondelivery of shipment shall be instituted within sixty
days from the date of accrual of the right of action. Failure to make claims, to institute judicial proceedings as herein provided
shall constitute a waiver of claim or right of action.

The court decided in favor of the defendant and against the plaintiff upon the theory that the delivery of the goods to Aldeguer
constitutes nondelivery, wherefore, the claim not having been filed within thirty days nor the action instituted within sixty days, the
plaintiff-respondent waived his claim or right of action against the defendant.

On appeal the Court of Appeals upheld the contrary view and rendered judgment in favor of the plaintiff and against the defendant for
the sum of P586.60, with legal interest from the filing of the complaint, and the costs of both instances. From this decision, the
defendant has taken this appeal on certiorari.

Considering that the bill of lading covering the goods in question has been made to order, which means that said goods cannot be
delivered without previous payment of the value thereof, it is evident that, the said goods having been delivered to Aldeguer without
paying the price of the same, these facts constitute misdelivery and not nondelivery, because there was in fact delivery of merchandise.
We do not believe it can be seriously and reasonably argued that what took place as contended by the petitioner, is a case of
misdelivery with respect to Aldeguer and at the same time nondelivery with respect to the Philippine National Bank who had the bill of
lading, because the only thing to consider in this question is whether Enrique Aldeguer was entitled to get the merchandise or whether,
on the contrary, the Philippine National Bank is the one entitled thereto. Under the facts, the defendant-petitioner should not have
delivered the goods to Aldeguer but to the Philippine National Bank. Having made the delivery to Aldeguer, the delivery is a case of
misdelivery. If the goods have been delivered, it cannot at the same time be said that they have not been delivered.

According to the bill of lading which was issued in the case at bar to the order of the shipper, the carrier was under a duty not to deliver
the merchandise mentioned in the bill of lading except upon presentation of the bill of lading duly endorsed by the shipper. (10 C. J.,
259.) Hence, the defendant-petitioner Tan Pho having delivered the goods to Enrique Aldeguer without the presentation by the latter of
the bill of lading duly endorsed to him by the shipper, the said defendant made a misdelivery and violated the bill of lading, because his
duty was not only to transport the goods entrusted to him safely, but to deliver them to the person indicated in the bill of lading. (10 C.
J., 262.)

In conclusion, inasmuch as the action commenced by the plaintiff, the herein respondent, is not founded upon nondelivery of the
merchandise, but upon the misdelivery thereof to Aldeguer, the period of limitation stipulated in section 7 of the bill of lading is without
application.

The defendant-petitioner contends that the demand made by the plaintiff-respondent upon Aldeguer to sign a forty-day draft for the
amount of the goods which he received from the defendant-petitioner was tantamount to an act of ratification of the misdelivery made
by the said defendant-petitioner.

Such contention is belied by the fact that the plaintiff-respondent required Aldeguer to return the goods, and it has been held that when
the owner of the goods transported attempts to secure the value thereof from the person to whom they have been delivered by
mistakes, he cannot be deemed to have ratified the misdelivery or to have waived his right against the carrier. (10 C. J., 268 [footnote];
McSwegan vs. Pennsylvania R. Co., 77 App. Div., 301; 40 N. Y., 51; Arrington vs. Wilmington, etc. R. Co., 51 N. C., 68; 72 Am. Dec.,
559.)

It will not be amiss to mention a defect which the respondent notes in his brief, a defect which consists in that the Court of Appeals has
not been made a party in this petition as held by this court in Mayol vs. Blanco (61 Phil., 547). This defect being merely technical, the
same cannot be considered as a ground for denying the petition; however, in view of the foregoing, we hold that the writ
of certiorari does not lie and that the decision of the Court of Appeals should be, as the same is hereby, affirmed, with the costs to the
petitioner. So ordered.
G.R. No. L-18965 October 30, 1964

COMPAÑIA MARITIMA, petitioner,

vs.
INSURANCE COMPANY OF NORTH AMERICA, respondent.

Rafael Dinglasan for petitioner.

Ozaeta Gibbs & Ozaeta for respondent.

BAUTISTA ANGELO, J.:

Sometime in October, 1952, Macleod and Company of the Philippines contracted by telephone the services of the Compañia Maritima,
a shipping corporation, for the shipment of 2,645 bales of hemp from the former's Sasa private pier at Davao City to Manila and for their
subsequent transhipment to Boston, Massachusetts, U.S.A. on board the S.S. Steel Navigator. This oral contract was later on
confirmed by a formal and written booking issued by Macleod's branch office in Sasa and handcarried to Compañia Maritima's branch
office in Davao in compliance with which the latter sent to Macleod's private wharf LCT Nos. 1023 and 1025 on which the loading of the
hemp was completed on October 29, 1952. These two lighters were manned each by a patron and an assistant patron. The patrons of
both barges issued the corresponding carrier's receipts and that issued by the patron of Barge No. 1025 reads in part:

Received in behalf of S.S. Bowline Knot in good order and condition from MACLEOD AND COMPANY OF PHILIPPINES,
Sasa Davao, for transhipment at Manila onto S.S. Steel Navigator.

FINAL DESTINATION: Boston.

Thereafter, the two loaded barges left Macleod's wharf and proceeded to and moored at the government's marginal wharf in the same
place to await the arrival of the S.S. Bowline Knot belonging to Compañia Maritima on which the hemp was to be loaded. During the
night of October 29, 1952, or at the early hours of October 30, LCT No. 1025 sank, resulting in the damage or loss of 1,162 bales of
hemp loaded therein. On October 30, 1952, Macleod promptly notified the carrier's main office in Manila and its branch in Davao
advising it of its liability. The damaged hemp was brought to Odell Plantation in Madaum, Davao, for cleaning, washing, reconditioning,
and redrying. During the period from November 1-15, 1952, the carrier's trucks and lighters hauled from Odell to Macleod at Sasa a
total of 2,197.75 piculs of the reconditioned hemp out of the original cargo of 1,162 bales weighing 2,324 piculs which had a total value
of 116,835.00. After reclassification, the value of the reconditioned hemp was reduced to P84,887.28, or a loss in value of P31,947.72.
Adding to this last amount the sum of P8,863.30 representing Macleod's expenses in checking, grading, rebating, and other fees for
washing, cleaning and redrying in the amount of P19.610.00, the total loss adds up to P60,421.02.

All abaca shipments of Macleod, including the 1,162 bales loaded on the carrier's LCT No. 1025, were insured with the Insurance
Company of North America against all losses and damages. In due time, Macleod filed a claim for the loss it suffered as above stated
with said insurance company, and after the same had been processed, the sum of P64,018.55 was paid, which was noted down in a
document which aside from being a receipt of the amount paid, was a subrogation agreement between Macleod and the insurance
company wherein the former assigned to the latter its rights over the insured and damaged cargo. Having failed to recover from the
carrier the sum of P60,421.02, which is the only amount supported by receipts, the insurance company instituted the present action on
October 28, 1953. After trial, the court a quo rendered judgment ordering the carrier to pay the insurance company the sum of
P60,421.02, with legal interest thereon from the date of the filing of the complaint until fully paid, and the costs. This judgment was
affirmed by the Court of Appeals on December 14, 1960. Hence, this petition for review.

The issues posed before us are: (1) Was there a contract of carriage between the carrier and the shipper even if the loss occurred
when the hemp was loaded on a barge owned by the carrier which was loaded free of charge and was not actually loaded on the S.S.
Bowline Knot which would carry the hemp to Manila and no bill of lading was issued therefore?; (2) Was the damage caused to the
cargo or the sinking of the barge where it was loaded due to a fortuitous event, storm or natural disaster that would exempt the carrier
from liability?; (3) Can respondent insurance company sue the carrier under its insurance contract as assignee of Macleod in spite of
the fact that the liability of the carrier as insurer is not recognized in this jurisdiction?; (4) Has the Court of Appeals erred in regarding
Exhibit NNN-1 as an implied admission by the carrier of the correctness and sufficiency of the shipper's statement of accounts contrary
to the burden of proof rule?; and (5) Can the insurance company maintain this suit without proof of its personality to do so?

1. This issue should be answered in the affirmative. As found by the Court of Appeals, Macleod and Company contracted by telephone
the services of petitioner to ship the hemp in question from the former's private pier at Sasa, Davao City, to Manila, to be subsequently
transhipped to Boston, Massachusetts, U.S.A., which oral contract was later confirmed by a formal and written booking issued by the
shipper's branch office, Davao City, in virtue of which the carrier sent two of its lighters to undertake the service. It also appears that the
patrons of said lighters were employees of the carrier with due authority to undertake the transportation and to sign the documents that
may be necessary therefor so much so that the patron of LCT No. 1025 signed the receipt covering the cargo of hemp loaded therein
as follows: .

Received in behalf of S.S. Bowline Knot in good order and condition from MACLEOD AND COMPANY OF PHILIPPINES,
Sasa Davao, for transhipment at Manila onto S.S. Steel Navigator.

FINAL DESTINATION: Boston.

The fact that the carrier sent its lighters free of charge to take the hemp from Macleod's wharf at Sasa preparatory to its loading onto
the ship Bowline Knot does not in any way impair the contract of carriage already entered into between the carrier and the shipper, for
that preparatory step is but part and parcel of said contract of carriage. The lighters were merely employed as the first step of the
voyage, but once that step was taken and the hemp delivered to the carrier's employees, the rights and obligations of the parties
attached thereby subjecting them to the principles and usages of the maritime law. In other words, here we have a complete contract of
carriage the consummation of which has already begun: the shipper delivering the cargo to the carrier, and the latter taking possession
thereof by placing it on a lighter manned by its authorized employees, under which Macleod became entitled to the privilege secured to
him by law for its safe transportation and delivery, and the carrier to the full payment of its freight upon completion of the voyage.

The receipt of goods by the carrier has been said to lie at the foundation of the contract to carry and deliver, and if actually no
goods are received there can be no such contract. The liability and responsibility of the carrier under a contract for the carriage
 of goods commence on their actual delivery to, or receipt by, the carrier or an authorized agent. ... and delivery to a lighter in
charge of a vessel for shipment on the vessel, where it is the custom to deliver in that way, is a good delivery and binds the
vessel receiving the freight, the liability commencing at the time of delivery to the lighter. ... and, similarly, where there is a
contract to carry goods from one port to another, and they cannot be loaded directly on the vessel and lighters are sent by the
vessel to bring the goods to it, the lighters are for the time its substitutes, so that the bill of landing is applicable to the goods
as soon as they are placed on the lighters. (80 C.J.S., p. 901, emphasis supplied)

... The test as to whether the relation of shipper and carrier had been established is, Had the control and possession of the
cotton been completely surrendered by the shipper to the railroad company? Whenever the control and possession of goods
passes to the carrier and nothing remains to be done by the shipper, then it can be said with certainty that the relation of
shipper and carrier has been established. Railroad Co. v. Murphy, 60 Ark. 333, 30 S.W. 419, 46 A. St. Rep. 202; Pine Bluff &
Arkansas River Ry. v. MaKenzie, 74 Ark. 100, 86 S.W. 834; Matthews & Hood v. St. L., I.M. & S.R. Co., 123 Ark. 365, 185
S.W. 461, L.R.A. 1916E, 1194. (W.F. Bogart & Co., et al. v. Wade, et al., 200 S.W. 148).

The claim that there can be no contract of affreightment because the hemp was not actually loaded on the ship that was to take it from
Davao City to Manila is of no moment, for, as already stated, the delivery of the hemp to the carrier's lighter is in line with the contract.
In fact, the receipt signed by the patron of the lighter that carried the hemp stated that he was receiving the cargo "in behalf of S.S.
Bowline Knot in good order and condition." On the other hand, the authorities are to the effect that a bill of lading is not indispensable
for the creation of a contract of carriage.

Bill of lading not indispensable to contract of carriage. — As to the issuance of a bill of lading, although article 350 of the Code
of Commerce provides that "the shipper as well as the carrier of merchandise or goods may mutua-lly demand that a bill of
lading is not indispensable. As regards the form of the contract of carriage it can be said that provided that there is a meeting
of the minds and from such meeting arise rights and obligations, there should be no limitations as to form." The bill of lading is
not essential to the contract, although it may become obligatory by reason of the regulations of railroad companies, or as a
condition imposed in the contract by the agreement of the parties themselves. The bill of lading is juridically a documentary
proof of the stipulations and conditions agreed upon by both parties. (Del Viso, pp. 314-315; Robles vs. Santos, 44 O.G.
2268). In other words, the Code does not demand, as necessary requisite in the contract of transportation, the delivery of the
bill of lading to the shipper, but gives right to both the carrier and the shipper to mutually demand of each other the delivery of
said bill. (Sp. Sup. Ct. Decision, May 6, 1895). (Martin, Philippine Commercial Laws, Vol. II, Revised Edition, pp. 12-13)

The liability of the carrier as common carrier begins with the actual delivery of the goods for transportation, and not merely with
the formal execution of a receipt or bill of lading; the issuance of a bill of lading is not necessary to complete delivery and
acceptance. Even where it is provided by statute that liability commences with the issuance of the bill of lading, actual delivery
and acceptance are sufficient to bind the carrier. (13 C.J.S., p. 288)

2. Petitioner disclaims responsibility for the damage of the cargo in question shielding itself behind the claim of force majeure or storm
which occurred on the night of October 29, 1952. But the evidence fails to bear this out.

Rather, it shows that the mishap that caused the damage or loss was due, not to force majeure, but to lack of adequate precautions or
measures taken by the carrier to prevent the loss as may be inferred from the following findings of the Court of Appeals:

Aside from the fact that, as admitted by appellant's own witness, the ill-fated barge had cracks on its bottom (pp. 18-19, t.s.n.,
Sept. 13, 1959) which admitted sea water in the same manner as rain entered "thru tank man-holes", according to the patron
of LCT No. 1023 (exh. JJJ-4) — conclusively showing that the barge was not seaworthy — it should be noted that on the night
of the nautical accident there was no storm, flood, or other natural disaster or calamity. Certainly, winds of 11 miles per hour,
although stronger than the average 4.6 miles per hour then prevailing in Davao on October 29, 1952 (exh. 5), cannot be
classified as storm. For according to Beaufort's wind scale, a storm has wind velocities of from 64 to 75 miles per hour; and by
Philippine Weather Bureau standards winds should have a velocity of from 55 to 74 miles per hour in order to be classified as
storm (Northern Assurance Co., Ltd. vs. Visayan Stevedore Transportation Co., CA-G.R. No. 23167-R, March 12, 1959).

The Court of Appeals further added: "the report of R. J. del Pan & Co., Inc., marine surveyors, attributes the sinking of LCT No. 1025 to
the 'non-water-tight conditions of various buoyancy compartments' (exh. JJJ); and this report finds confirmation on the above-
mentioned admission of two witnesses for appellant concerning the cracks of the lighter's bottom and the entrance of the rain water
'thru manholes'." We are not prepared to dispute this finding of the Court of Appeals.

3. There can also be no doubt that the insurance company can recover from the carrier as assignee of the owner of the cargo for the
insurance amount it paid to the latter under the insurance contract. And this is so because since the cargo that was damaged was
insured with respondent company and the latter paid the amount represented by the loss, it is but fair that it be given the right to recover
from the party responsible for the loss. The instant case, therefore, is not one between the insured and the insurer, but one between the
shipper and the carrier, because the insurance company merely stepped into the shoes of the shipper. And since the shipper has a
direct cause of action against the carrier on account of the damage of the cargo, no valid reason is seen why such action cannot be
asserted or availed of by the insurance company as a subrogee of the shipper. Nor can the carrier set up as a defense any defect in the
insurance policy not only because it is not a privy to it but also because it cannot avoid its liability to the shipper under the contract of
carriage which binds it to pay any loss that may be caused to the cargo involved therein. Thus, we find fitting the following comments of
the Court of Appeals:

It was not imperative and necessary for the trial court to pass upon the question of whether or not the disputed abaca cargo
was covered by Marine Open Cargo Policy No. MK-134 isued by appellee. Appellant was neither a party nor privy to this
insurance contract, and therefore cannot avail itself of any defect in the policy which may constitute a valid reason for
appellee, as the insurer, to reject the claim of Macleod, as the insured. Anyway, whatever defect the policy contained, if any, is
deemed to have been waived by the subsequent payment of Macleod's claim by appellee. Besides, appellant is herein sued in
its capacity as a common carrier, and appellee is suing as the assignee of the shipper pursuant to exhibit MM. Since, as above
demonstrated, appellant is liable to Macleod and Company of the Philippines for the los or damage to the 1,162 bales of hemp
after these were received in good order and condition by the patron of appellant's LCT No. 1025, it necessarily follows that
appellant is likewise liable to appellee who, as assignee of Macleod, merely stepped into the shoes of and substi-tuted the
latter in demanding from appellant the payment for the loss and damage aforecited.
4. It should be recalled in connection with this issue that during the trial of this case the carrier asked the lower court to order the
production of the books of accounts of the Odell Plantation containing the charges it made for the loss of the damaged hemp for
verification of its accountants, but later it desisted therefrom on the claim that it finds their production no longer necessary. This
desistance notwithstanding, the shipper however pre-sented other documents to prove the damage it suffered in connection with the
cargo and on the strength thereof the court a quo ordered the carrier to pay the sum of P60,421.02. And after the Court of Appeals
affirmed this award upon the theory that the desistance of the carrier from producing the books of accounts of Odell Plantation implies
an admission of the correctness of the statements of accounts contained therein, petitioner now contends that the Court of Appeals
erred in basing the affirmance of the award on such erroneous interpretation.

There is reason to believe that the act of petitioner in waiving its right to have the books of accounts of Odell Plantation presented in
court is tantamount to an admission that the statements contained therein are correct and their verification not necessary because its
main defense here, as well as below, was that it is not liable for the loss because there was no contract of carriage between it and the
shipper and the loss caused, if any, was due to a fortuitous event. Hence, under the carrier's theory, the correctness of the account
representing the loss was not so material as would necessitate the presentation of the books in question. At any rate, even if the books
of accounts were not produced, the correctness of the accounts cannot now be disputed for the same is supported by the original
documents on which the entries in said books were based which were presented by the shipper as part of its evidence. And according
to the Court of Appeals, these documents alone sufficiently establish the award of P60,412.02 made in favor of respondent.

5. Finally, with regard to the question concerning the personality of the insurance company to maintain this action, we find the same of
no importance, for the attorney himself of the carrier admitted in open court that it is a foreign corporation doing business in the
Philippines with a personality to file the present action.

WHEREFORE, the decision appealed from is affirmed, with costs against petitioner.
G.R. No. L-16629 January 31, 1962

SOUTHERN LINES, INC., petitioner,

vs.
COURT OF APPEALS and CITY OF ILOILO, respondents.

Jose Ma. Lopez Vito, Jr. for petitioner.

The City Fiscal for respondents.

DE LEON, J.:

This is a petition to review on certiorari the decision of the Court of Appeals in CA-G.R. No. 15579-R affirming that of the Court of First
Instance of Iloilo which sentenced petitioner Southern Lines, Inc. to pay respondent City of Iloilo the amount of P4,931.41.

Sometime in 1948, the City of Iloilo requisitioned for rice from the National Rice and Corn Corporation (hereafter referred to as NARIC)
in Manila. On August 24 of the same year, NARIC, pursuant to the order, shipped 1,726 sacks of rice consigned to the City of Iloilo on
board the SS "General Wright" belonging to the Southern Lines, Inc. Each sack of rice weighed 75 kilos and the entire shipment as
indicated in the bill of lading had a total weight of 129,450 kilos. According to the bill of lading, the cost of the shipment was P63,115.50
itemized and computed as follows: .
Unit Price per bag P36.25 P62,567.50

Handling at P0.13 per bag 224.38

Trucking at P2.50 per bag 323.62

T o t a l . . . . . .. . . . . 63,115.50

On September 3, 1948, the City of Iloilo received the shipment and paid the amount of P63,115.50. However, it was noted that the foot
of the bill of lading that the City of Iloilo 'Received the above mentioned merchandise apparently in same condition as when shipped,
save as noted below: actually received 1685 sacks with a gross weight of 116,131 kilos upon actual weighing. Total shortage
ascertained 13,319 kilos." The shortage was equivalent to 41 sacks of rice with a net weight of 13,319 kilos, the proportionate value of
which was P6,486.35.

On February 14, 1951 the City of Iloilo filed a complaint in the Court of First Instance of Iloilo against NARIC and the Southern Lines,
Inc. for the recovery of the amount of P6,486.35 representing the value of the shortage of the shipment of rice. After trial, the lower
court absolved NARIC from the complaint, but sentenced the Southern Lines, Inc. to pay the amount of P4,931.41 which is the
difference between the sum of P6,486.35 and P1,554.94 representing the latter's counterclaim for handling and freight.

The Southern Lines, Inc. appealed to the Court of Appeals which affirmed the judgment of the trial court. Hence, this petition for review.

The only question to be determined in this petition is whether or not the defendant-carrier, the herein petitioner, is liable for the loss or
shortage of the rice shipped.

Article 361 of the Code of Commerce provides: .

ART. 361. — The merchandise shall be transported at the risk and venture of the shipper, if the contrary has not been
expressly stipulated.

As a consequence, all the losses and deteriorations which the goods may suffer during the transportation by reason of
fortuitous event, force majeure, or the inherent nature and defect of the goods, shall be for the account and risk of the
shipper.1äwphï1.ñët

Proof of these accidents is incumbent upon the carrier.

Article 362 of the same Code provides: .

ART. 362. — Nevertheless, the carrier shall be liable for the losses and damages resulting from the causes mentioned in the
preceding article 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 his establisbed among careful persons, unless the shipper has committed fraud in the bill of
lading, representing the goods to be of a kind or quality different from what they really were.

If, notwithstanding the precautions referred to in this article, the goods transported run the risk of being lost, on account of their
nature or by reason of unavoidable accident, there being no time for their owners to dispose of them, the carrier may proceed
to sell them, placing them for this purpose at the disposal of the judicial authority or of the officials designated by special
provisions.

Under the provisions of Article 361, the defendant-carrier in order to free itself from liability, was only obliged to prove that the damages
suffered by the goods were "by virtue of the nature or defect of the articles." Under the provisions of Article 362, the plaintiff, in order to
hold the defendant liable, was obliged to prove that the damages to the goods by virtue of their nature, occurred on account of its
negligence or because the defendant did not take the precaution adopted by careful persons. (Government v. Ynchausti & Co., 40 Phil.
219, 223).

Petitioner claims exemption from liability by contending that the shortage in the shipment of rice was due to such factors as the
shrinkage, leakage or spillage of the rice on account of the bad condition of the sacks at the time it received the same and the
negligence of the agents of respondent City of Iloilo in receiving the shipment. The contention is untenable, for, if the fact of improper
packing is known to the carrier or his servants, or apparent upon ordinary observation, but it accepts the goods notwithstanding such
condition, it is not relieved of liability for loss or injury resulting thereform. (9 Am Jur. 869.) Furthermore, according to the Court of
Appeals, "appellant (petitioner) itself frankly admitted that the strings that tied the bags of rice were broken; some bags were with holes
and plenty of rice were spilled inside the hull of the boat, and that the personnel of the boat collected no less than 26 sacks of rice
which they had distributed among themselves." This finding, which is binding upon this Court, shows that the shortage resulted from the
negligence of petitioner.

Invoking the provisions of Article 366 of the Code of Commerce and those of the bill of lading, petitioner further contends that
respondent is precluded from filing an action for damages on account of its failure to present a claim within 24 hours from receipt of the
shipment. It also cites the cases of Government v. Ynchausti & Co., 24 Phil. 315 and Triton Insurance Co. v. Jose, 33 Phil. 194, ruling
to the effect that the requirement that the claim for damages must be made within 24 hours from delivery is a condition precedent to the
accrual of the right of action to recover damages. These two cases above-cited are not applicable to the case at bar. In the first cited
case, the plaintiff never presented any claim at all before filing the action. In the second case, there was payment of the transportation
charges which precludes the presentation of any claim against the carrier. (See Article 366, Code of Commerce.) It is significant to note
that in the American case of Hoye v. Pennsylvania Railroad Co., 13 Ann. Case. 414, it has been said: .

... "It has been held that a stipulation in the contract of shipment requiring the owner of the goods to present a notice of his
claim to the carrier within a specified time after the goods have arrived at their destination is in the nature of a condition
precedent to the owner's right to enforce a recovery, that he must show in the first instance that be has complied with the
condition, or that the circumstances were such that to have complied with it would have required him to do an unreasonable
thing. The weight of authority, however, sustains the view that such a stipulation is more in the nature of a limitation upon the
owner's right to recovery, and that the burden of proof is accordingly on the carrier to show that the limitation was reasonable
and in proper form or within the time stated." (Hutchinson on Carrier, 3d ed., par. 44) Emphasis supplied.

In the case at bar, the record shows that petitioner failed to plead this defense in its answer to respondent's complaint and, therefore,
the same is deemed waived (Section 10, Rule 9, Rules of Court), and cannot be raised for the first time at the trial or on appeal.
(Maxilom v. Tabotabo, 9 Phil. 390.) Moreover, as the Court of Appeals has said: .

... the records reveal that the appellee (respondent) filed the present action, within a reasonable time after the short delivery in
the shipment of the rice was made. It should be recalled that the present action is one for the refund of the amount paid in
excess, and not for damages or the recovery of the shortage; for admittedly the appellee (respondent) had paid the entire
value of the 1726 sacks of rice, subject to subsequent adjustment, as to shortages or losses. The bill of lading does not at all
limit the time for filing an action for the refund of money paid in excess.

WHEREFORE, the decision of the Court of Appeals is hereby affirmed in all respects and the petition for certioraridenied.

With costs against the petitioner.

G.R. No. 110398 November 7, 1997

NEGROS NAVIGATION CO., INC., petitioner,

vs.
THE COURT OF APPEALS, RAMON MIRANDA, SPS. RICARDO and VIRGINIA DE LA VICTORIA, respondents.

MENDOZA, J.:

This is a petition for review on certiorari of the decision of the Court of Appeals affirming with modification the Regional Trial Court's
award of damages to private respondents for the death of relatives as a result of the sinking of petitioner's vessel.

In April of 1980, private respondent Ramon Miranda purchased from the Negros Navigation Co., Inc. four special cabin tickets (#74411,
74412, 74413 and 74414) for his wife, daughter, son and niece who were going to Bacolod City to attend a family reunion. The tickets
were for Voyage No. 457-A of the M/V Don Juan, leaving Manila at 1:00 p.m. on April 22, 1980.

The ship sailed from the port of Manila on schedule.

At about 10:30 in the evening of April 22, 1980, the Don Juan collided off the Tablas Strait in Mindoro, with the M/T Tacloban City, an oil
tanker owned by the Philippine National Oil Company (PNOC) and the PNOC Shipping and Transport Corporation (PNOC/STC). As a
result, the M/V Don Juan sank. Several of her passengers perished in the sea tragedy. The bodies of some of the victims were found
and brought to shore, but the four members of private respondents' families were never found.

Private respondents filed a complaint on July 16, 1980 in the Regional Trial Court of Manila, Branch 34, against the Negros Navigation,
the Philippine National Oil Company (PNOC), and the PNOC Shipping and Transport Corporation (PNOC/STC), seeking damages for
the death of Ardita de la Victoria Miranda, 48, Rosario V. Miranda, 19, Ramon V. Miranda, Jr., 16, and Elfreda de la Victoria, 26.

In its answer, petitioner admitted that private respondents purchased ticket numbers 74411, 74412, 74413 and 74414; that the ticket
numbers were listed in the passenger manifest; and that the Don Juan left Pier 2, North Harbor, Manila on April 22, 1980 and sank that
night after being rammed by the oil tanker M/T Tacloban City, and that, as a result of the collision, some of the passengers of the
M/V Don Juan died. Petitioner, however, denied that the four relatives of private respondents actually boarded the vessel as shown by
the fact that their bodies were never recovered. Petitioner further averred that the Don Juan was seaworthy and manned by a full and
competent crew, and that the collision was entirely due to the fault of the crew of the M/T Tacloban City.

On January 20, 1986, the PNOC and petitioner Negros Navigation Co., Inc. entered into a compromise agreement whereby petitioner
assumed full responsibility for the payment and satisfaction of all claims arising out of or in connection with the collision and releasing
the PNOC and the PNOC/STC from any liability to it. The agreement was subsequently held by the trial court to be binding upon
petitioner, PNOC and PNOC/STC. Private respondents did not join in the agreement.

After trial, the court rendered judgment on February 21, 1991, the dispositive portion of which leads as follows:

WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of the plaintiffs, ordering all the defendants to
pay jointly and severally to the plaintiffs damages as follows:

To Ramon Miranda:

P42,025.00 for actual damages;

P152,654.55 as compensatory damages for loss of

earning capacity of his wife;

P90,000.00 as compensatory damages for wrongful

death of three (3) victims;

P300,000.00 as moral damages;

P50,000.00 as exemplary damages, all in the total

amount of P634,679.55; and

P40,000.00 as attorney's fees.

To Spouses Ricardo and Virginia de la Victoria:

P12,000.00 for actual damages;

P158,899.00 as compensatory damages for loss of

earning capacity;

P30,000.00 as compensatory damages for wrongful

death;

P100,000.00 as moral damages;

P20,000.00 as exemplary damages, all in the total

amount of P320,899.00; and
 P15,000.00 as attorney's fees.

On appeal, the Court of Appeals1 affirmed the decision of the Regional Trial Court with modification —

1. Ordering and sentencing defendants-appellants, jointly and severally, to pay plaintiff-appellee Ramon Miranda the amount
of P23,075.00 as actual damages instead of P42,025.00;

2. Ordering and sentencing defendants-appellants, jointly and severally, to pay plaintiff-appellee Ramon Miranda the amount
of P150,000.00, instead of P90,000.00, as compensatory damages for the death of his wife and two children;

3. Ordering and sentencing defendants-appellants, jointly and severally, to pay plaintiffs-appellees Dela Victoria spouses the
amount of P50,000.00, instead of P30,000.00, as compensatory damages for the death of their daughter Elfreda Dela Victoria;

Hence this petition, raising the following issues:

(1) whether the members of private respondents' families were actually passengers of the Don Juan;

(2) whether the ruling in Mecenas v. Court of Appeals,2 finding the crew members of petitioner to be grossly negligent in the
performance of their duties, is binding in this case;

(3) whether the total loss of the M/V Don Juan extinguished petitioner's liability; and

(4) whether the damages awarded by the appellate court are excessive, unreasonable and unwarranted.

First. The trial court held that the fact that the victims were passengers of the M/V Don Juan was sufficiently proven by private
respondent Ramon Miranda, who testified that he purchased tickets numbered 74411, 74412, 74413, and 74414 at P131.30 each from
the Makati office of petitioner for Voyage No. 47-A of the M/V Don Juan, which was leaving Manila on April 22, 1980. This was
corroborated by the passenger manifest (Exh. E) on which the numbers of the tickets and the names of Ardita Miranda and her children
and Elfreda de la Victoria appear.

Petitioner contends that the purchase of the tickets does not necessarily mean that the alleged victims actually took the trip. Petitioner
asserts that it is common knowledge that passengers purchase tickets in advance but do not actually use them. Hence, private
respondent should also prove the presence of the victims on the ship. The witnesses who affirmed that the victims were on the ship
were biased and unreliable.

This contention is without merit. Private respondent Ramon Miranda testified that he personally took his family and his niece to the
vessel on the day of the voyage and stayed with them on the ship until it was time for it to leave. There is no reason he should claim
members of his family to have perished in the accident just to maintain an action. People do not normally lie about so grave a matter as
the loss of dear ones. It would be more difficult for private respondents to keep the existence of their relatives if indeed they are alive
than it is for petitioner to show the contrary. Petitioner's only proof is that the bodies of the supposed victims were not among those
recovered from the site of the mishap. But so were the bodies of the other passengers reported missing not recovered, as this Court
noted in the Mecenas3 case.

Private respondent Miranda's testimony was corroborated by Edgardo Ramirez. Ramirez was a seminarian and one of the survivors of
the collision. He testified that he saw Mrs. Miranda and Elfreda de la Victoria on the ship and that he talked with them. He knew Mrs.
Miranda who was his teacher in the grade school. He also knew Elfreda who was his childhood friend and townmate. Ramirez said he
was with Mrs. Miranda and her children and niece from 7:00 p.m. until 10:00 p.m. when the collision happened and that he in fact had
dinner with them. Ramirez said he and Elfreda stayed on the deck after dinner and it was there where they were jolted by the collision
of the two vessels. Recounting the moments after the collision, Ramirez testified that Elfreda ran to fetch Mrs. Miranda. He escorted her
to the room and then tried to go back to the deck when the lights went out. He tried to return to the cabin but was not able to do so
because it was dark and there was a stampede of passengers from the deck.

Petitioner casts doubt on Ramirez' testimony, claiming that Ramirez could not have talked with the victims for about three hours and not
run out of stories to tell, unless Ramirez had a "storehouse" of stories. But what is incredible about acquaintances thrown together on a
long journey staying together for hours on end, in idle conversation precisely to while the hours away?

Petitioner also points out that it took Ramirez three (3) days before he finally contacted private respondent Ramon Miranda to tell him
about the fate of his family. But it is not improbable that it took Ramirez three days before calling on private respondent Miranda to tell
him about the last hours of Mrs. Miranda and her children and niece, in view of the confusion in the days following the collision as
rescue teams and relatives searched for survivors.

Indeed, given the facts of this case, it is improper for petitioner to even suggest that private respondents' relatives did not board the ill-
fated vessel and perish in the accident simply because their bodies were not recovered.

Second. In finding petitioner guilty of negligence and in failing to exercise the extraordinary diligence required of it in the carriage of
passengers, both the trial court and the appellate court relied on the findings of this Court in Mecenas v. Intermediate Appellate
Court,4 which case was brought for the death of other passengers. In that case it was found that although the proximate cause of the
mishap was the negligence of the crew of the M/T Tacloban City, the crew of the Don Juan was equally negligent as it found that the
latter's master, Capt. Rogelio Santisteban, was playing mahjong at the time of collision, and the officer on watch, Senior Third Mate
Rogelio De Vera, admitted that he failed to call the attention of Santisteban to the imminent danger facing them. This Court found that
Capt. Santisteban and the crew of the M/V Don Juan failed to take steps to prevent the collision or at least delay the sinking of the ship
and supervise the abandoning of the ship.

Petitioner Negros Navigation was found equally negligent in tolerating the playing of mahjong by the ship captain and other crew
members while on board the ship and failing to keep the M/V Don Juan seaworthy so much so that the ship sank within 10 to 15
minutes of its impact with the M/T Tacloban City.
In addition, the Court found that the Don Juan was overloaded. The Certificate of Inspection, dated August 27, 1979, issued by the
Philippine Coast Guard Commander at Iloilo City stated that the total number of persons allowed on the ship was 864, of whom 810 are
passengers, but there were actually 1,004 on board the vessel when it sank, 140 persons more than the maximum number that could
be safely carried by it.

Taking these circumstances together, and the fact that the M/V Don Juan, as the faster and better-equipped vessel, could have avoided
a collision with the PNOC tanker, this Court held that even if the Tacloban City had been at fault for failing to observe an internationally-
recognized rule of navigation, the Don Juan was guilty of contributory negligence. Through Justice Feliciano, this Court held:

The grossness of the negligence of the "Don Juan" is underscored when one considers the foregoing circumstances in the
context of the following facts: Firstly, the "Don Juan" was more than twice as fast as the "Tacloban City." The "Don Juan's" top
speed was 17 knots; while that of the "Tacloban City" was 6.3. knots. Secondly, the "Don Juan" carried the full complement of
officers and crew members specified for a passenger vessel of her class. Thirdly, the "Don Juan" was equipped with radar
which was functioning that night. Fourthly, the "Don Juan's officer on-watch had sighted the "Tacloban City" on his radar
screen while the latter was still four (4) nautical miles away. Visual confirmation of radar contact was established by the "Don
Juan" while the "Tacloban City" was still 2.7 miles away. In the total set of circumstances which existed in the instant case, the
"Don Juan," had it taken seriously its duty of extraordinary diligence, could have easily avoided the collision with the "Tacloban
City." Indeed, the "Don Juan" might well have avoided the collision even if it had exercised ordinary diligence merely.

It is true that the "Tacloban City" failed to follow Rule 18 of the International Rules of the Road which requires two (2) power-
driven vessels meeting end on or nearly end on each to alter her course to starboard (right) so that each vessel may pass on
the port side (left) of the other. The "Tacloban City," when the two (2) vessels were only three-tenths (0.3) of a mile apart,
turned (for the second time) 15° to port side while the "Don Juan" veered hard to starboard. . . . [But] "route observance" of the
International Rules of the Road will not relieve a vessel from responsibility if the collision could have been avoided by proper
care and skill on her part or even by a departure from the rules.

In the petition at bar, the "Don Juan" having sighted the "Tacloban City" when it was still a long way off was negligent in failing
to take early preventive action and in allowing the two (2) vessels to come to such close quarters as to render the collision
inevitable when there was no necessity for passing so near to the "Tacloban City" as to create that hazard or inevitability, for
the "Don Juan" could choose its own distance. It is noteworthy that the "Tacloban City," upon turning hard to port shortly
before the moment of collision, signalled its intention to do so by giving two (2) short blasts with its horn. The "Don Juan" gave
no answering horn blast to signal its own intention and proceeded to turn hard to starboard.

We conclude that Capt. Santisteban and Negros Navigation are properly held liable for gross negligence in connection with the
collision of the "Don Juan" and "Tacloban City" and the sinking of the "Don Juan" leading to the death of hundreds of
passengers. . . .5

Petitioner criticizes the lower court's reliance on the Mecenas case, arguing that, although this case arose out of the same incident as
that involved in Mecenas, the parties are different and trial was conducted separately. Petitioner contends that the decision in this case
should be based on the allegations and defenses pleaded and evidence adduced in it or, in short, on the record of this case.

The contention is without merit. What petitioner contends may be true with respect to the merits of the individual claims against
petitioner but not as to the cause of the sinking of its ship on April 22, 1980 and its liability for such accident, of which there can only be
one truth. Otherwise, one would be subscribing to the sophistry: truth on one side of the Pyrenees, falsehood on the other!

Adherence to the Mecenas case is dictated by this Court's policy of maintaining stability in jurisprudence in accordance with the legal
maxim "stare decisis et non quieta movere" (Follow past precedents and do not disturb what has been settled.) Where, as in this case,
the same questions relating to the same event have been put forward by parties similarly situated as in a previous case litigated and
decided by a competent court, the rule of stare decisis is a bar to any attempt to relitigate the same issue. 6 In Woulfe v. Associated
Realties Corporation,7 the Supreme Court of New Jersey held that where substantially similar cases to the pending case were
presented and applicable principles declared in prior decisions, the court was bound by the principle of stare decisis. Similarly, in State
ex rel. Tollinger v. Gill,8 it was held that under the doctrine of stare decisis a ruling is final even as to parties who are strangers to the
original proceeding and not bound by the judgment under the res judicata doctrine. The Philadelphia court expressed itself in this wise:
"Stare decisis simply declares that, for the sake of certainty, a conclusion reached in one case should be applied to those which follow,
if the facts are substantially the same, even though the parties may be different." 9 Thus, in J.M. Tuason v. Mariano, supra, this Court
relied on its rulings in other cases involving different parties in sustaining the validity of a land title on the principle of "stare decisis et
non quieta movere."

Indeed, the evidence presented in this case was the same as those presented in the Mecenas case, to wit:

Document Mecenas case This case

Decision of Commandant, Exh. 10 10 Exh. 11-B-NN/X

Phil. Coast Guard
in BMI Case No.
415-80 dated 3/26/81

11
Decision of the Minister Exh. 11 Exh. ZZ
of National Defense
dated 3/12/82

Resolution on the Exh. 13 12 Exh. AAA

motion for reconsideration (private
of the decision of the respondents)
Minister of National
defense dated 7/27/84
 Certificate of Exh. 1-A 13 Exh. 19-NN
inspection dated
8/27/79

Certificate of Stability Exh. 6-A 14 Exh. 19-D-NN

dated 12/16/76

Nor is it true that the trial court merely based its decision on the Mecenas case. The trial court made its own independent findings on
the basis of the testimonies of witnesses, such as Senior Third Mate Rogelio de Vera, who incidentally gave substantially the same
testimony on petitioner's behalf before the Board of Marine Inquiry. The trial court agreed with the conclusions of the then Minister of
National Defense finding both vessels to be negligent.

Third. The next issue is whether petitioner is liable to pay damages notwithstanding the total loss of its ship. The issue is not one of first
impression. The rule is well-entrenched in our jurisprudence that a shipowner may be held liable for injuries to passengers
notwithstanding the exclusively real and hypothecary nature of maritime law if fault can be attributed to the shipowner. 15

In Mecenas, this Court found petitioner guilty of negligence in (1) allowing or tolerating the ship captain and crew members in playing
mahjong during the voyage, (2) in failing to maintain the vessel seaworthy and (3) in allowing the ship to carry more passengers than it
was allowed to carry. Petitioner is, therefore, clearly liable for damages to the full extent.

Fourth. Petitioner contends that, assuming that the Mecenas case applies, private respondents should be allowed to claim only
P43,857.14 each as moral damages because in the Mecenas case, the amount of P307,500.00 was awarded to the seven children of
the Mecenas couple. Under petitioner's formula, Ramon Miranda should receive P43,857.14, while the De la Victoria spouses should
receive P97,714.28.

Here is where the principle of stare decisis does not apply in view of differences in the personal circumstances of the victims. For that
matter, differentiation would be justified even if private respondents had joined the private respondents in the Mecenas case. The
doctrine of stare decisis works as a bar only against issues litigated in a previous case. Where the issue involved was not raised nor
presented to the court and not passed upon by the court in the previous case, the decision in the previous case is not stare decisis of
the question presently presented. 16 The decision in the Mecenas case relates to damages for which petitioner was liable to the
claimants in that case.

In the case at bar, the award of P300,000.00 for moral damages is reasonable considering the grief petitioner Ramon Miranda suffered
as a result of the loss of his entire family. As a matter of fact, three months after the collision, he developed a heart condition
undoubtedly caused by the strain of the loss of his family. The P100,000.00 given to Mr. and Mrs. de la Victoria is likewise reasonable
and should be affirmed.

As for the amount of civil indemnity awarded to private respondents, the appellate court's award of P50,000.00 per victim should be
sustained. The amount of P30,000.00 formerly set in De Lima v. Laguna Tayabas Co., 17 Heirs of Amparo delos Santos v. Court of
Appeals, 18 and Philippine Rabbit Bus Lines, Inc. v. Intermediate Appellate Court 19as benchmark was subsequently increased to
P50,000.00 in the case of Sulpicio Lines, Inc. v. Court of Appeals, 20which involved the sinking of another interisland ship on October
24, 1988.

We now turn to the determination of the earning capacity of the victims. With respect to Ardita Miranda, the trial court awarded
damages computed as follows: 21

In the case of victim Ardita V. Miranda whose age at the time of the accident was 48 years, her life expectancy was computed
to be 21.33 years, and therefore, she could have lived up to almost 70 years old. Her gross earnings for 21.33 years based on
P10,224.00 per annum, would be P218,077.92. Deducting therefrom 30% as her living expenses, her net earnings would be
P152,654.55, to which plaintiff Ramon Miranda is entitled to compensatory damages for the loss of earning capacity of his
wife. In considering 30% as the living expenses of Ardita Miranda, the Court takes into account the fact that plaintiff and his
wife were supporting their daughter and son who were both college students taking Medicine and Law respectively.

In accordance with the ruling in Villa-Rey Transit, Inc. v. Court of Appeals, 22 we think the life expectancy of Ardita Miranda was
correctly determined to be 21.33 years, or up to age 69. Petitioner contends, however, that Mrs. Miranda would have retired from her
job as a public school teacher at 65, hence her loss of earning capacity should be reckoned up to 17.33 years only.

The accepted formula for determining life expectancy is 2/3 multiplied by (80 minus the age of the deceased). It may be that in the
Philippines the age of retirement generally is 65 but, in calculating the life expectancy of individuals for the purpose of determining loss
of earning capacity under Art. 2206(1) of the Civil Code, it is assumed that the deceased would have earned income even after
retirement from a particular job. In this case, the trial court took into account the fact that Mrs. Miranda had a master's degree and a
good prospect of becoming principal of the school in which she was teaching. There was reason to believe that her income would have
increased through the years and she could still earn more after her retirement, e.g., by becoming a consultant, had she not died. The
gross earnings which Mrs. Miranda could reasonably be expected to earn were it not for her untimely death was, therefore, correctly
computed by the trial court to be P218,077.92 (given a gross annual income of P10,224.00 and life expectancy of 21.33 years).

Petitioner contends that from the amount of gross earnings, 60% should be deducted as necessary living expenses, not merely 30% as
the trial court allowed. Petitioner contends that 30% is unrealistic, considering that Mrs. Miranda's earnings would have been subject to
taxes, social security deductions and inflation.

We agree with this contention. In Villa-Rey Transit, Inc. v. Court of Appeals, 23 the Court allowed a deduction of P1,184.00 for living
expenses from the P2,184.00 annual salary of the victim, which is roughly 54.2% thereof. The deceased was 29 years old and a
training assistant in the Bacnotan Cement Industries. In People v. Quilation, 24 the deceased was a 26-year old laborer earning a daily
wage. The court allowed a deduction of P120,000.00 which was 51.3% of his annual gross earnings of P234,000.00. In People
v. Teehankee, 25 the court allowed a deduction of P19,800.00, roughly 42.4% thereof from the deceased's annual salary of P46,659.21.
The deceased, Maureen Hultman, was 17 years old and had just received her first paycheck as a secretary. In the case at bar, we hold
that a deduction of 50% from Mrs. Miranda's gross earnings (P218,077.92) would be reasonable, so that her net earning capacity
should be P109,038.96. There is no basis for supposing that her living expenses constituted a smaller percentage of her gross income
than the living expenses in the decided cases. To hold that she would have used only a small part of her income for herself, a larger
part going to the support of her children would be conjectural and unreasonable.

As for Elfreda de la Victoria, the trial court found that, at the time of her death, she was 26 years old, a teacher in a private school in
Malolos, Bulacan, earning P6,192.00 per annum. Although a probationary employee, she had already been working in the school for
two years at the time of her death and she had a general efficiency rating of 92.85% and it can be presumed that, if not for her untimely
death, she would have become a regular teacher. Hence, her loss of earning capacity is P111,456.00, computed as follows:

net earning = life x gross less reasonable

capacity (x) expectancy annual & necessary

income living expenses

(50%)

x = [2(80-26)] x [P6,192.00 - P3,096.00]

————

= 36 x 3,096.00

= P111,456.00

On the other hand, the award of actual damages in the amount of P23,075.00 was determined by the Court of Appeals on the basis
receipts submitted by private respondents. This amount is reasonable considering the expenses incurred by private respondent
Miranda in organizing three search teams to look for his family, spending for transportation in going to places such as Batangas City
and Iloilo, where survivors and the bodies of other victims were found, making long distance calls, erecting a monument in honor of the
four victims, spending for obituaries in the Bulletin Today and for food, masses and novenas.

Petitioner's contention that the expenses for the erection of a monument and other expenses for memorial services for the victims
should be considered included in the indemnity for death awarded to private respondents is without merit. Indemnity for death is given
to compensate for violation of the rights of the deceased, i.e., his right to life and physical integrity. 26 On the other hand, damages
incidental to or arising out of such death are for pecuniary losses of the beneficiaries of the deceased.

As for the award of attorney's fees, we agree with the Court of Appeals that the amount of P40,000.00 for private respondent Ramon
Miranda and P15,000.00 for the de la Victoria spouses is justified. The appellate court correctly held:

The Mecenas case cannot be made the basis for determining the award for attorney's fees. The award would naturally vary or
differ in each case. While it is admitted that plaintiff-appellee Ramon Miranda who is himself a lawyer, represented also
plaintiffs-appellees Dela Victoria spouses, we note that separate testimonial evidence were adduced by plaintiff-appellee
Ramon Miranda (TSN, February 26, 1982, p. 6) and plaintiffs-appellees spouses Dela Victoria (TSN, August 13, 1981, p. 43).
Considering the amount of work and effort put into the case as indicated by the voluminous transcripts of stenographic notes,
we find no reason to disturb the award of P40,000.00 for plaintiff-appellee Ramon Miranda and P15,000.00 for plaintiffs-
appellees Dela Victoria spouses. 27

The award of exemplary damages should be increased to P300,000.00 for Ramon Miranda and P100,000.00 for the de la Victoria
spouses in accordance with our ruling in the Mecenas case:

Exemplary damages are designed by our civil law to permit the courts to reshape behaviour that is socially deleterious in its
consequence by creating negative incentives or deterrents against such behaviour. In requiring compliance with the standard
of extraordinary diligence, a standard which is in fact that of the highest possible degree of diligence, from common carriers
and in creating a presumption of negligence against them, the law seeks to compel them to control their employees, to tame
their reckless instincts and to force them to take adequate care of human beings and their property. The Court will take judicial
notice of the dreadful regularity with which grievous maritime disasters occur in our waters with massive loss of life. The bulk
of our population is too poor to afford domestic air transportation. So it is that notwithstanding the frequent sinking of
passenger vessels in our waters, crowds of people continue to travel by sea. This Court is prepared to use the instruments
given to it by the law for securing the ends of law and public policy. One of those instruments is the institution of exemplary
damages; one of those ends, of special importance in an archipelagic state like the Philippines, is the safe and reliable
carriage of people and goods by sea. 28

WHEREFORE, the decision of the Court of Appeals is AFFIRMED with modification and petitioner is ORDERED to pay private
respondents damages as follows:

To private respondent Ramon Miranda:

P23,075.00 for actual damages;

P109,038.96 as compensatory damages for loss of

earning capacity of his wife;

P150,000.00 as compensatory damages for wrongful

death of three (3) victims;
 P300,000.00 as moral damages;

P300,000.00 as exemplary damages, all in the total

amount of P882,113.96; and

P40,000.00 as attorney's fees.

To private respondents Spouses Ricardo and Virginia de la Victoria:

P12,000.00 for actual damages;

P111,456.00 as compensatory damages for loss of

earning capacity;

P50,000.00 as compensatory damages for wrongful

death;

P100,000.00 as moral damages;

P100,000.00 as exemplary damages, all in the total

amount of P373,456.00; and

P15,000.00 as attorney's fees.

Petitioners are further ordered to pay costs of suit.

In the event the Philippine National Oil Company and/or the PNOC Shipping and Transport Corporation pay or are required to pay all or
a portion of the amounts adjudged, petitioner Negros Navigation Co., Inc. shall reimburse either of them such amount or amounts as
either may have paid, and in the event of failure of Negros Navigation Co., Inc., to make the necessary reimbursement, PNOC and/or
PNOC/STC shall be entitled to a writ of execution without need of filing another action.

SO ORDERED.
G.R. No. 125524 August 25, 1999

BENITO MACAM doing business under the name and style BEN-MAC ENTERPRISES, petitioner,
vs.
COURT OF APPEALS, CHINA OCEAN SHIPPING CO., and/or WALLEM PHILIPPINES SHIPPING, INC.,respondents.

BELLOSILLO, J.:

On 4 April 1989 petitioner Benito Macam, doing business under the name and style Ben-Mac Enterprises, shipped on board the
vessel Nen Jiang, owned and operated by respondent China Ocean Shipping Co., through local agent respondent Wallem Philippines
Shipping, Inc. (hereinafter WALLEM), 3,500 boxes of watermelons valued at US$5,950.00 covered by Bill of Lading No. HKG 99012
and exported through Letter of Credit No. HK 1031/30 issued by National Bank of Pakistan, Hongkong (hereinafter PAKISTAN BANK)
and 1,611 boxes of fresh mangoes with a value of US$14,273.46 covered by Bill of Lading No. HKG 99013 and exported through Letter
of Credit No. HK 1032/30 also issued by PAKISTAN BANK. The Bills of Lading contained the following pertinent provision: "One of the
Bills of Lading must be surrendered duly endorsed in exchange for the goods or delivery order. 1 The shipment was bound for Hongkong
with PAKISTAN BANK as consignee and Great Prospect Company of Kowloon, Hongkong (hereinafter GPC) as notify party.

On 6 April 1989, per letter of credit requirement, copies of the bills of lading and commercial invoices were submitted to petitioner's
depository bank, Consolidated Banking Corporation (hereinafter SOLIDBANK), which paid petitioner in advance the total value of the
shipment of US$20,223.46.1âwphi1.nêt

Upon arrival in Hongkong, the shipment was delivered by respondent WALLEM directly to GPC, not to PAKISTAN BANK, and without
the required bill of lading having been surrendered. Subsequently, GPC failed to pay PAKISTAN BANK such that the latter, still in
possession of the original bills of lading, refused to pay petitioner through SOLIDBANK. Since SOLIDBANK already pre-paid petitioner
the value of the shipment, it demanded payment from respondent WALLEM through five (5) letters but was refused. Petitioner was thus
allegedly constrained to return the amount involved to SOLIDBANK, then demanded payment from respondent WALLEM in writing but
to no avail.

On 25 September 1991 petitioner sought collection of the value of the shipment of US$20,223.46 or its equivalent of P546,033.42 from
respondents before the Regional Trial Court of Manila, based on delivery of the shipment to GPC without presentation of the bills of
lading and bank guarantee.

Respondents contended that the shipment was delivered to GPC without presentation of the bills of lading and bank guarantee per
request of petitioner himself because the shipment consisted of perishable goods. The telex dated 5 April 1989 conveying such request
read —

AS PER SHPR'S REQUEST KINDLY ARRANGE DELIVERY OF A/M SHIPT TO RESPECTIVE CNEES WITHOUT
PRESENTATION OF OB/L2 and bank guarantee since for prepaid shipt ofrt charges already fully paid our end . . . . 3

Respondents explained that it is a standard maritime practice, when immediate delivery is of the essence, for the shipper to request or
instruct the carrier to deliver the goods to the buyer upon arrival at the port of destination without requiring presentation of the bill of
lading as that usually takes time. As proof thereof, respondents apprised the trial court that for the duration of their two-year business
relationship with petitioner concerning similar shipments to GPC deliveries were effected without presentation of the bills of
lading.4 Respondents advanced next that the refusal of PAKISTAN BANK to pay the letters of credit to SOLIDBANK was due to the
latter's failure to submit a Certificate of Quantity and Quality. Respondents counterclaimed for attorney's fees and costs of suit.

On 14 May 1993 the trial court ordered respondents to pay, jointly and severally, the following amounts: (1) P546,033.42 plus legal
interest from 6 April 1989 until full payment; (2) P10,000.00 as attorney's fees; and, (3) the costs. The counterclaims were dismissed for
lack of merit.5 The trial court opined that respondents breached the provision in the bill of lading requiring that "one of the Bills of Lading
must be surrendered duly endorsed in exchange for the goods or delivery order," when they released the shipment to GPC without
presentation of the bills of lading and the bank guarantee that should have been issued by PAKISTAN BANK in lieu of the bills of
lading. The trial court added that the shipment should not have been released to GPC at all since the instruction contained in the telex
was to arrange delivery to the respective consignees and not to any party. The trial court observed that the only role of GPC in the
transaction as notify party was precisely to be notified of the arrival of the cargoes in Hongkong so it could in turn duly advise the
consignee.

Respondent Court of Appeals appreciated the evidence in a different manner. According to it, as established by previous similar
transactions between the parties, shipped cargoes were sometimes actually delivered not to the consignee but to notify party GPC
without need of the bills of lading or bank guarantee. 6 Moreover, the bills of lading were viewed by respondent court to have been
properly superseded by the telex instruction and to implement the instruction, the delivery of the shipment must be to GPC, the real
importer/buyer of the goods as shown by the export invoices,7 and not to PAKISTAN BANK since the latter could very well present the
bills of lading in its possession; likewise, if it were the PAKISTAN BANK to which the cargoes were to be strictly delivered it would no
longer be proper to require a bank guarantee. Respondent court noted that besides, GPC was listed as a consignee in the telex. It
observed further that the demand letter of petitioner to respondents never complained of misdelivery of goods. Lastly, respondent court
found that petitioner's claim of having reimbursed the amount involved to SOLIDBANK was unsubstantiated. Thus, on 13 March 1996
respondent court set aside the decision of the trial court and dismissed the complaint together with the counterclaims. 8 On 5 July 1996
reconsideration was denied.9

Petitioner submits that the fact that the shipment was not delivered to the consignee as stated in the bill of lading or to a party
designated or named by the consignee constitutes a misdelivery thereof. Moreover, petitioner argues that from the text of the telex,
assuming there was such an instruction, the delivery of the shipment without the required bill of lading or bank guarantee should be
made only to the designated consignee, referring to PAKISTAN BANK.

We are not persuaded. The submission of petitioner that "the fact that the shipment was not delivered to the consignee as stated in the
Bill of Lading or to a party designated or named by the consignee constitutes a misdelivery thereof" is a deviation from his cause of
action before the trial court. It is clear from the allegation in his complaint that it does not deal with misdelivery of the cargoes but of
delivery to GPC without the required bills of lading and bank guarantee —
 6. The goods arrived in Hongkong and were released by the defendant Wallem directly to the buyer/notify party, Great
Prospect Company and not to the consignee, the National Bank of Pakistan, Hongkong, without the required bills of lading and
bank guarantee for the release of the shipment issued by the consignee of the goods . . . . 10

Even going back to an event that transpired prior to the filing of the present case or when petitioner wrote respondent WALLEM
demanding payment of the value of the cargoes, misdelivery of the cargoes did not come into the picture —

We are writing you on behalf of our client, Ben-Mac Enterprises who informed us that Bills of Lading No. 99012 and 99013
with a total value of US$20,223.46 were released to Great Prospect, Hongkong without the necessary bank guarantee. We
were further informed that the consignee of the goods, National Bank of Pakistan, Hongkong, did not release or endorse the
original bills of lading. As a result thereof, neither the consignee, National Bank of Pakistan, Hongkong, nor the importer, Great
Prospect Company, Hongkong, paid our client for the goods . . . .11

At any rate, we shall dwell on petitioner's submission only as a prelude to our discussion on the imputed liability of respondents
concerning the shipped goods. Article 1736 of the Civil Code provides —

Art. 1736. The extraordinary responsibility of the common carriers lasts from the time the goods are unconditionally placed in
the possession of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the
carrier to the consignee, or to the person who has a right to receive them, without prejudice to the provisions of article 1738. 12

We emphasize that the extraordinary responsibility of the common carriers lasts until actual or constructive delivery of the cargoes to
the consignee or to the person who has a right to receive them. PAKISTAN BANK was indicated in the bills of lading as consignee
whereas GPC was the notify party. However, in the export invoices GPC was clearly named as buyer/importer. Petitioner also referred
to GPC as such in his demand letter to respondent WALLEM and in his complaint before the trial court. This premise draws us to
conclude that the delivery of the cargoes to GPC as buyer/importer which, conformably with Art. 1736 had, other than the consignee,
the right to receive them14 was proper.

The real issue is whether respondents are liable to petitioner for releasing the goods to GPC without the bills of lading or bank
guarantee.

Respondents submitted in evidence a telex dated 5 April 1989 as basis for delivering the cargoes to GPC without the bills of lading and
bank guarantee. The telex instructed delivery of various shipments to the respective consignees without need of presenting the bill of
lading and bank guarantee per the respective shipper's request since "for prepaid shipt ofrt charges already fully paid." Petitioner was
named therein as shipper and GPC as consignee with respect to Bill of Lading Nos. HKG 99012 and HKG 99013. Petitioner disputes
the existence of such instruction and claims that this evidence is self-serving.

From the testimony of petitioner, we gather that he has been transacting with GPC as buyer/importer for around two (2) or three (3)
years already. When mangoes and watermelons are in season, his shipment to GPC using the facilities of respondents is twice or thrice
a week. The goods are released to GPC. It has been the practice of petitioner to request the shipping lines to immediately release
perishable cargoes such as watermelons and fresh mangoes through telephone calls by himself or his "people." In transactions covered
by a letter of credit, bank guarantee is normally required by the shipping lines prior to releasing the goods. But for buyers using
telegraphic transfers, petitioner dispenses with the bank guarantee because the goods are already fully paid. In his several years of
business relationship with GPC and respondents, there was not a single instance when the bill of lading was first presented before the
release of the cargoes. He admitted the existence of the telex of 3 July 1989 containing his request to deliver the shipment to the
consignee without presentation of the bill of lading 15 but not the telex of 5 April 1989 because he could not remember having made such
request.

Consider pertinent portions of petitioner's testimony —

Q: Are you aware of any document which would indicate or show that your request to the defendant Wallem for the immediate
release of your fresh fruits, perishable goods, to Great Prospect without the presentation of the original Bill of Lading?

A: Yes, by telegraphic transfer, which means that it is fully paid. And I requested immediate release of the cargo because there
was immediate payment.

Q: And you are referring, therefore, to this copy Telex release that you mentioned where your Company's name appears Ben-
Mac?

Atty. Hernandez: Just for the record, Your Honor, the witness is showing a Bill of Lading referring to SKG (sic) 93023
and 93026 with Great Prospect Company.

Atty. Ventura:

Q: Is that the telegraphic transfer?

A: Yes, actually, all the shippers partially request for the immediate release of the goods when they are perishable. I thought
Wallem Shipping Lines is not neophyte in the business. As far as LC is concerned, Bank guarantee is needed for the
immediate release of the goods . . . .15

Q: Mr. Witness, you testified that if is the practice of the shipper of the perishable goods to ask the shipping lines to release
immediately the shipment. Is that correct?

A: Yes, sir.

Q: Now, it is also the practice of the shipper to allow the shipping lines to release the perishable goods to the importer of
goods without a Bill of Lading or Bank guarantee?
 A: No, it cannot be without the Bank Guarantee.

Atty. Hernandez:

Q: Can you tell us an instance when you will allow the release of the perishable goods by the shipping lines to the importer
without the Bank guarantee and without the Bill of Lading?

A: As far as telegraphic transfer is concerned.

Q: Can you explain (to) this Honorable Court what telegraphic transfer is?

A: Telegraphic transfer, it means advance payment that I am already fully paid . . . .

Q: Mr. Macam, with regard to Wallem and to Great Prospect, would you know and can you recall that any of your shipment
was released to Great Prospect by Wallem through telegraphic transfer?

A: I could not recall but there were so many instances sir.

Q: Mr. Witness, do you confirm before this Court that in previous shipments of your goods through Wallem, you requested
Wallem to release immediately your perishable goods to the buyer?

A: Yes, that is the request of the shippers of the perishable goods . . . .16

Q: Now, Mr. Macam, if you request the Shipping Lines for the release of your goods immediately even without the presentation
of OBL, how do you course it?

A: Usually, I call up the Shipping Lines, sir . . . .17

Q: You also testified you made this request through phone calls. Who of you talked whenever you made such phone call?

A: Mostly I let my people to call, sir. (sic)

Q: So everytime you made a shipment on perishable goods you let your people to call? (sic)

A: Not everytime, sir.

Q: You did not make this request in writing?

A: No, sir. I think I have no written request with Wallem . . . . 18

Against petitioner's claim of "not remembering" having made a request for delivery of subject cargoes to GPC without presentation of
the bills of lading and bank guarantee as reflected in the telex of 5 April 1989 are damaging disclosures in his testimony. He declared
that it was his practice to ask the shipping lines to immediately release shipment of perishable goods through telephone calls by himself
or his "people." He no longer required presentation of a bill of lading nor of a bank guarantee as a condition to releasing the goods in
case he was already fully paid. Thus, taking into account that subject shipment consisted of perishable goods and SOLIDBANK pre-
paid the full amount of the value thereof, it is not hard to believe the claim of respondent WALLEM that petitioner indeed requested the
release of the goods to GPC without presentation of the bills of lading and bank guarantee.

The instruction in the telex of 5 April 1989 was "to deliver the shipment to respective consignees." And so petitioner argues that,
assuming there was such an instruction, the consignee referred to was PAKISTAN BANK. We find the argument too simplistic.
Respondent court analyzed the telex in its entirety and correctly arrived at the conclusion that the consignee referred to was not
PAKISTAN BANK but GPC —

There is no mistake that the originals of the two (2) subject Bills of Lading are still in the possession of the Pakistani Bank. The
appealed decision affirms this fact. Conformably, to implement the said telex instruction, the delivery of the shipment must be
to GPC, the notify party or real importer/buyer of the goods and not the Pakistani Bank since the latter can very well present
the original Bills of Lading in its possession. Likewise, if it were the Pakistani Bank to whom the cargoes were to be strictly
delivered, it will no longer be proper to require a bank guarantee as a substitute for the Bill of Lading. To construe otherwise
will render meaningless the telex instruction. After all, the cargoes consist of perishable fresh fruits and immediate delivery
thereof to the buyer/importer is essentially a factor to reckon with. Besides, GPC is listed as one among the several
consignees in the telex (Exhibit 5-B) and the instruction in the telex was to arrange delivery of A/M shipment (not any party) to
respective consignees without presentation of OB/L and bank guarantee . . . . 20

Apart from the foregoing obstacles to the success of petitioner's cause, petitioner failed to substantiate his claim that he returned to
SOLIDBANK the full amount of the value of the cargoes. It is not far-fetched to entertain the notion, as did respondent court, that he
merely accommodated SOLIDBANK in order to recover the cost of the shipped cargoes from respondents. We note that it was
SOLIDBANK which initially demanded payment from respondents through five (5) letters. SOLIDBANK must have realized the absence
of privity of contract between itself and respondents. That is why petitioner conveniently took the cudgels for the bank.

In view of petitioner's utter failure to establish the liability of respondents over the cargoes, no reversible error was committed by
respondent court in ruling against him.

WHEREFORE, the petition is DENIED. The decision of respondent Court of Appeals of 13 March 1996 dismissing the complaint of
petitioner Benito Macam and the counterclaims of respondents China Ocean Shipping Co. and/or Wallem Philippines Shipping, Inc., as
well as its resolution of 5 July 1996 denying reconsideration, is AFFIRMED.1âwphi1.nêt
G.R. No. 154305 December 9, 2004

MACONDRAY & CO., INC., petitioner,

vs.
PROVIDENT INSURANCE CORPORATION, respondent.

DECISION

PANGANIBAN, J.:

Hornbook is the doctrine that the negligence of counsel binds the client. Also settled is the rule that clients should take the initiative of
periodically checking the progress of their cases, so that they could take timely steps to protect their interest.

The Case

Before us is a Petition for Review1 under Rule 45 of the Rules of Court, seeking to set aside the February 28, 2002 Decision 2 and the
July 12, 2002 Resolution3 of the Court of Appeals (CA) in CA-GR CV No. 57077. The dispositive portion of the Decision reads as
follows:

"WHEREFORE, premises considered, the assailed Decision dated September 17, 1996 is hereby REVERSED and SET
ASIDE. Accordingly, [Petitioner] Macondray & Co., Inc., is hereby ORDERED to pay the [respondent] the amount
of P1,657,700.95."

The assailed Resolution denied petitioner's Motion for Reconsideration.

The Facts

The CA adopted the factual antecedents narrated by the trial court, as follows:

"x x x. On February 16, 1991, at Vancouver, B.C. Canada, CANPOTEX SHIPPING SERVICES LIMITED INC., of Saskatoon,
Saskatchewan, (hereinafter the SHIPPER), shipped and loaded on board the vessel M/V 'Trade Carrier', 5000 metric tons of
Standard Grade Muriate of Potash in bulk for transportation to and delivery at the port of Sangi, Toledo City, Cebu, in favor of
ATLAS FERTILIZER CORPORATION, (hereinafter CONSIGNEE) covered by B/L Nos. VAN-SAN-1 for the 815.96 metric tons
and VAN-SAN-2 for the 4,184.04 metric tons. Subject shipments were insured with [respondent] against all risks under and by
virtue of an Open Marine Policy No. MOP-00143 and Certificate of Marine Insurance No. CMI-823-91.

"When the shipment arrived, CONSIGNEE discovered that the shipment sustained losses/shortage of 476.140 metric tons
valued at One Million Six Hundred Fifty Seven Thousand Seven Hundred Pesos and Ninety Five Centavos (P1,657,700.95),
Philippine Currency. Provident paid losses. Formal claims was then filed with Trade & Transport and Macondray but the same
refused and failed to settle the same. Hence, this complaint.

"As per Officer's Return dated 4 June 1992, summons was UNSERVED to defendant TRADE AND TRANSPORT at the given
address for reason that TRADE AND TRANSPORT is no longer connected with Macondray & Co. Inc., and is not holding
office at said address as alleged by Ms. Guadalupe Tan. For failure to effect service of summons the case against TRADE &
TRANSPORT was considered dismissed without prejudice.

"Defendant MACONDRAY filed ANSWER, denying liability over the losses, having NO absolute relation with defendant
TRADE AND TRANSPORT, the alleged operator of the vessel who transported the subject shipment; that accordingly,
MACONDRAY is the local representative of the SHIPPER; the charterer of M/V TRADE CARRIER and not party to this case;
that it has no control over the acts of the captain and crew of the Carrier and cannot be held responsible for any damage
arising from the fault or negligence of said captain and crew; that upon arrival at the port of Sangi, Toledo City, Cebu, the M/V
Trade Carrier discharged the full amount of shipment, as shown by the draft survey with a total quantity of 5,033.59 metric tons
discharged from the vessel and delivered to the CONSIGNEE.

"ISSUES: Whether or not Macondray and Co. Inc., as an agent is responsible for any loss sustained by any party from the
vessel owned by defendant Trade and Transport. "Whether or not Macondray is liable for loss which was allegedly sustained
by the plaintiff in this case.

"EVIDENCE FOR THE PLAINTIFF

"Plaintiff presented the testimonies of Marina Celerina P. Aguas and depositions of Alberto Milan and Alfonso Picson
submitted as additional witnesses for PROVIDENT to prove the material facts of the complaint are deemed admitted by
defendant MACONDRAY, on their defense that it is not an agent of TRADE AND TRANSPORT.

"EVIDENCE FOR THE DEFENDANT MACONDRAY:

"Witness Ricardo de la Cruz testified as Supercargo of MACONDRAY, that MACONDRAY was not an agent of defendant
TRADE AND TRANSPORT; that his functions as Supercargo was to prepare a notice of readiness, statement of facts, sailing
notice and custom's clearance in order to attend to the formalities and the need of the vessel; that MACONDRAY is performing
functions in behalf of CANPOTEX and was appointed as local agent of the vessel, which duty includes arrangement of the
entrance and clearance of the vessel."
 The trial court, in the decision dated September 17, 1996 earlier adverted to, ruled in favor of the [petitioner] x x x, the
dispositive portion of which reads:

"WHEREFORE, PREMISES CONSIDERED, the case as against [petitioner] MACONDRAY is hereby DISMISSED.

"No pronouncement as to costs."4

Ruling of the Court of Appeals

The CA affirmed the trial court's finding that petitioner was not the agent of Trade and Transport. The appellate court ruled, however,
that petitioner could still be held liable for the shortages of the shipment, because the latter was the ship agent of Canpotex Shipping
Services Ltd. -- the shipper and charterer of the vessel M/V Trade Carrier.

All told, the CA held petitioner "liable for the losses incurred in the shipment of the subject cargoes to the [respondent], who, being the
insurer of the risk, was subrogated to the rights and causes of action which the consignee, Atlas Fertilizer Corporation, had against the
[petitioner]."5

Hence, this Petition.6

The Issues

Petitioner raises the following issues for our consideration:

"Whether or not liability attached to petitioner despite the unequivocal factual findings, that it was not a ship agent.

"Whether or not the 28 February 2002 Decision of the Court of Appeals has attained finality.

"Whether or not by filing the instant Petition for Review on Certiorari, petitioner is guilty of forum-shopping."7

The Court's Ruling

The Petition has no merit.

First Issue:

Petitioner's Liability

As a rule, factual findings of the Court of Appeals -- when not in conflict with those of the trial court -- are not disturbed by this Court,8 to
which only questions of law may be raised in an appeal by certiorari. 9

In the present case, we find no compelling reason to overturn the Court of Appeals in its categorical finding that petitioner was the ship
agent. Such factual finding was not in conflict with the trial court's ruling, which had merely stated that petitioner was not the agent of
Trade and Transport. Indeed, although it is not an agent of Trade and Transport, petitioner can still be the ship agent of the vessel M/V
Trade Carrier.

Article 586 of the Code of Commerce states that a ship agent is "the person entrusted with provisioning or representing the vessel in
the port in which it may be found."

Hence, whether acting as agent of the owner10 of the vessel or as agent of the charterer,11 petitioner will be considered as the ship
agent12 and may be held liable as such, as long as the latter is the one that provisions or represents the vessel.

The trial court found that petitioner "was appointed as local agent of the vessel, which duty includes arrangement for the entrance and
clearance of the vessel."13 Further, the CA found and the evidence shows that petitioner represented the vessel. The latter prepared the
Notice of Readiness, the Statement of Facts, the Completion Notice, the Sailing Notice and Custom's Clearance. 14 Petitioner's
employees were present at Sangi, Toledo City, one day before the arrival of the vessel, where they stayed until it departed. They were
also present during the actual discharging of the cargo. 15 Moreover, Mr. de la Cruz, the representative of petitioner, also prepared for
the needs of the vessel, like money, provision, water and fuel. 16

These acts all point to the conclusion that it was the entity that represented the vessel in the Port of Manila and was the ship
agent17 within the meaning and context of Article 586 of the Code of Commerce.

As ship agent, it may be held civilly liable in certain instances. The Code of Commerce provides:

"Article 586. The shipowner and the ship agent shall be civilly liable for the acts of the captain and for the obligations
contracted by the latter to repair, equip, and provision the vessel, provided the creditor proves that the amount claimed was
invested for the benefit of the same."

"Article 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons which may arise from the
conduct of the captain in the care of the goods which he loaded on the vessel; but he may exempt himself therefrom by
abandoning the vessel with all her equipments and the freight it may have earned during the voyage."

Petitioner does not dispute the liabilities of the ship agent for the loss/shortage of 476.140 metric tons of standard-grade Muriate of
Potash valued at P1,657,700.95. Hence, we find no reason to delve further into the matter or to disturb the finding of the CA holding
petitioner, as ship agent, liable to respondent for the losses sustained by the subject shipment.
 Second Issue:

Finality of the CA Decision

Petitioner claims that it picked up the February 28, 2002 Decision of the CA on May 14, 2002, after receiving the postal notice the day
before. It further attributes gross negligence to its previous counsel for not informing the CA of his change of address. It thus contends
that notice of the assailed Decision given to the previous counsel cannot be considered as notice to petitioner.

We are not persuaded. "It is well-settled that when a party is represented by counsel, notice should be made upon the counsel of record
at his given address to which notices of all kinds emanating from the court should be sent in the absence of a proper and adequate
notice to the court of a change of address."18

In the present case, service of the assailed Decision was made on petitioner's counsels of record, Attys. Moldez and Galoz, on March
6, 2002. That copy of the Decision was, however, returned to the sender for the reason that the addressee had "move[d] out." If counsel
moves to another address without informing the court of that change, such omission or neglect is inexcusable and will not stay the
finality of the decision.19 "The court cannot be expected to take judicial notice of the new address of a lawyer who has moved or to
ascertain on its own whether or not the counsel of record has been changed and who the new counsel could possibly be or where he
probably resides or holds office."20

It is unfortunate that the lawyer of petitioner neglected his duties to the latter. Be that as it may, the negligence of counsel binds the
client.21 Service made upon the present counsel of record at his given address is service to petitioner. Hence, the assailed Decision has
already become final and unappealable.

In the present case, there is no compelling reason to overturn well-settled jurisprudence or to interpret the rules liberally in favor of
petitioner, who is not entirely blameless. It should have taken the initiative of periodically keeping in touch with its counsel, checking
with the court, and inquiring about the status of its case.22 In so doing, it could have taken timely steps to neutralize the negligence of its
chosen counsel and to protect its interests. "Litigants represented by counsel should not expect that all they need to do is sit back, relax
and await the outcome of their case." 23

In view of the foregoing, there is no necessity of passing upon the third issue raised by petitioner.

WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against petitioner.

SO ORDERED.
G..R. No. 156978 May 2, 2006

ABOITIZ SHIPPING CORPORATION, Petitioner,

vs.
NEW INDIA ASSURANCE COMPANY, LTD., Respondent.

DECISION

QUISUMBING, J.:

For review on certiorari are the Decision1 dated August 29, 2002 of the Court of Appeals in CA-G.R. CV No. 28770 and its
Resolution2 dated January 23, 2003 denying reconsideration. The Court of Appeals affirmed the Decision 3dated November 20, 1989 of
the Regional Trial Court of Manila in Civil Case No. 82-1475, in favor of respondent New India Assurance Company, Ltd.

This petition stemmed from the action for damages against petitioner, Aboitiz Shipping Corporation, arising from the sinking of its
vessel, M/V P. Aboitiz, on October 31, 1980.

The pertinent facts are as follows:

Societe Francaise Des Colloides loaded a cargo of textiles and auxiliary chemicals from France on board a vessel owned by Franco-
Belgian Services, Inc. The cargo was consigned to General Textile, Inc., in Manila and insured by respondent New India Assurance
Company, Ltd. While in Hongkong, the cargo was transferred to M/V P. Aboitiz for transshipment to Manila.4

Before departing, the vessel was advised by the Japanese Meteorological Center that it was safe to travel to its destination. 5 But while
at sea, the vessel received a report of a typhoon moving within its general path. To avoid the typhoon, the vessel changed its course.
However, it was still at the fringe of the typhoon when its hull leaked. On October 31, 1980, the vessel sank, but the captain and his
crew were saved.

On November 3, 1980, the captain of M/V P. Aboitiz filed his "Marine Protest", stating that the wind force was at 10 to 15 knots at the
time the ship foundered and described the weather as "moderate breeze, small waves, becoming longer, fairly frequent white horses."6

Thereafter, petitioner notified7 the consignee, General Textile, of the total loss of the vessel and all of its cargoes. General Textile,
lodged a claim with respondent for the amount of its loss. Respondent paid General Textile and was subrogated to the rights of the
latter.8

Respondent hired a surveyor, Perfect, Lambert and Company, to investigate the cause of the sinking. In its report,9the surveyor
concluded that the cause was the flooding of the holds brought about by the vessel’s questionable seaworthiness. Consequently,
respondent filed a complaint for damages against petitioner Aboitiz, Franco-Belgian Services and the latter’s local agent, F.E. Zuellig,
Inc. (Zuellig). Respondent alleged that the proximate cause of the loss of the shipment was the fault or negligence of the master and
crew of the vessel, its unseaworthiness, and the failure of defendants therein to exercise extraordinary diligence in the transport of the
goods. Hence, respondent added, defendants therein breached their contract of carriage. 101avvphil.net

Franco-Belgian Services and Zuellig responded, claiming that they exercised extraordinary diligence in handling the shipment while it
was in their possession; its vessel was seaworthy; and the proximate cause of the loss of cargo was a fortuitous event. They also filed a
cross-claim against petitioner alleging that the loss occurred during the transshipment with petitioner and so liability should rest with
petitioner.

For its part, petitioner also raised the same defense that the ship was seaworthy. It alleged that the sinking of M/V P. Aboitiz was due to
an unforeseen event and without fault or negligence on its part. It also alleged that in accordance with the real and hypothecary nature
of maritime law, the sinking of M/V P. Aboitiz extinguished its liability on the loss of the cargoes.11

Meanwhile, the Board of Marine Inquiry (BMI) conducted its own investigation to determine whether the captain and crew were
administratively liable. However, petitioner neither informed respondent nor the trial court of the investigation. The BMI exonerated the
captain and crew of any administrative liability; and declared the vessel seaworthy and concluded that the sinking was due to the
vessel’s exposure to the approaching typhoon.

On November 20, 1989, the trial court, citing the Court of Appeals decision in General Accident Fire and Life Assurance Corporation v.
Aboitiz Shipping Corporation12 involving the same incident, ruled in favor of respondent. It held petitioner liable for the total value of the
lost cargo plus legal interest, thus:

WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered in favor of New India and against Aboitiz ordering the latter to
pay unto the former the amount of P142,401.60, plus legal interest thereon until the same is fully paid, attorney’s fees equivalent to
fifteen [percent] (15%) of the total amount due and the costs of suit.

The complaint with respect to Franco and Zuellig is dismissed and their counterclaim against New India is likewise dismissed

SO ORDERED.131avvphil.net

Petitioner elevated the case to the Court of Appeals and presented the findings of the BMI. However, on August 29, 2002, the appellate
court affirmed in toto the trial court’s decision. It held that the proceedings before the BMI was only for the administrative liability of the
captain and crew, and was unilateral in nature, hence not binding on the courts. Petitioner moved for reconsideration but the same was
denied on January 23, 2003.

Hence, this petition for review, alleging that the Court of Appeals gravely erred in:

I.
x x x DISREGARDING THE RULINGS OF THE HONORABLE SUPREME COURT ON THE APPLICATION OF THE RULE ON
LIMITED LIABILITY UNDER ARTICLE 587, 590 AND 837 OF THE CODE OF COMMERCE TO CASES INVOLVING THE SINKING
OF THE M/V "P. ABOITIZ;

A.

x x x NOT APPLYING THE RULINGS IN THE CASES OF MONARCH INSURANCE CO., INC. ET AL. V. COURT OF APPEALS ET
AL. AND ABOITIZ SHIPPING CORPORATION V. GENERAL ACCIDENT FIRE AND LIFE ASSURANCE CORPORATION, LTD.;

B.

x x x RULING THAT THE ISSUE ON THE APPLICATION OF THE RULE ON LIMITED LIABILITY UNDER ARTICLES 587, 590 AND
837 OF THE CODE OF COMMERCE HAD BEEN CONSIDERED AND PASSED UPON IN ITS DECISION;

II.

x x x NOT LIMITING THE AWARD OF DAMAGES TO RESPONDENT TO ITS PRO-RATA SHARES IN THE INSURANCE
PROCEEDS FROM THE SINKING OF THE M/V "P. ABOITIZ".14

Stated simply, we are asked to resolve whether the limited liability doctrine, which limits respondent’s award of damages to its pro-rata
share in the insurance proceeds, applies in this case.

Petitioner, citing Monarch Insurance Co. Inc. v. Court of Appeals, 15 contends that respondent’s claim for damages should only be
against the insurance proceeds and limited to its pro-rata share in view of the doctrine of limited liability.

Respondent counters that the doctrine of real and hypothecary nature of maritime law is not applicable in the present case because
petitioner was found to have been negligent. Hence, according to respondent, petitioner should be held liable for the total value of the
lost cargo.

It bears stressing that this Court has variedly applied the doctrine of limited liability to the same incident – the sinking of M/V P.
Aboitiz on October 31, 1980. Monarch, the latest ruling, tried to settle the conflicting pronouncements of this Court relative to the sinking
of M/V P. Aboitiz. In Monarch, we said that the sinking of the vessel was not due to force majeure, but to its unseaworthy
condition.16 Therein, we found petitioner concurrently negligent with the captain and crew. 17 But the Court stressed that the
circumstances therein still made the doctrine of limited liability applicable.18

Our ruling in Monarch may appear inconsistent with the exception of the limited liability doctrine, as explicitly stated in the earlier part of
the Monarch decision. An exception to the limited liability doctrine is when the damage is due to the fault of the shipowner or to the
concurrent negligence of the shipowner and the captain. In which case, the shipowner shall be liable to the full-extent of the
damage.19 We thus find it necessary to clarify now the applicability here of the decision in Monarch.

From the nature of their business and for reasons of public policy, common carriers are bound to observe extraordinary diligence over
the goods they transport according to all the circumstances of each case. 20 In the event of loss, destruction or deterioration of the
insured goods, common carriers are responsible, unless they can prove that the loss, destruction or deterioration was brought about by
the causes specified in Article 1734 of the Civil Code.21 In all other cases, common carriers are presumed to have been at fault or to
have acted negligently, unless they prove that they observed extraordinary diligence.22 Moreover, where the vessel is found
unseaworthy, the shipowner is also presumed to be negligent since it is tasked with the maintenance of its vessel. Though this duty can
be delegated, still, the shipowner must exercise close supervision over its men. 23

In the present case, petitioner has the burden of showing that it exercised extraordinary diligence in the transport of the goods it had on
board in order to invoke the limited liability doctrine. Differently put, to limit its liability to the amount of the insurance proceeds,
petitioner has the burden of proving that the unseaworthiness of its vessel was not due to its fault or negligence. Considering the
evidence presented and the circumstances obtaining in this case, we find that petitioner failed to discharge this burden. It initially
attributed the sinking to the typhoon and relied on the BMI findings that it was not at fault. However, both the trial and the appellate
courts, in this case, found that the sinking was not due to the typhoon but to its unseaworthiness. Evidence on record showed that the
weather was moderate when the vessel sank. These factual findings of the Court of Appeals, affirming those of the trial court are not to
be disturbed on appeal, but must be accorded great weight. These findings are conclusive not only on the parties but on this Court as
well.24

In contrast, the findings of the BMI are not deemed always binding on the courts. 25 Besides, exoneration of the vessel’s officers and
crew by the BMI merely concerns their respective administrative liabilities. 26 It does not in any way operate to absolve the common
carrier from its civil liabilities arising from its failure to exercise extraordinary diligence, the determination of which properly belongs to
the courts.27

Where the shipowner fails to overcome the presumption of negligence, the doctrine of limited liability cannot be applied. 28 Therefore, we
agree with the appellate court in sustaining the trial court’s ruling that petitioner is liable for the total value of the lost cargo.

WHEREFORE, the petition is DENIED for lack of merit. The Decision dated August 29, 2002 and Resolution dated January 23, 2003 of
the Court of Appeals in CA-G.R. CV No. 28770 are AFFIRMED.

Costs against petitioner.

SO ORDERED.
G.R. No. L-1600 June 1, 1906

THE PHILIPPINE SHIPPING COMPANY, ET AL., plaintiffs-appellants,

vs.
FRANCISCO GARCIA VERGARA, defendant-appellee.

Del-Pan, Ortigas and Fisher, for appellants.

Ledesma, Sumulong and Quintos, for appellee.

ARELLANO, C.J.:

The Philippine Shipping Company, the owner of the steamship Nuestra Sra. de Lourdes, claims an indemnification of 44,000 pesos for
the loss of the said ship as a result of a collision. Ynchusti & Co. also claimed 24,705.64 pesos as an indemnification for the loss of the
cargo of hemp and coprax carried by the said ship on her last trip. The defendant, Francisco Garcia Vergara, was the owner of the
steamship Navarra, which collided with the Lourdes.

From the judgment of the trial court the Philippine Shipping Company and the defendant Vergara appealed, but the latter has failed to
prosecute his appeal by a bill of exceptions or otherwise. The only appellant who has prosecuted this appeal now reduced its claim to
18,000 pesos, the value of the colliding vessel.

The court below found as a matter of fact that the steamship Lourdes was sailing in accordance with law, but that the Navarra was not,
and was therefore responsible for the collision. (Bill of exceptions, p. 7.) The court also found as a fact that "both ships with their
respective cargoes were entirely lost." Construing article 837 of the Code Commerce, the court below held "that the defendant was not
responsible to the plaintiff for the value of the steamship Lourdes, with the costs against the latter." (Bill of exceptions, p. 8.)

But the appellant, the Philippine Shipping Company, contends that the defendant should pay to 18,000 pesos, the value of
the Navarra at the time of its loss; that this is the sense in which the provisions of article 837 of the Code of Commerce should be
understood; that said code has followed the principles of the English law and not those of the American law, and that it was immaterial
whether the Navarra had been entirely lost, provided her value at the time she was lost could be ascertained, since the extent of the
liability of the owner of the colliding vessel for the damages resulting from the collision is to be determined in accordance with such
value.

Article 837 of the Code Commerce provides: "The civil liability contracted by the shipowners in the cases prescribed in this section shall
be understood as limited to the value of the vessel with all her equipment and all the freight money earned during the voyage."

This section is a necessary consequence of the right to abandon the vessel given to the shipowner in article 587 of the code,
and it is one of the many superfluities contained in the code. (Lorenzo Benito, "Lecciones," 352.)

Art. 587. The agent shall also the civilly liable for the indemnities in favor of third persons which arise from the conduct of the
captain in the care of the goods which the vessel carried, but he may exempt himself therefrom by abandoning the vessel with
all her equipments and the freight he may have earned during the trip.

ART. 590. The part owners of a vessel shall be civilly liable, in the proportion of their contribution to the common fund, for the
results of the acts of the captain referred to in article 587. Each part owner may exempt himself from this liability by the
abandonment, before a notary, of the part of the vessel belonging to him.

The "Exposicion de motivos" of the Code of Commerce contains the following: "The present code (1829) does not determine the
juridical status of the agent where such agent is not himself the owner of the vessel. This omission is supplied by the proposed code,
which provides in accordance with the principles of maritime law that by agent it is to be understood the person intrusted with the
provisioning of the vessel, or the one who represents her in the port in which she happens to be. This person is the only who represents
the interest of the owner of the vessel. This provision has therefore cleared the doubt which existed as to the extent of the liability, both
of the agent and for the owner of the vessel. Such liability is limited by the proposed code to the value of the vessel and other things
appertaining thereto."

There is no doubt that if the Navarra had not been entirely lost, the agent, having held liable for the negligence of the captain of the
vessel, could have abandoned her with all her equipment and the freight money earned during the voyage, thus bringing himself within
the provisions of the article 837 in so far as the subsidiary civil liability is concerned. This abandonment which would have amounted to
an offer of the value of the vessel, of her equipment, and freight money earned could not have been refused, and the agent could not
have been personally compelled, under such circumstances, to pay the 18,000 pesos, the estimated value of the vessel at the time of
the collision.

This is the difference which exist between the lawful acts and lawful obligation of the captain and the liability which he incurs on account
of any unlawful act committed by him. In the first case, the lawful acts and obligations of the captain beneficial to the vessel may be
enforced as against the agent for the reason that such obligations arise from the contract of agency (provided, however, that the
captain does not exceed his authority), while as to any liability incurred by the captain through his unlawful acts, the ship agent is simply
subsidiarily civilly liable. This liability of the agent is limited to the vessel and it does not extend further. For this reason the Code of
Commerce makes agent liable to the extent of the value of the vessel, as to the codes of the principal maritime nations provided, with
the vessel, and not individually. Such is also the spirit of our code.

The spirit of our code is accurately set forth in a treatise on maritime law, from which we deem proper to quote the following as the
basis of this decision:

That which distinguishes the maritime from the civil law and even from the mercantile law in general is the real and
hypothecary nature of the former, and the many securities of a real nature that maritime customs from time immemorial, the
laws, the codes, and the later jurisprudence, have provided for the protection of the various and conflicting interest which are
ventured and risked in maritime expeditions, such as the interests of the vessel and of the agent, those of the owners of the
 cargo and consignees, those who salvage the ship, those who make loans upon the cargo, those of the sailors and members
of the crew as to their wages, and those of a constructor as to repairs made to the vessel.

As evidence of this "real" nature of the maritime law we have (1) the limitation of the liability of the agents to the actual value of
the vessel and the freight money, and (2) the right to retain the cargo and the embargo and detention of the vessel even cases
where the ordinary civil law would not allow more than a personal action against the debtor or person liable. It will be observed
that these rights are correlative, and naturally so, because if the agent can exempt himself from liability by abandoning the
vessel and freight money, thus avoiding the possibility of risking his whole fortune in the business, it is also just that his
maritime creditor may for any reason attach the vessel itself to secure his claim without waiting for a settlement of his rights by
a final judgment, even to the prejudice of a third person.

This repeals the civil law to such an extent that, in certain cases, where the mortgaged property is lost no personal action lies
against the owner or agent of the vessel. For instance, where the vessel is lost the sailors and members of the crew can not
recover their wages; in case of collision, the liability of the agent is limited as aforesaid, and in case of shipwrecks, those who
loan their money on the vessel and cargo lose all their rights and can not claim reimbursement under the law.

There are two reasons why it is impossible to do away with these privileges, to wit: (1) The risk to which the thing is exposed,
and ( 2 ) the "real" nature of maritime law, exclusively "real," according to which the liability of the parties is limited to a thing to
which is at mercy of the waves. If the agent is only liable with the vessel and freight money and both may be lost through the
accidents of navigation it is only just that the maritime creditor have some means of obviating this precarious nature of his
rights by detaining the ship, his only security, before it is lost.

The liens, tacit or legal, which may exist upon the vessel and which a purchaser of the same would be obliged to respect and
recognize — in addition to those existing in favor of the State by virtue of the privileges which are granted to it by all the laws
— pilot, tonnage, and port dues and other similar charges, the wages of the crew earned during the last voyage as provided in
article 646, of the Code of Commerce, salvage dues under article 842, the indemnification due to the captain of the vessel in
case his contract is terminated on account of the voluntary sale of the ship and the insolvency of the owner as provided in
article 608, and other liabilities arising from collisions under article 837 and 838. (Madariaga, pp. 60-62, 63, 85.)

We accordingly hold that the defendant is liable for the indemnification to which the plaintiff is entitled by reason of the collision, but he
is not required to pay such indemnification of the reason that the obligation thus incurred has been extinguished on account of
the loss of the thing bound for the payment thereof, and in this respect the judgment of the court below is affirmed except in so far as it
requires the plaintiff to pay the costs of this action, which is not exactly proper. After the expiration of twenty days let judgment be
entered in accordance herewith and ten days thereafter the record be remanded to the Court of First Instance for execution. So
ordered.
G.R. No. L-46340 April 28, 1983

SWEET LINES, INC., petitioner,

vs.
THE HONORABLE COURT OF APPEALS, MICAELA B. QUINTOS, FR. JOSE BACATAN, S.J., MARCIANO CABRAS and
ANDREA VELOSO, respondents.

Felixberto Leonardo and Ramon Tuangco for petitioner.

Expedito P. Bugarin for respondents.

RESOLUTION

MELENCIO-HERRERA, J.:

For having by-passed a port of call without previous notice, petitioner shipping company and the ship captain were sued for damages
by four of its passengers, private respondents herein, before the then Court of First Instance of Cebu, Branch VIII,

Briefly, the facts of record show that private respondents purchased first- class tickets from petitioner at the latter's office in Cebu City.
They were to board petitioner's vessel, M/V Sweet Grace, bound for Catbalogan, Western Samar. Instead of departing at the scheduled
hour of about midnight on July 8, 1972, the vessel set sail at 3:00 A.M. of July 9, 1972 only to be towed back to Cebu due to engine
trouble, arriving there at about 4:00 P.M. on the same day. Repairs having been accomplished, the vessel lifted anchor again on July
10, 1972 at around 8:00 A.M.

Instead of docking at Catbalogan, which was the first port of call, the vessel proceeded direct to Tacloban at around 9:00 P.M. of July
10, 1972. Private respondents had no recourse but to disembark and board a ferryboat to Catbalogan.

Hence, this suit for damages for breach of contract of carriage which the Trial Court, affirmed by respondent Appellate Court, awarded
as follows:

IN THE LIGHT OF THE FOREGOING OBSERVATIONS, judgment is rendered ordering the defendant Sweet Lines,
Incorporated to pay to the plaintiffs the following:

l) P175,000.00 as moral damages divided among the plaintiffs as follows: P30,000.00 for Mrs. Micaela B. Quintos,
P26,000.00 for Jesuit Father Jose Bacatan; P10,000.00 for Mrs. Andrea Veloso and P10,000.00 for plaintiff Mike
Cabras;

2) P30,000.00 as exemplary or corrective damages;

3) Interest at the legal rate of 6% per annum on the moral and exemplary damages as set forth above from the date
of this decision until said damages are fully paid;

4) P5,000.00 as attorney's fees; and

5) The costs.

Counterclaim dismissed.

The governing provisions are found in the Code of Commerce and read as follows:

ART. 614. A captain who, having agreed to make a voyage, fails to fulfill his undertaking, without being prevented by
fortuitous event or force majeure, shall indemnify all the losses which his failure may cause, without prejudice to
criminal penalties which may be proper.

and

ART. 698. In case of interruption of a voyage already begun, the passengers shall only be obliged to pay the fare in
proportion to the distance covered, without right to recover damages if the interruption is due to fortuitous event or
force majeure, but with a right to indemnity, if the interruption should have been caused by the captain exclusively. If
the interruption should be caused by the disability of the vessel, and the passenger should agree to wait for her
repairs, he may not be required to pay any increased fare of passage, but his living expenses during the delay shall
be for his own account.

The crucial factor then is the existence of a fortuitous event or force majeure. Without it, the right to damages and indemnity exists
against a captain who fails to fulfill his undertaking or where the interruption has been caused by the captain exclusively.

As found by both Courts below, there was no fortuitous event or force majeure which prevented the vessel from fulfilling its undertaking
of taking private respondents to Catbalogan. In the first place, mechanical defects in the carrier are not considered a caso fortuito that
exempts the carrier from responsibility. 1

In the second place, even granting arguendo that the engine failure was a fortuitous event, it accounted only for the delay in departure.
When the vessel finally left the port of Cebu on July 10, 1972, there was no longer any force majeure that justified by-passing a port of
call. The vessel was completely repaired the following day after it was towed back to Cebu. In fact, after docking at Tacloban City, it left
the next day for Manila to complete its voyage. 2

The reason for by-passing the port of Catbalogan, as admitted by petitioner's General Manager, was to enable the vessel to catch up
with its schedule for the next week. The record also discloses that there were 50 passengers for Tacloban compared to 20 passengers
for Catbalogan,3 so that the Catbalogan phase could be scrapped without too much loss for the company.

In defense, petitioner cannot rely on the conditions in small bold print at the back of the ticket reading.

The passenger's acceptance of this ticket shall be considered as an acceptance of the following conditions:

3. In case the vessel cannot continue or complete the trip for any cause whatsoever, the carrier reserves the right to
bring the passenger to his/her destination at the expense of the carrier or to cancel the ticket and refund the
passenger the value of his/her ticket;

xxx xxx xxx

11. The sailing schedule of the vessel for which this ticket was issued is subject to change without previous notice.
(Exhibit "l -A")

Even assuming that those conditions are squarely applicable to the case at bar, petitioner did not comply with the same. It did not
cancel the ticket nor did it refund the value of the tickets to private respondents. Besides, it was not the vessel's sailing schedule that
was involved. Private respondents' complaint is directed not at the delayed departure the next day but at the by- passing of Catbalogan,
their destination. Had petitioner notified them previously, and offered to bring them to their destination at its expense, or refunded the
value of the tickets purchased, perhaps, this controversy would not have arisen.

Furthermore, the conditions relied upon by petitioner cannot prevail over Articles 614 and 698 of the Code of Commerce heretofore
quoted.

The voyage to Catbalogan was "interrupted" by the captain upon instruction of management. The "interruption" was not due to
fortuitous event or for majeure nor to disability of the vessel. Having been caused by the captain upon instruction of management, the
passengers' right to indemnity is evident. The owner of a vessel and the ship agent shall be civilly liable for the acts of the captain. 4

Under Article 2220 of the Civil Code, moral damages are justly due in breaches of contract where the defendant acted fraudulently or in
bad faith. Both the Trial Court and the Appellate Court found that there was bad faith on the part of petitioner in that:

(1) Defendants-appellants did not give notice to plaintiffs- appellees as to the change of schedule of the vessel;

(2) Knowing fully well that it would take no less than fifteen hours to effect the repairs of the damaged engine,
defendants-appellants instead made announcement of assurance that the vessel would leave within a short period of
time, and when plaintiffs-appellees wanted to leave the port and gave up the trip, defendants-appellants' employees
would come and say, 'we are leaving, already.'

(3) Defendants-appellants did not offer to refund plaintiffs-appellees' tickets nor provide them with transportation from
Tacloban City to Catbalogan. 5

That finding of bad faith is binding on us, since it is not the function of the Court to analyze and review evidence on this point all over
again, 6 aside from the fact that we find it faithful to the meaning of bad faith enunciated thus:

Bad faith means a breach of a known duty through some motive or interest or illwill. Self-enrichment or fraternal
interest, and not personal illwill may have been the motive, but it is malice nevertheless. 7

Under the circumstances, however, we find the award of moral damages excessive and accordingly reduce them to P3,000.00,
respectively, for each of the private respondents.

The total award of attorney's fees of P5,000.00 is in order considering that the case has reached this Tribunal.

Insofar as exemplary damages are concerned, although there was bad faith, we are not inclined to grant them in addition to moral
damages. Exemplary damages cannot be recovered as a matter of right; the Court decides whether or not they should be
adjudicated.8 The objective to meet its schedule might have been called for, but petitioner should have taken the necessary steps for
the protection of its passengers under its contract of carriage.

Article 2215(2) of the Civil Code 9 invoked by petitioner is inapplicable herein. The harm done to private respondents outweighs any
benefits they may have derived from being transported to Tacloban instead of being taken to Catbalogan, their destination and the
vessel's first port of call, pursuant to its normal schedule.

ACCORDINGLY, the judgment appealed from is hereby modified in that petitioner is hereby sentenced to indemnify private
respondents in the sum of P3,000.00 each, without interest, plus P1,250.00, each, by way of att/rney's fees and litigation expenses.
Costs against petitioner.

SO ORDERED.
G.R. No. L-42926 September 13, 1985

PEDRO VASQUEZ, SOLEDAD ORTEGA, CLETO B. BAGAIPO, AGUSTINA VIRTUDES, ROMEO VASQUEZ and MAXIMINA
CAINAY, petitioners,
vs.
THE COURT OF APPEALS and FILIPINAS PIONEER LINES, INC., respondents.

Emilio D. Castellanes for petitioners.

Apolinario A. Abantao for private respondents.

MELENCIO-HERRERA, J.:

This litigation involves a claim for damages for the loss at sea of petitioners' respective children after the shipwreck of MV Pioneer Cebu
due to typhoon "Klaring" in May of 1966.

The factual antecedents, as summarized by the trial Court and adopted by respondent Court, and which we find supported by the
record, read as follows:

When the inter-island vessel MV "Pioneer Cebu" left the Port of Manila in the early morning of May 15, 1966 bound
for Cebu, it had on board the spouses Alfonso Vasquez and Filipinas Bagaipo and a four-year old boy, Mario Marlon
Vasquez, among her passengers. The MV "Pioneer Cebu" encountered typhoon "Klaring" and struck a reef on the
southern part of Malapascua Island, located somewhere north of the island of Cebu and subsequently sunk. The
aforementioned passengers were unheard from since then.

Plaintiffs Pedro Vasquez and Soledad Ortega are the parents of Alfonso Vasquez; plaintiffs Cleto Bagaipo and
Agustina Virtudes are the parents of Filipinas Bagaipo; and plaintiffs Romeo Vasquez and Maxima Cainay are the
parents of the child, Mario Marlon Vasquez. They seek the recovery of damages due to the loss of Alfonso Vasquez,
Filipinas Bagaipo and Mario Marlon Vasquez during said voyage.

At the pre-trial, the defendant admitted its contract of carriage with Alfonso Vasquez, Filipinas Bagaipo and Mario
Marlon Vasquez, and the fact of the sinking of the MV "Pioneer Cebu". The issues of the case were limited to the
defenses alleged by the defendant that the sinking of the vessel was caused by force majeure, and that the
defendant's liability had been extinguished by the total loss of the vessel.

The evidence on record as to the circumstances of the last voyage of the MV "Pioneer Cebu" came mainly, if not
exclusively, from the defendant. The MV "Pioneer Cebu" was owned and operated by the defendant and used in the
transportation of goods and passengers in the inter-island shipping. Scheduled to leave the Port of Manila at 9:00
p.m. on May 14, 1966, it actually left port at 5:00 a.m. the following day, May 15, 1966. It had a passenger capacity of
three hundred twenty-two (322) including the crew. It undertook the said voyage on a special permit issued by the
Collector of Customs inasmuch as, upon inspection, it was found to be without an emergency electrical power
system. The special permit authorized the vessel to carry only two hundred sixty (260) passengers due to the said
deficiency and for lack of safety devices for 322 passengers (Exh. 2). A headcount was made of the passengers on
board, resulting on the tallying of 168 adults and 20 minors, although the passengers manifest only listed 106
passengers. It has been admitted, however, that the headcount is not reliable inasmuch as it was only done by one
man on board the vessel.

When the vessel left Manila, its officers were already aware of the typhoon Klaring building up somewhere in
Mindanao. There being no typhoon signals on the route from Manila to Cebu, and the vessel having been cleared by
the Customs authorities, the MV "Pioneer Cebu" left on its voyage to Cebu despite the typhoon. When it reached
Romblon Island, it was decided not to seek shelter thereat, inasmuch as the weather condition was still good. After
passing Romblon and while near Jintotolo island, the barometer still indicated the existence of good weather
condition continued until the vessel approached Tanguingui island. Upon passing the latter island, however, the
weather suddenly changed and heavy rains felt Fearing that due to zero visibility, the vessel might hit Chocolate
island group, the captain ordered a reversal of the course so that the vessel could 'weather out' the typhoon by facing
the winds and the waves in the open. Unfortunately, at about noontime on May 16, 1966, the vessel struck a reef
near Malapascua island, sustained leaks and eventually sunk, bringing with her Captain Floro Yap who was in
command of the vessel.

Due to the loss of their children, petitioners sued for damages before the Court of First Instance of Manila (Civil Case No. 67139).
Respondent defended on the plea of force majeure, and the extinction of its liability by the actual total loss of the vessel.

After proper proceedings, the trial Court awarded damages, thus:

WHEREFORE, judgment is hereby rendered ordering the defendant to pay:

(a) Plaintiffs Pedro Vasquez and Soledad Ortega the sums of P15,000.00 for the loss of earning capacity of the
deceased Alfonso Vasquez, P2,100.00 for support, and P10,000.00 for moral damages;

(b) Plaintiffs Cleto B. Bagaipo and Agustina Virtudes the sum of P17,000.00 for loss of earning capacity of deceased
Filipinas Bagaipo, and P10,000.00 for moral damages; and

(c) Plaintiffs Romeo Vasquez and Maximina Cainay the sum of P10,000.00 by way of moral damages by reason of
the death of Mario Marlon Vasquez.

On appeal, respondent Court reversed the aforementioned judgment and absolved private respondent from any and all liability.
Hence, this Petition for Review on Certiorari, the basic issue being the liability for damages of private respondent for the presumptive
death of petitioners' children.

The trial Court found the defense of caso fortuito untenable due to various decisive factors, thus:

... It is an admitted fact that even before the vessel left on its last voyage, its officers and crew were already aware of
the typhoon brewing somewhere in the same general direction to which the vessel was going. The crew of the vessel
took a calculated risk when it proceeded despite the typhoon advisory. This is quite evident from the fact that the
officers of the vessel had to conduct conferences amongst themselves to decide whether or not to proceed. The crew
assumed a greater risk when, instead of seeking shelter in Romblon and other islands the vessel passed en route,
they decided to take a change on the expected continuation of the good weather the vessel was encountering, and
the possibility that the typhoon would veer to some other directions. The eagerness of the crew of the vessel to
proceed on its voyage and to arrive at its destination is readily understandable. It is undeniably lamentable, however,
that they did so at the risk of the lives of the passengers on board.

Contrariwise, respondent Appellate Court believed that the calamity was caused solely and proximately by fortuitous event which not
even extraordinary diligence of the highest degree could have guarded against; and that there was no negligence on the part of the
common carrier in the discharge of its duties.

Upon the evidence and the applicable law, we sustain the trial Court. "To constitute a caso fortuito that would exempt a person from
responsibility, it is necessary that (1) the event must be independent of the human will; (2) the occurrence must render it impossible for
the debtor to fulfill the obligation in a normal manner; and that (3) the obligor must be free of participation in, or aggravation of, the injury
to the creditor." 1 In the language of the law, the event must have been impossible to foresee, or if it could be foreseen, must have been
impossible to avoid. 2 There must be an entire exclusion of human agency from the cause of injury or loss. 3

Turning to this case, before they sailed from the port of Manila, the officers and crew were aware of typhoon "Klaring" that was reported
building up at 260 kms. east of Surigao. In fact, they had lashed all the cargo in the hold before sailing in anticipation of strong winds
and rough waters.4 They proceeded on their way, as did other vessels that day. Upon reaching Romblon, they received the weather
report that the typhoon was 154 kms. east southeast of Tacloban and was moving west northwest. 5 Since they were still not within the
radius of the typhoon and the weather was clear, they deliberated and decided to proceed with the course. At Jintotolo Island, the
typhoon was already reported to be reaching the mainland of Samar. 6 They still decided to proceed noting that the weather was still
"good" although, according to the Chief Forecaster of the Weather Bureau, they were already within the typhoon zone. 7 At Tanguingui
Island, about 2:00 A.M. of May 16, 1966, the typhoon was in an area quite close to Catbalogan, placing Tanguingui also within the
typhoon zone. Despite knowledge of that fact, they again decided to proceed relying on the forecast that the typhoon would weaken
upon crossing the mainland of Samar. 8 After about half an hour of navigation towards Chocolate Island, there was a sudden fall of the
barometer accompanied by heavy downpour, big waves, and zero visibility. The Captain of the vessel decided to reverse course and
face the waves in the open sea but because the visibility did not improve they were in total darkness and, as a consequence, the vessel
ran aground a reef and sank on May 16, 1966 around 12:45 P.M. near Malapascua Island somewhere north of the island of Cebu.

Under the circumstances, while, indeed, the typhoon was an inevitable occurrence, yet, having been kept posted on the course of the
typhoon by weather bulletins at intervals of six hours, the captain and crew were well aware of the risk they were taking as they hopped
from island to island from Romblon up to Tanguingui. They held frequent conferences, and oblivious of the utmost diligence required of
very cautious persons, 9 they decided to take a calculated risk. In so doing, they failed to observe that extraordinary diligence required
of them explicitly by law for the safety of the passengers transported by them with due regard for an circumstances 10 and unnecessarily
exposed the vessel and passengers to the tragic mishap. They failed to overcome that presumption of fault or negligence that arises in
cases of death or injuries to passengers. 11

While the Board of Marine Inquiry, which investigated the disaster, exonerated the captain from any negligence, it was because it had
considered the question of negligence as "moot and academic," the captain having "lived up to the true tradition of the profession."
While we are bound by the Board's factual findings, we disagree with its conclusion since it obviously had not taken into account the
legal responsibility of a common carrier towards the safety of the passengers involved.

With respect to private respondent's submission that the total loss of the vessel extinguished its liability pursuant to Article 587 of the
Code of Commerce12 as construed in Yangco vs. Laserna, 73 Phil. 330 [1941], suffice it to state that even in the cited case, it was held
that the liability of a shipowner is limited to the value of the vessel or to the insurance thereon. Despite the total loss of the vessel
therefore, its insurance answers for the damages that a shipowner or agent may be held liable for by reason of the death of its
passengers.

WHEREFORE, the appealed judgment is hereby REVERSED and the judgment of the then Court of First Instance of Manila, Branch V,
in Civil Case No. 67139, is hereby reinstated. No costs.

SO ORDERED.
G.R. No. L-47447-47449 October 29, 1941

TEODORO R. YANGCO, ETC., petitioner,

vs.

MANUEL LASERNA, ET AL., respondents.

Claro M. Recto for petitioner.

Powell & Vega for respondents.

MORAN, J.:

At about one o'clock in the afternoon of May 26, 1927, the steamer S.S. Negros, belonging to petitioner here, Teodoro R. Yangco, left
the port of Romblon on its retun trip to Manila. Typhoon signal No. 2 was then up, of which fact the captain was duly advised and his
attention thereto called by the passengers themselves before the vessel set sail. The boat was overloaded as indicated by the loadline
which was 6 to 7 inches below the surface of the water. Baggage, trunks and other equipments were heaped on the upper deck, the
hold being packed to capacity. In addition, the vessel carried thirty sacks of crushed marble and about one hundred sacks of copra and
some lumber. The passengers, numbering about 180, were overcrowded, the vessel's capacity being limited to only 123 passengers.
After two hours of sailing, the boat encountered strong winds and rough seas between the islands of Banton and Simara, and as the
waves splashed the ladies' dresses, the awnings were lowered. As the sea became increasingly violent, the captain ordered the vessel
to turn left, evidently to return to port, but in the manuever, the vessel was caught sidewise by a big wave which caused it to capsize
and sink. Many of the passengers died in the mishap, among them being Antolin Aldaña and his son Victorioso, husband and son,
respectively, of Emilia Bienvenida who, together with her other children and a brother-in-law, are respondents in G.R. No. 47447;
Casiana Laserna, the daughter of respondents Manuel Laserna and P.A. de Laserna in G.R. 47448; and Genaro Basaña, son of
Filomeno Basaña, respondent in G.R. No. 47449. These respondents instituted in the Court of First Instance of Capiz separate civil
actions against petitioner here to recover damages for the death of the passengers aforementioned. The court awarded the heirs of
Antolin and Victorioso Aldana the sum of P2,000; the heirs of Casiana Laserna, P590; and those of Genaro Basana, also P590. After
the rendition of the judgment to this effcet, petitioner, by a verified pleading, sought to abandon th evessel to the plainitffs in the three
cases, together with all its equipments, without prejudice to his right to appeal. The abandonment having been denied, an appeal was
taken to the Court of Appeals, wherein all the judgmnets were affirmed except that which sums was increased to P4,000. Petitioner,
now deceased, appealed and is here represented by his legal representative.

Brushing aside the incidental issues, the fundamental question here raised is: May the shipowner or agent, notwithstanding the total
loss of the vessel as a result of the negligence of its captain, be properly held liable in damages for the consequent death of its
passengers? We are of the opinion and so hold that this question is controlled by the provisions of article 587 of the Code of
Commerce. Said article reads:

The agent shall also be civilly liable for the indemnities in favor of third persons which arise from the conduct of the captain in
the care of the goods which the vessel carried; but he may exempt himself therefrom by abandoning the vessel with all her
equipments and the freight he may have earned during the voyage.

The provisions accords a shipowner or agent the right of abandonment; and by necessary implication, his liability is confined to that
which he is entitled as of right to abandon — "the vessel with all her equipments and the freight it may have earned during the voyage."
It is true that the article appears to deal only with the limited liability of shipowners or agents for damages arising from the misconduct of
the captain in the care of the goods which the vessel carries, but this is a mere deficiency of language and in no way indicates the true
extent of such liability. The consensus of authorities is to the effect that notwithstanding the language of the aforequoted provision, the
benefit of limited liability therein provided for, applies in all cases wherein the shipowner or agent may properly be held liable for the
negligent or illicit acts of the captain. Dr. Jose Ma. Gonzalez de Echavarri y Vivanco, commenting on said article, said:

La letra del Codigo, en el articulo 587, presenta una gravisima cuestion. El derecho de abandono, si se atiende a lo escrito,
solo se refiere a las indemnizaciones a que dierQe lugar la conducta del Capitan en la custodia de los efectos que cargo en el
buque.

¿Es ese el espiritu del legislador? No; ¿habra derecho de abandono en las responsabilidades nacidas de obligaciones
contraidas por el Capitan y de otros actos de este? Lo reputamos evidente y, para fortalecer nuestra opinion, basta copiar el
siguiente parrafo de la Exposicion de motivos:

"El proyecto, al aplicar estos principios, se inspira tambien en los intereses del comercio maritimo, que quedaran mas
asegurados ofreciendo a todo el que contrata con el naviero o Capitan del buque, la garantia real del mismo,
cualesquiera que sean las facultades o atribuciones de que se hallen investidos." (Echavarri, Codigo de Comercio,
Tomo 4, 2. a ed., pags. 483-484.)

A cursory examination will disclose that the principle of liomited liability of a shipowner or agent is provided for in but three articles of the
Code of Commerce — article 587 aforequoted and article 590 and 837. Article 590 merely reiterates the principle embodied in article
587, applies the same principle in cases of collision, and it has been observed that said article is but "a necessary consequences of the
right to abandon the vessel given to the shipowner in article 587 of the Code, and it is one of the many superfluities contained in the
Code." (Lorenzo Benito, Lecciones 352, quoted in Philippine Shipping Co. vs. Garcia, 6 Phil. 281, 282.) In effect, therefore, only articles
587 and 590 are the provisions conatined in our Code of Commerce on the matter, and the framers of said code had intended those
provisions to embody the universal principle of limited liability in all cases. Thus, in the "Exposicon de Motivos" of the Code of
Commerce, we read:

The present code (1829) does not determine the juridical status of the agent where such agent is not himself the owner of the
vessel. This omission is supplied by the proposed code, which provides in accordance with the principles of maritime law that
by agent it is to be understood the person intrusted with the provisioning of the vessel, or the one who represents her in the
port in which she happens to be. This person is the only one who represents the vessel — that is to say, the only one who
represents the interests of the owner of the vessel. This provision has therefore cleared the doubt which existed as to the
extent of the liability, both of the agent and of the owner of the vessel. Such liability is limited by the proposed code to
the value of the vesseland other things appertaining thereto.
In Philippine Shipping Co. vs. Garcia (6 Phil., 281, 284-286), we have expressed ourselves in such a comprehensive manner as to
leave no room for doubt on the applicability of our ratio decidendi not only to cases of collision but also to those of shipwrecks, etc. We
said:

This is the difference which exists between the lawful acts and lawful obligations of the captain and the liability which he incurs
on account of any unlawful act committed by him. In the first case, the lawful acts and obligations of the captain beneficial to
the vessel may be enforced as against the agent for the reason that such obligations arise from te the contract of agency
(provided, however, that the captain does not exceed his authority), while as to any liability incurred by the captain through his
unlawful acts, the ship agent is simply subsidiarily civilly liable. This liability of the agent is limited to the vessel and it does not
extend further. For this reason the Code of Commerce makes the agent liable to the extent of the value of the vessel, as the
codes of the principal maritime nations provide with the vessel, and not individually. Such is also the spirit of our Code.

The spirit of our code s accurately set forth in a treatise on maritime law, from which we deem proper to quote the following as
the basis of this decision:lawphil.net

"That which distinguishes the maritime from the civil law and even from the mercantile law in general is the real and
hypothecary nature of the former, and the many securities of a real nature that maritime customs from time
immemorial, the laws, the codes, and the later jurisprudence, have provided for the protection of the various and
conflicting interests which are ventured and risked in maritime expeditions, such as the interests of the vessel and of
the agent, those of the owners of the cargo and consignees, those who salvage the ship, those who make loans upon
the cargo, those of the sailors and members of the crew as to their wages, and those of a constructor as to repairs
made to the vessel.

"As evidence of this real nature of the maritime law we have (1) the limitation of the liability of the agents to the actual
value of the vessel and the freight money, and (2) the right to retain the cargo and the embargo and detention of the
vessel even in cases where the ordinary civil law would not allow more than a personal action against the debtor or
person liable. It will be observed that these rights are correlative, and naturally so, because if the agent can exempt
himself from liability by abandoning the vessel and freight money, thus avoiding the possibility of risking his whole
fortune in the business, it is also just that his maritime creditor may for any reason attach the vessel itself to secure
his claim without waiting for a settlement of his rights by a final judgment, even to the prejudice of a third person.

"This repeals the civil law to such an extent that, in certain cases, where the mortgaged property is lostno personal
action lies against the owner or agent of the vessel. For instance, where the vessel is lost the sailors and members of
the crew cannot recover their wages; in case of collision, the liability of the agent is limited as aforesaid, and in case
of shipwreck, those who loan their money on the vessel and cargo lose all their rights and cannot claim
reimbursement under the law.

"There are two reasons why it is impossible to do away with these privileges, to wit: (1) The risk to which the thing is
exposed, and (2) the real nature of the maritime law, exclusively real, according to which the liability of the parties is
limited to a thing which is at the mercy of the waves. If the agent is only liable with the vessel and freight money and
both may be lost through the accidents of navigation it is only just that the maritime creditor have some means to
obviating this precarious nature of his rights by detaining the ship, his only security, before it is lost.

"The liens, tacit or legal, which may exist upon the vessel and which a purchaser of the same would be obliged to
respect and recognize are — in addition to those existing in favor of the State by virtue of the privileges which are
granted to it by all the laws — pilot, tonnate, and port dues and other similar charges, the wages of the crew earned
during the last voyage as provided in article 646 of the Code of Commerce, salvage dues under article 842, the
indemnification due to the captain of the vessel in case his contract is terminated on account of the voluntary sale of
the ship and the insolvency of the owner as provided in article 608, and all other liabilities arising from collisions
under articles 837 and 838."

We are shared in this conclusion by the eminent commentators on the subject. Agustin Vicente y Gella, asserting, in his "Introduccion al
Derecho Mercantil Comparado" 1929 (pages 374-375), the like principle of limited liability of shipowners or agent in cases of accidents,
collisions, shipwrecks, etc., said:

De las responsabilities que pueden resultar como consequencia del comercio maritimo, y no solo por hechos propios sino
tambien por las que se ocasionen por los del capitan y la tripulacion, responde frente a tercero el naviero que representa el
buque; pero el derecho maritimo es sobre todo tradicional y siguiendo un viejo principio de la Edad Media la responsabilidad
del naviero se organiza de un modo especifico y particularisimo que no encuentra similar en el derecho general de las
obligaciones.

Una forma corrientisima de verificarse el comercio maritimo durante la epoca medieval, era prestar un propietario su navio
para que cargase en el mercancias determinada persona, y se hiciese a la mar, yendo al frente de la expedicion un patron del
buque, que llegado al puerto de destino se encargaba de venderlas y retornaba al de salida despues de adquirir en aquel
otros efectos que igualmente revendia a su regreso, verificado lo cual los beneficios de la expedicion se repartian entre el
dueño del buque, el cargador y el capitan y tripulantes en la proporcion estipulada. El derecho maritimo empezo a considerar
la asociacion asi formada como una verdadera sociedad mercantil, de responsabilidad limitada, y de acuerdo con los
principios que gobiernan aquella en los casos de accidentes, abordajes, naufragios, etc., se resolvia que el dueño del buque
perdia la nave, el cargador las mercancias embarcadas y el capitan y la tripulacion su trabajo, sin que en ningun caso el tercer
acreedor pudiese reclamar mayor cantidad de ninguno de ellos, porque su responsabilidad quedaba limitada a lo que cada
uno aporto a la sociedad. Recogidas estas ideas en el derecho comercial de tiempos posteriores, la responsabilidad del
naviero se edifico sobre aquellos principios, y derogando la norma general civil de que del cumplimiento de sus obligaciones
responde el deudor con todos sus bienes presentes y futuros, la responsabilidad maritima se considero siempre limitada ipso
jure al patrimonio de mar. Y este es el origen de la regla trascendental de derecho maritimo segun la cual el naviero se libera
de toda responsabilidad abandonando el buque y el flete a favor de los acreedores.

From the Enciclopedia Juridica Española, Vol. 23, p. 347, we read:

 Ahora bien: ¿hasta donde se extiende esta responsabilidad del naviero? ¿sobre que bienes pueden los acreedores
resarcirse? Esta es otra especialidad del Derecho maritimo; en el Derecho comun la responsabilidad es limitada; tambien lo
era en el antiguo Derecho maritimo romano; es daba la actio exercitoria contra el exercitor navis sin ninguna restriccion, pero
en la Edad Media una idea nueva se introdujo en los usos maritimos. Las cargas resultantes de las expediciones maritimas se
consideraron limitadas por los propietarios de las naves a los valores comprometidos por ellos en cada expedicion; se separo
ficticiamente el patrimonio de los navieros en dos partes que todavia se designan de una manera bastante exacta; fortuna de
tierra y fortuna de mar o flotante; y se admitio la teoria de que esta era la que respondia solo de las deudas provinientes de
los actos del capitan o de la tripulacion, es decir, que el conjunto del patrimonio del naviero escaparia a estas cargas desde el
momento en que abandonara la nave y los fletes a los acreedores. . . .

Escriche in his Diccionario de la Legislacion y Jurisprudencia, Vol. 1, p. 38, observes:

La responsabilidad del naviero, en el caso expuesto, se funda en el principio de derecho comun de ser responsable todo el
que pone al frente de un establecimiento a una persona, de los daños o perjuicios que ocasionare esta desempeñando su
cometido, y en que estando facultado el naviero para la eleccion de capitan de la nave, viene a tener indirectamente culpa en
la negligencia o actos de este que o casionaron daños o perjuicios, puesto que no se aseguro de su pericia o buena fe.
Limitase, sin embargo, la responsabilidad del naviero a la perdida de la nave, sus aparejos, y fletes devengados durante el
viaje; porque no pudiendo vigilar de un modo directo e inmediato la conducta del capitan, hubiera sido duro hacerla extensiva
a todos sus bienes que podria comprometer el capitan con sus faltas o delitos.

The views of these learned commentators, including those of Estasen (Derecho Mercantil, Vol. 4, 259) and Supino (Derecho Mercantil,
pp. 463-464), leave nothing to be desired and nothing to be doubted on the principle. It only remains to be noted that the rule of limited
liability provided for in our Code of Commerce reflects merely, or is but a restatement, imperfect though it is, of the almost universal
principle on the subject. While previously under the civil or common law, the owner of a vessel was liable to the full amount for
damages caused by the misconduct of the master, by the general maritime law of modern Europe, the liability of the shipowner was
subsequently limited to his interest in the vessel. (Norwich & N. Y. Trans. Co. v. Wright, 80 U. S. 104, 20 Law. ed. 585.) A similar
limitation was placed by the British Parliament upon the liability of Englosh shipowners through a series of statutes beginning in 1734
with the Act of 7 George II, chapter 15. The legislatures of Massachusetts and Maine followed suit in 1818 and 1821, and finally,
Congress enacted the Limited Liability Act of March 3, 1851, embodying most of the provisions contained in the British Statutes (see 24
R. C. L. pp. 1387-1389). Section 4283 of the Revised Statutes (sec. 183, Tit. 46, Code of Laws of U. S. A.) reads:

LIABILITY OF OWNER NOT TO EXCEED INTEREST. — The liability of the owner of any vessel, for any embezzlement, loss,
or destruction, by any person, of any property, goods, or merchandise, shipped or put on board of such vessel, or for any loss,
damage, or injury by collision, or for any act, matter or thing, loss, damage, or forfeiture, done, occasioned, or incurred without
the privity, or knowledge of such owner or owners, shall in no case exceed the amount or value of the interest of such owner in
such vessel, and her freight then pending.

The policy which the rule is designed to promote is the encouragement of shipbuilding and investment in maritime commerce. (Vide:
Norwich & N. Y. Trans. Co. v. Wright, supra; The Main v. Williams, 152 U. S. 122; 58 C. J. 634.) And it is in that spirit that the American
courts construed the Limited Liability Act of Congress whereby the immunities of the Act were applied to claims not only for lost goods
but also for injuries and "loss of life of passengers, whether arising under the general law of admiralty, or under Federal or State
statutes." (The City of Columbus, 22 Fed. 460; The Longfellow, 104 Fed. 360; Butler v. Boston & Savannah Steamship Co., 32 Law. ed.
1017; Craig v. Continental Insurance Co., 35 Law. ed. 836.) The Supreme Court of the United States in Norwich & N. Y. Trans. Co. v.
Wright, 80 U. S. 104, 20 Law. ed. 585, 589-590, accounting for the history of the principle, clinches our exposition of the supporting
authorities:

The history of the limitation of liability of shipowners is matter of common knowledge. The learned opinion of Judge Ware in
the case of The Rebecca, 1 Ware, 187-194, leaves little to be desired on the subject. He shows that it originated in the
maritime law of modern Europe; that whilst the civil, as well as the common law, made the owner responsible to the whole
extent of damage caused by the wrongful act or negligence of the matter or crew, the maritime law only made then liable (if
personally free from blame) to the amount of their interest in the ship. So that, if they surrendered the ship, they were
discharged.

Grotius, in his law of War and Peace, says that men would be deterred from investing in ships if they thereby incurred the
apprehension of being rendered liable to an indefinite amount by the acts of the master and, therefore, in Holland, they had
never observed the Roman Law on that subject, but had a regulation that the ship owners should be bound no farther than the
value of their ship and freight. His words are: Navis et eorum quae in navi sunt," "the ship and goods therein." But he is
speaking of the owner's interest; and this, as to the cargo, is the freight thereon, and in that sense he is understood by the
commentators. Boulay Paty, Droit Maritime, tit. 3, sec. 1, p. 276; Book II, c. XI, sec. XIII. The maritime law, as codified in the
celebrated French Ordonance de la Marine, in 1681, expressed the rule thus: 'The proprietors of vessels shall be responsible
for the acts of the master, but they shall be discharged by abandoning the ship and freight.' Valin, in his commentary on this
passage, lib. 2, tit. 8, art. 2, after specifying certain engagements of the master which are binding on the owners, without any
limit of responsibility, such as contracts for the benefit of the vessel, made during the voyage (except contracts of bottomry)
says: "With these exceptions it is just that the owner should not be bound for the acts of the master, except to the amount of
the ship and freight. Otherwise he would run the risk of being ruined by the bad faith or negligence of his captain, and the
apprehension of this would be fatal to the interests of navigation. It is quite sufficient that he be exposed to the loss of his ship
and of the freight, to make it his interest, independently of any goods he may have on board to select a reliable captain."
Pardessus says: 'The owner is bound civilly for all delinquencies committed by the captain within the scope of his authority, but
he may discharge himself therefrom by abandoning the ship and freight; and, if they are lost, it suffices for his discharge, to
surrender all claims in respect of the ship and its freight," such as insurance, etc. Droit Commercial, part 3, tit. 2, c. 3, sec. 2.

The same general doctrine is laid down by many other writers on maritime law. So that it is evident that, by this law, the
owner's liability was coextensive with his interest in the vessel and its freight, and ceased by his abandonment and surrender
of these to the parties sustaining loss.

In the light of all the foregoing, we therefore hold that if the shipowner or agent may in any way be held civilly liable at all for injury to or
death of passengers arising from the negligence of the captain in cases of collisions or shipwrecks, his liability is merely co-extensive
with his interest in the vessel such that a total loss thereof results in its extinction. In arriving at this conclusion, we have not been
unmindful of the fact that the ill-fated steamship Negros, as a vessel engaged in interisland trade, is a common carrier (De
Villata v. Stanely, 32 Phil., 541), and that the as a vessel engaged in interisland trade, is a common carrier (De Villata v. Stanely, 32
Phil., 541), and that the relationship between the petitioner and the passengers who died in the mishap rests on a contract of carriage.
But assuming that petitioner is liable for a breach of contract of carriage, the exclusively "real and hypothecary nature" of maritime law
operates to limit such liability to the value of the vessel, or to the insurance thereon, if any. In the instant case it does not appear that
the vessel was insured.

Whether the abandonment of the vessel sought by the petitioner in the instant case was in accordance with law of not, is immaterial.
The vessel having totally perished, any act of abandonment would be an idle ceremony.

Judgement is reversed and petitioner is hereby absolved of all the complaints, without costs.
G.R. No. L-48264 February 21, 1980

SWITZERLAND GENERAL INSURANCE COMPANY, LTD., petitioner,

vs.
HON. PEDRO A. RAMIREZ, Presiding Judge of the Court of First Instance of Manila, Branch XXX, OYAMA LINES, CITADEL
LINES and MABUHAY BROKERAGE CO., INC., respondents.

Manuel N. Camacho, for petitioner.

Bito, Misa & Lozada for respondents Oyama Lines and Citadel Lines.

Gregorio Gonzales for respondent Company.

ANTONIO, J.:

Petition for review of the decision, dated February 24, 1978 of the Court of First Instance of Manila in Civil Case No. 100704,
entitled "Switzerland General Insurance Co., Ltd. v. Oyama Lines and Citadel Lines, and/or Mabuhay Brokerage Co., Inc."

On December 24, 1975, petitioner, a foreign insurance company authorized to do business in the Philippines thru its agent, F. E. Zuellig
Inc., filed an admiralty case (Civil Case No. 100704) against private respondents Oyama Shipping Co., Ltd. (referred to as Oyama
Lines), a foreign firm doing business in the Philippines, and Citadel Lines, Inc. which is the local agent of private, respondent Oyama
Shipping Co., Inc. and/or Mabuhay Brokerage Co., Inc.

The complaint alleged that on December 21, 1974, 60,000 bags of Urea Nitrogen were shipped from Niihama Japan, on board the S/S
St. Lourdes", claimed to be owned and operated by defendant Citadel Lines, Inc. The goods were consigned to Borden International
Phils., Inc., and insured by petitioner for the sum of P9,319,105.00 against all risks.

The shipment was discharged from the vessel S/S "St. Lourdes" shipside into lighters owned by Mabuhay Brokerage Company, Inc.,
but when the same was subsequently delivered to and received by the consignee, it was found to have sustained losses and/or
damage amounting to P38.698.94. This amount was paid by petitioner insurance company to the consignee/assured, by virtue of which
payment it became subrogated to the rights of the latter.

Petitioner made repeated demands against herein private respondents for payment of the aforesaid losses or damaged but no payment
was made and, uncertain in whose custody the goods were damaged, impleaded the private respondents as alternative defendants to
determine their respective liability.

Defendant Citadel Lines, Inc. filed an Answer with Compulsory Counterclaim and Cross-claim, interposing special and affirmative
defenses and alleging that defendant Citadel Lines was merely the civil agent in the Philippines for the Japanese firm Oyama Shipping
Co., Ltd., which was the charterer of the vessel S/S "St. Lourdes", said vessel being owned by Companies Maritime de Brios, Sociedad
Anonima a Panamanian corporation. It was further alleged that the principal agency relationship between the said Oyama Shipping Co.,
Ltd. and defendant Citadel Lines, Inc. was terminated on August 21, 1975 when the Tokyo District Court declared and decreed the
insolvency of the said Oyama Shipping Co., Ltd.

It was argued that defendant Citadel Lines "has always acted as an agent of a disclosed principal and, therefore, the herein defendant
is without any liability at all" in connection with the plaintiff's claim.

By way of cross-claim, defendant Citadel Lines alleged that the loss/damaged to the cargo took place while the latter was being
delivered to the consignee thereof by the Mabuhay Brokerage, Inc. and said corporation should be held liable therefor, as well as for all
damages suffered and expenses incurred by defendant Citadel Lines as a result of the filing of the suit. Defendant likewise interposed a
counterclaim for damages against plaintiff Switzerland General Insurance Company, Ltd. (herein petitioner).

Defendant Oyama Shipping Co. Ltd. likewise filed its Answer, denying the material averments of the complaint, alleging that it ceased
to be represented in the Philippines upon the declaration of its insolvency by the Tokyo Court; that it was a mere charterer of the S/S
"St. Lourdes" which is owned by Companies Maritime de Brios, Sociedad Anonima a Panamanian corporation; that due to the
insolvency of Oyama Shipping Co. Ltd., the case as against it should be dismissed, the remedy for the plaintiff being to file its claim
before the insolvency court in Tokyo, Japan. Further, it imputed the loss or damage to the shipment to the shipper, Sumitomo Shoji
Kaisha, Ltd. for failing to provide seaworthy packages for the goods, and/or the Mabuhay Brokerage for failure to exercise utmost
diligence after it took possession of the cargo from the vessel S/S "St. Lourdes". Finally, it was averred that plaintiff's reinsurer had
already paid the plaintiff's claim and, hence, said reinsurer is the real party to the action, and that assumming defendant Oyama
Shipping Co., Ltd. to be liable, its liability is limited to the amount of the loss in relation to the total amount of the freight of the goods,
which if computed, would be a much lower amount. It was prayed that the complaint be dismissed as against this defendant.

After trial on the merits, respondent court rendered a decision, dated February 23, 1978, in favor of petitioner as against therein
defendant Oyama Shipping Co., Ltd., but absolving Citadel Lines, Inc. and Mabuhay Brokerage Co., Inc. from liability. The decision
reads, in part, as follows:

Since in the case at bar there is no question that the shipment in question has suffered loss or damage while in the
custody of the carrier, the herein defendant Oyama Line, but it has not adduced evidence to prove that it was caused
by any of those factors or reasons exempting it from liability, particularly that the bags became torn or burst and the
contents spilled because of the character of the shipment or defects in the packing or in the containers, or the nature
or defect of the article itself. the defendant Oyama Line, as carrier, cannot avoid liability to the consignee or its
subrogee the plaintiff herein.

The defendant Oyama Line pleads prescription of the plaintiff's cause of action under Article 366 of the Code of
Commerce. The defense is untenable. to begin with, the required claim that the owner of merchandise is supposed to
make within 24 hours from receipt is but in the nature of a limitation upon his right to recovery and the burden of proof
 is accordingly on the carrier to show that the limitation is reasonable and in proper form or without the time stated
(Southern Lines, Inc. vs. Court of Appeals, 4 SCRA 258, 261-262). And it is incumbent upon the said defendant to
prove its defense, particularly that no such claim was filed within the required period. Without such proof of a negative
allegation, which it has failed to adduce, the pleader must suffer defeat under the rules of evidence (section 1, Rule
131, Revised Rules of Court). Be that as it may, the survey report submitted in evidence by the plaintiff states that
after completion of delivery the consignee signified its 'intention to file a claim for the full value of the loss sustained
by the shipment' (Exhibits 1, 1-1 to 1-5), a fact that has not at all been refuted by the defendant Oyama Line.

The fact that the defendant Oyama Line has been declared insolvent by the Tokyo District Court of Japan since
August 21, 1975, is no defense at all. For such declaration of insolvency, even under Philippine Laws, does not bar
recovery of damages based on contract. Neither can it successfully ward off liability on a claim that it is a mere
charterer of the carrying vessel, having represented on the face of the bill of lading as the carrier itself (Exhibit A;
Exhibit 1-Oyama) And even if it is but a charterer of the vessel that it claims it is, it cannot avoid its liability as a carrier
for loss and damage suffered by the goods it has transported.

As a mere agent in the Philippines of the defendant Oyama Line, the defendant Citadel Line (see paragraph 1,
complaint) cannot be held liable for the damages recoverable from its principal. But for failure to substantiate it, its
counterclaim against the plaintiff should be dismissed. So must its crossclaim against its co-defendant brokerage
company be dismissed since it has not at all been held liable to the plaintiff.

Neither can the defendant Mabuhay Brokerage Company, Inc. be held answerable for the loss and damage
sustained by the cargo in question while still in custody of the carrying vessel, for obvious reasons. Nor can it be
made liable, jointly and severally, with the defendant Oyama Line for further loss and damage to the contents of the
torn or burst bags turned over to its custody in that condition in view of the required extraordinary diligence that it has
observed to prevent further loss or damage to them. According to the defendant brokerage's witness, Virgilio de
Jesus, as soon as the bags in bad order were received from the lighters they were tied and the torn parts sewed the
falsity of which the plaintiff has failed to prove.

WHEREFORE, the Court hereby renders judgment in favor of the plaintiff Switzerland General Insurance Company,
Ltd. and against the defendant Oyama Line, ordering the latter to pay the former the amount of P38,698.94, with
interest thereon at the legal rate from the date of the filing of the complaint on December 24, 1975, until fully paid,
P5,000.00 as attorney's fees and the costs of the suit. The plaintiff's complaint against the defendants Citadel Line
and Mabuhay Brokerage Company, Inc. are dismissed. So is the defendant Citadel Lines' counterclaim against the
plaintiff and crossclaim against its co-defendant brokerage company dismissed.

Petitioner filed a Motion for Reconsideration of the aforesaid decision insofar as it absolves respondents Citadel Lines, Inc. and
Mabuhay Brokerage Co., Inc. from liability, but said Motion for Reconsideration was denied on April 21, 1979; hence, the instant petition
for review.

The main issue raised in the instant petition is whether or not respondent Citadel Lines, Inc., the local agent of a foreign ocean going
vessel, the S/S "St. Lourdes", may be held primarily liable for the loss/damage found to have been sustained by subject shipment while
on board and/or still in the custody of the said vessel.

Petitioner contends that respondent Citadel Lines, Inc., being the ship agent for the vessel S/S "St. Lourdes", is liable under the
pertinent provisions of the Code of Commerce and applicable jurisprudence.

Respondent Citadel Lines, Inc., in its Comment to the petition, alleges that the lower court had made a finding that it is a mere agent of
Oyama Shipping Co., Ltd., and not a ship agent, and this, being a finding of fact, can no longer be questioned in the instant
proceedings. Further, it argues that the provisions of the Code of Commerce relied upon by petitioner are applicable to a ship agent, but
not to a mere agent like private respondent, and that granting that it is a ship agent, it contends that it should not be held liable because
the principal, Oyama Shipping Co., Ltd. has been declared insolvent. it is claimed that petitioner, upon being informed of the insolvency
of the Oyama Shipping Co., Ltd., should have filed its claim before the Trustee of the Oyama Shipping Co., Ltd. in Japan.

In fine, private respondents do not dispute that a ship agent is liable to third persons under certain circumstances as provided in the
Code of Commerce, but insists that it is not a ship agent but a mere agent and hence, not liable.

We find the instant petition meritorious the error of the lower court lies in its application of the general rule on agency to the case a quo,
when the applicable law is contained in the pertinent provisions of the Code of Commerce as applied in relevant decisions of this Court.
Its finding. therefore, that respondent Citadel Lines, Inc. was a mere agent of Oyama Shipping Co., Ltd. was a result of its erroneous
application of the law of agency to the instant case. Considering the relationship of the parties, respondent Citadel Lines, Inc. cannot be
considered as a "mere agent" under the civil law on agency as distinguished from a ship agent, within the context of the Code of
Commerce. In Yu Biao Sontua & Co. v. Ossorio, 1 for example, it was held that the doctrines having reference to the relations Between
principal and agent cannot be applied in the case of ship agents and ship owners. For this reason, respondent cannot validly claim that
the court a quo made a finding of fact which is conclusive upon this Court. A ship agent, according to Article 586 of the Code of
Commerce, is the person entrusted with the provisioning of a vessel or who represents her in the port in which she happens to be."
(Emphasis supplied.)

It is not disputed by the private respondent that it is the local representative in the Philippines of the Oyama Shipping Co., Ltd. and, as
alleged by petitioner, upon arrival of the vessel S/S "St. Lourdes" in Manila, it took charge of the unloading of the cargo and issued
cargo receipts (or tally sheets) in its own name, for the purpose of evidencing discharge of cargoes and the conditions thereof from the
vessel to the arrastre operators and/or unto barges/lighters, and that claims against the vessel S/S "St. Lourdes" for losses/damages
sustained by shipments were in fact filed and processed by respondent Citadel Lines, Inc. These facts point to the inevitable conclusion
that private respondent is the entity that represents the vessel in the port of Manila and hence is a ship agent within the meaning and
context of Article 586 of the Code of Commerce.

The Code of Commerce provides, among others, that the ship agent shall also be liable for the indemnities in favor of third persons
which arise from the conduct of the captain in the care of the goods which the vessel carried; but he may exempt himself therefrom by
abandoning the vessel with all her equipments and the freightage he may have earned during the voyage. (Article 587).
In addition, Article 618 of the same Code states:

Art. 618. The captain shall be civilly liable to the ship agent and the latter to the third persons who may have made
contracts with the former —

1. For all the damages sufferred by the vessel and its cargo by reason of want of skill or negligence on his part. If a
misdemeanor or crime has been committed he shall be liable in accordance with the Penal Code.

2. For all the thefts and robberies committed by the crew, reserving his right of action against the guilty parties.

3. For the losses, fines, and confiscations imposed on account of violation. of the laws and regulations of customs,
police, health, and navigation

4. For the losses and damages caused by mutinies on board the vessel or by reason of faults committed by the crew
in the service and defense of the same, if he does not prove Chat, he made full use of his authority to prevent or
avoid them.

5. For those arising by reason of a misuse of powers and non-fulfillment of the duties which pertain to him in
accordance with Articles 610 and 612.

6. For those arising by reason of his going out of his course or taking a course which, in the opinion of the officers of
the vessel, at a meeting attended by the shippers or super cargoes who may be on board, he should not have taken
without sufficient cause.

No exception whatsoever shall exempt him from his obligation.

7. For those arising by reason of his voluntarily entering a port other than his destination, with the exception of the
cases or without the formalities referred to in Article 612.

8. For those arising by reason of the non-observance of the provisions contained in the regulations for lights and
maneuvers for the purpose of preventing collisions.

The foregoing provisions have been repeatedly applied by this Court in various cases, among them: Pons y Compañia v. La Compania
Maritima;2 Behn, Meyer & Co. v. McMicking, et al.: 3 Yu Biao Sontua & Co. v. Ossorio, 4Wing Kee Compradoring Co. v. Bark
"Monongahela" 5 and The American Insurance Co., Inc. v. Macondray & Co., Inc. 6

In Pons v. La Compania Maritima, supra, it was held that for damages resulting to merchandize in transit due to negligence of the
officers of the ship, a cause of action arises against the owners or agents of the vessels which may be prosecuted by the shipper or
consignor the damaged goods.

At any rate, the liabilities of the ship agent are not disputed by private respondent. It appearing that the Citadel Lines is the ship agent
for the vessel S/S "St. Lourdes" at the port of Manila, it is, therefore, liable to the petitioner, solidarily with its principal, Oyama Shipping
Co., Ltd., in an amount representing the value of the goods lost and or damaged, amounting to P38,698.94, which was likewise the
amount paid by petitioner, as insurer, to the insured consignee As found by the court a quo, there has been no proof presented to show
that the officers of the vessel, in whose custody the goods were lost or damaged, are exempt from liability therefrom and that the
damage was caused by factors and circumstances exempting them from liability.

The insolvency of Oyama Lines has no bearing on the instant case insofar as the liability of Citadel Lines, Inc. is concerned. The law
does does not make the liability of the ship agent dependent upon the solvency or insolvency of the ship owner.

WHEREFORE, the decision appealed from is modified, and private respondent Citadel Lines, Inc. is hereby ordered to pay, solidarily
with its principal, Oyama Lines (Oyama Shipping Co., LTD.), the amount of P38,698.94, with interest thereon at the legal rate from the
date of the filing of the complaint on December 24, 1975 until fully paid, P5,000.00 as attorney's fees and the costs of suit. The rest of
the decision is affirmed. No pronouncement as to costs.

SO ORDERED.
G.R. No. L-51165 June 21, 1990

HEIRS OF AMPARO DE LOS SANTOS, HEIRS OF ERNANIE DELOS SANTOS, HEIRS OF AMABELLA DELOS SANTOS, HEIRS
OF LENNY DELOS SANTOS, HEIRS OF MELANY DELOS SANTOS, HEIRS OF TERESA PAMATIAN, HEIRS OF DIEGO SALEM,
AND RUBEN REYES, petitioners,
vs.
HONORABLE COURT OF APPEALS AND COMPANIA MARITIMA, respondents.

Severino Z. Macavinta, Jr. for petitioners.

Dinglasan Law Office for private respondent.

MEDIALDEA. J.:

This petition for review on certiorari seeks to set aside the decision of the Court of Appeals in CA-G.R. No. 58118-R affirming the
decision in Civil Case No. 74593 of the then Court of First Instance (now Regional Trial Court), Branch XI, Manila which dismissed the
petitioners' claim for damages against Compania Maritima for the injury to and death of the victims as a result of the sinking of M/V
Mindoro on November 4, 1967.

The trial court found the antecedent facts to be as follows:

This is a complaint originally filed on October 21, 1968 (p. 1, rec.) and amended on October 24, 1968 (p. 16 rec.) by
the heirs of Delos Santos and others as pauper litigants against the Compania Maritima, for damages due to the
death of several passengers as a result of the sinking of the vessel of defendant, the M/V 'Mindoro', on November 4,
1967.

There is no dispute in the record that the M/V 'Mindoro' sailed from pier 8 North Harbor, Manila, on November 2,1967
at about 2:00 (should have been 6:00 p.m.) in the afternoon bound for New Washington, Aklan, with many
passengers aboard. It appears that said vessel met typhoon 'Welming' on the Sibuyan Sea, Aklan, at about 5:00 in
the morning of November 4, 1967 causing the death of many of its passengers, although about 136 survived.

Mauricio delos Santos declared that on November 2, 1967 he accompanied his common-law wife, Amparo delos
Santos, and children, namely: Romeo, Josie, Hernani, who was 10 years old, Abella, 7 years old, Maria Lemia, 5
years old and Melany, 5 months old, to pier 8, North Harbor, Manila, to board the M/V Mindoro 'bound for Aklan. It
appears that Amparo delos Santos and the aforesaid children brought all their belongings, including household
utensils valued at P 1,000.00, with the intention of living in Aklan permanently.

As already stated, the boat met typhoon 'Welming' and due to the strong waves it sank causing the drowning of many
passengers among whom were Amparo delos Santos and all the aforesaid children. It appears also that Teresa
Pamatian and Diego Salim, who were also passengers also drowned. Plaintiff Ruben Reyes was one of the survivors.
'The plaintiffs presented the birth and death certificates of Amparo delos Santos and the children (Exhs. 1, I-1, J, J-1,
K, K-1, L, L-1, 0 to S, pp. 180 to 194 rec.). They also presented copies of the manifest of passengers of the M/V
'Mindoro' on November 2,1967 (Exhs. B & C, pp. 163 to 161 rec.).

Eliadora Crisostomo de Justo, one of the survivors, corroborated the testimony of Mauricio delos Santos that he
accompanied Amparo delos Santos and her children to the port to board the M/V Mindoro. She is a cousin of Amparo
delos Santos' husband. According to her, when she boarded the second deck of the vessel, she saw about 200
persons therein. She tried to see whether she could be accommodated in the third deck or first deck because the
second deck was very crowded. She admitted that she was not included in the manifest because she boarded the
boat without a ticket, but she purchased one in the vessel. She testified further that the boat was not able to reach its
destination due to its sinking. During the typhoon before the vessel sunk, she was able to board a 'balsa'.

Ruben Reyes, the other survivor, declared that he paid for his ticket before boarding the M/V Mindoro. At that time he
had with him personal belongings and cash all in the amount of P2,900.00. It appears that Felix Reyes Jakusalem,
Teresa Pamatian and Amparo delos Santos drowned during the sinking of the vessel. He was able to swim on (sic)
an island and was with the others, rescued later on and brought to the hospital. The survivors were then taken ashore
(Exh. M, p. 188, rec.).

Dominador Salim declared that Teresa Pamatian, his aunt and Diego Salim, his father, drowned along with the
sinking of the M/V Mindoro. Tins witness declared that he accompanied both his father and his aunt to the pier to
board the boat and at the time Teresa Pamatian was bringing cash and personal belongings of about P250.00 worth.
His father brought with him P200.00 in cash plus some belongings. He admitted that when his father boarded the
vessel he did not have yet a ticket.

The plaintiffs further submitted in evidence a copy of a Radiogram stating among other things that the MN Mindoro
was loaded also with 3,000 cases of beer, one dump truck and 292 various goods (Exhs. D and D-1, p. 162 rec).

In alleging negligence on the part of the vessel, plaintiffs introduced in evidence a letter sent to the Department of
Social Welfare concerning the resurvey of the M/V Mindoro victims (Exh. F, p. 169 rec.) and a telegram to the Social
Welfare Administration (Exh. G, p. 170 rec.), a resurvey of the M/V 'Mindoro' victims (Exh. H, p. 171 rec.), a complete
list of the M/V 'Mindoro' victims (Exhs. H-1 to H-8, pp. 172179 rec.), a certified true copy of the Special Permit to the
Compania Maritima issued by the Bureau of Customs limiting the vessel to only 193 passengers (Exh. X, p. 318 rec.).

It appears that in a decision of the Board of Marine Inquiry, dated February 2, 1970, it was found that the captain and
some officers of the crew were negligent in operating the vessel and imposed upon them a suspension and/or
 revocation of their license certificates. It appears, however, that this decision cannot be executed against the captain
who perished with the vessel (Exhs. E, E-1, E-1-A, E-2 to E-9, pp. 163- 168 rec.).

Upon agreement of the parties, the plaintiffs also introduced in evidence the transcript of stenographic notes of the
testimony of Boanerjes Prado before Branch I of this Court (Exh. U, pp. 203-220) and that of Felimon Rebano in the
same branch (Exh. V, pp. 225-260 rec.).

The defendant alleges that no negligence was ever established and, in fact, the shipowners and their officers took all
the necessary precautions in operating the vessel. Furthermore, the loss of lives as a result of the drowning of some
passengers, including the relatives of the herein plaintiff, was due to force majeure because of the strong typhoon
'Welming.' It appears also that there was a note of marine protest in connection with the sinking of the vessel as
substantiated by affidavits (Exhs. 3, 3-A, 3-B, 3-C, 3-D, 3-E, 3-F and 3-G rec.). On this score Emer Saul, member of
the PC Judge Advocate General's Office, brought to Court records of this case which were referred to their office by
the Board of Marine Inquiry. According to him the decision referred to by the plaintiffs was appealed to the
Department of National Defense, although he did not know the result of the appeal. At any rate, he knew that the
Department of National Defense remanded the case to the Board of Marine Inquiry for further investigation. In the
second indorsement signed by Efren I. Plana, Undersecretary of National Defense, it is stated, among other things,
that the hearings of the Board of Marine Inquiry wherein the Philippine Coast Guard made the decision lacked the
necessary quorum as required by Section 827 of the Tariff and Customs Code. Moreover, the decision of the
Commandant of the Philippine Coast Guard relied principally on the findings reached by the Board of Officers after an
ex-parte investigation especially in those aspects unfavorable to the captain (Exh. 1, folder of exhibits).

It appears also that there were findings and recommendations made by the Board of Marine Inquiry, dated March 5,
1968, recommending among other things that the captain of the M/V 'Mindoro,' Felicito Irineo, should be exonerated.
Moreover, Captain Irineo went down with the vessel and his lips are forever sealed and could no longer defend
himself. This body also found that the ship's compliment (sic) and crew were all complete and the vessel was in
seaworthy condition. If the M/V Mindoro' sank, it was through force majeure (Exhs. 2 & 2-A, folder of exhibits).

Defendant also introduced in evidence the transcripts of stenographic notes of the testimony of Francisco Punzalan,
marine officer, as well as of Abelardo F. Garcia, Harbor Pilot in Zamboanga City, in Civil Case No. Q-12473 of Branch
XXVIII, Court of First Instance of Rizal, Quezon City Branch (Exhs. 3-H & 10-H, folder of exhibits), and of Arturo
Ilagan, boat captain, in Civil Case No. Q-1 5962 of Branch V, of the same Court (Exh. 9 folder of exhibits).

It appears that five other vessels left the pier at Manila on November 2, 1967, aside from the M/V Mindoro' (Exhs 4 &
4-A). A certification of the Weather Bureau indicated the place of typhoon 'Welming' on November 2, 1967 (Exh. 6). A
certification of the shipyard named El Varadero de Manila stated among other things that the M/V 'Mindoro' was dry-
docked from August 25 to September 6, 1967 and was found to be in a seaworthy condition (Exh. 5), and that the
said M/V 'Mindoro' was duly inspected by the Bureau of Customs (Exhs. 7, 7-A & 7-B). Another certification was
introduced stating among other things that the Bureau of Customs gave a clearance to the M/V 'Mindoro' after
inspection (Exh. 8 folder of exhibits). (CFI Decision, Records, pp. 468-471)

On the basis of these facts, the trial court sustained the position of private respondent Compania Maritima (Maritima, for short) and
issued a decision on March 27, 1974, to wit:

WHEREFORE, the Court finds that in view of lack of sufficient evidence, the case be, as it is hereby DISMISSED.

For lack of evidence, the counterclaim is also hereby DISMISSED.

IT IS SO ORDERED. (Records, p. 474)

Forthwith, the petitioners' heirs and Reyes brought an appeal to the Court of Appeals. As earlier mentioned, the appellate court affirmed
the decision on appeal. While it found that there was concurring negligence on the part of the captain which must be imputable to
Maritima, the Court of Appeals ruled that Maritima cannot be held liable in damages based on the principle of limited liability of the
shipowner or ship agent under Article 587 of the Code of Commerce.

The heirs and Reyes now come to Us with the following assignment of errors:

ERROR I

THE HONORABLE RESPONDENT COURT OF APPEALS ERRED IN NOT CONCENTRATING TO (sic) THE
PROVISION OF LAW IN THE NEW CIVIL CODE AS EXPRESSED) IN, —

Art. 1766. In all matters not regulated by this Code, the rights and obligations of common carriers
shall be governed by the Code of Commerce and by special laws.

ERROR II

RESPONDENT COURT OF APPEALS ERRED IN NOT REVERSING THE DECISION OF THE LOWER COURT OF
ORIGIN AFTER FINDING A SERIES OF FAULTS AND NEGLIGENCE AND IN NOT ORDERING ITS CO-
RESPONDENT COMPANIA MARITIMA TO PAY THE DAMAGES IN ACCORDANCE WITH THE LAW.

ERROR III

THE HONORABLE RESPONDENT COURT OF APPEALS ERRED TO NOTE, OBSERVE AND COMPREHEND
THAT ART. 587 OF THE CODE OF COMMERCE IS ONLY FOR THE GOODS WHICH THE VESSEL CARRIED
AND DO NOT INCLUDE PERSONS. (Rollo, p. 8)
The petition has merit. At the outset, We note that there is no dispute as to the finding of the captain's negligence in the mishap. The
present controversy centers on the questions of Maritima's negligence and of the application of Article 587 of the Code of Commerce.
The said article provides:

Art. 587. The ship agent shall also be civilly liable for indemnities in favor of third persons which may arise from the
conduct of the captain in the care of the goods which he loaded on the vessel, but he may exempt himself therefrom
by abandoning the vessel with all her equipments and the freight it may have earned during the voyage.

Under this provision, a shipowner or agent has the right of abandonment; and by necessary implication, his liability is confined to that
which he is entitled as of right to abandon-"the vessel with all her equipments and the freight it may have earned during the voyage"
(Yangco v. Laserna, et al., 73 Phil. 330, 332). Notwithstanding the passage of the New Civil Code, Article 587 of the Code of
Commerce is still good law. The reason lies in the peculiar nature of maritime law which is 94 exclusively real and hypothecary that
operates to limit such liability to the value of the vessel, or to the insurance thereon, if any (Yangco v. Laserna, Ibid). As correctly stated
by the appellate court, "(t)his rule is found necessary to offset against the innumerable hazards and perils of a sea voyage and to
encourage shipbuilding and marine commerce. (Decision, Rollo, p. 29). Contrary to the petitioners' supposition, the limited liability
doctrine applies not only to the goods but also in all cases like death or injury to passengers wherein the shipowner or agent may
properly be held liable for the negligent or illicit acts of the captain (Yangco v. Laserna, Ibid). It must be stressed at this point that Article
587 speaks only of situations where the fault or negligence is committed solely by the captain. In cases where the shipowner is likewise
to be blamed, Article 587 does not apply (see Manila Steamship Co., Inc. v. Abdulhanan, et al., 100 Phil. 32, 38). Such a situation will
be covered by the provisions of the New Civil Code on Common Carriers. Owing to the nature of their business and for reasons of
public policy, common carriers are tasked to observe extraordinary diligence in the vigilance over the goods and for the safety of its
passengers (Article 1733, New Civil Code). Further, they are bound to carry the passengers safely as far as human care and foresight
can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances (Article 1755, New Civil
Code). Whenever death or injury to a passenger occurs, common carriers are presumed to have been at fault or to have acted
negligently unless they prove that they observed extraordinary diligence as prescribed by Articles 1733 and 1755 (Article 1756, New
Civil Code).

Guided by the above legal provisions, We painstakingly reviewed the records of the case and found imprints of Maritima's negligence
which compel Us to reverse the conclusion of the appellate court.

Maritima claims that it did not have any information about typhoon 'Welming' until after the boat was already at sea. Modem technology
belie such contention. The Weather Bureau is now equipped with modern apparatus which enables it to detect any incoming
atmospheric disturbances. In his summary report on tropical cyclone 'Welming' which occurred within the Philippine Area of
Responsibility, Dr. Roman L. Kintanar, Weather Bureau Director, stated that during the periods of November 15, 1967, the Bureau
issued a total of seventeen (17) warnings or advisories of typhoon 'Welming' to shipping companies. Additionally, he reported that:

By 11:15 a.m. of November lst, or in less than twenty four hours, the storm intensified into a typhoon. It was by then
located at 8.7 N 137.3 E with sea level pressure of 978 millibars, an eye diameter of about 18.53 kilometers and a
maximum surface wind of 139 kilometers per hour. "As it moved along in the open sea, it intensified further and by
11.07 a.m. of November 2, when its center was at 103 N 131.4 E, it had attained surface winds of about 240
kilometers per hour. ... (Exh. Z, p. 131, Index of Exhibits, p. 11 5, Emphasis supplied).

Considering the above report and the evidence on record showing the late departure of the ship at 6:00 p.m. (instead of the scheduled
2:00 p.m. departure) on November 2, 1967, We find it highly improbable that the Weather Bureau had not yet issued any typhoon
bulletin at any time during the day to the shipping companies. Maritima submitted no convincing evidence to show this omission. It's
evidence showing the Weather Bureau's forecast of November 3, 1967 is not persuasive. It merely indicated the weather bulletin of that
day. Nowhere could We find any statement therein from the Weather Bureau that it had not issued any forecast on November I and 2,
1967 (Exh. 6, Records, p. 257). Significantly, the appellate court found that the ship's captain through his action showed prior
knowledge of the typhoon. The court said:

... It cannot be true that he was apprised of the typhoon only at about 11:00 o'clock the following morning on
November 3, 1967 when the Weather report was transmitted to him from the Weather Bureau at which time he
plotted its position. For in his radiogram sent to defendant-appellee's office in Manila as early as 8:07 in the morning
of November 3, 1967 (Exh. D) he states in the concluding portion 'still observing weather condition.' thereby implicitly
suggesting that he had known even before departure of the unusual weather condition. ... (Decision, Rollo, p. 26)

If the captain knew of the typhoon beforehand, it is inconceivable for Maritima to be totally in the dark of 'Welming.' In allowing the ship
to depart late from Manila despite the typhoon advisories, Maritima displayed lack of foresight and minimum concern for the safety of its
passengers taking into account the surrounding circumstances of the case.

While We agree with the appellate court that the captain was negligent for overloading the ship, We, however, rule that Maritima shares
equally in his negligence. We find that while M/V Mindoro was already cleared by the Bureau of Customs and the Coast Guard for
departure at 2:00 p.m. the ship's departure was, however, delayed for four hours. Maritima could not account for the delay because it
neither checked from the captain the reasons behind the delay nor sent its representative to inquire into the cause of such delay. It was
due to this interim that the appellate court noted that "(i)ndeed there is a great probability that unmanifested cargo (such as dump truck,
3 toyota cars, steel bars, and 6,000 beer cases) and passengers (about 241 more than the authorized 193 passengers) were loaded
during the four (4) hour interval" (Decision, p. 13, Rollo, p. 26). Perchance, a closer supervision could have prevented the overloading
of the ship. Maritima could have directed the ship's captain to immediately depart in view of the fact that as of 11:07 in the morning of
November 2, 1967, the typhoon had already attained surface winds of about 240 kilometers per hour. As the appellate court stated,
'(v)erily, if it were not for have reached (its) destination and this delay, the vessel could thereby have avoided the effects of the storm"
(Decision, Rollo p. 26). This conclusion was buttressed by evidence that another ship, M/V Mangaren, an interisland vessel, sailed for
New Washington, Aklan on November 2, 1967, ahead of M/V Mindoro and took the same route as the latter but it arrived safely (Exh.
BB-2, Index of Exhibits, pp. 143-144 and Exh. 4-A, Ibid, p. 254).

Maritima presents evidence of the seaworthy condition of the ship prior to its departure to prove that it exercised extraordinary diligence
in this case. M/V Mindoro was drydocked for about a month. Necessary repairs were made on the ship. Life saving equipment and
navigational instruments were installed.
While indeed it is true that all these things were done on the vessel, Maritima, however, could not present evidence that it specifically
installed a radar which could have allowed the vessel to navigate safely for shelter during a storm. Consequently, the vessel was left at
the mercy of ''Welming' in the open sea because although it was already in the vicinity of the Aklan river, it was unable to enter the
mouth of Aklan River to get into New Washington, Aklan due to darkness and the Floripon Lighthouse at the entrance of the Aklan
River was not functioning or could not be seen at all (Exh. 3-H, Index of Exhibits, p. 192-195; see also Exh. 2-A, Ibid, p. 160). Storms
and typhoons are not strange occurrences. In 1967 alone before 'Welming,' there were about 17 typhoons that hit the country (Exh. M,
Index of Exhibits, p. 115), the latest of which was typhoon Uring which occurred on October 20-25, which cost so much damage to lives
and properties. With the impending threat of 'Welming,' an important device such as the radar could have enabled the ship to pass
through the river and to safety.

The foregoing clearly demonstrates that Maritima's lack of extraordinary diligence coupled with the negligence of the captain as found
by the appellate court were the proximate causes of the sinking of M/V Mindoro.

Hence, Maritima is liable for the deaths and injury of the victims. amount of With the above finding, We now come to the damages due
to the petitioners. Ordinarily, We would remand the case to the trial court for the reception of evidence. Considering however, that this
case has been pending for almost twenty-three (23) years now and that since all the evidence had already been presented by both
parties and received by the trial court, We resolve to decide the corresponding damages due to petitioners (see Samal v. Court of
Appeals, 99 Phil. 230; Del Castillo v. Jaymalin, L-28256, March 17, 1982, 112 SCRA 629).

In their complaint filed with the Court of First Instance, petitioners prayed for moral, actual and exemplary damages, as well as for
attorney's fees plus costs.

Under Article 1764 in relation to Article 2206 of the New Civil Code, the amount of damages for the death of a passenger caused by the
breach of contract by a common carrier is at least three thousand pesos (P3,000.00). The prevailing jurisprudence has increased the
amount of P3,000.00 to P30,000.00 (De Lima v. Laguna Tayabas Co., L-35697-99, April 15, 1988, 160 SCRA 70). Consequently,
Maritima should pay the civil indemnity of P30,000.00 to the heirs of each of the victims. For mental anguish suffered due to the deaths
of their relatives, Maritima should also pay to the heirs the sum of P10,000.00 each as moral damages.

In addition, it was proven at the trial that at the time of death, (1) Amparo delos Santos had with her cash in the sum of P1,000.00 and
personal belongings valued at P500.00; (2) Teresa Pamatian, cash in the sum of P250.00 and personal belongings worth P200.00; and
(3) Diego Salem, cash in the sum of P200.00 and personal belongings valued at P100.00. Likewise, it was established that the heirs of
Amparo delos Santos and her deceased children incurred transportation and incidental expenses in connection with the trial of this
case in the amount of P500.00 while Dominador Salem, son of victim Diego Salem and nephew of victim Teresa Pamatian spent about
P100.00 for expenses at the trial. With respect to petitioner Reyes, the evidence shows that at the time of the disaster, he had in his
possession cash in the sum of P2,900.00 and personal belongings worth P100.00. Further, due to the disaster, Reyes was unable to
work for three months due to shock and he was earning P9.50 a day or in a total sum of P855.00. Also, he spent about P100.00 for
court expenses. For such losses and incidental expenses at the trial of this case, Maritima should pay the aforestated amounts to the
petitioners as actual damages.

Reyes' claim for moral damages cannot be granted inasmuch as the same is not recoverable in damage action based on the breach of
contract of transportation under Articles 2219 and 2220 of the New Civil Code except (1) where the mishap resulted in the death of a
passenger and (2) where it is proved that the carrier was guilty of fraud or bad faith, even if death does not result (Rex Taxicab Co., Inc.
v. Bautista, 109 Phil. 712). The exceptions do not apply in this case since Reyes survived the incident and no evidence was presented
to show that Maritima was guilty of bad faith. Mere carelessness of the carrier does not per se constitute or justify an inference of
malice or bad faith on its part (Rex Taxicab Co., Inc. v. Bautista, supra).

Anent the claim for exemplary damages, We are not inclined to grant the same in the absence of gross or reckless negligence in this
case.

As regards the claim for attorney's fees, the records reveal that the petitioners engaged the services of a lawyer and agreed to pay the
sum of P 3,000.00 each on a contingent basis (see TSN'S, July 21, 1971, p. 24; November 3, 1971, pp. 18 and 29). In view hereof, We
find the sum of P 10,000.00 as a reasonable compensation for the legal services rendered.

ACCORDINGLY, the appealed decision is hereby REVERSED and judgment is hereby rendered sentencing the private respondent to
pay the following: (1) P30,000.00 as indemnity for death to the heirs of each of the victims; (2) P10,000.00 as moral damages to the
heirs of each of the victims; (3) P6,805.00 as actual damages divided among the petitioners as follows: heirs of Amparo Delos Santos
and her deceased children, P2,000.00; heirs of Teresa Pamatian, P450.00; heirs of Diego Salem, P400.00; and Ruben Reyes,
P2,955.00; (4) P10,000.00 as attorney's fees; and (5) the costs.

SO ORDERED.